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Note 11 - Fair Value of Financial Instruments and Derivative Instruments

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Financial Instruments Disclosure [Text Block]

11.

Fair value of Financial Instruments and derivative instruments:

The principal financial assets of the Company consist of cash on hand and at banks, restricted cash, deposit assets, prepaid expenses and other receivables. The principal financial liabilities of the Company consist of long term loans, accounts payable due to suppliers, amounts due to related parties and accrued liabilities.

a)

Interest rate risk: The Company is subject to market risks relating to changes in interest rates of debt outstanding under the ABN and Alpha Bank facilities on which it pays interest based on one-month LIBOR plus a margin. As of June 30, 2021 the Company has not entered into any rate swap agreements, however in order to manage part or whole of its exposure to changes in interest rates due to this floating rate indebtedness, the Company might do so in the future.

b)

Credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions with which it places its temporary cash investments.

c)

Fair value:

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short term maturities. The Company considers its creditworthiness when determining the fair value of its liquid assets.

The fair values of the variable interest long-term debt approximate the recorded values, due to their variable interest rates. The fair value of the fixed interest long-term debt is estimated using prevailing market rates as of the period end (see Note 7). The Company believes the terms of its loans are similar to those that could be procured as of June 30, 2021. The fair value of the long term debt is determined using observable market-based inputs hence it is considered Level 2 per the value hierarchy.

The Company follows the accounting guidance for Fair Value Measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

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.

Derivative Financial Instruments not designated as hedging instruments – Class B Warrants:

On May 7, 2021 the Company’s 4,200,000 outstanding Class B Warrants that entitled their owners to purchase 168,000 of the Company’s common shares expired. No Class B Warrants were exercised in the six months ended June 30, 2021.

Non-recurring fair value measurements

Fair Value Measurement at Reporting Date

Total

Using Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Other

Unobservable

Inputs

(Level 3)

As of June 30, 2021

Vessels held for sale
25,887 - 25,887 -

During the six months ended June 30, 2021, in accordance with the provisions of relevant guidance, a vessel held for sale with a carrying amount of $27,047 was written down to its fair value of $25,887, resulting in an impairment charge of $1,160, which is included in the accompanying unaudited interim condensed consolidated statements of comprehensive (loss) / income for the six months ended June 30, 2021. The fair value of the impaired vessel was determined based on a market approach, which was determined using the purchase consideration in the related sale agreement. As a result, the Company has classified this long-lived asset held for sale as Level 2.

The following table sets forth a summary of changes in fair value of the Company’s level 3 fair value measurements for the six months ended June 30, 2021:

Closing balance – December 31, 2020
66

Change in fair value of warrants due to expiry, included in the unaudited interim condensed consolidated statements of comprehensive (loss) / income
(66 )

Closing balance – June 30, 2021
-