PYXIS TANKERS INC., 20-F filed on 3/28/2017
Annual and Transition Report (foreign private issuer)
Document and Entity Information
12 Months Ended
Dec. 31, 2016
Document And Entity Information [Abstract]
 
Document Type
20-F 
Amendment Flag
false 
Document Period End Date
Dec. 31, 2016 
Document Fiscal Year Focus
2016 
Document Fiscal Period Focus
FY 
Trading Symbol
PXS 
Entity Registrant Name
Pyxis Tankers Inc. 
Entity Central Index Key
0001640043 
Current Fiscal Year End Date
--12-31 
Entity Well-known Seasoned Issuer
No 
Entity Voluntary Filers
No 
Entity Current Reporting Status
Yes 
Entity Filer Category
Non-accelerated Filer 
Entity Common Stock, Shares Outstanding
18,277,893 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 783 
$ 4,122 
Restricted cash, current portion
143 
143 
Inventories
1,173 
583 
Trade receivables, net
1,681 
455 
Prepayments and other assets
404 
725 
Total current assets
4,184 
6,028 
FIXED ASSETS, NET:
 
 
Vessels, net
121,341 
130,501 
Total fixed assets, net
121,341 
130,501 
OTHER NON-CURRENT ASSETS:
 
 
Restricted cash, net of current portion
4,857 
4,357 
Deferred charges, net
358 
836 
Total other non-current assets
5,215 
5,193 
Total assets
130,740 
141,722 
CURRENT LIABILITIES:
 
 
Current portion of long-term debt, net of deferred financing costs, current
6,813 
7,095 
Accounts payable
3,115 
1,103 
Due to related parties
1,953 
121 
Hire collected in advance
415 
2,129 
Accrued and other liabilities
574 
752 
Total current liabilities
12,870 
11,200 
NON-CURRENT LIABILITIES:
 
 
Long-term debt, net of current portion and deferred financing costs, non-current
66,617 
73,456 
Promissory note
2,500 
2,500 
Total non-current liabilities
69,117 
75,956 
COMMITMENTS AND CONTINGENCIES
   
   
STOCKHOLDERS’ EQUITY:
 
 
Preferred stock ($0.001 par value; 50,000,000 shares authorized; none issued)
   
   
Common stock ($0.001 par value; 450,000,000 shares authorized; 18,244,671 and 18,277,893 shares issued and outstanding at December 31, 2015 and 2016, respectively)
18 
18 
Additional paid-in capital
70,123 
70,123 
Accumulated deficit
(21,388)
(15,575)
Total stockholders’ equity
48,753 
54,566 
Total liabilities and stockholders’ equity
$ 130,740 
$ 141,722 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2016
Dec. 31, 2015
Statement Of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, share authorized
50,000,000 
50,000,000 
Preferred stock, share issued
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, share authorized
450,000,000 
450,000,000 
Common stock, share issued
18,277,893 
18,244,671 
Common stock, share outstanding
18,277,893 
18,244,671 
Consolidated Statements of Comprehensive Income / (Loss) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Statement [Abstract]
 
 
 
Voyage revenues
$ 30,710 
$ 33,170 
$ 27,760 
Expenses:
 
 
 
Voyage related costs and commissions
(6,611)
(4,725)
(10,030)
Vessel operating expenses
(12,871)
(13,188)
(11,064)
General and administrative expenses
(2,574)
(1,773)
(93)
Management fees, related parties
(631)
(577)
(611)
Management fees, other
(1,024)
(1,061)
(922)
Amortization of special survey costs
(236)
(174)
(203)
Depreciation
(5,768)
(5,710)
(5,446)
Vessel impairment charge
(3,998)
 
(16,930)
Operating (loss) / income
(3,003)
5,962 
(17,539)
Other income / (expenses):
 
 
 
Other income
 
74 
 
Interest and finance costs, net
(2,810)
(2,531)
(1,704)
Total other expenses, net
(2,810)
(2,457)
(1,704)
Net (loss) / income
$ (5,813)
$ 3,505 
$ (19,243)
(Loss) / earnings per common share, basic and diluted
$ (0.32)
$ 0.19 
$ (1.05)
Weighted average number of shares, basic
18,277,893 
18,244,671 
18,244,671 
Weighted average number of shares, diluted
18,277,893 
18,277,893 
18,244,671 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings / (Accumulated Deficit) [Member]
BALANCE at Dec. 31, 2013
$ 54,320 
 
$ 54,157 
$ 163 
Net (loss) income
(19,243)
 
 
(19,243)
Stockholder’s contributions
18,824 
 
18,824 
 
BALANCE at Dec. 31, 2014
53,901 
 
72,981 
(19,080)
Issuance of common stock
10 
18 
(8)
 
Issuance of common stock, shares
 
18,244,671 
 
 
Net (loss) income
3,505 
 
 
3,505 
Expenses for Merger
(1,745)
 
(1,745)
 
Stock compensation
143 
 
143 
 
Paid-in capital re-imbursement / distribution
(1,248)
 
(1,248)
 
BALANCE at Dec. 31, 2015
54,566 
18 
70,123 
(15,575)
BALANCE, shares at Dec. 31, 2015
 
18,244,671 
 
 
Issuance of common stock, shares
 
33,222 
 
 
Net (loss) income
(5,813)
 
 
(5,813)
BALANCE at Dec. 31, 2016
$ 48,753 
$ 18 
$ 70,123 
$ (21,388)
BALANCE, shares at Dec. 31, 2016
 
18,277,893 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Cash flows from operating activities:
 
 
 
Net (loss) / income
$ (5,813)
$ 3,505 
$ (19,243)
Adjustments to reconcile net (loss) / income to net cash from operating activities:
 
 
 
Depreciation
5,768 
5,710 
5,446 
Amortization of special survey costs
236 
174 
203 
Amortization of financing costs
164 
173 
136 
Vessel impairment charge
3,998 
 
16,930 
Stock compensation
 
143 
 
Changes in assets and liabilities:
 
 
 
Inventories
(590)
321 
(482)
Trade receivables
(1,226)
748 
(131)
Prepayments and other assets
321 
(107)
(217)
Special surveys cost
(364)
(888)
(469)
Accounts payable
2,012 
532 
328 
Due to related parties
1,832 
(10)
3,353 
Hire collected in advance
(1,714)
1,650 
(421)
Accrued and other liabilities
(178)
415 
(71)
Net cash provided by operating activities
4,446 
12,366 
5,362 
Cash flows from investing activities:
 
 
 
Advances for vessel acquisition
 
(18,766)
(6,923)
Additions to vessel cost
 
 
(233)
Net cash used in investing activities
 
(18,766)
(7,156)
Cash flows from financing activities:
 
 
 
Proceeds from long-term debt
 
21,000 
 
Repayment of long-term debt
(7,263)
(6,863)
(6,183)
Issuance of promissory note
 
2,500 
 
Issuance of common stock
 
10 
 
Change in restricted cash
(500)
(3,500)
 
Proceeds from equity contributions
 
 
6,424 
Paid-in capital re-imbursement / distribution
 
(1,248)
 
Payment of financing costs
(22)
(279)
 
Expenses for Merger
 
(1,745)
 
Net cash provided by / (used in) financing activities
(7,785)
9,875 
241 
Net (decrease) / increase in cash and cash equivalents
(3,339)
3,475 
(1,553)
Cash and cash equivalents at beginning of the year
4,122 
647 
2,200 
Cash and cash equivalents at end of the year
783 
4,122 
647 
SUPPLEMENTAL INFORMATION:
 
 
 
Cash paid for interest, net of amounts capitalized
$ 2,779 
$ 2,191 
$ 1,788 
Basis of Presentation and General Information
Basis of Presentation and General Information

1.

Basis of Presentation and General Information

PYXIS TANKERS INC. (“Pyxis”) was formed as a corporation under the laws of the Republic of Marshall Islands on March 23, 2015, for the purpose of acquiring from entities under common control a 100% ownership interest in six vessel-owning companies, SECONDONE CORP. (“Secondone”), THIRDONE CORP. (“Thirdone”), FOURTHONE CORP. (“Fourthone”), SIXTHONE CORP. (“Sixthone”), SEVENTHONE CORP. (“Seventhone”) and EIGHTHONE CORP. (“Eighthone” and collectively with the other vessel-owning companies, the “Vessel-owning companies”). All of the Vessel-owning companies were established under the laws of the Republic of Marshall Islands and are engaged in the marine transportation of liquid cargoes through the ownership and operation of tanker vessels, as listed below:

 

Vessel-owning

company

 

Incorporation

date

 

Vessel

 

DWT

 

Year

built

 

Acquisition

date

Secondone

 

05/23/2007

 

Northsea Alpha

 

8,615

 

2010

 

05/28/2010

Thirdone

 

05/23/2007

 

Northsea Beta

 

8,647

 

2010

 

05/25/2010

Fourthone

 

05/30/2007

 

Pyxis Malou

 

50,667

 

2009

 

02/16/2009

Sixthone

 

01/15/2010

 

Pyxis Delta

 

46,616

 

2006

 

03/04/2010

Seventhone

 

05/31/2011

 

Pyxis Theta

 

51,795

 

2013

 

09/16/2013

Eighthone

 

02/08/2013

 

Pyxis Epsilon

 

50,295

 

2015

 

01/14/2015

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Pyxis and its wholly-owned subsidiaries (collectively the “Company”) as discussed below, as of December 31, 2015 and 2016 and for the years ended December 31, 2014, 2015 and 2016.

All of the Company’s vessels are double-hulled and are engaged in the transportation of refined petroleum products and other liquid bulk items, such as, organic chemicals and vegetable oils. The vessels Northsea Alpha and Northsea Beta are smaller tanker sister ships and Pyxis Malou, Pyxis Delta, Pyxis Theta and Pyxis Epsilon, are medium-range tankers.

Prior to the consummation of the transactions discussed below, Mr. Valentios (“Eddie”) Valentis was the sole ultimate stockholder of Pyxis and the Vessel-owning companies, holding all of their issued and outstanding share capital through MARITIME INVESTORS CORP. (“Maritime Investors”). Maritime Investors owned directly 100% of Pyxis, Secondone and Thirdone, and owned indirectly (through the intermediate holding company PYXIS HOLDINGS INC. (“Holdings”)) 100% of Fourthone, Sixthone, Seventhone and Eighthone.

On March 25, 2015, Pyxis caused MARITIME TECHNOLOGIES CORP., a Delaware corporation (“Merger Sub”), to be formed as its wholly-owned subsidiary and to be a party to the agreement and plan of merger discussed below.

On April 23, 2015, Pyxis and Merger Sub entered into an agreement and plan of merger (the “Agreement and Plan of Merger”) (further amended on September 22, 2015) with among others, LOOKSMART LTD. (“LS”), a digital advertising solutions company listed on NASDAQ. Merger Sub served as the entity into which LS was merged in accordance with the Agreement and Plan of Merger (the “Merger”). Upon execution of the Agreement and Plan of Merger, Pyxis paid LS a cash consideration of $600.

Prior to the Merger, on October 26, 2015, Holdings and Maritime Investors transferred all of their shares in the Vessel-owning companies to Pyxis as a contribution in kind, at no consideration. Since there was no change in ultimate ownership or control of the business of the Vessel-owning companies, the transaction constituted a reorganization of companies under common control, and has been accounted for in a manner similar to a pooling of interests. Accordingly, upon the transfer of the assets and liabilities of the Vessel-owning companies, the financial statements of the Company are presented using combined historical carrying amounts of the assets and liabilities of the Vessel-owning companies and present the consolidated financial position and results of operations, as if Pyxis and its wholly-owned companies were consolidated for all periods presented.


1.

Basis of Presentation and General Information – Continued:

On October 28, 2015, in accordance with the terms of the Agreement and Plan of Merger, LS, after having divested full of its business and all of its assets and liabilities, merged with and into the Merger Sub, with Merger Sub surviving the Merger and continuing to be a wholly-owned subsidiary of Pyxis.

On October 28, 2015, the Merger was consummated and the Company’s shares commenced their listing on the NASDAQ Capital Markets thereafter.

Pyxis was both the legal and accounting acquirer of LS. The acquisition by Pyxis of LS was not an acquisition of an operating company as the business, assets and liabilities of LS were spun off prior to the Merger. As such, for accounting purposes, the Merger between Merger Sub and LS was accounted for as a capital transaction rather than as a business combination.

PYXIS MARITIME CORP. (“Maritime”), a corporation established under the laws of the Republic of the Marshall Islands, which is beneficially owned by Mr. Valentis, provides certain ship management services to the Vessel-owning companies (Note 3).

With effect from the delivery of each vessel, the crewing and technical management of the vessels were contracted to INTERNATIONAL TANKER MANAGEMENT LTD. (“ITM”) with permission from Maritime. ITM is an unrelated third party technical manager, represented by its branch based in Dubai, UAE. Each agreement with ITM will continue indefinitely until terminated by either party with three months’ prior notice.

In September 2010, Secondone and Thirdone entered into commercial management agreements with NORTH SEA TANKERS BV (NST”), an unrelated company established in the Netherlands. Pursuant to these agreements, NST provided chartering services to Northsea Alpha and Northsea Beta. On March 16, 2016 and on June 28, 2016, the Company sent notices of termination of the commercial management agreement with Thirdone and Secondone, respectively. In June and November 2016, Maritime assumed full commercial management of the Northsea Beta and the Northsea Alpha, respectively.

As of December 31, 2016, Mr. Valentis beneficially owned approximately 93% of the Company’s common stock.

Significant Accounting Policies
Significant Accounting Policies

2.

Significant Accounting Policies:

(a) Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP. The consolidated financial statements include the accounts of Pyxis and its wholly-owned subsidiaries (the Vessel-owning companies and Merger Sub). All intercompany balances and transactions have been eliminated upon consolidation.

Pyxis, as the holding company, determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity. Under Accounting Standards Codification (“ASC”) 810 “Consolidation” a voting interest entity is an entity in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make financial and operating decisions. Pyxis consolidates voting interest entities in which it owns all, or at least a majority (generally, greater than 50%), of the voting interest. Variable interest entities (“VIE”) are entities as defined under ASC 810-10, that in general either do not have equity investors with voting rights or that have equity investors that do not provide sufficient financial resources for the entity to support its activities. A controlling financial interest in a VIE is present when a company absorbs a majority of an entity’s expected losses, receives a majority of an entity’s expected residual returns, or both. The company with a controlling financial interest, known as the primary beneficiary, is required to consolidate the VIE. Pyxis evaluates all arrangements that may include a variable interest in an entity to determine if it may be the primary beneficiary, and would be required to include assets, liabilities and operations of a VIE in its consolidated financial statements. As of December 31, 2016 no such interest existed.

(b) Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP 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 reported period. Actual results could differ from these estimates.

(c) Comprehensive Income / (Loss): The Company follows the provisions of ASC 220 “Comprehensive Income”, which requires separate presentation of certain transactions which are recorded directly as components of equity. The Company had no transactions which affect comprehensive income / (loss) during the years ended December 31, 2014, 2015 and 2016 and, accordingly, comprehensive income / (loss) was equal to net income / (loss).


2.Significant Accounting Policies – Continued:

(d) Foreign Currency Translation: Since the Company operates in international shipping markets and, therefore, primarily transacts business in U.S. dollars, its functional currency is the U.S. dollar. The Company’s accounting records are maintained in U.S. dollars. Transactions involving other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies, are translated into U.S. dollars at the year-end exchange rates. Resulting gains or losses are included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income / (loss). All amounts in the financial statements are presented in thousand U.S. dollars rounded at the nearest thousand.

(e) Commitments and Contingencies: Provisions are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each balance sheet date.

(f) Insurance Claims Receivable: The Company records insurance claim recoveries for insured losses incurred on damage to fixed assets and for insured crew medical expenses. Insurance claim recoveries are recorded, net of any deductible amounts, at the time the Company’s fixed assets suffer insured damages or when crew medical expenses are incurred, recovery is probable under the related insurance policies and the claim is not subject to litigation.

(g) Concentration of Credit Risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents, consisting mostly of deposits, with qualified financial institutions with high creditworthiness. The Company performs periodic evaluations of the relative creditworthiness of those financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its accounts receivable.

(h) Cash and Cash Equivalents and Restricted Cash: The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents. Restricted cash is associated with pledged retention accounts in connection with the loan repayments and minimum liquidity requirements under the loan agreements discussed in Note 7 and is presented separately in the accompanying consolidated balance sheets.

In order to align the Restricted cash, current portion and the Restricted cash, net of current portion included under the accompanying consolidated balance sheets with the minimum liquidity requirements pursuant to the Company’s debt agreements, the Company adjusted the balance of the sum of both line items to include the balance under its retention accounts in the overall minimum liquidity requirements discussed in Note 7. In this context, as of December 31, 2015, Cash and cash equivalents increased and Restricted cash, net of current portion decreased by $143. This reclassification has no impact on the Company’s results of operations and net assets for any period.

(i) Income Taxation: Under the laws of the Republic of the Marshall Islands, the country of incorporation of the Vessel-owning companies, and/or the vessels’ registration, the Vessel-owning companies are not liable for any income tax on their income derived from shipping operations. Instead, a tax is levied depending on the countries where the vessels trade based on their tonnage, which is included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income / (loss). The Vessel-owning companies with vessels that have called on the United States during the relevant year of operation are obliged to file tax returns with the Internal Revenue Service. The applicable tax is 50% of 4% of U.S. related gross transportation income unless an exemption applies. The Company believes that based on current legislation the relevant Vessel-owning companies are entitled to an exemption because they satisfy the relevant requirements, namely that (i) the related Vessel-owning companies are incorporated in a jurisdiction granting an equivalent exemption to U.S. corporations and (ii) over 50% of the ultimate stockholders of the vessel-owning companies are residents of a country granting an equivalent exemption to U.S. persons.

(j) Inventories: Inventories consist of lubricants and bunkers on board the vessels, which are stated at the lower of cost or market value. Cost is determined by the first-in, first-out (“FIFO”) method.


2.Significant Accounting Policies – Continued:

(k) Trade Receivables, net: The amount shown as receivables, at each balance sheet date, includes receivables from charterers for hire, freight and demurrage billings, net of a provision for doubtful accounts, if any. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for overdue accounts receivable. The allowance for doubtful accounts at December 31, 2015 and 2016 was $nil and $100, respectively.

(l) Advances for Vessels under Construction and Related Costs: This represents amounts expended by the Company in accordance with the terms of the construction contracts for its vessels, as well as other expenses incurred directly or under a management agreement with a related party in connection with onsite supervision. The carrying value of vessels under construction represents the accumulated costs at the balance sheet date. Costs components include payments for yard installments and variation orders, commissions to a related party, construction supervision, equipment, spare parts, capitalized interest, costs related to first time mobilization and commissioning costs.

(m) Vessels, Net: Vessels are stated at cost, which consists of the contract price and any material expenses incurred in connection with the acquisition (initial repairs, improvements, delivery expenses and other expenditures to prepare the vessel for her initial voyage, as well as professional fees directly associated with the vessel acquisition). Subsequent expenditures for major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels; otherwise, these amounts are charged to expenses as incurred. Amounts paid to sellers of vessels as advances and for other costs related with the acquisition of a vessel are included in Advances for vessel acquisitions in the accompanying consolidated balance sheets until the date the vessel is delivered to the Company, when the amounts are transferred to Vessels, net.

The cost of each of the Company’s vessels is depreciated from the date of acquisition on a straight-line basis over the vessels’ remaining estimated economic useful life, after considering the estimated residual value. A vessel’s residual value is equal to the product of its lightweight tonnage and estimated scrap rate of $0.300 per ton. The Company estimates the useful life of the Company’s vessels to be 25 years from the date of initial delivery from the shipyard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations are adopted.

(n) Impairment of Long Lived Assets: The Company reviews its long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

In developing estimates of future undiscounted cash flows, the Company makes assumptions and estimates about the vessels’ future performance, with the significant assumptions relating to time charter equivalent rates by vessel type, vessels’ operating expenses, vessels’ capital expenditures, vessels’ residual value, fleet utilization and the estimated remaining useful life of each vessel. The assumptions used to develop estimates of future undiscounted cash flows are based on historical trends as well as future expectations.

To the extent impairment indicators are present, the projected net operating cash flows are determined by considering the charter revenues from existing time charters for the fixed fleet days and an estimated daily time charter rate for the unfixed days (based on the most recent seven year historical average rates, where available, over the remaining estimated useful life of the vessels), expected outflows for vessels’ operating expenses assuming an annual inflation rate of 2.00% (in line with the world Consumer Price Index), planned dry-docking and special survey expenditures, management fees expenditures which are adjusted every year, pursuant to the Company’s existing group management agreement, and fleet utilization of 98.6% (excluding the scheduled off-hire days for planned dry-dockings and vessel surveys which are determined separately ranging from five days for intermediate and up to 20 days for special surveys depending on the size and age of each vessel) based on historical experience. The residual value used in the impairment test is estimated to be approximately $0.300 per lightweight ton in accordance with the vessels’ depreciation policy.


2.Significant Accounting Policies – Continued:

(n) Impairment of Long Lived Assets – Continued:

As of December 31, 2015, the Company obtained market valuations for all its vessels from reputable marine appraisers, each of which exceeded the carrying value of the respective vessel, except for the Northsea Alpha and the Northsea Beta, for which the market values were $330 and $201 lower than their net book values as of December 31, 2015, respectively. In this respect, the Company performed an impairment analysis to estimate the future undiscounted cash flows for each of these vessels. The analysis resulted in higher undiscounted cash flows than each vessel’s carrying value as of December 31, 2015 and accordingly, no adjustment to the vessels’ carrying values was required.

As of December 31, 2016, the Company obtained market valuations for all its vessels from reputable marine appraisers, all of which were lower than the carrying values of the respective vessels, except for the Pyxis Epsilon. More specifically, the market values of the Pyxis Malou, the Pyxis Delta, the Pyxis Theta, the Northsea Alpha and the Northsea Beta were $2,694, $2,524, $6,176, $1,769 and $1,623 lower than their carrying values as of December 31, 2016, respectively. In this respect, the Company performed an impairment analysis to estimate the future undiscounted cash flows for each of these tankers. The analysis resulted in higher undiscounted cash flows than each vessel’s carrying value as of December 31, 2016, except for the Northsea Alpha and the Northsea Beta for which a total Vessel impairment charge of $3,998 was recorded as of December 31, 2016, of which $3,392 was charged against Vessels, net and $606 against Deferred charges, net (Notes 5, 6 and 10).

(o) Accounting for Special Survey and Dry-docking Costs: The Company follows the deferral method of accounting for special survey and dry-docking costs, whereby actual costs incurred at the yard and parts used in the dry-docking or special survey, are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due. Costs deferred are limited to actual costs incurred at the shipyard and costs incurred in the dry-docking or special survey. If a dry-dock or a survey is performed prior to the scheduled date, the remaining unamortized balances of the previous dry-dock and survey are immediately written off. Unamortized dry-dock and survey balances of vessels that are sold are written off and included in the calculation of the resulting gain or loss in the period of the vessel’s sale.

(p) Financing Costs: Costs associated with new loans or refinancing of existing loans, including fees paid to lenders or required to be paid to third parties on the lender’s behalf for obtaining new loans or refinancing existing loans, are recorded as a direct deduction from the carrying amount of the debt liability. Such costs are deferred and amortized to Interest and finance costs in the consolidated statements of comprehensive income / (loss) during the life of the related debt using the effective interest method. Unamortized costs relating to loans repaid or refinanced, meeting the criteria of debt extinguishment, are expensed in the period the repayment or refinancing is made. Commitment fees relating to undrawn loan principal are expensed as incurred.

(q) Revenue and Related Expenses: The Company generates its revenues from charterers for the charter hire of its vessels. Vessels are chartered using primarily either spot charters, where a contract is made in the spot market for the use of a vessel for a specific voyage for a specified charter rate, or time charters, where a contract is entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate. If a charter agreement exists and collection of the related revenue is reasonably assured, revenue is recognized as it is earned ratably during the duration of the period of each spot or time charter. Revenues from time charter agreements providing for varying daily rates are accounted for as operating leases and thus are recognized on a straight line basis over the term of the time charter as service is performed. Revenue under spot charters is not recognized until a charter has been agreed, even if the vessel has discharged its previous cargo and is proceeding to an anticipated port of loading. Demurrage income represents payments by a charterer to a vessel owner when loading or discharging time exceeds the stipulated time in the spot charter and is recognized ratably as earned during the related spot charter’s duration period. Hire collected in advance includes cash received prior to the balance sheet date and is related to revenue earned after such date.

Voyage expenses, primarily consisting of commissions, port, canal and bunker expenses that are unique to a particular charter, are paid for by the charterer under time charter arrangements or by the Company under spot charter arrangements, except for commissions, which are always paid for by the Company, regardless of the charter type. All voyage and vessel operating expenses are expensed as incurred, except for commissions. Commissions are deferred and amortized over the related voyage period in a charter to the extent revenue has been deferred since commissions are earned as the Company’s revenues are earned.

2.

Significant Accounting Policies – Continued:

(q) Revenue and Related Expenses – Continued:

Revenues for the years ended December 31, 2014, 2015 and 2016, deriving from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues), were as follows:

 

Charterer

 

2014

 

2015

 

2016

A

 

7%

 

18%

 

B

 

21%

 

17%

 

12%

C

 

 

17%

 

20%

D

 

 

 

14%

E

 

 

 

10%

 

 

28%

 

52%

 

56%

 

(r) Fair Value Measurements: The Company follows the provisions of Accounting Standard Update (“ASU”) 2015-07 “Fair Value Measurements and Disclosures”, Topic 820, which defines and provides guidance as to the measurement of fair value. This standard creates a hierarchy of measurement and indicates that, when possible, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets and the lowest priority (Level 3) to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy (Note 10).

(s) Segment Reporting: The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e., spot or time charters. The Company does not use discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide (subject to certain agreed exclusions) and, as a result, the disclosure of geographic information is impracticable. As a result, management, reviews operating results solely by revenue per day and operating results of the fleet and thus the Company has determined that it operates under one reportable segment.

(t) Earnings / (loss) per Share: Basic earnings / (loss) per share are computed by dividing net income attributable to common equity holders by the weighted average number of shares of common stock outstanding. The computation of diluted earnings / (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and is performed using the treasury stock method.

(u) Stock Compensation: The Company has a stock based incentive plan that covers directors and officers of the Company and its affiliates and its consultants and service providers. Awards granted are valued at fair value and compensation cost is recognized on a straight line basis, net of estimated forfeitures, over the requisite service period of each award. The fair value of restricted stock awarded to directors and officers of the Company at the grant date is equal to the closing stock price on that date and is amortized over the applicable vesting period using the straight-line method. The fair value of restricted stock awarded to non-employees is equal to the closing stock price at the grant date adjusted by the closing stock price at each reporting date and is amortized over the applicable performance period.


2.Significant Accounting Policies – Continued:

(v) Going Concern: The Company performs on a regular basis cash flow projections to evaluate whether it will be in a position to cover its liquidity needs for the next 12 month period and in compliance with the financial and security collateral cover ratio covenants under its existing debt agreements. In developing estimates of future cash flows, the Company makes assumptions about the vessels’ future performance, with significant assumptions relating to time charter equivalent rates by vessel type, vessels’ operating expenses, vessels’ capital expenditures, fleet utilization, the Company’s management fees and general and administrative expenses, and cash flow requirements for debt servicing. The assumptions used to develop estimates of future cash flows are based on historical trends as well as future expectations.

As of the filing date of the financial statements, the Company believes that it will be in a position to cover its liquidity needs for the next 12 month period and in compliance with the financial and security collateral cover ratio covenants under its existing debt agreements as discussed in Note 7.

(w) New Accounting Pronouncements:

i) Revenue from Contracts with Customers: In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) (collectively, the “Boards”) jointly issued a standard that will supersede virtually all of the existing revenue recognition guidance in U.S. GAAP and International Financial Reporting Standards (“IFRS”). The standard establishes a five-step model that will apply to revenue earned from a contract with a customer (with limited exceptions), regardless of the type of revenue transaction or the industry. The standard’s requirements will also apply to the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., sales of property, plant and equipment or intangibles). Extensive disclosures will be required, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods, and key judgments and estimates.

The guidance in ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this ASU supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts”. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. In August 2015, the FASB deferred by one year the effective date of the new guidance. The new revenue recognition standard will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Nonpublic entities will be required to adopt the standard for annual reporting periods beginning after 15 December 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Public and nonpublic entities will be permitted to adopt the standard as early as the original public entity effective date (i.e., annual reporting periods beginning after December 15, 2016 and interim periods therein). In 2016, the FASB issued two updates with respect to Topic 606: ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” and ASU 2016-12, “Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients.” The amendments in these updates do not change the core principle of the guidance in Topic 606. The amendments in update 2016-10 clarify the following two aspects of Topic 606: i) identifying performance obligations and ii) licensing implementation guidance. The amendments in update 2016-12 similarly affect only certain narrow aspects of Topic 606; namely, i) “Assessing the Collectability Criterion and Accounting for Contracts That Do Not Meet the Criteria for Step 1,” ii) “Presentation of Sales Taxes and Other Similar Taxes Collected from Customers,” iii) “Noncash Consideration,” iv) “Contract Modifications at Transition,” v) “Completed Contracts at Transition,” and vi) “Technical Correction.” The effective date and transition requirements for the amendments in these updates are the same as the effective date and transition requirements in Topic 606. Early adoption prior to that date will not be permitted. The Company is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.


2.Significant Accounting Policies – Continued:

(w) New accounting pronouncements are discussed below – Continued:

ii) Inventories: In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 simplifies the subsequent measurement of inventory by replacing today’s lower of cost or market test with a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method (“RIM”). Entities that use LIFO or RIM will continue to use existing impairment models. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance must be applied prospectively after the date of adoption. The Company believes that the implementation of this update will not have any material impact on its financial statements.

iii) Leases: In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which provides new guidance related to accounting for leases and supersedes existing U.S. GAAP on lease accounting. The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, unless the lease is a short term lease. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

iv) Stock Compensation: In March 2016, the FASB issued the ASU No 2016-09, Stock Compensation, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year. The Company believes that the implementation of this update will not have any material impact on its financial statements.

v) Classification of Certain Cash Payments and Cash Receipts: In August 2016, the FASB issued the ASU 2016-15 – classification of certain cash payments and cash receipts. This ASU addresses certain cash flow issues with the objective of reducing the existing diversity in practice. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. It must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable, if retrospective application would be impracticable. The Company believes that the implementation of this update will not have any material impact on its financial statements and has not elected early adoption.

vi) Restricted Cash: In November 2016 the FASB issued the ASU 2016-18 – Restricted cash. This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. The implementation of this update affects disclosures only and has no impact on the Company’s balance sheet and statement of comprehensive income / (loss). The Company has not elected early adoption.


2.Significant Accounting Policies – Continued:

(w) New accounting pronouncements are discussed below – Continued:

(vii) Business Combinations: In January 2017, FASB issued the ASU 2017-01 Business Combinations to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processes that generate outputs) constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. The amendments of this ASU should be applied prospectively on or after the effective date. Early adoption is permitted, including adoption in an interim period 1) for transactions for which the acquisition date occurs before the issuance date or effective date of the ASU, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and 2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. Company is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

Inventories
Inventories

4.

Inventories:

The amounts in the accompanying consolidated balance sheets as at December 31, 2015 and 2016 are analyzed as follows:

 

 

 

2015

 

2016

Lubricants

 

$583

 

$479

Bunkers

 

 

694

Total

 

$583

 

$1,173

 

Vessels, net (Vessels [Member])
Vessels, net

5.

Vessels, net:

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

 

 

 

Vessel

 

Accumulated

 

Net Book

 

 

Cost

 

Depreciation

 

Value

Balance January 1, 2014

 

$143,505

 

($18,045)

 

$125,460

Additions to vessel cost

 

233

 

 

233

Depreciation

 

 

(5,446)

 

(5,446)

Vessel impairment charge

 

(28,443)

 

11,913

 

(16,530)

Balance December 31, 2014

 

115,295

 

(11,578)

 

103,717

Depreciation

 

 

(5,710)

 

(5,710)

Transfer from advances for vessel acquisition

 

32,494

 

 

32,494

Balance December 31, 2015

 

147,789

 

(17,288)

 

130,501

Depreciation

 

 

(5,768)

 

(5,768)

Vessel impairment charge

 

(9,729)

 

6,337

 

(3,392)

Balance December 31, 2016

 

$138,060

 

($16,719)

 

$121,341

 

Eighthone took delivery of the Pyxis Epsilon on January 14, 2015. As a result, $31,623 of advances paid to the shipyard together with $871 of capitalized costs (out of which $18,743 and $23, respectively, were incurred during the year ended December 31, 2015), were transferred from Advances for vessel acquisition to Vessels, net.

As of December 31, 2016, the Company reviewed the carrying amount in connection with the estimated recoverable amount for each of its vessels. This review indicated that such carrying amount was not fully recoverable for the Company’s vessels Northsea Alpha and Northsea Beta. Consequently the carrying value of these vessels was written down resulting in a total impairment charge of $3,998, of which $3,392 was charged against Vessels, net, based on level 2 inputs of the fair value hierarchy, as discussed in Notes 2 and 10.

All of the Company’s vessels have been pledged as collateral to secure the bank loans discussed in Note 7.

Deferred Charges
Deferred Charges

6.

Deferred Charges:

The movement in Deferred charges in the accompanying consolidated balance sheets are as follows:

 

 

 

Special Survey

 

 

Costs

Balance, January 1, 2014

 

$256

Additions

 

469

Amortization

 

(203)

Impairment charge

 

(400)

Balance, December 31, 2014

 

122

Additions

 

888

Amortization

 

(174)

Balance, December 31, 2015

 

836

Additions

 

364

Amortization

 

(236)

Impairment charge

 

(606)

Balance, December 31, 2016

 

$358

 

The amortization of the special survey costs is separately reflected in the accompanying consolidated statements of comprehensive income / (loss).

The impairment charge of $606 relates to the impairments of the Northsea Alpha and the Northsea Beta as of December 31, 2016, discussed in Notes 2 and 10.

Long-Term Debt
Long-Term Debt

7.

Long-term Debt:

The amounts shown in the accompanying consolidated balance sheets at December 31, 2015 and 2016 are analyzed as follows:

 

Vessel (Borrower)

2015

 

2016

(a) Northsea Alpha (Secondone)

$5,268

 

$4,808

(a) Northsea Beta (Thirdone)

5,268

 

4,808

(b) Pyxis Malou (Fourthone)

22,490

 

20,350

(c) Pyxis Delta (Sixthone)

9,787

 

8,437

(c) Pyxis Theta (Seventhone)

18,481

 

17,228

(d) Pyxis Epsilon (Eighthone)

19,800

 

18,200

Total

$81,094

 

$73,831

 

 

 

  

Current portion

$7,263

 

$6,963

Less: Current portion of deferred financing costs

(168)

 

(150)

Current portion of long-term debt, net of deferred financing costs, current

$7,095

 

$6,813

 

  

 

  

Long-term portion

$73,831

 

$66,868

Less: Non-current portion of deferred financing costs

(375)

 

(251)

Long-term debt, net of current portion and deferred financing costs, non-current

$73,456

 

$66,617

 


7.

Long-term Debt – Continued:

(a)

On September 26, 2007, Secondone and Thirdone jointly entered into a loan agreement with a financial institution for an amount of up to $24,560, in order to partly finance the acquisition cost of the vessels Northsea Alpha and Northsea Beta.

Each of Secondone’s and Thirdone’s outstanding loan balance at December 31, 2016 amounting to $4,808, is repayable in seven semiannual installments of $230 each, the first falling due in May 2017, and the last installment accompanied by a balloon payment of $3,198 falling due in May 2020.

The main terms and conditions of the loan agreement dated September 26, 2007, as subsequently amended, are as follows:

 

In addition to a first priority mortgage over the Northsea Alpha and the Northsea Beta, the loan is secured by a second priority mortgage over the Pyxis Malou.

 

 

The loan bears interest at LIBOR, plus a margin of 1.75% per annum.

Covenants:

 

The Company undertakes to maintain as of December 31, 2015 and March 31, 2016, minimum liquidity at the higher of $4,500 or $750 per vessel in its fleet. On each of June 30, September 30, December 31 and March 31 of each year thereafter, the Company undertakes to maintain minimum cash deposits at the higher of $5,000 or $750 per vessel in its fleet, of which $2,500 shall be freely available and unencumbered cash under deposit by the Company. At any time that the number of vessels in the fleet exceeds ten, the minimum cash requirement shall be reduced to an amount of $500, for each vessel in the fleet that exceeds ten.

 

 

The minimum security collateral cover (“MSC”) is to at least 133% of the respective outstanding loan balance.

(b)

Based on a loan agreement concluded on December 12, 2008, Fourthone borrowed $41,600 in February 2009 in order to partly finance the acquisition cost of the Pyxis Malou.

The outstanding balance of the loan at December 31, 2016 of $20,350, is repayable in seven semiannual installments of $1,070 each, the first falling due in February 2017, plus a balloon payment of $12,860 falling due in May 2020.

The main terms and conditions of the loan agreement dated December 12, 2008, as subsequently amended, are as follows:

 

In addition to a first priority mortgage over the Pyxis Malou, the loan is secured by a second priority mortgage over the Northsea Alpha and the Northsea Beta.

 

 

The loan bears interest at LIBOR, plus a margin of 1.75% per annum.

Covenants:

 

The Company undertakes to maintain on each of December 31, 2015 and March 31, 2016, minimum liquidity at the higher of $4,500 or $750 per vessel in its fleet. On each of June 30, September 30, December 31 and March 31 of each year thereafter, the Company undertakes to maintain minimum cash deposits at the higher of $5,000 or $750 per vessel in its fleet, of which $2,500 shall be freely available and unencumbered cash under deposit by the Company. At any time that the number of vessels in the fleet exceeds ten, the minimum cash requirement shall be reduced to an amount of $500, for each vessel in the fleet that exceeds ten.

 

 

MSC is to be at least 125% of the respective outstanding loan balance.


7.

Long-term Debt – Continued:

(c)

On October 12, 2012, Sixthone and Seventhone concluded as joint and several borrowers a loan agreement with a financial institution in order to partly finance the acquisition and construction cost of the Pyxis Delta and the Pyxis Theta, respectively. In February 2013, Sixthone drew down an amount of $13,500, while in September 2013, Seventhone drew down an amount of $21,300 (“Tranche A” and “Tranche B”, respectively). On September 29, 2016, the Company agreed with the lender of Sixthone to extend the maturity of Tranche A from May 2017 to September 2018, under the same amortization schedule and applicable margin.

Following the supplemental agreement dated September 29, 2016, the outstanding balance of the loan under Tranche A at December 31, 2016 of $8,437, is repayable in seven quarterly installments of $338 each, the first falling due in February 2017, and the last installment accompanied by a balloon payment of $6,071 falling due in September 2018. In addition, the outstanding balance of the loan under Tranche B at December 31, 2016 of $17,228, is repayable in seven quarterly installments of $313 each, the first falling due in March 2017, and the last installment accompanied by a balloon payment of $15,037 falling due in September 2018.

The main terms and conditions of the loan agreement dated October 12, 2012, as subsequently amended, are as follows:

 

 

The loan bears interest at LIBOR, plus a margin of 3.35% per annum.

Covenants:

 

The Company undertakes to maintain minimum deposits with the bank of $1,000 at all times.

 

 

The ratio of the Company’s total liabilities to market value adjusted total assets is not to exceed 65%. This requirement is only applicable in order to assess whether the two Vessel-owning companies are entitled to distribute dividends to Pyxis. As of December 31, 2016, such ratio was 68%, or 3% higher than the required threshold. Until the Company cures such non-compliance, neither Sixthone nor Seventhone will be permitted to make dividend distributions.

 

 

MSC is to be at least 130% of the respective outstanding loan balance.

(d)

Based on a loan agreement concluded on January 12, 2015, Eighthone borrowed $21,000 on the same date in order to partly finance the construction cost of the Pyxis Epsilon.

The outstanding balance of the loan at December 31, 2016 of $18,200, is repayable in one quarterly installment of $400 due in January 2017, followed by 20 quarterly installments of $300 each, the last together with a balloon payment of $11,800 falling due in January 2022.

The main terms and conditions of the loan agreement dated January 12, 2015, as subsequently amended, are as follows:

 

 

The loan bears interest at LIBOR, plus a margin of 2.90% per annum.


7.

Long-term Debt – Continued:

Covenants:

 

The Company undertakes to maintain minimum deposits with the bank of $750 at all times.

 

 

The Company undertakes to maintain minimum liquidity of at least the higher of: i) $750 multiplied by the number of vessels owned by the Company and ii) during the Company’s first two financial quarters following its listing on NASDAQ, debt service for the following three months and thereafter, debt service for the following six months

 

 

The ratio of the Company’s total liabilities to market value adjusted total assets is not to exceed 75%.

 

 

MSC is to be at least 130% of the respective outstanding loan balance until January 2018 and at least 135% thereafter.

Each loan is secured by a first priority mortgage over the respective vessel and a first priority assignment of the vessel’s insurances and earnings. Each loan agreement contains customary ship finance covenants including restrictions as to changes in management and ownership of the vessel, and in dividend distributions when certain financial ratios are not met.

As of December 31, 2016, the Company was in compliance with all of its financial and MSC covenants with respect to its loan agreements, other than the ratio of total liabilities over the market value of the Company’s adjusted total assets with one of its lenders, which only restricts the ability of two vessel-owning companies to distribute dividends to Pyxis as discussed above in 7(c). In addition, as of December 31, 2016, there was no amount available to be drawn down by the Company under its existing loan agreements.

The annual principal payments required to be made after December 31, 2016, are as follows:

 

Year ending December 31,

Amount

2017

$6,963

2018

27,322

2019

4,260

2020

21,986

2021

1,200

2022 and thereafter

12,100

Total

$73,831

 

Total interest expense on long-term debt for the years ended December 31, 2014, 2015 and 2016, amounted to $1,796, $2,359 and $2,577, respectively, and is included in Interest and finance costs, net (Note 12) in the accompanying consolidated statements of comprehensive income / (loss). Of the above amounts $228, $13 and $nil for the years ended December 31, 2014, 2015 and 2016, respectively, were capitalized and are included in Advances for vessels acquisition and Vessels, net, respectively. The Company’s weighted average interest rate (including the margin) for the years ended December 31, 2014, 2015 and 2016, was 2.57%, 2.78% and 3.27% per annum, including the promissory note discussed in Note 3, respectively.

Earnings / (Loss) per Common Share
Earnings / (Loss) per Common Share

9.

Earnings / (Loss) per Common Share:

 

 

 

2014

 

2015

 

2016

Net (loss) / income available to common stockholders

 

($19,243)

 

$3,505

 

($5,813) 

 

 

 

 

 

 

 

Weighted average number of common shares, basic

 

18,244,671

 

18,244,671

 

18,277,893

 

 

 

 

 

 

 

Dilutive effect of stock granted under the EIP

 

-

 

33,222

 

-

 

 

 

 

 

 

 

Weighted average number of common shares, diluted

 

18,244,671

 

18,277,893

 

18,277,893

 

 

 

 

 

 

 

(Loss) / earnings per common share, basic and diluted

 

($1.05)

 

$0.19

 

($0.32)

Basic earnings per share for the year ended December 31, 2014 reflect retrospectively the common shares issued upon formation of Pyxis and in connection with the consummation of the Merger. Dilutive earnings per share has been adjusted to reflect the restricted shares of the Company’s common stock to certain of its officers, granted during the year ended December 31, 2015 under the Company’s EIP (Note 8).

 

Risk Management and Fair Value Measurements
Risk Management and Fair Value Measurements

10.

Risk Management and Fair Value Measurements:

The principal financial assets of the Company consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable due from charterers. The principal financial liabilities of the Company consist of long-term bank loans and accounts payable and due to related parties.

Interest Rate Risk

The Company’s interest rates are calculated at LIBOR plus a margin. Long-term loans and repayment terms are described in Note 7. The Company’s exposure to market risk from changes in interest rates relates to the Company’s bank debt obligations.

Credit Risk

Credit risk is minimized since accounts receivable from charterers are presented net of the relevant provision for uncollectible amounts, whenever required. On the balance sheet date there were no significant concentrations on credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

Currency risk

The Company’s transactions are denominated primarily in U.S. Dollars; therefore overall currency exchange risk is limited. Balances in foreign currency other than U.S. Dollars are not considered significant.


10.

Risk Management and Fair Value Measurements – Continued:

Fair Value

The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their respective carrying amounts due to their short term nature. The fair value of long-term bank loans with variable interest rates approximate the recorded values, generally due to their variable interest rates.

Long Lived Assets Held and Used

 

As of December 31, 2016, the Company reviewed the carrying amount in connection with the estimated recoverable amount for each of its vessels. This review indicated that such carrying amount was not fully recoverable for the Company’s vessels Northsea Alpha and Northsea Beta. Consequently the carrying value of these vessels was written down as presented in the table below.

Vessel

 

Significant Other Observable Inputs (Level 2)

 

Impairment Loss

charged against Vessels, net

 

Impairment Loss

charged against Deferred charges, net

 

Vessel Impairment Charge

Northsea Alpha

 

$8,000

 

$1,769

 

$292

 

$2,061

Northsea Beta

 

8,000

 

1,623

 

314

 

1,937

TOTAL

 

$16,000

 

$3,392

 

$606

 

$3,998

 

The fair value is based on level 2 inputs of the fair value hierarchy and reflects the Company’s best estimate of the value of each vessel on a time charter free basis, and is supported by a vessel valuation of an independent shipbroker as of December 31, 2016, which is mainly based on recent sales and purchase transactions of similar vessels.

 

The Company recognized the total Vessel impairment charge of $3,998, which is included in the accompanying consolidated statements of comprehensive income / (loss) for the year ended December 31, 2016.

The Company performs such an exercise on an annual basis and whenever circumstances indicate so. All other nonfinancial assets or nonfinancial liabilities are carried at fair value as of December 31, 2015 and 2016.

 

Commitments and Contingencies
Commitments and Contingencies

11.

Commitments and Contingencies:

Minimum Contractual Charter Revenues: Future minimum contractual charter revenues, gross of 1.25% brokerage commissions to Maritime, and of any other brokerage commissions to third parties, based on vessels committed, non-cancelable, long-term time charter contracts as of December 31, 2016 are as follows:

 

Year ending December 31,

 

Amount

2017

 

$4,846

 

 

$4,846

 


11.Commitments and Contingencies – Continued:

Make-Whole Right and Financial Guarantee: In the event that subsequent to the Merger, the Company completes a primary common share financing (a “Future Pyxis Offering”) at an offering price per share (the “New Offering Price”) lower than the valuation ascribed to the share of the Company’s common stock received by the former LS stockholders pursuant to the Agreement and Plan of Merger (the “Consideration Value”), the Company will be obligated to make “whole” the former LS stockholders as of April 29, 2015 (the “Make-Whole Record Date”) pursuant to which such LS stockholders will be entitled to receive additional shares of the Company’s common stock to compensate them for the difference between the New Offering Price and the Consideration Value (the “Make-Whole Right”). The Make-Whole Right shall only apply to the first Future Pyxis Offering following the closing of the Merger which results in gross proceeds to the Company of at least $5,000, excluding any proceeds received from any shares purchased or sold by Maritime Investors or its affiliates.

In addition, the Make-Whole Right provides that should the Company fail to complete a Future Pyxis Offering within a date which is three years from the date of the closing of the Merger, each former LS stockholder who has held his Company shares continuously from the date of the Make-Whole Record Date (the “Legacy LS Stockholders”) until the expiration of such three year period, will have a 24-hour option (the “Put Period”) to require the Company to purchase from such Legacy LS Stockholders, a pro rata amount of the Company’s common stock that would result in aggregate gross proceeds to the Legacy LS Stockholders, in an amount not to exceed $2,000; provided that in no event shall a Legacy LS Stockholder receive an amount per share greater than the Consideration Value (the “Financial Guarantee”).

Under ASC 815, the Make-Whole Right does not meet the criteria to be accounted for as a derivative instrument under “Derivatives and Hedging.” since it is not readily convertible into cash. The Make-Whole Right requires the Company to issue its own equity shares and according to ASC 460 “Guarantees”, the Company is not required to recognize an initial liability. If a Future Pyxis Offering had been completed as of December 31, 2016, the maximum number of shares issuable to Legacy LS Stockholders would have amounted to 609,228, based on the closing price of the Company’s stock on December 31, 2016 of $2.60, the Consideration Value at the Merger date of $4.30, and assuming that all number of the original Legacy LS Stockholders retained their make-whole right as of such date and they exercised their right to receive the additional shares.

The Financial Guarantee is accounted under ASC 460-10 “Guarantees – Option Based Contracts”. No liability for the Financial Guarantee has been reflected in the accompanying consolidated balance sheet dates, assuming that a Future Pyxis Offering will take place, the number of shares to be repurchased is not fixed, and the New Offering Price will be at a minimum equal to the Consideration Value. The Company controls the timing of any Future Pyxis Offering and the New Offering Price of any Company shares in such future offering will be subject to U.S. capital markets conditions and investors’ interest.

 

Dispute with charterer: In September 2016, the Company had a commercial dispute with one of its charterers. As a result, Maritime placed an amount of $300, as security, in escrow on behalf of Sixthone, and is included in balances due to related parties as reflected in the accompanying consolidated balance sheet for the year ended December 31, 2016, as discussed in Note 3. The Company has already recognized allowance for doubtful accounts of $100 relating to this case, as discussed in Note 2.

 

Other: Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company’s vessels. Currently, management is not aware of any such claims not covered by insurance or contingent liabilities, which should be disclosed, or for which a provision has not been established in the accompanying consolidated financial statements.

The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of any other claims or contingent liabilities which should be disclosed or for which a provision should be established in the accompanying consolidated financial statements. The Company is covered for liabilities associated with the individual vessels’ actions to the maximum limits as provided by Protection and Indemnity (P&I) Clubs, members of the International Group of P&I Clubs.

Interest and Finance Costs
Interest and Finance Costs

12.

Interest and Finance Costs:

The amounts in the accompanying consolidated statements of comprehensive income / (loss) are analyzed as follows:

 

 

 

2014

 

2015

 

2016

Interest on long-term debt (Note 7)

 

$1,796

 

$2,359

 

$2,577

Interest on Promissory Note (Note 3)

 

 

12

 

69

Capitalized interest

 

(228)

 

(13)

 

Amortization of deferred financing costs (Note 7)

 

136

 

173

 

164

Total

 

$1,704

 

$2,531

 

$2,810

 

Subsequent Events
Subsequent Events

13.

Subsequent Events:

On March 7, 2017, the Company agreed with Maritime Investors to further extend the maturity of the promissory note for one additional year, from January 2018 to January 2019, at same terms and at no additional cost to the Company.

Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)
Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)

Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)

Balance Sheets

As at December 31, 2015 and 2016

(Expressed in thousands of U.S. Dollars, except for share and per share data)

 

 

 

2015

 

2016

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,967

 

$

Prepayments and other assets

 

 

2

 

 

Total current assets

 

 

1,969

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

Restricted cash

 

 

2,607

 

 

131

Investment in subsidiaries*

 

 

57,778

 

 

52,131

Total non-current assets

 

 

60,385

 

 

52,262

Total assets

 

$

62,354

 

$

52,262

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

226

 

$

105

Due to related parties

 

 

4,909

 

 

822

Accrued and other liabilities

 

 

153

 

 

82

Total current liabilities

 

 

5,288

 

 

1,009

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

Promissory note

 

 

2,500

 

 

2,500

Total non-current liabilities

 

 

2,500

 

 

2,500

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock ($0.001 par value; 50,000,000 shares authorized; none issued)

 

 

 

Common stock ($0.001 par value; 450,000,000 shares authorized; 18,244,671 and 18,277,893 shares issued and outstanding at December 31, 2015 and 2016, respectively)

 

 

18

 

 

18

Additional paid-in capital

 

 

70,123

 

 

70,123

Accumulated deficit

 

 

(15,575)

 

 

(21,388)

Total stockholders’ equity

 

 

54,566

 

 

48,753

Total liabilities and stockholders’ equity

 

$

62,354

 

$

52,262

 

* Eliminated in consolidation


Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)

Statements of Comprehensive Income / (Loss)

For the period from March 23, 2015 (“Incorporation Date”) until December 31, 2015, and for the year ended December 31, 2016

(Expressed in thousands of U.S. Dollars, except for share and per share data)

 

 

 

From Incorporation Date until December 31, 2015

 

Year Ended

December 31, 2016

Expenses:

 

 

 

 

 

 

General and administrative expenses

 

$

(1,607)

 

$

(2,344)

Operating loss

 

 

(1,607)

 

 

(2,344)

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

Interest and finance costs, net

 

 

(13)

 

 

(72)

Total other expenses, net

 

 

(13)

 

 

(72)

 

 

 

 

 

 

 

Equity in earnings / (loss) of subsidiaries*

 

 

5,125

 

 

(3,397)

 

 

 

 

 

 

 

Net income / (loss)

 

$

3,505

 

$

(5,813)

 

 

 

 

 

 

 

Earnings / (loss) per common share, basic and diluted

 

$

0.19

 

$

(0.32)

 

 

 

 

 

 

 

Weighted average number of shares, basic

 

 

18,244,671

 

 

18,277,893

 

 

 

 

 

 

 

Weighted average number of shares, diluted

 

 

18,277,893

 

 

18,277,893

 

* Eliminated in consolidation


Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)

Statements of Stockholders’ Equity

For the period from Incorporation Date until December 31, 2015, and for the year ended December 31, 2016

(Expressed in thousands of U.S. Dollars, except for share and per share data)

 

 

Common Stock

 

Additional
paid-in capital

 

Accumulated

Deficit

 

Total Stockholders' Equity

 

# of Shares

 

Par value

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, as of

Incorporation Date

 

 

$

 

$

71,733

 

$

(19,080)

 

$

52,653

Issuance of common stock

18,244,671

 

 

18

 

 

(8)

 

 

 

 

10

Net income

 

 

 

 

 

 

3,505

 

 

3,505

Expenses for Merger

 

 

 

(1,745)

 

 

 

 

(1,745)

Stock compensation

 

 

 

 

 

143

 

 

 

 

143

BALANCE, December 31, 2015

18,244,671

 

$

18

 

$

70,123

 

$

(15,575)

 

$

54,566

Issuance of common stock

 

33,222

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(5,813)

 

 

(5,813)

BALANCE, December 31, 2016

18,277,893

 

$

18

 

$

70,123

 

$

(21,388)

 

$

48,753

 

 


Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)

Statements of Cash Flows

For the period from Incorporation Date until December 31, 2015, and for the year ended December 31, 2016

(Expressed in thousands of U.S. Dollars)

 

 

 

From Incorporation Date until December 31, 2015

 

Year Ended

December 31, 2016

Cash flows from operating activities:

 

 

 

 

 

 

Net income / (loss)

 

$

3,505

 

$

(5,813)

Adjustments to reconcile net income / (loss) to net cash from operating activities:

 

 

 

 

 

 

Stock compensation

 

143

 

 

Equity in (earnings) / loss of subsidiaries, net of dividends received*

 

 

(5,125)

 

 

5,647

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Prepayments and other assets

 

 

(2)

 

 

2

Accounts payable

 

 

226

 

 

(121)

Due to related parties

 

 

4,909

 

 

(4,087)

Accrued and other liabilities

 

 

153

 

 

(71)

Net cash provided by / (used in) operating activities

 

$

3,809

 

$

(4,443)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Net cash provided by investing activities

 

$

 

$

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Issuance of promissory note

 

2,500

 

 

Issuance of common stock

 

10

 

 

Change in restricted cash

 

 

(2,607)

 

 

2,476

Expenses for Merger

 

(1,745)

 

 

Net cash (used in) / provided by financing activities

 

$

(1,842)

 

$

2,476

 

 

 

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

 

 

1,967

 

 

(1,967)

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of the period

 

 

 

 

1,967

 

 

 

 

 

 

 

Cash and cash equivalents at end of the period

 

$

1,967

 

$

 

* Eliminated in consolidation


Schedule I – Condensed Financial Information of PYXIS TANKERS INC. (Parent Company Only)

For the period from Incorporation Date until December 31, 2015, and for the year ended December 31, 2016

(Expressed in thousands of U.S. Dollars, except for share and per share data)

In the condensed financial information of Pyxis, Pyxis’ investment in subsidiaries is stated at cost plus equity in undistributed earnings / losses of subsidiaries. During the period from the Incorporation Date until December 31, 2015, Pyxis did not receive dividend distributions from its subsidiaries. In May 2016, Pyxis received dividend distributions from Sixthone and Seventhone amounting to $2,250, in the aggregate, based on the respective vessel-owning companies’ financial position as of and for the year ended December 31, 2015.

The lender of Sixthone and Seventhone requires the ratio of the Company’s total liabilities to market value adjusted total assets not to exceed 65%. This requirement is only applicable in order to assess whether the two Vessel-owning companies are entitled to distribute dividends to Pyxis. As of December 31, 2015, the ratio of the Company’s total liabilities to market value adjusted total assets was 58%, while as of December 31, 2016, such ratio was 68%, or 3% higher than the required threshold. As discussed in Note 7, until the Company cures such non-compliance, neither Sixthone nor Seventhone will be permitted to make dividend distributions. Other than the above, there are no legal or regulatory restrictions on Pyxis’ ability to obtain funds from its subsidiaries through dividends, loans or advances.

The condensed financial information of Pyxis, as parent company only, should be read in conjunction with the Company’s consolidated financial statements.

Significant Accounting Policies (Policies)

(a) Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP. The consolidated financial statements include the accounts of Pyxis and its wholly-owned subsidiaries (the Vessel-owning companies and Merger Sub). All intercompany balances and transactions have been eliminated upon consolidation.

Pyxis, as the holding company, determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity. Under Accounting Standards Codification (“ASC”) 810 “Consolidation” a voting interest entity is an entity in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make financial and operating decisions. Pyxis consolidates voting interest entities in which it owns all, or at least a majority (generally, greater than 50%), of the voting interest. Variable interest entities (“VIE”) are entities as defined under ASC 810-10, that in general either do not have equity investors with voting rights or that have equity investors that do not provide sufficient financial resources for the entity to support its activities. A controlling financial interest in a VIE is present when a company absorbs a majority of an entity’s expected losses, receives a majority of an entity’s expected residual returns, or both. The company with a controlling financial interest, known as the primary beneficiary, is required to consolidate the VIE. Pyxis evaluates all arrangements that may include a variable interest in an entity to determine if it may be the primary beneficiary, and would be required to include assets, liabilities and operations of a VIE in its consolidated financial statements. As of December 31, 2016 no such interest existed.

(b) Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP 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 reported period. Actual results could differ from these estimates.

(c) Comprehensive Income / (Loss): The Company follows the provisions of ASC 220 “Comprehensive Income”, which requires separate presentation of certain transactions which are recorded directly as components of equity. The Company had no transactions which affect comprehensive income / (loss) during the years ended December 31, 2014, 2015 and 2016 and, accordingly, comprehensive income / (loss) was equal to net income / (loss).

(d) Foreign Currency Translation: Since the Company operates in international shipping markets and, therefore, primarily transacts business in U.S. dollars, its functional currency is the U.S. dollar. The Company’s accounting records are maintained in U.S. dollars. Transactions involving other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies, are translated into U.S. dollars at the year-end exchange rates. Resulting gains or losses are included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income / (loss). All amounts in the financial statements are presented in thousand U.S. dollars rounded at the nearest thousand.

(e) Commitments and Contingencies: Provisions are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each balance sheet date.

(f) Insurance Claims Receivable: The Company records insurance claim recoveries for insured losses incurred on damage to fixed assets and for insured crew medical expenses. Insurance claim recoveries are recorded, net of any deductible amounts, at the time the Company’s fixed assets suffer insured damages or when crew medical expenses are incurred, recovery is probable under the related insurance policies and the claim is not subject to litigation.

(g) Concentration of Credit Risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents, consisting mostly of deposits, with qualified financial institutions with high creditworthiness. The Company performs periodic evaluations of the relative creditworthiness of those financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its accounts receivable.

(h) Cash and Cash Equivalents and Restricted Cash: The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents. Restricted cash is associated with pledged retention accounts in connection with the loan repayments and minimum liquidity requirements under the loan agreements discussed in Note 7 and is presented separately in the accompanying consolidated balance sheets.

In order to align the Restricted cash, current portion and the Restricted cash, net of current portion included under the accompanying consolidated balance sheets with the minimum liquidity requirements pursuant to the Company’s debt agreements, the Company adjusted the balance of the sum of both line items to include the balance under its retention accounts in the overall minimum liquidity requirements discussed in Note 7. In this context, as of December 31, 2015, Cash and cash equivalents increased and Restricted cash, net of current portion decreased by $143. This reclassification has no impact on the Company’s results of operations and net assets for any period.

(i) Income Taxation: Under the laws of the Republic of the Marshall Islands, the country of incorporation of the Vessel-owning companies, and/or the vessels’ registration, the Vessel-owning companies are not liable for any income tax on their income derived from shipping operations. Instead, a tax is levied depending on the countries where the vessels trade based on their tonnage, which is included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income / (loss). The Vessel-owning companies with vessels that have called on the United States during the relevant year of operation are obliged to file tax returns with the Internal Revenue Service. The applicable tax is 50% of 4% of U.S. related gross transportation income unless an exemption applies. The Company believes that based on current legislation the relevant Vessel-owning companies are entitled to an exemption because they satisfy the relevant requirements, namely that (i) the related Vessel-owning companies are incorporated in a jurisdiction granting an equivalent exemption to U.S. corporations and (ii) over 50% of the ultimate stockholders of the vessel-owning companies are residents of a country granting an equivalent exemption to U.S. persons.

(j) Inventories: Inventories consist of lubricants and bunkers on board the vessels, which are stated at the lower of cost or market value. Cost is determined by the first-in, first-out (“FIFO”) method.

(k) Trade Receivables, net: The amount shown as receivables, at each balance sheet date, includes receivables from charterers for hire, freight and demurrage billings, net of a provision for doubtful accounts, if any. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for overdue accounts receivable. The allowance for doubtful accounts at December 31, 2015 and 2016 was $nil and $100, respectively.

(l) Advances for Vessels under Construction and Related Costs: This represents amounts expended by the Company in accordance with the terms of the construction contracts for its vessels, as well as other expenses incurred directly or under a management agreement with a related party in connection with onsite supervision. The carrying value of vessels under construction represents the accumulated costs at the balance sheet date. Costs components include payments for yard installments and variation orders, commissions to a related party, construction supervision, equipment, spare parts, capitalized interest, costs related to first time mobilization and commissioning costs.

(m) Vessels, Net: Vessels are stated at cost, which consists of the contract price and any material expenses incurred in connection with the acquisition (initial repairs, improvements, delivery expenses and other expenditures to prepare the vessel for her initial voyage, as well as professional fees directly associated with the vessel acquisition). Subsequent expenditures for major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels; otherwise, these amounts are charged to expenses as incurred. Amounts paid to sellers of vessels as advances and for other costs related with the acquisition of a vessel are included in Advances for vessel acquisitions in the accompanying consolidated balance sheets until the date the vessel is delivered to the Company, when the amounts are transferred to Vessels, net.

The cost of each of the Company’s vessels is depreciated from the date of acquisition on a straight-line basis over the vessels’ remaining estimated economic useful life, after considering the estimated residual value. A vessel’s residual value is equal to the product of its lightweight tonnage and estimated scrap rate of $0.300 per ton. The Company estimates the useful life of the Company’s vessels to be 25 years from the date of initial delivery from the shipyard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations are adopted.

(n) Impairment of Long Lived Assets: The Company reviews its long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

In developing estimates of future undiscounted cash flows, the Company makes assumptions and estimates about the vessels’ future performance, with the significant assumptions relating to time charter equivalent rates by vessel type, vessels’ operating expenses, vessels’ capital expenditures, vessels’ residual value, fleet utilization and the estimated remaining useful life of each vessel. The assumptions used to develop estimates of future undiscounted cash flows are based on historical trends as well as future expectations.

To the extent impairment indicators are present, the projected net operating cash flows are determined by considering the charter revenues from existing time charters for the fixed fleet days and an estimated daily time charter rate for the unfixed days (based on the most recent seven year historical average rates, where available, over the remaining estimated useful life of the vessels), expected outflows for vessels’ operating expenses assuming an annual inflation rate of 2.00% (in line with the world Consumer Price Index), planned dry-docking and special survey expenditures, management fees expenditures which are adjusted every year, pursuant to the Company’s existing group management agreement, and fleet utilization of 98.6% (excluding the scheduled off-hire days for planned dry-dockings and vessel surveys which are determined separately ranging from five days for intermediate and up to 20 days for special surveys depending on the size and age of each vessel) based on historical experience. The residual value used in the impairment test is estimated to be approximately $0.300 per lightweight ton in accordance with the vessels’ depreciation policy.


2.Significant Accounting Policies – Continued:

(n) Impairment of Long Lived Assets – Continued:

As of December 31, 2015, the Company obtained market valuations for all its vessels from reputable marine appraisers, each of which exceeded the carrying value of the respective vessel, except for the Northsea Alpha and the Northsea Beta, for which the market values were $330 and $201 lower than their net book values as of December 31, 2015, respectively. In this respect, the Company performed an impairment analysis to estimate the future undiscounted cash flows for each of these vessels. The analysis resulted in higher undiscounted cash flows than each vessel’s carrying value as of December 31, 2015 and accordingly, no adjustment to the vessels’ carrying values was required.

As of December 31, 2016, the Company obtained market valuations for all its vessels from reputable marine appraisers, all of which were lower than the carrying values of the respective vessels, except for the Pyxis Epsilon. More specifically, the market values of the Pyxis Malou, the Pyxis Delta, the Pyxis Theta, the Northsea Alpha and the Northsea Beta were $2,694, $2,524, $6,176, $1,769 and $1,623 lower than their carrying values as of December 31, 2016, respectively. In this respect, the Company performed an impairment analysis to estimate the future undiscounted cash flows for each of these tankers. The analysis resulted in higher undiscounted cash flows than each vessel’s carrying value as of December 31, 2016, except for the Northsea Alpha and the Northsea Beta for which a total Vessel impairment charge of $3,998 was recorded as of December 31, 2016, of which $3,392 was charged against Vessels, net and $606 against Deferred charges, net (Notes 5, 6 and 10).

(o) Accounting for Special Survey and Dry-docking Costs: The Company follows the deferral method of accounting for special survey and dry-docking costs, whereby actual costs incurred at the yard and parts used in the dry-docking or special survey, are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due. Costs deferred are limited to actual costs incurred at the shipyard and costs incurred in the dry-docking or special survey. If a dry-dock or a survey is performed prior to the scheduled date, the remaining unamortized balances of the previous dry-dock and survey are immediately written off. Unamortized dry-dock and survey balances of vessels that are sold are written off and included in the calculation of the resulting gain or loss in the period of the vessel’s sale.

(p) Financing Costs: Costs associated with new loans or refinancing of existing loans, including fees paid to lenders or required to be paid to third parties on the lender’s behalf for obtaining new loans or refinancing existing loans, are recorded as a direct deduction from the carrying amount of the debt liability. Such costs are deferred and amortized to Interest and finance costs in the consolidated statements of comprehensive income / (loss) during the life of the related debt using the effective interest method. Unamortized costs relating to loans repaid or refinanced, meeting the criteria of debt extinguishment, are expensed in the period the repayment or refinancing is made. Commitment fees relating to undrawn loan principal are expensed as incurred.

(q) Revenue and Related Expenses: The Company generates its revenues from charterers for the charter hire of its vessels. Vessels are chartered using primarily either spot charters, where a contract is made in the spot market for the use of a vessel for a specific voyage for a specified charter rate, or time charters, where a contract is entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate. If a charter agreement exists and collection of the related revenue is reasonably assured, revenue is recognized as it is earned ratably during the duration of the period of each spot or time charter. Revenues from time charter agreements providing for varying daily rates are accounted for as operating leases and thus are recognized on a straight line basis over the term of the time charter as service is performed. Revenue under spot charters is not recognized until a charter has been agreed, even if the vessel has discharged its previous cargo and is proceeding to an anticipated port of loading. Demurrage income represents payments by a charterer to a vessel owner when loading or discharging time exceeds the stipulated time in the spot charter and is recognized ratably as earned during the related spot charter’s duration period. Hire collected in advance includes cash received prior to the balance sheet date and is related to revenue earned after such date.

Voyage expenses, primarily consisting of commissions, port, canal and bunker expenses that are unique to a particular charter, are paid for by the charterer under time charter arrangements or by the Company under spot charter arrangements, except for commissions, which are always paid for by the Company, regardless of the charter type. All voyage and vessel operating expenses are expensed as incurred, except for commissions. Commissions are deferred and amortized over the related voyage period in a charter to the extent revenue has been deferred since commissions are earned as the Company’s revenues are earned.

2.

Significant Accounting Policies – Continued:

(q) Revenue and Related Expenses – Continued:

Revenues for the years ended December 31, 2014, 2015 and 2016, deriving from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues), were as follows:

 

Charterer

 

2014

 

2015

 

2016

A

 

7%

 

18%

 

B

 

21%

 

17%

 

12%

C

 

 

17%

 

20%

D

 

 

 

14%

E

 

 

 

10%

 

 

28%

 

52%

 

56%

 

(r) Fair Value Measurements: The Company follows the provisions of Accounting Standard Update (“ASU”) 2015-07 “Fair Value Measurements and Disclosures”, Topic 820, which defines and provides guidance as to the measurement of fair value. This standard creates a hierarchy of measurement and indicates that, when possible, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets and the lowest priority (Level 3) to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy (Note 10).

(s) Segment Reporting: The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e., spot or time charters. The Company does not use discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide (subject to certain agreed exclusions) and, as a result, the disclosure of geographic information is impracticable. As a result, management, reviews operating results solely by revenue per day and operating results of the fleet and thus the Company has determined that it operates under one reportable segment.

(t) Earnings / (loss) per Share: Basic earnings / (loss) per share are computed by dividing net income attributable to common equity holders by the weighted average number of shares of common stock outstanding. The computation of diluted earnings / (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and is performed using the treasury stock method.

(u) Stock Compensation: The Company has a stock based incentive plan that covers directors and officers of the Company and its affiliates and its consultants and service providers. Awards granted are valued at fair value and compensation cost is recognized on a straight line basis, net of estimated forfeitures, over the requisite service period of each award. The fair value of restricted stock awarded to directors and officers of the Company at the grant date is equal to the closing stock price on that date and is amortized over the applicable vesting period using the straight-line method. The fair value of restricted stock awarded to non-employees is equal to the closing stock price at the grant date adjusted by the closing stock price at each reporting date and is amortized over the applicable performance period.

(v) Going Concern: The Company performs on a regular basis cash flow projections to evaluate whether it will be in a position to cover its liquidity needs for the next 12 month period and in compliance with the financial and security collateral cover ratio covenants under its existing debt agreements. In developing estimates of future cash flows, the Company makes assumptions about the vessels’ future performance, with significant assumptions relating to time charter equivalent rates by vessel type, vessels’ operating expenses, vessels’ capital expenditures, fleet utilization, the Company’s management fees and general and administrative expenses, and cash flow requirements for debt servicing. The assumptions used to develop estimates of future cash flows are based on historical trends as well as future expectations.

As of the filing date of the financial statements, the Company believes that it will be in a position to cover its liquidity needs for the next 12 month period and in compliance with the financial and security collateral cover ratio covenants under its existing debt agreements as discussed in Note 7.

(w) New Accounting Pronouncements:

i) Revenue from Contracts with Customers: In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) (collectively, the “Boards”) jointly issued a standard that will supersede virtually all of the existing revenue recognition guidance in U.S. GAAP and International Financial Reporting Standards (“IFRS”). The standard establishes a five-step model that will apply to revenue earned from a contract with a customer (with limited exceptions), regardless of the type of revenue transaction or the industry. The standard’s requirements will also apply to the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., sales of property, plant and equipment or intangibles). Extensive disclosures will be required, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods, and key judgments and estimates.

The guidance in ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this ASU supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts”. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. In August 2015, the FASB deferred by one year the effective date of the new guidance. The new revenue recognition standard will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Nonpublic entities will be required to adopt the standard for annual reporting periods beginning after 15 December 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Public and nonpublic entities will be permitted to adopt the standard as early as the original public entity effective date (i.e., annual reporting periods beginning after December 15, 2016 and interim periods therein). In 2016, the FASB issued two updates with respect to Topic 606: ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” and ASU 2016-12, “Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients.” The amendments in these updates do not change the core principle of the guidance in Topic 606. The amendments in update 2016-10 clarify the following two aspects of Topic 606: i) identifying performance obligations and ii) licensing implementation guidance. The amendments in update 2016-12 similarly affect only certain narrow aspects of Topic 606; namely, i) “Assessing the Collectability Criterion and Accounting for Contracts That Do Not Meet the Criteria for Step 1,” ii) “Presentation of Sales Taxes and Other Similar Taxes Collected from Customers,” iii) “Noncash Consideration,” iv) “Contract Modifications at Transition,” v) “Completed Contracts at Transition,” and vi) “Technical Correction.” The effective date and transition requirements for the amendments in these updates are the same as the effective date and transition requirements in Topic 606. Early adoption prior to that date will not be permitted. The Company is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.


2.Significant Accounting Policies – Continued:

(w) New accounting pronouncements are discussed below – Continued:

ii) Inventories: In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 simplifies the subsequent measurement of inventory by replacing today’s lower of cost or market test with a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method (“RIM”). Entities that use LIFO or RIM will continue to use existing impairment models. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance must be applied prospectively after the date of adoption. The Company believes that the implementation of this update will not have any material impact on its financial statements.

iii) Leases: In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) which provides new guidance related to accounting for leases and supersedes existing U.S. GAAP on lease accounting. The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, unless the lease is a short term lease. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

iv) Stock Compensation: In March 2016, the FASB issued the ASU No 2016-09, Stock Compensation, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year. The Company believes that the implementation of this update will not have any material impact on its financial statements.

v) Classification of Certain Cash Payments and Cash Receipts: In August 2016, the FASB issued the ASU 2016-15 – classification of certain cash payments and cash receipts. This ASU addresses certain cash flow issues with the objective of reducing the existing diversity in practice. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. It must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable, if retrospective application would be impracticable. The Company believes that the implementation of this update will not have any material impact on its financial statements and has not elected early adoption.

vi) Restricted Cash: In November 2016 the FASB issued the ASU 2016-18 – Restricted cash. This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. The implementation of this update affects disclosures only and has no impact on the Company’s balance sheet and statement of comprehensive income / (loss). The Company has not elected early adoption.


2.Significant Accounting Policies – Continued:

(w) New accounting pronouncements are discussed below – Continued:

(vii) Business Combinations: In January 2017, FASB issued the ASU 2017-01 Business Combinations to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processes that generate outputs) constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. The amendments of this ASU should be applied prospectively on or after the effective date. Early adoption is permitted, including adoption in an interim period 1) for transactions for which the acquisition date occurs before the issuance date or effective date of the ASU, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and 2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. Company is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

Basis of Presentation and General Information (Tables)
Schedule of Ownership and Operation of Tanker Vessels

All of the Vessel-owning companies were established under the laws of the Republic of Marshall Islands and are engaged in the marine transportation of liquid cargoes through the ownership and operation of tanker vessels, as listed below:

 

Vessel-owning

company

 

Incorporation

date

 

Vessel

 

DWT

 

Year

built

 

Acquisition

date

Secondone

 

05/23/2007

 

Northsea Alpha

 

8,615

 

2010

 

05/28/2010

Thirdone

 

05/23/2007

 

Northsea Beta

 

8,647

 

2010

 

05/25/2010

Fourthone

 

05/30/2007

 

Pyxis Malou

 

50,667

 

2009

 

02/16/2009

Sixthone

 

01/15/2010

 

Pyxis Delta

 

46,616

 

2006

 

03/04/2010

Seventhone

 

05/31/2011

 

Pyxis Theta

 

51,795

 

2013

 

09/16/2013

Eighthone

 

02/08/2013

 

Pyxis Epsilon

 

50,295

 

2015

 

01/14/2015

 

Significant Accounting Policies (Tables)
Summary of Revenue from Significant Charterers for 10% or More of Revenue

Revenues for the years ended December 31, 2014, 2015 and 2016, deriving from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues), were as follows:

 

Charterer

 

2014

 

2015

 

2016

A

 

7%

 

18%

 

B

 

21%

 

17%

 

12%

C

 

 

17%

 

20%

D

 

 

 

14%

E

 

 

 

10%

 

 

28%

 

52%

 

56%

 

Inventories (Tables)
Schedule of Inventories

The amounts in the accompanying consolidated balance sheets as at December 31, 2015 and 2016 are analyzed as follows:

 

 

 

2015

 

2016

Lubricants

 

$583

 

$479

Bunkers

 

 

694

Total

 

$583

 

$1,173

 

Vessels, net (Tables) (Vessels [Member])
Schedule of Vessels

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

 

 

 

Vessel

 

Accumulated

 

Net Book

 

 

Cost

 

Depreciation

 

Value

Balance January 1, 2014

 

$143,505

 

($18,045)

 

$125,460

Additions to vessel cost

 

233

 

 

233

Depreciation

 

 

(5,446)

 

(5,446)

Vessel impairment charge

 

(28,443)

 

11,913

 

(16,530)

Balance December 31, 2014

 

115,295

 

(11,578)

 

103,717

Depreciation

 

 

(5,710)

 

(5,710)

Transfer from advances for vessel acquisition

 

32,494

 

 

32,494

Balance December 31, 2015

 

147,789

 

(17,288)

 

130,501

Depreciation

 

 

(5,768)

 

(5,768)

Vessel impairment charge

 

(9,729)

 

6,337

 

(3,392)

Balance December 31, 2016

 

$138,060

 

($16,719)

 

$121,341

 

Deferred Charges (Tables)
Schedule of Deferred Charges

The movement in Deferred charges in the accompanying consolidated balance sheets are as follows:

 

 

 

Special Survey

 

 

Costs

Balance, January 1, 2014

 

$256

Additions

 

469

Amortization

 

(203)

Impairment charge

 

(400)

Balance, December 31, 2014

 

122

Additions

 

888

Amortization

 

(174)

Balance, December 31, 2015

 

836

Additions

 

364

Amortization

 

(236)

Impairment charge

 

(606)

Balance, December 31, 2016

 

$358

 

Long-Term Debt (Tables)

The amounts shown in the accompanying consolidated balance sheets at December 31, 2015 and 2016 are analyzed as follows:

 

Vessel (Borrower)

2015

 

2016

(a) Northsea Alpha (Secondone)

$5,268

 

$4,808

(a) Northsea Beta (Thirdone)

5,268

 

4,808

(b) Pyxis Malou (Fourthone)

22,490

 

20,350

(c) Pyxis Delta (Sixthone)

9,787

 

8,437

(c) Pyxis Theta (Seventhone)

18,481

 

17,228

(d) Pyxis Epsilon (Eighthone)

19,800

 

18,200

Total

$81,094

 

$73,831

 

 

 

  

Current portion

$7,263

 

$6,963

Less: Current portion of deferred financing costs

(168)

 

(150)

Current portion of long-term debt, net of deferred financing costs, current

$7,095

 

$6,813

 

  

 

  

Long-term portion

$73,831

 

$66,868

Less: Non-current portion of deferred financing costs

(375)

 

(251)

Long-term debt, net of current portion and deferred financing costs, non-current

$73,456

 

$66,617

 


7.

Long-term Debt – Continued:

(a)

On September 26, 2007, Secondone and Thirdone jointly entered into a loan agreement with a financial institution for an amount of up to $24,560, in order to partly finance the acquisition cost of the vessels Northsea Alpha and Northsea Beta.

Each of Secondone’s and Thirdone’s outstanding loan balance at December 31, 2016 amounting to $4,808, is repayable in seven semiannual installments of $230 each, the first falling due in May 2017, and the last installment accompanied by a balloon payment of $3,198 falling due in May 2020.

The main terms and conditions of the loan agreement dated September 26, 2007, as subsequently amended, are as follows:

 

In addition to a first priority mortgage over the Northsea Alpha and the Northsea Beta, the loan is secured by a second priority mortgage over the Pyxis Malou.

 

 

The loan bears interest at LIBOR, plus a margin of 1.75% per annum.

Covenants:

 

The Company undertakes to maintain as of December 31, 2015 and March 31, 2016, minimum liquidity at the higher of $4,500 or $750 per vessel in its fleet. On each of June 30, September 30, December 31 and March 31 of each year thereafter, the Company undertakes to maintain minimum cash deposits at the higher of $5,000 or $750 per vessel in its fleet, of which $2,500 shall be freely available and unencumbered cash under deposit by the Company. At any time that the number of vessels in the fleet exceeds ten, the minimum cash requirement shall be reduced to an amount of $500, for each vessel in the fleet that exceeds ten.

 

 

The minimum security collateral cover (“MSC”) is to at least 133% of the respective outstanding loan balance.

(b)

Based on a loan agreement concluded on December 12, 2008, Fourthone borrowed $41,600 in February 2009 in order to partly finance the acquisition cost of the Pyxis Malou.

The outstanding balance of the loan at December 31, 2016 of $20,350, is repayable in seven semiannual installments of $1,070 each, the first falling due in February 2017, plus a balloon payment of $12,860 falling due in May 2020.

The main terms and conditions of the loan agreement dated December 12, 2008, as subsequently amended, are as follows:

 

In addition to a first priority mortgage over the Pyxis Malou, the loan is secured by a second priority mortgage over the Northsea Alpha and the Northsea Beta.

 

 

The loan bears interest at LIBOR, plus a margin of 1.75% per annum.

Covenants:

 

The Company undertakes to maintain on each of December 31, 2015 and March 31, 2016, minimum liquidity at the higher of $4,500 or $750 per vessel in its fleet. On each of June 30, September 30, December 31 and March 31 of each year thereafter, the Company undertakes to maintain minimum cash deposits at the higher of $5,000 or $750 per vessel in its fleet, of which $2,500 shall be freely available and unencumbered cash under deposit by the Company. At any time that the number of vessels in the fleet exceeds ten, the minimum cash requirement shall be reduced to an amount of $500, for each vessel in the fleet that exceeds ten.

 

 

MSC is to be at least 125% of the respective outstanding loan balance.


7.

Long-term Debt – Continued:

(c)

On October 12, 2012, Sixthone and Seventhone concluded as joint and several borrowers a loan agreement with a financial institution in order to partly finance the acquisition and construction cost of the Pyxis Delta and the Pyxis Theta, respectively. In February 2013, Sixthone drew down an amount of $13,500, while in September 2013, Seventhone drew down an amount of $21,300 (“Tranche A” and “Tranche B”, respectively). On September 29, 2016, the Company agreed with the lender of Sixthone to extend the maturity of Tranche A from May 2017 to September 2018, under the same amortization schedule and applicable margin.

Following the supplemental agreement dated September 29, 2016, the outstanding balance of the loan under Tranche A at December 31, 2016 of $8,437, is repayable in seven quarterly installments of $338 each, the first falling due in February 2017, and the last installment accompanied by a balloon payment of $6,071 falling due in September 2018. In addition, the outstanding balance of the loan under Tranche B at December 31, 2016 of $17,228, is repayable in seven quarterly installments of $313 each, the first falling due in March 2017, and the last installment accompanied by a balloon payment of $15,037 falling due in September 2018.

The main terms and conditions of the loan agreement dated October 12, 2012, as subsequently amended, are as follows:

 

 

The loan bears interest at LIBOR, plus a margin of 3.35% per annum.

Covenants:

 

The Company undertakes to maintain minimum deposits with the bank of $1,000 at all times.

 

 

The ratio of the Company’s total liabilities to market value adjusted total assets is not to exceed 65%. This requirement is only applicable in order to assess whether the two Vessel-owning companies are entitled to distribute dividends to Pyxis. As of December 31, 2016, such ratio was 68%, or 3% higher than the required threshold. Until the Company cures such non-compliance, neither Sixthone nor Seventhone will be permitted to make dividend distributions.

 

 

MSC is to be at least 130% of the respective outstanding loan balance.

(d)

Based on a loan agreement concluded on January 12, 2015, Eighthone borrowed $21,000 on the same date in order to partly finance the construction cost of the Pyxis Epsilon.

The outstanding balance of the loan at December 31, 2016 of $18,200, is repayable in one quarterly installment of $400 due in January 2017, followed by 20 quarterly installments of $300 each, the last together with a balloon payment of $11,800 falling due in January 2022.

The main terms and conditions of the loan agreement dated January 12, 2015, as subsequently amended, are as follows:

 

 

The loan bears interest at LIBOR, plus a margin of 2.90% per annum.


7.

Long-term Debt – Continued:

Covenants:

 

The Company undertakes to maintain minimum deposits with the bank of $750 at all times.

 

 

The Company undertakes to maintain minimum liquidity of at least the higher of: i) $750 multiplied by the number of vessels owned by the Company and ii) during the Company’s first two financial quarters following its listing on NASDAQ, debt service for the following three months and thereafter, debt service for the following six months

 

 

The ratio of the Company’s total liabilities to market value adjusted total assets is not to exceed 75%.

 

 

MSC is to be at least 130% of the respective outstanding loan balance until January 2018 and at least 135% thereafter.

Each loan is secured by a first priority mortgage over the respective vessel and a first priority assignment of the vessel’s insurances and earnings. Each loan agreement contains customary ship finance covenants including restrictions as to changes in management and ownership of the vessel, and in dividend distributions when certain financial ratios are not met.

The annual principal payments required to be made after December 31, 2016, are as follows:

 

Year ending December 31,

Amount

2017

$6,963

2018

27,322

2019

4,260

2020

21,986

2021

1,200

2022 and thereafter

12,100

Total

$73,831

 

Earnings / (Loss) per Common Share (Tables)
Schedule of Earnings / (Loss) per Common Share

 

 

 

2014

 

2015

 

2016

Net (loss) / income available to common stockholders

 

($19,243)

 

$3,505

 

($5,813) 

 

 

 

 

 

 

 

Weighted average number of common shares, basic

 

18,244,671

 

18,244,671

 

18,277,893

 

 

 

 

 

 

 

Dilutive effect of stock granted under the EIP

 

-

 

33,222

 

-

 

 

 

 

 

 

 

Weighted average number of common shares, diluted

 

18,244,671

 

18,277,893

 

18,277,893

 

 

 

 

 

 

 

(Loss) / earnings per common share, basic and diluted

 

($1.05)

 

$0.19

 

($0.32)

 

Risk Management and Fair Value Measurements (Tables)
Summary of Fair Value of Long Lived Assets Held and Used

As of December 31, 2016, the Company reviewed the carrying amount in connection with the estimated recoverable amount for each of its vessels. This review indicated that such carrying amount was not fully recoverable for the Company’s vessels Northsea Alpha and Northsea Beta. Consequently the carrying value of these vessels was written down as presented in the table below.

Vessel

 

Significant Other Observable Inputs (Level 2)

 

Impairment Loss

charged against Vessels, net

 

Impairment Loss

charged against Deferred charges, net

 

Vessel Impairment Charge

Northsea Alpha

 

$8,000

 

$1,769

 

$292

 

$2,061

Northsea Beta

 

8,000

 

1,623

 

314

 

1,937

TOTAL

 

$16,000

 

$3,392

 

$606

 

$3,998

 

Commitments and Contingencies (Tables)
Schedule of Future Minimum Contractual Charter Revenues

Future minimum contractual charter revenues, gross of 1.25% brokerage commissions to Maritime, and of any other brokerage commissions to third parties, based on vessels committed, non-cancelable, long-term time charter contracts as of December 31, 2016 are as follows:

 

Year ending December 31,

 

Amount

2017

 

$4,846

 

 

$4,846

 

Interest and Finance Costs (Tables)
Schedule of Interest and Finance Costs

The amounts in the accompanying consolidated statements of comprehensive income / (loss) are analyzed as follows: