F-1/A: OceanPal Inc. Files Amended Prospectus for Highly Dilutive Unit Offering Amidst Continued Losses and Fleet Challenges

OceanPal Inc. has filed an amended prospectus for a public offering of units, each comprising common shares or pre-funded warrants and highly dilutive Class C Warrants with multiple reset provisions and a zero-cash exercise option, aiming to raise up to $15 million for general corporate purposes and fleet expansion, despite reporting a significant net loss of $17.86 million in 2024.

Summary

• OceanPal Inc. is offering 9,316,770 units at an assumed price of $1.61 per unit, with each unit consisting of one common share (or pre-funded warrant) and one Class C Warrant.
• The Class C Warrants are immediately exercisable for three years at an initial exercise price of 225% of the public offering price, subject to two downward resets based on VWAP and floor prices (50% and 30% of the Nasdaq Official Closing Price preceding the Underwriting Agreement).
• A zero-cash exercise option for Class C Warrants allows holders to receive twice the shares issuable upon cash exercise for no additional consideration for 90 days post-issuance, making it highly unlikely the company will receive cash from warrant exercises.
• This offering could lead to substantial dilution for existing shareholders, with an example showing one warrant potentially becoming 15 common shares if exercised on a zero-cash basis after both resets.
• The maximum number of common shares issuable upon zero-cash exercise of the Class C Warrants is 139,751,550, or up to 160,714,275 shares if the underwriters' over-allotment option is fully exercised.
• The company expects net proceeds of approximately $13.75 million (or $15.84 million with over-allotment option exercised) for general corporate purposes, including working capital and fleet expansion.
• OceanPal reported a net loss of $17.86 million for the year ended December 31, 2024, a significant increase from a $1.98 million net loss in 2023.
• Vessel revenues increased to $25.70 million in 2024 from $18.96 million in 2023, driven by stronger capesize market conditions and increased operating days.
• The company incurred a $6.12 million impairment loss in 2024 for the M/V Melia, M/T Zeze Start, and M/V Baltimore, compared to no impairment loss in 2023.
• Operating expenses increased, with voyage expenses rising to $3.71 million (from $1.94 million) and vessel operating expenses to $12.49 million (from $10.42 million) in 2024.
• The company's fleet consists of two Panamax dry bulk carriers (average age 20.3 years) and one MR2 product tanker (age 16.3 years), with a weighted average fleet age of 19.3 years in 2024.
• OceanPal regained compliance with Nasdaq's minimum bid price requirement on June 30, 2025, after receiving a non-compliance notice on April 17, 2025.
• The company sold M/V Protefs for $7.0 million on June 12, 2025, and M/V Salt Lake City in February 2025.
• Working capital decreased to $9.02 million as of December 31, 2024, from $17.76 million in 2023, and cash and cash equivalents declined to $7.16 million from $14.84 million over the same period.
• Net cash used in operating activities was $3.53 million in 2024, a decrease from $0.82 million provided in 2023.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to a significant increase in net losses, deteriorating cash flow from operations, substantial impairment charges on vessels, and a highly dilutive capital raise structure that offers minimal future cash inflow from warrant exercises. The company's older fleet and exposure to volatile market conditions and increasing regulatory costs further contribute to a high-risk profile. While Nasdaq compliance was regained, the offering itself poses a delisting risk due to its dilutive nature.

Positives

• Vessel revenues increased by $6.74 million to $25.70 million in 2024, primarily due to stronger capesize market conditions and an increase in operating days.
• The company successfully regained compliance with Nasdaq's minimum bid price requirement on June 30, 2025, after a period of non-compliance.
• The Time Charter Equivalent (TCE) rate improved to $12,184 in 2024 from $9,969 in 2023, indicating better daily earnings from vessel employment.
• The company completed the sale of M/V Protefs for $7.0 million and M/V Salt Lake City in early 2025, providing cash proceeds.

Negatives

• The company reported a substantial net loss of $17.86 million in 2024, significantly worse than the $1.98 million net loss in 2023.
• Net loss attributable to common shareholders increased to $19.73 million in 2024 from $6.71 million in 2023.
• Basic and diluted loss per share worsened to $2.64 in 2024 from $2.02 and $3.83 respectively in 2023.
• The offering includes highly dilutive Class C Warrants with multiple downward exercise price resets and a zero-cash exercise option, making it unlikely the company will receive additional funds from warrant exercises.
• The potential issuance of up to 160,714,275 common shares from warrant exercises represents extreme dilution for existing shareholders, with an example showing one warrant potentially converting into 15 common shares.
• Working capital significantly decreased to $9.02 million in 2024 from $17.76 million in 2023, indicating a weakening liquidity position.
• Cash and cash equivalents declined to $7.16 million in 2024 from $14.84 million in 2023.
• Net cash used in operating activities was negative $3.53 million in 2024, a reversal from positive cash flow in 2023.
• The company incurred a $6.12 million impairment loss on vessels in 2024, reflecting a decline in asset values.
• The aggregate carrying value of four vessels exceeded their market value by approximately $2.7 million as of December 31, 2024.
• Vessel operating expenses increased to $12.49 million in 2024, partly due to increased repair, spares, and stores costs.
• The fleet's weighted average age is high (20.3 years for Panamax, 16.3 years for tanker), which may lead to increased maintenance costs and reduced competitiveness.
• The company incurred $6.75 million in support agreement costs in 2024 related to a payment to Sphinx.
• There is no established public trading market for the Pre-Funded Warrants or Class C Warrants, limiting their liquidity.

Risks

• Charter hire rates in the shipping industry are volatile, which may adversely affect business, financial condition, operating results, and ability to comply with loan covenants.
• Global financial markets and economic conditions may negatively impact operations, cash flows, and ability to obtain future financing.
• Geopolitical conditions (e.g., Middle East, Ukraine, Red Sea, South China Sea) may affect the seaborne transportation industry, leading to increased premiums, restricted coverage, and difficulty obtaining financing.
• Operating results are subject to seasonal fluctuations, leading to quarter-to-quarter volatility.
• An increase in fuel prices may adversely affect operating results and cash flows, especially for vessels off-hire or in the spot market.
• Worldwide inflationary pressures could negatively impact operating, voyage, and administrative costs, and alter demand for services.
• Compliance with complex environmental laws and regulations (IMO 2020, ballast water, EU ETS, FuelEU Maritime) can adversely affect costs, resale value, useful life, and access to certain waters/ports.
• Operational risks and damage to vessels (marine disasters, mechanical failures, human error, war, terrorism, piracy, labor strikes, environmental damage) could lead to substantial liabilities not covered by insurance.
• Calling on sanctioned ports/countries or engaging in violative transactions could lead to monetary fines, penalties, and reputational harm.
• Uncertainties in China's legal system could limit legal protections and impose new costs or taxes.
• Failure to comply with the U.S. Foreign Corrupt Practices Act (FCPA) could result in fines, criminal penalties, and adverse effects on business.
• Changing laws and evolving reporting requirements (e.g., GDPR, SEC cybersecurity, ESG policies) may create additional compliance costs and risks.
• A decline in the market values of vessels could limit future borrowing, trigger financial covenant breaches, and result in impairment charges or losses on sale.
• Primary reliance on short-to-medium duration time charters makes the company vulnerable to declining charter rates.
• Inability to execute growth strategy or realize anticipated benefits from past or future acquisitions.
• Operating secondhand vessels with an age above the industry average may lead to increased technical problems, higher operating expenses, and faster depreciation.
• Conflicts of interest may arise due to affiliations of officers and directors with other entities (Diana Shipping, Steamship, DWM, START).
• Dependence on other entities (DWM, START, Steamship) for fleet management, with termination or failure to perform potentially adversely affecting operations.
• Rising crew costs could adversely affect results of operations.
• Cyber-attacks could materially disrupt business, and the company does not currently maintain cyber-liability insurance.
• Increasing scrutiny and changing expectations regarding Environmental, Social, and Governance (ESG) policies may impose additional costs or expose the company to risks, potentially affecting access to capital.
• Counterparty risks on contracts, including charter agreements, could lead to significant losses if counterparties fail to meet obligations.
• Intense competition in the international shipping industry from companies with greater resources may hinder profitable vessel employment.
• Inability to attract and retain qualified key management personnel or employees may delay development efforts.
• Technological innovation and evolving quality requirements from customers could reduce charter income and vessel value.
• Inadequate insurance coverage may not compensate for all losses or third-party liabilities.
• Exposure to U.S. dollar and foreign currency fluctuations and devaluations.
• Dependence on a few significant customers (57% of 2024 revenues from three charterers) means loss of one could adversely affect results.
• Emerging growth company status and reduced disclosure requirements may make common shares less attractive to investors.
• As a holding company, dependence on subsidiaries' ability to distribute funds to satisfy financial obligations.
• Marshall Islands incorporation may make it difficult to serve legal process or enforce judgments against the company or its directors/management.
• Potential for U.S. federal income tax on U.S. source income if Section 883 exemption is lost, reducing earnings.
• U.S. tax authorities could treat the company as a passive foreign investment company (PFIC), leading to adverse U.S. federal income tax consequences for U.S. holders.
• Changes in global tax laws (e.g., OECD Pillar Two) could materially and adversely affect taxes paid and financial results.
• No declared dividend policy, and future dividend payments are not assured.
• Insufficient cash to pay preferred stock dividends may lead to adverse consequences, including dilution from in-kind payments.
• Convertibility of Series C, D, and E Preferred Stock into common shares could cause substantial dilution.
• Rapid and substantial price volatility of common shares, potentially unrelated to financial performance, could cause substantial losses for investors.
• Risk of Nasdaq halting trading or delisting common shares due to public interest concerns or failure to maintain minimum bid price, especially given the highly dilutive nature of this offering.
• The public offering price is set by the Board and does not necessarily indicate the actual or market value of common shares.
• Broad discretion in how the proceeds from this offering are used, which may not yield a favorable return.
• No public market for the Pre-Funded Warrants or Class C Warrants, limiting their liquidity.

Future Outlook

The company anticipates that future demand for its vessels and charter rates will depend on global economic growth, seasonal/regional demand changes, and fleet capacity. It expects its revenues and results in 2025 to be subject to service demand, inflation, market disruptions, and interest rates. The company intends to finance future growth through cash from operations, equity offerings, debt, and proceeds from vessel sales, and believes current working capital and anticipated funds will meet liquidity needs for at least twelve months.

Management Comments

• "We believe it is highly unlikely that a holder of the Warrants would pay an exercise price in cash to receive one Common Share when the holder could instead choose the zero cash exercise option and pay no cash to receive more Common Shares than they would receive if they did pay an exercise price. As a result, we will likely not receive any additional funds and do not expect to receive any additional funds upon the exercise of the Warrants."
• "Our management will have significant flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately."
• "We believe that our working capital and these anticipated sources of funds, as well as our ability to access the equity capital markets if needed, will be sufficient to meet our liquidity needs for at least twelve months from the date of the annual report."
• "Management monitors the Company’s liquidity position throughout the year to ensure that it has access to sufficient funds to meet its forecast cash requirements."
• "Management does not consider inflation or interest rates to be a significant risk to direct costs in the current and foreseeable economic environment."

Industry Context

The seaborne transportation industry is highly competitive and fragmented, with demand influenced by global economic conditions, trade patterns, and geopolitical events. The dry bulk and product tanker markets are volatile, with charter rates fluctuating based on supply and demand. The industry faces increasing regulatory pressures related to environmental standards (e.g., IMO 2020, EU ETS, FuelEU Maritime) and cybersecurity, which can increase operating costs and require significant capital expenditures. There's a trend towards consolidation and a focus on ESG practices, which may impact access to capital and customer relationships. The company's fleet, with an average age above the industry average, faces challenges in fuel efficiency and compliance with evolving standards compared to more modern 'eco-vessels'.

Comparison to Industry Standards

• The company's fleet's weighted average age of 19.3 years for dry bulk carriers and 16.3 years for the tanker is noted as 'above the industry average', implying higher operating expenses and potential difficulties in financing or chartering compared to newer, more fuel-efficient 'eco-vessels' operated by competitors.
• The Baltic Dry Index (BDI) ranged from a high of 2,419 (March 18, 2024) to a low of 715 (January 30, 2025), and the Baltic Dirty Tanker Index (BDTI) ranged from a high of 1,552 (January 16, 2024) to a low of 799 (January 9, 2025), illustrating the high volatility in charter rates that the company's vessels are exposed to, consistent with broader industry trends.
• The company's fleet utilization rate of 96.8% in 2024 (down from 99.1% in 2023) is a key industry metric, indicating efficiency in finding employment for vessels, though the slight decrease suggests some challenges in maintaining optimal utilization.
• The average age at which a vessel is scrapped was 33 years in 2024, 30 years in 2023, and 32 years in 2022, which is relevant given the company's older fleet and the risk of more rapid depreciation and obsolescence compared to newer vessels.

Corporate Governance

Legal Proceedings

• The company is not currently subject to any material legal actions, suits, inquiries, or investigations that could result in a Material Adverse Effect, except as disclosed in the Registration Statement and Prospectus.
• No action, proceeding, revocation proceeding, writ, injunction or claim is pending or, to the company's knowledge, threatened against the company or any of its subsidiaries relating to Occupational Laws.
• No investigation by the Commission involving the company or any current or former director or officer is pending or contemplated.
• The SEC adopted amendments to its rules on cybersecurity risk management, strategy, governance, and incident disclosure in July 2023, requiring reporting of material cybersecurity incidents and periodic reporting on policies. Compliance could incur substantial costs and increase negative publicity.
• Multiple lawsuits challenging the SEC's climate-related disclosure rules were filed in federal court, and the SEC voluntarily issued a stay pending judicial review. The Supreme Court's overturning of Chevron deference may raise the burden for administrative agencies to prove authority for rules, potentially impacting SEC's climate-related disclosure rules.

Related Party Transactions

• Steamship Shipbroking Enterprises Inc., controlled by the company's Chairperson, provides insurance, administrative, and brokerage services. Fees include $500/$250 per vessel per month for insurance, $10,000 per month for administrative services, and a lump sum commission of $150,000 per month plus 2.5% on gross hire for brokerage services. The brokerage agreement was terminated and replaced on March 12, 2025, with retroactive effect from January 1, 2025, with similar terms.
• Diana Shipping Inc. (NYSE: DSX), from which OceanPal was spun off, owned 48.63% of OceanPal's common shares and 207 Series C Preferred Stock as of June 13, 2025. Diana Shipping also holds 500,000 shares of Series B Preferred Stock, granting significant voting influence (up to 34% of total votes, capped at 49% with affiliates).
• Diana Shipping granted OceanPal a right of first refusal over six dry bulk carriers, with one vessel remaining available for purchase at fair market value.
• A non-competition agreement with Diana Shipping grants OceanPal a right of first refusal over certain dry bulk vessel acquisition/charter-in opportunities and spot market employment opportunities, and prohibits employee solicitation. This agreement terminates if Diana Shipping's ownership falls below 10% and there are no common executive officers.
• Diana Wilhelmsen Management Limited (DWM), a 50/50 joint venture between Diana Shipping and Wilhelmsen Ship Management, provides commercial and technical management services for the dry bulk fleet, charging 1.25% on hire/freight plus a fixed monthly fee of $18,500 (employed) or $9,250 (laid-up) per vessel. DWM also provides technical supervision for the tanker for $1,000 per month.
• Sea Transportation Inc. (START), controlled by a company director, provides commercial services to the M/T Zeze Start for a fixed fee of $300 per day plus 3.0% on the vessel's revenues.
• The company acquired the M/T Zeze Start on July 15, 2024, from an entity controlled by a director for $27.0 million, paid partly in cash ($18.9 million) and partly in 9,442 shares of Series D Preferred Stock.
• Altair Travel Agency S.A., an entity in which the company's Chairperson holds equity interests, provides travel-related services to the company.

Stakeholder Impact

• **Shareholders**: Existing common shareholders will experience substantial dilution due to the issuance of new common shares and the highly dilutive nature of the Class C Warrants with their reset provisions and zero-cash exercise option. The pro forma net book value per common share will decrease significantly from $11.24 to $5.83. Preferred shareholders (Series C and D) have cumulative dividend rights that must be paid before common shareholders, and their conversion rights could further dilute common shareholders.
• **Employees**: The company has no direct employees but relies on third-party managers (DWM, START, Steamship) for crewing and management. Rising crew costs could impact operational efficiency and profitability, indirectly affecting the company's ability to sustain operations.
• **Customers**: The company's dependence on a few significant charterers (57% of 2024 revenues from three) creates counterparty risk; failure of these customers to meet obligations could severely impact revenues. The company's older fleet may also face discrimination from charterers with age restrictions or higher quality/compliance standards.
• **Creditors**: The decline in vessel market values could limit the company's ability to borrow funds in the future or trigger breaches of financial covenants in any future borrowing facilities. The weakening liquidity position (decreased working capital and cash) could raise concerns for potential creditors.
• **Regulatory Bodies**: The company is subject to complex and evolving international and national regulations (e.g., environmental, cybersecurity, tax), requiring ongoing compliance efforts and potential capital expenditures, which could impact financial performance and operational flexibility.

Next Steps

• The company expects to deliver the securities offered on or about July 3, 2025, subject to customary closing conditions.
• Management intends to use the net proceeds for general corporate purposes, including funding for working capital needs and fleet expansion, though no specific vessels have been identified for acquisition.
• The company will continue to monitor and adjust charter hire periods for its vessels based on market developments.
• The company will continue to comply with all applicable environmental, safety, and security regulations, which may require future capital expenditures for vessel modifications or new equipment.
• The company will continue to retain its independent registered public accountants for a period of three years from the effective date of the registration statement.
• The company will continue to maintain the listing of its Common Shares on the Nasdaq Capital Market for at least three years after the closing date.

Key Dates

Recommendation

Keywords

Dry Bulk Shipping, Product Tanker, SEC Filing, F-1/A, Public Offering, Units Offering, Common Shares, Warrants, Pre-Funded Warrants, Dilution, Nasdaq Listing, Shipping Industry, Financial Performance, Vessel Impairment, Corporate Governance, Related Party Transactions, Capital Raise, Risk Factors, OceanPal Inc., OP