Globus Maritime(US:GLBS)2020-03-31 22:05PART I Item 3. Key Information This section presents five-year financial and operational data, highlighting a significant net loss, impairment, and extensive industry and company-specific risks, including going concern doubts Selected Financial Data The company's 2015-2019 financial performance shows volatile revenues, persistent net losses, a $29.9 million impairment in 2019, and declining Adjusted EBITDA and TCE rates Consolidated Statement of Comprehensive Loss Highlights (2015-2019, in thousands) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $15,623 | $17,354 | $13,883 | $8,701 | $12,252 | | Impairment Loss | ($29,902) | $0 | $0 | $0 | ($20,144) | | Operating (Loss)/Profit | ($33,649) | ($1,448) | ($4,015) | ($7,228) | ($29,708) | | Total Comprehensive Loss | ($36,351) | ($3,568) | ($6,475) | ($9,825) | ($32,396) | | Basic & Diluted Loss per Share | ($8.73) | ($1.11) | ($2.51) | ($37.73) | ($126.22) | | Adjusted EBITDA (unaudited) | $2,678 | $4,319 | $1,701 | ($3,466) | ($2,376) | Consolidated Statement of Financial Position Highlights (As of Dec 31, 2015-2019, in thousands) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | $55,656 | $86,674 | $91,603 | $93,996 | $114,837 | | Total Equity | $9,879 | $41,050 | $43,968 | $20,760 | $30,535 | | Total Liabilities | $45,777 | $45,624 | $47,635 | $73,236 | $84,302 | Key Operational Data (2015-2019) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Ownership Days | 1,825 | 1,825 | 1,825 | 1,908 | 2,380 | | Fleet Utilization | 98.2% | 98.2% | 97.6% | 97.1% | 96.4% | | Average Number of Vessels | 5.0 | 5.0 | 5.0 | 5.2 | 6.5 | | Daily TCE Rate | $7,564 | $9,213 | $6,993 | $3,962 | $4,333 | | Daily Operating Expenses | $4,867 | $5,438 | $5,005 | $4,553 | $4,337 | Risk Factors The company faces significant industry and company-specific risks, including dry bulk market volatility, over-supply, global uncertainties, going concern doubts, potential Nasdaq delisting, and shareholder dilution - The international dry bulk shipping industry is cyclical and highly volatile, with charter rates, vessel values, and profitability subject to significant fluctuations based on supply and demand for vessel capacity and cargo50 - The market values of the company's vessels have declined, triggering an impairment loss of approximately $29.9 million as of December 31, 2019. Further declines could lead to breaches of financial covenants in loan agreements, potentially resulting in debt acceleration and foreclosure on vessels717276 - The COVID-19 global pandemic poses a significant risk, potentially decreasing demand for raw materials, reducing cargo volumes, causing operational delays due to quarantines, and putting further downward pressure on already volatile freight rates113114115 - There are substantial doubts about the company's ability to continue as a going concern. As of December 31, 2019, the company had a working capital deficit of $3.2 million, and its ability to continue operations depends on generating sufficient revenue or obtaining additional financing130132134 - The company received a notification from Nasdaq on March 2, 2020, for failing to meet the minimum $1.00 bid price requirement. Failure to regain compliance within the grace period could result in delisting, which would impair liquidity, capital raising ability, and trigger defaults under credit facilities140150152 - The company's convertible note can be converted at a floating price, leading to significant dilution for existing shareholders, especially when the stock price is low. The number of shares issuable increases as the stock price declines, down to a floor price of $1.00141143 Item 4. Information on the Company This section details the company's history, business operations, fleet, and regulatory environment, including corporate events, chartering strategy, competitive landscape, and extensive international and national regulations History and Development of the Company Globus Maritime's history includes its 2006 incorporation, Nasdaq listing, multiple reverse stock splits, various financing rounds, and a fleet of five dry bulk vessels by year-end 2019 - The company has undergone multiple reverse stock splits to manage its share price and maintain listing requirements: a four-for-one split in October 2016 and a ten-for-one split in October 2018229233 - In March 2019, the company issued a $5 million senior convertible note, maturing in March 2020 (later extended to 2021). By year-end 2019, the outstanding amount was $3.3 million, and 867,643 common shares had been issued upon conversion235236 - The company's fleet consisted of five dry bulk vessels as of December 31, 2019, with a total carrying capacity of 300,571 dwt and a weighted average age of 11.8 years243 Business Overview Globus Maritime provides worldwide dry bulk marine transportation with a fleet of five vessels, managed in-house, operating in a highly competitive and fragmented market influenced by supply, demand, and global economic activity Company Fleet as of December 31, 2019 | Vessel | Year Built | Vessel Type | Carrying Capacity (dwt) | | :--- | :--- | :--- | :--- | | m/v River Globe | 2007 | Supramax | 53,627 | | m/v Sky Globe | 2009 | Supramax | 56,855 | | m/v Star Globe | 2010 | Supramax | 56,867 | | m/v Moon Globe | 2005 | Panamax | 74,432 | | m/v Sun Globe | 2007 | Supramax | 58,790 | | Total | | | 300,571 | - The company's operations are managed in-house by its wholly-owned subsidiary, Globus Shipmanagement Corp., based in Greece, which handles commercial and technical management for the fleet245 - The company operates in a highly competitive and fragmented market, competing on price, vessel location, size, age, condition, and reputation. Many competitors have larger fleets and greater financial resources264265 - The company is subject to extensive environmental and safety regulations from international bodies like the IMO (e.g., MARPOL, SOLAS, ISM Code) and national authorities. Key regulations include the global 0.5% sulphur cap on marine fuels effective January 1, 2020, and upcoming ballast water management system requirements303305309315 Organizational Structure Globus Maritime is a holding company with six wholly-owned subsidiaries, five owning vessels and one, Globus Shipmanagement Corp., managing the fleet - The company is a holding company with six wholly-owned subsidiaries. Five subsidiaries each own one vessel, and the sixth, Globus Shipmanagement Corp., manages the fleet352 Property, Plants and Equipment The company's primary assets are its mortgaged vessels; it leases office space from a related party, owing approximately $91,000 in back rent as of December 31, 2019 - The company leases its office space from Cyberonica S.A., a related party. As of December 31, 2019, approximately $91,000 of back rent was owed353 - Other than its vessels, the company does not have any material property. The vessels are subject to priority mortgages securing obligations under various loan facilities354 Item 5. Operating and Financial Review and Prospects Analysis of financial performance, detailing 10% revenue decrease, $33.6 million operating loss from impairment, critical liquidity, and complex financing Operating Results Voyage revenues decreased 10% to $15.6 million in 2019 due to lower TCE rates, leading to a $33.6 million operating loss driven by a $29.9 million vessel impairment, while interest costs more than doubled Year-over-Year Operating Results Comparison (in thousands) | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Voyage Revenues | $15,623 | $17,354 | -10% | | Vessel Operating Expenses | $8,882 | $9,925 | -10% | | Impairment Loss | $29,902 | $0 | N/A | | Operating Loss | ($33,649) | ($1,448) | -2224% | | Interest Expense & Finance Costs | $4,703 | $2,056 | +129% | | Total Comprehensive Loss | ($36,351) | ($3,568) | -919% | - The company recognized a significant impairment loss of $29.9 million on its vessels as of December 31, 2019, due to their recoverable amounts being lower than their carrying amounts. No impairment was recognized in 2018409431 - Interest expense and finance costs increased by 124% to $4.7 million in 2019, primarily due to a higher weighted average interest rate (8.66% in 2019 vs. 4.97% in 2018) and fees related to the early termination of the Macquarie Loan Agreement432 - A gain of $1.8 million on derivative financial instruments was recognized in 2019, attributed to the fair value accounting of the convertible note issued in March 2019433 Liquidity and Capital Resources The company faces severe liquidity pressure with a $3.2 million working capital deficit and substantial doubt about its going concern ability, relying on a $37 million EnTrust loan and other financing to manage $41.1 million in debt - The company reported a working capital deficit of $3.2 million as of December 31, 2019, an improvement from a $40.4 million deficit in 2018, but still indicating significant liquidity challenges474 - Management has expressed substantial doubt about the company's ability to continue as a going concern, as cash on hand and operating cash flow may be insufficient to meet liquidity requirements and debt obligations over the next year480 Cash Flow Summary (in thousands) | Cash Flow Activity | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $213 | $3,851 | $631 | | Net Cash Used in Investing Activities | ($20) | ($126) | ($263) | | Net Cash from/(used in) Financing Activities | $2,127 | ($6,435) | $2,225 | - In June 2019, the company entered into a new $37 million term loan facility with EnTrust Global's Blue Ocean Fund (EnTrust Loan Facility) to refinance its existing debt. This facility carries a high interest rate of LIBOR plus 8.5%506511 Contractual Obligations As of December 31, 2019, total contractual obligations were $51.5 million, with $42.7 million due within one to three years, primarily long-term debt and interest Contractual Obligations as of December 31, 2019 (in thousands) | Obligation | Less than One Year | One to Three Years | Three to Five Years | More than Five years | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Long term debt | $4,109 | $37,000 | $0 | $0 | $41,109 | | Interest on long term debt | $4,341 | $5,247 | $0 | $0 | $9,588 | | Lease payments | $232 | $425 | $142 | $1 | $800 | | Totals | $8,682 | $42,672 | $142 | $1 | $51,497 | Item 6. Directors, Senior Management and Employees This section details the company's leadership, including Chairman Georgios Feidakis and CEO Athanasios Feidakis, board structure with three committees, and $318,200 in unpaid non-executive director compensation - The company is led by Chairman Georgios Feidakis (founder and principal shareholder) and his son, Athanasios Feidakis (President, CEO, and CFO)527528 - As of December 31, 2019, the company had accrued but unpaid compensation of approximately $318,200 due to its non-executive directors for prior service537 - The Board of Directors is classified into three classes serving staggered three-year terms. It has an Audit Committee, a Remuneration Committee, and a Nomination Committee526542 - As of December 31, 2019, the company had thirteen full-time employees and two consultants, all located in Greece546 Item 7. Major Shareholders and Related Party Transactions This section details major shareholders and related party transactions, with Chairman Georgios Feidakis owning 22.1% and the company engaging in office leases and credit facilities with related entities Major Shareholder Ownership (as of March 31, 2020) | Name | Number of common shares beneficially owned | Percentage of common shares beneficially owned | | :--- | :--- | :--- | | George Feidakis | 1,420,163 | 22.1% | - The company leases its office space from Cyberonica S.A., a company owned by Chairman George Feidakis. Rent expense was $139,000 in 2019572 - The company has a revolving credit facility of up to $15 million with Firment Shipping Inc., a related party controlled by the Chairman. As of Dec 31, 2019, $0.8 million was outstanding and $11.1 million was available to be drawn579580 Item 8. Financial Information This section confirms the availability of consolidated financial statements, notes no significant legal proceedings, and states no dividends were paid on common shares in 2017-2019 due to restrictions - The company has not been involved in any legal proceedings that have had a significant effect on its business or financial position588 - No dividends were declared or paid on common shares during the years ended December 31, 2019, 2018, and 2017. Dividend payments are restricted by loan agreements and subject to board discretion592595 Item 10. Additional Information This section covers corporate governance, including anti-takeover provisions, and taxation, where the company believes its U.S. shipping income is exempt and it is not a PFIC, despite legal uncertainties - The company's articles of incorporation include several anti-takeover provisions, such as a classified board of directors serving staggered three-year terms, the authorization of 'blank check' preferred shares, and a dual-class stock structure (though no Class B shares are currently outstanding)620621622623 - As a Marshall Islands corporation, the company believes its U.S. source shipping income is exempt from U.S. federal income tax under Section 883 of the Internal Revenue Code, as it expects to satisfy the 'Publicly Traded Test'650659 - The company believes it should not be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, based on its position that income from time charters constitutes services income rather than passive rental income. However, this position is subject to legal uncertainty670671 Item 11. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its variable-rate debt, with a 1.0% LIBOR increase adding $0.4 million in 2020 interest expense, and foreign currency risk, while fuel price risk is mitigated - The company is exposed to interest rate risk through its $37 million EnTrust Loan Facility, which bears interest at LIBOR plus 8.5%691511 Interest Rate Sensitivity to a 1.0% (100 bps) Increase in LIBOR | Year | Additional Interest Expense | | :--- | :--- | | 2020 | $0.4 million | | 2021 | $0.4 million | | 2022 | $0.2 million | - The company faces foreign currency risk as it generates revenues in U.S. dollars but incurs a portion of its operating expenses in other currencies, primarily the Euro698699 PART II Item 15. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with no attestation report required - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019707 - Based on the COSO framework, management determined that the company's internal control over financial reporting was effective as of December 31, 2019709 Item 16. Corporate Governance and Other Disclosures This section covers corporate governance, including the audit committee financial expert, code of ethics, $114,700 in principal accountant fees, and home country practices as a foreign private issuer - The Board of Directors has identified Ioannis Kazantzidis as the audit committee financial expert713 Principal Accountant Fees (Ernst & Young, in dollars) | Fee Category | 2019 | 2018 | | :--- | :--- | :--- | | Audit Fees | $109,700 | $103,000 | | Tax Fees | $5,000 | $5,000 | | Total | $114,700 | $108,000 | - As a foreign private issuer, the company is exempt from certain Nasdaq corporate governance standards, including the requirement for a majority-independent board and a three-member audit committee (the company's has two)720725 PART III Item 18. Financial Statements This section presents the audited consolidated financial statements for 2019, including the auditor's going concern emphasis, detailing vessel impairment, complex debt, and related party transactions Report of Independent Registered Public Accounting Firm Ernst & Young (Hellas) issued a fair opinion on the financial statements but emphasized substantial doubt about the company's ability to continue as a going concern due to losses and working capital deficiency - The independent auditor's report includes a paragraph highlighting substantial doubt about the Company's ability to continue as a going concern due to its net loss from operations, working capital deficiency, and potential inability to comply with loan covenants or cover working capital needs743 Consolidated Financial Statements The 2019 consolidated financial statements show a $36.4 million comprehensive loss, a decrease in total assets to $55.7 million due to impairment, and a sharp decline in equity to $9.9 million Consolidated Statement of Comprehensive Loss (Year Ended Dec 31, in thousands) | (in thousands) | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Total Revenues | $15,623 | $17,354 | $13,883 | | Operating Loss | ($33,649) | ($1,448) | ($4,015) | | Total Comprehensive Loss | ($36,351) | ($3,568) | ($6,475) | Consolidated Statement of Financial Position (As of Dec 31, in thousands) | (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Total Assets | $55,656 | $86,674 | | Total Liabilities | $45,777 | $45,624 | | Total Equity | $9,879 | $41,050 | Notes to the Consolidated Financial Statements The notes detail critical financial information, including going concern doubts (Note 2), the $29.9 million vessel impairment (Note 5), complex long-term debt structure (Note 11), and related party transactions (Note 4) - The 'Going Concern' section (Note 2) states that low charter rates from the coronavirus outbreak, a working capital deficit of $3.2 million, and potential inability to meet liquidity requirements raise substantial doubt about the company's ability to continue as a going concern764765766 - A vessel impairment loss of $29,902 thousand was recognized in 2019 after an assessment indicated that the recoverable amounts of the vessels were lower than their carrying amounts. The recoverable amount for four vessels was based on fair value less costs of disposal, and for one vessel, it was based on value in use (Note 5)852853854 - As of December 31, 2019, total long-term debt was $37.7 million (net), primarily consisting of the $36.3 million EnTrust Loan Facility, which bears interest at LIBOR + 8.5% (Note 11)470879