C3is Inc.

Good morning to everybody and welcome to C3IS first quarter 2023 earnings conference call. I'm Harry Vassias, chairman of the board of C3IS. With me on the call is the company CEO, Mr. Andriotis Yamadis, as well the company CFO, Mrs. Nina Pellia. We're all honored for having you with us today. This is the very first conference call of C3IS following the successful spin-off concluded on June 21st. Before we commence our discussion, I kindly ask you to read the safe harbor language on slide number two of our presentation, which reminds you that today's call may include forward-looking statements that are based on current expectations and assumptions, which by nature are inherently uncertain and outside the company's control. In addition, we have a couple of additional remarks to make. First, the financial results presented were prepared on a carve-out basis from the financial statements of Imperial Petroleum. which was our parent company prior to the completion of the spin-off, and accordingly do not reflect any adjustments for the spin-off, including variations of common shares, series A convertible preferred shares. Secondly, during this call, we will quote monetary amounts, which are all denominated in U.S. dollars, unless explicitly stated otherwise. On slide three, we're introducing a recently listed company called C3IS. Our new company is the outcome of the successful spin-off of two hundred-size dry bulk vessels from Imperial Petroleum. The specific spin-off structure, the rationale of the transaction, and the potential benefits of our shareholders are analyzed in detail in the C3IS registration statement filed with the SEC. C3IS is for the time being a small-scale company with a promising growth potential as it belongs to a shipping group with long-standing experience and proven track record in the industry. Evafia's group has five active shipping companies, three NASDAQ listed, and two private ones. Given that Stealth Gas has been listed on the NASDAQ since 2005, it's quite evident that we hold considerable experience in the capital markets. C3IS strategy is very simple. We'll be focused on healthy growth and profitability. Our short-term goal is to expand our fleet to a minimum of 10 ships. Current market values of dry bike buses are quite attractive, a fact which may assist us to attain our fleet expansion. We have three key words, which are our objectives, growth, stability, and environment. And as an entity, we'll fulfill our responsibility to support these three aims, but our top priority will always be safety for the environment, our crews, and our ships. We are confident that this endeavor will materialize as we aim to leverage upon and replicate the success story of both Imperial Petroleum and actually reap the benefits of economies of scale and know-how that our large affiliated shipping group has to offer. Our experience in the dry bulk sector is undisputed as our management company, Brave Maritime, has been managing dry vessels since the 70s. Of course, that doesn't limit us in one sector and we might make acquisitions in other shipping sectors as well. On slide four, we are discussing our investment rationale behind the spin-off and the gains we feel it brings upon to our shareholders. As already mentioned, Imperial Petroleum spun off two of its hand-sided bulk vessels, which equates to only 15% of its fleet book value as of March 31, 23. A small contribution in terms of value, but with a large economic potential. Imperial Petroleum also supported CFDIS by contributing $5 million of working capital in order to ensure adequate liquidity during its first period of operations. Now, what do Imperial Petroleum shareholders and warren holders have to gain? That basis, the basis of the record rate of June 13 received on June 21 shares of C3IS on a ratio of 1 to 8. We view these shares granted as a dividend to our shareholder base that is an opportunity to participate in a separate public company with promising potential. Most importantly, we feel that C3IS poses an interesting investment opportunity as our company shares may also become as liquid as those of Imperial Petroleum. On slide five, we're presenting your fleet. As said, our fleet is currently small-scale, comprised of two high-quality countryside bulk carriers, the Echo Bushfire built in 2011 and the Echo Angel Bay built in 2009, both built in Japan. Our fleet average age is 12.9 years. Our fleet is unencumbered. We have no immediate capital commitments. Both vessels have ballast water treatment system installed, while the next dry docking is due in the second quarter of 2026. Both vessels are semi-box-shaped, capable of lowering versatile bread bulk and project cargoes, and are certified by class to load most cargoes listed in the IMDG. As for the Echo Bushfire, this vessel is equipped with grabs and not a very common feature amongst vessels of similar size. In terms of wind deployment, both vessels are employed on time-charted trips, expiring in July and September 2013 accordingly. Overall, our current chartering strategy basis current market condition is to employ our investors on time charters or spot voyages up to three months duration. We usually attend high operational utilization. Our investors, our CIS and our manager have developed strong relationships and have repeat business within their national charters. I'll now pass the floor to our CEO who will provide you with a market update.

Thank you, Harry. Before I commence discussing the dry market, I would like to express that as C3IS CEO, I firmly believe in our new company's capabilities and I will provide my full support in order to successfully materialize our growth strategy. Let us move on to slide 6 in order to discuss the dry market prevailing condition and expectations going forward. Overall, the performance of the dry market is customarily dependent upon several variables, such as global microeconomic outlook, China's economy, demand and trade of major commodities like iron, coal, and grain, and the fundamentals of the dry fleet, that is, demand and supply. In terms of global economic outlook, in spite of the recent banking crisis, inflation, the ongoing Russian-Ukrainian conflict, world GDP is forecast to grow in 2023 by 1.9%. In terms of seaborne dry bag trade, we expect 1.5% growth in terms of tones and 2.4% growth in terms of ton miles demand with further improvement possibilities in 2024. Looking at the prospects of the Chinese economy, China has entered into a post-COVID recovery and in 2023 is expected to expand its economy by about 5%. A recovery will be most driven by the consumption and services sector. Indeed, it is expected that in the period of 2023 to 2027, China's import growth will be in a region of 4.2%, gradually slowing down thereafter. The biggest question is whether the housing sector, that heavily affects the demand for steel, will gradually recover. Let us move on to slide 7, so as to look at the trade of major commodities. The global trade of iron ore by sea is expected to increase by approximately 1.5% in the full year of 2023. This growth is driven by stronger demand from China as well as iron ore exports growth mainly from Australia and Brazil. In 2023, global trade of both thermal coal and caulking coal is expected to grow by 3% respectively. Although demand from Europe is expected to stay at similar levels as in 2022 due to the ongoing Russian-Ukraine conflict, we expect to see a rise in coal demand from India and China. Looking at grain trade, this is also anticipated to grow by 4% in 2023, fueled by strong demand from key regions such as China, the economic rebound of countries like Pakistan, Egypt, and Bangladesh, and the increase in corn exports from Brazil. In slide 8, we provide the summary of the hand-designed dry bulk fleet fundamentals. The hand-designed dry bulk segment is quite over-aged and with a very small order book. Currently, the order book to fleet ratio stands at 3.35%, while 70% of the fleet is above 20 years of age. If demolition in the segment intensifies, the small number of orders might cause the handy-sized dry bulk fleet to shrink. New building prices remain well below last year's peak. In addition to this, new orders are mostly focused on the larger 39,000 deadweight segment, and in terms of period charter, rates picked up until March and were above the last five years' average, which then we witnessed a slight decline. In relation to the second quarter of 2023, we have witnessed an overall soft market for the handy-sized dry bulk vessels. We expect the market to show some improvement in the third quarter of 2023, especially if the Chinese government implements economic stimulus packages, as this should lead to a more positive sentiment overall, thus an increase in market rates. I will now hand over the call to NINAP India, the CFO of C3IS, in order to discuss our financial performance.

Thank you Diamantis and good morning to everyone. C3IS Inc. was just listed in NASDAQ, so we will present and analyze CalVAD financials from the parent company Imperial Petroleum. We will base our discussion on our performance during the first quarter of 2023. Before we commence the analysis of our financial performance, I would like to touch upon our financial strategy going forward. As mentioned before, we will aim at growth and fleet expansion while following a prudent financial strategy in terms of leverage. Both of our vessels are unencumbered, hence we have absolutely no financial obligations, which is very positive cash flow-wise, especially now that interest rates are very high and that we are entering into an expansion phase. Focusing on the first quarter 2023 performance, in slide 9, revenues came in at $3.2 million. Our two vessels were employed only on time charter trips. We managed to achieve a high, a strong operational utilization of about 91%, marking only 17 days of commercial or higher. Voyage costs amounted to $0.3 million. Although our vessels were employed on time charters, where no voyage costs are incurred by the owner, this quarter we had about $150,000 of ballasting costs for the Echo bushfire. Our time charter equivalent revenues for Q123 were in the order of $2.9 million, which is translated to a daily TCE of about $16,000, a performance over and above the prevailing market rates during the first quarter of 2023. Our running costs amounted to $1 million. These expenses mainly included crew costs of $0.6 million, corresponding to 60% of total OPEX, and spares and consumables of $0.3 million. Our EBITDA for the quarter was $1.4 million, while our net income was $0.8 million, a satisfactory performance given that we operate a fleet of only two vessels. Compared to Q422, we did generate a higher income, despite daily rates that were slightly higher in the last quarter of 2022. The main reason was that during Q422, one of our vessels, the Echo Angel Bay, underwent its scheduled dry docking, resulting in 0.6 million of dry docking charges and technical off-hires. Moving on to slide 10, let us take a look at our balance sheet and for the first three months of 2023. Our financial structure is simple. We are a debt-free company, while for the time being, almost all of our asset value stems from our fleet book value of $38.2 million. Right after the spin-off was effected, our liquidity was enhanced by the $5 million contributed from Imperial Petroleum as working capital. Going forward, our liquidity will also be boosted from cash flows stemming from our fleet operations. Concluding our presentation in slide 11, we outlined the key variables that will assist us to progress from our company's growth. The fundamentals going forward are our proven growth expertise, our attention to operating costs and leverage levels, management expertise, and our strong relationship with charterers. We hope that we will materialize upon these competitive advantages and make C3IS an investment success story. At this stage, our board chairman, Mr. Harry Vakias, will summarize our concluding remarks for the period examined.

We are pleased with the successful spin-off of the two of Imperial Petroleum's handy-sized drivable inversions to a newly listed entity called C3IS. Our affiliate shipping group operates five active companies, three NASDAQ listed, and two private companies. C3IS is our latest project. Although currently a small-scale company, we believe that current market conditions will assist our fast-flip expansion. Looking ahead, we are eager to replicate the success story of Imperial Petroleum, which started with four leveraged ships and in less than 18 months had 12 debt-free vessels and a considerable cash as well. The dry bulk transport market is expected to show an increase in marine transport volume over the medium and long-term horizon. We have now reached the end of our presentation and would like to open the floor for your questions. So operator, open the floor.

Thank you, sir. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, you can please press star 1 and 1 again. Once again, please press star 1 and 1 if you have any questions or comment at this time. We are going to proceed with our first question. Oops, I think this question just got withdrawn one moment. We are now going to proceed with our first question. And the questions come from the line of Jason Vien from Living Traditionally. Please ask your question. Your line is opened.

Hello? Can you hear me? Yes. Very good. All right. If I were to be an original investor in stealth gas, I'd be down about 71% now. If I was an original investor in Imperial, I'd be down about 88% right now. And if I was an original investor in C3, well, currently I'd be down about 32% right now. All your stocks have been major losers for investors over the course of time. What's your plan to change that? And why do you think that is? In previous conversations, we've talked about it being a lack of trust in your management style and just being off dilution for unnecessary reasons and refusal to return any money back to investors. What's the plan to change that? And how are you going to start supporting investors. I found it very interesting that you launched this without really supporting Imperial stock. I mean, with a one-year chart that looks like an absolute nightmare for investors, I can't imagine people wanting to invest in another company of yours. And so what's your argument against that?

Some people made a lot of money on the Imperial stock, so I would definitely disagree with you.

I didn't say if I was an original investor.

So please listen to my words. I let you speak. Now you let me speak. So first of all, Stealth Gas not only has given dividends, which I don't know if you have taken in your calculation. Secondly, Stealth Gas has done huge share buybacks, giving most of the time value back to the shareholders. Stelvga shareholders got Imperial stock for free, right? So if you sell it at $8 or if you sell it at $2, if you got it for free, then it's a nice dividend, isn't it? The same for CCIS. If you were an Imperial shareholder, you got CCIS shares for free. You can keep them. If you don't like them, you can sell them, and you're going to get some money back. Now, shaping is a very volatile. I haven't finished, my good friend. I haven't finished. I didn't interrupt you, did I? So you need to have manners. Otherwise, you won't be on our calls. So I repeat again, you got the shares for free, which means you can sell them for $1 and make a profit. You can sell them for $8. People that got in Imperial Petroleum early, some people made 500% return. Some people made 700% return. We said from the beginning in Imperial Petroleum, we're going to issue shares. So we didn't hide anything from anybody. They knew we wanted to grow the company, and this is exactly what we did. And where did we end up now? We ended up with a company that has 12 vessels, completely debt-free, and close to $100 million in cash. That's not too bad for a company that started with four ships with debt and $5 million in cash. So if people cannot buy and sell shares at the right time, it's not our problem. You have to buy and sell shares at the right time, like with every company. So this is a CCIS call. If you have any specific questions on CCIS, I'll be very glad to take them. If not, we move on to the next question.

Well, I guess it's just a general, you know, the issue with the market has always been... If you are not a good investor, you don't know when to buy and sell shares, I cannot do anything about it, my good friend.

People make money by buying low and selling high. If you bought high and sold low, I apologize, but it's not our fault.

So being an original investor with you is a guaranteed loser.

When you get to a high level, you should sell and mitigate your losses or sell and make a profit. This is what you learn in the first year of college. Let's go to the next question, please.

Sure. We are now going to proceed with our next question. And the questions come from the hand of John Deschamps from Pinnacle. Please ask your question. Your line is opened.

Good morning. Thanks for taking my question. I was just curious why you only transferred two dry bulk ships into the new company. I think you have four. What's the strategy behind leaving the two behind? at Imperial. I mean, if you transferred four, Imperial would be a pure tanker company and perhaps be more widely received in the marketplace. So I'm just curious why you only transferred two dry bulkers into the new company.

Good question. That can be done in a future move. We never said that Imperial will become a pure tanker company. We're always looking at different segments because the different shipping segments move in different ways, and sometimes tankers are better, sometimes bulkers are better, sometimes gas carriers are better. So we never said Imperial will only stay in tankers, and we never said C3IS will only stay in dry. But we said we start with two ships, see what happens. It was a big gift from INPP to C3IS. two debt-free ships plus five million in cash, so quite a big gift to the daughter company. But yes, if the company has money and wants to grow, they can make an offer to buy the INPP dry vessels or buy a tanker vessel if they think it has better revenue for the company. But yeah, good question, actually.

Okay, thank you. The other question is... C3IS has 600,000 shares of convertible preferred A shares. Outstanding. Who owns those and what are the specifics on that preferred in terms of strike price?

INPP has the shares. And if you have other specific questions on that, please send us an email and we'll be delighted to come back to you.

Okay. Can you tell me the conversion price?

There is no conversion price.

There's no conversion price. It's just a straight convertible. All right. Thank you very much.

Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the land of Deepak. Larry Chaff from Investop is asking a question. Hi.

Hello, everyone. Can you guys hear me? Yes. Hello, Harry. Actually, I have one question. I've been a recent investor with Imperial. I've seen ups and downs. I think Jason earlier mentioned something similar. My question is more around what lessons have you learned through Imperial Petroleum and how can we avoid some of the pitfalls we have seen in the past so that we are on a clear growth trajectory we can execute on the growth strategy that we just heard. And you can get the, as investors, we can get the value out of the investments we are making.

This is a C3IS call. You're asking questions about Imperial.

No, I'm not asking about Imperial. My question is what lessons you have learned as a CEO of Imperial Petroleum that you can apply on this new organization, new company you have set up so you can learn from the past mistakes and continue on the positive growth trajectory.

I'm not the CEO of C3IS. Yes, I'm not the CEO of C3IS. So what lessons we learned with Imperial as the CEO of Imperial doesn't mean that these are going to be implemented in C3IS as it's a different management team. But thank you that these comments will be discussed at board level and obviously whatever we can do do to make the company successful and bigger and with a healthy balance sheet, definitely we're going to do them. Next question, please.

We have no further questions at this time. I will now hand back the conference to you for closing remarks. Thank you.

We would like to thank everybody for joining us at our conference call today and for your interest and trust in our company. We look forward to having you again with us. at our next call for our Q2 results. Thank you very much.