Edgar Filing: Eagle Bulk Shipping Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended December 31, 2007

Commission File Number 000–51366

EAGLE BULK SHIPPING INC.

(Exact name of Registrant as specified in its charter)

Republic of the Marshall Islands 98–0453513 (State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)

Registrant’s Address:
477 Madison Avenue
New York, New York 10022

Registrant’s telephone number, including area code: (212) 785–2500

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 per share
The Common Stock is registered on the NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-Accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 30, 2007, the last business day of the registrant’s most recently completed second quarter, was $934,806,706 based on the closing price of $22.41 per share on the NASDAQ Stock Exchange on that date. (For this purpose, all outstanding shares of Common Stock have been considered held by non-affiliates, other than the shares beneficially owned by directors, officers and certain 5% shareholders of the registrant; without conceding that any of the excluded parties are ‘‘affiliates’’ of the registrant for purposes of the federal securities laws.)

As of February 29, 2008, 46,757,153 shares of the registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed by the registrant within 120 days of December 31, 2007 in connection with its 2008 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

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Page PART I

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits, Financial Statement Schedules

Signatures

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PART I

ITEM 1. BUSINESS

Overview

Eagle Bulk Shipping Inc. (the ‘‘Company’’, ‘‘we’’, ‘‘us’’, or ‘‘our’’), incorporated under the laws of the Republic of the Marshall Islands (the ‘‘Marshall Islands’’) and headquartered in New York City, is engaged primarily in the ocean transportation of a broad range of major and minor bulk cargoes, including iron ore, coal, grain, cement and fertilizer, along worldwide shipping routes. We operate in the Handymax sector of the dry bulk industry, with particular emphasis on the Supramax class of vessels. As of December 31, 2007, we owned and operated a modern fleet of 18 oceangoing vessels with a combined carrying capacity of 915,502 deadweight tons and an average age of approximately 6 years. We have also contracted for the construction of 35 Supramax vessels with a combined carrying capacity of 1,995,000 deadweight tons, deliveries of which are expected to commence in August 2008 and will continue until 2012.

We own one of the largest fleets of Supramax dry bulk vessels in the world. Supramax dry bulk vessels range in size from 50,000 to 60,000 dwt. These vessels have the cargo loading and unloading flexibility of on-board cranes while offering cargo carrying capacities approaching that of Panamax dry bulk vessels, which range in size from 60,000 to 100,000 dwt and must rely on port facilities to load and offload their cargoes. We believe that the cargo handling flexibility and cargo carrying capacity of the Supramax class vessels make them attractive to charterers.

We carry out the commercial and strategic management of our fleet through our wholly-owned subsidiary, Eagle Shipping International (USA) LLC, a Marshall Islands limited liability company that was formed in January 2005 and maintains its principle executive offices in New York City. Each of our vessels is owned by us through a separate wholly owned Marshall Islands limited liability company.

We maintain our principal executive offices at 477 Madison Avenue, New York, New York 10022. Our telephone number at that address is (212) 785-2500. Our website address is www.eagleships.com. Information contained on our website does not constitute part of this annual report.

A glossary of shipping terms (the ‘‘Glossary’’) that should be used as a reference when reading this Annual Report on Form 10-K begins on page 19. Capitalized terms that are used in this Annual Report are either defined when they are first used or in the Glossary.

Forward-Looking Statements

This Form 10-K contains forward-looking statements regarding the outlook for dry cargo markets, and the Company’s prospects. There are a number of factors, risks and uncertainties that could cause actual results to differ from the expectations reflected in these forward-looking statements, including changes in production of or demand for major and minor bulk commodities, either globally or in particular regions; greater than anticipated levels of vessel newbuilding orders or less than anticipated rates of scrapping of older vessels; changes in trading patterns for particular commodities significantly impacting overall tonnage requirements; changes in the rates of growth of the world and various regional economies; risks incident to vessel operation, including discharge of pollutants; unanticipated changes in laws and regulations; increases in costs of operation; the availability to the Company of suitable vessels for acquisition or chartering-in on terms it deems favorable; the ability to attract and retain customers. This Form 10-K also includes statistical data regarding world dry bulk fleet and orderbook and fleet age. We generated some of these data internally, and some were obtained from independent industry publications and reports that we believe to be reliable sources. We have not independently verified these data nor sought the consent of any organizations to refer to their reports in this Annual Report. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements in this Form 10-K and written and oral forward-looking statements attributable to the Company or its representatives after the date of this Form 10-K are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports hereafter filed by the Company with the Securities and Exchange Commission.

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Management of Our Fleet

Our New York City based management team, with an average of 20 years of experience in the shipping industry primarily focused on the sub-Panamax dry bulk sectors, such as Supramax, Handymax and Handysize vessels, undertakes all commercial and strategic management of our fleet and supervises the technical management of our vessels. The technical management of our fleet is provided by unaffiliated third party managers, V.Ships and Wilhelmsen Ship Management (formerly Barber Ship Management), which are two of the world’s largest providers of independent ship management and related services, and which we refer to as our technical managers. The management of our fleet includes the following functions:

• Strategic management. We locate, obtain financing and insurance for, purchase and sell, vessels.

• Commercial management. We obtain employment for our vessels and manage our relationships with charterers.

• Technical management. The technical manager performs day-to-day operations and maintenance of our vessels.

Our Competitive Strengths and our Business Strategy

We believe that we have a number of strengths that provide us with a competitive advantage in the dry bulk shipping industry, including:

• A fleet of Supramax dry bulk vessels. We specialize in the Supramax class of the Handymax sector of the dry bulk industry. Our operating fleet of 18 vessels and 35 newbuilding vessels makes us one of the world’s largest fleets of vessels in the sector. We view Handymax vessels, especially the Supramax class of vessels, as a highly attractive sector of the dry bulk shipping industry relative to larger vessel sectors due to their:

– reduced volatility in charter rates;

– increased operating flexibility;

– ability to access more ports;

– ability to carry a more diverse range of cargoes; and

– broader customer base.

• A modern, high quality fleet. The 18 Handymax vessels in our operating fleet at December 31, 2007 had an average age of approximately 6 years compared to an average age for the world Handymax dry bulk fleet of over 15 years. As of December 31, 2007, we are also constructing 35 Supramax vessels which will commence entry into our fleet in August 2008. We believe that owning a modern, high quality fleet reduces operating costs, improves safety and provides us with a competitive advantage in securing employment for our vessels. Our fleet was built to high standards and all of our vessels were built at leading Japanese shipyards, including Mitsui Engineering and Shipbuilding Co., Ltd., and Oshima Shipbuilding Co., Ltd. The vessels under construction are being built at premier shipyards in Japan, IHI Marine United, and China, Dayang Yangzhou Shipbuilding Yard.

• A fleet of sister and similar ships allows us to maintain low cost, highly efficient operations. Our current operating fleet includes 8 identical sister ships built at the Mitsui shipyard based upon the same design specifications and 3 similar ships built at the Oshima shipyard that use many of the same parts and equipment. Our newbuilding fleet of 35 vessels includes three sets of sister vessels – five 56,000 dwt sister ships from IHI Marine, five 53,000 dwt sister ships and twenty five 58,000 dwt sister ships from Dayang shipyard. Operating sister and similar ships provides us with operational and scheduling flexibility, efficiencies in employee training and lower inventory and maintenance expenses. We believe that this should allow us both to increase revenue and lower operating costs. We intend to

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actively monitor and control vessel operating expenses while maintaining the high quality of our fleet through regular inspection and maintenance programs. We also intend to take advantage of savings that result from the economies of scale that the third party technical manager provides us through access to bulk purchasing of supplies, quality crew members and a global service network of engineers, naval architects and port captains.

• A medium-to long-term fixed-rate time charter program. We have entered into time charters employment contracts for a substantial portion of our fleet and these charters provide for fixed semi-monthly payments in advance. Our charters on the 18 vessels in our operating fleet range in length from one to three years, while 21 of the 35 newbuilding vessels will enter into charters averaging approximately 8 years duration upon their delivery. We believe that this structure provides significant visibility to our future financial results and allows us to take advantage of the stable cash flows and high utilization rates that are associated with medium- to long-term time charters. Our use of time charters also mitigates in part the seasonality of the spot market business. Generally, spot markets are strongest in the first and fourth quarters of the calendar year and weaker in the second and third quarters. We have entered into time charters for all of our vessels in the operating fleet ranging in length from one to three years and provide for fixed semi-monthly payments in advance. While we remain focused on securing charters with fixed base rates, we have also entered into contracts with fixed minimum rates and profit sharing arrangements, enabling us to benefit from an increasing rate environment while still minimizing downside risk. We regularly monitor the dry bulk shipping market and based on market conditions we may consider taking advantage of short-term charter rates.

• A strong balance sheet with a low level of indebtedness. Since our initial public offering in June 2005, we have used a combination of debt and equity to fund our fleet expansion. We believe that our relatively low level of outstanding indebtedness strengthens our balance sheet and in the future, we expect to draw funds under our credit facility or use the net proceeds from future equity issuances to fund vessel acquisitions. We intend to repay all or a portion of our acquisition related debt from time to time with the net proceeds of equity issuances. While our leverage will vary according to our acquisition strategy and our ability to refinance acquisition related debt through equity offerings on terms acceptable to us, we generally intend to limit the amount of indebtedness that we have outstanding at any time to low levels for our industry. We believe this strategy will provide us with flexibility in pursuing acquisitions that are accretive to earnings and dividends per share.

• Expand our fleet through selective acquisitions of dry bulk vessels. We intend to continue to grow our fleet through timely and selective acquisitions of additional vessels in a manner that is accretive to earnings and dividends per share. We expect to focus primarily in the Handymax sector of the dry bulk shipping industry, and in particular on Supramax class vessels. We may also consider acquisitions of other sizes of dry bulk vessels, including Handysize vessels, but do not intend to acquire tankers.

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Our Fleet

Our operating fleet consists of 18 vessels and we are constructing 35 vessels under our newbuilding program. The following tables presents certain information concerning our fleet as of December 31, 2007:

No. of Vessels Dwt Vessel Type Delivery Operating Fleet 18 Vessels

915,502

15 Supramax 2005-2007

3 Handymax 2005 Newbuilding Fleet 5 Vessels

265,000

53,000 dwt series 2008-2009 5 Vessels

280,000

56,000 dwt series 2008-2010 25 Vessels

1,450,000

58,000 dwt series 2009-2012 Total 53 Vessels

2,910,502

All vessels in our fleet are fitted with cargo cranes and cargo grabs. All of our vessels are flagged in the Marshall Islands. We own each of our vessels through a separate wholly owned Republic of Marshall Islands subsidiary.

Operating Fleet:

Our operating fleet consists of 18 vessels and these vessels are all employed on time charters. The following table represents certain information about the Company’s operating fleet as of December 31, 2007:

Vessel Year Built Dwt Delivered to Charterer Time Charter Employment(1) Cardinal

2004

55,408

June 21, 2007 May 2008 to August 2008 Condor

2001

50,296

March 19, 2007 May 2009 to August 2009 Falcon

2001

50,296

April 22, 2005 February 2008 to June 2008 Griffon

1995

46,635

March 18, 2007 March 2009 to June 2009 Harrier

2001

50,296

June 21, 2007 June 2009 to September 2009 Hawk I

2001

50,296

April 1, 2007 April 2009 to June 2009 Heron

2001

52,827

December 11, 2005 December 2007 to February 2008 Jaeger

2004

52,248

July 12, 2007 July 2008 to September 2008 Kestrel I

2004

50,326

July 1, 2006 December 2007 to April 2008 Kite

1997

47,195

August 11, 2007 September 2009 to January 2010 Merlin

2001

50,296

December 19, 2007 December 2010 to March 2011 Osprey I

2002

50,206

September 1, 2005 July 2008 to November 2008 Peregrine

2001

50,913

December 16, 2006 December 2008 to March 2009 Sparrow

2000

48,225

January 27, 2007 December 2007 to March 2008 Tern

2003

50,200

July 3, 2006 December 2007 to April 2008 Shrike

2003

53,343

April 24, 2007 April 2009 to August 2009 Skua

2003

53,350

June 20, 2007 May 2009 to August 2009 Kittiwake

2002

53,146

June 27, 2007 May 2008 to August 2008

(1) The date range provided represents the earliest and latest date on which the charterer may redeliver the vessel to the Company upon the conclusion of the charter.

Newbuilding Acquisitions

In November 2006, the Company, through its subsidiaries, entered into two vessel newbuilding contracts with IHI Marine United Inc., a Japanese shipyard, for the construction of two ‘Future-56’ class Supramax vessels. These 56,000 deadweight ton vessels are expected to be delivered in January and February of 2010, respectively.

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In March 2007, we entered into two contracts with IHI Marine United Inc., a Japanese shipyard, for the construction of the CROWNED EAGLE and CRESTED EAGLE, two ‘Future-56’class Supramax 56,000, deadweight ton vessels, which are expected to be delivered in November 2008 and February 2009, respectively.

In April 2007, we entered into a contract with the same shipyard for the construction of the STELLAR EAGLE, also‘Future-56’class Supramax 56,000, deadweight ton vessel, which is expected to be delivered in April 2009.

During the third quarter of 2007, we acquired the rights to 26 Supramax newbuilding vessels and options for 9 additional newbuilding vessels from Kyrini Shipping Inc., an unrelated privately held Greek shipping company. The total contractual cost of the newbuilding vessel construction project in China is approximately $1,100,000,000. Five of these Supramax vessels are of the 53,000 deadweight ton category, while the remaining 21 are of the 58,000 deadweight ton category. These vessels are expected to be delivered between 2008 and 2012. Of these 26 vessels, 21 vessels are secured by long-term charters through 2018. On December 27, 2007, the Company exercised four of the nine options to construct additional 58,000 dwt Supramax vessels. The options for the remaining five vessels expire on March 31, 2008.

At December 31, 2007, our newbuilding fleet consists of 35 vessels and 21 of these vessels will enter long term time charters upon their delivery into the Company’s fleet. The following table represents certain information about the Company’s newbuilding fleet:

Vessel Dwt Year Built –
Expected Delivery(1) Time Charter Employment(2) Crowned Eagle

56,000

Nov 2008 Charter Free Crested Eagle

56,000

Feb 2009 Charter Free Stellar Eagle

56,000

Apr 2009 Charter Free Golden Eagle

56,000

Jan 2010 Charter Free Imperial Eagle

56,000

Feb 2010 Charter Free Wren

53,100

Aug 2008 Aug 2008 to Dec 2018/Apr 2019 Woodstar

53,100

Oct 2008 Oct 2008 to Dec 2018/Apr 2019 Thrush

53,100

Sep 2009 Charter Free Thrasher

53,100

Nov 2009 Nov 2009 to Dec 2018/Apr 2019 Avocet

53,100

Dec 2009 Dec 2009 to Dec 2018/Apr 2019 Bittern

58,000

Sep 2009 Dec 2014 to Dec 2018/Apr 2019 Canary

58,000

Oct 2009 Jan 2015 to Dec 2018/Apr 2019 Crane

58,000

Nov 2009 Feb 2015 to Dec 2018/Apr 2019 Egret(3)

58,000

Dec 2009 Sep 2012 to Jan 2013 Gannet(3)

58,000

Jan 2010 Oct 2012 to Feb 2013 Grebe(3)

58,000

Feb 2010 Nov 2012 to Mar 2013 Ibis(3)

58,000

Mar 2010 Dec 2012 to Apr 2013 Jay

58,000

Apr 2010 Sep 2015 to Dec 2018/Apr 2019 Kingfisher

58,000

May 2010 Oct 2015 to Dec 2018/Apr 2019 Martin

58,000

Jun 2010 Dec 2016 to Dec 2017 Nighthawk

58,000

Mar 2011 Sep 2017 to Sep 2018 Oriole

58,000

Jul 2011 Jan 2018 to Jan 2019 Owl

58,000

Aug 2011 Feb 2018 to Feb 2019 Petrel(4)

58,000

Sep 2011 Jun 2014 to Oct 2014 Puffin(4)

58,000

Oct 2011 Jul 2014 to Nov 2014 Roadrunner(4)

58,000

Nov 2011 Aug 2014 to Dec 2014 Sandpiper(4)

58,000

Dec 2011 Sep 2014 to Jan 2015 Snipe

58,000

Jan 2012 Charter Free Swift

58,000

Feb 2012 Charter Free

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Vessel Dwt Year Built –
Expected Delivery(1) Time Charter Employment(2) Raptor

58,000

Mar 2012 Charter Free Saker

58,000

Apr 2012 Charter Free Besra(5)

58,000

Oct 2011 Charter Free Cernicalo(5)

58,000

Jan 2011 Charter Free Fulmar(5)

58,000

Jul 2011 Charter Free Goshawk(5)

58,000

Sep 2011 Charter Free

(1) Vessel build and delivery dates are estimates based on guidance received from shipyard. (2) The date range represents the earliest and latest date on which the charterer may redeliver the vessel to the Company upon conclusion of the charter. (3) The charterer has an option to extend the charter by 2 periods of 11 to 13 months each. (4) The charterer has an option to extend the charter by 2 periods of 11 to 13 months each. (5) Options for construction declared on December 27, 2007.

Nature of Business

Our strategy is to charter our vessels primarily pursuant to one- to three-year time charters to allow us to take advantage of the stable cash flow and high utilization rates that are associated with medium- to long-term time charters. We have entered into time charters for all of our vessels ranging in length from one to three years. We will regularly monitor the dry bulk shipping market and based on market conditions we may consider taking advantage of short-term charter rates.

A time charter involves the hiring of a vessel from its owner for a period of time pursuant to a contract under which the vessel owner places its ship (including its crew and equipment) at the service of the charterer. Under a typical time charter, the charterer periodically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of fuel and port and canal charges. Once we have time chartered a vessel, trading of the vessel and the commercial risks shift to the customer. Subject to certain restrictions imposed by us in the contract, the charterer determines the type and quantity of cargo to be carried and the ports of loading and discharging. We have contracted the technical operations of the vessel to third party vessel managers and we oversee the technical operation and navigation of the vessel at all times, including monitoring vessel operating expenses, such as the cost of crewing, insuring, repairing and maintaining the vessel, costs of spare parts and supplies, tonnage taxes and other miscellaneous expenses.

In connection with the charter of each of our vessels, we pay commissions ranging from 1.25% to 6.25% of the total daily charter hire rate of each charter to unaffiliated ship brokers and to in-house ship brokers associated with the charterers, depending on the number of brokers involved with arranging the relevant charter.

Our vessels operate worldwide within the trading limits imposed by our insurance terms and do not operate in areas where United States or United Nations sanctions have been imposed.

Our Customers

Our customers include international companies such as Norden A/S, Korea Line, Ltd., Western Bulk ASA, Daeyang Shipping Ltd., Clipper Bulk, Pacific Basin, BHP and Cosco. Our assessment of a charterer’s financial condition and reliability is an important factor in negotiating employment for our vessels. We expect to charter our vessels to major trading houses (including commodities traders), publicly traded companies, reputable vessel owners and operators, major producers and government-owned entities rather than to more speculative or undercapitalized entities. We evaluate the counterparty risk of potential charterers based on our management’s experience in the shipping industry combined with the additional input of two independent credit risk consultants. In 2007, four customers individually accounted for more than 10% of our time charter revenue.

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Operations

There are two central aspects to the operation of our fleet:

• Commercial Operations, which involves chartering and operating a vessel; and

• Technical Operations, which involves maintaining, crewing and insuring a vessel.

We carry out the commercial and strategic management of our fleet through our wholly owned subsidiary, Eagle Shipping International (USA) LLC, a Marshall Islands limited liability company that was formed in January 2005 and maintains its principle executive offices in New York City. Our office staff, either directly or through this subsidiary, provides the following services:

• commercial operations and technical supervision;

• safety monitoring;

• vessel acquisition; and

• financial, accounting and information technology services.

We currently have a total of sixteen shore-based personnel, including our senior management team.

Commercial and Strategic Management

We perform all of the commercial and strategic management of our fleet, including:

• Obtaining employment for our vessels and maintaining our relationships with our charterers. We believe that because our management team has an average of 20 years experience in operating Handymax and Handysize dry bulk vessels, we have access to a broad range of charterers and can employ the fleet efficiently in any market and achieve high utilization rates.

In accordance with our strategy, we have entered into time charters for all 18 of our vessels currently in the operating fleet and 21 of the 35 vessels under construction. In general, our time charters afford us greater assurance that we will be able to cover a fixed portion of our costs, mitigate revenue volatility, provide stable cash flow and achieve higher utilization rates than if our vessels were employed on the shorter term voyage charters or on the spot market.

We regularly monitor the dry bulk shipping market and, based on market conditions, when a time charter ends, we may consider taking advantage of short-term charter rates. In such cases we will arrange voyage charters for those vessels that we will operate in the spot market. Under a voyage charter, the owner of a vessel provides the vessel for the transport of goods between specific ports in return for the payment of an agreed-upon freight per ton of cargo or, alternatively, a specified total amount. All operating costs are borne by the owner of the vessel. A single voyage charter is often referred to as a ‘‘spot market’’ charter, which generally lasts from two to ten weeks. Operating vessels in the spot market may afford greater speculative opportunity to capitalize on fluctuations in the spot market; when vessel demand is high we earn higher rates, but when demand is low our rates are lower and potentially insufficient to cover costs. Spot market rates are volatile and are affected by world economics, international events, weather conditions, strikes, governmental policies, supply and demand, and other factors beyond our control. If the markets are especially weak for protracted periods, there is a risk that vessels in the spot market may spend time idle waiting for business, or may have to be ‘‘laid up’’.

• Identifying, purchasing, and selling vessels. We believe that our commercial management team has longstanding relationships in the dry bulk industry, which provides us access to an extensive network of ship brokers and vessel owners that we believe will provide us with an advantage in future transactions.

• Obtaining insurance coverage for our vessels. We have well-established relationships with reputable marine underwriters in all the major insurance markets around the world that helps insure our fleet with insurance at competitive rates.

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• Supervising our third party technical managers. We regularly monitor the expenditures, crewing, and maintenance of our vessels by our technical managers, V Ships and Wilhemsen Ship Management. Our management team has direct experience with vessel operations, repairs, drydockings and vessel construction.

Technical Management

The technical management of our fleet is provided by our technical managers, V.Ships, an unaffiliated third party, that we believe is the world’s largest provider of independent ship management and related services, and Barber Ship Management, one of the largest vessel managers in the world. We review the performance of our managers on an annual basis and may add or change technical managers.

Technical management includes managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging our hire of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. Our Technical Managers also manage and process all crew insurance claims. Our technical managers maintain records of all costs and expenditures incurred in connection with their services that are available for our review on a daily basis. Our technical managers are members of marine contracting associations which arrange bulk purchasing thereby enabling us to benefit from economies of scale.

We currently crew our vessels with officers and seamen from Ukraine and Romania who are supplied by our managers. As of December 31, 2007, we employed a total of 387 officers and seamen on the 18 vessels in our operating fleet. Our technical manager handles each seaman’s training, travel, and payroll and ensures that all our seamen have the qualifications and licenses required to comply with international regulations and shipping conventions. Additionally, our seafaring employees perform most commissioning work and assist in supervising work at shipyards and drydock facilities. We typically man our vessels with more crew members than are required by the country of the vessel’s flag in order to allow for the performance of routine maintenance duties. All of our crew members are subject to and are paid commensurate with international collective bargaining agreements and, therefore, we do not anticipate any labor disruptions. No international collective bargaining agreements to which we are a party are set to expire within two years.

We pay our technical managers a monthly fee per vessel plus actual costs incurred by our vessels. These monthly fees averaged $8,906 per vessel in 2007, $8,583 per vessel in 2006 and $8,333 per vessel in 2005.

Permits and Authorizations

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel’s crew and the age of a vessel. We expect to be able to obtain all permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of us doing business.

Environmental and Other Regulations

Government regulation significantly affects the ownership and operation of our vessels. We are subject to international conventions, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered.

A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (United States Coast Guard, harbor master or equivalent), classification societies, flag state administrations (country of registry)

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and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses and certificates for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend the operation of one or more of our vessels.

We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the dry bulk shipping industry.

Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations applicable to us as of the date of this annual report.

International Maritime Organization

The International Maritime Organization, or IMO, has negotiated international conventions that impose liability for oil pollution in international waters and a signatory’s territorial waters. The IMO adopted Annex VI to the International Convention for the Prevention of Pollution from Ships to address air pollution from ships which became effective in May 2005. Annex VI set limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibit deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. Our vessels are in compliance with Annex VI.

The operation of our vessels is also affected by the requirements set forth in the IMO’s Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM Code requires ship owners and bareboat charterers to develop and maintain an extensive ‘‘Safety Management System’’ that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a ship owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. As of the date of this annual report, all of the vessels in our operating fleet is ISM Code-certified.

The United States Oil Pollution Act of 1990

The United States Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea and its two hundred nautical mile exclusive economic zone.

Under OPA, vessel owners, operators and bareboat charterers are ‘‘responsible parties’’ and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:

• natural resources damage and the costs of assessment thereof;

• real and personal property damage;

• net loss of taxes, royalties, rents, fees and other lost revenues;

• lost profits or impairment of earning capacity due to property or natural resources damage; and

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• net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.

OPA limits the liability of responsible parties to the greater of $600 per gross ton or $0.5 million per dry bulk vessel that is over 300 gross tons (subject to possible adjustment for inflation). These limits of liability do not apply if an incident was directly caused by violation of applicable United States federal safety, construction or operating regulations or by a responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.

We maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operation.

OPA requires owners and operators of vessels to establish and maintain with the United States Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under the OPA. In December 1994, the United States Coast Guard implemented regulations requiring evidence of financial responsibility in the amount of $1,500 per gross ton, which includes the OPA limitation on liability of $1,200 per gross ton and the United States Comprehensive Environmental Response, Compensation, and Liability Act liability limit of $300 per gross ton. Under the regulations, vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance or guaranty. Under OPA, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessels in the fleet having the greatest maximum liability under OPA.

The United States Coast Guard’s regulations concerning certificates of financial responsibility provide, in accordance with OPA, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain organizations, which had typically provided certificates of financial responsibility under pre-OPA laws, including the major protection and indemnity organizations, have declined to furnish evidence of insurance for vessel owners and operators if they are subject to direct actions or required to waive insurance policy defenses.

The United States Coast Guard’s financial responsibility regulations may also be satisfied by evidence of surety bond, guaranty or by self-insurance. Under the self-insurance provisions, the ship owner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of financial responsibility. We have complied with the United States Coast Guard regulations by providing a certificate of responsibility from third party entities that are acceptable to the United States Coast Guard evidencing sufficient self-insurance.

OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states that have enacted such legislation have not yet issued implementing regulations defining vessels owners’ responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call.

Other Environmental Initiatives

The European Union is considering legislation that will affect the operation of vessels and the liability of owners for oil pollution. It is difficult to predict what legislation, if any, may be promulgated by the European Union or any other country or authority.

Although the United States is not a party thereto, many countries have ratified and follow the liability scheme adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended, or the CLC, and the Convention for the Establishment of

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an International Fund for Oil Pollution of 1971, as amended. Under these conventions, a vessel’s registered owner is strictly liable for pollution damage caused on the territorial waters of a contracting state by discharge of persistent oil, subject to certain complete defenses. Many of the countries that have ratified the CLC have increased the liability limits through a 1992 Protocol to the CLC. The liability limits in the countries that have ratified this Protocol are currently approximately $4.0 million plus approximately $566.00 per gross registered ton above 5,000 gross tons with an approximate maximum of $80.5 million per vessel, with the exact amount tied to a unit of account which varies according to a basket of currencies. The right to limit liability is forfeited under the CLC where the spill is caused by the owner’s actual fault or privity and, under the 1992 Protocol, where the spill is caused by the owner’s intentional or reckless conduct. Vessels trading to contracting states must provide evidence of insurance covering the limited liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to the CLC.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the Maritime Transportation Security Act of 2002, or the MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the United States Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to the International Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the convention dealing specifically with maritime security. The new chapter came into effect in July 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security Code or ISPS Code. Among the various requirements are:

• on-board installation of automatic information systems, or AIS, to enhance vessel-to-vessel and vessel-to-shore communications;

• on-board installation of ship security alert systems;

• the development of vessel security plans; and

• compliance with flag state security certification requirements.

The United States Coast Guard regulations, intended to align with international maritime security standards, exempt non-United States vessels from MTSA vessel security measures provided such vessels have on board a valid International Ship Security Certificate, or ISSC, that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. We have implemented the various security measures addressed by the MTSA, SOLAS and the ISPS Code.

Inspection by Classification Societies

Every seagoing vessel must be ‘‘classed’’ by a classification society. The classification society certifies that the vessel is ‘‘in class,’’ signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.

The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and /or to the regulations of the country concerned.

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For maintenance of the class, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:

• Annual Surveys. For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant and where applicable for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate.

• Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.

• Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery, including the electrical plant and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a ship owner has the option of arranging with the classification society for the vessel’s hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five year cycle. At an owner’s application, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.

All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years. Vessels under 5 years of age can waive drydocking in order to increase available days and decrease capital expenditures, provided that the vessel is inspected underwater.

Most vessels are drydocked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a ‘‘recommendation’’ which must be rectified by the ship owner within prescribed time limits.

Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as ‘‘in class’’ by a classification society which is a member of the International Association of Classification Societies, or IACS. All our vessels that we have purchased and may agree to purchase in the future must be certified as being ‘‘in class’’ prior to their delivery under our standard purchase contracts and memorandum of agreement. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel. We have all of our vessels, and intend to have all vessels that we acquire in the future, classed by IACS members.

Risk of Loss and Liability Insurance

General

The operation of any dry bulk vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills (from fuel oil) and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the United States market.

We maintain hull and machinery insurance, war risks insurance, loss of hire, protection and indemnity cover, and freight, demurrage and defense cover for our operating fleet in amounts that we

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believe to be prudent to cover normal risks in our operations. We may not be able to achieve or maintain this level of coverage throughout a vessel’s useful life. Furthermore, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

Hull &Machinery and War Risks Insurance

We maintain marine hull and machinery, war risks insurances, and loss of hire insurance which cover the risk of actual or constructive total loss for all of our vessels. Our vessels are each covered up to at least their fair market value with deductibles of $75,000 – $100,000 per vessel per incident.

Protection & Indemnity Insurance

Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure our third party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or ‘‘clubs.’’ Subject to the ‘‘capping’’ discussed below, our coverage, except for pollution, is unlimited.

Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The fourteen P&I Associations that comprise the International Group insure approximately 90% of the world’s commercial tonnage and have entered into a pooling agreement to reinsure each association’s liabilities. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on the group’s claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group.

Competition

We compete with a large number of international fleets. The international shipping industry is highly competitive and fragmented with many market participants. There are approximately 6,670 drybulk carriers aggregating approximately 392 million dwt, and the ownership of these vessels is divided among approximately 1,400 mainly private independent dry bulk vessel owners with no one shipping group owning or controlling more than 5.0% of the world dry bulk fleet. We primarily compete with other owners of dry bulk vessels in the Handymax class that are mainly privately owned fleets.

Competition in the ocean shipping industry varies primarily according to the nature of the contractual relationship as well as with respect to the kind of commodity being shipped. Our business will fluctuate in line with the main patterns of trade of dry bulk cargoes and varies according to changes in the supply and demand for these items. Competition in virtually all bulk trades is intense and based primarily on supply and demand. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and operator. Increasingly, major customers are demonstrating a preference for modern vessels based on concerns about the environmental and operational risks associated with older vessels. Consequently, owners of large modern fleets have gained a competitive advantage over owners of older fleets.

As in the spot market, the time charter market is price sensitive and also depends on our ability to demonstrate the high quality of our vessels and operations to chartering customers. However, because of the longer term commitment, customers entering time charters are more concerned about their exposure and image from chartering vessels that do not comply with environmental regulations or that will be forced out of service for extensive maintenance and repairs. Consequently, in the time charter market, factors such as the age and quality of a vessel and the reputation of the owner and operator tend to be more significant than in the spot market in competing for business.

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Value of Assets and Cash Requirements

The replacement costs of comparable new vessels may be above or below the book value of our fleet. The market value of our fleet may be below book value when market conditions are weak and exceed book value when markets are strong. In common with other shipowners, we may consider asset redeployment which at times may include the sale of vessels at less than their book value.

The Company’s results of operations and cash flow may be significantly affected by future charter markets.

Exchange Controls

Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common stock.

United States Tax Considerations

The following is a discussion of certain United States federal income tax considerations relevant to owning our common stock by a United States Holder, as defined below. This discussion does not purport to deal with the tax consequences of owning the Company’s common stock to all categories of investors, some of which (such as financial institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, insurance companies, persons holding our common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that have elected the mark-to-market method of accounting for their securities, persons liable for alternative minimum tax, persons who are investors in pass-through entities, dealers in securities or currencies, persons who own 10% or more of our common stock and investors whose functional currency is not the United States dollar) may be subject to special rules. Shareholders are encouraged to consult their own tax advisors concerning the overall tax consequences arising in any particular situation under United States federal, state, local or foreign law of the ownership of our common stock.

United States Federal Income Taxation of Our Company

Taxation of Operating Income

The Company anticipates that it will derive substantially all of its gross income from the use and operation of vessels in international commerce and that this income will principally consist of hire from time and voyage charters for the transportation of cargoes and the performance of services directly related thereto, which is referred to herein as ‘‘shipping income.’’

Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the U.S. will be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. The Company does not engage in transportation that gives rise to 100% U.S. source income. Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the U.S. will not be subject to any U.S. federal income tax.

The Company’s vessels operate in various parts of the world, including to or from U.S. ports. We believe that we currently qualify under Section 883 of the U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’), for an exemption from U.S. federal income tax on substantially all of our shipping income. This exemption may be lost if 50% or more of our stock is owned, for more than half the number of days during the taxable year, by persons who actually or constructively own 5% or more of our stock and we cannot qualify for an exemption from such rule.

While we believe that we qualify for exemption from tax under Section 883 for 2006, we can give no assurance that changes in the ownership of our stock will permit us to qualify for the Section 883

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exemption in the future. If we do not qualify for an exemption pursuant to Section 883 of the Code, we will be subject to U.S. federal income tax imposed on a gross basis at 4% on our U.S. source shipping income. In such a case, our net income and cash flow will be reduced by the amount of such tax.

If the Section 883 exemption were not available to the Company for 2006, the 4% tax so imposed would be approximately $800,000. However, since no more that 50% of our shipping income would be treated as derived from U.S. sources, our maximum tax liability under the 4% tax regime would never exceed 2% of our shipping income.

No assurance can be given that changes in or interpretation of existing laws will not occur or will not be retroactive or that anticipated future circumstances will in fact occur. The Company’s views should not be considered official, and no assurances on the conclusions discussed above can be given.

United States Federal Income Taxation of United States Holders

Passive Foreign Investment Company Status and Significant Tax Consequences

Special United States federal income tax rules apply to a United States Holder (as used herein means a beneficial owner of common stock that is an individual United States citizen or resident, a United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust) that holds stock in a foreign corporation classified as a ‘‘passive foreign investment company’’ for United States federal income tax purposes. In general, the Company will be treated as a passive foreign investment company with respect to a United States Holder if, for any taxable year in which such holder holds the Company’s common stock, either

• at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business), or

• at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income.

Income earned, or deemed earned, by the Company in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute ‘‘passive income’’ unless the Company was treated under specific rules as deriving its rental income in the active conduct of a trade or business.

Based on the Company’s current operations and future projections, we do not believe that the Company has been or is, nor do we expect the Company to become, a passive foreign investment company with respect to any taxable year. Although there is no legal authority directly on point, our belief is based principally on the position that, for purposes of determining whether the Company is a passive foreign investment company, the gross income it derives from its time chartering and voyage chartering activities should constitute services income, rather than rental income. Accordingly, such income should not constitute passive income, and the assets that the Company owns and operates in connection with the production of such income, in particular, the vessels, should not constitute passive assets for purposes of determining whether the Company is a passive foreign investment company. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. In addition, we have obtained an opinion from our counsel, Seward & Kissel LLP, that, based upon the Company’s operations as described herein, its income from time charters and voyage charters should not be treated as passive income for purposes of determining whether it is a passive foreign investment company. However, in the absence of any legal authority specifically relating to the statutory provisions governing passive foreign investment companies, the Internal Revenue Service or a court could disagree with our position. In addition,

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although the Company intends to conduct its affairs in a manner to avoid being classified as a passive foreign investment company with respect to any taxable year, we cannot assure you that the nature of its operations will not change in the future.

As discussed more fully below, if the Company were to be treated as a passive foreign investment company for any taxable year, a United States Holder would be subject to different taxation rules depending on whether the United States Holder makes an election to treat the Company as a ‘‘Qualified Electing Fund,’’ which election we refer to as a ‘‘QEF election.’’ As an alternative to making a QEF election, a United States Holder should be able to make a ‘‘mark-to-market’’ election with respect to the Company’s common stock, as discussed below.

Taxation of United States Holders Making a Timely QEF Election

If a United States Holder makes a timely QEF election, which United States Holder we refer to as an ‘‘Electing Holder,’’ the Electing Holder must report for United States federal income tax purposes its pro rata share of the Company’s ordinary earnings and net capital gain, if any, for each taxable year of the Company for which it is a passive foreign investment company that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received from the Company by the Electing Holder. No portion of any such inclusions of ordinary earnings will be treated as ‘‘qualified dividend income.’’ Net capital gain inclusions of United States Non-Corporate Holders would be eligible for preferential capital gains tax rates. The Electing Holder’s adjusted tax basis in the common stock will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common stock and will not be taxed again once distributed. An Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that the Company incurs with respect to any year. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of the Company’s common stock. A United States Holder would make a timely QEF election for shares of the Company by filing one copy of IRS Form 8621 with his United States federal income tax return for the first year in which he held such shares when the Company was a passive foreign investment company. If the Company were to be treated as a passive foreign investment company for any taxable year, the Company would provide each United States Holder with all necessary information in order to make the QEF election described above.

Taxation of United States Holders Making a ‘‘Mark-to-Market’’ Election

Alternatively, if the Company were to be treated as a passive foreign investment company for any taxable year and, as we anticipate, its stock is treated as ‘‘marketable stock,’’ a United States Holder would be allowed to make a ‘‘mark-to-market’’ election with respect to the Company’s common stock, provided the United States Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury regulations. If that election is made, the United States Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common stock at the end of the taxable year over such holder’s adjusted tax basis in the common stock. The United States Holder would also be permitted an ordinary loss in respect of the excess, if any, of the United States Holder’s adjusted tax basis in the common stock over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A United States Holder’s tax basis in his common stock would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of the Company’s common stock would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the United States Holder. No ordinary income inclusions under this election will be treated as ‘‘qualified dividend income.’’

Taxation of United States Holders Not Making a Timely QEF or Mark-to-Market Election

Finally, if the Company were to be treated as a passive foreign investment company for any taxable year, a United States Holder who does not make either a QEF election or a ‘‘mark-to-market’’

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election for that year, whom we refer to as a ‘‘Non-Electing Holder,’’ would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common stock), and (2) any gain realized on the sale, exchange or other disposition of the Company’s common stock. Under these special rules:

• the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the common stock;

• the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which the Company was a passive foreign investment company, would be taxed as ordinary income and would not be ‘‘qualified dividend income’’; and

• the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

These special rules would not apply to a qualified pension, profit sharing or other retirement trust or other tax-exempt organization that did not borrow money or otherwise utilize leverage in connection with its acquisition of the Company’s common stock. If the Company is a passive foreign investment company and a Non-Electing Holder who is an individual dies while owning the Company’s common stock, such holder’s successor generally would not receive a step-up in tax basis with respect to such stock.

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GLOSSARY OF SHIPPING TERMS

Following are definitions of shipping terms used in this Form 10-K.

Annual Survey — The inspection of a vessel by a classification society, on behalf of a flag state, that takes place every year.

Bareboat Charter — Also known as ‘‘demise charter.’’ Contract or hire of a ship under which the shipowner is usually paid a fixed amount of charter hire rate for a certain period of time during which the charterer is responsible for the operating costs and voyage costs of the vessel as well as arranging for crewing.

Bulk Vessels/Carriers — Vessels which are specially designed and built to carry large volumes of cargo in bulk cargo form.

Bunkers — Heavy fuel oil used to power a vessel’s engines.

Capesize — A dry bulk carrier in excess of 100,000 dwt.

Charter — The hire of a vessel for a specified period of time or to carry a cargo for a fixed fee from a loading port to a discharging port. The contract for a charter is called a charterparty.

Charterer — The individual or company hiring a vessel.

Charter Hire Rate — A sum of money paid to the vessel owner by a charterer under a time charterparty for the use of a vessel.

Classification Society — An independent organization which certifies that a vessel has been built and maintained in accordance with the rules of such organization and complies with the applicable rules and regulations of the country of such vessel and the international conventions of which that country is a member.

Deadweight Ton — ‘‘dwt’’ — A unit of a vessel’s capacity for cargo, fuel oil, stores and crew, measured in metric tons of 1,000 kilograms. A vessel’s DWT or total deadweight is the total weight the vessel can carry when loaded to a particular load line.

Demise Charter — See bareboat charter

Draft — Vertical distance between the waterline and the bottom of the vessel’s keel.

Dry Bulk — Non-liquid cargoes of commodities shipped in an unpackaged state.

Drydocking — The removal of a vessel from the water for inspection and/or repair of submerged parts.

Gross Ton — Unit of 100 cubic feet or 2.831 cubic meters used in arriving at the calculation of gross tonnage.

Handymax — A dry bulk carrier of approximately 35,000 to 60,000 dwt.

Handysize — A dry bulk carrier having a carrying capacity of up to approximately 35,000 dwt.

Hull — The shell or body of a vessel.

International Maritime Organization — ‘‘IMO’’ — A United Nations agency that issues international trade standards for shipping.

Intermediate Survey — The inspection of a vessel by a classification society surveyor which takes place between two and three years before and after each Special Survey for such vessel pursuant to the rules of international conventions and classification societies.

ISM Code — The International Management Code for the Safe Operation of Ships and for Pollution Prevention, as adopted by the IMO.

Metric Ton — A unit of measurement equal to 1,000 kilograms.

Newbuilding — A newly constructed vessel.

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OPA — The United States Oil Pollution Act of 1990 (as amended).

Orderbook — A reference to currently placed orders for the construction of vessels (e.g., the Panamax orderbook).

Panamax — A dry bulk carrier of approximately 60,000 to 100,000 dwt of maximum length, depth and draft capable of passing fully loaded through the Panama Canal.

Protection & Indemnity Insurance — Insurance obtained through a mutual association formed by shipowners to provide liability insurance protection from large financial loss to one member through contributions towards that loss by all members.

Scrapping — The disposal of old or damaged vessel tonnage by way of sale as scrap metal.

Short-Term Time Charter — A time charter which lasts less than approximately 12 months.

Sister Ships — Vessels of the same class and specification which were built by the same shipyard.

SOLAS — The International Convention for the Safety of Life at Sea 1974, as amended, adopted under the auspices of the IMO.

Special Survey — The inspection of a vessel by a classification society surveyor which takes place a minimum of every four years and a maximum of every five years.

Spot Market — The market for immediate chartering of a vessel usually for single voyages.

Strict Liability — Liability that is imposed without regard to fault.

Supramax — A new class of Handymax dry bulk carrier of approximately 50,000 to 60,000 dwt.

Time Charter — Contract for hire of a ship. A charter under which the ship-owner is paid charter hire rate on a per day basis for a certain period of time, the shipowner being responsible for providing the crew and paying operating costs while the charterer is responsible for paying the voyage costs. Any delays at port or during the voyages are the responsibility of the charterer, save for certain specific exceptions such as loss of time arising from vessel breakdown and routine maintenance.

Ton — A metric ton.

Voyage Charter — Contract for hire of a vessel under which a shipowner is paid freight on the basis of moving cargo from a loading port to a discharge port. The shipowner is responsible for paying both operating costs and voyage costs. The charterer is typically responsible for any delay at the loading or discharging ports.

Available Information

The Company makes available free of charge through its internet website, www.eagleships.com its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission. You may read and copy any document we file with the SEC at the SEC’s public reference facilities maintained by the Securities and Exchange Commission at 100 Fifth Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facilities. Our SEC filings are also available to the public at the SEC’s web site at http://www.sec.gov. The information on our website is not incorporated by reference into this report.

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ITEM 1A. RISK FACTORS

We operate in an intensely competitive industry. Some of the following risks relate principally to the industry in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our common stock. The occurrence of any of the events described in this section could cause results to differ materially from those contained in the forward-looking statements made in this report, and could significantly and negatively affect our business, financial condition, operating results or cash available for dividends.

Industry Specific Risk Factors

Charter hire rates for dry bulk vessels may decrease in the future, which may adversely affect our earnings. The dry bulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The degree of charter hire rate volatility among different types of dry bulk vessels has varied widely, and charter hire rates for dry bulk vessels have recently declined from historically high levels. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by water internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.

Factors that influence demand for vessel capacity include:

• supply and demand for energy resources, commodities, semi-finished and finished consumer and industrial products;

• changes in the exploration or production of energy resources, commodities, semi-finished and finished consumer and industrial products;

• the location of regional and global exploration, production and manufacturing facilities;

• the location of consuming regions for energy resources, commodities, semi-finished and finished consumer and industrial products;

• the globalization of production and manufacturing;

• global and regional economic and political conditions, including armed conflicts and terrorist activities; embargoes and strikes;

• developments in international trade;

• changes in seaborne and other transportation patterns, including the distance cargo is transported by sea;

• environmental and other regulatory developments;

• currency exchange rates; and

• weather.

Factors that influence the supply of vessel capacity include:

• number of newbuilding deliveries;

• scrapping of older vessels;

• vessel casualties; and

• number of vessels that are out of service.

We anticipate that the future demand for our dry bulk vessels will be dependent upon continued economic growth in the world’s economies, seasonal and regional changes in demand, changes in the capacity of the global dry bulk fleet and the sources and supply of dry bulk cargo to be transported by sea. The capacity of the global dry bulk carrier fleet seems likely to increase and there can be no assurance that economic growth will continue. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.

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Our ability to recharter our dry bulk vessels upon the expiration or termination of their time charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, the current state of the dry bulk shipping market. If the dry bulk shipping market is in a period of depression when our vessels’ charters expire, we may be forced to re-charter them at reduced rates or even possibly a rate whereby we incur a loss, which may reduce our earnings or make our earnings volatile.

In addition, because the market value of our vessels may fluctuate significantly, we may incur losses when we sell vessels, which may adversely affect our earnings. If we sell vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel’s carrying amount on our financial statements, resulting in a loss and a reduction in earnings.

An economic slowdown in the Asia Pacific region could have a material adverse effect on our business, financial position and results of operations. We anticipate a significant number of the port calls made by our vessels will involve the loading or discharging of dry bulk commodities in ports in the Asia Pacific region. As a result, a negative change in economic conditions in any Asia Pacific country, but particularly in China, may have an adverse effect on our business, financial position and results of operations, as well as our future prospects. In recent years, China has been one of the world’s fastest growing economies in terms of gross domestic product, which has had a significant impact on shipping demand. We cannot assure you that such growth will be sustained or that the Chinese economy will not experience negative growth in the future. Moreover, any slowdown in the economies of the United States, the European Union or certain Asian countries may adversely affect economic growth in China and elsewhere. Our business, financial position, results of operations, ability to pay dividends as well as our future prospects, will likely be materially and adversely affected by an economic downturn in any of these countries.

The market values of our vessels may decrease, which could limit the amount of funds that we can borrow under our credit facility. The fair market values of our vessels have generally experienced high volatility. Market prices for secondhand dry bulk vessels have recently been at historically high levels. You should expect the market values of our vessels to fluctuate depending on general economic and market conditions affecting the shipping industry and prevailing charter hire rates, competition from other shipping companies and other modes of transportation, the types, sizes and ages of our vessels, applicable governmental regulations and the cost of newbuildings. If the market value of our fleet declines, we may not be able to draw down the full amount of our credit facility and we may not be able to obtain other financing or incur debt on terms that are acceptable to us or at all.

The market values of our vessels may decrease, which could cause us to breach covenants in our credit facility and adversely affect our operating results. If the market values of our vessels, which have recently been at historically high levels, decrease, we may breach some of the covenants contained in the financing agreements relating to our indebtedness at the time, including covenants in our credit facility. If we do breach such covenants and we are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on our fleet. In addition, if the book value of a vessel is impaired due to unfavorable market conditions or a vessel is sold at a price below its book value, we would incur a loss that could adversely affect our operating results.

An over-supply of dry bulk carrier capacity may lead to reductions in charter hire rates and profitability. The market supply of dry bulk carriers has been increasing, and the number of dry bulk carriers on order are near historic highs. These newbuildings were delivered in significant numbers starting at the beginning of 2006 and continuing through 2007. As of December 2007, newbuilding orders had been placed for an aggregate of more than 57% of the existing global dry bulk fleet, with deliveries expected during the next 36 months. An over-supply of dry bulk carrier capacity may result in a reduction of charter hire rates. If such a reduction occurs, upon the expiration or termination of our vessels’ current charters we may only be able to re-charter our vessels at reduced or unprofitable rates or we may not be able to charter these vessels at all.

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World events could affect our results of operations and financial condition. Terrorist attacks such as the attacks on the United States on September 11, 2001 and in London on July 7, 2005 and the continuing response of the United States to these attacks, as well as the threat of future terrorist attacks in the United States or elsewhere, continues to cause uncertainty in the world financial markets and may affect our business, operating results and financial condition. The continuing conflict in Iraq may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.

Our operating results will be subject to seasonal fluctuations, which could affect our operating results and the amount of available cash with which we can pay dividends. We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. To the extent we operate vessels in the spot market, this seasonality may result in quarter-to-quarter volatility in our operating results, which could affect the amount of dividends that we pay to our stockholders from quarter to quarter. The dry bulk shipping market is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. While this seasonality will not affect our operating results as long as our fleet is employed on time charters, if our vessels are employed in the spot market in the future, it could materially affect our operating results and cash available for distribution to our stockholders.

Rising fuel prices may adversely affect our profits. The cost of fuel is a significant factor in negotiating charter rates. As a result, an increase in the price of fuel beyond our expectations may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geo-political developments, supply and demand for oil, actions by members of the Organization of the Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns and regulations.

We are subject to international safety regulations and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports. The operation of our vessels is affected by the requirements set forth in the United Nation’s International Maritime Organization’s International Management Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive ‘‘Safety Management System’’ that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. Each of the vessels that has been delivered to us is ISM Code-certified and we expect that each other vessel that we have agreed to purchase will be ISM Code-certified when delivered to us.

In addition, vessel classification societies also impose significant safety and other requirements on our vessels. In complying with current and future environmental requirements, vessel-owners and operators may also incur significant additional costs in meeting new maintenance and inspection requirements, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become stricter in the future and require us to incur significant capital expenditures on our vessels to keep them in compliance.

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Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and disrupt our business. International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points. Inspection procedures can result in the seizure of the cargo and contents of our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us.

Our business has inherent operational risks, which may not be adequately covered by insurance. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, environmental accidents, war, terrorism, piracy and other circumstances or events. In addition, transporting cargoes across a wide variety of international jurisdictions creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts, the potential for changes in tax rates or policies, and the potential for government expropriation of our vessels. Any of these events may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.

In the event of a casualty to a vessel or other catastrophic event, we will rely on our insurance to pay the insured value of the vessel or the damages incurred. Through our management agreements with our technical managers, we procure insurance for the vessels in our fleet employed under time charters against those risks that we believe the shipping industry commonly insures against. These insurances include marine hull and machinery insurance, protection and indemnity insurance, which include pollution risks and crew insurances, and war risk insurance. Currently, the amount of coverage for liability for pollution, spillage and leakage available to us on commercially reasonable terms through protection and indemnity associations and providers of excess coverage is $1 billion per vessel per occurrence.

We cannot assure you that we will be adequately insured against all risks or that we will be able to obtain adequate insurance coverage at reasonable rates for our vessels in the future. For example, in the past more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. Additionally, our insurers may refuse to pay particular claims. Any significant loss or liability for which we are not insured could have a material adverse effect on our financial condition.

Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow. Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a claimant may seek to obtain security for its claim by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums of money to have the arrest or attachment lifted. In addition, in some jurisdictions, such as South Africa, under the ‘‘associated ship’’ theory of liability, a claimant may arrest both the vessel which is subject to the claimant’s maritime lien and any ‘‘associated’’ vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert ‘‘associated ship’’ liability against one vessel in our fleet for claims relating to another of our vessels.

Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings. A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes her charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of our vessels may negatively impact our revenues and reduce the amount of cash we have available for distribution as dividends to our stockholders.

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Company Specific Risk Factors

We cannot assure you that our board of directors will declare dividends. Our policy is to declare quarterly dividends to stockholders in March, May, August and November. The declaration and payment of dividends, if any, will always be subject to the discretion of our board of directors, restrictions contained in our credit facility and the requirements of Marshall Islands law. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, the terms of our outstanding indebtedness and the ability of our subsidiaries to distribute funds to us. Although our fleet is currently committed to time charters, the international dry bulk shipping industry is highly volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is available for the payment of dividends.

We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described in this Annual Report. Our growth strategy contemplates that we will finance our acquisitions of additional vessels through debt financings or the net proceeds of future equity issuances on terms acceptable to us. If financing is not available to us on acceptable terms, our board of directors may determine to finance or refinance acquisitions with cash from operations, which would reduce or even eliminate the amount of cash available for the payment of dividends.

Under the terms of our credit facility, we will not be permitted to pay dividends if there is a default or a breach of a loan covenant. In addition, we are permitted to pay dividends only in amounts up to our cumulative cash flows which is EBITDA (as defined in our credit agreement) less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for drydockings. Please see the section of this Annual Report entitled ‘‘Credit Facility’’ for more information relating to restrictions on our ability to pay dividends under the terms of our credit facility.

The Republic of Marshall Islands law generally prohibits the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. We may not have sufficient surplus in the future to pay dividends and our subsidiaries may not have sufficient funds or surplus to make distributions to us. We can give no assurance that dividends will be paid at all.

We may have difficulty managing our planned growth properly. The acquisition and management of the 18 vessels in our operating fleet have imposed, and additional dry bulk vessels that we may acquire in the future, will impose, significant responsibilities on our management and staff. The addition of vessels to our fleet may require us to increase the number of our personnel. We will also have to manage our customer base so that we can provide continued employment for our vessels upon the expiration of our existing time charters.

We intend to continue to grow our business. Our future growth will primarily depend on:

• locating and acquiring suitable vessels;

• identifying and consummating acquisitions;

• enhancing our customer base;

• managing our expansion; and

• obtaining required financing on acceptable terms.

Growing any business by acquisition presents numerous risks, such as undisclosed liabilities and obligations, the possibility that indemnification agreements will be unenforceable or insufficient to cover potential losses and difficulties associated with imposing common standards, controls, procedures and policies, obtaining additional qualified personnel, managing relationships with

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customers and integrating newly acquired assets and operations into existing infrastructure. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth.

We cannot assure you that we will be able to borrow amounts under our credit facility and restrictive covenants in our credit facility may impose financial and other restrictions on us

We entered into a senior secured revolving credit facility in July 2005. We used borrowings under the revolving credit facility to refinance a portion of our outstanding indebtedness at the time of our initial public offering in June 2005 and to fund vessel acquisitions. Since then we have amended and enhanced our credit facility periodically in 2006 and 2007 to accommodate our newbuilding program with the most recent amendment in October 2007 enabling us to complete the construction of 35 vessels. Our ability to borrow future amounts under our credit facility will be subject to the satisfaction of certain customary conditions precedent and compliance with terms and conditions included in the loan documents. In connection with vessel acquisitions, amounts borrowed may not exceed 75% of the value of the vessels securing our obligations under the credit facility. Our ability to borrow such amounts, in each case, will be subject to our lender’s approval of the vessel acquisition. Our lender’s approval will be based on the lender’s satisfaction of our ability to raise additional capital through equity issuances in amounts acceptable to our lender and the proposed employment of the vessel to be acquired. To the extent that we are not able to satisfy these requirements, including as a result of a decline in the value of our vessels, we may not be able to draw down the credit facility in connection with a vessel acquisition without obtaining a waiver or consent from the lender.

The credit facility also imposes operating and financial restrictions on us. These restrictions may limit our ability to, among other things:

• pay dividends in amounts exceeding our EBITDA, less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for drydockings;

• change our Chief Executive Officer without the approval of our lender;

• incur additional indebtedness;

• change the flag, class or management of our vessels;

• create liens on our assets;

• sell our vessels;

• merge or consolidate with, or transfer all or substantially all our assets to, another person;

• enter into a new line of business; and

• enter into a time charter or consecutive voyage charters that has a term that exceeds, or which by virtue of any optional extensions may exceed, thirteen months.

In addition, we may not pay dividends if there is a default or a breach of a loan covenant under the credit facility or if the payment of the dividends would result in a default or breach of a loan covenant. Our indebtedness may also be accelerated if we experience a change of control. Therefore, we may need to seek permission from our lender in order to engage in some corporate actions. Our lender’s interests may be different from ours and we cannot guarantee you that we will be able to obtain our lender’s permission when needed. This may limit our ability to pay dividends to you, finance our future operations, make acquisitions or pursue business opportunities.

We cannot assure you that we will be able to refinance indebtedness incurred under our credit facility. Our business strategy contemplates that we repay all or a portion of our acquisition related debt from time to time with the net proceeds of equity issuances. We cannot assure you that we will be able to refinance our indebtedness through equity offerings or otherwise on terms that are acceptable to us or at all. If we are not able to refinance our indebtedness, we will have to dedicate a portion of our cash flow from operations to pay the principal and interest of this indebtedness. We cannot assure you that we will be able to generate cash flow in amounts that are sufficient for these

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purposes. If we are not able to satisfy these obligations, we may have to undertake alternative financing plans or sell our assets. The actual or perceived credit quality of our charterers, any defaults by them, and the market value of our fleet, among other things, may materially affect our ability to obtain alternative financing. In addition, debt service payments under our credit facility or alternative financing may limit funds otherwise available for working capital, capital expenditures, payment of dividends and other purposes. If we are unable to meet our debt obligations, or if we otherwise default under our credit facility or an alternative financing arrangement, our lender could declare the debt, together with accrued interest and fees, to be immediately due and payable and foreclose on our fleet, which could result in the acceleration of other indebtedness that we may have at such time and the commencement of similar foreclosure proceedings by other lenders.

Purchasing and operating secondhand vessels may result in increased operating costs and reduced fleet utilization. The 18 Handymax dry bulk vessels in our operating fleet at December 31, 2007, are all secondhand vessels. We have entered into contracts for the construction of 35 newbuilding vessels. We also may enter into additional newbuilding contracts and purchase additional secondhand vessels in the future. While we have the right to inspect previously owned vessels prior to purchase, such an inspection does not provide us with the same knowledge about their condition that we would have if these vessels had been built for and operated exclusively by us. A secondhand vessel may have conditions or defects that we were not aware of when we bought the vessel and which may require us to incur costly repairs to the vessel. These repairs may require us to put a vessel into drydock, which would reduce our fleet utilization. Furthermore, we usually do not receive the benefit of warranties on secondhand vessels.

We depend upon a few significant customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance. We derive a significant part of our revenues from a small number of charterers. The charterers’ payments to us under their charters are our sole source of revenue. Some of our charterers are privately owned companies for which limited credit and financial information was available to us in making our assessment of counterparty risk when we entered into our charter. In addition, the ability of each of our charterers to perform its obligations under a charter will depend on a number of factors that are beyond our control. These factors may include general economic conditions, the condition of the dry bulk shipping industry, the charter rates received for specific types of vessels and various operating expenses. If one or more of these charterers terminates its charter or chooses not to re-charter our vessel or is unable to perform under its charter with us and we are not able to find a replacement charter, we could suffer a loss of revenues that could adversely affect our financial condition, results of operations and cash available for distribution as dividends to our stockholders. In addition, we may be required to change the flagging or registration of the related vessel and may incur additional costs, including maintenance and crew costs if a charterer were to default on its obligations. Our stockholders do not have any recourse against our charterers.

In the highly competitive international shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources. Our vessels are employed in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom have substantially greater resources than we do. Competition for the transportation of dry bulk cargo by sea is intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter the dry bulk shipping industry and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer.

We may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively impact the effectiveness of our management and results of operations. Our success depends to a significant extent upon the abilities and efforts of our management team. We have entered into an employment contract with our Chairman and Chief Executive Officer, Sophocles Zoullas. Our success will depend upon our ability to retain key members of our management team and to hire new members as may be necessary. The loss of any of these

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individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining replacement personnel could have a similar effect. We do not maintain ‘‘key man’’ life insurance on any of our officers.

Risks associated with operating ocean going vessels could affect our business and reputation, which could adversely affect our revenues and stock price. The operation of ocean going vessels carries inherent risks. These risks include the possibility of:

• marine disaster;

• environmental accidents;

• cargo and property losses or damage;

• business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, labor strikes or adverse weather conditions; and

• piracy.

Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an environmental disaster may harm our reputation as a safe and reliable vessel owner and operator.

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings. In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. Although the weighted average age of the 18 Handymax dry bulk vessels in our operating fleet as of December 31, 2007 is approximately 6 years, one of the vessels in our fleet which we sold in 2007 was 23 years old. As our fleet ages, we will incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of vessels may also require expenditures for alterations or the addition of new equipment, to our vessels and may restrict the type of activities in which our vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.

We may have to pay tax on United States source income, which would reduce our earnings. Under the United States Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as United States source shipping income and such income is subject to a 4% United States federal income tax without allowance for any deductions, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury regulations promulgated thereunder.

We believe that we and each of our subsidiaries qualify for this statutory tax exemption and we will take this position for United States federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption after the offering and thereby cause us to become subject to United States federal income tax on our United States source shipping income. For example, there is a risk that we could no longer qualify for exemption under Section 883 of the Code for a particular taxable year if other shareholders with a five percent or greater interest in our stock were, in combination with [TBD], to own 50% or more of our outstanding shares of our stock on more than half the days during the taxable year. Due to the factual nature of the issues involved, we can give no assurances on our tax-exempt status or that of any of our subsidiaries.

In addition, changes in the Code, the Treasury regulations or the interpretation thereof by the Internal Revenue Service or the courts could adversely affect our ability to take advantage of the exemption under Section 883.

If we are not entitled to this exemption under Section 883 for any taxable year, we would be subject for such taxable year to a 4% United States federal income tax on our United States source

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shipping income. The imposition of this taxation could have a negative effect on our business and would result in decreased earnings available for distribution to our stockholders.

Based on the current operation of our vessels, if we were subject to this tax, our United States federal income tax liability would be approximately $800,000 per year. Because the operations of our vessels are under the control of third party charterers, we can give no assurance that our United States federal income tax liability would be substantially higher. However, since no more that 50% of our shipping income would be treated as derived from U.S. sources, our maximum tax liability under the 4% tax regime would never exceed 2% of our shipping income.

United States tax authorities could treat us as a ‘‘passive foreign investment company,’’ which could have adverse United States federal income tax consequences to United States holders. A foreign corporation will be treated as a ‘‘passive foreign investment company,’’ or PFIC, for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of ‘‘passive income’’ or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of ‘‘passive income.’’ For purposes of these tests, ‘‘passive income’’ includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute ‘‘passive income.’’ United States stockholders of a PFIC are subject to a disadvantageous United States federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

Based on our current method of operation, we do not believe that we have been, are or will be a PFIC with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does not constitute ‘‘passive income,’’ and the assets that we own and operate in connection with the production of that income do not constitute passive assets.

There is, however, no direct legal authority under the PFIC rules addressing our method of operation. Accordingly, no assurance can be given that the United States Internal Revenue Service, or IRS, or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations.

If the IRS were to find that we are or have been a PFIC for any taxable year, our United States stockholders would face adverse United States tax consequences. Under the PFIC rules, unless those stockholders made an election available under the Code (which election could itself have adverse consequences for such stockholders, as discussed below under ‘‘United States Federal Income Taxation of United States Holders’’), such stockholders would be liable to pay United States federal income tax upon excess distributions and upon any gain from the disposition of our common stock at the then prevailing income tax rates applicable to ordinary income plus interest as if the excess distribution or gain had been recognized ratably over the stockholder’s holding period of our common stock. Please see the section of this Form 10-K entitled ‘‘Tax Considerations – United States Federal Income Taxation of United States Holders’’ for a more comprehensive discussion of the United States federal income tax consequences to United States stockholders if we are treated as a PFIC.

Our vessels may suffer damage and we may face unexpected drydocking costs, which could adversely affect our cash flow and financial condition. If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. The loss of earnings while our vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings and reduce the amount of cash that we have available for dividends. We may not have insurance that is sufficient to cover these costs or losses and may have to pay drydocking costs not covered by our insurance.

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We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments. We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to satisfy our financial obligations and make dividend payments depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to declare or pay dividends. We do not intend to obtain funds from other sources to pay dividends.

As we expand our business, we may need to improve our operating and financial systems and will need to recruit suitable employees and crew for our vessels. Our current operating and financial systems may not be adequate as we implement our plan to expand the size of our fleet and our attempts to improve those systems may be ineffective. In addition, as we expand our fleet, we will need to recruit suitable additional seafarers and shore side administrative and management personnel. We cannot guarantee that we will be able to hire suitable employees as we expand our fleet. If we or our crewing agent encounters business or financial difficulties, we may not be able to adequately staff our vessels. If we are unable to grow our financial and operating systems or to recruit suitable employees as we expand our fleet, our financial performance may be adversely affected and, among other things, the amount of cash available for distribution as dividends to our stockholders may be reduced.

Risks Relating to Our Common Stock

We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law. Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the laws of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in the United States. The rights of stockholders of companies incorporated in the Marshall Islands may differ from the rights of stockholders of companies incorporated in the United States. While the BCA provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we can not predict whether Marshall Islands courts would reach the same conclusions as United States courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling stockholders than would stockholders of a corporation incorporated in a United States jurisdiction which has developed a relatively more substantial body of case law.

Future sales of our common stock could cause the market price of our common stock to decline. Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales could occur, may depress the market price for our common stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future. We intend to issue additional shares of our common stock in the future. Our amended and restated articles of incorporation authorize us to issue 100 million shares of common stock of which 46,727,153 shares are outstanding as of December 31, 2007.

Anti-takeover provisions in our organizational documents, as well as our shareholder rights plan, could have the effect of discouraging, delaying or preventing a merger or acquisition, or could make it difficult for our stockholders to replace or remove our current board of directors, which could adversely affect the market price of our common stock. Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our stockholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions, as well as our shareholder rights plan, may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. These provisions will include:

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• authorizing our board of directors to issue ‘‘blank check’’ preferred stock without stockholder approval;

• providing for a classified board of directors with staggered, three year terms;

• authorizing vacancies on our board of directors to be filled only by a vote of the majority of directors then in office and specifically denying our stockholders the right to fill vacancies on the board;

• establishing certain advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings;

• prohibiting cumulative voting in the election of directors;

• limiting the persons who may call special meetings of stockholders;

• authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote for the directors;

• prohibiting stockholder action by written consent; and

• establishing supermajority voting provisions with respect to amendments to certain provisions of our amended and restated articles of incorporation and bylaws.

In addition to the provision described above, on November 9, 2007, our board of directors adopted a shareholder rights plan and declared a dividend distribution of one Right for each outstanding share of our common stock to shareholders of record on the close of business on November 23, 2007. Each Right is nominally exercisable, upon the occurrence of certain events, for one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $.01 per share, at a purchase price of $125.00 per unit, subject to adjustment. The Rights may further discourage a third party from making an unsolicited proposal to acquire us, as exercise of the Rights would cause substantial dilution to such third party attempting to acquire us.

These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

We do not own any real property. We lease office space at 477 Madison Avenue, New York, New York 10022.

ITEM 3. LEGAL PROCEEDINGS

We have not been involved in any legal proceedings which may have, or have had a significant effect on our business, financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

The trading market for shares of our common stock is the Nasdaq Stock Market, on which our shares are quoted under the symbol ‘‘EGLE.’’ As of February 27, 2008 the number of stockholders of record of the Company’s common stock was approximately 50,000. The following table sets forth the high and low closing prices for shares of our common stock in 2007 and 2006, as reported by the Nasdaq Stock Market:

For the period: High Low January 1, 2007 to March 31, 2007 $ 21.64

$ 17.36

April 1, 2007 to June 30, 2007 $ 22.98

$ 19.65

July 1, 2007 to September 30, 2007 $ 27.01

$ 22.92

October 1, 2007 to December 31, 2007 $ 35.29

$ 24.73

January 1, 2006 to March 31, 2006 $ 16.07

$ 11.90

April 1, 2006 to June 30, 2006 $ 14.25

$ 12.65

July 1, 2006 to September 30, 2006 $ 16.08

$ 13.96

October 1, 2006 to December 31, 2006 $ 17.43

$ 15.80

Recent Sales of Unregistered Securities

On June 28, 2006, we completed an offering of 2,750,000 shares of our common stock to certain institutional investors, raising gross proceeds of $33,000,000 before deduction of fees and expenses of $1,770,811. The shares were sold pursuant to an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.

Payment of Dividends to Stockholders

In 2006, the Company declared four quarterly dividends in the aggregate amount of $2.08 per share of its common stock in January, April, July and October. Aggregate payments were $71,729,500 for dividends declared in 2006.

In 2007, the Company declared four quarterly dividends in the aggregate amount of $1.98 per share of its common stock in February, April, July and November. Aggregate payments were $82,134,982 for dividends declared in 2007.

In February 2008, the Company declared a cash dividend for the fourth quarter of 2007 of $0.50 per share to be paid on March 18, 2008 to shareholders of record as of March 13, 2008. The aggregate amount of this cash dividend is $23,378,576.

The Company currently intends to pay quarterly dividends to stockholders in March, May, August and November; however, any determination to pay dividends in the future will be at the discretion of the Board of Directors and will depend upon the Company’s results of operations, financial condition, covenants and other factors deemed relevant by the Board of Directors. Payment of dividends is limited by Marshall Islands law and the terms of certain credit agreements to which the Company and its subsidiaries are party. (See Notes to the Consolidated Financial Statements and page 54 of Management’s Discussion & Analysis.)

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ITEM 6. SELECTED FINANCIAL DATA

We were incorporated on March 23, 2005 and our predecessor, Eagle Holdings LLC, was formed on January 26, 2005. The following selected consolidated financial data are derived from the audited consolidated financial statements of the Company included elsewhere in this report. The data presented herein should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein. In accordance with standard shipping industry practice, we did not obtain from the sellers historical operating data for the vessels that we acquired, as that data was not material to our decision to purchase the vessels. Accordingly, we have not included any historical financial data relating to the results of operations of our vessels from the period before our acquisition of them. Please see the section of this annual report entitled ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Lack of Historical Operating Data for Vessels Before their Acquisition.’’

(Dollar amounts in thousands except Per Share amounts and Fleet Data) 2007 2006 2005 Income Statement Data

Revenues, net of commissions $ 124,815

$ 104,648

$ 56,066

Vessel Expenses

27,144

21,562

11,053

Depreciation and Amortization

26,435

21,813

10,412

General and Administrative Expenses

7,520

5,223

3,491

Management and Other Fees to Affiliates

—

6,175

Non-cash Compensation Expense

4,257

13,070

11,735

Gain on Sale of Vessel

(873 )

Total Operating Expenses

64,483

61,668

42,866

Net Interest Expense

8,088

9,179

6,547

Net Income $ 52,244

$ 33,801

$ 6,653

Share and Per Share Data

Basic and Diluted Income per share $ 1.24

$ 0.98

$ 0.30

Weighted Average Shares Outstanding – Diluted

42,195,561

34,543,862

21,968,824

Cash Dividends Declared per share $ 1.98

$ 2.08

$ 0.54

Consolidated Cash Flow Data

Net cash from operating activities $ 82,889

$ 70,535

$ 26,616

Net cash used in investing activities

(446,251 )

(130,759 )

(427,966 ) Net cash from financing activities

493,989

57,973

425,877

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December 31,
2007 December 31,
2006 December 31,
2005 Consolidated Balance Sheet Data

Current Assets $ 157,454

$ 27,652

$ 33,829

Total Assets

1,136,008

568,791

462,344

Total Liabilities

621,037

247,215

146,551

Long-term Debt

597,243

239,975

140,000

Stockholders’ Equity

514,971

321,576

315,793

Other Data

EBITDA(a) $ 99,418

$ 82,695

$ 43,075

Capital Expenditures :

Vessels $ 458,262

$ 130,759

$ 427,966

Payments for Drydockings $ 3,625

$ 2,325

$ 422

Ratio of Total Debt to Total Capitalization(b)

53.7 %

42.7 %

30.7 % Fleet Data

Number of Vessels in operating fleet

Average Age of Fleet (in dwt weighted years)

Fleet Ownership Days

6,166

5,288

2,531

Fleet Available Days

6,073

5,224

2,507

Fleet Operating Days

6,039

5,203

2,500

Fleet Utilization Days

99.4 %

99.6 %

99.7 %

(a) Our amended revolving credit facility permits us to pay dividends in amounts up to cumulative free cash flows which are our earnings before extraordinary or exceptional items, interest, taxes, depreciation and amortization (Credit Agreement EBITDA), less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for dry-docking. Therefore, we believe that this non-GAAP measure is important for our investors as it reflects our ability to pay dividends. The Company’s computation of EBITDA may not be comparable to similar titled measures of other companies. The following table is a reconciliation of net income, as reflected in the consolidated statements of operations, to the Credit Agreement EBITDA:

2007 2006 2005 Net Income $ 52,243,981

$ 33,801,540

$ 6,653,400

Interest Expense

12,741,106

10,548,616

7,208,641

Depreciation and Amortization

26,435,646

21,812,486

10,412,227

Amortization of Prepaid and Deferred Revenue

3,740,000

3,462,000

890,500

EBITDA

95,160,733

69,624,642

25,164,768

Adjustments for Exceptional Items:

Management and Other Fees to Affiliates(1)

—

6,175,046

Non-cash Compensation Expense(2)

4,256,777

13,070,473

11,734,812

Credit Agreement EBITDA $ 99,417,510

$ 82,695,115

$ 43,074,626

(1) One time charge (see Notes 7 and 10 to the financial statements) (2) Stock-based compensation related to stock options, restricted stock units and management’s participation in profits interests in Eagle Ventures LLC (see Note 10 to the financial statements) (b) Ratio of Total Debt to Total Capitalization was calculated as debt divided by capitalization (debt plus stockholders’ equity).

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following is a discussion of the Company’s financial condition and results of operation for the years ended December 31, 2007 and 2006, and the period from January 26, 2005 (inception) to December 31, 2005 (‘‘the year ended December 31, 2005’’). This section should be read in conjunction with the consolidated financial statements included elsewhere in this report and the notes to those financial statements.

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provided for under these sections. These statements may include words such as ‘‘believe,’’ ‘‘estimate,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘anticipate,’’ and similar expressions in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward looking statements reflect management’s current expectations and observations with respect to future events and financial performance. Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. The principal factors that affect our financial position, results of operations and cash flows include, charter market rates, which have recently increased to historic highs, and periods of charter hire, vessel operating expenses and voyage costs, which are incurred primarily in U.S. dollars, depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels’ estimated useful lives, and financing costs related to our indebtedness. Our actual results may differ materially from those anticipated in these forward looking statements as a result of certain factors which could include the following: (i) changes in demand in the dry bulk market, including, without limitation, changes in production of, or demand for, commodities and bulk cargoes, generally or in particular regions; (ii) greater than anticipated levels of dry bulk vessel new building orders or lower than anticipated rates of dry bulk vessel scrapping; (iii) changes in rules and regulations applicable to the dry bulk industry, including, without limitation, legislation adopted by international bodies or organizations such as the International Maritime Organization and the European Union or by individual countries; (iv) actions taken by regulatory authorities; (v) changes in trading patterns significantly impacting overall dry bulk tonnage requirements; (vi) changes in the typical seasonal variations in dry bulk charter rates; (vii) changes in the cost of other modes of bulk commodity transportation; (viii) changes in general domestic and international political conditions; (ix) changes in the condition of the Company’s vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated dry docking costs); (x) and other factors listed from time to time in our filings with the Securities and Exchange Commission. This discussion also includes statistical data regarding world dry bulk fleet and orderbook and fleet age. We generated some of these data internally, and some were obtained from independent industry publications and reports that we believe to be reliable sources. We have not independently verified these data nor sought the consent of any organizations to refer to their reports in this annual report. We disclaim any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Overview

We are Eagle Bulk Shipping Inc., a Republic of Marshall Islands corporation headquartered in New York City. We own one of the largest fleets of Supramax dry bulk vessels in the world. Supramax dry bulk vessels range in size from 50,000 to 60,000 dwt. We transport a broad range of major and minor bulk cargoes, including iron ore, coal, grain, cement and fertilizer, along worldwide shipping routes. As of December 31, 2007, we owned and operated a modern fleet of 18 Handymax dry bulk vessels, 16 of which are of the Supramax class. In addition to our operating fleet of 18 vessels, we have contracted for the construction of 35 newbuilding vessels in Japan and China, deliveries of which

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are scheduled to commence in mid-2008. Upon delivery of all newbuilding vessels by early 2012, our total fleet will consist of 53 vessels with a combined carrying capacity of 2.9 million dwt.

We are focused on maintaining a high quality fleet that is concentrated primarily in one vessel type – Handymax dry bulk carriers and its sub-category of Supramax vessels which are Handymax vessels ranging in size from 50,000 to 60,000 dwt. Fifteen of the 18 vessels in our operating fleet are classified as Supramax dry bulk vessels. These vessels have the cargo loading and unloading flexibility of on-board cranes while offering cargo carrying capacities approaching that of Panamax dry bulk vessels, which range in size from 60,000 to 100,000 dwt and must rely on port facilities to load and offload their cargoes. We believe that the cargo handling flexibility and cargo carrying capacity of the Supramax class vessels make them attractive to potential charterers. The 18 vessels in our operating fleet have a combined carrying capacity of 915,502 dwt and an average age of approximately 6 years, as compared to an average age for the world Handymax dry bulk fleet of over 15 years.

Our financial performance is based on the following key elements of our business strategy:

(1) our strategy is to concentrate in one vessel category: Handymax dry bulk vessels, especially its Supramax class of vessels, which offer size, operational and geographical advantages (over Panamax and Capesize vessels).

(2) our strategy is to charter our vessels primarily pursuant to one- to three-year time charters to allow us to take advantage of the stable cash flow and high utilization rates that are associated with medium to long-term time charters. Reliance on the spot market contributes to fluctuations in revenue, cash flow, and net income. On the other hand, time charters provide a shipping company with a predictable level of revenues. We have entered into time charters for all of our vessels which range in length from one to three years and provide for fixed semi-monthly payments in advance. We have also entered into contracts with fixed minimum rates and profit sharing arrangements, enabling us to benefit from an increasing rate environment while still minimizing downside risk. This strategy is effective in strong and weak dry bulk markets, giving us security and predictability of cashflows relative to the volatility inherent in shipping markets.

(3) our strategy is to maintain high quality vessels and improve standards of operation through improved environmental procedures, crew training and maintenance and repair procedures.

(4) our strategy is to maintain a balance between purchasing vessels as market conditions and opportunities arise and maintaining prudent financial ratios (e.g. leverage ratio).

The following are several significant events that occurred during 2007:

• In January 2007, we entered into two vessel newbuilding contracts with IHI Marine United Inc., a Japanese shipyard, for the construction of two ‘Future-56’ class Supramax vessels at a contract price of equivalent $33,500,000 each. These 56,000 deadweight ton vessels are expected to be delivered in November 2008 and February 2009.

• In February 2007 we sold our oldest vessel, SHIKRA, and we expanded our fleet from 16 vessels to 18 vessels by acquiring the SHRIKE, SKUA and KITTIWAKE.

• In March 2007, we completed a public offering of 5,813,819 shares of our common stock.

• In April 2007, we entered into a vessel newbuilding contracts with IHI Marine United Inc., a Japanese shipyard, for the construction of a ‘Future-56’ class Supramax vessel at a contract price of equivalent $33,500,000. The 56,000 deadweight ton vessel is expected to be delivered in April 2009.

• In August 2007, we completed the acquisition of the rights to 26 newbuilding vessels and options for the construction of an additional 9 vessels. These vessels will be constructed in China and delivered into the Company’s fleet between 2008 and 2012 for a total cost of approximately $1,100,000,000 and associated capitalized financing and technical supervision costs. On December 27, 2007, the Company exercised four of the nine options. The total contract price for the four additional vessels is $169,200,000. The remaining five options expire on March 31, 2008.

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• On September 21, 2007, we completed a public offering of 5,000,000 shares of our common stock.

• In October 2007, we amended and increased our revolving credit facility to $1,600,000,000.

The following are several significant events that occurred during 2006:

• We expanded our fleet from 13 vessels to 16 vessels by acquiring the KESTREL I, TERN and JAEGER in June and July 2006.

• On June 28, 2006, we completed an offering of 2,750,000 shares of our common stock at $12.00 per share to certain institutional investors.

• In July 2006, we increased our credit facility from $330,000,000 to $450,000,000.

• In November 2006, we entered into two vessel newbuilding contracts with IHI Marine United Inc., a Japanese shipyard, for the construction of two ‘Future-56’ class Supramax vessels at a contract price equivalent to $33,500,000 each. These 56,000 deadweight ton vessels are expected to be delivered in January and February of 2010.

• In November 2006, we increased our credit facility to $500,000,000.

The following are several significant events that occurred during 2005:

• We incorporated on March 23, 2005 as a Marshall Islands corporation headquartered in New York City.

• In April 2005, we acquired the vessels CARDINAL, CONDOR, FALCON, HARRIER, HAWK I, and SHIKRA.

• In May 2005, we acquired the vessel KITE.

• In June 2005, we acquired the vessel GRIFFON and PEREGRINE.

• On June 23, 2005, we completed our initial public offering by selling 14,400,000 shares of common stock at $14.00 per share.

• In July 2005, we acquired the vessel SPARROW.

• In August 2005, we acquired the vessel OSPREY I.

• On October 28, 2005, we sold 6,000,000 shares of our common stock in a follow-on public offering at a price of $14.50 per share.

• In October 2005, we acquired the vessel MERLIN.

• In December 2005, we acquired the vessel HERON.

We have employed all of our vessels on time charters for periods ranging from one to three years. The following table represents certain information about the Company’s vessel acquisition and revenue earning charters:

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The following table represents certain information about the Company’s revenue earning charters on its operating fleet as of December 31, 2007:

Vessel Year Built Dwt Delivered to
Charterer Time Charter Expiration(1) Daily Time
Charter
Hire Rate Cardinal 2004 55,408 June 21, 2007 May 2008 to August 2008 $28,000 Condor(2) 2001 50,296 March 19, 2007 May 2009 to August 2009 $20,500 Falcon(3) 2001 50,296 April 22, 2005 February 2008 to June 2008 $20,950 Griffon 1995 46,635 March 18, 2007 March 2009 to June 2009 $20,075 Harrier(4) 2001 50,296 June 21, 2007 June 2009 to September 2009 $24,000 Hawk I 2001 50,296 April 1, 2007 April 2009 to June 2009 $22,000 Heron(5) 2001 52,827 December 11, 2005 December 2007 to February 2008 $24,000 Jaeger(6) 2004 52,248 July 12, 2007 July 2008 to September 2008 $27,500 Kestrel I (7) 2004 50,326 July 1, 2006 December 2007 to April 2008 $18,750 Kite 1997 47,195 August 11, 2007 September 2009 to January 2010 $21,000 Merlin(8) 2001 50,296 December 19, 2007 December 2010 to March 2011 $25,000 Osprey I(9) 2002 50,206 September 1, 2005 July 2008 to November 2008 $21,000 Peregrine 2001 50,913 December 16, 2006 December 2008 to March 2009 $20,500 Sparrow(10) 2000 48,225 January 27, 2007 December 2007 to March 2008 $24,000 Tern(11) 2003 50,200 July 3, 2006 December 2007 to April 2008 $19,000 Shrike(12) 2003 53,343 April 24, 2007 April 2009 to August 2009 $24,600 Skua(13) 2003 53,350 June 20, 2007 May 2009 to August 2009 $24,200 Kittiwake(14) 2002 53,146 June 27, 2007 May 2008 to August 2008 $30,400

(1) The date range provided represents the earliest and latest date on which the charterer may redeliver the vessel to the Company upon the termination of the charter. (2) The charterer of the CONDOR has exercised its option to extend the charter period by 11 to 13 months at a time charter rate of $22,000 per day. (3) Upon conclusion of the current charter, the FALCON commences a new time charter with a rate of $39,500 per day for 21 to 23 months. The charterer has an option to extend the charter period by 11 to 13 months at a daily time charter rate of $41,000. (4) The daily rate for the HARRIER is $27,000 for the first year and $21,000 for the second year. Revenue recognition is based on an average daily rate of $24,000. (5) Upon conclusion of the current charter, the HERON commences a new time charter with a rate of $26,375 per day for 36 to 39 months. The charterer has an option for a further 11 to 13 months at a time charter rate of $27,375 per day. The charterer has a second option for a further 11 to 13 months at a time charter rate of $28,375 per day. (6) The charter rate for the JAEGER may reset at the beginning of each month based on the average time charter rate for the Baltic Supramax Index, but in no case less than $22,500 per day. (7) The charterer of the KESTREL I has exercised its option to extend the charter period by 11 to 13 months at a daily time charter rate of $20,000 per day. (8) Upon conclusion of the charter in December 2007, the MERLIN commenced a new 36 to 39 month time charter. The daily rate for the MERLIN is $27,000 for the first year, $25,000 for the second year and $23,000 for the third year. Revenue recognition is based on an average daily rate of $25,000.

Table of Contents (9) The charterer of the OSPREY I has exercised its option to extend the charter period by up to 11 to 13 months at a time charter rate of $25,000 per day. The charterer has an additional option to extend for a further 11 to 13 months at a time charter rate of $25,000 per day. (10) The SPARROW is on a time charter at a base rate of $24,000 per day for 11 to 13 months with a profit share of 30% of up to the first $3,000 per day over the base rate. Upon conclusion of the charter, the SPARROW commences a new 24 to 26 month time charter at a rate of $34,500 per day. (11) The charterer of the TERN has exercised its option to extend the charter period by 11 to 13 months at a time charter rate of $20,500 per day. (12) The Company took delivery of the SHRIKE on April 24, 2007 and the vessel was immediately delivered to the charterer at a time charter rate of $24,600 per day for 24 to 27 months. The charterer has an option to extend the charter period by 12 to 14 months at a daily time charter rate of $25,600. (13) The Company took delivery of the SKUA on June 20, 2007 and the vessel was immediately delivered to the charterer at a time charter rate of $24,200 per day for 23 to 25 months. The charterer has an option to extend the charter period by 11 to 13 months at a daily time charter rate of $25,200. (14) The Company took delivery of the KITTIWAKE on June 27, 2007 and the vessel was immediately delivered to the charterer at a time charter rate of $30,400 per day for 11 to 13 months. The charter rate may reset at the beginning of each month based on the average time charter rate for the Baltic Supramax Index, but in no case less than $24,400 per day.

As of December 31, 2007, the Company has contracted for 35 vessels to be constructed. The following table represents certain information about the Company’s newbuilding vessels and their employment upon delivery:

Vessel Dwt Year Built –
Expected
Delivery(1) Time Charter
Employment Expiration(2) Daily Time
Charter Hire
Rate(3) Profit Share Crowned Eagle

56,000

Nov 2008 Charter Free

—

Crested Eagle

56,000

Feb 2009 Charter Free

—

Stellar Eagle

56,000

Apr 2009 Charter Free

—

Golden Eagle

56,000

Jan 2010 Charter Free

—

Imperial Eagle

56,000

Feb 2010 Charter Free

—

Wren

53,100

Aug 2008 Feb 2012
Feb 2012 to Dec 2018/Apr 2019 $24,750
$18,000 —
50% over $22,000 Woodstar

53,100

Oct 2008 Jan 2014
Jan 2014 to Dec 2018/Apr 2019 $18,300
$18,000 —
50% over $22,000 Thrush

53,100

Sep 2009 Charter Free

—

Thrasher

53,100

Nov 2009 Feb 2016 $ 18,400

—

Feb 2016 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Avocet

53,100

Dec 2009 Mar 2016 $ 18,400

—

Mar 2016 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Bittern

58,000

Sep 2009 Dec 2014 $ 18,850

—

Dec 2014 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Canary

58,000

Oct 2009 Jan 2015 $ 18,850

—

Jan 2015 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Crane

58,000

Nov 2009 Feb 2015 $ 18,850

—

Feb 2015 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Egret(4)

58,000

Dec 2009 Sep 2012 to Jan 2013 $ 17,650

50% over $20,000 Gannet(4)

58,000

Jan 2010 Oct 2012 to Feb 2013 $ 17,650

50% over $20,000

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Vessel Dwt Year Built –
Expected
Delivery(1) Time Charter
Employment Expiration(2) Daily Time
Charter Hire
Rate(3) Profit Share Grebe(4)

58,000

Feb 2010 Nov 2012 to Mar 2013 $ 17,650

50% over $20,000 Ibis(4)

58,000

Mar 2010 Dec 2012 to Apr 2013 $ 17,650

50% over $20,000 Jay

58,000

Apr 2010 Sep 2015 $ 18,500

50% over $21,500

Sep 2015 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Kingfisher

58,000

May 2010 Oct 2015 $ 18,500

50% over $21,500

Oct 2015 to Dec 2018/Apr 2019 $ 18,000

50% over $22,000 Martin

58,000

Jun 2010 Dec 2016 to Dec 2017 $ 18,400

—

Nighthawk

58,000

Mar 2011 Sep 2017 to Sep 2018 $ 18,400

—

Oriole

58,000

Jul 2011 Jan 2018 to Jan 2019 $ 18,400

—

Owl

58,000

Aug 2011 Feb 2018 to Feb 2019 $ 18,400

—

Petrel(4)

58,000

Sep 2011 Jun 2014 to Oct 2014 $ 17,650

50% over $20,000 Puffin(4)

58,000

Oct 2011 Jul 2014 to Nov 2014 $ 17,650

50% over $20,000 Roadrunner(4)

58,000

Nov 2011 Aug 2014 to Dec 2014 $ 17,650

50% over $20,000 Sandpiper(4)

58,000

Dec 2011 Sep 2014 to Jan 2015 $ 17,650

50% over $20,000 Snipe

58,000

Jan 2012 Charter Free

—

Swift

58,000

Feb2012 Charter Free

—

Raptor

58,000

Mar 2012 Charter Free

—

Saker

58,000

Apr 2012 Charter Free

—

Besra(5)

58,000

Oct 2011 Charter Free

—

Cernicalo(5)

58,000

Jan 2011 Charter Free

—

Fulmar(5)

58,000

Jul 2011 Charter Free

—

Goshawk(5)

58,000

Sep 2011 Charter Free

—

(1) Vessel build and delivery dates are estimates based on guidance received from shipyard. (2) The date range represents the earliest and latest date on which the charterer may redeliver the vessel to the Company upon the termination of the charter. (3) The time charter hire rate presented are gross daily charter rates before brokerage commissions ranging from 2.25% to 6.25% to third party ship brokers. (4) The charterer has an option to extend the charter by 2 periods of 11 to 13 months each. (5) Options for construction declared on December 27, 2007.

Market Overview

The international shipping industry is highly competitive and fragmented with many market participants. There are approximately 6,400 drybulk carriers of over 10,000 dwt aggregating approximately 367 million dwt, and the ownership of these vessels is divided among approximately 1,400 mainly private independent dry bulk vessel owners with no one shipping group owning or controlling more than 5% of the world bulker fleet. We primarily compete with other owners of dry bulk vessels in the Handymax and Handysize class and Panamax class sectors that are mainly privately owned fleets.

Competition in virtually all bulk trades is intense and based primarily on supply and demand. Such demand is a function of world economic conditions and the consequent requirement for commodities, production and consumption patterns, as well as events which interrupt production, trade routes and consumption. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and operator. Increasingly, major customers are demonstrating a preference for modern vessels based on concerns about the environmental and operational risks associated with older vessels. Consequently, owners of large modern fleets have gained a competitive advantage over owners of older fleets.

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Our strategy is to concentrate in one vessel category of the dry bulk segment of the shipping industry – the Handymax sector. Handymax dry bulk vessels range in size from 35,000 to 60,000 dwt. Within the Handymax sector, the industry has migrated to a larger size of vessel class called the Supramax class of dry bulk vessels which range in size from 50,000 dwt to 60,000 dwt. vessel. These vessels have the cargo loading and unloading flexibility of on-board cranes while offering cargo carrying capacities approaching that of Panamax dry bulk vessels, which range in size from 60,000 to 100,000 dwt and must rely on port facilities to load and offload their cargoes. We believe that the cargo handling flexibility and cargo carrying capacity of the Supramax class vessels make them attractive to potential charterers. Fifteen of the 18 vessels in our operating fleet as of December 31, 2007 are classified as Supramax vessels. All of the 35 vessels under construction are also Supramax class vessels.

The supply of dry bulk vessels depends primarily on the level of the orderbook, the fleet age profile, and the operating efficiency of the existing fleet. As of January 2008, 33% of the world Handymax fleet is 20 years or older. The 18 Handymax vessels in our operating fleet have an average age of approximately 6 years as of December 31, 2007, compared to an average age for the world Handymax dry bulk fleet of over 15 years. The Handymax newbuilding orderbook currently stands at 52% of the world Handymax fleet.

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The Handymax Market

The primary driver for the dry bulk shipping industry continues to be sustained demand in East Asia led by strong demand for commodities in China and increasingly India. Demand for vessels is further boosted by port congestion and shifts in trade patterns which increase distances or ton-miles, especially the port infrastructure bottlenecks and recent changes in weather patterns in commodity resource-rich Australia. These port delays are resulting in grain, ores and coal being shipped from increasing distances as importers turn to other producers. The boom in commodity trades since 2005 saw dry bulk shipping rates reach even greater peaks during most of 2007 before abruptly slowing towards the end of the year as the credit crisis brought in uncertainty in drybulk shipping rates. An additional factor in the uncertainty was the drawn-out intense negotiations over iron-ore contract pricing between importing countries and miners.

We believe industry fundamentals remain attractive as ongoing global economic activity continues to foster demand for drybulk commodities. Robust Chinese steel demand continues to stimulate iron ore and coal trade growth, and pricing of iron ore contracts for 2008 will only bring certainty to drybulk shipping rates. Global infrastructure building programs have also boosted trade of minor bulks such as cement. Minor bulks provide a secure, protective market for Handymax vessels vastly benefiting the Supramax class with their superior cargo capacity and gear. Additionally due to longer haul routes, ton-mile demand is increasing at a faster pace than trade growth. On the supply side, however, there has been a surge in drybulk newbuildings with the peak supply period being 2009-2010 which will calibrate the drybulk demand and supply balance.

Lack of Historical Operating Data for Vessels Before their Acquisition

Consistent with shipping industry practice, other than inspection of the physical condition of the vessels and examinations of classification society records, there is no historical financial due diligence process when we acquire vessels. Accordingly, we do not obtain the historical operating data for the vessels from the sellers because that information is not material to our decision to make acquisitions, nor do we believe it would be helpful to potential investors in our common stock in assessing our business or profitability. Most vessels are sold under a standardized agreement, which, among other

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things, provides the buyer with the right to inspect the vessel and the vessel’s classification society records. The standard agreement does not give the buyer the right to inspect, or receive copies of, the historical operating data of the vessel. Prior to the delivery of a purchased vessel, the seller typically removes from the vessel all records, including past financial records and accounts related to the vessel. In addition, the technical management agreement between the seller’s technical manager and the seller is automatically terminated and the vessel’s trading certificates are revoked by its flag state following a change in ownership.

Consistent with shipping industry practice, we treat the acquisition of a vessel (whether acquired with or without charter) as the acquisition of an asset rather than a business. Although vessels are generally acquired free of charter, we have acquired (and may in the future acquire) some vessels with time charters. Where a vessel has been under a voyage charter, the vessel is delivered to the buyer free of charter, and it is rare in the shipping industry for the last charterer of the vessel in the hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases, when a vessel is under time charter and the buyer wishes to assume that charter, the vessel cannot be acquired without the charterer’s consent and the buyer’s entering into a separate direct agreement with the charterer to assume the charter. The purchase of a vessel itself does not transfer the charter, because it is a separate service agreement between the vessel owner and the charterer.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a description of all our significant accounting policies, see Note 2 to our consolidated financial statements included herein.

Revenue Recognition

We currently generate all of our revenue from time charters. Time charters are for a specific period of time at a specific rate per day or month, and are generally not as complex or as subjective as voyage charters.

Vessel Lives and Impairment

The carrying value of each of our vessels represents its original cost at the time it was delivered or purchased less depreciation. We depreciate our dry bulk vessels on a straight-line basis over their estimated useful lives, estimated to be 28 years from date of initial delivery from the shipyard to the original owner. Depreciation is based on cost less the estimated residual salvage value. Salvage, or scrap, value is based upon a vessel’s lightweight tonnage (‘‘lwt’’) multiplied by a scrap rate. We use a scrap rate of $150 per lwt, which we believe is common in the dry bulk shipping industry, to compute each vessel’s salvage value. An increase in the useful life of a dry bulk vessel or in its salvage value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a dry bulk vessel or in its salvage value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, the vessel’s useful life is adjusted to end at the date such regulations become effective. The estimated scrap value is used in the computation of depreciation expense and recoverability of the carrying value of each vessel when evaluating for impairment of vessels. Management’s estimates for salvage values may differ from actual results.

The carrying values of the Company’s vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels tend to fluctuate with changes in charter

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rates and the cost of newbuildings. Historically, both charter rates and vessel values tend to be cyclical. We evaluate the carrying amounts and periods over which long-lived assets are depreciated to determine if events have occurred which would require modification to their carrying values or useful lives. In evaluating useful lives and carrying values of long-lived assets, we review certain indicators of potential impairment, such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions. We determine undiscounted projected net operating cash flow for each vessel and compare it to the vessel carrying value. This assessment is made at the individual vessel level since separately identifiable cash flow information for each vessel is available. In developing estimates of future cash flows, the Company must make assumptions about future charter rates, ship operating expenses, and the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations. Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. In the event that an impairment were to occur, we would determine the fair value of the related asset and record a charge to operations calculated by comparing the asset’s carrying value to the estimated fair value. We estimate fair value primarily through the use of third party valuations performed on an individual vessel basis.

Deferred Drydock Cost

There are two methods that are used by the shipping industry to account for drydockings; (a) the deferral method where drydock costs are capitalized when incurred and amortized over the period to the next scheduled drydock; and (b) expensing drydocking costs in the period it is incurred. We use the deferral method of accounting for drydock expenses. Under the deferral method, drydock expenses are capitalized and amortized on a straight-line basis until the next drydock, which we estimate to be a period of two to three years. We believe the deferral method better matches costs with revenue than expensing the costs as incurred. We use judgment when estimating the period between drydocks performed, which can result in adjustments to the estimated amortization of drydock expense. If the vessel is disposed of before the next drydock, the remaining balance in deferral drydock is written-off to the gain or loss upon disposal of vessels in the period when contracted. We expect that our vessels will be required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. Costs capitalized as part of the drydocking include actual costs incurred at the drydock yard and parts and supplies used in making such repairs.

Vessel Acquisitions

Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we record all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the amount of expected future cash flows. We value any asset or liability arising from the market value of the time charters assumed when an acquired vessel is delivered to us.

Where we have assumed an existing charter obligation or enter into a time charter with the existing charterer in connection with the purchase of a vessel at charter rates that are less than market charter rates, we record a liability in Deferred Revenues based on the difference between the assumed charter rate and the market charter rate for an equivalent vessel. Conversely, where we assume an existing charter obligation or enter into a time charter with the existing charterer in connection with the purchase of a vessel at charter rates that are above market charter rates, we record an asset in Prepaid Charter Revenue, based on the difference between the market charter rate and the contracted charter rate for an equivalent vessel. This determination is made at the time the vessel is delivered to us, and such assets and liabilities are amortized to revenue over the remaining period of the charter. The determination of the fair value of acquired assets and assumed liabilities requires us to make significant assumptions and estimates of many variables including market charter rates, expected future charter rates, future vessel operation expenses, the level of utilization of our vessels and our weighted average cost of capital. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on our financial position and results

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of operations. In the event that the market charter rates relating to the acquired vessels are lower than the contracted charter rates at the time of their respective deliveries to us, our net earnings for the remainder of the terms of the charters may be adversely affected although our cash flows will not be so affected.

Results of Operations for the years ended December 31, 2007 and 2006, and period from January 26, 2005 (inception) to December 31, 2005

Factors Affecting Our Results of Operations

We believe that the important measures for analyzing future trends in our results of operations consist of the following:

2007 2006 2005 Ownership Days

6,166

5,288

2,531

Available Days

6,073

5,224

2,507

Operating Days

6,039

5,203

2,500

Fleet Utilization

99.4 %

99.6 %

99.7 %

• Ownership days: We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period. Ownership days in 2007 increased by the delivery of three vessels in the second quarter of 2007, net of the sale of one vessel in the first quarter of 2007. In 2006, we added three vessels to our initial fleet of 13 vessels. The increase in ownership days in 2006 resulted from the additional three vessels and operations for the full calendar year of vessels acquired in 2005.

• Available days: We define available days as the number of our ownership days less the aggregate number of days that our vessels are off-hire due to vessel familiarization upon acquisition, scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues. Available days in 2007 increased due to a larger fleet size, net of positioning one vessel for sale and drydocks. Available days in 2006 increased due to larger fleet size. In 2007, five of our vessels drydocked compared to six in 2006. We incurred less than one takeover day for the additional acquisitions in 2006. During the period the fleet was in operation in 2005, we drydocked one vessel and incurred eleven days in vessel takeover days.

• Operating days: We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.

• Fleet utilization: We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning. Our fleet continues to perform at very high utilization rates.

• TCE rates: We define TCE rates as our voyage and time charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time

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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 such amounts. All our vessels are employed on time charters hence our TCE rate is equal to the time charter rate.

Voyage and Time Charter Revenue

Shipping revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by a Company and the trades in which those vessels operate. In the drybulk sector of the shipping industry, rates for the transportation of drybulk cargoes such as ores, grains, steel, fertilizers, and similar commodities, are determined by market forces such as the supply and demand for such commodities, the distance that cargoes must be transported, and the number of vessels expected to be available at the time such cargoes need to be transported. The demand for shipments then is significantly affected by the state of the economy globally and in discrete geographical areas. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally because of scrapping.

Revenues are also affected by the mix of charters between spot (voyage charter) and long-term (time charter). Because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters, we manage our vessels based on time charter equivalent (‘‘TCE’’) revenues. TCE revenue comprises revenue from vessels operating on time charters, or TC revenue, and voyage revenue less voyage expenses from vessels operating on voyage charters in the spot market. TCE revenue serves as a measure of analyzing fluctuations between financial periods and as a method of equating revenue generated from a voyage charter to time charter revenue. TCE revenue also serves as an industry standard for measuring revenue and comparing results between geographical regions and among competitors.

Our economic decisions are based on anticipated TCE rates and we evaluate financial performance based on TCE rates achieved. Our revenues are driven primarily by the number of vessels in our fleet, the number of days during which our vessels operate and the amount of the daily charter hire rates that our vessels earn under charters, which, in turn, are affected by a number of factors, including:

• the duration of our charters;

• our decisions relating to vessel acquisitions and disposals;

• the amount of time that we spend positioning our vessels;

• the amount of time that our vessels spend in dry-dock undergoing repairs;

• maintenance and upgrade work;

• the age, condition and specifications of our vessels;

• levels of supply and demand in the dry bulk shipping industry; and

• other factors affecting spot market charter rates for dry bulk carriers.

All our revenues for the years ended December 31, 2007 and December 31, 2006 and December 31, 2005 were earned from time charters, hence our TCE revenue is equal to the TC revenue. As is common in the shipping industry, we pay commissions ranging from 1.25% to 6.25% of the total daily charter hire rate of each charter to unaffiliated ship brokers and in-house brokers associated with the charterers, depending on the number of brokers involved with arranging the charter.

Net revenues for the year ended December 31, 2007 of $124,814,804 included billed time charter revenues of $135,412,594, deductions for brokerage commissions of $6,857,790 and amortization of prepaid revenue of $3,740,000. Net revenues for the year ended December 31, 2007 were 19% greater than net revenues for the year ended December 31, 2006, primarily due to a larger fleet size as reflected by increased operating days and an increase in daily time charter rates.

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Net revenues for the year ended December 31, 2006 of $104,648,197 included billed time charter revenues of $113,900,922, deductions for brokerage commissions of $5,790,725 and amortization of prepaid revenue of $3,462,000. Net revenues for the year ended December 31, 2006 were 87% greater than net revenues for the year ended December 31, 2005, primarily due to a larger fleet size as reflected by increased operating days and an increase in daily time charter rates.

Net revenues for the year ended December 31, 2005 of $56,066,058 included billed time charter revenues of $59,997,448, deductions for brokerage commissions of $3,040,890 and amortization of prepaid revenue of $890,500.

Voyage Expenses

To the extent that we employ our vessels on voyage charters, we will incur expenses that include port and canal charges, bunker (fuel oil) expenses and commissions, as these expenses are borne by the vessel owner on voyage charters. Port and canal charges and bunker expenses primarily increase in periods during which vessels are employed on voyage charters because these expenses are for the account of the vessels. Currently all our vessels are employed under time charters that require the charterer to bear all of those expenses, hence we expect that any port and canal charges and bunker expenses, if incurred, will represent a relatively minor portion of our vessels’ overall expenses.

Vessel Expenses

Vessel expenses for the year ended December 31, 2007 were $27,143,515 compared to $21,562,034 for the year ended December 31, 2006. The increase in vessel expense is attributable to a larger fleet size in operation for the year of 2007 and increases in vessel crew and lubricants costs. Vessel expenses for the year ended December 31, 2007 included $25,338,098 in vessel operating costs and $1,805,417 in technical management fees. Vessel expenses for the year ended December 31, 2006 included $20,070,181 in vessel operating costs and $1,491,853 in technical management fees.

Vessel expenses for the year ended December 31, 2006 were $21,562,034 compared to $11,052,429 for the year ended December 31, 2005. The increase in vessel expense is attributable to a larger fleet size in operation for the year of 2006. Vessel expenses for the year ended December 31, 2006 included $20,070,181 in vessel operating costs and $1,491,853 in technical management fees. Vessel expenses for the year ended December 31, 2005 included $10,359,824 in vessel operating costs and $692,605 in technical management fees.

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores and related inventory, tonnage taxes, pre-operating costs associated with the delivery of acquired vessels including providing the newly acquired vessels with initial provisions and stores, other miscellaneous expenses, and technical management fees.

Insurance expense varies with overall insurance market conditions as well as the insured’s loss record, level of insurance and desired coverage. The main insurance expenses include Protection and Indemnity (‘‘P & I’’) insurance (i.e. liability insurance) costs, and hull and machinery insurance (i.e. asset insurance) costs. Certain other insurances, such as basic war risk premiums based on voyages into designated war risk areas are often for the account of the charterers.

With regard to vessel operating expenses, we have entered into technical management agreements for each of our vessels with V. Ships Management Ltd. and Wilhelmsen Ship Management, our independent technical managers. In conjunction with our management, V. Ships and Barber Ship have established an operating expense budget for each vessel. All deviations from the budgeted amounts are for our account.

Included in Vessel Expenses is a fixed management fee for each vessel in our operating fleet paid to our independent technical managers, V. Ships and Wilhelmsen Ship Management. For the years ended December 31, 2007, 2006, and 2005, the technical management fees averaged $8,906, $8583 and $8,333 per month per vessel, respectively.

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Technical management services include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging the hire of qualified officers and crew, arranging dry-docking and repairs, purchasing stores, supplies, spare parts and new equipment, appointing supervisors and technical consultants and providing technical support.

Our vessel expenses, which generally represent costs under the vessel operating budgets, cost of insurance and vessel registry and other regulatory fees, will increase with the enlargement of our fleet. Other factors beyond our control, some of which may affect the shipping industry in general, may also cause these expenses to increase, including, for instance, developments relating to market prices for crew, insurance and petroleum-based lubricants and supplies.

Depreciation and Amortization

For the years ended December 31, 2007 and 2006, total depreciation and amortization expense was $26,435,646 and $21,812,486, respectively. Total depreciation and amortization expense for the year ended December 31, 2007 includes $24,791,502 of vessel depreciation and $1,644,144 of amortization of deferred drydocking costs. Comparable amounts for the year ended December 31, 2006 were $21,031,357 of vessel depreciation and $781,129 of amortization of deferred drydocking costs.

For the years ended December 31, 2006 and 2005, total depreciation and amortization expense was $21,812,486 and $10,412,227, respectively. Total depreciation and amortization expense for the year ended December 31, 2006 includes $21,031,357 of vessel depreciation and $781,129 of amortization of deferred drydocking costs. Comparable amounts for the period from inception on January 26, 2005 to December 31, 2005 were $10,384,247 of vessel depreciation and $27,980 of amortization of deferred drydocking costs.

Amortization of deferred financing costs relating to our operating fleet is included in interest expense. These financing costs relate to costs associated with our revolving credit facility and these are amortized over the life of the facility. For the years ended December 31, 2007, 2006, and 2005, the amortization of deferred financing costs was $242,357, $178,246 and $98,065, respectively.

General and Administrative Expenses

Our general and administrative expenses include onshore vessel administration related expenses such as legal and professional expenses and recurring administrative and other expenses including payroll and expenses relating to our executive officers and office staff, office rent and expenses, directors fees, and directors and officers insurance.

General and administrative expenses for the years ended December 31, 2007 and 2006 were $7,519,734 and $5,222,875, respectively. The increase in general and administrative expenses for the year ended December 31, 2007 was attributable to expenses associated with managing a larger fleet.

General and administrative expenses for the years ended December 31, 2006 and 2005 were $5,222,875 and $3,491,330, respectively. The increase in general and administrative expenses for the year ended December 31, 2006 was attributable to 2006 being our first full year of operations and the expenses associated with a larger fleet.

We expect general and administrative expenses to increase as we expand our fleet

Financial Advisory Fees

In 2007 and 2006 we did not incur any financial advisory fees.

In 2005, we incurred an expense of $5,175,046 in connection with an investment banking and financial advisory fees paid to Kelso & Company, L.P. (‘‘Kelso’’) and certain non-management affiliates of Eagle Ventures LLC pursuant to the financial advisory agreement that we entered into with Kelso. The agreement was terminated in 2005.

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Non-Cash Compensation Expense

The Company has recorded non-cash compensation charges of $4,256,777, $13,070,473 and $11,734,812, respectively in 2007, 2006 and 2005. These non-cash compensation charges relate to the stock options and restricted stock units granted to certain directors of the Company and members of management under the 2005 Stock Incentive Plan (see Note 12) and non-cash, non-dilutive charges relating to profits interests awarded to members of the Company’s management by the Company’s former principal shareholder Eagle Ventures LLC. Amounts recorded with respect to the stock options and the restricted stock units were $1,118,965 and $47,033 in 2007 and 2006, respectively. Amounts recorded with respect to the non-cash, non-dilutive charges relating to profits interests were $3,137,812, $13,023,440 and $11,734,812 in 2007, 2006 and 2005, respectively.

Members of the Company’s management were awarded profits interests in the Company’s former principal shareholder Eagle Ventures LLC that entitled such persons to an economic interest of up to 16.7% on a fully diluted basis (assuming all profits interests were vested) in any appreciation in the value of the assets of Eagle Ventures LLC (including shares of the Company’s common stock owned by Eagle Ventures LLC when sold). These profits interests diluted only the interests of owners of Eagle Ventures LLC, and did not dilute direct holders of the Company’s common stock. However, the Company’s statement of operations reflects non-cash charges for compensation related to the profits interests. The non-cash compensation charges were being recorded as an expense over the estimated service period in accordance with SFAS No. 123(R). As Eagle Ventures has sold substantially all of its holdings in the Company, the non-cash, non-dilutive charges relating to profits interests ended in the first quarter of 2007 and there will be no charges in future periods.

Interest and Finance Costs

Interest Expense, exclusive of capitalized interest, consists of:

2007 2006 2005 Loan Interest $ 12,259,010

$ 9,694,244

$ 4,855,054

Commitment Fees

239,739

676,126

516,588

Eagle Ventures Note Interest

—

608,222

Amortization of Deferred Financing Costs

242,357

178,246

98,065

Write-off of Deferred Financing Costs

—

1,130,712

Total Interest Expense $ 12,741,106

$ 10,548,616

$ 7,208,641

Interest expense during 2007 and 2006 includes loan interest incurred on borrowings from the Company’s revolving credit facility for the vessels in operation, commitment fees incurred on the unused portion of the revolving credit facility, and the amortization of financing costs associated with the revolving credit facility. Interest expense during 2005 includes loan interest incurred on borrowings from the Company’s initial term loan facility which was refinanced with the revolving credit facility, commitment fees incurred on the unused portion of the revolving credit facility, and amortization of financing costs associated with the revolving credit facility (see section Revolving Credit Facility).

For 2007, interest rates on our outstanding debt ranged from 4.97% to 6.56%, including a margin over LIBOR applicable under the terms of the amended revolving credit facility. The weighted average effective interest rate was 5.44%. Commitment fees incurred on the undrawn portion of the facility was 0.25% on the unused portions of the revolving credit facility.

For 2006, interest rates on our outstanding debt ranged from 4.97% to 6.32%, including a margin over LIBOR applicable under the terms of the amended revolving credit facility. The weighted average effective interest rate was 5.39%. Commitment fees incurred on the undrawn portion of the facility ranged from 0.25% to 0.4% on the unused portions of the revolving credit facility.

During 2005, interest rates on our outstanding debt ranged from 4.10% to 5.49%, including a margin of 0.95% over LIBOR. The weighted average effective interest rate was 4.69%. Commitment fees in 2005 were incurred at 0.4%.

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Cash interest paid during 2007, 2006, and 2005, exclusive of capitalized interest, amounted to $13,031,996, $10,194,882 and $5,465,233, respectively.

As our fleet increases in size, interest expense will increase as a result of additional debt drawn from our revolving credit facility to finance the acquisition of vessels. Interest costs on borrowings made for the construction of our newbuilding vessels are capitalized until the vessels are delivered (see below).

Capitalized Interest

We have contracted for the construction of 35 newbuilding vessels. Of the 35 vessels in the newbuildings program, contracts for 33 vessels were entered into in 2007. Interest costs on borrowings made for the vessels in our newbuilding program are capitalized until the vessels are delivered.

For 2007, capitalized interest amounted to $9,400,288 ($8,964,989 in interest and $435,299 in amortization of financing costs) compared to $259,580 ($236,152 in interest and $23,428 in amortization of financing costs) in 2006. The increase in capitalized interest is substantially due to additional borrowings to fund the construction of the newbuilding vessels. Cash paid for capitalized interest during 2007 amounted to $8,775,957 compared to $126,702 in 2006.

Interest Rate Swaps

We have entered into interest rate swaps to effectively convert a portion of our debt from a floating to a fixed-rate basis. Under these swap contracts, exclusive of applicable margins, we pay fixed rate interest and receive floating-rate interest amounts based on three-month LIBOR settings. The swaps are designated and qualify as cash flow hedges.

As of December 31, 2007, the following swap contracts were outstanding:

– Notional amount of $100,000,000 with a fixed interest rate of 4.22% and maturity in September 2010

– Notional amount of $30,000,000 with a fixed interest rate of 4.54% and maturity in September 2010

– Notional amount of $84,800,000 with a fixed interest rate of 5.24% and maturity in September 2009

– Notional amount of $25,048,118 with a fixed interest rate of 4.74% and maturity in December 2011

– Notional amount of $25,776,443 with a fixed interest rate of 4.90% and maturity in March 2010

– Notional amount of $36,752,038 with a fixed interest rate of 5.22% and maturity in August 2012

– Notional amount of $202,340,000 with a fixed interest rate of 5.04% and maturity in August 2010

– Notional amount of $10,995,000 with a fixed interest rate of 4.98% and maturity in August 2010

We record the fair value of the interest rate swaps as an asset or liability on the balance sheet. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, $13,531,883 and $2,936,804 has been recorded in Other Liabilities and Other Assets in the Company’s balance sheets as of December 31, 2007 and December 31, 2006, respectively.

Subsequent to December 31, 2007, the Company entered into an interest rate swap contract and converted $81,500,000 of its outstanding debt which was on a floating interest rate basis into a fixed interest rate basis. The contract matures in January 2013 and, exclusive of applicable margin, the Company will pay fixed rate interest of 3.895% and receive floating rate interest amounts based on three-month Libor settings.

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Foreign Currency Swaps

The shipping industry’s functional currency is the U.S. dollar. All our revenues and the majority of our operating expenses and the entirety of our management expenses are in U.S. dollars. Therefore we do not use or intend to use financial derivatives to mitigate the risk of exchange rate fluctuations for our revenues and expenses.

However, as we have entered into a newbuilding program for vessels to be built in Japan and which are priced in Japanese yen, we have entered into foreign exchange swap transactions to hedge foreign currency risks to our vessel newbuilding contracts. These swaps are designated and qualify as cash flow hedges.

During 2007, we entered into contracts to build three vessels in Japan that were priced in Japanese yen. In order to hedge the foreign currency risks associated with these contracts, we entered into foreign exchange swap transactions. The Company swapped a total of 11.5 billion in Japanese yen currency exposure into the equivalent of $100,063,505.

At December 31, 2007, the Company had outstanding foreign currency swap contracts for notional amounts aggregating 11.28 billion Japanese yen swapped into the equivalent of $104,259,998.

The Company records the fair value of the currency swaps as an asset or liability in its financial statements. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, an amount of $932,638 and $359,180 have been recorded in Other Assets and Other Liabilities in the accompanying financial statements as of December 31, 2007 and December 31, 2006, respectively.

Gain on Sale of Vessel

On February 27, 2007, we sold the SHIKRA, a 1984-built Handymax vessel, to an unrelated third party for $12,525,000. We incurred total expenses of $513,518 relating to the sale. We recorded a gain on the sale of $872,568.

EBITDA

EBITDA represents operating earnings before extraordinary items, depreciation and amortization, interest expense, and income taxes, if any. EBITDA is included because it is used by certain investors to measure a company’s financial performance. EBITDA is not an item recognized by GAAP and should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. EBITDA is presented to provide additional information with respect to the Company’s ability to satisfy its obligations including debt service, capital expenditures, and working capital requirements. While EBITDA is frequently used as a measure of operating results and the ability to meet debt service requirements, the definition of EBITDA used here may not be comparable to that used by other companies due to differences in methods of calculation.

Our amended revolving credit facility permits us to pay dividends in amounts up to cumulative free cash flows which is our earnings before extraordinary or exceptional items, interest, taxes, depreciation and amortization (Credit Agreement EBITDA), less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for dry-docking. Therefore, we believe that this non-GAAP measure is important for our investors as it reflects our ability to pay dividends. The following table is a reconciliation of net income, as reflected in the consolidated statements of operations, to the Credit Agreement EBITDA:

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2007 2006 2005 Net Income $ 52,243,981

$ 33,801,540

$ 6,653,400

Interest Expense

12,741,106

10,548,616

7,208,641

Depreciation and Amortization

26,435,646

21,812,486

10,412,227

Amortization of Prepaid and Deferred Revenue

3,740,000

3,462,000

890,500

EBITDA

95,160,733

69,624,642

25,164,768

Adjustments for Exceptional Items:

Management and Other Fees to Affiliates(1)

—

6,175,046

Non-cash Compensation Expense(2)

4,256,777

13,070,473

11,734,812

Credit Agreement EBITDA $ 99,417,510

$ 82,695,115

$ 43,074,626

Effects of Inflation

The Company does not believe that inflation has had or is likely, in the foreseeable future, to have a significant impact on vessel operating expenses, drydocking expenses and general and administrative expenses.

Liquidity and Capital Resources

Net cash provided by operating activities during the years ended December 31, 2007 and 2006 was $82,889,373 and $70,535,078, respectively. The increase was primarily due to cash generated from the operation of the fleet for 6,166 operating days in 2007 compared to 5,288 operating days in 2006.

Net cash used in investing activities during 2007, was $446,250,566. In 2007, we purchased three modern Supramax vessels, the SHRIKE, SKUA and KITTIWAKE, for a total contract price of $138,700,000. We also incurred costs of $333,326 relating to these vessel acquisitions and improvements. During 2007, for our newbuilding program, we placed deposits in Japanese yen of an equivalent $38,113,974 for three 56,000 deadweight ton vessels, the CROWNED EAGLE, CRESTED EAGLE and STELLAR EAGLE, which are to be constructed and delivered in November 2008, February 2009 and April 2009, respectively. These deposits are in addition to the deposits of $24,798,118 that were placed for the GOLDEN EAGLE and IMPERIAL EAGLE in 2006. In addition, we paid an aggregate of $270,940,000 in advances for the transaction involving 26 newbuilding vessels. We also incurred $8,964,989 in capitalized interest and $1,209,760 in legal and technical supervision for the 35 vessels in the newbuilding program. On February 12, 2007, we sold the SHIKRA, a 1984-built Handymax vessel, to an unrelated third party for $12,525,000 and we incurred total expenses of $513,518 relating to the sale.

Net cash provided by financing activities during 2007 was $493,989,394. During 2007, we received $234,206,147 in net proceeds from the sale of common shares of the Company. We borrowed $369,708,070 from our revolving credit facility, of which $36,344,000 was used to partly fund the purchase of the three vessels,SHRIKE, SKUA and KITTIWAKE, and $333,364,070 was used to fund the advances for the construction of newbuilding vessels and pay $12,000,000 in financing costs associated with the amended credit facility. We used $12,440,000 from the proceeds of the sale of the SHIKRA to repay borrowings from the revolving credit facility. We also paid $82,134,982 in dividends. Net cash provided by financing activities during 2006, was $57,973,096 which primarily consisted of $33,000,000 in gross proceeds from the sale of shares of the Company’s common stock, borrowings of $99,974,820 from the Company’s revolving credit facility, net of $71,729,500 paid in dividends.

As of December 31, 2007, our cash balance was $152,903,692 compared to a cash balance of $24,526,528 at December 31, 2006. In addition, $9,000,000 in cash deposits are maintained with our

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lender for loan compliance purposes and this amount is recorded in Restricted Cash on our balance sheet as of December 31, 2007. Also recorded in Restricted Cash is an amount of $124,616 which is collateralizing a letter of credit relating to our office lease.

On October 19, 2007, the revolving credit facility was amended to $1,600,000,000 (See section entitled ‘‘Revolving Credit Facility’’ for a description of the facility and its amendments). As of December 31, 2007, total availability under the enhanced revolving credit facility was $1,600,000,000 of which $597,242,890 has been borrowed. The facility also provides us with the ability to borrow up to $20,000,000 for working capital purposes.

We anticipate that our current financial resources, together with cash generated from operations and, if necessary, borrowings under our revolving credit facility will be sufficient to fund the operations of our fleet, including our working capital requirements, for at least the next 12 months. Our amended and enhanced credit facility also provides us with the funds required to meet our newbuilding commitments. We were in compliance with all of the covenants contained in our debt agreements as of December 31, 2007.

It is our intention to fund our future acquisition related capital requirements initially through borrowings under the amended and increased revolving credit facility and to repay all or a portion of such borrowings from time to time with the net proceeds of equity issuances. On December 31, 2007, the Company filed an S-3 shelf registration which would enable the Company to issue such securities. We believe that funds will be available to support our growth strategy, which involves the acquisition of additional vessels, and will allow us to pay dividends to our stockholders as contemplated by our dividend policy.

Dividends

Our policy is to declare quarterly dividends to stockholders in March, May, August and November. Our amended revolving credit facility permits us to pay quarterly dividends in amounts up to cumulative free cash flows which is our quarterly earnings before extraordinary or exceptional items, interest, taxes, depreciation and amortization (Credit Agreement EBITDA), less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for drydocking for the period, provided that there is not a default or breach of loan covenant under the credit facility and the payment of the dividends would not result in a default or breach of a loan covenant. Depending on market conditions in the dry bulk shipping industry and acquisition opportunities that may arise, we may be required to obtain additional debt or equity financing which could affect our dividend policy.

On February 27, 2008 the Company’s Board of Directors declared a cash dividend for the fourth quarter of 2007 of $0.50 per share to be paid on March 18, 2008 to all shareholders of record as of March 13, 2008. The aggregate amount of this cash dividend is $23,363,857.

In 2005, the Company declared and paid a quarterly dividend on its common stock in the amount of $0.54 per share in October 2005. The aggregate amount of this cash dividend was $14,661,000.

Sale of Common Stock

On January 16, 2007, our then principal shareholder, Eagle Ventures LLC, sold 7,202,679 shares of the Company’s common stock from its holdings of the Company’s common stock in a secondary sale. The Company did not receive any proceeds from this offering.

On March 6, 2007, we sold 5,400,000 shares of our common stock at a price to the public of $18.95 per share, raising gross proceeds of $102,330,000. On March 23, 2007, we raised an additional

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$7,841,870 in gross proceeds from the underwriter’s exercise of their over-allotment option for the purchase of 413,819 shares of our common stock. We used the net proceeds from the offering to fund a portion of the acquisition costs of three vessels, the SHRIKE, SKUA and KITTIWAKE, which were delivered in the second quarter of 2007.

On September 21, 2007, we sold 5,000,000 shares of our common stock at a price to the public of $25.90 per share, raising gross proceeds of $129,500,000.

We have incurred fees and expenses aggregating $5,642,117 for the share sales in 2007.

Revolving Credit Facility

In July 2005, we entered into a 10-year $330,000,000 revolving credit facility. The facility has since been amended, most recently on October 19, 2007, when the facility was increased to $1,600,000,000 to accommodate the Company’s expanding newbuilding program. As of December 31, 2007, we had $597,242,890 outstanding under our revolving credit facility. The facility will be available to pay the remaining installments and associated costs relating to the construction of our newbuilding Supramax vessels. The facility will also provide working capital of up to $20,000,000; and provide funds for the acquisition of additional drybulk vessels.

The amended facility has a term of 10 years and is available in full until July 2012 when availability will begin to reduce in 10 semi-annual reductions of $75,000,000 with a with a final reduction of $850,000,000 occurring simultaneously with the last semi-annual reduction in July 2017. The facility bears interest at the rate of 0.80% to 0.90% over LIBOR, depending upon the amount of debt drawn as a percentage of the value of the Company’s vessels. The Company will also pay on a quarterly basis a commitment fee of 0.25% per annum on the undrawn portion of the facility. In connection with the latest amendment to the revolving credit facility, the Company incurred arrangement fees aggregating $12,000,000. It will also pay the lender an annual agency fee of $65,000.

Our ability to borrow amounts under the amended revolving credit facility will be subject to the satisfaction of certain customary conditions precedent and compliance with terms and conditions included in the loan documents. In connection with vessel acquisitions, amounts borrowed may not exceed 75% of the value of the vessels securing our obligations under the credit facility. Our ability to borrow such amounts, in each case, is subject to our lender’s approval of the vessel acquisition. Our lender’s approval will be based on the lender’s satisfaction of our ability to raise additional capital through equity issuances in amounts acceptable to our lender and the proposed employment of the vessel to be acquired.

Our obligations under the amended revolving credit facility are secured by a first priority mortgage on each of the vessels in our fleet and such other vessels that we may from time to time include with the approval of our lender, and by a first assignment of all freights, earnings, insurances and requisition compensation relating to our vessels. The facility also limits our ability to create liens on our assets in favor of other parties.

The revolving credit facility, as amended, contains financial covenants requiring us, among other things, to ensure that:

• the aggregate market value of the vessels in our fleet that secure our obligations under the revolving credit facility, as determined by an independent shipbroker on a charter free basis, at all times exceeds 130% of the aggregate principal amount of debt outstanding under the new credit facility and the notional or actual cost of terminating any related hedging arrangements;

• we maintain an adjusted net worth, i.e., total assets less consolidated debt of an amount not less than $300,000,000 during any accounting period;

• our EBITDA, as defined in the credit agreement, will at all times be not less than 2x the aggregate amount of interest incurred and net amounts payable under interest rate hedging arrangements during the relevant period; and

• we maintain with the lender $500,000 per delivered vessel.

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For the purposes of the revolving credit facility, our ‘‘total assets’’ includes our tangible fixed assets and our current assets, as set forth in our consolidated financial statements, except that the value of any vessels in our fleet that secure our obligations under the facility are measured by their fair market value rather than their carrying value on our consolidated balance sheet.

The revolving credit facility permits us to pay dividends in amounts up to our earnings before extraordinary or exceptional items, interest, taxes, depreciation and amortization (EBITDA), less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for dry-docking, provided that there is not a default or breach of loan covenant under the credit facility and the payment of the dividends would not result in a default or breach of a loan covenant.

Contractual Obligations

The following table sets forth our expected contractual obligations and their maturity dates as of December 31, 2007:

(in thousands of U.S. dollars) Within
One Year One to
Three Years Three to
Five Years More than
Five years Total Vessels(1) $ 186,247

$ 522,258

$ 390,765

—

$ 1,099,270

Bank Loans

—

$ 597,243

597,243

Interest and borrowing fees(2)

36,284

72,369

72,469

162,782

343,904

Office lease(3)

250

501

125

—

876

Total $ 222,781

$ 595,128

$ 463,359

$ 760,025

$ 2,041,293

(1) The balance of the contract price in US dollars for the 35 newbuilding vessels which are to be constructed and delivered between August 2008 and April 2012. (2) The Company is a party to floating-to-fixed interest rate swaps covering notional amounts of $100,000,000, $30,000,000, $84,800,000, $25,048,118, $25,776,443, $36,752,038, $10,995,000 and $202,340,000 as of December 31, 2007 that effectively convert the Company’s interest rate exposure from a floating rate based on LIBOR to a fixed rate of 4.22%, 4.54%, 5.24%, 4.74%, 4.90%, 5.22%, 4.98% and 5.04% respectively, plus applicable margin. Interest and borrowing fees includes capitalized interest for the newbuilding vessels. (3) Remainder of the lease on the office space which we occupy.

Capital Expenditures

Our capital expenditures relate to the purchase of vessels and capital improvements to our vessels which are expected to enhance the revenue earning capabilities and safety of these vessels.

We make capital expenditures from time to time in connection with our vessel acquisitions. As of December 31, 2007, our fleet currently consists of 18 Supramax vessels which are currently operational and 35 newbuilding vessels which have been contracted for construction.

In addition to acquisitions that we may undertake in future periods, the Company’s other major capital expenditures include funding the Company’s maintenance program of regularly scheduled drydocking necessary to preserve the quality of our 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 its dry docking, the costs are relatively predictable. Management anticipates that vessels are to be drydocked every two and a half years. Funding of these requirements is anticipated to be met with cash from operations. We anticipate that this process of recertification will require us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our available days and operating days during that period.

Drydocking costs incurred are amortized to expense on a straight-line basis over the period through the date the next drydocking for those vessels are scheduled to occur. In 2007, five of our

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vessels passed drydock surveys. In 2006, six of our vessels passed drydock surveys. For 2007 and 2006, we spent $3,624,851 and $2,324,726, respectively on vessel drydockings. The following table represents certain information about the estimated costs for anticipated vessel drydockings in the next four quarters, along with the anticipated off-hire days:

Quarter Ending Off-hire Days(1) Projected Costs(2) March 31, 2008

$0.50 million June 30, 2008

$0.50 million September 30, 2008

$2.00 million December 31, 2008

$0.50 million

(1) Actual duration of drydocking will vary based on the condition of the vessel, yard schedules and other factors. (2) Actual costs will vary based on various factors, including where the drydockings are actually performed.

Contracted Time Charter Revenue

We have time charter contracts currently for all our vessels in the operating fleet. The contracted time charter revenue schedule, as shown earlier on page 40 of the Management’s discussion and analysis of financial condition and results of operation, reduces future contracted revenue for any estimated off-hire days relating to dry-docks.

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company is exposed to market risk from changes in interest rates, which could impact its results of operations and financial condition. The Company’s objective is to manage the impact of interest rate changes on earnings and cash flows of its borrowings. The Company expects to manage this exposure to market risk through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company expects to use interest rate swaps to manage net exposure to interest rate changes related to its borrowings and to lower its overall borrowing costs.

As of December 31, 2007, the Company’s debt consisted of $597,242,890 in loans under the revolving credit facility at a margin plus variable rates above the LIBOR. During the year ended December 31, 2007, interest rates on the outstanding debt ranged from 4.97% to 6.56% (including margins). The weighted average effective interest rate was 5.44%.

The Company entered into interest rate swaps to effectively convert a substantial portion of its debt from a floating to a fixed-rate basis. The swaps are designated and qualify as cash flow hedges. As of December 31, 2007, the Company had the following swap contracts outstanding:

– Notional amount of $100,000,000 with a fixed interest rate of 4.22% and maturity in September 2010

– Notional amount of $30,000,000 with a fixed interest rate of 4.54% and maturity in September 2010

– Notional amount of $84,800,000 with a fixed interest rate of 5.24% and maturity in September 2009

– Notional amount of $25,048,118 with a fixed interest rate of 4.74% and maturity in December 2011

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– Notional amount of $25,776,443 with a fixed interest rate of 4.90% and maturity in March 2010

– Notional amount of $36,752,038 with a fixed interest rate of 5.22% and maturity in August 2012

– Notional amount of $202,340,000 with a fixed interest rate of 5.04% and maturity in August 2010

– Notional amount of $10,995,000 with a fixed interest rate of 4.98% and maturity in August 2010

The Company records the fair value of the interest rate swap as an asset or liability in our financial statement. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, a liability of $13,531,883 and an asset of $2,936,804 have been recorded in Other Liabilities and Other Assets in the Company’s financial statements as of December 31, 2007 and December 31, 2006, respectively.

Foreign Currency and Exchange Rate Risk

The shipping industry’s functional currency is the U.S. dollar. The Company generates all of its revenues in U.S. dollars. The majority of the Company’s operating expenses and the entirety of its management expenses are in U.S. dollars. The Company does not intend to use financial derivatives to mitigate the risk of exchange rate fluctuations for its revenues and expenses.

The Company has entered into foreign exchange swap transactions to hedge foreign currency risks on its capital asset transactions (vessel newbuildings). The swaps are designated and qualify as cash flow hedges. The Company has entered into foreign exchange swap transactions to hedge the Japanese yen (JPY) exposure into US dollars for the purchase price in Japanese yen of five new-build vessels which are expected to be delivered to the Company from August 2008 to February 2010. At December 31, 2007, the Company had outstanding foreign currency swap contracts for notional amounts aggregating JPY 11,280,000,000 swapped into equivalent US $104,259,998. The Company records the fair value of the currency swaps as an asset or liability in our financial statement. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, $932,638 and $359,180 have been recorded in Other Assets and Other Liabilities in the accompanying balance sheets as of December 31, 2007 and December 31, 2006, respectively.

Item 8. Financial Statements and Supplementary Data

The information required by this item is contained in the financial statements set forth in Item 15(a) under the caption ‘‘Consolidated Financial Statements’’ as part of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in

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Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits to the SEC under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.

Management has conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2007 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2007 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing on page F-3.

Internal Control Over Financial Reporting

In addition, we evaluated our internal control over financial reporting, (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934), and there have been no changes in our internal control over financial reporting that occurred during the fourth quarter of 2007 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our chief executive officer and our chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two

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or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors

The information concerning our directors required under this Item is incorporated herein by reference from our proxy statement, which will be filed with the Securities and Exchange Commission, relating to our Annual Meeting of Stockholders (our ‘‘2008 Proxy Statement’’).

Executive Officers

The information concerning our Executive Officers required under this Item is incorporated herein by reference from our 2008 Proxy Statement.

Code of Ethics

The information concerning our Code of Conduct is incorporated herein by reference from our 2008 Proxy Statement.

Audit Committee

The information concerning our Audit Committee is incorporated herein by reference from our 2008 Proxy Statement.

Audit Committee Financial Experts

The information concerning our Audit Committee Financial Experts is incorporated herein by reference from our 2008 Proxy Statement.

Item 11. Executive Compensation

The information required under this Item is incorporated herein by reference from our 2008 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required under this Item is incorporated herein by reference from our 2008 Proxy Statement.

Item 13. Certain Relationships and Related Transactions

The information required under this Item is incorporated herein by reference from our 2008 Proxy Statement.

Item 14. Principal Accountant Fees and Services

Information about the fees for 2007 for professional services rendered by our independent registered public accounting firm is incorporated herein by reference from our 2008 Proxy Statement. Our Audit Committee’s policy on pre-approval of audit and permissible non-audit services of our independent registered public accounting firm is incorporated by reference from our 2008 Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Documents filed as part of this Annual Report on Form 10-K

1. Consolidated Financial Statements: See accompanying Index to Consolidated Financial Statements.

2. Consolidated Financial Statement Schedule: Financial statement schedules are omitted due to the absence of conditions under which they are required

(b) Exhibits

3 .1

Amended and Restated Articles of Incorporation of the Company*

3 .2

Amended and Restated Bylaws of the Company*

3 .3

Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Incorporated by reference to the Company’s Registration Statement on Form 8-A filed on November 13, 2007).

4 .1

Form of Share Certificate of the Company*

4 .2

Form of Senior Indenture****

4 .3

Form of Subordinated Indenture****

4 .4

Rights Agreement (Incorporated by reference to the Company’s Registration Statement on Form 8-A filed on November 13, 2007).

10 .1

Form of Registration Rights Agreement*

10 .2

Form of Management Agreement*

10 .3

Form of Restricted Stock Unit Award Agreement (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2007, filed on November 9, 2007).†

10 .4

Third Amended and Restated Credit Agreement (Incorporated by reference to the Company’s Report on Form 8-K filed on October 25, 2007).

10 .5

Eagle Bulk Shipping Inc. 2005 Stock Incentive Plan*†

10 .6

Employment Agreement for Mr. Sophocles N. Zoullas*†

10 .7

Stock Purchase Agreement (Incorporated by reference to the Company’s Report on Form 8-K filed on July 30, 2007).

21 .1

Subsidiaries of the Registrant (Incorporated by reference to the Company’s Registration Statement on Form S-3 Registration No. 333-148417, filed on December 31, 2007).

23 .1

Consent of Ernst & Young LLP

31 .1

Rule 13a-14(d) / 15d-14(a) – Certification of CEO

31 .2

Rule 13a-14(d) / 15d-14(a) – Certification of CFO

32 .1

Section 1350 Certification of CEO

32 .2

Section 1350 Certification of CFO

* Incorporated by reference to Amendment No. 4 to the Company’s Registration Statement on Form S-1, Registration No. 333-123817 filed on June 22, 2005.

Table of Contents ** Incorporated by reference to the Company’s Report on Form 8-K filed on July 31, 2006. *** Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 14, 2006. **** Incorporated by reference to the Company’s Registration Statement on Form S-3, Registration No. 333-139745, filed on December 29, 2007. † Management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EAGLE BULK SHIPPING INC. By: /s/ Sophocles N. Zoullas Name: Sophocles N. Zoullas Title: Chief Executive Officer

February 29, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 29, 2008.

Signature Title

/s/ Sophocles N. Zoullas Chief Executive Officer and Director Sophocles N. Zoullas

/s/ David B. Hiley Director David B. Hiley

/s/ Douglas P. Haensel Director Douglas P. Haensel

/s/ Joseph M. Cianciolo Director Joseph M. Cianciolo

/s/ Forrest E. Wiley Director Forrest E. Wiley

/s/ Alexis P. Zoullas Director Alexis P. Zoullas

/s/ Jon Tomasson Director Jon Tomasson

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets at December 31, 2007 and December 31, 2006 F-4 Consolidated Statements of Operations for the Years ended December 31, 2007, December 31, 2006 and for the period from January 26, 2005 (inception) to December 31, 2005 F-5 Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2007, December 31, 2006 and for the period from January 26, 2005 (inception) to December 31, 2005 F-6 Consolidated Statements of Cash Flows for the Years ended December 31, 2007 and December 31, 2006 and for the period from January 26, 2005 (inception) to December 31, 2005 F-7 Notes to Consolidated Financial Statements F-8

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Eagle Bulk Shipping Inc.

We have audited the accompanying consolidated balance sheets of Eagle Bulk Shipping Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2007 and 2006 and for the period from January 26, 2005 (inception) through December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries at December 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years ended December 31, 2007 and 2006 and for the period from January 26, 2005 to December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Eagle Bulk Shipping Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York
February 29, 2008

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Eagle Bulk Shipping Inc.

We have audited Eagle Bulk Shipping Inc.’s (the ‘‘company’’) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the ‘‘COSO criteria’’). The company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Eagle Bulk Shipping Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Eagle Bulk Shipping Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2007 and 2006 and the period from January 26, 2005 (inception) to December 31, 2005, and our report dated February 29, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York
February 29, 2008

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EAGLE BULK SHIPPING INC.
CONSOLIDATED BALANCE SHEETS

December 31, 2007 December 31, 2006 ASSETS:

Current Assets:

Cash $ 152,903,692

$ 22,275,491

Accounts Receivable

3,392,461

616,205

Prepaid Charter Revenue

—

3,740,000

Prepaid Expenses

1,158,113

1,020,821

Total Current Assets

157,454,266

27,652,517

Fixed Assets:

Vessels and Vessel Improvements, at cost, net of Accumulated
Depreciation of $52,733,604 and $31,415,604, respectively

605,244,861

502,141,951

Advances for Vessel Construction

344,854,962

25,190,941

Restricted Cash

9,124,616

6,524,616

Deferred Drydock Costs, net of Accumulated Amortization of
$2,453,253 and $809,109, respectively

3,918,006

1,937,299

Deferred Financing Costs

14,479,024

2,406,839

Other Assets

932,638

2,936,804

Total Assets $ 1,136,008,373

$ 568,790,967

LIABILITIES & STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts Payable $ 3,621,559

$ 1,650,159

Accrued Interest

455,750

800,683

Other Accrued Liabilities

1,863,272

1,717,124

Unearned Charter Hire Revenue

4,322,024

2,713,060

Total Current Liabilities

10,262,605

6,881,026

Long-term Debt

597,242,890

239,974,820

Other Liabilities

13,531,883

359,180

Total Liabilities

621,037,378

247,215,026

Commitment and Contingencies

Stockholders’ Equity:

Preferred Stock, $.01 par value, 25,000,000 shares authorized, none issued

—

Common stock, $.01 par value, 100,000,000 shares authorized, 46,727,153 and 35,900,001 shares issued and outstanding, respectively

467,271

359,000

Additional Paid-In Capital

602,929,530

364,574,877

Retained Earnings (net of Dividends declared of $168,525,482 and $86,390,500 as of December 31, 2007 and 2006, respectively)

(75,826,561 )

(45,935,560 ) Accumulated Other Comprehensive (Loss)/Income

(12,599,245 )

2,577,624

Total Stockholders’ Equity

514,970,995

321,575,941

Total Liabilities and Stockholders’ Equity $ 1,136,008,373

$ 568,790,967

The accompanying notes are an integral part of these Consolidated Financial Statements.

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EAGLE BULK SHIPPING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended
December 31, 2007 Year Ended
December 31, 2006 Period from
January 26, 2005
(inception) to
December 31, 2005 Revenues, net of commissions $ 124,814,804

$ 104,648,197

$ 56,066,058

Vessel Expenses

27,143,515

21,562,034

11,052,429

Depreciation and Amortization

26,435,646

21,812,486

10,412,227

General and Administrative Expenses

7,519,734

5,222,875

3,491,330

Management and Other Fees to Affiliates

—

6,175,046

Non-cash Compensation Expense

4,256,777

13,070,473

11,734,812

Gain on Sale of Vessel

(872,568 )

—

Total Operating Expenses

64,483,104

61,667,868

42,865,844

Operating Income

60,331,700

42,980,329

13,200,214

Interest Expense

12,741,106

10,548,616

7,208,641

Interest Income

(4,653,387 )

(1,369,827 )

(661,827 ) Net Interest Expense

8,087,719

9,178,789

6,546,814

Net Income $ 52,243,981

$ 33,801,540

$ 6,653,400

Weighted Average Shares Outstanding:

Basic

42,064,911

34,543,836

21,968,824

Diluted

42,195,561

34,543,862

21,968,824

Per Share Amounts:

Basic Net Income $ 1.24

$ 0.98

$ 0.30

Diluted Net Income $ 1.24

$ 0.98

$ 0.30

Cash dividends declared and paid $ 1.98

$ 2.08

$ 0.54

The accompanying notes are an integral part of these Consolidated Financial Statements.

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EAGLE BULK SHIPPING INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Retained Earnings Shares Common
Shares Additional
Paid-In
Capital Net Income Cash
Dividends Accumulated
Deficit Other
Comprehensive
Income Total
Stockholders’
Equity Balance at January 26, 2005

—

$ —

Comprehensive Income:

Net Income

—

6,653,400

—

6,653,400

—

6,653,400

Net Unrealized gains on derivatives

—

2,647,077

Comprehensive
Income

—

9,300,477

Issuance of Common Stock and Capital Contributions

12,750,000

127,500

40,716,162

—

40,843,662

Initial Public Offering, net of issuance costs

14,400,000

144,000

186,385,290

—

186,529,290

Stock Offering, net of issuance costs

6,000,000

60,000

81,985,773

—

82,045,773

Cash Dividends

—

(14,661,000 )

—

(14,661,000 ) Non-cash
Compensation

—

11,734,812

—

11,734,812

Balance at December 31, 2005

33,150,000

331,500

320,822,037

(8,007,600 )

2,647,077

315,793,014

Comprehensive Income:

Net Income

—

33,801,540

—

33,801,540

—

33,801,540

Net Unrealized losses on derivatives

—

(69,453 )

(69,453 ) Comprehensive Income

—

33,732,087

Stock Offering, net of issuance costs

2,750,001

27,500

30,682,367

—

30,709,867

Cash Dividends

—

(71,729,500 )

—

(71,729,500 ) Non-cash Compensation

—

13,070,473

—

13,070,473

Balance at December 31, 2006

35,900,001

359,000

364,574,877

(45,935,560 )

2,577,624

321,575,941

Comprehensive Income:

Net Income

—

52,243,981

—

52,243,981

—

52,243,981

Net Unrealized losses on derivatives

—

(15,176,869 )

(15,176,869 ) Comprehensive
Income

—

37,067,112

Stock Offering, net of issuance costs

10,813,819

108,138

233,921,613

—

234,029,751

Exercise of Stock Options

13,333

133

176,263

—

176,396

Cash Dividends

—

(82,134,982 )

—

(82,134,982 ) Non-cash Compensation

—

4,256,777

—

4,256,777

Balance at December 31, 2007

46,727,153

$ 467,271

$ 602,929,530

$ (75,826,561 ) $ (12,599,245 ) $ 514,970,995

The accompanying notes are an integral part of these Consolidated Financial Statements.

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EAGLE BULK SHIPPING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended
2007 Year Ended
2006 Period from
January 26,
2005
(inception) to
December
31, 2005 Cash Flows from Operating Activities

Net Income $ 52,243,981

$ 33,801,540

$ 6,653,400

Adjustments to Reconcile Net Income to Net Cash provided by Operating Activities:

Items included in net income not affecting cash flows:

Depreciation

24,791,502

21,031,357

10,384,247

Amortization of Deferred Drydocking Costs

1,644,144

781,129

27,980

Amortization of Deferred Financing Costs

242,357

178,246

98,065

Write-off of Deferred Financing Costs

—

1,130,712

Amortization of Prepaid and Deferred Charter Revenue

3,740,000

3,462,000

890,500

Gain on Sale of Vessel

(872,568 )

—

Non-cash Compensation Expense

4,256,777

13,070,473

11,734,812

Changes in Operating Assets and Liabilities:

Accounts Receivable

(2,776,256 )

(335,111 )

(281,094 ) Prepaid Charter Revenue

—

(10,149,000 ) Prepaid Expenses

(137,292 )

(507,676 )

(513,145 ) Accounts Payable

1,971,400

(469,199 )

1,620,722

Accrued Interest

(344,933 )

286,052

514,631

Accrued Expenses

146,148

1,292,455

424,669

Deferred Revenue

—

2,056,500

Drydocking Expenditures

(3,624,851 )

(2,324,726 )

(421,682 ) Unearned Charter Hire Revenue

1,608,964

268,538

2,444,522

Net Cash Provided by Operating Activities

82,889,373

70,535,078

26,615,839

Cash Flows from Investing Activities

Purchase of Vessels and Improvements

(139,033,326 )

(105,591,698 )

(427,965,857 ) Advances for Vessel Construction

(319,228,722 )

(25,167,513 )

—

Proceeds from Sale of Vessel

12,011,482

—

Net Cash Used in Investing Activities

(446,250,566 )

(130,759,211 )

(427,965,857 ) Cash Flows from Financing Activities

Capital Contribution

—

40,843,662

Issuance of Common Stock

239,848,264

33,000,000

288,600,000

Equity Issuance Costs

(5,642,117 )

(2,031,920 )

(19,784,514 ) Bank Borrowings

369,708,070

99,974,820

314,450,000

Repayment of Bank Debt

(12,440,000 )

—

(174,450,000 ) Changes in Restricted Cash

(2,600,000 )

100,000

(6,624,616 ) Deferred Financing Costs

(12,749,841 )

(1,340,304 )

(2,496,986 ) Borrowings from Eagle Ventures LLC

—

58,730,434

Repayment of Eagle Ventures LLC Note

—

(58,730,434 ) Cash Dividend

(82,134,982 )

(71,729,500 )

(14,661,000 ) Net Cash Provided by Financing Activities

493,989,394

57,973,096

425,876,546

Net Increase in Cash

132,628,201

(2,251,037 )

24,526,528

Cash at Beginning of Period

22,275,491

24,526,528

—

Cash at End of Period $ 152,903,692

$ 22,275,491

$ 24,526,528

Supplemental Cash Flow Information:

Cash paid during the period for Interest (including Capitalized interest of $8,775,957 and $126,702 in 2007 and 2006 and Commitment Fees) $ 21,807,953

$ 10,321,584

$ 5,465,233

The accompanying notes are an integral part of these Consolidated Financial Statements.

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EAGLE BULK SHIPPING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation and General Information:

The accompanying consolidated financial statements include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries (collectively, the ‘‘Company’’). The Company is engaged in the ocean transportation of dry bulk cargoes worldwide through the ownership and operation of dry bulk vessels. The Company’s fleet is comprised of Handymax bulk carriers and the Company operates its business in one business segment.

The Company is a holding company incorporated in 2005, under the laws of the Republic of the Marshall Islands and is the sole owner of all of the outstanding shares of the Republic of the Marshall Island incorporated wholly owned subsidiaries. The primary activity of each of the subsidiaries is the ownership of a vessel. The operations of the vessels are managed by a wholly owned subsidiary of the Company, Eagle Shipping International (USA) LLC, a Republic of the Marshall Islands limited liability company.

As of December 31, 2007, the Company’s operating fleet consists of 18 vessels. The Company has also entered into contracts for the construction of 35 vessels under its newbuilding program. The following tables presents certain information concerning the Company’s fleet as of December 31, 2007:

No. of Vessels Dwt Vessel Type Delivery Employment 18 Vessels

915,502

15 Supramax 2005 – 2007 Time Charter

3 Handymax 2005 Time Charter 5 Vessels

265,000

53,000 dwt series 2008 – 2009 Charter Free 5 Vessels

280,000

56,000 dwt series 2008 – 2010 4 Vessels on Time Charter and 1 Vessel Charter Free 25 Vessels(1)

1,450,000

58,000 dwt series 2009 – 2012 17 Vessels on Time Charter and 8 Vessels Charter Free

(1) The Company has options at the Chinese shipyard for the construction of 9 additional 58,000 dwt Supramax vessels. On December 27, 2007, the Company exercised four of these options. The remaining five options expire on March 31, 2008.

The following table describes the revenue concentration:

% of Consolidated Time Charter Revenue Charterer 2007 2006 2005 Charterer A

12.9 %

15.1 %

19.9 % Charterer B

22.3 %

19.2 %

17.2 % Charterer C

—

13.2 %

11.3 % Charterer D

12.4 %

12.2 %

10.4 % Charterer H

11.0 %

—

Note 2. Significant Accounting Policies:

(a) Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions were eliminated upon consolidation.

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(b) Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles 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.

(c) Other Comprehensive Income: The Company follows the provisions of Statement of Financial Accounting Standards (‘‘SFAS’’) No. 130, ‘‘Reporting Comprehensive Income’’, which requires separate presentation of certain transactions, which are recorded directly as components of stockholders’ equity. The Company records the fair value of interest rate swaps and foreign currency swaps as an asset or liability on the balance sheet. The effective portion of the swap is recorded in accumulated other comprehensive income. Comprehensive Income is composed of net income and gains or losses relating to the swaps.

(d) Cash, Cash Equivalents and Restricted Cash: The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents. Restricted Cash includes minimum cash deposits required to be maintained with a bank for loan compliance purposes and an amount of $124,616 which is collateralizing a letter of credit.

(e) Accounts Receivable: Accounts receivable includes receivables from charterers for hire. At each balance sheet date, all potentially uncollectible accounts are assessed for purposes of determining the appropriate provision for doubtful accounts.

(f) Insurance Claims: Insurance claims are recorded on an accrual basis and represent the claimable expenses, net of deductibles, incurred through each balance sheet date, which are expected to be recovered from insurance companies. Any remaining costs to complete the claims are included in accrued liabilities.

(g) Vessels at Cost: Vessels are stated at cost which consists of the contract price and any material expenses incurred upon acquisition for major improvements and delivery expenses.

(h) Intangibles: Where the Company identifies any intangible assets or liabilities associated with the acquisition of a vessel, the Company records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the amount of expected future cash flows. The Company values any asset or liability arising from the market value of the time charters assumed when a vessel is acquired. When the time charters assumed are above market charter rates, the difference between the market charter rate and assumed charter rate is recorded as Prepaid Charter Revenue. When the time charters assumed are below market charter rates, the difference between the market charter rate and assumed charter rate is recorded as Deferred Revenue. Such assets and liabilities are amortized to revenue over the remaining period of the time charters.

(i) Impairment of Long-Lived Assets: The Company uses SFAS No. 144 ‘‘Accounting for the Impairment or Disposal of Long-lived Assets,’’ which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The standard requires that, long-lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, the Company should evaluate the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset as provided by third parties or discounted cash flow analyses. In this respect, management regularly reviews the carrying amount of the vessels in connection with the estimated recoverable amount for each of the Company’s vessels.

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(j) Vessel Depreciation: Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated salvage value. Each vessel’s salvage value is equal to the product of its lightweight tonnage and estimated scrap rate. Management estimates the useful life of the Company’s vessels to be 28 years from the date of initial delivery from the shipyard to the original owner. Management estimates the scrap rate to be $150 per lightweight ton. Secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful life.

(k) Accounting for Dry-Docking Costs: The Company follows the deferral method of accounting for dry-docking costs whereby actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next dry-docking is scheduled to become due, generally 30 months. Unamortized dry-docking costs of vessels that are sold are written off and included in the calculation of the resulting gain or loss in the year of the vessels’ sale.

(l) Financing Costs: Fees incurred for obtaining new loans or refinancing existing ones are deferred and amortized to interest expense over the life of the related debt. Unamortized fees relating to loans repaid or refinanced are expensed in the period the repayment or refinancing is made.

(m) Accounting for Revenues and Expenses: Revenues are generated from voyage and time charter agreements. Time charter revenues are recognized on a straight-line basis over the term of the respective time charter agreements as service is provided. Time charter hire and voyage charter revenue brokerage Commissions are recorded in the same period as these revenues are recognized. Vessel operating expenses are accounted for on the accrual basis.

(n) Unearned Charter Hire Revenue: Unearned charter hire revenue represents cash received from charterers prior to the time such amounts are earned. These amounts are recognized as revenue as services are provided in future periods.

(o) Repairs and Maintenance: All repair and maintenance expenses are expensed as incurred and is recorded in Vessel Expenses.

(p) Protection and Indemnity Insurance: The Vessel’s Protection and Indemnity Insurance is subject to additional premiums referred to as ‘‘back calls’’ or ‘‘supplemental calls’’ which are accounted for on an accrual basis and is recorded in Vessel Expenses.

(q) Derivatives: SFAS No. 133, ‘‘Accounting for Derivative Instruments and Hedging Activities’’ as amended establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value, with changes in the derivatives’ fair value recognized currently in earnings unless specific hedge accounting criteria are met.

(r) Earnings Per Share: Earnings per share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the impact of stock options and restricted stock unless their impact is antidilutive.

(s) Segment Reporting: The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e., spot or time charters. The Company does not use discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet and thus the Company has determined that it operates under one reportable segment. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.

(t) Interest Rate Risk Management: The Company is exposed to the impact of interest rate changes. The Company’s objective is to manage the impact of interest rate changes on earnings and cash flows of its borrowings. The Company may use interest rate swaps to manage net exposure to interest rate changes related to its borrowings.

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(u) Federal Income Taxes: The Company is a Republic of Marshall Islands Corporation. Pursuant to various tax treaties and the current United States Internal Revenue Code, the Company does not believe its operations prospectively will be subject to federal income taxes in the United States of America.

Impact of Recently Issued Accounting Standards

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, ‘‘Fair Value Measurements’’ (‘‘Statement No. 157’’) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Statement No. 157 applies to other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The company is currently evaluating the impact of adopting the provisions of Statement No. 157.

Note 3. Vessels

a. Vessel and Vessel Improvements

At December 31, 2007, the Company’s fleet consisted of 18 dry bulk vessels The Company acquired three vessels in 2007, three vessels in 2006 and 13 vessels in 2005. The Company sold a vessel in 2007. Vessel and vessel improvements consist of the following:

Vessels and Vessel Improvements, at December 31, 2005 $ 417,581,610

Purchase of Vessels and Improvements in 2006

105,591,698

Depreciation Expense in 2006

(21,031,357 ) Balance Vessels and Vessel Improvements, at December 31, 2006 $ 502,141,951

Purchase of Vessels and Improvements in 2007

139,033,326

Disposal of Vessel in 2007

(11,138,914 ) Depreciation Expense in 2007

(24,791,502 ) Balance Vessels and Vessel Improvements, at December 31, 2007 $ 605,244,861

b. Advances for Vessel Construction

At December 31, 2007, the Company had 31 vessels under construction. Advances for Vessel Construction consist of the following:

Progress Payments in 2006 $ 24,798,118

Capitalized Interest

259,580

Legal and Technical Supervision Costs

133,243

Balance Advances for Vessel Construction at December 31, 2006 $ 25,190,941

Progress Payments

309,053,973

Capitalized Interest

9,400,288

Legal and Technical Supervision Costs

1,209,760

Balance Advances for Vessel Construction at December 31, 2007 $ 344,854,962

As of December 31, 2006, the Company had two vessels under construction at a shipyard in Japan. During 2007, the Company entered into contracts for the construction of three additional vessels in Japan. These five vessels construction contracts are Japanese yen based and the total cost of these contracts in US dollars is $167,172,089. The Company will incur additional associated costs relating to the construction of these vessels. As of December 31, 2007, the Company has advanced $62,912,091 in progress payments towards these contracts. These vessels are expected to be delivered between 2008 and 2010.

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During 2007, the Company acquired the rights to 26 Supramax newbuilding vessels and options for 9 additional newbuilding vessels from Kyrini Shipping Inc., an unrelated privately held Greek shipping company. The total cost of the newbuilding vessel construction project in China is approximately $1,100,000,000 and associated capitalized financing, legal and technical supervision costs. This agreement includes construction contracts aggregating approximately $944,000,000 and consideration of $150,000,000 to purchase all of the issued and outstanding shares of the capital stock of 19 wholly owned subsidiaries of Kyrini Shipping Inc., a Liberian corporation whose primary assets consisted of contracts for the construction of the 26 Supramax vessels, time charter employment contracts for 21 of the 26 vessels and options for the construction of 9 additional Supramax vessels. On December 27, 2007, the Company exercised four of these options for a total contract price of $169,200,000. The options for the remaining five vessels expire on March 31, 2008.. The vessels, being built at a shipyard in China, are expected to be delivered between 2008 and 2012 and the Company will periodically advance construction payments to the shipyard and incur additional associated costs relating to the construction of these vessels. As of December 31, 2007, the Company has advanced $270,940,000 in progress payments towards these contracts. The assets acquired are required to be recorded at fair value. The amounts recorded as of December 31, 2007 are preliminary and subject to the completion of a valuation.

Note 4. Other Accrued Liabilities

Accrued Liabilities consist of:

December 31,
2007 December 31,
2006 Vessel Expenses $ 966,771

$ 623,935

Accrued Compensation Expense

800,000

536,460

Other Expenses

96,501

556,729

Balance $ 1,863,272

$ 1,717,124

Note 5. Debt

At December 31, 2007, the Company’s debt consisted of $597,242,890 in net borrowings under the amended Revolving Credit Facility. During 2007, upon the sale of a vessel, the Company repaid $12,440,000 of its outstanding debt.

During 2007, the Company amended its revolving credit facility to a $1,600,000,000 senior secured revolving credit facility underwritten by its sole lender. The revolving credit facility will be available to pay the remaining installments and associated costs relating to the construction of 35 Supramax vessels. The facility also provides working capital of up to $20,000,000; and provides funds for the acquisition of additional drybulk vessels. At December 31, 2007, $1,002,757,110 is available for additional borrowings under the credit facility.

The facility has a term of 10 years and is available in full until July 2012 when availability will begin to reduce in 10 semi-annual reductions of $75,000,000 with a full repayment in July 2017. The facility bears interest at the rate of 0.80% to 0.90% over LIBOR, depending upon the amount of debt drawn as a percentage of the value of the Company’s vessels. The Company will also pay on a quarterly basis a commitment fee of 0.25% per annum on the undrawn portion of the facility. In connection with the latest amendment to the revolving credit facility, the Company incurred arrangement fees aggregating $12,000,000.

For the year ended December 31, 2007, interest rates on our outstanding debt ranged from 4.97% to 6.56%, including a margin over LIBOR applicable under the terms of the amended revolving credit facility. The weighted average effective interest rate was 5.44%. Commitment fees incurred on the undrawn portion of the facility was 0.25% on the unused portions of the revolving credit facility.

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Interest Expense, exclusive of capitalized interest, consists of:

2007 2006 2005 Loan Interest $ 12,259,010

$ 9,694,244

$ 4,855,054

Commitment Fees

239,739

676,126

516,588

Eagle Ventures Note Interest

—

608,222

Amortization of Deferred Financing Costs

242,357

178,246

98,065

Write-off of Deferred Financing Costs

—

1,130,712

Total Interest Expense $ 12,741,106

$ 10,548,616

$ 7,208,641

Interest paid, excluding capitalized interest, amounted to $13,031,996 in 2007, $10,194,882 in 2006 and $5,465,233 in 2005.

Note 6. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents — The carrying amounts reported in the consolidated balance sheet for interest-bearing deposits approximate their fair value due to their short-term nature thereof.

Debt — The carrying amounts of borrowings under the revolving credit agreement approximate their fair value, due to the variable interest rate nature thereof.

Interest rate swaps — The fair value of interest rate swaps (used for hedging purposes) is the estimated amount that the Company would receive or pay to terminate the swaps at the reporting date.

Foreign currency swaps — The fair value of foreign currency swaps (used for hedging purposes) is the estimated amount that the Company would receive or pay to terminate the swaps at the reporting date.

Interest-Rate Swaps

The Company has entered into interest rate swaps to effectively convert a portion of its debt from a floating to a fixed-rate basis. Under these swap contracts, exclusive of applicable margins, the Company will pay fixed rate interest and receive floating-rate interest amounts based on three-month LIBOR settings. The swaps are designated and qualify as cash flow hedges.

As of December 31, 2007, the Company the Company has the following swap contracts outstanding:

– Notional amount of $100,000,000 with a fixed interest rate of 4.22% and maturity in September 2010

– Notional amount of $30,000,000 with a fixed interest rate of 4.54% and maturity in September 2010

– Notional amount of $84,800,000 with a fixed interest rate of 5.24% and maturity in September 2009

– Notional amount of $25,048,118 with a fixed interest rate of 4.74% and maturity in December 2011

– Notional amount of $25,776,443 with a fixed interest rate of 4.90% and maturity in March 2010

– Notional amount of $36,752,038 with a fixed interest rate of 5.22% and maturity in August 2012

– Notional amount of $202,340,000 with a fixed interest rate of 5.04% and maturity in August 2010

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– Notional amount of $10,995,000 with a fixed interest rate of 4.98% and maturity in August 2010

The Company records the fair value of the interest rate swaps as an asset or liability on its balance sheet. The effective portion of the swap is recorded in accumulated other comprehensive income. Accordingly, a liability of $13,531,883 and an asset of $2,936,804 has been recorded in Other Liabilities and Other Assets in the Company’s financial statements as of December 31, 2007 and December 31, 2006, respectively.

Foreign Currency Swaps

At December 31, 2006, the Company had outstanding foreign currency swap contracts for notional amounts aggregating 4.386 billion Japanese yen swapped into the equivalent of $42,310,465. During 2007, the Company swapped a total of 11.5 billion in Japanese yen currency exposure into the equivalent of $100,063,505. After giving effect to the deposits paid for the vessels in the newbuilding program, at December 31, 2007, the Company had outstanding foreign currency swap contracts for notional amounts aggregating 11.28 billion Japanese yen swapped into the equivalent of $104,259,998.

Note 7. Related Party Transactions

In 2005 the Company had a financial advisory agreement with Kelso & Company, L.P. Under the terms of the agreement the Company was to pay Kelso annual fees of up to $500,000. The agreement also provided for Kelso to be paid fees in connection with other financial advisory services. In June 2005, the Company terminated certain of its obligations under this agreement, including its obligation to pay the annual fees of $500,000, for a one-time payment of $1,000,000. The Company recorded an expense of $6,175,046 during 2005 for fees incurred under this agreement.

Note 8. Commitments and Contingencies

Vessel Technical Management Contract

The Company has technical management agreements for each of its vessels with independent technical managers. The Company paid average monthly technical management fees of $8,906 per vessel in 2007 and $8,583 per vessel in 2006.

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Operating Lease

In December 2005, the Company entered into a lease for office space. The lease is secured by a Letter of Credit backed by cash collateral of $124,616 which amount is recorded under Restricted Cash. The future minimum commitments under the lease for office space are as follows:

2008 $ 260,634

2009

270,814

2010

273,193

2011

68,858

Total $ 873,499

Note 9. Earnings Per Common Share

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period. Diluted net income per share gives effect to the assumed exercise of stock options and restricted stock units using the treasury stock method, unless the impact is antidulitive

2007 2006 2005 Net Income $ 52,243,981

$ 33,801,540

$ 6,653,400

Weighted Average Shares – Basic

42,064,911

34,543,836

21,968,824

Dilutive effect of stock options and restricted stock units

130,650

—

Weighted Average Shares – Diluted

42,195,561

34,543,862

21,968,824

Basic Earnings Per Share $ 1.24

$ 0.98

$ 0.30

Diluted Earnings Per Share $ 1.24

$ 0.98

$ 0.30

Note 10. Non-cash Compensation

Members of the Company’s management had been awarded profits interests in the Company’s former principal shareholder Eagle Ventures LLC that entitled such persons to an economic interest of up to 16.7% on a fully diluted basis (assuming all profits interests were vested) in any appreciation in the value of the assets of Eagle Ventures LLC (including shares of the Company’s common stock owned by Eagle Ventures LLC when sold). These profits interests diluted only the interests of owners of Eagle Ventures LLC, and did not dilute direct holders of the Company’s common stock. However, the Company’s statement of operations reflects non-cash charges for compensation related to the profits interests. The non-cash compensation charges were being recorded as an expense over the estimated service period in accordance with SFAS No. 123(R). As Eagle Ventures has sold substantially all of its holdings in the Company, the non-cash, non-dilutive charges relating to profits interests ended in the first quarter of 2007 and there will be no charges in future periods.

Note 11. Capital Stock

Common Stock

On June 28, 2006 the Company sold 2,750,000 shares of its common stock to certain institutional investors in a private placement at $12.00 per share raising gross proceeds of $33,000,000 before

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deduction of fees and expenses of $1,770,811. The Company used the proceeds from the offering to fund a portion of the acquisition of three vessels KESTREL I, TERN and JAEGER.

On March 6, 2007, the Company sold 5,400,000 of the Company’s common shares for $18.95 per share, raising gross proceeds of $102,330,000. On March 23, 2007, the Company raised an additional $7,841,870 in gross proceeds from the underwriter’s exercise of their over-allotment option for the sale of 413,819 of the Company’s common shares.

On September 21, 2007, the Company sold 5,000,000 of the Company’s common shares at a price of $25.90 per share, raising gross proceeds of $129,500,000.

The Company has incurred fees and expenses aggregating $5,642,117 for the shares sold in 2007.

Dividends

The Company’s current policy is to declare quarterly dividends to shareholders in March, May, August and November. Payment of dividends is limited by the terms of certain agreements which the Company and its subsidiaries are party to. The Company’s revolving credit facility permits it to pay quarterly dividends in amounts up to its quarterly earnings before extraordinary or exceptional items, interest, taxes, depreciation and amortization (Credit Agreement EBITDA), less the aggregate amount of interest incurred and net amounts payable under interest rate hedging agreements during the relevant period and an agreed upon reserve for dry-docking for the period, provided that there is not a default or breach of loan covenant under the credit facility and the payment of the dividends would not result in a default or breach of a loan covenant. Depending on market conditions in the dry bulk shipping industry and acquisition opportunities that may arise, the Company may be required to obtain additional debt or equity financing which could affect its dividend policy. However, any determination to pay dividends in the future will be at the discretion of the Board of Directors and will depend upon the Company’s results of operations, financial condition, capital restrictions, covenants and other factors deemed relevant by the Board of Directors.

In 2005, the Company declared and paid a quarterly dividend on its common stock in the amount of $0.54 per share in October 2005. The aggregate amount of this cash dividend payment was $14,661,000.

Note 12. 2005 Stock Incentive Plan

The Company adopted the 2005 Stock Incentive Plan for the purpose of affording an incentive to eligible persons. The 2005 Stock Incentive Plan provides for the grant of equity based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses, dividend equivalents and other awards based on or relating to the Company’s common stock to eligible non-employee directors, selected officers and other employees and independent contractors. The plan is administered by a committee of the Company’s Board of Directors.

An aggregate of 2.6 million shares of the Company’s common stock has been authorized for issuance under the plan. As of December 31, 2005, no grants had been made under the plan. On March 17, 2006, the Company granted options to purchase 56,666 shares of the Company’s common stock to its independent non-employee directors. These options vested and became exercisable on the grant date at an exercise price of $13.23 per share. During 2007, options to purchase 13,333 shares were exercised. All options expire ten years from the date of grant.

On January 12, 2007, the Company granted options to purchase 13,334 of the Company’s common shares to its independent non-employee directors and 524,000 of the Company’s common shares to

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members of its management. The options have an exercise price of $17.80 per share and they vested and became exercisable for the non-employee directors on the grant date while the options for management vest and become exercisable over three years. All options expire ten years from the date of grant.

For purposes of determining compensation cost for the Company’s stock option plans using the fair value method of FAS 123(R), the fair value of the options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 5%, dividend yield of 14%, expected stock price volatility factor of 0.45. The Company has recorded non-cash compensation charges of $448,037 and $47,033 relating to the fair value of these stock options in 2007 and 2006 respectively.

In 2006 and 2007, the Company granted Dividend Equivalent Rights Awards to its independent non-employee directors and members of its management. The Dividend Equivalent Rights award entitles the participant to receive a Dividend Equivalent payment each time the Company pays a dividend to the Company’s stockholders. The amount of the Dividend Equivalent payment is equal to the number of Dividend Equivalent Rights multiplied by the amount of the per share dividend paid by the Company on its stock on the date the dividend is paid.

On March 17, 2006, the Company granted a Dividend Equivalent Rights Award to its independent non-employee directors equivalent to 62,964 shares of the Company’s common stock. During 2007, the Company granted an additional Dividend Equivalent Rights Award to its independent non-employee directors equivalent to 45,370 shares of the Company’s common stock. In 2007, the Company also granted a Dividend Equivalent Rights Award to members of its management equivalent to 524,000 shares of the Company’s common stock. The Company recorded $1,210,457 and $95,267 as compensation expense for the Dividend Equivalent payments in 2007 and 2006, respectively.

In 2007 the Company granted 793,713 Restricted Stock Units to members of its management. Each Restricted Stock Unit granted to the participant represents the right to receive one share of the Company’s Common Stock as of the date of vesting, with such vesting to occur ratably over three years. The Restricted Stock Unit also entitles the participant to receive a Dividend Equivalent payment on the unvested portion of the underlying shares granted under the award, each time the Company pays a dividend to the Company’s stockholders. The fair value of the non-vested restricted stock at the grant date, equivalent to the market value at the date of the grants, is $21,912,547. Amortization of this charge, which is included in non-cash compensation expense, for the year ended December 31, 2007 was $670,928. The remaining expense for the each of the years ended 2008 and 2009 will be $7,304,182, and the expense for the year ended 2010 will be $6,633,255. The Company has also recorded $180,000 in compensation expense for the Restricted Stock Units Dividend Equivalent payments in 2007.

On January 15, 2008, the Company granted 30,000 shares of its common stock to its independent non-employee directors. The fair value of the stock at the grant date is equal to the closing stock price on that date. These grants vested on the issue date and the Company will record a non-cash compensation charge of $608,400 in the first quarter of 2008 as a result of this grant.

Note 13. Shareholder Rights Plan

On November 9, 2007, the Company’s board of directors adopted a shareholder rights plan and declared a dividend distribution of one Right for each outstanding share of our common stock to shareholders of record on the close of business on November 23, 2007. Each Right is nominally exercisable, upon the occurrence of certain events, for one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $.01 per share, at a purchase price of $125.00 per unit, subject to adjustment.

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Note 14. 2007, 2006 and 2005 Quarterly Results of Operations (Unaudited)

Consolidated Statement of Operations (Unaudited) Three Months
ended
March 31, Three Months
ended
June 30, Three
Months
ended
September 30, Three
Months
ended
December 31, 2007

Revenues, net of commissions $ 26,908,532

$ 28,338,047

$ 33,955,704

$ 35,612,521

Total Operating Expenses

16,067,004

14,601,064

15,580,744

18,234,292

Operating Income

10,841,528

13,736,983

18,374,960

17,378,229

Net Income

8,487,788

11,924,695

15,501,895

16,329,602

Basic Net Income Per Share $ 0.23

$ 0.29

$ 0.37

$ 0.35

Diluted Net Income Per Share $ 0.23

$ 0.29

$ 0.37

$ 0.35

Cash dividends declared and paid $ 0.51

$ 0.50

$ 0.47

$ 0.50

2006

Revenues, net of commissions $ 23,790,052

$ 24,105,383

$ 28,358,830

$ 28,393,932

Total Operating Expenses

11,262,744

12,910,077

16,442,389

21,052,658

Operating Income

12,527,308

11,195,306

11,916,441

7,341,274

Net Income

10,792,501

9,391,736

9,100,737

4,516,566

Basic Net Income Per Share $ 0.33

$ 0.28

$ 0.27

$ 0.13

Diluted Net Income Per Share $ 0.33

$ 0.28

$ 0.27

$ 0.13

Cash dividends declared and paid $ 0.57

$ 0.50

$ 0.51

Period from
January 26, 2005
(inception) to
March 31,(a) Three Months
ended
June 30, Three
Months
ended
September 30, Three
Months

ended
December 31, 2005

Revenues, net of commissions — $ 10,615,879

$ 21,137,615

$ 24,312,564

Total Operating Expenses —

19,565,687

12,160,758

10,333,186

Operating Income (Loss) —

(8,949,808 )

8,976,857

13,979,378

Net Income (Loss) — $ (12,088,544 ) $ 7,394,289

$ 12,153,868

Basic Net Income Per Share — $ (0.87 ) $ 0.27

$ 0.39

Diluted Net Income Per Share — $ (0.87 ) $ 0.27

$ 0.39

Cash dividends declared and paid —

—

$ 0.54

(a) The Company’s inception was on January 26, 2005 and it began vessel operations in April 2005. It issued shares to the public on June 23, 2005.

Note 15. Subsequent Events

Dividend

On February 27], 2008 the Company’s Board of Directors declared a cash dividend for the fourth quarter of 2007 of $0.50 per share to be paid on March 18, 2008 to all shareholders of record as of March 13, 2008. The aggregate amount of this cash dividend is $23,378,576.

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