Globus Maritime(US:GLBS)2022-04-10 16:00PART I Key Information This section outlines the principal risks associated with the company and its industry, detailing the cyclical and volatile nature of the dry bulk shipping market, competitive pressures, and the impact of global financial conditions and geopolitical events Risk Factors The company faces significant risks from the cyclical and volatile dry bulk shipping industry, influenced by global economic conditions, vessel supply/demand balance, and geopolitical events, alongside company-specific risks like stock price volatility, potential shareholder dilution, and restrictive debt covenants - The international dry bulk shipping industry is characterized by high volatility and cyclicality in charter rates, vessel values, and profitability, driven by supply and demand for vessel capacity and cargo3644 - Pandemics like COVID-19 and geopolitical conflicts, such as the one in Ukraine, create significant operational difficulties, disrupt supply chains, and introduce unpredictable consequences for demand, charter rates, and the company's financial outlook56117 - The company's stock price has been highly volatile, with significant fluctuations that may not align with business developments. The closing price in 2021 ranged from a high of $7.46 to a low of $1.98132133 - Restrictive covenants in the company's loan agreements may limit liquidity and corporate activities, such as paying dividends, incurring additional debt, or selling assets. A default under one loan could trigger cross-defaults under other financing arrangements151156 Information on the Company Globus Maritime Limited is an integrated dry bulk shipping company providing worldwide marine transportation services, with details on its history, fleet, chartering strategy, customer base, competitive landscape, and complex regulatory environment History and Development of the Company The company, incorporated in 2006 and redomiciled to the Marshall Islands in 2010, has undergone several reverse stock splits and engaged in numerous capital-raising activities, including public offerings and the acquisition of three Kamsarmax vessels in 2021 - The company has executed multiple reverse stock splits to manage its share price and maintain listing compliance, including a 1-for-4 split in 2016, a 1-for-10 split in 2018, and a 1-for-100 split in October 2020246260 - Throughout 2020 and 2021, the company raised significant capital through a series of public and registered direct offerings of common shares and warrants, substantially increasing its shares outstanding and strengthening its balance sheet250255257 - In 2021, the company expanded its fleet by acquiring three Kamsarmax vessels: m/v Diamond Globe for $27 million, m/v Power Globe for $16.2 million, and m/v Orion Globe for $28.4 million, all financed with available cash271272273 - In May 2021, the company secured a new loan facility of $34.25 million from CIT Bank N.A. to repay its existing, higher-interest EnTrust Loan Facility268 Business Overview Globus Maritime operates a fleet of nine dry bulk vessels with a total carrying capacity of 626,257 dwt and a weighted average age of 10.2 years, employing a mix of short-term and longer-term charters while navigating intense competition and extensive international, EU, and U.S. regulations Fleet Composition as of December 31, 2021 | 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 | | m/v Galaxy Globe | 2015 | Kamsarmax | 81,167 | | m/v Diamond Globe | 2018 | Kamsarmax | 82,027 | | m/v Power Globe | 2011 | Kamsarmax | 80,655 | | m/v Orion Globe | 2015 | Kamsarmax | 81,837 | | Total | | | 626,257 | - The company's chartering strategy is to employ its vessels on a mix of short-term/spot market contracts and longer-term time charters to balance stable cash flow with the ability to capitalize on market upswings279 - The company's operations are subject to extensive regulation, including the IMO's global 0.5% sulphur cap on marine fuels, which came into force on January 1, 2020. The company's vessels comply by using more expensive low-sulphur fuel as they are not equipped with scrubbers347 - The company must comply with the Ballast Water Management (BWM) Convention, which entered into force in September 2017 and requires vessels to have systems to manage ballast water and prevent the spread of harmful aquatic organisms357 Operating and Financial Review and Prospects This section provides a detailed analysis of the company's financial performance and condition, highlighting a significant turnaround in 2021 with increased operating income driven by higher charter rates, strengthened liquidity from equity offerings, and an overview of debt facilities and market trends Operating Results The company's operating results dramatically improved in 2021, with voyage revenues increasing by 266% to $43.2 million and an operating income of $17.9 million, driven by a surge in average daily Time Charter Equivalent (TCE) rates and a larger fleet Key Operational Metrics (2019-2021) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Ownership days | 2,594 | 1,894 | 1,825 | | Available days | 2,531 | 1,778 | 1,788 | | Operating days | 2,477 | 1,733 | 1,756 | | Fleet utilization | 97.9% | 97.5% | 98.2% | | Average number of vessels | 7.1 | 5.2 | 5.0 | | Daily TCE rate | $16,627 | $5,210 | $7,564 | Results of Operations (in thousands of U.S. Dollars) | Line Item | 2021 | 2020 | | :--- | :--- | :--- | | Voyage revenues | 43,211 | 11,753 | | Vessel operating expenses | (13,808) | (8,581) | | Impairment loss | — | (4,615) | | Operating income/(loss) | 17,944 | (11,423) | | Interest expense and finance costs | (3,262) | (4,155) | | TOTAL INCOME/(LOSS) FOR THE YEAR | 14,950 | (17,372) | - Voyage revenues increased by 266% in 2021 compared to 2020, primarily due to a significant increase in average Time Charter Equivalent (TCE) rates501 - Daily vessel operating expenses increased by 18% in 2021 to $5,325, mainly attributed to higher crew-related costs, including more frequent repatriations and COVID-19 compliance measures503 Liquidity and Capital Resources The company's liquidity significantly improved, with unrestricted cash and cash equivalents increasing to $45.2 million at year-end 2021, driven by cash from operations and $77.4 million in net cash from financing activities, primarily from equity offerings totaling $89.6 million, and a new $34.25 million loan facility with CIT Bank N.A. Cash Flow Summary (in millions of U.S. Dollars) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 20.8 | (6.2) | | Net Cash Used In Investing Activities | (72.0) | (18.5) | | Net Cash from Financing Activities | 77.4 | 41.5 | | Unrestricted Cash at Year End | 45.2 | 19.0 | - In May 2021, the company entered into a new loan facility with CIT Bank N.A. for up to $34.25 million, bearing interest at LIBOR plus 3.75%. The proceeds were used to repay the outstanding balance of the higher-cost EnTrust Loan Facility547576 - The CIT Loan Facility contains several financial covenants, including a minimum liquidity requirement of $500,000 per mortgaged ship, a maximum leverage ratio of 0.75:1.00, and restrictions on dividend payments584587 - Working capital improved to a surplus of $37.8 million as of December 31, 2021, compared to a surplus of $9.2 million as of December 31, 2020554 Trend Information The dry bulk shipping market experienced significant volatility and a strong recovery in 2021, with demand growth outpacing fleet supply growth, though the market remains cyclical and subject to global economic trends and geopolitical events like the Russia-Ukraine conflict - The Baltic Dry Index (BDI) was highly volatile in 2021, ranging from a low of 1,303 to a high of 5,650, reflecting a strong recovery in the dry bulk market600602 - In 2021, demand growth for dry bulk vessels (4.1%) outpaced supply growth (3.6%), contributing to the significant increase in the BDI601 - The conflict between Russia and Ukraine is expected to cause significant volatility and uncertainty in the dry bulk market, potentially shifting trade routes for grain and coal, which could increase ton-mile demand604 - The dry bulk orderbook stands at a relatively low 6.7% of the world's total fleet, which may provide support for charter rates going forward605 Directors, Senior Management and Employees This section provides information on the company's leadership and governance structure, including the staggered board of directors, key personnel, executive compensation primarily managed through a consultancy agreement with an affiliate of the CEO, and the company's equity incentive plan - The company's senior leadership includes Georgios Feidakis as Chairman and his son, Athanasios Feidakis, as President, CEO, and CFO608609 - Executive compensation for the CEO is structured through a consultancy agreement with Goldenmare Limited, an affiliated company. In December 2020, the annual fee was increased to €400,000, and a one-time cash bonus of $1.5 million was approved. Another $1.5 million bonus was approved in December 2021615 - The Board of Directors is classified into three staggered three-year terms. It has established an Audit Committee, a Remuneration Committee, and a Nomination Committee607624 - The company has a 2012 Equity Incentive Plan (EIP) authorizing up to 100,000 common shares for awards like stock options and restricted stock to directors, officers, and employees631633 Major Shareholders and Related Party Transactions This section details the ownership structure and transactions with related parties, highlighting the significant voting control held by the CEO through Series B preferred shares and outlining key related party agreements such as office leases and consultancy services - The CEO, Athanasios Feidakis, controls 49.99% of the company's voting power via Goldenmare Limited's ownership of 10,300 Series B preferred shares, which have 25,000 votes per share, subject to a 49.99% aggregate voting cap656692 Major Shareholders as of April 11, 2022 | Name of Beneficial Owner | Number of common shares beneficially owned | Percentage of common shares beneficially owned | | :--- | :--- | :--- | | Armistice Capital, LLC | 1,200,000 | 5.8% | | Intracoastal Capital LLC | 1,959,250 | 8.7% | | Lind Global Macro Fund, LP | 2,241,200 | 9.8% | | Hudson Bay Master Fund Ltd. | 2,283,475 | 9.99% | | George Feidakis (Chairman) | 761,530 | 3.7% | - The company leases its office space from Cyberonica S.A., an affiliate of the Chairman. In August 2021, a new agreement was signed, increasing the space and the monthly rent to €26,000659 - The company has a consultancy agreement with Goldenmare Limited, an affiliate of the CEO, for advisory services. The agreement includes an annual fee of €400,000 and provisions for significant one-time bonuses665 Financial Information This section confirms the inclusion of consolidated financial statements under Item 18, notes the absence of significant legal proceedings, and discusses the company's dividend policy, which has not involved common share dividends since 2012 due to board discretion and loan agreement restrictions - The company has not paid any dividends on its common shares since 2012672 - The declaration and payment of any future dividends are at the discretion of the board of directors and are restricted by covenants in the CIT Loan Facility671679 - The company has not been involved in any legal proceedings that have had or may have a significant effect on its business or financial position670 Additional Information This section details the company's corporate governance and legal framework, including its authorized share capital with significant voting power concentrated in Series B preferred stock, anti-takeover provisions, and a detailed analysis of U.S. federal income tax considerations, including the Section 883 exemption and PFIC risks - The company's capital structure includes common shares (1 vote), Class B common shares (20 votes, none outstanding), and Series B preferred shares (25,000 votes, capped at 49.99% of total voting power)686692 - The company has several anti-takeover provisions, including a classified board of directors, the ability to issue 'blank check' preferred stock, and advance notice requirements for shareholder proposals713717718 - The company believes its income from international shipping was exempt from U.S. federal income tax in 2021 under Section 883 of the Internal Revenue Code by satisfying the 'Publicly Traded Test'1100766 - There is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would result in adverse U.S. federal income tax consequences for U.S. shareholders. The company believes it should not be treated as a PFIC based on its current operations224775 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to several market risks, primarily interest rate risk from floating-rate debt, currency risk from operating expenses in foreign currencies, and commodity risk related to fluctuating fuel prices - The company is exposed to interest rate risk from its floating-rate debt. A 1.0% increase in LIBOR would increase interest expense by approximately $0.3 million in 2022796799800 - The company faces foreign currency risk as it generates revenues in U.S. dollars but incurs some operating expenses in other currencies. It does not currently use financial derivatives to hedge this risk801802 - Commodity risk is present due to fluctuating fuel prices, which can adversely affect profitability, especially for vessels not on time charter where the charterer bears the fuel cost803 PART II Material Modifications to the Rights of Security Holders and Use of Proceeds This section highlights the material impact of the Series B preferred shares on the rights of common shareholders, as these shares, held by an affiliate of the CEO, grant the holder up to 49.99% of the total voting power, thereby giving substantial control over corporate matters - The Series B preferred shares, held by an affiliate of the CEO, grant the holder up to 49.99% of the company's total voting power, giving it substantial control over corporate matters and limiting the influence of common shareholders808809810 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2021, with an unqualified attestation report from the independent registered public accounting firm - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021819821 - Based on the COSO 2013 framework, management determined that the company's internal control over financial reporting was effective as of December 31, 2021824 - The independent registered public accounting firm issued an unqualified attestation report on the effectiveness of the company's internal control over financial reporting825826 Corporate Governance This section outlines the company's corporate governance practices, including the designation of an audit committee financial expert, adoption of a code of ethics, fees paid to the principal accountant, and the company's adherence to home country practices as a foreign private issuer, which exempts it from certain Nasdaq rules - The Board of Directors has designated Ioannis Kazantzidis as the audit committee financial expert829 Principal Accountant Fees (in thousands of U.S. Dollars) | Fee Category | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees | $327.1 | $363.6 | | Tax Fees | $6.85 | $5.0 | | Total | $333.95 | $368.6 | - As a foreign private issuer, the company is exempt from certain Nasdaq corporate governance requirements, including having a majority-independent board and obtaining shareholder approval for all equity issuances841 PART III Financial Statements This section contains the audited consolidated financial statements for Globus Maritime Limited for the fiscal year ended December 31, 2021, including the Independent Registered Public Accounting Firm's unqualified opinion on both the financial statements and internal control over financial reporting, along with key financial statements and detailed notes Consolidated Statement of Financial Position (in thousands of U.S. Dollars) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | ASSETS | | | | Total non-current assets | 135,712 | 64,160 | | Total current assets | 49,940 | 22,281 | | TOTAL ASSETS | 185,652 | 86,441 | | EQUITY AND LIABILITIES | | | | Total equity | 146,418 | 42,094 | | Total non-current liabilities | 27,108 | 31,285 | | Total current liabilities | 12,126 | 13,062 | | TOTAL EQUITY AND LIABILITIES | 185,652 | 86,441 | Consolidated Statement of Comprehensive Income/(Loss) (in thousands of U.S. Dollars) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Voyage revenues | 43,211 | 11,753 | 15,623 | | Operating income/(loss) | 17,944 | (11,423) | (33,649) | | TOTAL INCOME/(LOSS) FOR THE YEAR | 14,950 | (17,372) | (36,351) | | Basic and Diluted EPS (U.S.$) | 1.01 | (18.11) | (873.36) |