| Quarter ended June 30, 2003 | Commission File Number: |
| 1-10231 |
| LIBERIA | 98-0101881 | |||
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 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 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 X | NO |
| Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date. |
|||
| Class | Shares
outstanding at June 30, 2003 |
||
| Common stock, par value $.01 | 8,240,158 |
||
|
|
JUNE
30 2003 |
DECEMBER
31 2002 |
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 7,992,322 | $ 14,061,451 |
| Restricted cash | 1,929,396 | 2,001,759 |
| Hire receivables | 66,310 | 8,560 |
| Recoverable from insurers | 632,280 | 946,447 |
| Inventories | 518,071 | 506,401 |
| Receivables from affiliates | - | 80,518 |
| Prepaid expenses and other current assets |
1,743,940 |
1,182,139 |
|
|
-------------------- | -------------------- |
| TOTAL CURRENT ASSETS | 12,882,319 | 18,787,275 |
|
|
-------------------- | -------------------- |
| VESSELS, AT COST | 134,303,246 | 134,303,246 |
| Less - Accumulated depreciation | (51,046,445) | (43,098,414) |
|
|
-------------------- | -------------------- |
|
|
83,256,801 | 91,204,832 |
|
|
-------------------- | -------------------- |
| FURNITURE & EQUIPMENT, AT COST | 25,762 | 33,955 |
| Less - Accumulated depreciation | (19,979) | (25,492) |
|
|
-------------------- | -------------------- |
|
|
5,783 | 8,463 |
|
|
-------------------- | -------------------- |
| OTHER ASSETS | ||
| Drydocking costs (net of accumulated amortization of $1,320,213 at June 30, 2003 and $1,180,678 at December 31, 2002) | 3,825,886 | 1,638,711 |
| Debt issuance cost (net of accumulated amortization of $1,550,181 at June 30, 2003 and $1,446,864 at December 31, 2002) | 740,772 | 989,956 |
|
|
-------------------- | -------------------- |
| TOTAL ASSETS | $ 100,711,561 | $ 112,629,237 |
|
|
-------------------- | -------------------- |
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. |
||
|
|
JUNE
30 2003 |
DECEMBER
31 2002 |
|
|
||
| CURRENT LIABILITIES | ||
| Accounts payable | $ 791,541 | $ 650,174 |
| Hire received in advance | 29,750 | 629,645 |
| Accrued expenses | 7,560,468 | 5,455,907 |
| Accrued interest | 1,323,725 | 1,675,313 |
| Current portion of long term debt | 11,379,553 | 12,968,616 |
|
|
-------------------- | -------------------- |
| TOTAL CURRENT LIABILITIES | 21,085,037 | 21,379,655 |
|
|
-------------------- | -------------------- |
| LONG TERM DEBT | ||
| 11.25% Senior Notes due 2008 | 27,640,000 | 34,640,000 |
| Secured Loans | 25,131,467 | 30,821,243 |
|
|
-------------------- | -------------------- |
| TOTAL LONG TERM DEBT | 52,771,467 | 65,461,243 |
|
|
-------------------- | -------------------- |
| TOTAL LIABILITIES | 73,856,504 | 86,840,898 |
|
|
-------------------- | -------------------- |
| SHAREHOLDERS'EQUITY | ||
|
Common
stock, $.01 par value 20,000,000 shares authorized 8,481,624 shares issued |
84,816 | 84,816 |
| Additional paid-in capital | 52,165,202 | 52,165,202 |
| Less : Treasury stock, at cost (263,270 shares) | (971,185) | (971,185) |
| Accumulated deficit | (24,012,292) | (24,996,251) |
| Accumulated comprehensive income | (411,484) | (494,243) |
|
|
-------------------- | -------------------- |
|
|
26,855,057 | 25,788,339 |
|
|
-------------------- | -------------------- |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 100,711,561 | $ 112,629,237 |
| -------------------- | -------------------- | |
|
|
||
| THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. |
||
|
|
JUNE
30 2003 |
JUNE
30 2002 |
| CHARTERHIRE AND OTHER INCOME | $ 9,882,431 | $ 11,028,018 |
| COSTS AND EXPENSES | ||
| Commission on Charterhire | (257,321) | (279,940) |
| Vessel Operating Expenses | (4,735,976) | (5,047,751) |
| Amortisation of Drydocking Costs | (259,160) | (150,244) |
| Depreciation | (2,654,142) | (2,433,556) |
| General and Administrative Expenses | (240,642) | (355,002) |
|
|
-------------------- | -------------------- |
| OPERATING INCOME | 1,735,190 | 2,761,525 |
| OTHER INCOME/(EXPENSES) | ||
| Interest Expense | (1,268,778) | (1,670,198) |
| Interest Income | 15,954 | 20,810 |
| Provision for impairment Loss on vessels | 32,865 | (561,974) |
| Gains on Repurchases of Notes | - | - |
|
|
-------------------- | -------------------- |
| NET INCOME | $ 515,231 | $ 550,165 |
|
|
-------------------- | -------------------- |
| BASIC AND DILUTED PER SHARE AMOUNTS | ||
| Net Income | $ 0.06 | $ 0.07 |
|
|
-------------------- | -------------------- |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 8,240,158 | 8,218,354 |
| -------------------- | -------------------- | |
| THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. |
||
|
|
JUNE
30 2003 |
JUNE
30 2002 |
| CHARTERHIRE AND OTHER INCOME | $ 20,198,368 | $ 20,314,229 |
| COSTS AND EXPENSES | ||
| Commission on Charterhire | (517,520) | (572,944) |
| Vessel Operating Expenses | (9,186,210) | (10,017,628) |
| Amortization of Drydocking Costs | (467,046) | (295,560) |
| Depreciation | (5,392,337) | (3,754,110) |
| General and Administrative Expenses | (672,173) | (668,746) |
|
|
-------------------- | -------------------- |
| OPERATING INCOME | 3,963,082 | 5,005,241 |
| OTHER INCOME/(EXPENSES) | ||
| Interest Expense | (2,719,875) | (3,132,000) |
| Interest Income | 38,925 | 65,601 |
| Provision for impairment loss on vessels | (2,918,650) | (871,474) |
| Gains on Repurchases of Notes | 2,620,477 | - |
|
|
-------------------- | -------------------- |
| NET INCOME | $ 983,959 | $ 1,067,369 |
|
|
-------------------- | -------------------- |
| BASIC AND DILUTED PER SHARE AMOUNTS | ||
| Net Income | $ 0.12 | $ 0.13 |
|
|
-------------------- | -------------------- |
| WEIGHTED AVERAGE NUMBER OF | ||
| SHARES OUTSTANDING | 8,240,158 | 8,218,354 |
| -------------------- | -------------------- | |
| THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. |
||
|
JUNE
30 2003 |
JUNE
30 2002 |
|
|
|
||
| OPERATING ACTIVITIES: | ||
| NET INCOME | $ 983,959 | $ 1,067,369 |
| Adjustments to reconcile Net Income to net cash provided from operating Activities | ||
| Depreciation | 5,392,337 | 3,754,110 |
| Amortization of Dry-docking costs | 467,046 | 295,560 |
| Amortization of issuance costs | 152,710 | 104,931 |
| Dry-docking Costs Capitalized | (3,013,719) | (160,498) |
| Provision for impairment loss | 2,918,650 | 871,474 |
| Gains on repurchases of Senior Notes | (2,620,477) | - |
| Comprehensive income | 82,759 | (78,586) |
| Changes in Operating Assets and Liabilities: | ||
| Hire receivables | (57,750) | (201,346) |
| Recoverable from insurers | 314,167 | (271,389) |
| Inventories | (11,670) | 60,238 |
| Receivables from affiliates | 29,060 | 64,437 |
| Prepaid expenses and other current assets | (510,343) | 88,210 |
| Accounts payable | 141,367 | 554,595 |
| Accrued expenses | 2,104,561 | (904,487) |
| Hire received in advance | (599,895) | (1,068,394) |
| Accrued interest | (351,588) | 82,034 |
|
|
-------------------- | -------------------- |
| NET CASH PROVIDED FROM OPERATING ACTIVITIES | $ 5,421,174 | $ 4,258,258 |
|
|
-------------------- | -------------------- |
| INVESTING ACTIVITIES: | ||
| Purchase of office equipment | (776) | (4,430) |
| Purchase of vessels | - | (25,000,000) |
| Change in restricted cash | 72,363 | (2,381,846) |
-------------------- |
-------------------- |
|
| NET CASH PROVIDED FROM INVESTING ACTIVITIES | $ 71,587 | $ (27,386,276) |
-------------------- |
-------------------- |
|
| FINANCING ACTIVITIES: | ||
| Repayments of long-term debt | (7,278,839) | (3,149,151) |
| Repurchases of Senior Notes | (4,283,050) | - |
| Debt issuance costs | - | (313,565) |
| Drawdown of term loans | - | 18,000,000 |
-------------------- |
-------------------- |
|
| NET CASH USED BY FINANCING ACTIVITIES | $ (11,561,889) | $ 14,537,284 |
-------------------- |
-------------------- |
|
| DECREASE IN CASH | (6,069,128) | (8,590,734) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 14,061,451 | 14,252,732 |
-------------------- |
-------------------- |
|
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 7,992,322 | $ 5,661,998 |
-------------------- |
-------------------- |
|
|
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. |
||
| NOTE
1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of MC Shipping Inc. and subsidiaries (the "Company") have been prepared in accordance with United States generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. These consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K. NOTE 2. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION: The Company is incorporated in the Republic of Liberia and, through its subsidiaries, owns and operates thirteen second-hand vessels comprising seven liquid petroleum gas ("LPG") carriers, four containerships (following the sale of another four containerships in July 2003), and two multipurpose seariver vessels. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of MC Shipping Inc. and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated. REVENUE RECOGNITION: Charter revenues are derived from timecharters, voyage charters and bareboat charters. Timecharter and bareboat charter revenue is recognized on an accrual basis. Voyage charter revenue and related expenses are accounted for on the percentage of completion method. VESSEL REPAIR AND OVERHAUL: Normal vessel repair and maintenance costs are charged to income when incurred. Costs incurred during drydockings and periodic inspections for regulatory and insurance purposes are deferred and charged to income rateably over the period of five years to the next intermediate or special survey drydocking. For the vessels, which are earmarked for sale, drydocking expenses are charged to expenses when incurred. VESSELS AND DEPRECIATION: Vessels are stated at cost, which includes contract price and other direct costs relating to acquiring and placing the vessels in service. Depreciation is calculated, based on cost, less estimated salvage value, using the straight-line method, over the remaining economic life of each vessel. The economic life of LPG carriers is assumed to extend from the date of their construction to the date of the final special survey which is closest to thirty years from the date of their construction. The economic life of other vessels is assumed to extend from the date of their construction to the date of the final special survey, which is closest to twenty-five years from the date of their construction. If a vessel is used beyond its fifth special survey, its economic life is assumed to extend to the end of its current charter. IMPAIRMENT OF LONG LIVED ASSETS: In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for Impairment of long-lived Assets and for long-lived Assets to be Disposed of", the Company writes down the value of vessels to fair value when information, typically in the form of appraisals and cash flow forecasts, indicates that the carrying value of such vessels is not recoverable. Assets to be disposed of are valued at the lower of carrying amount or fair value less cost to sell. Depreciation is not recorded on the vessels that are earmarked for sale, as such vessels are included in the financial statements at their market value, and such value is reviewed at the end of each quarter. SEGMENT REPORTING: The Company operates as a single segment, as Management internally evaluates the performance of the enterprise as a whole and not on the basis of separate business units. COMPREHENSIVE INCOME: Comprehensive income consists of foreign currency translation adjustment and unrealised losses on cash flow hedges. DEBT ISSUANCE COSTS: Debt issuance costs are being amortized, using the interest method, over the terms of the long-term credit facilities. The write-offs of debt issuance costs associated with the Company's repurchases and retirements of Notes are recorded as a reduction of Gains on repurchases of Notes. The write-offs of debt issuance costs associated with the Company's prepayment of secured debt at the time of the sale of vessels are recorded as a reduction of gains on disposals of vessels. INTEREST RATE SWAPS: The Company has one interest-rate swap agreement to fix the variable interest rate of some of its outstanding debt (See Note 6). As this interest rate swap is designated and qualifying as a cash flow hedge (i.e. hedging the exposure to variability in expected future cash flows that are attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period during which the hedged transaction affects earnings. If a swap is cancelled, the cancellation cost is recorded as interest expense. INVENTORIES: Inventories consist principally of supplies and are stated at cost, determined by the first-in, first-out method. CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist primarily of deposits with banks. RESTRICTED CASH: Restricted cash consists primarily of deposits with banks, that are restricted to guarantee the Company's performance under various loan agreements. EARNINGS PER SHARE: Basic and diluted earnings per share are calculated in accordance with FASB Statement No. 128, Earnings per Share. Basic earnings per share exclude dilution and are computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if outstanding options were exercised or converted into common stock. TAXATION: The Company is not subject to corporate income taxes in Liberia because its income is derived from non-Liberian sources. Additionally, the Company believes that it is not subject to corporate income taxes in other jurisdictions, including the United States. CHANGE IN PRESENTATION: Certain prior year amounts have been reclassified to conform to the 2003 presentation. NOTE 3. RELATED COMPANY TRANSACTIONS The Vlasov Group is the main shareholder of the Company. The Vlasov Group is owned by a trust, the sole trustee of which is Securitas Holding Corporation ("Securitas"). As of June 30, 2003, Vlasov Investment Corporation ("VIC"), a wholly-owned subsidiary of Securitas, owned approximately 48.17% of the Company and Greysea Limited ("Greysea") a Guernsey corporation controlled by certain senior officers and former officers of V.Ships owned 0.62%. Until March 28, 2003, V.Ships was an affiliate of the Company as it was 39% owned by Vlasov Group Inc. ("VGI"), another wholly owned subsidiary of Securitas. V.Ships was also owned 31% by Greysea, 19% by General Electric Capital Corporation ("GECC") and 11% by some officers of V Ships. As of March 28, 2003, V.Ships owned approximately 4.24% of the Company. Effective March 28, 2003, V.Ships ceased to be an affiliate of the Company following a change in the shareholding structure of V.Ships. Following a one year transitional period during which the Vlasov Group and General Electric Capital Corporation will each retain a small shareholding in V.Ships, V.Ships will be owned 50% by its senior management and 50% by a third party independent investor group. Therefore, the related company disclosure with respect to V.Ships only covers the period from January 1, 2003 through March 28, 2003. VGI and Greysea were involved in the initial organisation of the Company. Two directors and officers of the Company own material interests in Greysea. One of these directors and officers is also a director of Greysea. A director and officer of the Company is also a director and officer of VGI. Another director of the Company is also a director and officer of various shipowning and operating subsidiaries of the Vlasov Group. Certain of the directors and executive officers of the Company are involved in outside business activities similar to those conducted by the Company. As a result of these affiliations, such persons may experience conflicts of interest in connection with the selection, purchase, operation and sale of the Company's vessels and those of other entities affiliated with such persons. The By-laws of the Company provide that many of the transactions giving rise to potential conflicts of interest are subject to review by the Audit Committee of the Company's Board of Directors which is also charged with the responsibility of monitoring and reviewing transactions to be entered into with affiliates. Management believes that the terms of all the transactions described herein with V.Ships were fair to the Company. The Company, via its wholly owned subsidiaries, has entered into Management Agreements with V.Ships for the technical operation of all the Company's fleet, excluding the seariver vessels which are managed by an independent vessel manager because of the specialised nature of the trade. The Agreements are "cost-plus"contracts under which the Company reimburses all costs incurred by V. Ships for the operation of the Company's vessels and V.Ships is paid a fixed management fee. For 2003, the management fees are fixed at the rate of $8,600 per vessel/per month for the container ships and the Laforge and at the rate of $8,500 per vessel/per month for the other LPG carriers managed by V.Ships. In 2003, up to March 28, $282,000 were paid by the Company to V.Ships for services provided to the Company pursuant to the Management Agreements (in the first six months of 2002 - $646,500). If the Company deems it necessary to employ the services of V.Ships in the chartering or commercial operation of any of the Company's vessels, V.Ships is entitled to a commercial chartering commission determined in light of current industry practice. This commission can vary between 0.5% and 1.25% of such vessels'gross charter revenue and demurrage. In 2003, up to March 28, commercial chartering commissions totalling $4,500 have been paid by the Company to affiliates of V.Ships (in the first six months of 2002 - $82,444). If the Company deems it necessary to employ the services of V.Ships in the acquisition or disposal of vessels, the Company will pay commissions and legal fees determined in light of current industry practice. In 2003, up to March 28, no commissions or legal fees were paid by the Company to affiliates of V.Ships (in the first six months of 2002 - $30,964). The Company leases office space from an affiliate of V.Ships. In 2003, up to March 28, the rental cost paid to the affiliate of V.Ships was approximately $20,216 (in the first six months of 2002 - $36,104). In 2003, up to March 28, the Company paid approximately $8,000 for accounting services to an affiliate of V. Ships (in the first six months of 2002 - $16,500). In addition, on a case by case basis, as technical manager of the Company's fleet, V.Ships may use on behalf of the Company the services of other service providers for insurance, crew and staff travelling, port agency services, manning, safety and training services, and miscellaneous services. Some of the service providers may be affiliates of V Ships. At June 30, 2003, the Company had no intercompany balances of trade account receivable due from affiliates ($80,518 at December 31, 2002). NOTE 4. PROVISION FOR IMPAIRMENT LOSS In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for Impairment of long-lived Assets and for long-lived Assets to be Disposed of", the Company writes down the value of vessels to fair value when information, typically in the form of appraisals and cash flow forecasts, indicates that the carrying value of such vessels is not recoverable. At June 30, 2003, the Company evaluated the recoverability of its vessels in accordance with FAS 144 and determined that no provision for loss was required as the carrying values of vessels were deemed to be recoverable. The Company also reviewed the carrying values of the vessels earmarked for sale and determined that no further write off was necessary. (see "Item 2. Management discussion and analysis", for further comments). Evaluating recoverability in accordance with FAS 144 requires Management to make estimates and assumptions regarding future cash flows. Actual results could differ from those estimates, which could have a material effect on the recoverability of vessels. NOTE 5. SHAREHOLDERS'EQUITY The net income of $983,959 for the six months ended June 30, 2003 has been recorded as a reduction in the accumulated deficit. The summary of changes in shareholders'equity during the quarter ended June 30, 2003 is as follows: |
|
|
Common
Stock Par Value |
Treasury
Stock at cost |
Additional
Paid-in Capital |
Accumulated
Deficit |
Foreign
Currency Translation Adjustment |
Unrealised
Losses on Cash flow Hedges |
Total
Shareholders Equity |
|
|
--------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |
| December 31, 2002 | $84,816 | $(971,185) | $52,165,202 | $(24,996,251) | $15,924 | $(510,167) | $25,788,339 |
|
|
|
|
|
|
|
||
| Net Income |
|
|
|
983,959 |
|
|
983,959 |
|
|
|
|
|
|
|
||
| Foreign currency translation adjustment |
|
|
|
|
31,604 |
|
31,604 |
|
|
|
|
|
||||
| Unrealised gains on cash flow hedges |
|
|
|
|
|
51,155 | 51,155 |
|
|
--------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |
| June 30, 2003 | $84,816 | $(971,185) | $52,165,202 | (24,012,292) | 47,528 | $(459,012) | $26,855,057 |
|
|
--------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |
| With effect from April 1, 1998,
directors who are not officers of the Company or of an affiliated company,
receive $5,000 out of their total annual compensation of $25,000 by allotment
of shares of the
Company's common stock of equivalent value. On June 20, 2002, 163,148 stock options were granted to employees (see Note 7 Stock Option Plan). NOTE 6. LONG TERM DEBT In March 1998, the Company completed an issue of $100,000,000 of 10-year Senior Notes (the "Notes"). These Notes were issued pursuant to an indenture (the "Indenture") between the Company and Bankers Trust Company as trustee. Interest on the Notes is payable semi-annually in arrears on March 1 and September 1 in each year at a rate of 11.25% per annum. The Notes are senior unsecured obligations of the Company and rank senior in right of payment to all subordinated indebtedness of the Company and pari passu in right of payment with all other senior unsecured indebtedness of the Company. The Notes effectively rank junior to all secured indebtedness and to any indebtedness of the Company's subsidiaries. The Company's obligations under the Indenture were guaranteed on a senior unsecured basis as of the date of the Indenture by substantially all of the Company's then existing vessel-owning subsidiaries and in the future may be jointly and severally guaranteed by certain other subsidiaries of the Company. The Indenture contains various business and financial covenants, including among other things, (i) limitation on restricted payments, which include dividends, repurchases of capital stock, repayment of subordinated debt and restricted investments, (ii) limitations on additional indebtedness, (iii) limitations on liens, (iv) restrictions on sale and lease-back transactions, (v) limitations on transactions with affiliates, (vi) limitations on asset sales, (vii) limitations on unrestricted subsidiary designations, and (viii) limitations on mergers and consolidations. The Board of Directors has authorised Management to repurchase Notes at times and prices and in volumes, which Management deems appropriate. During the six months ended June 30, 2003, the Company repurchased Notes having a total face value of $7,000,000 for a cash outlay of approximately $4,283,000 and recorded a net gain of $2,620,477 on the transaction (there were no repurchases in the first six months of 2002). The repurchased Notes have been retired. The Company has a long-term debt agreement with Fortis Bank and Banque Nationale de Paris ("BNP") obtained in June 1998. Pursuant to this credit facility, certain of the Company's subsidiaries could borrow up to total of $40,000,000 to finance the acquisition of vessels. The facility bears interest at LIBOR plus 1.25% and the final repayment date under the facility is fixed at June 30, 2006. The vessel-owning subsidiaries have granted ship mortgages over their vessels as security for the advances and the Company has issued a guarantee in relation to the facility. Repayment schedules (consisting of semi-annual instalments plus a balloon) are determined in relation to each drawing at the time the advances were made by reference to the ages and to the types of vessels acquired. Since December 31, 2002, drawings are no longer permitted under this facility. At June 30, 2003, the total amount outstanding under this facility was $16,960,395. In September 2002, the Company was granted a $17,700,000 credit facility by The Bank of Nova Scotia ("Scotiabank") in order to finance the acquisition of a second-hand LPG vessel by one of the Company's wholly owned subsidiaries. The facility bears interest at LIBOR plus 2% and is non-recourse to the Company. The acquiring subsidiary made a drawing of $13,462,500, which is repayable over five years in equal quarterly instalments. A swap agreement was concurrently entered into with Scotiabank, as a result of which the variable rate on the loan, exclusive of margin, has been effectively fixed at 4.595%. The swap's notional amount and duration follow the scheduled repayments of the underlying loan. At June 30, 2003, the total amount outstanding under this facility was $8,750,625. In addition, two of the Company's wholly owned subsidiaries, each of which had acquired a second-hand containership in 1998, made drawings totalling $4,237,500 under this facility to refinance their vessels. The outstanding amount of this second advance $1,059,375 was prepaid on March 24, 2003 and the corresponding swap cancelled. In April 2002, the Company was granted a $18,000,000 credit facility by Nedship Bank in order to finance the acquisition of four second hand container vessels by four of the Company's wholly owned subsidiaries. The facility is guaranteed by the Company, bears interest at a fixed rate of 5.42% and is repayable in ten equal quarterly repayments of $1,800,000. At June 30, 2003, the amount outstanding under this facility was $10,800,000. The Company's long-term debt is secured by certain of its vessels. NOTE 7: STOCK OPTION PLAN On June 20, 2002, the shareholders authorised the creation of a Stock Option Plan for the Company's employees. A maximum of 407,871 shares or 5% of the Company's outstanding shares were authorised for issuance under this stock option plan. Under the terms of the plan, the options give the right to purchase one share per option and vest 25% per annum, commencing one year after the grant date of the respective option. Options expire 10 years after the grant date. On June 20, 2002, the Company's Board of Directors approved the issuance of 163,148 options to employees at an exercise price of $0.622 per share. In the first quarter 2003, 13,542 options were cancelled following the departure of an employee at a cost of $3,494. At June 30, 2003, 74,803 stock options were exercisable. As of June 30, 2003, the stock price of the Company was $1.10. NOTE 8: SUBSEQUENT EVENTS On July 15 2003, the Company sold four second-hand container vessels to a non-affiliated third party. The total sale price was $21,200,000. The Nedship Bank credit facility was fully prepaid. None of these vessels were earmarked for sale. In July 2003, the Company counter-guaranteed, for an amount of Euros 2,250,000, a performance bond issued in favour of a Major European Group. This bond was placed to support the Company's submission to a tender offer for the acquisition of some of this Group's vessels, together with a time charter back. The tender offer was made jointly by a group of companies including The Company, and the performance bond was issued by a bank. The validity of the bond expires latest on October 31st, 2003. |
| Item
1 - Legal Proceedings None Item 2 - Changes in Securities None Item 3 - Defaults upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 31.1 Certifications provided by the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (b) Exhibit 31.2 Certifications provided by the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (c) Exhibit 32.1 Certifications provided by the Chief Executive Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (d) Exhibit 32.2 Certifications provided by the Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (e) Reports on Form 8-K The Company filed a report on Form 8-K on August 14, 2003. |