UNITED
STATES
  SECURITIES
AND EXCHANGE COMMISSION
  WASHINGTON,
DC 20549
  FORM
20-F
 
 REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934
  OR
  S           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  For the
fiscal year ended December 31, 2009
  OR
  TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  For the
transition period from to
  OR
  SHELL
COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  Date of
event requiring this shell company report
  For the
transition period from to
  Commission
file number 001-09987
  B
+ H   O C E A N   C A R R I E R
S   L T D.
  (Exact
name of Registrant as specified in its charter)
  Liberia
  (Jurisdiction
of incorporation or organization)
  3rd
Floor, Par La Ville Place
  14 Par La
Ville Road
  Hamilton
HM 08, Bermuda
  (Address
of principal executive offices)
  Mr.
Michael S.  Hudner
  Tel:  441-295-6875,
Fax: 441-295-6796
  (Name,
Telephone, E-mail and/or Facsimile number and address of Company Contact
Person)
  Securities
registered or be registered pursuant to Section 12(b) of the Act:
  Title
      of each class
              Name
      of each exchange on which registeredCommon
      Stock, par value $.01 per share
              American
      Stock Exchange
 Securities
registered pursuant to Section 12(g) of the Act:  NONE
  Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:  NONE
  Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report.  5,555,426 shares of common stock were outstanding at December
31, 2009.
  Indicate
by check mark if the registrant is a well known seasoned issuer, as defined in
Rule 405 of the Securities Act.
  Yes  0                                           No  S
  If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
  Yes  0                                           No  S
  Note -
checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.
  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  S                                           No  0
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
  Yes  S                                           No  0
  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  0                                                      Accelerated
filer  0                                                      Non-accelerated
filer  S
  Indicate
by check mark which basis of accounting the registrant has used to prepare the
statements included in this filing:
  International
      Financial Reporting Standards as issued byUS
      GAAP   S
              the
      International Accounting Standards Board   0
              Other    0
 
 If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow:
  Item
17  0                                Item
18  0
  If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act.):
  Yes  0                                No   S
   
  Item
      1.
                IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
                1Item
      2.
                OFFER
      STATISTICS AND EXPECTED TIMETABLE
                1Item
      3.
                KEY
      INFORMATION
                1Item
      4.
                INFORMATION
      ON THE COMPANY
                17Item
      5.
                OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                29Item
      6.
                DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                43Item
      7.
                MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                45Item
      8.
                FINANCIAL
      INFORMATION
                48Item
      9.
                THE
      OFFER AND LISTING
                49Item
      10.
                ADDITIONAL
      INFORMATION
                50Item
      11.
                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                51Item
      12.
                DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                52Item
      13.
                DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                52Item
      14.
                MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
                52Item
      15.
                CONTROLS
      AND PROCEDURES
                52Item
      16A.
                AUDIT
      COMMITTEE FINANCIAL EXPERT
                53Item
      16B.
                CODE
      OF ETHICS
                53Item
      16C.
                PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                53Item
      16D.
                EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
                53Item
      16E.
                PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
                53Item
      16F.
                CHANGE
      IN REGISTRANT’S CERTIFYING ACCOUNTANT
                53Item
      16G.
                CORPORATE
      GOVERNANCE
                54Item
      17.
                FINANCIAL
      STATEMENTS
                54Item
      18.
                FINANCIAL
      STATEMENTS.
                54Item
      19.
                EXHIBITS
                54
   PART
I
  Item
              1.                IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS
  Not
Applicable.
  Item
              2.                OFFER
      STATISTICS AND EXPECTED TIMETABLE
  Not
Applicable.
  Item
              3.                KEY
      INFORMATION
  A.
              Selected
      financial data
  The
following selected consolidated financial data of B+H Ocean Carriers Ltd. (“we”
or the “Company”) and its subsidiaries are derived from and should be read in
conjunction with the Consolidated Financial Statements and notes thereto
appearing elsewhere in this Annual Report.
  Income
      Statement Data:
                Year
      ended December 31,2009
                2008
                2007
                2006
                2005Voyage,
      time and bareboat charter revenues
                $       77,733,764
                $     104,018,073
                $     110,917,094
                $       95,591,276
                $       71,388,561Other
      operating income
                29,946
                890,842
                1,499,737
                1,287,775
                514,491Voyage
      expenses
                (13,758,771)
                (28,097,799)
                (27,882,163)
                (14,792,322)
                (6,033,470)Vessel
      operating expenses
                (36,778,737)
                (46,845,031)
                (39,366,478)
                (34,159,942)
                (26,369,749)Depreciation,
      amortization and impairment
                (54,263,480)
                (32,563,838)
                (21,542,550)
                (16,812,342)
                (11,917,359)(Loss)
      gain on sale of vessels
                (35,067,228)
                13,262,590
                -
                -
                828,115General
      and administrative expenses
                (5,209,864)
                (6,035,828)
                (7,349,371)
                (5,254,323)
                (3,797,613)(Loss)
      income from operations
                (67,314,370)
                4,629,009
                16,276,269
                25,860,122
                24,612,976Interest
      expense, net
                (6,962,066)
                (10,093,310)
                (9,619,621)
                (8,298,750)
                (4,383,627)Income
      from investment in Nordan OBO 2 Inc.
                1,192,504
                3,933,495
                790,288
                1,262,846
                -Gain
      (loss) on derivative instruments
                707,074
                15,291,859
                (4,670,192)
                -
                -Other
      income (expense)
                1,582,366
                2,104,063
                (757,567)
                (49,905)
                (130,704)Net
      (loss) income
                $     (70,794,492)
                $       15,865,116
                $         2,019,177
                $       18,774,313
                $       20,098,645Basic
      earnings per share (1)
                $              (12.74)
                $                  2.36
                $                  0.29
                $                  2.67
                $                  3.44Diluted
      earnings per share (2)
                $              (12.74)
                $                  2.36
                $                  0.29
                $                  2.59
                $                  3.30
 
 (1)           Based
on weighted average number of shares outstanding of 5,555,426 in 2009, 6,723,832
in 2008, 6,994,843 in 2007, 7,027,343 in 2006 and 5,844,301 in
2005.
  (2)           Based
on the weighted average number of shares outstanding, increased in 2007, 2006,
and 2005 by the net effects of stock options using the treasury stock method and
by the assumed distribution of all shares to BHM under the 1998 Stock Incentive
Plan (See Item 7.B Related Party Transactions).  The denominator for
the diluted earnings per share calculation was 7,031,210 in 2007, 7,237,453 in
2006, and 6,092,522 in 2005.  There were no options outstanding at
December 31, 2009 and 2008.
  
 1
  Year
      ended December 31,Balance
      Sheet Data:
                2009
                2008
                2007
                2006
                2005Current
      assets
                $18,282,842
                $57,301,712
                $97,408,642
                $85,870,618
                $65,719,790Total
      assets
                195,178,315
                354,789,344
                400,833,474
                366,822,444
                281,423,286Current
      liabilities
                47,084,302
                208,641,819
                83,142,107
                63,688,354
                44,305,700Long-term
      liabilities
                76,656,895
                4,982,914
                185,254,745
                167,153,908
                117,063,472Working
      capital (deficit)
                (28,801,460)
                (151,340,107)
                14,266,535
                22,182,264
                21,414,090Shareholders'
      equity
                71,437,118
                141,164,611
                132,436,622
                135,980,182
                120,054,114
 
  
 B.
              Risk
      factors
  You
should consider carefully the following factors as well as other information set
forth in this report.  Some of the following risks relate principally
to the industry in which the Company operates and its business in
general.  Other risks relate principally to the securities market and
ownership of its stock.  Any of the risk factors could significantly
and negatively affect its business, financial condition or operating results and
the trading price of its stock.  You could lose all or part of your
investment.
  Industry
Specific Risk Factors
  The
cyclical nature of the international shipping industry may lead to volatile
changes in charter rates and vessel values, which may adversely affect the
Company’s earnings
  The
shipping industry is generally known to be cyclical.  Vessel values
and charter freight rates fluctuate widely and frequently, and the Company
expects they will continue to do so in the future.  Growth within the
largest economies will normally contribute to an increase in the ton-mile demand
in global seaborne trade.  These volatile and unpredictable changes
may adversely affect the Company’s earnings.
  Volatility
in the product tanker and bulk charter markets may have an adverse effect on
shipping company earnings and affect compliance with loan covenants
  Charter
rates for product tankers and bulk carriers rose then declined sharply in 2008,
and while the charter rates recovered slightly in 2009, remain low in
2010.   The recent volatility in charter rates in the product
tanker and bulk carrier markets has resulted in a general decline in the
industrywide vessel values, affecting cash flows, liquidity and compliance with
the covenants contained in loan agreements for most shipping
companies.
  The
operations of the Company on a worldwide basis may increase the volatility of
the Company’s business
  The
operations of the Company are conducted primarily outside the United States and
therefore may be affected by currency fluctuations and by changing economic,
political and governmental conditions in the countries where its vessels operate
and are registered.  Future hostilities or other political instability
in the regions in which the Company conducts its operations could affect the
Company’s trade patterns and could adversely affect the Company’s business and
results of operations.  Although the substantial majority of the
Company’s revenues and expenses have historically been denominated in U.S.
dollars, there can be no assurance that the portion of the Company’s business
conducted in other currencies will not increase in the future, which could
expand the Company’s exposure to losses arising from currency
fluctuations.
  2
 The
Company is subject to regulation and liability under environmental laws that
could require significant expenditures and affect its cash flows and net
income
  The
Company’s operations are subject to extensive regulation in the form of local,
national and foreign laws, as well as international treaties and conventions
that can subject us to material liabilities for environmental
events.
  The
operation of its vessels is subject to the requirements set forth in the
International Management Code for the Safe Operation of Ships and Pollution
Prevention (the “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
shipowner 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.  Currently, each of the vessels in the Company’s fleet
is ISM Code-certified.
  The U.S.
Oil Pollution Act of 1990, (“OPA90”), provides that owners, operators and
bareboat charterers are strictly liable for the discharge of oil in U.S. waters,
including the 200 nautical mile zone off the U.S. coasts.  OPA90
provides for unlimited liability in some circumstances, such as a vessel
operator’s gross negligence or willful misconduct.  However, in most
cases OPA90 limits liability to the greater of $1,200 per gross ton or $10
million per vessel.  OPA90 also permits states to set their own
penalty limits.  Most states bordering navigable waterways impose
unlimited liability for discharges of oil in their waters.
  The
International Maritime Organization (“IMO”) has adopted a similar liability
scheme that imposes strict liability for oil spills, subject to limits that do
not apply if the release is caused by the vessel owner’s intentional or reckless
conduct.
  The
United States has established strict deadlines for phasing out single-hull and
double-sided oil tankers, and both the IMO and the European Union have proposed
similar phase-out periods.  Under OPA90, oil tankers that do not have
double hulls will be phased out by 2015 and will not be permitted to come to
U.S. ports or trade in U.S. waters.  The Company’s product tanker,
representing approximately 11% by deadweight ton (“DWT”) of its combined fleet,
is a double-sided tanker and as such will be prohibited from carrying crude oil
and oil products in U.S. waters or certain other countries by 2010 unless an
exemption is obtained from the vessel’s flag state, in which case the
prohibition would be deferred until February 2015. The Company has obtained such
an exemption.
  An
amendment to the International Convention for the Prevention of Pollution from
Ships accelerated the phase out of single-hull and non-qualifying double-sided
tankers from 2015 to 2010 unless the relevant flag states extend the date to
2015.  Moreover, the IMO or other regulatory bodies may adopt further
regulations in the future that could adversely affect the useful lives of its
tankers as well as the Company’s ability to generate income from
them.  Other IMO regulation requires vegetable oils to be carried on
IMO type 2 chemical tankers.  The supramax tanker SACHEM was converted
to a bulk carrier in May 2008 and sold in January 2009.  The Company
may sell its Panamax product tanker at the end of the current time charter which
will be fourth quarter 2010 or first quarter of 2011.
  The
Panama Canal Authority (“PCA”) recently issued an Advisory announcing that it
may exercise its authority to deny the transit of a single-hull oil tanker which
has been granted a Flag State exemption from the phase-out provisions of MARPOL
(the International Convention for the Prevention of Pollution from
Ships).  If it does allow such transit, all additional costs or
resources provided to minimize the risk of environmental damage will be charged
to the vessel.  The PCA will evaluate each ship on a case-by-case
basis.
  These
requirements can affect the resale value or useful lives of the Company’s
vessels.  The Company believes that regulation of the tanker industry
will continue to become more stringent and more expensive for the Company and
its competitors.  Substantial violations of applicable requirements or
a catastrophic release from one of the Company’s vessels could have a material
adverse impact on its financial condition and results of operations as well as
its reputation in the crude oil and refined petroleum products sectors, and
could therefore negatively impact its ability to obtain charters in the
future.
  The
Company’s vessels are subject to inspection by a classification
society
  3
 The hull
and machinery of every commercial vessel must be classed by a classification
society authorized by its country of registry.  The classification
society certifies that a vessel is safe and seaworthy in accordance with the
applicable rules and regulations of the country of registry of the vessel and
the Safety of Life at Sea Convention.  The Company’s fleet is
currently enrolled with the American Bureau of Shipping, Bureau Veritas, Det
Norske Veritas, Class NKK and Lloyds.
  A vessel
must undergo Annual Surveys, Intermediate Surveys and Special
Surveys.  In lieu of a Special Survey, a vessel’s machinery may be on
a continuous survey cycle, under which the machinery would be surveyed
periodically over a five-year period.  The Company’s vessels are on
Special Survey cycles for hull inspection and continuous survey cycles for
machinery inspection.  Every vessel is also required to be drydocked
every two to three years for inspection of the underwater parts of such
vessel.
  If any
vessel does not maintain its class or fails any Annual Survey, Intermediate
Survey or Special Survey, the vessel will be unable to trade between ports and
will be unemployable and the Company could be in violation of certain covenants
in its loan agreements.  This would negatively impact its
revenues.
  Maritime
claimants could arrest its vessels, which could interrupt its 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 that vessel for
unsatisfied debts, claims or damages.  In many jurisdictions, a
maritime lienholder may enforce its lien by arresting a vessel through
foreclosure proceedings.  The arrest or attachment of one or more of
the Company’s vessels could interrupt its cash flow and require the Company to
pay large penalties to have the arrest lifted.
  In
addition, in some jurisdictions, such as South Africa, under the “sister 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 try to assert
“sister ship” liability against one vessel in its fleet for claims relating to
another of its ships.
  Governments
could requisition the Company’s vessels during a period of war or emergency,
resulting in loss of earnings
  A
government could requisition for title or seize the Company’s
vessels.  Requisition for title occurs when a government takes control
of a vessel and becomes the owner.  Also, a government could
requisition its vessels for hire.  Requisition for hire occurs when a
government takes control of a vessel and effectively becomes the charterer at
dictated charter rates.  Generally, requisitions occur during a period
of war or emergency.  Government requisition of one or more of its
vessels may negatively impact its revenues.
  The
shipping business is subject to terrorist attacks
  Terrorist
attacks such as the attacks on the United States on September 11, 2001, in
London on July 7, 2005 and in Mumbai on November 26, 2008 and the continuing
response of the United States and others to these attacks, as well as the threat
of future terrorist attacks in the United States or elsewhere, continue to cause
uncertainty in the world financial markets and may affect the Company’s
business, results of operations and financial condition.  The
continuing presence of the U.S. and other armed forces in Iraq and Afghanistan
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 the
Company’s ability to obtain additional financing on acceptable terms 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
have also affected vessels trading in regions such as the South China
Sea.  Any of these occurrences could have a material adverse impact on
the Company’s operating results, revenues and costs.
  4
 Terrorist
attacks may in the future also negatively affect the Company’s operations and
financial condition and directly impact the Company’s vessels or
customers.  Future terrorist attacks could result in increased
volatility of the financial markets in the United States and globally and could
result in an economic recession in the United States or the
world.  Any of these occurrences could have a material adverse impact
on the Company’s operating results, revenue and costs.
  Acts
of piracy on ocean-going vessels have recently increased in frequency, which
could adversely affect our business
  Acts of
piracy have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea and in the Gulf of Aden off the coast of
Somalia.  Throughout 2009, the frequency of piracy incidents has
increased significantly, particularly in the Gulf of Aden off the coast of
Somalia.  If these piracy attacks result in regions in which our
vessels are deployed being characterized by insurers as “war risk” zones, as the
Gulf of Aden temporarily was in May 2008, or Joint War Committee (“JWC”) “war
and strikes” listed areas, premiums payable for such coverage could increase
significantly and such insurance coverage may be more difficult to
obtain.  Crew costs, including those due to employing onboard security
guards, could increase in such circumstances.  In addition, while we
believe the charterer remains liable for charter payments when a vessel is
seized by pirates, the charterer may dispute this and withhold charter hire
until the vessel is released.  A charterer may also claim that a
vessel seized by pirates was not “on-hire” for a certain number of days and it
is therefore entitled to cancel the charter party, a claim that we would
dispute.  We may not be adequately insured to cover losses from these
incidents, which could have a material adverse effect on us.  In
addition, detention hijacking as a result of an act of piracy against our
vessels, or an increase in cost, or unavailability of insurance for our vessels,
could have a material adverse impact on our business, financial condition,
results of operations and cash flows.
  The
volatility in the bulk and product carrier charter market has adversely affected
our revenues, earnings and profitability
  The
Baltic Drybulk Index, or BDI, declined from a high of 11,793 in May 2008 to a
low of 663 in December 2008, which represents a decline of 94%. The BDI fell
over 70% during the month of October 2008 alone. Over the comparable period of
May through December 2008, the high and low of the Baltic Panamax Index and the
Baltic Capesize Index represent a decline of 96% and 99%,
respectively.  Between January and December 2009, the BDI reached a
high of 4,661, though this level still represented a decline of 61% and 58%
respectively, in the Panamax and Capesize sector from the historic highs reached
in 2008, while at April 22, 2010, the BDI stands at approximately 3,242. The
decline and volatility in charter rates is due to various factors, including the
limited availability of trade financing for purchases of commodities carried by
sea, which has resulted in a significant decline in cargo shipments, and the
excess supply of iron ore in China, which has resulted in falling iron ore
prices and increased stockpiles in Chinese ports. The decline and volatility in
charter rates in the drybulk market also affects the value of our Combination
Carriers (OBO’s) vessels, which are impacted by the trends of drybulk charter
rates, and earnings on our charters, and similarly, affects our cash flows,
liquidity and compliance with the covenants contained in our loan
agreements.
  The
market value of our vessels may decrease, which would require us to raise
additional capital in order to remain compliant with our loan covenants and loan
covenant waiver agreements, and could result in the loss of our vessels and
adversely affect our earnings and financial condition.
  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.
  Charter
hire rates for bulk carriers and product tankers have decreased since mid-2008,
which may adversely affect our earnings
  The bulk
shipping industry and product tanker sectors are cyclical with attendant
volatility in charter hire rates and profitability.  For example, the
degree of charter hire rate volatility among different types of bulk carriers
and product tankers has varied widely.  After reaching historical
highs in mid-2008, charter hire rates for Panamax and Capesize bulk carriers
reached near historically low levels in December 2008, improved slightly
throughout 2009 and remain low in 2010.  Because we charter some of
our vessels pursuant to spot market voyage charters, or spot charters, we are
exposed to changes in spot market charter rates for bulk carriers and such
changes may affect our earnings and the value of our bulk carriers at any given
time.  We may not be able to successfully charter our vessels in the
future or renew existing charters at rates sufficient to allow us to meet our
obligations.  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.
  5
 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;
  Availability
      of financial facilities, such as letters of
  credit;
  Currency
      exchange rates; and
  Weather.
  The
factors that influence the supply of vessel capacity include:
  The
      number of new building deliveries;
  Port
      and canal congestion;
  The
      scrapping rate of older vessels;
  Vessel
      casualties; and
  The
      number of vessels that are out of
service.
  We
anticipate that the future demand for our vessels will be dependent upon
continued economic growth in the world’s economies, including China and India,
seasonal and regional changes in demand, changes in the capacity of the global
carrier fleet and the sources and supply of cargoes to be transported by
sea.  The capacity of the global carrier fleet seems likely to
increase and economic growth may not continue.  Adverse economic,
political, social or other developments could have a material adverse effect on
our business and operating results.
  Disruptions
in world financial markets and the resulting governmental action in the United
States and in other parts of the world could have a further material adverse
impact on our results of operations, financial condition and cash flows, and
could cause the market price of our common stock to decline
  The
United States and other parts of the world are exhibiting weak economic trends
and have been in a recession.  For example, the credit markets in the
United States have experienced significant contraction, de-leveraging and
reduced liquidity, and the U.S. federal government and state governments have
implemented and are considering a broad variety of governmental action and new
regulation of the financial markets.  Securities and futures markets
and the credit markets are subject to comprehensive statutes, regulations and
other requirements.  The Securities and Exchange Commission, other
regulators, self-regulatory organizations and exchanges are authorized to take
extraordinary actions in the event of market emergencies, and may effect changes
in law or interpretations of existing laws.
  6
 Recently,
a number of financial institutions have experienced serious financial
difficulties and, in some cases, have entered bankruptcy proceedings or are in
regulatory enforcement actions.  The uncertainty surrounding the
future of the credit markets in the United States and the rest of the world has
resulted in reduced access to credit worldwide.
  We face
risks attendant to changes in economic environments, changes in interest rates,
and instability in the banking and securities markets around the world, among
other factors.  Major market disruptions and the current adverse
changes in market conditions and regulatory climate in the United States and
worldwide may adversely affect our business or impair our ability to borrow
amounts under our credit facilities or any future financial
arrangements.  We cannot predict how long the current market
conditions will last.  However, these recent and developing economic
and governmental factors, together with the concurrent decline in charter rates
and vessel values, may have a material adverse effect on our results of
operations, financial condition or cash flows, have caused the price of our
common stock to decline from its price in early 2008 and could cause the price
of our common stock to decline further.
  Economic
slowdown in the Asia Pacific region could exacerbate the effect of recent
slowdowns in the economies of the United States and the European Union and may
have a material adverse effect on the Company’s business, financial condition
and results of operations
  The
Company anticipates a significant number of the port calls made by our vessels
will continue to involve the loading or discharging of bulk commodities in ports
in the Asia Pacific region.  As a result, negative changes in economic
conditions in any Asia Pacific country, particularly in China, may exacerbate
the effect of recent slowdowns in the economies of the United States and the
European Union and may have a material adverse effect on our business, financial
condition 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. China was the driving force of the dry
bulk market last year with iron ore and coal imports increasing year on year at
a record pace. For 2010, we expect commodity demand to increase at a strong pace
as the year on year gains in Chinese and Indian imports will be supplemented by
a return to normality of the rest of the world.    The
Company’s business, financial condition and results of operations, as well as
its future prospects, will likely be materially and adversely affected by a
further economic downturn in any of these countries.
  Rising
fuel prices may adversely affect our profits
  While we
do not bear the cost of fuel (bunkers) consumed by the Company’s vessels when
employed on time charters, fuel is a significant, if not the largest, expense in
our shipping operations when vessels are employed on spot
charters.  Changes in the price of fuel may adversely affect our
profitability.  The price and supply of fuel is unpredictable and
fluctuates based on events outside our control, including geopolitical
developments, supply and demand for oil and gas, actions by OPEC and other oil
and gas producers, war and unrest in oil producing countries and regions,
regional production patterns and environmental concerns.  Further,
fuel may become much more expensive in the future, which may reduce the
profitability and competitiveness of our business versus other forms of
transportation, such as truck or rail.
  Company
Specific Risk Factors
  The
Company’s business is dependent on the markets for product tankers and OBOs,
which can be cyclical
  The
Company’s fleet consists of five ore/bulk/oil combination carriers (“OBOs”) and
one product tanker.  Thus, the Company is dependent upon the petroleum
product industry, the vegetable oil and chemical industries and the dry bulk
industry as its primary sources of revenue.  These industries have
historically been subject to substantial fluctuation as a result of, among other
things, economic conditions in general and demand for petroleum products, steel
and iron ore, coal, vegetable oil and chemicals, in particular.  Any
material seasonal fluctuation in the industry or any material diminution in the
level of activity therein could have a material adverse effect on the Company’s
business and operating results.  The profitability of these vessels
and their asset value results from changes in the supply of and demand for such
capacity.  The factors affecting such supply and demand are described
in more detail under “Industry Specific Risk Factors” above.
  7
 The
recent downturns in the product tanker and bulk charter markets had an adverse
effect on compliance with loan covenants and led to losses on sales of
vessels
  Charter
rates for product tankers and bulk carriers rose then declined sharply in 2008,
and, while the rates recovered slightly in 2009, remain low in
2010.   The recent volatility in charter rates in the product
tanker and bulk carrier markets has resulted in a general decline in the
industrywide vessel values, affecting cash flows, liquidity and compliance with
the covenants contained in loan agreements for most shipping companies. The
Company sold four of its product tankers and two bulk carriers during 2009 due
to the deteriorating shipping market, and the sale proceeds were applied to
related loan facilities.  The Company incurred losses in 2009 relating
to the sale of vessels aggregating $35.1 million.
  Double
sided vessels are being phased out
  The
Company’s product tanker, representing approximately 11% by DWT of its combined
fleet, is a double-sided vessel.  Under the United States Oil
Pollution Act of 1990, all oil tankers that do not have double hulls will be
phased out over a 20-year period (1995-2015) based on size, age and place of
discharge, unless retrofitted with double-hulls, and will not be permitted to
come to United States ports or trade in United States waters.  The
European Union has required the phase out of single hull vessels carrying “heavy
oil” and as a result single hull vessels are prohibited from carrying this
product to European Union ports.  In addition, due to regulations
adopted by the IMO under Annex I (oil) of MARPOL, single hull and double-sided
vessels carrying petroleum products tankers will be phased out over the course
of the period between 2005 and 2010 unless, in the case of double-sided vessels
an exemption is obtain from the flag state.  As a result of the MARPOL
regulations, the Company expects that its remaining double sided product tanker
will be unable to carry crude oil and petroleum products in many markets after
2010 unless it obtains an exemption.  The Company currently expects
that it will obtain such an exemption, which will permit the vessel to trade
until February 2015.  While the Company currently believes that it
will obtain such an exemption, it is possible that it will not.  If
the Company is unable to obtain such exemption, then its business and results of
operation could be materially adversely affected.
  The
Company’s fleet consists of second-hand vessels which are expensive to maintain
and carry limited warranties
  All of
the vessels comprising the Company’s fleet were acquired
second-hand.  The Company intends to purchase additional second-hand
vessels.  In general, expenditures necessary for maintaining a vessel
in good operating condition increase as the age of the vessel
increases.  Moreover, second-hand vessels typically carry very limited
warranties with respect to their condition as compared to warranties available
for newer vessels.  Because of improvements in engine technology,
older vessels are typically less fuel efficient than newer
vessels.  Changes in governmental regulations, safety or other
equipment standards may require expenditures for alterations to existing
equipment or the addition of new equipment to the vessels and restrict the
cargoes that the vessels may transport.  There can be no assurance
that market conditions will justify such expenditures or enable the Company to
generate sufficient income or cash flow to allow it to continue to make such
expenditures.
  The
Company is subject to financial risks related to the purchase of additional
vessels
  The
Company’s current business strategy includes the acquisition of newer,
high-quality second-hand vessels. Despite recent declines in vessel prices, such
vessels may be purchased at relatively high vessel prices.  If charter
rates remain low or fall in the future, the Company may not be able to recover
its investment in the new ships or even satisfy its payment obligations on its
debt facilities that will be increased to finance the purchase of such new
vessels.  There can also be no assurance that such acquisitions will
be available on terms favorable to the Company or, that, if acquired, such
second-hand vessels will have sufficient useful lives or carry adequate
warranties or that financing for such acquisitions will be
available.
  If
the Company acquires additional vessels and those vessels are not delivered on
time or are delivered with significant defects, the Company’s earnings and
financial condition could suffer
  8
 The
Company expects to acquire additional vessels in the future.  A delay
in the delivery of any of these vessels to the Company or the failure of the
contract counterparty to deliver a vessel at all could cause it to breach its
obligations under a related time charter and could adversely affect its
earnings, its financial condition and the amount of dividends, if any, that it
pays in the future.  The delivery of these vessels could be delayed or
certain events may arise which could result in the Company not taking delivery
of a vessel, such as a total loss of a vessel, a constructive loss of a vessel,
or substantial damage to a vessel prior to delivery.  In addition, the
delivery of any of these vessels with substantial defects could have similar
consequences.
  The
Company may be subject to loss and liability for which it may not be fully
insured
  The
operation of any ocean-going vessel carries an inherent risk, without regard to
fault, of catastrophic marine disaster, mechanical failure, collision and
property losses to the vessel.  The business of the Company is
affected by the risk of environmental accidents, the risk of cargo loss or
damage, the risk of business interruption because of political action in foreign
countries, labor strikes and adverse weather conditions, all of which could
result in loss of revenues, increased costs or loss of reputation.
  The
Company maintains, and intends to continue to maintain, insurance consistent
with industry standards against these risks.  The Company procures
hull and machinery insurance, protection and indemnity insurance, which includes
environmental damage and pollution insurance coverage and war risk insurance for
its fleet.  The Company also maintains  insurance against
loss of hire  which covers certain business interruptions that result
in the loss of use of a vessel.  There can be no assurance that all
risks will be adequately insured against, that any particular claim will be paid
out of such insurance or that the Company will be able to procure adequate
insurance coverage at commercially reasonable rates in the
future.  More stringent environmental and other regulations may result
in increased costs for, or the lack of availability of, insurance against the
risks of environmental damage, pollution, damages asserted against the Company
or the loss of income resulting from a vessel being removed from
operations.  The Company’s insurance policies contain deductibles for
which the Company will be responsible and limitations and exclusions which may
increase its costs or lower its revenue.
  The
Company places a portion of its Hull and Machinery insurance with Northampton
Assurance Ltd (“NAL”), the great majority of which NAL reinsures with market
underwriters.  NAL is a subsidiary of Northampton Holdings Ltd., a
major stockholder.  Although the reinsurers are investment grade
insurance companies, it is possible that they might default in the settlement of
a claim.  Although the Company believes that NAL is adequately
capitalized, in the event the reinsurers default, NAL, as primary insurer, may
be unable in turn to settle the Company’s claim.
  Moreover,
even if insurance proceeds are paid to the Company to cover the financial losses
incurred following the occurrence of one of these events, there can be no
assurance that the Company’s business reputation, and therefore its ability to
obtain future charters, will not be materially adversely affected by such
event.  Such an impact on the Company’s business reputation could have
a material adverse effect on the Company’s business and results of
operations.  The Company may not be able to obtain adequate insurance
coverage for its fleet in the future and the insurers may not pay particular
claims.
  Risks
involved with operating ocean-going vessels could affect the Company’s business
and reputation, which would adversely affect its revenues and stock
price
  The
operation of an ocean-going vessel carries inherent risks.  These
risks include the possibility of:
  marine
      disaster;
  piracy;
  environmental
      accidents;
  cargo
      and property losses or damage; and
  business
      interruptions caused by mechanical failure, human error, war, terrorism,
      political action in various countries, labor strikes or adverse weather
      conditions.
  9
 Any of
these circumstances or events could increase the Company’s costs or lower its
revenues.  The involvement of its vessels in an oil spill or other
environmental disaster may harm its reputation as a safe and reliable vessel
operator and lead to a loss of customers and revenue.
  The
Company may suffer adverse consequences from the fluctuation in the market value
of its vessels
  The fair
market value of its vessels may increase and decrease significantly depending on
a number of factors including:
  ·
              supply
      and demand for products, including crude oil, petroleum products,
      vegetable oil, ores, coal and
grain;
  ·
              general
      economic and market conditions affecting the shipping
      industry;
  ·
              competition
      from other shipping companies;
  ·
              types
      and sizes of vessels;
  ·
              other
      modes of transportation;
  ·
              cost
      of building new vessels;
  ·
              governmental
      or other regulations;
  ·
              prevailing
      level of charter rates; and
  ·
              the
      cost of retrofitting or modifying second hand vessels as a result of
      charterer requirements, technological advances in vessel design or
      equipment, or otherwise.
  If the
Company sells vessels at a time when vessel prices have fallen, the sale may be
at less than the vessel’s carrying amount on its financial statements, resulting
in a loss and a reduction in earnings.
  In
addition, the Company’s mortgage indebtedness at December 31, 2009 of $94.1
million is secured by mortgages on the existing fleet of vessels of the Company
and its subsidiaries.  If the market value of its fleet declines, the
Company may not be in compliance with certain provisions of its existing credit
facilities and the Company may not be able to refinance its debt or obtain
additional financing. If the Company is unable to pledge additional collateral,
its lenders could accelerate its debt and foreclose on its fleet or the Company
will otherwise be obliged to sell vessels on unfavorable terms.
  Purchasing
and operating previously owned, or secondhand, vessels may result in increased
operating costs and vessels off-hire, which could adversely affect its
earnings
  The
Company’s inspection of secondhand vessels prior to purchase does not provide us
with the same knowledge about their condition and cost of required (or
anticipated) repairs that the Company would have had if these vessels had been
built for and operated exclusively by us.  Generally, the Company does
not receive the benefit of warranties on secondhand vessels.
  In
general, the costs to maintain a vessel in good operating condition increase
with the age of the vessel.  As of December 31, 2009, the average age
of the vessels in its fleet was 19.9 years.  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, safety or other equipment standards related to the age of vessels
may require expenditures for alterations or the addition of new equipment, to
its vessels and may restrict the type of activities in which the vessels may
engage.  The Company cannot assure that, as its vessels age, market
conditions will justify those expenditures or enable us to operate its vessels
profitably during the remainder of their useful lives.  If the Company
sell vessels, the Company is not certain that the price for which the Company
sells them will equal at least their carrying amount at that time.
  10
 The
Company’s vessels may suffer damage and the Company may face unexpected
drydocking costs, which could affect its cash flow and financial
condition
  If the
Company’s 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 Company may have to pay drydocking costs that its
insurance does not cover.  The loss of earnings while these vessels
are being repaired and repositioned, as well as the actual cost of these
repairs, would decrease its earnings.  In addition, space at
drydocking facilities is sometimes limited and not all drydocking facilities are
conveniently located.  The Company may be unable to find space at a
suitable drydocking facility or our vessels may be forced to travel to a
drydocking facility that is not conveniently located to our vessels’
positions.  The loss of earnings while these vessels are forced to
wait for space or to steam to more distant drydocking facilities would decrease
our earnings.
  The
market for OBO charters is highly competitive
  The OBO
industry is fragmented and only approximately 75 vessels between 50,000 and
125,000 DWT are in existence. In this size range, the largest ownership
group has twelve OBOs.  Otherwise, these vessels are owned
in fleets of six vessels or less.  Combination trading
capable OBOs will carry wet or dry cargoes depending on freight rates
achievable and compete with regular oil tankers and dry cargo vessels in
their respective size/tdw segments. The Company’s OBOs are still maintained and
certified to perform combination trades (alternating between wet and dry
cargoes) when market conditions make such trading attractive.
  The
Company competes principally with other vessel owners through the global tanker
and dry bulk charter market, which is comprised of shipbrokers representing both
charterers and ship owners.  Charter parties are quoted on either an
open or private basis.  Requests for quotations on an open charter are
usually made by major oil companies on a general basis to a large number of
vessel operators.  Competition for open charters can be intense and
involves vessels owned by operators such as other major oil companies, oil
traders and independent ship owners.  Requests for quotations on a
private basis are made to a limited number of vessel operators and are greatly
influenced by prior customer relationships.  The Company bids for both
open and private charters.
  Competition
generally intensifies during times of low market activity when several vessels
may bid to transport the same cargo.  Many of the Company’s
competitors have greater financial strength and capital resources, as well as
younger vessels.
  The
Company may be dependent on the spot market for charters
  The
Company’s vessels are currently operated on time charters but are likely to
operate on spot market voyages commencing in February 2011.  The spot
charter market is highly competitive and spot charter rates are subject to
greater fluctuation than time charter rates.  There can be no
assurance that the Company will be successful in keeping its vessels fully
employed in the spot market or that future spot charter rates will be sufficient
to enable the Company’s vessels to be operated profitably.
  The Company is dependent upon certain
significant customers
  At
December 31, 2009, the Company’s largest three accounts receivable balances
represented 85% of total accounts receivable.  At December 31, 2008, the
Company’s largest three accounts receivable balances represented 72% of total
accounts receivable.  At June 2, 2010, approximately 86% of the 2010
revenue to date and expected total revenue through 2011 for the fleet emanates
from a single charterer whose obligations have been guaranteed by affiliated
investment grade corporations.  The allowance for doubtful accounts was
approximately $181,000 and $253,000 at December 31, 2009 and 2008,
respectively.  To date, the Company’s actual losses on past due receivables
have not exceeded our estimate of bad debts.
  11
 The
Company will depend entirely on B+H Management Ltd. (“BHM”) to manage and
charter its fleet
  The
Company subcontracts the commercial and the technical management of its fleet,
including crewing, maintenance and repair to BHM, an affiliated company with
which the Company is under common control.  The loss of BHM’s services
or its failure to perform its obligations to the Company could materially and
adversely affect the results of its operations.  Although the Company
may have rights against BHM if it defaults on its obligations to the Company,
shareholders will have no recourse against BHM.  Further, the Company
expects that it will need to seek approval from lenders to change its
manager.
  BHM
is a privately held company and there is little or no publicly available
information about it
  The
ability of BHM to continue providing services for the Company’s benefit will
depend in part on BHM’s own financial strength.  Circumstances beyond
its control could impair BHM’s financial strength, and because it is privately
held it is unlikely that information about its financial strength would become
public unless BHM began to default on its obligations.  As a result,
an investor in the Company’s shares might have little advance warning of
problems affecting BHM, even though these problems could have a material adverse
effect on us.
  The
Company’s Chairman and Chief Executive Officer has affiliations with BHM which
could create conflicts of interest
  The
Company’s majority shareholders, which are affiliated with Michael S. Hudner,
own 66.7% of the Company and also own BHM.  Mr. Hudner is also BHM’s
Chairman and Chief Executive Officer.  These responsibilities and
relationships could create conflicts of interest between us, on the one hand,
and BHM, on the other hand.  These conflicts may arise in connection
with the chartering, purchase, sale and operations of the vessels in its fleet
versus vessels managed by other companies affiliated with BHM and Mr.
Hudner.  In particular, BHM may give preferential treatment to vessels
that are beneficially owned by related parties because Mr. Hudner and members of
his family may receive greater economic benefits.
  If
the Company fails to manage its recent contracts or planned growth properly, the
Company may not be able to successfully expand its market share
  The
Company sold four of its product tankers and two bulk carriers during 2009 due
to the deteriorating shipping market, and the sale proceeds were applied to
related loan facilities.  The Company may in the future increase the
size of its fleet via acquisitions.  An expansion may impose
additional responsibilities on its management and staff, and the management and
staff of BHM.  This may necessitate that the Company and BHM increase
the number of personnel.  BHM may have to increase its customer base
to provide continued employment for the vessels to be acquired.
  The
Company’s growth will depend on:
  locating
      and acquiring suitable vessels;
  identifying
      and consummating acquisitions or joint
ventures;
  integrating
      any acquired business successfully with its existing
      operations;
  enhancing
      its customer base;
  managing
      its expansion; and
  obtaining
      required financing.
  Growing
any business by acquisition presents numerous risks such as undisclosed
liabilities and obligations, difficulty experienced in obtaining acquisition
financing, obtaining additional qualified personnel and managing relationships
with customers and suppliers and integrating newly acquired operations into
existing infrastructures.  The Company cannot give any assurance that
the Company will be successful in executing its growth plans or that the Company
will not incur significant expenses and losses in connection
therewith.
  12
 There
is no assurance that the Company will be able to pay dividends
  The
Company has a policy of investment for future growth and does not anticipate
paying cash dividends on the common stock in the foreseeable
future.  Declaration and payment of any dividend is subject to the
discretion of its Board of Directors.  The timing and amount of
dividend payments will be dependent upon its earnings, financial condition, cash
requirements and availability, fleet renewal and expansion, restrictions in its
loan agreements, the provisions of Liberia law affecting the payment of
distributions to shareholders and other factors.  If there is a
substantial decline in the product market or bulk charter market, its earnings
would be negatively affected thus limiting its ability to pay
dividends.  Liberia law generally prohibits the payment of dividends
other than from surplus or while a company is insolvent or would be rendered
insolvent upon the payment of such dividend.  The Company’s current
floating rate facilities restrict the Company from paying
dividends.
  Servicing
future debt would limit funds available for other purposes such as the payment
of dividends
  If the
Company acquires new vessels, the Company will incur additional secured
debt.  The Company will need to dedicate a portion of its cash flow
from operations to pay the principal and interest on its debt.  These
payments limit funds otherwise available for working capital, capital
expenditures and other purposes.  The need to service its debt may
limit funds available for other purposes, including distributing cash to its
shareholders, and its inability to service debt could lead to acceleration of
its debt and foreclosure on its fleet.  The Company has not entered
into agreements for future fleet expansion or required relating financing, and
there can be no assurance it will be able to enter into any such agreements on
favorable terms to the Company or at all.
  The
Company’s loan agreements contain restrictive covenants that may limit the
Company’s liquidity and corporate activities
  The
Company’s loan agreements impose operating and financial restrictions on
us.  These restrictions may limit its ability to, among other
things:
  incur
      additional indebtedness;
  create
      liens on its assets;
  sell
      capital stock of its subsidiaries;
  engage
      in mergers or acquisitions;
  make
      capital expenditures;
  change
      the management of its vessels or terminate or materially amend the
      management agreement relating to each vessel; and sell its
      vessels.
  Therefore,
the Company may need to seek permission from our lenders in order to engage in
some corporate actions.  The Company’s lenders’ interests may be
different from ours, and the Company cannot guarantee that we will be able to
obtain the lenders’ permission when needed.  This may prevent us from
taking actions that are in the Company’s best interest.
  The
Company is a holding company and depends on the ability of its subsidiaries to
distribute funds to us in order to satisfy its financial obligations or to make
dividend payments
  The
Company is a holding company and its subsidiaries, which are all wholly-owned by
us, conduct all of their operations and own all of their operating
assets.  The Company has no significant assets other than the equity
interests in its wholly-owned subsidiaries.  As a result, its ability
to make dividend payments depends on its subsidiaries and their ability to
distribute funds to us.  If the Company is unable to obtain funds from
its subsidiaries, its Board of Directors may exercise its discretion not to pay
dividends.  The Company does not currently plan to pay
dividends.
  13
 The
Company may not generate sufficient gross revenue to operate profitably or to
service its indebtedness
  The
Company had net loss of $70.8 million on gross revenue of $77.8 million in
2009.  Loss from vessel operations was $67.3 million for the year-end
December 31, 2009.  At December 31, 2009, the Company had
approximately $107.6 million in indebtedness.  There can be no
assurance that future charter rates will be sufficient to generate adequate
revenues or that the Company will be able to maintain efficiency levels to
permit the Company to operate profitably or to service its
indebtedness.
  The
Company’s charterers may terminate or default on their charters, which could
adversely affect results of operations and cash flow
  The terms
of the Company’s charters vary as to which events or occurrences will cause a
charter to terminate or give the charterer the option to terminate the charter,
but these generally include a total or constructive total loss of the related
vessel, the requisition for hire of the related vessel or the failure of the
related vessel to meet specified performance criteria.  In addition,
the ability of each of its charterers to perform its obligations under a charter
will depend on a number of factors that are beyond its control.  These
factors may include general economic conditions, the condition of a specific
shipping market sector, the charter rates received for specific types of vessels
and various operating expenses.  The costs and delays associated with
the default by a charterer of a vessel may be considerable and may adversely
affect the Company’s business, results of operations, cash flows and financial
condition.
  The
Company cannot predict whether its charterers will, upon the expiration of their
charters, recharter its vessels on favorable terms or at all.  If the
Company’s charterers decide not to recharter its vessels, the Company may not be
able to recharter them on terms similar to the terms of current
charters.
  If the
Company receives lower charter rates under replacement charters or are unable to
recharter all of the Company’s vessels, the Company’s business, results of
operations, cash flows and financial condition may be adversely
affected.
  In
addition, in depressed market conditions, the Company’s charterers may no longer
need a vessel that is currently under charter or may be able to obtain a
comparable vessel at lower rates.  As a result, charterers may seek to
renegotiate the terms of their existing charter parties or avoid their
obligations under those contracts.  Should a counterparty fail to
honor its obligations under agreements with the Company, the Company could
sustain significant losses which could have a material adverse effect on the
Company’s business, results of operations, cash flows and financial
condition.
  The
creditworthiness and performance of its time charterers may affect its financial
condition and its ability to obtain additional debt financing and pay
dividends
  The
Company’s income is derived from the charter of its vessels.  Any
defaults by any of its charterers could adversely impact its financial
condition, including its ability to service its debt and pay
dividends.  In addition, the actual or perceived credit quality of its
charterers, and any defaults by them, may materially affect its ability to
obtain the additional capital resources that the Company will require purchasing
additional vessels or may significantly increase its costs of obtaining such
capital.  The Company’s inability to obtain additional financing at
all or at a higher than anticipated cost may materially affect its results of
operation and its ability to implement its business strategy.
  As
the Company expands its business, the Company will need to improve its
operations and financial systems, staff and crew; and if the Company cannot
improve these systems or recruit suitable employees, its performance may be
adversely affected
  The
Company’s current operating and financial systems may not be adequate as the
Company implements its plan to expand the size of its fleet, and its attempts to
improve those systems may be ineffective.  In addition, as the Company
expands its fleet, the Company will have to rely on BHM to recruit suitable
additional seafarers and shoreside administrative and management
personnel.  The Company cannot assure you that BHM will be able to
continue to hire suitable employees as the Company expands its
fleet.  If BHM’s unaffiliated crewing agent encounters business or
financial difficulties, the Company may not be able to adequately staff its
vessels.  If the Company is unable to operate its financial and
operations systems effectively or to recruit suitable employees as the Company
expand its fleet, its performance may be adversely affected.
  14
 In
the highly competitive international shipping industry, the Company may not be
able to compete for charters with new entrants or established companies with
greater resources
  The
Company employs its vessels 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 the
Company does.  Competition for the transportation of dry bulk and
liquid cargo can be intense and depends on price, location, size, age, condition
and the acceptability of the vessel and its managers to the
charterers.  Due in part to the highly fragmented market, competitors
with greater resources could enter and operate larger fleets through
consolidations or acquisitions that may be able to offer better prices and
fleets.
  The
Company may be unable to attract and retain key management personnel and other
employees in the shipping industry, which may negatively affect the
effectiveness of its management and its results of operations
  The
Company’s success depends to a significant extent upon the abilities and efforts
of its management team.  The Company has no employment contract with
its Chairman and Chief Executive Officer, Michael S.  Hudner, or any
other key individual; instead all management services are provided by
BHM.  The Company’s success will depend upon BHM’s ability to hire and
retain key members of its management team.  The loss of any of these
individuals could adversely affect its business prospects and financial
condition, and the Company has no key man insurance on any of these
individuals.  Difficulty in hiring and retaining personnel could
adversely affect its results of operations.
  The
Company is subject to the reporting requirements of Sarbanes-Oxley
  Effective
for its first fiscal year ending on or after December 15, 2010, the Company is
subject to full compliance with all provisions of the Sarbanes-Oxley Act of
2002.  As directed by Section 404 of the Sarbanes-Oxley Act of 2002
(“Section 404”), the Securities and Exchange Commission adopted rules requiring
public companies to include a report of management on the Company’s internal
control over financial reporting in their annual reports on Form
20-F.  Such a report is required to contain an assessment by
management of the effectiveness of a company’s internal controls over financial
reporting.  In addition, the independent registered public accounting
firm auditing a public company’s financial statements must attest to and report
on the effectiveness of the Company’s internal controls over financial
reporting.  While the Company expended significant resources in
developing the necessary documentation and testing procedures required by
Section 404, there is a risk that the Company will not comply with all of the
requirements imposed by Section 404.  If the Company cannot maintain
the required controls, the Company may be unable to comply with the requirements
of Section 404 in a timely manner.  This could result in an adverse
reaction in the financial markets due to a loss of confidence in the reliability
of its financial statements, which could cause the market price of its common
stock to decline and make it more difficult for us to finance its
operations.
  The
Company may have to pay tax on U.S. source income, which would reduce its
earnings
  Under the
U.S. Internal Revenue Code of 1986, or the Code, 50% of the gross shipping
income of a vessel-owning or chartering corporation, such as the Company and its
subsidiaries, that is attributable to transportation that begins or ends, but
that does not begin and end, in the United States is characterized as United
States source shipping income and as such is subject to a four percent United
States federal income tax without allowance for deduction, unless that
corporation qualifies for exemption from tax under Section 883 of the Code and
the Treasury Regulations promulgated thereunder in August 2003.  Such
Treasury Regulations became effective on January 1, 2005, for calendar year
taxpayers such as the Company and its subsidiaries.
  The
Company expects that it will qualify for this statutory tax exemption and the
Company will take this position for U.S. federal income tax return reporting
purposes.  If the Company is not entitled to this exemption under
Section 883 for any taxable year, it would be subject for those years to a 4%
United States federal income tax on its U.S. source shipping
income.  The imposition of this taxation could have a negative effect
on its business and would result in decreased earnings available for
distribution to its shareholders.
  15
 U.S.
tax authorities could treat the Company as a “passive foreign investment
company,” which could have adverse U.S. federal income tax consequences to U.S.
holders
  A foreign
corporation will be treated as a “passive foreign investment company,” or PFIC,
for U.S. 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”.  U.S. shareholders of a PFIC are
subject to a disadvantageous U.S. 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
its proposed method of operation, the Company does not believe that the Company
will be a PFIC with respect to any taxable year.  In this regard, the
Company intends to treat the gross income the Company derives or is deemed to
derive from its time chartering activities as services income, rather than
rental income.  Accordingly, the Company believes that its income from
time chartering activities does not constitute “passive income”, and the assets
that the Company owns and operates 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 its proposed
method of operation.  Accordingly, no assurance can be given that the
U.S. Internal Revenue Service, or IRS, or a court of law will accept its
position, and there is a risk that the IRS or a court of law could determine
that the Company is a PFIC.  Moreover, no assurance can be given that
the Company would not constitute a PFIC for any future taxable year if there
were to be changes in the nature and extent of its operations.
  If the
IRS were to find that the Company is or has been a PFIC for any taxable year,
its U.S. shareholders will face adverse U.S. tax consequences.  Under
the PFIC rules, unless those shareholders make an election available under the
Code (which election could itself have adverse consequences for such
shareholders, as discussed, above such shareholders would be liable to pay U.S.
federal income tax at the then prevailing income tax rates on ordinary income
plus interest upon excess distributions and upon any gain from the disposition
of its common shares, as if the excess distribution or gain had been recognized
ratably over the shareholder’s holding period of its common shares.
  The
Company may not be exempt from Liberian taxation, which would materially reduce
its net income and cash flow by the amount of the applicable tax
  The
Republic of Liberia enacted a new income tax law generally effective as of
January 1, 2001 (the “New Act”), which repealed, in its entirety, the prior
income tax law in effect since 1977 pursuant to which the Company and its
Liberian subsidiaries, as non-resident domestic corporations, were wholly exempt
from Liberian tax.
  In 2004,
the Liberian Ministry of Finance issued regulations pursuant to which a
non-resident domestic corporation engaged in international shipping such as
ourselves will not be subject to tax under the New Act retroactive to January 1,
2001 (the “New Regulations”).  In addition, the Liberian Ministry of
Justice issued an opinion that the New Regulations were a valid exercise of the
regulatory authority of the Ministry of Finance.  Therefore, assuming
that the New Regulations are valid, the Company and its Liberian subsidiaries
will be wholly exempt from tax as under Prior Law.
  If the
Company were subject to Liberian income tax under the New Act, the Company and
its Liberian subsidiaries would be subject to tax at a rate of 35% on its
worldwide income.  As a result, its net income and cash flow would be
materially reduced by the amount of the applicable tax.  In addition,
shareholders would be subject to Liberian withholding tax on dividends at rates
ranging from 15% to 20%.
  The
Company is incorporated in the Republic of the Liberia, which does not have a
well-developed body of corporate law
  The
Company’s corporate affairs are governed by its Articles of Incorporation and
By-laws and by the Liberia Business Corporations Act, or 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 Republic of the Liberia interpreting the BCA.  The rights
and fiduciary responsibilities of directors under the law of the Republic of the
Liberia are not as clearly established as the rights and fiduciary
responsibilities of directors under statutes or judicial precedent in existence
in certain United States jurisdictions.  Shareholder rights may differ
as well.  While the BCA does specifically incorporate the
non-statutory law, or judicial case law, of the State of Delaware and other
states with substantially similar legislative provisions, its public
shareholders may have more difficulty in protecting their interests in the face
of actions by the management, directors or controlling shareholders than would
shareholders of a corporation incorporated in a United States
jurisdiction.
  16
 Because
most of its employees are covered by industry-wide collective bargaining
agreements, failure of industry groups to renew those agreements may disrupt the
Company’s operations and adversely affect its earnings
  All of
the seafarers on the ships in its fleet are covered by industry-wide collective
bargaining agreements that set basic standards.  The Company cannot
assure you that these agreements will prevent labor
interruptions.  Any labor interruptions could disrupt its operations
and harm its financial performance.
  Item
              4.                INFORMATION
      ON THE COMPANY
  A.
              History
      and development of the Company
  B+H Ocean
Carriers Ltd. (the “Company”) was organized on April 28, 1988 to engage in the
business of acquiring, investing in, owning, operating and selling vessels for
dry bulk and liquid cargo transportation. When referred to in the context of
vessel ownership, the “Company” shall mean the wholly-owned subsidiaries of B+H
Ocean Carriers Ltd. that are registered owners.  As of December 31,
2009, the Company owned and operated one Panamax product tanker, one bulk
carrier and five OBOs.  See ITEM 4. INFORMATION ON THE COMPANY A.
History and Development of the Company – 2009 acquisitions, disposals and other
significant transactions.  The Company also owns a 50% interest in a
company which is the disponent owner of a 1992-built 72,389 DWT OBO, effected
through a lease structure.  Each vessel accounts for a significant
portion of the Company’s revenues.  On July 29, 2008, the Company,
through a wholly-owned subsidiary, entered into an agreement to acquire an
Accommodation Field Development Vessel (“AFDV”) upon completion of the
construction of the vessel. The contract for the AFDV was cancelled on March 30,
2010 due to a failure by the seller to meet its contractual
obligations.
  The
Company owns one 68,500 DWT Panamax product tanker.  Product tankers
are single-deck oceangoing vessels designed to carry simultaneously a number of
segregated liquid bulk commodities, such as refined petroleum products,
vegetable oils, caustic soda and molasses.  The Company’s fleet of
OBOs are between 74,000 and 84,000 DWT.  OBOs are combination carriers
used to transport liquid, iron ore or bulk products such as coal, grain,
bauxite, phosphate, sugar, steel products and other dry bulk
commodities.
  The
Company is organized as a corporation in Liberia, and its principal executive
office is located at ParLaVille Place, 14 Par-La-Ville Road, Hamilton HM 08,
Bermuda (telephone number (441) 295-6875).
  Recent
acquisitions, disposals and other significant transactions
  Fleet
Developments
  The
Company sold four of its product tankers and two bulk carriers during 2009 due
to the deteriorating shipping market, and the sale proceeds were applied to
related loan facilities.  On January 15, 2009, the Company, through a
wholly-owned subsidiary, sold the M/V ALGONQUIN for $17.7 million.  No
gain or loss was recorded as the carrying value was written down to estimated
fair value during 2008.
  On August
21, 2009, the Company, through a wholly-owned subsidiary, sold M/T AGAWAM for
$3.8 million. The sale resulted in a loss of approximately $3.0 million in the
third quarter of 2009.
  17
 On August
27, 2009, the Company, through a wholly-owned subsidiary, sold M/T PEQUOD for
$4.0 million. The sale resulted in a loss of approximately $5.1 million in the
third quarter of 2009.
  On
September 18, 2009, the Company, through a wholly-owned subsidiary, sold M/T
ANAWAN for $4.1 million. The sale resulted in a loss of approximately $1.6
million in the third quarter of 2009.
  On
October 29, 2009, the Company, through a wholly-owned subsidiary, sold M/V CAPT
THOMAS J HUDNER for $9.9 million.  The sale resulted in a loss of
$23.1 million and it is reflected in the accompanying 2009 Consolidated
Statement of Operations.
  On
November 19, 2009, the Company, through a wholly-owned subsidiary, sold M/T
AQUIDNECK for $3.9 million.  The sale resulted in a loss of $2.3
million and it is reflected in the accompanying 2009 Consolidated Statement of
Operations.
  The
Company, through a wholly-owned subsidiary, sold M/V SACHEM in January 2010, and
since the vessel was deemed an asset held for sale, recorded an $18.0 million
impairment charge on the vessel in the fourth quarter of 2010.
  Repurchase
of 2006 Bonds
  During
the first quarter of 2009, the Company purchased additional unsecured bonds
issued by the Company in 2006 due in 2013 in the initial principal amount of $25
million (the “2006 Bonds”) with a face value of $2.0 million for $600,000 and
realized a $1.4 million gain.  As a result of this debt extinguishment
and purchase of 2006 Bonds in prior years, total 2006 Bonds payable at March 31,
2009 was $13.5 million.  The Company has not purchased any 2006 Bonds
since March 31, 2009.  SEE NOTE 7 to the 2009 Consolidated Statement
of Operations.
  Waivers
and Amendments
  The
Company entered into covenant waivers and amendment agreements with respect to
the following credit facilities:
  1)           $202
million reducing revolving credit facility with Nordea Bank Norge ASA, as Agent,
dated August 29, 2006 (the “OBO Holdings Loan Facility Agreement”)
  On
December 14, 2009, the lenders to the OBO Holdings Loan Facility Agreement
agreed on a temporary basis to waive breaches of certain financial covenants and
the scheduled repayment of $5.1 million due on December 15, 2009 until January
15, 2010.  On January 29, 2010, a new set of financial covenants were
adopted under an amendment to the OBO Holdings Loan Facility
Agreement.  Under the new set of financial covenants, the Company is
required to maintain (a) Value Adjusted Equity (as such term is defined therein)
of not less than $30 million, (b) positive working capital as of June 30,
2010, (c) Cash and Cash Equivalents (as such terms are defined therein) of not
less than $4 million and, as of September 30, 2010, $6 million, and (d) an
equity-to-assets ratio of not less than 25%.  In addition, the
aggregate market value of the vessels securing this facility must be at least
135% of the outstanding balance of the loan. The lenders also agreed to defer
50% of amounts due in March 2010 ($2.55 million), payable in six equal quarterly
installments, the first which is payable in June 2010.  The final
maturity date of the loan is in December 2011.
  2)           $8
million term loan facility with Nordea Bank Norge ASA, as Agent, dated September
5, 2006 (the “Seapowet Loan Facility Agreement”)
  On
December 14, 2009, the lenders agreed on a temporary basis to waive breaches of
certain financial covenants. On January 29, 2010, a new set of financial
covenants were adopted under an amendment to the Seapowet Loan Facility
Agreement.  These financial covenants are the same as those adopted in
the OBO Holdings Loan Facility Agreement. The final maturity date of the loan is
in September 2010.
  3)           $27.3
million term loan facility with Bank of Nova Scotia dated January 24, 2007 (the
“Sakonnet Loan Facility Agreement”)
  On April
15, 2010, the lender agreed to waive a breach of the Ratio of EBIDTA to Fixed
Charges covenant through January 1, 2011.  On April 15, 2010, a new
set of financial covenants were adopted under an amendment to the Sakonnet Loan
Facility Agreement.  These financial covenants are the same as those
adopted in the OBO Holdings Loan Facility Agreement. The final maturity date of
the loan is in January 2015.
  18
 4)           $3.975
million term loan facility with Bank of Scotland, dated February 11, 2010 (the
“OBO  Holdings Junior Loan Facility Agreement”)
  On
February 11, 2010, the Company drew down a $3.975 million loan, the proceeds of
which were applied towards repayment of the residual balance of the Loan
Agreement dated September 7, 2007 by and between Boss Tankers, Ltd., Bank of
Scotland and certain other financial institutions listed therein relating to a
term loan facility of $25,500,000 (the “Boss Tankers Loan Facility
Agreement”).  This loan will be due in December 2011 and is secured by
second mortgages on OBO BONNIE SMITHWICK, OBO RIP HUDNER, OBO SEAROSE G, OBO
ROGER M JONES and M/T SAGAMORE.
  Acquisition
in 2008 and termination of Accommodation Field Development Vessel
(“AFDV”)
  On July
29, 2008, the Company, through a wholly-owned subsidiary, Straits Offshore Ltd.
(“Straits”), entered into an agreement to acquire an Accommodation Field
Development Vessel (“AFDV”) upon completion of the construction of the vessel
for $35.9 million.  On September 4, 2008, an amendment was agreed
under which the price was increased by $2.6 million to $38.5 million to provide
for the purchase of additional equipment.  The purchase was secured by
a $25.8 million letter of credit, which was secured, inter alia, by the common
shares of such wholly-owned subsidiary and its contracted rights relating to the
AFDV.  In addition, Straits placed an order for a 300 ton crane and an
eight point mooring system for the AFDV at a cost of Euros 3.4 million
(approximately $4.8 million) and SGD $3.1 million (approximately $2.2 million),
respectively.  The contract was canceled by the Company on March 30,
2010 due to the seller being unable to meet its contractual
obligations.
  Other
2008 acquisitions and disposals
  On May
13, 2008, the Company, through a wholly-owned subsidiary, entered into a $30
million term loan facility to refinance the previously completed conversion of
M/V SACHEM to a bulk carrier.  The loan was secured by the vessel, by
an assignment of a time charter and by an assignment of certain put option
contracts entered into by the Company to mitigate the risk associated with the
possibility of falling time charter rates.
  On
February 26, 2008, the Company, through a wholly-owned subsidiary, sold M/T
ACUSHNET for $7.8 million.  The book value of the vessel of
approximately $4.6 million was classified as held for sale at December 31,
2007.  A realized gain of $3.0 million is reflected in the
Consolidated Statements of Operations for the year ended December 31,
2008.
  On March
27, 2008, the Company, through a wholly-owned subsidiary, sold M/V SACHUEST for
$31.3 million.  The book value of the vessel of approximately $20.4
million was classified as held for sale at December 31, 2007.  A
realized gain of $10.3 million is reflected in the Consolidated Statements of
Operations for the year ended December 31, 2008.
  B.
              Business
      overview
  Management
of the Company
  The
shipowning activities of the Company are managed by BHM under a Management
Services Agreement (the “Management Agreement”) dated June 27, 1988 and amended
on October 10, 1995 and on June 1, 2009, subject to the oversight and direction
of the Company’s Board of Directors.
  The
shipowning activities of the Company entail three separate functions, all under
the overall control and responsibility of BHM: (1) the shipowning function,
which is that of an investment manager and includes the purchase and sale of
vessels and other shipping interests; (2) the marketing and operations function
which involves the deployment and operation of the vessels; and (3) the vessel
technical management function, which encompasses the day-to-day physical
maintenance, operation and crewing of the vessels.
  19
 BHM
employs Navinvest Marine Services (USA) Inc. (“NMS”), a Connecticut corporation,
under an agency agreement, to assist with the performance of certain of its
financial reporting and administrative duties under the Management
Agreement.
  The
Management Agreement may be terminated by the Company in the following
circumstances: (i) certain events involving the bankruptcy or insolvency of BHM;
(ii) an act of fraud, embezzlement or other serious criminal activity by Michael
S.  Hudner with respect to the Company; (iii) gross negligence or
willful misconduct by BHM; or (iv) a change in control of BHM.
  Marketing
and operations of vessels
  The
Company time charters vessels to Product Transport Corporation Ltd (“PROTRANS”),
a Bermuda corporation and wholly-owned subsidiary of the Company.
  BHM is
the manager of PROTRANS and has delegated certain administrative, marketing and
operational functions to NMS and Product Transport (S) Pte.  Ltd, a
Singapore corporation, under agency agreements.
  PROTRANS
subcharters the vessels on a voyage charter or time charter basis to third party
charterers.  Under a voyage charter, PROTRANS agrees to provide a
vessel for the transport of cargo between specific ports in return for the
payment of an agreed freight per ton of cargo or an agreed lump sum
amount.  Voyage costs, such as canal and port charges and bunker
(fuel) expenses, are the responsibility of PROTRANS.  A single voyage
charter (generally three to ten weeks) is commonly referred to as a spot market
charter.  Under a time charter, PROTRANS places a vessel at the
disposal of a subcharterer for a given period of time in return for the payment
of a specified rate per DWT capacity per month or a specified rate of hire per
day.  Voyage costs are the responsibility of the
subcharterer.  In both voyage charters and time charters, operating
costs (such as repairs and maintenance, crew wages and insurance premiums) are
the responsibility of the shipowner.
  Voyage
and time charters can be for varying periods of time, ranging from a single trip
to terms approximating the useful life of a vessel, depending on the evaluation
of market trends by PROTRANS and by subcharterers.  Long-term charters
afford greater assurance that the Company will be able to cover their costs
(including depreciation, debt service, and operating costs), and afford
subcharterers greater stability of transportation costs.  Operating or
chartering a vessel in the spot market affords both PROTRANS and subcharterers
greater speculative opportunities, which may result in high rates when ships are
in demand or low rates (possibly insufficient to cover costs) when ship
availability exceeds demand.  Charter rates are affected by world
economic conditions, international events, weather conditions, strikes,
government policies, supply and demand, and many other factors beyond the
control of PROTRANS and the Company.
  Vessel
Technical Management
  BHM and
its subsidiary B+H Equimar Singapore Pte Ltd (“BHES”), a Singapore Corporation,
are the technical managers of all of the Company’s vessels, under technical
management agreements.    The vessel technical manager is
responsible for all technical aspects of day-to-day vessel operations, including
physical maintenance, provisioning and crewing, and receives compensation
$16,762 per Panamax product tanker or OBO per month, which may be adjusted
annually for any increases in the Consumer Price Index.  Such
supervision includes the establishment of operating budgets and the review of
actual operating expenses against budgeted expenses on a regular
basis.
  Insurance
and Safety
  The
business of the Company is affected by a number of risks, including mechanical
failure of the vessels, collisions, property loss to the vessels, cargo loss or
damage and business interruption due to political circumstances in foreign
countries, hostilities and labor strikes.  In addition, the operation
of any ocean-going vessel is subject to the inherent possibility of catastrophic
marine disaster, including oil spills and other environmental mishaps, and the
liabilities arising from owning and operating vessels in international
trade.  OPA90, by imposing potentially unlimited liability upon
owners, operators and bareboat charterers for certain oil pollution accidents in
the United States, has made liability insurance more expensive for ship owners
and operators and has also caused insurers to consider reducing available
liability coverage.
  20
 The
Company maintains hull and machinery and war risks insurance, which include the
risk of actual or constructive total loss, protection and indemnity insurance
with mutual assurance associations and loss of hire insurance, on all its
vessels.  The Company believes that its current insurance coverage is
adequate to protect it against most accident-related risks involved in the
conduct of its business and that it maintains appropriate levels of
environmental damage and pollution insurance coverage.  Currently, the
available amount of coverage for pollution is $1 billion per vessel per
incident.  However, there can be no assurance that all risks are
adequately insured against, that any particular claim will be paid or that the
Company will be able to procure adequate insurance coverage at commercially
reasonable rates in the future.
  Competition
  The OBO
industry is fragmented and at December 31, 2009 only approximately 75
vessels between 50,000 and 125,000 DWT are in existence. In this size
range, the largest ownership group has twelve OBOs. 
Otherwise, these vessels are owned in fleets of six vessels or
less.  Combination trading capable OBOs will carry wet or dry
cargoes depending on freight rates achievable and compete with regular oil
tankers and dry cargo vessels in their respective size/tdw segments. The
Company’s OBOs are still maintained and certified to perform combination trades
(alternating between wet and dry cargoes) when market conditions make such
trading attractive.
  The
Company competes principally with other handysize vessel owners through the
global tanker charter market, which is comprised of tanker brokers representing
both charterers and ship owners.  Charterparties are quoted on either
an open or private basis.  Requests for quotations on an open charter
are usually made by major oil companies on a general basis to a large number of
vessel operators.  Competition for open charters can be intense and
involves vessels owned by operators such as other major oil companies, oil
traders and independent ship owners.  Requests for quotations on a
private basis are made to a limited number of vessel operators and are greatly
influenced by prior customer relationships.  The Company bids for both
open and private charters.
  Competition
generally intensifies during times of low market activity when several vessels
may bid to transport the same cargo.  In these situations, the
Company’s customer relationships are paramount, often allowing the Company the
opportunity of first refusal on the cargo.  The Company believes that
it has a significant competitive advantage in the handysize tanker market as a
result of the quality and type of its vessels and through its close customer
relationships, particularly in the Atlantic and in the Indo-Asia Pacific
Region.  Some of the Company’s competitors, however, have greater
financial strength and capital resources.
  Seasonality
  Although
the Company’s liquid cargo trade is affected by seasonal oil uses, such as
heating in winter and increased automobile use in summer, the volume of liquid
cargo transported generally remains the same through the year, with rates firmer
in midwinter and midsummer and softer in the spring.
  Inspection
by Classification Society
  The hull
and machinery of every commercial vessel must be classed by a classification
society authorized by its country of registry.  The classification
society certifies that a vessel is safe and seaworthy in accordance with the
applicable rules and regulations of the country of registry of the vessel and
the Safety of Life at Sea Convention.  The Company’s fleet is
currently enrolled with the American Bureau of Shipping, Bureau Veritas, Det
Norske Veritas, Class NKK and Lloyds.
  A vessel
must be inspected by a surveyor of the classification society every year
(“Annual Survey”), every two and a half years (“Intermediate Survey”) and every
five years (“Special Survey”).  In lieu of a Special Survey, a
ship-owner has the option of arranging with the classification society for the
vessel’s machinery to be on a continuous survey cycle, under which the machinery
would be surveyed over a five-year period.  The Company’s vessels are
on Special Survey cycles for hull inspection and continuous survey cycles for
machinery inspection.  Every vessel 15 years and older is also
required to be dry-docked at least twice in a five-year period for inspection of
under-water parts of the vessel.
  If any
defects are found in the course of a survey or dry-docking, the classification
survey or will require immediate rectification or issue a “condition of class”
under which the appropriate repairs must be carried out within a prescribed time
limit.  The hull Special Survey includes measurements of the thickness
of the steel structures in the hull of the vessel.  Should the
thickness be found to be less than class requirements, steel renewals will be
prescribed.  Substantial expense may be incurred on steel renewal to
pass a Special Survey if the vessel has suffered excessive
corrosion.
  21
 In
January 1997, BHES was awarded its International Safety Management (“ISM”)
Document of Compliance by Lloyd’s Register, certifying that BHES complied with
the requirements of the International Management Code for the Safe Operation of
Ships and for Pollution Prevention (ISM Code).  Following the award of
the Document of Compliance (“DOC”), each individual vessel in the fleet under
management was audited by Lloyds Register for compliance with the documented
BHES management procedures on which the DOC is based.  After the
audit, each vessel was awarded a ship specific Safe Management Certificate
(“SMC”).  Both the DOC and the SMC are subject to annual internal and
external audits over a five year period.  A successful renewal audit
of the DOC, valid until November 2, 2012, was conducted by ABS on November 2,
2007.
  Regulation
  The
business of the Company and the operation of its vessels are materially affected
by government regulation in the form of international conventions, national,
state and local laws and regulations in force in the jurisdictions in which the
vessels operate, as well as in the country or countries of their
registration.  Because such conventions, laws and regulations are
subject to revision, it is difficult to predict what legislation, if any, may be
promulgated by any country or authority.  The Company also cannot
predict the ultimate cost of complying with such conventions, laws and
regulations, or the impact thereof on the resale price or useful life of its
vessels.  Various governmental and quasi-governmental agencies require
the Company to obtain certain permits, licenses and certificates with respect to
the operation of its vessels.  Subject to the discussion below and to
the fact that the required permits, licenses and certificates depend upon a
number of factors, the Company believes that it has been and will be able to
obtain all permits, licenses and certificates material to the conduct of its
operations.
  The
Company believes that the heightened environmental and quality concerns of
insurance underwriters, regulators and charterers will impose greater inspection
and safety requirements on all vessels in the tanker market.  The
Company’s vessels are subject to both scheduled and unscheduled inspections by a
variety of governmental and private interests, each of whom may have a different
perspective and standards.  These interests include U.S. Coast Guard,
port state, classification society, flag state administration (country of
registry) and charterers, particularly major oil companies which conduct vetting
inspections and terminal operators.
  Environmental
Regulation-IMO.  Under the International Maritime Organization (“IMO”)
adopted regulations under Annex I (oil) of MARPOL (the International Convention
for the Prevention of Pollution from Ships), crude tankers of 20,000 DWT and
above and product tankers of 30,000 DWT and above which did not have protective
segregated ballast tanks (PL/SBT) and which were 25 years old, were to be fitted
with double sides and double bottoms.  Product tankers of 30,000 DWT
and above, which did have SBT, were exempt until they reached the age of 30. PL/
In addition, existing tankers were subject to an Enhanced Survey
Program.  Under revised MARPOL regulations, single hull crude tankers
of 20,000 DWT and above and single hull product carriers of 30,000 DWT and above
were to be phased out by certain scheduled dates between 2003-2015, depending on
age, type of oil carried and vessel construction.  The revised
regulations applied only to tankers carrying petroleum products and thus did not
apply to tankers carrying noxious liquid substances, vegetable or animal oils or
other non-petroleum liquids.
  Under
further revisions to the MARPOL regulations, adopted on December 4, 2003, the
final phasing out date for Category 1 tankers (principally those not fitted with
PL/SBT) was brought forward to 2005 and the final phasing out date for Category
2 tankers (principally those fitted with PL/SBT) was brought forward to 2010
from 2015.  The Condition Assessment Scheme (CAS) was also to be made
applicable to all single hull tankers of 15 years or older, rather than just to
Category 1 tankers continuing to trade after 2005 and to Category 2 tankers
continuing to trade after 2010.  Flag states were permitted to allow
continued operation of Category 2 tankers beyond 2010 subject to satisfactory
results from the CAS and provided that the continued operation did not extend
beyond 2015 or the date on which the vessel reached 25 years of
age.  Flag states were also permitted to allow continued operation of
Category 2 tankers beyond 2010 if they were fitted with qualifying double sides
or double bottoms, provided that the continued operation did not extend beyond
the date on which the vessel reached 25 years of age.  Notwithstanding
these rights of flag states to allow continued operation beyond 2010, port
states were permitted to deny entry by single hull tankers after 2010 and
tankers with qualifying double sides or double bottoms after 2015. The Company’s
double-sided Panamax product tanker is allowed to carry crude oil and petroleum
products in many markets through February 2015
  22
 MARPOL
regulations were also introduced in respect of the carriage of Heavy Grade Oil
(HGO).  HGO includes crude oil having a density higher than 900kg/m3
at 15 degrees C and fuel oils having a density higher than 900kg/m3 at 15
degrees C or a kinematic viscosity higher than 180mm2/s at 50 degrees
C.  Notwithstanding these regulations, any party to MARPOL would be
entitled to deny entry of single hull tankers carrying HGO, which had been
otherwise allowed to carry such cargo under MARPOL, into the ports and offshore
terminals under its jurisdiction.  Subject to certain exceptions, all
HGO to or from European Union ports must be carried in tankers of double hull
construction
  In short,
the IMO regulations, which have been adopted by over 150 nations, including many
of the jurisdictions in which our tankers operate, provide for, among other
things, phase-out of single-hulled tankers and more stringent inspection
requirements; including, in part, that:
  tankers
      between 25 and 30 years old must be of double-hulled construction or of a
      mid-deck design with double-sided construction, unless: (1) they have wing
      tanks or double-bottom spaces not used for the carriage of oil, which
      cover at least 30% of the length of the cargo tank section of the hull or
      bottom; or (2) they are capable of hydrostatically balanced loading
      (loading less cargo into a tanker so that in the event of a breach of the
      hull, water flows into the tanker, displacing oil upwards instead of into
      the sea);
  tankers
      30 years old or older must be of double-hulled construction or mid-deck
      design with double sided construction;
and
  all
      tankers are subject to enhanced
inspections.
  Also,
under IMO regulations, a tanker must be of double-hulled construction or a
mid-deck design with double-sided construction or be of another approved design
ensuring the same level of protection against oil pollution if the
tanker:
  is
      the subject of a contract for a major conversion or original construction
      on or after July 6, 1993;
  commences
      a major conversion or has its keel laid on or after January 6, 1994;
      or
  completes
      a major conversion or is a new building delivered on or after July 6,
      1996.
  The IMO
has also negotiated international conventions that impose liability for oil
pollution in international waters and a signatory’s territorial
waters.  Annex VI to the MARPOL Convention addresses air pollution
from ships and became effective May 19, 2005.  Annex VI set limits on
sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits
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.  Vessels built before
2002 are not obligated to comply with regulations pertaining to nitrogen oxide
emissions.
  The
Company believes that all our vessels are currently compliant in all material
respects with these regulations.  Additional or new conventions, laws
and regulations may be adopted that could adversely affect our business, cash
flows, results of operations and financial condition.
  The IMO
also has adopted the International Convention for the Safety of Life at Sea, or
SOLAS Convention, which imposes a variety of standards to regulate design and
operational features of ships.  SOLAS standards are revised
periodically.  We believe that all our vessels are in substantial
compliance with SOLAS standards.
  Under the
International Safety Management Code for the Safe Operation of Ships and for
Pollution Prevention, or ISM Code, promulgated by the IMO, the party with
operational control of a vessel is required to develop an extensive safety
management system that includes, among other things, the adoption of a safety
and environmental protection policy setting forth instructions and procedures
for operating its vessels safely and describing procedures for responding to
emergencies.  In 1994, the ISM Code became mandatory with the adoption
of Chapter IX of SOLAS.  We intend to rely on the safety management
system that BHM has developed.
  23
 The ISM
Code requires that vessel operators obtain a safety management certificate for
each vessel they operate.  This certificate evidences compliance by a
vessel’s management with code requirements for a safety management
system.  No vessel can obtain a certificate unless its operator has
been awarded a document of compliance, issued by each flag state, under the ISM
Code.  We believe that has all material requisite documents of
compliance for its offices and safety management certificates for vessels in our
fleet for which the certificates are required by the IMO.  BHM will be
required to review these documents of compliance and safety management
certificates annually.
  Noncompliance
with the ISM Code and other IMO regulations may subject the ship-owner to
increased liability, may lead to decreases in available insurance coverage for
affected vessels and may result in the denial of access to, or detention in,
some ports.  For example, the U.S. Coast Guard and European Union
authorities have indicated that vessels not in compliance with the ISM Code will
be prohibited from trading in U.S. and European Union ports.
  Environmental
Regulation-OPA90/CERCLA.  OPA90 established an extensive regulatory
and liability regime for environmental protection and cleanup of oil
spills.  OPA90 affects all owners and operators whose vessels trade
with the United States or its territories or possessions, or whose vessels
operate in the waters of the United States, which include the United States
territorial sea and the two hundred nautical mile exclusive economic zone of the
United States.  The Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”) applies to the discharge of hazardous substances,
which the Company’s vessels are capable of carrying.
  Under
OPA90, vessel owners, operators and bareboat (or “demise”) charterers are
“responsible parties” who 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 oil spill containment and clean-up costs and other
damages arising from oil spills caused by their vessels.  These other
damages are defined broadly to include (i) natural resource damages and the
costs of assessment thereof, (ii) real and personal property damages, (iii) net
loss of taxes, royalties, rents, fees and other lost natural resources damage,
(v) net cost of public services necessitated by a spill response, such as
protection from fire, safety or health hazards, (iv) loss of profits or
impairment of earning capacity due to injury, destruction or loss of real
property, personal property and natural resources, and (v) loss of subsistence
use of natural resources.  OPA90 limits the liability of responsible
parties to the greater of $1,200 per gross ton or $10 million per tanker that is
over 3,000 gross tons and $600 per gross ton or $500,000 for non-tanker vessels
(subject to possible adjustment for inflation).  CERCLA, which applies
to owners and operators of vessels, contains a similar liability regime and
provides for cleanup, removal and natural resource damages.  Liability
under CERCLA is limited to the greater of $300 per gross ton or $5
million.  These limits of liability would not apply if the incident
were proximately caused by violation of applicable United States federal safety,
construction or operating regulations, or by the 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 the oil
removal activities.  OPA and CERCLA each preserve the right to recover
damages under other laws, including maritime tort law.  OPA90
specifically permits individual states to impose their own liability regimes
with regard to oil pollution incidents occurring within their boundaries, and
some states that have enacted legislation providing for unlimited liability for
oil spills.  In some cases, states, which have enacted such
legislation, have not yet issued implementing regulations defining tanker
owners’ responsibilities under these laws.  Moreover, OPA90 and CERCLA
preserve the right to recover damages under existing law, including maritime
tort law.  The Company intends to comply with all applicable state
regulations in the ports where its vessels call.
  The
Company currently maintains and plans to continue to maintain pollution
liability insurance for its vessels in the amount of $1 billion.  A
catastrophic spill could exceed the insurance coverage available, in which event
there could be a material adverse effect on the Company.  OPA90 does
not by its terms impose liability on lenders or the holders of mortgages on
vessels.
  Under
OPA90, with certain limited exceptions, all newly built or converted tankers
operating in United States waters must be built with double-hulls, and existing
vessels that do not comply with the double-hull requirement must be phased out
over a 20-year period (1995-2015) based on size, age and place of discharge,
unless retrofitted with double-hulls.  Notwithstanding the phase-out
period, OPA90 currently permits existing single-hull tankers to operate until
the year 2015 if their operations within United States waters are limited to
discharging at the Louisiana Off-Shore Oil Platform, or off-loading by means of
lightering activities within authorized lightering zones more than 60 miles
offshore.
  24
 OPA90
expands the pre-existing financial responsibility requirements for vessels
operating in United States waters and requires owners and operators of vessels
to establish and maintain with the Coast Guard evidence of financial
responsibility sufficient to meet the limit of their potential strict liability
under OPA90.  The U.S. Coast Guard’s regulations require evidence of
financial responsibility in the amount of $1,500 per gross ton for tankers,
coupling the OPA limitation on liability of $1,200 per gross ton with the CERCLA
liability limit of $300 per gross ton.  Under the regulations, such
evidence of financial responsibility may be demonstrated by insurance, surety
bond, self-insurance or guaranty.  Under OPA90 regulations, an owner
or operator of more than one tanker will be required to demonstrate evidence of
financial responsibility for the entire fleet in an amount equal only to the
financial responsibility requirement of the tanker having the greatest maximum
strict liability under OPA90/CERCLA.  The Company has provided
requisite guarantees from a Coast Guard approved mutual insurance organization
and received certificates of financial responsibility from the Coast Guard for
each vessel required to have one.
  The Coast
Guard’s regulations concerning certificates of financial responsibility provide,
in accordance with OPA90 and CERCLA, that claimants may bring suit directly
against an insurer or guarantor that furnishes certificates of financial
responsibility; and, in the event that such insurer or guarantor is sued
directly, it is prohibited from asserting any 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 insurance
organizations, which typically provide guarantees for certificates of financial
responsibility, including the major protection and indemnity organizations which
the Company would normally expect to provide guarantees for a certificate of
financial responsibility on its behalf, 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.
  Owners or
operators of tankers operating in the waters of the United States are required
to file vessel response plans with the Coast Guard, and their tankers were
required to be operating in compliance with their Coast Guard approved
plans.  Such response plans must, among other things, (i) address a
“worst case” scenario and identify and ensure, through contract or other
approved means, the availability of necessary private response resources to
respond to a “worst case discharge,” (ii) describe crew training and drills, and
(iii) identify a qualified individual with full authority to implement removal
actions.  The Company has vessel response plans approved by the Coast
Guard for tankers in its fleet operating in the waters of the United
States.  The Coast Guard has announced it intends to propose similar
regulations requiring certain tank vessels to prepare response plans for the
release of hazardous substances.
  As
discussed above, OPA does not prevent individual states from imposing their own
liability regimes with respect to oil pollution incidents occurring within their
boundaries, including adjacent coastal waters.  In fact, most U.S.
states that border a navigable waterway have enacted environmental pollution
laws that impose strict liability on a person for removal costs and damages
resulting from a discharge of oil or a release of a hazardous
substance.  These laws may be more stringent than U.S. federal
law.
  The phase
out dates for the purposes of carriage of petroleum products under OPA90, for
the vessels currently owned by the Company, are set out in the table
below.
  VESSEL
                  (AS
      OF DECEMBER 31, 2009)
                HULL
                DATE
      BUILT
                DWT
                PHASE
      OUT FOR CARRIAGE OF
                  PETROLEUM
      PRODUCTSMARPOL/EU
                OPA90M/T
      SAGAMORE(1)
                DS
                Feb-91
                68,536
                Feb-15
                Feb-15OBO
      RIP HUDNER
                DH
                Jul-94
                83,155
                N/A
                N/AOBO
      BONNIE SMITHWICK
                DH
                Dec-93
                83,155
                N/A
                N/AOBO
      SEAROSE G
                DH
                Apr-94
                83,155
                N/A
                N/AOBO
      ROGER M JONES
                DH
                Nov-92
                74,868
                N/A
                N/AOBO
      SAKONNET
                DH
                May-93
                83,155
                N/A
                N/AOBO
      SEAPOWET (2)
                DH
                Sep-92
                72,389
                N/A
                N/AM/V
      SACHEM
                
                Mar-88
                55,791
                N/A
                N/A
 
 (1)           Vessel
must comply with Reg. 13F to Annex I of MARPOL by February 2015 (with the
extension).
 
 (2)           50%
owner of the entity which is the disponent owner through a bareboat charter
party.
 
 25
 According
to Regulation 20 of Annex I of MARPOL 73/78, during 2010 the remainder of the
single hull (SH) tankers will.  However,Regulation 20 contains
some provisions for non-double hull tankers to continue to
trade.  Regulation 20.5 permits flag states to allow tankers that are
fitted with double sides or double bottoms to continue to trade oil until their
25th anniversary.  Regulation 20.7 permits flag states to allow SH
tankers to trade until the earliest of 2015 or such tankers’ 25th anniversary,
if these tankers have achieved a satisfactory result during a Condition
Assessment Scheme (“CAS”) assessment. Regulation 20.8.2 states that a Port State
shall be entitled to deny entry into the ports or offshore terminals under its
jurisdiction of oil tankers operating in accordance with the provisions of
regulations 20.5 and 20.7 above.  Regulation 21 restricted SH tankers
from carrying heavy grades of oil since April 2005, but this regulation also
permits flag states to grant extensions. However, Regulation 21.8.2 provides
Port States with the authority to deny entry to such oil tankers carrying heavy
grades of oil. The above regulations are complex and have made it difficult to
ascertain the actual enforcement policies of the various Administrations and
Port Authorities. Although these regulations  require flags and ports
to inform the IMO of their enforcement policy, to date only a few authorities
have provided such information.
  Environmental
Regulation - Other.
  Although
the United States is not a party to these conventions, 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 (the “CLC”) and the Convention for the Establishment of an International
Fund for Oil Pollution of 1971, as amended (“Fund Convention”).  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.  For vessels of
5,000 to 140,000 gross tons (a unit of measurement for the total enclosed spaces
within a vessel), liability will be limited to approximately $6.88 million plus
$962.24 for each additional gross ton over 5,000.  For vessels of over
140,000 gross tons, liability will be limited to approximately $136.89
million.  As the convention calculates liability in terms of a basket
of currencies, these figures are based on currency exchange rates on January 19,
2005.  Under the 1969 Convention, the right to limit liability is
forfeited where the spill is caused by the owner’s actual fault; under the 1992
Protocol, a ship-owner cannot limit liability where the spill is caused by the
owner’s intentional or reckless conduct.  Vessels trading in
jurisdictions that are parties to these conventions must provide evidence of
insurance covering the liability of the owner.  In jurisdictions where
the International Convention on Civil Liability for Oil Pollution Damage 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 that
convention.  We believe that our protection and indemnity insurance
will cover the liability under the plan adopted by the IMO.
  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.
  Additional
U.S. Environmental Requirements.
  The U.S.
Clean Air Act of 1970, as amended (the “CAA”), requires the U.S. Environmental
Protection Agency, or EPA, to promulgate standards applicable to emissions of
volatile organic compounds and other air contaminants.  Our vessels
are subject to vapor control and recovery requirements for certain cargoes when
loading, unloading, ballasting, cleaning and conducting other operations in
regulated port areas.  Our vessels that operate in such port areas are
equipped with vapor control systems that satisfy these
requirements.  The CAA also requires states to draft State
Implementation Plans, or SIPs, designed to attain national health-based air
quality standards in primarily major metropolitan and/or industrial
areas.  Several SIPs regulate emissions resulting from vessel loading
and unloading operations by requiring the installation of vapor control
equipment.  As indicated above, our vessels operating in covered port
areas are already equipped with vapor control systems that satisfy these
requirements.  The EPA and the State of California, however, have each
proposed more stringent regulations of air emissions from ocean-going
vessels.  On July 24, 2008, the California Air Resources Board of the
State of California, or CARB, approved clean-fuel regulations applicable to all
vessels sailing within 24 miles of the California coastline whose itineraries
call for them to enter any California ports, terminal facilities, or internal or
estuarine waters.  The new CARB regulations require such vessels to
use low sulfur marine fuels rather than bunker fuel.  By July 1, 2009,
such vessels are required to switch either to marine gas oil with a sulfur
content of no more than 1.5% or marine diesel oil with a sulfur content of no
more than 0.5%.  By 2012, only marine gas oil and marine diesel oil
fuels with 0.1% sulfur will be allowed.  In the event our vessels were
to travel within such waters, these new regulations would require significant
expenditures on low-sulfur fuel and would increase our operating
costs.  Although a risk exists that new regulations could require
significant capital expenditures and otherwise increase our costs, we believe,
based on the regulations that have been proposed to date, that no material
capital expenditures beyond those currently contemplated and no material
increase in costs are likely to be required.  The Clean Water Act
(“CWA”) prohibits the discharge of oil or hazardous substances into navigable
waters and imposes strict liability in the form of penalties for any
unauthorized discharges.  The CWA also imposes substantial liability
for the costs of removal, remediation and damages.  State laws for the
control of water pollution also provide varying civil, criminal and
administrative penalties in the case of a discharge of petroleum or hazardous
materials into state waters.  The CWA complements the remedies
available under the more recent OPA and CERCLA, discussed above.
  26
 The EPA
historically exempted the discharge of ballast water and other substances
incidental to the normal operation of vessels in U.S. waters from CWA permitting
requirements.  The EPA has enacted rules governing the regulation of
ballast water discharges and other discharges incidental to the normal operation
of vessels within U.S. waters.  Under the new rules, which took effect
February 6, 2009, commercial vessels 79 feet in length or longer (other than
commercial fishing vessels), or Regulated Vessels, are required to obtain a CWA
permit regulating and authorizing such normal discharges.  This
permit, which the EPA has designated as the Vessel General Permit for Discharges
Incidental to the Normal Operation of Vessels, or VGP, incorporates the current
U.S. Coast Guard requirements for ballast water management as well as
supplemental ballast water requirements, and includes limits applicable to 26
specific discharge streams, such as deck runoff, bilge water and gray
water.  For each discharge type, among other things, the VGP
establishes effluent limits pertaining to the constituents found in the
effluent, including best management practices, or BMPs, designed to decrease the
amount of constituents entering the waste stream.  Unlike land-based
discharges, which are deemed acceptable by meeting certain EPA-imposed numerical
effluent limits, each of the 26 VGP discharge limits is deemed to be met when a
Regulated Vessel carries out the BMPs pertinent to that specific discharge
stream.  The VGP imposes additional requirements on certain Regulated
Vessel types that emit discharges unique to those
vessels.  Administrative provisions, such as inspection, monitoring,
recordkeeping and reporting requirements, are also included for all Regulated
Vessels.  Although the VGP became effective on February 6, 2009, the
VGP application procedure, known as the Notice of Intent, or NOI, has yet to be
finalized.  Accordingly, Regulated Vessels will effectively be covered
under the VGP from February 6, 2009 until June 19, 2009, at which time the
“eNOI” electronic filing interface will become
operational.  Thereafter, owners and operators of Regulated Vessels
must file their NOIs prior to September 19, 2009, or the
Deadline.  Any Regulated Vessel that does not file an NOI by the
Deadline will, as of that date, no longer be covered by the VGP and will not be
allowed to discharge into U.S. navigable waters until it has obtained a
VGP.  Any Regulated Vessel that was delivered on or before the
Deadline will receive final VGP permit coverage on the date that the EPA
receives such Regulated Vessel’s complete NOI.  Regulated Vessels
delivered after the Deadline will not receive VGP permit coverage until 30 days
after their NOI submission.  Our fleet is composed entirely of
Regulated Vessels, and we have submitted NOIs for each vessel in our fleet on
September 1, 2009.  In addition, pursuant to §401 of the CWA, which
requires each state to certify federal discharge permits such as the VGP,
certain states have enacted additional discharge standards as conditions to
their certification of the VGP.  These local standards bring the VGP
into compliance with more stringent state requirements, such as those further
restricting ballast water discharges and preventing the introduction of
non-indigenous species considered to be invasive.  The VGP and its
state-specific regulations and any similar restrictions enacted in the future
will increase the costs of operating in the relevant waters.
  The
National Invasive Species Act (“NISA”) was enacted in 1996 in response to
growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by ships in foreign ports.  NISA established a
ballast water management program for ships entering U.S.
waters.  Under NISA, mid-ocean ballast water exchange is voluntary,
except for ships heading to the Great Lakes, Hudson Bay, or vessels engaged in
the foreign export of Alaskan North Slope crude oil.  However, NISA’s
exporting and record-keeping requirements are mandatory for vessels bound for
any port in the United States.  Although ballast water exchange is the
primary means of compliance with the act’s guidelines, compliance can also be
achieved through the retention of ballast water onboard the ship, or the use of
environmentally sound alternative ballast water management methods approved by
the U.S. Coast Guard.  If the mid-ocean ballast exchange is made
mandatory throughout the United States, or if water treatment requirements or
options are instituted, the costs of compliance could increase for ocean
carriers.
  27
 European
Union Tanker Restrictions.
  The
European Union requires acceleration of the IMO single hull tanker phase-out
timetable and, as of 2010, prohibits all single-hulled tankers used for the
transport of oil from entering into its ports or offshore
terminals.  The European Union, following the lead of certain European
Union nations such as Italy and Spain, also banned all single-hulled tankers
carrying heavy grades of oil, regardless of flag, from entering or leaving its
ports or offshore terminals or anchoring in areas under its
jurisdiction.  Certain single-hulled tankers above 15 years of age are
also restricted from entering or leaving European Union ports or offshore
terminals and anchoring in areas under European Union
jurisdiction.  The European Union is also considering legislation that
would: (1) ban manifestly sub-standard vessels (defined as those over 15 years
old that have been detained by port authorities at least twice in a six-month
period) from European waters and create an obligation of port states to inspect
vessels posing a high risk to maritime safety or the marine environment; and (2)
provide the European Union with greater authority and control over
classification societies, including the ability to seek to suspend or revoke the
authority of negligent societies.  It is impossible to predict what
legislation or additional regulations, if any, may be promulgated by the
European Union or any other country or authority.
  Greenhouse
Gas Regulation.
  In
February 2005, the Kyoto Protocol to the United Nations Framework Convention on
Climate Change, or the Kyoto Protocol, entered into force.  Pursuant
to the Kyoto Protocol, adopting countries are required to implement national
programs to reduce emissions of certain gases, generally referred to as
greenhouse gases, which are suspected of contributing to global
warming.  Currently, the emissions of greenhouse gases from
international shipping are not subject to the Kyoto
Protocol.  However, the European Union has indicated that it intends
to propose an expansion of the existing European Union emissions trading scheme
to include emissions of greenhouse gases from vessels.  Any future
passage of climate control legislation or other regulatory initiatives by the
IMO, European Union or individual countries where we operate that restrict
emissions of greenhouse gases could entail financial impacts on our operations
that we cannot predict with certainty at this time.
  C.
              Organizational
      Structure
  The
Company owns each of its vessels through separate wholly-owned subsidiaries
incorporated in Liberia and the Marshall Islands.  The operations of
the Company’s vessels are managed by B+H Management Ltd. (BHM), under the
Management Agreement.  See ITEM 7.  MAJOR SHAREHOLDERS AND
RELATED PARTY TRANSACTIONS.
  As of
March 31, 2010, the Company’s subsidiaries are as follows:
  B+H
      OCEAN CARRIERS LTD.
                ParentOBO
      HOLDINGS LTD.
                100%
      Wholly-ownedSubsidiaries:BHOBO
      ONE LTD.
                100%
      Wholly-owned
                Owns
      M/V BONNIE SMITHWICKBHOBO
      TWO LTD.
                100%
      Wholly-owned
                Owns
      M/V RIP HUDNERBHOBO
      THREE LTD.
                100%
      Wholly-owned
                Owns
      M/V SEAROSE GRMJ
      SHIPPING LTD.
                100%
      Wholly-owned
                Owns
      M/V ROGER M JONESSAGAMORE
      SHIPPING CORP.
                100%
      Wholly-owned
                Owns
      M/T SAGAMORESEASAK
      OBO HOLDINGS LTD.
                100%
      Wholly-ownedSubsidiaries:SAKONNET
      SHIPPING LTD.
                100%
      Wholly-owned
                Owner
      of M/V SAKONNETSEAPOWET
      TRADING LTD.
                100%
      Wholly-owned
                Disponent
      Owner of 50% of M/V SEAPOWET (1)SACHEM
      SHIPPING LTD.
                100%
      Wholly-owned
                Owned
      M/V SACHEM, which was sold in January 2010STRAITS
      OFFSHORE LTD
                100%
      Wholly-owned
                Buyer
      of now-cancelled AFDV
 
 28
 (1)           Disponent
owner of M/V SEAPOWET as 50% owner of Nordan OBO II Ltd. which is disponent
owner through a bareboat charter party.
 
 Certain
of the vessels were sold in 2009.  See ITEM 4. INFORMATION ON THE
COMPANY A. History and Development of the Company – 2009 acquisitions, disposals
and other significant transactions.
  D.
              Property,
      Plant and Equipment
  Fleet
  Each of
the Company’s vessels is owned by a separate wholly-owned subsidiary, except as
noted in the table above.
  Other
  Pursuant
to the terms of the Management Agreement and as part of the services provided to
the Company thereunder, BHM furnishes the Company with office space and
administrative services at its offices in Hamilton, Bermuda.
  Item
              5.                OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
  A.
              Operating
      results
  The
following is a discussion of our financial condition and results of operations
for the years ended December 31, 2009, 2008 and 2007.  You should read
this section together with the consolidated financial statements including the
notes to those financial statements for the periods mentioned
above.
  The
Company is a provider of international liquid and dry bulk seaborne
transportation services, carrying petroleum products, crude oil, vegetable oils
and dry bulk cargoes.  The Company operates a fleet consisting of one
Panamax product tanker, one bulk carrier and five OBOs.  The Panamax
product tanker is 68,500 DWT.  Product tankers are single-deck
oceangoing vessels designed to carry simultaneously a number of segregated
liquid bulk commodities, such as petroleum products and vegetable
oils.  The OBOs are between 74,000 and 84,000 DWT
(Aframax).  OBOs can operate as tankers or as bulk
carriers.  They can be used to transport liquid cargo including crude,
fuel oils and clean petroleum products, and they can also be used to transport
major dry bulk commodities, such as iron ore, coal, and grain.
  The
Company’s wholly owned OBO fleet will operate 100% under time charters in
2010.  Its OBOs carry crude oil, petroleum products, iron ore and
coal.  Historically, the Company deploys its fleet on both time
charters, which can last from a few months to several years, and spot market
charters, which generally last from several days to several
weeks.  Under spot market voyage charters, the shipowner pays voyage
expenses such as port, canal and fuel costs.  A time charter is
generally a contract to charter a vessel for a fixed period of time at a
specified daily rate.  Under time charters, the charterer pays voyage
expenses such as port, canal and fuel costs.  Under both types of
charters, the shipowner pays for vessel operating expenses, which include crew
costs, provisions, deck and engine stores, lubricating oil, insurance,
maintenance and repairs.  The shipowner is also responsible for the
vessel’s intermediate and special survey costs.
  Vessels
operating on time charters provide more predictable cash flows, but can, in a
strong market, yield lower profit margins than vessels operating in the spot
market.  Vessels operating in the spot market generate revenues that
are less predictable but may enable the shipowner to capture increased profit
margins during periods of improvements in tanker rates, although it is exposed
to the risk of declining tanker rates which may have a materially adverse impact
on our financial performance.  We are constantly evaluating the
appropriate balance between the number of our vessels deployed on time charter
and the number employed on the spot market.
  29
 For
discussion and analysis purposes only, we evaluate performance using time
charter equivalent, or TCE revenues.  TCE revenues are voyage revenues
minus direct voyage expenses.  Direct voyage expenses primarily
consist of port, canal and fuel costs that are unique to a particular voyage,
which would otherwise be paid by a charterer under a time charter, as well as
commissions.  We believe that presenting voyage revenues on a TCE
basis enables a proper comparison to be made between vessels deployed on time
charter or those deployed on the spot market.
  The
Company’s voyage revenues are recognized ratably over the duration of the
voyages and the lives of the charters, while vessel operating expenses are
recognized on the accrual basis.  We calculate daily TCE rates by
dividing TCE revenues by voyage days for the relevant time
period.  The Company also generates demurrage revenue, which an owner
charges a charterer for exceeding an agreed upon time to load or discharge a
cargo.
  We
depreciate our vessels on a straight-line basis over their estimated useful
lives determined to be 30 years from the date of their initial delivery from the
shipyard.  Depreciation is based on cost less the estimated residual
value.  We capitalize the total costs associated with special surveys,
which take place every five years and amortize them on a straight-line basis
over 60 months.  Regulations and/or incidents may change the estimated
dates of next drydockings.
  Fiscal
Year ended December 31, 2009 Compared to Fiscal Year ended December 31,
2008
  2009
                
                2008Total
      revenues
                $             77,763,710
                
                $              104,908,915Voyage
      expenses
                (13,758,771)
                
                (28,097,799)Net
      revenues
                64,004,939
                
                76,811,116Gross
      voyage revenues
                17,319,968
                
                35,639,274Less:
      direct voyage expenses
                (10,290,337)
                
                (20,145,639)Time
      charter equivalent ("TCE") revenues
                7,029,631
                
                15,493,635Time
      charter revenues
                60,413,796
                
                68,378,799Less:
      brokerage commissions and misc expenses
                (1,628,437)
                
                (3,070,656)Time
      charter revenues
                58,785,359
                
                65,308,143Less:
      other voyage expenses
                (1,839,997)
                
                (4,881,504)Other  revenue
                29,946
                
                890,842Net
      revenues
                $             64,004,939
                
                $                76,811,116Days
      revenues on voyage
                960
                
                1,097Days
      revenues on time charter
                2,707
                
                2,9833,667
                
                4,080TCE
      rate
                $                      7,323
                
                $                       14,124Average
      time charter rate
                $                    22,318
                
                $                       22,923Net
      revenues per day
                $                    17,454
                
                $                       18,826
 
 Revenues
  Total
revenues decreased by $27.1 million, or 25.9%, to $77.8 million in the year
ended December 31, 2009, compared to $104.9 million for the year ended December
31, 2008.  The decrease is attributable to market conditions
prevailing during the year which resulted in lower rates earned by the Company’s
vessels operating in the spot market, and to a reduction in the average number
of operating vessels, which decreased from 13.3 during the year ended December
31, 2008 to 10.8 during the year ended December 31, 2009. Net revenues per ship
per day decreased from $18,826 for the year ended December 31, 2008 to $17,454
for the year ended December 31, 2009.
  During
2009, the Company sold four of its MR product tankers and two bulk carriers
which were previously employed in the voyage charters and on short term time
charters.  The five wholly owned OBOs and the Panamax product tanker
were employed in 2009 on long-term time charters.
  30
 At
December 31, 2008, other revenue of $0.9 million represents the Company’s
portion of the profit sharing arrangement with the charterer of one of the
Company’s OBOs.
  Voyage
expenses
  Voyage
expenses, which a shipowner only incurs on voyage charters, consist of port,
canal and fuel costs that are unique to a particular voyage, and commercial
overhead costs, including commercial management fees paid to
BHM.  Voyage expenses decreased $14.3 million, or 51.0%, to $13.8
million for the year ended December 31, 2009, as compared to $28.1 million for
the comparable period of 2008.  The decrease was due to the Company
having fewer vessels on voyage charters during 2009 as a result of sales of four
MR product tankers and two bulk carriers.
  Vessel
operating expenses
  Operating
expenses decreased by $10.1 million, or 21.5%, to $36.8 million for the
twelve-month period ended December 31, 2009, as compared to $46.8 million for
the twelve-month period ended December 31, 2008. The decrease is attributable to
a reduction in the number of vessels from an average of 13.3 vessels for 2008 to
10.8 vessels for 2009.
  Depreciation
  Total
depreciation expense in 2009 was approximately the same as in 2008. The Company
had completed the conversion of two of its bulk carriers in the second quarter
of 2008 and the first quarter of 2009.  The increase in the
depreciation charge for converted vessels was offset by a reduction in the
depreciation charge for  vessels sold during 2009.
  Amortization
and Special Survey costs
  Amortization
of Special Surveys increased $1.1 million to $3.7 million for the year ended
December 31, 2009 due to the fact that there were three Special Surveys
completed in January 2009.  The decrease in amortization of vessel
conversion cost was due to the sale of four MR product tankers during
2009.  The increase in amortization of debt issuance cost was
predominantly due to the write-off of costs related to loan
prepayments.
  2009
                
                2008Depreciation
      of vessels
                $             17,031,000
                
                $             16,444,000Amortization
      of special survey costs
                3,678,000
                
                2,568,000Amortization
      of vessel conversion costs
                3,185,000
                
                5,135,000Amortization
      of debt issuance costs
                1,332,000
                
                1,052,000Total
      depreciation and amortization
                $             25,226,000
                
                $             25,199,000Impairment
      charge
                28,918,000
                
                7,365,000
 
 
 Vessel
impairment loss
  As of
December 31, 2009, the Company classified the M/V SACHEM as an asset held for
sale.  A long-lived asset (or disposal group) to be disposed of by
sale should be considered “held for sale” when specific criteria for a
qualifying plan of sale are met.  The Company determined that all
requisite criteria specified were met as of December 31, 2009.
  A
long-lived asset classified as “held for sale” is initially measured at the
lower of its carrying amount or fair value less cost to sell.  As
such, the Company recorded the vessel at its fair value less cost to sell
(approximately $10.4 million) as this was the less than its carrying value
(approximately $28.4 million).  This resulted in the Company
recognizing a $18.0 million impairment charge for the year ended December 31,
2009.   The fair value of the vessel as of December 31, 2009
approximates the agreed upon selling price.  Delivery of the vessel
occurred and proceeds from the sale were received in January 2010, with no
further loss recorded.
  31
 We
evaluate the carrying amounts of our vessels to determine if events have
occurred that 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.
  The
current economic and market conditions, including the significant disruptions in
the global credit markets, are having broad effects on participants in a wide
variety of industries. Since mid-August 2008, the charter rates have declined
significantly, and, despite some stabilization of charter rates in 2009, vessel
values have also declined as a result of a slowdown in the availability of
global credit, anticipated supply of new vessels and the lower level of charter
rates, conditions that we consider indicators of impairment.
  We
determine undiscounted projected net operating cash flows for each vessel and
compare it to the vessel's carrying value. The projected net operating cash
flows are determined by considering the charter revenues from existing time
charters for the fixed fleet days and an estimated daily time charter equivalent
for the unfixed days (based on the most recent ten year historical average) over
the remaining estimated life of the vessel, net of brokerage commissions,
expected outflows for vessels' maintenance and vessel operating expenses,
assuming an average annual inflation rate of 2.0%.
  If our
estimate of undiscounted future cash flows for any vessel is lower than the
vessel's carrying value, the carrying value is written down, by recording a
charge to operations, to the vessel's fair market value if the fair market value
is lower than the vessel's carrying value.  Management’s analysis for
the year ended December 31, 2009 indicated there was impairment on its single
hulled product tanker and the Company recorded an impairment loss of $10.9
million at December 31, 2009.
  Loss
on disposal of vessels
  Loss from
vessel sales in 2009 amounted to approximately $35.1 million and resulted from
the sale of four product tankers and one bulk carrier.  There was a
gain on sale of vessel of $13.3 million in the year ended December 31,
2008.
  General
and administrative expenses
  General
and administrative expenses include all of the Company’s onshore expenses and
the fees paid to BHM for administration.  Management fees were
approximately the same in 2009 as they were in 2008.  Under the
Management Agreement, BHM continues to receive management fees for the three
month period after a vessel is sold. As of February 1, 2010, management fees
have been reduced reflecting the 2009 sale of six of the Company’s
vessels.  Fees for consulting and professional fees and other expenses
decreased by $0.7 million or 15.5% from 2008 to 2009 are due to the Company’s
reductions in spending on legal, professional, and IT services.
  Interest
expense and interest income
  The $4.3
million or 37.9% decrease in interest expense is due to a decrease in interest
rates and to a reduction in mortgage indebtedness from $160.3 million at
December 31, 2008 to $107.6 million at December 31, 2009.  Interest
income decreased by $1.1 million or 98.4%, to $18,000 in 2009 compared to $1.2
million in 2008. The decrease is attributable to decreased levels of cash on
hand during the year and reduced interest rates.
  Equity
in income of Nordan OBO 2
  Equity in
income of Nordan OBO 2 amounted to $1.2 million and $3.9 million in the years
ended December 31, 2009 and 2008, respectively.  Equity in income
of Nordan OBO 2 represents income from the Company’s 50% interest in an entity
which is the disponent owner of a 1992-built 72,389 DWT OBO (MV SEAPOWET)
through a bareboat charter party which was acquired in March
2006.  The decrease from 2008 of $2.7 million consists primarily of
the Company’s 50% share of a deposit forfeited in 2008 when a buyer under
contract to purchase MV SEAPOWET failed to take delivery.
  32
 Gain
on fair value of interest rate swaps
  During
the year ended December 31, 2009, the Company recognized a gain of $0.7 million
relating to two interest swaps, as compared to $0.8 million loss for interest
rate swaps for the year ended December 31, 2008.The realized gain is
attributable to the mark- to- market valuation of interest rate swaps that do
not qualify for hedge accounting.  During 2009, one of the Company’s
swaps no longer met hedge accounting criteria, and the Company accordingly
reclassified the gain out of Accumulated Other Comprehensive Loss into
earnings.
  As of
December 31, 2009, the aggregate fair value of the non-qualifying swap
agreements was a liability of $0.8 million as compared with a liability of $0.5
million at December 31, 2008.  The remaining swap agreements have been
designated as cash flow hedges by the Company and, as such, the changes in fair
value of these swaps are reflected as a component of Accumulated Other
Comprehensive Loss.  As of December 31, 2009, the aggregate fair value
of such designated swaps was a liability of $2.3 million, as compared with a
liability of $4.4 million at December 31, 2008.
  Fiscal
Year ended December 31, 2008 Compared to Fiscal Year ended December 31,
2007
  2008
                
                2007Total
      revenues
                $
      104,908,915
                
                $
      112,416,831Voyage
      expenses
                (28,097,799)
                
                (27,882,163)Net
      revenues
                76,811,116
                
                84,534,668Gross
      voyage revenues
                35,639,274
                
                42,909,357Less:
      direct voyage expenses
                (20,145,639)
                
                (20,505,424)Time
      charter equivalent ("TCE") revenues
                15,493,635
                
                22,403,933Time
      charter revenues
                68,378,799
                
                68,007,737Less:
      brokerage commissions
                (3,070,656)
                
                (2,113,286)Time
      charter revenues
                65,308,143
                
                65,894,451Less:
      other voyage expenses
                (4,881,504)
                
                (5,263,453)Other
                890,842
                
                1,499,737Net
      revenues
                $                76,811,116
                
                $                84,534,668Days
      revenues on voyage
                1,097
                
                1,763Days
      revenues on time charter
                2,983
                
                2,8704,080
                
                4,633TCE
      rate
                $                       14,124
                
                $                       12,708Average
      time charter rate
                $                       22,923
                
                $                       23,696Net
      revenues per day
                $                       18,826
                
                $                       18,246
 
 Revenues
  Revenues
from voyage and time charters decreased $7.5 million or 6.7% from
2007.  The decrease is due to a decrease of 553 days (or 12%) in the
number of total on-hire days from 2007 to 2008 partly offsetting the impact of
this decrease was an increase in the TCE rate of $1,416 per day
(11%).  The decrease in on-hire days is due to the sale of the M/T
ACUSHNET in February 2008 and the OBO SACHUEST in March 2008.  Offhire
for conversions was 555 days in 2008 and 577 days in 2007.  Offhire
for scheduled drydockings was 148 days in 2008 and 14 days in 2007.
  33
 At
December 31, 2008, three of the Company’s MR product tankers were employed in
the voyage charter market and one on a short term time charter.  The
five combination carriers and the Panamax product tanker were employed on
long-term time charters.  The two bulk carriers were on short time
charter and one MR product tanker was being converted to a bulk
carrier.
  Certain
of the vessels were sold in 2009.  See ITEM 4. INFORMATION ON THE
COMPANY A. History and Development of the Company – 2009 acquisitions, disposals
and other significant transactions.
  Other
revenue of $0.9 million represents the Company’s portion of the profit sharing
arrangement with the charterer of one of the Company’s OBOs acquired in
2005.
  Voyage
expenses
  Voyage
expenses consist of port, canal and fuel costs that are unique to a particular
voyage and commercial overhead costs, including commercial management fees paid
to BHM.  Under a time charter, the Company does not incur port, canal
or fuel costs.  Voyage expenses increased $0.2 million, or 0.8%, to
$28.1 million for the year ended December 31, 2008 as compared to $27.9 million
for the comparable period of 2007.  This is predominantly due to an
increase in bunker costs.
  Vessel
operating expenses
  The
increase in vessel operating expenses of $7.5 million is due in part to $1.9
million of intermediate drydocking expense compared to $0.5 million in
2007.  In addition, there was an increase in average daily operating
expenses of $2,239 per day.  This increase was predominantly due to
increases in crew related costs, bunkers on offhire, upgrading expenses and
repairs and maintenance costs.
  Depreciation
and amortization
  Depreciation
increased by $1.2 million, or 8.2%, to $16.4 million due to the conversion of
the M/V SACHEM and partially offset by the sale of two ships in the first half
of the year.  Amortization of special surveys increased $0.9 million
to $2.6 million for the year ended December 31, 2008 due to the fact that there
were two special surveys completed during 2008 and there was a full year of
depreciation expense on the four converted vessels.  Amortization of
debt issuance costs increased $0.4 million due predominantly to costs associated
with new loans in 2007 and 2008 and due to the write-off of costs related to
loan prepayments.  Amortization of vessel conversion costs increased
$1.1 million due to the fact there was a full year of depreciation in 2008 as
compared to partial year depreciation in 2007.
  2008
                2007Depreciation
      of vessels
                $16,444,000
                $15,201,000Amortization
      of special survey costs
                2,568,000
                1,714,000Amortization
      of vessel conversion costs
                5,135,000
                4,020,000Amortization
      of debt issuance costs
                1,052,000
                607,000Total
      depreciation and amortization
                $25,199,000
                $21,542,000Impairment
      charge
                7,365,000
                -
 
 As of
September 30, 2008, the Company classified the M/V ALGONQUIN as an asset held
for sale.  A long-lived asset (or disposal group) to be disposed of by
sale should be considered “held for sale” when specific criteria for a
qualifying plan of sale are met.  The Company determined that all
requisite criteria specified in paragraph 30 of SFAS No. 144 were met as of
September 30, 2008.
  A
long-lived asset classified as “held for sale” is initially measured at the
lower of its carrying amount or fair value less cost to sell.  As
such, the Company recorded the vessel at its fair value less costs to sell
(approximately $17.7 million) as this was the less than its carrying value
(approximately $25.1 million).  This resulted in the Company
recognizing a $7.4 million impairment charge for the year ended December 31,
2008.   The fair value of the vessel as of December 31, 2008
approximates the agreed upon purchase price.  Delivery of the vessel
occurred and proceeds from the sale were received in January 2009, with no
further loss recorded.
  34
 Based on
management’s review of the performance of the vessels in the Company’s fleet and
overall market conditions within the shipping industry, management determined
that no indicators of impairment were present during fiscal 2007 for any of the
Company’s vessels.  As no indicators of impairment were present during
2007 for any vessels within its fleet, the Company determined that a test for
recoverability was not required during the year ended December 31,
2007.
  As a
result of this impairment charge and the decline in dry bulk carrier time
charter rates, the Company determined that an indicator of impairment existed
with respect to its dry bulk carriers.  Accordingly, the Company
performed an impairment analysis on those two vessels.  No indicators
of impairment were present related to the other vessels in the Company’s
fleet.  The Company compared the undiscounted cash flows to the
carrying values for each bulk carrier to determine if the vessels were
recoverable.  The analysis was performed using historical average time
charter rates as well as management’s estimation and judgment in forecasting
future rates and operating results.  These estimates are consistent
with the plans and forecasts used by management to conduct its
business.  The analysis indicated that the carrying value of the
vessels was recoverable.
  General
and administrative expenses
  General
and administrative expenses include all of our onshore expenses and the fees
that BHM charges for administration.  Management fees decreased by
$1.1 million, or 47%, to $1.2 million for the twelve month period ended December
31, 2008 compared to $2.3 million for the prior period.  The decrease
is due to the one-time issuance in 2007 of 60,000 shares of common stock to BHM
resulting in compensation expense of $1.1 million in 2007.  Fees for
consulting and professional fees and other expenses decreased $0.3 million or
5%.  The decrease is primarily attributable to the one-time issuance
of 2,500 shares of the Company’s common stock to each director in 2007,
resulting in compensation expense of $0.4 million.
  Interest
expense and interest income
  The $1.5
million (12%) decrease in interest expense is due to the decrease in interest
rates and to the reduction in mortgage indebtedness from $200.3 million at
December 31, 2007 to $160.3 million at December 31, 2008.
  Both the
interest paid on the Company’s debt and the interest earned on its cash balances
are based on LIBOR.  Interest income for 2008 of $1.2 million
represented a decrease of $1.9 million or 63% of the prior year’s interest
income of $3.1 million.  The decrease in interest income is due to the
fact that the Company had a higher average cash balance during 2007 as compared
to 2008.  In addition, average LIBOR rates of 5.25% for 2007 were
approximately 49% higher than the 2008 average rate of 2.67%.
  Equity
in income of Nordan OBO 2
  Equity in
income of Nordan OBO 2 of $3.9 million represents income from the Company’s 50%
interest in an entity which is the disponent owner of a 1992-built 72,389 DWT
-OBO through a bareboat charter party which was acquired in March
2006.  The increase from 2007 of $3.1 million consists primarily of
$2.5 million representing the Company’s 50% share of a deposit forfeited when
the buyer under contract to purchase MV SEAPOWET failed to take delivery of the
vessel.
  Loss
on fair value of interest rate swaps
  During
2006 and 2007, the Company entered into five interest rate swap agreements to
mitigate the risk associated with its variable rate debt.  As of
December 31, 2008, one of these interest rate swap agreements did not qualify
for hedge accounting under US GAAP and, as such, the change in the fair value of
this swap is reflected within gain (loss) on value of interest rate swaps in the
accompanying Consolidated Statements of Operations.  For the year
ended December 31, 2008, the Company recognized aggregate losses of $0.8 million
on this non-qualifying swap.  For the year ended December 31, 2007,
two of the Company’s interest rate swap agreements did not qualify for hedge
accounting.  For 2007, the Company recognized aggregate losses of $1.3
million related to these swaps which are reflected within gain (loss) on value
of interest rate swaps on the accompanying Consolidated Statements of
Operations.
  35
 As of
December 31, 2008, the fair value of the non-qualifying swap agreement was a
liability of $0.5 million.  As of December 31, 2007, the aggregate
fair value of the two non-qualifying swap agreements was a liability of $0.9
million.  The remaining swap agreements have been designated as cash
flow hedges by the Company and, as such, the changes in the fair value of these
swaps are reflected as a component of other comprehensive income.  As
of December 31, 2008, there were four interest rate swap agreements designated
as cash flow hedges with an aggregate fair value of liability $4.4
million.  As of December 31, 2007, there were three interest rate swap
agreements designated as cash flow hedges with an aggregate fair value of
liability $0.8 million.
  Gain
on fair value of put option contracts
  In 2007
and 2006, the Company bought put options costing a total of $11.1 million to
mitigate the risk associated with the possibility of falling time charter
rates.  These put options did not qualify for special hedge accounting
under US GAAP and, as such, the aggregate changes in the fair value of these
option contracts were reflected in the Company’s Consolidated Statements of
Operations.  The put options were sold or settled during
2008.  The aggregate realized gain on the sale of the put options
totaled $16.1 million at December 31, 2008.  The aggregate unrealized
loss on the value of the put options totaled $3.4 million at December 31,
2007.
  Gain
on fair value of foreign exchange contracts
  The
Company is party to foreign currency exchange contracts which are designed to
mitigate the risk associated with changes in foreign currency exchange
rates.  These contracts, which were entered into during 2007, did not
qualify for special hedge accounting; and the changes in their fair value is
therefore recorded in loss on other investments in the Company’s Consolidated
Statements of Operations.  At December 31, 2008, the aggregate fair
value of these non-qualifying foreign exchange contracts was a liability of
$57,000 and was reflected within Fair Value of Derivative liability on the
accompanying Consolidated Balance Sheet.
  Other
gains and losses
  Other
losses consist primarily of $0.2 million of losses from trading marketable
securities.  Other losses in 2007 consist of the write off of the $0.6
million investment in an unsuccessful oil drilling operation.
  B.
              Liquidity
      and capital resources
  The
Company operates in a capital-intensive industry, which requires extensive
investment in revenue-producing assets. We have historically financed our
capital requirements with cash flow from operations, equity contributions from
stockholders and long-term bank debt. Our principal use of funds has been
capital expenditures to grow our fleet, maintain the quality of our vessels,
comply with international shipping standards and environmental laws and
regulations, fund working capital requirements and make principal repayments on
outstanding loan facilities.
  The
Company’s ability to generate cash flow from operations will depend upon the
Company’s future performance, which will be subject to general economic
conditions and to financial, business and other factors affecting the operations
of the Company, many of which are beyond its control.
  The
Company’s fleet consists of one product tanker and OBOs; accordingly, the
Company is dependent upon the petroleum product, vegetable oil and chemical
industries and the bulk products market as its primary sources of
revenue.  These industries have historically been subject to
substantial fluctuation as a result of, among other things, economic conditions
in general and demand for petroleum products, vegetable oil, ore, other bulk,
and chemicals in particular.  Any material seasonal fluctuation in
these industries or any material diminution in the level of activity therein
could have a material adverse effect on the Company’s business and operating
results.  The profitability of product tankers and OBOs and their
asset value results from changes in the supply of and demand for such
capacity.  The supply of such capacity is a function of the number of
new vessels being constructed and the number of older vessels that are laid-up
or scrapped.  The demand for product tanker and OBO capacity is
influenced by global and regional economic conditions, increases and decreases
in industrial production and demand for petroleum products, vegetable oils and
chemicals, developments in international trade and changes in seaborne and other
transportation patterns.  The nature, timing and degree of change in
these industry conditions are unpredictable as a result of the many factors
affecting the supply of and demand for capacity.  Although there can
be no assurance that the Company’s business will continue to generate cash flow
at or above current levels, the Company believes it will generate cash flow at
levels sufficient to service its liquidity requirements in the
future.
  36
 The
Company sold four of its product tankers and two bulk carriers during 2009 due
to the deteriorating shipping market, and the sale proceeds were applied to
related loan facilities.
  Loan
amendments
  1)           $202
million reducing revolving credit facility with Nordea Bank Norge ASA, as Agent,
dated August 29, 2006 (the “OBO Holdings Loan Facility Agreement”)
  On
December 14, 2009, the lenders to the OBO Holdings Loan Facility Agreement
agreed on a temporary basis to waive breaches of certain financial covenants and
the scheduled repayment of $5.1 million due on December 15, 2009 until January
15, 2010.  On January 29, 2010, a new set of financial covenants were
adopted under an amendment to the OBO Holdings Loan Facility
Agreement.  Under the new set of financial covenants, the Company is
required to maintain (a) Value Adjusted Equity (as such term is defined therein)
of not less than $30 million, (b) positive working capital as of June 30,
2010, (c) Cash and Cash Equivalents (as such terms are defined therein) of not
less than $4 million and, as of September 30, 2010, $6 million, and (d) an
equity-to-assets ratio of not less than 25%.  In addition, the
aggregate market value of the vessels securing this facility must be at least
135% of the outstanding balance of the loan. The lenders also agreed to defer
50% of amounts due in March 2010 ($2.55 million), payable in six equal quarterly
installments, the first which is payable in June 2010.  The final
maturity date of the loan is in December 2011.
  2)           $8
million term loan facility with Nordea Bank Norge ASA, as Agent, dated September
5, 2006 (the “Seapowet Loan Facility Agreement”)
  On
December 14, 2009, the lenders agreed on a temporary basis to waive breaches of
certain financial covenants. On January 29, 2010, a new set of financial
covenants were adopted under an amendment to the Seapowet Loan Facility
Agreement.  These financial covenants are the same as those adopted in
the OBO Holdings Loan Facility Agreement. The final maturity date of the loan is
in September 2010.
  3)           $27.3
million term loan facility with Bank of Nova Scotia dated January 24, 2007 (the
“Sakonnet Loan Facility Agreement”)
  On April
15, 2010, the lender agreed to waive a breach of the Ratio of EBIDTA to Fixed
Charges covenant through January 1, 2011.  On April 15, 2010, a new
set of financial covenants were adopted under an amendment to the Sakonnet Loan
Facility Agreement.  These financial covenants are the same as those
adopted in the OBO Holdings Loan Facility Agreement. The final maturity date of
the loan is in January 2015.
  4)           $3.975
million term loan facility with Bank of Scotland, dated February 11, 2010 (the
“OBO Holdings Junior Loan Facility Agreement”)
  On
February 11, 2010, the Company drew down a $3.975 million loan, the proceeds of
which were applied towards repayment of the residual
balance of the Boss Tankers Loan Facility Agreement. This loanwill be due in December
2011 and is secured by second mortgages on OBO BONNIE SMITHWICK, OBO RIP HUDNER,
OBO SEAROSE G, OBO ROGER M JONES and M/T SAGAMORE.
  Cash
Flow
  Cash at
December 31, 2009 amounted to $4.7 million, including $1.1 million restricted
cash earmarked for the next debt service payment, a decrease of $26.8 million as
compared to December 31, 2008.  The decrease in the cash balance is
attributable to net outflows from financing activities of $65.6 million and
operating activities of $2.5 million, which were offset by inflows from
investing activities of $41.3 million.
  37
 Net
Cash used in Operating Activities
  Net cash
used in operating activities was $2.5 million for the year ended December 31,
2009, as compared to $ 0.8 million for the year ended December 31, 2008, a
decrease of 221%.  This decrease is primarily attributable to the
decreased charter hire revenue during the year ended December 31,
2009.
  Net Cash provided by Investing Activities
  Net cash
provided by investing activities was $41.3 million during the year ended
December 31, 2009 which is mainly a result of (i) $43.4 million, representing
proceeds received from sale of the vessels and (ii) $3.5 million, representing
dividends from Nordan OBO 2, offset by (iii) $2.9 million investment in
additional equipment for the Company’s new-building AFDV and other capital
expenditures for vessel improvements.  Net cash provided by investing
activities during the year ended December 31, 2008 amounted to $16.8 million and
is mainly a result of (i) $38.1 million, representing proceeds received from
sale of vessels and (ii) $21.8 million, representing proceeds received from sale
of put option contracts, offset by (iii) $34.3 million, representing
installments paid to shipyards for our new-building vessel and vessel
conversions.
  Net
Cash Used In Financing Activities
  Net cash
used in financing activities was $65.6 million for the year ended December 31,
2009, which is mainly attributable to $66.2 million of loan repayments and
prepayments.
  Net cash
used in financing activities was $47.2 million for the year ended December 31,
2008, consisting mainly of (i) loan repayment of $70.0 million and (ii)
repurchase of common stock of $4.7 million, offset by (iii) drawdown of $30
million under long-term credit facility.
  The
Company had a working capital deficit of $28.8 million at December 31, 2009 as
compared to a working capital deficit of $151.3 million at December 31,
2008.  The decrease (improvement) in the working capital deficit is
primarily due to a reversal of reclassification of $126.8 million from long term
debt as short term debt as outlined in NOTE 3 20F/A to Consolidated Financial
Statements in 2008.  The decrease is also partly attributable to the
reduction of long-term debt.  It is important to note that it is
customary for shipping companies and their lenders to exclude the current
portion of long-term debt in any working capital analysis.  Excluding
the current portion of long-term debt, the Company had working capital of $5.3
million at December 31, 2009 as compared to $24.5 million at December 31,
2008.
  The
Company believes that based upon current levels of revenue generated from vessel
employment, cash flows from operations, and the cancellation of the contract to
acquire the AFDV, the Company will have adequate liquidity to make the required
payments of principal and interest on our debt and fund working capital
requirements at least through December 31, 2010.
  All
vessels under long-term time charter with healthy charter hire rates through
2011 and 2012
  All of
the Company’s wholly owned vessels are fixed on long term time charters through
various dates in 2011 and 2012, and the Company’s exposure to market changes in
this period will therefore be limited.
  Cancellation
of Acquisition of Accommodation Field Development Vessel (“AFDV”)
  On March
30, 2010, the Company cancelled its previously announced acquisition of the new
construction of the AFDV from an unrelated third party because of a breach of
contract by the seller. The Company received a refund of its deposit on the
vessel in the amount of $4.1 million together with interest thereon in April 30,
2010.  On May 11, 2010, the Company received an additional $1.1
million from Malayan Banking Berhad as liquidated damages due to the
cancellation of the contract.  The Company expects to obtain an
agreement on additional amounts due from an unaffiliated party under Memorandum
of Agreement related to this contract.  These refunds affect the
Company’s liquidity positively.
  38
 Trade
accounts receivable decreased by $1.6 million from December 31, 2008 to December
31, 2009. The decrease is predominantly attributable to the reduction in the
number of voyage days during the year.
  At
December 31, 2009, the Company’s largest three accounts receivable balances
represented 85% of total accounts receivable. At December 31, 2008, the
Company’s largest three accounts receivable balances represented 72% of total
accounts receivable. The allowance for doubtful accounts was $181,000 and
$253,000 at December 31, 2009 and 2008, respectively. To date, the Company’s
actual losses on past due receivables have not exceeded its estimate of bad
debts.
  Revenue
from one customer accounted for $46.3 million (60%) of total revenues in 2009.
During 2008, revenues from one customer accounted for $34.5 million (33.1%) of
total revenues. Revenue from one customer accounted for $35.6 million (31.6%) of
total revenues in 2007.
  Inventories
decreased $2.2 million primarily due to a reduction in voyage charters and
offhire at December 31, 2009 as compared with December 31, 2008. Bunker
inventory is owned by the shipowner when the vessel is on a voyage or offhire,
but is owned by the charterer when the vessel is on time charter.
  Vessels
and capital improvements, net of accumulated depreciation, amounted to
approximately $165.3 million at December 31, 2009. The decrease in vessel and
capital improvements of $116.9 million or 41% was due to (i) the sale of four MR
product tankers and two bulk carriers and (ii) the impairment charge on the
vessel delivered to the buyer in January 2010 and on the single hulled Panamax
product tanker, offset by (iii) the investment in the AFDV during
2009.
  At
December 31, 2008, certain put option contracts were sold or settled. The
aggregate realized gain on the sale of contracts totaled $16.1 million for the
year ending December 31, 2008.  There was no put option contract
activity during 2009.
  Other
assets decreased $1.4 million as a result of amortization and write-off of debt
issuance costs.
  Accounts
payable decreased $11.9 million and accrued liabilities decreased $4.0 million
from December 31, 2008 to December 31, 2009. The decrease in accounts payable
and accrued liabilities is due to the decrease in the average number of vessels
operated from 13.3 during the year ended December 31, 2008 to 10.8 during the
year ended December 31, 2009.
  The $4.8
million (or 71%) decrease in deferred revenue is due to the reduction in
long-term time charter revenue adjustments and charter hire advances by
customers.
  Expenses
for drydock and related repair work totaled $3.6 million for two vessels in
2009, $1.9 million for one vessel in 2008, and $0.5 million for three vessels in
2007. At December 31, 2008 and 2007, the Company had one and two vessels,
respectively, in the shipyard being converted to bulk carriers.
  The
capitalized cost of scheduled classification survey and related vessel upgrades
was $3.9 million for three vessels in 2009, $7.7 million for seven vessels in
2008 and $8.0 million for five vessels in 2007. The Company capitalizes the
costs associated with drydockings as they occur and amortize these costs on a
straight-line basis over the period between drydockings. Unamortized drydocking
costs of vessels are included in the calculation of the resulting gain or loss
in the year of the vessel’s sale. Costs capitalized as part of the drydocking
include actual costs incurred at the yard and parts used in the drydocking. The
Company believes that these criteria are consistent with industry practice and
that our policy of capitalization reflects the economics and market values of
the vessels.
  Critical
accounting policies
  Basis
of accounting
  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 generally accepted accounting principles in the US
GAAP.  The preparation of those financial statements requires us to
make estimates and judgments that affect the reported amount 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 or
conditions.
  39
 Critical
accounting policies are those that reflect significant judgments or
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 that involve a high degree of
judgment and the methods of their application.  For a description of
all of our significant accounting policies, see NOTE 2 to the 2009 Consolidated
Financial Statements.
  Revenue
recognition, trade accounts receivable and concentration of credit
risk
  Revenues
from voyage and time charters are recognized in proportion to the charter-time
elapsed during the reporting periods.  Charter revenue received in
advance is recorded as a liability until charter services are
rendered.
  Under a
voyage charter, the Company agrees to provide a vessel for the transport of
cargo between specific ports in return for the payment of an agreed freight per
ton of cargo or an agreed lump sum amount.  Voyage costs, such as
canal and port charges and bunker (fuel) expenses, are the Company’s
responsibility.  Voyage revenues and voyage expenses include estimates
for voyage charters in progress which are recognized on a
percentage-of-completion basis by prorating the estimated final voyage profit
using the ratio of voyage days completed through year end to the total voyage
days.
  Under a
time charter, the Company places a vessel at the disposal of a charterer for a
given period of time in return for the payment of a specified rate per DWT
capacity per month or a specified rate of hire per day.  Voyage costs
are the responsibility of the charterer.  Revenue from time charters
in progress is calculated using the daily charter hire rate, net of brokerage
commissions, multiplied by the number of on-hire days through the
year-end.  Revenue recognized under long-term variable rate time
charters is equal to the average daily rate for the term of the
contract.
  The
Company’s financial instruments that are exposed to concentrations of credit
risk consist primarily of cash equivalents, trade receivables and derivative
contracts (interest rate swaps).  The Company maintains its cash
accounts with various high quality financial institutions in the United States,
the United Kingdom and Norway.  The Company performs periodic
evaluations of the relative credit standing of these financial
institutions.  At various times throughout the year, the Company may
maintain certain U.S. bank account balances in excess of Federal Deposit
Insurance Corporation limits.  The Company does not believe that
significant concentration of credit risk exists with respect to these cash
equivalents.
  Trade
accounts receivable are recorded at the invoiced amount and do not bear
interest.  The allowance for doubtful accounts is the Company’s best
estimate of the total losses likely in its existing accounts
receivable.  The allowance is based on historical write-off experience
and patterns that have developed with respect to the type of receivable and an
analysis of the collectibility of current amounts.  Past due balances
that are not specifically reserved for are reviewed individually for
collectibility.  Specific accounts receivable invoices are charged off
against the allowance when the Company determines that collection is
unlikely.  Credit risk with respect to trade accounts receivable is
limited due to the long standing relationships with significant customers and
their relative financial stability.  The Company performs ongoing
credit evaluations of its customers’ financial condition and maintains
allowances for potential credit losses when necessary.  The Company
does not have any off-balance sheet credit exposure related to its
customers.
  Vessels,
capital improvements and depreciation
  Vessels
are stated at cost, which includes contract price, acquisition costs and
significant capital expenditures made within nine months of the date of
purchase.  Depreciation is provided using the straight-line method
over the remaining estimated useful lives of the vessels, based on cost less
salvage value.  The estimated useful lives used are 30 years from the
date of construction.  When vessels are sold, the cost and related
accumulated depreciation are reversed from the accounts, and any resulting gain
or loss is reflected in the accompanying Consolidated Statements of
Operations.
  Capital
improvements to vessels made during special surveys are capitalized when
incurred and amortized over the five year period until the next special
survey.  Capitalized costs for scheduled classification survey and
related vessel upgrades are depreciated over the remaining useful life of the
respective vessels.  Conversion costs are capitalized and depreciated
over the period remaining to 30 years.
  40
 Payments
for special survey costs are characterized as operating activities on the
Consolidated Statements of Cash Flows.  Amortization of special survey
costs is characterized as amortization of deferred charges on the Consolidated
Statements of Operations and of Cash Flows.
  Impairment
of long-lived assets
  The
Company is required to review its long-lived assets for impairment whenever
events or circumstances indicate that the carrying amount of an asset may not be
recoverable.  Upon the occurrence of an indicator of impairment,
long-lived assets are measured for impairment when the estimate of undiscounted
future cash flows expected to be generated by the asset is less than its
carrying amount.  Measurement of the impairment loss is based on the
asset grouping and is calculated based upon comparison of the fair value to the
carrying value of the asset grouping.
  Derivatives
and hedging activities
  The
Company accounts for derivatives in accordance with the provisions of ASC Topic
815.  The Company uses derivative instruments to reduce market risks
associated with its operations, principally changes in interest rates and
changes in charter rates.  Derivative instruments are recorded as
assets or liabilities and are measured at fair value.
  Derivatives
designated as cash flow hedges pursuant to ASC Topic 815 are recorded on the
balance sheet at fair value with the corresponding changes in fair value
recorded as a component of accumulated other comprehensive income
(equity).  Derivatives that do not qualify for hedge accounting
pursuant to ASC Topic 815 are recorded on the balance sheet at fair value with
the corresponding changes in fair value recorded in operations.
  Recent
accounting pronouncements
  In June,
2009 the Financial Accounting Standards Board (“FASB”) issued Statement No. 168,
FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted
Accounting Principles — a replacement of FASB Statement No. 162 (SFAS No. 168),
which became the single source of authoritative U.S. GAAP recognized by the FASB
to be applied by nongovernmental entities. Once effective, the Codification's
content will carry the same level of authority, effectively superseding
Statement 162. In other words, the GAAP hierarchy will be modified to include
only two levels of GAAP: authoritative and nonauthoritative. Statement 168 (as
codified in ASC Topic 105) is effective for financial statements issued for
interim and annual periods ending after September 15, 2009.  The
adoption of ASC Topic 105 did not have a material impact on the Company’s
results of operations or financial position.
  In May,
2009, the FASB issued SFAS No. 165 "Subsequent Events" ("SFAS No. 165"), which
provides guidance on management's assessment of subsequent events. SFAS 165 (as
codified in ASC Topic 855):
  Clarifies that management must
evaluate, as of each reporting period, events or transactions that occur after
the balance sheet date "through the date that the financial statements are
issued or are available to be issued."
  Does not change the recognition and
disclosure requirements in AICPA Professional Standards, AU Section 560,
"Subsequent Events" ("AU Section 560") for Type I and Type II subsequent events;
however, Statement 165 refers to them as recognized (Type I) and nonrecognized
subsequent events (Type II).
  ASC Topic
855 is effective prospectively for interim or annual financial periods ending
after June 15, 2009. Adoption of ASC Topic 855 in 2009 did not have a
significant impact on the Company's financial statements.
  C.
              Trend
      information
  The
Company operates six OBOs of 72,000 to 84,000 DWT.  Five of these
vessels are currently employed on long term time charters with redelivery dates
in the range from March 2011 through October 2012.  The sixth, in
which the Company has a 50% interest, is currently employed on short term time
charter. The Company also operates a Panamax tanker which is employed on a long
term time charter with redelivery expected in January 2011.
  41
 The
Company expects to operate these vessels in both the voyage (spot) markets and
on long-term time charters as the existing time charters expire.
  D.
              Off-balance
      sheet arrangements
  The
Company does not have any off-balance sheet arrangements.
  E.
              Tabular
      disclosure of contractual
obligations
  At
December 31, 2009, the Company’s contractual obligations consist of the OBO
Holdings Loan Facility Agreement, the Seapowet Loan Facility Agreement, the
Sakonnet Loan Facility Agreement, the Boss Tankers Loan Facility Agreement and
the Loan Agreement dated May 13, 2008 by and between Sachem Shipping Ltd., DVB
Bank AG, DVB Group Merchant Bank (Asia) Ltd. and certain other financial
institutions listed therein relating to a loan facility of $30,000,000 (the
“Sachem Loan Facility Agreement”), each guaranteed by B+H Ocean Carriers
Ltd.  No amounts remain available under any of the term loan
facilities as of December 31, 2009 and 2008.  A summary of term loan
facilities is provided below:
  Loan
      balance as of
                
                Loan
      balance as ofDecember 31, 2009
                
                December 31, 2008OBO
      Holdings (term loan facility dated 8/29/06)
                
                $                         62,300,000
                
                $                          77,950,000Cliaship
      (term loan facility dated 10/25/07)
                
                -
                
                20,000,000Sachem
      (term loan facility dated 5/31/08)
                
                9,500,000
                
                12,500,000Sakonnet
      (term loan facility dated 1/24/07)
                
                16,810,686
                
                20,766,230Seapowet
      (term loan facility dated 9/5/06)
                
                1,500,000
                
                3,500,000Boss
      Tankers (term loan facility dated 12/7/07)
                -
                
                25,575,000OBO
      Holdings Junior (term loan facility dated 2/11/2010)
                3,975,230
                
                -BHO
      Bond (term loan facility date 12/12/06)
                
                13,500,000
                
                15,500,000Total
                
                107,585,916
                
                175,791,230Less:
      Current portion
                
                (34,081,044)
                
                (175,791,230)Long-term
      portion
                
                73,504,871
                
                -
 
 The
following table summarizes the Company's long-term debt:
  Less than
                
                
                More thanTotal
                1 year
                1-3 year
                3-5 years
                5 yearLong-Term
      Debt Obligations (1)
                107,585,916
                34,081,044
                53,330,907
                20,173,965
                -Interest
      Expense (2)
                7,413,780
                3,668,149
                3,651,476
                94,155Total
                114,999,696
                37,749,193
                56,982,383
                20,268,120
                -
 
 (1)           As
of December 31, 2009, the Company had four loans outstanding maturing on
September 2010 (the Seapowet Loan Facility Agreement), December 2011 (the OBO
Holdings Loan Facility Agreement), December 2013 (the BHO Bond) and January 2015
(the Sakonnet Loan Facility Agreement).  The OBO Holdings Junior Loan
Facility Agreement dated February 11, 2010 matures in December 2011. The Sachem
Loan Facility was paid off in January 2010 upon sale of the vessel securing the
loan. The above table also includes the $13.5 million outstanding 2006 Bonds
payable.
  (2)           All
other debt bears interest at LIBOR plus a margin. For the calculation of the
contractual interest expense obligations in the table above, for all years a
LIBOR rate of  0.253% was used, based on the 3 months LIBOR as at
December 31, 2009 plus the applicable margin. Derivative contracts were not
included in calculations.
  42
 F.
              Safe
      harbor
  This
Annual Report contains certain statements, other than statements of historical
fact, that constitute 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.  When used herein, the words
“anticipates,” “believes,” “seeks,” “intends,” “plans,” or “projects” and
similar expressions are intended to identify forward-looking
statements.  The forward-looking statements express the current
beliefs and expectations of management and involve a number of known and unknown
risks and uncertainties that could cause the Company’s future results,
performance or achievements to differ significantly from the results,
performance or achievements expressed or implied by such forward-looking
statements.  Important factors that could cause or contribute to such
difference include, but are not limited to, those set forth in this Annual
Report and the Company’s filings with the Securities and Exchange
Commission.  Further, although the Company believes that its
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Annual Report will prove to
be accurate.
  Item
              6.                DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
  A.
              Directors
      and senior management
  The
directors and executive officers of the Company are as follows:
  Name
                Age
                Director Since
                Position with the CompanyMichael
      S. Hudner
                63
                1988
                Chairman
      of the Board, President and Chief Executive Officer and Class A
      DirectorTrevor
      J. Williams
                67
                1988
                Vice
      President and Class A DirectorR.
      Anthony Dalzell
                65
                1997
                Treasurer
      and Chief Financial Officer and Class B DirectorCharles
      L. Brock
                67
                1985
                Class
      B DirectorJohn
      M. LeFrere
                65
                1995
                Class
      A DirectorHope
      F. Hudner
                59
                2009
                Class
      A DirectorPer
      Ditlev-Simonsen
                77
                1998
                Class
      B DirectorO.
      Michael Lewis
                60
                2006
                Class
      B Director
 
 Pursuant
to the Company’s Articles of Incorporation, the Board of Directors is divided
into two classes of at least three persons each.  Each class is
elected for a two-year term.  The Class A directors will serve until
the 2009 annual meeting and the Class B directors will serve until the 2010
annual meeting of shareholders.  Officers are appointed by the Board
of Directors and serve until their successors are appointed and
qualified.
  Michael S. Hudner - Michael S.
Hudner has been President and Chief Executive Officer and a director of the
Company since 1988 and Chairman of the Board of the Company since October
1993.  He is also President and a director of BHM, a director of
PROTRANS, and he has a controlling ownership interest, and is President and a
director of NMS.  Since 1978, Mr. Hudner, in his capacity as a partner
in B+H Company (“BHC”), and its predecessor, was primarily responsible for the
acquisition and financing of over 100 bulk carriers, product tankers and crude
oil tankers for BHC and its affiliates and joint ventures (including all the
vessels owned by the Company).  Mr. Hudner is a member of the New York
Bar, and is a member of the Council of the American Bureau of
Shipping.  Mr. Hudner is a U.S. citizen and resides in Rhode Island,
United States.
  Trevor J. Williams - Mr.
Williams has been principally engaged since 1985 as President and Director of
Consolidated Services Limited, a Bermuda-based firm providing management
services to the shipping industry.  He is a director of PROTRANS and
has been for more than five years a director and Vice President of the Company
and BHM.  Mr. Williams is a Director of Excel Maritime Carriers Ltd.,
a publicly quoted Company.  Mr. Williams is a British citizen and
resides in Bermuda.
  R. Anthony Dalzell - Mr.
Dalzell has been affiliated with BHM since October 1995.  He was
appointed Treasurer and Chief Financial Officer of the Company in March
1997.  Mr. Dalzell was Managing Director of Ugland Brothers Ltd., a
U.K.  based ship owner and ship manager from March 1982 until March
1988.  From April 1988 until December 1992, he was General Manager of
NMS and Secretary and a Vice President of the Company.  From June 1993
until October 1995, Mr. Dalzell was affiliated with B+H Bulk Carriers
Ltd.  Mr. Dalzell is a British citizen and resides in the United
Kingdom.
  43
 Charles L. Brock - Mr. Brock
has been a member of the law firm of Brock Partners since April 1995, which firm
acted as United States counsel for the Company from 1995 to 2000, and since June
2002, a member of the investment banking firm of Brock Capital
Group.  Mr. Brock is a U.S. citizen and resides in East Hampton, New
York, United States.
  John M. LeFrere - Mr. LeFrere
has been a private investor and consultant to several major corporations since
March 1996.  From February 1993 to March 1996, he was a Managing
Director of Bankers Trust Company of New York in charge of equity research for
the Capital Markets Division.  Mr. LeFrere is President of
J.  V.  Equities Corp., an investment banking firm, and was
a partner in several research and investment banking firms.  Mr.
LeFrere is a U.S. citizen and resides in Florida, United States.
  Hope F. Hudner -age 59, is a
Bahamian and U. S. Citizen and is the wife of Michael S. Hudner.  She
is a designer and artist and is or has been a director of numerous non-profit
boards during the past five years, including the Board of Trustees of the Moses
Brown School, the Museum of Art of the Rhode Island School of Design, Perennial
Planters, the Development Board of Women & Infants Hospital and the
Development Board of Save the Bay, all located in Rhode Island.  She
is also an officer and director of Navinvest Marine Services (U.S.) Inc., an
affiliate of Mr. Hudner, which acts as agent for the Company.
  Per Ditlev-Simonsen - Mr.
Ditlev-Simonsen is Chairman of the Board of Eidsiva Rederi ASA, an Oslo Stock
Exchange listed shipping company with its main interests in bulk, car and ro-ro
carriers from 1991 to 2009.  Mr. Ditlev-Simonsen has more than 35
years experience in international shipping and offshore drilling.  In
the years 1991-1996, he was Chairman of the Board of Christiana Bank og
Kreditkasse, Norway’s second largest commercial bank and one of the world’s
largest shipping banks.  Mr. Ditlev-Simonsen, the Mayor of Oslo from
1995 to 2007, has served as a member of the Norwegian Parliament and the Oslo
City Council, and as Chairman of the Conservative Party in Oslo.  He
was also Minister of Defense in the Norwegian Government from October 1989 to
November 1990.  Mr. Ditlev-Simonsen is a Norwegian citizen and resides
in Oslo, Norway.
  O. Michael Lewis - Mr. Lewis
was the Senior Partner of London law firm Peachey & Co from 1997 to 2005
having been a partner since 1979.  Mr. Lewis specialized in advising
international shipping groups.  Mr. Lewis is a trustee of the Boris
Karloff Charitable Foundation.
  No family
relationships exist between any of the executive officers and directors of the
Company, except that Hope F. Hudner is the wife of Michael S.
Hudner.
  B.
              Compensation
  The
Company does not pay salaries or provide other direct compensation to its
executive officers.  Directors who are not officers of the Company are
entitled to receive annual fees of $30,000, and the Chairman of the Audit
Committee is entitled to receive an additional fee of $2,000 per
month.  Certain directors and executive officers of the Company earn
compensation indirectly through entities which provide services to the
Company.  (See Item 7.B.  Related Party
Transactions).
  C.
              Board
      practices
  The
By-Laws of the Company provide for an Audit Committee of the Board of Directors
consisting of two or more directors of the Company designated by a majority vote
of the entire Board.  The Audit Committee consists of directors who
are not officers of the Company and who are not and have not been employed by
BHM or by any person or entity under the control of, controlled by, or under
common control with, BHM.  The Audit Committee is currently comprised
of Messrs.  Brock (Chairman), Ditlev-Simonsen and Lewis, and is
currently charged under the By-Laws with reviewing the following matters and
advising and consulting with the entire Board of Directors with respect
thereto:  (a) the preparation of the Company’s annual financial
statements in collaboration with the Company’s independent
registered  public accounting firm; (b) the performance by BHM of its
obligations under the Management Services Agreement with the Company;
and  (c) all agreements between the Company and BHM, any officer of
the Company, or affiliates of BHM or any such officer.  The Audit
Committee, like most independent Board committees of public companies, does not
have the explicit authority to veto any actions of the entire Board of Directors
relating to the foregoing or other matters; however, the Company’s senior
management, recognizing their own fiduciary duty to the Company and its
shareholders, is committed not to take any action contrary to the recommendation
of the Audit Committee in any matter within the scope of its
review.  See also Item 6.A.  Directors and Senior
Management.
  44
 D.
              Employees
  The
Company employed, as of December 31, 2009, four non-salaried individuals on a
part-time basis as officers of the Company and, through its vessel-owning
subsidiaries, utilizes the services of approximately 193 officers and
crew.  The Company’s vessels are manned principally by crews from the
Philippines, Pakistan, Croatia, Turkey and India.
  E.
              Share
      ownership
  See Item
7.A.  Major Shareholders and Related Party Transactions.
  Item
              7.                MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
  A.
              Major
      shareholders
  The
following table sets forth information as of May 14, 2010 concerning the
beneficial ownership of the common stock of the Company by (i) the only persons
known by the Company’s management to own beneficially more than 5% of the
outstanding shares of common stock, (ii) each of the Company’s directors and
executive officers, and (iii) all executive officers and directors of the
Company as a group:
  Name
      of Beneficial Owner
              Number
      of Shares Beneficially Owned
              Percent
      of Common Stock (a)Northampton
      Holdings Ltd.
              2,011,926
              36.22%Michael
      S. Hudner (b)
              3,693,414
              66.48%Fundamental
      Securities International Ltd.
              1,421,848
              25.59%Devonport
      Holdings Ltd. (c)
              1,421,848
              25.59%Harbor
      Holdings Corp. (d)
              202,500
              3.65%Charles
      L. Brock
              2,500
              0.05%R.
      Anthony Dalzell (e)
              57,140
              1.03%Dean
      Investments Ltd.
              54,540
              0.98%John
      M. LeFrere
              2,500
              0.05%Anthony
      J. Hardy
              2,500
              0.05%Per
      Ditlev-Simonsen
              ----
              -----Trevor
      J. Williams (f)
              3,493,414
              62.88%O.
      Michael Lewis
              2,500
              0.05%Caiano
      Ship AS (g)
              1,162,467
              20.92%All
      executive officers and directors as a group (8 persons)
              3,705,914
              66.71%
 
 (a)
              As
      used herein, the term beneficial ownership with respect to a security is
      defined by Rule 13d-3 under the Exchange Act as consisting of sole or
      shared voting power (including the power to vote or direct the vote)
      and/or sole or shared investment power (including the power to dispose or
      direct the disposition) with respect to the security through any contract,
      arrangement, understanding, relationship, or otherwise, including a right
      to acquire such power(s) during the next 60 days.  Unless
      otherwise noted, beneficial ownership consists of sole ownership, voting,
      and investment power with respect to all shares of common stock shown as
      beneficially owned by them.
  (b)
              Comprised
      of shares shown in the table as held by Northampton Holdings Ltd. (“NHL”),
      Fundamental Securities International Ltd.  (“Fundamental”),
      Harbor Holdings Ltd.. (“Harbor”) and Dean Investments (“Dean Investments”)
      a Cayman Islands corporation.  Mr. Hudner is a general partner
      in the partnership which is the ultimate parent of Fundamental and a
      general partner in the ultimate owner of the general partner of
      B+H/Equimar 95 Associates, L.P. (“95 Associates”), which is a 60.6% owner
      of NHL.  Fundamental is a 30.3% shareholder of
      NHL.  Mr. Hudner and a trust for the benefit of his family own
      Harbor, a Connecticut corporation.  Anthony Dalzell is a
      beneficial owner of Dean Investments, a Cayman Islands
      corporation.  Mr. Dalzell and Dean Investments executed a Voting
      Agreement, dated as of September 29, 2006 (the “Voting Agreement”), with
      the other entities noted above.  Under the Voting Agreement, Mr.
      Dalzell and Dean Investments agreed to vote shares as determined by the
      majority in interest of the group.  Accordingly, Mr. Hudner may
      be deemed to share voting and dispositive power as an indirect beneficial
      owner of the shares held by NHL, Fundamental, Harbor and Dean
      Investments.
  45
 (c)
              Devonport
      Holdings Ltd.  is a general partner of the partnership that is
      the ultimate parent of Fundamental and is also a general partner in the
      ultimate owner of the general partner of 95
  Associates.
  (d)
              Comprised
      of shares reissued by the Company during 2007, upon exercise of options
      granted to B+H Management Ltd.
  (e)
              Includes
      54,540 shares held by Dean
Investments.
  (f)
              Comprised
      of shares shown in the table for NHL, Fundamental, Dean Investments and
      2,500 shares held individually.  Mr. Williams is president and a
      director of Fundamental and the president and a director of 95
      Associates.  Accordingly, Mr. Williams may be deemed to share
      voting and dispositive power as an indirect beneficial owner of the shares
      held by NHL, Fundamental and Dean
Investments.
  (g)
              Per
      VPS Registered Shareholder list.
  B.
              Related
      party transactions
  BHM/NMS/BHES/PROTRANS
  The
shipowning activities of the Company are managed by an affiliate, B+H Management
Ltd.  (“BHM”) under a Management Services Agreement (the “Management
Agreement”) dated June 27, 1988 and amended on October 10, 1995 and on June 1,
2009, subject to the oversight and direction of the Company’s Board of
Directors.
  The
shipowning activities of the Company entail three separate functions, all under
the overall control and responsibility of BHM: (1) the shipowning function,
which is that of an investment manager and includes the purchase and sale of
vessels and other shipping interests; (2) the marketing and operations function
which involves the deployment and operation of the vessels; and (3) the vessel
technical management function, which encompasses the day-to-day physical
maintenance, operation and crewing of the vessels.
  BHM
employs Navinvest Marine Services (USA) Inc. (“NMS”), a Connecticut corporation,
under an agency agreement, to assist with the performance of certain of its
financial reporting and administrative duties under the Management
Agreement.
  The
Management Agreement may be terminated by the Company in circumstances including
the following: (i) certain events involving the bankruptcy or insolvency of BHM;
(ii) an act of fraud, embezzlement or other serious criminal activity by Michael
S.  Hudner, Chief Executive Officer, President, Chairman of the Board
and significant shareholder of the Company, with respect to the Company; (iii)
gross negligence or willful misconduct by BHM; or (iv) a change in control of
BHM.
  Mr.
Hudner is President of BHM and the sole shareholder of NMS.  BHM is
technical manager of the Company’s wholly-owned vessels under technical
management agreements.  BHM employs B+H Equimar Singapore (PTE) Ltd.,
(“BHES”), to assist with certain duties under the technical management
agreements.  BHES is a wholly-owned subsidiary of BHM.
  Currently,
the Company pays BHM a monthly rate of $6,743 per vessel for general,
administrative and accounting services, which may be adjusted annually for any
increases in the Consumer Price Index.  During the years ended
December 31, 2009, 2008 and 2007, the Company paid BHM fees of approximately
$1,100,000, $1,200,000 and $1,126,000, respectively, for these
services.  The total fees vary due to the change in the number of fee
months resulting from changes in the number of vessels owned during each
period.
  46
 The
Company also pays BHM a monthly rate of $13,844 per MR product tanker and
$16,762 per Panamax product tanker or OBO for technical management services,
which may be adjusted annually for any increases in the Consumer Price
Index.  Vessel technical managers coordinate all technical aspects of
day to day vessel operations including physical maintenance, provisioning and
crewing of the vessels.  During the years ended December 31, 2009,
2008, and 2007, the Company paid BHM fees of approximately $2,259,000,
$2,540,000 and $2,539,000, respectively, for these
services.  Technical management fees are included in vessel operating
expenses in the Consolidated Statements of Operations.  The total fees
have decreased due to the decrease in the number of vessels operated from an
average of 13.3 vessels for the twelve months of 2008 to 10.8 vessels for the
twelve months of 2009.
  The
Company engages BHM to provide commercial management services at a monthly rate
of $10,980 per vessel, which may be adjusted annually for any increases in the
Consumer Price Index.  BHM obtains support services from Protrans
(Singapore) Pte.  Ltd., which is owned by BHM.  Commercial
managers provide marketing and operations services.  During the years
ended December 31, 2009, 2008 and 2007, the Company paid BHM fees of
approximately $1,625,000, $1,896,000 and $1,835,000, respectively, for these
services.  Commercial management fees are included in voyage expenses
in the Consolidated Statements of Operations.  The total fees
decreased in 2009 due to the decrease in the number of fee months resulting from
the decrease in the number of vessels owned.
  The
Company engaged Centennial Maritime Services Corp.  (“Centennial”), a
company affiliated with the Company through common ownership, to provide manning
services at a monthly rate of $1,995 per vessel and agency services at variable
rates, based on the number of crew members placed on board.  During
the years ended December 31, 2009, 2008 and 2007, the Company paid Centennial
manning fees of approximately $568,000, $777,000 and $662,000,
respectively.  Manning fees are included in vessel operating expenses
in the Consolidated Statements of Operations.
  BHES
provides office space and administrative services to Straits, a wholly-owned
subsidiary and owner of the AFDV originally scheduled to be delivered in the
second quarter of 2010, for SGD 5,000 (approximately $3,468) per month from
January 2009 through April 2009 and SGD 12,000 (approximately $8,280) per month
effective May 1, 2009.  The total paid to BHES for these services was
$95,600 in 2009.  The agreement to purchase the newbuilding AFDV was
cancelled on March 30, 2010 due to the builder's repudiation of its obligations
under the memorandum of agreement.
 
 BHM
received arrangement fees of $232,000 in connection with the financing of the
accommodation barge SAFECOM1 in January 2009 and received brokerage commissions
of $448,000 in connection with the sales of six vessels during
2009.  The Company also paid BHM standard industry chartering
commissions of $704,000 in 2009, $720,000 in 2008 and $717,000 in 2007 in
respect of certain time charters in effect during those
periods.  Clearwater Chartering Corporation, a company affiliated
through common ownership, was paid $489,000, $1,176,000 and $1,362,000 in 2009,
2008 and 2007, respectively, for standard industry chartering
commissions.  Brokerage commissions are included in voyage expenses in
the Consolidated Statements of Operations.
  The
Company paid fees of $312,000, $501,000 and $501,000 to J.V. Equities, Inc. in
2009, 2008 and 2007, respectively, for consulting services
rendered.  J.V. Equities is controlled by John LeFrere, a director of
the Company.
  During
each of 2009, 2008 and 2007, the Company paid fees of $128,000, $56,000 and
$186,000 respectively, to R. Anthony Dalzell, Chief Financial Officer, Vice
President and a director of the Company, or to a Company deemed to be controlled
by him for consulting services.
  During
1998, the Company’s Board of Directors approved an agreement with BHM whereby up
to 110,022 shares of common stock of the Company will be issued to BHM for
distribution to individual members of management, contingent upon certain
performance criteria.  The Company issued the shares of common stock
to BHM at such time as the specific requirements of the agreement were
met.  During 2007, 2,275 shares, bringing the total to 64,522 shares,
were issued from treasury stock.  Compensation cost of $34,000 based
on the market price of the shares at the date of issue, were included as
management fees to related parties in the Consolidated Statement of Operations
for the years ended December 31, 2007.  All shares in the plan were
vested at December 31, 2007.
  47
 As a
result of BHM’s possible future management of other shipowning companies and
BHM’s possible future involvement for its own account in other shipping
ventures, BHM may be subject to conflicts of interest in connection with its
management of the Company.  To avoid any potential conflict of
interest, the management agreement between BHM and the Company provides that BHM
must provide the Company with full disclosure of any disposition of handysize
bulk carriers by BHM or any of its affiliates on behalf of persons other than
the Company.
  For the
policy year ending February 20, 2010, the Company placed the following insurance
with NAL:
  66.5%
      of its Hull & Machinery (“H&M”) insurance for claims in excess of
      minimum $120/125,000 each incident, which insurance NAL fully
      reinsured.
  67.5%
      of its H&M insurance (Machinery Claims only) on 6 vessels of up to
      $50,000 in excess of $120/125,000 each incident;
  and
  67.5%
      of its H&M insurance (Machinery claims only) on 1 vessel up to
      $100,000 in excess of $120/125,000 each
  incident.
  For the
policy year ending February 20, 2009, the Company placed the following insurance
with Northampton Assurance Ltd (“NAL”):
  66.5%
      of its Hull & Machinery (“H&M”) insurance for claims in excess of
      minimum $120/125,000 each incident, which insurance NAL fully
      reinsured.
  67.5%
      of its H&M insurance (Machinery claims only) on 6 vessels of up to
      $50,000 in excess of $120/125,000 each incident;
  and
  67.5%
      of its H&M insurance (Machinery claims only) on 1 vessel up to
      $100,000 in excess of $120/125,000 each
  incident.
  For the
policy year ending February 20, 2008, the Company placed the following insurance
with NAL:
  65%
      of its Hull & Machinery (“H&M”) insurance for claims in excess of
      minimum $120/125,000 each incident, which insurance NAL fully
      reinsured.
  70%
      of its H&M insurance (Machinery Claims only) on 6 vessels of up to
      $50,000 in excess of $120/125,000 each incident;
  and
  70%
      of its H&M insurance (Machinery claims only) on 1 vessel up to
      $100,000 in excess of $120/125,000 each
  incident.
  For the
periods ending December 31, 2009, 2008 and 2007, vessel operating expenses on
the Consolidated Statements of Operations include approximately $719,000,
$982,000 and $896,000, respectively, of insurance premiums paid to NAL (of which
$667,000, $915,000 and $813,000, respectively, was ceded to reinsurers) and
approximately $99,000, $196,000, and $188,000, respectively, of brokerage
commissions paid to NAL.
  The
Company had accounts payable to NAL of $86,000 and $397,000 at December 31, 2009
and 2008, respectively.  NAL paid fees of $174,000 during each of the
three years ending December 31, 2009, 2008 and 2007 to Mr. Dalzell or to a
company deemed to be controlled by him for consulting service.
  C.
              Interests
      of experts and counsel
  Not
applicable
  48
 Item
              8.                FINANCIAL
      INFORMATION
  A.
              Consolidated
      statements and other financial
information
  See Item
16.  Financial Statements
  A.7.Legal
proceedings
  There are
no material pending legal proceedings to which the Company or any of its
subsidiaries is a party to or of which any of its or their property is the
subject of, other than ordinary routine litigation incidental to the Company’s
business.
  A.8.Policy
on dividend distributions
  The
Company has a policy of investment for future growth and does not anticipate
paying cash dividends on the common stock in the foreseeable
future.  The payment of cash dividends on shares of common stock will
be within the discretion of the Company’s Board of Directors and will depend
upon the earnings of the Company, the Company’s capital requirements and other
financial factors which are considered relevant by the Company’s Board of
Directors.  Both the Loan Agreement dated October 25, 2007 by and
between Cliaship Holdings Ltd., Nordea Bank Norge ASA and certain other
financial institutions listed therein relating to a loan facility of $26,700,000
(the “Cliaship Loan Facility Agreement”) and the OBO Holdings Loan Facility
Agreement restrict the payment of dividends.
  B.
              Significant
      changes
  Not
applicable
  Item
              9.                THE
      OFFER AND LISTING
  A.
              Offer
      and listing details
  The
following table sets forth, for the last six months, the high and low sales
price, for the two most recent fiscal years, the quarterly high and low sales
prices and for the prior five fiscal years, the annual high and low sales price
for a share of Common Stock on the American Stock Exchange:
  Sale
      PriceTime
      Period
                High
                Low20091st
      Quarter
                4.77
                1.622nd
      Quarter
                5.21
                1.873rd
      Quarter
                4.19
                3.374th
      Quarter
                4.60
                1.6720081st
      Quarter
                14.98
                9.522nd
      Quarter
                11.94
                9.663rd
      Quarter
                11.70
                6.734th
      Quarter
                8.65
                1.81Annual2007
                20.40
                12.092006
                20.55
                13.802005
                24.40
                9.502004
                27.43
                7.602003
                16.65
                6.50
 
 As of
December 31, 2009, there were approximately 405 record holders of Common
Stock.
 
 49
 B.
              Plan
      of distribution
  Not
applicable
  C.
              Markets
  The
Company’s Common Stock has been publicly held and listed for trading on the
American Stock Exchange (now NYSE Amex) since the completion of the Company’s
public offering in August 1988.  The symbol for the Company’s Common
Stock on the American Stock Exchange is “BHO.”  The Company had a
secondary listing on the Oslo Stock Exchange under the symbol BHOC until it
withdrew from listing on September 23, 2008.
  Item
              10.                ADDITIONAL
      INFORMATION
  A.
              Share
      capital
  Not
applicable
  B.
              Memorandum
      and articles of association
  The
Articles of Incorporation of the Company as amended July 25, 1988, were filed as
Exhibit 3.1 to the Company’s Registration Statement on Form S-1, Registration
No. 33-22811 (“the Registration Statement”).  The Amendment adopted
October 11, 1995 to the Articles of Incorporation of the Company was filed as
Exhibit 1.1(i) to the Company’s Annual Report on Form 20-F for the fiscal year
ended December 31, 1995.  The Amendment adopted October 21, 1998 to
the Articles of Incorporation, was filed as Exhibit 1.2(ii) to the Company’s
Annual Report on Form 20-F for the fiscal year ended December 31,
1998.
  The
By-Laws of the Company, were filed as Exhibit 3.2 to the Registration
Statement.  The Amendment adopted October 11, 1995 to the By-Laws of
the Company was filed as Exhibit 1.2(i) to the Company’s Annual Report on Form
20-F for the fiscal year ended December 31, 1995.  The Amendment
adopted October 21, 1998 to the By-Laws of the Company was filed as Exhibit
1.2(iii) to the Company’s Annual Report on Form 20-F for the fiscal year ended
December 31, 1998.
  C.
              Material
      contracts
  Material
contracts are listed as exhibits and described elsewhere in the
text.
  D.
              Exchange
      controls
  Currently,
there are no governmental laws, decrees or regulations in Liberia, the country
in which the Company is incorporated, which restrict the export or import of
capital (including foreign exchange controls), or which affect the remittance of
dividends or other payments to nonresident holders of the securities of Liberian
corporations.  Also, there are no limitations currently imposed by
Liberian law or by the Company’s Articles of Incorporation and By-Laws on the
right of nonresident or foreign owners to hold or vote the Company’s Common
Stock.
  E.
              Taxation
  United
States shareholders of the Company are not subject to any taxes under existing
laws and regulations of Liberia.  There is currently no reciprocal tax
treaty between Liberia and the United States regarding income tax withholding on
dividends.
  50
 F.
              Dividends
      and paying agents
  Not
applicable
  G.
              Statements
      by experts
  Not
applicable
  H.
              Documents
      on display
  We are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended.  In accordance with these requirements we file
reports and other information with the SEC.  These materials,
including this annual report and the accompanying exhibits, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington D.C.  20459.  You
may obtain information on the operation of the public reference room by calling
1 (800) SEC-0330, and you may obtain copies at prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington,
D.C.  20549.  The SEC maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information that we and other registrants have filed electronically with
the SEC.  In addition, documents referred to in this annual report may
be inspected at our offices located at 3rd Floor, Par La Ville Place, 14 Par La
Ville Road, Hamilton HM 08, Bermuda.
  Item
              11.                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  The
carrying amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, trade accounts receivable, accounts payable and accrued liabilities
approximate their fair value due to the short-term maturities.  The
carrying amount reported in the Consolidated Balance Sheets for long-term debt
approximates its fair value due to variable interest rates, which approximate
market rates.
  Credit
Risk.  The Company’s financial instruments that are exposed to
concentrations of credit risk consist primarily of cash equivalents, trade
receivables and derivative contracts (interest rate swaps).  The
Company maintains its cash accounts with various major financial institutions in
the United States, the United Kingdom and Norway.  The Company
performs periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any one
institution.  The Company is exposed to credit risk in the event of
non-performance by counter parties to derivative instruments; however, the
Company limits its exposure by diversifying among counter parties with high
credit ratings.
  Due to
the long standing relationships with significant customers, their relative
financial stability, and the fact that customers generally pay in advance,
credit risk with respect to trade accounts receivable is limited.  The
Company performs ongoing credit evaluations of its customers’ financial
condition and maintains allowances for potential credit losses.
  At
December 31, 2009, the Company’s largest three accounts receivable represented
85% of total accounts receivable.  At December 31, 2008, the Company’s
largest three accounts receivable balances represented 72% of total accounts
receivable.  The allowance for doubtful accounts was $181,000 and
$253,000 at December 31, 2009 and 2008, respectively.  To date, the
Company’s actual losses on past due receivables have not exceeded our estimate
of bad debts.
  Interest
Rate Fluctuation.  The Company’s debt contains interest rates that
fluctuate with LIBOR.  Increasing interest rates could adversely
impact future earnings.  The Company does not expect this rate to
fluctuate dramatically, however slight increases can be expected.  The
Company does not expect rate changes to have a material adverse effect on its
liquidity and capital resources due to the mitigation of such risk resulting
from interest rate swaps.  The Company is party to interest swap
agreements where it receives a floating interest rate and in exchange pays a
fixed interest rate for a certain period.  Contracts which meet the
strict criteria for hedge accounting are accounted for as cash flow
hedges.  A cash flow hedge is a hedge of the exposure to variability
in cash flows that is attributable to a particular risk associated with a
recognized asset or liability, or a highly probable forecasted transaction that
could affect profit or loss.  The effective portions of the gain or
loss on the hedging instrument is recognized directly as a component of Other
Comprehensive income in equity, while the ineffective portion, if any, is
recognized immediately in current period earnings.
  51
 Foreign
Exchange Rate Risk.  The Company generates all of its revenues in U.S.
dollars but the Company incurs a portion of its expenses in currencies other
than U.S. dollars.  For accounting purposes, expenses incurred in
foreign currencies are translated into U.S. dollars at exchange rates prevailing
at the date of transaction.  Resulting exchange gains and/or losses on
settlement or translation are included in the accompanying Consolidated
Statements of Operations.
  Inflation.  Although
inflation has had a moderate impact on its trading fleet’s operating and voyage
expenses in recent years, management does not consider inflation to be a
significant risk to operating or voyage costs in the current economic
environment.  However, in the event that inflation becomes a
significant factor in the global economy, inflationary pressures would result in
increased operating, voyage and financing costs.
  Asset/Liability
Risk Management.  The Company continuously measures and quantifies
interest rate risk and foreign exchange risk, in each case taking into account
the effect of hedging activity.  The Company uses derivatives as part
of its asset/liability management program in order to reduce interest rate
exposure arising from changes in interest rates.  The Company does not
use derivative financial instruments for the purpose of generating earnings from
changes in market conditions or for speculative purposes.  Before
entering into a derivative transaction, the Company determines that there is a
high correlation between the change in value of, or the cash flows associated
with, the hedged asset or liability and the value of, or the cash flows
associated with, the derivative instrument.
  Item
              12.                DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES
  Not
Applicable
  PART
II
  Item
              13.                DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES
  Not
Applicable
  Item
              14.                MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
  Not
Applicable
  Item
              15.                CONTROLS
      AND PROCEDURES
  A.           Pursuant
to Rules 13a-15(e) or 15d-15(e) of the Exchange Act, the Company’s management,
under the supervision and with the participation of the chief executive officer
and chief financial officer, has evaluated the effectiveness of the design and
operation of the Company’s disclosure controls and procedures as of
December 31, 2009. The terms disclosure controls and procedures are defined
under SEC rules as controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the Act is
accumulated and communicated to the issuer’s management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and
the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives.
  Based on
that evaluation, our chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures are effective as of
December 31, 2009.
  B.           The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. This internal control system
was designed to provide reasonable assurance to the Company’s management and
board of directors regarding the preparation and fair presentation of published
financial statements.
  52
 All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Management assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2009. In
making this assessment, it used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. Based on our assessment under those criteria,
management of the Company believes that, as of December 31, 2009, the Company’s
internal control over financial reporting is effective.
  This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in the annual report.
  C.           Subsequent
to the date of management’s evaluation, there were no significant changes in the
Company’s internal controls or in other factors that could significantly affect
the internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
  Item
16A.                      AUDIT
COMMITTEE FINANCIAL EXPERT
  The
Company’s Board of Directors has determined that Charles Brock, who is the
Chairman of the Audit Committee, is duly qualified as a Financial
Expert.
  Item
              16B.                CODE
      OF ETHICS
  The
Company has adopted a Code of Ethics that applies to all officers, directors and
employees (collectively, the “Covered Persons”).  The Company expects
each of the Covered Persons to act in accordance with the highest standards of
personal and professional integrity in all aspects of their activities, to
comply with all applicable laws, rules and regulations, to deter wrongdoing, and
to abide by the Code of Ethics.
  Any
change to or waiver of the Code of Ethics for Covered Persons must be approved
by the Board and disclosed promptly to the Company’s shareholders.
  The
Company undertakes to provide a copy of the Code of Ethics, free of charge, upon
written request to the Secretary at the following address: B+H Ocean Carriers,
Ltd.  3rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton HM
08, Bermuda, Attention: Secretary.
  Item
              16C.                PRINCIPAL
      ACCOUNTING FEES AND SERVICES
  Fees,
including reimbursements for expenses, for professional services rendered by
Ernst & Young LLP for the audit of the Company’s financial statements for
the years ended December 31, 2009, 2008 and 2007 were $105,000, $159,000, and
$144,000, respectively.  Ernst & Young LLP does not provide other
services to the Company.
  Item
              16D.                EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES.
  Not
applicable
  Item
              16E.                PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
  Not
applicable
  Item
              16F.                CHANGE
      IN REGISTRANT’S CERTIFYING
ACCOUNTANT
  Not
applicable
  53
 Item
              16G.                CORPORATE
      GOVERNANCE
  Section
801 of the NYSE American Stock Exchange Company Guide has established specific
exemptions from its listing standards for controlled companies, i.e., companies
of which more than 50% of the voting power is held by an individual, a group or
another entity.  The Company is a “controlled company” by virtue of
the fact that Michael S. Hudner, Trevor Williams and R.  Anthony
Dalzell, each an officer and a director of the Company jointly control a
majority interest in the stock of the
Company.  Messrs.  Hudner and Williams, together with
certain other entities, have filed a Schedule 13D with the SEC on March 20,
2007, affirming that as members of a group they share voting power of over 50.5%
of the Company’s outstanding voting stock.  Mr. Dalzell and an
affiliated entity have agreed to cause their beneficially owned shares to be
voted with Messrs.  Hudner and Williams.  See Item
7.  Major Shareholders and Related Party Transactions.
  The
Company has elected to rely upon certain of the exemptions provided in Part 8 of
the NYSE American Stock Exchange Company Guide.  Specifically, the
Company will rely on exceptions to the requirements that listed companies (i)
have a majority of independent directors, (ii) select, or recommend for the
Board’s selection, director nominees by a majority of independent directors or a
nominating committee comprised solely of independent directors, and (iii)
determine officer compensation by a majority of independent directors or a
compensation committee comprised solely of independent
directors.  Notwithstanding the above, the Company’s current practices
include (i) selecting director nominees by the full Board of Directors, and (ii)
determining officer compensation by a majority of independent
directors.
  Other
than the above, the Company has followed and intends to continue to follow the
applicable corporate governance standards under the NYSE American Stock Exchange
Company Guide.
  In
accordance with Section 610 of the NYSE American Stock Exchange Company Guide,
the Company will post this annual report on Form 20-F on the Company’s website
at www.bhocean.com.  In addition, the Company will provide hard copies
of the annual report free of charge to shareholders upon request.
  Item
              17.                FINANCIAL
      STATEMENTS
  The
Company has elected to furnish the financial statements and related information
specified in Item 18.
  Item
              18.                FINANCIAL
      STATEMENTS.
  The
following Consolidated Financial Statements of the Company and its subsidiaries
appear at the end of this Annual Report:
  Page
      No.Consolidated
      Financial Statements:
              F-1Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008
              F-3Consolidated
      Statements of Operations for the three years ended December 31, 2009, 2008
      and 2007
              F-5Consolidated
      Statements of Shareholders’ Equity for the three years ended December 31,
      2009, 2008 and 2007
              F-6Consolidated
      Statements of Cash Flows for the three years ended December 31, 2009, 2008
      and 2007
              F-7Notes
      to Consolidated Financial Statements
              F-9
 
 54
 Item
              19.                EXHIBITS
  (a)           Exhibits,
Exhibit Number, Description
  1.1.           Form
of Amended and Restated Articles of Incorporation of the Company1
  1.2.           Form
of Amended and Restated By-Laws of the Company2
  4.1.           Management
Services Agreement dated June 27, 1988 between the Company and B+H Ocean
Management3
  4.1(a)                      Amendment
No. 1 to Management Services Agreement dated June 27, 1988 between the Company
and B+H Ocean Management, dated October 10, 19954
  4.1(b)                      Amendment
No. 2 to Management Services Agreement dated June 27, 1988 between the Company
and B+H Ocean Management, dated June 1, 20095
  4.2           Loan
Agreement dated August 29, 2006 by and between Nordea Bank Finland Plc., Nordea
Bank Norge ASA, OBO Holdings Ltd. and certain other financial institutions
listed therein relating to a loan facility of $202,000,0006
  4.3(a)                      Addendum
No. 1 to Loan Agreement dated August 29, 2006 by and between Nordea Bank Finland
Plc., Nordea Bank Norge ASA, OBO Holdings Ltd. and certain other financial
institutions listed therein relating to a loan facility of $202,000,000, dated
October 10, 20087
  4.3(b)                      Addendum
No. 2 and Waiver Agreement to Loan Agreement dated August 29, 2006 by and
between Nordea Bank Finland Plc., Nordea Bank Norge ASA, OBO Holdings Ltd. and
certain other financial institutions listed therein relating to a loan facility
of $202,000,000, dated July 17, 20098
  4.3(c)                      Addendum
No. 3 to Loan Agreement dated August 29, 2006 by and between Nordea Bank Finland
Plc., Nordea Bank Norge ASA, OBO Holdings Ltd. and certain other financial
institutions listed therein relating to a loan facility of $202,000,000, dated
January 29, 20109
  4.4(a)                      Loan
Agreement dated September 5, 2006 by and between Seapowet Trading Ltd., Nordea
Bank Norge ASA and certain other financial institutions listed therein relating
to a loan facility of $8,000,00010
  4.4(b)                      Addendum
No. 1 and Waiver Agreement to Loan Agreement dated September 5, 2006 by and
between Seapowet Trading Ltd., Nordea Bank Norge ASA and certain other financial
institutions listed therein relating to a loan facility of $8,000,000, dated
July 17, 200911
  4.4(c)                      Addendum
No. 2 to Loan Agreement dated September 5, 2006 by and between Seapowet Trading
Ltd., Nordea Bank Norge ASA and certain other financial institutions listed
therein relating to a loan facility of $8,000,000, dated January 29, 201012
  4.5           Loan
Agreement dated September 7, 2007 by and between Boss Tankers, Ltd., Bank of
Scotland and certain other financial institutions listed therein relating to a
term loan facility of $25,500,00013
  4.6           Amendment
to Loan Agreement dated September 7, 2007 by and between Boss Tankers, Ltd.,
Bank of Scotland and certain other financial institutions listed therein
relating to a term loan facility of $25,500,000, dated December 7, 200714
  4.6(a)                      Loan
Agreement dated September 7, 2007 by and between Boss Tankers, Ltd., Bank of
Scotland and certain other financial institutions listed therein relating to a
term loan facility of $3,975,230, dated February 3, 201015
  4.7           Loan
Agreement dated October 25, 2007 by and between Cliaship Holdings Ltd., Nordea
Bank Norge ASA and certain other financial institutions listed therein relating
to a loan facility of $26,700,00016
  4.7(a)                      Addendum
No. 1 and Waiver Agreement to Loan Agreement dated October 25, 2007 by and
between Cliaship Holdings Ltd., Nordea Bank Norge ASA and certain other
financial institutions listed therein relating to a loan facility of
$26,700,000, dated July 17, 200917
  4.8           Loan
Agreement dated January 24, 2007 by and between Sakonnet Shipping Ltd., The Bank
of Nova Scotia Asia, Ltd. and certain other financial institutions listed
therein relating to a loan facility of $27,300,00018
  4.9           Side
letter relating to the Loan Agreement dated January 24, 2007 by and between
Sakonnet Shipping Ltd., The Bank of Nova Scotia Asia, Ltd. and certain other
financial institutions listed therein relating to a loan facility of
$27,300,000, dated November 24, 200819
  4.10           Consent
Letter relating to the Loan Agreement dated January 24, 2007 by and between
Sakonnet Shipping Ltd., The Bank of Nova Scotia Asia, Ltd. and certain other
financial institutions listed therein relating to a loan facility of
$27,300,000, dated April 15, 201020
  4.10(a)                      Consent
Letter relating to the Loan Agreement dated January 24, 2007 by and between
Sakonnet Shipping Ltd., The Bank of Nova Scotia Asia, Ltd. and certain other
financial institutions listed therein relating to a loan facility of
$27,300,000, dated May 12, 201021
  4.11           Loan
Agreement dated May 13, 2008 by and between Sachem Shipping Ltd., DVB Bank AG,
DVB Group Merchant Bank (Asia) Ltd. and certain other financial institutions
listed therein relating to a loan facility of $30,000,00022
  4.12           Side
Letter relating to the Loan Agreement dated May 13, 2008 by and between Sachem
Shipping Ltd., DVB Bank AG, DVB Group Merchant Bank (Asia) Ltd. and certain
other financial institutions listed therein relating to a loan facility of
$30,000,000, dated October 28, 200823
  4.13           Letter
of Credit Facility Agreement dated July 31, 2008 by and between Straits Offshore
Ltd. and HSH Nordbank AG, New York Branch in the amount of $23,205,00024
  4.14           Agreement
dated September 1, 2008 between Straits Offshore and B+H Equimar Singapore25
  4.15           Amendment
to Letter of Credit Facility Agreement dated July 31, 2008 by and between
Straits Offshore Ltd. and HSH Nordbank AG, New York Branch in the amount of
$23,205,000, dated September 12, 200826
  4.16           Limited
Waiver and Consent Agreement to Letter of Credit Facility Agreement dated July
31, 2008 by and between Straits Offshore Ltd. and HSH Nordbank AG, New York
Branch, dated April 20, 201027
  4.17           Loan
Agreement dated February 11, 2010 by and between OBO Holdings Ltd., Bank of
Scotland Plc. andcertain other financial institutions listed therein relating to
a loan facility of $3,975,23028
  8.1           Subsidiaries
of the Company29
  12.1           Rule
13a-14(a)/15d-14(a) Certification of Principal Executive Officer30
  12.2           Rule
13a-14(a)/15d-14(a) Certification of Principal Financial Officer31
  13.1           Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232
  13.2           Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200233
  
 1
                Filed
      as Exhibit 3.1 to the Company’s Registration Statement on Form S-1,
      Registration No. 33-22811 (the “Registration Statement”)..  The
      Amendment adopted October 11, 1995 to the Articles of Incorporation was
      filed as Exhibit 1.1(i) to the Company’s Annual Report on Form 20-F for
      the fiscal year ended December 31, 1995.  The Amendment adopted
      October 21, 1998 to the Articles of Incorporation, was filed as Exhibit
      1.2(ii) to the Company’s Annual Report on Form 20F for the fiscal year
      ended December 31, 1998.
 2
                Filed
      as Exhibit 3.2 to the Registration Statement. The Amendment adopted
      October 11, 1995 to the By-Laws was filed as Exhibit 1.2(i) to the
      Company’s Annual Report on Form 20-F for the fiscal year ended December
      31, 1995. The Amendment adopted October 21, 1998 to the By-Laws was filed
      as Exhibit 1.2(iii) to the Company’s Annual Report on Form 20F for the
      fiscal year ended December 31,
1998.
 3
                Filed
      as Exhibit 10.1 to the Registration
Statement.
 4
                Previously
      filed as an exhibit to the Company’s amended Annual Report on Form 20-F on
      November 9, 2009.
 5
                Previously
      filed as an exhibit to the Company’s amended Annual Report on Form 20-F on
      November 9, 2009.
 6
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on May 3,
      2007.
 7
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on July
      13, 2009.
 8
                Filed
      herewith.
 9
                Previously
      filed as an exhibit to the Company’s Report on Form 6-K on February 23,
      2010.
 10
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on May 3,
      2007.
 11
                Filed
      herewith.
 12
                Previously
      filed as an exhibit to the Company’s Report on Form 6-K on February 23,
      2010.
 13
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on June
      16, 2008.
 14
                Previously
      filed as an exhibit to the Company’s amended Annual Report on Form 20-F on
      November 9, 2009.
 15
                Previously
      filed as an exhibit to the Company’s Report on Form 6-K on February 23,
      2010.
 16
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on June
      16, 2008.
 17
                Filed
      herewith.
 18
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on June
      16, 2008.
 19
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on July
      13, 2009.
 20
                Filed
      herewith.
 21
                Filed
      herewith.
 22
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on July
      13, 2009.
 23
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on July
      13, 2009.
 24
                Previously
      filed as an exhibit to the Company’s Annual Report on Form 20-F on July
      13, 2009.
 25
                Previously
      filed as an exhibit to the Company’s amended Annual Report on Form 20-F on
      November 9, 2009.
 26
                Filed
      herewith.
 27
                Filed
      herewith.
  28
                Filed
      herewith.
 29
                Filed
      herewith.
 29
                Filed
      herewith.
 30
                Filed
      herewith.
 31
                Filed
      herewith.
 32
                Filed
      herewith.
 33
                Filed
      herewith.
  55
  SIGNATURES
  The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
  
 B+H OCEAN
CARRIERS LTD.
 (Registrant)
 
 
 By:           /s/ Michael S.
Hudner
 Chairman
of the Board, President and
 Chief
Executive Officer
 
  56
  
  EXHIBIT
12.1
  CERTIFICATION
PURSUANT TO SECTION 302 (RULES 13A - 14(A) AND 15D - 14(A)) OF THE
SARBANES-OXLEY ACT OF 2002
  I,
Michael S. Hudner, certify that:
  1.
              I
      have reviewed this annual report on Form 20-F of B+H Ocean Carriers
      Ltd.;
  2.
              Based
      on my knowledge, this report  does not  contain any
      untrue statement of a material fact or  omit to state a material
      fact necessary to make the statements made, in light of the circumstances
      under which such statements were made, not misleading with respect to the
      period covered by this report;
  3.
              Based
      on my knowledge, the
      financial  statements,  and  other  financial
      information included in this report, fairly present in all material
      respects the financial  condition, results of operations and
      cash flows of the registrant as of, and for the periods presented in this
      report.
  4.
              The
      company’s other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
      the Company and have:
  (a)
              Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the Company, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
  (b)
              Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;
  (c)
              Evaluated
      the effectiveness of the Company’s disclosure controls and procedures and
      presented in this annual report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and
  (d)
              Disclosed
      in this report any change in the Company’s internal control over financial
      reporting that occurred during the period covered by this report that has
      materially affected, or is reasonably likely to materially affect the
      Company’s internal control over financial reporting;
  and
  5.
              The
      Company’s other certifying officers and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the Company’s auditors and the audit committee of the Company’s board of
      directors:
  (a)
              All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over reporting which are reasonably likely
      to adversely affect the Company’s ability to record, process, summarize
      and report financial information;
and
  (b)
              Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the Company’s internal controls
      over financial reporting.
  Date:                      June
8, 2010
  
 By:           /s/ Michael S.
Hudner
 Michael
S. Hudner
 Chairman
of the Board, President and
 Chief
Executive Officer
  57
  EXHIBIT
12.2
  CERTIFICATION
PURSUANT TO SECTION 302 (RULES 13A - 14(A) AND 15D - 14(A)) OF THE
SARBANES-OXLEY ACT OF 2002
  I, R.
Anthony Dalzell, certify that:
  1.
              I
      have reviewed this annual report on Form 20-F of B+H Ocean Carriers
      Ltd.;
  2.
              Based
      on my knowledge, this report  does not  contain any
      untrue statement of a material fact or  omit to state a material
      fact necessary to make the statements made, in light of the circumstances
      under which such statements were made, not misleading with respect to the
      period covered by this report;
  3.
              Based
      on my knowledge, the
      financial  statements,  and  other  financial
      information included in this report, fairly present in all material
      respects the financial  condition, results of operations and
      cash flows of the registrant as of, and for the periods presented in this
      report.
  4.
              The
      company’s other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
      the Company and have:
  (a)
              Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the Company, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
  (b)
              Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;
  (c)
              Evaluated
      the effectiveness of the Company’s disclosure controls and procedures and
      presented in this annual report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and
  (d)
              Disclosed
      in this report any change in the Company’s internal control over financial
      reporting that occurred during the period covered by this report that has
      materially affected, or is reasonably likely to materially affect the
      Company’s internal control over financial reporting;
  and
  5.
              The
      Company’s other certifying officers and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the Company’s auditors and the audit committee of the Company’s board of
      directors:
  (a)
              All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over reporting which are reasonably likely
      to adversely affect the Company’s ability to record, process, summarize
      and report financial information;
and
  (b)
              Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the Company’s internal controls
      over financial reporting.
  Date:                      June
8, 2010
  By:           /s/ R. Anthony
Dalzell
 R.
Anthony Dalzell
 Treasurer
and Chief Financial Officer
  58
  EXHIBIT
13.1
  CERTIFICATION
PURSUANT TO 18 U.S.C.  SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
  In
connection with the Annual Report on Form 20-F of B+H Ocean Carriers Ltd.; (the
“Company”) for the year ending December 31, 2009 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Michael
S.  Hudner, Chairman of the Board, President and Chief Executive
Officer and Class A Director of the Company, certify, pursuant to 18
U.S.C.  1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002, that:
  (1)
              The
      Report fully complies with the requirements of Section 13(a) or 15(d) of
      the Securities Exchange Act of 1934;
and
  (2)
              The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.
  Date:                      June 8,
2010
  
 By:           /s/ Michael S.
Hudner
 Michael
S. Hudner
 Chairman
of the Board, President and
 Chief
Executive Officer
 
  59
  EXHIBIT
13.2
  CERTIFICATION
PURSUANT TO 18 U.S.C.  SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
  In
connection with the Annual Report on Form 20-F of B+H Ocean Carriers Ltd.; (the
“Company”) for the year ending December 31, 2009 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, R. Anthony
Dalzell, Treasurer and Chief Financial Officer and Class A Director of the
Company, certify, pursuant to 18 U.S.C.  1350, as adopted pursuant to
§906 of the Sarbanes-Oxley Act of 2002, that:
  (1)
              The
      Report fully complies with the requirements of Section 13 (a) or 15(d) of
      the Securities Exchange Act of 1934;
and
  (2)
              The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.
  Date:                      June
8, 2010
  
 By:           /s/ R. Anthony
Dalzell
 R.
Anthony Dalzell
 Treasurer
and Chief Financial Officer
 
  60
  
 Item
              18.                FINANCIAL
      STATEMENTS.
  B+H
Ocean Carriers Ltd.
  Index
to Consolidated Financial Statements
  
  Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008
              F-3Consolidated
      Statements of Operations for the three years ended December 31, 2009, 2008
      and 2007
              F-5Consolidated
      Statements of Shareholders’ Equity for the three years ended December 31,
      2009, 2008 and 2007
              F-6Consolidated
      Statements of Cash Flows for the three years ended December 31, 2009, 2008
      and 2007
              F-7Notes
      to Consolidated Financial Statements
              F-9
  F-1
  Report
of Independent Registered Public Accounting Firm
 
  To the
Board of Directors and Shareholders of B+H Ocean Carriers Ltd.
  We have
audited the accompanying consolidated balance sheets of B+H Ocean Carriers
Ltd.  as of December 31, 2009 and 2008, and the related consolidated
statements of operations, shareholders’ equity, and cash flows for each of the
three years in the period ended December 31, 2009.  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.  We were
not engaged to perform an audit of the Company’s internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  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 B+H Ocean Carriers
Ltd.  at December 31, 2009 and 2008 and the consolidated results of
its operations and its cash flows for the each of the three years in the period
ended December 31, 2009, in conformity with U.S. generally accepted accounting
principles.
  
 /s/ Ernst
& Young LLP
 
 Providence,
RI
 June 8,
2010
 
    F-2
 B+H
Ocean Carriers Ltd.
 Consolidated
Balance Sheets
 December
31, 2009 and 2008
 ASSETS
                2009
                
                2008CURRENT
      ASSETS:Cash
      and cash equivalents
                $           3,679,324
                
                $           30,483,501Restricted
      cash (Note 11)
                1,065,983
                
                -Marketable
      equity securities
                566,921
                
                233,779Trade
      accounts receivable, less allowance for doubtful accounts
                  of
      $180,750 and $252,633 in 2009 and 2008, respectively
                964,345
                
                2,534,775Vessels
      held for sale
                10,354,750
                
                17,735,000Inventories
                668,886
                
                2,828,070Prepaid
      expenses and other current assets
                982,633
                
                3,486,587Total
      current assets
                18,282,842
                
                57,301,712Vessels,
      at cost:Vessels
                226,749,097
                
                358,800,247Less
      - Accumulated depreciation
                (61,472,453)
                
                (76,596,657)165,276,644
                
                282,203,590Investment
      in Nordan OBO 2 Inc.
                10,117,685
                
                12,425,181Other
      assets
                1,501,144
                
                2,858,861Total
      assets
                $          195,178,315
                
                $         354,789,344LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                $           7,860,608
                
                $           19,800,733Accrued
      liabilities
                1,572,723
                
                5,611,280Accrued
      interest
                208,073
                
                510,754Current
      portion of mortgage payable
                34,081,044
                
                160,291,230Floating
      rate bonds payable
                -
                
                15,500,000Deferred
      income
                1,992,526
                
                6,818,299Other
      liabilities
                119,328
                
                109,523Unsecured
      loan
                1,250,000
                
                -Total
      current liabilities
                47,084,302
                
                208,641,819Fair
      value of derivative liabilities
                3,152,024
                
                4,982,914Mortgage
      payable
                60,004,871
                
                -Floating
      rate bonds payable
                13,500,000
                
                -SHAREHOLDERS'
      EQUITY:Preferred
      stock, $0.01 par value; 20,000,000 shares authorized; no shares issued and
      outstanding
                
                
                -Common
      stock, $0.01 par value; 30,000,000 shares authorized; 7,557,268 shares
      issued,5,555,426
      shares outstanding as of December 31, 2009 and 2008,
      respectively
                75,572
                
                75,752Paid-in
      capital
                93,863,094
                
                93,863,094Retained
      (deficit) earnings
                (4,229,947)
                
                66,564,545Accumulated
      other comprehensive loss
                (2,159,800)
                
                (3,226,799)Treasury
      stock
                (16,111,801)
                
                (16,111,801)Total
      shareholders' equity
                71,437,118
                
                141,164,611Total
      liabilities and shareholders' equity
                $          195,178,315
                
                $         354,789,344
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
  B+H Ocean
Carriers Ltd.
 Consolidated
Statements of Operations
 For the
years ended December 31, 2009, 2008 and 2007
 2009
                
                2008
                
                2007Revenues:Voyage
      and time charter revenues
                $        77,733,764
                
                $      104,018,073
                
                $      110,917,094Other
      revenue
                29,946
                
                890,842
                
                1,499,737Total
      revenues
                77,763,710
                
                104,908,915
                
                112,416,831Operating
      expenses:Voyage
      expenses
                13,758,771
                
                28,097,799
                
                27,882,163Vessel
      operating expenses, drydocking and survey costs
                36,778,737
                
                46,845,031
                
                39,366,478Depreciation
                17,031,428
                
                16,443,807
                
                15,201,220Amortization
      of deferred charges
                8,194,909
                
                8,755,356
                
                6,341,330Impairment
      charge on vessel
                28,918,393
                
                7,364,675
                
                -Goodwill
      impairment charge
                118,750
                
                -
                
                -Loss
      (gain) on sale of vessels
                35,067,228
                
                (13,262,590)
                
                -General
      and administrative:Management
      fees to related party
                1,123,964
                
                1,199,581
                
                2,252,608Consulting
      and professional fees, and other expenses
                4,085,900
                
                4,836,247
                
                5,096,763Total
      operating expenses
                145,078,080
                
                100,279,906
                
                96,140,562(Loss)
      income from vessel operations
                (67,314,370)
                
                4,629,009
                
                16,276,269Other
      income (expense):Interest
      expense
                (6,980,341)
                
                (11,249,461)
                
                (12,740,894)Interest
      income
                18,275
                
                1,156,151
                
                3,121,273Income
      from investment in Nordan OBO 2 Inc.
                1,192,504
                
                3,933,495
                
                790,288Gain
      (loss) on fair value of derivatives
                -
                
                16,055,794
                
                (3,419,797)Gain
      (loss) on value of interest rate swaps
                707,074
                
                (763,935)
                
                (1,250,395)Gain
      (loss) on other investments
                163,866
                
                (240,937)
                
                (757,567)Gain
      on debt extinguishment
                1,418,500
                
                2,345,000
                
                -Total
      other (expense) income, net
                (3,480,122)
                
                11,236,107
                
                (14,257,092)Net
      (loss) income
                $         (70,794,492)
                
                $         15,865,116
                
                $            2,019,177Basic
      earnings per common share
                $                 (12.74)
                
                $                   2.36
                
                $                    0.29Diluted
      earnings per common share
                $                 (12.74)
                
                $                   2.36
                
                $                    0.29Weighted
      average number of common shares outstanding:Basic
                5,555,426
                
                6,723,832
                
                6,994,843Diluted
                5,555,426
                
                6,723,832
                
                7,031,210
 The
accompanying notes are an integral part of these consolidated financial
statement.
  F-4
 B
+ H Ocean Carriers Ltd.
 Consolidated
Statements of Shareholders’ Equity
 Common
                Treasury
                Paid-in
                Retained
                Accumulated
      OtherStock
                Stock
                Capital
                Earnings
      (Deficit)
                Income
      (Loss)
                TotalBalance,
      December 31, 2006
                $   75,572
                $   (6,655,040)
                $
      93,861,215
                $
      48,680,252
                $  18,183
                $
      135,980,182Net
      income
                -
                -
                -
                2,019,177
                -
                2,019,177Change
      in fair value of cash flow hedge
                
                
                
                
                (842,969)
                (842,969)Comprehensive
      income
                -
                -
                -
                2,019,177
                (842,969)
                1,176,208Common
      stock issued (3)
                -
                -
                (45,646)
                -
                -
                (45,646)Treasury
      shares issued (1)
                -
                16,878
                16,634
                -
                -
                33,512Treasury
      shares issued (2)
                -
                1,088,239
                (887,549)
                -
                -
                200,690Treasury
      shares issued (5)
                
                537,560
                918,440
                
                
                1,456,000Treasury
      shares acquired (4)
                -
                (6,364,324)
                -
                -
                -
                (6,364,324)Balance,
      December 31, 2007
                75,572
                (11,376,687)
                93,863,094
                50,699,429
                (824,786)
                132,436,622Net
      income
                -
                -
                -
                15,865,116
                -
                15,865,116Change
      in fair value of cash flow hedge
                -
                -
                -
                -
                (2,402,013)
                (2,402,013)Comprehensive
      income
                
                
                
                15,865,116
                (2,402,013)
                13,463,103Treasury
      shares acquired (4)
                -
                (4,735,114)
                -
                -
                -
                (4,735,114)Balance,
      December 31, 2008
                75,572
                (16,111,801)
                93,863,094
                66,564,545
                (3,226,799)
                141,164,611Net
      (loss)
                -
                -
                -
                (70,794,492)
                -
                (70,794,492)Change
      in fair value of cash flow hedge
                -
                -
                -
                -
                1,066,999
                1,066,999Comprehensive
      income
                
                
                
                (70,794,492)
                1,066,999
                (69,727,493)Treasury
      shares acquired (4)
                -
                -
                -
                -
                -
                -Balance,
      December 31, 2009
                $  75,572
                $
      (16,111,801)
                $93,863,094
                $(4,229,947)
                $
      (2,159,800)
                $71,437,118
 
 Shares
outstanding at December 31, 2009, 2008 and 2007 totaled 5,555,426, 5,555,426 and
6,866,615, respectively.
 
 (1)           Treasury
shares issued per 1998 Agreement.
  (2)
              Pursuant
      to a program to repurchase up to 600,000 shares for reissuance to B+H
      Management Ltd. (“BHM”) when options are
  exercised.
  (3)           Expenses
related to private placement of shares in 2005.
  (4)
              Pursuant
      to a program to repurchase up to 10% of the Company’s shares, which was
      authorized by the Board of Directors in October
  2005.
  (5)           Shares
granted to BHM and to the Board of Directors.
   F-5
  B
+ H Ocean Carriers Ltd.
 Consolidated
Statements of Cash Flows
 For
the years ended December 31, 2009, 2008, 2007
 2009
                
                2008
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss) income
                (70,794,492)
                
                15,865,116
                
                $     2,019,177Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:Vessel
      depreciation
                17,031,428
                
                16,443,807
                
                15,201,220Amortization
      of deferred charges
                8,194,909
                
                8,755,356
                
                6,341,330Impairment
      charge on vessel
                28,918,393
                
                7,364,675
                
                -Goodwill
      impairment charge
                118,750Loss
      (gain) on sale of vessels
                35,067,228
                
                (13,262,590)
                
                -(Gain)
      loss on value of interest rate swaps
                (707,074)
                
                763,935
                
                1,250,395(Gain)
      on value of put contracts
                -
                
                (14,494,776)
                
                3,419,797(Reduction)  in
      allowance for uncollectible accounts
                (71,883)
                
                (83,759)
                
                216,000Other
      (gain) losses, net
                (163,866)
                
                326,194
                
                128,707Compensation
      expense recognized under stock awards
                -
                
                -
                
                1,489,512Gain
      on debt extinguishment
                (1,418,500)
                
                (2,345,000)
                
                -Changes
      in assets and liabilities:Decrease
      (increase)  in trade accounts receivable
                1,642,313
                
                2,297,246
                
                (2,431,552)Decrease
      (increase) in inventories
                2,159,184
                
                578,786
                
                (859,080)Decrease
      (increase) in prepaid expenses and other current assets
                2,503,954
                
                (1,804,323)
                
                (341,350)(Decrease)
      increase in accounts payable
                (11,940,125)
                
                (15,378,084)
                
                23,720,892(Decrease)
      increase in accrued liabilities
                (4,038,557)
                
                2,500,038
                
                (766,337)(Decrease)  in
      accrued interest
                (302,681)
                
                (721,377)
                
                141,654(Decrease)
      increase in deferred income
                (4,825,773)
                
                240,283
                
                (768,174)Increase
      (decrease) in other liabilities
                9,805
                
                (124,777)
                
                83,589Payments
      for special surveys
                (3,854,721)
                
                (7,691,627)
                
                (7,984,217)Total
      adjustments
                68,322,784
                
                (16,635,993)
                
                38,842,386Net
      cash (used in) provided by operating activities
                (2,471,708)
                
                (770,877)
                
                40,861,563CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      and investment in vessels
                (2,897,775)
                
                (6,829,373)
                
                (19,600,000)Proceeds
      from sale of vessels
                43,417,908
                
                38,116,601
                
                -Investment
      in vessel conversion
                (130,658)
                
                (34,336,062)
                
                (39,107,941)Income
      from investment in Nordan OBO II Inc.
                (1,192,504)
                
                (3,933,495)
                
                (790,288)Dividends
      from Nordan OBO II Inc.
                3,500,000
                
                1,500,000
                
                1,375,000Investment
      in put option contracts
                -
                
                -
                
                (10,008,075)Proceeds
      from sale of put option contracts
                -
                
                21,787,494
                
                -Purchase
      of marketable equity securities
                (333,142)
                
                (2,123,942)
                
                (163,455)Redemption
      of marketable equity securities, net
                -
                
                2,664,367
                
                -Increase
      in restricted cash
                (1,065,983)
                
                -
                
                -Net
      cash provided by (used in) in investing activities
                41,297,846
                
                16,845,590
                
                (68,294,759)CASH
      FLOWS FROM FINANCING ACTIVITIES:Payments
      for debt financing costs
                (93,500)
                
                (294,999)
                
                (1,526,501)Issuance
      of common stock, net of issuance costs
                -
                
                -
                
                (45,646)Purchase
      of treasury stock
                -
                
                (4,735,114)
                
                (6,364,324)Issuance
      of treasury shares
                -
                
                -
                
                200,690Purchase
      of debt securities
                (581,500)
                
                (2,155,000)
                
                -Proceeds
      from unsecured Loan
                1,250,000
                
                -
                
                -Proceeds
      from mortgage financing
                -
                
                30,000,000
                
                88,700,000Payments
      of unsecured debt
                -
                
                -
                
                (31,402,960)Payments
      of mortgage principal
                (66,205,315)
                
                (70,010,967)
                
                (38,914,223)Net
      cash (used) provided by financing activities
                (65,630,315)
                
                (47,196,080)
                
                10,647,036Net
      (decrease) increase in cash and cash equivalents
                (26,804,177)
                
                (31,121,367)
                
                (16,786,160)Cash
      and cash equivalents, beginning of year
                30,483,501
                
                61,604,868
                
                78,391,028Cash
      and cash equivalents, end of year
                $            3,679,324
                
                $         30,483,501
                
                $    61,604,868
 
 Supplemental
schedule of noncash financing and investment transactions (NOTE 9).
  F-6
 NOTE 1 --
ORGANIZATION
  B+H Ocean
Carriers Ltd.  (the “Company”), a Liberian Corporation, was
incorporated in April 1988 and was initially capitalized on June 27,
1988.  The Company is engaged in the business of acquiring, investing
in, owning, operating and selling product tankers, OBO (Ore/Bulk/Oil)
combination carriers, an Accommodation Field Development Vessel (“AFDV”) and
bulk carriers.  In August 1988, the Company completed a public
offering of 4,000,000 shares of its common stock.  In May 2005, the
Company made a private offering of 3,243,243 shares of its common
stock.
  As of
December 31, 2009, the Company owned and operated one panamax product tanker,
five OBO (Ore/Bulk/Oil) combination carriers and one bulk
carrier.  Through its subsidiary,  Straits Offshore Ltd, the
Company entered into an agreement to purchase an Accommodation Field Development
Vessel which was under construction in Malaysia and was due to be delivered to
the Company in second quarter 2010.  The contract for the AFDV was
cancelled on March 30, 2010 due to a failure by the seller to meet its
contractual obligations.
 
 The
Company also owns a 50% interest in the disponent owner of a combination carrier
through its interest in Nordan OBO 2 Inc (“Nordan”), which was acquired in March
2006.  The Company accounts for its interest in Nordan under the
equity method.
  At
December 31, 2008, the Company did not expect that it would be able to meet all
financial covenants of certain of its loan agreements in periods subsequent to
December 31, 2008 and, although management did not expect that lenders would
demand repayment before maturity, the Company reclassified long term debt under
those loan agreements, amounting to $77.8 million, as current.  Due to the
possibility of future consequential technical default under cross default or
material adverse change provisions of other credit facilities, the Company
reclassified the balance of its long-term debt at December 31, 2008,
amounting to $48.9 million, as current.   If breaches of
covenants arose and waivers were not granted, the Company’s
lenders would have the right to cancel the commitments under these
facilities and demand full repayment and cash generated from current
operations would likely not have been sufficient to repay the balance
had the lenders demanded total repayment.  Therefore, as of December 31,
2008, these factors raised substantial doubt about the
Company's ability to continue as a going concern.
 
 The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business.During 2009, the Company
entered into amendments to three of its loan agreements which, among other
matters, provided for less restrictive covenants on an on-going basis, and the
Company obtained waivers, as necessary, under two loan agreements and one credit
facility, which were repaid or settled in full in 2009 or during the early
months of 2010.  In addition, in 2009 the Company (i) sold six unprofitable
vessels, (ii) paid an aggregate of $66.2 million of the Company’s secured debt,
which represented 41% of total secured debt of the Company at December 31, 2008,
and (iii) arranged for employment of the remaining wholly owned fleet on long
term time charters valid through various dates in 2011 and 2012. Approximately
86% of the total revenue of these charters emanates from a charterer whose
obligations have been guaranteed by affiliated investment grade
corporations.  Subsequent to December 31, 2009, the Company cancelled a
contract to acquire an AFDV on March 30, 2010, as a result of which the Company,
through June 2, 2010, received refunds and related amounts totaling $5.9
million, and is due to receive a further refund of up to $2.7
million.
  As a
consequence of these efforts and the waivers received effective December 31,
2009, the Company was fully compliant with all covenants under all its loan
agreements at December 31, 2009, and, based on its projections for 2010, expects
to remain fully compliant with the covenants under all outstanding loan
agreements in 2010.  The Company believes that these events will allow
the Company to continue as a going concern through at least January 1,
2011.
  F-7
 NOTE 2 --
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Basis
of accounting:
  The
accompanying consolidated financial statements are prepared on the accrual basis
of accounting in accordance with accounting principles generally accepted in the
United States.  A summary of significant accounting policies
follows.
  Principles
of consolidation:
  The
accompanying Consolidated Financial Statements include the accounts of the
Company and its wholly-owned subsidiaries, including Cliaship Holdings Ltd.
(“Cliaship”), OBO Holdings Ltd. (“OBO Holdings”), Product Transport Corporation
Ltd. (“Protrans”), Boss Tankers, Ltd. (“Boss”), Seasak Holdings Ltd. (“Seasak”)
and Straits Offshore Ltd.  (“Straits”).  Additionally, the
consolidated financial statements reflect the Company’s equity investment and
related earnings associated with Nordan.  All significant intercompany
transactions and accounts have been eliminated in consolidation.
  Revenue
recognition, trade accounts receivable and concentration of credit
risk:
  Under a
voyage charter, the Company agrees to provide a vessel for the transport of
cargo between specific ports in return for the payment of an agreed freight per
ton of cargo or an agreed lump sum amount.  Voyage costs, such as
canal and port charges and bunker (fuel) expenses, are the Company’s
responsibility.  Voyage revenues include estimates for voyage charters
in progress which are recognized on a percentage-of-completion basis using the
ratio of voyage days completed through year end to the total voyage
days.
  Under a
time charter, the Company places a vessel at the disposal of a charterer for a
given period of time in return for the payment of a specified rate of hire per
day.  Voyage costs are the responsibility of the
charterer.  Revenue from time charters in progress is calculated using
the daily charter hire rate, net of brokerage commissions, multiplied by the
number of on-hire days through year-end.  Revenue recognized under
long-term variable rate time charters is equal to the average daily rate for the
term of the contract.
  The
Company’s financial instruments that are exposed to concentrations of credit
risk consist primarily of cash equivalents and trade receivables.  The
Company maintains its cash accounts with various high quality financial
institutions mainly in the United Kingdom and Norway.  The Company
performs periodic evaluations of the relative credit standing of these financial
institutions.  The Company does not believe that significant
concentration of credit risk exists with respect to these cash
equivalents.
  Trade
accounts receivable are recorded at the invoiced amount and do not bear
interest.  The allowance for doubtful accounts is the Company’s best
estimate of the total losses likely in its existing accounts
receivable.  The allowance is based on historical write-off experience
and patterns that have developed with respect to the type of receivable and the
analysis of collectibility of current amounts.  Past due balances are
reviewed individually for collectibility.  Specific accounts
receivable invoices are charged off against the allowance when the Company
determines that collection is unlikely.  Credit risk with respect to
trade accounts receivable is limited due to the long standing relationships with
significant customers and their relative financial stability.  The
Company performs ongoing credit evaluations of its customers’ financial
condition and maintains allowances for potential credit losses when
necessary.  The Company does not have any off-balance sheet credit
exposure related to its customers.
  At
December 31, 2009, the Company’s largest three accounts receivable balances
represented 85% of total accounts receivable.  At December 31, 2008,
the Company’s largest three accounts receivable balances represented 72% of
total accounts receivable.  The allowance for doubtful accounts was
approximately $181,000 and $253,000 at December 31, 2009 and 2008,
respectively.  To date, the Company’s actual losses on past due
receivables have not exceeded its estimate of bad debts.
  During
2009, revenues from one customer accounted for $46.3 million (60.0%) of total
revenues.  Revenue from one customer accounted for $34.5 million
(33.1%) of total revenues in 2008.  In 2007, revenue from one customer
accounted for $35.6 million (31.6%) of total revenues.   During
the years ended December 31, 2009, 2008 and 2007, revenues from three
significant customers accounted for $62.5 million (80.5%), $53.4 million (51.4%)
and $23.9 million (32.0%) of total revenues, respectively.
  F-8
 Basic
and diluted net income per common share:
  Basic net
income per common share is computed by dividing the net income for the year by
the weighted average number of common shares outstanding.  Diluted
earnings per share (“EPS”) is calculated by dividing net income for the year by
the weighted average number of common shares, increased by potentially dilutive
securities.  For the year ended December 31, 2007, diluted EPS
reflects the net effect on shares outstanding, using the treasury stock method,
of the stock options granted to BHM in 2000 and the treasury shares held to
satisfy the 1998 agreement. There were no dilutive securities for the years
ended December 31, 2009 and 2008.
  2009
                2008
                2007Weighted
      average number of shares outstanding - basic
                5,555,426
                6,723,832
                6,994,843Net
      effect of outstanding stock options
                -
                -
                36,367Weighted
      average number of shares outstanding - diluted
                5,555,426
                6,723,832
                7,031,210
 
  Cash
and cash equivalents:
  Cash and
cash equivalents include cash, certain money market accounts and overnight
deposits with an original maturity of 90 days or less when
acquired.
  Marketable
Securities:
  Marketable
equity securities are recorded at fair value determined on the basis of quoted
market price.  Such investments are classified as trading
securities.  Changes in the fair value of such investments are
recorded in other income in the Consolidated Statements of
Operations.
  The
Company’s securities are bought and held principally for the purpose of selling
in the near term (and are thus generally held for only a short period of
time).  Furthermore, the trading generally reflects active and
frequent buying and selling, and trading securities are generally used with the
objective of generating profits on short-term differences in
price.  As such, the Company has determined that the classification of
cash flows from purchases, sales and maturities of trading securities as
investing cash flows is appropriate.
  Fair
value of financial instruments:
  The
following methods and assumptions were used to estimate the fair value of
financial instruments included in the following categories:
  The
carrying amounts reported in the accompanying Consolidated Balance Sheets for
cash and cash equivalents and accounts receivable approximate their fair values
due to the short term nature of such instruments.
  The
carrying amounts reported in the accompanying Consolidated Balance Sheets for
short-term debt approximates its fair value due to the current maturity of such
instruments coupled with interest at variable rates that are periodically
adjusted to reflect changes in overall market rates.  The carrying
amount of the Company’s variable rate long-term debt approximates fair
value.
  Vessels,
capital improvements and depreciation:
  Vessels
are stated at cost, which includes contract price, acquisition costs and
significant capital expenditures made within nine months of the date of
purchase.  Depreciation is provided using the straight-line method
over the remaining estimated useful lives of the vessels, based on cost less
salvage value.  The estimated useful lives used are 30 years from the
date of construction.  When vessels are sold, the cost and related
accumulated depreciation are eliminated from the accounts, and any resulting
gain or loss is reflected in the accompanying Consolidated Statements of
Operations.
  F-9
 Capital
improvements to vessels made during special surveys are capitalized when
incurred and amortized over the 5-year period until the next special
survey.  The capitalized costs for scheduled classification survey and
related vessel upgrades were $3.9 million for three vessels in 2009, $7.7
million for five vessels in 2008 and $8.0 million in 2007 for three
vessels.  Three special surveys occurred in the year ended December
31, 2009.  Conversion costs are capitalized and will be amortized over
the period remaining to 30 years.  Unamortized conversion costs and
dry-docking costs of vessels that are sold are included in calculation of the
resulting gain or loss in the year of the vessel’s sale.
  Payments
for special survey costs are characterized as operating activities on the
Consolidated Statements of Cash Flows.  Amortization of special survey
costs is characterized as amortization of deferred charges on the Consolidated
Statements of Operations and Cash Flows.
  Repairs
and maintenance:
  Expenditures
for repairs and maintenance and interim dry-docking of vessels are charged
against income in the year incurred.  Repairs and maintenance expense
approximated $2.8 million, $4.3 million and $2.2 million for the years ended
December 31, 2009, 2008 and 2007, respectively.  Interim dry-docking
expense was approximately $3.6 million, $1.9 million and $0.5 million for the
years ended December 31, 2009, 2008 and 2007, respectively.
  Impairment
of long-lived assets:
  The
Company evaluates the carrying amounts of its vessels to determine if events
have occurred that would require modification to their carrying values or useful
lives.  In evaluating useful lives and carrying values of long-lived
assets, the Company reviews certain indicators of potential impairment, such as
undiscounted projected operating cash flows, vessel sales and purchases,
business plans and overall market conditions.
 
 The
current economic and market conditions, including the significant disruptions in
the global credit markets, are having broad effects on participants in a wide
variety of industries. Since mid-August 2008, the charter rates in the dry bulk
charter market and the product tanker charter market have declined
significantly, and vessel values have also declined both as a result of a
slowdown in the availability of global credit and the significant deterioration
in charter rates, conditions that we consider indicators of
impairment.
 
 The
Company determines undiscounted projected net operating cash flows for each
vessel and compares it to the vessel's carrying value. The projected net
operating cash flows are determined by considering the charter revenues from
existing time charters for the fixed fleet days and an estimated daily time
charter equivalent for the unfixed days (based on the most recent ten year
historical average) over the remaining estimated life of the vessel, net of
brokerage commissions, expected outflows for vessels' maintenance and vessel
operating expenses, assuming an average annual inflation rate of
2.0%.
 
 If the Company’s estimate of
undiscounted future cash flows for any vessel is lower than the vessel's
carrying value, the carrying value is written down, by recording a charge to
operations, to the vessel's fair market value if the fair market value is lower
than the vessel's carrying value.  Fair market value is determined by
reference to appraisals provided by independent brokers.  Third party
brokers provide appraisalswith or without physical inspection of the
vessels on the basis of a sale for prompt delivery for cash at arm’s length on
normal commercial terms as between a willing buyer and seller, on an “as is,
where is” basis, free of any existing charter or other contract of employment
and/or pool arrangement.
 
 In
developing estimates of future cash flows, the Company must make assumptions
about future charter rates, vessel operating expenses, vessels' residual value
and the estimated remaining useful lives of the vessels. These assumptions are
based on historical trends as well as future expectations. Although the Company
believes that the assumptions used to evaluate potential impairment are
reasonable and appropriate, such assumptions are highly subjective. For the year
end December 31, 2009, the Company recognized an aggregate impairment loss of
$28.9 million related to the M/V SACHEM and M/T SAGAMORE.
  F-10
 Segment
Reporting:
  The
Company has determined that it operates in one reportable segment, the
international transport of dry bulk and liquid cargo.
  Inventories:
  Inventories
consist of engine and machinery lubricants and bunkers (fuel) required for the
operation and maintenance of each vessel.  Inventories are valued at
cost, using the first-in, first-out method.  Expenditures on other
consumables are charged against income when incurred.
  Taxation:
  The
Company is not subject to corporate income taxes on its profits in Liberia
because its income is derived from non-Liberian sources.  The Company
is not subject to corporate income tax in other jurisdictions.
  Derivatives
and hedging activities:
  The
Company accounts for derivatives in accordance with the provisions of ASC Topic
815.  The Company uses derivative instruments to reduce market risks
associated with its operations, principally changes in interest
rates.  Derivative instruments are recorded as assets or liabilities
and are measured at fair value.
  Derivatives
designated as cash flow hedges are recorded on the balance sheet at fair value
with the corresponding changes in fair value recorded as a component of
accumulated other comprehensive income (equity).  At December 31,
2009, the Company is party to three interest rate swap agreements that qualify
as cash flow hedges; the aggregate fair value of these cash flow hedges is a
liability of $2.3 million.  At December 31, 2008, the Company was
party to four interest rate swap agreements that qualified as cash flow hedges;
the aggregate fair value of these cash flow hedges was a liability of $4.4
million.
  Derivatives
that do not qualify for hedge accounting are recorded on the balance sheet at
fair value with the corresponding changes in fair value recorded in
operations.  At December 31, 2009, the Company is party to two
interest rate swap agreements having an aggregate notional value of $18.4
million, which do not qualify for hedge accounting.  During 2009, one
of the swaps no longer met hedge accounting criteria and, accordingly, the
Company reclassified the gains associated with that interest rate swap out of
accumulated other comprehensive income and into earnings in 2009.  The
fair value of these non-qualifying swaps is a liability of $0.8 million at
December 31, 2009.  At December 31, 2008, the Company was party to one
interest rate swap agreement which did not qualify for hedge
accounting.  The aggregate fair value of this non-qualifying swap
agreement was a liability of $0.5 million.  These are both reflected
within Fair Value of Derivative Liabilities on the accompanying Consolidated
Balance Sheets and are recorded as Gain (Loss) on value of interest rate swaps
in the Consolidated Statements of Operations.
  The
Company is exposed to credit loss in the event of non-performance by the counter
party to the interest rate swap agreements; however, the Company does not
anticipate non-performance by the counter party.
  The
Company is party to foreign currency exchange contracts which are designed to
mitigate the risk associated with changes in foreign currency exchange
rates.  These contracts, which were entered into during 2007, did not
qualify for hedge accounting; and the change in their fair value is therefore
recorded in operations.  At December 31, 2008, the aggregate fair
value of these non-qualifying foreign exchange contracts was a liability of
$57,000 and is reflected within Fair Value of Derivative Liabilities on the
accompanying Consolidated Balance Sheets.  There were no such
contracts at December 31, 2009.
  F-11
 Fair
value measurements:
   Fair value of financial
instruments:
   The
following methods and assumptions were used to estimate the fair value of
financial instruments included in the following categories:
   The
carrying amounts reported in the accompanying Consolidated Balance Sheets for
cash and cash equivalents and accounts receivable approximate their fair values
due to the short term nature of such instruments.
   The
carrying amounts reported in the accompanying Consolidated Balance Sheets for
short-term debt approximates its fair value due to the current maturity of such
instruments coupled with interest at variable rates that are periodically
adjusted to reflect changes in overall market rates.  The carrying amount
of the Company’s variable rate long-term mortgage payable approximates fair
value.  The
most recent trading activity related to the Company's Bonds, which occurred in
March 18 2009, indicates that the fair value of the Bonds as of that date is
approximately $3.9 million.
  The
Company adopted SFAS No. 157, Fair Value Measurements, (“SFAS No. 157”)
effective January 1, 2008.  SFAS No. 157 (as codified in ASC Topic
820, Fair Value Measurement Disclosures) defines fair value as the price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement
date.  ASC Topic 820 also describes three levels of inputs that may be
used to measure fair value:
  Level 1 -
quoted prices in active markets for identical assets and
liabilities
  Level 2 -
observable inputs other than quoted prices in active markets for identical
assets and liabilities
  Level 3 -
unobservable inputs in which there is little or no market data available, which
require the reporting entity to develop its own assumptions.
  The fair
value of the Company’s financial assets and liabilities measured at fair value
on a recurring basis were as follows:
  
  Fair
      Value Measurements at Reporting Date UsingQuoted
      Prices in Active
                Significant
      Other
                SignificantMarkets
      for Identical Assets
                Observable
      Inputs
                Unobservable
      InputsDescription
                
                12/31/09
                Level  1
                Level  2
                Level  3Marketable
      equity securities - asset
                
                $566,921
                $566,921
                -
                -Marketable
      equity securities – securities sold short
                
                $(61,747)
                $(61,747)Interest
      rate hedge
                
                (3,152,024)
                
                (3,152,024)
                -Total
                
                $(2,646,850)
                $505,174
                $(3,152,024)
                -Fair
      Value Measurements at Reporting Date UsingQuoted
      Prices in Active
                Significant
      Other
                SignificantMarkets
      for Identical Assets
                Observable
      Inputs
                Unobservable
      InputsDescription
                
                12/31/08
                Level  1
                Level  2
                Level  3Marketable
      equity securities - asset
                
                $233,779
                $233,779
                -
                -Interest
      rate hedge - liability
                
                (4,926,097)
                
                (4,926,097)
                -Foreign
      currency contracts - liability
                
                (56,817)
                
                (56,817)
                -Total
                
                $(4,749,135)
                $233,779
                $(4,982,914)
                -
 
  F-12
 Use
of estimates:
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates
and assumptions.
  Term
loan issuance costs:
  Term loan
issuance costs are amortized over the life of the obligation using the
straight-line method, which approximates the interest method.
  
 Recent
accounting pronouncements
  In June
2009 the FASB issued Statement No. 168, FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles — a replacement of
FASB Statement No. 162 (SFAS No. 168), which became the single source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. Once effective, the Codification's content will carry the same level
of authority, effectively superseding Statement 162. In other words, the GAAP
hierarchy will be modified to include only two levels of GAAP: authoritative and
nonauthoritative. Statement 168 (as codified in ASC Topic 105) is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The adoption of ASC Topic 105 did not have a material impact
on the Company’s results of operations or financial position.
  In May,
2009, the FASB issued SFAS No. 165 "Subsequent Events"("SFAS No. 165"), which
provides guidance on management's assessment of subsequent events. SFAS 165 (as
codified in ASC Topic 855):
 
 -Clarifies
that management must evaluate, as of each reporting period, events or
transactions that occur after the balance sheet date "through the date that the
financial statements are issued or are available to be issued."
 
 -Does not
change the recognition and disclosure requirements in AICPA Professional
Standards, AU Section 560, "Subsequent Events" ("AU Section 560") for Type I and
Type II subsequent events; however, Statement 165 refers to them as recognized
(Type I) and nonrecognized subsequent events (Type II).
 
 F-13
 ASC Topic
855 is effective prospectively for interim or annual financial periods ending
after June 15, 2009. Adoption of ASC Topic 855 in 2009 did not have a
significant impact on the Company's financial statements.
 
 NOTE
3 – ACQUISITIONS, SALES AND OTHER SIGNIFICANT TRANSACTIONS
  On
January 15, 2009, the Company, through a wholly-owned subsidiary,
sold  M/V ALGONQUIN for $17.7 million.  No gain or loss was
recorded as the carrying value was written down to estimated fair value during
2008.
  During
the first quarter of 2009, the Company purchased additional unsecured bonds with
a face value of $2.0 million and realized a $1.4 million gain.  As a
result of this debt extinguishment, total bonds payable at December 31, 2009 was
$13.5 million.   The Company has not purchased any bonds since
March 31, 2009. SEE NOTE 7.
  On August
21, 2009, the Company, through a wholly-owned subsidiary, sold M/T AGAWAM for
$3.8 million. The sale resulted in a loss of approximately $3.0 million in the
third quarter of 2009.
  On August
27, 2009, the Company, through a wholly-owned subsidiary, sold M/T PEQUOD for
$4.0 million. The sale resulted in a loss of approximately $5.1 million in the
third quarter of 2009.
  On
September 18, 2009, the Company, through a wholly-owned subsidiary, sold M/T
ANAWAN for $4.1 million. The sale resulted in a loss of approximately $1.6
million in the third quarter of 2009.
  On
October 29, 2009, the Company, through a wholly-owned subsidiary, sold M/V CAPT
THOMAS J. HUDNER JR for $9.9 million.  The sale resulted in a loss of
approximately $23.1 million in the fourth quarter of 2009.
 
 On
November 19, 2009, the Company, through a wholly-owned subsidiary, sold M/T
AQUIDNECK for $3.9 million.  The sale resulted in a loss of
approximately $2.3 million in the fourth quarter of 2009.
 
 The
vessels listed below are encumbered by the $202.0 million term loan facility,
dated August 29, 2006.  The loan balance was $62.3 million at December
31, 2009.  The Company also completed the refinancing of the $3.9
million balance of a loan remaining after the sale in 2009 of four product
tankers that were secured by the $34.0 million loan facility. The refinanced
loan will be due in December 2011 and is secured by a second mortgage on the
following five vessels.  SEE NOTE 6.
  OBO
      BONNIE SMITHWICK
  OBO
      RIP HUDNER
  OBO
      SEAROSE G
  OBO
      ROGER M JONES
  M/T
      SAGAMORE
  The
following vessels were previously encumbered by the $26.7 million loan facility,
dated October 25, 2007.  The loan balance was paid in full at December
31, 2009.  SEE NOTE 6.
  OBO
      SACHUEST (Sold on March 27, 2008)
  M/T
      ACUSHNET (Sold on February 26,
2008)
  M/V
      CAPT THOMAS J HUDNER (Sold on October 29,
2009)
  M/T
      ALGONQUIN (Sold on January 15,
2009)
  OBO
SAKONNET is encumbered by the $27.3 million term loan facility, dated January
24, 2007.  The loan balance was $16.8 million at December 31, 2009.
SEE NOTE 6.
  M/V
SACHEM is encumbered by the $30.0 million term loan facility, dated May 13,
2008.  The loan balance was $9.5 million at December 31, 2009 and was
paid in full on January 15, 2010.  SEE NOTE 6.
   F-14
  Vessels,
net:
  The
amounts in the accompanying consolidated balance sheets are summarized as
follows:
  12/31/2007
                2   0   0   8Vessels
                Cost
      Vessels
                Accumulated
                  Depreciation
                Additions
      Vessel/ Conversion/ Equipment
                Disposals
                  Equipments
                Deletions
                  Depreciation
                Additions
                  Depreciation
                Impairment
      Charge
                12/31/2008
                12/31/2008
                Vessel
      Held for Sale
                Accumulated
      Depreciation for Vessel Held for SaleAgawam
                $16,114,141
                $(6,654,819)
                $21,754
                $(1,358,187)
                $1,358,187
                $(1,717,011)
                
                $14,777,708
                $(7,013,643)Algonquin
                20,070,761
                (4,137,843)
                9,488,366
                (31,532)
                31,532
                (321,609)
                (7,364,675)
                29,527,595
                (11,792,595)
                (29,527,595)
                11,792,595Anawan
                15,865,379
                (7,122,319)
                15,000
                (1,589,650)
                1,589,650
                (1,825,568)
                
                14,290,729
                (7,358,237)Aquidneck
                15,665,908
                (5,836,085)
                4,059
                (1,046,026)
                1,046,026
                (2,144,083)
                
                14,623,941
                (6,934,142)Bonnie
      Smithwick
                35,804,454
                (5,075,065)
                526,972
                
                
                (1,801,944)
                
                36,331,426
                (6,877,009)Pequod
                22,980,620
                (9,422,606)
                -
                (823,889)
                953,970
                (2,808,924)
                
                22,156,731
                (11,277,560)Rip
      Hudner
                37,216,779
                (5,054,512)
                1,568,665
                
                
                (1,780,788)
                
                38,785,444
                (6,835,300)Roger
      Jones
                33,480,495
                (4,142,013)
                1,464,031
                
                
                (2,045,488)
                
                34,944,526
                (6,187,501)Sagamore
                26,236,808
                (3,546,155)
                -
                
                
                (1,743,945)
                
                26,236,808
                (5,290,100)Sakonnet
                36,400,000
                (3,462,885)
                2,993,949
                
                
                (2,217,679)
                
                39,393,949
                (5,680,564)Sachem
                27,162,387
                (1,512,107)
                8,652,266
                
                
                (2,596,375)
                
                35,814,653
                (4,108,482)Searose
      G
                37,200,000
                (4,986,208)
                367,665
                
                
                (1,780,788)
                
                37,567,665
                (6,766,996)TJ
      Hudner
                19,906,239
                (694,515)
                17,101,385
                
                
                (1,362,892)
                
                37,007,624
                (2,057,407)Other
                247,626
                (241,247)
                (176,423)
                (31,533)
                31,531
                -
                
                39,670
                (209,716)Accommodation
      Barge
                
                
                6,829,373
                -
                
                -
                
                6,829,373
                -Total
                $344,351,597
                $(61,888,379)
                $48,857,062
                $(4,880,817)
                $5,010,896
                $(24,147,094)
                $(7,364,675)
                $388,327,842
                $(88,389,252)Vessel
      held for sale
                -
                -
                
                
                
                
                
                (29,527,595)
                11,792,595344,351,597
                (61,888,379)
                
                
                
                
                
                358,800,247
                (76,596,657)Net
      book value of owned vessels
                
                $282,463,218
                
                
                
                
                
                $282,203,590
 
   F-15
  
  Fixed
      Asset Record with Straight Line Depreciation12/31/2008
                2009Vessels
                Cost
      Vessels
                Accumulated
                  Depreciation
                Additions
      Vessel Special survey
                Disposals
      Vessels
                Deletions
      Depreciation
                Additions
      Depreciation
                Loss
      on vessel sales
                Impairment
      charges/loss on vessel sales
                Total
      vessel at Cost 12/31/09
                Accumulated
      Depreciation 12/31/09Agawam
                14,777,708
                (7,013,643)
                -
                (14,777,708)
                10,928,820
                (1,001,589)
                (2,913,588)
                -
                -
                -Algonquin
                29,527,595
                (11,792,595)
                
                (29,527,595)
                11,792,595
                
                
                
                -
                -Anawan
                14,290,729
                (7,358,237)
                -
                (14,290,729)
                10,171,877
                (1,234,100)
                (1,579,540)
                
                -
                -Aquidneck
                14,623,941
                (6,934,142)
                -
                (14,623,941)
                10,818,462
                (1,608,060)
                (2,276,260)
                -
                -
                -Bonnie
      Smithwick
                36,331,426
                (6,877,009)
                1,945,785
                
                
                (2,255,283)
                
                
                38,277,211
                (9,132,292)Pequod
                22,156,731
                (11,277,560)
                -
                (22,156,731)
                18,015,765
                (1,404,335)
                (5,333,870)
                -
                -
                -Rip
      Hudner
                38,785,444
                (6,835,300)
                208,946
                
                
                (2,106,683)
                
                
                38,994,390
                (8,941,983)Roger
      Jones
                34,944,526
                (6,187,501)
                -
                
                
                (2,116,093)
                
                
                34,944,526
                (8,303,594)Sagamore
                26,236,808
                (5,290,100)
                
                (56,233)
                
                (1,744,321)
                
                (10,917,388)
                26,180,575
                (17,951,809)Sakonnet
                39,393,949
                (5,680,564)
                -
                
                
                (2,542,022)
                
                
                39,393,949
                (8,222,586)Sachem
                35,814,653
                (4,108,482)
                -
                (25,377)
                
                (3,325,039)
                
                (18,001,005)
                35,789,276
                (25,434,526)Searose
      G
                37,567,665
                (6,766,996)
                1,663,633
                
                
                (2,153,193)
                
                
                39,231,298
                (8,920,189)TJ
      Hudner
                37,007,624
                (2,057,407)
                130,658
                (37,138,283)
                27,424,531
                (2,403,154)
                (22,963,970)
                -
                -
                -Other
                39,670
                (209,716)
                36,357
                (76,027)
                209,716
                -
                
                
                -
                -Accommodation
      Barge
                6,829,373
                -
                2,897,775
                
                
                -
                
                
                9,727,148
                -Total
                388,327,842
                (88,389,252)
                6,883,154
                (132,672,623)
                89,361,766
                (23,893,872)
                (35,067,228)
                (28,918,393)
                262,538,373
                (86,906,979)Vessel
      held for sale
                (29,527,595)
                11,792,595
                
                
                
                
                
                
                (35,789,276)
                25,434,526358,800,247
                (76,596,657)
                
                
                
                
                
                
                226,749,097
                (61,472,453)Net
      book value of owned vessels
                
                282,203,590
                
                
                
                
                
                
                165,276,644
  F-16
  Prior
year acquisitions, disposals and other significant transactions
  On July 29, 2008, Straits entered into
an agreement to acquire an Accommodation Field Development Vessel (“AFDV”) upon
completion of the construction of the vessel for $35.9 million.  On
September 12, 2008, an amendment was agreed under which the price was increased
by $2.6 million to $38.5 million to provide for additional
equipment.  The purchase is secured by a $25.8 million letter of
credit, which is secured, inter alia, by the Company.  The vessel was
originally expected to be delivered in the second quarter of 2010.  In
addition, Straits had placed an order for a 300T crane and an 8 point mooring
system for the AFDV at a cost of Euros 3.4 million (approximately $4.8 million)
and SGD $3.1 million (approximately $2.2 million),
respectively.  During 2009, the Company had committed to purchase
additional equipment for approximately $1.4 million. The contract for the AFDV
was subsequently cancelled on March 30, 2010 due to a failure by the seller to
meet its contractual obligations.On April 30, 2010, the
Company received a refund of its deposit on the vessel in the amount of $4.1
million together with interest thereon.  On May 11, 2010, the Company
received an additional $1.1 million from Malayan Banking Berhad as liquidated
damages due to the cancellation of the contract.
 
  On May
13, 2008, the Company, through a wholly-owned subsidiary, entered into a $30
million term loan facility to refinance the previously completed conversion of
M/V SACHEM to a bulk carrier.  The loan was secured by the vessel and
by certain put option contracts entered into by the Company to mitigate the risk
associated with the possibility of falling time charter rates.  In
October 2008 there was a repudiatory breach by the time charterer of M/V SACHEM
and the Company withdrew the vessel from the time charterer’s
service.  As a result of this breach and its effect on the security
provided to the mortgagee bank by the time charter, the bank reserved its rights
under the finance documents.  On October 28, 2008, the Company agreed
to prepay $12.5 million of the loan and in consideration the bank agreed to
waive its rights under the finance documents arising in relation to this event
of default and to release the assignment of certain put options.
  On
February 26, 2008, the Company, through a wholly-owned subsidiary, sold M/T
ACUSHNET for $7.8 million.  The book value of the vessel of
approximately $4.6 million was classified as held for sale at December 31,
2007.  A realized gain of $3.0 million is reflected in the
Consolidated Statements of Operations.
  On March
27, 2008, the Company, through a wholly-owned subsidiary, sold M/V SACHUEST for
$31.3 million.  The book value of the vessel of approximately $20.4
million was classified as held for sale at December 31, 2007.  A
realized gain of $10.3 is reflected in the Consolidated Statements of
Operations.
  NOTE
4 -- OTHER ASSETS
  “Other
Assets” are comprised of the following:
  2009
                
                2008Debt
      financing and related fees, net
                
                $        1,371,694
                
                $   2,610,659Other
      assets
                
                129,450
                
                248,202Total
      other assets
                
                $        1,501,144
                
                $    2,858,861
 
 Mortgage
commitment and related fees incurred in connection with the Company’s loan
facilities are being amortized over the terms of the respective loans using the
straight-line method which approximates the interest method.
  NOTE
5-- RELATED PARTY TRANSACTIONS
  BHM/NMS/BHES/PROTRANS
  The
shipowning activities of the Company are managed by an affiliate, B+H Management
Ltd.  (“BHM”) under a Management Services Agreement (the “Management
Agreement”) dated June 27, 1988 and amended on October 10, 1995 and on June 1,
2009, subject to the oversight and direction of the Company’s Board of
Directors.
  F-17
 The
shipowning activities of the Company entail three separate functions, all under
the overall control and responsibility of BHM: (1) the shipowning function,
which is that of an investment manager and includes the purchase and sale of
vessels and other shipping interests; (2) the marketing and operations function
which involves the deployment and operation of the vessels; and (3) the vessel
technical management function, which encompasses the day-to-day physical
maintenance, operation and crewing of the vessels.
  BHM
employs Navinvest Marine Services (USA) Inc. (“NMS”), a Connecticut corporation,
under an agency agreement, to assist with the performance of certain of its
financial reporting and administrative duties under the Management
Agreement.
  The
Management Agreement may be terminated by the Company in the following
circumstances: (i) certain events involving the bankruptcy or insolvency of BHM;
(ii) an act of fraud, embezzlement or other serious criminal activity by Michael
S.  Hudner, Chief Executive Officer, President, Chairman of the Board
and significant shareholder of the Company, with respect to the Company; (iii)
gross negligence or willful misconduct by BHM; or (iv) a change in control of
BHM.
  Mr.
Hudner is President of BHM and the sole shareholder of NMS.  BHM is
technical manager of the Company’s wholly-owned vessels under technical
management agreements.  BHM employs B+H Equimar Singapore (PTE) Ltd.,
(“BHES”), to assist with certain duties under the technical management
agreements.  BHES is a wholly-owned subsidiary of BHM.
  Currently,
the Company pays BHM a monthly rate of $6,743 per vessel for general,
administrative and accounting services, which may be adjusted annually for any
increases in the Consumer Price Index.  During the years ended
December 31, 2009, 2008 and 2007, the Company paid BHM fees of approximately
$1,100,000, $1,200,000 and $1,126,000, respectively, for these
services.  The total fees vary due to the change in the number of fee
months resulting from changes in the number of vessels owned during each
period.
  The
Company also pays BHM a monthly rate of $13,844 per MR product tanker and
$16,762 per Panamax product tanker or OBO for technical management services,
which may be adjusted annually for any increases in the Consumer Price
Index.  Vessel technical managers coordinate all technical aspects of
day to day vessel operations including physical maintenance, provisioning and
crewing of the vessels.  During the years ended December 31, 2009,
2008 and 2007, the Company paid BHM fees of approximately $2,259,000, $2,540,000
and $2,539,000, respectively, for these services.  Technical
management fees are included in vessel operating expenses in the Consolidated
Statements of Operations.  The total fees have decreased as a result
of the decrease in the number of vessels operated from an average of 13.3
vessels for the twelve months of 2008 to 10.8 vessels for the twelve months of
2009.
 
 The
Company engages BHM to provide commercial management services at a monthly rate
of $10,980 per vessel, which may be adjusted annually for any increases in the
Consumer Price Index.  BHM obtains support services from Protrans
(Singapore) Pte.  Ltd., which is owned by BHM.  Commercial
managers provide marketing and operations services.  During the years
ended December 31, 2009, 2008 and 2007, the Company paid BHM fees of
approximately $1,625,000, $1,896,000 and $1,835,000, respectively, for these
services.  Commercial management fees are included in voyage expenses
in the Consolidated Statements of Operations.  The total fees
decreased in 2009 due to the decrease in the number of fee months resulting from
the decrease in the number of vessels owned.
  The
Company engaged Centennial Maritime Services Corp.  (“Centennial”), a
company affiliated with the Company through common ownership, to provide manning
services at a monthly rate of $1,995 per vessel and agency services at variable
rates, based on the number of crew members placed on board.  During
the years ended December 31, 2009, 2008 and 2007, the Company paid Centennial
manning fees of approximately $568,000, $777,000 and $662,000,
respectively.  Manning fees are included in vessel operating expenses
in the Consolidated Statements of Operations.
  BHES
provides office space and administrative services to Straits, a wholly-owned
subsidiary and owner of the AFDV originally scheduled to be delivered in the
second quarter of 2010, for SGD 5,000 (approximately $3,468) per month from
January 2009 through April 2009 and SGD 12,000 (approximately $8,280) per month
effective May 1, 2009.  The total expense incurred for these services
was $95,600 in 2009.  These fees are included in general and
administrative expenses in the Consolidated Statement of
Operations.  The agreement to purchase the newbuilding AFDV was
cancelled on March 30, 2010 due to the builder's repudiation of its obligations
under the memorandum of agreement.
 
 F-18
 BHM
received arrangement fees of $232,000 in connection with the financing of the
accommodation barge SAFECOM1 in January 2009 and received brokerage commissions
of $452,000 in connection with the sales of six vessels during
2009.  The Company also paid BHM standard industry chartering
commissions of $704,000 in 2009, $720,000 in 2008 and $717,000 in 2007 in
respect of certain time charters in effect during those
periods.  Clearwater Chartering Corporation, a company affiliated
through common ownership, was paid $489,000, $1,176,000 and $1,362,000 in 2009,
2008 and 2007, respectively, for standard industry chartering
commissions.  Brokerage commissions are included in voyage expenses in
the Consolidated Statements of Operations.
  The
Company paid fees of $312,000, $501,000 and $501,000 to J.V. Equities, Inc. in
2009, 2008 and 2007, respectively, for consulting services
rendered.  J.V. Equities is controlled by John LeFrere, a director of
the Company.
  During
each of 2009, 2008 and 2007, the Company paid fees of $128,000, $56,000 and
$186,000 respectively, to R.  Anthony Dalzell, Chief Financial
Officer, Vice President and a director of the Company, or to a Company deemed to
be controlled by Mr. Dalzell for consulting services.
  During
1998, the Company’s Board of Directors approved an agreement with BHM whereby up
to 110,022 shares of common stock of the Company would be issued to BHM for
distribution to individual members of management, contingent upon certain
performance criteria.  The Company issued the shares of common stock
to BHM at such time as the specific requirements of the agreement were
met.  During 2007, 2,275 shares, bringing the total to 64,522 shares,
were issued from treasury stock.  Compensation cost of $34,000 based
on the market price of the shares at the date of issue, was included as
management fees to related parties in the Consolidated Statement of Operations
for the year ended December 31, 2007.  All shares in the plan were
vested at December 31, 2007.
  As a
result of BHM’s possible future management of other shipowning companies and
BHM’s possible future involvement for its own account in other shipping
ventures, BHM may be subject to conflicts of interest in connection with its
management of the Company.  To avoid any potential conflict of
interest, the management agreement between BHM and the Company provides that BHM
must provide the Company with full disclosure of any disposition of handysize
bulk carriers by BHM or any of its affiliates on behalf of persons other than
the Company.
  For the
policy year ending February 20, 2010, the Company placed the following insurance
with NAL:
  66.5%
      of its Hull & Machinery (“H&M”) insurance for claims in excess of
      minimum $120/125,000 each incident, which insurance NAL fully
      reinsured.
  67.5%
      of its H&M insurance (Machinery Claims only) on 6 vessels of up to
      $50,000 in excess of $120/125,000 each incident;
  and
  67.5%
      of its H&M insurance (Machinery claims only) on 1 vessel up to
      $100,000 in excess of $120/125,000 each
  incident.
  For the
policy year ending February 20, 2009, the Company placed the following insurance
with Northampton Assurance Ltd (“NAL”):
  66.5%
      of its Hull & Machinery (“H&M”) insurance for claims in excess of
      minimum $120/125,000 each incident, which insurance NAL fully
      reinsured.
  67.5%
      of its H&M insurance (Machinery claims only) on 6 vessels of up to
      $50,000 in excess of $120/125,000 each incident;
  and
  67.5%
      of its H&M insurance (Machinery claims only) on 1 vessel up to
      $100,000 in excess of $120/125,000 each
  incident.
  F-19
 For the
policy year ending February 20, 2008, the Company placed the following insurance
with Northampton Assurance Ltd (“NAL”):
  65%
      of its Hull & Machinery (“H&M”) insurance for claims in excess of
      minimum $120/125,000 each incident, which insurance NAL fully
      reinsured.
  70%
      of its H&M insurance (Machinery Claims only) on 6 vessels of up to
      $50,000 in excess of $120/125,000 each incident;
  and
  70%
      of its H&M insurance (Machinery claims only) on 1 vessel up to
      $100,000 in  excess of $120/125,000 each
    incident.
  For the
periods ending December 31, 2009, 2008 and 2007, vessel operating expenses on
the Consolidated Statements of Operations include approximately $719,000,
$982,000 and $896,000, respectively, of insurance premiums paid to NAL (of which
$667,000, $915,000 and $813,000, respectively, was ceded to reinsurers) and
approximately $99,000, $196,000, and $188,000, respectively, of brokerage
commissions paid to NAL.
  The
Company had accounts payable to NAL of $86,000 and $397,000 at December 31, 2009
and 2008, respectively.  NAL paid fees of $174,000 during each of the
three years ending December 31, 2009, 2008 and 2007 to Mr. Dalzell or to a
company deemed to be controlled by him for consulting service.
  NOTE
6-- MORTGAGE PAYABLE
  The
following table provides a summary of the Company’s various loan facilities at
each balance sheet date:
  
 Loan
      balance as of
                
                Loan
      balance as ofDecember 31, 2009
                
                December 31, 2008SAKONNET
      (term loan facility 1/24/07)
                
                $   16,810,686
                
                $  20,766,230MR
      Product Tankers (term loan facility dated 12/7/07) As subsequently
      refinanced at February 11, 2010)
                
                -
                
                25,575,000OBO
      Holdings Junior Loan  (term loan facility dated
      2/11/2010)
                
                3,975,230
                
                -CLIASHIP
      (term loan facility dated 10/25/07
                
                -
                
                20,000,000OBO
      (term loan facility dated 8/29/06)
                
                62,300,000
                
                77,950,000SEAPOWET
      (term loan facility 9/5/06)
                
                1,500,000
                
                3,500,000SACHEM
      (term loan facility 5/13/08)
                
                9,500,000
                
                12,500,000BHO
      Bond (term loan facility date 12/12/06)
                
                13,500,000
                
                15,500,000Total
                
                107,585,916
                
                175,791,230Less:
      Current portion
                
                (34,081,044)Long-term
      portion
                
                73,504,871
 
 The
Sakonnet term loan facility, OBO Holdings Junior loan facility, OBO term loan
facility and Seapowet term loan facility all contain a material adverse change
(“MAC”) clause. If the Company encountered difficulties that would qualify as a
MAC in the Company’s (i) operations, (ii) condition (financial or otherwise), or
(iii) ability to repay the amount outstanding, the Company’s credit agreement
could be cancelled at the lender’s sole discretion. The lenders could then elect
to declare the indebtedness, together with accrued interest and other fees, to
be immediately due and payable and proceed against any collateral securing such
indebtedness. The Company believes, although the Company can provide no
assurance, that the Company will continue to be able to meet the financial
covenants, as amended (see below), and will not encounter a MAC triggering event
associated with these term loan Facilities.
  The
Company was in compliance with the new set of financial covenants at December
31, 2009 and projects continued compliance over the next twelve months.  A
significant input into the covenant calculations is derived from the fair value
of the Company’s vessels, which is dependent upon appraisals from third parties.
 Third party appraisals are inherently subjective estimates and subject to
market volatility.  The Company is required to comply with such covenants
on a quarterly basis.  There can be no assurance that the appraised values
of the Company’s vessels will be sufficient to ensure compliance with its
covenants in future periods.
 F-20
 1)
$27,300,000 term loan facility, with Bank of Nova Scotia, dated January 24, 2007
(the “Sakonnet Loan
Facility Agreement”)
  On
January 24, 2007, the Company, through a wholly-owned subsidiary, entered into a
$27 million term loan facility to refinance the acquisition of M/V SAKONNET,
acquired in January 2006 under an unsecured financing agreement.
  The loan
is payable in four quarterly installments of $816,000 commencing on April 30,
2007, followed by the payment of twelve quarterly installments of $989,000 each
and sixteen quarterly installments of $742,000 thereafter, ending on January 30,
2015.
  Interest
on the Sakonnet Loan Facility Agreement was equal to LIBOR plus 0.875% through
December 31, 2009.  Expenses associated with the loan of $395,000 were
capitalized and are being amortized over the eight year term of the
loan.
  The
Company was in breach of the Ratio of EBIDTA to Fixed Charges covenant contained
therein at June 30, 2009. The lender agreed to waive this breach from June 30,
2009 through December 31 2009, and then agreed to a further waiver effective as
of January 1, 2010 (as described below).
  On April
15, 2010, the Companyagreed to adopta new set of financial
covenantsin an
amendment to the loan agreement. Under the new set of financial covenants, the
Company is required to maintain (a) minimum Value Adjusted Equity (as such term
is defined therein, based on certain third party appraisals) of $30 million, (b)
positive working capital (this covenant shall first be tested with the delivery
of the compliance certificate for the second quarter of 2010), (c) Cash and Cash
Equivalents (as such terms are defined therein) of not less than $4 million
until September 30, 2010,and $6 million
thereafter and (d) an equity to assets ratio of at least 25%.  The
Company also agreed to a further extension of the waiver of the Ratio of EBIDTA
to Fixed Charge commencing January 1, 2010 until January 1, 2011.
  The Sakonnet Loan Facility Agreement
also requires mandatory prepayment in the event of the total loss or sale of a
vessel. The applicable loan facility margin increased to 3.0% effective January
1, 2010. The
Company was in compliance with the new set of financial covenants at December
31, 2009 and projects continued compliance over the next twelve
months.
  2)
$34,000,000 term loan facility with Bank of Scotland, dated December 7, 2007
(the “Boss Tankers Loan Facility Agreement”)
  The four
vessels securing the Boss Tankers Loan Facility Agreement, M/T AGAWAM, M/T
ANAWAN, M/T AQUIDNECK and M/T PEQUOD, were sold in 2009 with the proceeds
applied toward repayment of the loan.  Following the sale of the
vessels, there was a remaining loan balance of $3.975 million, which was fully
repaid in February 2010 (see item 3 below). The Company was not in compliance
with various financial covenants under the Boss Tankers Loan Facility Agreement,
and the lender waived compliance of these covenants in a letter dated April 27,
2010.
  3)
$3,975,230 term loan facility with Bank of Scotland plc, dated February 11, 2010
(the “OBO Holdings Junior Loan Facility Agreement”)
  On
February 11, 2010, the Company drew down a $3.975 million loan, the proceeds of
which were applied towards repayment of the residual balance of the loan under
the Boss Tankers Loan Facility Agreement. This loan will be due in December 2011
and is secured by second mortgages on OBO BONNIE SMITHWICK, OBO RIP HUDNER, OBO
SEAROSE G, OBO ROGER M JONES and M/T SAGAMORE.  The loan facility
margin is 6.50%.  Under the OBO Holdings Junior Loan Facility
Agreement, the Company is required to maintain (a) minimum Value Adjusted Equity
(as such term is defined therein) of $30 million, (b) positive working capital
(this covenant shall first be tested with the delivery of the compliance
certificate for the second quarter of 2010), (c) Cash and Cash Equivalents (as
such terms are defined therein) of not less than $4 million until September 30,
2010, and $6 million thereafter and (d) an equity to assets ratio of at least
25%.  In addition, the aggregate market value of the vessels securing
this facility must be at least 125% of the sum of the outstanding balance of the
loan under the OBO Holdings Junior Loan Facility Agreement and the outstanding
balance of the loan under the OBO Holdings Loan Facility Agreement and 135% of
the outstanding balance of the loan under the OBO Holdings Loan Facility
Agreement.
  F-21
 Under
this facility agreement, The Company was in compliance with the new set of
financial covenants on February 11, 2010, the date of drawdown and projects
continued compliance for the rest of 2010.
  4)
$26,700,000 term loan facility with Nordea Bank Norge ASA, dated October 25,
2007 (the “Cliaship Loan Facility Agreement”)
  On
October 25, 2007 the Company entered into an amended and restated $26,700,000
floating rate loan facility. The Cliaship Loan Facility Agreement made available
an additional $19.6 million for the purpose of acquiring the M/T CAPT. THOMAS J
HUDNER and changed the payment terms for the $7.1 million balance of the
loan.
  On
February 26, 2008, the Company, through a wholly-owned subsidiary, sold M/T
ACHUSHNET for $7.8 million.  On March 27, 2008, the Company, through a
wholly-owned subsidiary, sold M/V SACHUEST for $31.3 million and paid down the
loan under the Cliaship Loan Facility Agreement by $6,700,000.  The
Cliaship Loan Facility Agreement is payable in thirteen quarterly installments
of $812,500, the first payable on July 30, 2009, and the final payment of
$687,500 is due in October 2012.  Interest on the facility was
initially equal to LIBOR plus 1.0% and increased in July 2009 to LIBOR plus
3.00% during the waiver period as set forth in the Addendum No.1 and Waiver
Agreement to the Cliaship Loan Facility Agreement dated July 17,
2009.
  On
October 29, 2009, the Company, through a wholly-owned subsidiary, sold M/V CAPT
THOMAS J. HUDNER JR for $10.2 million and paid off the outstanding loan
balance.
  5)
$202,000,000 reducing revolving credit facility, with Nordea Bank Norge ASA, as
Agent, dated August 29, 2006 (the “OBO Holdings Loan Facility
Agreement”)
  On
October 18, 2005 the Company, through wholly-owned subsidiaries, entered into a
$138,100,000 reducing revolving credit facility which amended the agreement
entered into on February 23, 2005.  The amendment made available an
additional $43.0 million for the purpose of acquiring M/V ROGER M JONES and M/T
SAGAMORE.
  On August
29, 2006 the Company, through wholly-owned subsidiaries, entered into a
$202,000,000 Reducing Revolving Credit Facility Agreement which amended the
agreement entered into on October 18, 2005.
  The
Company was in breach of the Ratio of EBIDTA to Fixed Charges covenant contained
therein at June 30, 2009. The lenders agreed to waive this breach on July 17,
2009 through January 1, 2010.
  F-22
 On
December 14, 2009, the Company agreed to adopt a new set of financial covenants
and to remove the Ratio of EBIDTA to Fixed Charges covenant in an amendment to
the loan agreement. Under the new set of financial covenants, the Company is
required to maintain (a) minimum Value Adjusted Equity (as such term is defined
therein, based on certain third party appraisals) of $30 million, (b) positive
working capital (this covenant shall first be tested with the delivery of the
compliance certificate for the second quarter of 2010), (c) Cash and Cash
Equivalents (as such terms are defined therein) of not less than $4 million
until September 30, 2010, and $6 million thereafter and (d) an equity to assets
ratio of at least 25%.  In addition, the aggregate market value of the
vessels securing the OBO Holdings Loan Facility Agreement must be at least 135%
of the outstanding balance of the loan. The lenders also agreed to defer 50% of
amounts due in March 2010 ($2.55 million), payable in six equal quarterly
installments, the first which is payable in June 2010.The
loan facility margin was also increased to 3.75%.
  The
Company was in compliance with the new set of financial covenants at December
31, 2009 and projects continued compliance over the next twelve
months.
 6)
$8,000,000 term loan facility with Nordea Bank Norge ASA dated September 5, 2006
(the “Seapowet Loan Facility Agreement”)
 
 On
September 5, 2006, the Company, through a wholly-owned subsidiary, entered into
an $8 million term loan facility to finance the acquisition of its 50% interest
in an entity which was the disponent owner of M/V SEAPOWET.  The
Seapowet Loan Facility Agreement is repayable in sixteen quarterly installments
of $500,000, commencing on December 7, 2006.  Interest on the Seapowet
Loan Facility Agreement was equal to LIBOR plus 1.75% and increased in July 2009
to LIBOR plus 3.00% as a result of a waiver, as discussed
below.  Expenses associated with the loan of $221,000 were capitalized
and are being amortized over the 4 year term of the loan. The loan matures in
September 2010.
  The
Company was in breach of the Ratio of EBIDTA to Fixed Charges covenant contained
therein at June 30, 2009. The lenders agreed to waive this breach on July 17,
2009 through January 1, 2010.
  On
December 14, 2009, the Company agreed to adopt a new set of financial covenants
and to remove the Ratio of EBIDTA to Fixed Charges covenant in an addendum to
the Seapowet Loan Facility Agreement. Under the new set of financial covenants,
the Company is required to maintain (a) minimum Value Adjusted Equity (as such
term is defined therein, based on certain third party appraisals) of $30
million, (b) positive working capital (this covenant shall first be tested with
the delivery of the compliance certificate for the second quarter of 2010), (c)
Cash and Cash Equivalents (as such terms are defined therein) of not less than
$4 million until September 30, 2010, and $6 million thereafter and (d) an equity
to assets ratio of at least 25%.The
loan facility margin was also increased to 3.00%.
  The
Company was in compliance with the new set of financial covenants at December
31, 2009 and projects continued compliance over the next twelve
months.
  F-23
  7)
$30,000,000 term loan facility with DVB Group Merchant Bank, as Agent, dated May
13, 2008 (the “Sachem Loan Facility Agreement”)
  On May
13, 2008, the Company, through a wholly-owned subsidiary, entered into a $30
million term loan facility to refinance the previously completed conversion of
M/V SACHEM to a bulk carrier. The Sachem Loan Facility Agreement was secured by
the vessel, by an assignment of a time charter and by an assignment of certain
put option contracts entered into by the Company to mitigate the risk associated
with the possibility of falling time charter rates.
  TheSachem Loan Facility
Agreement contains restrictive financial covenants and requires mandatory
prepayment by the Company in the event of the total loss or sale of the
vessel.  TheSachem Loan Facility
Agreementrequires
the Company to maintain (a) minimum Value Adjusted Equity (as such term is
defined therein, based on certain third party appraisals) of $50 million, (b)
positive working capital, (c) Cash and Cash Equivalents (as such terms are
defined therein) in an amount equal to the greater of $15 million or 6% of its
long term debt and (d) an equity to assets ratio of at least 30%. As of December
31, 2009, the Company was not in compliance with the EBITDA/Fixed Charge ratio
and the minimum cash covenants, which were the subject of a waiver by the Lender
in a letter dated April 19, 2010.
  On
January 15, 2010, the Company, through a wholly-owned subsidiary, sold M/V
SACHEM for $10.7 million and the outstanding loan balance was paid in full on
January 15, 2010.
  NOTE
7 - BONDS PAYABLE
  On
December 12, 2006, the Company issued $25 million of unsecured bonds of which
the Company subscribed a total of $5 million.  The net proceeds of the
bonds were to be used for general corporate purposes, including but not limited
to: (i) conversion of single hull or double sided tankers, (ii) acquisition of
further vessels and (iii) continuance of share buy-back.
  Interest
on the bonds is equal to LIBOR plus 4%, payable quarterly in
arrears.  The bonds are in denominations of $100,000 each and rank
pari passu.  The term of the bond issue is seven years, payable in
full on the maturity date.  In order to mitigate the risk of interest
rate volatility associated with the variable interest rate on these bonds, the
Company entered into an interest rate swap agreement to hedge $10 million of
these bonds.  Under the term of the interest rate swap agreement,
which has similar attributes to the debt, the interest rate on the $10 million
is converted from a variable rate to a fixed rate of 4.995%.  The
Company has designated this interest rate swap agreement as a cash flow
hedge.  At December 31, 2009 and 2008, the fair value of this interest
rate swap was a liability of $1,002,000 and $1,400,400
respectively.
  All or a
portion of the bonds may be redeemed at any time between June 2010 and June 2011
at 104.5%, between June 2011 and June 2012 at 103.25%, between June 2012 and
June 2013 at 102.25% and between June 2013 and the maturity date at
101.00%.
  During
the first quarter of 2009, the Company repurchased unsecured bonds with a face
value of $2.0 million and realized a $1.4 million gain.
  During
the 4th quarter of 2008, the Company repurchased unsecured bonds with a face
value of $4.5 million and realized a $2.3 million gain.
  The bond
facility contains certain restrictive covenants which restrict the payment of
dividends. The facility requires a minimum value adjusted equity ratio (as such
term is defined therein, based on certain third party appraisals) of
25%.  The
Company was in compliance with the financial covenants at December 31, 2009
and projects continued compliance over the next twelve months.
  F-24
 
 NOTE
8 -- COMMITMENTS AND CONTINGENCIES
  On July
31, 2008 (as amended September 12, 2008), the Company, through a wholly-owned
subsidiary, entered into an agreement to acquire an AFDV upon completion of the
construction of the vessel for $38.5 million.  The purchase was
secured by a $25.8 million Letter of Credit, which is secured, inter alia, by
the Company.  The Company cancelled the contract on March 30, 2010 due
to a breach of contract by the seller.
  The
Company does not currently have any mortgage or loan or rental commitments for
leased or owned facilities.
  
 NOTE
9 -- SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid
for interest was $7,476,000, $11,884,000 and $12,256,000 during the years ended
December 31, 2009, 2008 and 2007, respectively.
  NOTE
10 – INVESTMENT IN NORDAN
  In March
2006, the Company paid $13.0 million for a 50% ownership interest in Nordan OBO
2, Inc. (Nordan).  Nordan has as its primary asset a bareboat charter on a
1992 combination carrier whose value was approximately $30.4 million as of March
2006.  As of March 2006, the underlying equity of Nordan totaled
approximately $17.1 million.  The Company has concluded that the equity
method of accounting is the most appropriate method under which to account for
its investment, as the Company does not have control of Nordan and can exert
significant influence.  The Company has determined that the difference
between its cost and its share of the fair value of Nordan’s net identifiable
assets ($4.4 million) should be allocated to Nordan’s vessel and depreciated
over the vessel’s remaining useful life (as this is the primary asset of
Nordan).  During the years ended December 31, 2009, 2008 and 2007,
approximately $275,000 of additional depreciation expense related to the
difference between the Company’s cost of its investment in Nordan and the amount
of underlying equity in net assets of Nordan has been included within Income
from Investment in Nordan OBO 2 Inc. in the accompanying Consolidated Statements
of Operations.
  The
following table provides summarized unaudited financial information for the
Company’s investment in Nordan:
 
 31-Dec-09
                
                31-Dec-08
                
                31-Dec-07Current
      assets
                $
      5,636,066
                
                $   8,492,543
                
                $    2,021,081Vessels,
      net
                15,715,484
                
                17,519,801
                
                19,249,386Current
      liabilities
                1,946,728
                
                1,261,091
                
                1,786,132Long
      term capital lease obligation
                6,675,000
                
                7,950,470
                
                7,973,384Voyage,
      time and bareboat charter revenues
                10,141,631
                
                8,809,292
                
                7,467,510Income
      from vessel operations
                3,129,709
                
                3,613,805
                
                2,728,148Net
      income
                2,929,039
                
                8,289,832
                
                2,257,983
 
 Net
income during 2008 includes $5.0 million related to a forfeited deposit by a
potential buyer of Nordan's vessel.
 
 F-25
 NOTE
11 – RESTRICTED CASH
 
 Under the
terms of the $202 million loan agreement, the Company is required to hold bank
deposits which are to be used to fund loan installments and interest coming due.
These funds can only be used for the purposes of such debt service and are shown
as “Restricted cash” in Current Assets. At December 31, 2009 these funds
amounted to $1,066,000 in the accompanying Consolidated Balance Sheet.
Restricted cash has been classified as current as of December 31, 2009 as
the related debt has been classified as current liability.
 
 
 NOTE
12 – UNSECURED LOAN
 
 On
September 2009, the Company received a $1.25 million unsecured interest free
loan from Nordan OBO 2 Inc. in anticipation of a dividend. The loan was repaid
in full in January 2010.
  
 
 NOTE
13 -- SUBSEQUENT EVENTS
 
 The
Company has evaluated all events and transactions that have occurred after the
balance sheet date of December 31, 2009 up through the date we issued these
financial statements.  During this period, we did not have any
material subsequent events requiring disclosure, except as noted
below.  No material subsequent events occurred requiring recognition
at December 31, 2009.
  The
unsecured interest free loan provided by Nordan OBO 2 Inc. in September 2009 was
repaid in its entirety in January 2010.
 
  On
January 15, 2010, the Company, through a wholly-owned subsidiary, sold M/V
SACHEM for $10.7 million. No gain or loss was recorded as the carrying value was
written down to estimated fair value during 2009, resulting in an impairment
loss of $18.0 million during 2009.
  On March
30, 2010, the Company, through its wholly-owned subsidiary, Straits Offshore
Ltd., exercised its right to cancel its previously announced agreement to
purchase an Accommodation Field Development Vessel (“AFDV”) from an unrelated
third party.  The seller was unable to meet its contractual obligation
for delivery of the AFDV in accordance with the contract.  On April
30, 2010, the Company received a refund of its deposit on the vessel in the
amount of $4.1 million together with interest thereon.  On May 11,
2010, the Company received an additional $1.1 million as liquidated damages due
to the cancellation of the contract.  The Company anticipates it will receive
approximately $2.7 million during 2010 from the unrelated third party associated
to this contract.
 
   F-26