Pangaea Logistics Solutions Ltd. 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our consolidated financial statements and footnotes thereto contained in this report. Forward Looking Statements All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward looking statements. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward looking statements as a result of the risk factors and other factors detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in Part I, Item 1A , above. All subsequent written or oral forward looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. Overview Critical Accounting Policies and Estimates As discussed in Note 3, "Summary of Significant Accounting Policies," of our Financial Statements, which more fully describes our significant accounting policies, the preparation of consolidated financial statements in accordance with U.S. GAAP requires us to exercise judgment in the process of applying our accounting policies. It also requires that we make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting policies and estimates that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require the most difficult, subjective, and complex judgments in estimating the effect of inherent uncertainties. Revenue Recognition: Revenues are generated from time charters and voyage charters. Time charter revenues are recognized on a straight-line basis over the term of the respective time charter agreements as service is provided. Voyage revenues represent revenues earned by the Company, principally from providing transportation services under voyage charters. A voyage charter involves the carriage of a specific amount and type of cargo on a load port to discharge port basis, subject to various cargo handling terms. Under a voyage charter, the service revenues are earned and recognized ratably over the duration of the voyage. A contract is accounted for when it has approval and commitment from both parties, the rights and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Estimated losses under a voyage charter are provided for in full at the time such losses become probable. Demurrage, which is included in voyage revenues, represents payments by the charterer to the vessel owner when loading and discharging time exceed the stipulated time in the voyage charter. Demurrage is measured in accordance with the provisions of the respective charter agreements and the circumstances under which demurrage revenues arise. Demurrage revenue is included in the calculation of voyage revenue and recognized ratably over the duration of the voyage to which it pertains. Voyage revenue recognized is presented net of address commissions. Charter revenues relate to a time charter arrangement under which the Company is paid to provide transportation services on a per day basis for a specified period of time. Revenues from time charters are earned and recognized on a straight-line basis over the term of the charter, as the charters do not fall under the scope of ASC 606. Revenue is not earned when vessels are offhire. Long-lived Assets Impairment Considerations: The carrying values of the Company’s vessels may not represent their fair market value or the amount that could be obtained by selling the vessel at any point in time because the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the pricing of new vessels, which tend to be cyclical. The carrying value of each group of vessels classified as held and used are reviewed for potential impairment when events or changes in circumstances indicate that the carrying value of a particular group may not be fully recoverable. In such instances, an impairment charge would be recognized if the estimate of the undiscounted future cash flows expected to result from the use of the group and its eventual disposition is less than its carrying value. This assessment is made at the assets group level, which 48 represents the lowest level for which identifiable cash flows are largely independent of other groups of assets. The asset groups established by the Company are defined by vessel size and major characteristic or trade. The significant factors and assumptions used in the undiscounted projected net operating cash flow analysis include the Company’s estimate of future time charter equivalent "TCE" rates based on current rates under existing charters and contracts. When existing contracts expire, the Company uses an estimated TCE based on actual results and extends these rates out to the end of the vessel’s useful life. TCE rates can be highly volatile, may affect the fair value of the Company’s vessels and may have a significant impact on the Company’s ability to recover the carrying amount of its fleet. Accordingly, the volatility is contemplated in the undiscounted projected net operating cash flow by using a sensitivity analysis based on percent changes in the TCE rates. The Company prepares a series of scenarios in an attempt to capture the range of possible trends and outcomes. Projected net operating cash flows are net of brokerage and address commissions and assume no revenue on scheduled offhire days. The Company uses the current vessel operating expense budget, estimated costs of drydocking and historical general and administrative expenses as the basis for its expected outflows, and applies an inflation factor it considers appropriate. The net of these inflows and outflows, plus an estimated salvage value, constitutes the projected undiscounted future cash flows. If these projected cash flows do not exceed the carrying value of the asset group, an impairment charge would be calculated. Measurement of the impairment loss is based on the fair value of the asset as provided by third parties. The Company concluded that no triggering event had occurred during the twelve months ended December 31, 2021 which would require impairment testing. The Company concluded that no triggering event had occurred during the first, third and fourth quarter of 2020 which would require impairment testing. During the second quarter of 2020, the Company determined that a triggering event occurred related to the sale of a vessel, as the carrying value exceeded its fair value. A loss on impairment of $1.8 million was recorded in the second quarter of 2020 when the Memorandum of Agreement was signed. The Company performed an impairment analysis on each asset group and concluded the estimated undiscounted future cash flows were higher than their carrying amount and as such, no additional loss on impairment was recognized. 49 The table set forth below indicates the purchase price of the Company’s vessels and the net carrying amount of each vessel as of December 31, 2021. (In thousands of U.S. dollars) Vessel Name Date Acquired Size Year Build Purchase Price Net Carrying Amount m/v Bulk Endurance January 2017 UMX - 1C 2017 $ 28,000 $ 23,070 m/v Bulk Destiny January 2017 UMX - 1C 2017 24,000 20,075 m/v Bulk Courageous April 2021 UMX 2013 16,798 16,357 m/v Nordic Oasis January 2016 PMX-1A 2016 32,600 27,650 m/v Nordic Olympic February 2015 PMX-1A 2015 32,600 25,983 m/v Nordic Odin February 2015 PMX-1A 2015 32,625 26,074 m/v Nordic Oshima September 2014 PMX-1A 2014 33,709 25,612 m/v Nordic Orion April 2012 PMX-1A 2011 32,363 23,057 m/v Nordic Odyssey April 2012 PMX-1A 2010 32,691 22,456 m/v Bulk Valor June 2021 SMX 2013 18,182 17,797 m/v Bulk Friendship September 2019 SMX 2011 14,447 14,526 m/v Bulk Independence May 2019 SMX 2008 14,393 13,467 m/v Bulk Pride December 2017 SMX 2008 14,023 13,561 m/v Bulk Trident September 2012 SMX 2006 17,010 12,459 m/v Bulk Freedom June 2017 SMX 2005 9,016 8,477 m/v Bulk Newport September 2013 SMX 2003 15,546 11,567 m/v Bulk Spirit February 2019 SMX 2009 13,000 12,293 m/v Bulk Pangaea December 2009 PMX 1996 26,500 11,802 m/v Bulk Xaymaca (1) August 2018 PMX 2006 14,010 12,662 m/v Bulk Promise July 2021 PMX 2013 18,633 18,307 m/v Nordic Nuluujaak May 2021 Post Panamax 1A 2021 38,424 38,949 m/v Nordic Qinngua June 2021 Post Panamax 1A 2021 38,471 38,838 m/v Nordic Sanngijuq September 2021 Post Panamax 1A 2021 37,920 38,377 m/v Nordic Siku November 2021 Post Panamax 1A 2021 37,935 38,776 Miss Nora G. Pearl November 2017 Deck Barge 1979 3,833 2,715 Total $ 596,728 $ 514,908 (1) Formerly known as m/v Bulk PODS. Recent Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Companies can apply the ASU immediately, however the guidance will only be available until December 31, 2022. The Company is currently evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for the Company at the beginning of 2023. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently assessing the new guidance and its impact on its consolidated financial statements, and it intends to adopt the guidance when it becomes effective in the first quarter of 2023. 50 Important Financial and Operational Terms and Concepts The Company uses a variety of financial and operational terms and concepts when analyzing its performance. These include revenue recognition, deferred revenue, allowance for doubtful accounts, vessels and depreciation and long-lived assets impairment considerations, as defined above as well as the following: Voyage Expenses. The Company incurs expenses for voyage charters, including bunkers (fuel), port charges, canal tolls, brokerage commissions and cargo handling operations, which are expensed as incurred. Charter Expenses. The Company charters in vessels to supplement its owned fleet to support its voyage charter operations. The Company hires vessels under time charters with third party vessel owners, and recognizes the charter hire payments as an expense on a straight-line basis over the term of the charter. Charter hire payments are typically made in advance, and the unrecognized portion is reflected as advance hire in the accompanying consolidated balance sheets. Under the time charters, the vessel owner is responsible for the vessel operating costs such as crews, maintenance and repairs, insurance, and stores. Vessel Operating Expenses. Vessel operating expenses represent the cost to operate the Company’s owned vessels. Vessel operating expenses include crew hire and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, other miscellaneous expenses, and technical management fees. These expenses are recognized as incurred. Technical management services include day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, arranging the hire of crew, and purchasing stores, supplies, and spare parts. Fleet Data. The Company believes that the measures for analyzing future trends in its results of operations consist of the following: • Shipping days. The Company defines shipping days as the aggregate number of days in a period during which its owned or chartered-in vessels are performing either a voyage charter (voyage days) or a time charter (time charter days). • Daily vessel operating expenses. The Company defines daily vessel operating expenses as vessel operating expenses divided by ownership days for the period. Vessel operating expenses include crew hire and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes, other miscellaneous expenses, and technical management fees. • Chartered in days. The Company defines chartered in days as the aggregate number of days in a period during which it chartered in vessels from third party vessel owners. • Time Charter Equivalent ‘‘TCE’’ rates. The Company defines TCE rates as total revenues less voyage expenses divided by the length of the voyage, which is consistent with industry standards. TCE rate is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because rates for vessels on voyage charters are generally not expressed in per-day amounts while rates for vessels on time charters generally are expressed in per-day amounts. Business Overview The seaborne drybulk transportation industry is cyclical and can be volatile. In 2021 drybulk freight markets reached levels not seen in a decade driven by strong global demand in major and minor bulks, and supply constraints driven by lack of supply and port congestion. The Baltic Dry Index (“BDI”), a measure of dry bulk market performance, averaged 2,956 for 2021, up from an average of 1,085 for 2020. Seasonal volatility within the year resulted in an intra-year low of 1,452 BDI in January and a high of 5,167 in September, which was this highest level since 2008. More specifically, and reflecting the composition of the Company's fleet, the average published market index rates for Supramax and Panamax vessels increased approximately 214% from an average of $8,020 in 2020 to $25,146 in 2021. We have historically experienced fluctuations in our results of operations on a quarterly and annual basis. We expect to experience continued fluctuations in our operating results in the foreseeable future due to a variety of factors, including dislocation in supply of vessels, demand for commodities carried on our vessels, competition, and seasonality. Given the possibilities of wave surges of COVID-19 globally and the uncertainty where they may impact in the future, we have taken steps to manage operating costs, further enhance our financial flexibility, selectively deploy our capital, and protect the health and safety of our crew and shore based employees. Consistent with our chartering strategy we have redelivered chartered- 51 in vessels when possible and continue to charter in new vessels, when needed, for short term periods dependent on market conditions at the time. We have implemented stricter protocols around crew changes, and required quarantine periods, and shore based employees in our Newport, Copenhagen, Singapore and Athens offices continue to comply with local and international guidelines. TCE Performance The Company's TCE rates increased 102% from $12,433 for year ended December 31, 2020 to $25,056 for the year ended December 31, 2021. The average supramax and panamax market index rates for 2021 were $25,146 per day. Pangaea’s earned TCE rates were on par with or below the market index during the first three quarters due to the impact of timing of pricing and duration of performing voyages in a rapidly rising market as well as the impact of performance of voyages on fixed freight rates from our long term contracts of affreightment that are less than spot market rates. However, in the fourth quarter of 2021, the Company's achieved TCE rates outperformed the average of the Baltic panamax and supramax market indexes and exceeded the average market rates by approximately 16%. This was the result of the factors noted above, specifically, the pricing and performing of voyages on fixed freight rates as the prevailing market declined as part of the Company's strategy of protecting downside exposure to declining markets. 2021 Highlights • Net income attributable to Pangaea Logistics Solutions Ltd. of $67.2 million as compared to $11.4 million for the year ended December 31, 2020. • Income from operations of $78.9 million, up from $19.7 million for 2020. • Earnings per share were $1.50 as compared to $0.26 for the year ended December 31, 2020. • Cash flow from operations of $61.7 million, compared to $20.8 million for the prior year. • Pangaea's TCE rates increased 102% to $25,056 from $12,433 in 2020. • At December 31, 2021, Pangaea had $56.2 million in cash and cash equivalents. Results of Operations Fiscal Year Ended December 31, 2021 Compared to Fiscal Year Ended December 31, 2020 Revenues Pangaea’s revenues are derived predominantly from voyage charters and time charters. Total revenue for the fiscal year ended December 31, 2021, was $718.1 million compared to $382.9 million, for the same period in 2020. The number of shipping days increased 12% to 19,895 in the fiscal year ended December 31, 2021, from 17,777 for the same period in 2020. The revenue increase was due to a 102% increase in the average TCE rate, which was $25,056 per day for the twelve months ended December 31, 2021, compared to $12,433 per day for the same period in 2020. Components of revenue are as follows: Voyage revenues for the fiscal year ended December 31, 2021, increased 76% to $614.5 million from $349.7 million for the same period in 2020. The increase in voyage revenues was primarily due to higher average TCE rates as noted above. The number of voyage days of increased 8% to 15,932 for the twelve months ended December 31, 2021 from 14,756 for the same period in 2020. Charter revenues increased 213% to $103.6 million for the year ended December 31, 2021 from $33.2 million for the year ended December 31, 2020. The increase in charter revenues was due to an increase in drybulk market rates and an increase in time charter days, which were up 31% to 3,963 in 2021 from 3,021 in 2020. The optionality of our chartering strategy allows the Company to selectively release excess ship days, if any, into the market under time charters arrangements. Voyage Expenses Voyage expenses for the fiscal year ended December 31, 2021 were $219.6 million compared to $161.9 million for the year ended 2020, an increase of approximately 36%. The increase was primarily attributable t o an increase in bunker costs, port expenses and canal fees. Further voyage days increased by 8% to 15,932 days in the twelve months ended December 31, 2021 from 14,756 days for the same period in 2020 . Total costs of bunkers consumed increased by 45% for the twelve months ended December 31, 2021 compared to the same period in 2020 due to the increasing market price for bunkers. Port expenses increased by 22% compared to prior year as a result of increased canal fees incurred in the current year. 52 Charter Hire Expenses The Company charters in vessels, typically on short term basis, from other shipowners to supplement its owned fleet. Charter hire expenses paid to third party shipowners were $335.0 million for the year ended December 31, 2021, compared to $127.8 million for the year ended December 31, 2020, a 162% increase. The increase in charter hire expenses was primarily due to an increase in market rates to charter-in vessels. The average published market rates for Supramax and Panamax vessels increased approximately 214% from an average of $8,020 in 2020 to $25,146 in the same period of 2021. Additionally, the number of chartered-in days increased 11% from 11,554 days in the twelve months ended December 31, 2020 to 12,859 days for the twelve months ended December 31, 2021 as the Company limited its exposure to the prevailing market in 2020 due to the impacts of COVID-19 and subsequently increased the chartered-in fleet to meet increasing demand in 2021. The Company's flexible charter-in strategy allows it to supplement its owned fleet with short term chartered-in tonnage at prevailing market prices, when needed, to meet cargo demand. Vessel Operating Expenses Vessel operating expenses increased 12%, from $38.0 million for the year ended December 31, 2020 to $42.7 million for the year ended December 31, 2021. The increase in vessel operating expenses was predominantly due to an increase in owned days resulting from the acquisition of vessels in 2021. Excluding technical management fees, vessel operating expenses on a per day basis were $5,260 for the twelve months ended December 31, 2021 and $5,432 for the twelve months ended December 31, 2020. Technical management fees were approximately $3.9 million and $3.6 million, respectively, for the twelve months ended December 31, 2021 and 2020, respectively. General and Administrative Expenses General and administrative expenses increased from $15.9 million for the year ended December 31, 2020 to $19.0 million for the year ended December 31, 2021. The increase was primarily due to an increase in incentive compensation. Depreciation and Amortization Depreciation and amortization expense increased $5.9 million or 35%. The increase was primarily due to the 16% increase in ownership days to 7,383 days in 2021 from 6,343 days in 2020. The increase in ownership days is due to the acquisition of vessels, as noted above, which was part of a fleet renewal plan. The increase in depreciation and amortization expense is also due to an increase in the cost base of our owned fleet due to the capitalization of ballast water treatment systems ("BWTS") on our vessels. Loss on sale of vessels The Company recorded a loss of $0.7 million on the sale of the m/v Bulk Beothuk, and m/v Bulk Patriot, offset by a small gain on the sale of the m/v Nordic Barents in the year ended December 31, 2020. No loss on sales of vessels were recorded in the year ended December 31, 2021. Impairment of vessels During the twelve months ended December 31, 2020, the Company recorded $1.8 million of impairment of vessel assets. On June 29, 2020 the Company entered into an agreement to sell the Bulk Beothuk for $4.6 million, the sale was finalized and the vessel delivered to its new owner on August 4, 2020. A loss on impairment of $1.8 million was recorded in the second quarter of 2020 when the Memorandum of Agreement was signed as the carrying value of the assets exceeded the fair value. No loss on impairment of vessels were recorded in the year ended December 31, 2021. Unrealized (Loss) Gain on Derivative Instruments The Company assesses risk associated with fluctuating future freight rates and bunker prices, when appropriate, actively hedges identified economic risk that may impact the operating income of long-term cargo contracts with forward freight agreements or bunker swaps. The usage of such derivatives can lead to fluctuations in the Company’s reported results from operations on a period-to-period basis. The Company recorded an unrealized gain on derivative instruments of $3.9 million in the year ended December 31, 2021 and recorded an unrealized loss of $0.2 million in the year ended December 31, 2020. Refer to Note 6 Margin Account, Derivative and Fair Value Measures to the consolidated financial statements for further information. 53 Liquidity and Capital Resources Liquidity and Cash Needs The Company has historically financed its capital requirements with cash flow from operations, the issuance of common stock, proceeds from non-controlling interests, and proceeds from long-term debt and finance lease financing arrangements. The Company has used its capital primarily to fund operations, vessel acquisitions, and the repayment of debt and the associated interest expense. The Company may consider debt or additional equity financing alternatives from time to time. However, if market conditions deteriorate, the Company may be unable to raise additional debt or equity financing on acceptable terms or at all. As a result, the Company may be unable to pursue opportunities to expand its business. At December 31, 2021 and 2020, the Company had working capital of $72.2 million and $0.5 million, respectively, an increase primarily due to the refinancing of Bulk Nordic Odin, Bulk Nordic Olympic, Bulk Nordic Oshima, and Bulk Nordic Oasis Loan Agreements in 2021. The increase in working capital is also due to an increase in accounts receivable due to increased revenue in 2021. Considerations made by management in assessing the Company’s ability to continue as a going concern are its ability to consistently generate positive cash flows from operations, which were approximately $61.7 million in 2021, and $20.8 million in 2020; its excess of cash and cash restricted by facility agents over the current portion of secured long-term debt and finance lease obligations, and its focus on contract employment (COAs). In addition, the Company has demonstrated its ability to adapt to changing market conditions by changing the chartered-in profile to meet its cargo commitments and react to volatile market rates. The Company believes that future operating cash flows together with cash on hand, availability of borrowings, and contributions from non-controlling interests will be sufficient to meet our future operating and capital expenditure cash requirements for the next 12 months and the foreseeable future. For more information on the results of operations, see Part II. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of Operations. Capital Expenditures The Company’s capital expenditures relate to the purchase of vessels and interests in vessels, and to capital improvements to its vessels which are expected to enhance the revenue earning capabilities and safety of these vessels. The Company’s owned or partially owned and controlled fleet at December 31, 2021 includes: nine Panamax drybulk carriers (six of which are Ice-Class 1A); eight Supramax drybulk carriers, three Ultramax drybulk carriers (Two of which are Ice-Class IC), and four Post Panamax Ice Class 1A drybulk vessels. In addition to vessel acquisitions that the Company may undertake in future periods, its other major capital expenditures include funding its program of regularly scheduled drydockings necessary to make improvements to its vessels, as well as to comply with international shipping standards and environmental laws and regulations. This includes installation of BWTS required under new regulations, the cost of which will be $0.5 million to $0.7 million per vessel. The Company has some flexibility regarding the timing of drydocking, but the total cost is unpredictable. The Company expects to perform two special surveys in 2022 at an aggregate total cost of approximately $3.0 million. The Company expects to perform three intermediate surveys in 2022 at an aggregate total cost of approximately $1.5 million. The Company estimates that offhire related to the surveys and related repair work is ten to twenty days per vessel, depending on the size and condition of the vessel. Funding of these requirements is anticipated to be met with cash from operations. The Company anticipates that this process of recertification will require it to reposition these vessels from a discharge port to shipyard facilities, which will reduce the Company’s available days and operating days during that period. The following table summarizes Pangaea’s net cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2021 and 2020: (in millions) 2021 2020 Net cash provided by operating activities $ 61.7 $ 20.8 Net cash used in investing activities $ (197.8) $ (6.9) Net cash provided by (used in) financing activities $ 143.9 $ (18.6) Operating Activities 54 Net cash provided by operating activities during the year ended December 31, 2021 was $61.7 million, compared to net cash provided by operating activities of $20.8 million during the year ended December 31, 2020. The cash flows from operating activities increased primarily due to the increase in income from operations, partially offset by the impact of changes in working capital. Investing Activities Net cash used in investing activities was $197.8 million for 2021, which consists primarily $196.6 million for vessel acquisitions and investments in non-consolidated subsidiaries for $1.1 million. Net cash used in investing activities was $6.9 million for 2020, which consists primarily of $15.0 million paid to acquire an additional one-third interest in NBHC. Refer to Note11 Other Long-Term Liabilities for further information. This use of cash was offset by proceeds from the sale of three vessels of $11.7 million. Financing Activities Net cash provided by financing activities in 2021 was $143.9 million compared to net cash used in financing activities of $18.6 million for the same period of 2020. During the twelve months ended December 31, 2021, the Company received $220.3 million in proceeds from long-term debt and finance leases and $9.2 million in proceeds from non-controlling interest recorded as a long-term liability. The Company repaid $62.0 million of long term debt, $9.9 million of finance leases and $2.5 million of other long term liabilities. The Company also paid $5.5 million of common stock cash dividends and $3.3 million cash dividends to non-controlling interests. Net cash used in financing activities was $18.6 million for 2020, which consists of $18.0 million of proceeds from secured credit facilities; repayments of $23.0 million on credit facilities and repayments of $12.5 million on financing arrangements. 55 Borrowing Activities Long-term debt consists of the following: December 31, 2021 December 31, 2020 Interest Rate (%) (1) Maturity Date Bulk Nordic Odin Ltd., Bulk Nordic Olympic Ltd. Loan Agreement $ — $ 25,466,300 Not applicable Bulk Nordic Oasis Ltd. Loan Agreement — 14,000,000 Not applicable Bulk Nordic Oshima Ltd. Amended and Restated Loan Agreement — 12,004,295 Not applicable Bulk Nordic Odyssey (MI) Corp., Bulk Nordic Orion (MI) Corp. Senior Secured Term Loan Facility (2) (3) 16,224,189 18,000,000 2.95 % December 2027 Bulk Nordic Oshima (MI) Corp., Bulk Nordic Odin (MI) Corp., Bulk Nordic Olympic (MI) Corp., Bulk Nordic Oasis (MI) Corp. Secured Term Loan Facility (2) (3) (4) 49,400,000 — 3.38 % June 2027 The Amended Senior Facility - Dated May 13, 2019 (formerly The Amended Senior Facility - Dated December 21, 2017) (5) Bulk Nordic Six Ltd. - Tranche A (2) 11,166,661 12,233,329 4.39 % May 2024 Bulk Nordic Six Ltd. - Tranche B 2,330,000 2,590,000 2.53 % May 2024 Bulk Pride - Tranche C (2) 4,100,000 5,200,000 5.39 % May 2024 Bulk Independence - Tranche E (2) 11,500,000 12,500,000 3.54 % May 2024 Bulk Freedom Loan Agreement 2,600,000 3,200,000 3.95 % June 2022 Bulk Valor Corp. Loan and Security Agreement (2) 12,718,279 — 3.29 % June 2028 Bulk Promise Corp. 12,453,926 — 2.43 % October 2027 109 Long Wharf Commercial Term Loan 484,066 593,666 2.09 % April 2026 Total $ 122,977,121 $ 105,787,590 Less: unamortized bank fees (6) (1,697,209) (643,018) $ 121,279,912 $ 105,144,572 Less: current portion (15,443,115) (57,382,674) Secured long-term debt, net $ 105,836,797 $ 47,761,898 (1) As of December 31, 2021. (2) Interest rates on the loan facilities are fixed. (3) The borrowers under this facility are owned by NBHC. The Company has two-third's ownership interest and STST has one-third ownership interest in NBHC. NBHC is consolidated in accordance with ASC 810-10 and as such, amounts pertaining to the non-controlling ownership held by the third parties in the financial position of NBHC are reported as non-controlling interest in the accompanying balance sheets. (4) On April 26, 2021, NBHC entered into a new Senior Secured Term Loan Facility with two new lenders. The agreement advanced $53.0 million in respect of the m/v Nordic Oshima, m/v Nordic Olympic, m/v Nordic Odin and m/v Nordic Oasis. The agreement requires repayment of the advance in 24 equal quarterly principal installments of $1.2 million beginning on June 15, 2021 and a balloon payment of $24.2 million due in June 2027. (5) This facility is cross-collateralized by the vessels m/v Bulk Endurance, m/v Bulk Pride, and m/v Bulk Independence and is guaranteed by the Company. (6) A portion of unamortized debt issuance costs were reclassified as a reduction of the finance leases liabilities. Refer to Note 10 "Commitments and Contingencies" for additional information. Bulk Nordic Odin Ltd., Bulk Nordic Olympic Ltd. Bulk Nordic Odyssey Ltd., Bulk Nordic Orion Ltd. And Bulk Nordic Oshima Ltd. – Dated September 28, 2015 - Amended and Restated Loan Agreement The amended agreement advanced $21,750,000 in respect of each the m/v Nordic Odin and the m/v Nordic Olympic; $13,500,000 in respect of each the m/v Nordic Odyssey and the m/v Nordic Orion, and $21,000,000 in respect of the m/v Nordic Oshima. The agreement requires repayment of the advances as follows: In respect of the Odin and Olympic advances, repayment to be made in 28 equal quarterly installments of $375,000 per borrower (one of which was paid prior to the amendment by each borrower) and the loan was repaid in full on April 26, 2021. 56 In respect of the Odyssey and Orion advances, repayment to be made in 20 quarterly installments of $375,000 per borrower and balloon payments of $5,677,203 due with each of the final installments in September 2020. In September 2020 the Company amended the facility to make an additional quarterly installment of $375,000 per borrower and extend the balloon payments to December 2020 which were paid in full on December 23, 2020. In respect of the Oshima advance, repayment to be made in 28 equal quarterly installments of $375,000 and the loan was repaid in full on April 26, 2021. The Bulk Nordic Oasis Ltd. - Loan Agreement - Dated December 11, 2015 The agreement advanced $21,500,000 in respect of the m/v Nordic Oasis. The agreement requires repayment of the advance in 24 equal quarterly installments of $375,000 beginning on March 28, 2016 and the loan was repaid in full on April 26, 2021. The Bulk Nordic Odyssey (MI) Corp., Bulk Nordic Orion (MI) Corp. Senior Secured Term Loan Facility - Dated December 23, 2020. The agreement advanced $18,000,000 in respect of the m/v Nordic Odyssey and m/v Nordic Orion. The agreement requires repayment of the advance in 28 equal quarterly principal and interest installments of $571,821 beginning on March 23, 2021 and a balloon payment of $4,400,000 due with the final installment in December 2027. Interest on this advance is fixed at 2.95%. The loan is secured by a first preferred mortgage on the m/v Nordic Odyssey and m/v Nordic Orion, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. Additionally, the agreement contains a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously provided, to remain above defined ratios. As of December 31, 2021 the Company was in compliance with its financial covenants. Bulk Nordic Oshima (MI) Corp., Bulk Nordic Odin (MI) Corp., Bulk Nordic Olympic (MI) Corp., and Bulk Nordic Oasis (MI) Corp. Facility Agreement dated April 26, 2021 On April 26, 2021, NBHC entered into a new Senior Secured Term Loan Facility with two new lenders. The agreement advanced $53.0 million in respect of the m/v Nordic Oshima, m/v Nordic Olympic, m/v Nordic Odin and m/v Nordic Oasis. The agreement requires repayment of the advance in 24 equal quarterly principal installments of $1,200,000 beginning on June 15, 2021 and a balloon payment of $24,200,000 due in March 2027. Interest on this advance is fixed at 3.38% effective May 5, 2021. The Loan is secured by a first lien on m/v Nordic Bulk Oshima, m/v Nordic Bulk Odin, m/v Nordic Bulk Olympic and m/v Nordic Bulk Oasis. The Company used a portion of the proceeds of the loan to repay the outstanding balance of $51.5 million for the Nordic Oshima, Nordic Odin, Nordic Olympic and Nordic Oasis loan facilities which was set to mature on October 1, 2021. As of December 31, 2021 the Company was in compliance with its financial covenants. The Amended Senior Facility - Dated May 13, 2019 (previously identified as The Amended Senior Facility - Dated December 21, 2017) On May 13, 2019, the Company, through its wholly owned subsidiaries, Bulk Endurance, Bulk Pride and Bulk Independence entered into the Second Amendatory Agreement, (the "Second Amendment"), amending and supplementing the First Amendatory Agreement dated December 17, 2017. The Second Amendment advanced $14,000,000 under Tranche E in respect to the m/v Bulk Independence, extended maturity dates on Tranche A, B, and C to May 2024, and reduced applicable interest rate margin on Tranche A, B, and C to 1.70% for the first eight quarters following the drawdown of Tranche E, and 2.40% thereafter. Bulk Endurance Tranche A and B The amended agreement advanced $19,500,000 in respect of the m/v Bulk Endurance on January 7, 2017, in two tranches. The agreement requires repayment of Tranche A, totaling $16,000,000, in three equal quarterly installments of $100,000 beginning on April 7, 2017 and 27 equal quarterly installments of $266,667. A balloon payment of $8,766,658 is due with the final installment in May 2024. Interest on this advance was fixed at 3.69% through March 2021, fixed at 4.39% through December 2021, and fixed at 3.46% thereafter. 57 The agreement also advanced $3,500,000 under Tranche B, which is payable in 28 equal quarterly installments of $65,000 beginning on September 27, 2017, and a balloon payment of $1,745,000 due with the final installment in May 2024. Interest on this advance is floating at LIBOR plus 1.70% (2.55% at December 31, 2021) through March 2021, and thereafter at LIBOR plus 2.4%. Bulk Pride Tranche C and D The amended agreement advanced $10,000,000 in respect of the m/v Bulk Pride on December 21, 2017, in two tranches. The agreement requires repayment of Tranche C, totaling $8,500,000, in 26 equal quarterly installments of $275,000 beginning in March 2018 and a balloon payment of $1,350,000 due with the final installment in May 2024. Interest on this advance was fixed at 4.69% through March 2021, fixed at 5.39% through December 2021, and fixed at 3.6% thereafter. The agreement also advanced $1,500,000 under Tranche D, which is payable in 4 equal quarterly installments of $375,000 beginning in September 2018. Tranche D was fully repaid in June 2019. Bulk Independence Tranche E The amended agreement advanced $14,000,000 under Tranche E in respect of the m/v Bulk Independence on May 13, 2019, which requires repayment of 20 equal quarterly installments of $250,000 beginning in September 2019 and a balloon payment of $9,000,000 due with the final installment in May 2024. Interest on this advance was fixed at 3.48% through March 31, 2020, fixed at 2.84% through December 31, 2021 and fixed at 3.54% thereafter. The loan is secured by first preferred mortgages on the m/v Bulk Endurance, the m/v Bulk Pride and the m/v Bulk Independence, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. Additionally, the agreement contains a minimum liquidity requirement, positive working capital of the borrower and a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously provided, to remain above defined ratios. At December 31, 2021 and December 31, 2020, the Company was in compliance with these covenants. The Bulk Freedom Corp. Loan Agreement -- Dated June 14, 2017 The agreement advanced $5,500,000 in respect of the m/v Bulk Freedom on June 14, 2017. The agreement requires repayment of the loan in 8 quarterly installments of $175,000 and 12 quarterly installments of $150,000 beginning on September 14, 2017. A balloon payment of $2,300,000 is due on June 14, 2022 with the final installment. The facility bears interest at LIBOR plus a margin of 3.75% (3.95% at December 31, 2021). The loan is secured by a first preferred mortgage on the m/v Bulk Freedom, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. Additionally, the agreement contains a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously provided, to remain above defined ratios. At December 31, 2021 and December 31, 2020, the Company was in compliance with these covenants. 109 Long Wharf Commercial Term Loan Initial amount of $1,096,000 entered into on May 27, 2016. The Long Wharf Construction to Term Loan was repaid from the proceeds of this new facility. The loan is payable in 120 equal monthly installments of $9,133. Interest is floating at the 30 day LIBOR plus 2.00% (2.09% at December 31, 2020). The loan is collateralized by all real estate located at 109 Long Wharf, Newport, RI, and a corporate guarantee of the Company. The loan contains a maximum loan to value covenant and a debt service coverage ratio. At December 31, 2021 and December 31, 2020, the Company was in compliance with these covenants. The Bulk Valor Corp. Loan Agreement -- Dated June 17, 2021 The agreement advanced $13,350,000 in respect of the m/v Bulk Valor on June 17, 2021. The agreement requires repayment of the loan in 28 quarterly installments commencing on September 17, 2021. A balloon payment is due on June 17, 2028. Interest on this advance is fixed at 3.29%. The loan is secured by a first preferred mortgage on the m/v 58 Bulk Valor, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. As of December 31, 2021 the Company was in compliance with its financial covenants. The Bulk Promise Corp. Loan Agreement -- Dated July 12, 2021 The agreement advanced $12,800,000 in respect of the m/v Bulk Promise on July 7, 2021. The agreement requires repayment of the loan in 24 quarterly installments of $346,074 commencing on October 15, 2021. A balloon payment of $4,494,224 is due on October 15, 2027. Interest on this advance is floating at three-month LIBOR plus 2.30%. The loan is secured by a first preferred mortgage on the m/v Bulk Promise, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. As of December 31, 2021 the Company was in compliance with its financial covenants. The future minimum annual payments under the debt agreements are as follows: Years ending December 31, 2022 $ 15,443,115 2023 12,940,758 2024 31,857,187 2025 9,718,626 2026 9,761,812 Thereafter 43,255,623 $ 122,977,121 Related Party Transactions Amounts and notes payable to related parties consist of the following: December 31, 2020 Activity December 31, 2021 Included in trade accounts receivable and voyage revenue on the consolidated balance sheets and statements of income, respectively: Trade receivables due from King George Slag (i) $ 106,959 $ (106,959) $ — Included in accounts payable and accrued expenses on the consolidated balance sheets: Trade payables due to Seamar (ii) $ 4,151,192 $ (1,303,282) $ 2,847,910 Commissions payable (trade payables) (iii) — 38,896 38,896 Included in current related party notes payable on the consolidated balance sheets: Interest payable – 2011 Founders Note 242,852 — 242,852 Total current related party notes payable $ 242,852 $ — $ 242,852 i. King George Slag LLC is a joint venture of which the Company owns 25% at December 31, 2021 and 2020 . ii. Seamar Management S.A. ("Seamar") is a joint venture of which the Company owns 51% at December 31, 2021 and 2020 . iii. Phoenix Bulk Carriers (Brasil) Intermediacoes Maritimas Ltda. - a wholly-owned Company of a member of the Board of Directors Under the terms of a technical management agreement between the Company and Seamar Management S.A. (Seamar), an equity method investee, Seamar is responsible for the day-to-day operation of some of the Company’s owned vessels. During the years ended December 31, 2021 and 2020, the Company incurred technical management fees of $2,847,120 and $2,761,800 under this arrangement, which is included in vessel operating expenses in the consolidated statements of income. The total amounts payable 59 to Seamar at December 31, 2021 and 2020, (including amounts due for vessel operating expenses), were $2,847,910 and $4,151,192, respectively. Accrued dividends consist of the following: 2013 common stock dividend (2) Dividends payable on issued and outstanding common stock (1) Total Balance at December 31, 2019 $ 478,359 $ 153,602 $ 631,961 Accrued dividend — 908,955 908,955 Paid in cash (478,359) (56,794) (535,153) Balance at December 31, 2020 — 1,005,763 1,005,763 Accrued dividend — 4,743,263 4,743,263 Paid in cash — (5,535,261) (5,535,261) Balance at December 31, 2021 $ — $ 213,765 $ 213,765 (1) Accrued dividends on unvested restricted shares under the Company's incentive compensation plan. Effect of Inflation The Company believes that its business benefits during periods of elevated inflation and positive demand growth, as higher charter rates, and net revenues, more than offset increases in costs relating to vessel operating expenses, drydocking, and general and administrative. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as of December 31, 2021 or 2020. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES Not applicable for a smaller reporting company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This information appears following Item 15 of this Report and is included herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.