SEC Filing | Eagle Bulk Shipping Inc.

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egle-20210630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number 001-33831

EAGLE BULK SHIPPING INC.

(Exact name of Registrant as specified in its charter)


Republic of the Marshall Islands						98-0453513
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

300 First Stamford Place, 5th floor

Stamford, Connecticut 06902

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (203) 276-8100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	EGLE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-Accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

Number of shares of registrant’s common stock outstanding as of August 5, 2021:13,459,865

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	F-1

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	F-2

	Condensed Consolidated Statements of Comprehensive income/(loss) for the three and six months ended June 30, 2021 and 2020	F-3

	Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2021 and 2020	F-4

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	F-6

	Notes to Condensed Consolidated Financial Statements	F-8

ITEM 2.	MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	12

ITEM 4.	CONTROLS AND PROCEDURES	12

PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	13
ITEM 1A.	RISK FACTORS	13
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	13
ITEM 4.	MINE SAFETY DISCLOSURES	13
ITEM 5.	OTHER INFORMATION	13
ITEM 6.	EXHIBITS	14
SIGNATURES		15

Effective as of September 15, 2020, the Company completed a 1-for-7 reverse stock split (the “Reverse Stock Split”) of the Company's issued and outstanding shares of common stock, par value $0.01 per share, as previously approved by our Board of Directors (the "Board of Directors") and our shareholders. Proportional adjustments were made to the Company’s issued and outstanding common stock and to the exercise price and the number of shares issuable upon exercise of all of the Company’s outstanding warrants, the exercise price and number of shares issuable upon exercise of the options outstanding under the Company’s equity incentive plans, and the number of shares subject to restricted stock awards under the Company’s equity incentive plans. Furthermore, the conversion rate set forth in the indenture governing the Company’s Convertible Bond Debt was adjusted to reflect the Reverse Stock Split. No fractional shares of common stock were issued in connection with the Reverse Stock Split. Furthermore, if a shareholder held less than seven shares prior to the Reverse Stock Split, then such shareholder received cash in lieu of the fractional share. All references to common stock and all per share data relating to periods prior to the Reverse Stock Split that are contained in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2021 (the "Quarterly Report on Form 10-Q") have been retrospectively adjusted to reflect the Reverse Stock Split unless explicitly stated otherwise.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbor provided for under these sections. These statements may include words such as “believe,” “estimate,” “project,” “intend,” “expect,” “plan,” “anticipate,” and similar expressions in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements reflect management’s current expectations and observations with respect to future events and financial performance.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. The principal factors that affect our financial position, results of operations and cash flows include, charter market rates, which could decline from historic highs, periods of charter hire, vessel operating expenses and voyage costs, which are incurred primarily in U.S. dollars, depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels' estimated useful lives, and financing costs related to our indebtedness. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors which could include the following: (i) changes in demand in the drybulk market, including, without limitation, changes in production of, or demand for, commodities and bulk cargoes, generally or in particular regions; (ii) greater than anticipated levels of drybulk vessel newbuilding orders or lower than anticipated rates of drybulk vessel scrapping; (iii) changes in rules and regulations applicable to the drybulk industry, including, without limitation, legislation adopted by international bodies or organizations such as the International Maritime Organization and the European Union (the “EU”) or by individual countries; (iv) actions taken by regulatory authorities including without limitation the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”); (v) changes in trading patterns significantly impacting overall drybulk tonnage requirements; (vi) changes in the typical seasonal variations in drybulk charter rates; (vii) changes in the cost of other modes of bulk commodity transportation; (viii) changes in general domestic and international political conditions; (ix) changes in the condition of the Company's vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated dry docking costs); (x) significant deterioration in charter hire rates from current levels or the inability of the Company to achieve its cost-cutting measures; (xi) the duration and impact of the novel coronavirus ("COVID-19") pandemic, including the availability and effectiveness of vaccines on a widespread basis and the impact of any mutations of the virus; (xii) the relative cost and availability of low and high sulfur fuel oil; (xiii) our ability to realize the economic benefits or recover the cost of the scrubbers we have installed; (xiv) any legal proceedings which we may be involved from time to time; and other factors listed from time to time in our filings with the Securities and Exchange Commission (the “SEC”). This discussion also includes statistical data regarding world drybulk fleet and order book and fleet age. We generated some of this data internally, and some were obtained from independent industry publications and reports that we believe to be reliable sources. We have not independently verified this data nor sought the consent of any organizations to refer to their reports in this Quarterly Report on Form 10-Q. We disclaim any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

PART I: FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in U.S. dollars except share and per share data)


	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	79,278,151	$	69,927,594
Restricted cash - current	4,446,177		18,846,177
Accounts receivable, net of a reserve of $2,134,000 and $2,357,191, respectively	23,995,321		13,843,480
Prepaid expenses	4,294,715		3,182,815
Inventories	15,899,222		11,624,833
Vessel held for sale	4,885,998		—
Collateral on derivatives	33,499,170		—
Other current assets	1,478,163		839,881
Total current assets	167,776,917		118,264,780
Noncurrent assets:
Vessels and vessel improvements, at cost, net of accumulated depreciation of $195,472,078 and $177,771,755, respectively	876,088,651		810,713,959
Advances for vessel purchases	5,340,000		3,250,000
Operating lease right-of-use assets	12,441,041		7,540,871
Other fixed assets, net of accumulated depreciation of $1,276,574 and $1,137,562, respectively	363,993		489,179
Restricted cash - noncurrent	75,000		75,000
Deferred drydock costs, net	26,504,065		24,153,776
Deferred financing costs	99,033		—
Fair value of derivatives asset - noncurrent	36,384		—
Advances for ballast water systems and other assets	4,443,281		2,639,491
Total noncurrent assets	925,391,448		848,862,276
Total assets	$	1,093,168,365	$	967,127,056
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	18,921,097	$	10,589,970
Accrued interest	4,558,933		4,690,135
Other accrued liabilities	10,601,676		11,747,064
Fair value of derivatives - current	31,607,854		481,791
Current portion of operating lease liabilities	10,639,630		7,615,371
Unearned charter hire revenue	8,402,876		8,072,295
Holdco Revolving Credit Facility, net of debt issuance costs	23,724,982		—
Current portion of long-term debt	41,444,297		39,244,297
Total current liabilities	149,901,345		82,440,923

Noncurrent liabilities:
Norwegian Bond Debt, net of debt discount and debt issuance costs	165,993,915		169,290,230
Super Senior Facility, net of debt issuance costs	—		14,896,357
New Ultraco Debt Facility, net of debt issuance costs	125,093,090		132,083,949
Revolver loan under New Ultraco Debt Facility	25,000,000		—
Convertible Bond Debt, net of debt discount and debt issuance costs	98,736,604		96,660,485
Fair value of derivatives - noncurrent	85,603		650,607
Noncurrent portion of operating lease liabilities	2,099,452		686,422
Total noncurrent liabilities	417,008,664		414,268,050
Total liabilities	566,910,009		496,708,973
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued as of June 30, 2021 and December 31, 2020	—		—
Common stock, $0.01 par value, 700,000,000 shares authorized, 12,753,255 and 11,661,797 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	127,533		116,618
Additional paid-in capital	979,682,504		943,571,685
Accumulated deficit	(453,063,487)		(472,137,822)
Accumulated other comprehensive loss	(488,194)		(1,132,398)
Total stockholders' equity	526,258,356		470,418,083
Total liabilities and stockholders' equity	$	1,093,168,365	$	967,127,056

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-1

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in U.S. dollars except share and per share data)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Revenues, net	$	129,850,586	$	57,391,784	$	226,422,754	$	131,770,103

Voyage expenses	24,522,734		23,767,747		51,137,653		50,332,105
Vessel operating expenses	23,679,665		20,232,274		45,198,104		43,932,383
Charter hire expenses	6,169,544		4,719,367		14,649,764		10,760,306
Depreciation and amortization	13,110,597		12,503,191		25,616,983		24,969,674
General and administrative expenses	7,912,970		6,767,403		15,611,180		14,728,475
Other operating expense	559,128		—		1,520,244		—
Operating lease impairment	—		352,368		—		352,368
Total operating expenses	75,954,638		68,342,350		153,733,928		145,075,311
Operating income/(loss)	53,895,948		(10,950,566)		72,688,826		(13,305,208)
Interest expense	8,799,137		8,737,079		17,050,558		17,928,894
Interest income	(15,529)		(56,132)		(33,298)		(212,989)
Realized and unrealized loss/(gain) on derivative instruments, net	35,887,315		859,814		36,597,231		(7,002,027)
Total other expense, net	44,670,923		9,540,761		53,614,491		10,713,878
Net income/(loss)	$	9,225,025	$	(20,491,327)	$	19,074,335	$	(24,019,086)

Weighted average shares outstanding*:
Basic*	12,168,180		10,277,946		11,950,048		10,272,484
Diluted*	12,397,156		10,277,946		12,081,772		10,272,484

Per share amounts*:
Basic income/(loss)*	$	0.76	$	(1.99)	$	1.60	$	(2.34)
Diluted income/(loss)*	$	0.74	$	(1.99)	$	1.58	$	(2.34)

*Adjusted to give effect for the 1-for-7 Reverse Stock Split that became effective as of September 15, 2020, see Note 1.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-2

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive income/(loss)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income/(loss)	$	9,225,025	$	(20,491,327)	$	19,074,335	$	(24,019,086)

Other comprehensive income/(loss):
Net unrealized gain/(loss) on cash flow hedges	44,320		(649,287)		644,204		(921,155)

Comprehensive income/(loss)	$	9,269,345	$	(21,140,614)	$	19,718,539	$	(24,940,241)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-3

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(in U.S. dollars except share and per share data)


	Common Stock	Common Stock Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ Equity
Balance at December 31, 2020	11,661,797	$	116,618	$	943,571,685	$	(472,137,822)	$	(1,132,398)	$	470,418,083
Net income		—		—		9,849,310		—		9,849,310
Issuance of shares due to vesting of restricted shares	71,146	711		(711)		—		—		—
Unrealized gain on cash flow hedges	—	—		—		—		599,884		599,884
Fees for equity offerings	—	—		(31,830)		—		—		(31,830)
Cash used to settle net share equity awards	—	—		(811,456)		—		—		(811,456)
Stock-based compensation	—	—		871,943		—		—		871,943
Balance at March 31, 2021	11,732,943	$	117,329	$	943,599,631	$	(462,288,512)	$	(532,514)	$	480,895,934
Net income	—	—		—		9,225,025		—		9,225,025
Issuance of shares due to vesting of restricted shares	2,773	27		(27)		—		—		—
Issuance of shares upon conversion of warrants (1)	432,037	4,322		8,370,976		—		—		8,375,298
Issuance of shares from ATM Offering, net of commissions and issuance costs (2)	581,385	5,814		27,278,103		—		—		27,283,917
Issuance of shares upon exercise of stock options	4,117	41		22,183		—		—		22,224
Unrealized gain on cash flow hedges	—	—		—		—		44,320		44,320
Cash used to settle net share equity awards	—	—		(174,230)		—		—		(174,230)
Stock-based compensation	—	—		585,868		—		—		585,868
Balance at June 30, 2021	12,753,255	$	127,533	$	979,682,504	$	(453,063,487)	$	(488,194)	$	526,258,356

(1) Please see Note 3 Vessels for additional information.

(2) Please see Note 1 Basis of presentation and general information for additional information.

F-4


	Common Stock*	Common Stock Amount*		Additional Paid-in Capital*		Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ Equity
Balance at December 31, 2019	10,214,600	$	102,146	$	918,475,145	$	(437,074,354)	$	—	$	481,502,937
Net loss	—	—		—		(3,527,759)		—		(3,527,759)
Issuance of shares due to vesting of restricted shares	62,526	626		(626)		—		—		—
Unrealized loss on cash flow hedges	—	—		—		—		(271,868)		(271,868)
Cash used to settle net share equity awards	—	—		(1,161,301)		—		—		(1,161,301)
Stock-based compensation	—	—		836,200		—		—		836,200
Balance at March 31, 2020	10,277,126	$	102,772	$	918,149,418	$	(440,602,113)	$	(271,868)	$	477,378,209
Net loss	—	—		—		(20,491,327)		—		(20,491,327)
Issuance of shares due to vesting of restricted shares	2,572	26		(26)		—		—		—
Unrealized loss on cash flow hedges	—	—		—		—		(649,287)		(649,287)
Stock-based compensation	—	—		723,223		—		—		723,223
Balance at June 30, 2020	10,279,698	$	102,798	$	918,872,615	$	(461,093,440)	$	(921,155)	$	456,960,818

*Adjusted to give effect for the 1-for-7 Reverse Stock Split that became effective as of September 15, 2020, see Note 1.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-5

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
	June 30, 2021		June 30, 2020
Cash flows from operating activities:
Net income/(loss)	$	19,074,335	$	(24,019,086)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation	21,537,938		21,303,889
Amortization of operating lease right-of-use assets	6,201,490		6,273,102
Amortization of deferred drydocking costs	4,079,045		3,665,785
Amortization of debt discount and debt issuance costs	3,467,185		3,046,071
Operating lease impairment	—		352,368
Net unrealized loss on fair value of derivatives	30,540,919		814,014
Stock-based compensation expense	1,457,811		1,559,423
Drydocking expenditures	(6,429,334)		(6,576,633)
Changes in operating assets and liabilities:
Accounts payable	8,216,287		(4,523,437)
Accounts receivable	(10,390,156)		(2,921,947)
Accrued interest	(131,202)		(306,303)
Inventories	(4,274,389)		5,719,516
Operating lease liabilities current and noncurrent	(6,664,371)		(6,603,999)
Collateral on derivatives	(33,499,170)		—
Other current and noncurrent assets	(40,507)		(7,078,072)
Other accrued liabilities	(1,779,183)		(7,280,400)
Prepaid expenses	(1,111,900)		1,214,764
Unearned charter hire revenue	330,581		187,760
Net cash provided by/(used in) operating activities	30,585,379		(15,173,185)

Cash flows from investing activities:
Purchase of vessels and vessel improvements	(79,002,764)		(510,029)
Advances for vessel purchases	(5,340,000)		—
Purchase of scrubbers and ballast water systems	(2,385,024)		(22,371,606)
Proceeds from hull and machinery insurance claims	238,315		3,658,924
Purchase of other fixed assets	(13,826)		(40,853)
Net cash used in investing activities	(86,503,299)		(19,263,564)

Cash flows from financing activities:
Proceeds from New Ultraco Debt Facility	11,000,000		22,550,000
Repayment of Norwegian Bond Debt	(4,000,000)		(4,000,000)
Repayment of term loan under New Ultraco Debt Facility	(15,897,148)		(13,112,245)
Repayment of revolver loan under New Ultraco Debt Facility	(30,000,000)		—
Repayment of revolver loan under Super Senior Facility	(15,000,000)		—
Proceeds from revolver loan under New Ultraco Debt Facility	55,000,000		55,000,000
Proceeds from revolver loan under Super Senior Facility	—		15,000,000
Proceeds from Holdco Revolving Credit Facility	24,000,000		—
Proceeds from issuance of shares under ATM Offering, net of commissions	27,372,417		—

F-6


Cash received from exercise of stock options	22,224		—
Cash used to settle net share equity awards	(985,686)		(1,161,301)
Equity offerings issuance costs	(291,830)		—
Debt issuance costs paid to lenders on New Ultraco Debt Facility	(181,500)		(381,471)
Debt issuance costs paid to lenders of Holdco Revolving Credit Facility	(170,000)		—
Other financing costs	—		18,539
Net cash provided by financing activities	50,868,477		73,913,522
Net (decrease)/increase in cash, cash equivalents and restricted cash	(5,049,443)		39,476,773
Cash, cash equivalents and restricted cash at beginning of period	88,848,771		59,130,285
Cash, cash equivalents and restricted cash at end of period	$	83,799,328	$	98,607,058
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest	$	13,419,869	$	15,202,876
Accruals for vessel purchases and vessel improvements included in Other accrued liabilities	$	229,185	$	—
Accruals for scrubbers and ballast water treatment systems included in Accounts payable and Other accrued liabilities	$	3,345,643	$	8,507,683
Accrual for issuance costs for ATM Offering included in Other accrued liabilities	$	88,500	$	—
Accruals for debt issuance costs included in Other accrued liabilities	$	500,000	$	200,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-7

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation and General Information

The accompanying condensed consolidated financial statements include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or similar terms). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership, charter and operation of drybulk vessels. The Company’s fleet is comprised of Supramax and Ultramax drybulk carriers and the Company operates its business in one business segment.

As of June 30, 2021, the Company owned and operated a modern fleet of 51 oceangoing vessels, including 27 Supramax and 24 Ultramax vessels with a combined carrying capacity of 3,056,772 deadweight tonnage ("dwt") and an average age of approximately 9.0 years. Additionally, the Company charters-in three Ultramax vessels on a long term basis with remaining lease terms of approximately one year and also charters-in vessels on a short term basis for a period less than one year.

For the three and six months ended June 30, 2021 and 2020, the Company’s charterers did not individually account for more than 10% of the Company’s gross charter revenue during those periods.

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), and the rules and regulations of the SEC that apply to interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes normally included in consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K, filed with the SEC on March 12, 2021.

The accompanying condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed consolidated financial position and results of operations for the interim periods presented.

The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

In March 2021, the Company entered into an at market issuance sales agreement with B. Riley Securities, Inc., BTIG, LLC and Fearnley Securities, Inc., as sales agents (each, a “Sales Agent” and collectively, the “Sales Agents”), to sell shares of common stock, par value $0.01 per share, of the Company with aggregate gross sales proceeds of up to $50.0 million, from time to time through an “at-the-market” offering program (the “ATM Offering”). As of June 30, 2021, the Company had sold and issued an aggregate of 581,385 shares at a weighted-average sales price of $47.97 per share under the ATM Offering for aggregate net proceeds of $27.3 million after deducting sales agent commissions and other offering costs. The proceeds were used for partial financing of vessel acquisitions and other corporate purposes.

Effective as of September 15, 2020, the Company completed a 1-for-7 reverse stock split (the “Reverse Stock Split”) of the Company's issued and outstanding shares of common stock, as previously approved by our Board of Directors (the "Board of Directors") and our shareholders. Proportional adjustments were made to the Company’s issued and outstanding common stock and to the exercise price and the number of shares issuable upon exercise of all of the Company’s outstanding warrants, the exercise price and number of shares issuable upon exercise of the options outstanding under the Company’s equity incentive plans, and the number of shares subject to restricted stock awards under the Company’s equity incentive plans. Furthermore, the conversion rate set forth in the indenture governing the Company’s Convertible Bond Debt was adjusted to reflect the Reverse Stock Split. No fractional shares of common stock were issued in connection with the Reverse Stock Split. Furthermore, if a shareholder held less than seven shares prior to the Reverse Stock Split, then such shareholder received cash in lieu of the fractional share. All references herein to common stock and per share data relating to periods prior to the Reverse Stock Split that are presented in these condensed consolidated financial statements and notes thereto have been retrospectively adjusted to reflect the Reverse Stock Split.

The preparation of condensed 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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions of the

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Company are residual value of vessels, the useful lives of vessels, the value of stock-based compensation, estimated losses on our trade receivables, fair value of Convertible Bond Debt (as defined below) and its equity component, fair value of operating lease right-of-use assets and operating lease liabilities and the fair value of derivatives. Actual results could differ from those estimates.

Note 2. Recent Accounting Pronouncements

Leases

The following are the type of contracts that fall under ASC 842:

Time charter-out contracts

In a time charter contract, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. The charterer has the full discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such that the vessel is sent only to safe ports by the charterer, subject always to compliance with applicable sanction laws, and carry only lawful or non-hazardous cargo. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period. The performance obligations in a time charter contract are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to the Company. The charterer generally pays the charter hire in advance of the upcoming contract period. The Company determined that all time charter contracts are considered operating leases and therefore fall under the scope of ASC 842 because: (i) the vessel is an identifiable asset; (ii) the Company does not have substantive substitution rights; and (iii) the charterer has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use.

The transition guidance associated with ASC 842 allows for certain practical expedients to the lessors. The Company elected not to separate the lease and non-lease components included in the time charter revenue because the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same. The daily hire rate represents the hire rate for a bare boat charter as well as the compensation for expenses incurred running the vessel such as crewing expense, repairs, insurance, maintenance and lubes. Both the lease and non-lease components are earned by passage of time.

The adoption of ASC 842 did not materially impact our accounting for time charter-out contracts. The revenue generated from time charter out contracts is recognized on a straight-line basis over the term of the respective time charter agreements, which are recorded as part of Revenues, net in our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020.

Time charter-in contracts

The Company charters in vessels to supplement our own fleet and employs them both on time charters and voyage charters. The time charter-in contracts range in lease terms from 30 days to 2 years. The Company elected the practical expedient of ASC 842 that allows for time charter-in contracts with an initial lease term of less than 12 months to be excluded from the operating lease right-of-use assets and lease liabilities recognized on our Condensed Consolidated Balance Sheet as of January 1, 2019. The Company recognized the operating lease right-of-use assets and the corresponding lease liabilities on the Condensed Consolidated Balance Sheet for time charter-in contracts greater than 12 months on the date of adoption of ASC 842. The Company will continue to recognize the lease payments for all operating leases as charter hire expenses on the condensed consolidated statements of operations on a straight-line basis over the lease term.

Under ASC 842, leases are classified as either finance or operating arrangements, with such classification affecting the pattern and classification of expense recognition in an entity's income statement. For operating leases, ASC 842 requires recognition in an entity’s income statement of a single lease expense, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Right-of-use assets represent a right to use an underlying asset for the lease term and the related lease liability represents an obligation to make lease payments pursuant to the contractual terms of the lease agreement.

At lease commencement, a lessee must develop a discount rate to calculate the present value of the lease payments so that it can determine lease classification and measure the lease liability. When determining the discount rate to be used at lease commencement, a lessee must use the rate implicit in the lease unless that rate cannot be readily determined. When the rate implicit in the lease cannot be readily determined, the lessee should use its incremental borrowing rate. The incremental

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borrowing rate is the rate that reflects the interest a lessee would have to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment. The Company determined that the time charter-in contracts do not contain an implicit borrowing rate. Therefore, the Company arrived at the incremental borrowing rate by determining the Company's implied credit rating and the yield curve for debt as of January 1, 2019. The Company then interpolated the yield curve to determine the incremental borrowing rate for each lease based on the remaining lease term on the specific lease. Based on the above methodology, the Company's incremental borrowing rates ranged from 5.05% to 6.08% for the five lease contracts for which the Company recorded operating lease right-of-use assets and corresponding lease liabilities.

The Company had time charter-in contracts for three Ultramax vessels which are greater than 12 months as of the date of adoption of ASC 842. A brief description of each of these contracts is below:

(i) The Company entered into an agreement effective April 28, 2017, to charter-in a 61,400 dwt, 2013 built Japanese vessel for approximately four years with options for two additional years. The hire rate for the first four years is $12,800 per day and the hire rate for the first optional year is $13,800 per day and $14,300 per day for the second optional year. In addition, the Company’s fair value below contract value of time charters acquired of $1.8 million as of December 31, 2018, which related to the unamortized value of a prior charter with the same counterparty that had been recorded at the time of the Company’s emergence from bankruptcy, was offset against the corresponding right of use asset on this lease as of January 1, 2019. On July 9, 2021, the Company exercised its option to extend the charter for another year at a hire rate of $13,800 per day.

(ii) On May 4, 2018, the Company entered into an agreement to charter-in a 61,425 dwt 2013 built Ultramax vessel for three years with an option for an additional two years. The hire rate for the first three years is $12,700 per day and $13,750 per day for the first year option and $14,750 per day for the second year option. The Company took delivery of the vessel in the third quarter of 2018. During the second quarter of 2021, the Company decided to extend the lease term to its maximum redelivery date allowed under the charter party. Additionally, on June 28, 2021, the Company exercised its option to extend the charter for another year until October 19, 2022 at a hire rate of $13,750 per day. The Company has increased the lease liability and the corresponding right-of-use asset by $5.8 million to reflect the extended lease term in its Condensed Consolidated Balance Sheets as of June 30, 2021. The discount rate utilized in the measurement of lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of June 28, 2021 was 1.34%.

(iii) On December 9, 2018, the Company entered into an agreement to charter-in a 62,487 dwt 2016 built Ultramax vessel for two years. The hire rate for the vessel until March 2020 was $14,250 per day and $15,250 per day thereafter. The Company took delivery of the vessel in the fourth quarter of 2018. On December 25, 2019, the Company renegotiated the lease terms for another year at a hire rate of $11,600 per day. The Company accounted for this as a lease modification on December 25, 2019 and increased its lease liability and right-of-use asset on its consolidated balance sheet as of December 31, 2019 by $4.5 million. During the first quarter of 2021, the Company decided to extend the lease term to its maximum redelivery date allowed under the charter party. Therefore, the lease liability and the corresponding right-of-use asset as of March 31, 2021 have been increased by $1.0 million to reflect the change in lease term from minimum redelivery date to maximum redelivery date allowed under the charter party. On May 4, 2021, the Company exercised its option to extend the charter for another year until July 31, 2022 at a hire rate of $12,600 per day. The Company has increased the lease liability and the corresponding right-of-use asset by $4.3 million to reflect the extended lease term in its Condensed Consolidated Balance Sheets as of June 30, 2021. The discount rate utilized in the measurement of lease liability and the corresponding right-of-use asset based on the Company's implied credit rating and the yield curve for debt as of May 4, 2021 was 1.38%.

Office leases

On October 15, 2015, the Company entered into a commercial lease agreement as a sublessee for office space in Stamford, Connecticut. The lease is effective from January 2016 through June 2023, with an average annual rent of $0.4 million. The lease is secured by cash collateral of $0.1 million which is recorded as Restricted cash - noncurrent in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020. In November 2018, the Company entered into an office lease agreement in Singapore, which expires in October 2021, with an average annual rent of $0.3 million. The Company determined the two office leases to be operating leases and recorded the lease expense as part of General and administrative expenses in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020.

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Lease Disclosures Under ASC 842

The objective of the disclosure requirements under ASC 842 is to enable users of an entity’s financial statements to assess the amount, timing, and uncertainty of cash flows arising from lease arrangements. In addition to the supplemental qualitative leasing disclosures included above, below are quantitative disclosures that are intended to meet the stated objective of ASC 842.

Operating lease right-of-use assets and lease liabilities as of June 30, 2021 and December 31, 2020 are as follows:


Description	Location in Balance Sheet	June 30, 2021 (1)		December 31, 2020 (1)
Noncurrent assets:
Chartered-in contracts greater than 12 months	Operating lease right-of-use assets	$	11,433,701	$	6,207,253
Office leases	Operating lease right-of-use assets	1,007,340		1,333,618
Operating lease right-of-use assets		$	12,441,041	$	7,540,871

Liabilities:
Chartered-in contracts greater than 12 months	Current portion of operating lease liabilities	$	10,105,556	$	6,974,943
Office leases	Current portion of operating lease liabilities	534,074		640,428
Lease liabilities - current portion		$	10,639,630	$	7,615,371

Chartered-in contracts greater than 12 months	Noncurrent portion of operating lease liabilities	$	1,632,955	$	—
Office leases	Noncurrent portion of operating lease liabilities	$	466,497	$	686,422
Lease liabilities - noncurrent portion		$	2,099,452	$	686,422

(1) The Operating lease right-of-use assets and Operating lease liabilities represent the present value of lease payments for the remaining term of the lease. The discount rate used ranged from 1.34% to 6.08%. The weighted average discount rate used to calculate the lease liability was 2.58%.

The table below presents the components of the Company’s lease expenses and sublease income on a gross basis earned from chartered-in contracts greater than 12 months for the three and six months ended June 30, 2021 and 2020.

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		Three Months Ended				Six Months Ended
Description	Location in Statement of Operations	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Lease expense for chartered-in contracts less than 12 months	Charter hire expenses	$	3,157,702	$	1,644,173	$	8,644,466	$	4,389,586
Lease expense for chartered-in contracts greater than 12 months	Charter hire expenses	3,011,842		3,075,194		6,005,298		6,370,720
	Total charter hire expenses	$	6,169,544	$	4,719,367	$	14,649,764	$	10,760,306

Lease expense for office leases	General and administrative expenses	92,383		181,412		276,389		362,824

Sublease income from chartered-in contracts greater than 12 months *	Revenues, net	$	5,607,346	$	1,292,814	$	6,753,137	$	5,290,038

* The sublease income represents only time charter revenue earned on the chartered-in contracts with terms more than 12 months. There is additional revenue earned from voyage charters on the same chartered-in contracts which is recorded in Revenues, net in our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020.

The cash paid for operating leases with terms greater than 12 months is $3.4 million and $6.8 million for the three and six months ended June 30, 2021, respectively.

The cash paid for operating leases with terms greater than 12 months is $3.4 million and $7.1 million for the three and six months ended June 30, 2020, respectively.

On December 22, 2020, the Company entered into an agreement to lease a Japanese-built Supramax scrubber-fitted vessel for a minimum period of 12 months and maximum period of 15 months with an option to extend for an additional minimum period of 11 months and maximum period of 13 months. The fixed hire rate for the initial period is $5,900 per day plus 57% of BSI 58 average of 10 TC routes published by the Baltic Exchange each business day. The fixed hire during the optional period increases to $6,500 per day plus 57% of BSI 58 average of 10TC routes. The vessel was delivered on July 7, 2021.

On June 11, 2021, the Company entered into an agreement to lease a 2007 built Supramax vessel for a minimum period of 12 months and maximum period of 15 months with an option to extend for an additional minimum period of 12 months. The fixed hire rate for the initial period is $16,800 per day and $18,800 for the optional period. The vessel is expected to be delivered in the third quarter of 2021.

The weighted average remaining lease term on our operating lease contracts greater than 12 months is 14.26 months.

The table below provides the total amount of remaining lease payments on an undiscounted basis on our chartered-in contracts and office leases greater than 12 months as of June 30, 2021:

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Year	Chartered-in contracts greater than 12 months			Office leases			Total Operating leases

Discount rate upon adoption	5.37		%	5.80		%	5.48		%

Six months ending December 31, 2021	$	4,458,038		$	331,482		$	4,789,520
2022	7,351,737			483,048			7,834,785
2023	—			244,878			244,878
	$	11,809,775		$	1,059,408		$	12,869,183

Present value of lease liability

Lease liabilities - short term	$	10,105,556		$	534,074		$	10,639,630
Lease liabilities - long term	1,632,955			466,497			2,099,452
Total lease liabilities	$	11,738,511		$	1,000,571		$	12,739,082

Discount based on incremental borrowing rate	$	71,264		$	58,837		$	130,101

Revenue recognition

Voyage charters

In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses the Company for any delays that exceed the agreed to laytime at the ports visited, with the amounts recorded as demurrage revenue. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime which is known as despatch and results in a reduction of revenue. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. The Company determined that its voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses, and the revenue is recognized on a straight-line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.

The voyage contracts are considered service contracts which fall under the provisions of ASC 606 because the Company, as the shipowner, retains control over the operations of the vessel such as directing the routes taken or the vessel speed. The voyage contracts generally have variable consideration in the form of demurrage or despatch. The amount of revenue earned as demurrage or despatch paid by the Company for the three and six months ended June 30, 2021 was $4.3 million and $8.2 million, respectively. The amount of revenue earned as demurrage or despatch paid by the Company for the three and six months ended June 30, 2020 was $2.1 million and $4.0 million, respectively.

The following table shows the revenues earned from time charters and voyage charters for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020

Time charters	$	59,492,158	$	20,506,088	$	88,732,695	$	48,336,563
Voyage charters	70,358,428		36,885,696		137,690,059		83,433,540
	$	129,850,586	$	57,391,784	$	226,422,754	$	131,770,103

Contract costs

In a voyage charter contract, the Company bears all voyage related costs such as fuel costs, port charges and canal tolls. These costs are considered contract fulfillment costs because the costs are direct costs related to the performance of the contract and are expected to be recovered. The costs incurred during the period prior to commencement of loading the cargo, primarily bunkers, are deferred as they represent setup costs and recorded as a Current asset and are amortized on a straight-line basis as the related performance obligations are satisfied. As of June 30, 2021, the Company recognized $0.3 million of deferred costs which represents bunker expenses and charter-hire expenses incurred prior to commencement of loading. These costs are recorded in Other current assets on the Condensed Consolidated Balance Sheets.

Financial Instruments - Credit Losses

On January 1, 2020, the Company adopted ASC 2016-13, "Financial Instruments - Credit Losses" ("ASC 326"). The adoption of ASC 326 primarily impacted our trade receivables recorded on our Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020. The Company maintains an allowance for credit losses for expected uncollectible accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as voyage expense in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020. Upon adoption of ASC 326, the Company assessed collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considered historical collectability based on past due status and made judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considered customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. For the three and six months ended June 30, 2021, our assessment considered estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods. The allowance for credit losses on accounts receivable was $2.1 million as of June 30, 2021 and $2.4 million as of December 31, 2020.

Note 3. Vessels

Vessel and Vessel Improvements

As of June 30, 2021, the Company’s owned operating fleet consisted of 51 drybulk vessels.

During the fourth quarter of 2020, the Company entered into a series of memorandum of agreements to purchase three high specification scrubber-fitted Ultramax bulkcarriers for a total purchase price of $50.2 million excluding direct expenses of acquisition. The Company took delivery of the vessels during the first quarter of 2021.

During the first quarter of 2021, the Company entered into another series of memorandum of agreements to purchase four vessels. The first vessel is a high-specification scrubber-fitted Ultramax bulkcarrier for a total purchase price of $15.0 million and warrant for 212,315 common shares of the Company. The remaining three vessels are 2011-built Crown-58 Supramax bulkcarriers that were purchased for a total purchase price of $21.2 million and warrants for 329,583 common shares of the Company. Common shares are issuable upon exercise of warrants on a pro-rata basis in connection with each vessel delivery. The warrants would be measured at fair value on the date of the memorandum of agreement and recorded as Vessel and vessel improvements on the Condensed Consolidated Balance Sheets when the Company takes delivery of the vessels. The fair value of the warrants for the total of 541,898 common shares is approximately $10.7 million. The above mentioned prices exclude direct expenses of acquisition. The Company took delivery of the three vessels during the second quarter of 2021 and issued 432,037

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shares of common stock by conversion of outstanding warrants valued at $8.4 million. The remaining vessel is expected to be delivered during the third quarter of 2021 with an additional issuance of 109,861 shares of common stock upon delivery.

During the second quarter of 2021, the Company entered into memorandum of agreements to acquire two high-specification 2015-built scrubber-fitted Ultramax bulkcarriers for a total consideration of $44.0 million. This acquisition will be partially financed with cash on hand, which includes proceeds raised from equity issued under the Company's ATM Offering. The vessels are expected to be delivered during the third quarter of 2021.

On June 1, 2021, the Company signed a memorandum of agreement to sell the vessel Tern for a total consideration of $9.7 million. The vessel will be delivered to the buyer during the third quarter of 2021. The Company recorded the carrying amount of the vessel of $4.9 million as Vessel held for sale in its Condensed Consolidated Balance Sheets as of June 30, 2021.

During the third quarter of 2018, the Company entered into a contract for the installation of ballast water treatment systems ("BWTS") on 39 of our owned vessels. The projected cost, including installation, is approximately $0.5 million per BWTS. The Company intends to complete the installations during scheduled drydockings. The Company completed installation of BWTS on 16 vessels and recorded $7.8 million in Vessels and vessel improvements in the Condensed Consolidated Balance Sheets as of June 30, 2021. Additionally, the Company recorded $4.0 million as advances paid towards installation of BWTS on the remaining vessels as a Noncurrent asset in its Condensed Consolidated Balance Sheets as of June 30, 2021.

The Vessels and vessel improvements activity for the six months ended June 30, 2021 is below:


Vessels and vessel improvements, at December 31, 2020	$	810,713,959
Purchase of vessels and vessel improvements	79,231,949
Advances paid for vessel purchases as of December 31, 2020	3,250,000
Fair value of warrants issued as consideration for vessels purchase	8,375,298
Vessel held for sale	(4,885,998)
Scrubbers and BWTS	802,369
Depreciation expense	(21,398,926)
Vessels and vessel improvements, at June 30, 2021	$	876,088,651

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Note 4. Debt


	June 30, 2021		December 31, 2020
Convertible Bond Debt	$	114,120,000	$