Fixed Assets

At June 30, 2017, the Company owned seventeen dry bulk vessels including two financed under capital lease obligations. The carrying amounts of these vessels, including unamortized drydocking costs, are as follows:



	June 30,		December 31,
	2017		2016
Owned vessels	(unaudited)
m/v BULK PANGAEA	$	17,139,017	$17,879,380
m/v BULK PATRIOT	11,741,723		12,391,724
m/v BULK JULIANA	11,831,893		12,252,733
m/v NORDIC ODYSSEY	26,327,977		27,021,211
m/v NORDIC ORION	27,171,255		27,874,584
m/v BULK TRIDENT	14,578,631		14,962,163
m/v BULK BEOTHUK ⁽¹⁾	—		12,006,270
m/v BULK NEWPORT	13,138,035		13,473,429
m/v NORDIC BARENTS	3,431,169		3,517,151
m/v NORDIC BOTHNIA	3,425,976		3,520,616
m/v NORDIC OSHIMA	30,734,293		31,346,414
m/v NORDIC OLYMPIC	30,966,125		31,560,965
m/v NORDIC ODIN	31,145,046		31,741,658
m/v NORDIC OASIS	32,221,643		32,834,500
m/v BULK ENDURANCE ⁽²⁾	27,536,556		—
m/v BULK FREEDOM ⁽³⁾	8,898,948		—
	290,288,287		272,382,798
Other fixed assets, net	3,505,173		2,882,874
Total fixed assets, net	$	293,793,460	$	275,265,672

Vessels under capital lease
m/v BULK DESTINY ⁽⁴⁾	$	23,576,925	$	—
m/v BULK BEOTHUK ⁽¹⁾	$	7,000,000	$	—
	$	30,576,925	$	—


⁽¹⁾	The m/v Bulk Beothuk was sold on June 15, 2017 and simultaneously chartered back under a bareboat charter accounted for as a capital lease. At June 30, 2017, the vessel had a carrying amount of $7.0 million.


⁽²⁾	The m/v Bulk Endurance was delivered to the Company on January 7, 2017.


⁽³⁾	The Company acquired the m/v Bulk Freedom on June 14, 2017.


⁽⁴⁾	The Company took delivery of the m/v Bulk Destiny on January 7, 2017 and simultaneously entered into a sale and leaseback financing agreement, the terms of which are discussed in Note 7.

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.

The significant factors and assumptions used in the undiscounted projected net operating cash flow analysis include the Company’s estimate of future time charter equivalent "TCE" rates based on current rates under existing charters and contracts. When existing contracts expire, the Company uses an estimated TCE based on actual results and extends these rates out to the end of the vessel’s useful life. TCE rates can be highly volatile, may affect the fair value of the Company’s vessels and may have a significant impact on the Company’s ability to recover the carrying amount of its fleet. Accordingly, the volatility is contemplated in the undiscounted projected net operating cash flow by using a sensitivity analysis based on percent changes in the TCE rates. The Company prepares a series of scenarios in an attempt to capture the range of possible trends and outcomes. Projected net operating cash flows are net of brokerage and address commissions and assume no revenue on scheduled offhire days. The Company uses the current vessel operating expense budget, estimated costs of drydocking and historical general and administrative expenses as the basis for its expected outflows, and applies an inflation factor it considers appropriate. The net of these inflows and outflows, plus an estimated salvage value, constitutes the projected undiscounted future cash flows. If these projected cash flows do not exceed the carrying value of the asset group, an impairment charge would be recognized.

During the three and six months ended June 30, 2017 and the year ended December 31, 2016, the Company identified potential impairment indicators 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. 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 for the three and six months ended June 30, 2017 or the year ended December 31, 2016.