PROSPECTUS
SUPPLEMENT
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Filed
pursuant to Rule 424(b)(5)
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(To
Prospectus
dated February 13, 2018)
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File No. 333-222848
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$2,300,000
Common
Stock
We
have entered into an equity distribution agreement (the “distribution agreement”) with Noble Capital Markets, Inc.
(“Noble Capital Markets”) as our sales agent, relating to the shares of our common stock, par value $0.001 per share,
offered by this prospectus supplement and the accompanying prospectus. In accordance with the terms of the distribution agreement,
we may, through our sales agent, offer and sell from time to time shares of our common stock having an aggregate offering price
of up to $2,300,000.
Sales
of our common stock, if any, under this prospectus supplement and the accompanying prospectus may be made in sales deemed to be
“at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities
Act”), including by sales made directly on or through the NASDAQ Capital Market (“NASDAQ”) or another market
for our common stock, sales made to or through a market maker other than on an exchange or otherwise, in negotiated transactions
at market prices prevailing at the time of sale or at negotiated prices, or as otherwise agreed with the sales agent. Subject
to the terms and conditions of the distribution agreement, the sales agent will use its commercially reasonable efforts to sell
on our behalf all of the designated shares. We may instruct the sales agent not to sell any shares if the sales cannot be effected
at or above the price designated by us in any such instruction.
We
also may sell shares of our common stock to the sales agent, as principal for its own account, at a price per share agreed upon
at the time of sale. If we sell shares to the sales agent, as principal, we will enter into a separate terms agreement with the
sales agent, and we will describe the agreement in a separate prospectus supplement or pricing supplement.
The
aggregate market value of our outstanding common shares held by non-affiliates as of January 29, 2018, is $6,956,651, based on
20,877,893 common shares outstanding as of the date of this prospectus supplement, of which 3,642,226 are held by non-affiliates,
and an average bid/ask price of $1.91 on that date. Upon any sale of common shares under this prospectus supplement pursuant to
General Instruction I.B.5 of Form F-3, in no event will the aggregate market value of securities sold by us or on our behalf pursuant
to General Instruction I.B.5 of Form F-3 during the twelve calendar month period immediately prior to, and including, the date
of any such sale exceed one-third of the aggregate market value of our common shares held by non-affiliates, calculated in accordance
with General Instruction I.B.5 of Form F-3. During the 12 calendar month period that ends on and includes the date hereof, we
have not sold securities pursuant to General Instruction I.B.5 of Form F-3.
We
will pay the sales agent a commission of 2.75% of the gross sales price per share sold through it as our agent under the distribution
agreement. In connection with the sale of our common shares on our behalf, the sales agent may be deemed to be an “underwriter”
within the meaning of the Securities Act, and the compensation paid to the sales agent may be deemed to be underwriting commissions
or discounts.
Our
common stock is listed on NASDAQ under the symbol “PXS.” On March 29, 2018 the last reported sale price of the shares
of our common stock on NASDAQ was $0.98 per share.
Investing
in our common stock involves a high degree of risk. Before buying any shares of common stock, you should carefully consider the
risks that we have described in “Risk Factors” beginning on page S-3 of this prospectus supplement, as well
as those described in our filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or accompanying prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
Noble
Capital Markets
The
date of this prospectus supplement is March 30, 2018.
TABLE
OF CONTENTS
Prospectus
Supplement
Prospectus
We
have not, and the sales agent has not, authorized any dealer, salesperson or other person to give any information or to make any
representation other than those contained in or incorporated by reference into this prospectus supplement, the accompanying prospectus
or any applicable free writing prospectus. You must not rely upon any information or representation not contained in or incorporated
by reference into this prospectus supplement, the accompanying prospectus or any applicable free writing prospectus as if we had
authorized it. This prospectus supplement, the accompanying prospectus and any applicable free writing prospectus do not constitute
an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate.
Nor do this prospectus supplement, the accompanying prospectus or any applicable free writing prospectus constitute an offer to
sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. You should not assume that the information contained in this prospectus supplement, the
accompanying prospectus, the documents incorporated herein and therein by reference and any applicable free writing prospectus
is correct on any date after their respective dates, even though this prospectus supplement, the accompanying prospectus or an
applicable free writing prospectus is delivered or securities are sold on a later date. Our business, financial condition, results
of operations and cash flows may have changed since those dates.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first is this prospectus supplement, which describes the specific terms of this offering of our
common stock under the distribution agreement and also adds to and updates information contained in the accompanying prospectus
and the documents incorporated by reference into the accompanying prospectus. The second part, the accompanying prospectus, gives
more general information, some of which may not apply to this offering. You should read both this prospectus supplement and the
accompanying prospectus before deciding to invest in shares of our common stock. If the information varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.
Before
you invest in our common stock, you should carefully read the registration statement (including the exhibits thereto) of which
this prospectus supplement and the accompanying prospectus form a part, this prospectus supplement, the accompanying prospectus
and the documents incorporated herein and therein by reference. The incorporated documents are described in this prospectus supplement
under the headings “Where You Can Find More Information” and “Incorporation by Reference.” Except as otherwise
indicated or unless the context otherwise requires, all references in this prospectus supplement to “Pyxis Tankers Inc.,”
“Pyxis,” “we,” “us” and “our” and similar terms refer to Pyxis Tankers Inc. and
its consolidated subsidiaries unless the context requires otherwise.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-3
under the Securities Act. This prospectus supplement, which is part of the registration statement, does not contain all of the
information set forth in the registration statement and the exhibits and schedules to the registration statement. For further
information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement.
If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been
filed. Each statement in this prospectus supplement relating to a document filed as an exhibit is qualified in all respects by
the filed exhibit.
We
are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information
with the SEC, including annual reports on Form 20-F and reports on Form 6-K. We will file a Form 20-F annual report with the SEC
within four months following the end of our fiscal year. You may inspect and copy reports and other information filed with the
SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports
and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As
a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing
and content of proxy statements, and our managing directors and supervisory directors and principal stockholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not
required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act.
INCORPORATION
BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus supplement information that we file with the SEC.
This means that we can disclose important information to you without actually including the specific information in this prospectus
supplement by referring you to other documents filed separately with the SEC. The information incorporated by reference is an
important part of this prospectus supplement. Information that we later provide to the SEC, and which is deemed to be “filed”
with the SEC, automatically will update information previously filed with the SEC, and may replace information in this prospectus.
We
incorporate by reference into this prospectus the documents listed below:
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our
annual report on Form 20-F for the fiscal year ended December 31, 2017 (the “Annual Report”), filed with the SEC
on March 23, 2018;
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all
subsequent annual reports on Form 20-F filed with the SEC prior to the termination of this offering;
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our
Reports on Form 6-K filed with the SEC on January 2, 2018 and February 28, 2018;
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all
Reports on Form 6-K filed with the SEC prior to the termination of this offering that we identify in such Reports as being
incorporated by reference into the registration statement of which this prospectus is a part; and
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the
description of our capital stock as described in our Registration Statement on Form 8-A filed on October 28, 2015, including
any subsequent amendments or reports filed for the purpose of updating such description.
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These
reports contain important information about us, our financial condition and our results of operations.
You
may obtain any of the documents incorporated by reference in this prospectus supplement from the SEC through its public reference
facilities or its website at the addresses provided above. You also may request a copy of any document incorporated by reference
in this prospectus supplement (excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference
in this document), at no cost, by visiting our internet website at www.pyxistankers.com, or by writing or calling us at the following
address:
Pyxis
Tankers Inc.
59
K. Karamanli Street
Maroussi
15125
Greece
+30
210 638 0200
You
should rely only on the information incorporated by reference or provided in this prospectus supplement. We have not authorized
anyone else to provide you with any information. You should not assume that the information incorporated by reference or provided
in this prospectus supplement is accurate as of any date other than the date on the front of each document. The information contained
in our website is not part of this prospectus supplement.
In
reviewing any agreements included as exhibits to the registration statement relating to the securities covered by this prospectus
supplement or to other SEC filings incorporated by reference into this prospectus supplement, please be aware that these agreements
are attached as exhibits to provide you with information regarding their terms and are not intended to provide any other factual
or disclosure information about us or the other parties to the agreements. The agreements may contain representations and warranties
by each of the parties to the applicable agreement, which representations and warranties may have been made solely for the benefit
of the other parties to the applicable agreement and, as applicable:
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should
not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the
parties if those statements prove to be inaccurate;
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have
been qualified by disclosures that may have been made to the other party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in the agreement;
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may
apply standards of materiality in a way that is different from what may be viewed as material to you or other investors;
and
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were
made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and
are subject to more recent developments.
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Accordingly,
these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other
time and should not be relied upon by investors in considering whether to invest in our securities.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We
have made statements in this prospectus supplement and the documents incorporated herein by reference that are forward-looking
statements within the meaning of the federal securities laws, including 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 in this prospectus supplement and the documents incorporated herein by reference 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 the “Risk Factors” section of this prospectus supplement and “Item 3. Key
Information – D. Risk Factors” section of our Annual Report, filed with the SEC on March 23, 2018. 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;
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other
factors discussed under the “Risk Factors” section of this prospectus supplement;
and
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other
factors discussed under “Item 3. Key Information – D. Risk Factors”
in our Annual Report.
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You
should not place undue reliance on forward-looking statements contained in this prospectus supplement and the documents incorporated
herein by reference, because they are statements about events that are not certain to occur as described or at all. All forward-looking
statements in this prospectus supplement and the documents incorporated herein by reference are qualified in their entirety by
the cautionary statements contained in our Annual Report. 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 of this prospectus supplement or to reflect the occurrence
of unanticipated events.
PROSPECTUS
SUPPLEMENT SUMMARY
Overview
We
are an international maritime transportation company focused on the product tanker sector. Our fleet is comprised of six double
hull product tankers, which are employed under a mix of spot and medium-term time charters. As of March 20, 2018, our fleet had
an average age of 7.0 years, based on dead weight tonnage (“dwt”), compared to an industry average of approximately
10.6 years, with a total cargo carrying capacity of 216,635 dwt. We acquired these six vessels from affiliates of our founder
and Chief Executive Officer, Mr. Eddie Valentis. Four of the vessels in the fleet are medium range (“MR”) tankers,
three of which have eco-efficient or eco-modified designs, and two are short-range tanker sister ships. Each of the vessels in
the fleet has IMO certifications and is capable of transporting refined petroleum products, such as naphtha, gasoline, jet fuel,
kerosene, diesel and fuel oil, as well as other liquid bulk items, such as vegetable oils and organic chemicals.
Our
principal objective is to own and operate our fleet in a manner that will enable us to benefit from short- and long-term trends
that we expect in the product tanker sector to maximize our revenues. We intend to expand the fleet through selective acquisitions
of modern product tankers, primarily MRs, and to employ our vessels through time charters to creditworthy customers and on the
spot market. We intend to continually evaluate the markets in which we operate and, based upon our view of market conditions,
adjust our mix of vessel employment by counterparty and stagger our charter expirations. In addition, we may choose to opportunistically
direct asset sales when conditions are appropriate, and may pursue a sale or long-term strategy for our small tankers.
The
Fleet
The
following chart provides summary information concerning our fleet as of March 20, 2018:
Vessel
Name
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Shipyard
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Vessel
type
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Carrying
Capacity (dwt)
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Year
Built
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Type
of Charter
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Charter
Rate
(per day)
(1)
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Anticipated
Redelivery
Date
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Pyxis
Epsilon
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SPP
/ S. Korea
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MR
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50,295
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2015
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Time
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$
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16,250
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May
2018
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Pyxis
Theta
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SPP
/ S. Korea
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MR
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51,795
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2013
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Time
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$
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15,000
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May
2018
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Pyxis
Malou
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SPP
/ S. Korea
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MR
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50,667
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2009
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Time
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$
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14,000
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Jul.
2018
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Pyxis
Delta
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Hyundai
/ S. Korea
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MR
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46,616
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2006
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Time
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$
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14,325
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May
2018
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Northsea
Alpha
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Kejin
/ China
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Small
Tanker
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8,615
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2010
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Spot
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n/a
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n/a
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Northsea
Beta
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Kejin
/ China
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Small
Tanker
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8,647
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2010
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Spot
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n/a
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n/a
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216,635
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(1)
This table shows gross rates and does not reflect any commissions payable.
Recent
Developments
As
disclosed in the Annual Report, we are required to re-domicile three of our vessel-owning subsidiaries in the Republic of Malta
prior to May 1, 2018 to comply with the terms of our outstanding debt. On March 29, we received confirmation that Secondone Corp.
(Northsea Alpha)
and Thirdone Corp.
(Northsea Beta)
have been re-domiciled. We expect the re-domiciliation
of Fourthone Corp.
(Pyxis Malou)
to become effective prior to the May 1, 2018 deadline.
Corporate
Information
We
maintain our principal place of business at the offices of our ship manager, Pyxis Maritime Corp., at 59 K. Karamanli,
Maroussi 15125, Athens, Greece. Our telephone number at that address is +30 210 638 0200. Our registered agent in the
Marshall Islands is The Trust Company of the Marshall Islands, Inc. located at Trust
Company Complex, Ajeltake Road,
Ajeltake Island, Majuro, Marshall Islands MH96960. Our website is located at
www.pyxistankers.com
.
Information
on, or accessible through, our website is not part of, or incorporated by reference into, this prospectus supplement other
than the documents that we file with the SEC and incorporate by reference into this prospectus supplement.
The
Offering
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Issuer
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Pyxis
Tankers Inc.
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Securities
Offered by Us
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Shares
of our common stock having an aggregate offering price of up to $2,300,000.
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Manner
of Offering
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“At-the-market
offering” that may be made from time to time through our sales agent, Noble Capital Markets. See “Plan of Distribution”
on page S-7.
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We
also may sell shares of our common stock to the sales agent, as principal for its own account, at a price per share agreed
upon at the time of sale. If we sell common stock to the sales agent, as principal, we will enter into a separate terms agreement
with the sales agent setting forth the terms of such transaction, and we will describe the agreement in a separate prospectus
supplement of pricing supplement.
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The
proceeds from this offering, if any, will vary depending on the number of shares that we offer and the offering price per
share. We may choose to raise less than the maximum $2,300,000 in gross offering proceeds permitted by this prospectus supplement.
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Use
of Proceeds
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We
intend to use the net proceeds from the sale of our common stock pursuant to this offering for general corporate purposes,
which may include the repayment of existing indebtedness and working capital. Our management will have broad discretion in
the application of the net proceeds. See “Risk Factors” on page S-3 and “Use of Proceeds” on
page S-4.
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Risk
Factors
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Investing
in our common stock involves a high degree of risk. See “Risk Factors” beginning on page S-3, as well as
the other information included in or incorporated by reference in this prospectus supplement and the accompanying prospectus,
for a discussion of risks you should carefully consider before investing in our common stock.
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NASDAQ
Symbol
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PXS
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RISK
FACTORS
An
investment in shares of the shares of our common stock involves a high degree of risk. You should carefully consider the risks
described below, as well as the risks described in the section entitled “Risk Factors” and elsewhere in our most recent
Annual Report on Form 20-F that has been filed with the SEC and incorporated herein by reference, and any other documents that
we have filed with the SEC and that are incorporated herein by reference, as well as other information in this prospectus supplement,
the accompanying prospectus and in any other documents incorporated into this prospectus supplement or the accompanying prospectus
by reference, before purchasing any shares of our common stock. We expect to update these Risk Factors from time to time in the
periodic and current reports that we file with the SEC after the date of this prospectus supplement. These updated risk factors
will be incorporated by reference in this prospectus supplement and the accompanying prospectus. Each of the risks described in
these sections and documents could adversely affect our business, financial condition and results of operations, and could result
in a complete loss of your investment. This prospectus supplement, the accompanying prospectus and the incorporated documents
also contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward- looking statements as a result of certain factors, including the risks mentioned above. See
“Cautionary Statement Regarding Forward-Looking Statements.”
Risks
Related to This Offering
The
actual number of shares we will issue under the distribution agreement, at any one time or in total, is uncertain and you may
experience significant dilution.
Subject
to certain limitations in the distribution agreement and compliance with applicable law, we have the discretion to deliver notices
to the sales agent at any time throughout the term of the distribution agreement. The number of shares that are sold by the sales
agent after delivering a notice will fluctuate based on the market price of the shares of common stock during the sales period
and limits we set with the sales agent.
Because
the sales of the shares offered hereby will be made directly into the market or in negotiated transactions, the prices which we
sell these shares will vary and these variations may be significant. Purchasers of the shares we sell, as well as our existing
stockholders, will experience significant dilution if we sell shares at prices significantly below the price at which they invested.
Our
management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not
yield a significant return.
Our
management will have broad discretion over the use of any proceeds from this offering. We intend to use the net proceeds from
the of our common stock pursuant to this offering for general corporate purposes, which may include the repayment of existing
indebtedness and working capital. Our management will have considerable discretion in the application of the net proceeds, and
you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The net proceeds may be used for corporate purposes that do not increase our operating results or enhance the value of our common
stock.
USE
OF PROCEEDS
The
amount of proceeds from this offering will depend upon the number of shares of our common stock sold and the market price at which
they are sold. There can be no assurance that we will be able to sell any shares under or fully utilize the distribution agreement
as a source of financing. We intend to use the net proceeds from the sale of the shares of our common stock pursuant to this offering
for general corporate purposes, which may include the repayment of existing indebtedness and working capital. Our management will
have broad discretion in the application of the net proceeds.
CAPITALIZATION
The
following table sets forth our capitalization at December 31, 2017:
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on
an actual basis; and
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on
an as adjusted basis to give effect to the following transactions:
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the
issuance and sale of $2,300,000 of our common stock pursuant to this prospectus supplement, resulting in net proceeds
of approximately $2.1 million, after sales commissions of 2.75% on gross proceeds and estimated expenses of approximately
$185,000;
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the
refinancing of $26.9 million of outstanding loans with a new five year loan facility of $20.5 million and cash of $2.1
million, as well as the gain from debt extinguishment of $4.3 million attributed to the write-off of the remaining
balance by the previous lender (for further information on the refinancing, see the section entitled “Item 5.
Operating and Financial Review and Prospects – B. Liquidity and Capital Resources –
Indebtedness” of our Annual Report); and
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the
scheduled principal repayments of $1.0 million in outstanding indebtedness under our remaining loan agreements since December
31, 2017.
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You
should read this table in conjunction with our audited financial statements, the section entitled “Item 5. Operating
and Financial Review and Prospects” and the section entitled “Item 3. Key Information – D. Risk
Factors” in our Annual Report, as well as the risks described in the section entitled “Risk Factors” and
the section entitled “Use of Proceeds” in this prospectus supplement.
(In
thousands of U.S. Dollars, except per share data)
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As
of December 31, 2017
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Actual
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As
Adjusted
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Cash
and cash equivalents, including restricted cash
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$
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6,693
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$
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5,694
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Current
Debt:
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Bank
loans
(1)
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7,440
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4,390
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Non-current
debt:
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Bank
loans
(1)
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59,428
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55,122
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Unsecured
promissory note
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5,000
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5,000
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Total
Debt
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71,868
|
|
|
|
64,512
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock ($0.001 par value); 50,000,000 shares authorized; none issued, actual and as adjusted
|
|
|
–
|
|
|
|
–
|
|
Common
stock ($0.001 par value); 450,000,000 shares authorized; 20,877,893 and 23,224,832 shares issued and outstanding, actual
and as adjusted based on the closing price of the common stock on March 29, 2018, respectively
|
|
|
21
|
|
|
|
23
|
|
Additional
paid-in capital
|
|
|
74,766
|
|
|
|
76,816
|
|
Accumulated
deficit
|
|
|
(26,631
|
)
|
|
|
(22,325
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
48,156
|
|
|
|
54,514
|
|
Total
capitalization
|
|
$
|
120,024
|
|
|
$
|
119,026
|
|
(1)
Our vessel owning subsidiaries, as borrowers, entered into loan agreements to finance the purchase of each of the vessels in our
fleet. For more information on our loan agreements, see our Annual Report incorporated by reference in this prospectus.
PRICE
RANGE OF OUR COMMON STOCK
Our
common stock is listed on NASDAQ under the symbol “PXS.” The high and low sales prices of shares of our common stock
on NASDAQ are presented for the periods listed below.
For
the year ended December 31,
|
|
High
|
|
|
Low
|
|
2015
|
|
$
|
4.30
|
|
|
$
|
1.26
|
|
2016
|
|
$
|
4.27
|
|
|
$
|
0.55
|
|
2017
|
|
$
|
12.22
|
|
|
$
|
0.90
|
|
For
the quarter ended
|
|
High
|
|
|
Low
|
|
March
31, 2016
|
|
$
|
2.05
|
|
|
$
|
0.55
|
|
June 30, 2016
|
|
$
|
4.27
|
|
|
$
|
1.92
|
|
September
30, 2016
|
|
$
|
3.52
|
|
|
$
|
2.07
|
|
December 31,
2016
|
|
$
|
4.25
|
|
|
$
|
1.89
|
|
March 31,
2017
|
|
$
|
3.00
|
|
|
$
|
1.92
|
|
June 30, 2017
|
|
$
|
2.33
|
|
|
$
|
0.90
|
|
September
30, 2017
|
|
$
|
2.06
|
|
|
$
|
1.53
|
|
December 31,
2017
|
|
$
|
12.22
|
|
|
$
|
1.50
|
|
March
31, 2018
|
|
$
|
3.88
|
|
|
$
|
0.95
|
|
For
the months
|
|
High
|
|
|
Low
|
|
August
2017
|
|
$
|
1.95
|
|
|
$
|
1.53
|
|
September
2017
|
|
$
|
2.06
|
|
|
$
|
1.82
|
|
October
2017
|
|
$
|
2.03
|
|
|
$
|
1.50
|
|
November
2017
|
|
$
|
5.25
|
|
|
$
|
1.55
|
|
December
2017
|
|
$
|
12.22
|
|
|
$
|
1.92
|
|
January
2018
|
|
$
|
3.88
|
|
|
$
|
1.62
|
|
February
2018
|
|
$
|
1.77
|
|
|
$
|
1.17
|
|
March
2018
|
|
$
|
1.55
|
|
|
$
|
0.95
|
|
On
February 23, 2016, we received a deficiency notice from The NASDAQ Stock Market, Inc. stating that, for a period of 30 consecutive
trading days, our shares of common stock closed below the minimum price of $1.00 per share as required for continued listing on
NASDAQ. In accordance with the notice, we had until August 22, 2016, or 180 calendar days from the date of the notice, to regain
compliance with NASDAQ’s continued listing minimum closing bid price requirements (Marketplace Rule 5550(a)(2)). We received
a written notification from the exchange on March 11, 2016 stating that the closing bid price of our shares had been $1.00 per
share or higher for 10 consecutive trading days, from February 26 to March 10, 2016, and, accordingly, we were again in compliance
with the exchange’s minimum closing bid price rule.
On
June 1, 2017, our shares of common stock closed at the price of $0.99 per share. The closing price of our shares remained
above $1.00 per share from that date until March 28, 2018 and March 29, 2018, when shares of our common stock
closed at prices of $0.96 per share and $0.98 per share, respectively. See “Item 3. Key Information
– D. Risk Factors
– If our common stock does not meet the NASDAQ’s minimum share price
requirement, and if we cannot cure such deficiency within the prescribed timeframe, our common stock could be delisted”
in the Annual Report.
PLAN
OF DISTRIBUTION
We
have entered into a distribution agreement with Noble Capital Markets, as our sales agent, under which we may offer and sell shares
of our common stock having an aggregate offering price of up to $2,300,000 from time to time. The sales, if any, of the shares
of our common stock made under the distribution agreement may be made in sales deemed to be “at-the-market offerings”
as defined in Rule 415 under the Securities Act, including by sales made directly on or through NASDAQ or another market for the
shares of our common stock, sales made to or through a market maker other than on an exchange or otherwise, or as otherwise agreed
with the sales agent. The sales agent also may sell the common stock in negotiated transactions subject to our prior approval.
We
will designate the maximum amount of shares of our common stock to be sold through the sales agent on a daily basis or otherwise
as we and the sales agent agree and the minimum price per share at which such shares may be sold. Subject to the terms and conditions
of the distribution agreement, the sales agent will use its commercially reasonable efforts to sell on our behalf all of the designated
shares. We may instruct the sales agent not to sell any shares if the sales cannot be effected at or above the price designated
by us in any such instruction. We or the sales agent may suspend the offering of shares at any time and from time to time by notifying
the other party. We cannot predict the number of shares of our common stock that we may sell hereby or if any shares will be sold.
We
will pay the sales agent a commission 2.75% of the gross sales price per share sold through it as our agent under the distribution
agreement. We have agreed to pay or reimburse certain of the sales agent’s expenses, including legal costs of up to $50,000.
The
sales agent will provide to us written confirmation immediately following the trading day in which shares are sold under the distribution
agreement. Each confirmation will include the number of shares sold on that day, the gross sales proceeds, the net proceeds to
us (after deducting any expenses payable by us and any transaction fees, transfer taxes or similar taxes or fees imposed by any
governmental entity or self-regulatory organization in respect of such sales) and the compensation payable by us to the sales
agent. We will report in a prospectus supplement and/or our filings under the Exchange Act, at least quarterly the number of shares
sold by or through the sales agent under the distribution agreement, the net proceeds to us and the aggregate compensation of
the sales agents in connection with the sales of the shares.
Settlement
for sales of the shares of our common stock will occur, unless the parties agree otherwise, on the second business day following
the date on which any sales were made in return for payment of the net proceeds to us. There is no arrangement for funds to be
received in an escrow, trust or similar arrangement.
Under
the terms of the distribution agreement, we also may sell shares of our common stock to the sales agent, as principal for its
own account, at a price per share agreed upon at the time of sale. If we sell shares to the sales agent, as principal, we will
enter into a separate terms agreement with the sales agent, and we will describe the agreement in a separate prospectus supplement
or pricing supplement.
To
the extent required by Regulation M, the sales agent will not engage in any market making activities involving our common stock
while the offering is ongoing under this prospectus supplement.
The
offering of the shares of our common stock pursuant to the distribution agreement will terminate upon the earlier of (1) the sale
of all shares subject to the distribution agreement or (2) the termination of the distribution agreement by us or by the sales
agent.
In
connection with the sale of the shares of our common stock on our behalf, the sales agent may be deemed to be an “underwriter”
within the meaning of the Securities Act, and the compensation paid to the sales agent may be deemed to be underwriting commissions
or discounts. We have agreed to provide indemnification and contribution to the sales agents against certain liabilities, including
civil liabilities under the Securities Act.
We
estimate that the total expenses of this offering payable by us, excluding commissions payable to the sales agent under the distribution
agreement, will be approximately $185,000.
The
sales agent and its affiliates are full service financial institutions engaged in various activities, which may include sales
and trading, investment banking, advisory, investment management, investment research, principal investment, hedging, market making,
brokerage and other financial and non-financial activities and services. The sales agent and its affiliates may in the future
provide a variety of these services to us and to persons and entities with relationships with us, for which they will receive
customary fees and expenses.
In
the ordinary course of their various business activities, the sales agent and its affiliates, officers, directors and employees
may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies,
credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment
and trading activities may involve or relate to our assets, securities and/or instruments (directly, as collateral securing other
obligations or otherwise) and/or persons and entities with relationships with us. The sales agent and its affiliates may also
communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research
views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should
acquire, long and/or short positions in such assets, securities and instruments.
LEGAL
MATTERS
Jones
Day, New York, New York, will pass upon certain legal matters for us with respect to the offering of our common stock. The validity
of the shares of common stock offered hereby and other matters relating to Marshall Islands law will be passed upon for us by
Seward & Kissel LLP, New York, New York. Morgan, Lewis & Bockius LLP, New York, New York, represented the sales agent
in this offering.
EXPERTS
The
consolidated financial statements of Pyxis Tankers Inc. appearing in Pyxis Tankers Inc.’s Annual Report (Form 20-F)
for the year ended December 31, 2017 have been audited by Ernst & Young (Hellas) Certified Auditors Accountants S.A.,
independent registered public accounting firm, as set forth in their report thereon included therein, and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on
the authority of such firm as experts in accounting and auditing. The address of Ernst & Young (Hellas) Certified Auditors
Accountants S.A. is 8B Chimarras street, 151 25 Maroussi, Greece.
The
section in the Annual Report titled “Item 4. Information on the Company – B. Business Overview
– The International Product Tanker Shipping Industry” has been prepared by Drewry Shipping Consultants Ltd., our
industry expert, who has confirmed to us that such section accurately describes the international tanker market. The address
of Drewry Shipping Consultants Ltd. is 15-17 Christopher Street, London EC2A 2BS, United Kingdom.
EXPENSES
The
following table sets forth costs and expenses, excluding commissions payable to the sales agent under the distribution agreement,
we expect to incur in connection with the issuance and distribution of the shares of our common stock covered by this prospectus
supplement. All amounts are estimated except the Financial Industry and Regulatory Authority, Inc. (“FINRA”) registration
fee.
FINRA
filing fees
|
|
|
16,842
|
|
Legal
fees and expenses
|
|
|
130,000
|
|
Accounting
fees and expenses
|
|
|
32,000
|
|
Transfer
agent fees
|
|
|
3,750
|
|
Miscellaneous
|
|
|
2,408
|
|
Total
|
|
$
|
185,000
|
|
PYXIS
TANKERS INC.
$100,000,000
Common
Stock
Preferred
Stock
Debt
Securities
Warrants
Purchase
Contracts
Rights
Units
5,233,222
Shares of Common Stock Offered by the Selling Stockholders
Through
this prospectus, we may periodically offer:
|
(1)
|
our
common stock,
|
|
|
|
|
(2)
|
our
preferred stock,
|
|
|
|
|
(3)
|
our
debt securities,
|
|
|
|
|
(4)
|
our
warrants,
|
|
|
|
|
(5)
|
our
purchase contracts,
|
|
|
|
|
(6)
|
our
rights, and
|
|
|
|
|
(7)
|
our
units.
|
We
may also offer securities of the types listed above that are convertible or exchangeable into one or more of the securities listed
above.
The
aggregate offering price of all securities issued and sold by us under this prospectus may not exceed $100,000,000. The securities
issued under this prospectus may be offered directly or through underwriters, agents or dealers. The names of any underwriters,
agents or dealers will be included in a supplement to this prospectus.
The
selling stockholders named in this prospectus may offer and sell, from time to time, up to 5,233,222 shares of our common stock,
par value $0.001 per share. The selling stockholders may offer our common stock directly or through underwriters, broker-dealers
or agents and in one or more public or private transactions and at fixed prices, prevailing market prices, at prices related to
prevailing market prices or at negotiated prices. If our common stock is sold through underwriters, broker-dealers or agents,
the selling stockholders will be responsible for underwriting discounts, commissions or agents’ commissions. See the sections
entitled “Plan of Distribution” and “About this Prospectus” for more information. We will not receive
any of the proceeds from the sale of our common stock by the selling stockholders.
This
prospectus provides a general description of the securities we or the selling stockholders may offer. We will provide the specific
terms of the securities offered by us, and may provide additional information about the securities offered by
the
selling stockholders, in one or more supplements to this prospectus. We may also authorize one or more free writing prospectuses
to be provided to you in connection with offerings by us or the selling stockholders. You should read carefully this prospectus,
the applicable prospectus supplement and any related free writing prospectus, as well as any documents incorporated by reference,
before you invest in any of our securities. This prospectus may not be used to offer or sell any securities, other than by the
selling stockholders, unless accompanied by the applicable prospectus supplement.
Our
common stock is listed on the NASDAQ Capital Market (“NASDAQ”) under the symbol “PXS.” On February 12,
2018, the last reported sale price of our common stock on NASDAQ was $1.18 per share. The applicable prospectus supplement will
contain information, where applicable, as to any other listing on NASDAQ or any securities market or other exchange of the securities,
if any, covered by the prospectus supplement.
The
aggregate market value of our outstanding common stock held by non-affiliates as of February 12, 2018 was $4,291,927, based on
20,877,893 shares of common stock outstanding, of which 3,637,226 are held by non-affiliates, and a closing price on NASDAQ of
$1.18 on that date. As of the date hereof, we have not offered any securities pursuant to General Instruction I.B.5 of Form F-3
during the twelve calendar month period that ends on and includes the date hereof.
We
are an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities
Act”), and, as such, we may elect to comply with certain reduced public company reporting requirements.
Investing
in our securities involves risks. See “Risk Factors” beginning on page 3 of this prospectus, as well as documents
which are incorporated by reference herein and therein, for a discussion of information that should be considered in connection
with an investment in our securities.
Neither
the U.S. Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved
of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is February 13, 2018.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form F-3 that we have filed with the U.S. Securities and Exchange Commission
(the “SEC”) using a “shelf” registration process. Under this shelf registration process, we may sell from
time to time common stock, preferred stock, debt securities, warrants, purchase contracts and units, each as described in this
prospectus, in any combination, in one or more offerings up to an aggregate dollar amount of $100,000,000. In addition, the selling
stockholders referred to in this prospectus may sell in one or more offerings up to 5,233,222 shares of our common stock from
time to time as described in this prospectus. This prospectus generally describes us and the securities we and the selling stockholders
may offer. Each time we or the selling stockholders offer securities with this prospectus, we will or may, as applicable, provide
this prospectus and a prospectus supplement that will describe, among other things, the specific amounts and prices of the securities
being offered and the terms of the offering. The prospectus supplement may also add to, update or change information in this prospectus.
If information varies between this prospectus and any prospectus supplement, you should rely on the information in the prospectus
supplement.
This
prospectus does not cover the issuance of any shares of our common stock by us to the selling stockholders, and we will not receive
any of the proceeds from any sale of our common stock by the selling stockholders. Except for any underwriting discounts, selling
commissions, transfer taxes, fees and any expenses incurred in connection with any underwritten offering of the selling stockholders’
shares, all of which are to be paid by the selling stockholders, we have agreed to pay the expenses incurred in connection with
the registration of our common stock owned by the selling stockholders covered by this prospectus.
This
prospectus and any prospectus supplement are part of a registration statement we filed with the SEC and do not contain all of
the information in the registration statement. Forms of the indentures are filed as exhibits to this the registration statement.
Other documents establishing the terms of the offered securities will be filed by way of a post-effective amendment or by incorporation
by reference to documents filed with the SEC. Statements in this prospectus or any prospectus supplement about these documents
are summaries and each statement is qualified in all respects by reference to the document to which it refers. You should refer
to the actual documents for a more complete description of the relevant matters. For further information about us or the securities
offered hereby, you should refer to the registration statement, which you can obtain from the SEC as described in the section
of this prospectus entitled “Where You Can Find Additional Information.”
You
should rely only on the information contained in this prospectus, any prospectus supplement, any related free writing prospectus
and the documents incorporated by reference herein and therein. Neither we nor the selling stockholders have authorized anyone
to provide you with different information. If anyone provides you with additional, different or inconsistent information, you
should not rely on it. This prospectus may only be used where it is legal to sell our securities. You should not assume that the
information contained in this prospectus, or in any prospectus supplement or free writing prospectus, is accurate as of any date
other than its date regardless of the time of delivery of the prospectus, prospectus supplement or free writing prospectus or
any sale of our securities. Our business, financial condition, results of operations and prospects, as well as other information,
may have changed since such dates.
We
have not authorized any dealer, salesperson or other person to give any information or represent anything not contained in this
prospectus. You should not rely on any unauthorized information. This prospectus does not offer to sell or buy any shares in any
jurisdiction in which it is unlawful. The information in this prospectus is current as of the date on the cover. You should rely
only on the information contained or incorporated by reference in this prospectus.
Unless
otherwise indicated, references in this prospectus to “Pyxis Tankers Inc.,” “Pyxis,” “we,”
“us” and “our” and similar terms refer to Pyxis Tankers Inc. and/or one or more of its subsidiaries, except
that those terms, when used in this prospectus in connection with the securities described herein, shall mean specifically Pyxis
Tankers Inc. Unless otherwise indicated, the term “selling stockholders” as used in this prospectus means the selling
stockholders referred to in this prospectus and its donees, pledgees, transferees and other successors-in-interest.
Unless
otherwise indicated, all references in this prospectus to “dollars” and “$” are to, and amounts are presented
in, U.S. Dollars, and financial information presented in this prospectus is prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”).
You
should read carefully this prospectus, any prospectus supplement, and the additional information described below under the headings
“Where You Can Find More Information” and “Incorporation of Documents by Reference.”
FORWARD-LOOKING
STATEMENTS
Our
disclosure and analysis in this prospectus include forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 in this prospectus
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, and our ability to consummate such acquisitions, our business strategy
and expected capital spending or operating expenses, including drydocking and insurance costs, competition in the 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 the “Risk
Factors” section of this prospectus. 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:
|
●
|
changes
in governmental rules and regulations or actions taken by regulatory authorities;
|
|
|
|
|
●
|
changes
in economic and competitive conditions affecting our business, including market fluctuations in charter rates and charterers’
abilities to perform under existing time charters;
|
|
|
|
|
●
|
the
length and number of off-hire periods and dependence on third-party managers; and
|
|
|
|
|
●
|
other
factors discussed under the “Risk Factors” section of this prospectus.
|
You
should not place undue reliance on forward-looking statements contained in this prospectus because they are statements about events
that are not certain to occur as described or at all. All forward-looking statements in this prospectus are qualified in their
entirety by the cautionary statements contained in this prospectus. 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 of this prospectus or to reflect
the occurrence of unanticipated events.
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere is this prospectus or incorporated by reference from our Annual Report
on Form 20-F for the fiscal year ended December 31, 2016 and our other filings with the SEC listed in the section of this prospectus
entitled “Incorporation of Documents By Reference.” This summary does not contain all of the information that you
should consider before investing in our securities. You should read this entire prospectus, including the section entitled “Risk
Factors,” and our financial statements and notes thereto in our Current Report on Form 6-K, filed with the SEC on December
19, 2017, which are incorporated by reference herein, before making an investment decision.
The
Company
We
are an international maritime transportation company focused on the product tanker sector. Our fleet is comprised of six double
hull product tankers, which are employed under a mix of spot and medium-term time charters. As of January 31, 2018, our fleet
had an average age of 6.9 years, based on dead weight tonnage (“dwt”), with a total cargo carrying capacity of 216,635
dwt. We acquired these six vessels from affiliates of our founder and Chief Executive Officer, Mr. Valentios Valentis. Four of
the vessels in the fleet are medium-range tankers (“MRs”), three of which have eco-efficient or eco-modified designs,
and two are short-range tanker sister ships. Each of the vessels in the fleet has International Maritime Organization certifications
and is capable of transporting refined petroleum products, such as naphtha, gasoline, jet fuel, kerosene, diesel and fuel oil,
as well as other liquid bulk items, such as vegetable oils and organic chemicals.
Our
principal objective is to own and operate our fleet in a manner that will enable us to benefit from short- and long-term trends
that we expect in the product tanker sector to maximize our revenues. We intend to expand the fleet through selective acquisitions
of modern product tankers, primarily MRs, and to employ our vessels through time charters to creditworthy customers and on the
spot market. We intend to continually evaluate the markets in which we operate and, based upon our view of market conditions,
adjust our mix of vessel employment by counterparty and stagger our charter expirations. In addition, we may choose to opportunistically
direct asset sales when conditions are appropriate, and may pursue a sale or other long-term strategies for our small tankers.
We
are incorporated under the laws of the Republic of the Marshall Islands as Pyxis Tankers Inc. Our principal executive offices
are located at 59 K. Karamanli Street, Maroussi, Greece, 15125 and our phone number is +30 210 638 0200. Our website address is
www.pyxistankers.com. The information contained on our website is not part of this prospectus.
Implications
of Being an Emerging Growth Company
We
qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”). An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain
other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, among
other things:
|
●
|
we
are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control
over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
|
|
|
|
|
●
|
we
are exempt from compliance with any requirement that the Public Company Accounting Oversight Board (the “PCAOB”)
may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information
about the audit and the financial statements;
|
|
|
|
|
●
|
we
are permitted to provide less extensive disclosure about our executive compensation arrangements;
|
|
|
|
|
●
|
we
are not required to give our shareholders non-binding advisory votes on executive compensation or golden parachute arrangements;
|
|
|
|
|
●
|
we
are granted the ability to present more limited financial data in this registration statement, of which this prospectus is
a part; and
|
|
|
|
|
●
|
we
may elect not to use an extended transition period for complying with new or revised accounting standards.
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We
may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company.
We will cease to be an emerging growth company by 2020 or if we have more than $1.07 billion in annual revenues, have more than
$700 million in market value of our common stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt
securities over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have elected
not to opt-out of such extended transition period, which means that when a new or revised accounting standard is issued, and it
has different application dates for public or private companies, we, as an emerging growth company, will not adopt the new or
revised standard until the time private companies are required to adopt the new or revised standard.
The
Securities We May Offer
We
may use this prospectus to offer, through one or more offerings, our common stock, preferred stock, debt securities, warrants,
purchase contracts, rights and units. We may also offer securities of the types listed above that are convertible or exchangeable
into one or more of the securities listed above. The aggregate offering price of all securities issued and sold by us under this
prospectus may not exceed $100,000,000. A prospectus supplement will describe the specific types, amounts, prices, and detailed
terms of any of these offered securities and may describe certain risks in addition to those set forth below and associated with
an investment in the securities. In addition, the selling stockholders may sell in one or more offerings pursuant to this registration
statement up to 5,233,222 shares of our common stock. We will not receive any of the proceeds from the sale of our common stock
by the selling stockholders.
RISK
FACTORS
Before
investing in our securities, you should carefully consider all of the information included or incorporated by reference into this
prospectus. When evaluating an investment in any of our securities, you should carefully consider the following risk factors together
with all other information included in this prospectus and information included in any applicable prospectus supplement.
If
any of these risks were to occur, our business, financial condition, operating results or cash flows could be materially adversely
affected. In that case, the trading price of our securities could decline, we might be unable to pay dividends on shares of our
equity securities or interest or principal on our debt securities and you could lose all or part of your investment. In addition
to the following risk factors, please read the section entitled “Tax Considerations” in this prospectus for a more
complete discussion of expected material U.S. federal income and non-U.S. tax consequences of owning and disposing of our securities.
Risks
Related to Our Industry
Operating
ocean-going vessels is inherently risky.
The
operation of ocean-going vessels in international trade is affected by a number of risks. Our vessels and their cargoes will be
at risk of being damaged or lost because of events, including bad weather, grounding, fire, explosions, mechanical failure, personal
injury, vessel and cargo property loss or damage, hostilities, labor strikes, adverse weather conditions, stowaways, placement
on our vessels of illegal drugs and other contraband by smugglers, war, terrorism, piracy, human error, environmental accidents
generally, collisions and other catastrophic natural and marine disasters. An accident involving any of our vessels could result
in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, damage to our customer
relationships, loss of revenues from or termination of charter contracts, governmental fines, penalties or restrictions on conducting
business or higher insurance rates.
In
addition, the operation of tankers, and product tankers in particular, has unique operational risks associated with the transportation
of refined petroleum products and chemicals. A spill of refined petroleum products or chemicals may cause significant environmental
damage, and a catastrophic spill could exceed the insurance coverage available. We could also become subject to personal injury
or property damage claims relating to the release of, or exposure to, hazardous materials associated with our operations. Violations
of, or liabilities under, environmental requirements also can result in substantial penalties, fines and other sanctions, including
in certain instances, seizure or detention of our vessels. Compared to other types of vessels, product tankers are exposed to
a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision or other cause due to the high flammability
and high volume of the products transported in tankers. In addition, if our vessels are found with contraband, we may face governmental
or other regulatory claims. Any of these circumstances or events could negatively impact our business, results of operations and
financial condition.
If
our vessels suffer damage, they may need to be repaired at a shipyard. The costs of repairs are unpredictable and may be substantial.
We may have to pay repairs that our insurance does not cover in full. In addition, we may be unable to find space at a suitable
shipyard or our vessels may be forced to travel to a shipyard that is not conveniently located to our vessels’ positions.
The loss of revenues and continuation of certain operating expenses while these vessels are being repaired and repositioned, as
well as the actual cost of these repairs, may adversely affect our business and financial conditions. In addition, the total loss
of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.
We
operate our vessels worldwide and as a result, our vessels are exposed to international risks that may reduce revenue or increase
expenses.
The
international shipping industry is an inherently risky business involving global operations. In addition to the circumstances
and events summarized above, changing economic, regulatory and political conditions in some countries, including political and
military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes
and boycotts. These sorts of events could interfere with shipping routes and result in market disruptions that may reduce our
revenue or increase our expenses. International shipping is also subject to various security and customs inspection and related
procedures in countries of origin and destination and transshipment points. Inspection procedures can result in the seizure of
cargo and/or our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties
against us. It is possible that changes to inspection procedures could impose additional financial and legal obligations on us.
Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in
certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may
have a material adverse effect on our business, results of operations and financial condition.
Charter
hire rates for product tankers are cyclical and volatile.
The
product tanker market is cyclical and volatile in charter hire rates. The degree of charter hire rate volatility among different
types of product tankers has varied widely, and, as a result, our ability to charter, or to re-charter our vessels upon the expiration
or termination of our current charters, the charter rates payable under any replacement charters and vessel values will depend
upon, among other things, economic conditions in the product tanker market at that time and changes in the supply and demand for
vessel capacity. After reaching historic highs in mid-2008, charter hire rates for product tankers declined significantly before
increasing in 2015 and then declining again in 2016. Since then, charter hire rates have remained volatile. If charter hire rates
remain depressed or fall further in the future when our charters expire, we may be unable to re-charter our vessels at rates as
favorable to us, with the result that our earnings and available cash flow will continue to be adversely affected. In addition,
a decline in charter hire rates will likely cause the value of our vessels to decline.
Charter
hire rates depend on the demand for, and supply of, product tanker vessels. The factors that influence the demand for product
tanker vessel capacity are unpredictable and outside of our control, and include, among others:
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demand
and supply for refined petroleum products and other liquid bulk products such as vegetable and edible oils;
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competition
from alternative sources of energy and a shift in consumer demand towards other energy resources such as wind, solar or water
energy;
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regional
availability of refining capacity;
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the
globalization of manufacturing;
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global
and regional economic and political conditions and developments in international trade;
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increases
in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of
new, pipeline systems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelines in those areas;
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changes
in seaborne and other transportation patterns, including changes in the distances over which refined petroleum and chemical
cargoes are transported;
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competition
from other shipping companies and other modes of transportation that compete with product tankers;
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environmental
and other regulatory developments;
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international
sanctions, embargoes, import and export restrictions, nationalizations and wars;
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currency
exchange rates; and
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weather
and natural disasters.
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The
factors that influence the supply of product tanker vessel capacity are also outside of our control and unpredictable and include,
among others:
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the
number of product tanker newbuilding deliveries;
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the
scrapping rate of older product tankers;
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the
price of steel and vessel equipment;
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the
cost of newbuildings and the cost of retrofitting or modifying secondhand product tankers as a result of charterer requirements;
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availability
and cost of capital;
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cost
and supply of labor;
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technological
advances in product tanker design and capacity;
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conversion
of product tankers to other uses and the conversion of other vessels to product tankers;
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product
tanker freight rates, which are themselves affected by factors that may affect the rate of newbuilding, scrapping and laying-up
of product tankers;
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port
and canal congestion;
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exchange
rate fluctuations;
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changes
in environmental and other regulations that may limit the useful lives of product tankers; and
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the
number of product tankers that are out of service.
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These
factors influencing the supply of and demand for product tanker capacity and charter rates are outside of our control, and we
may not be able to correctly assess the nature, timing and degree of changes in industry conditions. A global economic downturn
may reduce demand for transportation of refined petroleum products and chemicals. We cannot assure you that we will be able to
successfully charter our product tankers in the future at all or at rates sufficient to allow us to meet our contractual obligations,
including repayment of our indebtedness, or to pay dividends to our stockholders.
Product
tanker rates fluctuate based on seasonal variations in demand.
Product
tanker markets are typically stronger in the winter months as a result of increased refined petroleum products consumption in
the northern hemisphere and weaker in the summer months as a result of lower consumption in the northern hemisphere and refinery
maintenance that is typically conducted in the summer months. Unpredictable weather patterns during the winter months in the northern
hemisphere tend to disrupt vessel routing and scheduling. The price volatility of products resulting from these factors has historically
led to increased product trading activities in the winter months. As a result, revenues generated by vessels are typically weaker
during the quarters ended June 30 and September 30, and stronger in the quarters ended March 31 and December 31. If increased
revenues generated in the fall/winter months are not sufficient to offset any decreases in revenue in the spring/summer months,
it may have an adverse effect on our business results, results of operations and financial condition.
An
over-supply of product tanker capacity may lead to reductions in charter rates, vessel values and profitability.
The
market supply of product tankers is affected by a number of factors such as the demand for energy resources, oil, petroleum and
chemical products, as well as overall global economic growth. There has been a global trend towards energy efficient technologies
and alternative sources of energy. In the long-term, demand for oil may be reduced by increased availability of such energy sources
and machines that run on them. In addition, reduced global supply of oil due to coordinated action, such as the production cuts
recently agreed by the Organization of Petroleum Exporting Countries (“OPEC”) and other oil producing nations, may
lead to an over-supply of product tanker capacity due to lower demand for the transportation of refined petroleum products.
Furthermore,
if the capacity of new ships delivered exceeds the capacity of product tankers being scrapped and lost, product tanker capacity
will increase. If the supply of product tanker capacity increases and if the demand for product tanker capacity does not increase
correspondingly, charter rates and vessel values could materially decline.
A
reduction in charter rates and the value of our vessels for any of these reasons may have a material adverse effect on our business,
results of operations and financial condition.
Acts
of piracy on ocean-going vessels could adversely affect our business.
Acts
of piracy have historically affected ocean-going vessels trading in many regions of the world. Although the frequency of piracy
on ocean-going vessels has decreased since 2014, piracy incidents continue to occur, such as in the Gulf of Aden off the coast
of Somalia and the Gulf of Guinea. Tanker vessels are particularly vulnerable to attacks by pirates. If regions in which our vessels
are deployed are characterized as “war risk’’ zones or “war and strikes” listed areas by insurers,
or other parties such as the Joint War Committee of Lloyds Insurance and IUA Company, premiums payable for coverage could increase
significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including employing onboard
security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents.
In addition, any detention hijacking as a result of an act of piracy against our vessels could increase the cost or affect the
availability of insurance for our vessels. These risks could have a material adverse impact on our business, results of operations
and financial condition.
Our
substantial operations outside the United States expose us to political, governmental and economic instability.
Our
operations are primarily conducted outside the United States and may be adversely affected by changing or adverse political, governmental
and economic conditions in the countries where our vessels are flagged or registered, and in the regions where we operate. In
particular, we may derive some portion of our revenues from our vessels transporting refined petroleum products from politically
unstable regions.
Terrorist
attacks, such as the attacks that occurred against targets in the United States on September 11, 2001, Mumbai on November 26,
2008, Paris on November 13, 2015, Nice on July 14, 2016, and continuing hostilities in Iraq, Syria, Afghanistan and elsewhere
in the Middle East and the world may lead to additional armed conflicts or to further acts of terrorism and civil disturbance
causing instability. Our operations may also be adversely affected by expropriation of vessels, taxes, regulation, tariffs, trade
embargoes, economic sanctions, or a disruption of, or limit to, trading activities or other adverse events or circumstances in
or affecting the countries and regions where we operate or where we may operate in the future.
Our
operations are also potentially vulnerable to economic instability inherent in political and government risk. In particular, the
shipping industry, like many others, is dependent on the continued growth of emerging markets. For example, the Chinese government’s
reputation and economic reforms continue to develop. Many of the reforms by the Chinese government are unprecedented or experimental
and may be subject to revision, change or abolition based upon the outcome of such experiments. Due to these and other risks,
there can be no assurance that China’s economy will continue to exhibit high growth.
In
addition, fluctuations in exchange rates may affect charter rates and may adversely affect the profitability in U.S. dollars of
the services we provide in foreign markets where payment is made in other currencies. All of our consolidated revenue is received
in U.S. dollars. The amount and frequency of expenses paid in currency other than the U.S. dollar (such as vessel repairs, supplies
and stores) may fluctuate from period to period. Depreciation in the value of the U.S. dollar relative to other currencies increases
the U.S. dollar cost to us. The portion of our business conducted in other currencies could increase in the future, which could
expand our exposure to losses arising from currency fluctuations, including the continued devaluation of the Yuan by the People’s
Bank of China that commenced in August 2015. Even if we implement hedging strategies to mitigate this risk, these strategies might
not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing
management time and expertise, external costs to implement the hedging activities and potential accounting implications.
Political
instability in Greece may have an adverse impact on our and Pyxis Maritime Corp.’s (“Maritime”) operations in
that country. We are headquartered in Greece, which continues to be in the midst of an economic crisis that includes, among other
things, a high budget deficit compared to previous years. The Greek government is adopting reforms, and it is not clear how this
new legislation will be implemented in practice. On August 19, 2015, the European Commission signed a Memorandum of Understanding
(the “MoU”) with Greece following approval by the European Stability Mechanism Board of Governors for further stability
support accompanied by a third economic adjustment program. Within the scope of the MoU, the Greek government has committed to
phasing out special tax treatments of the shipping industry. Over recent years, Greece has subjected foreign flag vessels (jointly
with their owners and their Greece-based ship managers) to tonnage tax equal to that payable for equivalent Greek flag vessels
on condition of providing a tax credit for the equivalent taxes actually incurred in respect of the same vessels towards their
flag states. Greece has also enacted legislation increasing the levels of tonnage tax by 4% until 2020 in conformity with the
MoU. In addition, Greek tax-related shipping legislation is currently under scrutiny by the EU Competition Commission, and the
European Commission has the ability to amend the existing shipping tax-related legislation in Greece by early 2019. A Supplemental
Memorandum of Understanding forming part of the third economic adjustment program has also been agreed, which provides for a review
in 2018 of Greece’s preferential tax treatments for the shipping industry. As part of its reforms, the government in Greece
may impose additional taxes on ship management companies located in Greece, as well as on shipowners with vessels under the management
of such Greece-based managers, including on shipping income which currently benefits from a dividend tax exemption.
Any
of these factors may interfere with the operation of our vessels, increase the cost and risk that insurance will be unavailable,
insufficient or more expensive for our vessels and increase our costs, which could harm our business, results of operations and
financial condition.
The
current global economic condition and financial environment may negatively affect our business.
In
recent years, businesses in the global economy have faced slower growth, recessions, limited or no credit or credit on less favorable
terms than previously obtained, lower demand for goods and services, reduced liquidity and declining capital markets. These factors
have had, and in part continue to have, a negative effect on the demand for refined petroleum products including fuel oil or bunkers,
which, along with diminished trade credit available for the delivery of such cargoes have led to decreased demand for product
tankers, creating downward pressure on charter rates and reduced product tanker values. In particular, a significant number of
the port calls we expect our vessels to make will likely involve the loading or discharging of cargo in ports in Organization
of Economic Cooperation and Development countries and the Asia Pacific region. China’s economy has shown signs of slowing
its growth rate. We cannot assure you that the Chinese, Indian or Japanese economies, which generate a substantial amount of demand
for shipping companies, will not experience a significant contraction or otherwise negatively change in the future, especially
due to the recent effects from the turmoil in the Chinese capital markets. Moreover, a significant or protracted slowdown in the
economies of the United States, the European Union (“EU”) or various Asian countries may adversely affect economic
growth in China and elsewhere. In addition, concerns persist regarding the debt burden of certain Eurozone countries and their
ability to meet future financial obligations and the overall stability of the Euro. An extended period of adverse development
in the outlook for European countries could reduce the overall demand for our services.
These
issues, along with the re-pricing of credit risk and the difficulties currently experienced by financial institutions, especially
those lending in the shipping industry, have made, and will likely continue to make, it difficult to obtain financing. As a result
of the disruptions in the credit markets and higher capital requirements, many lenders have enacted tighter lending standards,
required more restrictive terms (including higher collateral ratios for advances, shorter maturities and smaller loan amounts),
increased margins or lending rates or have refused to refinance existing debt at all. Moreover, certain banks that have historically
been significant lenders to the shipping industry have reduced or ceased lending activities in the shipping industry. Further
tightening of capital requirements and the resulting policies adopted by lenders, could further reduce lending activities.
Global
economic conditions remain fragile with uncertainty surrounding full recovery and long-term prospects. If the current global economic
and financial environment persists or worsens, we may be negatively affected in the following ways, among others:
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we
may not be able to employ our vessels at charter rates as favorable to us as historical rates or operate our vessels profitably;
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the
market value of our vessels could decrease, which may cause us to, among other things, recognize losses if any of our vessels
are sold or if their values are impaired, violate covenants in our current loan agreements and future financing agreements
and be unable to incur debt at all or on terms that are acceptable to us; and
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we
may experience difficulties obtaining financing commitments or be unable to fully draw under loans we arrange in the future
if the lenders are unwilling to extend financing to us or unable to meet their funding obligations due to their own liquidity,
capital or solvency issues. We cannot be certain that financing will be available on acceptable terms or at all. If financing
is not available when needed, or is available only on unfavorable terms, we may be unable to meet our future obligations as
they come due. In the absence of available financing, we also may be unable to take advantage of business opportunities or
respond to competitive pressures.
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addition, as a result of the ongoing economic slump in Greece and the related austerity measures implemented by the Greek government,
our and Maritime’s operations in Greece will likely be subjected to new regulations that will require us to incur new or
additional compliance or other administrative costs and may require us to pay to the Greek government new taxes or other fees
as described above. In particular, a recently enacted social security reform is likely to require us and Maritime to incur additional
social security costs regarding our and Maritime’s Greek based personnel. Furthermore, the continuing debt crisis in Greece
and a possible default in the future may undermine Greece’s political and economic stability and may lead it to exit the
Eurozone, which may adversely affect our and Maritime’s operations located in Greece. Even though the Greek government has
enacted measures to ease the flow of foreign funds transferred to Greece, we also face the risk that continued capital controls
on banking deposits with Greek financial institutions and future strikes, work stoppages and civil unrest within Greece may disrupt
our shore-side operations and those of Maritime’s employees located in Greece.
The
occurrence of any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.
Changes
in fuel, or bunkers, prices may adversely affect profits.
Fuel,
or bunkers, is a significant expense in shipping operations for our vessels employed on the spot market and can have a significant
impact on earnings. With respect to our vessels employed on time charter, the charterer is generally responsible for the cost
and supply of fuel, but such cost may affect the charter rates we are able to negotiate for our vessels. The price and supply
of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand
for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional
production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce the
profitability and competitiveness of our business versus other forms of transportation, such as truck or rail. Changes in the
price of fuel may adversely affect our profitability.
If
our vessels call on ports located in countries that are subject to restrictions imposed by the U.S. government, our reputation
and the market for our securities could be adversely affected.
Although
no vessels owned or operated by us have called on ports located in countries subject to sanctions and embargoes imposed by the
U.S. government and other authorities or countries identified by the U.S. government or other authorities as state sponsors of
terrorism, such as Iran, Sudan, and Syria, in the future, our vessels may call on ports in these countries from time to time on
charterers’ instructions in violation of contractual provisions that prohibit them from doing so. Sanctions and embargo
laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities,
and such sanctions and embargo laws and regulations may be amended or strengthened over time. In 2010, the United States enacted
the Comprehensive Iran Sanctions Accountability and Divestment Act (“CISADA”), which expanded the scope of the Iran
Sanctions Act. Among other things, CISADA expands the application of the prohibitions on companies, such as us, and introduces
limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment,
supply or export of refined petroleum or petroleum products.
In
2012, President Barack Obama signed Executive Order 13608, which prohibits foreign persons from violating or attempting to violate,
or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of
any person subject to U.S. sanctions. Any persons found to be in violation of Executive Order 13608 will be deemed a foreign sanctions
evader and will be banned from all contact with the United States, including conducting business in U.S. dollars. Also in 2012,
President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “Iran Threat Reduction
Act”), which created new sanctions and strengthened existing sanctions. Among other things, the Iran Threat Reduction Act
intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Iran’s petroleum
or petrochemical sector. The Iran Threat Reduction Act also includes a provision requiring the President of the United States
to impose five or more sanctions from Section 6(a) of the Iran Sanctions Act, as amended, on a person the President determines
is a controlling beneficial owner of, or otherwise owns, operates, or controls or insures a vessel that was used to transport
crude oil from Iran to another country and (1) if the person is a controlling beneficial owner of the vessel, the person had actual
knowledge the vessel was so used or (2) if the person otherwise owns, operates, or controls, or insures the vessel, the person
knew or should have known the vessel was so used. Such a person could be subject to a variety of sanctions, including exclusion
from U.S. capital markets, financial transactions subject to U.S. jurisdiction, and U.S. ports for that person’s vessels
for up to two years.
On
November 24, 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) entered into an interim agreement
with Iran entitled the Joint Plan of Action (“JPOA”). Under the JPOA, it was agreed that, in exchange for Iran taking
certain voluntary measures to ensure that its nuclear program is used only for peaceful purposes, the United States and the EU
would voluntarily suspend certain sanctions for a period of six months.
On
January 20, 2014, the United States and the EU indicated that they would begin implementing the temporary relief measures provided
for under the JPOA. These measures include, among other things, the suspension of certain sanctions on the Iranian petrochemicals,
precious metals, and automotive industries, initially for the six-month period beginning January 20, 2014 and ending July 20,
2014. The JPOA has since been extended on multiple occasions.
On
July 14, 2015, the P5+1 and the EU announced that they reached a landmark agreement with Iran titled the Joint Comprehensive Plan
of Action Regarding the Islamic Republic of Iran’s Nuclear Program (the “JCPOA”), which is intended to significantly
restrict Iran’s ability to develop and produce nuclear weapons for 10 years while simultaneously easing sanctions directed
toward non-U.S. persons for conduct involving Iran, but taking place outside of U.S. jurisdiction and not involving U.S. persons.
On January 16, 2016, the United States joined the EU and the United Nations in lifting a significant number of their nuclear-related
sanctions on Iran following an announcement by the International Atomic Energy Agency (“IAEA”) that Iran had satisfied
its respective obligations under the JCPOA.
U.S.
sanctions prohibiting certain conduct that is now permitted under the JCPOA have not actually been repealed or permanently terminated
at this time. Rather, the U.S. government has implemented changes to the sanctions regime by: (1) issuing waivers of certain statutory
sanctions provisions; (2) committing to refrain from exercising certain discretionary sanctions authorities; (3) removing certain
individuals and entities from the Office of Foreign Assets Control’s sanctions lists; and (4) revoking certain Executive
Orders and specified sections of Executive Orders. These sanctions will not be permanently “lifted” until the earlier
of “Transition Day,” set to occur on October 20, 2023, or upon a report from the IAEA stating that all nuclear
material in Iran is being used for peaceful activities.
We
do not do business in sanctions-targeted jurisdictions. We have not entered into agreements or other arrangements with the governments
or any governmental entities of sanctioned countries, and we do not have any direct business dealings with officials or representatives
of any sanctioned governments or entities. However, it is nevertheless possible that third-party charterers of our vessels, or
their sub-charterers, may arrange for vessels in our fleet to call on ports located in one or more sanctioned countries. To avoid
this, and maintain our compliance with applicable sanctions and embargo laws and regulations, we have various policies and controls
in place, such as, among others, the monitoring and review of the movement of our vessels, as well as the cargo being transported
by our vessels, on a continuing basis, and provisions in our charter contracts that restrict our vessels from visiting countries
targeted by sanctions or embargo laws.
Although
we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain
such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws
may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions
that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors
deciding, or being required, to divest their interest, or not to invest, in us. Moreover, our charterers may violate applicable
sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations
could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely
affected if we engage in certain other activities, such as engaging in operations under an otherwise lawful contract or transaction
with a third party which separately and subsequently becomes involved in sanctionable conduct.
Our
vessels could be arrested by maritime claimants, which could result in a significant loss of earnings and cash flow if we are
not able to post the required security to lift the arrest.
Generally
under the terms of the time charters for our vessels, a vessel would be placed off-hire (that is, the charterer could cease to
pay charter hire) for any period during which it is “arrested” for a reason not arising from the fault of the charterer.
Under maritime law in many jurisdictions, and under the International Convention on Arrest of Ships, 1999, crew members, tort
claimants, claimants for breach of certain maritime contracts, vessel mortgagees, suppliers of goods and services to a vessel
and shippers and consignees of cargo and others entitled to a maritime lien against the vessel may enforce their lien by “arresting”
a vessel through court processes. In addition, claims may be brought by parties in hostile jurisdictions or on fictitious grounds
or for claims against previous owners, if any, or in respect of previous cargoes. Any such claims could lead to the arrest of
the vessel, against which the ship owner would have to post security to have the arrest lifted and to defend against such claims.
In
addition, in those countries adopting the International Convention on Arrest of Ships, 1999, and in certain other jurisdictions,
such as South Africa, under the “sister ship” theory of liability, a claimant may arrest not only the vessel with
respect to which the claimant’s maritime lien has arisen, but also any “associated” vessel owned or controlled
by the legal or beneficial owner of that vessel. While in some of the jurisdictions which have adopted this doctrine, liability
for damages is limited in scope and would only extend to a company and its vessel-owning subsidiaries, there can be no assurance
that liability for damages caused by a vessel managed by International Tanker Management (“ITM”) (but otherwise with
no affiliation to us at all), would not be asserted against us or one or more of our vessels. The arrest of one or more vessels
in our fleet could result in a material loss of cash flow for us and/or require us to pay substantial sums to have the arrest
lifted.
Governments
could requisition our vessels during a period of war or emergency.
A
government could take actions for requisition of title, hire or seize our vessels. Requisition for title occurs when a government
takes control of a vessel and becomes its owner. Also, a government could requisition our vessels for hire, which occurs when
a government takes control of a vessel and effectively becomes her charterer at dictated charter rates. Generally, requisitions
occur during a period of war or emergency. Government requisition of one or more of our vessels could negatively impact our business,
results of operations and financial condition.
We
are subject to increasingly complex laws and regulations, including environmental and safety laws and regulations, which expose
us to liability and significant additional expenditures, and can adversely affect our insurance coverage and access to certain
ports as well as our business, results of operations and financial condition.
Our
operations are affected by extensive and changing international, national and local laws, regulations, treaties, conventions and
standards in force in international waters, the jurisdictional waters of the countries in which our vessels operate, as well as
the countries of our vessels’ registration.
These
laws and regulations include, but are not limited to, the U.S. Oil Pollution Act of 1990 (the “OPA”), requirements
of the U.S Coast Guard (“USCG”) and the U.S. Environmental Protection Agency (the “EPA”), the U.S. Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (the “CERCLA”), the U.S. Clean Air Act of 1970 (as
amended from time to time and referred to herein as the “CAA”), the U.S. Clean Water Act of 1972 (as amended from
time to time and referred to herein as the “CWA”), the IMO, the International Convention on Civil Liability for Oil
Pollution Damage of 1969 (as amended from time to time and referred to herein as the “CLC”), the IMO International
Convention on Civil Liability for Bunker Oil Pollution Damages (the “Bunker Convention”), the IMO International Convention
for the Prevention of Pollution from Ships of 1973 (as amended from time to time and referred to herein as “MARPOL”),
including designation of Emission Control Areas (“ECAs”) thereunder, the IMO International Convention for the Safety
of Life at Sea of 1974 (as amended from time to time and referred to herein as the “SOLAS Convention”) and the International
Management Code for the Safe Operation of Ships and Pollution Prevention (the “ISM Code”) promulgated thereby, the
International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”),
the IMO International Convention on Load Lines of 1966 (as from time to time amended), the U.S. Maritime Transportation Security
Act of 2002 (the “MTSA”), the International Labour Organization (“ILO”), the Maritime Labour Convention
and EU regulations.
Environmental
laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject
us to liability without regard to whether we were negligent or at fault. Under the OPA, for example, owners, operators and bareboat
charterers are jointly and severally strictly liable for the discharge of oil in U.S. waters, including the 200-nautical mile
exclusive economic zone around the United States. An oil spill could also result in significant liability, including fines, penalties,
criminal liability and remediation costs for natural resource damages under other international and U.S. federal, state and local
laws, as well as third-party damages, and could harm our reputation with current or potential charterers of our tankers. We are
required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other
pollution incidents. Although we have arranged insurance to cover certain environmental risks, there can be no assurance that
such insurance will be sufficient to cover all such risks.
The
safe operation of our vessels is affected by the requirements of the ISM Code, promulgated by the IMO under the SOLAS Convention.
The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management
System” that includes the adoption of safety and environmental protection policies setting forth instructions and procedures
for safe operation and describing procedures for dealing with emergencies. If we fail to comply with the ISM Code, we may be subject
to increased liability, invalidation of our existing insurance, or reduction in available insurance coverage for our affected
vessels. Such noncompliance may also result in a denial of access to, or detention in, certain ports.
Compliance
with such laws and regulations, where applicable, may require installation of costly equipment, vessel modifications, operational
changes or restrictions, a reduction in cargo-capacity and may affect the resale value or useful lives of our vessels as well
as result in the denial of access to, or detention in, certain jurisdictional waters or ports. We may also incur additional costs
in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air
emissions including greenhouse gases, the management of ballast and bilge waters, maintenance and inspection, elimination of tin-based
paint, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability
to address pollution incidents. Government regulation of the shipping industry, particularly as it may relate to safety, ship
recycling requirements, greenhouse gas emissions and climate change, and other environmental matters, can be expected to become
stricter in the future, and may require us to incur significant capital expenditures on our vessels to keep them in compliance,
may require us to scrap or sell certain vessels altogether, may reduce the residual value we receive if a vessel is scrapped,
and may generally increase our compliance costs. A failure to comply with applicable laws and regulations may result in administrative
and civil penalties, criminal sanctions or the suspension or termination of operations. All of the above, both individually and
cumulatively, could have a material adverse effect on our business, results of operations and financial condition.
Recent
action by the IMO’s Maritime Safety Committee and U.S. agencies indicate that cyber-security regulations for the maritime
industry are likely to be further developed in the near future in an attempt to combat cyber-security threats. This might cause
companies to cultivate additional procedures for monitoring cyber-security, which could require additional expenses and/or capital
expenditures. However, the impact of such regulations is hard to predict at this time.
The
failure to maintain class certifications of authorized classification societies on one or more of our vessels would affect our
ability to employ such vessels.
The
hull and machinery of every commercial vessel must be certified as meeting its class requirements by a classification society
authorized by the vessel’s country of registry. The classification society certifies that the vessel is safe and seaworthy
in accordance with the applicable rules and regulations of the country of registry of the vessel and the SOLAS Convention. The
operating vessels in our fleet are classed by the major classification societies, Nippon Kaiji Kyokai (“NKK”) and
Det Norske Veritas (“DNV GL”). ITM and the vessels in our fleet have also been awarded certifications from major classification
societies under the ISM Code. In order for a vessel to maintain its classification, the vessel must undergo annual surveys, intermediate
surveys and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous survey cycle under
which the machinery would be surveyed from time to time over a five year period. All of the vessels in our fleet on time charters
or operating on the spot market are on special survey cycles for both hull and machinery inspection. Every vessel may also be
required to be dry-docked every two to three years for inspection of the underwater parts of the vessel. If a vessel fails any
survey or otherwise fails to maintain its class, the vessel will be unable to trade and will be unemployable, and may subject
us to claims from the charterer if it has chartered the vessel, which would negatively impact our revenues as well as our reputation.
We
could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide
anti-bribery laws.
The
FCPA and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments
to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these laws. In
certain circumstances, third parties may request our employees and agents to make payments that may not comply with the FCPA and
other anti-bribery laws. Despite such compliance program, we cannot assure you that our internal control policies and procedures
always will protect us from reckless or negligent acts committed by our employees or agents. Violations of these laws, or allegations
of such violations, could have a negative impact on our business, results of operations and financial condition.
We
are subject to funding calls by our protection and indemnity associations, and our associations may not have enough resources
to cover claims made against them.
We
are indemnified for certain liabilities incurred while operating our vessels through membership in protection and indemnity associations,
which are mutual insurance associations whose members contribute to cover losses sustained by other association members. Claims
are paid through the aggregate premiums (typically annually) of all members of the association, although members remain subject
to calls for additional funds if the aggregate premiums are insufficient to cover claims submitted to the association. Claims
submitted to the association may include those incurred by members of the association, as well as claims submitted to the association
from other protection and indemnity associations with which our association has entered into inter-association agreements. We
cannot assure you that the associations to which we belong will remain viable.
Technological
innovation could reduce our charter hire income and the value of our vessels.
The
charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s
efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge
cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and
straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance, the
impact of the stress of operations and stipulations from classification societies. If new product tankers are built that are more
efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced
vessels could adversely affect the amount of charter hire payments we receive for our vessels once their initial charters expire
and the resale value of our vessels could significantly decrease. As a result, our financial condition and available cash could
be adversely affected.
Risks
Related to Our Business and Operations
We
operate in highly competitive international markets.
The
product tanker industry is highly fragmented, with many charterers, owners and operators of vessels, and the transportation of
refined petroleum products is characterized by intense competition. Competition arises primarily from other tanker owners, including
major oil companies as well as independent tanker companies, some of which have substantially greater financial and other resources
than we do. Although we believe that no single competitor has a dominant position in the markets in which we compete, the trend
towards consolidation in the industry is creating an increasing number of global enterprises capable of competing in multiple
markets, which will likely result in greater competition to us. Our competitors may be better positioned to devote greater resources
to the development, promotion and employment of their businesses than we are. Competition for charters, including for the transportation
of refined petroleum products, is intense and depends on price as well as on vessel location, size, age, condition and acceptability
of the vessel and its operator to the charterer and reputation. Competition may increase in some or all of our principal markets,
including with the entry of new competitors. We may not be able to compete successfully or effectively with our competitors and
our competitive position may be eroded in the future, which could have an adverse effect on our business, financial condition
and results of operations.
Because
we intend to charter some of the vessels in our fleet on the spot market or in pools trading in the spot market, we expect to
have exposure to the cyclicality and volatility of the spot charter market.
The
spot market is highly competitive and volatile, and spot charter rates may fluctuate dramatically based on the competitive factors
listed in the preceding risk factor. Significant fluctuations in spot charter rates may result in significant fluctuations in
our ability to continuously re-charter our vessels upon the expiration or termination of their current spot charters and in the
earnings of our vessels operating on the spot market. Since we charter a number of our vessels on the spot market, and may in
the future also admit our vessels in pools trading on the spot market, we have exposure to the cyclicality and volatility of the
spot charter market. By focusing the employment of some of the vessels in our fleet on the spot market, we will benefit if conditions
in this market strengthen. However, we will also be particularly vulnerable to declining spot charter rates. Future spot charters
may continue to be at the rates currently prevailing in the spot market at which we cannot operate our vessels profitably and
may fall further. If spot charter rates remain at current levels or decrease further, our earnings will be adversely impacted
to the extent we have vessels trading on the spot market.
We
may be unable to secure medium- and long-term employment for our vessels at profitable rates.
One
of our strategies is to explore and selectively enter into or renew medium- and long-term, fixed rate time and bareboat charters
for some of the vessels in our fleet in order to provide us with a base of stable cash flows and to manage charter rate volatility.
However, the process for obtaining longer term charters is highly competitive and generally involves a more lengthy and intense
screening and vetting process and the submission of competitive bids, compared to shorter term charters. In addition to the quality,
age and suitability of the vessel, longer term charters tend to be awarded based upon a variety of other factors relating to the
vessel operator, including:
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office
assessments and audits of the vessel operator;
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the
operator’s environmental, health and safety record;
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compliance
with heightened industry standards that have been set by several oil companies and other charterers;
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compliance
with several oil companies and other charterers’ codes of conduct, policies and guidelines, including transparency,
anti-bribery and ethical requirements and relationships with third-parties;
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shipping
industry relationships, reputation for customer service, technical and operating expertise and safety record;
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shipping
experience and quality of ship operations, including cost-effectiveness;
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quality,
experience and technical capability of crews;
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the
ability to finance vessels at competitive rates and overall financial stability;
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relationships
with shipyards and the ability to obtain suitable berths with on-time delivery of new vessels according to customer’s
specifications;
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willingness
to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events;
and
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competitiveness
of the bid in terms of overall price.
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We
cannot assure you that we would be successful in winning medium- and long-term employment for our vessels at profitable rates.
Our
ability to obtain new customers will depend upon a number of factors, many of which are beyond our control.
Our
ability to obtain new customers will depend upon a number of factors, many of which are beyond our control. These include, among
others, our ability to: successfully manage our liquidity and obtain the necessary financing to fund our anticipated growth; attract,
hire, train and retain qualified personnel and technical managers to manage and operate our fleet; identify and consummate desirable
acquisitions, joint ventures or strategic alliances; and identify and capitalize on opportunities in new markets. ITM may not
be approved through the vessel vetting process of certain charterers, thereby limiting our ability to develop new customers.
If
we cannot meet our customers’ quality and compliance requirements we may not be able to operate our vessels profitably which
could have an adverse effect on our future performance, results of operations, cash flows and financial position.
Our
customers, in particular those in the petroleum products industry, have a high and increasing focus on quality and compliance
standards with their suppliers across the entire value chain, including the shipping and transportation segment. Our continuous
compliance with these standards and quality requirements is vital for our operations. Related risks could materialize in multiple
ways, including a sudden and unexpected breach in quality and/or compliance concerning one or more vessels, or a continuous decrease
in the quality concerning one or more vessels occurring over time. Moreover, continuous increasing requirements from petroleum
products industry customers can further complicate our ability to meet the standards. Any noncompliance by us, either suddenly
or over a period of time, on one or more vessels, or an increase in requirements by petroleum products operators above and beyond
what we deliver, may have a material adverse effect on our future performance, results of operations, cash flows and financial
position.
We
may not be able to successfully mix our charter durations profitably.
It
may be difficult to properly balance time and spot charters and anticipate trends in these markets. If we are successful in employing
vessels under medium- and long-term charters, those vessels will not be available for the spot market during an upturn in the
product tanker demand cycle, when spot trading may be more profitable. By contrast, at the expiration of our charters, if a charter
terminates early for any reason or if we acquire vessels charter-free, we may want to charter or re-charter our vessels under
medium- and long-term charters. Should more vessels be available on the spot or short-term market at the time we are seeking to
fix new medium- to long-term time charters, we may have difficulty entering into such charters at profitable rates and for any
term other than a short-term and, as a result, our cash flow may be subject to instability. A more active short-term or spot market
may require us to enter into charters on all our vessels based on fluctuating market rates, as opposed to long-term contracts
based on a fixed rate, which could result in a decrease in our cash flow in periods when the charter rates for product tankers
are depressed. If we cannot successfully employ our vessels in a profitable mix of medium- and long-term time charters and on
the spot market, our business, results of operations and financial condition could be adversely affected.
We
have become reliant on Maritime, an entity affiliated with our Chairman and Chief Executive Officer, Mr. Valentis, for our short-term
working capital financing.
At
December 31, 2016, Maritime extended $2.0 million of advances which we used to pay various operating costs, debt service and other
obligations. At September 30, 2017, such advances had been increased to $5.8 million. On December 29, 2017, we entered into a
third amendment to the promissory note we issued in favor of Maritime Investors Corp. (“Maritime Investors”) on October
28, 2015. This amendment (i) increased the outstanding principal balance of the promissory note from $2.5 million to $5.0 million;
(ii) extended the maturity date to June 15, 2019; (iii) increased the fixed rate to 4% per annum payable quarterly in arrears;
and (iv) made such interest payable only in cash. In exchange for entering into this amendment, we reduced the outstanding balance
due to Maritime by $2.5 million. In the near-term, we expect Maritime to advance us additional funds for similar purposes. There
are no specific repayment terms with respect to these advances, which Maritime controls as our manager. We cannot assure you that
in the future we will be able to rely on Maritime for this working capital financing on similar terms, or at all, or on what terms
Maritime will request repayment. If our operating cash flows are insufficient to satisfy our liquidity needs, we may have to rely
on the sale of assets or additional equity financing to raise adequate funds or restructure our indebtedness, or a combination
thereof. An inability to continue this financing in the future from Maritime or the imposition by Maritime of repayment terms
that are unfavorable to us may negatively affect our liquidity position and our ability to fund our ongoing operations.
Counterparties,
including charterers or technical managers, could fail to meet their obligations to us.
We
enter into, among other things, memoranda of agreement, charter parties, ship management agreements and loan agreements with third
parties with respect to the purchase and operation of our fleet and our business. Such agreements subject us to counterparty risks.
The ability and willingness of each of our counterparties to perform its obligations under these agreements with us depends on
a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition
of the tanker shipping industry and the overall financial condition of the counterparties. In particular, we face credit risk
with our charterers. It is possible that not all of our charterers will provide detailed financial information regarding their
operations. As a result, charterer risk is largely assessed on the basis of our charterers’ reputation in the market, and
even on that basis, there can be no assurance that they can or will fulfill their obligations under the contracts we enter into
with them.
Charterers
are sensitive to the commodity markets and may be impacted by market forces affecting commodities. In addition, in depressed market
conditions, there have been reports of charterers renegotiating their charters or defaulting on their obligations under charters.
Our customers may fail to pay charter hire or attempt to renegotiate charter rates. Should a charterer counterparty fail to honor
its obligations under agreements with us, it may be difficult to secure substitute employment for that vessel, and any new charter
arrangements we secure on the spot market or on substitute charters may be at lower rates depending on the then existing charter
rate levels. The costs and delays associated with the default by a charterer under a charter of a vessel may be considerable.
In addition, if the charterer of a vessel in our fleet that is used as collateral under our loan agreements defaults on its charter
obligations to us, such default may constitute an event of default under our loan agreements, which may allow the banks to exercise
remedies under our loan agreements.
As
a result of these risks, we could sustain significant losses, which could have a material adverse effect on our business, results
of operations and financial condition.
We
depend on ITM and Maritime to operate our business and our business could be harmed if they fail to perform their services satisfactorily.
Pursuant
to our management agreements, ITM provides us with day-to-day technical management services (including crewing, maintenance, repair,
dry-dockings and maintaining required vetting approvals) and Maritime provides us with ship management and administrative services
for our vessels. Our operational success depends significantly upon ITM and Martime’s satisfactory performance of these
services. Our business would be harmed if ITM or Maritime failed to perform these services satisfactorily. In addition, if our
management agreements with either ITM or Maritime were to be terminated or if their terms were to be altered, our business could
be adversely affected, as we may not be able to immediately replace such services, and even if replacement services were immediately
available, the terms offered could be less favorable than those under our management agreements. A change of tenchical manager
may require approval by certain customers of ours for employment of a vessel.
Our
ability to compete for and enter into new period time and spot charters and to expand our relationships with our existing charterers
will depend largely on our relationship with ITM and Maritime, and their respective reputation and relationships in the shipping
industry. If ITM or Maritime suffers material damage to its reputation or relationships, it may harm our ability to:
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obtain
new charters;
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obtain
financing on commercially acceptable terms;
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maintain
satisfactory relationships with our charterers and suppliers; and
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successfully
execute our business strategies.
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If
our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, financial
condition and results of operations.
We
may fail to successfully control our operating and voyage expenses.
Our
operating results are dependent on our ability to successfully control our operating and voyage expenses. Under our ship management
agreements with ITM we are required to pay for vessel operating expenses (which includes crewing, repairs and maintenance, insurance,
stores, lube oils and communication expenses), and, for spot charters, voyage expenses (which include bunker expenses, port fees,
cargo loading and unloading expenses, canal tolls, agency fees and conversions). These expenses depend upon a variety of factors,
many of which are beyond our or the technical manager’s control, including unexpected increases in costs for crews, insurance
or spare parts for our vessels, unexpected dry-dock repairs, mechanical failures or human error (including revenue lost in off-hire
days), vessel age, arrest action against our vessels due to failure to pay debts, disputes with creditors or claims by third parties,
labor strikes, severe weather conditions, any quarantines of our vessels and uncertainties in the world oil markets. Some of these
costs, primarily relating to voyage expenses, have been increasing and may increase, possibly significantly, in the future. Repair
costs are unpredictable and can be substantial, some of which may not be covered by insurance. If our vessels are subject to unexpected
or unscheduled off-hire time, it could adversely affect our cash flow and may expose us to claims for liquidated damages if the
vessel is chartered at the time of the unscheduled off-hire period. The cost of dry-docking repairs, additional off-hire time,
an increase in our operating expenses and/or the obligation to pay any liquidated damages could adversely affect our business,
results of operations and financial condition.
In
addition, to the extent our vessels are employed under spot charters in the future, our expenses may be impacted by increases
in bunker costs and by canal costs, including the cost of canal-related delays incurred by employment of the vessels on certain
routes. Unlike time charters in which the charterer bears all bunker and canal costs, in spot charters we bear these costs. Because
it is not possible to predict the future price of bunker or canal-related costs when fixing spot charters, a significant rise
in these costs could have an adverse impact on the costs associated with any spot charters we enter into and our earnings. Additionally,
an increase in the price of bunkers beyond our expectations may adversely affect our profitability at the time we negotiate time
or bareboat charters, and low-sulfur bunker rules may result in a significant increase in vessel bunker costs starting in 2020.
We
will be required to make substantial capital expenditures, for which we may be dependent on additional financing, to maintain
the vessels we own or to acquire other vessels.
We
must make substantial capital expenditures to maintain, over the long-term, the operating capacity of our fleet. Our business
strategy is also based in part upon the expansion of our fleet through the purchase of additional vessels. Maintenance capital
expenditures include dry-docking expenses, modification of existing vessels or acquisitions of new vessels to the extent these
expenditures are incurred to maintain the operating capacity of our fleet. In addition, we expect to incur significant maintenance
costs for our current and any newly-acquired vessels. A newbuilding vessel must be dry-docked within five years of its delivery
from a shipyard, and vessels are typically dry-docked every 30 to 60 months thereafter depending on the vessel, not including
any unexpected repairs. We estimate the cost to dry-dock a vessel is between $0.2 and $0.9 million (including estimated expenditures
for upgrades to comply with new ballast water treatment system regulations), depending on the size and condition of the vessel
and the location of dry-docking. In addition, capital maintenance expenditures could increase as a result of changes in the cost
of labor and materials, customer requirements, increases in the size of our fleet, governmental regulations and maritime self-regulatory
organization standards relating to safety, security or the environment and competitive standards.
To
purchase additional vessels from time to time, we may be required to incur additional borrowings or raise capital through the
sale of debt or additional equity securities. Asset impairments, financial stress, enforcement actions and credit rating pressures
experienced in recent years by financial institutions to extend credit to the shipping industry due to depressed shipping rates
and the deterioration of asset values that have led to losses in many banks’ shipping portfolios, as well as changes in
overall banking regulations, have severely constrained the availability of credit for shipping companies like us. For example,
following heavy losses in its shipping portfolio, and at the EU Commission’s behest, one of our lenders, HSH Nordbank AG,
has initiated a process to be privatized by the end of February 2018.
In
addition, our ability to obtain bank financing or to access the capital markets for future offerings may be limited by the terms
of our existing credit agreements, our financial condition, the actual or perceived credit quality of our customers, and any defaults
by them, as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies
and uncertainties that are beyond our control.
We
cannot assure you that we will be able to obtain such additional financing in the future on terms that are acceptable to us or
at all. Our failure to obtain funds for capital expenditures could have a material adverse effect on our business, results of
operations and financial condition. In addition, our actual operating and maintenance capital expenditures will vary significantly
from quarter to quarter based on, among other things, the number of vessels dry-docked during that quarter. Even if we are successful
in obtaining the necessary funds for capital expenditures, the terms of such financings could limit our ability to pay dividends
to our stockholders. Incurring additional debt may significantly increase our interest expense and financial leverage, and issuing
additional equity securities may result in significant dilution.
Any
vessel modification projects we undertake could have significant cost overruns, delays or fail to achieve the intended results.
Market
volatility and higher bunker prices, coupled with increased regulation and concern about the environmental impact of the international
shipping industry, have led to an increased focus on bunker efficiency. Many shipbuilders have implemented vessel modification
programs for their existing ships in an attempt to capture potential efficiency gains. We will consider making modifications to
our fleet in instances when we believe the efficiency gains will result in a positive return for our stockholders. However, these
types of projects are subject to risks of delay and cost overruns, resulting from shortages of equipment, unforeseen engineering
problems, work stoppages, unanticipated cost increases, inability to obtain necessary certifications and approvals, shortages
of materials or skilled labor, among other problems. In addition, any completed modification may not achieve the full expected
benefits or could even compromise the fleet’s ability to operate at higher speeds, which is an important factor in generating
additional revenue in an improving freight rate environment. The failure to successfully complete any modification project we
undertake or any significant cost overruns or delays in any retrofitting projects could have a material adverse effect on our
business, results of operations and financial condition.
We
may not be able to implement our business strategy successfully or manage our growth effectively.
Our
future growth will depend on the successful implementation of our business strategy. A principal focus of our business strategy
is to grow by expanding the size of our fleet while capitalizing on a mix of charter types, including on the spot market. Our
future growth will depend upon a number of factors, some of which are not within our control. These factors include, among others,
our ability to:
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identify
suitable tankers and/or shipping companies for acquisitions at attractive prices;
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identify
and consummate desirable acquisitions, joint ventures or strategic alliances;
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hire,
train and retain qualified personnel and crew to manage and operate our growing business and fleet;
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improve
our operating, financial and accounting systems and controls; and
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obtain
required financing for our existing and new vessels and operations.
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Acquisitions
of vessels may not be profitable to us at or after the time we acquire them. We may:
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fail
to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;
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decrease
our liquidity by using a significant portion of our available cash or borrowing capacity to finance vessel acquisitions;
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significantly
increase our interest expense or financial leverage if we incur additional debt to finance vessel acquisitions;
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fail
to integrate any acquired tankers or businesses successfully with our existing operations, accounting systems and infrastructure
generally;
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incur
or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired, particularly if any
vessel we acquire proves not to be in good condition; or
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incur
other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
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In
addition, unlike newbuildings, secondhand vessels typically provide very limited or no warranties with respect to the condition
of the vessel. While we expect we would inspect secondhand vessels prior to purchase, this does not provide us with the same knowledge
about their condition that we would have had if these vessels had been built for, and operated exclusively by, us. Generally,
we do not receive the benefit of warranties from the builders of the secondhand vessels that we acquire.
We
also seek to take advantage of changing market conditions, which may include taking advantage of pooling arrangements or profit
sharing components of the charters we may enter into. In addition, our future growth will depend upon our ability to: maintain
or develop new and existing customer relationships; employ vessels consistent with our chartering strategy; successfully manage
our liquidity and expenses; and identify and capitalize on opportunities in new markets. Changing market and regulatory conditions
may require or result in the sale or other disposition of vessels we are not able to charter because of customer preferences or
because they are not or will not be compliant with existing or future rules, regulations and conventions. Additional vessels of
the age and quality we desire may not be available for purchase at prices we are prepared to pay or at delivery times acceptable
to us, and we may not be able to dispose of vessels at reasonable prices, if at all.
However,
even if we successfully implement our business strategy, we may not improve our net revenues or operating results. Furthermore,
we may decide to alter or discontinue aspects of our business strategy and may adopt alternative or additional strategies in response
to business or competitive factors or factors or events beyond our control. Our failure to execute our business strategy or to
manage our growth effectively could adversely affect our business, results of operations and financial condition.
If
we purchase and operate secondhand vessels, we will be exposed to increased operating costs which could adversely affect our earnings
and, as our fleet ages, the risks associated with older vessels could adversely affect our ability to obtain profitable charters.
In
general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically
less fuel-efficient than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase
with the age of a vessel, making older vessels less desirable to charterers.
Governmental
regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the
addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels
age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder
of their useful lives.
In
addition, unless we maintain cash reserves for vessel replacement, we may be unable to replace the vessels in our fleet upon the
expiration of their useful lives. We estimate the useful life of our vessels to be 25 years from the date of initial delivery
from the shipyard. Our cash flows and income are dependent on the revenues we earn by chartering our vessels to customers. If
we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, financial condition
and results of operations will be materially adversely affected. Any reserves set aside for vessel replacement may not be available
for other cash needs or dividends.
New
vessels may experience initial operational difficulties and unexpected incremental start-up costs.
New
vessels, during their initial period of operation, have the possibility of encountering structural, mechanical and electrical
problems as well as unexpected incremental start-up costs. Typically, the purchaser of a newbuilding will receive the benefit
of a warranty from the shipyard for newbuildings, but we cannot assure you that any warranty we obtain will be able to resolve
any problem with the vessel without additional costs to us and off-hire periods for the vessel. Upon delivery of a newbuild vessel
from a shipyard, we may incur operating expenses above the incremental start-up costs typically associated with such a delivery
and such expenses may include, among others, additional crew training, consumables and spares.
Delays
in deliveries of additional vessels, our decision to cancel an order for purchase of a vessel, or our inability to otherwise complete
the acquisitions of additional vessels for our fleet, could harm our operating results.
We
expect to purchase additional vessels from time to time. The delivery of these vessels, or vessels on order, could be delayed,
not completed or cancelled, which would delay or eliminate our expected receipt of revenues from the employment of these vessels.
The seller could fail to deliver these vessels to us as agreed, or we could cancel a purchase contract because the seller has
not met its obligations. The delivery of vessels we propose to order or that are on order could be delayed because of, among other
things:
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work
stoppages or other labor disturbances or other events that disrupt the operations of the shipyard building the vessels;
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quality
or other engineering problems;
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changes
in governmental regulations or maritime self-regulatory organization standards;
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lack
of raw materials;
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bankruptcy
or other financial crisis of the shipyard building the vessels;
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our
inability to obtain requisite financing or make timely payments;
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a
backlog of orders at the shipyard building the vessels;
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hostilities
or political or economic disturbances in the countries where the vessels are being built;
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weather
interference or a catastrophic event, such as a major earthquake, typhoon or fire;
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our
requests for changes to the original vessel specifications;
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shortages
or delays in the receipt of necessary construction materials, such as steel;
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our
inability to obtain requisite permits or approvals;
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a
dispute with the shipyard building the vessels, non-performance of the purchase or construction agreement with respect to
a vessel by the seller or the shipyard as applicable;
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our
inability to obtain requisite permits, approvals or financings; or
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damage
to or destruction of vessels while being operated by the seller prior to the delivery date.
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If
the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to a charter under which
we become responsible for substantial liquidated damages to the customer as a result of the delay or cancellation, our business,
results of operations and financial condition could be adversely affected.
Declines
in charter rates and other market deterioration could cause us to incur impairment charges.
We
evaluate the carrying amounts of our vessels to determine if events have occurred that would require an impairment of their carrying
amounts. The recoverable amount of vessels is reviewed based on events and changes in circumstances that would indicate that the
carrying amount of the assets might not be recovered. The review for potential impairment indicators and projection of future
cash flows related to the vessels is complex and requires our management to make various estimates including future charter rates,
operating expenses and dry-dock costs. All of these items have been historically volatile. We reviewed, as of December 31, 2016,
the carrying amount in connection with the estimated recoverable amount for each of our vessels. This review indicated that such
carrying amount was not fully recoverable for the Northsea Alpha and the Northsea Beta. Consequently, we wrote down the carrying
value of these vessels and recorded a total vessel impairment charge of $4.0 million.
Our
charterers may terminate charters early or choose not to re-charter with us, which could adversely affect our business, results
of operations and financial condition.
Our
charters may terminate earlier than the dates indicated in the charter party agreements. The terms of our charters vary as to
which events or occurrences will cause a charter to terminate or give the charterer the option to terminate the charter, but these
generally include a total or constructive loss of the relevant vessel, the requisition for hire of the relevant vessel, the dry-docking
of the relevant vessel for a certain period of time or the failure of the relevant vessel to meet specified performance criteria.
An early termination of our charters may adversely affect our business, results of operations and financial condition.
We
cannot predict whether any of our charterers will, upon the expiration of their charters, re-charter our vessels on favorable
terms or at all. If our charterers decide not to re-charter our vessels, we may not be able to re-charter them on terms similar
to our current charters or at all. Also, we may incur additional costs depending on where the vessel is re-delivered to us. We
may also employ our vessels on the spot-charter market, which is subject to greater rate fluctuation than the time charter market.
If we receive lower charter rates under replacement charters or are unable to re-charter all of our vessels, our available cash
may be significantly reduced or eliminated.
We
are dependent on the services of our founder and Chief Executive Officer and other members of our senior management team.
We
are dependent upon our Chief Executive Officer, Mr. Valentis, and the other members of our senior management team for the principal
decisions with respect to our business activities. The loss or unavailability of the services of any of these key members of our
management team for any significant period of time, or the inability of these individuals to manage or delegate their responsibilities
successfully as our business grows, could adversely affect our business, results of operations and financial condition. If the
individuals were no longer to be affiliated with us, we may be unable to recruit other employees with equivalent talent and experience,
and our business and financial condition may suffer as a result. We do not maintain “key man” life insurance for our
Chief Executive Officer or other members of our senior management team.
Our
founder, Chairman and Chief Executive Officer has affiliations with Maritime, which may create conflicts of interest.
Mr.
Valentis, our founder, Chairman and Chief Executive Officer, also owns and controls Maritime. His responsibilities and relationships
with Maritime could create conflicts of interest between us, on the one hand, and Maritime, on the other hand. These conflicts
may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus vessels managed
by other companies affiliated with Maritime. Maritime entered into a Head Management Agreement (as defined herein) with us and
into separate ship management agreements with our subsidiaries. The negotiation of these management arrangements may have resulted
in certain terms that may not reflect market standard terms or may include terms that could not have been obtained from arms-length
negotiations with unaffiliated third parties for similar services.
In
addition, Maritime may give preferential treatment to vessels that are time chartered-in by related parties because our founder,
Chairman and Chief Executive Officer and members of his family may receive greater economic benefits. In particular, as of December
31, 2017, Maritime provided commercial management services to one tanker vessel, other than the vessels in our fleet, that was
owned or operated by one or more entities affiliated with Mr. Valentis. Such conflicts may have an adverse effect on our business,
results of operations and financial condition.
Several
of our senior executive officers do not, and certain of our officers in the future may not, devote all of their time to our business,
which may hinder our ability to operate successfully.
Mr.
Valentis, our Chairman and Chief Executive Officer, Mr. Lytras, our Chief Operating Officer, Mr. Williams, our Chief Financial
Officer, and Mr. Backos, our General Counsel, Senior Vice President and Secretary, participate, and other of our senior officers
which we may appoint in the future may also participate, in business activities not associated with us. As a result, they may
devote less time to us than if they were not engaged in other business activities and may owe fiduciary duties to our stockholders
as well as stockholders of other companies with which they may be affiliated. This may create conflicts of interest in matters
involving or affecting us and our customers and it is not certain that any of these conflicts of interest will be resolved in
our favor. This could have a material adverse effect on our business, results of operations and financial condition.
Our
senior executive officers and directors may not be able to successfully manage a publicly traded company.
None
of our senior executive officers or directors have previously managed a publicly traded company, and they may not be successful
in doing so. The demands of managing a publicly traded company such as us are much greater as compared to those of a private company,
and some of our senior executive officers and directors may not be able to successfully meet those increased demands.
We
have a limited operating history which may make it difficult for investors to evaluate our prospects for success.
We
were incorporated under the laws of the Republic of the Marshall Islands on March 23, 2015. We own the vessels in our fleet through
six separate wholly-owned subsidiaries that were incorporated in the Republic of the Marshall Islands. We acquired the vessel-owning
subsidiaries from affiliates of our founder and Chief Executive Officer in advance of the closing of the transactions contemplated
by the Agreement and Plan of Merger dated as of April 23, 2015, as amended, by and among Maritime Technologies Corp., LookSmart
Ltd. (“LookSmart”), Looksmart Group, Inc. and us (the “LookSmart Agreement”), which occurred on October
28, 2015. We have a limited operating history as a consolidated company and this lack of consolidated operating history may make
it difficult for investors to evaluate our prospects for success. There is no assurance that we will be successful and the likelihood
of success must be considered in light of the relatively early stage of our consolidated operations.
As
we expand our business, both we and Maritime may need to improve our operating and financial systems and Maritime will need to
recruit and retain suitable employees and crew for our vessels.
Our
and Maritime’s current operating and financial systems may not be adequate as the size of our fleet expands, and attempts
to improve those systems may be ineffective. In addition, as we expand our fleet, Maritime may need to recruit and retain suitable
additional seafarers and shore based administrative and management personnel. We cannot guarantee that Maritime will be able to
continue to hire suitable employees as we expand our fleet. If we or Maritime encounter business or financial difficulties, we
may not be able to adequately staff our vessels. If we are unable to accomplish the above, our financial reporting performance
may be adversely affected and, among other things, it may not be compliant with SEC rules.
Our
insurance may be insufficient to cover losses that may result from our operations.
Although
we carry hull and machinery, protection and indemnity and war risk insurance on each of the vessels in our fleet, we face several
risks regarding that insurance. The insurance is subject to deductibles, limits and exclusions. Since it is possible that a large
number of claims may be brought, the aggregate amount of these deductibles could be material. As a result, there may be other
risks against which we are not insured, and certain claims may not be paid. We do not carry insurance covering the loss of revenues
resulting from vessel off-hire time based on our analysis of the cost of this coverage compared to our off-hire experience.
Certain
of our insurance coverage, such as tort liability (including pollution-related liability), is maintained through mutual protection
and indemnity associations, and as a member of such associations we may be required to make additional payments over and above
budgeted premiums if member claims exceed association reserves. Claims submitted to the association may include those incurred
by members of the association, as well as claims submitted to the association from other protection and indemnity associations
with which our association has entered into inter-association agreements. We cannot assure you that the associations to which
we belong will remain viable. If such associations do not remain viable or are unable to cover our losses, we may have to pay
what our insurance does not cover in full.
We
may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent
environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability
of, insurance against risks of environmental damage or pollution. Changes in the insurance markets attributable to terrorist attacks
may also make certain types of insurance more difficult for us to obtain. We maintain for each of the vessels in our existing
fleet pollution liability coverage insurance in the amount of $1.0 billion per incident. A catastrophic oil spill or marine
disaster could exceed such insurance coverage. In addition, our insurance may be voidable by the insurers as a result of certain
of our actions, such as our vessels failing to maintain certification with applicable maritime self-regulatory organizations.
The circumstances of a spill, including non-compliance with environmental laws, could also result in the denial of coverage, protracted
litigation and delayed or diminished insurance recoveries or settlements. The insurance that may be available to us may be significantly
more expensive than our existing coverage. Furthermore, even if insurance coverage is adequate, we may not be able to obtain a
timely replacement vessel in the event of a loss. Any of these circumstances or events could negatively impact our business, results
of operations and financial condition.
We
may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse
effect on us.
We
may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes,
environmental claims or proceedings, employment and personal injury matters, and other litigation that arises in the ordinary
course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or
effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them
may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases or insurers may not remain
solvent, which may have a material adverse effect on our financial condition.
We
and our subsidiaries may be subject to group liability for damages or debts owed by one of our subsidiaries or by us.
Although
each of our vessels is and will be separately owned by individual subsidiaries, under certain circumstances, a parent company
and its ship-owning subsidiaries can be held liable under corporate veil piercing principles for damages or debts owed by one
of the subsidiaries or the parent. Therefore, it is possible that all of our assets and those of our subsidiaries could be subject
to execution upon a judgment against us or any of our subsidiaries.
Maritime
and ITM are privately held companies and there is little or no publicly available information about them.
The
ability of Maritime and ITM to render their respective management services will depend in part on their own financial strength.
Circumstances beyond each such company’s control could impair its financial strength. Because each of these companies is
privately held, information about each company’s financial strength is not available. As a result, we and an investor in
our securities might have little advance warning of financial or other problems affecting either Maritime or ITM even though its
financial or other problems could have a material adverse effect on us and our stockholders.
Our
vessels may operate in pooling arrangements in the future, which may or may not be beneficial compared to chartering our vessels
outside of a pool.
In
a pooling arrangement, the net revenues generated by all of the vessels in a pool are aggregated and distributed to pool members
pursuant to a pre-arranged weighting system that recognizes each vessel’s earnings capacity based on factors, which may
include its cargo capacity, speed and bunker consumption, and actual on-hire performance. Pooling arrangements are intended to
maximize vessel utilization. However, pooling arrangements are dependent on the spot charter market, in which rates fluctuate.
We cannot assure you that entering any of our vessels into a pool will be beneficial to us compared to chartering our vessels
outside of a pool. If we participate in, or for any reason our vessels cease to participate in a pooling arrangement, their utilization
rates could fall and the amount of additional hire paid could decrease, either of which could have an adverse effect on our business,
results of operations and financial condition. We also cannot assure you that if we join a pooling arrangement that we will continue
to use the pooling arrangement or whether the pools our vessels could participate in will continue to exist in the future.
Exchange
rate fluctuations could adversely affect our revenues, financial condition and operating results.
We
generate a substantial part of our revenues in U.S. dollars, but incur costs in other currencies. The difference in currencies
could in the future lead to fluctuations in our net income due to changes in the value of the U.S. dollar relative to other currencies.
We have not hedged our exposure to exchange rate fluctuations, and as a result, our U.S. dollar denominated results of operations
and financial condition could suffer as exchange rates fluctuate.
We
must protect the safety and condition of the cargoes transported on our vessels and any failure to do so may subject us to claims
for loss or damage.
Under
our time and spot charters, we are responsible for the safekeeping of cargo entrusted to us and must properly maintain and control
equipment and other apparatus to ensure that cargo is not lost or damaged in transit. Claims and any liability for loss or damage
to cargo that is not covered by insurance could harm our reputation and adversely affect our business, financial condition and
results of operations.
We
may face labor interruptions.
A
majority of the crew members on the vessels in our fleet that are under time or spot charters are employed under collective bargaining
agreements. ITM is a party to some of these collective bargaining agreements. These collective bargaining agreements and any employment
arrangements with crew members on the vessels in our fleet may not prevent labor interruptions and are subject to renegotiation
in the future. Any labor interruptions, including due to failure to successfully renegotiate collective bargaining employment
agreements with the crew members on the vessels in our fleet, could disrupt our operations and could adversely affect our business,
financial condition and results of operations.
We
do not currently enter into hedging arrangements with respect to the cost of fuel.
We
have not entered into hedging arrangements to establish, in advance, a price for the cost of fuel. As a result, although we may
realize the benefit of any short-term decrease in the price of fuel, we will not be protected against increases in the price of
fuel, which could materially adversely affect our business, financial condition and results of operation.
In
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addition,
to the extent we decide to enter into hedging arrangements in the future, the success of any hedging arrangement generally depends
on the degree of correlation between price movements of a derivative instrument and the position being hedged, the creditworthiness
of the counterparty, the costs of the hedging transaction and other factors. While such transactions may reduce the risks of losses
with respect to adverse movements in market factors, the transaction may also limit the opportunity for gain. In addition, these
arrangements may require the posting of cash or other collateral at a time when we have insufficient cash or illiquid assets such
that the posting of the cash is either impossible or requires the sale of assets at prices that do not reflect their underlying
value. Moreover, these hedging arrangements may generate significant transactions costs, including potential tax costs and legal
fees, which reduce the anticipated returns on an investment. There can be no assurance that any future hedging transaction we
enter will successfully hedge the risks associated with hedged positions or that it will not result in poorer overall investment
performance than if it had not been executed.
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A
cyber-attack could materially disrupt our business.
We
and our ship managers rely on information technology systems and networks in our and their operations and business administration.
Our or any of our ship managers’ operations and business administration could be targeted by individuals or groups seeking
to sabotage or disrupt such systems and networks, or to steal data. A successful cyber-attack could materially disrupt our or
our managers’ operations, which could also adversely affect the safety of our operations or result in the unauthorized release
or alteration of information in our or our managers’ systems. Such an attack on us, or our managers, could result in significant
expenses to investigate and repair security breaches or system damages and could lead to litigation, fines, other remedial action,
heightened regulatory scrutiny, diminished customer confidence and damage to our reputation. We do not maintain cyber-liability
insurance at this time to cover such losses. As a result, a cyber-attack or other breach of any such information technology systems
could have a material adverse effect on our business, results of operations and financial condition.
Risks
Related to our Indebtedness
We
may not be able to generate sufficient cash flow to meet our debt service and other obligations.
Our
ability to make scheduled payments on our outstanding indebtedness and other obligations will depend on our ability to generate
cash from operations in the future. Our future financial and operating performance will be affected by a range of economic, financial,
competitive, regulatory, business and other factors that we cannot control, such as general economic and financial conditions
in the tanker sector or the economy generally. In particular, our ability to generate steady cash flow will depend on our ability
to secure charters at acceptable rates. Our ability to renew our existing charters or obtain new charters at acceptable rates
or at all will depend on the prevailing economic and competitive conditions.
Amounts
borrowed under our loan agreements bear interest at variable rates. Increases in prevailing interest rates could increase the
amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income
and cash flows would decrease.
In
addition, our existing loan agreements require us to maintain various cash balances, our financial and operating performance is
also dependent on our subsidiaries’ ability to make distributions to us, whether in the form of dividends, loans or otherwise.
The timing and amount of such distributions will depend on restrictions on our various debt instruments, our earnings, financial
condition, cash requirements and availability, fleet renewal and expansion, the provisions of Marshall Islands law affecting the
payment of dividends and other factors.
At
any time that our operating cash flows are insufficient to service our debt and other liquidity needs, we may be forced to take
actions such as increasing our accounts payable and/or our amounts due to related parties, reducing or delaying capital expenditures,
selling assets, restructuring or refinancing our indebtedness, seeking additional capital, seeking bankruptcy protection or any
combination of the foregoing. For example, at December 31, 2016, our accounts payable were $3.1 million and our amount due to
related parties was $2.0 million, which represented increases of $2.0 and $1.8 million, respectively, since December 31,
2015. At September 30, 2017, our accounts payable declined to $2.7 million, while our amount due to related parties increased
to $5.8 million, which was then reduced by $2.5 million following the third amendment to our promissory note with Maritime Investors
that we entered into on December 29, 2017, as discussed above. We cannot assure you that any of the actions listed above could
be effected on satisfactory terms, if at all, or that they would yield sufficient funds to make required payments on our outstanding
indebtedness and to fund our other liquidity needs. As of September 30, 2017, our total bank debt outstanding, net of deferred
financing costs, aggregated $67.8 million. Also, the terms of existing or future debt agreements may restrict us from pursuing
any of these actions as, among other things, if we are unable to meet our debt obligations or if some other default occurs under
our loan agreements, the lenders could elect to declare that debt, together with accrued interest and fees, to be immediately
due and payable and foreclose against the collateral vessels securing that debt. Any such action could also result in an impairment
of cash flows and our ability to service debt in the future. Further, our debt level could make us more vulnerable than our competitors
with less debt to competitive pressures or a downturn in our business or the economy generally.
The
market values of our vessels may decrease, which could cause, as in the past, us to breach covenants in our loan agreements.
The
fair market values of product tankers have generally experienced high volatility. You should expect the market value of our vessels
to fluctuate. Values for ships can fluctuate substantially over time due to a number of factors, including, among others:
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prevailing
economic conditions in the energy markets;
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a
substantial or extended decline in demand for refined products;
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competition
from other shipping companies and other modes of transportation;
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the
level of worldwide refined petroleum product production and exports;
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changes
in the supply-demand balance of the global product tanker market;
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applicable
governmental regulations;
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the
availability of newbuild and newer, more advanced vessels at attractive prices compared to our vessels;
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changes
in prevailing charter hire rates;
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the
physical condition of the vessel;
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the
vessel’s size, age, technical specifications, efficiency and operational flexibility; and
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the
cost of retrofitting or modifying existing ships, as a result of technological advances in ship design or equipment, changes
in applicable environmental or other regulations or standards, customer requirements or otherwise.
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If
the market value of our fleet declines further, we may not be able to incur debt at all or on terms that are acceptable to us.
An additional decrease in these values could cause us to breach certain covenants that are contained in our loan agreements and
in future financing agreements. Prior to the consummation of the merger agreed to in the LookSmart Agreement, vessel value fluctuations
caused us to not comply with the minimum security covenant in our subsidiary’s loan agreement with Commerzbank AG (“Commerzbank”).
In connection with our obtaining Commerzbank’s consent to the merger, in October 2015 we provided Commerzbank with a new
guarantee (in place of the prior one given by Maritime) and security in the Northsea Alpha and Northsea Beta as additional collateral
to satisfy such non-compliance.
If
we breach covenants in our loan agreements or future financing agreements and are unable to cure the breach, our lenders could
accelerate our debt repayment and foreclose on vessels in our fleet. In addition, as vessels grow older, they generally decline
in value. If for any reason we sell vessels at a time when prices have fallen, we could incur a loss and our business, results
of operations and financial condition could be adversely affected. During 2016, the market value of our fleet declined more rapidly
than book value as the vessels aged, and this trend may continue in the future. Accordingly, we will incur losses on disposition
if we sell vessels below their depreciated book value.
Restrictive
covenants in our current and future loan agreements may impose financial and other restrictions on us.
The
restrictions and covenants in our current and future loan agreements could adversely affect our ability to finance future operations
or capital needs or to pursue and expand our business activities. Our current loan agreements contain, and future financing agreements
will likely contain, restrictive covenants that prohibit us or our subsidiaries from, among other things:
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paying
dividends under certain circumstances, including if there is a default under the loan agreements or, only with respect to
our subsidiaries, Sixthone and Seventhone, if the ratio of our and our subsidiaries as a group total liabilities to market
value adjusted total assets is greater than 65% in the relevant year. As of December 31, 2016, the ratio of total liabilities
over the market value of our adjusted total assets was 68%, or 3% higher than the required threshold. In addition, as of September
30, 2017, the relevant ratio was 69%, or 4% higher than the required threshold. As such, until such non-compliance is cured,
neither Sixthone nor Seventhone is permitted to distribute dividends to us;
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incurring
or guaranteeing indebtedness;
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charging,
pledging or otherwise encumbering our vessels;
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changing
the flag, class, management or ownership of our vessels;
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utilizing
available cash;
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changing
ownership or structure, including through mergers, consolidations, liquidations or dissolutions;
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making
certain investments;
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entering
into a new line of business;
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changing
the commercial and technical management of our vessels; and
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selling,
transferring, assigning or changing the beneficial ownership or control of our vessels.
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In
addition, the loan agreements generally contain covenants requiring us, among other things, to ensure that:
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we
maintain minimum cash and cash equivalents based on the number of vessels owned and chartered-in and debt service requirements.
Our required minimum cash balance as of December 31, 2015, December 31, 2016 and September 30, 2017 was $4.5 million, $5.0
million and $5.0 million, respectively;
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our
subsidiaries, Sixthone and Seventhone, maintain retention accounts with monthly deposits equal to one-third of the next quarterly
principal installment together with the appropriate amount of interest expense due;
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the
fair market value of the mortgaged vessel plus any additional collateral must be no less than a certain percentage (ranging
from 125% to 135%) of outstanding borrowings under the applicable loan agreement, less any money in respect of the principal
outstanding with the credit of any applicable retention account and any free or pledged cash deposits held with the lender
in our or its subsidiary’s name; and
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we
maintain, depending on the loan agreement, a total liabilities to market value adjusted total assets ratio of no greater than
75%.
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As
a result of the above, we may need to seek permission from our lenders in order to engage in some corporate actions. The lenders’
interests may be different from ours and we may not be able to obtain our lenders’ permission when needed. This may limit
our ability to pay dividends, finance our future operations or capital requirements, make acquisitions or pursue business opportunities.
Our
ability to comply with covenants and restrictions contained in our current and future loan agreements may also be affected by
events beyond our control, including prevailing economic, financial and industry conditions. If our cash flow is insufficient
to service our current and future indebtedness and to meet our other obligations and commitments, we will be required to adopt
one or more alternatives, such as reducing or delaying our business activities, acquisitions, investments, capital expenditures,
the payment of dividends or the implementation of our other strategies, refinancing or restructuring our debt obligations, selling
vessels or other assets, seeking to raise additional debt or equity capital or seeking bankruptcy protection. However, we may
not be able to effect any of these remedies or alternatives on a timely basis, on satisfactory terms or at all, which could lead
to events of default under these loan agreements, giving the lenders foreclosure rights on our vessels.
Our
ability to obtain additional debt financing may be dependent on the performance of our then existing charters and the creditworthiness
of our charterers.
The
actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the
additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining
such capital. Our inability to obtain additional financing at all, or our ability to do so only at a higher than anticipated cost,
may materially affect our results of operations and our ability to implement our business strategy.
If
LIBOR is volatile, it could affect our profitability, earnings and cash flow.
LIBOR
has been volatile in the past, with the spread between LIBOR and the prime lending rate widening significantly at times. Because
the interest rates borne by most of our outstanding indebtedness fluctuates with changes in LIBOR, significant changes in LIBOR
would have a material effect on the amount of interest payable on our debt, which in turn, could have an adverse effect on our
financial condition.
Risks
Related to Being a Public, Emerging Growth Company
We
are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging
growth companies make our securities less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act. We expect to remain an “emerging growth company”
until December 31, 2020. As an emerging growth company, we are not required to comply with, among other things, the auditor attestation
requirements of the Sarbanes-Oxley Act. Further, the JOBS Act exempts emerging growth companies from being required to comply
with new or revised financial accounting standards until private companies are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt-out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an election to opt-out is irrevocable. We have elected
not to opt-out of such extended transition period, which means that when a standard is issued or revised and it has different
application dates for public or private companies, we, as an emerging growth company, will not adopt the new or revised standard
until the time private companies are required to adopt the new or revised standard. This may make comparison of our financial
statements with other public companies difficult or impossible because of the potential differences in accountant standards used.
Investors may find our securities less attractive because we rely on these provisions. If investors find our securities less attractive
as a result, there may be a less active trading market for our securities and prices of the securities may be more volatile.
If
we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report
our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting,
which would harm our business and the trading price of our securities.
Effective
internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls,
or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. Any testing by
us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered
public accounting firm, may reveal deficiencies in our internal controls over financial reporting that may require prospective
or retroactive changes in our financial statements or identify other areas for further attention or improvement. In addition,
for as long as we are an “emerging growth company,” our independent registered public accounting firm will not be
required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley
Act. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s
assessment might not. Undetected material weaknesses in our internal controls could lead to restatements of our financial statements
and require us to incur the expense of remediation. Inferior internal controls could also cause investors to lose confidence in
our reported financial information, which could have a negative effect on the trading price of our securities.
The
PCAOB inspection of our independent accounting firm could lead to findings in our auditors’ reports and challenge the accuracy
of our published audited consolidated financial statements.
Auditors
of U.S. public companies are required by law to undergo periodic PCAOB inspections that assess their compliance with U.S. law
and professional standards in connection with performance of audits of financial statements filed with the SEC. These PCAOB inspections
could result in findings in our auditors’ quality control procedures, question the validity of the auditor’s reports
on our published consolidated financial statements and cast doubt upon the accuracy of our published audited financial statements.
Risks
Related to our Common Stock and this Offering
An
investment in our common stock is speculative and there can be no assurance of any return on any such investment.
An
investment in our common stock is highly speculative, and there is no assurance that investors will obtain any return on their
investment. Investors will be subject to substantial risks involved in their investment, including the risk of losing their entire
investment.
The
price of our Common Stock may be volatile.
Our
shares of common stock have been listed on the NASDAQ since November 2, 2015. We cannot assure you that the public market for
our common stock will be active and liquid. The price of shares of our common stock may fluctuate due to a variety of factors,
some of which are beyond our control, including:
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actual
or anticipated fluctuations in our periodic results and those of other public companies in the shipping industry;
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changes
in market valuations of similar companies and stock market price and volume fluctuations generally;
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speculation
in the press or investment community about our business or the shipping industry generally;
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mergers
and strategic alliances in the shipping industry;
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market
prices and conditions in the shipping industry;
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changes
in government regulation;
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potential
or actual military conflicts or acts of terrorism;
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natural
disasters affecting the supply chain or use of petroleum products;
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the
failure of securities analysts to publish research about us, or shortfalls in our operating results compared to levels forecast
by securities analysts;
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the
thin trading market for our common stock, which makes it somewhat illiquid;
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additions
or departures of key personnel;
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announcements
concerning us or our competitors;
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the
general state of the securities market; and
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domestic
and international economic, market and currency factors unrelated to our performance.
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These
market and industry factors may materially reduce the market price of shares of our common stock, regardless of our operating
performance. The seaborne transportation industry has been highly unpredictable and volatile. The market for shares of our common
stock may be equally volatile, and has been particularly volatile since November 2017. Consequently, you may not be able to sell
shares of our common stock at prices equal to or greater than those paid by you in this offering.
We
may issue additional shares of our common stock or other equity securities without stockholder approval, which would dilute your
ownership interests and may depress the market price of our common stock.
We
may issue additional shares of our common stock or other equity securities of equal or senior rank in the future in connection
with, among other things, future vessel acquisitions, repayment of outstanding indebtedness or our equity incentive plan, without
stockholder approval, in a number of circumstances. Our issuance of additional common stock or other equity securities of equal
or senior rank would have the following effects:
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our
existing stockholders’ proportionate ownership interest in us will decrease;
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the
amount of cash available per share, including for payment of dividends in the future, may decrease;
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the
relative voting strength of each previously outstanding share of our common stock may be diminished; and
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the
market price of our common stock may decline.
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Future
sales of shares of our common stock by existing stockholders or issuance of shares of our common stock pursuant to the exercise
by former holders of LookSmart’s common stock of their right to receive additional shares of our common stock could negatively
impact our ability to sell equity in the future and cause the market price of shares of our common stock to decline.
The
market price for shares of our common stock could decline as a result of sales by existing stockholders of large numbers of shares
of our common stock, including Maritime Investors (the parent of Pyxis Holdings Inc.) and the selling stockholders named herein,
or as a result of the perception that such sales may occur. In addition, in accordance with the terms of the LookSmart Agreement,
former holders of LookSmart’s common stock (the “Legacy LookSmart Stockholders”) are entitled to receive the
value of any difference between $4.30 (the “Consideration Value”) and the price of our shares in a future offering
of common stock of at least $5 million completed prior to April 29, 2018 (the “Make-Whole Right”). During November
and December 2017, our share’s trade activity increased notably. Its price reached a high of $12.22, or about 184% higher
than the Consideration Value. We estimate that more than half of the shares that were originally issued to Legacy LookSmart Stockholders
have been sold. Nonetheless, the actual number of original shares currently held by Legacy LookSmart Stockholders cannot be accurately
assessed. If such an offering had been completed as of December 31, 2017, the maximum number of shares issuable to Legacy LookSmart
Stockholders would have amounted to 312,516 based on the closing price of our shares on December 29, 2017 of $3.22 and assuming
that all of the original Legacy LookSmart Stockholders retained their Make-Whole Right as of such date and they exercised their
right to receive the shares. The ability of Legacy LookSmart Stockholders to obtain additional shares of our common stock and
any future sales of shares of our common stock by these and other stockholders might make it more difficult to us to sell equity
or equity-related securities in the future at a time and at the prices that we deem appropriate.
We
are incorporated in the Marshall Islands, which does not have a well-developed body of corporate or bankruptcy law and, as a result,
stockholders may have fewer rights and protections under Marshall Islands law than under a U.S. jurisdiction.
Our
corporate affairs are governed by our Articles of Incorporation, Bylaws and the Marshall Islands Business Corporations Act (the
“BCA”). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United
States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and
fiduciary responsibilities of directors under the laws of the Republic of the Marshall Islands are not as clearly established
as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions.
Stockholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law,
of the State of Delaware and other states with substantially similar legislative provisions, our public stockholders may have
more difficulty in protecting their interests in the face of actions by management, directors or significant stockholders than
would stockholders of a corporation incorporated in a U.S. jurisdiction. Additionally, the Republic of the Marshall Islands does
not have a legal provision for bankruptcy or a general statutory mechanism for insolvency proceedings. As such, in the event of
a future insolvency or bankruptcy, our stockholders and creditors may experience delays in their ability to recover their claims
after any such insolvency or bankruptcy.
We
are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial
and other obligations.
We
are a holding company and have no significant assets other than the equity interests in our subsidiaries. Our subsidiaries own
all of our existing vessels, and subsidiaries we form in the future will own any other vessels we may acquire in the future. All
payments under our charters will be made to our subsidiaries. As a result, our ability to meet our financial and other obligations,
and to pay dividends in the future, will depend on the performance of our subsidiaries and their ability to distribute funds to
us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including
a creditor, by the terms of our loan agreements, any financing agreement we may enter into in the future, or by Marshall Islands
law, which regulates the payment of dividends by our companies. The applicable loan agreement entered into by our subsidiaries,
Sixthone and Seventhone, prohibits such subsidiaries from paying any dividends to us unless the ratio of the total liabilities
and the market value adjusted total assets (total assets adjusted to reflect the market value of all our vessels) of us and our
subsidiaries as a group is 65% or less. As of December 31, 2016 and September 30, 2017, this ratio was 68% and 69%, respectively,
and until such non-compliance is cured, we will not be able to receive dividend distributions from these two subsidiaries. If
we, Sixthone or Seventhone do not satisfy this requirement or if we or a subsidiary breach a covenant in our loan agreements or
any financing agreement we may enter into in the future, such subsidiary may be restricted from paying dividends. If we are unable
to obtain funds from our subsidiaries, we will not be able to fund our liquidity needs or pay dividends in the future unless we
obtain funds from other sources, which we may not be able to do.
It
may be difficult to serve process on or enforce a U.S. judgment against us, our officers and our directors because we are not
a U.S. corporation.
We
are a Marshall Islands corporation, a substantial portion of our assets are located outside of the United States and many of our
directors and executive officers are not residents of the United States. As a result, you may have difficulty serving legal process
within the United States upon us. You may also have difficulty enforcing, both in and outside the United States, judgments you
may obtain in U.S. courts against us in any action, including actions based upon the civil liability provisions of U.S. federal
or state securities laws. Furthermore, there is substantial doubt that the courts of the Marshall Islands or of the non-U.S. jurisdictions
in which our offices are located would enter judgments in original actions brought in those courts predicated on U.S. federal
or state securities laws. As a result, it may be difficult or impossible for you to bring an original action against us or against
individuals in a Marshall Islands court in the event that you believe that your rights have been infringed under the U.S. federal
securities laws or otherwise because the Marshall Islands courts would not have subject matter jurisdiction to entertain such
a suit. A judgment entered in a foreign jurisdiction is enforceable in the Marshall Islands without a retrial on the merits so
long as the provisions of the Marshall Islands Uniform Foreign Money-Judgments Recognition Act are complied with. In addition,
there is doubt as to the enforceability in Greece against us and/or our executive officers and directors who are non-residents
of the U.S., in original actions or in actions for enforcement of judgments of U.S. courts, of liabilities predicated solely upon
the securities laws of the U.S.
We
do not intend to pay dividends in the near future and cannot assure you that we will ever pay dividends.
We
do not intend to pay dividends in the near future, and we will make dividend payments to our stockholders in the future only if
our board of directors, acting in its sole discretion, determines that such payments would be in our best interest and in compliance
with relevant legal, fiduciary and contractual requirements. The payment of any dividends is not guaranteed or assured, and, if
paid at all in the future, may be discontinued at any time at the discretion of the board of directors.
Our
ability to pay dividends will in any event be subject to factors beyond our control, including the following, among others:
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our
earnings, financial condition and anticipated cash requirements;
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the
terms of any current or future credit facilities or loan agreements;
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the
loss of a vessel or the acquisition of one or more vessels;
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required
capital expenditures;
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increased
or unanticipated expenses;
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future
issuances of securities;
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disputes
or legal actions; and
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the
requirements of the laws of the Marshall Islands, which limit payments of dividends if we are, or could become, insolvent
and generally prohibit the payment of dividends other than from surplus (retaining earnings and the excess of consideration
received for the sale of shares above the par value of the shares).
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The
payment of dividends would not be permitted if we are not in compliance with our loan agreements or in default of such agreements.
Maritime
Investors beneficially owns approximately 81.4% of our total outstanding common stock, which may limit stockholders’ ability
to influence our actions.
Maritime
Investors, a corporation controlled by our Chief Executive Officer, Mr. Valentis, beneficially owns approximately 81.4% of our
outstanding common stock. As a result, Maritime Investors has the power to exert considerable influence over our actions through
Maritime Investors’ ability to effectively control matters requiring stockholder approval, including the determination to
enter into a corporate transaction or to prevent a transaction, regardless of whether our other stockholders believe that any
such transaction is in their or our best interests. For example, Maritime Investors could cause us to consummate a merger or acquisition
that increases the amount of our indebtedness or causes us to sell all of our revenue-generating assets. We cannot assure you
that the interests of Maritime Investors will coincide with the interests of other stockholders. As a result, the market price
of shares of our common stock could be adversely affected.
Additionally,
Maritime Investors may invest in entities that directly or indirectly compete with us, or companies in which Maritime Investors
currently invests may begin competing with us. Maritime Investors may also separately pursue acquisition opportunities that may
be complementary to our business, and as a result, those acquisition opportunities may not be available to us. As a result of
these relationships, when conflicts arise between the interests of Maritime Investors and the interests of our other stockholders,
Mr. Valentis may not be a disinterested director. Maritime Investors will effectively control all of our corporate decisions so
long as they continue to own a substantial number of shares of our common stock.
If
our common stock does not meet the NASDAQ’s minimum share price requirement, and if we cannot cure such deficiency within
the prescribed timeframe, our common stock could be delisted.
Under
the rules of NASDAQ, listed companies are required to maintain a share price of at least $1.00 per share. If the share price declines
below $1.00 for a period of 30 consecutive business days, then the listed company has a cure period of at least 180 days to regain
compliance with the $1.00 per share minimum. If the price of our common stock closes below $1.00 for 30 consecutive days, and
if we cannot cure that deficiency within the 180-day timeframe, then our common stock could be delisted. On February 23, 2016,
we received a deficiency notice from The NASDAQ Stock Market, Inc. stating that, for a period of 30 consecutive trading days,
our shares of common stock closed below the minimum price of $1.00 per share as required for continued listing on NASDAQ.
In accordance with the notice, we had until August 22, 2016, or 180 calendar days from the date of the notice, to regain compliance
with NASDAQ’s continued listing minimum closing bid price requirements (Marketplace Rule 5550(a)(2)). We received a written
notification from the exchange on March 11, 2016 stating that the closing bid price of our shares had been $1.00 per share or
higher for 10 consecutive trading days, from February 26 to March 10, 2016, and, accordingly, we were again in compliance with
the exchange’s minimum closing bid price rule.
On
June 1, 2017, our shares of common stock closed at the price of $0.99 per share. However, the closing price of our shares
has remained above $1.00 per share since that date.
As
a foreign private issuer, our corporate governance practices are exempt from certain NASDAQ corporate governance requirements
applicable to U.S. domestic companies. As a result, our corporate governance practices may not have the same protections afforded
to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.
We
believe that our corporate governance practices are in compliance with the applicable NASDAQ listing rules and are not prohibited
by the laws of the Republic of the Marshall Islands.
Anti-takeover
provisions in our Articles of Incorporation and Bylaws could make it difficult for our stockholders to replace our board of directors
or could have the effect of discouraging an acquisition, which could adversely affect the market price of our common stock.
Several
provisions of our Articles of Incorporation and Bylaws make it difficult for our stockholders to change the composition of our
board of directors in any one year. In addition, the same provisions may discourage, delay or prevent a merger or acquisition
that stockholders may consider favorable. These provisions include:
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providing
for a classified board of directors with staggered, three year terms;
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authorizing
the board of directors to issue so-called “blank check” preferred stock without stockholder approval;
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prohibiting
cumulative voting in the election of directors;
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authorizing
the removal of directors only for cause and only upon the affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock cast at an annual meeting of stockholders;
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prohibiting
stockholder action by written consent unless consent is signed by all stockholders entitled to vote on the action;
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limiting
the persons who may call special meetings of stockholders;
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establishing
advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted
on by stockholders at stockholder meetings; and
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restricting
business combinations with interested stockholders.
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These
anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control and,
as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control
premium.
Tax
Risks
We
may have to pay tax on U.S. source income, which would reduce our earnings and cash flow.
Under
the Internal Revenue Code of 1986, as amended (the “Code”), 50% of the gross shipping income of a vessel-owning or
chartering corporation (or “shipping income”) that is attributable to voyages that either begin or end in the United
States is characterized as “U.S.-source shipping income” and such income is generally subject to a 4% U.S. federal
income tax (on a gross basis) unless that corporation qualifies for exemption from tax under Section 883 of the Code or under
an applicable U.S. income tax treaty.
As
we and our shipowning subsidiaries are organized under the laws of the Republic of the Marshall Islands, a country with which
the United States does not have an income tax treaty, we do not qualify for a treaty-based exemption. However, we believe that
we qualify for the exemption from tax under Section 883 of the Code for the 2016 taxable year and intend to take such position
on our returns for the 2016 taxable year. Nevertheless, for the 2017 or any later taxable year, there are factual circumstances
beyond our control that could cause us to lose the benefit of this tax exemption and thereby cause us to become subject to U.S.
federal income tax on our U.S.-source shipping income. For example, there is a risk that we could no longer qualify for exemption
under Section 883 of the Code for a particular taxable year if additional shares of our common stock are issued to new stockholders
such that, due to their status or unwillingness to cooperate with certain substantiation and reporting requirements, we no longer
satisfy one of the ownership test requirements for qualification. Due to the factual nature of the issues involved, we can give
no assurances on the availability of the exemption to us.
If
we and/or one or more of our subsidiaries are not entitled to this exemption under Section 883 of the Code for any taxable year,
we and/or such subsidiaries would generally be subject for that year to a 4% U.S. federal income tax on the U.S.-source shipping
income for that year. The imposition of this tax could have a negative effect on our business and would result in decreased earnings
and cash flow. See “Tax Considerations — U.S. Federal Income Taxation of Pyxis” for a detailed discussion of
the qualification for the exemption under Section 883 of the Code.
If
U.S. tax authorities were to treat us or one or more of our subsidiaries as a “passive foreign investment company,”
there could be adverse tax consequences to U.S. holders.
A
non-U.S. corporation will be treated as a “passive foreign investment company” (or a “PFIC”) for U.S.
federal income tax purposes if either (i) at least 75% of its gross income for any taxable year consists of certain types of
“passive income,” or (ii) at least 50% of the average value of the corporation’s assets produce, or are held
for the production of, such types of “passive income.” For purposes of these tests, “passive income”
includes dividends, interest and gains from the sale or exchange of investment property and rents and royalties other than rents
and royalties which are received from unrelated parties in connection with the active conduct of trade or business. For purposes
of these tests, time and voyage charter income is generally viewed as income derived from the performance of services and not
rental income and, therefore, would not constitute “passive income.” U.S. stockholders of a PFIC are subject to a
disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive
from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
U.S.
shareholders of a PFIC generally are subject to an adverse U.S. federal income tax regime with respect to the income derived by
the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of
their shares in the PFIC, and would be subject to annual information reporting to the U.S. Internal Revenue Service (the “IRS”).
If we were to be treated as a PFIC for any taxable year (and regardless of whether we remained a PFIC for subsequent taxable years),
a U.S. shareholder who does not make certain mitigating elections (as described more fully in this prospectus under “Tax
Considerations — U.S. Federal Income Taxation of U.S. Holders — Consequences of Possible PFIC Classification”)
would be required to allocate ratably over such U.S. shareholder’s holding period any “excess distributions”
received (i.e., the portion of any distributions received on our common stock in a taxable year in excess of 125% of certain average
historic annual distributions) and any gain realized on the sale, exchange or other disposition of our common stock. The amount
allocated to the current taxable year and any year prior to the first year in which we were a PFIC would be subject to U.S. federal
income tax as ordinary income and the amount allocated to each of the other taxable years would be subject to tax at the highest
rate of tax in effect for the applicable class of taxpayer for that year. An interest charge for the deemed deferral benefit would
be imposed with respect to the resulting tax attributable to each such other taxable year. Investors in our common stock are urged
to consult with their own tax advisors regarding the tax consequences of the PFIC rules to them, including the benefit of any
available mitigating elections. For a more complete discussion of the U.S. Federal income tax consequences of passive foreign
investment company characterization, see “Tax Considerations — U.S. Federal Income Taxation of U.S. Holders —
Consequences of Possible PFIC Classification.”
Based
on our current and projected operations, we do not believe that we (or any of our subsidiaries) were a PFIC in our 2017 taxable
year, and we do not expect to become (or any of our subsidiaries to become) a PFIC with respect to the 2018 or any later taxable
year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities
as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does
not constitute “passive income,” and the assets that we own and operate in connection with the production of that
income do not constitute “passive assets.” There is, however, no direct legal authority under the PFIC rules addressing
our method of operation. Accordingly, no assurance can be given that the IRS or a court of law will accept our position, and there
is a risk that the IRS or a court of law could determine that we are (or were in a prior taxable year) a PFIC. Moreover, no assurance
can be given that we would not constitute a PFIC for any taxable year if there were to be changes in the nature and extent of
our operations.
If
U.S. tax authorities were to treat Pyxis as a “controlled foreign corporation,” there could be adverse U.S. federal
income tax consequences to certain U.S. investors.
If
more than 50% of the voting power or value of our shares is treated as owned by U.S. citizens or residents, U.S. corporations
or partnerships, or U.S. estates or trusts (as defined for U.S. federal income tax purposes), each of which owned at least 10%
of our voting power or value (each, a “U.S. Stockholder”), then we and one or more of our subsidiaries will be a controlled
foreign corporation (or “CFC”) for U.S. federal income tax purposes. If we were treated as a CFC for any taxable year,
our U.S. Stockholders may face adverse U.S. federal income tax consequences and information reporting obligations. See “Tax
Considerations — U.S. Federal Income Taxation of U.S. Holders — Consequences of Controlled Foreign Corporation Classification
of Pyxis.”
Risks
Related to Future Offerings
There
is no existing trading market for our preferred stock, debt securities, warrants, purchase contracts, rights or units
.
There
is no existing trading market for our preferred stock, debt securities, warrants, purchase contracts, rights or units. As a result,
there can be no assurance that a liquid market will develop or be maintained for those securities, or that a purchaser will be
able to sell any of those securities at a particular time (if at all). We may not list the preferred stock, debt securities, warrants,
purchase contracts, rights or units on any U.S. securities exchange.
Future
sales may affect the market price of our common stock.
In
order to finance future operations, we may determine to raise funds through the issuance of additional shares of common stock
or the issuance of debt instruments or other securities convertible into shares of common stock. We cannot predict the size of
future issuances of common stock or the issuance of debt instruments or other securities convertible into shares of common stock
or the dilutive effect, if any, that future issuances and sales of our securities will have on the market price of our common
stock. These sales may have an adverse impact on the market price of our common stock.
Our
management will have substantial discretion concerning the use of proceeds.
Our
management will have substantial discretion concerning the use of proceeds of an offering under any prospectus supplement as well
as the timing of the expenditure of the proceeds thereof. As a result, investors will be relying on the judgment of management
as to the specific application of the proceeds of any offering of securities under any prospectus supplement. Management may use
the net proceeds of any offering of securities under any prospectus supplement in ways that an investor may not consider desirable.
The results and effectiveness of the application of the net proceeds are uncertain.
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth our unaudited ratio of earnings to fixed charges for each of the years ended December 31, 2014, 2015
and 2016, and for the nine months ended September 30, 2017. No preferred stock dividends were paid during the periods.
|
|
Year
Ended December 31,
|
|
|
Nine
months Ended September 30,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
(Loss)
/ Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) / income
|
|
|
(19,243
|
)
|
|
|
3,505
|
|
|
|
(5,813
|
)
|
|
|
(3,794
|
)
|
Add:
Fixed charges (calculated below)
|
|
|
1,932
|
|
|
|
2,544
|
|
|
|
2,810
|
|
|
|
2,157
|
|
Add:
Amortization of capitalized interest
|
|
|
17
|
|
|
|
28
|
|
|
|
28
|
|
|
|
21
|
|
Less:
Capitalized interest
|
|
|
(228
|
)
|
|
|
(13
|
)
|
|
|
–
|
|
|
|
–
|
|
Total
(Loss) / Earnings
|
|
|
(17,522
|
)
|
|
|
6,064
|
|
|
|
(2,975
|
)
|
|
|
(1,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
Interest expensed and capitalized
|
|
|
1,796
|
|
|
|
2,371
|
|
|
|
2,646
|
|
|
|
2,041
|
|
b)
Amortization of deferred financing costs
|
|
|
136
|
|
|
|
173
|
|
|
|
164
|
|
|
|
116
|
|
Total
Fixed Charges
|
|
|
1,932
|
|
|
|
2,544
|
|
|
|
2,810
|
|
|
|
2,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of Earnings to Fixed Charges (1)(2)
|
|
|
|
|
|
|
2.4x
|
|
|
|
|
|
|
|
|
|
Dollar
amount of the Coverage Deficiency
|
|
|
19,454
|
|
|
|
|
|
|
|
5,785
|
|
|
|
3,773
|
|
(1)
For purposes of computing the consolidated ratio of earnings to fixed charges, “earnings” consist of pre-tax income
from continuing operations prepared under GAAP, plus amortization of capitalized interest, less capitalized interest, plus fixed
charges, where fixed charges represent interest incurred and amortized, plus amortization of deferred financing costs.
(2)
For the periods that the ratio is less than one-to-one, earnings were inadequate to cover fixed charges.
USE
OF PROCEEDS
We
intend to use the net proceeds from the sale of securities offered by us as set forth in the applicable prospectus supplement.
We will not receive any of the proceeds from the sale or other disposition of the shares of our common stock offered by the selling
stockholders pursuant to this prospectus.
CAPITALIZATION
Updated
information about our capitalization will be included in applicable future prospectus supplements.
The
following table sets forth our capitalization at September 30, 2017:
|
●
|
on
an actual basis; and
|
|
|
|
|
●
|
on
an as adjusted basis to give effect to the following transactions:
|
|
○
|
the
issuance and sale of the common stock in the Private Placement (as defined herein) resulting in net proceeds of approximately
$4.3 million, after deducting estimated expenses related to the sale of $0.5 million payable by us; and
|
|
|
|
|
○
|
the
issuance of 200,000 restricted shares of our common stock that were granted to one of our senior officers and the resulting
non-cash share based compensation of $0.4 million as discussed in Note 8 of our interim consolidated financial statements
included in our Current Report on Form 6-K, filed with the SEC on December 19, 2017, incorporated by reference herein (the
“December 19 6-K”).
|
The
table below does not reflect our obligation to satisfy the Make-Whole Right following the consummation of this offering. See “Item
4. Information on the Company — the LookSmart Agreement and Make-Whole Right” of our Annual Report on Form 20-F for
the fiscal year ended December 31, 2016, filed with the SEC on March 28, 2017 and incorporated by reference herein.
You
should read this table in conjunction with our unaudited interim condensed consolidated financial statements and the section entitled
“Management’s Discussion and Analysis of Financial Results” included in the December 19 6-K, as well as the
section entitled “Use of Proceeds” in this prospectus.
(In
thousands of U.S. Dollars, except per share data)
|
|
As
of September 30, 2017
|
|
|
|
Actual
|
|
|
As
Adjusted
|
|
Cash
and cash equivalents, including restricted cash
|
|
$
|
5,604
|
|
|
$
|
9,904
|
|
|
|
|
|
|
|
|
|
|
Current
Debt
(1)
:
|
|
|
|
|
|
|
|
|
Bank
loans
(2)
|
|
|
7,200
|
|
|
|
7,200
|
|
Non-current
debt
(1)
:
|
|
|
|
|
|
|
|
|
Bank
loans
(2)
|
|
|
61,079
|
|
|
|
61,079
|
|
Unsecured
promissory note
(3)
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
Total
Debt
|
|
|
70,779
|
|
|
|
70,779
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock ($0.001 par value); 50,000,000 shares authorized; none issued, actual and as adjusted
|
|
|
–
|
|
|
|
–
|
|
Common
stock ($0.001 par value); 450,000,000 shares authorized; 18,277,893 and 20,877,893 shares issued and outstanding, actual and
as adjusted, respectively
|
|
|
18
|
|
|
|
21
|
|
Additional
paid-in capital
|
|
|
70,123
|
|
|
|
74,775
|
|
Accumulated
Deficit
|
|
|
(25,182
|
)
|
|
|
(25,537
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
44,959
|
|
|
|
49,259
|
|
Total
capitalization
|
|
$
|
115,738
|
|
|
$
|
120,038
|
|
(1)
Subsequent to September 30, 2017, we have paid $1.7 million towards scheduled principal repayments of our various debt obligations,
which are not reflected in the table above.
(2)
Our vessel owning subsidiaries, as borrowers, entered into loan agreements to finance the purchase of each of the vessels in our
fleet. For more information on our loan agreements, see our Annual Report on Form 20-F for the fiscal year ended December 31,
2016, filed with the SEC on March 28, 2017 and incorporated by reference in this prospectus.
(3)
On December 29, 2017, we entered into an amendment to the promissory note we issued in favor of Maritime Investors on October
28, 2015 to increase the outstanding balance from $2,500,000 to $5,000,000. For more information, see our Current Report on Form
6-K, filed with the SEC on January 2, 2018.
PRICE
RANGE OF OUR COMMON STOCK
Our
common stock is listed on NASDAQ under the symbol “PXS.” The high and low sales prices of shares of our common stock
on NASDAQ are presented for the periods listed below.
For
the year ended December 31,
|
|
High
|
|
|
Low
|
|
2015
|
|
$
|
4.30
|
|
|
$
|
1.26
|
|
2016
|
|
$
|
4.27
|
|
|
$
|
0.55
|
|
2017
|
|
$
|
12.22
|
|
|
$
|
0.90
|
|
For
the quarter ended
|
|
High
|
|
|
Low
|
|
March
31, 2016
|
|
$
|
2.05
|
|
|
$
|
0.55
|
|
June 30, 2016
|
|
$
|
4.27
|
|
|
$
|
1.92
|
|
September
30, 2016
|
|
$
|
3.52
|
|
|
$
|
2.07
|
|
December 31,
2016
|
|
$
|
4.25
|
|
|
$
|
1.89
|
|
March 31,
2017
|
|
$
|
3.00
|
|
|
$
|
1.92
|
|
June 30, 2017
|
|
$
|
2.33
|
|
|
$
|
0.90
|
|
September
30, 2017
|
|
$
|
2.06
|
|
|
$
|
1.53
|
|
December 31,
2017
|
|
$
|
12.22
|
|
|
$
|
1.50
|
|
March 31,
2018
(1)
|
|
$
|
3.88
|
|
|
$
|
1.17
|
|
For
the months
|
|
High
|
|
|
Low
|
|
August
2017
|
|
$
|
1.95
|
|
|
$
|
1.53
|
|
September
2017
|
|
$
|
2.06
|
|
|
$
|
1.82
|
|
October 2017
|
|
$
|
2.03
|
|
|
$
|
1.50
|
|
November 2017
|
|
$
|
5.25
|
|
|
$
|
1.55
|
|
December 2017
|
|
$
|
12.22
|
|
|
$
|
1.92
|
|
January 2018
|
|
$
|
3.88
|
|
|
$
|
1.62
|
|
February 2018
(2)
|
|
$
|
1.77
|
|
|
$
|
1.17
|
|
|
(1)
|
From
January 1, 2018 through February 12, 2018
|
|
(2)
|
Through
and including February 12, 2018
|
On
February 23, 2016, we received a deficiency notice from The NASDAQ Stock Market, Inc. stating that, for a period of 30 consecutive
trading days, our shares of common stock closed below the minimum price of $1.00 per share as required for continued listing
on NASDAQ. In accordance with the notice, we had until August 22, 2016, or 180 calendar days from the date of the notice, to regain
compliance with NASDAQ’s continued listing minimum closing bid price requirements (Marketplace Rule 5550(a)(2)). We received
a written notification from the exchange on March 11, 2016 stating that the closing bid price of our shares had been $1.00 per
share or higher for 10 consecutive trading days, from February 26 to March 10, 2016, and, accordingly, we were again in compliance
with the exchange’s minimum closing bid price rule.
On
June 1, 2017, our shares of common stock closed at the price of $0.99 per share. However, the closing price of our shares
has remained above $1.00 per share since that date.
DESCRIPTION
OF CAPITAL STOCK
We
are a corporation organized under the laws of the Republic of the Marshall Islands and are subject to the provisions of Marshall
Islands law. Our authorized capital stock consists of 450,000,000 shares of common stock, par value $0.001 per share, of which
20,877,893 shares are currently issued and outstanding and 50,000,000 shares of preferred stock, par value $0.001 per share, none
of which are outstanding. All of our shares of stock are in registered form. There are no limitations on the rights to own securities,
including the rights of non-resident or foreign stockholders to hold or exercise voting rights on the securities, imposed by Marshall
Islands law or by our Articles of Incorporation or Bylaws.
The
following is a description of the material terms of our Articles of Incorporation and Bylaws. Please see our Articles of Incorporation
and Bylaws, copies of which have been filed as Exhibits 3.1 and 3.2, respectively, to our Registration Statement on Form F-4 (File
No. 333-203598) filed with the SEC on April 23, 2015. The information contained in these exhibits is incorporated by reference
herein.
Purpose
Our
purpose, as stated in our Articles of Incorporation, is to engage in any lawful act or activity for which corporations may now
or hereafter be organized under the BCA.
Authorized
Capital Stock
Common
Stock
Each
outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders. Subject
to preferences that may be applicable to any outstanding preferred shares, holders of our common stock are entitled to receive
ratably all dividends, if any, declared by our board of directors out of funds legally available for dividends. Upon our dissolution
or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid
to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common stock are
entitled to receive pro rata the remaining assets available for distribution. Holders of our common stock do not have preemptive,
subscription or conversion rights or redemption or sinking fund provisions.
Preferred
Stock
Our
board of directors has the authority to authorize the issuance from time to time of one or more classes of preferred stock with
one or more series within any class thereof, with such voting powers, full or limited, or without voting powers and with such
designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions
thereon as shall be set forth in the resolution or resolutions adopted by our board of directors providing for the issuance of
such preferred stock. Issuances of preferred stock, while providing flexibility in connection with possible financings, acquisitions
and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock.
Directors
Our
directors are elected by a plurality of the votes cast at a meeting of stockholders entitled to vote. There is no provision for
cumulative voting.
Directors
are elected annually on a staggered basis. There are three classes of directors; each class serves a separate term length. Our
board of directors has the authority to, in its discretion, fix the amounts which shall be payable to members of the board of
directors and to members of any committee for attendance at the meetings of the board of directors or of such committee and for
services rendered to us.
Certain
Provisions of Our Articles of Incorporation and Bylaws
Certain
provisions of Marshall Islands law and our Articles of Incorporation and Bylaws could make the acquisition of Pyxis by means of
a tender offer, a proxy contest, or otherwise, and the removal of our incumbent officers and directors more difficult. These provisions
are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of Pyxis to work with our management.
Our
Articles of Incorporation and Bylaws include provisions that:
|
●
|
allow
our board of directors to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred
stock;
|
|
|
|
|
●
|
provide
for a classified board of directors with staggered, three year terms;
|
|
|
|
|
●
|
prohibit
cumulative voting in the election of directors;
|
|
|
|
|
●
|
prohibit
stockholder action by written consent unless consent is signed by all stockholders entitled to vote on the action;
|
|
|
|
|
●
|
authorize
the removal of directors only for cause and only upon the affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock cast at an annual meeting of stockholders;
|
|
|
|
|
●
|
require
that special meetings of our stockholders be called only by a majority of our board of directors or the chairman of the board;
and
|
|
|
|
|
●
|
establish
an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders.
|
Our
Articles of Incorporation also prohibit us from engaging in any “Business Combination” with any “Interested
Shareholder” (as such terms are explained further below) for a period of three years following the date the stockholder
became an Interested Shareholder, unless:
|
●
|
prior
to such time, our board of directors approved either the Business Combination or the transaction which resulted in the stockholder
becoming an Interested Shareholder;
|
|
|
|
|
●
|
upon
consummation of the transaction which resulted in the stockholder becoming an Interested Shareholder, the Interested Shareholder
owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned (i) by persons who are directors and also officers and (ii) employee stock
plans in which employee participants do not have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer;
|
|
|
|
|
●
|
at
or subsequent to such time, the Business Combination is approved by our board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative vote of at least two thirds of the outstanding
voting stock that is not owned by the Interested Shareholder; or
|
|
|
|
|
●
|
the
stockholder became an Interested Shareholder prior to March 23, 2015.
|
These
restrictions shall not apply if:
|
●
|
a
stockholder becomes an Interested Shareholder inadvertently and (i) as soon as practicable divests itself of ownership of
sufficient shares so that the stockholder ceases to be an Interested Shareholder; and (ii) would not, at any time within the
three-year period immediately prior to a Business Combination between Pyxis and such stockholder, have been an Interested
Shareholder but for the inadvertent acquisition of ownership; or
|
|
|
|
|
●
|
the
Business Combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement
or the notice required of a proposed transaction which (i) constitutes one of the transactions described in the following
sentence; (ii) is with or by a person who either was not an Interested Shareholder during the previous three years or who
became an Interested Shareholder with the approval of the Board; and (iii) is approved or not opposed by a majority of the
members of our board of directors then in office (but not less than one) who were directors prior to any person becoming an
Interested Shareholder during the previous three years or were recommended for election or elected to succeed such directors
by a majority of such directors. The proposed transactions referred to in the preceding sentence are limited to:
|
(a)
a merger or consolidation of Pyxis (except for a merger in respect of which, pursuant to the BCA, no vote of our stockholders
is required);
(b)
a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether
as part of a dissolution or otherwise, of assets of Pyxis or of any direct or indirect majority-owned subsidiary of Pyxis (other
than to any direct or indirect wholly-owned subsidiary or to Pyxis) having an aggregate market value equal to 50% or more of either
that aggregate market value of all of the assets of Pyxis determined on a consolidated basis or the aggregate market value of
all the outstanding shares; or
(c)
a proposed tender or exchange offer for 50% or more of our outstanding voting shares.
Our
Articles of Incorporation define a “Business Combination” to include:
|
●
|
any
merger or consolidation of Pyxis or any direct or indirect majority-owned subsidiary of Pyxis with (i) the Interested Shareholder
or any of its affiliates, or (ii) with any other corporation, partnership, unincorporated association or other entity if the
merger or consolidation is caused by the Interested Shareholder;
|
|
|
|
|
●
|
any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except
proportionately as a stockholder of Pyxis, to or with the Interested Shareholder, whether as part of a dissolution or otherwise,
of assets of Pyxis or of any direct or indirect majority-owned subsidiary of Pyxis which assets have an aggregate market value
equal to 10% or more of either the aggregate market value of all the assets of Pyxis determined on a consolidated basis or
the aggregate market value of all the outstanding shares;
|
|
|
|
|
●
|
any
transaction which results in the issuance or transfer by Pyxis or by any direct or indirect majority-owned subsidiary of Pyxis
of any shares, or any share of such subsidiary, to the Interested Shareholder, except: (A) pursuant to the exercise, exchange
or conversion of securities exercisable for, exchangeable for or convertible into shares, or shares of any such subsidiary,
which securities were outstanding prior to the time that the Interested Shareholder became such; (B) pursuant to a merger
with a direct or indirect wholly-owned subsidiary of Pyxis solely for purposes of forming a holding company; (C) pursuant
to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable
for or convertible into shares, or shares of any such subsidiary, which security is distributed, pro rata to all holders of
a class or series of shares subsequent to the time the Interested Shareholder became such; (D) pursuant to an exchange offer
by Pyxis to purchase shares made on the same terms to all holders of said shares; or (E) any issuance or transfer of shares
by Pyxis; provided however, that in no case under items (C)-(E) of this subparagraph shall there be an increase in the Interested
Shareholder’s proportionate share of the any class or series of shares;
|
|
|
|
|
●
|
any
transaction involving Pyxis or any direct or indirect majority-owned subsidiary of Pyxis which has the effect, directly or
indirectly, of increasing the proportionate share of any class or series of shares, or securities convertible into any class
or series of shares, or shares of any such subsidiary, or securities convertible into such shares, which is owned by the Interested
Shareholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or
redemption of any shares not caused, directly or indirectly, by the Interested Shareholder; or
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any
receipt by the Interested Shareholder of the benefit, directly or indirectly (except proportionately as a stockholder of Pyxis),
of any loans, advances, guarantees, pledges or other financial benefits (other than those expressly permitted above) provided
by or through Pyxis or any direct or indirect majority-owned subsidiary.
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Our
Articles of Incorporation define an “Interested Shareholder” as any person (other than Pyxis, Maritime Investors and
any direct or indirect majority-owned subsidiary of Pyxis or Maritime Investors and its affiliates) that:
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is
the owner of 15% or more of our outstanding voting shares; or
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is
an affiliate or associate of Pyxis and was the owner of 15% or more of the outstanding voting shares of Pyxis at any time
within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an
Interested Shareholder; and the affiliates and associates of such person; provided, however, that the term “Interested
Shareholder” shall not include any person whose ownership of shares in excess of the 15% limitation set forth herein
is the result of action taken solely by Pyxis; provided that such person shall be an Interested Shareholder if thereafter
such person acquires additional shares of voting shares of Pyxis, except as a result of further Company action not caused,
directly or indirectly, by such person.
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Stockholder
Meetings
Under
our Bylaws, annual stockholder meetings will be held at a time and place selected by our board of directors. The meetings may
be held in or outside of the Marshall Islands. Special stockholder meetings may be called at any time by the majority of our board
of directors or the chairman of the board. No business may be conducted at the special meeting other than the business brought
before the special meeting by the majority of our board of directors or the chairman of the board. Our board of directors may
set a record date between 15 and 60 days before the date of any meeting to determine the stockholders that will be eligible to
receive notice and vote at the meeting.
Interested
Transactions
Our
Bylaws provide that no contract or transaction between us and one or more of our directors or officers, or between us and any
other corporation, partnership, association or other organization in which one or more of its directors or officers are our directors
or officers, or have a financial interest, will be void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board of directors or committee thereof which authorizes the contract
or transaction or solely because his or her or their votes are counted for such purpose, if (i) the material facts as to the relationship
or interest and as to the contract or transaction are disclosed or are known to our board of directors or its committee and our
board of directors or the committee in good faith authorizes the contract or transaction by the affirmative vote of a majority
of disinterested directors, or, if the votes of the disinterested directors are insufficient to constitute an act of the board
of directors as provided in the BCA, by unanimous vote of the disinterested directors; (ii) the material facts as to the relationship
or interest are disclosed to the stockholders, and the contract or transaction is specifically approved in good faith by the vote
of the stockholders; or (iii) the contract or transaction is fair to us as of the time it is authorized, approved or ratified,
by our board of directors, its committee or the stockholders.
Registrar
and Transfer Agent
The
registrar and transfer agent for our common stock is VStock Transfer, LLC.
Listing
Our
common stock is currently listed on the NASDAQ Capital Market under the symbol “PXS.”
Private
Placement of Common Stock
On
December 8, 2017, we completed the sale of the common stock in a private placement exempt from registration under the Securities
Act and received net proceeds of approximately $4.8 million (the “Private Placement”). The shares of our common stock
sold in the Private Placement were registered pursuant to the Registration Statement on Form F-3 filed on December 19, 2017, which
became effective on January 3, 2018.
MARSHALL
ISLANDS COMPANY CONSIDERATIONS
We
are a corporation organization under the laws of the Republic of the Marshall Islands. Marshall Islands law and our Articles of
Incorporation and Bylaws govern the rights of our stockholders. The provisions of the BCA resemble provisions of the corporation
laws of a number of states in the United States. While the BCA also provides that it is to be interpreted according to the laws
of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court
cases interpreting the BCA in the Republic of the Marshall Islands and we cannot predict whether Marshall Islands courts would
reach the same conclusions as courts in the United States. Thus, when you become a stockholder of Pyxis you may have more difficulty
in protecting your interests in the face of actions by the management, directors or significant stockholders than would stockholders
of a corporation incorporated in a U.S. jurisdiction which has developed a substantial body of case law. The following table provides
a comparison between the statutory provisions of the BCA and the Delaware General Corporation Law relating to stockholders’
rights. You also should review our Articles of Incorporation and Bylaws previously filed with the SEC, as well as the Delaware
corporate law and corporate laws of the Republic of the Marshall Islands, including the BCA, to understand how these laws apply
to us.
STOCKHOLDER
MEETINGS
Marshall
Islands
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Delaware
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Held
at a time and place as designated in the bylaws.
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May
be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as
determined by the board of directors.
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Special
meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by
the articles of incorporation or by the bylaws
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Special
meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by
the certificate of incorporation or by the bylaws.
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May
be held within or outside the Marshall Islands.
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May
be held within or outside Delaware.
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Notice:
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Notice:
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Whenever
stockholders are required to take any action at a meeting, written notice of the meeting shall be given which shall state
the place, date and hour of the meeting and, unless it is an annual meeting, indicate that it is being issued by or at the
direction of the person calling the meeting. Notice of a special meeting shall also state the purpose for which the meeting
is called.
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Whenever
stockholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state
the place, if any, date and hour of the meeting, and the means of remote communications, if any.
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A
copy of the notice of any meeting shall be given personally or sent by mail not less than 15 nor more than 60 days before
the meeting.
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Written
notice of any meeting shall be given not less than 10 nor more than 60 days before the date of the meeting.
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STOCKHOLDERS’
VOTING RIGHTS
Marshall
Islands
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Delaware
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Any
action required to be taken by a meeting of stockholders may be taken without meeting if consent is in writing and is signed
by all the stockholders entitled to vote.
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Any
action required to be taken at a meeting of stockholders may be taken without a meeting if a consent for such action is in
writing and is signed by stockholders having not fewer than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
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Any
person authorized to vote may authorize another person or persons to act for him by proxy.
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Any
person authorized to vote may authorize another person or persons to act for him or her by proxy.
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Unless
otherwise provided in the articles of incorporation, a majority of shares entitled to vote constitutes a quorum. In no event
shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting.
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For
stock corporations, the certificate of incorporation or bylaws may specify the number of shares required to constitute a quorum
but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such
specifications, a majority of shares entitled to vote shall constitute a quorum.
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When
a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders.
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When
a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders.
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Except
as otherwise required by the BCA or the articles of incorporation, directors shall be elected by a plurality of the votes
cast by holders of shares entitled to vote, and, except as required or permitted by the BCA or our articles of incorporation,
any other corporate action shall be authorized by a majority of votes cast by holders of shares entitled to vote thereon.
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Unless
otherwise specified in the certificate of incorporation or by-laws, directors shall be elected by a plurality of the votes
of the shares entitled to vote on the election of directors, and, in all other matters, the affirmative vote of the majority
of the shares entitled to vote on the subject matter shall be the act of the stockholders.
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The
articles of incorporation may provide for cumulative voting in the election of directors.
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The
certificate of incorporation may provide for cumulative voting in the election of directors.
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MERGER
OR CONSOLIDATION
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Marshall
Islands
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Delaware
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Any
two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority
vote of the holders of outstanding shares of each corporation at a stockholder meeting.
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Any
two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution
and upon the majority vote by stockholders of each constituent corporation at an annual or special meeting.
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Any
sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation’s
usual or regular course of business, once approved by the board, shall be authorized by the affirmative vote of two-thirds
of the shares of those entitled to vote at a stockholder meeting.
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Every
corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as
its board of directors deems expedient and for the best interests of the corporation when so authorized by a resolution adopted
by the holders of a majority of the outstanding stock of the corporation entitled to vote.
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Any
domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge
such other corporation into itself without the authorization of the stockholders of any corporation.
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Any
corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation
into itself and assume all of its obligations without the vote or consent of stockholders; however, in case the parent corporation
is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent
corporation entitled to vote at a duly called stockholder meeting.
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Any
mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without
the vote or consent of the stockholders, unless otherwise provided for in the articles of incorporation.
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Any
mortgage or pledge of a corporation’s property and assets may be authorized without the vote or consent of stockholders,
except to the extent that the certificate of incorporation otherwise provides.
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Dissenters’
Rights of Appraisal
Marshall
Islands
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Delaware
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Stockholders
have a right to dissent from a merger or consolidation or sale or exchange of all or substantially all assets not made in
the usual and regular course of business, and receive payment of the fair value of their shares. However, the right of dissenting
shareholders under the BCA to receive payment of the appraised fair value of their shares may not be available “for
the shares of any class or series of stock, which shares or depository receipts in respect thereof, at the record date fixed
to determine the shareholders entitled to receive notice of and to vote at the meeting of the shareholders to act upon the
agreement of merger or consolidation, were either (i) listed on a securities exchange or admitted for trading on an interdealer
quotation system or (ii) held of record by more than 2,000 holders.” The right of a dissenting stockholder to receive
payment of the fair value of his or her shares shall not be available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the vote of the shareholders of the surviving corporation.
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Appraisal
rights shall be available for the shares of a corporation in a merger or consolidation, subject to limited exceptions, such
as a merger or consolidation of corporations listed on a national securities exchange in which listed stock is offered for
consideration is (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders.
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A
holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation
has the right to dissent and to receive payment for such shares if the amendment:
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The
certificate of incorporation may provide that appraisal rights are available for shares as a result of an amendment to the
certificate of incorporation, any merger or consolidation or the sale of all or substantially all of the assets.
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Alters
or abolishes any preferential right of any outstanding shares having preferences; or
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Creates,
alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or
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Alters
or abolishes any preemptive right of such holder to acquire shares or other securities; or
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Excludes
or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to
new shares then being authorized of any existing or new class.
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DIRECTORS
Marshall
Islands
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Delaware
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The
board of directors must consist of at least one member.
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The
board of directors must consist of at least one member.
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The
number of board members may be changed by an amendment to the bylaws, by the stockholders, or by action of the board under
the specific provisions of a bylaw.
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The
number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation
fixes the number of directors, in which case a change in the number shall be made only by an amendment to the certificate
of incorporation.
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If
the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long
as no decrease in the number shall shorten the term of any incumbent director.
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If
the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment
of the certificate.
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Members
of a board of directors owe a fiduciary duty to the company to act honestly and in good faith with a view to the best interests
of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable
circumstances.
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The
business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their
powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation and a fiduciary duty
of loyalty to act in the best interests of its stockholders.
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REMOVAL
Marshall
Islands
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Delaware
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Any
or all of the directors may be removed for cause by vote of the stockholders.
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Any
or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote
unless the certificate of incorporation otherwise provides.
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If
the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of
the stockholders.
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In
the case of a classified board, stockholders may affect removal of any or all directors only for cause.
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STOCKHOLDER’S
DERIVATIVE ACTIONS
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MARSHALL
ISLANDS
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DELAWARE
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An
action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting
trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff
is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which
he complains, or that his shares or his interest therein devolved upon him by operation of law.
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In
any derivative suit instituted by a stockholder of a corporation, it shall be averred in the complaint that the plaintiff
was a stockholder of the corporation at the time of the transaction of which he complains or that such stockholder’s
stock thereafter devolved upon such stockholder by operation of law.
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A
complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board
or the reasons for not making such effort.
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Other
requirements regarding derivative suits have been created by judicial decision, including that a stockholder may not bring
a derivative suit unless he or she first demands that the corporation sue on its own behalf and that demand is refused (unless
it is shown that such demand would have been futile).
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Such
action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic of The Marshall
Islands.
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Reasonable
expenses including attorney’s fees may be awarded if the action is successful.
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A
corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns
less than 5% of any class of stock and the shares have a value of less than $50,000.
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DESCRIPTION
OF DEBT SECURITIES
We
may offer and issue debt securities from time to time in one or more series, under one or more indentures, each dated as of a
date on or prior to the issuance of the debt securities to which it relates, and pursuant to an applicable prospectus supplement.
We may issue senior debt securities and subordinated debt securities pursuant to separate indentures, a senior indenture and a
subordinated indenture, respectively, in each case between us and the trustee named in the indenture. We have filed forms of these
documents as exhibits to the registration statement, of which this prospectus forms a part. The senior indenture and the subordinated
indenture, as amended or supplemented from time to time, are sometimes referred to individually as an “indenture”
and collectively as the “indentures.” Each indenture will be subject to and governed by the Trust Indenture Act and
will be construed in accordance with and governed by the laws of the State of New York, without giving effect to any principles
thereof relating to conflicts of law that would result in the application of the laws of any other jurisdiction, unless otherwise
stated in the applicable prospectus supplement and indenture (or post-effective amendment hereto). The aggregate principal amount
of debt securities which may be issued under each indenture will contain the specific terms of any series of debt securities or
provide that those terms must be set forth in or determined pursuant to, an authorizing resolution, as defined in the applicable
prospectus supplement, and/or a supplemental indenture, if any, relating to such series. Our debt securities may be convertible
or exchangeable into any of our equity or other debt securities.
The
following description sets forth certain general terms and provisions of the debt securities. The particular terms and provisions
of the debt securities offered by any prospectus supplement, and the extent to which the general terms and provisions described
below may apply to the offered debt securities, will be described in the applicable subsequent filings. We refer to any applicable
prospectus supplement, amendment to the registration statement of which this prospectus forms a part, and reports we file with
the SEC under the Exchange Act as “subsequent filings.” The statements below are not complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of the applicable indenture. The specific terms of
any debt securities that we may offer, including any modifications of, or additions to, the general terms described below as well
as any applicable material U.S. federal income tax considerations concerning the ownership of such debt securities will be described
in the applicable prospectus supplement and indenture and, as applicable, supplemental indenture. Accordingly, for a complete
description of the terms of a particular issue of debt securities, the general description of the debt securities set forth below
should be read in conjunction with the applicable prospectus supplement and indenture, as amended or supplemented from time to
time.
General
We
expect that neither indenture will limit the amount of debt securities which may be issued. The debt securities may be issued
in one or more series.
You
should read the applicable indenture and subsequent filings relating to the particular series of debt securities for the following
terms of the offered debt securities:
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the
title, designation, aggregate principal amount and authorized denominations;
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the
issue price or prices, expressed as a percentage of the aggregate principal amount;
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the
maturity date or dates, and the right, if any, to extend such date or dates;
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the
interest rate per annum (which may be fixed or variable), if any, or the method used to determined such rate or rates, whether
the rate may be reset upon certain designated events and, in the case of variable rate securities, the notice, if any, to
holders regarding the determination of interest and the manner of giving notice;
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if
the debt securities provide for interest payments, the date from which interest will accrue, the dates on which interest will
be payable, the date on which payment of interest will commence and the regular record dates for interest payment dates;
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any
optional or mandatory sinking fund provisions or conversion or exchangeability provisions upon which securities shall be redeemed,
purchased, converted or exchanged, including into or for, as applicable, shares of our common stock or preferred stock;
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the
terms and conditions upon which conversion or exchange of any convertible or exchangeable debt securities may be effected,
including the conversion or exchange price, the conversion or exchange period and other conversion or exchange provisions;
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whether
the debt securities will be our senior or subordinated securities;
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whether
the debt securities will be our secured or unsecured obligations;
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the
applicability and terms of any guarantees;
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the
date, if any, after which and the price or prices at which the debt securities may be optionally redeemed or must be mandatorily
redeemed and any other terms and provisions of optional or mandatory redemptions;
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if
other than denominations of $1,000 and any integral multiple thereof, the denominations in which the debt securities of the
series will be issuable;
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if
other than the full principal amount, the portion of the principal amount of the debt securities of the series which will
be payable upon acceleration or provable in bankruptcy;
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any
addition to or change in the events of default set forth in this prospectus and any change in the right of the trustee or
the requisite holders of the debt securities to declare the principal amount thereof due and payable;
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the
currency or currencies, including composite currencies, in which principal, premium and interest will be payable, if other
than the currency of the United States of America;
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if
principal, premium or interest is payable, at our election or at the election of any holder, in a currency other than that
in which the debt securities of the series are stated to be payable, the period or periods within which, and the terms and
conditions upon which, the election may be made;
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whether
interest will be payable in cash or additional securities at our or the holder’s option and the terms and conditions
upon which the election may be made;
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if
denominated in a currency or currencies other than the currency of the United States of America, the equivalent price in the
currency of the United States of America for purposes of determining the voting rights of holders of those debt securities
under the applicable indenture;
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if
the amount of payments of principal, premium or interest may be determined with reference to an index, formula or other method
based on a coin or currency other than that in which the debt securities of the series are stated to be payable, the manner
in which the amounts will be determined;
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any
restrictive covenants or other material terms relating to the debt securities;
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whether
the debt securities will be issued in the form of global securities or certificates in registered form, and if the former,
the depository for such global securities;
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any
listing on any securities exchange or quotation system;
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additional
provisions, if any, related to defeasance and discharge of the debt securities; and
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any
other terms, conditions, rights and preferences (or limitations on such rights and preferences) relating to the debt securities.
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Subsequent
filings may include additional terms not listed above. Unless otherwise indicated in subsequent filings with the SEC relating
to the indenture, principal, premium and interest will be payable and the debt securities will be transferable at the corporate
trust office of the applicable trustee. Unless other arrangements are made or set forth in subsequent filings or a supplemental
indenture, principal, premium and interest will be paid by checks mailed to the registered holders at their registered addresses.
Unless
otherwise indicated in subsequent filings with the SEC, the debt securities will be issued only in fully registered form without
coupons, in denominations of $1,000 or any integral multiple thereof. No service charge will be made for any transfer or exchange
of the debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection with these debt securities.
Some
or all of the debt securities may be issued as discounted debt securities, bearing no interest or interest at a rate which at
the time of issuance is below market rates, to be sold at a substantial discount below the stated principal amount. United States
federal income tax consequences and other special considerations applicable to any discounted securities will be described in
subsequent filings with the SEC relating to those securities.
Senior
Debt
We
may issue senior debt securities, which may be secured or unsecured, under the senior debt indenture. The senior debt securities
will rank on an equal basis with all our other senior debt except subordinated debt. The senior debt securities will be effectively
subordinated, however, to all of our secured debt to the extent of the value of the collateral securing such debt. We will disclose
the amount of our debt in the applicable prospectus supplement.
Subordinated
Debt
We
may issue subordinated debt securities under the subordinated debt indenture. Subordinated debt will rank subordinate and junior
in right of payment, to the extent set forth in the subordinated debt indenture, to all our senior debt.
Covenants
Any
series of debt securities may have covenants in addition to or differing from those included in the applicable indenture which
will be described in subsequent filings prepared in connection with the offering of such securities, limiting or restricting,
among other things:
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our
ability to incur either secured or unsecured debt, or both;
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our
ability to make certain payments, dividends, redemptions or repurchases;
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our
ability to create dividend and other payment restrictions affecting our subsidiaries;
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our
ability to make investments;
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mergers
and consolidations by us or our subsidiaries;
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sales
of assets by us;
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our
ability to enter into transactions with affiliates;
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our
ability to incur liens; and
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sale
and leaseback transactions.
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Modification
of the Indentures
We
expect that each indenture and the rights of the respective holders may be modified by us only with the consent of holders of
not less than a majority in aggregate principal amount of the outstanding debt securities of all series under the respective indenture
affected by the modification, taken together as a class. But we expect that no modification that:
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(1)
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changes
the amount of securities whose holders must consent to an amendment, supplement or waiver;
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(2)
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reduces
the rate of or changes the interest payment time on any security or alters its redemption provisions (other than any alteration
to any such section which would not materially adversely affect the legal rights of any holder under the indenture) or the
price at which we are required to offer to purchase the securities;
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(3)
|
reduces
the principal or changes the maturity of any security or reduces the amount of, or postpones the date fixed for, the payment
of any sinking fund or analogous obligation;
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(4)
|
waives
a default or event of default in the payment of the principal of or interest, if any, on any security (except a rescission
of acceleration of the securities of any series by the holders of at least a majority in principal amount of the outstanding
securities of that series and a waiver of the payment default that resulted from such acceleration);
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(5)
|
makes
the principal of or interest, if any, on any security payable in any currency other than that stated in the security;
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(6)
|
makes
any change with respect to holders’ rights to receive principal and interest, the terms pursuant to which defaults can
be waived, certain modifications affecting shareholders or certain currency-related issues; or
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|
(7)
|
waives
a redemption payment with respect to any security or changes any of the provisions with respect to the redemption of any securities;
|
will
be effective against any holder without his consent. Other terms as specified in subsequent filings may be modified without the
consent of the holders.
Events
of Default
We
expect that each indenture will define an event of default for the debt securities of any series as being any one of the following
events:
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●
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default
in any payment of interest when due which continues for 30 days;
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●
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default
in any payment of principal or premium at maturity;
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●
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default
in the deposit of any sinking fund payment when due;
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●
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default
in the performance of any covenant in the debt securities or the applicable indenture which continues for 60 days after we
receive notice of the default;
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●
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default
under a bond, debenture, note or other evidence of indebtedness for borrowed money by us or our subsidiaries (to the extent
we are directly responsible or liable therefor) having a principal amount in excess of a minimum amount set forth in the applicable
subsequent filings, whether such indebtedness now exists or is hereafter created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and
payable, without such acceleration having been rescinded or annulled or cured within 30 days after we receive notice of the
default; and
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|
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●
|
events
of bankruptcy, insolvency or reorganization.
|
An
event of default of one series of debt securities will not necessarily constitute an event of default with respect to any other
series of debt securities.
There
may be such other or different events of default as described in an applicable subsequent filings with respect to any class or
series of debt securities.
We
expect that under each indenture, in case an event of default occurs and continues for the debt securities of any series, the
applicable trustee or the holders of not less than 25% in aggregate principal amount of the debt securities then outstanding of
that series may declare the principal and accrued but unpaid interest of the debt securities of that series to be due and payable.
Further, any event of default for the debt securities of any series which has been cured is expected to be permitted to be waived
by the holders of a majority in aggregate principal amount of the debt securities of that series then outstanding.
We
expect that each indenture will require us to file annually after debt securities are issued under that indenture with the applicable
trustee a written statement signed by two of our officers as to the absence of material defaults under the terms of that indenture.
We also expect that each indenture will provide that the applicable trustee may withhold notice to the holders of any default
if it considers it in the interest of the holders to do so, except notice of a default in payment of principal, premium or interest.
Subject
to the duties of the trustee in case an event of default occurs and continues, we expect that each indenture will provide that
the trustee is under no obligation to exercise any of its rights or powers under that indenture at the request, order or direction
of holders unless the holders have offered to the trustee reasonable indemnity. Subject to these provisions for indemnification
and the rights of the trustee, each indenture is expected to provide that the holders of a majority in principal amount of the
debt securities of any series then outstanding have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or exercising any trust or power conferred on the trustee as long as the exercise of that
right does not conflict with any law or the indenture.
Defeasance
and Discharge
The
terms of each indenture are expected to provide us with the option to be discharged from any and all obligations in respect of
the debt securities issued thereunder upon the deposit with the trustee, in trust, of money or U.S. government obligations, or
both, which through the payment of interest and principal in accordance with their terms will provide money in an amount sufficient
to pay any installment of principal, premium and interest on, and any mandatory sinking fund payments in respect of, the debt
securities on the stated maturity of the payments in accordance with the terms of the debt securities and the indenture governing
the debt securities. We expect that this right may only be exercised if, among other things, we have received from, or there has
been published by, the United States Internal Revenue Service a ruling to the effect that such a discharge will not be deemed,
or result in, a taxable event with respect to holders. This discharge would not apply to our obligations to register the transfer
or exchange of debt securities, to replace stolen, lost or mutilated debt securities, to maintain paying agencies and hold moneys
for payment in trust.
Defeasance
of Certain Covenants
We
expect that the terms of the debt securities provide us with the right not to comply with specified covenants and that specified
events of default described in a subsequent filing will not apply provided we deposit with the trustee money or U.S. government
obligations, or both, which through the payment of interest and principal will provide money in an amount sufficient to pay any
installment of principal, premium, and interest on, and any mandatory sinking fund payments in respect of, the debt securities
on the stated maturity of such payments in accordance with the terms of the debt securities and the indenture governing such debt
securities. We expect that to exercise this right, we will also be required to deliver to the trustee an opinion of counsel to
the effect that the deposit and related covenant defeasance should not cause the holders of such series to recognize income, gain
or loss for federal income tax purposes.
We
refer you to applicable subsequent filings with respect to any deletions or additions or modifications from the description contained
in this prospectus.
DESCRIPTION
OF WARRANTS
We
may issue warrants to purchase any of our debt or equity securities. Warrants may be issued independently or together with any
other securities and may be attached to, or separate from, such securities. Each series of warrants will be issued under a separate
warrant agreement to be entered into between us and a warrant agent. The terms of any warrants to be issued and a description
of the material provisions of the applicable warrant agreement will be set forth in the applicable prospectus supplement. We expect
that such terms will include, among others:
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●
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the
title of such warrants;
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●
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the
aggregate number of such warrants;
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|
●
|
the
price or prices at which such warrants will be issued;
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●
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the
number and type of our securities purchasable upon exercise of such warrants;
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●
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the
price at which our securities purchasable upon exercise of such warrants may be purchased;
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●
|
the
date on which the right to exercise such warrants shall commence and the date on which such right shall expire;
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●
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if
applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;
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●
|
if
applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants
issued with each such security;
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●
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if
applicable, the date on and after which such warrants and the related securities will be separately transferable;
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●
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information
with respect to book-entry procedures, if any;
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|
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●
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if
applicable, a discussion of any material U.S. federal income tax considerations; and
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|
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|
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●
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any
other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants.
|
DESCRIPTION
OF PURCHASE CONTRACTS
We
may issue purchase contracts for the purchase or sale of any of our debt or equity securities issued by us.
Each
purchase contract will entitle the holder thereof to purchase or sell, and obligate us to sell or purchase, on specified dates,
such securities at a specified purchase price, which may be based on a formula, all as set forth in the applicable prospectus
supplement. We may, however, satisfy our obligations, if any, with respect to any purchase contract by delivering the cash value
of such purchase contract or the cash value of the securities otherwise deliverable, as set forth in the applicable prospectus
supplement. The applicable prospectus supplement will also specify the methods by which the holders may purchase or sell such
securities and any acceleration, cancellation or termination provisions, provisions relating to U.S. federal income tax considerations,
if any, or other provisions relating to the settlement of a purchase contract.
The
purchase contracts may require us to make periodic payments to the holders thereof or vice versa, which payments may be deferred
to the extent set forth in the applicable prospectus supplement, and those payments may be unsecured or pre-funded on some basis.
The purchase contracts may require the holders thereof to secure their obligations in a specified manner to be described in the
applicable prospectus supplement. Alternatively, purchase contracts may require holders to satisfy their obligations thereunder
when the purchase contracts are issued. Our obligation to settle such pre-paid purchase contracts on the relevant settlement date
may constitute indebtedness. Accordingly, pre-paid purchase contracts will be issued under an indenture.
DESCRIPTION
OF RIGHTS
We
may issue rights to purchase our equity securities. These rights may be issued independently or together with any other security
offered by this prospectus and may or may not be transferable by the shareholder receiving the rights in the rights offering.
In connection with any rights offering, we may enter into a standby underwriting agreement with one or more underwriters pursuant
to which the underwriter will purchase any securities that remain unsubscribed for upon completion of the rights offering.
The
applicable prospectus supplement relating to any rights will describe the terms of the offered rights, including, where applicable,
the following:
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●
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the
exercise price for the rights;
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●
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the
number of rights issued to each shareholder;
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●
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the
extent to which the rights are transferable;
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●
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any
other terms of the rights, including terms, procedures and limitations relating to the exchange and exercise of the rights;
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●
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the
date on which the right to exercise the rights will commence and the date on which the right will expire;
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●
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the
amount of rights outstanding;
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●
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the
extent to which the rights include an over-subscription privilege with respect to unsubscribed securities; and
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●
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the
material terms of any standby underwriting arrangement entered into by us in connection with the rights offering.
|
The
description in the applicable prospectus supplement of any rights we offer will not necessarily be complete and will be qualified
in its entirety by reference to the applicable rights certificate or rights agreement, which will be filed with the SEC if we
offer rights. For more information on how you can obtain copies of any rights certificate or rights agreement if we offer rights,
see the section entitled “Where You Can Find Additional Information” in this prospectus. We urge you to read the applicable
rights certificate, the applicable rights agreement and any applicable prospectus supplement in their entirety.
DESCRIPTION
OF UNITS
As
specified in the applicable prospectus supplement, we may issue units consisting of one or more rights, purchase contracts, warrants,
debt securities, preferred stock, common stock or any combination of such securities. The applicable prospectus supplement will
describe the terms of the offered units. We expect that such terms will include, among others:
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●
|
the
terms of the units and of the rights, purchase contracts, warrants, debt securities, preferred stock and common stock comprising
the units, including whether and under what circumstances the securities comprising the units may be traded separately;
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|
|
|
|
●
|
a
description of the terms of any unit agreement governing the units;
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|
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|
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●
|
if
applicable, a discussion of any material U.S. federal income tax considerations; and
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|
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●
|
a
description of the provisions for the payment, settlement, transfer or exchange of the units.
|
SELLING
STOCKHOLDERS
This
prospectus covers the offering for resale of up to 5,233,222 shares of our common stock by the selling stockholders identified
in the table below.
The
table below has been prepared based on information available to us or furnished to us by the selling stockholders as of February
13, 2018 and provides information about the number of shares of common stock beneficially owned by each selling stockholder that
may be offered for sale under this prospectus. The selling stockholders may currently hold or acquire at any time shares of common
stock in addition to those registered hereby. In addition, the selling stockholders identified below may have sold, transferred
or otherwise disposed of some or all of their shares of common stock since the date on which the information in the following
table is presented, in transactions exempt from or not subject to the registration requirements of the Securities Act.
Information
concerning the selling stockholders may change from time to time and, to the extent required, we will supplement this prospectus
accordingly.
|
|
Beneficial
Ownership Prior to Offering
|
|
|
|
|
|
Beneficial
Ownership After Offering
|
|
Name
and Address of Selling
Stockholder
|
|
Number
of Shares of Common Stock
|
|
|
Percent
of Shares of Common Stock**
|
|
|
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this Prospectus
|
|
|
Number
of Shares of Common Stock
|
|
|
Percent
of Shares of Common Stock**
|
|
Antonios
C. Backos(1)
59 K. Karamanli Street
Maroussi 15125 Greece
|
|
|
11,074
|
|
|
|
*
|
|
|
|
11,074
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
Konstantinos
Lytras(2)
59 K. Karamanli Street
Maroussi 15125 Greece
|
|
|
11,074
|
|
|
|
*
|
|
|
|
11,074
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
Maritime
Investors Corp.(3)
59 K. Karamanli Street
Maroussi 15125 Greece
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|
|
17,002,445
|
|
|
|
81.4
|
|
|
|
5,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
P. Williams(4)
59 K. Karamanli Street
Maroussi 15125 Greece
|
|
|
211,074
|
|
|
|
1.0
|
|
|
|
211,074
|
|
|
|
—
|
|
|
|
—
|
|
*
|
Less
than one percent.
|
**
|
Based
on a total of 20,877,893 shares of common stock issued and outstanding on February 13, 2018.
|
|
|
(1)
|
Antonios
C. Backos, the General Counsel, Senior Vice President, and Secretary of Pyxis Tankers Inc., has voting and investment power
over the shares.
|
|
|
(2)
|
Konstantinos
Lytras, the Chief Operating Officer of Pyxis Tankers Inc., has voting and investment power over the shares.
|
|
|
(3)
|
Valentios
(“Eddie”) Valentis, the Chief Executive Offer of Pyxis Tankers Inc., is the sole shareholder of Maritime Investors
Corp. and has voting and investment power over the shares.
|
|
|
(4)
|
Henry
P. Williams, the Chief Financial Officer of Pyxis Tankers, Inc., has voting and investment power over the shares.
|
PLAN
OF DISTRIBUTION
We
or the selling stockholders may sell or distribute the securities included in this prospectus in any one or more of the following
ways:
|
●
|
directly
to one or more purchasers in privately negotiated transactions;
|
|
|
|
|
●
|
through
underwriters;
|
|
|
|
|
●
|
through
ordinary brokerage transactions, or other transactions involving brokers, dealers or agents;
|
|
|
|
|
●
|
in
“at the market” offerings, as defined in Rule 415 under the Securities Act;
|
|
|
|
|
●
|
on
any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
|
|
|
|
|
●
|
in
the over-the-counter market;
|
|
|
|
|
●
|
through
block trades (including crosses) in which the broker or dealer engaged to handle the block trade will attempt to sell the
securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
|
|
|
|
|
●
|
through
purchases by a broker-dealer, as principal, and resale by the broker-dealer for its account;
|
|
|
|
|
●
|
through
trading plans entered into by us pursuant to Rule 10b5-1 under the Exchange Act that are in place at the time of an offering
pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of our securities
on the basis of parameters described in such trading plans;
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|
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|
|
●
|
through
the writing of options (including the issuance by the selling stockholders of derivative securities), whether the options
or such other derivative securities are listed on an options exchange or otherwise;
|
|
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|
|
●
|
through
short sales;
|
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|
|
●
|
in
hedging transactions;
|
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|
|
●
|
through
the distribution by a selling stockholder to its partners, members or stockholders;
|
|
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|
|
●
|
through
a combination of any of the above methods of sale; or
|
|
|
|
|
●
|
by
any other method permitted pursuant to applicable law.
|
|
|
|
|
|
The
prices at which the securities offered by this prospectus are sold may include:
|
|
|
|
|
●
|
a
fixed price or prices, which may be changed;
|
|
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|
|
●
|
prevailing
market prices at the time of sale;
|
|
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|
|
●
|
prices
related to prevailing market prices, including sales made directly on a national securities exchange or sales made through
a market maker other than on an exchange or other similar offerings through sales agents;
|
|
|
|
|
●
|
varying
prices determined at the time of sale; or
|
|
|
|
|
●
|
negotiated
prices.
|
At
the time a particular offering of our securities is made, a prospectus supplement, if required, will be distributed, which will
set forth the terms of the offering, including (1) the aggregate amount of securities being offered, (2) the purchase price of
the securities, (3) the initial offering price of the securities, (4) the name or names of any underwriters, broker-dealers or
agents, (5) any discounts, commissions and other terms constituting compensation from us and any discounts, commissions or concessions
allowed or re-allowed or paid to dealers, (6) any other offering expenses, (7) any securities exchanges on which the securities
may be listed, (8) the method of distribution of the securities, (9) the terms of any agreement, arrangement or understanding
entered into with the underwriters, brokers or dealers, and (10) any other material information.
We
or the selling stockholders may enter into derivative transactions with third parties, or sell securities not covered by this
prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection
with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement,
in short sale transactions. If such short sale transactions occur, the third party may use securities pledged by us or the
selling
stockholders or borrowed from us to settle those sales or to close out any related open borrowings of stock, and may use securities
received from us in settlement of those derivatives to close out any related open borrowings of stock. The third party in such
sale transactions will be deemed to be an underwriter and, if not identified in this prospectus, will be identified in the applicable
prospectus supplement (or a post-effective amendment). In addition, we or the selling stockholders may otherwise loan or pledge
securities to a financial institution or other third party that in turn may sell the securities short using this prospectus. Such
financial institution or other third party may transfer its economic short position to investors in our securities or in connection
with a concurrent offering of other securities.
The
selling stockholders and any broker-dealers or other persons acting on our behalf or on the behalf of the selling
stockholders
that participate with us or the selling stockholders in the distribution of the securities may be deemed to be underwriters and
any commissions received or profit realized by them on the resale of the securities may be deemed to be underwriting discounts
and commissions under the Securities Act.
The
securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters
or directly by one or more of such firms. Unless otherwise set forth in the prospectus supplement, the obligations of the underwriters
or dealers to purchase the securities offered will be subject to certain conditions precedent and the underwriters or dealers
will be obligated to purchase all of the offered securities if any are purchased. Any public offering price and any discount or
concession allowed or re-allowed or paid by underwriters or dealers to other dealers may be changed from time to time.
If
the selling stockholder sell securities through underwriters or broker-dealers, each selling stockholder will be responsible for
underwriting discounts or commissions or agent’s commissions applicable to the sale of such selling stockholder’s
securities.
The
selling stockholders and any other person participating in a distribution will be subject to applicable provisions of the Exchange
Act, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation
M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of the securities by the selling
stockholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person
engaged in the distribution of the securities to engage in market-making activities with respect to the securities. All of the
foregoing may affect the marketability of the securities and the ability of any person or entity to engage in market-making activities
with respect to the Securities.
In
order to comply with the securities laws of certain states, if applicable, the securities may be sold in those
jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain states, the securities may not be sold unless
they have been registered or qualified for sale in the state or an exemption from the registration or qualification requirement
is available and complied with.
We
know of no existing arrangements between any selling stockholder, any other stockholder, broker, dealer,
underwriter,
or agent relating to the sale or distribution of the securities offered by this prospectus. To our knowledge, there are currently
no plans, arrangements or understandings between any selling stockholders and any underwriter, broker-dealer or agent
regarding
the securities by the selling stockholders. There can be no assurance that any selling stockholder will sell any or all of
the
securities pursuant to this prospectus.
We,
our executive officers, our directors and the selling stockholders may agree, subject to certain exemptions, that for a certain
period from the date of the prospectus supplement under which the securities are offered, we and they will not, without the prior
written consent of an underwriter, offer, sell, contract to sell, pledge or otherwise dispose of any shares of our common stock
or any securities convertible into or exchangeable for shares our common stock. However, an underwriter, in its sole discretion,
may release any of the securities subject to these lock-up agreements at any time without notice. We expect an underwriter to
exclude from these lock-up agreements, securities exercised and/or sold pursuant to trading plans entered into by the selling
stockholders pursuant to Rule 10b5-1 under the Exchange Act, that are in place at the time of an offering pursuant to this prospectus
and any prospectus supplement hereto that provide for periodic sales of their securities on the basis of parameters described
in such trading plans.
Underwriters
or agents could make sales in privately negotiated transactions and/or any other method permitted by law,
including
sales deemed to be an at-the-market offering as defined in Rule 415 promulgated under the Securities Act, which includes sales
made directly on or through NASDAQ, the existing trading market for our shares of common stock, or sales made to or through a
market maker other than on an exchange.
TAX
CONSIDERATIONS
Certain
U.S. Federal Income Tax Considerations
The
following is a summary of certain material U.S. federal income tax consequences of owning or disposing of our common stock. The
discussion set forth below is based upon the Code, Treasury regulations and judicial and administrative rulings and decisions
all as in effect and available on the date hereof and all of which are subject to change, possibly with retroactive effect. In
addition, the application, and interpretation of, certain aspects of the PFIC rules, referred to below, and of new tax legislation
enacted in December 2017 (commonly known as the “Tax Cuts and Jobs Act” (or “TCJA”)) require the issuance
of regulations and other guidance which in many instances have not been promulgated or provided and which may have retroactive
effect. There can be no assurance that any of these regulations or other guidance will be enacted, promulgated or provided, and
if so, the form they will take or the effect that they may have on this discussion. This discussion is not binding on the IRS
or the courts and prospective investors should note that no rulings have been or are expected to be sought from the IRS with respect
to any of the U.S. federal income tax consequences discussed below, and no assurance can be given that the IRS will not take contrary
positions.
Further,
the following summary does not deal with all U.S. federal income tax consequences applicable to any given investor; nor does it
address the U.S. federal income tax considerations applicable to categories of investors subject to special taxing rules, such
as brokers, expatriates, banks, real estate investment trusts, regulated investment companies, insurance companies, tax-exempt
organizations, controlled foreign corporations, individual retirement or other tax-deferred accounts, dealers or traders in securities
or currencies, traders in securities that elects to use a mark-to-market method of accounting for their securities holdings, partners
and partnerships, S corporations, estates and trusts, investors that would hold their common stock as part of a hedge, straddle
or an integrated or conversion transaction, investors whose “functional currency” is not the U.S. dollar or investors
that own, directly or indirectly, 10% or more of Pyxis’ stock by vote or value. Furthermore, the discussion does not address
alternative minimum tax consequences or estate or gift tax consequences, or any state tax consequences, and this discussion is
generally limited to investors that will hold our common stock as “capital assets” within the meaning of Section 1221
of the Code. Each prospective investor is strongly urged to consult, and depend on, his, her or its own tax advisor in analyzing
the U.S. federal, state, local and non-U.S. tax consequences particular to such investor of the acquisition, ownership or disposition
of Pyxis common stock.
THIS
DISCUSSION SHOULD NOT BE VIEWED AS TAX ADVICE. YOU SHOULD CONSULT YOUR OWN TAX ADVISERS CONCERNING THE U.S. FEDERAL TAX CONSEQUENCES
TO YOU IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, AS WELL AS ANY OTHER TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL, FOREIGN OR OTHER TAXING JURISDICTION, THE EFFECT OF ANY CHANGES IN APPLICABLE TAX LAW, AND YOUR ENTITLEMENT TO BENEFITS
UNDER AN APPLICABLE INCOME TAX TREATY.
U.S.
Federal Income Taxation of Pyxis
Taxation
of Operating Income
Unless
exempt from U.S. federal income taxation under the rules described below in “The Section 883 Exemption,” a non-U.S.
corporation that earns only shipping income (as described below) is generally subject to U.S. federal income taxation under one
of two alternative tax regimes: (1) the 4% gross basis tax, or (2) the net basis tax and branch profits tax. Because Pyxis and
its subsidiaries are organized in the Marshall Islands and there is no comprehensive income tax treaty between the Marshall Islands
and the United States, Pyxis and its subsidiaries cannot claim an exemption from such taxes under a treaty.
The
4% Gross Basis Tax
The
United States imposes a 4% U.S. federal income tax (without allowance of any deductions) on a non-U.S. corporation’s gross
U.S.-source shipping income to the extent such income is not treated as effectively connected with the conduct of a U.S. trade
or business. For this purpose, shipping income includes income from (i) the use of a vessel, (ii) hiring or leasing of a vessel
for use on a time, operating or bareboat charter basis or (iii) the performance of services directly related to the use of a vessel
(and thus includes voyage, time and bareboat charter income). The U.S.-source portion of shipping income is 50% of the income
attributable to voyages that begin or end, but not both begin and end, in the United States. As a result of this sourcing rule,
the effective tax is 2% of the gross income attributable to voyages beginning or ending in the United States. Generally, no amount
of the income from voyages that begin and end outside the United States is treated as U.S.-source income, and consequently none
of the shipping income attributable to such voyages is subject to this 4% tax. Although the entire amount of shipping income from
voyages that both begin and end in the United States would be U.S.–source income, Pyxis does not expect to have any shipping
income from voyages that both begin and end in the United States.
The
Net Basis Tax and Branch Profits Tax
Pyxis
does not expect to engage in any activities in the United States or otherwise have a fixed place of business in the United States.
Nonetheless, if this situation were to change or if Pyxis were to be treated as engaged in a U.S. trade or business, all or a
portion of Pyxis’ taxable income, including gain from the sale of vessels, could be treated as effectively connected with
the conduct of this U.S. trade or business (or “Effectively Connected Income”). Any Effectively Connected Income,
net of allowable deductions, would be subject to U.S. federal corporate income tax (with the highest statutory rate currently
being 21%). In addition, Pyxis also may be subject to a 30% “branch profits” tax on earnings effectively connected
with the conduct of the U.S. trade or business (as determined after allowance for certain adjustments), and on certain interest
paid or deemed paid that is attributable to the conduct of our U.S. trade or business. The 4% gross basis tax described above
is inapplicable to income that is treated as Effectively Connected Income. Pyxis’ U.S.-source shipping income would be considered
to be Effectively Connected Income only if Pyxis has or is treated as having a fixed place of business in the United States involved
in the earning of U.S.-source gross shipping income and substantially all of Pyxis’ U.S.-source gross shipping income is
attributable to regularly scheduled transportation (such as the operation of a vessel that follows a published schedule with repeated
sailings at regular intervals between the same points for voyages that begin or end in the United States). Based on its intended
mode of shipping operations and other activities, Pyxis does not expect to have any Effectively Connected Income.
The
Section 883 Exemption
The
4% gross basis tax, the net basis tax and the branch profits tax described above are inapplicable to shipping income that qualifies
for exemption under Section 883 of the Code (the “Section 883 Exemption”). To qualify for the Section 883 Exemption,
a non-U.S. corporation must, among other things:
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be
organized in a jurisdiction outside the United States that grants an equivalent exemption from tax to corporations organized
in the United States (an “Equivalent Exemption”);
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satisfy
one of the following three ownership tests (discussed in more detail below): (1) the more than 50% ownership test (the “50%
Ownership Test”), (2) the controlled foreign corporation test (the “CFC Test”) or (3) the “Publicly
Traded Test”; and
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meet
certain substantiation, reporting and other requirements (which include the filing of U.S. income tax returns).
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Pyxis
is organized under the laws of the Republic of the Marshall Islands. Each of the vessels in Pyxis’ existing fleet will be
owned by a separate wholly-owned subsidiary organized in the Republic of the Marshall Islands. Some of these subsidiaries may
make elections to be treated as disregarded entities for U.S. federal income tax purposes, in which case all of their income,
assets and operations will be attributed to Pyxis. If Pyxis makes an election to treat any subsidiary as a disregarded entity,
certain U.S. Holders may have U.S. federal income tax reporting obligations in respect of those subsidiaries on IRS Form 8858
if, as discussed under “U.S. Federal Taxation of U.S. Holders — Consequences of Controlled Foreign Corporation Classification
of Pyxis,” Pyxis is treated as a CFC. U.S. Holders are urged to consult with their own tax advisers regarding any such reporting
obligations. The Treasury recognizes the Republic of the Marshall Islands as a jurisdiction that grants an Equivalent Exemption;
therefore, Pyxis and/or one or more of its subsidiaries meet the first requirement for the Section 883 Exemption.
If
the shareholdings in Pyxis are such that Pyxis believes that it or one or more of its subsidiaries may satisfy one of the ownership
tests for claiming the Section 883 Exemption in respect of U.S.-source shipping income, Pyxis intends to attempt to comply with
the substantiation, reporting and other requirements that are applicable under Section 883 of the Code to claim the exemption.
However, the substantiation requirements may require cooperation of the stockholders of Pyxis and there is no assurance that a
sufficient number of stockholders will cooperate with Pyxis.
The
50% Ownership Test
In
order to satisfy the 50% Ownership Test, a non-U.S. corporation must be able to substantiate that more than 50% of the value of
its shares is owned, directly or indirectly, by “Qualified Shareholders.” For this purpose, Qualified Shareholders
include: (1) individuals who are residents (as defined in the Treasury regulations promulgated under Section 883 of the Code (the
“Section 883 Regulations”)) of countries, other than the United States, that grant an Equivalent Exemption, (2) non-U.S.
corporations that meet the Publicly Traded Test and are organized in countries that grant an Equivalent Exemption, or (3) certain
foreign governments, non-profit organizations, and beneficiaries of foreign pension funds. In order for a stockholder to be a
Qualified Shareholder, there cannot be any bearer shares in the chain of ownership between the stockholder and the taxpayer claiming
the exemption. A corporation claiming the Section 883 Exemption based on the 50% Ownership Test must obtain all the facts necessary
to satisfy the IRS that the 50% Ownership Test has been satisfied (as detailed in the Section 883 Regulations) and must meet certain
substantiation and reporting requirements. As of our last completed offering of common stock, it was more likely than not that
Pyxis would be able to satisfy the 50% Ownership Test due to the expected ownership of its shares.
The
CFC Test
The
CFC Test requires that the non-U.S. corporation be treated as a CFC for U.S. federal income tax purposes for more than half of
the days in the taxable year. In addition, more than 50% of the value of the shares of the CFC must be owned by qualifying U.S.
persons for more than half of the days during the taxable year concurrent with the period of time that such non-U.S. corporation
qualifies as a CFC. For this purpose, a qualifying U.S. person is defined as a U.S. citizen, a resident alien, a domestic corporation
or domestic trust, in each case, if such U.S. person, and each intermediary in the chain of ownership between such non-U.S. corporation
and the qualified U.S. person, provides such non-U.S. corporation with an ownership statement signed under penalty of perjury.
Please read “—U.S. Federal Income Taxation of Pyxis—The Publicly Traded Test.” Pyxis did not believe that
it would be a CFC as a result of its last completed offering of common stock based on the expected ownership of its shares.
The
Publicly Traded Test
The
Publicly Traded Test requires that one or more classes of equity representing more than 50% of the voting power and value in a
non-U.S. corporation be “primarily and regularly traded” on an established securities market either in the United
States or in a foreign country that grants an Equivalent Exemption. The Section 883 Regulations also generally provide that shares
will be considered to be “regularly traded” on an established securities market if one or more classes of shares in
the corporation representing in the aggregate more than 50% of the total combined voting power and value of all classes of shares
of the corporation are listed on an established securities market. Pyxis’ common stock is listed on the NASDAQ Capital Market
exchange, which may be considered an established securities market in the United States; therefore Pyxis expects that its common
stock may be deemed to be “regularly traded” on an established securities market, provided the further requirements
described below are met.
Under
the applicable Treasury regulations, in order for Pyxis’ common stock to be considered “regularly traded” on
an established securities market, it is further required that with respect to each class of stock relied upon to meet the listing
threshold (1) such class of the stock is traded on the market, other than in minimal quantities, on at least 60 days during the
taxable year or 1/6 of the days in a short taxable year; and (2) the aggregate number of shares of such class of stock traded
on such market is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately
adjusted in the case of a short taxable year. As of the date hereof, Pyxis cannot determine whether it will satisfy the trading
frequency and trading volume tests in any current or future taxable year. However, the Section 883 Regulations provide that the
trading frequency and trading volume tests will be deemed satisfied if such class of stock is traded on an established market
in the United States and such stock is regularly quoted by dealers making a market in such stock.
Notwithstanding
the foregoing, the applicable Treasury regulations provide, in pertinent part, that a class of Pyxis’ stock will not be
considered to be “regularly traded” on an established securities market for any taxable year in which 50% or more
of the vote and value of such class of the outstanding shares of Pyxis’ stock is owned, actually or constructively under
specified stock attribution rules, on more than half the days during the taxable year by a person or persons who each own 5% or
more of the vote and value of such class of Pyxis’ outstanding stock, which Pyxis refers to as the “Five Percent Override
Rule.” For purposes of being able to determine the persons who own 5% or more of Pyxis’ common stock (each, a “5%
Shareholder”) the Treasury regulations permit Pyxis to rely on those persons that are identified on Schedule 13G and Schedule
13D filings with the SEC, as having a 5% or more beneficial interest in Pyxis’ common Stock. The applicable Treasury regulations
further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not
be treated as a 5% Shareholder for such purposes. In the event the Five Percent Override Rule is triggered, the Section 883 Regulations
provide that the Five Percent Override Rule will nevertheless not apply if Pyxis can establish that within the group of 5% Shareholders,
there are sufficient Qualified Shareholders for purposes of the Section 883 Exemption to preclude non-Qualified Shareholders in
such group from owning 50% or more of Pyxis’ common stock for more than half the number of days during the taxable year.
For
2017, we expect that one or more 5% Shareholders will own collectively more than 50% of our stock on more than half of the days
during the taxable year. Thus, Pyxis anticipates that its common stock will be subject to the Five Percent Override Rule, unless
it can establish that among the 5% Shareholders sufficient shares are owned, directly or indirectly, by one or more Qualified
Shareholders for purposes of the Section 883 Exemption to preclude non-Qualified Shareholders in such group from owning 50% or
more of Pyxis’ common stock for more than half the number of days during the taxable year. Pyxis believes that sufficient
shares are owned directly or indirectly by one or more Qualified Shareholders to preclude non-Qualified Shareholders from owning
50% or more of Pyxis’ common stock, and therefore Pyxis believes that it is more likely than not that it will satisfy the
Publicly Traded Test.
If,
after a future offering of common stock, the ownership of Pyxis is such that it will not satisfy the 50% Ownership Test, the CFC
Test or the Publicly Traded Test, it will be subject to the 4% gross basis tax on its U.S.-source shipping income.
A
corporation’s qualification for the Section 883 Exemption is determined for each taxable year. If Pyxis and/or one or more
of its subsidiaries were not to qualify for the Section 883 Exemption in any year, the U.S. income taxes that become payable would
have a negative effect on the business of Pyxis and its subsidiaries, and would result in decreased earnings available for distribution
to Pyxis’ stockholders. If the shareholdings in Pyxis are such that Pyxis and/or one or more of its subsidiaries may qualify
for the Section 883 Exemption, Pyxis would not be entitled to claim the exemption unless each of the stockholders needed to qualify
for the 50% Ownership Test, the Publicly Traded Test or the CFC Ownership test provided Pyxis or the relevant subsidiary with
a statement, signed under penalty of perjury, certifying such stockholder’s status as a qualifying stockholder for purposes
of satisfying such tests. If in future years the stockholders fail to update or correct such statements, Pyxis and its subsidiaries
may not continue to qualify for the Section 883 Exemption.
U.S.
Taxation of Gain on Sale of Vessels
If
Pyxis qualifies for the Section 883 Exemption, then gain from the sale of any vessel may be exempt from tax under Section 883
of the Code. If, however, the gain is not exempt from tax under Section 883 of the Code, Pyxis will not be subject to U.S. federal
income taxation with respect to such gain provided that the income from the vessel has never constituted Effectively Connected
Income and that the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general,
a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk
of loss with respect to the vessel, pass to the buyer outside of the United States. To the extent possible, Pyxis will attempt
to structure any sale of a vessel so that it is considered to occur outside of the United States.
U.S.
Federal Income Taxation of U.S. Holders
As
used herein, “U.S. Holder” means a beneficial owner of common stock that is an individual citizen or resident of the
United States for U.S. federal income tax purposes, a corporation (or other entity taxable as a corporation for U.S. federal income
tax purposes) created or organized in or under the laws of the United States or any state thereof (including the District of Columbia),
an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within
the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons (as
defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election
under Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes). As used in this prospectus, a
“Non-U.S. Holder” generally means any owner (or beneficial owner) of common stock that is not a U.S. Holder, other
than a partnership. If a partnership holds common stock, the tax treatment of a partner will generally depend upon the status
of the partner and upon the activities of the partnership. Partners of partnerships holding common stock should consult their
own tax advisors regarding the tax consequences of an investment in the common stock (including their status as U.S. Holders or
Non-U.S. Holders).
Distributions
Subject
to the discussion of PFICs below, any distributions made by Pyxis with respect to its common stock to a U.S. Holder of common
stock will generally constitute dividends, which may be taxable as ordinary income or qualified dividend income as described in
more detail below, to the extent of Pyxis’ current or accumulated earnings and profits as determined under U.S. federal
income tax principles. Distributions in excess of Pyxis’ earnings and profits will be treated as a nontaxable return of
capital to the extent of the U.S. Holder’s tax basis in its common stock and, thereafter, as capital gain.
U.S.
Holders that are corporations generally will not be entitled to claim a dividends received deduction with respect to any distributions
they receive from Pyxis, except that certain U.S. Holders that are corporations and that directly, indirectly or constructively
own 10% or more of our voting power or value may be entitled to a 100% dividends received deduction under certain circumstances.
The rules with respect to the dividends received deduction are complex and involve the application of rules that depend on a U.S.
Holder’s particular circumstances and on whether Pyxis is a PFIC, CFC or both, among other things. You should consult your
own tax advisor to determine the effect of the dividends received deduction on your ownership of our common stock.
Dividends
paid with respect to our common stock generally will be treated as non-U.S. source income and generally will constitute “passive
category income” for purposes of computing allowable foreign tax credits for U.S. federal foreign tax credit purposes. The
rules with respect to foreign tax credits are complex and involve the application of rules that depend on a U.S. Holder’s
particular circumstances. You should consult your own tax advisor to determine the foreign tax credit implications of owning our
common stock, including rules regarding the ability to utilize foreign tax credits against income recognized currently by a U.S.
Shareholder under the TCJA.
Dividends
paid on the shares of a non-U.S. corporation to an individual U.S. Holder generally will not be treated as qualified dividend
income that is taxable at preferential tax rates. However, dividends paid in respect of common stock to an individual U.S. Holder
may qualify as qualified dividend income if: (1) the common stock of such non-U.S. corporation on which a dividend is paid is
readily tradable on an established securities market in the United States; (2) such non-U.S. corporation is not a PFIC for the
taxable year during which the dividend is paid or in the immediately preceding taxable year; (3) the individual U.S. Holder has
owned the common stock for more than 60 days in the 121-day period beginning 60 days before the “ex dividend date”
and (4) the individual U.S. Holder is not under an obligation to make related payments with respect to positions in substantially
similar or related property. Pyxis anticipates that the first requirement may be met, and anticipates that the second requirement
will be met as more fully described below under “Consequences of Possible PFIC Classification.” Satisfaction of the
final two requirements will depend on the particular circumstances of each individual U.S. Holder. Consequently, depending on
the status of the U.S. Holder, the dividends paid to individual U.S. Holders in respect of Pyxis’ common stock may be treated
as qualified dividend income and may not be taxed as ordinary income. Dividends received from Pyxis that are not eligible for
the preferential tax rate will be taxed at the ordinary income rates.
Consequences
of Possible PFIC Classification
The
Code provides special rules regarding certain distributions received by U.S. persons with respect to, and sales, exchanges and
other dispositions, including pledges, of, shares of stock in a PFIC. A non-U.S. entity treated as a corporation for U.S. federal
income tax purposes will be a PFIC in any taxable year in which, after taking into account the income and assets of the corporation
and certain subsidiaries pursuant to a “look through” rule, either: (1) 75% or more of its gross income is “passive”
income, or (2) 50% or more of the average value of its assets (based on the average of the fair market values of the assets determined
at the end of each quarterly period) is attributable to assets that produce passive income or are held for the production of passive
income. For purposes of these tests, “passive income” generally includes dividends, interest and gains from the sale
or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties
in connection with the active conduct of trade or business. Time and voyage charter income also generally is viewed as income
derived from the performance of services and not rental income and, therefore, would not constitute “passive income,”
although as discussed below case law has treated a time charter as a lease (thereby generating rental income) for a different
tax purpose even though such a charter arrangement would have been treated as service contract income (generating services income)
under IRS rulings. Under the look through rule, in determining whether a non-U.S. corporation is a PFIC, a pro rata portion of
the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken
into account.
If
a corporation is a PFIC in any taxable year that a person holds shares in the corporation (and was not a qualified electing fund
(or “QEF”) with respect to such year, as discussed below), the shares held by such person will be treated as shares
in a PFIC for all future years (absent an election which, if made, may require the electing person to pay taxes in the year of
the election). A U.S. Holder of shares in a PFIC may be required to file an annual information return containing information regarding
the PFIC as required by Treasury regulations.
While
there are legal uncertainties involved in this determination, including as a result of adverse case law described below, Pyxis
believes that (1) the time charters Pyxis (or its subsidiaries) has entered into should constitute service contracts rather than
leases for U.S. federal income tax purposes and (2) as a result, the income from these charters should not constitute “passive
income,” and the assets that Pyxis owns for the production of this income should not constitute passive assets.
In
2009, the Fifth Circuit Court of Appeals decided in Tidewater Inc. v. United States, 565 F.3d 299, that a typical time charter
is a lease, and not a contract for the provision of transportation services. In that case, the court was considering a tax issue
that turned on whether the taxpayer was a lessor where a vessel was under a time charter, and the court did not address the definition
of passive income or the PFIC rules; however, the reasoning of the case could have implications as to how the income from a time
charter would be classified under such rules. If the reasoning of the Tidewater case is applied to Pyxis’ situation and
Pyxis’ time charters are treated as leases, Pyxis’ time charter income could be classified as rental income and Pyxis
would be a PFIC unless more than 25% of its income is from spot charters or an active leasing exception applies. The IRS has announced
that it will not follow the reasoning of the Tidewater case, and would have treated the income from the time charters at issue
in Tidewater as services income and not as passive income including under the PFIC rules. Pyxis intends to take the position that
all of its time chartering activities will generate active operating income and not passive leasing income.
Based
on Pyxis’ intention and expectation that the income generated by it and its subsidiaries from spot, time and voyage chartering
activities will be greater than 25% of their total gross income individually or in the aggregate at all relevant times, and that
the gross value of their vessels subject to such charters will exceed the gross value of all other assets they own at all relevant
times, Pyxis does not expect that it (or one or more of its subsidiaries) will constitute a PFIC with respect to any taxable year.
However, there can be no assurance that Pyxis will be able to manage its vessels and its business so as to avoid being classified
as a PFIC for any particular taxable year.
There
can be no assurance that the nature of the assets, income and operations of Pyxis and its subsidiaries will remain the same in
the future (notwithstanding Pyxis’ current expectations). Additionally, no assurance can be given that the IRS or a court
of law will accept Pyxis’ position that the time charters Pyxis has entered into constitute service contracts rather than
leases for U.S. federal income tax purposes, or that future changes of law will not adversely affect this position. Pyxis has
not obtained a ruling from the IRS and does not intend to seek one. Any contest with the IRS may materially and adversely impact
the market for the shares of Pyxis’ common stock and the prices at which they trade. In addition, the costs of any contest
with the IRS will result in a reduction in cash available for distribution and thus will be borne indirectly by Pyxis’ stockholders.
If
Pyxis (and/or one or more of its subsidiaries) were to be classified as a PFIC in any year, each U.S. Holder of Pyxis’ common
stock will be subject (in that year and all subsequent years) to special rules with respect to, unless such holder makes a QEF
election or mark-to-mark election: (1) any “excess distribution” (generally defined as any distribution received by
a stockholder in a taxable year that is greater than 125% of the average annual distributions received by the stockholder in the
three preceding taxable years or, if shorter, the shareholder’s holding period for the shares), and (2) any gain realized
upon the sale or other disposition of the common stock. Under these rules:
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the
excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period;
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the
amount allocated to the current taxable year and any year prior to the first year in which Pyxis was a PFIC will be taxed
as ordinary income in the current year; and
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the
amount allocated to each of the other taxable years in the U.S. Holder’s holding period will be subject to U.S. federal
income tax at the highest rate in effect for the applicable class of taxpayer for that year, and an interest charge will be
added as though the amount of the taxes computed with respect to these other taxable years were overdue.
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In
order to avoid the application of the PFIC rules discussed above, U.S. Holders may make a QEF election provided in Section 1295
of the Code in respect of their common stock. In lieu of the PFIC rules discussed above, a U.S. Holder that makes a valid QEF
election will, in very general terms, be required to include its pro rata share of Pyxis’ ordinary income and net capital
gains, unreduced by any prior year losses, in income for each taxable year (as ordinary income and long-term capital gain, respectively)
and to pay tax thereon, even if the amount of that income is not the same as the distributions paid on the common stock during
the year. If Pyxis later distributes the income or gain on which the U.S. Holder has already paid taxes under the QEF rules, the
amounts so distributed will not again be subject to tax in the hands of the U.S. Holder. A U.S. Holder’s tax basis in any
common stock as to which a QEF election has been validly made will be increased by the amount included in such U.S. Holder’s
income as a result of the QEF election and decreased by the amount of nontaxable distributions received by the U.S. Holder. On
the disposition of a common share, a U.S. Holder making the QEF election generally will recognize capital gain or loss equal to
the difference, if any, between the amount realized upon such disposition and its adjusted tax basis in the common share. In general,
a QEF election should be made on or before the due date for filing a U.S. Holder’s U.S. federal income tax return for the
first taxable year for which Pyxis is a PFIC or, if later, the first taxable year for which the U.S. Holder held common stock
by filing an IRS Form 8621. In this regard, a QEF election is effective only if certain required information is made available
by the PFIC. Subsequent to the date that Pyxis first determines that it is a PFIC, Pyxis will use commercially reasonable efforts
to provide any U.S. Holder of common stock, upon request, with the information necessary for such U.S. Holder to make the QEF
election. A U.S. Holder whose QEF election is effective after the first taxable year during the holder’s holding period
in which the corporation is a PFIC will continue to be subject to the excess distribution rules for years beginning with such
first taxable year for which the QEF election is effective.
In
addition to the QEF election, Section 1296 of the Code permits U.S. Holders to make a “mark-to-market” election with
respect to marketable shares in a PFIC, generally meaning shares regularly traded on a qualified exchange or market and certain
other shares considered marketable under Treasury regulations. Because Pyxis’ common stock may be regularly traded on a
qualified exchange, Pyxis’ common stock may be treated as marketable for this purpose, and the mark-to-market election may
be available if this is the case, unless or until the shares cease to meet applicable trading requirements. The excess distribution
rules described above generally do not apply to a U.S. Holder for tax years for which a mark-to-market election is in effect.
However, if a U.S. Holder makes a mark-to-market election for PFIC stock after the beginning of the holder’s holding period
for the stock, a coordination rule applies to ensure that the holder does not avoid the tax and interest charge with respect to
amounts attributable to periods before the election.
If
a U.S. Holder makes a mark-to-market election in respect of its common stock, such U.S. Holder generally would, in each taxable
year: (1) include as ordinary income the excess, if any, of the fair market value of the common stock at the end of the taxable
year over such U.S. Holder’s adjusted tax basis in the common stock, and (2) be permitted an ordinary loss in respect of
the excess, if any, of such U.S. Holder’s adjusted tax basis in the common stock over their fair market value at the end
of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market
election (with the U.S. Holder’s basis in the common stock being increased and decreased, respectively, by the amount of
such ordinary income or ordinary loss). The consequences of this election are generally less favorable than those of a QEF election
for U.S. Holders that are sensitive to the distinction between ordinary income and capital gain, although this is not necessarily
the case. U.S. Holders are urged to consult their tax advisors as to the consequences of making a mark-to-market or QEF election,
as well as other U.S. federal income tax consequences of holding shares in a PFIC.
As
previously indicated, if Pyxis (and/or one or more of its subsidiaries) were to be classified as a PFIC for a taxable year in
which Pyxis pays a dividend or the immediately preceding taxable year, the preferential U.S. federal income tax rates for dividends
and long-term capital gain of individual U.S. Holders (as well as certain trusts and estates) would not apply, and special rates
would apply for calculating the amount of the foreign tax credit with respect to excess distributions.
U.S.
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PYXIS’ STATUS AS A PFIC, AND, IF PYXIS (AND/OR ONE OR MORE OF
ITS SUBSIDIARIES) IS TREATED AS A PFIC, AS TO THE EFFECT ON THEM OF, AND THE REPORTING REQUIREMENTS WITH RESPECT TO, THE PFIC
RULES AND THE DESIRABILITY OF MAKING, AND THE AVAILABILITY OF, EITHER A QEF ELECTION OR A MARK-TO-MARKET ELECTION WITH RESPECT
TO OUR COMMON STOCK. PYXIS PROVIDES NO ADVICE ON TAXATION MATTERS.
Consequences
of Controlled Foreign Corporation Classification of Pyxis
If
more than 50% of either the total combined voting power of the shares of Pyxis entitled to vote or the total value of all of Pyxis’
outstanding shares were owned, directly, indirectly or constructively by one or more U.S. Shareholders (i.e., (1) citizens or
residents of the United States, (2) U.S. partnerships or corporations, or (3) U.S. estates or trusts (as defined for U.S. federal
income tax purposes), each of which owned, directly, indirectly or constructively 10% or more of the total combined voting power
or value of Pyxis shares entitled to vote), Pyxis and its wholly-owned subsidiaries generally would be treated as CFCs. U.S. Shareholders
of a CFC generally are required to include in gross income their pro rata shares of the CFC’s “subpart F income,”
investments in “United States property” and “global intangible low-taxed income” (or “GILTI”),
each as defined in the Code, of the CFC even if they do not receive actual distributions. Consequently, any U.S. Holders who are
also U.S. Shareholders may be required to include in their U.S. federal taxable income their pro rata share of our (or our subsidiaries’)
subpart F income, investments in United States property or GILTI, regardless of the amount of cash distributions received. Pyxis
believes that its time charter income will not be treated as passive rental income, but there can be no assurance that the IRS
will accept this position.
In
the case where Pyxis is a CFC, to the extent that Pyxis’ distributions to a U.S. Holder who is also a U.S. Shareholder are
attributable to prior inclusions of subpart F income, investments in United States property or GILTI of such U.S. Holder, such
distributions generally are not required to be reported as additional income of such U.S. Holder.
Whether
or not Pyxis or a subsidiary will be a CFC will depend on the identity of the stockholders of Pyxis during each taxable year of
Pyxis. As of its last completed offering of common stock, Pyxis did not believe that it would be a CFC.
If
Pyxis and/or one or more of its subsidiaries is a CFC, certain burdensome U.S. federal income tax and administrative requirements
would apply to U.S. Holders that are U.S. Shareholders, but such U.S. Holders generally would not also be subject to all of the
requirements generally applicable to owners of a PFIC. For example, a U.S. Holder that is a U.S. Shareholder will be required
to annually file IRS Form 5471 to report certain aspects of its indirect ownership of a CFC or IRS Form 8858 to report in respect
to the disregarded entities through which Pyxis holds its vessels. U.S. Holders should consult with their own tax advisors as
to the consequences to them of being a U.S. Shareholder in a CFC.
Sale,
Exchange or Other Disposition of Common Stock
A
U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of common stock in an amount
equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S.
Holder’s tax basis in such common stock. Assuming Pyxis does not constitute a PFIC for any taxable year, this gain or loss
will generally be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one year
at the time of the sale, exchange or other disposition. A U.S. Holder’s ability to deduct capital losses is subject to certain
limitations.
U.S.
Federal Income Taxation of Non-U.S. Holders
A
Non-U.S. Holder will generally not be subject to U.S. federal income tax on dividends paid in respect of Pyxis’ common stock
or on gains recognized in connection with the sale or other disposition of the common stock provided that the Non-U.S. Holder
makes certain tax representations (1) regarding the identity of the beneficial owner of the common stock, (2) that such dividends
or gains are not effectively connected with the Non-U.S. Holder’s conduct of a U.S. trade or business or are not attributable
to a permanent establishment (or in the case of an individual, a fixed place of business) that such Non-U.S. Holder maintains
in the United States (if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation
on a net income basis) and (3) that, with respect to gain recognized in connection with the sale or other disposition of the common
stock by a non-resident alien individual, such individual is not present in the United States for 183 days or more in the taxable
year of the sale or other disposition. In the second case, the Non-U.S. Holder generally will be taxed in the same manner as a
U.S. Holder (other than with respect to the Medicare Tax described below). In the third case, the Non-U.S. Holder will be subject
to U.S. federal income tax at a rate of 30% on the amount by which such Non-U.S. Holder’s U.S.-source capital gains exceed
such non-U.S. Holder’s U.S.-source capital losses. If you are a corporate non-U.S. Holder, “effectively connected”
dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or a lower
rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Medicare
Tax
Certain
U.S. Holders who are individuals, estates or trusts are required to pay a 3.8% Medicare surtax on all or part of that holder’s
“net investment income,” which includes, among other items, dividends on, and capital gains from the sale or other
taxable disposition of, common stock, subject to certain limitations and exceptions. Prospective investors should consult their
own tax advisors regarding the effect, if any, of this surtax on their ownership and disposition of the common stock.
Backup
Withholding and Information Reporting
Information
reporting to the IRS may be required with respect to payments on Pyxis’ common stock and with respect to proceeds from the
sale of the common stock. With respect to Non-U.S. Holders, copies of such information returns reporting may be made available
to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of any applicable income tax treaty
or exchange of information agreement. A “backup” withholding tax (currently at a 24% rate) may also apply to those
payments if a non-corporate holder of the common stock fails to provide certain identifying information (such as the holder’s
taxpayer identification number or an attestation to the status of the holder as a Non-U.S. Holder), such holder is notified by
the IRS that he or she has failed to report all interest or dividends required to be shown on his or her federal income tax returns
or, in certain circumstances, such holder has failed to comply with applicable certification requirements.
Non-U.S.
Holders may be required to establish their exemption from information reporting and backup withholding by certifying under penalties
of perjury their status on IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as applicable. A Non-U.S. Holder should consult his or
her own tax advisor as to the qualifications for exemption from backup withholding and the procedures for obtaining the exemption.
U.S.
Holders of common stock may be required to file forms with the IRS under the applicable reporting provisions of the Code. For
example, such U.S. Holders may be required, under Sections 6038, 6038B and/or 6046 of the Code, to supply the IRS with certain
information regarding the U.S. Holder, other U.S. Holders and Pyxis if (1) such person owns at least 10% of the total value or
10% of the total combined voting power of all classes of shares entitled to vote or (2) the acquisition, when aggregated with
certain other acquisitions that may be treated as related under applicable regulations, exceeds $100,000. In the event a U.S.
Holder fails to file a form when required to do so, the U.S. Holder could be subject to substantial tax penalties.
If
a stockholder of Pyxis is a Non-U.S. Holder and sells his or her common stock to or through a U.S. office of a broker, the payment
of the proceeds is subject to both U.S. backup withholding and information reporting unless the stockholder certifies that he
or she is not a U.S. person, under penalty of perjury, or he or she otherwise establishes an exemption. If a stockholder of Pyxis
is a Non-U.S. Holder and sells his or her common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are
paid to such stockholder outside the United States, then information reporting and backup withholding generally will not apply
to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales
proceeds, even if that payment is made to a stockholder outside the United States, if the stockholder sells his or her common
stock through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States. Such information
reporting requirements will not apply, however, if the broker has documentary evidence in its records that the stockholder is
not a U.S. person and certain other conditions are met, or the stockholder otherwise establishes an exemption.
Backup
withholding is not an additional tax and may be refunded (or credited against the holder’s U.S. federal income tax liability,
if any), provided that appropriate returns are filed with and certain required information is furnished to the IRS in a timely
manner.
Information
with Respect to Foreign Financial Assets
In
addition, a U.S. Holder that is an individual (and, to the extent provided in future regulations, an entity), may be subject to
certain reporting obligations with respect to Pyxis’s common stock if the aggregate value of these and certain other “specified
foreign financial assets” exceeds $50,000. If required, this disclosure is made by filing IRS Form 8938 with the IRS. Significant
penalties can apply if U.S. Holders are required to make this disclosure and fail to do so. In addition, a U.S. Holder should
consider the possible obligation to file annually FinCEN Report 114 (Report of Foreign Bank and Financial Accounts) as a result
of holding Pyxis’ common stock. U.S. Holders are thus encouraged to consult their U.S. tax advisors with respect to these
and other reporting requirements that may apply to their ownership and disposition of Pyxis’ common stock.
Non-U.S.
Tax Consequences
The
following discussion is the opinion of Seward & Kissel LLP as to matters of the laws of the Republic of the Marshall Islands,
and the current laws of the Republic of the Marshall Islands applicable to persons who do not reside in, maintain offices in or
engage in business in the Republic of the Marshall Islands.
Because
Pyxis does not, and Pyxis does not expect that it will, conduct business or operations in the Republic of the Marshall Islands,
and because all documentation related to this offering will be executed outside of the Republic of the Marshall Islands, under
current Republic of the Marshall Islands law you will not be subject to Republic of the Marshall Islands taxation or withholding
on distributions, including upon a return of capital, Pyxis makes to you as a stockholder. In addition, you will not be subject
to Republic of the Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of common stock,
and you will not be required by the Republic of the Marshall Islands to file a tax return relating to the common stock.
Pyxis
encourages each U.S. Holder and Non-U.S. Holder to consult with his, her or its own tax advisor as to the particular tax consequences
to it of holding and disposing of Pyxis’ common stock, including the applicability of any federal, state, local or foreign
tax laws and any proposed changes in applicable law.
In
particular, it is the responsibility of each stockholder to investigate the legal and tax consequences, under the laws of pertinent
jurisdictions, including the Republic of the Marshall Islands, of his or her investment in Pyxis. Accordingly, each prospective
stockholder is urged to consult, and depend upon, his or her tax counsel or other advisor with regard to those matters. Further,
it is the responsibility of each stockholder to file all state, local and non-U.S., as well as U.S. federal tax returns that may
be required of him or her.
SERVICE
OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We
are incorporated under the laws of the Republic of the Marshall Islands as a corporation. The Republic of the Marshall Islands
has a less developed body of securities laws as compared to the United States and provides protections for investors to a significantly
lesser extent.
Most
of our directors and officers and those of our controlled affiliates are residents of countries other than the United States.
Substantially all of our and our subsidiaries’ assets and a substantial portion of the assets of our directors and officers
are located outside of the United States. As a result, it may be difficult or impossible for United States investors to effect
service of process within the United States upon us or our subsidiaries or to realize against us or them judgments obtained in
United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United
States or any state in the United States.
In
addition, there is uncertainty as to whether the courts of the Republic of the Marshall Islands would (1) recognize or enforce
against us or our directors and officers judgments of courts of the United States based on civil liability provisions of applicable
U.S. federal and state securities laws or (2) impose liabilities against us or our directors and officers or those of our controlled
affiliates in original actions brought in the Republic of the Marshall Islands based on these laws.
LEGAL
MATTERS
Unless
otherwise stated in any applicable prospectus supplement, Jones Day, New York, New York, will pass upon certain legal matters
for us with respect to the offering of our securities. Unless otherwise stated in any applicable prospectus supplement, the validity
of shares of our equity securities and certain other legal matters with respect to the laws of the Republic of the Marshall Islands
will be passed upon for us by Seward & Kissel LLP, New York, New York. As appropriate, legal counsel representing any underwriters,
dealers or agents will be named in the applicable prospectus supplement and may opine to certain legal matters.
EXPERTS
The
consolidated financial statements of Pyxis Tankers Inc. appearing in Pyxis Tankers Inc.’s Annual Report (Form 20-F) for
the fiscal year ended December 31, 2016 (including schedule appearing therein) have been audited by Ernst & Young (Hellas)
Certified Auditors Accountants S.A., independent registered public accounting firm, as set forth in their report thereon included
therein, and incorporated herein by reference. Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The address
of Ernst & Young (Hellas) Certified Auditors Accountants S.A. is Chimarras 8B, 151 25 Maroussi, Greece.
The
section in Pyxis Tankers Inc.’s Annual Report on Form 20-F for the fiscal year ended December 31, 2016 titled “Information
on the Company—Business Overview—The International Product Tanker Shipping Industry” has been prepared by Drewry
Shipping Consultants Ltd., our industry expert, who has confirmed to us that such section accurately describes the international
tanker market. The address of Drewry Shipping Consultants Ltd. is 15-17 Christopher Street, London EC2A 2BS, United Kingdom.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-3
under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the registration statement. For further information,
we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document
has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each
statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.
We
are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information
with the SEC, including annual reports on Form 20-F and reports on Form 6-K. We will file a Form 20-F annual report with the SEC
within four months following the end of our fiscal year. You may inspect and copy reports and other information filed with the
SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports
and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As
a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing
and content of proxy statements, and our managing directors and supervisory directors and principal stockholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not
required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus information that we file with the SEC. This means
that we can disclose important information to you without actually including the specific information in this prospectus by referring
you to other documents filed separately with the SEC. The information incorporated by reference is an important part of this prospectus.
Information that we later provide to the SEC, and which is deemed to be “filed” with the SEC, automatically will update
information previously filed with the SEC, and may replace information in this prospectus.
We
incorporate by reference into this prospectus the documents listed below:
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our
Annual Report on Form 20-F for the fiscal year ended December 31, 2016, filed with the SEC on March 28, 2017;
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all
subsequent Annual Reports on Form 20-F filed with the SEC prior to the termination of this offering;
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our
Reports on Form 6-K filed with the SEC on November 9, 2017, December 8, 2017, December 19, 2017 and January 2, 2018;
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all
subsequent Reports on Form 6-K filed with the SEC prior to the termination of this offering that we identify in such Reports
as being incorporated by reference into the registration statement of which this prospectus is a part; and
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the
description of our capital stock as described in our Registration Statement on Form 8-A filed on October 28, 2015, including
any subsequent amendments or reports filed for the purpose of updating such description.
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These
reports contain important information about us, our financial condition and our results of operations.
A
copy of any statement of eligibility of trustee on Form T-1 will be filed by post-effective amendment or by incorporation by reference
to documents filed with the SEC.
You
may obtain any of the documents incorporated by reference in this prospectus from the SEC through its public reference facilities
or its website at the addresses provided above. You also may request a copy of any document incorporated by reference in this
prospectus (excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference in this document),
at no cost, by visiting our internet website at www.pyxistankers.com, or by writing or calling us at the following address:
Pyxis
Tankers Inc.
59
K. Karamanli Street
Maroussi
15125
Greece
+30
210 638 0200
You
should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We
have not authorized anyone else to provide you with any information. You should not assume that the information incorporated by
reference or provided in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front
of each document. The information contained in our website is not part of this prospectus.
In
reviewing any agreements included as exhibits to the registration statement relating to the securities covered by this prospectus
or to other SEC filings incorporated by reference into this prospectus or any prospectus supplement, please be aware that these
agreements are attached as exhibits to provide you with information regarding their terms and are not intended to provide any
other factual or disclosure information about us or the other parties to the agreements. The agreements may contain representations
and warranties by each of the parties to the applicable agreement, which representations and warranties may have been made solely
for the benefit of the other parties to the applicable agreement and, as applicable:
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should
not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the
parties if those statements prove to be inaccurate;
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have
been qualified by disclosures that may have been made to the other party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in the agreement;
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may
apply standards of materiality in a way that is different from what may be viewed as material to you or other investors;
and
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were
made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and
are subject to more recent developments.
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Accordingly,
these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other
time and should not be relied upon by investors in considering whether to invest in our securities.
EXPENSES
The
following table sets forth costs and expenses, other than any underwriting discounts and commissions, we expect to incur in connection
with the issuance and distribution of the securities covered by this prospectus. All amounts are estimated except the SEC registration
fee.
U.S.
Securities and Exchange Commission registration fee
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$
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13,565
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FINRA
filing fees
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*
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Legal
fees and expenses
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*
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Accounting
fees and expenses
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*
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Printing
costs
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*
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Transfer
agent fees
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*
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NASDAQ
listing fee
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*
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Miscellaneous
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*
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Total
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$
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13,565
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*
To be provided in a prospectus supplement or in a Report on Form 6-K subsequently incorporated by reference into this prospectus.
$2,300,000
PROSPECTUS
SUPPLEMENT
Noble
Capital Markets
March
30, 2018
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