Fixed Assets

At September 30, 2016, the Company’s owned fleet consisted of 14 dry bulk vessels. The carrying amounts of these vessels, including unamortized drydocking costs, are as follows:



	September 30,		December 31,
Vessel	2016		2015
	(unaudited)
m/v BULK PANGAEA	$	18,299,078	$	19,555,658
m/v BULK PATRIOT	12,727,064		13,732,984
m/v BULK JULIANA	12,463,608		13,096,232
m/v NORDIC ODYSSEY	27,368,778		28,537,024
m/v NORDIC ORION	28,227,211		29,242,572
m/v BULK TRIDENT	15,145,795		15,696,689
m/v BULK BEOTHUK	12,168,071		12,653,475
m/v BULK NEWPORT	13,632,397		14,109,300
m/v NORDIC BARENTS	3,565,462		3,700,000
m/v NORDIC BOTHNIA	3,562,863		3,700,000
m/v NORDIC OSHIMA	31,644,927		32,540,468
m/v NORDIC OLYMPIC	31,865,904		32,780,722
m/v NORDIC ODIN	32,049,207		32,971,855
m/v NORDIC OASIS ⁽¹⁾	33,140,929		—
	275,861,294		252,316,979
Other fixed assets, net	2,959,807		2,828,828
Total fixed assets, net	$	278,821,101	$	255,145,807

(1)The m/v Nordic Oasis was delivered to the Company on January 5, 2016.

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. For example, in the event that TCE rates over the estimated useful lives of the entire fleet are 10% lower than expected, the impact on the total undiscounted projected net operating cash flow would be a decrease of 14%. 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.

At September 30, 2016 and December 31, 2015, the Company identified a potential impairment indicator by reference to estimated market values of its vessel groups. As a result, the Company evaluated each group for impairment by estimating the total undiscounted cash flows expected to result from the use of the group and its eventual disposal.

At September 30, 2016, the estimated undiscounted future cash flows were determined to be higher than the carrying amount of each group. Therefore, the Company did not recognize any loss on impairment. At December 31, 2015, the carrying amount of the m/v Nordic Barents and m/v Nordic Bothnia were determined to be higher than their estimated undiscounted future cash flows. As a result, a loss on impairment of these vessels totaling approximately $5.4 million was included in the consolidated statements of operations for the year ended December 31, 2015.

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 will be 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.