|
|
|
|
|
|
|
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.
|
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.
|
3. |
Transactions with Related Parties: |
The Company uses the services of Maritime, a ship management company with its principal office in Greece and an office in the U.S.A. Maritime is engaged under separate management agreements directly by the Company’s respective subsidiaries to provide a wide range of shipping services, including but not limited to, chartering (other than for the Northsea Alpha and the Northsea Beta, which is performed by NST), sale and purchase, insurance, operations and dry-docking and construction supervision, all provided at a fixed daily fee per vessel. For the ship management services, Maritime charges a fee payable by each subsidiary of $0.325 per day per vessel, while the vessel is in operation including any pool arrangements (out of which a fee of Euro 151 per day was paid to NST with respect to vessels Northsea Alpha and Northsea Beta for which chartering was contracted to NST) and $0.450 per day per vessel while the vessel is under construction, as well as an additional daily fee (which is dependent on the seniority of the personnel) to cover the cost of engineers employed to conduct the supervision of the newbuilding (collectively the “ship-management fees”).
In addition, Maritime charges the Company a commission of 1.25% on all charter hire agreements arranged by Maritime.
The management agreements for the vessels Northsea Alpha, Northsea Beta and Pyxis Delta will continue until December 31, 2015, for Pyxis Theta until December 31, 2017 and for the Pyxis Epsilon and the Pyxis Malou until December 31, 2018. Thereafter, all management agreements will continue until terminated by either party on three months’ notice.
On October 14, 2015, the vessel owning companies amended and restated their management agreements with Maritime to provide that the post-delivery management fees will be $0.160 per day as long as the chartering services are subcontracted to NST.
Following their initial expiration date, the amended management agreements will be renewed for consecutive five year periods.
Under a Head Management Agreement (the “Head Management Agreement”) with Maritime that commenced on March 23, 2015 and will continue until March 23, 2020 (unless terminated by either party on 90 days’ notice), Maritime provides administrative services to the Company, which include, among other, the provision of the services of Pyxis’ Chief Executive Officer, Chief Financial Officer, Senior Vice President of Corporate Development, General Counsel and Corporate Secretary, Chief Operating Officer, one or more internal auditor(s) and a secretary, as well as use of office space in Maritime’s premises. Under the Head Management Agreement, Pyxis pays Maritime a fixed fee of $1,600 annually (the “administration fees”). On August 5, 2015, the Company amended and restated its Head Management Agreement with Maritime to provide that in the event of a change of control of the Company during the management period or within 12 months after the early termination of the Head Management Agreement, then the Company will pay to Maritime an amount equal to 2.5 times the then annual administration fees.
The ship-management fees and the administration fees will be adjusted annually according to the official inflation rate in Greece or such other country where Maritime was headquartered during the preceding year.
The fees charged by Maritime during the years ended December 31, 2013, 2014 and 2015, totaled $1,150, $1,102 and $2,153, respectively. Of these amounts, (i) $468, $611 and $577 for the years ended December 31, 2013, 2014 and 2015, respectively, are separately reflected in the accompanying consolidated statements of comprehensive income/(loss) as Management fees, related parties, (ii) $503, $255 and $10 for the years ended December 31, 2013, 2014 and 2015, respectively, which relate to the supervision costs during the vessels construction period and commission on the acquisition of the vessels are included as a component of Vessels, net, in the accompanying consolidated balance sheets (Note 6), (iii) $179, $236 and $321 for the years ended December 31, 2013, 2014 and 2015, respectively, are included in Voyage related costs and commissions in the accompanying consolidated statements of comprehensive income/(loss) and (iv) $1,245 for the year ended December 31, 2015, is included in the accompanying consolidated statement of comprehensive income in General and administrative expenses. During the years ended December 31, 2013, 2014 and 2015, no commissions on revenues from charter hire agreements relating to Northsea Alpha and Northsea Beta were charged by Maritime, since Secondone and Thirdone have entered into separate commercial management agreements with NST, discussed in Note 1 above.
On April 23, 2015, the Company issued a promissory note amounting to $625 (the “Note”) in favor of Maritime Investors. The Note was issued in return for the payment of $600 by Maritime Investors to LS on behalf of Pyxis, representing the cash consideration of the Merger. The remaining balance of the Note covered miscellaneous transaction costs. On October 28, 2015, Pyxis and Maritime Investors agreed to replace the existing Note of $625 with a new promissory note of $2,500, payable on January 15, 2017. The additional amount of $1,875 was provided in lieu of additional, newly issued, fully paid and non-assessable shares of Pyxis common stock, in accordance with the terms of the amended Agreement and Plan of Merger (Note 1). The new promissory note bears an interest rate of 2.75% per annum payable quarterly in arrears in cash or additional Pyxis shares, at a price per Pyxis share based on a five day volume weighted average price, at Pyxis’ discretion. As of December 31, 2015, the amount of $2,500 is separately reflected in the consolidated balance sheet under non-current liabilities.
Accrued interest for the period from the replacement date of the Note until December 31, 2015, amounted to $12, and is included in Interest and finance costs, net in the accompanying consolidated statement of comprehensive income for the year ended December 31, 2015.
As of December 31, 2014 and 2015, the balances due to Maritime were $131 and $121, respectively and are included in Due to related parties in the accompanying consolidated balance sheets. The balances with Maritime are interest free and with no specific repayment terms.
|
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 |
|
|
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.
|
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.
|
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.
|
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.
|
9. |
Common Stock Equity of Contributed Entities and Additional Paid-In Capital: |
The Company’s authorized common and preferred stock consists of 450,000,000 common shares and 50,000,000 preferred shares with a par value of USD 0.001 per share, out of which 10,000,000 common shares were issued to Maritime Investors upon formation of Pyxis.
In connection with the Merger and as provided in the Agreement and Plan of Merger, the Company further issued: i) to Maritime Investors, 7,002,445 common “true-up” shares following the transfer of the shares of the vessel-owning companies to Pyxis and ii) to LS shareholders and Maxim Group LLC (Pyxis’ financial advisor), 931,761 and 310,465 common shares, respectively. In connection with the closing of the Merger, each post-split common share of LS was cancelled and was exchanged for the right to receive 1.0667 shares of Pyxis common stock.
The amounts shown in the accompanying consolidated balance sheets as Additional paid-in capital represent contributions made by the stockholders at various dates to finance vessel acquisitions in excess of the amounts of bank loans obtained and advances for working capital purposes, net of subsequent distributions primarily from re-imbursement of certain payments to shipyards in respect to the construction of new-built vessels.
The capital contributions for 2013 of $22,247 consist of $5,550 representing the fourth installment payment for the construction of the Pyxis Theta, $6,440 representing the first and second installment payments for the construction of the Pyxis Epsilon (Note 5) and $10,257 relating to the early repayment of the outstanding principal under the loan discussed in Note 8(c) above.
The capital contributions for 2014 of $18,824 consist of $6,424 representing the third and fourth installment payments for the construction of the Pyxis Epsilon (Note 5) and of $12,400 representing amounts due to Maritime which Holdings undertook the obligation to pay.
In addition, paid-in capital includes transaction costs relating to the Merger of $3,080, comprising: i) the fees charged by Pyxis’ legal advisors, consultants and auditors, totaling to $820, ii) $625 representing the cash consideration to LS shareholders upon execution of the Merger and miscellaneous transactional costs and iii) an aggregate $1,635 fee due to Maxim Group LLC, of which $300 was paid in cash and $1,335 was compensated through the issuance of restricted stock (i.e., 310,465 Pyxis’ common shares) at the date of the Merger and accounted for as transaction cost. The aforementioned transaction costs totaling to $1,745 payable in cash were recognized in equity.
On October 28, 2015, the Company’s Board of Directors approved an equity incentive plan (the “EIP”), providing for the granting of share-based awards to directors, officers and employees of the Company and its affiliates and to its consultants and service providers. The maximum aggregate number of shares of common stock of the Company, that may be delivered pursuant to awards granted under the EIP, shall be equal to 15% of the then issued and outstanding number of shares of common stock. On the same date the Company’s Board of Directors approved the issuance of 33,222 restricted shares of the Company’s common stock to certain of its officers. As of December 31, 2015, all such shares had vested and none were issued. The respective stock compensation recognized in the consolidated statement of comprehensive income under General and administrative expenses for the year ended December 31, 2015, amounted to $143.
Stockholder’s re-imbursements/distributions for the years ended December 31, 2013, 2014 and 2015 amounted to $13,457, $nil and $1,248 respectively.
|
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.
|
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.
|
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 |
|
|
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). |
|
(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.
|
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 |
|
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 |
% |
|
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 |
|
|
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 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 |
|
|
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 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 |
|
|
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 |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|