PYXIS TANKERS INC., 20-F filed on 3/23/2016
Annual and Transition Report (foreign private issuer)
Document and Entity Information
12 Months Ended
Dec. 31, 2015
Document And Entity Information [Abstract]
 
Document Type
20-F 
Amendment Flag
false 
Document Period End Date
Dec. 31, 2015 
Document Fiscal Year Focus
2015 
Document Fiscal Period Focus
FY 
Trading Symbol
PXS 
Entity Registrant Name
Pyxis Tankers Inc. 
Entity Central Index Key
0001640043 
Current Fiscal Year End Date
--12-31 
Entity Well-known Seasoned Issuer
No 
Entity Voluntary Filers
No 
Entity Current Reporting Status
Yes 
Entity Filer Category
Non-accelerated Filer 
Entity Common Stock, Shares Outstanding
18,244,671 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 3,979 
$ 500 
Restricted cash current portion
143 
147 
Inventories (Note 4)
583 
904 
Trade receivables
455 
1,203 
Prepayments and other assets
725 
618 
Total current assets
5,885 
3,372 
FIXED ASSETS, NET:
 
 
Advances for vessel acquisition (Note 5)
 
13,728 
Vessels, net (Note 6)
130,501 
103,717 
Total fixed assets, net
130,501 
117,445 
OTHER NON CURRENT ASSETS:
 
 
Restricted cash, net of current portion
4,500 
1,000 
Deferred charges, net (Note 7)
836 
122 
Total other non current assets
5,336 
1,122 
Total assets
141,722 
121,939 
CURRENT LIABILITIES:
 
 
Current portion of long-term debt (Note 8)
7,095 
5,529 
Accounts payable
1,103 
571 
Due to related parties (Note 3)
121 
131 
Hire collected in advance
2,129 
479 
Accrued and other liabilities
752 
337 
Total current liabilities
11,200 
7,047 
NON-CURRENT LIABILITIES:
 
 
Promissory note (Note 3)
2,500 
 
Long-term debt, net of current portion (Note 8)
73,456 
60,991 
Total non-current liabilities
75,956 
60,991 
COMMITMENTS AND CONTINGENCIES (Note 12)
   
   
STOCKHOLDERS’ EQUITY:
 
 
Preferred stock ($0.001 par value, 50,000,000 shares authorized, none issued) (Note 9)
   
   
Common stock ($0.001 par value, 450,000,000 shares authorized, none and 18,244,671 shares issued and outstanding at December 31, 2014 and 2015, respectively) (Note 9)
18 
 
Additional paid-in capital (Note 9)
70,123 
72,981 
Accumulated deficit
(15,575)
(19,080)
Total stockholders’ equity
54,566 
53,901 
Total liabilities and stockholders’ equity
$ 141,722 
$ 121,939 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2015
Dec. 31, 2014
Statement Of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, share authorized
50,000,000 
50,000,000 
Preferred stock, share issued
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, share authorized
450,000,000 
450,000,000 
Common stock, share issued
18,244,671 
Common stock, share outstanding
18,244,671 
Consolidated Statements of Comprehensive Income/(Loss) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Statement [Abstract]
 
 
 
Voyage revenues:
$ 33,170 
$ 27,760 
$ 21,980 
Expenses:
 
 
 
Voyage related costs and commissions (Note 3)
(4,725)
(10,030)
(3,817)
Vessel operating expenses
(13,188)
(11,064)
(10,220)
General and administrative expenses (Note 3 and Note 9)
(1,773)
(93)
(173)
Management fees, related parties (Note 3)
(577)
(611)
(468)
Management fees, other
(1,061)
(922)
(823)
Amortization of special survey costs (Note 7)
(174)
(203)
(157)
Depreciation (Note 6)
(5,710)
(5,446)
(4,520)
Vessel impairment charge (Note 6 and Note 7)
 
(16,930)
 
Operating income/(loss)
5,962 
(17,539)
1,802 
Other income/(expenses):
 
 
 
Other income
74 
 
192 
Interest and finance costs, net (Note 13)
(2,531)
(1,704)
(402)
Total other income/(expenses)
(2,457)
(1,704)
(210)
Net income/(loss)
3,505 
(19,243)
1,592 
Total comprehensive income/(loss)
$ 3,505 
$ (19,243)
$ 1,592 
Earnings/(losses) per common share, basic
$ 0.19 
$ (1.05)
$ 0.09 
Earnings/(losses) per common share, diluted
$ 0.19 
 
 
Weighted average number of shares, basic
18,244,671 
18,244,671 
18,244,671 
Weighted average number of shares, diluted
18,277,893 
18,244,671 
18,244,671 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings / (Accumulated Deficit) [Member]
BALANCE at Dec. 31, 2012
$ 43,938 
 
$ 45,367 
$ (1,429)
Net income (loss)
1,592 
 
 
1,592 
Total comprehensive income/(loss)
1,592 
 
 
1,592 
Stockholder’s contributions
22,247 
 
22,247 
 
Stockholder’s re-imbursements/distributions
(13,457)
 
(13,457)
 
BALANCE at Dec. 31, 2013
54,320 
 
54,157 
163 
Net income (loss)
(19,243)
 
 
(19,243)
Total comprehensive income/(loss)
(19,243)
 
 
(19,243)
Stockholder’s contributions
18,824 
 
18,824 
 
BALANCE at Dec. 31, 2014
53,901 
 
72,981 
(19,080)
Net income (loss)
3,505 
 
 
3,505 
Total comprehensive income/(loss)
3,505 
 
 
3,505 
Expenses for Merger
(1,745)
 
(1,745)
 
Issuance of common stock
10 
18 
(8)
 
Issuance of common stock, shares
 
18,244,671 
 
 
Stock compensation
143 
 
143 
 
Stockholder’s re-imbursements/distributions
(1,248)
 
(1,248)
 
BALANCE at Dec. 31, 2015
$ 54,566 
$ 18 
$ 70,123 
$ (15,575)
BALANCE, shares at Dec. 31, 2015
 
18,244,671 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Cash flows from operating activities:
 
 
 
Net income (loss)
$ 3,505 
$ (19,243)
$ 1,592 
Adjustments to reconcile net income/(loss) to net cash from operating activities:
 
 
 
Depreciation
5,710 
5,446 
4,520 
Amortization of special survey costs
174 
203 
157 
Vessel impairment charge
 
16,930 
 
Amortization of financing costs
173 
136 
193 
Stock compensation
143 
 
 
(Increase)/Decrease in:
 
 
 
Inventories
321 
(482)
(90)
Trade receivables
748 
(131)
(674)
Prepayments and other assets
(107)
(217)
(121)
Special surveys cost
(888)
(469)
 
Increase/(Decrease) in:
 
 
 
Accounts payable
532 
328 
(256)
Due to related parties
(10)
3,353 
(412)
Hire collected in advance
1,650 
(421)
900 
Accrued and other liabilities
415 
(71)
183 
Net cash provided by operating activities
12,366 
5,362 
5,992 
Cash flows from investing activities:
 
 
 
Advances for vessel acquisition
(18,766)
(6,923)
(29,389)
Additions to vessel cost
 
(233)
 
Net cash used in investing activities
(18,766)
(7,156)
(29,389)
Cash flows from financing activities:
 
 
 
Proceeds from long-term debt
21,000 
 
34,800 
Repayment of long-term debt
(6,863)
(6,183)
(17,801)
Issuance of promissory note
2,500 
 
 
Issuance of common stock
10 
 
 
Change in restricted cash
(3,496)
(887)
Proceeds from equity contributions
 
6,424 
22,247 
Paid-in capital re-imbursement/distribution
(1,248)
 
(13,457)
Payment of financing costs
(279)
 
 
Expenses for Merger
(1,745)
 
 
Net cash provided by financing activities
9,879 
246 
24,902 
Net increase/(decrease) in cash and cash equivalents
3,479 
(1,548)
1,505 
Cash and cash equivalents at beginning of the year
500 
2,048 
543 
Cash and cash equivalents at end of the year
3,979 
500 
2,048 
SUPPLEMENTAL INFORMATION
 
 
 
Cash paid for interest, net of amounts capitalized
$ 2,191 
$ 1,788 
$ 1,307 
Basis of Presentation and General Information
Basis of Presentation and General Information

1.

Basis of Presentation and General Information:

Pyxis Tankers Inc. (the “Company” or “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”). 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

subsidiary

 

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

 

01/18/2010

 

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

 

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

Prior to the consummation of the transactions discussed below, Mr. Valentios (“Eddie”) Valentis was the sole ultimate stockholder of the Company 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, the Company 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, the Company 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 the Company 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 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 is both the legal and accounting acquirer of LS. The acquisition by Pyxis of LS is not an acquisition of an operating company as the business of LS was spun off prior to the acquisition. As such, for accounting purposes, the Merger between Merger Sub and LS is 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 provides chartering services to Northsea Alpha and Northsea Beta. The agreements with NST will continue indefinitely until terminated by either party with three months’ prior notice.

Significant Accounting Policies
Significant Accounting Policies

2.

Significant Accounting Policies:

(a) Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company 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. The Company 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, 2015 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, 2013, 2014 and 2015 and, accordingly, comprehensive income/(loss) was equal to net income/(loss).

(d) Foreign Currency Translation: The functional currency of the Company is the U.S. dollar as it operates in international shipping markets and, therefore, primarily transacts business in U.S. dollars. 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 8 and is presented separately in the accompanying consolidated balance sheets.

(i) Income Taxation: Under the laws of the countries 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 based on the tonnage of the vessels, 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. Management 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, which are stated at the lower of cost or market value. Cost is determined by the first in, first out method.

(k) Trade Receivables: 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 overdue accounts at December 31, 2014 and 2015 was $nil.

(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. Management 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.

As of December 31, 2014, the Company concluded that the economic and market conditions, including the significant disruptions in the global credit markets in the prior years, had broad effects on participants in a wide variety of industries. Time charter rates and charter free vessel values remained at depressed levels during 2014 as reduced demand for transportation services occurred during a time of increased supply of vessels, conditions that were considered to be indicators of possible impairment. As a result, the Company performed an impairment assessment of the Company’s long lived assets by comparing the undiscounted projected net operating cash flows for each vessel to its respective carrying value.

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 rates, 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, over the remaining estimated useful life of the vessels), expected outflows for vessels’ operating expenses assuming an annual inflation rate of 2.50% (in line with the average world Consumer Price Index forecasted), planned dry-docking and special survey expenditures, management fees expenditures which are adjusted every year, after December 31, 2014, 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 salvage value used in the impairment test is estimated to be approximately $0.300 per light weight ton in accordance with the vessels’ depreciation policy. The Company’s assessment concluded that measurement of impairment was required for one vessel as of December 31, 2014. As the undiscounted projected net operating cash flows for one vessel exceeded its carrying value, the Company obtained valuations from two independent ship brokers to determine the market value of the vessel based on which an impairment loss of $16,930, was recorded as of December 31, 2014, of which $16,530 was charged against Vessels, net and $400 against Deferred charges, net (Note 6 and Note 7).

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 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 small tankers, using the same assumptions with the impairment test performed as of December 31, 2014. 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.

(o) Accounting for Special Survey and Drydocking Costs: The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred at the yard and parts used in the drydocking 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 drydock or a survey is performed prior to the scheduled date, the remaining unamortized balances of the previous drydock and survey are immediately written off. Unamortized drydock 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. Upon adoption, of the new guidance the Company adjusted all prior periods presented in the consolidated financial statements.

ASU No. 2015-03 is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company early adopted the new guidance for the consolidated financial statements for the fiscal year ending December 31, 2015 and thus presented deferred financing costs, net of accumulated amortization as a reduction of long-term debt. In order to conform with the current period presentation, the Company has reclassified deferred financing costs, net from Deferred Charges and has decreased the amount of Current portion of long-term debt by $134 and the amount of Long-term portion of long-term debt by $303 on the consolidated balance sheet as of December 31, 2014 (Note 8). This reclassification has no impact on the Company’s results of operations, cash flows and net assets for any period.

(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 annual rates are accounted for as operating leases and thus recognized on a straight line basis over the term of the time charter as service is performed.  A voyage is deemed to commence upon the completion of discharge of the vessel’s previous cargo and is deemed to end upon the completion of discharge of the current cargo. 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, 2013, 2014 and 2015, deriving from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues), were as follows:

 

Charterer

 

2013

 

 

2014

 

 

2015

 

A

 

 

 

 

7

%

 

 

18

%

B

 

 

 

 

21

%

 

 

17

%

C

 

 

 

 

 

 

17

%

D

 

 

36

%

 

 

 

 

E

 

 

22

%

 

 

 

 

 

 

 

58.0

%

 

 

28.0

%

 

 

52.0

%

 

(r) Fair Value Measurements: The Company follows the provisions of ASU 820 “Fair Value Measurements and Disclosures”, 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 11).

(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/(losses) per Share: Basic earnings/(losses) 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 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) New accounting pronouncements are discussed below:

(i) Revenue from Contracts with Customers: In May 2014, 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). Early adoption prior to that date will not be permitted. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(ii) Going Concern: In August 2014, FASB issued ASU No. 2014-15 – “Presentation of Financial Statements - Going Concern”. ASU 2014-15 provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires an entity’s management to evaluate at each reporting period based on the relevant conditions and events that are known at the date when financial statements are issued, whether there are conditions or events, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to disclose the necessary information. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(iii) Inventory: 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. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(iv) Income Statement—Extraordinary and Unusual Items: In January 2015, the FASB issued ASU No. 2015-01 “Income Statement—Extraordinary and Unusual Items: Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. The concept of extraordinary items is removed and instead items that are both unusual in nature and infrequently occurring should be presented within income from continuing operations or disclosed in notes to financial statements because those items satisfy the conditions for an item that is unusual in nature or infrequently occurring. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, but adoption must occur at the beginning of a fiscal year. Companies can elect to apply the guidance either prospectively or retrospectively. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(v)Consolidation: In February 2015, the FASB issued ASU No. 2015-02 “Consolidation (Topic 810), Amendments to the Consolidation Analysis.” The guidance eliminates the deferral of FAS 167, which has allowed entities with interests in certain investment funds to follow the previous consolidation guidance in FIN 46(R), and makes other changes to both the variable interest model and the voting model. While the guidance is aimed at asset managers, it will affect all reporting entities that have variable interests in other legal entities (e.g., limited partnerships, similar entities and certain corporations). In some cases, consolidation conclusions will change. In other cases, reporting entities will need to provide additional disclosures about entities that currently aren’t considered variable interest entities (VIEs) but will be considered VIEs under the new guidance provided they have a variable interest in those VIEs. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For other entities, it is effective for fiscal years beginning after  December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. A reporting entity must apply the amendments using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the period of adoption or apply the amendments retrospectively. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

 

(vi)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. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

Inventories
Inventories

4.

Inventories:

The amounts in the accompanying consolidated balance sheets as at December 31, 2014 and 2015 are analyzed as follows:

 

 

 

2014

 

 

2015

 

Lubricants

 

 

643

 

 

 

583

 

Bunkers

 

 

261

 

 

 

Total

 

 

904

 

 

 

583

 

 

Advances for Vessel Acquisition
Advances for Vessel Acquisition

5.

Advances for Vessel Acquisition:

On October 6, 2011, Seventhone contracted with a shipyard for the construction and purchase of a newbuilding vessel (Pyxis Theta) at a contract price of $37,100. The vessel was delivered to Seventhone on September 16, 2013 at cost of $38,155 (Note 6).

On February 28, 2013, Eighthone contracted with a shipyard for the construction and purchase of a newbuilding vessel (Pyxis Epsilon) at a contract price of $32,200. The vessel was delivered on January 14, 2015.

The amounts shown in the accompanying 2014 consolidated balance sheet includes payments to the shipyard, capitalized commissions, management fees and fees for supervision services from Maritime and capitalized interest cost.

The movement of the account in the accompanying consolidated balance sheets as at December 31, 2014 and 2015 is as follows:

 

 

 

2013

 

 

2014

 

 

2015

 

Beginning balance

 

 

15,571

 

 

 

6,805

 

 

 

13,728

 

Pre-delivery installments and other vessel equipment

 

 

28,580

 

 

 

6,440

 

 

 

18,743

 

Supervision fees - related parties (Note 3)

 

 

181

 

 

 

255

 

 

 

10

 

Capitalised interest (Note 13)

 

 

306

 

 

 

228

 

 

 

13

 

Purchase commission – related parties (Note 3)

 

 

322

 

 

 

 

 

Transferred to vessel cost (Note 6)

 

 

(38,155

)

 

 

 

 

(32,494

)

Total

 

 

6,805

 

 

 

13,728

 

 

 

 

The amount of $28,580 comprises payments towards the Pyxis Theta for various equipment of $83 and installments paid to the shipyard of $22,057, following price adjustment of $263, concerning compensation for the vessel’s late delivery and items not delivered by the shipyard and payments towards Hull S-1153 (Pyxis Epsilon) of $6,440.

 

The amount of $18,743 refers to the delivery installment for the Pyxis Epsilon paid to the shipyard of $19,320, net of $550, concerning compensation for the vessel’s late delivery and a final credit to the Company of $27.

Vessels, net (Vessels [Member])
Vessels

6.

Vessels, net:

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

 

 

 

Vessel

 

 

Accumulated

 

 

Net Book

 

 

 

Cost

 

 

Depreciation

 

 

Value

 

Balance January 1, 2013

 

 

105,350

 

 

 

(13,525

)

 

 

91,825

 

Depreciation

 

 

 

 

(4,520

)

 

 

(4,520

)

Transfer from advances for vessel acquisition (Note 5)

 

 

38,155

 

 

 

 

 

38,155

 

Balance December 31, 2013

 

 

143,505

 

 

 

(18,045

)

 

 

125,460

 

Additions to vessel cost

 

 

233

 

 

 

 

 

233

 

Depreciation

 

 

 

 

(5,446

)

 

 

(5,446

)

Vessel impairment charge

 

 

(16,530

)

 

 

 

 

(16,530

)

Balance December 31, 2014

 

 

127,208

 

 

 

(23,491

)

 

 

103,717

 

Depreciation

 

 

 

 

(5,710

)

 

 

(5,710

)

Transfer from advances for vessel acquisition (Note 5)

 

 

32,494

 

 

 

 

 

32,494

 

Balance December 31, 2015

 

 

159,702

 

 

 

(29,201

)

 

 

130,501

 

 

Seventhone took delivery of the Pyxis Theta on September 16, 2013. As a result, $36,920 of advances paid to the shipyard together with $1,235 of capitalized costs (out of which $22,141 and $444, respectively, were incurred during the year ended December 31, 2013), were transferred from Advances for vessel acquisition to Vessels, net.

 

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, 2014, 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 vessel Pyxis Malou. Consequently the carrying value of this vessel was written down resulting in total impairment charge of $16,930, of which $16,530 was charged against Vessels, net, based on level 3 inputs of the fair value hierarchy, as determined by management taking into consideration valuations from independent marine brokers.

All of the Company’s vessels have been pledged as collateral to secure the bank loans discussed in Note 8.

Deferred Charges
Deferred Charges

7.

Deferred Charges:

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

 

 

 

Special Survey

 

 

 

Costs

 

Balance January 1, 2013

 

 

413

 

Amortization

 

 

(157

)

Balance, December 31, 2013

 

 

256

 

Additions

 

 

469

 

Amortization

 

 

(203

)

Impairment charge

 

 

(400

)

Balance, December 31, 2014

 

 

122

 

Additions

 

 

888

 

Amortization

 

 

(174

)

Balance, December 31, 2015

 

 

836

 

 

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

Impairment charge of $400 relates to the impairment of the Pyxis Malou as of December 31, 2014 discussed in Note 2 and Note 6.

Long-Term Debt
Long-Term Debt

8.

Long-term Debt:

The amounts shown in the accompanying consolidated balance sheets at December 31, 2014 and 2015 are analyzed as follows:

 

Vessel (Borrower)

 

2014

 

 

2015

 

(a) Northsea Alpha (Secondone)

 

 

5,728

 

 

 

5,268

 

(a) Northsea Beta (Thirdone)

 

 

5,728

 

 

 

5,268

 

(b) Pyxis Malou (Fourthone)

 

 

24,630

 

 

 

22,490

 

(c) Pyxis Delta (Sixthone)

 

 

11,137

 

 

 

9,787

 

(c) Pyxis Theta (Seventhone)

 

 

19,734

 

 

 

18,481

 

(d) Pyxis Epsilon (Eighthone)

 

 

 

 

19,800

 

Total

 

 

66,957

 

 

 

81,094

 

 

 

 

 

 

 

 

 

 

Current portion

 

 

5,663

 

 

 

7,263

 

Less: Current portion of deferred financing costs

 

 

(134

)

 

 

(168

)

Current portion of long-term debt, net

 

 

5,529

 

 

 

7,095

 

 

 

 

 

 

 

 

 

 

Long-term portion

 

 

61,294

 

 

 

73,831

 

Less: Non current portion of deferred financing costs

 

 

(303

)

 

 

(375

)

Long-term debt, net of current portion

 

 

60,991

 

 

 

73,456

 

 

(a)

In September 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.

For each of Secondone and Thirdone, the outstanding balance of the loan at December 31, 2015 of $5,268, is repayable in nine semiannual installments of $230 each, the first falling due in February 2016, and the last installment accompanied by a balloon payment of $3,198 falling due in May 2020.

The loan is secured by a first priority mortgage over the two vessels, a first priority assignment of the vessels’ insurances and earnings and by a corporate guarantee. The loan agreement contains customary ship finance covenants including restrictions as to changes in management and ownership of the vessels, as well as a requirement that the minimum security cover (“MSC”) be at least 133% of the respective outstanding loan balance for each of the vessels.

On October 23, 2015, Secondone and Thirdone entered into a supplemental agreement to their loan agreement (see Note 8(b) herein).

(b)

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

As of December 31, 2014, Fourthone was not in compliance with its loan covenant related to the MSC ratio. The covenant required Fourthone to maintain a market value of Pyxis Malou of at least 125% of its balance under the loan agreement. As of December 31, 2014, no waiver had been obtained for this non-compliance and, accordingly, the bank had the right to require Fourthone, within 30 business days from the date of the written demand of the bank, to either prepay the loan in such amount as may be necessary to cause the market value of the vessel to equal or exceed the MSC ratio or provide such additional collateral as may be acceptable to the bank to bring Fourthone into compliance with the required MSC ratio. In accordance with a letter received by the lending bank of Secondone, Thirdone and Fourthone on March 23, 2015, Fourthone, was not required to make any deficiency payment, subject to certain changes to the loan agreements with these vessel-owning companies. Accordingly, on October 23, 2015, Fourthone also concluded a supplemental agreement to its loan agreement.

The terms of the supplemental agreements with Secondone, Thirdone and Fourthone  and the respective new security documents provide among other things, as follows:

 

i.

the margins under the loan agreements were increased to 1.75% p.a.,

 

ii.

Fourthone’s outstanding loan balance of $22,490 as of December 31, 2015, will be repaid in nine consecutive semi-annual instalments of $1,070 each, plus a balloon instalment of $12,860 on May 31, 2020,

 

iii.

a second priority mortgage was registered over the Northsea Alpha and the Northsea Beta,

 

iv.

Maritime was released as the corporate guarantor and was replaced by Pyxis, and

 

v.

Pyxis undertakes to maintain on each of December 31, 2015 and March 31, 2016, minimum cash deposits 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, Pyxis 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 Pyxis. 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.

(c)

In March 2010, Sixthone borrowed $15,000 in order to partly finance the acquisition cost of the Pyxis Delta. The outstanding balance of the loan at January 29, 2013 of $11,371, was fully prepaid using proceeds received from a capital contribution and existing available cash, at a discount on the then outstanding amount (Note 9). Savings of $1,114 is reflected under interest and finance costs in the 2013 consolidated statement of comprehensive income (Note 13). 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: (i) the Pyxis Delta (Tranche A: up to the lesser of $16,000 and 60% of the market value of the Pyxis Delta) and (ii) the Pyxis Theta (Tranche B: up to the lesser of $21,300 and 60% of the initial market value of the Pyxis Theta). On February 13, 2013, Sixthone and Seventhone entered into a supplemental agreement with the bank to revise Tranche A to an amount of up to $14,000. The amount drawn down by Sixthone associated with Tranche A on February 15, 2013, was $13,500. On September 9, 2013, Seventhone drew down $21,300 associated with Tranche B.

For both Tranches A and B, the tenor is five years but in no event later than June 30, 2017 for Tranche A and January 31, 2019 for Tranche B. The loan bears interest at three month LIBOR plus a margin of 3.35% per annum, payable quarterly. As of December 31, 2015, the outstanding balance of Tranche A of $9,787 corresponding to Sixthone, is repayable in six quarterly installments of $338 each, the first falling due in February 2016, and the last together with a balloon payment of $7,759 falling due in May 2017. As of December 31, 2015, the outstanding balance of Tranche B of $18,481 corresponding to Seventhone, is repayable in 11 quarterly installments of $313 each, the first falling due in March 2016 and the last together with a balloon payment of $15,038 falling due in September 2018.

The loan is secured by a first priority mortgage over the two vessels, a first priority assignment of the vessels’ insurances and earnings and by a corporate guarantee. The loan agreement contains customary ship finance covenants including restrictions as to changes in management and ownership of the vessels, as well as a requirement that the “MSC” be at least 130% of the respective outstanding loan balance for each of the vessels. In addition, the loan includes the maintenance of minimum deposits with the bank of $1,000 and the maintenance of a maximum corporate leverage ratio, requiring the ratio of total liabilities over the market value of the group’s adjusted total assets (total assets adjusted to reflect the market value of all group vessels) not to exceed 65% in the relevant year.

On October 23, 2015, Sixthone and Seventhone concluded a supplemental agreement to their loan agreement, according to which Holdings was released as the corporate guarantor and was replaced by Pyxis.

(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 loan bears interest at three month LIBOR plus a margin of 2.9% per annum, payable quarterly. The outstanding balance of the loan at December 31, 2015, of $19,800 is repayable in five quarterly installments of $400 each, the first falling due in January 2016, followed by 20 quarterly installments of $300 each, the last together with a balloon payment of $11,800 falling due in January 2022.

Among others, the loan contains a minimum liquidity requirement for the group of companies owned by the corporate guarantor, of at least the higher of: i) $750 multiplied by the number of vessels owned by Pyxis’ subsidiaries and ii) during Pyxis’ 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.

In addition, the loan includes the maintenance of a maximum corporate leverage ratio, requiring the ratio of total liabilities over the market value of the group’s adjusted total assets (total assets adjusted to reflect the market value of all group vessels) not to exceed 75% in the relevant year.

On October 23, 2015, Eighthone concluded a supplemental loan agreement, according to which Holdings was released as the corporate guarantor and was replaced by Pyxis.

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 MSC ratios.

The annual principal payments required to be made after December 31, 2015, are as follows:

 

Year ending December 31,

 

Amount

 

2016

 

 

7,263

 

2017

 

 

14,050

 

2018

 

 

20,235

 

2019

 

 

4,260

 

2020

 

 

21,986

 

2021 and thereafter

 

 

13,300

 

Total

 

 

81,094

 

 

Total interest expense on long-term debt for the years ended December 31, 2013, 2014 and 2015, amounted to $1,460, $1,796 and $2,359, respectively, and is included in Interest and finance costs, net (Note 13) in the accompanying consolidated statements of comprehensive income/(loss). Of the above amounts $306, $228 and $13 for the years ended December 31, 2013, 2014 and 2015, 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, 2013, 2014 and 2015, was 2.40%, 2.57% and 2.78% per annum, respectively.

Earnings per Common Share
Earnings per Common Share

10.

Earnings per Common Share:

 

 

 

2013

 

 

2014

 

 

2015

 

Net income/(loss) available to common stockholders

 

 

1,592

 

 

 

(19,243

)

 

 

3,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

18,244,671

 

 

 

18,244,671

 

 

 

18,244,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock granted under the EIP

 

 

-

 

 

 

-

 

 

 

33,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares – diluted (Note 9)

 

 

18,244,671

 

 

 

18,244,671

 

 

 

18,277,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

 

0.09

 

 

 

(1.05

)

 

 

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

 

-

 

 

 

-

 

 

 

0.19

 

 

Basic earnings per share for the years ended December 31, 2013 and 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 9).

Risk Management
Risk Management

11.

Risk Management:

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 8. 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 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.

The Company at December 31, 2014, determined the fair value of one of its vessels at market value, through Level 3 of the fair value hierarchy as defined in FASB guidance for Fair Value Measurements. Level 3 data are derived principally from or corroborated by unobservable data, for example brokers valuations. 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 at December 31, 2015.

Commitments and Contingencies
Commitments and Contingencies

12.

Commitments and Contingencies:

Long-term Time Charters: 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, 2015 are as follows:

 

Year ending December 31,

 

Amount

 

2016

 

 

16,801

 

2017

 

 

282

 

 

 

 

17,083

 

Make Whole Right and Financial Guarantee (Note 11): In the event that subsequent to the Merger, Pyxis completes a primary common share financing (a “Future Pyxis Offering”) at a an offering price per share (the “New Offering Price”) lower than the valuation ascribed to the share of Pyxis common stock received by the former LS stockholders pursuant to the Agreement and Plan of Merger (the “Consideration Value”), Pyxis 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 Pyxis 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 Pyxis 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 Pyxis 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 Pyxis 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 Pyxis to purchase from such Legacy LS Stockholders, a pro rata amount of Pyxis 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 was completed as of December 31, 2015, the maximum number of shares that may have been issued to Legacy LS Stockholders would have amounted to 2,248,058, based on the closing price of the stock at December 31, 2015 of $1.26, the Consideration Value at the Merger date of $4.30, and assuming that the number of Legacy LS Stockholders at December 31, 2015 is the same as the number at the Make Whole Record Date.

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 2015 consolidated balance sheet, 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.

 

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 Cost
Interest and Finance Cost

13.

Interest and Finance Cost:

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

 

 

 

2013

 

 

2014

 

 

2015

 

Interest on long-term debt (Note 8)

 

 

1,460

 

 

 

1,796

 

 

 

2,359

 

Interest on Promissory Note (Note 3)

 

 

 

 

 

 

12

 

Capitalized interest (Note 5)

 

 

(306

)

 

 

(228

)

 

 

(13

)

Loan commitment fees

 

 

169

 

 

 

 

 

Discount on early debt repayment

 

 

(1,114

)

 

 

 

 

Amortization of deferred financing costs (Note 8)

 

 

193

 

 

 

136

 

 

 

173

 

Total

 

 

402

 

 

 

1,704

 

 

 

2,531

 

 

Subsequent Events
Subsequent Events

14.

Subsequent Events:

 

 

(i)

On February 23, 2016, the Company received a de-listing notification from the NASDAQ Stock Market, because the closing bid price of the Company's common stock for 30 consecutive business days was below the minimum $1.00 per share bid price requirement. On March 10, 2016, the NASDAQ Stock Market notified the Company that this deficiency was remediated, because the closing bid price of its common stock remained higher than $1.00 per share for ten consecutive business days following the submission of the de-listing notice.

 

 

(ii)

On March 15, 2016, the Company issued the 33,222 restricted shares of its common stock, which had been granted in 2015 to certain of its officers under the EIP (Note 9).

 

Significant Accounting Policies (Policies)

(a) Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company 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. The Company 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, 2015 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, 2013, 2014 and 2015 and, accordingly, comprehensive income/(loss) was equal to net income/(loss).

(d) Foreign Currency Translation: The functional currency of the Company is the U.S. dollar as it operates in international shipping markets and, therefore, primarily transacts business in U.S. dollars. 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 8 and is presented separately in the accompanying consolidated balance sheets.

(i) Income Taxation: Under the laws of the countries 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 based on the tonnage of the vessels, 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. Management 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, which are stated at the lower of cost or market value. Cost is determined by the first in, first out method.

(k) Trade Receivables: 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 overdue accounts at December 31, 2014 and 2015 was $nil.

(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. Management 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.

As of December 31, 2014, the Company concluded that the economic and market conditions, including the significant disruptions in the global credit markets in the prior years, had broad effects on participants in a wide variety of industries. Time charter rates and charter free vessel values remained at depressed levels during 2014 as reduced demand for transportation services occurred during a time of increased supply of vessels, conditions that were considered to be indicators of possible impairment. As a result, the Company performed an impairment assessment of the Company’s long lived assets by comparing the undiscounted projected net operating cash flows for each vessel to its respective carrying value.

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 rates, 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, over the remaining estimated useful life of the vessels), expected outflows for vessels’ operating expenses assuming an annual inflation rate of 2.50% (in line with the average world Consumer Price Index forecasted), planned dry-docking and special survey expenditures, management fees expenditures which are adjusted every year, after December 31, 2014, 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 salvage value used in the impairment test is estimated to be approximately $0.300 per light weight ton in accordance with the vessels’ depreciation policy. The Company’s assessment concluded that measurement of impairment was required for one vessel as of December 31, 2014. As the undiscounted projected net operating cash flows for one vessel exceeded its carrying value, the Company obtained valuations from two independent ship brokers to determine the market value of the vessel based on which an impairment loss of $16,930, was recorded as of December 31, 2014, of which $16,530 was charged against Vessels, net and $400 against Deferred charges, net (Note 6 and Note 7).

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 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 small tankers, using the same assumptions with the impairment test performed as of December 31, 2014. 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.

(o) Accounting for Special Survey and Drydocking Costs: The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred at the yard and parts used in the drydocking 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 drydock or a survey is performed prior to the scheduled date, the remaining unamortized balances of the previous drydock and survey are immediately written off. Unamortized drydock 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. Upon adoption, of the new guidance the Company adjusted all prior periods presented in the consolidated financial statements.

ASU No. 2015-03 is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company early adopted the new guidance for the consolidated financial statements for the fiscal year ending December 31, 2015 and thus presented deferred financing costs, net of accumulated amortization as a reduction of long-term debt. In order to conform with the current period presentation, the Company has reclassified deferred financing costs, net from Deferred Charges and has decreased the amount of Current portion of long-term debt by $134 and the amount of Long-term portion of long-term debt by $303 on the consolidated balance sheet as of December 31, 2014 (Note 8). This reclassification has no impact on the Company’s results of operations, cash flows and net assets for any period.

(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 annual rates are accounted for as operating leases and thus recognized on a straight line basis over the term of the time charter as service is performed.  A voyage is deemed to commence upon the completion of discharge of the vessel’s previous cargo and is deemed to end upon the completion of discharge of the current cargo. 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, 2013, 2014 and 2015, deriving from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues), were as follows:

 

Charterer

 

2013

 

 

2014

 

 

2015

 

A

 

 

 

 

7

%

 

 

18

%

B

 

 

 

 

21

%

 

 

17

%

C

 

 

 

 

 

 

17

%

D

 

 

36

%

 

 

 

 

E

 

 

22

%

 

 

 

 

 

 

 

58.0

%

 

 

28.0

%

 

 

52.0

%

 

(r) Fair Value Measurements: The Company follows the provisions of ASU 820 “Fair Value Measurements and Disclosures”, 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 11).

(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/(losses) per Share: Basic earnings/(losses) 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 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) New accounting pronouncements are discussed below:

(i) Revenue from Contracts with Customers: In May 2014, 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). Early adoption prior to that date will not be permitted. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(ii) Going Concern: In August 2014, FASB issued ASU No. 2014-15 – “Presentation of Financial Statements - Going Concern”. ASU 2014-15 provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires an entity’s management to evaluate at each reporting period based on the relevant conditions and events that are known at the date when financial statements are issued, whether there are conditions or events, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to disclose the necessary information. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(iii) Inventory: 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. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(iv) Income Statement—Extraordinary and Unusual Items: In January 2015, the FASB issued ASU No. 2015-01 “Income Statement—Extraordinary and Unusual Items: Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. The concept of extraordinary items is removed and instead items that are both unusual in nature and infrequently occurring should be presented within income from continuing operations or disclosed in notes to financial statements because those items satisfy the conditions for an item that is unusual in nature or infrequently occurring. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, but adoption must occur at the beginning of a fiscal year. Companies can elect to apply the guidance either prospectively or retrospectively. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

(v)Consolidation: In February 2015, the FASB issued ASU No. 2015-02 “Consolidation (Topic 810), Amendments to the Consolidation Analysis.” The guidance eliminates the deferral of FAS 167, which has allowed entities with interests in certain investment funds to follow the previous consolidation guidance in FIN 46(R), and makes other changes to both the variable interest model and the voting model. While the guidance is aimed at asset managers, it will affect all reporting entities that have variable interests in other legal entities (e.g., limited partnerships, similar entities and certain corporations). In some cases, consolidation conclusions will change. In other cases, reporting entities will need to provide additional disclosures about entities that currently aren’t considered variable interest entities (VIEs) but will be considered VIEs under the new guidance provided they have a variable interest in those VIEs. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For other entities, it is effective for fiscal years beginning after  December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. A reporting entity must apply the amendments using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the period of adoption or apply the amendments retrospectively. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

 

(vi)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. Management is in the process of assessing the impact of the new standard on the Company’s consolidated financial position and performance.

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

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

subsidiary

 

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

 

01/18/2010

 

Pyxis Delta

 

 

46,616

 

 

2006

 

03/04/2010

Seventhone

 

05/31/2011

 

Pyxis Theta

 

 

51,795

 

 

2013

 

09/16/2013

Eighthone

 

02/08/2013

 

Pyxis Epsilon

 

 

50,295

 

 

2015

 

01/14/2015

 

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

Revenues for the years ended December 31, 2013, 2014 and 2015, deriving from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues), were as follows:

 

Charterer

 

2013

 

 

2014

 

 

2015

 

A

 

 

 

 

7

%

 

 

18

%

B

 

 

 

 

21

%

 

 

17

%

C

 

 

 

 

 

 

17

%

D

 

 

36

%

 

 

 

 

E

 

 

22

%

 

 

 

 

 

 

 

58.0

%

 

 

28.0

%

 

 

52.0

%

 

Inventories (Tables)
Schedule of Inventories

The amounts in the accompanying consolidated balance sheets as at December 31, 2014 and 2015 are analyzed as follows:

 

 

 

2014

 

 

2015

 

Lubricants

 

 

643

 

 

 

583

 

Bunkers

 

 

261

 

 

 

Total

 

 

904

 

 

 

583

 

 

Advances for Vessel Acquisition (Tables)
Schedule of Account in Accompanying Consolidated Balance Sheets

The movement of the account in the accompanying consolidated balance sheets as at December 31, 2014 and 2015 is as follows:

 

 

 

2013

 

 

2014

 

 

2015

 

Beginning balance

 

 

15,571

 

 

 

6,805

 

 

 

13,728

 

Pre-delivery installments and other vessel equipment

 

 

28,580

 

 

 

6,440

 

 

 

18,743

 

Supervision fees - related parties (Note 3)

 

 

181

 

 

 

255

 

 

 

10

 

Capitalised interest (Note 13)

 

 

306

 

 

 

228

 

 

 

13

 

Purchase commission – related parties (Note 3)

 

 

322

 

 

 

 

 

Transferred to vessel cost (Note 6)

 

 

(38,155

)

 

 

 

 

(32,494

)

Total

 

 

6,805

 

 

 

13,728

 

 

 

 

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

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

 

 

 

Vessel

 

 

Accumulated

 

 

Net Book

 

 

 

Cost

 

 

Depreciation

 

 

Value

 

Balance January 1, 2013

 

 

105,350

 

 

 

(13,525

)

 

 

91,825

 

Depreciation

 

 

 

 

(4,520

)

 

 

(4,520

)

Transfer from advances for vessel acquisition (Note 5)

 

 

38,155

 

 

 

 

 

38,155

 

Balance December 31, 2013

 

 

143,505

 

 

 

(18,045

)

 

 

125,460

 

Additions to vessel cost

 

 

233

 

 

 

 

 

233

 

Depreciation

 

 

 

 

(5,446

)

 

 

(5,446

)

Vessel impairment charge

 

 

(16,530

)

 

 

 

 

(16,530

)

Balance December 31, 2014

 

 

127,208

 

 

 

(23,491

)

 

 

103,717

 

Depreciation

 

 

 

 

(5,710

)

 

 

(5,710

)

Transfer from advances for vessel acquisition (Note 5)

 

 

32,494

 

 

 

 

 

32,494

 

Balance December 31, 2015

 

 

159,702

 

 

 

(29,201

)

 

 

130,501

 

 

Deferred Charges (Tables)
Schedule of Deferred Charges

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

 

 

 

Special Survey

 

 

 

Costs

 

Balance January 1, 2013

 

 

413

 

Amortization

 

 

(157

)

Balance, December 31, 2013

 

 

256

 

Additions

 

 

469

 

Amortization

 

 

(203

)

Impairment charge

 

 

(400

)

Balance, December 31, 2014

 

 

122

 

Additions

 

 

888

 

Amortization

 

 

(174

)

Balance, December 31, 2015

 

 

836

 

 

Long-Term Debt (Tables)

The amounts shown in the accompanying consolidated balance sheets at December 31, 2014 and 2015 are analyzed as follows:

 

Vessel (Borrower)

 

2014

 

 

2015

 

(a) Northsea Alpha (Secondone)

 

 

5,728

 

 

 

5,268

 

(a) Northsea Beta (Thirdone)

 

 

5,728

 

 

 

5,268

 

(b) Pyxis Malou (Fourthone)

 

 

24,630

 

 

 

22,490

 

(c) Pyxis Delta (Sixthone)

 

 

11,137

 

 

 

9,787

 

(c) Pyxis Theta (Seventhone)

 

 

19,734

 

 

 

18,481

 

(d) Pyxis Epsilon (Eighthone)

 

 

 

 

19,800

 

Total

 

 

66,957

 

 

 

81,094

 

 

 

 

 

 

 

 

 

 

Current portion

 

 

5,663

 

 

 

7,263

 

Less: Current portion of deferred financing costs

 

 

(134

)

 

 

(168

)

Current portion of long-term debt, net

 

 

5,529

 

 

 

7,095

 

 

 

 

 

 

 

 

 

 

Long-term portion

 

 

61,294

 

 

 

73,831

 

Less: Non current portion of deferred financing costs

 

 

(303

)

 

 

(375

)

Long-term debt, net of current portion

 

 

60,991

 

 

 

73,456

 

 

 

(a)

In September 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.

For each of Secondone and Thirdone, the outstanding balance of the loan at December 31, 2015 of $5,268, is repayable in nine semiannual installments of $230 each, the first falling due in February 2016, and the last installment accompanied by a balloon payment of $3,198 falling due in May 2020.

The loan is secured by a first priority mortgage over the two vessels, a first priority assignment of the vessels’ insurances and earnings and by a corporate guarantee. The loan agreement contains customary ship finance covenants including restrictions as to changes in management and ownership of the vessels, as well as a requirement that the minimum security cover (“MSC”) be at least 133% of the respective outstanding loan balance for each of the vessels.

On October 23, 2015, Secondone and Thirdone entered into a supplemental agreement to their loan agreement (see Note 8(b) herein).

(b)

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

As of December 31, 2014, Fourthone was not in compliance with its loan covenant related to the MSC ratio. The covenant required Fourthone to maintain a market value of Pyxis Malou of at least 125% of its balance under the loan agreement. As of December 31, 2014, no waiver had been obtained for this non-compliance and, accordingly, the bank had the right to require Fourthone, within 30 business days from the date of the written demand of the bank, to either prepay the loan in such amount as may be necessary to cause the market value of the vessel to equal or exceed the MSC ratio or provide such additional collateral as may be acceptable to the bank to bring Fourthone into compliance with the required MSC ratio. In accordance with a letter received by the lending bank of Secondone, Thirdone and Fourthone on March 23, 2015, Fourthone, was not required to make any deficiency payment, subject to certain changes to the loan agreements with these vessel-owning companies. Accordingly, on October 23, 2015, Fourthone also concluded a supplemental agreement to its loan agreement.

The terms of the supplemental agreements with Secondone, Thirdone and Fourthone  and the respective new security documents provide among other things, as follows:

 

i.

the margins under the loan agreements were increased to 1.75% p.a.,

 

ii.

Fourthone’s outstanding loan balance of $22,490 as of December 31, 2015, will be repaid in nine consecutive semi-annual instalments of $1,070 each, plus a balloon instalment of $12,860 on May 31, 2020,

 

iii.

a second priority mortgage was registered over the Northsea Alpha and the Northsea Beta,

 

iv.

Maritime was released as the corporate guarantor and was replaced by Pyxis, and

 

v.