UNITED
      STATESSECURITIES
      AND EXCHANGE COMMISSIONWASHINGTON,
      DC 20549FORM
      20-F





oREGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934





OR





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




For
the fiscal year ended December 31, 2008





OR





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




For the
transition period
from              to





OR





o SHELL
COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


Date of
event requiring this shell company
report. . . . . . . . . . . . . . . .





Commission
file number 001-32520





ARIES MARITIME TRANSPORT
LIMITED


(Exact name
of Registrant as specified in its charter)





Aries Maritime Transport
Limited


(Translation
of Registrant's name into English)





Bermuda


(Jurisdiction
of incorporation or organization)





18 Zerva
Nap., Glyfada, 166 75, Greece


(Address of
principal executive offices)





Mr. Jeffrey Owen
Parry


Tel:  + 30 210 898
3787, Fax: + 30 210 898 3788


E-mail:
jparry@ariesmaritime.com


(Name,
Telephone, E-mail and/or Facsimile number and Address of


Company
Contact Person)





Securities
registered or to be registered pursuant to Section 12(b) of the
Act:





Title of each class
                
                Name of each exchange on which
      registeredCommon
      stock, $0.01 par value
                
                Nasdaq
      Global Market





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





Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None






i





Indicate the
number of outstanding shares of each of the issuer's classes of capital or
common stock as of the close of the period covered by the annual
report:





As of December 31, 2008,
there were
28,841,877shares of the registrant's
common stock outstanding.





Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


o Yes  x No


If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.


o Yes  x No


Note-Checking
the box above will not relieve any registrant required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.




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


x Yes  o 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).


o Yes  o No





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





Large
      accelerated filer o
            Accelerated
      filer xNon-accelerated
      filer   o





Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this
filing:





U.S.
      GAAPx
            International
      Financial Reporting Standards as issued by the International Accounting
      StandardsoOthero





If
"Other" has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.


o  Item
17  o Item 18





If this is
an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).


o Yes  x No





ii





TABLE OF CONTENTS


PageITEM
      1.
                                                                                                                                                                                                                            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
                                                                                                                                                                                                                            1ITEM
      2.
                                                                                                                                                                                                                            OFFER
      STATISTICS AND EXPECTED TIMETABLE
                                                                                                                                                                                                                            1ITEM
      3.
                                                                                                                                                                                                                            KEY
      INFORMATION
                                                                                                                                                                                                                            1ITEM
      4.
                                                                                                                                                                                                                            INFORMATION
      ON THE COMPANY
                                                                                                                                                                                                                            21ITEM
      4A.
                                                                                                                                                                                                                            UNRESOLVED
      STAFF COMMENTS
                                                                                                                                                                                                                            32ITEM
      5.
                                                                                                                                                                                                                            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                                                                                                                                                                                                                            32ITEM
      6.
                                                                                                                                                                                                                            DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                                                                                                                                                                                                                            50ITEM
      7.
                                                                                                                                                                                                                            MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                                                                                                                                                                                                                            54ITEM
      8.
                                                                                                                                                                                                                            FINANCIAL
      INFORMATION
                                                                                                                                                                                                                            56ITEM
      9.
                                                                                                                                                                                                                            THE
      OFFER AND LISTING
                                                                                                                                                                                                                            57ITEM
      10.
                                                                                                                                                                                                                            ADDITIONAL
      INFORMATION
                                                                                                                                                                                                                            57ITEM
      11.
                                                                                                                                                                                                                            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT
                                                                                                                                                                                                                              MARKET
      RISK
                                                                                                                                                                                                                            66ITEM
      12.
                                                                                                                                                                                                                            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                                                                                                                                                                                                                            66ITEM
      13.
                                                                                                                                                                                                                            DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                                                                                                                                                                                                                            67ITEM
      14.
                                                                                                                                                                                                                            MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY
                                                                                                                                                                                                                              HOLDERS
      AND USE OF PROCEEDS
                                                                                                                                                                                                                            67ITEM
      15.
                                                                                                                                                                                                                            CONTROLS
      AND PROCEDURES
                                                                                                                                                                                                                            67ITEM
      16A.
                                                                                                                                                                                                                            AUDIT
      COMMITTEE FINANCIAL EXPERT
                                                                                                                                                                                                                            67ITEM
      16B.
                                                                                                                                                                                                                            CODE
      OF ETHICS
                                                                                                                                                                                                                            67ITEM
      16C.
                                                                                                                                                                                                                            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                                                                                                                                                                                                                            68ITEM
      16D.
                                                                                                                                                                                                                            EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                                                                                                                                                                                                                            68ITEM
      16E.
                                                                                                                                                                                                                            PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASES
                                                                                                                                                                                                                            68ITEM
      16G.
                                                                                                                                                                                                                            CORPORATE
      GOVERNANCE
                                                                                                                                                                                                                            68ITEM
      17.
                                                                                                                                                                                                                            FINANCIAL
      STATEMENTS
                                                                                                                                                                                                                            70ITEM
      18.
                                                                                                                                                                                                                            FINANCIAL
      STATEMENTS
                                                                                                                                                                                                                            70ITEM
      19.
                                                                                                                                                                                                                            EXHIBITS
                                                                                                                                                                                                                            70


iii








CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS




In this report, "we," "us," "our,"
"Aries Maritime Transport Limited," and "the Company," all refer to Aries
Maritime Transport Limited Inc. and its subsidiaries.





The Company desires to take advantage of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and is including this cautionary statement in connection
therewith.  This document and any other written or oral statements
made by the Company or on its behalf may include forward-looking statements,
which reflect its current views with respect to future events and financial
performance.  This report includes assumptions, expectations,
projections, intentions and beliefs about future events. These statements are
intended as "forward-looking statements." We caution that assumptions,
expectations, projections, intentions and beliefs about future events may and
often do vary from actual results and the differences can be material. When used
in this document, the words "anticipate," "estimate," "project," "forecast,"
"plan," "potential," "may," "should" and "expect" reflect forward-looking
statements.




All
statements in this document that are not statements of historical fact are
forward-looking statements. Forward-looking statements include, but are not
limited to, such matters as future operating or financial results; statements
about planned, pending or recent vessel disposals and/or acquisitions, business
strategy, the proposed transaction with Grandunion, Inc., future dividend
payments and expected capital spending or operating expenses, including
drydocking and insurance costs; statements about trends in the container vessel
and product tanker shipping markets, including charter rates and factors
affecting supply and demand; our ability to obtain additional financing;
expectations regarding the availability of vessel acquisitions; completion of
repairs; length of off-hire; availability of charters and anticipated
developments with respect to any pending litigation.




The
forward-looking statements in this report are based upon various assumptions,
many of which are based, in turn, upon further assumptions, including, without
limitation, management’s examination of historical operating trends, data
contained in our records and other data available from third parties. Although
Aries Maritime Transport Limited believes that these assumptions were reasonable
when made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, Aries Maritime Transport Limited cannot assure you that
it will achieve or accomplish these expectations, beliefs or projections
described in the forward-looking statements contained in this report. Important
factors that, in our view, could cause actual results to differ materially from
those discussed in the forward-looking statements include the strength of world
economies and currencies; general market conditions, including changes in
charter rates and vessel values; failure of a seller to deliver one or more
vessels; failure of a buyer to accept delivery of a vessel; inability to procure
acquisition financing; default by one or more charterers of our vessels; our
ability to complete documentation of agreements in principle; changes in demand
for oil and oil products; the effect of changes in OPEC’s petroleum production
levels; worldwide oil consumption and storage; changes in demand that may affect
attitudes of time charterers; scheduled and unscheduled drydocking; additional
time spent in completing repairs; changes in Aries Maritime Transport Limited’s
voyage and operating expenses, including bunker prices, drydocking and insurance
costs; changes in governmental rules and regulations or actions taken by
regulatory authorities; potential liability from pending or future litigation;
domestic and international political conditions; potential disruption of
shipping routes due to accidents, international hostilities and political events
or acts by terrorists; material adverse events affecting either Aries Maritime
Transport Limited or Grandunion or the ability of Aries Maritime Transport
Limited and Grandunion to enter into definitive agreements; and other factors
discussed in Aries Maritime Transport Limited’s filings with the U.S. Securities
and Exchange Commission from time to time. Aries Maritime Transport Limited and
Grandunion are not obligated to enter into a definitive agreement and the change
of control transaction described in this report may never
occur.








iv





PART I




ITEM
      1.
            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS




Not applicable.




ITEM
      2.
            OFFER
      STATISTICS AND EXPECTED TIMETABLE




Not applicable.




ITEM
      3.
            KEY
      INFORMATION




Unless the context otherwise requires,
as used in this report, the terms ''the Company,'' ''we,'' ''us,'' "the Group"
and ''our'' refer to Aries Maritime Transport Limited and all of its
subsidiaries, and ''Aries Maritime Transport Limited'' refers only to Aries
Maritime Transport Limited and not to its subsidiaries.  We use the
term deadweight, or dwt, in describing the size of vessels. Dwt, expressed in
metric tons, each of which is equivalent to 1,000 kilograms, refers to the
maximum weight of cargo and supplies that a vessel can carry. We use the term
Twenty-Foot Equivalent Units, or TEUs, in describing the size of vessels
carrying containers. The size of one TEU is equivalent to 20 feet by 8 feet by 8
feet 6 inches (that is, 5.9 metres by 2.35 metres by 2.39
metres).




A.           
  Selected Financial
Data




The following selected consolidated and
combined financial information set forth below has been derived from our audited
financial statements for the years ended December 31, 2008, 2007, 2006, 2005
(date of incorporation) and from our predecessor combined carve-out financial
statements for the year ended December 31, 2004. The information is only a
summary and should be read in conjunction with "Item 5. Operating and Financial
Review and Prospects" and our audited consolidated financial statements and
notes thereto contained in this report. During 2008, we sold three vessels. The
results of these vessels as well as the related gains on sales have been
classified as discontinued operations. The selected consolidated and combined
financial information have been amended to reflect the sale of these three
vessels as discontinued operations. In accordance with standard shipping
industry practice, we did not obtain from the sellers historical operating data
for the vessels that we acquired, as that data was not material to our decision
to purchase the vessels. Accordingly, we have not included any historical
financial data relating to the results of operations of our vessels for any
period before we acquired them. Please see the discussion in "Item 5. Operating
and Financial Review and Prospects — Lack of Historical Operating Data for
Vessels Before their Acquisition."






1





Year
      ended
                  December
      31, 2004
                Year
      ended
                  December
      31, 2005
                Year
      ended
                  December
      31, 2006
                Year
      ended
                  December
      31, 2007
                Year
      ended
                  December
      31, 2008(Dollars
      in thousands except per share data and fleet data)Statement
      of Operations Data (for period ending)Operating
      revenues
                35,850
                52,020
                76,347
                81,080
                81,331Vessel
      operating expenses
                (9,278)
                (12,540)
                (19,276)
                (23,996)
                (31,730)Management
      fees
                (686)
                (1,106)
                (1,554)
                (1,700)
                (1,860)General
      & administrative expenses
                -
                (1,601)
                (3,938)
                (5,518)
                (7,878)Depreciation
                (8,790)
                (12,707)
                (22,684)
                (23,883)
                (23,912)Impairment
      charge
                
                -
                -
                -
                (30,075)Amortization
      of drydocking and special survey expenses
                (1,287)
                (1,372)
                (1,947)
                (2,626)
                (3,997)Net
      operating income/ (loss) from continuing operations
                29,547
                22,080
                23,460
                19,189
                (26,561)Other
      income (expenses), net
                75
                (151)
                (146)
                (156)
                (213)Net
      income/ (loss) from continuing operations
                23,759
                12,903
                7,169
                (1,861)
                (49,062)Net
      income/ (loss) from operations
                25,273
                14,771
                2,199
                (8,733)
                (39,828)Earnings/
      (loss) per share (basic and diluted) continuing operations
                1.47
                0.56
                0.25
                (0.07)
                (1.71)Earnings/
      (loss) per share (basic and diluted)
                1.56
                0.64
                0.08
                (0.31)
                (1.39)Cash
      dividends declared per share
                -
                0.52
                0.89
                0.63
                0.10Weighted
      average number of shares (basic and diluted)
                16,176,877
                23,118,466
                28,416,877
                28,478,850
                28,634,186Balance
      Sheet Data (at period end)Cash
      and cash equivalents
                5,334
                19,248
                11,612
                12,444
                4,009Restricted
      cash
                4,803
                10
                3,242
                39
                8,510Total
      current assets
                12,371
                22,438
                22,430
                20,199
                19,741Total
      assets
                245,725
                377,898
                458,040
                425,491
                317,777Total
      current liabilities
                34,666
                21,356
                29,622
                311,997
                251,489Current
      portion of long-term debt
                21,910
                -
                -
                284,800
                223,710Long-term
      debt, net of current portion
                185,050
                183,820
                284,800
                -
                -Total
      liabilities
                229,072
                222,217
                325,452
                318,372
                252,261Total
      stockholders' equity
                16,653
                155,681
                132,588
                107,119
                65,516Other
      Financial Data (for period ending)Net
      cash provided by operating activities
                21,899
                36,974
                24,215
                17,581
                2,901Net
      cash (used in) / provided by investing activities
                (161,773)
                (114,001)
                (101,815)
                (2,008)
                61,083Net
      cash provided by / (used in) financing activities
                144,541
                90,941
                69,964
                (14,741)
                (72,419)Net
      increase (decrease) in cash and cash equivalents
                4,667
                13,914
                (7,636)
                832
                (8,435)Cash
      dividends paid
                -
                (14,776)
                (25,292)
                (17,970)
                (2,862)Fleet
      Data (at period end)Number
      of product tankers owned
                7
                8
                10
                10
                9Number
      of container vessels owned
                3
                5
                5
                5
                3






2





(All
      amounts in thousands of U.S. dollars, unless otherwise
    stated)
              Year
      ended
                December
      31,
              Year
      ended
                December
      31,
              Year
      ended
                December
      31,
              Year
      ended
                December
      31,
              Year
      ended
                December
      31,2004
              2005
              2006
              2007
              2008ADJUSTED
      EBITDA(1)NET
      INCOME/ (LOSS)
              23,759
              12,903
              7,169
              (1,861)
              (49,062)Plus
      Net interest expense
              6,074
              9,556
              14,357
              16,834
              15,773Plus
      Depreciation and Amortization
              1,022
              4,787
              12,957
              20,499
              19,795Plus
      Impairment charge
              -
              -
              -
              -
              30,075Plus/
      (minus) Change in fair value of derivatives
              (211)
              (531)
              1,788
              4,060
              6,515Plus
      Stock based compensation expense
              
              -
              -
              1,232
              1,084ADJUSTED
      EBITDA
              30,644
              26,715
              36,271
              40,764
              24,180





(1) We consider Adjusted EBITDA to
represent the aggregate of net income/ (loss) from continuing
operations, net interest
expense, depreciation, amortization(excluding the effect of the
amortization of the deferred charter revenue due to the assumption of charters
associated with certain vessels acquisitions),change in the fair value of
derivatives, stock-based compensation expense and impairment
charge.  The Company's management uses Adjusted EBITDA as a
performance measure.  The Company believes that Adjusted EBITDA is
useful to investors because the shipping industry is capital intensive and may
involve significant financing costs.  Adjusted EBITDA is not an item
recognized by GAAP and should not be considered as an alternative to net income,
operating income or any other indicator of a company's operating performance
required by GAAP.  The Company's definition of Adjusted EBITDA may not
be the same as that used by other companies in the shipping or other
industries.




3





B.      
      Capitalization and
Indebtedness




Not applicable.




C.       
     Reasons for the Offer and Use of
Proceeds




Not applicable.




D.      
      Risk Factors




The following risks relate principally
to the industry in which we operate and our business in general. Other risks
relate to the securities market and ownership of our common stock. If any of the
circumstances or events described below actually arises or occurs, our business,
results of operations, cash flows, financial condition and ability to pay
dividends in the future could be materially adversely affected. In any such
case, the market price of our common shares could decline, and you may lose all
or part of your investment.




Industry Specific Risk
Factors





Charter rates for product tankers and
container vessels have declined significantly and may decrease in the future,
which may adversely affect our earnings.





The
product tanker and container vessel sectors are cyclical with volatility in
charter hire rates and industry profitability. The degree of charter hire rate
volatility among different types of product tankers and container vessels has
varied widely and after reaching historical highs in mid-2008, charter hire
rates for product tankers and container vessels have declined significantly from
historically high levels. If the
shipping industry is depressed in the future when our charters expire, our
revenues, earnings and available cash flow may be adversely affected.In
addition, a decline in charter hire rates likely will cause the value of our
vessels to decline. Four of our
period charters (one container vessel and three product tankers) are
scheduled to expire during 2009.In addition, three of ourproduct tankers are currently in the spot
market.We
cannot assure you that we will be able to successfully charter our vessels in
the future or renew our existing charters at rates sufficient to allow us to
operate our business profitably or meet our obligations. Our ability to re-charter our vessels on
the expiration or termination of our current charters, the charter rates payable
under any replacement charters and vessel values will depend upon, among other
things, economic conditions in the product tanker and container vessel markets
at that time, changes in the supply and demand for vessel capacity and changes
in the supply and demand for oil and oil products and container
transportation.The factors affecting the supply and demand for
product tankers and container vessels are outside of our control and are
unpredictable. The nature, timing, direction and degree of changes in industry
conditions are also unpredictable.




The factors that influence the demand
for vessel capacity include:




·
            demand for oil and oil
      products;




·
            supply of oil and oil
      products;




·
            regional availability of refining
      capacity;




·
            the globalization of
      manufacturing;




·
            global and regional economic and
      political conditions;




·
            developments in international
      trade;




·
            changes in seaborne and other
      transportation patterns, including changes in the distances over which
      cargoes are transported;




·
            environmental and other regulatory
      developments;




·
            currency exchange rates;
      and




·
            weather.




The factors that influence the supply of
vessel capacity include:




·
            the number of newbuilding
      deliveries;












4





·
              the scrapping rate of older
      vessels;·
              the price of steeland vessel equipment;





·
            changes in environmental and other
      regulations that may limit the useful lives of
    vessels;





·
            the number of vessels that are out
      of service; and





·
            port or canal
      congestion.




If the number of new vessels delivered
exceeds the number of vessels being scrapped and lost, vessel capacity will
increase. If the supply of vessel capacity increases but the demand for vessel
capacity does not increase correspondingly, charter rates and vessel values
could materially decline.





Please see the information contained in
the table of vessel information under "Item 4 – Information on the Company –
Business Overview – Our Fleet." The period charter expiration dates for all
our vessels are detailed in the table under "Charter Expiration," except for the
three product tankers that are currently employed in the spot
market.




Please see the information contained in
"Item 5 – Operating and Financial Review and Prospects – Operating Results –
Important Factors to Consider When Evaluating our Historical and Future Results
of Operations."





The downturns in the product tanker
and container vessel charter markets may have an adverse effect on our earnings,
affect compliance with our loan covenants and our ability to pay dividends if
reinstated in the future.


Charter
rates for product
tankers havedeclined
sharply sincethe
end of 2008.
For example, the Baltic Clean Tankers Index (BCTI), ameasure
ofinternational
clean tanker routes and a selection of basket and individual timecharter
equivalents (TCEs),dropped
from 839 points before the end of 2008
to 372 points as atMarch31,2009.
According to industry sources, the average spot market rate for an MR tankertransporting 38,000 tonnes of gasoline to the US reached a low
of W62.5, or $604 per day, on April 2009, compared to a high of
$20,000
reached during 2008. The decline in charter
rates in the product tanker market has resulted in a commensurate decline in our
tanker vessel values affecting our cash flows, liquidity and compliance
with the covenants contained in our loanagreements.





Container vessel charter rateshave also declined
sharplysince the end of
2008.Charter rates and
vessel values in the container sectorcontinued to be placed underdownwardpressure from the decline in freight
ratesresulting from thedecrease in the transportation of
cargoes by container vessels. The Howe Robinson Containership Index
(HRCI),a measure ofinternational
container vessel charter rates,dropped from 498 points before the
end of 2008 to 379 points
as atMarch31,2009. The container market remains under
the pressures of a slowdown in trade activities and reduced demand for cargo
traffic. While the charter
rates forbulk carriers
declined substantially in the second half of 2008, the fall has stabilized and
recovered moderately in 2009.





We are currently in breach of certain of
our financial covenants contained in our fully-revolving credit
facility.  Please see"Item 5. Operating Financial Review
and Prospects — B. Liquidity and Capital Resources — Indebtedness."





In September 2008, our board of
directors determined, after careful consideration of various factors, to suspend
the payment of cash dividends in order to preserve capital and to allow
management to focus on improving the Company's long-term strength and operational
results.





If the current low charter rates in the
product tanker and container markets continue through any significant period in
2009 and 2010, when time charters for our seven vessels that are employed
on time charter expire and we are consequently exposed to then-prevailing
charter rates, our earnings may be adversely affected. If these trends continue,
in order to remain viable, we may have to extend the period in which we suspend
dividend payments and/or sell vessels in our fleet.





In addition, the Company's impairment
analysis as of December 31, 2008 resulted in an impairment loss of$(30,075)and is reflected
in the accompanying 2008 Consolidated Statements of Operations. However, the
current assumptions used and the estimates made are highly subjective, and could
be negatively impacted by further significant deterioration in charter rates or
vessel utilization over the remaining life of the vessels which could require
the Company to record a material impairment charge in future periods. No
impairment loss was recorded in the years ended December 31, 2006 and
2007.




A further economic slowdown in the
Asia Pacific region could exacerbate the effect of recent slowdowns in the
economies of the United States and the European Union and may have a material
adverse effect on our business, financial condition and results of
operations.





We
anticipate that a significant number of the port calls made by our vessels will
continue to involve the loading or discharging of commodities in ports in the
Asia Pacific region. As a result, negative changes in economic conditions in any
Asia Pacific country, particularly in China, may exacerbate the effect of recent
slowdowns in the economies of the United States and the European Union and may
have a material adverse effect on our business, financial condition and results
of operations, as well as our future prospects. In recent years, China has been
one of the world's fastest growing economies in terms of gross domestic product,
which has had a significant impact on shipping demand. This rate of
growth declined
significantly in the second half of 2008 and it is likely that China and other
countries in the Asia Pacific region will continue to experience slowed or even
negative economic growth in the near future. Moreover, the current economic
slowdown in the economies of the United States, the European Union and other
Asian countries may further adversely affect economic growth in China and
elsewhere. China has recently announced a $586.0 billion stimulus package aimed
in part at increasing investment and consumer spending and maintaining export
growth in response to the recent slowdown in its economic growth. Our business,
financial condition and results of operations, as well as our future prospects,
will likely be materially and adversely affected by a further economic downturn
in any of these countries.






5







Changes in the economic and
political environment in China and policies adopted by the government to
regulate its economy may have a material adverse effect on our business,
financial condition and results of operations.





The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development (OECD) in such respects as
structure, government involvement, level of development, growth rate, capital
reinvestment, allocation of resources, rate of inflation and balance of payments
position. Prior to 1978, the Chinese economy was a planned economy. Since 1978,
increasing emphasis has been placed on the utilization of market forces in the
development of the Chinese economy. Annual and five year State Plans are adopted
by the Chinese government in connection with the development of the economy.
Although state-owned enterprises still account for a substantial portion of the
Chinese industrial output, in general, the Chinese government is reducing the
level of direct control that it exercises over the economy through State Plans
and other measures. There is an increasing level of freedom and autonomy in
areas such as allocation of resources, production, pricing and management and a
gradual shift in emphasis to a "market economy" and enterprise reform. Limited
price reforms were undertaken, with the result that prices for certain
commodities are principally determined by market forces. Many of the reforms are
unprecedented or experimental and may be subject to revision, change or
abolition based upon the outcome of such experiments. If the Chinese government
does not continue to pursue a policy of economic reform, the level of imports to
and exports from China could be adversely affected by changes to these economic
reforms by the Chinese government, as well as by changes in political, economic
and social conditions or other relevant policies of the Chinese government, such
as changes in laws, regulations or export and import restrictions, all of which
could, adversely affect our business, operating results and financial
condition.





The value of our vessels may fluctuate,
which may adversely affect our liquidity.




Vessel values can fluctuate
substantially over time due to a number of different factors,
including:




·
            general economic and market
      conditions affecting the shipping
  industry;




·
            competition from other shipping
      companies;




·
            the types and sizes of available
      vessels;




·
            the availability of other modes of
      transportation;




·
            increases in the supply of vessel
      capacity;




·
            the cost of
      newbuildings;




·
            prevailing charter rates;
      and




·
            the cost of retrofitting or
      modifying second hand vessels as a result of charterer requirements,
      technological advances in vessel design or equipment, changes in
      applicable environmental or other regulations or standards, or
      otherwise.




In addition, as vessels grow older, they
generally decline in value. Due to the cyclical nature of the product tanker and
container vessel markets, if for any reason we sell vessels at a time when
prices have fallen, we could incur a loss and our business, results of
operations, cash flows, financial condition and ability to pay dividends in the
future could be adversely affected.





An over-supply of tanker capacity may
lead to reductions in charter hire rates and profitability.





The market supply of tankers is affected
by a number of factors such as demand for energy resources, oil, and petroleum
products, waiting days in ports, as well as strong overall economic growth in
parts of the world economy including Asia.Furthermore, the extension of
refinery capacity in India and the Middle East up to 2011 is expected to exceed
the immediate consumption in these areas, and an increase in exports of refined
oil products is expected as a result.Factors that tend to decrease tanker
supply include the conversion of tankers to non-tanker purposes and the phasing
out of single-hull tankers due to legislation and environmental concerns. We
believe that the current order book represents a significant percentage of the
existing fleet. An over-supply of tanker capacity may result in a reduction of
charter hire rates.If a reduction in charter rates occurs, upon the
expiration or termination of our vessels' current charters, we may only be able
to recharter our vessels at reduced or unprofitable rates or we may not be able
to charter these vessels at all, which could lead toa material adverse effect on our
results of operations.













An over-supply of container vessel
capacity may lead to further reductions in charter hire rates and
profitability.




The
market supply of container vessels has been increasing, and the carrying
capacity (measured in TEUs) on order is at an historic high. This has led to an
over-supply of container vessel capacity, resulting in a reduction of charter
hire rates and a decrease in the value of our container vessels. The reduction
in rates may, under certain circumstances, affect the ability of our customers
who charter our container vessels to make charter hire payments to
us.  This and other factors affecting the supply and demand for
container vessels and the supply and demand for products shipped in containers
are outside our control and the nature, timing and degree of changes in the
industry may affect the ability of our charterers to make charter hire payments
to us.





Disruptions in world financial
markets and the resulting governmental action in the United States and in other
parts of the world could have a material adverse impact on our results of
operations, financial condition and cash flows, and could cause the market price
of our common stock to further decline.





The
United States and other parts of the world are exhibiting deteriorating economic
trends and have been in a recession. For example, the credit markets in the
United States have experienced significant contraction, deleveraging and reduced
liquidity, and the United States federal government and state governments have
implemented and are considering a broad variety of governmental action and/or
new regulation of the financial markets. Securities and futures markets and the
credit markets are subject to comprehensive statutes, regulations and other
requirements. The Commission, other regulators, self-regulatory organizations
and exchanges are authorized to take extraordinary actions in the event of
market emergencies, and may effect changes in law or interpretations of existing
laws.





Recently,
a number of financial institutions have experienced serious financial
difficulties and, in some cases, have entered bankruptcy proceedings or are in
regulatory enforcement actions. The uncertainty surrounding the future of the
credit markets in the United States and the rest of the world has resulted in
reduced access to credit worldwide. As of June 25, 2009, we had total
outstanding indebtedness of $223.7 million.





We
face risks attendant to changes in economic environments, changes in interest
rates, and instability in the banking and securities markets around the world,
among other factors. Major market disruptions and the current adverse changes in
market conditions and regulatory climate in the United States and worldwide may
adversely affect our business or impair our ability to borrow amounts under our
fully revolving credit facility or any future financial arrangements. We cannot
predict how long the current market conditions will last. However, these recent
and developing economic and governmental factors, together with the concurrent
decline in charter rates and vessel values, may have a material adverse effect
on our results of operations, financial condition or cash flows, have caused the
trading price of our common shares on the Nasdaq Global Market to decline and
could cause the price of our common shares to continue to decline.





Acts of piracy on ocean-going vessels
have recently increased in frequency, which could adversely affect our
business.





Acts
of piracy have historically affected ocean-going vessels trading in regions of
the world such as the South China Sea and in the Gulf of Aden off the coast of
Somalia. Throughout 2008 the frequency of piracy incidents has increased
significantly, particularly in the Gulf of Aden off the coast of Somalia, with
drybulk vessels and tankers particularly vulnerable to such attacks. For
example, in April 2009, the Maersk Alabama, a cargo vessel not affiliated with
us, was captured by pirates off the coast of Somalia and was released following
military action by the U.S. Navy. In November 2008, the Sirius Star, a
tanker vessel not affiliated with us, was also captured by pirates in the Indian
Ocean while carrying crude oil estimated to be worth $100 million, and was
released in January 2009 upon a ransom payment of $3 million. If these
piracy attacks result in regions in which our vessels are deployed being
characterized as "war risk" zones by insurers, as the Gulf of Aden temporarily
was in May 2008, or Joint War Committee (JWC) "war and strikes" listed
areas, premiums payable for such coverage could increase significantly and such
insurance coverage may be more difficult to obtain. In addition, crew costs,
including due to employing onboard security guards, could increase in such
circumstances. We may not be adequately insured to cover losses from these
incidents, which could have a material adverse effect on us. In addition, any
detention hijacking as a result of an act of piracy against our vessels, or an
increase in cost, or unavailability, of insurance for our vessels, could have a
material adverse impact on our business, financial condition, results of
operations and ability to reinstate the payment of dividends.





Fuel, or bunker prices, may adversely
affect profits.





While
we generally do not bear the cost of fuel, or bunkers, under our time charters,
fuel is a significant factor in negotiating charter rates. As a result, an
increase in the price of fuel beyond our expectations may adversely affect our
profitability at the time of charter negotiation or when our vessels trade in
the spot market. Fuel is also a significant, if not the largest, expense in our
shipping operations when vessels are under voyage charter. Increases in the
price of fuel may adversely affect our profitability. The price and supply of
fuel is unpredictable and fluctuates based on events outside our control,
including geopolitical developments, supply and demand for oil and gas, actions
by OPEC and other oil and gas producers, war and unrest in oil producing
countries and regions, regional production patterns and environmental concerns.
Further, fuel may become much more expensive in the future, which may reduce the
profitability and competitiveness of our business versus other forms of
transportation, such as truck or rail.






7





We are subject to complex laws and
regulations, including environmental regulations that can adversely affect the
cost, manner or feasibility of doing business.





Our
operations are subject to numerous laws and regulations in the form of
international conventions and treaties, national, state and local laws and
national and international regulations in force in the jurisdictions in which
our vessels operate or are registered, which can significantly affect the
ownership and operation of our vessels. These requirements include, but are not
limited to, the International Convention on Civil Liability for Oil Pollution
Damage of 1969, the International Convention for the Prevention of Pollution
from Ships of 1975, the International Maritime Organization, or IMO,
International Convention for the Prevention of Marine Pollution of 1973, the IMO
International Convention for the Safety of Life at Sea of 1974, the
International Convention on Load Lines of 1966, the U.S. Oil Pollution Act of
1990, or OPA, the U.S. Clean Air Act, the U.S. Clean Water Act and the U.S.
Marine Transportation Security Act of 2002. Compliance with such laws,
regulations and standards, where applicable, may require installation of costly
equipment or operational changes and may affect the resale value or useful lives
of our vessels. We may also incur additional costs in order to comply with other
existing and future regulatory obligations, including, but not limited to, costs
relating to air emissions, the management of ballast waters, maintenance and
inspection, elimination of tin-based paint, development and implementation of
emergency procedures and insurance coverage or other financial assurance of our
ability to address pollution incidents. These costs could have a material
adverse effect on our business, results of operations, cash flows and financial
condition. A failure to comply with applicable laws and regulations may result
in administrative and civil penalties, criminal sanctions or the suspension or
termination of our operations. Environmental laws often impose strict liability
for remediation of spills and releases of oil and hazardous substances, which
could subject us to liability without regard to whether we were negligent or at
fault. Under OPA, for example, owners, operators and bareboat charterers are
jointly and severally strictly liable for the discharge of oil within the
200-mile exclusive economic zone around the United States. An oil spill could
result in significant liability, including fines, penalties, criminal liability
and remediation costs for natural resource damages under other federal, state
and local laws, as well as third-party damages. We are required to satisfy
insurance and financial responsibility requirements for potential oil (including
marine fuel) spills and other pollution incidents. Although we have arranged
insurance to cover certain environmental risks, there can be no assurance that
such insurance will be sufficient to cover all such risks or that any claims
will not have a material adverse effect on our business, results of operations,
cash flows and financial condition.





We are subject to international safety
regulations and the failure to comply with these regulations may subject us to
increased liability, may adversely affect our insurance coverage and may result
in a denial of access to, or detention in, certain ports.





The operation of our vessels is affected
by the requirements set forth in the IMO International Management Code for the
Safe Operation of Ships and Pollution Prevention, or ISM Code.  The
ISM Code requires shipowners, ship managers and bareboat charterers to develop
and maintain an extensive "Safety Management System" that includes the adoption
of a safety and environmental protection policy setting forth instructions and
procedures for safe operation and describing procedures for dealing with
emergencies.  The failure of a shipowner or bareboat charterer to
comply with the ISM Code may subject it to increased liability, may invalidate
existing insurance or decrease available insurance coverage for the affected
vessels and may result in a denial of access to, or detention in, certain
ports.  As of the date of this report, each of our vessels is ISM
code-certified.




Our vessels may suffer damage due to the
inherent operational risks of the seaborne transportation industry and we may
experience unexpected drydocking costs, which may adversely affect our business
and financial condition.





Our vessels and their cargoes will be at
risk of being damaged or lost because of events such as marine disasters, bad
weather, business interruptions caused by mechanical failures, grounding, fire,
explosions and collisions, human error, war, terrorism, piracy and other
circumstances or events. These hazards may result in death or injury to persons,
loss of revenues or property, environmental damage, higher insurance rates,
damage to our customer relationships, delay or rerouting. If our vessels suffer
damage, they may need to be repaired at a drydocking facility. The costs of
drydock repairs are unpredictable and may be substantial. We may have to pay
drydocking costs that our insurance does not cover in full. The loss of earnings
while these vessels are being repaired and repositioned, as well as the actual
cost of these repairs, would decrease our earnings. In addition, space at
drydocking facilities is sometimes limited and not all drydocking facilities are
conveniently located. We may be unable to find space at a suitable drydocking
facility or our vessels may be forced to travel to a drydocking facility that is
not conveniently located to our vessels' positions. The loss of earnings while
these vessels are forced to wait for space or to steam to more distant
drydocking facilities would decrease our earnings.




Our insurance may not be adequate to
cover our losses that may result from our operations due to the inherent
operational risks of the seaborne transportation industry.





We carry insurance to protect us against
most of the accident-related risks involved in the conduct of our business,
including marine hull and machinery insurance, protection and indemnity
insurance, which includes pollution risks, crew insurance and war risk
insurance. However, we may not be adequately insured to cover losses from our
operational risks, which could have a material adverse effect on
us.  Additionally, our insurers may
refuse to pay particular claims and our insurance may be voidable by the
insurers if we take, or fail to take, certain action, such as failing to
maintain certification of our vessels with applicable maritime regulatory
organizations. Any significant uninsured or under-insured loss or liability
could have a material adverse effect on our business, results of operations,
cash flows and financial condition. In addition, we may not be able to obtain
adequate insurance coverage at reasonable rates in the future during adverse
insurance market conditions.






8






As a result of the September 11, 2001
attacks, the U.S. response to the attacks and related concern regarding
terrorism, insurers have increased premiums and reduced or restricted coverage
for losses caused by terrorist acts generally. Accordingly, premiums payable for
terrorist coverage have increased substantially and the level of terrorist
coverage has been significantly reduced.




In addition, while we carry loss of hire
insurance to cover 100% of our fleet, we may not be able to maintain this level
of coverage. Accordingly, any loss of a vessel or extended vessel off-hire, due
to an accident or otherwise, could have a material adverse effect on our
business, results of operations, financial condition and our ability to pay
dividends to our shareholders in the future.




Because we obtain some of our insurance
through protection and indemnity associations, we may also be subject to calls
in amounts based not only on our own claim records, but also the claim records
of other members of the protection and indemnity
associations.




We may be subject to calls in amounts
based not only on our claim records but also the claim records of other members
of the protection and indemnity associations through which we receive insurance
coverage for tort liability, including pollution-related liability. Our payment
of these calls could result in significant expense to us, which could have a
material adverse effect on our business, results of operations, cash flows and
financial condition.




In addition, in some jurisdictions, such
as South Africa, under the "sister ship" theory of liability, a claimant may
arrest both the vessel that is subject to the claimant's maritime lien and any
"associated" vessel, which is any vessel owned or controlled by the same owner.
Claimants could try to assert "sister ship" liability against one vessel in our
fleet for claims relating to another of our vessels.




Increased inspection procedures, tighter
import and export controls and new security regulations could increase costs and
cause disruption of our container shipping business.




International container shipping is
subject to additional security and customs inspection and related procedures in
countries of origin, destination and trans-shipment points. These security
procedures can result in cargo seizure, delays in the loading, offloading,
trans-shipment, or delivery of containers and the levying of customs duties,
fines or other penalties against exporters or importers and, in some cases,
carriers.




Since the events of September 11 2001,
U.S. authorities have significantly increased the levels of inspection for all
imported containers. Government investment in non-intrusive container scanning
technology has grown, and there is interest in electronic monitoring technology,
including so-called "e-seals" and "smart" containers that would enable remote,
centralized monitoring of containers during shipment to identify tampering with
or opening of the containers, along with potentially measuring other
characteristics such as temperature, air pressure, motion, chemicals, biological
agents and radiation.




It is unclear what changes, if any, to
the existing security procedures will ultimately be proposed or implemented, or
how any such changes will affect the container shipping industry. These changes
have the potential to impose additional financial and legal obligations on
carriers and, in certain cases, to render the shipment of certain types of goods
by container uneconomical or impractical. These additional costs could reduce
the volume of goods shipped in containers, resulting in a decreased demand for
container vessels. In addition, it is unclear what financial costs any new
security procedures might create for container vessel owners and operators. Any
additional costs or a decrease in container volumes could have an adverse impact
on our customers that charter container vessels from us and, under certain
circumstances, may affect their ability to make charter hire payments to us
under the terms of our charters.





Labor interruptions could disrupt our
business.




Our vessels are manned by masters,
officers and crews that are employed by third parties. If not resolved in a
timely and cost-effective manner, industrial action or other labor unrest could
prevent or hinder our operations from being carried out as we expect and could
have a material adverse effect on our business, results of operations, cash
flows, financial condition and ability to pay dividends in the
future.




Maritime claimants could arrest our
vessels, which would interrupt our business.





Crew members, suppliers of goods and
services to a vessel, shippers of cargo and other parties may be entitled to a
maritime lien against a vessel for unsatisfied debts, claims or damages. In many
jurisdictions, a maritime lien holder may enforce its lien by arresting or
attaching a vessel through foreclosure proceedings. The arrest or attachment of
one or more of our vessels could interrupt our business or require us to pay
large sums of money to have the arrest lifted, which would have a negative
effect on our cash flows.






9





Maritime
claimants could attach our assets under United States Supplemental Admiralty
Rule B ("Rule B"), which could interrupt our financial condition, cash flows and
results of operations.





It
is possible that we could be sued and the plaintiff could use Rule B to attach
our assets located in the United States.  Rule B provides that where a
defendant is not "found" for jurisdictional purposes within the United States
federal district in which a Rule B action is commenced, a plaintiff with a valid
maritime claim can, ex
parte, attach or garnish the defendant's tangible or intangible property
located in such federal district.  Certain United States' courts have
broadly defined what constitutes a maritime claim and this exposes defendants to
a greater risk of attachment.  Under Rule B, the property sought to be
attached must be in the possession of the garnishee (such as a bank) and
recently certain United States' courts have held that this can include
Electronic Funds Transfers, or EFTs, passing through an intermediary money
center bank (a substantial number of which are in the Southern District of New
York), on their way to or from overseas financial institutions.





We
currently maintain an office in Greenwich, Connecticut. Although this may
provide a defense to a Rule B attachment, it is still possible that our assets
could be attached by a plaintiff pursuant to Rule B while passing through the
United States.  In particular, we frequently transact business in
United States Dollars and attachments of EFTs passing through New York may
unexpectedly freeze funds transfers to or from us.  Attachments of our
assets under Rule B could have a material adverse effect on our financial
condition, cash flows and results of operations.





According
to rulings by certain United States' courts, it may be possible to prevent Rule
B attachments in the Southern District of New York by registering with the
Secretary of State of New York as a foreign corporation licensed to do business
in the State of New York and appointing an agent for service of process in the
Southern District.  However, after consideration, we have decided not
to pursue such course of action.  We may decide in the future to both
register with the New York Secretary of State as a foreign corporation licensed
to do business in New York and appoint an agent for service of process in the
Southern District of New York and this may add certain costs to our
operations.





Governments could requisition our
vessels during a period of war or emergency without adequate
compensation.




A government could requisition or seize
our vessels. Under requisition for title, a government takes control of a vessel
and becomes its owner. Under requisition for hire, a government takes control of
a vessel and effectively becomes its charterer at dictated charter rates.
Generally, requisitions occur during periods of war or emergency. Although we
would be entitled to compensation in the event of a requisition, the amount and
timing of payment would be uncertain.Government requisition of one or
more of our vessels may negatively impact our business, financial condition and
results of operations.




We operate our vessels worldwide and, as
a result, our vessels are exposed to international risks that could reduce
revenue or increase expenses.




The international shipping industry is
an inherently risky business involving global operations. Our vessels are at
risk of damage or loss because of events such as mechanical failure, collision,
human error, war, terrorism, piracy, cargo loss and bad weather. In addition,
changing economic, regulatory and political conditions in some countries,
including political and military conflicts, have from time to time resulted in
attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and
boycotts. These sorts of events could interfere with shipping routes and result
in market disruptions that may reduce our revenue or increase our
expenses.




Terrorist attacks and international
hostilities can affect the seaborne transportation industry, which could
adversely affect our business.





We conduct most of our operations
outside of the United States, and our business, results of operations, cash
flowsandfinancial condition may be adversely
affected by changing economic, political and government conditions in the
countries and regions where our vessels are employed or registered. Moreover, we
operate in a sector of the economy that is likely to be adversely impacted by
the effects of political instability, terrorist or other attacks, war or
international hostilities.Terrorist attacks such as the attacks on the
United States on September 11, 2001, in London on July 7, 2005 and in Mumbai on
November 26, 2008 and the continuing response of the United States and others to
these attacks, as well as the threat of future terrorist attacks in the United
States or elsewhere, continue to cause uncertainty in the world financial
markets and may affect our business, operating results and financial condition.
The continuing presence of United States and other armed forces in Iraq and
Afghanistan may lead to additional acts of terrorism and armed conflict around
the world, which may contribute to further economic instability in the global
financial markets. These uncertainties could also adversely affect our ability
to obtain additional financing on terms acceptable to us or at all. In the past,
political conflicts have also resulted in attacks on vessels, mining of
waterways and other efforts to disrupt international shipping, particularly in
the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels
trading in regions such as the South China Sea and the Gulf of Aden off the
coast of Somalia. Any of these occurrences could have a material adverse impact
on our operating results, revenues and costs.





Terrorist
attacks on vessels, such as the October 2002 attack on the M.V. Limburg, a very large crude
carrier not related to us, may in the future also negatively affect our
operations and financial condition and directly impact our vessels or our
customers. Future terrorist attacks could result in increased volatility and
turmoil in the financial markets in the United States and globally. Any of these
occurrences could have a material adverse impact on our revenues and
costs.






10





Company Specific Risk
Factors





We
are in breach of certain financial covenants contained in our fully-revolving
credit facility, and if we are not successful in obtaining a waiver and
amendment to our credit facility, our lenders may declare an event of default
and accelerate our outstanding indebtedness, which would impair our ability to
continue to conduct our business.





Our credit agreement requires us to
adhere to certain financial covenants as of the end of each fiscal quarter,
including the following:





·
            the
      aggregate fair market value of our vessels ("Security Value") must be no
      less than 140% of the aggregate outstanding loans under the fully
      revolving credit facility ("Security
  Requirement");





·
            our
      shareholders' equity as a percentage of our total assets, adjusting the
      book value of our fleet to its market value, must be no less than
      35%;





·
            minimum
      liquidity consisting of free cash and cash equivalents plus any undrawn
      element of the $5.0 million portion of the credit facility available for
      general corporate purposes, which must be no less than the aggregate of 5%
      of interest bearing debt and 5% of the $5.0 million portion of the credit
      facility available for general corporate
  purposes;





·
            our
      current liabilities, excluding deferred revenue, derivative financial
      instruments and voluntary and mandatory prepayments, may not exceed our
      current assets, excluding derivative financial instruments and the value
      of any ship committed for sale; and





·
            the
      ratio of EBITDA (earnings before interest, taxes, depreciation and
      amortization) to interest expense must be no less than 3.00 to 1.00 on a
      trailing four quarter basis.





In
addition, pursuant to the Fifth Supplemental Agreement to the facility entered
into in June 2008, we were required to reduce the outstanding borrowings under
the facility from $284.8 million to $200.0 million, by disposal of vessels, by
August 31, 2008. We subsequently sold three of our vessels for net proceeds of
$59.6 million. In addition, we expect to receive net proceeds of $2.3 million
from the sale of the Ocean
Hope, which we expect to deliver to its new owners between June 29 and
July 15, 2009. We are currently not in compliance with the requirements of the
Fifth Supplemental Agreement. Specifically, the amended interest coverage
financial covenant ratio was not met during the year ended December 31, 2008 and
we failed to reduce the outstanding borrowings to $200 million. In addition, as
of December 31, 2008, we were in breach of our equity ratio financial covenant
as defined in the credit agreement. The lenders gave notices to us on October
27, 2008, December 24, 2008, February 6, 2009 and April 3, 2009 stating that
certain events of default have occurred and continue to occur. The lenders
advise that it is not their immediate intention to take enforcement action but
they reserve their rights to do so. As of December 31, 2008, and as of the date
of this report, we continue to be in breach of the following
covenants:





·
            An
      equity ratio of not less than 35%;





·
            An
      interest coverage ratio (as defined in the facility agreement) of not less
      than 3.00 to 1.00;





·
            The
      reduction of the outstanding borrowings to $200 million in accordance with
      the Fifth Supplemental Agreement;
and





·
            A
      working capital, including the amount of $223.7 million of debt reflected
      as current, of not less than zero.





Our credit agreement also requires the
Group's two principal beneficial equity holders to maintain a beneficial
ownership of no less than 10% each in the issued stock of the
Company. Moreover, the credit agreement also prevents us from declaring
dividends if any event of default, as defined in the credit agreement, occurs or
would result from such declaration. In September 2008, our board of directors
determined to suspend the payment of cash dividends in order to preserve capital
and to allow management to focus on improving the Company's long-term strength
and operating results.





Each of the following constitutes an
event of default under the credit agreement:




·
            the failure to pay principal,
      interest, fees, expenses or other amounts when
  due;





·
            breach of certain financial
      covenants, including those which require Magnus Carriers, a related party,
      to maintain a minimum cash
balance;





·
            the failure of any representation
      or warranty to be materially
correct;





·
            the occurrence of a material
      adverse change (as defined in the credit
  agreement);






11





·
            the failure of the security
      documents or guarantees to be
effective;





·
            judgments against us or any of our
      subsidiaries in excess of certain
  amounts;





·
            bankruptcy or insolvency events;
      and





·
            the failure of our principal
      beneficial equity holders to maintain their investment in
      us.





Furthermore,
due to the current financial turmoil that has significantly affected the
industry and our vessels' values, our lenders notified us on April 9, 2009 that
the Security Value of our vessels was less than the Security Requirement. We are
currently in discussions with our lenders about the applicability of the
valuations that formed the basis for the lenders notification.





A
violation of our financial covenants constitutes an event of default under our
credit facility, which would, unless waived by our lenders, provide our lenders
with the right to require us to refrain from declaring and paying dividends and
borrowing additional funds under the credit facility, post additional
collateral, enhance our equity and liquidity, increase our interest payments,
pay down our indebtedness to a level where we are in compliance with our loan
covenants, sell vessels in our fleet, reclassify our indebtedness as current
liabilities and accelerate our indebtedness and foreclose their liens on our
vessels, which would impair our ability to continue to conduct our business. A
total of $223.7 million of indebtedness has been reclassified as current
liabilities in our audited consolidated balance sheet for the year ended
December 31, 2008, included in this report.





If
current market conditions continue, we do not expect that we will be able to
meet all financial covenants of our credit facility in the foreseeable future in
the absence of further agreement with our lenders. We are currently in
discussions with our lenders to restructure our facility including
amendments to certain financial covenants, although we cannot assure you that we will be
successful reaching an agreement with our lenders.  In addition,in connection with any waiver and/or amendment to our credit facility,
our lenders may impose additional operating and financial restrictions on us
and/or modify the terms of our credit facility. These restrictions may
limit our ability to, among other things, pay dividends in the future, make
capital expenditures and/or incur additional indebtedness, including through the
issuance of guarantees. In addition, our lenders may require the payment of
additional fees, require prepayment of a portion of our indebtedness to
them, accelerate the amortization schedule for our indebtedness and increase the
interest rates they charge us on our outstanding indebtedness. If our
indebtedness is accelerated, it would be very difficult in the current financing
environment for us to refinance our debt or obtain additional financing and we
could lose our vessels if our lenders foreclose their liens.




On June 24, 2009, we signed a
non-binding letter of intent (LOI) with Grandunion, a company controlled by
Michael Zolotas and Nicholas Fistes, that contemplates, among other things, the
acquisition of three Capesize drybulk carriers with an approximate net asset
value of $36.0 million in exchange for 15,977,778 newly issued shares of Aries
Maritime and a change of control of our board of directors. Please see “Item
4.A. History and Development of the Company – Recent Developments” for further
information concerning the LOI.
  The market value of our vessels have
declined and may further decrease, which could lead to a default under our fullyrevolving credit facility,
the loss of our vesselsand/or we may incur a loss if we sell vessels
following a decline in their market value.





The
fair market values of our vessels have generally experienced high volatility and
have recently declined significantly. Our fully revolving credit facility
requires us to meet certain financial covenants.  For instance, if the
market value of our fleet declines below 140% of the aggregate outstanding
principal balance of our borrowings under our fully revolving credit facility,
we will not be in compliance with certain provisions of our credit facility and
our lenders may declare an event of default unless we are able to pledge
additional collateral or repay our outstanding borrowings.  As of May
11, 2009, our lenders have notified us that we are currently in breach of the
minimum security requirement contained in our fully revolving credit facility as
a result of the decline in the fair market value of our vessels based on
valuations which we believe are not valid based on the lack of liquidity in the
vessel sale and purchase market as noted in the various disclaimers contained in
the valuations obtained by our lenders.  We are currently in
discussions with our lenders regarding the alleged breach; however there can be
no assurance regarding the outcome of our discussions.  Our lenders
have notified us that we are in breach of various other covenants contained in
our loan agreement and we may be unable to refinance our debt or obtain
additional financing.  Please read "Item 5 – Operating and Financial
Review and Prospects – Liquidity and Capital Resources – Indebtedness" for
information concerning the breach of loan covenants contained in our fully
revolving credit facility.





In
addition, if we sell one or more of our vessels at a time when vessel prices
have fallen and before we have recorded an impairment adjustment to our
consolidated financial statements, the sale may be less than the vessel's
carrying value on our consolidated financial statements, resulting in a loss and
a reduction in earnings. Furthermore, if vessel values fall significantly we may
have to record an impairment adjustment in our consolidated financial statements
which could adversely affect our financial results.





We pay interest under our fully
revolving credit facility at a rate of LIBOR plus a margin of
1.75%.  If the market value of our vessels further declines, we may
pay a higher margin under the terms of our fully revolving credit facility. You
should read "Item 5 – Operating and Financial Review and Prospects –
Liquidity and Capital Resources – Indebtedness" for additional information
concerning our fully revolving credit facility.






12




The
fair market value of our vessels, which have experienced high volatility and
have recently declined significantly, may fall further from their currently
depressed levels, and we may have to record a further impairment adjustment to
our financial statements, which would adversely affect financial
results.





If
the fair market value of our vessels, deteriorates significantly from their
currently depressed levels, we may have to record a further impairment
adjustment to our financial statements, which would adversely affect our
financial results and further hinder our ability to raise capital. In addition,
as discussed below, our independent registered public accounting firm has issued
its opinion with an explanatory paragraph in connection with our audited
financial statements included in this report that expresses substantial doubt
about our ability to continue as a going concern.





Our incurrence of a net loss during the
years ended and December 31, 2008 and December 31, 2007, our net working
capital deficit and our inability to adhere to certain financial covenants
under our fully revolving credit facility raise substantial doubt about our
ability to continue as a going concern.




During the years ended December 31, 2008
and December 31, 2007, we incurred losses of $39.8 million and $8.7 million,
respectively. As at December 31, 2008, we reported a working capital deficit of
$231.7 million,which
includes $223.7 million of debt reflected as current, and have not met certain of our
financial covenants under our fully revolving credit facility. As a result, it
is likely that we may continue to not meet the covenants of our credit
facility for the foreseeable future and in the absence of our lenders'
consent, our outstanding indebtedness would be immediately
due.We have plans in
place to improveourperformance and financial strength.
These plans mainly relate to the reduction of vessel operating expenses and
potential sales of one or more vessels to strengthenourfinancial positionin addition to plans for enhancing our
equity capital.Therefore, our ability to continue as a
going concern is dependent on our ability to achieve the sale of the
vessels and to continue to improve our performance, which includes achieving
profitable operations in the future, and the continued support of our
lenders. Our independent registered public accounting firm has issued their
opinion with an explanatory paragraph in connection with our consolidated
financial statements included in this report that expresses substantial doubt
about our ability to continue as a going concern.  Our consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of our
inability to continue as a going concern. However, there is a material
uncertainty related to events or conditions which raises substantial doubt on
our ability to continue as a going concern and, therefore, we may be unable to
realize our assets and discharge our liabilities in the normal course of
business. Although we believe that the actions presently being taken to
further implement our business plan, to sell one or more vessels and generate
revenues, will provide the opportunity for us to continue as a going concern,
there can be no assurances to that effect. On June
24, 2009, we signed a non-binding letter of intent (LOI) with Grandunion, a
company controlled by Michael Zolotas and Nicholas Fistes, that contemplates,
among other things, the acquisition of three Capesize drybulk carriers with an
approximate net asset value of $36.0 million in exchange for 15,977,778 newly
issued shares of Aries Maritime and a change of control of our board of
directors. Please see “Item 4.A. History and Development of the Company – Recent
Developments” for further information concerning the
LOI.





Servicing our debt will substantially
limit our funds available for other purposes, such as vessel acquisitions and
the payment of dividends, if any, in the future.




We
are currently in default of certain financial covenants contained in our credit
facility as explained above and in 'Item 5: Operating and Financial Review
and Prospects', including the requirement to reduce the amount outstanding to
$200 million by the sale of vessels by August 31, 2008, and we are under
negotiation with our lenders about obtaining relevant debt waivers and
restructuring our existing credit facility.  We may be unable to
restructure or refinance our existing credit facility on terms that are
favorable to us or at all. A large part of our cash from operations may be
required to pay principal and interest on our debt. Our debt service payments
will reduce our funds available for other purposes, including those that may be
in the best interests of our shareholders. We cannot assure you that our future
cash flows will be adequate to fund future vessel acquisitions or to pay
dividends.




For fiscal year 2008, we were dependent
upon three significant charterers for the majority of our revenues and we
will need to find new employment for these vessels in the currently depressed
charter market, which may adversely affect our results of operations and cash
flows.





We have historically derived a
significant part of our revenue from a small number of charterers. During 2008,
approximately 55% of our revenue was derived from three charterers, Stena Group,
Deiulemar Compagnia di Navigazione S.p.A and CMA CGM S.A. One of our charter
agreements with Deiulemar  Compagnia di Navigazione S.p.A. expired in
June 2009 and the other is set to expire later in 2009 and we
will need to seek new employment for these two vessels in the currently
depressed charter market.  The loss of charterers upon whom we have
historically been dependent may adversely affect our results of operations, cash
flows and financial condition. Further, after the sales of three vessels in
April and June 2008, we now operate a fleet of 12 vessels. Assumingthatwe sell one or more additional vessels
in order to reduce our outstanding balance under our credit facility, we will operate asmaller fleet.As the size of our fleet decreases, we
will become increasingly dependent upon a limited number of charterers for our
revenues.




Our charterers may terminate or default
on their charters, which could adversely affect our results of operations and
cash flow.




Our charters may terminate earlier than
the dates indicated in the section "Our Fleet" in "Item 4 – Information on the
Company."  The terms of our charters vary as to which events or
occurrences will cause a charter to terminate or give the charterer the option
to terminate the charter, but these generally include a total or constructive
total loss of the related vessel, the requisition for hire of the related vessel
or the failure of the related vessel
to meet specified performance criteria. In addition, the ability of each of our
charterers to perform its obligations under a charter will depend on a number of
factors that are beyond our control. These factors may include general economic
conditions, the condition of a specific shipping market sector, the charter
rates received for specific types of vessels and various operating expenses. The
costs and delays associated with the default by a charterer of a vessel may be
considerable and may adversely affect our business, results of operations, cash
flows and financial condition.






13






We cannot predict whether our charterers
will, upon the expiration of their charters, recharter our vessels on favorable
terms or at all. If our charterers decide not to recharter our vessels, we may
not be able to recharter them on terms similar to the terms of our current
charters. In the future, we may also employ our vessels on the spot charter
market, which is subject to greater rate fluctuation than the time charter
market.




The time charters for six of our vessels
currently provide for charter rates that are above current market rates. If we
receive lower charter rates under replacement charters or are unable to
recharter all of our vessels, our business, results of operations, cash flows
and financial condition may be adversely affected.





In
addition, in depressed market conditions, our charterers may no longer need a
vessel that is currently under charter or may be able to obtain a comparable
vessel at lower rates. As a result, charterers may seek to renegotiate the terms
of their existing charter parties or avoid their obligations under those
contracts. Should a counterparty fail to honor its obligations under agreements
with us, we could sustain significant losses which could have a material adverse
effect on our business, results of
operations, cash flows and financial condition.




Our ability to obtain additional debt
financing may depend on the performance of our then existing charters and the
creditworthiness of our charterers.




The actual or perceived credit quality
of our charterers, and any defaults by them, may materially affect our ability
to obtain the additional capital resources that we will require to purchase
additional vessels or may significantly increase our costs of obtaining that
capital. Our inability to obtain additional financing or our ability to obtain
additional financing at higher than anticipated costs may materially and
adversely affect our business, results of operations, cash flows and financial
condition.





We may be unable
to attract and retain key management personnel and other employees in the
shipping industry, which may negatively impact the effectiveness of our
management and our results of operations.





Our
success depends to a significant extent upon the abilities and efforts of our
management team. We have entered into employment contracts with our Chief
Executive Officer, Jeffrey Owen Parry and our Chief Financial Officer, Ioannis
Makris. Our success will depend upon our ability to retain key members of our
management team and to hire new members as may be necessary. The loss of any of
these individuals could adversely affect our business prospects and financial
condition. Difficulty in hiring and retaining replacement personnel could have a
similar effect. We do not maintain "key man" life insurance on any of our
officers.




Our
board of directors has determined to suspend the payment of cash dividends in
order to preserve capital and to allow management to focus on improving our
operating results, and until conditions improve in the international shipping
industry and credit markets, it is unlikely that we will reinstate the payment
of dividends.





On
September 12, 2008, our board of directors determined to suspend payment of our
quarterly dividend, effective immediately. The decision followed our new
management's strategic review of our business and reflected our focus on
improving our long-term strength and operational results. We will make dividend payments to our
shareholders only if our board of directors, acting in its sole discretion,
determines that such payments would be in our best interest and in compliance
with relevant legal and contractual requirements. The principal business factors
that our board of directors expects to consider when determining the timing and
amount of dividend payments will be our earnings, financial condition and cash
requirements at the time. Currently, the principal contractual and legal
restrictions on our ability to make dividend payments are those contained in our
fully revolving credit facility agreement and those created by Bermuda
law.




Our credit agreement prohibits us from
paying a dividend if an event of default under the credit agreement is
continuing or would result from the payment of the dividend. Our credit
agreement further requires us to maintain financial ratios and minimum liquidity
and working capital amounts. Our obligations pursuant to these and other terms
of our fully revolving credit facility could prevent us from making dividend
payments under certain circumstances.  In March 2008, pursuant to the
condition imposed by our lenders in connection with the relaxation of the
interest coverage ratio under our credit facility, our board of directors
suspended the payment of quarterly dividends commencing with the dividend in
respect of the fourth quarter of 2007.  The Company resumed payment of
dividends with a dividend of $0.10 per share in respect of the first quarter of
2008. In September 2008, our board of directors suspended the payment of
quarterly dividends commencing with the dividend in respect of the second
quarter of 2008.




Under Bermuda law, we may not declare or
pay dividends if there are reasonable grounds for believing that (1) we are, or
would after the payment be, unable to pay our liabilities as they become due or
(2) the realizable value of our assets would thereby be less than the sum of our
liabilities, our issued share capital (the total par value of all outstanding
shares) and share premium accounts (the aggregate amount paid for the
subscription for our shares in excess of the aggregate par value of such
shares). Consequently, events beyond our control, such as a reduction in the
realizable value of our assets, could cause us to be unable to make dividend
payments.






14




We may incur other expenses or
liabilities that would reduce or eliminate the cash available for distribution
as dividends in the future. We may also enter into new agreements or new legal
provisions may be adopted that will restrict our ability to pay dividends in the
future. As a result, we cannot assure you that we will be able to reinstate the
payment of dividends.




We are dependent in part upon third
party managers for the management of our vessels.





Currently, International Tanker
Management Limited, or ITM, based in Dubai, performs technical management of
five of our vessels, Ernst Jacob Ship Management GmbH performs technical
management of theChinookand AMT Management Ltd., or AMT
Management, our wholly-owned subsidiary, performs technical management for our
three container vessels and theNordanvind. Currently, AMT Management performs the
commercial management for all of our vessels. TheStena
Compassand theStena
Compassionare employed
under a bareboat charter. In addition, we are generally required to obtain
approval from our lenders to change our ship managers.





The loss of services of one or more
of our managers or the failure of one or more of our managers to perform
their obligations under the respective management agreements could materially
and adversely affect our business, results of operations, cash flows and
financial condition. Although we may have rights against ITM and/or Ernst Jacob
if they default on their obligations to us, our shareholders will not directly
share that recourse.




The ability of our ship managers to
continue providing services for our benefit will depend in part on their own
financial strength. Circumstances beyond our control could impair the financial
strength of our ship managers. Because our third party ship managers are
privately held companies, it is unlikely that information about their financial
strength would become public prior to any default by such ship manager under the
management agreements. As a result, an investor in our shares might have little
advance warning of problems affecting our ship managers, even though those
problems could have a material adverse effect on us.




We are a holding company, and we depend
on the ability of our subsidiaries to distribute funds to us in order to satisfy
our financial and other obligations and to make dividend payments, if any, in
the future.




We are a holding company, and we have no
significant assets other than the equity interests in our subsidiaries. Our
subsidiaries own all our vessels, and payments under the charters with our
charterers are made to our subsidiaries. As a result, our ability to satisfy our
financial and other obligations and to pay dividends, if any, in the future
depends on the performance of our subsidiaries and their ability to distribute
funds to us. If we are unable to obtain funds from our subsidiaries, we will not
be able to pay dividends unless we obtain funds from other
sources.  We cannot assure you that we will be able to obtain the
necessary funds from other sources.





If we are unable to operate our vessels
efficiently, we may be unsuccessful in competing in the highly competitive
international tanker market.




The operation of tanker vessels and
transportation of crude and petroleum products is extremely competitive.
Competition arises primarily from other tanker owners, including major oil
companies as well as independent tanker companies, some of whom have
substantially greater resources. Competition for the transportation of oil and
oil products can be intense and depends on price, location, size, age, condition
and the acceptability of the tanker and its operators to the charterers. We will
have to compete with other tanker owners, including major oil companies as well
as independent tanker companies.Due in part to the highly fragmented
market, competitors with greater resources could enter the product tanker and container vessel
shipping markets and operate larger fleets through consolidations or
acquisitions and may be able to offer lower charter rates and higher quality
vessels than we are able to offer.




Our market share may decrease in the
future. We may not be able to compete profitably as we expand our business into
new geographic regions or provide new services. New markets may require
different skills, knowledge or strategies than we use in our current markets,
and the competitors in those new markets may have greater financial strength and
capital resources than we do.




We may not be able to grow or
effectively manage our growth.




A principal focus of our strategy is to
grow by expanding our product tanker fleet as opportunities are
identified. Our future growth will depend on a number of factors, including
our ability to restructure our credit facility and other factors, some of which
we can control and some of which we cannot. These factors include our ability
to:




·
              identify vessels for
      acquisition;
 
 ·
              consummate
      acquisitions;
 
 ·
              integrate acquired vessels
      successfully with our existing
  operations;




15






















·
            identify businesses engaged in
      managing, operating or owning vessels for acquisitions or joint
      ventures;





·
            hire, train and retain qualified
      personnel and crew to manage and operate our growing business and
      fleet;





·
            identify additional new
      markets;





·
            improve our operating, financial
      and accounting systems and controls;
and





·
            obtain required financing for our
      existing and new operations.




A deficiency in any of these factors
could adversely affect our ability to achieve anticipated growth in cash flows
or realize other anticipated benefits. In addition, competition from other
buyers could reduce our acquisition opportunities or cause us to pay a higher
price than we might otherwise pay.




The process of integrating acquired
vessels into our operations may result in unforeseen operating difficulties, may
absorb significant management attention and may require significant financial
resources that would otherwise be available for the ongoing development and
expansion of our existing operations. Future acquisitions could result in the
incurrence of additional indebtedness and liabilities that could have a material
adverse effect on our business, results of operations, cash flows and financial
condition. Further, if we issue additional common shares, your interest in our
Company will be diluted.




Capital expenditures and other costs
necessary to operate and maintain our vessels may increase due to changes in
governmental regulations, safety or other equipment
standards.




Changes in governmental regulations,
safety or other equipment standards, as well as compliance with standards
imposed by maritime self-regulatory organizations and customer requirements or
competition, may require us to make additional expenditures. In order to satisfy
these requirements, we may, from time to time, be required to take our vessels
out of service for extended periods of time, with corresponding losses of
revenues. In the future, market conditions may not justify these expenditures or
enable us to operate some or all of our vessels profitably during the remainder
of their economic lives.




If we are unable to fund our capital
expenditures, we may not be able to continue to operate some of our vessels,
which would have a material adverse effect on our business.




In order to fund our capital
expenditures, we may be required to incur borrowings or raise capital through
the sale of debt or equity securities. Our ability to access the capital markets
through future offerings may be limited by our financial condition at the time
of any such offering as well as by adverse market conditions resulting from,
among other things, general economic conditions and contingencies and
uncertainties that are beyond our control. Currently, under our credit facility,
we are restricted in incurring additional borrowings and in making capital
expenditures for new vessel acquisitions. Our failure to obtain the funds for
necessary future capital expenditures would limit our ability to continue to
operate some of our vessels and could have a material adverse effect on our
business, results of operations and financial condition.




Unless we set aside reserves or are able
to borrow funds for vessel replacement, at the end of a vessel's useful life our
revenue will decline, which would adversely affect our business, results of
operations and financial condition.





Unless we maintain reserves or are able
to borrow or raise funds for vessel replacement we will be unable to replace the
vessels in our fleet upon the expiration of their remaining useful lives, which
we estimate to be 25 years. Our cash flows and income are dependent on the
revenues earned by the chartering of our vessels to customers. If we are unable
to replace the vessels in our fleet upon the expiration of their useful lives,
our business, results of operations and financial condition, if any, in the
future will be materially and adversely affected.  Any reserves set
aside for vessel replacement may not be available for dividends, if any, in the
future.





Risks
associated with operating ocean-going vessels could affect our business and
reputation, which could adversely affect our revenues and stock
price.





The
operation of ocean-going vessels carries inherent risks. These risks include the
possibility of:





·
            marine
      disaster;





·
            environmental
      accidents;





·
            cargo
      and property losses or damage;





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






16





·
            piracy.





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




The operation of tankers involves
certain unique operational risks.





The operation of tankers has unique
operational risks associated with the transportation of oil. An oil spill
may cause significant environmental damage, and a catastrophic spill could
exceed the insurance coverage available. Compared to other types of
vessels, tankers are exposed to a higher risk of damage and loss by fire,
whether ignited by a terrorist attack, collision, or other cause, due to the
high flammability and high volume of the oil transported in
tankers.




If we are unable to adequately maintain
or safeguard our vessels we may be unable to prevent these events. Any of these
circumstances or events could negatively impact our business, financial
condition and results of operations. In addition, the loss of any of our vessels
could harm our reputation as a safe and reliable vessel owner and
operator.




Exposure to currency exchange rate
fluctuations will result in fluctuations in our cash flows and operating
results.




We generate all our revenues in U.S.
dollars, but a portion of our vessel operating expenses are in currencies other
than U.S. dollars and we incur general and administrative expenses in currencies
other than the U.S. dollar. For the year ended December 31, 2008, we incurred
12% of our operating expenses in currencies other than the U.S. dollar. This
difference could lead to fluctuations in our vessel operating expenses, which
would affect our financial results. Expenses incurred in foreign currencies
increase when the value of the U.S. dollar falls, which would reduce our
profitability. For example, in the year ended December 31, 2008, the value of
the U.S. dollar reached highs of $1.25 and lows of $1.59 compared to the Euro,
and as a result, a 1% adverse movement in U.S. dollar exchange rates would
have increased our vessel operating expenses.




Our incorporation under the laws of
Bermuda may limit the ability of our shareholders to protect their
interests.




We are a Bermuda company. Our memorandum
of association and bye-laws and the Companies Act 1981 of Bermuda, or the BCA,
as amended, govern our corporate affairs. Investors may have more difficulty in
protecting their interests in the face of actions by management, directors or
controlling shareholders than would shareholders of a corporation incorporated
in a United States jurisdiction. Under Bermuda law, a director generally owes a
fiduciary duty only to the company, not to the company's shareholders. Our
shareholders may not have a direct cause of action against our directors. In
addition, Bermuda law does not provide a mechanism for our shareholders to bring
a class action lawsuit under Bermuda law. Further, our bye-laws provide for the
indemnification of our directors or officers against any liability arising out
of any act or omission, except for an act or omission constituting fraud or
dishonesty. There is a statutory remedy under Section 111 of the Companies Act,
which provides that a shareholder may seek redress in the courts as long as such
shareholder can establish that our affairs are being conducted, or have been
conducted, in a manner oppressive or prejudicial to the interests of some part
of the shareholders, including such shareholder. However, the principles
governing Section 111 have not been well developed.





If the recent volatility in LIBOR
continues, it could affect our profitability, earnings and cash
flow.





LIBOR
has recently been volatile, with the spread between LIBOR and the prime lending
rate widening significantly at times. These conditions are the result of the
recent disruptions in the international credit markets. Because the interest
rates borne by our outstanding indebtedness fluctuate with changes in LIBOR, if
this volatility were to continue, it would affect the amount of interest payable
on our debt, which in turn, could have an adverse effect on our profitability,
earnings and cash flow. Recently,
however, lenders have insisted on provisions that entitle the lenders, in their
discretion, to replace published LIBOR as the base for the interest calculation
with their cost-of-funds rate. If we are required to agree to such a provision
in future loan agreements, our lending costs could increase significantly, which
would have an adverse effect on our profitability, earnings and cash
flow.




It may not be possible for investors to
enforce U.S. judgments against us.




We and all our subsidiaries are
incorporated in jurisdictions outside the U.S., substantially all of our assets
and those of our subsidiaries are located outside the U.S. In addition, most of
our directors and officers are non-residents of the U.S., and all or a
substantial portion of the assets of these non-residents are located outside the
U.S. As a result, it may be difficult or impossible for U.S. investors to serve
process within the U.S. upon us, our subsidiaries or our directors and officers
or to enforce a judgment against us for civil liabilities in U.S. courts. In
addition, you should not assume that courts in the countries in which we or our
subsidiaries are incorporated or where our or the assets of our subsidiaries are
located (1) would enforce judgments of U.S. courts obtained in actions against
us or our subsidiaries based upon the civil liability provisions of applicable
U.S. federal and state securities laws or (2) would enforce, in original
actions, liabilities against us or our subsidiaries based on those
laws.


17






U.S. tax authorities could treat us as a
"passive foreign investment company," which could have adverse U.S. federal
income tax consequences to U.S. shareholders.




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




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




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




If the IRS were to find that we are or
have been a PFIC for any taxable year, our U.S. shareholders would face adverse
and special U.S. tax consequences. Among other things, the distributions a
shareholder received with respect to our shares and the gain, if any, a
shareholder derived from his sale or other disposition of our shares would be
taxable as ordinary income (rather than as qualified dividend income or capital
gain, as the case may be), would be treated as realized ratably over his holding
period in our common shares, and would be subject to an additional interest
charge. However, a U.S. shareholder may be able to make certain tax elections
that would ameliorate these consequences.




We may have to pay tax on United States
source income, which would reduce our earnings.




Under the Code, 50% of the gross
shipping income of a vessel-owning or chartering corporation, such as our
Company and our subsidiaries, that is attributable to transportation that begins
or ends, but that does not both begin and end, in the United States is
characterized as U.S.-source shipping income and is subject to a 4% United
States federal income tax without allowance for deduction, unless that
corporation qualifies for exemption from tax under Section 883 of the Code and
the related Treasury Regulations.




We expect that we and each of our
subsidiaries qualifies for this statutory tax exemption, and we take this
position for United States federal income tax reporting purposes. However, there
are factual circumstances beyond our control that could cause us to lose the
benefit of this tax exemption and thereby become subject to United States
federal income tax on our United States-source income.





For example, Aries Energy Corporation,
or Aries Energy (through its wholly-owned subsidiary Rocket Marine Inc., or
Rocket Marine), owns approximately 52% of our outstanding common shares. We are
ineligible to qualify for exemption under Section 883 for any taxable year in
which Aries Energy alone or together with other shareholders with a 5% or
greater interest in our common shares, or the 5% shareholder group, own 50% or
more of our outstanding common shares on more than half the days during such
taxable year and we are unable to establish in accordance with the Treasury
Regulations that within the 5% shareholder group there are sufficient qualified
shareholders for purposes of Section 883 to preclude non-qualified shareholders
within such group from owning 50% or more of the value of our common stock for
more than half the number of days during the taxable year. In order to establish
this, qualified shareholders within the 5% shareholder group would have to
provide us with certain information in order to substantiate their identity as
qualified shareholders. Captain Gabriel Petridis, a 50% beneficial owner of
Aries Energy, has agreed to provide us with such information. Notwithstanding
this agreement, we may be unable to establish in conformity with the Treasury
Regulations that there are sufficient qualified shareholders within the 5%
shareholder group to allow us to qualify for exemption under Section 883. Due to
the factual nature of the issues involved, we can give no assurances regarding
our tax-exempt status or that of any of our subsidiaries for any future taxable
year.






18




If we or our subsidiaries are not
entitled to exemption under Section 883 of the Code for any taxable year, the
imposition of a 4% U.S. federal income tax on our U.S.-source shipping income
and that of our subsidiaries could have a negative effect on our business and
would result in decreased earnings available for distribution to our
shareholders.




Risks Relating to Our Common
Stock




The market price of our common shares
has fluctuated widely and the market price of our common shares may fluctuate in
the future.





The
market price of our common shares has fluctuated widely since we became a public
company in June 2005 and may continue to do so as a result of many factors,
including our actual results of operations and perceived prospects, the
prospects of our competition and of the shipping industry in general and in
particular the product tanker and container vessel sectors, differences between
our actual financial and operating results and those expected by investors and
analysts, changes in analysts' recommendations or projections, changes in
general valuations for companies in the shipping industry, particularly the
product tanker and container vessel sectors, changes in general economic or
market conditions and broad market fluctuations.





Our
common shares have traded below $5.00 per share, and the last reported sale
price on The Nasdaq Global Market on June25, 2009 was $0.76 per share. If the market
price of our common shares remains below $5.00 per share, under stock exchange
rules, our shareholders will not be able to use such shares as collateral for
borrowing in margin accounts. This inability to continue to use our common
shares as collateral may lead to sales of such shares thereby creating downward
pressure on and increased volatility in the market price of our common
shares.





In
addition, under the rules of The Nasdaq Stock Market, listed companies have
historically been required to maintain a share price of at least $1.00 per share
and if the share price declines below $1.00 for a period of 30 consecutive
business days, then the listed company would have a cure period of at least 180
days to regain compliance with the $1.00 per share minimum. In light of recently
deteriorating market conditions, under a rule change recently approved by the
Securities and Exchange Commission, the Nasdaq Stock Market has temporarily
suspended the minimum share price requirement through July 19, 2009. Following
the expiration of the suspension, in the event that our share price declines
below $1.00 for a period of 30 consecutive business days, we may be required to
take action, such as a reverse stock split, in order to comply with Nasdaq rules
that may be in effect at the time.





There may not be an active market for
our common shares, which may cause our common shares to trade at a discount and
make it difficult to sell the common shares you purchase.




We cannot assure you that an active
trading market for our common shares will be sustained. We cannot assure you of
the price at which our common shares will trade in the public market in the
future or that the price of our shares in the public market will reflect our
actual financial performance. You may not be able to resell your common shares
at or above their current market price. Additionally, a lack of liquidity may
result in wide bid-ask spreads, contribute to significant fluctuations in the
market price of our common shares and limit the number of investors who are able
to buy the common shares.




The product tanker and container vessel
sectors have been highly unpredictable and volatile. The market price of our
common shares may be similarly volatile.




Future sales of our common shares could
cause the market price of our common shares to decline.




The market price of our common shares
could decline due to sales of a large number of shares in the market, including
sales of shares by our large shareholders, or the perception that these sales
could occur. These sales, or the perception that these sales could occur, could
also make it more difficult or impossible for us to sell equity securities in
the future at a time and price that we deem appropriate to raise funds through
future offerings of common shares.




Aries Energy owns approximately 52% of
our common shares. Aries Energy through Rocket Marine is eligible to sell any of
our common shares, directly or indirectly, in the public market. We have entered
into a registration rights agreement with Rocket Marine that entitles it to have
all of its remaining shares registered for sale in the public market. In
addition, these shares could be sold into the public market after one year
pursuant to Rule 144 under the Securities Act of 1933, as amended, or the
Securities Act, subject to certain volume, manner of sale and notice
requirements. Sales or the possibility of sales of substantial amounts of our
common shares by Aries Energy in the public markets could adversely affect the
market price of our common shares.





Rocket Marine Inc., an affiliate, owns
approximately 52% of our outstanding common shares and as a result, Rocket
Marine is able to control the outcome of shareholder votes.




Rocket Marine Inc.,
a wholly-owned subsidiary of Aries Energy, owns approximately 52% of our
outstanding common shares. As a result of this share ownership and for so long
as Rocket Marine owns a significant percentage of our outstanding common shares,
Rocket Marine will be able to control or influence the outcome of any
shareholder vote, including the election of directors, the adoption or amendment
of provisions in our memorandum of association or bye-laws and possible
mergers, amalgamations, corporate control contests and other significant
corporate transactions. This concentration of ownership may have the effect of
delaying, deferring or preventing a change in control, merger, amalgamation,
consolidation, takeover or other business combination. This concentration of
ownership could also discourage a potential acquirer from making a tender offer
or otherwise attempting to obtain control of us, which could in turn have an
adverse effect on the market price of our common shares.  In addition,
this concentration of ownership has had, and may continue to have, an adverse
effect on the liquidity of our common shares.






19






On June 24, 2009,
we signed a non-binding letter of intent (LOI) with Grandunion, a company
controlled by Michael Zolotas and Nicholas Fistes, that contemplates, among
other things, the acquisition of three Capesize drybulk carriers with an
approximate net asset value of $36.0 million in exchange for 15,977,778 newly
issued shares of Aries Maritime and a change of control of our board of
directors. Please see “Item 4.A. History and Development of the Company – Recent
Developments” for further information concerning the LOI. If this transaction
occurs, Grandunion and Rocket Marine would control in the aggregate,
approximately 69% of
our outstanding common shares.




Anti-takeover provisions in our
organizational documents could have the effect of discouraging, delaying or
preventing a merger, amalgamation or acquisition, which could adversely affect
the market price of our common shares.




Several provisions of our bye-laws could
discourage, delay or prevent a merger or acquisition that shareholders may
consider favorable. These include provisions:




·
            authorizing our board of directors
      to issue "blank check" preference shares without shareholder
      approval;




·
            establishing a classified board of
      directors with staggered, three-year
  terms;





·
            prohibiting us from engaging in a
      "business combination" with an " interested shareholder" for a period of
      three years after the date of the transaction in which the person becomes
      an interested shareholder unless certain conditions are
      met;





·
            not permitting cumulative voting
      in the election of
directors;




·
            authorizing the removal of
      directors only for cause and only upon the affirmative vote of the holders
      of at least 80% of our outstanding common
  shares;




·
            limiting the persons who may call
      special meetings of shareholders to our board of directors, subject to
      certain rights guaranteed to shareholders under the BCA;
      and




·
            establishing advance notice
      requirements for nominations for election to our board of directors and
      for proposing matters that can be acted on by shareholders at our
      shareholder meetings.




These provisions could have the effect
of discouraging, delaying or preventing a merger, amalgamation or acquisition,
which could adversely affect the market price of our common
shares.





20




ITEM
      4.
            INFORMATION
      ON THE COMPANY




A.          
  History and Development of the Company




We are Aries Maritime Transport Limited,
or Aries Maritime, a Bermuda company incorporated in January 2005 as a
wholly-owned indirect subsidiary of Aries Energy Corporation, or Aries Energy.
We are an international shipping company that owns product tankers and container
vessels. In March 2005, subsidiaries of Aries Energy contributed to us all of
the issued and outstanding stock of 10 vessel-owning companies in exchange for
shares in our Company. As a result, we hold 100% of the issued and outstanding
stock of each vessel-owning company. Because our ownership percentage in each
vessel-owning company was identical to each contributing subsidiary's prior
ownership percentage in the same vessel-owning company, the group reorganization
was accounted for as an exchange of equity interests at historical cost. On June
8, 2005, Aries Maritime closed its initial public offering of 12,240,000 common
shares at an offering price of $12.50 per share. On July 6, 2005, the
underwriters exercised a portion of the over-allotment, resulting in an
additional 1,400,000 shares of our common stock being sold. Our common stock is
listed on the Nasdaq Global Market under the symbol "RAMS." The address of our
principal executive office is 18 Zerva Nap., Glyfada, 166 75,
Greece.





Our primary capital expenditures are in
connection with the acquisitions of vessels. Since the date of our
incorporation, we have exercised an option to reacquire two additional container
vessels,MSC
Seine(exCMA CGM
Seine)andSaronikos Bridge
(exCMA CGM
Makassar), from an
affiliate of Aries Energy and took delivery of the vessels in June and July
2005, respectively. Also, in October 2005, contracts were entered into for the
purchase of two new product tankers,Stena
CompassandStena
Compassion. TheStena
Compasswas delivered in
February 2006 and theStena
Compassionin June 2006. In
November 2005, we took delivery of the 2001-built product tankerChinook.





The aggregate purchase price of the
three vessels we acquired in 2005 was $103.2 million and the aggregate purchase
price of the two vessels we acquired in 2006 was $112.2 million. The aggregate net sales price of
the three vessels sold during 2008 was $59.6 million and we realized a gain of
$13.6 million in discontinued operations. Under the terms of our credit facility
as described below, we are obligated to reduce the amount outstanding from the
current level of $284.8 million to $200.0 million, by disposal of vessels, by
August 31, 2008. See note 6 to our consolidated financial statements included
in this report.





In March 2008, we announced that the
Board of Directors had initiated a review to evaluate strategic alternatives to
enhance shareholder value. After careful consideration of various strategic
alternatives, including potential capital raises and the continued execution of
the Company's operating plan, the Board of Directors concluded its review of
strategic alternatives and decided that it was in the best interests of our
shareholders to continue execution of the Company's operating
plan.





Further
to the Fifth Supplemental Agreement with our lenders signed on June 11, 2008, as
described below, based on which we were obliged to reduce our outstanding
borrowings from $284.8 million to $200 million, in February 2008 and March 2008,
we entered into contracts for the sale of the Arius, MSC Oslo and Energy 1.  Arius was sold and delivered
to her new owners in June 2008 for a net sales price of $21.4 million and a gain
on the sale of $8.6 million. MSC Oslo and Energy 1 were sold and
delivered to their new owners in April and June for a net sales price of $19.7
million and $18.5 million respectively. The vessels were delivered to their new
owners in April 2008 and June 2008 respectively and the gain on the sale of the
vessels amounted to $2.9 million and $2.1, respectively. On June 10, 2009, we
entered into a contract for the sale of the Ocean Hope for a net sales
price of $2.3 million. We expect to deliver the vessel to its new owners between
June 29 and July 15, 2009.




As a
result of these acquisitions and disposals, our fleet now consists of nine
product tankers with an aggregate capacity of approximately
489,802  dwt and three container vessels with an aggregate capacity of
approximately 7,633 TEU. On June 10, 2009, we entered into a contract for the
sale of the Ocean Hope
for a net sales price of $2.3 million. We expect to deliver the vessel to its
new owners between June 29 and July 15, 2009.
 
 Recent
Developments
 
 On June
24, 2009, we entered into a non-binding letter of intent with Grandunion, Inc.,
or Grandunion, a company controlled by Michael Zolotas and Nicholas Fistes, that
contemplates, among other things, the acquisition of three Capesize drybulk
carriers with an approximate net asset value of $36.0 million in exchange for
15,977,778 newly issued shares of the Company and a change of control of our
board of directors.
 
 Upon
closing the transaction, Mr. Fistes would serve as the Chairman of our board of
directors, and Mr. Zolotas would serve as a member of our board of directors and
our President. Grandunion would also designate our Chief Financial Officer and
four out of seven members of our board of directors (including Messrs. Fistes
and Zolotas).
 
 The
letter of intent is subject to a number of conditions, including (a) the receipt
of a commitment letter from an investment bank for a fully underwritten private
issuance of $145.0 million aggregate principal amount of 7% Senior Unsecured
Convertible Notes due 2014 (the "Notes"), convertible into common shares at a
conversion price of $0.75 per share, and the proceeds of which would be used
primarily to fund vessel acquisitions and partially repay existing indebtedness;
and (b) obtaining certain amendments to our existing senior credit
facility.
 
 The
letter of intent obligates the parties to negotiate in good faith, but does not
obligate them to complete definitive agreements or to close the transaction. The
letter of intent provides for a binding 60-day exclusivity period, during which
Grandunion may complete due diligence and we and Grandunion may negotiate
definitive agreements, and a $3,000,000 break-up fee payable to Grandunion if we
accept an offer from a third party during the exclusivity period and enter into
a definitive agreement with that party. The exclusivity period will terminate if
Grandunion is unable to procure a signed commitment letter within 15 days of the
date of the letter of intent to fully underwrite the $145.0 million in principal
amount of the Notes and within 30 days of the date of the letter of intent a
firm commitment from our syndicate of lenders to make certain amendments to our
existing credit facility. The letter of intent may also be terminated if no
definitive agreement has been entered into by August 31, 2009.
 
 The
letter of intent provides that the exclusivity period will be automatically
extended if the parties sign a definitive agreement, which shall contain
customary "superior proposal" provisions and break-up fees.
 
 The
letter of intent provides that any definitive agreement would be subject, among
other things, to customary closing conditions, to the execution of ancillary
agreements and to:
 
 ·
              Entry
      by Rocket Marine into a voting agreement in Grandunion's favor;
      and
 
 ·
              Transfer
      by Grandunion to Rocket Marine of 2,666,667 common shares in consideration
      of Rocket Marine’s entry into a voting
  agreement.


B.       
     Business Overview




Our Fleet




As of December 31, 2008 andJune
25, 2009, our fleet
consisted of nine product tankers and three container vessels, including the
Ocean
Hope, which we have contracted to sell. Our nine product tankers
consisted of five double-hulled MR tankers and four double-hulled Panamax
tankers.Set forth below is
summary information concerning our fleet as ofJune
25, 2009.




Vessel Name
                  Size
                  Year Built
                  Charterer
                  Charter
      Expiration
                  
                  Net DailyCharter hireRateProduct
    TankersAltius
                  73,400 dwt
                  2004
                  Spot
                  -
                  
                  
                  -Fortius
                  73,400 dwt
                  2004
                  Deiulemar/Enel
                  August 2009
                  
                  $
                  14,860Nordanvind
                  38,701 dwt
                  2001
                  Spot
                  -
                  
                  
                  -Ostria (ex
      Bora)
                  38,701 dwt
                  2000
                  Spot
                  -
                  
                  
                  -High Land
                  41,450 dwt
                  1992
                  IPG
                  September
    2009
                  
                  $
                  14,822.50
                  (1)High Rider
                  41,502 dwt
                  1991
                  IPG
                  October
2009
                  
                  $
                  15,015
                  (1)Stena
    Compass
                  72,750 dwt
                  2006
                  Stena Group
                  August 2010
                  
                  $
                  18,232.50
                  (2)(3)Stena
      Compassion
                  72,750 dwt
                  2006
                  Stena Group
                  December 2010
                  
                  $
                  18,232.50
                  (2)(3)Chinook
                  38,701 dwt
                  2001
                  Spot
                  -
                  
                  
                  -Container
      VesselsSaronikos Bridge (ex CMA CGM
      Makassar)
                  2,917 TEU
                  1990
                  CMA CGM
                  June2010
                  $
                  20,400MSC Seine (formerlyCMA CGM Seine)
                  2,917 TEU
                  1990
                  MSC
                  September 2009
                  $
                  14,918.50Ocean Hope
                  1,799 TEU
                  1989
                  
                  ------
                  $
                  -------
                  (4)


(1)
            We
      have received notice of early redelivery for the High Land on June
      30, 2009 and the High
      Rider on July 8-10, 2009, under early termination provisions
      contained in the current time charter agreement.(2)
            Plus
      additional income under profit sharing provisions of our charter agreement
      with Stena Group.(3)
            Bareboat
      charters(4)
            On
      June 10, 2009, we entered into a contract for the sale of the Ocean Hope for a net
      sales price of $2.3 million. We expect to deliver the vessel to its new
      owners between June 29 and July 15,
2009.




21


Our product tankers are designed to
transport several different refined petroleum products simultaneously in
segregated coated cargo tanks. These cargoes typically include gasoline, jet
fuel, kerosene, naphtha and heating oil, as well as edible oils. The average age
of our product tankers was approximately eight years as of December 31, 2008.
Six of our product tankers were employed under period charters as of December
31, 2008, with remaining terms ranging from approximately six months to two
years, with the exception ofOstria, Nordanvind
andChinook,which were
operating in the spot market.





Our three container vessels ranged in
capacity from 1,799 to 2,917 TEU and had an average age of 19.2 years as of
December 31, 2008. Container vessels of this size are generally utilized in the
North/South trade routes that link Europe and Asia with Latin America, Africa,
India, Australia and New Zealand. Our two larger container vessels are also
utilized in the East/West trade routes that link Europe with the Far East and
the United States. All of our container vessels were employed under time
charters as of December 31, 2008, with current remaining terms ranging from
approximately nine months to 1.6 years.





After our period charters expire, we may
employ our vessels under new period charters or in the spot voyage market
between period charters, depending on the prevailing market conditions at that
time.





Vessel Charters




Currently, seven of our vessels are
committed under period employment agreements with national, regional and
international companies. Pursuant to these agreements, known as charterparties,
we provide these companies, or charterers, with a vessel and crew at a fixed,
per-day rate for a specified term.




The charterers under the time charters
referenced below are generally responsible for, among other things, the cost of
all fuels with respect to the vessels (with certain exceptions, including during
off-hire periods); port charges; costs related to towage, pilotage, mooring
expenses at loading and discharging facilities; and certain operating expenses.
The charterers are not obligated to pay us charter hire for off-hire days, which
include days a vessel is out of service due to, among other things, repairs or
drydockings. Under the time charters, we are generally required, among other
things, to keep the related vessels seaworthy, to crew and maintain the vessels
and to comply with applicable regulations. We are also required to provide
protection and indemnity, hull and machinery, war risk and oil pollution
insurance cover. Our ship management companies perform these duties for us under
the ship management agreements.




Charter periods are typically, at the
charterer's option, subject to (1) extension or reduction by between 15 and 60
days at the end of the final charter period and (2) extension by any amount of
time during the charter period that the vessel is off-hire. A vessel is
generally considered to be "off-hire" during any period that it is out of
service due to damage to or breakdown of the vessel or its equipment or a
default or deficiency of its crew. Under certain circumstances our charters may
terminate prior to their scheduled termination dates. The terms of our charters
vary as to which events or occurrences will cause a charter to terminate or give
the charterer the option to terminate the charter, but these generally include a
total or constructive total loss of the related vessel, the requisition for hire
of the related vessel or the failure of the related vessel to meet specified
performance criteria.




Our vessel,Fortius, is employed under a time charter
with Deiulemar Compagnia di Navigazione S.p.A ("Deiulemar"), an Italian shipping
company, at a daily charter rate of $14,860 per vessel, net of commissions,
which commenced in August
2004. Deiulemar has in turn sub-chartered the vessel to Enel.FTL, an Italian
energy company partly owned by the Italian state. The time charter with
Deiulemar forFortiusis scheduled to expire in August
2009subject to the typical
adjustments discussed above.




Our sister vessels,High Land and High Rider,entered into time charters duringSeptember and October 2008,respectively, with International
Petroleum Group (IPG) for a period of twelve
months.IPG's
main activities are exploration and production of oil & gas, production of
petroleum products and petrochemicals, and marketing of these outputs.Under the terms of these time charters, IPG
is required to pay us a net daily rate of $14,823and $15,015,respectively. We have received notice
of early redelivery for the High Land on June 30,
2009 and the High
Rider on July 8-10, 2009, under early termination provisions
contained in the current time charter agreement.






22




Our vesselSaronikos Bridge
(exCMA CGM
Makassar)is employed
undera time charterto CMA CGM S.A. ("CMA CGM"), a worldwide container shipping
company based in France. Under the terms ofthe time charter, CMA CGMisrequired topay a daily charter rate of $20,400,
net of commissions. This five-year time charter commenced in May 2005 and is
subject to the typical adjustments discussed above.




Our
vessel MSC Seine(ex
CMA CGM Seine) entered
in September 2008 into a twelve month time charter with MSC, a privately-owned
company founded in 1970, which is the second largest container shipping line in
the world.  Under the terms of the time charter, MSC is required to
pay us a daily charter rate of $14,919 net of commissions, subject to the
typical adjustments discussed above.




Our vesselMSC OSLO(exSCI Tej), sister vessel ofM/V Energy
1, was employed under time
charter to MSC, a privately-owned company founded in 1970, which is the second
largest container shipping line in the world.  Under the terms of the
time charter, MSC is required to pay us a daily charter rate of $15,000, net of
commissions, subject to the typical adjustments discussed above. This time
charter commenced on March 8, 2007 and is for two years. As noted above, on
March 25, 2008, the Company announced that it has reached an agreement to sell
both theEnergy 1and its sister ship, theMSC
Oslo,to an unrelated party
for net proceeds totaling approximately $38.2 million and realized a gain of
$5.0 million in discontinued operations. The vessel was delivered to her new
owners on April 30, 2008.




Our
vessel Ocean Hope was
employed under a time charter with China Shipping Container Lines (Asia) Co.
Ltd. ("CSCL"), a company within the China Shipping Group, a state-owned Chinese
shipping conglomerate. Under the terms of the time charter, the daily charter
rate was $13,300, net of commissions. The time charter to CSCL commenced in June
2007 and expired in April 2009. The vessel was redelivered on April 2009 and on
June 10, 2009, we entered into a contract for the sale of the Ocean Hope for a net sales
price of $2.3 million. We expect to deliver the vessel to its new owners between
June 29 and July 15, 2009.




Our
vessels Stena Compass
and Stena Compassion
are currently employed under bareboat charters with two companies of the Stena
Group (Panvictory Ltd. and Panvision Ltd. respectively). Under the terms of the
bareboat charters, the Stena Group companies are required to pay a basic daily
charter rate of $18,233 per vessel, net of commissions. In addition, the Stena
Group companies are required to pay an additional hire equal to 30% of the
actual time charter equivalent above $26,000 per day for each vessel. The
bareboat charters expire in August 2010 and December 2010,
respectively.




The charterers under the bareboat
charters referenced above are generally responsible for the running cost of the
vessels, which include, among other things, operation, maintenance, insurance
(protection and indemnity, hull and machinery, war risk and oil pollution) and
repairs, drydocking and crew. Also, charter hire is not subject to deductions
for off-hire days under the bareboat charters.




Fleet Management





The
vessel-owning companies of our vessels had entered in June 2005 and July 2005
into technical and commercial management agreements with Magnus Carriers, a
related party, except the Chinook which has been
managed by Ernst Jacob Shipmanagement GmbH, or Ernst Jacob, since November 2005,
and the Stena Compass
and Stena Compassion
which have been employed under bareboat charters with two companies of the Stena
Group.  On August 31, 2007, notice of termination was delivered to and
accepted by Magnus Carriers in relation to the twelve existing ship management
agreements.  As a result of the termination, we received a termination
payment from Magnus Carriers of $5.0 million, of which $2.5 million was received
during the year ended December 31, 2007 and the remaining $2.5 million was
received in 2008.





The
technical management for five of our vessels, the Altius, Fortius, Ostria, High
Land and High
Rider, was transferred to International Tanker Management Limited, or
ITM, between October 2007 and January 2008.  ITM was part of the
Wilhelmsen Group, one of the largest ship managers in the world and in February
2009, it was announced that ITM was acquired by V.Ships Shipmanagement, the
world's largest ship manager, providing technical and crewing services to more
than 1,000 ships.  Magnus Carriers retained the commercial management
for these vessels through commercial management agreements entered into in
October 2007. The commercial management for these vessels was transferred to AMT
Management in May 2009.





The
technical management for our three container vessels was transferred from Magnus
Carriers to Wilhelmsen Ship Management (formerly named Barber Ship Management
Singapore Pte Ltd) between December 2007 and February 2008. These technical
management agreements with Wilhelmsen Ship Management were terminated in January
2009 and the technical management for these vessels was transferred to their
current managers, AMT Management, in January 2009. Magnus Carriers retained the
commercial management for these vessels through commercial management agreements
entered into in October 2007. The commercial management for these vessels was
transferred to AMT Management in the beginning of October 2008.





The
technical and commercial management of the Nordanvind was transferred
from Magnus Carriers to AMT Management in November 2008.






23





Currently,
under the ITM and Ernst Jacob management agreements, ITM and Ernst Jacob are
responsible for all technical management of the six vessels, including crewing,
maintenance, repair, capital expenditures, dry-docking and other vessel
operating activities. As compensation for these services, we pay ITM and Ernst
Jacob an amount equal to the budgeted vessel operating expenses, which we have
established jointly with ITM and Ernst Jacob plus an agreed management fee.
These are reviewed and agreed annually.





Currently,
under the AMT Management management agreements, AMT is responsible for the
technical management of four vessels and the commercial management of all of our
vessels including crewing, maintenance, repair, capital expenditures,
dry-docking, insurances and other vessel operating activities.





Under
the commercial management agreements entered into with Magnus Carriers in
October 2007, Magnus provided commercial management services for all our vessels
except Stena Compass
and Stena Compassion,
as well as chartering agency services such as finding employment for our vessels
and identifying and developing vessel acquisition opportunities that will fit
our strategy. We paid Magnus Carriers 1.25% of any gross charter hire and
freight paid to us for new charters or $7,000 per month per vessel for the
vessels under pre-existing charters and 1% of the sale or purchase price in
connection with a vessel sale or purchase that Magnus Carriers brokered for us.
Subsequent to the transfer of the commercial management of our vessels to AMT
Management, between October 2008 and May 2009, Magnus Carriers provides
non-exclusive chartering agency services in exchange for 1.25% of
any gross charter hire and freight paid to us for new charters and 1% of the
sale or purchase price in connection with a vessel sale or purchase that Magnus
Carriers brokers for us.





In
addition, as long as Magnus Carriers performs management services for us, Magnus
Carriers and its principals have granted us a right of first refusal to acquire
or charter any container vessels or any product tankers ranging from 20,000 to
85,000 dwt, which Magnus Carriers, its principals or any of their controlled
affiliates may consider for acquisition or charter in the future.




Crewing and
Employees




As of December 31, 2008, our Group
including our wholly-owned subsidiary, AMT Management Ltd., employed 20
employees, all of whom are shore-based.





Our technical managers ensure that all
seamen have the qualifications and licenses required to comply with
international regulations and shipping conventions and that our vessels employ
experienced and competent personnel.




All
of the employees of our managers are subject to a general collective bargaining
agreement covering employees of shipping agents. These agreements set
industry-wide minimum standards. We have not had any labor interruptions with
our employees under this collective bargaining agreement.





Seasonality





The
demand for product tankers has historically fluctuated depending on the time of
year. Demand for product tankers is influenced by many factors, including
general economic conditions, but it is primarily related to demand for petroleum
products in the areas of greatest consumption. Accordingly, demand for product
tankers generally rises during the winter months and falls during the summer
months in the Northern hemisphere. Moreover, these are generalized trading
patterns that vary from year to year and there is no guarantee that similar
patterns will continue in the future.




The
International Product Tanker Industry




The
international seaborne transportation industry represents the most efficient and
we believe safest method of transporting large volumes of crude oil and refined
petroleum products such as gasoline, diesel, fuel oil, gas oil and jet fuel, as
well as edible oils and chemicals. Over the past five years, seaborne
transportation of refined petroleum products has grown substantially over the
period, although has declined during 2008.


Freight
rates in the refined petroleum product tanker shipping industry are determined
by the supply of product tankers and the demand for crude oil and refined
petroleum products transportation. Factors that affect the supply of product
tankers and the demand for transportation of crude oil and refined petroleum
products include:
  Demand:
  ·
                In
      general, the strength of the global economy and in particular China’s
      economic growth has increased
demand;
  ·
                The
      increase in the distance petroleum products are transported due to the
      increased exports from new refineries in the Middle East and Asia and the
      expected lack of growth in the refining capacity of the refineries in the
      U.S. and Europe; and
  ·
                Increasing
      global production and consumption of refined petroleum products and in
      particular the increase in exports from the Asian and Russian Baltic and
      Caspian regions.
  Supply:
  ·
                Shipyards
      where new ships are constructed are fully booked through 2010, thereby
      limiting the number of new product tankers that will enter the market in
      coming years;
  ·
                The
      phase-out of single hull tankers under more stringent regulatory and
      environmental protection laws and regulations will reduce the overall
      supply of vessels;
  ·
                The
      implementation of stringent safety and security measures has effectively
      reduced the supply of product tankers that are available for hire at any
      particular time;
  ·
                Major
      energy companies are selective in the employment of product tankers and
      have strict vetting standards for approval of vessels for trading;
      and
  ·
                Reclassification
      of vessels that can be used for transportation of vegetable and other
      edible oils beginning January 1,
2007.
  The
International Containership Industry
  The
international containership industry is one of the truly global industries that
are aligned closely to the level of economic activity in the world. The
containership industry is fundamental to international trade as it is the only
practicable and cost effective means of transporting large volumes of many
essential finished goods. The sector is also characterized by strong competition
at all levels. Revenues are sensitive to changes in demand for and supply of
transportation capacity, and can be volatile.
  Over
the past five years, seaborne transportation of containership products has grown
substantially in demand, although during 2008, demand has declined due to the
global economic recession. As a result of the current economic slowdown and
over-capacity in the container shipping industry as well as the state of
the current markets for equity and senior debt,  the potential for cyclical
growth in the containership sector remains uncertain over the near
term.


Environmental and Other
Regulations




Government regulation significantly
affects the ownership and operation of our fleet.We are subject to
various international conventions, laws and regulations in force in the
countries in which our vessels may operate or are registered. Compliance with
such laws, regulations and other requirements can entail significant expense,
including vessel modification and implementation of certain operating
procedures.





A variety of governmental and private
entities subject our vessels to both scheduled and unscheduled inspections.
These entities include the local port authorities (applicable national
authorities such as the U.S. Coast Guard and harbor masters), classification
societies, flag state administration (country of registry) and charterers,
particularly terminal operators, and oil companies. Some of these entities
require us to obtain permits, licenses, certificates and other authorizations
for the operation of our fleet. Our failure to maintain necessary permits or
approvals could require us to incur substantial costs or temporarily suspend
operation of one or more of the vessels in our fleet.




Heightened levels of environmental and
quality concerns among insurance underwriters, regulators and charterers have
led to greater inspection and safety requirements on all vessels and may
accelerate the scrapping of older vessels throughout the industry. Increasing
environmental concerns have created a demand for vessels that conform to
stricter environmental standards. We are required to maintain operating
standards for all of our vessels emphasizing operational safety, quality
maintenance, continuous training of our officers and crews and compliance with
applicable local, national and international environmental laws and regulations.
We believe that the operation of our vessels is in substantial compliance
with applicable environmental laws and regulations and that our vessels have all
material permits, licenses, certificates or other authorizations necessary for
the conduct of our operations; however, because such laws and regulations are
frequently changed and may impose increasingly stricter requirements, we cannot
predict the ultimate cost of complying with these requirements, or the impact of
these requirements on the resale value or useful lives of our
vessels.  In addition, a future serious marine incident that results
in significant oil pollution or otherwise causes significant adverse
environmental impact could result in additional legislation or regulation that
could negatively affect our profitability.






24






International Maritime
Organization




The International Maritime Organization,
or IMO (the United Nations agency for maritime safety and the prevention of
pollution by ships), has adopted the International Convention for the Prevention
of Marine Pollution from Ships, 1973, as modified by the Protocol of 1978
relating thereto, which has been updated through various amendments (the "MARPOL
Convention").The MARPOL Convention implements environmental standards
including oil leakage or spilling, garbage management, as well as the handling
and disposal of noxious liquids, harmful substances in packaged forms, sewage
and air emissions. These regulations, which have been implemented in many
jurisdictions in which our vessels operate, provide, in part, that:





·
            25-year
      old tankers must be of double-hull construction or of a mid-deck design
      with double-sided construction,
unless:





(1)
            they
      have wing tanks or double-bottom spaces not used for the carriage of oil
      which cover at least 30% of the length of the cargo tank section of the
      hull or bottom; or





(2)
            they
      are capable of hydrostatically balanced loading (loading less cargo into a
      tanker so that in the event of a breach of the hull, water flows into the
      tanker, displacing oil upwards instead of into the
  sea);





·
            30-year
      old tankers must be of double hull construction or mid-deck design with
      double-sided construction; And





·
            all
      tankers will be subject to enhanced
inspections.





Also, under IMO regulations, a
newbuild tanker of 5,000 dwt and above must be of double hull construction or a
mid-deck design with double-sided construction or be of another approved design
ensuring the same level of protection against oil pollution if the
tanker:




·
            is
      the subject of a contract for a major conversion or original construction
      on or after July 6, 1993;





·
            commences
      a major conversion or has its keel laid on or after January 6, 1994;
      or





·
            completes
      a major conversion or is a newbuilding delivered on or after July 6,
      1996.





Effective September 2002, the IMO
accelerated its existing timetable for the phase-out of single-hull oil
tankers. At the time, these regulations required the phase-out of most
single-hull oil tankers by 2015 or earlier, depending on the age of the tanker
and whether it has segregated ballast tanks. Under the regulations, the flag
state may allow for some newer single-hull ships registered in its country that
conform to certain technical specifications to continue operating until the 25th
anniversary of their delivery.  Any port state, however, may deny
entry of those single-hull tankers that are allowed to operate until their 25th
anniversary to ports or offshore terminals.




However, as a result of the oil spill in
November 2002 relating to the loss of them.t.
Prestige, which was owned
by a company not affiliated with us, in December 2003, the Marine Environmental
Protection Committee of the IMO, or MEPC, adopted an amendment to the MARPOL
Convention, which became effective in April 2005. The amendment revised an
existing regulation 13G accelerating the phase-out of single-hull oil tankers
and adopted a new regulation 13H on the prevention of oil pollution from oil
tankers when carrying heavy grade oil.  Under the revised regulation,
single-hull oil tankers must be phased out no later than April 5, 2005 or the
anniversary of the date of delivery of the ship on the date or in the year
specified in the following table:








25


Category of Single Hull Oil
      Tankers
            
            Date or Year for Phase
      OutCategory 1- oil tankers of 20,000 dwt and
      above carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as
      cargo, and of 30,000 dwt and above carrying other oils, which do not
      comply with the requirements for protectively located segregated ballast
      tanks
            
            April 5, 2005 for ships delivered
      on April 5, 1982 or earlier; or 2005 for ships delivered after April 5,
      1982


Category 2- oil tankers of 20,000 dwt and
      above carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as
      cargo, and of 30,000 dwt and above carrying other oils, which do comply
      with the requirements for protectively located segregated ballast
      tanks
                
                and
                
                Category 3- oil tankers of 5,000 dwt and
      above but less than the tonnage specified for Category 1 and 2
      tankers.
              
              April 5, 2005 for ships delivered
      on April 5, 1977 or earlier; 2005 for ships delivered after April 5, 1977
      but before January 1, 1978
                2006 for ships delivered in 1978
      and 1979
                2007 for ships delivered in 1980
      and 1981
                2008 for ships delivered in
      1982
                2009 for ships delivered in
      1983
                2010 for ships delivered in 1984
      or later




Under the revised regulations, a flag
state may permit continued operation of certain Category 2 or 3 tankers beyond
their phase-out date in accordance with the above schedule.  Under
regulation 13G, the flag state may allow for some newer single-hull oil tankers
registered in its country that conform to certain technical specifications to
continue operating until the earlier of the anniversary of the date of delivery
of the vessel in 2015 or the 25th anniversary of their
delivery.  Under regulations 13G and 13H, as described below, certain
Category 2 and 3 tankers fitted only with double bottoms or double sides may be
allowed by the flag state to continue operations until their 25th anniversary of
delivery.  Any port state, however, may deny entry of those
single-hull oil tankers that are allowed to operate under any of the flag state
exemptions.




In October 2004 the MEPC adopted a
unified interpretation of regulation 13G that clarified the delivery date for
converted tankers. Under the interpretation, where an oil tanker has undergone a
major conversion that has resulted in the replacement of the fore-body,
including the entire cargo carrying section, the major conversion completion
date shall be deemed to be the date of delivery of the ship, provided
that:




·
            the oil tanker conversion was
      completed before July 6,
1996;




·
            the conversion included the
      replacement of the entire cargo section and fore-body and the tanker
      complies with all the relevant provisions of the MARPOL Convention
      applicable at the date of completion of the major conversion;
      and




·
            the original delivery date of the
      oil tanker will apply when considering the 15 years of age threshold
      relating to the first technical specifications survey to be completed in
      accordance with the MARPOL
Convention.




In December 2003, the MEPC adopted a new
regulation 13H on the prevention of oil pollution from oil tankers when carrying
heavy grade oil, or HGO, which includes most grades of marine
fuel.  The new regulation bans the carriage of HGO in single-hull oil
tankers of 5,000 dwt and above after April 5, 2005, and in single-hull oil
tankers of 600 dwt and above but less than 5,000 dwt, no later than the
anniversary of their delivery in 2008.




Under regulation 13H, HGO means any of
the following:




·
            crude oils having a density at
      15єC higher than 900kg/m3;




·
            fuel oils having either a density
      at 15єC higher than 900 kg/m3 or a kinematic viscosity at 50єC higher than
      180 mm2/s; or




·
            bitumen, tar and their
      emulsions.




Under regulation
13H, the flag state may allow continued operation of oil tankers of 5,000 dwt
and above, carrying crude oil with a density at 15єC higher than 900 kg/m3 but
lower than 945 kg/m3, that conform to certain technical specifications and if,
inthe opinion of the flag
state, the ship is fit to continue such operation, having regard to the size,
age, operational area and structural conditions of the ship and provided that
the continued operation shall not go beyond the date on which the ship reaches
25 years after the date of its delivery.  The flag state may also
allow continued operation of a single-hull oil tanker of 600 dwt and above but
less than 5,000 dwt, carrying HGO as cargo, if, in the opinion of the flag
state, the ship is fit to continue such operation, having regard to the size,
age, operational area and structural conditions of the ship, provided that the
operation shall not go beyond the date on which the ship reaches 25 years after
the date of its delivery.




The flag state may also exempt an oil
tanker of 600 dwt and above carrying HGO as cargo if the ship is either engaged
in voyages exclusively within an area under its jurisdiction, or is engaged in
voyages exclusively within an area under the jurisdiction of another party,
provided the party within whose jurisdiction the ship will be operating agrees.
The same applies to vessels operating as floating storage units of
HGO.




Any port state, however, can deny entry
of single-hull tankers carrying HGO which have been allowed to continue
operation under the exemptions mentioned above, into the ports or offshore
terminals under its jurisdiction, or deny ship-to-ship transfer of HGO in areas
under its jurisdiction except when this is necessary for the purpose of securing
the safety of a ship or saving life at sea.






26




Revised Annex I to the MARPOL Convention
entered into force in January 2007.  Revised Annex I incorporates
various amendments adopted since the MARPOL Convention entered into force in
1983, including the amendments to Regulation 13G (regulation 20 in the revised
Annex) and Regulation 13H (regulation 21 in the revised
Annex).  Revised Annex I also imposes construction requirements for
oil tankers delivered on or after January 1, 2010.  A further
amendment to revised Annex I includes an amendment to the definition of HGO that
will broaden the scope of regulation 21.  On August 1, 2007,
regulation 12A (an amendment to Annex I) came into force requiring oil fuel
tanks to be located inside the double hull in all ships with an aggregate oil
fuel capacity of 600 m3and above, which are delivered on or
after August 1, 2010, including ships for which the building contract is entered
into on or after August 1, 2007 or, in the absence of a contract, for which the
keel is laid on or after February 1, 2008.





Ballast Water
Requirements




The IMO adopted an International
Convention for the Control and Management of Ships' Ballast Water and Sediments,
or the BWM Convention, in February 2004. The BWM Convention's implementing
regulations call for a phased introduction of mandatory ballast water exchange
requirements (beginning in 2009), to be replaced in time with mandatory
concentration limits. The BWM Convention will not enter into force until 12
months after it has been adopted by 30 states, the combined merchant fleets of
which represent not less than 35% of the gross tonnage of the world's merchant
shipping.




Air Emissions




In
September 1997, the IMO adopted Annex VI to the MARPOL Convention to
address air pollution from ships.  Effective in May 2005, Annex VI
sets limits on sulfur oxide and nitrogen oxide emissions from all commercial
vessel exhausts and prohibits deliberate emissions of ozone depleting substances
(such as halons and chlorofluorocarbons), emissions of volatile compounds from
cargo tanks, and the shipboard incineration of specific
substances.  Annex VI also includes a global cap on the sulfur content
of fuel oil and allows for special areas to be established with more stringent
controls on sulfur emissions.  We believe that all our vessels are
currently compliant in all material respects with these
regulations.  Additional or new conventions, laws and regulations may
be adopted that could require the installation of expensive emission control
systems and that could adversely affect our business, cash flows, results of
operations and financial condition.




In
October 2008, the IMO adopted amendments to Annex VI regarding particulate
matter, nitrogen oxide and sulfur oxide emission standards which are expected to
enter into force on July 1 2010.  The amended Annex VI would reduce
air pollution from vessels by, among other things, (i) implementing a
progressive reduction of sulfur oxide, emissions from ships, with the global
sulfur cap reduced initially to 3.50% (from the current cap of 4.50%), effective
from January 1 2012, then progressively to 0.50%, effective from January 1 2020,
subject to a feasibility review to be completed no later than 2018; and (ii)
establishing new tiers of stringent nitrogen oxide emissions standards for new
marine engines, depending on their date of installation.  Once these
amendments become effective, we may incur costs to comply with these revised
standards.




Safety Requirements




The IMO has also adopted the
International Convention for the Safety of Life at Sea, or SOLAS Convention, and
the International Convention on Load Lines, 1966, or LL Convention, which impose
a variety of standards to regulate design and operational features of ships.
SOLAS Convention and LL Convention standards are revised periodically. We
believe that all our vessels are in substantial compliance with SOLAS Convention
and LL Convention standards.




UnderChapter IX of SOLAS, the
requirements contained in the
International Safety Management Code for the Safe Operation of Ships and for
Pollution Prevention, or ISM Code, promulgated by the IMO, the party with
operational control of a vessel is required to develop an extensive safety
management system that includes, among other things, the adoption of a safety
and environmental protection policy setting forth instructions and procedures
for operating its vessels safely and describing procedures for responding to
emergencies. In 1994, the ISM Code became mandatory with the adoption of Chapter
IX of SOLAS.We intend to
rely upon the safety management systemsthatMagnus Carriers and our other ship
management companieshave
developed.




The ISM Code requires that vessel
operators obtain a safety management certificate for each vessel they operate.
This certificate evidences compliance by a vessel's management with ISM Code
requirements for a safety management system. No vessel can obtain a safety
management certificate unless its operator has been awarded a document of
compliance, issued by each flag state, under the ISM Code. Magnus Carriers and
our other ship management companies have obtained documents of compliance for
their offices and safety management certificates for the vessels in our fleet
for which such certificates are required by the IMO. These documents of
compliance and safety management certificates are renewed as
required.




Noncompliance with the ISM Code and
other IMO regulations may subject the shipowner or bareboat charterer to
increased liability, may lead to decreases in available insurance coverage for
affected vessels and may result in the denial of access to, or detention in,
some ports. For example, the U.S. Coast Guard and European Union (EU)
authorities have indicated that vessels not in compliance with the ISM Code will
be prohibited from trading in U.S. and EU ports.






27





Oil Pollution
Liability




Although
the U.S. is not a party to these conventions, many countries have ratified and
follow the liability plan adopted by the IMO and set out in the International
Convention on Civil Liability for Oil Pollution Damage of 1969, as amended in
2000, or the CLC. Under this convention and depending on whether the country in
which the damage results is a party to the CLC, a vessel's registered owner is
strictly liable for pollution damage caused in the territorial waters of a
contracting state by discharge of persistent oil, subject to certain complete
defenses. The limits on liability outlined in the 1992 Protocol use the
International Monetary Fund currency unit of Special Drawing Rights, or SDR.
Under an amendment to the 1992 Protocol that became effective on November 1,
2003 for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the
total enclosed spaces within a vessel), liability will be limited to
approximately 4.51 million SDR, or $6.80 million, plus 631 SDR, or $950.74, for
each additional gross ton over 5,000. For vessels over 140,000 gross tons,
liability will be limited to 89.77 million SDR, or $135.26 million. The exchange
rate between SDRs and U.S. Dollars was 0.663694 SDR per U.S. dollar on March 24,
2009.  The right to limit liability is forfeited under the CLC where
the spill is caused by the owner's actual fault and under the 1992 Protocol
where the spill is caused by the owner's intentional or reckless conduct.
Vessels trading to states that are parties to these conventions must provide
evidence of insurance covering the liability of the owner. In jurisdictions
where the CLC has not been adopted various legislative schemes or common law
govern, and liability is imposed either on the basis of fault or in a manner
similar to that of the CLC. We believe that our insurance will cover the
liability under the plan adopted by the IMO.




The
IMO continues to review and introduce new regulations.  It is
difficult to accurately predict what additional regulations, if any, may be
passed by the IMO in the future and what effect, if any, such regulations might
have on our operations.




United States
Requirements





U.S. Oil Pollution Act of 1990 and
Comprehensive Environmental Response, Compensation and Liability
Act




In
1990, the U.S. Congress enacted OPA to establish an extensive regulatory and
liability regime for environmental protection and cleanup of oil spills. OPA
affects all owners and operators whose vessels trade with the U.S. or its
territories or possessions, or whose vessels operate in the waters of the U.S.,
which include the U.S. territorial sea and the 200 nautical mile exclusive
economic zone around the U.S. The Comprehensive Environmental Response,
Compensation and Liability Act, or CERCLA, imposes liability for clean-up and
natural resource damage from the release of hazardous substances (other than
oil) whether on land or at sea. Both OPA and CERCLA impact our
operations.




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







·
            natural
      resource damages and related assessment costs;·
            real
      and personal property damages;·
            net
      loss of taxes, royalties, rents, profits or earnings
    capacity;·
            net
      cost of public services necessitated by a spill response, such as
      protection from fire, safety or health hazards;·
            loss
      of profits or impairment of earning capacity due to injury, destruction or
      loss of real property, personal property and natural resources;
      and·
            loss
      of subsistence use of natural
resources.





Under
amendments to OPA that became effective on July 11 2006, the liability of
responsible parties is limited, with respect to tanker vessels, to the greater
of $1,900 per gross ton or $16.0 million per vessel that is over 3,000 gross
tons, and with respect to non-tanker vessels, to the greater of $950 per gross
ton or $0.8 million per vessel (subject to periodic adjustment for
inflation).  The act specifically permits individual states to impose
their own liability regimes with regard to oil pollution incidents occurring
within their boundaries, and some states have enacted legislation providing for
unlimited liability for discharge of pollutants within their waters. In some
cases, states that have enacted this type of legislation have not yet issued
implementing regulations defining tanker owners' responsibilities under these
laws. CERCLA, which applies to owners and operators of vessels, contains a
similar liability regime and provides for clean-up, removal and natural resource
damages relating to the discharge of hazardous substances (other than oil).
Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0
million for vessels carrying a hazardous substance as cargo or residue and the
greater of $300 per gross ton or $0.5 million for any other vessel.




These
limits of liability do not apply, however, where the incident is caused by
violation of applicable U.S. federal safety, construction or operating
regulations, or by the responsible party's gross negligence or willful
misconduct. These limits also do not apply if the responsible party fails or
refuses to report the incident or to cooperate and assist in connection with the
substance removal activities. OPA and CERCLA each preserve the right
to recover damages under existing law, including maritime tort law. We believe
that we are in substantial compliance with OPA, CERCLA and all applicable state
regulations in the ports where our vessels call.






28






OPA
also requires owners and operators of vessels to establish and maintain with the
U.S. Coast Guard evidence of financial responsibility sufficient to meet the
limit of their potential strict liability under the act.  U.S. Coast
Guard regulations currently require evidence of financial responsibility in the
amount of $2,200 per gross ton for tankers, coupling the OPA limitation on
liability of $1,900 per gross ton with the CERCLA liability limit of $300 per
gross ton.  Under the regulations, evidence of financial
responsibility may be demonstrated by insurance, surety bond, self-insurance or
guaranty. Under OPA regulations, an owner or operator of more than one tanker is
required to demonstrate evidence of financial responsibility for the entire
fleet in an amount equal only to the financial responsibility requirement of the
tanker having the greatest maximum strict liability under OPA and CERCLA. We
have provided such evidence and received certificates of financial
responsibility from the U.S. Coast Guard for each of our vessels required to
have one.




AMT
Management and the Stena Group companies managing Stena Compass and Stena Compassion have
arranged insurance for our vessels with pollution liability insurance in the
maximum commercially available amount of $1.0 billion. A catastrophic spill
could exceed the insurance coverage available, which could have a material
adverse effect on our business.




Under OPA, with certain
limited exceptions, all newly-built or converted vessels operating in U.S.
waters must be built with double hulls, and existing vessels that do not comply
with the double hull requirement will be prohibited from trading in U.S. waters
over a 20-year period (1995-2015) based on size, age and place of discharge,
unless retrofitted with double hulls. Owners or operators of tankers operating
in the waters of the United States must file vessel response plans with the U.S.
Coast Guard, and their tankers are required to operate in compliance with their
U.S. Coast Guard approved plans. These response plans must, among other
things:







·
            address
      a "worst case" scenario and identify and ensure, through contract or other
      approved means, the availability of necessary private response resources
      to respond to a "worst case discharge";·
            describe
      crew training and drills; and·
            identify
      a qualified individual with full authority to implement removal
      actions.





We
have obtained vessel response plans approved by the U.S. Coast Guard for our
vessels operating in the waters of the U.S. In addition, we conduct regular oil
spill response drills in accordance with the guidelines set out in
OPA.




As discussed above, OPA does not prevent
individual states from imposing their own liability regimes with respect to oil
pollution incidents occurring within their boundaries, including adjacent
coastal waters. In fact, most U.S. states that border a navigable waterway have
enacted environmental pollution laws that impose strict liability on a person
for removal costs and damages resulting from a discharge of oil or a release of
a hazardous substance. These laws may be more stringent than U.S. federal
law.




Additional U.S. Environmental
Requirements




The U.S. Clean Air Act of 1970, as
amended by the Clean Air Act Amendments of 1977 and 1990 (the "CAA"), requires
the U.S. Environmental Protection Agency, or EPA, to promulgate standards
applicable to emissions of volatile organic compounds and other air
contaminants. Our vessels are subject to vapor control and recovery requirements
for certain cargoes when loading, unloading, ballasting, cleaning and conducting
other operations in regulated port areas. Our vessels that operate in such port
areas are equipped with vapor control systems that satisfy these requirements.
The CAA also requires states to draft State Implementation Plans, or SIPs,
designed to attain national health-based air quality standards in primarily
major metropolitan and/or industrial areas. Several SIPs regulate emissions
resulting from vessel loading and unloading operations by requiring the
installation of vapor control equipment. As indicated above, our vessels
operating in covered port areas are already equipped with vapor control systems
that satisfy these requirements. Although a risk exists that new regulations
could require significant capital expenditures and otherwise increase our costs,
we believe, based on the regulations that have been proposed to date, that no
material capital expenditures beyond those currently contemplated and no
material increase in costs are likely to be required.




The Clean Water Act ("CWA") prohibits
the discharge of oil or hazardous substances into navigable waters and imposes
strict liability in the form of penalties for any unauthorized discharges. The
CWA also imposes substantial liability for the costs of removal, remediation and
damages. State laws for the control of water pollution also provide varying
civil, criminal and administrative penalties in the case of a discharge of
petroleum or hazardous materials into state waters. The CWA complements the
remedies available under the more recent OPA and CERCLA, discussed
above.





Effective
February 6, 2009, the EPA, regulates the discharge of ballast water and other
substances incidental to the normal operation of vessels in U.S. waters using a
Vessel General Permit, or VGP, system pursuant to the CWA, in order to combat
the risk of harmful foreign organisms that can travel in ballast water carried
from foreign ports. A VGP is required for commercial vessels 79 feet in length
or longer (other than commercial fishing
vessels). Compliance could require the installation of equipment on our vessels
to treat ballast water before it is discharged or the implementation of other
port facility disposal arrangements or procedures at potentially substantial
cost, and/or otherwise restrict our vessels from entering U.S.
waters.






29







Ballast water is also addressed under
the U.S. National Invasive Species Act, or NISA.U.S. Coast Guard regulations adopted
under NISA impose mandatory ballast water management practices for all vessels
equipped with ballast water tanks entering U.S.
waters.





European Union
Restrictions




In response to theMT Prestigeoil spill in November 2002,
the European Union adopted legislation that prohibits all single-hull tankers
from entering into its ports or offshore terminals by 2010 or earlier depending
on age. The European Union has also banned all single-hull tankers carrying
heavy grades of oil from entering or leaving its ports or offshore terminals or
anchoring in areas under its jurisdiction. Commencing in 2005, certain
single-hull tankers above 15 years of age will also be restricted from entering
or leaving European Union ports or offshore terminals and anchoring in areas
under European Union jurisdiction.





The European Union has also adopted
legislation that would: (1) strengthen regulation against manifestly
sub-standard vessels (defined as those over 15 years old that have been detained
by port authorities at least twice in a six-month period) from European waters
and create an obligation of port states to inspect vessels posing a high risk to
maritime safety or the marine environment and (2) provide the European Union
with greater authority and control over classification societies, including the
ability to seek to suspend or revoke the authority of negligent societies. It is
difficult to accurately predict what legislation or additional regulations, if
any, may be promulgated by the European Union or any other country or
authority.




All of the tankers in our fleet are
double hulled; however, because of certain age restrictions and requirements set
forth in the regulations described above,High
LandandHigh
Riderand theArius(exCitius) are subject to certain restrictions in
trading.





Greenhouse
Gas Regulation




In February 2005, the Kyoto
Protocol to the United Nations Framework Convention on Climate Change, which we
refer to as the Kyoto Protocol, entered into force. Pursuant to the Kyoto
Protocol, adopting countries are required to implement national programs to
reduce emissions of certain gases, generally referred to as greenhouse gases,
which are suspected of contributing to global warming. Currently, the emissions
of greenhouse gases from international shipping are not subject to the Kyoto
Protocol. However, the European Union has indicated that it intends to propose
an expansion of the existing European Union emissions trading scheme to include
emissions of greenhouse gases from vessels. In the U.S., the EPA has begun the
process of declaring greenhouse gases to be dangerous pollutants, which may be
followed by future federal regulation of greenhouse gases. Any passage of
climate control legislation or other regulatory initiatives by the IMO, EU, the
U.S. or other countries where we operate that restrict emissions of greenhouse
gases could require us to make significant financial expenditures we cannot
predict with certainty at this time.




Vessel Security
Regulations




Since the terrorist attacks of September
11, 2001, there have been a variety of initiatives intended to enhance vessel
security. On November 25, 2002, the U.S. Maritime Transportation Security Act of
2002, or MTSA, came into effect. To implement certain portions of the MTSA, in
July 2003, the U.S. Coast Guard issued regulations requiring the implementation
of certain security requirements aboard vessels operating in waters subject to
the jurisdiction of the United States. Similarly, in December 2002, amendments
to SOLAS created a new chapter of the convention dealing specifically with
maritime security. The new chapter became effective in July 2004 and imposes
various detailed security obligations on vessels and port authorities, most of
which are contained in the International Ship and Port Facilities Security Code,
or the ISPS Code. The ISPS Code is designed to protect ports and international
shipping against terrorism. After July 1, 2004, to trade internationally, a
vessel must attain an International Ship Security Certificate, or ISSC, from a
recognized security organization approved by the vessel's flag state. Among the
various requirements are:




·
            on-board installation of automatic
      identification systems to provide a means for the automatic transmission
      of safety-related information from among similarly equipped ships and
      shore stations, including information on a ship's identity, position,
      course, speed and navigational
status;




·
            on-board installation of ship
      security alert systems, which do not sound on the vessel but only alerts
      the authorities on shore;





·
            the development of vessel security
      plans;




·
            ship identification number to be
      permanently marked on a vessel's
hull;




·
            a continuous synopsis record kept
      onboard showing a vessel's history including the name of the ship and of
      the state whose flag the ship is entitled to fly, the date on which the
      ship was registered with that state, the ship's identification number, the
      port at which the ship is registered and the name of the registered
      owner(s) and their registered address;
  and






30




·
            compliance with flag state
      security certification
requirements.




The U.S. Coast Guard regulations,
intended to align with international maritime security standards, exempt from
MTSA vessel security measures non-U.S. vessels that have on board, as of July 1,
2004, a valid ISSC attesting to the vessel's compliance with SOLAS security
requirements and the ISPS Code. We have implemented the various security
measures addressed by MTSA, SOLAS and the ISPS Code, and our fleet is in
compliance with applicable security requirements.




Risk of Loss and
Insurance




The operation of any cargo vessel
includes risks such as mechanical failure, physical damage, collision, property
loss, cargo loss or damage and business interruption due to political
circumstances in foreign countries, hostilities and labor strikes. In addition,
there is always an inherent possibility of marine disaster, including oil spills
and other environmental mishaps, and the liabilities arising from owning and
operating vessels in international trade. The U.S. Oil Pollution Act of 1990, or
OPA, which imposes virtually unlimited liability upon owners, operators and
charterers of any vessel trading in the United States' exclusive economic zone
for certain oil pollution accidents in the United States, has made liability
insurance more expensive for ship owners and operators trading in the U.S.
market. While we believe that our present insurance coverage is adequate, not
all risks can be insured against, and there can be no guarantee that any
specific claim will be paid, or that we will always be able to obtain adequate
insurance coverage at reasonable rates.




We have obtained marine hull and
machinery and war risk insurance, which includes the risk of actual or
constructive total loss, for all our vessels. The vessels are each covered up to
at least fair market value.




We also arranged increased value
insurance for most of our vessels. Under the increased value insurance, in case
of total loss of the vessel, we will be able to recover the sum insured under
the policy in addition to the sum insured under our hull and machinery policy.
Increased value insurance also covers excess liabilities that are not
recoverable in full by the hull and machinery policies by reason of
under-insurance.




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




Our current protection and
indemnity insurance coverage for pollution is $1.0 billion per vessel per
incident. The 13 P&I Associations that compose the International Group
insure approximately 90% of the world's commercial tonnage and have entered into
a pooling agreement to reinsure each association's liabilities. Each P&I
Association has capped its exposure to this pooling agreement at $4.5 billion.
As a member of a P&I Association that is a member of the International
Group, we are subject to calls payable to the associations based on our claim
records as well as the claim records of all other members of the individual
associations, and members of the International Group.




Inspection by a Classification
Society




Our vessels have been certified as
being "in class" by either Nippon Kaijori Kyokai Corp., Lloyds Register of
Shipping, Bureau Veritas, Germanischer Lloyd or Det Norske Veritas, each of
which is a member of the International Association of Classification Societies.
Every commercial vessel's hull and machinery is evaluated by a classification
society authorized by its country of registry. The classification society
certifies that the vessel has been built and maintained in accordance with the
rules of the classification society and complies with applicable rules and
regulations of the vessel's country of registry and the international
conventions of which that country is a member. Each vessel is inspected by a
surveyor of the classification society in three surveys of varying frequency and
thoroughness: every year for the annual survey, every two to three years for
intermediate surveys and every four to five years for special surveys. Should
any defects be found, the classification surveyor will issue a "recommendation"
for appropriate repairs, which have to be made by the shipowner within the time
limit prescribed. Vessels may be required, as part of the annual and
intermediate survey process, to be drydocked for inspection of the underwater
portions of the vessel and for necessary repair stemming from the inspection.
Special surveys always require drydocking.




Competition




We operate in markets that are
highly competitive and based primarily on supply and demand. We compete for
charters on the basis of  price, vessel location, size, age and condition
of the vessel, as well as on our reputation as an operator. We typically arrange
our charters in the period market through the use of brokers, who negotiate the
terms of the charters based on market conditions. We compete primarily with
owners of container ships and owners of product tankers in the Aframax, Panamax
and Handymax class sizes. Ownership of tankers is highly fragmented and is
divided among major oil companies and independent vessel
owners.






31




C.           
   Organizational Structure




Aries Maritime Transport Limited is the
sole owner of all outstanding shares of the subsidiaries listed in note 1 of our
consolidated financial statements included in this report.




D.       
      Properties, Plants and
Equipment




We lease office space in Glyfada,
Greece, from Domina Petridou O.E., which is owned by Mons S. Bolin, one of our
directors, and Domina Petridou. In November 2005, we entered into a 10-year
lease agreement with the landowner. In October 2007, we entered into an
additional nine-year lease agreement with the landowner. See note 17 to our
audited consolidated financial statements included in this report.  We
refer you to "Our Fleet" above in this item for a discussion of our
vessels.




ITEM
4A.                UNRESOLVED
STAFF COMMENTS




Not
applicable.




ITEM
      5.
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS





The following discussion of our
financial condition and results of operations should be read in conjunction with
our consolidated financial statements and the related notes, and the other
financial and other information included in this document. This discussion
contains forward-looking statements which are based on our assumptions about the
future of our business. Our actual results will likely differ materially from
those contained in the forward-looking statements and such differences may be
material. Please read "Forward-Looking Statements" for additional information
regarding forward-looking statements used in this document. Reference in the
following discussion to "our" and " us" and "the Company" refer to our company,
our subsidiaries and the predecessor operations of Aries Maritime Transport
Limited, except where the context otherwise indicates or
requires.




General




We are Aries Maritime Transport Limited,
or Aries Maritime, a Bermuda company incorporated in January 2005 as a
wholly-owned indirect subsidiary of Aries Energy Corporation, or Aries Energy.
We are an international shipping company that owns product tankers and container
vessels. In March 2005, subsidiaries of Aries Energy contributed to us all of
the issued and outstanding stock of 10 vessel-owning companies in exchange for
shares in our company. As a result, we  hold 100% of the issued and
outstanding stock of each vessel-owning company. Because our ownership
percentage in each vessel-owning company is identical to each contributing
subsidiary's prior ownership percentage in the same vessel-owning company, the
group reorganization was accounted for as an exchange of equity interests at
historical cost. On June 8, 2005, Aries Maritime closed its initial public
offering of 12,240,000 common shares at an offering price of $12.50 per
share.




During
the years ended December 31, 2008 and December 31, 2007, we incurred losses of
$39.8 million and $8.7 million, respectively. As at December 31, 2008, we
reported working capital deficit of $231.4 million, which includes $223.7
million of debt reflected as current.





During
the years ended December 31, 2008 and December 31, 2007, we have not been in
compliance with the following covenants of our facility agreement:




·
            The
      interest coverage ratio financial covenant, during each quarter of 2007
      and 2008;




·
            The
      minimum working capital financial covenant, as at December 31, 2007 and
      during each quarter of 2008, as a result of our outstanding borrowings
      being reflected as current;




·
            The
      adjusted equity ratio financial covenant, as of December 31, 2008;
      and




·
            The
      reduction of the outstanding borrowings from their level of $284.8 million
      as at June 11 to $200 million, by disposal of vessels, by August 31, 2008.
      The outstanding borrowings have been reduced to $223.7 million through the
      sale of three of our vessels, the Arius, MSC Oslo and Energy 1 for net
      proceeds of $59.6 million. In addition, we expect to reduce our
      outstanding borrowings to $221.4 million with net proceeds of $2.3 million
      from the sale of the Ocean
    Hope.




Furthermore,
due to the current financial turmoil that has significantly affected the
industry and our vessels' values, our lenders notified us on April 9, 2009 that
the Security Value of our vessels was less than the Security Requirement, as
defined in the credit agreement. However, we believe that the valuations
obtained by our lenders are not valid due to the lack of liquidity in the vessel
sale and purchase market as noted in the various disclaimers included in such
valuations.  We are currently in discussions with our lenders
regarding the alleged breach of the Security Requirement covenant.




32


In
addition, we are currently in discussions with our lenders in order to obtain
waivers in respect of the covenants of which we are in breach and to restructure
our credit facility. We also have plans in place to improve our performance and
financial strength. These plans mainly relate to the reduction of vessel
operating expenses, the potential sales of one or more vessels to strengthen our
financial position and plans for enhancing our equity capital. On June 24, 2009,
we signed a non-binding letter of intent (LOI) with Grandunion, a company
controlled by Michael Zolotas and Nicholas Fistes, that contemplates, among
other things, the acquisition of three Capesize drybulk carriers with an
approximate net asset value of $36.0 million in exchange for 15,977,778 newly
issued shares of Aries Maritime and a change of control of our board of
directors. Please see “Item 4.A. History and Development of the Company – Recent
Developments” for further information concerning the LOI. However, there is no
assurance that we will enter into definitive agreements with Grandunion or that
we will be successful in achieving our objectives.




Absent
any further relaxation under our credit facility covenants, the lenders have the
ability to demand repayment of outstanding borrowings. The lenders notified us
on October 27, 2008, December 24, 2008, February 6, 2009 and April 3, 2009 that
certain events of default have occurred and continue to occur. In addition, the
lenders have advised us that it is not their immediate intention to take
enforcement action, but they reserve their rights to do so.




This
debt is reflected as current due to the high degree of uncertainty surrounding
our ability to meet our existing financial covenants in future periods. While
our consolidated financial statements have been prepared using generally
accepted accounting principles applicable to a going concern, which contemplate
the realization of assets and liquidation of liabilities during the normal
course of operations, the conditions and events described above raise
substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is dependent on management's ability to reach an
agreement with our lenders and to continue to improve our performance, which
includes achieving profitable operations in the future, and the continued
support of our lenders.




A.            
  Operating Results




Important Factors to Consider When
Evaluating Our Historical and Future Results of Operations





Charters





We
generate revenues by charging customers for the transportation of oil and
petroleum products in our product tankers and dry cargoes in our container
vessels.  As of June25,
2009, we employ five of our vessels on period charter
agreements, four of our vessels under spot-market charters and two of our
vessels on bareboat charter.  As of June 25,
2009, the current
remainingterm of our charters is one month to 1.6
years.  A time charter is a contract for the use of a vessel for a
specific period of time during which the charterer pays substantially all of the
voyage expenses, including port and canal charges and the cost of bunkers (fuel
oil), but the vessel owner pays the vessel operating expenses, including the
cost of crewing, insuring, repairing and maintaining the vessel, the costs of
spares and consumable stores and tonnage taxes. Under a spot-market charter, the
vessel owner pays both the voyage expenses (less specified amounts covered by
the voyage charterer) and the vessel operating expenses. Under both types of
charters we pay commissions to ship brokers and to in-house brokers associated
with the charterer, depending on the number of brokers involved with arranging
the charter. Vessels operating in the spot-charter market generate revenues that
are less predictable than time charter revenues but may enable us to capture
increased profit margins during periods of improvements in charter
rates.




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




• Operating
days.  Operating days are defined as the total days the vessels
were in the Company's possession for the relevant period.





• Revenue
days.  Revenue days are defined as the total days the vessels
were not off hire or out of service.





• TCE rates. Time charter
equivalent, or TCE, is a measure of the average daily revenue performance of a
vessel on a per voyage basis. TCE is a non-GAAP measure. Our method of
calculating TCE is consistent with industry standards and is determined by
dividing gross revenues (net of voyage expenses) by voyage days for the relevant
time period. Voyage expenses primarily consist of port, canal and fuel costs
that are unique to a particular voyage, which would otherwise be paid by the
charterer under a time charter contract, as well as commissions. TCE is a
standard shipping industry performance measure used primarily to compare
period-to-period changes in a shipping company's performance despite changes in
the mix of charter types (i.e., spot charters, time charters and bareboat
charters) under which the vessels may be employed between the
periods.





The
following table reflects our operating days, our revenue days
and daily TCE rate for the years ended December 31, 2008, 2007 and
2006.





December 31, 2008
                  December 31, 2007
                  December 31, 2006Operating
      Days
                  4,392
                  4,380
                  4,170Revenue
      Days
                  4,100
                  4,159
                  3,718Time
      Charter Equivalent Rate (1)
                  18,814
                  19,511
                  20,465





(1)
            Adjusted
      to reflect that the Stena Compass and the Stena Compassion were each
      employed on a bareboat charter by assuming a TCE rate of $24,500 per day,
      reflecting assumed operating costs of $5,800 per day, has been included in
      respect of the 366 and 365 operating days of the vessels during the twelve
      month period ended December 31, 2008, 2007 and 2006,
      respectively.






33





Lack of Historical Operating Data for
Vessels Before their Acquisition




Consistent with shipping industry
practice, other than inspection of the physical condition of the vessels and
examinations of classification society records, there is no historical financial
due diligence process when we acquire vessels. Accordingly, we do not obtain the
historical operating data for the vessels from the sellers because that
information is not material to our decision to make acquisitions, nor do we
believe it would be helpful to potential investors in our common shares in
assessing our business or profitability. Most vessels are sold under a
standardized agreement, which, among other things, provides the buyer with the
right to inspect the vessel and the vessel's classification society records. The
standard agreement does not give the buyer the right to inspect, or receive
copies of, the historical operating data of the vessel. Prior to the delivery of
a purchased vessel, the seller typically removes from the vessel all records,
including past financial records and accounts related to the vessel. In
addition, the technical management agreement between the seller's technical
manager and the seller is automatically terminated and the vessel's trading
certificates are revoked by its flag state following a change in
ownership.




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




·
            obtain
      the charterer's consent to us as the new owner;·
            obtain
      the charterer's consent to a new technical manager;·
            in
      some cases, obtain the charterer's consent to a new flag for the
      vessel;·
            arrange
      for a new crew for the vessel;·
            replace
      all hired equipment on board, such as gas cylinders and communication
      equipment;·
            negotiate
      and enter into new insurance contracts for the vessel through our own
      insurance brokers;·
            register
      the vessel under a flag state and perform the related inspections in order
      to obtain new trading certificates from the flag state;·
            implement
      a new planned maintenance program for the vessel; and·
            ensure
      that the new technical manager obtains new certificates for compliance
      with the safety and vessel security regulations of the flag
      state.





The following discussion is intended to
help you understand how acquisitions of vessels affect our business and results
of operations.




Our
business is comprised of the following main elements:




·
              employment
      and operation of our product tankers and container vessels;
      and·
              management
      of the financial, general and administrative elements involved in the
      conduct of our business and ownership of our product tankers and container
      vessels.




The employment and operation of our
vessels require the following main components:




·
            vessel
      maintenance and repair;·
            crew
      selection and training;




34




·
                    vessel
      spares and stores supply;·
                    contingency
      response planning;·
                    onboard
      safety procedures auditing;·
                    accounting;·
                    vessel
      insurance arrangement;·
                    vessel
      chartering;·
                    vessel
      hire management;·
                    vessel
      surveying; and·
                    vessel
      performance
monitoring.





The management of financial, general and
administrative elements involved in the conduct of  our business and
ownership of our vessels requires the following main
components:




·
                  management
      of our financial resources, including banking relationships, i.e., administration of
      bank loans and bank accounts;·
                  management
      of our accounting system and records and financial
    reporting;·
                  administration
      of the legal and regulatory requirements affecting our business and
      assets; and





Principal Factors that Affect Our
Business




The principal factors that affect our
financial position, results of operations and cash flows
include:




·
                    charter
      rates and periods of charter hire;·
                    vessel
      operating expenses and voyage costs, which are incurred in both U.S.
      Dollars and other currencies, primarily Euros;·
                    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, which totaled $223.7 million at
      December 31, 2008.





You should read the following discussion
together with the information contained in the table of vessel information under
"Item 4 — Information on the Company — Business Overview — Our Fleet." The net
daily charter hire rates detailed in that table under "Net Daily Charter hire
Rate" are fixed rates and all detailed vessels, exceptOstria,NordanvindandChinook, which are currently operating in the
spot market, are employed under period charters. Revenues from period charters
are stable over the duration of the charter, provided there are no unexpected or
periodic survey off-hire periods and no performance claims from the charterer or
charterer defaults. We cannot guarantee that actual results will be as
anticipated.




Our strategy is to employ vessels on
period charters in order to generate stable cash flow over a period of time. As
of December 31, 2008, nine of our 12 vessels were employed on period charters
and, with the exception of theStena
CompassandStena
Compassion, are employed on
time charters. TheStena
CompassandStena
Compassioncharters are
bareboat charters. The average remaining term under our existing period charters
on our fleet was 0.99 years, as of December 31, 2008, with 33% of the charter
parties for our product tankers containing profit sharing
arrangements.




Our policy is to carry loss-of-hire
insurance, which will provide the equivalent of the charter rate on the vessel
in the event that a vessel is off-hire for more than 14 days up to a maximum of
60 days. The total loss-of-hire insurance recognized during the year ended
December 31, 2008 was $1.23 million and is included in
revenues.




The daily net charter hire under our
existing charter agreements is increased by any profit sharing and by the
amortization of the deferred charter revenue associated with our assumption of
charters when acquiring certain vessels. The total profit sharing earned during
the year ended December
31, 2008 was $1.03 million. The total deferred charter revenue amortization in
respect of the relevant vessels was $8.1 million during the year ended December
31, 2008. The recognition of deferred charter revenue will only continue for the
duration of the charters assumed with the acquisition of the relevant
vessels.






35






Vessels typically operate for 360 days
per year, which is a level commonly used as an industry average. The five days
of non-operation per year are to provide for time spent in drydock and off-hire
time. Should a vessel be operational for 355 days, instead of 360 days, in any
year, charter hire income from that vessel would decrease by 1.4% in that year.
We earned revenues, excluding deferred charter revenue, of $73.2 million in the
year ended December 31, 2008. An average 1.4% decrease in charter hire income
for the vessels comprising our fleet would have resulted in a decrease of
revenues by $1 million to $72.2 million.




As
of December 31, 2008, management for the vessels Altius, Fortius, High Land, High
Rider and Ostria was performed by International Tanker Management (ITM).
Management for the vessels Ocean Hope, MSC SeineandCMA CGM Saronikos
Bridge, was performed by Wilhelmsen Ship Management (formerly Barber Ship
Management Singapore Pte Ltd). Ernst Jacob performed the management for the
vessel Chinook.
Management for the vessel Nordanvind was performed by
AMT Management. See "Technical and Commercial Management of our Fleet" below.
The main factors that could increase total vessel operating expenses are crew
salaries, insurance premiums, dry-docking and special survey costs, spare parts
orders, repairs that are not covered under insurance policies and lubricants
prices.




Revenues




At December 31, 2008, all our revenues
were derived from the time, bareboat and voyage charters of our nine product
tankers and three container vessels. Our vessels were chartered to reputable
charterers with remaining periods ranging from approximately 0.3 to two years,
with an average of approximately 0.99 years as of December 31, 2008. Our vessels
have been employed with these charterers for periods ranging from 3 months to
4.2 years. We believe that the performance of the charterers to date has been in
accordance with our charterparties. At the maturity of each charter, we will
seek to renew these charters with the same or other reputable
charterers.




Our revenues, for the period ended
December 31, 2008, reflect the operation of nine product tankers and three
container vessels for the entire year. During the year ended December 31, 2008,
our product tankers recorded 128 non-revenue days due to repairs and vessel
upgrades.The respective
non-revenue days for the containers were 114.Non-revenue days are defined as the days
the vessels were in our possession, but off-hire or out of service and not
earning charter hire. In addition, one of our vessels was out of service due to
scheduled drydocking and special survey, upgradings and preventative maintenance
works for a total of 50 days.




Our revenues include an amount for the
amortization of deferred charter revenue associated with the acquisition of a
vessel. We record all such identified assets or liabilities at fair value. Fair
value is determined by reference to market data. We value any asset or liability
arising from the market value of the time or bareboat charters assumed when a
vessel is acquired. The amount to be recorded as an asset or liability at the
date of vessel delivery is based on the difference between the current fair
value of a charter with similar characteristics as the time charter assumed and
the net present value of future contractual cash flows from the time charter
contract assumed.  When the present value of the time charter assumed
is greater than the current fair value of such charter, the difference is
recorded as a back log asset. Otherwise, the difference is recorded as deferred
charter revenue.The total
amount of deferred charter revenue included for the yearended December 31,2008 was $8.1
million.





For the periods ended December 31, 2008,
2007 and 2006, our revenues from our nine product tankers were $56.9 million,
$56 million and $46.2 million, respectively.  For the periods ended
December 31, 2008, 2007 and 2006, our revenues from our three container vessels
were $16.3 million, $19 million and $18.5 million,
respectively.  These revenues include Deferred charter
revenue.For a discussion of deferred
charter revenue, please see below under "Accounting Policies – Purchase of
Vessels."




Commissions




Commissions
are paid to brokers and charterers (address commission) and are typically based
on a percentage of the charter hire rate. We are currently paying commissions
ranging from 2.5% to 5% per vessel, with an average of 2.81%. Commissions paid
to related parties during the year ended December 31, 2008 were
1.25%.




Voyage Expenses





Voyage expenses are incurred due to a
vessel's traveling from a loading port to a discharging port, to repair
facilities or on a repositioning voyage, and include fuel (bunkers) cost, port
expenses, agent's fees, canal dues and extra war risk insurance. Under period
charters, the charterer is responsible for paying voyage expenses while the
vessel is on hire.




General & Administrative
Expenses





These expenses include executive and
director compensation (inclusive of shares granted), staff wages, legal fees, audit
fees, liability insurance premium, and company administration
costs.






36




Gain on Disposal of
Vessels




Gain on disposal of vessels is the
difference between the net proceeds received from the sale of vessels and their
net book value at the date of sale.During the year ended December 31, 2008,wedisposedof three vesselsto unrelated parties. The net proceeds
for the three vessels that were disposedofwere $21.4 millionfor theArius, $19.7 millionfor theOslo, and$18.5millionfor theEnergy 1. The total gain for the sale of these
vessels amounted to $13.6 millionin discontinued operations.




Vessel Operating
Expenses




Vessel operating expenses are the costs
of operating a vessel, primarily consisting of crew wages and associated costs,
insurance premiums, lubricants and spare parts, and repair and maintenance
costs. Vessel operating expenses exclude fuel cost, port expenses, agents' fees,
canal dues and extra war risk insurance, which are not included in "voyage
expenses."




Certain vessel operating expenses are
higher during the initial period of a vessel's operation. Initial daily vessel
operating expenses are usually higher than normal as newly acquired vessels are
inspected and modified to conform to the requirements of our
fleet.





Under multi-year time charters, and
under short-term time charters, we pay for vessel operating expenses. Under
bareboat charters, our charterers bear most vessel operating expenses, including
the costs of crewing, insurance, surveys, drydockings, maintenance and
repairs.




Depreciation




Depreciation is the periodic cost
charged to our income for the reduction in usefulness and long-term value of our
vessels. We depreciate the cost of our vessels over 25 years on a straight-line
basis. No charge is made for depreciation of vessels under construction until
they are delivered.




Amortization of Special Survey and
drydocking Costs




We follow the deferral method
of accounting for special survey and drydocking costs. Special survey and
dry-docking costs are amortized over a period of five and two and a half years,
respectively, which reflects the period between each required special survey and
minimum period between each dry-docking.




Interest and Finance
Expenses




Interest expenses include interest,
commitment fees, arrangement fees, amortization of deferred financing costs,
debt discount and other similar charges. Interest incurred during the
construction of a newbuilding is capitalized in the cost of the newbuilding. The
amount of interest expense is determined by the amount of loans and advances
outstanding from time to time and interest rates. The effect of changes in
interest rates may be reduced (increased) by interest rate swaps or other
derivative instruments. We use interest rate swaps to hedge our interest rate
exposure under our loan agreements.




Change in Fair Value of
Derivatives




At
the end of each quarter, the fair values of our interest rate swaps are valued
to market. Changes in the fair value between quarters are recognized in the
statements of operations.




Foreign Exchange
Rates




Foreign exchange rate fluctuations,
particularly between the Euro and Dollar, have had an impact on our vessel
operating expenses and administrative expenses. We actively seek to manage such
exposure. Currently, approximately 10% of our vessel operating cost is incurred
in currencies other than the U.S. dollar. Close monitoring of foreign exchange
rate trends, maintaining foreign currency accounts and buying foreign currency
in anticipation of our future requirements are the main ways we manage our
exposure to foreign exchange risk. See below under "Results of Operations –
Foreign Exchange Rates."




Technical and Commercial Management of
Our Fleet




We
have historically contracted the technical management of our vessels to Magnus
Carriers, a related party, under separate ten-year ship management
agreements.  On August 31, 2007, notice of termination was delivered
to and accepted by Magnus Carriers in relation to the twelve existing ship
management agreements.  As a result of the termination, we received a
termination payment from Magnus Carriers of $5.0 million, of which $2.5 million
was received during the year ended December 31, 2007 and the remaining $2.5
million was received in 2008.





The
technical management for five of our vessels, the Altius, Fortius, Ostria, High Land
and High Rider, was transferred to ITM between October 2007 and January
2008.  Magnus Carriers retained the commercial management for these
vessels through commercial management agreements entered into in October
2007.  The commercial management for these vessels was transferred to
AMT Management in May 2009.





The
technical management for our three container vessels was transferred from Magnus
Carriers to Willhelmsen Ship Management (formerly named Barber Ship Management
Singapore Pte Ltd) between December 2007 and February 2008.  These
technical management agreements with Willhelmsen
Ship Management were terminated in January 2009 and the technical management for
these vessels was transferred to their current managers, AMT Management, in
January 2009. Magnus Carriers retained the commercial management for these
vessels until the end of September 2008 when it was transferred to AMT
Management.






37









The
technical and commercial management of the Nordanvind was transferred from
Magnus Carriers to AMT Management in November 2008.





Vessel
operating expenses for the vessels under third party management (ITM, Ernst
Jacob and Willhelmsen Ship Management) are payable by us monthly in advance. The
annual management fees paid to our third party managers for 2008 were on average
$148,500 per vessel for ITM, €142,740 for Ernst Jacob and $105,000 per vessel
for Willhelmsen Ship. For 2009 the annual management fees were increased to
$163,350 on average per vessel for ITM and €149,650 for Ernst Jacob. The
management fees are paid monthly in advance.





Under
the commercial management agreements entered into with Magnus Carriers in
October 2007, Magnus provided commercial management services for all our vessels
except Stena Compass
and Stena Compassion,
as well as chartering agency services such as finding employment for our vessels
and identifying and developing vessel acquisition opportunities that would fit
our strategy. We paid Magnus Carriers 1.25% of any gross charter hire and
freight paid to us for new charters or $7,000 per month per vessel for the
vessels under pre-existing charters.  In addition, Magnus Carriers was
responsible for supervising the sale of our vessels and the purchase of any
additional vessels in accordance with our instructions.  We paid
Magnus Carriers 1% of the sale or purchase price in connection with a vessel
sale or purchase that Magnus Carriers brokered for us.





Subsequent
to the transfer of the commercial management of our vessels from Magnus Carriers
to AMT Management, between October 2008 and May 2009, Magnus
Carriers provides non-exclusinve chartering agency services in
exchange for 1.25% of any gross charter hire and freight paid to us for new
charters and 1% of the sale or purchase price in connection with a vessel sale
or purchase that Magnus Carriers brokers for us.





Critical Accounting
Policies





Aries
Maritime Transport Limited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America, or U.S. GAAP. The preparation of these consolidated financial
statements requires Aries Maritime Transport Limited to make estimates in the
application of its accounting policies based on the best assumptions, judgments
and opinions of management. The following is a discussion of the accounting
policies that involve a higher degree of judgment and the methods of their
application that affect the reported amount of assets and liabilities, revenues
and expenses and related disclosure of contingent assets and liabilities at the
date of its consolidated financial statements. Actual results may differ from
these estimates under different assumptions or conditions.




Our
financial position, results of operations and cash flows include all expenses
allocable to our business, but may not be indicative of the results we would
have achieved had we operated as a public entity under our current chartering,
management and other arrangements for the entire periods presented or for future
periods.




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




Use
of estimates





The
preparation of consolidated financial statements in conformity with the
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. On an on-going basis,
management evaluates the estimates and judgments, including those related to
uncompleted voyages, future drydock dates, the selection of useful lives for
tangible assets, expected future cash flows from long-lived assets to support
impairment tests, provisions necessary for accounts receivables, provisions for
legal disputes, and contingencies. Management bases its estimates and judgments
on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results could differ from those
estimates under different assumptions and/or conditions.






38





Vessels,
net




Vessels
represent our most significant assets. Aries Maritime Transport Limited records
the value of its vessels at their cost (which includes acquisition costs
directly attributable to the vessel and expenditures made to prepare the vessel
for its initial voyage) less accumulated depreciation.




Depreciation
is computed using the straight-line basis method over the estimated useful life
of the vessel, after considering the estimated residual value.  We
estimate the residual values of our vessels based on a scrap value of $180 or
$190 per lightweight ton, which we believe are levels common in the shipping
industry. An increase in the useful life of a vessel or in its residual value
would have the effect of decreasing the annual depreciation charge and extending
it into later periods. A decrease in the useful life of a vessel or in its
residual value would have the effect of increasing the annual depreciation
charge. Management estimates the useful life of the Company's vessels to be
25-years from the date of initial delivery from the shipyard. We believe that a
25-year depreciable life is consistent with that of other shipping companies and
it represents the most reasonable useful life for each of our vessels. However,
when regulations place limitations over the ability of a vessel to trade on a
worldwide basis, its useful life is re-estimated to end at the date such
regulations become effective.




If
circumstances cause us to change our assumptions in making determinations as to
whether vessel improvements should be capitalized, the amounts we expense each
year as repairs and maintenance costs could increase, partially offset by a
decrease in depreciation expense.




Impairment of Long-lived
Assets




We
evaluate the carrying amounts and periods over which long-lived assets are
depreciated to determine if events or changes in circumstances have occurred
that would require modification to their carrying values or useful lives. In
evaluating useful lives and carrying values of long-lived assets, we review
certain indicators of potential impairment, such as undiscounted projected
operating cash flows, vessel sales and purchases, business plans and overall
market conditions. We determine undiscounted projected net operating cash flows
for each vessel and compare it to the vessel carrying value. In the event that
the  undiscounted projected cash flows do not exceed the recorded
amount, we would determine the fair value of the related assets and we would
record a charge to operations calculated by comparing the asset's carrying value
to the estimated fair market value. We estimate fair market value primarily
through the use of valuations performed on an individual vessel
basis.




During
the fourth quarter of 2008, we concluded that events and circumstances had
changed, which may indicate the existence of potential impairment of our
long-lived assets. These indicators were a significant decline in our stock
price, continued deterioration in the spot market, and the related impact of the
current worldwide economic conditions on our expectation for future revenues. As
a result, we performed an interim impairment assessment of long-lived assets.
Unless these indicators improve, it is likely we will be required to perform an
impairment analysis in the future.




The
interim testing comprised of a review of the estimated fair market
values for each vessel obtained by third party appraisers compared to the
carrying value of such vessels. The significant factors we used in deriving the
carrying value included: net book value of the vessels, unamortized special
survey, dry docking cost and deferred revenue.




Although
we believe our assessment is reasonable, if charter rate trends and the length
of the current market downturn vary significantly from our assumptions, we may
be required to perform another interim impairment analysis in the future.
Therefore, there can be no assurances that we would not have material impairment
charges in the future.




Deferred
Dry-docking and Special Survey Costs




Our
vessels are subject to regularly scheduled dry-docking and special surveys which
are carried out every 30 and 60 months respectively, to coincide with the
renewal of the related certificates issued by the Classification Societies,
unless a further extension is obtained in rare cases and under certain
conditions. The costs of dry-docking and special surveys is deferred and
amortized over the above periods or to the next dry-docking or special survey
date if such has been determined. Unamortized dry-docking or special survey
costs of vessels sold are written off to income in the year the vessel is sold.
When vessels are acquired the portion of the vessels' capitalized cost that
relates to dry-docking or special survey is treated as a separate component of
the vessels' cost and is deferred and amortized as above. This cost is
determined by reference to the estimated economic benefits to be derived until
the next dry-docking or special survey.





Stock-based
compensation




On
June 5, July 4, July 17 and July 23, 2008 the Board of Directors approved grants
of restricted common stock and stock options in accordance with the Company's
equity incentive plan. The Company awarded restricted common stock to its
officers and directors and stock options to the Company's Chief Executive
Officer. The restricted stock and option awards are subject to applicable
vesting and unvested common shares and options may be forfeited under specified
circumstances.





The
fair value of stock option grants has been calculated based on the Binomial
lattice model method. The fair value of common stock grants is determined by
reference to the quoted stock price on the date of grant.







39






Accounts
Receivable




The
amount shown as Accounts Receivable at each balance sheet date includes
estimated recoveries from charterers for hire, frieght and demurrage billings,
net of allowance for doubtful accounts. An estimate is made of the allowance for
doubtful accounts based on a review of all outstanding amounts at each period,
and an allowance is made for any accounts which management believes are not
recoverable. Bad debts are written off in the year in which they are identified.
The provision for doubtful accounts at December 31, 2008 amounted to $0.9
million, which relates to continued and discontinued operations.




Revenue
Recognition




Revenues
are generated by chartering our customers for the use of our vessels to
transport petroleum products and dry cargoes. In recognizing revenue we are
required to make certain estimates and assumptions. Historically, differences
between our estimates and actual results have not been material to our financial
results.




We
have provided services to our customers under the following types of contractual
relationships:




Voyage charters, which are
contracts that are made in the spot market for the use of a vessel for a
specific voyage for a specified charter rate.




Time Charters,which are
contracts for the use of a vessel for a fixed period of time at a specified
daily rate. All other expenses related to the time charter voyages are assumed
by the charterers.




Bareboat
Charters,which are contracts pursuant to which the vessel owner provides
the vessel to the charterer for a fixed period of time at a specified daily
rate, and the customer provides for all of
the vessel's operatingexpenses including crewing repairs,
maintance, insurance, stores lube oils and communication expenses in addition to
the voyage costs (with the exception of commissions) and generally assumes all
risk of operation.




Any
profit sharing additional hires generated are recorded over the term of the
charter as the service is provided. Deferred income represents revenue
applicable to periods after the balance sheet date.




Fair
value of  Financial Instruments




The
Company has entered into various interest rate swap agreements in order to hedge
then interest expense arising from the Company's long-term borrowings detailed
in Note 15 to our consolidated financial statements. Under the interest rate
swaps, the Company agrees with the counter-party to exchange, at specified
intervals, the difference between a fixed rate and floating rate interest amount
calculated by reference to the agreed notional amount. In determining the fair
value of interest rate swaps, a number of assumptions and estimates are required
to be made. These assumptions include future interest rates.




These
assumptions are assessed at the end of each reporting period based on available
information existing at that time. Accordingly, the assumptions upon which these
estimates are based are subject to change and may result in a material change in
the fair value of these items.




Purchase
of Vessels




When
we identify any intangible assets or liabilities associated with the acquisition
of a vessel, we record all identified tangible and intangible assets or
liabilities at fair value. Fair value is determined by reference to market data
and the discounted amount of expected future cash flows. Where we have assumed
an existing charter obligation at charter rates that are less than market
charter rates, we record a liability, being the difference between the assumed
charter rate and the market charter rate for an equivalent vessel. This deferred
charter revenue is amortized to revenue over the remaining period of the
charter. The determination of the fair value of acquired assets and assumed
liabilities requires us to make significant assumptions and estimates of many
variables including market charter rates, expected future charter rates, future
vessel operating expenses, the level of utilization of our vessels and our
weighted average cost of capital. The use of different assumptions could result
in a material change in the fair value of these items, which could have a
material impact on our financial position and results of
operations.




Results
of continuing operations




For
the Year Ended December 31, 2008 Compared to the Year Ended December 31,
2007




Revenues




Total
revenues of $81.3 million from continuing operations were recorded for the year
ended December 31, 2008, compared to $81.1 million recorded for the year ended
December 31, 2007. Excluding deferred charter revenue, due to the assumption of
charters associated with certain vessel acquisitions as well as commissions and
voyage expenses, total revenues were $64.8 million and $70.9 million for the
years ended December 31, 2008, and
December 31, 2007, respectively. The decrease in revenues is primarily
attributable to lower utilization as well as lower charter rates for certain
vessels in the Company's fleet during the twelve months ended December 31, 2008,
compared to the twelve months ended December 31, 2007.






40






During
the year ended December 31, 2008, total vessel operating days were 4,392
compared to total vessel operating days of 4,380 for the year ended December 31,
2007. The Company defines operating days as the total days the vessels were in
the Company's possession for the relevant period. Total revenue days for the
years ended December 31, 2008 and December 31, 2007, were 4,100 and 4,159,
respectively. The Company defines revenue days as the total days the vessels
were not off hire or out of service.




Of
the total revenue earned by our vessels during the year ended December 31, 2008,
78% (2007: 75%) was earned by our product tankers and 22% (2007: 25%) by our
container vessels.




Commissions




Chartering
commissions increased by approximately 27% to $1.4 million in the year ended
December 31, 2008, compared to $1.1 million in the year ended December 31, 2007.
The increase is primary attributable to a higher commission paid to Magnus
Carriers, pursuant to the commercial management agreement entered
into at the end of 2007.




Voyage
Expenses




Voyage
expenses increased by approximately 125% to $7.0 million in the year ended
December 31, 2008, compared to $3.1 million in the year ended December 31, 2007.
The increase is primary attributable to increased fuel cost, more of our vessels
trading in the spot market, and the increase in off hire days.




Vessel
operating expenses




Vessel
operating expenses increased by approximately 32% to $31.7 million during the
year ended December 31, 2008, compared to $24.0 million during the year ended
December 31, 2007. This increase is mainly attributable to higher repairs and
upgrading costs for the vessels and higher average fleet running costs partially
offset by Magnus Carriers' contribution under the budget variance sharing
arrangement under the ship management agreements between certain of our
vessel-owning subsidiaries and Magnus Carriers. The Magnus Carriers contribution
to vessels operating expenses totaled $1.2 million during the year ended
December 31, 2008 and $3.1 million for the year ended December 31, 2007.
Excluding the Magnus Carriers contribution, vessel operating expenses were $32.9
million for the year ended December 31, 2008, compared to $27.1 million for the
year ended December 31, 2007.




Of
the total vessel operating expenses during the year ended December 31, 2008, 63%
was incurred by our product tankers and 37% by our container vessels, and for
the year ended December 31, 2007, 61% was incurred by our product tankers and
39% by our container vessels, respectively.




General
& Administrative Expenses




General
and administrative expenses increased by approximately 44% to $7.9 million in
the year ended December 31, 2008, compared to $5.5 million in the year ended
December 31, 2007. This increase is primarily due to an increase in staff as a
result of the establishment of AMT, as well as higher third party fees and
compensation costs related to restricted stock grants. Please see the discussion in "Item 6.
Directors, Senior management and employees — Compensation."




Depreciation
and Amortization




Depreciation
amounted to $23.9 million during both years ended December 31, 2008 and December
31, 2007. Amortization of dry-docking and special survey costs increased by 54%
to $4.0 million in the year ended December 31, 2008, compared to $2.6 million in
the year ended December 31, 2007 due to higher dry-docking and special survey
costs in 2008 related to the High
Land, Seine, Ostria and
Saronikos Bridge. In
2008, pursuant to the requirements
of the Financial Accounting Standards Board Statement No. 144, "Accounting for
the Impairmentor Disposal
of Long-Lived Assets," weevaluated the carrying amounts of our
long-lived assets in light of current market conditions. The total impairment
loss in 2008 amounted to $30.1 million. No impairment loss was recorded in the
years ended December 31, 2006 and 2007.




Management
Fees to Related Party




Management
fees increased approximately by 12% to $1.9 million for the year ended December
31, 2008, compared to $1.7 million for the year ended December 31,
2007.




Interest
and finance Expense




Total
interest and finance expense decreased by approximately 9% to $16 million during
the year ended December 31, 2008, compared to $17.5 million during the year
ended December 31, 2007. Interest expense on loans decreased by approximately
12% to $13.9 million, compared to $15.8 million
for the year ended December 31, 2007. This decrease is primarily due to lower
interest rates. Interest and finance expenses for both years ended December 31,
2008 and December 31, 2007 include amortization of deferred financing costs
amounting to $1.3 million.








41






Interest
Rate Swaps




The
marking to market of our seven interest rate swaps in effect as of December 31,
2008 resulted in an unrealized loss of $ 6.5 million, compared to an unrealized
loss for the year ended December 31, 2007 of $4.1 million, due to the change in
fair value over the period. The marking to market valuation of this set of seven
interest rate swaps as at December 31, 2008 and December 31, 2007 resulted in a
liability of $12.5 million and $5.9 million, respectively.




Foreign
Exchange Rates




During
the year ended December 31, 2008 and 2007, a charge of $0.2 million and $0.3
million, respectively, was recorded due to adverse movement in foreign exchange
rates. Foreign exchange differences are included in General & Administrative
Expenses.




Net Income /
(loss)




Net
loss from continuing operations was $49.1 million in the year ended December 31,
2008 compared to a net loss of $1.9 million in the year ended December 31, 2007.
This decrease is primarily due to the impairment loss of $30.1 million that was
recognized for the year ended December 31, 2008, higher fleet running costs,
increased voyage expenses, as well as the adverse change in the fair value of
our interest rate swaps.




Net
gain from discontinuing operations was $9.2 million in the year ended December
31, 2008 compared to a net loss of $6.9 million in the year ended December 31,
2007. This increase is primarily due to the sale of three vessels amounting to a
gain of $13.6 million.




For
the Year Ended December 31, 2007 Compared to the Year Ended December 31,
2006




Revenues




Total
revenues of $81.1 million from continuing operations were recorded for the year
ended December 31, 2007, compared to $76.3 million recorded for the year ended
December 31, 2006. Excluding deferred charter revenue, due to the assumption of
charters associated with certain vessel acquisitions as well as commissions and
voyage expenses, total revenues were $70.9 million and $61.2 million for the
years ended December 31, 2007, and December 31, 2006, respectively. The increase
is primarily attributable to the growth of the Company's fleet (we acquired two
product tankers, Stena
Compass and Stena
Compassionduring 2006) and increase in operating days during the twelve
months ended December 31, 2007, compared to the twelve months ended December 31,
2006.




During
the year ended December 31, 2007, total vessel operating days were 4,380,
compared to total vessel operating days of 4,170 for the year ended December 31,
2006. The Company defines operating days as the total days the vessels were in
the Company's possession for the relevant period. Total revenue days for the
years ended December 31, 2007, and December 31, 2006, were 4,159 and 3,718,
respectively.The
Company defines revenue days as the total days the vessels were not off hire or
out of service.




Of
the total revenue earned by our vessels during the year ended December 31, 2007,
75% (2006: 71%) was earned by our product tankers and 25% (2006: 29%) by our
container vessels.




Commissions




Chartering
commissions increased by approximately 37.5% to $1.1 million in the year ended
December 31, 2007, compared to $0.8 million in the year ended December 31, 2006.
This increase is primarily due to the aggregate effect of an increase in revenue
days and increased number of commissions paid to Magnus Carriers as a result of
new period charters and voyage charters.




Voyage
Expenses




Voyage
expenses increased by approximately 15% to $3.1 million in the year ended
December 31, 2007, compared to $2.7 million in the year ended December 31, 2006.
This increase is primarily due to the aggregate effect of increased incurrence
of such costs due to a higher number of voyage charters being undertaken and
costs incurred by certain vessels traveling to repair facilities and increased
fuel costs during the year ended December 31, 2007.






42




Vessel
operating expenses




Vessel
operating expenses increased by approximately 24% to $24 million during the year
ended December 31, 2007, compared to $19.3 million during the year ended
December 31, 2006. This increase is mainly attributable to the greater number of
operating days and higher repairs and maintenance costs for the Company's fleet
during the year ended December 31, 2007. The Magnus Carriers contribution to
vessels operating expenses totaled $3.1 million during the year ended December
31, 2007 and $3.3 million for the year ended December 31, 2006. Excluding the
Magnus Carriers contribution, vessel operating expenses were $27.1 million for
the year ended December 31, 2007, compared to $22.6 million for the year ended
December 31, 2006.




Of
the total vessel operating expenses during the year ended December 31, 2007,
72.9% was incurred by our product tankers and 27.1% by our container vessels. Of
the total vessel operating expenses during the year ended December 31, 2006,
66.8% was incurred by our product tankers and 33.2% by our container
vessels.




General
& Administrative Expenses




General
and administrative expenses increased by approximately 41% to $5.5 million in
the year ended December 31, 2007 compared to $3.9 million in the year ended
December 31, 2006.  This increase is primarily due to higher audit
costs and compensation costs related to restricted stock grants.




Depreciation
and Amortization




Depreciation
increased by approximately 5% to $23.9 million during the year ended December
31, 2007 compared to $22.7 million during the year ended December 31, 2006.
Amortization of dry-docking and special survey costs increased by 37% to $2.6
million in the year ended December 31, 2007 compared to $1.9 million in the year
ended December 31, 2006. These increases are primarily due to the growth of the
Company's fleet and consequent increase in operating days during the year ended
December 31, 2007 as well as higher dry-docking and special survey
expenses.




Management
Fees to Related Party




Management
fees paid to Magnus Carriers increased by 6% to $1.7 million in the year ended
December 31, 2007 compared to $1.6 million in the year ended December 31, 2006.
This increase is primarily due to the increase in operating days.




Interest
and Finance  Expenses




Total
interest and finance expense increased by approximately 15% to $17.5 million
during the year ended December 31, 2007 compared to $15.2 million during the
year ended December 31, 2007. Interest expense on loans increased by
approximately 19% to $15.8 million, compared to $13.3 million for the year ended
December 31, 2006. This increase is primarily due to the growth of the Company's
fleet and associated increase in debt and financing days. In addition, as a
result of the relaxed interest rate covenants described below under "Liquidity
and Capital Resources – Indebtedness," we paid an increased margin of 1.75% on
amounts drawn under the credit facility. Finance expense relating to
amortization of deferred financing costs decreased by approximately 19% to $1.3
million during the year ended December 31, 2007 compared to $1.6 million during
the year ended December 31, 2006.




Interest
Rate Swaps




The
marking to market of our seven interest rate swaps in effect as of December 31,
2007 resulted in an unrealized loss of $4.1 million, compared to an unrealized
loss for the year ended December 31, 2006 of $1.8 million, due to the change in
fair value over the period.  The marking to market valuation of this
set of seven interest rate swaps as of December 31, 2007 resulted in a liability
$5.9 million.




Foreign
Exchange Rates




During
the year ended December 31, 2007 and December 31, 2006, a charge of $0.3 million
and $0.4 million, respectively, was recorded due to adverse movement in foreign
exchange rates. Foreign exchange differences are included in General &
Administrative Expenses.




Net
Income (loss)




Net
loss was $1.9 million in the year ended December 31, 2007 compared to $7.2
million net income in the year ended December 31, 2006. This decrease is
primarily due to higher fleet running costs, increased voyage expenses, as well
as the increased depreciation and amortization charges, and the adverse change
in the fair value of our interest rate swaps.






43




B.        
     Liquidity and Capital
Resources





Overview




We operate in a capital intensive
industry. Our principal sources of liquidity are cash flows from operations,
equity and debt. Our future liquidity requirements relate to: (1) our operating
expenses, (2) quarterly payments of interest and other debt-related expenses and
the repayment of principal, (3) maintenance of financial covenants under our
fully revolving credit facility agreement,(4) payments for dry-docking and special
survey costs,(5)
maintenance of cash reserves to provide for contingencies and (6) payment of
dividends in the future.  In September 2008, our board of directors
determined to suspend the payment of cash dividends.




As
of December 31, 2008 and December 31, 2007, we had a working capital deficit of
$231.7 million and $291.8 million, respectively, which include the total of our
outstanding borrowing of $223.7 million and $284.8 million, respectively,
reflected as current.





As
further explained below under "Indebtedness," during 2006, 2007 and 2008, we did
not comply with the interest coverage ratio financial covenant of our credit
facility as originally defined in the facility agreement and as temporarily
relaxed during 2007 and 2008, the latter in accordance with the Fifth
Supplemental Agreement. Additionally, as part of the relaxation received, we
were required, among other covenants, to reduce the outstanding borrowings under
the credit facility from $284.8 million to $200 million, by disposal of vessels,
by August 31, 2008. In April and June 2008, we sold three of our vessels, the Arius, MSC Oslo and Energy
1 for net proceeds of $59.6 million and reduced our outstanding
borrowings to $223.7 million.  In addition, on June 10, 2009, we
entered into a contract for the sale of the Ocean Hope. We expect to
reduce our outstanding borrowings to $221.4 million with net proceeds of $2.3
million from the sale




During
2008, and currently, we are in breach of certain financial covenants of our
facility including the interest coverage ratio covenant, the minimum working
capital covenant and the adjusted equity ratio covenant (as further explained
below under "Indebtedness"). Furthermore, due to the current financial turmoil,
which has significantly affected the industry and vessel values, our lenders
notified us on April 9, 2009, that the Security Value of our vessels was less
than the Security Requirement, as defined in the agreement, and requested
remedies in accordance with the provisions of the facility agreement. We are
currently in discussions with our lenders regarding the applicability of the
valuations that formed the basis for this notice in light of the lack of
liquidity in the vessel sale and purchase market.




We
are currently in negotiations with our lenders in an effort to obtain waivers in
respect of the covenants of which we are in breach and to restructure our
facility. Absent any further relaxation under our facility, the lenders have the
ability to demand repayment of outstanding borrowings. The lenders notified us
on October 27, 2008, December 24, 2008, February 6, 2009 and April 3, 2009 that
certain events of default have occurred and continue to occur. In addition, the
lenders have advised us that it is not their immediate intention to take
enforcement action, but they reserve their rights to do so.





Our
debt is reflected as current due to the high degree of uncertainty surrounding
our ability to reach an agreement with our lenders about the current events of
default. While these consolidated financial statements have been prepared using
generally accepted accounting principles applicable to a going concern, which
contemplate the realization of assets and liquidation of liabilities during the
normal course of operations, the conditions and events described above raise
substantial doubt about our ability to continue as a going concern.





Four of
our period charters are scheduled to expire during 2009. In addition, four
of our product tankers are trading in the spot market. After our period charters
expire, we may employ our vessels under new period charters or in the spot
voyage market between period charters, depending on the prevailing market
conditions at the time. If market conditions in the international shipping
industry are depressed when our charters expire, our liquidity may be
negatively affected and our cash flows may not be sufficient to allow us to meet
our obligations.





We
have plans in place to improve our performance and financial strength. These
plans mainly relate to the reduction of vessel operating expenses, the potential
sales of one or more vessels to strengthen our financial position and plans for
enhancing our equity capital. On June
24, 2009, we signed a non-binding letter of intent (LOI) with Grandunion, a
company controlled by Michael Zolotas and Nicholas Fistes, that contemplates,
among other things, the acquisition of three Capesize drybulk carriers with an
approximate net asset value of $36.0 million in exchange for 15,977,778 newly
issued shares of Aries Maritime and a change of control of our board of
directors. Please see “Item 4.A. History and Development of the Company – Recent
Developments” for further information concerning the LOI. However, there is no
assurance that we will enter into definitive agreements with Grandunion or that
we will be successful in achieving our objectives.





On
September 12, 2008, we announced the suspension of payment of our quarterly
dividend, effective immediately. The decision followed the new management's
strategic review of our business and reflects our focus on improving our
long-term strength and operational results.





Assuming
that we are successful in our plans to improve our performance and
financial strength and in reaching an agreement with our lenders in respect of
the breach of our facility covenants,  we believe that our anticipated
cash flows and the availability of funds under our fully revolving credit
facility will be sufficient to permit us to meet our liquidity requirements over
the next 12 months. The lenders could, however, as long as there are continuing
events of default, elect to declare the outstanding debt, together with accrued
interest and other fees, to be immediately due and payable and proceed against
the collateral securing that debt, which could constitute all or substantially
all of our assets. Our independent registered public accounting firm has issued
their opinion with an explanatory paragraph in connection with our consolidated
financial statements included in this
report that expresses substantial doubt about our ability to continue as a going
concern. We believe that the actions presently being taken, as explained above,
will provide the opportunity for us to continue as a going concern. However,
there is a material uncertainty related to events or conditions that raises
substantial doubt on our ability to continue as a going concern and, therefore,
we may be unable to realize our assets and discharge our liabilities in the
normal course of business.  See Note 1 to our consolidated financial
statements.






44






Our longer-term liquidity requirements
include repayment of the outstanding debt under our fully revolving credit
facility. We will require new borrowings and/or issuances of equity capital or
other securities to meet the repayment obligation when our fully revolving
credit facility matures in April 2011.  For further information on our
fully revolving credit facility please read "Indebtedness"
below.




Cash
Flows




As
of December 31, 2008, 2007 and 2006, we had cash balances of $4.0 million, $12.4
million, and $11.6 million, respectively.




For
the year ended December 31, 2008, our net cash provided by operating activities
was $2.9 million, compared to $17.6 million in the year ended December 31, 2007,
a decrease of 84%. This decrease was primarily due to a net loss of $39.8
million for the year ended December 31, 2008, compared to a net loss of $8.7
million for the year ended December 31, 2007.




For
the year ended December 31, 2008, our net cash provided by investing activities
was $61.1 million, compared to our net cash used in investing activities of $2.0
million during the year ended December 31, 2007, an increase of 2955%. This
increase was primarily due to vessel disposals amounting to $59.6 million during
the year ended December 31, 2008. There were no disposals of vessels in the year
ended December 31, 2007.




In
the year ended December 31, 2008, our net cash used in financing activities was
$72.4 million, compared to $14.7 million in the year ended December 31, 2007, an
increase of 393%. This increase was primarily due to repayments under our credit
facility amounting to $61.1 million.




For
the year ended December 31, 2007, our net cash provided by operating activities
was $17.6 million, compared to $24.2 million during the year ended December 31,
2006, a decrease of 27%. This decrease was primarily due to changes in working
capital and a net loss of $8.7 million for the year ended December 31, 2007,
compared to a net income of $2.2 million for the year ended December 31,
2006.




For
the year ended December 31, 2007, our net cash used in investing activities was
$2.0 million, compared to $101.8 million in the year ended December 31, 2006, a
decrease of 98%. This decrease was primarily due to no new vessel acquisitions
during the year ended December 31, 2007, compared to two vessels acquisitions
during the year ended December 31, 2006.




In
the year ended December 31, 2007, our net cash used in financing activities was
$14.7 million, compared to our net cash provided by financing activities of $70
million in the year ended December 31, 2006. This 79% decrease is primarily due
to dividend payments of $17.9 million during the year ended December 31, 2007,
compared to long term debt proceeds of $101 million during the year ended
December 31, 2006.




Indebtedness





We
entered into a $360 million fully revolving credit facility in April 2006 with
Bank of Scotland and Nordea Bank Finland as lead arrangers and Bank of Scotland
as Agent. We used the fully revolving credit facility to (i) refinance our old
$140 million drawn term loan; (ii) refinance our old revolving acquisition
facility, which was drawn to the extent of $43.8 million at December 31, 2005
and which was further drawn in February 2006 in the amount of $50.5 million to
complete the purchase of the Stena Compass; and (iii) to
complete the purchase of the Stena Compassion. The fully
revolving credit facility has a five year term and is subject to nine
semi-annual fixed reductions of $11 million each. As explained further below, as
per the amendments further to the facility's Fifth Supplemental Agreement, the
facility was reduced effective from April 2008 to $290 million, and is subject
to the remaining five semi-annual reductions of $11 million each.




As
of December 31, 2008, our outstanding borrowings amounted to $223.7 million,
compared to $284.8 million as of December 31, 2007.




Under
the original terms of the facility agreement, borrowings can be used to fund the
purchase price (and, with respect to newbuildings, reasonable pre-delivery
interest and inspection costs) of one or more additional vessels under certain
conditions acceptable to the lenders and on the further condition that for the
first thirty months of the facility, the total amount borrowed would not exceed
65% of the fair market value of the collateral vessels, and for the last thirty
months of the facility the total amount borrowed would not exceed 60% of the
fair market value of the collateral vessels.




Borrowings
can also be used to the extent of $5.0 million for general corporate purposes.
As of  December 31, 2008, this amount remains undrawn.






45




Our
obligations under the fully revolving credit facility are secured by a first
priority security interest, subject to permitted liens, in all vessels in our
fleet and any other vessels we subsequently acquire. In addition, the lenders
will have a first priority security interest in all earnings from and insurances
on our vessels, all existing and future charters relating to our vessels, our
ship management agreements and all equity interests in our subsidiaries. Our
obligations under the fully revolving credit facility agreement are also
guaranteed by all subsidiaries that have an ownership interest in any of our
vessels.




Under
the original terms of the facility, amounts drawn bear interest at an annual
rate equal to LIBOR plus a margin equal to:




·
            1.125% if our total liabilities
      divided by our total assets, adjusting the book value of our fleet to its
      market value, is less than
50%;





·
            1.25% if our total liabilities
      divided by our total assets, adjusting the book value of
      our fleet to its market value, is equal to or greater than 50%
      but less than 60%;





·
            1.375% if our total liabilities
      divided by our total assets, adjusting the book value of
      our fleet to its market value, is equal to or greater than 60% but
      less than 65%; and





·
            1.5% if our total liabilities
      divided by our total assets, adjusting the book value of our fleet to its
      market value, is equal to or greater than
  65%.





The
interest rate on overdue sums will be equal to the applicable rate described
above plus 2%. As explained further below, as per the Fifth Supplemental
Agreement, in connection with the temporary relaxation of the interest coverage
covenant of the facility, an increased margin of 1.75% above LIBOR applied
during 2008 and still applies until the covenant meets the required level of
3.00:1.00. As of December 31, 2008, borrowings under our fully revolving credit
facility bore an annual effective interest rate, including the margin, of
5.76%.




We
use interest rate swaps to swap our floating rate interest payment obligations
for fixed rate obligations. For additional information regarding our interest
rate swaps, please read "Quantitative and Qualitative Disclosures About Market
Risk—Interest Rate Exposure" below.




We
paid a one-time arrangement fee of approximately $2.3 million at the initial
draw down of the facility. We also pay annual agency fees of $0.1 million, and
pay, quarterly in arrears, a commitment fee equal to 0.5% per annum of the
unused commitment of each lender under the facility. We may prepay all loans
under the credit agreement without premium or penalty other than customary LIBOR
breakage costs.




The
credit agreement requires us to adhere to certain financial covenants as of the
end of each fiscal quarter, including the following:




·
            our shareholders' equity as a
      percentage of  our total assets, adjusting the book value of our
      fleet to its market value, must be no less than
  35%;





·
            minimum liquidity consisting of
      free cash and cash equivalents, plus the undrawn element of the $5.0
      million portion of the fully revolving credit facility available for
      general corporate purposes, which must be no less than the aggregate of 5%
      of interest bearing debt and 5% of the $5.0 million portion of the fully
      revolving credit facility available for general corporate
      purposes;





·
            the
      ratio of EBITDA (earnings before interest, taxes, depreciation and
      amortization) to interest expense must be no less than 3.00 to 1.00 on a
      trailing four quarter basis;
      and





·
            our current liabilities, excluding
      deferred revenue, derivative financial instruments and voluntary and
      mandatory prepayments, may not exceed our current assets, excluding
      derivative financial instruments and the value of any ship committed for
      sale;





·
            the aggregate fair market value of
      our vessels must be no less than 140% of the aggregate outstanding loans
      under the credit facility.




In addition, the Manager of the vessels
is required to maintain a credit balance in an account opened with the Agent of at least $1.0
million.





The credit agreement also requires our
two principal beneficial equity holders to maintain a beneficial ownership
interest in our company of no less than 10% each.





In
March 2008, we and our lenders agreed to a temporary relaxation of the interest
coverage covenant contained in the credit facility to 2.25:1.00 for the periods
ended December 31, 2007, March 31, 2008 and June 2008, increasing to 2.75:1.00
for the period ended September 30, 2008.  Please see  note 10 of
the consolidated financial statements for additional information. In addition,
we entered into the Fifth Supplemental Agreement to the credit facility on June
11, 2008. The relaxation of the interest coverage covenant was among other
things conditioned on:






46









·
            An
      immediate reduction in the credit facility commitment level to $290.0
      million;·
            A
      reduction of the outstanding borrowings under the credit facility from the
      level of $284.8 million to $200 million, by disposal of vessels,
      by  September 30, 2008, subject to legally binding sales
      contracts having been executed by June 30, 2008 which, on June 20, 2008,
      was extended to August 31, 2008;·
            Our
      continued payment of an increased margin of 1.75% above LIBOR until a
      compliance certificate is provided to its lenders advising the interest
      coverage ratio meets the required level of 3.00:1.00;·
            Our
      not paying a dividend for the quarter ended December 31,
    2007;·
            During
      the period of interest coverage covenant relaxation any advance for new
      investments requires the consent of all of the lenders under the fully
      revolving credit facility; and·
            A
      one-time fee of $362,500 which was paid in April
  2008.




Primarily
due to unexpected out of service days for certain vessels and due to the adverse
change in the financial and shipping market conditions, during 2008 and
currently we have not met certain of our financial covenants. Our lenders
notified us on October 27, 2008, December 24, 2008, February 6, 2009 and April
3, 2009 that certain events of default have occurred and continue to occur. In
addition, our lenders advise that it is not their immediate intention to take
enforcement action, but they reserve their rights to do so.





As
of December 31, 2008, and at the present time, we are in breach of the following
covenants:





·
            An
      adjusted equity ratio of not less than
35%;




·
            An
      interest coverage ratio (as defined in the facility agreement) of not less
      than 3.00 to 1.00;




·
            The
      reduction of outstanding borrowings to $200 million in accordance with the
      Fifth Supplemental Agreement;




·
            A
      working capital, including the $223.7 million of debt reflected as
      current, of not less than zero.




Furthermore,
due to the current financial turmoil which has significantly affected the
industry and the value of our vessels (as defined in the credit facility), our
lenders notified us on April 9, 2009 that the Security Value of our vessels was
less than the Security Requirement and requested remedies in accordance with the
provisions of the facility agreement. We are currently in discussions with our
lenders regarding the applicability of the valuations that formed the basis for
this notice in light of the lack of liquidity in the vessel sale and purchase
market.




We
are currently in negotiations with our lenders in order to obtain waivers in
respect of the covenants of which we are in breach and to restructure our
facility.




Capital Expenditures





Please see the information contained
under "Item 4A – History and Development of the Company" regarding capital
expenditures.





C.        
    Research and Development, Patents and
Licenses





Not
applicable.





D.     
       Trend Information





Not
applicable.





E.       
      Off-Balance Sheet Arrangements





We do not have any off-balance
sheet arrangements.





F.       
      Tabular Disclosure of Contractual
Obligations






47




As of December 31, 2008, significant
existing contractual obligations and contingencies consisted of our obligations
as borrower under our fully revolving credit facility. In addition, we had
contractual obligations under interest rate swap contracts, ship management
agreements and an office rental agreement.




Long-Term Financial Obligations and
Other Commercial Obligations




The following table sets out long-term
financial and other commercial obligations, outstanding as of December 31, 2008
(all figures in thousands of U.S. Dollars):




Payment due by
      PeriodContractual
      Obligations
              
              Total
              
              
              Less than 1
      year
              
              
              1-3 years
              
              
              3-5 years
              
              
              More than 5
      yearsLong-term debt
      obligation(1)
              
              
              223,710
              
              
              
              23,710
              
              
              
              200,000
              
              
              
              0
              
              
              
              0Interest
      payments(2)
              
              
              29,096
              
              
              
              12,884
              
              
              
              16,212
              
              
              
              0
              
              
              
              0Rental agreement (3)
              
              
              1,263
              
              
              
              147
              
              
              
              316
              
              
              
              348
              
              
              
              452Total
              
              
              254,069
              
              
              
              36,741
              
              
              
              216,528
              
              
              
              348
              
              
              
              452





Notes:




(1)
            Refers to our obligations to repay
      the indebtedness outstanding as of December 31, 2008, assuming that the
      Company meets the covenants of the credit
  facility.


(2)
            Refers to our expected interest
      payments over the term of the indebtedness outstanding as of December 31,
      2008, assuming an effective interest rate of 5.76% per
      annum.


(3)
            Refers to our obligations under
      the rental agreements for office space for the
    Company.





Quantitative and Qualitative Disclosures
About Market Risk





Interest Rate
Exposure




Our
debt obligations under our fully revolving credit facility bear interest at
LIBOR plus a margin ranging from 1.125% to 1.5% per annum. With effect from
January 3, 2007, and until the relaxation of the interest cover financial
covenant no longer applies, the margin has been increased to 1.75%. Increasing
interest rates could adversely affect our future profitability.




On
July 5, 2006, we entered into interest rate swaps with five banks on identical
terms. These five swaps had an effective date of July 3, 2006 and a maturity
date of April 3, 2011. Under the terms of the swap agreements, we pay a fixed
interest rate of 5.63% per annum on a total of $100 million of our long-term
debt.




On
April 3, 2008 we entered into a floored swap transaction with one bank and a
simultaneous swap and cap transaction with another bank. These two synthetic
swaps had an effective date of April 3, 2008 and maturity dates of April 3, 2011
and April 4, 2011, respectively. Under the terms of the floored swap agreement,
we pay a fixed interest rate of 4.285% per annum on a total of $23.3 million of
our long term debt. Under the terms of the swap and cap transactions, we pay a
fixed interest rate of 4.14% on a total of $23.3 million of our long term debt
and we have limited our interest rate exposure to 4.14% on an additional amount
of $23.3 million.




A
100 basis point increase in LIBOR would have resulted in an increase of
approximately $0.5 million in our interest expense on the unhedged element of
drawings under the fully revolving credit facility for the year ended December
31, 2008.




Foreign Exchange Rate
Exposure




Our
vessel-owning subsidiaries generate revenues in U.S. dollars but incur a portion
of their vessel operating expenses, and we incur our general and administrative
costs, in other currencies, primarily Euros.




We
monitor trends in foreign exchange rates closely and actively manage our
exposure to foreign exchange rates. We maintain foreign currency accounts and
buy foreign currency in anticipation of our future requirements in an effort to
manage foreign exchange risk. In
the year ended December 31, 2008, the value of the U.S. dollar reached highs of
$1.25 and lows of $1.59 compared to the Euro, and as a
result,an adverse or positive movement could increase or decrease
operating expenses.




Recent Accounting
Developments





In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157 (SFAS 157) "Fair Value Measurement." SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet issued
financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The provisions of SFAS 157 should be applied prospectively as of the beginning
of the fiscal year in which it is initially applied except for certain cases
where it should be applied retrospectively. This statement was effective for the
Company for the fiscal year beginning on January 1, 2008 and it did not have a
material effect on its consolidated financial statements.






48







In
February, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities," which permits companies to report
certain financial assets and financial liabilities at fair
value.  SFAS 159 was effective for the Company as of January 1, 2008
at which time the Company could elect to apply the standard prospectively and
measure certain financial instruments at fair value.  The Company has
evaluated the guidance contained in SFAS 159, and has elected not to report any
existing financial assets or liabilities at fair value that are not already
reported, therefore, the adoption of the statement had no impact on its
financial position and results of operations.  The Company retains the
ability to elect the fair value option for certain future assets and liabilities
acquired under this new pronouncement.





In
February 2008, the FASB issued the FASB Staff Position, or FSP No. 157-2, which
delays the effective date of SFAS 157, for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). For purposes
of applying this FSP, nonfinancial assets and nonfinancial liabilities would
include all assets and liabilities other that those meeting the definition of a
financial asset or financial liability as defined in paragraph 6 of FASB
Statement No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" This FSP defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and the interim periods within those fiscal
years for items within the scope of this FSP. The application of SFAS 157 in
future periods to those items covered by FSP 157-2 did not have a material
effect on the consolidated financial statements of the Company.





In
March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161, or SFAS 161, "Disclosures about Derivative Instruments and Hedging
Activities — an amendment of FASB Statement No. 133." SFAS 161 changes the
disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why
an entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged
items affect an entity's financial position, financial performance, and cash
flows. This statement is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
application encouraged. This statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. The Company is
currently evaluating the potential impact, if any, of the adoption of SFAS 161
on its consolidated financial statements.





In
April 2008, FASB issued FASB Staff Position FSP 142-3 "Determination of the
useful life of intangible assets." This FASB Staff Position, or FSP, amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, "Goodwill and Other Intangible Assets." The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows used
to measure the fair value of the asset under FASB Statement No. 141 (revised
2007), "Business Combinations," and other U.S. generally accepted accounting
principles, or GAAP. This FSP will be effective for Aries Maritime Transport
Limited for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited. The adoption of FSP
142-3 is not expected to have a material effect on the consolidated financial
statements of the Company.





In
May 2008, the Financial Accounting Standards Board issued FASB Statement
No. 162, "The Hierarchy of Generally Accepted Accounting Principles." The
new standard is intended to improve financial reporting by identifying a
consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented in conformity with
GAAP for nongovernmental entities. Statement 162 is effective 60 days
following the SEC's approval of the Public Company Accounting Oversight Board
Auditing amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The adoption of
SFAS No. 162 is not expected to have material effect on the
consolidated financial statements of Aries Maritime Transport
Limited.





In
June 2008, FASB issued FASB Staff Position FSP EITF 03-6-1 "Determining
whether instruments granted in share-based payment transactions are
participating securities." This FSP addresses whether instruments granted
in share-based payment transactions are participating securities prior to
vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share, or EPS, under the two-class method described in
paragraphs 60 and 61 of FASB Statement No. 128, "Earnings per Share." This
FSP will be effective for the Company for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. All
prior-period EPS data presented shall be adjusted retrospectively (including
interim financial statements, summaries of earnings, and selected financial
data) to conform with the provisions of this FSP. Early application is not
permitted. The Company is currently evaluating the potential impact, if any, of
the adoption of FSP EITF 03-6-1 on the Company's consolidated financial
statements.





In
September 2008, FASB issued FSP FAS 133-1 and FIN 45-4 "Disclosures
about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement
No. 133 and FASB Interpretation No. 45; and Clarification of the
Effective Date of FASB Statement No. 161." This FSP amends FASB Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, to
require disclosures by sellers of credit derivatives, including credit
derivatives embedded in a hybrid instrument. This FSP also amends FASB
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to
require an additional disclosure about the current
status of the payment/performance risk of a guarantee. Further, this FSP
clarifies the FASB's intent about the effective date of FASB Statement
No. 161, Disclosures about Derivative Instruments and Hedging Activities.
This FSP applies to credit derivatives within the scope of Statement 133, hybrid
instruments that have embedded credit derivatives, and guarantees within the
scope of Interpretation 45. This FSP's amendment to Statement 133 also pertains
to hybrid instruments that have embedded credit derivatives (for example,
credit-linked notes). The provisions of this FSP that amend Statement 133 and
Interpretation 45 shall be effective for reporting periods (annual or interim)
ending after November 15, 2008. This FSP encourages that the amendments to
Statement 133 and Interpretation 45 be applied in periods earlier than the
effective date to facilitate comparisons at initial adoption. In periods after
initial adoption, this FSP requires comparative disclosures only for periods
ending subsequent to initial adoption. The adoption of FSP 133-1 and FIN 45-4 is
not expected to have a material effect on the Company's consolidated financial
statements.






49







In
October 2008, the FASB issued the FSP which clarifies the application of FASB
Statement No. 157, "Fair Value Measurements" in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that asset is not active. This
FSP, or FSP No. 157-3, applies to financial assets within the scope of
accounting pronouncements that require or permit fair value measurements in
accordance with Statement 157. The FSP shall be effective upon issuance,
including prior periods for which financial statements have not been issued.
Revisions resulting from a change in the valuation technique or its application
shall be accounted for as a change in accounting estimate ("FASB Statement No.
154 "Accounting changes and Error Corrections", paragraph 19). The disclosure
provisions of Statement No. 154 for a change in accounting estimate are not
required for revisions resulting from a change in valuation technique or its
application. The application of FSP 157-3 does not have a material effect on the
consolidated financial statements of the Company.




Subsequent Events





a)
            In
      January 2009, Seine Marine Ltd and Jubilee Shipholding S.A, the vessel
      owning companies of Seine and Ocean Hope,
      respectively, terminated their technical ship management agreement with
      Wilhelmsen Ship Management (formerly named Barber Ship Management
      Singapore Pte Ltd). Technical ship management for these vessels was
      undertaken by AMT Management.




b)
            In
      January 2009, Makassar Marine Ltd, the vessel owning company of Saronikos Bridge,
      terminated its technical ship management agreement with Wilhelmsen Ship
      Management (formerly named Barber Ship Management Singapore Pte Ltd).
      Technical ship management for the vessel was undertaken by AMT
      Management.




c)
            In
      April 2009, our lenders notified us through the Agent that the minimum
      hull cover ratio covenant of 140% is not met and requested for the
      necessary remedy in accordance with the provisions of the loan
      agreement.




d)
            On
      June 10, 2009, we signed a memorandum of agreement (MOA) for the sale of
      Ocean Hopefor a
      sale price of $2.4 million. We expect to deliver the vessel to its new
      owners between June 29 and July 15,
2009.




e)
              On
      June 24, 2009, we signed a non-binding letter of intent (LOI) with
      Grandunion, a company controlled by Michael Zolotas and Nicholas Fistes,
      that contemplates, among other things, the acquisition of three Capesize
      drybulk carriers with an approximate net asset value of $36.0 million in
      exchange for 15,977,778 newly issued shares of the Company and a change of
      control of our board of directors. Please see “Item 4.A. History and
      Development of the Company – Recent Developments” for further information
      concerning the LOI.




G.           
  Safe Harbor





See section "Forward-Looking
Statements" at the beginning of this annual report.





ITEM
6.                  DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES




A.     
        Directors and Senior
Management




Set forth below are the names, ages and
positions of our directors and executive officers. Our board of directors is
elected annually on a staggered basis, and each director elected holds office
until his successor shall have been duly elected, except in the event of his
death, resignation, removal or the earlier termination of his office. The
primary business address of each of our executive officers and directors is 18
Zerva Nap., Glyfada, 166 75, Greece.




Name
                  
                  Age
                  
                  PositionCaptain Gabriel
      Petridis
                  
                  55
                  
                  Class I Director as of April 2008
      and Chairman since July 2008Panagiotis
      Skiadas
                  
                  38
                  
                  Class III Director and Deputy
      ChairmanMons S.
    Bolin
                  
                  55
                  
                  Class I Director, Chief Executive
      Officer through June 2008 and President through June
      2009George
      Xiradakis
                  
                  45
                  
                  Class II
      DirectorChristopher
      Georgakis
                  
                  45
                  
                  Class II
      DirectorOlga
      Lambrianidou
                  
                  53
                  
                  Corporate
      SecretaryJeffrey Owen
      Parry
                  
                  49
                  
                  Chief Executive Officer since July
      2008 and President since June 2009Ioannis
    Makris
                  
                  41
                  
                  Chief Financial Officer since June
      2008Simos
      Katikas
                  
                  63
                  
                  Chief Operating Officer since
      September
2008


______________________






50




Our
board of directors is divided into three classes, as nearly equal in number as
possible, with each director serving a three-year term and one class being
elected at each year's annual meeting of shareholders. The term of the Class III
Directors expires in 2010, the term of the Class II Directors expires in 2011
and the term of the Class I Directors expires in 2009.





Christopher
J. Georgakis became a member of our board of directors upon the resignation of
Mr. Per Olav Karlsen, who served as a member of our board of directors since our
initial public offering until his resignation effective June 30,
2008.





Jeffrey
Owen Parry became our Chief Executive Officer replacing Mons S. Bolin, who
served as our President and Chief Executive Officer since April 2005 and remains
a member of our board of directors.





George
Xiradakis became a member of our board of directors upon the resignation of
Henry S. Marcus, who served as a member of our board of directors since our
initial public offering until his resignation effective July 4,
2008.





Certain biographical information about
each of these individuals is set forth below.




Captain Gabriel Petridis was
appointed to our board of directors in April 2008 and as Chairman to our board
of directors in July 2008 to fill the vacancy resulting from the resignation
of  Per Olav Karlsen.  Capt Gabriel Petridis served as Officer and
Master for over 18 years in various types of vessels such as tankers, bulk
carriers, multipurpose, and gas carriers and served for 32 months as Officer and
as Vice Commander in mine sweepers in the Greek Navy.  He has been employed
by various shipping companies since 1986 holding managerial positions in
different departments.  In 1991, he co-founded with Mons Bolin, Southern
Seas Shipping Corporation, an affiliate of Aries Energy Corporation, which he
still beneficially owns with Mr. Bolin.  From February 1997 until the end
of 2005, Capt Gabriel Petridis was the Managing Director of Magnus
Carriers.  In 1986, he was employed as a director in World Carriers, a
company based in London which owned and managed a fleet of about 20 very large
crude carriers and product carriers.  He remains a co-director of Sea
Breeze (UK) Ltd., an affiliate of Aries Energy Corporation.  He graduated
from the Nautical College of Greece.  Capt Gabriel Petridis is citizen of
Greece and France and a resident of Greece.





Panagiotis Skiadas has served
as a member of our board of directors and our Deputy Chairman since the closing
of our initial public offering in June 2005.  Mr. Skiadas has been the
Environmental Manager of VIOHALCO S.A., the holding company of the largest Greek
metals processing group that incorporates approximately 90 companies. Prior to
joining VIOHALCO in April 2006, Mr. Skiadas performed the same role for a
subsidiary of VIOHALCO, ELVAL S.A. since 2004. He has also served as the Section
Manager of Environmental Operations for the Organizational Committee of Olympic
Games, Athens 2004 S.A. Mr. Skiadas has received a Bachelor of Science in
Environmental Engineering from University of Florida, a Master of Engineering in
Civil and Environmental Engineering from Massachusetts Institute of Technology
and a diploma in Management Studies from Alba University in Athens.




Mons S. Bolin has served as a
director since April 2005 and served as our Chief Executive Officer from April
2005 to July 2008 and President from April 2005 to June 2009. He has over 30
years of shipping industry experience. After graduating with distinction in Law
(LLB), Economics and Business Administration from the University of Lund in
Sweden, Mr. Bolin completed his military service as an officer in the Swedish
Royal Marines in 1975. Mr. Bolin worked as a shipbroker for Fearnleys A/S in
Oslo, Norway from 1975 to 1977 and was then a director and partner in the
shipbrokering firm of Alexandrakis Brandts in Greece for eight years before
co-founding an oil/commodity trading and ship operating business, Westminster
Oil and Gas Ltd., in London in 1985. In 1991 he co-founded with Gabriel
Petridis, Southern Seas Shipping Corporation, an affiliate of Aries Energy,
which he still beneficially owns with Capt. Petridis. From February 1997 to
April 2005, Mr. Bolin was co-managing director of Magnus Carriers. He remains a
director of Sea Breeze UK Ltd., an affiliate of Aries Energy. Mr. Bolin is a
citizen of Sweden and a resident of Great Britain.




George Xiradakis was appointed
to our board of directors in July 2008. Since 1999, Mr. Xiradakis has been the
Managing Director of XRTC Business Consultants Ltd., a consulting firm providing
financial advice to the maritime industry, including financial and state
institutions; XRTC is the commercial representative of the French banking group
NATIXIS in Greece. He is also the advisor of various shipping companies, as well
as other international and state organizations. Mr. Xiradakis has served as a
President of the Hellenic Rea Estate Corporation from June 2004 to October 2006.
As of March 2007, he is the President of the National Centre of Port Development
in Greece. At present he also serves as the General Secretary of the Association
of Banking and Shipping Executives of Hellenic Shipping.  Mr.
Xiradakis has a certificate as a Deck Officer from the Hellenic Merchant Marine
and he is a graduate of the Nautical Marine Academy of Aspropyrgos, Greece. In
addition, he has a postgraduate Diploma in Commercial Operation of Shipping from
London Guildhall University, formerly known as City of London Polytechnic in
London. Mr. Xiradakis also holds an MSc in Maritime Studies from the University
of Wales.





Christopher Georgakis was
appointed to the board of directors in July 2008. Mr. Georgakis has two decades
of dry bulk shipping experience and joined Franco Compania Naviera in 2008,
following four years as President & Chief Executive Officer of Excel
Maritime Carriers (NYSE:EXM), a publicly traded owner and operator of dry bulk
carriers. Prior to that time, Mr. Georgakis was managing partner for a period of
six years at Sea Challenger, a subsidiary of Belmont Shipping Ltd, where he
managed all aspects of shipping operations. He joined his family's London based
shipping operations when he was 19, progressing eventually to Chartering
Manager. In 1990, Mr. Georgakis assumed responsibility for the group's
shipbuilding activities in Spain and Greece, including fund raising for new
buildings. Mr. Georgakis holds a BSc in Business Administration, magna cum
laude, from United States International University (Europe). He and his family
relocated from London to Athens in 2004.






51





Olga Lambrianidou has served
as our Corporate Secretary since October 2008. Prior to joining us, Ms.
Lambrianidou was the Corporate Secretary and Investor Relations Officer of
DryShips Inc., a drybulk publicly trading shipping company for two years. From
2000 to 2006, Ms. Lambrianidou was with OSG Ship Management (GR) Ltd., formerly
known as Stelmar Shipping Ltd., as a Human Resources Manager, Corporate
Secretary, and Investor Relations Officer. Before moving to Greece, Ms.
Lambrianidou worked extensively in the banking and the insurance fields in the
United States. She studied in the United States and has a BBA Degree in
Marketing/English Literature and an MBA Degree in Banking/Finance from Pace
University in New York.





Jeffrey Owen Parry has served as our Chief Executive
Officer since July 2008 and our President since June 2009.Mr. Parry has over 24 years
of experience in the shipping industry. He was the President of Mystic Marine
Advisors, a Connecticut-based advisory services firm for international ship
owners, which he founded in 1998. Mystic Marine specializes in the development
and structuring of private investments in dry bulk and tanker assets. From 2003
to 2007, he was a Managing Director of Poten Capital Services (PCS), a division
of Poten & Partners, Inc. PCS, which was co-founded by Mr. Parry, is a FINRA
registered broker-dealer specializing in M&A and commercial advisory
services to major participants in the international energy and maritime sectors.
Prior to co-founding PCS, Mr. Parry was a Senior Advisor at Poten &
Partners, focusing on period tanker chartering and S&P projects. From 1988
to 1998, he was an Executive Vice President at "C" Ventures, Inc., a New
York-based firm specializing in ship management and private equity investments
in shipping and telecommunications. Mr. Parry started his career in shipping as
a stevedore on the New York waterfront. He holds an MBA from Columbia Business
School with a concentration in Finance and Accounting. He received a BA in
English Literature from Brown University.





Ioannis Makris has served as
our Chief Financial Officer since June 2008.  Mr. Makris has
approximately 15 years of experience in finance and shipping. Previously, he
served as a Banking Executive at Cardiff Marine Inc., one of the largest
Greek-based shipping companies. Prior to that, Mr. Makris was a Finance and
Accounting Manager at Niki Shipping Company Inc., a private shipping company
based in Athens. He began his career at Ernst & Young, where he was an
auditor and a consultant from 1993 to 1996. Mr. Makris received a BS in
Economics from the London School of Economics and Political Science and an MS in
Economics from Birkbeck College in London. He is a Chartered Certified
Accountant.





Simos Katikas has served as
our Chief Operating Officer since September 2008. Mr. Katikas has over 30 years
of shipping experience. Mr. Katikas has held numerous senior level positions
with well-known shipping companies such as Aris Theodoridis Marine Consultant
Ltd, Libexim Shipping SA- Seabulk, and Uniship (Hellas) & Delphic Shipping
Co. From 1982 to 1995 Mr. Katikas served as Technical Director and head of claim
department with Libexim Shipping SA- Seabulk. From 1995 to 2003 he served as
Technical Director and head of insurance and claim department with Delphic
Shipping. During 2003 he was assigned the title of General Manager for Delphic
Shipping. From 2003 until 2005 Mr. Katikas was the Technical Director at
Technomar Shipping in Athens. For the last four years prior to joining us, he
was the Senior Technical Advisor at Niki Shipping. Mr. Katikas has a Bsc
(Honours) Degree in Naval Architecture and Shipbuilding from New Castle
University in the United Kingdom and a Msc Degree in Naval Architecture from the
University of Michigan while he served as an officer in the merchant navy for
approximately eight years.




B.           
  Compensation




During 2008, we paid our officers and
directors aggregate compensation of approximately $1,036,152, $839,000 in 2007
and $619,049 in 2006. In addition, stock-based compensation costs in 2008 and
2007 were $1,083,031 and$1,231,947,respectively. In addition, each director will be
reimbursed for out-of-pocket expenses incurred while attending any meeting of
the Board of Directors or any board committee.This amounted to $78,698 in 2008,
$168,630 in 2007 and $174,900 in 2006. Please see below regarding awards under
our 2005 Equity Incentive Plan.





On
June 5, 2008, we entered into an employment agreement with Mr. Ioannis Makris to
employ him as our Chief Financial Officer. This agreement has an initial
term of two years unless terminated earlier in accordance with the terms of such
agreement. The initial term shall be automatically extended for successive one
year terms unless we or Mr. Makris gives notice of non-renewal at least ninety
days prior to the expiration of the initial term or such one year extension to
the initial term. Under the employment agreement, Mr. Makris is expected to
receive an annual salary of €140,000, or approximately $196,252. Upon completion
of the four month probationary period, Mr. Makris was granted 20,000 shares of
our restricted common stock subject to applicable vesting periods, as mentioned
below. Mr. Makris will also receive additional incentive compensation as
determined annually by the compensation committee of our board of
directors.





On
July 23, 2008, we entered into an employment agreement with Mr. Jeffrey Owen
Parry to employ him as our Chief Executive Officer. This agreement has an
initial term of three years unless terminated earlier in accordance with the
terms of such agreement. The term shall be automatically renewed for successive
one year intervals unless we or Mr. Parry gives written notice of not less than
one hundred eighty (180) days of their intent to terminate the agreement. Under
the employment agreement, Mr. Parry is expected to receive an annual salary of
$500,000. In addition, upon execution of the agreement, Mr. Parry was granted
100,000 fully vested stock units of common stock. Such units were converted into
100,000 shares of our restricted common stock six months after the grant of such
units, as mentioned below. Furthermore, upon execution of the agreement, we also
granted to Mr. Parry options to purchase 300,000 common shares, subject to
applicable vesting periods and exercise prices, as mentioned below.Mr.
Parry will also receive additional incentive compensation as determined annually
by the compensation committee of our board of directors.






52





2005 Equity Incentive
Plan





We adopted an equity incentive plan,
which we refer to as the2005 Equity Incentive Plan, under which our officers, key
employees and directors are eligible to receive equitycompensationawards.Our board of directors adopted an
amendment to the plan in June 2009 pursuant to which we have reserved a total of1,000,000 common shares for issuance under the plan, of which
545,000have been issued.
Our board of directors administers the plan. Under the terms of the plan, our
board of directorsisable to grant new options exercisable
at a price per common share to be determined by our board of directors but in no
event less than fair market value of the common share as of the date of grant.
The plan also permits our board of directors to award other securities,
including restricted and unrestricted shares, performance shares and stock
appreciation rights. All options will expire no later than ten years from
the date of the grant. Unless terminated earlier pursuant to its terms, the plan
will terminate ten years from the date it was adopted by the board of
directors.





In August 2007, we issued under
the2005 Equity Incentive Plan, 40,000 restricted shares to each director
who was not also an officer of the Company for a total of 120,000 shares,
subject to the following vesting periods:





·
            20,000
      shares vested on July 1, 2007;





·
            10,000
      shares were scheduled to vest on July 1, 2008;
  and





·
            10,000
      shares were scheduled to vest on July 1,
2009.





In
October 2007, we issued under the 2005 Equity Incentive Plan, 40,000 restricted
common shares to each of the Chief Executive Officer and Chief Financial Officer
for a total of 80,000 shares, subject to the following vesting
periods:





·
            20,000
      shares vested on September 1, 2007;





·
            10,000
      shares were scheduled to vest on July 1, 2008;
  and





·
            10,000
      shares will vest on July 1, 2009.





On April 11, 2008, the board of
directors resolved to accelerate the vesting of the 100,000 shares unvested as
of December 31, 2007 of 200,000 shares awarded during 2007 under grants of
restricted stock to the Company's directors. All shares that had not vested
became vested on April 11, 2008.





In October 2008, we issued under the
2005 Equity Incentive Plan, 45,000 restricted common shares to each director of
the Company for a total of 225,000 shares, subject to the following vesting
periods:





·
            15,000 shares are scheduled to
      vest on July 1, 2009;





·
            15,000 shares are scheduled to
      vest on July 1, 2010; and





·
            15,000 shares are scheduled to
      vest on July 1, 2011.





In December 2008, we issued under the
2005 Equity Incentive Plan, 20,000 restricted common shares to the Chief
Financial Officer of the Company for a total of 20,000 shares, subject to the
following vesting periods:





·
            5,000 shares vested on October 5,
      2008; and





·
            15,000 shares are scheduled to
      vest on June 5, 2010.





In July 2008, pursuant toourChief Executive Officer'semployment agreement,ourChief Executive Officerwas granted 100,000 restricted stock
units under the 2005 Equity Incentive Plan, which were converted intofully vested restrictedcommon shares in January
2009.We have also granted
to our Chief Executive Officer options to purchase 300,000 common shares. The
options are subject to the following vesting periods and exercise
prices:





·
            options to purchase 100,000 shares
      are scheduled to vest on July 7, 2009 at an exercise price of
      $8.00;





·
            options to purchase 100,000 shares
      are scheduled to vest on July 7, 2010 at an exercise price of $8.00;
      and





·
            options to purchase 100,000 shares
      are scheduled to vest on July 7, 2011 at an exercise price of $10.00. The
      options expire ten years from the date of
  grant.







53


C.         
    Board Practices


Committees of the Board of
Directors




We have established an Audit Committee
comprised of our three independent directors responsible for reviewing our
accounting controls and recommending to the Board of Directors the engagement of
our outside auditors.  The current members of our audit committee are
Messrs. Panagiotis Skiadas (Chairman),George Xiradakis and Christopher
J. Georgakis.During 2008, there
had been one vacancy on our audit committee following the resignation of Per
Olav Karlsen from the audit committee in February 2008 in order to avoid any
possible conflicts of interest resulting from Mr. Karlsen's share ownership in a
shipbroking firm that received a commission from the purchaser of theAriusin connection with the sale of that
vessel.We have also
established a Compensation Committee comprised of our three independent
directors responsible for reviewing the compensation of our senior management,
officers and  board of directors.  The current members of
our Compensation Committee are Messrs. Panagiotis Skiadas, Capt. Gabriel
Petridis, and Christopher Georgakis.





There are no service contracts between
us and any of our directors providing for benefits upon termination of their
employment or service. Please see the information contained under "Item 7B –
Related Party Transactions" regarding transactions between us and any of our
directors.





D.         
    Employees




See "Item 4 — Information on the Company — Business
Overview —Crewing and Employees."




E.     
        Share Ownership




The common shares beneficially owned by
our directors and senior managers and/or companies affiliated with these
individuals are disclosed in "Item 7 –  Major Shareholders and Related
Party Transactions" below.




ITEM
7.                   MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS




A.       
      Major shareholders




The following table sets forth
information regarding (i) the owners of more than 5% of our common stock that we
are aware of and (ii) the total number of shares of our common stock held by
officers and directors as of June 25, 2009.




Title of
    Class
              Identity of Person or
      Group
              
              Amount
Owned
              
              
              Percent of
      ClassCommon stock, par value $0.01 per
      share
              Rocket Marine Inc.
      (1)(2)
              
              
              14,896,877
              
              
              
              52
              %Mons Bolin
      (1)(2)
              
              
              14,896,877
              
              
              
              52
              %Captain Gabriel Petridis
      (1)(2)
              
              
              14,896,877
              
              
              
              52
              %Directors and Executive Officers
      as a Group
              
              
              15,151,877
              
              
              
              53
              %Transamerica Investment
      Management, LLC (3)
              
              
              2,029,730
              
              
              
              7.2
              %





(1)
            Rocket
      Marine Inc., a Marshall Islands corporation, is a wholly-owned indirect
      subsidiary of Aries Energy Corporation, which is also a Marshall Islands
      corporation.  Mons Bolin and Captain Gabriel Petridis each own
      50% of the issued and outstanding capital stock of Aries Energy
      Corporation and Magnus Carriers.  Each of Aries Energy
      Corporation, Mons Bolin and Captain Gabriel Petridis disclaims beneficial
      ownership of such shares.(2)
            Includes
      an aggregate of 90,000 shares issued to Rocket Marine as the nominee of
      Mons S. Bolin and Captain Gabriel Petridis for shares issued under the
      Company's 2005 Equity Incentive Plan, which are subject to applicable
      vesting.(3)
            According
      to Schedule 13G/A filed with the Securities and Exchange Commission by
      Transamerica Investment Management, LLC on February 14,
      2008.  According to such Schedule 13G/A, Gary U. Rolle is the
      Chief Investment Officer of TransAmerica Investment Management,
      LLC.


Our major shareholders all have
equal voting rights.





B.         
    Related
Party Transactions




Consistent with Bermuda law
requirements, our bye-laws require any director who has a potential conflict of
interest to identify and declare the nature of the conflict to our board of
directors.  Our bye-laws additionally providethat related party transactions must be
approved by independent and disinterested directors.




Aries Energy
Corporation





Aries EnergyCorporation, through its wholly-owned,indirect subsidiary, Rocket Marine
Inc., owns 52% of our outstanding commonstock.Mr. Mons Bolin, our Presidentanddirector,who also served as our Chief Executive
Officer until July 8, 2008,owns 50% of the issued and outstanding
capital
stock of Aries Energy and of Magnus Carriers. Captain Gabriel Petridis, our
Chairman of the board, owns the remaining 50% of the outstanding capital stock
of Aries Energy and of Magnus Carriers.






54






Magnus
Carriers





We hadhistorically contracted the technical
and commercial management of our vessels to Magnus Carriers except for the
vesselsStena
CompassandStena
Compassionwhich have been
under bareboat charter and for the vessel Chinook which has been under the
technical management of Ernst Jacob. See "Item 5–Operating and Financial Review and
Prospects.–Technical and Commercial Management of
our Fleet" above for a
detailed description of the management agreements with Magnus
Carriers.




The technical and commercial management
agreements contained cost sharing agreement whereby costs in excess of agreed
budgets would be shared. In October 2007 the technical management agreements with Magnus
were cancelled effective upon delivery of the vessels to their new managers and
during 2007 and 2008 the technical management for five of our product tanker
vessels was transferred to ITM, the technical managementfor our three containers was transferred
to theWilhelmsen Ship Management (formerly Barber Ship Management
Singapore Pte Ltd) and the
management of theNordanvindwas transferred to AMT Management. As a
result of the termination of the technical management agreements, we agreed with Magnus
Carriers for a termination payment of $5.0 million.




Magnus Carriers retained the commercial
management and chartering services of the vessels pursuant to commercial
management agreements entered into in October 2007based on which we paid Magnus Carriers
1.25% of any gross charter hire and freight paid to us for new charters or
$7,000 per month per vessel for the vessels under pre-existing charters. In
addition, we paid Magnus Carriers 1% of the sale or purchase price in connection with a vessel sale or
purchase that Magnus Carriers brokered for us.




The commercial management of our vessels
was transferred from Magnus Carriers to AMT Management between October 2008 and
May 2009 and Magnus Carriers continues to provide non-exclusive
chartering agency services
in exchange for 1.25% of any gross charter hire and freight paid to us for new
charters and 1% of the sale or purchase price in connection with a vessel sale
or purchase that Magnus Carriers brokers for us.




During 2008, we paid management fees and
charter commissions of $1.1 million to Magnus Carriers relating to continuing
operations and we received $1.4 million from Magnus Carriers under the
termination agreement. In addition, in connection with the sale of theMT
Arius, theMSC Osloand theEnergy 1in April 2008 and June 2008, we paid
$0.6 million commission to
Magnus Carriers.




From May 2006, the vessel owning company
ofMV
Saronikos Bridgeentered
into a rent agreement with Magnus Carriers for a deck generator for $9,000 per
month. Under this agreement, the Company paid rental fees of $0.1
million for the year ended
December 31, 2008 and $0.1 million for the year ended December 31, 2007, which
are reflected in the operating expenses of the vessel in the statement of
operations. On December 31, 2008, the rental agreement was terminated and theCompany paid $0.04 million to Magnus
Carriers for the purchase of the deck generator.




From September 2006, the vessel owning
company ofMV Osloentered into a rent agreement with
Magnus Carriers for a  deck generator for $9,000 per month. Under this
agreement, the Company paid
rental fees of $0.04 million for the year ended December 31, 2008 and $0.1
million for the year ended December 31, 2007, which are reflected in the
operating expenses of the vessel in the statement of operations. On April 30,
2008, therental agreement was terminated and the
Company paid $0.09 million to Magnus Carriers for the purchase of the deck
generator.




Domina
Petridou O.E.





We
lease office space in Glyfada, Greece from Domina Petridou O.E., a company owned
by Mons S. Bolin and Domina Petridou. In November 2005, we entered into a
10-year lease agreement with the landowner. In October 2007, we entered into an
additional nine-year lease agreement with the landowner. The lease paid in 2008
amounted to $147,500.





Poseidon
Marine Agency





Part
of the crewing for the Company was undertaken by Magnus Carriers through a
related entity, Poseidon Marine Agency. During 2008, the Company paid manning
fees of $11,700 to Poseidon Marine Agency. The company ceased operations during
2008.





Directors
and Officers





During
the year ended December 31, 2008, we paid directors and officers fees of
$1,036,152.  With respect to the employment agreements we have entered
into with our Chief Executive Officer and Chief Financial Officer, please see
"Item 6 – Directors, Senior Management and Employees."






55





C.        
     Interests of experts and counsel.




Not
applicable.




ITEM
8.                  FINANCIAL
INFORMATION




A.           
  Consolidated Statements and Other Financial
Information




See Item 18.




Legal Proceedings Against
Us




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 of significant financial and managerial resources.




The
Charterers of the vessel Altius notified the Company in October 2008 of their
intention to pursue the following claims and notified the appointment of an
arbitrator in relation to them:





Damages
suffered by sub-charterers of the vessel in respect of remaining on board cargo
at New York in September 2007;





Damages
suffered by sub-charterers of the vessel as a result of a change in management
and oil major dispute from October 2007;





Damages
suffered by sub-charterers of the vessel resulting from a grounding at Houston
in October 2007.





In
May 2008 the Company was forwarded a claim from the vessel's sub-charterers to
the Charterers in respect of (c), for an amount of $0.75 million. No details of
heads of claim or quantum have been received for (a) and (b).





The
Charterers of the vessel Fortius notified the Company
in October 2008 of their intention to pursue the following claims, and notified
the appointment of an arbitrator in relation to them:





Damages
as a result of a change in management and oil major dispute from October 2007;
and





Damages
resulting from the creation of Hydrogen Sulphide in the vessel's tanks at two
ports in the USA.





These
claims arise from claims from sub-charterers to the Charterers. The Charterers
forwarded to the Company the sub-charterers notification of the details of these
claims whereby the sub-charterers seek indemnification of $2.2 million in
relation to head (a) and $0.9 million in relation to head (b).





A
notification from the Charterers of the vessel Ostria was received in
November 2008 for a potential claim amounting to $0.8 million in respect of loss
of time, damage to cargo and consequential losses caused by a leakage of cargo,
during loading in September 2008.  No further actions have been
pursued by the Charterers.





Other
than as described above, we have not been involved in any legal proceedings
which may have, or have had a significant effect on our financial position, nor
are we aware of any proceedings that are pending or threatened which may have a
significant effect on our financial position.




Dividend
Policy




On
September 12, 2008, we determined to suspend payment of our quarterly dividend,
effective immediately. The decision followed our new management's strategic
review of our business and reflected our focus on improving our long-term
strength and operational results. We will make dividend payments to our
shareholders only if our board of directors, acting in its sole discretion,
determines that such payments would be in our best interest and in compliance
with relevant legal and contractual requirements. The principal business factors
that our board of directors expects to consider when determining the timing and
amount of dividend payments will be our earnings, financial condition and cash
requirements at the time. Currently, the principal contractual and legal
restrictions on our ability to make dividend payments are those contained in our
fully revolving credit facility agreement, which we refer to as our credit
agreement, and those created by Bermuda law.




Our credit agreement prohibits us
from paying a dividend if an event of default under the credit agreement is
continuing or would result from the payment of the dividend. Our credit
agreement further requires us to maintain specified financial ratios and minimum
liquidity and working capital amounts. Our obligations pursuant to these and
other terms of our fully revolving credit facility could prevent us from making
dividend payments under certain circumstances.  In March 2008,
pursuant to the condition imposed by our lenders in connection with the
relaxation of the interest coverage ratio under our credit facility, our board
of directors suspended the payment of quarterly dividends commencing with the
dividend in
respect of the fourth quarter of 2007.  The Company resumed payment of
dividends with a dividend of $0.10 per share in respect of the first quarter of
2008. In September 2008, our board of directors suspended the payment of
quarterly dividends commencing with the dividend in respect of the second
quarter of 2008. Our board of directors may review and amend our dividend policy
from time to time in light of our plans for future growth and other
factors.






56







Under Bermuda law, a company may
not declare or pay dividends if there are reasonable grounds for believing
either that the company is, or would after the payment be, unable to pay its
liabilities as they become due, or that the realizable value of its assets would
thereby be less than the sum of its liabilities, its issued share capital (the
total par value of all outstanding shares) and share premium accounts (the
aggregate amount paid for the subscription for its shares in excess of the
aggregate par value of such shares). If the realizable value of our assets
decreases, our ability to pay dividends may require our shareholders to approve
resolutions reducing our share premium account by transferring an amount to our
contributed surplus account.




B.   
          Significant
Changes




Not
applicable.




ITEM
9.                 THE
OFFER AND LISTING




A.            
 Offer and Listing Details





The trading market for our common stock
is the Nasdaq Global Market, on which the shares are listed under the symbol
"RAMS". The following table sets forth the high and low closing prices for our
common stock since our initial public offering of common stock at $12.50 per
share on June 3, 2005, as reported by the Nasdaq Global Market. The high and low
closing prices for our common stock for the periods indicated were as
follows:




High
              
              
              LowFor the period from June 3, 2005
      to December 31, 2005
              
              $
              15.99
              
              
              $
              12.50For the Fiscal Year Ended December
      31, 2006
              
              $
              14.80
              
              
              $
              9.07For the Fiscal Year Ended December
      31, 2007
              
              $
              10.45
              
              
              $
              5.91For the Fiscal Year Ended December
      31, 2008
              
              $
              7.77
              
              
              $
              0.31For the Quarter
      EndedMarch 31,
    2007
              
              $
              9.43
              
              
              $
              7.48June 30,
    2007
              
              $
              10.20
              
              
              $
              7.53September 30,
      2007
              
              $
              10.45
              
              
              $
              7.83December 31,
      2007
              
              $
              9.87
              
              
              $
              5.91March 31,
    2008
              
              $
              7.77
              
              
              $
              5.22June 30,
    2008
              
              $
              6.29
              
              
              $
              4.75September 30,
      2008
              
              $
              4.94
              
              
              $
              2.05December 31,
      2008
              
              $
              2.44
              
              
              $
              0.31March 31,
    2009
              
              $
              1.64
              
              
              $
              0.32For the
    MonthDecember
    2008
              
              $
              0.89
              
              
              $
              0.31January
2009
              
              $
              1.64
              
              
              $
              0.32February
    2009
              
              $
              0.82
              
              
              $
              0.37March 2009
              
              $
              0.55
              
              
              $
              0.35April 2009
              
              $
              0.77
              
              
              $
              0.36May 2009
              
              $
              0.85
              
              
              $
              0.56





C.        
     Markets





See Item 9. A.
above.





ITEM
10.                ADDITIONAL
INFORMATION




A.        
     Share Capital




Not
applicable.





B.            
  Memorandum and Articles of Association




The following description of our capital
stock summarizes the material terms of our Memorandum of Association and our
bye-laws.  Under our Memorandum of Association, as amended, our
authorized capital consists of 30 million shares of preferred stock, par value
$0.01 per share and 100 million shares of common stock, par value of $0.01 per
share.






57






Common shares




Holders of common shares have no
pre-emptive, subscription, redemption, conversion or sinking fund rights.
Holders of common shares are entitled to one vote for each share held of record
on all matters submitted to a vote of our shareholders. Holders of common shares
have no cumulative voting rights. Holders of common shares are entitled to
dividends if and when they are declared by our board of directors, subject to
any preferred dividend right of holders of any preference shares. Directors to
be elected by holders of common shares require a plurality of votes cast at a
meeting at which a quorum is present. For all other matters, unless a different
majority is required by law or our bye laws, resolutions to be approved by
holders of common shares require approval by a majority of votes cast at a
meeting at which a quorum is present.




Upon our liquidation, dissolution or
winding up, our common shareholders will be entitled to receive, ratably, our
net assets available after the payment of all our debts and liabilities and any
preference amount owed to any preference shareholders.




The rights of our common
shareholders, including the right to elect directors, are subject to the rights
of any series of preference shares we may issue in the
future.




Preference
Shares




Under the terms of our bye-laws, our
board of directors has authority to issue up to 30 million "blank check"
preference shares in one or more series and to fix the rights, preferences,
privileges and restrictions of the preference shares, including voting rights,
dividend rights, conversion rights, redemption terms (including sinking fund
provisions) and liquidation preferences and the number of shares constituting a
series or the designation of a series.




The rights of holders of our common
shares will be subject to, and could be adversely affected by, the rights of the
holders of any preference shares that we may issue in the future. Our board of
directors may designate and fix rights, preferences, privileges and restrictions
of each series of preference shares which are greater than those of our common
shares. Our issuance of preference shares could, among other
things:




·
            restrict
      dividends on our common shares;




·
            dilute
      the voting power of our common
shares;




·
            impair
      the liquidation rights of our common shares;
and




·
            discourage, delay or prevent a
      change of control of our
company.





Our board of directors does not at
present intend to seek shareholder approval prior to any issuance of currently
authorized preference shares, unless otherwise required by applicable law or
Nasdaq requirements. Although we currently have no plans to issue preference
shares, we may issue them in the future.





Treasury Shares




Our bye-laws were amended at our 2008
annual general meeting to allow our board of directors, at its discretion
and without the sanction of a resolution of Members, to authorise the
acquisition by us of our shares, to be held as treasury shares. Our board of
directors may, at its discretion and without the sanction of a resolution
of Members, authorise the acquisition by us of our own shares, to be held as
treasury shares, upon such terms as the board of directors may in its discretion
determine, provided always that such acquisition is effected in accordance with
the provisions of the Companies Act. We shall be entered in the Register of
members as a shareholder in respect of the shares held by us as treasury
shares and shall be our shareholder but subject always to the provisions of the
Companies Act and for the avoidance of doubt we shall not exercise any rights
and shall not enjoy or participate in any of the rights attaching to those
shares save as expressly provided for in the Companies Act.  Subject as
otherwise provided in our bye-laws in relation to our shares generally, any of
our shares held by us as treasury shares shall be at the disposal of the board
of directors, which may hold all or any of such shares, dispose of or
transfer all or any of such shares for cash or other consideration, or
cancel all or any of such shares.





Dividends




Under Bermuda law, a company may not
declare or pay dividends if there are reasonable grounds for believing either
that the company is, or would after the payment be, unable to pay its
liabilities as they become due, or that the realizable value of its assets would
thereby be less than the sum of its liabilities, its issued share capital (the
total par value of all outstanding shares) and share premium accounts (the
aggregate amount paid for the subscription for its shares in excess of the
aggregate par value of such shares). If the realizable value of our assets
decreases, our ability to pay dividends may require our shareholders to approve
resolutions reducing our share premium account by transferring an amount to our
contributed surplus account. There are no restrictions on our ability to
transfer funds (other than funds denominated in Bermuda dollars) in and out of
Bermuda or to pay dividends to U.S. residents who are holders of our common
shares.






58




Anti-Takeover Effects of Provisions of
Our Constitutional Documents




Several provisions of our bye-laws may
have anti-takeover effects. These provisions are intended to avoid costly
takeover battles, lessen our vulnerability to a hostile change of control and
enhance the ability of our board of directors to maximize shareholder value in
connection with any unsolicited offer to acquire us. However, these
anti-takeover provisions, which are summarized below, could also discourage,
delay or prevent (1) the merger, amalgamation or acquisition of our company by
means of a tender offer, a proxy contest or otherwise, that a shareholder may
consider in its best interest and (2) the removal of our incumbent directors and
executive officers.




Blank Check Preference
Shares




Under the terms of our bye-laws, subject
to applicable legal or Nasdaq requirements, our board of directors has
authority, without any further vote or action by our shareholders, to issue up
to 30 million preference shares with such rights, preferences and privileges as
our board may determine. Our board of directors may issue preference shares on
terms calculated to discourage, delay or prevent a change of control of our
company or the removal of our management.




Classified Board of
Directors




Our bye-laws provide for the division of
our board of directors into three classes of directors, with each class as
nearly equal in number as possible, serving staggered, three year terms.
One-third (or as near as possible) of our directors will be elected each year.
Our bye-laws also provide that directors may only be removed for cause upon the
vote of the holders of no less than 80% of our outstanding common shares. These
provisions could discourage a third party from making a tender offer for our
shares or attempting to obtain control of our company. It could also delay
shareholders who do not agree with the policies of the board of directors from
removing a majority of the board of directors for two years.




Business
Combinations




Although the BCA does not contain
specific provisions regarding "business combinations" between companies
organized under the laws of Bermuda and "interested shareholders", we have
included these provisions in our bye-laws. Specifically, our bye-laws contain
provisions which prohibit us from engaging in a business combination with an
interested shareholder for a period of three years after the date of the
transaction in which the person became an interested shareholder, unless, in
addition to any other approval that may be required by applicable
law:





·
            prior
      to the date of the transaction that resulted in the shareholder becoming
      an interested shareholder, our board of directors approved either the
      business combination or the transaction that resulted in the shareholder
      becoming an interested shareholder;·
            upon
      consummation of the transaction that resulted in the shareholder becoming
      an interested shareholder, the interested shareholder owned at least 85%
      of our voting shares outstanding at the time the transaction commenced;
      or·
            after
      the date of the transaction that resulted in the shareholder becoming an
      interested shareholder, the business combination is approved by the board
      of directors and authorized at an annual or special meeting of
      shareholders by the affirmative vote of at least 80% of our outstanding
      voting shares that are not owned by the interested
      shareholder.


For purposes of these provisions, a
"business combination" includes mergers, amalgamations, consolidations,
exchanges, asset sales, leases, certain issues or transfers of shares or other
securities and other transactions resulting in a financial benefit to the
interested shareholder. An "interested shareholder" is any person or entity that
beneficially owns 15% or more of our outstanding voting shares and any person or
entity affiliated with or controlling or controlled by that person or entity,
except that so long as Rocket Marine owns 15% or more of our outstanding voting
shares, Rocket Marine shall not be an interested shareholder unless it acquires
additional voting shares representing 8% or more of our outstanding voting
shares.




Election and Removal of
Directors




Our bye-laws do not permit cumulative
voting in the election of directors. Our bye-laws require shareholders wishing
to propose a person for election as a director (other than persons proposed by
our board of directors) to give advance written notice of nominations for the
election of directors. Our bye-laws also provide that our directors may be
removed only for cause and only upon the affirmative vote of the holders of at
least 80% of our outstanding common shares, voted at a duly authorized meeting
of shareholders called for that purpose, provided that notice of such meeting is
served on such director at least 14 days before the meeting. These provisions
may discourage, delay or prevent the removal of our incumbent
directors.






59


Shareholder
Meetings


Under our bye-laws annual meetings of
shareholders will be held at a time and place selected by our board of directors
each calendar year. Special meetings of shareholders may be called by our board
of directors at any time and must be called at the request of shareholders
holding at least 10% of our paid-up share capital carrying the right to vote at
general meetings. Under our bye-laws at least 15, but not more than 60, days'
notice of an annual meeting or any special meeting must be given to each
shareholder entitled to vote at that meeting. Under Bermuda law accidental
failure to give notice will not invalidate proceedings at a meeting. Our board
of directors may set a record date between 15 and 60 days before the date of any
meeting to determine the shareholders who will be eligible to receive notice and
vote at the meeting.




Limited Actions by
Shareholders




Any action required or permitted to be
taken by our shareholders must be effected at an annual or special meeting of
shareholders or (except for certain actions) by unanimous written consent
without a meeting. Our bye-laws provide that, subject to certain exceptions and
to the rights granted to shareholders pursuant to the BCA, only our board of
directors may call special meetings of our shareholders and the business
transacted at a special meeting is limited to the purposes stated in the notice
for that meeting. Accordingly, a shareholder may be prevented from calling a
special meeting for shareholder consideration of a proposal over the opposition
of our board of directors and shareholder consideration of a proposal may be
delayed until the next annual meeting.




Subject to certain rights set out in the
BCA, our bye-laws provide that shareholders are required to give advance notice
to us of any business to be introduced by a shareholder at any annual meeting.
The advance notice provisions provide that, for business to be properly
introduced by a shareholder when such business is not specified in the notice of
meeting or brought by or at the direction of our board of directors, the
shareholder must have given our secretary notice not less than 90 nor more than
120 days prior to the anniversary date of the immediately preceding annual
meeting of the shareholders. In the event the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, the
shareholder must give our secretary notice not later than 10 days following the
earlier of the date on which notice of the annual meeting was mailed to the
shareholders or the date on which public disclosure of the annual meeting was
made. The chairman of the meeting may, if the facts warrant, determine and
declare that any business was not properly brought before such meeting and such
business will not be transacted.




Amendments to
Bye-Laws




Our bye-laws require the affirmative
vote of the holders of not less than 80% of our outstanding voting shares to
amend, alter, change or repeal the following provisions in our
bye-laws:




·
            the
      classified board and director removal provisions;·
            the
      percentage of approval required for our shareholders to amend our
      bye-laws;·
            the
      limitations on business combinations between us and interested
      shareholders;·
            the
      provisions requiring the affirmative vote of the holders of not less than
      80% of our outstanding voting shares to amend the foregoing provisions;
      and·
            the
      limitations on shareholders' ability to call special meetings, subject to
      certain rights guaranteed to shareholders under the
  BCA.




These requirements make it more
difficult for our shareholders to make changes to the provisions in our bye-laws
that could have anti-takeover effects.




C.           Material
Contracts




As of December 31, 2008 we had long term
debt obligations under our fully revolving credit facility, with a group of
international lenders. As of December 31, 2007, we had long term debt
obligations under our fully revolving credit facility, with a group of
international lenders. For a full description of our credit facilities see "Item
5 — Operating and Financial Review and Prospects –
Indebtedness."




D.           Exchange
controls




The Company has been designated as a
non-resident of Bermuda for exchange control purposes by the Bermuda Monetary
Authority, whose permission for the issue of the Common Shares was obtained
prior to the offering thereof.




The transfer of shares between persons
regarded as resident outside Bermuda for exchange control purposes and the
issuance of Common Shares to or by such persons may be effected without specific
consent under the Bermuda Exchange Control Act of 1972 and regulations
thereunder. Issues and transfers of Common Shares involving any person regarded
as resident in Bermuda for exchange control purposes require specific prior
approval under the Bermuda Exchange Control Act of 1972.






60




Subject to the foregoing, there are no
limitations on the rights of owners of the Common Shares to hold or vote their
shares. Because the Company has been designated as non-resident for Bermuda
exchange control purposes, there are no restrictions on its ability to transfer
funds in and out of Bermuda or to pay dividends to United States residents who
are holders of the Common Shares, other than in respect of local Bermuda
currency.




In accordance with Bermuda law, share
certificates may be issued only in the names of corporations or individuals. In
the case of an applicant acting in a special capacity (for example, as an
executor or trustee), certificates may, at the request of the applicant, record
the capacity in which the applicant is acting. Notwithstanding the recording of
any such special capacity, the Company is not bound to investigate or incur any
responsibility in respect of the proper administration of any such estate or
trust.




The Company will take no notice of any
trust applicable to any of its shares or other securities whether or not it had
notice of such trust.




As an "exempted company," the
Company is exempt from Bermuda laws which restrict the percentage of share
capital that may be held by non-Bermudians, but as an exempted company, the
Company may not participate in certain business transactions including: (i) the
acquisition or holding of land in Bermuda (except that required for its business
and held by way of lease or tenancy for terms of not more than 21 years) without
the express authorization of the Bermuda legislature; (ii) the taking of
mortgages on land in Bermuda to secure an amount in excess of $50,000 without
the consent of the Minister of Finance of Bermuda; (iii) the acquisition of
securities created or issued by, or any interest in, any local company or
business, other than certain types of Bermuda government securities or
securities of another "exempted company," exempted partnership or other
corporation or partnership resident in Bermuda but incorporated abroad; or (iv)
the carrying on of business of any kind in Bermuda, except insofar as may be
necessary for the carrying on of its business outside Bermuda or under a license
granted by the Minister of Finance of Bermuda.




There is a statutory remedy under
Section 111 of the Companies Act 1981 which provides that a shareholder may seek
redress in the Bermuda courts as long as such shareholder can establish that the
Company's affairs are being conducted, or have been conducted, in a manner
oppressive or prejudicial to the interests of some part of the shareholders,
including such shareholder. However, this remedy has not yet been interpreted by
the Bermuda courts.




The Bermuda government actively
encourages foreign investment in "exempted" entities like the Company that are
based in Bermuda but do not operate in competition with local business. In
addition to having no restrictions on the degree of foreign ownership, the
Company is subject neither to taxes on its income or dividends nor to any
exchange controls in Bermuda. In addition, there is no capital gains tax in
Bermuda, and profits can be accumulated by the Company, as required, without
limitation. There is no income tax treaty between the United States and Bermuda
pertaining to the taxation of income other than applicable to insurance
enterprises.




E.        
      Taxation





The following is a discussion of the
material Bermuda and United States federal income tax considerations with
respect to the Company and holders of common shares. This discussion does not
purport to deal with the tax consequences of owning common shares to all
categories of investors, some of which, such as dealers in securities, investors
whose functional currency is not the United States dollar and investors that
own, actually or under applicable constructive ownership rules, 10% or more of
our common shares, may be subject to special rules. This discussion deals only
with holders who hold the common shares as a capital asset. Holders of common
shares are encouraged to consult their own tax advisors concerning the overall
tax consequences arising in their own particular situation under United States
federal, state, local or foreign law of the ownership of common
shares.




Bermuda Tax
Considerations




As of the date of this document, we are
not subject to taxation under the laws of Bermuda, and distributions to us by
our subsidiaries also are not subject to any Bermuda tax. As of the date of this
document, there is no Bermuda income, corporation or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by non-residents of Bermuda in respect of capital gains realized on a
disposition of our common shares or in respect of distributions by us with
respect to our common shares. This discussion does not, however, apply to the
taxation of persons ordinarily resident in Bermuda. Bermuda holders should
consult their own tax advisors regarding possible Bermuda taxes with respect to
dispositions of, and distributions on, our common shares.




United States Federal Income Tax
Considerations




The following are the material United
States federal income tax consequences to us of our activities and to U.S.
Holders and Non-U.S. Holders, each as defined below, of our common shares. The
following discussion of United States federal income tax matters is based on the
United States Internal Revenue Code of 1986, or the Code, judicial decisions,
administrative pronouncements, and existing and proposed regulations issued by
the United States Department of the Treasury, all of which are subject to
change, possibly with retroactive effect. The discussion below is based, in
part, on the description of our business as described in "Item 4 — Information
on the Company" above and assumes that we conduct our business as described in
that section. Except as otherwise noted, this discussion is based on the
assumption that we will not maintain an office or other fixed place of business
within the United States. References in the following discussion to "we" and
"us" are to Aries Maritime Transport Limited and its subsidiaries on a
consolidated basis.






61






United States Federal Income Taxation of
Our Company





Taxation of Operating Income: In
General




We earn substantially all of our income
from the use of vessels, from the hiring or leasing of vessels for use on a
time, voyage or bareboat charter basis or from the performance of services
directly related to those uses, which we refer to as "shipping
income."




Fifty percent of shipping income that is
attributable to transportation that begins or ends, but that does not both begin
and end, in the United States constitutes income from sources within the United
States, which we refer to as "U.S.-source shipping income."




Shipping income attributable to
transportation that both begins and ends in the United States is considered to
be 100% from sources within the United States. We are not permitted by law to
engage in transportation that produces income which is considered to be 100%
from sources within the United States.




Shipping income attributable to
transportation exclusively between non-U.S. ports is not considered to be 100%
derived from sources outside the United States. Shipping income derived from
sources outside the United States is not subject to any United States federal
income tax.




In the absence of exemption from tax
under Section 883, our gross U.S. source shipping income is subject to a 4% tax
imposed without allowance for deductions as described below.




Exemption of Operating Income from
United States Federal Income Taxation




Under Section 883 of the Code, a foreign
corporation will be exempt from United States federal income taxation on its
U.S.-source shipping income if:





(1)
            it
      is organized in a qualified foreign country, which is one that grants an
      "equivalent exemption" to corporations organized in the United States in
      respect of such category of the shipping income for which exemption is
      being claimed under Section 883 and which we refer to as the "Country of
      Organization Test"; and





(2)
            either





(A)
            more
      than 50% of the value of its stock is beneficially owned, directly or
      indirectly, by individuals who are "residents" of a qualified foreign
      country, which we refer to as the "50% Ownership Test,"
  or





(B)
            its
      stock is "primarily and regularly traded on an established securities
      market" in its country of organization, in another qualified foreign
      country or in the United States, which we refer to as the "Publicly Traded
      Test."




The Country of Organization Test is
satisfied since we are incorporated in Bermuda, and each of our subsidiaries is
incorporated in the British Virgin Islands, the Marshall Islands, or Malta, all
of which are qualified foreign countries in respect of each category of Shipping
Income we currently earn and expect to earn in the future. Therefore, we and our
subsidiaries are exempt from United States federal income taxation with respect
to our U.S.-source shipping income as we and each of our subsidiaries meet
either of the 50% Ownership Test or the Publicly Traded Test. Under a special
attribution rule of Section 883, each of our Subsidiaries is deemed to have
satisfied the 50% Ownership Test if we satisfy such test or the Publicly Traded
Test.  Due to the widely-held nature of our stock, we may have
difficulty satisfying the 50% Ownership Test.




The Treasury Regulations provide, in
pertinent part, that stock of a foreign corporation is considered to be
"primarily traded" on an established securities market if the number of shares
of each class of stock that are traded during any taxable year on all
established securities markets in that country exceeds the number of shares in
each such class that are traded during that year on established securities
markets in any other single country. Our common shares, which are our sole class
of issued and outstanding stock, are "primarily traded" on the Nasdaq Global
Market, which is an established securities market in the United
States.




Under the Treasury Regulations, our
common shares are considered to be "regularly traded" on an established
securities market if one or more classes of our shares representing more than
50% of our outstanding shares, by total combined voting power of all classes of
shares entitled to vote and total value, is listed on an established securities
market, which we refer to as the listing threshold. Since our common shares are
our sole class of issued and outstanding stock and are listed on the Nasdaq
Global Market, we meet the listing threshold.






62




It is further required that with respect
to each class of stock relied upon to meet the listing threshold (i) such class
of the stock is traded on the market, other than in minimal quantities, on at
least 60 days during the taxable year or 1/6 of the days in a short taxable
year; and (ii) the aggregate number of shares of such class of stock traded on
such market is at least 10% of the average number of shares of such class of
stock outstanding during such year or as appropriately adjusted in the case of a
short taxable year. We satisfy these trading frequency and trading volume tests.
Even if this were not the case, the Treasury regulations provide that the
trading frequency and trading volume tests will be deemed satisfied if, as is
currently the case with our common shares, such class of stock is traded on an
established market in the United States and such stock is regularly quoted by
dealers making a market in such stock.




Notwithstanding the foregoing, the
Treasury Regulations provide, in pertinent part, that our shares are not to be
considered to be "regularly traded" on an established securities market for any
taxable year in which 50% or more of the vote and value of our outstanding
common shares are owned, actually or constructively under specified stock
attribution rules, on more than half the days during the taxable year by persons
who each own 5% or more of the vote and value of our outstanding stock, which we
refer to as the "5 Percent Override Rule."




To determine the persons who own 5% or
more of the vote and value of our shares, or "5% Shareholders," the Treasury
Regulations permit us to rely on those persons that are identified on Form 13G
and Form 13D filings with the United States Securities and Exchange Commission,
or the "SEC," as having a 5% or more beneficial interest in our common shares.
The Treasury Regulations further provide that an investment company which is
registered under the Investment Company Act of 1940, as amended, will not be
treated as a 5% Shareholder for such purposes.




In the event the 5 Percent Override Rule
is triggered, the Treasury Regulations provide that the 5 Percent Override Rule
does not apply if we can establish in conformity with the Treasury Regulations
that within the group of 5% Shareholders, sufficient shares are owned by
qualified shareholders for purposes of Section 883 to preclude non-qualified
shareholders in such group from owning 50% or more of the value of our shares
for more than half the number of days during such year.




Aries Energy (through its wholly-owned
subsidiary Rocket Marine Inc.) owns approximately 52% of our outstanding common
shares. If Aries Energy alone or together with other 5% Shareholders were to own
50% of our outstanding shares on more than half the days of any taxable year,
the 5 Percent Override Rule would be triggered. In order to preclude the
application of the 5 Percent Override Rule, Aries Energy, Rocket Marine Inc. and
Captain Gabriel Petridis, the 50% beneficial owner of Aries Energy, have
provided information to establish that Captain Petridis is a qualified
shareholder.




As a result, we believe we are able to
preclude the application of the 5 Percent Override Rule and therefore satisfy
the Publicly Traded Test. However, there can be no assurance that we are able to
continue to satisfy the Publicly Traded Test if (i) Captain Petridis's status as
a qualified shareholder changes, (ii) the direct or indirect beneficial
ownership of the shares held by Captain Petridis changes, (iii) the ownership of
shares not directly or indirectly owned by Captain Petridis comes to be
concentrated in 5% Shareholders that either are not qualified shareholders or
who fail to comply with applicable documentation requirements or (iv) Captain
Petridis, Aries Energy or Rocket Marine fail to satisfy the applicable
documentation requirements.




Even though we believe that we will be
able to qualify for the benefits of Section 883 under the Publicly-Traded Test,
we can provide no assurance that we will be able to continue to so qualify in
the future.




Taxation In The Absence of Section 883
Exemption




To the extent the benefits of Section
883 are unavailable, our U.S. source shipping income, to the extent not
considered to be "effectively connected"  with the conduct of a U.S.
trade or business, as described below, would be subject to a 4% tax imposed by
Section 887 of the Code on a gross basis, without the benefit of deductions.
Since under the sourcing rules described above, no more than 50% of our shipping
income would be treated as being derived from U.S. sources, the maximum
effective rate of U.S. federal income tax on our shipping income would never
exceed 2% under the 4% gross basis tax regime.




To the extent the benefits of the
Section 883 exemption are unavailable and our U.S. source shipping income is
considered to be "effectively connected" with the conduct of a U.S. trade or
business, as described below, any such "effectively connected" U.S. source
shipping income, net of applicable deductions, would, in lieu of the 4% gross
basis tax described above, be subject to the U.S. federal corporate income tax
currently imposed at rates of up to 35%. In addition, we may be subject to the
30% " branch profits"  tax on earnings effectively connected with the
conduct of such trade or business, as determined after allowance for certain
adjustments, and on certain interest paid or deemed paid attributable to the
conduct of our U.S. trade or business.




Our U.S. source shipping income would be
considered "effectively connected" with the conduct of a U.S. trade or business
only if:




·
              we
      have, or are considered to have, a fixed place of business in the United
      States involved in the earning of shipping income; and






63




·
                  substantially
      all of our U.S. source shipping income is attributable to regularly
      scheduled transportation, such as the operation of a vessel that follows a
      published schedule with repeated sailings at regular intervals between the
      same points for voyages that begin or end in the United
      States.





We do not have, or permit circumstances
that would result in our having, a fixed place of business in the United States
involved in the earning of shipping income and therefore, we believe that none
of our U.S. source shipping income will be "effectively
connected"  with the conduct of a U.S. trade or
business.




United States
Taxation of Gain on Sale of Vessels




Regardless of whether we qualify for
exemption under Section 883, we will not be subject to United States federal
income taxation with respect to gain realized on a sale of a vessel, provided
the sale is considered to occur outside of the United States under United States
federal income tax principles. In general, a sale of a vessel will be considered
to occur outside of the United States for this purpose if title to the vessel,
and risk of loss with respect to the vessel, pass to the buyer outside of the
United States. It is expected that any sale of a vessel by us will be considered
to occur outside of the United States.




United States Federal
Income Taxation of U.S. Holders




As used herein, the term " U.S. Holder"
means a beneficial owner of common shares that is a United States citizen or
resident, United States corporation or other United States entity taxable as a
corporation, an estate the income of which is subject to United States federal
income taxation regardless of its source, or a trust if a court within the
United States is able to exercise primary jurisdiction over the administration
of the trust and one or more United States persons have the authority to control
all substantial decisions of the trust.




If a partnership holds our common
shares, the tax treatment of a partner will generally depend upon the status of
the partner and upon the activities of the partnership. If you are a partner in
a partnership holding our common shares, you are encouraged to consult your tax
advisor.




Distributions




Subject to the discussion of passive
foreign investment companies below, any distributions made by us with respect to
our common shares to a U.S. Holder will generally constitute dividends, which
may be taxable as ordinary income or "qualified dividend income" as described in
more detail below, to the extent of our current or accumulated earnings and
profits, as determined under United States federal income tax principles.
Distributions in excess of our earnings and profits will be treated first as a
nontaxable return of capital to the extent of the U.S. Holder's tax basis in his
common shares on a dollar-for-dollar basis and thereafter as capital gain.
Because we are not a United States corporation, U.S. Holders that are
corporations will not be entitled to claim a dividends received deduction with
respect to any distributions they receive from us. Dividends paid with respect
to our common shares will generally be treated as "passive category income" or,
in the case of certain types of U.S. Holders "general category income" for
purposes of computing allowable foreign tax credits for United States foreign
tax credit purposes.




Dividends paid on our common shares to a
U.S. Holder who is an individual, trust or estate (a "U.S. Individual Holder" )
will generally be treated as "qualified dividend income"  that is
taxable to such U.S. Individual Holders at preferential tax rates (through 2010)
provided that (1) the common shares are readily tradable on an established
securities market in the United States (such as the Nasdaq Global Market, on
which our common shares are traded); (2) we are not a passive foreign investment
company for the taxable year during which the dividend is paid or the
immediately preceding taxable year (which we do not believe we are, have been or
will be); and (3) the U.S. Individual Holder has owned the common shares for
more than 60 days in the 121-day period beginning 60 days before the date on
which the common shares becomes ex-dividend. Legislation has been previously
introduced in the U.S. Congress which, if enacted in its present form, would
preclude our dividends from qualifying for such preferential rates prospectively
from the date of the enactment. Therefore, there is no assurance that any
dividends paid on our common shares will be eligible for these preferential
rates in the hands of a U.S. Individual Holder. Any dividends paid by the
Company which are not eligible for these preferential rates will be taxed as
ordinary income to a U.S. Individual Holder.




Special rules may apply to any
"extraordinary dividend" generally, a dividend in an amount which is equal to or
in excess of ten percent of a shareholder's adjusted basis (or fair market value
in certain circumstances) in a common share paid by us. If we pay an
"extraordinary dividend" on our common shares that is treated as "qualified
dividend income," then any loss derived by a U.S. Individual Holder from the
sale or exchange of such common shares will be treated as long-term capital loss
to the extent of such dividend.




Sale, Exchange or other Disposition of
Common Shares




Assuming we do not constitute a passive
foreign investment company for any taxable year, a U.S. Holder generally
recognizes taxable gain or
loss upon a sale, exchange or other disposition of our common shares in an
amount equal to the difference between the amount realized by the U.S. Holder
from such sale, exchange or other disposition and the U.S. Holder's tax basis in
such stock. Such gain or loss is treated as long-term capital gain or loss if
the U.S. Holder's holding period is greater than one year at the time of the
sale, exchange or other disposition. Such capital gain or loss is generally
treated as U.S.-source income or loss, as applicable, for U.S. foreign tax
credit purposes. A U.S. Holder's ability to deduct capital losses is subject to
certain limitations.






64






Passive Foreign Investment Company
Status and Significant Tax Consequences




Special United States federal income tax
rules apply to a U.S. Holder that holds stock in a foreign corporation
classified as a passive foreign investment company for United States federal
income tax purposes. In general, we are treated as a passive foreign investment
company with respect to a U.S. Holder if, for any taxable year in which such
holder held our common shares, either




·
            at
      least 75% of our gross income for such taxable year consists of passive
      income (e.g., dividends, interest, capital gains and rents derived other
      than in the active conduct of a rental business), or·
            at
      least 50% of the average value of the assets held by the corporation
      during such taxable year produce, or are held for the production of,
      passive income.




For purposes of determining whether we
are a passive foreign investment company, we are treated as earning and owning
our proportionate share of the income and assets, respectively, of any of our
subsidiary corporations in which we own at least 25% of the value of the
subsidiary's stock. Income earned, or deemed earned, by us in connection with
the performance of services would not constitute passive income. By contrast,
rental income would generally constitute "passive income" unless we were treated
under specific rules as deriving our rental income in the active conduct of a
trade or business.




Based on our current operations and
future projections, we do not believe that we have been, are, nor do we expect
to become, a passive foreign investment company with respect to any taxable
year. Although there is no legal authority directly on point, and we are not
relying upon an opinion of counsel on this issue, our belief is based
principally on the position that, for purposes of determining whether we are a
passive foreign investment company, the gross income we derive or are deemed to
derive from the time chartering and voyage chartering activities of our
wholly-owned subsidiaries should constitute services income, rather than rental
income. Correspondingly, such income should not constitute passive income, and
the assets that we or our wholly-owned subsidiaries own and operate in
connection with the production of such income, in particular, the vessels,
should not constitute passive assets for purposes of determining whether we are
a passive foreign investment company. We believe there is substantial legal
authority supporting our position consisting of case law and Internal Revenue
Service pronouncements concerning the characterization of income derived from
time charters and voyage charters as services income for other tax purposes.
However, in the absence of any legal authority specifically relating to the
statutory provisions governing passive foreign investment companies, the
Internal Revenue Service or a court could disagree with our position. In
addition, although we intend to conduct our affairs in a manner to avoid being
classified as a passive foreign investment company with respect to any taxable
year, we cannot assure you that the nature of our operations will not change in
the future.




If we were to be treated as a passive
foreign investment company, special and adverse United States federal income tax
rules would apply to a U.S. Holder of our shares. Among other things, the
distributions a U.S. Holder received with respect to our shares and gains, if
any, a U.S. Holder derived from his sale or other disposition of our shares
would be taxable as ordinary income (rather than as qualified dividend income or
capital gain, as the case may be), would be treated as realized ratably over his
holding period in our common shares, and would be subject to an additional
interest charge. However, a U.S. Holder might be able to make certain tax
elections which ameliorate these consequences.




United States Federal
Income Taxation of "Non-U.S. Holders"




A beneficial owner of common shares that
is not a U.S. Holder is referred to herein as a "Non-U.S.
Holder."




Dividends on Common
Shares




Non-U.S. Holders generally are not
subject to United States federal income tax or withholding tax on dividends
received from us with respect to our common shares, unless that income is
effectively connected with the Non-U.S. Holder's conduct of a trade or business
in the United States. If the Non-U.S. Holder is entitled to the benefits of a
United States income tax treaty with respect to those dividends, that income is
taxable only if it is attributable to a permanent establishment maintained by
the Non-U.S. Holder in the United States.




65




Sale, Exchange or Other Disposition of
Common Shares
  Non-U.S. Holders generally are not
subject to United States federal income tax or withholding tax on any gain
realized upon the sale, exchange or other disposition of our common shares,
unless:


·
            the
      gain is effectively connected with the Non-U.S. Holder's conduct of a
      trade or business in the United States. If the Non-U.S. Holder is entitled
      to the benefits of an income tax treaty with respect to that gain, that
      gain is taxable only if it is attributable to a permanent establishment
      maintained by the Non-U.S. Holder in the United States;
  or·
            the
      Non-U.S. Holder is an individual who is present in the United States for
      183 days or more during the taxable year of disposition and other
      conditions are met.





If the Non-U.S. Holder is engaged in a
United States trade or business for United States federal income tax purposes,
the income from the common shares, including dividends and the gain from the
sale, exchange or other disposition of the stock that is effectively connected
with the conduct of that trade or business is generally subject to regular
United States federal income tax in the same manner as discussed in the previous
section relating to the taxation of U.S. Holders. In addition, if you are a
corporate Non-U.S. Holder, your earnings and profits that are attributable to
the effectively connected income, which are subject to certain adjustments, may
be subject to an additional branch profits tax at a rate of 30%, or at a lower
rate as may be specified by an applicable income tax treaty.




F. Dividends and paying
agents





Not applicable.





G. Statement by
experts





Not applicable.





H. Documents on
display





We file annual reports and other
information with the SEC. You may read and copy any document we file with the
SEC at its public reference room at 100 F Street, N.E., Room 1580, Washington,
D.C. 20549. You may also obtain copies of this information by mail from the
public reference section of the SEC, 100 F Street, N.E., Room 1580, Washington,
D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference room. Our SEC
filings are also available to the public at the web site maintained by the SEC
at http://www.sec.gov, as well as on our website at
http://www.ariesmaritime.com.




I. Subsidiary
information





Not applicable.





ITEM
11.                QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




See "Item 5 – Operating and Financial
Review and Prospects – Quantitative and Qualitative Disclosures About Market
Risk."




ITEM
12.                DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES




Not applicable.







66





PART II




ITEM
13.                DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES




Neither we nor any of our subsidiaries
have been subject to a material default in the payment of principal, interest, a
sinking fund or purchase fund installment or any other material default that was
not cured within 30 days. In addition, the payment of our dividends is not, and
has not been in arrears or has not been subject to a material delinquency that
was not cured within 30 days.




ITEM
14.                MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS




Not applicable.





ITEM
15.                CONTROLS
AND PROCEDURES




(a)         
    Disclosure Controls and Procedures.





The Chief Executive Officer
and Chief Financial Officer, after evaluating the effectiveness of the
Company's disclosure controls and procedures (as defined by Rules 13a-15(e) and
15d-15(e) under the securities and Exchange Act of 1934) as of December 31,
2008, have concluded that, as of such date, the Company's disclosure controls
and procedures were effective to provide reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934, is recorded, processed, summarized and reported
within the time period specified in the SEC's rules and forms. The Company
further believes that a system of controls, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the controls
are met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected.




(b)         
   Management's annual report on internal control over financial
reporting.





Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act. Our internal
control system was designed to provide reasonable assurance to our management
and board of directors regarding the reliability of financial reporting and the
preparation of published financial statements in accordance with Generally
Accepted Accounting Principles.  All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective may not prevent or detect misstatements and
can provide only reasonable assurance with respect to financial statement
preparation and presentation.




Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2008. In making this assessment, management used the criteria for effective
internal control over financial reporting set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (''COSO'') in Internal
Control-Integrated Framework. Based on this assessment, management has concluded
that, as of December 31, 2008, our internal control over financial reporting was
effective based on those criteria.




(c)       
     Attestation report of the independent registered
public accounting firm.




The
effectiveness of the Company's internal control over financial reporting as of
December 31, 2008, has been audited by Pricewaterhousecoopers SA, an independent
registered public accounting firm, as stated in their report which appears
herein.




(d)           
  Changes in internal control over financial
reporting.





There have been no changes in internal
controls over financial reporting (identified in connection with management's
evaluation of such internal controls over financial reporting) that occurred
during the year covered by this annual report that have materially affected, or
are reasonably likely to materially affect, the Company's internal controls over
financial reporting.





ITEM
16A.            
AUDIT COMMITTEE FINANCIAL EXPERT




We
have established an audit committee comprised of three members which is
responsible for reviewing our accounting controls and recommending to the board
of directors the engagement of our outside auditors. Each member is an
independent director under the corporate governance rules of the Nasdaq Global
Market that are applicable to us. The members of the audit committee are Messrs.
Panagiotis Skiadas, George Xiradakis and Christofer Giorgakis. Mr.
Xiradakis  serves as the "audit committee financial expert" as defined
in Form 20-F.




ITEM
16B.             CODE
OF ETHICS




As
a foreign private issuer, we are exempt from the rules of the Nasdaq Global
Market that require the adoption of a code of ethics.  However,
we have voluntarily adopted a code of ethics that applies to our principal
executive officer, principal financial officer and persons performing similar
functions. We will also provide any person a hard copy of our code of ethics
free of charge upon written request. Shareholders may direct their requests to
the Company at 18 Zerva Nap., Glyfada, 166 75 Greece, Attn: Corporate
Secretary.






67






ITEM
16C.             PRINCIPAL
ACCOUNTANT FEES AND SERVICES




Audit
Fees




Our
principal accountants for the fiscal years ended December 31, 2008 and 2007 were
PricewaterhouseCoopers S.A.  Our audit fees for 2008 and 2007 were
$532,500 and $847,000 respectively.




Audit-Related
Fees




We
did not incur audit-related fees for 2008 and 2007.




Tax Fees




We
did not incur tax fees for 2008 or 2007.




All Other
Fees




We
did not incur any other fees for 2008 or 2007.




Our
audit committee pre-approves all audit, audit-related and non-audit services not
prohibited by law to be performed by our independent auditors and associated
fees prior to the engagement of the independent auditor with respect to such
services.




ITEM
16D.             EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES




Not applicable.




ITEM
16E.              PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES




None.





ITEM
16G.             CORPORATE
GOVERNANCE




We
have certified to Nasdaq that our corporate governance practices are in
compliance with, and are not prohibited by, the laws of Bermuda. Therefore, we
are exempt from many of Nasdaq's corporate governance practices other than the
requirements regarding the disclosure of a going concern audit opinion,
submission of a listing agreement, notification of material non-compliance with
Nasdaq corporate governance practices and the establishment and composition of
an audit committee and a formal written audit committee charter. The practices
that we follow in lieu of Nasdaq's corporate governance rules are described
below.




·
            We
      have a board of directors with a majority of independent directors which
      holds at least one annual meeting at which only independent directors are
      present, consistent with Nasdaq corporate governance requirements. We are
      not required under Bermuda law to maintain a board of directors with a
      majority of independent directors, and we cannot guarantee that we will
      always in the future maintain a board of directors with a majority of
      independent directors.





·
            In
      lieu of a nomination committee comprised of independent directors, our
      board of directors is responsible for identifying and recommending
      potential candidates to become board members and recommending directors
      for appointment to board committees. Shareholders may also identify and
      recommend potential candidates to become board members in writing. No
      formal written charter has been prepared or adopted because this process
      is outlined in our bye-laws.





·
            In
      lieu of obtaining an independent review of related party transactions for
      conflicts of interests, consistent with Bermuda law requirements, our
      bye-laws require any director who has a potential conflict of interest to
      identify and declare the nature of the conflict to our board of directors
      at the first meeting of the board of directors. Our bye-laws additionally
      provide that related party transactions must be approved by independent
      and disinterested directors.





·
            In
      lieu of obtaining shareholder approval prior to the issuance of
      securities, we were required to obtain the consent of the Bermuda Monetary
      Authority as required by Bermuda law before we issued securities. We have
      obtained blanket consent from the Bermuda Monetary Authority. If we choose
      to issue additional securities, we will not be required to obtain any
      further consent so long as our common shares are
  listed.






68





·
            As
      a foreign private issuer, we are not required to solicit proxies or
      provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance
      rules or Bermuda law. Consistent with Bermuda law, we will notify our
      shareholders of meetings between 15 and 60 days before the meeting. This
      notification will contain, among other things, information regarding
      business to be transacted at the meeting. In addition, our bye-laws
      provide that shareholders must give us advance notice to properly
      introduce any business at a meeting of the shareholders. Our bye-laws also
      provide that shareholders may designate a proxy to act on their behalf (in
      writing or by telephonic or electronic means as approved by our board from
      time to time).





Other
than as noted above, we are in full compliance with all other applicable Nasdaq
corporate governance standards.


69





Part III




ITEM
17.                FINANCIAL
STATEMENTS




See Item 18.




ITEM
18.                FINANCIAL
STATEMENTS




The following financial statements,
together with the report of PricewaterhouseCoopers S.A. thereon, are filed as
part of this report:





ITEM
19.                EXHIBITS





Number
                          
                          Description of
      Exhibits1.1
                          ____
                          Articles of Incorporation of Aries
      Maritime Transport Limited (1)1.2
                          ____
                          Amended and Restated Bye-laws of
      the Company (2)4.1
                          ____
                          Credit Agreement, dated April 3,
      2006 by and among the Company and The Bank of Scotland and Nordea Bank
      Finland as joint lead arrangers. (3)4.2
                          ____
                          First Supplemental Agreement,
      dated August 24, 2006 by and between the Company and The Bank of Scotland
      relating to the Credit Agreement. (4)4.3
                          ____
                          Second Supplemental Agreement,
      dated January 22, 2007 by and among the Company, certain subsidiaries, The
      Bank of Scotland and Magnus Carriers Corporation relating to the Credit
      Agreement. (5)4.4
                          ____
                          Third Supplemental Agreement,
      dated March 2, 2007 by and among the Company, certain subsidiaries, The
      Bank of Scotland and Magnus Carriers Corporation relating to the Credit
      Agreement. (6)4.5
                          ____
                          Form of Equity Incentive Plan.
      (7)4.6
                          ____
                          Fourth Supplemental Agreement,
      dated July 2007, by and among the Company, certain subsidiaries, Magnus
      Carriers Corporation and The Bank of Scotland relating to the Credit
      Agreement. (8)4.7
                          ____
                          Fifth Supplemental Agreement,
      dated June 11, 2008, by and among the Company and The Bank of Scotland
      relating to the Credit Agreement. (9)4.8
                          ___
                          Sixth
      Supplemental Agreement, dated June
      24, 2009, by and among the Company and The Bank of Scotland relating to
      the Credit Agreement.4.9
                          ____
                          Amendment to Equity Incentive
      Plan4.10
                          ___
                          Form of Technical and
      Commercial Management Agreement with AMT Management4.11
                          ___
                          Form
      of Commercial Management Agreement with AMT
  Management8.1
                          ____
                          List of
      Subsidiaries12.1
                          ____
                          Rule 13a-14(a)/15d-14(a)
      Certification of the Company's Chief Executive
    Officer.12.2
                          ____
                          Rule 13a-14(a)/15d-14(a)
      Certification of the Company's Chief Financial
    Officer.13.1
                          ____
                          Certification of the Company's
      Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.13.2
                          ____
                          Certification of the Company's
      Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.


(1) Incorporated by reference to Exhibit
3.1 to the Company's registration statement on Form F-1 (Registration No.
333-124952).




(2) Incorporated by reference to Exhibit
99. to the Company's Form 6-K, filed on October 22, 2008.




(3) Incorporated by reference to Exhibit
4.1 to the Company's Annual Report on Form 20-F/A for the fiscal year ended
December 31, 2005 filed on April 18, 2007.






70




(4) Incorporated by reference to Exhibit
4.2 to the Company's Annual Report on Form 20-F/A for the fiscal year ended
December 31, 2006 filed on April 20, 2007.




(5) Incorporated by reference to Exhibit
4.3 to the Company's Annual Report on Form 20-F/A for the fiscal year ended
December 31, 2006 filed on April 20, 2007.





(6) Incorporated by reference to Exhibit
4.4 to the Company's Annual Report on Form 20-F/A for the fiscal year ended
December 31, 2006 filed on April 20, 2007.




(7) Incorporated by reference to Exhibit
10.6 to the Company's registration statement on Form F-1/A (Registration No.
333-124952).




(8) Incorporated by reference to
Exhibit 4.6 to the Company's Annual Report on Form 20-F for the fiscal year
ended December 31, 2007 filed on June 30, 2008.





(9) Incorporated by reference to
Exhibit 4.7 to the Company's Annual Report on Form 20-F for the fiscal year
ended December 31, 2007 filed on June 30, 2008.













71





SIGNATURES






The registrant hereby certifies that it
meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this registration statement on its
behalf.




ARIES MARITIME TRANSPORT
      LIMITEDBy:
            /s/ Jeffrey Owen
      ParryName:  Jeffrey Owen
      Parry
              Title:   Chief
      Executive OfficerJune 26,
    2009











72







INDEX TO THE CONSOLIDATED
      FINANCIAL STATEMENTSPageReport of Independent Registered
      Public Accounting Firm
              
              
              
              F-2Consolidated Balance
      Sheets
              
              
              
              F-3Consolidated Statements of
      Operations
              
              F-4Consolidated Statements of
      Stockholders' Equity
              F-5Consolidated Statements of Cash
      Flows
              F-6Notes to the Consolidated
      Financial Statements
              F-7







F-1





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
the Board of Directors and Stockholders of
 Aries
Maritime Transport Limited:
  In
our opinion, the accompanying consolidated  balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Aries
Maritime Transport Ltd and its subsidiaries (the "Company") at December 31, 2008
and December 31, 2007, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2008, in conformity
with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control - Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible for these
financial statements, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in "Management's annual report on internal control
over financial reporting", appearing in Item 15(b) of the Company's 2008 Annual
Report on Form 20-F.  Our responsibility is to express opinions on
these financial statements and on the Company's internal control over financial
reporting based on our integrated audits (which were integrated audits in
2008 and 2007) . We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our audits of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed
risk.  Our audits also included performing such other procedures as we
considered necessary in the circumstances.   We believe that our audits
provide a reasonable basis for our opinion.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred a net loss, has a
net working capital deficit and has not met certain of its financial covenants
of debt agreements with lenders. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
  A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
  /s/
PricewaterhouseCoopers S.A.
  Athens,
Greece
 June
26, 2009
  F-2


ARIES
MARITIME TRANSPORT LIMITED


CONSOLIDATED
BALANCE SHEETS


(All
amounts expressed in thousands of U.S. Dollars except share
amounts)





As of December
      31,Notes
                2007
                
                2008ASSETSCurrent
      assetsCash and cash
      equivalents
                
                12,444
                
                4,009Restricted
    cash
                4
                39
                
                8,510Trade receivables,
      net
                2
                2,219
                
                2,533Other
      receivables
                
                1,033
                
                2,289Inventories
                5
                1,969
                
                1,224Prepaid
      expenses
                
                1,681
                
                967Due from managing
      agent
                
                814
                
                160Due from related
      parties
                19
                -
                
                49Total current
      assets
                
                20,199
                
                19,741Vessels and other fixed assets,
      net
                6
                400,838
                
                296,463Deferred charges,
      net
                9
                2,906
                
                1,573Restricted
    cash
                4
                1,548
                
                -Total non-current
      assets
                
                405,292
                
                298,036Total
assets
                
                425,491
                
                317,777LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      liabilitiesCurrent portion of long-term
      debt
                10
                284,800
                
                223,710Accounts payable,
      trade
                7
                8,423
                
                3,601Accrued
      liabilities
                8
                5,297
                
                7,776Deferred
    income
                
                2,291
                
                1,807Derivative financial
      instruments
                15
                5,936
                
                12,451Deferred charter
      revenue
                11
                4,656
                
                2,144Due to related
      parties
                19
                594
                
                -Total current
      liabilities
                
                311,997
                
                251,489Deferred charter
      revenue
                11
                6,375
                
                772Total
      liabilities
                
                318,372
                
                252,261Commitments and
      contingencies
                17
                -
                
                -Stockholders'
      equityPreferred Stock, $0.01 par value,
      30 million shares authorized, none issued.Common Stock, $0.01 par value, 100
      million shares authorized, 29  million shares  issued
      and outstanding  at December 31, 2008 (2007: 28.6 million
      shares)
                
                286
                
                290Additional paid-in
      capital
                13
                115,566
                
                113,787Deficit
                13
                (8,733)
                
                (48,561)Total stockholders'
      equity
                
                107,119
                
                65,516Total liabilities and
      stockholders' equity
                
                425,491
                
                317,777




The
accompanying notes are an integral part of the consolidated financial
statements.


F-3





ARIES
MARITIME TRANSPORT LIMITED


CONSOLIDATED
STATEMENTS OF OPERATIONS


(All
amounts expressed in thousands of U.S. Dollars, except share and per share
amounts)




Year ended December
      31,Notes
                
                
                2006
                
                
                2007
                
                
                2008OPERATING
      REVENUES
                
                
                11,14
                
                
                
                76,347
                
                
                
                81,080
                
                
                
                81,331EXPENSES:Commissions
                
                
                19
                
                
                
                (830
                )
                
                
                (1,049
                )
                
                
                (1,407
                )Voyage
    expenses
                
                
                
                
                
                
                (2,658
                )
                
                
                (3,119
                )
                
                
                (7,033
                )Vessel operating
      expenses
                
                
                19
                
                
                
                (19,276
                )
                
                
                (23,996
                )
                
                
                (31,730
                )General & administrative
      expenses
                
                
                12,19
                
                
                
                (3,938
                )
                
                
                (5,518
                )
                
                
                (7,878
                )Depreciation
                
                
                6
                
                
                
                (22,684
                )
                
                
                (23,883
                )
                
                
                (23,912
                )Impairment
    loss
                
                
                2
                
                
                
                -
                
                
                
                -
                
                
                
                (30,075
                )Amortization of dry-docking and
      special survey expense
                
                
                6
                
                
                
                (1,947
                )
                
                
                (2,626
                )
                
                
                (3,997
                )Management
    fees
                
                
                
                
                
                
                (1,554
                )
                
                
                (1,700
                )
                
                
                (1,860
                )(52,887
                )
                
                
                (61,891
                )
                
                
                (107,892
                )Net operating income/
      (loss)
                
                
                
                
                
                
                23,460
                
                
                
                19,189
                
                
                
                (26,561
                )OTHER INCOME/( EXPENSES),
      NET:Interest & finance expense,
      net
                
                
                10
                
                
                
                (15,226
                )
                
                
                (17,527
                )
                
                
                (16,021
                )Interest
    income
                
                
                
                
                
                
                869
                
                
                
                693
                
                
                
                248Other expenses,
      net
                
                
                
                
                
                
                (146
                )
                
                
                (156
                )
                
                
                (213
                )Change in fair value of
      derivatives
                
                
                15
                
                
                
                (1,788
                )
                
                
                (4,060
                )
                
                
                (6,515
                )Total other expenses,
      net
                
                
                
                
                
                
                (16,291
                )
                
                
                (21,050
                )
                
                
                (22,501
                )Net income / (loss) from
      continuing operations
                
                
                
                
                
                
                7,169
                
                
                
                (1,861
                )
                
                
                (49,062
                )Net income / (loss) from
      discontinued operations (including gain on sale of vessels $13,569 for
      December 31, 2008)
                
                
                20
                
                
                
                (4,970
                )
                
                
                (6,872
                )
                
                
                9,234Net income /
      (loss)
                
                
                
                
                
                
                2,199
                
                
                
                (8,733
                )
                
                
                (39,828
                )Earnings/ (loss) per
      share:Basic and
      dilutedContinuing
      operations
                
                
                
                
                
                $
                0.25
                
                
                $
                ( 0.07
                )
                
                $
                ( 1.71
                )Discontinued
      operations
                
                
                
                
                
                $
                ( 0.17
                )
                
                $
                ( 0.24
                )
                
                $
                0.32Total
                
                
                
                
                
                $
                0.08
                
                
                $
                ( 0.31
                )
                
                $
                ( 1.39
                )Weighted average number of
      shares:Basic and
      diluted
                
                
                
                
                
                
                28,416,877
                
                
                
                28,478,850
                
                
                
                28,634,186




The
accompanying notes are an integral part of the consolidated financial
statements.


F-4





ARIES
MARITIME TRANSPORT LIMITED


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY


(All
amounts expressed in thousands of U.S. Dollars)





Notes
                          
                          
                          Common
      Stock (Number of Shares in Thousands)
                          
                          
                          Share
      Capital
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Accumulated
                            Deficit
                          
                          
                          Total
                            Stockholders'
                            EquityBalance
      at December 31, 2005
                          
                          
                          
                          
                          
                          28,417
                          
                          
                          
                          284
                          
                          
                          
                          155,397
                          
                          
                          
                          -
                          
                          
                          
                          155,681Net
      income
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,199
                          
                          
                          
                          2,199Dividends
      paid
                          
                          
                          13
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (23,093
                          )
                          
                          
                          (2,199
                          )
                          
                          
                          (25,292
                          )Balance
      at December 31, 2006
                          
                          
                          
                          
                          
                          
                          28,417
                          
                          
                          
                          284
                          
                          
                          
                          132,304
                          
                          
                          
                          -
                          
                          
                          
                          132,588Net
      loss
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (8,733
                          )
                          
                          
                          (8,733
                          )Issuance
      of restricted shares
                          
                          
                          12
                          
                          
                          
                          200
                          
                          
                          
                          2
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2Stock-based
      compensation
                          
                          
                          12
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,232
                          
                          
                          
                          -
                          
                          
                          
                          1,232Dividends
      paid
                          
                          
                          13
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (17,970
                          )
                          
                          
                          -
                          
                          
                          
                          (17,970
                          )Balance
      at December 31, 2007
                          
                          
                          
                          
                          
                          
                          28,617
                          
                          
                          
                          286
                          
                          
                          
                          115,566
                          
                          
                          
                          (8,733
                          )
                          
                          
                          107,119Net
      loss
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (39,828
                          )
                          
                          
                          (39,828
                          )Issuance
      of restricted shares
                          
                          
                          12
                          
                          
                          
                          345
                          
                          
                          
                          4
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4Stock-based
      compensation
                          
                          
                          12
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,083
                          
                          
                          
                          -
                          
                          
                          
                          1,083Dividends
      paid
                          
                          
                          13
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,862
                          )
                          
                          
                          -
                          
                          
                          
                          (2,862
                          )Balance
      at December 31, 2008
                          
                          
                          
                          
                          
                          
                          28,962
                          
                          
                          
                          290
                          
                          
                          
                          113,787
                          
                          
                          
                          (48,561
                          )
                          
                          
                          65,516


The
accompanying notes are an integral part of the consolidated financial
statements.


F-5





ARIES
MARITIME TRANSPORT LIMITED


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(All
amounts expressed in thousands of U.S. Dollars)




Year ended December
      31,Notes
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2008Cash flows from operating
      activities:Net income/
      (loss)
                  
                  
                  
                  
                  
                  2,199
                  
                  
                  
                  (8,733
                  )
                  
                  
                  (39,828
                  )Adjustments to reconcile net
      income / (loss) to net cash provided by operating
      activities:Depreciation
                  
                  
                  
                  
                  
                  29,431
                  
                  
                  
                  30,653
                  
                  
                  
                  25,476Impairment
    loss
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  30,075Amortization of dry-docking and
      special survey
                  
                  
                  
                  
                  
                  3,727
                  
                  
                  
                  6,485
                  
                  
                  
                  5,017Provision for doubtful
      receivables
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,018Amortization and write-off of
      deferred financing costs
                  
                  
                  
                  
                  
                  1,639
                  
                  
                  
                  1,308
                  
                  
                  
                  1,333Amortization of deferred charter
      revenue
                  
                  
                  
                  
                  
                  (10,715
                  )
                  
                  
                  (6,010
                  )
                  
                  
                  (8,115
                  )Change in fair value of derivative
      financial instruments
                  
                  
                  
                  
                  
                  1,788
                  
                  
                  
                  4,060
                  
                  
                  
                  6,515Payments for dry-docking / special
      survey costs
                  
                  
                  
                  
                  
                  (15,151
                  )
                  
                  
                  (6,144
                  )
                  
                  
                  (2,159
                  )Proceeds for vessel's dry-docking
      / special survey costs
                  
                  
                  
                  
                  
                  5,000Stock-based
      compensation
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  1,232
                  
                  
                  
                  1,083Gain on sale of
      vessels
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (13,569
                  )Changes in assets and
      liabilities
                  
                  
                  16
                  
                  
                  
                  6,297
                  
                  
                  
                  (5,270
                  )
                  
                  
                  (3,945
                  )Net cash provided by operating
      activities
                  
                  
                  
                  
                  
                  
                  24,215
                  
                  
                  
                  17,581
                  
                  
                  
                  2,901Cash flows from investing
      activities:Vessel acquisitions/
      additions
                  
                  
                  
                  
                  
                  
                  (101,765
                  )
                  
                  
                  (399
                  )
                  
                  
                  -Other fixed asset
      acquisitions
                  
                  
                  
                  
                  
                  
                  (50
                  )
                  
                  
                  (37
                  )
                  
                  
                  (27
                  )Vessels
      disposals
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  59,562Restricted
    cash
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  (1,572
                  )
                  
                  
                  1,548Net cash (used in) / provided by
      investing activities
                  
                  
                  
                  
                  
                  
                  (101,815
                  )
                  
                  
                  (2,008
                  )
                  
                  
                  61,083Cash flows from financing
      activities:Proceeds from issuance
      of long-term debt
                  
                  
                  
                  
                  
                  
                  100,980
                  
                  
                  
                  -
                  
                  
                  
                  -Principal repayments
      of long-term debt
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (61,090
                  )Proceeds from
      termination of derivative financial instruments
                  
                  
                  
                  
                  
                  
                  489
                  
                  
                  
                  -
                  
                  
                  
                  -Payment of financing
      costs
                  
                  
                  
                  
                  
                  
                  (2,981
                  )
                  
                  
                  -
                  
                  
                  
                  -Restricted
      cash
                  
                  
                  
                  
                  
                  
                  (3,232
                  )
                  
                  
                  3,227
                  
                  
                  
                  (8,471
                  )Proceeds from issuance
      of capital stock
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  2
                  
                  
                  
                  4Dividends
      paid
                  
                  
                  
                  
                  
                  
                  (25,292
                  )
                  
                  
                  (17,970
                  )
                  
                  
                  (2,862
                  )Net cash provided by/ (used in)
      financing activities
                  
                  
                  
                  
                  
                  
                  69,964
                  
                  
                  
                  (14,741
                  )
                  
                  
                  (72,419
                  )Net increase/ (decrease) in cash
      and cash equivalents
                  
                  
                  
                  
                  
                  
                  (7,636
                  )
                  
                  
                  832
                  
                  
                  
                  (8,435
                  )Cash and cash
      equivalentsBeginning of
      year
                  
                  
                  
                  
                  
                  
                  19,248
                  
                  
                  
                  11,612
                  
                  
                  
                  12,444End of year
                  
                  
                  
                  
                  
                  
                  11,612
                  
                  
                  
                  12,444
                  
                  
                  
                  4,009Supplemental Cash Flow
      information:Interest
    paid
                  
                  
                  
                  
                  
                  
                  13,466
                  
                  
                  
                  23,211
                  
                  
                  
                  13,453





The
accompanying notes are an integral part of the consolidated financial
statements.


F-6





ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements





1.
            Organization
      and Basis of Presentation





Aries
Maritime Transport Limited (the "Company" or "Aries Maritime") was incorporated
on January 12, 2005. The principal business of Aries Maritime is the ownership
and chartering of ocean-going vessels world-wide. The Company conducts its
operations through its subsidiaries. The vessel-owning subsidiaries own products
tankers and container vessels that transport a variety of refined petroleum
products and containers world-wide. Aries Maritime is currently the ultimate
owner of all outstanding shares of the following subsidiaries:











Company  Name
                                                
                                                Country
      of Incorporation
                                                Vessel
      Name
                                                Date
      of Vessel Acquisition1. Land Marine
      S.A.
                                                
                                                Marshall
      Islands
                                                M/T High
    Land
                                                March 7,
    20032. Rider Marine
      S.A.
                                                
                                                Marshall
      Islands
                                                M/T High
    Rider
                                                March 18,
    20033.
      Ostria Waves Ltd.
                                                
                                                Marshall
      Islands
                                                M/T
      Ostria ex Bora
                                                May
      25, 20044. Altius Marine
      S.A.
                                                
                                                Marshall
      Islands
                                                M/T Altius
                                                June 24,
    20045. Fortius Marine
      S.A.
                                                
                                                Marshall
      Islands
                                                M/T Fortius
                                                August 2,
    20046. Vintage Marine
      S.A.
                                                
                                                Marshall
      Islands
                                                M/T Arius ex
      Citius***
                                                August 5,
    20047. Ermina Marine
      Ltd.
                                                
                                                Marshall
      Islands
                                                M/T
    Nordanvind
                                                December 9,
      20048.
      Chinook Waves Corporation
                                                
                                                Marshall
      Islands
                                                M/T
      Chinook
                                                November
      30, 20059.
      Compass Overseas Ltd.
                                                
                                                Bermuda
                                                M/T
      Stena Compass
                                                February
      14, 200610.
      Compassion Overseas Ltd.
                                                
                                                Bermuda
                                                M/T
      Stena Compassion
                                                June
      16, 200611. Santa Ana Waves
      Corporation
                                                
                                                Marshall
      Islands
                                                -
                                                -12. Makassar Marine
      Ltd.
                                                
                                                Marshall
      Islands
                                                M/V Saronikos Bridge ex CMA
      CGM  Makassar
                                                July 15,
    200513. Seine Marine
      Ltd.
                                                
                                                Marshall
      Islands
                                                M/V MSC Seine ex CMA CGM
      Seine
                                                June 24,
    200514. Jubilee Shipholding
      S.A.
                                                
                                                Marshall
      Islands
                                                M/V Ocean
    Hope
                                                July 26,
    200415. Olympic Galaxy Shipping
      Ltd.
                                                
                                                Marshall
      Islands
                                                M/V Energy 1 ex ANL
      Energy*
                                                April 28,
    200416. Dynamic Maritime
      Co.
                                                
                                                Marshall
      Islands
                                                M/V MSC Oslo ex SCI
      Tej**
                                                June 1,
  200417.
      AMT Management Ltd.
                                                
                                                Marshall
      Islands
                                                -
                                                -18. Aries Maritime (US)
      LLC
                                                
                                                United
    States
                                                -****
                                                -





*               
M/V Energy 1 was sold on June 2, 2008.


**             
M/V MSC Oslo was sold on April 30, 2008.


***           
M/T Arius was sold on June 11, 2008.


****         Aries
Maritime (US) LLC was incorporated on October 23, 2008 as a representative
office in the U.S.A.




F-7





ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)





1.
            Organization
      and Basis of Presentation
(continued)





On
June 8, 2005, Aries Maritime closed its initial public offering of 12,240,000
common shares at an offering price of $12.50 per share. The net proceeds of the
offering after expenses were $140.8 million.





Aries
Maritime is an indirect subsidiary of Aries Energy Corporation, or Aries Energy.
Aries Energy, an affiliate through its wholly-owned subsidiary Rocket Marine
Inc., owns approximately 52% of the Company's outstanding common
shares.  Hereinafter, Aries Maritime and its subsidiaries listed above
will be referred to as "the Company".





During the years ended December 31, 2008
and December 31, 2007, the Company incurred losses of $39.8 million and $8.7
million, respectively. As at December 31, 2008, the Company reported working
capital deficit of $231.7million which includes $223.7 million of
debt reflected as current.





During the years 2007 and 2008, the
Company was not in compliance with certain covenants of its loan facility (refer
to note 10) and absent any further relaxation from the lenders, the
lenders have the ability to
demand repayment of outstanding borrowings. On this basis, and due to the high
degree of uncertainty surrounding the Company's ability to meet loan terms and
covenants in future periods, as well as, the uncertainty with respectto the lender's intention to demand
immediate repayment of the outstanding debt, this debt is reflected as current
in the accompanying balance sheets.


Management
is currently in negotiations with its lenders for obtaining waivers in respect
of its covenant in breach and for restructuring its facility. Management also
has plans in place to improve the performance and financial strength of the
Company. These plans mainly relate to the reduction of vessel operating
expenses, the potential sales of one or more vessels to strengthen its financial
position and the potential addition of assets which would enhance its future
cash earnings. On
June 24, 2009, the Company signed a non-binding letter of intent (LOI) with
Grandunion, a company controlled by Michael Zolotas and Nicholas Fistes, that
contemplates, among other things, the acquisition of three Capesize drybulk
carriers with an approximate net asset value of $36.0 million in exchange for
15,977,778 newly issued shares of the Company and a change of control of the
Company's board of directors.  See note 21 for further information
concerning the LOI. However, there is no assurance that the Company will enter
into definitive agreements with Grandunion or that the Company will be
successful in achieving our objectives.




While these consolidated financial
statements have been prepared using generally accepted accounting principles
applicable to a going concern, which contemplate the realization of assets and
liquidation of liabilities during the normal course of operations, the conditions and events described
above raise substantial doubt about the Company's ability to continue as a going
concern. The Company's ability to continue as a going concern is dependent on
management's ability to reach an agreement with its lendersand to continue to improve the
performance of the Company, which includes achieving profitable operations in
the future, and the continued support of its shareholders and its lenders. The
financial statements do not include any adjustments to reflect thepossible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of the Company's inability to
continue as a going concern. However, there is a material uncertaintyrelated to events or conditions which
may raise substantial doubt about the entity's ability to continue as a going
concern and, therefore, that it may be unable to realize its assets and
discharge its liabilities in the normal course of business.





2.
            Summary
      of Significant Accounting Policies




Principles
of Consolidation:




The
accompanying consolidated financial statements represent the consolidation of
the accounts of the Company and its wholly-owned subsidiaries and are prepared
in accordance with accounting principles generally accepted in the United States
of America (US GAAP). The subsidiaries are fully consolidated from the date on
which control is transferred to the Company.




All intercompany balances and
transactions have been eliminated upon consolidation.




Use
of Estimates:


The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and expenses and
the disclosure of contingent assets and liabilities in the financial statements
and accompanying notes. Actual results could differ from those
estimates.




F-8


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)





2.
            Summary
      of Significant Accounting Policies
(continued)




Foreign
Currency Transactions:


The
functional currency of the Company is the U.S. Dollar because the Company's
vessels operate in international shipping markets, which typically utilize the
U.S. Dollar as the functional currency. The accounting records of the
Company's  subsidiaries are maintained in U.S. Dollars. Transactions
involving other currencies during a period are converted into U.S. Dollars using
the exchange rates in effect at the time of the transactions. At the balance
sheet dates, monetary assets and liabilities, which are denominated in other
currencies, are translated to reflect the period-end exchange rates. Resulting
gains or losses are reflected in the accompanying consolidated statements of
operations.




Cash
and Cash Equivalents:


The
Company considers highly liquid investments, such as time deposits and
certificates of deposit, with an original maturity of three months or less to be
cash equivalents.




Restricted
Cash:


Restricted
cash includes cash collateralized, retention accounts, which are used to fund
the debt service payments coming due in accordance with the facility agreement
as well as the minimum liquidity required under the facility agreement. The
funds can only be used for the purposes of interest payments and loan
repayments.




Trade
Receivables:


The
amount shown as trade receivables includes estimated recoveries from charterers
for hire, freight and demurrage billings, net of provision for doubtful
accounts. At each balance sheet date, all potentially uncollectible accounts are
assessed individually for purposes of determining the appropriate provision for
doubtful accounts. The provision for doubtful accounts at December 31, 2008 and
2007 amounted to $0.9 million and $0, respectively. This relates to discontinued
operations.




Inventories:


Inventories
which comprise bunkers, lubricants, provisions and stores remaining on board the
vessels at period end, are valued at the lower of cost and market value as
determined using the first in first out method.




Vessels
and Other Fixed Assets, net:


Vessels
are stated at cost, which consists of the contract price, delivery and
acquisition expenses, interest cost while under construction, and, where
applicable, initial improvements. Subsequent expenditures for conversions and
major improvements are also capitalized when they appreciably extend the life,
increase the earning capacity or improve the efficiency or safety of a vessel;
otherwise, these amounts are charged to expenses as incurred.




The
component of each new vessel's initial capitalized cost that relates to
dry-docking and special survey calculated by reference to the related estimated
economic benefits to be derived until the next scheduled dry-docking and special
survey, is treated as a separate component of the vessel's cost and is accounted
for in accordance with the accounting policy for dry-docking and special survey
costs.




Where
the Company identifies any intangible assets or liabilities associated with the
acquisition of a vessel, the Company records all identified tangible and
intangible assets or liabilities at fair value. Fair value is determined by
reference to market data and the discounted amount of expected future cash
flows.




Vessels'
depreciation is computed using the straight-line method over the estimated
useful life of the vessels, after considering the estimated salvage value of the
vessels. Each vessel's salvage value is equal to the product of its lightweight
tonnage and estimated scrap value per lightweight ton. Management estimates the
useful life of the Company's vessels to be 25 years from the date of its initial
delivery from the shipyard. However, when regulations place limitations over the
ability of a vessel to trade, its useful life is adjusted to end at the date
such regulations become effective.




Fixed
assets are stated at cost.The cost and related accumulated depreciation
of fixed assets sold or retired are removed from the accounts at the time of
sale or retirement and any gain or loss is included in the accompanying
statement of operations.






F-9




ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






2.
            Summary
      of Significant Accounting Policies
(continued)




Vessels
and Other Fixed Assets, net (continued)




Depreciation
of fixed assets is computed using the straight-line method. Annual depreciation
rates, which approximate the useful life of the assets, are:




Furniture, fixtures and
equipment:                                                                             
5 years


Computer equipment and
software:                                                                           
5 years




Accounting
for Special Survey and Dry-docking Costs:


The
Company follows the deferral method of accounting for special survey and
drydocking expenses, whereby actual costs incurred are deferred and amortized on
a straight-line basis over the period until the next scheduled survey and
drydocking, which is five years and two and a half years respectively. If
special survey or drydocking is performed prior to the scheduled date, the
remaining unamortized balances are immediately written off.




Costs incurred during the drydocking
period relating to routine repairs and maintenance are expensed. The unamortized
portion of special survey and drydocking costs for vessels sold is included as
part of the carrying amount of the vessel in determining the gain/(loss) on sale
of the vessel.




Impairment
of Long-lived Assets:


The Company uses SFAS No. 144
"Accounting for the Impairment or Disposal of Long-lived Assets", which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The standard requires that, long-lived assets and certain
identifiable intangibles held and used or disposed of by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. If the future net
undiscounted cash flows from the assets are less than the carrying values of the
asset, an impairment loss is recorded equal to the difference between the
asset's carrying value and its fair value.




During
the fourth quarter of 2008, we concluded that events and circumstances had
changed which may indicate the existence of potential impairment of our
long-lived assets. As a result, we performed an interim impairment assessment of
long-lived assets. The significant factors and assumptions the Company used in
undiscounted projected net operating cash flow analysis included, among others,
operating revenues, off-hire revenues, dry-docking costs, operating expenses and
management fee estimates. Revenues assumptions were based on contracted time
charter rates up to the end of life of the current contract of each vessel as
well as historical average time charter rates for the remaining life of the
vessel after the completion of the current contracts and included scheduled and
unscheduled off-hire revenues based on historical experience. Operating expenses
assumptions included an annual escalation factor. All estimates used and
assumptions made were in accordance with the Company's historical experience of
the shipping industry.




The
Company's assessment concluded to evaluate the existence of potential impairment
of our long-lived assets with a review of the estimate fair market values for
each vessel obtained by third party appraisers compared to the carrying value.
The significant factors we used in deriving the carrying value included: net
book value of the vessels, unamortized special survey, dry docking cost and
deferred revenue.




The Company's impairment analysis as of
December 31, 2008 resulted to an impairment loss of$(30,075)and is reflected in the accompanying
2008 Consolidated Statements of Operations. However, the current assumptions
used and the estimates made are highly subjective, and could be negatively
impacted by further significant deterioration in charter rates or vessel
utilization over the remaining life of the vessels which could require the
Company to record a material impairment charge in future periods. No impairment
loss was recorded in the years ended December 31, 2006 and
2007.









F-10




ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






2.
            Summary
      of Significant Accounting Policies
(continued)




Back
log asset / Deferred charter revenue:


Where the Company identifies any assets
or liabilities associated with the acquisition of a vessel, the Company records
all such identified assets or liabilities at fair value. Fair value is
determined by reference to market data. The Company values any asset or
liability arising from the market value of the time or bareboat charters assumed
when a vessel is acquired. The amount to be recorded as an asset or liability at
the date of vessel delivery is based on the difference between the current fair
value of a charter with similar characteristics as the time charter assumed and
the net present value of future contractual cash flows from the time charter
contract assumed.  When the present value of the time charter assumed
is greater than the current fair value of such charter, the difference is
recorded as a back log asset; otherwise, the difference is recorded as deferred
charter revenue. Such assets and liabilities, respectively, are amortized as a
reduction of, or an increase in, revenue over the remaining period of the time
or bareboat charters acquired.




Financing
Costs:


Fees
incurred for obtaining new loans or refinancing existing loans are deferred and
amortized over the life of the related debt, using the effective interest rate
method. Any unamortized balance of costs relating to loans repaid or refinanced
is expensed in the period the repayment or refinancing is made.




Fees
incurred in a refinancing of existing loans continue to be amortized over the
remaining term of the new loan where there is a modification of the loan. Fees
incurred in a refinancing of existing loans where there is an extinguishment of
the old loan are written off and included in the debt extinguishment gain or
loss.




Interest
Expense:


Interest
costs are expensed as incurred and include interest on loans, financing costs
and amortization. Interest costs incurred while a vessel is being constructed
are capitalized.




Accounting
for Revenue and Expenses:


The
Company generates its revenues from charterers for the charter hire of its
vessels.  Vessels are chartered using either time and bareboat
charters, where a contract is entered into for the use of a vessel for a
specific period of time and a specified daily charter hire rate, or voyage
charters, where a contract is made in the spot market for the use of a vessel
for a specific voyage for a specified charter rate. If a charter agreement
exists, price is fixed, service is provided and collection of the related
revenue is reasonably assured, revenue is recognized as it is earned ratably on
a straight-line basis over the duration of the period of each time charter as
adjusted for the off-hire days that the vessel spends undergoing repairs,
maintenance and upgrade work depending on the condition and specification of the
vessel. A voyage is deemed to commence upon the completion of discharge of the
vessel's previous cargo and is deemed to end upon the completion of the
discharge of the current cargo.




Profit
sharing represents the Company's portion on the excess of the actual net daily
charter rate earned by the Company's charterers from the employment of the
Company's vessels over a predetermined base charter rate, as agreed between the
Company and its charterers; such profit sharing is recognized in revenue when
mutually settled.




Demurrage
income represents payments by the charterer to the vessel owner when loading or
discharging time exceeded the stipulated time in the voyage charter and is
recognized as incurred.




Deferred
income represents cash received on charter agreement prior to the balance sheet
date and is related to revenue not meeting the criteria for
recognition.




Voyage
related and vessel operating costs are expensed as incurred.  Under
time charter, specified voyage costs such as fuel and port charges are paid by
the charterer, and other non-specified voyage expenses such as commission are
paid by the Company. Vessel operating costs including crews, maintenance and
insurance are paid by the Company. Under bareboat charter, the charterer assumes
responsibility for all voyage and vessel operating expenses and risk of
operation.




F-11


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






2.
            Summary
      of Significant Accounting Policies
(continued)







Repairs
and Maintenance:


Expenditure
for routine repairs and maintenance of the vessels is charged against income in
the period in which the expenditure is incurred. Major vessel improvements and
upgrades are capitalized to the cost of vessel.




Derivative
Instruments:


Derivative
financial instruments are recognized in the balance sheets at their fair values
as either assets or liabilities.  Changes in the fair value of
derivatives that are designated and qualify as cash flow hedges, and that are
highly effective, are recognized in other comprehensive income.  If
derivative transactions do not meet the criteria to qualify for hedge
accounting, any unrealized changes in fair value are recognized immediately in
the statement of operations.




Amounts
receivable or payable arising on the termination of interest rate swap
agreements qualifying as hedging instruments are deferred and amortized over the
shorter of the life of the hedged debt or the hedge instrument.




The
Company has entered into various interest rate swap agreements (see note 15)
that did not qualify for hedge accounting. As such, the fair value of these
agreements and changes therein are recognized in the balance sheets and
statements of operations, respectively




Stock
– Based Compensation:


According
to Statement 123R "Share Based Payments", the Company is required to measure the
cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award (with limited
exceptions). That cost is recognized over the period during which an employee is
required to provide service in exchange for the award—the requisite service
period (usually the vesting period). No compensation cost is recognized for
equity instruments for which employees do not render the requisite service.
Employee share purchase plans will not result in recognition of compensation
cost if certain conditions are met.




The
Company initially measures the cost of employee services received in exchange
for an award or liability instrument based on its current fair value; the fair
value of that award or liability instrument is remeasured subsequently at each
reporting date through the settlement date. Changes in fair value during the
requisite service period are recognized as compensation cost over that period.
The grant-date fair value of employee share options and similar instruments are
estimated using option-pricing models adjusted for the unique characteristics of
those instruments (unless observable market prices for the same or similar
instruments are available). If an equity award is modified after the grant date,
incremental compensation cost will be recognized in an amount equal to the
excess of the fair value of the modified award over the fair value of the
original award immediately before the modification.




Segment
Reporting:


The
Company reports financial information and evaluates its operations by charter
revenues and not by vessel type, length of ship employment, customers or type of
charter. Management, including the chief operating decision makers, reviews
operating results solely by revenue per day and operating results of the fleet,
and thus the Company has determined that it operates under one reportable
segment.




Earnings
/ (loss) Per Share:


The
Company has presented basic earnings (loss) per share for all periods presented
based on the common shares outstanding of Aries Maritime. Diluted earnings
(loss) per share is calculated by dividing net earnings by the weighted average
common shares outstanding adjusted for the dilutive effect of unvested
restricted common shares and stock options using the treasury stock method. For
the year ended December 31, 2008, the 240,000 non-vested restricted common
shares and the 300,000 non-vested stock options have been excluded from the
Company's diluted computation as their effect would be anti-dilutive. For the
year ended December 31, 2007, 100,000 non-vested restricted common shares have
been excluded from the Company's diluted computation as their effect would be
anti-dilutive.




F-12


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








3.
            Recent
      Accounting Pronouncements






In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157 (SFAS 157) "Fair Value Measurement." SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP) and expands disclosures about fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years. Earlier application is encouraged, provided that the reporting entity has
not yet issued financial statements for that fiscal year, including financial
statements for an interim period within that fiscal year. The provisions of SFAS
157 should be applied prospectively as of the beginning of the fiscal year in
which it is initially applied except for certain cases where it should be
applied retrospectively. The adoption of this standard is not expected to have a
material effect on the consolidated financial statements. This statement was
effective for the Company for the fiscal year beginning on January 1, 2008 and
it did not have a material effect on its consolidated financial
statements.




In February, 2007, the FASB issued SFAS
No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities,"
which permits companies to report certain financial assets and financial
liabilities at fair value.  SFAS 159 was effective for the Company as
of January 1, 2008 at which time the Company could elect to apply the standard
prospectively and measure certain financial instruments at fair
value.  The Company has evaluated the guidance contained in SFAS 159,
and has elected not to report any existing financial assets or liabilities at
fair value that are not already reported, therefore, the adoption of the
statement had no impact on its financial position and results of
operations.  The Company retains the ability to elect the fair value
option for certain future assets and liabilities acquired under this new
pronouncement.




In
February 2008, the FASB issued the FASB Staff Position ("FSP No. 157-2") which
delays the effective date of SFAS 157, for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). For purposes
of applying this FSP, nonfinancial assets and nonfinancial liabilities would
include all assets and liabilities other that those meeting the definition of a
financial asset or financial liability as defined in paragraph 6 of FASB
Statement No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" This FSP defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and the interim periods within those fiscal
years for items within the scope of this FSP. The application of SFAS 157 in
future periods to those items covered by FSP 157-2 did not have a material
effect on the consolidated financial statements of the Company.




In March 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("SFAS 161")
"Disclosures about Derivative Instruments and Hedging Activities — an amendment
of FASB Statement No. 133". SFAS 161 changes the disclosure requirements
for derivative instruments and hedging activities. Entities are required to
provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under Statement 133 and its related interpretations, and
(c) how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. This statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. This
statement encourages, but does not require, comparative disclosures for earlier
periods at initial adoption. The Company is currently evaluating the potential
impact, if any, of the adoption of SFAS 161 on its consolidated financial
statements.




In
April 2008, FASB issued FASB Staff Position FSP 142-3 "Determination of the
useful life of intangible assets". This FASB Staff Position (FSP) amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, "Goodwill and Other Intangible Assets". The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows used
to measure the fair value of the asset under FASB Statement No. 141 (revised
2007), "Business Combinations", and other U.S. generally accepted accounting
principles (GAAP). This FSP will be effective for Aries Maritime Transport
Limited for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited. The adoption of FSP
142-3 is not expected to have a material effect on the consolidated financial
statements of the Company.




F-13


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






3.
            Recent
      Accounting Pronouncements
(continued)






In May 2008, the Financial Accounting
Standards Board issued FASB Statement No. 162, "The Hierarchy of Generally
Accepted Accounting Principles". The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (GAAP) for nongovernmental entities. Statement 162 is effective
60 days following the SEC's approval of the Public Company Accounting
Oversight Board Auditing amendments to AU Section 411, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles. The
adoption of SFAS No. 162 is not  expected to have material
effect on the consolidated financial statements of Aries Maritime Transport
Limited.




In June 2008, FASB issued FASB
Staff Position FSP EITF 03-6-1 "Determining whether instruments granted in
share-based payment transactions are participating securities". This FASB Staff
Position (FSP) addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and, therefore, need
to be included in the earnings allocation in computing earnings per share
(EPS) under the two-class method described in paragraphs 60 and 61 of FASB
Statement No. 128, "Earnings per Share". This FSP will be effective for the
Company for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years. All prior-period EPS data presented shall be
adjusted retrospectively (including interim financial statements, summaries of
earnings, and selected financial data) to conform with the provisions of this
FSP. Early application is not permitted. The Company is currently evaluating the
potential impact, if any, of the adoption of FSP EITF 03-6-1 on the Company's
consolidated financial statements.




In September 2008, FASB issued FASB
Staff Positions (FSP) FAS 133-1 and FIN 45-4 "Disclosures about Credit
Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133
and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161". This FSP amends FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, to require
disclosures by sellers of credit derivatives, including credit derivatives
embedded in a hybrid instrument. This FSP also amends FASB Interpretation
No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, to require an
additional disclosure about the current status of the payment/performance risk
of a guarantee. Further, this FSP clarifies the FASB's intent about the
effective date of FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. This FSP applies to credit derivatives
within the scope of Statement 133, hybrid instruments that have embedded credit
derivatives, and guarantees within the scope of Interpretation 45. This FSP's
amendment to Statement 133 also pertains to hybrid instruments that have
embedded credit derivatives (for example, credit-linked notes). The provisions
of this FSP that amend Statement 133 and Interpretation 45 shall be effective
for reporting periods (annual or interim) ending after November 15, 2008.
This FSP encourages that the amendments to Statement 133 and Interpretation 45
be applied in periods earlier than the effective date to facilitate comparisons
at initial adoption. In periods after initial adoption, this FSP requires
comparative disclosures only for periods ending subsequent to initial adoption.
The adoption of FSP 133-1 and FIN 45-4 is not expected to have a material effect
on the Company's consolidated financial statements.




In
October 2008, the FASB issued the FASB Staff Position ("FSP No. 157-3") which
clarifies the application of FASB Statement No. 157, "Fair Value Measurements"
in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that asset is not active. This FSP applies to financial assets within
the scope of accounting pronouncements that require or permit fair value
measurements in accordance with Statement 157. The FSP shall be effective upon
issuance, including prior periods for which financial statements have not been
issued. Revisions resulting from a change in the valuation technique or its
application shall be accounted for as a change in accounting estimate ("FASB
Statement No. 154 "Accounting changes and Error Corrections", paragraph 19). The
disclosure provisions of Statement No. 154 for a change in accounting estimate
are not required for revisions resulting from a change in valuation technique or
its application. The application of FSP 157-3 does not have a material effect on
the consolidated financial statements of the Company.




F-14


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






4.     Restricted
      Cash




As of December
      31,2007
                  
                  
                  2008Retention
      account
                  
                  
                  5
                  
                  
                  
                  2,054Minimum
      Liquidity
                  
                  
                  -
                  
                  
                  
                  6,436Other
                  
                  
                  34
                  
                  
                  
                  20Short term restricted
      account
                  
                  
                  39
                  
                  
                  
                  8,510Guarantee
                  
                  
                  1,500
                  
                  
                  
                  -Other
                  
                  
                  48
                  
                  
                  
                  -Long term restricted
      account
                  
                  
                  1,548
                  
                  
                  
                  -1,587
                  
                  
                  
                  8,510





Cash
deposited in the retention account is made available for loan interest payments
within three months of being deposited.







5.
            Inventories





As of December
      31,2007
                  
                  
                  2008Lubricants
                  
                  
                  879
                  
                  
                  
                  722Bunkers
                  
                  
                  993
                  
                  
                  
                  361Provisions
      (Stores)
                  
                  
                  97
                  
                  
                  
                  1411,969
                  
                  
                  
                  1,224


F-15


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








6.
            Vessels
      and Other Fixed Assets, Net





Other fixed
      assets
                
                
                Cost of
    vessel
                
                
                Special
    survey
                
                
                Dry-docking
                
                
                TotalBalance at December 31,
      2006
                
                
                146
                
                
                
                478,773
                
                
                
                6,417
                
                
                
                12,616
                
                
                
                497,952Additions
                
                
                37
                
                
                
                399
                
                
                
                1,439
                
                
                
                4,705
                
                
                
                6,580Balance at December 31,
      2007
                
                
                183
                
                
                
                479,172
                
                
                
                7,856
                
                
                
                17,321
                
                
                
                504,532Additions
                
                
                27
                
                
                
                -
                
                
                
                1,019
                
                
                
                1,140
                
                
                
                2,186Disposals - Discontinued
      operations (note 20)
                
                
                -
                
                
                
                (69,003
                )
                
                
                (822
                )
                
                
                (6,450
                )
                
                
                (76,275
                )Impairment loss (note
      2)
                
                
                
                
                
                
                (30,075
                )
                
                
                
                
                
                
                
                
                
                
                (30,075
                )Balance at December 31,
      2008
                
                
                210
                
                
                
                380,094
                
                
                
                8,053
                
                
                
                12,011
                
                
                
                400,368Accumulated Depreciation and
      AmortizationBalance at December 31,
      2006
                
                
                (35
                )
                
                
                (59,160
                )
                
                
                (3,063
                )
                
                
                (4,298
                )
                
                
                (66,556
                )Depreciation and Amortization of
      the year
                
                
                (25
                )
                
                
                (30,628
                )
                
                
                (1,186
                )
                
                
                (5,299
                )
                
                
                (37,138
                )Balance at December 31,
      2007
                
                
                (60
                )
                
                
                (89,788
                )
                
                
                (4,249
                )
                
                
                (9,597
                )
                
                
                (103,694
                )Depreciation and Amortization of
      the year
                
                
                (39
                )
                
                
                (25,437
                )
                
                
                (1,242
                )
                
                
                (3,775
                )
                
                
                (30,493
                )Disposals
                
                
                -
                
                
                
                25,753
                
                
                
                570
                
                
                
                3,959
                
                
                
                30,282Balance at December 31,
      2008
                
                
                (99
                )
                
                
                (89,472
                )
                
                
                (4,921
                )
                
                
                (9,413
                )
                
                
                (103,905
                )Net book value - December 31,
      2006
                
                
                111
                
                
                
                419,613
                
                
                
                3,354
                
                
                
                8,318
                
                
                
                431,396Net book value - December 31,
      2007
                
                
                123
                
                
                
                389,384
                
                
                
                3,607
                
                
                
                7,724
                
                
                
                400,838Net book value - December 31,
      2008
                
                
                111
                
                
                
                290,622
                
                
                
                3,132
                
                
                
                2,598
                
                
                
                296,463






On June 11, 2008, the Company sold Arius
to an unrelated party for net proceedsof $21.4 million. The gain on the sale
of the vessel amounted to $8.6 million. The Company paid 1% of the purchase
price as sales commission to Magnus Carriers, a related company. The Company
also paid a 1% commission to a brokerage firm of which one of the former Company's directors is a
shareholder (refer to note 19).





On April 30, 2008 and June 2, 2008, the
Company sold both the MSC Oslo and its sister ship, the Energy 1 to an unrelated
party for net proceeds totalling $19.7 million and $18.5 million, respectively.
The gain on the sale of the MSC Oslo amounted to $2.9million and the gain on the sale of
Energy 1 amounted to $2.1 million. The Company paid 1% of the purchase price as
sales commission to Magnus Carriers (refer to note 19).





The results of the above sold vessels
until the date of their delivery to their newowners, have been reported as
discontinued operations in the accompanying statements of operations and cash
flows (see note 20).





Two vessels, the M/T Altius and M/T
Fortius, were employed under time charters with Deiulemar Compagnia di
Navigazione S.p.A ("Deiulemar"). Under the time charter
agreements, Deiulemar had an option to purchase 50% of each vessel's equity
subject to certain conditions. These options have not been exercised and have
expired.


F-16


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






7.
            Accounts
    Payable







As of December
      31,2007
                                                
                                                
                                                2008Suppliers
                                                
                                                
                                                5,765
                                                
                                                
                                                
                                                1,189Agents
                                                
                                                
                                                713
                                                
                                                
                                                
                                                159Othercreditors
                                                
                                                
                                                1,945
                                                
                                                
                                                
                                                2,2538,423
                                                
                                                
                                                
                                                3,601








8.
            Accrued
      Liabilities






As of December
      31,2007
                  
                  
                  2008Accrued
      interest
                  
                  
                  1,562
                  
                  
                  
                  3,366Other accrued
      expenses
                  
                  
                  3,735
                  
                  
                  
                  4,4105,297
                  
                  
                  
                  7,776











9.
            Deferred
      Charges







Financing
    CostsNet Book Value at December 31,
      2005
                                                                    
                                                                    
                                                                    2,872Additions
                                                                    
                                                                    
                                                                    2,981Amortization
                                                                    
                                                                    
                                                                    (877
                                                                    )Deferred charges
      written-off
                                                                    
                                                                    
                                                                    (762
                                                                    )Net Book Value at December 31,
      2006
                                                                    
                                                                    
                                                                    4,214Amortization
                                                                    
                                                                    
                                                                    (1,308
                                                                    )Net Book Value at December 31,
      2007
                                                                    
                                                                    
                                                                    2,906Amortization
                                                                    
                                                                    
                                                                    (850
                                                                    )Deferred charges
      written-off
                                                                    
                                                                    
                                                                    (483
                                                                    )Net Book Value at December 31,
      2008
                                                                    
                                                                    
                                                                    1,573


F-17


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)






10.     Long-Term
      Debt




Senior
secured credit agreement





On April 3, 2006, the Company entered
into a new $360 million revolving credit facility, for the purposes of (a)
refinancing amounts drawn under the previous $140 million term loan facility and
$150 million revolving credit facility, (b) financing of theacquisition of M/T "Stena Compassion" and
(c) general corporate purposes up to $5.0 million. The facility, has a term of
five years and is subject to nine semi-annual scheduled commitment reductions of
$11 million each, commencing six months from signatureof the facility, with the remaining
commitment to be reduced to zero or repaid in full in one instalment in April,
2011.





The facility is guaranteed by the
vessel-owning subsidiaries and secured by first priority mortgages over the
vessels, first priorityassignment of earnings and insurances of
the mortgaged vessels, assignment of time charter contracts in excess of twelve
months and pledge of earnings and retention accounts.





The facility contains various financial
covenants, requiring the Company to maintain (a) minimum hull cover ratios,
(b) minimum liquidity, (c) minimum equity ratio and interest cover ratio and,
(d) positive working capital. The facility also contains restrictions as to
changes in the management and ownership of the vessels, limitation on incurring additional indebtedness
and requires the Company's two principal beneficial equity holders to maintain a
beneficial ownership of no less than 10% each in the issued stock of the
Company. In addition, the Managers of the vessels are requiredto maintain a credit balance in an
account with the lenders of at least $1 million.





Interest on the facility is charged at
LIBOR plus a margin equal to 1.125% if the total liabilities divided by the
total assets, adjusting the book value of the fleet toits market value, is less than 50%; and
1.25% if equal to or greater than 50% but less than 60%; and 1.375% if equal to
or greater than 60% but less than 65%; and 1.5% if equal to or greater than 65%.
As explained further below, with effect from January 3, 2007 the Company
paid an increased margin of 1.75%above LIBOR.





The
amounts shown as interest and finance expense in the statements of operations
are analyzed as follows:





For the year ended December
      31,Continuing
      Operations
              2006
              
              2007
              
              2008Interest
      expense
              13,339
              
              15,812
              
              13,934Amortization of deferred
      charges
              877
              
              1,308
              
              850Deferred charges written
      off
              762
              
              -
              
              483Other fees
              248
              
              407
              
              75415,226
              
              17,527
              
              16,021





The effective interest rate at December
31, 2008 was 5.76% p.a. (2007: 6.94% p.a., 2006: 6.62%
p.a.).


F-18


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








10.     Long-Term
      Debt (continued)




Primarily due to vessel out-of-service
time, the interest coverage ratio financial covenant contained in the debt
agreement was not met during 2006 and 2007 and the lenders granted a relaxation
from 3.00 to 1.00 to 2.50 to 1.00 for the periods ending December 31, 2006, March 31,2007,
June 30, 2007 and September 30, 2007. With effect from January 3, 2007, the
Company paid an increased margin of 1.75%above LIBOR.




On
March 17, 2008, the lenders granted a further relaxation in the interest
coverage ratio financial covenant from 3.00 to 1.00 to 2.25 to 1.00 for the
periods ending December 31, 2007, March 31, 2008, June 30, 2008, with the ratio
increasing to 2.75 to 1.00 for the period ending September 30, 2008 and
returning to 3.00 to 1.00 for the period ending December 31, 2008. A relevant
Fifth Supplemental Agreement was signed on June 11, 2008.




The
relaxation was subject to the following conditions:






a.
                            A
      reduction in the credit facility commitment level to $290 million with
      effect from April 3, 2008;b.
                            A
      reduction of the outstanding borrowings under the credit facility from the
      level of $284.8 million to $200 million, by disposal of vessels,
      by  September 30, 2008, subject to legally binding sales
      contracts having been executed by June 30, 2008 which, on June 20, 2008,
      was extended to August 31, 2008;c.
                            The
      Company's continued payment of an increased margin of 1.75% above
      LIBORuntil a
      compliance certificate is provided to its lenders advising the interest
      coverage ratio meets the required level of 3.00:1.00;d.
                            The
      Company's not paying dividend for the quarter ended December 31,
      2007;e.
                            During
      the period of the interest coverage covenant relaxation any advance for
      new investments requires the consent of all of the lenders under the
      credit
facility.




On
April 17, 2008, the lenders approved an amendment to the working capital ratio
financial covenant to exclude from its calculation voluntary and mandatory
prepayments.




The
conditions set by the Fifth Supplemental Agreement were not fully met. More
specifically, the amended interest coverage financial covenant ratio was not met
during the year ended December 31, 2008 and the Company failed to reduce the
outstanding borrowings to $200 million. In addition, as of December 31, 2008 the
Company was in breach of its equity ratio financial covenant as defined in the
facility agreement. The lenders gave notices to the Company on October 27, 2008,
December 24, 2008, February 6, 2009 and April 3, 2009 that certain events of
default have occurred and are continuing and in which they advise that it is not
their immediate intention to take enforcement action but they reserve their
rights to do so. As of December 31, 2008, and at the present time, the Company
continues to be in breach of the following covenants:




(a)
            An
      equity ratio of not less than 35%;




(b)
            An
      interest coverage ratio (as defined in the Facility Agreement) of not less
      than 3.00 to 1.00;




(c)
            The reduction of its outstanding
      borrowings to $200 million in accordance with the Fifth Supplemental
      Agreement;




(d)
            A working capital including the
      $223.7 million of debt reflected as current of not less than
      zero.




Furthermore, due to the current
financial turmoil which has significantly affected the industry and the vessels'
values, the minimum hull cover ratio covenant was not met within 2009 (see note
21).


F-19


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








10.     Long-Term
Debt (continued)





As at December 31, 2008 repayments of
the long-term debt under the new credit facility, assumingthat the covenants of the credit
facility will be met, are due as follows:





2009
                                  
                                  23,7102011
                                  
                                  200,000223,710








11.
            Deferred  Charter
      Revenue





December 31,
      2006
                  
                  
                  17,041Amortization
                  
                  
                  (6,010
                  )December 31,
      2007
                  
                  
                  11,031Amortization
                  
                  
                  (8,115
                  )December 31,
      2008
                  
                  
                  2,916Short term
                  
                  
                  2,144Long term
                  
                  
                  7722,916








12.
            Stock-Based
      Compensation





The Company's 2005 Equity Incentive Plan
(the "Plan") is designed to provide certain key persons, on whose initiative and
efforts the successful conduct of the Company depends, with incentives to: (a)
enter into and remain in the service of the Company, (b) acquire a proprietary interest in the
success of the Company, (c) maximize their performance, and (d) enhance the
long-term performance of the Company.





On March 28, 2007 and August 7, 2007 the
Company made grants of restricted common stock of 120,000 shares and 80,000 shares to its three
non-executive directors and its two executive directors, respectively. The fair
value of each share on the grant dates was $7.80 and $9.90 respectively. As of
December 31, 2007, the fair value of the non-vested shares granted amounted to $148 and $346,
respectively and was recognized as compensation cost in the statement of
operations over the period to April 11, 2008.





On July 17, 2008 the Company made grants
of restricted common stock of 225,000 shares to the five members of its Board of
Directors. The fair value of each share on the grant date was $3.11. These
shares were issued on October 10, 2008. The vesting periodfor the shares is as
follows:





·
            75,000 shares will vest on July 1,
      2009


·
            75,000 shares will vest on July 1,
      2010


·
            75,000 shares will vest on July 1,
      2011





The Company recognized as compensation
expense for the year ended 2008, an amount of $202. The remaining fair value of the shares
amounting to $495 will be recognized as compensation expense in thestatement of operationsover the remaining vesting period.


F-20


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








12.
            Stock-Based
      Compensation (continued)





On June 5, 2008, the Company made grants
of restricted common stock of 20,000 shares to the CFO. The fair value of each
share on the grant date was $5.75. These shares were issued on January
21, 2009. The vesting period for the shares is as
follows:





·
            5,000 shares will vest on October 5,
      2008


·
            15,000 shares will vest on June 5,
      2010





The Company recognized as compensation
expense for the year 2008, an amount of $41. The remaining fair value of the
shares amounting to $74 will be recognized as compensation expense in thestatement of
operationsover the remaining
vesting period.





On July 23, 2008, the Company made
grants of fully vested restricted common stock in the amount of 100,000 shares
to the CEO. The fair value of each share on the grant date was$3.04. These shares were issued on
January 23, 2009. The fair value of the fully vested shares granted amounted to
$303 and were recognized as compensations cost immediately.





In addition, on July 23, 2008 the
Company made grants to the CEO of 300,000 stock options to purchase shares of
restricted common stock. The options shall become vested and exercisable as
follows:





·
            100,000 of the shares vest on July
      7, 2009 and have an exercise price $8.00 per
  share


·
            100,000 of the shares vest on July
      7, 2010 andhave an
      exercise price $8.00 per
share


·
            100,000 of the shares vest on July
      7, 2011 and have an exercise price $10.00 per
  share





The above options expire on the
10thanniversary of the grant
date.





The fair value of all stock option
awards has been calculated
based on the Binomial lattice model method. The Company used this model given
that the options granted are exercisable at a specified time after vesting
period (up to 10 years). The assumptions utilized in the Binomial lattice
valuation model for thestock option included a dividend yield
of 5% and, an expected volatility of 43%. For the first two vesting dates, the
risk-free interest rate was 3.8% and the fair value per stock option amounted to
$0.55 with an expected life of 6 years. For the third vesting date, the risk-free interest rate
was 4.6% with an expected life of 10 years, while the fair value per stock
option amounted to $0.45.  No stock options were granted during the year
ended December 31, 2007.





The resulting compensation expensearising from the stockoptionsdescribed aboveamounted to $43 for the year ended
December 31, 2008 and is included in general and administrative expenses in thestatement of operations.
The unrecognised portion of the expense amounting to $113 will be recognized as
compensation cost in the statements of operations over the remaining vesting
period until July 23, 2011.





As of December 31, 2008, the 300,000
non-vested stock options have no intrinsic value since the difference
between the underlying stock's price and the strike price is negative. There
were no grant of stock options for the years ended December 31, 2007 and
2006.





13.
            Stockholders'
      equity





(a) During the year ended December 31,
2008, the Company paid dividends of $0.10 per share ($2.9 million) to existing
stockholders.





(b) During the year ended December 31,
2007, the Company paid dividends of $0.63 per share ($18 million) to existing
stockholders.





(c) During the year ended December 31,
2006, the Company paid dividends of $0.89 per share ($25.3 million) to existing
stockholders.


F-21


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








14.
            Operating
      revenue by Charterers





The
Company reports financial information and evaluates its operations by total
charter revenues. Although revenue can be identified for different types of
charters, management does not identify expenses, profitability or other
financial information for different charters. As a result, management, including
the chief operating decision maker, reviews operating results solely by revenue
per day and operating results of the fleet, and thus the Company has determined
that it has only one operating and reportable segment.





During the year ended December 31, 2008,
the Company received 55% of its income from continuing operations from three
charterers (27%, 15%, and 13%, respectively).


During the year ended December 31, 2007,
the Company received 87% of its income from continuing operations from five
charterers (27%, 18%, 18%, 14% and 10%, respectively).


During the year ended December 31, 2006,
the Company received 64% of its income from continuing operations from four
charterers (21%, 17%, 14% and 12%, respectively).






15.
            Financial
      Instruments





The  principal
financial  assets of the Company consist  of cash
and  cash  equivalents,  trade  receivables
and  other assets. The principal financial liabilities of the Company
consist of long-term bank loans and accounts payable.





Fair Values


The
carrying amounts of the following financial instruments approximate their fair
values; cash and cash equivalents and restricted cash accounts, trade and other
receivables, due from managing agent, due to related parties, derivative
financial instruments and trade and other payables.  The fair values
of long-term loans approximate the recorded values, generally, due to their
variable interest rates.




Interest Rate
Risk:Interest rate risk arises on bank borrowings. The Company monitors
the interest rate on borrowings closely to ensure that the borrowings are
maintained at favorable rates. The interest rates relating to the long-term
loans are disclosed in note 10, Long-term Debt.




Concentration
of Credit Risk


The
Company believes that no significant credit risk exists with respect to the
Company's cash due to the spread of this risk among various different banks and
the high credit status of these counter-parties. The Company is also exposed to
credit risk in the event of non-performance by counter-parties to derivative
instruments. However, the Company limits this exposure by entering into
transactions with counter-parties that have high credit ratings. Credit risk
with respect to trade accounts receivable is reduced by the Company by
chartering its vessels to established international charterers (refer to note
14).




Interest Rate Swaps


Outstanding
swap agreements involve both the risk of a counter-party not performing under
the terms of the contract and the risk associated with changes in market value.
The Company monitors its positions, the credit ratings of counter-parties and
the level of contracts it enters into with any one party. The counter-parties to
these contracts are major financial institutions. The Company has a policy of
entering into contracts with counter-parties that meet stringent qualifications
and, given the high level of credit quality of its derivative counter parties,
the Company does not believe it is necessary to obtain collateral
arrangements.




The Company has entered into
variousinterest rate swap
agreements in order to hedge the interest expense arising from the Company's
long-term borrowings detailed in note 10. The interest rate swaps allow the
Company to raise long-term borrowings atfloating rates and swap them into
effectively fixed rates. Under the interest rate swaps, the Company agrees with
the counter-party to exchange, at specified intervals, the difference between a
fixed rate and floating rate interest amount calculated by reference to the agreed notional
amount.


F-22


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








15.
            Financial
      Instruments (continued)







The
details of the Company's swap agreements are as follows:




Counter-party
              Value date
              Termination
      date
              Notional
    amount
              
              
              Fair
      Value              As
      of December 31,2007
              2008Interest rate
      swaps
              
              
              
              Fixed rate
              Floating
    rateSMBC Bank
              3/7/2006
              4/4/2011
              20,000
              5.63%
              3-month
    LIBOR
              (1,103)
              (1,918)Bank of
    Ireland
              3/7/2006
              4/4/2011
              20,000
              5.63%
              3-month
    LIBOR
              (1,085)
              (1,925)HSH
Nordbank
              3/7/2006
              4/4/2011
              20,000
              5.63%
              3-month
    LIBOR
              (1,054)
              (1,924)Nordea Bank
              3/7/2006
              4/4/2011
              20,000
              5.63%
              3-month
    LIBOR
              (1,054)
              (1,923)Bank of
      Scotland
              3/7/2006
              4/4/2011
              20,000
              5.63%
              3-month
    LIBOR
              (1,074)
              (1,941)Nordea Bank
              3/1/2006
              3/4/2008
              46,667
              4.89%
              3-month
    LIBOR
              (280)
              -Bank of
      Scotland
              3/1/2006
              3/4/2008
              46,667
              4.89%
              3-month
    LIBOR
              (286)
              -Nordea
Bank*
              3/4/2008
              4/4/2011
              23,333
              4.14%
              3-month
    LIBOR
              -
              (1,356)Bank of
      Scotland**
              3/4/2008
              3/4/2011
              46,667
              4.285%
              3-month
    LIBOR
              -
              (1,464)(5,936)
              (12,451)








*Synthetic
swap including interest rate cap detailed as follows:


Counter-party
              Value date
              Termination
      date
              Notional
    amount
              CapNordea
              03/04/08
              04/04/11
              23,333
              4.14%





**Synthetic
swap including interest rate floor detailed as follows:


Counter-party
              Value date
              Termination
      date
              Notional
    amount
              FloorBank of
      Scotland
              03/04/08
              03/04/11
              23,333
              4.285%





The
total fair value change of the interest rate swaps indicated above is shown in
the consolidated statements of operations . These amounts were a loss of $(6.5)
million, $(4.0) million and $(1.8) million for the years ended December 31,
2008, 2007 and 2006, respectively. These fair values are determined through
Level 2 of the fair value hierarchy as defined in SFAS No. 157. The
related asset or liability is shown under derivative financial instruments in
the balance sheet.


F-23


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








15.
            Financial
      Instruments (continued)




Effective January 1, 2008, the
Company adopted Statement No. 157. The Statement clarifies the definition
of fair value, prescribes methods for measuring fair value, establishes a fair
value hierarchy based on the inputs used to measure fair value and expands
disclosures about the use of fair value measurements. In accordance with FSP
157-2, we will defer the adoption of Statement No. 157 for our nonfinancial
assets and nonfinancial liabilities, except those items recognized or disclosed
at fair value on an annual or more frequently recurring basis, until
January 1, 2009. The adoption of Statement No. 157 did not have an
impact on our fair value measurements.




The following tables present ourliabilitiesthat are measured at fair value on a
recurring basis and are categorized using the fair value hierarchy. The fair
value hierarchy has three levels based on the reliability of the inputs used to
determine fair value.






Total
                
                Quoted Prices
                  in
      Active
                  Markets for
                  Identical
      Assets
                  (Level
      1)
                
                Significant
                  Other
                  Observable
                  Inputs
                  (Level
      2)
                
                Significant
                  Unobservable
                  Inputs
                  (Level
      3)2007
                  LiabilitiesInterest
      rate swap
                  contracts
                
                $5,936
                
                $
      —
                
                $5,936
                
                $
      —2008
                  LiabilitiesInterest
      rate swap
                  contracts
                
                $12,451
                
                $
      —
                
                $12,451
                
                $
      —






The Company's derivative instruments are
valued using pricing models and the Company generally uses similar models to
value similar instruments. Where possible, the Company verifies the values
produced by its pricing models to market prices. Valuation models require a
variety of inputs, including contractual terms, market prices, yield curves,
credit spreads, measures of volatility, and correlations of such inputs. The
Company's derivatives trade in liquid markets, and as such, model inputs can
generally be verified and do not involve significant management judgment. Such
instruments are typically classified within Level 2 of the fair value
hierarchy.


F-24


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








16.
            Changes in Assets and
      Liabilities








Year ended December
      31,2006
                    
                    
                    2007
                    
                    
                    2008(Increase) decrease in:Trade
      receivables
                    
                    
                    (1,784
                    )
                    
                    
                    (259
                    )
                    
                    
                    (1,332
                    )Other
      receivables
                    
                    
                    (112
                    )
                    
                    
                    (861
                    )
                    
                    
                    (1,256
                    )Inventories
                    
                    
                    (851
                    )
                    
                    
                    (473
                    )
                    
                    
                    745Prepaid
      expenses
                    
                    
                    183
                    
                    
                    
                    (1,343
                    )
                    
                    
                    714Due from managing
      agent
                    
                    
                    (360
                    )
                    
                    
                    (370
                    )
                    
                    
                    654Due from/to related
      parties
                    
                    
                    (1,202
                    )
                    
                    
                    3,089
                    
                    
                    
                    (643
                    )Increase (decrease) in:Accounts payable,
      trade
                    
                    
                    7,230
                    
                    
                    
                    (3,405
                    )
                    
                    
                    (4,822
                    )Accrued
      liabilities
                    
                    
                    4,409
                    
                    
                    
                    (1,992
                    )
                    
                    
                    2,479Deferred
    income
                    
                    
                    (1,216
                    )
                    
                    
                    344
                    
                    
                    
                    (484
                    )6,297
                    
                    
                    
                    (5,270
                    )
                    
                    
                    (3,945
                    )













17.
            Commitments and Contingent
      Liabilities








(i)Rental agreement




The Company has entered into two office
rental agreements with a related party, a company with common ultimate
beneficial stockholders, each at a monthly rental of Euro 4,000 plus stamp
duties, with duration until November 2015 and September 2016
respectively.





The committed rent payments as of
December 31, 2008 are:





2009
                    1472010
                    1542011
                    1622012
                    1702013
                    1782014
      and thereafter
                    452TOTAL
                    1,263





(ii) Management
agreements




Technical Ship ManagementAgreements




Five vessel-owning subsidiaries have
technical ship management agreements with International Tanker Management
Limited (''ITM'') based in Dubai. ITM and the vessel-owning companies of M/T
Altius, M/T Fortius, M/T High Land, M/T High Rider and M/T Ostria have entered into annual management
agreements with ITM, which are cancellable by either party with two months
notice.The agreed annual management fees for 2009 are $145 for two of
the vessels and $175 for three of the vessels.M/T Chinook has a technicalship management agreement
with Ernst Jacob Ship management GmbH (''Ernst Jacob'').The agreed
annual management fee for 2009 is EURO 149,650.




F-25


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








17.
            Commitments and Contingent
      Liabilities (continued)







(ii) Management agreements
(continued)




Commercial
Ship Management Agreements




Magnus
Carriers Corporation, (''Magnus Carriers''), a related party, a company with
common ultimate beneficial stockholders, provided the ship-owning companies of
M/T Altius, M/T Fortius, M/T High
Land, M/T High Rider, M/T Ostria and M/T Chinookwith non-exclusive
commercial management services through commercial management agreements entered
into in October 2007. These agreements were cancelled by the Company effective
May 1, 2009.  See note 19 for the terms of the agreements.




Contingencies





The Company is involved in various
disputes and arbitration proceedings arising in the ordinary course of business.
Provisions have been recognized in the financial statements for all such
proceedings where the Company believes that a liability may be probable, and for which the amounts are
reasonably estimable, based upon facts known at the date the financial
statements were prepared. Other than those listed below, there are no material
legal proceedings to which the Company is a party other than routinelitigation incidental to the Company's
business:








·
            The Charterers of the vessel
      Altius notified the Company in October 2008 of their intention to pursue
      the following claims and notified the appointment of an arbitrator in
      relation to them:





a)
            Damages suffered by sub-charterers
      of the vessel in respect of remaining on board cargo at New York in
      September 2007;


b)
            Damages suffered by sub-charterers
      of the vessel as a result of a change in management and the
      consequent dispute regarding oil major approval  from October
      2007;


c)
              Damages suffered by sub-charterers of
      the vessel resulting from a grounding at Houston in October
      2007.


In May 2008, the Company was forwarded a
claim from the vessel's sub-charterers to the Charterers in respect of (c), for
an amount of $0.75 million. No details of heads of claim or quantum have
been received for (a) and (b).





·
            The Charterers of the vessel
      Fortius notified the Company in October 2008 of their intention to pursue
      the following claims, and notified the appointment of an arbitrator in
      relationto
      them:




a)
              Damages as a result of a change in
      management and the consequent dispute regarding oil major approval from
      October 2007;
 b)
              Damages resulting from the
      creation of Hydrogen Sulphide in the vessel's tanks at two ports in the
      USA.


These claims arise from claims from
sub-charterers to
Charterers. The Charterers forwarded to the Company the sub-charterers
notification of the details of these claims whereby the sub-charterers seek
indemnification of $2.2 million in relation to head (a) and $0.9 million in
relation to head (b).





·
            A notification from the Charterers of
      the vessel Ostria was received in November 2008, for a potential claim
      amounting to $0.8 million in respect of loss of time, damage to cargo and
      consequential losses caused by a leakage of cargo, during loading in
      September2008.No further actions have been
      pursued by the Charterers.





As of December 31, 2008, no amount has
been accrued in relation to the aforementioned contingencies. Based upon facts
known at the date of issuance of the consolidated financial statements,
Management cannot assess
the likelihood of the outcome for these contingencies.


F-26


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








17.
            Commitments and Contingent
      Liabilities (continued)







Contingencies(continued)





All prior years contingencies have been
resolved as follows:





1.
            A settlement of $0.8 million was
      agreed in July 2008, with Trafigura Beheer BV, the charterers of the
      vessel Ostria, against an initial claim of $1.5 million relating to
      vessel's out of service time. This amount was paid from a cash deposit of
      $1.5 millionwhich was deposited by Magnus
      Carriers as security for the claim and the remaining funds were returned
      to Magnus Carriers.





2.
            A settlement of $0.8 million was
      agreed in March 2009, with ST Shipping, the charterers of the vessel
      Arius, against an initialclaim of $1.3 million arising
      under the charter party. The settlement amount has been accrued in the
      consolidated financial statements for the year ended December 31, 2008,
      and is included in the vessel operating
  expenses.





The
Company accrues for the cost of environmental liabilities when management
becomes aware that a liability is probable and is able to reasonably estimate
the probable exposure. Currently, management is not aware of any such claims or
contingent liabilities, which should be disclosed, or for which a provision
should be established in the accompanying consolidated financial statements. The
Company's protection and indemnity (P&I) insurance coverage for pollution is
$1 billion per vessel per incident.








18.
            Taxation








The Company is not subject to tax on
international shipping income in its respective jurisdictions of incorporation
or in the jurisdictions in which their respective vessels are registered.
However, the vessel-owning companies' vessels are subject to tonnage taxes, which have been included in
the vessel operating expenses in the accompanying statements of
income.





Pursuant to the U.S. Internal Revenue
Code (the "Code"), U.S.-source income from the international operation of
vessels is generally exempt fromU.S. tax if the company operating the
vessels meets certain requirements. Among other things, in order to qualify for
this exemption, the company operating the vessels must be incorporated in a
country which grants an equivalent exemption from income taxesto U.S.
corporations.





All of the Company's ship-operating
subsidiaries satisfy these initial criteria. In addition, these companies must
be more than 50% owned by individuals who are residents, as defined, in the
countries of incorporation or another foreign country that grants an equivalent
exemption to U.S. corporations. These companies also currently satisfy the more
than 50% beneficial ownership requirement. In addition, should the beneficial
ownership requirement not be met, the management of the Company believes that by virtue of a
special rule applicable to situations where the ship operating companies are
beneficially owned by a publicly traded company like the Company, the more than
50% beneficial ownership requirement can also be satisfied basedon the trading volume and the
anticipated widely-held ownership of the Company's shares, but no assurance can
be given that this will remain so in the future, since continued compliance with
this rule is subject to factors outside of the Company's control.


F-27


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)








19.
            Transactions Involving Related
      Parties





(a)
            Amounts paid to Magnus Carriers
      Corporation





1.
            Management services and
      commissions


Magnus Carriers Corporation, a related
party, a company with common ultimate beneficial stockholders, provided
commercial management services to certain Group vessel-owning companies at a
commission of 1.25% of hires and freights earned by the vessels orfees of $7 per month per vessel where no
1.25% commission was payable. In addition Magnus Carriers was entitled
commission of 1% on the sale or purchase price in connection with a vessel sale
or purchase. Until November 2008, Magnus Carriers also provided technical management services for certain
vessel-owning companies.





During 2008 the Company paid to Magnus
Carriers commissions and fees in respect of the commercial, technical management
services and commission on the sale of vessels, this amounting to
$1.7million (2007: $2.2
million, 2006: $1.8 million) (figures include continuing and
discontinuing operations).





2.
            Contributions under management
      agreements


During the year ended December 31, 2008
the Company received $1.4 million (2007:$6.1 million, 2006:$6.5 million) from Magnus Carriers under
the ship-management cost-sharing agreements for vessel operating expenses as
terminated. The Company also received during the year ended December 31, 2008 an
amount of $0.6 million (2007 $1.4 million and 2006 $0.2 million) for special survey and dry-docking
amortization (figures
include continuing and discontinuing operations).





Crewing


Part of the crewing for the Company was
undertaken by Magnus Carriers, until May 2008, through a related entity,
Poseidon Marine Agency.  Manning fees paid in 2008 amounted to $0.01
million (2007: $0.1 million, 2006: $0.3 million) (figures include continuing and discontinuing
operations).





3.
            Rental of
      equipment


The vessel owning companies of MSC Oslo
and Saronikos Bridge entered into an agreement with Magnus Carriers each for the
rent of a deck generator for its vessel. These agreements were terminated in2008 and the vessel-owning
companies purchased the deck generators from Magnus Carriers. Total fees paid to
Magnus Carriers in 2008 amounted to $0.27 million (2007:$0.22 million, 2006:$0.1
million) (figures include
continuing and discontinuing operations).








(b)
            Amounts paid to other related
      parties





During 2005 and 2007, the Company
entered into two rental agreements for its office space in Athens, with a
related party, a company with common ultimate beneficial stockholders. Rent paid
in 2008 amounted to $0.15
million (2007 $0.08 million and 2006 $0.06 million).





In 2008, the Company paid a commission
on the sale of the vessel Arius of $0.2 million to a brokerage firm of which one
of the former Company's directors is a shareholder.





(c)     
   Amounts due (to)/ from related parties





Amounts due (to)/from related parties
are as follows:





Year ended December
      31,2007
                                
                                
                                2008Magnus Carriers
      Corporation
                                
                                
                                (805
                                )
                                
                                
                                12Other
                                
                                
                                211
                                
                                
                                
                                37Total
                                
                                
                                (594
                                )
                                
                                
                                49


F-28


ARIES
MARITIME TRANSPORT LIMITED


(All
amounts expressed in thousands of U.S. Dollars except where otherwise
specified)


Notes
to the Consolidated Financial Statements (continued)





19.
            Transactions Involving Related
      Parties (continued)





(d) Officers and directors
fees paid





During
2008, we paid our officers and directors aggregate compensation of approximately
$1,036, $839 in 2007 and $619 in 2006. In addition, stock-based compensation
costs in 2008 and 2007 were $1,083 and $1,232, respectively. In addition, each
director will be reimbursed for out-of-pocket expenses incurred while attending
any meeting of the Board of Directors or any board committee. This amounted to
$79 in 2008, $169 in 2007 and $175 in 2006.




20.
            Discontinued
      operations





During 2008, the Company sold two
containers vessels, MSC Oslo and Energy 1, and one product tanker, Arius,
to  an unrelated companies (refer to note 6). The Company determined
that the sale of these vessels met the requirements of Financial Accounting
Standards Board Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets (and related
interpretations, including EITF Issue No. 03-13)" astheir operations and
cash flows would be eliminated from the ongoing operations of the Company. As a
result of their disposal the Company would not have continuing involvement in
the operation of these vessels following their disposal,  and accordingly, the
revenues and expenses of these vessels are reflected as discontinued operations
in the Company's
consolidated statements of operations for the periods
presented.





The
following table represents the revenues and net income from discontinued
operations:





Year ended December
      31,2006
                  
                  
                  2007
                  
                  
                  2008Operating
      Revenues
                  
                  
                  17,852
                  
                  
                  
                  18,343
                  
                  
                  
                  6,450Net Income / (Loss) (including
      gain on sale of vessels $13,569 for December 31,
      2008)
                  
                  
                  (4,970
                  )
                  
                  
                  (6,872
                  )
                  
                  
                  9,234





21.     Subsequent events





(a)
            In January 2009, Seine Marine Ltd
      and Jubilee Shipholding S.A, vessel owning companies of Seine and Ocean
      Hope respectively, terminated their technical ship management agreement
      with Wilhelmsen Ship Management (formally named Barber ship management
      Singapore Pte Ltd). Technical ship
      management for these vessels was undertaken by AMT
      Management.





(b)
            In January 2009,Makassar Marine Ltd,vessel owning company of
      Saronikos Bridge, terminated its technical ship management agreement with
      Wilhelmsen Ship Management (formally named Barber ship management
      Singapore Pte Ltd). Technical ship management for the vessel was
      undertaken by AMT Management.





(c)
            In April 2009, the Company's
      lenders notified the Company through the Agent that the minimum hull cover
      ratio covenant of 140% is not met and requested for the necessary remedy
      in accordance with the provisions of the loan
      agreement.








(d)
                On
      June 10, 2009, we signed a memorandum of agreement (MOA) for the sale of
      Ocean Hopefor a sale price of
      $2.4 million. We expect to deliver the vessel to its new owners between
      June 29 and July 15, 2009.(e)
                On
      June 24, 2009, the Company signed a non-binding letter of intent (LOI)
      with Grandunion, a company controlled by Michael Zolotas and Nicholas
      Fistes, that contemplates, among other things, the acquisition of three
      Capesize drybulk carriers with an approximate net asset value of $36.0
      million in exchange for 15,977,778 newly issued shares of the Company and
      a change of control of the Company's board of
directors.Upon
      closing the transaction, Mr. Fistes would serve as the Chairman of the
      Company's board of directors, and Mr. Zolotas would serve as a member of
      the Company's board of directors and President. Grandunion would also
      designate the Company's Chief Financial Officer and four out of seven
      members of the Company's board of directors (including Messrs. Fistes and
      Zolotas).The
      letter of intent is subject to a number of conditions, including (a) the
      receipt of a commitment letter from an investment bank for a fully
      underwritten private issuance of $145.0 million aggregate principal amount
      of 7% Senior Unsecured Convertible Notes due 2014 (the "Notes"),
      convertible into common shares at a conversion price of $0.75 per share,
      and the proceeds of which would be used primarily to fund vessel
      acquisitions and partially repay existing indebtedness; and (b) obtaining
      certain amendments to the Company's existing senior credit
    facility.The
      letter of intent obligates the parties to negotiate in good faith, but
      does not obligate them to complete definitive agreements or to close the
      transaction. The letter of intent provides for a binding 60-day
      exclusivity period, during which Grandunion may complete due diligence and
      the Company and Grandunion may negotiate definitive agreements, and a
      $3,000,000 break-up fee payable to Grandunion if the Company accepts an
      offer from a third party during the exclusivity period and enter into a
      definitive agreement with that party. The exclusivity period will
      terminate if Grandunion is unable to procure a signed commitment letter
      within 15 days of the date of the letter of intent to fully underwrite the
      $145.0 million in principal amount of the Notes and within 30 days of the
      date of the letter of intent a firm commitment from the Company's
      syndicate of lenders to make certain amendments to the Company's existing
      credit facility. The letter of intent may also be terminated if no
      definitive agreement has been entered into by August 31,
      2009.The
      letter of intent provides that the exclusivity period will be
      automatically extended if the parties sign a definitive agreement, which
      shall contain customary "superior proposal" provisions and break-up
      fees.The
      letter of intent provides that any definitive agreement would be subject,
      among other things, to customary closing conditions, to the execution of
      ancillary agreements and to:





·
              Entry
      by Rocket Marine into a voting agreement in Grandunion's favor;
    and·
              Transfer
      by Grandunion to Rocket Marine of 2,666,667 common shares in consideration
      of Rocket Marine's entry into a voting
  agreement.











SK 23248 0002 996350
v8


F-29