Mail Stop 03-05
May 24, 2005
Harry N. Vafias
StealthGas Inc.
331 Kifissias Avenue
Athens, Greece
Re: StealthGas Inc.
Registration Statement on Form F-1
Confidential filing, filed on 04/21/05
Dear Mr. Vafias,
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Update the financial statements, as necessary, to comply with
Rule
3-12 of Regulation S-X at the effective date of the registration
statement.
2. Please include a currently dated consent in the registration
statement prior to requesting effectiveness.
Front Cover
3. Please provide us with any artwork that you intend to use. The
inside front cover artwork should be clear illustrations of your
product or business with concise language describing the
illustrations. Artwork that does not convey the business purpose
and
language that strays beyond a limited scope will not be
appropriate
inside the front cover. Please refer to Section VIII of the
Division
of Corporation Finance March 31, 2001 Current Issues and
Rulemaking
Projects Quarterly Update available at www.sec.gov.
Prospectus Summary
4. We refer to the first sentence under this heading. This
section
should summarize the key and not some of the information that
appears
in the prospectus. Please revise.
Our Fleet, page 2
5. Please disclose here, as disclosed on page 27, that you are
purchasing the Identified Vessels from the Vafias Group and
briefly
discuss the terms of the purchase.
6. Please revise the last paragraph to clarify that your ability
to
take advantage of market conditions will be hampered by the fact
that
your vessels may be tied up in charters lasting several years or,
conversely, that no long term charters may be available when
market
conditions would make selecting them advantageous.
Our Fleet Manager, page 3
7. Include a brief discussion of the terms of the management
agreement with Stealth Maritime in this section.
Our Distinguishing Factors, page 4
8. The first two bullet points under this subheading seem to
address
factors that apply to the entire industry rather than ones that
distinguish the company from others. Revise to delete the heading
or
advise.
9. We do not understand how a company formed in December 2004
could
have "strong customer relationships." Either revise or tell us
how.
A relationship with the Vafias Group is not a relationship with
StealthGas.
Leveraging Relationship with Vafias Group, page 4
10. Please disclose here the age of your CEO. Also add a risk
factor
about his age and the amount of experience it suggests or tell us
why
it is not needed.
Increased Market Share Through Acquisition of Identified Vessels,
page 4
11. To help investors gage the importance of your enhanced market
share, please disclose the percentage of the fleets of the size
you
discuss you will have.
Our Business Strategy, page 5
12. We refer to your statement in the fourth bullet point, that as
you grow your fleet, you will own among the larger LPG carrier
fleets. Given the current number of ships in your fleet, the
definitive tone of the statement seems inappropriate. Becoming
an
industry leader is a goal or a hope; we do not understand why it
is a
strategy. Please revise or delete.
Risk Factors, page 11
13. Either add a risk factor to address your lack of operating
history in the current holding company structure or tell us what
consideration you have given to doing so.
14. Either add a risk factor to address the difficulty that may
arise
in attempting to affect service of process on officers and
directors
of the company who are non-U.S. persons or enforcing U.S.
judgments
against the assets of the company located outside of the United
States or tell us what consideration you have given to doing so.
15. Please add a risk that the period of less than three months
for
which you have provided financials may be too short a period to
judge
whether you have a viable business model.
16. Consider including a risk factor discussion addressing the
potential conflict of interest between the company and some of its
officers and directors who also are executives of companies in the
same industry as you.
Our growth depends on continued growth in demand, page 12
17. Please revise the heading to clearly state the risk.
Because the market value of our vessels may fluctuate, page 13
18. Please revise this subheading to indicate that the market
values
are currently at high levels.
Our loan agreements or other financing arrangements, page 19
19. If there is a risk that you may not be able to maintain the
specified financial ratios and covenants under the loan agreement
with Fortis Bank, please disclose the ratios and covenants that
you
need to maintain here and show how you currently satisfy the
ratios
or covenants, so that investors can assess the risk.
Capitalization, page 29
20. Update your Capitalization table as of a date no earlier than
60
days prior to the filing of the registration statement on EDGAR.
See
Item 3.B. of Form 20-F.
21. As to your indebtedness, please distinguish between guaranteed
and unguaranteed, and secured and unsecured, indebtedness. See
Item
3.B. of Form 20-F.
Management`s Discussion and Analysis, page 34
Contractual Obligations, page 39
22. We note the disclosure of a table of contractual obligations
as
required under Item 5.F.1 of Form 20-F. Please revise your table
to
include the loan from Fortis Bank and your obligations under the
management agreement with Stealth Maritime.
Critical Accounting Policies - Revenues and Expenses, page 40
Note 2 - Accounting for Revenues and Expenses, page F-9
23. We note that you recognize revenues and associated voyage
costs
on a pro-rata basis over the duration of the voyage. As a result,
the operating results of voyages in progress at each reporting
date
are estimated and recognized pro-rata on a per day basis. Your
accounting treatment under these voyage charters does not appear
to
comply with the acceptable revenue and expense recognition methods
in
EITF 91-9. In this regard, method 5 would allow for allocation
of
revenues between reporting periods based on relative transit time
in
each reporting period (i.e. pro-rata basis), however expenses
should
be recognized as incurred. You should revise your accounting
treatment under this type of charter to apply one of the
acceptable
methods under EITF 91-9. If management believes that a revision
to
the historical financial statements would not be material, we
would
not object if management represents in the disclosure that a
change
to an acceptable method would not have a material impact on the
historical financial statements with an assertion that a revised
method in conformity with the guidance in EITF 91-9 will be used
in
future reporting periods. Pease revise accordingly.
Business, page 53
Customers, page 55
24. Please disclose the percentage of your business that comes
from
Petredec Ltd. If appropriate, please also consider adding a risk
factor in the risk factor section, to address the adverse impact
of
the loss of your principal customer(s). If any other customer
accounts for more than 10% of your revenues, please identify the
customer and give the percentage.
Management, page 73
25. Please consider whether the compensation you intend to pay in
the
next 12 months, if any, would be material to an investment
decision.
If so, please disclose it. Refer to Item 6.B.1. of Form 20-F.
Tax Considerations, page 81
26. Replace the language in the first paragraph stating investors
"should consult" with their own tax advisor with language
suggesting
or encouraging them to do so.
Underwriting, page 85
27. We note your disclosure on page 87 that there may be
electronic
distributions of your shares. If any member of the underwriting
syndicate will engage in any electronic offer, sale or
distribution
of the shares please advise us of that and supplementally confirm
that their procedures have been cleared with us. Any electronic
offer, sale of distribution should be reflected in this section.
If
you become aware of any members of the underwriting syndicate that
may engage in electronic offers, sales or distributions after you
respond to this comment, promptly supplement your response.
28. We note that your prospectus may be available in electronic
format on the Internet. Please tell us whether you or the
underwriters have any arrangements with a third party to host or
access your preliminary prospectus on the Internet. If so,
identify
the party and the website, describe the material terms of your
agreement and provide us with a copy of any written agreement.
Provide us also with copies of all information concerning your
company or prospectus that has appeared on their website.
29. Please advise us whether you will have a directed share
program
of any type. If so, include disclosure in the prospectus
describing
the program and the group it targets. Also, please provide us
with
all materials given to potential purchasers in the directed
offering.
Financial Statement
Basis of Presentation and General Information, Page F-7
30. We have reviewed the letter addressed to Mr. Craig C. Olinger,
Deputy Chief Accountant in the Division of Corporation Finance
with
your belief that no historical financial information should be
provided for the vessels purchased. Based on the information in
your letter, we will not object to your determination that the
assets
acquired do not constitute a business under Article 11 of
Regulation
S-X. However, the registration statement should include a
substantive and robust discussion of your determination that
assets
and not businesses were acquired. In this regard, please
significantly expand your disclosure to clearly explain why the
vessels purchased in 2004, and the vessels to be delivered in
2005,
do not constitute a business under Article 11-01(d) of Regulation
S-
X. Your disclosure should include, but not be limited to, the
following factors:
* historical financial information based on previous charter rates
and cost structure are of little relevance to investors;
* acquisitions of carriers that are subject to existing time
charters
must include assignments of the charters (with the charterers`
consents) to the purchaser;
* vessel purchasers are rarely shown any historical financial
statements relating to any purchased vessels and the company did
not
request nor did it receive or consider any historical financial
statements when agreeing to acquire the vessels; and
* vessel purchases usually involve significant changes in
components
such as the crew, maintenance and operation or management of the
vessel.
Since this list is not exhaustive, management should discuss any
additional factors that may support their position of the
acquisition
of the vessel as an asset rather than a business.
31. In addition, provide a thorough description of the company`s
business which should include a description of the elements of
revenues and expenses that reasonably may be anticipated and of
material factors affecting profitability, cash flows and the
shareholders` return on investment. Such disclosures should
include
a potential range of revenues and costs for vessels purchased
based
on a range of average daily contractual charter rates for the
related
vessel and determined based on the number of days you anticipate
the
vessel to be operational (i.e. not in dry docking or without
cargo).
Estimates of cost should be based on your anticipated costs to
crew,
maintain and operate each vessel.
Note 16: Subsequent Events, Page F-14
32. The last paragraph on page 41 describes that your acquisition
of
the Gas Amazon is subject to a number of conditions. Please
revise
Note 16 to include the nature of these conditions, including any
obligations that require action by StealthGas, Inc.
33. We note that two of the vessels you have entered into
agreements
to acquire will be subject to existing time charters. Please tell
us
your proposed accounting for these charters, including whether any
consideration has been given to separately record these charters
as
identifiable assets.
Signatures, page i
34. The registration statement must be signed by the controller or
principal accounting officer as well as the principal executive
officer, the principal financial officer, and by at least a
majority
of the board of directors of the registrant.
Other
35. We remind you that as stated in Securities Act Release No.
5180,
a registrant is "in registration" at least from the time an issuer
reaches an understanding with a broker-dealer to the period of 25-
40
days after effectiveness, during which dealers must deliver a
prospectus. Interviews conducted by the registrant`s principals
during this period may raise Section 5 concerns since they may be
selling material. Any selling material outside the statutory
prospectus violates the Securities Act unless a final prospectus
is
delivered prior to or simultaneously with that additional selling
material. Please acknowledge the staff`s position in your
response.
**********
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
Closing
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Theresa Messinese at (202) 551-3307 or
Michael
Fay (202) 551- 551-3812, if you have questions regarding comments
on
the financial statements and related matters. Please contact
Messeret Nega at (202) 551-3316 or me at (202) 551-3755 with any
other questions.
Sincerely,
Max A. Webb
Assistant Director
cc: Via Facsimile
Stephen P. Farrell, Esq.
Morgan, Lewis & Bockius LLP
(212) 309-6001
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Harry N. Vafias
StealthGas Inc.
May 24, 2005
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