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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Dated: May 5, 2011
Commission File No. 001-34104
NAVIOS MARITIME ACQUISITION CORPORATION
85 Akti Miaouli Street, Piraeus, Greece 185 38
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes o No þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes o No þ
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
N/A
 
 

 

 

     This Report on Form 6-K is hereby incorporated by reference into the Navios Maritime Acquisition Corporation Registration Statements on Form F-3, File Nos. 333-151707 and 333-169320.
Operating and Financial Review and Prospects
     The following is a discussion of the financial condition and results of operations for the three month periods ended March 31, 2011 and 2010 of Navios Maritime Acquisition Corporation (referred to herein as “we”, “us” or “Navios Acquisition”). All of the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). You should read this section together with the consolidated financial statements and the accompanying notes included in Navios Acquisition’s 2010 Annual Report filed on Form 20-F with the Securities and Exchange Commission.
     This Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on Navios Acquisition’s current expectations and observations. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to changes in the demand for product and chemical tankers, fluctuation of charter rates, competitive factors in the market in which Navios Acquisition operates; risks associated with operations outside the United States; and other factors listed from time to time in the Navios Acquisition’s filings with the Securities and Exchange Commission.
Recent Developments and History
Dividend Policy
     On May 2, 2011, the Board of Directors of Navios Acquisition declared a quarterly cash dividend for the first quarter of 2011 of $0.05 per share of common stock. The dividend is payable on July 6, 2011 to the stockholders of record as of June 15, 2011. The declaration and payment of any further dividends remains subject to the discretion of the Board and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements.
Delivery of the chemical tanker vessel, Nave Polaris
     On January 27, 2011, Navios Acquisition took delivery of a chemical tanker, the Nave Polaris, of 25,145 dwt from a South Korean shipyard. The vessel is chartered-out for 6 months at a net rate of $10,238 per day for the first three months and at a net rate of $11,213 per day for the remainder of the charter out period.
History and development of Navios Acquisition
     Navios Acquisition was formed as a “blank check” company on March 14, 2008 under the laws of the Republic of the Marshall Islands and has its offices located at 85 Akti Miaouli Street, Piraeus, Greece 185 38, and its telephone number is (011) +30-210-4595000. Our agent for service is Trust Company of the Marshall Islands, Inc., located at Trust Company Complex, Ajeltake Island, P.O. Box 1405, Majuro, Marshall Islands MH96960.
     On July 1, 2008, we consummated our IPO in which we sold 25,300,00 units, consisting of one common stock and one warrant, and raised gross proceeds of $253.0 million. Simultaneously with the closing of the IPO, Navios Maritime Holdings Inc. (“Navios Holdings”) purchased 7,600,000 warrants from us in a private placement (the “Private Placement Warrants”). The proceeds from this private placement of warrants were added to the proceeds of the IPO and placed in a trust account.
     On May 25, 2010, after its special meeting of stockholders, Navios Acquisition announced the approval of (a) the acquisition from Navios Holdings of 13 vessels (11 product tankers and two chemical tankers) for an aggregate purchase price of $457.7 million, of which $128.7 million was to be paid from existing cash and the $329.0 million balance with existing and new debt financing pursuant to the terms and conditions of the Acquisition Agreement by and between Navios Acquisition and Navios Holdings and (b) certain amendments to Navios Acquisition’s amended and restated articles of incorporation.
     On May 28, 2010, Navios Acquisition consummated the acquisition of vessels, referred to herein as the Product and Chemical Tanker Acquisition, which constituted its initial business combination. In connection with the stockholder vote to approve the vessel acquisition, holders of 10,021,399 shares of common stock voted against the vessel acquisition and elected to redeem their shares in exchange for an aggregate of approximately $99.3 million, which amount was disbursed from the trust account on May 28, 2010. Following the consummation of the transactions described in the Acquisition Agreement, Navios Holdings was released from all debt and equity commitments for the 13 vessels and Navios Acquisition reimbursed Navios Holdings for vessel installments made prior to the stockholders’ meeting under the purchase contracts for the vessels, plus all associated payments previously made by Navios Holdings amounting to $76.5 million. The initial business combination was treated as an asset acquisition and the consideration paid and fair values of assets and liabilities assumed on May 28, 2010 (See note 3 of the condensed interim financial statements included herein).
     On August 27, 2010, Navios Acquisition completed the “Warrant Exercise Program” under which holders of its publicly traded and privately issued warrants had the opportunity to exercise their warrants on enhanced terms (see note 15 of the condensed interim financial statements included herein).

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     On September 10, 2010, Navios Acquisition consummated the acquisition of seven very large crude carriers (the “VLCC Acquisition”) for an aggregate purchase price of $587.0 million, adjusted for net working capital acquired of $20.6 million. The purchase price was financed as follows: (a) $410.5 million of bank debt, assumed at closing, consisting of six credit facilities with a consortium of banks; (b) $134.3 million of cash paid at closing; (c) $11.0 million through the issuance of 1,894,918 Navios Acquisition shares of common stock (based on the closing trading price averaged over the 15 trading days immediately prior to closing on September 10, 2010) of which 1,378,122 shares of common stock were deposited to a one-year escrow to provide for indemnity or other claims; and (d) $51.4 million due to a shipyard in 2011 for the newbuilding scheduled for delivery in June 2011. The VLCC Acquisition was accounted for as a business combination.
     On October 21, 2010, Navios Acquisition completed the sale of $400.0 million of 8 5/8% First Priority Ship Mortgage notes due 2017 (the “Notes”). The Notes are secured by first priority ship mortgages on six VLCC vessels, aggregating approximately 1.8 million deadweight tons, owned by certain subsidiary guarantors. The Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (U.S.) Inc. (a co-issuer of the ship mortgage notes).
Equity Transactions
     On September 17, 2010, Navios Acquisition issued 3,000 shares of Series A Convertible Preferred Stock to an independent third party holder in connection with the payment of certain consultant and advisory fees. The preferred stock issued to the consultant was recorded at fair value as an expense in our statement of income totalling $5.6 million.
     On October 29, 2010, Navios Acquisition issued 540 shares of Series B Convertible Preferred Stock (fair value $1.6 million) to the seller of two newbuild LR1 product tankers. The preferred stock contains a 2% per annum dividend payable quarterly starting on January 1, 2011, and mandatorily converts into shares of common stock at various dates in the future subject to the terms and conditions of such preferred stock. The holders of the shares of preferred stock also have the right to convert their shares to common stock subject to certain terms and conditions. The preferred stock does not have any voting rights.
     On November 19, 2010, the Company completed the public offering of 6,500,000 shares of common stock at $5.50 per share and raised gross proceeds of $35.8 million. The net proceeds of this offering, including the underwriting discount of $1.8 million and excluding offering costs of $0.6 million were approximately $34.0 million.
     Pursuant to an Exchange Agreement entered into March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for 1,000 shares of non-voting Series C Convertible Preferred Stock of Navios Acquisition.
     As of May 4, 2011, Navios Acquisition had outstanding: 40,734,572 shares of common stock, 3,000 shares of Series A Convertible Preferred Stock, 540 shares of Series B Convertible Preferred Stock issued in connection with the acquisition of the two new build LR1 product tankers, 1,000 shares of Series C Convertible Preferred Stock issued to Navios Holdings and 6,037,994 public warrants.
Vessel Deliveries and Acquisitions
     On June 29, 2010, Navios Acquisition took delivery of the Colin Jacob, an LR1 product tanker, as part of the Product and Chemical Tanker Acquisition, for total cost of $43.7 million. Cash paid was $39.3 million and $4.4 million was transferred from vessel deposits.
     On July 2, 2010, Navios Acquisition took delivery of the Ariadne Jacob, an LR1 product tanker, as part of the Product and Chemical Tanker Acquisition, for total cost of $43.7 million. Cash paid was $39.3 million and $4.4 million was transferred from vessel deposits.
     On October 26, 2010, Navios Acquisition entered into an agreement for the acquisition of two new build LR1 product tankers scheduled to be delivered in the fourth quarter of 2011 from a South Korean shipyard. The acquisition price, including the issuance of mandatorily convertible preferred shares, was $87.0 million and was partially financed with a new credit facility of $52.2 million and cash of $29.4 million.
     On October 27, 2010, Navios Acquisition took delivery of the Nave Cosmos, a 25,130 dwt South Korean-built chemical tanker for a total cost of $31.8 million. Cash paid was $11.3 million and $20.5 million was transferred from vessel deposits.
     On January 27, 2011, Navios Acquisition took delivery of a 25,145 dwt chemical tanker, the Nave Polaris, from a South Korean shipyard, for a total cost of $31.8 million. Cash paid was $4.5 million and $27.3 million was transferred from vessel deposits.
Fleet
     “Core fleet” refers to tanker vessels, including the new buildings to be delivered. The current “core fleet” consists of 22 vessels totalling 2,769,635 dwt. The 10 vessels in operation aggregate approximately 1,971,780 dwt and have an average age of 7.4 years. Navios Acquisition has currently fixed 89.5%, 57.4% and 36.3% of its 2011, 2012 and 2013 available days, respectively, of its fleet, representing contracted revenues (net of commissions), based on the rates from current charter agreements of $112.0 million, $116.1 million and $109.5 million, respectively. Although these revenues are based on contractual charter rates, any contract is subject to performance by the counterparties and us. Additionally, the level of these revenues would decrease depending on the vessels’ off-hire days to perform periodic maintenance. The average contractual daily charter-out rate for the core fleet is $31,868, $35,231 and $37,524 for 2011, 2012 and 2013, respectively.

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        Built/Delivery           Net Charter         Expiration
Vessels   Type   Date   DWT     Rate(1)     Profit Share   Date(2)
Owned Vessels
                                
Colin Jacob
   LR1 Product Tanker   2007     74,671       17,000     50/50 above $17,000   June 2013
Ariadne Jacob
   LR1 Product Tanker   2007     74,671       17,000     50/50 above $17,000   July 2013
Nave Cosmos
   Chemical Tanker   2010     25,130       11,213 (3)   None   August 2011
Nave Polaris
   Chemical Tanker   2011     25,145       11,213     None   July 2011
Shinyo Splendor
   VLCC   1993     306,474       38,019     None   May 2014
Shinyo Navigator
   VLCC   1996     300,549       42,705     None   December 2016
C. Dream
   VLCC   2000     298,750       29,625 (4)   50% above $30,000   March 2019
 
                           40% above $40,000    
Shinyo Ocean
   VLCC   2001     281,395       38,400     50% above $43,500   January 2017
Shinyo Kannika
   VLCC   2001     287,175       38,025     50% above $44,000   February 2017
Shinyo Saowalak
   VLCC   2010     298,000       48,153     35% above $54,388   June 2025
 
                           40% above 59,388    
 
                           50% above 69,388    
Owned Vessels to be Delivered
                                
Shinyo Kieran
   VLCC   Q2 2011     298,000       48,153     35% above $54,388   June 2026
 
                           40% above $59,388    
 
                           50% above $69,388    
TBN
   LR1   Q4 2011     75,000                  
TBN
   LR1   Q4 2011     75,000                  
TBN
   LR1   Q3 2012     75,000                  
TBN
   LR1   Q4 2012     75,000                  
TBN
   MR2   Q1 2012     50,000                  
TBN
   MR2   Q2 2012     50,000                  
TBN
   MR2   Q3 2012     50,000                  
TBN
   MR2   Q3 2012     50,000                  
TBN
   MR2   Q4 2012     50,000                  
TBN
   MR2   Q4 2012     50,000                  
TBN
   MR2   Q4 2012     50,000                  
Options to Acquire Vessels (5)
                                
TBN
   LR1   Q4 2012     75,000                  
TBN
   LR1   Q1 2013     75,000                  
 
(1)   Net time charter-out rate per day (net of commissions).
 
(2)   Estimated dates assuming midpoint of redelivery of charterers.
 
(3)   Charterer’s option to extend the charter for an additional six months at $11,213 plus 60% / 40% profit sharing.
 
(4)   Vessel subchartered at $34,843/day until Q3 2012.
 
(5)   Our option to acquire the two LR1 vessels expires in July 2011.
Charter Policy and Industry Outlook
     Our core fleet consists of 22 vessels, of which seven VLCCs are chartered out for an average of 8.2 years, two LR1 vessels are chartered out for approximately two years at $17,000 net per day and the chemical tankers are chartered out for a period of approximately four months at $11,213 net per day. The remaining vessels being delivered in the period from June 2011 through 2012 have not yet been chartered out. We intend to deploy these open vessels to leading charterers in a mix of long, medium and short-term time charters. This chartering strategy is intended to allow us to capture increased profits during strong charter markets, while developing relatively stable cash flows from longer term time charters. We will also seek profit sharing arrangements in our long-term time charters, to provide us with potential incremental revenue above the contracted minimum charter rates.
     We intend to grow our fleet using Navios Holdings’ global network of relationships and long experience in the marine transportation industry, coupled with our financial resources and financing capability, to make selective acquisitions of young, high quality, modern, double-hulled vessels in the crude oil transportation, product and chemical tanker sectors. Vessel prices in these sectors have been severely affected by the continuing scarcity of debt financing available to shipping industry participants resulting from the recent worldwide financial crisis and because of the depressed charter rates for crude carriers and tankers that have persisted since the fall of 2008. We believe the most attractive opportunity in the maritime industry is acquiring modern tonnage in the crude oil transportation, product and chemical tanker sectors and that are currently at cyclically low levels.
     We believe that developments in the marine transportation industry, particularly in the crude oil transportation, product tanker and chemical tanker sectors have created significant opportunities to acquire vessels near historically low (inflation-adjusted) prices and employ

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them in a manner that will provide attractive returns on capital. We also believe that the recent financial crisis continues to adversely affect the availability of credit to shipping industry participants, creating opportunities for well-capitalized companies with committed available financing such as ours, to enter the crude oil transportation, product tanker and chemical tanker sectors during these times of historically low prices.
Factors Affecting Navios Acquisition’s Results of Operations
     We believe the principal factors that will affect our future results of operations are the economic, regulatory, political and governmental conditions that affect the shipping industry generally and that affect conditions in countries and markets in which our vessels engage in business. Other key factors that will be fundamental to our business, future financial condition and results of operations include:
  •   the demand for seaborne transportation services;
 
  •   the ability of Navios Holdings’ commercial and chartering operations to successfully employ our vessels at economically attractive rates, particularly as our fleet expands and our charters expire;
 
  •   the effective and efficient technical management of our vessels;
 
  •   Navios Holdings’ ability to satisfy technical, health, safety and compliance standards of major commodity traders; and
 
  •   the strength of and growth in the number of our customer relationships, especially with major commodity traders.
     In addition to the factors discussed above, we believe certain specific factors will impact our combined and consolidated results of operations. These factors include:
  •   the charter hire earned by our vessels under our charters;
 
  •   our access to capital required to acquire additional vessels and/or to implement our business strategy;
 
  •   our ability to sell vessels at prices we deem satisfactory;
 
  •   our level of debt and the related interest expense and amortization of principal; and
 
  •   the level of any dividend to our stockholders.
                 
    Three month period ended
    March 31
    2011   2010
FLEET DATA
                
Available days (1)
     874       —  
Operating days (2)
     843       —  
Fleet utilization (3)
     96.5 %     —  
Vessels operating at period end
     10       —  
AVERAGE DAILY RESULTS
                
Time Charter Equivalent per day (4)
   $ 29,558     $ —  
Navios Acquisition believes that the important measures for analyzing trends in its results of operations consist of the following:
(1) Available days: Available days is the total number of days a vessel is controlled by a company less the aggregate number of days that the vessel is off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(2) Operating days: Operating days is the number of available days in a period less the aggregate number of days that the vessels are off-hire due to any reason, including lack of demand or unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(3) Fleet utilization: Fleet utilization is obtained by dividing the number of operating days during a period by the number of available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
(4) Time Charter Equivalent: Time Charter Equivalent is defined as voyage and time charter revenues less voyage expenses during a period divided by the number of available days during the period. The TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts, while charter hire rates for vessels on time charters generally are expressed in such amounts.

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Voyage and Time Charter
     Revenues are driven primarily by the number of vessels in the fleet, the number of days during which such vessels operate and the amount of daily charter hire rates that the vessels earn under charters, which, in turn, are affected by a number of factors, including:
  •   the duration of the charters;
 
  •   the level of spot market rates at the time of charters;
 
  •   decisions relating to vessel acquisitions and disposals;
 
  •   the amount of time spent positioning vessels;
 
  •   the amount of time that vessels spend in drydock undergoing repairs and upgrades;
 
  •   the age, condition and specifications of the vessels; and
 
  •   the aggregate level of supply and demand in the tanker shipping industry.
     Time charters are available for varying periods, ranging from a single trip (spot charter) to long-term which may be many years. In general, a long-term time charter assures the vessel owner of a consistent stream of revenue. Operating the vessel in the spot market affords the owner greater spot market opportunity, which may result in high rates when vessels are in high demand or low rates when vessel availability exceeds demand. Vessel charter rates are affected by world economics, international events, weather conditions, strikes, governmental policies, supply and demand, and many other factors that might be beyond the control of management.
     Consistent with industry practice, Navios Acquisition uses TCE rates, which consist of revenue from vessels operating on time charters and voyage revenue less voyage expenses from vessels operating on voyage charters in the spot market, as a method of analyzing fluctuations between financial periods and as a method of equating revenue generated from a voyage charter to time charter revenue.
     TCE revenue also serves as an industry standard for measuring revenue and comparing results between geographical regions and among competitors.
     The cost to maintain and operate a vessel increases with the age of the vessel. Older vessels are less fuel efficient, cost more to insure and require upgrades from time to time to comply with new regulations. The average age of Navios Acquisition’s owned fleet currently in the water, is 7.4 years. But as such fleet ages or if Navios Acquisition expands its fleet by acquiring previously owned and older vessels the cost per vessel would be expected to rise and, assuming all else, including rates, remains constant, vessel profitability would be expected to decrease.
     Navios Acquisition reports financial information and evaluates its operations by charter revenues. Navios Acquisition does not use discrete financial information to evaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operating results of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.
Period over Period Comparisons
The Three Month Period ended March 31, 2011 compared to the Three Month Period ended March 31, 2010
     The following table presents consolidated revenue and expense information for the three month periods ended March 31, 2011 and 2010. This information was derived from the unaudited consolidated revenue and expense accounts of Navios Acquisition for the respective periods.
     Expressed in thousands of U.S. dollars
                 
    For the Three     For the Three  
    Months     Months  
    Ended March     Ended March  
    31, 2011     31, 2010  
    (unaudited)     (unaudited)  
Revenue
   $ 25,130     $ —  
Time charter expenses
     (427 )     —  
Management fees
     (7,584 )     —  
General and administrative expenses
     (1,025 )     (342 )
Depreciation and amortization
     (8,045 )     —  
Interest income
     480       45  
Interest expenses and finance cost, net
     (8,893 )     —  
Other income/ (expense), net
     (42 )     —  
 
            
Net loss
   $ (406 )   $ (297 )
 
            
 
                
EBITDA(1)
   $ 16,052     $ (342 )

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(1)   EBITDA is a non-GAAP financial measure. See "—Reconciliation of EBITDA to Net Cash from Operating Activities” for a description of EBITDA and a reconciliation of EBITDA to the most comparable measure under US GAAP.
     For the three month period ended March 31, 2011, Navios Acquisition had 874 available days. There were no available days in the comparative period of 2010, since Navios Acquisition did not have operations in the corresponding period.
     Revenue: Revenue for the three month period ended March 31, 2011 was $25.1 million. Following the delivery of a chemical tanker, the Nave Polaris, on January 27, 2011, Navios Acquisition had 874 available days and a TCE rate of $29,558. There were no operations in the corresponding period in 2010.
     Time charter expenses: Time charter expenses for the three month period ended March 31, 2011 were $0.4 million and $0 for the corresponding period in 2010, since there were no operations in the corresponding period in 2010. These expenses primarily related to broker fees and various voyage expenses.
     Management fees: Management fees for the three month period ended March 31, 2011 were $7.6 million. Pursuant to a management agreement dated May 28, 2010, a subsidiary of Navios Holdings provides for five years from the closing of the vessels’ acquisition, commercial and technical management services to Navios Acquisition’s vessels for a daily fee of $6,000 per owned MR2 product tanker and chemical tanker vessel, $7,000 per owned LR1 product tanker vessel and $10,000, per owned VLCC vessel for the first two years. This daily fee covers all of the vessels’ operating expenses, other than certain extraordinary fees and costs. During the remaining term of the management agreement, Navios Acquisition will reimburse Navios Holdings for all of the actual operating costs and expenses it incurs in connection with the management of its fleet. Actual operating costs and expenses will be determined in a manner consistent with how the initial fixed fees were determined. Dry docking expenses are fixed under this agreement for up to $0.3 million per LR1 and MR2 product tanker vessel and will be reimbursed at cost for VLCC vessels.
     General and administrative expenses: General and administrative expenses increased by $0.7 million from $0.3 million during the three month period ended March 31, 2010, to $1.0 million for the three month period ended March 31, 2011, due to a $0.3 million in administrative services charged by Navios Holdings and $0.4 million increase in legal, audit and other professional services. Up to May 28, 2010, we occupied office space provided by Navios Holdings. On May 28, 2010, we entered into an administrative services agreement, expiring May 28, 2015, pursuant to which a subsidiary of Navios Holdings provides certain administrative management services to us which include: bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. For the three month period ended March 31, 2011, Navios Holdings has charged us $0.3 million for administrative services.
     Depreciation and amortization: Depreciation and amortization for the three months ended March 31, 2011 was $8.0 million compared to $0 for the same period in 2010. Of the $8.0 million, $7.2 million was related to vessel depreciation and $0.8 million was related to amortization of intangible assets and liabilities associated with the acquisition of the VLCC vessels.
     Interest income: Interest income increased by $0.45 million to $0.5 million for the three month period ended March 31, 2011 from $0.05 million for the three month period ended March 31, 2010.
     Interest Expense and Finance Cost, Net: Interest expense and finance cost, net amounted to $8.9 million for the three month period ended March 31, 2011, compared to $0 for the same period in 2010. Interest expense and finance cost for the three month period ended March 31, 2011, related to $8.6 million of accrued bond coupon expenses and the balance related to interest expense and finance costs in relation to our existing facilities. The weighted average loan for the three month period ended March 31, 2011, was $331.2 million and the weighted average interest rate was 3.02%.
     Other income/ (expense) net: Other income was below $0.1 million for both three month periods ended March 31, 2011 and March 31, 2010.
Liquidity and Capital Resources
     Our initial liquidity needs were primarily met through our initial public offering and private placement which generated gross proceeds of $260.6 million.
     On May 28, 2010, we consummated the vessel acquisition of 13 vessels, which constituted our initial business combination. In connection with the stockholder vote to approve the vessel acquisition, holders of 10,021,399 shares of common stock voted against the vessel acquisition and elected to redeem their shares in exchange for an aggregate of approximately $99.3 million, which amount was disbursed from the trust account on May 28, 2010. In addition, on May 28, 2010, we disbursed an aggregate of $8.9 million from the trust account to the underwriters of our initial public offering for deferred fees. After disbursement of approximately $76.5 million to Navios Holdings to reimburse it for the first equity installment payment on the vessels of $38.8 million and other associated payments, the balance of the trust account of $66.1 million was released to us and we commenced operations as an operating company. As an operating company, Navios Acquisition will finance its capital requirements with cash flows from operations, equity and debt contributions from stockholders and

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bank loans.
     On August 27, 2010, we completed a warrant exercise program under which holders of our publicly traded and privately issued warrants had the opportunity to exercise their warrants on enhanced terms. As a result of the warrant exercise program and subsequent warrant exercises, gross proceeds of $78.3 million were raised.
     On September 10, 2010, Navios Acquisition consummated the VLCC Acquisition for an aggregate purchase price of $587.0 million. The VLCC Acquisition was financed as follows: (a) $410.5 million of assumed bank debt, consisting of six credit facilities with a consortium of banks; (b) $134.3 million of cash paid at closing; (c) $11.0 million through the issuance of 1,894,918 shares of common stock at closing of which 1,378,122 were deposited in a one-year escrow account to provide for indemnity or other claims; and (d) $51.4 million due to a shipyard in 2011 for the new build scheduled for delivery in June 2011 (of which $36.8 million is expected to be drawn down from existing debt facilities entered into in connection with the acquisition).
     In connection with the VLCC Acquisition, Navios Acquisition entered into a $40.0 million credit facility with Navios Holdings. The $40.0 million facility has a margin of LIBOR plus 300 bps and a term of 18 months, maturing on April 1, 2012 and was subsequently partially repaid following the issuance of the Notes in October 2010. Pursuant to an amendment in October 2010, the facility will be available for multiple drawings up to a limit of $40.0 million.
     On October 21, 2010, Navios Acquisition and Navios Acquisition Finance (US) Inc., its wholly owned finance subsidiary, completed the sale of $400.0 million of 8 5/8% first priority ship mortgage notes due 2017 (the “Notes”). Upon issuance the Notes were secured by first priority ship mortgages on six very large crude carrier (“VLCC”) vessels aggregating approximately 1.8 million deadweight tons owned by certain subsidiary guarantors. The Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (U.S.) Inc. (a co-issuer of the ship mortgage notes). Following the issuance of the Notes and net proceeds raised of $388.9 million, the securities on six VLCC under their loan facilities were fully released in connection with the full repayment of the facilities totalling approximately $343.8 million, and $27.6 million was used to partially repay the $40.0 million Navios Holdings’ credit facility.
Cash Flow
Three Month Period ended March 31, 2011 compared to the Three Month Period ended March 31, 2010
     The following table presents cash flow information for the three month periods ended March 31, 2011 and March 31, 2010.
                 
    Three     Three  
    Month     Month  
    Period     Period  
    Ended     Ended  
    March 31,     March 31,  
    2011     2010  
    (unaudited)     (unaudited)  
Expressed in thousands of U.S. dollars
                
Net cash provided by/(used in) operating activities
   $ 18,749     $ (378 )
Net cash (used in)/provided by investing activities
     (6,750 )     721  
Net cash used in financing activities
     (934 )     —  
 
            
 
                
Net increase in cash and cash equivalents
     11,065       343  
Cash and Cash Equivalent, beginning of the period
     61,360       87  
 
            
 
                
Cash and Cash Equivalent, end of period
   $ 72,425     $ 430  
 
            
Cash provided by/ (used in) operating activities for the three month period ended March 31, 2011 as compared to the three month period ended March 31, 2010.
     Net cash provided by operating activities increased by $19.0 million to $18.7 million for the three month period ended March 31, 2011 as compared to an outflow of $0.3 million for the three month period ended March 31, 2010. In determining net cash provided by operating activities, net loss is adjusted for the effects of certain non-cash items including depreciation and amortization.
     Net loss for the three month period ended March 31, 2011 was $0.4 million as compared to $0.3 million for the three month period ended March 31, 2010. The cumulative effect of the adjustments to reconcile net loss to net cash provided by operating activities was an $8.4 million increase for the three month period ended March 31, 2011, which consisted of $8.0 million relating to depreciation and amortization and $0.4 million relating to amortization of finance costs.
     Prepaid expenses as of March 31, 2011 were $0.3 million and as of December 31, 2010 were $0.4 million. The $0.1 million decrease was attributable to the decrease in prepaid insurances.
     Accrued expenses increased by $9.5 million from $9.2 million at December 31, 2010 to $18.7 million at March 31, 2011. The primary reasons for the increase were (a) an $8.8 million increase in accrued loan interest and bond coupon expenses and (b) a $0.7 million increase in

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accrued voyage expenses.
     Amounts due to related parties increased by $1.0 million from $6.1 million at December 31, 2010 to $7.1 million at March 31, 2011, as a result of (a) a $0.2 million increase in accrued management fees and (b) an $0.8 million increase in accrued administrative expenses and other payables due to affiliated companies.
     Accounts receivable decreased by $3.0 million from $4.4 million at December 31, 2010 to $1.4 million at March 31, 2011 due to a decrease in amounts due from charterers.
     Deferred revenue increased by $0.1 million from $2.8 million at December 31, 2010 to $2.9 million at March 31, 2011, due to an increase in prepaid charter hires.
     Accounts payable decreased to $0.5 million at March 31, 2011 from $3.5 million at December 31, 2010. The decrease resulted from a $2.5 million decrease in professional and legal fees payable and a $0.6 million decrease in creditors payable, which was partially offset by a $0.1 million increase in brokers payable.
Cash (used in) / provided by investing activities for the three month period ended March 31, 2011 as compared to the three month period ended March 31, 2010.
     Net cash used in investing activities increased by $7.4 million to $6.7 million outflow at March 31, 2011 from $0.7 million inflow at March 31, 2010.
     Net cash used in investing activities increased as a result of the $4.5 million paid for the delivery of the Nave Polaris on January 27, 2011 and $3.0 million increase in deposits for vessel acquisitions. This increase was partially offset by $0.8 million decrease in restricted cash.
     Net cash provided by investing activities for the three month period ended March 31, 2010 mainly resulted from a $0.7 million decrease in the balance of the trust account as interest earned was released to fund Navios Acquisition’s working capital requirements.
Cash used in financing activities for the three month period ended March 31, 2011 as compared to the three month period ended March 31, 2010.
     Net cash used in financing activities for the three month period ended March 31, 2011 was $1.0 million. There were no financing activities for the same period in 2010.
     Net cash used in financing activities resulted from (a) $0.9 million of loan repayments, (b) $2.5 million payment of dividends and (c) $0.6 million increase in restricted cash, which amounts were partially offset by $3.0 million from loan proceeds.
Reconciliation of EBITDA to Net Cash from Operating Activities
                 
    (unaudited)     (unaudited)  
    Three Month     Three Month  
    Period     Period  
    Ended     Ended  
    March 31, 2011     March 31, 2010  
Expressed in thousands of U.S. dollars
                
Net cash provided by/(used in) operating activities
   $ 18,749     $ (378 )
Net (decrease)/ increase in operating assets
     (3,090 )     22  
Net (increase)/decrease in operating liabilities
     (7,639 )     59  
Net interest cost
     8,413       —  
Deferred finance costs
     (381 )     (45 )
 
            
EBITDA
   $ 16,052     $ (342 )
EBITDA
     EBITDA represents net loss plus interest and finance costs plus depreciation and amortization and income taxes. EBITDA is included because it is used by certain investors to measure a company’s financial performance. EBITDA is a “non-GAAP financial measure” and should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity.
     Management believes EBITDA provides additional information with respect to Navios Acquisition’s ability to satisfy its obligations including debt service, capital expenditures and working capital requirements. While EBITDA is frequently used as a measure of operating results and the ability to meet debt service requirements, the definition of EBITDA used here may not be comparable to that used by other companies due to differences in methods of calculation.
     EBITDA for the three month period ended March 31, 2011 was $16.1 million as result of $25.1 million of revenue from vessel operations which was partially offset by (a) $7.6 million of management fees, (b) $0.4 million of voyage expenses and (c) $1.0 million of

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general and administrative expenses.
     EBITDA for the three month period ended March 31, 2010 was a loss of $0.4 million as result of $0.4 million general and administrative expenses.
Long-Term Debt Obligations and Credit Arrangements
8 5/8% First Priority Ship Mortgage Notes
     On October 21, 2010, Navios Acquisition and Navios Acquisition Finance (US) Inc.(“Navios Acquisition Finance”), its wholly owned finance subsidiary, completed the sale of $400.0 million of 8 5/8% first priority ship mortgage notes due 2017 (the “Notes”). The Notes were offered and sold in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and in offshore transactions to non-United States persons in reliance on Regulation S under the Securities Act. The Notes are secured by first priority ship mortgages on six VLCC vessels aggregating approximately 1.8 million dwt owned by certain subsidiary guarantors. Following the issuance of the Notes and net proceeds raised of $388.9 million, the securities on six VLCC under their loan facilities were fully released in connection with the full repayment of the facilities totalling $343.8 million, $27.6 million was used to partially repay the $40.0 million Navios Holdings’ credit facility and the remaining proceeds were used for working capital purposes.
     The Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of Notes). All subsidiaries are 100% owned. The Company does not have any independent assets or operations.
     The Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale of assets, entering into certain transactions with affiliates, merging or consolidating or selling all or substantially all of Company’s properties and assets and creation or designation of restricted subsidiaries. In addition, we filed a registration statement for the Notes which became effective on January 31, 2011. On February 2, 2011, we commenced the exchange offer which terminated on March 2, 2011. As a result of such exchange offer, 100% of the outstanding Notes were exchanged.
Credit Facilities
     Deutsche Schiffsbank AG, Alpha Bank A.E., and Credit Agricole Corporate and Investment Bank: As a result of its initial vessel acquisition, Navios Acquisition assumed a loan agreement dated April 7, 2010, with Deutsche Schiffsbank AG, Alpha Bank A.E. and Credit Agricole Corporate and Investment Bank of up to $150.0 million (divided in six equal tranches of $25.0 million each) to partially finance the construction of two chemical tankers and four product tankers. Each tranche of the facility is repayable in 12 equal semi-annual installments of $0.75 million each with a final balloon payment of $16.75 million to be repaid on the last repayment date. The repayment of each tranche starts six months after the delivery date of the respective vessel which that tranche finances. It bears interest at a rate of LIBOR plus 250 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, $110.7 million was drawn under this facility.
     BNP Paribas SA Bank and DVB Bank S.E.: As a result of the initial vessel acquisition, Navios Acquisition assumed a loan agreement dated April 8, 2010, of up to $75.0 million (divided in three equal tranches of $25.0 million each) to partially finance the purchase price of three product tankers. Each of the tranche is repayable in 12 equal semi-annual installments of $0.75 million each with a final balloon payment of $16.75 million to be repaid on the last repayment date. The repayment date of each tranche starts six months after the delivery date of the respective vessel which that tranche finances. It bears interest at a rate of LIBOR plus 250 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, $36.2 million was drawn under this facility.
     DVB Bank S.E. and ABN AMRO Bank N.V.: On May 28, 2010, Navios Acquisition entered into a loan agreement with DVB Bank S.E. and ABN AMRO BANK N.V. of up to $52.0 million (divided into two tranches of $26.0 million each) to partially finance the acquisition costs of two product tanker vessels. Each tranche of the facility is repayable in 24 equal quarterly installments of $0.45 million each with a final balloon payment of $15.2 million to be repaid on the last repayment date. The repayment of each tranche started three months after the delivery date of the respective vessel. It bears interest at a rate of LIBOR plus 275 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, the outstanding amount under this facility was $49.3 million.
     Marfin Egnatia Bank: In September 2010, Navios Acquisition (through four subsidiaries) entered into an $80.0 million revolving credit facility with Marfin Egnatia Bank to partially finance the acquisition and construction of vessels and for investment and working capital purposes. The loan is secured by assignments of construction contracts and guarantees, as well as security interests in related assets. The loan matures on September 7, 2012 (with available one-year extensions) and bears interest at a rate of LIBOR plus 275 bps. As of March 31, 2011, the outstanding amount under this facility was $80.0 million.
     Eurobank Ergasias S.A.: On October 26, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.2 million (divided into two tranches of $26.1 million each) to partially finance the acquisition costs of two product tanker vessels. Each tranche of the facility is repayable in 32 equal quarterly installments of $0.35 million, each with a final balloon payment of $15.1 million, to be repaid on the last repayment date. The repayment of each tranche starts three months after the delivery date of the respective vessel. The loan bears interest at a rate of LIBOR plus (i) 250 bps for the period prior to the delivery date in respect of the vessel

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being financed, and (ii) 275 bps, thereafter. The loan also requires compliance with certain financial covenants. The outstanding amount under this facility as of March 31, 2011 was $22.8 million.
     Eurobank Ergasias S.A.: On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.0 million (divided into two tranches of $26.0 million each) to partially finance the acquisition costs of two product tanker vessels. Each tranche of the facility is repayable in 32 equal quarterly installments of $0.35 million each with a final balloon payment of $15.0 million, to be repaid on the last repayment date. The repayment of each tranche starts three months after the delivery date of the respective vessel. It bears interest at a rate of LIBOR plus 300 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, $13.0 million was drawn ($6.5 million from each of the two tranches).
     The Navios Holdings Credit Facility: In connection with the VLCC Acquisition, Navios Acquisition entered into a $40.0 million credit facility with Navios Holdings. The $40.0 million facility has a margin of LIBOR plus 300 bps and a term of 18 months, maturing on April 1, 2012. Following the issuance of the Notes in October 2010, the Company prepaid $27.6 million of this facility. Pursuant to an amendment in October 2010, the facility will be available for multiple drawings up to a limit of $40.0 million. As of March 31, 2011, the outstanding amount under this facility was $12.4 million and interest accrued under this facility of $0.02 million, is included under amounts due to related parties.
     As of March 31, 2011, the Company was in compliance with its covenants.
Off-Balance Sheet Arrangements
     Navios Acquisition has no off-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations:
                                         
    Payments due by period  
    Less than                     More than        
(In thousands of U.S. dollars)   1 year     1-3 years     3-5 years     5 years     Total  
Long term debt obligations(1)
   $ 6,586     $ 93,172     $ 13,172     $ 599,066     $ 711,996  
Loans due to related parties (2)
   $ —     $ 12,391       —       —       12,391  
Vessel deposits (3)
     146,832       97,350       —       —       244,182  
 
                              
Total contractual obligations
   $ 153,418     $ 202,913     $ 13,172     $ 599,066     $ 968,569  
 
                              
 
(1)   The amount identified does not include interest costs associated with the outstanding credit facilities, which are based on LIBOR or applicable interest rate swap rates, plus the costs of complying with any applicable regulatory requirements and a margin ranging from 2.50% to 3.00% per annum or the $400.0 million Notes which have a fixed rate of 8 5/8%.
 
(2)   The amount relates to the credit facility with Navios Holdings. The amount identified does not include interest costs associated with the outstanding credit facility which is based on LIBOR, plus the costs of complying with any applicable regulatory requirements and a margin of 3.00% per annum.
 
(3)   Future remaining contractual deposits for the Navios Acquisition tanker vessels to be delivered on various dates through December 2012.
Capital Expenditures
     On May 25, 2010, after its special meeting of stockholders, Navios Acquisition announced the approval of (a) the acquisition of 13 vessels (11 product tankers and two chemical tankers) for an aggregate purchase price of $457.7 million, of which $128.7 million was to be from existing cash and the balance of $329.0 million from debt financing pursuant to the terms and conditions of the Acquisition Agreement by and between Navios Acquisition and Navios Holdings and (b) certain amendments to Navios Acquisition’s amended and restated articles of incorporation. The delivery of the acquired vessels is expected at various times through the end of 2012.
     On June 29, 2010, Navios Acquisition took delivery of the Colin Jacob, an LR1 product tanker, as part of the initial acquisition of the 13 vessels, for total cost of $43.7 million, cash paid was $39.3 million and $4.4 million was transferred from vessel deposits.
     On July 2, 2010, Navios Acquisition took delivery of the Ariadne Jacob, an LR1 product tanker, as part of the initial acquisition of the 13 vessels, for total cost of $43.7 million, cash paid was $39.3 million and $4.4 million was transferred from vessel deposits.
     On September 10, 2010, Navios Acquisition took delivery of seven VLCC vessels, six of which are currently operating and one will be delivered in June 2011. Total fair value attributed to the six currently operating vessels was $419.5 million (see note 4).
     On October 27, 2010, Navios Acquisition took delivery of the Nave Cosmos, a 25,130 dwt South Korean-built chemical tanker, for a total cost of $31.8 million. Cash paid was $11.3 million and $20.5 million was transferred from vessel deposits.

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     On January 27, 2011, Navios Acquisition took delivery of the Nave Polaris, a 25,145 dwt South Korean —built chemical tanker, for a total cost of $31.8 million. Cash paid was $4.5 million and $27.3 million was transferred from vessel deposits.
     Total consideration of the remaining vessels to be delivered as of March 31, 2011, was approximately $244.2 million. As of March 31, 2011, Navios Acquisition has paid $272.7 million in total installments, which has been included in the financial statements in “Deposits for vessel acquisitions.”
Related Party Transactions
     On July 1, 2008, we closed our initial public offering of 25,300,000 units, including 3,300,000 units issued upon the full exercise of the underwriters’ over-allotment option. Each unit consists of one share of common stock and one warrant that entitles the holder to purchase one share of common stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds to us of $253.0 million. Simultaneously with the closing of the initial public offering, we consummated a private placement of 7,600,000 warrants at a purchase price of $1.00 per warrant to our sponsor, Navios Holdings. The initial public offering and the private placement generated gross proceeds to us in an aggregate amount of $260.6 million. As of March 31, 2011, all of the 7,600,000 privately placed warrants had been exercised for cash into shares of common stock.
     On January 12, 2010, Navios Acquisition announced the appointment of Leonidas Korres as its Senior Vice President — Business Development. Pursuant to an agreement between Navios Acquisition and Navios Holdings, the compensation of Mr. Korres up to the amount of €65,000 was paid by Navios Holdings. Compensation was reimbursed on November 10, 2010.
     Through May 28, 2010, we agreed to pay Navios Holdings $10,000 per month for office space, as well as certain office and secretarial services. After May 28, 2010, we entered into an administrative services agreement, expiring May 28, 2015, pursuant to which a subsidiary of Navios Holdings provides certain administrative management services to us which include: bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. For the three month period ended March 31, 2011, Navios Holdings has charged us $0.3 million for administrative services.
     In connection with the VLCC Acquisition, Navios Acquisition entered into a $40.0 million credit facility with Navios Holdings. The $40.0 million facility has a margin of LIBOR plus 300 bps and a term of 18 months, maturing on April 1, 2012. Following the issuance of the Notes in October 2010, the Company prepaid $27.6 million of this facility. Pursuant to an amendment in October 2010, the facility will be available for multiple drawings up to a limit of $40.0 million. As of March 31, 2011, the outstanding amount under this facility was $12.4 million and interest accrued under this facility of $0.02 million, was included under amounts due to related parties.
     Pursuant to an Exchange Agreement entered into on March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for 1,000 shares of non-voting Series C Convertible Preferred Stock of Navios Acquisition.
Management fees: Pursuant to a Management Agreement dated May 28, 2010, for five years from the closing of the vessel acquisition, a subsidiary of Navios Holdings provides commercial and technical management services to Navios Acquisition’s vessels for a daily fee of $6,000 per owned MR2 product tanker and chemical tanker vessel, $7,000 per owned LR1 product tanker vessel and $10,000 per owned VLCC vessel, for the first two years with the fixed daily fees adjusted for the remainder of the term based on then-current market fees. This daily fee covers all of the vessels’ operating expenses, other than certain extraordinary fees and costs. During the remaining three years of the term of the Management Agreement, Navios Acquisition expects it will reimburse Navios Holdings for all of the actual operating costs and expenses it incurs in connection with the management of its fleet. Actual operating costs and expenses will be determined in a manner consistent with how the initial fixed fees were determined. Dry docking expenses are fixed under this agreement for up to $0.3 million per MR2 Product tanker, chemical tanker and LR1 product tanker vessels and will be reimbursed at cost for VLCC vessels. Total management fees for each of the three month periods ended March 31, 2011 and 2010 amounted to $7.6 million and $0, respectively.
Omnibus agreement: Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”) with Navios Holdings and Navios Maritime Partners L.P. (“Navios Partners”) in connection with the closing of Navios Acquisition’s initial vessel acquisition, among other things, Navios Holdings and Navios Partners agreed not to acquire, charter-in or own liquid shipment vessels, except for container vessels and vessels that are primarily employed in operations in South America without the consent of an independent committee of Navios Acquisition. In addition, Navios Acquisition, under the Acquisition Omnibus Agreement, agreed to cause its subsidiaries not to acquire, own, operate or charter drybulk carriers under specific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries grant to Navios Holdings and Navios Partners, a right of first offer on any proposed sale, transfer or other disposition of any of its drybulk carriers and related charters owned or acquired by Navios Acquisition. Likewise, Navios Holdings and Navios Partners agreed to grant a similar right of first offer to Navios Acquisition for any liquid shipment vessels they might own. These rights of first offer, which provides for, will not apply to a (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other agreement with a counterparty, or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.

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Quantitative and Qualitative Disclosures about Market Risks
Foreign Exchange Risk
     Our functional and reporting currency is the U.S. dollar. We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are predominantly U.S. dollar denominated. Transactions in currencies other than U.S. dollar are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statement of income.
Interest Rate Risk
     As of March 31, 2011, Navios Acquisition had a total of $724.4 million in long-term liabilities. Borrowings under our credit facilities bear interest at rates based on a premium over U.S.$ LIBOR except for the interest rate on the Notes which is fixed. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. For the three month period ended March 31, 2011, we paid interest on our outstanding debt at a weighted average interest rate of 3.02% excluding Notes. A 1% increase in LIBOR would have increased our interest expense for the three month period ended March 31, 2011 by $0.8 million.
Concentration of Credit Risk
     Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable. We closely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history. For the three month period ended March 31, 2011, we had six charter counterparties, the most significant of which were DOSCO, Formosa Petrochemical Corporation, Blue Light Chartering Inc. and Jacob Tank Chartering GMBH & Co. KG, and which counterparties accounted for approximately 44.5%, 13.8%, 13.8% and 12.2%, respectively, of our total revenue.
Inflation
     Inflation has had a minimal impact on vessel operating expenses and general and administrative expenses. Our management does not consider inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.
Critical Accounting Policies
     Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. Following is a discussion of the accounting policies that involve a higher degree of judgment and the methods of their application that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
     Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. Navios Acquisition has described below what it believes are its most critical accounting policies that involve a high degree of judgment and the methods of their application. For a description of all of Navios Acquisition’s significant accounting policies, see Note 2 to the Consolidated Financial Statements, included in Navios Acquisition’s 2010 annual report on Form 20-F filed with the Securities and Exchange Commission.
     Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets, expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal disputes, pension benefits and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.
     Vessels, Net: Vessels are stated at cost, which consists of the contract price, delivery and acquisition expenses and interest costs while under construction. Vessels acquired in an asset acquisition are recorded at cost to acquire, and vessels acquired in a business combination are recorded at fair value. Subsequent expenditures for major improvements and upgrading are capitalized, provided they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Expenditures for routine maintenance and repairs are expensed as incurred.
     Depreciation is computed using the straight line method over the useful life of the vessels, after considering the estimated residual value. The Company estimates the residual values of its tanker vessels based on a scrap value of $285 per lightweight ton, as it believes this level is common in the shipping industry. Management estimates the useful life of our vessels to be 25 years from the vessel’s original construction. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life is re-estimated to end at the date such regulations become effective.

12

 

     Impairment of Long Lived Assets: Vessels, and certain identifiable intangibles held and used by Navios Acquisition are reviewed periodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. In accordance with accounting for long-lived assets, management determines projected undiscounted cash flows for each asset and compares it to its carrying amount. In the event that projected undiscounted cash flows for an asset is less than its carrying amount, then management reviews fair values and compares them to the asset’s carrying amount. In the event that impairment occurs, an impairment charge is recognized by comparing the asset’s carrying amount to its fair value. For the purposes of assessing impairment, long lived-assets are grouped at the lowest levels for which there are separately identifiable cash flows.
     For the three month period ended March 31, 2011, management of Navios Acquisition, after considering various indicators, including but not limited to the market price of its long-lived assets, its contracted revenues and cash flows and the economic outlook, has no reason to suspect that a long-lived asset may not be recoverable and therefore did not test for impairment of its long-lived assets.
     Although management believes the underlying indicators supporting this assessment are reasonable, if charter rate trends and the length of the current market downturn, vary significantly from our forecasts, management may be required to perform impairment analysis in the future that could expose Navios Acquisition to material impairment charges in the future.
     Revenue Recognition: Revenue is recorded when services are rendered, under a signed charter agreement or other evidence of an arrangement, the price is fixed or determinable, and collection is reasonably assured. Revenue is generated from time charter of vessels. Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight-line basis as the average revenue over the charter periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers’ disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under time charters, operating costs such as for crews, maintenance and insurance are typically paid by the owner of the vessel.
     Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterer’s average daily income (calculated on a quarterly or half-yearly basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accruals cannot be made due to the nature of the profit share elements, these are accounted for on the actual cash settlement.
     Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixed percentage of the agreed upon charter or freight rate. Since address commissions represent a discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.
     Goodwill: As required by the accounting guidance, goodwill acquired in a business combination initiated after June 30, 2001 is not to be amortized.
     Goodwill is tested for impairment at the reporting unit level at least annually and written down with a charge to operations if the carrying amount exceeds the estimated implied fair value.
     The Company will evaluate impairment of goodwill using a two-step process. First, the aggregate fair value of the reporting unit is compared to its carrying amount, including goodwill. The Company determines the fair value of the reporting unit based on a combination of discounted cash flow analysis and an industry market multiple.
     If the fair value exceeds the carrying amount, no impairment exists. If the carrying amount of the reporting unit exceeds the fair value, then the Company must perform the second step in order to determine the implied fair value of the reporting unit’s goodwill and compare it with its carrying amount. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all the assets and liabilities of that unit, as if the unit had been acquired in a business combination and the fair value of the unit was the purchase price. If the carrying amount of the goodwill exceeds the implied fair value, then a goodwill impairment is recognized by writing the goodwill down to its implied fair value.
     Navios Acquisition has one reporting unit. No impairment loss was recognized for any of the periods presented.
     Intangibles other than goodwill: Navios Acquisition’s intangible assets and liabilities consist of favorable lease terms, unfavorable lease terms and vessel purchase options. When intangible assets or liabilities associated with the acquisition of a vessel are identified, they are recorded at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where charter rates are higher than market charter rates, an asset is recorded, being the difference between the acquired charter rate and the market charter rate for an equivalent vessel. Where charter rates are less than market charter rates, a liability is recorded, being the difference between the assumed charter rate and the market charter rate for an equivalent vessel. The determination of the fair value of acquired assets and assumed liabilities requires the Company to make significant assumptions and estimates of many variables including market charter rates, expected future charter rates, the level of utilization of its vessels and its weighted average cost of capital. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on the Company’s financial position and results of operations.
     The amortizable value of favorable and unfavorable leases is amortized over the remaining life of the lease term and the amortization expense is included in the statement of income in the depreciation and amortization line item. The amortizable value of favorable leases would be considered impaired if its fair market value could not be recovered from the future undiscounted cash flows associated with the asset. Vessel purchase options that have not been exercised, which are included in favorable lease terms, are not amortized and would be considered impaired if the carrying value of an option, when added to the option price of the vessel, exceeded the fair

13

 

value of the vessel. If the purchase option is exercised the portion of this asset will be capitalized as part of the cost of the vessel and will be depreciated over the remaining useful life of the vessel. As of March 31, 2011, there was no impairment of intangible assets.
     Deferred Drydock and Special Survey Costs: Navios Acquisition’s vessels are subject to regularly scheduled drydocking and special surveys which are carried out every 30 or 60 months to coincide with the renewal of the related certificates issued by the Classification Societies, unless a further extension is obtained in rare cases and under certain conditions. The costs of drydocking and special surveys is deferred and amortized over the above periods or to the next drydocking or special survey date if such has been determined. Unamortized drydocking or special survey costs of vessels sold are written off to income in the year the vessel is sold.
Recent Accounting Pronouncements
Fair Value Disclosures
     In January 2010, the Financial Accounting Standards Board (the “FASB”) issued amended standards requiring additional fair value disclosures. The amended standards require disclosures of transfers in and out of Levels 1 and 2 of the fair value hierarchy, as well as requiring gross basis disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation. Additionally, the update clarifies the requirement to determine the level of disaggregation for fair value measurement disclosures and to disclose valuation techniques and inputs used for both recurring and nonrecurring fair value measurements in either Level 2 or Level 3. Navios Acquisition adopted the new guidance in the first quarter of fiscal 2010, except for the disclosures related to purchases, sales, issuance and settlements, which was effective for Navios Acquisition beginning in the first quarter of fiscal 2011. The adoption of the new standards did not have a significant impact on Navios Acquisition’s consolidated financial statements.
Supplementary Pro Forma Information for Business Combinations
     In December 2010, the FASB issued an amendment of the Accounting Standards Codification regarding Business Combinations. This amendment affects any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this Update also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Navios Acquisition adopted these new requirements in fiscal 2010 and the adoption did not have a significant impact on Navios Acquisition’s consolidated financial statements.

14

 

NAVIOS MARITIME ACQUISITION CORPORATION
         
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010
     F-2  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2011 AND 2010
     F-3  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2011 AND 2010
     F-4  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2011 AND 2010
     F-6  
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
     F-7  

F-1

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. Dollars — except share data)
                         
            March 31,        
            2011     December 31,  
    Notes     (unaudited)     2010  
ASSETS
                        
Current assets
                        
Cash and cash equivalents
     5     $ 72,425     $ 61,360  
Restricted cash, short term portion
     5       17,845       15,012  
Accounts receivable
             1,442       4,479  
Prepaid expenses & other current assets
             303       351  
 
                    
Total current assets
             92,015       81,202  
 
                        
Vessels, net
     6       554,235       529,659  
Deposits for vessels acquisitions
     6       272,703       296,690  
Deferred financing costs, net
             17,978       18,178  
Goodwill
     8       1,579       1,579  
Intangible assets — other than goodwill
     7       57,974       58,992  
Restricted cash, long term portion
     5       15,796       18,787  
 
                    
Total non-current assets
             920,265       923,885  
 
                    
 
                        
Total assets
           $ 1,012,280     $ 1,005,087  
 
                    
 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
Current liabilities
                        
Accounts payable
           $ 464     $ 3,454  
Dividend payable
     9       2,421       2,421  
Accrued expenses
     10       18,711       9,219  
Due to related parties
     13       7,106       6,080  
Deferred revenue
             2,876       2,765  
Current portion of long term debt
     11       6,586       5,086  
 
                    
Total current liabilities
             38,164       29,025  
 
                        
Long term debt, net of current portion
     11       705,410       704,332  
Loans due to related parties
     13       12,391       12,391  
Unfavorable lease terms
     7       5,440       5,611  
 
                    
Total non-current liabilities
             723,241       722,334  
 
                    
 
                        
Total liabilities
           $ 761,405     $ 751,359  
 
                        
Commitments and contingencies
             —       —  
Stockholders’ equity
                        
Preferred stock, $0.0001 par value; 10,000,000 shares authorized (1,000,000 as of December 31, 2010); 4,540 and 3,540 issued and outstanding as of March 31, 2011 and December 31, 2010, respectively
             —       —  
 
                        
Common stock, $0.0001 par value; 250,000,000 shares authorized (100,000,000 as of December 31, 2010); 40,734,572 and 48,410,572 issued and outstanding as of March 31, 2011 and December 31, 2010, respectively
             4       5  
Additional paid-in capital
             264,424       266,870  
 
                    
Accumulated Deficit
             (13,553 )     (13,147 )
 
                    
Total stockholders’ equity
             250,875       253,728  
 
                    
 
                        
Total liabilities and stockholders’ equity
           $ 1,012,280     $ 1,005,087  
 
                    
See unaudited condensed notes to consolidated financial statements

F-2

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of U.S. dollars—except share and per share data)
                         
            For the Three     For the Three  
            Months Ended     Months Ended  
            March 31, 2011     March 31, 2010  
    Note     (unaudited)     (unaudited)  
Revenue
           $ 25,130     $ —  
Time charter expenses
             (427 )     —  
Management fees
     13       (7,584 )     —  
General and administrative expenses
             (1,025 )     (342 )
Depreciation and amortization
     6,7       (8,045 )     —  
Interest income
             480       45  
Interest expenses and finance cost, net
     11       (8,893 )     —  
Other expense, net
             (42 )     —  
 
                    
Net loss
           $ (406 )   $ (297 )
 
                    
 
                        
Net loss attributable to common shareholders
     17     $ (431 )     (297 )
 
                    
 
                        
Net loss per share, basic
     17     $ (0.01 )     (0.01 )
 
                    
 
                        
Weighted average number of shares, basic
     17       46,947,161       31,625,000  
 
                    
 
                        
Net loss per share, diluted
     17     $ (0.01 )     (0.01 )
 
                    
 
                        
Weighted average number of shares, diluted
     17       46,947,161       31,625,000  
 
                    
See unaudited condensed notes to consolidated financial statements

F-3

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)
                         
            For the Three Months     For the Three Months  
            Ended     Ended  
            March 31, 2011     March 31, 2010  
    Note     (unaudited)     (unaudited)  
Operating Activities
                        
Net loss
           $ (406 )   $ (297 )
Adjustments to reconcile net loss to net cash provided by / (used in) operating activities:
                        
Depreciation and amortization
     6,7       8,045       —  
Amortization of deferred finance cost
             381       —  
Changes in operating assets and liabilities:
                        
Decrease / (increase) in prepaid expenses
             48       (22 )
Decrease in accounts receivable
             3,037       —  
Decrease in restricted cash
             5       —  
Decrease in accounts payable
             (2,990 )     (45 )
Increase / (decrease) in accrued expenses
             9,492       (74 )
Increase in due to related parties
     13       1,026       60  
Increase in deferred revenue
             111       —  
 
                    
Net cash provided by/ (used in) operating activities
           $ 18,749     $ (378 )
 
                    
 
                        
Investing Activities
                        
Acquisition of vessels
     6       (4,533 )     —  
Deposits for vessel acquisition
             (2,995 )     —  
Restricted cash
             778       —  
Net investment in trust account
             —       721  
 
                    
Net cash (used in)/ provided by investing activities
           $ (6,750 )   $ 721  
 
                    
 
                        
Financing Activities
                        
Loan proceeds, net of deferred finance cost
     11       3,035       —  
Loan repayments
     11       (897 )     —  
Dividend paid
     9       (2,447 )     —  
Restricted cash
             (625 )     —  
 
                    
 
                        
Net cash used in financing activities
           $ (934 )   $ —  
 
                    
 
                        
Net increase in cash and cash equivalents
             11,065       343  
Cash and cash equivalents, beginning of year
             61,360       87  
 
                    
Cash and cash equivalents, end of period
           $ 72,425     $ 430  
 
                    

F-4

 

                 
    For the three month   For the three month period
    period ended   ended
    March 31, 2011.   March 31, 2010.
Supplemental disclosures of cash flow information
                
Cash interest paid
   $ 2,674     $ —  
Non-cash financing activities
                
Dividends payable
   $ 2,421     $ —  
See unaudited condensed notes to consolidated financial statements

F-5

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of U.S. dollars, except share data)
                                                         
                               
    Preferred Stock     Common Stock             (Accumulated      
    Number of             Number of             Additional     deficit)/     Total  
    Preferred             Common             Paid-in     Retained     Stockholders’  
    Shares     Amount     Units/Shares     Amount     Capital     earnings     Equity  
Balance, December 31,2009
     —       —       31,625,000     $ 3     $ 141,588     $ 399     $ 141,990  
Net loss
     —       —       —       —       —       (297 )     (297 )
 
                                          
 
                                                        
Balance, March 31, 2010
     —       —       31,625,000     $ 3     $ 141,588     $ 102     $ 141,693  
 
                                          
 
                                                        
Balance, December 31, 2010
     3,540     $ —       48,410,572     $ 5     $ 266,870     $ (13,147 )   $ 253,728  
Common stock exchanged for 1,000 Series C preferred shares (see Note 15)
     1,000       —       (7,676,000 )     (1 )     1       —       —  
Dividends Paid/Declared
     —       —       —       —       (2,447 )     —       (2,447 )
Net loss
     —       —       —       —       —       (406 )     (406 )
 
                                          
Balance, March 31, 2011
     4,540       —       40,734,572     $ 4     $ 264,424     $ (13,553 )   $ 250,875  
 
                                          
See unaudited condensed notes to consolidated financial statements

F-6

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
NOTE 1: DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
     Navios Maritime Acquisition Corporation (“Navios Acquisition” or the “Company”) (NYSE: NNA) owns a large fleet of modern crude oil, refined petroleum product and chemical tankers providing world-wide marine transportation services. The Company’s strategy is to charter its vessels to international oil companies, refiners and large vessel operators under long, medium and short-term charters. The Company is committed to providing quality transportation services and developing and maintaining long-term relationships with its customers.
     Navios Acquisition was incorporated in the Republic of Marshall Islands on March 14, 2008. We were formed to acquire through a merger, capital stock exchange, asset acquisition, stock purchases or other similar business combination one or more assets or operating business in the marine transportation and logistic industries. On July 1, 2008, Navios Acquisition completed its initial public offering, or its IPO. In the offering, Navios Acquisition sold 25,300,000 units, consisting of one common stock and one warrant for an aggregate purchase price of $253,000. From the IPO, an amount equal to approximately 99.1% of the gross proceeds was held in a trust account (the “Trust Account”) until the initial business combination. Simultaneously with the completion of the IPO, Navios Maritime Holdings Inc. (“Navios Holdings”) purchased 7,600,000 private placement warrants of Navios Acquisition for an aggregate purchase price of $7,600 (“Private Placement Warrants”). Prior to the IPO, Navios Holdings had purchased 8,625,000 units (“Sponsor Units”) for a total consideration of $25, of which an aggregate of 290,000 units were transferred to the Company’s officers and directors and an aggregate of 2,300,000 Sponsor Units were returned to Navios Acquisition and cancelled upon receipt. Each unit consisted of one share of Navios Acquisition’s common stock and one warrant (“Sponsor Warrants,” and together with the “Private Placement Warrants,” the “Navios Acquisition Warrants”). Navios Acquisition, at the time, was not a controlled subsidiary of Navios Holdings but was accounted for under the equity method due to the Navios Holdings significant influence over Navios Acquisition.
     On May 25, 2010, after its special meeting of stockholders, Navios Acquisition announced the approval of (a) the acquisition from Navios Holdings of 13 vessels (11 product tankers and two chemical tankers) for an aggregate purchase price of $457,659, of which $128,659 was to be paid from existing cash and the $329,000 balance with existing and new debt financing pursuant to the terms and conditions of the Acquisition Agreement by and between Navios Acquisition and Navios Holdings and (b) certain amendments to Navios Acquisition’s amended and restated articles of incorporation.
     On May 28, 2010, Navios Acquisition consummated the vessel acquisition, which constituted its initial business combination (see note 3). In connection with the stockholder vote to approve the business combination, holders of 10,021,399 shares of common stock voted against the business combination and elected to redeem their shares in exchange for an aggregate of approximately $99,312, which amount was disbursed from the Company’s investments held in trust account on May 28, 2010. In addition, on May 28, 2010, Navios Acquisition disbursed an aggregate of $8,855 from the trust account to the underwriters of its IPO for deferred fees. After disbursement of approximately $76,485 to Navios Holdings to reimburse it for the first equity installment payment on the vessels of $38,763 and other associated payments, the balance of the trust account of $66,118 was released to Navios Acquisition for general operating expenses. Following such transaction, Navios Acquisition commenced its operations as an operating company and was controlled by Navios Holdings.
     On September 10, 2010, Navios Acquisition consummated the acquisition (the “VLCC Acquisition”) of a fleet of seven very large crude carrier (“VLCC”) vessels for an aggregate purchase price of $587,000, adjusted for net working capital acquired of $20,561 (see note 4). The purchase price was financed as follows: (a) $410,451 of bank debt, assumed at closing, consisting of six credit facilities with a consortium of banks; (b) $134,270 of cash paid at closing; (c) $11,000 through the issuance of 1,894,918 Navios Acquisition shares of common stock (based on the closing trading price averaged over the 15 trading days immediately prior to closing on September 10, 2010) of which 1,378,122 shares of common stock were deposited to a one-year escrow to provide for indemnity or other claims. The 1,894,918 shares were valued at the opening price of the stock on the date of the acquisition of $5.67; and (d) $51,425 due to a shipyard in 2011 for the newbuilding scheduled for delivery in June 2011.
     On March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for 1,000 shares of Preferred Stock of Navios Acquisition pursuant to an Exchange Agreement entered into on March 30, 2011, between Navios Acquisition and Navios Holdings (see note 15). Following this exchange, Navios Holdings’ interest in Navios Acquisition decreased to 45%.
     As of March 31, 2011 Navios Acquisition had outstanding: 40,734,572 shares of common stock, 4,540 shares of preferred stock and 6,037,994 public warrants.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation: The accompanying interim condensed consolidated financial statements are unaudited, but, in the opinion of management, reflect all adjustments for a fair presentation of Navios Acquisition’s consolidated financial position, statements of income and cash flows for the periods presented. Adjustments consist of normal, recurring entries. The year end condensed balance sheet data was derived from audited financial statements, but does not include all disclosure required by accounting principles generally accepted in the United States of America (“GAAP”). The results of operations for the interim periods are not necessarily indicative of results for the full year. The footnotes are condensed as permitted by the requirements for interim financial statements and accordingly, do not include information

F-7

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
and disclosures required under GAAP for complete financial statements. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements and notes included in Navios Acquisition’s 2010 Annual Report filed on Form 20-F with the Securities and Exchange Commission (“SEC”).
     (b) Principles of consolidation: The accompanying interim consolidated financial statements include the accounts of Navios Acquisition, a Marshall Islands corporation, and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidated statements.
     The Company also consolidates entities that are determined to be variable interest entities as defined in the accounting guidance, if it determines that it is the primary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.
(c) Subsidiaries: Subsidiaries are those entities in which the Company has an interest of more than one half of the voting rights and/or otherwise has power to govern the financial and operating policies. The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition. The excess of the cost of acquisition over the fair value of the net assets acquired and liabilities assumed is recorded as goodwill.
     As of March 31, 2011 the entities included in these consolidated financial statements were:
                 
Navios Maritime Acquisition Corporation and       Country of        
Subsidiaries:   Nature   Incorporation   2011   2010
Company Name
                
Aegean Sea Maritime Holdings Inc.
  Sub-Holding Company   Marshall Is.   1/1 — 3/31   —
Amorgos Shipping Corporation
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Andros Shipping Corporation
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Antiparos Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Crete Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Folegandros Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Ikaria Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Ios Shipping Corporation
  Vessel Owning Company   Cayman Is.   1/1 — 3/31   —
Kos Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Mytilene Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Navios Acquisition Finance (U.S.) Inc.
  Co-Issuer   Delaware   1/1 — 3/31   —
Rhodes Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Serifos Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Shinyo Dream Limited
  Vessel Owning Company   Hong Kong   1/1 — 3/31   —
Shinyo Kannika Limited
  Vessel Owning Company   Hong Kong   1/1 — 3/31   —
Shinyo Kieran Limited(1)
  Vessel Owning Company   British Virgin Is.   1/1 — 3/31   —
Shinyo Loyalty Limited
  Vessel Owning Company   Hong Kong   1/1 — 3/31   —
Shinyo Navigator Limited
  Vessel Owning Company   Hong Kong   1/1 — 3/31   —
Shinyo Ocean Limited
  Vessel Owning Company   Hong Kong   1/1 — 3/31   —
Shinyo Saowalak Limited
  Vessel Owning Company   British Virgin Is.   1/1 — 3/31   —
Sifnos Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Skiathos Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Skopelos Shipping Corporation
  Vessel Owning Company   Cayman Is.   1/1 — 3/31   —
Syros Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Thera Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
Tinos Shipping Corporation (1)
  Vessel Owning Company   Marshall Is.   1/1 — 3/31   —
 
(1)   Each company has the rights over a shipbuilding contract of a tanker vessel.
 
(d)   Use of estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis,

F-8

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
management evaluates the estimates and judgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets, expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal disputes, pension benefits and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.
(e) Recent Accounting Pronouncements:
Fair Value Disclosures
     In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended standards requiring additional fair value disclosures. The amended standards require disclosures of transfers in and out of Levels 1 and 2 of the fair value hierarchy, as well as requiring gross basis disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation. Additionally, the update clarifies the requirement to determine the level of disaggregation for fair value measurement disclosures and to disclose valuation techniques and inputs used for both recurring and nonrecurring fair value measurements in either Level 2 or Level 3. Navios Acquisition adopted the new guidance in the first quarter of fiscal 2010, except for the disclosures related to purchases, sales, issuance and settlements, which is effective for Navios Acquisition beginning in the first quarter of fiscal 2011. The adoption of the new standards did not have a significant impact on Navios Acquisition’s consolidated financial statements.
Supplementary Pro Forma Information for Business Combinations
     In December 2010, the FASB issued an amendment of the Accounting Standards Codification regarding Business Combinations. This amendment affects any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this Update also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Navios Acquisition adopted these new requirements in fiscal 2010 and the adoption did not have a significant impact on Navios Acquisition’s consolidate financial statements.
NOTE 3: INITIAL VESSEL ACQUISITION
     On May 25, 2010, after its special meeting of stockholders, Navios Acquisition announced the approval of (a) the acquisition from Navios Holdings of 13 vessels (11 product tankers and two chemical tankers) for an aggregate purchase price of $457,659, of which $128,659 was to be paid from existing cash and the $329,000 balance with existing and new debt financing pursuant to the terms and conditions of the Acquisition Agreement by and between Navios Acquisition and Navios Holdings and (b) certain amendments to Navios Acquisition’s amended and restated articles of incorporation.
     On May 28, 2010, Navios Acquisition consummated the acquisition of vessels, which constituted its initial business combination. In connection with the stockholder vote to approve the acquisition of vessels, holders of 10,021,399 shares of our common stock voted against the business combination and elected to redeem their shares in exchange for an aggregate of approximately $99,312 which amount was disbursed from our investments in trust account on May 28, 2010. In addition, on May 28, 2010, Navios Acquisition disbursed an aggregate of $8,855 from the trust account to the underwriters of its IPO for deferred fees. After disbursement of approximately $76,485 to Navios Holdings to reimburse it for the first equity installment payment on the vessels of $38,763 and other associated payments, the balance of the trust account of $66,118 was released to the Company for general operating expenses.
     Following the consummation of the transactions described in the Acquisition Agreement, Navios Holdings was released from all debt and equity commitments for the above vessels and Navios Acquisition reimbursed Navios Holdings for vessel installments made prior to the stockholders’ meeting under the purchase contracts for the vessels, plus all associated payments previously made by Navios Holdings amounting to $76,485.
     The initial acquisition was treated as an asset acquisition and the following table summarizes the consideration paid and fair values of assets and liabilities assumed on May 28, 2010.
         
Initial Acquisition of 13 vessels
        
Restricted Cash
   $ 35,596  
Deposits for vessel acquisitions
     174,411  

F-9

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
         
Purchase options
     3,158  
Debt assumed
     (132,987 )
Long-term liabilities
     (3,158 )
Accrued expenses
     (112 )
 
      
Total
   $ 76,908  
 
      
 
        
Cash paid, net of cash received of $57
   $ 76,428  
Payable to Navios Holdings
     480  
 
      
Total
   $ 76,908  
 
      
NOTE 4: VLCC ACQUISITION
          On September 10, 2010, Navios Acquisition consummated the VLCC Acquisition for $134,270 of cash and the issuance of 1,894,918 shares of common stock having a fair value of $10,745 (of which 1,378,122 shares are deposited into one-year escrow to provide for indemnity and other claims). As of March 31, 2011, there were no contingencies known to the Company which would entitle us to escrow shares. The 1,894,918 shares were valued using the opening price of the stock on the date of the acquisition of $5.67.
          Transaction costs amounted to $8,019 and have been fully expensed. Transaction costs include $5,619, which is the fair value of the 3,000 preferred shares, issued to a third party on September 17, 2010, as a compensation for consulting services.
          The VLCC Acquisition was treated as a business combination and the following table summarizes the consideration paid and the fair value of assets and liabilities assumed on September 10, 2010:
VLCC Acquisition
         
Purchase price:
        
Cash consideration
   $ 134,270  
Equity issuance
     10,745  
 
      
Total purchase price
     145,015  
 
        
Fair value of assets and liabilities acquired:
        
Vessels
     419,500  
Deposits for vessel acquisition
     62,575  
Favorable lease terms
     57,070  
Current assets including cash of $32,232
     35,716  
Current liabilities
     (15,155 )
Long-term debt assumed (including current portion)
     (410,451 )
Unfavorable lease terms
     (5,819 )
 
      
Fair value of net assets acquired
     143,436  
 
      
 
        
Goodwill
   $ 1,579  
 
      
          The acquired intangible assets and liabilities, listed below, as determined at the acquisition date and where applicable, are amortized under the straight line method over the periods indicated below:
                 
    Weighted    
    average    
    amortization   Amortization per
    (years)   year
Favorable lease terms
     12.5     $ (4,566 )
Unfavorable lease terms
     8.5       683  

F-10

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
The following is a summary of the acquired identifiable intangible assets as of March 31, 2011:
                         
    Gross     Accumulated     Net Book  
    Amount     Amortization     Value  
Description
                        
Favorable lease terms
   $ 57,070     $ (2,254 )   $ 54,816  
Unfavorable lease terms
     (5,819 )     379       (5,440 )
 
                  
Balance March 31, 2011
   $ 51,251     $ (1,875 )   $ 49,376  
 
                  
NOTE 5: CASH AND CASH EQUIVALENTS
          Cash and cash equivalents consisted of the following:
                 
    March     December  
    31, 2011     31, 2010  
Cash on hand and at banks
   $ 29,118     $ 16,117  
Short-term deposits
     43,307       45,243  
 
            
Total cash and cash equivalents
   $ 72,425     $ 61,360  
 
            
          Short term deposits relate to time deposit accounts held in bank for general financing purposes. As of March 31, 2011 restricted cash was $33,641 and is invested to be used mainly for the future installments for vessel deposits, loan repayments and interest.
NOTE 6: VESSELS, NET
                         
            Accumulated     Net Book  
    Cost     Depreciation     Value  
Vessels
                        
Balance at December 31, 2009
   $ —     $ —     $ —  
Vessels delivered from initial acquisition
     119,251       (2,024 )     117,227  
VLCC Acquisition (note 4)
     419,500       (7,068 )     412,432  
 
                  
Balance at December 31, 2010
   $ 538,751     $ (9,092 )   $ 529,659  
Additions
     31,774       (7,198 )     24,576  
 
                  
Balance at March 31, 2011
     570,525       (16,290 )     554,235  
 
                  
          On June 29, 2010, Navios Acquisition took delivery of the Colin Jacob, an LR1 product tanker, as part of the initial acquisition of the 13 vessels, for total cost of $43,733, cash paid was $39,310 and $4,423 was transferred from vessel deposits.
          On July 2, 2010, Navios Acquisition took delivery of the Ariadne Jacob, an LR1 product tanker, as part of the initial acquisition of the 13 vessels, for total cost of $43,729, cash paid was $39,306 and $4,423 was transferred from vessel deposits.
          On September 10, 2010, Navios Acquisition took delivery of seven VLCC vessels, six of which are currently operating and one will be delivered in June 2011. Total fair value attributed to the six currently operating vessels was $419,500 (see note 4).
          On October 27, 2010, Navios Acquisition took delivery of the Nave Cosmos, a 25,130 dwt South Korean-built chemical tanker, as part of the initial acquisition of the 13 vessels, for a total cost of $31,789. Cash paid was $11,294 and $20,495 was transferred from vessel deposits.
          On January 27, 2011, Navios Acquisition took delivery of the Nave Polaris, a 25,145 dwt South Korean —built chemical tanker, for a total cost of $31,774. Cash paid was $4,533 and $27,241 was transferred from vessel deposits.
          Deposits for vessel acquisition represent deposits for vessels to be delivered in the future. As of March 31, 2011, Navios Acquisition vessel deposits amounted to $272,703 out of which $212,686 was financed through loans, $1,649 was financed through the issuance of preferred shares (see note 15) and the balance from existing cash. For the period ended March 31, 2011, $27,241 was transferred to vessels.

F-11

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
NOTE 7: INTANGIBLE ASSETS OTHER THAN GOODWILL
          Intangible assets as of March 31, 2011 and December 31, 2010 consisted of the following:
                         
                    Net  
                    Book  
                    Value  
                    March  
    Acquisition     Accumulated     31,  
    Cost     Amortization     2011  
Purchase options
   $ 3,158     $ —     $ 3,158  
Favorable lease terms
     57,070       (2,254 )     54,816  
 
                  
Total Intangible assets
     60,228       (2,254 )     57,974  
 
                  
Unfavorable lease terms
     (5,819 )     379       (5,440 )
 
                  
Total
   $ 54,409     $ (1,875 )   $ 52,534  
 
                  
                         
                    Net Book  
                    Value  
    Acquisition     Accumulated     December  
    Cost     Amortization     31, 2010  
Purchase options
   $ 3,158     $ —     $ 3,158  
Favorable lease terms
     57,070       (1,236 )     55,834  
 
                  
Total Intangible assets
     60,228       (1,236 )     58,992  
 
                        
Unfavorable lease terms
     (5,819 )     208       (5,611 )
 
                  
Balance as of March 31, 2011
   $ 54,409     $ (1,028 )   $ 53,381  
 
                  
          Amortization (expense)/income of favorable and unfavorable lease terms for the periods ended March 31, 2011 and 2010, is presented in the following table:
                 
    March     March  
    31, 2011     31, 2010  
Unfavorable lease terms
   $ 171     $ —  
Favorable lease terms charter-out
     (1,018 )     —  
 
            
Total
   $ (847 )   $ —  
 
            
The aggregate amortizations of acquired intangibles will be as follows:
                                                 
    Within                                
    One     Year     Year     Year     Year        
Description   Year     Two     Three     Four     Five     Thereafter  
Favorable lease terms
   $ 5,193       5,418       5,418       5,020       4,959       28,808  
Unfavorable lease terms
     (683 )     (683 )     (683 )     (683 )     (683 )     (2,025 )
 
                                    
 
   $ 4,510     $ 4,735     $ 4,735     $ 4,337     $ 4,276     $ 26,783  
 
                                    

F-12

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
NOTE 8: GOODWILL
          Goodwill as of March 31, 2011 and December 31, 2010 consisted of the following:
         
Balance December 31, 2009
   $ —  
VLCC Acquisition (Note 4)
     1,579  
 
      
Balance December 31, 2010
     1,579  
Additions
     —  
 
      
Balance March 31, 2011
   $ 1,579  
 
      
NOTE 9: DIVIDEND PAYABLE
          On November 8, 2010, the Board of Directors of Navios Acquisition declared a quarterly cash dividend for the third quarter of 2010 of $0.05 per share of common stock. A dividend in the aggregate amount of $2,421 was paid on January 12, 2011 to stockholders of record as of December 8, 2010.
          On February 7, 2011, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2010 of $0.05 per share of common stock. A dividend in the aggregate amount of $2,421 was paid on April 5, 2011, to stockholders of record as of March 16, 2011.
          On March 31, 2011, Navios Acquisition paid a dividend of $26 to the holders of the 540 shares of Series B preferred stock.
NOTE 10: ACCRUED EXPENSES
     Accrued expenses as of March 31, 2011 and December 31, 2010 consisted of the following:
                 
    March 31,     December 31,  
    2011     2010  
Accrued voyage expenses
   $ 1,133     $ 434  
Accrued loan interest
     16,680       7,849  
Accrued legal and professional fees
     898       936  
 
            
Total accrued expenses
   $ 18,711     $ 9,219  
 
            
NOTE 11: BORROWINGS
         
    March 31,  
    2011  
Deutsche Schifsbank AG, Alpha Bank AE, Credit Agricole Corporate and Investment Bank
   $ 110,710  
BNP Paribas S.A. and DVB Bank SE
     36,175  
DVB Bank SE and ABN AMRO Bank N.V.
     49,311  
Marfin Egnatia Bank
     80,000  
Eurobank Ergasias S.A. $52.2 million
     22,800  
Eurobank Ergasias S.A. $52.0 million
     13,000  
Ship Mortage Notes
     400,000  
 
      
Total borrowing
     711,996  
Less: current portion
     (6,586 )
 
      
Total long-term borrowings
   $ 705,410  
 
      
Long-Term Debt Obligations and Credit Arrangements
Senior Notes
          Ship Mortgage Notes: In October 2010, Navios Acquisition issued the $400,000 of 8 5/8% First Priority Ship Mortgage Notes (the “Notes”) due on November 1, 2017. The Notes are senior obligations of Navios Acquisition and are secured by first priority ship mortgages

F-13

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
on six VLCC vessels owned by certain subsidiary guarantors and certain other associated property and contract rights. The guarantees of the Company’s subsidiaries that own mortgage vessels are senior secured guarantees and the guarantees of the Company’s subsidiaries that do not own mortgage vessels are senior unsecured guarantees. Navios Acquisition may redeem the Notes in whole or in part, as its option, at any time (1) before November 1, 2013 at a redemption price equal to 100% of the principal amount plus a make whole price which is based on a formula calculated using a discount rate of treasury bonds plus 50 bps (2) on or after November 1, 2013, at a fixed price of 104.313%, which price declines ratably until it reaches par. In addition, any time before November 1, 2013, Navios Acquisition may redeem up to 35% of the aggregate principal amount of the Notes with the net proceeds of an equity offering at 108.625% of the principal amount of the Notes, plus accrued and unpaid interest, if any, so long as at least 65% of the originally issued aggregate principal amount of the Notes remains outstanding after such redemption. Furthermore, upon occurrence of certain change of control events, the holders of the Notes may require Navios Acquisition to repurchase some or all of the Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date. Pursuant to a registration rights agreement, Navios Acquisition filed a registration statement enabling the holders of the Notes to exchange the privately placed notes with publicly registered Notes with identical terms, which registration statement went effective on January 31, 2011. On February 2, 2011, we commenced the exchange offer which terminated on March 2, 2011. As a result of such exchange offer, 100% of the outstanding Notes were exchanged. The Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale of assets, entering into certain transactions with affiliates, merging or consolidating or selling all or substantially all of Company’s properties and assets and creation or designation of restricted subsidiaries.
          Following the issuance of the Notes and net proceeds raised of $388,883, the securities on six VLCC vessels previously secured by the loan facilities were fully released in connection with the full repayment of the facilities totalling approximately $343,841, and $27,609 was used to partially repay the $40,000 Navios Holdings’ credit facility.
Credit Facilities
          Deutsche Schiffsbank AG, Alpha Bank A.E., and Credit Agricole Corporate and Investment Bank: As a result of the initial business combination, Navios Acquisition assumed a loan agreement dated April 7, 2010, with Deutsche Schiffsbank AG, Alpha Bank A.E. and Credit Agricole Corporate and Investment Bank of up to $150,000 (divided in six equal tranches of $25,000 each) to partially finance the construction of two chemical tankers and four product tankers. Each tranche of the facility is repayable in 12 equal semi-annual installments of $750 each with a final balloon payment of $16,750 to be repaid on the last repayment date. The repayment of each tranche starts six months after the delivery date of the respective vessel which that tranche finances. It bears interest at a rate of LIBOR plus 250 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, $110,710 was drawn under this facility and the remaining was available for working capital purposes.
          BNP Paribas SA Bank and DVB Bank S.E.: As a result of the initial business combination, Navios Acquisition assumed a loan agreement dated April 8, 2010, of up to $75,000 (divided in three equal tranches of $25,000 each) for the purpose to partially finance the acquisition costs of three product tankers. Each of the tranche is repayable in 12 equal semi-annual installments of $750 each with a final balloon payment of $16,750 to be repaid on the last repayment date. The repayment date of each tranche starts six months after the delivery date of the respective vessel which that tranche finances. It bears interest at a rate of LIBOR plus 250 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, $36,175 was drawn under this facility.
          DVB Bank S.E. and ABN AMRO Bank N.V.: On May 28, 2010, Navios Acquisition entered into a loan agreement with DVB Bank S.E. and ABN AMRO BANK N.V. of up to $52,000 (divided into two tranches of $26,000 each) to partially finance the acquisition costs of two product tanker vessels. Each tranche of the facility is repayable in 24 equal quarterly installments of $448 each with a final balloon payment of $15,241 to be repaid on the last repayment date. The repayment of each tranche starts three months after the delivery date of the respective vessel. It bears interest at a rate of LIBOR plus 275 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, the outstanding amount under this facility was $49,311.
          Marfin Egnatia Bank: In September 2010, Navios Acquisition (through four subsidiaries) entered into a $80,000 revolving credit facility with Marfin Egnatia Bank to partially finance the acquisition and construction of vessels and for investment and working capital purposes. The loans are secured by assignments of construction contracts and guarantees, as well as security interests in related assets. The loan matures on September 7, 2012 (with available one-year extensions) and bears interest at a rate of LIBOR plus 275 bps. As of March 31, 2011, the outstanding amount under this facility was $80,000.
          Eurobank Ergasias S.A.: On October 26, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52,200 (divided into two tranches of $26,100 each) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility is repayable in 32 equal quarterly installments of $345, each with a final balloon payment of $15,060, to be repaid on the last repayment date. The repayment of each tranche starts three months after the delivery date of the respective vessel. The loan bears interest at a rate of LIBOR plus (i) 250 bps for the period prior to the delivery date in respect of the vessel being financed, and (ii) 275 bps, thereafter. The loan also requires compliance with certain financial covenants. The outstanding amount under this facility as of March 31, 2011 was $22,800.

F-14

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
          Eurobank Ergasias S.A.: On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52,000 (divided into two tranches of $26,000 each) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility is repayable in 32 equal quarterly installments of $345 each with a final balloon payment of $14,960, to be repaid on the last repayment date. The repayment of each tranche starts three months after the delivery date of the respective vessel. It bears interest at a rate of LIBOR plus 300 bps. The loan also requires compliance with certain financial covenants. As of March 31, 2011, $13,000 was drawn ($6,500 from each of the two tranches).
          As of March 31, 2011, the Company was in compliance with its covenants.
Guarantees
          The Company’s 8 5/8% Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (U.S.) Inc. (a co-issuer of the ship mortgage notes). The guarantees of our subsidiaries that own mortgaged vessels are senior secured guarantees and the guarantees of our subsidiaries that do not own mortgaged vessels are senior unsecured guarantees. All subsidiaries, including Navios Acquisition Finance (U.S.) Inc. are 100% owned. The Company does not have any independent assets or operations.
          The maturity table below reflects the principal payments of all Notes and credit facilities outstanding as of March 31, 2011 for the next five years and thereafter are based on the repayment schedule of the respective loan facilities (as described above) and the outstanding amount due under the senior Notes. The maturity table below includes in the amount shown for 2016 and thereafter future principal payments of the drawn portion of credit facilities associated with the financing of the construction of vessels scheduled to be delivered on various dates throughout 2012.
         
    March 31,  
Long-Term Debt Obligations:   2011  
Year
        
March 31, 2012
   $ 6,586  
March 31, 2013
     86,586  
March 31, 2014
     6,586  
March 31, 2015
     6,586  
March 31, 2016
     6,586  
March 31, 2017 and thereafter
     599,066  
 
      
Total
   $ 711,996  
 
      
NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
          The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
          Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair value because of the short maturity of these investments.
          Restricted Cash: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair value because of the short maturity of these investments.
          Accounts receivable: Carrying amounts are considered to approximate fair value due to the short-term nature of these accounts receivables and no significant changes in interest rates. All amounts that are assumed to be uncollectible are written off and/or reserved.
          Accounts payable: The carrying amount of accounts payable reported in the balance sheet approximates its fair value due to the short-term nature of these accounts payable and no significant changes in interest rates.
          Other long term borrowings: The carrying amount of the floating rate loans approximates its fair value.
          Senior Notes: The fair value of the Notes, which has a fixed rate, was determined based on quoted market prices, as indicated in the table below.
          Loans due to related party: The carrying amount of the floating rate loans approximates its fair value.

F-15

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
                 
    March 31, 2011
    Book Value   Fair Value
Cash and cash equivalents
   $ 72,425     $ 72,425  
Restricted cash
   $ 33,641     $ 33,641  
Accounts receivable
   $ 1,442     $ 1,442  
Accounts payable
   $ 464     $ 464  
Other Long-term debt, including senior notes
   $ 711,996     $ 725,996  
Loans due to related party
   $ 12,391     $ 12,391  
NOTE 13: TRANSACTIONS WITH RELATED PARTIES
          On July 1, 2008, Navios Acquisition closed its IPO of 25,300,000 units, including 3,300,000 units issued upon the full exercise of the underwriters’ over-allotment option. Each unit consists of one share of common stock and one warrant that entitles the holder to purchase one share of common stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds to the Company of $253,000. Simultaneously with the closing of the IPO, Navios Acquisition consummated a private placement of 7,600,000 Private Placement Warrants at a purchase price of $1.00 per warrant to Navios Holdings. The IPO and the private placement generated gross proceeds to Navios Acquisition in an aggregate amount of $260,600. As of March 31, 2011, all of the 7,600,000 Private Placement Warrants had been exercised for cash into shares of common stock.
          On January 12, 2010, Navios Acquisition announced the appointment of Leonidas Korres as its Senior Vice President — Business Development. Pursuant to an agreement between Navios Acquisition and Navios Holdings, the compensation of Mr. Korres up to the amount of €65 was paid by Navios Holdings. Compensation was reimbursed on November 10, 2010.
          Pursuant to an Exchange Agreement entered into March 30, 2011 Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for 1,000 shares of Preferred Stock of Navios Acquisition.
          The Navios Holdings Credit Facility: In connection with the VLCC Acquisition, Navios Acquisition entered into a $40,000 credit facility with Navios Holdings. The $40,000 facility has a margin of LIBOR plus 300 bps and a term of 18 months, maturing on April 1, 2012. Following the issuance of the Notes in October 2010, the Company prepaid $27,609 of this facility. Pursuant to an amendment in October 2010, the facility will be available for multiple drawings up to a limit of $40,000. As of March 31, 2011, the outstanding amount under this facility was $12,391 and interest accrued under this facility is $26, is included under amounts due to related parties.
          Management fees: Pursuant to a Management Agreement dated May 28, 2010, the Manager provides, for five years from the closing of the Company’s initial vessel acquisition, commercial and technical management services to Navios Acquisition’s vessels for a daily fee of $6 per owned MR2 product tanker and chemical tanker vessel and $7 per owned LR1 product tanker vessel and $10 per VLCC tanker vessel for the first two years with the fixed daily fees adjusted for the remainder of the term based on then-current market fees. This daily fee covers all of the vessels’ operating expenses, other than certain fees and costs. During the remaining three years of the term of the Management Agreement, Navios Acquisition expects it will reimburse Navios Holdings for all of the actual operating costs and expenses it incurs in connection with the management of its fleet. Actual operating costs and expenses will be determined in a manner consistent with how the initial fixed fees were determined. Drydocking expenses will be fixed under this agreement for up to $300 per vessel chemical LR1 and MR2 product and will be reimbursed at cost for VLCC vessels. Total management fees for each of the periods ended March 31, 2011 and 2010 amounted to $7,584 and $0, respectively.
          General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an administrative services agreement with Navios Holdings, expiring on May 28, 2015, pursuant to which a subsidiary of Navios Holdings provides certain administrative management services to Navios Acquisition which include: bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. For the three month period ended March 31, 2011, administrative services rendered by Navios Holdings amounted to $316.
          Balance due to related parties: Amounts due to related parties as of March 31, 2011 was $7,106, which represented the account payable to Navios Holdings and its subsidiaries. The balance mainly consisted of (a) management fees amounting to $2,902, (b) $4,178 costs related to vessel pre-building expenses and (c) $26 for accrued interest expense due on the loan from related party.
          Amounts due to related parties as of December 31, 2010 is $6,080, which represents the current account payable to Navios Holdings and its subsidiaries.
          Omnibus agreement: Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”) with Navios Holdings and Navios Maritime Partners L.P. (“Navios Partners”) in connection with the closing of Navios Acquisition’s vessel acquisition, pursuant to which, among other things, Navios Holdings and Navios Partners agreed not to acquire, charter-in or own liquid shipment vessels, except for container vessels and vessels that are primarily employed in operations in South America without the consent of an independent committee of Navios Acquisition. In addition, Navios Acquisition, under the Acquisition Omnibus Agreement, agreed to cause its subsidiaries not to acquire, own, operate or charter drybulk carriers under specific exceptions. Under the Acquisition Omnibus Agreement,

F-16

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
Navios Acquisition and its subsidiaries grant to Navios Holdings and Navios Partners, a right of first offer on any proposed sale, transfer or other disposition of any of its drybulk carriers and related charters owned or acquired by Navios Acquisition. Likewise, Navios Holdings and Navios Partners agreed to grant a similar right of first offer to Navios Acquisition for any liquid shipment vessels they might own. These rights of first offer will not apply to a (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the existing terms of any charter or other agreement with a counterparty, or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.
NOTE 14: COMMITMENTS AND CONTINGENCIES
          As of March 31, 2011, Navios Acquisition committed for future remaining contractual deposits for the vessels to be delivered on various dates through March 2013.
          The future minimum commitments by period as of March 31, 2011, of Navios Acquisition under its ship building contracts, were as follows:
         
    Amount  
March 31, 2012
   $ 146,832  
March 31, 2013
     97,350  
 
      
 
   $ 244,182  
 
      
NOTE 15: PREFERRED AND COMMON STOCK
Preferred Stock
          As of March 31, 2011, the Company is authorized to issue 10,000,000 shares of $0.0001 par value preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.
          On September 17, 2010, Navios Acquisition issued 3,000 shares of the Company’s authorized Series A Convertible Preferred Stock (fair value of $5,619) to an independent third party as a consideration for certain consulting and advisory fees related to the VLCC Acquisition. The Company valued these shares on and accounted for these shares as issued and outstanding from September 17, 2010 since all services had been provided. The $5,619 has been recorded in the accompanying financial statements as transaction costs. Under the terms of the consulting agreement, the preferred stock will be distributed in tranches of 300 shares every six months commencing on June 30, 2011 and ending on March 15, 2015. Accordingly, the shares of Series A Preferred Stock and the shares of common stock underlying them, will only be eligible for transfer upon distribution to the holder. The preferred stock has no voting rights, is only convertible into shares of common stock and does not participate in dividends until such time as the shares are converted into common stock. The holder of the preferred stock also has the right to convert their shares to common stock subject to certain terms and conditions at any time after distribution at a conversion price of $35.00 per share of common stock. Any shares of preferred stock remaining outstanding on March 31, 2015 shall automatically convert into shares of common stock at a conversion price of $25.00 per share of common stock. The fair market value on September 17, 2010, was determined using a binomial valuation model. The model used takes into account the credit spread of the Company, the volatility of its stock, as well as the price of its stock at the issuance date.
          On October 29, 2010, Navios Acquisition issued 540 shares of the Company’s authorized Series B Convertible Preferred Stock (fair value $1,649) to the seller of the two newbuild LR1 product tankers the Company recently acquired and were included in the vessel cost. The preferred stock contains a 2% per annum dividend payable quarterly starting on January 1, 2011 and upon declaration by the Company’s Board commences payment on March 31, 2011. The Series B Convertible Preferred Stock, plus any accrued but unpaid dividends, will mandatorily convert into shares of common stock as follows: 30% of the outstanding amount will convert on June 30, 2015 and the remaining outstanding amounts will convert on June 30, 2020 at a price per share of common stock not less than $25.00. The holder of the preferred stock shall have the right to convert the shares of preferred stock into common stock prior to the scheduled maturity dates at a price of $35.00 per share of common stock. The preferred stock does not have any voting rights. The fair value on October 29, 2010, was determined using a binomial valuation model. The model used takes into account the credit spread of the Company, the volatility of its stock, as well as the price of its stock at the issuance date. Fees incurred in connection with the issuance of the above shares of preferred stock amounted to $1,805.
          On March 30, 2011, pursuant to an Exchange Agreement, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for 1,000 non-voting Series C Convertible Preferred Stock of Navios Acquisition. Each holder of shares of Series C Convertible Preferred Stock shall be entitled at their option at any time, after March 31, 2013 to convert all or any the outstanding shares of Series C Convertible Preferred Stock into a number of fully paid and non-assessable shares of Common Stock determined by multiplying each share of Series C Convertible Preferred Stock to be converted by 7,676, subject to certain limitations. Upon the declaration of a common stock dividend, the holders of the Series C Convertible Preferred Stock are entitled to receive dividends on the Series C Convertible

F-17

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
Preferred Stock in an amount equal to the amount that would have been received in the number of shares of Common Stock into which the Shares of Series C Convertible Preferred Stock held by each holder thereof could be converted. The shares Series C Preferred Stock were recorded at fair value of the common stock exchanged which totalled $30,474, using the common stock price on March 30, 2011 of $3.97. The impact of the exchange (other than the par value of the common and preferred stock) was recorded net in Additional-Paid-In-Capital.
          As of March, 31, 2011 and December 31, 2010, 4,540 and 3,540 shares of preferred stock were issued and outstanding, respectively.
Common Stock
          As of March 31, 2011, the Company is authorized to issue 250,000,000 shares of $0.0001 par value common stock.
          On November 19, 2010, the Company completed the public offering of 6,500,000 shares of common stock at $5.50 per share and raised gross proceeds of $35,750. The net proceeds of this offering, including the underwriting discount of $1,787 and excluding offering costs of $561 were $33,963.
          Pursuant to an Exchange Agreement entered into on March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it held for 1,000 non-voting Series C Convertible Preferred Stock of Navios Acquisition.
Warrant Exercise Program
          On September 2, 2010, Navios Acquisition completed its Warrant Exercise Program (the “Warrant Exercise Program”). Under the Warrant Exercise Program, holders of public warrants had the opportunity to exercise the public warrants on enhanced Terms through August 27, 2010.
          The Warrant Exercise Program was coupled with a consent solicitation accelerating the ability of Navios Holdings and its officers and directors to exercise certain private warrants on the same terms available to the public warrants during the Warrant Exercise Program.
          On September 2, 2010, Navios Acquisition completed its Warrant Exercise Program. As of March 31, 2011, the Company had outstanding 6,037,994 publicly traded warrants which are classified as equity, since they cannot be cash settled.
          As a result of the above:
  •   19,246,056 public warrants (76.13% of the public warrants then outstanding) were exercised on a cashless basis at an exchange rate of 4.25 public warrants for one share of common stock;
 
  •   $78,342 of gross cash proceeds were raised from the exercise of 15,950 of the public warrants by payment of $5.65 cash exercise price, and 13,850,000 private warrants owned by Navios Holdings and Angeliki Frangou, Navios Acquisition’s Chairman and Chief Executive Officer; Total expenses associated with the Warrant Exercise Program were $3,364.
 
  •   a portion of the private warrants exercised were held by officers and directors of Navios Acquisition, 15,000 and 75,000 were exercised on a cash basis and cashless basis, respectively; and
 
  •   18,412,053 new shares of common stock were issued.
NOTE 16: SEGMENT INFORMATION
          Navios Acquisition reports financial information and evaluates its operations by charter revenues. Navios Acquisition does not use discrete financial information to evaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operating results of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.
          The following table sets out operating revenue by geographic region for Navios Acquisition’s reportable segment. Revenue is allocated on the basis of the geographic region in which the customer is located. Tanker vessels operate worldwide. Revenues from specific geographic region which contribute over 10% of total revenue are disclosed separately.
Revenue by Geographic Region
          Vessels operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operations to specific countries.

F-18

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
                 
    Three Month     Three Month  
    Period ended     Period ended  
    March 31, 2011     March 31, 2010  
    ($ ’000)     ($ ’000)  
    (unaudited)     (unaudited)  
Europe
   $ 3,060     $ —  
Asia
     22,070       —  
 
            
Total
   $ 25,130     $ —  
 
            
NOTE 17: LOSS PER COMMON SHARE
          Loss per share is calculated by dividing net loss available to common stockholders by the average number of common shares of Navios Acquisition outstanding during the period excluding the 1,378,122 contingently returnable common shares issued on September 10, 2010 for the VLCC Acquisition which were deposited into a one year escrow to provide for indemnity and other claims. Net loss for the three month period ended March 31, 2011 was adjusted for the purposes of earnings per share calculation, for the dividends on Series B Preferred Shares and for the undistributed loss that is attributable to Series C preferred stock.
          Potential preferred shares and shares kept in escrow have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) and are therefore excluded from the calculation of diluted earnings per share.
                 
    For the Three   For the Three
    Months Ended   Months Ended
    March 31,   March 31,
    2011   2010
Numerator:
                
Net loss attributable to common stockholders
   $ (406 )   $ (297 )
Dividend declared on preferred shares Series B
     (26 )     —  
Undistributed loss attributable to Series C participating preferred shares
     1       —  
 
                
Loss attributable to common shares
     (431 )     (297 )
 
                
Denominator:
                
Denominator for basic net loss per share — weighted average shares
     46,947,161       31,625,000  
 
                
Denominator for diluted net loss per share — adjusted weighted average shares
     46,947,161       31,625,000  
 
                
Basic net loss per share
   $ (0.01 )   $ (0.01 )
 
                
Diluted net loss per share
   $ (0.01 )   $ (0.01 )
NOTE 18: INCOME TAXES
          Marshall Islands, Cayman Islands, British Virgin Islands, and Hong Kong, do not impose a tax on international shipping income. Under the laws of Marshall Islands, of the companies’ incorporation and vessels’ registration, the companies are subject to registration and tonnage taxes which have been included in vessel operating expenses in the accompanying consolidated statements of income.
          Pursuant to Section 883 of the Internal Revenue Code of the United States (the “Code”), U.S. source income from the international operation of ships is generally exempt from U.S. income tax if the company operating the ships meets certain incorporation and ownership requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country, which grants an equivalent exemption from income taxes to U.S. corporations. All the Company’s ship-operating subsidiaries satisfy these initial criteria. In addition, these companies must be more than 50% owned by individuals who are residents, as defined, in the countries of incorporation or another foreign country that grants an equivalent exemption to U.S. corporations. Subject to proposed regulations becoming finalized in their current form, the management of the Company believes by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like the Company, the second criterion can also be satisfied based on the trading volume and ownership of the Company’s shares, but no assurance can be given that this will remain so in the future. Due to the exemption under Section 883 of the Code, Delaware would not impose a tax on the Company or its subsidiaries’ international shipping income.

F-19

 

NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars—except share data)
NOTE 19: SUBSEQUENT EVENTS
          On May 2, 2011, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2011 of $0.05 per common share of common stock payable on July 6, 2011 to stockholders of record as of June 15, 2011.

F-20

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  NAVIOS MARITIME ACQUISITION CORPORATION
 		  
  By:   /s/ Angeliki Frangou    
    Angeliki Frangou   
    Chief Executive Officer
Date: May 5, 2011