UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report: Not applicable
For the transition period from ___________________________ to ___________________________
Commission file number 001-38802
 
CASTOR MARITIME INC.
 
 
(Exact name of Registrant as specified in its charter)
 
     
 
(Translation of Registrant's name into English)
 
     
 
Republic of the Marshall Islands
 
 
(Jurisdiction of incorporation or organization)
 
     
 
223 Christodoulou Chatzipavlou Street
 
 
Hawaii Royal Gardens
 
 
3036 Limassol, Cyprus
 
 
(Address of principal executive offices)
 
     
 
Petros Panagiotidis, Chairman, Chief Executive Officer and Chief Financial Officer
223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036 Limassol, Cyprus
Phone number: + 357 25 357 767
Fax Number: +357 25 357 796
 
 
(Name, Telephone, E-mail and/or Facsimile number and
Address of Company Contact Person)
 
     



 
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
     
 
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
 
 
 
Common Shares, $0.001 par value
 
CTRM
 
Nasdaq Capital Market
 
 
 
Series C Participating Preferred Shares, $0.001 par value
 
CTRM
 
Nasdaq Capital Market
 
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of share capital as of the close of the period covered by the annual report:
As of December 31, 2020, there were outstanding 131,212,376 common shares of the Registrant, $0.001 par value per share.
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ Yes
☐No
If this report is an annual report or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes
☒ No
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes
☐ No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during this preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes
☐ No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Emerging Growth Company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☒

† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
☒ U.S. GAAP
☐ International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow.
☐  Item 17
☐  Item 18
If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes
☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes
☐ No



TABLE OF CONTENTS
PAGE

PART I

1

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3. KEY INFORMATION
1
ITEM 4. INFORMATION ON THE COMPANY
38
ITEM 4A. UNRESOLVED STAFF COMMENTS
55
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
55
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
71
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
73
ITEM 8. FINANCIAL INFORMATION
75
ITEM 9. THE OFFER AND LISTING
76
ITEM 10. ADDITIONAL INFORMATION
76
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
95
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

95
PART II

96
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
96
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
96
ITEM 15. CONTROLS AND PROCEDURES
96
ITEM 16. RESERVED
98
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
98
ITEM 16B. CODE OF ETHICS
98
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
97
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
99
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS.
99
ITEM 16F. CHANGE IN REGISTRANT`S CERTIFYING ACCOUNTANT.
99
ITEM 16G. CORPORATE GOVERNANCE
99
ITEM 16H. MINE SAFETY DISCLOSURE

100
PART III

100
ITEM 17. FINANCIAL STATEMENTS
100
ITEM 18. FINANCIAL STATEMENTS
100
ITEM 19. EXHIBITS
100



i

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this annual report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995, or the PSLRA, provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
Castor Maritime Inc. desires to take advantage of the safe harbor provisions of the PSLRA and is including this cautionary statement in connection with this safe harbor legislation. This annual report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this annual report, the words "anticipate," "believe," "targets," "likely," "will," "would," "could," "seeks," "continue," "contemplate," "possible," "might," "expect," "intend," "estimate," "forecast," "project," "plan," "potential," "may," "should," and similar expressions or phrases may identify forward-looking statements.
The forward-looking statements in this annual report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
In addition to these assumptions and matters discussed elsewhere herein and in the documents incorporated by reference herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the following:
•
dry bulk and tanker market trends, including fluctuations in charter rates, factors affecting supply and demand, and opportunities for the profitable operations of dry bulk and tanker carriers;
•
our future financial condition or results of operations and our future revenues and expenses;
•
our continued borrowing availability under our debt agreements and compliance with the covenants contained therein;
•
our ability to procure or have access to financing, our liquidity and the adequacy of cash flows for our operations;
•
our continued ability to enter into time or voyage charters with existing and new customers, and to re-charter our vessels upon the expiry of the existing charters;
•
changes in our operating expenses, including bunker prices, dry-docking and insurance costs;
•
our ability to fund future capital expenditures and investments in the acquisition and refurbishment of our vessels (including the amount and nature thereof and the timing of completion thereof, the delivery and commencement of operations dates, expected downtime and lost revenue);
•
planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including dry-docking, surveys, upgrades and insurance costs;
•
our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions as planned;
•
our ability to realize the expected benefits from our vessel acquisitions;
ii


•
vessel breakdowns and instances of off-hire;
•
potential conflicts of interest involving members of our Board of Directors, or the Board, and senior management;
•
potential liability from pending or future litigation and potential costs due to environmental damage and vessel collisions;
•
potential exposure or loss from investment in derivative instruments (if any);
•
changes in supply and demand in the dry bulk and tanker shipping industry, including the market for our vessels and the number of newbuildings under construction;
•
the length and severity of epidemics and pandemics, including the ongoing global outbreak of the novel coronavirus ("COVID-19") and its impact on the demand for seaborne transportation in the dry bulk and tanker sector;
•
the strength of world economies;
•
stability of Europe and the Euro;
•
fluctuations in interest rates and foreign exchange rates;
•
changes in seaborne and other transportation;
•
changes in governmental rules and regulations or actions taken by regulatory authorities;
•
general domestic and international political conditions or events, including "trade wars";
•
potential disruption of shipping routes due to accidents, political events, international hostilities and instability, piracy or acts by terrorists;
•
our business strategy and other plans and objectives for future operations;
•
future sales of our securities in the public market;
•
the impact of the discontinuance of LIBOR after 2021 on interest rates of our debt that reference LIBOR;
•
the impact of adverse weather and natural disasters;
•
the impact of public health threats and outbreaks of other highly communicable diseases; and
•
other factors detailed in this annual report and from time to time in our periodic reports.
Any forward-looking statements contained herein are made only as of the date of this annual report, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all or any of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. See the section entitled "Item 3. Key Information—D. Risk Factors" of this annual report on Form 20-F for the year ended December 31, 2020 for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this annual report are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.

iii
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.
 KEY INFORMATION
Unless the context otherwise requires, as used in this annual report, the terms "Company", "we", "us", and "our" refer to Castor Maritime Inc. and all of its subsidiaries, and "Castor Maritime Inc." refers only to Castor Maritime Inc. and not to its subsidiaries. We use the term deadweight ton, or dwt, in describing the size of vessels. Dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry.
A.
Selected Financial Data
The selected consolidated financial and operational data set forth below should be read in conjunction with our audited consolidated financial statements and related notes included in "Item 18. Financial Statements" herein, and together with "Item 5. Operating and Financial review and Prospects". The selected statement of operations data for the years ended December 31, 2020 and 2019, the three-month transition period ended December 31, 2018, the year ended September 30, 2018 and the period ended September 30, 2017 and the selected balance sheet data as of December 31, 2020 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The selected balance sheet data as of December 31, 2018 have been derived from our audited consolidated financial statements included in our annual report on Form 20-F for the year ended December 31, 2019. The selected balance sheet data as of September 30, 2018 and 2017 have been derived from our audited consolidated financial statements included in our annual report on Form 20-F for the year ended September 30, 2018.
In U.S. dollars, except for share data
 
Period from December 13, 2016 to
September 30, 2017
   
Year ended September 30, 2018
   
Three-months ended December 31, 2018
   
Year ended December 31, 2019
   
Year ended December 31, 2020
 
SELECTED STATEMENT OF OPERATIONS DATA
                             
Vessel revenues, net
   
2,018,061
     
3,960,822
     
1,111,075
     
5,967,772
     
12,487,692
 
Voyage expenses – including related parties
   
(80,853
)
   
(37,373
)
   
(19,556
)
   
(261,179
)
   
(584,705
)
Vessel operating expenses
   
(1,194,995
)
   
(1,727,770
)
   
(432,544
)
   
(2,802,991
)
   
(7,447,439
)
General and administrative expenses
                                       
- Company administration expenses (including related party)
   
(58,467
)
   
(109,233
)
   
(22,954
)
   
(378,777
)
   
(1,130,953
)
- Public registration costs
   
(35,973
)
   
(350,167
)
   
(161,116
)
   
(132,091
)
   
-
 
Depreciation & amortization
   
(182,346
)
   
(637,611
)
   
(177,378
)
   
(897,171
)
   
(1,904,963
)
Provision for doubtful debt
   
-
     
-
     
-
     
-
     
(37,103
)
Management fees, related parties
   
(55,500
)
   
(111,480
)
   
(29,440
)
   
(212,300
)
   
(930,500
)
Operating Income
 
$
409,927
   
$
987,188
   
$
268,087
   
$
1,283,263
   
$
452,029
 
                                         
Interest and finance costs – including related party
   
(532
)
   
(3,393
)
   
(519
)
   
(222,163
)
   
(2,189,577
)
Interest income
   
-
     
4,243
     
7,985
     
31,589
     
34,976
 
Gain on derivative financial instruments
   
475,530
     
-
     
-
     
-
     
-
 
Foreign exchange (losses)/gains
   
(7,021
)
   
(8,539
)
   
89
     
(4,540
)
   
(29,321
)
Other, net
   
740
     
1,439
     
800
     
-
     
-
 
Total other income/(expenses), net
   
468,717
     
(6,250
)
   
8,355
     
(195,114
)
   
(2,183,922
)
 US Source Income Taxes
   
-
     
-
     
-
     
-
     
(21,640
)
Net income/(loss)
 
$
878,644
   
$
980,938
   
$
276,442
   
$
1,088,149
   
$
(1,753,533
)
                                         
EARNINGS/(LOSS) PER COMMON SHARE, basic & diluted
 
$
0.35
   
$
(0.28
)
 
$
(0.30
)
 
$
0.31
   
$
(0.03
)
                                         
Weighted average number of common shares outstanding, basic and diluted
   
2,400,000
     
2,400,000
     
2,400,000
     
2,662,383
     
67,735,195
 
                                         
CASH FLOW DATA:
                                       
Net Cash Provided by/ (Used in) Operating Activities
 
$
770,749
   
$
902,706
   
$
148,106
   
$
2,311,962
   
$
(2,343,809
)
Net Cash Used in Investing Activities
   
(7,549,281
)
   
-
     
-
     
(17,227,436
)
   
(35,472,173
)
Net Cash Provided by Financing Activities
   
7,615,000
     
-
     
-
     
18,087,133
     
42,183,946
 
                                         
SELECTED BALANCE SHEET DATA (as of period/year):
 
September 30, 2017
   
September 30, 2018
   
December 31, 2018
   
December 31, 2019
   
December 31, 2020
 
Total current assets
 
$
1,350,983
   
$
2,110,000
   
$
2,847,417
   
$
6,220,897
   
$
13,564,154
 
Vessel(s), net
   
7,366,935
     
7,070,404
     
6,995,350
     
23,700,029
     
58,045,628
 
Total assets
   
8,717,918
     
9,623,798
     
10,183,837
     
30,420,926
     
74,371,355
 
Total current liabilities
   
224,274
     
149,216
     
432,813
     
2,982,750
     
10,903,907
 
Total long-term debt, including current portion and related party debt, net of unamortized deferred financing fees
   
-
     
-
     
-
     
15,757,060
     
18,185,866
 
Common stock
   
2,400
     
2,400
     
2,400
     
3,318
     
131,212
 
Total shareholders' equity
   
8,493,644
     
9,474,582
     
9,751,024
     
13,204,011
     
52,383,619
 
Shares issued and outstanding
   
2,400,000
     
2,400,000
     
2,400,000
     
3,318,112
     
131,212,376
 
                                         

1


FLEET PERFORMANCE DATA:
 
Period from December 13, 2016 to
September 30, 2017
   
Year
ended
September 30, 2018
   
Three-months ended
December 31, 2018
   
Year
ended
December 31, 2019
   
Year ended
December 31, 2020
 
Number of vessels at the end of the year
   
1
     
1
     
1
     
3
     
6
 
Available days (1)
   
216
     
336
     
92
     
545
     
1,219
 
Ownership days (2)
   
222
     
365
     
92
     
556
     
1,405
 
Fleet utilization (3)
   
97
%
   
92
%
   
100
%
   
98
%    
87
%
                                         
OTHER OPERATIONAL METRICS:
                                       
Daily time charter equivalent (or TCE) (4)
 
$
8,969
   
$
11,677
   
$
11,864
   
$
10,471
   
$
9,765
 
EBITDA (4)
 
$
1,061,522
   
$
1,617,699
   
$
446,354
   
$
2,175,894
   
$
2,327,671
 
___________________________
(1) Available days are the Ownership days after subtracting off-hire days associated with major scheduled repairs, vessel upgrades and dry-dockings or special or intermediate surveys and major unscheduled repair and positioning days (which do not include ballast voyage days for which compensation has been received by the Company). The shipping industry uses Available days to measure the aggregate number of days in a period during which vessels are available to generate revenues. Our calculation of Available days may not be comparable to that reported by other companies.
(2) Ownership days are the total number of calendar days in a period during which we owned our fleet, or our Fleet.
(3) We calculate fleet utilization by dividing the number of our Available days during a period by the number of our Ownership days during that period.

(4) Non-GAAP Financial Information

Time Charter Equivalent ("TCE") Rate. TCE rate, is a measure of the average daily revenue performance of a vessel and is calculated by dividing total revenues (time charter and/or voyage revenues, net of charterers' commissions), less voyage expenses, by the number of Available Days during that period. Under a time charter, the charterer pays substantially all the vessel voyage related expenses. However, we may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during dry-docking or due to other unforeseen circumstances. The TCE rate is not a measure of financial performance under U.S. GAAP (non-GAAP measure), and should not be considered as an alternative to Time charter revenues, net, the most directly comparable GAAP measure, or any other measure of financial performance presented in accordance with U.S. GAAP. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a company's performance and assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance. Our calculation of TCE rates may not be comparable to that reported by other companies. The following table reflects the calculation of our TCE rates for the periods presented (amounts in U.S. dollars, except for Available Days):
(In U.S. dollars, except for Available days)
 
For the period ended September 30, 2017
   
Year ended
September 30, 2018
   
Three Months Ended
December 31, 2018
   
Year ended
December 31, 2019
   
Year ended
December 31, 2020
 
Vessel revenues, net
 
$
2,018,061
   
$
3,960,822
   
$
1,111,075
   
$
5,967,772
   
$
12,487,692
 
Voyage expenses
   
(80,853
)
   
(37,373
)
   
(19,556
)
   
(261,179
)
   
(584,705
)
Time charter equivalent revenues
   
1,937,208
     
3,923,449
     
1,091,519
     
5,706, 593
     
11,902,987
 
Available days
   
216
     
336
     
92
     
545
     
1,219
 
Time charter equivalent (TCE) rate
 
$
8,969
   
$
11,677
   
$
11,864
   
$
10,471
   
$
9,765
 

2


EBITDA. We define EBITDA as earnings before interest and finance costs (if any), net of interest income/(loss), taxes (when incurred), depreciation and amortization of deferred dry-docking costs. EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our operating performance. We believe that EBITDA assists our management and investors by providing useful information that increases the comparability of our performance operating from period to period and against the operating performance of other companies in our industry that provide EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, depreciation and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including EBITDA as a measure of operating performance benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength. EBITDA is not a measure of financial performance under U.S. GAAP, does not represent and should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following table reconciles EBITDA to net income, the most directly comparable U.S. GAAP financial measure, for the periods presented:
Reconciliation of Net Income/(Loss) to EBITDA
       
 
Period ended September 30,
 
Year ended September 30,
 
Three Months Ended December 31,
 
Year ended December 31,
   
Year ended December 31, 2020
 
(In U.S. Dollars)
2017
 
2018
 
2018
 
2019
   
2020
 
Net Income/(Loss)
 
$
878,644
   
$
980,938
   
$
276,442
   
$
1,088,149
   
$
(1,753,533
)
Depreciation and amortization
   
182,346
     
637,611
     
177,378
     
897,171
     
1,904,963
 
Interest and finance costs, net
   
532
     
(850
)
   
(7,466
)
   
190,574
     
2,154,601
 
US Source Income Taxes
   
-
     
-
     
-
     
-
     
21,640
 
EBITDA
 
$
1,061,522
   
$
1,617,699
   
$
446,354
   
$
2,175,894
   
$
2,327,671
 

B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
   Some of the following risks relate principally to the industry in which we operate. Other risks relate principally to ownership of our common stock. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results, cash available for dividends, as and if declared, or the trading price of our common stock.
Summary of Risk Factors
•
Charter hire rates for dry bulk and tanker vessels are volatile and have declined significantly since their historic highs and may remain at low levels or decrease in the future, which may adversely affect our earnings, revenues and our profitability.
•
Global economic conditions may continue to negatively impact the dry bulk and tanker sectors of the shipping industry.
•
The Company is exposed to fluctuating prices of oil and decreased demand for oil and petroleum products.
•
The operation of tankers has unique operational risks associated with the transportation of oil.
•
Seasonal fluctuations in the tanker and dry bulk industry demand could have a material adverse effect on our business, financial condition and results of operations and the amount of available cash with which we can pay dividends.
3


•
A shift in consumer demand from oil towards other energy sources or changes to trade patterns for refined oil products may have a material adverse effect on our business.
•
Risks involved with operating ocean-going vessels could affect our business and reputation, which could have a material adverse effect on our results of operations and financial condition.
•
The U.K.'s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.
•
Changes in the economic and political environment in China and policies adopted by the government to regulate its economy may have a material adverse effect on our business, financial condition and results of operations.
•
Acts of piracy on ocean-going vessels could adversely affect our business.
•
The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
•
Political instability, terrorist attacks, international hostilities and global public health threats can affect the seaborne transportation industry, which could adversely affect our business.
•
A cyber-attack could materially disrupt our business.
•
Major outbreaks of diseases (such as COVID-19) and governmental responses thereto could adversely affect our business.
•
If our vessels call on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government or other governmental authorities, it could lead to monetary fines or penalties and adversely affect our reputation and the market for our common shares.
•
Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and negatively impact our results of operations.
•
Regulations relating to ballast water discharge may adversely affect our revenues and profitability.
•
The IMO 2020 regulations may cause us to incur substantial costs and to procure low-sulfur fuel oil directly on the wholesale market for storage at sea and onward consumption on our vessels.
•
We are subject to laws and regulations, which can adversely affect our business, results of operations, cash flows and financial condition, and our ability to pay dividends (as and if declared).
•
Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
•
We are subject to international safety standards and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
•
Developments in safety and environmental requirements relating to the recycling of vessels may result in escalated and unexpected costs.
•
Maritime claimants could arrest our vessels, which could interrupt our cash flow and business.
•
Governments could requisition our vessels during a period of war or emergency resulting in a loss of earnings.
•
Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
•
Our business has inherent operational risks, which may not be adequately covered by insurance.
•
Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, charter terminations and an adverse effect on our business.
•
We are a recently formed company with a limited history of operations.
•
Our Fleet currently consists of nine dry bulk carriers and two tanker vessels and we are awaiting delivery of three dry bulk carriers. Any limitation in the availability or operation of these vessels could have a material adverse effect on our business, results of operations and financial condition.
•
We may not be able to re-charter or obtain new and favorable charters for our vessels, which could adversely affect our revenues and profitability.
•
We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
•
The failure of our charterers to meet their obligations under our charter agreement, on which we depend for our revenues, could cause us to suffer losses or otherwise adversely affect our business.
•
Our credit facilities contain, and we expect that any new or amended credit facility we may enter into will contain, restrictive covenants that limit, or may limit the future, our business and financing activities.
4


•
We are exposed to volatility in the London Interbank Offered Rate or LIBOR, and we may enter into derivative contracts, which can result in higher than market interest rates and charges against our income. If volatility in LIBOR occurs, it could affect our profitability, earnings and cash flow.
•
Our vessels operate under a mix of period time charters and trip time charters and any decrease in trip charter rates or indexes in the future may adversely affect our earnings.
•
We may not be able to obtain financing on acceptable terms, which may negatively impact our planned growth.
•
The Company has relied on financial support from Mr. Panagiotidis through related party loans, which may not be available to the Company in the future.
•
We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial and other obligations.
•
We cannot assure you that our Board will declare dividends.
•
We are dependent upon Castor Ships and Pavimar, which are related parties, for the management of our Fleet and business.
•
We may have difficulty managing our planned growth properly.
•
As we expand our business, we may be unable to improve our operating and financial systems and to recruit suitable employees and crew for our vessels.
•
Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results.
•
We operate secondhand vessels, and, as a result, we may incur increased operating costs which could adversely affect our earnings. Furthermore, as our vessels age, the risks associated with our vessels could adversely affect our ability to obtain profitable charters.
•
Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income and the value of our vessels.
•
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance ("ESG") policies may impose additional costs on us or expose us to additional risks.
•
We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.
•
A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could result in a higher tax rate on our worldwide earnings, which could result in a significant negative impact on our earnings and cash flows from operations.
•
We are dependent on our management and their ability to hire and retain key personnel, in particular our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis.
•
Our share price has recently been volatile and may continue to be volatile in the future, and as a result, investors in our common shares could incur substantial losses.
•
Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
•
Recent share issuances and the issuance of additional shares in the future may impact the price of our common shares and our ability to regain compliance with Nasdaq's minimum bid price requirement.
•
We have a continuing ATM program in effect, under which we may sell up to $10.0 million of our common shares.
•
We issued 918,112, 127,894,264 and 575,945,560 common shares during 2019, 2020 and 2021, respectively, through various transactions. Shareholders may experience significant dilution as a result of our offerings.
•
Future issuances or sales, or the potential for future issuances or sales, of our common shares may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.
•
We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate and case law.
•
We are incorporated in the Marshall Islands, and all of our officers and directors are non-U.S. residents. It may be difficult to serve legal process or enforce judgments against us, our directors or our management.
5


•
Anti-takeover provisions in our organizational documents and in our stockholder rights plan could have the effect of discouraging, delaying or preventing a merger or acquisition, or could make it difficult for our shareholders to replace or remove our current Board, which could adversely affect the market price of our common shares.
•
Our Chairman, Chief Executive Officer and Chief Financial Officer, who may be deemed to beneficially own, directly or indirectly, 100% of our Series B Preferred Shares, has control over us.
•
We are an "emerging growth company", and we cannot be certain if the reduced requirements applicable to emerging growth companies make our securities less attractive to investors.
•
U.S. tax authorities could treat us as a "passive foreign investment company", which could have adverse U.S. federal income tax consequences to U.S. shareholders.
•
We may have to pay tax on United States source income, which would reduce our earnings, cash from operations and cash available for distribution to our shareholders.
•
Our Series A Preferred Shares rank senior to our common shares with respect to dividends, distributions and payments upon liquidation, which could have an adverse effect on the value of our common shares.
•
We may not have sufficient cash from our operations to enable us to pay dividends on our Series A Preferred Shares following the payment of expenses and the establishment of any reserves.
•
The Series A Preferred Shares represent perpetual equity interests.
•
Our Series A Preferred Shares are subordinate to our indebtedness, and your interests could be diluted by the issuance of additional preferred shares, including additional Series A Preferred Shares, and by other transactions.
•
We may redeem the Series A Preferred Shares, and holders of Series A Preferred Shares may not be able to reinvest the redemption price they receive in a similar security.
•
Holders of Series A Preferred Shares have extremely limited voting rights.
•
Our ability to pay dividends on and to redeem our Series A Preferred Shares is limited by the requirements of Marshall Islands law.
Risk Related to Our Industry
Charter hire rates for dry bulk and tanker vessels are volatile and have declined significantly since their historic highs and may remain at low levels or decrease in the future, which may adversely affect our earnings, revenues and our profitability.
The dry bulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The degree of charter hire rate volatility among different types of dry bulk vessels has varied widely, and charter hire rates for dry bulk vessels have declined significantly from historically high levels. For example, in the past, time charter and spot market rates for dry bulk vessels have declined below operating costs of vessels. The Baltic Dry Index, or BDI, an index published by the Baltic Exchange Limited of shipping rates for 20 key dry bulk routes, fell 97% from a peak of 11,793 in May 2008 to a low of 290 in February 2016. While the BDI has since increased to 1960 on March 15, 2021, there can be no assurance that the dry bulk charter market will not decline further in the future.
The tanker industry is also both cyclical and volatile in terms of charter rates and profitability. Periodic adjustments to the supply of and demand for oil tankers cause the industry to be cyclical in nature. We expect continued volatility in market rates for our tanker vessels in the foreseeable future with a consequent effect on our liquidity as soon as the charters attached to those vessels expire. A worsening of current global economic conditions resulting from the COVID-19 pandemic and other factors may cause tanker charter rates to further decline and thereby adversely affect our ability to charter or re-charter our vessels or to sell them on the expiration or termination of their charters. Fluctuations in charter rates and vessel values result from changes in the supply and demand for tanker capacity and changes in the supply and demand for oil and oil products. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by water internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in charter rates are also unpredictable.
6


Factors that influence demand for vessel capacity include:
•
supply of and demand for energy resources, commodities, semi-finished and finished consumer and industrial products and oil and petroleum products;
•
changes in the exploration or production of energy resources, commodities, semi-finished and finished consumer and industrial products;
•
the location of regional and global exploration, production and manufacturing facilities;
•
the location of consuming regions for energy resources, commodities, semi-finished and finished consumer and industrial products;
•
the globalization of production and manufacturing;
•
global and regional economic and political conditions and developments, including armed conflicts and terrorist activities, embargoes and strikes;
•
developments in international trade;
•
changes in seaborne and other transportation patterns leading to repositioning and distances cargo is transported by sea;
•
pandemics, such as the COVID-19 outbreak;
•
environmental and other regulatory developments
•
with respect to tanker vessel demand, regional availability of refining capacity and inventories, competition from alternative sources of energy and the distance over which oil and oil products are to be moved by sea;
•
currency exchange rates; and
•
the weather.
Demand for our vessels is dependent upon economic growth in the world's economies, seasonal and regional changes in demand, changes in the capacity of the global dry bulk and tanker fleet and the sources and supply of dry bulk and wet cargo transported by sea. To the extent that the newbuilding deliveries exceed the scrapping rates of older vessels, the capacity of the global fleet of dry bulk and tanker vessels may exceed the economic growth and the resulting demand for vessel capacity. As such, adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.
Factors that influence the supply of both dry bulk and tanker vessel capacity include:
•
number of newbuilding orders and deliveries;
•
the number of shipyards and ability of shipyards to deliver vessels;
•
port and canal congestion;
•
scrapping of older vessels;
•
speed of vessels being operated;
7


•
vessel casualties;
•
with respect to tanker vessel supply, demand for alternative sources of energy and supply and demand for energy resources and oil and petroleum products; and
•
number of vessels that are out of service or laid up.
•
environmental concerns and regulations;
•
product imbalances (affecting the level of trading activity);
•
developments in international trade, including refinery additions and closures; and
•
port or canal congestion.
In addition to the prevailing and anticipated charter rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, the efficiency and age profile of the existing fleet in the market, and government and industry regulations of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.
Furthermore, a significant decrease in charter rates would cause asset values to decline, and we may have to record an impairment charge in our consolidated financial statements which could adversely affect our financial results. Because the market value of our vessels may fluctuate significantly, we may also incur losses when we sell vessels, which may adversely affect our earnings. If we sell vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel's carrying amount in our financial statements, resulting in a loss and a reduction in earnings.
Global economic conditions may continue to negatively impact the dry bulk and tanker sectors of the shipping industry.
In the current global economy, operating businesses are faced with tightening credit, weak demand for goods and services, and weak international liquidity conditions. There has similarly been a general decline in the willingness by banks and other financial institutions to extend credit, particularly in the shipping industry, due to the historically volatile asset values of vessels. As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it has been negatively affected by this decline. In particular, lower demand for dry bulk cargoes and crude oil and petroleum products as a result of the COVID-19 pandemic and resulting reduction in economic activity, as well as diminished trade credit available for the delivery of such cargoes have led to decreased demand for dry bulk and tanker vessels, creating downward pressure on charter rates and vessel values. Any further weakening in global economic conditions may have a number of adverse consequences for dry bulk and tanker and other shipping sectors, including, among other things:

•
low charter rates, particularly for vessels employed on short-term time charters or in the spot market;

•
decreases in the market value of vessels and limited second-hand market for the sale of vessels;

•
limited financing for vessels;

•
widespread loan covenant defaults; and

•
declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers.
The occurrence of one or more of these events could have a material adverse effect on our business, results of operations, cash flows and financial condition.
8


The Company is exposed to fluctuating prices of oil and decreased demand for oil and petroleum products.
Sustained periods of low oil prices typically result in reduced exploration and extraction because oil companies' capital expenditure budgets are subject to cash flow from such activities and are therefore sensitive to changes in energy prices. These changes in commodity prices can have a material effect on demand for our services, and periods of low demand can cause excess vessel supply and intensify the competition in the industry, which often results in vessels, particularly older and less technologically-advanced vessels, being idle for long periods of time. We cannot predict the future level of demand for our services or future conditions of the oil industry. Any decrease in exploration, development or production expenditures by oil companies could reduce our revenues and materially harm our business, results of operations and cash available for distribution.
The COVID-19 pandemic has in the past negatively impacted demand for oil and petroleum products. A worsening of current global economic conditions resulting from the COVID-19 pandemic and other factors may cause a decrease in demand for oil and petroleum products, which may have a material effect on demand for our services.
The operation of tankers has unique operational risks associated with the transportation of oil.
The operation of oil and petroleum products tankers is inherently risky. An oil spill may cause significant environmental damage. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. An oil spill could result in significant liability, including fines, penalties and criminal liability and remediation costs for natural resource damages under other federal, state and local laws, as well as third-party damages. As a result, the unique operational risks associated with transportation of oil could result in significantly more expensive insurance coverage and the associated costs of an oil spill could exceed the insurance coverage available to us. Further, the involvement of our vessels in an oil spill or other environmental disaster may harm our reputation as a safe and reliable dry bulk and tanker operator, which could have a material adverse effect on our results of operations and financial condition.
Additionally, compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil transported in tankers.
Seasonal fluctuations in the tanker and dry bulk industry demand could have a material adverse effect on our business, financial condition and results of operations and the amount of available cash with which we can pay dividends.
The tanker sector has historically exhibited seasonal variations in demand and, as a result, in charter rates. This seasonality may result in quarter-to-quarter volatility in our operating results. The tanker sector is typically stronger in the fall and winter months in anticipation of increased consumption of oil and petroleum products in the northern hemisphere during the winter months. As a result, our revenues from our tankers may be weaker during the fiscal quarters ending June 30 and September 30, and, conversely, revenues may be stronger in fiscal quarters ending December 31 and March 31.
The market for dry bulk transportation services is typically stronger in the fall months in anticipation of increased consumption of coal in the northern hemisphere during the winter months and the grain export season from North America. Similarly, the market for marine dry bulk transportation services is typically stronger in the spring months in anticipation of the South American grain export season due to increased distance traveled by vessels to their end destination known as ton mile effect, as well as increased coal imports in parts of Asia due to additional electricity demand for cooling during the summer months. Demand for marine dry bulk transportation services is typically weaker at the beginning of the calendar year and during the summer months. In addition, unpredictable weather patterns during these periods tend to disrupt vessel scheduling and supplies of certain commodities.
This seasonality in the tanker and dry bulk industry could have a material adverse effect on our business, financial condition and results of operations.
9


A shift in consumer demand from oil towards other energy sources or changes to trade patterns for refined oil products may have a material adverse effect on our business.
A shift in the consumer demand from oil and oil products towards other energy resources such as wind energy, solar energy, electricity or water energy would potentially affect the demand for our product tankers. This could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Seaborne trading and distribution patterns are primarily influenced by the relative advantage of the various sources of production, locations of consumption, pricing differentials and seasonality. Changes to the trade patterns of refined oil products may have a significant negative or positive impact on the ton-mile and therefore the demand for our product tankers. This could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Risks involved with operating ocean-going vessels could affect our business and reputation, which could have a material adverse effect on our results of operations and financial condition.
The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:
•
a marine disaster;
•
terrorism;
•
environmental accidents;
•
cargo and property losses and damage; and
•
business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions.
Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an oil spill or other environmental disaster may harm our reputation as a safe and reliable dry bulk and tanker operator, which could have a material adverse effect on our results of operations and financial condition.
The U.K.'s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.
On June 23, 2016, in a referendum vote commonly referred to as "Brexit," a majority of voters in the U.K. voted to exit the European Union. Since then, the U.K. and the EU have negotiated the terms of a withdrawal agreement, which was approved in October 2019 and ratified in January 2020. The U.K. formally exited the European Union on January 31, 2020, although a transition period remained in place until December 2020 during which the U.K. was subject to the rules and regulations of the EU while continuing to negotiate the parties' relationship going forward, including trade deals. On December 24, 2020, the U.K. government and the EU agreed to a trade deal ("Trade and Cooperation Agreement"), which went into effect on January 1, 2021, replacing the transitional agreements. The Trade and Cooperation Agreement sets out arrangements in certain areas such as trade in goods and in services, digital trade and intellectual property. Negotiations between the U.K. and the EU are expected to continue in relation to other areas which are not covered by the Trade and Cooperation Agreement. The long-term effects of Brexit will depend on the effects of the implementation and application of the Trade and Cooperation Agreement and any other relevant agreements between the U.K. and the EU. It is unclear what long-term economic, financial, trade and legal implications the withdrawal of the U.K. from the European Union would have and how such withdrawal would affect our business. In addition, Brexit may lead other European Union member countries to consider referendums regarding their European Union membership. Any of these events, along with any political, economic and regulatory changes that may occur, could cause political and economic uncertainty and harm our business and financial results.
10


Brexit contributes to considerable uncertainty concerning the current and future economic environment. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets.
Changes in the economic and political environment in China and policies adopted by the government to regulate its economy may have a material adverse effect on our business, financial condition and results of operations.
The Chinese economy differs from the economies of western countries in such respects as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, bank regulation, currency and monetary policy, rate of inflation and balance of payments position. Prior to 1978, the Chinese economy was a "planned economy". Since 1978, increasing emphasis has been placed on the utilization of market forces in the development of the Chinese economy. Annual and five-year State Plans are adopted by the Chinese government in connection with the development of the economy. Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that it exercises over the economy through State Plans and other measures. There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a "market economy" and enterprise reform. Limited price reforms were undertaken with the result that prices for certain commodities are principally determined by market forces. In addition, economic reforms may include reforms to the banking and credit sector and may produce a shift away from the export-driven growth model that has characterized the Chinese economy over the past few decades. Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based upon the outcome of such experiments. The level of imports to and exports from China could be adversely affected by the failure to continue market reforms or changes to existing pro-export economic policies. The level of imports to and exports from China may also be adversely affected by changes in political, economic and social conditions (including a slowing of economic growth) or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, internal political instability, changes in currency policies, changes in trade policies and territorial or trade disputes. A decrease in the level of imports to and exports from China could adversely affect our business, operating results and financial condition.
Acts of piracy on ocean-going vessels could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia and, in particular, the Gulf of Guinea region off Nigeria, which experienced increased incidents of piracy in recent years. Sea piracy incidents continue to occur, increasingly in the Sulu Sea and the Gulf of Guinea, with dry bulk and tanker vessels particularly vulnerable to such attacks. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping. The perception that our vessels are a potential piracy or terrorist target could have a material adverse impact on our business, financial condition and results of operations.
Further, if these piracy attacks occur in regions in which our vessels are deployed that insurers characterize as "war risk" zones or by the Joint War Committee as "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain, if available at all. In addition, crew costs, including costs that may be incurred to the extent we employ on-board security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, results of operations, cash flows and financial condition, and this may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
11


The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
We expect that our vessels will call in ports in areas where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims which could have an adverse effect on our business, results of operations, cash flows and financial condition.
Political instability, terrorist attacks, international hostilities and global public health threats can affect the seaborne transportation industry, which could adversely affect our business.
We conduct most of our operations outside of the United States, or the U.S., and our business, results of operations, cash flows, financial condition and ability to pay dividends, if any, in the future may be adversely affected by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the effects of political conflicts.
Currently, the world economy faces a number of challenges, including public health concerns stemming from the ongoing COVID-19 pandemic, trade tensions between the United States and China and between the United States and the European Union, continuing turmoil and hostilities in the Middle East, the Korean Peninsula, North Africa, Venezuela, Iran and other geographic areas and countries, continuing economic weakness in the European Union, geopolitical events such as the withdrawal of the U.K. from the European Union ("Brexit"), continuing threat of terrorist attacks around the world, and slowing growth in China.
The threat of future terrorist attacks around the world, continues to cause uncertainty in the world's financial markets and international commerce and may affect our business, operating results and financial condition. Continuing conflicts and recent developments in the Middle East, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets and international commerce. Additionally, any escalations between the United States and Iran could result in retaliation from Iran that could potentially affect the shipping industry, through increased attacks on vessels in the Strait of Hormuz (which already experienced an increased number of attacks on and seizures of vessels in 2019 and 2020). These uncertainties could also adversely affect our ability to obtain additional financing or insurance on terms acceptable to us or at all. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.
Additionally, in Europe, large sovereign debts and fiscal deficits, low growth prospects and high unemployment rates in a number of countries have contributed to the rise of Eurosceptic parties, which would like their countries to leave the Euro. Brexit further increases the risk of additional trade protectionism. Brexit, or similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.
Also, China and the US have implemented certain increasingly protective trade measures with continuing trade tensions, including significant tariff increases, between these countries. These trade barriers to protect domestic industries against foreign imports, depress shipping demand. Protectionist developments, or the perception they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay any cash distributions to our shareholders.
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In addition, public health threats such as influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, Japan and South Korea, which may even become pandemics, such as the COVID-19 virus, could lead to a significant decrease of demand for the transportation of dry bulk commodities, crude-oil and other petroleum products. Such events have and may also in the future adversely impact our operations, including timely rotation of our crews, the timing of completion of any outstanding or future newbuilding projects or repair works in drydock as well as the operations of our customers. Delayed rotation of crew may adversely affect the mental and physical health of our crew and the safe operation of our vessels as a consequence.
A cyber-attack could materially disrupt our business.
We rely on information technology systems and networks in our operations and administration of our business. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. Our business operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber‐attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release of information or alteration of information in our systems. Any such attack or other breach of our information technology systems could have a material adverse effect on our business and results of operations. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
    In addition, recent action by the IMO's Maritime Safety Committee and United States agencies indicates that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. For example, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might require us to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of such regulations is hard to predict at this time.
Major outbreaks of diseases (such as COVID-19) and governmental responses thereto could adversely affect our business.
Since the beginning of calendar year 2020, the outbreak of the COVID-19 pandemic around the world has negatively affected economic conditions, the supply chain, the labor market, the demand for shipping both regionally and globally, has caused delays and uncertainties relating to newbuildings, dry-dockings and other functions of shipyards, and may continue to impact our operations and the operations of our customers and suppliers. The COVID-19 pandemic has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus, including travel bans, quarantines and other emergency public health measures, and a number of countries implemented lockdown measures. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial markets. If the COVID-19 pandemic continues on a prolonged basis or becomes more severe, the adverse impact on the global economy and the rate environment for dry bulk and tanker vessels may deteriorate further and our operations and cash flows may be negatively impacted. The extent of COVID-19's continuous impact on our financial and operational results, which could be material in the long run, will depend on the length of time that the pandemic continues, the ability to effectively vaccinate a large percentage of the population and whether subsequent waves of the infection happen globally or in certain geographic regions. Uncertainties regarding the economic impact of the ongoing COVID-19 pandemic are likely to result in sustained market volatility, which could impact our business, financial condition and cash flows to a greater extent. Governments are approving large stimulus packages to mitigate the effects of the sudden decline in economic activity caused by the pandemic; however, we cannot predict the extent to which these measures will be sufficient to restore or sustain the business and financial condition of companies in the shipping industry. These measures, though contemplated to be temporary in nature, may continue and increase as countries attempt to contain the outbreak or any reoccurrences thereof.
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At this stage, it is difficult to determine the full impact of COVID-19 on our business in the long run. Effects of the current ongoing pandemic have included or may include, among others:

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deterioration of economic conditions and activity and of demand for shipping;

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operational disruptions to us or our customers due to worker health risks and the effects of new regulations, directives or practices implemented in response to the pandemic (such as travel restrictions for individuals and vessels and quarantining and physical distancing);

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potential delays in (a) the loading and discharging of cargo on or from our vessels, (b) vessel inspections and related certifications by class societies, customers or government agencies and (c) maintenance, modifications or repairs to, or dry-docking of, our existing vessels due to worker health or other business disruptions;

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reduced cash flow and financial condition, including potential liquidity constraints;

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credit tightening or declines in global financial markets, including to the prices of our publicly traded securities and the securities of our peers, could make it more difficult for us to access capital;

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potential reduced ability to opportunistically sell any of our vessels on the second-hand market, either as a result of a lack of buyers or a general decline in the value of second-hand vessels;

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potential decreases in the market values of our vessels and any related impairment charges or breaches relating to vessel-to-loan financial covenants;

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potential disruptions, delays or cancellations in the construction of new vessels, which could reduce our future growth opportunities;

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difficulty of our crew in embarking and disembarking on our ships due to quarantine restrictions placed on persons and limitations on commercial aviation and other forms of public transportation; although the restrictions have in certain cases delayed crew embarking and disembarking on our ships, they have not functionally affected our ability to sufficiently crew our vessels;

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international transportation of personnel could be limited or otherwise disrupted. In particular, our crews generally work on a rotation basis, relying largely on international air transport for crew changes plan fulfillment. Any such disruptions could impact the cost of rotating our crew, and possibly impact our ability to maintain a full crew synthesis on-board all our vessels at any given time. It may also be difficult for our in-house technical teams to travel to shipyards to observe vessel maintenance, and we may need to hire local experts, which local experts may vary in skill and are difficult to supervise remotely for work we ordinarily address in-house; and

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potential non-performance by counterparties relying on force majeure clauses and potential deterioration in the financial condition and prospects of our customers or other business partners.
The ongoing COVID-19 pandemic and measures to contain its spread have negatively impacted regional and global economies and trade patterns in markets in which we operate, the way we operate our business, and the businesses of our charterers and suppliers. These negative impacts could continue or worsen, even after the pandemic itself diminishes or ends. Companies, including us, have also taken precautions, such as requiring employees to work remotely and imposing travel restrictions, while some other businesses have been required to close entirely. Moreover, we face significant risks to our onshore or offshore personnel and operations due to the COVID-19 pandemic. Our crews face risk of exposure to COVID-19 as a result of travel to ports in which cases of COVID-19 have been reported. Our shore-based personnel likewise face risk of such exposure, as we maintain offices in areas that have been impacted by the spread of COVID-19.
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Measures against COVID-19 in a number of countries have restricted crew rotations on our vessels, which may continue or become more severe. As a result, in 2020, we experienced and may continue to experience disruptions to our normal vessel operations caused by deviation time associated with positioning our vessels to countries in which we can undertake a crew rotation in compliance with such measures. Delays in crew rotations have led to issues with crew fatigue and may continue to do so, which may result in delays or other operational issues. We have had and expect to continue to have increased expenses due to incremental fuel consumption and days in which our vessels are unable to earn revenue in order to deviate to certain ports on which we would ordinarily not call during a typical voyage. Although our vessels' deviations / repositioning and/or delays in ports that are or will be open for crew rotations should be considered as the most notable impact, we have incurred and should also continue to expect to incur considerable expenses in relation to health protocols imposed by both departure and arrival countries for the incoming and outgoing of crew members, which should be strictly followed (i.e. repeated PCR tests, quarantine periods up to 21days, governmental special permissions and/or visas, personal protective equipment etc.). Furthermore, reduced flights availability, limitation of selected routes for our flight schedule and imposed health measures by air carrier companies, caused us and may continue to cause us significant increases in the average airfare costs.
The impact of the ongoing COVID-19 pandemic has also resulted in reduced industrial activity in China with temporary closures of factories and other facilities, labor shortages and restrictions on travel. We believe these disruptions along with other seasonal factors, including lower demand for some of the cargoes we carry such as iron ore and coal, have contributed to lower dry bulk rates in 2020.
Organizations across industries, including ours, are rightly focusing on their employees' well-being, whilst making sure that their operations continue undisrupted and at the same time, adapting to the new ways of operating. As such employees are encouraged or even required to operate remotely which significantly increases the risk of cyber security attacks.
While we cannot fully assess the overall impact that the ongoing COVID-19 pandemic will have on our financial condition and results of operations and on the dry bulk and tanker industries in general in the long run, we assess that the dry bulk and tanker charter rates have been reduced significantly as a result of the ongoing COVID-19 pandemic and that the shipping industry in general and our Company specifically are likely to continue to be exposed to volatility in the near to medium term. Indicatively, vessels in our Fleet which came up for charter renewal in the 2020 were employed at comparably less favorable charter rates than those achieved during 2019 and those expected before the ongoing COVID-19 pandemic which had a negative impact on voyage revenues earned in 2020.
Further, containment measures and quarantine restrictions adopted by many countries worldwide have caused significant impact on our ability to embark and disembark crew members and on our seafarers themselves. As a result, since the outbreak of COVID-19 and as of the date of this annual report, we have encountered certain prolonged delays and surrounding complexities in embarking and disembarking crew onto our ships which further resulted in increased operational costs and decreased revenues by reason of off-hires associated with crew rotation and related logistical complications associated with supplying our vessels with spares or other supplies.
The occurrence or continued occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash flows, financial condition, value of our vessels, and ability to pay dividends (as and if declared).
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If our vessels call on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government or other governmental authorities, it could lead to monetary fines or penalties and adversely affect our reputation and the market for our common shares.
While none of our vessels have called on ports located in countries or territories that are the subject of country-wide or territory-wide sanctions or embargoes imposed by the U.S. government or other governmental authorities ("Sanctioned Jurisdictions") in violation of sanctions or embargo laws in 2020, and although we intend to maintain compliance with all applicable sanctions and embargo laws, and we endeavor to take precautions reasonably designed to mitigate such risks, it is possible that, in the future, our vessels may call on ports located in Sanctioned Jurisdictions on charterers' instructions and/or without our consent. If such activities result in a violation of sanctions or embargo laws, we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our ordinary shares could adversely affected.
Sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or expanded over time. Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the future the subject of sanctions imposed by the governments of the U.S., EU, and/or other international bodies. If we determine that such sanctions require us to terminate existing or future contracts to which we, or our subsidiaries, are party or if we are found to be in violation of such applicable sanctions, our results of operations may be adversely affected, or we may suffer reputational harm.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, any such violation could result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our common shares may adversely affect the price at which our common shares trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. Investor perception of the value of our common shares may also be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in t countries or territories that we operate in.
Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and negatively impact our results of operations.
The hull and machinery of every commercial vessel must be certified as being "in class" by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention.
A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel's machinery may be placed on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. We expect our vessels to be on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Most vessels are also required to be dry-docked, or inspected by divers, every two to three years for inspection of its underwater parts.
While the Company believes that it has adequately budgeted for compliance with all currently applicable safety and other vessel operating requirements, newly enacted regulations in the future applicable to the Company and its vessels may result in significant and unanticipated expense in the future. If any vessel does not maintain its class or fails any annual, intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.
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Regulations relating to ballast water discharge may adversely affect our revenues and profitability.
The IMO has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel's ballast water. Depending on the date of the International Oil Pollution Prevention (IOPP) renewal survey, existing vessels constructed before September 8, 2017 must comply with the updated D-2 standard on or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ships constructed on or after September 8, 2017 are to comply with the D-2 standards on or after September 8, 2017.
Currently, our vessels will be required to comply with the regulation at our IOPP renewal survey scheduled for August 8, 2022 for the Magic P, July 15, 2022 for the Magic Moon and June 13, 2022 for the Magic Rainbow. The costs of compliance may be substantial and adversely affect our revenues and profitability. The eight remaining vessels in our Fleet and the vessels that we expect to take delivery of pursuant to our previously entered acquisition transactions are currently in compliance with this regulation.
Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit ("VGP") program and U.S. National Invasive Species Act ("NISA") are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act ("VIDA"), which was signed into law on December 4, 2018, requires that the EPA develop national standards of performance for approximately 30 discharges, similar to those found in the VGP within two years. On October 26, 2020, the EPA published a Notice of Proposed Rulemaking for Vessel Incidental Discharge National Standards of Performance under VIDA. Within two years after the EPA publishes its final Vessel Incidental Discharge National Standards of Performance, the U.S. Coast Guard must develop corresponding implementation, compliance and enforcement regulations regarding ballast water. The new regulations could require the installation of new equipment, which may cause us to incur substantial costs and to the extent we are not able to pass these costs on to our customers may materially and adversely affect our results of operations and/or cash flows.
The IMO 2020 regulations may cause us to incur substantial costs and to procure low-sulfur fuel oil directly on the wholesale market for storage at sea and onward consumption on our vessels.
Effective January 1, 2020, the IMO implemented a new regulation for a 0.50% global sulfur cap on emissions from vessels. Under this new global cap, vessels must use marine fuels with a sulfur content of no more than 0.50% against the former regulations specifying a maximum of 3.50% sulfur in an effort to reduce the emission of sulfur oxide into the atmosphere.
Although the cost of low sulfur marine fuels has remained relatively low in 2020, we may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require, among others, the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
Currently, none of our vessels are equipped with scrubbers and, as of January 1, 2020, we have transitioned to burning IMO compliant fuels. We continue to evaluate different options in complying with IMO and other rules and regulations. Low sulfur fuel is more expensive than standard marine fuel containing 3.5% sulfur content and may become more expensive or difficult to obtain as a result of increased demand. Although the cost differential between low sulfur fuel and standard marine fuel in 2020 was less than anticipated, that differential has increased during the first quarter of 2021. If the cost differential between low sulfur fuel and high sulfur fuel is significantly higher than anticipated in the future, or if low sulfur fuel is not available at ports on certain trading routes, it may not be feasible or competitive to operate our vessels on certain trading routes without installing scrubbers or without incurring deviation time to obtain compliant fuel. Scrubbers may not be available to be installed on such vessels at a favorable cost or at all if we seek them at a later date.
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Fuel is a significant, if not the largest, expense in our shipping operations when vessels are under voyage charter and is an important factor in negotiating charter rates. Our operations and the performance of our vessels, and as a result our results of operations, cash flows and financial position, may be negatively affected to the extent that compliant sulfur fuel oils are unavailable, of low or inconsistent quality, if de-bunkering facilities are unavailable to permit our vessels to accept compliant fuels when required, or upon occurrence of any of the other foregoing events. Costs of compliance with these and other related regulatory changes may be significant and may have a material adverse effect on our future performance, results of operations, cash flows and financial position. As a result, an increase in the price of fuel beyond our expectations may adversely affect our profitability at the time of charter negotiation. Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.
While we carry cargo insurance to protect us against certain risks of loss of or damage to the procured commodities, we may not be adequately insured to cover any losses from such operational risks, which could have a material adverse effect on us. Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, results of operations, cash flows and financial condition and our available cash.
We are subject to laws and regulations, which can adversely affect our business, results of operations, cash flows and financial condition, and our ability to pay dividends (as and if declared).
Our operations are subject to numerous international, national, state and local laws, regulations, treaties and conventions in force in international waters and the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These regulations include, but are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Air Act, the U.S. Clean Water Act and the U.S. Maritime Transportation Security Act of 2002, or the MTSA, and treaties and conventions of the United Nations International Maritime Organization, or the IMO, including the International Convention for the Prevention of Pollution from Ships of 1973, as from time to time amended and generally refer to as MARPOL, the International Convention for the Safety of Life at Sea of 1974, or the SOLAS Convention, and the International Convention on Load Lines of 1966. Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or implementation of operational changes and may affect the resale value or useful lives of our vessels. These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations.
Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the U. S. Furthermore, the 2010 explosion of the Deepwater Horizon and the subsequent release of oil into the Gulf of Mexico, or other similar events, may result in further regulation of the shipping and offshore industry, and modifications to statutory liability schemes, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. An oil spill could result in significant liability, including fines, penalties and criminal liability and remediation costs for natural resource damages under other federal, state and local laws, as well as third-party damages.
Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
Due to concern over the risk of climate change, a number of countries and the IMO have adopted regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy. In addition, although the emissions of greenhouse gases from international shipping currently are not subject to the Paris Agreement (discussed below in "Item 4. Information on the Company—B. Business Overview—Environmental and Other Regulations in the Shipping Industry—Greenhouse Gas Regulation"), or the Kyoto Protocol to the United Nations Framework Convention on Climate Change, that required adopting countries to implement national programs to reduce emissions of certain gases, a new treaty may be adopted in the future that includes restrictions on shipping emissions.
Adverse effects upon the oil industry relating to climate change and greenhouse gas restrictions may also adversely affect demand for our tanker services.
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We are subject to international safety standards and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
The operation of our vessels is affected by the requirements set forth in the International Safety Management Code, or the ISM Code, promulgated by the IMO under the SOLAS Convention. The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation of vessels and describing procedures for dealing with emergencies.  In addition, vessel classification societies impose significant safety and other requirements on our vessels. The failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
Developments in safety and environmental requirements relating to the recycling of vessels may result in escalated and unexpected costs.
The 2009 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, or the Hong Kong Convention, aims to ensure ships, being recycled once they reach the end of their operational lives, do not pose any unnecessary risks to the environment, human health and safety. The Hong Kong Convention has yet to be ratified by the required number of countries to enter into force. Upon the Hong Kong Convention's entry into force, each ship sent for recycling will have to carry an inventory of its hazardous materials. The hazardous materials, whose use or installation are prohibited in certain circumstances, are listed in an appendix to the Hong Kong Convention. Ships will be required to have surveys to verify their inventory of hazardous materials initially, throughout their lives and prior to the ship being recycled. The Hong Kong Convention, which is currently open for accession by IMO Member States, will enter into force 24 months after the date on which 15 IMO Member States, representing at least 40% of world merchant shipping by gross tonnage, have ratified or approved accession. As of the date of this annual report, 15 countries have ratified or approved accession of the Hong Kong Convention but the requirement of 40% of world merchant shipping by gross tonnage has not yet been satisfied.
On November 20, 2013, the European Parliament and the Council of the EU adopted the Ship Recycling Regulation, which retains the requirements of the Hong Kong Convention and requires that certain commercial seagoing vessels flying the flag of an EU Member State may be recycled only in facilities included on the European list of permitted ship recycling facilities.
Apart from that, any vessel, including ours, is required to set up and maintain an Inventory of Hazardous Materials ("IHM") from December 31, 2018 for EU flagged new ships and from December 31, 2020 for EU flagged existing ships and Non-EU flagged ships calling at a port or anchorage of an EU member state. Such a system includes information on the hazardous materials with a quantity above the threshold values specified in relevant EU Resolution and are identified in the ship's structure and equipment. This inventory should be properly maintained and updated, especially after repairs, conversions or unscheduled maintenance on board the ship.
These regulatory developments, when implemented, may lead to cost escalation by shipyards, repair yards and recycling yards. This may then result in a decrease in the residual scrap value of a vessel, and a vessel could potentially not cover the cost to comply with latest requirements, which may have an adverse effect on our future performance, results of operations, cash flows and financial position.
Maritime claimants could arrest our vessels, which could interrupt our cash flow and business.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by "arresting" or "attaching" a vessel through foreclosure proceedings. The arrest or attachment of our vessels could result in a significant loss of earnings for the related off-hire period. In addition, in jurisdictions where the "sister ship" theory of liability applies, such as South Africa, a claimant may arrest the vessel that is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. In countries with "sister ship" liability laws, claims might be asserted against us or any of our vessels for liabilities of other vessels that we will then own.
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Governments could requisition our vessels during a period of war or emergency resulting in a loss of earnings.
A government of a vessel's registry could requisition for title or seize a vessel. Requisition for title occurs when a government takes control of a vessel and becomes the owner. A government could also requisition a vessel for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of our vessels could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points. Inspection procedures may result in the seizure of contents of our vessels, delays in the loading, offloading, trans-shipment or delivery and the levying of customs duties, fines or other penalties against us.
It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition and results of operations.
Our business has inherent operational risks, which may not be adequately covered by insurance.
Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, environmental accidents, war, terrorism, piracy and other circumstances or events. In addition, transporting cargoes across a wide variety of international jurisdictions creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts, the potential for changes in tax rates or policies, and the potential for government expropriation of our vessels. Any of these events may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
In the event of a casualty to our vessels or other catastrophic event, we will rely on our insurance to pay the insured value of the vessel or the damages incurred. We procure insurance for our vessels employed under time charters against those risks that we believe the shipping industry commonly insures against. This insurance includes marine hull and machinery insurance, protection and indemnity insurance, which include pollution risks and crew insurance, and war risk insurance. Currently, the amount of coverage for liability for pollution, spillage and leakage available to us on commercially reasonable terms through protection and indemnity associations and providers of excess coverage is $1 billion per occurrence.
We maintain hull and machinery insurance, protection and indemnity insurance for our vessels, which provides environmental damage and pollution insurance coverage and war risk insurance. We do not maintain, for our vessels, insurance against loss of hire, which covers business interruptions that result from the loss of use of a vessel. We may not be adequately insured against all risks. We may not be able to obtain adequate insurance coverage for our Fleet in the future, and we may not be able to obtain certain insurance coverages. The insurers may not pay particular claims. Our insurance policies contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our revenues. Moreover, insurers may default on claims they are required to pay.
We cannot assure you that we will be adequately insured against all risks or that we will be able to obtain adequate insurance coverage at reasonable rates for our vessels in the future. For example, in the past more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. Additionally, our insurers may refuse to pay particular claims. Any significant loss or liability for which we are not insured could have a material adverse effect on our financial condition.
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Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, charter terminations and an adverse effect on our business.
We may operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.
Risk Related To Our Company
We are a recently formed company with a limited history of operations.
We are a recently formed company and have a limited performance record, operating history and historical financial statements upon which you can evaluate our operations or our ability to implement and achieve our business strategy. We cannot assure you that we will be successful in implementing our business strategy. Up to September 4, 2019, we had had only one vessel in our Fleet with a relatively short operating history, and as such, we may face certain operational challenges not faced by companies with a longer operating history and more vessels. As we continue to expand our Fleet, we cannot assure you that we will be able to successfully integrate the additional vessels that we have agreed to purchase when they are delivered to us or that we may purchase in the future.
Our Fleet currently consists of nine dry bulk carriers and two tanker vessels and we are awaiting delivery of three dry bulk carriers. Any limitation in the availability or operation of these vessels could have a material adverse effect on our business, results of operations and financial condition.
Our Fleet currently consists of nine dry bulk carriers and two tankers and, upon the completion of our recently announced acquisitions, our Fleet will consist of twelve dry bulk carriers and two tankers. If any of our vessels is unable to generate revenues as a result of off-hire time, early termination of the time charter in effect, delays in the delivery of the recently acquired vessels or failure to secure new charters at charter hire rates as favorable as our average historical rates or at all, our future liquidity, cash flows, results of operations, and financial condition could be materially adversely affected.
We may not be able to re-charter or obtain new and favorable charters for our vessels, which could adversely affect our revenues and profitability.
Our vessels are currently employed solely on time charters and may, from time to time in the future, be employed under voyage charters. Our ability to renew charters or obtain new charters will depend on the prevailing market conditions at the time.
If we are not able to obtain new charters, either on time charter or in the spot market, in direct continuation with our existing charters or if new charters are entered into at rates substantially below the existing rates or on terms otherwise less favorable compared to the existing charter terms, our revenues and profitability could be adversely affected and we may have difficulty meeting our working capital and debt obligations or paying dividends in the future.
21


We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
We have entered into, and may enter into in the future, various contracts, including charter agreements, shipbuilding contracts and credit facilities. Such agreements subject us to counterparty risks. The ability of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses. For example, the combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of our charterers to make charter payments to us. In addition, in depressed market conditions, our charterers and customers may no longer need a vessel that is then under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The failure of our charterers to meet their obligations under our charter agreement, on which we depend for our revenues, could cause us to suffer losses or otherwise adversely affect our business.
We expect to employ our vessels under short-term, medium or long-term charter agreements as well as in the spot voyage market. The ability and willingness of each of our counterparties to perform their obligations under a time charter, spot charter or other agreement with us, will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the dry bulk and tanker industries and the overall financial condition of the counterparties. In addition, in depressed market conditions, there have been reports of charterers renegotiating their charters or defaulting on their obligations under charters. Our customers may fail to pay charter hire or attempt to renegotiate charter rates. Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters may be at lower rates. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends, if any, in the future.
Our credit facilities contain, and we expect that any new or amended credit facility we may enter into will contain, restrictive covenants that limit, or may limit the future, our business and financing activities.
The operating and financial restrictions and covenants in our credit agreements with Alpha Bank S.A., Chailease International Financial Services Co. Ltd. and Hamburg Commercial AG, and any new or amended credit facility we may enter into in the future, could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities.
For example, our current facilities require the consent of our lenders to:

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incur or guarantee indebtedness outside of our ordinary course of business;

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charge, pledge or encumber our vessels;

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change the flag, class, management or ownership of our vessels;

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change the commercial and technical management of our vessels;
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•
declare or pay any dividends or other distributions at a time when the Company has an Event of Default or the payment of such distribution would cause an Event of Default;

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form or acquire any subsidiaries;

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make any investments in any person, asset, firm, corporation, joint venture or other entity;

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merge or consolidate with any other person; and

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sell or change the beneficial ownership or control of our vessels.
Additionally, it is an event of default under one or more of our existing facilities if, among other things, (i) the registration of vessels under the laws and flag of the relevant flag state is cancelled or terminated without the prior written consent of the lender, (ii) there has been a change of control directly or indirectly in our subsidiaries or us, or (iii) there is a change in management of our vessels without the prior written consent of the respective lender.
Our facilities also require us to comply with certain financial covenants related to (i) maintaining a certain minimum level of free cash on a pledged deposit account and (ii) maintaining a certain security requirement ratio, which is the ratio of the aggregate market value of the mortgaged vessels plus the value of any additional security and value of the pledged deposit to the aggregate principal amounts due under the facilities.
Our ability to comply with the covenants and restrictions contained in our current or future credit facilities may be affected by events beyond our control, including prevailing economic, financial and industry conditions, interest rate developments, changes in the funding costs of our banks and changes in vessel earnings and asset valuations. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we are in breach of any of the restrictions, covenants, ratios or tests in our current or future credit facilities, or if we trigger a cross-default contained in our current or future credit facilities, a significant portion of our obligations may become immediately due and payable. We may not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, obligations under our current and future credit facilities are and are expected to be secured by our vessels, and if we are unable to repay debt under our current or future credit facilities, the lenders could seek to foreclose on those assets.
Furthermore, any contemplated vessel acquisitions will have to be at levels that do not impair the required ratios set out above. The global economic downturn that occurred within the past several years had an adverse effect on vessel values, which may occur again if an economic slowdown arises in the future. If the estimated asset values of the vessels in our Fleet decrease, such decreases may limit the amounts we can draw down under our future credit facilities to purchase additional vessels and our ability to expand our Fleet. In addition, we may be obligated to prepay part of our outstanding debt in order to remain in compliance with the relevant covenants in our current or future credit facilities. If funds under our current or future credit facilities become unavailable as a result of a breach of our covenants or otherwise, we may not be able to perform our business strategy which could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends.
We are exposed to volatility in the London Interbank Offered Rate or LIBOR, and we may enter into derivative contracts, which can result in higher than market interest rates and charges against our income. If volatility in LIBOR occurs, it could affect our profitability, earnings and cash flow.
LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to be eliminated or to perform differently than in the past. The consequences of these developments cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness and obligations. The amount outstanding under our senior secured credit facilities has been, and amounts under additional credit facilities that we have entered into after December 31, 2020 including the $15.3 Million Term Loan Facility (as described in "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Borrowing Activities") or may enter in the future will generally be, unless a replacement rate is introduced, advanced at a floating rate based on LIBOR, which has been volatile in prior years and can affect the amount of interest payable on our debt, and in turn, could have an adverse effect on our earnings and cash flow. In addition, in recent years, LIBOR has been at relatively low levels, and may rise in the future as the current low interest rate environment comes to an end. Our financial condition could be materially adversely affected at any time that we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and any other financing arrangements we may enter into in the future. Moreover, we currently do not have any derivative instruments but even if we enter into interest rate swaps or other derivative instruments for purposes of managing our interest rate exposure, our hedging strategies may not be effective and we may incur substantial losses.
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LIBOR has historically been volatile, with the spread between LIBOR and the prime lending rate widening significantly at times. These conditions are the result of the disruptions in the international credit markets. Because the interest rates borne by our variable interest-bearing outstanding indebtedness fluctuate with changes in LIBOR, if this volatility were to occur, it would affect the amount of interest payable on our variable interest debt, which in turn, could have an adverse effect on our profitability, earnings and cash flow.
Furthermore, the calculation of interest in most financing agreements in our industry has been based on published LIBOR rates. Due in part to uncertainty relating to the LIBOR calculation process in recent years, it is planned that LIBOR will be phased out in the future. As a result, lenders have insisted on provisions that entitle the lenders, following consultation with the borrowers and in the absence of agreement, in their discretion, and under certain market disruption events, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate. As such, our lending costs could increase significantly, which would have an adverse effect on our profitability, earnings and cash flow.
In addition, the banks currently reporting information used to set LIBOR will likely stop such reporting after 2021, when their commitment to reporting information ends. However, on November 30, 2020 the administrator of LIBOR, ICE Benchmark Administration ("IBA"), announced that it would consult on ceasing to determine one-week and two-month U.S. dollar LIBOR with effect from December 31, 2021 deadline but ceasing to determine the remaining U.S. dollar LIBOR tenors on June 30, 2023. This announcement coincided with an announcement by the International Swaps and Derivatives Association ("ISDA") that the IBA announcement was not a triggering event which would set the spread to be used in its derivative contracts as part of the risk-free rate determination process. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or "SOFR". The impact of such a transition from LIBOR to SOFR could be significant for us.
In order to manage our exposure to interest rate fluctuations, we may from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The use of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position. Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other alternative rates. Entering into swaps and derivatives transactions is inherently risky and presents various possibilities for incurring significant expenses. Such risk may have an adverse effect on our financial condition and results of operations.
Our vessels operate under a mix of period time charters and trip time charters and any decrease in trip charter rates or indexes in the future may adversely affect our earnings.
Our vessels have historically operated mostly under period time charters but may, from period to period, be placed on the trip time charter market, exposing us to fluctuations in trip market charter rates. Further, we may employ any additional vessels that we acquire in the trip time charter market.
Although the number of vessels in our Fleet that participate in the trip time charter market vary from time to time, we anticipate that some portion of our Fleet will participate in this market. As a result, our financial performance may be significantly affected by conditions in the trip time charter market and only our vessels that may operate under fixed-rate period time charters may, during the period such vessels operate under such period time charters, provide a fixed source of revenue to us.
Historically, the cargo markets have been volatile as a result of the many conditions and factors that can affect the price, supply of and demand for dry bulk and tanker vessel capacity. The weak global economic trends may further reduce demand for transportation of dry bulk cargoes and for energy consumption and the demand for the carriage of oil products in our tanker vessels over longer distances, which may materially affect our revenues, profitability and cash flows. The trip charter market may fluctuate significantly based upon supply of and demand of vessels and cargoes. The successful operation of our vessels in the competitive trip charter market depends upon, among other things, obtaining profitable trip charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. The trip charter market is very volatile, and, in the past, there have been periods when trip charter rates have declined below the operating cost of vessels. If future trip charter rates decline, then we may be unable to operate our vessels which may trade in the trip market profitably, or meet our debt and other working capital obligations. Furthermore, as charter rates for trip charters are fixed for a single voyage, which may last up to several weeks, during periods in which trip charter rates are rising, we will generally experience delays in realizing the benefits from such increases.
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We may not be able to obtain financing on acceptable terms, which may negatively impact our planned growth.
As a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the ability to obtain money from the credit markets has become more difficult as many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt and reduced, and in some cases ceased, to provide funding to borrowers. Due to these factors, we cannot be certain that financing will be available if needed and to the extent required, on acceptable terms. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to enhance our existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise.
The Company has relied on financial support from Mr. Panagiotidis through related party loans, which may not be available to the Company in the future.
From time to time, we have obtained loans from our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, to meet vessel purchase obligations of the Company. These loans may not be available to the Company in the future. Even if we are able to borrow money from such parties, such borrowing could create a conflict of interest of management to the extent they also act as lenders to the Company.
We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial and other obligations.
We are a holding company and have no significant assets other than the equity interests in our subsidiaries. Our subsidiaries own all of our existing vessels, and subsidiaries we form in the future will own any other vessels we may acquire in the future. All payments under our charters will be made to our subsidiaries. As a result, our ability to meet our financial and other obligations, and to pay dividends in the future, as and if declared, will depend on the performance of our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, by the terms of our loan agreements, any financing agreement we may enter into in the future, or by Marshall Islands law, which regulates the payment of dividends by our companies.
The applicable loan agreements entered into by our subsidiaries, prohibits such subsidiaries from paying any dividends to us if we or such subsidiary breach a covenant in our loan agreements or any financing agreement we may enter into in the future. If we are unable to obtain funds from our subsidiaries, we will not be able to fund our liquidity needs or pay dividends in the future unless we obtain funds from other sources, which we may not be able to do.
We cannot assure you that our Board will declare dividends.
Our Board will continue to assess our dividend policy and may in the future determine to pay dividends. The declaration and payment of dividends, if any, will always be subject to the discretion of our Board, restrictions contained in our debt agreements or debt agreements that we may enter into in the future and the requirements of Marshall Islands law. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, the terms of our outstanding indebtedness and the ability of our subsidiaries to distribute funds to us. The dry bulk and tanker industries are highly volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is available for the payment of dividends.
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We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein. Our growth strategy contemplates that we will finance our acquisitions of additional vessels through debt financings or the net proceeds of future equity issuances on terms acceptable to us. If financing is not available to us on acceptable terms or at all, our Board may determine to finance or refinance acquisitions with cash from operations, which would reduce the amount of any cash available for the payment of dividends, if any.
The Republic of Marshall Islands laws generally prohibits the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. We may not have sufficient surplus in the future to pay dividends and our subsidiaries may not have sufficient funds or surplus to make distributions to us. We can give no assurance that dividends will be paid at all.
We are dependent upon Castor Ships and Pavimar, which are related parties, for the management of our Fleet and business.
The management of our business, including, but not limited, the commercial and technical management of our Fleet as well as administrative, financial and other business functions, is carried out by Castor Ships S.A. ("Castor Ships"), which is a company controlled by our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, and Pavimar S.A. ("Pavimar"), which is a company controlled by Ismini Panagiotidis, the sister of our Chairman, Chief Executive Officer and Chief Financial Officer. The loss of Castor Ships' and/or Pavimar's services or their failure to perform their obligations to us could materially and adversely affect our results of operations and financial condition.
In addition, our ability to enter into new charters and expand our customer relationships depends largely on our ability to leverage our relationship with Castor Ships and Pavimar and their reputations and relationships in the shipping industry. If Castor Ships or Pavimar suffer material damage to their reputations or relationships, it may harm our ability to renew existing charters upon their expiration, obtain new charters or maintain satisfactory relationships with suppliers and other third parties.
Our business will be harmed if Castor Ships or Pavimar fail to perform these services satisfactorily, if they cancel their agreements with us or if they stop providing these services to us. Our operational success and ability to execute our growth strategy will depend significantly upon the satisfactory performance of these services by Castor Ships and Pavimar and their reputations.
We may have difficulty managing our planned growth properly.
We are a recent company formed for the purpose of acquiring, owning, chartering and operating oceangoing cargo vessels. One of our principal strategies is to continue to grow by expanding our operations and adding to our Fleet. As our business grows, we intend to acquire additional dry bulk, tanker and other vessels and expand our activities. Our future growth will primarily depend upon a number of factors, some of which may not be within our control. These factors include our ability to:

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identify suitable vessels, including newbuilding slots at reputable shipyards and/or shipping companies for acquisitions at attractive prices;

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obtain required financing for our existing and new operations;

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integrate any acquired vessels, assets or businesses successfully with our existing operations, including obtaining any approvals and qualifications necessary to operate vessels that we acquire;

•
hire, train and retain qualified personnel and crew to manage and operate our growing business and Fleet;
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•
enhance our customer base; and

•
improve our operating, financial and accounting systems and controls.
In addition, competition from other companies, many of which have significantly greater financial resources than we do, may reduce our acquisition opportunities or cause us to pay higher prices. Our failure to effectively identify, acquire, develop and integrate any vessels could adversely affect our business, financial condition and results of operations. The number of employees that perform services for us and our current operating and financial systems may not be adequate as we implement our plan to expand the size of our Fleet, and we may not be able to effectively hire more employees or adequately improve those systems. Finally, acquisitions may require additional equity issuances, which may dilute our common shareholders if issued at lower prices than the price they acquired their shares, or debt issuances (with amortization payments), both of which could lower our available cash. If any such events occur, our financial condition may be adversely affected.
Growing any business by acquisition(s) presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. The expansion of our Fleet may impose significant additional responsibilities on our management and the management and staff of our commercial and technical managers, and may necessitate that we, and they, increase the number of personnel. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth.
As we expand our business, we may be unable to improve our operating and financial systems and to recruit suitable employees and crew for our vessels.
Our or our managers' current operating and financial systems may not be adequate as we continue to implement our plan to expand the size of our Fleet and our attempts to improve those systems may be ineffective. In addition, if we further expand our Fleet, we will need to recruit suitable additional seafarers and shore-side administrative and management personnel. We cannot guarantee that we will be able to hire suitable employees as we expand our Fleet. If we encounter business or financial difficulties, we may not be able to adequately staff our vessels or our shore-side personnel. If we are unable to grow our financial and operating systems or to recruit suitable employees as we expand our Fleet, our financial performance may be adversely affected and, among other things, the amount of cash available for distribution as dividends to our shareholders may be reduced.
Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results.
We may incur some of our operating expenses and general and administrative expenses in currencies other than the U.S. dollar. This difference could lead to fluctuations in vessel operating expenses, which would affect our financial results. Expenses incurred in foreign currencies increase when the value of the U.S. dollar falls, which would reduce our profitability. Our operating results could suffer as a result.
We operate secondhand vessels, and, as a result, we may incur increased operating costs which could adversely affect our earnings. Furthermore, as our vessels age, the risks associated with our vessels could adversely affect our ability to obtain profitable charters.
While we have inspected our vessels and we intend to inspect any potential future vessel acquisition, this does not provide us with the same knowledge about its condition that we would have had if the vessel had been built for and operated exclusively by us. Generally, purchasers of secondhand vessels do not receive the benefit of warranties from the builders for the secondhand vessels that they acquire.
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. We currently own a fleet with an average age of 14.3 years and, upon completion of our recently announced acquisitions, we will own a fleet with an average age of 13.5 years. As our vessels age typically, it will become less fuel-efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of vessels may also require expenditures for alterations or the addition of new equipment, to our vessels and may restrict the type of activities in which our vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of its useful life.
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Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income and the value of our vessels.
Our customers have a high and increasing focus on quality and compliance standards with their suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality requirements is vital for our operations. The charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel's efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, operate in extreme climates, utilize related docking facilities and pass through canals and straits. The length of a vessel's physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. We face competition from companies with more modern vessels with more fuel efficient designs than our vessels, or eco vessels, and if new dry bulk vessels and tanker vessels are built that are more efficient or more flexible or have longer physical lives than the current eco vessels, competition from the current eco vessels and any more technologically advanced vessels could adversely affect the amount of charter hire payments we receive for our vessels once their initial charters expire and the resale value of our vessels could significantly decrease. This could have an adverse effect on our results of operations, cash flows, financial condition and ability to pay dividends.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance ("ESG") policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company's ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us, especially given the highly focused and specific trade of dry bulk, crude oil and petroleum products transportation in which we are engaged. If we do not meet these standards, our business and/or our ability to access capital could be harmed.
These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets.  If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements.  The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.
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We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.
We may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on our financial condition.
A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could result in a higher tax rate on our worldwide earnings, which could result in a significant negative impact on our earnings and cash flows from operations.
We conduct our operations through subsidiaries which can trade worldwide. Tax laws and regulations are highly complex and subject to interpretation. Consequently, we are subject to changing tax laws, treaties and regulations in and between countries in which we operate. Our income tax expense, if any, is based upon our interpretation of tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings, and such change could be significant to our financial results. If any tax authority successfully challenges our operational structure, or the taxable presence of our operating subsidiaries in certain countries, or if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or if we lose a material tax dispute in any country, our effective tax rate on our worldwide earnings could increase substantially, and our earnings and cash flows from these operations could be materially adversely affected.
Our subsidiaries may be subject to taxation in the jurisdictions in which its activities are conducted. The amount of any such taxation may be material and would reduce the amounts available for distribution to shareholders.
Investors are encouraged to consult their own tax advisors concerning the overall tax consequences of the ownership of the common shares arising in an investor's particular situation under U.S. federal, state, local or foreign law.
We are dependent on our management and their ability to hire and retain key personnel, in particular our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis.
Our success will depend upon our and our management's ability to hire and retain key members of our management team, including Petros Panagiotidis. The loss of Mr. Panagiotidis could adversely affect our business prospects and financial condition.
Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain "key man" life insurance on any of our officers.
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Risks Relating To Our Common Shares
Our share price has recently been volatile and may continue to be volatile in the future, and as a result, investors in our common shares could incur substantial losses.
Our stock price has recently been volatile and may continue be volatile in the future. For example, the reported closing sale price of our common shares on the Nasdaq Capital Market was $0.12 per share on November 2, 2020 and $1.73 per share on February 11, 2021. In addition, on January 28, 2021, the intra-day sale price of our common shares reported on the Nasdaq Capital Market fluctuated between a low of $0.50 per share and a high of $0.90 per share. The stock market in general, and the market for shipping companies in particular, have experienced extreme volatility that has often been unrelated or disproportionate to the operating performance of particular companies. In addition, the ongoing COVID-19 pandemic has caused broad stock market and industry fluctuations. Further, we believe that we have a large number of retail investors holding our common shares, which could increase volatility in the price of our common shares. As a result of this volatility, investors may experience substantial losses on their investment in our common shares. The market price for our common shares may be influenced by many factors, including the following:

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investor reaction to our business strategy;

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sentiment of retail investors (including as may be expressed on financial trading and other social media sites and online forums), the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our common shares, access to margin debt, trading in options and other derivatives on our common shares and any related hedging and other trading factors;

•
our continued compliance with the listing standards of the Nasdaq Capital Market;

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regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our industry;

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variations in our financial results or those of companies that are perceived to be similar to us;

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our ability or inability to raise additional capital and the terms on which we raise it;

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declines in the market prices of stocks generally;

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trading volume of our common shares;

•
sales of our common shares by us or our shareholders;

•
speculation in the press or investment community about our Company or industry;

•
general economic, industry and market conditions; and

•
other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the ongoing COVID-19 pandemic, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations or result in political or economic instability.
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These factors, many of which are outside of our control, may negatively impact the market price of our common shares, regardless of our operating performance. For example, recent increases are significantly inconsistent with any improvements in actual or expected business prospects, operating performance, financial condition or other traditional measures of value, including our loss per share of $0.03 for the year ended December 31, 2020. Since the price of our common shares has recently been volatile and may continue to be volatile in the future, investors in our common shares could incur substantial losses.
Further, investors may purchase our common shares to hedge existing exposure or to speculate on the price of our common shares. Speculation on the price of our common shares may involve long and short exposures. To the extent an aggregate short exposure in our common shares becomes significant, investors with short exposure may have to pay a premium to purchase shares for delivery to share lenders at times if and when the price of our common shares increases significantly, particularly over a short period of time. Those purchases may in turn, dramatically increase the price of our common shares. This is often referred to as a "short squeeze". A short squeeze could lead to volatile price movements in our common shares that are not directly correlated to our business prospects, operating performance, financial condition or other traditional measures of value for the Company or our common shares.
In addition, some companies that have experienced volatility in the market price of their common shares have been subject to securities class-action litigation. If instituted against us, such litigation could result in substantial costs and diversion of management's attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that the price of our common shares will remain at its current level or that future sales of our common shares will not be at prices lower than those sold to investors.
Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
We received written notification from Nasdaq, dated April 14, 2020, indicating that because the closing bid price of the Company's common shares for 30 consecutive business days, from February 27, 2020 to April 13, 2020, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq Capital Market, the Company is not in compliance with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). The Company was also informed by Nasdaq that due to the COVID-19 crisis, temporary relief has been granted related to the minimum bid price requirement and the Company's compliance period will be suspended until June 30, 2020. Pursuant to the Nasdaq Listing Rule 5810(c)(3)(A), the applicable grace period to regain compliance is 180 days, or December 28, 2020, which included the temporary COVID-19 relief period.
On December 30, 2020, we announced that we received a notification letter from Nasdaq granting us an additional 180-day extension, or until June 28, 2021, to regain compliance with the minimum bid price requirement. We can cure this deficiency if the closing bid price of our common shares is $1.00 per share or higher for the requisite amount of time during the Second Compliance Period. Nasdaq may exercise its discretion to extend such requisite amount of time to better evaluate the registrant's ability to sustain long-term compliance with the minimum bid price requirement. We are evaluating all our options to regain compliance with the minimum bid price requirement within the Second Compliance Period, including a reverse stock split. During this time, our common shares will continue to be listed and traded on the Nasdaq Capital Market.
 If we are unable to regain compliance with the minimum bid price requirement within the Second Compliance Period, our common shares may be suspended or delisted at the discretion of Nasdaq. If a suspension or delisting of our common shares were to occur, there would be significantly less liquidity in the suspended or delisted common shares. In addition, our ability to raise additional capital through equity or debt financing would be greatly impaired. There can be no assurance that we will regain compliance with the minimum bid price requirement and, if we regain compliance, there can be no assurance that we will maintain compliance in the future.
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Recent share issuances and the issuance of additional shares in the future may impact the price of our common shares and our ability to regain compliance with Nasdaq's minimum bid price requirement.
The Company had 707,157,936 issued and outstanding shares as of March 26, 2021. Upon the exercise of outstanding warrants, the Company may issue up to an additional 1,394,940 common shares. Additionally, the Company has an authorized share capital of 1,950,000,000 common shares that it may issue without further shareholder approval. We cannot assure you at what price the offering of our common shares in the future, if any, will be made but they may be offered and sold at a price significantly below the current trading price of our common shares and may be at a discount to the trading price of our common shares at the time of such sale. The issuance and sale of any securities in the future may be dilutive to our existing shareholders and may cause the price of our common shares to decline. The issuance of additional shares by the Company that has the effect of reducing the price of the trading price of the common shares may also prevent the Company from being able to regain compliance with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2) prior to June 28, 2021, which may result in our common shares being suspended or delisted from the Nasdaq Capital Market. If a suspension or delisting of our common shares were to occur, there would be significantly less liquidity in the suspended or delisted common shares. In addition, our ability to raise additional capital through equity or debt financing would be greatly impaired.
We have a continuing ATM program in effect, under which we may sell up to $10.0 million of our common shares.
Subject to certain limitations in the Equity Distribution Agreement (as defined in "Item 5. Operating and Financial Review and Prospects—A. Liquidity and Capital Resources—Equity Issuances") and compliance with applicable law, we have the discretion to deliver placement notices to Maxim Group LLC, or Maxim, as our exclusive sales agent at any time throughout the term of the Equity Distribution Agreement, which started on June 28, 2019 and may be terminated by either party at any time. The number of shares that are sold by Maxim after delivering a placement notice will fluctuate based on the market price of the common shares during the sales period and limits we set with Maxim. Although we are initially eligible to sell common shares with an initial aggregate sales price of up to $10.0 million, should we be eligible and desire to offer additional common shares pursuant to the Equity Distribution Agreement with Maxim, we will file an additional prospectus supplement to register such additional common shares and the related preferred shares purchase rights. Therefore, investors will have no advance insight into the number of shares we are actually offering under the Equity Distribution Agreement. As of the date of this annual report, we have sold 618,112 common shares having raised approximate gross proceeds of approximately $2.6 million pursuant to the Equity Distribution Agreement.
We issued 918,112, 127,894,264 and 575,945,560 common shares during 2019, 2020 and 2021, respectively, through various transactions. Shareholders may experience significant dilution as a result of our offerings.
We have already issued and sold large quantities of our common shares pursuant to previous public and private offerings of our equity and equity-linked securities. We also have 480,000 Series A Preferred Shares outstanding and 12,000 Series B Preferred Shares outstanding. In addition, in the future we may file a replacement shelf registration statement covering the sale of some or all of our authorized common shares and other securities. We have additional outstanding warrants that may obligate us to issue up to an additional 1,394,940 common shares, in aggregate, upon the exercise of these warrants in full.
Purchasers of the common shares we sell, as well as our existing shareholders, will experience significant dilution if we sell shares at prices significantly below the price at which they invested. In addition, we may issue additional common shares or other equity securities of equal or senior rank in the future in connection with, among other things, debt prepayments, future vessel acquisitions, redemptions of our Series A Preferred Shares, without shareholder approval, in a number of circumstances. Our existing shareholders may experience significant dilution if we issue shares in the future at prices below the price at which previous shareholders invested.
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Our issuance of additional common shares or other equity securities of equal or senior rank would have the following effects:

•
our existing shareholders' proportionate ownership interest in us will decrease;

•
the per share amount of cash available for dividends on our common shares (as and if declared) could decrease;

•
the relative voting strength of each previously outstanding common share could be diminished; and

•
the market price of our common shares could decline.
Future issuances or sales, or the potential for future issuances or sales, of our common shares may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.
We have issued a significant number of our common shares and we may do so in the future. Shares to be issued in future equity offerings could cause the market price of our common shares to decline, and could have an adverse effect on our earnings per share. In addition, future sales of our common shares or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our common shares to decline, and could materially impair our ability to raise capital through the sale of additional securities.
The market price of our common shares could decline due to sales, or the announcements of proposed sales, of a large number of common shares in the market, including sales of common shares by our large shareholders, or the perception that these sales could occur. These sales or the perception that these sales could occur could also depress the market price of our common shares and impair our ability to raise capital through the sale of additional equity securities or make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate. We cannot predict the effect that future sales of common shares or other equity-related securities would have on the market price of our common shares.
Our Articles of Incorporation authorizes our Board to, among other things, issue additional shares of common or preferred shares or securities convertible or exchangeable into equity securities, without shareholder approval. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred shares or convertible securities could be substantially dilutive to our shareholders. Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common shares in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of shares of our common shares have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate and case law.
We are organized in the Republic of the Marshall Islands, which does not have a well-developed body of corporate or case law, and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States. Our corporate affairs are governed by our Articles of Incorporation and Bylaws and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the laws of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in the United States. The rights of shareholders of companies incorporated in the Marshall Islands may differ from the rights of shareholders of companies incorporated in the United States. While the BCA provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we can't predict whether Marshall Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction which has developed a relatively more substantial body of case law.
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We are incorporated in the Marshall Islands, and all of our officers and directors are non-U.S. residents. It may be difficult to serve legal process or enforce judgments against us, our directors or our management.
We are incorporated under the laws of the Republic of the Marshall Islands, and substantially all of our assets are located outside of the United States. Our principal executive office is located in Cyprus. In addition, all of our directors and officers are non-residents of the United States, and substantially all of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Republic of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or our directors and officers. Although you may bring an original action against us or our affiliates in the courts of the Marshall Islands, and the courts of the Marshall Islands may impose civil liability, including monetary damages, against us or our affiliates for a cause of action arising under Marshall Islands law, it may be impracticable for you to do so.
Anti-takeover provisions in our organizational documents and in our stockholder rights plan could have the effect of discouraging, delaying or preventing a merger or acquisition, or could make it difficult for our shareholders to replace or remove our current Board, which could adversely affect the market price of our common shares.
Several provisions of our Articles of Incorporation and Bylaws could make it difficult for our shareholders to change the composition of our Board in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable. These provisions include:

•
authorizing our Board to issue "blank check" preferred shares without shareholder approval;

•
providing for a classified Board with staggered, three-year terms;

•
establishing certain advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by shareholders at shareholder meetings;

•
prohibiting cumulative voting in the election of directors;

•
limiting the persons who may call special meetings of shareholders; and

•
establishing supermajority voting provisions with respect to amendments to certain provisions of our Articles of Incorporation and Bylaws.
These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium.
Our Chairman, Chief Executive Officer and Chief Financial Officer, who may be deemed to beneficially own, directly or indirectly, 100% of our Series B Preferred Shares, has control over us.
Our Chairman, Chief Executive Officer and Chief Financial Officer, Mr. Petros Panagiotidis, may be deemed to beneficially own, directly or indirectly, all of the 12,000 outstanding shares of our Series B Preferred Shares. The shares of Series B Preferred Shares each carry 100,000 votes. By his ownership of 100% of our Series B Preferred Shares, Mr. Panagiotidis has control over our actions. The interests of Mr. Panagiotidis may be different from your interests.
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We are an "emerging growth company", and we cannot be certain if the reduced requirements applicable to emerging growth companies make our securities less attractive to investors.
We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As an emerging growth company, we are not required to comply with, among other things, the auditor attestation requirements of the Sarbanes-Oxley Act. Investors may find our securities less attractive because we rely on this provision. If investors find our securities less attractive as a result, there may be a less active trading market for our securities and prices of the securities may be more volatile.
U.S. tax authorities could treat us as a "passive foreign investment company", which could have adverse U.S. federal income tax consequences to U.S. shareholders.
A foreign corporation will be treated as a "passive foreign investment company", or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income". For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income," whereas rental income would generally constitute "passive income" to the extent not attributable to the active conduct of a trade or business. U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
We do not believe that we will be treated as a PFIC for any taxable year. However, our status as a PFIC is determined on an annual basis and will depend upon the operations of our vessels and our other activities during each taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our spot chartering and time chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does not constitute "passive income," and the assets that we own and operate in connection with the production of that income do not constitute passive assets.
There is, however, no direct legal authority under the PFIC rules addressing our method of operation. Accordingly, no assurance can be given that the U.S. Internal Revenue Service, or IRS, or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any taxable year we become unable to acquire vessels in a timely fashion or if there were to be changes in the nature and extent of our operations.
If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders would face adverse U.S. federal income tax consequences and information reporting obligations. Under the PFIC rules, unless those shareholders made an election available under the Internal Revenue Code (which election could itself have adverse consequences for such shareholders, as discussed below under "Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Status and Significant Tax Consequences"), such shareholders would be liable to pay U.S. federal income tax upon excess distributions and upon any gain from the disposition of our common shares at the then prevailing income tax rates applicable to ordinary income plus interest as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of our common shares. Please see the section of this annual report entitled "Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Status and Significant Tax Consequences" for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if we are treated as a PFIC.
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We may have to pay tax on United States source income, which would reduce our earnings, cash from operations and cash available for distribution to our shareholders.
Under the United States Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States, may be subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the applicable Treasury Regulations promulgated thereunder.
We expect that we will not qualify for this statutory tax exemption for the 2020 taxable year and as such we will be subject to an effective 2% U.S. federal income tax on the gross shipping income we derive during the year that are attributable to the transport of cargoes to or from the United States. The imposition of this tax for the 2020 taxable year is not expected to have a material negative effect on our business and cash flows, however, we cannot guarantee that it will not do so in any future taxable years.
Risks Relating to Our Series A Preferred Shares
Our Series A Preferred Shares rank senior to our common shares with respect to dividends, distributions and payments upon liquidation, which could have an adverse effect on the value of our common shares.
The rights of the holders of our Series A Preferred Shares rank senior to the obligations to holders of our common shares. Upon our liquidation, the holders of Series A Preferred Shares will be entitled to receive a liquidation preference of $30.00 per share, plus all accrued but unpaid dividends, prior and in preference to any distribution to the holders of any other class of our equity securities, including our common shares. The Series A Preferred Shareholders agreed to waive all dividend payment obligations on the Series A Preferred Shares during the period from July 1, 2019 until December 31, 2021. The existence of the Series A Preferred Shares could have an adverse effect on the value of our common shares.
We may not have sufficient cash from our operations to enable us to pay dividends on our Series A Preferred Shares following the payment of expenses and the establishment of any reserves.
Starting on January 1, 2022, the Series A Preferred Shareholders will be entitled to semi-annual dividends on our Series A Preferred Shares only from funds legally available for such purpose when, as and if declared by our Board. We may not have sufficient cash available to pay our dividends semi-annually. The amount of dividends we can pay on our Series A Preferred Shares depends upon the amount of cash we generate from and use in our operations, which may fluctuate.
The amount of cash we have available for dividends on our Series A Preferred Shares will not depend solely on our profitability. The actual amount of cash we have available to pay dividends on our Series A Preferred Shares depends on many other factors, including the following:

•
changes in our operating cash flow, capital expenditure requirements, working capital requirements and other cash needs;

•
restrictions under any current or future credit facilities or any future debt securities on our ability to pay dividends if an event of default has occurred and is continuing or if the payment of the dividend would result in an event of default, or under certain facilities if it would result in the breach of certain financial covenants;

•
the amount of any cash reserves established by our Board; and

•
restrictions under Marshall Islands law, which generally prohibit the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or while a company is insolvent or would be rendered insolvent by the payment of such a dividend.
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The amount of cash we generate from our operations may differ materially from our net income or loss for the period, which is affected by non-cash items, and our Board in its discretion may elect not to declare any dividends. As a result of these and the other factors mentioned above, we may pay dividends during periods when we record losses and may not pay dividends during periods when we record profits.
The Series A Preferred Shares represent perpetual equity interests.
The Series A Preferred Shares represent perpetual equity interests in us and, unlike our indebtedness, do not give rise to a claim for payment of a principal amount at a particular date. As a result, holders of the Series A Preferred Shares may be required to bear the financial risks of an investment in the Series A Preferred Shares for an indefinite period of time. In addition, the Series A Preferred Shares will rank junior to all of our indebtedness and other liabilities, and to any other senior securities we may issue in the future with respect to assets available to satisfy claims against us.
Our Series A Preferred Shares are subordinate to our indebtedness, and your interests could be diluted by the issuance of additional preferred shares, including additional Series A Preferred Shares, and by other transactions.
Our Series A Preferred Shares are subordinated to all indebtedness. Therefore, our ability to pay dividends on, redeem or pay the liquidation preference on our Series A Preferred Shares in liquidation or otherwise may be subject to prior payments due to the holders of our indebtedness. Our future indebtedness may include restrictions on, our ability to pay dividends on or redeem preferred shares. Our Articles of Incorporation currently authorize the issuance of up to 50,000,000 preferred shares, par value $0.001 per share. Of these preferred shares, 480,000 shares have been designated Series A Preferred Shares. The issuance of additional Series A Preferred Shares would dilute the interests of holders of our Series A Preferred Shares, and any current or future indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on our Series A Preferred Shares. The Series A Preferred Shares do not contain any provisions affording the holders of our Series A Preferred Shares protection in the event of a highly-leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets or business, which might adversely affect the holders of our Series A Preferred Shares, so long as the rights of our Series A Preferred Shares are not directly materially and adversely affected.
We may redeem the Series A Preferred Shares, and holders of Series A Preferred Shares may not be able to reinvest the redemption price they receive in a similar security.
We may, at our option, redeem Series A Preferred Shares, in whole or in part, at any time or from time to time. We may have an incentive to redeem Series A Preferred Shares voluntarily if market conditions allow us to issue other preferred shares or debt securities at a rate that is lower than the dividend on the Series A Preferred Shares. If we redeem Series A Preferred Shares, then from and after the redemption date, dividends will cease to accrue on the Series A Preferred Shares, the Series A Preferred Shares shall no longer be deemed outstanding and all of the rights of the holders of those shares will terminate, except the right to receive the redemption price plus accumulated and unpaid dividends, if any, payable upon redemption. If we redeem the Series A Preferred Shares for any reason, the Series A Preferred Shareholders may not be able to reinvest the redemption price they receive in a similar security.
Holders of Series A Preferred Shares have extremely limited voting rights.
The voting rights of the Series A Preferred Shares are extremely limited. Our common shares and Series B Preferred Shares are the only outstanding classes or series of our shares carrying full voting rights. Holders of Series A Preferred Shares have no voting rights other than the ability to approve any amendments to our Articles of Incorporation that adversely alters the preferences, powers or rights of the Series A Preferred Shares.
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Our ability to pay dividends on and to redeem our Series A Preferred Shares is limited by the requirements of Marshall Islands law.
Marshall Islands law provides that we may pay dividends on and redeem the Series A Preferred Shares only to the extent that assets are legally available for such purposes. Legally available assets generally are limited to our surplus, which essentially represents our retained earnings and the excess of consideration received by us for the sale of shares above the par value of the shares. In addition, under Marshall Islands law we may not pay dividends on or redeem Series A Preferred Shares if we are insolvent or would be rendered insolvent by the payment of such a dividend or the making of such redemption.
ITEM 4.
INFORMATION ON THE COMPANY
A.
History and Development of the Company
We are a growth-oriented global shipping company that was incorporated in the Republic of the Marshall Islands in September 2017 for the purpose of acquiring, owning, chartering and operating oceangoing cargo vessels. We are a provider of worldwide seaborne transportation services for dry bulk cargo as well as crude oil and refined petroleum products. As of March 26, 2021, our Fleet consisted of 9 dry bulk carriers and 2 tankers with an aggregate cargo carrying capacity of 1.0 million dwt and an average age of 14.3 years. Upon the successful consummation of our recent vessel acquisitions, as further discussed under B. Business Overview—Fleet Development, our Fleet will consist of 14 vessels, with an aggregate capacity of 1.3 million dwt, consisting of 1 Capesize, 5 Kamsarmax and 6 Panamax dry bulk vessels and 2 Aframax LR2 tankers and an average age of 13.5 years.
Our commercial strategy primarily focuses on deploying our Fleet under a mix of period time charters and trip time charters according to our assessment of market conditions, adjusting the mix of these charters to take advantage of the relatively stable cash flows and high utilization rates associated with period time charters or to profit from attractive trip charter rates during periods of strong charter market conditions.
Our principal executive office is at 223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036 Limassol, Cyprus. Our telephone number at that address is + 357 25 357 767. Our website is www.castormaritime.com. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's internet site is www.sec.gov. None of the information contained on these websites is incorporated into or forms a part of this annual report.
For an overview of our Fleet and information regarding the development of our Fleet, including vessel acquisitions, please see "B. Business Overview—Our Fleet".
Nasdaq Listing Standards Compliance

On April 14, 2020, we received written notification from the Nasdaq indicating that because the closing bid price of our common shares for 30 consecutive business days, from February 27, 2020 to April 13, 2020, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq, we were not in compliance with Nasdaq Listing Rule 5550(a)(2). We were also informed by the Nasdaq that due to the COVID-19 crisis, temporary relief has been granted related to minimum listing bid price requirements and our compliance period would be suspended until June 30, 2020. Pursuant to the Nasdaq Listing Rule 5810(c)(3)(A), the applicable initial grace period to regain compliance was 180 days, or December 28, 2020, which included the temporary COVID-19 relief period.
On December 30, 2020, we announced that we received a notification letter from the Nasdaq granting us an additional 180-day extension, or until June 28, 2021, to regain compliance with Nasdaq's minimum bid price requirement (the "Second Compliance Period"). We can cure this deficiency if the closing bid price of our common shares is $1.00 per share or higher for the requisite period of time during the Second Compliance Period. Nasdaq may exercise its discretion to extend such requisite amount of time to better evaluate the registrant's ability to sustain long-term compliance with the minimum bid price requirement. We are evaluating all our options to regain compliance within the Second Compliance Period, including a reverse stock split. During this time, our common shares will continue to be listed and traded on the Nasdaq Capital Market.
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Equity transactions
For a description of our recent equity transactions, please see "Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Equity Issuances".
Fleet Development and Vessel Capital Expenditures
As of the date of this annual report, 8 of the 11 vessels in our Fleet are equipped with ballast water management system ("BWMS"), 1 vessel is partly equipped and 2 are non-equipped. We expect to retrofit the 3 non-fully equipped and non-equipped vessels with BWMS within 2022, obtaining operational flexibility worldwide. As of December 31, 2020, we had made capital expenditures of approximately $1.0 million regarding the installation of BWMS on our vessels. It is estimated that the contractual obligations related to these purchases as well as purchases on our remaining fleet vessels (in cases where not already installed), excluding installation costs, will be approximately $0.8 million, with scheduled payments of $0.5 million in 2021 and $0.3 million in 2022.
In connection with our Fleet expansion, we conducted a series of vessel acquisitions and financing transactions, which are further discussed below under in "B. Business Overview—Fleet Development".
Financing Transactions
On January 23, 2020, we, through one of our ship-owning subsidiaries, entered into $4.5 million secured term loan facility with Chailease International Financial Services Co. Ltd., or the Chailease Financial Services Facility. The loan was drawn down on January 31, 2020, has a tenor of five years from the drawdown date and bears interest at a margin plus LIBOR.
On January 27, 2020, we entered into a securities purchase agreement with YAII PN, LTD, or the Investor, pursuant to which we agreed to sell and the Investor agreed to purchase up to three convertible debentures (individually, a "Convertible Debenture" and collectively, the "$5.0 Million Convertible Debentures") for a maximum aggregate price of $5.0 million. During the period from January 28, 2020 up to June 9, 2020, the Investor had converted the full $5.0 million principal amount and $0.1 million of interest under the $5.0 Million Convertible Debentures for 8,042,078 common shares.
On January 22, 2021, we, through two of our ship-owning subsidiaries, entered into a $15.3 million senior secured term loan facility with Hamburg Commercial AG, or the $15.3 Million Term Loan Facility, secured by the M/V Magic Horizon and the M/V Magic Nova. The $15.3 Million Term Loan Facility has a tenor of four years from the drawdown date and bears interest at a margin plus LIBOR. The loan was drawn down in full on January 27, 2021. The Company intends to use the net proceeds from the $15.3 Million Term Loan Facility to support the Company's growth plans and for general corporate purposes.
For more information about our financing agreements which we have entered into in connection with the expansion of our Fleet and for other general corporate purposes, please see "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Borrowing Activities".
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B.
Business Overview
Our Fleet
The following table summarizes key information about our Fleet (delivered only vessels) as of March 26, 2021:
Vessel Name
Year Built
Type of
Charter
Capacity
(dwt)
Delivered to
Castor
Gross Charter Rate ($/day)
Estimated Earliest Charter Expiration
Estimated Latest Charter Expiration
Dry bulk vessels
             
Panamax
             
Magic P
2004
Period Time Charter
76,453
February 2017
$12,750
August 2021
November 2021
Magic Sun
2001
Period Time Charter
75,311
September 2019
$10,200
August 2021
October 2021
Magic Moon
2005
Period Time Charter
76,602
October 2019
$10,500
July 2021
September 2021
Magic Rainbow
2007
Trip Time Charter
73,593
August 2020
$18,500
April 2021
April 2021
Magic Horizon
2010
Period Time Charter
76,619
October 2020
$11,000
August 2021
December 2021
Magic Nova
2010
Period Time Charter
78,833
October 2020
$10,400
April 2021
August 2021
Kamsarmax
             
Magic Venus
2010
Period Time Charter
83,416
March 2021
$18,500
August 2021
October 2021
Magic Argo
2009
Trip Time Charter
82,338
March 2021
$25,100
June 2021
June 2021
Capesize
             
Magic Orion
2006
Trip Time Charter
180,200
March 2021
$21,000
April 2021
April 2021
Tanker vessels
             
Aframax/LR2
             
Wonder Polaris
2005
Period Time Charter
115,341
March 2021
$15,000 + profit sharing
February 2022
February 2023
Wonder Sirius
2005
Period Time Charter
115,340
March 2021
$15,000 + profit sharing
February 2022
February 2023

Fleet Development
On July 25, 2019, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2001 Korean- built Panamax dry bulk carrier, or the M/V Magic Sun, from an unaffiliated third party for a purchase price of $6.7 million. The M/V Magic Sun was delivered to us on September 5, 2019. The acquisition of the M/V Magic Sun was financed with both cash on hand and the proceeds from a $5.0 million unsecured term loan agreement entered into between the Company and an entity controlled by Petros Panagiotidis, as further described under "Item 5 – Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Our Borrowing Activities".
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On October 14, 2019, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2005 Japanese-built Panamax dry bulk carrier, or the M/V Magic Moon, from a third party in which a family member of our Chairman, Chief Executive Officer and Chief Financial Officer had an interest, for a purchase price of $10.2 million. The M/V Magic Moon was delivered to us on October 20, 2019. The acquisition of the M/V Magic Moon was financed with a combination of cash on hand, the net cash proceeds from sales under our ATM Program and the proceeds from a $7.5 million interest free unsecured bridge loan, which was provided to the Company by an entity controlled by Petros Panagiotidis, as further described under "Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions – Loans – $7.5 Million Shareholder Bridge Loan".
On June 30, 2020, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2007 Chinese- built Panamax dry bulk carrier, or the M/V Magic Rainbow, from an unaffiliated third party for a purchase price of $7.85 million. The M/V Magic Rainbow was delivered to us on August 8, 2020. The acquisition of the M/V Magic Rainbow was financed in whole with the proceeds from our debt and equity financings concluded in 2020.
On July 28, 2020, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2010 Japanese- built Panamax dry bulk carrier, or the M/V Magic Horizon, from an unaffiliated third party for a purchase price of $12.75 million. The M/V Magic Horizon was delivered to us on October 9, 2020. The acquisition of the M/V Magic Horizon was financed in whole with the proceeds from our debt and equity financings concluded in 2020.
On September 28, 2020, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2010 Japanese-built Panamax dry bulk carrier, or the M/V Magic Nova, from an unaffiliated third party for a purchase price of $13.86 million. The M/V Magic Nova was delivered to us on October 15, 2020. The acquisition of the M/V Magic Nova was financed in whole with the proceeds from our debt and equity financings concluded in 2020.
On January 20, 2021, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2006 Japanese-built Capesize dry bulk carrier, or the M/V Magic Orion, from an unaffiliated third party for a purchase price of $17.5 million. The M/V Magic Orion was delivered to us on March 17, 2021. The acquisition of the M/V Magic Orion was financed in whole with cash on hand.
On January 28, 2021, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2010 Japanese-built Kamsarmax dry bulk carrier, or the M/V Magic Venus, from an unaffiliated third party for a purchase price of $15.85 million. The M/V Magic Venus was delivered to us on March 2, 2021. The acquisition of the M/V Magic Venus was financed in whole with cash on hand.
On February 2, 2021, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2009 Japanese-built Kamsarmax dry bulk carrier, or the M/V Magic Argo, from an unaffiliated third party for a purchase price of $14.5 million. The M/V Magic Argo was delivered to us on March 18, 2021. The acquisition of the M/V Magic Argo was financed in whole with cash on hand.
On February 5, 2021, we, through two of our wholly-owned subsidiaries, entered into agreements to purchase two 2005 Korean-built Aframax LR2 tankers for an aggregate purchase price of $27.2 million from an unaffiliated third-party seller. Both vessels have attached time charter contracts with a reputable charterer with an estimated remaining term of about one year, each of which shall provide the Company with a minimum gross daily hire of $15,000 and have a 50% profit sharing arrangement over such level based on a predetermined formula. The charterer has the option to extend the duration of each contract for an additional one-year term. The M/T Wonder Polaris and the M/T Wonder Sirius were delivered to us on March 11, 2021 and March 22, 2021, respectively. The acquisition of both vessels was financed in whole with cash on hand.
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On February 18, 2021, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2010 Japanese-built Kamsarmax dry bulk carrier, from an unaffiliated third party for a purchase price of $14.8 million. The acquisition is expected to be consummated by taking delivery of the vessel sometime in the beginning of the second quarter of this year, is expected to be financed in whole with cash on hand and is subject to the satisfaction of certain customary closing conditions.
On March 9, 2021, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2010 Korean-built Kamsarmax dry bulk carrier from an unaffiliated third party for a purchase price of $15.5 million. The acquisition is expected to be consummated by taking delivery of the vessel within the second quarter of this year, is expected to be financed in whole with cash on hand and is subject to the satisfaction of certain customary closing conditions.
On March 11, 2021, we, through one of our wholly-owned subsidiaries, entered into an agreement to purchase a 2011 Japanese-built Kamsarmax dry bulk carrier from an unaffiliated third party for a purchase price of $16.9 million. The acquisition is expected to be consummated by taking delivery of the vessel sometime between the second and third quarter of this year, is expected to be financed in whole with cash on hand and is subject to the satisfaction of certain customary closing conditions.
Chartering of our Fleet
We actively market our vessels, and expect to market the vessels that we have agreed to purchase once they are delivered to us, in the short, medium and long-term charter markets in order to secure optimal employment in the dry bulk and tanker shipping markets. As of March 26, 2021, three of our vessels were chartered on the trip time charter market. Trip charter rates are volatile and fluctuate on a seasonal and year-to-year basis. Fluctuations derive from imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes. Vessels operating in the trip market generate revenue that is less predictable than those under period time charters, but may enable us to capture increased profit margins during periods of improvements in the dry bulk and tanker markets. Downturns in the dry bulk and/or tanker industries would result in a reduction in profit margins and could lead to losses. Our remaining eight vessels were employed under medium term time charters which have a fixed charter hire rate and, particularly with regards to our Aframax LR2 tanker which we have purchased with time charter attached, a profit sharing arrangement over and above that fixed charter rate level. In the future, we may opportunistically look to employ more of our vessels under trip time charter contracts, should the marker outlook become more attractive.
Management of our Business
Our vessels are technically managed by Pavimar, a company controlled by Ismini Panagiotidis, the sister of our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis. Under the technical management agreements, our ship-owning subsidiaries pay a $600 daily fee to Pavimar for the provision of a wide range of shipping services such as crew management, technical management, operational employment management, insurance arrangements, provisioning, bunkering, accounting and audit support services, which it may choose to subcontract to other parties at its discretion. Pavimar and one of our wholly-owned subsidiaries have entered into a management agreement with Fleet Ship Management Inc. ("Fleet Ship"), a third-party ship-management company, pursuant to which Fleet Ship provides technical management to the M/V Magic Nova. Pavimar pays, at its own expense, Fleet Ship a fee for the services it has subcontracted to it, without burdening the Company with any additional cost.

Our vessels are commercially managed by Castor Ships, a company controlled by our Chairman, Chief Executive Officer and Chief Financial Officer. Castor Ships manages our business overall and provides us with commercial, chartering and administrative services, including, but not limited to, securing employment for our Fleet, arranging and supervising the vessels' commercial operations, handling all of the Company's vessel sale and purchase transactions, undertaking related shipping project and management advisory and support services, as well as other associated services requested from time to time by us and our ship-owning subsidiaries. In exchange for these services, we and our subsidiaries pay Castor Ships (i) a flat quarterly management fee in the amount of $0.3 million for the management and administration of our business, (ii) a daily fee of $250 per vessel for the provision of commercial services, (iii) a commission rate of 1.25% on all charter agreements and (iv) a commission of 1% on each sale and purchase transaction.
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The three Kamsarmax vessels that we have agreed to purchase and which we expect to take delivery of in the near term, will be technically and commercially managed by Pavimar and Castor Ships upon their delivery to us.
Environmental and Other Regulations in the Shipping Industry
Government regulations and laws significantly affect the ownership and operation of our Fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard ("USCG"), harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations frequently change and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.
International Maritime Organization
The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels (the "IMO"), has adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as "MARPOL," the International Convention for the Safety of Life at Sea of 1974 ("SOLAS Convention"), and the International Convention on Load Lines of 1966 (the "LL Convention"). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to dry bulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997; new emissions standards, titled IMO-2020, took effect on January 1, 2020.
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Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits "deliberate emissions" of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below. Emissions of "volatile organic compounds" from certain tankers, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or PCBs) are also prohibited. We believe that our vessels are currently compliant in all material respects with these regulations.
The Marine Environment Protection Committee, or "MEPC," adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%) starting from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels, or certain exhaust gas cleaning systems.  Ships are now required to obtain bunker delivery notes and International Air Pollution Prevention ("IAPP") Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships were adopted and took effect on March 1, 2020. These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs.
Sulfur content standards are even stricter within certain "Emission Control Areas," or ("ECAs"). As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean area. Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China are subject to local regulations that impose stricter emission controls. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency ("EPA") or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date of installation. At the MEPC meeting held from March to April 2014, amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx) standards in ECAs will go into effect.  Under the amendments, Tier III NOx standards apply to ships that operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx produced by vessels with a marine diesel engine installed and constructed on or after January 1, 2016. Tier III requirements could apply to areas that will be designated for Tier III NOx in the future. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021. The EPA promulgated equivalent (and in some senses stricter) emissions standards in 2010.  As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.
As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection having commenced on January 1, 2019. The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.
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As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop and implement Ship Energy Efficiency Management Plans ("SEEMPS"), and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index ("EEDI"). Under these measures, by 2025, all new ships built will be 30% more energy efficient than those built in 2014.   Additionally, MEPC 75 adopted amendments to MARPOL Annex VI which brings forward the effective date of the EEDI's "phase 3" requirements from January 1, 2025 to April 1, 2022 for several ship types, including gas carriers, general cargo ships, and LNG carriers.
Additionally, MEPC 75 introduced draft amendments to Annex VI which impose new regulations to reduce greenhouse gas emissions from ships.  These amendments introduce requirements to assess and measure the energy efficiency of all ships and set the required attainment values, with the goal of reducing the carbon intensity of international shipping.  The requirements include (1) a technical requirement to reduce carbon intensity based on a new Energy Efficiency Existing Ship Index ("EEXI"), and (2) operational carbon intensity reduction requirements, based on a new operational carbon intensity indicator ("CII").  The attained EEXI is required to be calculated for ships of 400 gross tonnage and above, in accordance with different values set for ship types and categories.  With respect to the CII, the draft amendments would require ships of 5,000 gross tonnage to document and verify their actual annual operational CII achieved against a determined required annual operational CII.  Additionally, MEPC 75 proposed draft amendments requiring that, on or before January 1, 2023, all ships above 400 gross tonnage must have an approved SEEMP on board. For ships above 5,000 gross tonnage, the SEEMP would need to include certain mandatory content.  MEPC 75 also approved draft amendments to MARPOL Annex I to prohibit the use and carriage for use as fuel of heavy fuel oil ("HFO") by ships in Arctic waters on and after July 1, 2024.  The draft amendments introduced at MEPC 75 may be adopted at the MEPC 76 session, to be held during 2021.
We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills.  The Convention of Limitation of Liability for Maritime Claims (the "LLMC") sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.
Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the "ISM Code"), our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical management team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificate are renewed as required.
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Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers. The SOLAS Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers ("GBS Standards").
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code ("IMDG Code"). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking, packing and classification requirements for dangerous goods, and (3) new mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous Goods, including (1) new provisions regarding IMO type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas.
The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers ("STCW"). As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate. Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.
The IMO's Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for Ships Operating in Polar Water (the "Polar Code"). The Polar Code, which entered into force on January 1, 2017, covers design, construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating in the waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal survey.
Furthermore, recent action by the IMO's Maritime Safety Committee and United States agencies indicates that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. For example, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of such regulations is hard to predict at this time.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. For example, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments (the "BWM Convention") in 2004. The BWM Convention entered into force on September 8, 2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, and require all ships to carry a ballast water record book and an international ballast water management certificate.
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On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM Convention so that the dates are triggered by the entry into force date and not the dates originally in the BWM Convention. This, in effect, makes all vessels delivered before the entry into force date "existing vessels" and allows for the installation of ballast water management systems on such vessels at the first International Oil Pollution Prevention ("IOPP") renewal survey following entry into force of the convention. The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At MEPC 71, the schedule regarding the BWM Convention's implementation dates was also discussed and amendments were introduced to extend the date existing vessels are subject to certain ballast water standards. Those changes were adopted at MEPC 72.  Ships over 400 gross tons generally must comply with a "D-1 standard," requiring the exchange of ballast water only in open seas and away from coastal waters. The "D-2 standard" specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the Ballast Water, must be approved in accordance with IMO Guidelines (Regulation D-3). As of October 13, 2019, MEPC 72's amendments to the BWM Convention took effect, making the Code for Approval of Ballast Water Management Systems, which governs assessment of ballast water management systems, mandatory rather than permissive, and formalized an implementation schedule for the D-2 standard. Under these amendments, all ships must meet the D-2 standard by September 8, 2024. Costs of compliance with these regulations may be substantial.   Additionally, in November 2020, MEPC 75 adopted amendments to the BWM Convention which would require a commissioning test of the ballast water management system for the initial survey or when performing an additional survey for retrofits. This analysis will not apply to ships that already have an installed BWM system certified under the BWM Convention. These amendments are expected to enter into force on June 1, 2022.
Once mid-ocean exchange ballast water treatment requirements become mandatory under the BWM Convention, the cost of compliance could increase for ocean carriers and may have a material effect on our operations. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements.
The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the "Bunker Convention") to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as the United States where the CLC or the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
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Anti‑Fouling Requirements
In 2001, the IMO adopted the International Convention on the Control of Harmful Anti‑fouling Systems on Ships, or the "Anti‑fouling Convention". The Anti‑fouling Convention, which entered into force on September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the anti‑fouling systems are altered or replaced.
In November 2020, MEPC 75 approved draft amendments to the Anti-fouling Convention to prohibit anti-fouling systems containing cybutryne, which would apply to ships from January 1, 2023, or, for ships already bearing such an anti-fouling system, at the next scheduled renewal of the system after that date, but no later than 60 months following the last application to the ship of such a system.  These amendments may be formally adopted at MEPC 76 in 2021.
We have obtained Anti‑fouling System Certificates for our vessels that are subject to the Anti‑fouling Convention.
Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this report, we confirm our vessels are ISM Code certified through Pavimar that technically operates our vessels. The technical managers have obtained the document of compliance in order to operate the vessel in accordance with the ISM Code. However, there can be no assurance that such certificates will be maintained in the future. The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
United States Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990 ("OPA") established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners and operators" whose vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.'s territorial sea and its 200 nautical mile exclusive economic zone around the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define "owner and operator" in the case of a vessel as any person owning, operating or chartering by demise, the vessel.  Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these other damages broadly to include:
(i)  injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
(ii)  injury to, or economic losses resulting from, the destruction of real and personal property;
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(iii) loss of subsistence use of natural resources that are injured, destroyed or lost;
(iv)  net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
(v)  lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
(vi)  net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective December 12, 2019, the USCG adjusted the limits of OPA liability for non-tank vessels, edible oil tank vessels, and any oil spill response vessels, to the greater of $1,200 per gross ton or $997,100 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to be in compliance going forward with the USCG's financial responsibility regulations by providing applicable certificates of financial responsibility.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling, and a pilot inspection program for offshore facilities.  However, several of these initiatives and regulations have been or may be revised.  For example, the U.S. Bureau of Safety and Environmental Enforcement's ("BSEE") revised Production Safety Systems Rule ("PSSR"), effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR. Additionally, the BSEE amended the Well Control Rule, effective July 15, 2019, which rolled back certain reforms regarding the safety of drilling operations, and former U.S. President Trump had proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling.  The effects of these proposals and changes are currently unknown, and recently, current U.S. President Biden signed an executive order temporarily blocking new leases for oil and gas drilling in federal waters.  Compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business.
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OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA and some states have enacted legislation providing for unlimited liability for oil spills. Many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law. Moreover, some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining tanker owners' responsibilities under these laws. The Company intends to be in compliance with all applicable state regulations in the ports where the Company's vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1.0 billion per incident for our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operations.
Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) ("CAA") requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA requires states to adopt State Implementation Plans, or "SIPs," some of which regulate emissions resulting from vessel loading and unloading operations which may affect our Vessel.
The U.S. Clean Water Act ("CWA") prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In 2015, the EPA expanded the definition of "waters of the United States" ("WOTUS"), thereby expanding federal authority under the CWA. Following litigation on the revised WOTUS rule, in December 2018, the EPA and Department of the Army proposed a revised, limited definition of "waters of the United States". The proposed rule was published in the Federal Register on February 14, 2019 and was subject to public comment. On October 22, 2019, the agencies published a final rule repealing the 2015 Rule defining "waters of the United States" and recodified the regulatory text that existed prior to the 2015 Rule. The final rule became effective on December 23, 2019. On January 23, 2020, the EPA published the "Navigable Waters Protection Rule," which replaces the rule published on October 22, 2019, and redefines "waters of the United States". This rule became effective on June 22, 2020, although the effective date has been stayed in at least one U.S. state pursuant to court order. The effect of this rule is currently unknown.
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. Waters.  The EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act ("VIDA"), which was signed into law on December 4, 2018 and replaces the 2013 Vessel General Permit ("VGP") program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act ("NISA"), such as mid-ocean ballast exchange programs and installation of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters. VIDA establishes a new framework for the regulation of vessel incidental discharges under Clean Water Act (CWA), requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within two years of EPA's promulgation of standards. Under VIDA, all provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized. Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent ("NOI") or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required. Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels which have not already installed one or the implementation of other port facility disposal procedures as a result of which we may incur additional capital expenditures, or may otherwise restrict our vessels from entering U.S. waters.
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European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, and flag as well as the number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called "SOx-Emission Control Area"). As of January 2020, EU member states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.
On September 15, 2020, the European Parliament voted to include greenhouse gas emissions from the maritime sector in the European Union's carbon market from 2022. This will require shipowners to buy permits to cover these emissions. Contingent on another formal approval vote, specific regulations are forthcoming and are expected to be proposed by 2021.
International Labour Organization
The International Labour Organization (the "ILO") is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 ("MLC 2006"). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross tonnage or over and are either engaged in international voyages or flying the flag of a Member and operating from a port, or between ports, in another country. We believe that our vessels are in substantial compliance with and are certified as per MLC 2006.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions with targets extended through 2020. International negotiations are continuing with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships. The U.S. initially entered into the agreement, but on June 1, 2017, former U.S. President Trump announced that the United States intends to withdraw from the Paris Agreement, and the withdrawal became effective on November 4, 2020. On January 20, 2021, U.S. President Biden signed an executive order to rejoin the Paris Agreement, which took effect on February 19, 2021.
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At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies "levels of ambition" to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely. The initial strategy notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition. These regulations could cause us to incur additional substantial expenses.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto Protocol's second period from 2013 to 2020. Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other information. As previously discussed, regulations relating to the inclusion of greenhouse gas emissions from the maritime sector in the European Union's carbon market are also forthcoming.
In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit greenhouse gas emissions from certain mobile sources, and proposed regulations to limit greenhouse gas emissions from large stationary sources. However, in March 2017, former U.S. President Trump signed an executive order to review and possibly eliminate the EPA's plan to cut greenhouse gas emissions and in August 2019, the Administration announced plans to weaken regulations for methane emissions and on August 13, 2020, the EPA released rules rolling back standards to control methane and volatile organic compound emissions from new oil and gas facilities. However, U.S. President Biden recently directed the EPA to publish a proposed rule suspending, revising, or rescinding certain of these rules.  The EPA or individual U.S. states could enact environmental regulations that would affect our operations.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or certain weather events.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002 ("MTSA"). To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and mandates compliance with the International Ship and Port Facility Security Code ("the ISPS Code"). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate ("ISSC") from a recognized security organization approved by the vessel's flag state. Ships operating without a valid certificate may be detained, expelled from, or refused entry at port until they obtain an ISSC. The various requirements, some of which are found in the SOLAS Convention, include, for example, on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; the development of vessel security plans; ship identification number to be permanently marked on a vessel's hull; a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and compliance with flag state security certification requirements.
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The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel's compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact on us. We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.
The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured losses could significantly affect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.
Inspection by Classification Societies
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be certified "in class" by a classification society which is a member of the International Association of Classification Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or the Rules, which apply to oil tankers and bulk carriers contracted for construction on or after July 1, 2015. The Rules attempt to create a level of consistency between IACS Societies. Our vessels are certified as being "in class" by the applicable IACS Classification Societies (e.g., American Bureau of Shipping, Lloyd's Register of Shipping, Nippon Kaiji Kyokai etc.).
A vessel must undergo annual surveys, intermediate surveys, dry-dockings and special surveys. In lieu of a special survey, a vessel's machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be dry-docked every 30 to 36 months for inspection of the underwater parts of the vessel. If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, dry-docking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy incidents, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic zone of the United States for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market. We carry insurance coverage as customary in the shipping industry. However, not all risks can be insured, specific claims may be rejected, and we might not be always able to obtain adequate insurance coverage at reasonable rates.
Hull and Machinery Insurance
We procure hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance and war risk insurance and freight, demurrage and defense insurance for our Fleet. We generally do not maintain insurance against loss of hire, which covers business interruptions that result in the loss of use of a vessel.
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Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or "P&I Associations," and covers our third-party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs".
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The 13 P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. The International Group's website states that the Pool provides a mechanism for sharing all claims in excess of US$ 10 million up to, currently, approximately US$ 3.1 billion. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations and members of the shipping pool of P&I Associations comprising the International Group.
Competition
We operate in markets that are highly competitive. The process of obtaining new employment for our Fleet generally involves intensive screening, and competitive bidding, and often extends for several months. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and operator. Demand for dry bulk and tanker vessels fluctuates in line with the main patterns of trade of the major dry bulk and tanker cargoes and varies according to their supply and demand. Ownership of dry bulk and tanker vessels is highly fragmented.
Permits and Authorizations
We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel's crew and the age of a vessel. We have been able to obtain all permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase our cost of doing business.
Seasonality
Demand for vessel capacity has historically exhibited seasonal variations and, as a result, fluctuations in charter rates. This seasonality may result in quarter-to-quarter volatility in our operating results for our vessels when trading in the spot market or if on time charter when a new time charter is being entered into. The dry bulk sector is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere. The tanker sector is typically stronger in the fall and winter months in anticipation of increased consumption of oil and petroleum products in the northern hemisphere during the winter months. Seasonality in the sectors in which we operate could materially affect our operating results and flows.
C.
Organizational Structure
We were incorporated in the Republic of the Marshall Islands in September 2017, with our principal executive offices located at 223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036 Limassol, Cyprus. A list of our subsidiaries is filed as Exhibit 8.1 to this annual report on Form 20-F.
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D.
Property, Plants and Equipment
We own no properties other than our vessels. For a description of our Fleet, please see "Item 4. Information on the Company—B. Business Overview—Our Fleet".
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Introduction
The following discussion provides a review of the performance of our operations and compares our performance with that of the preceding year. All dollar amounts referred to in this discussion and analysis are expressed in United States dollars except where indicated otherwise.
In September 2019, we changed our fiscal year end from September 30 to December 31. This change in our fiscal year end resulted in a three-month transition period from October 1, 2018 to December 31, 2018. For a discussion of our results for the year ended December 31, 2019 compared to the year ended December 31, 2018, please see "Item 5 – Operating and Financial Review and Prospects – A. Operating Results – Year ended December 31, 2019 as compared to year ended December 31, 2018" contained in our annual report on Form 20-F for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 31, 2020.
The Company's business could be materially and adversely affected by the risks, or the public perception of the risks related to the COVID-19 pandemic. The following discussion of the results of our operations and our financial condition should be read in conjunction with the financial statements and the notes to those statements included in "Item 18. Financial Statements". This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth in "Item 3. Key Information—D. Risk Factors".
A.
Operating Results
Principal factors impacting our business, results of operations and financial condition
Our results of operations are affected by numerous factors. The principal factors that have impacted the business during the fiscal periods presented in the following discussion and analysis and that are likely to continue to impact our business are the following:

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The levels of demand and supply in the dry bulk and tanker shipping industries;

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The cyclical nature of the shipping industry in general and its impact on charter rates and vessel values;

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Utilization rates of our Fleet;

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The employment and operation of our Fleet;

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Management of the financial, general and administrative elements involved in the conduct of our business and ownership of our Fleet;

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The age, condition and specifications of our vessels;
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The performance of our charterers' obligations under their charter agreements;

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Our ability to maintain solid working relationships with our existing charterers and our ability to increase the number of our charterers through the development of new working relationships;

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The effective and efficient management of our Fleet by Castor Ships and Pavimar;

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Economic, regulatory, political and governmental conditions that affect shipping and the dry bulk and tanker industries;

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Dry-docking and special survey days, both expected and unexpected;

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Our ability to successfully employ our vessels at economically attractive rates and our strategic decisions regarding the employment mix of our Fleet in the voyage market as well as period and trip time charter markets, as our charters expire or are otherwise terminated;

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Performance of our counterparties, including our charterers ability to make charter payments to us;

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Our ability to obtain equity and debt financing at acceptable and attractive terms to fund future capital expenditures;

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Management of our financial resources, including banking relationships and of the relationships with our various stakeholders;

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Our access to capital required to acquire additional ships and/or to implement our business strategy; and

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The level of dividends on all classes of our shares, if any.
Cyclical Nature of the Industry
One of the factors that impacts our profitability is the hire rates at which we are able to fix our vessels. The shipping industry is cyclical with attendant volatility in charter hire rates and, as a result, profitability. The dry bulk and tanker sectors have both been characterized by long and short periods of imbalances between supply and demand, causing charter rates to be volatile.
The degree of charter rate volatility among different types of dry bulk and tanker vessels has varied widely, and charter rates for these vessels have also varied significantly in recent years. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by ocean going vessels internationally. The factors affecting the supply and demand for vessels are unpredictable to a great extent and outside our control. That being said, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.

Our vessel deployment strategy seeks to maximize charter revenue throughout industry cycles while maintaining cash flow stability and foreseeability. Our gross revenues for the year ended December 31, 2020, consisted of hire earned under time charter contracts, where charterers pay a fixed daily hire, and other minor compensation costs related to the contracts. In the future, our revenues may also consist of amounts earned under voyage charter contracts, where charterers pay a fixed amount per ton of cargo carried. Our future gross revenues may be affected by the proportion of voyage and time charters, since revenues from voyage charters are generally higher than equivalent time charter hire revenues, as they are of a shorter duration and cover all costs relating to a given voyage, including port expenses, canal dues and fuel (bunker) costs. Accordingly, year-to-year comparisons of gross revenues are not necessarily indicative of vessel performance. We believe that the TCE rate provides a more accurate measure for comparison.
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The BDI average for the years ended December 31, 2019 and 2020 was 1,352 points and 1,066 points, respectively; notably though, the charter rate volatility exhibited within this period due to the Covid-19 pandemic was significant and negatively affected our revenues. In particular, the Baltic Dry Index (BDI) closed at 411 points on February 10, 2020 and slowly recovered by year end. Following the increased flow of newbuilding vessels that entered the market during the early 2010's, the oversupply of capacity had a negative impact on the market as demand for dry bulk commodities transfer was not able to absorb the flow of the vessels entering the market. The deadweight carrying capacity for 2020 increased by approximately 3.7%, which is significantly lower from the double digit increases during the early 2000's and from 2009 to 2012, while increase in demand of commodities is expected to increase by approximately 1 to 2%. The volatility in charter rates in the dry bulk market affects the value of dry bulk vessels, which follows the trends of dry bulk charter rates, and earnings on our charters, and similarly, affects our cash flows and liquidity.
The tanker industry has also varied significantly, with Aframax LR2 tanker spot rates peaking in April 2020, according to BIMCO, before falling significantly in 2020 as a result of the global pandemic.
Employment and operation of our Fleet
A factor that impacts our profitability is the employment and operation of our Fleet which mainly requires regular maintenance and repair, effective crew selection and training, ongoing supply of our Fleet with the spares and the stores that it requires, contingency response planning, auditing of our vessels' onboard safety procedures, arrangements for our vessels' insurance, chartering of the vessels, training of onboard and on shore personnel with respect to the vessels' security and security response plans (ISPS), obtaining of ISM certifications and performing the necessary audit for the vessels within the six months of taking over a vessel and the ongoing performance monitoring of the vessels.
Financial, general and administrative management
The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires us to manage our financial resources, which includes managing banking relationships, administrating our bank accounts, managing our accounting system, records and financial reporting, monitoring and ensuring compliance with the legal and regulatory requirements affecting our business and assets and managing our relationships with our service providers and customers.
Because many of these factors are beyond our control and certain of these factors have historically been volatile, past performance is not necessarily indicative of future performance and it is difficult to predict future performance with any degree of certainty.
Important Measures and Definitions for Analyzing Results of Operations
We believe that important concepts and measures for analyzing trends in our results of operations include the following:
Ownership days. Ownership days are the total number of calendar days in a period during which we owned our vessels. Ownership days are an indicator of the size of our Fleet over a period and determine both the level of revenues and expenses recorded during that specific period.
Available days. Available days are the Ownership days after subtracting off-hire days associated with major scheduled repairs, vessel upgrades and dry-dockings or special or intermediate surveys and major unscheduled repair and positioning days (which do not include ballast voyage days for which compensation has been received by the Company). The shipping industry uses Available days to measure the aggregate number of days in a period during which vessels are available to generate revenues. Our calculation of Available days may not be comparable to that reported by other companies.
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Fleet utilization. We calculate Fleet utilization by dividing the Available days during a period by the number of Ownership days during that period. Fleet utilization is used to measure a company's ability to efficiently find suitable employment for its vessels and minimize the number of days that its vessels are off-hire for reasons such as major repairs, vessel upgrades, dry-dockings or special or intermediate surveys and other unforeseen events.
Off-hire. The period our Fleet is unable to perform the services for which it is required under a charter for reasons such as scheduled repairs, vessel upgrades, dry-dockings or special or intermediate surveys or other unforeseen events.
Dry-docking/Special Surveys. We periodically dry-dock and/ or perform special surveys on our Fleet for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Our ability to control our dry-docking  and special survey expenses and our ability to complete our scheduled dry-dockings and/or special surveys on time also affects our financial results. Dry-docking and special survey costs are accounted under the deferral method whereby the actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due.
Daily vessel operating expenses. The level of our vessels' operating expenses, including crewing costs, insurance and maintenance costs. Our ability to control our vessels' operating expenses also affects our financial results. These expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, lubricating oil costs, tonnage taxes and other miscellaneous expenses. Daily vessel operating expenses are calculated by dividing Fleet operating expenses by the Ownership days for the relevant period.
Daily company administration expenses. Daily company administration expenses include administration expenses such as audit fees, legal fees, directors' insurance and remuneration, listing fees and other miscellaneous administration expenses, essential for the conduct of our business, and are calculated by dividing company administration expenses by the Ownership days for the relevant period.
Daily management fees. Daily management fees are calculated by dividing management fees by the Ownership days for the relevant time period and represent the fees payable to Castor Ships and Pavimar for managing our Fleet.
Time charter. A time charter is a contract for the use of a vessel for a specific period of time during which the charterer pays substantially all of the voyage expenses, including port charges, bunker expenses and canal charges. The vessel owner pays the vessel operating expenses, which include crew costs, provisions, deck and engine stores and spares, lubricants, insurance, maintenance and repairs. The vessel owner is also responsible for each vessel's dry-docking and intermediate and special survey costs. Time charter rates are usually fixed during the term of the charter. Prevailing time charter rates do fluctuate on a seasonal and year-to-year basis and may be substantially higher or lower from a prior time charter agreement when the subject vessel is seeking to renew the time charter agreement with the existing charterer or enter into a new time charter agreement with another charterer. Fluctuations in time charter rates are influenced by changes in spot charter rates.
Time charter equivalent ("TCE") Rate. Our method of calculating TCE rate is determined by dividing vessel revenues (time charter and/or voyage revenues, net of charterers' commissions and voyage expenses) by the Available days in the relevant period.  Please see please see "Item 3. Key Information— A. Selected Financial Data" on the use by the Company of this Non-GAAP measure.
58


The following table presents the operational metrics that management uses to assess our financial condition and results of operations:
   
For the year ended
 
   
December 31, 2019
   
December 31, 2020
 
Operational Metrics
           
Available days
   
545
     
1,219
 
Ownership days
   
556
     
1,405
 
Fleet utilization
   
98
%
   
87
%
Daily time charter equivalent (or TCE)
 
$
10,471
   
$
9,765
 
Daily vessel operating expenses
 
$
5,041
   
$
5,301
 
Daily management fees
 
$
382
   
$
662
 
Daily general and administrative expenses
 
$
681
   
$
805
 
EBITDA (1)
 
$
2,175,894
   
$
2,327,671
 
_______________________
 (1) For this definition see "Item 3. Key information—A. Selected Financial Data".

Results of Operations
Year ended December 31, 2020 as compared to year ended December 31, 2019
(In U.S. Dollars, except for share and per share data)
 
Year ended
December 31, 2019
   
Year ended
December 31, 2020
   
Change -amount
   
Change-%
 
Vessel revenues (net of charterers' commissions)
   
5,967,772
     
12,487,692
     
6,519,920
     
109.3
%
Expenses:
                               
Voyage expenses (including commissions from related parties)
   
(261,179
)
   
(584,705
)
   
323,526
     
123.9
%
Vessel operating expenses
   
(2,802,991
)
   
(7,447,439
)
   
4,644,448
     
165.7
%
Management fees to related parties
   
(212,300
)
   
(930,500
)
   
718,200
     
338.3
%
General and administrative expenses
                               
• Company administration expenses (including administrations costs from related party)
   
(378,777
)
   
(1,130,953
)
   
752,176
     
198.6
%
• Public registration costs
   
(132,091
)
   
—
     
(132,091
)
   
(100
)%
Provision for doubtful debt
   
—
     
(37,103
)
   
37,103
     
100
%
Depreciation and amortization
   
(897,171
)
   
(1,904,963
)
   
1,007,792
     
112.3
%
Operating income
   
1,283,263
     
452,029
     
(831,234
)
   
(64.8
)%
                                 
Interest and finance costs, net (including interest costs from related party)
   
(190,574
)
   
(2,154,601
)
   
1,964,027
     
1,030.6
%
Total Other Income / (expenses), net
   
(195,114
)
   
(2,183,922
)
   
1,988,808
     
1,019.3
%
US Source Income Taxes
   
—
     
(21,640
)
   
—
     
100
%
Net income/ (loss) and comprehensive income/ (loss)
   
1,088,149
     
(1,753,533
)
   
(2,841,682
)
   
(261.1
)%
                                 
Earnings/ (Loss) per common share, basic and diluted
   
0.31
     
(0.03
)
               
Weighted average number of common shares, basic and diluted
   
2,662,383
     
67,735,195
                 

59


Vessel revenues, net – Vessel revenues, net of charterers' commissions, increased by $6,519,920, or 109.3%, from $5,967,772 in the year ended December 31, 2019, to $12,487,692 in the corresponding period of 2020. This increase was exclusively driven by the addition of the M/V Magic Rainbow, the M/V Magic Horizon and the M/V Magic Nova to our Fleet in the third and fourth quarters of 2020, respectively, which correspondingly increased our Fleet Available days from 545 in the year ended December 31, 2019, to 1,219 in the year ended December 31, 2020, partly counterbalanced by the weaker charter hire rates achieved in certain charter renewals in the current year mostly for the M/V Magic P and the M/V Magic Sun as compared to last year, which we predominantly attribute to the negative impact of the ongoing COVID-19 pandemic. The average daily TCE of our Fleet for the year ended December 31, 2020 was $9,765, or 6.7% lower than the $10,471 earned during the same period ended December 31, 2019, mainly as a result of the weaker charter market rates achieved for certain prolonged periods in 2020 to the majority part of our fleet, but mostly those achieved during the year for the M/V Magic P and M/V Magic Sun, as previously discussed. TCE rate is a non-GAAP measure. Please refer to "Item 3. Key Information— A. Selected Financial Data" for a reconciliation of the TCE rate to Vessel revenues, net, the most directly comparable U.S. GAAP measure.
Voyage Expenses – Voyage expenses consist primarily of brokerage commissions (including commissions from related parties, if any), port expenses, and gain/loss on bunkers. Gain/loss on bunkers may arise where the cost of the bunker fuel sold to the new charterer exceeds/falls short of the cost of the bunker fuel acquired, whereas, loss may also arise due to bunkers consumption due to repositioning, deviation(s) and/or port stay periods. The increase in voyage expenses by $323,526, or by 123.9%, in the years ended December 31, 2019 and 2020, was primarily attributable to (i) higher charges for chartering brokerage commissions, consistent with our higher vessel revenues and (ii) $222,753 of bunker losses we incurred in the year ended December 31, 2020, versus $127,900 of bunker losses in the year ended December 31, 2019, mostly as a result of bunkers consumed during port stay, repositioning and/or deviation periods. The voyage expenses of our fleet, though, on a daily basis, were commensurate with the growth of our fleet since last year.
Vessel Operating Expenses – Vessel operating expenses increased by 165.7%, or $4,644,448, to $7,447,439 during the year ended December 31, 2020, from $2,802,991 during the year ended December 31, 2019. On a daily basis, our operating expenses increased from $5,041 in 2019 to $5,301 in 2020. This increase was largely associated with (i) elevated crew costs for the vast majority of our fleet resulting from difficulties and delays in embarking and disembarking crew on our vessels amid the ongoing COVID-19 pandemic and, (ii) increased spares and repair maintenance costs for the M/V Magic Rainbow.
Management Fees – During the years ended December 31, 2019 and 2020, we incurred $212,300 and $930,500 in management fees, respectively, or an average daily management fee of $382 and $662, respectively. From January 1, 2020, the daily management fee of the vessels then comprising our fleet was $500 per day and on September 1, 2020, we and Pavimar agreed to adjust the daily technical management fee of our fleet from $500 per day to $600 per day. In addition, effective September 1, 2020, we pay Castor Ships a daily commercial management fee of $250. These are the main attributes to the increase in daily management fees in 2020 as compared with the prior year, whereas, the gross increase is also attributed to the growth of our fleet and the resultant increase in our fleet's Ownership Days from 556 in 2019 to 1,405 in 2020.
General and Administrative Expenses
•
Company administration expenses
During the years ended December 31, 2019 and 2020, we incurred Company administration expenses of $378,777 and $1,130,953, respectively. Daily company administration expenses for each of the years ended December 31, 2019 and 2020 were $681 and $804, respectively. The $123 increase in daily administration expenses mainly stemmed from additional legal, investor relations, listing and directors' insurance fees, commensurate with the growth of our business, as well as the quarterly $0.3 million flat fee we pay Castor Ships effective September 1, 2020, in exchange for the management and administration of our business, further discussed under "Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions".
60


•
Public registration costs
Public registration costs decreased by $132,091 or 100.0%, from $132,091 for year ended December 31, 2019 to $0 for the year ended December 31, 2020. Public registration costs relate to the costs incurred by the Company in connection with the Company's registration and listing of its 2,400,000 issued and outstanding common shares on the Norwegian OTC on December 21, 2018 and the NASDAQ Capital Market on February 11, 2019. Apart from registration and listing costs, public registration costs further include legal, consultancy and other costs incurred in connection with the subject listings. After the end of the first quarter of 2019, we did not incur nor do we expect to incur costs of similar nature.
Depreciation and Amortization – Depreciation and amortization expenses are comprised of vessels' depreciation and the amortization of vessels' capitalized dry-dock costs. Depreciation and amortization expenses increased for the year ended December 31, 2020 due to an increase in vessels' depreciation from $556,101 in 2019 to $1,750,434 in 2020 as a result of the increase in our Ownership days which was partly offset by a lower dry-dock amortization charge of $154,529 for the year ended December 31, 2020 versus a relevant charge of $341,070 in the respective period of 2019. Dry-dock days did not significantly vary in the years ended December 31, 2019 and 2020, however, average daily dry-dock amortization cost was approximately $527 during 2020 versus an approximate cost of $1,100 in 2019, which explains the above noted variation to a large extent.
Interest and finance costs, net – The increase by $1,964,027 in net interest and finance costs in the year ended December 31, 2020, as compared with the previous year, is the result of (i) an increase in the level of weighted outstanding indebtedness from approximately $3.5 million in 2019 to approximately $20.2 million in 2020 (partly set-off, however, by the lower level of 5.0% of weighted average interest during 2020 as compared to 5.8% during 2019) and (ii) the non-cash recurring amortization expenses in connection with our existing credit facilities and the non-cash accelerated amortization expenses related to deferred financing costs and to a beneficial conversion feature recognized in connection with our fully repaid, as of December 31, 2020, $5.0 Million Convertible Debentures aggregating to an amount of $1,131,524.
Recent Accounting Pronouncements
Refer to "Note 2. Significant Accounting Policies" to our Consolidated Financial Statements included in this annual report.
Inflation
Inflation has not had a material effect on our expenses given recent economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating costs.
Currency Fluctuations
Refer to risk factor "Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results". Currency fluctuations have not had a material effect on our expenses.
Impact of Governmental Economic, Fiscal, Monetary or Political Policies
Refer to risk factor "Political instability, terrorist attacks, international hostilities and global public health threats can affect the seaborne transportation industry, which could adversely affect our business".
61


Implications of Being an Emerging Growth Company
We had less than $1.07 billion in revenue during our last fiscal year, which means that we are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, or JOBS Act. An emerging growth company may take advantage of specified reduced public company reporting requirements that are otherwise applicable generally to public companies. These provisions include:

•
exemption from the auditor attestation requirement of management's assessment of the effectiveness of the emerging growth company's internal controls over financial reporting pursuant to Section 404(b) of Sarbanes-Oxley; and

•
exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and financial statements.
We may choose to take advantage of some or all of these reduced reporting requirements. We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of the date we first sell our common equity securities pursuant to an effective registration statement under the Securities Act or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in "total annual gross revenues" during our most recently completed fiscal year, if we become a "large accelerated filer" with a public float of more than $700 million, as of the last business day of our most recently completed second fiscal quarter or as of any date on which we have issued more than $1 billion in non-convertible debt over the three-year period prior to such date. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. See Item 3. "Key Information—D. Risk Factors— We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common shares less attractive to investors". As of October 1, 2018, we irrevocably elected to opt out of such extended transition period.
B.
Liquidity and Capital Resources
We operate in a capital-intensive industry and we expect to finance the purchase of additional vessels and other capital expenditures through a combination of proceeds from equity offerings, borrowings from debt transactions and cash generated from operations. Our liquidity requirements relate to servicing the principal and interest on our debt, funding capital expenditures and working capital (which includes maintaining the quality of our vessels and complying with international shipping standards and environmental laws and regulations) and maintaining cash reserves for the purpose of satisfying a certain minimum liquidity restrictions contained in our credit facilities. In accordance with our business strategy, other liquidity needs may relate to funding potential investments and maintaining cash reserves against fluctuations in operating cash flows. Our funding and treasury activities are intended to maximize investment returns while maintaining appropriate liquidity.
For the year ended December 31, 2020, our principal sources of funds were the net proceeds from (i) the issuance of common stock pursuant to the June Equity Offering and the July Equity Offering and the resultant issuance of certain Class A Warrants pursuant to the June Equity Offering and (ii) the incurrence of secured and unsecured debt as discussed below under "Our Borrowing Activities". As of December 31, 2020 and December 31, 2019, we had cash and cash equivalents of $8.9 million and $4.6 million (which excludes $0.5 million of minimum cash restricted in both years under our debt agreements), respectively. Cash and cash equivalents are held in U.S. dollars.
62


Working capital is equal to current assets minus current liabilities. As of December 31, 2020, we had a working capital surplus of $2.7 million as compared to a working capital surplus of $3.2 million as of December 31, 2019. We believe that our current sources of funds and those that we anticipate to internally generate for a period of at least the next twelve months from the date of this annual report, will be sufficient to fund the operations of our Fleet, meet our normal working capital requirements and service the principal and interest on our debt.
Capital Expenditures
We make capital expenditures from time to time in connection with vessel acquisitions and vessels upgrades and improvements (either for the purpose of meeting regulatory or legal requirements or for the purpose of complying with requirements imposed by classification societies), which we finance with cash from operations, debt and equity issuances. As of December 31, 2020, we had no commitments for capital expenditures related to vessel acquisitions. As of the date of this annual report, remaining capital expenditure requirements relating to our recent vessel acquisitions amount to 26.7 million, all due within 2021. We expect to cover such capital expenditures with cash from operations and cash on hand.
In November 2018, we entered into a contract to purchase and install BWMS on our then owned dry bulk carriers, as further amended in October 2019 and December 2020, to reflect our subsequent vessel acquisitions. We completed the BWMS installation on the M/V Magic Sun during the vessel's scheduled dry-docking which took place in the fourth quarter of 2020, whereas, the BWMS system installations on the M/V Magic P and the M/V Magic Moon were granted extensions from the third quarter of 2020 to the third quarter of 2022. It is estimated that the aggregate contractual obligations related to all these purchases as well as purchases on our remaining Fleet vessels (in cases where not already installed), excluding installation costs, will be approximately $0.8 million, with scheduled payments of $0.5 million in 2021 and $0.3 million in 2022. We also expect to cover such cash flow needs with cash from operations and cash on hand.
A failure to fulfill our capital expenditure commitments generally results in a forfeiture of advances paid with respect to the contracted acquisitions and a write-off of capitalized expenses. In addition, we may also be liable for other damages for breach of contract(s). Such events could have a material adverse effect on our business, financial condition and results of operations.
Equity Issuances
On June 28, 2019, we entered into an equity distribution agreement, or the Equity Distribution Agreement, with Maxim acting as a sales agent, under which we may, from time to time, offer and sell shares of our common stock through an at-the-market, or ATM, program having an aggregate offering price of up to $10,000,000. As of December 31, 2020, we had raised gross and net proceeds (after deducting sales commissions and other fees and expenses) under the ATM of $2.6 million and $2.3 million, respectively, by issuing and selling 618,112 common shares. The net proceeds received under the ATM were used to partly finance the acquisition of the M/V Magic Moon. We have not incurred any further sales under the ATM program since September 2019.
On October 10, 2019, we reached an agreement with all of the holders of our Series A Preferred Shares to waive all due and overdue dividends and to adopt and to Amend and Restate the Statement of Designations of our Series A Preferred Shares, or the Series A Agreement. Pursuant to the Series A Agreement, on October 17, 2019, we issued 300,000 common shares to the holders of the Series A Preferred Shares in exchange for the waiver of approximately $4.3 million worth of dividends accumulated on the Series A Preferred Shares, for the period since their original issuance to June 30, 2019.
On January 27, 2020, we entered into a securities purchase agreement with YAII PN, LTD, pursuant to which we agreed to sell and the Investor agreed to purchase up to three convertible debentures for a maximum aggregate price of $5.0 million, further discussed below under "Our Borrowing Activities". During the period from January 2020 up until June 2020, the Investor had converted the full $5.0 million principal amount and $0.1 million of interest under the $5.0 Million Convertible Debentures for 8,042,078 common shares.
63


On June 23, 2020, we entered into an agreement with Maxim, acting as underwriter, pursuant to which we offered and sold 59,110,000 units, each unit consisting of (i) one common share or a pre-funded warrant to purchase one common share at an exercise price equal to $0.01 per common share (a "Pre-Funded Warrant"), and (ii) one Class A Warrant to purchase one common share (a "Class A Warrant"), for $0.35 per unit (or $0.34 per unit including a Pre-Funded Warrant), or the June Equity Offering. The June Equity Offering, which closed on June 26, 2020, resulted in the issuance of 59,082,686 common shares and 59,110,000 Class A Warrants, which also included 7,710,000 over-allotment units pursuant to an over-allotment option that was exercised by Maxim on June 24, 2020. In connection with this offering, we raised gross and net cash proceeds of approximately $20.7 million and $18.6 million, respectively. Further, as of March 26, 2021, an aggregate of 58,393,700 Class A Warrants have been exercised at an exercise price of $0.35 per warrant, for which we have received total gross proceeds of approximately $20.4 million.
On July 12, 2020, we entered into agreements with certain unaffiliated institutional investors pursuant to which we offered 57,750,000 common shares in a registered offering (the "July Equity Offering"). In a concurrent private placement, we also issued warrants to purchase up to 57,750,000 common shares (the "Private Placement Warrants"). The aggregate purchase price for each common share and Private Placement Warrant was $0.30. In connection with the July Equity Offering, which closed on July 15, 2020, we received gross and net cash proceeds of approximately $17.3 million and $15.6 million, respectively. Further, as of March 26, 2021, an aggregate of 57,071,360 Private Placement Warrants have been exercised at an exercise price of $0.35 per warrant, for which we have received total gross proceeds of approximately $20.0 million.
On December 30, 2020, we entered into agreements with certain unaffiliated institutional investors pursuant to which we offered 94,750,000 common shares and warrants to purchase 94,750,000 common shares (the "January 5 Warrants") in a registered direct offering which closed on January 5, 2021. The aggregate purchase price for each common share and January 5 Warrant was $0.19. In connection with this offering, we received gross proceeds of approximately $18.0 million and net proceeds of approximately $16.4 million, net of estimated fees and expenses of approximately $1.6 million. All of the January 5 Warrants have been exercised at an exercise price of $0.19 per warrant, for which we have received total gross proceeds of approximately $18.0 million.
On January 8, 2021, we entered into agreements with certain investors pursuant to which we offered 137,000,000 common shares and warrants to purchase 137,000,000 common shares (the "January 12 Warrants") in a registered direct offering. The aggregate purchase price for each common share and January 12 Warrant was $0.19. In connection with this offering, which closed on January 12, 2021, we received gross proceeds of approximately $26.0 million and net proceeds of approximately $24.0 million, net of estimated fees and expenses of approximately $2.0 million. All of the January 12 Warrants have been exercised at an exercise price of $0.19 per warrant, for which we have received total gross proceeds of approximately $26.0 million.
Our Borrowing Activities
As of December 31, 2020, we had $18.5 million of gross indebtedness outstanding under our debt agreements, of which $7.2 million matures in the twelve-month period ending December 31, 2021. Our contractual commitments, as of December 31, 2020, primarily relate to debt and interest repayments of $20.0 million under our credit facilities, of which approximately $7.8 million mature in less than one year. As of December 31, 2020, we also were in compliance with all the financial and liquidity covenants contained in the Alpha Bank Facility (defined below) and the Chailease Financial Services Facility.
$5.0 Million Term Loan Facility
On August 30, 2019, we entered into a $5.0 million unsecured term loan with Thalassa Investment Co. S.A., or Thalassa, an entity affiliated with Petros Panagiotidis, or the $5.0 Million Term Loan Facility. The proceeds from the $5.0 Million Term Loan Facility were used to partly finance the acquisition of the M/V Magic Sun. The entire loan amount was drawn down on September 3, 2019. The $5.0 Million Term Loan Facility bears a fixed interest rate at 6.0% per annum and had an original bullet repayment on March 3, 2021, a date which was eighteen (18) months after the drawdown date. On March 2, 2021, the maturity of the $5.0 Million Term Loan Facility was extended for an additional six-month term on similar terms with those of the original loan agreement. The $5.0 Million Term Loan Facility may be prepaid in whole or in part at any time prior to its maturity, at our option. The $5.0 Million Term Loan Facility contains event of default provisions and covenants customary for unsecured facilities of this type, including, but not limited to, failure to pay, bankruptcy and insolvency, material litigation, change of business, as further set forth in the provisions of the $5.0 Million Term Loan Facility. The $5.0 Million Term Loan Facility does not impose any financial covenant requirements or other minimum liquidity restrictions on us.
64


Alpha Bank Facility - $11.0 Million Senior Secured Credit Facility
On November 22, 2019, Spetses Shipping Co. and Pikachu Shipping Co., our wholly-owned subsidiaries, concluded as co-borrowers, or the Borrowers, our first secured financing in the amount of $11.0 million, or the Alpha Bank Facility, the net proceeds of which were drawn down on December 2, 2019. The Alpha Bank Facility has a term of five years from the drawdown date, bears interest at 3.50% over LIBOR per annum and is repayable in twenty (20) equal quarterly instalments of $400,000 each, plus a balloon instalment payable at maturity, on December 2, 2024. The facility is secured by, including but not limited to, a first preferred mortgage and first priority general assignment covering earnings, insurances and requisition compensation over the vessels owned by the Borrowers, an earnings account pledge, shares security deed relating to the shares of the vessels' owning subsidiaries, manager's undertakings and is guaranteed by Castor.
The Alpha Bank Facility contains certain customary minimum liquidity restrictions and financial covenants that require the Borrowers to:

•
maintain a certain amount of minimum free liquidity per collateralized vessel ("the Minimum Liquidity Deposit"); and

•
meet a specified minimum security requirement ratio, which is the ratio of the aggregate market value of the mortgaged vessels plus the value of any additional security and the value of the Minimum Liquidity Deposit to the aggregate principal amounts due under the Alpha Bank Facility.
Chailease Financial Services Facility - $4.5 Million Senior Secured Credit Facility
On January 23, 2020, pursuant to the terms of a credit agreement, Bistro Maritime Co., our wholly-owned subsidiary, entered into a $4.5 million secured term loan facility with Chailease International Financial Services Co., Ltd., or the Chailease Financial Services Facility. The loan was drawn down on January 31, 2020, is repayable in twenty (20) equal quarterly installments of $150,000 each, plus a balloon installment payable at maturity and bears interest at 4.50% plus LIBOR per annum. The facility contains a standard security package including a first preferred mortgage on the vessel, pledge of bank account, charter assignment, shares pledge and a general assignment over the vessel's earnings, insurances and any requisition compensation in relation to the vessel owned by the borrower, and is guaranteed by the Company and Pavimar. Pursuant to the terms of the Chailease Financial Services Facility, the Company is also subject to a certain minimum liquidity restriction requiring the borrower to maintain a certain credit balance with the lender (the "Cash Collateral") as well as certain customary, for this type of facilities, negative covenants. The credit agreement governing the Chailease Financial Services Facility also requires maintenance of a minimum value to loan ratio being the aggregate principal amount of (i) fair market value of the collateral vessel and (ii) the value of any additional security (including the Cash Collateral), to the aggregate principal amount of the loan.
$5.0 Million Convertible Debentures
On January 27, 2020, we entered into a securities purchase agreement with the Investor, pursuant to which, on January 27, 2020, February 10, 2020 and February 19, 2020, we issued and sold to the Investor three convertible debentures in original principal amounts of $2.0 million, $1.5 million and $1.5 million each, respectively. The $5.0 Million Convertible Debentures originally matured 12 months from their issuance dates and bore fixed interest at 6% per annum. As of June 9, 2020, the Investor had converted the aggregate $5.0 million of principal and $0.1 million of interest due under the $5.0 Million Convertible Debentures for 8,042,078 common shares.
65


$15.3 Million Term Loan Facility
On January 22, 2021, pursuant to the terms of a credit agreement, Pocahontas Shipping Co. and Jumaru Shipping Co., our wholly-owned subsidiaries, entered into the $15.3 Million Term Loan Facility with Hamburg Commercial Bank AG. The loan was drawn down on January 27, 2021, is repayable in sixteen (16) equal quarterly installments of $471,000 each, plus a balloon installment payable at maturity and bears interest at 3.30% plus LIBOR per annum. The facility contains a standard security package including first preferred mortgages on the vessels, pledge of bank accounts, charter assignments, shares pledge and a general assignment over the vessels' earnings, insurances and any requisition compensation in relation to the vessels owned by the borrowers, and is guaranteed by the Company. Pursuant to the terms of the $15.3 Million Term Loan Facility, the Company is also subject to a certain minimum liquidity restriction requiring the borrowers to maintain a certain credit balance with the lender (the "Liquidity Accounts"), to maintain and gradually fund certain dry-dock reserve accounts (the "Dry-dock Reserve Accounts") in order to ensure the payment of any costs incurred in relation to the next dry-docking of each mortgaged vessel, as well as to certain customary, for this type of facilities, negative covenants. The credit agreement governing the $15.3 Million Term Loan Facility also requires maintenance of a minimum security cover ratio being the aggregate amount of (i) the fair market value of the collateral vessels, (ii) the value of the Liquidity Accounts, (iii) the value of the Dry-dock Reserve Accounts and (iv) any additional security provided, over the aggregate principal amount outstanding of the loan.
The Company intends to use the net proceeds from the $15.3 Million Term Loan Facility to support the Company's growth plans and for general corporate purposes.
Cash Flows
The following table summarizes our net cash flows from operating, investing and financing activities for the years ended December 31, 2020 and 2019:
 
For the year ended
 
(In US Dollars)
December 31, 2019
 
December 31, 2020
 
Net cash provided by/ (used in) operating activities
   
2,311,962
     
(2,343,809
)
Net cash used in investing activities
   
(17,227,436
)
   
(35,472,173
)
Net cash provided by financing activities
   
18,087,133
     
42,183,946
 

Operating Activities: For the year ended December 31, 2020, net cash used in operating activities amounted to $2.3 million, consisting of net income after non-cash items of $1.1 million less a decrease in working capital by $3.4 million. For the year ended December 31, 2019, net cash provided by operating activities amounted to $2.3 million, consisting of net income after non-cash items of $2.0 million plus an increase in working capital of $0.3 million. The major driver of the decrease in cash provided by/ (used in) operating activities is the increase in interest costs paid as discussed in "Item 5. Operating and Financial Review and Prospects", as compared to the fiscal year ended December 31, 2019, further impacted by (i) increased cash outflows related to dry-docking capitalized expenses by $1.3 million in 2020 compared to 2019, (ii) decreased cash inflows from trade receivables by $1.6 million and (iii) other negative cash flow variations in working capital accounts during the fiscal year ended December 31, 2020 as compared with the fiscal year ended December 31, 2019.
Investing Activities: Net cash used in investing activities in the fiscal year ended December 31, 2020 reflects the cash outflows associated with (i) the acquisitions of the M/V Magic Rainbow, the M/V Magic Horizon and the M/V Magic Nova in the third and fourth quarters of  2020 and (ii) the BWMS installations on the M/V Magic P and the M/V Magic Sun. Net cash used in investing activities in the fiscal year ended December 31, 2019 reflects the cash outflows associated with the acquisition of the M/V Magic Sun in September 2019 and of the M/V Magic Moon in October 2019.
Financing Activities: Net cash from financing activities of $42.2 million for the year ended December 31, 2020 consisted of (i) the net cash proceeds received pursuant to the June Equity Offering and the July Equity Offering amounting to $35.3 million, (ii) proceeds of $9.5 million in the period from the $5.0 Million Convertible Debentures and the Chailease Financial Services Facility, (iii) principal scheduled repayments under our credit facilities amounting to $2.0 million and (iv) payment of deferred finance costs in connection with the closing of our debt agreements in an aggregate amount of $0.6 million.
66


C.
Research and Development, Patents and Licenses, Etc.
Not applicable.
D.
Trend Information
Our results of operations depend primarily on the charter hire rates that we are able to realize. Charter hire rates paid for dry bulk and tanker vessels are primarily a function of the underlying balance between vessel supply and demand. For a discussion regarding the market performance, please see "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Cyclical Nature of the Industry".
While global trade is likely to continue to grow, we expect the overcapacity in the shipping market to come to a stop and, therefore, no longer exert the considerable pressure that it did on charter rates in recent years. There can be no assurance as to how long charter rates will remain at their current levels or whether they will improve or deteriorate and, if so, when and to what degree. Charter rates may remain at current levels for some time, which may adversely affect our future growth potential and our profitability. Also, the Company's business could be materially and adversely affected by the risks, or the public perception of the risks and travel restrictions related to the COVID-19 pandemic. The Company is unable to reasonably predict the estimated length or severity of the COVID-19 pandemic on future operating results.
E.
Off Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements.
F.
Tabular Disclosure of Contractual Obligations
The following table sets forth our contractual obligations and their maturity dates as of December 31, 2020:
         
Payments due by period
 
Obligations
 
Total
   
Less than 1 year
   
1-3 years
   
3-5 years
   
More than 5 years
 
Long-term debt
 
$
18,450,000
   
$
7,200,000
   
$
4,400,000
   
$
6,850,000
   
$
-
 
Interest on long-term debt (1)
   
1,539,058
     
557,163
     
744,892
     
237,003
     
-
 
Administration fees - Castor Ships (2)
   
5,600,000
     
1,200,000
     
2,400,000
     
2,000,000
     
-
 
Management fees- Pavimar & Castor Ships (2)
   
8,690,400
     
1,861,500
     
3,723,000
     
3,105,900
     
-
 
Capital expenditures related to BWMS purchases (3)
   
849,122
     
495,871
     
353,251
     
-
     
-
 
Total
 
$
35,128,580
   
$
11,314,534
   
$
11,621,143
   
$
12,192,903
   
$
-
 
__________________________
(1)
Our variable rate long-term debt outstanding as of December 31, 2020 bears variable interest at a margin over LIBOR. The calculation of interest payments has been made assuming interest rates based on the LIBOR specific to our variable rate credit facilities as of December 31, 2020, and our applicable margin rate.
(2)
For further discussion on our contractual relationship with our managers, please see "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions".
(3)
Our calculation of the contractual obligations related to BWMS purchases as of December 31, 2020 excludes installation costs and other unforeseen costs that we might incur as part of the systems' installation and has been made on the basis of a Euro/US Dollar exchange rate of €1.0000/$1.2271 as of December 31, 2020. For further discussion regarding the respective commitments, please see section Capital Expenditures above.
67


G.
Safe Harbor
Please see "Cautionary Statement Regarding Forward Looking Statements" at the beginning of this annual report.
Critical Accounting Estimates
We prepare our financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of our material accounting policies, please read "Item 18. Financial Statements" and more precisely "Note 2. Summary of Significant Accounting Policies" of our Consolidated Financial Statements.
Vessels' Depreciation
We record the value of our dry bulk vessels at their cost (which includes the contract price plus any direct expenses incurred upon acquisition, including improvements, delivery expenses and other expenditures to prepare the vessel for its initial voyage) less accumulated depreciation. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of a vessel; otherwise these amounts are charged to expense as incurred. Depreciation is calculated on a straight-line basis over the vessels' remaining economic useful life, estimated to be 25 years from the date of initial delivery from the shipyard, after considering the estimated residual value. Residual value is estimated by taking an estimated steel scrap rate times the weight of the ship noted in lightweight ton. Residual values are periodically reviewed and revised, if needed, to recognize changes in conditions, new regulations or for other reasons. Changes in the useful life of a vessel or in its residual value affect the depreciable amount of the vessels and affect the depreciation expense in the period of the revision and in future periods. Our vessels, being secondhand vessels, are depreciated from the date of their acquisition through their remaining estimated useful life. The assumptions inherent in the calculation of vessels' depreciation are based on current and historical market trends. We do not expect these assumptions to change in the near future unless market trends will indicate otherwise. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations become effective.
Vessel Lives and Impairment
The carrying value of each of our vessels represents its original cost (contract price plus any direct expenses incurred upon acquisition, including improvements, delivery expenses and other expenditures to prepare the vessel for its intended use) at the time of delivery or purchase less accumulated depreciation. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of a vessel; otherwise these amounts are charged to expense as incurred. The Company reviews for impairment its long-lived assets held and used whenever events or changes in circumstances (such as market conditions, obsolesce or damage to the asset, potential sales and other business plans) indicate that the carrying amount of the assets may not be recoverable. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, we are required to evaluate the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset.
The carrying values of our vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuilds. Historically, both charter rates and vessel values tend to be cyclical.
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The table below specifies (i) the carrying value of each of our vessels as of December 31, 2020 and 2019 and (ii) which of those vessels we believe had a charter-free market value below its carrying value. We believe that the aggregate carrying value of the vessels indicated with an asterisk below exceeded their aggregate basic charter-free market value by approximately $0.8 million as of December 31, 2020. This aggregate difference represents the approximate analysis of the amount by which we believe we would have to reduce our net loss if we sold all of such vessels in the current environment, on industry standard terms, in cash transactions, to a willing buyer in circumstances where we are not under any compulsion to sell, and where the buyer is not under any compulsion to buy. For purposes of this calculation, we have assumed that the vessels would be sold at a price that reflects our estimate of their current basic market values.
Our estimates of basic market value assume that the vessels are all in good and seaworthy condition without need for repair and, if inspected, would be certified in class without notations of any kind. Our estimates are based on the estimated market values for the vessels received from a third-party independent shipbroker approved by our financing providers. Vessel values are highly volatile. Accordingly, as such, our estimates may not be indicative of the current or future basic market value of the vessels or prices that could be achieved if the vessels were to be sold.
Vessels
 Date acquired
 
Carrying value as of
December 31, 2020
(in millions of United
States dollars)
   
Carrying value as of
December 31, 2019
(in millions of United
States dollars)
 
Magic P
21/02/2017
 
$
6.8
   
$
6.7
 
Magic Sun
05/09/2019
 
$
6.9
*
 
$
6.8
 
Magic Moon
20/10/2019
 
$
9.6
*
 
$
10.2
 
Magic Rainbow
08/08/2020
 
$
8.0
   
$
-
 
Magic Horizon
09/10/2020
 
$
12.9
   
$
-
 
Magic Nova
15/10/2020
 
$
13.8
   
$
-
 
Total
   
$
58.0
   
$
23.7
 
______________________
* Indicates vessels for which we believe that, as of December 31, 2020, the carrying value exceeded the charter-free market value. As discussed below, we believe that the carrying values of our vessels as of December 31, 2020 and 2019 were recoverable as the undiscounted projected net operating cash flows of these vessels exceeded their carrying value by a significant amount.
We performed undiscounted cash flow tests as of December 31, 2020, as an impairment analysis, in which we made estimates and assumptions relating to determining the projected undiscounted net operating cash flows by considering the following:

•
the charter revenues from existing time charters for the fixed fleet days;

•
estimated vessel operating expenses and voyage expenses;

•
estimated dry-docking expenditures;

•
an estimated gross daily charter rate for the unfixed days (based on the ten-year average of the historical six-months and one-year time charter rates available for each type of vessel) over the remaining economic life of each vessel, excluding days of scheduled off-hires and net of  commissions;

•
residual value of vessels;

•
commercial and technical management fees;

•
an estimated utilization rate; and

•
the remaining estimated life of our vessels.
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The net operating undiscounted cash flows are then compared with the vessels' net book value plus unamortized dry-docking costs. The difference, if any, between the carrying amount of the vessel plus unamortized dry-docking costs and their fair value is recognized in the Company's accounts as impairment loss.
Although we believe that the assumptions used to evaluate potential impairment, which are largely based on the historical performance of our fleet, are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how charter rates and vessel values will fluctuate in the future. Charter rates may, from time to time throughout our vessels' lives, remain for a considerable period of time at depressed levels which could adversely affect our revenue and profitability, and future assessments of vessel impairment.
Our assumptions, based on historical trends, and our accounting policies are as follows:

•
in accordance with the prevailing industry standard, depreciation is calculated using an estimated useful life of 25 years for our vessels, commencing at the date the vessel was originally delivered from the shipyard;

•
estimated useful life of vessels takes into account commercial considerations and regulatory restrictions;

•
estimated charter rates are based on rates under existing vessel contracts and thereafter at market rates at which we expect we can re-charter our vessels based on market trends. We believe that the ten-year average historical time charter rate is appropriate (or less than ten years if appropriate data is not available) for the following reasons:
• it reflects more accurately the earnings capacity of the type, specification, deadweight capacity and average age of our vessels;
• it reflects the type of business conducted by us (period as opposed to spot);
• it includes at least one market cycle; and
• respective data series are adequately populated.

•
estimates of vessel utilization, including estimated off-hire time are based on the historical experience of our fleet;

•
estimates of operating expenses and dry-docking expenditures are based on historical operating and dry-docking costs based on the historical experience of our fleet and our expectations of future operating requirements;

•
vessel residual values are a product of a vessel's lightweight tonnage and an estimated scrap rate; and

•
the remaining estimated lives of our vessels used in our estimates of future cash flows are consistent with those used in our depreciation calculations.
The impairment test that we conduct is most sensitive to variances in future time charter rates. Based on the sensitivity analysis performed for December 31, 2020, we would begin recording impairment on the first vessel that will incur impairment if time charter declines by 7% from their ten-year historical averages.
Based on the above assumptions we determined that the undiscounted cash flows support the vessels' carrying amounts as of December 31, 2020.
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ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
Set forth below are the names, ages and positions of our directors and executive officer. Our Board currently consists of three directors and is elected annually on a staggered basis, and each director elected holds office for a three-year term. The business address of each of our directors and executive officer listed below is Castor Maritime Inc., 223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036 Limassol, Cyprus.
Name
 
Age
 
Position
Petros Panagiotidis
 
31
 
Chairman, Chief Executive Officer, Chief Financial Officer, President, Treasurer and Class C Director
Dionysios Makris
 
40
 
Secretary and Class B Director
Georgios Daskalakis
 
31
 
Class A Director

Certain biographical information with respect to each director and senior management of the Company listed above is set forth below.
Petros Panagiotidis, Chairman, Chief Executive Officer, Chief Financial Officer, President, Treasurer and Class C Director
Petros Panagiotidis, is the founder of Castor Maritime Inc. He has been serving as the Company’s Chairman of the Board, Chief Executive Officer and Chief Financial Officer since our inception in 2017. During his years with Castor Maritime he has been actively engaged in the successful company’s listing on the NASDAQ Capital Market in February 2019. He is responsible for the implementation of our business strategy and the overall management of our affairs. Prior to founding Castor Maritime, he gained extensive experience working in shipping and investment banking positions focused on operations, corporate finance and business management. He holds a bachelor’s degree in International Studies and Mathematics from Fordham University and a Master’s Degree in Management and Systems from the New York University.

Dionysios Makris, Secretary and Class B Director
Dionysios Makris has been a non-executive member and Secretary of our Board since our establishment in September 2017. He is a lawyer and has been a member of the Athens Bar Association since September 2005. He is currently based in Piraeus, Greece and is licensed to practice law before the Supreme Court of Greece. He practices mainly shipping and commercial law and is involved in both litigation and transactional practice. He holds a Bachelor of Laws degree from the Law School of the University of Athens, Greece and a Master of Arts degree in International Relations from the University of Warwick, United Kingdom.
Georgios Daskalakis, Class A Director
Georgios Daskalakis has been a non-executive member of our Board since our establishment in September 2017. He has invested all of his professional life in the shipping industry and held various positions for different prominent companies. From 2013 to 2015, he was an insurance officer at Minerva Marine Inc.  Later on, from 2015 to 2017, he served as an operator of tanker vessels at Trafigura Maritime Logistics PTE Ltd. He is currently employed at M/Maritime Corp., a company he has been with since 2017 and in which he has held several positions. Currently, he serves as a Chief Commercial Officer and Chairman of the Board of Directors. He holds a Bachelor's degree from Babson College with a concentration on Economics and Finance as well as a Master of Science degree in Shipping, Trade and Finance from the Costas Grammenos Centre for Shipping, Trade and Finance, Cass Business School, City University of London.
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B.
Compensation
Compensation of Directors
The compensation payable to our Chairman, Chief Executive Officer and Chief Financial Officer for the years ended December 31, 2020, and December 31, 2019, which includes the three-month transition period ended December 31, 2018, amounted to $0.01 million and $0.01 million, respectively. Effective October 1, 2020, we terminated the compensation payments towards our Chief Executive Officer and Chief Financial Officer. Subsequent to the termination of our executive compensation payments, the services rendered by our Chairman, Chief Executive Officer and Chief Financial Officer are included in our master agreement with Castor Ships described under "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions", below. For the year ended December 31, 2020, we paid our non-executive directors fees in the aggregate amount of $20,000 per annum, or $10,000 per director per annum, plus reimbursement for their out-of-pocket expenses. We did not pay our non-executive directors any compensation since our inception until December 31, 2019. Our Chief Executive Officer and Chief Financial Officer who also serves as our director does not receive additional compensation for his service as director.
C.
Board Practices
Our Board currently consists of three directors and is elected annually on a staggered basis. Each director elected holds office for a three-year term or until his successor is duly elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office. At our annual meeting of shareholders held on November 25, 2020, our shareholders re-elected our Class C director to serve until the annual meeting of shareholders to be held in 2023 and approved the granting of discretionary authority to our Board to effect one or more reverse stock splits of our issued common shares, at a ratio of not less than one-for-two and not more than one-for-75 and in the aggregate at a ratio of not more than one-for-75, inclusive, with the exact ratio to be set at a whole number within this range to be determined by the Board, or any duly constituted committee thereof. The term of office of our Class A director expires at the annual meeting of shareholders to be held in 2021, and the term of office our Class B director expires at the annual meeting of shareholders to be held in 2022. Officers are appointed from time to time by our Board and hold office until a successor is appointed. Our directors do not have service contracts and do not receive any benefits upon termination of their directorships.
Our audit committee is comprised of our independent directors, Mr. Dionysios Makris and Mr. Georgios Daskalakis. Our Board has determined that the members of the audit committee meet the applicable independence requirements of the Commission and the Nasdaq Stock Market Rules. Our Board has determined that Mr. Georgios Daskalakis is an "Audit Committee Financial Expert" under the Commission's rules and the corporate governance rules of the Nasdaq Stock Market. The audit committee is responsible for our external financial reporting function as well as for selecting and meeting with our independent registered public accountants regarding, among other matters, audits and the adequacy of our accounting and control systems. Our audit committee is also responsible for reviewing all related party transactions for potential conflicts of interest and all related party transactions are subject to the approval of the audit committee.
D.
Employees
As of the date of this annual report, Mr. Petros Panagiotidis, holding the positions of Chairman, Chief Executive Officer and Chief Financial Officer, is our only employee.
E.
Share Ownership
With respect to the total amount of common shares owned by all of our officers and directors individually and as a group, please see "Item 7. Major Shareholders and Related Party Transactions". Please also see "Item 10. Additional Information—B. Memorandum and Articles of Association" for a description of the rights of holders of our Series B Preferred Shares relative to the rights of holders of shares of our common stock.
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ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
Based on information available to us, including information contained in public filings, as of March 26, 2021, there were no beneficial owners of 5% or more of our common shares. The following table sets forth certain information regarding the beneficial ownership of common shares and Series B Preferred Shares of all of our directors and officers as of March 26, 2021.
All of our common shareholders are entitled to one vote for each common share held.
The percentage of beneficial ownership is based on 707,157,936 common shares outstanding as of March 26, 2021.
Name of Beneficial Owner
No. of Common Shares
 
Percentage
 
All executive officers and directors as a group (1) (2)
   
-
     
-
%
______________________
(1)
Neither any member of our Board of Directors or executive officer individually, nor all of them taken as a group, hold more than 1% of our outstanding common shares.
(2)
Petros Panagiotidis owns 1,124,094 common shares and 12,000 Series B Preferred Shares (representing all such Series B Preferred Shares outstanding, each Series B Preferred Share having the voting power of one hundred thousand (100,000) common shares). Please see "Item 10. Additional Information—B. Memorandum and Articles of Association" for a description of the rights of holders of our Series B Preferred Shares relative to the rights of holders of shares of our common stock.
B.
Related Party Transactions
From time to time, we have entered into agreements and have consummated transactions with certain related parties. We may enter into related party transactions from time to time in the future.
Management, Commercial and Administrative Services
Our vessels are technically managed by Pavimar, a company controlled by Ismini Panagiotidis, the sister of our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis. Under the technical management agreements, our ship-owning subsidiaries pay a $600 daily fee to Pavimar for the provision of a wide range of shipping services such as crew management, technical management, operational employment management, insurance arrangements, provisioning, bunkering, accounting and audit support services, which it may choose to subcontract to other parties at its discretion. Pavimar and one of our wholly-owned subsidiaries have entered into a management agreement with Fleet Ship Management Inc. ("Fleet Ship"), a third-party ship-management company, pursuant to which Fleet Ship provides technical management to the M/V Magic Nova. Pavimar pays, at its own expense, Fleet Ship a fee for the services it has subcontracted to it, without burdening the Company with any additional cost. The technical management agreements have a term of five years and such term automatically renews for a successive five-year term on each anniversary of their effective date, unless the agreements are terminated earlier in accordance with the provisions contained therein. In the event that the Pavimar management agreements are terminated by the ship-owning subsidiaries other than by reason of default by Pavimar, a termination fee equal to four times the total amount of the daily management fee calculated on an annual basis shall be payable from the ship-owning subsidiaries to Pavimar. The technical management agreements also provide that the management fees shall be subject to an annual review on their anniversary.
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Our vessels are commercially managed by Castor Ships, a company controlled by our Chairman, Chief Executive Officer and Chief Financial Officer. Castor Ships manages our business overall and provides us with commercial, chartering and administrative services, including, but not limited to, securing employment for our Fleet, arranging and supervising the vessels' commercial operations, handling all of the Company's vessel sale and purchase transactions, undertaking related shipping project and management advisory and support services, as well as other associated services requested from time to time by us and our ship-owning subsidiaries. In exchange for these services, we and our subsidiaries pay Castor Ships (i) a flat quarterly management fee in the amount of $0.3 million for the management and administration of our business, (ii) a daily fee of $250 per vessel for the provision of commercial services, (iii) a commission rate of 1.25% on all charter agreements and (iv) a commission of 1% on each sale and purchase transaction. The Castor Ships management agreements have a term of five years and such term automatically renews for a successive five-year term on each anniversary of the effective date, unless the agreements are terminated earlier in accordance with the provisions contained therein. In the event that the Castor Ships management agreements are terminated by the Company, or are terminated by Castor Ships due to a material breach of the master management agreement by the Company or a change of control in the Company, Castor Ships shall be entitled to a termination fee equal to four times the total amount of the flat management fee and the per vessel management fees calculated on an annual basis. The commercial ship management agreements with Castor Ships also provide that the management fees shall be subject to an annual review on their anniversary.
Vessel Acquisition
On October 14, 2019, we entered into, through a separate wholly-owned subsidiary, an agreement to purchase a 2005 Japan built Panamax dry bulk carrier, the Magic Moon, for a purchase price of $10.2 million from a third party in which a family member of our Chairman, Chief Executive Officer and Chief Financial Officer has an interest.
Loans
$5.0 Million Term Loan Facility
On August 30, 2019, we entered into the $5.0 Million Term Loan Facility with Thalassa, an entity affiliated with Petros Panagiotidis. Please see "Item 5 – Liquidity and Capital Resources – Our Borrowing Activities" for more information about the $5.0 Million Term Loan Facility.
$7.5 Million Shareholder Bridge Loan
On October 20, 2019, we took delivery of the Magic Moon that was purchased for $10.2 million from a third party in which a family member of Petros Panagiotidis has an interest. The purchase of the Magic Moon was financed using a combination of cash on hand, the net cash proceeds from sales under our ATM Program received through September 30, 2019 and the proceeds from a $7.5 million interest free unsecured bridge loan, which was provided to us by an entity controlled by Petros Panagiotidis, or the $7.5 Million Shareholder Bridge Loan. The $7.5 Million Shareholder Bridge Loan, originally maturing on December 31, 2019, allowed us to timely partly finance the Magic Moon acquisition while in the meantime assessing financing options for our Fleet. Our Board and a special committee consisting of disinterested and independent members of the Board approved the $7.5 Million Shareholder Bridge Loan. On December 6, 2019, we repaid the $7.5 Million Shareholder Bridge Loan in full by partially using the net proceeds received under the Alpha Bank Facility, further discussed under "Item 5 –Liquidity and Capital Resources – Our Borrowing Activities".
2019 Commercial Services
During 2019, we occasionally used the commercial services of Alexandria Enterprises S.A., ("Alexandria") an entity controlled by a family member of the Company's Chairman, Chief Executive Officer and Chief Financial Officer. In exchange for these services, Alexandria charged the Company a commission rate equal to 1.25% of the gross charter hire, freight and the ballast bonus earned under a charter agreement. During the year ended December 31, 2019, commissions charged by Alexandria amounted to $40,471. We did not incur any charges from Alexandria during the year ended December 31, 2020 and we no longer use the services of Alexandria.
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C.
Interests of Experts and Counsel
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A.
Consolidated Statements and other Financial Information
Please see "Item 18. Financial Statements".
Legal Proceedings
To our knowledge, we are not currently a party to any lawsuit that, if adversely determined, would have a material adverse effect on our financial position, results of operations or liquidity. As such, we do not believe that pending legal proceedings, taken as a whole, should have any significant impact on our financial statements. From time to time in the future, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. While we expect that these claims would be covered by our existing insurance policies, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We have not been involved in any legal proceedings which may have, or have had, a significant effect on our financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position, results of operations or liquidity.
Dividend Policy
Under our Bylaws, our Board may declare and pay dividends in cash, stock or other property of the Company. Any dividends declared will be in the sole discretion of the Board and will depend upon earnings, restrictions in any of our agreements, market prospects, current capital expenditure programs and investment opportunities, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors.
Any dividends paid by us may be treated as ordinary income to a U.S. shareholder. Please see the section entitled "Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Distributions" for additional information relating to the U.S. federal income tax treatment of our dividend payments, if any are declared in the future.
In addition, we may incur expenses or liabilities, including extraordinary expenses, decreases in revenues, including as a result of unanticipated off-hire days or loss of a vessel, or increased cash needs that could reduce or eliminate the amount of cash that we have available for distribution as dividends. The dry bulk and tanker charter markets are cyclical and volatile. We cannot predict with accuracy the amount of cash flows our operations will generate in any given period. Factors beyond our control may affect the charter market for our vessels and our charterer's ability to satisfy their contractual obligations to us, and we cannot assure you that dividends will actually be declared or paid in the future. We are a recently formed company and have a limited performance record and operating history. Accordingly, we cannot assure you that we will be able to pay dividends at all, and our ability to pay dividends will be subject to the limitations set forth above and in the section of this annual report titled "Risk Factors".
Dividends on our Series A Preferred Shares accrue and are cumulative starting on January 1, 2022 and are payable on each June 15 and December 15, when, as and if declared by our Board or any authorized committee thereof out of legally available funds for such purpose. The dividend rate for our Series A Preferred Shares is 9.75% per annum per share. Please see the section herein "Item 10. Additional Information —B. Memorandum and Articles of Association —Description of Series A Preferred Shares" for a description of the dividend terms of the Series A Preferred Shares.
75


Marshall Islands law provides that we may pay dividends on and redeem any shares of capital stock, including the Series A Preferred Shares, only to the extent that assets are legally available for such purposes. Legally available assets generally are limited to our surplus, which essentially represents our retained earnings and the excess of consideration received by us for the sale of shares above the par value of the shares. In addition, under Marshall Islands law, we may not pay dividends on or redeem any shares of capital stock, including the Series A Preferred Shares, if we are insolvent or would be rendered insolvent by the payment of such a dividend or the making of such redemption.
We have not paid any dividends to our shareholders as of the date of this annual report.
B.
Significant Changes
Not applicable.
ITEM 9.
THE OFFER AND LISTING
A.
Offer and Listing Details
Our common shares currently trade on the Norwegian OTC, or the NOTC, under the symbol "CASTOR" and on the Nasdaq Capital Market under the symbol "CTRM".
B.
Plan of Distribution
Not applicable.
C.
Markets
Please see "Item 9. The Offer and Listing—A. Offer and Listing Details".
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
ITEM 10.
ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
Articles of Association and Bylaws
The description of our Articles of Incorporation is incorporated by reference from our registration statement on Form F-4 (Registration No. 333-224242), which was filed with the Securities and Exchange Commission on April 11, 2018. Our Articles of Incorporation were filed as Exhibit 3.1 to the F-4 Registration Statement and are hereby incorporated by reference into this annual report.
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Purpose
Our purpose is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act, or BCA. Our Articles of Incorporation and Bylaws do not impose any limitations on the ownership rights of our shareholders.
Authorized Capitalization
Under our Articles of Incorporation, our authorized capital stock consists of 1,950,000,000 common shares, par value $0.001 per share, of which 707,157,936 common shares were issued and outstanding as of March 26, 2021, and 50,000,000 preferred shares, par value $0.001 per share, of which 480,000 Series A Preferred Shares and 12,000 Series B Preferred Shares are currently issued and outstanding.
Description of Common Shares
Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding preferred shares, holders of common shares are entitled to receive ratably all dividends, if any, declared by our Board out of funds legally available for dividends. Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred shares having liquidation preferences, if any, the holders of our common shares are entitled to receive pro rata our remaining assets available for distribution. Holders of common shares do not have conversion, redemption or pre-emptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares, which we have issued in the past or which we may issue in the future.
Share History
On September 22, 2017, we entered into an exchange agreement, or the Exchange Agreement, with Spetses Shipping Co., or Spetses, and its shareholders. Under the terms of the Exchange Agreement, we issued 2,400,000 common shares, 480,000 Series A Preferred Shares and 12,000 Series B Preferred Shares of the Company in exchange for all of the issued and outstanding common shares of Spetses.
On November 21, 2017, we declared a dividend of one preferred share purchase right for each outstanding common share and adopted a shareholder rights plan, as set forth in a Stockholders Rights Agreement dated as of November 20, 2017, by and between us and American Stock Transfer & Trust Company, LLC, as rights agent. For more information, please see "Stockholders Rights Agreement" below. In connection with the Stockholders Rights Agreement, we designated 3,000 shares as Series C Participating Preferred Shares, none of which are outstanding as of the date of this annual report.
Please see "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Equity Issuances" for a description of the Company's equity issuances.
Preferred Shares
Our Articles of Incorporation authorize our Board to establish one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:

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the designation of the series;

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the number of shares of the series;

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the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series; and

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the voting rights, if any, of the holders of the series.
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Description of Series A Preferred Shares
On September 22, 2017, we issued 480,000 shares of Series A Preferred Shares to the shareholders of Spetses, under the Exchange Agreement. On October 10, 2019, we adopted the Amended and Restated Statement of Designations of the Series A Preferred Shares.
The Series A Preferred Shares entitle the holders thereof to receive cumulative cash dividends when, as and if declared by our Board out of legally available funds for such purpose. Each Series A Preferred Share has a fixed liquidation preference of $30.00 per share plus an amount equal to accumulated and unpaid dividends thereon to the date fixed for payment, whether or not declared. See "Liquidation Rights " below.
The Series A Preferred Shares represent perpetual equity interests in us and, unlike indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. As such, the Series A Preferred Shares would rank junior to all of our indebtedness and other liabilities with respect to assets available to satisfy claims against us.
Ranking
The Series A Preferred Shares rank, with respect to dividend distributions and distributions upon the liquidation, winding-up and dissolution of our affairs, senior to our common shares, our Series B Preferred Shares and to each other class or series of capital stock established after the original issue date of the Series A Preferred Shares as to the payment of dividends and amounts payable upon liquidation, dissolution or winding up, whether voluntary or involuntary ("Junior Stock").
We may issue additional common shares, additional Series A Preferred Shares and Junior Stock. Except as described in the Series A Preferred Shares Statement of Designation, the Board has the authority to determine the preferences, powers, qualifications, limitations, restrictions and special or relative rights or privileges, if any, of any such series of Junior Stock before the issuance of any shares of that series. The Board shall also determine the number of shares constituting each series of securities.
Dividends
General
Holders of Series A Preferred Shares will be entitled to receive, when, as and if declared by our Board out of legally available funds for such purpose, cumulative cash dividends from January 1, 2022 (or, for any newly issued and outstanding shares, from the Dividend Payment Date immediately preceding the issuance date of such stock or for shares issued on or before June 14, 2022 then January 1, 2022). No dividends shall accrue or accumulate for the period from July 1, 2019 to December 31, 2021.
Dividend Rate
Dividends on Series A Preferred Shares will be cumulative and payable on each Dividend Payment Date, commencing on June 15, 2022, when, as and if declared by our Board or any authorized committee thereof out of legally available funds for such purpose. Dividends on the Series A Preferred Shares will accrue at a rate of 9.75% per annum per Series A Preferred Share having a value of $25.00 per share.
In the event that any semi-annual dividend payable on the Series A Preferred Shares is in arrears, the Dividend Rate payable on the Series A Preferred Shares shall be increased a single time to a rate of 1.3 times the Dividend Rate for each Series A Preferred Share having a value of $25.00 per share until the Dividend Payment Default is cured.
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Dividend Payment Dates
The "Dividend Payment Dates" for the Series A Preferred Shares will be each June 15 and December 15, commencing June 15, 2022. Dividends will accumulate in each dividend period from and including the preceding Dividend Payment Date or the initial issue date, as the case may be, to but excluding the applicable Dividend Payment Date for such dividend period. If any Dividend Payment Date otherwise would fall on a day that is not a Business Day, declared dividends will be paid on the immediately succeeding Business Day without the accumulation of additional dividends. Dividends on the Series A Preferred Shares will be payable based on a 360-day year consisting of twelve 30-day months.
"Business Day" means a day on which Nasdaq is open for trading and which is not a Saturday, a Sunday or other day on which banks in New York City are authorized or required by law to close.
Payment of Dividends
Not later than 5:00 p.m., New York City time, on each Dividend Payment Date, we will pay those dividends, if any, on the Series A Preferred Shares that have been declared by our Board to the holders of such shares as such holders' names appear on our stock transfer books maintained at the Company or by the Registrar and Transfer Agent on the applicable Record Date. The applicable record date (the "Record Date"), will be the Business Day immediately preceding the applicable Dividend Payment Date, except that in the case of payments of dividends in arrears, the Record Date with respect to a Dividend Payment Date will be such date as may be designated by our Board in accordance with our Bylaws then in effect and the Statement of Designation.
No dividend may be declared or paid or set apart for payment on any Junior Stock (other than a dividend payable solely in shares of Junior Stock) unless full cumulative dividends have been or contemporaneously are being paid or provided for on all outstanding Series A Preferred Shares for all prior and the then-ending dividend periods. In addition, in the event that full cumulative dividends on the Series A Preferred Shares have not been paid or declared and set apart for payment, we may not repurchase, redeem or otherwise acquire, in whole or in part, any Series A Preferred Shares except pursuant to a purchase or exchange offer made on the same terms to all holders of Series A Preferred Shares. Common shares and any other Junior Stock may not be redeemed, repurchased or otherwise acquired unless full cumulative dividends on the Series A Preferred Shares for all prior and the then-ending dividend periods have been paid or declared and set apart for payment.
Accumulated dividends in arrears for any past dividend period may be declared by our Board and paid on any date fixed by our Board, whether or not a Dividend Payment Date, to holders of the Series A Preferred Shares on the record date for such payment, which may not be more than 60 days, nor less than 5 days, before such payment date. Subject to the next succeeding sentence, if all accumulated dividends in arrears on all outstanding Series A Preferred Shares have not been declared and paid, or sufficient funds for the payment thereof have not been set apart, payment of accumulated dividends in arrears will be made in order of their respective Dividend Payment Dates. If less than all dividends payable with respect to all Series A Preferred Shares are paid, any partial payment will be made pro rata with respect to the Series A Preferred Shares entitled to a dividend payment at such time in proportion to the aggregate amounts remaining due in respect of such shares at such time. Holders of the Series A Preferred Shares will not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest or sum of money in lieu of interest will be payable in respect of any dividend payment which may be in arrears on the Series A Preferred Shares.
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Liquidation Rights
The holders of outstanding Series A Preferred Shares will be entitled, in the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, to receive the liquidation preference of $30.00 per share in cash plus an amount equal to accumulated and unpaid dividends thereon to the date fixed for payment of such amount (whether or not declared), and no more, before any distribution will be made to the holders of our common shares or any other Junior Stock. A consolidation or merger of us with or into any other entity, individually or in a series of transactions, will not be deemed a liquidation, dissolution or winding up of our affairs for this purpose. In the event that our assets available for distribution to holders of the outstanding Series A Preferred Shares are insufficient to permit payment of all required amounts, our assets then remaining will be distributed among the Series A Preferred Shares, as applicable, ratably on the basis of their relative aggregate liquidation preferences. After payment of all required amounts to the holders of the outstanding Series A Preferred Shares, our remaining assets and funds will be distributed among the holders of the common shares and any other Junior Stock then outstanding according to their respective rights.
Voting Rights
The Series A Preferred Shares have no voting rights except as provided by Marshall Islands law. Unless the Company shall have received the affirmative vote or consents of the holders of at least two thirds of the outstanding Series A Preferred Shares, voting as a single class, the Company may not adopt any amendment to its Articles of Incorporation that adversely alters the preferences, powers or rights of the Series A Preferred Shares.
Redemption
Optional Redemption
We have the right, at any time, to redeem the Series A Preferred Shares, in whole or from time to time in part, from any funds available for such purpose. Any such redemption shall occur on a date set by the Company, or the Redemption Date.
Redemption Procedures
(a) Redemption Price. The Company may redeem each share of Series A Preferred Shares with cash, common shares or a Note as shall be determined by the Company at its sole discretion. If the Company redeems Series A Preferred Shares with cash, then each share of Series A Preferred Shares shall have a value of $30.00 per share, whether or not declared, or the Cash Redemption Price. If paid in common shares or a Note, then each Series A Preferred Share shall have a value of $25.00 per share, whether or not declared, or the Cashless Redemption Price and together with the cash Redemption Price, the Redemption Price. If paid in common shares, the price of the common shares will be 90% of the lowest daily volume weighted average price on any trading day during the 5-consecutive trading day period ending and including the trading day immediately prior to the date of the applicable Redemption Date.
Notwithstanding any other provisions herein, the holder of Series A Preferred Shares shall not acquire, or be obligated or have the right to acquire, any common share pursuant to an optional redemption which, when aggregated with all other common shares then beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the Holder and its Affiliates, would result in the beneficial ownership by the holder of Series A Preferred Shares of more than 4.9% of the then issued and outstanding common shares, or the Ownership Limitation. If the Company issues a Redemption Notice that would cause the aggregate number of common shares then beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the holder of Series A Preferred Shares and its affiliates to exceed the Ownership Limitation, such Redemption Notice shall be void ab initio to the extent of the amount by which the number of common shares otherwise issuable pursuant to such Redemption Notice, together with all common shares then beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the holder of Series A Preferred Shares and its affiliates, would exceed the Ownership Limitation. Upon the written or oral request of the holder of Series A Preferred Shares, the Company shall promptly confirm orally or in writing to the holder of Series A Preferred Shares the number of common shares then outstanding.
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The holder of Series A Preferred Shares and the Company shall each cooperate in good faith in the determinations required hereby and the application hereof. The written certification to the Company by the holder of Series A Preferred Shares of the applicability of the Ownership Limitation, and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error. Upon delivery of a written notice to the Company, the holder of Series A Preferred Shares may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Ownership Limitation to any other amount of common shares not in excess of 9.99% of the then issued and outstanding shares of common shares as specified in such notice, provided that any such increase in the Ownership Limitation will not be effective until the sixty-first (61st) day after such written notice is delivered to the Company.
(b) Redemption Notice. The Company shall give notice of any redemption by mail not less than 30 days and not more than 60 days before the scheduled Redemption Date, to the holder of Series A Preferred Shares of record (as of 4:59 p.m. New York City time on the Business Day next preceding the day on which notice is given) of any Series A Preferred Shares to be redeemed as such holders' names appear on the Company's stock transfer books maintained by the Registrar and Transfer Agent and at the address of such holders shown therein. Such notice, or the Redemption Notice shall state: (1) the Redemption Date, (2) the number of Series A Preferred Shares to be redeemed and, if less than all outstanding Series A Preferred Shares are to be redeemed, the number (and the identification) of shares to be redeemed from such Holder, (3) the Redemption Price, (4) the place where the Series A Preferred Shares is to be redeemed and shall be presented and surrendered for payment of the Redemption Price therefor and (5) that dividends on the stock to be redeemed shall cease to accumulate from and after such Redemption Date.
(c) Effect of Redemption; Partial Redemption. If the Company elects to redeem less than all of the outstanding Series A Preferred Shares, the number of shares to be redeemed shall be determined by the Company, and such shares shall be redeemed pro rata or by lot, with adjustments to avoid redemption of fractional shares. The Company shall give notice, or cause notice to be given, to the holders of the number of shares of Series A Preferred Shares to be redeemed, and the Company shall determine the number of Series A Preferred Shares to be redeemed from the account of each of its participants holding such shares in its participant account. The aggregate Redemption Price for any such partial redemption of the outstanding Series A Preferred Shares shall be allocated correspondingly among the redeemed Series A Preferred Shares. The Series A Preferred Shares not redeemed shall remain outstanding and subject to all the terms provided in this Statement of Designation.
(d) Redemption Funds. If the Company gives or causes to be given a Redemption Notice, the Company shall deposit with the paying agent funds sufficient to redeem the Series A Preferred Shares as to which such Redemption Notice shall have been given, no later than 4:59 p.m. New York City time on the Business Day immediately preceding the Redemption Date, and shall give the paying agent irrevocable instructions and authority to pay the Redemption Price to the holders of the Series A Preferred Shares to be redeemed upon surrender or deemed surrender of the certificates therefor. If the Redemption Notice shall have been given, from and after the Redemption Date, unless the Company defaults in providing funds sufficient for such redemption at the time and place specified for payment pursuant to the Redemption Notice, all dividends on such Series A Preferred Shares to be redeemed shall cease to accumulate and all rights of Holders of such shares as the Company's shareholders shall cease, except the right to receive the Redemption Price, and such shares shall not thereafter be transferred on Company's stock transfer books or be deemed to be outstanding for any purpose whatsoever. The Company shall be entitled to receive from the paying agent the interest income, if any, earned on such funds deposited with the paying agent (to the extent that such interest income is not required to pay the Redemption Price of the Series A Preferred Shares to be redeemed), and the holders of any shares so redeemed shall have no claim to any such interest income. Any funds deposited with the paying agent hereunder by the Company for any reason, including, but not limited to, redemption of Series A Preferred Shares, that remain unclaimed or unpaid after two years after the applicable Redemption Date or other payment date, shall be, to the extent permitted by law, repaid to the Company upon its written request after which repayment the holders of the Series A Preferred Shares entitled to such redemption or other payment shall have recourse only to the Company. Notwithstanding any Redemption Notice, there shall be no redemption of any Series A Preferred Shares called for redemption until funds sufficient to pay the full Redemption Price of such shares shall have been deposited by the Company with the paying agent.
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(e) Certificate. If only a portion of the Series A Preferred Shares represented by a certificate shall have been called for redemption, upon surrender of the certificate to the Paying Agent, the Paying Agent shall issue to the Holder of such shares a new certificate (or adjust the applicable book-entry account) representing the number of shares of Series A Preferred Shares represented by the surrendered certificate that have not been called for redemption.
Description of Series B Preferred Shares
On September 22, 2017, we issued 12,000 shares of Series B Preferred Shares to Thalassa, under the Exchange Agreement. Each Series B Preferred Share has the voting power of one hundred thousand (100,000) common shares.
The Series B Preferred Shares have the following characteristics:

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Conversion. The Series B Preferred Shares are not convertible into common shares.

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Voting. Each Series B Preferred Share has the voting power of 100,000 common shares and count for 100,000 votes for purposes of determining quorum at a meeting of shareholders.

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Distributions. The Series B Preferred Shares have no dividend or distribution rights.

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Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Company, the Series B Preferred Shares shall have the same liquidation rights as the common shares.
Stockholders Rights Agreement
On November 21, 2017, our Board declared a dividend of one preferred share purchase right, or a Right, for each outstanding common share and adopted a shareholder rights plan, as set forth in the Stockholders Rights Agreement dated as of November 20, 2017, or the Rights Agreement, by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.
The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board. If a shareholder's beneficial ownership of our common shares as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold, that shareholder's then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 1% or more. Our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, is exempt from these provisions.
The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which is an exhibit to this annual report. The foregoing description of the Rights Agreement is qualified in its entirety by reference to such exhibit.
The Rights. The Rights trade with, and are inseparable from, our common shares. The Rights are evidenced only by certificates that represent our common shares. New Rights will accompany any new common shares of the Company issued after November 21, 2017 until the Distribution Date described below.
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Exercise Price. Each Right allows its holder to purchase from the Company one one-thousandth of a share of Series C Participating Preferred Shares, or a Series C Preferred Share, for $15.00, or the Exercise Price, once the Rights become exercisable. This portion of a Series C Preferred Share will give the shareholder approximately the same dividend, voting and liquidation rights as would one common share. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability. The Rights are not exercisable until 10 days after the public announcement that a person or group has become an "Acquiring Person" by obtaining beneficial ownership of 15% or more of our outstanding common shares. Except our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, is exempt from being the "Acquiring Person".
Certain synthetic interests in securities created by derivative positions — whether or not such interests are considered to be ownership of the underlying common shares or are reportable for purposes of Regulation 13D of the Securities Exchange Act of 1934, as amended— are treated as beneficial ownership of the number of our common shares equivalent to the economic exposure created by the derivative position, to the extent our actual common shares are directly or indirectly held by counterparties to the derivatives contracts. Swaps dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.
For persons who, prior to the time of public announcement of the Rights Agreement, beneficially own 15% or more of our outstanding common shares, the Rights Agreement "grandfathers" their current level of ownership, so long as they do not purchase additional shares in excess of certain limitations.
The date when the Rights become exercisable is the "Distribution Date". Until that date, our common share certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) will also evidence the Rights, and any transfer of our common shares will constitute a transfer of Rights. After that date, the Rights will separate from our common shares and will be evidenced by book-entry credits or by Rights certificates that the Company will mail to all eligible holders of our common shares. Any Rights held by an Acquiring Person are null and void and may not be exercised.
Series C Preferred Share Provisions
Each one one-thousandth of a Series C Preferred Share, if issued, will, among other things:

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not be redeemable;

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entitle holders to quarterly dividend payments in an amount per share equal to the aggregate per share amount of all cash dividends, and the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in our common shares or a subdivision of our outstanding common shares (by reclassification or otherwise), declared on our common shares since the immediately preceding quarterly dividend payment date; and

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entitle holders to one vote on all matters submitted to a vote of the shareholders of the Company.
The value of one one-thousandth interest in a Series C Preferred Share should approximate the value of one common share.
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Consequences of a Person or Group Becoming an Acquiring Person.
Flip In.  If an Acquiring Person obtains beneficial ownership of 15% or more of our common shares, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares (or, in certain circumstances, cash, property or other securities of the Company) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described below.
Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.
Flip Over. If, after an Acquiring Person obtains 15% or more of our common shares, (i) the Company merges into another entity; (ii) an acquiring entity merges into the Company; or (iii) the Company sells or transfers 50% or more of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares of the person engaging in the transaction having a then-current market value of twice the Exercise Price.
Notional Shares. Shares held by affiliates and associates of an Acquiring Person, including certain entities in which the Acquiring Person beneficially owns a majority of the equity securities, and Notional Common Shares (as defined in the Rights Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.
Redemption. The Board may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If the Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of the Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if the Company has a stock dividend or a stock split.
Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common shares, the Board may extinguish the Rights by exchanging one common share or an equivalent security for each Right, other than Rights held by the Acquiring Person. In certain circumstances, the Company may elect to exchange the Rights for cash or other securities of the Company having a value approximately equal to one common share.
Expiration. The Rights expire on the earliest of (i) November 21, 2027, or (ii) the redemption or exchange of the Rights as described above.
Anti-Dilution Provisions. The Board may adjust the purchase price of the Series C Preferred Shares, the number of Series C Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Series C Preferred Shares or our common shares. No adjustments to the Exercise Price of less than 1% will be made.
Amendments. The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights, with certain exceptions, in order to (i) cure any ambiguities; (ii) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with any other provision therein; (iii) shorten or lengthen any time period pursuant to the Rights Agreement; or (iv) make changes that do not adversely affect the interests of holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).
Taxes. The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, shareholders may recognize taxable income.
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Description of the Class A Warrants
The following summary of certain terms and provisions of our Class A Warrants is not complete and is subject to, and qualified in its entirety by the provisions of the form of Class A Warrant, which is filed as an exhibit to our registration statement on Form F-1/A (Registration No. 333-238990), filed with the Commission on June 23, 2020. Prospective investors should carefully review the terms and provisions set forth in the form of Class A Warrant.
Exercisability. The Class A Warrants are exercisable at any time after their original issuance up to the date that is five years after their original issuance. Each of the Class A Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the common shares underlying the Class A Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of common shares purchased upon such exercise. If a registration statement registering the issuance of the common shares underlying the Class A Warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may, in its sole discretion, elect to exercise the Class A Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of common shares determined according to the formula set forth in the Class A Warrant. No fractional common shares will be issued in connection with the exercise of a Class A Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
Exercise Price. The exercise price per whole common share purchasable upon exercise of the Class A Warrants is $0.35 per share. The exercise price and number of common shares issuable upon exercise will adjust in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common shares. The Class A Warrants will be immediately exercisable and may be exercised at any time until they are exercised in full.
Transferability. Subject to applicable laws, the Class A Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. We do not intend to apply for the listing of the Class A Warrants on any stock exchange. Without an active trading market, the liquidity of the Class A Warrants will be limited.
Rights as a Shareholder. Except as otherwise provided in the Class A Warrants or by virtue of such holder's ownership of our common shares, the holder of a Class A Warrant does not have the rights or privileges of a holder of our common shares, including any voting rights, until the holder exercises the Class A Warrant.
Fundamental Transactions. In the event of a fundamental transaction, as described in the Class A Warrants and generally including, with certain exceptions, any reorganization, recapitalization or reclassification of our common shares, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common shares, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common shares, the holders of the Class A Warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Class A Warrants immediately prior to such fundamental transaction.
Governing Law. The Class A Warrants and warrant agreement are governed by New York law.
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Description of the Private Placement Warrants
Each Private Placement Warrant is exercisable at any time after its original issuance for $0.35 per common share and has a term of 5 years. If a registration statement registering the resale of the common shares underlying the Private Placement Warrants under the Securities Act is not effective or available at any time after the six month anniversary of the date of issuance of the Private Placement Warrants, the holder may, in its sole discretion, elect to exercise the Private Placement Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of common shares determined according to the formula set forth in the Private Placement Warrant. The Private Placement Warrant contains certain damages provisions pursuant to which we have agreed to pay the holder certain damages if we do not issue the shares in a timely fashion. A holder will not have the right to exercise any portion of the Private Placement Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of our common shares outstanding immediately after giving effect to the exercise, as such percentage of beneficial ownership is determined in accordance with the terms of the Private Placement Warrants. However, any holder may increase or decrease such percentage, but not in excess of 9.99%, provided that any increase will not be effective until the 61st day after such election. The exercise price of the Private Placement Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common shares and also upon any distributions of assets, including cash, stock or other property to our shareholders. If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the Private Placement Warrants with the same effect as if such successor entity had been named in the Private Placement Warrant itself. If holders of our common shares are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder shall be given the same choice as to the consideration it receives upon any exercise of the Private Placement Warrant following such fundamental transaction. In addition, we or the successor entity, at the request of Private Placement Warrant holders, will be obligated to purchase any unexercised portion of the Private Placement Warrants in accordance with the terms of such Private Placement Warrants. We have also agreed to file a registration statement to register the resale of the common shares underlying the Private Placement Warrants within 30 calendar days from the date of the Securities Purchase Agreement. We have also agreed to use commercially reasonable efforts to cause such registration to become effective and to keep such registration statement effective at all times until no investor owns any Private Placement Warrants or shares issuable upon exercise thereof.
Description of the January 5 and January 12 Warrants
Each January 5 Warrant and January 12 Warrant was exercisable for $0.19 per common share and for a term of 5 years. All of the January 5 and January 12 Warrants were exercised in full prior to the date of this annual report, resulting in the issuance of an aggregate of 231,750,000 common shares for an aggregate exercise price of approximately $44.0 million.
Listing and Markets
On December 21, 2018, our common shares, par value $0.001, were registered for trading on the NOTC with ticker symbol "CASTOR".  On February 11, 2019, our common shares began trading on the NASDAQ Capital Market under the ticker symbol "CTRM".
Transfer Agent
The registrar and transfer agent for our common shares is American Stock Transfer & Trust Company, LLC.
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C.
Material Contracts
We refer you to "Item 4. Information on the Company", "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources" and "Item 7 Major Shareholders and Related Party Transactions – B. Related Party Transactions" for a discussion of the contracts to which we are a party, that we consider to be both material and not entered into in the ordinary course of business during the two-year period immediately preceding the date of this annual report. Certain of these material agreements that are to be performed in whole or in part at or after the date of this annual report are attached as exhibits to this annual report. Other than these contracts, we have no other material contracts, other than contracts entered into in the ordinary course of business, to which we are a party during the two-year period immediately preceding the date of this annual report.
D.
Exchange Controls
The Marshall Islands impose no exchange controls on non-resident corporations.
E.
Taxation
The following is a discussion of the material Marshall Islands and U.S. federal income tax considerations relevant to a U.S. Holder and a Non-U.S. Holder, each as defined below, with respect to the common stock. This discussion does not purport to deal with the tax consequences of owning common stock to all categories of investors, such as dealers in securities or commodities, financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, persons liable for the alternative minimum tax, persons who hold common shares as part of a straddle, hedge, conversion transaction or integrated investment, U.S. Holders whose functional currency is not the United States dollar, persons required to recognized income no later than when such income is included on an "applicable financial statement," persons subject to the "base erosion and anti-avoidance" tax, and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, may be subject to special rules. This discussion deals only with holders who hold our common shares as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or foreign law of the ownership of common stock. The discussion below is based, in part, on the description of our business in this annual report above and assumes that we conduct our business as described in that section. Except as otherwise noted, this discussion is based on the assumption that we will not maintain an office or other fixed place of business within the United States. References in the following discussion to "we" and "us" are to Castor Maritime Inc. and its subsidiaries on a consolidated basis.
Marshall Islands Tax Consequences
We are incorporated in the Republic of the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our shareholders.
U.S. Federal Income Taxation of Our Company
Taxation of Operating Income: In General

Unless exempt from U.S. federal income taxation under the rules discussed below, a foreign corporation is subject to U.S. federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement, cost sharing arrangements or other joint venture it directly or indirectly owns or participates in that generates such income, or from the performance of services directly related to those uses, which we refer to as "shipping income," to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which we refer to as "U.S.-source shipping income".
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Shipping income attributable to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States. We are not permitted by law to engage in transportation that produces income which is considered to be 100% from sources within the United States.
Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any U.S. federal income tax.
In the absence of exemption from tax under Section 883 of the Code, our gross U.S.-source shipping income would be subject to a 4% tax imposed without allowance for deductions as described below.
Exemption of Operating Income from U.S. Federal Income Taxation
Under Section 883 of the Code and the regulations thereunder, we will be exempt from U.S. federal income tax on our U.S.-source shipping income if:
(1) we are organized in a foreign country, or our country of organization, that grants an "equivalent exemption" to corporations organized in the United States; and
(2)  either
A. more than 50% of the value of our stock is owned, directly or indirectly, by individuals who are "residents" of our country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the United States (each such individual a "qualified shareholder" and such individuals collectively, "qualified shareholders"), which we refer to as the "50% Ownership Test," or
B. our stock is "primarily and regularly traded on an established securities market" in our country of organization, in another country that grants an "equivalent exemption" to U.S. corporations, or in the United States, which we refer to as the "Publicly-Traded Test".
The Marshall Islands, the jurisdiction where we and our ship-owning subsidiaries are incorporated, grants an "equivalent exemption" to U.S. corporations. Therefore, we will be exempt from U.S. federal income tax with respect to our U.S.-source shipping income if either the 50% Ownership Test or the Publicly-Traded Test is met.
Due to the wide publicly-held nature of our common stock, we do not expect that we will be able to satisfy the requirements of the 50% Ownership Test. Therefore, we will be exempt from U.S. federal income taxation on our U.S. source shipping income if we are able to satisfy the Publicly-Traded Test.
Treasury Regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be "primarily traded" on an established securities market if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our common stock is "primarily traded" on the Nasdaq Capital Market.
Under the Treasury Regulations, our common stock will be considered to be "regularly traded" on an established securities market if one or more classes of our stock representing more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on the market which we refer to as the listing threshold. Although our common stock is listed on the Nasdaq Capital Market, our common stock may not represent more than 50% of the voting power of all classes of stock entities to vote.
Because our common stock may not have represented more than 50% of the voting power of all classes of our stock entitled to vote, notwithstanding that it was traded on the Nasdaq Capital Market in 2020, we intend to take the position on our 2020 U.S. federal income tax returns that we did not satisfy the Publicly-Traded Test.  However, we may qualify for the exemption under Section 883 in future taxable years, although no assurance can be given in this regard.
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Taxation in the Absence of Exemption under Section 883 of the Code
Because the benefits of Section 883 of the Code may be unavailable, we intend to take the position that our U.S.-source shipping income, to the extent not considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, is subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, which we refer to as the "4% gross basis tax regime," for the 2020 taxable year. Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on our shipping income should never exceed 2% under the 4% gross basis tax regime.
To the extent the benefits of the exemption under Section 883 of the Code are unavailable and our U.S.-source shipping income is considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, any such "effectively connected" U.S.-source shipping income, net of applicable deductions, would be subject to the U.S. federal corporate income tax imposed at a rate of 21%. In addition, we may be subject to the 30% "branch profits" tax on earnings effectively connected with the conduct of such U.S. trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of such U.S. trade or business.
Our U.S.-source shipping income would be considered "effectively connected" with the conduct of a U.S. trade or business only if:

•
We have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and

•
substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States.
We do not currently have, nor intend to have or permit circumstances that would result in having, any vessel operating to the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S.-source shipping income will be "effectively connected" with the conduct of a U.S. trade or business.
U.S. Taxation of Gain on Sale of Vessels
Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term "U.S. Holder" means a beneficial owner of our common stock that is a U.S. citizen or resident, U.S. corporation or other U.S. entity taxable as a corporation, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or a trust if (i) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has in place an election to be treated as  United States person for U.S. federal income tax purposes.
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If a partnership holds our common stock, the tax treatment of a partner of such partnership will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock, you are encouraged to consult your tax advisor.
Distributions
Subject to the discussion of passive foreign investment companies, or PFIC, below, any distributions made by us with respect to our common stock to a U.S. Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of such earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in his common stock on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders that are corporations will generally not be entitled to claim a dividends-received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common stock will generally be treated as "passive category income" for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.
Dividends paid on our common stock to a U.S. Holder who is an individual, trust or estate will generally be treated as ordinary income.
Special rules may apply to any "extraordinary dividend," generally, a dividend paid by us in an amount which is equal to or in excess of 10% of a shareholder's adjusted tax basis (or fair market value in certain circumstances) or dividends received within a one-year period that, in the aggregate, equal or exceed 20% of a shareholder's adjusted tax basis (or fair market value upon the shareholder's election) in a common share. If we pay an "extraordinary dividend" on our common stock that is treated as "qualified dividend income," then any loss derived by a U.S. Non-Corporate Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.
Sale, Exchange or other Disposition of Common Stock
Subject to the discussion of our status as a PFIC below, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder's holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as U.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes. A U.S. Holder's ability to deduct capital losses is subject to certain limitations.
3.8% Tax on Net Investment Income
A U.S. Holder that is an individual, estate, or, in certain cases, a trust, will generally be subject to a 3.8% tax on the lesser of (1) the U.S. Holder's net investment income for the taxable year and (2) the excess of the U.S. Holder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000). A U.S. Holder's net investment income will generally include distributions made by us which constitute a dividend for U.S. federal income tax purposes and gain realized from the sale, exchange or other disposition of our common stock. This tax is in addition to any income taxes due on such investment income.
If you are a U.S. Holder that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the 3.8% tax on net investment income to the ownership and disposition of our common stock.
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Passive Foreign Investment Company Status and Significant Tax Consequences
Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a PFIC for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held our common stock, either
at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or
at least 50% of the average value of the assets held by the corporation during such taxable year produce, or are held for the production of, passive income.
For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiaries' corporations in which we own at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute "passive income" for these purposes. By contrast, rental income would generally constitute "passive income" unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.
In general, income derived from the bareboat charter of a vessel will be treated as "passive income" for purposes of determining whether we are a PFIC and such vessel will be treated as an asset which produces or is held for the production of "passive income". On the other hand, income derived from the time charter of a vessel should not be treated as "passive income" for such purpose, but rather should be treated as services income; likewise, a time chartered vessel should generally not be treated as an asset which produces or is held for the production of "passive income".
Based on our current assets and activities, we do not believe that we will be a PFIC for the current or subsequent taxable years. Although there is no legal authority directly on point, and we are not relying upon an opinion of counsel on this issue, our belief is based principally on the position that, for purposes of determining whether we are a passive foreign investment company, the gross income we derive or are deemed to derive from the time chartering and voyage chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our wholly-owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, should not constitute passive assets for purposes of determining whether we were a passive foreign investment company. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, in the absence of any legal authority specifically relating to the statutory provisions governing passive foreign investment companies, the IRS or a court could disagree with our position. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a passive foreign investment company with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different U.S. federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a "Qualified Electing Fund," which election is referred to as a "QEF Election". As discussed below, as an alternative to making a QEF Election, a U.S. Holder should be able to make a "mark-to-market" election with respect to our common stock, which election is referred to as a "Mark-to-Market Election". A U.S. Holder holding PFIC shares that does not make either a "QEF Election" or "Mark-to-Market Election" will be subject to the Default PFIC Regime, as defined and discussed below in "Taxation—U.S. Federal Income Taxation of U.S. Holders—Taxation of U.S. Holders Not Making a Timely QEF or "Mark-to-Market" Election".
If the Company were to be treated as a PFIC, a U.S. Holder would be required to file IRS Form 8621 to report certain information regarding the Company.  If you are a U.S. Holder who held our common shares during any period in which we are a PFIC, you are strongly encouraged to consult your tax advisor.
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The QEF Election
If a U.S. Holder makes a timely QEF Election, which U.S. Holder we refer to as an "Electing Holder," the Electing Holder must report each year for United States federal income tax purposes his pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were made by us to the Electing Holder. The Electing Holder's adjusted tax basis in the common stock will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common stock and will not be taxed again once distributed. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A U.S. Holder would make a QEF Election with respect to any year that our Company is a PFIC by filing one copy of IRS Form 8621 with his United States federal income tax return and a second copy in accordance with the instructions to such form. It should be noted that if any of our subsidiaries is treated as a corporation for U.S. federal income tax purposes, a U.S. Holder must make a separate QEF Election with respect to each such subsidiary.
Taxation of U.S. Holders Making a "Mark-to-Market" Election
As long as our common stock is traded on an over-the-counter market, as it currently is and as it may continue to be, our common stock may not be considered "marketable stock" for purposes of making the Mark-to-Market Election. U.S. Holders are urged to consult their own tax advisors in this regard.
Taxation of U.S. Holders Not Making a Timely QEF or "Mark-to-Market" Election
Finally, a U.S. Holder who does not make either a QEF Election or a Mark-to-Market Election with respect to any taxable year in which we are treated as a PFIC, or a U.S. Holder whose QEF Election is invalidated or terminated, or a Non-Electing Holder, would be subject to special rules, or the Default PFIC Regime, with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common stock), and (2) any gain realized on the sale, exchange, redemption or other disposition of the common stock.
Under the Default PFIC Regime:
the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common stock;
the amount allocated to the current taxable year and any taxable year before we became a PFIC would be taxed as ordinary income; and
the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
Any distributions other than "excess distributions" by us to a Non-Electing Holder will be treated as discussed above under "Taxation—U.S. Federal Income Taxation of U.S. Holders—Distributions".
These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of the common stock. If a Non-Electing Holder who is an individual dies while owning the common stock, such Non-Electing Holder's successor generally would not receive a step-up in tax basis with respect to the common stock.
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U.S. Federal Income Taxation of "Non-U.S. Holders"
A beneficial owner of our common stock (other than a partnership) that is not a U.S. Holder is referred to herein as a "Non-U.S. Holder".
Dividends on Common Stock
Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on dividends received from us with respect to our common stock, unless that income is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.
Sale, Exchange or Other Disposition of Common Stock
Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common stock, unless:

•
the gain is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or

•
the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.
If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from the common stock, including dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business will generally be subject to U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S. Holder, the earnings and profits of such Non-U.S. Holder that are attributable to effectively connected income, subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable U.S. income tax treaty.
Backup Withholding and Information Reporting
In general, dividend payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements. In addition, such payments will be subject to backup withholding tax if you are a non-corporate U.S. Holder and you:

•
fail to provide an accurate taxpayer identification number;

•
are notified by the IRS that you have failed to report all interest or dividends required to be shown on your U.S. federal income tax returns; or

•
in certain circumstances, fail to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on an applicable IRS Form W-8.
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If you sell your common stock to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common stock through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States. Backup withholding tax is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your U.S. federal income tax liability by filing a refund claim with the IRS.
Individuals who are U.S. Holders (and to the extent specified in applicable Treasury Regulations, certain individuals who are Non-U.S. Holders and certain U.S. entities) who hold "specified foreign financial assets" (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury Regulations). Specified foreign financial assets would include, among other assets, our common shares, unless the shares are held through an account maintained with a U.S. financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury regulations, an individual Non-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed.  U.S. Holders (including U.S. entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under this legislation.
Other Tax Considerations
In addition to the income tax consequences discussed above, the Company may be subject to tax, including tonnage taxes, in one or more other jurisdictions where the Company conducts activities. All our vessel-owning subsidiaries are subject to tonnage taxes. Generally, under a tonnage tax, a company is taxed based on the net tonnage of qualifying vessels such company operates, independent of actual earnings. The amount of any such tax imposed upon our operations may be material.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements we file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information that we and other registrants have filed electronically with the SEC. Our filings are also available on our website at www.castormaritime.com. This web address is provided as an inactive textual reference only. Information contained on our website does not constitute part of this annual report.
Shareholders may also request a copy of our filings at no cost, by writing or telephoning us at the following address:
Castor Maritime Inc.
223 Christodoulou Chatzipavlou Street
Hawaii Royal Gardens
3036 Limassol, Cyprus
Tel: + 357 25 357 767
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I.
Subsidiary Information
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including foreign currency fluctuations, changes in interest rates and credit risk. Our activities expose us primarily to the financial risks of changes in foreign currency exchange rates and interest rates as described below.
Interest Rate Risk
The international shipping industry is capital intensive, requiring significant amounts of investment provided in the form of long-term debt. A significant portion or our debt contains floating interest rates that fluctuate with changes in the financial markets and in particular changes in LIBOR. Increasing interest rates could increase our interest expense and adversely impact our future results of operations. As of December 31, 2020, our net effective exposure to floating interest rate fluctuations on our outstanding debt was $13.5 million. Our interest expense is affected by changes in the general level of interest rates, particularly LIBOR. As an indication of the extent of our sensitivity to interest rate changes, an increase in LIBOR of 1% would have increased our net loss in the year ended December 31, 2020 by approximately $0.1 million based upon our floating interest-bearing debt level during 2020. We expect our sensitivity to interest rate changes to increase in the future if we enter into additional debt agreements in connection with our previously announced and/or potential acquisitions of vessels from affiliated or unaffiliated third parties. For further information on the risks associated with our business, please see "Item 3. Key Information—D. Risk Factors" for a discussion on the risks associated with LIBOR, among others.
Foreign Currency Exchange Rate Risk
We generate all of our revenue in U.S. dollars. The minority of our vessels' operating expenses (approximately 18.0% for the year ended December 31, 2020) and the minority of our general and administrative expenses (approximately 10.2%) are in currencies other than the U.S. dollar, primarily the Euro and Japanese Yen. For accounting purposes, expenses incurred in other currencies are converted into U.S. dollars at the exchange rate prevailing on the date of each transaction. We do not consider the risk from exchange rate fluctuations to be material for our results of operations because as of December 31, 2020, these non-US dollar expenses represented 11.7% of our revenues. However, the portion of our business conducted in other currencies could increase in the future, which could increase our exposure to losses arising from exchange rate fluctuations.
Inflation Risk
Inflation has not had a material effect on our expenses given recent economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating costs.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
95



PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
The accumulated, but not declared, due and overdue dividends on the Series A Preferred Shares as of September 30, 2018 and December 31, 2018, 2019 and 2020, amounted to $1,646,775, $2,668,770, $0 and $0, respectively.
On October 10, 2019, we reached an agreement with the holders of our Series A Preferred Shares to settle in full all accumulated dividend obligations on the Series A Preferred Shares, or the Series A Dividends Settlement Agreement, and to simultaneously adopt an Amended and Restated Statements of Designations on our Series A Preferred Shares, or the Series A Amended SOD. Pursuant to the Series A Dividends Settlement Agreement, the Series A Preferred holders agreed to waive our obligations related to all due and overdue accumulated dividends on the Series A Preferred Shares during the period from their original issue date up to and including June 30, 2019, amounting to $4.3 million, and to receive, in settlement thereof, 300,000 newly issued common shares, or the Settlement Shares. The Settlement Shares were issued to the Series A Preferred holders on October 17, 2019. In addition, in accordance with the terms of the Series A Amended SOD, we and the Series A Preferred holders mutually agreed to waive all dividend payment obligations on the Series A Preferred Shares during the period from July 1, 2019 until December 31, 2021, reduce the progressively increasing dividend payment default rate that is 1.30 times the rate payable on the Series A Preferred Shares on the date preceding such payment to a fixed dividend payment default rate that is 1.30 times the base dividend payment rate, increase the redemption price of the Series A Preferred Shares to $30 from $25 per share, in case we exercise our current option to redeem the Series A Preferred Shares, in whole or in part, with cash, and increase the liquidation preference from $25 to $30 per Series A Preferred Share. As a result of the foregoing, dividends on the Series A Preferred Shares will neither accrue nor accumulate during the period from July 1, 2019 until December 31, 2021, and we will no longer have any restriction declaring dividends to holders of our common shares during this period.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
We have adopted the Stockholders Rights Agreement, pursuant to which each share of our common stock includes one preferred shares purchase right that entitles the holder to purchase from us a unit consisting of one-thousandth of a share of our Series C Participating Preferred Shares if any third party seeks to acquire control of a substantial block of our common stock without the approval of our Board. See "Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement" included in this annual report for a description of our Stockholders Rights Agreement.
Please also see "Item 10. Additional Information—B. Memorandum and Articles of Association" for a description of the rights of holders of our Series A cumulative redeemable perpetual preferred shares and Series B Preferred Shares relative to the rights of holders of shares of our common stock.
ITEM 15.
CONTROLS AND PROCEDURES
A.
Disclosure Controls and Procedures
Management, under the supervision and with the participation of our Chairman, Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of the end of the period covered by this annual report, as of December 31, 2020.
96


The term disclosure controls and procedures are defined under SEC rules as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its Chief Executive and Chief Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Based upon that evaluation, our Chairman, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2020.
B.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) promulgated under the Securities Exchange Act of 1934.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company's Chief Executive and Chief Financial Officer, Mr. Petros Panagiotidis, and effected by the Company's Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of Company's management and directors; and

•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
Management conducted the evaluation of the effectiveness of the internal controls over financial reporting using the control criteria framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its report entitled Internal Control-Integrated Framework (2013).
Our management with the participation of our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of the design and operation of the Company's internal controls over financial reporting pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as of December 31, 2020. Based upon that evaluation, our management with the participation of our Chief Executive Officer and Chief Financial Officer concluded that the Company's internal controls over financial reporting are effective as of December 31, 2020.
97


C.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm, since, as an "emerging growth company", we are exempt from having our independent auditor assess our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.
D.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.
ITEM 16.
RESERVED
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that Mr. Georgios Daskalakis, who serves as Chairman of the Audit Committee, qualifies as an "audit committee financial expert" under SEC rules, and that Mr. Daskalakis is "independent" under applicable Nasdaq rules and SEC standards.
ITEM 16B.
CODE OF ETHICS
We adopted a code of ethics that applies to any of our employees, including our principal executive and financial officer. The code of ethics may be downloaded from our website (www.castormaritime.com). Additionally, any person, upon request, may receive a hard copy or an electronic file of the code of ethics at no cost. If we make any substantive amendment to the code of ethics or grant any waivers, including any implicit waiver, from a provision of our code of ethics, we will disclose the nature of that amendment or waiver on our website. During the year ended December 31, 2020, no such amendment was made or waiver granted.
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Aggregate fees billed to the Company for the years ended December 31, 2019 and 2020 represent fees billed by our principal accounting firm, Deloitte Certified Public Accountants S.A., an independent registered public accounting firm and member of Deloitte Touche Tohmatsu, Limited. Audit fees represent compensation for professional services rendered for the audit of the consolidated financial statements of the Company and for the review of the quarterly financial information as well as in connection with the review of registration statements and related consents and comfort letters and any other audit services required for SEC or other regulatory filings. No other non-audit, tax or other fees were charged.
 
For the year ended
 
 In U.S. dollars
December 31, 2019
 
December 31, 2020
 
Audit Fees
   
140,385
     
188,750
 

98


Audit-Related Fees
Not applicable.
Tax Fees
Not applicable.
All Other Fees
Not applicable.
Audit Committee's Pre-Approval Policies and Procedures
Our audit committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services.
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS.
Not applicable.
ITEM 16F.
CHANGE IN REGISTRANT`S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
Pursuant to an exception under the Nasdaq listing standards available to foreign private issuers, we are not required to comply with all of the corporate governance practices followed by U.S. companies under the Nasdaq listing standards, which are available at www.nasdaq.com, because in certain cases we follow our home country (Marshall Islands) practice. Pursuant to Section 5600 of the Nasdaq Listed Company Manual, we are required to list the significant differences between our corporate governance practices that comply with and follow our home country practices and the Nasdaq standards applicable to listed U.S. companies. Set forth below is a list of those differences:
•
Independence of Directors. The Nasdaq requires that a U.S. listed company maintain a majority of independent directors. While our Board is currently comprised of three directors a majority of whom are independent, we cannot assure you that in the future we will have a majority of independent directors.
•
Executive Sessions. The Nasdaq requires that non-management directors meet regularly in executive sessions without management. The Nasdaq also requires that all independent directors meet in an executive session at least once a year. As permitted under Marshall Islands law and our bylaws, our non-management directors do not regularly hold executive sessions without management.
•
Nominating/Corporate Governance Committee. The Nasdaq requires that a listed U.S. company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law and our bylaws, we do not currently have a nominating or corporate governance committee.
99


•
Compensation Committee. The Nasdaq requires U.S. listed companies to have a compensation committee composed entirely of independent directors and a committee charter addressing the purpose, responsibility, rights and performance evaluation of the committee. As permitted under Marshall Islands law, we do not currently have a compensation committee. To the extent we establish such committee in the future, it may not consist of independent directors, entirely or at all.
•
Audit Committee.  The Nasdaq requires, among other things, that a listed U.S. company have an audit committee with a minimum of three members, all of whom are independent. As permitted by Rule 10A-3 under the Securities Exchange Act of 1934, our audit committee consists of two independent members of our Board, Mr. Georgios Daskalakis and Mr. Dionysios Makris.
•
Shareholder Approval Requirements. The Nasdaq requires that a listed U.S. company obtain prior shareholder approval for certain issuances of authorized stock or the approval of, and material revisions to, equity compensation plans. As permitted under Marshall Islands law and our bylaws, we do not seek shareholder approval prior to issuances of authorized stock or the approval of and material revisions to equity compensation plans.
•
Corporate Governance Guidelines. The Nasdaq requires U.S. companies to adopt and disclose corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation of the Board. We are not required to adopt such guidelines under Marshall Islands law and we have not adopted such guidelines.
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
PART III
ITEM 17.
FINANCIAL STATEMENTS
See Item 18.
ITEM 18.
FINANCIAL STATEMENTS
The financial information required by this Item is set forth on pages F-1 to F-31 filed as part of this annual report.
ITEM 19.
EXHIBITS
1.1
 
 
1.2
 
 
2.1
 
 
2.2
 
 
2.3


100

2.4
 
 
4.1
 
 
4.2
 
 
4.3
 
 
4.4
 
 
4.5
 
 
4.6
 
 
4.7
 
 
4.8
 
 
4.9
 
 
4.10
 
 
4.11
 
 
4.12
 
 
4.13


101

4.14
 
 
4.15
 
 
4.16
 
 
4.17
 
 
4.18
 
 
8.1
 
 
12.1
 
 
12.2
 
 
13.1
 
 
13.2
 
 
15.1
   
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
XBRL Taxonomy Extension Schema Calculation Linkbase Document
 
 
101.DEF
XBRL Taxonomy Extension Schema Definition Linkbase Document
 
 
101.LAB
XBRL Taxonomy Extension Schema Label Linkbase Document
 
 
101.PRE
XBRL Taxonomy Extension Schema Presentation Linkbase Document


102


SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf.

   
CASTOR MARITIME INC.
     
/s/ Petros Panagiotidis
 
March 30, 2021
Name:  Petros Panagiotidis
   
Title: Chairman, Chief Executive Officer and
Chief Financial Officer
   


103


  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

 
Page
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Balance Sheets as of December 31, 2019 and 2020
F-3
   
Consolidated Statements of Comprehensive Income/ (Loss) for the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020
F-4
   
Consolidated Statements of Shareholders’ Equity for the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020
F-5
   
Consolidated Statements of Cash Flows for the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020
F-6
   
Notes to Consolidated Financial Statements
F-7

F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Castor Maritime Inc.,
Majuro, Republic of the Marshall Islands
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Castor Maritime Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, shareholders’ equity and cash flows, for the year ended September 30, 2018, the three months ended December 31, 2018, the year ended December 31, 2019 and the year ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the year ended September 30, 2018, the three months ended December 31, 2018, the year ended December 31, 2019 and the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte Certified Public Accountants S.A.
Athens, Greece
March 30, 2021
 
We have served as the Company's auditor since 2017.
F-2



CASTOR MARITIME INC.
 
CONSOLIDATED BALANCE SHEETS
 
December 31, 2019 and 2020
 
(Expressed in U.S. Dollars – except for share data)
 
ASSETS
       
December 31,
   
December 31,
 
CURRENT ASSETS:
 
Note
   
2019
   
2020
 
Cash and cash equivalents
       
$
4,558,939
   
$
8,926,903
 
Accounts receivable trade, net
         
216,485
     
1,302,218
 
Due from related party
   
3
     
759,386
     
1,559,132
 
Inventories
           
143,534
     
714,818
 
Prepaid expenses and other assets
           
375,255
     
1,061,083
 
Deferred charges, net
           
167,298
     
—
 
Total current assets
           
6,220,897
     
13,564,154
 
                         
NON-CURRENT ASSETS:
                       
Vessels, net
   
5
     
23,700,029
     
58,045,628
 
Restricted cash
   
6
     
500,000
     
500,000
 
Prepaid expenses and other assets, non-current
   
6
     
—
     
200,000
 
Deferred charges, net
   
4
     
—
     
2,061,573
 
Total non-current assets
           
24,200,029
     
60,807,201
 
                         
Total assets
         
$
30,420,926
   
$
74,371,355
 
                         
LIABILITIES AND SHAREHOLDERS' EQUITY
                       
                         
CURRENT LIABILITIES:
                       
Current portion of long-term debt, net
   
6
     
1,522,895
     
2,102,037
 
Current portion of long-term debt, related party
   
3, 6
     
—
     
5,000,000
 
Accounts payable
           
410,592
     
2,078,695
 
Due to related party, current
   
3
     
—
     
1,941
 
Deferred revenue, net
           
493,015
     
108,125
 
Accrued liabilities (including $100,000 and $405,000 accrued interest to related party for years ended December 31,2019 and 2020, respectively)
   
3
     
556,248
     
1,613,109
 
Total current liabilities
           
2,982,750
     
10,903,907
 
                         
Commitments and contingencies
   
9
                 
                         
NON-CURRENT LIABILITIES:
                       
Long-term debt, net
   
6
     
9,234,165
     
11,083,829
 
Long-term debt, related party
   
3, 6
     
5,000,000
     
—
 
Total non-current liabilities
           
14,234,165
     
11,083,829
 
                         
SHAREHOLDERS' EQUITY:
                       
Common shares, $0.001 par value; 1,950,000,000 shares authorized; 3,318,112 shares issued and outstanding as of December 31, 2019 and 131,212,376 issued and outstanding as of December 31, 2020
   
7
     
3,318
     
131,212
 
Preferred shares, $0.001 par value: 50,000,000 shares authorized:
   
7
                 
Series A Preferred Shares- 9.75% cumulative redeemable perpetual preferred shares (liquidation preference of $30 per share), 480,000 shares issued and outstanding as of December 31, 2019 and 2020, respectively
   
7
     
480
     
480
 
Series B Preferred Shares – 12,000 shares issued and outstanding as of December 31, 2019 and 2020, respectively
   
7
     
12
     
12
 
Additional paid-in capital
           
12,763,403
     
53,568,650
 
Retained earnings/ (Accumulated deficit)
           
436,798
     
(1,316,735
)
Total shareholders' equity
           
13,204,011
     
52,383,619
 
                         
Total liabilities and shareholders' equity
         
$
30,420,926
   
$
74,371,355
 
The accompanying notes are an integral part of these consolidated financial statements.
F-3

CASTOR MARITIME INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020
(Expressed in U.S. Dollars – except for share data)


         
Year Ended
September 30,
   
Three Months Ended
December 31,
   
Year Ended
December 31,
   
Year Ended
December 31,
 
   
Note
   
2018
   
2018
   
2019
   
2020
 
REVENUES:
                             
Vessel revenues (net of commissions to charterers of $153,406, $43,125 ,$302,556 and $629,015 respectively)
       
$
3,960,822
   
$
1,111,075
   
$
5,967,772
   
$
12,487,692
 
Total revenues
         
3,960,822
     
1,111,075
     
5,967,772
     
12,487,692
 
                                       
EXPENSES:
                                     
Voyage expenses (including $40,471 and $29,769 to related parties for the years ended December 31, 2019 and 2020, respectively)
   
3,12
     
(37,373
)
   
(19,556
)
   
(261,179
)
   
(584,705
)
Vessel operating expenses
   
12
     
(1,727,770
)
   
(432,544
)
   
(2,802,991
)
   
(7,447,439
)
Management fees to related parties
   
3
     
(111,480
)
   
(29,440
)
   
(212,300
)
   
(930,500
)
Depreciation and amortization
   
4,5
     
(637,611
)
   
(177,378
)
   
(897,171
)
   
(1,904,963
)
Provision for doubtful accounts
   
2
     
—
     
—
     
—
     
(37,103
)
General and administrative expenses
   
13
                                 
- Company administration expenses (including $400,000 to related party for the year ended December 31, 2020)
           
(109,233
)
   
(22,954
)
   
(378,777
)
   
(1,130,953
)
- Public registration costs
           
(350,167
)
   
(161,116
)
   
(132,091
)
   
—
 
Total expenses
           
(2,973,634
)
   
(842,988
)
   
(4,684,509
)
   
(12,035,663
)
                                         
Operating income
           
987,188
     
268,087
     
1,283,263
     
452,029
 
                                         
OTHER INCOME/ (EXPENSES):
                                       
Interest and finance costs (including $162,500 and $305,000 to related party for years ended December 31, 2019 and 2020, respectively)
   
3,6, 14
     
(3,393
)
   
(519
)
   
(222,163
)
   
(2,189,577
)
Interest income
           
4,243
     
7,985
     
31,589
     
34,976
 
Foreign exchange (losses)/ gains
           
(8,539
)
   
89
     
(4,540
)
   
(29,321
)
Other, net
           
1,439
     
800
     
—
     
—
 
Total other income/ (expenses), net
           
(6,250
)
   
8,355
     
(195,114
)
   
(2,183,922
)
                                         
Net income/(loss) and comprehensive income/(loss), before taxes
         
$
980,938
   
$
276,442
   
$
1,088,149
   
$
(1,731,893
)
 US Source Income Taxes
   
10
     
—
     
—
     
—
     
(21,640
)
Net income/(loss) and comprehensive income/(loss)
         
$
980,938
   
$
276,442
   
$
1,088,149
   
$
(1,753,533
)
                                         
(Loss)/ Earnings per common share, basic and diluted
   
11
   
$
(0.28
)
 
$
(0.30
)
 
$
0.31
   
$
(0.03
)
Weighted average number of common shares, basic and diluted
           
2,400,000
     
2,400,000
     
2,662,383
     
67,735,195
 
The accompanying notes are an integral part of these consolidated financial statements.
F-4



CASTOR MARITIME INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020
(Expressed in U.S. Dollars – except for share data)

   
Number of shares issued
                         
   
Common shares
   
Preferred A shares
   
Preferred B shares
   
Par Value of
Shares issued
   
Additional
Paid-in capital
   
Retained earnings/
(Accumulated deficit)
   
Total Shareholders' Equity
 
Balance, September 30, 2017
   
2,400,000
     
480,000
     
12,000
   
$
2,892
   
$
7,612,108
   
$
878,644
   
$
8,493,644
 
- Net income
   
—
     
—
     
—
     
—
     
—
     
980,938
     
980,938
 
Balance, September 30, 2018
   
2,400,000
     
480,000
     
12,000
   
$
2,892
   
$
7,612,108
   
$
1,859,582
   
$
9,474,582
 
- Net income
   
—
     
—
     
—
     
—
     
—
     
276,442
     
276,442
 
Balance, December 31, 2018
   
2,400,000
     
480,000
     
12,000
     
2,892
     
7,612,108
     
2,136,024
     
9,751,024
 
- Issuance of common stock, net of commissions and issuance costs, pursuant to the ATM Program (Note 7)
   
618,112
     
—
     
—
     
618
     
2,319,083
     
—
     
2,319,701
 
- Issuance of common stock related to Series A Preferred Stock dividends (Note 7)
   
300,000
     
—
     
—
     
300
     
967,500
     
(967,800
)
   
—
 
- Series A Preferred Stock dividend waived accounted as deemed contribution (Note 7)
   
—
     
—
     
—
     
—
     
3,379,589
     
—
     
3,379,589
 
- Series A Preferred Stock dividend waived (Note 7)
   
—
     
—
     
—
     
—
     
(1,560,014
)
   
(1,819,575
)
   
(3,379,589
)
- Gain on extinguishment of preferred stock pursuant to the Series A Preferred Stock Amendment Agreement, net of expenses (Note 7)
   
—
     
—
     
—
     
—
     
112,637
     
—
     
112,637
 
- Preferred shareholders’ deemed dividend pursuant to the Series A Preferred Stock Amendment Agreement (Note 7)
   
—
     
—
     
—
     
—
     
(130,000
)
   
—
     
(130,000
)
- Shareholder’s deemed contribution pursuant to the $7.5 Million Bridge Loan
   
—
     
—
     
—
     
—
     
62,500
     
—
     
62,500
 
- Net income
   
—
     
—
     
—
     
—
     
—
     
1,088,149
     
1,088,149
 
Balance, December 31, 2019
   
3,318,112
     
480,000
     
12,000
     
3,810
     
12,763,403
     
436,798
     
13,204,011
 
-  Issuance of common stock pursuant to the $5.0 Million Convertible Debentures (Notes 6,7)
   
8,042,078
     
—
     
—
     
8,042
     
5,049,731
     
—
     
5,057,773
 
-  Issuance of common stock pursuant to the June Equity Offering, net of issuance costs (Note 7)
   
59,082,686
     
—
     
—
     
59,083
     
18,539,169
     
—
     
18,598,252
 
-  Issuance of common stock pursuant to the July Equity Offering, net of issuance costs (Note 7)
   
57,750,000
     
—
     
—
     
57,750
     
15,630,104
     
—
     
15,687,854
 
- Issuance of common stock pursuant to the exercise of Class A Warrants (Note 7)
   
3,019,500
     
—
     
—
     
3,019
     
1,053,806
     
—
     
1,056,825
 
- Beneficial conversion feature pursuant to the issuance of the $5.0 Million Convertible Debentures (Note 6)
   
—
     
—
     
—
     
—
     
532,437
     
—
     
532,437
 
Net loss
   
—
     
—
     
—
     
—
     
—
     
(1,753,533
)
   
(1,753,533
)
Balance, December 31, 2020
   
131,212,376
     
480,000
     
12,000
     
131,704
     
53,568,650
     
(1,316,735
)
   
52,383,619
 


The accompanying notes are an integral part of these consolidated financial statements.
F-5

CASTOR MARITIME INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020 (Expressed in U.S. Dollars)

   
Note
   
Year Ended
September 30,
   
Three Months Ended December 31,
   
Year Ended
December 31,
   
Year Ended
December 31,
 
         
2018
   
2018
   
2019
   
2020
 
Cash Flows provided by/(used in) Operating Activities:
                             
Net income/(loss)
       
$
980,938
   
$
276,442
   
$
1,088,149
   
$
(1,753,533
)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) Operating activities:
                                     
Depreciation and amortization of deferred dry-docking costs
   
4,5
     
637,611
     
177,378
     
897,171
     
1,904,963
 
Amortization and write-off of deferred finance charges
   
14
     
—
     
—
     
6,628
     
599,087
 
Amortization of other deferred charges
           
—
     
—
     
31,066
     
112,508
 
Deferred revenue amortization
           
—
     
—
     
(119,006
)
   
(430,994
)
Convertible debentures’ interest settled in common stock
   
6,14
     
—
     
—
     
—
     
57,773
 
Amortization and write-off of convertible notes beneficial conversion feature
   
6,14
     
—
     
—
     
—
     
532,437
 
Provision for doubtful accounts
   
2
     
—
     
—
     
—
     
37,103
 
Shareholders' deemed interest contribution
           
—
     
—
     
62,500
     
—
 
Changes in operating assets and liabilities:
                                       
Accounts receivable trade
           
340,152
     
(668,520
)
   
454,488
     
(1,122,836
)
Inventories
           
(14,111
)
   
3,167
     
(86,004
)
   
(571,284
)
Due from/to related parties
           
(166,815
)
   
86,645
     
(582,952
)
   
(797,805
)
Prepaid expenses and other assets
           
(15,537
)
   
(10,603
)
   
(320,055
)
   
(885,828
)
Dry-dock costs paid
           
(784,474
)
   
—
     
—
     
(1,308,419
)
Other deferred charges
           
—
     
—
     
(198,364
)
   
26,494
 
Accounts payable
           
(71,621
)
   
210,888
     
129,201
     
584,527
 
Accrued liabilities
           
(3,437
)
   
25,001
     
384,827
     
625,894
 
Deferred revenue
           
—
     
47,708
     
564,313
     
46,104
 
Net Cash provided by/(used in) Operating Activities
           
902,706
     
148,106
     
2,311,962
     
(2,343,809
)
                                         
Cash flow used in Investing Activities:
                                       
Vessel acquisitions and other vessel improvements
   
5
     
—
     
—
     
(17,227,436
)
   
(35,472,173
)
Net cash used in Investing Activities
           
—
     
—
     
(17,227,436
)
   
(35,472,173
)
                                         
Cash flows provided by Financing Activities:
                                       
Gross proceeds from issuance of common stock and warrants
   
7
     
—
     
—
     
2,625,590
     
39,053,325
 
Common stock issuance expenses paid
           
—
     
—
     
(305,889
)
   
(3,710,394
)
Proceeds from long-term debt and convertible debentures
   
6
     
—
     
—
     
11,000,000
     
9,500,000
 
Repayment of long-term debt
   
6
     
—
     
—
     
—
     
(2,050,000
)
Proceeds from related party debt
   
6
     
—
     
—
     
12,500,000
     
—
 
Repayment of related party debt
   
6
     
—
     
—
     
(7,500,000
)
   
—
 
Payment of deferred financing costs
           
—
     
—
     
(232,568
)
   
(608,985
)
Net cash provided by Financing Activities
           
—
     
—
     
18,087,133
     
42,183,946
 
                                         
Net increase in cash, cash equivalents, and restricted cash
           
902,706
     
148,106
     
3,171,659
     
4,367,964
 
Cash, cash equivalents and restricted cash at the beginning of the year/period
           
836,468
     
1,739,174
     
1,887,280
     
5,058,939
 
Cash, cash equivalents and restricted cash at the end of the year/period
         
$
1,739,174
   
$
1,887,280
   
$
5,058,939
   
$
9,426,903
 
                                         
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
                                       
Cash and cash equivalents
         
$
1,739,174
   
$
1,887,280
   
$
4,558,939
   
$
8,926,903
 
Restricted cash
           
—
     
—
     
500,000
     
500,000
 
Cash, cash equivalents, and restricted cash
         
$
1,739,174
   
$
1,887,280
   
$
5,058,939
     
9,426,903
 
                                         
SUPPLEMENTAL CASH FLOW INFORMATION
                                       
Cash paid for interest
           
—
     
—
     
—
     
654,555
 
Shares issued in connection with the settlement of the $5.0 Million Convertible Debentures
           
—
     
—
     
—
     
5,057,773
 
Shares issued in connection with the Series A Preferred Shares Settlement Agreement
           
—
     
—
     
967,800
     
—
 
Series A Preferred Stock dividend waived accounted as deemed contribution
           
—
     
—
     
3,379,589
     
—
 
Preferred shareholders’ deemed contribution pursuant to the Series A Preferred Stock Amendment Agreement, net of expenses
           
—
     
—
     
112,637
     
—
 
Shareholder’s deemed contribution pursuant to the $7.5 Million Bridge Loan
           
—
     
—
     
62,500
     
—
 
Unpaid vessel acquisition and other vessel improvement costs (included in Accounts payable and Accrued liabilities)
           
—
     
—
     
33,344
     
657,204
 
Unpaid deferred financing costs (included in Accounts payable)
           
—
     
—
     
17,000
     
—
 
Unpaid deferred dry-dock costs (included in Accounts payable and Accrued liabilities)
           
—
     
—
     
—
     
907,685
 

The accompanying notes are an integral part of these consolidated financial statements.
F-6

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

1.
Basis of Presentation and General information

Castor Maritime Inc. (“Castor”) was incorporated in September 2017 under the laws of the Republic of the Marshall Islands. The accompanying consolidated financial statements include the accounts of Castor and its wholly-owned subsidiaries (collectively, the “Company”).
The Company is engaged in the worldwide transportation of ocean-going cargoes through its vessel-owning subsidiaries. On December 21, 2018, Castor’s common shares began trading on the Norwegian OTC and on February 11, 2019, they began trading on the Nasdaq Capital Market, or Nasdaq, under the symbol “CTRM”.
As of December 31, 2020, Castor was controlled by Thalassa Investment Co. S.A. (“Thalassa”) by virtue of the 100% Series B preferred shares owned by it and, as a result, could control the outcome of matters on which shareholders are entitled to vote. Thalassa is controlled by Petros Panagiotidis, the Company's Chairman, Chief Executive Officer and Chief Financial Officer.
Pavimar S.A., a corporation incorporated under the laws of the Republic of the Marshall Islands (“Pavimar”), a related party controlled by the sister of Petros Panagiotidis, Ismini Panagiotidis, provides technical, crew and operational management services to the Company.
Castor Ships S.A., a corporation incorporated under the laws of the Republic of the Marshall Islands (“Castor Ships”), a related party controlled by the Company’s Chairman, Chief Executive Officer and Chief Financial Officer, manages overall the Company’s business and provides commercial, chartering and administrative services to the Company.
As of December 31, 2020, the Company was the sole owner of all outstanding shares of the following subsidiary companies:
Vessel owning subsidiaries consolidated owning dry-bulk Panamax vessels
Company
Country of incorporation
Vessel Name
DWT
Year Built
Delivery date to Castor
Spetses Shipping Co. (“Spetses”)
Marshall Islands
Magic P
76,453
2004
February 2017
Bistro Maritime Co. (“Bistro”)
Marshall Islands
Magic Sun
75,311
2001
September 2019
Pikachu Shipping Co. (“Pikachu”)
Marshall Islands
Magic Moon
76,602
2005
October 2019
Bagheera Shipping Co. (“Bagheera”)
Marshall Islands
Magic Rainbow
73,593
2007
August 2020
Pocahontas Shipping Co. (“Pocahontas”)
Marshall Islands
Magic Horizon
76,619
2010
October 2020
Jumaru Shipping Co. (“Jumaru”)
Marshall Islands
Magic Nova
78,833
2010
October 2020
Change of fiscal year
On September 27, 2019, the Company’s Board of Directors authorized a change in Castor’s fiscal year end from September 30 to December 31. This change in the Company’s fiscal year end resulted in a three-month transition period from October 1, 2018 to December 31, 2018 (the “Transition Period”). On December 16, 2019, the Company filed an audited transition report on Form 20-F with the U.S. Securities and Exchange Commission for the Transition Period.
F-7

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

1.
Basis of Presentation and General information (continued):

Credit concentration:
During the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020, charterers that individually accounted for more than 10% of the Company’s revenues (as percentages of total revenues) were as follows:

Charterer
   
Year Ended September 30, 2018
   
Three Months Ended December 31, 2018
   
Year Ended December 31, 2019
   
Year Ended December 31, 2020
 
A
     
24
%
   
100
%
   
63
%
   
34
%
B
     
52
%
   
—
%
   
—
%
   
—
%
C
     
17
%
   
—
%
   
—
%
   
—
%
D
     
—
%
   
—
%
   
13
%
   
—
%
E
 
   
—
%
   
—
%
   
12
%
   
24
%
F
 
   
—
%
   
—
%
   
12
%
   
—
%
Total
     
93
%
   
100
%
   
100
%
   
58
%

COVID-19 related considerations
The COVID-19 ongoing pandemic has negatively impacted, and may continue to impact negatively, global economic activity and demand, including the shipping industry into which the Company operates. In case that the ongoing COVID-19 pandemic continues to negatively impact market rates in the long-term, depending on the pervasiveness of such economic recession, there could be a significant negative impact in the Company’s liquidity, vessels’ value and overall financial condition. The COVID-19 pandemic has had a negative impact on certain of the Company’s vessels’ charter rates and, therefore, on the Company’s voyage revenues for the year ended December 31, 2020. Additionally, during 2020, the Company has experienced disruptions and in certain cases, prolonged delays, to the majority of its vessels’ normal operations caused by deviation time associated with quarantine checks, crew changes and positioning its vessels to countries in which it can rotate crew in compliance with such measures. These overall difficulties have caused the Company’s operating costs and, more specifically, crew costs, to increase during the year ended December 31, 2020 while also having elevating its fleet off-hire days.
The Company evaluates on a quarterly basis its ability to continue as a going concern in accordance the provisions of ASU No. 2014-15 for a period of one year after the date that the financial statements are issued. In light of the continuity of the COVID-19 pandemic and the overall uncertainty on its potential future impact, the Company, as at December 31, 2020, performed a sensitivity analysis on key assumptions such as the estimates of future charter rates for non-contracted revenue days in order to identify conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date the financial statements are issued. As per the Company’s evaluation, it was concluded that COVID-19 related considerations did not adversely affect the Company’s ability to continue as a going concern.
2.
Significant Accounting Policies and Recent Accounting Pronouncements:
Principles of consolidation
The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Castor and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Castor, as the holding company, determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity. Under Financial Accounting
F-8

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810 “Consolidation”, a voting interest entity is an entity in which the total equity investment at risk is deemed sufficient to absorb the expected losses of the entity, the equity holders have all the characteristics of a controlling financial interest and the legal entity is structured with substantive voting rights. The holding company consolidates voting interest entities in which it owns all, or at least a majority (generally, greater than 50%) of the voting interest. Variable interest entities (“VIE”) are entities, as defined under ASC 810, that in general either have equity investors with non-substantive voting rights or that have equity investors that do not provide sufficient financial resources for the entity to support its activities. The holding company has a controlling financial interest in a VIE and is, therefore, the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. A VIE should have only one primary beneficiary which is required to consolidate the VIE. A VIE may not have a primary beneficiary if no party meets the criteria described above. The Company evaluates all arrangements that may include a variable interest in an entity to determine if it is the primary beneficiary, and would therefore be required to include assets, liabilities and operations of a VIE in its consolidated financial statements.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include vessel valuations, the valuation of amounts due from charterers, residual value and the useful life of the vessels. Actual results may differ from these estimates.
Other comprehensive income
The Company follows the accounting guidance relating to comprehensive income, which requires separate presentation of certain transactions that are recorded directly as components of shareholders' equity. The Company has no other comprehensive income/ (loss) items and, accordingly, comprehensive income equals net income for the periods presented.
Foreign currency translation
The Company's reporting and functional currency is the U.S. Dollar (“USD”). Transactions incurred in other currencies are translated into USD using the exchange rates in effect at the time of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in other currencies are translated into USD to reflect the end-of-period exchange rates and any gains or losses are included in the consolidated statements of comprehensive income.
Cash and cash equivalents
The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.
Restricted Cash
Restricted cash may comprise of (i) minimum liquidity collateral requirements or minimum required cash deposits that are required to be maintained under the Company’s financing arrangements, (ii) cash deposits in so-called “retention accounts” which may only be used as per the Company’s borrowing arrangements for the purpose of serving the loan installments coming due or, (iii) other cash deposits required to be retained until other specified conditions prescribed in the Company’s debt agreements are met. In the event that the obligation to maintain such deposits is expected to elapse within the next operating cycle, these deposits are classified as current assets. Otherwise, they are classified as non-current assets.

F-9

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)
2.
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
Accounts receivable trade, net
The amount shown as trade receivables, net, at each balance sheet date, includes receivables from charterers for hire and other potential sources of income (such as ballast bonus compensation or holds cleaning compensation) under the Company’s charter contracts, net of any provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. Provision for doubtful accounts recorded as of December 31, 2019 and 2020 amounted to $0 and $37,103, respectively.
Inventories
Inventories consist of lubricants and provisions on board each vessel. Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price less reasonably predictable costs of disposal and transportation. Cost is determined by the first in, first out method. Inventories may also consist of bunkers during periods when vessels are unemployed, undergoing dry-docking or special survey or under voyage charters, in which case, they are also stated at the lower of cost or net realizable value and cost is also determined by the first in, first out method.
Insurance Claims 
The Company records insurance claim recoveries for insured losses incurred on damage to fixed assets, loss of hire and for insured crew medical expenses. Insurance claim recoveries are recorded, net of any deductible amounts, at the time when (i) the Company’s vessels suffer insured damages or at the time when crew medical expenses are incurred, (ii) recovery is probable under the related insurance policies, (iii) the Company can estimate the amount of such recovery following submission of the insurance claim and (iv) provided that the claim is not subject to litigation.
Vessels, net
Vessels, net are stated at cost net of accumulated depreciation. The cost of a vessel consists of the contract price plus any direct expenses incurred upon acquisition, including improvements, delivery expenses and other expenditures to prepare the vessel for its intended use which is to provide worldwide integrated transportation services. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of a vessel; otherwise these amounts are charged to expense as incurred. 
Vessels’ depreciation
Depreciation is computed using the straight line method over the estimated useful life of a vessel, after considering the estimated salvage value. Each vessel's salvage value is equal to the product of its lightweight tonnage and estimated scrap rate. Salvage values are periodically reviewed and revised, if needed, to recognize changes in conditions, new regulations or for other reasons. Revisions of salvage value affect the depreciable amount of the vessels and affect depreciation expense in the period of the revision and future periods. Management estimates the useful life of its vessels to be 25 years from the date of their initial delivery from the shipyard.
Impairment of long‑ lived assets
The Company reviews its vessels for impairment whenever events or changes in circumstances indicate that the carrying amount of a vessel may not be recoverable. When the estimate of future undiscounted cash flows expected to be generated by the use of a vessel is less than its carrying amount, the Company evaluates the vessel for an impairment loss. Measurement of the impairment loss is based on the fair value of the vessel in comparison to its carrying value. In this respect, management regularly reviews the carrying amount of its vessels’ in connection with their estimated recoverable amount.
F-10

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)
2.
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
Dry-docking and special survey costs
Dry-docking and special survey costs are accounted under the deferral method whereby the actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due. Costs deferred are limited to actual costs incurred at the yard and parts used in the dry-docking or special survey. Costs deferred include expenditures incurred relating to shipyard costs, hull preparation and painting, inspection of hull structure and mechanical components, steelworks, machinery works, and electrical works as well as lodging and subsistence of personnel sent to the yard site to supervise. If a dry-dock and/or a special survey is performed prior to its scheduled date, the remaining unamortized balance is immediately expensed. Unamortized balances of vessels that are sold are written-off and included in the calculation of the resulting gain or loss in the period of a vessel’s sale. The amortization charge related to dry-docking costs and special survey costs is presented within Depreciation and amortization in the accompanying consolidated statements of comprehensive income.
Revenue and expenses recognition (including Leases)
The Company currently generates and has historically generated its revenues only under time charter contracts. A time charter is a type of contract that is entered into for the use of such vessel as well as such vessel’s operations for a specific period of time at a specified daily charter hire rate.
Lease Contracts
The Company accounts for its time charter contracts as operating leases pursuant to ASC 842 “Leases” which was early adopted by the Company on October 1, 2018. The Company has determined that the non-lease component in its time charter contracts relates to services for the operation of the vessel, which comprise of crew, technical and safety services, among others. The Company further elected to adopt the above discussed optional practical expedient and recognize lease revenue as a combined single lease component for all time charter contracts (operating leases) since it made a determination that the related lease component and non-lease component have the same timing and pattern of transfer and the predominant component is the lease. The Company qualitatively assessed that more value is ascribed to the use of the asset (i.e the vessel) rather than to the services provided under the time charter agreements.
Lease revenues are recognized on a straight line basis over the rental periods of such charter agreements, as rental service is provided, beginning when a vessel is delivered to the charterer until it is redelivered back to the Company, and is recorded as part of vessel revenues in the Company’s consolidated statements of comprehensive income/(loss). Revenue generated from variable lease payments is recognized in the period when changes in facts and circumstances on which the variable lease payments are based occur. Deferred revenue includes (i) cash received prior to the balance sheet date for which all criteria to recognize as lease revenue have not yet been met as at the balance sheet date and, accordingly, is related to revenue earned after such date and (ii) deferred contract revenue such as deferred ballast compensation earned as part of a lease contract. Lease revenue is shown net of commissions payable directly to charterers under the relevant time charter agreements. Charterers’ commissions represent discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer. Apart from the agreed hire rate, the owner may be entitled to additional income, such as ballast bonus, which is considered as reimbursement of owner’s expenses and is recognized together with the lease component over the duration of the charter. The Company made an accounting policy election to recognize the related ballast costs, which mainly consist of bunkers, incurred over the period between the charter party date or the prior redelivery date (whichever is latest) and the delivery date to the charterer, as contract fulfillment costs in accordance with ASC 340-40 and amortize these over the period of the charter.
As of December 31, 2019, deferred ballast costs and related deferred ballast income related to lease contracts amounted to $112,508 and $430,994, respectively, and are presented under Deferred charges, net (Current) and Deferred revenue, net (Current) respectively, in the accompanying consolidated balance sheet. Deferred ballast costs and related deferred ballast income were zero as of December 31, 2020. Amortization expenses related to deferred ballast costs for the years ended
F-11

 
CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)


2.
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
December 31, 2019 and 2020 amounted to $31,066 and $112,508, respectively, and is included under Voyage expenses in the accompanying consolidated statements of comprehensive income. Amortization of deferred ballast income for the years ended December 31, 2019 and 2020 amounted to $119,006 and $430,994, respectively, and is included under Vessel revenues in the accompanying consolidated statement of comprehensive income. There was no unamortized balance of deferred ballast costs and deferred ballast income as of December 31, 2020.
Voyage Expenses
Voyage expenses, consist of: (a) port, canal and bunker expenses that are unique to a particular charter, are paid for by the charterer under time charter arrangements or by the Company under voyage charter arrangements, and (b) brokerage commissions, which are always paid for by the Company, regardless of charter type. All voyage expenses are expensed as incurred, except for brokerage commissions. Commissions paid to brokers are deferred and amortized over the related charter period to the extent revenue has been deferred since commissions are earned as the Company's revenues are earned. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a bunker gain or loss within voyage expenses.
Accounting for Financial Instruments
The principal financial assets of the Company consist of cash and cash equivalents, restricted cash, amounts due from related parties and trade receivables, net. The principal financial liabilities of the Company consist of trade and other payables, accrued liabilities, long-term debt and amounts due to related parties. The Company is exposed to changes in the spot market rates associated with the deployment of its vessels and its objective is to manage the impact of such changes in its cash flows. In this respect, from time to time, the Company may engage in certain forward freight agreements. The Company may also enter into interest rate derivatives to economically hedge its exposure to interest rate fluctuations of its debt obligations as well as derivatives relating to the fluctuation of the price of bunker fuel consumed by its vessels.
When such derivatives do not qualify for hedge accounting the Company records these financial instruments in the consolidated balance sheet at their fair value as either a derivative asset or a liability, and recognizes the fair value changes thereto in earnings. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in fair value of the derivatives are either offset against the fair value of assets and liabilities through earnings, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in earnings. As of December 31, 2019 and 2020, there were no open derivative instruments.
Convertible debt and associated beneficial conversion features
Convertible debt is accounted in accordance with ASC 470-20, Debt with Conversion and Other Options. An instrument that is not a derivative itself must be evaluated for embedded features that should be bifurcated and separately accounted for as freestanding derivatives in accordance with ASC 815, Derivatives and Hedging, or separately accounted for under the cash conversion literature of ASC 470-20, Debt with Conversion and Other Options.

The BCF is recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of the BCF to additional paid-in capital, resulting in a discount on the convertible instrument. This discount is accreted from the date on which the BCF is first recognized through the stated maturity date of the convertible instrument using the effective interest method. Upon conversion of an instrument with a BCF, all unamortized discounts at the conversion date are recognized immediately as interest expense.
F-12

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
Fair value measurements
The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures” which defines, and provides guidance as to the measurement of fair value. ASC 820 creates a hierarchy of measurement and indicates that, when possible, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets and the lowest priority (Level 3) to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy.
Repairs and Maintenance
All repair and maintenance expenses including underwater inspection expenses are expensed in the period incurred. Such costs are included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income.
Financing Costs
In accordance with ASU 2015-03, “Interest – Imputation of Interest”, costs associated with long-term debt, including but not limited to, fees paid to lenders, fees required to be paid to third parties on the lender’s behalf in connection with debt financing or refinancing, or any unamortized portion thereof, are presented by the Company as a reduction of long-term debt. Such fees are deferred and amortized to interest and finance costs during the life of the related debt instrument using the effective interest method. Unamortized fees relating to loans repaid or refinanced as debt extinguishments and loan commitment fees are expensed as interest and finance costs in the period incurred in the accompanying statements of comprehensive income. Any unamortized balance of costs relating to refinanced long-term debt is deferred and amortized over the term of the credit facility in the period that such refinancing occurs, subject to the provisions of the accounting guidance prescribed under 470-50, Debt—Modifications and Extinguishments.
Offering costs 
Expenses directly attributable to an equity offering are deferred and set off against the proceeds of the offering within paid-in capital, unless the offering is aborted, in which case they are written-off and charged to earnings.
Earnings/ (losses) per common share
Basic earnings/(losses) per common share are computed by dividing net income available to common stockholders after subtracting the dividends accumulated for the period on cumulative preferred stock (whether or not earned), by the weighted average number of common shares outstanding during the period. Diluted earnings per common share, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised.
Commitments and contingencies
Commitments are recognized when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle this obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the present value of the expenditure expected to be required to settle the obligation. Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable.
F-13

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.
Significant Accounting Policies and Recent Accounting Pronouncements (continued):
Recent Accounting Pronouncements – Adopted
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. The Company adopted this ASU for the reporting period commencing on January 1, 2020 and has adjusted its disclosures accordingly.
Recent Accounting Pronouncements – Not Yet Adopted
The FASB has issued accounting standards that have not yet become effective and may impact the Company’s consolidated financial statements or related disclosures in future periods. These standards and their potential impact are discussed below:
In March 2020, the Financial Standard Board issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”)”. ASU 2020-04 provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to expected market transition from LIBOR and other interbank offered rates to alternative reference rates. This ASU is effective for adoption at any time between March 12, 2020 and December 31, 2022. The Company is currently evaluating the impact of this adoption in its consolidated financial statements and related disclosures.
In August 2020, the Financial Standard Board issued Accounting Standards Update (“ASU”) No. 2020-06 “Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity's Own Equity”, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
F-14

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)


3.
Transactions with Related Parties:
During the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020, the Company incurred the following charges in connection with related party transactions, which are included in the accompanying consolidated statements of comprehensive income/ (loss):
   
Year ended
September 30,
   
Three months ended
December 31,
   
Year ended
December 31,
   
Year ended
December 31,
 
   
2018
   
2018
   
2019
   
2020
 
Management fees-related parties
                       
Management fees – Pavimar (a)
 
$
111,480
   
$
29,440
   
$
212,300
   
$
768,000
 
Management fees – Castor Ships (d)
   
—
     
—
     
—
     
162,500
 
                                 
Included in Voyage expenses
                               
Charter hire commissions (b),(d)
 
$
—
   
$
—
   
$
40,471
   
$
29,769
 
                                 
Included in Interest and finance costs
                               
Interest expenses (c) – Thalassa
 
$
—
   
$
—
   
$
162,500
   
$
305,000
 
                                 
Included in General and administrative expenses
                               
Administration fees  – Castor Ships (d)
 
$
—
   
$
—
   
$
—
   
$
400,000
 
                                 
Included in Vessels’ cost
                               
Sale & purchase commission – Castor Ships (d)
 
$
—
   
$
—
   
$
—
   
$
138,600
 
As of December 31, 2019 and 2020, balances with related parties consisted of the following:

   
December 31,
2019
   
December 31,
2020
 
Assets:
           
Working capital advances granted to Pavimar (a)
 
$
759,386
   
$
1,559,132
 
 
               
Liabilities:
               
Related party debt (c) – Thalassa
 
$
5,000,000
   
$
5,000,000
 
Accrued loan interest (c) – Thalassa
   
100,000
     
405,000
 
Voyage Commissions due to Castor Ships (d)
   
—
     
1,941
 



F-15
CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

3.
Transactions with Related Parties (continued):
(a)  Pavimar:
Each of the Company’s ship-owning subsidiaries have entered into separate vessel management agreements with Pavimar, a company controlled by Ismini Panagiotidis, the sister of Petros Panagiotidis (see Note 1). Pursuant to the terms of the management agreements, Pavimar provides the Company with a wide range of shipping services, including crew management, technical management, operational employment management, insurance arrangements, provisioning, bunkering, vessel accounting and audit support services, in exchange for a daily fee. Since November 13, 2017 and up to December 31, 2019, the daily management fee of the sole vessel in the Company’s fleet at that time, the Magic P, was set at $320. The daily management fee on the Magic Sun and Magic Moon was set at $500 from their delivery date onwards. On January 1, 2020, the Magic P daily management fee was aligned via an amendment to its management agreement with that of the remaining fleet, and, as a result, up to August 31, 2020, all the Company’s vessels were charged with a daily management fee of $500 per day per vessel.
On September 1, 2020, the Company’s then shipowning subsidiaries entered into revised shipmanagement agreements with Pavimar which replaced the then existing shipmanagement agreements in their entirety (the “Technical Management Agreements”). Pursuant to the Technical Management Agreements, effective September 1, 2020, Pavimar provides the Company’s shipowning subsidiaries with the range of technical, crewing, insurance and operational services stipulated in the previous agreements in exchange for which Pavimar is now paid a daily fee of $600 per vessel, which shall be also subject to an annual review on their anniversary date. The Technical Management Agreements have a term of five years and such term automatically renews for a successive five-year term on each anniversary of their effective date, unless the agreements are terminated earlier in accordance with the provisions contained therein. In the event that the Technical Management Agreements are terminated by the ship-owning subsidiaries other than by reason of default by Pavimar, a termination fee equal to four times the total amount of the daily management fee calculated on an annual basis shall be payable from the ship-owning subsidiaries to Pavimar.
Pavimar has subcontracted the technical management of the Magic Nova to a third-party ship-management company, Fleet Ship Management Inc. (“Fleet Ship”). Fleet Ship provides technical management to the Magic Nova for a fixed annual fee which is paid by Pavimar at its own expense. The subcontract services provided by Fleet Ship to Pavimar have a minimum term of six months following delivery of the Magic Nova to the Company and may be terminated at any time thereafter.
During the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020, the Company incurred management fees under the Technical Management Agreements amounting to $111,480, $29,440, $212,300 and $768,000, respectively, which are included in Management fees to related parties in the accompanying consolidated statements of comprehensive income/(loss).
In addition, each month Pavimar makes payments for operating expenses with funds provided in advance by the Company. As of December 31, 2019 and 2020, amounts of $759,386 and $1,559,132 respectively, were due from Pavimar in relation to these working capital advances granted to it.
 (b) Alexandria Enterprises S.A:
During the year ended December 31, 2019, the Company used on a non-recurring basis the commercial services of Alexandria Enterprises S.A., (“Alexandria”) an entity controlled by a family member of the Company’s Chairman, Chief Executive Officer and Chief Financial Officer. In exchange for these services, Alexandria charged the Company a commission rate equal to 1.25% of the gross charter hire, freight and the ballast bonus earned under a charter agreement.
Commissions charged by Alexandria during the year ended December 31, 2019 amounted to $40,471 and are included in Voyage expenses in the accompanying consolidated statements of comprehensive income/(loss). The Company has stopped using the commercial services of Alexandria since January 1, 2020, and, accordingly, no relevant charges exist for the year ended December 31, 2020. As of December 31, 2019 and 2020, no amounts were due to Alexandria.

F-16

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)
3.
Transactions with Related Parties (continued):
(c) Thalassa:
$5.0 Million Term Loan Facility
On August 30, 2019, the Company entered into a $5.0 million unsecured term loan with Thalassa, the proceeds of which were used to partly finance the acquisition of the Magic Sun (the “$5.0 Million Term Loan Facility”) (Note 5). The Company drew down the entire loan amount on September 3, 2019.  The $5.0 Million Term Loan Facility bears a fixed interest rate of 6% per annum and has a bullet repayment on March 3, 2021, a date which is eighteen (18) months after the drawdown date. The $5.0 Million Term Loan Facility may be prepaid in whole or in part at any time prior to its maturity, at the Company’s option.
The $5.0 Million Term Loan Facility contains event of default provisions and covenants customary for unsecured facilities of this type, including, but not limited to, failure to pay, bankruptcy and insolvency, material litigation, change of business, as further set forth in the provisions of the $5.0 Million Term Loan Facility. The $5.0 Million Term Loan Facility does not impose any financial covenant requirements or other minimum liquidity restrictions on the Company. During the years ended December 31, 2019 and 2020, the Company incurred interest costs in connection with the $5.0 Million Term Loan Facility amounting to $100,000 and $305,000, respectively, which are included in Interest and finance costs in the accompanying consolidated statements of comprehensive income/(loss).
As of December 31, 2020, no amounts were prepaid under the $5.0 Million Term Loan Facility.
(d) Castor Ships:
On September 1, 2020, the Company and its shipowning subsidiaries entered into a master management agreement (the “Master Agreement”) with Castor Ships. Pursuant to the terms of the Master Agreement each of the Company’s shipowning subsidiaries also entered into separate commercial shipmanagement agreements with Castor Ships (the “Commercial Shipmanagement Agreements” and together with the Master Agreement, the “Castor Ships Management Agreements”. Under the terms of the Castor Ships Management Agreements, Castor Ships manages overall the Company’s business and provides commercial, chartering and administrative services, including, but not limited to, securing employment for the Company’s fleet, arranging and supervising the vessels’ commercial operations, handling all the Company’s vessel sale and purchase transactions, undertaking related shipping project and management advisory and support services, as well as other associated services requested from time to time by the Company and its shipowning subsidiaries. In exchange for these services, the Company and its subsidiaries pay Castor Ships (i) a flat quarterly management fee in the amount of $0.3 million for the management and administration of the Company’s business, (ii) a daily fee of $250 per vessel for the provision of the services under the Commercial Shipmanagement Agreements, (iii) a commission rate of 1.25% on all charter agreements arranged by Castor Ships and (iv) a commission of 1% on each vessel sale and purchase transaction.
The Castor Ships Management Agreements have a term of five years and such term automatically renews for a successive five-year term on each anniversary of the effective date, unless the agreements are terminated earlier in accordance with the provisions contained therein. In the event that the Castor Ships Management Agreements are terminated by the Company, or are terminated by Castor Ships due to a material breach of the Master Agreement by the Company or a change of control in the Company, Castor Ships shall be entitled to a termination fee equal to four times the total amount of the flat management fee and the per vessel management fees calculated on an annual basis. The Commercial Shipmanagement Agreements also provide that the management fees shall be subject to an annual review on their anniversary.
During the year ended December 31, 2020, the Company incurred (i) management fees amounting to $400,000 for the management and administration of the Company’s business, which are included in General and administrative expenses in the accompanying consolidated statements of comprehensive income/(loss), (ii) management fees amounting to $162,500 for the provision of the services under the Commercial Shipmanagement Agreements which are included in Management fees to related parties in the accompanying consolidated statements of comprehensive income/(loss), (iii) charter hire commissions amounting to $29,769 which are included in Voyage expenses in the accompanying consolidated statements of comprehensive income/(loss) and (iv) sale and purchase commission amounting to $138,600 which is included in Vessels, net in the accompanying consolidated balance sheet.
F-17

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)
4.
Deferred charges, net:
The movement in deferred dry-docking costs, net in the accompanying consolidated balance sheets, is as follows:
   
Dry-docking costs
 
Balance September 30, 2018
 
$
443,394
 
Amortization
   
(102,324
)
Balance December 31, 2018
 
$
341,070
 
Amortization
   
(341,070
)
Balance December 31, 2019
 
$
—
 
Additions
   
2,216,102
 
Amortization
   
(154,529
)
Balance December 31, 2020
 
$
2,061,573
 

On February 14, 2020, the Magic P commenced its scheduled dry-dock which was completed on March 21, 2020 and, on November 20, 2020 the Magic Sun commenced its scheduled dry-dock which was completed on December 24, 2020. The Magic Moon was undergoing dry-dock as of December 31, 2020. Amortization of deferred dry-docking costs is included in Depreciation and amortization in the accompanying consolidated statements of comprehensive income/(loss).
5.
Vessels, net:
The amounts in the accompanying consolidated balance sheets are analyzed as follows:
   
Vessel Cost
   
Accumulated depreciation
   
Net Book Value
 
Balance September 30, 2018
 
$
7,549,281
   
$
(478,877
)
 
$
7,070,404
 
—Period depreciation
   
—
     
(75,054
)
   
(75,054
)
Balance December 31, 2018
 
$
7,549,281
   
$
(553,931
)
 
$
6,995,350
 
— Acquisitions
   
17,260,780
     
—
     
17,260,780
 
—Yearly depreciation
   
—
     
(556,101
)
   
(556,101
)
Balance December 31, 2019
 
$
24,810,061
   
$
(1,110,032
)
 
$
23,700,029
 
— Acquisitions and other improvements to fleet vessels
   
36,096,033
     
—
     
36,096,033
 
—Yearly depreciation
   
—
     
(1,750,434
)
   
(1,750,434
)
Balance December 31, 2020
   
60,906,094
     
(2,860,466
)
   
58,045,628
 
Vessel Acquisitions and other Capital Expenditures:
On August 8, 2020, pursuant to an agreement entered into on June 30, 2020 with an unaffiliated third party, the Company took delivery of its fourth Panamax dry bulk carrier vessel, the Magic Rainbow, which it acquired for a cash consideration of $7.85 million, excluding acquisition costs.
On October 9, 2020, pursuant to an agreement entered into on July 28, 2020 with an unaffiliated third party, the Company took delivery of its fifth Panamax dry bulk carrier vessel, the Magic Horizon, which it acquired for a cash consideration of $12.75 million, excluding acquisition costs.
On October 15, 2020, pursuant to an agreement entered into on September 28, 2020 with an unaffiliated third party, the Company took delivery of its sixth Panamax dry bulk carrier vessel, the Magic Nova, which it acquired for a cash consideration of $13.86 million, excluding acquisition costs.
During the year ended December 31, 2020, the Company completed the partial installation on the Magic P and the complete installation on the Magic Sun of a ballast water management system (“BWMS”) for which it incurred aggregated capitalized expenditures amounting approximately to $1.0 million (Note 9(a)).
F-18

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

5.
Vessels, net (continued):
As of December 31, 2020, three out of the six vessels in the Company’s fleet having an aggregate carrying value of $23,393,835 were first priority mortgaged as collateral to their loan facilities (Note 6).
6.
Long-Term Debt:
The amount of long-term debt (including related party debt discussed under Note 3) shown in the accompanying consolidated balance sheet of December 31, 2020, is analyzed as follows:
     
Year Ended
 
Loan facilities
Borrowers- Issuers
 
December 31, 2019
   
December 31, 2020
 
$11.0 Million Alpha Bank Facility (a)
Spetses- Pikachu
 
$
11,000,000
   
$
9,400,000
 
$4.5 Million Chailease Financial Services Facility (b)
Bistro
   
—
     
4,050,000
 
Total long-term debt
   
$
11,000,000
   
$
13,450,000
 
Less: Deferred financing costs
     
(242,940
)
   
(264,134
)
Total long-term debt, net of deferred finance costs
   
$
10,757,060
     
13,185,866
 
                   
Presented:
                 
Current portion of long-term debt
   
$
1,600,000
   
$
2,200,000
 
Less: Current portion of deferred finance costs
     
(77,105
)
   
(97,963
)
Current portion of long-term debt, net of deferred finance costs
   
$
1,522,895
   
$
2,102,037
 
                   
Non-Current portion of long-term debt
     
9,400,000
     
11,250,000
 
Less: Non-Current portion of deferred finance costs
     
(165,835
)
   
(166,171
)
Non-Current portion of long-term debt, net of deferred finance costs
   
$
9,234,165
   
$
11,083,829
 
                   
Debt instruments from related party
                 
$5.0 Million Term Loan Facility (Note 3(c))
Castor
   
5,000,000
     
5,000,000
 
Total long-term debt from related party
   
$
5,000,000
   
$
5,000,000
 
a.
$11.0 Million Alpha Bank Facility:
On November 22, 2019, the Company, through two of its wholly-owned subsidiaries owning the Magic P and the Magic Moon (the “Borrowers”), entered into a $11.0 million senior secured term loan facility with Alpha Bank A.E., or the $11.0 Million Alpha Bank Facility. The facility was drawn down on December 2, 2019. The $11.0 Million Alpha Bank Facility has a term of five years from the drawdown date, bears interest at a margin over LIBOR per annum and is repayable in twenty (20) equal quarterly instalments of $400,000 each, plus a balloon instalment payable at maturity, on December 2, 2024. The facility is secured by, including but not limited to, a first preferred mortgage and first priority general assignment covering earnings, insurances and requisition compensation over the vessels owned by the Borrowers, an earnings account pledge, shares security deed relating to the shares of the vessels’ owning subsidiaries, manager’s undertakings and is guaranteed by the Company. The $11.0 Million Alpha Bank Financing net proceeds were partly used by the Company in order to repay the $7.5 Million Bridge Loan on December 6, 2019, whereas, the remainder of the proceeds was used for general corporate purposes including financing vessel acquisitions.
The $11.0 Million Alpha Bank Facility contains certain customary minimum liquidity restrictions and financial covenants that require the Borrowers to:
F-19

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)
6.
Long-Term Debt (continued):

•
maintain minimum free liquidity of at least $250,000 per collateralized vessel (“the Minimum Liquidity Deposit”); and

•
meet a specified minimum security requirement ratio, which is the ratio of the aggregate market value of the mortgaged vessels plus the value of any additional security and the value of the Minimum Liquidity Deposit to the aggregate principal amounts due under the $11.0 Million Alpha Bank Facility;
b.
$4.5 Million Chailease Financial Services Facility:
On January 23, 2020, pursuant to the terms of a credit agreement, the Company, through one of its wholly-owned subsidiaries owning the Magic Sun, entered into a $4.5 million senior secured term loan facility with Chailease International Financial Services Co., Ltd., or the Chailease Financial Services Facility. The loan was drawn down on January 31, 2020, is repayable in twenty (20) equal quarterly installments of $150,000 each, plus a balloon installment payable at maturity and bears interest at a margin over LIBOR per annum. The facility contains a standard security package including a first preferred mortgage on the vessel, pledge of bank account, charter assignment, shares pledge and a general assignment over the vessel's earnings, insurances and any requisition compensation in relation to the vessel owned by the borrower, and is guaranteed by the Company and Pavimar. Pursuant to the terms of the Chailease Financial Services Facility, the Company is also subject to certain minimum liquidity restrictions requiring the borrower to maintain a $400,000 credit balance with the lender (the “Cash Collateral”) as well as certain customary, for this type of facilities, negative covenants. The Company shall, from the first anniversary of the drawdown date, be entitled to withdraw up to $200,000 in aggregate from this balance provided no default has occurred. As a result of the above, the $200,000 of the Cash Collateral was classified in Prepaid expenses and other assets, current in the accompanying consolidated balance sheet with the balance having been classified in Prepaid expenses and other assets, non-current. 
The credit agreement governing the Chailease Financial Services Facility also requires maintenance of a maximum value to loan ratio being the aggregate principal amount of (i) fair market value of the collateral vessel and (ii) the value of any additional security (including the Cash Collateral), to the aggregate principal amount of the loan.
c.
$5.0 Million Convertible Debentures:
On January 27, 2020, the Company entered into a securities purchase agreement with an institutional investor, YAII PN, LTD, or the Investor, pursuant to which, on January 27, 2020, February 10, 2020 and February 19, 2020, the Company issued and sold to the Investor three unsecured convertible debentures that were convertible into shares of the Company’s common stock, in original principal amounts of $2.0 million, $1.5 million and $1.5 million each, respectively (individually, a “Convertible Debenture” and collectively, the “$5.0 Million Convertible Debentures”). The $5.0 Million Convertible Debentures originally matured 12 months from their issuance dates, bore fixed interest at 6% per annum, and were convertible at the Investor’s option, at any time after issuance, into common shares of the Company at the lower of (i) a price of $2.25 per common share or (ii) 90% of the lowest daily volume weighted average price of the common stock during the 10 trading days prior to the conversion date. As of June 8, 2020, the Investor had converted the full principal amount and interest owed with respect to the $5.0 Convertible Debentures aggregating to an amount of $5,057,773 and the Company issued 8,042,078 common shares in settlement thereof.
The Company accounted for the issuance of the convertible debentures in accordance with the BCF guidance in ASC 470-20 and accordingly recognized the BCFs, amounting to $532,437, separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of these features to additional paid-in capital. The intrinsic value of each BCF was calculated at the commitment date as the difference between the conversion price and the fair value of the common stock, multiplied by the number of shares into which the security was convertible. Following the conversions by the Investor of the amounts owed under the $5.0 Million Convertible Debentures, the Company, as of December 31, 2020, recognized all unamortized discounts at the conversion dates as interest expense which are included in Interest and Finance Costs in the accompanying consolidated statements of comprehensive income/(loss).
As of December 31, 2020, the Company was in compliance with all financial covenants prescribed in its debt agreements.
F-20

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)
6.
Long-Term Debt (continued):
Restricted cash as of December 31, 2019 and 2020, includes $500,000 of non-legally restricted cash as per the $11.0 Million Alpha Bank Facility minimum liquidity requirements, or $250,000 per collateralized vessel.
The annual principal payments for the Company’s outstanding debt arrangements as of December 31, 2020 (including related party debt discussed under Note 3), required to be made after the balance sheet date, are as follows:
Year ending December 31,
 
Amount
 
2021
 
$
7,200,000
 
2022
   
2,200,000
 
2023
   
2,200,000
 
2024
   
5,200,000
 
2025
   
1,650,000
 
Total long-term debt (including related party debt)
 
$
18,450,000
 

The weighted average interest rate on the Company’s long-term debt for the years ended December 31, 2019 and 2020 was 5.8% and 5.0% respectively.
Total interest incurred on long-term debt for the years ended December 31, 2019 and 2020, amounted to $210,085 and $1,030,925 respectively, and is included in Interest and finance costs (Note 14) in the accompanying consolidated statements of comprehensive income/(loss).
7.
Equity Capital Structure:
Under the Company's articles of incorporation, the Company's authorized capital stock consists of 2,000,000,000 shares, par value $0.001 per share, of which 1,950,000,000 shares are designated as common shares and 50,000,000 shares are designated as preferred shares.
(a)
Common Shares:
Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding preferred shares, common shareholders are entitled to receive ratably all dividends, if any, declared by the Company's board of directors out of funds legally available for dividends. Upon the Company's dissolution or liquidation or the sale of all or substantially all of its assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, the common shareholders are entitled to receive pro rata the remaining assets available for distribution. Common shareholders do not have conversion, redemption or preemptive rights to subscribe to any of the Company's securities. The rights, preferences and privileges of common shareholders are subject to the rights of the holders of any preferred shares, which the Company has or may issue in the future.
At-the-market common stock offering 
On June 28, 2019, the Company, entered into an equity distribution agreement, or as commonly referred to, an at-the-market offering, with Maxim Group LLC (“Maxim”), under which the Company may sell an aggregate offering price of up to $10,000,000 of its common stock with Maxim acting as a sales agent over a minimum period of 12 months (the “ATM Program”). No warrants, derivatives, or other share classes were associated with this transaction. As of December 31, 2019, the Company had received $2,625,590 gross proceeds under the ATM Program by issuing 618,112 common shares, whereas, the net proceeds under the ATM Program, after deducting sales commissions and other transaction fees and expenses, amounted to $2,319,701. No sales have been effected by the Company in connection with its ATM Program as of December 31, 2020.
F-21

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

7.
Equity Capital Structure (continued):
Issuance of common stock in connection with the $5.0 Million Convertible Debentures
During the period from February 20, 2020 to June 8, 2020, the Company issued 8,042,078 common shares upon the conversion of the $5.0 Million Convertible Debentures in their entirety (see Note 6 for further discussion on this topic).
Underwritten common stock and Class A Warrants follow-on offering
On June 23, 2020, the Company entered into an agreement with Maxim Group LLC, or Maxim, which acted as underwriter, pursuant to which it offered and sold 59,110,000 units, each unit consisting of (i) one common share or a pre-funded warrant to purchase one common share at an exercise price equal to $0.01 per common share (a “Pre-Funded Warrant”), and (ii) one Class A Warrant to purchase one common share (a “Class A Warrant”), for $0.35 per unit (or $0.34 per unit including a pre-funded warrant), or the June Equity Offering. The June Equity Offering, which closed on June 26, 2020, resulted in the issuance of 59,082,686 common shares (the “June Equity Offering Shares”) and 59,110,000 Class A Warrants, which also included 7,710,000 over-allotment units pursuant to an over-allotment option that was exercised by Maxim on June 24, 2020. The Company raised gross and net cash proceeds from this transaction of $20.7 million and $18.6 million, respectively.
The Class A Warrants issued in the June Equity Offering have a term of five years and are exercisable immediately and throughout their term for $0.35 per common share (American style option). The exercise price of the Class A Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common shares and also upon any distributions of assets, including cash, stock or other property to existing shareholders.
Between their issuance date, being June 26, 2020 and December 31, 2020, there were exercises of 3,019,500 Class A Warrants pursuant to which the Company received proceeds of $1,056,825, and, as a result, as of December 31, 2020, 56,090,500 Class A Warrants remained unexercised and potentially issuable into common stock of the Company.
The Company accounted for the Class A Warrants as equity in accordance with the accounting guidance under ASC 815-40. The accounting guidance provides a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition of a derivative if the contract is both (i) indexed to the entity's own stock and (ii) meets the equity classifications conditions. The Company concluded these warrants were equity-classified since they contained no provisions which would require the Company to account for the warrants as a derivative liability, and therefore were initially measured at fair value in permanent equity with subsequent changes in fair value not measured.
On initial recognition the fair value of the Class A Warrants was $22.4 million and was determined using the Black-Scholes methodology. The fair value was considered by the Company to be classified as Level 3 in the fair value hierarchy since it was derived by unobservable inputs. The major unobservable input in connection with the valuation of the Class A Warrants was the volatility used in the valuation model, which was approximated by using historical observations of the Company’s share price. The annualized historical volatility that has been applied in the Class A Warrants valuation was 153.5%. A 5% increase in the volatility applied would have led to an increase of 1.4% in the fair value of the Class A Warrants.
First Registered Direct Equity Offering
On July 12, 2020, the Company entered into agreements with certain unaffiliated institutional investors pursuant to which it offered and sold 57,750,000 common shares in a registered offering or the July Equity Offering. In a concurrent private placement, the Company also issued warrants to purchase up to 57,750,000 common shares (the “Private Placement Warrants”). In connection with the July Equity Offering, which closed on July 15, 2020, the Company received gross and net cash proceeds of approximately $17.3 million and $15.7 million, respectively.
F-22

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

7.
Equity Capital Structure (continued):
The Private Placement Warrants issued in the July Equity Offering have a term of five years and are exercisable immediately and throughout their term for $0.35 per common share (American style option). The exercise price of the Private Placement Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common shares and also upon any distributions of assets, including cash, stock or other property to existing shareholders.
Between their issuance date, being July 15, 2020 and December 31, 2020, there were no exercises of Private Placement Warrants and, as a result, as of December 31, 2020, 57,750,000 Private Placement Warrants remained unexercised and potentially issuable into common stock of the Company.
The Company accounted for the Private Placement Warrants as equity in accordance with the accounting guidance under ASC 815-40. The accounting guidance provides a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition of a derivative if the contract is both (i) indexed to the entity's own stock and (ii) meets the equity classifications conditions. The Company concluded these warrants were equity-classified since they contained no provisions which would require the Company to account for the warrants as a derivative liability, and therefore were initially measured at fair value in permanent equity with subsequent changes in fair value not measured.
On initial recognition the fair value of the Private Placement Warrants was $13.2 million and was determined using the Black-Scholes methodology. The fair value was considered by the Company to be classified as Level 3 in the fair value hierarchy since it was derived by unobservable inputs. The major unobservable input in connection with the valuation of the Private Placement Warrants was the volatility used in the valuation model, which was approximated by using historical observations of the Company’s share price. The annualized historical volatility that has been applied in the Private Placement Warrants valuation was 153.2%. A 5% increase in the volatility applied would have led to an increase of 1.9% in the fair value of the Private Placement Warrants.
Nasdaq Listing Standards Compliance
On April 14, 2020, the Company received written notification from the Nasdaq Stock Market that it was not in compliance with the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq Capital Market and was initially provided with 180 calendar days, or until October 12, 2020, to regain compliance with the subject requirement. On April 20, 2020, the Nasdaq Stock Market informed the Company that due to the COVID-19 crisis, temporary relief has been granted related to minimum listing bid price requirements and the Company’s compliance period would be suspended until June 30, 2020, thus extending the period to regain compliance to December 28, 2020. On December 30, 2020, the Company announced that it received a notification letter from the Nasdaq Stock Market (“Nasdaq”) granting the Company an additional 180-day extension, or until June 28, 2021, to regain compliance with Nasdaq’s minimum bid price requirement.
(b)
Preferred Shares:
The table below presents a summary of all series of preferred shares outstanding as of December 31, 2019 and 2020:
Series
Description
Initial Issuance Date
Total Shares Outstanding
Liquidation Preference per Share   (in dollars)
Par Value
Dividend Rate
Carrying Value December 31, 2019 and 2020
Series A
9.75% Cumulative
Perpetual Redeemable
09/22/17
480,000
$30 (1)
$480
Effective January 1, 2022- 9.75% per annum of a value of $25 per share
$2,627,843
Series B
n/a
09/22/17
12,000
-
$12
n/a
$12
Total
   
492,000
 
$492
 
$2,627,855

(1)
The Series A Preferred Shares from their original issue date and up to the Series A Amended SOD date had a liquidation preference of $25 per share. Following the Series A Amended SOD, the liquidation preference on the Series A Preferred Shares increased from $25 to $30 per share.


F-23


 
CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

7.
Equity Capital Structure (continued):
Series A Preferred Shares amendment and accumulated dividends settlement:
On October 10, 2019, the Company reached an agreement with the holders of its Series A Preferred Shares to settle in full all accumulated dividend obligations on the Series A Preferred Shares (the “Series A Dividends Settlement Agreement”) and to simultaneously adopt an Amended and Restated Statements of Designations of its Series A Preferred Shares (the  “Series A Amended SOD”). Pursuant to the Series A Dividends Settlement Agreement, the Series A Preferred holders agreed to forgive the Company’s obligations related to all due and overdue accumulated dividends on the Series A Preferred shares during the period from their original issue date up to and including June 30, 2019, amounting to $4.3 million, and to receive, in settlement thereof, 300,000 newly issued common shares, the fair value of which as of the settlement date amounted to $967,800 and was determined through Level 1 input data of the fair value hierarchy, i.e. the common share closing market price at the date of issuance (the “Settlement Shares”). The dividends waived amounted to $3,379,589 and an amount of $1,819,575 was charged against retained earnings and an amount of $1,560,014 in the absence of retained earnings, charged against paid-in-capital. The Settlement Shares were issued to the Series A Preferred holders on October 17, 2019.
In addition, in accordance with the terms of the Series A Amended SOD, the Company and the Series A Preferred holders mutually agreed to:

i)
waive all dividend payment obligations on the Series A Preferred Shares during the period from July 1, 2019 until December 31, 2021;

ii)
reduce the previous progressively increasing dividend payment default rate that was 1.30 times the rate payable on the Series A Preferred Shares on the date preceding such payment to a fixed dividend payment default rate that is 1.30 times the base dividend payment rate;

iii)
increase the redemption price of the Series A Preferred Shares to $30 from $25 per share in case that the Company exercises its current option to redeem the Series A Preferred Shares, in whole or in part, with cash; and

iv)
increase the liquidation preference from $25 to $30 per Series A Preferred Share.
As a result of the foregoing, dividends on the Series A Preferred Shares neither accrue nor accumulate during the period from July 1, 2019 until December 31, 2021 and the Company does not have any dividend priority restrictions to holders of its common shares during this period.
The Company has accounted for the amendment to the rights, preferences and privileges of the Series A Preferred Shares, in accordance with FASB ASC Topic 260-10-S99-2, as an extinguishment of the original preferred stock and the issuance of new preferred stock due to the significance of the modifications to the substantive contractual terms of the preferred stock and the associated fundamental changes to the nature of the preferred stock, which, as discussed above, included the forfeiture of accrued dividends on the Series A Preferred Shares up to and including June 30, 2019 and the issuance of 300,000 common shares in settlement thereof. Accordingly, upon extinguishment, the Company recorded a net gain of $112,637 on the Series A Preferred Stock within shareholders’ equity equal to the difference between the fair value of the new shares of preferred stock issued and the carrying amount of the old shares of preferred stock extinguished. The Company allocated the entire net gain on extinguishment of the Series A Preferred Shares to Additional paid-in capital. The net gain on extinguishment is reflected in the calculation of net income available to common stockholders in accordance with FASB ASC Topic 260, Earnings per Share. The non-recurring fair value of the new Series A Preferred Shares was based on Level 3 hierarchical data using the income approach, which was based on projected cash flows discounted to their present value using a discount rate that considers the timing and risk of the forecasted cash flows. The discount rate used was 16.6% and was based on the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics and is considered an unobservable significant input.
F-24

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

7.
Equity Capital Structure (continued):
As of December 31, 2019 and 2020, there were no accumulated, due or overdue dividends on the Series A Preferred Shares.
Description of Series A Preferred Shares following the Series A Amended SOD:
Dividends on Series A Preferred Shares will be cumulative from January 1, 2022 (or, for any newly issued and outstanding shares, from the dividend payment date immediately preceding the issuance date of such stock and, for shares issued on or before June 14, 2022, then January 1, 2022) and payable on each dividend payment date, which will be each June 15 and December 15, commencing on June 15, 2022, when, as and if declared by Company’s Board of Directors out of legally available funds for such purpose. Dividends on the Series A Preferred Shares will accrue at a rate of 9.75% per annum per Series A Preferred Share having a value of $25 per share. In the event that any semi-annual dividend payable on the Series A Preferred Shares is in arrears, the dividend rate payable on the Series A Preferred Shares shall be increased a single time to a rate of 1.30 times of the dividend rate for each Series A Preferred Share having a value of $25.00 per share until the dividend payment default is cured.
The Series A Preferred Shares rank, with respect to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Company’s affairs, senior to the common shares and the Series B Preferred Shares.
The Series A Preferred Shares do not have a mandatory redemption feature. The Company has the right to redeem the Series A Preferred Shares, in whole or from time to time in part, from any funds available for such purpose, on a date set by the Company. If the Company redeems Series A Preferred Shares with cash then each share of Series A Preferred Shares shall have a value of $30.00 per share, or the Cash Redemption Price. If paid in common shares or a Note, then each Series A Preferred Share shall have a value of $25.00 per share, or the Cashless Redemption Price.  If paid in common shares, the value of the common shares will be 90% of the lowest daily volume weighted average price on any trading day during the 5-consecutive trading day period ending and including the trading day immediately prior to the date of the applicable Redemption Date.
Description of Series B Preferred Shares:
The Series B Preferred Shares have the following characteristics: (i) the Series B Preferred Shares are not convertible into common shares, (ii) each Series B Preferred Share has the voting power of 100,000 common shares and shall count for 100,000 votes for purposes of determining quorum at a meeting of shareholders, (iii) the Series B Preferred Shares have no dividend or distribution rights and (iv) upon any liquidation, dissolution or winding up of the Company, the Series B Preferred Shares shall have the same liquidation rights as the common shares.
8.
Financial Instruments and Fair Value Disclosures:
The principal financial assets of the Company consist of cash at banks, restricted cash, trade accounts receivable and amounts due from related party. The principal financial liabilities of the Company consist of trade accounts payable and long-term debt (including related party debt).
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
◾
Cash and cash equivalents, restricted cash, trade accounts receivable, amounts due from related party and trade accounts payable: The carrying values reported in the accompanying consolidated balance sheets for those financial instruments are reasonable estimates of their fair values due to their short-term maturity nature. Cash and cash equivalents are considered Level 1 items as they represent liquid assets with short term maturities. The carrying value approximates the fair market value for interest bearing cash classified as restricted cash, non-current and is considered Level 1 item of the fair value hierarchy. The carrying value of these instruments is separately reflected in the accompanying consolidated balance sheets. 
F-25


CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

8.
Financial Instruments and Fair Value Disclosures (continued):
◾
Long-term debt: The $11.0 Million Alpha Bank Facility and the Chailease Financial Services Facility discussed in Note 6, have a recorded value which is a reasonable estimate of their fair value due to their variable interest rate and are thus considered Level 2 items in accordance with the fair value hierarchy as LIBOR rates are observable at commonly quoted intervals for the full terms of the loans. The fair value of the fixed interest bearing $5.0 Million Term Loan Facility, discussed in Note 3, determined through Level 2 inputs of the fair value hierarchy (quoted prices for identical or similar assets and liabilities in markets that are not active), approximates its recorded value as of December 31, 2020.
Concentration of credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of the financial institutions in which it places its deposits. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers' financial condition.
9.
Commitments and contingencies:
Various claims, lawsuits, 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.
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. The Company is covered for liabilities associated with the vessels’ actions to the maximum limits as provided by Protection and Indemnity (P&I) Clubs, members of the International Group of P&I Clubs.
(a)
Commitments under Contracts for BWMS Installation
On November 15, 2018, the Company entered into a contract to purchase and install BWMS on its dry bulk carriers, which was further amended on October 20, 2019 and December 8, 2020, to reflect the Company’s vessel acquisitions, as applicable in each period. The Company completed the BWMS installation on the Magic Sun during the vessel’s scheduled dry-docking which took place in the fourth quarter of 2020, whereas, the BWMS system installations on the Magic P and the Magic Moon were granted extensions from the third quarter of 2020 to the third quarter of 2022. It is estimated that the contractual obligations related to these purchases as well as purchases on the Company’s remaining fleet vessels (where not already installed), excluding installation costs, will be approximately €0.7 million (or $0.8 million on the basis of a Euro/US Dollar exchange rate of €1.0000/$1.2271 as of December 31, 2020). These costs will be capitalized and depreciated over the remainder of the life of each vessel. As of December 31, 2020, part of the BWMS equipment for the Magic P had been delivered to the vessel and has, thus, been included in Vessels, net in the accompanying consolidated balance sheet.
(b)
Commitments under long-term lease contracts

F-26

CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)


9.
Commitments and contingencies (continued):
The Company’s future minimum contracted lease payments (gross of charterers’ commissions), based on vessels’ commitment to non-cancelable time charter contracts (including fixture recaps) as of December 31, 2020, was $6.8 million, all due within the next 12 months. This amount does not include any assumed off-hire days.
10.
Income Taxes:
Castor and its subsidiaries are incorporated under the laws of the Republic of the Marshall Islands and they are not subject to income taxes in the Republic of the Marshall Islands. Castor’s ship-owning subsidiaries are subject to registration and tonnage taxes, which have been included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income/(loss). 
Pursuant to §883 of the Internal Revenue Code of the United States (the "Code"), U.S. source income from the international operation of ships is generally exempt from U.S. Federal income tax on such income if the company meets the following requirements: (a) the company is organized in a foreign country that grants an equivalent exception to corporations organized in the U. S. and (b) either (i) more than 50 percent of the value of the company's stock is owned, directly or indirectly, by individuals who are "residents" of the company's country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the U.S. (the "50% Ownership Test") or (ii) the company's stock is "primarily and regularly traded on an established securities market" in its country of organization, in another country that grants an "equivalent exemption" to U.S. corporations, or in the U.S. (the "Publicly-Traded Test"). Marshall Islands, the jurisdiction where the Company and its ship-owning subsidiaries are incorporated, grants an equivalent exemption to United States corporations. Therefore, the Company is exempt from United States federal income taxation with respect to U.S.-source shipping income if either the 50% Ownership Test or the Publicly-Traded Test is met.
For the year ended December 31, 2020, the Company determined that it did not satisfy the Publicly-Traded Test as a result of its shares not meeting the "regularly traded" requirement as set forth under the regulations. In addition, the Company did not satisfy the 50% Ownership Test as it is unable to substantiate certain requirements regarding the identity of its shareholders. As a result, the Company did not qualify for exemption under §883 of the Code from the 4% U.S. Federal income tax on its U.S. source gross transportation income. U.S. source gross transportation income is defined as 50% of shipping income that is attributable to transportation that begins or ends, but does not both begin and end, in the U.S. Gross transportation income from each voyage is equal to the product of (i) the number of days in each voyage and (ii) the daily charter rate paid to the Company by the charterer.
As a result, U.S. source income taxes of approximately $21,640 were recognized in the accompanying consolidated comprehensive income/(loss) for the year ended December 31, 2020.
11. Earnings/ (Loss) Per Share:
The Company calculates earnings/(loss) per share by dividing net income/(loss) available to common stockholders in each period by the weighted-average number of common shares outstanding during that period, after adjusting for the effect of cumulative dividends on the Series A Preferred Shares, whether or not earned, and only at periods when dividends on the Series A Preferred Shares are contractually allowed to accumulate.   
Diluted earnings/(loss) per share, if applicable, reflects the potential dilution that could occur if potentially dilutive instruments were exercised, resulting in the issuance of additional shares that would then share in the Company’s net income. As of December 31, 2020, securities that could potentially dilute basic loss per share that were excluded from the computation of diluted loss per share, because to do so would have been antidilutive for the period presented, were the incremental shares in connection with the unexercised, as of December 31, 2020, 56,090,500 Class A warrants and the 57,750,000 Private Placement Warrants (Note 7), calculated in accordance with the treasury stock method. The Company had no dilutive instruments in the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the year ended December 31, 2019.
The components of the calculation of basic and diluted net loss per common share in each of the periods comprising the accompanying consolidated statements of comprehensive income/(loss) are as follows:
F-27

 
CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

11.
Earnings/ (Loss) Per Share (continued):

   
Year ended September 30,
   
Three months ended
December 31,
   
Year ended
December 31,
   
Year ended
December 31,
 
   
2018
   
2018
   
2019
   
2020
 
Net income/(loss) and comprehensive income/(loss)
 
$
980,938
   
$
276,442
   
$
1,088,149
   
$
(1,753,533
)
Less: Cumulative dividends on Series A Preferred Shares
   
(1,646,775
)
   
(992,745
)
   
(372,022
)
   
—
 
Plus: Gain on extinguishment of preferred stock pursuant to the Series A Preferred Stock Amendment Agreement, net of expenses
   
—
     
—
     
112,637
     
—
 
Net income/ (loss) and comprehensive income/ (loss) available to common shareholders
   
(665,837
)
   
(716,303
)
   
828,764
     
(1,753,533
)
Weighted average number of common shares outstanding, basic and diluted
   
2,400,000
     
2,400,000
     
2,662,383
     
67,735,195
 
(Loss)/Earnings per common share, basic and diluted
 
$
(0.28
)
 
$
(0.30
)
 
$
0.31
   
$
(0.03
)

12.
Vessel Operating and Voyage Expenses:

The amounts in the accompanying consolidated statements of comprehensive income/(loss) are analyzed as follows:
   
Year ended
September 30,
   
Three months ended December 31,
   
Year ended
December 31,
   
Year ended
December 31,
 
 Vessel Operating Expenses
 
2018
   
2018
   
2019
   
2020
 
Crew & crew related costs
   
983,985
     
239,610
     
1,396,477
     
3,753,578
 
Repairs & maintenance, spares, stores, classification, chemicals & gases, paints, victualling
   
415,306
     
124,354
     
868,915
     
2,314,260
 
Lubricants
   
95,835
     
19,750
     
153,969
     
429,967
 
Insurances
   
133,090
     
31,869
     
189,781
     
507,885
 
Tonnage taxes
   
40,345
     
8,583
     
50,553
     
131,674
 
Other
   
59,209
     
8,378
     
143,296
     
310,075
 
Total Vessel operating expenses
 
$
1,727,770
   
$
432,544
   
$
2,802,991
   
$
7,447,439
 


   
Year ended
September 30,
   
Three months ended December 31,
   
Year ended
December 31,
   
Year ended
December 31,
 
Voyage expenses
 
2018
   
2018
   
2019
   
2020
 
Brokerage commissions
   
90,194
     
14,375
     
87,179
     
188,307
 
Port & other expenses
   
57,042
     
5,181
     
46,100
     
173,645
 
(Gain)/loss on bunkers
   
(109,863
)
   
—
     
127,900
     
222,753
 
Total voyage expenses
 
$
37,373
   
$
19,556
   
$
261,179
   
$
584,705
 

F-28


 
CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

13.
General and Administrative Expenses:
General and administrative expenses include costs in relation to the administration of the Company and its non-recurring public registration costs.
Company Administration Expenses: Company administration expenses are analyzed as follows:

   
Year ended
September 30,
   
Three months ended December 31,
   
Year ended
December 31,
   
Year ended
December 31,
 
   
2018
   
2018
   
2019
   
2020
 
Audit fees
 
$
91,700
   
$
20,000
   
$
119,535
   
$
129,420
 
Chief Executive and Chief Financial Officer and directors’ compensation
   
12,000
     
3,000
     
12,000
     
29,000
 
Other professional fees
   
5,533
     
(46
)
   
247,242
     
572,533
 
Administration fees-related party
   
-
     
-
     
-
     
400,000
 
Total
 
$
109,233
   
$
22,954
   
$
378,777
   
$
1,130,953
 

The Chief Executive Officer and Chief Financial Officer compensation was terminated on October 1, 2020 and, subsequent to this date, all services rendered by the Company’s Chief Executive Officer and Chief Financial Officer are included in its Master Agreement with Castor Ships (see Note 3(d) above).
Public Registration Costs: During the year ended September 30, 2018, the Transition Period ended December 31, 2018 and the years ended December 31, 2019 and 2020, the Company incurred public registration costs of $350,167, $161,116, $132,091 and $0 respectively. Public registration costs relate to the costs incurred by the Company in connection with the Company’s registration and listing of its 2,400,000 issued and outstanding common shares on the Norwegian OTC on December 21, 2018 and the NASDAQ Stock Market on February 11, 2019. Apart from registration and listing costs, public registration costs further include legal, consultancy and other costs incurred in connection with the subject listings.
14.
Interest and Finance Costs:
The amounts in the consolidated balance sheets are analyzed as follows:
   
Year ended
September 30,
   
Three months ended December 31,
   
Year ended
December 31,
   
Year ended
December 31,
 
   
2018
   
2018
   
2019
   
2020
 
Interest on long-term debt
 
$
-
   
$
-
   
$
47,585
   
$
668,152
 
Interest on long-term debt – related party (Note 3 (c))
   
-
     
-
     
162,500
     
305,000
 
Interest on convertible debt – non cash (Note 6)
   
-
     
-
     
-
     
57,773
 
Amortization and write-off of deferred finance charges
   
-
     
-
     
6,628
     
599,087
 
Amortization and write-off of convertible notes beneficial conversion features
   
-
     
-
     
-
     
532,437
 
Other finance charges
   
3,393
     
519
     
5,450
     
27,128
 
Total
 
$
3,393
   
$
519
   
$
222,163
   
$
2,189,577
 

F-29


 
 
CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

15.
Subsequent Events:

(a)  Equity Offerings:
Second Registered Direct Equity Offering: On December 30, 2020, the Company entered into agreements with certain unaffiliated institutional investors pursuant to which it offered and sold 94,750,000 common shares and warrants to purchase 94,750,000 common shares (the “January 5 Warrants”) in a registered direct offering. In connection with this offering, which closed on January 5, 2021, the Company received gross proceeds of approximately $18.0 million.
Third Registered Direct Equity Offering: On January 8, 2021, the Company entered into agreements with certain unaffiliated institutional investors pursuant to which it offered and sold 137,000,000 common shares and warrants to purchase 137,000,000 common shares (the “January 12 Warrants”) in a registered direct offering. In connection with this offering, which closed on January 12, 2021, the Company received gross proceeds of approximately $26.0 million.
(b)  Vessel Acquisitions:
On January 20, 2021, the Company entered into an agreement with an unaffiliated third party for the purchase of the Magic Orion, a secondhand 2006 Japanese-built Capesize dry bulk carrier for a purchase price of $17.5 million. The Magic Orion was delivered to the Company on March 17, 2021 and was financed in its entirety with cash on hand.
On January 28, 2021, the Company entered into an agreement with an unaffiliated third party for the purchase of the Magic Venus, a secondhand 2010 Japanese-built Kamsarmax dry bulk carrier for a purchase price of $15.85 million. The Magic Venus was delivered to the Company on March 2, 2021 and was financed in its entirety with cash on hand.
On February 2, 2021, the Company entered into an agreement with an unaffiliated third party for the purchase of the Magic Argo, a secondhand 2009 Japanese-built Kamsarmax dry bulk carrier for a purchase price of $14.5 million. The Magic Argo was delivered to the Company on March 18, 2021 and was financed in its entirety with cash on hand.
On February 5, 2021, the Company entered into agreements to purchase two 2005 Korean-built Aframax LR2 tankers from an unaffiliated third-party seller for an aggregate purchase price of $27.2 million. Both vessels have attached time charter contracts with a reputable charterer with an estimated remaining term of about one year, each of which shall provide the Company with a minimum gross daily hire of $15,000 and have a 50% profit sharing arrangement over such level based on a predetermined formula. The charterer has the option to extend the duration of each contract for an additional one-year term. The M/T Wonder Polaris and the M/T Wonder Sirius were delivered to the Company on March 11, 2021 and March 22, 2021, respectively. Both acquisitions were financed in their entirety with cash on hand.
On February 18, 2021, the Company entered into an agreement with an unaffiliated third party for the purchase of a secondhand 2010 Korean-built Kamsarmax dry bulk carrier for a purchase price of $14.8 million. The acquisition is expected to be consummated by taking delivery of the vessel sometime in the beginning of the second quarter of 2021 and is expected to be financed in its entirety with cash on hand.
On March 9, 2021, the Company entered into an agreement with an unaffiliated third party for the purchase of a secondhand 2010 Korean-built Kamsarmax dry bulk carrier for a purchase price of $15.5 million. The acquisition is expected to be consummated by taking delivery of the vessel within the second quarter of 2021 and is expected to be financed in its entirety with cash on hand.
On March 11, 2021, the Company entered into an agreement with an unaffiliated third party for the purchase of a secondhand 2011 Japanese-built Kamsarmax dry bulk carrier for a purchase price of $16.9 million. The acquisition is expected to be consummated by taking delivery of the vessel sometime between the second and third quarter of 2021 and is expected to be financed in its entirety with cash on hand.
F-30


CASTOR MARITIME INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars – except for share data unless otherwise stated)

15.
Subsequent Events (continued):

(c)  Entry into $15.3 Million Debt Financing: On January 22, 2021, the Company, through two of its ship-owning subsidiaries, entered into a $15.3 million senior secured post-delivery term loan facility with Hamburg Commercial AG (the “$15.3 Million Hamburg Facility”). The $15.3 Million Hamburg Facility was drawn in full on January 27, 2021. The facility has a tenor of four years from the drawdown date, bears interest at 3.30% plus LIBOR per annum, and is secured by first mortgages on the Magic Horizon and the Magic Nova.
 (d)  $5.0 Million Term Loan Facility Extension: On March 2, 2021, the Company entered into a supplemental agreement pursuant to which it extended its originally maturing on March 3, 2021, $5.0 Million Term Loan Facility for an additional six-month period on terms similar with those of the initial loan agreement.
(e)  Subsequent Warrant Exercises: Subsequent to December 31, 2020 and up to March 25, 2021, there have been exercises of 55,374,200 Class A Warrants, 57,071,360 Private Placement Warrants, 94,750,000 January 5 Warrants and 137,000,000 January 12 Warrants which resulted in the issuance of an equivalent number of the Company’s common shares and proceeds to the Company of approximately $83.4 million.


F-31

Exhibit 2.2

DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

As of the date of the annual report to which this exhibit is being filed, Castor Maritime Inc. (the “Company”) had two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended:


(1)
Common shares, par value $0.001 per share (the “common shares”); and

(2)
Series C Participating Preferred Shares, par value $0.001 per share (the “Series C Preferred Shares”).

The following description sets forth certain material provisions of these securities. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of (i) the Company’s Articles of Incorporation (the “Articles of Incorporation”) and (ii) the Company’s Bylaws (the “Bylaws”), each of which is incorporated by reference as an exhibit to the Annual Report on Form 20-F of which this Exhibit is a part. We encourage you to refer to our Articles of Incorporation and Bylaws for additional information.

DESCRIPTION OF COMMON SHARES

Under our Articles of Incorporation, our authorized capital stock consists of 2,000,000,000 registered shares, of which 1,950,000,000 are designated as common shares, par value $0.001 per share, and 50,000,000 are designated as preferred shares, par value $0.001 per share. Holders of common shares do not have conversion, redemption or pre-emptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares, which we have issued in the past or which we may issue in the future.

Voting Rights

Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Our directors are elected by a plurality of the votes cast by shareholders entitled to vote and serve for three-year terms. There is no provision for cumulative voting.

Dividend Rights

Subject to preferences that may be applicable to any outstanding preferred shares, holders of common shares are entitled to receive ratably all dividends, if any, declared by our Board out of funds legally available for dividends.

Liquidation Rights

Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred shares having liquidation preferences, if any, the holders of our common shares are entitled to receive pro rata our remaining assets available for distribution.

Limitations on Ownership

Under Marshall Islands law generally and our Articles of Incorporation, there are no limitations on the right of non-residents of the Marshall Islands or owners who are not citizens of the Marshall Islands to hold or vote our common shares.

DESCRIPTION OF SERIES C PREFERRED SHARES

Preferred Shares

Our articles of incorporation authorize our Board to establish one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:


●
the designation of the series;


●
the number of shares of the series;


●
the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series; and


●
the voting rights, if any, of the holders of the series.

Stockholders Rights Agreement

On November 21, 2017, our Board declared a dividend of one preferred share purchase right, or a Right, for each outstanding common share and adopted a shareholder rights plan, as set forth in the Stockholders Rights Agreement dated as of November 20, 2017, or the Rights Agreement, by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.

The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board. If a shareholder’s beneficial ownership of our common shares as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold, that shareholder’s then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 1% or more.  Our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, is exempt from these provisions.

The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business combination approved by our Board.

For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which is an exhibit to this annual report.  The foregoing description of the Rights Agreement is qualified in its entirety by reference to such exhibit.

The Rights. The Rights trade with, and are inseparable from, our common shares. The Rights are evidenced only by certificates that represent our common shares. New Rights will accompany any new common shares of the Company issued after November 21, 2017 until the Distribution Date described below.

Exercise Price. Each Right allows its holder to purchase from the Company one one-thousandth of a share of Series C Participating Preferred Stock, or a Series C Preferred Share, for $15.00, or the Exercise Price, once the Rights become exercisable. This portion of a Series C Preferred Share will give the shareholder approximately the same dividend, voting and liquidation rights as would one common share. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.


Exercisability. The Rights are not exercisable until 10 days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownership of 15% or more of our outstanding common shares.  Except our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, is exempt from being the “Acquiring Person”.

Certain synthetic interests in securities created by derivative positions — whether or not such interests are considered to be ownership of the underlying common shares or are reportable for purposes of Regulation 13D of the Securities Exchange Act of 1934, as amended— are treated as beneficial ownership of the number of our common shares equivalent to the economic exposure created by the derivative position, to the extent our actual common shares are directly or indirectly held by counterparties to the derivatives contracts. Swaps dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.

For persons who, prior to the time of public announcement of the Rights Agreement, beneficially own 15% or more of our outstanding common shares, the Rights Agreement “grandfathers” their current level of ownership, so long as they do not purchase additional shares in excess of certain limitations.

The date when the Rights become exercisable is the “Distribution Date”. Until that date, our common share certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) will also evidence the Rights, and any transfer of our common shares will constitute a transfer of Rights. After that date, the Rights will separate from our common shares and will be evidenced by book-entry credits or by Rights certificates that the Company will mail to all eligible holders of our common shares. Any Rights held by an Acquiring Person are null and void and may not be exercised.

Series C Preferred Share Provisions

Each one one-thousandth of a Series C Preferred Share, if issued, will, among other things:


●
not be redeemable;


●
entitle holders to quarterly dividend payments in an amount per share equal to the aggregate per share amount of all cash dividends, and the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in our common shares or a subdivision of our outstanding common shares (by reclassification or otherwise), declared on our common shares since the immediately preceding quarterly dividend payment date; and


●
entitle holders to one vote on all matters submitted to a vote of the shareholders of the Company.

The value of one one-thousandth interest in a Series C Preferred Share should approximate the value of one common share.

Consequences of a Person or Group Becoming an Acquiring Person.

Flip In.  If an Acquiring Person obtains beneficial ownership of 15% or more of our common shares, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares (or, in certain circumstances, cash, property or other securities of the Company) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described below.

Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.


Flip Over. If, after an Acquiring Person obtains 15% or more of our common shares, (i) the Company merges into another entity; (ii) an acquiring entity merges into the Company; or (iii) the Company sells or transfers 50% or more of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares of the person engaging in the transaction having a then-current market value of twice the Exercise Price.

Notional Shares. Shares held by affiliates and associates of an Acquiring Person, including certain entities in which the Acquiring Person beneficially owns a majority of the equity securities, and Notional Common Shares (as defined in the Rights Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.

Redemption. The Board may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If the Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of the Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if the Company has a stock dividend or a stock split.

Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common shares, the Board may extinguish the Rights by exchanging one common share or an equivalent security for each Right, other than Rights held by the Acquiring Person. In certain circumstances, the Company may elect to exchange the Rights for cash or other securities of the Company having a value approximately equal to one common share.

Expiration. The Rights expire on the earliest of (i) November 21, 2027, or (ii) the redemption or exchange of the Rights as described above.

Anti-Dilution Provisions. The Board may adjust the purchase price of the Series C Preferred Shares, the number of Series C Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Series C Preferred Shares or our common shares. No adjustments to the Exercise Price of less than 1% will be made.

Amendments. The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights, with certain exceptions, in order to (i) cure any ambiguities; (ii) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with any other provision therein; (iii) shorten or lengthen any time period pursuant to the Rights Agreement; or (iv) make changes that do not adversely affect the interests of holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).

Taxes. The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, shareholders may recognize taxable income.

Marshall Islands Company Considerations

Our corporate affairs are governed by our Articles of Incorporation and Bylaws and by the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. While the BCA also provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as courts in the United States. As a result, you may have more difficulty protecting your interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a substantial body of case law. The following table provides a comparison between the statutory provisions of the BCA and the General Corporation Law of the State of Delaware relating to shareholders’ rights.


Marshall Islands
 
Delaware
Shareholder Meetings
Held at a time and place as designated in the bylaws.
 
May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the board of directors.
   
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the articles of incorporation or by the bylaws.
 
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.
   
May be held within or without the Marshall Islands.
 
May be held within or without Delaware.
   
Notice:
 
Notice:
   
Whenever shareholders are required to take any action at a meeting, written notice of the meeting shall be given which shall state the place, date and hour of the meeting and, unless it is an annual meeting, indicate that it is being issued by or at the direction of the person calling the meeting. Notice of a special meeting shall also state the purpose for which the meeting is called.
 
Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any.
   
A copy of the notice of any meeting shall be given personally, sent by mail or by electronic mail not less than 15 nor more than 60 days before the meeting.
 
Written notice shall be given not less than 10 nor more than 60 days before the meeting.
 
Shareholders’ Voting Rights
Unless otherwise provided in the articles of incorporation, any action required to be taken at a meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all the shareholders entitled to vote with respect to the subject matter thereof, or if the articles of incorporation so provide, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
Any action required to be taken at a meeting of shareholders may be taken without a meeting if a consent for such action is in writing and is signed by shareholders having not fewer than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
 
 
 
   
Any person authorized to vote may authorize another person or persons to act for him by proxy.
 
Any person authorized to vote may authorize another person or persons to act for him by proxy.
 
Unless otherwise provided in the articles of incorporation or bylaws, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting.
 
For stock corporations, the certificate of incorporation or bylaws may specify the number of shares required to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.
   
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
 
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
   
The articles of incorporation may provide for cumulative voting in the election of directors.
 
The certificate of incorporation may provide for cumulative voting in the election of directors.
 

Merger or Consolidation
Any two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority vote of the holders of outstanding shares at a shareholder meeting.
 
Any two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution and upon the majority vote by shareholders of each constituent corporation at an annual or special meeting.
   
Any sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation’s usual or regular course of business, once approved by the board, shall be authorized by the affirmative vote of two-thirds of the shares of those entitled to vote at a shareholder meeting.
 
Every corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as its board deems expedient and for the best interests of the corporation when so authorized by a resolution adopted by the holders of a majority of the outstanding stock of the corporation entitled to vote.
   
Any domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge such other corporation into itself without the authorization of the shareholders of any corporation.
 
Any corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation into itself and assume all of its obligations without the vote or consent of shareholders; however, in case the parent corporation is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent corporation entitled to vote at a duly called shareholder meeting.
   
Any mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without the vote or consent of the shareholders, unless otherwise provided for in the articles of incorporation.
 
Any mortgage or pledge of a corporation’s property and assets may be authorized without the vote or consent of shareholders, except to the extent that the certificate of incorporation otherwise provides.
 
Directors
The board of directors must consist of at least one member.
 
The board of directors must consist of at least one member.
   
The number of board members may be changed by an amendment to the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw.
 
The number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by an amendment to the certificate of incorporation.
     
If the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long as no decrease in the number shall shorten the term of any incumbent director.
 
If the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment of the certificate.
   
Removal:
 
Removal:
     
Any or all of the directors may be removed for cause by vote of the shareholders.
 
Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote unless the certificate of incorporation otherwise provides.
   
If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the shareholders.
 
In the case of a classified board, shareholders may effect removal of any or all directors only for cause.
 

Dissenters’ Rights of Appraisal
Shareholders have a right to dissent from any plan of merger, consolidation or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their shares. However, the right of a dissenting shareholder under the BCA to receive payment of the appraised fair value of his shares shall not be available for the shares of any class or series of stock, which shares or depository receipts in respect thereof, at the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of the shareholders to act upon the agreement of merger or consolidation, were either (i) listed on a securities exchange or admitted for trading on an interdealer quotation system or (ii) held of record by more than 2,000 holders. The right of a dissenting shareholder to receive payment of the fair value of his or her shares shall not be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the shareholders of the surviving corporation.
 
Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, subject to limited exceptions, such as a merger or consolidation of corporations listed on a national securities exchange in which listed stock is offered for consideration is (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders.
   
A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:
   
   
• Alters or abolishes any preferential right of any outstanding shares having preference; or
   
   
• Creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or
   
   
• Alters or abolishes any preemptive right of such holder to acquire shares or other securities; or
   
   
• Excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class.
   
 
Shareholder’s Derivative Actions
An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law.
 
In any derivative suit instituted by a shareholder of a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such shareholder’s stock thereafter devolved upon such shareholder by operation of law.
   
A complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.
 
Other requirements regarding derivative suits have been created by judicial decision, including that a shareholder may not bring a derivative suit unless he or she first demands that the corporation sue on its own behalf and that demand is refused (unless it is shown that such demand would have been futile).
   
Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic of the Marshall Islands.
   
   
Reasonable expenses including attorney’s fees may be awarded if the action is successful.
   
   
A corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of outstanding shares or holds voting trust certificates or a beneficial interest in shares representing less than 5% of any class of such shares and the shares, voting trust certificates or beneficial interest of such plaintiff has a fair value of $50,000 or less.
   

Exhibit 4.15
Dated 22 January 2021
POCAHONTAS SHIPPING CO.
and
JUMARU SHIPPING CO.
as joint and several Borrowers

THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 1
as Lenders
and
HAMBURG COMMERCIAL BANK AG
as Agent, Mandated Lead Arranger
and Security Trustee
LOAN AGREEMENT
relating to
a senior secured post-delivery term loan facility of up to US$15,290,000
to provide finance secured on
two bulk carrier vessels named "MAGIC HORIZON" and "MAGIC NOVA"
Index
Clause
Page
     
1
Interpretation
1
2
Facility
23
3
Position of the Lenders
23
4
Drawdown
24
5
Interest
25
6
Interest Periods
27
7
Default Interest
28
8
Repayment and Prepayment
29
9
Conditions Precedent
32
10
Representations and Warranties
33
11
General Undertakings
37
12
Corporate Undertakings
44
13
Insurance
45
14
Ship Covenants
52
15
Security Cover
58
16
Payments and Calculations
60
17
Application of Receipts
62
18
Application of Earnings
63
19
Events of Default
65
20
Fees and Expenses
70
21
Indemnities
72
22
No Set-Off or Tax Deduction
75
23
Illegality, etc.
77
24
Increased Costs
78
25
Set-Off
80
26
Transfers and Changes in Lending Offices
80
27
Variations and Waivers
86
28
Notices
88
29
Joint and Several Liability
91
30
Supplemental
92
31
Bail-In
92
32
Law and Jurisdiction
93

Schedules

Schedule 1 Lenders and Commitments
94
Schedule 2 Drawdown Notice
95
Schedule 3 Condition Precedent Documents
96
Part A
96
Part B
98
Schedule 4 Mandatory Cost Formula
100
Schedule 5 Transfer Certificate
102
Schedule 6 Power of Attorney
106
Schedule 7 Form of Compliance Certificate
107

Execution

Execution Pages
108

THIS AGREEMENT is made on 22 January 2021
BETWEEN
(1)
POCAHONTAS SHIPPING CO. and JUMARU SHIPPING CO., each a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, as joint and several Borrowers;
(2)
THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;
(3)
HAMBURG COMMERCIAL BANK AG acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, as Agent;
(4)
HAMBURG COMMERCIAL BANK AG acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, as Mandated Lead Arranger;
(5)
HAMBURG COMMERCIAL BANK AG acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, as Security Trustee.
BACKGROUND
(A)
The Lenders have agreed to make available to the Borrowers a secured post-delivery term loan facility of up to US$15,290,000 in two advances as follows:

(i)
an advance in an amount of up to the lesser of (AA) US$7,645,000 and (BB) 55 per cent. of the Initial Market Value of Ship A; and

(ii)
an advance in an amount of up to the lesser of (AA) US$7,645,000 and (BB) 55 per cent. of the Initial Market Value of Ship B,
for the purpose of partly financing the Ships' Initial Market Value (as defined below).
IT IS AGREED as follows:
1
INTERPRETATION
1.1
Definitions
Subject to Clause 1.5, in this Agreement:
"Account" means each of the Earnings Accounts, each of the Liquidity Accounts, the Dry Dock Reserve Account and the Retention Account and, in the plural, means all of them.
"Account Bank" means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, or any successor.
"Account Pledge" means, in relation to each Account, a pledge agreement creating security in respect of that Account in the Agreed Form and, in the plural, means all of them.
"Advance" means each of Advance A and Advance B and, in the plural, means both of them.

"Advance A" means the principal amount of the borrowing by the Borrowers under this Agreement in respect of Ship A or, as the context may require, the principal amount outstanding of such Advance in respect of that Ship under this Agreement.
"Advance B" means the principal amount of the borrowing by the Borrowers under this Agreement in respect of Ship B or, as the context may require, the principal amount outstanding of such Advance in respect of that Ship under this Agreement.
"Affected Lender" has the meaning given in Clause 5.7.
"Agency and Trust Agreement" means the agency and trust agreement executed or to be executed between the Borrowers and the Creditor Parties in the Agreed Form.
"Agent" means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Agreement.
"Aggregate Insurable Amount" has the meaning given to it in Clause 13.16.
"Agreed Form" means in relation to any document, that document in the form approved in writing by the Agent (acting on the instructions of the Majority Lenders) or as otherwise approved in accordance with any other approval procedure specified in any relevant provisions of any Finance Document.
"Applicable Lender" has the meaning given in Clause 5.2.
"Approved Broker" means each of Arrow, Clarksons, Maersk Brokers and Howe Robinson (or any affiliate of such person through which valuations are commonly issued) and, in the plural, means all of them.
"Approved Flag" means, in relation to a Ship, the Republic of the Marshall Islands flag or such other flag as the Agent may approve (in its sole and absolute discretion) as the flag on which that Ship is or, as the case may be, shall be registered.
"Approved Flag State" means, in relation to a Ship, the Republic of the Marshall Islands or any other country in which the Agent may approve that that Ship is or, as the case may be, shall be registered.
"Approved Manager" means, in respect of a Ship:

(a)
Pavimar S.A. a corporation incorporated and existing in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;

(b)
Castor Ships;

(c)
Fleet Ship Management Inc., a company incorporated and existing in the British Virgin Islands, whose registered address is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands;

(d)
Fleet Management Ltd., a company incorporated and existing in Hong Kong whose registered office is at 27th Floor, South Island Place, 8 Wong Chuk Hang Road, Hong Kong;
2


(e)
or any other company which the Agent (acting on the instructions of the Majority Lenders) may approve from time to time as the commercial and/or technical manager of that Ship.
"Approved Manager's Undertaking" means, in relation to each Ship, a letter of undertaking including, inter alia, an assignment of each Approved Manager's rights, title and interest in the Insurances of that Ship executed or to be executed by that Approved Manager in favour of the Security Trustee in the Agreed Form agreeing certain matters in relation to that Approved Manager serving as manager of that Ship and subordinating its rights against that Ship and the Borrower which is the owner thereof to the rights of the Creditor Parties under the Finance Documents and, in the plural, means all of them.
"Article 55 BRRD" means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms.
"Assignable Charter" means, in relation to a Ship, any time charterparty, consecutive voyage charter or contract of affreightment in respect of such Ship having a duration (or capable of exceeding a duration) of 12 months or more and any guarantee of the obligations of the charterer under such charter or any bareboat charter in respect of that Ship and any guarantee of the obligations of the charterer under such bareboat charter, entered or to be entered into by the Borrower which is the owner thereof and a charterer or, as the context may require, bareboat charterer and, in the plural, means all of them.
"Availability Period" means, in relation to each Advance, the period commencing on the date of this Agreement and ending on:

(a)
27 January 2021 (or such later date as the Agent may, with the authorisation of the Lenders, agree with the Borrowers); or

(b)
if earlier, the date on which the Total Commitments are fully borrowed, cancelled or terminated.
"Bail-In Action" means the exercise of any Write-down and Conversion Powers.
"Bail-In Legislation" means:

(a)
in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and

(b)
in relation to any state other than such an EEA Member Country or (to the extent that the United Kingdom is not such an EEA Member Country) the United Kingdom, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.
"Balloon Instalment" has the meaning given in Clause 8.1.
"Basel III" means, together:

(a)
the agreements on capital requirements, a leverage ratio and liquidity standards contained in "Basel III: A global regulatory framework for more resilient banks and banking systems", "Basel III: International framework for liquidity risk measurement, standards and monitoring" and "Guidance for national authorities operating the
3

countercyclical capital buffer" published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;

(b)
the rules for global systemically important banks contained in "Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text" published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and

(c)
any further guidance or standards published by the Basel Committee on Banking Supervision relating to "Basel III".
"Borrower" means each of Borrower A and Borrower B, and, in the plural, means both of them.
"Borrower A" means Pocahontas Shipping Co., a corporation incorporated and existing in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960.
"Borrower B" means, Jumaru Shipping Co., a corporation incorporated and existing in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960.
"Break Costs" has the meaning given in Clause 21.2.
"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business:

(a)
in Hamburg and London regarding the fixing of any interest rate which is required to be determined under this Agreement or any Finance Document;

(b)
in Hamburg and New York in respect of any payment which is required to be made under a Finance Document; and

(c)
in Hamburg, in Athens and Limassol regarding any other action to be taken under this Agreement or any other Finance Document.
"Cancellation Notice" has the meaning given in Clause 8.6.
"Cash Shortfall" has the meaning given to it in Clause 11.19;
"Castor Ships" means Castor Ships S.A., a corporation incorporated and existing in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;
"Change of Control" means:

(a)
in relation to a Security Party (other than the Corporate Guarantor and Castor Ships) or a Borrower, a change in:

(i)
the ultimate beneficial ownership of any of the shares in that Security Party; or

(ii)
the ultimate control of the voting rights attaching to any of those shares; or

(iii)
the legal ownership of any of those shares; and
4


(b)
in relation to the Corporate Guarantor, a change which results in any person or group of persons acting in concert gaining directly or indirectly control of the Corporate Guarantor other than the Permitted Holder;

(c)
For the purpose of sub-paragraphs (b) above "control" means the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

(i)
cast, or control the casting of, more than 50 per cent. of the maximum number of votes that might be cast at a general meeting of the Corporate Guarantor; or

(ii)
appoint or remove all, or the majority, of the directors or other equivalent officers of the Corporate Guarantor; or

(iii)
give directions with respect to the operating and financial policies of the Corporate Guarantor with which the directors or other equivalent officers of the Corporate Guarantor are obliged to comply; and/or
For the purpose of paragraph (b) above "acting in concert" means a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition directly or indirectly of shares in the Corporate Guarantor by any of them, either directly or indirectly, to obtain or consolidate control of the Corporate Guarantor.
"Charterparty Assignment" means, in relation to a Ship, an assignment of the rights of the Borrower who is the owner of that Ship under any Assignable Charter relative thereto and any guarantee of such Assignable Charter executed or to be executed by that Borrower in favour of the Security Trustee in the Agreed Form and, in the plural, means all of them.
"Code" means the US Internal Revenue Code of 1986.
"Commitment" means, in relation to a Lender, the amount set opposite its name in Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and "Total Commitments" means the aggregate of the Commitments of all the Lenders).
"Compliance Certificate" means a certificate in the form set out in Schedule 7 (or in any other form which the Agent approves or requires) to be provided at the times and in the manner set out in Clause 11.21.
"Contractual Currency" has the meaning given in Clause 21.6.
"Contribution" means, in relation to a Lender, the part of the Loan which is owing to that Lender.
"Corporate Guarantee" means a guarantee of the obligations of the Borrowers under this Agreement and the other Finance Documents to which each Borrower is a party, in the Agreed Form.
"Corporate Guarantor" means Castor Maritime Inc., a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960.
5

"Correction Rate" means, at any relevant time in relation to an Applicable Lender, the amount (expressed as a rate per annum) by which that Lender's Cost of Funding exceeds LIBOR.
"Cost of Funding" means, in relation to a Lender, the rate per annum determined by that Lender to be the rate at which deposits in Dollars are offered to that Lender by leading banks in the Relevant Interbank Market at that Lender's request at or about the Specified Time on the Quotation Date for an Interest Period and for a period equal to that Interest Period and for delivery on the first Business Day of it, or, if that Lender uses other ways to fund deposits in Dollars, such rate as determined by that Lender to be the Lender's cost of funding deposits in Dollars for that Interest Period, such determination being conclusive and binding in the absence of manifest error.
"Creditor Party" means the Agent, the Security Trustee, the Mandated Lead Arranger, any Lender, whether as at the date of this Agreement or at any later time and, in the plural, means all of them.
"Debt Service" means, in relation to a Ship, any sums to be incurred by the Borrower owning that Ship in respect of the payment of principal of, and any interest to be accrued on, the Advance to which that Ship relates and any accrued costs and expenses attributable to that Advance pursuant to this Agreement.
"Disruption Event" means either or both of:

(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Loan (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties or, if applicable, any Security Party; or

(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party or, if applicable, any Security Party preventing that, or any other, Party or, if applicable, any Security Party:

(i)
from performing its payment obligations under the Finance Documents; or

(ii)
from communicating with other Parties or, if applicable, any Security Party in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party or, if applicable, any Security Party whose operations are disrupted.
"Dollars" and "$" means the lawful currency for the time being of the United States of America.
"Drawdown Date" means, in respect of each Advance, the date requested by the Borrowers for that Advance to be borrowed, or (as the context requires) the date on which that Advance is actually borrowed.
"Drawdown Notice" means a notice in the form set out in Schedule 2 (or in any other form which the Agent approves or reasonably requires).
6

"Dry Dock Reserve Account" means an account in the joint names of the Borrowers with the Account Bank designated " Jumaru Shipping Co. and Pocahontas Shipping Co. and – Dry Dock Account", or any other account (with that or another office of the Account Bank) which replaces this account and is designated by the Agent as the Dry Dock Reserve Account for the purposes of this Agreement.
"Dry Docking Reserve Amount" has the meaning given to it in Clause 11.20.
"Earnings" means, in relation to a Ship, all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower owning that Ship or the Security Trustee and which arise out of the use or operation of that Ship, including (but not limited to):

(a)
except to the extent that they fall within paragraph (b);

(i)
all freight, hire and passage moneys;

(ii)
compensation payable to that Borrower or the Security Trustee in the event of requisition of a Ship for hire;

(iii)
remuneration for salvage and towage services;

(iv)
demurrage and detention moneys;

(v)
damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of that Ship; and

(vi)
all moneys which are at any time payable under any Insurances in respect of loss of hire; and

(b)
if and whenever that Ship is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Ship.
"Earnings Account" means, in relation to a Ship, an account in the name of the Borrower owning that Ship with the Account Bank designated "name of relevant Borrower - Earnings Account", or any other account (with that or another office of the Account Bank) which replaces such account and is designated by the Agent as that Earnings Account for the purposes of this Agreement.
"EEA Member Country" means any member state of the European Union, Iceland, Liechtenstein and Norway.
"Environmental Claim" means:

(a)
any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

(b)
any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,
7

and "claim" means a claim for damages, compensation, fines, penalties or any other payment of any kind whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.
"Environmental Incident" means, in relation to each Ship:

(a)
any release of Environmentally Sensitive Material from that Ship; or

(b)
any incident in which Environmentally Sensitive Material is released from a vessel other than that Ship and which involves a collision between that Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which that Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or that Ship and/or the Borrower which is the owner thereof and/or any operator or manager of that Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

(c)
any other incident in which Environmentally Sensitive Material is released otherwise than from that Ship and in connection with which that Ship is actually or potentially liable to be arrested and/or where the Borrower which is the owner thereof and/or any operator or manager of that Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action.
"Environmental Law" means any law, regulation, convention and agreement relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.
"Environmentally Sensitive Material" means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.
"EU Bail-In Legislation Schedule" means the document described as such and published by the LMA from time to time.
"Event of Default" means any of the events or circumstances described in Clause 19.1.
"FATCA" means:

(a)
sections 1471 to 1474 of the Code or any associated regulations;

(b)
any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or

(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
"FATCA Deduction" means a deduction or withholding from a payment under a Finance Document required by FATCA.
8

"FATCA Exempt Party" means a Party that is entitled to receive payments free from any FATCA Deduction.
"Final Repayment Date" means, in relation to an Advance, the date falling on the earlier of (i) the date falling on the fourth anniversary of the Drawdown Date in respect of that Advance and (ii) 20 January 2025.
"Finance Documents" means together:

(a)
this Agreement;

(b)
the Agency and Trust Agreement;

(c)
the Account Pledges;

(d)
the Corporate Guarantee;

(e)
any Subordination Agreement;

(f)
any Subordinated Debt Security;

(g)
the Mortgages;

(h)
the General Assignments;

(i)
any Charterparty Assignments;

(j)
the Approved Manager's Undertakings;

(k)
the Side Letter; and

(l)
any other document (whether creating a Security Interest or not) which is executed at any time by a Borrower, the Corporate Guarantor, any Approved Manager or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders under this Agreement or any of the other documents referred to in this definition and, in the singular, means any of them.
"Financial Indebtedness" means, in relation to a person (the "debtor"), any actual or contingent liability of the debtor:

(a)
for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

(b)
under any loan stock, bond, note or other security issued by the debtor;

(c)
under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

(d)
under a financial lease, a deferred purchase consideration arrangement (in each case, other than in respect of assets or services obtained on normal commercial terms in the ordinary course of business) or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;
9


(e)
under any foreign exchange transaction, any interest or currency swap, exchange or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

(f)
under receivables sold or discounted (other than any receivables to the extent that they are sold on a non-recourse basis); or

(g)
under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (a) to (f) if the references to the debtor referred to the other person.
"Financial Year" means, in relation to each of the Borrowers and the Corporate Guarantor, each period of one year commencing on 1 January in respect of which its individual or, as the case may be, consolidated accounts are or ought to be prepared.
"General Assignment" means, in relation to a Ship, a general assignment of (inter alia) the Earnings, the Insurances and any Requisition Compensation relative to that Ship in the Agreed Form and, in the plural, means both of them.
"Group" means the Corporate Guarantor and its direct and indirect subsidiaries from time to time, including, without limitation, the Borrowers and "member of the Group" shall be construed accordingly.
"IACS" means the International Association of Classification Societies.
"Initial Market Value" means, in relation to each Ship, the Market Value thereof calculated in accordance with the valuation relative thereto referred to in paragraph 4 of Schedule 3, Part B.
"Instalment" has the meaning given in Clause 8.1.
"Insurances" means, in relation to a Ship:

(a)
all policies and contracts of insurance and reinsurance, policies or contracts, including entries of that Ship in any protection and indemnity or war risks association, effected in respect of that Ship, its Earnings or otherwise in relation to it whether before, on or after the date of this Agreement; and

(b)
all rights (including, without limitation, any and all rights or claims which the Borrower owning that Ship may have under or in connection with any cut-through clause relative to any reinsurance contract relating to the aforesaid policies or contracts of insurance) and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement.
"Interest Period" means a period determined in accordance with Clause 6 or Clause 7 as the case may be.
"Interpolated Screen Rate" means, in relation to an Interest Period, the rate which results from interpolating on a linear basis between:
10


(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than that Interest Period; and

(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds that Interest Period,
each as of the Specified Time on the Quotation Date for that Interest Period.
"ISM Code" means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation as the same may be amended or supplemented from time to time (and the terms "safety management system", "Safety Management Certificate" and "Document of Compliance" have the same meanings as are given to them in the ISM Code).
"ISPS Code" means the International Ship and Port Facility Security Code as adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time.
"ISSC" means a valid and current International Ship Security Certificate issued under the ISPS Code.
"Lender" means, subject to Clause 26.6, a bank or financial institution listed in Schedule 1 and acting through its branch indicated in Schedule 1 (or through another branch notified to the Agent under Clause 26.15) or its transferee, successor or assign.
"LIBOR" means, for an Interest Period:

(a)
the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to, or as near as possible equal to, the relevant Interest Period which appears on the Screen Rate; or;

(b)
(if no Screen Rate is available for that Interest Period), the applicable Interpolated Screen Rate for that Interest Period; or

(c)
if no Screen Rate is available and it is not possible to calculate an Interpolated Screen Rate for that Interest Period, the rate per annum determined by the Agent to be the arithmetic mean (rounded upwards, if necessary, to the nearest fifth decimal point) of the rate(s) per annum notified to the Agent by each, or if there is only one Reference Bank, that Reference Bank as the rate at which deposits in Dollars are offered to that Reference Bank by leading banks in the Relevant Interbank Market at that Reference Bank's request,
at or about the Specified Time on the Quotation Date for that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it and, if any such rate is below zero, LIBOR will be deemed to be zero.
"Liquidity Account" means, in relation to a Ship, an account in the name of the Borrower owning that Ship with the Account Bank designated "Name of the Borrower. – Liquidity Account", or any other account (with that or another office of the Account Bank) which replaces such account and is designated by the Agent as that Liquidity Account for the purposes of this Agreement.
"LMA" means the Loan Market Association or any successor organisation.
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"Loan" means the principal amount for the time being outstanding under this Agreement.
"LSW 1189" means the London Standard Wording for marine insurances which incorporates the German Direct Mortgage Clause.
"Major Casualty" means, in relation to a Ship, any casualty to that Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $500,000 or the equivalent in any other currency;
"Majority Lenders" means:

(a)
before an Advance is made, Lenders whose Commitments total 66 2/3 per cent. of the Total Commitments; and

(b)
after an Advance is made, Lenders whose Contributions total 66 2/3 per cent. of the Loan.
"Mandated Lead Arranger" means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, or any successor.
"Mandatory Cost" means the percentage rate per annum calculated by the Agent in accordance with Schedule 4.
"Margin" means 3.30 per cent. per annum.
"Market Value" means, in relation to each Ship, the market value thereof determined in accordance with Clause 15.3.
"Material Adverse Change" means any event or series of events which, in the opinion of the Majority Lenders, is likely to have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on:

(a)
the business, property, assets, liabilities, operations or condition (financial or otherwise) of a Borrower and/or any Security Party taken as a whole;

(b)
the ability of a Borrower and/or any Security Party to (i) comply with or perform any of its obligations or (ii) discharge any of its liabilities, under any Finance Document as they fall due; or

(c)
the validity, legality or enforceability of any Finance Document.
"Maximum Advance Amount" means, in respect of an Advance, an amount up to the lesser of (i) $7,645,000 and (ii) 55 per cent. of the Initial Market Value of the Ship to which that Advance relates;
"Minimum Liquidity" has the meaning given in Clause 11.19.
"Mortgage" means, in relation to each Ship, the first preferred or, as the case may be, priority ship mortgage on that Ship in the Agreed Form and, in the plural, means both of them.
"Mortgaged Ship" means a Ship which is subject to a Mortgage at the relevant time and, in the plural, means both of them.
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"Negotiation Period" has the meaning given in Clause 5.10.
"Notifying Lender" has the meaning given in Clause 21.2, Clause 23.1 or Clause 24.1 as the context requires.
"Participating Member State" means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
"Party" means a party to this Agreement.
"Payment Currency" has the meaning given in Clause 21.6.
"Permitted Holder" the person disclosed in the Side Letter as being the person having control (as such term is defined in paragraph (c) of the definition of "Change of Control") of the Corporate Guarantor as at the date of this Agreement;
"Permitted Security Interests" means:

(a)
Security Interests created by the Finance Documents;

(b)
liens for unpaid master's and crew's wages in accordance with usual maritime practice;

(c)
liens for salvage;

(d)
liens arising by operation of law for not more than one month's prepaid hire under any charter in relation to a Ship not prohibited by this Agreement;

(e)
liens for master's disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of a Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the relevant Borrower in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 14.13(d);

(f)
any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses while a Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and

(g)
Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made.
"Pertinent Document" means:

(a)
any Finance Document;

(b)
any policy or contract of insurance contemplated by or referred to in Clause 13 or any other provision of this Agreement or another Finance Document;

(c)
any other document contemplated by or referred to in any Finance Document; and
13


(d)
any document which has been or is at any time sent by or to a Servicing Bank in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (a) or (c).
"Pertinent Jurisdiction" in relation to a company, means:

(a)
England and Wales;

(b)
the country under the laws of which the company is incorporated or formed;

(c)
a country in which the company has the centre of its main interests or which the company's central management and control is or has recently been exercised;

(d)
a country in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;

(e)
a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a branch or permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; and

(f)
a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company, whether as a main or territorial or ancillary proceedings, or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c).
"Pertinent Matter" means:

(a)
any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or

(b)
any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a),
and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the signing of this Agreement or on or at any time after that signing.
"Potential Event of Default" means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Majority Lenders and/or the satisfaction of any other condition, would constitute an Event of Default.
"Prepayment Date" has the meaning given in Clause 15.2.
"Prepayment Notice" has the meaning given in Clause 8.5(b).
"Quotation Date" means, in relation to any Interest Period (or any other period for which an interest rate is to be determined under any provision of a Finance Document), the day on which quotations would ordinarily be given by leading banks in the Relevant Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that Interest Period or other period.
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"Reference Banks" means, subject to Clause 26.18, together, the Hamburg branch of Hamburg Commercial Bank AG, the head office of any other bank which is a Lender at the relevant time (unless such Lender has advised the Agent in writing that it does not wish to be a Reference Bank) and any of their respective successors.
"Relevant Interbank Market" means the London interbank market.
"Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board.
"Relevant Person" has the meaning given in Clause 19.9.
"Repayment Date" means a date on which a repayment is required to be made under Clause 8.
"Replacement Benchmark" means a benchmark rate which is:

(a)
formally designated, nominated or recommended as the replacement for a Screen Rate by:

(i)
the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

(ii)
any Relevant Nominating Body,
and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;

(b)
in the opinion of the Lenders, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to a Screen Rate; or

(c)
in the opinion of the Lenders, an appropriate successor to a Screen Rate.
"Requisition Compensation" includes all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of "Total Loss".
"Resolution Authority" means any body which has authority to exercise any Write-down and Conversion Powers.
"Retention Account" means an account in the joint names of the Borrowers with the Account Bank designated "Jumaru Shipping Co. and Pocahontas Shipping Co.– Retention Account", or any other account (with that or another office of the Account Bank) which replaces this account and is designated by the Agent as the Retention Account for the purposes of this Agreement.
"Screen Rate" means the London interbank offered rate administered by the ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for Dollars for the relevant period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of
15

Reuters. If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Borrowers.
"Screen Rate Replacement Event" means, in relation to a Screen Rate:

(a)
the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Lenders, materially changed;
(b)

(i)

(A)
the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

(B)
information is published in any order, decree, notice, petition or filing, however described, or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,
provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

(ii)
the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

(iii)
the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

(iv)
the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

(c)
the administrator of that Screen Rate determines that that Screen Rate should be calculated in accordance with its reduced submissions or other contingency or fallback policies or arrangements and either:

(i)
the circumstance(s) or event(s) leading to such determination are not (in the opinion of the Lenders) temporary; or

(ii)  (ii)  that Screen Rate is calculated in accordance with any such policy or arrangement for a period no less than 15 Business Days; or

(d)
in the opinion of the Lenders, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Agreement.
"Secured Liabilities" means all liabilities which the Borrowers, the Security Parties or any of them have, at the date of this Agreement or at any later time or times, under or in connection with any Finance Document or any judgment relating to any Finance Document; and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or
16

variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country.
"Security Cover Ratio" means, at any relevant time, the aggregate of (i) the aggregate of the Market Value of the Mortgaged Ships, (ii) the aggregate of the Minimum Liquidity standing to the credit of the Liquidity Accounts, (iii) the Dry Docking Reserve Amount standing to the credit of the Dry Dock Reserve Account and (iii) the net realisable value of any additional security provided at that time under Clause 15, at that time expressed as a percentage of the Loan.
"Security Interest" means:

(a)
a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;

(b)
the rights of a plaintiff under an action in rem; and

(c)
any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had he held a security interest over an asset of A; but paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution.
"Security Party" means:

(a)
the Corporate Guarantor;

(b)
Castor Ships;

(c)
Pavimar S.A.; and

(d)
any other person (except a Creditor Party and any other manager which is not a member of the Group) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the final paragraph of the definition of "Finance Documents".
"Security Period" means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies the Borrowers, the Security Parties and the other Creditor Parties that:

(a)
all amounts which have become due for payment by a Borrower or any Security Party under the Finance Documents have been paid;

(b)
no amount is owing or has accrued (without yet having become due for payment) under any Finance Document;

(c)
neither a Borrower nor any Security Party has any future or contingent liability under Clauses 20, 21 or 22 or any other provision of this Agreement or another Finance Document; and

(d)
the Agent, the Mandated Lead Arranger, the Security Trustee and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future bankruptcy of a Borrower or a Security Party or in any
17

present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document.
"Security Trustee" means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Agreement.
"Servicing Bank" means the Agent or the Security Trustee.
"Side Letter" means a letter dated on or about the date of this Agreement specifying the person having control (as such term is defined in paragraph (c) of the definition of "Change of Control") of the Corporate Guarantor as at the date of this Agreement to be executed by the Agent, the Borrowers and the Corporate Guarantor in the Agreed Form;
"Ship" means each of Ship A and Ship B and, in the plural, means both of them.
"Ship A" means the Panamax bulk carrier vessel of 76,619 dwt currently registered in the ownership of Borrower A with IMO number 9553062 under the Marshall Islands flag in accordance with the laws of the relevant Approved Flag State with the name "MAGIC HORIZON".
"Ship B" means the Panamax bulk carrier vessel of 78,833 dwt currently registered in the ownership of Borrower B with IMO number 9425679 under the Marshall Islands flag in accordance with the laws of the relevant Approved Flag State with the name "MAGIC NOVA".
"Specified Time" means 11.00 a.m. London time.
"Subordinated Creditor" means a Borrower, a Security Party or any other person who becomes a Subordinated Creditor in accordance with this Agreement.
"Subordinated Debt" in relation to a Subordinated Creditor, has the meaning given to it in the Subordination Agreement entered into by that Subordinated Creditor.
"Subordinated Debt Security" means a document creating a Security Interest in relation to any Subordinated Debt in the Agreed Form.
"Subordination Agreement" means a subordination agreement entered into or to be entered into by a Subordinated Creditor, a Borrower, a Security Party and the Security Trustee in the Agreed Form.
"Total Loss" means, in relation to a Ship:

(a)
actual, constructive, compromised, agreed or arranged total loss of that Ship;

(b)
any expropriation, confiscation, requisition or acquisition of that Ship, whether for full or part consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority unless it is within one month from the date of such occurrence redelivered to the full control of the Borrower owning that Ship;

(c)
any condemnation of that Ship by any tribunal or by any person or person claiming to be a tribunal; and
18


(d)
any arrest, capture, seizure, confiscation or detention of that Ship (including any hijacking or theft) unless it is within one month redelivered to the full control of the Borrower owning that Ship.
"Total Loss Date" means, in relation to a Ship:

(a)
in the case of an actual loss of that Ship, the date on which it occurred or, if that is unknown, the date when that Ship was last heard of;

(b)
in the case of a constructive, compromised, agreed or arranged total loss of that Ship, the earlier of:

(i)
the date on which a notice of abandonment is given to the insurers; and

(ii)
the date of any compromise, arrangement or agreement made by or on behalf of the Borrower owning that Ship with that Ship's insurers in which the insurers agree to treat the Ship as a total loss; and

(c)
in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred.
"Transfer Certificate" has the meaning given in Clause 26.2.
"Trust Property" has the meaning given in clause 3.1 of the Agency and Trust Agreement.
"UK Bail-In Legislation" means (to the extent that the United Kingdom is not an EEA Member Country which has implemented, or implements, Article 55 BRRD) Part 1 of the United Kingdom Banking Act 2009 and any other law or regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutes or their affiliates (otherwise than through liquidation, administration or other insolvency proceedings).
"Underlying Document" means any Assignable Charter.
"US" means the United States of America.
"US GAAP" means generally accepted accounting principles in the Unites States.
"US Tax Obligor" means:

(a)
a Borrower which is resident for tax purposes in the US; or

(b)
a Borrower or a Security Party some or all whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
"Write-down and Conversion Powers" means:

(a)
in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule;

(b)
in relation to any other applicable Bail-In Legislation:
19


(i)
any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and

(ii)
any similar or analogous powers under that Bail-In Legislation; and

(c)
in relation to any UK Bail-In Legislation:

(i)
any powers under that UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that UK Bail-In Legislation that are related to or ancillary to any of those powers; and

(ii)
any similar or analogous powers under that UK Bail-In Legislation.
1.2
Construction of certain terms
In this Agreement:
"administration notice" means a notice appointing an administrator, a notice of intended appointment and any other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person prior to, or in connection with, the appointment of an administrator;
"approved" means, for the purposes of Clause 13, approved in writing by the Agent at its discretion;
"asset" includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;
"company" includes any partnership, joint venture and unincorporated association;
"consent" includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;
"contingent liability" means a liability which is not certain to arise and/or the amount of which remains unascertained;
"document" includes a deed; also a letter or fax;
20

"excess risks" means, in relation to a Ship, the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims;
"expense" means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;
"gross negligence" means a form of negligence which is distinct from ordinary negligence, in which the due diligence and care which are generally to be exercised have been disregarded to a particularly high degree, in which the plainest deliberations have not been made and that which should be most obvious to everybody has not been followed;
"law" includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;
"legal or administrative action" means any legal proceeding or arbitration and any administrative or regulatory action or investigation;
"liability" includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;
"months" shall be construed in accordance with Clause 1.3;
"obligatory insurances" means, in relation to a Ship, all insurances effected, or which the Borrower owning that Ship is obliged to effect, under Clause 13 or any other provision of this Agreement or another Finance Document;
"parent company" has the meaning given in Clause 1.4;
"person" includes any individual, any partnership, any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;
"policy" in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;
"protection and indemnity risks" means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 1 of the Institute Time Clauses (Hulls) (1/10/82) or clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;
"regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency (monetary or otherwise), department, central bank, regulatory, self-regulatory or other authority or organisation;
"subsidiary" has the meaning given in Clause 1.4;
21

"successor" includes any person who is entitled (by assignment, novation, merger or otherwise) to any person's rights under this Agreement or any other Finance Document (or any interest in those rights) or who, as administrator, liquidator or otherwise, is entitled to exercise those rights; and in particular references to a successor include a person to whom those rights (or any interest in those rights) are transferred or pass as a result of a merger, division, reconstruction or other reorganisation of it or any other person;
"tax" includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine; and
"war risks" includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls)(1/11/95) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).
1.3
Meaning of "month"
A period of one or more "months" ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started ("the numerically corresponding day"), but:
(a)
on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or
(b)
on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day,
and "month" and "monthly" shall be construed accordingly.
1.4
Meaning of "subsidiary"
A company (S) is a subsidiary of another company (P) if:
(a)
a majority of the issued shares in S (or a majority of the issued shares in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P; or
(b)
P has direct or indirect control over a majority of the voting rights attaching to the issued shares of S; or
(c)
P has the direct or indirect power to appoint or remove a majority of the directors of S; or
(d)
P otherwise has the direct or indirect power to ensure that the affairs of S are conducted in accordance with the wishes of P,
and any company of which S is a subsidiary is a parent company of S.
1.5
General Interpretation
In this Agreement:
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(a)
references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Agreement or otherwise;
(b)
references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise;
(c)
words denoting the singular number shall include the plural and vice versa; and
(d)
Clauses 1.1 to 1.5 apply unless the contrary intention appears.
1.6
Headings
In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.
2
FACILITY
2.1
Amount of facility
Subject to the other provisions of this Agreement, the Lenders shall make available to the Borrowers a senior secured term loan facility of up to $15,290,000, in two Advances, Advance A and Advance B, for the purpose stated in the preamble to this Agreement.
2.2
Lenders' participations in Advances
Subject to the other provisions of this Agreement, each Lender shall participate in each Advance in the proportion which, as at the relevant Drawdown Date, its Commitment bears to the Total Commitments.
2.3
Purpose of Advances
The Borrowers undertake with each Creditor Party to use each Advance only for the purpose stated in the preamble to this Agreement.
3
POSITION OF THE LENDERS
3.1
Interests several
The rights of the Lenders under this Agreement are several.
3.2
Individual right of action
Each Lender shall be entitled to sue for any amount which has become due and payable by the Borrowers to it under this Agreement without joining the Agent, the Security Trustee or any other Lender as additional parties in the proceedings.
3.3
Proceedings requiring Majority Lender consent
Except as provided in Clause 3.2, no Lender may commence proceedings against the Borrowers or any Security Party in connection with a Finance Document without the prior consent of the Majority Lenders.
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3.4
Obligations several
The obligations of the Lenders under this Agreement are several; and a failure of a Lender to perform its obligations under this Agreement shall not result in:
(a)
the obligations of the other Lenders being increased; nor
(b)
a Borrower, any Security Party, any other Lender being discharged (in whole or in part) from its obligations under any Finance Document;
and in no circumstances shall a Lender have any responsibility for a failure of another Lender to perform its obligations under this Agreement.
4
DRAWDOWN
4.1
Request for an Advance
Subject to the following conditions, the Borrowers may request an Advance to be borrowed by ensuring that the Agent receives a completed Drawdown Notice not later than 11.00 a.m. (Hamburg time) three Business Days prior to the relevant Drawdown Date.
4.2
Availability
The conditions referred to in Clause 4.1 are that:
(a)
a Drawdown Date has to be a Business Day during the relevant Availability Period;
(b)
each Advance shall not exceed the relevant Maximum Advance Amount;
(c)
any undrawn portion of the Total Commitments in respect of an Advance to occur, upon the determination of the Initial Market Value of the Ship to which that Advance relates, shall be automatically cancelled as at the Drawdown Date of that Advance; and
(d)
the aggregate amount of the Advances shall not exceed the Total Commitments.
4.3
Notification to Lenders of receipt of a Drawdown Notice
The Agent shall promptly notify the Lenders that it has received a Drawdown Notice and shall inform each Lender of:
(a)
the amount of the Advance to which that Drawdown Notice relates and the relevant Drawdown Date;
(b)
the amount of that Lender's participation in that Advance; and
(c)
the duration of the first Interest Period in respect of that Advance.
4.4
Drawdown Notice irrevocable
A Drawdown Notice must be signed by a duly authorised signatory of the Borrowers; and once served, a Drawdown Notice cannot be revoked without the prior consent of the Agent, acting on the authority of the Lenders.
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4.5
Lenders to make available Contributions
Subject to the provisions of this Agreement, each Lender shall, on and with value on each Drawdown Date, make available to the Agent for the account of the Borrowers the amount due from that Lender on that Drawdown Date under Clause 2.2.
4.6
Disbursement of Advance
Subject to the provisions of this Agreement, the Agent shall on each Drawdown Date pay to the Borrowers the amounts which the Agent receives from the Lenders under Clause 4.5 and that payment to the Borrowers shall be made:
(a)
to the account which the Borrowers specify in the Drawdown Notice; and
(b)
in like funds as the Agent received the payments from the Lenders.
The payment by the Agent under this Clause 4.6 shall constitute the making of the Advance and the Borrowers shall at that time become indebted, as principal and direct obligors, to each Lender in an amount equal to that Lender's participation in the Advance.
5
INTEREST
5.1
Payment of normal interest
Subject to the provisions of this Agreement, interest on each Advance in respect of each Interest Period relative to that Advance shall be paid by the Borrowers on the last day of that Interest Period.
5.2
Normal rate of interest
Subject to the provisions of this Agreement, the rate of interest on each Advance in respect of an Interest Period relative to that Advance shall be the aggregate of (i) the Margin, (ii) the Mandatory Cost (if any), (iii) LIBOR for that Interest Period and (iv) if a Lender (the "Applicable Lender") notifies the Agent at least 5 Business Days before the start of that Interest Period that its Cost of Funding exceeds LIBOR (including the amount of such excess) on the Quotation Date for that Interest Period, additionally in respect of that Applicable Lender's Contribution in the relevant Advance, the Correction Rate applicable to the Applicable Lender for that Interest Period.
5.3
Payment of accrued interest
In the case of an Interest Period of longer than three months (subject to the prior agreement of the Agent in accordance with Clause 6.2(b)), accrued interest shall be paid every three months during that Interest Period and on the last day of that Interest Period.
5.4
Notification of Interest Periods and rates of normal interest
The Agent shall notify the Borrowers and each Lender of:
(a)
each rate of interest; and
(b)
the duration of each Interest Period,
as soon as reasonably practicable after each is determined.
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5.5
Obligation of Reference Banks to quote
A Reference Bank which is a Lender shall use all reasonable efforts to supply the quotation required of it for the purposes of fixing a rate of interest under this Agreement unless that Reference Bank ceases to be a Lender pursuant to Clause 26.18.
5.6
Absence of quotations by Reference Banks
If any Reference Bank fails to supply a quotation, the Agent shall determine the relevant LIBOR on the basis of the quotations supplied by the other Reference Bank(s) but if two or more of the Reference Banks fail (or, if at any time there is only one Reference Bank, that Reference Bank fails) to provide a quotation, the relevant rate of interest shall be set in accordance with the following provisions of this Clause 5.
5.7
Market disruption
The following provisions of this Clause 5 apply if:
(a)
no rate is quoted on the Screen Rate, it is not possible to calculate an Interpolated Screen Rate for that Interest Period and two or more of the Reference Banks do not (or, if at any time there is only one Reference Bank, that Reference Bank does not), before 1.00 p.m. (London time) on the Quotation Date for an Interest Period, provide a quotation to the Agent in order to fix LIBOR; or
(b)
at least three Business Days before the start of an Interest Period, the Agent is notified by a Lender (the "Affected Lender") that for any reason it is unable to obtain Dollars in the Relevant Interbank Market in order to fund its Contribution (or any part of it) during the Interest Period.
5.8
Notification of market disruption
The Agent shall promptly notify the Borrowers and each of the Lenders stating the circumstances falling within Clause 5.7 which have caused its notice to be given.
5.9
Suspension of drawdown
If the Agent's notice under Clause 5.8 is served before an Advance is made:
(a)
in a case falling within Clause 5.7(a), the Lenders' obligation to advance that Advance; and
(b)
in a case falling within Clause 5.7(b), the Affected Lender's obligation to participate in that Advance,
shall be suspended while the circumstances referred to in the Agent's notice continue.
5.10
Negotiation of alternative rate of interest
(a)
If the Agent's notice under Clause 5.8 is served after an Advance is borrowed then, subject to Clause 27.4, the Borrowers, the Agent, the Lenders or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within 30 days after the date on which the Agent serves its notice under Clause 5.8 (the "Negotiation Period"), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period concerned.
26

(b)
During the Negotiation Period the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an interest period and interest rate representing the Cost of Funding of the Lenders or (as the case may be) the Affected Lender in Dollars, in each case as determined by the relevant Lender, or in any available currency of their or its Contribution plus the Margin and the Mandatory Cost (if any).
5.11
Application of agreed alternative rate of interest
Subject to Clause 27.4, any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.
5.12
Alternative rate of interest in absence of agreement
If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the procedure provided for in Clause 5.10(b) shall be repeated at the end of the interest period set by the Agent pursuant to that Clause.
5.13
Notice of prepayment
If the Borrowers do not agree with an interest rate set by the Agent under Clause 5.12, the Borrowers may give the Agent not less than five Business Days' notice of their intention to prepay the Loan at the end of the interest period set by the Agent.
5.14
Prepayment; termination of Commitments
A notice under Clause 5.13 shall be irrevocable; the Agent shall promptly notify the Lenders of the Borrowers' notice of intended prepayment; and:
(a)
on the date on which the Agent serves that notice, the Total Commitments shall be cancelled; and
(b)
on the last Business Day of the interest period set by the Agent, the Borrowers shall prepay (without premium or penalty) the Loan, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any).
5.15
Application of prepayment
The provisions of Clause 8 shall apply in relation to the prepayment.
6
INTEREST PERIODS
6.1
Commencement of Interest Periods
The first Interest Period applicable to an Advance shall commence on the Drawdown Date in respect of that Advance and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.
6.2
Duration of normal Interest Periods
Subject to Clauses 6.3 and 6.4, each Interest Period in respect of each Advance shall be:
(a)
3 months; or
27

(b)
such other period (as proposed by the Borrowers to the Agent not later than 11:00 a.m. (Hamburg time) 5 Business Days before the commencement of the Interest Period in respect of that Advance) as the Agent may, with the authorisation of the Majority Lenders, agree with the Borrowers (failing which the Interest Period shall be three months).
6.3
Duration of Interest Periods for Instalments
In respect of an amount due to be repaid under Clause 8 on a particular Repayment Date, an Interest Period in respect of the Advance to which that Repayment Date relates shall end on that Repayment Date.
6.4
Non-availability of matching deposits for Interest Period selected
If, after the Borrowers have proposed and the Lenders have agreed an Interest Period longer than three months, any Lender notifies the Agent by 11.00 a.m. (Hamburg time) on the third Business Day before the commencement of the Interest Period that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the Relevant Interbank Market when the Interest Period commences, the Interest Period shall be of three months.
7
DEFAULT INTEREST
7.1
Payment of default interest on overdue amounts
The Borrowers shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by the Borrowers under any Finance Document which the Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:
(a)
the date on which the Finance Documents provide that such amount is due for payment; or
(b)
if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or
(c)
if such amount has become immediately due and payable under Clause 19.4, the date on which it became immediately due and payable.
7.2
Default rate of interest
Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be 2.50 per cent. above:
(a)
in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and 7.3(b); or
(b)
in the case of any other overdue amount, the rate set out at Clause 7.3(b).
7.3
Calculation of default rate of interest
The rates referred to in Clause 7.2 are:
28

(a)
the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period applicable to it);
(b)
the aggregate of the Margin, any Correction Rate and the Mandatory Cost (if any) plus, in respect of successive periods of any duration (including at call) up to three months which the Agent may select from time to time:

(i)
LIBOR; or

(ii)
if the Agent (after consultation with the Reference Banks) determines that Dollar deposits for any such period are not being made available to any Reference Bank by leading banks in the Relevant Interbank Market in the ordinary course of business, a rate from time to time determined by the Agent by reference to the cost of funds to the Reference Banks from such other sources as the Agent (after consultation with the Reference Banks) may from time to time determine.
7.4
Notification of interest periods and default rates
The Agent shall promptly notify the Lenders and the Borrowers of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph 7.3(b) of that Clause; but this shall not be taken to imply that the Borrowers are liable to pay such interest only with effect from the date of the Agent's notification.
7.5
Payment of accrued default interest
Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.
7.6
Compounding of default interest
Any such interest which is not paid at the end of the period by reference to which it was determined shall thereupon be compounded.
8
REPAYMENT AND PREPAYMENT
8.1
Amount of Instalments
The Borrowers shall repay:
(a)
Advance A, by:

(i)
16 equal consecutive quarterly instalments, each in the amount of $237,000 (each an "Instalment A" and, together, the "Instalments A"); and

(ii)
a balloon instalment in the amount of $3,853,000 (the "Balloon Instalment A"); and
29

(b)
Advance B, by:

(i)
16 equal consecutive quarterly instalments (each an "Instalment B" and, together, the "Instalments B" and, together with the Instalments A, the "Instalments" and each an "Instalment"), each in the amount of $234,000; and

(ii)
a balloon instalment (the "Balloon Instalment B" and, together with the Balloon Instalment A, the "Balloon Instalments" and each a "Balloon Instalment") in the amount of $3,901,000,
Provided that, if the amount advanced in respect of either Advance is less than $7,645,000, the aggregate amount of the Instalments and the Balloon Instalment in respect of that Advance shall be reduced by an amount equal to the undrawn amount on a pro rata basis.
8.2
Repayment Dates
The first Instalment in respect of each Advance shall be repaid on the date falling three months after the Drawdown Date in respect of that Advance, each subsequent Instalment shall be repaid at three-monthly intervals thereafter and the last Instalment in respect of that Advance, shall be repaid together with the Balloon Instalment in respect of that Advance, latest on the relevant Final Repayment Date.
8.3
Final Repayment Date
On the Final Repayment Date, in respect of the second Advance to be drawn down pursuant to this Agreement, the Borrowers shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document.
8.4
Voluntary prepayment
Subject to the following conditions, the Borrowers may prepay the whole or any part of the Loan on the last day of an Interest Period.
8.5
Conditions for voluntary prepayment
The conditions referred to in Clause 8.4 are that:
(a)
a partial prepayment shall be (i) $237,000 in respect of Advance A and (ii) $234,000 in respect of Advance B or a higher integral multiple thereof;
(b)
the Agent has received from the Borrowers at least five Business Days' prior irrevocable written notice (each, a "Prepayment Notice") specifying the amount to be prepaid and the date on which the prepayment is to be made;
(c)
the Borrowers have provided evidence satisfactory to the Agent that any consent required by any Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any regulation relevant to this Agreement which affects any Borrower or any Security Party has been complied with; and
(d)
the Borrowers are in compliance with Clause 8.10 on or prior to the date of prepayment.
30

8.6
Optional facility cancellation
The Borrowers shall be entitled, upon giving to the Agent not less than five Business Days' prior written notice, to cancel, in whole or in part, and, if in part, by an aggregate amount not less than (i) $237,000 in respect of Advance A and (ii) $234,000 in respect of Advance B or a higher multiple thereof (or such other amount acceptable to the Agent in its sole discretion), the undrawn balance of the Total Commitments (the "Cancellation Notice") which notice shall be irrevocable and shall, at the option of the Borrowers, specify whether such cancellation will be applied against a specific Advance, in which case the Borrowers will specify the Advance against which that cancellation should be applied.  A failure by the Borrowers to make such a designation, in circumstances where both Advances have been made, shall result in the cancellation being applied against both Advances proportionately.  Upon such cancellation taking effect on expiry of a Cancellation Notice the several obligations of the Lenders to make their respective Commitments available in relation to the portion of the Total Commitments to which such Cancellation Notice relates shall terminate.
8.7
Cancellation Notice or Prepayment Notice
The Agent shall notify the Lenders promptly upon receiving a Cancellation Notice or Prepayment Notice, and shall provide, in the case of a Prepayment Notice, any Lender which so requests with a copy of any document delivered by the Borrowers under Clause 8.5(c).
8.8
Mandatory prepayment
(a)
The Borrowers shall be obliged to prepay the Relevant Amount if a Ship:

(i)
is sold, on or before the date on which the sale is completed by delivery of that Ship to the buyer; or

(ii)
becomes a Total Loss, on the earlier of the date falling 120 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss.
(b)
Any surplus, after the prepayment of the Relevant Amount (plus any additional costs due pursuant to Clause 8.10), shall be for the account of the Borrowers Provided that no Event of Default has occurred and is continuing at the relevant time or will occur as a result of the release of such surplus to the Borrowers.
In this Clause 8.8:
"Relevant Amount" means an amount equal to the greater of:

(i)
the Advance to which the Ship being sold or which has become a Total Loss relates; and

(ii)
an amount (if any) which after the application of the prepayment to be made pursuant to Clause 8.11(b) results in the Security Cover Ratio being the greater of (A) 130 per cent. and (B) the percentage which applied immediately prior to the applicable event described in paragraph (i) or (ii) of this Clause 8.8.
31

8.9
Effect of Prepayment Notice and Cancellation Notice
Neither a Prepayment Notice nor a Cancellation Notice may be withdrawn or amended without the consent of the Agent, given with the authorisation of the Majority Lenders, and:
(a)
in the case of a Prepayment Notice, the amount specified in that Prepayment Notice shall become due and payable by the Borrowers on the date for prepayment specified in that Prepayment Notice; and
(b)
in the case of a Cancellation Notice, the amount cancelled shall be permanently cancelled and may not be borrowed.
8.10
Amounts payable on prepayment
A prepayment shall be made together with accrued interest (and any other amount payable under Clause 21 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an Interest Period together with any sums payable under Clause 21.2) but without premium or penalty.
8.11
Application of partial prepayment or cancellation
Each partial prepayment shall be applied:
(a)
if made pursuant to Clause 5.13, 8.4, 15.2, 19.2, 23.3 or 24.6 proportionately between each Advance and within each Advance pro rata against the Instalments and the Balloon Instalment of each Advance;
(b)
if made pursuant to Clause 8.8, first towards full repayment of the Advance related to the Ship being sold or which has become a Total Loss, and thereafter towards reduction of the other Advance and within such Advance, pro rata against the Instalments in respect of that Advance which are at the time being outstanding and the Balloon Instalment of such Advance.
8.12
No reborrowing
No amount prepaid or cancelled may be (re)borrowed.
9
CONDITIONS PRECEDENT
9.1
Documents, fees and no default
Each Lender's obligation to contribute to an Advance is subject to the following conditions precedent:
(a)
that, on or before the service of the first Drawdown Notice, the Agent receives the documents described in Part A of Schedule 3 in form and substance satisfactory to the Agent and its lawyers;
(b)
that, on the Drawdown Date but prior to the making of the Advance, the Agent receives;

(i)
the documents described in Part B of Schedule 3 in form and substance satisfactory to the Agent and its lawyers;

(ii)
in the case of the first Drawdown Notice to be served under this Agreement, the structuring fee payable pursuant to Clause 20.1(a);
32


(iii)
payment of any commitment fee payable pursuant to Clause 20.1(b); and

(iv)
payment of any expenses payable pursuant to Clause 20.2 which are due and payable on the Drawdown Date to which that Drawdown Notice relates;
(c)
that both at the date of each Drawdown Notice and at the relevant Drawdown Date:

(i)
no Event of Default or Potential Event of Default has occurred or would result from the borrowing of the relevant Advance;

(ii)
the representations and warranties in Clause 10 and those of either Borrower or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing;

(iii)
none of the circumstances contemplated by Clause 5.7 has occurred and is continuing; and

(iv)
there has been no Material Adverse Change; and
(d)
that, if the Security Cover Ratio were applied immediately following the making of an Advance, the Borrowers would not be obliged to provide additional security or prepay part of the Loan under that Clause; and
(e)
that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorisation of the Majority Lenders, request by notice to the Borrowers prior to the relevant Drawdown Date.
9.2
Waiver of conditions precedent
If the Majority Lenders, at their discretion, permit an Advance to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrowers shall ensure that those conditions are satisfied within five Business Days after the relevant Drawdown Date (or such longer period as the Agent may, with the authorisation of the Majority Lenders, specify).
10
REPRESENTATIONS AND WARRANTIES
10.1
General
Each Borrower represents and warrants to each Creditor Party as follows.
10.2
Status
Each Borrower is duly incorporated, validly existing and in good standing under the laws of the Republic of the Marshall Islands and no Borrower or Security Party is a US Tax Obligor.
10.3
Share capital and ownership
Each Borrower is authorised to issue 500 registered shares of no par value, all of which shares have been issued, and the legal title and beneficial ownership of all those shares is held, free of any Security Interest or other claim, by the Corporate Guarantor.
33
10.4
Corporate power
Each Borrower has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:
(a)
to execute the Underlying Documents to which it is a party and to maintain its Ship in its ownership under the applicable Approved Flag;
(b)
to execute the Finance Documents to which that Borrower is a party; and
(c)
to borrow under this Agreement and to make all the payments contemplated by, and to comply with, those Finance Documents to which that Borrower is a party.
10.5
Consents in force
All the consents referred to in Clause 10.4 remain in force and nothing has occurred which makes any of them liable to revocation.
10.6
Legal validity; effective Security Interests
The Finance Documents to which each Borrower is a party, do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):
(a)
constitute that Borrower's legal, valid and binding obligations enforceable against that Borrower in accordance with their respective terms; and
(b)
create legal, valid and binding Security Interests (having the priority specified in the relevant Finance Document) enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate,
subject to any relevant insolvency laws affecting creditors' rights generally.
10.7
No third party Security Interests
Without limiting the generality of Clause 10.6, at the time of the execution and delivery of each Finance Document to which each Borrower is a party:
(a)
that Borrower will have the right to create all the Security Interests which that Finance Document purports to create; and
(b)
no third party will have any Security Interest (except for Permitted Security Interests) or any other interest, right or claim over, in or in relation to any asset to which any such Security Interest, by its terms, relates.
10.8
No conflicts
The execution by each Borrower and each other Security Party of each Finance Document and each Underlying Document to which it is a party, and the borrowing by that Borrower (together with the other Borrower) of the Loan (or any part thereof), and its compliance with each Finance Document and each Underlying Document to which it is a party:
(a)
will not involve or lead to a contravention of:
34


(i)
any law or regulation; or

(ii)
the constitutional documents of that Borrower or other Security Party; or

(iii)
any contractual or other obligation or restriction which is binding on that Borrower or other Security Party or any of its assets, and
(b)
will not have a Material Adverse Effect; and
(c)
is for the corporate benefit of that Borrower or each other Security Party.
10.9
No withholding taxes
All payments which each Borrower is liable to make under the Finance Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.
10.10
No default
No Event of Default or Potential Event of Default has occurred.
10.11
Information
All information which has been provided in writing by or on behalf of the Borrowers or any Security Party to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.5; all audited and unaudited accounts and financial statements which have been so provided satisfied the requirements of Clause 11.7 and are true, correct and not misleading and present fairly and accurately the financial position of the Borrowers the Corporate Guarantor or the Group (as the case may be); and there has been no change in the financial position or state of affairs of either Borrower, the Corporate Guarantor or the Group (or any member thereof) from that disclosed in the latest of those accounts which is likely to have a Material Adverse Effect.
10.12
No litigation
No legal or administrative action involving either Borrower or any Security Party (including action relating to any alleged or actual breach of the ISM Code or the ISPS Code) has been commenced or taken or, to either Borrower's knowledge, is likely to be commenced or taken which would, in either case, be likely to have a Material Adverse Effect.
10.13
Validity and completeness of the Underlying Documents
Each of the Underlying Documents constitutes valid, binding and enforceable obligations of the parties thereto in accordance with its terms and:
(a)
each of the copies of the Underlying Documents delivered to the Agent before the date of this Agreement is a true and complete copy; and
(b)
no amendments or additions to an Underlying Document have been agreed nor has any party which is the party to an Underlying Document waived any of its respective rights thereunder.
35

10.14
Compliance with certain undertakings
At the date of this Agreement, the Borrowers are in compliance with Clauses 11.2, 11.4, 11.9, 11.13, 13, 14.3 and 14.10.
10.15
No rebates etc.
There is no agreement or understanding to allow or pay any rebate, premium, commission, discount or other benefit or payment (howsoever described) to a Borrower or a third party in connection with the purchase by that Borrower of its Ship, other than as disclosed to the Agent in writing on or prior to the date of this Agreement.
10.16
Taxes paid
Each Borrower has paid all taxes applicable to, or imposed on or in relation to that Borrower, its business or the Ship owned by it.
10.17
ISM Code and ISPS Code compliance
All requirements of the ISM Code and the ISPS Code as they relate to the Borrowers, the Corporate Guarantor, the Approved Managers and the Ships have been complied with.
10.18
No Money laundering
(a)
Neither Borrower and, to the extent applicable, no Security Party has, in connection with this Agreement or any of the other Finance Documents, contravened, or permitted any subsidiary to contravene, any law, official requirement or other regulatory measure or procedure implemented to combat "money laundering" (as defined in Article 1 of the Directive 2015/849/EC of the European Parliament and of the Council of the European Union of 20 May 2015) and any comparable US federal and state laws.
(b)
Each Borrower confirms to the Agent that it is the beneficiary within the meaning of the German Anti Money Laundering Act (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz)), acting for its own account and not for or on behalf of any other person for each part of the Loan made or to be made available to it under this Agreement (that is to say, it acts for its own account and not for or on behalf of anyone else).
10.19
No immunity
No Borrower nor any of its assets is entitled to immunity on grounds of sovereignty or otherwise from any legal action or proceeding (including, without limitation, suit, attachment prior to judgement, execution or other enforcement).
10.20
Choice of law
The choice of the laws of England to govern this Agreement and those other Finance Documents which are expressed to be governed by the laws of England, the laws of Germany to govern the Account Pledges and the laws of the applicable Approved Flag State to govern the Mortgages, constitutes a valid choice of law and the submission by the Borrowers or, as the case may be, the relevant Security Parties thereunder to the jurisdiction of the Courts of England and, in the case of each Account Pledge, Germany or, in the case of the Mortgages, the applicable Approved Flag State is a valid submission and does not contravene the laws of England or, in the case of each Account Pledge, Germany or, in the case of the Mortgages, the
36

applicable Approved Flag State or the laws of any other Pertinent Jurisdiction, will be applied by the courts of any Pertinent Jurisdiction if this Agreement or those other Finance Documents or any claim thereunder comes under their jurisdiction upon proof of the relevant provisions of the laws of England or, in the case of each Account Pledge, Germany or, in the case of the Mortgages, the applicable Approved Flag State.
10.21
Pari passu ranking
The obligations of each Borrower and Security Party under the Finance Documents to which it is a party are direct, general and unconditional obligations and rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except for obligations mandatorily preferred by law applying to companies generally.
10.22
Repetition
The representations and warranties in this Clause 10 shall be deemed to be repeated by the Borrowers:
(a)
on the date of service of each Drawdown Notice;
(b)
on each Drawdown Date; and
(c)
with the exception of Clauses 10.9 and 10.14, on the first day of each Interest Period and on the date of any Compliance Certificate issued pursuant to Clause 11.21,
as if made with reference to the facts and circumstances existing on each such day.
11
GENERAL UNDERTAKINGS
11.1
General
Each Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Agent, acting with the authorisation of the Majority Lenders, may otherwise permit in writing.
11.2
Title and negative pledge
Each Borrower will:
(a)
hold the legal title to, and own the entire beneficial interest in its Ship, her Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Documents and except for Permitted Security Interests; and
(b)
not create or permit to arise any Security Interest (except for Permitted Security Interests) over any other asset, present or future.
11.3
No disposal of assets
Neither Borrower will transfer, lease or otherwise dispose of:
(a)
all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not; or
37

(b)
any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation,
but paragraph (a) does not apply to any charter of a Ship.
11.4
No other liabilities or obligations to be incurred
Neither Borrower will incur any liability or obligation (including, without limitation, any Financial Indebtedness or any obligations under a guarantee) except:
(a)
liabilities and obligations under the Finance Documents and the Underlying Documents to which it is or, as the case may be, will be a party; and
(b)
liabilities or obligations reasonably incurred in the normal course of its business of trading, operating and chartering, maintaining and repairing the Ship owned by it (including, without limitation, any Financial Indebtedness and other indebtedness owing to its shareholders subject to the relevant Borrower ensuring on or prior to the first Drawdown Date, that the rights of each creditor thereunder are fully subordinated in writing pursuant to a Subordination Agreement).
11.5
Information provided to be accurate
All financial and other information, including but not limited to factual information, exhibits and reports, which is provided in writing by or on behalf of a Borrower under or in connection with any Finance Document will be true, correct and not misleading and will not omit any material fact or consideration.
11.6
Provision of financial statements
Each Borrower will send or procure that there are sent to the Agent:
(a)
as soon as possible, but in no event later than 180 days after the end of each Financial Year of that Borrower and the Corporate Guarantor, the individual unaudited annual management accounts of that Borrower and the consolidated audited annual financial statements of the Corporate Guarantor (commencing with the financial statements for the Financial Year which ended on 31 December 2020); and
(b)
as soon as possible, but in no event later than 90 days after the first 6-month period ending on 30 June in each Financial Year of that Borrower or, as the case may be, the Corporate Guarantor, the semi-annual individual unaudited management accounts in respect of that Borrower or, in the case of the Corporate Guarantor, the semi-annual consolidated unaudited management accounts of the Group, in each case, for that 6-month period (commencing with the financial statements for the 6-month period ending on 30 June 2021), duly certified as to their correctness by the chief financial officer of the Corporate Guarantor; and
(c)
promptly after each request by the Agent, such further financial or other information in respect of that Borrower, each Ship and the Corporate Guarantor (including, without limitation, any information regarding any sale and purchase agreements, investment brochures, shipbuilding contracts, charter agreements and operational expenditures for the Ships) as may be requested by the Agent.
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11.7
Form of financial statements
All accounts delivered under Clause 11.6 will:
(a)
be prepared in accordance with all applicable laws and US GAAP and, in the case of any audited financial statements, be certified by an independent and reputable auditor selected and appointed by the relevant Borrower or the Corporate Guarantor;
(b)
give a true and fair view of the state of affairs of each Borrower, the Corporate Guarantor and the Group at the date of those accounts and of its profit for the period to which those accounts relate; and
(c)
fully disclose or provide for all significant liabilities of each Borrower, the Corporate Guarantor and the Group and each of its subsidiaries.
11.8
Shareholder and creditor notices
Each Borrower will send the Agent promptly upon its request copies of all communications which are despatched to that Borrower's shareholders or creditors or any class of them.
11.9
Consents
Each Borrower will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Agent of, all consents required:
(a)
for that Borrower to perform its obligations under any Finance Document or any Underlying Document to which it is a party;
(b)
for the validity or enforceability of any Finance Document or any Underlying Document to which it is a party;
(c)
for that Borrower to continue to own and operate the Ship owned by it,
and that Borrower will comply with the terms of all such consents.
11.10
Maintenance of Security Interests
Each Borrower will:
(a)
at its own cost, do all that it reasonably can to ensure that any Finance Document validly creates the obligations and the Security Interests which it purports to create; and
(b)
without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document, give any notice or take any other step which, in the opinion of the Majority Lenders, is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.
11.11
Notification of litigation
Each Borrower will provide the Agent with details of any legal or administrative action involving that Borrower, the Ship owned by it, the Earnings or the Insurances in respect of that Ship, any
39

Security Party or the Approved Managers, as soon as such action is instituted or it becomes apparent to that Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot have a Material Adverse Effect, and each Borrower shall procure that all reasonable measures are taken to defend any such legal or administrative action.
11.12
No amendment to Underlying Documents
The Borrowers will not waive or fail to enforce, the Underlying Documents to which it is a party or any of its provisions and promptly notify the Agent of any amendment or supplement to any Underlying Document.
11.13
Principal place of business
Each Borrower will maintain its place of business, and keep its corporate documents and records, at the address of Castor Ships as indicated in Clause 28.2; and no Borrower will establish, or do anything as a result of which it would be deemed to have, a place of business in any country other than Greece.
11.14
Confirmation of no default
Each Borrower will, within two Business Days after service by the Agent of a written request, serve on the Agent a notice which is signed by an officer of that Borrower and which:
(a)
states that no Event of Default or Potential Event of Default has occurred; or
(b)
states that no Event of Default or Potential Event of Default has occurred, except for a specified event or matter, of which all material details are given.
The Agent may serve requests under this Clause 11.14 from time to time but only if asked to do so by a Lender or Lenders having Contributions exceeding 10 per cent. of the Loan or (if no Advances have been made) Commitments exceeding 10 per cent. of the Total Commitments; and this Clause 11.14 does not affect the Borrowers' obligations under Clause 11.15.
11.15
Notification of default
Each Borrower will notify the Agent as soon as that Borrower becomes aware of:
(a)
the occurrence of an Event of Default or a Potential Event of Default; or
(b)
any matter which indicates that an Event of Default or a Potential Event of Default may have occurred,
and will keep the Agent fully up-to-date with all developments.
11.16
Provision of further information
Each Borrower will, as soon as practicable after receiving the request, provide the Agent with any additional financial or other information relating:
(a)
to that Borrower, the Ship owned by it, the Earnings or the Insurances; or
(b)
to any other matter relevant to, or to any provision of, a Finance Document,
which may be requested by the Agent, the Security Trustee or any Lender at any time.
40

11.17
Provision of copies and translation of documents
Each Borrower will supply the Agent with a sufficient number of copies of the documents referred to above to provide one copy for each Creditor Party; and if the Agent so requires in respect of any of those documents, the Borrowers will provide a certified English translation prepared by a translator approved by the Agent.
11.18
"Know your customer" checks
If:
(a)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
(b)
any change in the composition of the shareholders of the Borrowers or any Security Party (other than Castor Ships) after the date of this Agreement; or
(c)
a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of paragraph (c), any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrowers shall promptly upon the request of the Agent or the Lender concerned supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or the Lender concerned (for itself or, in the case of the event described in paragraph (c), on behalf of any prospective new Lender) in order for the Agent, the Lender concerned or, in the case of the event described in paragraph (c), any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
11.19
Minimum Liquidity
(a)
Subject to paragraph (c) below, each Borrower shall maintain in its respective Liquidity Account credit balances in an aggregate amount of not less than $500,000 in respect of each Mortgaged Ship ($1,000,000 in aggregate) ("Minimum Liquidity") commencing from the Drawdown Date in respect of the Advance which will finance the relevant Ship and at all times thereafter throughout the remainder of the Security Period.
(b)
Each Liquidity Account shall be secured under the applicable Account Pledge and, subject to paragraph (c) below, remain blocked.
(c)
Subject to the Agent's prior written consent and at the Agent's absolute discretion, each Borrower may request to utilise the whole or any part of the Minimum Liquidity relating to the Ship owned by that Borrower throughout the Security Period if, at the end of a Relevant Period, there is a Cash Shortfall and provided that:

(A)
no Event of Default has occurred at the relevant time; and

(B)
that part of the Minimum Liquidity which is released from the relevant Liquidity Account (the "Released Amount") pursuant to this Clause 11.19 is
41

utilised by the relevant Borrower only for the purpose of paying the Debt Service; and

(C)
that Borrower provides the Agent with the most recent quarterly management accounts evidencing such Cash Shortfall.
(d)
In this Clause 11.19 (Minimum Liquidity):
"Cash Shortfall" means, in relation to a Ship during a Relevant Period, the amount by which the aggregate Operating Expenses and the Debt Service of that Ship exceed the aggregate Earnings of that Ship, in each case, during the Relevant Period, as determined by the Majority Lenders, in their sole and absolute discretion;
"Operating Expenses" means, in relation to a Ship, the aggregate expenditure incurred by the Borrower which is the owner of that Ship in operating, crewing, insuring, maintaining, repairing and generally trading that Ship including management fees as evidenced by the most recent quarterly management accounts as provided by the relevant Borrower to the Agent pursuant to paragraph (c) of this Clause 11.19 (Minimum Liquidity);
"Relevant Period" means each 3-month period during the Security Period, the first of which shall commence on the Drawdown Date and end 3 months thereafter with each subsequent period commencing at 3-monthly intervals thereafter;
11.20
Dry Docking Reserve Amount
(a)
Each Borrower undertakes with each Creditor Party that, from the date falling three months after the Drawdown Date and at quarterly intervals thereafter during the Security Period, in respect of each Mortgaged Ship, an amount of $25,000 per Ship ($50,000 in aggregate) (collectively, the "Dry Docking Reserve Amount") is deposited to the Dry Dock Reserve Account.
(b)
The Dry Dock Reserve Account shall be secured under the Account Pledge and, subject to paragraph (d) below, remain blocked thereon.
(c)
The Dry Docking Reserve Amount shall be released to each Borrower as follows:

(i)
the cumulative Dry Docking Reserve Amount relating to Ship A shall be released to Borrower A only for the payment of any costs incurred in relation to the next dry docking and special survey of Ship A; and

(ii)
the cumulative Dry Docking Reserve Amount relating to Ship B shall be released to Borrower B only for the payment of any costs incurred by in relation to the next dry docking and special survey of Ship B;
(such costs referred to in sub-paragraphs (i) to (ii) above are, together, the "Dry Docking Expenses") and subject to, in each case:

(A)
the Borrowers previously delivering to the Agent, in form and substance satisfactory to the Agent, copies of the invoices and/or proforma invoices to be paid (partially or in full out of the Dry Docking Reserve Amount) in respect of the Dry Docking Expenses; and
42


(B)
no Event of Default or Potential Event of Default having occurred and being continuing at the relevant time or resulting from the release of the Dry Docking Reserve Amount.
Upon completion of each of the dry docking and special survey referred to in paragraph (c) above, the Borrowers shall promptly deliver to the Agent evidence satisfactory to it that such dry docking and special survey has been completed.
(d)
If a Ship is sold and all amounts payable pursuant to Clause 8.8 in connection with such sale have been paid by the Borrowers before the completion of the dry docking and special survey in respect of that Ship, the relevant portion of the Dry Docking Reserve Amount in relation to that dry docking and special survey will be released to the Borrowers Provided that no Event of Default or Potential Event of Default has occurred and is continuing at the relevant time or will result from such release.
11.21
Compliance Certificate
(a)
The Borrowers shall supply to the Agent, together with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 11.6, a Compliance Certificate (commencing with the financial statements to be provided for the 6-month period ending on 30 June 2021).
(b)
Each Compliance Certificate shall be duly signed by an officer of each Borrower and the Corporate Guarantor, evidencing (inter alia) the Borrower's compliance (or not, as the case may be) with the provisions of Clause 11.19, 11.20 and Clause 15.1.
11.22
No Money laundering
(a)
Each Borrower:

(i)
will not, and will procure that no Security Party, to the extent applicable, will, in connection with this Agreement or any of the other Finance Documents, contravene, or permit any subsidiary to contravene, any law, official requirement or other regulatory measure or procedure implemented to combat "money laundering" (as defined in Article 1 of the Directive 2015/849/EC of the European Parliament and of the Council of the European Union of 20 May 2015) and any comparable US federal and state laws; and

(ii)
shall further submit any documents and declarations on request, if such documents or declarations are required by any Creditor Party to comply with its domestic money laundering and/or legal identification requirements.
(b)
Each Borrower:

(i)
shall confirm to the Agent that it is the beneficiary within the meaning of the German Anti Money Laundering Act (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz)), acting for its own account and not for or on behalf of any other person for each part of the Loan made or to be made available to it under this Agreement (that is to say, it acts for its own account and not for or on behalf of anyone else); and

(ii)
will promptly inform the Agent by written notice, if it is not or ceases to be the beneficiary and will provide in writing the name and address of the beneficiary.
43

(c)
The Agent shall promptly notify the Lenders of any written notice it receives under sub-paragraph (b)(ii) above.
12
CORPORATE UNDERTAKINGS
12.1
General
Each Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 12 at all times during the Security Period except as the Agent, acting with the authorisation of the Majority Lenders, may otherwise permit in writing.
12.2
Maintenance of status
Each Borrower will maintain its separate corporate existence and remain in good standing under the laws of the Republic of the Marshall Islands.
12.3
Negative undertakings
Neither Borrower will:
(a)
change the nature of its business or carry on any business other than the ownership, chartering and operation of the Ship owned by it;
(b)

(i)
pay any dividend or make any other form of distribution if:

(A)
an Event of Default or a Potential Event of Default has occurred and is continuing at the relevant time; or

(B)
an Event of Default will result from the payment of a dividend or the making of any other form of distribution,
provided that if there is a Cash Shortfall and the Borrowers have utilised a Released Amount pursuant to paragraph (c) of Clause 11.19, the Borrowers shall only be permitted to declare or pay a dividend or make any other form of distribution if:

(A)
no Event of Default or a Potential Event of Default has occurred and is continuing at the relevant time; or

(B)
no Event of Default will result from the payment of a dividend or the making of any other form of distribution; and

(C)
the Minimum Liquidity standing to the credit of the Liquidity Accounts has been restored, pursuant to paragraph (c) of Clause 11.19 (Minimum Liquidity), to at least an amount equal to the Minimum Liquidity at the time of such declaration, payment and/or distribution.

(ii)
effect any form of redemption, purchase or return of its issued shares; or
(c)
repay any Subordinated Debt;
(d)
provide any form of credit or financial assistance (including any guarantee or indemnity) to:
44


(i)
a person who is directly or indirectly interested in that Borrower's share or loan capital; or

(ii)
any company in or with which such a person is directly or indirectly interested or connected,
or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to that Borrower than those which it could obtain in a bargain made at arms' length;
(e)
enter into any material agreement other than:

(i)
the Finance Documents and the Underlying Documents; or

(ii)
any other agreement expressly allowed under any other term of this Agreement;
(f)
open or maintain any account with any bank or financial institution except accounts with the Agent, the Account Bank and the Security Trustee for the purposes of the Finance Documents;
(g)
issue, allot or grant any person a right to any shares in its capital or repurchase or reduce its issued shares and/or number of shares it is authorised to issue;
(h)
change its Financial Year;
(i)
acquire any shares or other securities other than short term debt obligations or Treasury bills issued by the US, the UK or a Participating Member State and certificates of deposit issued by major North American or European banks, or enter into any transaction in a derivative; or
(j)
allow a Change of Control; or
(k)
enter into any form of amalgamation, merger or de-merger, acquisition, divesture, split-up or any form of reconstruction or reorganisation.
12.4
Corporate Guarantor's subsidiaries
The Borrowers shall provide the Agent on or before the date of this Agreement with a list of each member of the Group at the date of this Agreement and shall promptly advise the Agent in writing of any amendments to such list.
13
INSURANCE
13.1
General
Each Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 13 at all times during the Security Period except as the Agent, acting with the authorisation of the Majority Lenders, may otherwise permit in writing.
13.2
Maintenance of obligatory insurances
Each Borrower shall keep the Ship owned by it insured at the expense of that Borrower against:
(a)
fire and usual marine risks (including hull and machinery and excess risks);
45

(b)
war risks (including, without limitation, protection and indemnity war risks with a separate limit not less than hull value of the relevant Ship);
(c)
protection and indemnity risks (including, without limitation, protection and indemnity war risks in excess of the amount for war risks (hull) and oil pollution liability risks) in each case in the highest amount available in the international insurance market); and
(d)
any other risks the insurance of which the Security Trustee (acting on the instructions of the Majority Lenders), having regard to practices, recommendations and other circumstances prevailing at the relevant time, may from time to time require by notice to that Borrower.
13.3
Terms of obligatory insurances
Each Borrower shall effect such insurances in such amounts in such currency and upon such terms and conditions (including, without limitation, any LSW 1189 or any other, in the opinion of the Security Trustee, comparable mortgage clause) as shall from time to time be approved in writing by the Security Trustee in its sole discretion, but in any event as follows:
(a)
in Dollars;
(b)
in the case of fire and usual marine risks and war risks, on an agreed value basis in an amount equal to at least the higher of:

(i)
an amount which is equal to 120 per cent. of the aggregate of:

(A)
the Advance relating to the Ship owned by it: and

(B)
the aggregate principal amount secured by Permitted Security Interests over that Ship which have a prior ranking to the Security Interests created by the Finance Documents; and

(ii)
the Market Value of that Ship;
(c)
in the case of oil pollution liability risks, for an amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry (with the International Group of Protection and Indemnity Clubs) and the international marine insurance market (currently $1,000,000,000 for any one accident or occurrence);
(d)
in relation to protection and indemnity risks in respect of the full value and tonnage of that Ship;
(e)
in relation to war risks insurance, extended to cover piracy and terrorism where excluded under the fire and usual marine risks insurance;
(f)
on approved terms and conditions;
(g)
such other risks of whatever nature and howsoever arising in respect of which insurance would be maintained by a prudent owner of a vessel similar to that Ship; and
(h)
through approved brokers and with approved insurance companies and/or underwriters which have a Standard & Poor's rating of at least BBB- or a comparable rating by any other rating agency acceptable to the Security Trustee (acting on the instructions of the Majority Lenders) or, in the case of war risks and protection and indemnity risks, in approved war risks
46

and protection and indemnity risks associations which are members of the International Group of Protection and Indemnity Clubs.
13.4
Further protections for the Creditor Parties
In addition to the terms set out in Clause 13.3, each Borrower shall and shall procure that:
(a)
it and any and all third parties who are named assured or co-assured under any obligatory insurance shall assign their interest in any and all obligatory insurances and other Insurances if so required by the Agent;
(b)
whenever the Security Trustee requires, the obligatory insurances name (or be amended to name) the Security Trustee as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation they may have under any applicable law against the Security Trustee but without the Security Trustee thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;
(c)
the interest of the Security Trustee as assignee and as loss payee shall be duly endorsed on all slips, cover notes, policies, certificates of entry or other instruments of insurance in respect of the obligatory insurances;
(d)
the obligatory insurances shall name the Security Trustee as sole loss payee with such directions for payment as the Security Trustee may specify;
(e)
the obligatory insurances shall provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee shall be made without set-off, counterclaim or deductions or condition whatsoever;
(f)
the obligatory insurances shall provide that the insurers shall waive, to the fullest extent permitted by English law, their entitlement (if any) (whether by statute, common law, equity, or otherwise) to be subrogated to the rights and remedies of the Security Trustee in respect of any rights or interests (secured or not) held by or available to the Security Trustee in respect of the Secured Liabilities, until the Secured Liabilities shall have been fully repaid and discharged, except that the insurers shall not be restricted by the terms of this paragraph (f) from making personal claims against persons (other than either Borrower or any Creditor Party) in circumstances where the insurers have fully discharged their liabilities and obligations under the relevant obligatory insurances;
(g)
the obligatory insurances shall provide that the obligatory insurances shall be primary without right of contribution from other insurances effected by the Security Trustee or any other Creditor Party;
(h)
the obligatory insurances shall provide that the Security Trustee may make proof of loss if that Borrower fails to do so; and
(i)
the obligatory insurances shall provide that if any obligatory insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Security Trustee, or if any obligatory insurance is allowed to lapse for non-payment of premium, such cancellation, charge or lapse shall only be effective against the Security Trustee 14 days (or 7 days in the case of war risks) after receipt by the Security Trustee of prior written notice from the insurers of such cancellation, change or lapse.
47

13.5
Renewal of obligatory insurances
Each Borrower shall:
(a)
at least 14 days before the expiry of any obligatory insurance effected by it:

(i)
notify the Security Trustee of the brokers, underwriters, insurance companies and any protection and indemnity or war risks association through or with whom that Borrower proposes to renew that obligatory insurance and of the proposed terms and conditions of renewal; and

(ii)
seek the Security Trustee's approval to the matters referred to in paragraph (i);
(b)
at least 7 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Security Trustee's approval pursuant to paragraph (a); and
(c)
procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Security Trustee in writing of the terms and conditions of the renewal.
13.6
Copies of policies; letters of undertaking
Each Borrower shall ensure that all approved brokers provide the Security Trustee with pro forma copies of all cover notes and policies relating to the obligatory insurances which they are to effect or renew and of a letter or letters of undertaking in a form required by the Security Trustee and including undertakings by the approved brokers that:
(a)
they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 13.4;
(b)
they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in accordance with the said loss payable clause;
(c)
they will advise the Security Trustee immediately of any material change to the terms of the obligatory insurances;
(d)
they will notify the Security Trustee, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from that Borrower or its agents and, in the event of their receiving instructions to renew, they will promptly notify the Security Trustee of the terms of the instructions; and
(e)
they will not set off against any sum recoverable in respect of a claim relating to the Ship owned by that Borrower under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of that Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of that Ship forthwith upon being so requested by the Security Trustee.
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13.7
Copies of certificates of entry; letters of undertaking
Each Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship owned by that Borrower is entered provides the Security Trustee with:
(a)
a certified copy of the certificate of entry for that Ship;
(b)
a letter or letters of undertaking in such form as may be required by the Security Trustee;
(c)
where required to be issued under the terms of insurance/indemnity provided by that Borrower's protection and indemnity association, a certified copy of each United States of America voyage quarterly declaration (or other similar document or documents) made by that Borrower in accordance with the requirements of such protection and indemnity association; and
(d)
a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority or, as the case may be, protection and indemnity associations in relation to that Ship (if applicable).
13.8
Deposit of original policies
Each Borrower shall ensure that all policies relating to obligatory insurances effected by it are deposited with the approved brokers through which the insurances are effected or renewed.
13.9
Payment of premiums
Each Borrower shall punctually pay all premiums or other sums payable in respect of the obligatory insurances effected by it and produce all relevant receipts when so required by the Security Trustee.
13.10
Guarantees
Each Borrower shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
13.11
Compliance with terms of insurances
Each Borrower shall not do or omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular it shall:
(a)
take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 13.6(c)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Security Trustee has not given its prior approval;
(b)
not make any changes relating to the classification or classification society or manager or operator of the Ship owned by it approved by the underwriters of the obligatory insurances;
(c)
make (and promptly supply copies to the Agent) of all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which that Ship is entered to maintain cover for trading to the United States of America and Exclusive Economic
49

Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation) and, if applicable, shall procure that each Approved Manager complies with this requirement; and
(d)
not employ that Ship, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
13.12
Alteration to terms of insurances
Each Borrower shall neither make nor agree to any alteration to the terms of any obligatory insurance or waive any right relating to any obligatory insurance.
13.13
Settlement of claims
No Borrower shall settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances and shall do all things necessary to ensure such collection or recovery is made.
13.14
Provision of copies of communications
Each Borrower shall provide the Security Trustee upon request, copies of all written communications between that Borrower and:
(a)
the approved brokers;
(b)
the approved protection and indemnity and/or war risks associations; and
(c)
the approved insurance companies and/or underwriters, which relate directly or indirectly to:

(i)
that Borrower's obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls;

(ii)
any credit arrangements made between that Borrower and any of the persons referred to in paragraphs (a) or (b) relating wholly or partly to the effecting or maintenance of the obligatory insurances; and

(iii)
a claim under any Insurances.
13.15
Provision of information and further undertakings
In addition, each Borrower shall promptly provide the Security Trustee (or any persons which it may designate) with any information which the Security Trustee (or any such designated person) requests for the purpose of:
(a)
obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or
(b)
effecting, maintaining or renewing any such insurances as are referred to in Clause 13.16 or dealing with or considering any matters relating to any such insurances,
50

and that Borrower shall:

(i)
do all things necessary and provide the Agent and the Security Trustee with all documents and information to enable the Security Trustee to collect or recover any moneys in respect of the Insurances which are payable to the Security Trustee pursuant to the Finance Documents; and

(ii)
promptly provide the Agent with full information regarding any Major Casualty in consequence whereof the Ship owned by that Borrower has become or may become a Total Loss and agree to any settlement of such casualty or other accident or damage to that Ship only with the Agent's prior written consent,
and that Borrower shall, forthwith upon demand, indemnify the Security Trustee in respect of all fees and other expenses incurred by or for the account of the Security Trustee in connection with any such report as is referred to in paragraph (a).
13.16
Mortgagee's interest and additional perils insurances
The Security Trustee shall be entitled from time to time to effect, maintain and renew all or any of the following insurances in such amounts, on such terms, through such insurers and generally in such manner as the Majority Lenders may from time to time consider appropriate:

(a)
a mortgagee's interest insurance in respect of each Ship providing for the indemnification of the Creditor Parties for any losses under or in connection with any Finance Document which directly or indirectly result from loss of or damage to a Ship or a liability of such Ship or of the Borrower owning that Ship, such loss or damage being prima facie covered by an obligatory insurance but in respect of which there is a non-payment (or reduced payment) by the underwriters by reason of, or on the basis of, an allegation concerning:

(i)
any act or omission on the part of that Borrower, of any operator, charterer, manager or sub-manager of that Ship or of any officer, employee or agent of that Borrower or of any such person, including any breach of warranty or condition or any non-disclosure relating to such obligatory insurance;

(ii)
any act or omission, whether deliberate, negligent or accidental, or any knowledge or privity of that Borrower, any other person referred to in paragraph (i) above, or of any officer, employee or agent of that Borrower or of such a person, including the casting away or damaging of that Ship and/or that Ship being unseaworthy; and/or

(iii)
any other matter capable of being insured against under a mortgagee's interest marine insurance policy, whether or not similar to the foregoing,
in an amount of up to 120 per cent. of the aggregate of:

(A)
the Advance relating to the Ship owned by it: and

(B)
the aggregate principal amount secured by Permitted Security Interests over that Ship which have a prior ranking to the Security Interests created by the Finance Documents,
(the aggregate of (A) and (B) being the "Aggregate Insurable Amount");
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(b)
a mortgagee's interest additional perils insurance in respect of each Ship providing for the indemnification of the Creditor Parties against, amongst other things, any possible losses or other consequences of any Environmental Claim, including the risk of expropriation, arrest or any form of detention of that Ship, the imposition of any Security Interest over that Ship and/or any other matter capable of being insured against under a mortgagee's interest additional perils policy, whether or not similar to the foregoing, and in an amount of up to 110 per cent. of the Aggregate Insurable Amount;
and the Borrowers shall upon demand fully indemnify the Security Trustee in respect of all premiums and other expenses which are incurred in connection with, or with a view to, effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.
13.17
Review of insurance requirements
The Security Trustee shall be entitled to review the requirements of this Clause 13 from time to time in order to take account of any changes in circumstances after the date of this Agreement which are, in the opinion of the Agent (acting on the instructions of the Majority Lenders), significant and capable of affecting the Borrowers, each Ship and its Insurances (including, without limitation, changes in the availability or the cost of insurance coverage or the risks to which the Borrower owning that Ship may be subject) and the Borrowers shall upon demand fully indemnify the Agent in respect of all fees and other expenses incurred by or for the account of the Agent in appointing an independent marine insurance broker or adviser to conduct such review.
13.18
Modification of insurance requirements
The Security Trustee shall notify the Borrowers of any proposed modification under Clause 13.17 to the requirements of this Clause 13 which the Security Trustee reasonably considers appropriate in the circumstances, and such modification shall take effect on and from the date it is notified in writing to the Borrowers as an amendment to this Clause 13 and shall bind the Borrowers accordingly.
13.19
Compliance with mortgagee's instructions
The Security Trustee shall be entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require a Ship to remain at any safe port or to proceed to and remain at any safe port designated by the Security Trustee until the Borrower owning that Ship implements any amendments to the terms of the obligatory insurances and any operational changes required as a result of a notice served under Clause 13.18.
14
SHIP COVENANTS
14.1
General
Each Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 14 at all times during the Security Period except as the Agent, acting with the authorisation of the Majority Lenders, may otherwise permit in writing.
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14.2
Ship's name and registration
Each Borrower shall keep the Ship owned by it registered in its name under an Approved Flag; shall not do, omit to do or allow to be done anything as a result of which such registration might be cancelled or imperilled; and shall not change the name or port of registry of that Ship.
14.3
Repair and classification
Each Borrower shall, and shall procure that each Approved Manager shall, keep the Ship owned by that Borrower in a good and safe condition and state of repair, sea and cargo worthy in all respects:
(a)
consistent with first-class ship ownership and management practice;
(b)
so as to maintain the highest class free of overdue recommendations and conditions, with a classification society which is a member of IACS (being one of Lloyd's Registry, American Bureau of Shipping, Det Norske Veritas, Bureau Veritas, Korean Register of Shipping, Nippon Kaiji Kyoykai or Registro Italiano Navale) and acceptable to the Agent; and
(c)
so as to comply with all laws and regulations applicable to vessels registered at ports in the applicable Approved Flag State or to vessels trading to any jurisdiction to which that Ship may trade from time to time, including but not limited to the ISM Code and the ISPS Code,
and the Agent shall be given power of attorney in the form attached as Schedule 6 to act on behalf of that Borrower in order to, inspect the class records and any files held by the classification society and to require the classification society to provide the Agent or any of its nominees with any information, document or file, it might request and the classification society shall be fully entitled to rely hereon without any further inquiry.
14.4
Classification society undertaking
Each Borrower shall instruct the classification society referred to in Clause 14.3 (and procure that the classification society undertakes with the Security Trustee) in relation to its Ship:
(a)
to send to the Security Trustee, following receipt of a written request from the Security Trustee, certified true copies of all original class records and any other related records held by the classification society in relation to the Ship owned by that Borrower;
(b)
to allow the Security Trustee (or its agents), at any time and from time to time, to inspect the original class and related records of that Ship at the offices of the classification society and to take copies of them;
(c)
to notify the Security Trustee immediately in writing if the classification society:

(i)
receives notification from that Borrower or any person that that Ship's classification society is to be changed; or

(ii)
becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of that Ship's class under the rules or terms and conditions of that Borrower's or that Ship's membership of the classification society;
(d)
following receipt of a written request from the Security Trustee:
53

(i)
to confirm that that Borrower is not in default of any of its contractual obligations or liabilities to the classification society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the classification society; or

(ii)
if that Borrower is in default of any of its contractual obligations or liabilities to the classification society, to specify to the Security Trustee in reasonable detail the facts and circumstances of such default, the consequences thereof, and any remedy period agreed or allowed by the classification society.
14.5
Modification
Neither Borrower shall make any modification or repairs to, or replacement of, its Ship or equipment installed on it which would or might materially alter the structure, type or performance characteristics of that Ship or materially reduce its value.
14.6
Removal of parts
Neither Borrower shall remove any material part of its Ship, or any item of equipment installed on that Ship unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Security Trustee and becomes on installation on that Ship the property of that Borrower and subject to the security constituted by the relevant Mortgage Provided that a Borrower may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by it.
14.7
Surveys
Each Borrower shall submit the Ship owned by it regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Security Trustee provide the Security Trustee, with copies of all survey reports.
14.8
Inspection
Each Borrower shall permit the Security Trustee (by surveyors or other persons appointed by it for that purpose) to board the Ship owned by that Borrower at all reasonable times to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections at the Borrowers' expense, and if the inspector or surveyor appointed by the Security Trustee under this Clause is of the opinion that there are any technical, commercial or operational actions being undertaken or omitted to be undertaken by the Borrower which is the owner of that Ship or the relevant Approved Manager which adversely affect the operation or value of that Ship, the Borrowers shall forthwith (at their expense) on the Security Trustee's demand remedy such action or inaction and provide the Security Trustee with evidence that it has taken such remedial action.
14.9
Prevention of and release from arrest
Each Borrower shall promptly discharge:
(a)
all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Ship owned by it, the Earnings or the Insurances;
54

(b)
all taxes, dues and other amounts charged in respect of that Ship, the Earnings or the Insurances; and
(c)
all other outgoings whatsoever in respect of that Ship, the Earnings or the Insurances,
and, forthwith upon receiving notice of the arrest of that Ship, or of its detention in exercise or purported exercise of any lien or claim, that Borrower shall procure its release by providing bail or otherwise as the circumstances may require.
14.10
Compliance with laws etc.
Each Borrower shall:
(a)
comply, or procure compliance with the ISM Code, the ISPS Code, all Environmental Laws and all other laws or regulations relating to the Ship owned by it, its ownership, operation and management or to the business of that Borrower;
(b)
not employ the Ship owned by it nor allow its employment in any manner contrary to any law or regulation in any relevant jurisdiction including but not limited to the ISM Code and the ISPS Code; and
(c)
in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit that Ship to enter or trade to any zone which is declared a war zone by any government or by the Ship's war risks insurers unless the prior written consent of the Security Trustee has been given and that Borrower has (at its expense) effected any special, additional or modified insurance cover which the Security Trustee may require.
14.11
Provision of information
Each Borrower shall promptly provide the Security Trustee with any information which it requests regarding:
(a)
the Ship owned by it, its employment, position and engagements;
(b)
the Earnings and payments and amounts due to the master and crew of that Ship;
(c)
any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of that Ship and any payments made in respect of that Ship;
(d)
any towages and salvages; and
(e)
its compliance, each Approved Manager's compliance and the compliance of that Ship with the ISM Code and the ISPS Code,
and, upon the Security Trustee's request, provide copies of any current charter relating to that Ship, of any current charter guarantee and copies of that Borrower's or the relevant Approved Manager's Document of Compliance, Safety Management Certificate and the ISSC.
14.12
Notification of certain events
Each Borrower shall:
(a)
before entering into:
55


(i)
any demise charter for any period in respect of its Ship; or

(ii)
any other Assignable Charter,
notify the Agent and provide copies of any draft charter relating to its Ship and, if applicable, any draft charter guarantee and that Borrower shall be entitled to enter into such charter Provided that:

(A)
that Borrower executes in favour of the Security Trustee a specific assignment of all its rights, title and interest in and to such charter and any charter guarantee in the form of a Charterparty Assignment;

(B)
the charterer and any charter guarantor agree to acknowledge to the Security Trustee (1) the specific assignment of such charter and charter guarantee by executing an acknowledgement substantially in the form included in the relevant Charterparty Assignment and (2) that the Mortgage over that Ship has been registered prior to the entry into such charter and the charterer provides to the Security Trustee a letter of undertaking pursuant to which the charterer subordinates all its claims against the relevant Borrower and its Ship to the claims of the Creditor Parties under or in connection with the Finance Documents in the Agreed Form;

(C)
in the case where such charter is a demise charter the charterer undertakes to the Security Trustee (1) to comply with all of that Borrower's undertakings with regard to the employment, insurances, operation, repairs and maintenance of its Ship contained in this Agreement, the Mortgage and the General Assignment in relation to that Ship and (2) to provide an assignment of its interest in the insurances of that Ship in the Agreed Form;

(D)
the relevant Borrower provides certified true and complete copies of the charter relating to its Ship and of any current charter guarantee, if any, immediately after its execution;

(E)
the Agent's receipt of a copy of the charter and its failure or neglect to act, delay or acquiescence in connection with the relevant Borrower's entering into such charter shall not in any way constitute an acceptance by the Agent of whether or not the Earnings under the charter are sufficient to meet the debt service requirements under this Agreement nor shall it in any way affect the Agent's or the Security Trustee's entitlement to exercise its rights under the Finance Documents pursuant to Clause 19 upon the occurrence of an Event of Default arising as a result of an act or omission of the charterer; and

(F)
the Borrower delivers to the Agent such other documents equivalent to those referred to at paragraphs 2, 3, 4, 5, 8, 9 and 10 of Schedule 3, Part A as the Agent may require; and
(b)
immediately notify the Security Trustee by letter, of:

(i)
its entry into any agreement or arrangement for the postponement of any date on which any Earnings are due, the reduction of the amount of any Earnings or otherwise for the release or adverse alteration of any right of that Borrower to any Earnings;
56


(ii)
its entry into any time or consecutive voyage charter in respect of that Ship for a term which exceeds, or which by virtue of any optional extensions may exceed, six months;

(iii)
any casualty which is or is likely to be or to become a Major Casualty;

(iv)
any occurrence as a result of which the Ship owned by it has become or is, by the passing of time or otherwise, likely to become a Total Loss;

(v)
any requirement, condition or recommendation made by any insurer or classification society or by any competent authority which is not immediately complied with;

(vi)
any arrest or detention of that Ship, any exercise or purported exercise of any lien on that Ship or its Earnings or any requisition of that Ship for hire;

(vii)
any intended dry docking of that Ship;

(viii)
any Environmental Claim made against that Borrower or in connection with that Ship, or any Environmental Incident;

(ix)
any claim for breach of the ISM Code or the ISPS Code being made against that Borrower, any Approved Manager or otherwise in connection with that Ship;

(x)
its intention to de-activate or lay up its Ship; or

(xi)
any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with,
and that Borrower shall keep the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of that Borrower's, any Approved Manager's or any other person's response to any of those events or matters.
14.13
Restrictions on chartering, appointment of managers etc.
Neither Borrower shall, in relation to the Ship owned by it:
(a)
enter into any charter in relation to that Ship under which more than two months' hire (or the equivalent) is payable in advance;
(b)
charter that Ship otherwise than on bona fide arm's length terms at the time when that Ship is fixed;
(c)
appoint a manager of that Ship other than the Approved Managers or agree to any alteration to the terms of any Approved Manager's appointment; or
(d)
put that Ship into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed $1,000,000 (or the equivalent in any other currency) unless that person has first given to the Security Trustee and in terms satisfactory to it a written undertaking not to exercise any lien on that Ship or its Earnings for the cost of such work or for any other reason.
14.14
Notice of Mortgage
Each Borrower shall keep the Mortgage relative to its Ship registered against that Ship as a valid first preferred or, as the case may be, priority mortgage, carry on board that Ship a
57

certified copy of that Mortgage and place and maintain in a conspicuous place in the navigation room and the Master's cabin of that Ship a framed printed notice stating that that Ship is mortgaged by that Borrower to the Security Trustee.
14.15
Sharing of Earnings
Neither Borrower shall enter into any agreement or arrangement for the sharing of any Earnings (other than (i) any profit sharing agreement with a charterer which takes effect above an agreed minimum charter hire rate payable to the relevant Borrower under a charter to which that Borrower is a party and (ii) any pool agreement, in either case, on bona fide arm's length terms).
14.16
ISPS Code
Each Borrower shall comply with the ISPS Code and in particular, without limitation, shall:
(a)
procure that the Ship owned by it and the company responsible for that Ship's compliance with the ISPS Code comply with the ISPS Code; and
(b)
maintain for that Ship an ISSC; and
(c)
notify the Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.
15
SECURITY COVER
15.1
Minimum required security cover
Clause 15.2 applies if the Agent notifies the Borrowers that the Security Cover Ratio is below 130 per cent.
15.2
Prepayment; provision of additional security
If the Agent serves a notice on the Borrowers under Clause 15.1, the Borrowers shall prepay such part at least of the Loan as will eliminate the shortfall on or before the date falling 14 Business Days after the date on which the Agent's notice is served under Clause 15.1 (the "Prepayment Date") unless at least five calendar days before the Prepayment Date the Borrowers have provided, or ensured that a third party has provided, additional security which, in the opinion of the Majority Lenders, has a net realisable value at least equal to the shortfall and is documented in such terms as the Agent may, with the authorisation of the Majority Lenders, approve or require.
15.3
Valuation of Ships
(a)
The Market Value of a Mortgaged Ship at any date is that shown by a valuation issued by an Approved Broker selected and appointed by the Agent, such valuation to be addressed to the Agent and prepared:

(i)
as at a date not more than 30 days previously;

(ii)
with or without physical inspection of that Ship (as the Agent may require); and
58


(iii)
on the basis of a sale for prompt delivery for cash on normal arm's length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment.
(b)
If a Borrower disagrees with the valuation obtained by the Agent in accordance with paragraph (a) above, it shall be entitled to obtain a second valuation from an Approved Broker selected by the Borrowers and appointed by the Agent, and prepared in accordance with sub-paragraphs (i) to (iii) of paragraph (a) above. In that case the Market Value of the Mortgaged Ship shall be the arithmetic mean of the two valuations issued provided that if the Borrowers do not elect to appoint an Approved Broker within 14 days after the Agent's request to receive a valuation of a Mortgaged Ship, the Market Value of that Mortgaged Ship shall be that shown in the sole valuation obtained by the Agent in accordance with paragraph (a) above.
15.4
Value of additional vessel security
The net realisable value of any additional security which is provided under Clause 15.2 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 15.3.
15.5
Valuations binding
Any valuation under Clause 15.2, 15.3 or 15.4 shall be binding and conclusive as regards the Borrowers, as shall be any valuation which the Majority Lenders make of any additional security which does not consist of or include a Security Interest.
15.6
Provision of information
The Borrowers shall promptly provide the Agent and any Approved Broker or expert acting under Clause 15.3 or 15.4 with any information which the Agent or that Approved Broker or expert may request for the purposes of the valuation; and, if the Borrowers fail to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which that Approved Broker or the Majority Lenders (or the expert appointed by them) consider prudent.
15.7
Payment of valuation expenses
Without prejudice to the generality of the Borrowers' obligations under Clauses 20.2, 20.3 and 21.3, the Borrowers shall, on demand, pay the Agent the amount of the fees and expenses of any Approved Broker or expert instructed by the Agent under this Clause and all legal and other expenses incurred by any Creditor Party in connection with any matter arising out of this Clause Provided that so long as no Event of Default has occurred which is continuing the Borrowers shall not be obliged to pay any such fees and expenses in respect of more than two sets of valuations of each Ship in any calendar year (in addition to the set of valuations to determine the Initial Market Value of each Ship obtained prior to the Drawdown Date).
15.8
Frequency of valuations
The Borrowers acknowledge and agree that the Agent may commission valuation(s) of either Ship at such times as the Agent (acting on the instructions of the Lenders) shall deem necessary and, in any event, not less than once during each 6-month period of the Security Period.
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16
PAYMENTS AND CALCULATIONS
16.1
Currency and method of payments
All payments to be made by the Lenders or by either Borrower under a Finance Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:
(a)
by not later than 11.00 a.m. (New York City time) on the due date;
(b)
in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement);
(c)
in the case of an amount payable by a Lender to the Agent or by either Borrower to the Agent or any Lender, to the account of the Agent at J.P. Morgan Chase Bank (SWIFT Code CHASUS33) (Account No. 001 1331 808 in favour of Hamburg Commercial Bank AG, SWIFT Code HSHNDEHH; Reference "MAGIC HORIZON / MAGIC NOVA") or to such other account with such other bank as the Agent may from time to time notify to the Borrowers and the other Creditor Parties; and
(d)
in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to the Borrowers and the other Creditor Parties.
16.2
Payment on non-Business Day
If any payment by either Borrower under a Finance Document would otherwise fall due on a day which is not a Business Day:
(a)
the due date shall be extended to the next succeeding Business Day; or
(b)
if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day,
and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due date.
16.3
Basis for calculation of periodic payments
All interest and commitment fee and any other payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360-day year.
16.4
Distribution of payments to Creditor Parties
Subject to Clauses 16.5, 16.6 and 16.7:
(a)
any amount received by the Agent under a Finance Document for distribution or remittance to a Lender or the Security Trustee shall be made available by the Agent to that Lender or, as the case may be, the Security Trustee by payment, with funds having the same value as the funds received, to such account as the Lender or the Security Trustee may have notified to the Agent not less than five Business Days previously; and
60

(b)
amounts to be applied in satisfying amounts of a particular category which are due to the Lenders generally shall be distributed by the Agent to each Lender pro rata to the amount in that category which is due to it.
16.5
Permitted deductions by Agent
Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent may, before making an amount available to a Lender, deduct and withhold from that amount any sum which is then due and payable to the Agent from that Lender under any Finance Document or any sum which the Agent is then entitled under any Finance Document to require that Lender to pay on demand.
16.6
Agent only obliged to pay when monies received
Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent shall not be obliged to make available to either Borrower or any Lender any sum which the Agent is expecting to receive for remittance or distribution to that Borrower or that Lender until the Agent has satisfied itself that it has received that sum.
16.7
Refund to Agent of monies not received
If and to the extent that the Agent makes available a sum to a Borrower or a Lender without first having received that sum, that Borrower or (as the case may be) the Lender concerned shall, on demand:
(a)
refund the sum in full to the Agent; and
(b)
pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or other loss, liability or expense incurred by the Agent as a result of making the sum available before receiving it.
16.8
Agent may assume receipt
Clause 16.7 shall not affect any claim which the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it had not received the sum which it made available.
16.9
Creditor Party accounts
Each Creditor Party shall maintain accounts showing the amounts owing to it by the Borrowers and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrowers and any Security Party.
16.10
Agent's memorandum account
The Agent shall maintain a memorandum account showing the amounts advanced by the Lenders and all other sums owing to the Agent, the Security Trustee and each Lender from the Borrowers and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrowers and any Security Party.
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16.11
Accounts prima facie evidence
If any accounts maintained under Clauses 16.9 and 16.10 show an amount to be owing by a Borrower or a Security Party to a Creditor Party, those accounts shall be prima facie evidence that that amount is owing to that Creditor Party.
17
APPLICATION OF RECEIPTS
17.1
Normal order of application
Except as any Finance Document may otherwise provide, any sums which are received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:
(a)
FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents in the following order and proportions:

(i)
firstly, in or towards satisfaction pro rata of all amounts then due and payable to the Creditor Parties under the Finance Documents (including, but without limitation, all amounts payable by either Borrower under Clauses 20, 21 and 22 of this Agreement or by either Borrower or any Security Party under any corresponding or similar provision in any other Finance Document) other than those amounts referred to at paragraphs (ii) and (iii);

(ii)
secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Creditor Parties under the Finance Documents; and

(iii)
thirdly, in or towards satisfaction of the Loan;
(b)
SECONDLY: in retention of an amount equal to any amount not then due and payable under any Finance Document but which the Agent, by notice to the Borrowers (or either of them), the Security Parties and the other Creditor Parties, states in its reasonable opinion will either or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 17.1(a); and
(c)
THIRDLY: any surplus shall be paid to the Borrowers or to any other person appearing to be entitled to it.
17.2
Application by any covered bond Lender
If and to the extent that any Lender includes the Loan and/or a Mortgage in its covered bond register, any enforcement proceeds recovered under the Finance Documents and attributable to it under the relevant Finance Document shall, notwithstanding the provisions of Clause 17.1(a), be applied by it first to the part of the Loan that corresponds to that Lender's Contribution registered in its covered bond register and thereafter in the following order:
(a)
firstly, in or towards satisfaction of the amounts set out under Clause 17.1(a)(i);
(b)
secondly, in or towards satisfaction of the amounts set out under Clause 17.1(a)(ii); and
(c)
thirdly, in or towards satisfaction of any part of the Loan that corresponds to any unregistered part of that Lender's contribution.
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17.3
Variation of order of application
The Agent may, with the authorisation of the Majority Lenders, by notice to the Borrowers, the Security Parties and the other Creditor Parties provide for a different manner of application from that set out in Clause 17.1 (but not, for the avoidance of doubt, that set out in Clause 17.2) either as regards a specified sum or sums or as regards sums in a specified category or categories.
17.4
Notice of variation of order of application
The Agent may give notices under Clause 17.3 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.
17.5
Appropriation rights overridden
This Clause 17 and any notice which the Agent gives under Clause 17.3 shall override any right of appropriation possessed, and any appropriation made, by either Borrower or any Security Party.
18
APPLICATION OF EARNINGS
18.1
Payment of Earnings
Each Borrower undertakes with each Creditor Party that, throughout the Security Period (and subject only to the provisions of the General Assignment to which it is a party):
(a)
it shall maintain the Accounts with the Account Bank;
(b)
it shall ensure that all Earnings of the Ship owned by it are paid to the Earnings Account for that Ship;
(c)
the Minimum Liquidity required pursuant to Clause 11.19 shall be maintained in the Liquidity Accounts;
(d)
the Dry Docking Reserve Amount required pursuant to Clause 11.20 shall be maintained in the Dry Dock Reserve Account;
18.2
Monthly retentions to Retention Account
The Borrowers undertake with each Creditor Party to ensure that, on and from the date falling one month after each Drawdown Date and at monthly intervals thereafter during the Security Period, there are transferred in respect of each Advance drawn on that Drawdown Date to the Retention Account out of the Earnings received in the relevant Earnings Account during the preceding month:
(a)
one-third of the amount of the relevant Instalment falling due in respect of that Advance under Clause 8.1 on the next Repayment Date; and
(b)
the relevant fraction of the aggregate amount of interest on that Advance which is payable on the next due date for payment of interest under this Agreement,
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and the Borrowers irrevocably authorise the Agent to make those transfers (in its sole discretion and without any obligation) if the Borrowers fail to do so.
The "relevant fraction", in relation to paragraph (b), is a fraction of which the numerator is 1 and the denominator the number of months comprised in the then current Interest Period (or if the current Interest Period in respect of that Advance ends after the next due date for payment of interest under this Agreement, the number of months from the later of the commencement of the current Interest Period in respect of that Advance or the last due date for payment of interest to the next due date for payment of interest in respect of that Advance under this Agreement).
18.3
Shortfall in Earnings
If the aggregate Earnings received in the Earnings Accounts are insufficient at any time for the required amount to be transferred to the Retention Account under Clause 18.2, the Borrowers shall immediately pay the amount of the insufficiency into the Retention Account.
18.4
Application of retentions
Until an Event of Default or a Potential Event of Default occurs, the Agent shall, to the extent there are sufficient funds standing to the credit of the Retention Account, on each Repayment Date in respect of an Advance and on each due date for the payment of interest in respect of that Advance under this Agreement distribute to the Lenders in accordance with Clause 16.4 so much of the then balance on the Retention Account as equals:
(a)
the Instalment in respect of the relevant Advance due on that Repayment Date pursuant to Clause 8.1; or
(b)
the amount of interest in respect of the relevant Advance payable on that interest payment date,
in discharge of the Borrowers' liability for that Instalment or that interest.
18.5
Interest accrued on the Accounts
Any credit balance on each Account shall bear interest at the rate from time to time offered by the Agent to its customers for Dollar deposits of similar amounts and for periods similar to those for which such balances appear to the Agent likely to remain on that Account.
18.6
Release of accrued interest
Interest accruing under Clause 18.5 shall be credited to the relevant Account and may be released to a Borrower pursuant to Clause 18.10.
18.7
Location of Accounts
Each Borrower shall promptly:
(a)
comply with any requirement of the Agent as to the location or re-location of the Accounts (or any of them); and
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(b)
execute any documents which the Agent specifies to create or maintain in favour of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) the Accounts.
18.8
Debits for fees, expenses etc.
The Agent shall be entitled (but not obliged) from time to time to debit any Earnings Account without prior notice in order to discharge any amount due and payable under Clauses 20 or 21 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clauses 20 or 21.
18.9
Borrowers' obligations unaffected
The provisions of this Clause 18 (as distinct from a distribution effected under Clause 18.4) do not affect:
(a)
the liability of the Borrowers to make payments of principal and interest on the due dates; or
(b)
any other liability or obligation of the Borrowers or any Security Party under any Finance Document.
18.10
Restriction on withdrawal
During the Security Period no sum may be withdrawn by a Borrower from any Liquidity Account, the Dry Dock Reserve Account or the Retention Account (other than interest pursuant to Clause 18.6 and/or any sums withdrawn in accordance with, and pursuant to, the terms of Clauses 11.19(c) and/or 11.20(d)), provided that no Event of Default or Potential Event of Default has occurred which is continuing), without the prior written consent of the Agent.
The Borrowers may, in any calendar month, after having transferred and/or after having taken into account all amounts due or which will become due to the Retention Account in such calendar month in accordance with Clause 18.2, withdraw any surplus (a "Surplus") from the Earnings Accounts as they may think fit for purposes permitted by this Agreement and the other Finance Documents Provided always no Event of Default or Potential Event of Default has occurred which is continuing in which case any Surplus shall remain on the Earnings Accounts and the Borrowers may only withdraw the Surplus (or any part thereof) with the prior written consent of the Agent (acting upon the instructions of the Majority Lenders) in order to satisfy the documented and properly incurred operating expenses of the Ships.
19
EVENTS OF DEFAULT
19.1
Events of Default
An Event of Default occurs if:
(a)
any Borrower or any Security Party fails to pay when due or (if so payable) on demand any sum payable under a Finance Document or under any document relating to a Finance Document unless:

(i)
its failure to pay is caused by administrative or technical error or a Disruption Event; and

(ii)
payment is made within three Business Days; or
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(b)
any breach occurs of Clause 2.3, 9.2, 11.2, 11.3, 11.18, 11.19, 11.21, 12.2, 12.3 or 15.2; or
(c)
any breach by any Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a) or (b)) which, in the opinion of the Majority Lenders, is capable of remedy, and such default continues unremedied 15 Business Days after written notice from the Agent requesting action to remedy the same; or
(d)
(subject to any applicable grace period specified in the Finance Documents) any breach by any Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a), (b) or (c)); or
(e)
any representation, warranty or statement made or repeated by, or by an officer of, a Borrower or a Security Party in a Finance Document or in a Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading when it is made or repeated; or
(f)
any of the following occurs in relation to any Financial Indebtedness which, (other than in the case of the Borrowers) exceeds in aggregate $500,000 (or its equivalent in any other currency) of a Relevant Person:

(i)
any Financial Indebtedness of a Relevant Person is not paid when due; or

(ii)
any Financial Indebtedness of a Relevant Person becomes due and payable or capable of being declared due and payable prior to its stated maturity date as a consequence of any event of default; or

(iii)
a lease, hire purchase agreement or charter creating any Financial Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being terminated as a consequence of any termination event; or

(iv)
any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a result of any event of default, or cash cover is required, or becomes capable of being required, in respect of such a facility as a result of any event of default; or

(v)
any Security Interest securing any Financial Indebtedness of a Relevant Person becomes enforceable; or
(g)
any of the following occurs in relation to a Relevant Person:

(i)
a Relevant Person becomes, in the opinion of the Majority Lenders, unable to pay its debts as they fall due; or

(ii)
any assets of a Relevant Person are subject to any form of execution, attachment, arrest, sequestration or distress or any form of freezing order; or

(iii)
any administrative or other receiver is appointed over any asset of a Relevant Person; or

(iv)
an administrator is appointed (whether by the court or otherwise) in respect of a Relevant Person; or
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(v)
any formal declaration of bankruptcy or any formal statement to the effect that a Relevant Person is insolvent or likely to become insolvent is made by a Relevant Person or by the directors of a Relevant Person or, in any proceedings, by a lawyer acting for a Relevant Person; or

(vi)
a provisional liquidator is appointed in respect of a Relevant Person, a winding up order is made in relation to a Relevant Person or a winding up resolution is passed by a Relevant Person; or

(vii)
a resolution is passed, an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by (aa) a Relevant Person, (bb) the members or directors of a Relevant Person, (cc) a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person, or (dd) a government minister or public or regulatory authority of a Pertinent Jurisdiction for or with a view to the winding up of that or another Relevant Person or the appointment of a provisional liquidator or administrator in respect of that or another Relevant Person, or that or another Relevant Person ceasing or suspending business operations or payments to creditors, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrowers or the Corporate Guarantor which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Majority Lenders and effected not later than three months after the commencement of the winding up; or

(viii)
an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by a creditor of a Relevant Person (other than a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person) for the winding up of a Relevant Person or the appointment of a provisional liquidator or administrator in respect of a Relevant Person in any Pertinent Jurisdiction, unless the proposed winding up, appointment of a provisional liquidator or administration is being contested in good faith, on substantial grounds and not with a view to some other insolvency law procedure being implemented instead and either (aa) the application or petition is dismissed or withdrawn within 30 days of being made or presented, or (bb) within 30 days of the administration notice being given or filed, or the other relevant steps being taken, other action is taken which will ensure that there will be no administration and (in both cases (aa) or (bb)) the Relevant Person will continue to carry on business in the ordinary way and without being the subject of any actual, interim or pending insolvency law procedure; or

(ix)
a Relevant Person or its directors take any steps (whether by making or presenting an application or petition to a court, or submitting or presenting a document setting out a proposal or proposed terms, or otherwise) with a view to obtaining, in relation to that or another Relevant Person, any form of moratorium, suspension or deferral of payments, reorganisation of debt (or certain debt) or arrangement with all or a substantial proportion (by number or value) of creditors or of any class of them or any such moratorium, suspension or deferral of payments, reorganisation or arrangement is effected by court order, by the filing of documents with a court, by means of a contract or in any other way at all; or

(x)
any meeting of the members or directors, or of any committee of the board or senior management, of a Relevant Person is held or summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described
67

in paragraphs (iv) to (ix) or a step preparatory to such action, or (with or without such a meeting) the members, directors or such a committee resolve or agree that such an action or step should be taken or should be taken if certain conditions materialise or fail to materialise; or

(xi)
in a country other than England, any event occurs, any proceedings are opened or commenced or any step is taken which, in the opinion of the Majority Lenders is similar to any of the foregoing; or
(h)
any Borrower ceases or suspends carrying on its business or a part of its business which, in the opinion of the Majority Lenders, is material in the context of this Agreement; or
(i)
it becomes unlawful in any Pertinent Jurisdiction or impossible:

(i)
for any Borrower or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Majority Lenders consider material under a Finance Document; or

(ii)
for the Agent, the Security Trustee or the Lenders to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or
(j)
any official consent necessary to enable any Borrower to own, operate or charter the Ship owned by it or to enable any Borrower or any Security Party to comply with any provision which the Majority Lenders consider material of a Finance Document or any Underlying Document is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or
(k)
it appears to the Majority Lenders that, without their prior consent, a Change of Control has occurred or probably has occurred after the date of this Agreement in respect of a Security Party; or
(l)
any provision which the Majority Lenders consider material of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest; or
(m)
a Relevant Person rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or evidences an intention to rescind or repudiate a Finance Document;
(n)
the security constituted by a Finance Document is in any way imperilled or in jeopardy; or
(o)
any other event occurs or any other circumstances arise or develop including, without limitation:

(i)
a change in the financial position, state of affairs or prospects of any Borrower, the Corporate Guarantor or any other Security Party; or

(ii)
any accident or other event involving any Ship or another vessel owned, chartered or operated by a Relevant Person (other than Castor Ships); or

(iii)
the threat or commencement of legal or administrative action involving a Borrower, a Ship, any of the Approved Managers or any Security Party; or
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(iv)
the withdrawal of any material license or governmental or regulatory approval in respect of a Ship, a Borrower, any Approved Manager or any Borrower's or Approved Manager's business (unless such withdrawal can be contested with the effect of suspension and is in fact so contested in good faith by the Borrowers or any Approved Manager),
which constitutes a Material Adverse Change.
19.2
Actions following an Event of Default
On, or at any time after, the occurrence of an Event of Default:
(a)
the Agent may, and if so instructed by the Majority Lenders, the Agent shall:

(i)
serve on the Borrowers a notice stating that all or part of the Commitments and of the other obligations of each Lender to the Borrowers under this Agreement are cancelled; and/or

(ii)
serve on the Borrowers a notice stating that all or part of the Loan together with accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand; and/or

(iii)
take any other action which, as a result of the Event of Default or any notice served under paragraph (i) or (ii), the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable law; and/or
(b)
the Security Trustee may, and if so instructed by the Agent, acting with the authorisation of the Majority Lenders, the Security Trustee shall take any action which, as a result of the Event of Default or any notice served under paragraph (a)(i) or (a)(ii), the Security Trustee, the Agent, the Mandated Lead Arranger and/or the Lenders are entitled to take under any Finance Document or any applicable law.
19.3
Termination of Commitments
On the service of a notice under Clause 19.2(a)(i), the Commitments and all other obligations of each Lender to the Borrowers under this Agreement shall be cancelled.
19.4
Acceleration of Loan
On the service of a notice under Clause 19.2(a)(ii), all or, as the case may be, the part of the Loan specified in the notice together with accrued interest and all other amounts accrued or owing from the Borrowers or any Security Party under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand.
19.5
Multiple notices; action without notice
The Agent may serve notices under Clauses 19.2(a)(i) or 19.2(a)(ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 19.2 if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.
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19.6
Notification of Creditor Parties and Security Parties
The Agent shall send to each Lender, the Security Trustee and each Security Party a copy or the text of any notice which the Agent serves on the Borrowers under Clause 19.2; but the notice shall become effective when it is served on the Borrowers, and no failure or delay by the Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide any Borrower or any Security Party with any form of claim or defence.
19.7
Creditor Party rights unimpaired
Nothing in this Clause shall be taken to impair or restrict the exercise of any right given to individual Lenders under a Finance Document or the general law; and, in particular, this Clause is without prejudice to Clause 3.1.
19.8
Exclusion of Creditor Party liability
No Creditor Party, and no receiver or manager appointed by the Security Trustee, shall have any liability to a Borrower or a Security Party:
(a)
for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or
(b)
as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset,
except that this does not exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly and mainly caused by the dishonesty or the wilful misconduct of such Creditor Party's own officers and employees or (as the case may be) such receiver's or manager's own partners or employees.
19.9
Relevant Persons
In this Clause 19, a "Relevant Person" means a Borrower, the Corporate Guarantor, any Security Party and any member of the Group.
19.10
Interpretation
In Clause 19.1(f) references to an event of default or a termination event include any event, howsoever described, which is similar to an event of default in a facility agreement or a termination event in a finance lease; and in Clause 19.1(g) "petition" includes an application.
20
FEES AND EXPENSES
20.1
Structuring and commitment fees:
The Borrowers shall pay to the Agent:
(a)
on the earlier of (i) the Drawdown Date and (ii) the last day of the Availability Period, a non-refundable structuring fee in the amount equal to $152,900 (representing 1.0 per cent. of the Total Commitments as at the date of this Agreement) for distribution among the Lenders pro rata to their Commitments;
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(b)
a non-refundable commitment fee, at the rate of 1.00 per cent. per annum on the undrawn or uncancelled amount of the Total Commitments, payable quarterly in arrears for distribution among the Lenders pro rata to their Commitments, during the period from (and including)18 December 2020 (being the date of the Borrowers' acceptance of the firm offer letter in respect of the Loan) to the earlier of (i) the last Drawdown Date to occur under this Agreement and (ii) the last day of the Availability Period which is the last to expire.
20.2
Costs of negotiation, preparation etc.
The Borrowers shall pay to the Agent on its demand the amount of all legal and other expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document.
20.3
Costs of variations, amendments, enforcement etc.
The Borrowers shall pay to the Agent, on the Agent's demand, for the account of the Creditor Party concerned, the amount of all legal and other expenses incurred by a Creditor Party in connection with:
(a)
the response to, or the evaluation, negotiation or implementation of, any amendment or supplement (or any proposal for such an amendment or supplement):

(i)
requested (or, in the case of a proposal, made) by or on behalf of the Borrowers and relating to a Finance Document or any other Pertinent Document; or

(ii)
which is contemplated in Clause 27.4;
(b)
any consent, waiver or suspension of rights by the Lenders, the Majority Lenders or the Creditor Party concerned or any proposal for any of the foregoing requested (or, in the case of a proposal, made) by or on behalf of the Borrowers under or in connection with a Finance Document or any other Pertinent Document;
(c)
the valuation of any security provided or offered under and pursuant to Clause 15 or any other matter relating to such security; or
(d)
any step taken by the Lender concerned with a view to the preservation, protection, exercise or enforcement of any rights or Security Interest created by a Finance Document or for any similar purpose including, without limitation, any proceedings to recover or retain proceeds of enforcement or any other proceedings following enforcement proceedings until the date all outstanding indebtedness to the Creditor Parties under the Finance Documents and any other Pertinent Document is repaid in full.
There shall be recoverable under paragraph (d) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.
20.4
Documentary taxes
The Borrowers shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Agent's demand, fully indemnify each Creditor Party against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrowers to pay such a tax.
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20.5
Certification of amounts
A notice which is signed by two officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 20 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.
21
INDEMNITIES
21.1
Indemnities regarding borrowing and repayment of Loan
The Borrowers shall fully indemnify the Agent and each Lender on the Agent's demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably and with due diligence estimates that it will incur, as a result of, or in connection with:
(a)
an Advance not being borrowed on the date specified in the relevant Drawdown Notice for any reason other than a default by the Lender claiming the indemnity after the relevant Drawdown Notice has been served in accordance with the provisions of this Agreement;
(b)
the receipt or recovery of all or any part of the Loan or an overdue sum otherwise than on the last day of an Interest Period or other relevant period;
(c)
any failure (for whatever reason) by the Borrowers (or any of them) to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrowers on the amount concerned under Clause 7) including but not limited to any costs and expenses of enforcing any Security Interests created by the Finance Documents and any claims, liabilities and losses which may be brought against, or incurred by, a Creditor Party when enforcing any Security Interests created by the Finance Documents; and
(d)
the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Loan under Clause 19,
and in respect of any tax (other than tax on its overall net income (and a FATCA Deduction) for which a Creditor Party is liable in connection with any amount paid or payable to that Creditor Party (whether for its own account or otherwise) under any Finance Document.
21.2
Break Costs
If a Lender (the "Notifying Lender") notifies the Agent that as a consequence of receipt or recovery of all or any part of the Loan (a "Payment") on a day other than the last day of an Interest Period applicable to the sum received or recovered the Notifying Lender has or will, with effect from a specified date, incur Break Costs:
(a)
the Agent shall promptly notify the Borrowers of a notice it receives from a Notifying Lender under this Clause 21.2;
(b)
the Borrowers shall, within five Business Days of the Agent's demand, pay to the Agent for the account of the Notifying Lender the amount of such Break Costs; and
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(c)
the Notifying Lender shall, as soon as reasonably practicable, following a request by the Borrowers, provide a certificate confirming the amount of the Notifying Lender's Break Costs for the Interest Period in which they accrue, such certificate to be, in the absence of manifest error, conclusive and binding on the Borrowers.
In this Clause 21.2, "Break Costs" means, in relation to a Payment the amount (if any) by which:

(i)
the interest which the Notifying Lender, should have received in accordance with Clause 5 in respect of the sum received or recovered from the date of receipt or recovery of such Payment to the last day of the then current Interest Period applicable to the sum received or recovered had such Payment been made on the last day of such Interest Period;
exceeds

(ii)
the amount which the Notifying Lender, would be able to obtain by placing an amount equal to such Payment on deposit with a leading bank in the Relevant Interbank Market for a period commencing on the Business Day following receipt or recovery of such Payment (as the case may be) and ending on the last day of the then current Interest Period applicable to the sum received or recovered.
21.3
Other breakage costs
Without limiting its generality, Clause 21.1 covers any claim, expense, liability or loss, including (without limitation) a loss of a prospective profit, incurred by a Lender in borrowing, liquidating or re-employing deposits from third parties acquired, contracted for or arranged to fund, effect or maintain all or any part of its Contribution and/or any overdue amount (or an aggregate amount which includes its Contribution or any overdue amount) other than claims, expenses, liabilities and losses which are shown to have been directly and mainly caused by the gross negligence or wilful misconduct of the officers or employees of the Creditor Party concerned.
21.4
Miscellaneous indemnities
The Borrowers shall fully indemnify each Creditor Party severally on their respective demands, without prejudice to any of their other rights under any of the Finance Documents, in respect of all claims, expenses, liabilities and losses which may be made or brought against or sustained or incurred by a Creditor Party, in any country, as a result of or in connection with:
(a)
any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance Document;
(b)
investigating any event which the Creditor Party concerned reasonably believes constitutes an Event of Default or Potential Event of Default;
(c)
acting or relying on any notice, request or instruction which the Creditor Party concerned reasonably believes to be genuine, correct and appropriately authorised; or
(d)
any other Pertinent Matter,
other than claims, expenses, liabilities and losses which are shown to have been directly and mainly caused by the dishonesty, gross negligence or wilful misconduct of the officers or employees of the Creditor Party concerned.
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21.5
Environmental Indemnity
Without prejudice to the generality of Clause 21.4, this Clause 21.5 covers any claims, demands, proceedings, liabilities, taxes, losses, liabilities or expenses of every kind which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code or the ISPS Code, any Environmental Law.
21.6
Currency indemnity
If any sum due from a Borrower or any Security Party to a Creditor Party under a Finance Document or under any order, award or judgment relating to a Finance Document (a "Sum") has to be converted from the currency in which the Finance Document provided for the Sum to be paid (the "Contractual Currency") into another currency (the "Payment Currency") for the purpose of:
(a)
making, filing or lodging any claim or proof against a Borrower or any Security Party, whether in its liquidation, any arrangement involving it or otherwise; or
(b)
obtaining an order, judgment or award from any court or other tribunal in relation to any litigation or arbitration proceedings; or
(c)
enforcing any such order, judgment or award,
the Borrowers shall as an independent obligation, within three Business Days of demand, indemnify the Creditor Party to whom that Sum is due against any cost, loss or liability arising when the payment actually received by that Creditor Party is converted at the available rate of exchange back into the Contractual Currency including any discrepancy between (A) the rate of exchange actually used to convert the Sum from the Payment Currency into the Contractual Currency and (B) the available rate of exchange.
In this Clause 21.6, the "available rate of exchange" means the rate at which the Creditor Party concerned is able at the opening of business (London time) on the Business Day after it receives the Sum to purchase the Contractual Currency with the Payment Currency.
Each Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.
If any Creditor Party receives any Sum in a currency other than the Contractual Currency, the Borrowers shall indemnify in full the Creditor Party concerned against any cost, loss or liability arising directly or indirectly from any conversion of such Sum to the Contractual Currency.
This Clause 21.6 creates a separate liability of that Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.
21.7
Certification of amounts
A notice which is signed by two officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.
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21.8
Sums deemed due to a Lender
For the purposes of this Clause 21, a sum payable by the Borrowers to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.
22
NO SET-OFF OR TAX DEDUCTION
22.1
No deductions
All amounts due from the Borrowers under a Finance Document shall be paid:
(a)
without any form of set-off, counter-claim, cross-claim or condition; and
(b)
free and clear of any tax deduction except a tax deduction which a Borrower is required by law to make.
22.2
Grossing-up for taxes
If, at any time, a Borrower is required by law, regulation or regulatory requirement to make a tax deduction from any payment due under a Finance Document:
(a)
that Borrower shall notify the Agent as soon as it becomes aware of the requirement;
(b)
the amount due in respect of the payment shall be increased by the amount necessary to ensure that, after the making of such tax deduction, each Creditor Party receives on the due date for such payment (and retains free from any liability relating to the tax deduction) a net amount which is equal to the full amount which it would have received had no such tax deduction been required to be made; and
(c)
that Borrower shall pay the full amount of the tax required to be deducted to the appropriate taxation authority promptly in accordance with the relevant law, regulation or regulatory requirement, and in any event before any fine or penalty arises.
22.3
Indemnity and evidence of payment of taxes
The Borrowers shall fully indemnify each Creditor Party on the Agent's demand in respect of all claims, expenses, liabilities and losses incurred by any Creditor Party by reason of any failure of the Borrowers (or either of them) to make any tax deduction or by reason of any increased payment not being made on the due date for such payment in accordance with Clause 22.2.  Within 30 days after making any tax deduction, the Borrowers or, as the case may be, the relevant Borrower shall deliver to the Agent any receipts, certificates or other documentary evidence satisfactory to the Agent that the tax had been paid to the appropriate taxation authority.
22.4
Exclusion of tax on overall net income
In this Clause 22 "tax deduction" means any deduction or withholding from any payment due under a Finance Document for or on account of any present or future tax except:
(a)
tax on a Creditor Party's overall net income; and
(b)
a FATCA Deduction.
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22.5
FATCA Information
(a)
Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:

(i)
confirm to that other Party whether it is:

(A)
a FATCA Exempt Party; or

(B)
not a FATCA Exempt Party; and

(ii)
supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA; and

(iii)
supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation or exchange of information regime.
(b)
If a Party confirms to another Party pursuant to sub-paragraph (i) of paragraph (a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c)
Paragraph (a) above shall not oblige any Creditor Party to do anything and sub-paragraph (iii) of paragraph (a) above shall not oblige any other Party to do anything which would or might in its reasonable opinion constitute a breach of:

(i)
any law or regulation;

(ii)
any fiduciary duty; or

(iii)
any duty of confidentiality.
(d)
If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with sub-paragraphs (i) or (ii) of paragraph (a) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
(e)
If a Lender knows or has reason to know that a Borrower is a US Tax Obligor, or where the Agent reasonably believes that its obligations under FATCA require it, each Lender shall, within ten Business Days of:

(i)
where the Lender knows or has reason to know that a Borrower is a US Tax Obligor and the relevant Lender is a Party as at the date of this Agreement, the date of this Agreement;

(ii)
where the Lender knows or has reason to know that a Borrower is a US Tax Obligor and the relevant Lender became a Party after the date of this Agreement, the date on which the relevant Transfer Certificate became effective; or

(iii)
the date of a request from the Agent,
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supply to the Agent:

(iv)
a withholding certificate on US Internal Revenue Service Form W-8 or Form W-9 (or any successor form) (as applicable); or

(v)
any withholding statement and other documentation, authorisations and waivers as the Agent may require to certify or establish the status of such Lender under FATCA.
The Agent shall provide any withholding certificate, withholding statement, documentation, authorisations and waivers it receives from a Lender pursuant to this paragraph (e) to the Borrowers, to the extent required for compliance with FATCA or any other law or regulation, and shall be entitled to rely on any such withholding certificate, withholding statement, documentation, authorisations and waivers provided without further verification. The Agent shall not be liable for any action taken by it under or in connection with this paragraph (e).
(f)
Each Lender agrees that if any withholding certificate, withholding statement, documentation, authorisations and waivers provided to the Agent pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, it shall promptly update such withholding certificate, withholding statement, documentation, authorisations and waivers or promptly notify the Agent in writing of its legal inability to do so.  The Agent shall provide any such updated withholding certificate, withholding statement, documentation, authorisations and waivers to the Borrowers, to the extent required for compliance with FATCA or any other law or regulation.  The Agent shall not be liable for any action taken by it under or in connection with this paragraph (f).
22.6
FATCA Deduction
(a)
Each Party may make any FATCA Deduction as it reasonably determines it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(b)
Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify each Borrower and the Agent and the Agent shall notify the other Creditor Parties.
23
ILLEGALITY, ETC.
23.1
Illegality
This Clause 23 applies if a Lender (the "Notifying Lender") notifies the Agent that it has become, or will with effect from a specified date, become:
(a)
unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or
(b)
contrary to, or inconsistent with, any regulation,
for the Notifying Lender to perform, maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement or to fund or maintain the Loan.
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23.2
Notification of illegality
The Agent shall promptly notify the Borrowers, the Security Parties, the Security Trustee and the other Lenders of the notice under Clause 23.1 which the Agent receives from the Notifying Lender.
23.3
Prepayment; termination of Commitment
On the Agent notifying the Borrowers under Clause 23.2, the Notifying Lender's Commitment shall be immediately cancelled; and thereupon or, if later, on the date specified in the Notifying Lender's notice under Clause 23.1 as the date on which the notified event would become effective the Borrowers shall prepay the Notifying Lender's Contribution on the last day of the then current Interest Period in accordance with Clauses 8.10 and 8.11(a).
24
INCREASED COSTS
24.1
Increased costs
This Clause 24 applies if a Lender (the "Notifying Lender") notifies the Agent that the Notifying Lender considers that as a result of:
(a)
the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Agreement of a tax on the Lender's overall net income); or
(b)
complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Notifying Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement; or
(c)
the implementation or application of or compliance with the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (the "Basel II Accord") or any other law or regulation implementing the Basel II Accord or any of the approaches provided for and allowed to be used by banks under or in connection with the Basel II Accord, in each case when compared to the cost of complying with such regulations as determined by the Agent (or parent company of it) on the date of this Agreement (whether such implementation, application or compliance is by a government, regulator, supervisory authority, the Notifying Lender or its holding company); or
(d)
the implementation or application of or compliance with Basel III or any law or regulation which implements or applies Basel III (regardless of the date on which it is enacted, adopted or issued and regardless of whether any such implementation, application or compliance is by a government, regulator, the Notifying Lender or any of its affiliates),
the Notifying Lender (or a parent company of it) has incurred or will incur an "increased cost".
24.2
Meaning of "increased cost"
In this Clause 24, "increased cost" means, in relation to a Notifying Lender:
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(a)
an additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having entered into, or being a party to, this Agreement or a Transfer Certificate, of funding or maintaining its Commitment or Contribution or performing its obligations under this Agreement, or of having outstanding all or any part of its Contribution or other unpaid sums;
(b)
a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective return which such a payment represents to the Notifying Lender or on its capital;
(c)
an additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of advances formed by or including the Notifying Lender's Contribution or (as the case may require) the proportion of that cost attributable to the Contribution; or
(d)
a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Notifying Lender under this Agreement,
but not an item attributable to a change in the rate of tax on the overall net income of the Notifying Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 21.1 or by Clause 22 or a FATCA Deduction required to be made by a Party.
For the purposes of this Clause 24.2 the Notifying Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or any class of its assets and liabilities) on such basis as it considers appropriate.
24.3
Notification to Borrowers of claim for increased costs
The Agent shall promptly notify the Borrowers and the Security Parties of the notice which the Agent received from the Notifying Lender under Clause 24.1.
24.4
Payment of increased costs
The Borrowers shall pay to the Agent, within 5 days on the Agent's demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrowers that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.
24.5
Notice of prepayment
If the Borrowers are not willing to continue to compensate the Notifying Lender for the increased cost under Clause 24.4, the Borrowers may give the Agent not less than 14 days' notice of their intention to prepay the Notifying Lender's Contribution at the end of an Interest Period.
24.6
Prepayment; termination of Commitment
A notice under Clause 24.5 shall be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrowers' notice of intended prepayment; and:
(a)
on the date on which the Agent serves that notice, the Commitment of the Notifying Lender shall be cancelled; and
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(b)
on the date specified in its notice of intended prepayment, the Borrowers shall prepay (without premium or penalty) the Notifying Lender's Contribution, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any).
24.7
Application of prepayment
Clause 8 shall apply in relation to the prepayment.
25
SET-OFF
25.1
Application of credit balances
Each Creditor Party may without prior notice to the Borrowers but with prior notice to the Agent:
(a)
apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of a Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due from that Borrower to that Creditor Party under any of the Finance Documents; and
(b)
for that purpose:

(i)
break, or alter the maturity of, all or any part of a deposit of that Borrower;

(ii)
convert or translate all or any part of a deposit or other credit balance into Dollars; and

(iii)
enter into any other transaction or make any entry with regard to the credit balance which the Creditor Party concerned considers appropriate.
25.2
Existing rights unaffected
No Creditor Party shall be obliged to exercise any of its rights under Clause 25.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which a Creditor Party is entitled (whether under the general law or any document).
25.3
Sums deemed due to a Lender
For the purposes of this Clause 25, a sum payable by the Borrowers to the Agent or the Security Trustee for distribution to, or for the account of, a Lender shall be treated as a sum due to that Lender; and each Lender's proportion of a sum so payable for distribution to, or for the account of, the Lenders shall be treated as a sum due to such Lender.
25.4
No Security Interest
This Clause 25 gives the Creditor Parties a contractual right of set-off only, and does not create any equitable charge or other Security Interest over any credit balance of either Borrower.
26
TRANSFERS AND CHANGES IN LENDING OFFICES
26.1
Transfer by Borrowers
Neither Borrower may assign or transfer any of its rights, liabilities or obligations under any Finance Document.
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26.2
Transfer by a Lender
Subject to this Clause 26, a Lender (the "Transferor Lender") may at any time, without needing the consent or approval of the Borrowers or any Security Party (but with prior consultation with the Borrowers), cause:
(a)
its rights in respect of all or part of its Contribution; or
(b)
its obligations in respect of all or part of its Commitment; or
(c)
a combination of (a) and (b); or
(d)
all or part of its credit risk under this Agreement and the other Finance Documents,
to be syndicated to or (in the case of its rights) assigned, pledged or transferred to, or (in the case of its obligations) pledged or assumed by, any other bank or financial institution or to a trust, fund or other entity, provided such other entity is regularly engaged in, or established for the purpose of, making, purchasing or investing in loans, securities or other financial assets (a "Transferee Lender") by delivering to the Agent a completed certificate in the form set out in Schedule 5 with any modifications approved or required by the Agent (a "Transfer Certificate") executed by the Transferor Lender and the Transferee Lender Provided that:
prior consultation with the Borrowers shall not be required for an assignment or transfer by a Transferor Lender under this Clause 26 if the assignment or transfer is to (a) another Lender or an affiliate of a Lender or (b) made at a time when an Event of Default has occurred.
However, any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee will have to be dealt with separately in accordance with the Agency and Trust Agreement.
26.3
Transfer Certificate, delivery and notification
As soon as reasonably practicable after a Transfer Certificate is delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):
(a)
sign the Transfer Certificate on behalf of itself, the Borrowers, the Security Parties, the Security Trustee and each of the other Lenders;
(b)
on behalf of the Transferee Lender, send to each Borrower and each Security Party letters or faxes notifying them of the Transfer Certificate and attaching a copy of it; and
(c)
send to the Transferee Lender copies of the letters or faxes sent under paragraph (b) above.
26.4
Effective Date of Transfer Certificate
A Transfer Certificate becomes effective on the date, if any, specified in the Transfer Certificate as its effective date Provided that it is signed by the Agent under Clause 26.3 on or before that date.
26.5
No transfer without Transfer Certificate
Except as provided in Clause 26.17, no assignment or transfer of any right or obligation of a Lender under any Finance Document is binding on, or effective in relation to, either Borrower,
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any Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.
26.6
Lender re-organisation
However, if a Lender enters into any merger, de-merger or other reorganisation as a result of which all its rights or obligations vest in another person (the "successor"), the successor shall become a Lender with the same Commitment and Contribution as were held by the predecessor Lender only upon receipt by the Agent of a notice to this effect and evidence that all rights and obligations have automatically and by operation of law vested in the successor by virtue of the merger, de-merger or other reorganisation, without the need for the execution and delivery of a Transfer Certificate; the Agent shall in that event inform the Borrowers and the Security Trustee accordingly.
26.7
Effect of Transfer Certificate
A Transfer Certificate takes effect in accordance with English law as follows:
(a)
to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender absolutely, free of any defects in the Transferor Lender's title and of any rights or equities which either Borrower or any Security Party had against the Transferor Lender;
(b)
the Transferor Lender's Commitment is discharged to the extent specified in the Transfer Certificate;
(c)
the Transferee Lender becomes a Lender with the Contribution previously held by the Transferor Lender and a Commitment of an amount specified in the Transfer Certificate;
(d)
the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to the Lenders generally, including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender ceases to be bound by them;
(e)
any part of the Loan which the Transferee Lender advances after the Transfer Certificate's effective date ranks in point of priority and security in the same way as it would have ranked had it been advanced by the transferor, assuming that any defects in the transferor's title and any rights or equities of either Borrower or any Security Party against the Transferor Lender had not existed;
(f)
the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to the Lenders generally, including but not limited to those relating to the Majority Lenders and those under Clause 5.7 and Clause 20, and to the extent that the Transferee Lender becomes entitled to such rights, the Transferor Lender ceases to be entitled to them; and
(g)
in respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document or any misrepresentation made in or in connection with a Finance Document, the Transferee Lender shall be entitled to recover damages by reference to the loss incurred by it
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as a result of the breach or misrepresentation, irrespective of whether the original Lender would have incurred a loss of that kind or amount.
The rights and equities of either Borrower or any Security Party referred to above include, but are not limited to, any right of set off and any other kind of cross-claim.
26.8
Maintenance of register of Lenders
During the Security Period the Agent shall maintain a register in which it shall record the name, Commitment, Contribution and administrative details (including the lending office) from time to time of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 26.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the Borrowers during normal banking hours, subject to receiving at least three Business Days' prior notice.
26.9
Reliance on register of Lenders
The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Lenders and the amounts of their Commitments and Contributions and the effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance Documents for all purposes relating to the Finance Documents.
26.10
Authorisation of Agent to sign Transfer Certificates
The Borrowers, the Security Trustee, each Lender irrevocably authorises the Agent to sign Transfer Certificates on its behalf.  The Borrower and each Security Party irrevocably agree to the transfer procedures set out in this Clause 26 and to the extent the cooperation of the Borrowers and/or any Security Party shall be required to effect any such transfer, the Borrowers and such Security Party shall take all necessary steps to afford such cooperation Provided that this shall not result in any additional costs to the Borrowers or such Security Party.
26.11
Registration fee
In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of $2,500 from the Transferor Lender or (at the Agent's option) the Transferee Lender.
26.12
Sub-participation; subrogation assignment
A Lender may sub-participate or include in a securitisation or similar transaction all or any part of its rights and/or obligations under or in connection with the Finance Documents without the Borrowers' prior consent and without serving a notice thereon; the Lenders may assign without the Borrowers' prior consent and without serving a notice thereon all or any part of the rights referred to in the preceding sentence to an insurer or surety who has become subrogated to them.
26.13
Sub-division, split, modification or re-tranching
Any Lender may, in its sole discretion, sub-divide, split, sever, modify or re-tranche its Contribution into one or more parts subject to the overall cost of its Contribution to the Borrowers remaining unchanged, if such changes are necessary in order to achieve a successful execution of a securitisation, syndication or any other capital market exit in respect of its Contribution (or any applicable part thereof).
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26.14
Disclosure of information
(a)
A Lender may, without the prior consent of the Borrowers, the Corporate Guarantor or any other Security Party, disclose to a potential Transferee Lender or sub participant as well as, where relevant, to rating agencies, trustees and accountants, any financial or other information which that Lender has received in relation to the Loan, the Borrowers (or either of them), the Corporate Guarantor and any other Security Party or their affairs and collateral or security provided under or in connection with any Finance Document, their financial circumstances and any other information whatsoever, as that Lender may deem reasonably necessary or appropriate in connection with the potential syndication, the assessment of the credit risk and the ongoing monitoring of the Loan by any potential Transferee Lender and that Lender shall be released from its obligation of secrecy and from banking confidentiality.
(b)
In the event any such potential Transferee Lender, sub-participant, rating agency, trustee or accountant is not already bound by any legal obligation of secrecy or banking confidentiality, the Lender concerned shall require such other party to sign a confidentiality agreement.  The Borrowers shall, and shall procure that the Corporate Guarantor and any other Security Party shall:

(i)
provide the Creditor Parties (or any of them) with all information deemed, reasonably, necessary by the Creditor Parties (or any of them) for the purposes of any transfer, syndication or sub-participation to be effected pursuant to this Clause 26; and

(ii)
procure that the directors and officers of each Borrower, the Corporate Guarantor or any other Security Party, are available to participate in any meeting with any Transferee Lender, sub-participant, rating agency, trustee or accountant at such times and places as the Creditor Parties may reasonably request following prior notice (to be served on the Borrowers reasonably in advance) to that Borrower, the Corporate Guarantor or that Security Party.
(c)
The Borrowers shall not, and shall ensure that no Security Party will, publish any details regarding the Loan or any of the Finance Documents without the Agent's prior written consent.
(d)
The permission of disclosure set out in this Clause 26.14 is granted for the purposes of providing relief from banking secrecy and confidentiality requirements. It is not intended as, and is no declaration of, consent in accordance with the DS GVO (EU Regulation 2016/679, General Data Protection Regulation).
26.15
Change of lending office
A Lender may change its lending office by giving notice to the Agent and the change shall become effective on the later of:
(a)
the date on which the Agent receives the notice; and
(b)
the date, if any, specified in the notice as the date on which the change will come into effect.
26.16
Notification
On receiving such a notice, the Agent shall notify the Borrowers and the Security Trustee; and, until the Agent receives such a notice, it shall be entitled to assume that a Lender is acting through the lending office of which the Agent last had notice.
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26.17
Security over Lenders' rights
In addition to the other rights provided to Lenders under this Clause 26, each Lender may without consulting with or obtaining consent from, either Borrower or any Security Party, at any time charge, assign or otherwise create a Security Interest in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:
(a)
any charge, assignment or other Security Interest to secure obligations to a federal reserve or central bank; and
(b)
in the case of any Lender which is a fund, any charge, assignment or other Security Interest granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities;
except that no such charge, assignment or Security Interest shall:

(i)
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security Interest for the Lender as a party to any of the Finance Documents; or

(ii)
require any payments to be made by either Borrower or any Security Party or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.
26.18
Replacement of a Reference Bank
If any Reference Bank ceases to be a Lender or is unable on a continuing basis to supply quotations for the purposes of Clause 5 then, unless the Borrowers, the Agent and the Majority Lenders otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrowers, shall appoint another bank (whether or not a Lender) to be a replacement Reference Bank; and, when that appointment comes into effect, the first-mentioned Reference Bank's appointment shall cease to be effective.
26.19
Securitisation
Each Borrower shall, and the Borrowers shall procure that each Security Party will, assist the Agent and/or any Lender in achieving a successful securitisation (or similar transaction) in respect of the Loan and the Finance Documents and such Security Party's reasonable costs for providing such assistance shall be met by the relevant Lender. The Borrowers, if requested by the Agent, shall provide documentation evidencing the purchase price of each Ship when acquired by the relevant Borrower.
26.20
No additional costs
If a Transferor Lender assigns or transfers any of its rights or obligations under the Finance Documents and as a result of circumstances existing at the date the assignment or transfer occurs, a Borrower or a Security Party would be obliged to make a payment to the Transferee Lender under Clause 26.2 or under that clause as incorporated by reference or in full in any other Finance Document, then the Transferee Lender is only entitled to receive payment under that clause to the same extent as the Transferor Lender would have been if the assignment or transfer had not occurred.
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27
VARIATIONS AND WAIVERS
27.1
Required consents
(a)
Subject to Clause 27.2 and Clause 27.4, any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Borrowers and any such amendment or waiver will be binding on all Creditor Parties and the Borrowers.
(b)
Any instructions given by the Majority Lenders will be binding on all the Creditor Parties.
(c)
The Agent may effect:

(i)
on behalf of the Borrowers and any Creditor Party, any amendment or waiver permitted by Clause 27.4; and

(ii)
on behalf of any Creditor Party, any amendment or waiver permitted by any other provision of this Clause 27.
27.2
Exceptions
(a)
An amendment or waiver that has the effect of changing or which relates to:

(i)
the definition of "Majority Lenders" or "Finance Documents" or "Screen Rate Replacement Event" or "Replacement Benchmark" in Clause 1.1 (Definitions);

(ii)
an extension to the date of payment of any amount under the Finance Documents;

(iii)
a reduction in the Margin or a reduction in the amount of any payment of principal, interest fees, commission or other amount payable under any of the Finance Documents;

(iv)
an increase in or an extension of any Lender's Commitment;

(v)
any provision which expressly requires the consent of all the Lenders;

(vi)
Clause 3 (Position of the Lenders), Clause 11.5 (Information provided to be accurate), Clause 11.6 (Provision of financial statements), Clause 11.7 (Form of financial statements), Clause 11.16 (Provision of Further Information), Clause 26 (Transfers and Changes in Lending Offices), this Clause 27.2 (Exceptions) or Clause 27.4 (Replacement of Screen Rate);

(vii)
any release of any Security Interest, guarantee, indemnities or subordination arrangement created by any Finance Document;

(viii)
any change of the currency in which the Loan is provided or any amount is payable under any of the Finance Documents;

(ix)
any change to the Screen Rate pursuant to Clause 27.4 (Replacement of Screen Rate);

(x)
an extension of the Availability Period; or

(xi)
a change in Clauses 16.4 (Distribution of payment to Creditor Parties) or 22.2 (Grossing-up),
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may not be effected without the prior written consent of all Lenders.
(b)
An amendment or waiver which relates to the rights or obligations of the Agent, the Mandated Lead Arranger or the Security Trustee may not be effected without the consent of the Agent, the Mandated Lead Arranger or the Security Trustee, as the case may be.
27.3
Exclusion of other or implied variations
Except for a document which satisfies the requirements of any of Clauses 27.1, 27.2 and 27.4, no document, no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:
(a)
a provision of this Agreement or another Finance Document; or
(b)
an Event of Default; or
(c)
a breach by a Borrower or a Security Party of an obligation under a Finance Document or the general law; or
(d)
any right or remedy conferred by any Finance Document or by the general law,
and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.
27.4
Replacement of Screen Rate
(a)
If a Screen Rate Replacement Event has occurred in relation to the Screen Rate the Agent (acting on the instructions of all Lenders) shall be entitled to:

(i)
replace the Screen Rate with a Replacement Benchmark;

(ii)
adjust the pricing on the Replacement Benchmark by the amendment of the Margin or otherwise, in each case at its discretion, to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation); and

(iii)
amend this Agreement for the purpose of any of:

(A)
providing for the use of a Replacement Benchmark;

(B)
aligning any provision to the use of that Replacement Benchmark;

(C)
enabling that Replacement Benchmark to be used for the calculation of interest under this Agreement (including, without limitation, any
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consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Agreement);

(D)
implementing market conventions applicable to that Replacement Benchmark;

(E)
providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; and

(F)
adjusting the pricing in accordance with paragraph (ii) above.
(b)
The Agent shall promptly notify the Borrowers and each Creditor Party of any replacement of the Screen Rate, any adjustment of pricing and any amendment of this Agreement made pursuant to paragraph (a) above, which shall take effect immediately as from (and including) the date specified in such notification.
(c)
If required by the Agent (acting on the instructions of all Lenders), the Borrowers shall (and shall procure that each other Security Party shall) enter into such supplemental, replacement or other agreement in relation to any Finance Document as the Agent may specify to extend the effect of any of the amendments referred to in paragraph (a) above to such Finance Document.
28
NOTICES
28.1
General
Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter or fax; and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly.
28.2
Addresses for communications
A notice by letter or fax shall be sent:
(a)
to the Borrowers:
c/o Castor Ships S.A.
25 Foinikos Str. 14564
Nea Kifissia, Athens, Greece
Fax No: + 357 25357796
     
(b)
To a Lender:
At the address next to its name in Schedule 1 or (as the case may require) in the relevant Transfer Certificate.
     
(c)
To the Agent and Security Trustee:
 
     
 
for general matters:
Hamburg Commercial Bank AG
UB 25 Shipping
Shipping Clients [Domestic/International]
Gerhart-Hauptmann-Platz 50
20095 Hamburg
Germany
 
 
88
   
Attention: Minas Peramatzis
Fax No: +30 210 4295-323
     
 
For credit administrative matters:
Hamburg Commercial Bank AG
Gerhart-Hauptmann-Platz 50
20095 Hamburg
Germany
 
Fax No: +49 40 3333 34167
     
or to such other address as the relevant Party may notify the Agent or, if the relevant Party is the Agent or the Security Trustee, the Borrowers, the Lenders and the Security Parties.
28.3
Effective date of notices
Subject to Clauses 28.4 and 28.5:
(a)
a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered; and
(b)
a notice which is sent by fax shall be deemed to be served, and shall take effect, two hours after its transmission is completed.
28.4
Service outside business hours
However, if under Clause 28.3 a notice would be deemed to be served:
(a)
on a day which is not a business day in the place of receipt; or
(b)
on such a business day, but after 5 p.m. local time,
the notice shall (subject to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a business day.
28.5
Illegible notices
Clauses 28.3 and 28.4 do not apply if the recipient of a notice notifies the sender within one hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.
28.6
Valid notices
A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:
(a)
the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or
(b)
in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.
89
28.7
Electronic communication
(a)
Any communication from the Agent or the other Creditor Parties made by electronic means will be sent unsecured and without electronic signature, however, the Borrowers may request the Agent and the other Creditor Parties at any time in writing to change the method of electronic communication from unsecured to secured electronic mail communication.
(b)
The Borrowers hereby acknowledge and accept the risks associated with the use of unsecured electronic mail communication including, without limitation, risk of delay, loss of data, confidentiality breach, forgery, falsification and malicious software.  The Agent and the other Creditor Parties shall not be liable in any way for any loss or damage or any other disadvantage suffered by the Borrowers resulting from such unsecured electronic mail communication.
(c)
If the Borrowers (or any of them) or any other Security Party wish to cease all electronic communication, they shall give written notice to the Agent and the other Creditor Parties accordingly after receipt of which notice the Parties shall cease all electronic communication.
(d)
For as long as electronic communication is an accepted form of communication, the Parties shall:

(i)
notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

(ii)
notify each other of any change to their respective addresses or any other such information supplied to them; and
in case electronic communication is sent to recipients with the domain <domain with ending>, the parties shall without undue delay inform each other if there are changes to the said domain or if electronic communication shall thereafter be sent to individual e-mail addresses.
(e)
Each Borrower undertakes and declares that any documents to fulfil the disclosure of the financial circumstances according to Sec. 18 of the German Banking Act (KWG) that were or are hereinafter submitted to the Hamburg Commercial Bank AG electronically or on data carriers through the Borrowers or any other Security Party or any of them or a third party are complete and correct. It further agrees and declares that:

(i)
it is irrelevant whether such documents were submitted with or without signature;

(ii)
documents submitted to Hamburg Commercial Bank AG electronically or on data carriers according to Sec. 18 of the German Banking Act (KWG) have the same legal significance as documents with signature in paper form; and

(iii)
until written revocation, the declaration under this Clause 28.7 shall remain valid.
28.8
English language
Any notice under or in connection with a Finance Document shall be in English.
28.9
Meaning of "notice"
In this Clause 28, "notice" includes any demand, consent, authorisation, approval, instruction, waiver or other communication.
90

29
JOINT AND SEVERAL LIABILITY
29.1
General
All liabilities and obligations of the Borrowers under this Agreement shall, whether expressed to be so or not, be several and, if and to the extent consistent with Clause 29.2, joint.
29.2
No impairment of Borrower's obligations
The liabilities and obligations of a Borrower shall not be impaired by:
(a)
this Agreement being or later becoming void, unenforceable or illegal as regards the other Borrower;
(b)
any Lender or the Security Trustee entering into any rescheduling, refinancing or other arrangement of any kind with the other Borrower;
(c)
any Lender or the Security Trustee releasing the other Borrower or any Security Interest created by a Finance Document; or
(d)
any combination of the foregoing.
29.3
Principal debtors
Each Borrower declares that it is and will, throughout the Security Period, remain a principal debtor for all amounts owing under this Agreement and the Finance Documents and neither Borrower shall in any circumstances be construed to be a surety for the obligations of the other Borrower under this Agreement.
29.4
Subordination
Subject to Clause 29.5, during the Security Period, neither Borrower shall:
(a)
claim any amount which may be due to it from the other Borrower whether in respect of a payment made, or matter arising out of, this Agreement or any Finance Document, or any matter unconnected with this Agreement or any Finance Document; or
(b)
take or enforce any form of security from the other Borrower for such an amount, or in any other way seek to have recourse in respect of such an amount against any asset of the other Borrower; or
(c)
set off such an amount against any sum due from it to the other Borrower; or
(d)
prove or claim for such an amount in any liquidation, administration, arrangement or similar procedure involving the other Borrower or other Security Party; or
(e)
exercise or assert any combination of the foregoing.
29.5
Borrowers' required action
If during the Security Period, the Agent, by notice to a Borrower, requires it to take any action referred to in paragraphs (a) to (d) of Clause 29.4, in relation to the other Borrower, that Borrower shall take that action as soon as practicable after receiving the Agent's notice.
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30
SUPPLEMENTAL
30.1
Rights cumulative, non-exclusive
The rights and remedies which the Finance Documents give to each Creditor Party are:
(a)
cumulative;
(b)
may be exercised as often as appears expedient; and
(c)
shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.
30.2
Severability of provisions
If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.
30.3
Counterparts
A Finance Document may be executed in any number of counterparts.
30.4
Third party rights
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.
30.5
Benefit and binding effect
The terms of this Agreement shall be binding upon, and shall enure to the benefit of, the Parties and their respective (including subsequent) successors and permitted assigns and transferees.
31
BAIL-IN
Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the parties to a Finance Document, each Party acknowledges and accepts that any liability of any party to a Finance Document under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:
(a)
any Bail-In Action in relation to any such liability, including (without limitation):

(i)
a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii)
a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)
a cancellation of any such liability; and
(b)
a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
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32
LAW AND JURISDICTION
32.1
English law
This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.
32.2
Exclusive English jurisdiction
Subject to Clause 32.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.
32.3
Choice of forum for the exclusive benefit of the Creditor Parties
Clause 32.2 is for the exclusive benefit of the Creditor Parties, each of which reserves the right:
(a)
to commence proceedings in relation to any Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; and
(b)
to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.
Neither Borrower shall commence any proceedings in any country other than England in relation to a Dispute.
32.4
Process agent
Each Borrower irrevocably appoints Hill Dickinson Services (London) Limited, at its registered office for the time being presently at The Broadgate Tower, 20 Primrose Street, London EC2A 2EW, England to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.
32.5
Creditor Party rights unaffected
Nothing in this Clause 32 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.
32.6
Meaning of "proceedings" and "Dispute"
In this Clause 32, "proceedings" means proceedings of any kind, including an application for a provisional or protective measure and a "Dispute" means any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement) or any non-contractual obligation arising out of or in connection with this Agreement.
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.
93
SCHEDULE 1


LENDERS AND COMMITMENTS

Lender
Lending Office
Commitment
(US Dollars)
Hamburg Commercial Bank AG
Gerhart-Hauptmann-Platz 50
20095 Hamburg
Germany
$15,290,000

94

SCHEDULE 2


DRAWDOWN NOTICE
To:
Hamburg Commercial Bank AG
Gerhart-Hauptmann-Platz 50
20095 Hamburg
Germany
Attention: Loans Administration
   
[—] 2021
DRAWDOWN NOTICE
1
We refer to the loan agreement (the "Loan Agreement") dated [—] and made between ourselves, as joint and several Borrowers, the Lenders referred to therein, and yourselves as Agent, Mandated Lead Arranger, Security Trustee in connection with a facility of up to US$15,290,000. Terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.
2
We request to borrow as follows:
(a)
Amount of Advance in relation to Ship [A] [B]: US$[—];
(b)
Drawdown Date: [—];
(c)
Duration of the first Interest Period shall be [—] months; and
(d)
Payment instructions: account in our name and numbered [—] with [—] of [—].
3
We represent and warrant that:
(a)
the representations and warranties in Clause 10 of the Loan Agreement would remain true and not misleading if repeated on the date of this Drawdown Notice with reference to the circumstances now existing; and
(b)
no Event of Default or Potential Event of Default has occurred or will result from the borrowing of that Advance.
4
This Drawdown Notice cannot be revoked without the prior consent of the Majority Lenders.
5
We authorise you to deduct the structuring and commitment fees payable pursuant to Clause 20.1(a) and (b).
[Name of Signatory]


for and on behalf of
Pocahontas Shipping Co. and
Jumaru Shipping Co.
95

SCHEDULE 3


CONDITION PRECEDENT DOCUMENTS
PART A
The following are the documents referred to in Clause 9.1(a) required before service of the first Drawdown Notice.
1
A duly executed original of:
(a)
this Agreement;
(b)
the Corporate Guarantee;
(c)
the Agency and Trust Agreement;
(d)
any Subordination Agreement;
(e)
any Subordinated Debt Security;
(f)
the Side Letter; and
(g)
the Account Pledges.
2
Copies of the certificate of incorporation and constitutional documents of each Borrower, the Corporate Guarantor and any other Security Party and any company registration documents in respect of either Borrower, the Corporate Guarantor or, any other Security Party (including, without limitation, any corporate register excerpts) required by the Agent and a list of all members of the Group.
3
Copies of resolutions of the shareholders and directors of each Borrower, the Corporate Guarantor and any other Security Party authorising the execution of each of the Finance Documents to which that Borrower, the Corporate Guarantor or that Security Party is a party and, in the case of each Borrower, authorising named officers to give the Drawdown Notice(s) and other notices under this Agreement.
4
The original of any power of attorney under which any Finance Document is executed on behalf of a Borrower, the Corporate Guarantor or any other Security Party.
5
Copies of all consents which either Borrower, the Corporate Guarantor or any other Security Party requires to enter into, or make any payment under, any Finance Document.
6
Evidence satisfactory to the Agent that the Accounts have been opened.
7
The originals of any mandates or other documents required in connection with the opening or operation of the Accounts.
8
Documentary evidence that the agent for service of process named in Clause 32 has accepted its appointment.
9
Copies of each Underlying Document and of all documents signed or issued by the Borrowers or any party thereto (or any of them) under or in connection with such documents together,
96

with such documentary evidence as the Agent and its legal advisers may require in relation to the due authorisation and execution of all such documents by the parties thereto.
10
Any documents required by the Agent in respect of each Borrower, the Corporate Guarantor and any other Security Party (other than Castor Ships) to satisfy the Lenders' "know your customer" requirements.
11
Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of the Republic of the Marshall Islands, England and such other relevant jurisdictions as the Agent may require.
12
Documents establishing that each Ship is managed by the relevant Approved Manager on terms acceptable to the Lenders.
13
If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.
97

PART B
The following are the documents referred to in Clause 9.1(b) required before each Drawdown Date.  In Part B of this Schedule 3, the following definitions have the following meanings:
(a)
"Relevant Borrower" means the Borrower which is or is to become the owner of the Relevant Ship; and
(b)
"Relevant Ship" means the Ship which is relevant to the Advance being borrowed on the relevant Drawdown Date.
1
A duly executed original of the Mortgage, the General Assignment and any Charterparty Assignment relating to any Assignable Charter (and of each document to be delivered by each of them) each in respect of the Relevant Ship.
2
Documentary evidence that:
(a)
the Relevant Ship is definitively and permanently registered in the name of the Relevant Borrower under an Approved Flag in accordance with the laws of the applicable Approved Flag State;
(b)
the Relevant Ship is in the absolute and unencumbered ownership of the Relevant Borrower save as contemplated by the Finance Documents;
(c)
the Relevant Ship maintains the class specified in Clause 14.3(b) with a first class classification society which is a member of IACS (being one of Lloyd's Registry, American Bureau of Shipping, Det Norske Veritas, Bureau Veritas, Korean Register of Shipping, Nippon Kaiji Kyoykai or Registro Italiano Navale) as the Agent may approve free of all overdue recommendations and conditions of such classification society;
(d)
the Mortgage relating to the Relevant Ship has been duly registered or recorded against the Relevant Ship as a valid first preferred or, as the case may be, priority mortgage in accordance with the laws of the applicable Approved Flag State;
(e)
the Relevant Ship is insured in accordance with the provisions of this Agreement and all requirements therein in respect of insurances have been complied with; and
(f)
the Relevant Ship has been delivered to the relevant charterer after the registration or recordation of the Relevant Ship's Mortgage and that any charterer has acknowledged such prior registration or recordation or has subordinated in writing all its claims against the Relevant Ship and the Relevant Borrower to the rights of the Creditor Parties.
3
In relation to an Approved Manager and the Relevant Ship:
(a)
the Approved Manager's Undertaking relative thereto; and
(b)
copies of the Approved Manager's Document of Compliance and of that Ship's Safety Management Certificate (together with any other details of the applicable safety management system which the Agent requires).
4
The Initial Market Value of the Relevant Ship as shown by a valuation prepared by an Approved Broker selected and appointed by the Agent and otherwise pursuant to Clause 15.3, stated to be for the purposes of this Agreement, which shows a value of the Relevant Ship in an amount
98

which will be sufficient to satisfy the Borrowers' obligations under Clause 15.1 Provided that If the Borrowers do not agree with the amount of such valuation, they may request, within 14 days after the date on which the Agent notifies the Borrowers of such valuation (the "Drawdown Request Period"), a second valuation to be commissioned from any Approved Broker selected by the Borrowers but appointed by the Agent, such second valuation shall be also prepared in accordance with Clause 15.3, Provided further that:

(i)
if the Borrowers request such valuation but fail to select the second Approved Broker within the Drawdown Request Period, then the Initial Market Value of the Relevant Ship shall be that shown in the sole valuation obtained by the Agent; or

(ii)
if the Borrowers do select a second Approved Broker within the Drawdown Request Period, the Initial Market Value of the Relevant Ship in such circumstances shall be the arithmetic mean of both valuations Provided even further that if the difference between such two valuations is greater than 15 per cent., a third valuation shall be commissioned from a third Approved Broker appointed and selected by the Agent (prepared in accordance with Clause 15.3) and the Initial Market Value of the Relevant Ship in such circumstances shall be the arithmetic mean of all three valuations.
5
Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of the relevant Approved Flag State and such other relevant jurisdictions as the Agent may require.
6
A favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the insurances for the Relevant Ship as the Agent may require.
7
Evidence satisfactory to the Agent that the Minimum Liquidity is standing to the credit of the Liquidity Accounts pursuant to Clause 11.19.
8
If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.
9
Evidence satisfactory to the Agent of payment of all fees due and payable in accordance with Clause 9 of this Agreement.
10
A recent survey report (or comparable inspection report satisfactory to the Agent ) in respect of each Relevant Ship.
11
Copies of any memorandum of agreement in respect of a Relevant Ship (and any addenda thereto) or, as the case may be, shipbuilding contracts of a Relevant Ship.
Each of the documents specified in paragraphs 3 and 4 of Part A shall be notarised or legalised by a competent authority acceptable to the Agent and every other copy document delivered under this Schedule shall be certified as a true and up to date copy by the secretary (or equivalent officer) of the relevant Borrower.
99

SCHEDULE 4


MANDATORY COST FORMULA

1
The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Financial Services Authority (or any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.
2
On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Lender, in accordance with the paragraphs set out below.  The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Advance) and will be expressed as a percentage rate per annum.
3
The Additional Cost Rate for any Lender lending from a lending office in a Participating Member State will be the percentage notified by that Lender to the Agent.  This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in all Advances made from that lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.
4
The Additional Cost Rate for any Lender lending from a lending office in the United Kingdom will be calculated by the Agent as follows:
per cent. per annum
Where:

E
is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.
5
For the purposes of this Schedule:
(a)
"Eligible Liabilities" and "Special Deposits" have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
(b)
"Fee Tariffs" means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);
(c)
"Fees Rules"  means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;
100

(d)
"Participating Member State" means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union; and
(e)
"Tariff Base" has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.
6
If requested by the Agent, the Reference Banks shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by the Reference Banks to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by the Reference Banks as being the average of the Fee Tariffs applicable to the Reference Banks for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of the Reference Banks.
7
Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate.  In particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it becomes a Lender:
(a)
the jurisdiction of its lending office; and
(b)
any other information that the Agent may reasonably require for such purpose.
Each Lender shall promptly notify the Agent in writing of any change to the information provided by it pursuant to this paragraph.
8
The rates of charge of the Reference Banks for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraph 6 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.
9
The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or the Reference Banks pursuant to paragraphs 3, 6 and 7 above is true and correct in all respects.
10
The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and the Reference Banks pursuant to paragraphs 3, 6 and 7 above.
11
Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties.
12
The Agent may from time to time, after consultation with the Borrowers and the Lenders, determine and notify to all parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties.
101
SCHEDULE 5


TRANSFER CERTIFICATE
The Transferor and the Transferee accept exclusive responsibility for ensuring that this Certificate and the transaction to which it relates comply with all legal and regulatory requirements applicable to them respectively.
To:
Hamburg Commercial Bank AG for itself and for and on behalf of each Borrower, each Security Party, the Security Trustee, each Lender, as defined in the Loan Agreement referred to below.
[—]
1
This Certificate relates to a Loan Agreement (the "Loan Agreement") dated [—] and made between (1) Pocahontas Shipping Co. and Jumaru Shipping Co. (together, the "Borrowers") as joint and several Borrowers, (2) the banks and financial institutions named therein as Lenders, (3) Hamburg Commercial Bank AG as Agent, (4) Hamburg Commercial Bank AG as Mandated Lead Arranger and (5) Hamburg Commercial Bank AG as Security Trustee for a loan facility of up to US$15,290,000.
2
In this Certificate, terms defined in the Loan Agreement shall, unless the contrary intention appears, have the same meanings and:
"Relevant Parties" means the Agent, each Borrower, each Security Party, the Security Trustee, each Lender;
"Transferor" means [full name] of [lending office]; and
"Transferee" means [full name] of [lending office].
3
The effective date of this Certificate is [—] Provided that this Certificate shall not come into effect unless it is signed by the Agent on or before that date.
4
[The Transferor assigns to the Transferee absolutely all rights and interests (present, future or contingent) which the Transferor has as Lender under or by virtue of the Loan Agreement and every other Finance Document in relation to [—] per cent. of its Contribution, which percentage represents $[—].
5
[By virtue of this Certificate and Clause 26 of the Loan Agreement, the Transferor is discharged [entirely from its Commitment which amounts to $[—]] [from [—] per cent. of its Commitment, which percentage represents $[—]] and, subject to Clause 26.7 of the Loan Agreement, from all obligations connected therewith, the Transferee acquires a Commitment of $[—].]
6
The Transferee undertakes with the Transferor and each of the Relevant Parties that the Transferee will observe and perform all the obligations under the Finance Documents which Clause 26 of the Loan Agreement provides will become binding on it upon this Certificate taking effect.
7
The Agent, at the request of the Transferee (which request is hereby made) accepts, for the Agent itself and for and on behalf of every other Relevant Party, this Certificate as a Transfer Certificate taking effect in accordance with Clause 26 of the Loan Agreement.
102

8
The Transferor:
(a)
warrants to the Transferee and each Relevant Party that:

(i)
the Transferor has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are in connection with this transaction; and

(ii)
this Certificate is valid and binding as regards the Transferor;
(b)
warrants to the Transferee that the Transferor is absolutely entitled, free of encumbrances, to all the rights and interests covered by the assignment in paragraph 4 above; and
(c)
undertakes with the Transferee that the Transferor will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferee's title under this Certificate or for a similar purpose.
9
The Transferee:
(a)
confirms that it has received a copy of the Loan Agreement and each of the other Finance Documents;
(b)
agrees that it will have no rights of recourse on any ground against either the Transferor, the Agent, the Mandated Lead Arranger, the Security Trustee, any Lender in the event that:

(i)
any of the Finance Documents prove to be invalid or ineffective;

(ii)
either Borrower or any Security Party fails to observe or perform its obligations, or to discharge its liabilities, under any of the Finance Documents;

(iii)
it proves impossible to realise any asset covered by a Security Interest created by a Finance Document, or the proceeds of such assets are insufficient to discharge the liabilities of the Borrowers or any Security Party under the Finance Documents;
(c)
agrees that it will have no rights of recourse on any ground against the Agent, the Mandated Lead Arranger, the Security Trustee, any Lender in the event that this Certificate proves to be invalid or ineffective;
(d)
warrants to the Transferor and each Relevant Party that:

(i)
it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which it needs to take or obtain in connection with this transaction; and

(ii)
this Certificate is valid and binding as regards the Transferee; and
(e)
confirms the accuracy of the administrative details set out below regarding the Transferee.
10
The Transferor and the Transferee each undertake with the Agent, the Mandated Lead Arranger and the Security Trustee severally, on demand, fully to indemnify the Agent and/or the Security Trustee and/or the Mandated Lead Arranger in respect of any claim, proceeding, liability or expense (including all legal expenses) which they or either of them may incur in connection with this Certificate or any matter arising out of it, except such as are shown to
103

have been mainly and directly caused by the gross and culpable negligence or dishonesty of the Agent's, the Mandated Lead Arranger's or the Security Trustee's own officers or employees.
11
The Transferee shall repay to the Transferor on demand so much of any sum paid by the Transferor under paragraph 10 as exceeds one-half of the amount demanded by the Agent, the Mandated Lead Arranger or the Security Trustee in respect of a claim, proceeding, liability or expense which was not reasonably foreseeable at the date of this Certificate; but nothing in this paragraph shall affect the liability of each of the Transferor and the Transferee to the Agent, the Mandated Lead Arranger or the Security Trustee for the full amount demanded by it.
[Name of Transferor]
[Name of Transferee]
By:
By:
Date:
Date:
   
Agent
Signed for itself and for and on behalf of itself
as Agent and for every other Relevant Party

Hamburg Commercial Bank AG
By:
Date:
104
Administrative Details of Transferee
Name of Transferee:
Lending Office:
Contact Person
(Loan Administration Department):
Telephone:
Fax:
Contact Person
(Credit Administration Department):
Telephone:
Fax:
Account for payments:
Notes:
This Transfer Certificate alone may not be sufficient to transfer a proportionate share of the Transferor's interest in the security constituted by the Finance Documents in the Transferor's or Transferee's jurisdiction.  It is the responsibility of each Lender to ascertain whether any other documents are required for this purpose.
Paragraph 4 deals with assignment of rights and can be used together with paragraph 5 if the parties have agreed to a combination of assignment of rights and transfer of obligations.
Paragraph 5 deals with transfer of obligations and should be removed if the parties have agreed to an assignment only.

105

SCHEDULE 6


POWER OF ATTORNEY
Know all men by these presents that [Pocahontas Shipping Co.][Jumaru Shipping Co.] (the "Company"), a corporation incorporated in the Republic of the Marshall Islands and having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 irrevocably and by way of security appoints Hamburg Commercial Bank AG (the "Attorney") of Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany its attorney, to act in the name of the Company and to exercise any right, entitlement or power of the Company in relation to [name of classification society] (the "Classification Society") and/or to the classification records of any vessel owned, controlled or operated by the Company including, without limitation, such powers or entitlement as the Company may have to inspect the class records and any files held by the Classification Society in relation to any such vessel and to require the Classification Society to provide to the Attorney or to any of its nominees any information, document or file which the Attorney may request
Ratification of actions of attorney.  For the avoidance of doubt and without limiting the generality of the above, it is confirmed that the Company hereby ratifies any action which the Attorney takes or purports to take under this Power of Attorney and the Classification Society shall be entitled to rely hereon without further enquiry.
Delegation.  The Attorney may exercise its powers hereunder through any officer or through any nominee and/or may sub-delegate to any person or persons (including a receiver and persons designated by him) all or any of the powers (including the discretions) conferred on the Attorney hereunder, and may do so on terms authorising successive sub-delegations.
This Power of Attorney was executed by the Company as a Deed on [date].

EXECUTED as a DEED by
)
[Pocahontas] [Jumaru] Shipping Co.
)
acting by President or Secretary
)
 
)
In the presence of:

106

SCHEDULE 7


FORM OF COMPLIANCE CERTIFICATE
To:
Hamburg Commercial Bank AG
Gerhart-Hauptmann-Platz 50
D-20095 Hamburg
Germany
   
[—] 2021
Dear Sirs
We refer to a loan agreement dated [—] (the "Loan Agreement") made between (amongst others) yourselves and ourselves in relation to a term loan facility of up to $15,290,000.
Words and expressions defined in the Loan Agreement shall have the same meaning when used in this compliance certificate.
Each Borrower and the Corporate Guarantor represent that no Event of Default or Potential Event of Default has occurred as at the date of this certificate [except for the following matter or event [set out all material details of matter or event]].  In addition as of [—], each Borrower and the Corporate Guarantor confirms compliance with the minimum liquidity requirements set out in Clause 11.19 [,] [and] the minimum security cover requirement set out in Clause 15.1 [and][list here any other financial covenants which are applicable to the relevant transaction], of the Loan Agreement for the [6-month] period ending on the date of this certificate.
We now certify that, as at [—]:
(a)
the aggregate of the Minimum Liquidity standing to the credit of the Liquidity Account is $[—];
(b)
the Security Cover Ratio is [—] per cent.; and
This certificate shall be governed by, and construed in accordance with, English law.
     
[—]
CASTOR MARITIME INC.
Chief Financial Officer
107
EXECUTION PAGES

BORROWERS
 
   
SIGNED by
)
Viktoria Poziopoulov
)   /s/ Viktoria Poziopoulov
Its  attorney-in-fact
)
for and on behalf of
)
POCAHONTAS SHIPPING CO.
)
In the presence of:
)   /s/ Eleni Antonakou
   
   
SIGNED by
)
Viktoria Poziopoulov
)   /s/ Viktoria Poziopoulov
Its  attorney-in-fact
)
for and on behalf of
)
JUMARU SHIPPING CO.
)
In the presence of:
)   /s/ Eleni Antonakou
   
   
LENDERS
 
   
SIGNED by
)
Anthi Kekatou
)   /s/ Anthi Kekatou
for and on behalf of
)
HAMBURG COMMERCIAL BANK AG
)
In the presence of:
)   /s/ Eleni Antonakou
   
   
AGENT
 
   
SIGNED by
)
Anthi Kekatou
)   /s/ Anthi Kekatou
for and on behalf of
)
HAMBURG COMMERCIAL BANK AG
)
In the presence of:
)   /s/ Eleni Antonakou
   
   
MANDATED LEAD ARRANGER
 
   
SIGNED by
)
Anthi Kekatou
)   /s/ Anthi Kekatou
for and on behalf of
)
HAMBURG COMMERCIAL BANK AG
)
In the presence of:
)   /s/ Eleni Antonakou
   
   

108

SECURITY TRUSTEE
 
   
SIGNED by
)
Anthi Kekatou
)   /s/ Anthi Kekatou
for and on behalf of
)
HAMBURG COMMERCIAL BANK AG
)
In the presence of:
)   /s/ Eleni Antonakou








109
Exhibit 4.16




Dated:         2 March 2021






 
CASTOR MARITIME INC.
(1)

and

 
THALASSA INVESTMENT CO. S.A.
(2)















FIRST SUPPLEMENTAL AGREEMENT
to the Loan Agreement
dated 30 August 2019




THIS AGREEMENT is dated
  2 March 2021

BETWEEN:

(1)
CASTOR MARITIME INC., a corporation duly incorporated in the Republic of Marshall Islands and having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 (the “Borrower”);

(2)
THALASSA INVESTMENT CO. S.A., a corporation duly incorporated in the Republic of Liberia and having its registered address at 80 Broad Street, Monrovia, Liberia (the “Lender”);

AND IT IS HEREBY AGREED as follows:


1.
WHEREAS

1.01 This Agreement is a supplemental agreement to a term loan agreement dated 30 August 2019 (the “Original Agreement”) made between (i) Castor Maritime Inc. (the “Borrower”) incorporated under the laws of the Republic of the Marshall Islands as borrower, and (ii) Thalassa Investment Co. S.A. (the “Lender”) incorporated under the laws of the Republic of Liberia as lender, by which the Lender in accordance with the terms and conditions of the Original Agreement made available to the Borrower a term loan facility of US Dollars Five Million (US$ 5,000,000).

1.02 The Borrower served a Utilisation Request on 30 August 2019 and has drawn the Facility in the amount of US Dollars Five Million (US$ 5,000,000) on 3 September 2019 under the Original Agreement. The Borrower hereby accepts and acknowledges that the amount of the Loan owing to the Lender is on the date hereof US Dollars Five million (US$ 5,000,000) plus interest.

1.03 The Borrower has requested and hereby requests that the Lender grants an extension of six (6) months for repayment of the Loan and interest and the Lender expressed its intention to agree to the abovementioned request of the Borrower subject to the terms and conditions of the Original Agreement, as amended by this Agreement.

1.04 This Agreement sets out the amendments which the parties have agreed to make to the Original Agreement and constitutes an integral part thereof.


2.
DEFINITIONS AND INTERPRETATION

2.01 Unless the context otherwise requires or unless otherwise defined herein, words and expressions defined in the Original Agreement shall have the same meaning when used in this Agreement.

2.02  Unless the context otherwise requires, references in the Original Agreement to “this Agreement” shall be references to the Original Agreement as amended and supplemented by
2

this Agreement and words such as “herein” where they appear in the Original Agreement, shall be construed accordingly.


3.
LENDER’S CONSENT

3.01. The Lender, relying upon the repetition of the representations and warranties of the Original Agreement by the Borrower and reconfirmation of its obligations (as per Clause 5 of this Agreement), agrees and consents to granting an extension of six (6) months for repayment of the Loan and interest, upon and subject to the terms of the Original Agreement as amended by this Agreement.


4.
AMENDMENTS TO THE ORIGINAL AGREEMENT

4.01 It is hereby agreed that with effect from the date of this Agreement Clause 5.01 of the Original Agreement is amended to read as follows:

5.01 (Repayment) The Loan shall be repaid in full on the date that is twenty-four months (24) following the Drawdown Date (the “Maturity Date”).


5.
REPETITION OF ORIGINAL AGREEMENT REPRESENTATIONS AND WARRANTIES AND RECONFIRMATION BY THE BORROWER

5.01 The Borrower and the Lender represent and warrant that the representations and warranties in Clause 7 of the Original Agreement remain true at the date of this Agreement and are repeated herein as if contained in this Agreement and as if made with reference to the facts and circumstances existing on the date hereof in connection with this Agreement.

5.02 The Borrower hereby reconfirms its obligations under the Original Agreement and its compliance with the covenants contained in Clause 9 of the Original Agreement.


6.
CONDITIONS PRECEDENT

6.01 (Conditions concerning corporate authorisation) The granting by the Lender to the Borrower of an extension to the repayment of the Facility shall be subject to the conditions that prior to and/or simultaneously with the execution of this Agreement or on any such other longer period as the Lender may agree, the Lender shall have received the following documents and evidence in form and substance reasonably satisfactory to the Lender, unless the Lender has specifically waived any of the following documents:

(i) a recent certificate of incumbency of the Borrower signed by the secretary or a director of the Borrower stating its officers and/or its directors and/or its shareholders;

(ii) minutes of meeting of the board of directors of the Borrower at which there is approval of the entry into, execution, delivery and performance of this Agreement;

(iii) evidence of the due authority of any person signing this Agreement, and any other
3

documents executed or to be executed pursuant hereto on behalf of the Borrower.


7.
MISCELLANEOUS

7.01 (Counterparts) This Agreement may be executed in any number of counterparts, each of which when executed shall constitute a duplicate original, but all the counterparts shall together constitute one agreement.

7.02 Save for the amendments set forth in this Agreement, all other terms of the Original Agreement remain unchanged and in full force and effect.

7.03 The Original Agreement and this Agreement constitute an integral document which is valid and binding upon its parties in accordance with its terms.

7.04 Each Party shall bear its own costs of, and incidental to, the preparation, negotiation, execution and implementation of this Agreement.

7.05 (Governing Law and Jurisdiction) Clause 12 (Governing Law and Jurisdiction) of the Original Agreement, shall apply to this Agreement as if it was expressly incorporated in this Agreement with any necessary modifications.


4

IN WITNESS whereof, the parties hereto have caused this agreement to be duly executed the day and year first above written.

SIGNED by
Petros Panagiotidis
for and on behalf of
CASTOR MARITIME INC.
the Borrower
)
)
)
)
)
__________________
 


SIGNED by
Loucas Hadjiyiangou
for and on behalf of
THALASSA INVESTMENT CO. S.A.
the Lender
)
)
)
)
__________________
 





5
Exhibit 8.1


Subsidiaries of Castor Maritime Inc.

   
           Name
 
Jurisdiction of Incorporation
   
Spetses Shipping Co.
 
Republic of the Marshall Islands
   
Bistro Maritime Co.
 
Republic of the Marshall Islands
   
Pikachu Shipping Co.
 
Republic of the Marshall Islands
   
Bagheera Shipping Co.
 
Republic of the Marshall Islands
   
Pocahontas Shipping Co.
 
Republic of the Marshall Islands
   
Jumaru Shipping Co.
 
Republic of the Marshall Islands





Exhibit 12.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Petros Panagiotidis, certify that:

1. I have reviewed this annual report on Form 20-F of Castor Maritime Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: March 30, 2021

 /s/ Petros Panagiotidis
Petros Panagiotidis
Chief Executive Officer (Principal Executive Officer)

Exhibit 12.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Petros Panagiotidis, certify that:

1. I have reviewed this annual report on Form 20-F of Castor Maritime Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) and 15d-15(f) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: March 30, 2021


 /s/ Petros Panagiotidis
Petros Panagiotidis
Chief Financial Officer (Principal Financial Officer)

Exhibit 13.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with this Annual Report of Castor Maritime Inc. (the “Company”) on Form 20-F for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Petros Panagiotidis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
Date: March 30, 2021


/s/ Petros Panagiotidis
Petros Panagiotidis
Chief Executive Officer (Principal Executive Officer)
Exhibit 13.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with this Annual Report of Castor Maritime Inc. (the “Company”) on Form 20-F for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Petros Panagiotidis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
Date: March 30, 2021


 /s/ Petros Panagiotidis
Petros Panagiotidis
Chief Financial Officer (Principal Financial Officer)




 
Exhibit 15.1


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-238990 and No 333-240262 on Form F-3 of our report dated March 30, 2021, relating to the consolidated financial statements of Castor Maritime Inc. appearing in this Annual Report on Form 20-F for the year ended December 31, 2020.


/s/ Deloitte Certified Public Accountants S.A.
Athens, Greece
March 30, 2021