0001606909-18-000045.txt : 20180510 0001606909-18-000045.hdr.sgml : 20180510 20180510161314 ACCESSION NUMBER: 0001606909-18-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 54 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180510 DATE AS OF CHANGE: 20180510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Pangaea Logistics Solutions Ltd. CENTRAL INDEX KEY: 0001606909 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 000000000 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36798 FILM NUMBER: 18822652 BUSINESS ADDRESS: STREET 1: 109 LONG WHARF CITY: NEWPORT STATE: RI ZIP: 02840 BUSINESS PHONE: 401 846 7790 MAIL ADDRESS: STREET 1: 109 LONG WHARF CITY: NEWPORT STATE: RI ZIP: 02840 FORMER COMPANY: FORMER CONFORMED NAME: Quartet Holdco Ltd. DATE OF NAME CHANGE: 20140430 10-Q 1 panl-3312018x10q.htm 10-Q Document
 

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 March 31, 2018
 
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: 001-36139
 
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, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated Filer  ¨ 
Accelerated Filer ¨ 
Non-accelerated Filer ¨ 
Smaller reporting company x
 
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 $0.01 per share, 44,096,911 shares outstanding as of May 10, 2018.

 




TABLE OF CONTENTS
 
 
 
Page
PART I
FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

March 31, 2018

December 31, 2017

(unaudited)

 
Assets
 

 
Current assets
 


 

Cash and cash equivalents
$
28,205,463


$
34,531,812

Accounts receivable (net of allowance of $2,135,877 at
March 31, 2018 and December 31, 2017)
21,682,912


21,089,425

Bunker inventory
14,293,347


15,356,712

Advance hire, prepaid expenses and other current assets
9,797,784


12,032,272

Total current assets
73,979,506


83,010,221





 
Restricted cash
4,000,000

 
4,000,000

Fixed assets, net
304,114,813


306,292,655

Vessels under capital lease
29,704,830

 
29,994,212

Total assets
$
411,799,149


$
423,297,088





 
Liabilities and stockholders' equity
 


 

Current liabilities
 

 
Accounts payable, accrued expenses and other current liabilities
$
21,793,353


$
29,181,276

Related party debt
4,468,457


7,009,597

Deferred revenue
6,581,760


5,815,924

Current portion of secured long-term debt
18,706,122


18,979,335

Current portion of capital lease obligations
1,812,475

 
1,785,620

Dividend payable
6,333,598


7,238,401

Total current liabilities
59,695,765


70,010,153





 
Secured long-term debt, net
113,170,604

 
117,615,634

Obligations under capital lease
24,552,298

 
25,015,659





 
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; 44,096,911 shares issued and outstanding at March 31, 2018; 43,794,526 shares issued and outstanding at December 31, 2017
4,410

 
4,379

Additional paid-in capital
155,556,362

 
154,943,728

Accumulated deficit
(7,694,827
)
 
(9,596,785
)
Total Pangaea Logistics Solutions Ltd. equity
147,865,945

 
145,351,322

Non-controlling interests
66,514,537

 
65,304,320

Total stockholders' equity
214,380,482

 
210,655,642

Total liabilities and stockholders' equity
$
411,799,149

 
$
423,297,088

 
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 March 31,
 
2018
 
2017
 
 
 
 
Revenues:
 
 
 
Voyage revenue
$
70,319,194

 
$
77,688,449

Charter revenue
8,654,099

 
6,766,672

 
78,973,293

 
84,455,121

Expenses:
 
 
 
Voyage expense
30,168,028

 
41,271,919

Charter hire expense
22,695,935

 
23,201,155

Vessel operating expense
9,849,165

 
8,591,243

General and administrative
4,128,298

 
3,514,764

Depreciation and amortization
4,338,188

 
3,941,795

Loss on sale and leaseback of vessels

 
4,289,998

Total expenses
71,179,614

 
84,810,874


 
 
 
Income (loss) from operations
7,793,679

 
(355,753
)

 
 
 
Other (expense) income:
 
 
 

Interest expense, net
(2,060,736
)
 
(1,630,988
)
Interest expense on related party debt
(63,459
)
 
(77,979
)
Unrealized (loss) gain on derivative instruments, net
(562,605
)
 
1,966,387

Other income
428,332

 
94,650

Total other (expense) income, net
(2,258,468
)
 
352,070


 
 
 
Net income (loss)
5,535,211

 
(3,683
)
(Income) loss attributable to non-controlling interests
(1,210,217
)
 
1,350,525

Net income attributable to Pangaea Logistics Solutions Ltd.
$
4,324,994

 
$
1,346,842


 
 
 
Earnings per common share:
 
 
 
Basic
$
0.10

 
$
0.04

Diluted
$
0.10

 
$
0.04


 
 
 
Weighted average shares used to compute earnings
 
 
 
per common share
 
 
 
Basic
42,019,779

 
35,280,806

Diluted
42,655,038

 
35,805,205

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


4

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

 
Three Months Ended March 31,
 
2018
 
2017
Operating activities
 

 
 

Net income (loss)
$
5,535,211

 
$
(3,683
)
Adjustments to reconcile net income to net cash provided by operations:
 

 
 
Depreciation and amortization expense
4,338,188

 
3,941,795

Amortization of deferred financing costs
166,221

 
174,342

Amortization of prepaid rent
30,484

 
30,485

Unrealized loss (gain) on derivative instruments
562,605

 
(1,966,387
)
Gain from equity method investee
(90,000
)
 
(80,681
)
Provision for doubtful accounts

 
147,745

Loss on sale of vessel

 
4,289,998

Drydocking costs
(1,497,979
)
 
(63,808
)
Recognized cost for restricted stock issued as compensation
612,665

 
446,978

Change in operating assets and liabilities:
 
 
 
Accounts receivable
(593,487
)
 
(2,324,202
)
Bunker inventory
1,063,365

 
(2,166,797
)
Advance hire, prepaid expenses and other current assets
4,026,194

 
(69,870
)
Accounts payable, accrued expenses and other current liabilities
(7,400,141
)
 
(838,732
)
Deferred revenue
(3,962,909
)
 
913,854

Net cash provided by operating activities
2,790,417

 
2,431,037

 
 
 
 
Investing activities
 

 
 

Purchase of vessels and vessel improvements
(298,418
)
 
(37,902,753
)
Purchase of building and equipment
(110,417
)
 
(7,245
)
Proceeds from sale of equipment
31,594

 

Purchase of non-controlling interest in consolidated subsidiary

 
(799,289
)
Net cash used in investing activities
(377,241
)
 
(38,709,287
)
 
 
 
 
Financing activities
 

 
 

Payments of related party debt
(2,541,140
)
 

Proceeds from long-term debt

 
19,500,000

Payments of financing and issuance costs
(91,329
)
 
(763,381
)
Payments of long-term debt
(4,765,747
)
 
(4,059,488
)
Proceeds from sale and leaseback of vessel

 
21,000,000

Payments of capital lease obligations
(436,506
)
 

Dividends paid to non-controlling interests
(904,803
)
 

Net cash (used in) provided by financing activities
(8,739,525
)
 
35,677,131

 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
(6,326,349
)
 
(601,119
)
Cash, cash equivalents and restricted cash at beginning of period
38,531,812

 
28,422,949

Cash, cash equivalents and restricted cash at end of period
$
32,205,463

 
$
27,821,830

 
 
 
 
Supplemental cash flow information and disclosure of noncash items
 

 
 

Cash paid for interest
$
1,758,934

 
$
1,420,287


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

5



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 two Panamax, two Ultramax Ice Class 1C, six 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.

On January 27, 2017, the Company acquired its consolidated joint venture partner's interest in Nordic Bulk Ventures Holding Company Ltd. (“BVH”). BVH owns m/v Bulk Destiny and m/v Bulk Endurance through wholly-owned subsidiaries. BVH is wholly-owned by the Company after the acquisition. 

Note 2. Basis of Presentation and Significant Accounting Policies

The accompanying consolidated balance sheet as of March 31, 2018, the consolidated statements of operations and consolidated statements of cash flows for the three months ended March 31, 2018 and 2017 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 March 31, 2018 and December 31, 2017, and its results of operations and cash flows for the three months ended March 31, 2018 and 2017. The financial data and the other information disclosed in these notes to the consolidated financial statements related to these three 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 the three months ended March 31, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 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 fair value used in determining loss on sale and leaseback of vessel, 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.

Advance hire, prepaid expenses and other current assets were comprised of the following: 
 
 
 
March 31, 2018
 
December 31, 2017
 
 
(unaudited)
 
 
Advance hire
 
$
4,578,681

 
$
3,628,417

Prepaid expenses
 
304,402

 
460,445

Accrued receivables
 
4,397,325

 
6,153,212

Other current assets
 
517,376

 
1,790,198

 
 
$
9,797,784

 
$
12,032,272

 

6


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

 
 
March 31, 2018
 
December 31, 2017
 
 
(unaudited)
 
 
Accounts payable
 
$
14,776,185

 
$
15,686,235

Accrued voyage expenses
 
5,322,131

 
11,923,445

Accrued interest
 
571,549

 
611,406

Other accrued liabilities
 
1,123,488

 
960,190

 
 
$
21,793,353

 
$
29,181,276



Significant Accounting Policies Update     

Our significant accounting policies are included in Note 3 of our Annual Report on Form 10-K for the year ended December 31, 2017.  On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As the Company’s performance obligations are transportation services which are received and consumed by its customers as it performs such services, revenues are recognized over time using the input method, proportionate to the days elapsed since the service commencement compared to the total days anticipated to complete the service. The Company believes that this method provides a faithful depiction of the satisfaction of its performance obligation. After analyzing its contracts with customers for each significant revenue stream, the Company determined that revenue from vessels operating on time charter will not change significantly from previous practice, which is to recognize revenue ratably over the periods of such charters. Payment on time charters is made in advance.Under the new standard, voyage revenue is recognized over the period between load port and discharge port. In addition, certain costs to fulfill contracts for voyages for which loading has not commenced are recognized as assets and amortized pro rata over the period between load and discharge. The payment terms on voyage charters is within five days of cargo loading. Costs to obtain a contract are expensed as incurred, as provided by a practical expedient, since all such costs are expected to be amortized over less than one year. The Company adopted ASC 606 using the modified retrospective transition method applied to voyage contracts that were not substantially complete at the end of 2017.  The Company recorded a $2.4 million adjustment to decrease retained earnings at the beginning of 2018, which reflects the cumulative impact of adopting this standard. Comparative financial statements have not been restated and are reported under the accounting standards in effect for those periods. 


7



A reconciliation as of and for the three months ended March 31, 2018 under ASC 606 to the prior accounting standards, for each of the financial statement line items impacted, is provided below:
Consolidated Balance Sheets
 
As Reported
 
Effect of ASC 606 Adoption
 
Under Prior Accounting
Advance hire, prepaid expenses and other current assets
 
9,797,784

 
1,359,317

 
8,438,467

Total current assets
 
73,979,506

 
1,359,317

 
72,620,189

Total assets
 
411,799,149

 
1,359,317

 
410,439,832

Deferred revenue
 
6,581,760

 
2,124,830

 
4,456,930

Total current liabilities
 
59,695,765

 
2,124,830

 
57,570,935

Accumulated deficit
 
(7,694,827
)
 
(765,513
)
 
(6,929,314
)
Total liabilities and stockholders' equity
 
411,799,149

 
1,359,317

 
410,439,832

 
 
 
 
 
 
 
Consolidated Statements of Operations
 
As Reported
 
Effect of ASC 606 Adoption
 
Under Prior Accounting
Voyage revenue
 
70,319,194

 
2,603,925

 
67,715,269

Total revenues
 
78,973,293

 
2,603,925

 
76,369,368

Voyage expense
 
30,168,028

 
256,325

 
29,911,703

Charter hire expense
 
22,695,935

 
690,078

 
22,005,857

Total Expenses
 
71,179,614

 
946,403

 
70,233,211

Income from Operations
 
7,793,679

 
1,657,522

 
6,136,157

Net Income
 
5,535,211

 
1,657,522

 
3,877,689

Net income attributable to Pangaea Logistics Solutions Ltd.
 
4,324,994

 
1,657,522

 
2,667,472

Earnings per common share, basic
 
0.10

 
0.04

 
0.06

Earnings per common share, diluted
 
0.10

 
0.04

 
0.06

 
 
 
 
 
 
 
Consolidated Statements of Cash Flows
 
As Reported
 
Effect of ASC 606 Adoption
 
Under Prior Accounting
Net Income
 
5,535,211

 
1,657,522

 
3,877,689

Change in operating assets and liabilities:
 
 
 
 
 
 
Advance hire, prepaid expenses and other current assets
 
4,026,194

 
946,403

 
3,079,791

Deferred Revenue
 
(3,962,909
)
 
(2,603,925
)
 
(1,358,984
)

Assets and liabilities related to our voyage contracts with customers are reported on a contract-by-contract basis at the end of each reporting period.  Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains reserves against its accounts receivable for potential credit losses. Credit losses recognized on accounts receivable were immaterial for the three-month periods ended March 31, 2018 and 2017, respectively. Other contract assets include unbilled revenue which arises when revenue is recognized in advance of billing for certain voyage contracts. Contract liabilities consist of deferred revenue which arises when amounts are billed to or collected from customers in advance of revenue recognition.

At March 31, 2018, unbilled revenue and deferred revenue totaled $1.4 million and $2.1 million, respectively.  Upon adoption of ASC 606 on January 1, 2018, unbilled revenue and deferred revenue totaled $2.3 million and $4.7 million, respectively.  All voyages that were not substantially complete on January 1, 2018 were completed during the three months ended March 31, 2018, therefore, all related voyage contract liabilities were recognized as revenue in the quarter.

On January 1, 2018, the Company adopted ASU No. 2016-18, Statement of Cash Flows (ASC 230). The amendments in this update provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing the diversity in practice. Specifically, this update addresses how to classify and present changes in restricted cash or restricted cash equivalents that occur when there are transfers between cash, cash equivalents, and restricted cash or restricted cash equivalents and when there are direct cash receipts into restricted cash or restricted cash equivalents or direct cash payments

8


made from restricted cash or restricted cash equivalents. The new standard became effective for the Company on January 1, 2018. The amendments in this update were applied using a retrospective transition method to each period presented.

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 such amounts shown in the consolidated statement of cash flows:
 
March 31, 2018
 
December 31, 2017
Cash and cash equivalents
$
28,205,463

 
$
34,531,812

Restricted cash
4,000,000

 
4,000,000

Total cash, cash equivalents and restricted cash
$
32,205,463

 
$
38,531,812


Cash and cash equivalents include short-term deposits with an original maturity of less than three months. Restricted cash at March 31, 2018 and December 31, 2017 consists of $1.5 million held by the facility agent as required by the The Senior Secured Post-Delivery Term Loan Facility and $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.

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. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The Company does not typically enter into charters for terms exceeding six months. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company does not expect adoption of this guidance to have a material impact on its financial statements.

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. Early application is permitted in any interim period after issuance of the update. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. 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. The Company does not expect adoption of this guidance to have a material impact on its financial statements.


9



Note 3. Fixed Assets

At March 31, 2018, the Company owned eighteen dry bulk vessels including two financed under capital leases and one barge. The carrying amounts of these vessels, including unamortized drydocking costs, are as follows: 
 
March 31,
 
December 31,
 
2018
 
2017
Owned vessels
(unaudited)
 
 
m/v BULK PANGAEA
$
16,034,826

 
$16,398,650
m/v BULK PATRIOT
10,790,200

 
11,111,437

m/v BULK JULIANA
11,205,266

 
11,411,052

m/v NORDIC ODYSSEY
25,296,932

 
25,634,743

m/v NORDIC ORION
26,124,812

 
26,467,928

m/v BULK TRIDENT
14,003,332

 
14,195,098

m/v BULK NEWPORT
14,720,293

 
13,139,242

m/v NORDIC BARENTS
4,731,668

 
4,846,522

m/v NORDIC BOTHNIA
4,678,480

 
4,787,388

m/v NORDIC OSHIMA
29,816,112

 
30,122,172

m/v NORDIC ODIN
30,241,726

 
30,548,435

m/v NORDIC OLYMPIC
30,066,346

 
30,371,285

m/v NORDIC OASIS
31,301,751

 
31,608,785

m/v BULK ENDURANCE
26,778,315

 
27,030,918

m/v BULK FREEDOM
8,742,824

 
8,834,746

m/v BULK PRIDE
13,871,047

 
14,007,731

MISS NORA G PEARL
2,639,360

 
2,695,145

 
301,043,290

 
303,211,277

Other fixed assets, net
3,071,523

 
3,081,378

Total fixed assets, net
$
304,114,813

 
$
306,292,655

 
 
 
 
Vessels under capital lease
 
 
 
m/v BULK DESTINY
$
22,942,313

 
$
23,153,850

m/v BULK BEOTHUK
6,762,517

 
6,840,362

 
$
29,704,830

 
$
29,994,212


The Company also operates two dry bulk vessels under bareboat charters accounted for as operating leases, as discussed in Note 7.
 
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.


10


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 months ended March 31, 2018, the Company did not identify any potential triggering events and therefore, in accordance with authoritative guidance, did not perform tests of recoverability.

During the three months ended March 31, 2017, the Company identified a potential impairment indicator based on the estimated market value of its vessels. 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: 
 
 
March 31, 2018
 
December 31, 2017
 
 
(unaudited)
 
 
Bulk Trident Secured Note (1)
 
$
3,017,500

 
$
3,452,500

Bulk Juliana Secured Note (1)
 
1,014,064

 
1,521,095

Bulk Phoenix Secured Note (1)
 
4,030,947

 
4,473,805

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)
 
67,950,000

 
69,825,000

Term Loan Facility of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)
 
5,467,370

 
5,793,460

Bulk Nordic Oasis Ltd. Loan Agreement (2)
 
18,125,000

 
18,500,000

Bulk Nordic Six Ltd. Loan Agreement
 
28,196,666

 
28,803,333

Bulk Freedom Loan Agreement
 
4,975,000

 
5,150,000

109 Long Wharf Commercial Term Loan
 
895,067

 
922,466

Phoenix Bulk Carriers (US) LLC Automobile Loan
 

 
23,090

Total
 
133,671,614

 
138,464,749

Less: unamortized bank fees
 
(1,794,888
)
 
(1,869,780
)
 
 
131,876,726

 
136,594,969

Less: current portion
 
(18,706,122
)
 
(18,979,335
)
Secured long-term debt, net
 
$
113,170,604

 
$
117,615,634


(1) 
The Bulk Juliana Secured Note, the Bulk Trident Secured Note and the Bulk Phoenix Secured Note are cross-collateralized by the m/v Bulk Juliana, m/v Bulk Trident and m/v Bulk Newport and are guaranteed by the Company.
(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 Accounting Standards Codification ("ASC") 810, Consolidation, 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.


11


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 and extended the final maturity date and modified the repayment schedules, as follows: 

Bulk Trident Secured Note

Initial amount of $10,200,000, entered into in April 2012, for the acquisition of the m/v Bulk Trident. The Fourth Amendment extends the final maturity date and modifies the repayment schedule. The first and second quarterly installments following the amendment were increased to $650,000 and the third and fourth installments were increased to $435,000. These are followed by two installments of $327,500 and three of $300,000. A balloon payment of $1,462,500 is payable on July 19, 2019. The interest rate was fixed at 4.29% through April 19, 2017 and is floating at LIBOR plus 3.50% (5.81% at March 31, 2018), since April 19, 2017.

On April 19, 2018, the Company entered into a sale-leaseback financing arrangement whereby the m/v Bulk Trident will be sold and simultaneously leased back under a bareboat charter for a period of eight years. Proceeds from the sale will be used to repay the Bulk Trident Secured Note (see Note 8. - Subsequent Events)

Bulk Juliana Secured Note

Initial amount of $8,112,500, entered into in April 2012, for the acquisition of the m/v Bulk Juliana. The Fourth Amendment did not change this tranche, the balance of which is payable in six quarterly installments of $507,031. The final payment is due on July 19, 2018. The interest rate is fixed at 4.38%.
 
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 is payable in two installments of $700,000 and seven installments of $442,858. A balloon payment of $1,816,659 is payable on July 19, 2019. The interest rate is 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 March 31, 2018 and December 31, 2017, 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.

12


 
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% (4.71% at March 31, 2018). 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% (4.56% at March 31, 2018).

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 March 31, 2018 and December 31, 2017, 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 March 31, 2018 and December 31, 2017, 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 facility bears interest at LIBOR plus 2.50% (4.81% at March 31, 2018). 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. In addition, any cash in excess of $750,000 per borrower on any repayment date shall be applied toward prepayment of the relevant loan in inverse order, so the balloon payment is prepaid first. The agreement also contains a profit split in respect of the proceeds from the sale of either vessel and a minimum value clause ("MVC"). The Company was in compliance with this covenant at March 31, 2018 and December 31, 2017.

The Amended Senior Facility - Dated December 21, 2017 (previously identified as Bulk Nordic Six Ltd. - Loan Agreement - Dated December 21, 2016)

The 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, thereafter, 17 equal quarterly installments of $266,667 and a balloon payment of $11,667,667 due with the final installment in March 2022. Interest on this advance was fixed at 4.74% on March 27, 2017. The agreement also advanced $3,500,000 under Tranche B, which is payable in 18 equal quarterly installments of $65,000 beginning on October 7, 2017, and a balloon payment of $2,330,000 due with the final installment in March 2022. Interest on this advance is floating at LIBOR plus 6.00% (8.31% at March 31, 2018).

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 16 equal quarterly installments of $275,000 beginning in March 2018 and a balloon payment of $4,100,000 due with the final installment in December 2021. Interest on this advance is floating at LIBOR plus 2.75% (5.06% at March 31, 2018). The agreement also advanced $1,500,000 under Tranche D, which is payable in 4 equal quarterly installments of $375,000 beginning on August 21, 2018. Interest on this advance is floating at LIBOR plus 6.00% (8.31% at March 31, 2018).

13




The loan is secured by a first preferred mortgage on the m/v Bulk Endurance, 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 March 31, 2018 and December 31, 2017, 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. Interest is floating at LIBOR plus 3.75% (6.06% at March 31, 2018).

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 March 31, 2018 and December 31, 2017, the Company was in compliance with these covenants.

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% (4.31% at March 31, 2018). 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 March 31, 2018 and December 31, 2017, the Company was in compliance with these covenants.

Phoenix Bulk Carriers (US) LLC Automobile Loan

The Company purchased a commercial vehicle for use at the site of its port project on the United States' East Coast. The total loan amount of $29,435 is payable in 60 equal monthly installments of $539. Interest is fixed at 3.74%. The vehicle was sold in January 2018 and the loan was repaid.

The future minimum annual payments (excluding unamortized bank fees) under the debt agreements are as follows:
 
 
Years ending
 
March 31,
 
(unaudited)
2019
$
18,706,122

2020
20,721,295

2021
21,240,674

2022
70,096,857

2023
2,559,600

Thereafter
347,066

 
$
133,671,614




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). Such economic hedges do not always 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. Between November 2016 and March 31, 2018, the Company entered into FFAs that were not designated for hedge accounting. The aggregate fair value of these FFAs at March 31, 2018 were liabilities of approximately $49,000, which are included in other current liabilities on the consolidated balance sheets. The aggregate fair value of FFAs at December 31, 2017 were assets of approximately $266,000, which are included in other current assets on the consolidated balance sheets. The change in the aggregate fair value of the FFAs during the three months ended March 31, 2018 and 2017 are a loss of approximately $314,000 and a gain of approximately $2,728,000, respectively, which are included in unrealized (loss) gain on derivative instruments in the accompanying consolidated statements of operations.

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. During 2017 and 2016, the Company entered into various fuel swap contracts that were not designated for hedge accounting. The aggregate fair value of these fuel swaps at March 31, 2018 and December 31, 2017 are assets of approximately $129,000 and $377,000, respectively, which are included in other current assets on the consolidated balance sheets. The change in the aggregate fair value of the fuel swaps during the three months ended March 31, 2018 and 2017 are losses of approximately $248,000 and $758,000, respectively, which are included in unrealized (loss) gain on derivative instruments in the accompanying consolidated statements of operations.

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 March 31, 2018 and December 31, 2017:
 
Balance at
 
 
 
 
 
 
 
March 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
(unaudited)
 
 
 
 
 
 
Margin accounts
$
579,299

 
$
579,299

 
$

 
$

Fuel swaps
$
129,037

 
$

 
$
129,037

 
$

Freight forward agreements
$
(48,600
)
 
$

 
$
(48,600
)
 
$

 
 
Balance at
December 31, 2017
 
Level 1
 
Level 2
 
Level 3
Margin accounts
$
912,981

 
$
912,981

 
$

 
$

Fuel swaps
$
377,273

 
$

 
$
377,273

 
$

Freight forward agreements
$
265,768

 
$

 
$
265,768

 
$

 
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 indexes. Such quotes represent the estimated amounts the Company would receive or pay to terminate the contracts.

15


Note 6. Related Party Transactions
 
December 31, 2017
 
Activity
 
March 31, 2018
 
 
 
 
 
(unaudited)
Included in accounts payable, accrued expenses and other current liabilities on the consolidated balance sheets:
 

 
 

 
 

Affiliated companies (trade payables)
$
1,421,920

 
(203,479
)
 
$
1,218,441

 
 
 
 
 
 
Included in current related party debt on the consolidated balance sheets:
 

 
 

 
 

Loan payable – 2011 Founders Note
$
4,325,000

 

 
$
4,325,000

Interest payable in-kind - 2011 Founders Note (i)
684,597

 
(541,140
)
 
143,457

Promissory Note to Bulk Invest, Ltd.
2,000,000

 
(2,000,000
)
 

Total current related party debt
$
7,009,597

 
$
(2,541,140
)
 
$
4,468,457

 (i)    Paid in cash
            

 In November 2014, the Company entered into a $5,000,000 Promissory Note (the “Note”) with Bulk Invest, Ltd., a company controlled by the Founders. The outstanding balance on the Note was repaid on February 6, 2018.
 
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 was $4,325,000 at March 31, 2018 and December 31, 2017.

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 and the two vessels operating under bareboat charters. During the three-month periods ended March 31, 2018 and 2017, the Company incurred technical management fees of approximately $756,000 and $642,000, respectively, under this arrangement. These fees are included in vessel operating expenses in the consolidated statements of income. The total amounts payable to Seamar at March 31, 2018 and December 31, 2017 were approximately $1,218,000 and $1,422,000, respectively.
    
Dividends payable consist of the following, all of which are payable to related parties:

 
 
2013
common
stock
dividend
 
2013
Odyssey
and Orion
dividend
(1)
 
Total
Balance at December 31, 2017
 
6,333,598

 
904,803

 
7,238,401

Payments
 

 
(904,803
)
 
(904,803
)
Balance at March 31, 2018
 
$
6,333,598

 
$

 
$
6,333,598

(1) Paid on February 13, 2018


Note 7. Commitments and Contingencies

Vessel Sales and Leasebacks Accounted for as Capital Leases

The Company's fleet includes two vessels financed under sale and leaseback financing arrangements accounted for as capital leases. 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 vessel under capital lease on the consolidated balance sheet at March 31, 2018. 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.

16



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. Interest is fixed at 11.83%. The Company will own this vessel at the end of the lease term.

Long-term Contracts Accounted for as Operating Leases

On July 5, 2016, the Company entered into five-year bareboat charter agreements with the owner of two vessels (which were then renamed the m/v Bulk Power and the m/v Bulk Progress). Under a bareboat charter, the charterer is responsible for all of the vessel operating expenses in addition to the charter hire. The agreement also contains a profit sharing arrangement. Scheduled increases in charter hire are included in minimum rental payments and recognized on a straight-line basis over the lease term. Profit sharing is excluded from minimum lease payments and recognized as incurred. The rent expense under these bareboat charters (which are classified as operating leases) totals approximately $365,000 per annum.

The Company leases office space for its Copenhagen operations. The lease can be terminated with six months prior notice after June 30, 2018.

Future minimum lease payments under capital leases and operating leases with initial or remaining terms in excess of one year at March 31, 2018 were:
 
Capital Lease
 
Operating Leases
2019
$
3,278,295

 
$
530,649

2020
3,278,295

 
365,446

2021
3,278,295

 
365,446

2022
3,330,795

 
103,126

2023
6,175,795

 

Thereafter
13,218,293

 

Total minimum lease payments
$
32,559,768

 
$
1,364,667

Less amount representing interest
6,194,995

 
 
Present value of minimum lease payments
26,364,773

 
 
Less current portion
1,812,475

 
 
Long-term portion
$
24,552,298

 
 
            


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 April 12, 2018, the Company, through a wholly-owned subsidiary, signed a Memorandum of Agreement to purchase a Panamax bulk carrier built in 2006 for approximately $14.3 million. The vessel is expected to be delivered in the second quarter of 2018.

On April 19, 2018, the Company entered into a sale-leaseback financing arrangement whereby the m/v Bulk Trident will be sold for $15.0 million and simultaneously leased back under a bareboat charter for a period of eight years. The agreement requires a $2.0 million bareboat charter hire down payment to be deducted from the selling price at the time of delivery to the buyer. The lease is payable monthly at a rate of $4,845 per day over the eight year lease term. Interest is floating at LIBOR plus 1.7% (approximately 4.8% including the margin, at inception of the lease).




17



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. Gross revenue is calculated by multiplying the agreed rate per ton of cargo by the number of tons loaded.

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 agree rate per day.
 
Voyage Expenses. The Company incurs expenses for voyage charters, including bunkers (fuel), port charges, canal tolls, brokerage commissions and cargo handling operations, which are expensed as incurred.

Charter Expenses. The Company charters in vessels to supplement its owned fleet to support its voyage charter operations. The Company hires vessels under time charters with third party vessel owners, and recognizes the charter hire payments as an expense on a straight-line basis over the term of the charter. Charter hire payments are typically made in advance, and the unrecognized portion is reflected as advance hire in the accompanying consolidated balance sheets. Under the time charters, the vessel owner is responsible for the vessel operating costs such as crews, maintenance and repairs, insurance, and stores.

Vessel Operating Expenses. Vessel operating expenses represent the cost to operate the Company’s owned vessels. Vessel operating expenses include crew hire and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, other miscellaneous expenses, and technical management fees. These expenses are recognized as incurred. Technical management services include day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, arranging the hire of crew, and purchasing stores, supplies, and spare parts.

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.

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.

18





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.






19




Selected Financial Information

(in thousands, except shipping days data)
(figures may not foot due to rounding)
For the three months
ended March 31,
 
2018
 
2017
Selected Data from the Consolidated Statements of Operations
 
Voyage revenue
$
70,319

 
$
77,688

Charter revenue
$
8,654

 
$
6,767

Total revenue
78,973

 
84,455

Voyage expense
30,168

 
41,272

Charter expense
22,696

 
23,201

Vessel operating expenses
9,849

 
8,591

Total cost of transportation and service revenue
62,713

 
73,064

Net revenue (1)
16,260

 
11,391

Other operating expenses
8,466

 
7,457

Loss on sale and leaseback of vessels

 
4,290

Income from operations
7,794

 
(356
)
Total other expense, net
(2,258
)
 
352

Net income
5,536

 
(4
)
Income attributable to noncontrolling interests
(1,210
)
 
1,351

Net income attributable to Pangaea Logistics Solutions Ltd.
$
4,326

 
$
1,347

 
 
 
 
 
 
 
 
 
March 31, 2018
 
December 31, 2017
Selected Data from the Consolidated Balance Sheets
 

 
 

Cash
$
28,205

 
$
34,532

Total assets
$
411,799

 
$
423,297

Total secured debt, including obligations under capital leases
$
158,241

 
$
163,396

Total liabilities and stockholders' equity
$
411,799

 
$
423,297

 
 
 
 
 
For the three months
ended March 31,
 
2018
 
2017
Selected Data from the Consolidated Statements of Cash Flows
 
 
 
Net cash provided by operating activities
$
2,790

 
$
2,431

Net cash used in investing activities
$
(377
)
 
$
(38,709
)
Net cash (used in) provided by financing activities
$
(8,740
)
 
$
35,677

Adjusted EBITDA (2)
$
12,132

 
$
7,876

 
 
 
 
Shipping Days (3)
 

 
 

Voyage days
2,945

 
3,668

Time charter days
579

 
674

Total shipping days
3,524

 
4,342

 
 
 
 
TCE Rates ($/day) (4)
$
13,849

 
$
9,945

 
 
 
 

20




(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 March 31,
 
 
 
2018
 
2017
Net Revenue
 
 
 
 
Income from operations
 
$
7,794

 
$
(356
)
General and administrative
 
$
4,128

 
$
3,515

Depreciation and amortization
 
4,338

 
3,942

Loss on sale and leaseback of vessels
 

 
4,290

Net Revenue
 
$
16,260

 
$
11,391

 
 
 
 
 
Adjusted EBITDA (in millions)
 
 
 
 
Income from operations
 
$
7,794

 
$
(356
)
Depreciation and amortization
 
$
4,338

 
$
3,942

Loss on sale and leaseback of vessel
 
$

 
$
4,290

Adjusted EBITDA
 
$
12,132

 
$
7,876

 
(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.


21




Industry Overview

The seaborne drybulk transportation industry is cyclical and can be volatile. The industry has seen steady improvement over the last year, with rates and demand for dry bulk tonnage up significantly since the historic low in February of 2016 and average published market rates have improved more than 86% since that time. The Baltic Dry Index (“BDI”), a measure of dry bulk market performance, averaged 1,146 for the first quarter of 2018, up from an average of 996 for the comparable quarter of 2017. The Company's TCE rates have climbed consistently since the first quarter of 2017 and have exceeded average published market rates by 10% to 25% over this period.

1st Quarter 2018 Highlights     

Income from operations of $7.8 million for the three months ended March 31, 2018, as opposed to a loss from operations of $0.4 million for the same period of 2017.
Net income attributable to Pangaea Logistics Solutions Ltd. of $4.3 million as compared to $1.3 million for the three months ended March 31, 2017.
Pangaea's TCE rates increased 39% to $13,849 from $9,945 in the first quarter of 2017 while the market average for the first quarter was approximately $11,100, giving the Company an overall average premium over market rates of approximately $2,800 or 25%. The market rate increase is due to the consistent improvement in the drybulk market over the last year.
The Company completed two long-term COAs during 2017 and as a result, total shipping days decreased in the first quarter as compared to the first quarter of 2017. This decrease was matched with a corresponding decrease in voyage revenue, however, net revenue increased to $16.3 million for the three months ended March 31, 2018, due to the relative strength of the market as reflected in higher freight rates. Net revenue was $11.4 million for the three months ended March 31, 2017.
At the end of the quarter, Pangaea had $28.2 million in unrestricted cash and cash equivalents.

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017
 
Revenues
 
Pangaea’s revenues are derived predominately from voyage and time charters, which are discussed below. Total revenue for the three months ended March 31, 2018 was $79.0 million, compared to $84.5 million for the same period in 2017, a 6% decrease. The total number of shipping days decreased 19% to 3,524 in the three months ended March 31, 2018, compared to 4,342 for the same period in 2017. The average TCE rate was $13,849 per day for the three months ended March 31, 2018, compared to $9,945 per day for same period in 2017. The revenue decrease is predominantly due to the decrease in total shipping days, even as rates improved dramatically.
 
Components of revenue are as follows:
 
Voyage revenues decreased by 9% for the three months ended March 31, 2018 to $70.3 million compared to $77.7 million for the same period in 2017. The decrease in voyage revenues was predominantly driven by the 20% decrease in the number of voyage days, which were 2,945 in the first quarter of 2018 as compared to 3,668 in the first quarter of 2017. The decrease in voyage days was due in large part to COAs that began in the three months ended March 31, 2017 and were completed prior to the first quarter of 2018. However, market improvement from the three months ended March 31, 2017 to the three months ended March 31, 2018 translated into better net results for the current period, as highlighted above. Voyage revenues were also impacted by the adoption of ASC 606 which resulted in a net increase of approximately $2.6 million or $739 per day of TCE revenue for the three months ended March 31, 2018.

Charter revenues increased to $8.7 million from $6.8 million, or 28%, for the three months ended March 31, 2018 compared to the same period in 2017. The increase in charter revenues was due to improvement in drybulk market rates. Time charter days were down 14% to 579 in the first quarter of 2018 from 674 in the first quarter of 2017.
 

22




Voyage Expenses
 
Voyage expenses for the three months ended March 31, 2018 were $30.2 million, compared to $41.3 million for the same period in 2017, a decrease of approximately 27%. The decrease in voyage expense was due to the 20% decrease in voyage days, as discussed above. In addition, the Company incurred relet expenses of $3.4 million in the first quarter of 2017, but incurred only minimal relet expense in the same period of 2018. The Company will opportunistically relet a cargo depending on market conditions and as a risk management tool. Voyage expenses were also impacted by the adoption of ASC 606 which resulted in a net increase in voyage expenses of approximately $0.9 million.
 
Charter Hire Expenses
 
Charter hire expenses for the three months ended March 31, 2018 were $22.7 million, compared to $23.2 million for the same period in 2017. The number of chartered-in days decreased 33% from 2,916 days in the three months ended March 31, 2017 to 1,959 days for the three months ended March 31, 2018. However, the improving dry bulk market pushed average charter-hire rates paid by the Company up 46% for the three months ended March 31, 2018 as compared to the same period of 2017. Charter hire expense as a percentage of total revenue remained fairly consistent at 27% in the three months ended March 31, 2017 compared to 29% in the three months ended March 31, 2018. The Company continues to operate under its successful strategy of chartering-in primarily for committed contracts. Increasing charter hire rates in the first quarter kept the Company from taking longer positions, thereby avoiding potential losses as these increases in hire rates outpaced improvements in freight rates.
 
Vessel Operating Expenses
 
Vessel operating expenses for the three months ended March 31, 2018 were $9.8 million, compared to $8.6 million in the comparable period in 2017, an increase of approximately 15%. The increase in vessel operating expenses is due to the 12% increase in owned and bareboat charter days, which were 1,800 in the three months ended March 31, 2018 as compared to 1,608 in the three months ended March 31, 2017. This increase is due to the addition of two vessels acquired on June 14, 2017 and December 21, 2017. Vessel operating expenses per day were $5,472 for the three months ended March 31, 2018 and $5,343 for the three months ended March 31, 2017.

General and Administrative Expenses

General and administrative expenses increased from $3.5 million in the three months ended March 31, 2017 to $4.1 million in the three months ended March 31, 2018. This is due to an increase in accrued bonus compensation and director fees.

Depreciation and amortization

The increase in depreciation and amortization is due to the increase in the number of vessels owned and operated under bareboat charters. Ownership days increased 12% due to acquisitions in June and December of 2017, as noted above.

Loss on sale and leaseback of vessels

The Company incurred a $4.3 million loss on the sale and subsequent leaseback of the m/v Bulk Destiny in three months ended March 31, 2017 but did not incur any such losses for the corresponding period of 2018.

Income from Operations

The Company had income from operations of $7.8 million for the three months ended March 31, 2018 as compared to $0.4 million for the three months ended March 31, 2017. This is primarily due to the loss on sale and leaseback in January 2017, discussed above, and to improvement in the dry bulk market rates over the same period of 2017.

Interest Expense

The increase in interest expense is predominantly due to financing of the m/v Bulk Freedom in June 2017 and the m/v Bulk Pride in December 2017.

Unrealized (loss) gain on derivative instruments

The Company incurred losses on FFAs of approximately $314,000 and losses on bunker swaps of approximately $248,000 in the three months ended March 31, 2018 as compared to gains on FFAs of approximately $2,728,000 and losses on bunker swaps of

23




approximately $758,000 in the three months ended March 31, 2017. These result from changes in the fair value of the derivatives at the respective balance sheet dates.

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 loss on sale and leaseback of vessel, 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

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.

During the three months ended March 31, 2018, the Company did not identify any potential triggering events and therefore, in accordance with authoritative guidance, did not perform tests of recoverability.

During the three months ended March 31, 2017, the Company identified a potential impairment indicator based on the estimated market value of its vessels. 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.

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 capital 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. 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.
 

24




At March 31, 2018 and December 31, 2017, the Company had working capital of $14.3 million and $13.0 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 $2.8 million and $2.4 million in the three months ended March 31, 2018 and 2017, respectively; $29.2 million in 2017 and $19.2 million in 2016; and its ability to procure long-term fixed contract employment (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, 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 two Panamax drybulk carriers, six 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. 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 $1.5 million and $64,000 and expensed drydocking costs of approximately $34,000 and $58,000 in the three months ended March 31, 2018 and 2017, respectively.
 
Off-Balance Sheet Arrangements
 
The Company does not have off-balance sheet arrangements at March 31, 2018 or December 31, 2017. 


25




ITEM 3. Quantitative and Qualitative Disclosures about Market Risks
 
Interest Rate Risk    
 
The international shipping industry is capital intensive, requiring significant amounts of investment provided in the form of long-term debt. Certain of the Company’s outstanding debt contain floating interest rates that fluctuate with changes in the financial markets and in particular changes in LIBOR. Increasing interest rates could increase the Company’s interest expense and adversely impact its future earnings. The Company’s net effective exposure to floating interest rate fluctuations on its outstanding debt was $64.3 million and $66.5 million, respectively, at March 31, 2018 and December 31, 2017.
 
The Company’s interest expense is affected by changes in the general level of interest rates, particularly LIBOR. As an indication of the extent of the Company’s sensitivity to interest rate changes, an increase in LIBOR of 1% would have decreased the Company’s net income and cash flows during each of the three month periods ended March 31, 2018 and 2017 by approximately $0.1 million, based on the debt levels at the beginning of each period. The Company expects its sensitivity to interest rate changes to increase in the future if the Company enters into additional floating rate debt agreements in connection with its acquisition of additional vessels.
 
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). Such economic hedges do not always 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 March 31, 2018 was a liability of $49,000. The aggregate fair value of FFAs at December 31, 2017 was an asset of $266,000.
 
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. During the three months ended March 31, 2018 and the year ended December 31, 2017, the Company entered into various fuel swap contracts that were not designated for hedge accounting. The aggregate fair value of these fuel swaps at March 31, 2018 and December 31, 2017 were assets of $129,000 and $377,000, respectively.
 
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 three months ended March 31, 2018.
 
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.
 

26




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 21, 2018.
 
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.
 

27




Item 6 – Exhibits 
Exhibit no.
Description
Incorporated By Reference
Filed herewith
 
 
Form
Date
Exhibit
 
 
 
 
 
 
 
31.1
 
 
 
X
 
 
 
 
 
 
31.2
 
 
 
X
 
 
 
 
 
 
32.1
 
 
 
X
 
 
 
 
 
 
32.2
 
 
 
X
 
 
 
 
 
 
EX-101.INS
 
 
 
X
 
 
 
 
 
 
EX-101.SCH
 
 
 
X
 
 
 
 
 
 
EX-101.CAL
 
 
 
X
 
 
 
 
 
 
EX-101.DEF
 
 
 
X
 
 
 
 
 
 
EX-101.LAB
 
 
 
X
 
 
 
 
 
 
EX-101.PRE
 
 
 
X
 

28




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 May 10, 2018.
 
 
PANGAEA LOGISTICS SOLUTIONS LTD.
 
 
 
By:
/s/ Edward Coll
 
Edward Coll
 
Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
By:
/s/ Gianni DelSignore
 
Gianni DelSignore
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)


29
EX-31.1 2 panl-3312018xex311.htm EXHIBIT 31.1 Exhibit


Exhibit 31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Edward Coll, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q for the three months ended March 31, 2018, of Pangaea Logistics Solutions Ltd.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
All material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
May 10, 2018
/s/ Edward Coll
 
 
Edward Coll
 
 
Chief Executive Officer
 
 
(Principal Executive Officer)



EX-31.2 3 panl-3312018xex312.htm EXHIBIT 31.2 Exhibit


Exhibit 31.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER
 
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Gianni DelSignore, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q for the three months ended March 31, 2018, of Pangaea Logistics Solutions Ltd.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
All material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:
May 10, 2018
/s/ Gianni DelSignore
 
 
Gianni DelSignore
 
 
Chief Financial Officer
 
 
(Principal Financial Officer)



EX-32.1 4 panl-3312018xex321.htm EXHIBIT 32.1 Exhibit


Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report of Pangaea Logistics Solutions Ltd. (the “Company”) on Form 10-Q for the three months ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward Coll, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
May 10, 2018
/s/ Edward Coll
 
 
Edward Coll
 
 
Chief Executive Officer
 
 
(Principal Executive Officer)



EX-32.2 5 panl-3312018xex322.htm EXHIBIT 32.2 Exhibit


Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report of Pangaea Logistics Solutions Ltd. (the “Company”) on Form 10-Q for the three months ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gianni DelSignore, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:
May 10, 2018
/s/ Gianni DelSignore
 
 
Gianni DelSignore
 
 
Chief Financial Officer
 
 
(Principal Financial Officer)



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