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

________________


FORM 10-Q

(Mark One)

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

For the quarterly period ended SeptemberJune 30, 2014

2015

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 NumberNumber: 001-36139

PANGAEA LOGISTICS SOLUTIONS LTD.

(Exact name of Registrant as specified in its charter)

Bermuda N/A98-1205464
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

109 Long Wharf

Newport, RI 02940

(Address of principal executive offices)(Zip Code)

109 Long Wharf
Newport, RI 02940
(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.

YESx                 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).

YESx                  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 companyx

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            NO¨

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

Common Stock, par value $0.0001$0.01 per share, 1035,484,993 shares outstanding as of September 30, 2014.

August 13, 2015.

 



TABLE OF CONTENTS

  Page
PART IFINANCIAL INFORMATION 
Item 1.Financial Statements (unaudited) 3
   
Consolidated Balance Sheets as of June 30, 2015 (unaudited) and December 31, 2014
3
Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2015 and 2014
4
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2015 and 2014
5
Notes to Consolidated Financial Statements
6
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 3
16
   
Item 3.
Quantitative and Qualitative Disclosures about Market Risks
3
22
   
Item 4.
Controls and Procedures
 4
22
   
PART II
OTHER INFORMATION
 
Item 1.
Legal Proceedings
4
24
Item 1A.
Risk Factors
4
24
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
4
24
Item 3.
Defaults upon Senior Securities
4
24
Item 4.
Mine Safety Disclosures
4
24
Item 5.
Other Information
4
24
Item 6.
Exhibits
5
25

Signatures

6

-2-
 

PART I FINANCIAL INFORMATION



2
Item





Pangaea Logistics Solutions Ltd.
Consolidated Balance Sheets
 June 30, 2015 December 31, 2014
 (unaudited)  
Assets   
Current assets 
  
Cash and cash equivalents$34,154,575
 $29,817,507
Restricted cash1,000,000
 1,000,000
Accounts receivable (net of allowance of $4,542,781 at 
  
June 30, 2015 and $4,029,669 at December 31, 2014)21,004,625
 27,362,216
Bunker inventory12,611,371
 15,601,659
Advance hire, prepaid expenses and other current assets5,382,050
 6,568,234
Vessels held for sale, net3,486,254
 4,523,804
Total current assets77,638,875
 84,873,420
    
Fixed assets, net265,713,887
 207,667,613
Investments in newbuildings in-process15,381,477
 38,471,430
Other noncurrent assets876,964
 1,450,802
Total assets$359,611,203
 $332,463,265
    
Liabilities and stockholders' equity 
  
Current liabilities   
Accounts payable, accrued expenses and other current liabilities$24,918,504
 $40,201,794
Related party debt60,618,225
 59,102,077
Deferred revenue5,857,640
 11,748,926
Current portion long-term debt22,204,172
 17,807,674
Line of credit—
 3,000,000
Dividend payable12,724,825
 12,824,825
Total current liabilities126,323,366
 144,685,296
    
Secured long-term debt, net118,047,085
 87,430,416
    
Commitments and contingencies—
 —
    
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 35,484,993 and 34,756,980 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively3,556
 3,476
Additional paid-in capital134,261,190
 133,955,445
Accumulated deficit(24,483,234) (36,142,727)
Total Pangaea Logistics Solutions Ltd. equity109,781,512
 97,816,194
Non-controlling interests5,459,240
 2,531,359
Total stockholders' equity115,240,752
 100,347,553
Total liabilities and stockholders' equity$359,611,203
 $332,463,265
The accompanying notes are an integral part of these consolidated financial statements

3



Pangaea Logistics Solutions Ltd.
Consolidated Statements of Income
(unaudited)
 Three Months Ended June 30, Six Months Ended June 30,
 2015 2014 2015 2014
        
Revenues: 
  
    
Voyage revenue$60,902,796
 $79,921,090
 $151,481,738
 $171,480,619
Charter revenue4,199,976
 9,858,151
 8,736,822
 32,511,500
 65,102,772
 89,779,241
 160,218,560
 203,992,119
Expenses: 
  
    
Voyage expense28,129,297
 41,891,955
 73,453,416
 90,026,561
Charter hire expense15,195,199
 33,984,808
 39,854,594
 77,955,869
Vessel operating expenses7,116,502
 7,732,252
 14,901,830
 14,651,749
General and administrative3,916,119
 2,352,591
 8,234,811
 4,928,876
Depreciation and amortization3,271,238
 2,744,576
 6,261,832
 5,296,201
Loss (gain) on sale of vessels477,888
 (2,286,232) 566,756
 (2,286,232)
Total expenses58,106,243
 86,419,950
 143,273,239
 190,573,024
        
Income from operations6,996,529
 3,359,291
 16,945,321
 13,419,095
        
Other income (expense): 
  
    
Interest expense, net(1,279,933) (1,474,773) (2,690,704) (2,990,652)
Interest expense related party debt(110,763) (20,234) (225,729) (62,362)
Imputed interest on related party long-term debt—
 —
 —
 (322,947)
Unrealized gain (loss) on derivative instruments363,096
 (1,200,334) 1,186,551
 (1,571,892)
Other income (expense)60,935
 74,227
 144,084
 (75,773)
Total other expense, net(966,665) (2,621,114) (1,585,798) (5,023,626)
        
Net income6,029,864
 738,177
 15,359,523
 8,395,469
(Income) loss attributable to noncontrolling interests(569,227) 491,748
 (2,298,957) (572,259)
Net income attributable to Pangaea Logistics Solutions Ltd.$5,460,637
 $1,229,925
 $13,060,566
 $7,823,210
        
Earnings (loss) per common share: 
  
    
Basic$0.15
 $(0.04) $0.37
 $0.15
Diluted$0.15
 $(0.04) $0.37
 $0.15
        
Weighted average shares used to compute earnings 
  
    
per common share (Note 8) 
  
    
Basic and diluted35,240,373
 13,421,955
 35,000,012
 13,421,955
The accompanying notes are an integral part of these consolidated financial statements


4
Pangaea Logistics Solutions, Ltd.
Consolidated Statements of Cash Flows
(unaudited)


 Six Months Ended June 30,
 2015 2014
Operating activities 
  
Net income$15,359,523
 $8,395,469
Adjustments to reconcile net income to net cash provided by operations: 
  
Depreciation and amortization expense6,261,832
 5,296,201
Amortization of deferred financing costs404,968
 469,767
Unrealized (gain) loss on derivative instruments(1,186,551) 1,571,892
Gain from equity method investee(61,357) —
Provision for doubtful accounts513,112
 (4,457)
Loss (gain) on sales of vessels566,756
 (2,286,232)
Write off unamortized financing costs of repaid debt25,557
 241,522
Amortization of discount on related party long-term debt—
 322,947
Share-based compensation305,825
 —
Change in operating assets and liabilities: 
  
Accounts receivable5,844,479
 18,077,202
Bunker inventory2,990,288
 (757,527)
Advance hire, prepaid expenses and other current assets1,821,996
 1,158,809
Accounts payable, accrued expenses and other current liabilities(14,144,360) (13,346,491)
Deferred revenue(5,891,286) (9,389,418)
Net cash provided by operating activities12,810,782
 9,749,684
    
Investing activities 
  
Purchase of vessels(44,770,740) (15,051,116)
Proceeds from sales of vessels4,523,804
 12,400,609
Deposits on  newbuildings in-process(85,000) (3,462,453)
Drydocking costs—
 (287,416)
Purchase of building and equipment(52,936) (228,754)
Purchase of non-controlling interest(250,000) —
Net cash used in investing activities(40,634,872) (6,629,130)
    
Financing activities 
  
Proceeds of related party debt2,506,667
 2,375,000
Payments on related party debt(1,216,250) (162,928)
Proceeds from long-term debt45,000,000
 13,000,000
Payments of financing and issuance costs(729,866) (137,579)
Payments on long-term debt(9,777,473) (15,520,818)
Payments on line of credit(3,000,000) —
Common stock dividends paid(100,000) (100,000)
Distribution to non-controlling interest(521,920) —
Net cash provided by (used in) financing activities32,161,158
 (546,325)
    
Net increase in cash and cash equivalents4,337,068
 2,574,229
Cash and cash equivalents at beginning of period29,817,507
 18,927,927
Cash and cash equivalents at end of period$34,154,575
 $21,502,156
    
Disclosure of noncash items 
  
Dividends declared, not paid$—
 $3,564,554
Modification of shareholder loan to on demand$—
 $16,433,108
Imputed interest on related party long-term debt$—
 $322,947
Cash paid for interest$2,407,348
 $2,434,973
The accompanying notes are an integral part of these consolidated financial statements

5


Note 1. Financial Statements

Quartet Holdco Ltd., now known asGeneral Information


The accompanying consolidated financial statements include the accounts of Pangaea Logistics Solutions Ltd. (theand its wholly-owned subsidiaries (collectively, the “Company”) was formed as a wholly-owned subsidiary of Quartet Merger Corp. (“Merger Corp.”) solely for the purpose of effectuating the redomestication merger pursuant to that certain Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of April 30, 2014, by and among the Company, Merger Corp., Quartet Merger Sub Ltd. (“Merger Sub”), Pangaea Logistics Solutions Ltd., now known as Bulk Partners (Bermuda), Ltd. (“Former Pangaea”), and the securityholders of Former Pangaea (“Signing Holders”“we” or “our”). The Company wasis engaged in the ocean transportation of dry bulk cargoes worldwide through the ownership, chartering and operation of dry-bulk vessels. The Company's fleet is comprised of Panamax, Supramax and Handymax dry bulk carriers and the Company operates in one business segment.
The Company is a holding company, incorporated under the laws of Bermuda as an exempted company on April 29, 2014. From2014 in connection with the datemergers described below. Bulk Partners (Bermuda) Ltd. (“Bulk Partners”) a wholly owned subsidiary of incorporation until the period ended September 30, 2014, the Company owned no assets and did not operate any business.

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

As noted in Item 1. above, fromfollowing the date of incorporation until the period ended September 30, 2014, the Company owned no assets and did not operate any business.

Description of Business

The CompanyMergers, is a holding company that was incorporated under the laws of Bermuda as an exempted company on June 17, 2008 by three individuals who are collectively referred to as the Founders.

As of June 30, 2015, the Company owned a fleet of 14 drybulk vessels comprised of five Panamax Ice Class 1A, three Panamax, four Supramax and two Handymax Ice Class 1A vessels with an average age of approximately 11 years.
Note 2 – Completed Mergers
On April 29, 2014. The30, 2014 the Company was formed(formerly known as a wholly-owned subsidiaryQuartet Holdco Ltd.) entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with Quartet Merger Corp. solely for the purpose of effectuating the Redomestication Merger (as defined below). On October 1, 2014 the parties to the Merger Agreement consummated the transactions contemplated thereby and (i)(“Quartet”), Quartet Merger Sub merged withLtd. (“Merger Sub”), Bulk Partners’ (at the time, Pangaea Logistics Solutions Ltd.), and into Former Pangaea with Former Pangaea surviving as a wholly-owned subsidiarythe security holders of the Company and (ii)Bulk Partners (“Signing Holders”), which contemplated (i) Quartet mergedmerging with and into the Company, with the Company surviving such merger as the publicly-traded entity (the “Redomestication Merger”and (ii) Merger Sub merging with and into Bulk Partners with Bulk Partners surviving such merger as a wholly-owned subsidiary of the Company (collectively, the “Mergers”).

On September 26, 2014, Bulk Partners’ Board of Directors, acting by unanimous written consent, approved the Merger Agreement and the Mergers. On September 29, 2014, Quartet held a special meeting in lieu of its annual meeting of stockholders, at which time the Quartet stockholders considered and adopted, among other matters, the Merger Agreement and the Mergers.On October 1, 2014, the parties consummated the Mergers.
The Mergers were accounted for as a reverse acquisition in accordance with ASC 805-40-45-1. Under this method of accounting, Merger Sub was treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Bulk Partners’ comprising the ongoing operations of the combined entity, Bulk Partners senior management comprising the senior management of the combined company, and the Bulk Partners common stockholders having a majority of the voting power of the combined entity. In accordance with guidance applicable to these circumstances, the Mergers were considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Mergers were treated as the equivalent of Bulk Partners issuing stock for the Company’s net assets, accompanied by a recapitalization. The Company’s executive officersassets were stated at their pre-combination carrying amounts, with no goodwill or other intangible assets recorded. Operations prior to the Mergers are those of Bulk Partners. The equity structure after the Mergers reflects the Company’s equity structure.
Note 3. Basis of Presentation
The accompanying consolidated balance sheets as of June 30, 2015, the consolidated statements of income for the three and six months ended June 30, 2015 and 2014 and cash flows for the six months ended June 30, 2015 and 2014 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 and results of operations and cash flows for the three and six months ended June 30, 2015 and 2014. The financial data and the other information disclosed in these notes to the consolidated financial statements related to these three and six month periods are unaudited. Certain information and disclosures included in the annual consolidated financial statements have been omitted for the interim periods disclosed pursuant to the rules and regulations of the SEC. The results of the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or other future year.
 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 salvage value used in determining depreciation expense, the allowances for doubtful accounts and the discount on interest free loans.

6
Note 3. Basis of Presentation

Advance hire, prepaid expenses and other current assets were comprised of the following: 
  June 30, 2015 December 31, 2014
  (unaudited)  
Advance hire $3,851,954
 $4,345,959
Prepaid expenses 1,335,877
 427,889
Other current assets 194,219
 1,794,386
  $5,382,050
 $6,568,234
Accounts payable, accrued expenses and other current liabilities were comprised of the following:
  June 30, 2015 December 31, 2014
  (unaudited)  
Accounts payable $16,348,655
 $33,538,153
Accrued voyage expenses 6,762,532
 4,651,503
Accrued interest 1,220,073
 540,862
Other accrued liabilities 587,244
 1,471,276
  $24,918,504
 $40,201,794

7

Note 4. Fixed Assets

At June 30, 2015, the Company’s operating fleet consisted of 14 dry bulk vessels. The carrying amount of these vessels is as follows: 
 June 30, December 31,
Vessel2015 2014
 (unaudited)  
m/v BULK PANGAEA$20,368,405
 $21,176,498
m/v BULK CAJUN (1)
—
 4,523,804
m/v BULK DISCOVERY (1)
3,486,254
 3,741,375
m/v BULK PATRIOT14,361,607
 14,988,585
m/v BULK JULIANA13,615,793
 14,023,118
m/v NORDIC ODYSSEY28,539,097
 29,125,309
m/v NORDIC ORION29,057,542
 29,627,397
m/v BULK TRIDENT16,063,979
 16,430,154
m/v BULK BEOTHUK12,940,876
 13,228,238
m/v BULK NEWPORT14,421,584
 14,733,879
m/v NORDIC BARENTS6,691,807
 7,000,000
m/v NORDIC BOTHNIA6,685,204
 7,000,000
m/v NORDIC OSHIMA33,132,711
 33,615,314
m/v NORDIC OLYMPIC (2)
33,359,775
 —
m/v NORDIC ODIN (2)
33,555,872
 —
 266,280,506
 209,213,671
Other fixed assets, net2,919,635
 2,977,746
Less: vessel held for sale (1)
$(3,486,254) $(4,523,804)
Total fixed assets, net$265,713,887
 $207,667,613
(1)In February 2015, the Company sold the m/v Bulk Cajun for its scrap value of approximately $4,524,000. On July 6, 2015, the Company entered into an agreement to sell the m/v Bulk Discovery. Accordingly, the net carrying value is included in current assets as vessels held for sale.
(2)The m/v Nordic Olympic was delivered to the Company on February 6, 2015 and the m/v Nordic Odin was delivered to the Company on February 13, 2015.


8

Note 5. Debt

 Long-term debt consists of the following: 
 June 30, 2015 December 31, 2014
 (unaudited)  
Bulk Pangaea Secured Note (1)
$2,428,125
 $3,121,875
Bulk Discovery Secured Note (2)
3,068,000
 3,780,000
Bulk Patriot Secured Note (1)
3,537,500
 4,762,500
Bulk Cajun Secured Note (3)
—
 853,125
Bulk Trident Secured Note (1)
7,012,501
 7,650,000
Bulk Juliana Secured Note (1)
4,394,270
 5,070,312
Bulk Nordic Odyssey, Bulk Nordic Orion and Bulk Nordic Oshima Loan Agreement (4)
48,375,000
 51,125,000
Bulk Atlantic Secured Note (2)
7,505,000
 7,890,000
Bulk Phoenix Secured Note (1)
8,483,331
 8,916,665
Term Loan Facility of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)11,369,550
 12,021,730
Long Wharf Construction to Term Loan988,606
 998,148
Senior Secured Term Loan Facility of $45,000,000 (Bulk Nordic Odin Ltd. and Bulk Nordic Olympic Ltd.) (4)
44,250,000
 —
    
Total141,411,883
 106,189,355
Less: current portion(22,204,172) (17,807,674)
Less: unamortized bank fees(1,160,626) (951,265)
Secured long-term debt$118,047,085
 $87,430,416
(1)The Bulk Pangaea Secured Note, the Bulk Patriot Secured Note, the Bulk Juliana Secured Note, the Bulk Trident Secured Note and the Bulk Phoenix Secured Note are cross-collateralized by the vessels Bulk Pangaea, Bulk Patriot, Bulk Juliana, Bulk Trident and Bulk Newport and are guaranteed by the Company.
(2)The Bulk Discovery Secured Note and the Bulk Atlantic Secured Note are cross-collateralized by the vessels m/v Bulk Discovery and m/v Bulk Beothuk and are guaranteed by the Company. The Bulk Discovery Secured Note was repaid on July 1, 2015.
(3)The Bulk Cajun Secured Note was repaid on February 12, 2015 in conjunction with the sale of the m/v Bulk Cajun.
(4)These facilities are to NBHC, of which each of the Company and its joint venture partners ST Shipping and Transport Ltd. (“STST”) and ASO 2020 Maritime S.A. ("ASO2020") own one-third. NBHC is consolidated in accordance with ASC 810-10 and as such, amounts pertaining to the non-controlling ownership held by these third parties in the financial position of NBHC are reported as non-controlling interest in the accompanying balance sheets.

The Senior Secured Post-Delivery Term Loan Facility
On April 15, 2013, the Company, through its wholly owned subsidiaries, Bulk Pangaea, Bulk Patriot, Bulk Juliana and Bulk Trident, entered into a $30.3 million Senior Secured Post-Delivery Term Loan Facility (the “Post-Delivery Facility”) to refinance the Bulk Pangaea Secured Term Loan Facility dated December 15, 2009, the Bulk Patriot Secured Term Loan Facility dated September 29, 2011, the Bulk Juliana Secured Term Loan Facility dated April 18, 2012, and the Bulk Trident Secured Term Loan Facility dated August 28, 2012, the proceeds of which were used to finance the acquisitions of the m/v Bulk Pangaea, the m/v Bulk Patriot, the m/v Bulk Juliana and the m/v Bulk Trident, respectively. The Post-Delivery Facility was subsequently amended on May 16, 2013 by the First Amendatory Agreement, to increase the facility by $8.0 million to finance the acquisition of the m/v Bulk Providence and again on August 28, 2013, by the Second Amendatory Facility, to increase the facility by $10.0 million to finance the acquisition of the m/v Bulk Newport. The m/v Bulk Providence was sold on May 27, 2014 on which date this tranche of the Post-Delivery Facility was repaid.

9
Note 5. Debt

The Post-Delivery Facility contains financial covenants that require the Company to maintain a minimum consolidated net worth, and require the Company to maintain a minimum EBITDA to fixed charges ratio tested annually, as defined. In addition, the facility contains other Company and vessel related covenants that, among other things, restrict changes in management and ownership of the vessel, declaration of dividends, further indebtedness and mortgaging of a vessel without the bank’s prior consent. It also requires minimum collateral maintenance, which is tested at the discretion of the lender. As of June 30, 2015 and December 31, 2014, the Company was not in compliance with the consolidated debt service coverage ratio. Accordingly, the Company obtained a waiver from the Facility Agent.
The Post-Delivery Facility is divided into six tranches, as follows:
Bulk Pangaea Secured Note
Initial amount of $12,250,000, entered into in December 2009, for the acquisition of m/v Bulk Pangaea. The interest rate was fixed at 3.96% in April 2013, in conjunction with the post-delivery amendment discussed above. The amendment also modified the repayment schedule to 15 equal quarterly payments of $346,875 ending in January 2017.
Bulk Patriot Secured Note
Initial amount of $12,000,000, entered into in September 2011, for the acquisition of the m/v Bulk Patriot. Loan requires repayment in 24 equal quarterly installments of $500,000 beginning in January 2012. The interest rate was fixed at 4.01% in April 2013 in conjunction with the post-delivery amendment discussed above.
Bulk Trident Secured Note
Initial amount of $10,200,000, entered into in April 2012, for the acquisition of the m/v Bulk Trident. Loan requires repayment in 24 equal quarterly installments of $318,750 beginning in December 2012 with a balloon payment of $2,550,000 together with the last quarterly installment. Interest was fixed at 4.29% in April 2013 in conjunction with the post-delivery amendment discussed above.
Bulk Juliana Secured Note
Initial amount of $8,112,500, entered into in April 2012, for the acquisition of the m/v Bulk Juliana. Loan requires repayment in 24 equal quarterly installments of $338,021 beginning in October 2012. Interest was fixed at 4.38% in April 2013 in conjunction with the post-delivery amendment discussed above.
Bulk Phoenix Secured Note
Initial amount of $10,000,000, entered into in May 2013, for the acquisition of m/v Bulk Newport. Loan requires repayment in 7 equal quarterly installments of $216,667 and 16 equal quarterly installments of $416,667 with a balloon payment of $1,816,659 due in July 2019. Interest is fixed at 5.09%.
Other secured debt:
Bulk Cajun Secured Note
Initial amount of $4,550,000, entered into in October 2011, for the acquisition of the m/v Bulk Cajun. Loan requires repayment in 16 equal quarterly installments of $284,375 beginning in January 2012 with a balloon payment of $2,000,000 together with the last quarterly installment. Interest is fixed at 6.51%. This note was repaid on February 12, 2015 in conjunction with the sale of the m/v Bulk Cajun on February 26, 2015.


10
Note 5. Debt

Bulk Discovery Secured Note
Initial amount of $9,120,000, entered into in February 2011, for the acquisition of the m/v Bulk Discovery. Loan requires repayment in 20 equal quarterly installments of $356,000 beginning in June 2011 with a balloon payment of $2,356,000 due in March 2016. Interest is fixed at a rate of 8.16%. This note was repaid on July 1, 2015.
Bulk Atlantic Secured Note
Initial amount of $8,520,000, entered into on February 18, 2013, for the acquisition of m/v Bulk Beothuk. Loan requires repayment in 8 equal quarterly installments of $90,000 beginning in May 2013, 12 equal quarterly installments of $295,000 and a balloon payment of $4,260,000 due in February 2018. Interest is fixed at 6.46%.
The other secured notes, as outlined above, also contain collateral maintenance ratio clauses. If the Company encountered a change in financial condition which, in the opinion of the lender, is likely to affect the Company’s ability to perform its obligations under the loan facility, the Company’s credit agreement could be cancelled at the lender’s sole discretion. The lender could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable, and proceed against any collateral securing such indebtedness. As of June 30, 2015 and December 31, 2014, the Company was not in compliance with the minimum EBIDTA to fixed charges ratio. Accordingly, the Company obtained a waiver from the Facility Agent.
Bulk Nordic Odyssey Ltd., Bulk Nordic Orion Ltd. And Bulk Nordic Oshima Ltd. – Dated September 17, 2014 Amended and Restated Loan Agreement
Initial amount of $40,000,000, entered into on August 6, 2012, for the acquisition of the m/v Nordic Odyssey and the m/v Nordic Orion. The agreement requires repayment in 20 quarterly installments of $1,000,000 beginning in October 2012, with an additional $1,000,000 installment payable on the 5th, 9th and 17th installment dates and a balloon payment of $17,000,000 due with the final installment. The amended agreement was entered into on September 17, 2014, to finance the purchase of the m/v Nordic Oshima, which was delivered to the Company on September 25, 2014. The amended agreement advanced $22,500,000 and requires repayment of this advance in 28 equal quarterly installments of $375,000 and a balloon payment of $12,000,000 due with the final installment. Interest on the advance related to m/v Nordic Odyssey and m/v Nordic Orion is floating at LIBOR plus 3.00% (3.27% at June 30, 2015). Interest on the advance related to m/v Nordic Oshima is floating at LIBOR plus 2.25% (2.52% at June 30, 2015). The amended loan is secured by first preferred mortgages on the m/v Nordic Odyssey, the m/v Nordic Orion and m/v Nordic Oshima, the assignment of earnings, insurances and requisite compensation of the three 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 vessel plus the net realizable value of any additional collateral provided to remain above defined ratios. As of June 30, 2015 and December 31, 2014, the Company was in compliance with this covenant.
Term Loan Facility of USD 13,100,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)
Bulk Barents and Bulk 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.
The facility bears interest at LIBOR plus 2.5% (2.77% at June 30, 2015). 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 $2,750,000 (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 of not less than 100% of the outstanding indebtedness. As of June 30, 2015, the Company was not in compliance with the minimum value clause. Accordingly, the Company deposited additional cash collateral of approximately $300,000 for each vessel on August 4, 2015. At December 31, 2014, the Company was in compliance with the minimum value clause.


11
Note 5. Debt

Senior Secured Term Loan Facility of USD 45,000,000 (Bulk Nordic Odin Ltd. and Bulk Nordic Olympic Ltd.)
In January 2015, the Company entered into a loan agreement to finance the purchase of the m/v Nordic Odin and the m/v Nordic Olympic, which were delivered to the Company in February 2015. The agreement advanced $45,000,000 and requires repayment of this advance in 28 equal quarterly installments of $375,000 per borrower and a balloon payment of $12,000,000 per borrower due with the final installment. Interest on the facility is floating at LIBOR plus 2.0% (2.27% at June 30, 2015). The loan is secured by first preferred mortgages on the m/v Nordic Odin and the m/v Nordic Olympic, the assignment of earnings, insurances and requisite compensation of the two entities, and by guarantees of their shareholders. The 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 vessel plus the net realizable value of any additional collateral provided to remain above defined ratios. As of June 30, 2015 the Company was in compliance with this covenant.
Long Wharf Construction to Term Loan
Initial amount of $1,048,000 entered into in January 2011. The loan is payable in monthly installments based on a 25 year amortization schedule with a final balloon payment of all unpaid principal and accrued interest due January 2021. Interest is floating at LIBOR plus 2.85%. The Company entered into an interest rate swap which matures January 2021 and fixes the interest rate at 6.63%. The loan is collateralized by all real estate located at 109 Long Wharf, Newport, Rhode Island 02940,RI, as well as personal guarantees from the Founders and its telephone number is (401) 846-7790.

Froma corporate guarantee of the date of incorporation untilCompany. The loan contains one financial covenant that requires the period ended September 30,Company to maintain a minimum debt service coverage ratio, calculated on an annual basis. At December 31, 2014, the Company ownedwas not in compliance with this covenant and obtained a waiver of compliance from the lender.

The future minimum annual payments (excluding unamortized bank fees) under the debt agreements are as follows:
 
Years ending
June 30,
 (unaudited)
2015$22,204,172
201618,428,050
201733,266,539
201812,838,205
201910,678,753
Thereafter43,996,164
 $141,411,883

Note 6. Derivative Instruments and Fair Value Measurements
Interest-Rate Swaps
From time to time, the Company enters into interest rate swap agreements to mitigate the risk of interest rate fluctuations on its variable rate debt. At June 30, 2015 and December 31, 2014, the Company was party to one interest rate swap, which was entered into in February 2011, as required by the 109 Long Wharf Construction Loan agreement. Under the terms of the swap agreement, the interest rate on this note is fixed at 6.63%.
The Company did not elect to designate the swap as a hedge at inception, pursuant to ASC 815, Derivatives and Hedging. Accordingly, changes in the fair value are recorded in current earnings in the accompanying consolidated statements of income.
The fair value of the interest rate swap agreements at June 30, 2015 and December 31, 2014 were liabilities of approximately $106,000 and $112,000, which are included in other current liabilities on the consolidated balance sheets based on the instrument’s maturity date. The aggregate change in the fair value of the interest rate swap agreements for the six months ended June 30, 2015 and 2014 were a gain of $6,000 and a loss of $17,000, respectively, which are reflected in the unrealized gain (loss) on derivative instruments in the accompanying consolidated statements of income.

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Note 6. 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. The aggregate fair value of these FFAs was a liability of $31,500 at June 30, 2015. There were no open FFAs at December 31, 2014. The change in the aggregate fair value of the FFAs during the six months ended June 30, 2015 and 2014 resulted in losses of $31,500 and $1,934,000, respectively, which are included in unrealized gain (loss) on derivative instruments in the accompanying consolidated statements of income.
Fuel Swap Contracts
The Company continuously monitors the market volatility associated with bunker prices and seeks to reduce the risk of such volatility through a bunker hedging program. During the six months ended June 30, 2015 and the year ended December 31, 2014, the Company entered into various fuel swap contracts that were not designated for hedge accounting. The aggregate fair value of these fuel swaps at June 30, 2015 and December 31, 2014 are liabilities of approximately $180,000 and $1,391,000, which are included in other current liabilities on the consolidated balance sheets. The change in the aggregate fair value of the fuel swaps during the six months ended June 30, 2015 and 2014 are gains of approximately $1,211,000 and $378,000, respectively, which are included in unrealized gain (loss) on derivative instruments in the accompanying consolidated statements of income.
The three levels of the fair value hierarchy established by ASC 820, in order of priority are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities. Our Level 1 non-derivatives include cash, money-market accounts, restricted cash accounts and investment.
Level 2 – Quoted prices for similar assets and didliabilities in active markets or inputs that are observable. Our Level 2 non-derivatives include our term loan account.
Level 3 – Inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

The following table summarizes assets and liabilities measured at fair value on a recurring basis at June 30, 2015 and December 31, 2014:
 
Balance at
June 30, 2015
 Level 1 Level 2 Level 3
 (unaudited)      
Margin accounts$100,675
 $100,675
 $—
 $—
Interest rate swaps$(105,539) $—
 $(105,539) $—
Fuel swap contracts$(179,902) $—
 $(179,902) $—
Freight forward agreements$(31,500)   $(31,500)  
 
Balance at
December 31, 2014
 Level 1 Level 2 Level 3
Margin accounts$439,578
 $439,578
 $—
 $—
Interest rate swaps$(112,124) $—
 $(112,124) $—
Fuel swap contracts$(1,391,195) $—
 $(1,391,195) $—
The estimated fair values of the Company’s interest rate swap instruments, forward freight agreements and fuel swap contracts are based on market prices obtained from an independent third-party valuation specialist. Such quotes represent the estimated amounts the Company would receive to terminate the contracts.

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Note 7. Related Party Transactions
 December 31, 2014 Activity   June 30, 2015
       (unaudited)
Included in accounts payable, accrued expenses and other current liabilities on the consolidated balance sheets: 
  
    
To Founders$203,050
 $—
   $203,050
Affiliated companies (trade payables)4,037,850
 (3,098,241)   939,609
 $4,240,900
 $(3,098,241)   $1,142,659
        
Included in current related party debt on the consolidated balance sheets: 
  
    
Loan payable – 2011 Founders Note4,325,000
 —
 i $4,325,000
Interest payable in-kind334,605
 9,480
   344,085
Loan payable to Founders5,000,000
 (1,000,000)   4,000,000
Loan payable – BVH shareholder (STST)4,442,500
 —
 ii 4,442,500
Loan payable to NBHC shareholder (STST)22,500,000
 1,253,334
 ii 23,753,334
Loan payable to NBHC shareholder (ASO2020)22,499,972
 1,253,334
 ii 23,753,306
Total current related party debt$59,102,077
 $1,516,148
   $60,618,225
i.    Payable in cash
ii    Shareholder loans provided for purposes of funding the newbuilding projects
In November 2014, the Company entered in to a $5 million Promissory Note (the “Note”) with Bulk Invest, Ltd., a company controlled by Founders. The Note is payable on demand and no later than January 1, 2016. Interest on the Note is 5%. The Company repaid $1,000,000 of the Note on May 22, 2015.
During 2013, NBHC entered into contracts to purchase four 1A ice-class newbuildings. Shareholder loans totaling approximately $47,500,000 and $45,000,000 were made as of June 30, 2015 and December 31, 2014, respectively, to fund the deposits on these vessels. On April 1, 2014, the non-interest bearing loans were amended to be payable on demand.
BVH entered into an agreement for the construction of two new ultramax newbuildings in 2013. Shareholder loans totaling $4,447,500 at June 30, 2015 and December 31, 2014 were provided in order to make deposits on these contracts. The loans are payable on demand and do not operatebear interest.
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%. On January 1, 2012 the Company issued 5,675 shares of convertible redeemable preferred stock to the Founders, representing a partial repayment of the note the balance of which was $4,325,000 at June 30, 2015 and December 31, 2014.
Under the terms of a technical management agreement between the Company and Seamar Management S.A. (“Seamar”), an equity method investee, Seamar is responsible for the day-to-day operations for certain of the Company’s owned vessels. During the three month periods ended June 30, 2015 and 2014, the Company incurred technical management fees of approximately $655,000 and $615,000, respectively under this arrangement. These fees are included in vessel operating expenses in the consolidated statements of income. 

On June 22, 2015, N.B.V. Nordic Bulk Ventures (Cyprus) Limited ("NBV"), a wholly-owned subsidiary of Pangaea Logistics Solutions Ltd. (the “Company"), acquired 24.5% of Nordic Bulk Holdings ApS (“NBH”) for $250,000. Prior to the transaction, NBV owned 51% of NBH. This transaction follows the conversion of $4.0 million of intercompany debt held by NBV to additional share capital of Nordic Bulk Carriers AS ("NBC"). Prior to this transaction, NBC was a wholly-owned subsidiary of NBH. Following this transaction, NBV and NBH own 98% and 2% of NBC, respectively, and the Company's combined ownership of NBC is 99.5%. NBV is an entity that is consolidated pursuant to ASC 810-10 as a wholly-owned subsidiary. NBH and NBC are entities consolidated pursuant to ASC 810-10, but which are not wholly-owned.

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Note 8. Earnings (Loss) Per Common Share
 Three Months Ended June 30,Six Months Ended June 30,
 2015 2014 2015 2014 
 (unaudited) (unaudited) (unaudited) (unaudited) 
Numerator: 
  
     
Net income attributable to Pangaea Logistics Solutions Ltd.$5,460,637
 $1,229,925
 $13,060,566
 $7,823,210
 
Less: dividends declared on convertible redeemable preferred stock—
 (1,782,277) —
 (3,564,554) 
Less: allocation of earnings to preferred shareholders—
 —
 —
 (2,244,089) 
         
Total earnings (loss) allocated to common stock$5,460,637
 $(552,352) $13,060,566
 $2,014,567
 
Denominator: 
  
     
Weighted-average number of shares of common stock outstanding35,240,373
 13,421,955
(1) 
35,000,012
 13,421,955
(1) 
         
Basic and Diluted EPS - common stock$0.15
 $(0.04) $0.37
 $0.15
 
(1) Bulk Partners historical weighted average number of shares outstanding multiplied by the exchange ratio established in the Merger Agreement.

Note 9. Commitments and Contingencies
Legal Proceedings
The Company is involved in legal proceedings and may become involved in other legal matters arising in the ordinary course of its business. The Company evaluates these legal matters on a case-by-case basis to make a determination as to the impact, if any, business.

RESULTS OF OPERATIONS

Fromon its business, liquidity, results of operations, financial condition or cash flows.

Other
In January 2013, the dateCompany signed a shipbuilding contract for the construction of incorporation untilfour Ice Class 1A panamax vessels at $32,600,000 each. The Company had a total of $6,520,000 and $29,786,000 on deposit at June 30, 2015 and December 31, 2014, respectively. The first vessel was delivered on September 25, 2014. The second vessel was delivered on February 6, 2015 and the period ended Septemberthird vessel was delivered on February 13, 2015. The balance of payment due on these three vessels was financed with commercial facilities. The fourth vessel is expected to be delivered in 2016. The second installment on the last vessel, which is equal to 10% of the purchase price, becomes due and payable upon keel-laying of the vessel. The third installment of 10% is due and payable upon launching of the vessel and the balance is due upon delivery of the vessels. The Company expects to finance the final payment with a commercial facility.
In December 2013, the Company entered into shipbuilding contracts for the construction of two ultramax vessels for $28,950,000 each. At June 30, 2015 and December 31, 2014, the Company had $8,685,000 on deposit for these newbuildings. The third installments of 5% are due and payable upon keel laying of the vessels. The fourth installments of 10% are due and payable upon launching of the vessels and the balance is due upon delivery of the vessels. The Company expects to finance the final payments with commercial facilities.
The total purchase obligations under the shipbuilding contracts are approximately $27,527,000 for the twelve months ending June 30, 2016 and approximately $47,767,000 for the twelve months ending June 30, 2017.
The Company is subject to certain asserted claims arising in the ordinary course of business. The Company intends to vigorously assert its rights and defend itself in any litigation that may arise from such claims. While the ultimate outcome of these matters could affect the results of operations of any one year, and while there can be no assurance with respect thereto, management believes that after final disposition, any financial impact to the Company would not be material to its consolidated financial position, results of operations, or cash flows.

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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
Pangaea 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, long-lived assets impairment considerations, and the fair value of convertible redeemable preferred stock transactions, as defined above as well as the following:
Voyage Expenses.  Pangaea incurs expenses for voyage charters, including bunkers (fuel), port charges, canal tolls, broker commissions and cargo handling operations, which are expensed as incurred.
Charter Expenses.  Pangaea relies on a combination of owned and chartered-in vessels to support its operations. Pangaea hires vessels under time charters, 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 historycosts such as crews, maintenance and repairs, insurance, and stores.
Vessel Operating Expenses.  Vessel operating expenses represent the cost to operate Pangaea’s owned vessels. Vessel operating expenses include crew hire and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes, other miscellaneous expenses, and technical management fees. These expenses are recognized as incurred. Technical management services include day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, arranging the hire of crew, and purchasing stores, supplies, and spare parts.
Fleet Data.  Pangaea believes that the measures for analyzing future trends in its results of operations consist of the following:
Shipping days.  Pangaea defines shipping days as the aggregate number of days in a period during which its vessels are performing either a voyage charter (voyage days) or a time charter (time charter days).
Daily vessel operating expenses.  Pangaea defines daily vessel operating expenses as vessel operating expenses divided by ownership days for the period. Vessel operating expenses include crew hire and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes, other miscellaneous expenses, and technical management fees.
Chartered in days.  Pangaea defines chartered in days as the aggregate number of days in a period during which it chartered in vessels.
Time Charter Equivalent “TCE” rates.  Pangaea defines TCE rates as total revenues less voyage expenses divided by the number of shipping days, 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 charter hire rates for vessels on voyage charters are generally not expressed in per-day amounts while charter hire rates for vessels on time charters generally are expressed in per-day amounts.


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Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014
Revenues
Pangaea’s revenues are derived predominately from voyage and time charters, which are discussed below. Total revenue for the three months ended June 30, 2015 was $65.1 million, compared to $89.8 million for the same period in 2014. The total number of shipping days decreased 13% to 3,477 in the three months ended June 30, 2015, compared to 4,000 for the same period in 2014, which is due to Pangaea’s continued focus on optimizing the number of days a vessel is chartered in to match existing cargo commitments or to provide excess available days, as the market permits. In a weak market, the Company hires vessels only as necessary to perform voyages under contract and therefore does not have excess ship days on which to earn revenue. The average TCE rate was $10,633 per day for the three months ended June 30, 2015, compared to $11,973 per day for same period in 2014, further reducing reported revenues, and which reflects the overall weak shipping market.
Components of revenue are as follows:
Voyage revenues for the three months ended June 30, 2015 decreased by 24% to $60.9 million compared to $79.9 million for the same period in 2014. The decrease in voyage revenues was primarily driven by the weaker cargo rates in the overall shipping market. The Baltic Dry Index (“BDI”), a measure of dry bulk market performance, was at its historical low in the first quarter of 2015 and did not improve significantly during the three months ended June 30, 2015; however, the Company’s exposure to lower rates in the market was tempered by voyages performed under existing COAs with fixed rates. The number of voyage days decreased 11%, from 3,222 in the three months ended June 30, 2014, to 2,875 days for the same period in 2015. This decrease reflects the Company's strategy to reduce chartered-in days to meet contract demand in a weak market, limiting the days available for spot voyages.
Charter revenues decreased to $4.2 million from $9.9 million, or 57%, for the three months ended June 30, 2015 compared to the same period in 2014. The decrease in charter revenues was primarily driven by a 23% decrease in time charter days and to the weak market rates. The number of time charter days decreased to 602 days for the three months ended June 30, 2015 compared to 777 days for the same period in 2014. The Company continued to focus on limiting its exposure to decreasing rates by chartering in vessels only to meet the demands of specific COAs and voyage contracts, which reduces the days available to produce time-charter revenue but also reduces the risk that this additional capacity may result in operating losses in a turbulent market.
Voyage Expenses
Voyage expenses for the three months ended June 30, 2015 were $28.1 million, compared to $41.9 million for the same period in 2014, a decrease of approximately 33%. The decrease in voyage expenses was primarily due to a $14.6 million (44%) decrease in the aggregate cost of bunkers consumed in voyages during the three months ended June 30, 2015 compared to the three months ended June 30, 2014. The decrease in bunker consumption reflects the reduction in shipping days, but also the decline in bunker prices: bunker cost as a percentage of voyage expenses was 52% in the second quarter of 2015, down from 70% in the second quarter of 2014. Cargo relet expenses, incurred when the Company hires another owner or operator to perform its obligations under a spot contract, were approximately $4.1 million in the three months ended June 30, 2015. The current bulk shipping market and certain voyage business presented relet arbitrage opportunities that were not available in the three months ended June 30, 2014. Voyage expenses as a percentage of voyage revenue were 46% for the three months ended June 30, 2015 and 52% for the three months ended June 30, 2014, reflecting these changes.
Charter Hire Expenses
Charter hire expenses for the three months ended June 30, 2015 were $15.2 million, compared to $34.0 million for the same period in 2014. The 55% decrease in charter expenses was due in part to the 20% decrease in the number of chartered in days from 2,799 days in the three months ended June 30, 2014 to 2,240 days for the three months ended June 30, 2015. This reflects the Company’s strategy to charter in only for committed contracts, limiting its exposure while market conditions remain depressed. The weak market pushed average charter hire rates down 44% for the three months ended June 30, 2015 as compared to the same period of 2014, which also contributed to the decrease in charter hire expenses.

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Vessel Operating Expenses
Vessel operating expenses for the three months ended June 30, 2015 were $7.1 million, compared to $7.7 million in the comparable period in 2014, a decrease of approximately 8%. The decrease in vessel operating expenses was primarily due to the sale of three of the Company's older vessels in 2014 and 2015. Older vessels require more maintenance than newbuilding vessels and therefore incur higher operating expenses. Ownership days increased slightly from 1,230 for the three months ended June 30, 2014 to 1,274 for the three months ended June 30, 2015. The Company took delivery of one new vessel in the third quarter of 2014 and two new vessels in the first quarter of 2015. The resulting increases in ships and in owned days was offset by the sale of two vessels in the second quarter of 2014 and one during the first quarter of 2015. The vessel operating expense expressed on a per day basis decreased to $5,586 for the three months ended June 30, 2015 from $6,286 for the same period in 2014, or 11%.
General and Administrative
Pangaea’s general and administrative expenses include legal and professional fees, rent, payroll and related expenses for its corporate offices. General and administrative expenses for the three months ended June 30, 2015 and 2014 were $3.9 million and $2.4 million, respectively, an increase of approximately 66%. The increase in general and administrative expenses was primarily attributable to an increase in employee incentive compensation of approximately $0.7 million. In addition, the following increases are due to the fact that the Company was a public entity in the three months ended June 30, 2015, but was not public in the three months ended June 30, 2014: $0.1 million of salary and related expenses for additional personnel, $0.1 million of professional fees, director fees of $0.2 million and $0.1 million and $0.3 million of accounting and legal fees, respectively.
Depreciation and Amortization
For the three months ended June 30, 2015 and 2014, total depreciation and amortization expense was $3.3 million and $2.7 million, respectively. The increase in depreciation and amortization expense was attributable to the acquisition of three newbuildings in 2014 and early 2015 for which depreciation expenses are higher than the vessels they replaced in the fleet. This was slightly offset by a reduction due to the sale of older vessels that were acquired second hand and therefore had lower annual depreciation expense..

Loss (gain) on sale of vessels

The Company entered into an agreement to sell the m/v Bulk Discovery in July 2015 which resulted in a loss on impairment. In 2014, the Company sold the m/v Bulk Providence and the m/v Bulk Liberty for a gain.
Income from Operations

Income from operations increased from $3.4 million for the three months ended June 30, 2014 to $7.0 million for the three months ended June 30, 2015. This increase is due to the fact that voyage expenses as a percentage of voyage revenue decreased from 52% to 46% and because charter hire expense as a percentage of total revenue decreased from 38% to 23%.

Despite the decline in total revenues and increased general and administrative expense, the Company’s profit margin increased substantially due to: lower costs for chartered in vessels from a weak dry bulk shipping market; optimization of vessel days to minimize positioning cost and risk of losses in a weak market; decreased bunker costs; performing under fixed price COA’s at average rates higher than the present market; and operating cost reductions.

Unrealized gain (loss) on derivative instruments

During the three months ended June 30, 2015, the Company had a gain on fuel swaps of $0.4 million. The Company incurred losses of $1.6 million on forward freight agreements ("FFAs") in the three months ended June 30, 2014, which was net of a gain on fuel swaps of $0.4 million.


18



Income (loss) attributable to noncontrolling interest

The increase in income attributable to noncontrolling interest is due to net income of NBV of $0.3 million in the three months ended June 30, 2015 as compared to a loss of $2.1 million in the same period of 2014. The amount attributable to noncontrolling interest increased $1.0 million as a result. In addition, NBHC had income of $0.7 million in the three months ended June 30, 2015 as compared to $0.8 million in the three months ended June 30, 2014. This resulted in an increase in income attributable to noncontrolling interest of $0.1 million.

Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014
Revenues
Total revenue for the six months ended June 30, 2015 was $160.2 million, compared to $204.0 million for the same period in 2014. The total number of shipping days decreased 10% to 7,541 in the six months ended June 30, 2015, compared to 8,357 for the same period in 2014, which is due to Pangaea’s continued focus on optimizing the number of days a vessel is chartered in to match existing cargo commitments or provide excess available days, as the market permits. In a weak market, the Company hires vessels only as necessary to perform voyages under contract and therefore does not have excess ship days on which to earn revenue. The revenue decrease was due to the aforementioned decrease in shipping days combined with a 16% decrease in the average TCE rate, which was $11,505 per day for the six months ended June 30, 2015, compared to $13,637 per day for same period in 2014. Average TCE rates reflect the overall weak shipping market.
Components of revenue are as follows:
Voyage revenues for the six months ended June 30, 2015 decreased by 12% to $151.5 million compared to $171.5 million for the same period in 2014. The decrease in voyage revenues was primarily driven by the weaker cargo rates in the overall shipping market. The Baltic Dry Index (“BDI”), a measure of dry bulk market performance, was at its historical low in the first quarter of 2015 and did not improve significantly in the second quarter, however, the Company’s exposure to the lower rates was limited due to the existing COAs with fixed rates. There was an increase in the number of voyage days, from 6,270 in the six months ended June 30, 2014, to 6,501 days for the same period in 2015, which partially offset the impact of weak market rates. The increase of 578 days in the first quarter was the result of several voyages that were extended in various ports, an increase in the number of vessels operating under one of the Company’s COAs, and additional business with existing customers. This was offset by a decrease of 347 days in the second quarter for a net increase of 231 days for the six months ended June 30, 2015 versus the six months ended June 30, 2014. The decrease in voyage days reflects the Company's strategy to minimize risk in the weak market by chartering vessels exclusively to meet cargo demand.
Charter revenues decreased to $8.7 million from $32.5 million, or 73%, for the six months ended June 30, 2015 compared to the same period in 2014. The decrease in charter revenues was primarily driven by the 50% decrease in time charter days and to the weak market rates. The number of time charter days decreased to 1,040 days for the six months ended June 30, 2015 compared to 2,087 days for the same period in 2014. The Company continued to focus on limiting its exposure to decreasing rates by chartering in vessels only to meet the demands of specific COAs and voyage contracts, which reduces the ship days available to produce time-charter revenue.
Voyage Expenses
Voyage expenses for the six months ended June 30, 2015 were $73.5 million, compared to $90.0 million for the same period in 2014, a decrease of approximately 18%. The decrease in voyage expenses was primarily due to a $25.6 million (42%) decrease in the aggregate cost of bunkers consumed in voyages during the six months ended June 30, 2015 compared to the six months ended June 30, 2014. Bunker cost as a percentage of voyage expenses was 48% in the six months ended June 30, 2015, down from 68% in the six months ended June 30, 2014. Cargo relet expenses were approximately $10.6 million in the six months ended June 30, 2015. The bulk shipping market and certain voyage business presented arbitrage opportunities that were not available in the six months ended June 30, 2014. Voyage expenses as a percentage of voyage revenue were 48% for the six months ended June 30, 2015 and 52% for the six months ended June 30, 2014, reflecting these changes.

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Charter Hire Expenses
Charter hire expenses for the six months ended June 30, 2015 were $39.9 million, compared to $78.0 million for the same period in 2014. The 49% decrease in charter expenses was predominantly due to the weak market, which pushed average charter hire rates down 40% for the six months ended June 30, 2015 as compared to the same period of 2014. There was also a 15% decrease in the number of chartered in days from 6,037 days in the six months ended June 30, 2014 to 5,128 days for the six months ended June 30, 2015. This reflects the Company’s strategy to charter in only for committed contracts, limiting its exposure while market conditions remain depressed.
General and Administrative
Pangaea’s general and administrative expenses include legal and professional fees, rent, payroll and related expenses for its corporate offices. General and administrative expenses for the six months ended June 30, 2015 and 2014 were $8.2 million and $4.9 million, respectively, an increase of approximately 67%. The increase in general and administrative expenses was attributable to an increase in employee incentive compensation of approximately $1.5 million. In addition, the following increases are due to the fact that the Company was a public entity in the six months ended June 30, 2015, but was not public in the six months ended June 30, 2014: $0.6 million of director fees, $0.1 of public company filing and related expenses $0.3 million of accounting fees, $0.6 million of legal fees and $0.2 million of professional fees.
Depreciation and Amortization
For the six months ended June 30, 2015 and 2014, total depreciation and amortization expense was $6.3 million and $5.3 million, respectively. The increase in depreciation and amortization expense was attributable to the acquisition of three newbuildings in 2014 and early 2015. This was slightly offset by a reduction due to the sale of older vessels with lower carrying amounts.

Loss (gain) on sale of vessels

The Company sold the m/v Bulk Cajun in February 2015 and entered into an agreement to sell the m/v Bulk Discovery in July 2015. In 2014, the Company sold the m/v Bulk Providence and the m/v Bulk Liberty for a gain.
Income from Operations
For the six months ended June 30, 2015, income from operations increased $3.5 million to $16.9 million as compared to $13.4 million for the same period in 2014. The increase is due to the dramatic drop in the cost of bunker fuel, which accounted for 35% of voyage revenue in 2014 but only 22% of total revenue in 2015.

Despite the decline in total revenues and increased general and administrative expense, the Company’s profit margin increased substantially due to: lower costs for chartered-in vessels from a weak dry bulk shipping market; optimization of vessel days to minimize positioning cost and risk of losses in a weak market; decreased bunker costs; performing under fixed price COA’s at average rates higher than the present market; and operating cost reductions.

Unrealized gain (loss) on derivative instruments

During the six months ended June 30, 2015, the Company had a gain on fuel swaps of $1.2 million. The Company incurred losses of $1.9 million on FFAs in the six months ended June 30, 2014, which was net of a gain on fuel swaps of $0.4 million.

Income (loss) attributable to noncontrolling interest

The increase in income attributable to noncontrolling interest is due to net income of NBV of $1.9 million in the six months ended June 30, 2015 as compared to a loss of $0.3 million in the same period of 2014. The amount attributable to noncontrolling interest increased $0.9 million as a result. In addition, NBHC had income of $2.4 million in the six months ended June 30, 2015 as compared to $1.0 million in six months ended June 30, 2014. This resulted in an increase in income attributable to noncontrolling interest of $0.9 million. This was offset by losses incurred by the m/v/ Bulk Cajun.


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Liquidity and Capital Resources
Liquidity and Cash Needs
The Company has historically financed its capital requirements with cash flow from operations, the issuance of convertible redeemable preferred stock, proceeds from related party debt, and proceeds from long-term debt; and, in 2014, through the Mergers. The Company has used its funds primarily to fund its operations, vessel acquisitions, and the repayment of debt and the associated interest expense. The Company may consider debt or equity financing alternatives from time to time. 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.
NBHC, a 33% owned subsidiary of the Company, has made all of its newbuilding deposits required to date by using funds from related party loans from its shareholders, the Company, ST Shipping and Transport Ltd. (“ST Shipping”) and ASO 2020 Maritime S.A. (“ASO2020”) (see the Related Party Transactions section below). The Company believes that each of NBHC’s joint venture partners, ST Shipping and ASO2020, will continue to meet the deposit schedule for the final newbuilding by making additional related party loans, and will not call any revenuesexisting related party loans. However, if NBHC’s shareholders do not provide required funds, NBHC would likely need to seek replacement financing, which may not be available on acceptable terms. In such case, the Company may not be able to pursue opportunities to expand its business or earningsmeet its other commitments. 

BVH, a 50% owned subsidiary of the Company, has made all of its newbuilding deposits required to date by using funds from related party loans from its shareholders, the Company and ST Shipping (see the Related Party Transactions section below). The Company believes that ST Shipping will continue to meet the deposit schedule for the newbuildings by making additional related party loans, and will not call any existing related party loans. However, if BVH’s shareholders do not provide required funds, they would likely need to seek replacement financing, which may not be available on acceptable terms. In such case, the Company may not be able to pursue opportunities to expand its business or meet its other commitments.
At June 30, 2015 and December 31, 2014 the Company has working capital deficits of $48.7 million and $59.8 million, respectively. These working capital deficits are predominantly due to the related party loans of $51.9 million and $49.4 million, respectively at June 30, 2015 and December 31, 2014 and to loans payable to the Founders and their affiliated entities of approximately $8.7 million and $9.7 million, respectively at June 30, 2015 and December 31, 2014.
In order to address any going concern issues related to the issues noted above, certain of the Company’s common shareholders have provided written agreements whereby they have committed to providing financial support in the form of loans. At June 30, 2015, the Company also had an agreement in principle with the shareholders of NBHC to convert the related party debt to equity. Additional considerations made by management in assessing the Company’s ability to continue as a going concern are: its ability to generate net income of approximately $13.1 million in the first half of 2015 during a historically low market; its ability to generate positive cash flows from operations, which were approximately $12.8 million and $9.7 million for the six months ended June 30, 2015 and 2014, respectively, and $25.0 million for the year ended December 31, 2014; its ability to adapt to changing market conditions by changing the chartered-in profile to meet its cargo commitments; its significant contract employment (COAs); and the excess of the fair value of its vessels over the current and long-term debt secured by these vessels.
Capital Expenditures
The Company’s capital expenditures relate to the purchase 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 fleet includes eight Panamax drybulk carriers (five of which are Ice-Class 1A), four Supramax drybulk carriers and two Handymax drybulk carriers (both of which are Ice-Class 1A).
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. Although the Company has some flexibility regarding the timing of drydocking, the costs are relatively predictable. Funding of these requirements is anticipated to be met with cash from operations. The Company had no assets or financial resources.

LIQUIDTY AND CAPITAL RESOURCES

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 expects to drydock six vessels during 2015 and one vessel during 2016, at an aggregate anticipated cost of $3.4 million and $1.5 million, respectively, not including any unanticipated repairs.


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Off-Balance Sheet Arrangements
The Company was formed solely for purposes of effectuating the Redomestication Merger pursuant to the Merger Agreement, and, thusdoes not have off-balance sheet arrangements at SeptemberJune 30, 2014, the Company had no assets.2015 or December 31, 2014.From the date of incorporation until the period ended September 30, 2014, the Company had no business activities and no source of revenue.


Item
ITEM 3. Quantitative and Qualitative Disclosures about Market Risks

Not required.

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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. In the past, the Company has managed this risk by entering into interest rate swap agreements in which the Company exchanged fixed and variable interest rates based on agreed upon notional amounts. The Company has used such derivative financial instruments as risk management tools and not for speculative or trading purposes. In addition, the counterparties to the Company’s derivative financial instruments have been major financial institutions, which helped it to manage its exposure to nonperformance of its counterparties under the Company’s debt agreements. As of June 30, 2015 and December 31, 2014, the Company was a party to one interest rate swap agreement, which had an approximate fair value of $0.1 million liability at both dates. The Company’s net effective exposure to floating interest rate fluctuations on its outstanding debt was $105.0 million and $63.1 million, respectively, at June 30, 2015 and December 31, 2014.
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 the six months ended June 30, 2015 and 2014 by approximately $0.5 million and $0.3 million, respectively, based on the debt levels for the beginning and ending balances of each period. The Company expects its sensitivity to interest rate changes to increase in the future if the Company enters into additional 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 these FFAs was a liability of $31,500 at June 30, 2015. There were no open FFAs at December 31, 2014.
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 six months ended June 30, 2015 and the year ended December 31, 2014, the Company entered into various fuel swap contracts that were not designated for hedge accounting. The aggregate fair value of these fuel swaps at June 30, 2015 and December 31, 2014 are liabilities of approximately $180,000 and $1,391,000, which are included in other current liabilities on the consolidated balance sheets.
Item
ITEM 4. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

The Company was formedProcedures.

As of the end of the period covered by this report on April 29, 2014 solely for purposes of effectuating the Redomestication Merger pursuant to the Merger Agreement. Since its formation, it has not conducted any activities other than those incidental to its formation and the filing of a registration statement in connection with the transactions contemplated by the Merger Agreement. Accordingly, as of September 30, 2014, the company has no employees (other than officers), no active operations and no assets. Disclosure controls and procedures have been designed consistent with the Company’s non-operational status.

The Company has performedForm 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including its chief executive officerour Chief Executive Officer and chief financial officer,Chief Financial Officer, of the effectiveness of itsour disclosure controls and procedures (asas such term is defined in RulesRule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, management, including the chief executive officerour Chief Executive Officer and chief financial officer,Chief Financial Officer concluded that our disclosure controls and procedures were not effective for the six months ended June 30, 2015, due to the fact that there were material weaknesses in our internal control over financial reporting as discussed in more detail in our 2014 Annual Report on Form 10-K, under Part II Item 9A.



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Remediation Plan
Management has been actively engaged in developing remediation plans to address the above material weaknesses. The remediation efforts in process or that will be implemented include the following:
•Created and filled a new accounting manager position;
•Implemented a new reporting and SEC filing software solution; and
•Assessing alternative enterprise resource planning (“ERP”) systems.

Management believes that the foregoing efforts will effectively remediate the material weaknesses. Management has developed a detailed plan and timetable for the implementation of the endforegoing remediation efforts and will monitor the implementation. In addition, under the direction of the Chairman of the Audit Committee of our Board of Directors, management will continue to review and make necessary changes to the overall design of our internal control environment, as well as our policies and procedures to improve the overall effectiveness of internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Other than the changes noted above, there were no changes in our internal control over financial reporting that occurred during the period covered by this report the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported in a timely fashion and that such information is accumulated and communicated to them so as to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the period from inception of the Company, through the end of the fiscal quarter of 2014 covered by this report, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’sour internal controlscontrol over financial reporting.


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PART IIII: OTHER INFORMATION

Item 1.1 - Legal Proceedings

None

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.1A – Risk Factors

None

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 31, 2015.
Item 2.2 – Unregistered Sales of Equity Securities and Use of Proceeds

None

None.
Item 3.3 - Defaults uponUpon Senior Securities

None

None.
Item 4.4 – Mine Safety Disclosures

Not Applicable.

None.
Item 5.5 - Other Information

None

-4-
None.

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Item 6 – Exhibits

Item 6. Exhibits

(a) Exhibits

3.1Articles of Incorporation of Quartet Holdco Ltd. dated as of April 29, 2014

3.2Memorandum of Association of Quartet Holdco Ltd. dated as of April 29, 2014

3.3
Exhibit no.Bye-lawsDescriptionIncorporated By ReferenceFiled herewith
FormDateExhibit
10.21Pangaea Logistics Solutions Ltd. 2014 Long-term Incentive Plan (as amended and restated by the Board of Quartet Holdco Ltd. dated as of April 29, 2014Directors on August 7, 2015)X

31.1Certification of ChiefPrincipal Executive Officer Pursuantpursuant to ExchangeSection 302 of the Sarbanes-Oxley Act Rule 13a-14(a)of 2002X

31.2Certification of ChiefPrincipal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
32.1Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)

32Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuantAdopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002X

-5-
32.2Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
99.1Pangaea Logistics Solutions Ltd. 2014 Equity Incentive Plan (as amended and restated by the Board of Directors on August 7, 2015)X
EX-101.INSXBRL Instance DocumentX
EX-101.SCHXBRL Taxonomy Extension SchemaX
EX-101.CALXBRL Taxonomy Extension Calculation LinkbaseX
EX-101.DEFXBRL Taxonomy Extension Definition LinkbaseX
EX-101.LABXBRL Taxonomy Extension Label LinkbaseX
EX-101.PREXBRL Taxonomy Extension Presentation LinkbaseX


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SIGNATURE




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, hereuntothereunto duly authorized.

Dated: Novemberauthorized on Friday, August 14, 2014

PANGAEA LOGISTICS SOLUTIONS LTD.

By:/s/ Edward Coll

Name: Edward Coll

Title: Chief Executive Officer

2015.
-6-
PANGAEA LOGISTICS SOLUTIONS LTD.
By:/s/ Edward Coll
Edward Coll
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Anthony Laura
Anthony Laura
Chief Financial Officer
(Principal Financial and Accounting Officer)



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