UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.
20549


________________




FORM
10-Q





(Mark One)


[X]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period endedSeptember 30,
2009





OR




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


For the
transition period
from                    to


________________





Commission File
Number 001–33831








EAGLE
BULK SHIPPING INC.


(Exact name of Registrant as specified
in its charter)








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





477
      Madison Avenue
              New
      York, New York 10022
              (Address
      of principal executive offices)(Zip
Code)





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




Indicate by
check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


YESX             NO




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


YES              NO




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





Large
accelerated Filer X    
Accelerated Filer       Non-accelerated Filer      Smaller reporting company




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




YES
             NO
X




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


Common
Stock, par value $0.01 per share, 62,052,478 shares outstanding as of November
6, 2009.


1
 
  TABLEOF
    CONTENTSPagePART
      I
                FINANCIAL
      INFORMATIONItem
      1.
                Financial
      StatementsConsolidated
      Balance Sheets as of September 30, 2009 (unaudited) and
                  December
      31,
      2008
                3Consolidated
      Statements of Operations (unaudited) for the three and nine months ended
      September 30, 2009 and 2008
                4Consolidated
      Statement of Stockholders' Equity (unaudited) for the nine months ended
      September 30, 2009
                5Consolidated
      Statements of Cash Flows (unaudited) for the nine months
      ended  September 30, 2009 and 2008
                6Notes to Consolidated Financial Statements (unaudited)
                7Item
      2.
                Management's
      Discussion and Analysis of Financial Condition
                  and
      Results of
      Operations
                16Item
      3.
                Quantitative
      and Qualitative Disclosures about Market Risks
                29Item
      4.
                Controls
      and Procedures
                29PART
      II
                OTHER
      INFORMATIONItem
      1.
                Legal
      Proceedings
                30Item
      1A.
                Risk
      Factors
                30Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                30Item
      3.
                Defaults
      upon Senior Securities
                30Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                30Item
      5.
                Other
      Information
                30Item
      6.
                Exhibits
                30Signatures
                31
 
 
 
 2
  
 Part
1 : FINANCIAL INFORMATION
 Item
1 : Financial Statements
 EAGLE
BULK SHIPPING INC.
 CONSOLIDATED
BALANCE SHEETS
 September 30, 2009
              
              
              December 31, 2008ASSETS:
              
              (Unaudited)Current
      assets:Cash
      and cash equivalents
              
              $
              82,544,467
              
              
              $
              9,208,862Accounts
      receivable
              
              
              5,825,416
              
              
              
              4,357,837Prepaid
      expenses
              
              
              5,348,972
              
              
              
              3,297,801Total current
      assets
              
              
              93,718,855
              
              
              
              16,864,500Noncurrent
      assets:Vessels
      and vessel improvements, at cost, net of accumulated
                depreciation
      of $114,516,274 and $84,113,047, respectively
              
              
              919,565,338
              
              
              
              874,674,636Advances
      for vessel construction
              
              
              483,414,622
              
              
              
              411,063,011Other
      fixed assets, net of accumulated amortization of $25,755
      and  $4,556, respectively
              
              
              283,895
              
              
              
              219,245Restricted
      cash
              
              
              12,776,056
              
              
              
              11,776,056Deferred
      drydock costs
              
              
              4,805,679
              
              
              
              3,737,386Deferred
      financing costs
              
              
              22,012,037
              
              
              
              24,270,060Fair
      value above contract value of time charters acquired
              
              
              4,531,115
              
              
              
              4,531,115Fair
      value of derivative instruments
              
              
              5,984,686
              
              
              
              15,039,535Total
      noncurrent assets
              
              
              1,453,373,428
              
              
              
              1,345,311,044Total
      assets
              
              $
              1,547,092,283
              
              
              $
              1,362,175,544LIABILITIES
      & STOCKHOLDERS' EQUITY
                Current
      liabilities:Accounts
      payable
              
              $
              1,402,289
              
              
              $
              2,037,060Accrued
      interest
              
              
              7,717,705
              
              
              
              7,523,057Other
      accrued liabilities
              
              
              10,473,346
              
              
              
              3,021,975Deferred
      revenue and fair value below contract value of time charters
      acquired
              
              
              8,570,051
              
              
              
              2,863,184Unearned
      charter hire revenue
              
              
              5,754,126
              
              
              
              5,958,833Total
      current liabilities
              
              
              33,917,517
              
              
              
              21,404,109Noncurrent
      liabilities:Long-term
      debt
              
              
              836,725,880
              
              
              
              789,601,403Fair
      value below contract value of time charters acquired
              
              
              25,050,597
              
              
              
              29,205,196Fair
      value of derivative instruments
              
              
              41,365,655
              
              
              
              50,538,060Total
      noncurrent liabilities
              
              
              903,142,132
              
              
              
              869,344,659Total
      liabilities
              
              
              937,059,649
              
              
              
              890,748,768Commitment
      and contingenciesStockholders'
      equity:Preferred
      stock, $.01 par value, 25,000,000 shares authorized, none
      issued
              
              
              —
              
              
              
              —Common
      shares, $.01 par value, 100,000,000 shares authorized, 61,986,777 and
      47,031,300 shares issued and outstanding
              
              
              619,868
              
              
              
              470,313Additional
      paid-in capital
              
              
              721,483,816
              
              
              
              614,241,646Retained
      earnings (net of dividends declared of $262,188,388)
              
              
              (76,690,081
              )
              
              
              (107,786,658
              )Accumulated
      other comprehensive loss
              
              
              (35,380,969
              )
              
              
              (35,498,525
              )Total
      stockholders' equity
              
              
              610,032,634
              
              
              
              471,426,776Total
      liabilities and stockholders' equity
              
              $
              1,547,092,283
              
              
              $
              1,362,175,544
  The
accompanying notes are an integral part of these Consolidated Financial
Statements.
 
 3
 
 
 EAGLE
BULK SHIPPING INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 
 Three Months Ended
              
              
              Nine Months EndedSeptember30, 2009
              
              
              September30, 2008
              
              
              September30, 2009
              
              
              September30, 2008Revenues,
      net of Commissions
              
              $
              41,551,805
              
              
              $
              51,553,232
              
              
              $
              150,550,809
              
              
              $
              125,462,448Vessel
      Expenses
              
              
              11,493,889
              
              
              
              9,344,348
              
              
              
              37,498,893
              
              
              
              24,932,088Depreciation
      and Amortization
              
              
              11,094,238
              
              
              
              8,991,877
              
              
              
              32,328,402
              
              
              
              23,718,898General
      and Administrative Expenses
              
              
              7,839,942
              
              
              
              6,666,748
              
              
              
              25,784,155
              
              
              
              16,478,840Total
      Operating Expenses
              
              
              30,428,069
              
              
              
              25,002,973
              
              
              
              95,611,450
              
              
              
              65,129,826Operating
      Income
              
              
              11,123,736
              
              
              
              26,550,259
              
              
              
              54,939,359
              
              
              
              60,332,622Interest
      Expense
              
              
              7,294,151
              
              
              
              3,714,458
              
              
              
              20,596,321
              
              
              
              10,513,928Interest
      Income
              
              
              (65,965
              )
              
              
              (385,816
              )
              
              
              (136,828
              )
              
              
              (2,654,863
              )Write-off
      of Deferred Financing Costs
              
              
              3,383,289
              
              
              
              —
              
              
              
              3,383,289
              
              
              
              —Net
      Interest Expense
              
              
              10,611,475
              
              
              
              3,328,642
              
              
              
              23,842,782
              
              
              
              7,859,065Net
      Income
              
              $
              512,261
              
              
              $
              23,221,617
              
              
              $
              31,096,577
              
              
              $
              52,473,557Weighted
      Average Shares Outstanding :Basic
              
              
              61,976,794
              
              
              
              46,770,486
              
              
              
              53,808,348
              
              
              
              46,762,092Diluted
              
              
              61,986,752
              
              
              
              47,066,254
              
              
              
              53,831,913
              
              
              
              47,062,811Per
      Share Amounts:Basic
      Net Income
              
              $
              0.01
              
              
              $
              0.50
              
              
              $
              0.58
              
              
              $
              1.12Diluted
      Net Income
              
              $
              0.01
              
              
              $
              0.49
              
              
              $
              0.58
              
              
              $
              1.11Cash
      Dividends Declared and Paid
              
              
              —
              
              
              $
              0.50
              
              
              
              —
              
              
              $
              1.50
 
  The
accompanying notes are an integral part of these Consolidated Financial
Statements.
 
 
 4
 
 
 EAGLE
BULK SHIPPING INC.
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
 
 Common
                  Shares
              
              
              Common
                  Shares
                  Amount
              
              
              Additional
                  Paid-In
                  Capital
              
              
              Net Income
              
              
              Accumulated
      Deficit
              
              
              Other Comprehensive Income
      (Loss
              
              
              Total Stockholders' EquityBalance
      at December 31, 2008
              
              
              47,031,300
              
              
              $
              470,313
              
              
              $
              614,241,646
              
              
              
              
              
              
              $
              (107,786,658
              )
              
              $
              (35,498,525
              )
              
              $
              471,426,776Comprehensive
      income :Net
      income
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              31,096,577
              
              
              
              31,096,577
              
              
              
              —
              
              
              
              31,096,577Net
      unrealized gain on derivatives
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              117,556
              
              
              
              117,556Comprehensive
      income
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              502,640,909Issuance
      of common shares, net of issuance costs
              
              
              14,847,493
              
              
              
              148,475
              
              
              
              97,142,571
              
              
              
              
              
              
              
              —
              
              
              
              
              
              
              
              97,291,046Issuance
      of restricted shares
              
              
              107,984
              
              
              
              1,080
              
              
              
              (487,551
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (486,471
              )Non-cash
      compensation
              
              
              —
              
              
              
              —
              
              
              
              10,587,150
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              10,587,150Balance
      at September 30, 2009
              
              
              61,986,777
              
              
              $
              619,868
              
              
              $
              721,483,816
              
              
              
              
              
              
              $
              (76,690,081
              )
              
              $
              (35,380,969
              )
              
              $
              610,032,634
   The
accompanying notes are an integral part of these Consolidated Financial
Statements.
 
 
 5
 
 EAGLE
BULK SHIPPING INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  Nine
      Months EndedSeptember 30, 2009
              
              
              September 30, 2008Cash
      flows from operating activities:Net
      income
              
              $
              31,096,577
              
              
              $
              52,473,557Adjustments
      to reconcile net income to net cash provided by operating
      activities:Items
      included in net income not affecting cash flows:Depreciation
      and amortization
              
              
              30,424,426
              
              
              
              21,816,618Amortization
      of deferred drydocking costs
              
              
              1,903,976
              
              
              
              1,902,280Amortization
      of deferred financing costs
              
              
              881,728
              
              
              
              185,508Amortization
      of fair value below contract value of time charters acquired
              
              
              (1,942,278
              )
              
              
              (264,053
              )Write-off
      of Deferred Financing Costs
              
              
              3,383,289
              
              
              
              —Non-cash
      compensation expense
              
              
              10,587,150
              
              
              
              7,766,452Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (1,467,579
              )
              
              
              (489,213
              )Prepaid
      expenses
              
              
              (2,051,171
              )
              
              
              (2,409,563
              )Accounts
      payable
              
              
              (634,771
              )
              
              
              (3,288,849
              )Accrued
      interest
              
              
              644,354
              
              
              
              573,342Accrued
      expenses
              
              
              7,025,387
              
              
              
              1,056,589Drydocking
      expenditures
              
              
              (2,546,285
              )
              
              
              (1,701,042
              )Deferred
      revenue
              
              
              3,494,546
              
              
              
              —Unearned
      charter hire revenue
              
              
              (204,707
              )
              
              
              3,971,645Net
      cash provided by operating activities
              
              
              80,594,642
              
              
              
              81,593,271Cash
      flows from investing activities:Vessels
      and vessel improvements and advances for vessel construction
              
              
              (145,771,439
              )
              
              
              (273,766,850
              )Purchase
      of other assets
              
              
              (85,849
              )
              
              
              (120,723
              )Net
      cash used in investing activities
              
              
              (145,857,288
              )
              
              
              (273,887,573
              )Cash
      flows from financing activities:Issuance
      of Common Stock
              
              
              99,999,997
              
              
              
              —Proceeds
      from exercise of stock options
              
              
              —
              
              
              
              237,327Equity
      issuance costs
              
              
              (2,708,951
              )
              
              
              —Bank
      borrowings
              
              
              95,770,000
              
              
              
              144,724,967Repayment
      of bank debt
              
              
              (48,645,523
              )
              
              
              —Changes
      in restricted cash
              
              
              (1,000,000
              )
              
              
              (1,651,440
              )Deferred
      financing costs
              
              
              (4,330,801
              )
              
              
              (786,811
              )Cash
      used to settle net share equity awards
              
              
              (486,471
              )
              
              
              —Cash
      dividends
              
              
              —
              
              
              
              (70,149,063
              )Net cash provided by financing
      activities
              
              
              138,598,251
              
              
              
              72,374,980Net
      increase/(decrease) in cash
              
              
              73,335,605
              
              
              
              (119,919,322
              )Cash
      at beginning of period
              
              
              9,208,862
              
              
              
              152,903,692Cash
      at end of period
              
              $
              82,544,467
              
              
              $
              32,984,370
  The
accompanying notes are an integral part of these Consolidated Financial
Statements.
 
 6
 
 EAGLE
BULK SHIPPING INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 Note
1.  Basis of Presentation and General Information
 
 The accompanying consolidated financial
statements include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned
subsidiaries (collectively, the "Company", "we" or "our"). The Company is
engaged in the ocean transportation of dry bulk cargoes worldwide through the
ownership and operation of dry bulk vessels. The Company's fleet is comprised of
Supramax and Handymax bulk carriers and the Company operates its business in one
business segment.
 
 The Company is a holding company
incorporated in 2005, under the laws of the Republic of the Marshall Islands and
is the sole owner of all of the outstanding shares of its wholly-owned
subsidiaries incorporated in the Republic of the Marshall Islands. The primary
activity of each of the subsidiaries is the ownership of a vessel. The
operations of the vessels are managed by a wholly-owned subsidiary of the
Company, Eagle Shipping International (USA) LLC, a Republic of the Marshall
Islands limited liability company.
 
 As of September 30, 2009, the Company's
operating fleet consisted of 25 vessels. The Company has an extensive vessel
newbuilding program and as of September 30, 2009 had contracts for the
construction of 22 vessels. The following tables present certain information
concerning the Company's fleet as of September 30, 2009:
 
 No. of Vessels
              Dwt
              VesselType
              Delivery
              EmploymentVessels in Operation25
      Vessels
              1,296,917
              22
      Supramax
              
              Time
      Charter3
      Handymax
              
              Time
      CharterVessels to be delivered3
      Vessels
              159,300
              53,100
      dwt series
                Supramax
              2009-2010
              2
      Vessels on Time Charter and 1 Vessel Charter Free2
      Vessels
              112,000
              56,000
      dwt series
                Supramax
              2010
              2
      Vessels Charter Free17
      Vessels
              986,000
              58,000
      dwt series
                Supramax
              2009-2011
              17
      Vessels on Time Charter
 
 The following table represents certain
information about the Company's charterers which individually accounted for more
than 10% of the Company's gross time charter revenue during the periods
indicated:
 
 %
      of Consolidated Time Charter RevenueThree
      Months Ended
              Nine
      Months EndedSeptember
      30, 2009
              September
      30, 2008
              September
      30, 2009
              September
      30, 2008ChartererCharterer
      B
              13%
              22%
              16%
              25%Charterer
      H
              16%
              14%
              13%
              16%Charterer
      L
              —
              18%
              14%
              19%Charterer
      M
              17%
              12%
              18%
              12%Charterer
      P
              —
              10%
              —
              —
 
 7
 
 The accompanying unaudited consolidated
financial statements have been prepared in accordance with
 
 The
accompanying unaudited consolidated financial statements include all adjustments
(consisting of normal recurring adjustments) that management considers necessary
for a fair presentation of its consolidated financial position and results of
operations for the interim periods presented. The results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for the entire year.
 
 Note
2.  New Accounting Pronouncements
  In April
2009, the FASB amended the Fair Value of Financial Instruments to require an
entity to provide disclosures about fair value of financial instruments in
interim financial information ("Fair Value Disclosure Amendment"). The Fair
Value Disclosure Amendment requires a publicly traded company to include
disclosures about the fair value of its financial instruments whenever it issues
summarized financial information for interim reporting periods. In addition,
entities must disclose, in the body or in the accompanying notes of its
summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods, the fair value of all
financial instruments for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position. The
Fair Value Disclosure Amendment became effective for the Company in the quarter
ended June 30, 2009, and its adoption did not have an impact on our consolidated
financial condition or results of operations.
 
 In May
2009, the FASB issued guidance on "Subsequent Events."  This guidance
sets forth general standards of accounting for, and disclosure of, events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued.  This guidance is effective for periods
ending after June 15, 2009.  The adoption of this guidance did not
have an impact on our consolidated financial condition or results of operations.
The subsequent events have been evaluated through November 6, 2009, the date of the issuance of the
accompanying condensed consolidated financial statements.
 
 In June
2009, the FASB issued guidance on "The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles" which established
the FASB Accounting Standards Codification as the single source of authoritative
accounting principles in the preparation of financial statements in conformity
with GAAP.  This guidance also explicitly recognized rules and
interpretive releases of the Securities and Exchange Commission ("SEC") under
federal securities laws as authoritative GAAP for SEC
registrants.   This guidance was effective for financial
statements issued for periods ending after September 15, 2009.  The
adoption of this guidance did not have an impact on our consolidated financial
condition or results of operations.
  In June
2009, the FASB issued guidance which 1) replaces the quantitative-based risks
and rewards calculation for determining whether an enterprise is the primary
beneficiary in a variable interest entity with an approach that is primarily
qualitative, 2) requires ongoing assessments of whether an enterprise is the
primary beneficiary of a variable interest entity, and 3) requires additional
disclosures about an enterprise's involvement in variable interest
entities.  This guidance is effective for financial statements issued
for fiscal years beginning after November 15, 2009.   We do not
expect the adoption of this guidance to have a material impact, if any, on our
consolidated financial condition or results of operations.
 
 In
October 2009, an update was made to "Revenue Recognition – Multiple Deliverable
Revenue Arrangements." This update removes the
objective-and-reliable-evidence-of-fair-value criterion from the separation
criteria used to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, replaces references to
"fair value" with "selling price" to distinguish from the fair value
measurements required under the " Fair Value Measurements and Disclosures"
guidance, provides a hierarchy that entities must use to estimate the selling
price, eliminates the use of the residual method for allocation, and expands the
ongoing disclosure requirements.
This update is effective for the company beginning January 1, 2011 and can be
applied prospectively or retrospectively. We are currently evaluating the effect
that adoption of this update will have, if any, on the company's consolidated
financial position and results of operations when it becomes effective in
2011.
 
 8
 
 
 Note
3.  Vessels
 
 a. Vessel and Vessel
Improvements
 
 At September 30, 2009, the Company's
operating fleet consisted of 25 dry bulk vessels. In January and March 2009, the
Company took delivery of the Crested Eagle and Stellar Eagle,
respectively.
 
 Vessel
and vessel improvements:
  Vessels
      and Vessel Improvements, at December 31, 2008
              
              $
              874,674,636Purchase
      of Vessel and Vessel Improvements
              
              
              3,384,485Delivery
      of Newbuild Vessels
              
              
              71,909,444Depreciation
      Expense
              
              
              (30,403,227
              )Vessels
      and Vessel Improvements, at September 30, 2009
              
              $
              919,565,338
 
 b.
Advances for Vessel Construction
 
 The Company took delivery of the
Crested Eagle and Stellar Eagle, two Japanese built vessels, in January and
March 2009, respectively. In 2008, the Company took delivery of two Chinese and
one Japanese built vessels. In October 2009 the Company took delivery of the
Bittern.
 
 As of September 30, 2009, the total
contract cost of the remaining two Supramax vessels under construction in Japan
is approximately $73,798,065, these vessels' construction contracts are Japanese
yen denominated. As of September 30, 2009, the Company had advanced an
equivalent of $24,798,118 in progress payments towards these contracts. The
remaining two vessels are expected to be delivered in 2010. The Company will
incur additional costs relating to the construction of these vessels, including
capitalized interest, insurance, legal, and technical supervision
costs.
 
 As of September 30, 2009, the Company
had twenty Supramax vessels under construction at the shipyard in China. The
total contract cost of the construction project in China is approximately
$859,098,055, of which the Company has advanced $393,563,055 in payments towards
the construction of these vessels. These vessels are expected to be delivered
between 2009 and 2011. The Company will incur additional costs relating to the
construction of these vessels, including capitalized interest, insurance, legal,
and technical supervision costs.
 
 Advances
for Vessel Construction:
 Advances
      for Vessel Construction, at December 31, 2008
              
              $
      411,063,011Progress
      Payments
              
              117,330,996Capitalized
      Interest
              
              20,895,336Legal
      and Technical Supervision Costs
              
              6,034,723Delivery
      of Newbuild Vessels
              
              (71,909,444)Advances
      for Vessel Construction, at September 30, 2009
              
              $
      483,414,622
 
 
 
 
 9
 
 Note
4.  Long-Term Debt
 
 At September 30, 2009, the Company's
debt consisted of $836,725,880 in net borrowings under the amended revolving
credit facility. These borrowings consisted of $416,233,690 for the 25 vessels
currently in operation and $420,492,190 to fund the Company's newbuilding
program.
 
 On August
4, 2009, the Company entered into a third Amendatory Agreement to its revolving
credit facility dated October 19, 2007. Among other things, the credit facility
reduces the amount of the credit facility to $1,200,000,000 with maturity in
July 2014. The agreement also modifies the minimum security covenant, the
minimum net worth covenant, and the minimum interest coverage ratio covenant,
until such time as the Company can comply with the original covenants for two
consecutive accounting periods. In the interim, the measurement of the three
covenants at the end of each accounting period has been amended as follows: (a)
The minimum security covenant has been suspended, (b) the minimum net worth
covenant has been amended to a threshold minimum of $400 million plus an amount
equal to fifty percent of any equity received by the Company, with the
determination of net worth to utilize book value of vessel assets as stated in
the financial statements rather than the market value, and (c) until
reinstatement of the original minimum security and net worth covenants, for 24
months from July 1, 2009 to June 30, 2011, at each accounting period, the
Company's cumulative EBITDA (EBITDA as defined in the credit agreement) will at
all times be not less than 120% of the cumulative loan interest incurred on a
trailing four quarter basis, and for each accounting period after June 30, 2011,
the Company's cumulative EBITDA will at all times be not less than 130% of the
cumulative loan interest incurred on a trailing four quarter basis. The
amendment also requires, that until the Company is in compliance with the
original covenants for two consecutive accounting periods, the Company will use
half the net proceeds from any equity issuance to reduce the facility, including
approximately $48.6 million from the equity raised during the second quarter
which was paid during the third quarter. These payments reduce the available
amount of the credit facility to $1,151,354,477. The Company will continue to be
able to borrow the undrawn portion of the facility and the amounts borrowed will
bear interest at LIBOR plus 2.50%. Undrawn portions of the facility will bear a
commitment fee of 0.7%. The facility is available in full until July 2012 when
availability will begin to decline in four semi-annual reductions of $53,969,741
with a full repayment at maturity. In connection with the third amendment to the
revolving credit facility, the Company recorded deferred financing fees of
$3,014,400 and a one-time non-cash charge of $3,383,289 relating to write-off a
portion of deferred finance costs associated with the reduction of the credit
facility.
 
 Under the terms of the third amendment
of the revolving credit facility, among other things, we will maintain with the
lender an amount not less than the greater of $500,000 per delivered vessel or
an amount equal to any reductions in the total commitments scheduled to be
effected within the next six months less the amount of the then unutilized
facility. As of September 30, 2009, the Company has recorded $12,500,000 as
restricted cash in the accompanying balance sheets.
 
 For the
nine months ended September 30, 2009, interest rates on the outstanding debt
ranged from 2.19% to 7.73%, including a margin of 1.75% to 2.50% over LIBOR
applicable under the terms of the amended revolving credit facility. The
weighted average effective interest rate was 6.35%. The Company incurred a
commitment fee of 0.30% to 0.70% on the undrawn portion of the revolving credit
facility. Interest costs on borrowings used to fund the Company's newbuilding
program are capitalized until the vessels are delivered.
 
 Interest
Expense, exclusive of capitalized interest, consists of:
 
 Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008
              
              
              September
      30, 2009
              
              
              September
      30, 2008Loan
      Interest
              
              $
              6,921,937
              
              
              $
              3,652,171
              
              
              $
              19,714,593
              
              
              $
              10,328,420Amortization
      of Deferred Financing Costs
              
              
              372,214
              
              
              
              62,287
              
              
              
              881,728
              
              
              
              185,508Write-off
      of Deferred Financing Costs
              
              
              3,383,289
              
              
              
              —
              
              
              
              3,383,289
              
              
              
              —Total
      Interest Expense
              
              $
              10,677,440
              
              
              $
              3,714,458
              
              
              $
              23,979,610
              
              
              $
              10,513,928
 
 
 10
  
 Interest
paid, exclusive of capitalized interest, in the nine month periods ended
September 30, 2009 and 2008 amounted to $19,086,392 and $9,752,610,
respectively.
 Interest-Rate
Swaps
 
 The Company has entered into interest
rate swaps to effectively convert a portion of its debt from a floating to a
fixed-rate basis. Under these swap contracts, exclusive of applicable margins,
the Company will pay fixed rate interest and receive floating-rate interest
amounts based on three-month LIBOR settings. The swaps are designated and
qualify as cash flow hedges. The following table summarizes the interest rate
swaps in place as of September 30, 2009 and December 31, 2008.
 
 Notional
      Amount
                Outstanding
      –
                September
      30, 2009
              
              
              Notional
      Amount
                Outstanding
      –
                December
      31, 2008
              
              
              Fixed
      Rate
              
              Maturity$
              84,800,000
              
              
              $
              84,800,000
              
              
              
              3.900
              %
              
              
              09/201325,776,443
              
              
              
              25,776,443
              
              
              
              4.905
              %
              
              
              03/201010,995,000
              
              
              
              10,995,000
              
              
              
              4.980
              %
              
              
              08/2010202,340,000
              
              
              
              202,340,000
              
              
              
              5.040
              %
              
              
              08/2010100,000,000
              
              
              
              100,000,000
              
              
              
              4.220
              %
              
              
              09/201030,000,000
              
              
              
              30,000,000
              
              
              
              4.538
              %
              
              
              09/201025,048,118
              
              
              
              25,048,118
              
              
              
              4.740
              %
              
              
              12/201136,752,038
              
              
              
              36,752,038
              
              
              
              5.225
              %
              
              
              08/201281,500,000
              
              
              
              81,500,000
              
              
              
              3.895
              %
              
              
              01/2013144,700,000
              
              
              
              144,700,000
              
              
              
              3.580
              %
              
              
              10/20119,162,500
              
              
              
              9,162,500
              
              
              
              3.515
              %
              
              
              10/20113,405,174
              
              
              
              3,405,174
              
              
              
              3.550
              %
              
              
              10/201117,050,000
              
              
              
              17,050,000
              
              
              
              3.160
              %
              
              
              11/2011$
              771,529,273
              
              
              $
              771,529,273
 The Company records the fair value of
the interest rate swaps as an asset or liability on its balance sheet. The
effective portion of the swap is recorded in accumulated other comprehensive
income. Accordingly, liabilities of $41,365,655 and $50,538,060 have been
recorded in Fair value of derivative instruments in the Company's balance sheets
as of September 30, 2009 and December 31, 2008.
 
 Foreign
Currency swaps
 
 The
Company has entered into foreign exchange swap transactions to hedge foreign
currency risks on its capital asset transactions (vessel newbuildings). The
swaps are designated and qualified as cash flow hedges.
 
 At
December 31, 2008, the Company had outstanding foreign currency swap contracts
for notional amounts aggregating 8.6 billion Japanese yen swapped into the
equivalent of $80,378,030. In February 2009, the Company fixed the gain on its
outstanding foreign currency swaps contracts. This gain will be recognized upon
delivery of the remaining vessels as an offset to the cost of the vessels.
During the nine months ended September 30, 2009, the Company recognized a
foreign currency gain of $7,684,225 which offset the cost of Stellar Eagle and
Crested Eagle upon their delivery. The remaining gain as of September 30, 2009
aggregating $5,984,686 will offset the cost of the remaining two vessels upon
their delivery in January, 2010 and February 2010.
 
 The Company records the fair value of
the currency swaps as an asset or liability in its financial statements. The
effective portion of the currency swap is recorded in accumulated other
comprehensive income. Accordingly, an amount of $5,984,686 and $15,039,535 have
been recorded in Fair value of derivative instruments and other assets in the
accompanying balance sheets as of September 30, 2009, and December 31, 2008,
respectively.
 
 
 11
 
 Note  5.  Fair
Value Measurements
 
 The following methods and assumptions
were used to estimate the fair value of each class of financial
instrument:
 Cash and cash equivalents—the
carrying amounts reported in the consolidated balance sheet for interest-bearing
deposits approximate their fair value due to their short-term nature
thereof.
 Debt—the carrying amounts of
borrowings under the revolving credit agreement approximate their fair value,
due to the variable interest rate nature thereof.
 Interest rate swaps—the fair
value of interest rate swaps (used for hedging purposes) is the estimated amount
that the Company would receive or pay to terminate the swaps at the reporting
date.
 Foreign currency swaps—the
fair value of foreign currency swaps (used for hedging purposes) is the
estimated amount that the Company would receive or pay to terminate the swaps at
the reporting date.
 
 Effective January 1, 2008, the Company
defines fair value, establishes a framework for measuring fair value and
discloses fair value measurements.  The fair value hierarchy for
disclosure of fair value measurements is as follows:
  Level 1 –
Quoted prices in active markets for identical assets or liabilities
 Level 2 –
Quoted prices for similar assets and liabilities in active markets or inputs
that are observable
 Level 3 –
Inputs that are unobservable (for example cash flow modeling inputs based on
assumptions)
  The following table summarizes assets
and liabilities measured at fair value on a recurring basis at
September  30, 2009, as required by SFAS 157:
 
 Level
      1
              
              
              Level
      2
              
              
              Level
      3AssetsForeign
      currency contracts
              
              
              —
              
              
              $
              5,984,686
              
              
              
              —Liabilities
              Interest
      rate contracts
              
              
              —
              
              
              $
              41,365,655
              
              
              
              —
 The fair value of the interest rate and
foreign currency swap contracts are based on quoted market prices for a similar
contract and can be validated through external sources.
 
 Note  6.  Commitments
and Contingencies
 
 Vessel technical management
contracts
 
 The Company has technical management
agreements for each of its vessels with independent technical managers. The
Company paid average monthly technical management fees of $9,017 and $9,049 per
vessel during the nine months ended September 30, 2009 and 2008,
respectively.
 
 On August
4, 2009, the Company entered into a management agreement (the "Management
Agreement") with Delphin Shipping LLC ("Delphin"), a Marshall Islands limited
liability company affiliated with Kelso Investment Associates VII, and KEP VI,
LLC and the Company's Chief Executive Officer, Sophocles
Zoullas.  Delphin was formed for the purpose of acquiring and
operating drybulk and other vessels. Under the terms of the Management
Agreement, the Company will provide commercial and technical supervisory vessel
management services to drybulk vessels to be acquired by Delphin for a fixed
monthly management fee based on a sliding scale. Pursuant to the terms of the
Management Agreement the Company has been granted an opportunity to acquire for
its own account any drybulk vessel that Delphin proposes to
acquire.  The Company has also been granted a right of first refusal
on any drybulk charter opportunity, other than a renewal of an exisiting charter
for a Delphin owned vessel, that the Company reasonably deems suitable for a
Company owned vessel.  The Management Agreement also provides the
Company a right of first offer on the sale of any drybulk vessel by Delphin. The
term of the Management Agreement is one year and is renewable for successive one
year terms at the option of Delphin.
 
 
 12
 
 Note
7.  Earnings Per Common Share
 
 The computation of basic earnings per
share is based on the weighted average number of common shares outstanding
during the period. Diluted net income per share gives effect to stock options
and restricted stock units using the treasury stock method, unless the impact is
anti-dilutive. Diluted net income per share as of September 30, 2009, does not
include 1,397,260 restricted stock units and 590,668 stock options as their
effect was anti-dilutive.
 
 Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008
              
              
              September
      30, 2009
              
              
              September
      30, 2008Net
      Income
              
              $
              512,261
              
              
              $
              23,221,617
              
              
              $
              31,096,577
              
              
              $
              52,473,557Weighted
      Average Shares – Basic
              
              
              61,976,794
              
              
              
              46,770,486
              
              
              
              53,808,348
              
              
              
              46,762,092Dilutive
      effect of stock options and restricted stock units
              
              
              9,958
              
              
              
              295,768
              
              
              
              23,565
              
              
              
              300,719Weighted
      Average Shares – Diluted
              
              
              61,986,752
              
              
              
              47,066,254
              
              
              
              53,831,913
              
              
              
              47,062,811Basic
      Earnings Per Share
              
              $
              0.01
              
              
              $
              0.50
              
              
              $
              0.58
              
              
              $
              1.12Diluted
      Earnings Per Share
              
              $
              0.01
              
              
              $
              0.49
              
              
              $
              0.58
              
              
              $
              1.11
 
 Note
8.  Capital Stock
 
 Common
Stock
 
 On June
30, 2009, the Company completed its offering under an Equity Distribution
Agreement of $100,000,000 with UBS Securities dated March 2,
2009.  From May through June 2009, the Company sold 14,847,493 common
shares. The net proceeds, after underwriting commission of 2.5% and other
issuance fees, amounted to $97,291,046.
 
 Dividends
 
 Payment
of dividends is in the discretion of the board of directors and is limited by
the terms of certain agreements to which the Company and its subsidiaries are
parties to and provisions of Marshall Islands law. The
Company's revolving credit facility permits it to pay quarterly dividends in
amounts up to its cumulative free cash flows, which is our earnings before
extraordinary or exceptional items, interest, taxes, depreciation and
amortization (Credit Agreement EBITDA), less the aggregate amount of interest
incurred and net amounts payable under interest rate hedging agreements during
the relevant period and an agreed upon reserve for dry-docking for the period,
provided that the Company is in compliance with its loan covenants. Depending on
market conditions in the dry bulk shipping industry and acquisition
opportunities that may arise, the Company may be required to obtain additional
debt or equity financing which could affect its dividend policy. In this
connection, the drybulk market has recently declined substantially. In December
2008, the Company's board of directors suspended the payment of dividends to
stockholders in order to increase cash flow, optimize financial flexibility and
enhance internal growth.  In the future, the declaration and payment
of dividends, if any, will always be subject to the discretion of the board of
directors, restrictions contained in the credit facility and the requirements of
Marshall Islands law. The
timing and amount of any dividends declared will depend on, among other things,
the Company's earnings, financial condition and cash requirements and
availability, the ability to obtain debt and equity financing on acceptable
terms as contemplated by the Company's growth strategy, the terms of its
outstanding indebtedness and the ability of the Company's subsidiaries to
distribute funds to it.
 
 Note
9.  Stock Incentive Plans
 
 2009 Equity Incentive plan.
In May 2009, our shareholders approved the 2009 Equity
Incentive Plan (2009 Plan) for the purpose of affording an incentive to eligible
persons. The 2009 Equity
Incentive Plan provides for the grant of equity based awards, including stock
options, stock appreciation rights, restricted stock, restricted stock units,
dividend equivalents, unrestricted stock, other equity based or equity related
awards, and/or performance compensation awards based on or relating to the
Company's common shares to eligible non-employee directors, officers, employees
or consultants. The 2009 Plan is administered by a compensation committee or
such other committee of the Company's board of directors. A maximum of 4.2
million of the Company's common shares have been authorized for issuance under
the 2009 Plan.
 
 
 13
 
 2005 Equity Incentive plan.
In 2005, the Company adopted the 2005 Equity
Incentive Plan (2005 Plan) for the purpose of affording an incentive to eligible
persons. The 2005 Equity
Incentive Plan provides for the grant of equity-based awards, including stock
options, stock appreciation rights, restricted stock, restricted stock units,
stock bonuses, dividend equivalents and other awards based on or relating to the
Company's common shares to eligible non-employee directors, selected officers
and other employees and independent contractors. The plan is administered by a
committee of the Company's board of directors. An aggregate of 2.6 million
shares of the Company's common stock were authorized for issuance under the
plan. None of the Company's common shares remain available for issuance under
the 2005 Plan.
 
 In 2007
and 2008, the Company granted restricted stock units ("RSUs") to members of its
management which vest ratably between three to five years. As of September 30,
2009, RSUs covering a total of 1,264,346 of the
Company's shares are outstanding. These RSUs also entitle the participant to
receive a dividend equivalent payment on the unvested portion of the underlying
shares granted under the award, each time the Company pays a dividend to the
Company's shareholders. The dividend equivalent rights on the unvested RSU are
forfeited upon termination of employment.The Company is
amortizing to non-cash compensation expense the fair value of the non-vested
restricted stock at the grant date. For the nine and three months ended
September 30, 2009, the amortization charge was $9,810,190 and $3,270,063,
respectively. The remaining expense for each of the years ending 2009, 2010, and
2011 will be $3,270,063, $12,410,365, and $5,450,402, respectively, and
$7,126,803 thereafter.
 
 As of
December 31, 2008, options covering 590,668 of the Company's common shares were
outstanding.  These options were awarded to members of its management
and its independent non-employee directors. On January 23, 2009, the Company
granted options to purchase 222,815 of the Company's common shares to its
independent non-employee directors. These options vested and became exercisable
on the grant date at an exercise price of $5.00 per share and expire six years
from the date of grant. For purposes of determining the non-cash compensation
cost for the Company's stock option plans using the fair value method of FAS
123(R), the fair value of the options granted of $550,851 was estimated on the
date of grant using the Black-Scholes option pricing model. The weighted average
assumptions used for the 2009 grant included a risk free interest rate of 2.2%,
and an expected stock price volatility factor of 74%.  For the nine
and three months ended September 30, 2009, the Company has recorded a non-cash
compensation charge of $776,960 and $75,370, respectively. As of September 30,
2009, options covering 813,483 of the Company's common shares are outstanding
with exercise prices ranging from $5.00 to $21.88 per share (the market prices
at dates of grants). The options granted to the independent non-employee
directors vested and became exercisable on the grant dates. The options granted
to members of its management vest and become exercisable over three years. All
options expire between six to ten years from the date of grant.
 
 On
January 15, 2008, the Company granted 30,000 shares of its common stock, which
vested on the grant date, to its independent non-employee directors. The fair
value of the stock at the grant date was equal to the closing stock price on
that date and a total amount of $608,400 has been recorded in non-cash
compensation expense for the six months ended September 30, 2008.
 
 The non-cash compensation expenses
recorded by the Company and included in General and Administrative Expenses are
as follows:
  Three Months Ended
              
              
              Nine Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008
              
              
              September
      30, 2009
              
              
              September
      30, 2008Stock
      Option Plans
              
              $
              75,370
              
              
              $
              62,851
              
              
              $
              776,960
              
              
              $
              226,108Restricted
      Stock Grants
              
              
              3,270,063
              
              
              
              3,131,658
              
              
              
              9,810,190
              
              
              
              6,931,944Stock
      Grants
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              608,400Total
      Non-cash compensation expense
              
              $
              3,345,433
              
              
              $
              3,194,509
              
              
              $
              10,587,150
              
              
              $
              7,766,452
 
 In 2006
and 2007, the Company granted Dividend Equivalent Rights Awards ("DERs") to its
independent non-employee directors and members of its management. These DERs
entitle the participant to receive a dividend equivalent payment each time the
Company pays a dividend to the Company's shareholders. As of September 30, 2009,
DERs equivalent to 574,000 of the Company's common shares are outstanding. For
the nine months ended September 30, 2009 and 2008, the Company has recorded in
General and Administrative Expense cash compensation expenses of $0 and
$2,608,236, respectively.
 
 14
 
 ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATION
 
 The
following is a discussion of the Company's financial condition and results of
operation for the three-month and nine-month periods ended September 30, 2009
and 2008. This section should be read in conjunction with the consolidated
financial statements included elsewhere in this report and the notes to those
financial statements.
 
 This
discussion contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, Section 21E of the Securities
Exchange Act of 1934, as amended and the Private Securities Litigation Reform
Act of 1995, and are intended to be covered by the safe harbor provided for
under these sections.  These statements may include words such as
"believe," "estimate," "project," "intend," "expect," "plan," "anticipate," and
similar expressions in connection with any discussion of the timing or nature of
future operating or financial performance or other events. Forward looking
statements reflect management's current expectations and observations with
respect to future events and financial performance. Where we express an
expectation or belief as to future events or results, such expectation or belief
is expressed in good faith and believed to have a reasonable
basis.  However, our forward-looking statements are subject to risks,
uncertainties, and other factors, which could cause actual results to differ
materially from future results expressed, projected, or implied by those
forward-looking statements. The principal factors that affect our financial
position, results of operations and cash flows include, charter market rates,
which have recently declined significantly from historic highs, periods of
charter hire, vessel operating expenses and voyage costs, which are incurred
primarily in U.S. dollars, depreciation expenses, which are a function of the
cost of our vessels, significant vessel improvement costs and our vessels'
estimated useful lives, and financing costs related to our indebtedness. Our
actual results may differ materially from those anticipated in these forward
looking statements as a result of certain factors which could include the
following: (i) changes in demand in the dry bulk market, including, without
limitation, changes in production of, or demand for, commodities and bulk
cargoes, generally or in particular regions; (ii) greater than anticipated
levels of dry bulk vessel new building orders or lower than anticipated rates of
dry bulk vessel scrapping; (iii) changes in rules and regulations applicable to
the dry bulk industry, including, without limitation, legislation adopted by
international bodies or organizations such as the International Maritime
Organization and the European Union or by individual countries; (iv) actions
taken by regulatory authorities; (v) changes in trading patterns significantly
impacting overall dry bulk tonnage requirements; (vi) changes in the typical
seasonal variations in dry bulk charter rates; (vii) changes in the cost of
other modes of bulk commodity transportation; (viii) changes in general domestic
and international political conditions; (ix) changes in the condition of the
Company's vessels or applicable maintenance or regulatory standards (which may
affect, among other things, our anticipated drydocking costs); (x) and other
factors listed from time to time in our filings with the Securities and Exchange
Commission. This discussion also includes statistical data regarding world dry
bulk fleet and orderbook and fleet age. We generated some of this data
internally, and some were obtained from independent industry publications and
reports that we believe to be reliable sources. We have not independently
verified this data nor sought the consent of any organizations to refer to their
reports in this quarterly report. We disclaim any intent or obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under applicable
securities laws.
 
 Overview
 
 We are Eagle Bulk Shipping Inc., a
Republic of the Marshall Islands corporation headquartered in New York City. We
own one of the largest fleets of Supramax dry bulk vessels in the world.
Supramax dry bulk vessels range in size from 50,000 to 60,000 dwt. We transport
a broad range of major and minor bulk cargoes, including iron ore, coal, grain,
cement and fertilizer, along worldwide shipping routes. As of September 30,
2009, we own and operate a modern fleet of 25 Handymax dry bulk vessels, 22 of
which are of the Supramax class. We also have a Supramax newbuilding program for
the construction of vessels in Japan and China. As of September 30, 2009, we
have taken delivery of five vessels and an additional 22 vessels will be
constructed and are expected to be delivered into our fleet through 2011, at
which time, and assuming no disposition or acquisition of additional vessels,
our total fleet will consist of 47 vessels with a combined carrying capacity of
2.55 million dwt. In October 2009 the Company took delivery of the
Bittern.
 
 15
 
 We are focused on maintaining a high
quality fleet that is concentrated primarily in one vessel type – Handymax dry
bulk carriers and its sub-category of Supramax vessels which are Handymax
vessels ranging in size from 50,000 to 60,000 dwt. These vessels have the cargo
loading and unloading flexibility of on-board cranes while offering cargo
carrying capacities approaching that of Panamax dry bulk vessels, which range in
size from 60,000 to 100,000 dwt and rely on port facilities to load and offload
their cargoes. We believe that the cargo handling flexibility and cargo carrying
capacity of the Supramax class vessels make them attractive to cargo interests
and vessel charterers. The 25 vessels in our operating fleet, with an aggregate
carrying capacity of 1,296,917 deadweight tons, have an average age of only six
years compared to an average age for the world Handymax dry bulk fleet of over
15 years.
 
 Each of
our vessels is owned by us through a separate wholly owned Republic of the Marshall Islands limited
liability company.
 
 We
maintain our principal executive offices at 477 Madison Avenue, New York, New York
10022. Our telephone number at that address is (212) 785-2500. Our website
address is www.eagleships.com. Information contained on our website does not
constitute part of this quarterly report.
 
 Our
financial performance since inception is based on the following key elements of
our business strategy:
 
 (1)
              concentration
      in one vessel category: Supramax class of Handymax dry bulk vessels, which
      we believe offer size, operational and geographical advantages (over
      Panamax and Capesize vessels),
 
 (2)
              our
      strategy is to charter our vessels primarily pursuant to one- to
      three-year time charters to allow us to take advantage of the stable cash
      flow and high utilization rates that are associated with medium to
      long-term time charters. On the other hand, time charters provide a
      shipping company with a predictable level of revenues. We have entered
      into time charters for substantially all of our vessels in our operating
      fleet which range in length from approximately one to three years, and in
      the case of many of our newbuilding vessels for periods up to December
      2018. Our time charters provide for fixed semi-monthly payments in
      advance. We believe this strategy is effective in strong and weak dry bulk
      markets, giving us security and predictability of cashflows when we look
      at the volatility of the shipping
markets,
 
 (3)
              maintain
      high quality vessels and improve standards of operation through improved
      environmental procedures, crew training and maintenance and repair
      procedures, and
 
 (4)
              maintain
      a balance between purchasing vessels as market conditions and
      opportunities arise and maintaining prudent financial ratios (e.g.
      leverage ratio).
 
 We have
employed all of our vessels in our operating fleet on time charters. During the
nine months ended September 30, 2009, we took delivery of two newbuilding
vessels, CRESTED EAGLE and STELLAR EAGLE, which promptly entered into their
respective charters. The following table represents certain information about
the Company's revenue earning charters on its operating fleet:
   16
 
 Vessel
              Year Built
              Dwt
              Time Charter Expiration(1)
              Daily
      Time
                Charter Hire RateCardinal
      (2)
              2004
              55,362
              September
      2010 to November 2010
              $16,250Condor
              2001
              50,296
              May
      2010 to July 2010
              $22,000Falcon
              2001
              51,268
              April
      2010 to June 2010
              $39,500Griffon
              1995
              46,635
              February
      2010 to May 2010
              $9,500Harrier
              2001
              50,296
              April
      2010 to June 2010
              $13,500Hawk
      I
              2001
              50,296
              May
      2010 to August 2010
              $13,000Heron
      (3)
              2001
              52,827
              January
      2011 to May 2011
              $26,375Jaeger
      (4)
              2004
              52,248
              October
      2009 to January 2010
              $10,100Kestrel
      I
              2004
              50,326
              March
      2010 to July 2010
              $11,500Kite
      (5)
              1997
              47,195
              September
      2009 to January 2010
              $9,500Merlin
      (6)
              2001
              50,296
              December
      2010 to March 2011
              $25,000Osprey
      I
              2002
              50,206
              October
      2009 to December 2009
              $25,000Peregrine
      (7)
              2001
              50,913
              January
      2010
                Jan
      2010 to Jan 2011/Mar 2011
              $8,500
                $10,500
      (withIndex
      share)Sparrow
      (8)
              2000
              48,225
              February
      2010 to May 2010
              $10,000Tern
              2003
              50,200
              December
      2009 to March 2010
              $8,500Shrike
              2003
              53,343
              May
      2010 to August 2010
              $25,600Skua
      (9)
              2003
              53,350
              September
      2010 to November 2010
              IndexKittiwake
      (10)
              2002
              53,146
              June
      2010 to September 2010
              IndexGoldeneye
      (11)
              2002
              52,421
              May
      2010 to July 2010
              IndexWren
      (12)
              2008
              53,349
              Feb
      2012
                Feb
      2012 to Dec 2018/Apr 2019
              $24,750
                $18,000
      (withprofit
      share)Redwing
      (13)
              2007
              53,411
              August
      2010 to October 2010
              IndexWoodstar
      (14)
              2008
              53,390
              Jan
      2014
                Jan
      2014 to Dec 2018/Apr 2019
              $18,300
                $18,000
      (withprofit
      share)Crowned
      Eagle
              2008
              55,940
              September
      2009 to December 2009
              $16,000Crested
      Eagle (15)
              2009
              55,989
              December
      2009 to March 2010
              $10,500Stellar
      Eagle
              2009
              55,989
              February
      2010 to May 2010
              $12,000
  17
   (1)
                    The
      date range provided represents the earliest and latest date on which the
      charterer may redeliver the vessel to the Company upon the termination of
      the charter. The time charter hire rates presented are gross daily charter
      rates before brokerage commissions, ranging from 1.25% to 6.25%, to third
      party ship brokers.(2)
                    Upon
      conclusion of the previous charter in September 2009, the CARDINAL commenced
      a new one year charter at $16,250 per day.(3)
                    The
      charterer of the HERON has an option to extend the charter period by 11 to
      13 months at a time charter rate of $27,375 per day. The charterer has a
      second option for a further 11 to 13 months at a time charter rate of
      $28,375 per day.(4)
                    In
      December 2008, the JAEGER commenced a charter for one year at an average
      daily rate of approximately $10,100 based on a charter rate of $5,000 per
      day for the first 50 days and $11,000 per day for the balance of the year.
      Revenue recognition is based on an average daily rate of
      $10,100.(5)
                    In
      March 2009, the charterer of the KITE paid in advance for the duration of
      the charter an amount equal to the difference between the prevailing daily
      charter rate of $21,000 and a new rate of $9,500 per day. This amount has
      been recorded in Deferred Revenue in the Company's financial statements
      and has been recognized into revenue ratably until September
      2009.(6)
                    The
      daily rate for the MERLIN is $27,000 for the first year, $25,000 for the
      second year and $23,000 for the third year. Revenue recognition is based
      on an average daily rate of $25,000.(7)
                    The
      charterer of the PEREGRINE has exercised the option to extend the charter
      period by 11 to 13 months. The rate for the option period is index based
      with a minimum daily time charter rate of $10,500 and a profit share which
      is equal to 50% of the difference between the base rate and the average of
      the trailing Baltic Supramax Index for each 30 day hire
      period.(8)
                    In
      March 2009, the charterer of the SPARROW paid in advance for the duration
      of the charter an amount equal to the difference between the prevailing
      daily charter rate of $34,500 and a new rate of $10,000 per day. This
      amount has been recorded in Deferred Revenue in the Company's financial
      statements and is being recognized into revenue ratably over the charter
      period such that the daily charter rate remains effectively $34,500 per
      day. The cash payment received by the Company has been adjusted by a
      present value interest rate factor of
3%.
   18
  (9)
                    Upon
      conclusion of the previous time charter in August 2009, the SKUA commenced
      an index based one year charter with a minimum rate of $8,500 per day. The
      index rate will be an average of the trailing Baltic Supramax Index for
      each 15 day hire period. For the first 45 days of the charter the index
      rate will be a maximum of $19,000 per day.(10)
                    Upon
      conclusion of the previous time charter, in July 2009, the KITTIWAKE
      performed a short term charter at $18,000 per day and then entered into
      another short term time charter at $25,000 per day. Subsequently, in
      October 2009, the KITTIWAKE will enter into an index based charter for one
      year with a minimum rate of $8,500 per day. The index rate will be an
      average of the trailing Baltic Supramax Index for each 15 day hire period.
      For the first 45 days of the charter the index rate will be a maximum of
      $19,000 per day.(11)
                    Upon
      conclusion of the previous time charter, in September 2009, the GOLDENEYE
      commenced an index based one year charter with a minimum rate of $8,500
      per day. The index rate will be an average of the trailing Baltic Supramax
      Index for each 15 day hire period. For the first 50 days of the charter
      the index rate is $15,000 per day.(12)
                    The
      WREN has entered into a long-term charter. The charter rate until February
      2012 is $24,750 per day. Subsequently, the charter until redelivery in
      December 2018 to April 2019 will be profit share based. The base charter
      rate will be $18,000 with a 50% profit share for earned rates over $22,000
      per day. Revenue recognition for the base rate from commencement of the
      charter is based on an average daily base rate of
  $20,306.(13)
                    Upon
      conclusion of the previous time charter in August 2009, the REDWING
      commenced an index based one year charter with a minimum rate of $8,500
      per day. The index rate will be an average of the trailing Baltic Supramax
      Index for each 15 day hire period. For the first 45 days of the charter
      the index rate will be a maximum of $19,000 per day.(14)
                    The
      WOODSTAR has entered into a long-term charter. The charter rate until
      January 2014 is $18,300 per day. Subsequently, the charter until
      redelivery in December 2018 to April 2019 will be profit share based. The
      base charter rate will be $18,000 with a 50% profit share for earned rates
      over $22,000 per day. Revenue recognition for the base rate from
      commencement of the charter is based on an average daily base rate of
      $18,152.(15)
                    The
      charterer of the CRESTED EAGLE has an option to extend the charter period
      by 11 to 13 months at a base time charter rate of $11,500 plus 50% of the
      difference between the base rate and the BSI time charter average
      (provided the BSI TC average is greater than the base rate). The profit
      share to be calculated each month is based on the trailing BSI TC average
      for the month.
 The following table, as of September
30, 2009, represents certain information about the Company's newbuilding vessels
being constructed and their employment upon delivery:
 
 Vessel
              Dwt
              Year Built
-
                Expected Delivery(1)
              Time Charter Employment
      Expiration(2)
              Daily Time Charter Hire Rate(3)
              Profit ShareBittern (4)
              58,000
              Oct
      2009
              Dec
      2014
              $18,850
              —Dec
      2014 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Canary
              58,000
              2009Q4
              Jan
      2015
              $18,850
              —Jan
      2015 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Thrasher
              53,100
              2009Q4
              Feb
      2016
              $18,400
              —Feb
      2016 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Crane
              58,000
              2010Q1
              Feb
      2015
              $18,850
              —Feb
      2015 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Avocet
              53,100
              2010Q1
              Mar
      2016
              $18,400
              —Mar
      2016 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Egret (5)
              58,000
              2010Q1
              Sep
      2012 to Jan 2013
              $17,650
              50%
      over $20,000Golden Eagle
              56,000
              2010Q1
              Charter
      Free
              —
              —Imperial Eagle
              56,000
              2010Q1
              Charter
      Free
              —
              —Gannet (5)
              58,000
              2010Q1
              Oct
      2012 to Feb 2013
              $17,650
              50%
      over $20,000Grebe(5)
              58,000
              2010Q2
              Nov
      2012 to Mar 2013
              $17,650
              50%
      over $20,000Ibis(5)
              58,000
              2010Q2
              Dec
      2012 to Apr 2013
              $17,650
              50%
      over $20,000Jay
              58,000
              2010Q2
              Sep
      2015
              $18,500
              50%
      over $21,500Sep
      2015 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Kingfisher
              58,000
              2010Q3
              Oct
      2015
              $18,500
              50%
      over $21,500Oct
      2015 to Dec 2018/Apr 2019
              $18,000
              50%
      over $22,000Martin
              58,000
              2010Q3
              Dec
      2016 to Dec 2017
              $18,400
              —Thrush
              53,100
              2010Q4
              Charter
      Free
              —
              —Nighthawk
              58,000
              2011Q1
              Sep
      2017 to Sep 2018
              $18,400
              —Oriole
              58,000
              2011Q3
              Jan
      2018 to Jan 2019
              $18,400
              —Owl
              58,000
              2011Q3
              Feb
      2018 to Feb 2019
              $18,400
              —Petrel (5)
              58,000
              2011Q4
              Jun
      2014 to Oct 2014
              $17,650
              50%
      over $20,000Puffin (5)
              58,000
              2011Q4
              Jul
      2014 to Nov 2014
              $17,650
              50%
      over $20,000Roadrunner (5)
              58,000
              2011Q4
              Aug
      2014 to Dec 2014
              $17,650
              50%
      over $20,000Sandpiper (5)
              58,000
              2011Q4
              Sep
      2014 to Jan 2015
              $17,650
              50%
      over $20,000 19
  CONVERTED INTO OPTIONSCernicalo (6,7)
              58,000
              2011Q1
              Charter
      Free
              —
              —Fulmar (6,7)
              58,000
              2011Q3
              Charter
      Free
              —
              —Besra
      (6,7)
              58,000
              2011Q4
              Charter
      Free
              —
              —Goshawk (6,7)
              58,000
              2011Q4
              Charter
      Free
              —
              —Snipe (7)
              58,000
              2012Q1
              Charter
      Free
              —
              —Swift (7)
              58,000
              2012Q1
              Charter
      Free
              —
              —Raptor (7)
              58,000
              2012Q2
              Charter
      Free
              —
              —Saker (7)
              58,000
              2012Q2
              Charter
      Free
              —
              —
  (1)
                Vessel
      build and delivery dates are estimates based on guidance received from
      shipyard.(2)
                The
      date range represents the earliest and latest date on which the charterer
      may redeliver the vessel to the Company upon the termination of the
      charter.(3)
                The
      time charter hire rate presented are gross daily charter rates before
      brokerage commissions ranging from 1.25% to 6.25% to third party ship
      brokers.(4)
                The
      BITTERN was delivered in October 2009.(5)
                The
      charterer has an option to extend the charter by 2 periods of 11 to 13
      months each.(6)
                Options
      for construction declared on December 27, 2007.(7)
                Firm
      contracts converted to options in December
2008.
 
 Fleet
Management
 
 The management of our fleet includes
the following functions:
 
 ·
              Strategic management.
      We locate, obtain financing and insurance for, purchase and sell
      vessels.
 ·
              Commercial management.
      We obtain employment for our vessels and manage our relationships with
      charterers.
 
 20
 
 
 ·
              Technical management.
      The technical manager performs day-to-day operations and maintenance of
      our vessels.
 
 Commercial
      and Strategic Management
 
 We carry
out the commercial and strategic management of our fleet through our wholly
owned subsidiary, Eagle
Shipping International (USA) LLC, a Republic of the Marshall Islands limited
liability company that maintains its principal executive offices in New York City. We currently have
a total of thirty shore based personnel, including our senior management team
and our office staff, who either directly or through this subsidiary, provides
the following services:
 
 •      commercial
operations and technical supervision;
 •      safety
monitoring;
 •      vessel
acquisition; and
 •      financial,
accounting and information technology services.
 
 Technical
      Management
 
 The technical management of our fleet
is provided by our unaffiliated third party technical managers, V. Ships,
Wilhelmsen Ship Management, and Anglo Eastern International Ltd., that we
believe are three of the world's largest providers of independent ship
management and related services. In conjunction with our management, V. Ships,
Wilhelmsen, and Anglo Eastern International Ltd., we have established an
operating expense budget for each vessel. All deviations from the budgeted
amounts are for our account. We review the performance of our technical managers
on an ongoing basis and may add or change technical managers. In the third
quarter of 2009, the Company set up its own in-house technical management
capability in order to establish a vessel management bench-mark with its
external technical managers.
 
 Our third-party technical managers are
paid a fixed management fee for each vessel in our operating fleet for the
technical management services provided. For the three-month periods ended
September 30, 2009 and 2008, the technical management fee averaged $8,983 and
$8,913 per vessel per month, respectively. For the nine-month periods ended
September 30, 2009 and 2008, the technical management fee averaged $9,017 and
$9,049 per vessel per month, respectively. Management fees paid to our
third-party technical managers are recorded under Vessel Expenses.
 
 Value
of Assets and Cash Requirements
 
 The replacement costs of comparable new
vessels may be above or below the book value of our fleet. The market value of
our fleet may be below book value when market conditions are weak and exceed
book value when markets conditions are strong. Customary with industry practice,
we may consider asset redeployment which at times may include the sale of
vessels at less than their book value.
 
 The Company's results of operations and
cash flow may be significantly affected by future charter markets.
 
 Critical
Accounting Policies
 
 The discussion and analysis of our
financial condition and results of operations is based upon our interim,
unaudited, consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States, and the rules and
regulations of the SEC which apply to interim financial statements. The
preparation of those financial statements requires us to make estimates and
judgments that affect the reported amounts of assets and liabilities, revenues
and expenses and related disclosure of contingent assets and liabilities at the
date of our financial statements. Actual results may differ from these estimates
under different assumptions and conditions.
 
 21
 
 
 Critical accounting policies are those
that reflect significant judgments of uncertainties and potentially result in
materially different results under different assumptions and conditions. As the
discussion and analysis of our financial condition and results of operations is
based upon our interim, unaudited, consolidated financial statements, they do
not include all of the information on critical accounting policies normally
included in consolidated financial statements. Accordingly, a detailed
description of these critical accounting policies should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Reports on Form 10-K. There have been no material changes from
the "Critical Accounting Policies" previously disclosed in our Form 10-K for the
year ended December 31, 2008.
 
 Results
of Operations for the
three month and nine-month periods ended September 30, 2009 and
2008:
 
 Fleet
Data
 
 We
believe that the measures for analyzing future trends in our results of
operations consist of the following:
 
 Three
      Months Ended
              Nine
      Months EndedSeptember
      30, 2009
              September
      30, 2008
              September
      30, 2009
              September
      30, 2008Ownership
      Days
              2,300
              1,866
              6,713
              5,160Available
      Days
              2,271
              1,862
              6,657
              5,117Operating
      Days
              2,264
              1,845
              6,634
              5,094Fleet
      Utilization
              99.7%
              99.1%
              99.7%
              99.6%
 
 •           Ownership
days:  We define ownership days as the aggregate number of days
in a period during which each vessel in our fleet has been owned by us.
Ownership days are an indicator of the size of our fleet over a period and
affect both the amount of revenues and the amount of expenses that we record
during a period.  Ownership days for the three month period ended
September 30, 2009, increased 23% from the corresponding period in 2008 as we
operated 25 vessels in the third quarter of 2009 compared to 21 vessels in the
corresponding period in 2008.
 
 •           Available
days:  We define available days as the number of our ownership
days less the aggregate number of days that our vessels are off-hire due to
vessel familiarization upon acquisition, scheduled repairs or repairs under
guarantee, vessel upgrades or special surveys and the aggregate amount of time
that we spend positioning our vessels. The shipping industry uses available days
to measure the number of days in a period during which vessels should be capable
of generating revenues.  During the three and nine-month periods ended
September 30, 2009, the Company drydocked three and five vessels, respectively.
During the nine month period ended September 30, 2009, the Company also incurred
a total of one day of off-hire for vessel familiarization upon delivery of the
Crested Eagle and Stellar
Eagle which joined the
fleet in January and March 2009, respectively.
 
 •           Operating
days:  We define operating days as the number of our available
days in a period less the aggregate number of days that our vessels are off-hire
due to any reason, including unforeseen circumstances. The shipping industry
uses operating days to measure the aggregate number of days in a period during
which vessels actually generate revenues.
 
 •           Fleet
utilization:  We calculate fleet utilization by dividing the
number of our operating days during a period by the number of our available days
during the period. The shipping industry uses fleet utilization to measure a
company's efficiency in finding suitable employment for its vessels and
minimizing the amount of days that its vessels are off-hire for reasons other
than scheduled repairs or repairs under guarantee, vessel upgrades, special
surveys or vessel positioning. Our fleet continues to perform at high
utilization rates.
 
 Revenues
 
 All of our vessels are employed on time
charters. Our time charter equivalent ("TCE") rate is equal to the time charter
rate. As is common in the shipping industry, we pay commissions ranging from
1.25% to 6.25% of the total daily charter hire rate of each charter to
unaffiliated ship brokers and in-house brokers associated with the charterers,
depending on the number of brokers involved with arranging the
charter.
 
 22
 
 
 Gross time charter revenues in the
quarter ended September 30, 2009 were $43,688,025 compared to $54,169,749
recorded in the comparable quarter in 2008. Gross revenues declined due to
prevailing market conditions. Vessels with legacy time charters saw lower rates
upon charter renewals. Gross revenues recorded in the quarter ended September
30, 2009 and 2008, include an amount of $645,098 and $264,053, respectively,
relating to the non-cash amortization of fair value below contract value of time
charters acquired. Brokerage commissions incurred on revenues earned in the
quarter ended September 30, 2009 and 2008 were $2,136,220 and $2,616,517,
respectively. Net revenues during the quarter ended September 30, 2009, were
$41,551,805 compared to $51,553,232 in the quarter ended September 30,
2008.
 
 Gross time charter revenues for the
nine-month period ended September 30, 2009 were $158,243,472, an increase of 20%
from $131,951,183 recorded in the comparable period in 2008, primarily due to
the operation of a larger fleet and higher rates on legacy time charters, net of
lower rates on charter renewals. Gross revenues recorded in the 2009 and 2008
period include an amount of $1,942,278 and $264,053, respectively, relating to
the non-cash amortization of fair value below contract value of time charters
acquired. Brokerage commissions incurred on revenues earned in the nine-month
periods ended September 30, 2009 and 2008 were $7,692,663 and $6,488,735,
respectively. Net revenues during the nine-month period ended September 30,
2009, were $150,550,809 compared to $125,462,448 in the comparable period in
2008.
  Vessel
Expenses
 
 Vessel expenses for the three month
period ended September 30, 2009, were $11,493,889 compared to $9,344,348 in the
comparable quarter in 2008. The increase in vessel expense is attributable to a
larger fleet size in operation, increases in vessel crew, insurance costs, the
timing of purchases of consumable stores and spares. Vessel expenses for the
three-month period ended September 30, 2009, included $10,814,631 in vessel
operating costs and $679,259 in technical management fees. Vessel expenses for
the comparable period in 2008 included $8,792,573 in vessel operating costs and
$551,775 in technical management fees.
 
 Vessel
expenses for the nine-month period ended September 30, 2009 were $37,498,893
compared to $24,932,088 in the comparable nine-month period ended September 30,
2008. The increase in vessel expense is attributable to a larger fleet size in
operation for the nine-month period of 2009 and increases in vessel crew,
insurance costs, the timing of purchases of consumable stores and spares. Vessel
expenses for the nine-month period ended September 30, 2009 included $35,511,143
in vessel operating costs and $1,987,750 in technical management fees. Vessel
expenses for the nine-month period ended September 30, 2008, included
$23,343,511 in vessel operating costs and $1,588,577 in technical management
fees.
 
 Vessel
operating expenses include crew wages and related costs, the cost of insurance,
expenses relating to repairs and maintenance, the cost of spares and consumable
stores and related inventory, tonnage taxes, pre-operating costs associated with
the delivery of acquired vessels including providing the newly acquired vessels
with initial provisions and stores, other miscellaneous expenses, and technical
management fees paid to our third party managers.
 
 Our
vessel expenses will increase with the enlargement of our fleet. Other factors
beyond our control, some of which may affect the shipping industry in general,
may also cause these expenses to increase, including, for instance, developments
relating to market prices for crew, insurance and petroleum-based lubricants and
supplies.
 
 Depreciation
and Amortization
 
 For the
three-month periods ended September 30, 2009 and 2008, total depreciation and
amortization expense were $11,094,238 and $8,991,877, respectively. Total
depreciation and amortization expense for the three-month period ended September
30, 2009 includes $10,404,514 of vessel depreciation and other fixed assets
amortization, and $689,724 relating to the amortization of deferred drydocking
costs. Comparable amounts for the three-month period ended September 30, 2008
were $8,338,839 of vessel depreciation and $653,038 of amortization of deferred
drydocking costs. The increase in depreciation expense is attributable to a
larger fleet size in operation during the three-month period in 2009 compared to
2008.
 
 23
 
 
 For the
nine-month periods ended September 30, 2009 and 2008, total depreciation and
amortization expense were $32,328,402 and $23,718,898, respectively. Total
depreciation and amortization expense for the nine-month period ended September
30, 2009 includes $30,424,426 of vessel depreciation and other assets
amortization, and $1,903,976 relating to the amortization of deferred drydocking
costs. Comparable amounts for the nine-month period ended September 30, 2008
were $21,816,618 of vessel depreciation and $1,902,280 of amortization of
deferred drydocking costs.
 
 The cost of our vessels is depreciated
on a straight-line basis over the expected useful life of each vessel.
Depreciation is based on the cost of the vessel less its estimated residual
value. We estimate the useful life of our vessels to be 28 years from the date
of initial delivery from the shipyard to the original owner. Furthermore, we
estimate the residual values of our vessels to be $150 per lightweight ton,
which we believe is common in the dry bulk shipping industry. Our depreciation
charges will increase as our fleet is enlarged. Drydocking relates to our
regularly scheduled maintenance program necessary to preserve the quality of our
vessels as well as to comply with international shipping standards and
environmental laws and regulations. Management anticipates that vessels are to
be drydocked every two and a half years and, accordingly, these expenses are
deferred and amortized over that period.
 
 Amortization
of deferred financing costs which relate to the vessels on the water is included
in interest expense. These financing costs relate to costs associated with our
revolving credit facility and these are amortized over the life of the facility.
For the three-month periods ended September 30, 2009 and 2008, the amortization
of deferred financing costs allocated to the vessels on the water was $372,214
and $62,287, respectively. For the nine-month periods ended September 30, 2009
and 2008, the amortization of deferred financing costs allocated to the vessels
on the water was $881,728 and $185,508, respectively.
 
 General
and Administrative Expenses
 
 Our general and administrative expenses
include onshore vessel administration related expenses such as legal and
professional expenses and administrative and other expenses including payroll
and expenses relating to our executive officers and office staff, office rent
and expenses, directors fees, and directors and officers insurance. General and
administrative expenses also include non-cash compensation
expenses.
 
 General
and administrative expenses for the three month periods ended September 30, 2009
and 2008 were $7,839,942 and $6,666,748, respectively. These general and
administrative expenses include a non-cash compensation component of $3,345,433
and $3,194,509, respectively. The increase in general and administrative
expenses for the three-month period ended September 30, 2009, is primarily
attributable to higher administrative costs associated with operating a larger
fleet and the extensive newbuilding program and accruals of compensation expense
(performance-based compensation and amortization of restricted stock awards and
stock option compensation).
 
 General
and administrative expenses for the nine-month periods ended September 30, 2009
and 2008 were $25,784,155 and $16,478,840, respectively. These general and
administrative expenses include a non-cash compensation component of $10,587,150
and $7,766,452, respectively. The increase in general and administrative
expenses for the nine-month period ended September 30, 2009, is primarily
attributable to higher administrative costs associated with operating a larger
fleet and the extensive newbuilding program and accruals of compensation expense
(performance-based compensation and amortization of restricted stock awards and
stock option compensation).
 
 Capitalized Interest
 
 At
September 30, 2009, we had contracts for the construction of 22 newbuilding
vessels which are expected to be delivered through 2011. Interest costs on
borrowings used to fund the Company's newbuilding program are capitalized as
part of the cost of the newbuilding vessels until the vessels are
delivered.
 
 24
 
 
 For the three-month period ended September
30, 2009, capitalized interest amounted to $7,382,920 ($6,804,261 in interest
and $578,659 in amortization of deferred financing costs) and this amount has
been recorded and included in Advances for Vessel Construction in the financial
statements. For the corresponding three months period in 2008, capitalized
interest amounted to$6,933,818 ($6,499,042 in
interest and $434,776 in amortization of deferred financing costs).
 
 For the nine-month period ended September
30, 2009, capitalized interest amounted to $20,895,336 ($19,415,279 in interest
and $1,480,057 in amortization of deferred financing costs) and this amount has
been recorded and included in Advances for Vessel Construction in the financial
statements. For the corresponding nine months period in 2008, capitalized
interest amounted to$19,271,348 ($18,002,728
in interest and $1,268,620 in amortization of deferred financing
costs).
 
 EBITDA
 
 EBITDA
represents operating earnings before extraordinary items, depreciation and
amortization, interest expense, and income taxes, if any. EBITDA is included
because it is used by certain investors to measure a company's financial
performance. EBITDA is not an item recognized by GAAP and should not be
considered a substitute for net income, cash flow from operating activities and
other operations or cash flow statement data prepared in accordance with
accounting principles generally accepted in the United States or as a measure of
profitability or liquidity. EBITDA is presented to provide additional
information with respect to the Company's ability to satisfy its obligations
including debt service, capital expenditures, and working capital requirements.
While EBITDA is frequently used as a measure of operating results and the
ability to meet debt service requirements, the definition of EBITDA used here
may not be comparable to that used by other companies due to differences in
methods of calculation.
 
 Our
revolving credit facility permits us to pay dividends in amounts up to our
cumulative free cash flows which is our earnings before extraordinary or
exceptional items, interest, taxes, depreciation and amortization (Credit
Agreement EBITDA), less the aggregate amount of interest incurred and net
amounts payable under interest rate hedging agreements during the relevant
period and an agreed upon reserve for dry-docking. Therefore, we believe that
this non-GAAP measure is important for our investors as it reflects our ability
to pay dividends. The following table is a reconciliation of net income, as
reflected in the consolidated statements of operations, to the Credit Agreement
EBITDA:
 
 Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008
              
              
              September
      30, 2009
              
              
              September
      30, 2008Net
      Income
              
              $
              512,261
              
              
              $
              23,221,617
              
              
              $
              31,096,577
              
              
              $
              52,473,557Interest
      Expense
              
              
              7,294,151
              
              
              
              3,714,458
              
              
              
              20,596,321
              
              
              
              10,513,928Depreciation
      and Amortization
              
              
              11,094,238
              
              
              
              8,991,877
              
              
              
              32,328,402
              
              
              
              23,718,898Amortization
      of fair value below contract value of time charters
    acquired
              
              
              (645,098
              )
              
              
              (264,053
              )
              
              
              (1,942,278
              )
              
              
              (264,053
              )EBITDA
              
              
              18,255,552
              
              
              
              35,663,899
              
              
              
              82,079,022
              
              
              
              86,442,330Adjustments
      for Exceptional Items:Write-off
      of Financing Fees (1)
              
              
              3,383,289
              
              
              
              —
              
              
              
              3,383,289
              
              
              
              —Non-cash
      Compensation Expense (2)
              
              
              3,345,433
              
              
              
              3,194,509
              
              
              
              10,587,150
              
              
              
              7,766,452Credit
      Agreement EBITDA
              
              $
              24,984,274
              
              
              $
              38,858,408
              
              
              $
              96,049,461
              
              
              $
              94,208,782
 
 (1)One time charge (see Note 4 to
      the financial statements).
                (2)Stock
      based compensation related to stock options, restricted stock
      units.
 
 
 25
 
 Effects
of Inflation
 
 We
do not believe that inflation has had or is likely, in the foreseeable future,
to have a significant impact on vessel operating expenses, drydocking expenses
or general and administrative expenses.
 
 Liquidity
and Capital Resources
 
 Net cash
provided by operating activities during the nine month periods ended September
30, 2009 and 2008, was $80,594,642 and $81,593,271, respectively. The change was
primarily due to the operation of a larger fleet and lower rates on charter
renewals, offset by higher rates on legacy time charters.
 
 Net cash
used in investing activities during the nine month period ended September 30,
2009, was $145,857,288, compared to $273,887,573 during the corresponding nine
month period ended September 30, 2008. Investing activities during the nine
month period ended September 30, 2009 related primarily to making progress
payments for the newbuilding vessels and incurring related vessel construction
expenses. Investing activities during the nine month period ended September 30,
2008, included an amount of $146,688,116 spent for acquisition of two
second-hand vessels and advancing a total of $127,078,734 for the newbuilding
vessel construction program.
 
 Net cash
provided by financing activities during the nine month period ended September
30, 2009, was $138,598,251, compared to net cash provided by financing
activities of $72,374,980 during the corresponding nine month period ended
September 30, 2008. During the nine month period ended September 30, 2009, we
received $97,291,046 in net proceeds from distribution of common shares of the
Company, borrowed $95,770,000 from our revolving credit facility, repaid
$48,645,523 to our lenders under the terms of the amended debt agreement, and
incurred $4,330,801 in financing costs relating to our debt agreements.
Financing activities during the nine month period ended September 30, 2008,
primarily involved borrowings of $144,724,967 and payment of $70,149,063 in
dividends.
  As of
September 30, 2009, our cash balance was $82,544,467, compared to a cash balance
of $9,208,862 at December 31, 2008. In addition, $12,500,000 in cash deposits
are maintained with our lender for loan compliance purposes and this amount is
recorded in Restricted Cash in our financial statements as of September 30,
2009. Also recorded in Restricted Cash is an amount of $276,056, which is
collateralizing letters of credit relating to our office leases.
 
 In December 2008, our revolving credit
facility was amended to $1,350,000,000 (See section in the Company's 2008 Annual
Report on Form 10-K entitled "Revolving Credit Facility" for a description of
the facility and its amendments). On August 4, 2009, the Company entered into a
third Amendatory Agreement to its revolving credit facility dated October 19,
2007. Among other things, the credit facility reduces the amount of the credit
facility to $1,200,000,000 with maturity in July 2014. The agreement also
modifies the minimum security covenant, the minimum net worth covenant, and the
minimum interest coverage ratio covenant, until such time as the Company can
comply with the original covenants for two consecutive accounting periods. In
the interim, the measurement of the three covenants at the end of each
accounting period has been amended as follows: (a) The minimum security covenant
has been suspended, (b) the minimum net worth covenant has been amended to a
threshold minimum of $400 million plus an amount equal to fifty percent of any
equity received by the Company, with the determination of net worth to utilize
book value of vessel assets as stated in the financial statements rather than
the market value, and (c) until reinstatement of the original minimum security
and net worth covenants, for 24 months from July 1, 2009 to June 30, 2011, at
each accounting period, the Company's cumulative EBITDA (EBITDA as defined in
the credit agreement) will at all times be not less than 120% of the cumulative
loan interest incurred on a trailing four quarter basis, and for each accounting
period after June 30, 2011, the Company's cumulative EBITDA will at all times be
not less than 130% of the cumulative loan interest incurred on a trailing four
quarter basis. The amendment also requires, that until the Company is in
compliance with the original covenants for two consecutive accounting periods,
the Company will use half the net proceeds from any equity issuance to reduce
the facility, including approximately $48.6 million from the equity raised
during the second quarter which was paid during the third quarter. These
payments reduce the available amount of the credit facility to $1,151,354,477.
The Company will continue to be able to borrow the undrawn portion of the
facility and the amounts borrowed will bear interest at LIBOR plus 2.50%.
Undrawn portions of the facility will bear a commitment fee of 0.7%. The
facility is available in full until July 2012 when availability will begin to
decline in four semi-annual reductions of $53,969,741 with a full repayment at
maturity.
 
 26
 
 
 Under the
terms of the third amendment of the revolving credit facility, among other
things, we will maintain with the lender an amount not less than the greater of
$500,000 per delivered vessel or an amount equal to any reductions in the total
commitments scheduled to be effected within the next nine months less the amount
of the then unutilized facility.
 
 As of
September 30, 2009, borrowings under this facility aggregated $836,725,880. The
facility also provides us with the ability to borrow up to $20,000,000 for
working capital purposes. We were in compliance with all of the covenants
contained in our debt agreements as of September 30, 2009. We anticipate that
our current financial resources, together with cash generated from operations
and, if necessary, borrowings under our revolving credit facility will be
sufficient to fund the operations of our fleet, including our working capital
requirements, for the foreseeable future. We will rely on operating cash flows
as well as our revolving credit facility and possible additional equity and debt
financing alternatives to fund our long term capital requirements for vessel
construction and implement future growth plans.
 
 Our loan
agreements for our borrowings are secured by liens on our vessels and contain
various financial covenants. The covenants relate to our financial position,
operating performance and liquidity. The market value of drybulk vessels is
sensitive, among other things, to changes in the drybulk charter market. The
recent general decline in the drybulk carrier charter market has resulted in
lower charter rates for vessels in the drybulk market. The decline in charter
rates in the drybulk market coupled with the prevailing difficulty in obtaining
financing for vessel purchases have adversely affected drybulk vessel values. A
continuation of these conditions, could lead to a significant decline in the
fair market values of our vessels. The recent developments in the credit markets
and related impact on the drybulk charter market have also resulted in
additional risks. The occurrence of one or more of these risk factors could
adversely affect our results of operations or financial condition. Please refer
to the section entitled "Risk Factors" in Part II of this document which should
be read in conjunction with the risk factors included in the Company's 2008
Annual Report on Form 10-K.
 
 Dividends
 
 Our
amended revolving credit facility permits us to pay quarterly dividends in
amounts up to cumulative free cash flows which is our quarterly earnings before
extraordinary or exceptional items, interest, taxes, depreciation and
amortization (Credit Agreement EBITDA), less the aggregate amount of interest
incurred and net amounts payable under interest rate hedging agreements during
the relevant period and an agreed upon reserve for drydocking for the period,
provided that the company is in compliance with its loan covenants. Depending on
market conditions in the dry bulk shipping industry and acquisition
opportunities that may arise, we may be required to obtain additional debt or
equity financing which could affect our dividend policy. In this connection, the
drybulk market has recently declined substantially. In December 2008, commencing
with the fourth quarter of 2008, the Company's board of
directors  determined to suspend the payment of dividends to
stockholders in order to increase cash flow, optimize financial flexibility and
enhance internal growth.  In the future, the declaration and payment
of dividends, if any, will always be subject to the discretion of the board of
directors, restrictions contained in the amended credit facility and the
requirements of Marshall
Islands law. The timing and amount of any dividends declared will depend
on, among other things, the Company's earnings, financial condition and cash
requirements and availability, the ability to obtain debt and equity financing
on acceptable terms as contemplated by the Company's growth strategy, the terms
of its outstanding indebtedness and the ability of the Company's subsidiaries to
distribute funds to it.
 
 The
Company did not make any dividend payments in the first three quarters of 2009.
In the comparable period in 2008, the Company paid a cash dividend of $0.50 per
share for each of the first three quarters of 2008. The aggregate amount of this
cash dividend was $70,149,063.
  Contractual
Obligations
 
 The following table sets forth our
expected contractual obligations and their maturity dates as of September 30,
2009:
 
 27
 
 (in
      thousands of U.S. dollars)
              
              Within
                One
      Year
              
              
              One
      to
                Three
      Years
              
              
              Three
      toFive Years
              
              
              More
      than
                Five years
              
              
              TotalVessels
      (1)
              
              $
              308,978
              
              
              $
              198,868
              
              
              
              —
              
              
              
              —
              
              
              $
              507,846Bank
      Loans
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              836,726
              
              
              
              836,726Interest
      and borrowing fees (2)
              
              
              57,238
              
              
              
              114,632
              
              
              
              104,909
              
              
              
              —
              
              
              
              276,779Office
      lease (3)
              
              
              649
              
              
              
              1,577
              
              
              
              1,670
              
              
              
              3,062
              
              
              
              6,958Total
              
              $
              366,865
              
              
              $
              315,077
              
              
              $
              106,579
              
              
              $
              839,788
              
              
              $
              1,628,309
 
 (1)
              The
      balance of the contract price in US dollars for the 22 newbuilding vessels
      which are to be constructed and delivered between 2009 and 2011. Two of
      the newbuilding vessels are priced in Japanese
  yen.
 (2)
              The
      Company is a party to floating-to-fixed interest rate swaps covering
      aggregate notional amount of $771,529,273. Interest and borrowing fees
      includes capitalized interest for the newbuilding
  vessels.
 (3)
              Remainder
      of the lease on the office space which we
  occupy.
 
 Capital
Expenditures
 
 Our
capital expenditures relate to the purchase of vessels and capital improvements
to our vessels which are expected to enhance the revenue earning capabilities
and safety of these vessels.
 
 We make
capital expenditures from time to time in connection with our vessel
acquisitions. As of September 30, 2009, our fleet consists of 25 vessels which
are currently operational and 22 newbuilding vessels which have been contracted
for construction.
 
 In
addition to acquisitions that we may undertake in future periods, the Company's
other major capital expenditures include funding the Company's maintenance
program of regularly scheduled drydocking necessary to preserve the quality of
our vessels as well as to comply with international shipping standards and
environmental laws and regulations. Although the Company has some flexibility
regarding the timing of its dry docking, the costs are relatively predictable.
Management anticipates that vessels are to be drydocked every two and a half
years. Funding of these requirements is anticipated to be met with cash from
operations. We anticipate that this process of recertification will require us
to reposition these vessels from a discharge port to shipyard facilities, which
will reduce our available days and operating days during that
period.
 
 Drydocking
costs incurred are amortized to expense on a straight-line basis over the period
through the date the next drydocking for those vessels are scheduled to occur.
Three vessels were drydocked in the three months ended September 30, 2009. The
following table represents certain information about the estimated costs for
anticipated vessel drydockings in the next four quarters, along with the
anticipated off-hire days:
 
 Quarter Ending
              Off-hire Days(1)
              Projected Costs(2)December
      31, 2009
              44
              $1.00
      millionMarch
      31, 2010
              44
              $1.00
      millionJune
      30, 2010
              44
              $1.00
      millionSeptember
      30, 2010
              44
              $1.00
      million(1)Actual
      duration of drydocking will vary based on the condition of the vessel,
      yard schedules and other factors.
                (2)Actual
      costs will vary based on various factors, including where the drydockings
      are actually performed.
 
 
 Off-balance
Sheet Arrangements
 
 We do not have any off-balance sheet
arrangements.
 
 28
 
 
 
 Item 3.Quantitative and
Qualitative Disclosures about Market Risk
  Interest
Rate Risk
 
 There
have been no material changes from the "Interest Rate Risk" previously disclosed
in our Form 10-K for the year ended December 31, 2008.
 
 Currency
and Exchange Rates
 
 There
have been no material changes from the "Currency and Exchange Rates" risk
previously disclosed in our Form 10-K for the year ended December 31,
2008.
  Item 4.Controls and
Procedures
  Disclosure
Controls and Procedures
  Our
management, including our Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended, (the "Exchange Act")) as of the end of the period covered by
this report. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, our
disclosure controls and procedures are effective.
  Internal Control
Over Financial Reporting
  There
have been no changes in our internal control over financial reporting during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
 
 
 29
 
 PART
II: OTHER INFORMATION
 
 Item
1 - Legal Proceedings
 
 We are
not aware of any legal proceedings or claims to which we or our subsidiaries are
party or of which our property is subject. From time to time in the future, we
may be subject to legal proceedings and claims in the ordinary course of
business, principally personal injury and property casualty claims. Those
claims, even if lacking merit, could result in the expenditure by us of
significant financial and managerial resources.
 
 Item
1A – Risk Factors
 
 There
have been no material changes from the "Risk Factors" previously disclosed in
our Form 10-K for the year ended December 31, 2008.
 
 Item
2 – Unregistered Sales of Equity Securities and Use of Proceeds
 
 None.
 
 Item
3 - Defaults Upon Senior Securities
 
 None.
  Item
4 - Submission of Matters to a Vote of Security Holders
  None.
  Item 5 - Other
Information
 
 None.
 
 Item
6 – Exhibits
 
 EXHIBIT
INDEX
 
 3.1
                Amended
      and Restated Articles of Incorporation of the Company 13.2
                Amended
      and Restated Bylaws of the Company 13.3
                Certificate
      of Designation, Preferences and Rights of Series A Junior Participating
      Preferred Stock  24.1
                Form
      of Share Certificate of the Company 14.2
                Form
      of Senior Indenture 34.3
                Form
      of Subordinated Indenture 34.4
                Rights
      Agreement 210.1
                Amended
      and Restated Employment Agreement of Mr. Sophocles N. Zoullas, dated as of
      September 19, 2008 4,610.2
                Amendatory
      Agreement, dated as of July 3, 2008, among the Company and certain of its
      subsidiaries and the banks and financial institutions party thereto and
      the Royal Bank of Scotland plc, as mandated lead arranger 5
   30
  10.3
                Second
      Amendatory Agreement, dated as of December 17, 2008, among the Company and
      certain of its subsidiaries and the banks and financial institutions party
      thereto and the Royal Bank of Scotland plc, as mandated lead arranger
      710.4
                Third
      Amendatory Agreement, dated as of August 4, 2009, among the Company and
      certain of its subsidiaries and the banks and financial institutions party
      thereto and the Royal Bank of Scotland plc, as mandated lead
      arranger31.1
                Rule
      13a-14(d) / 15d-14(a) Certification of CEO31.2
                Rule
      13a-14(d) / 15d-14(a) Certification of CFO32.1
                Section
      1350 Certification of CEO32.2
                Section
      1350 Certification of CFO
 
 1Incorporated by
reference to Amendment No.4 to the Company's Registration Statement on Form S-1,
Registration No. 333-123817, filed on September 22, 2005.
  2Incorporated by
reference to the Company's Registration Statement on Form 8-A filed on November
13, 2007.
  3Incorporated by
reference to the Company's Registration Statement on Form S-3, Registration No.
333-139745,  filed on December 29, 2007.
  4Incorporated by
reference to the Company's Current Report on Form 8-K filed on September 20,
2008.
  5Incorporated by
reference to the Company's Current Report on Form 8-K filed on July 7,
2008.
  6Management
contract or compensating plan.
  7Incorporated by
reference to Exhibit 4.9 to the Company's registration statement on Form
S-3POSASR, Registration No. 333-148417 filed on March 2,
2009.
   SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 
 
 
 EAGLE
BULK SHIPPING INC.
 
 By:    /s/
Sophocles N. Zoullas
 --------------------------------------------------------------------------------
 Sophocles
N. Zoullas
 Chairman
of the Board and
 Chief
Executive Officer
 Date:November 6,
2009
 
 By:    /s/
Alan S. Ginsberg
 --------------------------------------------------------------------------------
 Alan S.
Ginsberg
 Chief
Financial Officer
 and
Principal Financial Officer
 Date: November 6,
2009
    SK 25083 0001
1044632
 31