Pyxis Tankers Inc. annual report, Q4 FY2021

Pyxis Tankers Inc. — Form 20-F Summary

Reporting period: Fiscal year ended December 31, 2021. The filing is an annual Form 20-F, not a quarterly filing; fourth-quarter items are identified where material. Financial statements are prepared under U.S. GAAP and audited by Ernst & Young.

Business context

Pyxis owns and operates product tankers transporting refined petroleum products and other liquid bulk cargoes. At December 31, 2021, the fleet included seven vessels, although two small tankers were classified as held for sale and were subsequently sold in January and March 2022. The company took delivery of the MR tanker Pyxis Karteria in July 2021 and acquired the related-party vessel Pyxis Lamda in December 2021. As of March 2022, the fleet consisted of five MR tankers with aggregate capacity of 249,554 dwt.

Key financial metrics

Metric	2020	2021	Change
Revenue, net	$21.7 million	$25.3 million	+16.7%
Operating loss	$1.9 million	$8.5 million	Higher loss
Net loss	$6.9 million	$12.3 million	Higher loss
Net loss attributable to common shareholders	$7.0 million	$12.9 million	Higher loss
Loss per common share	$0.32	$0.36	Higher loss per share
Net cash used in operating activities	$13.0 million	$0.9 million	Improved
Cash, cash equivalents and restricted cash	$4.0 million	$9.9 million	+ $5.8 million
Working capital	$(2.9) million	$(3.7) million	Deficit widened
Funded debt, net of deferred financing costs, including promissory note	Not clearly stated in the filing summary	$82.6 million	Not comparable from provided data

Revenue increased because of greater spot-market employment and additional vessel days, but voyage-related costs and commissions rose 124.7% to $9.6 million. The company’s daily time charter equivalent rate declined to $8,981 from $11,456, while utilization improved modestly to 88.0% from 86.3%. Operating margin was approximately (33.6%) in 2021 versus approximately (8.9%) in 2020; net margin was approximately (48.7%) versus (31.8%).

Spot charter revenue increased to $13.7 million from $7.0 million.
Time charter revenue decreased to $11.6 million from $14.7 million.
Vessel operating expenses increased 14.5% to $12.5 million, primarily due to the larger fleet and higher COVID-19-related crewing costs.
Interest and finance costs declined 33.8% to $3.3 million following refinancing and lower LIBOR costs.
2021 included a $2.4 million non-cash loss on vessels held for sale and a $0.5 million loss from debt extinguishment.
Total assets increased to $142.6 million from $93.2 million, while stockholders’ equity increased to $48.9 million from $29.6 million, largely reflecting vessel acquisitions and equity issuances.

Cash flow, debt and liquidity

Operating cash flow remained negative at $0.9 million, although substantially improved from the $13.0 million outflow in 2020.
Investing cash flow was negative $43.2 million, primarily due to the acquisitions of Pyxis Karteria and Pyxis Lamda.
Financing cash flow was positive $49.9 million, reflecting $59.5 million of new long-term debt, equity offerings and other financing activity, partially offset by $36.0 million of debt repayments.
At year-end, long-term vessel debt totaled $77.8 million before including the separate $6.0 million related-party promissory note. Scheduled principal payments were $12.0 million in 2022, $6.1 million in 2023, $6.1 million in 2024 and $53.6 million thereafter.
The company had a $3.7 million working-capital deficit and no undrawn capacity under existing loan agreements at December 31, 2021.
Management stated that projected vessel cash flows, potential financing, asset sales and other actions should fund liquidity needs for the following 12 months and maintain covenant compliance. This assessment depends materially on charter rates, utilization and operating costs.
Related-party Maritime advanced $4.0 million for operating costs, debt service, dry-docking and other obligations. The advances were interest-free and had no specific repayment terms.

Material changes versus 2020

The fleet expanded through the acquisitions of Pyxis Karteria and Pyxis Lamda, increasing ownership days and asset values but also leverage and financing obligations.
The company shifted toward more spot-market employment. This increased revenue potential but materially increased exposure to bunker costs, voyage expenses and rate volatility.
2021 financing included a $25.0 million common-stock private placement and a $6.17 million Series A preferred-share offering. Common shares outstanding increased to 42.5 million from 22.0 million.
The Series A Convertible Preferred Shares outstanding increased to 449,673, with cumulative annual dividends of 7.75% of the $25 liquidation preference.
The company refinanced debt secured by Pyxis Epsilon and Pyxis Malou, reducing interest expense but generating debt-extinguishment costs.
The two small tankers, Northsea Alpha and Northsea Beta, were sold after year-end for aggregate gross proceeds of $8.9 million. Net cash proceeds were approximately $2.7 million after debt repayment and transaction costs, plus $0.6 million released from lender deposits.
Common-stock Nasdaq listing compliance remained unresolved. Nasdaq granted an extension through June 13, 2022, and management intended to seek approval for a reverse stock split.

Outlook, commentary and risks

Management’s strategy is to maintain a modern MR tanker fleet, selectively acquire vessels, and use a mix of time charters and spot employment. The filing provides no formal revenue, earnings or charter-rate guidance. As of March 31, 2022, two vessels were on time charters and three were in the spot market; only 14% of remaining available 2022 days were contracted.

Product tanker rates and vessel values are cyclical and volatile. The company remains highly exposed to spot rates, bunker prices, vessel utilization and charterer credit.
COVID-19 caused lower charter activity, higher crewing expenses, crew-rotation disruptions and more expensive dry-dockings. Management expected some of these costs to normalize, but acknowledged continuing uncertainty.
The Russia-Ukraine conflict and related sanctions increased uncertainty around trade routes, oil-product demand, fuel prices, crew availability and counterparties. No direct operational disruption had occurred as of the filing date.
All vessels lack exhaust-gas scrubbers. The company therefore relies on more expensive low-sulfur fuel and may be less competitive than scrubber-fitted vessels.
Environmental requirements, including ballast-water treatment, greenhouse-gas rules, EEXI/CII standards and potential EU emissions trading obligations, may require additional capital expenditures and operating costs.
Most debt bears floating-rate interest linked to LIBOR. The company must transition existing facilities to an alternative benchmark before LIBOR cessation; a 100-basis-point rate increase was estimated to reduce annual net income and cash flow by approximately $0.5 million.
Revenue concentration remains material: three customers represented approximately 56% of 2021 revenue, with the largest representing 27%.
Maritime, controlled by the chairman and CEO, provides management services and working-capital advances. Related-party transactions and the CEO’s approximately 54% common-stock ownership create governance and conflict-of-interest risks.
The filing reports no impairment charge for vessels held and used, but the impairment analysis is sensitive to long-term charter-rate assumptions. The two vessels held for sale generated the $2.4 million non-cash loss recognized in 2021.
The company does not intend to pay common-stock dividends in the near future. Preferred-share dividends are cumulative and require cash resources.

Most important facts to verify

Whether the company maintained sufficient liquidity and met all minimum-cash, collateral-value and other debt covenants after the 2021 year-end and after the two vessel sales.
The status and terms of any Nasdaq reverse stock split, minimum-bid-price compliance and continued listing of PXS.
Current spot and time charter rates, contracted days, utilization and expected cash flow for 2022.
Actual post-sale cash proceeds from Northsea Alpha and Northsea Beta, including debt repayment and released restricted cash.
Refinancing or repayment plans for the $12.0 million of scheduled 2022 principal payments and the large future balloon payments.
Exposure to related parties, including Maritime advances, the $6.0 million promissory note and the related-party acquisition of Pyxis Lamda.
Future dilution from 449,673 Series A preferred shares, 1,590,540 warrants and additional underwriter warrants.
Progress toward LIBOR replacement and the effect of higher interest rates, fuel costs and environmental compliance expenditures.