Table of Contents
IMPERIAL PETROLEUM INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of operations for the
six-month
period ended June 30, 2023. Unless otherwise specified herein, references to the "Company" or "we" shall include Imperial Petroleum Inc. and its subsidiaries. You should read the following discussion and analysis together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in this report. For additional information relating to our management's discussion and analysis of financial condition and results of operations, please see our annual report on Form
20-F
for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission on April 3, 2023 (the "Annual Report"). All share amounts
reflect the 1-for-15 reverse split
of our common stock effected by the Company on April 28, 2023.
Overview
Imperial Petroleum Inc. is a ship-owning company providing petroleum products, crude oil and drybulk seaborne transportation services. As of June 30, 2023, the Company owned a total of ten vessels: five M.R. Product tankers, two Suezmax tankers, two Handysize dry bulk carriers and one Aframax oil tanker which was subsequently sold, with a total capacity of 743,804 deadweight tons (dwt). In September 2023, the Company agreed to acquire two additional tankers, one Aframax and one MR Product tanker, which will be delivered up until the end of January 2024 and will be financed by cash on hand. Following these deliveries, the Company will own a fleet of eleven vessels with an aggregate capacity of 791,716 dwt.
Our Fleet
The following summarizes the current employment of our fleet:
Name
Year

Built
Country

Built
Vessel Size

(dwt)
Vessel

Type
Employment

Status
Daily

Charter

Rate
Expiration of

Charter(1)
TANKER FLEET
Magic Wand
2008 Korea 47,000 MR product tanker Spot
Clean Thrasher
2008 Korea 47,000 MR product tanker Spot
Clean Sanctuary (ex. Falcon Maryam)
2009 Korea 46,000 MR product tanker Spot
Clean Nirvana
2008 Korea 50,000 MR product tanker Spot
Clean Justice
2011 Japan 47,000 MR product tanker Spot
Suez Enchanted
2007 Korea 160,000 Suezmax tanker Spot
Suez Protopia
2008 Korea 160,000 Suezmax tanker Spot
DRYBULK FLEET
Glorieuse
2012 Japan 38,000 Handysize drybulk carrier Time Charter $ 13,200 October 2023
Eco Wildfire
2013 Japan 33,000 Handysize drybulk carrier Time Charter $ 8,500 October 2023
Fleet Total
628,000 dwt
(1)
Earliest date charters could expire.
1
Table of Contents
As of September 1, 2023, we had both of our Handysize drybulk carriers under time charter employment expiring in October 2023. All of our tanker vessels were operating in the spot market, as market conditions and rates were favorable for spot employment.
Fleet Developments
On June 21, 2023,
we completed the spin-off of our
previously wholly-owned subsidiary, C3is Inc., the holding company for two drybulk carriers, the
Eco Angelbay
and the
Eco Bushfire
, each with an aggregate capacity of 64,000 dwt. Imperial Petroleum stockholders and warrantholders received one C3is common share for every eight shares of Imperial Petroleum's common stock owned, or in the case of holders of Imperial Petroleum's outstanding Warrants that they have the right to purchase pursuant to Warrants owned, at the close of business on June 13, 2023. We retain an interest in C3is Inc. through our ownership of Series A Convertible Preferred Stock of C3is Inc., which has an aggregate liquidation preference of $15 million, a conversion price of $1.05 currently, and a dividend rate of 5.0% per annum.
In July 2023, we sold the
M/T Stealth Berana
, an Aframax oil tanker, built at Samsung shipyard, South Korea in 2010, with a cargo carrying capacity of 115,804 dwt, to C3is Inc., an affiliated company, for $43 million.
In September 2023, we entered into an agreement with entities affiliated with the family of our Chief Executive Officer to acquire two tanker vessels, the Aframax tanker
Stealth Haralambos
, built in 2009 and the product tanker
Aquadisiac
built in 2008, with an aggregate capacity of approximately 163,716 dwt. The aggregate purchase price for these acquisitions is $71 million. Both vessels will be delivered on a charter-free basis by the end of January 2024.
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Table of Contents
Selected Financial Data
(in US Dollars except for Fleet Data)
For the
six-month
periods
ended June 30,
Statement of Comprehensive Income Data
2022
2023
Revenues
16,464,649 124,465,322
Voyage expenses
(4,721,312 ) (34,600,245 )
Voyage expenses - related party
(203,462 ) (1,546,799 )
Vessels' operating expenses
(5,034,767 ) (13,761,185 )
Vessels' operating expenses - related party
(37,500 ) (154,333 )
Drydocking costs
-  (1,318,310 )
Management fees-related party
(341,625 ) (871,640 )
General and administrative expenses
(527,985 ) (2,466,405 )
Depreciation
(4,902,831 ) (8,690,061 )
Impairment loss
-  (8,996,023 )
Income from operations
695,167 52,060,321
Interest and finance costs
(452,915 ) (1,810,769 )
Interest Income
44,140 2,131,146
Dividend income from related party
-  20,833
Foreign exchange gain
17,709 149,056
Net income
304,101 52,550,587
Balance Sheet Data
As of

December 31,
2022
As of June 30,

2023
Cash and cash equivalents
50,901,092 36,713,632
Time deposits
68,000,000 61,912,900
Current assets
133,872,063 117,182,572
Vessels, net
226,351,081 216,771,929
Total assets
365,823,144 346,642,683
Current liabilities
24,380,703 11,463,169
Total liabilities
84,168,626 11,463,169
Mezzanine equity
-  10,000,000
Capital stock
129,724 170,874
Total stockholders' equity
281,654,518 325,179,514
3
Table of Contents
Selected Financial Data (continued)
For the six-month periods ended
June 30,
Other Financial Data
2022
2023
Net cash provided by operating activities
1,270,841 63,816,346
Net cash used in investing activities
(79,022,533 ) (20,197,305 )
Net cash provided by/(used in) financing activities
153,532,079 (64,412,328 )
For the six-month periods ended June 30,
Fleet Data
2022
2023
Average number of vessels(1)
5.0 10.9
Total calendar days for fleet(2)
906 1,981
Total voyage days for fleet(3)
903 1,947
Total charter days for fleet(4)
683 718
Total spot market days for fleet(5)
220 1,229
Fleet utilization(6)
99.7 % 98.3 %
Fleet operational utilization(7)
89.1 % 79.8 %
1)
Average number of vessels is the number of owned vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.
2)
Total calendar days for fleet are the total days the vessels we operated were in our possession for the relevant period including
off-hire
days associated with major repairs, drydockings or special or intermediate surveys.
3)
Total voyage days for fleet reflect the total days the vessels we operated were in our possession for the relevant period net of
off-hire
days associated with major repairs, drydockings or special or intermediate surveys.
4)
Total charter days for fleet are the number of voyage days the vessels operated on time or bareboat charters for the relevant period.
5)
Total spot market charter days for fleet are the number of voyage days the vessels operated on spot market charters for the relevant period.
6)
Fleet utilization is the percentage of time that our vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period.
7)
Fleet operational utilization is the percentage of time that our vessels generated revenue, and is determined by dividing voyage days excluding commercially idle days by fleet calendar days for the relevant period.
4
Table of Contents
Result of Operations
Six-month
period ended June 30, 2023 compared to the
six-month
period ended June 30, 2022
REVENUES
- Total revenues for the six months ended June 30, 2023 amounted to $124.5 million, an increase of $108.0 million, or 654.5%, compared to revenues of $16.5 million for the six months ended June 30, 2022, primarily due to the increase in the average number of our vessels and improved market conditions resulting in higher rates particularly in the spot tanker market.
VOYAGE EXPENSES-
Total voyage expenses for the six months ended June 30, 2023 were $36.1 million compared to $4.9 million for the six months ended June 30, 2022. The $31.2 million increase in voyage expenses is mainly due to the increase in the spot days of our fleet by 1,009 days (458.6%).
VESSELS' OPERATING EXPENSES-
Total vessels' operating expenses for the six months ended June 30, 2023 were $13.9 million compared to $5.1 million for the six months ended June 30, 2022. The $8.8 million increase in vessels' operating expenses was primarily due to the increase in the average number of our vessels in our fleet by approximately six vessels.
DRYDOCKING COSTS
- Total drydocking costs for the six months ended June 30, 2023 and 2022 were $1.3 million and nil, respectively. This increase is due to the fact that during the six months ended June 30, 2023 two of our Handysize drybulk carriers underwent drydocking.
MANAGEMENT FEES - RELATED PARTY -
Management fees were $0.9 million for the six months ended June 30, 2023 compared to $0.3 million for the six months ended June 30, 2022. The increase in management fees in the six months ended June 30, 2023 is attributed to the increase of our fleet by approximately six vessels.
GENERAL AND ADMINISTRATIVE EXPENSES
- General and administrative expenses for the six months ended June 30, 2023 and 2022 were $2.5 million and $0.5 million, respectively. This rise of $2.0 million is mainly attributed to $1.1 million of stock-based compensation expense along with a rise in reporting costs related to our
spin-off
project.
DEPRECIATION
- Depreciation for the six months ended June 30, 2023, was $8.7 million, a $3.8 million increase from $4.9 million for the same period of last year, due to the increase in the average number of our vessels.
INTEREST AND FINANCE COSTS
- for the six months ended June 30, 2023 and 2022 were $1.8 million and $0.5 million, respectively. The $1.8 million of costs for the six months ended June 30, 2023 relates mainly to $1.3 million of interest charges incurred up to the full repayment of all outstanding loans concluded in April 2023 along with the full amortization of $0.5 million of loan related charges following the repayment of the Company's outstanding debt. Interest and finance costs increased by $1.3 million during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 mainly due to the increase in the average loan outstanding balance during the current period compared to the prior period. No debt was outstanding at June 30, 2023.
INTEREST INCOME
- for the six months ended June 30, 2023 and 2022 was $2.1 million and $0.04 million, respectively. The increase is attributed to our time deposits during the period at favourable time deposit rates.
IMPAIRMENT LOSS
- for the six months period ended June 30, 2023 stood at $9.0 million, and related to the
spin-off
of two of our four drybulk carriers to C3is Inc. The decline of drybulk vessels' fair values compared to one year ago when these vessels were acquired resulted in the incurrence of impairment loss.
NET INCOME
- As a result of the above, net income for the six months ended June 30, 2023 amounted to $52.6 million, compared to a net income of $0.3 million for the six months ended June 30, 2022.
5
Table of Contents
Cash Flows
Net cash provided by operating activities
- was $63.8 million for the six months ended June 30, 2023, compared to $1.3 million for the six months ended June 30, 2022. The increase in net cash provided by operating activities was mainly attributed to the increase in cash flows relating to the increased revenues partly offset by the increased cash outflows relating to our expenses as a result of the increase in average number of our vessels by approximately six vessels.
Net cash used in investing activities
- was $20.2 million for the six months ended June 30, 2023. This amount mainly represents the aggregate consideration paid for the acquisition of two Handysize dry vessels offset by the net change of funds under time deposits. Net cash used in investing activities for the six months ended June 30, 2022 amounting to $79.0 million related to the acquisition of four tanker vessels.
Net cash provided by/(used in) financing activities
- was an outflow of $64.4 million for the six months ended June 30, 2023, consisting mainly of $70.4 million utilized for loan repayments, $5.0 million of cash retained by C3is Inc. at its
spin-off
and $0.9 million paid for dividends on our Series A preferred shares partially offset by the $11.9 million of net proceeds from equity offerings. Net cash provided by financing activities for the six months ended June 30, 2022 amounted to $153.5 million and related mostly to $167.6 million raised from equity offerings partially offset by the $10.8 million of stock issuance costs and by the $2.4 million relating to loan repayments.
Liquidity and Capital Resources
As of June 30, 2023, we had cash and cash equivalents of $36.7 million and $61.9 million under time deposits. In August 2023, we completed an offering of 5,400,000 shares of common stock, 3,099,999
pre-funded
warrants with an exercise price of $0.01 per share, of which 2,122,471 have subsequently been exercised, and 8,499,999 Class E Warrants with an exercise price of $2.00 per share, resulting in gross proceeds, before placement agent fees and transaction expenses, to us of approximately $17.0 million.
Our principal sources of funds for our liquidity needs have been equity offerings and cash flows from operations, which we expect to continue to be significant components of the financing for further fleet growth. Potential additional sources of funds include bank borrowings. Our principal use of funds has been to acquire our vessels, maintain the quality of our vessels, and fund working capital requirements. In July 2023, we sold our Aframax tanker to C3is Inc. for cash consideration of $43 million, of which $4.3 million was received by us upon delivery of the vessel on July 14, 2023 and the balance is payable to us by July 14, 2024.
Our liquidity needs, as of June 30, 2023, primarily relate to funding expenses for operating our vessels, any vessel acquisition and vessel improvements that may be required and general and administrative expenses. In August 2023, we entered into agreements to acquire two tankers for an aggregate purchase price of $71 million, which are scheduled to be delivered on a charter-free basis by the end of January 2024.
As of June 30, 2023, we had no outstanding debt, as within the first and second quarter of 2023 we repaid all our then outstanding loans amounting to $69.1 million.
We believe that our working capital along with our cash flows generated from operations are sufficient for our present short-term liquidity requirements. We believe that, unless there is a major and sustained downturn in market conditions applicable to our specific shipping industry segment, our internally generated cash flows will be sufficient to fund our operations, including working capital requirements, for at least 12 months taking into account any possible capital commitments and debt service requirements that may arise in the future.
6
Table of Contents
In September 2023, the Company's Board of Directors approved a share repurchase program and authorized the officers of the Company to repurchase, from time to time, up to $10,000,000 of the Company's common stock.
Critical Accounting Estimates
A discussion of our critical accounting estimates can be found in our Annual Report.
Forward-Looking Statements
Matters discussed in this report may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, the conflict in Ukraine and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this 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 which are difficult or impossible to predict and are beyond our control, we assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the impact of any lingering impact
of the COVID-19 pandemic and
efforts throughout the world to contain its spread, the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, supply and demand for oil and oil products, charter counterparty performance, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydockings, shipyard performance, changes in our operating expenses, including bunker prices, drydocking and insurance costs, ability to obtain financing and comply with covenants in our financing arrangements, the ability to consummate the acquisition of our two contracted vessels and operate them profitably, performance of counterparty to our vessel sale agreement, , potential liability from pending or future litigation or actions taken by regulatory authorities, domestic and international political conditions, the conflict in Ukraine and related sanctions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. Risks and uncertainties are further described in the Annual Report and other reports we file with the U.S. Securities and Exchange Commission.
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Table of Contents
IMPERIAL PETROLEUM INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Index to unaudited interim condensed consolidated financial statements
Pages
Unaudited condensed consolidated balance sheets as of December 31, 2022 and June 30, 2023
F-2
Unaudited condensed consolidated statements of comprehensive income for the six month periods ended June 30, 2022 and June 30, 2023
F-4
Unaudited condensed consolidated statements of stockholders' equity and mezzanine equity for the six month periods ended June 30, 2023 and June 30, 2023
F-5
Unaudited condensed consolidated statements of cash flows for the six month periods ended June 30, 2022 and June 30, 2023
F-6
Notes to the unaudited interim condensed consolidated financial statements
F-7
F-1
Table of Contents
Imperial Petroleum Inc.
Unaudited condensed consolidated balance sheets
As of December 31, 2022 and June 30, 2023 (unaudited)
(Expressed in United States dollars, Except for Share Data)
As of

December 31, 2022
As of

June 30, 2023
Assets
Current assets
Cash and cash equivalents
50,901,092 36,713,632
Time deposits
68,000,000 61,912,900
Restricted cash
1,005,827 -
Receivable from related party (Note 3)
 146,708 -
Trade and other receivables
7,898,103 10,381,724
Other current assets (Note 11)
240,002 376,132
Inventories
5,507,423 7,444,975
Advances and prepayments
172,908 353,209
Total current assets
133,872,063
117,182,572
Non current assets
Vessels, net (Note 4)
226,351,081 216,771,929
Restricted cash
5,600,000 -
Operating lease
right-of-use
asset
- 31,349
Investment in related party (Note 3)
- 12,656,833
Total non current assets
231,951,081
229,460,111
Total assets
365,823,144
346,642,683
Liabilities, Mezzanine Equity and Stockholders' Equity
Current liabilities
Trade accounts payable
8,115,462 8,121,803
Payable to related parties(Notes 3)
3,016,438 491,456
Accrued liabilities
1,982,306 2,645,608
Deferred income
1, 089,959 172,953
Operating lease liabilities
- 31,349
Current portion of long-term debt (Note 5)
10,176,538 -
Total current liabilities
24,380,703
11,463,169
Non current liabilities
Long-term debt (Note 5)
59,787,923 -
Total non current liabilities
59,787,923
-
Total liabilities
84,168,626
11,463,169
F-2
Table of Contents
Commitments and contingencies (Note 12)
Mezzanine equity
Preferred stock, Series C, $0.01 par value, zero and 13,875 preferred shares authorized, zero and 13,875 preferred shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively
- 139
Preferred stock
paid-in
capital in excess of par value (Note 8)
- 9,999,861
Total Mezzanine equity
- 10,000,000
Stockholders' equity
Capital stock, 2,000,000,000 shares authorized at December 31, 2022 and June 30, 2023, 12,972,358 shares issued and outstanding at December 31, 2022 and 17,087,362 shares issued and outstanding at June 30, 2023 (Note 7)
129,724 170,874
Preferred stock, 200,000,000 shares authorized (Note 7)
Preferred stock, Series A, $0.01 par value, 800,000 preferred shares authorized, 795,878 and 795,878 preferred shares, issued and outstanding at December 31, 2022 and June 30, 2023, respectively (Note 7)
7,959 7,959
Preferred stock, Series B, $0.01 par value, 16,000 preferred shares authorized, 16,000 and 16,000 preferred shares, issued and outstanding at December 31, 2022 and June 30, 2023, respectively (Note 7)
160 160
Additional
paid-in
capital
252,912,550 244,901,303
Retained earnings
28,604,125 80,099,218
Total stockholders' equity
281,654,518
325,179,514
Total liabilities, mezzanine equity and stockholders' equity
365,823,144
346,642,683
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-3
Table of Contents
Imperial Petroleum Inc.
Unaudited condensed consolidated statements of comprehensive income
(Expressed in United States dollars)
For the six-month periods ended June 30,
2022
2023
Revenues
Revenues (Note 11)
16,464,649 124,465,322
Total revenues
16,464,649
124,465,322
Expenses
Voyage expenses
4,721,312 34,600,245
Voyage expenses - related party (Note 3)
203,462 1,546,799
Vessels' operating expenses
5,034,767 13,761,185
Vessels' operating expenses - related party (Note 3)
37,500 154,333
Drydocking costs
- 1,318,310
Management fees - related party (Note 3)
341,625 871,640
General and administrative expenses (including $105,200 and $230,642 to related party) (Note 3)
527,985 2,466,405
Depreciation (Note 4)
4,902,831 8,690,061
Impairment loss (Note 1)
- 8,996,023
Total expenses
15,769,482
72,405,001
Income from operations
695,167
52,060,321
Other (expenses) / income
Interest and finance costs
(452,915 ) (1,810,769 )
Interest income
44,140 2,131,146
Dividend income from related party (Note 3)
- 20,833
Foreign exchange gain
17,709 149,056
Other (expenses)/ income, net
(391,066
)
490,266
Net income
304,101
52,550,587
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-4
Table of Contents
Imperial Petroleum Inc.
Unaudited condensed consolidated statements of stockholders' equity and mezzanine equity
(Expressed in United States dollars, Except of Number of Shares)
Capital stock
Preferred stock 
Mezzanine Equity
Number

of Shares
Amount
Number

of
Shares
Amount
Additional

paid-in
capital
(Accumulate
d
deficit)/

Retained

Earnings
Total
stockholder's
Equity
Number

of Shares
 Mezzanine

equity
Balance,
December 31, 2021
318,351
3,184
795,878
7,959
97,206,257
(471,557
)
96,745,843
Issuance of common stock (including the exercise of warrants) net of issuance costs
12,365,251
123,653
-
-
156,680,918
-
156,804,571
-
-
Net income
-
-
-
-
-
304,101
304,101
Deemed dividend on warrant inducement
-
-
-
-
-
(2,943,675
)
(2,943,675
)
-
-
Incremental fair value of the Class D warrants
-
-
-
-
-
2,943,675
2,943,675
-
-
Dividends declared on Series A preferred shares
-
-
-
-
(870,492
)
-
(870,492
)
-
-
Balance, June
30, 2022
12,683,602
126,837
795,878
7,959
253,016,683
(167,456
)
252,984,023
-
-
Capital stock
Preferred stock 
Mezzanine Equity
Number

of Shares
Amount
Number

of
Shares
Amount
Additional
paid-in
capital
(Accumulate
d
deficit)/
Retained
Earnings
Total
stockholder's
Equity
Number

of Shares
Mezzanine

equity
Balance,
December 31, 2022
12,972,358
129,724
811,878
8,119
252,912,550
28,604,125
281,654,518
Issuance of common stock (including the exercise of warrants) net of issuance costs
3,287,062
32,871
-
-
11,863,795
-
11,896,666
Issuance of restricted shares and stock based compensation
827,942
8,279
-
-
1,082,910
-
1,091,189
Issuance of Series C preferred shares
-
-
-
-
-
-
-
13,875
10,000,000
Dividends declared on Series A preferred shares
-
-
-
-
-
(870,494
)
(870,494
)
Dividends declared on Series C preferred shares
-
-
-
-
-
(185,000
)
(185,000
)
Net income
-
-
-
-
-
52,550,587
52,550,587
Distribution of net assets of C3is Inc. to stockholders and warrant holders
-
-
-
-
(20,957,952
)
-
(20,957,952
)
Balance, June
30, 2023
17,087,362
170,874
811,878
8,119
244,901,303
80,099,218
325,179,514
13,875
10,000,000
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-5
Table of Contents
Imperial Petroleum Inc.
Unaudited consolidated statements of cash flows
(Expressed in United States dollars)
For the six-month periods ended June 30,
2022
2023
Cash flows from operating activities:
Net income
304,101 52,550,587
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
4,902,831 8,690,061
Amortization of deferred finance charges
29,470 474,039
Amortization of operating lease
right-of-use
asset
- 31,349
Share based compensation
- 1,091,189
Impairment loss
- 8,996,023
Dividend income from related party
- (20,833 )
Changes in operating assets and liabilities:
(Increase)/decrease in
Trade and other receivables
(2,172,381 ) (3,360,823 )
Other current assets
(581,331 ) (136,130 )
Inventories
(4,676,485 ) (2,062,365 )
Changes in operating lease liabilities
- (31,349 )
Advances and prepayments
(393,340 ) (373,262 )
Increase/(decrease) in
Trade accounts payable
4,288,624 500,001
Balances with related parties
(745,505 ) (2,752,024 )
Accrued liabilities
606,679 1,020,949
Deferred income
(291,822 ) (801,066 )
Net cash provided by operating activities
1,270,841
63,816,346
Cash flows from investing activities:
Acquisition and improvement of vessels
(79,022,533 ) (26,284,405 )
Placement of time deposits
- (61,912,900 )
Maturity of bank time deposits
- 68,000,000
Net cash used in investing activities
(79,022,533
)
(20,197,305
)
Cash flows from financing activities:
Proceeds from equity offerings
167,572,515 12,095,253
Stock issuance costs
(10,767,944 ) (198,587 )
Dividends paid on preferred shares
(870,492 ) (870,494 )
Loan repayments
(2,402,000 ) (70,438,500 )
Cash retained by C3is Inc. at
spin-off
- (5,000,000 )
Net cash provided by/ (used in) financing activities
153,532,079
(64,412,328
)
Net increase/(decrease) in cash, cash equivalents and restricted cash
75,780,387
(20,793,287
)
Cash, cash equivalents and restricted cash at the beginning of the year
6,341,059
57,506,919
Cash, cash equivalents and restricted cash at the end of the period
82,121,446
36,713,632
Supplemental cash flow information:
Interest paid
305,349 1,735,054
Non cash investing activity - Vessel improvements included in liabilities
51,580 322,527
Non cash financing activity - Dividend on Preferred Series C included in Balances with related parties
- 185,000
Non-cash investing and financing activity - Distribution of net assets of C3is Inc. to shareholders and warrantholders
- 20,957,952
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents
79,135,753 36,713,632
Restricted cash - Current assets
485,693 -
Restricted cash - Non current assets
2,500,000 -
Total cash, cash equivalents and restricted cash shown in the statements of cash flows
82,121,446
36,713,632
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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Imperial Petroleum Inc.
Notes to the unaudited interim condensed consolidated financial statements
(Expressed in United States dollars)
1. General Information and Basis of Presentation
Imperial Petroleum Inc. ("Imperial") was formed by StealthGas Inc (the "former Parent Company") on May 14, 2021 under the laws of the Republic of the Marshall Islands. Initial share capital of Imperial consisted of 500 common shares. StealthGas Inc. separated its crude and product tankers by transferring to Imperial its interest in Clean Power Inc., MR Roi Inc., King of Hearts Inc. and Tankpunk Inc. (the "Subsidiaries"), each owning one tanker. The transfer was completed on November 10, 2021 in exchange for 4,774,772 newly issued common shares and 795,878 Series A 8.75% Preferred Shares (the "Series A Preferred Shares") in Imperial. On December 3, 2021, StealthGas Inc. distributed the 4,775,272 common shares and 795,8788.75% Series A Preferred Shares (with a liquidation preference of $25.00 per share) in Imperial to holders of StealthGas Inc.'s common stock on a pro rata basis
(the "Spin-Off").
The accompanying unaudited interim consolidated financial statements include the accounts of Imperial and its wholly owned subsidiaries (collectively, the "Company").
On June 21, 2023, the Company completed the
spin-off
transaction (the
"Spin-off")
of its two Handysize drybulk carriers, "Eco Bushfire" and "Eco Angelbay" to its wholly-owned subsidiary C3is Inc. ("C3is"), which was formed by the Company in July 2022. Immediately prior to the
Spin-off,
Imperial received all issued and outstanding common shares and all 600,0005.00% Series A Perpetual Convertible Preferred shares of C3is (Note 3) in exchange for the contribution of the entities owning the aforementioned vessels together with $5,000,000 in cash as working capital. Imperial, as the sole shareholder of C3is, distributed the C3is's common shares to Company's stockholders and warrant holders in accordance with the terms of the Company's outstanding warrants on a pro rata basis on June 21, 2023. Common shares of C3is commenced trading on June 21, 2023 on the Nasdaq Capital Market under the ticker symbol "CISS". C3is is a provider of international drybulk seaborne transportation services owning and operating the two Handysize drybulk carriers previously owned and operated by Imperial and is now a separate publicly traded company. Imperial Inc. continues to operate in the tanker and dry bulk shipping market and remains a publicly traded company.
The assets and liabilities of C3is on June 21, 2023, were as follows:
June 21, 2023
Cash and cash equivalents
5,000,000
Trade and other receivables
877,202
Inventories
124,813
Advances and prepayments
192,961
Due from related party
188,750
Vessels, net (after impairment of $8,996,023)
28,500,000
Trade accounts payable
816,187
Accrued and other liabilities
357,647
Deferred income
115,940
Net assets of C3is distributed to stockholders and warrantholders
33,593,952
Less investment in preferred shares of C3is issued as part of
spin-off
(12,636,000 )
Distribution of net assets of C3is to stockholders and warrantholders
20,957,952
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. These unaudited interim consolidated financial statements have been prepared on the same basis and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2022 included in the Company's Annual Report on Form
20-F
filed with the Securities and Exchange Commission on April 3, 2023 (the "2022 Consolidated Financial Statements") and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. The reporting and functional currency of the Company is the United States Dollar. Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2023.
The consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
At June 30, 2023, the Company's fleet was comprised of 8 tankers consisting of 5 medium range (M.R.) type product tankers, 2 Suezmax and 1 Aframax crude oil tanker as well as 2 Handysize drybulk carriers providing worldwide marine transportation services under long, medium or short-term charters.
The Company's vessels are managed by Stealth Maritime Corporation S.A. (the "Manager"), a company controlled by members of the family of the Company's Chief Executive Officer. The Manager, a related party, was incorporated in Liberia and registered in Greece on May 17, 1999 under the provisions of law 89/1967, 378/1968 and article 25 of law 27/75 as amended by article 4 of law 2234/94. (See Note 3).
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Table of Contents
As of June 30, 2023, the 12 subsidiaries included in the Company's unaudited interim consolidated financial statements were:
Company
Date of

Incorporation
Name of Vessel

Owned by

Subsidiary
Dead Weight

Tonnage

("dwt")
Acquisition

Date
Clean Power Inc. 5/2/2007 Magic Wand 47,000 9/1/2008
MR Roi Inc. 5/2/2007 Clean Thrasher 47,000 27/2/2008
King of Hearts Inc. 17/3/2008 Clean Sanctuary 46,000 14/7/2009
Tankpunk Inc. 6/1/2008 Stealth Berana 115,804 26/7/2010
Nirvana Product Trading Inc 25/2/2022 Clean Nirvana 50,000 28/3/2022
Volume Jet Trading Inc. 25/2/2022 Clean Justice 47,000 31/5/2022
Intercontinental Crude and Product Enterprises Inc. 18/5/2022 Suez Enchanted 160,000 3/6/2022
Petroleum Trading and Shipping Inc. 21/4/2022 Suez Protopia 160,000 3/6/2022
Haven Exotic Trading Inc. 31/1/2023 Eco Wildfire 33,000 28/2/2023
Blue Oddysey International Inc. 31/1/2023 Glorieuse 38,000 27/2/2023
Drybulk International Trading and Shipping Inc.*
04/7/2022 Eco Bushfire 32,000 21/9/2022
Raw Commodities & Exports Inc.*
04/7/2022 Eco Angelbay 32,000 19/10/2022
*
Consolidated by the Company up to June 21, 2023, the date the Spin-Off of C3is Inc. was completed.
On April 28, 2023, the Company effected a
1-for-15
reverse stock split of its common stock. All numbers of common share
and
(loss)/
earnings
per share amounts, as well as warrant shares eligible for purchase under the Company's warrants, exercise price of said warrants and conversion price of the Company's Series C Preferred Shares, in these interim condensed consolidated financial statements have been retroactively adjusted to reflect this
1-for-15
reverse stock split.
2.
Significant Accounting Policies
A discussion of the Company's significant accounting policies can be found in the 2022 Consolidated Financial Statements. During the
six-month
period ended June 30, 2023, the Company adopted the following accounting policies:
New significant accounting policies adopted during the six months ended June 30, 2023
Investment in related party (Financial Instruments, Recognition and Measurement):
The Company has elected to measure equity securities without a readily determinable fair value, that do not qualify for the practical expedient in ASC 820 Fair Value Measurement to estimate fair value using the NAV per share (or its equivalent), at its cost minus impairment, if any. At each reporting period, the Company also evaluates indicators such as the investee's performance and its ability to continue as going concern and market conditions, to determine whether an investment is impaired in which case, the Company will estimate the fair value of the investment to determine the amount of the impairment loss.
3. Transactions with Related Parties
The Manager provides the vessels with a wide range of shipping services such as chartering, technical support and maintenance, insurance, consulting, financial and accounting services, for a fixed daily fee of $440 per vessel operating under a voyage or time charter or $125 per vessel operating under a bareboat charter (the "Management fees") and a brokerage commission of 1.25% on freight, hire and demurrage per vessel (the "Brokerage commissions"), as per the management agreement between the Manager and the Company. In addition, the Manager arranges for supervision onboard the vessels, when required, by superintendent engineers and when such visits exceed a period of five days in a twelve month period, an amount of $500 is charged for each additional day (the "Superintendent fees").
The Manager also provides crew management services to the vessels Magic Wand, Clean Thrasher, Clean Sanctuary, Clean Justice, Suez Protopia, Suez Enchanted, Eco Wildfire, Glorieuse, Clean Nirvana since February 2023, Stealth Berana since April 2023
, Eco Bushfire since September 2022 and up to the Spin-off and Eco Angelbay since October 2022 and up to the Spin-off
. These services have been subcontracted by the Manager to an affiliated ship-management company, Hellenic Manning Overseas Inc. (ex. Navis Maritime Services Inc.). The Company pays to the Manager a fixed monthly fee of $2,500 per vessel for crew management services (the "Crew management fees").
The Manager also acts as a sales and purchase broker for the Company in exchange for a commission fee equal to 1% of the gross sale or purchase price of vessels or companies. The commission fees relating to vessels purchased ("Commissions - vessels purchased") are capitalized to the cost of the vessels as incurred.
In addition to management services, the Company reimburses the Manager for the compensation of its executive officers (the "Executive compensation"). Furthermore, the Company rents office space from the Manager and incurs a rental expense (the "Rental Expense").
On February 14, 2023, the Company entered into memoranda of agreement with companies affiliated with members of the family of the Company's Chief Executive Officer for the acquisition of the vessels "Glorieuse" and "Eco Wildfire" for a total consideration of $35.5 million (Note 4). The vessels were delivered to the Company on March 27, 2023 and March 28, 2023, respectively. The aggregate purchase price of $18,500,000 of the vessel Glorieuse comprised of $8,500,000 in cash and 13,875 Series C Cumulative Convertible Perpetual Preferred Shares ("Series C Preferred Shares") (Note 8).
On June 21, 2023, the Company completed the
Spin-off
(Note 1), and received 600,000 Series A Perpetual Convertible Preferred shares of C3is, having a liquidation preference of $25 per share and a par value of $0.01 per share. The Company is the holder of all of the issued and outstanding Series A Perpetual Convertible Preferred shares of C3is (Note 1). The Series A Perpetual Convertible Preferred shares do not have voting rights. The Series A Perpetual Convertible Preferred are convertible into common stock of C3is at the Company's option at any time and from time to time on or after the date that is the date 90 days following the issuance date, at a conversion price equal to 150% of the VWAP of C3is common shares over the
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fiveconsecutive trading day period commencing on the issuance date. The conversion price will be adjusted to the lowest price of issuance of common stock by C3is in any registered offering of common stock of C3is after the original issuance of Series A
Perpetual
Convertible Preferred Shares. Furthermore, Imperial is entitled to receive cumulative cash dividends, at the annual rate of 5.00% on the stated amount of $25 per share, of the 600,000 Series A Perpetual Convertible Preferred shares, receivable quarterly in arrears on the 15
th
day of January, April, July and October in each year, subject to C3is's Board of Directors approval. As the first cash dividend will be received on the 15
th
day of each October, the Company recognized for the period from June 21, 2023 to June 30, 2023, the amount of $20,833, which is presented in 'Dividend income from related party' in the accompanying unaudited interim condensed consolidated statements of comprehensive income.
As there was no observable market for the Series A Perpetual Convertible Preferred shares, these were recorded at $12,636,000 (Note 6), being the fair value of the shares determined through Level 2 inputs of the fair value hierarchy by taking into consideration a third-party valuation based on the income approach taking into account the present value of the future cash flows the Company expects to receive from holding the equity instrument.
As of June 30, 2023, the aggregate value of investments in C3is amounted to $12,656,833, including $20,833 of accrued dividends and are separately presented as 'Investment in related party' in the accompanying unaudited condensed consolidated balance sheet. As of June 30, 2023, the Company did not identify any indications for impairment or any observable prices for identical or similar investments of the same issuer.
The amounts charged by the Company's related parties comprised the following:
For the six-month periods ended June 30,
Location in statement of comprehensive
income
2022
2023
Management fees
Management fees - related party 341,625 871,640
Brokerage commissions
Voyage expenses - related party 203,462 1,546,799
Superintendent fees
Vessels' operating expenses - related party - 1,000
Crew management fees
Vessels' operating expenses - related party 37,500 153,333
Executive compensation
General and administrative expenses 105,200 198,000
Commissions - vessels purchased
Vessels, net 778,000 355,000
Rental expense

General and administrative expenses

-
32,642

The related party balance with C3is Inc., mainly
relates
to collections received net of payments made on behalf of the Company
relating to the vessels contributed
, was a payable of $37,042 at June 30, 2023 (2022: nil). The related party balance with Flawless Management Inc., an affiliate of the Company where Imperial's CEO is the sole stockholder, relates to the accrued dividend for the Series C Preferred Shares, was a payable of $185,000 at June 30, 2023 (2022: nil). The related party receivable balance with European Institute of Regional Investments Inc. mainly relating to collections received on behalf of the Company was nil as at June 30, 2023 (2022: $146,708). The current account balance with the Manager at June 30, 2023 was a liability of $269,414 (2022: $3,016,438). The liability mainly represents payments made by the Manager on behalf of the Company.
4.
Vessels, net
An analysis of vessels, net is as follows:
Vessel Cost
Accumulated

depreciation
Net book value
Balance as at January 1, 2023
$
350,393,448
$
(124,042,367
)
$
226,351,081
Acquisitions and improvements
36,606,932 - 36,606,932
Impairment loss
(10,894,125 ) 1,898,102 (8,996,023 )
Depreciation for the period
-
(8,690,061 ) (8,690,061 )
Spin-off
of drybulk carriers (Note 1)
(28,500,000 ) - (28,500,000 )
Balance as at June 30, 2023
$
347,606,255
$
(130,834,326
)
$
216,771,929
The additions during the
six-month
period ended June 30, 2023 mainly relate to the acquisition of vessels "Glorieuse" and "Eco Wildfire" (Note 3).
As of December 31, 2022 and June 30, 2023, the Company performed an impairment review of its vessels, due to the prevailing conditions in the shipping industry. As undiscounted net operating cash flows exceeded each vessel's carrying value, no impairment was recorded.
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Table of Contents
5.
Long-term Debt
Long-term debt consists of the following:
As of December 31,
As of June 30,
2022
2023
Term loan
Issued in
November 2021
maturing in
November 2026
("term loan A")
$ 23,196,000 $ -
Issued in
September 2022
maturing in
September 2026
("term loan B")
16,450,000 -
Issued in
November 2022
maturing in
November 2027
("term loan C")
30,792,500 -
Total long-term debt
70,438,500
-
Less: Deferred finance charges
474,039 -
Total long-term debt, net
69,964,461
-
Less: Current portion of long-term debt
10,324,000 -
Add: Current portion of deferred loan and financing arrangements issuance costs
147,462 -
Long-term debt, net
$
59,787,923
$
-
Details of the Company's term loans are discussed in Note 5 of the 2022 Consolidated Financial Statements.
On March 10, 2023, the Company prepaid $23.2 million representing the then outstanding balance of the term loan A using cash on hand and the related mortgage of the vessels "Magic Wand", "Clean Thrasher", "Clean Sanctuary" and "Stealth Berana" was released.
During the
six-month
period ended June 30, 2023, the Company repaid the amount of $1.4 million in line with the amortization schedule of the term loans B and C, and then proceeded with their full prepayment as follows:
On April 7, 2023, the Company prepaid $30.0 million representing the then outstanding balance of the term loan C using cash on hand and the related mortgage of the vessels "Suez Enchanted" and "Suez Protopia" was released.
On April 2
5
, 2023, the Company prepaid $15.9 million representing the then outstanding balance of the term loan B using cash on hand and the related mortgage of the vessels "Clean Nirvana" and "Clean Justice" was released.
For the
six-month
periods ended June 30, 2023 and 2022 interest expense amounted to $1,271,409 and $362,365, respectively, and the weighted average interest rate of the Company's term loans was 7.55% and 1.45%, respectively.
6.
Fair Value of Financial Instruments and Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, time deposits, trade and other receivables, trade accounts payable, balances with related parties and accrued liabilities. The Company limits its credit risk with respect to accounts receivable by performing ongoing credit evaluations of its customers' financial condition and generally does not require collateral for its trade accounts receivable. The Company places its cash and cash equivalents, time deposits with high credit quality financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions.
Fair Value Disclosures:
The Company has categorized assets and liabilities recorded at fair value based upon the fair value hierarchy specified by the guidance. The levels of fair value hierarchy are as follows:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The carrying values of cash and cash equivalents, time deposits, trade and other receivables, trade accounts payable, balances with related parties other than investment in related party and accrued liabilities are reasonable estimates of their fair value due to the short term nature of these financial instruments. Cash and cash equivalents are considered Level 1 items as they represent liquid assets with short-term maturities. Investment in related party was initially measured at fair value which is deemed to be the cost and subsequently assessed for the existence of any observable market for the Series A Perpetual Convertible Preferred Shares and any observable price changes for identical or similar investments as well as the existence of any indications for impairment. As per the Company's assessment no such case was identified as at June 30, 2023.
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Table of Contents
June 30, 2023
Significant other observable
inputs (Level 2)
Total gain/
(loss)
Non-recurring
fair value measurements
Investment in related party (Note 3)
12,636,000 12,636,000 -
Total investment in related party
$
12,636,000
$
12,636,000
-
The valuation methodology applied comprised the bifurcation of the value of the Series A Perpetual Convertible Preferred shares in three components namely, the "straight" preferred stock component, the embedded option component and the control premium component. The mean of the sum of the three components was used to estimate the value for the Series A Perpetual Convertible Preferred shares at $12,636,000. The valuation methodology and the significant other observable inputs used for each component are set out below:
Valuation technique
Significant other observable input
Values
"Straight" Preferred Stock component
Discounted Cash Flow Model
- Weighted average cost of capital
13
%
Embedded Option component
Black & Scholes
- Volatility
- Risk-free rate
- Weighted average cost of capital
- Strike price
- Share price (based on the first 5 trading days volume weighted average)

78
4
13
$ 3.50
$ 2.33
%
%
%
Control Premium Component
Discounted Cash Flow Model
- Control premium
-Weighted average cost of capital

12
13
%
%
7.
Stockholders' Equity
Details of the Company's common stock and preferred stock are discussed in Note 8 of the 2022 Consolidated Financial Statements and are supplemented by the below new activities in the
six-month
period ended June 30, 2023.
Common Shares:
i)
NASDAQ Notification
On June 17, 2022, the Company received a written notification from the NASDAQ Stock Market, indicating that because the closing bid price of the Company's common stock for 30 consecutive business days, from May 5, 2022 to June 16, 2022, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq Capital Market, the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the applicable grace period to regain compliance was 180 days, or until December 14, 2022. In December 2022, the Company received formal notification from the Listing Qualification Department of the Nasdaq Stock Market notifying the Company that it has been granted an additional
180-day
compliance period, or until June 12, 2023, to regain compliance with the minimum $
1.00
bid price per share requirement of Nasdaq's Marketplace Rule 5550(a)(2). At the opening of trading on April 28, 2023, following an approval from the Company's Board of Directors, the Company effected
1-for-15
reverse stock split of the Company's common stock. On May 16, 2023 the Company regained compliance with Nasdaq Listing Rule 5550(a)(2) concerning the minimum bid price of the Company's common stock (Note 1).
ii)
Equity Offerings
During the
six-month
period ended June 30, 2023, the Company completed a public offering of 3,287,062 shares of common stock resulting in gross proceeds of $12,095,253, or $11,896,666 in net proceeds.
iii)
Warrants
As of June 30, 2023, none of remaining warrants were exercised. The number of remaining warrants was adjusted to reflect the
1-for-15
reverse stock split on April 28, 2023. As such, as of June 30, 2023, the number of common shares that can potentially be issued under each outstanding warrant are:
Warrant
Shares to be issued upon
exercise of remaining
warrants
Class A
2,867
Class B
786,800
Class C
5,218,591
Class D
2,076,667
Total
8,084,925
An aggregate of 291,194 additional common shares are potentially issuable upon exercise of the February 2022, March 2022 and May 2022 Representative Purchase Warrants.
Preferred Shares:
Aggregate dividends of $0.9 million were paid on the Company's 795,878 Series A Preferred Shares during the six months ended June 30, 2023.
8.
Mezzanine equity
On February 17, 2023, the Company entered into a Share Purchase Agreement with Flawless Management Inc. (Note 3) and sold to Flawless Management Inc. 13,875 newly issued Series C Cumulative Convertible Perpetual Preferred Shares ("Series C Preferred Shares") having a liquidation preference of one thousand dollars ($1,000) per share ("the Liquidation Preference"). The Series C Cumulative Convertible Perpetual Preferred Shares were used as a partial consideration for the acquisition of the Handysize drybulk carrier "Glorieuse" (Note 4) from an affiliated company.
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Table of Contents
Each holder of Series C Preferred Shares, at any time and from time to time on or after the date that is the date immediately following the
six-month
anniversary of February 17, 2023, may elect to convert, in whole or in part, its Series C Preferred Shares into shares of common stock at a rate equal to the Series C Liquidation Preference, plus the amount of any accrued and unpaid dividend thereon to and including the conversion date, divided by the lower of (1) $7.50 and (2) the
Ten-Day
VWAP, subject to adjustment from time to time, provided, that, the conversion price shall not be less than $1.50. If the Company shall, at any time or from time to time, pay a stock dividend or otherwise makes a distribution or distributions on its shares of common stock or any other equity or equity equivalent securities payable in shares of common stock, or effect a subdivision or split of the outstanding common shares, the conversion price in effect immediately before such stock dividend or distribution, subdividision or split shall be proportionately decreased and, conversely, if the Company shall, at any time or from time to time, effect a combination (including by means of a reverse stock split) of the outstanding shares of common stock the conversion price in effect before such combination shall be proportionately increased. Following the reverse stock split on April 28, 2023 (Note 1), the conversion price was adjusted to reflect the
1-for-15
reverse stock split.
The holder of the Series C Preferred Shares shall be entitled to receive dividends from time to time out of any assets of the Company legally available for the payment of dividends at a rate equal to 5.00% per annum when, as, and if declared by the Board of Directors. Dividends, to the extent declared to be paid by the Company, shall be paid quarterly on each January 15, April 15, July 15 and October 15 of each year commencing on July 15, 2023. Dividends on the Series C Preferred Shares shall be payable based on a
360-day
year consisting of twelve
30-day
months. The dividend rate of 5.00% per annum is not subject to adjustment. As of June 30, 2023, the Company accrued dividend of $185,000 on the Company's 13,875 Series C Preferred Shares that are payable to Flawless Management Inc. on July 15, 2023 (Note 3).
The Series C Preferred Shares are redeemable upon a change in control, which is defined as the acquisition by any "person" or "group" of beneficial ownership through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of the Company's shares entitling that person or group to exercise more than 50% of the total voting power of all of the Company's shares entitled to vote generally in elections of directors. The occurrence of the above events is not solely in the control of the Company, and hence Series C Preferred Shares has been classified in Mezzanine equity as per ASC
480-10-S99
"Distinguishing liabilities from Equity - SEC Materials". The Series C Preferred Shares were recorded at $10.0 million at initial recognition representing the acquisition price of the vessel Glorieuse amounting to $18,5 million less the cash consideration of $8.5 million. The acquisition price of the vessel, which approximated its fair value as determined by an independent broker, was used for the determination of the fair value of the mezzanine equity, since it was more clearly evident and, thus, more reliably measurable than the fair value of the Series C Preferred Shares issued. The Company concluded that since the occurrence of the change in control events is not probable, it is not probable that the Series C Preferred Shares will become redeemable and no subsequent adjustment has been made in the amount presented in temporary equity in accordance with ASC
480-10-S99.
9.
Equity Compensation Plan
Details of the Company's equity compensation plan (the "Plan") are discussed in Note 14 of the 2022 Consolidated Financial Statements and are supplemented by the below new transactions in the
six-month
period ended June 30, 2023.
On March 21, 2023, the Company granted $715,000 worth of shares of the Company's common stock under the Plan to certain of the Company's employees. The number of shares awarded was determined based on the closing price
on
the grant date i.e. March 21, 2023 which was equal to $2.55. 140,196 of the restricted shares vested on July 17, 2023 and the remaining 140,196 of the restricted shares will vest on July 17, 2024.
On May 15, 2023, the Company granted 547,550 restricted shares of common stock pursuant to the Plan to the Company's CEO. The fair value of each share on the grant date was $3.48. 273,775 of the restricted shares will vest on May 15, 2024 and the remaining 273,775 of restricted shares will vest on May 15, 2025.
The related expense for shares granted to the Company's CEO and certain of the Company's employees for the
six-month
periods ended June 30, 2023 and 2022, amounted to $1,091,189 and $nil, respectively, and is included under general and administration expenses.
The unrecognized cost for the
non-vested
shares granted to the Company's CEO and certain of the Company's employees as of June 30, 2023 and December 31, 2022 amounted to $2,414,030 and $882,744, respectively. On June 30, 2023, the weighted-average period over which the total compensation cost related to
non-vested
awards granted to the Company's CEO and certain of the Company's employees not yet recognized is expected to be recognized is 2.37 years.
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Table of Contents
10.
(Loss)/Earnings per share
The Company calculates basic and diluted loss/earnings per share as follows:
For the six-month periods ended June 30,
2022
2023
Numerator
Net income
304,101 52,550,587
Less: Cumulative dividends on Series A Preferred Shares
(870,492 ) (870,494 )
Less: Cumulative dividends on Series C Preferred Shares
- (185,000 )
Less: Deemed dividend on warrant inducement
(2,943,675 ) -
Less: Undistributed earnings allocated to
non-vested
shares
- (977,828 )
Net (loss)/ income attributable to common shareholders, basic
(3,510,066
)
50,517,265
Add: Undistributed earnings allocated to non-vested shares
- 977,828
Add: Cumulative dividends on Series C Preferred Shares
- 185,000
Less: Undistributed earnings re-allocated to non-vested shares
- (862,466 )
Net (loss)/ income attributable to common shareholders, diluted
(3,510,066
)
50,817,627
Denominator
Weighted average number of shares outstanding, basic
4,359,423 15,940,369
Weighted average number of shares outstanding, diluted
4,359,423 18,113,785
(Loss)/ Earnings per share, basic
(0.81 ) 3.17
(Loss)/Earnings per share, diluted
(0.81 ) 2.81
As of June 30, 2023, diluted earnings per share reflects the potential dilution from conversion of outstanding Series C Preferred Shares (Note 8) calculated with the "if converted" method by using the average closing market price over the reporting period. Securities that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS, because to do so would have anti-dilutive effect, are any incremental shares of unexercised warrants, calculated with the treasury stock method
. As of June 30, 2023, the aggregate number of unexercised warrants were 8,376,119 including Representative Purchase Warrants (Note
7)
.
As of June 30, 2022, securities that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS, because to do so would have anti-dilutive effect, are any incremental shares of unexercised warrants, calculated with the treasury stock method.
F-13
Table of Contents
11.
Revenues
The amounts in the accompanying unaudited condensed consolidated statements of comprehensive income are analyzed as follows:
For the six-month periods ended June 30,
2022
2023
Time charter revenues
8,937,026 18,384,522
Bareboat revenues
1,388,990 -
Voyage charter revenues
5,950,928 105,363,659
Other income
187,705 717,141
Total
16,464,649
124,465,322
The amount of revenue earned as demurrage relating to the Company's voyage charters for the
six-month
periods ended June 30, 2022 and 2023 was $0.4 million and $7.5 million, respectively and is included within "Voyage charter revenues" in the above table.
As of December 31, 2022 and June 30, 2023, receivables from the Company's voyage charters amounted to $6.1 million and $9.0 million, respectively.
As of December 31, 2022 and June 30, 2023, the Company recognized $240,002 and $376,132, respectively, of contract fulfillment costs which mainly represent bunker expenses incurred prior to commencement of loading relating to the Company's voyage charters. These costs are recorded in "Other current assets" in the unaudited condensed consolidated balance sheets.
As of December 31, 2022 and June 30, 2023, revenues relating to undelivered performance obligations of the Company's voyage charters amounted to $15.0 million and $5.9 million, respectively. The Company recognized the undelivered performance obligation as of June 30, 2023 as revenues in the third quarter of 2023 and the undelivered performance obligation as of December 31, 2022 as revenues in the first quarter of 2023.
12.
Commitments and Contingencies
•
From time to time the Company expects to be subject to legal proceedings and claims in the ordinary course of its business, principally relating to personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. Currently, the Company 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 unaudited consolidated financial statements.
•
Future minimum contractual charter revenues, gross of commissions, based on vessels committed to
non-cancellable,
time and bareboat charter contracts as of June 30, 2023, amount to $326,250 during the twelve months ending June 30, 2024.
13.
Subsequent events
In July 2023, the Company concluded a memorandum of agreement for the disposal of the vessel "Stealth Berana" to C3is, an affiliated party, for $43,000,000.
The vessel was delivered to her new owners in July 2023. The Company disposed the vessel "Stealth Berana" as the agreed selling price was a suitable opportunity for the Company.
In August 2023, the Company completed an underwritten public offering of 8,499,999 units, each unit consisting of (i) one share of common stock of the Company or one
pre-funded
warrant and (ii) one Class E Warrant to purchase one share of common stock at an exercise price of $2.00 per share. The offering resulted in gross proceeds to the Company of $17 million.
In September 2023, the Company entered into an agreement with affiliated
parties
to acquire two tanker vessels at an aggregate purchase price of $71 million. In addition, the Company's Board of Directors approved a share repurchase program and authorized the officers of the Company to repurchase, from time to time, up to $10,000,000 of the Company's common stock.
F-14

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Imperial Petroleum Inc. published this content on 22 September 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 September 2023 02:22:22 UTC.