##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, DC 20549
  FORM 20-F
  o

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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT
    OF 1934For the fiscal year ended December 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE
    ACT OF 1934For the transition period
    from          toORo

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
  NEWLEAD HOLDINGS LTD.
 (Exact name of Registrant as
    specified in its charter)
    (Translation of Registrants
    name into English)
  Bermuda
 (Jurisdiction of incorporation or
    organization)
  83 Akti Miaouli & Flessa Str., Piraeus Greece 185 38
 (Address of principal executive
    offices)
  Mr. Michail S. Zolotas
 83 Akti Miaouli & Flessa Str.
 Piraeus Greece 185 38
 Tel:  + 30 213 014 8600, Fax: + 30 213 014 8609
 E-mail: mzolotas@newleadholdings.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 shares, $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      Indicate by check mark if the registrant is a well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act. o x
  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 x
  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 o
  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 o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer x  Indicate by check mark which basis of accounting the
    registrant has used to prepare the financial statements included
    in this filing:
 U.S. GAAP þ
    International Financial Reporting Standards as issued
    Other
    o o
  If Other has been checked in response to the
    previous question, indicate by check mark which financial
    statement item the registrant has elected to follow.
 Item 17  o     Item 18  o
  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 x




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##### 





TABLE OF
    CONTENTS
   
 PageITEM 1.


IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS


4ITEM 2.


OFFER STATISTICS AND EXPECTED TIMETABLE


4ITEM 3.


KEY INFORMATION


4ITEM 4.


INFORMATION ON THE COMPANY


26ITEM 4A.


UNRESOLVED STAFF COMMENTS


46ITEM 5.


OPERATING AND FINANCIAL REVIEW AND PROSPECTS


46ITEM 6.


DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


71ITEM 7.


MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS


76ITEM 8.


FINANCIAL INFORMATION


79ITEM 9.


THE OFFER AND LISTING


81ITEM 10.


ADDITIONAL INFORMATION


81ITEM 11.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


93ITEM 12.


DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES


93ITEM 13.


DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES


94ITEM 14.


MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS


94ITEM 15.


CONTROLS AND PROCEDURES


94ITEM 16A.


AUDIT COMMITTEE FINANCIAL EXPERT


95ITEM 16B.


CODE OF ETHICS


95ITEM 16C.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


95ITEM 16D.


EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES


95ITEM 16E.


PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASES


95ITEM 16F.


CHANGE IN REGISTRANTS CERTIFYING
    ACCOUNTANT


95ITEM 16G.


CORPORATE GOVERNANCE


95ITEM 17.


FINANCIAL STATEMENTS


97ITEM 18.


FINANCIAL STATEMENTS


97ITEM 19.


EXHIBITS


97EX-4.16EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2   2




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CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
      and/or
   3




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PART I
  Item 1.
    Identity
    of Directors, Senior Management and Advisers    Item 2.
    Offer
    Statistics and Expected Timetable    Item 3.
    Key
    Information    A.
    Selected
    Financial Data   4




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Successor



PredecessorOctober 14



January 1to



to


Year Ended


Year Ended


Year Ended


Year EndedDecember 31,



October 13,


December 31,


December 31,


December 31,


December 31,2009



2009


2008


2007


2006


2005(U.S. dollars in thousands except per share data and
    fleet data)Statement of Operations DataOperating revenues


14,096




33,564



56,519



55,774



45,973



30,535Vessel operating expenses


(6,530
)



(22,681
)


(19,798
)


(17,489
)


(12,780
)


(9,309
)Management fees


(315
)



(900
)


(1,404
)


(1,243
)


(1,110
)


(829
)General & administrative expenses


(12,025
)



(8,366
)


(7,816
)


(5,278
)


(4,029
)


(1,539
)Depreciation and amortization expenses


(4,844
)



(11,813
)


(15,040
)


(14,029
)


(9,318
)


(4,116
)Impairment charge







(68,042
)














Net operating (loss)/income from continuing operations


(14,659
)



(87,581
)


5,449



14,471



16,157



14,397Interest and finance expense, net


(23,996
)



(10,928
)


(15,741
)


(16,966
)


(13,463
)


(8,344
)Other income/(expenses), net







40



2



(11
)


(72
)


(148
)Net (loss)/income from continuing operations


(35,865
)



(95,448
)


(16,573
)


(5,936
)


1,644



6,645Net (loss)/income


(37,872
)



(125,764
)


(39,828
)


(8,733
)


2,199



14,771(Loss)/earnings per share (basic and diluted) continuing
    operations


(0.53
)



(3.32
)


(0.58
)


(0.21
)


0.06



0.29(Loss)/earnings per share (basic and diluted)


(0.56
)



(4.37
)


(1.39
)


(0.31
)


0.08



0.64Cash dividends declared per share











0.10



0.63



0.89



0.52Weighted average number of shares (basic and diluted)


67,067,239




28,750,295



28,634,186



28,478,850



28,416,877



23,118,466Balance Sheet Data (at year end)Cash and cash equivalents


106,255








4,009



12,444



11,612



19,248Restricted cash


403








8,510



39



3,242



10Total current assets


121,421








19,741



20,199



22,430



22,438Total assets


399,285








317,777



425,491



458,040



377,898Total current liabilities


54,212








251,489



311,997



29,622



21,356Current portion of long-term debt


14,240








223,710



284,800







Long-term debt


264,460
















284,800



183,820Total liabilities


326,809








252,261



318,372



325,452



222,217Total shareholders equity


72,476








65,516



107,119



132,588



155,681Other Financial Data (for year end)Net cash (used in)/provided by operating activities


(5,869
)



(3,945
)


2,901



17,581



24,215



36,974Net cash provided by/(used in) investing activities







2,216



61,083



(2,008
)


(101,815
)


(114,001
)Net cash provided by/(used in) financing activities


112,124




(2,280
)


(72,419
)


(14,741
)


69,964



90,941Net increase (decrease) in cash and cash equivalents


106,255




(4,009
)


(8,435
)


832



(7,636
)


13,914Cash dividends paid











(2,862
)


(17,970
)


(25,292
)


(14,776
)Fleet Data (at year end)Number of product tankers owned


9




9



9



10



10



8Number of container vessels
    owned(1)


2




2



3



5



5



5Number of dry bulk vessels owned


3




















     (1)
    
    Considered discontinued operations
    for all periods presented.  5




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Successor



PredecessorOctober 14



January 1to



to


Year Ended


Year Ended


Year Ended


Year EndedDecember 31,



October 13,


December 31,


December 31,


December 31,


December 31,2009



2009


2008


2007


2006


2005(All amounts in thousands of U.S. dollars, unless otherwise
    stated)NET (LOSS)/INCOME from continuing operations

$
(35,865
)


$
(95,448
)

$
(16,573
)

$
(5,936
)

$
1,644


$
6,645Plus Net interest expense/(income)


23,760




10,919



15,509



16,336



12,652



7,851Plus Depreciation and Amortization


4,844




11,813



15,040



14,029



9,318



4,116EBITDA(1)

$
(7,261
)


$
(72,716
)

$
13,976


$
24,429


$
23,614


$
18,612Plus Deferred Income (straight-line)


158




















Plus Claim provisions







3,730















Plus Impairment loss







68,042















Plus/(minus) Change in fair value of derivatives


(2,554
)



(3,012
)


6,515



4,060



1,788



(248
)Plus Doubtful receivables and bad debts







217



160











Plus Share  based compensation expense (including
    warrants valuation


7,898




793



1,083



1,232







ADJUSTED
    EBITDA(1)

$
(1,759
)


$
(2,946
)

$
21,734


$
29,721


$
25,402


$
18,364     (1)
    
    EBITDA represents net income from
    continuing operations, before net interest, taxes, depreciation
    and amortization. Adjusted EBITDA represents EBITDA before other
    non-cash items such as share-based compensation expense, claim
    provisions, doubtful receivables, impairment loss, change in
    fair value of derivatives, straight-line of revenue and the
    effect of the amortization of the deferred revenue due to the
    assumption of charters associated with certain vessels
    acquisitions. The Company uses Adjusted EBITDA because it
    believes that EBITDA is a basis upon which liquidity can be
    assessed and because it believes that EBITDA presents useful
    information to investors regarding the Companys ability to
    service and/or incur indebtedness. The Company also believes
    that EBITDA is useful to investors because it is frequently used
    by securities analysts, investors and other interested parties
    in the evaluation of companies in our industry. EBITDA and
    Adjusted EBITDA have limitations as analytical tools, and should
    not be considered in isolation or as a substitute for analysis
    of the Companys results as reported under U.S. GAAP. Some
    of these limitations are: (i) EBITDA does not reflect
    changes in, or cash requirements for, working capital needs; and
    (ii) although depreciation and amortization are non-cash
    charges, the assets being depreciated and amortized may have to
    be replaced in the future, and EBITDA does not reflect any cash
    requirements for such capital expenditures.  B.
    Capitalization
    and Indebtedness    C.
    Reasons
    for the Offer and Use of Proceeds    D.
    Risk
    Factors   6




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Industry
    Specific Risk Factors
  Charter rates for product tankers and dry bulk vessels have
    declined significantly and may decrease in the future, which may
    adversely affect our earnings.
        
    demand for oil and oil products;
    supply of oil and oil products;
    demand for dry cargoes such as coal and raw materials;
    demand for dry cargoes such as coal and raw materials;
    demand of energy in developing countries;
    continuing growth of industrialization in the emerging countries;
    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; 7




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
    currency exchange rates; and
    weather.    
    the number of newbuilding deliveries;
    the scrapping rate of older vessels;
    the price of steel and vessel equipment;
    changes in environmental and other regulations that may limit
    the useful lives of vessels;
    the number of vessels that are in or out of service; and
    port or canal congestion.        The downturns in the product tankers and dry bulk vessels
    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.
    and/or
 8




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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.
    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 value of our vessels may fluctuate, which may adversely
    affect our liquidity.
    
    general economic and market conditions affecting the shipping
    industry;
    competition from other shipping companies; 9




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
    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;
    availability of acquisition finance;
    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.    An
    over-supply of tanker capacity may lead to reductions in charter
    hire rates and profitability.
    An
    over-supply of dry bulk vessel capacity may lead to further
    reductions in charter hire rates and profitability.
  pick-up
 10




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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 shares to further decline.
  and/or
      Acts of
    piracy on ocean-going vessels have recently increased in
    frequency, which could adversely affect our business.
   11




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Fuel, or
    bunker prices, may adversely affect profits.
    We are
    subject to complex laws and regulations, including environmental
    regulations that can adversely affect the cost, manner or
    feasibility of doing business.
         12




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clean-up
        Climate
    change and government laws and regulations related to climate
    change could negatively impact our financial
    condition.
   13




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If we
    purchase any newbuilding vessels, delays, cancellations or
    non-completion of deliveries of newbuilding vessels could harm
    our operating results.
      
    quality or engineering problems;
    changes in governmental regulations or maritime self-regulatory
    organization standards;
    work stoppages or other labor disturbances at the shipyard;
    bankruptcy or other financial crisis of the shipbuilder;
    a backlog of orders at the shipyard;
    political or economic disturbances;
    weather interference or catastrophic event, such as a major
    earthquake or fire;
    requests for changes to the original vessel specifications;
    shortages of or delays in the receipt of necessary construction
    materials, such as steel;
    inability to finance the construction or conversion of the
    vessels; or
    inability to obtain requisite permits or approvals.    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.
   14




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Our
    vessels may suffer damage due to the inherent operational risks
    of the seaborne transportation industry and we may experience
    unexpected dry-docking costs, which may adversely affect our
    business and financial condition.
    Our
    insurance may not be adequate to cover our losses that may
    result from our operations, which are subject to the inherent
    operational risks of the seaborne transportation
    industry.
        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 on the claim records
    of other members of the protection and indemnity
    associations.
     15




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Labor
    interruptions could disrupt our business.
    Maritime
    claimants could arrest our vessels, which would interrupt our
    business.
    Governments
    could requisition our vessels during a period of war or
    emergency without adequate compensation.
    A failure
    to pass inspection by classification societies could result in
    one or more vessels being unemployable unless and until they
    pass inspection, resulting in a loss of revenues from such
    vessels for that period and a corresponding decrease in
    operating cash flows.
        We
    operate our vessels worldwide and, as a result, our vessels are
    exposed to international risks that could reduce revenue or
    increase expenses.
   16




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Terrorist
    attacks and international hostilities can affect the seaborne
    transportation industry, which could adversely affect our
    business.
      Company
    Specific Risk Factors
  Under the
    terms of our facility agreement, certain financial covenants
    (excluding working capital and minimum liquidity) have been
    waived by our lenders until at least April 2012 with respect to
    some covenants and until October 2012 with respect to others. If
    we are unable to succeed in implementing our business plan, we
    could be in default under the facility agreement when such
    covenants come into effect. Such event could have a material
    adverse effect on our operations and our ability to raise new
    capital.
    We have
    incurred high levels of debt and with the refinancing of our
    credit facility and issuance of the 7% Notes, we are
    heavily leveraged. Defaults or other violations of the
    provisions of our various debt instruments could have a material
    adverse effect on our business.
   17




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The
    market value of our vessels have declined and may further
    decrease, which could lead to the loss of our vessels and/or we
    may incur a loss if we sell vessels following a decline in their
    market value.
    For the
    periods from January 1, 2009 to October 13, 2009 and
    from October 14, 2009 to December 31, 2009, we were
    dependent upon three significant charterers for the majority of
    our revenues. When the charter agreements expire or terminate,
    we will need to find new employment for the affected vessels in
    the currently depressed charter market, which may adversely
    affect our results of operations and cash flows.
    Our
    charterers may terminate or default on their charters, which
    could adversely affect our results of operations and cash
    flow.
         18




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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.
    Members
    of our management team continue to own and operate Grandunion
    Inc., a competitor, and may have conflicts of interest with
    respect to their fiduciary duties to both companies.
    Furthermore, they may not be able to devote sufficient time to
    our operations.
    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.
         19




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We are
    currently dependent, in part, upon third-party managers for the
    management of our vessels. However, it is our intention to
    consolidate the management of almost all of our vessels in-house
    in the future.
    and/or
    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 tankers involves certain unique operational
    risks.
     20




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We may
    not be able to grow or effectively manage our growth.
    
    identify vessels for acquisition;
    consummate acquisitions;
    integrate acquired vessels successfully with our existing
    operations;
    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.      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.
    
    the cost of our labor and materials;
    the cost of suitable replacement vessels;
    customer/market requirements;
    increases in the size of our fleet; and
    governmental regulations and maritime self-regulatory
    organization standards relating to safety, security or the
    environment.   21




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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.
    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.
    Risks
    associated with operating ocean-going vessels could affect our
    business and reputation, which could adversely affect our
    revenues and share price.
    
    marine disaster;
    environmental accidents;
    cargo and property losses or damage;
    business interruptions caused by mechanical failure, human
    error, war, terrorism, political action in various countries,
    labor strikes or adverse weather conditions; and
    piracy.    Exposure
    to currency exchange rate fluctuations will result in
    fluctuations in our cash flows and operating results.
   22




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Our
    incorporation under the laws of Bermuda may limit the ability of
    our shareholders to protect their interests.
    If the
    recent volatility in LIBOR continues, it could affect our
    profitability, earnings and cash flow.
  cost-of-funds
  It may
    not be possible for investors to enforce U.S. judgments against
    us.
    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.
   23




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We may
    have to pay tax on
    U.S.-source
    income, which would reduce our earnings.
  U.S.-source
  U.S.-source
  U.S.-source
  Risks
    Relating to Our Common Shares
  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.
     24




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180-day 180-day
  Michail
    S. Zolotas, our Chief Executive Officer, President and Deputy
    Chairman, beneficially owns approximately 76% of our outstanding
    common shares and as a result, he is able to influence the
    outcome of shareholder votes.
    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.
    
    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; 25




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
    requiring Grandunion to maintain legal and beneficial ownership
    of not less than 10% of the issued and outstanding share capital
    of the Company;
    requiring Nicholas Fistes and Michael Zolotas to be at any given
    time the beneficial owners of at least 50.1% of the voting share
    capital of Grandunion;
    requiring Nicholas Fistes and Michael Zolotas to remain at any
    given time the Chairman, and the President and Chief Executive
    Officer of the Company, respectively; 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.    Item 4.
    Information
    on the Company  A.
    History
    and Development of the Company  (30) 213-014-8600.
  
    Creating a diversified, balanced
    fleet.  The Company has created a diversified
    business model across two major shipping asset sectors: dry bulk
    carriers and refined product tankers. This advantageous blend of
    vessels generates a revenue mix that can help the company
    mitigate rate fluctuations while providing stable cash flow
    during shipping cycles.
    Executing an accretive fleet
    expansion.  The Company will continue to
    deploy its available cash to grow the fleet opportunistically
    across these two asset classes, utilizing its entrenched
    industry network, to build a stable and core fleet of 30+
    vessels and to become an established maritime leader.
    Optimizing fleet through active chartering
    strategy.  NewLead employs a prudent
    chartering strategy, maintaining an optimum balance of period
    and spot charters, to ensure cash flow stability while providing
    for the opportunity to participate in market upswings. During
    certain periods, the Companys asset utilization and
    portfolio may favor one particular shipping sector (e.g.,
    product tankers) based on strategic chartering decisions and
    market conditions. Overall, the Companys aim is to build
    and maintain long-term relationships with its well-established
    and diversified customer base to grow sustainable revenues while
    limiting counterparty risk.
    Achieving
    best-in-class
    commercial and technical excellence.NewLead intends to
    bring all aspects of commercial and technical ship management
    in-house to improve overall operational efficiency while
    providing a scalable platform to support future growth.
    Furthermore, achieving this strategic objective should benefit
    the Company by increasing operating days, reducing operating
    costs and enhancing cash flow while maintaining fleet quality,
    safety and reliability. implement a new business strategy that
    includes growing its two business segments (wet and dry),
    building a core fleet of owned and chartered-in vessels, as well
    as creating an appropriate revenue mix to achieve a stable cash
    flow. 26




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##### Table of Contents



Recapitalization
    and Recent Developments
  $400.0
    Million Recapitalization
    
    Grandunion transferred 100% ownership in three dry bulk carriers
    (which transaction included assets with a carrying value of
    approximately $75.3 million and the assumption of a
    facility of $37.4 million, for a net value of
    $35.0 million) to the Company in exchange for 18,977,778
    newly issued common shares of the Company. The details of the
    three new dry bulk vessels and their related charters are set
    forth in the below table:  Name


Type


DWT


Charter-out rate per day (net)

Charter Term (years)China



Capesize



135,364


$12,753

Through March 2017 (maximum option)Australia



Capesize



172,972


$20,391

Through January 2012 (maximum option)Brazil



Capesize



151,738


$28,985 1st/2nd year $26,180 balance years, all plus profit
    sharing above $26,600*.

February 2015     *
    
    Profit calculation: 85% of the Cape
    Spot 4 TCE Avg. minus $26,600  
    A voting agreement between Grandunion and Rocket Marine was
    entered into for which Grandunion transferred 2,666,667 of the
    Companys common shares to Rocket Marine, a company
    controlled by two of our former directors and principal
    shareholders, in exchange for Grandunions control over the
    voting rights relating to the shares owned by Rocket Marine and
    its affiliates. There are 17,563,544 common shares subject to
    the voting agreement. The voting agreement is in place for as
    long as Rocket Marine owns the common shares. The voting
    agreement contains a
    lock-up
    period until December 31, 2011, which, in the case of
    transfer or sale by Rocket Marine, requires the approval of
    Grandunion.
    The Company issued $145.0 million in aggregate principal
    amount of the 7% Notes due 2015. The 7% Notes are
    convertible into common shares at a conversion price of $0.75
    per share, subject to adjustment for certain events, including
    certain distributions by the Company of cash, debt and other
    assets, spin offs and other events. The 7% Notes are
    convertible at any time and if fully converted would result in
    the issuance of approximately 193.3 million newly issued
    common shares. The Investment Bank of Greece owns $100,000
    outstanding principal amount of the 7% Notes and has
    received warrants to purchase up to 5 million common shares
    at an exercise price of $2.00 per share, with an expiration date
    of October 13, 2015. The remainder ($144.9 million) is
    owned by Focus Maritime Corp., a company controlled by
    Mr. Zolotas, the Companys President and Chief
    Executive Officer. The proceeds of the 7% Notes were used
    in part to repay, in an amount of $20.0 million, a portion
    of existing indebtedness and the remaining proceeds are expected
    to be used to fund vessel acquisitions and for other general
    corporate purposes. In November 2009, $20.0 million of the
    7% Notes were converted into approximately
    26.7 million common shares. The $125.0 million
    outstanding principal amount of our 7% Notes is reflected
    as $41.4 million on our December 31, 2009 balance
    sheet due to the netting impact of a beneficial conversion
    feature (discount) as more fully described below under the
    caption Item 5  Operating and
    Financial Review and Prospects  Liquidity and
    Capital Resources  Indebtedness and in
    Note 12 of the Consolidated Financial Statements. We
    estimate as of March 18, 2010, the net outstanding amount
    for balance sheet purposes is approximately $44.5 million.
    The Companys existing syndicate of lenders entered into a
    new $221.4 million facility agreement, dated
    October 13, 2009, referred to herein as the Facility
    Agreement, by and among the Company and the banks
    identified therein in order to refinance the Companys
    existing revolving credit facility. The Company applied
    $20.0 million of the proceeds of the issuance of the
    7% Notes to reduce the outstanding balance under the
    Facility Agreement to $201.4 million, and the Facility
    Agreement has 27




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##### Table of Contents



been structured with $38.0 million payable in 19 quarterly
    installments of $2.0 million each, and a
    $163.4 million repayment due in October 2014. As a result
    of the refinancing new financial covenants were put in place.
    Except for working capital and minimum liquidity covenants, all
    other covenants will become effective in a period ranging from
    30 to 36 months from the execution of the Facility
    Agreement to allow a sufficient period of time for new
    management to implement its business strategy. Subsequent to the
    year end, the Company applied $9.0 million of the proceeds
    from the disposal of its two container vessels to reduce the
    outstanding credit facility balance. As a result, the quarterly
    installment has been reduced to approximately $1.9 million.
    As of March 18, 2010, there was $190.4 million
    outstanding under the Facility Agreement.  
    The Company assumed a $37.4 million credit facility in
    relation to the three vessels transferred to it as part of the
    recapitalization. The $37.4 million credit facility is
    payable in 20 consecutive quarterly installments of
    $1.56 million and a $6.2 million repayment due in
    October 2014. Such facility bears a margin of 3.5% above LIBOR.
    Subsequent to its assumption, this facility has been, and
    continues to be, periodically paid down and drawn upon to
    minimize the Companys cost of capital. The Company pays a
    1% commitment fee on the undrawn amount. As of March 18,
    2010, there was no outstanding balance under this facility.
    The Company underwent a complete change in leadership, resulting
    in the reconstitution of the board of directors and the
    appointment of new senior management. The new management of the
    Company is led by Nicholas G. Fistes as Executive Director
    (Chairman), Michail S. Zolotas as Executive Director (Deputy
    Chairman), President and Chief Executive Officer, and Allan L.
    Shaw as Executive Director and Chief Financial Officer.  Deleveraging
    Activities
      Name
    Change and Amended Bye-Laws
    Fleet
    Expansion and Technical Management
   28




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
    ISO 9001:2000 from American Bureau of Shipping for a quality
    management system, by consistently providing a service that
    meets customer and applicable statutory and regulatory
    requirements, and enhancing customer satisfaction through, among
    other things, processes for continual improvement.
    ISO 14001:2004 from American Bureau of Shipping for
    environmental management, including policy and objectives
    targeting legal and other requirements.
    Safety, Quality and Environmental accreditation from American
    Bureau of Shipping.    Commercial
    and Other Details
  CharterPartyExpectedCharter

Charter Party

End DateYear





Rate



Charter Party


Party

Expected

(IncludingVessel

Built


DWT


($)

Commissions

Commencement


Duration

End Date

Max. Option)Drybulk Vessels CapesizeGrand Ocean


1990



149,498


15,000 1st year; 16,000
    2nd year;

    16,000
    3rd

    option year

3.75% + 0.25%


2/10/2009


2 years +/- 60 days

Min. 12/10/2010 to Max. 4/10/2011


4/10/2012Grand Venetico


1990



134,982


16,500
    1st year;

    18,500 balance; 18,500 option six months

3.75% + 0.25%


3/1/2009


Abt. 2.5 years +/- 60 days

Min. 7/10/2011 to Max. 11/10/2011


5/10/2012PanamaxesGrand Victoria


2002



75,966


18,000

3.75% + 1.25% + 1.25%


11/22/2009


Abt. 11 to abt. 13 mos.

Min. 10/7/2010 to Max. 1/6/2011


1/6/2011Grand Rodosi


1990



68,788


10,200 net; plus profit sharing 50/50*

0.25%


7/22/2009


Abt. 3 years +/- 60 days

Min. 5/23/2012 to Max. 9/20/2012


9/20/2012Product Tankers Handy sizeHiona


2003



37,337


19,500 plus profit sharing

1.25% + 1.25%


4/18/2008


36 months +/- 30 days Charterers option

Min. 3/18/2011 to Max. 5/18/2011


5/18/2011Hiotissa


2004



37,330


19,500 plus profit sharing

1.25% + 1.25%


5/6/2008


36 months +/- 30 days Charterers option

Min. 4/6/2011 to Max. 6/6/2011


6/6/2011     *
    
    Profit calculation: 86% of Cape
    Spot 4 TCE Avg. minus $10,200.  Exit from
    the Container Market
    New
    Charter Party Agreement
   29




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##### Table of Contents



Acquisition
    of Kamsarmaxes
      NASDAQ
    Listing Notification
    180-day
 30




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##### Table of Contents



B.
    Business
    Overview  Our
    Fleet
    Net DailyCharterVessel Name

Size


Year Built


Charter Expiration

Hire RateProduct Tanker VesselsStena Compass


72,750 dwt



2006


August 2010


$18,232.50
(1)Stena Compassion


72,750 dwt



2006


December 2010


$18,232.50
(1)Newlead Avra (formerly Altius)


73,400 dwt



2004


Spot Market


Newlead Fortune (formerly Fortius)


73,400 dwt



2004


Spot Market


Nordanvind


38,701 dwt



2001


Spot Market


Chinook(2)


38,701 dwt



2001


Spot Market


Ostria


38,701 dwt



2000


Spot Market


High Land


41,450 dwt



1992


July 2010


$8,181.25High Rider


41,502 dwt



1991


Spot Market


Dry bulk VesselsBrazil


151,738 dwt



1995


February
    2015(3)


$28,985
(4)Australia


172,972 dwt



1993


January
    2012(3)


$20,391China


135,364 dwt



1992


March
    2017(3)


$12,753     (1)
    
    Bareboat charters, plus additional
    income under profit sharing provisions.(2)
    
    A memorandum of agreement
    (MOA) for the sale of the Chinook was signed on
    February 18, 2010. Gabriel Petrides, a former member of our
    board of directors, and an affiliate of Rocket Marine, one of
    our principal stockholders, is a principal of the purchaser of
    the Chinook.(3)
    
    Maximum option.(4)
    
    $28,985 for the first and second
    years, $26,180 all years thereafter, plus profit sharing (85% of
    the Cape Spot 4 TCE Avg. Minus $26,600).      
    China  Minimum five years, eight months 
    Maximum six years, seven months, plus an option to extend
    further by approximately 159 days due to dry-docking
    duration.
    Australia  Minimum one year and eight
    months  Maximum one year and ten months.
    Brazil  Minimum four years, seven months 
    Maximum four years, eleven months.   31




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Vessel
    Charters
  per-day
                 32




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##### Table of Contents



Fleet
    Management
        Crewing
    and Employees
        Seasonality
   33




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##### Table of Contents



The
    Product Tanker Industry
      Supply:
  
    The recent economic downturn has reduced the rate of new orders
    placed in this market segment. Considering the amount of product
    tankers that are on order, there are fears that oversupply of
    tonnage may occur in the near future. However, it is uncertain
    what percentage of the orders will finally materialize;
    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; and
    Major energy companies are selective in the employment of
    product tankers and have strict vetting standards for approval
    of vessels for trading.  Demand:
  
    For most of the prior years, 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, Russian Baltic and Caspian regions.  The Dry
    Bulk Shipping Industry
    
    Capesize vesselshave carrying capacities of more than
    85,000 dwt. These vessels generally operate along long haul iron
    ore and coal trade routes. There are relatively few ports around
    the world with the infrastructure to accommodate vessels of this
    size.
    Panamax vesselshave a carrying capacity of between
    60,000 and 85,000 dwt. These vessels carry coal, grains, and, to
    a lesser extent, minor bulks, including steel products, forest
    products and fertilizers. Panamax vessels are able to pass
    through the Panama Canal making them more versatile than larger
    vessels.
    Handymax vesselshave a carrying capacity of between
    35,000 and 60,000 dwt. These vessels operate along a large
    number of geographically dispersed global trade routes mainly
    carrying grains and minor bulks. Vessels below 60,000 dwt are
    sometimes built with on-board cranes enabling them to load and
    discharge cargo in countries and ports with limited
    infrastructure. 34




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##### Table of Contents




    Handysize vesselshave a carrying capacity of up to
    35,000 dwt. These vessels carry exclusively minor bulk cargo.
    Increasingly, these vessels have operated along regional trading
    routes. Handysize vessels are well suited for small ports with
    length and draft restrictions that may lack the infrastructure
    for cargo loading and unloading.    
    Kamsarmax: An approximately 82,000 dwt Panamax with increased
    length overall (the length of a vessel, referred to herein as
    LOA) of 229 meters (m), named for Port
    Kamsar in Equatorial Guinea.
    Postpanamax: An approximately 92,000 dwt vessel with
    increased LOA of 235m.
    Dunkirkmax: An approximately 175,000 dwt large Capesize with
    maximum LOA of 289m and a maximum beam (the width of a vessel,
    referred to herein as B) of 45m, named for the
    French ports eastern harbor lock at Dunkirk.
    Newcastlemax: An approximately 185,000 dwt large Capesize
    with a maximum B of 47m, named for the Australian port of
    Newcastle.
    Setouchmax: An approximately 205,000 dwt large Capesize (a
    very large bulk carrier or VLBC) with a
    low design draught of 16.10m and a maximum LOA of 299.9m, named
    for ports in the Setouch Sea in Japan.      Sources
    of applicable rules and standards
   35




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##### Table of Contents



Environmental
    and Other Regulations
        International
    Maritime Organization
   36




---



##### Table of Contents




    25-year old
    tankers must be of double-hull construction or of a mid-deck
    design with double-sided construction, unless:      
    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.    
    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.          
    the oil tanker conversion was completed before July 6, 1996; 37




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##### Table of Contents




    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.      
    crude oils having a density at 15 degrees Celsius
    (oC)

    higher than 900 kilograms per cubic meter
    (kg/m3);
    fuel oils having either a density at
    15oC

    higher than 900 kg/m3 or a kinematic viscosity at
    50oC

    higher than 180 square millimeters per second
    (mm2/s); or
    bitumen, tar and their emulsions.  o
    ship-to-ship
  3
 38




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##### Table of Contents



Ballast
    Water Requirements
    Air
    Emissions
      Safety
    Requirements
       39




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##### Table of Contents



Oil
    Pollution Liability
      United
    States Requirements
  U.S.
    Oil Pollution Act of 1990 and Comprehensive Environmental
    Response, Compensation and Liability Act
  clean-up
  clean-up
  
    natural resource damages and related assessment costs;
    real and personal property damages; 40




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##### Table of Contents




    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.  clean-up,
       41




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##### Table of Contents



20-year (1995-2015)
  
    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.      Additional
    U.S. Environmental Requirements
  and/or
 42




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##### Table of Contents



and/or
    European
    Union Restrictions
     43




---



##### Table of Contents



sub-standard
  double-hulled;
  Greenhouse
    Gas Regulation
    Vessel
    Security Regulations
    
    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
    compliance with flag state security certification requirements. 44




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##### Table of Contents



non-U.S. vessels
  International
    laws governing civil liability to pay compensation or
    damages
    Risk of
    Loss and Insurance
         45




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##### Table of Contents



Inspection
    by a Classification Society
    Competition
    C.
    Organizational
    Structure    D.
    Properties,
    Plants and Equipment    Item 4A.
    Unresolved
    Staff Comments    Item 5.
    Operating
    and Financial Review and Prospects   46




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##### Table of Contents



Overview
        
    Grow our diversified fleet through sourced networks at favorable
    terms;
    Implement a coherent charter strategy to achieve an optimal mix
    of spot charters, time charters and bareboat charters to smooth
    exposure to market cycles;
    Maintain cash flow stability with upside potential;
    Solidify a diverse customer base with established reliable
    charterers to reduce our counterparty risk;
    Bring in quality in-house technical managers to ensure efficient
    operations and optimum fleet utilization; and
    Employ leverage with a favorable repayment profile.    A.
    Operating
    Results  Important
    Factors to Consider When Evaluating Our Historical and Future
    Results of Operations
  Charters
   47




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##### Table of Contents




    Market exposure:  We manage the size and
    composition of our fleet by chartering our owned vessels to
    international charterers. We aim at achieving an appropriate
    balance between wet and dry vessels to diversify our market risk.
    Available days:  Available days is the total
    number of days a vessel is controlled by a company less the
    aggregate number of days that the vessel is off-hire due to
    scheduled repairs or repairs under guarantee, vessel upgrades or
    special surveys. The shipping industry uses available days to
    measure the number of days in a period during which vessels
    should be capable of generating revenues.
    Operating days:  Operating days is the number
    of available days in a period less the aggregate number of days
    that the vessels are off-hire due to any reason, including lack
    of demand or unforeseen circumstances. The shipping industry
    uses operating days to measure the aggregate number of days in a
    period during which vessels actually generate revenues.
    Fleet utilization:  Fleet utilization is
    obtained by dividing the number of operating days during a
    period by the number of available days during the period. The
    shipping industry uses fleet utilization to measure a
    companys efficiency in finding suitable employment for its
    vessels and minimizing the amount of days that its vessels are
    off-hire for reasons other than scheduled repairs or repairs
    under guarantee, vessel upgrades, special surveys or vessel
    positioning.
    Equivalent vesselsdata is the available days of the
    fleet divided by the number of the calendar days in the
    respective period.
    TCE rates:  Time Charter Equivalent, or TCE,
    rates are defined as voyage and time charter revenues, less
    voyage expenses during a period, divided by the number of
    available days during the period. The TCE rate is a standard
    shipping industry performance measure used primarily to compare
    daily earnings generated by vessels on time charters with daily
    earnings generated by vessels on voyage charters, because
    charter hire rates for vessels on voyage charters are generally
    not expressed in per day amounts, while charter hire rates for
    vessels on time charters generally are expressed in such
    amounts. This has been 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 annual operating days of the vessels
    during the periods from January 1, 2009 to October 13,
    2009 and October 14, 2009 to December 31, 2009 and for
    the years ended December 31, 2008 and 2007, respectively. 48




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##### Table of Contents



Successor



PredecessorOctober 14



January 1



Year Endedto



to



December 31,December 31, 2009



October 13, 2009



2008Available days



824




2,285




3,294Operating days



682




1,874




3,029Fleet utilization



83
%



82
%



92
%Equivalent vessels



87
%



89
%



100
%Time Charter Equivalent rate


$
12,293



$
12,052



$
16,318   Principal
    Factors that Affect Our Business
    
    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 totalled
    $278.7 million at December 31, 2009.    Revenues
      
    China  Minimum five years, eight months 
    Maximum six years, seven months, plus an option to extend
    further by approximately 159 days due to dry-docking
    duration.
    Australia  Minimum one year and eight
    months  Maximum one year and ten months.
    Brazil  Minimum four years, seven months 
    Maximum four years, eleven months.   49




---



##### Table of Contents



Commissions
    Voyage
    Expenses
    General
    and Administrative Expenses
    Vessel
    Operating Expenses
     50




---



##### Table of Contents



Depreciation
    Amortization
    of Special Survey and Dry-docking Costs
    Interest
    and Finance Expenses
    Change
    in Fair Value of Derivatives
    Foreign
    Exchange Rates
    Lack of
    Historical Operating Data for Vessels Before their
    Acquisition
     51




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##### Table of Contents




    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.      
    employment and operation of our product tankers and dry bulk
    vessels; and
    management of the financial, general and administrative elements
    involved in the conduct of our business and ownership of our
    product tankers and dry bulk vessels.    
    vessel maintenance and repair;
    crew selection and training;
    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. 52




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##### Table of Contents




    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; and
    administration of the legal and regulatory requirements
    affecting our business and assets.  Critical
    Accounting Policies
        Use of
    Estimates
  and/or
  Vessels,
    net
     53




---



##### Table of Contents



25-year
    Impairment
    of Long-lived Assets
          Deferred
    Dry-docking and Special Survey Costs
   54




---



##### Table of Contents



Share-based
    Compensation
    Accounts
    Receivable
    Revenue
    Recognition
      Voyage Charters
  Time Charters,
  Bareboat Charters,
    Fair
    Value of Financial Instruments
       55




---



##### Table of Contents



815-10-15
  815-10-15
    Purchase
    of Vessels
   56




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##### Table of Contents



Results
    of continuing operations
  For the
    Year Ended December 31, 2009 Compared to the Year Ended
    December 31, 2008
      Successor



PredecessorOctober 14,



January 1,2009 to



2009 to


Year EndedDecember 31,



October 31,


December 31,2009



2009


2008(Audited)(Audited)(Audited)(Expressed in thousands of U.S. dollars)Operating revenues

$
14,096



$
33,564


$
56,519Commissions


(407
)



(769
)


(689
)Voyage expenses


(4,634
)



(8,574
)


(6,323
)Vessel operating expenses


(6,530
)



(22,681
)


(19,798
)General and administrative expenses


(12,025
)



(8,366
)


(7,816
)Depreciation and amortization expenses


(4,844
)



(11,813
)


(15,040
)Impairment loss







(68,042
)


Management fees


(315
)



(900
)


(1,404
)(28,755
)



(121,145
)


(51,070
)Net operating (loss)/income


(14,659
)



(87,581
)


5,449Interest and finance expenses, net


(23,996
)



(10,928
)


(15,741
)Interest income


236




9



232Other income, net







40



2Change in fair value of derivatives


2,554




3,012



(6,515
)Net loss from continuing operations


(35,865
)



(95,448
)


(16,573
)Net loss from discontinued operations


(2,007
)



(30,316
)


(23,255
)Net loss

$
(37,872
)


$
(125,764
)

$
(39,828
)   Revenues
   57




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##### Table of Contents



Commissions
    Voyage
    Expenses
    Vessel
    Operating Expenses
    General
    and Administrative Expenses
    Depreciation
    and Amortization
    Impairment
    Loss
   58




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##### Table of Contents



Management
    Fees
    Interest
    and Finance Expense
    Change
    in Fair Value of Derivatives
    Net
    Loss
   59




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##### Table of Contents



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


Year endedDecember 31,


December 31,2008


2007(Audited)


(Audited)(Expressed in thousands of U.S. dollars)Operating revenues

$
56,519


$
55,774Commissions


(689
)


(551
)Voyage expenses


(6,323
)


(2,713
)Vessel operating expenses


(19,798
)


(17,489
)General and administrative expenses


(7,816
)


(5,278
)Depreciation and amortization expenses


(15,040
)


(14,029
)Impairment loss






Management fees


(1,404
)


(1,243
)(51,070
)


(41,303
)Net operating income


5,449



14,471Interest and finance expenses, net


(15,741
)


(16,966
)Interest income


232



630Other income/(expenses) income, net


2



(11
)Change in fair value of derivatives


(6,515
)


(4,060
)Net loss from continuing operations


(16,573
)


(5,936
)Net loss from discontinued operations


(23,255
)


(2,797
)Net loss

$
(39,828
)

$
(8,733
)   Revenues
    Commissions
   60




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##### Table of Contents



Voyage
    Expenses
    Vessel
    Operating Expenses
    General
    and Administrative Expenses
    Depreciation
    and Amortization
    Management
    Fees
    Interest
    and Finance Expense
    Change
    in Fair Value of Derivatives
    Net
    loss
   61




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##### Table of Contents



B.
    Liquidity
    and Capital Resources  Overview
          
    Our existing syndicate of lenders entered into a new
    $221.4 million Facility Agreement to refinance our existing
    revolving credit facility. As of March 18, 2010, the amount
    outstanding under the Facility Agreement was $190.4 million.
    The issuance of $145.0 million of the 7% Notes, that
    are convertible into common shares at a conversion price of
    $0.75 per common share. The $125.0 million outstanding
    principal amount of our 7% Notes is reflected as
    $41.4 million on our December 31, 2009 balance sheet
    due to the netting impact of a beneficial conversion feature
    (discount) as more fully described below under
    Indebtedness and in Note 12 of the
    Consolidated Financial Statements. We estimate as of
    March 18, 2010, the net outstanding amount for balance
    sheet purposes is approximately $44.5 million.
    We assumed a $37.4 million credit facility in relation to
    the three vessels transferred to us as part of the
    recapitalization. Subsequent to its assumption, this facility
    has been, and continues to be, periodically paid down and drawn
    upon to minimize our cost of capital. As of March 18, 2010,
    there was no outstanding balance under this facility. 62




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##### Table of Contents



PredecessorSuccessor






Year Ended


Year EndedOctober 14, 2009 to



January 1, 2009 to


December 31,


December 31,December 31, 2009



October 13, 2009


2008


2007(audited)



(audited)


(audited)


(audited)Net cash (used in)/provided by operating activities

$
(5,869
)


$
(3,945
)

$
2,901


$
17,581Net cash provided by/(used in) investing activities







2,216



61,083



(2,008
)Net cash provided by/(used in) financing activities


112,124




(2,280
)


(72,419
)


(14,741
)Net increase/(decrease) in cash and cash equivalents


106,255




(4,009
)


(8,435
)


832Cash and cash equivalents, beginning of the year







4,009



12,444



11,612Cash and cash equivalents, end of year

$
106,255



$



$
4,009


$
12,444   Cash
    Flows
             63




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##### Table of Contents



Indebtedness
                
    1.75% if our total shareholders equity divided by our
    total assets, adjusting the book value of our fleet to its
    market value, is equal to or greater than and 50%; 64




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##### Table of Contents




    2.75% if our total shareholders equity divided by our
    total assets, adjusting the book value of our fleet to its
    market value, is equal to or greater than 27.5% but less than
    50%; and
    3.25% if our total shareholders equity divided by our
    total assets, adjusting the book value of our fleet to its
    market value, is less than 27.5%.    
    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:      
    maintain, on a consolidated basis on each financial quarter,
    working capital of not less than zero dollars ($0);
    the ratio of EBITDA (earnings before interest, taxes,
    depreciation and amortization) to interest expense must be no
    less than:          
    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 $200.0 million
    in accordance with the Fifth Supplemental Agreement;
    A working capital balance, including the $221.4 million of
    debt reflected as current, of not less than $0; and
    The minimum liquidity requirement consisting of free cash and
    cash equivalents.   65




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##### Table of Contents




    The BCF was valued at $100.5 million and is amortized over
    the life of the 7% Notes as interest expense. The BCF
    represents the difference between the conversion price of the
    7% Notes ($0.75) and the market price of our common shares
    at the date of issuance ($1.27), multiplied by
    193.3 million shares, assuming full conversion of the
    initial $145.0 7% Notes. Assuming no further conversions of
    the remaining $125.0 million of the 7% Notes, the
    annual BCF amortization will be $14.4 million
    annually; and
    the Make Whole Fundamental Change was valued at $31,310 relating
    to an additional benefit of 10% of additional shares that the
    holders can potentially acquire when converting the
    7% Notes should certain conditions exist. This will also be
    amortized over the life of the 7% Notes as an interest
    expense.    Adjusted
    EBITDA
  and/or
     66




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##### Table of Contents



Capital
    Expenditures
    C.
    Research
    and Development, Patents and Licenses    D.
    Trend
    Information    E.
    Off-Balance
    Sheet Arrangements    F.
    Tabular
    Disclosure of Contractual Obligations    Long-Term
    Financial Obligations and Other Commercial Obligations
    Payment due by PeriodLess than








More thanContractual Obligations

Total


1 year


1-3 years


3-5 years


5 yearsLong-term debt
    obligation(1)

$
237,270


$
14,240


$
28,480


$
194,550


$
Interest
    payments(2)


91,080



23,836



35,932



31,312



Rental
    agreement(3)


1,313



110



220



220



763Total(4)

$
329,663


$
38,186


$
64,632


$
276,082


$
763     Notes:
  (1)
    
    Refers to our obligations to repay
    the indebtedness outstanding as of December 31, 2009,
    assuming that we meet the covenants of the credit facility. The
    amount does not reflect the repayment of the 7% Notes.(2)
    
    Refers to our expected interest
    payments over the term of the indebtedness outstanding as of
    December 31, 2009, assuming an effective interest rate of
    5.81% per annum.(3)
    
    Refers to our obligations under the
    rental agreements for office space.(4)
    
    This does not include the dropdown
    of the vessels and management company, or the acquisition of the
    Kamsarmaxes. 67




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##### Table of Contents



Recent
    Accounting Developments
  Fair
    Value
      Accounting
    for Business Combinations
    Determination
    of the Useful Life of Intangible Assets
    Interim
    Disclosure about Fair Value of Financial
    Instruments
   68




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##### Table of Contents



Transfers
    of Financial Assets
    Determining
    the Primary Beneficiary of a Variable Interest
    Entity
      FASB
    Accounting Standards Codification
    Measuring
    Liabilities at Fair Value
    Subsequent
    Events
  855-10
 69




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##### Table of Contents



Subsequent
    Events
  (a)
    On January 1, 2010, the board of directors made an annual
    restricted share grant in an aggregate amount of 80,000
    restricted common shares to the independent directors of the
    board of directors. These restricted common shares vest 100% on
    the first anniversary date of the grant.  (b)
    In January 2010, we sold the MSC Seine and the Saronikos Bridge
    for an aggregate purchase price resulting in gross proceeds to
    us of $12.8 million, paid in cash. The Saronikos Bridge was
    delivered to her new owners on January 7, 2010 and the MSC
    Seine was delivered on January 20, 2010.  (c)
    In February 2010, we signed a Stock Purchase Agreement providing
    for the purchase of two geared, 80,000 dwt Kamsarmaxes from
    COSCO Dalian Shipyard Co., Ltd. These vessels are expected to be
    delivered in the fourth quarter of 2010 and 2011, respectively.
    The aggregate purchase price of these vessels was
    $112.7 million. The charter attached for the first vessel
    is for a five-year initial term at a net daily rate of $28,710,
    with an option to extend the term for an additional two years.
    The charter for the second vessel is for a seven-year term at a
    net daily rate of $27,300.  Gabriel Petrides, a former Board member and an affiliate of
    Rocket Marine, one of our principal stockholders, is one of the
    principals of the seller of the two Kamsarmax vessels and is a
    principal of the purchaser of the Chinook. The vote on Rocket
    Marines shares is controlled by Grandunion pursuant to a
    voting agreement, and Mr. Petrides left our board in
    October 2009. Accordingly, even though Rocket Marine is a
    principal stockholder, neither it nor Mr. Petrides has the
    ability to influence us. We believe that the negotiations were
    conducted at arms length and that the sale price
    represents is no less favorable than would have been achieved
    through arms length negotiations with a
    wholly-unaffiliated third party.In relation to the above transaction, we have also signed a
    Memorandum of Agreement for the sale of the product tanker
    Chinook for $8.5 million.Once closed, the $112.7 million purchase price for the two
    Kamsarmaxes will be paid by $80.0 million of debt
    financing, cash and cash equivalents, as well as the
    consideration for the transfer of the Chinook to be delivered
    against the purchase price.  (d)
    On February 26, 2009, we entered into a five-month time
    charter beginning February 6, 2010 through July 1,
    2010 for the 1992-built, 41,450 dwt product tanker High Land at
    a net of commission rate of $8,181 per day.  G.
    Safe
    Harbor   70




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##### Table of Contents



Item 6.
    Directors,
    Senior Management and Employees  A.
    Directors
    and Senior Management    Name

Age

PositionNicholas G Fistes


51


Class I Director and Chairman since October 13, 2009Michail S. Zolotas


35


Class I Director and Deputy Chairman, President and CEO since
    October 13, 2009Allan L. Shaw


46


Class II Director, and Chief Financial Officer since
    October 13, 2009Masaaki Kohsaka


76


Class II Director since October 13, 2009Spyros Gianniotis


50


Class III Director since October 13, 20009Apostolos I. Tsitsirakis


42


Class III Director since October 13, 2009Panagiotis Skiadas


39


Class III Director since June 2005Panagiotis Peter Kallifidas


40


Corporate Secretary since January 1, 2010George Fragos


46


Chief Operating Officer since October 13, 2009Sozon Alifragkis


40


Senior Vice President and Chief Commercial Office since October
    13, 2009       Nicholas
    G. Fistes
    Director, Executive Chairman
  (2004-2005), (1993-1996), (2002-2003).
 71




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##### Table of Contents



Michael
    S. Zolotas
    Director, President and Chief Executive Officer
    Allan L.
    Shaw
    Director, Chief Financial Officer
    Spyros
    Gianniotis
    Director
    Masaaki
    Kohsaka
    Director
   72




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##### Table of Contents



Panagiotis
    Skiadas
    Director
    Apostolos
    I. Tsitsirakis
    Director
    Panagiotis
    Peter Kallifidas
    General Counsel and Corporate Secretary
    Sozon A.
    Alifragis
    Senior Vice President and Chief Commercial Officer
    George
    Fragos
    Chief Operating Officer
   73




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##### Table of Contents



B.
    Compensation  out-of-pocket
    2005
    Equity Incentive Plan
       74




---



##### Table of Contents



then-directors
        
    1,000,000 shares are scheduled to vest January 01,
    2011; and
    1,000,000 shares are scheduled to vest January 01,
    2012.    C.
    Board
    Practices  Board
    Classes
    Committees
    of the Board of Directors
      D.
    Employees   75




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##### Table of Contents



E.
    Share
    Ownership      Amount and Nature


Percentage ofof Beneficial


OutstandingName and Address of Beneficial
    Owner(1)

Ownership


Common SharesMichail S.
    Zolotas(2)(3)(4)


227,074,655



92.3
%Nicholas G
    Fistes(3)(4)


33,874,655



42.6
%Allan L.
    Shaw(5)


2,000,000



2.5
%Masaaki Kohsaka


65,000



*Spyros Gianniotis


65,000



*Apostolos I. Tsitsirakis


65,000



*Panagiotis Skiadas


185,000



*Panagiotis Peter Kallifidas


*



*George Fragos


*



*Sozon Alifragkis


*



*Directors and Executive Officers as a
    Group(2)(3)(4)


229,454,655



93.3
%     *
    
    Less than one percent(1)
    
    The business address of each of the
    individuals is 83 Akti Miaouli & Flessa Street,
    Piraeus Greece 185 38.(2)
    
    Includes 166,533,333 common shares
    underlying the 7% Notes owned by Focus Maritime Corp., a
    Marshall Islands corporation. Focus Maritime is wholly-owned by
    Michail S. Zolotas. Focus Maritimes business address is 83
    Akti Miaouli & Flessa Street, Piraeus Greece, 185 38.
    The foregoing information was derived from a Schedule 13G/A
    filed by Grandunion with the Securities and Exchange Commission
    (SEC) on October 22, 2009.(3)
    
    Includes 16,311,111 common shares
    owned by Grandunion Inc., a Marshall Islands corporation
    wholly-owned by Nicholas G. Fistes and Michail S. Zolotas, who
    each own 50% of the issued and outstanding capital stock of
    Grandunion. Grandunions business address is 83 Akti
    Miaouli & Flessa Street, Piraeus Greece 185 38. The
    foregoing information was derived from a Schedule 13G/A filed
    with the SEC on October 22, 2009.(4)
    
    Includes 17,563,544 common shares
    beneficially owned by Rocket Marine Inc. that is subject to a
    voting agreement with Grandunion, over which Grandunion has
    voting power. Rocket Marine Inc., a Marshall Islands
    corporation, is a wholly-owned subsidiary of Aries Energy
    Corporation, which is also a Marshall Islands corporation. Mons
    Bolin, the Companys former Chief Executive Officer,
    President and member of the board of directors, and Captain
    Gabriel Petridis, the Companys former Chairman, each own
    50% of the issued and outstanding capital stock of Aries Energy
    Corporation. Each of Aries Energy Corporation, Mons Bolin and
    Captain Gabriel Petridis disclaims beneficial ownership of such
    shares, except to the extent of their pecuniary interest
    therein. The principal business address for each of Aries Energy
    Corporation, Mr. Bolin and Cpt. Petridis is 18 Zerva Nap.
    Street, Glyfada, Athens Greece 166 75. The foregoing information
    was derived from a Schedule 13G/A filed with the SEC on
    October 16, 2009.(5)
    
    Does not include 3,000,000 common
    shares underlying options.  Item 7.
    Major
    Shareholders and Related Party Transactions  A.
    Major
    shareholders   76




---



##### Table of Contents



Amount and Nature


Percentage ofof Beneficial


OutstandingIdentity of Person or Group

Ownership


Common SharesFocus Maritime
    Corp.(1)(2)


193,200,000



79.4
%Grandunion
    Inc.(3)(4)


33,874,655



42.6
%Michail S.
    Zolotas(1)(2)(3)(4)


227,074,655



92.3
%Nicholas G.
    Fistes(2)(4)


33,874,655



42.6
%Rocket Marine
    Inc.(5)


17,563,544



22.8
%S. Goldman Advisors,
    LLC(6)


7,500,000



9.2
%Investment Bank of Greece,
    S.A.(7)


5,133,000



6.3
%     (1)
    
    Focus Maritime Corp., a Marshall
    Islands corporation, is wholly-owned by Michail S. Zolotas.
    Focus Maritimes business address is 83 Akti
    Miaouli & Flessa Street, Piraeus Greece 185 38. The
    foregoing information was derived from a Schedule 13G/A
    filed by Grandunion with the Securities and Exchange Commission
    (SEC) on October 22, 2009.(2)
    
    Includes 166,533,333 common shares
    underlying the 7% Notes.(3)
    
    Grandunion Inc., a Marshall Islands
    corporation, is wholly-owned by Nicholas G. Fistes and Michail
    S. Zolotas, who each own 50% of the issued and outstanding
    capital stock of Grandunion. Grandunions business address
    is 83 Akti Miaouli & Flessa Street, Piraeus Greece 185
    38. The foregoing information was derived from a
    Schedule 13G/A filed with the SEC on October 22, 2009.(4)
    
    Includes 17,563,544 common shares
    beneficially owned by Rocket Marine Inc. that is subject to a
    voting agreement with Grandunion, over which Grandunion has
    voting power.(5)
    
    Rocket Marine Inc., a Marshall
    Islands corporation, is a wholly-owned subsidiary of Aries
    Energy Corporation, which is also a Marshall Islands
    corporation. Mons Bolin, the Companys former Chief
    Executive Officer, President and member of the board of
    directors, and Captain Gabriel Petridis, the Companys
    former Chairman, each own 50% of the issued and outstanding
    capital stock of Aries Energy Corporation. Each of Aries Energy
    Corporation, Mons Bolin and Captain Gabriel Petridis disclaims
    beneficial ownership of such shares, except to the extent of
    their pecuniary interest therein. The principal business address
    for each of Aries Energy Corporation, Mr. Bolin and Cpt.
    Petridis is 18 Zerva Nap. Street, Glyfada, Athens Greece 166 75.
    The foregoing information was derived from a Schedule 13G/A
    filed with the SEC on October 16, 2009.(6)
    
    Includes 5,000,000 common shares
    underlying warrants. Beneficial ownership is shared by Sheldon
    Goldman, sole member of S. Goldman Advisors, LLC. The principal
    business address of S. Goldman Advisors, LLC and
    Mr. Goldman is 641 Lexington Avenue, 18th Floor, New York,
    NY, 10022. The foregoing information was derived from a
    Schedule 13D filed with the SEC on October 22, 2009.(7)
    
    Includes 5,000,000 common shares
    underlying warrants and 133,333 common shares underlying the
    7% Notes. Represents shares owned by Investment Bank of
    Greece, S.A. (IBG), Marfin Egnatia Bank S.A.
    (Marfin Egnatia) and Marfin Popular Bank Public Co.,
    Ltd. (Marfin Popular). Marfin Egnatia is deemed to
    beneficially own the foregoing shares as a result of its
    approximately 92% ownership of IBG and Marfin Popular is deemed
    to beneficially own such shares as a result of its approximately
    97% ownership of Marfin Egnatia. The principal business address
    of IBG is 24B Kifissias Avenue, Maroussi, Athens Greece 151 25.
    The principal business address of Marfin Egnatiais 20
    Mitropoleos Street and Komninon Street, Thessaloniki Greece 546
    24. The principal business address of Marfin Popular is 154
    Limassol Avenue, Nicosia, 2025, Cyprus. The foregoing
    information was derived from a Schedule 13G filed with the
    SEC on October 22, 2009.   77




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##### Table of Contents



B.
    Related
    Party Transactions    Grandunion
    Inc.
    lock-up
    Technical
    and Commercial Management
   78




---



##### Table of Contents



Rocket
    Marine Inc.
    Terra
    Stabile A.E.
  12-year
  Sea
    Breeze Ltd.
    C.
    Interests
    of experts and counsel.    Item 8.
    Financial
    Information  A.
    Consolidated
    Statements and Other Financial Information  See
    Item 18.
  Legal
    Proceedings Against Us
   79




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##### Table of Contents




    The charterers of the vessel Newlead Avra (formerly 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; andc)
    Damages suffered by
    sub-charterers
    of the vessel resulting from a grounding at Houston in October
    2007.  
    The charterers of the Newlead Fortune (formerly 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:  a)
    Damages as a result of a change in management and the consequent
    dispute regarding oil major approval from October 2007; andb)
    Damages resulting from the creation of Hydrogen Sulphide in the
    vessels tanks at two ports in the United States.    Dividend
    Policy
       80




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##### Table of Contents



B.
    Significant
    Changes    Item 9.
    The
    Offer and Listing  A.
    Offer
    and Listing Details    High


LowFor 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 Fiscal Year Ended December 31, 2009

$
1.41


$
0.36For the Quarter EndedMarch 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


$
0.32June 30, 2009

$
0.90


$
0.36September 30, 2009

$
0.80


$
0.58December 31, 2009

$
1.27


$
0.75For the MonthOctober 2009

$
1.38


$
0.73November 2009

$
1.24


$
0.96December 2009

$
1.05


$
0.90January 2010

$
0.96


$
0.74February 2010

$
0.90


$
0.68March 2010 (through March 17, 2010)

$
0.96


$
0.81   B.
    Plan
    of Distribution    C.
    Markets    D.
    Selling
    Shareholders    E.
    Dilution    Item 10.
    Additional
    Information  A.
    Share
    Capital   81




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##### Table of Contents



B.
    Memorandum
    and Articles of Association    Common
    shares
          Preference
    Shares
      
    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.    Treasury
    Shares
   82




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##### Table of Contents



Dividends
    Anti-Takeover
    Effects of Provisions of Our Constitutional Documents
    Blank
    Check Preference Shares
    Classified
    Board of Directors
    Business
    Combinations
   83




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##### Table of Contents




    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.    Election
    and Removal of Directors
    Shareholder
    Meetings
  paid-up
  Limited
    Actions by Shareholders
   84




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##### Table of Contents



Amendments
    to Bye-Laws
    
    the classified board and director election and 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.
    The passing of written resolutions by majority consent of the
    shareholders.    C.
    Material
    Contracts    
    Sixth Supplemental Agreement, dated June 24, 2009 between
    the Company and The Bank of Scotland relating to a Credit
    Agreement dated April 3, 2006. This revolving credit
    facility was refinanced and replaced by the Facility Agreement
    described in more detail in Item 5 
    Operating and Financial Review and Prospects.
    Securities Purchase Agreement, dated as of September 16,
    2009 between Grandunion and the Company. Please read
    Item 5  Operating and Financial Review and
    Prospects for a summary of certain contract terms.
    Facility Agreement, dated October 13, 2009 among the
    Company, Bank of Scotland plc, Nordea Bank Finland plc, London
    Branch, HSH Nordbank AG, The Governor and the Company of the
    Bank of Ireland, Sumitomo Mitsui Banking Corporation, Brussels
    Branch, Bayerische Hypo-und Vereinsbank AG, Commerzbank
    Aktiengesellschaft, General Electric Capital Corporation,
    Natixis and Swedbank AB (publ).
    Indenture, dated as of October 13, 2009 between the Company
    and Marfin Egnatia Bank S.A. (Marfin Bank). The
    7% Notes were issued under this Indenture. Please read
    Item 5  Operating and Financial Review and
    Prospects for a summary of certain contract terms. 85




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##### Table of Contents




    Note Purchase Agreement, dated October 13, 2009 among the
    Company, each of the purchasers listed on the signature thereto,
    and Marfin Bank. Please read Item 5  Operating
    and Financial Review and Prospects for a summary of
    certain contract terms.
    7% Convertible Senior Note Due 2015, dated October 13,
    2009, made by the Company. Please read
    Item 5  Operating and Financial Review and
    Prospects for a summary of certain contract terms.
    Registration Rights Agreement, dated October 13, 2009 among
    Investment Bank of Greece, Focus Maritime Corp. and the Company.
    Please read Item 5  Operating and
    Financial Review and Prospects for a summary of certain
    contract terms.
    Financial Agreement, dated August 18, 2009 among Marfin
    Bank, Australia Holdings Ltd., China Holdings Ltd. and Brazil
    Holdings Ltd. This $37.4 million credit facility was
    assumed by the Company in October 2009 as part of the
    recapitalization. Please read Item 5 
    Operating and Financial Review and Prospects for a summary
    of certain contract terms.  D.
    Exchange
    controls               86




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##### Table of Contents



E.
    Taxation    Bermuda
    Tax Considerations
    United
    States Federal Income Tax Considerations
  Non-U.S. Holders,
  United
    States Federal Income Taxation of Our Company
  Taxation
    of Operating Income: In General
   87




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##### Table of Contents



U.S.-source
    non-U.S. ports
    Exemption
    of Operating Income from United States Federal Income
    Taxation
  U.S.-source
  (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    (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.  U.S.-source
     88




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##### Table of Contents



1 6
          Taxation
    In The Absence of Section 883 Exemption
        
    we have, or are considered to have, a fixed place of business in
    the United States involved in the earning of shipping
    income; and 89




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##### Table of Contents




    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.    United
    States Taxation of Gain on Sale of Vessels
    United
    States Federal Income Taxation of U.S. Holders
      Distributions
  dollar-for-dollar
  121-day
 90




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##### Table of Contents



Sale,
    Exchange or other Disposition of Common Shares
  U.S.-source
  Passive
    Foreign Investment Company Status and Significant Tax
    Consequences
    
    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.     91




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##### Table of Contents



United
    States Federal Income Taxation of
    Non-U.S.
    Holders
  Non-U.S. Holder.
  Dividends
    on Common Shares
  Non-U.S. Holders Non-U.S. Holders Non-U.S. Holder Non-U.S. Holder
  Sale,
    Exchange or Other Disposition of Common Shares
  Non-U.S. Holders
  
    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.  Non-U.S. Holder Non-U.S. Holder,
  F.
    Dividends
    and paying agents    G.
    Statement
    by experts    H.
    Documents
    on display   92




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##### Table of Contents



1-800-SEC-0330 http://www.sec.gov, http://www.newleadholdings.com.
  I.
    Subsidiary
    information    Item 11.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Exposure
            Foreign
    Exchange Rate Exposure
      Item 12.
    Description
    of Securities Other than Equity Securities   93




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##### Table of Contents



PART II
  Item 13.
    Defaults,
    Dividend Arrearages and Delinquencies    Item 14.
    Material
    Modifications to the Rights of Security Holders and Use of
    Proceeds    Item 15.
    Controls
    and Procedures  (a)
    Disclosure
    Controls and Procedures.  Rules 13a-15(e) 15d-15(e)
  (b)
    Managements
    annual report on internal control over financial
    reporting.  Rule 13a-15(f) 15d-15(f)
    (c)
    Attestation
    report of the independent registered public accounting
    firm.    (d)
    Changes
    in internal control over financial reporting.   94




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##### Table of Contents



Item 16A.
    Audit
    Committee Financial Expert  Form 20-F.
  Item 16B.
    Code
    of Ethics    Item 16C.
    Principal
    Accountant Fees and Services  Audit
    Fees
    Audit-Related
    Fees
    Tax
    Fees
    All
    Other Fees
      Item 16D.
    Exemptions
    from the Listing Standards for Audit Committees    Item 16E.
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchases    Item 16F.
    Changes
    in Registrants Certifying Accountant    Item 16G.
    Corporate
    Governance   95




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##### Table of Contents




    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.
    We have a Governance and Nominating committee comprised of
    independent directors that is responsible for identifying and
    recommending potential candidates to become board members and
    recommending directors for appointment to the board and 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.
    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).   96




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##### Table of Contents



PART III
  Item 17.
    Financial
    Statements    Item 18.
    Financial
    Statements    Item 19.
    Exhibits  1
.1

Amended and Restated Memorandum of Association of NewLead
    Holdings Ltd. (Previously filed as Exhibit 99.1 to the
    Companys Report on
    Form 6-K,
    filed on September 30, 2009 and hereby incorporated by
    reference.)1
.2

Certificate of Incorporation on Change of Name (Previously filed
    as Exhibit 1.1 to the Companys Report on
    Form 6-K,
    filed on January 8, 2010 and hereby incorporated by
    reference.)1
.3

Amended and Restated Bye-laws of the Company (Previously filed
    as Exhibit 3.1 to the Companys Report on
    Form 6-K,
    filed on January 27, 2010 and hereby incorporated by
    reference.)2
.1

Indenture, dated as of October 13, 2009 between the Company
    and Marfin Egnatia Bank S.A. (Previously filed as
    Exhibit 99.1 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)2
.2

Form of Note Purchase Agreement, dated October 13, 2009
    among the Company, each of the purchasers listed on the
    signature thereto, and Marfin Egnatia Bank S.A. (Previously
    filed as Exhibit 99.2 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)2
.3

Form of 7% Convertible Senior Note Due 2015, dated as of
    October 13, 2009, made by the Company (Previously filed as
    Exhibit 99.3 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)2
.4

Warrant Certificate, dated October 13, 2009 from the
    Company to Investment Bank of Greece (Previously filed as
    Exhibit 99.8 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.1

Form of Equity Incentive Plan (Previously filed as
    Exhibit 10.6 to the Companys 10.6 to the
    Companys registration statement on
    Form F-1/A
    (Registration
    No. 333-124952)
    and hereby incorporated by reference.)4
.2

Amendment to Equity Incentive Plan (Previously filed as
    Exhibit 4.9 to the Companys Annual Report on
    Form 20-F,
    filed on June 26, 2009 and hereby incorporated by
    reference.)4
.3

Fifth Supplemental Agreement, dated June 11, 2008 between
    the Company and The Bank of Scotland relating to the Credit
    Agreement, dated April 3, 2006 among the Company and The
    Bank of Scotland and Nordea Bank Finland as joint lead arrangers
    (Previously filed as Exhibit 4.7 to the Companys
    Annual Report on
    Form 20-F,
    filed on June 30, 2008 and hereby incorporated by
    reference.)4
.4

Sixth Supplemental Agreement, dated June 24, 2009 between
    the Company and The Bank of Scotland relating to a Credit
    Agreement, dated April 3, 2006 among the Company and The
    Bank of Scotland and Nordea Bank Finland as joint lead arrangers
    (Previously filed as Exhibit 4.8 to the Companys
    Annual Report on
    Form 20-F,
    filed on June 26, 2009 and hereby incorporated by
    reference.)4
.5

$145 Million Convertible Bond Commitment Letter, dated
    July 15, 2009 between Investment Bank of Greece and the
    Company (Previously filed as Exhibit 99.F to the
    Schedule 13D of Grandunion Inc., filed on
    September 28, 2009 and hereby incorporated by reference.)4
.6

Financial Agreement, dated August 18, 2009 among Marfin
    Bank, Australia Holdings Ltd., China Holdings Ltd. and Brazil
    Holdings Ltd. (Previously filed as Exhibit 10.1 to the
    Companys Report on
    Form 6-K,
    filed on January 27, 2010 and hereby incorporated by
    reference.) 97




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##### Table of Contents



4
.7

Securities Purchase Agreement, dated September 16, 2009
    between Grandunion Inc. and the Company (Previously filed as
    Exhibit 99.D to the Schedule 13D (Amendment
    No. 1) of Grandunion Inc. and Focus Maritime Corp.,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.8

Voting Agreement, dated September 16, 2009 among Grandunion
    Inc., Rocket Marine Inc. Gabriel Petrides, Mons S. Bolin and
    Aries Energy Corporation and acknowledged by the Company
    (Previously filed as Exhibit 99.B to the Schedule 13D
    of Grandunion Inc., filed on September 28, 2009 and hereby
    incorporated by reference.)4
.9

Lock-Up
    Agreement, dated September 16, 2009 among Grandunion Inc.,
    Rocket Marine Inc., Gabriel Petrides, Mons S. Bolin and Aries
    Energy Corporation and acknowledged by the Company (Previously
    filed as Exhibit 99.C to the Schedule 13D of
    Grandunion Inc., filed on September 28, 2009 and hereby
    incorporated by reference.)4
.10

Lock-Up
    Agreement, dated September 16, 2009 among Grandunion Inc.,
    Rocket Marine Inc., Gabriel Petrides, Mons S. Bolin and Aries
    Energy Corporation and acknowledged by the Company (Previously
    filed as Exhibit 99.D to the Schedule 13D of
    Grandunion Inc., filed on September 28, 2009 and hereby
    incorporated by reference.)4
.10

Lock-Up
    Agreement, dated September 16, 2009 between Grandunion Inc.
    and the Company (Previously filed as Exhibit 99.E to the
    Schedule 13D of Grandunion Inc., filed on
    September 28, 2009 and hereby incorporated by reference.)4
.11

Facility Agreement, dated October 13, 2009 among the
    Company, Bank of Scotland plc, Nordea Bank Finland plc, London
    Branch, HSH Nordbank AG, The Governor and the Company of the
    Bank of Ireland, Sumitomo Mitsui Banking Corporation, Brussels
    Branch, Bayerische Hypo-und Vereinsbank AG, Commerzbank
    Aktiengesellschaft, General Electric Capital Corporation,
    Natixis and Swedbank AB (publ) (Previously filed as
    Exhibit 99.5 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.12

Warrant Purchase Agreement, dated October 13, 2009 between
    the Company and Investment Bank of Greece (Previously filed as
    Exhibit 99.6 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.13

Warrant Agreement, dated October 13, 2009 between the
    Company and Investment Bank of Greece (Previously filed as
    Exhibit 99.7 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.14

Registration Rights Agreement, dated October 13, 2009 among
    Investment Bank of Greece, Focus Maritime Corp. and the Company
    (Previously filed as Exhibit 99.4 to the Companys
    Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.15

Registration Rights Agreement, dated October 13, 2009
    between the Company and Investment Bank of Greece (Previously
    filed as Exhibit 99.4 to the Companys Report on
    Form 6-K,
    filed on October 22, 2009 and hereby incorporated by
    reference.)4
.16*

$80 Million Secured Senior and Junior Term Loan Facility
    Commitment Letter, dated February 19, 2019 between Bank of
    Scotland and the Company, as guarantor8
.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.     *
    
    Filed herewith. 98




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##### Table of Contents



SIGNATURES
  Form 20-F
    By:
    /s/  Michail
    S. Zolotas  Name:     Michail S. Zolotas
 Title:
    Chief Executive Officer  March 18, 2010
 99




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##### Table of Contents



INDEX TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
  
  PageREPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


F-2 and F-3CONSOLIDATED BALANCE SHEETS


F-4CONSOLIDATED STATEMENTS OF OPERATIONS


F-5CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY


F-6CONSOLIDATED STATEMENTS OF CASH FLOWS


F-7NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


F-8  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Shareholders of
 NewLead Holdings Ltd.:
  Internal Control  Integrated Framework Form 20-F.
           F-2




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Shareholders of
    NewLead Holdings Ltd.:
       F-3




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.CONSOLIDATED BALANCE SHEETS (All
    amounts expressed in thousands of U.S. dollars except share
    amounts)
  Successor



PredecessorAs of December 31,



As of December 31,Notes



2009



2008ASSETSCurrent assetsCash and cash equivalents



2



$
106,255



$
4,009Restricted cash



5




403




8,510Trade receivables, net



2




4,572




2,533Other receivables








496




2,289Inventories



6




3,085




1,224Prepaid expenses








1,082




967Back log asset



13




5,528




Due from managing agent



21









160Due from related parties













49Total current assets








121,421




19,741Restricted cash



5




9,668




Assets held for sale



7




8,250




Vessels and other fixed assets, net



7




253,115




296,463Deferred charges, net



8




6,831




1,573Total non-current assets








277,864




298,036Total assets







$
399,285



$
317,777LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt



11



$
14,240



$
223,710Accounts payable, trade



9




11,048




3,601Accrued liabilities



10




16,957




7,776Deferred income








226




1,807Derivative financial instruments



17




9,687




12,451Deferred charter revenue



13









2,144Due to managing agent



21




2,054




Total current liabilities








54,212




251,489Derivative financial instruments



17




7,407




7% convertible senior notes, net



12




41,430




Deferred income








730Deferred charter revenue



13









772Long-term debt



11




223,030




Total non-current liabilities








272,597




772Total liabilities








326,809




252,261Commitments and contingencies



19









Shareholders equitySUCCESSORPreference Shares, $0.01 par value, 500 million shares
    authorized, none issuedCommon Shares, $0.01 par value, 1 billion shares
    authorized, 79.4 million shares issued and outstanding as
    of December 31, 2009








794PREDECESSORPreference Shares, $0.01 par value, 30 million shares
    authorized, none issuedCommon Shares, $0.01 par value, 100 million shares
    authorized, 29.0 million shares issued and outstanding as
    of December 31, 2008













290Additional paid-in capital








109,554




113,787Accumulated deficit



15




(37,872
)



(48,561
)Total shareholders equity








72,476




65,516Total liabilities and shareholders equity







$
399,285



$
317,777    F-4




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.CONSOLIDATED STATEMENTS OF
    OPERATIONS (All
    amounts expressed in thousands of U.S. dollars, except share and
    per share amounts)
  Successor



PredecessorOctober 14, 2009



January 1, 2009


Year Ended


Year Endedto



to


December 31,


December 31,Notes


December 31, 2009



October 13, 2009


2008


2007OPERATING REVENUES


16


$
14,096



$
33,564


$
56,519


$
55,774EXPENSES:Commissions


21



(407
)



(769
)


(689
)


(551
)Voyage expenses






(4,634
)



(8,574
)


(6,323
)


(2,713
)Vessel operating expenses


21



(6,530
)



(22,681
)


(19,798
)


(17,489
)General & administrative expenses


21



(12,025
)



(8,366
)


(7,816
)


(5,278
)Depreciation and amortization expenses


7



(4,844
)



(11,813
)


(15,040
)


(14,029
)Impairment loss


2








(68,042
)






Management fees






(315
)



(900
)


(1,404
)


(1,243
)(28,755
)



(121,145
)


(51,070
)


(41,303
)Net operating (loss) / income






(14,659
)



(87,581
)


5,449



14,471OTHER INCOME / (EXPENSES), NET:Interest & finance expense, net


11



(23,996
)



(10,928
)


(15,741
)


(16,966
)Interest income






236




9



232



630Other income / (expense), net











40



2



(11
)Change in fair value of derivatives


17



2,554




3,012



(6,515
)


(4,060
)Total other expenses, net






(21,206
)



(7,867
)


(22,022
)


(20,407
)Net loss from continuing operations






(35,865
)



(95,448
)


(16,573
)


(5,936
)Net loss from discontinued operations


22



(2,007
)



(30,316
)


(23,255
)


(2,797
)Net loss





$
(37,872
)


$
(125,764
)

$
(39,828
)


(8,733
)Loss per share:Basic and dilutedContinuing operations





$
(0.53
)


$
(3.32
)

$
(0.58
)


(0.21
)Discontinued operations





$
(0.03
)


$
(1.05
)

$
(0.81
)


(0.10
)Total





$
(0.56
)


$
(4.37
)

$
(1.39
)


(0.31
)Weighted average number of shares:Basic and diluted






67,067,239




28,750,295



28,634,186



28,478,850    F-5




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.CONSOLIDATED STATEMENTS OF
    SHAREHOLDERS EQUITY (All
    amounts expressed in thousands of U.S. dollars)
  CommonShares(Number of





Additional





TotalShares in


Share


Paid-in


Accumulated


ShareholdersNotes


Thousands)


Capital


Capital


Deficit


EquityBalance at December 31, 2006 (Predecessor)






28,417


$
284


$
132,304


$



$
132,588Net loss


















(8,733
)


(8,733
)Issuance of common shares


14



200



2











2Share-based compensation


14











1,232







1,232Dividends paid


15











(17,970
)






(17,970
)Balance at December 31, 2007 (Predecessor)






28,617



286



115,566



(8,733
)


107,119Net loss


















(39,828
)


(39,828
)Issuance of common shares


14



345



4











4Share-based compensation


14











1,083







1,083Dividends paid


15











(2,862
)






(2,862
)Balance at December 31, 2008 (Predecessor)






28,962



290



113,787



(48,561
)


65,516Net loss


















(125,764
)


(125,764
)Issuance of common shares


14



88



1











1Share-based compensation


14











793







793Balance at October 13, 2009 (Predeccessor)






29,050


$
291


$
114,580


$
(174,325
)

$
(59,454
)Change in control  basis adjustment


4











(164,014
)


174,325



10,311Contribution of vessels


4



18,978



189



34,808







34,997Beneficial conversion feature on the 7% convertible senior notes


12











100,536







100,536Conversion of the 7% convertible senior notes ($20m)






26,667



267



19,733







20,000Net loss


















(37,872
)


(37,872
)Share-based compensation


14



4,680



47



3,911







3,958Balance at December 31, 2009 (Successor)






79,375


$
794


$
109,554


$
(37,872
)

$
72,476    F-6




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.CONSOLIDATED STATEMENTS OF CASH
    FLOWS (All
    amounts expressed in thousands of U.S. dollars)
  Successor



PredecessorOctober 14, 2009



January 1, 2009


Year Ended


Year Endedto



to


December 31,


December 31,Notes


December 31, 2009



October 13, 2009


2008


2007Cash flows from operating activities:Net loss





$
(37,872
)


$
(125,764
)

$
(39,828
)

$
(8,733
)Adjustments to reconcile net loss to net cash (used in)/
    provided by operating activities:Depreciation and amortization


7,13



3,656




17,368



30,493



37,138Impairment loss











91,601



30,075



Provision for doubtful receivables











292



1,018



Amortization and write-off of deferred financing costs


8



1,391




555



1,333



1,308Amortization of deferred charter revenue











(1,694
)


(8,115
)


(6,010
)Amortization of back log asset






1,992












Amortization of the beneficial conversion feature


12



17,000












Change in fair value of derivative financial instruments


17



(2,554
)



(3,012
)


6,515



4,060Payments for dry-docking / special survey costs






(1,040
)



(4,306
)


(2,159
)


(6,144
)Share-based compensation


14



3,958




793



1,083



1,232Warrants compensation expense


17



3,940












Loss / (Gain) on sale of vessels











5,584



(13,569
)


Restricted cash


5








6,612







Changes in assets and liabilities


18



3,660




8,026



(3,945
)


(5,270
)Net cash (used in)/ provided by operating activities






(5,869
)



(3,945
)


2,901



17,581Cash flows from investing activities:Vessel acquisitions/ additions



















(399
)Other fixed asset acquisitions











(63
)


(27
)


(37
)Restricted cash















1,548



(1,572
)Vessels disposals











2,279



59,562



Net cash provided by/ (used in) investing activities











2,216



61,083



(2,008
)Cash flows from financing activities:Principal repayments of long-term debt


11



(57,400
)



(2,280
)


(61,090
)


Proceeds from long-term debt


11



35,840












Proceeds from 7% convertible senior notes, net


12



140,718












Restricted cash


5



(8,173
)







(8,471
)


3,227Shareholders contribution






1,139












Proceeds from issuance of capital shares















4



2Dividends paid















(2,862
)


(17,970
)Net cash provided by/ (used in) financing activities






112,124




(2,280
)


(72,419
)


(14,741
)Net increase/ (decrease) in cash and cash equivalents






106,255




(4,009
)


(8,435
)


832Cash and cash equivalentsBeginning of year











4,009



12,444



11,612End of year





$
106,255



$



$
4,009


$
12,444Supplemental cash flow information:Interest paid





$
663



$
13,140


$
13,453


$
23,211Supplemental Cash Flow information     (1)
    
    As a result of the change in
    control the predecessor assets and liabilities were adjusted to
    fair value on October 13, 2009, which amounted to an
    increase of $10,311, in shareholders equity (see
    note 4).(2)
    
    Contribution of the Grandunion Inc.
    vessels amounting to $75,289 in vessels and $37,400 in Long-term
    debt (see note 4).(3)
    
    Issuance of warrants related to
    financing costs amounting to $3,940 (see note 2).   F-7




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.Notes to the Consolidated Financial
    Statements (All
    amounts expressed in thousands of U.S. dollars or Euro, as
    indicated, except share data and where otherwise specified)
  1.
    ORGANIZATION           F-8




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
      Successor


PredecessorCountry of



Periods that


Periods thatCompany Name

Incorporation

Vessel Name

vessel operates


vessel operates1.

Land Marine S.A.

Marshall Islands

M/T High Land

10/14 /2009-12/31/2009


03/07/2003  10/13/20092.

Rider Marine S.A.

Marshall Islands

M/T High Rider

10/14 /2009  12/31/2009


03/18/2003  10/13/20093.

Ostria Waves Ltd.

Marshall Islands

M/T Ostria

10/14 /2009  12/31/2009


05/25/2004  10/13/20094.

Altius Marine S.A.

Marshall Islands

M/T
    Altius(1)

10/14 /2009  12/31/2009


06/24/2004  10/13/20095.

Fortius Marine S.A.

Marshall Islands

M/T
    Fortius(2)

10/14 /2009  12/31/2009


08/02/2004  10/13/20096.

Vintage Marine S.A.

Marshall Islands

M/T
    Arius(3)




08/05/2004  06/11/20087.

Ermina Marine Ltd.

Marshall Islands

M/T Nordanvind

10/14 /2009  12/31/2009


12/09/2004  10/13/20098.

Chinook Waves Corporation

Marshall Islands

M/T
    Chinook(4)

10/14 /2009  12/31/2009


11/30/2005  10/13/20099.

Compass Overseas Ltd.

Bermuda

M/T Stena Compass

10/14 /2009  12/31/2009


02/14/2006  10/13/200910.

Compassion Overseas Ltd.

Bermuda

M/T Stena Compassion

10/14 /2009  12/31/2009


06/16/2006  10/13/200911.

Santa Ana Waves Corporation

Marshall Islands



10/14 /2009  12/31/2009


12.

Makassar Marine Ltd.

Marshall Islands

M/V Saronikos
    Bridge(5)

10/14 /2009  12/31/2009


7/15/2005  10/13/200913.

Seine Marine Ltd.

Marshall Islands

M/V MSC
    Seine(6)

10/14 /2009  12/31/2009


6/24/2005  10/13/200914.

Jubilee Shipholding S.A.

Marshall Islands

M/V Ocean
    Hope(7)




7/26/2004  06/29/200915.

Olympic Galaxy Shipping Ltd.

Marshall Islands

M/V Energy
    1(8)




4/28/2004  06/02/200816.

Dynamic Maritime Co.

Marshall Islands

M/V MSC
    Oslo(9)




6/1/2004  04/30/200817.

Australia Holdings Ltd.

Liberia

M/V Australia

10/14 /2009  12/31/2009


18.

Brazil Holdings Ltd.

Liberia

M/V Brazil

10/14 /2009  12/31/2009


19.

China Holdings Ltd.

Liberia

M/V China

10/14 /2009  12/31/2009


20.

AMT Management Ltd.

Marshall Islands






21.

Aries Maritime (US) LLC

United States

(10)




22.

Abroad Consulting Ltd.

Marshall Islands

(11)




     (1)
    
    M/T Altius was renamed to Newlead
    Avra on February 14, 2010.(2)
    
    M/T Fortius was renamed to Newlead
    Fortune on March 11, 2010.(3)
    
    M/T Arius was sold on June 11,
    2008.(4)
    
    A memorandum of agreement (MOA) for
    the sale of the M/T Chinook was signed on February 18, 2010.(5)
    
    M/V Saronikos Bridge was sold on
    January 7, 2010.(6)
    
    M/V MSC Seine was sold on
    January 20, 2010.(7)
    
    M/V Ocean Hope was sold on
    June 29, 2009.(8)
    
    M/V Energy 1 was sold on
    June 2, 2008.(9)
    
    M/V MSC Oslo was sold on
    April 30, 2008.(10)
    
    Aries Maritime (US) LLC was
    incorporated on October 23, 2008, as a representative
    office in the United States.(11)
    
    Abroad Consulting Ltd. was
    incorporated on November 13, 2009. F-9




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Basis
    of Presentation:
      step-up
  Principles
    of Consolidation:
        Use of
    Estimates:
  and/or
 F-10




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Foreign
    Currency Transactions:
    Cash
    and Cash Equivalents:
    Restricted
    Cash:
    Trade
    Receivables, Net and Other Receivables:
    Inventories:
    Vessels
    and Other Fixed Assets, net:
     F-11




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
          Furniture, fixtures and equipment:

5 yearsComputer equipment and software:

5 years   Assets
    held for sale/Discontinued operations:
      Accounting
    for Special Survey and Dry-docking Costs:
   F-12




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    Impairment
    of Long-lived Assets:
          Backlog
    asset / Deferred charter revenue:
   F-13




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Provisions:
      Financing
    Costs:
      Interest
    Expense:
    Accounting
    for Revenue and Expenses:
     F-14




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
      Voyage
    Expenses:
    Vessel
    Operating Expenses:
    Insurance
    Claims:
    Pension
    and Retirement Benefit Obligations-Crew:
    Repairs
    and Maintenance:
    Derivative
    Financial Instruments:
     F-15




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    Share-based
    Compensation:
      Warrants:
    Segment
    Reporting:
    Loss
    per Share:
   F-16




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   3.
    RECENT
    ACCOUNTING PRONOUNCEMENTS  Fair
    Value
      Accounting
    for Business Combinations
    Determination
    of the Useful Life of Intangible Assets
    Interim
    Disclosure about Fair Value of Financial Instruments
   F-17




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    Transfers
    of Financial Assets
    Determining
    the Primary Beneficiary of a Variable Interest Entity
      FASB
    Accounting Standards Codification
    Measuring
    Liabilities at Fair Value
   F-18




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Subsequent
    Events
    4.
    RECAPITALIZATION    
    Grandunion transferred 100% ownership in three dry bulk carriers
    (which transaction included assets with a carrying value of
    approximately $75,289 and the assumption of a credit facility of
    $37,400, for a net value of approximately $35,000) to the
    Company in exchange for 18,977,778 newly issued common shares of
    the Company. These three vessels and other related assets and
    liabilities have been recorded at Grandunion historical cost
    since control over the vessels and other related assets and
    liabilities have not changed. The details of the three new dry
    bulk vessels and their related charters are set forth in the
    below table:  Name

Type

DWT


Charter-out rate per day (net)

Charter Term (years)China

Capesize


135,364


$12.75

Through March 2017 (maximum option)Australia

Capesize


172,972


$20.39

Through January 2012 (maximum option)Brazil

Capesize


151,738


$28.98 1st/2nd year
    $26.18 balance years, all
    plus profit sharing above
    $26.60.

February 2015   
    A voting agreement between Grandunion and Rocket Marine was
    entered into for which Grandunion transferred 2,666,667 of the
    Companys common shares to Rocket Marine, a company
    controlled by two of the Companys former directors and
    principal shareholders, in exchange for Grandunions
    control over the voting rights relating to the shares owned by
    Rocket Marine and its affiliates. There are 17,563,544 common
    shares subject to the voting agreement. The voting agreement is
    in place for as long as Rocket Marine owns the common shares.
    The voting agreement contains a
    lock-up
    period until December 31, 2011, which, in the case of
    transfer or sale by Rocket Marine, requires the approval of
    Grandunion.
    The Company issued $145,000 in aggregate principal amount of
    7% senior unsecured convertible notes due 2015, referred to
    herein as the 7% Notes. The 7% Notes are
    convertible into common shares at a conversion price of $0.75
    per share, subject to adjustment for certain events, including
    certain distributions by the Company of cash, debt and other
    assets, spin offs and other events. The 7% Notes are
    convertible at any time and if fully converted would result in
    the issuance of approximately 193.3 million newly issued
    common shares. The Investment Bank of Greece owns $100
    outstanding principal amount of the 7% Notes and has
    received warrants to purchase up to 5 million common shares
    at an exercise price of $2.00 per share, with an expiration date
    of October 13, 2015. The remainder ($144,900) is owned by
    Focus Maritime Corp., a company controlled by Mr. Zolotas,
    the Companys President and Chief F-19




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Executive Officer. The proceeds of the 7% Notes were used
    in part to repay, in an amount of $20,000, a portion of existing
    indebtedness and the remaining proceeds are expected to be used
    to fund vessel acquisitions and for other general corporate
    purposes. In November 2009, $20,000 of the 7% Notes were
    converted into approximately 26.7 million common shares.
    The $125,000 outstanding principal amount of our 7% Notes
    is reflected as $41,430 on our December 31, 2010 balance
    sheet due to the netting impact of a beneficial conversion
    feature (discount) described in Note 12.  
    The Companys existing syndicate of lenders entered into a
    new $221,400 facility agreement, dated October 13, 2009,
    referred to herein as the Facility Agreement, by and
    among the Company and the banks identified therein in order to
    refinance the Companys existing revolving credit facility.
    The Company assumed a $37,400 credit facility in relation to the
    three vessels transferred to it as part of the recapitalization.
    The $37,400 credit facility is payable in 20 consecutive
    quarterly instalments of $1,560 and a $6,200 repayment due in
    October 2014. Such facility bears margin of 3.5% above LIBOR.
    Subsequent to its assumption, this facility has been, and
    continues to be, periodically paid down and drawn upon to
    minimize the Companys cost of capital. As of
    December 31, 2009, the outstanding balance was $35,840.
    Subsequent to the year end, the facility was repaid in full. The
    Company pays a 1% commitment fee on the undrawn amount.         F-20




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    October 13, 2009



October 13, 2009Predecessor



SuccessorContributionsfromValue of


Grandunion





PostAssets


(at historical


Financing


RecapitalizedCarrying



Basis


and Liabilities


basis)


Activities


CarryingValue



Adjustments


Acquired


(5)


(7)


ValuesA



B


C=A+B


D


E


F=C+D+ECash and cash equivalents

$




$



$



$
1,139


$
131,544
(8)

$
132,683Restricted cash


1,898








1,898







(1,498
)(7)


400Trade receivables, net


3,721








3,721











3,721Other receivables


584








584











584Inventories


2,713








2,713



262







2,975Prepaid expenses


1,102








1,102











1,102Backlog asset







7,520
(2)


7,520











7,520Total current assets


10,018




7,520



17,538



1,401



130,046



148,985Vessels and other fixed assets, net


185,813




2,587
(1)


188,400



75,289







263,689Restricted cash



















10,672
(7)


10,672Deferred charges, net


1,018




(1,018
)(3)










8,222
(8)


8,222Total non-current assets


186,831




1,569



188,400



75,289



18,894



282,583Total assets


196,849




9,089



205,938



76,690



148,940



431,568Current portion of long-term debt


(221,430
)







(221,430
)


(6,240
)


193,430
(7)


(34,240
)Accounts payable, trade


(10,146
)







(10,146
)










(10,146
)Accrued liabilities


(11,794
)







(11,794
)


(298
)






(12,092
)Deferred income


(673
)







(673
)


(887
)






(1,560
)Derivative financial instruments


(9,439
)







(9,439
)


(2,295
)






(11,734
)Deferred charter revenue


(1,222
)



1,222
(4)














Due to managing agent


(1,599
)







(1,599
)










(1,599
)Total current liabilities


(256,303
)



1,222



(255,081
)


(9,720
)


193,430



(71,371
)Deferred Income















(813
)






(813
)Derivative financial instruments



















(3,971
)(8)


(3,971
)7% Convertible senior notes, net



















(44,433
)(8)


(44,433
)Long-term debt















(31,160
)


(193,430
)(7)


(224,590
)Total non-current liabilities















(31,973
)


(241,834
)


(273,807
)Total liabilities


(256,303
)



1,222



(255,081
)


(41,693
)


(48,404
)


(345,178
)Share capital


(291
)







(291
)


(189
)






(480
)Additional paid-in capital


(114,580
)







49,434



(34,808
)


(100,536
)


(85,910
)Change in control- basis adjustment







(10,311
)














Accumulated deficit


174,325
(6)



















Total shareholders equity


59,454




(10,311
)


49,143



(34,997
)


(100,536
)


(86,390
)Total liabilities and shareholders equity

$
(196,849
)


$
(9,089
)

$
(205,938
)

$
(76,690
)

$
(148,940
)

$
(431,568
)     (1)
    
    Vessels and other fixed assets, net
    were adjusted to fair market value.(2)
    
    Backlog asset which relates to
    charter-out
    contracts were determined to have a fair value. F-21




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   (3)
    
    Deferred charges were valued at $0.(4)
    
    Deferred charter revenue was valued
    at $0.(5)
    
    The assets and liabilities of the
    three vessel owning companies brought into the Company from
    Grandunion were recorded at their historical cost.(6)
    
    Accumulated deficit was transferred
    to additional paid-in capital.(7)
    
    The Companys existing
    syndicate of lenders entered into the new Facility Agreement,
    dated October 13, 2009, which resulted in the
    classification of the debt according to the contractual terms.
    As a result of the new Facility agreement the Company complied
    with its covenants, note 11, and on the recapitalization
    date the Companys debt was reclassified between its long
    and short term components based on its contractual terms, while
    the agreement requires restricted cash of 5%.(8)
    
    Represents the issuance of the
    7% Notes described at the beginning of this note, net of
    discounts. For the detailed components of the 7% Notes see
    discussion in notes 2 (warrants) and 12.  5.
    RESTRICTED
    CASH  Successor



PredecessorAs of December 31,



As of December 31,2009



2008Retention account

$




$
2,054Minimum Liquidity


403




6,436Other







20Short term restricted account


403




8,510Minimum Liquidity


9,668




Long term restricted account


9,668




$
10,071



$
8,510     6.
    INVENTORIES  Successor



PredecessorAs of December 31,



As of December 31,2009



2008Lubricants

$
953



$
722Bunkers


2,075




361Provisions (Stores)


57




141$
3,085



$
1,224  F-22




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   7.
    VESSELS
    AND OTHER FIXED ASSETS, NET  Other fixed





Special


Dry-Cost

assets


Vessels


survey


docking


TotalPREDECESSORBalance at December 31, 2007

$
183


$
479,172


$
7,856


$
17,321


$
504,532Additions


27







1,019



1,140



2,186Disposals  Discontinued operations (note 22)






(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



400,368Additions


63







1,358



4,761



6,182Disposals  Discontinued operations (note 22)






(17,224
)


(421
)


(484
)


(18,129
)Impairment loss (note 2)






(91,601
)










(91,601
)Balance at October 13, 2009


273



271,269



8,990



16,288



296,820SUCCESSORAdditions














1,333



1,333Additions  Contribution from Grandunion






98,985







5,767



104,752Change in control  basis adjustment


(273
)


(82,870
)


(8,990
)


(16,288
)


(108,421
)Transfer to assets held for sale (note 2, 22)






(8,400
)










(8,400
)Balance at December 31, 2009






278,984







7,100



286,084Accumulated Depreciation and AmortizationPREDECESSORBalance 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
)Depreciation and Amortization of the year*


(174
)


(14,073
)


(1,071
)


(2,050
)


(17,368
)Disposals






9,361



421



484



10,266Balance at October 13, 2009


(273
)


(94,184
)


(5,571
)


(10,979
)


(111,007
)SUCCESSORAdditions  Contribution from Grandunion






(27,894
)






(1,569
)


(29,463
)Change in control  basis adjustment


273



94,184



5,571



10,979



111,007Depreciation and Amortization of the year






(3,187
)






(469
)


(3,656
)Transfer to assets held for sale (note 2, 22)






150











150Balance at December 31, 2009






(30,931
)






(2,038
)


(32,969
)PREDECESSORNet 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



296,463Net book value  October 13, 2009






177,085



3,419



5,309



185,813SUCCESSORNet book value  December 31, 2009

$



$
248,053


$



$
5,062


$
253,115  F-23




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    *
    
    Depreciation and amortization
    expenses in the Consolidated Statements of Operations for
    the period from October 14, 2009 to December 31, 2009
    includes an amount of approximately $1,300, which represents the
    amortization of Backlog assets.          8.
    DEFERRED
    CHARGES  Financing CostsNet Book Value at December 31, 2006 (Predecessor)

$
4,214Amortization


(1,308
)Net Book Value at December 31, 2007 (Predecessor)


2,906Amortization


(850
)Deferred charges written-off


(483
)Net Book Value at December 31, 2008 (Predecessor)


1,573Amortization


(555
)Net Book Value at October 13, 2009 (Predecessor)


1,018Change in control  basis adjustment


(1,018
)Additions


8,222Amortization


(1,391
)Net Book Value at December 31, 2009 (Successor)

$
6,831  F-24




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   9.
    ACCOUNTS
    PAYABLE, TRADE  Successor



PredecessorAs of December 31,



As of December 31,2009



2008Suppliers

$
6,316



$
1,368Agents


261




159Other creditors


4,471




2,074$
11,048



$
3,601   10.
    ACCRUED
    LIABILITIES  Successor


PredecessorAs of December 31,


As of December 31,2009


2008Interest

$
5,267


$
3,366Claims


4,152



815Other accrued expenses


7,538



3,595$
16,957


$
7,776   11.
    LONG-TERM
    DEBT  Senior
    secured credit agreement
    $37,400Facility


CreditDescription

Agreement


Facility


TotalLong-term


193,430



29,600



223,030Short-term


8,000



6,240



14,240Total


201,430



35,840



237,270     (a)
    Facility
    Agreement   F-25




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
      
    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 $200,000 in
    accordance with the Fifth Supplemental Agreement;
    A working capital balance, including the $221,400 of debt
    reflected as current, of not less than $0; and
    The minimum liquidity requirement consisting of free cash and
    cash equivalents.          
    1.75% if the Companys total shareholders equity
    divided by the Companys total assets, adjusting the book
    value of the Companys fleet to its market value, is equal
    to or greater than and 50%;
    2.75% if the Companys total shareholders equity
    divided by the Companys total assets, adjusting the book
    value of the Companys fleet to its market value, is equal
    to or greater than 27.5% but less than 50%; and
    3.25% if the Companys total shareholders equity
    divided by the Companys total assets, adjusting the book
    value of the Companys fleet to its market value, is less
    than 27.5%.   F-26




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    
    the Companys shareholders equity as a percentage of
    the Companys total assets, adjusting the book value of the
    Companys fleet to its market value, must be no less than:      
    maintain, on a consolidated basis on each financial quarter,
    working capital of not less than zero dollars ($0);
    the minimum liquidity requirement, at five percent of the
    outstanding loan:
    the ratio of EBITDA (earnings before interest, taxes,
    depreciation and amortization) to interest expense must be no
    less than;      (b)
    $37,400
    Credit Facility      Successor


PredecessorOctober 14,


January 1,


Predecessor


Predecessor2009 to


2009 to


Year Ended


Year EndedDecember 31,


October 13,


December 31,


December 31,Continuing Operations

2009


2009


2008


2007Interest expense

$
5,416


$
9,711


$
13,413


$
15,080Amortization of deferred charges


1,391



555



850



1,308Amortization of the beneficial conversion feature (see
    note 12)


17,000











Deferred charges written off










483



Other fees


189



662



995



578$
23,996


$
10,928


$
15,741


$
16,966    F-27




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    SuccessorYear Ended December 31, 20092010

$
14,2402011


14,2402012


14,2402013


14,2402014 and thereafter


180,310$
237,270   12.
    7% CONVERTIBLE
    SENIOR NOTES        815-10-15
 F-28




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  815-10-15
      SuccessorDecember 31,20097% Convertible Senior Notes  initially issued

$
(145,000
)Partial conversion of the convertible senior notes


20,0007% Convertible Senior Notes  outstanding


(125,000
)Beneficial conversion feature


100,536Amortization of the beneficial conversion feature


(17,000
)Make whole fundamental change


347% Convertible Senior Notes

$
(41,430
)   13.
    BACK LOG
    ASSET / DEFERRED CHARTER REVENUE  December 31, 2006 (Predecessor)

$
17,041Amortization


(6,010
)December 31, 2007 (Predecessor)


11,031Amortization


(8,115
)December 31, 2008 (Predecessor)


2,916Amortization


(1,694
)October 13, 2009 (Predecessor)


1,222Change in control  basis adjustment*


6,298Amortization


(1,992
)December 31, 2009 (Successor)


5,528Short-term


5,528Long-term


$
5,528     *
    
    On the date of recapitalization the remaining balance of
    deferred charter revenue of $1,222 was written off (see
    note 4). F-29




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   14.
    SHARE-BASED
    COMPENSATION  Equity
    Incentive Plan
          Restricted
    Common Shares
     F-30




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    WeightedWeighted


AverageNumber of


Average


Vesting PeriodShares


Fair Values


(Years)Outstanding and non-vested shares, at January 1, 2007
    (Predecessor)





$




Granted(1)


200,000


$
8.64



0.8Vested


(100,000
)

$
8.64



Outstanding and non-vested shares, as of December 31,
    2007 (Predecessor)


100,000


$
8.64



0.8Granted(2)


345,000


$
3.24



1.2Vested


(205,000
)

$
5.84



Outstanding and non-vested shares, as of December 31,
    2008 (Predecessor)


240,000


$
3.28



1.6Granted(3)


87,500


$
1.27



0.0Vested


(327,500
)

$
2.74



Outstanding and non-vested shares, as of October 13,
    2009 (Predecessor)










0.0Granted(4)


4,680,000


$
1.26



0.8Vested


(2,500,000
)

$
1.27



Outstanding and non-vested shares, as of December 31,
    2009 (Successor)


2,180,000


$
1.25



1.8     (1)
    
    100,000 shares had immediate
    vesting and 100,000 shares were vested in April 2008.(2)
    
    225,000 shares vest over a
    three-year period, 100,000 shares had immediate vesting and
    20,000 shares vests over a two-year period. Vesting for
    these shares was accelerated on the date of recapitalization.(3)
    
    Vested on the date of the
    recapitalization.(4)
    
    2,500,000 shares had immediate
    vesting, 2 million have a two-year vesting schedule (at
    January 1, 2011, and 2012), while 180,000 vest in three
    years (at January 1, 2011, 2012, and 2013).   F-31




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Share
    options
    Weighted


Weighted


WeightedNumber of


Average


Average Fair


average VestingOptions


Exercise Price


Value


Period (years)Outstanding, at January 1, 2008 (Predecessor)














Granted(1)


300,000


$
8.67


$
0.52



3.0Exercised














Forfeited














Expired














Outstanding, as of December 31, 2008 (Predecessor)


300,000


$
8.67


$
0.52



3.0Granted














Exercised














Forfeited














Expired














Outstanding, as of October 13, 2009  (Predecessor)


300,000


$
8.67


$
0.52



0.0Granted(2)


3,000,000


$
1.65


$
0.52



3.0Exercised














Forfeited














Expired














Outstanding, as of December 31, 2009 (Successor)


3,300,000


$
2.29


$
0.52



3.0Exercisable at December 31, 2009


550,000


$
5.48


$
0.52



     (1)
    
    In 2008, the Company granted to
    300,000 share options to purchase common shares subject to
    a vesting period of three annual equal installments. The fair
    value of these share 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 the share
    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 share
    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
    share option amounted to $0.45. No share options were granted
    during the year ended December 31, 2007. On
    October 13, 2009, all these shares were vested due to the
    recapitalization.(2)
    
    In 2009, the Company granted
    3,000,000 share options to purchase common shares, which
    vest equally over 36 months and are subject to accelerated
    vesting upon certain circumstances. The fair value of these
    share 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 (through five years from October 13, 2009).
    The assumptions utilized in the Binomial lattice valuation model
    for the share option included a dividend yield of 0% and an
    expected volatility of 90%. The risk-free interest rate was 2.3%
    and the weighted average fair value per share option amounted to
    $0.52.   F-32




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
        15.
    COMMON
    SHARES AND DIVIDENDS  Common
    Shares
    Dividends
        16.
    SEGMENT
    INFORMATION   F-33




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    Wet


Dry


TotalSuccessor



Predecessor


Successor



Predecessor


Successor



PredecessorOctober 14,



January 1,


October 14,



January 1,


October 14,



January 1,to



to


to



to


to



toDecember 31,



October 13,


December 31,



October 13,


December 31,



October 13,2009



2009


2009



2009


2009



2009Operating revenue

$
9,201



$
33,564


$
4,895



$



$
14,096



$
33,564Commissions


(292
)



(769
)


(115
)







(407
)



(769
)Voyage expenses


(4,548
)



(8,574
)


(86
)







(4,634
)



(8,574
)Vessel operating expenses


(4,694
)



(22,681
)


(1,836
)







(6,530
)



(22,681
)General & administrative expenses


(1,766
)



(4,553
)


(540
)







(2,306
)



(4,553
)Management fees


(194
)



(900
)


(121
)







(315
)



(900
)Other income, net







40

















40Net operating (loss) / income before depreciation and
    amortisation


(2,293
)



(3,873
)


2,197








(96
)



(3,873
)Depreciation and amortization expenses


(2,989
)



(11,813
)


(1,855
)







(4,844
)



(11,813
)Impairment loss







(68,042
)
















(68,042
)Net operating (loss) / income


(5,282
)



(83,728
)


342








(4,940
)



(83,728
)Transaction costs


(6,702
)



(3,442
)


(2,234
)







(8,936
)



(3,442
)Compensation costs


(587
)



(371
)


(196
)







(783
)



(371
)Interest and finance expenses, net


(18,372
)



(10,928
)


(5,624
)







(23,996
)



(10,928
)Interest income


177




9



59








236




9Change in fair value of derivatives


1,537




3,012



1,017








2,554




3,012Net loss from continuing operations

$
(29,229
)


$
(95,448
)

$
(6,636
)


$



$
(35,865
)


$
(95,448
)Total Assets

$
323,056







$
76,229







$
399,285   F-34




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Predecessor


PredecessorWet


Dry


TotalYear Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2008


2008


2008Operating revenue

$
56,519


$



$
56,519Commissions


(689
)






(689
)Voyage expenses


(6,323
)






(6,323
)Vessel operating expenses


(19,798
)






(19,798
)General & administrative expenses


(6,733
)






(6,733
)Management fees


(1,404
)






(1,404
)Other income, net


2







2Net operating income before depreciation and amortisation


21,574







21,574Depreciation and amortization expenses


(15,040
)






(15,040
)Net operating income


6,534







6,534Compensation costs


(1,083
)






(1,083
)Interest and finance expenses, net


(15,741
)






(15,741
)Interest income


232







232Change in fair value of derivatives


(6,515
)






(6,515
)Net loss from continuing operations

$
(16,573
)

$



$
(16,573
)Total Assets

$
317,777


$



$
317,777   F-35




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Predecessor


PredecessorWet


Dry


TotalYear Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2007


2007Operating revenue

$
55,774


$



$
55,774Commissions


(551
)






(551
)Voyage expenses Vessel operating expenses


(2,713
)






(2,713
)Vessel operating expenses


(17,489
)






(17,489
)General & administrative expenses


(4,046
)






(4,046
)Management fees


(1,243
)






(1,243
)Other expenses, net


(11
)






(11
)Net operating income before depreciation and amortization


29,721







29,721Depreciation and amortization expenses


(14,029
)






(14,029
)Net operating income


15,692







15.692Compensation costs


(1,232
)






(1,232
)Interest and finance expenses, net


(16,966
)






(16,966
)Interest income


630







630Change in fair value of derivatives


(4,060
)






(4,060
)Net loss from continuing operations

$
(5,936
)

$



$
(5,936
)Total Assets

$
425,491


$



$
425,491   Operating
    Revenue by Charterers
            17.
    FINANCIAL
    INSTRUMENTS   F-36




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  Fair
    Values
    Warrant
    Derivative Liability
          Interest Rate Risk:
  Concentration
    of Credit Risk
    Interest
    Rate Swaps
     F-37




---



##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
      Counter-party
  Fair ValueAs of



As ofValue


Termination


Notional


Fixed


Floating

December 31,



December 31,Interest rate swaps

Date


Date


Amount


Rate


Rate

2009



2008SMBC Bank


3/7/2006



4/4/2011


$
20,000



5.63
%

3-month
    LIBOR

$
(1,475
)


$
(1,918
)Bank of Ireland


3/7/2006



4/4/2011


$
20,000



5.63
%

3-month
    LIBOR


(1,484
)



(1,925
)HSH Nordbank


3/7/2006



4/4/2011


$
20,000



5.63
%

3-month
    LIBOR


(1,483
)



(1,924
)Nordea Bank


3/7/2006



4/4/2011


$
20,000



5.63
%

3-month
    LIBOR


(1,481
)



(1,923
)Bank of Scotland


3/7/2006



4/4/2011


$
20,000



5.63
%

3-month
    LIBOR


(1,481
)



(1,941
)Nordea Bank*


3/4/2008



4/4/2011


$
23,333



4.14
%

3-month
    LIBOR


(1,195
)



(1,356
)Bank of Scotland**


3/4/2008



3/4/2011


$
46,667



4.285
%

3-month
    LIBOR


(1,249
)



(1,464
)Marfin Egnatia Bank***


2/9/2009



2/9/2014


$
37,400



4.08
%

3-month
    LIBOR


(1,926
)



$
(11,774
)


$
(12,451
)   Fair ValueAs of



As ofDecember 31,



December 31,2009



2008Short-term

$
(9,687
)


$
(12,451
)Long-term


(2,087
)



$
(11,774
)


$
(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
%  ***
    
    As part of the contribution from
    Grandunion on October 13, 2009, the Company assumed a
    $37,400 interest rate swap by Marfin Egnatia Bank.   F-38




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    Fair
    Value Hierarchy
      Quoted Prices


Significantin Active


Other


SignificantMarkets for


Observable


UnobservableIdentical Assets


Inputs


InputsTotal


(Level 1)


(Level 2)


(Level 3)December 31, 2008AssetsVessel Valuations

$
39,500


$



$
39,500


$
LiabilitiesInterest rate swaps

$
12,451


$



$
12,451


$
December 31, 2009LiabilitiesInterest rate swaps

$
11,774


$



$
11,774


$
Warrants

$
5,273


$



$
5,273


$
Make Whole Fundamental Change

$
47


$



$
47


$
      F-39




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  18.
    CHANGES
    IN ASSETS AND LIABILITIES  Successor



PredecessorOctober 14,



January 1,2009 to



2009 to


Year Ended


Year EndedDecember 31,



October 13,


December 31,


December 31,2009



2009


2008


2007(Increase) decrease in :Trade receivables

$
(783
)


$
(1,480
)

$
(1,332
)

$
(259
)Other receivables


89




1,704



(1,256
)


(861
)Inventories


(110
)



(1,489
)


745



(473
)Prepaid expenses


20




(135
)


714



(1,343
)Due from managing agent


455




1,759



654



(370
)Due from/to related parties







49



(643
)


3,089Increase (decrease) in :Accounts payable, trade


991




6,546



(4,822
)


(3,405
)Accrued liabilities


4,571




2,206



2,479



(1,992
)Deferred income


(1,573
)



(1,134
)


(484
)


344Changes in Assets and Liabilities

$
3,660



$
8,026


$
(3,945
)

$
(5,270
)   19.
    COMMITMENTS
    AND CONTINGENT LIABILITIES  (i)
    Rental
    agreement        SuccessorYear Ended December 31, 20092010

$
1102011


1102012


1102013


1102014 and thereafter


873TOTAL

$
1,313  F-40




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
  (ii)
    Management
    agreements  Technical
    Ship Management Agreements
    Commercial
    Ship Management Agreements
    Contingencies
    
    The charterers of the Newlead Avra (formerly 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; and F-41




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   c)
    Damages suffered by
    sub-charterers
    of the vessel resulting from a grounding at Houston in October
    2007.  
    The charterers of the Newlead Fortune (formerly 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:  a)
    Damages as a result of a change in management and the consequent
    dispute regarding oil major approval from October 2007; andb)
    Damages resulting from the creation of Hydrogen Sulphide in the
    vessels tanks at two ports in the United States.      20.
    TAXATION    U.S.-source
   F-42




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
   21.
    Transactions
    Involving Related Parties  Management
    services and commissions
      Contributions
    under management agreements
    Crewing
    Rental of
    equipment
    SeaBreeze
    Newfront 
    Stamford
   F-43




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
    Terra
    Stabile A.E.
  12-year
  Domina
    Petridou O.E.
  10-year
  Amounts
    paid to other related parties
    Amounts
    due (to)/ from managing agent
    Successor


PredecessorAs of December 31,


As of December 31,2009


2008International Tanker Management

$
(1,812
)

$
27Wilhelmsen Ship Management


8



407Newfront Shipping S.A.


40



Stamford Navigation Inc


(234
)


Ernst Jacob Ship Management GmbH


(56
)


(274
)Total

$
(2,054
)

$
160   22.
    DISCONTINUED
    OPERATIONS   F-44




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##### Table of Contents



NEWLEAD
    HOLDINGS LTD.
  Notes to
    the Consolidated Financial Statements
 (All amounts
    expressed in thousands of U.S. dollars or Euro, as indicated,
    except share data and where otherwise specified)
      Successor

PredecessorOctober 14,

January 1,

Predecessor

Predecessor2009 to

2009 to

Year Ended

Year EndedDecember 31,

October 13,

December 31,

December 31,2009

2009

2008

2007Operating Revenues

$
1,591


$
11,679


$
22,777


$
37,364Net loss

$
(2,007
)

$
(30,316
)

$
(23,255
)

$
(2,797
)     23.
    SUBSEQUENT
    EVENTS               F-45