SecProbe.io

CORRESP
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filename1.htm

    d937597_corresp.htm

    November
12, 2008

    VIA
EDGAR

    Mr. Lyn
Shenk

    Branch
Chief

    Division
of Corporation Finance

    Securities
and Exchange Commission

    CF/AD5

    100 F
Street, N.E.

    Washington,
D.C. 20549

    Re:     Top
Ships Inc.

     File
No. 000-50859

    Form 20-F
for Fiscal Year Ended December 31, 2007

    Form 6-K
furnished on June 20, 2008

    Dear Mr.
Shenk:

    We
represent TOP SHIPS INC. (the “Company”).  This letter responds to
comments of the staff (the “Staff”) of the Securities and Exchange Commission
(the “SEC”) to the Annual Report on Form 20-F for the fiscal year ended December
31, 2007 (“Form 20-F”) filed May 21, 2008 and to the Form 6-K submitted to the
SEC on June 20, 2008 of the Company, as provided in a letter to Evangelos J.
Pistiolis, the Company’s President and Chief Executive Officer, dated October
10, 2008 (the “Comment Letter”).  This letter sets forth the Company’s
responses to the Staff’s comments.

    For your
convenience, the Staff’s comments have been restated in their entirety, with the
responses to each comment set forth immediately under the comment.

    Form 20-F For the Year Ended
December 31, 2007

    Item 5.  Operating
and Financial Review and Prospects

    A. Operating
Results

              Comment
      1.

              We
      note that a significant portion of your results of operations disclosure
      is dedicated to stating, in narrative text form, dollar and percentage
      changes in accounts. In addition, while you discuss certain factors to
      which changes are attributable, you do not quantify the impact of certain
      of these factors nor analyze the underlying business reasons for the
      changes. For example, you state that voyage expenses increased in 2007
      because i) your vessels operated 32.9% in the spot market in 2007,
      compared to 27.9% in the spot market in 2006 and ii) there was an increase
      in the number of times your vessels passed through
  canals.

              However
      you have not explained why canal passes increased or the amount by which
      additional canal passes increased voyage expenses. Furthermore, it is
      unclear why a portion of the increase in voyage expenses would be
      explained by the percentage of voyage days that your vessels operated in
      the spot market, when the aggregate number of days that your vessels
      operated in the spot market declined. In this regard, we note that the
      increase in voyage expense recognized in 2007 could have been more
      effectively described by a) presenting the table included in Note 18 to
      your financial statements and b) discussing the operating and business
      factors that contributed to the changes in each significant expense
      category shown in the table.

    ·       In general, we believe that the
MD&A disclosure in your annual report on Form 20-F could be improved and
made more user friendly and clear by:

    ·       Increasing the use of tables to
present the dollar and percentage changes in accounts, rather than including
such information in narrative text form;

    ·       Using tables to list, quantify and
sum all of the material individual factors to which changes in accounts are
attributable;

    ·       Refocusing the narrative text portion
of the disclosure on an analysis of the underlying business reasons and / or
industry and operating trends driving the individual factors in the tables
above;

    ·       Ensuring that all material factors
are quantified and analyzed;

    ·       Quantifying the effects of changes in
both price and volume on revenues and expenses categories, where appropriate
(for example quantifying the change in bunker expense that was related to price
increases as well as usage).

    Please
revise your MD&A disclosure in future filings accordingly.

              Response:

              Using
      the Staff’s recommendations as guidance, the Company will revise its
      MD&A disclosure in its future filings and submissions in order to make
      the presented information more user-friendly and
  clear.

    B. Liquidity and capital
resources, page 52

              Comment
      2.

              You
      state that you expect your working capital generation, in combination with
      your existing cash balances and recent equity offerings, will be
      sufficient to cover your liquidity requirements (page 53). However, we
      note the following with regard to your working capital, existing cash,
      liquidity and capital resources:

              ·

              You had a working capital
      deficit of approximately $51.1 million as of December 31,
      2007.

              ·

              Per the Form 6-K furnished on
      June 20, 2008, your working capital and available cash appear to have
      declined during the three month period ended March 31,
      2007.

          2

              ·

              There may be underlying
      limitations on your future borrowing capacity under certain of your credit
      facilities, given that many of your credit facilities include a covenant
      requiring that the aggregate market values of your mortgaged vessels equal
      or exceed the aggregate outstanding principal amounts under the facilities
      by a percentage in the range of 25% to
  45%.

              ·

              It appears that certain of the
      credit facilities entered into by your subsidiaries may limit the amount
      of income distributions that the subsidiaries can make to the parent
      company.

              ·

              The 15.5% discount that was
      given on your privately placed common shares issued in April of 2008, as
      well as the reverse stock split effected in March of 2008 in order to
      encourage greater interest in your shares by both the financial community
      and investors, may be indicators of challenges for your company to raise
      capital in the equity
markets.

              ·

              The equity capital raised by
      your company in April of 2008 was used to fund another 2008 loan, was used
      to prepay a bridge loan, and will be used to fund your diversification
      into the dry bulk sector and your “newbuilding”
      program.

    Given
that your current liabilities (including the current portion of long-term debt)
significantly exceeded your current assets as of December 31, 2007 and March 31,
2008, we believe that you should enhance your MD&A disclosure regarding your
short-term capital needs. We believe that your expanded disclosure should
include, but not limited to, a discussion of i) your current working capital
position, including the amount of debt due to be repaid in the next year, ii)
the specific sources of funding available to satisfy your short-term capital
needs particularly if spot rates do not recover to levels necessary to return
your company to profitability, iii) the aggregate borrowing capacity available
to your company, as well as any known terms related to such borrowing capacity,
and iv) any restrictions on your ability to satisfy the short-term liquidity
needs of your company or your subsidiaries through the distribution of income or
borrowings of other subsidiaries. Please provide your proposed
expanded disclosure as part of your response.

              Response:

              As
      per the Staff’s recommendation, the Company will expand its disclosure
      regarding short term capital needs. Specifically, the company proposes the
      following expanded disclosure in its discussions of liquidity and capital
      resources:

    Our
material capital requirements for the coming 12 months are as
follows:

    Total
current liabilities as at [year end]

    Interest
payment

    Newbuildings

    Operating
leases

          3

    Lease
payments under sale leasebacks

    The
capital currently available to cover the above capital requirements is as
follows:

    Funds as
at [year end]

    Cash
balances, excluding restricted cash

    Undrawn
amount from bank facility for newbuildings

    Subtotal

    We expect
to finance the remaining $____ of material capital requirements from our
operations.

    If funds
generated from operations do not suffice to cover the capital requirements, we
will consider one or more of the three following options for raising additional
capital in order to cover the shortfall: sale of assets, bank financing or
raising funds through sale of [debt or] equity.  When deciding which
of these options to pursue, we will take into consideration stock market
conditions, the interest rate environment, credit market conditions, vessel sale
and purchase market conditions and valuations as well as other factors that we
will consider important at that time.

    The
Company will also include a narrative of the prevailing conditions in each of
the aforementioned markets and our current working capital
position.  Furthermore, the Company will include a discussion of any
limitations on the use of cash, the transfer of funds between the different
companies of the group, or on the drawdown of bank facilities.

    Item 18
.  Financial Statements

    Notes to the consolidate
financial statements

    Note 4. Segment
Reporting

              Comment
      3.

              Per
      your disclosure, it appears that “Operating income (loss)” is the measure
      of segment profit or loss reviewed by your chief operating decision maker.
      However, we note that your ship-owning subsidiaries often borrow
      significant amounts of debt in order to fund the acquisition of vessels.
      In this regard, it appears that your recent entry into the dry bulk
      shipping sector may result in the issuance of a significant amount of debt
      in connection with the acquisition of dry bulk vessels. To the extent that
      you plan to finance the acquisition of dry bulk vessels using debt, please
      tell us whether each segment’s interest expense will be a measure
      regularly reviewed by your chief operating decision maker. If so, in
      future filings, please expand your footnote to reconcile the total of the
      reportable segments “Operating income
(loss)”

          4

    to
your consolidated income before income taxes, extraordinary items, and
discontinued operations, in accordance with paragraph 32(b) of SFAS No.
131.

              Response:

              As
      noted by the Staff, the Company recently entered the dry bulk
      market.  Currently, its dry bulk fleet consists of one vessel
      delivered to it in December of 2007 and four vessels delivered to it in
      the first and second quarters of 2008. The Company’s chief operating
      decision maker started reviewing interest expense by segment beginning in
      the second quarter of 2008 when interest expense for its dry bulk vessels
      became significant.

    As per
the Staff’s recommendation, the Company will expand the footnote to reconcile
the total of the reportable segments “Operating income (loss)” to “Net income
(loss)” in all future filings and submissions.

    Form 6-K furnished on June
20, 2008

    Appendix A – Specific Items
Affecting Net Income (Loss)

              Comment
      4.

              We
      note that you disclose the non-GAAP measure “Net income (loss) after
      specific items”. However, we do not believe that you have adequately
      explained why the presentation of this non-GAAP performance measure
      provides useful information to investors regarding your results of
      operations or your financial condition. In this regard, we do not believe
      that security analysts’ election to exclude certain items from “reported
      net income (loss)” for purposes of their published estimates of the
      company’s financial results adequately supports the disclosure of your
      non-GAAP measure. As such, please tell us and revise your disclosure to
      discuss the substantive reasons, specific to you, which demonstrate the
      usefulness of disregarding recurring items such as stock-based
      compensation, changes in the fair value of your financial instruments, and
      unexpected repairs when evaluating your performance. Alternatively, please
      discontinue the presentation of this non-GAAP measure. Refer to item
      10(e)(1)(i)(C) of regulation S-K for further
  guidance.

              Response:

              As
      per the Staff’s recommendation, the Company will discontinue the
      presentation of “Net income (loss) after specific items” which is a
      non-GAAP measure.

          5

    The
Company hereby acknowledges that (i) the Company is responsible for the adequacy
and accuracy of the disclosures in the filings; (ii) Staff comments or changes
to disclosures in response to Staff comments in the filings reviewed by the
Staff do not foreclose the SEC from taking any action with respect to the
filing; and (iii) the Company may not assert Staff comments as a defense in any
proceedings initiated by the SEC or any person under the federal securities laws
of the United States.

    Thank you
for your attention to the Company’s reports.  If you have any
additional comments or questions, please contact the undersigned at (212)
574-1223 or Anthony Tu-Sekine at (202) 737-8833.

              Very
      truly yours,

              Seward
      & Kissel llp

              By:

              /s/
      Gary J. Wolfe

              Gary
      J. Wolfe

              Cc:

              Jeffrey
      Sears, SEC

              Evangelos
      Pistiolis