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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2021
 
OR
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: 001-36798

PANGAEA LOGISTICS SOLUTIONS LTD. 
(Exact name of Registrant as specified in its charter)
Bermuda98-1205464
(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

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockPANLNASDAQ

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 FilerAccelerated Filer
Non-accelerated FilerSmaller reporting company
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

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 $0.0001 per share, 45,613,840 shares outstanding as of August 10, 2021.



TABLE OF CONTENTS
 
  Page
PART IFINANCIAL INFORMATION 
Item 1. 
   
 
   
 
  
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
PART II 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Signatures

2




Pangaea Logistics Solutions Ltd.
Consolidated Balance Sheets
June 30, 2021December 31, 2020
(unaudited) 
Assets  
Current assets  
Cash and cash equivalents$40,614,572 $46,897,216 
Restricted cash 1,500,000 
Accounts receivable (net of allowance of $1,679,305 and $1,896,038 at June 30, 2021 and December 31, 2020, respectively)
30,761,336 29,152,153 
Bunker inventory23,183,558 15,966,247 
Advance hire, prepaid expenses and other current assets38,575,365 19,515,945 
Total current assets133,134,831 113,031,561 
Fixed assets, net388,565,554 276,741,751 
Investment in newbuildings in-process7,602,391 15,390,635 
Finance lease right of use assets, net46,129,067 45,240,198 
Total assets$575,431,843 $450,404,145 
Liabilities and stockholders' equity  
Current liabilities  
Accounts payable, accrued expenses and other current liabilities$44,688,612 $32,400,288 
Related party debt242,852 242,852 
Deferred revenue15,825,938 12,799,561 
Current portion of secured long-term debt14,312,255 57,382,674 
Current portion of finance lease liabilities11,323,580 6,978,192 
Dividend payable98,864 1,005,763 
Total current liabilities86,492,101 110,809,330 
Secured long-term debt, net100,919,806 47,761,898 
Finance lease liabilities, net116,132,843 47,266,104 
Long-term liabilities - other - Note 815,010,955 10,135,408 
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; 45,641,441 shares issued and outstanding at June 30, 2021; 45,447,751 shares issued and outstanding at December 31, 2020
4,564 4,545 
Additional paid-in capital160,817,940 159,581,415 
Retained earnings46,718,409 23,179,805 
Total Pangaea Logistics Solutions Ltd. equity207,540,913 182,765,765 
Non-controlling interests49,335,225 51,665,640 
Total stockholders' equity256,876,138 234,431,405 
Total liabilities and stockholders' equity$575,431,843 $450,404,145 

 The accompanying notes are an integral part of these consolidated financial statements
3


Pangaea Logistics Solutions Ltd.
Consolidated Statements of Operations
(unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 
Revenues:
Voyage revenue$117,395,377 $66,857,166 $225,625,680 $153,381,057 
Charter revenue28,148,988 3,539,004 44,891,212 12,895,050 
Total revenue145,544,365 70,396,170 270,516,892 166,276,107 
Expenses:
Voyage expense46,112,779 31,757,910 93,951,636 79,553,822 
Charter hire expense62,604,014 15,203,731 116,239,356 47,529,178 
Vessel operating expense9,772,966 9,325,060 18,268,469 19,258,922 
General and administrative6,029,793 3,872,388 10,234,691 7,865,631 
Depreciation and amortization4,868,730 4,345,707 9,287,824 8,587,958 
Loss on impairment of vessels 1,801,039  1,801,039 
Loss on sale of vessels 297,475  219,485 
Total expenses129,388,282 66,603,310 247,981,976 164,816,035 
Income from operations16,156,083 3,792,860 22,534,916 1,460,072 
Other income (expense): 
Interest expense, net(2,621,110)(1,944,741)(4,577,916)(4,088,704)
Income attributable to Non-controlling interest recorded as long-term liability(179,080)(55,809)(449,745)(28,166)
Unrealized gain (loss) on derivative instruments, net6,303,776 1,404,317 8,326,148 (1,512,777)
Other (loss) income(82,496)98,635 250,962 695,191 
Total other income (expense), net3,421,090 (497,598)3,549,449 (4,934,456)
Net income (loss)19,577,173 3,295,262 26,084,365 (3,474,384)
Income attributable to non-controlling interests(349,898)(290,086)(1,002,919)(315,815)
Net income (loss) attributable to Pangaea Logistics Solutions Ltd.$19,227,275 $3,005,176 $25,081,446 $(3,790,199)
Earnings (loss) per common share:
Basic$0.44 $0.07 $0.57 $(0.09)
Diluted$0.43 $0.07 $0.56 $(0.09)
Weighted average shares used to compute earnings per common share:
Basic43,998,424 43,445,789 43,989,515 43,442,773 
Diluted44,688,602 43,445,789 44,731,058 43,442,773 
 
The accompanying notes are an integral part of these consolidated financial statements
 

4


Pangaea Logistics Solutions Ltd.
Consolidated Statements of Stockholders' Equity
(unaudited)
Common StockAdditional Paid-in CapitalRetained EarningsTotal Pangaea Logistics  Solutions Ltd. EquityNon-Controlling InterestTotal  Stockholders' Equity
SharesAmount
Balance at March 31, 202145,572,236 $4,557 $160,399,765 $29,033,976 $189,438,298 $52,318,661 $241,756,959 
Share-based compensation— — 418,182 — 418,182 — 418,182 
Issuance of restricted shares, net of forfeitures69,205 (7)— —   
Distribution to Non-Controlling Interests— — — — — (3,333,334)(3,333,334)
Common Stock Dividend— — — (1,542,842)(1,542,842)— (1,542,842)
Net Income— — — 19,227,275 19,227,275 349,898 19,577,173 
Balance at June 30, 202145,641,441 $4,564 $160,817,940 $46,718,409 $207,540,913 $49,335,225 $256,876,138 
Balance at December 31, 202045,447,751 $4,545 $159,581,415 $23,179,805 $182,765,765 $51,665,640 $234,431,405 
Share-based compensation1,365,7341,365,7341,365,734
Distribution to Non-Controlling Interests— — — — — (3,333,334)(3,333,334)
Issuance of restricted shares, net of forfeitures193,69019(129,209)(129,190)(129,190)
Common Stock Dividend— — — (1,542,842)(1,542,842)— (1,542,842)
Net Income— — — 25,081,44625,081,4461,002,91926,084,365
Balance at June 30, 202145,641,441 $4,564 $160,817,940 $46,718,409 $207,540,913 $49,335,225 $256,876,138 
Common StockAdditional Paid-in CapitalRetained EarningsTotal Pangaea Logistics  Solutions Ltd. EquityNon-Controlling InterestTotal  Stockholders' Equity
SharesAmount
Balance at March 31, 202045,112,062 $4,512 $158,564,477 $5,941,205 $164,510,194 $72,851,439 $237,361,633 
Share-based compensation— — 420,717 — 420,717 — 420,717 
Issuance of restricted shares, net of forfeitures(46,400)(5)(110,957)— (110,962)— (110,962)
Net (Loss) Income— — — 3,005,176 3,005,176 290,086 3,295,262 
Balance at June 30, 202045,065,662 $4,507 $158,874,237 $8,946,381 $167,825,125 $73,141,525 $240,966,650 
Balance at December 31, 201944,886,122 4,489 157,504,895 12,736,580 170,245,964 72,825,710 243,071,674 
Share-based compensation— — 1,523,486 — 1,523,486 — 1,523,486 
Issuance of restricted shares, net of forfeitures179,540 18 (154,144)— (154,126)— (154,126)
Net Income— — — (3,790,199)(3,790,199)315,815 (3,474,384)
Balance at June 30, 202045,065,662 $4,507 $158,874,237 $8,946,381 $167,825,125 $73,141,525 $240,966,650 

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

5

Pangaea Logistics Solutions, Ltd.
Consolidated Statements of Cash Flows
(unaudited)


 Six Months Ended June 30,
 20212020
Operating activities
Net income (loss)$26,084,365 $(3,474,384)
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense9,287,824 8,587,958 
Amortization of deferred financing costs477,263 346,985 
Amortization of prepaid rent57,628 61,136 
Unrealized (gain) loss on derivative instruments(8,326,148)1,512,777 
Income from equity method investee(250,962)(795,988)
Earnings attributable to non-controlling interest recorded as other long term liability449,745 28,166 
Provision (recovery) for doubtful accounts285,466 (185,331)
Loss on impairment of vessels 1,801,039 
Loss on sale of vessel 219,485 
Drydocking costs(5,551,513)(2,882,109)
Share-based compensation1,365,734 1,523,486 
Change in operating assets and liabilities:
Accounts receivable(1,894,649)10,296,790 
Bunker inventory(7,217,311)9,352,691 
Advance hire, prepaid expenses and other current assets(10,482,310)3,991,371 
Accounts payable, accrued expenses and other current liabilities12,222,358 (14,444,003)
Deferred revenue3,026,377 (9,033,002)
Net cash provided by operating activities19,533,867 6,907,067 
Investing activities
Purchase of vessels and vessel improvements(108,540,199)(1,652,366)
Investment in newbuildings in-process (33,445)
Purchase of fixed assets and equipment(112,196)(7,801)
Proceeds from sale of vessels 8,099,667 
Purchase of derivative instrument (628,000)
Net cash (used in) provided by investing activities(108,652,395)5,778,055 
Financing activities
Proceeds from long-term debt66,350,000  
Payments of financing fees and debt issuance costs(1,167,783)(149,118)
Payments of long-term debt(55,620,110)(6,568,134)
Proceeds from finance leases77,084,500  
Payments of finance lease obligations(3,824,259)(9,091,570)
Dividends paid to non-controlling interests(3,333,334) 
Accrued common stock dividends paid(2,449,741)(536,461)
Cash paid for incentive compensation shares relinquished(129,190)(154,126)
Contributions from non-controlling interest recorded as long-term liability4,621,398 322,750 
Payments to non-controlling interest recorded as long-term liability(195,597)(70,487)
Net cash provided by (used in) financing activities81,335,884 (16,247,146)
Net decrease in cash, cash equivalents and restricted cash(7,782,644)(3,562,024)
Cash, cash equivalents and restricted cash at beginning of period48,397,216 53,055,091 
Cash, cash equivalents and restricted cash at end of period$40,614,572 $49,493,067 

Supplemental cash flow information  
Cash and cash equivalents$40,614,572 $46,993,067 
Restricted cash 2,500,000 
$40,614,572 $49,493,067 

The accompanying notes are an integral part of these consolidated financial statements
6



NOTE 1 - GENERAL INFORMATION AND RECENT EVENTS

Organization and General

The accompanying consolidated financial statements include the accounts of Pangaea Logistics Solutions Ltd. and its consolidated subsidiaries (collectively, the “Company”, “Pangaea” “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.

At June 30, 2021, the Company owns two Panamax, two Ultramax Ice Class 1C, one Ultramax and eight Supramax drybulk vessels. The Company owns two-thirds of Nordic Bulk Holding Company Ltd. ("NBHC") which owns a fleet of six Panamax Ice Class 1A drybulk vessels. The Company owns approximately 63% of Nordic Bulk Partners LLC. ("NBP") which owns a fleet of two Post Panamax Ice Class 1A drybulk vessels and two Post Panamax Ice Class 1A drybulk vessels newbuildings are expected to be delivered in 3rd and 4th quarter of 2021. The Company also has a 50% interest in the owner of a deck barge.

On July 12, 2021, the Company took delivery of the m/v Bulk Promise, a 2013 Toyohashi-built 78,000 dwt dry bulk vessel.



7


NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q. Accordingly, these interim financial statements do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements. The accompanying financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

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. The significant estimates and assumptions of the Company are residual value of vessels, the useful lives of vessels and estimated losses on our trade receivables. Actual results could differ from those estimates.

Cash, cash equivalents and restricted cash

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, 2021December 31, 2020
(unaudited)
Money market accounts – cash equivalents$6,640,473 $18,443,443 
Cash (1)
33,974,099 28,453,773 
Total cash and cash equivalents$40,614,572 $46,897,216 
Restricted cash 1,500,000 
Total cash, cash equivalents and restricted cash$40,614,572 $48,397,216 

(1) Consists of cash deposits at various major banks.
 
Restricted cash at December 31, 2020 consists of $1.5 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. The restricted cash of $1.5 million was released in connection with the April 2021 refinancing.

Advance hire, prepaid expenses and other current assets were comprised of the following: 
 June 30, 2021December 31, 2020
 (unaudited) 
Advance hire$12,734,910 $5,026,953 
Prepaid expenses3,897,146 3,706,396 
Accrued receivables9,617,394 6,823,409 
Margin deposit 814,062 
Derivative assets8,326,056 — 
Other current assets3,999,859 3,145,125 
 $38,575,365 $19,515,945 
8



Accounts payable, accrued expenses and other current liabilities were comprised of the following:
 June 30, 2021December 31, 2020
 (unaudited) 
Accounts payable$24,483,640 $18,678,099 
Accrued expenses15,904,141 10,654,357 
Deferred consideration - Note 82,717,199 2,500,000 
Other accrued liabilities1,583,632 567,832 
 $44,688,612 $32,400,288 

Leases

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, Leases ("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, 2021, 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.

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.

At June 30, 2021, the Company had fifteen vessels chartered to customers under time charters that contain leases. These fifteen leases varied in original length from 24 days to 138 days. At June 30, 2021, lease payments due under these arrangements totaled approximately $8,648,000 and each of the time charters were due to be completed in 65 days or less.

At June 30, 2020, the Company had six vessels chartered to customers under time charters that contain leases. These six leases varied in original length from 1 day to 72 days. At June 30, 2020, lease payments due under these arrangements totaled approximately $1,611,000 and each of the time charters were due to be completed in 70 days or less. The Company does not have any sales-type or direct financing leases.

Office leases

The Company has two non-cancelable office leases and non-cancelable office equipment leases and the lease assets and liabilities are not material.

9


Revenue Recognition

In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses the Company for any delays that exceed the agreed to laytime at the ports visited, with the amounts recorded as demurrage revenue. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime which is known as despatch and results in a reduction of revenue. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. The Company determined that its voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses, and the revenue is recognized on a straight-line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.

The voyage contracts are considered service contracts which fall under the provisions of ASC 606, Revenue from Contracts with Customers because the Company, as the shipowner, retains control over the operations of the vessel such as directing the routes taken or the vessel speed. The voyage contracts generally have variable consideration in the form of demurrage or despatch.

During time charter agreements, 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, the charterers have substantive decision-making rights to direct how and for what purpose the vessel is used. As such, the Company has identified that time charter agreements contain a lease in accordance with ASC 842. Revenue is not earned when vessels are offhire.

Recently Issued Accounting Pronouncements Not Yet Adopted
    
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Companies can apply the ASU immediately, however the guidance will only be available until December 31, 2022. The Company is currently evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for the Company at the beginning of 2023. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently assessing the new guidance and its impact on its consolidated financial statements, and it intends to adopt the guidance when it becomes effective in the first quarter of 2023. 

10


NOTE 3 - FIXED ASSETS

At June 30, 2021, the Company owned twenty-two dry bulk vessels including eight financed under finance leases; and one barge. The carrying amounts of these vessels, including unamortized drydocking costs, are as follows: 
 June 30,December 31,
20212020
(unaudited) 
m/v BULK PANGAEA$12,962,170 $13,636,241 
m/v NORDIC ODYSSEY (1)
23,587,169 24,481,390 
m/v NORDIC ORION (1)
23,869,475 22,625,141 
m/v NORDIC OSHIMA (1)
26,288,518 26,966,257 
m/v NORDIC OLYMPIC (1)
26,662,131 27,341,460 
m/v NORDIC ODIN (1)
26,747,745 27,421,649 
m/v NORDIC OASIS (1)
28,704,320 28,029,024 
m/v NORDIC NULUUJAAK (2) (5)
39,507,150 — 
m/v NORDIC QINNGUA (2) (5)
39,199,958 — 
m/v BULK ENDURANCE23,547,069 24,024,593 
m/v BULK COURAGEOUS (5)
16,606,301 — 
m/v BULK NEWPORT11,819,986 11,966,186 
m/v BULK FREEDOM9,119,100 9,457,640 
m/v BULK PRIDE14,243,827 14,628,727 
m/v BULK SPIRIT (5)
12,571,330 12,849,322 
m/v BULK INDEPENDENCE13,694,244 14,020,964 
m/v BULK FRIENDSHIP (5)
13,143,600 13,431,253 
m/v BULK VALOR17,953,653  
m/v BULK PROMISE (3)
2,745,000 — 
MISS NORA G PEARL (4)
2,938,355 3,161,779 
385,911,101 274,041,626 
Other fixed assets, net2,654,453 2,700,125 
Total fixed assets, net$388,565,554 $276,741,751 
Right of Use Assets (5)
m/v BULK PODS$12,791,642 $13,095,023 
m/v BULK DESTINY20,236,373 20,636,264 
m/v BULK TRIDENT13,101,052 11,508,911 
$46,129,067 $45,240,198 

The Company placed a deposit and expects to take deliveries of the following vessels in 2021:

June 30,December 31,
20212020
NORDIC SIKU3,801,196 3,801,196 
NORDIC NUKILIK3,801,195 3,801,195 
$7,602,391 $7,602,391 

(1) Vessels are owned by NBHC, a consolidated joint venture in which the Company has a two-third ownership interest at June 30, 2021.

(2) Vessels are owned by NBP, a consolidated joint venture in which the Company has an approximately 63% ownership interest at June 30, 2021.

11


(3) On July 12, 2021, the Company took delivery of the m/v Bulk Promise, a 2013 Toyohashi-built 78,000 dwt dry bulk vessel.
(4) Barge is owned by a 50% owned consolidated subsidiary.
(5) Refer to Note 7, "Commitments and Contingencies," of our Financial Statements for additional information related to the vessels under finance lease.
Long-lived Assets Impairment Considerations

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. If indicators of impairment are present, we perform an analysis of the anticipated undiscounted future net cash flows to be derived from the related long-lived assets. Our assessment is made at the asset 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 Company concluded that no triggering event had occurred during the during the first half of 2021which would require impairment testing.

On June 29, 2020 the Company entered into an agreement to sell the Bulk Beothuk for $4.6 million, the sale was finalized and the vessel delivered to its new owner on August 4, 2020. A loss on impairment of $1.8 million was recorded in the second quarter of 2020 when the Memorandum of Agreement was signed. As the carrying value of the assets exceeded the fair value, the Company concluded it constituted a triggering event requiring assessment of impairment for its long-lived assets as of June 30, 2020. The Company performed an impairment analysis on each asset group and concluded the estimated undiscounted future cash flows were higher than their carrying amount and as such, no additional loss on impairment was recognized.


12


NOTE 4 - DEBT

Long-term debt consists of the following: 
June 30, 2021December 31, 2020
Interest Rate (%) (1)
Maturity Date
(unaudited)
Bulk Nordic Odin Ltd., Bulk Nordic Olympic Ltd. Loan Agreement (2)
$ $25,466,300 Not applicable
Bulk Nordic Oasis Ltd. Loan Agreement (2)
 14,000,000 Not applicable
Bulk Nordic Oshima Ltd. Amended and Restated Loan Agreement (2)
 12,004,295 Not applicable
Bulk Nordic Odyssey (MI) Corp., Bulk Nordic Orion (MI) Corp. Senior Secured Term Loan Facility (2)
17,118,619 18,000,000 2.950 %December 2027
Bulk Nordic Oshima (MI) Corp., Bulk Nordic Odin (MI) Corp., Bulk Nordic Olympic (MI) Corp., Bulk Nordic Oasis (MI) Corp. Secured Term Loan Facility (2) (3)
51,800,000  3.375 %June 2027
The Amended Senior Facility - Dated May 13, 2019 (formerly The Amended Senior Facility - Dated December 21, 2017) (4)
Bulk Nordic Six Ltd. - Tranche A11,699,995 12,233,329 3.690 %May 2024
Bulk Nordic Six Ltd. - Tranche B2,460,000 2,590,000 2.593 %May 2024
Bulk Pride - Tranche C4,650,000 5,200,000 4.690 %May 2024
Bulk Independence - Tranche E12,000,000 12,500,000 2.840 %May 2024
Bulk Freedom Loan Agreement2,900,000 3,200,000 3.869 %June 2022
Bulk Valor Corp. Loan and Security Agreement13,350,000  3.290 %June 2028
109 Long Wharf Commercial Term Loan538,866 593,666 2.092 %April 2026
Total$116,517,480 $105,787,590 
Less: unamortized issuance costs, net (5)
(1,285,419)(643,018)
$115,232,061 $105,144,572 
Less: current portion(14,312,255)(57,382,674)
Secured long-term debt, net$100,919,806 $47,761,898 

(1)As of June 30, 2021.
(2)The borrower under this facility is NBHC. The Company has two-third's ownership interest and STST has one-third ownership interest in NBHC. NBHC is consolidated in accordance with ASC 810-10 and as such, amounts pertaining to the non-controlling ownership held by the third parties in the financial position of NBHC are reported as non-controlling interest in the accompanying balance sheets..
(3)On April 26, 2021, NBHC entered into a new Senior Secured Term Loan Facility with two new lenders. The agreement advanced $53.0 million in respect of the m/v Nordic Oshima, m/v Nordic Olympic, m/v Nordic Odin and m/v Nordic Oasis. The agreement requires repayment of the advance in 24 equal quarterly principal installments of $1.2 million beginning on June 15, 2021 and a balloon payment of $24.2 million due in June 2027.
(4)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
(5)A portion of unamortized debt issuance costs were reclassified as a reduction of the finance leases liabilities. Refer to Note 7 "Commitments and Contingencies" for additional information.

The Bulk Valor Corp. Loan Agreement -- Dated June 17, 2021

The agreement advanced $13,350,000 in respect of the m/v Bulk Valor on June 17, 2021. The agreement requires repayment of the loan in 28 quarterly installments commencing on September 17, 2021. A balloon payment is due on June 17, 2028. Interest on this advance is fixed at 3.29%. The loan is secured by a first preferred mortgage on the m/v Bulk Valor, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders.

13


The future minimum annual payments under the debt agreements are as follows:
Years ending December 31,
(unaudited)
2021 (remainder of the year)$5,994,285 
202214,058,820 
202311,556,462 
202430,472,891 
20258,334,330 
Thereafter46,100,692 
$116,517,480 

Financial Covenants

Under the Company's respective debt agreements, the Company is required to comply with certain financial covenants, including 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 and to maintain positive working capital. The Company was in compliance with all applicable financial covenants as of June 30, 2021 and December 31, 2020.

14


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.

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.

Interest rate cap

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract. In January 2020, the Company entered into four interest rate cap contracts with total notional amount of $22.8 million at a cost of $628,000 to mitigate the risk associated with increases in interest rates on our sale and lease back financing arrangements of the four new-building vessels. In the event that the three-month LIBOR rate rises above the applicable strike rate of 3.25%, the Company would receive quarterly payments related to the spread difference. These interest rate cap agreements do not qualify for hedge accounting treatment.

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. The interest rate caps contracts are valued using analysis obtained from independent third party valuation specialists based on market observable inputs, representing Level 2 assets.

The following table summarizes assets and liabilities measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020:
Asset DerivativeLiability Derivative
Derivative instrumentsBalance Sheet Location06/30/202112/31/2020Balance Sheet Location6/30/202112/31/2020
Margin accounts (1)
Other current assets$ $814,062 Other current liabilities$ $ 
Forward freight agreements (2)
Other current assets$5,977,550 $ Other current liabilities $ $163,335 
Fuel swap contracts (2)
Other current assets$1,634,562 $ Other current liabilities$ $47,667 
Interest rate cap (2)
Other current assets$713,944 $210,910 Other current liabilities$ $ 

15


(1) The fair value measurements were all categorized within Level 1 of the fair value hierarchy.

(2) These fair value measurements were all categorized within Level 2 of the fair value hierarchy.

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 presents the effect of our derivative financial instruments on the consolidated statements of operations for the three and six months ended June 30, 2021 and 2020:

Unrealized gain (loss) on derivative instruments
For the three months ended For the six months ended
Derivative instruments06/30/20216/30/202006/30/20216/30/2020
Forward freight agreements$5,651,000 $104,040 $6,140,885 $118,170 
Fuel Swap Contracts940,615 1,364,198 $1,682,229 $(1,187,116)
Interest rate cap(287,839)(63,921)$503,034 $(443,831)
Total Gain (loss)$6,303,776 $1,404,317 $8,326,148 $(1,512,777)



 








16


NOTE 6 - RELATED PARTY TRANSACTIONS

Amounts and notes payable to related parties consist of the following:
December 31, 2020ActivityJune 30, 2021
(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)
$106,959 $ $106,959 
Included in accounts payable, accrued expenses and other current liabilities on the consolidated balance sheets:   
Affiliated companies (trade payables) (ii)
$4,151,192 (141,124)$4,010,068 
Included in current related party debt on the consolidated balance sheets:   
Interest payable - 2011 Founders Note242,852  242,852 
Total current related party debt$242,852 $ $242,852 

i.King George Slag LLC is a joint venture of which the Company owns 25%
ii.Seamar Management S.A. ("Seamar")

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, 2021 and 2020, the Company incurred technical management fees of approximately $682,800 and $655,200, respectively, under this arrangement. During six months ended June 30, 2021 and 2020, the Company incurred technical management fees of approximately $1,276,800 and $1,363,000, respectively, under this arrangement.

The Company paid cash dividends of $3.3 million to a non-controlling interest holder during the three months ended June 30, 2021.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Bulk Destiny, Bulk Trident, Bulk PODS, Bulk Spirit and Bulk Friendship are under finance leases and the leases are secured by the assignment of earnings and insurances and by guarantees of the Company. The Company will own these vessels at the end of lease term. Refer to the Company's annual report Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 15, 2021 for additional information on the finance leases.

In April 2021, the Company took delivery of the m/v Bulk Courageous for $16.5 million 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 includes a fixed price purchase obligation at the end of the lease term. The minimum lease payments fluctuate based on three-month LIBOR and are payable quarterly over the seven-year lease term. Interest is floating at three-month LIBOR plus 2.75%. On July 8th, 2021, the company fixed interest on the lease at 3.93%. The Company has the option to purchase the vessel in the case of default by the lessor, at any time during the lease term. The purchase obligation at the end of the lease term is at a fixed price of $3.6 million. This lease is secured by the assignment of earnings and insurances and by a guarantee of the Company.

In May 2021, the Company took delivery of the m/v Nordic Nuluujaak for $38.4 million 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 includes a fixed price purchase obligation at the end of the lease term. The minimum lease payments fluctuate based on three-month LIBOR and are payable monthly over the fifteen-year lease term. Interest is floating at three-month LIBOR plus 3.55%. The Company has the option to purchase the vessel starting in year 5 at 101% of then outstanding principal, and a purchase obligation in year 15. The purchase obligation is at a fixed price of $2.5 million. This lease is secured by the assignment of earnings and insurances and by a guarantee of the Company.

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In June 2021, the Company took delivery of the m/v Nordic Qinngua for $38.4 million 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 includes a fixed price purchase obligation at the end of the lease term. The minimum lease payments fluctuate based on three-month LIBOR and are payable monthly over the fifteen-year lease term. Interest is floating at three-month LIBOR plus 3.55%. The Company has the option to purchase the vessel starting in year 5 at 101% of then outstanding principal, and a purchase obligation in year 15. The purchase obligation is at a fixed price of $2.5 million. This lease is secured by the assignment of earnings and insurances and by a guarantee of the Company.

The following table provides details of the Company's future minimum lease payments under finance lease liabilities recorded on the Company's consolidated balance sheets as of June 30, 2021.

Year ending December 31,Amount
2021 (remainder of the year)$8,253,200 
202216,382,197 
202316,213,947 
202422,876,155 
202513,713,901 
Thereafter86,031,224 
Total minimum lease payments$163,470,624 
Less imputed interest32,711,895 
Present value of minimum lease payments130,758,729 
Less current portion(11,323,580)
Less issuance costs(3,302,306)
Long-term portion$116,132,843 

The above table reflects the Bulk Destiny amended bareboat charter dated July 7, 2021. Refer to Note 9 "Subsequent Events" for additional information.
Vessel Newbuildings

In 2019, the Company entered into a series of transactions to finance its four new post-panamax dry bulk vessels, to be delivered in 2021, under sale and leaseback transactions. The agreements obligate the Company to sell the vessels upon completion of construction at the lesser of approximately $32 million or 85% of fair market value at closing. Following the sale, the Company is obligated to charter the vessels from the buyer under a bareboat charter for a period of 15 years with a purchase obligation of $2.5 million at the end of year 15. The Company has options to purchase the vessels at designated prices starting the sixth year after delivery of each vessel. The Company expects to account for these transactions as failed sale and leaseback transactions and classify the leases as finance leases.

The Company took delivery of the first two vessels during second quarter of 2021 and the Nordic Siku and Nordic Nukilik are expected to be delivered in the 3rd and 4th quarter of 2021.        

The Company has also entered into a LLC agreement with the non-controlling interest holder of NBP which includes certain obligations as described in Note 8.

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 non-cancelable period is six months.

The Company leases office space for its Singapore operations. At June 30, 2021, the remaining lease term is five months.

For the three months ended June 30, 2021 and 2020, the Company recognized approximately $52,000 as lease expense for office leases in General and Administrative Expenses.

For the six months ended June 30, 2021 and 2020, the Company recognized approximately $104,000 as lease expense for office leases in General and Administrative Expenses.
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Legal Proceedings and Claims

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.    

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NOTE 8 - OTHER LONG-TERM LIABILITIES

In September 2019, the Company entered into an LLC agreement for the formation of NBP, that, at inception is owned 75% by the Company and 25% by an independent third party. NBP was established for the purpose of constructing and owning four new-build ice class post panamax vessels. During the construction phase of the vessel, the third party has committed to contribute additional funding and will ultimately own 50% of NBP at the time of delivery of the new-build ice class post panamax vessels. The Company took delivery of Nordic Nuluujaak and Nordic Qinngua during second quarter of 2021, the independent third party made additional contribution which increased their ownership interest in NBP to approximately 37% at June 30, 2021.

The agreement contains both put and call option provisions. Accordingly, the Company may be obligated, pursuant to the put option, or entitled pursuant to the call option, to purchase the third party's interest in NBP beginning any time after September 2026. The put option and call option are at fixed prices which are not significantly different from each other, starting at $4.0 million per vessel on the fourth anniversary from completion and delivery of each vessel and declining to $3.7 million per vessel on or after the seventh anniversary from completion and delivery of each vessel. If neither put nor call option is exercised, the Company is obligated to purchase the vessels from NBP at a fixed price. Pursuant to ASC 480, Distinguishing Liabilities from Equity, the Company has recorded the third party's interest in NBP of $10.0 million in Long term liabilities - Other at June 30, 2021.

On September 28, 2020, the Company acquired an additional one-third equity interest in its partially-owned consolidated subsidiary NBHC from its shareholders for $22.5 million, including a $15.0 million cash payment upon closing and $7.5 million of deferred consideration, at a three-month LIBOR plus 3.5%, in three equal installments of $2.5 million due on the first, second, and third anniversaries of September 28, 2020. The deferred consideration is recorded in "Other current liabilities" for $2.5 million plus accrued interest and "Long-term liabilities - other" for $5.0 million on the Company's Consolidated Balance Sheet as of June 30, 2021. NBHC will continue to be a consolidated entity in the Company’s consolidated financial statements pursuant to ASC 810-10. The portion of NBHC not owned by the Company will continue to be recognized as non-controlling interest in the Company’s consolidated financial statements.
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NOTE 9 - SUBSEQUENT EVENTS

On July 6, 2021, the Company, through its wholly owned subsidiary, Bulk Nordic Five Ltd., and the existing lender agreed to amend and restate the original Bareboat Charter dated October 27, 2016. The amended agreement extends the lease maturity date to April 2028 with a purchase obligation of $6.95 million. The Company also fixed the interest rate through maturity at 3.97%. The bareboat charter party is secured by a first preferred mortgage on the m/v Bulk Destiny, the assignment of earnings, insurances and requisite compensation of the entity, and by guarantees of its shareholders.

On July 12, 2021, the Company took delivery of the m/v Bulk Promise, a 2013 Shin Kurushima Toyohashi-built 78,228 dwt dry bulk vessel for $18.3 million. The vessel was financed under a secured term loan facility for $12.8 million payable in 24 equal quarterly installments and the final balloon payment of $4.5 million at maturity. Interest on the loan is floating at the three-month LIBOR plus 2.3%.

On August 9, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.035 per common share, to be paid on September 15, 2021, to all shareholders of record as of September 1, 2021.

        

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 non-lease 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
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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.

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.
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Selected Financial Information
(in thousands, except for shipping days data and per share data)
(figures may not foot due to rounding)
For the three months ended June 30,For the six months ended June 30,
 2021202020212020
Selected Financial DataUnauditedUnaudited
Voyage revenue$117,395 $66,857 $225,626 $153,381 
Charter revenue28,149 3,539 44,891 12,895 
Total revenue145,544 70,396 270,517 166,276 
Voyage expense46,113 31,758 93,952 79,554 
Charter hire expense62,604 15,204 116,239 47,529