1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS—Incorporated on August 1, 2008, under the Laws of Republic of the Marshall Islands, Gener8 Maritime, Inc. (formerly named General Maritime Corporation) and its wholly-owned subsidiaries (collectively, the “Company,” “We” or “Our”) provides international transportation services of seaborne crude oil and petroleum products. At December 31, 2017, the Company’s owned fleet consisted of 30 tankers, consisting of 21 Very Large Crude Carriers (“VLCCs”), six Suezmax tankers, one Aframax tankers and two Panamax tankers. The Company operates its business in one reportable segment, which is the transportation of international seaborne crude oil and petroleum products.

On June 30, 2015, the Company completed its Initial Public Offering (“IPO”) of 15,000,000 shares at $14.00 per share, which resulted in gross proceeds of $210.0 million. After underwriting commissions, the Company received net proceeds of $196.4 million. On July 17, 2015, following the exercise by the underwriters of the IPO of their over-allotment option to purchase 1,882,223 shares of common stock at the public offering price of $14.00 per share, the Company closed the issuance and sale of such shares, resulting in additional gross proceeds of $26.4 million and net proceeds of $24.6 million after underwriting commissions and other registration expenses. Additionally, the Company incurred $6.5 million of issuance costs.

On May 7, 2015, the Company consummated a merger (“2015 merger”) pursuant to an agreement between Gener8 Maritime Acquisition, Inc., a wholly owned subsidiary of the Company, Navig8 Crude Tankers, Inc. and the equity holders’ representatives named therein. As a result of the merger, Gener8 Maritime Subsidiary Inc. (formerly known as Navig8 Crude Tankers, Inc.) became a wholly owned subsidiary of the Company, and the Company’s name was changed from General Maritime Corporation to Gener8 Maritime, Inc. The Company followed the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Pursuant to this, the Company accounted for the 2015 merger as an asset acquisition.

The Company’s vessels are primarily available for employment in commercial pools, or for charter on a spot voyage or time charter basis.

The Company is party to certain commercial pooling arrangements. Commercial pools are designed to provide for effective chartering and commercial management of similar vessels that are combined into a single fleet to improve customer service, increase vessel utilization and capture cost efficiencies.

The Company employs all of its VLCC and Suezmax vessels in Navig8 Group commercial crude tanker pools including the VL8 Pool and the Suez8 Pool, respectively. In 2015, the Company’s VLCC, Suezmax and Aframax owning subsidiaries entered into pool agreements with the pool managers VL8 Pool Inc. and V8 Pool Inc., subsidiaries of Navig8 Limited. BASIS OF PRESENTATION—The financial statements of the Company have been prepared on the accrual basis of accounting and presented in United States Dollars (“USD” or “$”) which is the functional currency of the Company. A summary of the significant accounting policies followed in the preparation of the accompanying financial statements, which conform to Generally Accepted Accounting Principles (“GAAP”) in the United States of America, is presented below.

PRINCIPLES OF CONSOLIDATION—The accompanying consolidated financial statements include the accounts of Gener8 Maritime Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents—The Company considers highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less to be cash equivalents.

Allowance for doubtful accounts—The Company provides a reserve for freight and demurrage revenues based upon historical collection trends. The Company provides a general reserve based on aging of receivables, in addition to specific reserves on certain long-aged or doubtful receivables.

REVENUE AND EXPENSE RECOGNITION—Revenue and expense recognition policies for spot market voyage charters, time charters and pool revenues are as follows:

SPOT MARKET VOYAGE CHARTERS. Spot market voyage revenues are recognized on a pro rata basis based on the relative transit time in each period. The period over which voyage revenues are recognized commences at the time the vessel departs from its last discharge port and ends at the time the discharge of cargo at the next discharge port is completed. The Company does not begin recognizing revenue until a charter has been agreed to by the customer and the Company, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage. The Company does not recognize revenue when a vessel is off hire. Estimated losses on voyages are provided for in full at the time such losses become evident. Voyage expenses primarily include only those specific costs which are borne by the Company in connection with voyage charters which would otherwise have been borne by the charterer under time charter agreements. These expenses principally consist of fuel, canal and port charges which are generally recognized as incurred. Demurrage income represents payments by the charterer to the vessel owner when loading and discharging time exceed the stipulated time in the spot market voyage charter. Demurrage income is measured in accordance with the provisions of the respective charter agreements and the circumstances under which demurrage claims arise and is recognized on a pro rata basis over the length of the voyage to which it pertains. Direct vessel operating expenses are recognized when incurred. At December 31, 2017 and December 31, 2016, the Company has a reserve of approximately $1.4 million and $1.9 million, respectively, against its due from charterers balance associated with voyage revenues, including freight and demurrage revenues.

TIME CHARTERS. Revenue from time charters is recognized on a straight‑line basis over the term of the respective time charter agreement. Direct vessel operating expenses are recognized when incurred. Time charter agreements require, among others, that the vessels meet specified speed and bunker consumption standards. The Company believes that there may be unasserted claims relating to its time charters of $0 and $0.4 million as of December 31, 2017 and December 31, 2016, respectively, for which the Company has reduced its amounts due from charterers to the extent that there are amounts due from charterers with asserted or unasserted claims or as an accrued expense to the extent the claims exceed amounts due from such charterers.

POOL REVENUES. Pool revenue is determined in accordance with the terms specified within each pool agreement. In particular, the pool manager aggregates the revenues and expenses of all of the pool participants and distributes the net earnings to participants based on the following allocation key:

The pool points (vessel attributes such as cargo carrying capacity, fuel consumption and construction characteristics are taken into consideration); and

The number of days the vessel participated in the pool in the period.

Vessels are chartered into the pool and receive net time charter revenue in accordance with the pool agreement. The time charter revenue is variable depending upon the net result of the pool and the pool points and trading days for each vessel. The pool has the right to enter into voyage and time charters with external parties for which it receives freight and related revenue. It also incurs voyage costs such as bunkers, port costs and commissions. At the end of each period, the pool aggregates the revenue and expenses for all the vessels in the pool and distributes net revenue to the participants based on the results of the pool and the allocation key. The Company recognizes net pool revenue on a monthly basis, when the vessel has participated in a pool during the period and the amount of pool revenue for the month can be estimated reliably.

CHARTERHIRE EXPENSE—Charterhire expense is the amount the Company pays the vessel owner for time chartered-in vessel. The amount is usually for a fixed period of time at charter rates that are generally fixed, but may contain a variable component based on inflation, interest rates, profit sharing, or current market rates. The vessel’s owner is responsible for crewing and other vessel operating costs. Charterhire expense is recognized ratably over the charterhire period.

VESSELS, NET—Vessels, net is stated at cost, which was adjusted to fair value pursuant to fresh-start reporting when applicable, less accumulated depreciation. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from date of initial delivery from the shipyard. If regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life would be adjusted, if necessary, at the date such regulations are adopted. Depreciation is based on cost, which was adjusted to fair value pursuant to fresh-start reporting when applicable, less the estimated residual scrap value. The Company estimates residual value of its vessels to be $325/LWT (light weight ton). Depreciation expense of vessel assets for the years ended December 31, 2017, 2016 and 2015 totaled $97.6 million, $79.1 million and $41.6 million, respectively. Undepreciated cost of any asset component being replaced is written off as a component of Loss on disposal of vessels, net on the consolidated financial statements. Expenditures for routine maintenance and repairs are expensed as incurred. Vessel equipment is depreciated over the shorter of 5 years or the remaining life of the vessel.

VESSELS UNDER CONSTRUCTION— Vessels under construction represents the cost of acquiring contracts to build vessels, installments paid to shipyards, certain other payments made to third parties and interest costs incurred during the construction of vessels (until the vessel is substantially complete and ready for its intended use). During the years ended December 31, 2017, 2016 and 2015, the Company capitalized interest expense associated with vessels under construction of $3.2 million, $27.6 million and $35.2 million, respectively.

OTHER FIXED ASSETS, NET— Other fixed assets, net is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives:


DESCRIPTION		USEFUL LIVES
Furniture and fixtures		10 years
Vessel and computer equipment		5 years

REPLACEMENTS, RENEWALS AND BETTERMENTS— The Company capitalizes and depreciates the costs of significant replacements, renewals and betterments to its vessels over the shorter of the vessel’s remaining useful life or the life of the renewal or betterment. The amount capitalized is based on management’s judgment as to expenditures that extend a vessel’s useful life or increase the operational efficiency of a vessel. Costs that are not capitalized are written off as a component of direct vessel operating expense during the period incurred on the consolidated financial statements. Expenditures for routine maintenance and repairs are expensed as incurred.

IMPAIRMENT OF LONG‑LIVED ASSETS—The Company follows FASB ASC 360‑10, Accounting for the Impairment or Disposal of Long‑Lived Assets (“ASC 360-10”), which requires impairment losses to be recorded on long‑lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amount. In the evaluation of the future benefits of long‑lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long‑lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. The Company estimates fair value primarily through the use of third party valuations performed on an individual vessel basis. Various factors, including the use of trailing 10‑year industry average for each vessel class to forecast future charter rates and vessel operating costs, are included in this analysis.

As of December 31, 2017, and in accordance with ASC 360-10, the Company obtained third-party independent valuations to compare to the Company’s carrying value for its long-lived assets and determine if indicators of impairment for any vessel exist for the year ended December 31, 2017. Based on the analysis performed, it was determined that the carrying value of the Company’s fleet was higher than the independent third-party valuations of the Company’s fleet. Therefore, it was determined that indicators exist for potential long-lived assets impairment for the year ended December 31, 2017. In accordance with ASC 360-10 and based on the indicator analysis mentioned above, the Company prepared an analysis which estimated the future undiscounted cash flows for each vessel at December 31, 2017. Based on this analysis, which included consideration of the Company’s long-term intentions relative to its vessels, including its assessment of whether the Company would drydock and continue to operate its older vessels, it was determined that there was no impairment loss in 2017.

It was determined that there were no impairment loss for long-lived assets for the years ended December 31, 2016 and December 31, 2015.

DEFERRED DRYDOCK COSTS, NET—Approximately every thirty to sixty months, the Company’s vessels are required to be dry‑docked for major repairs and maintenance, which cannot be performed while the vessels are operating. The Company defers costs associated with the drydocks as they occur and amortizes these costs on a straight‑line basis over the estimated period between drydocks. Amortization of drydock costs is included in depreciation and amortization in the consolidated statements of operations. For the years ended December 31, 2017, 2016 and 2015, amortization was $5.7 million, $7.2 million and $5.1 million, respectively. Accumulated amortization as of December 31, 2017 and 2016 was $5.1 million and $13.9 million (net of $1.0 million write-off to assets held for sale related to the Gener8 Ulysses), respectively.

The Company only includes in deferred drydock costs those direct costs that are incurred as part of the drydock to meet regulatory requirements, or that are expenditures that add economic life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Direct costs include shipyard costs as well as the costs of placing the vessel in the shipyard. Expenditures for normal maintenance and repairs, whether incurred as part of the drydock or not, are expensed as incurred.

DEBT FINANCING COSTS, NET—Debt financing costs include bank fees and legal expenses associated with securing new loan facilities. These costs are amortized based upon the effective interest rate method over the life of the related debt, which is included in interest expense, net on the consolidated financial statements. Amortization for the years ended December 31, 2017, 2016, and 2015 was $14.9 million, $11.3 million and $3.3 million, respectively.

ACCOUNTING ESTIMATES—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 and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

STOCK-BASED COMPENSATION

STOCK OPTIONS—The Company calculates the fair value of stock options utilizing the Black-Scholes option pricing model. The parameters used include grant date, share price, exercise price, risk-free interest rate, expected option life, expected volatility (estimated based on historical share prices of similar listed companies) and expected dividends. The amount of share-based compensation recognized during a period is based on the fair value of the award at the time of issuance over the vesting period of the option.

WARRANTS—The Company calculates the fair value of warrants utilizing a valuation model to which Monte Carlo simulations and the Black-Scholes option pricing model are applied. The model projects future share prices based on a risk-neutral framework. The parameters used include inception date, share price, subscription price, lifetime, expected volatility (estimated based on historical share prices of similar listed companies) and expected dividends. The amount of share-based compensation recognized during a period is based on the fair value of the award at the time of issuance.

INTEREST EXPENSE, NET —The Company follows the provisions of FASB ASC 835-20-30, Capitalization of Interest, to capitalize interest cost as part of the historical cost of acquiring certain assets.

The amount of interest cost to be capitalized for qualifying assets is intended to be that portion of the interest cost incurred during the assets’ acquisition periods that theoretically could have been avoided (for example, by avoiding additional borrowings or by using the funds expended for the assets to repay existing borrowings) if expenditures for the assets had not been made. The notion of interest on borrowings as an avoidable cost does not require that the practicability of repaying individual borrowings be considered.

The amount capitalized in an accounting period is determined by applying the capitalization rate to the average amount of accumulated expenditures for the asset during the period. The capitalization rates used in an accounting period are based on the rates applicable to borrowings outstanding during the period. If an entity’s financing plans associate a specific new borrowing with a qualifying asset, the entity may use the rate on that borrowing as the capitalization rate to be applied to that portion of the average accumulated expenditures for the asset that does not exceed the amount of that borrowing. If average accumulated expenditures for the asset exceed the amounts of specific new borrowings associated with the asset, the capitalization rate to be applied to such excess is a weighted average of the rates applicable to other borrowings of the entity.

INTEREST RATE RISK MANAGEMENT— The Company is exposed to interest rate risk through its variable rate credit facilities. The Company uses interest rate swaps, under which the Company pays a fixed rate in exchange for receiving a LIBOR-based variable rate corresponding to the floating interest rate on the Company’s credit facilities, to achieve a fixed rate of interest on the hedged portion of its debt in order to increase the ability of the Company to forecast interest expense. The objective of these swaps is to help to protect the Company against changes in borrowing rates on the current credit facilities and any replacement floating rate LIBOR credit facility. Upon execution of the swaps, the Company designated the hedges as cash flow hedges of benchmark interest rate risk under FASB ASC 815, Derivatives and Hedging (“ASC 815”), and the Company has established effectiveness testing and measurement processes. In September 2017 the Company adopted Accounting Standards Update ("ASU") 2017-12 (“ASU 2017-12”) which amends ASC 815, and updated the cash flow designation to hedge the contractual LIBOR interest rate risk. Changes in the fair value of the interest rate swaps are recorded as assets or liabilities and, effective after adoption, all gains/losses are captured in a component of accumulated other comprehensive income (“AOCI”) until reclassified to interest expense, net on the consolidated financial statements when the hedged variable rate interest expenses are incurred. The Company elected to classify settlement payments as operating activities within the statement of cash flow. See Note 8, Financial Instruments and Note 19, RECENT ACCOUNTING PRONOUNCEMENTS, for recent accounting adoption and additional disclosures on the Company’s interest rate swaps.

(LOSS) / INCOME PER COMMON SHARE— Basic (loss) / income per share is computed by dividing net (loss) / income by the weighted-average number of common shares outstanding during the period. Diluted net (loss) / income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised using the treasury stock method.

FAIR VALUE OF FINANCIAL INSTRUMENTS—With the exception of the Company’s Senior Notes, the estimated fair values of the Company’s financial instruments approximate their individual carrying amounts as of December 31, 2017 and 2016 due to the short-term or variable-rate nature of the respective borrowings.

CONCENTRATION OF CREDIT RISK—Financial instruments that potentially subject the Company to concentrations of credit risk are amounts due from charterers. At December 31, 2017, the majority of the Company’s vessels are in the Navig8 Group commercial vessel pools (for further details, see Note 16, related party transactions). As a result, a significant portion of the Company’s shipping revenue were derived from these pools during this period. With respect to accounts receivable from spot voyage charters, the Company limits its credit risk by performing ongoing credit evaluations and, when deemed necessary, requires letters of credit, guarantees or collateral. During the years ended December 31, 2017, 2016 and 2015, the Company earned approximately 95.2%, 91.2% and 34.8%, respectively from Navig8 Group pools.

The Company maintains substantially all of its cash and cash equivalents with one financial institution. None of the Company’s cash balances are covered by insurance in the event of default by our financial institution.

FOREIGN CURRENCY TRANSACTIONS—Gains and losses on transactions denominated in foreign currencies are recorded within the consolidated statements of operations as components of other income (expense), net in the consolidated statements of operations.

TAXES— The Company is incorporated in the Republic of the Marshall Islands. Pursuant to the income tax laws of the Marshall Islands, the Company is not subject to Marshall Islands income tax. Additionally, pursuant to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Company is exempt from U.S. income tax on its income attributable to voyages that do not begin or end in the U.S. and has been so exempt since 2015, as a result of the Company’s IPO. The Company is generally not subject to state and local income taxation. The Company believes that, based on the ownership of its common shares in 2017, the Company is eligible for exemption from U.S. federal income taxation on its U.S. source shipping income for the 2017 taxable year pursuant to Internal Revenue Code Section 883 (“Section 883”), because the Company satisfies both requirements for exemption. First, the Company was organized in a “qualified foreign country” for purposes of Section 883 because it is organized in the Marshall Islands. Second, the Company’s stock is “primarily and regularly traded on an established securities market.” The Company’s sole class of stock has been listed on the New York Stock Exchange, which qualifies as an established securities market for purposes of Section 883, since June 30, 2015. The Company’s stock is deemed to be “regularly traded” for purposes of this test because its stock is traded on an established securities market in the U.S. and the stock is regularly quoted by dealers making a market in such stock. Furthermore, the Company should not be subject to a regulatory override of the listing and trading criteria, based on the Company’s analysis of the ownership of its common shares, because 5% shareholders of the Company did not own more than 50% of the Company’s common shares for more than half the days in the 2017 taxable year. Pursuant to various tax treaties, the Company’s shipping operations are not subject to foreign income taxes.