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 52 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. During the first quarter of 2022, the Company determined that a triggering event occurred related to the sale of a vessel, as the carrying value exceeded its fair value. On April 20, 2022, the Company signed a memorandum of agreement to sell the m/v Bulk Pangaea for a total net consideration of $8.6 million after brokerage commissions. As a result, we recorded an impairment charge of $3.0 million in the first quarter of 2022. The impairment analysis did not indicate any impairment on the remaining fleet. Also the Company concluded that no triggering event had occurred during the remaining period of the 2022 which would require impairment testing. The Company concluded that no triggering event had occurred during the twelve months ended December 31, 2021 which would require impairment testing. 53 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, 2022. (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 $ 23,106 m/v Bulk Destiny January 2017 UMX - 1C 2017 24,000 19,815 m/v Bulk Courageous April 2021 UMX 2013 16,798 15,756 m/v Nordic Oasis January 2016 PMX-1A 2016 32,600 26,233 m/v Nordic Olympic February 2015 PMX-1A 2015 32,600 24,628 m/v Nordic Odin February 2015 PMX-1A 2015 32,625 24,726 m/v Nordic Oshima September 2014 PMX-1A 2014 33,709 24,292 m/v Nordic Orion April 2012 PMX-1A 2011 32,363 21,406 m/v Nordic Odyssey April 2012 PMX-1A 2010 32,691 20,685 m/v Bulk Valor June 2021 SMX 2013 18,182 17,106 m/v Bulk Friendship September 2019 SMX 2011 14,447 13,681 m/v Bulk Sachuest October 13 2022 SMX 2010 17,364 17,188 m/v Bulk Independence May 2019 SMX 2008 14,393 14,880 m/v Bulk Pride December 2017 SMX 2008 14,023 12,175 m/v Bulk Trident September 2012 SMX 2006 17,010 11,024 m/v Bulk Freedom June 2017 SMX 2005 9,016 7,464 m/v Bulk Newport (2) September 2013 SMX 2003 15,546 10,212 m/v Bulk Spirit February 2019 SMX 2009 13,000 11,703 m/v Bulk Xaymaca (1) August 2018 PMX 2006 14,010 13,083 m/v Bulk Concord February 2022 PMX 2009 19,900 19,395 m/v Bulk Promise July 2021 PMX 2013 18,633 17,619 m/v Nordic Nuluujaak May 2021 Post Panamax 1A 2021 38,424 37,519 m/v Nordic Qinngua June 2021 Post Panamax 1A 2021 38,471 37,428 m/v Nordic Sanngijuq September 2021 Post Panamax 1A 2021 37,920 37,000 m/v Nordic Siku November 2021 Post Panamax 1A 2021 37,935 37,393 Miss Nora G. Pearl November 2017 Deck Barge 1979 3,833 2,268 Total $ 607,492 $ 517,786 (1) Formerly known as m/v Bulk PODS. (2) Vessel was sold on March 3, 2023 Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying generally accepted accounting principles (“GAAP”) to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” which clarified that certain optional expedients and exceptions in Topic 848 apply to derivatives that are affected by the discounting transition due to reference rate reform. In December 2022, the FASB issued ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848," which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief under Topic 848. 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 54 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. The adoption of ASU 2016-13 is currently not expected to have a material impact on the Company's consolidated financial statements. 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 dry bulk sector of the transportation and logistics industry is cyclical and can be volatile due to changes in supply of vessels and demand for transportation of dry bulk commodities. After reaching levels not seen in over a decade in 2021, the dry bulk freight market remained strong in historical terms in the first half of 2022 before slowing down in the second half of the year due to decreased freight demand. The Baltic Dry Index (“BDI”), a measure of dry bulk market performance, averaged 1,832 for 2022, compared to an average of 2,956 for 2021, down approximately 38%. More specifically, and reflecting the composition of the Company's fleet, the average published market rates for Supramax and Panamax vessels decreased approximately 20% from an average of $25,146 in 2021 to $20,012 in 2022. We have historically experienced fluctuations in our results of operations on a 55 quarterly and annual basis due to the volatility of the dry bulk sector. We expect to experience continued fluctuations in our operating results in the foreseeable future due to a variety of factors, including cargo demand for vessels, supply of vessels, competition, and seasonality. Effect of Inflation High inflation in the United States and in many of the global economies where the Company operates is beginning to impact vessel operating costs, including crew travel, transportation of equipment and spares, and drydocking costs. We expect crew payroll expenses to continue to increase over the near and medium future, and other inflated cost changes may make our vessel daily operating costs higher. Increases in the cost of fuel consumed on voyages are usually absorbed by cargo market rates passed on to customers or covered by fuel cost pass through under the terms of long-term contracts. Because interest rates on a large portion of the Company’s long-term debt, and finance leases is fixed or capped, the impact of higher interest rates on the Company’s earnings is limited. TCE Performance For the year ended December 31, 2022, the Company's TCE rates were down only 2% to $24,434 from $25,056 for the year ended December 31, 2021, while the overall dry bulk market rates declined by approximately 20% for the year ended December 31, 2022. The Company's achieved TCE rate for the year ended December 31, 2022 outperformed the average of the Baltic Panamax and Supramax market indexes and exceeded the average market rates by approximately 22% due to its long-term contracts of affreightment, ("COAs"), its specialized fleet and its cargo-focused strategy. 2022 Highlights • Net income attributable to Pangaea Logistics Solutions Ltd. was $79.5 million for twelve months ended December 31, 2022 as compared to $67.2 million for the same period of 2021. • Diluted net income per share was $1.76 for twelve months ended December 31, 2022, as compared to $1.50 for the same period of 2021. • Time Charter Equivalent ("TCE") rates earned by Pangaea was $24,434 per day for twelve months ended December 31, 2022 and $25,056 per day for the same period of 2021. • Adjusted EBITDA was $140.9 million for twelve months ended December 31, 2022, as compared to $105.1 million for the same period of 2021. • At the end of the year, Pangaea had $128.4 million in cash, and cash equivalents. Results of Operations Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended December 31, 2021 Revenues Pangaea’s revenues are derived predominantly from voyage charters and time charters. Total revenue for the fiscal year ended December 31, 2022, was $699.7 million compared to $718.1 million, for the same period in 2021, a 3% decrease. The number of shipping days decreased 11% to 17,715 in the fiscal year ended December 31, 2022, from 19,895 for the same period in 2021. The revenue decrease was due to a 2% decrease in the average TCE rate, which was $24,434 per day for the twelve months ended December 31, 2022, compared to $25,056 per day for the same period in 2021. Components of revenue are as follows: Voyage revenues increased by 4% for the fiscal year ended December 31, 2022 to $640.0 million from $614.5 million for the same period in 2021. The increase in voyage revenues was primarily due to higher average TCE rates earned throughout the first half of 2022 and partially offset by declined market rates in the second half of the 2022. The number of voyage days decreased 4% to 15,237 for the twelve months ended December 31, 2022 from 15,932 for the same period in 2021. Charter revenues decreased to $59.7 million from $103.6 million, or 42%, for the year ended December 31, 2022 compared to the same period in 2021. The decrease in charter revenues was due to a decrease in time charter days as well as a decrease in charter hire rates evidenced by the decrease in index rates for Panamax and Supramax vessels of approximately 20% compared to the same period of 2021. The time charter days were down 37% to 2,478 in the twelve months ended December 31, 2022 from 3,963 in the twelve months ended December 31, 2021. The time charter revenue per day was $24,078 for the twelve months ended December 31, 2022 compared to $26,147 for the same period of 2021. The optionality 56 of our chartering strategy allows the Company to selectively release excess ship days, if any, into the market under time charter arrangements. Voyage Expenses Voyage expenses for the fiscal year ended December 31, 2022 were $262.1 million compared to $219.6 million for the year ended 2021, an increase of approximately 19%. The increase is primarily due to an increase in bunker consumption expense of $48.5 million driven by an increase in bunker fuel prices, partially offset by a decrease in port charges and canal tolls of $3.6 million. Total costs of bunkers consumed increased by 42% for the twelve months ended December 31, 2022 compared to the same period in 2021. The port charges and canal tolls decreased primarily due to a decrease in voyage days of 4% to 15,237 days in the twelve months ended December 31, 2022 from 15,932 days for the same period in 2021 . 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 $222.3 million for the year ended December 31, 2022, compared to $335.0 million for the year ended December 31, 2021, a 34% decrease. The decrease in charter hire expenses was primarily due to a decrease in market rates to charter-in vessels and a decrease in the number of chartered-in days from 12,859 days in the twelve months ended December 31, 2021 to 8,971 days for the twelve months ended December 31, 2022. The average published market rates for Supramax and Panamax vessels decreased approximately 20% from an average of $25,146 in 2021 to $20,012 in the same period of 2022. The Company benefited for the full year in 2022 from the acquisition of vessels over 2021 and 2022. 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 for the year ended December 31, 2022 were $56.9 million, compared to $42.7 million for the same period in 2021, an increase of approximately 33%. The increase in vessel operating expenses was primarily due to an increase in owned days resulting from the acquisition of vessels over the period. The ownership days for the twelve months ended December 31, 2022 and 2021 were 8,962 and 7,382, respectively. Excluding technical management fees, vessel operating expenses on a per day basis were $5,805 for the twelve months ended December 31, 2022 and $5,260 for the same period in 2021. Technical management fees were approximately $4.8 million and $3.9 million for the twelve months ended December 31, 2022 and 2021, respectively. The increase in vessel operating expenses was also attributable an increase in crew expenses due to an increase in crewing costs, crew changes and expenses related to COVID-19 and the war in Ukraine. The Company also continues to face general inflationary pressures particularly impacting the cost of lubes, stores and spares. General and Administrative Expenses General and administrative expenses increased from $19.0 million for the year ended December 31, 2021 to $20.1 million for the year ended December 31, 2022. The increase was primarily due to an increase in employee incentive compensation. Depreciation and Amortization We depreciate the cost of our vessels on a straight-line basis over the expected useful life of each vessel. Depreciation is based on the cost of the vessel less its estimated residual value. We estimate the useful life of our vessels ranging between 25 years to 30 year from the date of initial delivery from the shipyard to the original owner. We estimate the scrap rate to be $300/lwt to compute each vessel's residual value. Depreciation and amortization expense increased $6.5 million or 28%. The increase was primarily due to the 21% increase in ownership days to 8,962 days in 2022 from 7,382 days in 2021. 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 was due to an increase in drydocking amortization. Five drydockings were completed in 2021 and four drydockings were completed in 2022. Loss on sale of vessels 57 The Company recorded a loss of $0.3 million on the sale of the m/v Bulk Pangaea in the year ended December 31, 2022. 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, 2022, the Company recorded $3.0 million of impairment of vessel assets. On April 20, 2022 the Company entered into an agreement to sell the Bulk Pangaea for $8.8 million, the sale was finalized and the vessel delivered to its new owner on June 23, 2022. A loss on impairment of $3.0 million was recorded in the first quarter of 2022 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 $0.7 million and $3.9 million in the year ended December 31, 2022 and 2021, respectively. Refer to Note 7 Margin Account, Derivative and Fair Value Measures to the consolidated financial statements for further information. 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, 2022 and 2021, the Company had working capital of $130.3 million and $72.2 million, respectively. The increase in working capital was primarily driven by an increase in cash and cash equivalents generated from operating activities during the year and timing of the accounts receivable and advance charter hire. 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 $134.8 million in 2022, and $61.7 million in 2021; 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. 58 The table below summarizes our primary sources and uses of cash for the fiscal years ended December 31, 2022 and 2021. We have derived these summarized statements of cash flows from the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. (in millions) 2022 2021 Net cash provided by/(used in): Operating activities: Net income adjusted for non-cash items $ 127.1 $ 94.1 Changes in operating assets and liabilities, net 7.7 (32.4) Operating activities 134.8 61.7 Investing activities (28.5) (197.8) Financing activities (34.1) 143.9 Net change $ 72.2 $ 7.8 Operating Activities Net cash provided by operating activities during the year ended December 31, 2022 was $134.8 million, compared to net cash provided by operating activities of $61.7 million during the year ended December 31, 2021. The cash flows from operating activities increased compared to the same period in the prior year primarily due to the increase in income from operations, and timing of customer receipts and supplier payments. Investing Activities Net cash used in investing activities during the twelve months ended December 31, 2022 was $28.5 million compared to net cash used in investing activities of was $197.8 million for the same period in 2021. The Company purchased two vessels for $35.7 million in 2022. This use of cash was partially offset by the proceeds from the sale of one vessel for $8.4 million. Net cash used in investing activities of $197.8 million in 2021 primarily consists of $196.6 million for vessel acquisitions and investments in non-consolidated subsidiaries for $1.1 million. Financing Activities Net cash used in financing activities in 2022 was $34.1 million compared to net cash provided by financing activities of $143.9 million for the same period of 2021. During the twelve months ended December 31, 2022, the Company received $8.5 million in proceeds from long-term debt and $15.0 million in finance leases. The Company repaid $15.4 million of long term debt, $15.8 million of finance leases and $5.0 million of other long term liabilities. The Company also paid $13.4 million of common stock cash dividends and $5.0 million cash dividends to non-controlling interests. Net cash provided by financing activities was $143.9 million for 2021. During the twelve months ended December 31, 2021, the Company received $79.2 million in proceeds from long-term debt, $141.17 million in proceeds from 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. 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, 2022 includes: nine Panamax drybulk carriers (six of which are Ice-Class 1A); nine Supramax drybulk carriers, two Ultramax Ice-Class IC, one Ultramax 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 59 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 2023 at an aggregate total cost of approximately $2.7 million. The Company expects to perform five intermediate surveys in 2023 at an aggregate total cost of approximately $0.4 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. 60 Borrowing Activities Long-term debt consists of the following: December 31, 2022 December 31, 2021 Interest Rate (%) (1) Maturity Date Bulk Nordic Odyssey (MI) Corp., Bulk Nordic Orion (MI) Corp. Senior Secured Term Loan Facility (2) (3) 14,395,409 16,224,189 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) 44,600,000 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) 10,099,993 11,166,661 4.39 % May 2024 – Bulk Nordic Six Ltd. - Tranche B 2,070,000 2,330,000 6.03 % May 2024 – Bulk Pride - Tranche C (2) 3,000,000 4,100,000 5.39 % May 2024 – Bulk Independence - Tranche E (2) 10,500,000 11,500,000 3.54 % May 2024 Bulk Freedom Loan Agreement — 2,600,000 June 2022 Bulk Valor Corp. Loan and Security Agreement (2) 11,424,507 12,718,279 3.29 % June 2028 Bulk Promise Corp. 11,069,630 12,453,926 5.45 % October 2027 Bulk Sachuest (2) $ 8,500,000 $ — 6.19 % October 2029 109 Long Wharf Commercial Term Loan 374,466 484,066 6.39 % April 2026 Total $ 116,034,005 $ 122,977,121 Less: unamortized bank fees (6) (1,431,736) (1,697,209) $ 114,602,269 $ 121,279,912 Less: current portion (15,782,530) (15,443,115) Secured long-term debt, net $ 98,819,739 $ 105,836,797 (1) As of December 31, 2022. (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 12 "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. 61 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, 2022 and 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, 2022 and 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. 62 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% (3.63% at December 31, 2022) through March 2021, and thereafter at LIBOR plus 2.4%. The loan was repaid in full on January 10, 2023. 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, 2022 and 2021, 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 loan was repaid in full on June 13, 2022. 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% (6.39% at December 31, 2022). 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. The loan was repaid in full on January 25, 2023. At December 31, 2022 and 2021, 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 63 Bulk Valor, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. As of December 31, 2022 and 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 was fixed at 5.45% on July 15, 2022 through maturity. 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, 2022 and 2021 the Company was in compliance with its financial covenants. The Bulk Sachuest Corp. Loan Agreement -- Dated October 13, 2022 The agreement advanced $8,500,000 in respect of the m/v Bulk Sachuest on October 13, 2022. The agreement requires repayment of the loan in 27 quarterly installments commencing on January 13, 2023. A balloon payment is due on October 13, 2029. Interest on this advance is fixed at 6.19%. The loan is secured by a first preferred mortgage on the m/v Bulk Sachuest, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. As of December 31, 2022 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, 2023 $ 15,782,530 2024 30,751,725 2025 10,476,019 2026 10,638,024 2027 39,955,014 Thereafter 8,430,693 $ 116,034,005 Related Party Transactions Amounts and notes payable to related parties consist of the following: December 31, 2021 Activity December 31, 2022 Included in accounts payable and accrued expenses on the consolidated balance sheets: Trade payables due to Seamar (i) $ 2,847,910 $ (1,204,104) $ 1,643,806 Commissions payable (trade payables) (ii) 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. Seamar Management S.A. ("Seamar") is a joint venture of which the Company owns 51% at December 31, 2022 and 2021 . ii. 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, 2022 and 2021, the Company incurred technical management fees of $3,280,920 and $2,847,120 under this arrangement, which is included in vessel operating expenses in the consolidated statements of income. The total amounts payable 64 to Seamar at December 31, 2022 and 2021, (including amounts due for vessel operating expenses), were $1,643,806 and $2,847,910, respectively. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as of December 31, 2022 or 2021. 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.