You may want to also take a closer look at the New York law firm Sichenzia Ross. They not only represent Box Ship but also Magna (Joshua Sason) who provided the first round of toxic financing to Box Ships resulting in massive dilution for the shareholders. I see a conflict of interest there as well.

I would be interested to learn more about the detailed audited transaction you have between Neige International and TEUFF. It is my understanding that this is the CEO's trust under which he purchased 208,000 shares of the TEUCF preferred shares at around $25 per share. In other words his trust purchased 5 Million of preferred shares that are now worth only a fraction of the original value. How did this benefit that CEO or the board of directors. Neige still owns these shares, correct?

My guess is he recovered around $140,000 on this deal but he also lost an arm and a leg on the purchase of 36,000 TEUCF shares (The original issue value was $25 PAR per share at 9% dividend). His purchase price could have been as high as $900,000 and he also foregoes the $162,000 outstanding dividend payments that have accrued over the last 2 years. At least he gets a nice write off.

For Box Ship this deal is a win win. They got rid of their outstanding dividend obligation and reduced the investors owned O/S of the preferred to 664,000 (not including the shares of the CEO/Neige). They also distributed the voting power of investors which is not so good for Mr. Chu.

Interesting, that makes sense. Thanks for clarifying!

That could be one possibility but shouldn't' there be an SEC filing?

Let's say they did uphold the 4.99% anti-dilution in the conversion note and raised cash via another conversion. This would mean that only a small portion of the note was converted. In this case the converting entity could have only been responsible for 1.5 Million of the new TEUFF shares (4.99% of today's O/S). This means they only converted 1,980 of their 36,000 TEUCF preferred shares to date.

Maybe the remain dilution came from newly raised funds which means they could have raised a maximum of $133,000. The last time they raised fund via a toxic financing method was with Magna (Joshua Sason). Investor relations assured me at the time that this deal was a mistake and that it would not happen again. Also, there was an SEC filing at the time.

O/S Before Note (TEUFF): 2,900,000
O/S After Note (TEUFF): 31,372,525
Newly issued Shares (TEUFF): 28,472,525
Shares Converted as per Note (TEUCF): 36,000
TEUCF Conversion Price as per Note: $3.90
Purchase Power from Conversion: $140,400
Average 40% Discounted Price per TEUFF Share: $0.00493
Lowest TEUFF Trading Price over last 21 Days: $0.0082

As per my math above, the ex holder of 36,000 TEUCF shares now owns 28.4 Million TEUFF shares which is 91% of the Outstanding Shares. The conversion has an anti-dilution clause which prevents the converter from owning more than 4.99%.

Why would Box Ship allow this entity to convert this many shares? Did this conversion violate SEC rules since it was not approved by the shareholders? Why did Box Ship put an anti-dilution clause into the conversion note and then violate it. Could it be that the 'Related Entity' is the CEO himself or one of his companies or trusts? i.e. Neige International? (Neige International is the CEO's trust that owns the 208,000 TEUCF Box Ship preferred shares).

So are you saying that the last Box Ship conversion note from July was a SEC violation? They did convert 36,000 preferred shares into 16 Million common shares without shareholder approval or am I missing something?

I first received multiple calls from MD Global Partners out of New York several months ago offering to buy my preferred shares for $4. I then called Box Ship investor relations and they denied any affiliation with the company. A few month later the same guy called again and he did setup a conference call with the COO of Box Ships in Greece who was also offering to send an agreement to buy out the preferred shares. After the call I never heard from them again.

How do you know that this is a one time deal? I personally received several phone calls from a New York firm representing Box Ships as well as phone calls from Box Ship management.

I firmly believe that this is just the first conversion and many more are coming unless preferred shareholder refuse to take the bate.

There is an open market for the preferred shares on the OTC Pink sheets under the symbol of TEUCF.

I don't know how exactly they handle the conversion but I believe they issue new shares which explains the rampant dilution. There is an SEC filing on the Box Ship web page which explains the details. Here is my simplified understanding as to how I it works:

The preferred shareholder agrees to convert one share of the preferred (TEUCF) at a value of $3.90 and convert it to a common at 40% discount to the lowest trading prices in a 21 day period. Let's say the TEUFF lowest share price in this period was 0.01. The conversion price would be 0.006 (40% discount). Under my simple example, the preferred shareholder would receive 650 newly issued common shares (TEUFF) for each relinquished preferred share (TEUCF).

The preferred shareholder foregoes all outstanding dividends that are owed to him which represents 9% of a $25 PAR value that has accrued over the last 2 years. Box Ship gets rid of their obligation and reduces the number of preferred shares while diluting the common shareholder.

You do the math. There are about 916,000 preferred shares outstanding minus the 36,000 that may have already been converted via the last note. The CEO still owns 22% (208,000). This leaves another 672,000 to be converted.

The only protection the common shareholder has is that the conversion note includes a anti-dilution clause under which the preferred shareholder can never own more than 4.99% of the total outstanding common shares. This is the part I don't understand. With this clause in place, how was it possible for the TEUFF common to grow from 2.9 Million O/S to almost 19 Million within a few weeks? Please chime in if this makes sense to you.

My post was about the TEUCF preferred share which is being converted to the TEUFF common share. You are right, the common share trades around 0.01 while the preferred is sitting around $1 per share. Executive management however has been contacting preferred shareholders (TEUCF) offering them to convert each preferred share at a value of $3.90 to the common at a 40% discount. Details are in the SEC filing for the conversion note. Sorry for the confusion.

I believe that the 0.01 price was a glitch. This morning, Citadel has been trying to buy 3,500 shares at 0.21 and I think 100 cleared at that price. I personally have been trying to buy but I had to move my order up to $1.00 and I only got a few shares. As I was moving up my order, Citadel moved up theirs. Once I got to $1, my order cleared for 100 shares but the price on the OTC or TD Ameritrade never changed. It kept being listed at 0.21. I placed a second order later in the day for $1 and it cleared and then the price suddenly updated but only on TD Ameritrade, not on the OTC. I have been observing this a lot. Another thing I have seen is that lower priced orders clear before higher priced orders. I don't know if this is a short coming of the OTC Pink sheets or if this behavior is intentional.

I think the CEO's strategy is to convince all preferred shareholders to convert their preferred share (722,000) at a price of $3.90 per share while diluting the common shareholders. Once the conversion is done, he will be the only preferred shareholder left and can then buy a majority stake of the common for next to nothing. After that I anticipate all kinds of positive news to come out but not until the conversion is done.

The CEO currently owns 22% of the preferred shares and I can not blame him for wanting to get his $25 original investment back (plus accrued interest).

Looking forward to what? More dilution? One preferred shareholder just converted 36,000 preferred shares (TEUCF) to common (TEUFF) and added almost 16 Million common to the OS. There are 722,000 other preferred shares out there other than the holding of the CEO (208K). If the also convert at the same rate we will be at 600 Million OS in a short period of time.

Only 18.9 Million? After the last 50:1 reverse split a few months ago, the O/S were 2.9 Million. How did we get from 2.9M to 18.9M and where will the O/S be in a month from now?

If one preferred share holder just converted 36,000 preferred shares at a price of $3.90 and the outstanding shares shot up form 2.9 Million a month ago to almost 19 Million now. This would mean that almost 16 Million shares of the common were newly issued. I don't understand how this is possible since any one shareholder can not own more than 4.99% of the company according to the conversion note. In my math 16 Million represents 84% of the company.

Can somebody explain how we got from 2.9 Million to almost 19 Million outstanding common shares within a month? The preferred conversion note has a 4.99% anti-dilution clause which means that at the time when it was executed the preferred holder could only convert his preferred shares to a maximum of 144,000 common shares (4.99% of 2,9 Million). Can somebody explain the difference? I don't see any additional SEC filings and it is my understanding that the shareholders voted against a reverse split?

What am I missing?

I think Mr Chu is going to loose his shirt just like every other common shareholder. This CEO seems to be using the same death spiral toxic financing methods that Magna (Joshua Sason) is famous for. (Remember the Bloomberg article on Joshua Sason?)

Here is what I think the CEO is currently doing (All speculation of course):

1) After getting rid of all the negative asset values (9 ships) and negotiating debt forgiveness with the banks he now has only one problem left and that is the 920,000 outstanding preferred shares (PAR value of $25 with 9% annual accrued dividend). He currently owns approx 200,000 preferred shares himself which he originally paid %5 Million for and raised 18 Million from other investors. Those investors now own the remaining 720K. Box Ships owes $900K in accrued dividends to the CEO and 3.2 Million to public investors. He is now in the process of contacting all large preferred shareholders trying to convince them to convert their preferred shares to the common using a convertible note (see SEC filing from July 2017). He offers them $3.90 per preferred share and allows them to convert to the common at a 40% discount to the lowest trading price of the previous 21 days. Using this method, he pays worthless shares and gets rid of the outstanding obligation. If all preferred investors take this deal, there will be over 676 Million outstanding shares in the common which would mean that the price of the common will eventually go down to 0.0001. (Assuming it stays at the current Market Cap)

2) If he manages to convince all Preferred Shareholders to convert to the worthless common, he will then be the only preferred shareholder that is left in the company with his stake of 200K shares.

3) In the meantime Mr. Chu will only hold a tiny fraction of the outstanding shares with little or no voting power.

4) At the end of the death financing cycle (which will be near the last expiration date of the last conversion note), our CEO will then buy back controlling interest of the common shares for next to nothing. He will then be the majority common shareholder and the only preferred shareholder.

5) Once he has controlling interest and all preferred shareholder are bought off, he has 0 obligation and 0 debt left (except the one owed to him) Now he will be very motivated to get back into the shipping business. He now has the option to either merge with Allseas/Paragon or just acquire news ships once the market for shipping has recovered. The preferred will jump back to $25. A Win Win situation for the CEO and a loose loose situation for everybody else.

6) This strategy may actually work unless the SEC or a any class action lawsuit will put an end to these practices.

I have a hard time believing that a lender or a bank would just forgive a 60 Million dollar outstanding loan on 3 ships, then allow the CEO and/or Allseas Marine to buy the ships for 1 dollar without assuming any liability and then turn around and sell them for a 42.8 Million dollar profit to a Box Ship customer.

Here is a recent press release from Allseas Marine:

http://www.tradewindsnews.com/drycargo/1323103/bodouroglous-allseas-shrinks-fleet-further

According to this press release, Allseas Marine sold 3 ex Box Ship assets for 42.8 Million

1) Maule for 20 Million
2) Box Voyager for 11.4 Million
3) Box Trader for 11.4

What I like to understand is the following: All three ships used to be on Box Ship's Balance sheet but the original loan for all 3 ships was over 100 Million dollars. At the end of 2015 the outstanding loan for the 3 ships was $60.5 Million. I understand that the debt was wiped out on all 3 ships were transferred off the balance sheet . It looks like Allseas must have taken over the asset, but what happened to the liability? Did Allseas sell these ship to pay off the liability to the lender? Or did Allseas actually profit $42.8 Million in this transaction? Also, what about Forgiveness of Debt taxes? Does Box ship owe taxes on the forgiven debt? In the US you would.

Thanks munhoi!

It is my understanding that executives can be hold personally liable for violating fiduciary responsibilities to shareholders. Is there any credible evidence?

To date, I have been giving him the benefit of the doubt but the recent sale of the Maule by Allseas Marine for 21 Million dollars and the continued rampant dilution of common shareholders using death spiral financing methods is starting to raise some serious concerns.

Remember that the CEO holds approximately 200,000 out of 900K preferred shares which at PAR value represents 5 Million dollars. 700K preferred shares are held by other investors. Wouldn't he have a vested interest of getting at least some of his 5 Million back? What would you do if you were in his shoes?

I know for a fact that they are contacting preferred shareholders individually and trying to convince them to convert to the common using the same Toxic financing method that they used with Joshua Saison. This is creating the new dilution of the common. The common shares went from 2 Million to over 8 Million in just a few weeks.

Here is what I think he is doing:

1) Let's say he is trying to convince as many preferred shareholders as he can to convert to the TEUFF common. If he is successful, he will be the only preferred shareholder left with approximately 200K shares at $25 PAR. Now the company owes him a hefty dividend plus 5 Million.

2) By using the Joshua Saison Toxic financing method all these preferred shares are converting to common shares at a massive discount driving the common share price down and increasing the outstanding shares. Once this comes to an end, he now has the option to buy controlling interest of Box Ship for pennies on the dollar while still owning the preferred.

I would not be surprised that when this is all done, he will own the majority of the common for little or nothing and while still owning 200K preferred. Then he has a vested interest to get back into business and start buying or transferring ships back into the company. Once the company is back to generating revenue, he will pay himself the accrued hefty dividends on the preferred shares he owns.

As off today, he could already buy 51% ownership of the company today for 30K.

In the past there used to be little or no competition between Michael's 3 entities:

1) Paragon - Bulk Vessels
2) Box Shop - Container Vessels
3) Allseas - Tanker Vessels

Paragon and Box Ship were publicly traded and Allseas is private.

Recently however Allseas expanded into the containership business as stated on their web page which is clearly competing with Box Ship's space.

If we give Michael the benefit of the doubt and assume has has the best interest of Box Ship shareholders in mind, the following maybe a potential strategy.. (Just a rough hopeful guess)

Michael B (if he is an honest guy) is in the process of eliminating the debt of the publicly traded companies by achieving debt forgiveness from the lenders and transferring the assets to his private entity. (Allseas) while selling off fuel inefficient vessels and buying greener more efficient vessels. Once the Greek shipping climate for publicly traded companies has improved, he will initiate a reverse merge with Allseas into Box Ship (tanker and containerships) and focus Paragon on bulk ships. He has a vested interest to do so since he owns a large portion of the preferred shares of Box Ship.

The other option is that he is tired of the publicly traded companies and tries to go private with Allseas by combining all 3 business into a private entity. This however maybe an issue since he has fiduciary responsibility towards his shareholders. Violating this may make him personally liable. I am sure he understands this.

I like to give him the benefit of the doubt and hope that he stands behind his word to his investors.

Do I understand this correct?

1) Box Ship previously had liabilities for the 3 vessels far exceeding the fair market value of the ships (Liabilities of 100 Million)
2) The board decides to sell all 3 vessels for $1.50 to Allseas?
3) Allseas a few months later sells one of the vessels (Maule) for 20.3 Million to a former client of Box Ships. (CMA CGM)

Since Box Ship was released of the liability, did Allseas assume the 100M liability or was this debt forgiven by the lender as part of the $1.50 transaction?

Can somebody explain to me as to how the Maule container ship ended up at Allseas Marine (Michael B.'s other shipping company)? I just found this article (link below) from June 2017 that states that AllSeas Marine received 20.3 Million dollars for this ship that used to sail under Box Ship.

http://splash247.com/cma-cgm-paying-20-3m-allseas-boxship/

The official PAR value of TEUCF is $25 per share with a 9% dividend on PAR (that has not been paid since Dec 2015 but is accruing). The last trade on the OTC Grey Market was $1.85 but be careful there is little or no liquidity. The only way to get an accurate price is to call your broker and they in turn need to call several market makers to get a quote. The CEO owns 25% of the 916,000 outstanding preferred shares and who knows how many other insiders own them.

You can't really believe the current price of TEUCF since there is no liquidity and no publicly quoted Bid and Ask. Nobody seems to be wanting to sell! I have been trying to buy at these prices for several months but nothing clears. I have even been trying to buy at much higher prices and it does not clear. This maybe the reason they are calling each preferred investor individually.

Has anybody else received calls from a company called MD Global Partners out of New York? They called me several times last week trying to buy my TEUCF Preferred Shares for $4. The company that offers the money is called Rockwell Capital. They claim that Box Ship has no assets left and that management needs to rid themselves of the remaining obligations of the preferred. I am just curious as to why a company would offer $4 for a preferred if the underlying company has no assets?

Oh I forgot to mention that the mortgage for Kingfish and Marlin at the end of 2015 was still $31,650,000 and that has been eliminated as well.

The sale of Box Voyager, Box Trader and Maule eliminated $65,350,000 in ABN AMRO Bank N.V.debt. The sale of Box Queen eliminated 16,500,000 in Unicredit Bank AG debt. The sale of Hong Kong and China eliminated 9,750,000 in ABN AMRO Bank N.V.debt but generated surplus of 3,250,000. Box Emma was sold for 6.5 Million and had no debt. This leaves the company with at least 31M in current assets. They do owe 2 Million in missed dividend payments to the preferred shareholders for 2016. I am sure they will pay this and then have 29 Million left. There will be plenty of great purchase opportunities for new ships at pennies on the dollar. Every company that has a large fleet runs about 4K per ship per day negative at these rates. Not so with Box Ship.

If you do the math, they should have approx. 31 Million dollars in current assets on their books and 0 debt. Smart move. Now they can patiently wait until container rates improve. This is far from BK.

Explain to me why a company would go BK that just wiped of 108 Million of their debt and now has approximately 35 Million dollars in liquid assets plus 2 ships. There maybe one more outstanding bank debt of approximately 15 Million secured by the two ships but the company is now in better shape than most of the competition.

My prediction is that Box Ship is getting ready to bid on some of the Hanjin bankruptcy assets that are going up for auction. Hanjin is auctioning off 97 container ships, of which 60 were chartered and 37 owned by Hanjin.

http://www.wsj.com/articles/hanjin-shippings-asia-u-s-route-assets-to-be-put-on-sale-1476329135

This explains why they negotiated 90 days to get their 3 ships back in case they are unable to acquire any new assets for pennies on the dollar.

Just a thought....

The Preferred Share Symbol is TEUCF.

This seems to be happening all over the industry. Banks in the Shipping industry are holding a combined 400 Billion dollars of debt related to the container and bulk ships that are now only worth a fraction of their original mortgages. A read an article a few months ago that the European central bank was looking into the issue and since then I have notice an increase of debt forgiveness. Diana Container ship (DCIX) is another example that just scrapped several ships at similar prices and obtained forgiveness on their outstanding debt.

You are right about the cash flow. My calculation are very simplified and my intent was really only focusing on the big picture. The 22 Million preferred obligation is still outstanding if you believe that the preferred share holders will be paid the full $25 PAR value. As you know, the preferred is currently priced at $1.60. I do agree with you that the dividends are still accruing but have not being paid since January 1st and won't be paid for a while. Keep in mind that the CEO owns 25% of the outstanding shares and judging by the low volume of transactions on the preferred I assume that many other insiders also own TEUCF. I own some myself but I don't expect a dividend for a couple of years. Also preferred shares are not showing on the balance sheet as a debt.

Believe me I was very bearish on the company for a while but I am starting to see some major improvement and I am shifting to the more bullish side especially when I compare them to competitors like DCIX who are trading at a 25 times higher valuation. For them, the worst is still to come for TEUFF, the worst is behind them. I wouldn't be surprised to see them acquiring a couple of Post Panamax ships when the market improves. There are some great deals on new ship orders since many other companies are refusing to take delivery and the builders are stuck with these ships. These ships are much larger and more fuel efficient and can now fit through the Panama canal.

This is not quite correct, TA!

Below are the list of Secured Bank Debts for each of the 8 Ships that were leveraged. The Box Emma was free and clear at the End of 2015.

As off today, my estimate is that they have approx 21M in current liquid assets and no more that $15.4 Million in outstanding debt and two ships left. I believe that their strategy is to get rid off Panamax ships and replace them with newer Post-Panamax ships once the market recovers. This is potentially a strategy to adapt to the widening of the Panama canal.

Here is the detail of my calculations with a baseline from the 2015 year end filing with the news of the 2016 filings applied:

(a) ABN AMRO Bank N.V. (Secured Debt for Box Voyager, Box Trader and Maule)
Original Secured Bank Debt: $100,000,000
Outstanding as off EoY 2015: $65,350,000
Settled in 2016 in return for 3 Ships out of 9
Debt left: 0

(b) Unicredit Bank AG (Secured Debt for Box Queen)
Original Secured Bank Debt: $30,000,000
Outstanding as off EoY 2015: $$16,500,000
Settled in 2016 in return for 1 Ship out of 9
Debt left 0

(c) Credit Suisse AG (Secured Debt for Kingfish and Marlin)
Original Secured Bank Debt: $44,000,000
Outstanding as off EoY 2015: $$31,650,000
Income received for the sale of 2 Ships for scrap: 13,000,000
Debt left: Not sure if entire note was settled. If not there is still a potential bank note of $18,650,000 outstanding

(d) ABN AMRO Bank N.V. (Secured Debt for Box Hong Kong Box China)
Original Secured Bank Debt: $25,000,000
Outstanding as off EoY 2015: $9,750,000
Income from sale of 2 Scrapped Ships: 13,000,000
Profit after paying off Note: $3,250,000

(e) Box Emma was free and clear without bank loan as off EOY 2015
Profit after Sale of Box Emma was $6,500,000


Current Assets as off EoY 2015: $21,000,000
Cash from Sale of Box Emma: $6,500,000
Cash from Toxic Notes: $850,000 Cash
TOTAL CURRENT ASSETS ESTIMATE as off today: $28,350,000
Long Terms Asset Value of 2 Ships at Scrap Value: $13,000,000
Debt Remaining (worst case): $15,400,000
Debt Remaining (best case): 0

TA, let's see if you agree with my calculations. At the end of 2015, Box Ship had 128 Million of debt on their balance sheet and 9 ships. If I recall they sold 4 ships for scrap at 6.5M each for a total of 26M. Lets say they had to use the funds to pay down the debt to 102M. The second facility of 30M, they had 16.9 outstanding which reduced the debt to 85.1 Million. (102-16.9) Today's debt reduction was approximately 61M out of the original 2011 100M facility. This leaves them with 2 assets and 24 Million in debt and in a great position to survive this crisis. Remember that debt forgiveness and scrapping of old Panamax ships is happening all over the industry, not only with Box Ships. I agree that they are still accruing 9% if interest on the 900K outstanding preferred shares but that interest is deferred and will probably be paid again once rates recover above 10K per day. I was originally very disappointed with management after the toxic notes but I start to respect what they are doing now . I have a feeling that this company is going to make it and is positioned for growth once rates recover. Please let me know if you disagree with my numbers above. Thanks.

The common (TEUFF) has approximately 93 Million shares outstanding according to the latest filing. The preferred (TEUCF) has approximately 900K outstanding. The CEO owns about 25% of the preferred. The preferred has a PAR value of $25. The board of directors voted to defer the 9.9% dividend payments of the preferred in January but they are still accruing.

Below is another example of debt forgiveness in the shipping industry. Banks seem to be working with shipping companies everywhere...Below is a press release from Dry Ship where 50% of outstanding debt was forgiven by the bank. This is all good news for Box Ship.

https://finance.yahoo.com/m/d7640973-6340-3fc7-a7b1-bcab6eea0afc/ss_dryships-settles-with-lender.html

My prediction for 2017:

Let's say that Box Ship will scrap two more ships and run a small fleet of 3 ship that will generate approximately $6,000 per day in revenue for a total runrate of 6.57 Million per year. In return banks will settle 16.9 Million of debt for each of the 6 scrapped ships for a total of 101.4 Million. This leaves the company with 20 Million of debt on their books offset by the asset value of 3 ships under contract.

Box Ship will then operate lean and mean until the shipping market recovers. Once daily rates recover to about 10,000 per day, they will be profitable again and the asset value of the ships will be substantially higher than their debt.

Under this scenario, the common share should go from 0.01 to 0.06 at a 1x revenue valuation and the preferred share will go from $1.65 to 25 (Par Value)

Let's say the rates recover back to 20K per day in 2018, revenue will be back over 20 Million and at an operating cost of 5K per ship per day, the company will be nice and profitable again and can expand.

Maybe it's wishful thinking but this is why I am buying.