PYXIS TANKERS INC., F-1/A filed on 6/13/2017
Securities Registration (foreign private issuer)
Document and Entity Information
3 Months Ended
Mar. 31, 2017
Document And Entity Information [Abstract]
 
Entity Registrant Name
Pyxis Tankers Inc. 
Entity Central Index Key
0001640043 
Trading Symbol
PXS 
Document Type
F-1/A 
Document Period End Date
Mar. 31, 2017 
Amendment Flag
false 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$ 465 
$ 783 
$ 4,122 
Restricted cash, current portion
142 
143 
143 
Inventories
1,063 
1,173 
583 
Trade receivables, net
2,968 
1,681 
455 
Prepayments and other assets
402 
404 
725 
Total current assets
5,040 
4,184 
6,028 
FIXED ASSETS, NET:
 
 
 
Vessels, net
119,968 
121,341 
130,501 
Total fixed assets, net
119,968 
121,341 
130,501 
OTHER NON-CURRENT ASSETS:
 
 
 
Restricted cash, net of current portion
4,858 
4,857 
4,357 
Deferred charges, net
340 
358 
836 
Total other non-current assets
5,198 
5,215 
5,193 
Total assets
130,206 
130,740 
141,722 
CURRENT LIABILITIES:
 
 
 
Current portion of long-term debt, net of deferred financing costs, current
6,717 
6,813 
7,095 
Accounts payable
3,115 
3,115 
1,103 
Due to related parties
5,024 
1,953 
121 
Hire collected in advance
446 
415 
2,129 
Accrued and other liabilities
724 
574 
752 
Total current liabilities
16,026 
12,870 
11,200 
NON-CURRENT LIABILITIES:
 
 
 
Long-term debt, net of current portion and deferred financing costs, non-current
64,630 
66,617 
73,456 
Promissory note
2,500 
2,500 
2,500 
Total non-current liabilities
67,130 
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; 18,277,893 shares issued and outstanding at each of December 31, 2016 and March 31, 2017, respectively and 18,244,671 at December 31, 2015)
18 
18 
18 
Additional paid-in capital
70,123 
70,123 
70,123 
Accumulated deficit
(23,091)
(21,388)
(15,575)
Total stockholders' equity
47,050 
48,753 
54,566 
Total liabilities and stockholders' equity
$ 130,206 
$ 130,740 
$ 141,722 
Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Financial Position [Abstract]
 
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
Preferred stock, share authorized
50,000,000 
50,000,000 
50,000,000 
Preferred stock, share issued
Common stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
Common stock, share authorized
450,000,000 
450,000,000 
450,000,000 
Common stock, share issued
18,277,893 
18,277,893 
18,244,671 
Common stock, share outstanding
18,277,893 
18,277,893 
18,244,671 
Consolidated Statements of Comprehensive Income / (Loss) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Statement [Abstract]
 
 
 
 
 
Voyage revenues
$ 7,715 
$ 8,448 
$ 30,710 
$ 33,170 
$ 27,760 
Expenses:
 
 
 
 
 
Voyage related costs and commissions
(3,006)
(805)
(6,611)
(4,725)
(10,030)
Vessel operating expenses
(2,965)
(3,303)
(12,871)
(13,188)
(11,064)
General and administrative expenses
(769)
(660)
(2,574)
(1,773)
(93)
Management fees, related parties
(175)
(145)
(631)
(577)
(611)
Management fees, other
(232)
(262)
(1,024)
(1,061)
(922)
Amortization of special survey costs
(18)
(62)
(236)
(174)
(203)
Depreciation for the period
(1,373)
(1,435)
(5,768)
(5,710)
(5,446)
Bad debt provisions
(181)
 
 
 
 
Vessel impairment charge
 
 
(3,998)
 
(16,930)
Operating income/(loss)
(1,004)
1,776 
(3,003)
5,962 
(17,539)
Other income / (expenses):
 
 
 
 
 
Other income
 
 
 
74 
 
Interest and finance costs, net
(699)
(701)
(2,810)
(2,531)
(1,704)
Total other expenses, net
(699)
(701)
(2,810)
(2,457)
(1,704)
Net income/(loss)
$ (1,703)
$ 1,075 
$ (5,813)
$ 3,505 
$ (19,243)
Earnings/(loss) per common share, basic and diluted (in dollars per share)
$ (0.09)
$ 0.06 
$ (0.32)
$ 0.19 
$ (1.05)
Weighted average number of common shares, basic and diluted (in shares)
18,277,893 
18,277,893 
 
 
 
Weighted average number of shares, basic (in shares)
 
 
18,277,893 
18,244,671 
18,244,671 
Weighted average number of shares, diluted (in shares)
 
 
18,277,893 
18,277,893 
18,244,671 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Common Stock
Additional paid-in capital
Retained Earnings / (Accumulated Deficit)
Total
BALANCE at Dec. 31, 2013
 
$ 54,157 
$ 163 
$ 54,320 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Net income/(loss)
 
 
(19,243)
(19,243)
Stockholder's contributions
 
18,824 
 
18,824 
BALANCE at Dec. 31, 2014
 
72,981 
(19,080)
53,901 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Issuance of common stock
18 
(8)
 
10 
Issuance of common stock, shares
18,244,671 
 
 
 
Net income/(loss)
 
 
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
18 
70,123 
(15,575)
54,566 
BALANCE, shares at Dec. 31, 2015
18,244,671 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Issuance of common stock, shares
33,222 
 
 
 
Net income/(loss)
 
 
1,075 
1,075 
BALANCE at Mar. 31, 2016
18 
70,123 
(14,500)
55,641 
BALANCE, shares at Mar. 31, 2016
18,277,893 
 
 
 
BALANCE at Dec. 31, 2015
18 
 
(15,575)
54,566 
BALANCE, shares at Dec. 31, 2015
18,244,671 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Issuance of common stock, shares
33,222 
 
 
 
Net income/(loss)
 
 
(5,813)
(5,813)
BALANCE at Dec. 31, 2016
18 
70,123 
(21,388)
48,753 
BALANCE, shares at Dec. 31, 2016
18,277,893 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Net income/(loss)
 
 
(1,703)
(1,703)
BALANCE at Mar. 31, 2017
$ 18 
$ 70,123 
$ (23,091)
$ 47,050 
BALANCE, shares at Mar. 31, 2017
18,277,893 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Cash flows from operating activities:
 
 
 
 
 
Net income/(loss)
$ (1,703)
$ 1,075 
$ (5,813)
$ 3,505 
$ (19,243)
Adjustments to reconcile net income / (loss) to net cash provided by operating activities:
 
 
 
 
 
Depreciation
1,373 
1,435 
5,768 
5,710 
5,446 
Amortization of special survey costs
18 
62 
236 
174 
203 
Amortization of financing costs
38 
43 
164 
173 
136 
Bad debt provisions
181 
 
 
 
 
Vessel impairment charge
 
 
3,998 
 
16,930 
Stock compensation
 
 
 
143 
 
Changes in assets and liabilities:
 
 
 
 
 
Inventories
110 
34 
(590)
321 
(482)
Trade receivables, net
(1,468)
(17)
(1,226)
748 
(131)
Due from related parties
 
(10)
 
 
 
Prepayments and other assets
147 
321 
(107)
(217)
Special surveys cost
 
 
(364)
(888)
(469)
Accounts payable
 
(445)
2,012 
532 
328 
Due to related parties
3,071 
(121)
1,832 
(10)
3,353 
Hire collected in advance
31 
(1,139)
(1,714)
1,650 
(421)
Accrued and other liabilities
150 
(86)
(178)
415 
(71)
Net cash provided by operating activities
1,803 
978 
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 provided by (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
(2,121)
(2,121)
(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
(2,121)
(2,121)
(7,785)
9,875 
241 
Net increase / (decrease) in cash and cash equivalents
(318)
(1,143)
(3,339)
3,475 
(1,553)
Cash and cash equivalents at the beginning of the period
783 
4,122 
4,122 
647 
2,200 
Cash and cash equivalents at the end of the period
465 
2,979 
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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
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 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”), (collectively 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-owningcompany
  
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 unaudited interim consolidated financial statements include the accounts of Pyxis and its Vessel-owning companies (collectively the “Company”) as discussed above as of December 31, 2016 (audited) and March 31, 2017 and for the three–month periods ended March 31, 2016 and 2017.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements. In the opinion of the management of the Company, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, operating results and cash flows have been included in the accompanying unaudited interim consolidated financial statements. Interim results are not necessarily indicative of results that may be expected for the year ending December 31, 2017. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes for the year ended December 31, 2016, included in the Company’s Annual Report on Form 20-F filed with the SEC on March 28, 2017 (the “Annual Report”).
PYXIS MARITIME CORP. (“Maritime”), a corporation established under the laws of the Republic of Marshall Islands, which is beneficially owned by Mr. Valentios (“Eddie”) Valentis, the Company’s Chairman, Chief Executive Officer and Class I Director, provides certain ship management services to the Vessel-owning companies, as discussed in Note 3 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
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 ship-management agreement with ITM continues by its terms until it is terminated by either party. The ship-management agreements can be cancelled by the Company for any reason at any time upon three months’ advance notice, but neither party can cancel the agreement, other than for specified reasons, until 18 months after the initial effective date of the ship-management agreement.
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 agreements between NST and Thirdone and Secondone, respectively. In June 2016 and November 2016, Maritime assumed full commercial management of the Northsea Beta and the Northsea Alpha, respectively.
As of March 31, 2017, Mr. Valentis beneficially owned approximately 93% of the Company’s common stock.
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 MalouPyxis DeltaPyxis 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.
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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Significant Accounting Policies
2.      Significant Accounting Policies
 
The same accounting policies have been followed in these unaudited interim consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2016. See Note 2 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
Recent Accounting Pronouncements: There are no recent accounting pronouncements the adoption of which would have a material effect on the Company’s unaudited consolidated financial statements in the current period or expected to have an impact on future periods, other than the ones discussed in Note 2 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
The Company had no transactions which affect comprehensive income / (loss) during the three months ended March 31, 2016 and 2017, and accordingly, comprehensive income / (loss) was equal to net income / (loss).
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).
(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.
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.
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.
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.
(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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Inventories
4.      Inventories:
 
The amounts in the accompanying consolidated balance sheets as at December 31, 2016 and March 31, 2017 are analyzed as follows:
   
December 31, 
2016
  
March 31, 
2017
 
Lubricants
   $479    $411  
Bunkers
    694     652  
Total
   $1,173    $1,063  
 
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)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Vessels, net
5.      Vessels, net:
 
The amounts in the accompanying consolidated balance sheets are analyzed as follows:
   
Vessel 
Cost
  
Accumulated 
Depreciation
  
Net Book 
Value
 
Balance January 1, 2017
   $138,060    ($16,719)    $121,341  
Depreciation for the period
         (1,373)     (1,373)  
Balance March 31, 2017
   $138,060    ($18,092)    $119,968  
 
All of the Company’s vessels have been pledged as collateral to secure the bank loans discussed in Note 7.
Vessels, net
5.      Vessels, net
 
The amounts in the accompanying consolidated balance sheets are analyzed as follows:
     
Vessel
Cost
   
Accumulated
Depreciation
   
Net Book
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, net
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Deferred Charges, net
6.      Deferred Charges, net:
 
The movement in deferred charges in the accompanying consolidated balance sheets are as follows:
   
Special Survey 
Costs
 
Balance, January 1, 2017
   $358  
Amortization
    (18)  
Balance, March 31, 2017
   $340  
 
The amortization of the special survey costs is separately reflected in the accompanying unaudited interim consolidated statements of comprehensive income / (loss).
Deferred Charges, net
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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Long-Term Debt
7.      Long-term Debt:
 
The amounts shown in the accompanying consolidated balance sheets at December 31, 2016 and March 31, 2017 are analyzed as follows:
Vessel (Borrower)
  
December 31, 
2016
  
March 31, 
2017
 
Northsea Alpha (Secondone)
   $4,808    $4,808  
Northsea Beta (Thirdone)
    4,808     4,808  
Pyxis Malou (Fourthone)
    20,350     19,280  
Pyxis Delta (Sixthone)
    8,437     8,100  
Pyxis Theta (Seventhone)
    17,228     16,914  
Pyxis Epsilon (Eighthone)
    18,200     17,800  
Total
   $73,831    $71,710  
    
Current portion
   $6,963    $6,863  
Less: Current portion of deferred financing costs
    (150)     (146)  
Current portion of long-term debt, net of deferred financing costs, current
   $6,813    $6,717  
    
Long-term portion
   $66,868    $64,847  
Less: Non-current portion of deferred financing costs
    (251)     (217)  
Long-term debt, net of current portion and deferred financing costs, non-current
   $66,617    $64,630  
 
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, in dividends distribution when certain financial ratios are not met, as well as requirements regarding minimum security cover ratios. For more information, please refer to Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
On September 29, 2016, the Company agreed with the lender of Sixthone and Seventhone (“Tranche A” and “Tranche B”, respectively) to extend the maturity of the loan under Tranche A from May 2017 to September 2018, under the same amortization schedule and applicable margin.
In June 2017, the lender of Sixthone and Seventhone agreed to further extend the maturity of its respective loans from September 2018 to September 2022 under the same amortization schedule and applicable margin. As of September 2018, the aggregate outstanding balance of these loans is scheduled to be $20,773, which will be subsequently repaid in 16 equal quarterly installments of  $651 each, plus a balloon payment of  $10,357 payable together with the last quarterly installment.
The annual principal payments required to be made after March 31, 2017, excluding the extension of the loan agreement of the Sixthone and Seventhone that was agreed in June 2017 discussed above, are as follows:
To March 31,
  
Amount
 
2018
   $6,863  
2019
    26,672  
2020
    4,260  
2021
    20,915  
2022
    13,000  
2023 and thereafter
      
Total   $71,710  
 
The Company’s weighted average interest rate (including the margin) for the three months ended March 31, 2016 and 2017 was 3.17% and 3.53%, including the promissory note discussed in Note 3, respectively.
As of March 31, 2017, the ratio of the Company’s total liabilities to market value adjusted total assets was 69%, or 4% higher than the required threshold under the loan agreement with one of its lenders. This requirement is only applicable in order to assess whether the relevant two Vessel-owning companies are entitled to distribute dividends to Pyxis. Other than the above, the Company was in compliance with all of its financial and security collateral cover ratio covenants with respect to its loan agreements. In addition, as of March 31, 2017, there was no amount available to be drawn down by the Company under its existing loan agreements.
As of the filing date of the interim 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 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
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
   
 
(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.
 
(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.
 
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.
Capital Structure and Equity Incentive Plan
Capital Structure and Equity Incentive Plan
8.      Capital Structure and Equity Incentive Plan:
 
The Company’s authorized common and preferred stock consists of 450,000,000 common shares and 50,000,000 preferred shares with a par value of USD 0.001 per share.
As of December 31, 2016 and March 31, 2017, the Company had a total of 18,277,893 common shares and no preferred shares outstanding.
On October 28, 2015, the Company’s Board of Directors approved an equity incentive plan (the “EIP”), providing for the granting of share-based awards to directors, officers and employees of the Company and its affiliates and to its consultants and service providers. The maximum aggregate number of shares of common stock of the Company, that may be delivered pursuant to awards granted under the EIP, shall be equal to 15% of the then issued and outstanding number of shares of common stock. On the same date, the Company’s Board of Directors approved the issuance of 33,222 restricted shares of the Company’s common stock to certain of its officers. As of December 31, 2016, all such shares had been vested and issued. During the three months ended March 31, 2017, no additional shares were granted under the EIP, and as of March 31, 2017, there was no unrecognized compensation cost.
On April 27, 2017, the Company filed with the SEC a registration statement on Form F-1 with respect to a proposed offering of the Company’s shares of common stock in an amount of  $10,000 (exclusive of the over-allotment option). The Company intends to use the proceeds of this offering to pay a portion of the purchase price of the common stock of a vessel-owning company whose principal asset is a 2017-built MR vessel (named the Pyxis Lamda) and to fund working capital and other general corporate purposes.
Earnings / (loss) per Common Share
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Earnings / (loss) per Common Share
9.      Earnings / (loss) per Common Share:
 
   
March 31,
 
   
2016
  
2017
 
Net income / (loss)
   $1,075    $(1,703)  
Weighted average number of common shares, basic and diluted
    18,277,893     18,277,893  
Earnings / (loss) per common share, basic and diluted
   $0.06    $(0.09)  
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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Risk Management and Fair Value Measurements
10.    Risk Management:
 
The principal financial assets of the Company consist of cash and cash equivalents and trade accounts receivable due from charterers. The principal financial liabilities of the Company consist of long-term bank loans, accounts payable, due to related parties and a promissory note.
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 above, as well as in Note 7 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report. 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 dates there were no significant concentrations on credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset on 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.
Fair Value: The fair values of cash and cash equivalents, accounts receivable, due to related parties 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. In addition, the Company believes that the fixed rate of the promissory note of 2.75% approximates the current market variable interest rates, and as such its fair value approximates the recorded value.
As of December 31, 2016 and March 31, 2017, the Company did not have any assets or liabilities measured at fair value, other than the ones discussed in Note 10 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
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.

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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
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 March 31, 2017, expiring through March 31, 2018, amount to $5,625.
Make-Whole Right and Financial Guarantee: In the event that 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 stockholders of LookSmart, Ltd. (“LS”) pursuant to the agreement and plan of merger discussed in Note 1 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report (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 $4.30 per share and the New Offering Price. 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, or April 2018, each former LS stockholder who has held the 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 $4.30 (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 March 31, 2017, the maximum number of shares issuable to Legacy LS Stockholders would have amounted to 833,249, based on the closing price of the Company’s stock on March 31, 2017 of  $2.27, and assuming that all 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 Pyxis 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, which is included in balances due to related parties as reflected in the accompanying consolidated balance sheet as of December 31, 2016 and March 31, 2017, as discussed in Note 3. In 2016, the Company recognized an allowance for doubtful accounts of  $100 relating to this case. In the first quarter of 2017, such allowance was increased to $150.
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 interim 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.
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

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, net
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Interest and Finance Costs, net
12.    Interest and Finance Costs, net:
 
The amounts in the accompanying unaudited interim consolidated statements of comprehensive income / (loss) are analyzed as follows:
   
March 31,
 
   
2016
  
2017
 
Interest on long-term debt (Note 7)
   $641    $644  
Interest on promissory note (Note 3)
    17     17  
Amortization of financing costs
    43     38  
Total
   $701    $699  
 
Interest and Finance Costs, net

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
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Subsequent Events
13.    Subsequent Events:
 
Long-term Debt: In June 2017, the lender of Sixthone and Seventhone agreed to extend the maturity of its respective loans from September 2018 to September 2022 under the same amortization schedule and applicable margin, as discussed in Note 7.
Equity Offering: On April 27, 2017, the Company filed with the SEC a registration statement on Form F-1 with respect to a proposed offering of the Company’s shares of common stock in an amount of $10,000 (exclusive of the over-allotment option), as discussed in Note 8.
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)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Accounting Policies [Abstract]
 
 
Principles of Consolidation
 
Use of Estimates
 
Comprehensive Income / (Loss)
 
Foreign Currency Translation
 
Commitments and Contingencies
 
Insurance Claims Receivable
 
Concentration of Credit Risk
 
Cash and Cash Equivalents and Restricted Cash
 
Income Taxation
 
Inventories
 
Trade Receivables, net
 
Advances for Vessels under Construction and Related Costs
 
Vessels, Net
 
Impairment of Long Lived Assets
 
Accounting for Special Survey and Dry-docking Costs
 
Financing Costs
 
Revenue and Related Expenses
 
Fair Value Measurements
 
Segment Reporting
 
Earnings / (loss) per Share
 
Stock Compensation
 
Going Concern
 
New Accounting Pronouncements

(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.
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, forwhichthe 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.

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.

Recent Accounting Pronouncements: There are no recent accounting pronouncements the adoption of which would have a material effect on the Company’s unaudited consolidated financial statements in the current period or expected to have an impact on future periods, other than the ones discussed in Note 2 of the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report.
 
The Company had no transactions which affect comprehensive income / (loss) during the three months ended March 31, 2016 and 2017, and accordingly, comprehensive income / (loss) was equal to net income / (loss).
(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.
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.
(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)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Schedule of Ownership and Operation of Tanker Vessels
Vessel-owningcompany
  
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
 
Schedule of Ownership and Operation of Tanker Vessels
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
 

Charterer

 

2014

 

2015

 

2016

A

 

7%

 

18%

 

B