Pangaea Logistics Solutions Ltd. (Form: 10-Q, Received: 08/12/2019 17:26:26)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36139

PANGAEA LOGISTICS SOLUTIONS LTD.

(Exact name of Registrant as specified in its charter)



Bermuda		98-1205464
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Phoenix Bulk Carriers (US) LLC

109 Long Wharf

Newport, RI 02840

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (401) 846-7790

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated Filer ¨		Accelerated Filer ¨
Non-accelerated Filer x		Smaller reporting company x
		Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	PANL	NASDAQ

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, par value $0.01 per share, 44,451,940 shares outstanding as of August 12, 2019 .

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	3

	Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2019 and 2018	4

	Consolidated Statements of Stockholders' Equity (unaudited) for the six months ended June 30, 2019 and 2018	5

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and 2018	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risks	29

Item 4.	Controls and Procedures	29

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

Pangaea Logistics Solutions Ltd.

Consolidated Balance Sheets



	June 30, 2019		December 31, 2018
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	41,161,115	$	53,614,735
Accounts receivable (net of allowance of $2,183,096 at June 30, 2019 and $2,357,130 December 31, 2018)	15,995,543		28,481,787
Bunker inventory	17,446,489		19,222,087
Advance hire, prepaid expenses and other current assets	18,495,225		12,187,551
Total current assets	93,098,372		113,506,160

Restricted cash	2,500,000		2,500,000
Fixed assets, net	301,096,555		281,355,366
Investment in newbuildings in-process	7,657,000		—
Finance lease right of use assets, net	54,864,199		56,113,096
Total assets	$	459,216,126	$	453,474,622

Liabilities and stockholders' equity
Current liabilities
Accounts payable, accrued expenses and other current liabilities	$	31,169,464	$	31,897,507
Related party debt	1,185,782		2,877,746
Deferred revenue	8,814,462		14,717,072
Current portion of secured long-term debt	14,952,927		20,127,742
Current portion of finance lease liabilities	6,632,119		5,364,963
Dividend payable	1,864,431		4,063,598
Total current liabilities	64,619,185		79,048,628

Secured long-term debt, net	102,394,123		95,374,270
Finance lease liabilities	54,508,878		45,684,727

Commitments and contingencies (Note 7)

Stockholders' equity:
Preferred stock, $0.0001 par value, 1,000,000 shares authorized and no shares issued or outstanding	—		—
Common stock, $0.0001 par value, 100,000,000 shares authorized; 44,451,940 shares issued and outstanding at June 30, 2019; 43,998,560 shares issued and outstanding at December 31, 2018	4,445		4,400
Additional paid-in capital	156,855,761		155,946,452
Retained earnings	11,916,436		5,737,199
Total Pangaea Logistics Solutions Ltd. equity	168,776,642		161,688,051
Non-controlling interests	68,917,298		71,678,946
Total stockholders' equity	237,693,940		233,366,997
Total liabilities and stockholders' equity	$	459,216,126	$	453,474,622

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

Pangaea Logistics Solutions Ltd.

Consolidated Statements of Income

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018

Revenues:
Voyage revenue	$	77,430,067		$	81,847,649		$	143,281,414		$	152,166,843
Charter revenue	5,860,548			14,975,553			19,553,386			23,629,652
	83,290,615			96,823,202			162,834,800			175,796,495
Expenses:
Voyage expense	37,224,412			38,027,489			69,398,519			68,195,517
Charter hire expense	18,317,345			30,683,892			43,264,714			53,379,827
Vessel operating expense	11,074,547			10,046,709			20,828,922			19,895,874
General and administrative	5,358,991			4,378,671			9,392,671			8,506,969
Depreciation and amortization	4,491,327			4,391,069			8,868,515			8,729,257
Loss on sale and leaseback of vessels	—			860,426			—			860,426
Total expenses	76,466,622			88,388,256			151,753,341			159,567,870

Income from operations	6,823,993			8,434,946			11,081,459			16,228,625

Other expense:
Interest expense, net	(2,101,052		)	(2,091,989		)	(4,308,220		)	(4,152,725		)
Interest expense on related party debt	(11,138		)	(53,914		)	(38,036		)	(117,373		)
Unrealized gain (loss) on derivative instruments, net	215,171			553,701			2,504,957			(8,904		)
Other income	232,092			30,000			399,912			458,332
Total other expense, net	(1,664,927		)	(1,562,202		)	(1,441,387		)	(3,820,670		)

Net income	5,159,066			6,872,744			9,640,072			12,407,955
Income attributable to non-controlling interests	(1,126,565		)	(1,099,721		)	(1,905,017		)	(2,309,938		)
Net income attributable to Pangaea Logistics Solutions Ltd.	$	4,032,501		$	5,773,023		$	7,735,055		$	10,098,017

Earnings per common share:
Basic	$	0.09		$	0.14		$	0.18		$	0.24
Diluted	$	0.09		$	0.13		$	0.18		$	0.24

Weighted average shares used to compute earnings per common share:
Basic	42,767,785			42,252,552			42,684,966			42,259,594
Diluted	43,293,022			42,763,925			43,202,187			42,632,688

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

Pangaea Logistics Solutions Ltd.

Consolidated Statements of Stockholders' Equity

(unaudited)



	Common Stock					Additional Paid-in Capital			Accumulated Deficit			Total Pangaea Logistics Solutions Ltd. Equity			Non-Controlling Interest			Total Stockholders' Equity
	Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Total Pangaea Logistics Solutions Ltd. Equity			Non-Controlling Interest			Total Stockholders' Equity
Balance at December 31, 2017	43,794,526		$	4,379		$	154,943,728		$	(9,596,785	)	$	145,351,322		$	65,304,320		$	210,655,642
Recognized cost for restricted stock issued as compensation	—		—			612,665			—			612,665			—			612,665
Issuance of restricted shares, net of forfeitures	302,385		31			(31		)	—			—			—			—
Change in accounting pronouncement	—		—			—			(2,423,036		)	(2,423,036		)	—			(2,423,036		)
Net income	—		—			—			4,324,994			4,324,994			1,210,217			5,535,211
Balance at March 31, 2018	44,096,911		$	4,410		$	155,556,362		$	(7,694,827	)	$	147,865,945		$	66,514,537		$	214,380,482
Recognized cost for restricted stock issued as compensation	—		—			226,731			—			226,731			—			226,731
Issuance of restricted shares, net of forfeitures	(32,925	)	(4		)	(101,075		)	—			(101,079		)	—			(101,079		)
Fees incurred for issuance of common shares	—		—			(50,812		)	—			(50,812		)	—			(50,812		)
Net income	—		—						5,773,023			5,773,023			1,099,721			6,872,744
Balance at June 30, 2018	44,063,986		$	4,406		$	155,631,206		$	(1,921,804	)	$	153,713,808		$	67,614,258		$	221,328,066

	Common Stock					Additional Paid-in Capital			Retained Earnings			Total Pangaea Logistics Solutions Ltd. Equity			Non-Controlling Interest			Total Stockholders' Equity
	Shares		Amount			Additional Paid-in Capital			Retained Earnings			Total Pangaea Logistics Solutions Ltd. Equity			Non-Controlling Interest			Total Stockholders' Equity
Balance at December 31, 2018	43,998,560		$	4,400		$	155,946,452		$	5,737,199		$	161,688,051		$	71,678,946		$	233,366,997
Recognized cost for restricted stock issued as compensation	—		—			674,599			—			674,599			—			674,599
Issuance of restricted shares, net of forfeitures	505,530		50			(50		)	—			—			—			—
Net Income	—		—			—			3,702,554			3,702,554			778,452			4,481,006
Balance at March 31, 2019	44,504,090		$	4,450		$	156,621,001		$	9,439,753		$	166,065,204		$	72,457,398		$	238,522,602
Recognized cost for restricted stock issued as compensation	—		—			370,908			—			370,908			—			370,908
Issuance of restricted shares, net of forfeitures	(52,150	)	(5		)	(136,148		)	—			(136,153		)	—			(136,153		)
Distribution to Non-Controlling Interests															(4,666,665		)	(4,666,665		)
Common Stock Dividend									(1,555,818		)	(1,555,818		)				(1,555,818		)
Net Income	—		—			—			4,032,501			4,032,501			1,126,565			5,159,066
Balance at June 30, 2019	44,451,940		$	4,445		$	156,855,761		$	11,916,436		$	168,776,642		$	68,917,298		$	237,693,940

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

Pangaea Logistics Solutions, Ltd.

Consolidated Statements of Cash Flows

(unaudited)



	Six Months Ended June 30,
	2019			2018
Operating activities
Net income	$	9,640,072		$	12,407,955
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense	8,868,515			8,729,257
Amortization of deferred financing costs	365,564			331,061
Amortization of prepaid rent	59,299			60,968
Unrealized (gain) loss on derivative instruments	(2,504,957		)	8,904
Gain from equity method investee	(247,312		)	(90,000		)
Provision for doubtful accounts	320,491			(148,458		)
Loss on sale of vessel	—			860,426
Drydocking costs	(1,545,094		)	(1,497,979		)
Recognized cost for restricted stock issued as compensation	1,045,507			839,396
Change in operating assets and liabilities:
Accounts receivable	12,165,753			2,855,167
Bunker inventory	1,775,598			(2,033,966		)
Advance hire, prepaid expenses and other current assets	(6,002,847		)	(844,650		)
Accounts payable, accrued expenses and other current liabilities	1,546,305			844,340
Deferred revenue	(5,902,610		)	(1,516,665		)
Net cash provided by operating activities	19,584,284			20,805,756

Investing activities
Purchase of vessels and vessel improvements	(25,557,060		)	(2,517,355		)
Investment in newbuildings in-process	(7,657,000		)	—
Purchase of building and equipment	(281,011		)	(360,286		)
Proceeds from sale of equipment	—			31,594
Net cash used in investing activities	(33,495,071		)	(2,846,047		)

Financing activities
Proceeds from long-term debt	14,000,000			—
Payments of related party debt	(1,691,964		)	(2,487,226		)
Payments of financing fees and issuance costs	(277,577		)	(367,052		)
Payments of long-term debt	(12,242,949		)	(12,145,694		)
Proceeds from finance leases	13,000,000			13,000,000
Dividends paid to non-controlling interests	(4,666,665		)	(904,803		)
Payments of finance lease obligations	(2,908,693		)	(1,014,939		)
Accrued common stock dividends paid	(3,754,985		)	—
Cash paid for incentive compensation shares relinquished	—			(101,075		)
Proceeds from private placement of common stock, net of issuance costs	—			(50,812		)
Net cash provided by (used in) financing activities	1,457,167			(4,071,601		)

Net (decrease) increase in cash, cash equivalents and restricted cash	(12,453,620		)	13,888,108
Cash, cash equivalents and restricted cash at beginning of period	56,114,735			38,531,812
Cash, cash equivalents and restricted cash at end of period	$	43,661,115		$	52,419,920

Pangaea Logistics Solutions, Ltd.

Consolidated Statements of Cash Flows

(unaudited)



Supplemental cash flow information and disclosure of noncash items
Cash paid for interest	$	4,414,197	$	3,809,699

Cash and cash equivalents	$	41,161,115	$	48,919,920
Restricted cash	2,500,000		3,500,000
	$	43,661,115	$	52,419,920

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

NOTE 1 - GENERAL INFORMATION

The accompanying consolidated financial statements include the accounts of Pangaea Logistics Solutions Ltd. and its consolidated subsidiaries (collectively, the “Company”, “we” or “our”). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership, chartering and operation of drybulk vessels. The Company is a holding company incorporated under the laws of Bermuda as an exempted company on April 29, 2014.

The Company owns three Panamax, two Ultramax Ice Class 1C, eight Supramax, and two Handymax Ice Class 1A drybulk vessels. The Company also owns one-third of Nordic Bulk Holding Company Ltd. (“NBHC”), a consolidated joint venture with a fleet of six Panamax Ice Class 1A drybulk vessels and has a 50% interest in the owner of a deck barge.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated balance sheets as of June 30, 2019 and 2018 , the consolidated statements of income for the three and six months ended June 30, 2019 and 2018 , the consolidated statements of equity for the three and six months ended June 30, 2019 and 2018 and the consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of June 30, 2019 and December 31, 2018 , and its results of operations and cash flows for the three and six months ended June 30, 2019 and 2018 . The financial data and the other information disclosed in these notes to the consolidated financial statements related to these three and six month periods are unaudited. Certain information and disclosures included in the annual consolidated financial statements have been omitted for the interim periods pursuant to the rules and regulations of the SEC. The results for three and six months ended June 30, 2019 and 2018 are not necessarily indicative of the results for the year ending December 31, 2019 or for any other interim period or future years.

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“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. Actual results could differ from those estimates. The significant estimates and assumptions of the Company are the estimated future cash flows used in its impairment analysis, the estimated salvage value used in determining depreciation expense and the allowances for doubtful accounts.

Voyage revenues represent revenues earned by the Company, principally from providing transportation services under voyage charters. A voyage charter involves the carriage of a specific amount and type of cargo on a load port to discharge port basis, subject to various cargo handling terms. Under a voyage charter, the service revenues are earned and recognized ratably over the duration of the voyage. A contract is accounted for when it has approval and commitment from both parties, the rights and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Estimated losses under a voyage charter are provided for in full at the time such losses become probable. Demurrage, which is included in voyage revenues, represents payments by the charterer to the vessel owner when loading and discharging time exceed the stipulated time in the voyage charter. Demurrage is measured in accordance with the provisions of the respective charter agreements and the circumstances under which demurrage revenues arise. At the time demurrage revenue can be estimated, it 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 vessel operates under the charter. Revenue is not earned when vessels are offhire.

Cash and cash equivalents include short-term deposits with an original maturity of less than three months. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:



	June 30, 2019		December 31, 2018
	(unaudited)
Money market accounts – cash equivalents	$	18,236,676	$	13,819,043
Cash ⁽¹⁾	22,924,439		39,795,692
Total cash and cash equivalents	$	41,161,115	$	53,614,735
Restricted cash	$	2,500,000	$	2,500,000
Total cash, cash equivalents and restricted cash	$	43,661,115	$	56,114,735

⁽¹⁾ Consists of cash deposits at various major banks.

Restricted cash at June 30, 2019 and December 31, 2018 consists of $2.5 million held by the facility agent as required by the Bulk Nordic Odin Ltd., Bulk Nordic Olympic Ltd. Bulk Nordic Odyssey Ltd., Bulk Nordic Orion Ltd. and Bulk Nordic Oshima Ltd. – Dated September 28, 2015 - Amended and Restated Loan Agreement (See NOTE 4).

Advance hire, prepaid expenses and other current assets were comprised of the following:



	June 30, 2019		December 31, 2018
	(unaudited)
Advance hire	$	6,398,595	$	5,851,070
Prepaid expenses	3,272,337		1,276,901
Accrued receivables	6,617,377		2,479,800
Margin deposit	546,539		1,820,656
Other current assets	1,660,377		759,124
	$	18,495,225	$	12,187,551

Accounts payable, accrued expenses and other current liabilities were comprised of the following:



	June 30, 2019		December 31, 2018
	(unaudited)
Accounts payable	$	12,897,850	$	19,892,511
Accrued expenses	15,423,871		7,424,286
Accrued interest	318,295		540,886
Derivative liabilities	778,465		3,225,907
Other accrued liabilities	1,750,983		813,917
	$	31,169,464	$	31,897,507

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued an ASU 2016-02, Accounting Standards Update for Leases. The update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. In determining the estimated value of right-of-use assets and lease liabilities, the Company considers the noncancelable period of the lease as well as periods for which it is reasonably certain that renewal options will be exercised. The Company discounts any estimated lease liability using the portfolio approach, the composition of which is its secured long-term debt facilities.

Time charter out contracts

Charter revenue is earned when the Company lets a vessel it owns or operates to a charterer for a specified period of time. Charter revenue is based on the agreed rate per day. The charterer has the power to direct the use and receives substantially all of the economic benefits from the use of the vessel. The Company determined that all time charter contracts are considered operating leases and therefore fall under the scope of ASC 842 because: (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 term of the contract and derives the economic benefits from such use.

Time charter in contracts

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. As allowed by a practical expedient under ASC 842, the Company made an accounting policy election by class of underlying asset for leases with a term of 12 months or less, to forego recognizing a right-of-use asset and lease liability on its balance sheet. For the quarter ending June 30, 2019 , the Company did not have any time charter in contracts with terms greater than 12 months, as such charter hire expense presented on the consolidated statements of income are lease expenses for chartered in contracts less than 12 months.

Adoption of ASC 842

The Company adopted ASC 842 on January 1, 2019. The Company elected the "package of practical expedients" in the new standard, under which we are not required to reassess our prior conclusions regarding lease identification, classification and initial direct costs. We did not elect the use-of-hindsight practical expedient; and the practical expedient pertaining to land easements does not apply to the Company.

In July 2018, the Financial Accounting Standards Board issued ASU 2018-11 to amend ASU 2016-02 and provided an additional (and optional) transition method to adopt the new lease standard. This transition method allows entities to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption instead of using the original modified retrospective transition method of adoption which required the restatement of all prior period financial statements. Under this new transition method, the comparative periods presented in the financial statements will continue to be in accordance with ASC Topic 840, Leases. The Company adopted the new lease standard effective January 1, 2019 using this new transition method.

The amendments in this Update also provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

1. The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

2. The lease component, if accounted for separately, would be classified as an operating lease.

The Company elected to use this practical expedient when it adopted the lessor provisions of this Update. As a result, the operating lease component and the vessel operating expense nonlease component in a time charter are reported as a single component.

At June 30, 2019 , the Company had three vessels chartered to customers under time charters that contain leases. These three leases varied in original length from 28 days to 49 days . At June 30, 2019 , lease payments due under these arrangements totaled approximately $383,000 and each of the time charters were due to be completed in thirty-one days or less. The Company does not have any sales-type or direct financing leases.

Adoption of the lessee provisions of this guidance did not have a material impact on the Company's consolidated financial statements because the Company does not have any vessels chartered in (operating leases) for longer than one year and the practical expedient relating to leases with terms of 12 months or less was elected. Furthermore, the Company's finance lease right of use assets and finance lease liabilities were referred to as "assets under capital lease" and "obligations under capital leases" in prior period financial statements, but no other changes resulted from adoption of the standard. In addition, the Company has two

noncancelable office leases for which the noncancelable periods are less than six months and noncancelable office equipment leases do not create significant right-of-use assets or lease liabilities.

In August 2017, the FASB issued an ASU 2017-12 Accounting Standards Update for Derivatives and Hedging. The amendments in this Update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this Update. The amended presentation and disclosure guidance is required only prospectively. Adoption of this guidance did not have a material impact on the Company's financial statements because our forward freight agreements and our fuel swaps do not qualify for hedge accounting treatment even after application of the amendments in this Update.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for our company at the beginning of 2020. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of the standard on our consolidated financial statements.

NOTE 3 - FIXED ASSETS

At June 30, 2019 , the Company owned twenty-one dry bulk vessels including five financed under finance leases; and one barge. The carrying amounts of these vessels, including unamortized drydocking costs, are as follows:



	June 30,		December 31,
	2019		2018
Owned vessels	(unaudited)
m/v BULK PANGAEA	$	15,499,311	$	15,231,305
m/v BULK PATRIOT	9,663,737		10,130,797
m/v BULK JULIANA	10,358,342		10,651,029
m/v NORDIC ODYSSEY	23,590,263		24,283,497
m/v NORDIC ORION	24,392,141		25,095,469
m/v BULK NEWPORT	13,470,429		13,956,092
m/v NORDIC BARENTS	4,127,735		4,370,817
m/v NORDIC BOTHNIA	4,082,548		4,322,490
m/v NORDIC OSHIMA	28,969,352		28,897,931
m/v NORDIC ODIN	28,708,182		29,151,529
m/v NORDIC OLYMPIC	28,541,651		29,321,599
m/v NORDIC OASIS	29,803,793		30,416,651
m/v BULK ENDURANCE	25,529,140		26,020,505
m/v BULK FREEDOM	8,380,280		8,467,058
m/v BULK PRIDE	13,263,936		13,531,561
m/v BULK SPIRIT	13,112,983		1,950,000
m/v BULK INDEPENDENCE ⁽¹⁾	13,921,582		—
MISS NORA G PEARL	2,995,144		2,995,144
	298,410,549		278,793,474
Other fixed assets, net	2,686,006		2,561,892
Total fixed assets, net	$	301,096,555	$	281,355,366

Right of Use Assets
m/v BULK DESTINY	$	21,896,217	$	22,307,701
m/v BULK BEOTHUK	6,827,418		7,065,300
m/v BULK TRIDENT	12,380,316		12,664,906
m/v BULK PODS	$	13,760,248	14,075,189
	$	54,864,199	$	56,113,096


⁽¹⁾	The Company acquired the 2008 built Supramax (m/v Bulk Independence) on May 14, 2019.

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 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 recognized. During the three and six months ended June 30, 2019 , the Company did not identify any potential triggering events and therefore, in accordance with authoritative guidance, did not perform tests of recoverability. At June 30, 2018 the Company identified potential triggering events that resulted from sale and leaseback financing arrangements transacted in the period. As a result, the Company evaluated each asset group for impairment by estimating the total undiscounted cash flows expected to result from the use of the asset group and its eventual disposal. The estimated undiscounted future cash flows were higher than the carrying amount of the vessels in the Company's fleet and as such, no loss on impairment was recognized.

NOTE 4 - DEBT

Long-term debt consists of the following:



	June 30, 2019			December 31, 2018
	(unaudited)
Bulk Phoenix Secured Note ⁽¹⁾	$	1,816,659		$	2,702,374
Bulk Nordic Odin Ltd., Bulk Nordic Olympic Ltd. Bulk Nordic Odyssey Ltd., Bulk Nordic Orion Ltd. and Bulk Nordic Oshima Ltd. Amended and Restated Loan Agreement ⁽²⁾	58,575,001			62,325,000
Term Loan Facility of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)	—			4,489,100
Bulk Nordic Oasis Ltd. Loan Agreement	16,250,000			17,000,000
The Amended Senior Facility - Dated May 13, 2019 (formerly The Amended Senior Facility - Dated December 21, 2017) ⁽³⁾	37,663,331			25,626,665
Bulk Freedom Loan Agreement	4,100,000			4,450,000
109 Long Wharf Commercial Term Loan	758,066			812,867
Total	$	119,163,057		$	117,406,006
Less: unamortized bank fees	(1,816,007		)	(1,903,994		)
	$	117,347,050		$	115,502,012
Less: current portion	(14,952,927		)	(20,127,742		)
Secured long-term debt, net	$	102,394,123		$	95,374,270


⁽¹⁾	See Senior Secured Post-Delivery Term Loan Facility below.


⁽²⁾	The borrower under this facility is NBHC, of which the Company and its joint venture partners, STST and ASO2020, each own one-third. NBHC is consolidated in accordance with ASC 810-10 and as such, amounts pertaining to the non-controlling ownership held by these third parties in the financial position of NBHC are reported as non-controlling interest in the accompanying balance sheets.


⁽³⁾	This facility is cross-collateralized by the vessels m/v Bulk Endurance, m/v Bulk Pride, and m/v Bulk Independence and is guaranteed by the Company.

The Senior Secured Post-Delivery Term Loan Facility

On April 14, 2017, the Company, through its wholly owned subsidiaries, Bulk Pangaea, Bulk Patriot, Bulk Juliana, Bulk Trident and Bulk Phoenix, entered into the Fourth Amendatory Agreement, (the "Fourth Amendment"), amending and supplementing the Loan Agreement dated April 15, 2013, as amended by a First Amendatory Agreement dated May 16, 2013, the Second Amendatory Agreement dated August 28, 2013 and the Third Amendatory Agreement dated July 14, 2016. The Fourth Amendment advanced the final repayment dates for Bulk Pangaea and Bulk Patriot, which have since been repaid.

Final payment on the Bulk Juliana Secured Note was made on July 19, 2018. The Bulk Trident Secured Note was repaid on June 7, 2018 in conjunction with the sale and leaseback of the vessel (NOTE - 7).

Bulk Phoenix Secured Note

Initial amount of $10,000,000 , entered into in May 2013, for the acquisition of m/v Bulk Newport. The Fourth Amendment did not change this tranche, the balance of which was payable in two installments of $700,000 and seven installments of $442,858 . The final balloon payment of $1,816,659 was paid on July 19, 2019. The interest rate was fixed at 5.09% .

The agreement contains financial covenants that require the Company to maintain a minimum net worth and minimum liquidity, on a consolidated basis. The facility also contains a consolidated leverage ratio and a consolidated debt service coverage ratio. In addition, the facility contains other Company and vessel related covenants that, among other things, restrict changes in management and ownership of the vessel, declaration of dividends, further indebtedness and mortgaging of a vessel without the bank’s prior consent. It also requires minimum collateral maintenance, which is tested at the discretion of the lender. As of June 30, 2019 and December 31, 2018 , the Company was in compliance with these covenants.

Bulk Nordic Odin Ltd., Bulk Nordic Olympic Ltd. Bulk Nordic Odyssey Ltd., Bulk Nordic Orion Ltd. And Bulk Nordic Oshima Ltd. – Dated September 28, 2015 - Amended and Restated Loan Agreement

The amended agreement advanced $21,750,000 in respect of each the m/v Nordic Odin and the m/v Nordic Olympic; $13,500,000 in respect of each the m/v Nordic Odyssey and the m/v Nordic Orion, and $21,000,000 in respect of the m/v Nordic Oshima.

The agreement requires repayment of the advances as follows:

In respect of the Odin and Olympic advances, repayment to be made in 28 equal quarterly installments of $375,000 per borrower (one of which was paid prior to the amendment by each borrower) and balloon payments of $11,233,150 due with each of the final installments in January 2022.

In respect of the Odyssey and Orion advances, repayment to be made in 20 quarterly installments of $375,000 per borrower and balloon payments of $5,677,203 due with each of the final installments in September 2020.

In respect of the Oshima advance, repayment to be made in 28 equal quarterly installments of $375,000 and a balloon payment of $11,254,295 due with the final installment in September 2021.

Interest on 50% of the advances to Odyssey and Orion was fixed at 4.24% in March 2017. Interest on the remaining advances to Odyssey and Orion is floating at LIBOR plus 2.40% ( 4.80% at June 30, 2019 ). Interest on 50% of the advances to Odin and Olympic was fixed at 3.95% in January 2017. Interest on the remaining advances to Odin and Olympic was floating at LIBOR plus 2.0% and was fixed at 4.07% on April 27, 2017. Interest on 50% of the advance to Oshima was fixed at 4.16% in January 2017. Interest on the remaining advance to Oshima is floating at LIBOR plus 2.25% ( 4.65% at June 30, 2019 ).

The amended loan is secured by first preferred mortgages on the m/v Nordic Odin, m/v Nordic Olympic, m/v Nordic Odyssey, m/v Nordic Orion and m/v Nordic Oshima, the assignment of earnings, insurances and requisite compensation of the five entities, and by guarantees of their shareholders.

The amended agreement contains one financial covenant that requires the Company to maintain minimum liquidity and a collateral maintenance ratio clause, which requires the aggregate fair market value of the vessels plus the net realizable value of any additional collateral provided, to remain above defined ratios. At June 30, 2019 and December 31, 2018 , the Company was in compliance with this covenant.

The Bulk Nordic Oasis Ltd. - Loan Agreement - Dated December 11, 2015

The agreement advanced $21,500,000 in respect of the m/v Nordic Oasis. The agreement requires repayment of the advance in 24 equal quarterly installments of $375,000 beginning on March 28, 2016 and a balloon payment of $12,500,000 due with the final installment in March 2022. Interest on this advance is fixed at 4.30% .

The loan is secured by a first preferred mortgage on the m/v Nordic Oasis, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. Additionally, the agreement contains a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously

provided, to remain above defined ratios. As of June 30, 2019 and December 31, 2018 , the Company was in compliance with this covenant.

Term Loan Facility of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)

Barents and Bothnia entered into a secured Term Loan Facility of $13,000,000 in two tranches of $6,500,000 which were drawn in conjunction with the delivery of the m/v Bulk Bothnia on January 23, 2014 and the m/v Bulk Barents on March 7, 2014. The loan is secured by mortgages on the m/v Nordic Bulk Barents and m/v Nordic Bulk Bothnia and is guaranteed by the Company.

The loan requires repayment in 22 equal quarterly installments of $163,045 (per borrower) beginning in June 2014, one installment of $163,010 (per borrower) and a balloon payment of $1,755,415 (per borrower) due in December 2019. The term loan was fully repaid on June 26, 2019. The interest rate was floating at LIBOR plus 2.5% since inception.

The Amended Senior Facility - Dated May 13, 2019 (previously identified as The Amended Senior Facility - Dated December 21, 2017)

On May 13, 2019, the Company, through its wholly owned subsidiaries, Bulk Endurance, Bulk Pride and Bulk Independence entered into the Second Amendatory Agreement, (the "Second Amendment"), amending and supplementing the First Amendatory Agreement dated December 17, 2017. The Second Amendment advanced $14,000,000 under Tranche E in respect to the m/v Bulk Independence, extended maturity dates on Tranche A, B, and C to May 2024, and reduced applicable interest rate margin on Tranche A, B, and C to 1.70% for the first eight quarters following the drawdown of Tranche E, and 2.40% thereafter.

Bulk Endurance Tranche A and B

The amended agreement advanced $19,500,000 in respect of the m/v Bulk Endurance on January 7, 2017, in two tranches. The agreement requires repayment of Tranche A, totaling $16,000,000 , in three equal quarterly installments of $100,000 beginning on April 7, 2017 and 27 equal quarterly installments of $266,667 . A balloon payment of $8,499,991 is due with the final installment in May 2024. Interest on this advance was fixed at 3.69% through March 2021, fixed at 4.16% through December 2021, and thereafter floating at Libor plus 2.40% . The agreement also advanced $3,500,000 under Tranche B, which is payable in 28 equal quarterly installments of $65,000 beginning on September 27, 2017, and a balloon payment of $1,680,000 due with the final installment in May 2024. Interest on this advance is floating at LIBOR plus 1.70% ( 4.05% at June 30, 2019 ) through March 2021, and thereafter at Libor plus 2.4% .

Bulk Pride Tranche C and D

The amended agreement advanced $10,000,000 in respect of the m/v Bulk Pride on December 21, 2017, in two tranches. The agreement requires repayment of Tranche C, totaling $8,500,000 , in 26 equal quarterly installments of $275,000 beginning in March 2018 and a balloon payment of $1,350,000 due with the final installment in May 2024. Interest on this advance is floating at LIBOR plus 1.70% ( 4.05% at June 30, 2019 ) through March 2021, and thereafter at Libor plus 2.4% . The agreement also advanced $1,500,000 under Tranche D, which is payable in 4 equal quarterly installments of $375,000 beginning in September 2018. Tranche D was fully repaid in June 2019.

Bulk Independence Tranche E

The amended agreement advanced $14,000,000 under Tranche E in respect of the m/v Bulk Independence on May 13, 2019, which requires repayment of 20 equal quarterly installments of $250,000 beginning in September 2019 and a balloon payment of $9,000,000 due with the final installment in May 2024. Interest on this advance is floating at LIBOR plus 1.70% ( 4.05% at June 30, 2019 ) during first eight quarters. Interest on this advance is floating at LIBOR plus 2.40% ( 4.05% at June 30, 2019 ) thereafter.

The loan is secured by first preferred mortgages on the m/v Bulk Endurance, the m/v Bulk Pride and the m/v Bulk Independence, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. Additionally, the agreement contains a minimum liquidity requirement, positive working capital of the borrower and a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously provided, to remain above defined ratios. At June 30, 2019 and December 31, 2018 , the Company was in compliance with these covenants.

The Bulk Freedom Corp. Loan Agreement -- Dated June 14, 2017

The agreement advanced $5,500,000 in respect of the m/v Bulk Freedom on June 14, 2017. The agreement requires repayment of the loan in 8 quarterly installments of $175,000 and 12 quarterly installments of $150,000 beginning on September 14, 2017. A balloon payment of $2,300,000 is due with the final installment. The facility bears interest at LIBOR plus a margin of 3.75% ( 6.18% at June 30, 2019).

The loan is secured by a first preferred mortgage on the m/v Bulk Freedom, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders. Additionally, the agreement contains a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously provided, to remain above defined ratios. At June 30, 2019 and December 31, 2018 , the Company was in compliance with this covenant.

109 Long Wharf Commercial Term Loan

Initial amount of $1,096,000 entered into on May 27, 2016. The Long Wharf Construction to Term Loan was repaid from the proceeds of this new facility. The loan is payable in 120 equal monthly installments of $9,133 . Interest is floating at the 30 day LIBOR plus 2.0% ( 4.40% at June 30, 2019 ). The loan is collateralized by all real estate located at 109 Long Wharf, Newport, RI, and a corporate guarantee of the Company. The loan contains a maximum loan to value covenant and a debt service coverage ratio. At June 30, 2019 and December 31, 2018 , the Company was in compliance with these covenants.

The future minimum annual payments (excluding unamortized bank fees) under the debt agreements are as follows:



	Years ending
	June 30,
	(unaudited)
2020	$	14,952,927
2021	21,490,674
2022	54,906,863
2023	3,536,268
2024	24,066,259
Thereafter	210,066
	$	119,163,057

NOTE 5 - DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Forward freight agreements

The Company assesses risk associated with fluctuating future freight rates and, when appropriate, hedges identified economic risk with appropriate derivative instruments, specifically forward freight agreements (FFAs). These economic hedges do not usually qualify for hedge accounting under ASC 815 and as such, the usage of such derivatives can lead to fluctuations in the Company’s reported results from operations on a period-to-period basis. The aggregate fair value of FFAs at June 30, 2019 and December 31, 2018 were assets and liabilities of approximately $58,000 and $60,000 , respectively, which are included in other current assets and liabilities on the consolidated balance sheets. The change in the aggregate fair value of the FFAs during the three months ended June 30, 2019 and 2018 are gains of approximately $557,000 and 60,000 , respectively, which are included in unrealized gain on derivative instruments in the accompanying consolidated statements of income. The change in the aggregate fair value of the FFAs during the six months ended June 30, 2019 and 2018 are a gain of approximately $117,000 and a loss of approximately $254,000 , respectively, which are included in unrealized gain (loss) on derivative instruments in the accompanying consolidated statements of income.

Fuel Swap Contracts

The Company continuously monitors the market volatility associated with bunker prices and seeks to reduce the risk of such volatility through a bunker hedging program. The Company enters into fuel swap contracts that are not designated for hedge accounting under ASC 815 and as such, the usage of such derivatives can lead to fluctuations in the Company’s reported results from operations on a period-to-period basis. The aggregate fair value of these fuel swaps at June 30, 2019 and December 31, 2018 are liabilities of approximately $778,000 and $3,166,000 , respectively, which are included in other liabilities on the consolidated balance sheets. The change in the aggregate fair value of the fuel swaps during the three months ended June 30, 2019 and 2018 are a loss of approximately $342,000 and a gain of approximately $493,000 , respectively, which are included in unrealized (loss) gain on derivative instruments in the accompanying consolidated statements of income. The change in the aggregate fair value of the fuel swaps during the six months ended June 30, 2019 and 2018 are gains of approximately $2,388,000 and $245,000 , respectively, which are included in unrealized gain (loss) on derivative instruments in the accompanying consolidated statements of income.

The three levels of the fair value hierarchy established by ASC 820, Fair Value Measurements and Disclosures , in order of priority are as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. Our Level 1 fair value measurements include cash, money-market accounts and restricted cash accounts.

Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Level 3 – Inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

The following table summarizes assets and liabilities measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018 :



	Balance at
	June 30, 2019			Level 1		Level 2			Level 3
	(unaudited)
Margin accounts	$	546,539		$	546,539	$	—		$	—
Fuel swaps	$	(778,465	)	$	—	$	(778,465	)	$	—
Freight forward agreements	$	57,515		$	—	$	57,515		$	—



	Balance at December 31, 2018			Level 1		Level 2			Level 3
Margin accounts	$	1,820,657		$	1,820,657	$	—		$	—
Fuel swaps	$	(3,165,967	)	$	—	$	(3,165,967	)	$	—
Freight forward agreements	$	(59,940	)	$	—	$	(59,940	)	$	—

The estimated fair values of the Company’s forward freight agreements and fuel swap contracts are based on market prices obtained from an independent third-party valuation specialist based on published indices. Such quotes represent the estimated amounts the Company would receive or pay to terminate the contracts.

NOTE 6 - RELATED PARTY TRANSACTIONS

Amounts and notes payable to related parties consist of the following:



	December 31, 2018		Activity			June 30, 2019
						(unaudited)
Included in trade accounts receivable and voyage revenue on the consolidated balance sheets and statements of income, respectively:
Trade receivables due from King George Slag ⁽ⁱ⁾	$	627,629	$	(88,124	)	$	539,505

Included in accounts payable, accrued expenses and other current liabilities on the consolidated balance sheets:
Affiliated companies (trade payables) ⁽ⁱⁱ⁾	1,971,935		126,885			2,098,820

Included in current related party debt on the consolidated balance sheets:
Loan payable – 2011 Founders Note	$	2,595,000	(1,730,000		)	$	865,000
Interest payable - 2011 Founders Note	282,746		38,036			320,782
Total current related party debt	$	2,877,746	$	(1,691,964	)	$	1,185,782


i.	King George Slag LLC is a joint venture of which the Company owns 25%


ii.	Seamar Management S.A. ("Seamar")

On October 1, 2011, the Company entered into a $10,000,000 loan agreement with the Founders, which was payable on demand at the request of the lenders (the 2011 Founders Note). The note bears interest at a rate of 5% . The balance of the 2011 Founders Note were $865,000 and $2,595,000 at June 30, 2019 and December 31, 2018 , respectively.

Under the terms of a technical management agreement between the Company and Seamar Management S.A. (“Seamar”), an equity method investee, Seamar is responsible for the day-to-day operations for certain of the Company’s owned vessels. During the three months ended June 30, 2019 and 2018 , the Company incurred technical management fees of approximately $793,200 and $764,400 , respectively, under this arrangement. The total amounts payable to Seamar at June 30, 2019 and December 31, 2018 were approximately $2,099,000 and $1,972,000 , respectively.

Dividends payable to related parties consist of the following:



	2013 common stock dividend
Balance at December 31, 2018	$	4,063,598
Payments	(2,256,357		)
Balance at June 30, 2019	$	1,807,241

NOTE 7 - COMMITTMENTS AND CONTINGENCIES

Vessel Sales and Leasebacks Accounted for as Capital Leases (in accordance with prior accounting guidance - ASC 840)

The Company's fleet includes four vessels financed under sale and leaseback financing arrangements accounted for as capital leases. These leases are secured by the assignment of earnings and insurances and by guarantees of the Company.

The selling price of the m/v Bulk Destiny to the new owner (lessor) was $21.0 million and the fair value of the vessel at the inception of the lease was $24.0 million . The difference between the selling price and the fair value of the vessel was recorded as prepaid rent and is being amortized over the 25 year estimated useful life of the vessel. Prepaid rent is included in finance lease right of use assets (previously "vessels under capital lease") on the consolidated balance sheet at June 30, 2019 . Minimum lease payments fluctuate based on three-month LIBOR and are payable quarterly over the seven year lease term , with a purchase obligation of $11,200,000 due with the final lease payment in January 2024. Interest is floating at LIBOR plus 2.75% ( 5.06% including the margin, at inception of the lease). The Company will own this vessel at the end of the lease term. The lease contains a minimum liquidity requirement, positive working capital of the leasee and a collateral maintenance ratio clause which requires the fair market value of the vessel plus the net realizable value of any additional collateral previously provided, to remain above defined ratios. At June 30, 2019 and December 31, 2018 , the Company was in compliance with these covenants.

The selling price of the m/v Bulk Beothuk was $7,000,000 and the fair value was estimated to be the same. The lease is payable at $3,500 per day every fifteen days over the five year lease term , and a balloon payment of $4,000,000 is due with the final lease payment in June 2022. The implied interest rate at inception was 11.83% . The Company will own this vessel at the end of the lease term.

The selling price of the m/v Bulk Trident was $13,000,000 and the fair value was estimated to be the same. The Company simultaneously leased the vessel back from the buyer. The minimum lease payments fluctuate based on three-month LIBOR and are payable monthly over the eight -year lease term. The Company has the option to purchase the vessel at the end of the third year of the lease or thereafter, or in the case of default by the lessor, at any time during the lease term. Interest is floating at LIBOR plus 1.7% ( 4.02% including the margin, at inception of the lease). The Company will own this vessel at the end of the lease term.

The selling price of the m/v Bulk PODS was $14,750,000 and the fair value was estimated to be the same. The Company simultaneously leased the vessel back from the buyer. The minimum lease payments fluctuate based on three-month LIBOR and are payable monthly over the eight -year lease term. The Company has the option to purchase the vessel at the end of the third year of the lease or thereafter, or in the case of default by the lessor, at any time during the lease term. Interest is floating at LIBOR plus 1.7% ( 4.02% including the margin, at inception of the lease). The Company will own this vessel at the end of the lease term.

Vessel Acquisition Accounted for as a Finance Lease (in accordance with new accounting guidance - ASC 842)

In February 2019, the Company acquired the m/v Bulk Spirit for $13,000,000 , which is the estimated fair value and simultaneously entered into a failed sale and leaseback of the vessel. The Company determined that the transfer of the vessel to the lessor was not a sale in accordance with ASC 606, because control of the vessel was not transferred to the lessor. The lease is classified as finance lease in accordance with ASC 842, because the lease transfers ownership of the vessel to the Company by the end of the lease term. The minimum lease payments include interest at 5.10% for the first five years. Interest fluctuates based on the three-month LIBOR for the remaining three years of the eight -year lease term. The Company has the option to purchase the vessel at the end of the second year of the lease or thereafter, or in the case of default by the lessor, at any time during the lease term. The Company is obligated to repurchase the vessel at the end of the lease term. A balloon payment of $3,875,000 is due with the final lease payment in March 2027. This lease is secured by the assignment of earnings and insurances and by a guarantee of the Company.

Long-term Contracts Accounted for as Operating Leases

The Company leases office space for its Copenhagen operations. Since December 31, 2018 , this lease continues on a month to month basis. The noncancelable period is six months, which represents the period for which it is reasonably certain that termination will not be exercised.

The Company leases office space for its Singapore operations. At June 30, 2019 , the remaining obligation under this lease is approximately $15,000 .

For the three and six months ended June 30, 2019 , the Company recognized approximately $52,000 and $103,000 , respectively, as lease expense for office leases in General and Administrative Expenses.

Future minimum lease payments under finance leases with initial or remaining terms in excess of one year at June 30, 2019 were:



	Years ending June 30,
2020	$	10,253,856
2021	9,938,535
2022	9,537,045
2023	12,190,555
2024	19,029,244
Thereafter	15,454,268
Total minimum lease payments	$	76,403,503
Less amount representing interest	15,262,506
Present value of minimum lease payments	61,140,997
Less current portion	6,632,119
Long-term portion	$	54,508,878

Other

On April 30, 2019, the Company entered into a contract to build two new post-panamax 95,000 dwt dry bulk vessels and holds options to build two more similar vessels. The new vessels, with a building cost of approximately $38 million each, are expected to be delivered in the first half of 2021. On May 29, 2019, the Company made a deposit of $7,657,000 for the two new vessels. The second installments of 15% are due and payable upon launching of the vessels and the final payments are due upon delivery of the vessels.

The Company is subject to certain asserted claims arising in the ordinary course of business. The Company intends to vigorously assert its rights and defend itself in any litigation that may arise from such claims. While the ultimate outcome of these matters could affect the results of operations of any one year, and while there can be no assurance with respect thereto, management believes that after final disposition, any financial impact to the Company would not be material to its consolidated financial position, results of operations, or cash flows.

NOTE 8 - SUBSEQUENT EVENTS

On July 22, 2019, the Company entered into an agreement to purchase a 2011 Nantong/Kawasaki built 58,000 dwt dry bulk vessel (to be renamed m/v Bulk Friendship) for $14.1 million . The vessel is expected to be delivered in September 2019.

On August 12, 2019, the Company declared a quarterly cash dividend of $0.035 per common share.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and footnotes thereto contained in this report.

Forward Looking Statements

All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward looking statements. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward looking statements as a result of the risk factors and other factors detailed in our filings with the Securities and Exchange Commission. All subsequent written or oral forward looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Important Financial and Operational Terms and Concepts

The Company uses a variety of financial and operational terms and concepts when analyzing its performance.

These include revenue recognition, deferred revenue, allowance for doubtful accounts, vessels and depreciation and long-lived assets impairment considerations, as defined above as well as the following:

Voyage Revenue. Voyage revenue is derived from voyage charters which involve the carriage of cargo from a load port to a discharge port, which is predetermined in each voyage contract. Gross revenue is calculated by multiplying the agreed rate per ton of cargo by the number of tons loaded. The Company directs how and for what purpose the vessel is used and therefore, these voyage contracts do not contain leases.

Charter Revenue. Charter revenue is earned when the Company lets a vessel it owns or operates to a charterer for a specified period of time. Charter revenue is based on the agreed rate per day. These time-charter arrangements contain leases because the lessee has the power to direct the use and receives substantially all of the economic benefits from the use of the vessel. The operating lease component and the vessel operating expense nonlease component of a time-charter contract are reported as a single component.

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. The Company does not record a right-of-use asset or lease liability for any arrangement less than one year.

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.

Net Revenue. Net revenue represents total revenue less the total direct costs of transportation and services, which includes charter hire, voyage and vessel operating expenses. Refer to Selected Financial Information, "Net revenue" for additional discussion.

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.

Selected Financial Information



(in thousands, except shipping days data) (figures may not foot due to rounding)	As of and for the three months ended June 30,						As of and for the six months ended June 30,
	2019			2018			2019			2018
Selected Data from the Consolidated Statements of Income
Voyage revenue	$	77,430		$	81,848		$	143,281		$	152,167
Charter revenue	5,861			14,976			19,553			23,630
Total revenue	83,291			96,823			162,835			175,796
Voyage expense	37,224			38,027			69,399			68,196
Charter expense	18,317			30,684			43,265			53,380
Vessel operating expenses	11,075			10,047			20,829			19,896
Total cost of transportation and service revenue	66,616			78,758			133,492			141,471
Net revenue ⁽¹⁾	16,674			18,065			29,343			34,325
Other operating expenses	9,850			8,770			18,261			17,236
Income from operations	6,824			8,435			11,081			16,229
Total other expense, net	(1,665		)	(1,562		)	(1,441		)	(3,821		)
Net income	5,159			6,873			9,640			12,408
Income attributable to noncontrolling interests	(1,127		)	(1,100		)	(1,905		)	(2,310		)
Net income attributable to Pangaea Logistics Solutions Ltd.	$	4,033		$	5,773		$	7,735		$	10,098

Adjusted EBITDA ⁽²⁾	11,315			13,686			19,950			25,818

Shipping Days ⁽³⁾
Voyage days	3,053			3,228			5,958			6,173
Time charter days	509			1,055			1,542			1,634
Total shipping days	3,562			4,283			7,500			7,807

TCE Rates ($/day) ⁽⁴⁾	$	12,933		$	13,728		$	12,458		$	13,783



	June 30, 2019			December 31, 2018
Selected Data from the Consolidated Balance Sheets
Cash, restricted cash and cash equivalents	$	43,661		$	56,115
Total assets	$	459,216		$	453,475
Total secured debt, including finance leases liabilities	$	178,488		$	166,552
Total liabilities and stockholders' equity	$	459,216		$	453,475

	For the six months ended June 30,
	2019			2018
Selected Data from the Consolidated Statements of Cash Flows
Net cash provided by operating activities	$	19,584		$	20,806
Net cash used in investing activities	$	(33,495	)	$	(2,846	)
Net cash provided by (used in) financing activities	$	1,457		$	(4,072	)

(1)

Net revenue represents total revenue less the total direct costs of transportation and services, which includes charter hire, voyage and vessel operating expenses. Net revenue is included because it is used by management and certain investors to measure performance by comparison to other logistic service providers. Net 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 revenue used here may not be comparable to an operating measure used by other companies.

(2)

Adjusted EBITDA represents operating earnings before interest expense, income taxes, depreciation and amortization, loss on sale and leaseback of vessels and other non-operating income and/or expense, 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.

The reconciliation of income from operations to net revenue and adjusted EBITDA is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net Revenue
Income from operations	$	6,823,993	$	8,434,946	$	11,081,459	$	16,228,625
General and administrative	5,358,991		4,378,671		9,392,671		8,506,969
Depreciation and amortization	4,491,327		4,391,069		8,868,515		8,729,257
Loss on sale and leaseback of vessels	$	—	$	860,426	$	—	$	860,426
Net Revenue	$	16,674,311	$	18,065,112	$	29,342,645	$	34,325,277

Adjusted EBITDA
Income from operations	6,823,993		8,434,946		11,081,459		16,228,625
Depreciation and amortization	4,491,327		4,391,069		8,868,515		8,729,257
Loss on sale and leaseback of vessels	$	—	$	860,426	$	—	$	860,426
Adjusted EBITDA	$	11,315,320	$	13,686,441	$	19,949,974	$	25,818,308

(3) 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).

(4) Pangaea defines time charter equivalent, or “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 such amounts.

Industry Overview

The dry bulk sector of the transportation 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, rose from a seasonal low of 689 at the end of the first quarter to 1,354 at the end of the second quarter. The BDI averaged 1,154 for the second quarter of 2019, down from an average of 1,272 for the comparable quarter of 2018.

The Company's TCE rates were down 6% from $13,728 for the three months ended June 30, 2018 to $12,933 for the three months ended June 30, 2019, but have recovered by 8% since the first quarter of 2019. The Company's achieved TCE rate for the three months ended June 30, 2019 significantly outperformed against the average of the Baltic panamax and supramax market indexes and exceeded the average market rates by approximately 49% due to its long-term contracts of affreightment, ("COAs"), its specialized fleet and its cargo-focused strategy.

2nd Quarter Highlights


•	Net income attributable to Pangaea Logistics Solutions Ltd. approximately $4.0 million for three months ended June 30, 2019 as compared to approximately $5.8 million for the same period of 2018 .


•	Earnings per share were $0.09 as compared to $0.13 for the three months ended June 30, 2018 .


•	Pangaea's TCE rates were $12,933 for the three months ended June 30, 2019 and $13,728 for the three months ended June 30, 2018 while the market average for the second quarter of 2019 was approximately $8,665 , giving the Company an overall average premium over market rates of approximately $4,268 or 49% . The Company's long-term COAs, cargo focus, and specialized fleet give rise to this premium.


•	Total revenue decreased to $83.3 million for the three months ended June 30, 2019 , from $96.8 million for the three months ended June 30, 2018 due to a decrease in market rates and shipping days.


•	At the end of the quarter, Pangaea had $43.7 million in cash, restricted cash and cash equivalents.

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

Revenues

Pangaea’s revenues are derived predominately from voyage and time charters, which are discussed below. Total revenue for the three months ended June 30, 2019 was $83.3 million , compared to $96.8 million for the same period in 2018 , a 14% decrease. The total number of shipping days decreased 17% to 3,562 in the three months ended June 30, 2019 , compared to 4,283 for the same period in 2018 .

Components of revenue are as follows:

Voyage revenues decreased by 5% for the three months ended June 30, 2019 to $77.4 million compared to $81.8 million for the same period in 2018 . The decrease in voyage revenues was primarily due to a decrease in the number of voyage days, which were 3,053 in the second quarter of 2019 as compared to 3,228 in the second quarter of 2018 and by the decrease in TCE rates, as discussed above.

Charter revenues decreased to $5.9 million from $15.0 million , or 61% , for the three months ended June 30, 2019 compared to the same period in 2018 . The decrease in charter revenues was due to a decrease in time charter days which were down 52% to 509 in the second quarter of 2019 from 1,055 in the second quarter of 2018 . The optionality of our chartering strategy allows the Company to selectively release excess tonne-days into the market under time charters arrangements.

Voyage Expenses

Voyage expenses for the three months ended June 30, 2019 were $37.2 million , compared to $38.0 million for the same period in 2018 , a decrease of approximately 2% . The decrease in voyage expense was primarily due to a 5% decrease in voyage days in second quarter of 2019.

Charter Hire Expenses

Charter hire expenses for the three months ended June 30, 2019 were $18.3 million , compared to $30.7 million for the same period in 2018 , a 40% decrease. The number of chartered-in days decreased 35% from 2,680 days in the three months ended June 30, 2018 to 1,742 days for the three months ended June 30, 2019 . This reflects the Company's unique ability to adapt to changing market conditions by increasing, decreasing, or renewing the chartered-in profile to meet its cargo commitments.

Vessel Operating Expenses

Vessel operating expenses for the three months ended June 30, 2019 were $11.1 million , compared to $10.0 million for the same period in 2018 , an increase of approximately 11% . The increase in vessel operating expenses is due to the increase in owned days, which were 1,868 in the three months ended June 30, 2019 as compared to 1,820 in the three months ended June 30, 2018. This increase is due to the addition of three vessels offset by the completion of two bareboat charters in 2018. Excluding technical management fees, vessel operating expenses per day were $5,398 for the three months ended June 30, 2019 and $4,991 for the three months ended June 30, 2018 . Technical management fees were approximately $991,200 and $962,400 for the three months ended June 30, 2019 and 2018 , respectively.

General and Administrative Expenses

General and administrative expenses increased from $4.4 million in the three months ended June 30, 2018 to $5.4 million in the three months ended June 30, 2019 . This is due to timing and recognition of incentive compensation resulting in an increase in accrued bonus compensation.

Income from Operations

The Company had income from operations of $6.8 million for the three months ended June 30, 2019 as compared to income from operations of $8.4 million for the three months ended June 30, 2018 . This is primarily due to the decreases in revenues discussed above.

Unrealized gain (loss) on derivative instruments

The Company incurred unrealized losses on bunker swaps of approximately $342,000 and gains on forward freight agreements (FFAs) of $557,000 in the three months ended June 30, 2019 as compared to gains of approximately $493,000 on bunker swaps and $60,000 on FFAs in the three months ended June 30, 2018 . These result from changes in the fair value of the derivatives at the respective balance sheet dates.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Revenues

Pangaea’s revenues are derived predominately from voyage and time charters, which are discussed below. Total revenue for the six months ended June 30, 2019 was $162.8 million , compared to $175.8 million for the same period in 2018 , a 7% decrease. The total number of shipping days decreased 4% to 7,500 in the six months ended June 30, 2019 , compared to 7,807 for the same period in 2018 .

Components of revenue are as follows:

Voyage revenues decreased by 6% for the six months ended June 30, 2019 to $143.3 million compared to $152.2 million for the same period in 2018 . The decrease in voyage revenues was primarily due to a decrease in the number of voyage days, which were 5,958 in the six months ended June 30, 2019 as compared to 6,173 in the six months ended June 30, 2018 and by the decrease in TCE rates to $12,458 from $13,783 .

Charter revenues decreased to $19.6 million from $23.6 million , or 17% , for the six months ended June 30, 2019 as compared to the same period in 2018 . The decrease in charter revenues was due to a decrease in drybulk market rates as well as time charter days which were down 6% to 1,542 in the six months ended June 30, 2019 from 1,634 in the six months ended June 30, 2018 .

Voyage Expenses

Voyage expenses for the six months ended June 30, 2019 were $69.4 million , compared to $68.2 million for the same period in 2018 , an increase of approximately 2% .

Charter Hire Expenses

Charter hire expenses for the six months ended June 30, 2019 were $43.3 million , compared to $53.4 million for the same period in 2018 , a 19% decrease. The number of chartered-in days decreased 15% to 3,962 days in the six months ended June 30, 2019 from 4,639 days for the six months ended June 30, 2018 . This reflects the Company's unique ability to adapt to changing market conditions by changing the chartered-in profile to meet its cargo commitments.

Vessel Operating Expenses

Vessel operating expenses for the six months ended June 30, 2019 were $20.8 million , compared to $19.9 million for the same period in 2018 , an increase of approximately 5% . Excluding technical management fees, vessel operating expenses per day were $5,254 for the six months ended June 30, 2019 and $4,967 for the six months ended June 30, 2018 . Technical management fees were approximately $1,905,600 and $1,916,400 for the six months ended June 30, 2019 and 2018 , respectively.

General and Administrative Expenses

General and administrative expenses increased from $8.5 million in the six months ended June 30, 2018 to $9.4 million in the three months ended June 30, 2019 . This is due to timing and recognition of incentive compensation resulting in an increase in accrued bonus compensation.

Income from Operations

The Company had income from operations of $11.1 million for the six months ended June 30, 2019 as compared to income from operations of $16.2 million for the six months ended June 30, 2018 . This is primarily due to the decrease in voyage and time charter days. Net revenue was down 15% over the same period.

Unrealized gain (loss) on derivative instruments

The Company had unrealized gains on bunker swaps of $2,388,000 in the six months ended June 30, 2019 as compared to unrealized losses of approximately $245,000 in the six months ended June 30, 2018 . This is primarily due to a drastic drop in fuel prices at the end of 2018, followed by the market recovery during the first half of 2019. Market prices remained relatively stable for the six months ended June 30, 2018 . The Company had unrealized gains on FFAs of approximately $117,000 and unrealized losses of approximately $254,000 for the six months ended June 30, 2019 and 2018 , respectively.

Income attributable to noncontrolling interests

Income attributable to noncontrolling interests totaled $1,905,017 for the six months ended June 30, 2019 and $2,309,938 for the six months ended June 30, 2018 . This is due to lower rates and the impact on the noncontrolling interests' earnings.

Significant accounting estimates

The discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“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. Actual results could differ from those estimates. The significant estimates and assumptions of the Company are the estimated fair value used in determining the estimated future cash flows used in its impairment analysis, the estimated salvage value used in determining depreciation expense and the allowances for doubtful accounts.

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. Historically, both charter rates and vessel values tend to be cyclical. The carrying value of each group of vessels (allocated by size, age and major characteristic or trade), which are classified as held and used by the Company, 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 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 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 recognized.

Liquidity and Capital Resources

Liquidity and Cash Needs

The Company has historically financed its capital requirements with cash flow from operations, proceeds from related party debt, proceeds from long-term debt and finance leases, and, in June 2017, through a private placement of common stock. The Company may consider additional debt and equity financing alternatives in the future. In February 2019 the Company entered into a finance lease arrangement to generate $13.0 million of cash for the acquisition of the m/v Bulk Spirit and in May 2019 entered into secured debt financing to generate $14 million for the acquisition of the m/v Bulk Independence. However, if market conditions are negative, 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 June 30, 2019 and December 31, 2018 , the Company had working capital of $28.5 million and $34.5 million , respectively.

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 $19.6 million and $20.8 million in the six months ended June 30, 2019 and 2018, respectively; $40.1 million in 2018 and $29.2 million in 2017; and its ability to procure long-term fixed COAs with new and longstanding customers. In addition, the Company has demonstrated its unique ability to adapt to changing market conditions by changing the chartered-in profile to meet its cargo commitments. For more information on the results of operations, see ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of Operations.

Capital Expenditures

The Company’s capital expenditures relate to the purchase and lease of interests in vessels, newbuild vessels, and capital improvements to its vessels which are expected to enhance the revenue earning capabilities and safety of these vessels. The Company’s owned and leased fleet includes three Panamax drybulk carriers, eight Supramax drybulk carriers, two Ultramax Ice-Class 1C, two Handymax drybulk carriers (both of which are Ice-Class 1A) and one barge. The Company also has a one-third interest in a consolidated joint venture which owns six Panamax Ice-Class 1A drybulk carriers.

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 ballast water treatment systems 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 dry docking, but the total cost is unpredictable. Funding expenses associated with these requirements will be met with cash from operations. The Company anticipates that this process of recertification will require it to reposition these vessels from a discharge port to shipyard facilities, which will reduce the Company’s available days and operating days during that period. The Company capitalized drydocking costs totaling approximately $1.2 million in the three months ended June 30, 2019 and expensed drydocking costs of approximately $78,000 and $8,000 in the three months ended June 30, 2019 and 2018 . The Company capitalized drydocking costs totaling approximately $1.5 million in six months ended June 30, 2019 and 2018 and expensed drydocking costs of approximately $78,000 in the six months ended June 30, 2019 and $42,000 in the six months ended June 30, 2018 .

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet arrangements at June 30, 2019 or December 31, 2018 .

ITEM 3. Quantitative and Qualitative Disclosures about Market Risks

No significant changes to our market risk have occurred since December 31, 2018. For a discussion of market risks affecting us, refer to Part II, Item 7A—"Quantitative and Qualitative Disclosures About Market Risk" included in the Company Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 4. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for the six months ended June 30, 2019 .

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1 - Legal Proceedings

From time to time, we are involved in various other disputes and litigation matters that arise in the ordinary course of our business, principally cargo claims. Those claims, even if lacking merit, could result in the expenditure by us of significant financial and managerial resources.

Item 1A – Risk Factors

There have been no material changes from the “Risk Factors” previously disclosed in our Annual Report on Form 10-K, filed with the SEC on March 20, 2019.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 - Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

None.

Item 5 - Other Information

None.

Item 6 – Exhibits



Exhibit No.	Description	Incorporated By Reference			Filed herewith
		Form	Date	Exhibit

10.45	The Amended Senior Facility - Dated May 13, 2019				X

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

31.2	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X

32.2	Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X

EX-101.INS	XBRL Instance Document				X

EX-101.SCH	XBRL Taxonomy Extension Schema				X

EX-101.CAL	XBRL Taxonomy Extension Calculation Linkbase				X

EX-101.DEF	XBRL Taxonomy Extension Definition Linkbase				X

EX-101.LAB	XBRL Taxonomy Extension Label Linkbase				X

EX-101.PRE	XBRL Taxonomy Extension Presentation Linkbase				X

SIGNATURES

Pursuant to the requirements of the Section 13 or 15 or 15(d) 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 on August 12, 2019 .



	PANGAEA LOGISTICS SOLUTIONS LTD.

	By:	/s/ Edward Coll
	Edward Coll
	Chief Executive Officer
	(Principal Executive Officer)

	By:	/s/ Gianni Del Signore
	Gianni Del Signore
	Chief Financial Officer
	(Principal Financial and Accounting Officer)



Lender	Lending Office	Commitment
NIBC BANK N.V. Address for Notices : Carnegieplein 4 2517 KJ The Hague The Netherlands Attention: Transportation - maritime@nibc.com , Jan-Willem Schellingerhout Email: Jan-Willem.Schellingerhout@nibc.com Tel: +31 (0)70 - 342 54 25 with a copy to: Carnegieplein 4 2517 KJ The Hague The Netherlands Attention: Dolf Rijnberg Email: Dolf.Rijnberg@nibc.com	Carnegieplein 4 2517 KJ The Hague The Netherlands	$19,500,000 in respect of the tranches relating to BULK ENDURANCE $10,000,000 in respect of the tranches relating to BULK PRIDE $14,000,000 in respect of the tranche relating to BULK INDEPENDENCE



Date:	August 12, 2019	/s/ Gianni DelSignore
		Gianni DelSignore
		Chief Financial Officer
		(Principal Financial Officer)



Date:	August 12, 2019	/s/ Gianni DelSignore
		Gianni DelSignore
		Chief Financial Officer
		(Principal Financial Officer)



	INDEX
Clause		Page
1	INTERPRETATION	2
2	FACILITY	25
3	POSITION OF THE LENDERS AND SWAP BANK	26
4	DRAWDOWN	28
5	INTEREST	30
6	INTEREST PERIODS	32
7	DEFAULT INTEREST	33
8	REPAYMENT AND PREPAYMENT	34
9	CONDITIONS PRECEDENT	37
10	REPRESENTATIONS AND WARRANTIES	39
11	GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS	48
12	FINANCIAL COVENANTS	55
13	MARINE INSURANCE COVENANTS	56
14	SHIP COVENANTS	61
15	COLLATERAL MAINTENANCE RATIO	67
16	INTENTIONALLY OMITTED	68
17	PAYMENTS AND CALCULATIONS	68
18	APPLICATION OF RECEIPTS	70
19	APPLICATION OF EARNINGS	71
20	EVENTS OF DEFAULT	73
21	FEES AND EXPENSES	78
22	INDEMNITIES	79
23	NO SET-OFF OR TAX DEDUCTION; TAX INDEMNITY	81
24	ILLEGALITY, ETC	84
25	INCREASED COSTS	85
26	SET‑OFF	86
27	TRANSFERS AND CHANGES IN LENDING OFFICES	87
28	VARIATIONS AND WAIVERS	91
29	NOTICES	92
30	SUPPLEMENTAL	95
31	THE SERVICING BANKS	96
32	LAW AND JURISDICTION	100
33	WAIVER OF JURY TRIAL	101
34	PATRIOT ACT NOTICE	101


(2)	THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as lenders (the “ Lenders ”, which expression includes their respective successors, transferees and assigns);


(3)	NIBC BANK N.V., acting in such capacity through its office at Carnegieplein 4, 2517 KJ, The Hague, The Netherlands, as arranger (in such capacity, the “ Arranger ”, which expression includes its successors, transferees and assigns);


(A)	Pursuant to a Loan Agreement dated as of December 21, 2016 (as amended and restated by the Amended and Restated Loan Agreement dated as of December 15, 2017, the “ Original Loan Agreement ”), the Lenders made available to Bulk Nordic and Bulk Pride a senior secured term loan facility upon the terms and conditions stated therein.


(B)	Upon the terms and conditions of this Agreement, the parties hereto have agreed to amend and restate the Original Loan Agreement to, among other things, provide for an additional tranche to finance BULK INDEPENDENCE.


(C)	Upon the request of the Borrowers, the Swap Bank may enter from time to time into interest rate swap transactions, interest rate options or a combination of both with the Borrowers to hedge the Borrowers’ exposure under this Agreement to interest rate fluctuations.


(D)	The Lenders and the Swap Bank have agreed to share pari passu in the Collateral to be granted to the Security Trustee pursuant to this Agreement.


(a)	December 27, 2016, with respect to the Advance relating to BULK ENDURANCE;


(b)	March 31, 2018, with respect to the Advance relating to BULK PRIDE;


(c)	June 30, 2019, with respect to the Advance relating to BULK INDEPENDENCE (or such later date as the Agent may, with the consent of the Lenders, agree with the Borrowers); or


(d)	the date on which the Total Commitments are fully borrowed, cancelled or terminated;


(a)	in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and


(b)	in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.


(b)	the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text” published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and


(c)	any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”.


(a)	in respect of each of the Borrowers, the occurrence of any act, event or circumstance that without prior written consent of the Lenders results in Nordic Bulk Ventures Holding owning directly less than 100% of the issued and outstanding Equity Interests in a Borrower, unless Pangaea acquires directly or indirectly 100% of the issued and outstanding Equity Interests in the Borrower;


(b)	in respect of Nordic Bulk Ventures Holding, the occurrence of any act, event or circumstance that without prior written consent of the Lenders results in Pangaea owning directly or indirectly, less than 100% of the issued and outstanding Equity Interests in Nordic Bulk Ventures Holding;


(c)	in respect of Pangaea, the occurrence of any act, event or circumstance that without prior written consent of the Lenders results in (i) Pangaea being de-listed; or (ii) any party acquiring a majority stake of more than 50% in the shares of Pangaea;


(a)	Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending regulation (EU) No. 648/2012;


(b)	Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC; and


(a)	it is entered into by a Borrower pursuant to a Master Agreement with the Swap Bank;


(b)	its purpose is hedging of a Borrower’s exposure under this Agreement to fluctuations in LIBOR arising from the funding of the Loan (or any part thereof) for a period expiring no later than the Maturity Date; and


(c)	it is designated by a Borrower, by delivery by such Borrower to the Agent of a notice of designation in the form set out in Schedule 6, as a Designated Transaction for the purposes of the Finance Documents;


(a)	except to the extent that they fall within paragraph (b):


(ii)	compensation payable to the Borrower owning that Ship or the Security Trustee in the event of requisition of that Ship for hire;


(v)	damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of that Ship; and


(vi)	all moneys which are at any time payable under Insurances in respect of loss of hire; and


(b)	if and whenever that Ship is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to that Ship;


(a)	any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or


(b)	any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,