ASC Ardmore Shipping Corporation

SIGNATURES

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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ARDMORE SHIPPING CORPORATION

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes contained in this Report on Form 6-K and with our audited consolidated financial statements contained in “Item 18. Financial Statements” and “Item 5. Operating and Financial Review and Prospects” of our Annual Report on Form 20-F for the year ended December 31, 2021. The unaudited interim condensed consolidated financial statements included in this report have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements (“U.S. GAAP”) and are presented in U.S. dollars as at March 31, 2022 and for the three months ended March 31, 2022 and 2021. Unless the context otherwise requires, the terms “Ardmore,” the “Company”, “we,” “our” and “us” refer to Ardmore Shipping Corporation (NYSE: ASC) and its consolidated subsidiaries.

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GENERAL

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Ardmore owns and operates a fleet of Medium Range (“MR”) product and chemical tankers ranging from 25,000 to 50,000 deadweight tonnes (“Dwt”). We provide seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with our modern, fuel-efficient fleet of mid-size tankers. As at March 31, 2022, we had in operation 27 vessels (including two chartered-in vessels), including 21 MR tankers ranging from 45,000 Dwt to 49,999 Dwt (15 Eco-Design and six Eco-Mod) and six Eco-Design IMO 2 product / chemical tankers ranging from 25,000 Dwt to 37,800 Dwt. Since March 1, 2021, we are commercially managing three of Carl Büttner's 24,000 Dwt chemical tankers.

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We are strategically focused on modern, fuel-efficient, mid-size product and chemical tankers. We actively pursue opportunities to exploit the overlap we believe exists between the clean petroleum product (“CPP”) and chemical sectors in order to enhance earnings, and also seek to engage in more complex CPP trades, such as multi-grade and multi-port loading and discharging operations, where our knowledge of chemical operations is beneficial to our CPP customers.

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Our fuel-efficient operations are designed to enhance our operating performance and provide value-added service to our customers. We believe we are at the forefront of fuel efficiency and emissions reduction trends and are well positioned to capitalize on these developments with our fleet of Eco-design and Eco-mod vessels. Our acquisition strategy includes to continue to build our fleet with Eco-design newbuilds or Eco-design second-hand vessels and with modern second-hand vessels that can be upgraded to Eco-mod.

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We believe that the global energy transition will have a profound impact on the shipping industry, including the product and chemical tanker segments. While this transition will unfold over years, the impact is already being felt through anticipated Energy Efficiency Existing Ship Index and Carbon Intensity Indicator regulations and constraints on newbuilding ordering activity. We view energy transition as less of a compliance challenge and more of an opportunity, which we have set out in our Energy Transition Plan (“ETP”), which is posted on our website. We have established Ardmore Ventures as our holding company for existing and future potential investments related to the ETP and we completed our first projects under the plan in June 2021.

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We are an integrated shipping company. The majority of our fleet is technically managed by a combination of Ardmore Shipping Services (Ireland) Limited and Anglo Ardmore Ship Management Limited, a joint venture entity that is 50% owned by us, and we also retain a third-party technical manager for some of our vessels. We have a resolute focus on both high-quality service and efficient operations, and we believe that our corporate overhead and operating expenses are among the lowest of our peers.

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We are commercially independent, as we have no blanket employment arrangements with third-party or related-party commercial managers. Through our in-house chartering and commercial team, we market our services directly to a broad range of customers, including oil majors, national oil companies, oil and chemical traders, chemical companies, and pooling service providers. We monitor the tanker markets to understand how to best utilize our vessels and may change our chartering strategy to take advantage of changing market conditions.

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As of March 31, 2022, our fleet consisted of the following 25 owned vessels:

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SIGNIFICANT DEVELOPMENTS

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Sale of Vessels

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In March 2022, Ardmore agreed to the sale of the Ardmore Sealeader, Ardmore Sealifter and Ardmore Sealancer for an aggregate price of $40 million. Effective March 28, 2022, the three vessels were classified as held for sale.

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Conflict in Ukraine

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Russia’s invasion of Ukraine in February 2022 has disrupted supply chains and caused instability and significant volatility in the global economy. Much uncertainty remains regarding the global impact of the conflict in Ukraine, and it is possible that such instability, uncertainty and resulting volatility could significantly increase our costs and adversely affect our business, including our ability to secure charters and financing on attractive terms.

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As a result of Russia’s invasion of Ukraine, the United States, several European Union nations, the United Kingdom and other countries have announced unprecedented sanctions and other measures against Russia, Belarus and certain Russian and Belarussian entities and nationals. The sanctions announced by the U.S. and other countries against Russia and, in some instances, Belarus include, among others, restrictions on selling or importing goods, services or technology in or from affected regions, travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia, severing large Russian banks from U.S. and/or other financial systems, and barring some Russian enterprises from raising money in the U.S. market. On March 8, 2022, the U.S. announced a ban on the import of certain Russian energy products into the U.S., including crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and coal. The U.S., EU nations and other countries could impose wider sanctions and take other actions should the conflict further escalate. While it is difficult to anticipate the impact the sanctions announced to date may have on our business and us, these and any further sanctions imposed or actions taken by the U.S., EU nations or other countries, and any retaliatory measures by Russia in response, could lead to increased volatility in global oil demand which, could have a material impact on our business, results of operations and financial condition.  In addition, it is possible that third parties with which we do business may be impacted by events in Russia and Ukraine, which could adversely affect us.

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COVID-19

In response to the COVID-19 pandemic, many countries, ports and organizations, including those where Ardmore conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic initially resulted and may again result in a significant decline in global demand for refined oil products.

As Ardmore’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo Ardmore transports has and could continue to adversely affect demand for its vessels and services. The extent to which the pandemic may impact Ardmore’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the virus and its variants and the level of the effectiveness and administration of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact of the COVID-19 pandemic on Ardmore cannot be made at this time.

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RESULTS OF OPERATIONS

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Factors You Should Consider When Evaluating Our Results

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There are a number of factors that should be considered when evaluating our historical financial performance and assessing our future prospects and we use a variety of financial and operational terms and concepts when analyzing our results of operations. Please read “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2021 for additional information.

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In accordance with U.S. GAAP, we report gross revenues in our condensed statements of operations and report voyage expenses separately. Ship-owners base economic decisions regarding the deployment of their vessels upon actual and anticipated time charter equivalent, or TCE rates (which represent net revenues divided by revenue days) and industry analysts typically measure rates in terms of TCE rates. This is because under time charters the customer typically pays the voyage expenses, while under voyage charters, also known as spot market charters, the shipowner usually pays the voyage expenses. Accordingly, the discussion of revenue below focuses on TCE rates where applicable. Net revenues, a non-U.S. GAAP financial measure, represents revenues less voyage expenses. Voyage expenses are all expenses related to a particular voyage, which include, among other things, bunkers and port/canal costs. Net revenue utilized to calculate TCE is determined on a discharge to discharge basis, which is different from how we record revenue under U.S. GAAP. Under discharge to discharge, revenue is recognized beginning from the discharge of cargo from the prior voyage to the anticipated discharge of cargo in the current voyage, and voyage expenses are recognized as incurred.

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Statement of Operations for the three months ended March 31, 2022 and March 31, 2021

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The following table presents our operating results for the three months ended March 31, 2022 and March 31, 2021.

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Revenue. Revenue for the three months ended March 31, 2022, was $63.4 million, an increase of $17.8 million from $45.6 million for the three months ended March 31, 2021.

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Our average number of operating vessels increased to 27 for the three months ended March 31, 2022, from 26 for the three months ended March 31, 2021.  

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We had one product tanker employed under time charter as at March 31, 2022 as compared with four as at March 31, 2021. Revenue days derived from time charters were 262 for the three months ended March 31, 2022, as compared to 169 for the three months ended March 31, 2021. The increase in revenue days for time-chartered vessels resulted in an increase in revenue of $1.7 million.

We had 2,126 spot revenue days for the three months ended March 31, 2022, as compared to 2,096 for the three months ended March 31, 2021. We had 26 and 22 vessels employed directly in the spot market as at March 31, 2022 and 2021, respectively. The increase in spot revenue days resulted in an increase in revenue of $0.6 million, while changes in spot rates resulted in an increase in revenue of $15.5 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. The Company managed three third party chemical tankers employed under spot as at March 31, 2022, compared with four as at March 31, 2021. This resulted in an increase in revenue of $0.1 million.

Voyage Expenses. Voyage expenses were $27.1 million for the three months ended March 31, 2022, an increase of $6.7 million from $20.4 million for the three months ended March 31, 2021. Voyage expenses increased primarily due to the increase in bunker prices resulting in an increase of $6.5 million and an increase in spot revenue days of $0.2 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

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TCE Rate. The average TCE rate for our fleet was $15,155 per day for the three months ended March 31, 2022, an increase of $3,806 per day from $11,349 per day for the three months ended March 31, 2021. The increase in average TCE rate was the result of higher spot rates for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. TCE rates represent net revenues (or revenue less voyage expenses) divided by revenue days, as further defined above.

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Vessel Operating Expenses. Vessel operating expenses were $16.6 million for the three months ended March 31, 2022, an increase of $2.1 million from $14.5 million for the three months ended March 31, 2021. This increase is due to the timing of vessel operating expenses between quarters. Vessel operating expenses, by their nature, are prone to fluctuations between periods. Average fleet operating expenses per day, including technical management fees, were $6,921 per vessel for the three months ended March 31, 2022, as compared to $6,340 per vessel for the three months ended March 31, 2021. The timing of crew changes as a result of COVID-19 related delays in 2021 was a contributing factor in the difference for the three months ended March 31, 2022 when compared with March 31, 2021.

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Charter Hire Costs. Charter hire costs were $2.1 million for the three months ended March 31, 2022, an increase of $0.9 million from $1.2 million from the three months ended March 31, 2021. We currently have two vessels chartered-in for the three months ended March 31, 2022 as compared to one vessel for the three months ended March 31, 2021.

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Depreciation. Depreciation expense for the three months ended March 31, 2022, was $7.8 million, consistent with $7.8 million for the three months ended March 31, 2021.

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Amortization of Deferred Drydock Expenditures. Amortization of deferred drydock expenditures for the three months ended March 31, 2022 was $1.2 million, a decrease of $0.3 million from $1.5 million for the three months ended March 31, 2021. The deferred costs of drydockings for a given vessel are amortized on a straight-line basis to the next scheduled drydocking of the vessel.

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General and Administrative Expenses: Corporate. Corporate-related general and administrative expenses for the three months ended March 31, 2022 were $4.5 million, an increase of $0.3 million from $4.2 million for the three months ended March 31, 2021.

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General and Administrative Expenses: Commercial and Chartering. Commercial and chartering expenses are the expenses attributable to our chartering and commercial operations departments in connection with our spot trading activities. Commercial and chartering expenses for the three months ended March 31, 2022 were $0.9 million, an increase of $0.1 million from $0.8 million for the three months ended March 31, 2021.

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Interest Expense and Finance Costs. Interest expense and finance costs include loan interest, finance lease interest, and amortization of deferred finance fees. Interest expense and finance costs for the three months ended March 31, 2022 were $4.1 million, an increase of $0.3 million from $3.8 million for the three months ended March 31, 2021. Cash interest expense increased by $0.4 million to $3.7 million for the three months ended March 31, 2022, from $3.3 million for the three months ended March 31, 2021, primarily due to increased average LIBOR during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. Amortization of deferred finance fees for the three months ended March 31, 2022 was $0.4 million, consistent with $0.4 million for the three months ended March 31, 2021.

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LIQUIDITY AND CAPITAL RESOURCES

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Our primary sources of liquidity are cash and cash equivalents, cash flows provided by our operations, our undrawn credit facilities and capital raised through debt and equity financing transactions. As at March 31, 2022, we had $53.2 million in liquidity available with cash and cash equivalents of $53.2 million (December 31, 2021: $55.4 million) and amounts available and undrawn under our revolving credit facilities of $Nil (December 31, 2021: $11.6 million). We believe that our working capital, together with expected cash flows from operations, will be sufficient for our present requirements.

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Our short-term liquidity requirements include the payment of operating expenses (including voyage expenses and bunkers from spot chartering our vessels), drydocking expenditures, debt servicing costs, lease payments, quarterly preferred stock dividends, interest rate swap settlements, any dividends on our shares of common stock, scheduled repayments of long-term debt, as well as funding our other working capital requirements. Our short-term and spot charters contribute to the volatility of our net operating cash flow, and thus our ability to generate sufficient cash flows to meet our short-term liquidity needs. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets historically have exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling. Time charters provide contracted revenue that may reduce the volatility (as rates can fluctuate within months) and seasonality from revenue generated by vessels that operate in the spot market. Spot charters preserve flexibility to take advantage of increasing rate environments, but also expose the ship-owner to decreasing rate environments. Variability in our net operating cash flow also reflects changes in interest rates, fluctuations in working capital balances, the timing and the amount of drydocking expenditures, repairs and maintenance activities and the average number of vessels in service. The number of vessel dry dockings tends to vary each period depending on the vessel's maintenance schedule and required maintenance.

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Our long-term capital needs are primarily for capital expenditures and debt repayment and finance lease payments. Generally, we expect that our long-term sources of funds will be cash balances, long-term bank borrowings, finance leases and other debt or equity financings. We expect that we will rely upon internal and external financing sources, including, cash balances, bank borrowings, lease financings and the issuance of debt and equity securities, to fund vessel acquisitions or newbuildings and expansion capital expenditures.

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Our credit facilities and finance leases are described in Notes 3 (“Debt”) and 4 (“Leases”), respectively, to our interim condensed consolidated financial statements included in this Report on Form 6-K. Our financing facilities contain covenants and other restrictions we believe are typical of debt financing collateralized by vessels, including those that restrict the relevant subsidiaries from incurring or guaranteeing additional indebtedness, granting certain liens, and selling, transferring, assigning or conveying assets.  The majority of our financing facilities do not impose a restriction on dividends, distributions, or returns of capital unless an event of default has occurred, is continuing or will result from such payment. Our financing facilities require us to maintain various financial covenants. Should we not meet these financial covenants or other covenants, the lenders may declare our obligations under the applicable agreements immediately due and payable, and terminate any further loan commitments, which would significantly affect our short-term liquidity requirements. As at March 31, 2022, we were in compliance with all covenants relating to our financing facilities.

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Cash (used in) / provided by operating activities

For the three months ended March 31, 2022, net cash used in operating activities was $5.3 million. Net loss adjusted for non-cash items resulted in an inflow of $9.3 million. Changes in operating assets and liabilities resulted in an outflow of $14.1 million and drydock payments were $0.5 million. For the three months ended March 31, 2021, net cash used in operating activities was $1.1 million. Net loss adjusted for non-cash items resulted in an inflow of $1.6 million. Changes in operating assets and liabilities resulted in an outflow of $Nil and drydock payments were $2.7 million.

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Cash (used in) / provided by investing activities

For the three months ended March 31, 2022, net cash used in investing activities was $0.6 million, which included advances for ballast water treatment systems (“BWTS”) of $0.2 million. Payments in relation to other non-current assets, the acquisition of vessels and vessel equipment, and equity investments were $0.4 million. For the three months ended March 31, 2021, net cash provided by investing activities was $9.3 million, with proceeds from the sale of the Ardmore Seamariner in January 2021 of $9.9 million offset by payments made for the acquisition of other vessel equipment were $0.6 million. For the three months ended March 31, 2021, there were no payments in relation to BWTS, leasehold improvements and other non-current assets.
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Cash provided by / (used in) financing activities

For the three months ended March 31, 2022, the net cash provided by financing activities was $3.7 million. Proceeds of debt amounted to $9.8 million and total principal repayments of finance lease arrangements were $5.3 million. Dividend payments on our Series A Redeemable Preferred Stock amounted to $0.7 million. For the three months ended March 31, 2021, the net cash used in financing activities was $16.4 million. Proceeds from debt were $Nil million. Repayments of debt amounted to $11.7 million and total principal repayments of finance lease arrangements were $4.7 million. Payments of cash dividends were $Nil.

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We endeavor to manage the timing of future dockings across the fleet in order to minimize the number of vessels that are drydocked at any one time. As our fleet matures, our drydock expenses are likely to increase.

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Ballast Water Treatment Systems Installation

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The BWTS installation schedule for our vessels that were in operation as of March 31, 2022 is as follows:

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We endeavor to manage the timing of future ballast water treatment system installations across the fleet in order to minimize the number of vessels that are completing ballast water treatment system installations at any one time.

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CRITICAL ACCOUNTING ESTIMATES

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We prepare our financial statements in accordance with U.S. GAAP, which require us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from our assumptions and estimates. Accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties are discussed in “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2021. There have been no significant changes to these estimates and assumptions in the three months ended March 31, 2022.

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DISCLOSURES ABOUT MARKET RISK

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In addition to the risks set forth below, you should carefully consider the risk factors discussed in “Item 3. Key Information – D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2021, regarding risks which could materially affect our business, financial condition and results of operations.

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Operational Risk

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We are exposed to operating costs arising from various vessel operations. Key areas of operating risk include drydock, repair costs, insurance, piracy and fuel prices. Our risk management includes various strategies for technical management of drydock and repairs coordinated with a focus on measuring cost and quality. Our relatively young fleet helps to minimize the risk. Given the potential for accidents and other incidents that may occur in vessel operations, the fleet is insured against various types of risk. We have established a set of countermeasures in order to minimize the risk of piracy attacks during voyages, particularly through regions which the Joint War Committee or our insurers consider high risk, or which they recommend monitoring, to make the navigation safer for sea staff and to protect our assets. The price and supply of fuel is unpredictable and can fluctuate from time to time. We periodically consider and monitor the need for fuel hedging to manage this risk. We are also subject to operational risks relating to COVID-19 as described in the “Significant Developments” section of this report.

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Foreign Exchange Risk

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The majority of our transactions, assets and liabilities are denominated in U.S. Dollars, our functional currency. We incur certain general and operating expenses in other currencies (primarily the Euro, Singapore Dollar, and Pounds Sterling) and, as a result, there is a risk that currency fluctuations may have a negative effect on the value of our cash flows. Such risk may also have an adverse effect on our financial condition and results of operations. We believe these adverse effects to be immaterial and we have not entered into any derivative contracts to manage foreign exchange risk during the three months ended March 31, 2022.

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Interest Rate Risk

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We are exposed to the impact of interest rate changes, primarily through borrowings that require us to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect our results of operations and our ability to repay debt. We regularly monitor interest rate exposure and enter into swap arrangements to hedge exposure where it is considered economically advantageous to do so.

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We are exposed to the risk of credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize counterparty risk, we have only entered into derivative transactions with investment grade counterparties at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

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During the three months ended June 30, 2020, we entered into floating-to-fixed interest rate swap agreements over a three-year term with multiple counterparties. In accordance with these transactions, we will pay an average fixed-rate interest amount of 0.32% and will receive floating rate interest amounts based on LIBOR. These interest rate swaps have a total notional amount of $252.1 million of which $210.2 million are designated as cash flow hedges.

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LIBOR is scheduled to be phased out and alternative reference rates for interest rates may be adopted, which could affect our interest rate risk.  For additional information, please see the risk factor entitled “There is uncertainty as to the continued use of LIBOR in the future, and the interest rates on our LIBOR-based obligations may increase in the future” Item 3.D (Key Information--Risk Factors) in our Annual Report on Form 20-F for the year ended December 31, 2021.

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Liquidity Risk

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Our principal objective in relation to liquidity is to ensure that we have access at minimum cost to sufficient liquidity to enable us to meet our obligations as they come due and to provide adequately for contingencies. Our policy is to manage our liquidity by forecasting of cash flows arising from or expense relating to spot voyage revenue, time charter revenue, pool revenue, vessel operating expenses, general and administrative overhead and servicing of debt.

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Credit Risk

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There is a concentration of credit risk with respect to our cash and cash equivalents to the extent that substantially all of the amounts are held in ABN Bank and Nordea Bank, and in short-term funds (with a credit risk rating of at least AA) managed by Blackrock State Street Global Advisors and JPMorgan Asset Management. While we believe this risk of loss is low, we intend to review and revise our policy for managing cash and cash equivalents if considered prudent to do so.

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We limit our credit risk with trade accounts receivable by performing ongoing credit evaluations of our customers’ financial condition. We generally do not require collateral for our trade accounts receivable.

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We may be exposed to a credit risk in relation to vessel employment and at times may have multiple vessels employed by one charterer. We consider and evaluate concentration of credit risk regularly and perform on-going evaluations of these charterers for credit risk, including credit concentration risk. As at March 31, 2022, our 27 vessels in operation (including two chartered-in vessels) were employed with 25 different charterers.

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Inflation

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We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment. However, in the event inflation becomes a significant factor in the global economy, inflationary pressures would result in increased operating, voyage and financing costs.

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Ardmore Shipping Corporation

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INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-2

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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F-3

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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F-4

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-5

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The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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F-6

Ardmore Shipping Corporation

1.          General information and significant accounting policies

1.1.       Background

Ardmore Shipping Corporation (NYSE: ASC) (“ASC”), together with its subsidiaries (collectively, the “Company”), provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies, with its modern, fuel-efficient fleet of mid-size product and chemical tankers and the Company operates its business in one operating segment, the transportation of refined petroleum products and chemicals. As at March 31, 2022, the Company had 25 owned vessels in operation. The average age of the Company’s owned fleet as at March 31, 2022 was 9 years. The Company has also chartered in one vessel since the third quarter of 2021 on a short-term lease that is scheduled to expire in September 2022 and another vessel in the second quarter of 2021 on a short-term lease that is scheduled to expire in the third quarter of 2022.

In response to the COVID-19 pandemic, many countries, ports and organizations, including those where ASC conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have caused severe trade disruptions. In addition, the pandemic initially resulted and may again result in a significant decline in global demand for refined oil products. As the Company’s business is the transportation of refined oil products on behalf of oil majors, oil traders and other customers, any significant decrease in demand for the cargo the Company transports has and could continue to adversely affect demand for its vessels and services. The extent to which the pandemic may impact the Company’s results of operations and financial condition, including possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including, among others, new information which may emerge concerning the virus and its variants and the level of the effectiveness and administration of vaccines and other actions to contain or treat its impact. Accordingly, an estimate of the impact of the COVID-19 pandemic on the Company cannot be made at this time.

1.2.       Management and organizational structure

ASC was incorporated in the Republic of the Marshall Islands on May 14, 2013. ASC commenced business operations through its predecessor company, Ardmore Shipping LLC, on April 15, 2010.

As at March 31, 2022, ASC had (a) 79 wholly owned subsidiaries, the majority of which represent single ship-owning companies for ASC’s fleet, (b) one 50%-owned joint venture, Anglo Ardmore Ship Management Limited ("AASML"), which provides technical management services to a majority of the ASC fleet, (c) one 33.33%-owned joint venture, e1 Marine LLC, to market and sell Element 1 Corp.’s methanol-to-hydrogen technology to the marine sector, and (d) a 10% equity stake, on a fully diluted basis, in Element 1 Corp. During the three months ended June 30, 2021, the Company paid an aggregate of $5.0 million in cash and $5.3 million through the issuance of ASC common shares for the Company’s equity stake in Element 1 Corp. and its equity interest in e1 Marine which is included in investments and other assets, net in the condensed consolidated balance sheet as of March 31, 2022.

Ardmore Maritime Services (Asia) Pte, a wholly owned subsidiary incorporated in Singapore, carries out the Company’s management services and associated functions. Ardmore Shipping Services (Ireland) Limited, a wholly owned subsidiary incorporated in Ireland, provides the Company’s corporate, accounting, fleet administration and operations services. Each of Ardmore Shipping (Asia) Pte. Limited and Ardmore Shipping (Americas) LLC, wholly owned subsidiaries incorporated in Singapore and Delaware, respectively, performs commercial management and chartering services for the Company.

1.3.       Basis of preparation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) that apply to interim condensed financial statements.

F-7

Ardmore Shipping Corporation

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and March 31, 2021

(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)

1.3.       Basis of preparation (continued)

Accordingly, they do not include all of the information and footnotes normally included in consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2021 Annual Report on Form 20-F, filed with the SEC on March 11, 2022. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the footnotes required by U.S. GAAP for complete financial statements.

The accompanying interim condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed consolidated financial position and results of operations for the interim periods presented.

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The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

All subsidiaries are 100% directly or indirectly owned by ASC. All intercompany balances and transactions have been eliminated on consolidation.

1.4.    Significant accounting policies

There have been no changes in the Company’s significant accounting policies for the three months ended March 31, 2022 as compared to the significant accounting policies described in the Company’s audited consolidated financial statements for the year ended December 31, 2021. The accounting policies used in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those applied in the audited financial statements for the year ended December 31, 2021.

2. Equity Investment

Element 1 Corp. - On June 17, 2021, the Company purchased a 10% equity stake in Element 1 Corp. (“E1”), a developer of advanced hydrogen generation systems used to power fuel cells, in exchange for $4.0 million in cash and $5.3 million through the issuance of the Company’s common shares. The Company’s 10% equity stake consists of 581,795 shares of E1’s common stock and the Company also received warrants to purchase 286,582 additional common shares of Element 1 Corp. common stock, which expire on the third anniversary from the date of the investment. The Company’s total investment in E1 amounted to $9.3 million and is allocated to investment in the ordinary shares and warrants based on their relative fair values as of the date of acquisition. The Company holds one board seat out of five, resulting in 20% voting rights and thus an ability to exercise significant influence in E1. Accordingly, the Company accounts for the investment in the common shares of E1 using the equity method in accordance with FASB Accounting Standards Codification 323, Investments – Equity Method and Joint Ventures (“ASC 323”) and the warrants are being accounted for at their fair value in accordance with FASB Accounting Standards Codification ASC 321, Investments – Equity Securities.

e1 Marine LLC - On June 17, 2021, the Company established a joint venture, e1 Marine LLC, with E1 and an affiliate of Maritime Partners LLC (“MP”), which seeks to deliver a hydrogen delivery systems to the marine sector with each joint venture partner owning 33.33% of e1 Marine. The Company accounts for the investments in e1 Marine LLC using the equity method in accordance with ASC 323.  

The Company records its share of earnings and losses in these investment on a quarterly basis. The Company recorded an investment of $10.5 million, inclusive of transaction costs (E1 investment of $9.6 million and e1 Marine LLC investment of $0.9 million), which is included in investments and other assets, net in the condensed consolidated balance sheet as of March 31, 2022.

F-8

Ardmore Shipping Corporation

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and March 31, 2021

(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)

3. Debt

As at March 31, 2022, the Company had five loan facilities, which it has used primarily to finance vessel acquisitions or vessels under construction and also for working capital. The Company’s applicable ship-owning subsidiaries have granted first-priority mortgages against the relevant vessels in favor of the lenders as security for the Company’s obligations under the loan facilities, which totaled 11 vessels as at March 31, 2022. ASC and its subsidiary Ardmore Shipping LLC have provided guarantees in respect of the loan facilities and ASC has granted a guarantee over its trade receivables in respect of the ABN AMRO Revolving Facility. These guarantees can be called upon following a payment default. The outstanding principal balances on each loan facility as at March 31, 2022 and December 31, 2021 were as follows:

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Future minimum scheduled repayments under the Company’s loan facilities for each year are as follows:

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NIBC Bank Facility

On September 12, 2014, one of ASC’s subsidiaries entered into a $13.5 million long-term loan facility with NIBC Bank N.V. to finance a secondhand vessel acquisition which delivered to the Company in 2014. The facility was drawn down in September 2014. Interest is calculated at a rate of LIBOR plus 2.90%. Principal repayments on the loans are made on a quarterly basis, with a balloon payment payable with the final instalment. On January 7, 2021, Ardmore repaid the facility in full.

F-9

Ardmore Shipping Corporation

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and March 31, 2021

(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)

3.      Debt (continued)

Nordea / SEB Joint Bank Facility and Nordea / SEB Revolving Facility

On December 11, 2019, eight of ASC’s subsidiaries entered into a $100 million long-term loan facility and a $40 million revolving credit facility with Nordea Bank AB (publ) and Skandinaviska Enskilda Banken AB (publ) to refinance existing facilities. The facility was fully drawn down in December 2020 and 2019. Interest is calculated at a rate of LIBOR plus 2.4%. Principal repayments on the term loans are made on a quarterly basis, with a balloon payment payable with the final instalment. The revolving facility may be drawn down or repaid with five days‘ notice.  On June 25, 2021, Ardmore partially repaid the facility in connection with the refinancing of two of the vessels under a new sale and leaseback arrangement. The term loan and revolving credit facility mature in December 2024.

ABN/CACIB Joint Bank Facility

On December 11, 2019, four of ASC’s subsidiaries entered into a $61.5 million long-term loan facility with ABN AMRO Bank N.V. and Credit Agricole Corporate and Investment Bank to refinance existing facilities. Interest is calculated at a rate of LIBOR plus 2.4%. Principal repayments on the term loans are made on a quarterly basis, with a balloon payment payable with the final instalment. The loan facility matures in December 2024.  

ABN AMRO Revolving Facility

On October 24, 2017, the Company entered into a $15 million revolving credit facility with ABN AMRO to fund working capital. Interest under this facility is calculated at a rate of LIBOR plus 3.9%. On October 7, 2021, the Company exercised an option to extend this facility for a further year to June 2023. Interest payments are payable on a quarterly basis.

IYO Bank Facility

On December 17, 2020, one of ASC’s subsidiaries entered into a $10.0 million long-term loan facility with IYO Bank to finance a secondhand vessel acquisition which vessel delivered to the Company in 2020. The facility was drawn down in December 2020. Interest is calculated at a rate of LIBOR plus 2.25%. Principal repayments on the loans are made on a quarterly basis, with a balloon payment payable with the final instalment. The loan facility matures in December 2025.

F-10

Ardmore Shipping Corporation

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and March 31, 2021

(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)

3.      Debt (continued)

Long-term debt financial covenants

The Company’s existing long-term debt facilities described above include certain covenants. The financial covenants require that the Company:

owned and chartered-in and 5% of outstanding debt; the required minimum cash and cash equivalents as at March 31, 2022 was $18.9 million;

The Company was in full compliance with all of its long-term debt financial covenants as at March 31, 2022 and December 31, 2021.

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F-11

Ardmore Shipping Corporation

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

For the three months ended March 31, 2022 and March 31, 2021

(Expressed in thousands of U.S. Dollars, except for shares and as otherwise stated)

4.  Leases

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As at March 31, 2022, the Company was a party, as the lessee, to seven finance lease facilities. The Company’s applicable ship-owning subsidiaries have granted first-priority mortgages against the relevant vessels in favor of the lenders as security for the Company’s obligations under the finance lease facilities, which totaled 14 vessels as at March 31, 2022. ASC has provided guarantees in respect of the finance lease facilities. These guarantees can be called upon following a payment default. The outstanding principal balances on each finance lease facility as at March 31, 2022 and December 31, 2021 were as follows:

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Maturity analysis of the Company’s finance lease facilities for each year are as follows: