SEC Filing | Eagle Bulk Shipping Inc.

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egle-20210930

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 September 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 November 5, 2021: 13,590,961

TABLE OF CONTENTS


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

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

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

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

	Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2021 and 2020	F-4

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

	Notes to Condensed Consolidated Financial Statements	F-7

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	14
ITEM 1A.	RISK FACTORS	14
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	14
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	14
ITEM 4.	MINE SAFETY DISCLOSURES	14
ITEM 5.	OTHER INFORMATION	14
ITEM 6.	EXHIBITS	15
SIGNATURES		16

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 nine months ended September 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)


	September 30, 2021		December 31, 2020
	(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	100,011,694	$	69,927,594
Restricted cash - current	25,557,674		18,846,177
Accounts receivable, net of a reserve of $2,169,958 and $2,357,191, respectively	24,243,815		13,843,480
Prepaid expenses	4,638,401		3,182,815
Inventories	17,091,901		11,624,833
Collateral on derivatives	31,369,664		—
Other current assets	1,689,972		839,881
Total current assets	204,603,121		118,264,780
Noncurrent assets:
Vessels and vessel improvements, at cost, net of accumulated depreciation of $206,815,553 and $177,771,755, respectively	898,405,068		810,713,959
Advance for vessel purchase	2,200,000		3,250,000
Operating lease right-of-use assets	22,845,697		7,540,871
Other fixed assets, net of accumulated depreciation of $1,346,243 and $1,137,562, respectively	309,625		489,179
Restricted cash - noncurrent	75,000		75,000
Deferred drydock costs, net	28,343,436		24,153,776
Advances for ballast water systems and other assets	5,875,314		2,639,491
Total noncurrent assets	958,054,140		848,862,276
Total assets	$	1,162,657,261	$	967,127,056
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,169,624	$	10,589,970
Accrued interest	7,075,532		4,690,135
Other accrued liabilities	14,660,495		11,747,064
Fair value of derivatives - current	24,381,090		481,791
Current portion of operating lease liabilities	21,094,309		7,615,371
Unearned charter hire revenue	17,045,647		8,072,295
Holdco Revolving Credit Facility, net of debt issuance costs	23,821,677		—
Current portion of long-term debt	42,666,521		39,244,297
Total current liabilities	165,914,895		82,440,923
Noncurrent liabilities:
Norwegian Bond Debt, net of debt discount and debt issuance costs	166,351,589		169,290,230
Super Senior Facility, net of debt issuance costs	—		14,896,357
New Ultraco Debt Facility, net of debt issuance costs	121,182,097		132,083,949
Convertible Bond Debt, net of debt discount and debt issuance costs	99,813,315		96,660,485
Fair value of derivatives - noncurrent	—		650,607
Noncurrent portion of operating lease liabilities	1,744,619		686,422
Total noncurrent liabilities	389,091,620		414,268,050
Total liabilities	555,006,515		496,708,973
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued as of September 30, 2021 and December 31, 2020	—		—
Common stock, $0.01 par value, 700,000,000 shares authorized, 12,863,998 and 11,661,797 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	128,640		116,618
Additional paid-in capital	982,652,311		943,571,685
Accumulated deficit	(374,722,217)		(472,137,822)
Accumulated other comprehensive loss	(407,988)		(1,132,398)
Total stockholders' equity	607,650,746		470,418,083
Total liabilities and stockholders' equity	$	1,162,657,261	$	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				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Revenues, net	$	183,392,700	$	68,182,301	$	409,815,454	$	199,952,404

Voyage expenses	30,272,949		19,627,919		81,410,602		69,960,025
Vessel operating expenses	28,125,682		21,748,531		73,323,785		65,680,913
Charter hire expenses	10,723,737		5,060,503		25,373,501		15,820,809
Depreciation and amortization	13,570,361		12,617,803		39,187,344		37,587,477
General and administrative expenses	7,948,037		7,995,715		23,559,217		22,724,190
Other operating expense	791,572		—		2,311,816		—
Operating lease impairment	—		—		—		352,368
(Gain)/loss on sale of vessel	(3,962,093)		389,207		(3,962,093)		389,207
Total operating expenses	87,470,245		67,439,678		241,204,172		212,514,989
Operating income/(loss)	95,922,455		742,623		168,611,282		(12,562,585)
Interest expense	8,511,117		8,954,200		25,561,676		26,883,094
Interest income	(19,533)		(23,644)		(52,831)		(236,633)
Loss on debt extinguishment	99,033		—		99,033		—
Realized and unrealized loss/(gain) on derivative instruments, net	8,990,568		2,971,353		45,587,799		(4,030,674)
Total other expense, net	17,581,185		11,901,909		71,195,677		22,615,787
Net income/(loss)	$	78,341,270	$	(11,159,286)	$	97,415,605	$	(35,178,372)

Weighted average shares outstanding:
Basic	12,802,401		10,279,698		12,237,288		10,274,906
Diluted	15,936,374		10,279,698		15,354,481		10,274,906

Per share amounts
Basic income/(loss)	$	6.12	$	(1.09)	$	7.96	$	(3.42)
Diluted income/(loss)	$	4.92	$	(1.09)	$	6.34	$	(3.42)

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				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income/(loss)	$	78,341,270	$	(11,159,286)	$	97,415,605	$	(35,178,372)

Other comprehensive income/(loss):
Net unrealized gain/(loss) on cash flow hedges	80,206		(203,590)		724,410		(1,124,745)

Comprehensive income/(loss)	$	78,421,476	$	(11,362,876)	$	98,140,015	$	(36,303,117)

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	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
Net income	—	—		—		78,341,270		—		78,341,270
Issuance of shares upon conversion of Convertible Bond Debt	25	—		982		—		—		982
Issuance of shares upon conversion of warrants (1)	109,861	1,099		2,303,591		—		—		2,304,690
Issuance of shares upon exercise of stock options	857	8		33,346		—		—		33,354
Unrealized gain on cash flow hedges	—	—		—		—		80,206		80,206
Issuance costs for ATM Offering	—	—		(145,580)						(145,580)
Stock-based compensation	—	—		777,468		—		—		777,468
Balance at September 30, 2021	12,863,998	$	128,640	$	982,652,311	$	(374,722,217)	$	(407,988)	$	607,650,746

(1) Please see Note 3 Vessels 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
Net loss	—	—		—		(11,159,286)		—		(11,159,286)
Cash used to settle fractional shares in the Reverse Stock Split	—	—		(12,513)		—		—		(12,513)
Unrealized loss on cash flow hedges	—	—		—		—		(203,590)		(203,590)
Stock-based compensation	—	—		741,021		—		—		741,021
Balance at September 30, 2020	10,279,698	$	102,798	$	919,601,123	$	(472,252,726)	$	(1,124,745)	$	446,326,450

*Adjusted to give effect for the 1-for-7 reverse stock split that became effective as of September 15, 2020.

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)


	Nine Months Ended
	September 30, 2021		September 30, 2020
Cash flows from operating activities:
Net income/(loss)	$	97,415,605	$	(35,178,372)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation	32,951,082		32,085,266
Amortization of operating lease right-of-use assets	10,535,980		9,388,238
Amortization of deferred drydocking costs	6,236,262		5,502,211
Amortization of debt discount and debt issuance costs	5,442,978		4,654,871
Loss on debt extinguishment	99,033		—
(Gain)/loss on sale of vessel	(3,962,093)		389,207
Operating lease impairment	—		352,368
Net unrealized loss on fair value of derivatives	24,193,472		2,677,003
Stock-based compensation expense	2,235,279		2,300,444
Drydocking expenditures	(10,736,908)		(10,830,172)
Changes in operating assets and liabilities:
Accounts payable	4,638,944		(4,135,537)
Accounts receivable	(10,645,335)		2,956,653
Accrued interest	2,385,397		1,850,383
Inventories	(5,467,068)		4,130,347
Operating lease liabilities current and noncurrent	(11,303,671)		(9,915,541)
Collateral on derivatives	(31,369,664)		—
Fair value of derivatives, other current and noncurrent assets	(1,149,973)		(5,905,400)
Other accrued liabilities	1,897,863		(5,872,683)
Prepaid expenses	(1,455,586)		1,906,748
Unearned charter hire revenue	8,973,352		1,296,976
Net cash provided by/(used in) operating activities	120,914,949		(2,346,990)

Cash flows from investing activities:
Purchase of vessels and vessel improvements	(109,384,938)		(605,660)
Advance for vessel purchase	(2,200,000)		—
Purchase of scrubbers and ballast water systems	(4,557,463)		(25,224,068)
Proceeds from hull and machinery insurance claims	245,000		3,749,779
Proceeds from sale of vessel	9,159,077		4,594,081
Purchase of other fixed assets	(29,127)		(43,659)
Net cash used in investing activities	(106,767,451)		(17,529,527)

Cash flows from financing activities:
Proceeds from New Ultraco Debt Facility	16,500,000		22,550,000
Repayment of Norwegian Bond Debt	(4,000,000)		(4,000,000)
Repayment of term loan under New Ultraco Debt Facility	(24,258,223)		(20,923,319)
Repayment of revolver loan under New Ultraco Debt Facility	(55,000,000)		(20,000,000)
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	27,242,417		—
Cash received from exercise of stock options	55,578		—
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	(328,241)		(381,471)
Debt issuance costs paid to lenders of Holdco Revolving Credit Facility	(285,893)		—
Cash used to settle fractional shares	—		(12,513)
Cash paid to bondholder upon conversion of Convertible Bond Debt	(23)		—
Other financing costs	—		(44,104)
Net cash provided by financing activities	22,648,099		46,027,292
Net increase in cash, cash equivalents and restricted cash	36,795,597		26,150,775
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	$	125,644,368	$	85,281,060
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest	$	17,462,440	$	20,377,697
Accruals for vessel purchases and vessel improvements included in Other accrued liabilities	$	499,578	$	—
Accruals for scrubbers and ballast water treatment systems included in Accounts payable and Other accrued liabilities	$	3,258,545	$	5,915,948
Accrual for issuance costs for ATM Offering included in Other accrued liabilities	$	104,080	$	—
Accruals for debt issuance costs included in Accounts payable and Other accrued liabilities	$	508,768	$	200,000

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

F-6

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 September 30, 2021, the Company owned and operated a modern fleet of 52 oceangoing vessels, including 27 Supramax and 25 Ultramax vessels with a combined carrying capacity of 3,128,107 deadweight tonnage ("dwt") and an average age of approximately 9.1 years. Additionally, the Company charters-in four Ultramax vessels on a long term basis with remaining lease term of approximately one year each and also charters-in vessels on a short term basis for a period less than one year.

For the three and nine months ended September 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”). During the second quarter of 2021, the Company 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 $27.2 million after deducting sales agent commissions and other offering costs. The proceeds were used for partial financing of vessel acquisitions and other corporate purposes.

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 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:

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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 nine months ended September 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 1 year. 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 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.

As of September 30, 2021, the Company had time charter-in contracts for four Ultramax vessels which are greater than 12 months. A brief description of each of these contracts is below:

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(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 8, 2021, the Company exercised its option to extend the charter for another year at a hire rate of $13,800 per day. The Company has increased the lease liability and the corresponding right-of-use asset by $5.0 million to reflect the extended lease term in its Condensed Consolidated Balance Sheet as of September 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 July 8, 2021 was 1.36%.

(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 Sheet as of September 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 Sheet as of September 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%.

(iv) On December 22, 2020, the Company entered into an agreement to charter-in a 63,634 dwt 2021 built Ultramax vessel for twelve months with an option for an additional three months at a hire rate of $5,900 per day plus 57% of the Baltic Supramax Index ("BSI") 58 average of 10 time charter routes as published by the Baltic Exchange each business day. Additionally, following the initial fifteen month period the Company has an additional option to extend for a period of eleven to thirteen months at an increased rate of $6,500 per day with no change in the rest of the terms. Also, the Company shall share the scrubber benefit with the owners 50% calculated as the price differential between the high sulfur and low sulfur fuel oil based on actual bunker consumption during the lease period. On July 7, 2021, the Company took delivery of the vessel and recorded $9.1 million as lease liability and corresponding right-of-use asset in its Condensed Consolidated Balance Sheet as of September 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 July 7, 2021 was 1.33%.

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 September 30, 2021 and December 31, 2020.

In November 2018, the Company entered into an office lease agreement in Singapore, which was initially set to expire in October 2021, with an average annual rent of $0.3 million. On August 17, 2021, the Company renewed the lease on the existing office space for an additional 5 years with an average annual rent of $0.4 million. The Company increased the lease liability and

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the corresponding right-of-use asset by $1.3 million in its Condensed Consolidated Balance Sheet as of September 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 as of August 17, 2021 was 3.09%.

Additionally, the Company entered into a new lease agreement for an additional office space in Singapore for 4.9 years beginning in the second quarter of 2022 with an average annual rent of $0.2 million. The Company is expected to take possession in the second quarter of 2022. No right-of-use asset or corresponding liability has been recognized in the Consolidated Balance Sheet as of September 30, 2021 since the Company did not take the possession of the office space and the lease term has not begun yet.

The Company determined the two office leases which terms have begun 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 nine months ended September 30, 2021 and 2020.

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 September 30, 2021 and December 31, 2020 are as follows:


Description	Location in Balance Sheet	September 30, 2021 (1)		December 31, 2020 (1)
Noncurrent assets:
Chartered-in contracts greater than 12 months	Operating lease right-of-use assets	$	20,712,287	$	6,207,253
Office leases	Operating lease right-of-use assets	2,133,410		1,333,618
Operating lease right-of-use assets		$	22,845,697	$	7,540,871

Liabilities:
Chartered-in contracts greater than 12 months	Current portion of operating lease liabilities	$	20,451,549	$	6,974,943
Office leases	Current portion of operating lease liabilities	642,760		640,428
Leas