UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
ý
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934For the
quarterly
period ended March 31, 2007.
|
or
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 For the
transition
period from
to
.
|
Commission
File Number: 001-32685
Star
Maritime Acquisition Corp.
(Exact
name of registrant as specified in its charter)
|
|
|
Delaware
|
|
20-2873585
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
103
Foulk Rd.
Wilmington,
Delaware 19803
(Address
of Principal Executive Offices including Zip Code)
302-656-1950
(Registrant’s
Telephone Number, Including Area Code)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Exchange Act 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. Yesý No
ð
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange. (Check
one):
Large
Accelerated Filer ð Accelerated
Filer ý Non-Accelerated
Filer ð
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ý No ð
There
were 29,026,924 shares of the Registrant’s common stock issued and outstanding
as of May 9, 2007.
Star
Maritime
Acquisition Corp.
Index
to Form 10-Q
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|
Page
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|
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Part
I.
|
Financial
Information
|
3
|
|
|
|
|
Item
1. Financial Statements (unaudited)
|
3
|
|
|
|
|
Condensed
Balance Sheet as of March 31, 2007 and December 31,
2006
|
3
|
|
|
|
|
Condensed
Statements of Income
|
4
|
|
|
|
|
Condensed
Statements of Stockholders’ Equity
|
5
|
|
|
|
|
Condensed
Statements of Cash Flows
|
6
|
|
|
|
|
Notes
to Financial Statements
|
7
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|
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
12
|
|
|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
15
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|
|
|
|
Item
4. Controls and Procedures
|
15
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|
|
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Part
II.
|
Other
Information
|
15
|
|
|
|
|
Item
1. Legal Proceedings
|
15
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|
|
|
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Item
1A. Risk Factors
|
15
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|
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
15
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|
|
|
|
Item
3. Defaults Upon Senior Securities
|
16
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|
|
|
|
Item
4. Submission of Matters to a Vote of Security Holders
|
16
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|
|
Item
5. Other Information
|
16
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|
|
|
|
Item
6. Exhibits
|
16
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|
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SIGNATURES
|
|
PART
I - FINANCIAL INFORMATION
ITEM
1 - FINANCIAL STATEMENTS
Star
Maritime
Acquisition Corp.
(a
development stage company)
Condensed
Balance Sheets
|
|
March
31, 2007
|
|
December
31,
|
|
|
|
(unaudited)
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
|
|
$
|
944,208
|
|
$
|
2,118,141
|
|
Investments
in trust account
|
|
|
194,571,504
|
|
|
192,915,257
|
|
Prepaid
expenses and other current assets
|
|
|
220,502
|
|
|
149,647
|
|
Total
Current Assets
|
|
|
195,736,214
|
|
|
195,183,045
|
|
Property
and equipment, net
|
|
|
6,304
|
|
|
3,256
|
|
TOTAL
ASSETS
|
|
$
|
195,742,518
|
|
$
|
195,186,301
|
|
LIABILITIES
& STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Accounts
payable & accrued expenses
|
|
$
|
544,930
|
|
$
|
603,520
|
|
Deferred
Interest on investments
|
|
|
2,709,453
|
|
|
2,163,057
|
|
Deferred
underwriting fees
|
|
|
4,000,000
|
|
|
4,000,000
|
|
Income
taxes payable
|
|
|
-
|
|
|
206,687
|
|
Total
Liabilities
|
|
|
7,254,383
|
|
|
6,973,264
|
|
Common
Stock, $.0001 par value, 6,599,999 shares subject to possible redemption,
at redemption value of $9.80 per share
|
|
|
64,679,990
|
|
|
64,679,990
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
Preferred
Stock, $.0001 par value; authorized, 1,000,000 shares; none issued
or
outstanding
|
|
|
-
|
|
|
-
|
|
Common
Stock, $.0001 par value, authorized, 100,000,000 shares; 29,026,924
shares
issued and outstanding.
|
|
|
2,903
|
|
|
2,903
|
|
(including
6,599,999 shares subject to possible redemption)
|
|
|
|
|
|
|
|
Additional
paid in capital
|
|
|
120,441,727
|
|
|
120,441,727
|
|
Earnings
accumulated in the development stage
|
|
|
3,363,515
|
|
|
3,088,417
|
|
Total
Stockholders’ Equity
|
|
|
123,808,145
|
|
|
123,533,047
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
195,742,518
|
|
$
|
195,186,301
|
|
See
accompanying notes to unaudited condensed financial statements.
Star
Maritime Acquisition Corp.
(a
development stage company)
Condensed
Statements of Income
|
|
Three
Months Ended March 31, 2007 (unaudited)
|
|
Three
Months Ended March 31, 2006 (unaudited)
|
|
May
13, 2005 (date of inception) to March 31, 2007
(unaudited)
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Professional
fees
|
|
$
|
591,494
|
|
$
|
21,017
|
|
$
|
1,207,517
|
|
Insurance
|
|
|
26,280
|
|
|
26,250
|
|
|
142,756
|
|
Due
diligence costs
|
|
|
43,297
|
|
|
11,296
|
|
|
306,174
|
|
Other
|
|
|
186,611
|
|
|
17,268
|
|
|
452,546
|
|
Total
operating expenses
|
|
|
847,682
|
|
|
75,831
|
|
|
2,108,993
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,122,780
|
|
|
994,654
|
|
|
5,702,195
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
275,098
|
|
|
918,823
|
|
|
3,593,202
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
121,206
|
|
|
229,687
|
|
Net
income
|
|
$
|
275,098
|
|
$
|
797,617
|
|
$
|
3,363,515
|
|
Earnings
per share (basic and diluted)
|
|
$
|
0.01
|
|
$
|
0.03
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic and diluted
|
|
|
29,026,924
|
|
|
29,026,924
|
|
|
22,573,933
|
|
See
accompanying notes to unaudited condensed financial statements.
Star
Maritime Acquisition Corp.
(a
development stage company)
Condensed
Statements of Stockholders’ Equity
|
|
Common
Stock
|
|
Additional
paid in
|
|
Earnings
accumulated in the development
|
|
Total
stockholders’
|
|
|
|
Shares
|
|
Amount
|
|
capital
|
|
stage
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
13, 2005 (Inception) to March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Issuance on May 17, 2005 at $.003 per share
|
|
|
9,026,924
|
|
$
|
903
|
|
$
|
24,097
|
|
$
|
—
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
placement issued December 15, 2005 at $10 per share
|
|
|
1,132,500
|
|
|
113
|
|
|
11,324,887
|
|
|
|
|
|
11,325,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued December 21, 2005 at $10 per share
|
|
|
18,867,500
|
|
|
1,887
|
|
|
188,673,113
|
|
|
|
|
|
188,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
of offerings
|
|
|
|
|
|
|
|
|
(14,900,380
|
)
|
|
|
|
|
(14,900,380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
subject to possible redemption of 6,599,999 shares
|
|
|
|
|
|
|
|
|
(64,679,990
|
)
|
|
|
|
|
(64,679,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the period May 13, 2005 (inception) to December 31,
2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110,331
|
|
|
110,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
29,026,924
|
|
$
|
2,903
|
|
$
|
120,441,727
|
|
$
|
110,331
|
|
$
|
120,554,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income for the year ended December 31, 2006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,978,086
|
|
|
2,978,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
29,026,924
|
|
$
|
2,903
|
|
$
|
120,441,727
|
|
$
|
3,088,417
|
|
$
|
123,533,047
|
|
Unaudited:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the three months ended March 31, 2007
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
275,098
|
|
|
275,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2007
|
|
|
29,026,924
|
|
$
|
2,903
|
|
$
|
120,441,727
|
|
$
|
3,363,515
|
|
$
|
123,808,145
|
|
See
accompanying notes to unaudited condensed financial statements.
Star
Maritime Acquisition Corp.
(a
development stage company)
Condensed
Statements of Cash Flows
|
|
Three
months ended March 31, 2007 (unaudited)
|
|
Three
months ended March 31, 2006 (unaudited)
|
|
May
13, 2005 (date of inception) to March 31, 2007
(unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
275,098
|
|
$
|
797,617
|
|
$
|
3,363,515
|
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
—
|
|
Depreciation
|
|
|
610
|
|
|
—
|
|
|
1,018
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
—
|
|
Increase
in value of trust account
|
|
|
(1,656,247
|
)
|
|
(1,169,638
|
)
|
|
(5,896,504
|
)
|
Increase
in prepaid expenses and other current assets
|
|
|
(70,855
|
)
|
|
(53,730
|
)
|
|
(220,502
|
)
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
(58,590
|
)
|
|
(291,276
|
)
|
|
544,930
|
|
Increase
in deferred interest
|
|
|
546,396
|
|
|
489,683
|
|
|
2,709,453
|
|
Increase
(decrease) in taxes payable
|
|
|
(206,687
|
)
|
|
121,206
|
|
|
—
|
|
Net
cash provided by (used in) operating activities
|
|
|
(1,170,275
|
)
|
|
(106,138
|
)
|
|
501,910
|
|
Cash
flows from investing activites:
|
|
|
|
|
|
|
|
|
|
|
Payment
to trust account
|
|
|
—
|
|
|
—
|
|
|
(188,675,000
|
)
|
Capital
expenditures
|
|
|
(3,658
|
)
|
|
—
|
|
|
(7,322
|
)
|
Net
cash used in investing activities
|
|
|
(3,658
|
)
|
|
—
|
|
|
(188,682,322
|
)
|
Cash
flows from financing activites:
|
|
|
|
|
|
|
|
|
|
|
Gross
proceeds from public offering
|
|
|
|
|
|
|
|
|
188,675,000
|
|
Gross
proceeds from private placement
|
|
|
|
|
|
|
|
|
11,325,000
|
|
Proceeds
of note payable to stockholder
|
|
|
—
|
|
|
—
|
|
|
590,000
|
|
Repayment
of note payable to stockholder
|
|
|
—
|
|
|
—
|
|
|
(590,000
|
)
|
Proceeds
from sale of shares of common stock
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
Payment
of offering costs
|
|
|
—
|
|
|
—
|
|
|
(10,900,380
|
)
|
Net
cash provided by financing activities
|
|
|
—
|
|
|
—
|
|
|
189,124,620
|
|
Net
cash (decrease) increase for period
|
|
|
(1,173,933
|
)
|
|
(106,138
|
)
|
|
944,208
|
|
Cash
at beginning of period
|
|
|
2,118,141
|
|
|
593,281
|
|
|
—
|
|
Cash
at end of period
|
|
$
|
944,208
|
|
$
|
487,143
|
|
$
|
944,208
|
|
Supplemental
cash disclosure
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9,163
|
|
Supplemental
schedule of non-cash financing activities
|
|
|
|
|
|
|
|
|
|
|
Accrual
of deferred underwriting fees
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,000,000
|
|
Accrual
of offering costs
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited condensed financial statements.
NOTE
A-ORGANIZATION AND BUSINESS OPERATIONS
Star
Maritime Acquisition Corp. (the “Company”) was incorporated in Delaware on May
13, 2005. The Company was formed to serve as a vehicle for the acquisition
through a merger, capital stock exchange, asset acquisition, or other similar
business combination (“Business Combination”) with one or more businesses in the
shipping industry. The company has not acquired an entity as of March 31, 2007.
The Company has selected December 31 as its fiscal year end. The Company is
considered to be in the development stage and is subject to the risks associated
with activities of development stage companies.
On
December 13, 2006, the Company created a wholly-owned subsidiary, Star Bulk
Carriers Corp. (“Star Bulk”) registered in the Marshall Islands. Star Bulk has
not yet been funded; therefore, there is no related effect on the financial
statements.
On
January 12, 2007, the Company, through its newly-formed, wholly-owned subsidiary
Star Bulk Carriers Corp., a Marshall Islands company ("Star Bulk"), agreed
to
purchase eight drybulk carriers (the "Vessels") from certain wholly-owned
subsidiaries of TMT Co., Ltd., a Taiwan corporation (TMT Co., Ltd. and such
wholly-owned subsidiaries, collectively, "TMT"), pursuant to separate definitive
Memoranda of Agreement by and between the Star Bulk and TMT (collectively,
the
"MOAs"), as supplemented by a Supplemental Agreement by and among the Company,
Star Bulk and TMT (the "Supplemental Agreement") and a Master Agreement by
and
among the Company, Star Bulk and TMT (the "Master Agreement" and collectively
with the MOAs and the Supplemental Agreement, the "Acquisition Agreements")
which transaction is also referred to as the "Asset Acquisition". As required
under its Certificate of Incorporation, the Company will hold a special meeting
of its stockholders to vote on the Asset Acquisition and a proposed merger
of
the Company into Star Bulk in which Star Bulk will be the surviving entity
(the
"Redomiciliation Merger" and together with the Asset Acquisition, the "Business
Combination"). The Redomiciliation Merger shall occur at the time of approval
by
the Company's stockholders of the Business Combination. The aggregate purchase
price for the Vessels is $345.2 million (the “Purchase Price”), consisting of
$120.7 million payable in 12,537,645 shares of common stock, par value $0.01,
of
Star Bulk (the “Stock Consideration”) and $224.5 million in cash (the “Cash
Consideration”).
On
February 7, 2007, Star Bulk formed the following wholly-owned subsidiaries
registered in the Marshall Islands. The share capital of each of the
subsidiaries consists of 500 authorized and issued shares without par value.
The
names of these subsidiaries are Star Alpha Inc, Star Beta Inc, Star Gamma Inc,
Star Epsilon Inc, Star Iota Inc, Star Theta Inc and Star Bulk Management
Inc.
Star
Gamma Inc., a wholly-owned subsidiary of Star Bulk, entered into a time charter
agreement dated, February 23, 2007, with TMT for the C Duckling ( to be renamed
the Star Gamma). The charter rate for the Star Gamma will be $28,500 per day
for
a term of one year. Star Iota Inc., a wholly-owned subsidiary of Star-Bulk,
entered into a time charter agreement, dated February 26, 2007, with TMT for
the
Mommy Duckling (to be renamed the Star Iota). The charter for the Star Iota
will
be $18,000 per day for a term of one year. Each charter will commence as of
the
date the vessel is delivered to the purchaser. Pursuant to the Supplemental
Agreement, these time charters will be null and void if the Redomiciliation
Merger is not consummated.
On
March
14, 2007, the Company entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Star Bulk regarding the Redomiciliation Merger, whereby the
Company will merge with and into Star Bulk, with Star Bulk as the surviving
corporation.
Subject
to the terms and conditions of the Merger Agreement, which has been unanimously
approved by the board of directors of the Company, following the Redomiciliation
Merger: (i) the separate corporate existence of the Company will cease; (ii)
each share of Star Maritime common stock, par value $0.0001 per share, will
be
converted into the right to receive one share of Star Bulk common stock, par
value $0.01 per share; and (iii) each outstanding warrant of the Company will
be
assumed by Star Bulk with the same terms and restrictions, except that each
will
be exercisable for common stock of Star Bulk. As provided in the Company’s
Certificate of Incorporation, holders of Star Maritime common stock have the
right to redeem their shares for cash if such stockholder votes against the
Redomiciliation Merger, elects to exercise redemption rights and the
Redomiciliation Merger is approved and completed.
The
Company cannot complete the Redomiciliation Merger unless (1) the holders of
at
least a majority of the issued and outstanding shares of Star Maritime entitled
to vote at the special meeting vote in favor of the Redomiciliation Merger;
(2)
holders of at least a majority of the shares issued in the initial public
offering and private placement vote in favor of the Redomiciliation Merger;
and
(3) holders of less than 6,600,000 shares of common stock, such number
representing 33.0% of the 20,000,000 shares of Star Maritime common stock issued
in the initial public offering and private placement, vote against the
Redomiciliation Merger and exercise their redemption rights to have their shares
redeemed for cash.
Messrs.
Tsirigakis and Syllantavos, the Company’s senior executive officers, and Messrs.
Pappas and Erhardt, two of the Company’s directors, have agreed to vote an
aggregate of 1,132,500 shares, or 3.9% of Star Maritime’s outstanding common
stock, acquired by them in the private placement and any shares of Star Maritime
common stock they may acquire in the future in favor of the Redomiciliation
Merger and thereby waive redemption rights with respect to such shares. All
of
the Company’s officers and directors have agreed to vote an aggregate of
9,026,924 shares, or 31.1% of Star Maritime’s outstanding common stock, issued
to them prior to the initial public offering and private placement in accordance
with the vote of the holders of a majority of the shares issued in the initial
public offering and private placement.
On
March
14, 2007, the Company filed with the Securities and Exchange Commission a
preliminary joint proxy statement/prospectus under cover of Schedule 14A
relating to the Company’s special meeting of stockholders. The Company expects
to consummate the Redomiciliation Merger during the third quarter of 2007,
assuming the requisite stockholder approval is obtained.
The
financial statements at March 31, 2007 and for the period from inception to
March 31, 2007 and for the three months ended March 31, 2007 and March 31,
2006
are unaudited. In the opinion of management, all adjustments (consisting of
normal adjustments) have been made that are necessary to present fairly the
financial position of the Company as of March 31, 2007, the results of its
operations and cash flows for the three months ended March 31, 2007 and March
31, 2006 and for the period May 13, 2005 (inception) through March 31, 2007.
Operating results for the interim period presented are not necessarily
indicative of the results to be expected for a full year. The condensed balance
sheet at December 31, 2006 has been derived from the audited financial
statements.
The
accompanying unaudited condensed financial statements should be read in
conjunction with the audited financial statements for the year ended December
31, 2006. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission
(“SEC”).
The
registration statement for the Company’s initial public offering (the “Public
Offering”) was declared effective on December 15, 2005. The Company completed a
private placement (the “Private Placement”) on such date and received net
proceeds of $10,532,250. The Company consummated the Public Offering on December
21, 2005 and received net proceeds of $174,567,370. The Company’s management has
broad discretion with respect to the specific application of the net proceeds
of
the Private Placement and the Public Offering (collectively the “Offerings”),
although substantially all of the net proceeds of the Offerings are intended
to
be generally applied toward consummating a business combination. As used herein,
a “business combination” shall mean the acquisition by the Company of a target
business.
Of
the
proceeds of the Offerings, $188,675,000 is being held in a trust account (“Trust
Account”) and invested until the earlier of (i) the consummation of the first
business combination or (ii) the distribution of the Trust Account as described
below. The amount in the Trust Account includes $3,773,500 of contingent
underwriting compensation and $226,500 of contingent private placement fees
(collectively, the “Discount”) which will be paid to the underwriters if a
business combination is consummated, but which will be forfeited in part if
public stockholders elect to have their shares redeemed for cash if a business
combination is consummated. The remaining proceeds may be used to pay for
business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses.
The
Company, after signing a definitive agreement for the acquisition of a target
business, will submit such transaction for stockholder approval. In the event
that public stockholders owning 33% or more of the outstanding stock sold in
the
Public Offering and Private Placement vote against the business combination
and
elect to have the Company redeem their shares for cash, the business combination
will not be consummated. All of the Company’s stockholders prior to the Public
Offering, including all of the officers and directors of the Company (“Initial
Stockholders”), have agreed to vote their 9,026,924 founding shares of common
stock in accordance with the vote of the majority in interest of all other
stockholders of the Company with respect to any business combination and to
vote
the shares they acquired in the Private Placement or in the aftermarket in
favor
of the business combination. After consummation of the Company’s first business
combination, all of these voting safeguards will no longer be
applicable.
With
respect to the first business combination which is approved and consummated,
any
holder of shares sold in the Public Offering, other than the Initial
Stockholders and their nominees (the “Public Stockholders”) who voted against
the business combination may demand that the Company redeem his or her shares.
The per share redemption price will equal $10.00 per share, which amount
represents $9.80 per share plus their pro rata share of any accrued interest
earned on the trust account (net of taxes payable) not previously distributed
to
us and $0.20 per share plus interest thereon (net of taxes payable) of
contingent underwriting compensation which the underwriters have agreed to
forfeit to pay redeeming stockholders. Accordingly, Public Stockholders holding
32.99% of the aggregate number of shares sold in the Proposed Offerings may
seek
redemption of their shares in the event of a business combination.
The
accompanying financial statements have been prepared assuming that Star Maritime
Acquisition Corp. will continue as a going concern. The Company’s Certificate of
Incorporation provides for mandatory liquidation of the Company by December
21,
2007, without stockholder approval, in the event that the Company does not
consummate a business combination within 18 months from the date of consummation
of the Public Offering, or 24 months from the consummation of the Public
Offering if certain extension criteria have been satisfied. The Initial
Stockholders have agreed to waive their rights to participate in any liquidation
distribution occurring upon its failure to consummate a business combination
with respect to those shares of common stock acquired by them prior to the
Public Offering and with respect to the shares included in the 1,132,500 units
purchased in the private placement. In addition, the underwriters have agreed
to
waive their rights to the $3,773,500 of contingent compensation and $226,500
of
placement fees deposited in the trust account for their benefit. Accordingly,
in
the event of liquidation, the public stockholders will receive $10.00 per share
plus interest (net of taxes payable and that portion of the earned interest
previously released to the Company). The Company will pay the costs of
liquidation and dissolution from remaining assets outside of the trust account.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE
B-RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In
June
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an Interpretation of SFAS No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in tax positions recognized in a company’s financial
statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN
48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of the tax position taken or
expected to be taken in a tax return. The Company adopted FIN 48 effective
January 1, 2007. The adoption of FIN 48 did not have any impact on the
accompanying financial statements since we have not identified any uncertain
tax
positions as defined by FIN 48.
We
recognize interest and penalties related to uncertain tax positions in income
tax expense. The tax years 2005 and 2006 remain open to examination by the
major
taxing jurisdictions to which we are subject.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
NOTE
C-COMMITMENTS
On
October 4, 2006, the Company entered into an agreement with Bongard Shipbrokers
S.A., or Bongard, for purposes of engaging Bongard in connection with sourcing,
developing contacts and making referrals for potential target businesses and
providing evaluations of such potential target businesses. In exchange for
such
services, the Company is obligated to pay a fee of $800,000 within thirty days
of the closing of a business combination transaction. In the event that the
Company does not consummate a business combination transaction, no fees are
payable to Bongard pursuant to the agreement.
On
December 19, 2006, the Company entered into a Sublease and Administrative
Services Agreement with Blue Diamond Realty, LLC, a Delaware limited liability
company ("Blue Diamond"). Effective as of December 1, 2006, Blue Diamond agreed
to sublet offices to the Company located at 103 Foulk Road, Wilmington,
Delaware. and provide the Company with such office space and equipment,
including a conference room, as well as administrative support necessary for
the
Company's business. The Agreement is effective December 1, 2006 through December
31, 2007, with an automatic renewal each year for an additional one year period,
unless either party gives the other party at least 90 days written notice of
its
intent to terminate the Agreement. The Company shall pay Blue Diamond annual
base rent and administrative services fees in the aggregate of $4,000 payable
on
January 1 each year.
On
December 20, 2006, the Company entered into an agreement with Cantor Fitzgerald
& Co., or CF&Co., for purposes of engaging CF&Co. as financial
advisor in connection with a possible business combination transaction. Pursuant
to the agreement, CF & Co. was engaged to provide such services as creating
financial models, advising on the structure of a possible transaction with
a
target business, negotiating agreements on behalf of and in conjunction with
management and assisting management with the preparation of marketing and
roadshow materials. In exchange for such services, the Company is obligated
to
pay a fee of $1,250,000, plus expenses of up to $60,000, within thirty days
of
the closing of a business combination transaction if such transaction is
consummated by December 31, 2007.
On
December 22, 2006, the Company entered into an agreement with Maxim Group LLC,
or Maxim, for purposes of engaging Maxim as co-lead financial advisor in
connection with a possible business combination transaction. Pursuant to the
agreement, Maxim was engaged to provide such services as creating financial
models, advising on the structure of a possible transaction with a target
business and assisting in the preparation of term sheets or letters of intent.
In exchange for such services, the Company is obligated to pay a fee of $800,000
for any business combination transaction consummated during the term of the
agreement (or within six months of the termination date). The agreement
terminates on October 31, 2007, unless terminated earlier by either the Company
or Maxim upon thirty days’ written notice, or extended by mutual
agreement.
The
Initial Stockholders have agreed to surrender up to an aggregate of 200,000
of
their shares of common stock to the Company for cancellation upon consummation
of a business combination in the event public stockholders exercise their right
to have the Company redeem their shares for cash. The number of shares that
the
Initial Stockholders will surrender will be determined by calculating the dollar
amount of the Trust Account (exclusive of interest) paid to redeeming
stockholders above the amount attributable to such stockholders ($9.23 per
share) and the Discount ($.20 per share) and dividing it by $10.00 (the value
attributed to the shares for purposes of this calculation). Accordingly, for
each 1,000 shares redeemed up to 3,508,772 shares, the Initial Stockholders
will
surrender 57 shares for cancellation.
The
Company has engaged the representative of the underwriters, on a non-exclusive
basis, as its agent for the solicitation of the exercise of the warrants. To
the
extent not inconsistent with the guidelines of the NASD and the rules and
regulations of the Securities and Exchange Commission, the Company has agreed
to
pay the representative for bona fide services rendered a commission equal to
5%
of the exercise price for each warrant exercised more than one year after the
date of the prospectus if the exercise was solicited by the underwriters. In
addition to soliciting, either orally or in writing, the exercise of the
warrants, the representative’s services may also include disseminating
information, either orally or in writing, to warrant holders about the Company
or the market for the Company’s securities, and assisting in the processing of
the exercise of the warrants. No compensation will be paid to the representative
upon the exercise of the warrants if:
·
|
the
market price of the underlying shares of common stock is lower than
the
exercise price;
|
·
|
the
holder of the warrants has not confirmed in writing that the
representative solicited the
exercise;
|
·
|
the
warrants are held in a discretionary
account;
|
·
|
the
warrants are exercised in an unsolicited transaction;
or
|
·
|
the
arrangements to pay the commission are not disclosed in the prospectus
provided to warrant holders at the time of
exercise.
|
NOTE
D-RELATED
PARTY TRANSACTIONS
Oceanbulk
Maritime, S.A., a related party, has paid for certain expenses of behalf of
the
Company. The Company's Director Mr. Petros Pappas is Honorary Chairman of
Oceanbulk Maritime S.A. The Company's Chairman, President and Chief Executive
Officer, Mr Prokopios (Akis) Tsirigakis as well as its officer Mr. Christo
Anagnostou are employees of Oceanbulk Maritime S.A.. As of March 31, 2007 the
Company owed approximately $161,000 to Oceanbulk Maritime S.A., for
reimbursements of vessel inspection expenses incurred by Oceanbulk
Maritime S.A. on behalf of the Company as well as for certain support services
including legal and office support provided by Oceanbulk Maritime S.A. to the
Company. This amount is included in the Company’s accrued expenses and accounts
payable section in the accompanying balance sheet.
The
Company has used the services of Combine Marine S.A. to conduct certain vessel
inspection services of the fleet of eight dry bulk carriers that Star Bulk
Carriers has agreed to acquire. The Company’s Chairman, President and Chief
Executive Officer, Mr Prokopios (Akis) Tsirigakis is the Managing Director
of
Combine Marine S.A. As of March 31, 2007 the Company owed approximately $6,900
to Combine Marine S.A. for vessel inspection services. This amount is included
in the Company’s accrued expenses and accounts payable section in the
accompanying balance sheet.
NOTE
E-COMMON
STOCK RESERVED FOR ISSUANCE
At
March
31, 2007 20,000,000 shares of common stock were reserved for issuance upon
exercise of redeemable warrants.
NOTE
F-PREFERRED STOCK
The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting, and other rights and preferences, as maybe determined
from
time to time by the Board of Directors.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward
Looking Statements
This
Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different
from
any future results, levels of activity, performance or achievements expressed
or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or
the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to,
those
described above under Item 1A “Risk Factors” and in our other Securities and
Exchange Commission filings. The following discussion should be read in
conjunction with our Financial Statements and related Notes thereto included
elsewhere in this report.
Overview
We
were
formed on May 13, 2005 to acquire, through a merger, capital stock exchange,
asset acquisition or other similar business combination, one or more businesses
in the shipping industry. Our initial business combination must be with a target
business or businesses whose fair market value is at least equal to 80% of
our
net assets at the time of such acquisition. We intend to utilize cash derived
from the proceeds of our Initial Public Offering, our capital stock, debt or
a
combination of cash, capital stock and debt, in effecting a business
combination.
If
Star
Maritime does not consummate the Redomiciliation Merger or another business
combination by December 21, 2007, then, pursuant to Article SIXTH of its
Certificate of Incorporation, Star Maritime’s officers must take all actions
necessary in accordance with the Delaware General Corporation Law to dissolve
and liquidate Star Maritime within 60 days of that date. There is substantial
doubt that Star Maritime will continue as a going concern if the Redomiciliation
Merger is not approved.
Critical
Accounting Policies
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of
expenses during the reporting period. Actual results could differ from those
estimates.
In
June
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an Interpretation of SFAS No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in tax positions recognized in a company’s financial
statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN
48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of the tax position taken or
expected to be taken in a tax return. The Company adopted FIN 48 effective
January 1, 2007. The adoption of FIN 48 did not have any impact on the
accompanying financial statements since we have not identified any uncertain
tax
positions as defined by FIN 48.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
Results
of Operations for the period January 1, 2007 to March 31,
2007
For
the
quarter ending March 31, 2007, we earned net income after taxes of $275,098
($821,494 before the deduction of $546,396 of net interest attributable to
common stock subject to redemption). Since we did not have any operations,
all
of our income was derived from interest income, most of which was earned on
funds held in the Trust Account. Our operating expenses during the period were
$847,682 and consisted primarily of expenses related to pursuing a business
combination, due diligence, insurance costs and legal and accounting
professional fees.
Results
of Operations for the period January 1, 2006 to March 31,
2006
For
the
quarter ending March 31, 2006, we earned net income after taxes of $797,617
($1,287,300) before the deduction of $489,683 of net interest attributable
to
common stock subject to redemption). Since we did not have any operations,
all
of our income was derived from interest income, most of which was earned on
funds held in the Trust Account. Our operating expenses during the period were
$75,831 and consisted primarily of expenses related to pursuing a business
combination, professional fees and the monthly administrative fee of $7,500
paid
to Schwartz & Weiss, P.C.
Liquidity
and Capital Resources
On
December 15, 2005, we sold 1,132,500 units in the Private Placement to certain
of our officers and directors. On December 21, 2005, we consummated our Initial
Public Offering of 18,867,500 units. Each unit in the Private Placement and
the
Initial Public Offering consists of one share of common stock and one redeemable
common stock purchase warrant. Each warrant entitles the holder to purchase
from
us one share of our common stock at an exercise price of $8.00. Our common
stock
and warrants started trading separately as of February 27, 2006.
The
net
proceeds from the sale of our units, after deducting certain offering expenses
of $10,217,665 including underwriting discounts and commissions and placement
fees, were $189,807,335. Of this amount, $188,675,000 was placed in the trust
account, $599,163 was used to repay debt and interest to Mr. Tsirigakis for
a
loan used to cover expenses related to the Initial Public Offering and the
remaining proceeds of $533,172, which after payment of approximately $170,000
of
additional financing fees, provided us with approximately $363,172 which was
deposited and held outside of the trust account to be used to provide for
business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses. The net proceeds deposited
into
the trust account remain on deposit in the trust account earning interest.
As of
March 31, 2007, there was approximately $194,571,504 held in the trust account,
of which up to $4,000,000 will be paid to the underwriters if a business
combination is consummated, but which will be forfeited in part if public
stockholders elect to have their shares redeemed for cash if a business
combination is not consummated. We will use substantially all of the net
proceeds of the Initial Public Offering to acquire a target business, and will
use the proceeds held outside of the trust account and disbursements of interest
income to identify and evaluate prospective acquisition candidates, select
the
target business, and structure, negotiate and consummate the business
combination. To the extent that our capital stock is used in whole or in part
as
consideration to effect a business combination, the proceeds held in the trust
account as well as any other net proceeds not expended will be used to finance
the operations of the target business.
At
the
time we seek stockholder approval of our initial business combination, we will
offer each public stockholder the right to have such stockholder’s shares of
common stock redeemed for cash if the stockholder votes against the business
combination and the business combination is approved and completed. The actual
per-share redemption price will be equal to the amount in the trust account
(calculated as of two business days prior to the consummation of the proposed
business combination), inclusive of any interest, net of taxes payable, divided
by the number of shares sold in the Initial Public Offering . We may effect
a
business combination so long as public stockholders owning no more than 32.99%
of the shares sold in the Initial Public Offering vote against the business
combination and exercise their redemption rights. In accordance with the terms
of the Initial Public Offering , 6,599,999 shares of common stock are subject
to
possible redemption. Accordingly, at March 31, 2007, $64,679,990 of the net
proceeds from the Initial Public Offering , has been classified as common stock
subject to possible redemption in the Company’s balance sheet.
We
believe we will have sufficient available funds outside of the trust account
to
operate through December 21, 2007, assuming that a business combination is
not
consummated during that time. We do not believe we will need to raise additional
funds in order to meet the expenditures required for operating our business.
However, we may need to raise additional funds through a private offering of
debt or equity securities, or enter into a financing arrangement if such funds
are required to consummate a business combination that is presented to us.
We
would only consummate such a financing simultaneously with the consummation
of a
business combination.
Off-Balance
Sheet Arrangements
Options
and warrants issued in conjunction with our Initial Public Offering are equity
linked derivatives and accordingly represent off balance sheet arrangements.
The
options and warrants meet the scope exception in paragraph 11(a) of FAS 133
and
are accordingly not accounted for as derivatives for purposes of FAS 133, but
instead are accounted for as equity. See Footnote 2 to the financial statements
for more information.
Contractual
Obligations
We
do not
have any long term debt, capital lease obligations, operating lease obligations,
purchase obligations or other long term liabilities.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices, and other market-driven rates or
prices. We are not presently engaged in and, if a suitable business target
is
not identified by us prior to the prescribed liquidation date of the Trust
Account, we may not engage in, any substantive commercial business. Accordingly,
we are not and, until such time as we consummate a business combination, we
will
not be, exposed to risks associated with foreign exchange rates, commodity
prices, equity prices or other market-driven rates or prices. The net proceeds
of our initial public offering held in the Trust Account have been invested
only
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act of 1940. Given our limited risk in our exposure
to money market funds, we do not view the interest rate risk to be
significant.
ITEM
4. CONTROLS AND PROCEDURES
An
evaluation of the effectiveness of our disclosure controls and procedures as
of
March 31, 2007 was made under the supervision and with the participation of
our
management, including our chief executive officer and chief financial officer.
Based on that evaluation, they concluded that our disclosure controls and
procedures are effective as of the end of the period covered by this report
to
ensure that information required to be disclosed by us in reports that we file
or submit under the Securities Exchange Act of 1934 is accumulated and
communicated to our management (including such officers) as appropriate to
allow
timely decisions regarding required disclosure and recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.
During
the period covered by this Quarterly Report on Form 10-Q, there has been no
significant change in our internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II -
OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
1A. RISK FACTORS
There
have been no material changes to the risk factors discussed in Part I, “Item 1A.
Risk Factors” in our Annual Report on Form 10-K for the year ended December 31,
2006. The risks described in our Annual Report on Form 10-K, are not the only
risks facing our Company. Additional risks and uncertainties not currently
known
to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On
December 21, 2005, we consummated our initial public offering of 18,867,500
units. Each unit consists of one share of common stock and one warrant. Each
warrant entitles the holder to purchase from us one share of our common stock
at
an exercise price of $8.00. The units were sold at an offering price of $10.00
per unit, generating total gross proceeds of $188,675,000. The securities sold
in the offering were registered under the Securities Act of 1933 on a
registration statement on Form S-1 (No. 333-125662). The Securities and Exchange
Commission declared the registration statement effective on December 15, 2005.
The net proceeds from the sale of our common stock will be used to acquire,
through a merger, capital stock exchange, asset acquisition or similar business
combination, one or more “target businesses” in the shipping industry. A “target
business” includes one or more entities with agreements to acquire vessels or an
operating business in the shipping industry.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The
Annual Meeting of the Stockholders of the Company was held on February 26,
2007,
at 5:00 p.m. (Athens Time)., at Star Maritime Acquisition Corp., Aethrion
Center, 40 Agiou Konstantinou Avenue, 2nd Floor, Suite B34-B38, 15124 Maroussi,
Athens, Greece. The stockholders of record of the Company’s common stock at the
close of business on December 29, 2006 were invited to vote for the purpose
of
(i) electing, subject to the provisions of our Certificate of Incorporation,
one
Class A director to serve for a three-year term until his respective successor
has been duly elected and qualified; (ii) ratifying the appointment of Goldstein
Golub Kessler LLP, as the Company’s independent public accountants; and (iii)
transacting any other business as may properly be presented at the Annual
Meeting or any adjournment or postponement thereof.
There
were a total of 22,865,773 shares voted in the Annual Meeting of the
stockholders of the Company. Stockholders approved the appointment of Petros
Pappas as a Class A director to hold office for a three year term or until
his
respective successor has been elected and qualified. The stockholders voted
as
follows:
For:
22,858,173 Withheld:
7,600 Abstain:0 Broker
non-vote: 0
Stockholders
ratified the appointment of Goldstein Golub Kessler LLP, as the Company’s
independent public accountants. The stockholders voted as follows:
For:
22,861,073 Against:
200
Abstain:
4,500 Broker
non-vote: 0
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
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Exhibit
No.
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|
Description
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31.1
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Certification
of the Chief Executive Officer (Principal Executive Officer) pursuant
to
Rule 13a-14(a) of the Securities Exchange Act, as
amended.
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31.2
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Certification
of the Chief Financial Officer and (Principal Financial Officer)
pursuant
to Rule 13a-14(a) of the Securities Exchange Act, as
amended.
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32.1
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Certification
of the Chief Executive Officer (Principal Executive Officer) and
Chief
Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002.
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SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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STAR
MARITIME ACQUISITION CORP.
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May
10, 2007
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By: /s/
Prokopios (Akis) Tsirigakis
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Prokopios
(Akis) Tsirigakis
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Chairman,
Chief Executive Officer and
President(Principal
Executive Officer)
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By: /s/
George Syllantavos
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George
Syllantavos
Chief
Financial Officer (Principal Financial
Officer)
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