Exhibit
99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following is a discussion of our financial condition and results of operations for the six-month periods ended June 30, 2019 and
2018. Unless otherwise specified herein, references to the “Company,” “we” or “our” shall
include PYXIS TANKERS INC. and its subsidiaries. You should read the following discussion and analysis together with our unaudited
interim consolidated financial statements as of June 30, 2019 and for the six-month periods ended June 30, 2019 and 2018, and
the accompanying notes thereto, included elsewhere in this report. For additional information relating to our management’s
discussion and analysis of financial condition and results of operations, please see our Annual Report on Form 20-F for the year
ended December 31, 2018, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 29, 2019 (the
“2018 Annual Report”).
Forward-Looking
Statements
Our
disclosure and analysis herein pertaining to our operations, cash flows and financial position, including, in particular, the
likelihood of our success in developing and expanding our business and making acquisitions, includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend
upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “projects,” “forecasts,”
“may,” “should” and similar expressions are forward-looking statements. All statements herein that are
not statements of either historical or current facts are forward-looking statements. Forward-looking statements include, but are
not limited to, such matters as our future operating or financial results, global and regional economic and political conditions
(including piracy), pending vessel acquisitions, our business strategy and expected capital spending or operating expenses, including
dry-docking and insurance costs, competition in the product tanker industry, statements about shipping market trends (including
charter rates and factors affecting supply and demand), our financial condition and liquidity, including our ability to obtain
financing in the future to fund capital expenditures, acquisitions and other general corporate activities, our ability to enter
into fixed-rate charters after our current charters expire and our ability to earn income in the spot market and our expectations
of the availability of vessels to purchase, the time it may take to construct new vessels, and vessels’ useful lives. Many
of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject
to risks and uncertainties that are described more fully under “Item 3. Key Information – D. Risk Factors” of
the 2018 Annual Report. Any of these factors or a combination of these factors could materially affect our future results of operations
and the ultimate accuracy of the forward-looking statements.
Factors
that might cause future results to differ include, but are not limited to, the following:
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changes
in governmental rules and regulations or actions taken by regulatory authorities; |
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changes
in economic and competitive conditions affecting our business, including market fluctuations in charter rates and charterers’
abilities to perform under existing time charters; |
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the
length and number of off-hire periods and dependence on third-party managers; and |
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other
factors discussed under “Item 3. Key Information – D. Risk Factors” of the 2018 Annual Report. |
You
should not place undue reliance on forward-looking statements contained herein because they are statements about events that are
not certain to occur as described or at all. All forward-looking statements herein are qualified in their entirety by the cautionary
statements contained herein. These forward-looking statements are not guarantees of our future performance, and actual results
and future developments may vary materially from those projected in the forward-looking statements. Except to the extent required
by applicable law or regulation, we undertake no obligation to release publicly any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Overview
We
are PYXIS TANKERS INC., a corporation incorporated in the Republic of the Marshall Islands on March 23, 2015. We currently own,
directly or indirectly, 100% ownership interest in the following six vessel-owning companies:
| ● |
SECONDONE
CORPORATION LTD, established under the laws of the Republic of Malta (“Secondone”); |
| ● |
THIRDONE
CORPORATION LTD, established under the laws of the Republic of Malta (“Thirdone”); |
| ● |
FOURTHONE
CORPORATION LTD, established under the laws of the Republic of Malta (“Fourthone”); |
| ● |
SIXTHONE
CORP., established under the laws of the Republic of the Marshall Islands (“Sixthone”); |
| ● |
SEVENTHONE
CORP., established under the laws of the Republic of the Marshall Islands (“Seventhone”); and |
| ● |
EIGHTHONE
CORP., established under the laws of the Republic of the Marshall Islands (“Eighthone,” and collectively with
Secondone, Thirdone, Fourthone, Sixthone and Seventhone, the “Vessel-owning companies”). |
The
Vessel-owning companies are engaged in the marine transportation of liquid cargoes through the ownership and operation of tanker
vessels, as listed below:
Vessel-owning company | |
Incorporation date | |
Vessel | |
DWT | |
Year built | |
Acquisition date |
| Secondone | |
05/23/2007 | |
Northsea Alpha | |
8,615 | |
2010 | |
05/28/2010 |
| Thirdone | |
05/23/2007 | |
Northsea Beta | |
8,647 | |
2010 | |
05/25/2010 |
| Fourthone | |
05/30/2007 | |
Pyxis Malou | |
50,667 | |
2009 | |
02/16/2009 |
| Sixthone | |
01/15/2010 | |
Pyxis Delta | |
46,616 | |
2006 | |
03/04/2010 |
| Seventhone | |
05/31/2011 | |
Pyxis Theta | |
51,795 | |
2013 | |
09/16/2013 |
| Eighthone | |
02/08/2013 | |
Pyxis Epsilon | |
50,295 | |
2015 | |
01/14/2015 |
Secondone,
Thirdone and Fourthone were initially established under the laws of the Republic of the Marshall Islands, under the names SECONDONE
CORP., THIRDONE CORP. and FOURTHONE CORP., respectively. In March and April 2018, these vessel-owning companies completed their
re-domiciliation under the jurisdiction of the Republic of Malta, and were renamed as mentioned above. For more information, please
refer to Notes 1 and 7 to our unaudited interim consolidated financial statements for the six-month periods ended June 30, 2019
and 2018, included elsewhere herein.
Vessel
Management
PYXIS
MARITIME CORP. (“Maritime”), a corporation established under the laws of the Republic of the Marshall Islands, which
is beneficially owned by Mr. Valentios (“Eddie”) Valentis, our Chairman, Chief Executive Officer and Class I Director,
provides certain ship management services to the Vessel-owning companies, including but not limited to chartering, financing and
accounting, sale and purchase, insurance, operations, dry-docking and construction supervision, for a fixed daily fee per vessel.
With
effect from the delivery of each vessel, the crewing and technical management of the vessels were contracted to INTERNATIONAL
TANKER MANAGEMENT LTD. (“ITM”) with permission from Maritime. ITM is an unrelated third party technical manager, represented
by its branch based in Dubai, UAE. Each ship-management agreement with ITM continues by its terms until it is terminated by either
party. The ship-management agreements may be cancelled by us or ITM for any reason at any time upon three months’ advance
notice.
Results
of Operations
Our
revenues consist of earnings under the charters on which we employ our vessels. We believe that the important measures for analyzing
trends in the results of our operations consist of the following:
Revenues
We
generate revenues by chartering our vessels for the transportation of petroleum products and other liquid bulk items, such as
organic chemicals and vegetable oils. Revenues are generated primarily by the number of vessels in our fleet, the number of voyage
days employed and the amount of daily charter hire earned under vessels’ charters. These factors, in turn, can be affected
by a number of decisions by us, including the amount of time spent positioning a vessel for charter, dry-dockings, repairs, maintenance
and upgrading, as well as the age, condition and specifications of our ships and supply and demand factors in the product tanker
market. At June 30, 2019, four of the vessels in our fleet were employed in time charters, one in the spot market and one was
awaiting orders. Revenues from time charter agreements providing for varying daily rates are accounted for as operating leases
and thus are recognized on a straight line basis over the term of the time charter as service is performed. Revenue under spot
charters is recognized from loading of the current spot charter to discharge of the current spot charter as discussed below. Vessels
operating on time charters provide more predictable cash flows, but can yield lower profit margins than vessels operating in the
spot market during periods characterized by favorable market conditions. The vessel owner generally pays commissions on both types
of charters on the gross charter rate. Address commissions represent a discount provided directly to the charterers based on a
fixed percentage of the agreed upon charter and is presented as a reduction in revenues.
Time
Charters
A
time charter is a contract for the use of a vessel for a specific period of time during which the charterer pays substantially
all of the voyage expenses, including port and canal charges and the cost of bunker (fuel oil), but the vessel owner pays vessel
operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable
stores and tonnage taxes. Time charter rates are usually set at fixed rates during the term of the charter. Prevailing time charter
rates fluctuate on a seasonal and on a year-to-year basis and, as a result, when employment is being sought for a vessel with
an expiring or terminated time charter, the prevailing time charter rates achievable in the time charter market may be substantially
higher or lower than the expiring or terminated time charter rate. Fluctuations in time charter rates are influenced by changes
in spot charter rates, which are in turn influenced by a number of factors, including vessel supply and demand. The main factors
that could increase total vessel operating expenses are crew salaries, insurance premiums, spare parts orders, repairs that are
not covered under insurance policies and lubricant prices.
Spot
Charters
Generally,
a spot charter refers to a contract to carry a specific cargo for a single voyage, which commonly lasts from several days up to
three months. Spot charters typically involve the carriage of a specific amount and type of cargo on a load-port to discharge-port
basis, subject to various cargo handling terms, and the vessel owner is paid on a per-ton basis. Under a spot charter, the vessel
owner is responsible for the payment of all expenses including its capital costs, voyage expenses (such as port, canal and bunker
costs) and vessel operating expenses. Fluctuations in spot charter rates are caused by imbalances in the availability of cargoes
for shipment and the number of vessels available at any given time to transport these cargoes at a given port. Demurrage income
represents payments by a charterer to a vessel owner when loading or discharging time exceeds the stipulated time in the spot
charter. We have determined that demurrage represents variable consideration and we estimate demurrage at contract inception.
Demurrage income estimated, net of address commission, is recognized over the time of the charter as the performance obligation
is satisfied.
Voyage
Related Costs and Commissions
We
incur voyage related costs for our vessels operating under spot charters, which mainly include port and canal charges and bunker
expenses. Port and canal charges and bunker expenses primarily increase in periods during which vessels are employed on spot charters
because these expenses are for the account of the vessel owner. Contract fulfillment costs are capitalized and amortized as the
performance obligation is satisfied and certain other criteria are met. Voyage costs during the ballast voyage
represented costs to fulfil a contract which give rise to an asset and are capitalized and amortized over the spot charter, consistent
with the recognition of voyage revenues from spot charter from load-to-discharge, while voyage costs incurred during the spot
charter are expensed as incurred. Brokerage commissions payable for both spot and time charter contracts, if any, depend on a
number of factors, including, among other things, the number of shipbrokers involved in arranging the charter and the amount of
commissions charged by brokers related to the charterer. Such commissions are deferred and amortized over the related period in
a charter to the extent revenue has been deferred since commissions are earned as revenues are earned.
Vessel
Operating Expenses
We
incur vessel operating expenses for our vessels operating under time and spot charters. Vessel operating expenses primarily consist
of crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable
stores, tonnage taxes and other miscellaneous expenses necessary for the operation of the vessel. All vessel operating expenses
are expensed as incurred.
General
and Administrative Expenses
The
primary components of general and administrative expenses consist of the annual fee payable to Maritime for the administrative
services under our Head Management Agreement, which includes the services of our senior executive officers, and the expenses associated
with being a public company. Such public company expenses include the costs of preparing public reporting documents, legal and
accounting costs, including costs of legal and accounting professionals and staff, and costs related to compliance with the rules,
regulations and requirements of the SEC, the rules of NASDAQ, board of directors’ compensation and investor relations.
Management
Fees
We
pay management fees to Maritime and ITM for commercial and technical management services, respectively, for our vessels. These
services include: obtaining employment for our vessels and managing our relationships with charterers; strategic management services;
technical management services, which include managing day-to-day vessel operations, ensuring regulatory and classification society
compliance, arranging our hire of qualified officers and crew, arranging and supervising dry-docking and repairs and arranging
insurance for vessels; and providing shoreside personnel who carry out the management functions described above. As part of their
ship management services, Maritime provides us with supervision services for new construction of vessels; these costs are capitalized
as part of the total delivered cost of the vessel.
Depreciation
We
depreciate the cost of our vessels after deducting the estimated residual value, on a straight-line basis over the expected useful
life of each vessel, which is estimated to be 25 years from the date of initial delivery from the shipyard. We estimate the residual
values of our vessels to be $300 per lightweight ton.
Interest
and Finance Costs
We have historically incurred interest expense
and financing costs in connection with the debt incurred to partially finance the acquisition of our existing fleet. We have also
incurred interest expense in relation to the $5.0 million promissory note we issued in favor of Maritime Investors Corp., which
is more fully described under the section entitled “Liquidity, Debt and Capital Structure”. Except for the interest
payments under our promissory note and the new loan for the Eighthone that are based on fixed rates, the interest rate under our
debt agreements is linked to the three month LIBOR rate. In order to hedge our variable interest rate exposure, on January 19,
2018, we, via one of our vessel-owning subsidiaries, purchased an interest rate cap with one of our lenders for a notional amount
of $10.0 million and a cap rate of 3.5%. The interest rate cap will terminate on July 18, 2022. In the future, we may consider
the use of additional financial hedging products to further limit our interest rate exposure.
In
evaluating our financial condition, we focus on the above financial and operating measures as well as fleet and vessel type for
utilization, time charter equivalent rates and operating expenses to assess our operating performance. We also monitor our cash
position and outstanding debt to assess short-term liquidity and our ability to finance further fleet expansion. Discussions about
possible acquisitions or sales of existing vessels are based on our financial and operational criteria which depend on the state
of the charter market, availability of vessel investments, employment opportunities, anticipated dry-docking costs and general
economic prospects.
Selected
Information
Our
selected consolidated financial and other data for the six months ended June 30, 2018 and 2019 and as of June 30, 2019, presented
in the tables below, have been derived from our unaudited interim consolidated financial statements and notes thereto included
elsewhere herein. Our selected consolidated financial data as of December 31, 2018, presented in the tables below have been derived
from our audited financial statements and notes thereto, included in our 2018 Annual Report.
| Statements of Comprehensive Loss Data | |
Six Months ended June 30, | |
| (In thousands of U.S. Dollars, except per share data) | |
2018 | | |
2019 | |
| Revenues, net | |
$ | 13,567 | | |
$ | 13,180 | |
| Voyage related costs and commissions | |
| (3,939 | ) | |
| (2,926 | ) |
| Vessel operating expenses | |
| (6,338 | ) | |
| (6,402 | ) |
| General and administrative expenses | |
| (1,247 | ) | |
| (1,187 | ) |
| Management fees, related parties | |
| (357 | ) | |
| (359 | ) |
| Management fees, other | |
| (465 | ) | |
| (465 | ) |
| Depreciation and amortization of special survey costs | |
| (2,793 | ) | |
| (2,822 | ) |
| Vessel impairment charge | |
| (1,543 | ) | |
| — | |
| Bad debt provisions | |
| (15 | ) | |
| (26 | ) |
| Gain from debt extinguishment | |
| 4,306 | | |
| — | |
| Gain / (Loss) from financial derivative instrument | |
| 7 | | |
| (25 | ) |
| Interest and finance costs, net | |
| (1,836 | ) | |
| (2,905 | ) |
| Net loss | |
$ | (653 | ) | |
$ | (3,937 | ) |
| | |
| | | |
| | |
| Loss per common share, basic and diluted | |
$ | (0.03 | ) | |
$ | (0.19 | ) |
| | |
| | | |
| | |
| Weighted average number of shares, basic and diluted | |
| 20,877,893 | | |
| 21,072, 472 | |
| Balance Sheets Data | |
December 31, | | |
June 30, | |
| (In thousands of U.S. Dollars) | |
2018 | | |
2019 | |
| Total current assets | |
$ | 4,307 | | |
$ | 2,925 | |
| Total other non-current assets | |
| 4,318 | | |
| 4,606 | |
| Total fixed assets, net | |
| 107,992 | | |
| 105,922 | |
| Total assets | |
| 116,617 | | |
| 113,453 | |
| Total current liabilities | |
| 13,545 | | |
| 16,537 | |
| Total non-current liabilities | |
| 63,129 | | |
| 60,918 | |
| Total stockholders’ equity | |
$ | 39,943 | | |
$ | 35,998 | |
| Statements of Cash Flows Data | |
Six Months ended June 30, | |
| (In thousands of U.S. Dollars) | |
2018 | | |
2019 | |
| | |
| | |
| |
| Net cash provided by operating activities | |
$ | 3,380 | | |
$ | 3,183 | |
| Net cash used in investing activities | |
| — | | |
| (268 | ) |
| Net cash used in financing activities | |
| (4,927 | ) | |
| (2,159 | ) |
| Change in cash and cash equivalents and restricted cash | |
$ | (1,547 | ) | |
$ | 756 | |
| Fleet data | |
Six Months ended June 30, | |
| | |
2018 | | |
2019 | |
| Ownership days (1) | |
| 1,086 | | |
| 1,086 | |
| Available days (2) | |
| 1,064 | | |
| 1,058 | |
| Operating days (3) | |
| 924 | | |
| 924 | |
| Utilization % (4) | |
| 86.8 | % | |
| 87.3 | % |
| Daily time charter equivalent rate (5) | |
$ | 10,419 | | |
$ | 11,096 | |
| Average number of vessels (6) | |
| 6.0 | | |
| 6.0 | |
| Number of vessels at period end | |
| 6 | | |
| 6 | |
| Weighted average age of vessels at period end (7) | |
| 7.3 | | |
| 8.3 | |
| (1) |
Ownership
days are the total number of days in a period during which we owned each of the vessels in our fleet. Ownership days are an
indicator of the size of our fleet over a period and affect both the amount of revenues generated and the amount of expenses
incurred during the respective period. |
| (2) |
Available
days are the number of ownership days in a period, less the aggregate number of days that our vessels were off-hire due to
scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and intermediate dry-dockings and the aggregate
number of days that we spent positioning our vessels during the respective period for such repairs, upgrades and surveys.
Available days measures the aggregate number of days in a period during which vessels should be capable of generating revenues. |
| (3) |
Operating
days are the number of available days in a period, less the aggregate number of days that our vessels were off-hire or out
of service due to any reason, including technical breakdowns and unforeseen circumstances. Operating days measures the aggregate
number of days in a period during which vessels actually generate revenues. |
| (4) |
We
calculate fleet utilization by dividing the number of operating days during a period by the number of available days during
the same period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable
employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled
repairs or repairs under guarantee, vessel upgrades, special surveys and intermediate dry-dockings or vessel positioning. |
| (5) |
Daily
Time Charter Equivalent (“TCE”) rate is a standard shipping industry performance measure of the average daily
revenue performance of a vessel on a per voyage basis. TCE is not calculated in accordance with U.S. GAAP. We utilize TCE
because we believe it is a meaningful measure to compare period-to-period changes in our performance despite changes in the
mix of charter types (i.e., spot charters, time charters and bareboat charters) under which our vessels may be employed between
the periods. Our management also utilizes TCE to assist them in making decisions regarding employment of the vessels. We believe
that our method of calculating TCE is consistent with industry standards and is calculated by dividing voyage revenues after
deducting voyage expenses, including commissions, by operating days for the relevant period. Voyage expenses primarily consist
of brokerage commissions, port, canal and bunker costs that are unique to a particular voyage, which would otherwise be paid
by the charter under a time charter contract. |
| (6) |
Average
number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the
number of days each vessel was part of our fleet during such period divided by the number of calendar days in the period. |
| (7) |
Weighted
average age of the fleet is the sum of the ages of our vessels, weighted by the dead weight tonnage (“dwt”) of
each vessel on the total fleet dwt. |
The
following table reflects the calculation of our daily TCE rates for the six-month periods ended June 30, 2018 and 2019:
| | |
Six Months ended June 30, (thousands of U.S. Dollars, except for operating days and daily TCE rates) | |
| | |
2018 | | |
2019 | |
| Revenues, net | |
$ | 13,567 | | |
$ | 13,180 | |
| Voyage related costs and commissions | |
| (3,939 | ) | |
| (2,926 | ) |
| Time charter equivalent revenues | |
$ | 9,628 | | |
$ | 10,254 | |
| | |
| | | |
| | |
| Operating days for fleet | |
| 924 | | |
| 924 | |
| | |
| | | |
| | |
| Daily TCE rate (1) | |
$ | 10,419 | | |
$ | 11,096 | |
(1)
Subject to rounding
The
following table reflects the daily TCE rate, daily operating expenses (“Opex”) and utilization rate on a per vessel
type basis for the six-month periods ended June 30, 2018 and 2019:
| (Amounts in U.S. Dollars) | |
| |
Six Months Ended June 30, | |
| | |
| |
2018 | | |
2019 | |
| Eco-Efficient MR2: (2 of our vessels) | |
| |
| | | |
| | |
| | |
TCE | |
| 12,863 | | |
| 13,673 | |
| | |
Opex | |
| 5,864 | | |
| 5,771 | |
| | |
Utilization % | |
| 93.6 | % | |
| 100.0 | % |
| Eco-Modified MR2: (1 of our vessels)` | |
| |
| | | |
| | |
| | |
TCE | |
| 11,785 | | |
| 12,809 | |
| | |
Opex | |
| 6,768 | | |
| 7,228 | |
| | |
Utilization % | |
| 83.6 | % | |
| 98.0 | % |
| Standard MR2: (1 of our vessels) | |
| |
| | | |
| | |
| | |
TCE | |
| 10,944 | | |
| 12,329 | |
| | |
Opex | |
| 5,830 | | |
| 5,959 | |
| | |
Utilization % | |
| 98.3 | % | |
| 100.0 | % |
| Small Tankers: (2 of our vessels) | |
| |
| | | |
| | |
| | |
TCE | |
| 6,391 | | |
| 4,981 | |
| | |
Opex | |
| 5,346 | | |
| 5,319 | |
| | |
Utilization % | |
| 75.7 | % | |
| 63.8 | % |
| Fleet: (6 vessels) | |
| |
| | | |
| | |
| | |
TCE | |
| 10,419 | | |
| 11,096 | |
| | |
Opex | |
| 5,836 | | |
| 5,895 | |
| | |
Utilization % | |
| 86.8 | % | |
| 87.3 | % |
Results
of Operations
Six
months ended June 30, 2019 and 2018
The
average number of vessels in our fleet was 6.0 for the six months ended June 30, 2019 and 2018.
| ● |
Revenues,
net: Revenues, net of $13.2 million for the six months ended June 30, 2019, represented a decrease of $0.4 million, or
2.9%, from $13.6 million in the comparable period in 2018. The decrease in revenues, net during the six-month period ended
June 30, 2019 was driven by lower TCE rates and utilization for the small tankers compared to the same period in 2018. |
| |
|
| ● |
Voyage
related costs and commissions: Voyage related costs and commissions of $2.9 million for the six months ended June 30,
2019, represented a decrease of $1.0 million, or 25.7%, from $3.9 million in the comparable period in 2018. The decrease was
primarily attributed to lower spot chartering activity, which incurs voyage costs. Under spot charters, all voyage expenses
are typically borne by us rather than the charterer and a decrease in spot chartering results in a decrease in voyage related
costs and commissions. |
| |
|
| ● |
Vessel
operating expenses: Vessel operating expenses for the six months ended June 30, 2019 were $6.4 million, represented a
slight increase of less than $0.1 million, or 1.0%, from $6.3 million in the comparable period in 2018. |
| |
|
| ● |
General
and administrative expenses: General and administrative expenses of $1.2 million for the six months ended June 30, 2019,
represented a slight decrease of less than $0.1 million, or 4.8%, from the comparable period in 2018. The decrease in general
and administrative expenses was primarily attributable to improved cost efficiencies. |
| |
|
| ● |
Management
fees: For the six months ended June 30, 2019, management fees payable to Maritime, our ship manager, and ITM, our fleet’s
technical manager, of $0.8 million in the aggregate, remained flat compared to the same period in 2018. |
| |
|
| ● |
Amortization
of special survey costs: Amortization of special survey costs of $0.1 million for the six months ended June 30, 2019,
represented an increase of 112.7%, compared to the same period in 2018 due to Pyxis Malou 10th year special survey performed
during the first quarter of 2019. |
| |
|
| ● |
Depreciation:
Depreciation of $2.7 million for the six months ended June 30, 2019, remained relatively flat compared to the same period
in 2018. |
| |
|
| ● |
Vessel
impairment charge: No vessel impairment charge was recorded during the six months ended June 30, 2019 compared to a vessel
impairment charge of $1.5 million (non-cash) for the comparable period of 2018 that was related to the write down of the carrying
amounts of Northsea Alpha and Northsea Beta to their then fair values. |
| |
|
| ● |
Bad
debt provisions: Bad debt provisions of less than $0.1 million for the six months ended June 30, 2019, remained flat compared
to the same period in 2018. |
| |
|
| ● |
Gain
from debt extinguishment: Gain from debt extinguishment of $4.3 million for the six months ended June 30, 2018, related
to the refinancing of existing indebtedness of Secondone, Thirdone and Fourthone with a new 5-year secured term loan, finalized
in the first quarter of 2018. Approximately $4.3 million was written-off by the previous lender at closing, which was recorded
as gain from debt extinguishment in 2018. There was no such gain recorded during the six months ended June 30, 2019. |
| |
|
| ● |
Gain
/ (Loss) from financial derivative instrument: Loss from financial derivative instrument of less than $0.1 million for
the six months ended June 30, 2019 related to the net loss from the change in fair value of the interest rate cap compared
to a gain of less than $0.1 million in the respective period in 2018. |
| |
|
| ● |
Interest
and finance costs, net: Interest and finance costs, net, of $2.9 million for the six months ended June 30, 2019, represented
an increase of $1.1 million, or 58.2%, from $1.8 million in the comparable period in 2018. The increase was attributable to
higher LIBOR rates paid on floating rate bank debt compared to the comparable period in 2018 and the refinancing of the loans
on four of our vessels at higher interest rates. The total borrowings outstanding increased to $61.2 million at June 30, 2019
from $58.2 million at June 30, 2018 and the overall weighted average interest rate increased to 8.2% in 2019 from 5.1% in
the comparable period in 2018. |
Cash
Flows
Our
principal sources of funds for the six months ended June 30, 2019, have been our cash inflows from the operation of our fleet as
well as cash inflows from the increase in balances due to Maritime. Our principal uses of funds have been
working capital requirements and principal and interest payments on our debt agreements. Cash and cash equivalents as of June
30, 2019, amounted to $1.4 million, compared to $0.5 million as of December 31, 2018. We define working capital as current
assets minus current liabilities. We had a working capital deficit of $13.6 million as of June 30, 2019, compared to the
working capital deficit of $9.2 million as of December 31, 2018. The increase in our working capital deficit was mainly
driven by the increase in current liabilities of $3.0 million as a result of a $1.6 million increase in balances due to
related parties, a $1.0 million increase in hires collected in advance and $0.4 million increase in accrued and other
liabilities. Our working capital deficit further deteriorated in the aggregate by $1.4 million mainly driven by the decrease
in trade accounts receivables, net of $2.2 million, partially offset by a $0.8 million increase in cash and cash
equivalents.
Operating
Activities
| ● |
Net
cash provided by operating activities was $3.2 million for the six months ended June 30, 2019, compared to $3.4 million for
the six months ended June 30, 2018. There were a number of factors driving the decrease in our net cash from operating activities.
Firstly, an increase in cash paid for interest and finance costs, net of $0.9 million compared to the comparable period in
2018, as a result of higher LIBOR rates paid on floating rate bank debt and the refinancing of the existing indebtedness of
four of our vessels at higher interest rates. Secondly, there was an increase by $0.6 million in revenues net of voyage related
costs and commissions, compared to the respective period in 2018, largely attributable to lower voyage related costs and commissions
as a result of lower spot chartering activity. Finally, the movement in changes to assets and liabilities decreased cash from
operating activities by $0.2 million. |
Investing
Activities
| ● |
Net
cash used in investing activities was $0.3 million for the six months ended June 30, 2019 due to the ballast water treatment
system installation in Pyxis Malou. There was no net cash provided by or used in investing activities for the six-month period
ended June 30, 2018. |
Financing
Activities
| ● |
Net
cash used in financing activities was $2.2 million for the six-month period ended June 30, 2019, which mainly reflects the
long-term debt repayments of $2.2 million incurred within the period partially offset by the gross proceeds from the issuance
of common stock of less than $0.1 million. Net cash used in financing activities was $4.9 million for the six-month period
ended June 30, 2018, which mainly reflects the proceeds from new secured term loans of $20.5 million, in aggregate, following
the refinancing of the existing indebtedness of Secondone, Thirdone and Fourthone, as discussed herein, partially offset by
long-term debt repayments of $24.9 million incurred within the period and the payment of financing costs of $0.5 million. |
Debt
Agreements
For
information relating to our debt agreements, please see Note 7 to our financial statements included in our 2018 Annual Report
for the year ended December 31, 2018 and Note 7 to our unaudited interim consolidated financial statements for the six-month periods
ended June 30, 2019 and 2018 included elsewhere herein.
Liquidity
and Capital Resources
Our
principal sources of liquidity are cash flows from operations, borrowings from bank debt, proceeds from issuances of equity and,
we expect in the future, from the selective sale of vessels and the proceeds from further issuances of equity and re-financings
of debt. We expect that our future liquidity requirements will relate primarily to:
| |
● |
our
operating expenses, including dry-docking and special survey costs; |
| |
|
|
| |
● |
payments
of interest and other debt-related expenses and the repayment of principal on our loans; |
| |
|
|
| |
● |
maintenance of cash reserves to provide for contingencies
and to adhere to minimum liquidity for loan covenants including dry-docking reserves; and |
| |
|
|
| |
● |
vessel
acquisitions. |
On
March 30, 2018, we filed with the SEC a prospectus supplement to sell up to $2.3 million of common shares through an At-the-Market
(“ATM”) offering or similar direct placement. We did not issue any securities under this program, but on November
19, 2018 we amended the prospectus supplement to increase the offering to $3.675 million. In November 2018 we sold 182,297 common
shares and our outstanding common shares increased from 20,877,893 to 21,060,190. Following the issuance and sale of a further
28,349 shares of common stock under the ATM Program during April 2019, the Company’s outstanding common shares increased
from 21,060,190 to 21,088,539 as at June 30, 2019.
We
expect to rely upon operating cash flows from the employment of our vessels on spot and time charters and amounts due to related
parties, long-term borrowings and the proceeds from future equity and debt offerings to fund our liquidity and capital needs and
implement our growth plan. We perform on a regular basis cash flow projections to evaluate whether we will be in a position to
cover our liquidity needs for the next 12-month period and be in compliance with the financial and security collateral cover ratio
covenants under the existing debt agreements. In developing estimates of future cash flows, we make assumptions about the vessels’
future performance, with significant assumptions relating to time charter equivalent rates by vessel type, vessels’ operating
expenses, vessels’ capital expenditures, fleet utilization, our management fees, general and administrative expenses, and
debt servicing requirements. The assumptions used to develop estimates of future cash flows are based on historical trends as
well as future expectations. As of June 30, 2019 we had a working capital deficit of $13.6 million, defined as current assets
minus current liabilities. As of the filing date of the unaudited interim consolidated financial statements, we expect that we
will be in a position to cover our liquidity needs for the next 12-month period through cash generated from operations and by
managing our working capital requirements. In addition, we may consider the raising of capital including by incurring additional
debt, issuing equity or debt securities, through joint ventures and / or sale of assets.
Our business is capital intensive and our
future success will depend on our ability to maintain a high-quality fleet through the acquisition of modern tanker vessels and
the selective sale of older tanker vessels. We are pursuing a sale or other long-term strategy for the small tankers including
without limitation a bareboat charter agreement with purchase option or commitment. The acquisitions and disposals
or other long-term strategy will be principally subject to management’s expectation of future market conditions,
our ability to acquire and dispose of tanker vessels on favorable terms as well as access to cost-effective capital on reasonable
terms.
We
do not intend to pay dividends to the holders of our shares in the near future and expect to retain our cash flows primarily for
the payment of vessel operating costs, dry-docking costs, debt servicing and other obligations, general corporate and administrative
expenses, and reinvestment in our business (such as to fund vessel or fleet acquisitions), in each case, as determined by our
board of directors and consistent with restrictions in our debt obligations.
On
May 14, 2019, we entered into a second amendment to the Amended & Restated Promissory Note which (i) extended the repayment
of the outstanding principal, in whole or in part, until the earlier of a) one year after the repayment of the credit facility
of Eighthone with EntrustPermal (the “Credit Facility”) in September 2023, b) January 15, 2024 and c) repayment
of any PIK interest and principal deficiency amount under the Credit Facility, and (ii) increased the interest rate to 9.0% per
annum of which 4.5% shall be paid in cash and 4.5% shall be paid in common shares calculated on the volume weighted average closing
share price for the 10 day period immediately prior to each quarter end. The new interest rate is effective from April 1, 2019.
After the repayment restrictions have been lifted per the Credit Facility, at our option, we may continue to pay interest on the
Amended & Restated Promissory Note in the afore-mentioned combination of cash and shares or pay all interest costs in cash.
On June 6, 2017, the lender of Sixthone and
Seventhone agreed to extend the maturity of its respective loans from September 2018 to September 2022 under the same applicable
margin, but with an extended amortization schedule. The aggregate outstanding balance of these loans as of June 30, 2019, of $18.8
million is scheduled to be repaid in 13 quarterly installments of $0.65 million each and a balloon payment of $10.4 million. As
of June 30, 2019, these subsidiaries were restricted from paying dividends to the Company under the HSH loan agreement because
the ratio of the Company’s total liabilities to market value adjusted total assets was 69.5%, or 4.5% higher than the threshold
under which dividends can be paid. This requirement is only applicable in order to assess whether the the Sixthone and Seventhone
are entitled to distribute dividends to Pyxis and does not constitute an event of default under this or our other loan agreements.
On
February 2, 2018, we filed with the SEC a registration statement on Form F-3 (the “Shelf Registration Statement”),
under which we may sell from time to time common stock, preferred stock, debt securities, warrants, purchase contracts and units,
each as described therein, in any combination, in one or more offerings up to an aggregate dollar amount of $100.0 million. In
addition, the selling stockholders referred to in the registration statement may sell in one of more offerings up to 5,233,222
shares of our common stock from time to time as described therein. The registration statement was declared effective by the SEC
on February 12, 2018. On March 30, 2018, we filed a prospectus supplement to the Shelf Registration Statement related to an ATM
Program under which we may, from time to time, issue and sell shares of our common stock up to an aggregate offering of $2.3 million
through a sales agent as either agent or principal. No shares were sold under this initial ATM Program, but on November 19, 2018
the prospectus supplement was amended to increase the offering to $3.675 million. As of December 31, 2018, following the issuance
and sale of 182,297 shares of common stock under the ATM Program during 2018, our outstanding common shares increased from 20,877,893
to 21,060,190. Following the issuance and sale of a further 28,349 shares of common stock under the ATM Program during April 2019,
our outstanding common shares increased from 21,060,190 to 21,088,539 as at June 30, 2019.
On
February 28, 2018, we refinanced existing indebtedness of $26.9 million under the Secondone, Thirdone and Fourthone loan agreements
with a new 5-year secured loan of $20.5 million and cash of $2.1 million. The remaining balance of approximately $4.3 million
was written-off by the previous lender at closing, which was recorded as gain from debt extinguishment in the first quarter of
2018. The new loan bears interest at LIBOR plus a margin of 4.65% per annum, and matures in February 2023. The loan is repayable
in quarterly installments and a balloon payment. Standard loan covenants include, among others, a minimum loan to value ratio
and liquidity. As a condition subsequent to the execution of this loan agreement, the borrowers, Secondone, Thirdone and Fourthone,
were required to complete all required procedures for their re-domiciliation to the jurisdiction of the Republic of Malta by May
1, 2018. The relevant re-domiciliations were completed in March and April 2018.
On
September 27, 2018, Eighthone, our vessel owning subsidiary that owns the Pyxis Epsilon, entered into a new $24.0 million loan
agreement for the purpose of refinancing the outstanding indebtedness under the previous loan facility. The new facility matures
in September 2023 and is secured by a first priority mortgage over the vessel, general assignment covering earnings, insurances
and requisition compensation, an account pledge agreement and a share pledge agreement concerning the respective vessel-owning
subsidiary and technical and commercial managers’ undertakings. The new loan facility bears an interest rate of 11.0% per
annum and incurs fees due upfront and upon early prepayment or final repayment of outstanding principal. The principal obligation
amortizes in 18 quarterly installments starting on March 29, 2019, equal to the lower of $0.4 million and excess cash computed
through a cash sweep mechanism, plus a balloon payment due at maturity. The facility also imposes certain customary covenants
and restrictions with respect to, among other things, the borrower’s ability to distribute dividends, incur additional indebtedness,
create liens, change its share capital, engage in mergers, or sell the vessel and a minimum collateral value to outstanding loan
principal. After repayment of existing loans, the new 5-year secured loan provided us approximately $7.3 million of additional
liquidity for general corporate purposes.
The Company was in compliance with all
of the loan covenants in its loan agreements. In addition, as of June 30, 2019, there was no amount available to be drawn down
by the Company under its existing loan agreements.
We
have historically incurred interest expense and financing costs in connection with the debt incurred to partially finance the
acquisition of our existing fleet. The interest rate is generally linked to the three-month LIBOR rate. In order to hedge our
variable interest rate exposure, on January 19, 2018, we, via one of our vessel-owning subsidiaries, purchased an interest rate
cap with one of our lenders for a notional amount of $10.0 million and a cap rate of 3.5%. The interest rate cap will terminate
on July 18, 2022. In the future, we may consider the use of additional financial hedging products to limit our interest rate exposure.
Recent
Developments
For
information relating to our recent developments, please refer to section “Liquidity and Capital Resources” above and
to Note 14 to our unaudited interim consolidated financial statements as of June 30, 2019 and for the six-month periods
ended June 30, 2019 and 2018 included elsewhere herein.
Fleet
Information (as of August 08, 2019)
| | |
| |
| |
Carrying | | |
| |
| |
Charter | | |
Anticipated |
| | |
| |
| |
Capacity | | |
Year | |
Type of | |
Rate | | |
Redelivery |
| Vessel
Name | |
Shipyard | |
Vessel type | |
(dwt) | | |
Built | |
Charter | |
(per
day) (1) | | |
Date |
| Pyxis
Epsilon (2) | |
SPP / S.
Korea | |
MR | |
| 50,295 | | |
2015 | |
Time | |
$ | 15,350 | | |
Mar. 2020 |
| Pyxis
Theta (2) | |
SPP / S. Korea | |
MR | |
| 51,795 | | |
2013 | |
Time | |
$ | 15,375 | | |
May 2020 |
| Pyxis
Malou | |
SPP / S. Korea | |
MR | |
| 50,667 | | |
2009 | |
Time | |
$ | 14,000 | | |
Sept. 2019 |
| Pyxis
Delta | |
Hyundai / S. Korea | |
MR | |
| 46,616 | | |
2006 | |
Time | |
$ | 14,500 | | |
Oct. 2019 |
| Northsea
Alpha(3) | |
Kejin / China | |
Small Tanker | |
| 8,615 | | |
2010 | |
Spot | |
| n/a | | |
n/a |
| Northsea
Beta(3) | |
Kejin
/ China | |
Small
Tanker | |
| 8,647 | | |
2010 | |
Spot | |
| n/a | | |
n/a |
| | |
| |
| |
| 216,635 | | |
| |
| |
| | | |
|
| (1) |
These
tables are dated as of August 08, 2019 and show gross rates and do not reflect commissions payable. |
| (2) |
Pyxis
Theta & Pyxis Epsilon have granted the charterer an option to extend the one year time charter for an additional
12 months (+/- 30 days) at a gross charter rate of $17,500/d. |
| (3) |
Management
is pursuing a sale or other long-term strategy for the small tankers. |
The
Pyxis Delta is scheduled for an intermediate survey during 4Q ’19 with expected off-hire of up to 3 days and estimated
cost of $50 thousand. The Pyxis Epsilon is scheduled to have her first dry-docking in 1Q ’20 with expected off-hire
of 25 days and estimated cost of $0.9 million, including BWTS.
PYXIS
TANKERS INC.
INDEX
TO unaudited interim cONSOLIDATED FINANCIAL STATEMENTS
PYXIS
TANKERS INC.
Consolidated
Balance Sheets
As
of December 31, 2018 and June 30, 2019 (unaudited)
(Expressed
in thousands of U.S. Dollars, except for share and per share data)
| | |
Notes | | |
December 31, 2018 | | |
June 30, 2019 | |
| ASSETS | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| CURRENT ASSETS: | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
| | | |
$ | 545 | | |
$ | 1,391 | |
| Restricted cash, current portion | |
| 7 | | |
| 255 | | |
| 69 | |
| Inventories | |
| 4 | | |
| 807 | | |
| 704 | |
| Trade accounts receivable, net | |
| 13 | | |
| 2,585 | | |
| 409 | |
| Prepayments and other assets | |
| | | |
| 115 | | |
| 352 | |
| Total current assets | |
| | | |
| 4,307 | | |
| 2,925 | |
| | |
| | | |
| | | |
| | |
| FIXED ASSETS, NET: | |
| | | |
| | | |
| | |
| Vessels, net | |
| 5, 10 | | |
| 107,992 | | |
| 105,922 | |
| Total fixed assets, net | |
| | | |
| 107,992 | | |
| 105,922 | |
| | |
| | | |
| | | |
| | |
| OTHER NON-CURRENT ASSETS: | |
| | | |
| | | |
| | |
| Restricted cash, net of current portion | |
| 7 | | |
| 3,404 | | |
| 3,500 | |
| Financial derivative instrument | |
| 10 | | |
| 28 | | |
| 3 | |
| Deferred charges, net | |
| 6 | | |
| 740 | | |
| 1,103 | |
| Prepayments and other assets | |
| | | |
| 146 | | |
| - | |
| Total other non-current assets | |
| | | |
| 4,318 | | |
| 4,606 | |
| Total assets | |
| | | |
$ | 116,617 | | |
$ | 113,453 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| CURRENT LIABILITIES: | |
| | | |
| | | |
| | |
| Current portion of long-term debt, net of deferred financing costs | |
| 7 | | |
$ | 4,333 | | |
$ | 4,474 | |
| Trade accounts payable | |
| | | |
| 4,746 | | |
| 4,658 | |
| Due to related parties | |
| 3 | | |
| 3,402 | | |
| 5,027 | |
| Hire collected in advance | |
| | | |
| 422 | | |
| 1,374 | |
| Accrued and other liabilities | |
| | | |
| 642 | | |
| 1,004 | |
| Total current liabilities | |
| | | |
| 13,545 | | |
| 16,537 | |
| | |
| | | |
| | | |
| | |
| NON-CURRENT LIABILITIES: | |
| | | |
| | | |
| | |
| Long-term debt, net of current portion and deferred financing costs | |
| 7 | | |
| 58,129 | | |
| 55,918 | |
| Promissory note | |
| 3 | | |
| 5,000 | | |
| 5,000 | |
| Total non-current liabilities | |
| | | |
| 63,129 | | |
| 60,918 | |
| | |
| | | |
| | | |
| | |
| COMMITMENTS AND CONTINGENCIES | |
| 11 | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | |
| STOCKHOLDERS’ EQUITY: | |
| | | |
| | | |
| | |
| Preferred stock ($0.001 par value; 50,000,000 shares authorized; none issued) | |
| 8 | | |
| - | | |
| - | |
| Common stock ($0.001 par value; 450,000,000 shares authorized; | |
| | | |
| | | |
| | |
| 21,060,190 and 21,088,539 shares issued and outstanding at | |
| | | |
| | | |
| | |
| each of December 31, 2018 and June 30, 2019) | |
| 8 | | |
| 21 | | |
| 21 | |
| Additional paid-in capital | |
| 8 | | |
| 74,767 | | |
| 74,759 | |
| Accumulated deficit | |
| | | |
| (34,845 | ) | |
| (38,782 | ) |
| Total stockholders’ equity | |
| | | |
| 39,943 | | |
| 35,998 | |
| Total liabilities and stockholders’ equity | |
| | | |
$ | 116,617 | | |
$ | 113,453 | |
The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.
PYXIS
TANKERS INC.
Unaudited
Interim Consolidated Statements of Comprehensive Loss
For
the six–month periods ended June 30, 2018 and 2019
(Expressed
in thousands of U.S. Dollars, except for share and per share data)
| | |
| | |
Six Months Ended | | |
Six Months Ended | |
| | |
Notes | | |
June 30, 2018 | | |
June 30, 2019 | |
| | |
| | |
| | |
| |
| Revenues, net | |
| 13 | | |
$ | 13,567 | | |
$ | 13,180 | |
| | |
| | | |
| | | |
| | |
| Expenses: | |
| | | |
| | | |
| | |
| Voyage related costs and commissions | |
| 3 | | |
| (3,939 | ) | |
| (2,926 | ) |
| Vessel operating expenses | |
| | | |
| (6,338 | ) | |
| (6,402 | ) |
| General and administrative expenses | |
| 3 | | |
| (1,247 | ) | |
| (1,187 | ) |
| Management fees, related parties | |
| 3 | | |
| (357 | ) | |
| (359 | ) |
| Management fees, other | |
| | | |
| (465 | ) | |
| (465 | ) |
| Amortization of special survey costs | |
| 6 | | |
| (55 | ) | |
| (117 | ) |
| Depreciation | |
| 5 | | |
| (2,738 | ) | |
| (2,705 | ) |
| Vessel impairment charge | |
| 10 | | |
| (1,543 | ) | |
| - | |
| Bad debt provisions | |
| | | |
| (15 | ) | |
| (26 | ) |
| Operating loss | |
| | | |
| (3,130 | ) | |
| (1,007 | ) |
| | |
| | | |
| | | |
| | |
| Other income / (expenses): | |
| | | |
| | | |
| | |
| Gain from debt extinguishment | |
| 7 | | |
| 4,306 | | |
| - | |
| Gain / (Loss) from financial derivative instrument | |
| 10 | | |
| 7 | | |
| (25 | ) |
| Interest and finance costs, net | |
| 3, 12 | | |
| (1,836 | ) | |
| (2,905 | ) |
| Total other income / (expenses), net | |
| | | |
| 2,477 | | |
| (2,930 | ) |
| | |
| | | |
| | | |
| | |
| Net loss | |
| | | |
$ | (653 | ) | |
$ | (3,937 | ) |
| | |
| | | |
| | | |
| | |
| Loss per common share, basic and diluted | |
| 9 | | |
$ | (0.03 | ) | |
$ | (0.19 | ) |
| | |
| | | |
| | | |
| | |
| Weighted average number of common shares, basic and diluted | |
| 9 | | |
| 20,877,893 | | |
| 21,072,472 | |
The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.
PYXIS
TANKERS INC.
Unaudited
Interim Consolidated Statements of Stockholders’ Equity
For
the six–month periods ended June 30, 2018 and 2019
(Expressed
in thousands of U.S. Dollars, except for share and per share data)
| | |
| | |
| | |
Additional | | |
| | |
Total | |
| | |
Common Stock | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| | |
# of Shares | | |
Par Value | | |
Capital | | |
Deficit | | |
Equity | |
| Balance January 1, 2018 | |
| 20,877,893 | | |
$ | 21 | | |
$ | 74,766 | | |
$ | (26,631 | ) | |
$ | 48,156 | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| (653 | ) | |
| (653 | ) |
| Balance June 30, 2018 | |
| 20,877,893 | | |
$ | 21 | | |
$ | 74,766 | | |
$ | (27,284 | ) | |
$ | 47,503 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance January 1, 2019 | |
| 21,060,190 | | |
$ | 21 | | |
$ | 74,767 | | |
$ | (34,845 | ) | |
$ | 39,943 | |
| Net result from the issuance of common stock | |
| 28,349 | | |
| - | | |
| (8 | ) | |
| - | | |
| (8 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| (3,937 | ) | |
| (3,937 | ) |
| Balance June 30, 2019 | |
| 21,088,539 | | |
$ | 21 | | |
$ | 74,759 | | |
$ | (38,782 | ) | |
$ | 35,998 | |
The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.
PYXIS
TANKERS INC.
Unaudited
Interim Consolidated Statements of Cash Flows
For
the six–month periods ended June 30, 2018 and 2019
(Expressed
in thousands of U.S. Dollars)
| | |
Six Months Ended | | |
Six Months Ended | |
| | |
June 30, 2018 | | |
June 30, 2019 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net loss | |
$ | (653 | ) | |
$ | (3,937 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |
| | | |
| | |
| Depreciation | |
| 2,738 | | |
| 2,705 | |
| Amortization of special survey costs | |
| 55 | | |
| 117 | |
| Amortization and write-off of financing costs | |
| 146 | | |
| 131 | |
| Vessel impairment charge | |
| 1,543 | | |
| - | |
| Gain from debt extinguishment | |
| (4,306 | ) | |
| - | |
| Change in fair value of financial derivative instrument | |
| (54 | ) | |
| 25 | |
| Bad debt provisions | |
| 15 | | |
| 26 | |
| Changes in assets and liabilities: | |
| | | |
| | |
| Inventories | |
| (151 | ) | |
| 103 | |
| Trade accounts receivable, net | |
| (1,010 | ) | |
| 2,150 | |
| Prepayments and other assets | |
| (323 | ) | |
| (237 | ) |
| Special survey costs | |
| (268 | ) | |
| (480 | ) |
| Trade accounts payable | |
| 1,560 | | |
| (178 | ) |
| Due to related parties | |
| 3,904 | | |
| 1,625 | |
| Hire collected in advance | |
| - | | |
| 952 | |
| Accrued and other liabilities | |
| 184 | | |
| 181 | |
| Net cash provided by operating activities | |
$ | 3,380 | | |
$ | 3,183 | |
| | |
| | | |
| | |
| Cash flow from investing activities: | |
| | | |
| | |
| Ballast water treatment system installation | |
| - | | |
| (268 | ) |
| Net cash used in investing activities | |
$ | - | | |
$ | (268 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Proceeds from long-term debt | |
| 20,500 | | |
| - | |
| Repayment of long-term debt | |
| (24,901 | ) | |
| (2,201 | ) |
| Gross proceeds from issuance of common stock | |
| - | | |
| 43 | |
| Common stock offering costs | |
| (54 | ) | |
| (1 | ) |
| Payment of financing costs | |
| (472 | ) | |
| - | |
| Net cash used in financing activities | |
$ | (4,927 | ) | |
$ | (2,159 | ) |
| | |
| | | |
| | |
| Net (decrease) / increase in cash and cash equivalents and restricted cash | |
| (1,547 | ) | |
| 756 | |
| | |
| | | |
| | |
| Cash and cash equivalents and restricted cash at the beginning of the period | |
| 6,693 | | |
| 4,204 | |
| | |
| | | |
| | |
| Cash and cash equivalents and restricted cash at the end of the period | |
$ | 5,146 | | |
$ | 4,960 | |
| | |
| | | |
| | |
| SUPPLEMENTAL INFORMATION: | |
| | | |
| | |
| Cash paid for interest | |
| 1,746 | | |
| 2,623 | |
| Unpaid portion of ballast water treatment system installation | |
| - | | |
| 268 | |
| Reconciliation
table of cash and restricted cash | |
December
31, 2018 | | |
June
30, 2019 | |
| Cash
and cash equivalents | |
$ | 545 | | |
$ | 1,391 | |
| Restricted
cash, current portion | |
| 255 | | |
| 69 | |
| Restricted
cash, net of current portion | |
| 3,404 | | |
| 3,500 | |
| Total
cash and cash equivalents and restricted cash | |
$ | 4,204 | | |
$ | 4,960 | |
The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.
PYXIS
TANKERS INC.
Notes
to the Unaudited Interim Consolidated Financial Statements
(Expressed
in thousands of U.S. Dollars, except for share and per share data)
| 1. | Basis
of Presentation and General Information: |
PYXIS
TANKERS INC. (“Pyxis”) is a corporation incorporated in the Republic of the Marshall Islands on March 23, 2015. Pyxis
currently owns 100% ownership interest in the following six vessel-owning companies:
| ● | SECONDONE
CORPORATION LTD, established under the laws of the Republic of Malta (“Secondone”); |
| ● | THIRDONE
CORPORATION LTD, established under the laws of the Republic of Malta (“Thirdone”); |
| ● | FOURTHONE
CORPORATION LTD, established under the laws of the Republic of Malta (“Fourthone”); |
| ● | SIXTHONE
CORP., established under the laws of the Republic of the Marshall Islands (“Sixthone”); |
| ● | SEVENTHONE
CORP., established under the laws of the Republic of the Marshall Islands (“Seventhone”);
and |
| ● | EIGHTHONE
CORP., established under the laws of the Republic of the Marshall Islands (“Eighthone,”
and collectively with Secondone, Thirdone, Fourthone, Sixthone and Seventhone, the “Vessel-owning
companies”). |
All
of the Vessel-owning companies are engaged in the marine transportation of liquid cargoes through the ownership and operation
of tanker vessels, as listed below:
Vessel-owning Company | |
Incorporation
date | |
Vessel | |
DWT | | |
Year built | | |
Acquisition
date |
| Secondone | |
05/23/2007 | |
Northsea Alpha | |
| 8,615 | | |
| 2010 | | |
05/28/2010 |
| Thirdone | |
05/23/2007 | |
Northsea Beta | |
| 8,647 | | |
| 2010 | | |
05/25/2010 |
| Fourthone | |
05/30/2007 | |
Pyxis Malou | |
| 50,667 | | |
| 2009 | | |
02/16/2009 |
| Sixthone | |
01/15/2010 | |
Pyxis Delta | |
| 46,616 | | |
| 2006 | | |
03/04/2010 |
| Seventhone | |
05/31/2011 | |
Pyxis Theta | |
| 51,795 | | |
| 2013 | | |
09/16/2013 |
| Eighthone | |
02/08/2013 | |
Pyxis Epsilon | |
| 50,295 | | |
| 2015 | | |
01/14/2015 |
Secondone,
Thirdone and Fourthone were initially established under the laws of the Republic of the Marshall Islands, under the names SECONDONE
CORP., THIRDONE CORP. and FOURTHONE CORP., respectively. In March and April 2018, these vessel-owning companies completed their
re-domiciliation under the jurisdiction of the Republic of Malta and were renamed as mentioned above. For further information,
please refer to Note 7.
The
accompanying unaudited interim consolidated financial statements include the accounts of Pyxis and its vessel-owning companies
(collectively the “Company”) as discussed above as of December 31, 2018 and June 30, 2019 and for the six–month
periods ended June 30, 2018 and 2019.
The
accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required
by U.S. GAAP for complete annual financial statements. In the opinion of the management of the Company, all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation of financial position, operating results and cash flows have
been included in the accompanying unaudited interim consolidated financial statements. Interim results are not necessarily indicative
of results that may be expected for the year ending December 31, 2019. These interim consolidated financial statements should
be read in conjunction with the consolidated financial statements and footnotes for the year ended December 31, 2018, included
in the Company’s Annual Report on Form 20-F filed with the SEC on March 29, 2019 (the “2018 Annual Report”).
PYXIS
MARITIME CORP. (“Maritime”), a corporation established under the laws of the Republic of the Marshall Islands, which
is beneficially owned by Mr. Valentios (“Eddie”) Valentis, the Company’s Chairman, Chief Executive Officer and
Class I Director, provides certain ship management services to the Vessel-owning companies, as discussed in Note 3 to the Company’s
consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report.
With
effect from the delivery of each vessel, the crewing and technical management of the vessels were contracted to INTERNATIONAL
TANKER MANAGEMENT LTD. (“ITM”) with permission from Maritime. ITM is an unrelated third party technical manager, represented
by its branch based in Dubai, UAE. Each ship-management agreement with ITM is in force until it is terminated by either party.
The ship-management agreements can be cancelled either by the Company.
As
of June 30, 2019, Mr. Valentis beneficially owned approximately 80.8% of the Company’s common stock.
PYXIS
TANKERS INC.
Notes
to the Unaudited Interim Consolidated Financial Statements
(Expressed
in thousands of U.S. Dollars, except for share and per share data)
| 2. | Significant
Accounting Policies: |
A
discussion of the Company’s significant accounting policies can be found in the Company’s consolidated financial statements
included in the Annual Report on Form 20-F for the year ended December 31, 2018, filed with the SEC on March 29, 2019. There have
been no material changes to these policies in the six-month period ended June 30, 2019.
The
Company had no transactions which effect comprehensive loss during the six months ended June 30, 2018 and 2019 and accordingly,
comprehensive loss was equal to net loss.
Recent
Accounting Pronouncements Not Yet Adopted:
In
April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments Credit Losses, Financial
Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments, the amendments of which
clarify the modification of accounting for available for sale debt securities excluding applicable accrued interest, which must
be individually assessed for credit losses when fair value is less than the amortized cost basis. In May 2019, the FASB issued
ASU 2019-05, Financial Instruments—Credit Losses (Topic 326)—Targeted Transition Relief, which is the final version
of Proposed Accounting Standards Update 2019-100—Targeted Transition Relief for Topic 326, Financial Instruments—Credit
Losses, which has been deleted. This Update provides entities with an option to irrevocably elect the fair value option applied
on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does
not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance
in Subtopics 820-10, Fair Value Measurement—Overall, and 825-10. The effective date and transition requirements for the
amendments in these Updates are the same as the effective dates and transition requirements in Update 2016-13, as amended by these
Updates. The Company is currently assessing the impact of the adoption of the new accounting standard on its consolidated financial
statements and related disclosures.
| 3. | Transactions
with Related Parties: |
The
following transactions with related parties occurred during the six–month periods ended June 30, 2018 and 2019.
(a)
Maritime:
The
following amounts were charged by Maritime pursuant to the head management and ship-management agreements with the Company, and
are included in the accompanying unaudited interim consolidated statements of comprehensive loss:
| | |
Six Months Ended June 30, | |
| | |
2018 | | |
2019 | |
| Included in Voyage related costs and commissions | |
| | | |
| | |
| Charter hire commissions | |
$ | 170 | | |
$ | 167 | |
| | |
| | | |
| | |
| Included in Management fees, related parties | |
| | | |
| | |
| Ship-management Fees | |
| 357 | | |
| 359 | |
| | |
| | | |
| | |
| Included in General and administrative expenses | |
| | | |
| | |
| Administration Fees | |
| 802 | | |
| 807 | |
| | |
| | | |
| | |
| Total | |
$ | 1,329 | | |
$ | 1,333 | |
As
of December 31, 2018 and June 30, 2019, the balances due to Maritime were $3,402 and $5,027, 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.
The
Ship-management Fees and the Administration Fees are adjusted annually according to the official inflation rate in Greece or such
other country where Maritime was headquartered during the preceding year. On August 9, 2016, the Company amended the Head Management
Agreement with Maritime to provide that in the event that the official inflation rate for any calendar year is deflationary, no
adjustment shall be made to the Ship-management Fees and the Administration Fees, which will remain, for the particular calendar
year, as per the previous calendar year. Effective January 1, 2018 and 2019, the Ship-management Fees and the Administration Fees
were increased by 1.12% and 0.62%, respectively in line with the average inflation rate in Greece in 2017 and 2018, respectively.
PYXIS
TANKERS INC.
Notes
to the Unaudited Interim Consolidated Financial Statements
(Expressed
in thousands of U.S. Dollars, except for share and per share data)
3.Transactions with Related Parties - Continued:
(b)
Maritime Investors Corp.:
On
May 14, 2019, the Company entered into a second amendment to the Amended & Restated Promissory Note which (i) extended the
repayment of the outstanding principal, in whole or in part, until the earlier of a) one year after the repayment of the credit
facility of Eighthone with EntrustPermal (the “Credit Facility”) on September 2023 (see Note 7), b) January 15, 2024
and c) repayment of any PIK interest and principal deficiency amount under the Credit Facility, and (ii) increased the interest
rate to 9.0% per annum of which 4.5% shall be paid in cash and 4.5% shall be paid in common shares of the Company calculated
on the volume weighted average closing share price for the 10 day period immediately prior to each quarter end. The new interest
rate is effective from April 1, 2019. After the repayment restrictions have been lifted per the Credit Facility, the Company,
at its option, may continue to pay interest on the Amended & Restated Promissory Note in the afore-mentioned combination of
cash and shares or pay all interest costs in cash. The Company considered the guidance under ASC 470-50 “Debt Modifications
and Extinguishments”, and concluded that the transaction should be accounted for as debt extinguishment.
With
respect to the portion of interest that will be settled in common shares, the Company considered the guidance in ASC 480 that
requires obligations that can be settled in shares with a fixed monetary value at settlement (e.g., share-settled debt) to be
carried at fair value and followed the guidance in ASC 835-30 to accrue the liability to the redemption amount using the interest
method.
Interest
charged on the Amended & Restated Promissory Note for the six months ended June 30, 2018 and 2019, amounted to $99 and $168,
respectively, and is included in Interest and finance costs, net in the accompanying unaudited interim consolidated statement
of comprehensive loss. Out of the total interest charged on the Amended & Restated Promissory Note during the six month period
ended June 30, 2019, $112 will be paid in cash and the remaining $56 will be settled in common shares (please refer to Note 14).
The
amount of $5,000 is separately reflected in the accompanying consolidated balance sheets under non-current liabilities.
The
amounts in the accompanying consolidated balance sheets are analyzed as follows:
| | |
December
31, 2018 | | |
June
30, 2019 | |
| Lubricants | |
$ | 428 | | |
$ | 468 | |
| Bunkers | |
| 379 | | |
| 236 | |
| Total | |
$ | 807 | | |
$ | 704 | |
The
amounts in the accompanying consolidated balance sheets are analyzed as follows:
| | |
Vessel Cost | | |
Accumulated Depreciation | | |
Net
Book Value | |
| Balance January 1, 2019 | |
$ | 134,310 | | |
$ | (26,318 | ) | |
$ | 107,992 | |
| Additions | |
| 635 | | |
| - | | |
| 635 | |
| Depreciation | |
| - | | |
| (2,705 | ) | |
| (2,705 | ) |
| Balance June 30, 2019 | |
$ | 134,945 | | |
$ | (29,023 | ) | |
$ | 105,922 | |
All
of the Company’s vessels have been pledged as collateral to secure the loans discussed in Note 7.
Additions
of $635 relate to ballast water treatment installation out of which, $367 has been paid and $268 is accrued and remains unpaid.
PYXIS TANKERS INC.
Notes to the Unaudited Interim Consolidated
Financial Statements
(Expressed in thousands of U.S. Dollars, except
for share and per share data)
The
movement in Deferred charges, net, in the accompanying consolidated balance sheets are as follows:
| | |
Dry docking costs | |
| Balance, January 1, 2019 | |
$ | 740 | |
| Additions | |
| 480 | |
| Amortization of special survey costs | |
| (117 | ) |
| Balance, June 30, 2019 | |
$ | 1,103 | |
Additions
of $480 for the six-month period ended June 30, 2019, relate to 10th year special survey for Pyxis Malou performed
during the first quarter of 2019.
The
amortization of the special survey costs is separately reflected in the accompanying unaudited interim consolidated statements
of comprehensive loss.
The
amounts shown in the accompanying consolidated balance sheets at December 31, 2018 and June 30, 2019, are analyzed as follows:
| Vessel (Borrower) | |
December
31, 2018 | | |
June
30, 2019 | |
| Northsea Alpha (Secondone) | |
$ | 4,055 | | |
$ | 3,890 | |
| Northsea Beta (Thirdone) | |
| 4,055 | | |
| 3,890 | |
| Pyxis Malou (Fourthone) | |
| 11,190 | | |
| 10,620 | |
| Pyxis Delta (Sixthone) | |
| 5,400 | | |
| 4,725 | |
| Pyxis Theta (Seventhone) | |
| 14,722 | | |
| 14,096 | |
| Pyxis Epsilon (Eighthone) | |
| 24,000 | | |
| 24,000 | |
| Total | |
$ | 63,422 | | |
$ | 61,221 | |
| | |
| | | |
| | |
| Current portion | |
$ | 4,503 | | |
$ | 4,633 | |
| Less: Current portion of deferred financing costs | |
| (170 | ) | |
| (159 | ) |
| Current portion of long-term debt, net of deferred financing costs, current | |
$ | 4,333 | | |
$ | 4,474 | |
| | |
| | | |
| | |
| Long-term portion | |
$ | 58,919 | | |
$ | 56,588 | |
| Less: Non-current portion of deferred financing costs | |
| (790 | ) | |
| (670 | ) |
| Long-term debt, net of current portion and deferred financing costs, non-current | |
$ | 58,129 | | |
$ | 55,918 | |
Each
loan is secured by a first priority mortgage over the respective vessel and a first priority assignment of the vessel’s
insurances and earnings. Each loan agreement contains customary ship finance covenants including restrictions as to changes
in management and ownership of the vessel, in dividends distribution when certain financial ratios are not met, as well as
requirements regarding minimum security cover ratios. For more information, please refer to Note 7 to the Company’s
consolidated financial statements for the year ended December 31, 2018, included in the 2018 Annual Report.
On
June 6, 2017, the lender of Sixthone and Seventhone agreed to extend the maturity of its respective loans from September 2018
to September 2022 under the same applicable margin, but with an extended amortization schedule. The aggregate outstanding balance
of these loans as of June 30, 2019, of $18,821 is scheduled to be repaid in 13 quarterly installments of $651 each and a balloon
payment of $10,358. As of June 30, 2019, these subsidiaries were restricted from paying dividends to the Company under
the HSH loan agreement because the ratio of the Company’s total liabilities to market value adjusted total assets was 69.5%,
or 4.5% higher than the threshold under which dividends can be paid. This requirement is only applicable in order to assess whether
the the Sixthone and Seventhone are entitled to distribute dividends to Pyxis and does not constitute an event of default under
this or the Company’s other loan agreements.
On
February 28, 2018, the Company refinanced existing indebtedness of $26,906 under the Secondone, Thirdone and Fourthone loan agreements
with a new 5-year secured loan of $20,500 and cash of $2,100. The remaining balance of approximately $4,306 was written-off by
the previous lender at closing, which was recorded as Gain from debt extinguishment in the first quarter of 2018, and is separately
reflected in the accompanying unaudited interim consolidated statement of comprehensive loss. As of June 30, 2019, each of Secondone’s
and Thirdone’s outstanding loan balance, amounting to $3,890, is repayable in 15 remaining quarterly installments of $100
each, the first falling due in August 2019, and the last installment accompanied by a balloon payment of $2,390 falling due in
February 2023. As of June 30, 2019, the outstanding balance of Fourthone loan of $10,620 is repayable in 15 remaining quarterly
installments amounting to $5,220, the first falling due in August 2019, and the last installment accompanied by a balloon payment
of $5,400 falling due in February 2023. The first installment, amounting to $300, is followed by two amounting to $300 each, four
amounting to $330 each, four amounting to $360 each and four amounting to $390 each. The loan bears interest at LIBOR plus
a margin of 4.65% per annum. As a condition subsequent to the execution of this loan agreement, the borrowers, Secondone, Thirdone
and Fourthone, were required to complete all required procedures for their re-domiciliation to the jurisdiction of the Republic
of Malta by May 1, 2018. The relevant re-domiciliation was completed in March and April 2018, as discussed in Note 1.
PYXIS TANKERS INC.
Notes to the Unaudited Interim Consolidated
Financial Statements
(Expressed in thousands of U.S. Dollars, except
for share and per share data)
| 7. | Long-term Debt - Continued: |
On
September 27, 2018, Eighthone entered into a new $24,000 loan agreement, for the purpose of refinancing the outstanding indebtedness
of $16,000 under the previous loan facility and for general corporate purposes. The facility matures in September 2023 and is
secured by a first priority mortgage over the vessel, general assignment covering earnings, insurances and requisition compensation,
an account pledge agreement and a share pledge agreement concerning the respective vessel-owning subsidiary and technical and
commercial managers’ undertakings. The loan facility bears an interest rate of 11% of which 1.0% can be paid as PIK interest
per annum for first two years, and 11.0% per annum thereafter and incurs fees due upfront and upon early prepayment or final repayment
of outstanding principal. The principal obligation amortizes in 18 quarterly installments starting in March 29, 2019, equal to
the lower of $400 and excess cash computed through a cash sweep mechanism, plus a balloon payment due at maturity. As of June
30, 2019, the outstanding balance of Eighthone loan is $24,000. The Company has assessed that no excess cash will be available
to proceed with any debt repayment within the next twelve months, therefore, no principal amortization will occur through
June 30, 2020.
Under
the facility, a deferred fee may be payable on the occurrence of certain events including, among others, the sale of the vessel
or on repayment or maturity of the loan. Management has assessed this deferred fee as a contingent liability under ASC 450 and
concluded that such loss contingency shall not be accrued by a charge in the interim consolidated statements of comprehensive
loss, since information available does not indicate that is probable that the liability has been incurred as of the balance sheet
date at June 30, 2019 and cannot be estimated.
Amounts presented in Restricted cash, current
and non-current in the consolidated balance sheet are related to minimum cash requirements imposed by the Company’s debt
agreements.
Assuming
no principal repayments under the new loan of Eighthone discussed above, the annual principal payments required to be made after
June 30, 2019, are as follows:
| To June 30, | |
Amount | |
| 2020 | |
$ | 4,633 | |
| 2021 | |
| 4,753 | |
| 2022 | |
| 4,873 | |
| 2023 | |
| 22,962 | |
| 2024 and thereafter | |
| 24,000 | |
| Total | |
$ | 61,221 | |
The
Company’s weighted average interest rate (including the margin) for the six months ended June 30, 2018 and 2019, was 5.05%
and 8.19%, including the Amended & Restated Promissory Note discussed in Note 3, respectively.
The Company was in compliance with all
of the loan covenants in its loan agreements. In
addition, as of June 30, 2019, there was no amount available to be drawn down by the Company under its existing loan agreements.
As
of June 30, 2019, the Company had a working capital deficit of $13,612, defined as current assets minus current liabilities. As
of the filing date of the unaudited interim consolidated financial statements, the Company expects that it will be in a position
to cover its liquidity needs for the next 12-month period through cash generated from operations and by managing its working capital
requirements. In addition, the Company may consider the raising of capital including, debt, equity securities, joint ventures
and / or sale of assets. Furthermore, the Company estimates that a breach of its financial covenants under its existing debt agreements
for the next 12-month period is not probable.
PYXIS TANKERS INC.
Notes to the Unaudited Interim Consolidated
Financial Statements
(Expressed in thousands of U.S. Dollars, except
for share and per share data)
| 8. | Capital
Structure and Equity Incentive Plan: |
The
Company’s authorized common and preferred stock consists of 450,000,000 common shares and 50,000,000 preferred shares with
a par value of USD 0.001 per share.
As
of December 31, 2018 and June 30, 2019, the Company had a total of 21,060,190 and 21,088,539 common shares, respectively, and
no preferred shares outstanding.
On February 2, 2018, the Company filed with the SEC a registration statement on Form F-3 (the “Shelf
Registration Statement”), under which it may sell from time to time common stock, preferred stock, debt securities, warrants,
purchase contracts and units, each as described therein, in any combination, in one or more offerings up to an aggregate dollar
amount of $100,000. In addition, the selling stockholders referred to in the registration statement may sell in one of more offerings
up to 5,233,222 shares of the Company’s common stock from time to time as described therein. The registration statement was
declared effective by the SEC on February 12, 2018. On March 30, 2018, the Company filed a prospectus supplement to the Shelf Registration
Statement related to an At-The-Market Program (“ATM Program”) under which it may, from time to time, issue and sell
shares of its common stock up to an aggregate offering of $2,300 through a sales agent as either agent or principal. No shares
were sold under this initial ATM Program, but on November 19, 2018 the prospectus supplement was amended to increase the offering
to $3,675.
As of December 31, 2018, following the issuance and sale of 182,297 shares of common stock under the ATM Program
during 2018, the Company’s outstanding common shares increased from 20,877,893 to 21,060,190. Following the issuance and
sale of a further 28,349 shares of common stock under the ATM Program during April 2019, the Company’s outstanding common
shares increased from 21,060,190 to 21,088,539 as at June 30, 2019.
| | |
Six Months Ended June 30, | |
| | |
2018 | | |
2019 | |
| Net loss available to common stockholders | |
$ | (653 | ) | |
$ | (3,937 | ) |
| | |
| | | |
| | |
| Weighted average number of common shares, basic and diluted | |
| 20,877,893 | | |
| 21,072,472 | |
| | |
| | | |
| | |
| Loss per common share, basic and diluted | |
$ | (0.03 | ) | |
$ | (0.19 | ) |
The weighted average number of share, basic
and diluted, for the six months ended June 30, 2019, includes shares that were issued subsequent to June 30, 2019 as discussed
in Note 14 of these unaudited interim consolidated financial statements.
| 10. | Risk
Management and Fair Value Measurements: |
The
principal financial assets of the Company consist of cash and cash equivalents and trade accounts receivable due from charterers.
The principal financial liabilities of the Company consist of long-term loans, trade accounts payable, amounts due to related
parties and a promissory note.
Interest
rate risk: The Company’s interest rates are calculated at LIBOR plus a margin, as described in Note 7 above, as
well as in Note 7 to the Company’s consolidated financial statements for the year ended December 31, 2018, included in the
2018 Annual Report, and hence the Company is exposed to movements in LIBOR. In order to hedge its variable interest rate exposure,
on January 19, 2018, the Company, via one of its vessel-owning subsidiaries, purchased an interest rate cap with one of its lenders
for a notional amount of $10,000 and a cap rate of 3.5%. The interest rate cap will terminate on July 18, 2022.
Credit
risk: Credit risk is minimized since trade accounts receivable from charterers are presented net of the relevant provision
for uncollectible amounts, whenever required. On the balance sheet dates there were no significant concentrations of credit risk.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset on the consolidated 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.
PYXIS TANKERS INC.
Notes to the Unaudited Interim Consolidated
Financial Statements
(Expressed in thousands of U.S. Dollars, except
for share and per share data)
| 10. | Risk
Management and Fair Value Measurements - Continued: |
Fair
value: The Management has determined that the fair values of the assets and liabilities as of June 30, 2019, are
as follows:
| | |
Carrying Value | | |
Fair Value | |
| Cash and cash equivalents | |
$ | 4,960 | | |
$ | 4,960 | |
| Trade accounts receivable, net | |
$ | 409 | | |
$ | 409 | |
| Trade accounts payable | |
$ | 4,658 | | |
$ | 4,658 | |
| Long-term debt with variable interest rates, net | |
$ | 37,221 | | |
$ | 37,221 | |
| Long-term loans and promissory note with non-variable interest rates, net | |
$ | 29,000 | | |
$ | 29,000 | |
Assets
measured at fair value on a recurring basis: Interest rate cap
The
Company’s interest rate cap does not qualify for hedge accounting. The Company adjusts its interest rate cap contract to
fair market value at the end of every period and records the resulting gain / (loss) during the period in the consolidated statements
of comprehensive loss. Information on the location and amount of derivative fair value in the consolidated balance sheets and
loss from financial derivative instrument in the unaudited interim consolidated statements of comprehensive loss is shown below:
| Consolidated Balance Sheets – Location | |
December 31, 2018 | | |
June 30, 2019 | |
| Financial derivative instrument – Other non-current assets | |
$ | 28 | | |
$ | 3 | |
| | |
| | | |
| | |
| Consolidated Statements of Comprehensive
Loss – Location | |
| June
30, 2018 | | |
| June
30, 2019 | |
| Financial derivative instrument – Initial cost | |
$ | (47 | ) | |
$ | (28 | ) |
| Financial derivative instrument – Fair value as at period end | |
| 54 | | |
| 3 | |
| Gain / (Loss) from financial derivative instrument | |
$ | 7 | | |
$ | (25 | ) |
The
fair value of the Company’s interest rate cap agreement is determined based on market-based LIBOR rates. LIBOR rates are
observable at commonly quoted intervals for the full term of the cap and therefore, are considered Level 2 items in accordance
with the fair value hierarchy.
Assets
measured at fair value on a non-recurring basis: Long lived assets held and used
As
of March 31, 2018, the Company reviewed the carrying amount in connection with the estimated recoverable amount for each of its
vessels. This review indicated that such carrying amount was not fully recoverable for the Company’s vessels Northsea
Alpha and Northsea Beta. Consequently the carrying value of these vessels was written-down to their respective fair
values as presented in the table below.
| Vessel | |
Significant Other
Observable Inputs
(Level 2) | | |
Vessel Impairment
Charge (charged against
Vessels, net) | |
| Northsea Alpha | |
$ | 6,750 | | |
$ | 772 | |
| Northsea Beta | |
| 6,750 | | |
| 771 | |
| TOTAL | |
$ | 13,500 | | |
$ | 1,543 | |
The
fair value is based on level 2 inputs of the fair value hierarchy and reflects the Company’s best estimate of the value
of each vessel on a time charter free basis, and is supported by a vessel valuation of an independent shipbroker as of March 31,
2018, which is mainly based on recent sales and purchase transactions of similar vessels.
The
Company performs an impairment exercise whenever there are indicators of impairment.
The
Company recognized a total Vessel impairment charge of $1,543 which is included in the accompanying unaudited interim consolidated
statements of comprehensive loss for the six-month period ended June 30, 2018. No impairment loss was recognized for the six-month
period ended June 30, 2019.
As
of December 31, 2018 and June 30, 2019, the Company did not have any other assets or liabilities measured at fair value on a non-
recurring basis.
PYXIS TANKERS INC.
Notes to the Unaudited Interim Consolidated
Financial Statements
(Expressed in thousands of U.S. Dollars, except
for share and per share data)
| 11. |
Commitments and Contingencies: |
Future
minimum lease payments: Future minimum lease payments, gross of 1.25% address commission and 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 June 30, 2019, expiring through June 30, 2020, amount to $11,038.
Other:
Various claims, suits and complaints, including those involving government regulations and environmental 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 unaudited interim consolidated financial statements.
The
Company accrues for the cost of environmental and other 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 unaudited interim 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.
| 12. | Interest
and Finance Costs, net: |
The
amounts in the accompanying unaudited interim consolidated statements of comprehensive loss are analyzed as follows:
| | |
Six Months Ended June 30, | |
| | |
2018 | | |
2019 | |
| Interest on long-term debt (Note 7) | |
$ | 1,591 | | |
$ | 2,606 | |
| Interest on promissory note (Note 3) | |
| 99 | | |
| 168 | |
| Amortization and write-off of financing costs | |
| 146 | | |
| 131 | |
| Total | |
$ | 1,836 | | |
$ | 2,905 | |
Out
of the total interest charged during the six month period ended June 30, 2019, $112 will be paid in cash and the remaining $56
will be settled in common shares (please refer to Note 14).
PYXIS TANKERS INC.
Notes to the Unaudited Interim Consolidated
Financial Statements
(Expressed in thousands of U.S. Dollars, except
for share and per share data)
The
Company disaggregates its revenue from contracts with customers by the type of charter (time charters and spot charters).
The
following table presents the Company’s revenue disaggregated by revenue source for the six-month periods ended June 30,
2018 and 2019:
| | |
June
30, 2018 | | |
June
30, 2019 | |
| Revenues derived from spot charters, net | |
$ | 5,430 | | |
$ | 4,397 | |
| Revenues derived from time charters, net | |
| 8,137 | | |
| 8,783 | |
| Revenues, net | |
$ | 13,567 | | |
$ | 13,180 | |
The
Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one
year or less, in accordance with the optional exception in ASC 606.
The
following table presents the Company’s net trade accounts receivable disaggregated by revenue source as at June 30, 2019
and December 31, 2018:
| | |
December
31, 2018 | | |
June
30, 2019 | |
| Accounts receivable trade, net from spot charters | |
$ | 2,581 | | |
$ | 356 | |
| Accounts receivable trade, net from time charters | |
| 4 | | |
| 53 | |
| Total | |
$ | 2,585 | | |
$ | 409 | |
On
July 2, 2019, following the second amendment to the Amended & Restated Promissory Note dated May 14, 2019, the Company issued
54,462 of common shares at the volume weighted average closing share price for the 10 day period immediately prior to the quarter
end.