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Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

(a)Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”) and include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions were eliminated upon consolidation.

(b)Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include fair values of long-lived assets (primarily vessels and operating lease right-of-use assets), impairment of long-lived assets (primarily vessels and operating lease right-of-use assets), stock-based compensation and financial instruments (primarily derivative instruments and Convertible Bond Debt (as defined herein)), residual values of vessels, useful lives of vessels and estimated losses on accounts receivable. Actual results could differ from those estimates.

(c)Cash, Cash Equivalents and Restricted Cash: The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less at the time of purchase to be cash equivalents. The Restricted cash - current balance as of December 31, 2020 related to the proceeds from the sale of vessels, which were restricted pursuant to the terms under the Norwegian Bond Debt (as defined herein).

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Consolidated Balance Sheets that sum to the total amounts shown in the Consolidated Statements of Cash Flows:


	December 31, 2022		December 31, 2021		December 31, 2020
Cash and cash equivalents	$	187,155	$	86,147	$	69,928
Restricted cash - current	—		—		18,846
Restricted cash - noncurrent	2,599		75		75
	$	189,754	$	86,222	$	88,849

(d)Accounts Receivable and Credit Losses: Accounts receivable primarily includes receivables from charterers for time and voyage charter contracts. The Company maintains an allowance for credit losses for expected uncollectible accounts receivable.

The Company maintains an allowance for credit losses for expected uncollectible accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as voyage expenses in the Consolidated Statements of Operations. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. For the years ended December 31, 2022, 2021 and 2020, our assessment considered business and market

disruptions caused by the conflict between Russia and Ukraine, the COVID-19 pandemic and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are inherently difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

A summary of activity within allowance for credit losses for the years ended December 31, 2022, 2021 and 2020 is as follows:


	For the Years Ended
	December 31, 2022		December 31, 2021		December 31, 2020
Beginning balance	$	1,818	$	2,357	$	2,472
Provision for credit losses	1,997		358		721
Write-offs of uncollectible amounts	(646)		(897)		(836)
Ending balance	$	3,169	$	1,818	$	2,357

(e)Insurance Claims: Insurance claims are recorded net of any deductible amounts for insured damages, which are recognized when recovery is virtually certain under the related insurance policies and where the Company can make an estimate of the amount to be reimbursed following the insurance claim. Insurance claims are included in accounts receivable in the Consolidated Balance Sheets.

(f)Inventories: Inventories, which consist of bunkers, are stated at cost which is determined on a first-in, first-out method. Lubes and spares are expensed as incurred.

(g)Vessels and Vessel Improvements, At Cost: Vessels are stated at cost, which consists of the contract price, and other direct costs relating to acquiring and placing the vessels in service. Major vessel improvements such as scrubbers and ballast water systems are capitalized and depreciated over the remaining useful lives of the vessels. Depreciation is calculated on a straight-line basis over the estimated useful lives of the vessels based on the cost of the vessels reduced by the estimated scrap value of the vessels as discussed below. The Company estimates the useful life of the Company's vessels to be 25 years from the date of initial delivery from the shipyard to the original owner. In addition, the Company estimates the scrap value of its vessels to be $300 per lwt.

(h)Impairment of Long-Lived Assets: The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the Company determines that an asset’s carrying amount may not be recoverable, an estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is compared to its carrying amount. The Company uses the 15-year average of one and three year time charter rates as published by a reputable independent third-party shipping broker in its estimation of undiscounted cash flows. When an asset’s estimated undiscounted cash flows is less than its carrying amount, the Company will record an impairment loss. Measurement of an impairment loss is based on the amount by which an asset’s carrying amount exceeds its estimated fair value. The Company uses information obtained from independent third-parties in its estimation of the fair values (basic charter-free market value) of its vessels. The Company reviews, on an annual basis, the assumptions used in the estimation of undiscounted cash flows. We did not recognize any impairment charges on our vessels and vessel improvements for the years ended December 31, 2022, 2021 and 2020.

(i)Accounting for Drydocking Costs: The Company follows the deferral method of accounting for drydocking costs whereby actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next drydocking is required to become due, generally 30 months for vessels that are 15 years old or more and 60 months for vessels that are less than 15 years old. Costs deferred as part of the drydocking include direct costs that are incurred as part of the drydocking to meet regulatory

requirements. Certain costs are capitalized during drydocking if they are expenditures that add economic life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Direct costs that are deferred include the shipyard costs, parts, inspection fees, steel, blasting and painting. Expenditures for normal maintenance and repairs, whether incurred as part of the drydocking or not, are expensed as incurred. Unamortized drydocking costs of vessels that are sold are written off and included in the calculation of the resulting gain or loss in the year of the vessels’ sale. Unamortized drydocking costs are written off as drydocking expense if the vessels are drydocked before the expiration of the applicable amortization period.

(j)Deferred Financing Costs: Fees incurred for obtaining new loans or refinancing existing ones are deferred and amortized to interest expense over the life of the related debt using the effective interest method. Unamortized deferred financing costs are written off when the related debt is repaid or refinanced and such amounts are expensed in the period the repayment or refinancing is made. Such amounts are classified as a reduction of the long-term debt balance on the Consolidated Balance Sheets.

(k)Other Fixed Assets: Other fixed assets are stated at cost less accumulated depreciation. Depreciation is based on a straight-line basis over the estimated useful life of the asset. Other fixed assets consist principally of leasehold improvements, computers and software and are depreciated over three years. Depreciation expense for other fixed assets for the years ended December 31, 2022, 2021 and 2020 was $0.2 million, $0.3 million and $0.3 million, respectively.

(l)Leases: Operating lease liabilities are recognized at the lease commencement date based on the net present value of fixed lease payments and variable lease payments that depend on an index or rate using the discount rate implicit in the lease, or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The Company’s incremental borrowing rate is the rate that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to a lease’s lease payments in a similar economic environment. Operating lease right-of-use assets are generally recognized based on the related lease liabilities. Operating lease liabilities and right-of-use assets are recognized for leases with a lease term (which includes periods covered by options to extend if the Company is reasonably certain to exercise that option) that is greater than twelve months.

Operating lease right-of-use assets are assessed for any potential impairment on each balance sheet date or whenever events or changes in circumstances indicate that an asset group’s carrying value may not be recoverable. The Company uses BSI forward curve data and time charter market rates that best align to an operating lease’s remaining lease term as published by independent third-party sources in its estimation of undiscounted cash flows. For the years ended December 31, 2022 and 2020, the Company recorded an impairment charge of $2.2 million and $0.4 million on operating lease right-of-use assets. No impairment charge on operating lease right-of-use assets was recorded for the year ended December 31, 2021.

Time charter-out contracts are accounted for as operating leases as (i) the vessel is an identifiable asset, (ii) the Company does not have substantive substitution rights and (iii) the charterer has the right to control the use of the vessel during the contractual term of the related time charter agreement and derives an economic benefit from its use. Under time charter-out contracts, the Company does not separate lease and non-lease components as the timing and pattern of transfer of lease and non-lease components are the same and the lease components, if accounted for separately, would be classified as an operating lease.

(m)Revenue Recognition: Revenues are derived from time and voyage charters.

Revenues from time charter contracts, which are accounted for as operating leases, are recognized on a straight-line basis over the contractual term of the related time charter agreement.

Voyage charter contracts generally consist of a single performance obligation of transportation of cargo within a specified period of time. This performance obligation is satisfied over time as the related voyage progresses and the related revenue is recognized on a straight-line basis over the estimated relative transit

time (in voyage days) from the commencement of the loading of cargo to the completion of discharge, provided an agreed non-cancellable charter between the Company and the charterer is in existence, the charter rate is fixed and determinable and collectability is reasonably assured.

(n)Voyage Expenses and Vessel Operating Expenses: Voyage expenses primarily consists of bunker costs, port charges, canal tolls and the cost of cargo handling operations incurred under voyage charter contracts. Similar costs under time charter contracts are the responsibility of the Company’s customers (the charterer) and are not recorded by the Company. Brokerage commissions incurred under time charter and voyage charter contracts are also included in voyage expenses. Brokerage commissions are deferred and recognized over the related contractual charter term. Vessel operating expenses primarily consists of crewing, vessel repairs and maintenance and vessel insurance costs. Except for brokerage commissions, voyage expenses and vessel operating expenses are expensed as incurred on an accrual basis.

At the inception of a time charter, the Company records the difference between the cost of bunkers from the previous charterer and the cost of bunkers sold to the current charterer as a gain or loss within voyage expenses. Additionally, the Company records lower of cost and net realizable value adjustments to re-value the bunker fuel on a quarterly basis for certain time charter agreements where the inventory is subject to gains and losses. These differences in bunkers, including any lower of cost and net realizable value adjustments, resulted in a net gain of $8.1 million, $6.3 million and $0.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. Additionally, voyage expenses include the cost of bunkers consumed during the ballast period for time charter voyages. The ballast period starts from the completion of the previous voyage and ends on the delivery of the vessel to the current charterers.

(o)Unearned Charter Hire Revenue: Unearned charter hire revenue represents cash received from charterers prior to the time such amounts are earned. These amounts are recognized as revenue as services are provided in future periods.

(p)Protection and Indemnity Insurance: The Company’s protection and indemnity insurance is subject to additional premiums referred to as “back calls” or “supplemental calls” which are accounted for on an accrual basis over the related coverage period and are recorded in vessel operating expenses.

(q)Earnings Per Share: The computation of basic net income/(loss) per share is based on income available to common stockholders divided by the weighted average number of common shares outstanding for the reporting period. Diluted net income/(loss) per share gives effect to dilutive securities, unless the impact of such securities is anti-dilutive.

(r)Interest Rate Risk Management: The Company is exposed to the impact of changes in benchmark interest rates on its outstanding debt under the Term Facility and Revolving Facility as part of the Global Ultraco Debt Facility (as each of these terms is defined below.) The Company manages its exposure to the impact of changes in benchmark interest rates on its earnings and cash flows through the use of interest rate swap derivative instruments. See Note 7, Debt and Note 8, Derivative Instruments for additional details.

(s)Federal Taxes: The Company is a Republic of the Marshall Islands Corporation. For the years ended December 31, 2022, 2021 and 2020, the Company believes that its operations qualify for Internal Revenue Code Section 883 exemption and therefore are not subject to United States federal taxes on United States source shipping income.

(t)Stock-Based Compensation: The Company generally measures stock-based compensation based on the fair value of the award at the date of grant and recognizes the related expense over the vesting period on a straight-line basis using the graded vesting method. The grant date fair value of stock options is generally estimated using the Black-Scholes option pricing model. The grant date fair value of stock-based compensation awards that are contingent upon a total shareholder return-based market condition is generally estimated using a Monte Carlo simulation model. Expense for stock-based compensation awards that include performance conditions are initially calculated and subsequently remeasured based on the

outcome deemed probable of occurring, and recognized over the vesting period, with the ultimate amount of expense recognized based on the actual performance outcome. Expense for stock-based compensation awards that include market conditions are calculated based on grant date fair value and recognized over the vesting period, whether or not, and regardless to what extent, the market condition is satisfied. Forfeitures of stock-based compensation are accounted for as they occur. See Note 14, Stock Incentive Plans, for additional information.

(u)Collateral on Derivatives: The Company separately presents the right to reclaim cash collateral or the obligation to return cash collateral from the fair value of derivative instruments. The amount of collateral required to be posted is defined in the terms of respective master agreements executed with counterparties or exchanges and is required when agreed-upon threshold limits are exceeded. As of December 31, 2022 and 2021, the Company posted cash collateral related to derivative instruments under its collateral security arrangements of $0.9 million and $15.1 million, respectively, which is recorded within Collateral on derivatives in the Consolidated Balance Sheets.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, the entity will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. The Company adopted ASU 2020-06 as of January 1, 2022 under the modified retrospective approach. Accordingly, the Convertible Bond Debt will no longer require bifurcation and separate accounting of its equity component. The related debt discount will no longer be amortized to interest expense over the life of the bond and thus an adjustment to beginning retained earnings of $8.7 million was recorded within Accumulated deficit reflecting the cumulative impact of adoption. Additionally, a $20.7 million reduction to Additional paid-in capital was recorded to reverse the equity component and an offsetting $12.0 million was recorded within Convertible Bond Debt, net of debt discount and debt issuance costs as a reversal of the debt discount.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. ASU 2020-04 is optional and effective for all entities as of March 12, 2020 and may be applied prospectively to contract modifications made on or before December 31, 2024 (as extended by ASU 2022-06, Deferral of the Sunset Date of Topic 848). In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope (“ASU 2021-01”), which clarifies certain provisions in Topic 848, if elected by an entity, to apply to derivative instruments that use interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The Company has not yet modified any contracts under the expedients or exceptions allowed by ASU 2020-04 or ASU 2021-01. If and when a contract modification within the scope of ASU 2020-04 occurs, it is not expected to have a material impact on our consolidated financial statements.