Pangaea Logistics Solutions Ltd. 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion should be read in conjunction with our consolidated financial statements and footnotes thereto contained in this report. The MD&A generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 14, 2024. Pangaea Logistics Solutions Ltd. and its subsidiaries (collectively, “Pangaea” or the “Company”) provides seaborne drybulk logistics and transportation services as well as terminal and stevedoring services. Pangaea utilizes its logistics expertise to service a broad base of industrial customers who require the transportation of a wide variety of drybulk cargoes, including grains, coal, iron ore, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite and limestone. The Company provides ocean transportation services to clients utilizing an ocean-going fleet of motor vessels ("m/v") in the Handysize, Handymax, Supramax, Ultramax and Panamax and Post-Panamax segments. At any time, this fleet may be comprised of a total of 45-60 vessels that are owned or chartered-in on a short-term basis. For the twelve months ended December 31, 2024, the Company operated on average a total fleet of 48 vessels. At December 31, 2024, 41 vessels were wholly-owned or partially-owned through joint ventures, following the acquisition of 15 Handysize vessels on December 30, 2024. 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, 2024. 62 (In thousands of U.S. dollars) Vessel Name Date Acquired Size Year Build Purchase Price Net Carrying Amount m/v Bulk Endurance January 2017 Ultramax 1C 2017 $ 28,000 $ 20,616 m/v Bulk Destiny January 2017 Ultramax 1C 2017 24,000 17,729 m/v Bulk Prudence June 2023 Ultramax 2014 26,650 26,744 m/v Bulk Courageous April 2021 Ultramax 2013 16,798 16,028 m/v Nordic Oasis January 2016 Panamax 1A 2016 32,600 23,436 m/v Nordic Olympic February 2015 Panamax 1A 2015 32,600 22,089 m/v Nordic Odin February 2015 Panamax 1A 2015 32,625 21,980 m/v Nordic Oshima September 2014 Panamax 1A 2014 33,709 23,106 m/v Nordic Orion April 2012 Panamax 1A 2011 32,363 18,144 m/v Nordic Odyssey April 2012 Panamax 1A 2010 32,691 17,181 m/v Bulk Valor June 2021 Supramax 2013 18,182 15,726 m/v Bulk Friendship September 2019 Supramax 2011 14,447 11,957 m/v Bulk Sachuest October 2022 Supramax 2010 17,364 15,678 m/v Bulk Brenton July 2024 Supramax 2016 28,762 28,256 m/v Bulk Patience August 2024 Supramax 2016 28,663 28,240 m/v Bulk Independence May 2019 Supramax 2008 14,393 12,622 m/v Bulk Pride December 2017 Supramax 2008 14,023 10,678 m/v Bulk Freedom June 2017 Supramax 2005 9,016 7,326 m/v Bulk Spirit February 2019 Supramax 2009 13,000 11,961 m/v Bulk Xaymaca August 2018 Panamax 2006 14,010 11,042 m/v Bulk Concord February 2022 Panamax 2009 19,900 18,511 m/v Bulk Promise July 2021 Panamax 2013 18,633 16,344 m/v Nordic Nuluujaak May 2021 Post Panamax 1A 2021 38,424 34,667 m/v Nordic Qinngua June 2021 Post Panamax 1A 2021 38,471 34,655 m/v Nordic Sanngijuq September 2021 Post Panamax 1A 2021 37,920 34,291 m/v Nordic Siku November 2021 Post Panamax 1A 2021 37,935 34,672 m/v Strategic Fortitude December 2024 Handysize 2016 16,874 16,874 m/v Strategic Resolve December 2024 Handysize 2015 14,606 14,606 m/v Strategic Explorer December 2024 Handysize 2015 14,606 14,606 m/v Strategic Entity December 2024 Handysize 2015 14,606 14,606 m/v Strategic Synergy December 2024 Handysize 2014 14,062 14,062 m/v Strategic Alliance December 2024 Handysize 2014 14,062 14,062 m/v Strategic Unity December 2024 Handysize 2014 14,062 14,062 m/v Strategic Harmony December 2024 Handysize 2014 14,062 14,062 m/v Strategic Equity December 2024 Handysize 2014 14,062 14,062 m/v Strategic Venture December 2024 Handysize 2014 14,062 14,062 m/v Strategic Savannah December 2024 Handysize 2013 11,431 11,431 m/v Strategic Spirit December 2024 Handysize 2012 11,068 11,068 m/v Strategic Vision December 2024 Handysize 2012 11,068 11,068 m/v Strategic Tenacity December 2024 Handysize 2012 10,705 10,705 m/v Strategic Endeavor December 2024 Handysize 2010 7,711 7,711 Miss Nora G. Pearl November 2017 Deck Barge 1979 3,833 1,597 Total $ 856,061 $ 732,325 63 Recent Accounting Pronouncements On January 1, 2023, we adopted ASU No. 2016-13, "Financial Instruments—Credit Losses" ("ASU 2016-13"). ASU 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The adoption of the accounting standard did not have any material impact on our consolidated financial statements. The Company adopted ASU No. 2020-04, ASU No. 2021-01, and ASU No. 2022-06 related to Reference Rate Reform (Topic 848). The adoption did not have a material impact on the Company’s consolidated financial statements or related disclosures." In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update expands the disclosure requirements for reportable segments by enhancing disclosures related to significant segment expenses, interim segment profit or loss, and segment assets. It also clarifies how the Chief Operating Decision Maker ("CODM") uses the reported segment profit or loss information to assess segment performance and allocate resources. The Company adopted ASU 2023-07 effective December 15, 2024, and determined that the application of this guidance did not have a material impact on its consolidated financial statements. For additional details on the adoption effects of ASU 2023-07, refer to Note 16. Recently Issued Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of incremental income tax information related to the income tax rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. The update is effective for annual periods beginning after December 15, 2024 on a prospective basis, and retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its disclosures within its consolidated financial statements. In November 2024, the FASB released ASU 2024-03, which focuses on Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires the disclosure of additional information regarding specific expense categories in the financial statement notes. It becomes effective for annual periods starting after December 15, 2026, and for interim periods starting after December 15, 2027, with early adoption permitted. The update can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is currently assessing the impact of ASU 2024-03 on its disclosures in the 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 credit losses, 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. 64 Terminal & Stevedore Expenses . Terminal & Stevedore expenses represent the cost to provide the Company's cargo handling services. Terminal & Stevedore expenses include direct labor and related costs, the cost of insurance, expenses relating to repairs and maintenance of shore based equipment, trucking, and other direct miscellaneous expenses. 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. 65 Selected Financial Data (in thousands, except shipping days data) December 31, 2024 December 31, 2023 Selected Data from the Consolidated Statements of Income Voyage revenue $ 494,107 $ 468,581 Charter revenue 30,326 23,716 Terminal & stevedore revenue 12,103 6,971 Total revenue 536,536 499,268 Voyage expense 237,479 227,435 Charter hire expense 130,764 111,034 Vessel operating expenses 55,544 55,784 Terminal Expenses 9,299 5,809 Total cost of transportation and service revenue 433,085 400,061 Transportation and service depreciation and amortization 30,266 29,960 Gross Profit 73,185 69,247 Other operating expenses 24,736 22,891 Loss on sale of vessels — 1,739 Income from operations 48,449 44,617 Total other expense, net (16,679) (16,079) Net income 31,769 28,538 Income attributable to noncontrolling interests (2,866) (2,214) Net income attributable to Pangaea Logistics Solutions Ltd. $ 28,903 $ 26,322 Net income from continuing operations per common share information Basic income per share $ 0.64 $ 0.59 Diluted income per share $ 0.63 $ 0.58 Weighted-average common shares Outstanding - basic 45,392 44,774 Weighted-average common shares Outstanding - diluted 46,046 45,475 Cash dividends declared per share $ 0.40 $ 0.40 Adjusted EBITDA (1) 83,040 79,724 Shipping Days (2) Voyage days 15,669 14,922 Time charter days 1,738 1,789 Total shipping days 17,407 16,711 TCE Rates ($/day) $ 16,485 $ 15,849 Selected Data from the Consolidated Balance Sheets Cash and cash equivalents $ 86,805 $ 99,038 Total assets $ 936,457 $ 705,180 Total secured debt, financing obligations, and finance leases $ 397,372 $ 264,435 Total shareholders' equity $ 474,664 $ 370,196 Selected Data from the Consolidated Statements of Cash Flows Net cash provided by operating activities $ 65,691 $ 53,787 Net cash used in investing activities $ (67,694) $ (15,982) Net cash used in by financing activities $ (10,230) $ (67,152) Amounts in the table above have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 66 (1) Adjusted EBITDA represents operating earnings before interest expense, interest income, income taxes, depreciation and amortization, loss on sale of vessels, share-based compensation and other non-operating income and/or expense, and other non-recurring items, if any. Adjusted EBITDA is included because it is used by management and certain investors to measure operating performance and is also reviewed periodically as a measure of financial performance by Pangaea's Board of Directors. Adjusted EBITDA is not an item recognized by the generally accepted accounting principles in the United States of America, or U.S. GAAP, and should not be considered as an alternative to net income, operating income, or any other indicator of a company's operating performance required by U.S. GAAP. Pangaea’s definition of Adjusted EBITDA used here may not be comparable to the definition of EBITDA used by other companies. (2) Shipping days are defined 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 time charter (time charter days). The reconciliation of gross profit to net transportation and service revenue and income from operations to Adjusted EBITDA is as follows: (in thousands) Years Ended December 31, 2024 2023 Net Transportation and Service Revenue (3) Gross Profit (4) $ 73,185 $ 69,247 Add: Transportation and service depreciation and amortization 30,266 29,960 Net transportation and service revenue $ 103,451 $ 99,207 Adjusted EBITDA Net Income $ 31,769 $ 28,538 Interest expense, net 17,154 13,916 Depreciation and amortization 30,376 30,070 EBITDA $ 79,299 $ 72,524 Loss on sale of vessel — 1,739 Share-based compensation 2,788 2,088 Unrealized loss on derivative instruments, net 953 2,925 Other non-recurring items — 448 Adjusted EBITDA $ 83,040 $ 79,724 Amounts in the table above have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. (3) Net transportation and service revenue represents total revenue less the total direct costs of transportation and services, which includes charter hire, voyage and vessel operating expenses, and terminal & stevedore expenses. Net transportation and service revenue is included because it is used by management and certain investors to measure performance by comparison to other logistic service providers. Net transportation and service revenue is not an item recognized by the generally accepted accounting principles in the United States of America, or U.S. GAAP, and should not be considered as an alternative to net income, operating income, or any other indicator of a company's operating performance required by U.S. GAAP. Pangaea’s definition of net transportation and service revenue used here may not be comparable to an operating measure used by other companies. (4) Gross profit represents total revenue less total cost of transportation and service revenue and less transportation related depreciation and amortization. Industry 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. The Baltic Dry Index (“BDI”), a measure of dry bulk market performance, averaged 1,754 for 2024, compared to an average of 1,426 for 2023, up approximately 23%. More specifically, and reflecting the composition of the Company's fleet, the average published market rates for Supramax and Panamax vessels rose approximately 17% from an average of $11,391 in 2023 to $13,314 in 2024. We have historically experienced fluctuations in our results of operations on a 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. 67 TCE Performance For the year ended December 31, 2024 , the Company's TCE rate increased by 4% to $16,485 from $15,849 in 2023 , while dry bulk market rates for Panamax and Supramax vessels rose by approximately 17% . The Company's TCE rate outperformed the average of the Baltic Panamax and Supramax market indexes, exceeding average market rates by approximately 24%. This outperformance was driven by the Company's long-term contracts of affreightment (COAs), specialized fleet, and cargo-focused strategy. 2024 Highlights • Net income attributable to Pangaea Logistics Solutions Ltd. was $28.9 million for twelve months ended December 31, 2024 as compared to $26.3 million for the same period of 2023. • Diluted net income per share was $0.63 for twelve months ended December 31, 2024, as compared to $0.58 for the same period of 2023. • Time Charter Equivalent ("TCE") rates earned by Pangaea was $16,485 per day for twelve months ended December 31, 2024 and $15,849 per day for the same period of 2023. • Adjusted EBITDA was $83.0 million for twelve months ended December 31, 2024, as compared to $79.3 million for the same period of 2023. • At the end of the year, Pangaea had $86.8 million in cash, and cash equivalents. Results of Operations Fiscal Year Ended December 31, 2024 Compared to Fiscal Year Ended December 31, 2023 Revenues Pangaea’s revenues are derived predominantly from voyage charters and time charters. Total revenue for the fiscal year ended December 31, 2024, was $536.5 million compared to $499.3 million, for the same period in 2023, a 7% increase. The number of shipping days increased 4% to 17,407 in the fiscal year ended December 31, 2024, from 16,711 for the same period in 2023. The revenue increase was primarily due to a 4% increase in the average TCE rate, which was $16,485 per day for the twelve months ended December 31, 2024, compared to $15,849 per day for the same period in 2023. Components of revenue are as follows: Voyage revenues increased by 5% for the fiscal year ended December 31, 2024 to $494.1 million from $468.6 million for the same period in 2023. The increase was primarily driven by higher average TCE rates in 2024 due to stronger market conditions. The number of voyage days increased 5% to 15,669 for the twelve months ended December 31, 2024 from 14,922 for the same period in 2023. Charter revenues increased to $30.3 million from $23.7 million, or 28%, for the year ended December 31, 2024 compared to the same period in 2023. The increase in charter revenues was due to an increase in charter hire rates evidenced by the increase in index rates for Panamax and Supramax vessels of approximately 17% compared to the same period of 2023 and partially offset by a decrease in time charter days. The time charter days were down 3% to 1,738 in the twelve months ended December 31, 2024 from 1,789 in the twelve months ended December 31, 2023. The time charter revenue per day was $17,450 for the twelve months ended December 31, 2024 compared to $13,258 for the same period of 2023. The optionality of our chartering strategy, in which the Company charters vessels in on short term periods with market available days during the charter period, allows the Company to selectively release excess ship days, if any, into the market under time charter arrangements. Terminal & Stevedore revenues increased by 74% to $12.1 million from $7.0 million for the twelve months ended December 31, 2024 compared to the same period in 2023. This revenue increase is mainly due to the acquisition of port operations in June 2023, which contributed to a full year of operations in the current year. Voyage Expenses Voyage expenses for the fiscal year ended December 31, 2024, were $237.5 million, a 4% increase from $227.4 million for the year ended December 31, 2023. This increase was primarily driven by a 5% rise in voyage days. 68 Charter Hire Expenses The Company charters in vessels, typically on a short-term basis, from other shipowners to supplement its owned fleet. Charter hire expenses paid to third-party shipowners were $130.8 million for the year ended December 31, 2024 , compared to $111.0 million for the year ended December 31, 2023 , an 18% increase . The increase in charter hire expenses was primarily due to an increase in market rates to charter-in vessels and a rise in the number of chartered-in days from 7,933 in 2023 to 8,523 in 2024 . Per-day charter hire expenses were $15,342 for the twelve months ended December 31, 2024 , compared to $13,996 for the same period in 2023 . The average published market rates for Supramax and Panamax vessels increased approximately 17% from an average of $11,391 in 2023 to $13,314 in 2024 . 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, 2024 , totaled $55.5 million , slightly lower than the $55.8 million recorded for the same period in 2023 . Ownership days for the twelve months ended December 31, 2024 , and 2023 were 8,741 and 8,230 , respectively. Excluding technical management fees, vessel operating expenses per day were $5,820 in 2024 , down from $6,256 in 2023 . Technical management fees amounted to $4.7 million in 2024 , compared to $4.3 million in 2023 . Terminal & Stevedore Expenses Terminal and stevedore expenses increased to $9.3 million for the twelve months ended December 31, 2024, up from $5.8 million for the same period in 2023. This increase was primarily driven by the acquisition of port operations in June 2023, resulting in a full year of operational contributions in 2024. General and Administrative Expenses The increase in general and administrative expenses from $22.8 million to $24.6 million for the year ending December 31, 2024, was primarily driven by higher compensation related expenses. Depreciation and Amortization We depreciate our vessels on a straight-line basis over their expected useful life, which ranges from 25 to 30 years from the date of initial delivery from the shipyard to the original owner. Depreciation is calculated based on the vessel's cost, less its estimated residual value. The residual value is determined using a scrap rate of $300 per lightweight ton (lwt). Depreciation and amortization expense increased by $0.3 million, or 1%, primarily due to an increase in ownership days, which rose to 8,741 days in 2024 from 8,230 days in 2023 as a result of vessel acquisitions. Additionally, the increase in depreciation and amortization expense was driven by higher drydocking amortization, with four drydockings completed in 2024 compared to three in 2023. Loss on sale of vessels In the year ended December 31, 2023, the Company recorded a $1.7 million loss on the sale of the M/V Bulk Trident and M/V Bulk Newport. No vessel sale gains or losses were recorded in 2024. Unrealized (Loss) Gain on Derivative Instruments The Company evaluates risks related to fluctuating future freight rates and bunker prices and, when appropriate, actively hedges identified economic risks that may impact the operating income of long-term cargo contracts through forward freight agreements or bunker swaps. The use of these derivatives may result in period-to-period fluctuations in the Company's reported operating results. In the year ended December 31, 2024, the Company recorded an unrealized loss on derivative instruments of $1.0 million, compared to an unrealized loss of $2.9 million in the year ended December 31, 2023. For further details, refer to Note 7, Margin Account, Derivatives, and Fair Value Measures , in the consolidated financial statements. 69 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, financing obligations and finance leases. 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, 2024 and 2023, the Company had working capital of $82.9 million and $86.5 million, respectively. The decrease in working capital was primarily driven by the increase in bunker inventory, partially offset by a rise in accounts payable. 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 $65.7 million in 2024, and $53.8 million in 2024; its excess of cash and cash restricted by facility agents over the current portion of secured long-term debt, financing obligations and finance leases, 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. The table below summarizes our primary sources and uses of cash for the fiscal years ended December 31, 2024 and 2023. 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) 2024 2023 Net cash provided by/(used in): Operating activities: Net income adjusted for non-cash items $ 64.1 $ 65.0 Changes in operating assets and liabilities, net 1.6 (11.2) Operating activities 65.7 53.8 Investing activities (67.7) (16.0) Financing activities (10.2) (67.2) Net change $ (12.2) $ (29.3) Operating Activities Net cash provided by operating activities during the year ended December 31, 2024 was $65.7 million, compared to net cash provided by operating activities of $53.8 million during the year ended December 31, 2023. 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 for the twelve months ended December 31, 2024, was $67.7 million, compared to $16.0 million for the same period in 2023. In 2024, the Company spent $69.3 million on purchasing two vessels and vessel improvements and $0.0 million as a partial cash allocation for the SSI asset acquisition. These outflows were partially offset by $1.9 million in dividends received from equity method investments. 70 In 2023, net cash used in investing activities totaled $16.0 million, primarily due to $27.3 million spent on vessel acquisitions and $7.2 million on port and terminal operations acquisitions, partially offset by the proceeds from the sale of two vessels for $17.3 million. Financing Activities Net cash used in financing activities in 2024 was $10.2 million compared to net cash used in financing activities of $67.2 million for the same period of 2023. During the twelve months ended December 31, 2024, the Company repaid $33.1 million of long term debt, $19.2 million of financing obligations and $3.0 million finance leases. Additionally, the Company distributed $18.7 million in cash dividends to common stockholders and made payments totaling $21.0 million, including $19.0 million for the acquisition of the remaining 50% equity ownership of Nordic Bulk Partners LLC from HS Nordic LLC and $2.0 million for payments to non-controlling interests recorded as a long-term liability. The Company also paid $2.3 million in cash dividends to non-controlling interests, offset by new borrowing of 89million. Net cash used in financing activities for 2023 totaled $67.2 million. Over the twelve months ended December 31, 2023, the Company repaid $15.8 million in long-term debt, $11.3 million in financing obligations, and $8.9 million in finance leases. Additionally, the Company distributed $18.1 million in cash dividends to common stockholders and $10.4 million in cash dividends to non-controlling interests. The Company also made a $2.5 million payment to non-controlling interests, recorded as a long-term liability. 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, 2024 includes: nine Panamax drybulk carriers (six of which are Ice-Class 1A); nine Supramax drybulk carriers, two Ultramax Ice-Class IC, two Ultramax, four Post Panamax Ice Class 1A drybulk vessels, and 15 Handysize vessels acquired through the Strategic Shipping Inc. merger. 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 nine special surveys in 2025 at an aggregate total cost of approximately $13.0 million. The Company expects to perform four intermediate surveys in 2025 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. 71 Critical Accounting Policies and Estimates As discussed in Note 3, "Summary of Significant Accounting Policies," of our Financial Statements, which 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. 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. Terminal & Stevedore Revenue: Terminal & Stevedore revenue is derived from inbound and outbound cargo handling services at ports which the Company operates in. Gross revenue is earned typically based on a per-unit rate for volumes handled. 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 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 occurred during the twelve months ended December 31, 2024, which would require impairment testing. 72 In both the first and fourth quarters of 2023, the Company identified triggering events associated with the sale of vessels, where the carrying value exceeded their fair value. On January 18, 2023, the Company entered into a memorandum of agreement to sell the m/v Bulk Newport for $8.9 million in net consideration after brokerage commissions, resulting in a recorded loss on sale of $1.2 million in the first quarter of 2023. Similarly, on October 17, 2023, the Company signed a memorandum of agreement to sell the m/v Bulk Trident for $9.5 million in net consideration after brokerage commissions, resulting in a loss on sale of $0.6 million in the fourth quarter of 2023. The Company conducted an impairment analysis on each asset group and determined that the estimated undiscounted future cash flows exceeded their carrying amounts. Therefore, no additional loss on impairment was recognized. Also the Company concluded that no other triggering event had occurred during the remaining period of the 2023 which would require impairment testing. 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, 2024. Vessel Name Date Acquired Size Year Build Purchase Price ($000) Net Carrying Amount ($000) m/v Bulk Endurance January 2017 Ultramax 1C 2017 $ 28,000 $ 20,616 m/v Bulk Destiny January 2017 Ultramax 1C 2017 24,000 17,729 m/v Bulk Prudence June 2023 Ultramax 2014 26,650 26,744 m/v Bulk Courageous April 2021 Ultramax 2013 16,798 16,028 m/v Nordic Oasis January 2016 Panamax 1A 2016 32,600 23,436 m/v Nordic Olympic February 2015 Panamax 1A 2015 32,600 22,089 m/v Nordic Odin February 2015 Panamax 1A 2015 32,625 21,980 m/v Nordic Oshima September 2014 Panamax 1A 2014 33,709 23,106 m/v Nordic Orion April 2012 Panamax 1A 2011 32,363 18,144 m/v Nordic Odyssey April 2012 Panamax 1A 2010 32,691 17,181 m/v Bulk Valor June 2021 Supramax 2013 18,182 15,726 m/v Bulk Friendship September 2019 Supramax 2011 14,447 11,957 m/v Bulk Sachuest October 2022 Supramax 2010 17,364 15,678 m/v Bulk Brenton July 2024 Supramax 2016 28,762 28,256 m/v Bulk Patience August 2024 Supramax 2016 28,663 28,240 m/v Bulk Independence May 2019 Supramax 2008 14,393 12,622 m/v Bulk Pride December 2017 Supramax 2008 14,023 10,678 m/v Bulk Freedom June 2017 Supramax 2005 9,016 7,326 m/v Bulk Spirit February 2019 Supramax 2009 13,000 11,961 m/v Bulk Xaymaca August 2018 Panamax 2006 14,010 11,042 m/v Bulk Concord February 2022 Panamax 2009 19,900 18,511 m/v Bulk Promise July 2021 Panamax 2013 18,633 16,344 m/v Nordic Nuluujaak May 2021 Post Panamax 1A 2021 38,424 34,667 m/v Nordic Qinngua June 2021 Post Panamax 1A 2021 38,471 34,655 m/v Nordic Sanngijuq September 2021 Post Panamax 1A 2021 37,920 34,291 m/v Nordic Siku November 2021 Post Panamax 1A 2021 37,935 34,672 m/v Strategic Fortitude December 2024 Handysize 2016 16,874 16,874 m/v Strategic Resolve December 2024 Handysize 2015 14,606 14,606 m/v Strategic Explorer December 2024 Handysize 2015 14,606 14,606 m/v Strategic Entity December 2024 Handysize 2015 14,606 14,606 m/v Strategic Synergy December 2024 Handysize 2014 14,062 14,062 m/v Strategic Alliance December 2024 Handysize 2014 14,062 14,062 73 Vessel Name Date Acquired Size Year Build Purchase Price ($000) Net Carrying Amount ($000) m/v Strategic Unity December 2024 Handysize 2014 14,062 14,062 m/v Strategic Harmony December 2024 Handysize 2014 14,062 14,062 m/v Strategic Equity December 2024 Handysize 2014 14,062 14,062 m/v Strategic Venture December 2024 Handysize 2014 14,062 14,062 m/v Strategic Savannah December 2024 Handysize 2013 11,431 11,431 m/v Strategic Spirit December 2024 Handysize 2012 11,068 11,068 m/v Strategic Vision December 2024 Handysize 2012 11,068 11,068 m/v Strategic Tenacity December 2024 Handysize 2012 10,705 10,705 m/v Strategic Endeavor December 2024 Handysize 2010 7,711 7,711 Miss Nora G. Pearl November 2017 Deck Barge 1979 3,833 1,597 Total $ 856,061 $ 732,325 Borrowing Activities As of December 31, 2024 and 2023 the Company’s borrowing activities primarily consisted of: • Long-term secured debt, refer to "Note 9, Secured long-term debt" for detail information • Financing obligations, refer to "Note 9, Secured long-term debt" for detail information • Finance leases, refer to "Note 10, Finance leases" for detail information Related Party Transactions Refer to "Note 8, Related party transactions" Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as of December 31, 2024 or 2023. 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 There were no disagreements with accountants on accounting or financial disclosure during 2024 or 2023.