21. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

As disclosed in Note 13, the Company is required to comply with various collateral maintenance and financial covenants, including covenants with respect to its maximum leverage ratio, minimum cash balance and an interest expense coverage ratio. While the Company was in compliance with all such covenants that were in effect as of December 31, 2017, due to the weaker tanker industry, low charter rates, and higher interest costs, management determined it was virtually certain as of the date the 2017 financial statements were available for issuance that the Company would not be in compliance with the interest expense coverage ratio covenant as of March 31, 2018. The Company has obtained short-term waivers from its lenders for the interest expense coverage ratio. The waivers for (i) the Sinosure Credit Facility and Korean Export Credit Facility cover the covenant test period ending on March 31, 2018, and (ii) the Refinancing Facility cover the same period, and automatically extend to include the subsequent test period ending on June 30, 2018, provided that the Merger is consummated.

As a result of the foregoing, management determined a material adjustment was required to correct the classification of the Company’s outstanding indebtedness under its senior secured credit facilities and related unamortized debt financing costs as current liabilities rather than noncurrent liabilities as of December 31, 2017 whereby the accompanying Consolidated Balance Sheet as of December 31, 2017 and related notes thereto have been restated to reclassify approximately $1 billion of the Company’s outstanding indebtedness, net of unamortized deferred financing costs, that were previously reported as long-term debt to long-term debt, current portion. The correction of this error had no effect on the Company’s Consolidated Statements of Operations, Comprehensive Loss, Shareholders’ Equity and Cash Flows for the year ended December 31, 2017. The effect of the correction of this error on total current and noncurrent liabilities as of December 31, 2017 is summarized in the following table (numbers in thousands):


	December 31,				December 31, 2017
	2017 (As Previously Reported)		Adjustments		2017 (As Restated)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	29,817	$	—	$	29,817
Long-term debt, current portion		120,336		1,047,151		1,167,487
Less unamortized discount and debt financing costs		—		(45,999)		(45,999)
Long-term debt, current portion less unamortized discount and debt financing costs		120,336		1,001,152		1,121,488
Derivative financial instruments - current		852		—		852
Total current liabilities		151,005		1,001,152		1,152,157
NONCURRENT LIABILITIES:
Long-term debt		1,241,490		(1,047,151)		194,339
Less unamortized discount and debt financing costs		(49,779)		45,999		(3,780)
Long-term debt less unamortized discount and debt financing costs		1,191,711		(1,001,152)		190,559
Other noncurrent liabilities		1,175		—		1,175
Total noncurrent liabilities		1,192,886		(1,001,152)		191,734
TOTAL LIABILITIES	$	1,343,891	$	—	$	1,343,891

In addition, as prescribed by ASC 205-40, Going Concern, the Company is required to assess its ability to continue as a going concern each reporting period and to provide related footnote disclosures in certain circumstances. In this regard, the Company’s operations, cash flows, liquidity, and its ability to comply with financial covenants related to its senior secured credit facilities have been negatively impacted by a weaker tanker industry, lower charter rates, and higher interest costs on its outstanding indebtedness whereby the Company incurred a net loss of $168.5 million for the year ended December 31, 2017 and had an accumulated deficit of $264.7 million as of December 31, 2017. Management considered the significance of these negative financial conditions in relation to the Company’s ability to meet its current and future obligations and determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. These accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. While management has obtained short-term waivers on its outstanding indebtedness that extend through the expected close date of the Merger Agreement discussed in Note 2 and has continued its efforts to improve the Company’s operations in the near term, there can be no assurance that the Company will be able to obtain further waivers if needed beyond the expected close date of Merger Agreement or cure noncompliance through improved operations and cash flows to meet its current and future obligations and, as such, the Company may be unable to continue its operations as a going concern.