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UNITEDSTATESSECURITIES AND EXCHANGECOMMISSION

Washington, D.C.20549

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FORM10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OFTHE SECURITIES EXCHANGE ACT OF1934

For the Fiscal Year Ended December31,2006

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Commission FileNumber 000–51366

EAGLE BULK SHIPPINGINC.

(Exact name of Registrant asspecified in its charter)

|                                                              |  |  |                                     |
|--------------------------------------------------------------|--|--|-------------------------------------|
| Republicof the MarshallIslands                               |  |  | 98–0453513                    |
| (Stateor other jurisdiction of incorporation ororganization) |  |  | (I.R.S. Employer IdentificationNo.) |
|                                                              |

Registrant’sAddress:477 Madison AvenueNew York, New York10022

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

Securities registered pursuantto Section 12(b) of the Act: Common Stock, par value $.01 pershare, The Nasdaq Global SelectMarket

Securities registered pursuant toSection 12(g) of the Act:

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

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

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

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-Kis not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. 

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

|                        |  |  |                                           |  |  |                       |
|------------------------|--|--|-------------------------------------------|--|--|-----------------------|
| Largeaccelerated filer |  |  |     Accelerated filer |  |  | Non-Accelerated filer |
|                        |

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

The aggregate market value of the CommonStock held by non-affiliates of the registrant on June30,  2006, the last business day of the registrant’s mostrecently completed second quarter, was $511,575,000, based on theclosing price of $14.25 per share on the NASDAQ Stock Exchange on thatdate. (For this purpose, all outstanding shares of Common Stock havebeen considered held by non-affiliates, other than the sharesbeneficially owned by directors, officers and certain 5%shareholders of the registrant; without conceding that any of theexcluded parties are ‘‘affiliates’’ of theregistrant for purposes of the federal securities laws.)

As ofFebruary  27,  2007, 35,900,001 shares of theregistrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BYREFERENCE

Portions of the registrant’s definitiveproxy statement to be filed by the registrant within 120 days ofDecember  31,  2006 in connection with its 2007 AnnualMeeting of Shareholders are incorporated by reference into Part III ofthis Form 10-K.

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TABLEOFCONTENTS

|         |  |  |                                                                                                                  |  |  |      |  |        |  |
|---------|--|--|------------------------------------------------------------------------------------------------------------------|--|--|------|--|--------|--|
|    |  |  |                                                                                                             |  |  | Page |
| PARTI   |  |  |                                                                                                             |  |  |      |  |   |  |
| Item1.  |  |  | Business                                                                                                         |  |  |      |  | 1      |  |
| Item1A. |  |  | Risk Factors                                                                                                     |  |  |      |  | 19     |  |
| Item1B. |  |  | Unresolved StaffComments                                                                                         |  |  |      |  | 28     |  |
| Item2.  |  |  | Properties                                                                                                       |  |  |      |  | 28     |  |
| Item3.  |  |  | LegalProceedings                                                                                                 |  |  |      |  | 28     |  |
| Item4.  |  |  | Submission of Matters to a Vote of SecurityHolders                                                               |  |  |      |  | 28     |  |
| PARTII  |  |  |                                                                                                             |  |  |      |  |   |  |
| Item5.  |  |  | Market for Registrant’s CommonEquity, Related Stockholder Matters and Issuer Purchases of EquitySecurities |  |  |      |  | 29     |  |
| Item6.  |  |  | Selected FinancialData                                                                                           |  |  |      |  | 30     |  |
| Item7.  |  |  | Management’s Discussion and Analysis of FinancialCondition and Results ofOperations                        |  |  |      |  | 32     |  |
| Item7A. |  |  | Quantitative and Qualitative Disclosures about MarketRisks                                                       |  |  |      |  | 54     |  |
| Item 8. |  |  | FinancialStatements and SupplementaryData                                                                        |  |  |      |  | 55     |  |
| Item 9. |  |  | Changes inand Disagreements with Accountants on Accounting and FinancialDisclosure                               |  |  |      |  | 55     |  |
| Item9A. |  |  | Controls andProcedures                                                                                           |  |  |      |  | 55     |  |
| Item9B. |  |  | OtherInformation                                                                                                 |  |  |      |  | 56     |  |
| PARTIII |  |  |                                                                                                             |  |  |      |  |   |  |
| Item10. |  |  | Directors, Executive Officers, and CorporateGovernance                                                           |  |  |      |  | 58     |  |
| Item11. |  |  | ExecutiveCompensation                                                                                            |  |  |      |  | 58     |  |
| Item12. |  |  | Security Ownership of Certain Beneficial Owners andManagement and Related StockholderMatters                     |  |  |      |  | 58     |  |
| Item13. |  |  | Certain Relationships and Related Transactions, andDirector Independence                                         |  |  |      |  | 58     |  |
| Item14. |  |  | Principal Accounting Fees andServices                                                                            |  |  |      |  | 58     |  |
| PARTIV  |  |  |                                                                                                             |  |  |      |  |   |  |
| Item15. |  |  | Exhibits, Financial StatementSchedules                                                                           |  |  |      |  | 59     |  |
|    |  |  | Signatures                                                                                                       |  |  |      |  | 60     |  |
|         |

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Table of Contents

PARTI

ITEM 1.    BUSINESS

Overview

EagleBulk Shipping Inc. (the ‘‘Company’’,‘‘we’’, ‘‘us’’,or ‘‘our’’), incorporated under the laws ofthe Republic of the Marshall Islands and headquartered in New YorkCity, is engaged primarily in the ocean transportation of a broad rangeof major and minor bulk cargoes, including iron ore, coal, grain,cement and fertilizer, along worldwide shipping routes. As ofDecember  31,  2006, we owned and operated a modern fleetof 16 oceangoing vessels with a combined carrying capacity of 796,663deadweight tons and an average age of 6 years. We have alsocontracted for the construction of two Supramax vessels which areexpected to be delivered to us in early 2010.

We are the largestU.S. based owner of Handymax dry bulk vessels. Handymax dry bulkvessels range in size from 35,000 to 60,000 dwt. Twelve of the 16vessels in our operating fleet are classed as Supramax dry bulkvessels, a class of Handymax dry bulk vessels, which range in size from50,000 dwt to 60,000 dwt. These vessels have the cargo loading andunloading flexibility of on-board cranes while offering cargo carryingcapacities approaching that of Panamax dry bulk vessels, which range insize from 60,000 to 100,000 dwt and must rely on port facilities toload and offload their cargoes. We believe that the cargo handlingflexibility and cargo carrying capacity of the Supramax class vesselsmake them attractive to charterers.

A glossary of shipping terms(the ‘‘Glossary’’) that should be used as areference when reading this Annual Report on Form 10-K begins on page19. Capitalized terms that are used in this Annual Report are eitherdefined when they are first used or in theGlossary.

Forward-Looking Statements 

This Form10-K contains forward-looking statements regarding the outlook for drycargo markets, and the Company’s prospects. There are a number offactors, risks and uncertainties that could cause actual results todiffer from the expectations reflected in these forward-lookingstatements, including changes in production of or demand for major andminor bulk commodities, either globally or in particular regions;greater than anticipated levels of vessel newbuilding orders or lessthan anticipated rates of scrapping of older vessels; changes intrading patterns for particular commodities significantly impactingoverall tonnage requirements; changes in the rates of growth of theworld and various regional economies; risks incident to vesseloperation, including discharge of pollutants; unanticipated changes inlaws and regulations; increases in costs of operation; the availabilityto the Company of suitable vessels for acquisition or chartering-in onterms it deems favorable; the ability to attract and retain customers.This Form 10-K also includes statistical data regarding world dry bulkfleet and orderbook and fleet age. We generated some of these datainternally, and some were obtained from independent industrypublications and reports that we believe to be reliable sources. Wehave not independently verified these data nor sought the consent ofany organizations to refer to their reports in this Annual Report. TheCompany assumes no obligation to update or revise any forward-lookingstatements. Forward-looking statements in this Form 10-K and writtenand oral forward-looking statements attributable to the Company or itsrepresentatives after the date of this Form 10-K are qualified in theirentirety by the cautionary statement contained in this paragraph and inother reports hereafter filed by the Company with the Securities andExchange Commission.

Corporate Structure

EagleBulk Shipping Inc. is a holding company incorporated under thelaws of the Republic of the Marshall Islands in 2005. Following ourincorporation, we merged with Eagle Holdings LLC, a Marshall Islandslimited liability company formed on January 26, 2005, and becamea wholly-owned subsidiary of Eagle Ventures LLC, or Eagle Ventures, aMarshall Islands limited liability company. Eagle Ventures is owned byKelso Investment Associates VII, L.P. and KEP VI, LLC, both affiliatesof Kelso & Company, L.P., or Kelso, members of ourmanagement, a director, and outside investors. Eagle Ventures currentlyowns approximately 0.4% of our outstanding common stock.

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We carry out the commercial and strategicmanagement of our fleet through our wholly-owned subsidiary, EagleShipping International (USA) LLC, a Marshall Islands limited liabilitycompany that was formed in January 2005 and maintains itsprinciple executive offices in New York City. Each of our vessels isowned by us through a separate wholly owned Marshall Islands limitedliability company.

We maintain our principal executive officesat 477 Madison Avenue, New York, New York 10022. Our telephone numberat that address is (212) 785-2500. Our website address iswww.eagleships.com. Information contained on our website does notconstitute part of this annual report.

Management of OurFleet

Our New York City based management team, with anaverage of 20 years of experience in the shipping industryprimarily focused on the Handymax and Handysize dry bulk sectors,undertakes all commercial and strategic management of our fleet andsupervises the technical management of our vessels. The technicalmanagement of our fleet is provided by an unaffiliated third party,V.Ships, which we believe is the world’s largest provider ofindependent ship management and related services, and which we refer toas our technical manager. The management of our fleet includes thefollowing functions:

|  |              |                                                                                                                      |
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|  | •  | Strategicmanagement.    We locate, obtain financing and insurance for,purchase and sell vessels. |

|  |              |                                                                                                                                |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Commercialmanagement.    We obtain employment for our vessels and manageour relationships with charterers. |

|  |              |                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Technical management.    Thetechnical manager performs day-to-day operations and maintenance of ourvessels. |

Our Competitive Strengths

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

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|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | A fleet of 16 Handymax dry bulkvessels.    We are the largest U.S. based owner of Handymax drybulk vessels. We view Handymax vessels as a highly attractive sector ofthe dry bulk shipping industry relative to larger vessel sectors due totheir: |

|  |               |                                     |
|--|---------------|-------------------------------------|
|  | –  | reduced volatility in charterrates; |

|  |               |                                 |
|--|---------------|---------------------------------|
|  | –  | increased operatingflexibility; |

|  |               |                              |
|--|---------------|------------------------------|
|  | –  | ability to access moreports; |

|  |               |                                                      |
|--|---------------|------------------------------------------------------|
|  | –  | ability to carry a more diverserange of cargoes; and |

|  |               |                       |
|--|---------------|-----------------------|
|  | –  | broader customerbase. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | A modern, high qualityfleet.    The 16 Handymax vessels in our operating fleetat December  31,  2006 had an average age of onlyapproximately 6 years as of that time, compared to an averageage for the world Handymax dry bulk fleet of over 15 years. Webelieve that owning a modern, high quality fleet reduces operatingcosts, improves safety and provides us with a competitive advantage insecuring employment for our vessels. Our fleet was built to highstandards and all of our vessels were built at leading Japaneseshipyards, including Mitsui Engineering and ShipbuildingCo., Ltd., which built 8 of our vessels, and Oshima ShipbuildingCo., Ltd., which built 3 of our vessels. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | A fleet of sister and similarships.    Our fleet includes 8 identical sister ships built atthe Mitsui shipyard based upon the same design specifications and 3similar ships built at the Oshima shipyard that use many of the sameparts and equipment. Operating sister and similar ships provides uswith operational and scheduling flexibility, efficiencies in employeetraining and lower inventory and maintenance expenses. We believe thatthis should allow us both to increase revenue and lower operatingcosts. |

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|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Amedium-to long-term fixed-rate time charter program.    We haveentered into time charters for all of our vessels. Our charters rangein length from one to three years and provide for fixed semi-monthlypayments in advance. We believe that this structure providessignificant visibility to our future financial results and allows us totake advantage of the stable cash flows and high utilization rates thatare associated with medium- to long-term time charters. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | A strong balance sheet with a lowlevel of indebtedness.    We used substantially all of the netproceeds of our initial public offering, which we completed onJune 28, 2005, to repay the majority of our outstandingindebtedness at that time. We also used a substantial portion of thenet proceeds of our follow-on public offering, which we completed onOctober  28,  2005, to repay part of our outstandingindebtedness at that time. Since then, we have used a combination ofdebt, increasing the size of our credit facility in July andNovember  2006, and equity which was issued in a June  2006offering to fund additional vessel acquisitions. We believe that ourrelatively low level of outstanding indebtedness strengthens ourbalance sheet and increases the amount of funds we may draw under ourenhanced credit facility in connection with future acquisitions. |

Our Business Strategy

Our strategy is to manage andexpand our fleet in a manner that enables us to pay attractivedividends to our stockholders. To accomplish this objective, we intendto:

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Operate a modern, highquality fleet of Handymax dry bulk vessels.    We believe thatour ability to maintain and increase our customer base will dependlargely on the quality of our fleet. We believe that owning a modern,high quality fleet reduces operating costs, improves safety andprovides us with a competitive advantage in obtaining employment forour vessels. We will carry out regular inspections and maintenance ofour fleet in order to maintain its high quality. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Pursue medium-to long-termcharters with the flexibility to pursue short-term charters in thefuture.    We have chartered our vessels pursuant to acombination of one-to three-year time charters that provide stable cashflows. Our strategy is to charter our vessels primarily pursuant to oneto three-year time charters to allow us to take advantage of the stablecash flow and high utilization rates that are associated with medium tolong-term time charters. Our use of time charters also mitigates inpart the seasonality of the spot market business. Generally, spotmarkets are strongest in the first and fourth quarters of the calendaryear and weaker in the second and third quarters. We have entered intotime charters for all of our vessels which range in length from one tothree years and provide for fixed semi-monthly payments in advance.While we remain focused on securing charters with fixed base rates, wehave also entered into contracts with fixed minimum rates and profitsharing arrangements, enabling us to benefit from an increasing rateenvironment while still minimizing downside risk. We regularly monitorthe dry bulk shipping market and based on market conditions we mayconsider taking advantage of short-term charter rates. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Maintain low cost, highlyefficient operations.    We believe that we are acost-efficient and reliable owner and operator of dry bulk vessels dueto the young age of our vessels, our groups of sister and similar shipsand the strength of our management team. We intend to actively monitorand control vessel operating expenses while maintaining the highquality of our fleet through regular inspection and maintenanceprograms. We also intend to take advantage of savings that result fromthe economies of scale that the third party technical manager providesus through access to bulk purchasing of supplies, quality crew membersand a global service network of engineers, naval architects and portcaptains. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Expand our fleetthrough selective acquisitions of dry bulk vessels.    Weintend to continue to grow our fleet through timely and selectiveacquisitions of additional vessels in a manner that is accretive toearnings and dividends per share. We expect to focus primarily in theHandymax sector of the dry bulk shipping industry, and in particular onSupramax class vessels. We may also consider acquisitions of othersizes of dry bulk vessels, including Handysize vessels, but do notintend to acquire tankers. |

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|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Maintaina strong balance sheet with low leverage.    We usedsubstantially all of the net proceeds of our initial public offering,which we completed on June 28, 2005, to repay the majority ofour outstanding indebtedness at that time. We also used a substantialportion of the net proceeds of our follow-on public offering, which wecompleted on October  28,  2005, to repay part of ouroutstanding indebtedness at that time. We increased the size of ourcredit facility in July and November  2006, and used acombination of debt and equity, which was issued in a June  2006offering, to fund additional vessel acquisitions. In the future, weexpect to draw funds under our credit facility or use the net proceedsfrom future equity issuances to fund vessel acquisitions. We intend torepay all or a portion of our acquisition related debt from time totime with the net proceeds of equity issuances. While our leverage willvary according to our acquisition strategy and our ability to refinanceacquisition related debt through equity offerings on terms acceptableto us, we generally intend to limit the amount of indebtedness that wehave outstanding at any time to low levels for our industry. We believethis strategy will provide us with flexibility in pursuing acquisitionsthat are accretive to earnings and dividends per share. |

OurFleet

The following table presents certain informationconcerning our fleet as of December  31,  2006.

|                       |  |  |           |  |        |     |  |  |                                              |  |        |  |  |  |                                    |
|-----------------------|--|--|-----------|--|--------|-----|--|--|----------------------------------------------|--|--------|--|--|--|------------------------------------|
| Vessel                |  |  | YearBuilt |  |        | Dwt |  |  | Current Time Charter EmploymentExpiration(1) |
| SUPRAMAX:             |  |  |           |  |   |     |  |  |                                              |  |   |  |  |  |                               |
| GoldenEagle(2)(3)     |  |  |           |  | 2010   |     |  |  |                                              |  | 56,000 |  |  |  | NewbuildingVessel                  |
| ImperialEagle(2)(3)   |  |  |           |  | 2010   |     |  |  |                                              |  | 56,000 |  |  |  | NewbuildingVessel                  |
| Cardinal(4)(5)        |  |  |           |  | 2004   |     |  |  |                                              |  | 55,408 |  |  |  | March2007 to June2007              |
| Condor(3)(6)          |  |  |           |  | 2001   |     |  |  |                                              |  | 50,296 |  |  |  | November2006 to March2007          |
| Falcon(3)             |  |  |           |  | 2001   |     |  |  |                                              |  | 50,296 |  |  |  | February2008 to June2008           |
| Harrier(3)(7)         |  |  |           |  | 2001   |     |  |  |                                              |  | 50,296 |  |  |  | June2007                           |
| HawkI(3)(8)           |  |  |           |  | 2001   |     |  |  |                                              |  | 50,296 |  |  |  | April2007                          |
| Heron                 |  |  |           |  | 2001   |     |  |  |                                              |  | 52,827 |  |  |  | December2007 to February2008  |
| Jaeger(9)             |  |  |           |  | 2004   |     |  |  |                                              |  | 52,248 |  |  |  | April2007 to June2007              |
| Kestrel I(3)(10) |  |  |           |  | 2004   |     |  |  |                                              |  | 50,326 |  |  |  | December2007 to April2008          |
| Merlin(3)             |  |  |           |  | 2001   |     |  |  |                                              |  | 50,296 |  |  |  | October2007 to December  2007      |
| OspreyI(3)(11)        |  |  |           |  | 2002   |     |  |  |                                              |  | 50,206 |  |  |  | July2008 to November2008           |
| Peregrine(4)(12)      |  |  |           |  | 2001   |     |  |  |                                              |  | 50,913 |  |  |  | December2008 to February2009       |
| Tern(3)(13)           |  |  |           |  | 2003   |     |  |  |                                              |  | 50,200 |  |  |  | December2007 to April2008          |
| HANDYMAX:             |  |  |           |  |   |     |  |  |                                              |  |   |  |  |  |                               |
| Sparrow(4)(14)        |  |  |           |  | 2000   |     |  |  |                                              |  | 48,225 |  |  |  | January2007                        |
| Kite(15)              |  |  |           |  | 1997   |     |  |  |                                              |  | 47,195 |  |  |  | March2007 to June2007              |
| Griffon(16)           |  |  |           |  | 1995   |     |  |  |                                              |  | 46,635 |  |  |  | January2007 to February  2007      |
| Shikra(17)            |  |  |           |  | 1984   |     |  |  |                                              |  | 41,096 |  |  |  | September2007 to December2007      |
|                       |

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|     |                                                                                                                                                                 |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Thedate range provided represents the earliest and latest date on whichthe charterers may redeliver the vessel to us upon the termination ofthe currentcharter. |

|     |                                             |
|-----|---------------------------------------------|
| (2) | Newbuilding vessels tobe delivered in 2010. |

|     |                                |
|-----|--------------------------------|
| (3) | Thesevessels are sister ships. |

|     |                                                            |
|-----|------------------------------------------------------------|
| (4) | These vessels are similar ships builtat the same shipyard. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (5) | Uponcompletion of the current charter the CARDINAL will enter a new timecharter at $28,000 per day for 11 to 13months. |

|     |                                                                                                                                                                                                                                           |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Upon completion of thecurrent charter the CONDOR will enter a new time charter at $20,500 perday for 26 to 29 months. The charterer has an option to extend thecharter period by 11 to 13 months at a time charter rate of $22,000 perday |

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|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (7) | The charterfor the HARRIER has been renewed at $24,000 per day commencing inJune  2007 for 24 to 27months. |

|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (8) | The charter for theHAWK I has been renewed at $22,000 per day commencing in April2007 for 24 to 26 months. |

|     |                                                                                                                                                                                                                                                                                                         |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (9) | Uponcompletion of the current charter, the JAEGER commences a new timecharter with a rate of $27,500 per day for 12 to14 months. The charterrate may reset at the beginning of each month based on the average timecharter rate for the Baltic Supramax Index, but in no case less than$22,500 per day. |

|      |                                                                                                                                      |
|------|--------------------------------------------------------------------------------------------------------------------------------------|
| (10) | The chartererof the KESTREL I has an option to extend the charter period by 11 to 13months at a time charter rate of $20,000 perday. |

|      |                                                                                                                                     |
|------|-------------------------------------------------------------------------------------------------------------------------------------|
| (11) | The charterer of theOSPREY I has an option to extend the charter period by up to 26 monthsat a time charter rate of $25,000 perday. |

|      |                                                                                                                                           |
|------|-------------------------------------------------------------------------------------------------------------------------------------------|
| (12) | Upon conclusion of theinitial charter in December  2006, the PEREGRINE commenced a newtime charter at $20,500 per day for 24 to 26months. |

|      |                                                                                                                                 |
|------|---------------------------------------------------------------------------------------------------------------------------------|
| (13) | The charterer of theTERN has an option to extend the charter period by 11 to 13 months at atime charter rate of $20,500 perday. |

|      |                                                                                                                                                                                                                                      |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (14) | Upon completion of thecurrent charter in January  2007, the SPARROW commenced a newtime charter at a base rate of $24,000 per day for 11 to 13 months witha profit share of 30% of up to the first $3,000 per day over thebase rate. |

|      |                                                                                                                    |
|------|--------------------------------------------------------------------------------------------------------------------|
| (15) | Upon conclusion ofthe current charter, the KITE commences a new time charter at $21,000per day for 26 to 29months. |

|      |                                                                                                                       |
|------|-----------------------------------------------------------------------------------------------------------------------|
| (16) | Upon completion of thecurrent charter the GRIFFON will enter a new time charter at $20,075per day for 24 to 26months. |

|      |                                           |
|------|-------------------------------------------|
| (17) | The SHIKRA was sold onFebruary  27,  2007 |

All of our vessels areflagged in the Marshall Islands. We own each of our vessels through aseparate wholly owned Marshall Islands subsidiary.

NewbuildingAcquisitions

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

Nature ofBusiness

Our strategy is to charter our vessels primarilypursuant to one- to three-year time charters to allow us to takeadvantage of the stable cash flow and high utilization rates that areassociated with medium- to long-term time charters. We have enteredinto time charters for all of our vessels ranging in length from one tothree years. We will regularly monitor the dry bulk shipping market andbased on market conditions we may consider taking advantage ofshort-term charter rates.

A time charter involves the hiring ofa vessel from its owner for a period of time pursuant to a contractunder which the vessel owner places its ship (including its crew andequipment) at the service of the charterer. Under a typical timecharter, the charterer periodically pays us a fixed daily charter hirerate and bears all voyage expenses, including the cost of fuel and portand canal charges. Once we have time chartered a vessel, trading of thevessel and the commercial risks shift to the customer. Subject tocertain restrictions imposed by us in the contract, the chartererdetermines the type and quantity of cargo to be carried and the portsof loading and discharging. The technical operation and navigation ofthe vessel at all times remain our responsibility, including vesseloperating expenses, such as the cost of crewing, insuring, repairingand maintaining the vessel, costs of spare parts and supplies, tonnagetaxes and other miscellaneous expenses.

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In connection with the charter of each ofour vessels, we pay commissions ranging from 1.25% to6.25% of the total daily charter hire rate of each charter tounaffiliated ship brokers and to in-house ship brokers associated withthe charterers, depending on the number of brokers involved witharranging the relevant charter.

Our vessels operate worldwidewithin the trading limits imposed by our insurance terms and do notoperate in areas where United States or United Nations sanctions havebeen imposed.

Our Customers

Our customerscurrently include international companies such as Norden A/S, KoreaLine, Ltd., Western Bulk ASA, Daeyang Shipping Ltd.,Armada Bulk Shipping Ltd., MUR Shipping Contracting (Metall undRohstoff), Strategic Bulk Carriers, Fairfield Bulk Carriers, ClipperBulk, and Pacific Basin, BHP and Cosco. Our assessment of acharterer’s financial condition and reliability is an importantfactor in negotiating employment for our vessels. We expect to charterour vessels to major trading houses (including commodities traders),publicly traded companies, reputable vessel owners and operators, majorproducers and government-owned entities rather than to more speculativeor undercapitalized entities. We evaluate the counterparty risk ofpotential charterers based on our management’s experience in theshipping industry combined with the additional input of two independentcredit risk consultants. In 2006, four customers individually accountedfor more than 10% of our time charter revenue. During the periodfrom our inception to December 31, 2005, four customersindividually accounted for more than 10% of our time charterrevenue.

Operations

There are two centralaspects to the operation of our fleet:

|  |              |                                                                                                    |
|--|--------------|----------------------------------------------------------------------------------------------------|
|  | •  | Commercial Operations, which involveschartering and operating a vessel;and     |

|  |              |                                                                                 |
|--|--------------|---------------------------------------------------------------------------------|
|  | •  | Technical Operations, whichinvolves maintaining, crewing and insuring a vessel. |

We carryout the commercial and strategic management of our fleet through ourwholly owned subsidiary, Eagle Shipping International (USA) LLC, aMarshall Islands limited liability company that was formed inJanuary  2005 and maintains its principle executive offices inNew York City. Our office staff, either directly or through thissubsidiary, provides the following services:

|  |              |                                                                         |
|--|--------------|-------------------------------------------------------------------------|
|  | •  | commercial operations and technicalsupervision;     |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | safetymonitoring;     |

|  |              |                        |
|--|--------------|------------------------|
|  | •  | vessel acquisition;and |

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | financial, accounting andinformation technology services. |

We currently have atotal of ten shore-based personnel, including our senior managementteam.

Commercial and Strategic Management

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

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Obtaining employment forour vessels and maintaining our relationships with ourcharterers.    We believe that because our management team hasan average of 20 years experience in operating Handymax andHandysize dry bulk vessels, we have access to a broad range ofcharterers and can employ the fleet efficiently in any market andachieve high utilization rates. |

We have entered into timecharters for all of our vessels, in accordance with our strategy. Ingeneral, our time charters afford us greater assurance that we will beable to cover a fixed portion of our costs, mitigate revenuevolatility, provide stable cash flow and achieve higher utilizationrates than if our vessels were employed on the shorter term voyagecharters or on the spot market.

We regularly monitor the drybulk shipping market and, based on market conditions, when a timecharter ends, we may consider taking advantage of short-term charterrates. In such cases we will 

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arrange voyage charters for those vessels thatwe will operate in the spot market. Under a voyage charter, the ownerof a vessel provides the vessel for the transport of goods betweenspecific ports in return for the payment of an agreed-upon freight perton of cargo or, alternatively, a specified total amount. All operatingcosts are borne by the owner of the vessel. A single voyage charter isoften referred to as a ‘‘spot market’’charter, which generally lasts from two to ten weeks. Operating vesselsin the spot market may afford greater speculative opportunity tocapitalize on fluctuations in the spot market; when vessel demand ishigh we earn higher rates, but when demand is low our rates are lowerand potentially insufficient to cover costs. Spot market rates arevolatile and are affected by world economics, international events,weather conditions, strikes, governmental policies, supply and demand,and other factors beyond our control. If the markets are especiallyweak for protracted periods, there is a risk that vessels in the spotmarket may spend time idle waiting for business, or may have to be‘‘laid up’’.

|  |              |                                                                                                                                                                                                                                                                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Identifying, purchasing, and sellingvessels.    We believe that our commercial management team haslongstanding relationships in the dry bulk industry, which provides usaccess to an extensive network of ship brokers and vessel owners thatwe believe will provide us with an advantage in futuretransactions. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                  |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Obtaining insurancecoverage for our vessels.    We have well-establishedrelationships with reputable marine underwriters in all the majorinsurance markets around the world that helps insure our fleet withinsurance at competitive rates. Additionally, our protection andindemnity insurance is directly placed with the underwriter, therebyeliminating broker expenses. |

|  |              |                                                                                                                                                                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Supervising V.Ships, our third partytechnical manager.    We regularly monitor the expenditures,crewing, and maintenance of our vessels by our technical manager. Ourmanagement team has direct experience with vessel operations, repairs,drydockings and construction. |

TechnicalManagement

The technical management of our fleet isprovided by our technical manager, V.Ships, an unaffiliated thirdparty, that we believe is the world’s largest provider ofindependent ship management and related services. We review theperformance of V.Ships on an annual basis and may add or changetechnical managers.

Technical management includes managingday-to-day vessel operations, performing general vessel maintenance,ensuring regulatory and classification society compliance, supervisingthe maintenance and general efficiency of vessels, arranging our hireof qualified officers and crew, arranging and supervising drydockingand repairs, purchasing supplies, spare parts and new equipment forvessels, appointing supervisors and technical consultants and providingtechnical support. V.Ships also manages and processes all crewinsurance claims. Our technical manager maintains records of all costsand expenditures incurred in connection with its services that areavailable for our review on a daily basis. Our technical manager is amember of Marine Contracting Association Limited (MARCAS), anassociation that arranges bulk purchasing for its members, whichenables us to benefit from economies of scale.

We currently crewour vessels with Ukrainian officers and seamen supplied by V.Ships inits capacity as technical manager. As of December  31,2006, we employed a total of 339 officers and seamen on the 16 vesselsin our operating fleet. Our technical manager handles eachseaman’s training, travel, and payroll and ensures that all ourseamen have the qualifications and licenses required to comply withinternational regulations and shipping conventions. Additionally, ourseafaring employees perform most commissioning work and assist insupervising work at shipyards and drydock facilities. We typically manour vessels with more crew members than are required by the country ofthe vessel’s flag in order to allow for the performance ofroutine maintenance duties. All of our crew members are subject to andare paid commensurate with international collective bargainingagreements and, therefore, we do not anticipate any labor disruptions.No international collective bargaining agreements to which we are aparty are set to expire within two years.

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We pay our technical manager a monthly feeper vessel plus actual costs incurred by our vessels. These monthlyfees amounted to $8,583 per vessel in 2006 and $8,333 per vessel in2005.

Permits and Authorizations

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

Environmental and Other Regulations

Governmentregulation significantly affects the ownership and operation of ourvessels. We are subject to international conventions, national, stateand local laws and regulations in force in the countries in which ourvessels may operate or are registered.

A variety of governmentand private entities subject our vessels to both scheduled andunscheduled inspections. These entities include the local portauthorities (United States Coast Guard, harbor master or equivalent),classification societies, flag state administrations (country ofregistry) and charterers, particularly terminal operators. Certain ofthese entities require us to obtain permits, licenses and certificatesfor the operation of our vessels. Failure to maintain necessary permitsor approvals could require us to incur substantial costs or temporarilysuspend the operation of one or more of our vessels.

We believethat the heightened level of environmental and quality concerns amonginsurance underwriters, regulators and charterers is leading to greaterinspection and safety requirements on all vessels and may acceleratethe scrapping of older vessels throughout the dry bulk shippingindustry.

Increasing environmental concerns have created ademand for vessels that conform to stricter environmental standards. Weare required to maintain operating standards for all of our vesselsthat emphasize operational safety, quality maintenance, continuoustraining of our officers and crews and compliance with United Statesand international regulations. We believe that the operation of ourvessels is in substantial compliance with applicable environmental lawsand regulations applicable to us as of the date of this annualreport.

International Maritime Organization

TheInternational Maritime Organization, or IMO, has negotiatedinternational conventions that impose liability for oil pollution ininternational waters and a signatory’s territorial waters. TheIMO adopted Annex VI to the International Convention for the Preventionof Pollution from Ships to address air pollution from ships whichbecame effective in May 2005. Annex VI set limits on sulfuroxide and nitrogen oxide emissions from ship exhausts and prohibitdeliberate emissions of ozone depleting substances, such aschlorofluorocarbons. Annex VI also includes a global cap on the sulfurcontent of fuel oil and allows for special areas to be established withmore stringent controls on sulfur emissions. Our vessels are incompliance with Annex VI.

The operation of our vessels isalso affected by the requirements set forth in the IMO’sManagement Code for the Safe Operation of Ships and PollutionPrevention, or ISM Code. The ISM Code requires ship owners and bareboatcharterers to develop and maintain an extensive ‘‘SafetyManagement System’’ that includes the adoption of a safetyand environmental protection policy setting forth instructions andprocedures for safe operation and describing procedures for dealingwith emergencies. The failure of a ship owner or bareboat charterer tocomply with the ISM Code may subject such party to increased liability,may decrease available insurance coverage for the affected vessels andmay result in a denial of access to, or detention in, certain ports. Asof the date of this annual report, all of the vessels in our operatingfleet is ISM Code-certified.

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The United States Oil Pollution Act of1990

The United States Oil Pollution Act of 1990, or OPA,established an extensive regulatory and liability regime for theprotection and cleanup of the environment from oil spills. OPA affectsall owners and operators whose vessels trade in the United States, itsterritories and possessions or whose vessels operate in United Stateswaters, which includes the United States’ territorial sea and itstwo hundred nautical mile exclusive economic zone.

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

|  |              |                                                              |
|--|--------------|--------------------------------------------------------------|
|  | •  | natural resources damage and the costs ofassessment thereof; |

|  |              |                                   |
|--|--------------|-----------------------------------|
|  | •  | real and personalproperty damage; |

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

|  |              |                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------|
|  | •  | lost profits or impairment of earning capacitydue to property or natural resources damage; and |

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

OPA limits theliability of responsible parties to the greater of $600 per gross tonor $0.5 million per dry bulk vessel that is over 300 gross tons(subject to possible adjustment for inflation). These limits ofliability do not apply if an incident was directly caused by violationof applicable United States federal safety, construction or operatingregulations or by a responsible party’s gross negligence orwillful misconduct, or if the responsible party fails or refuses toreport the incident or to cooperate and assist in connection with oilremoval activities.

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

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

TheUnited States Coast Guard’s regulations concerning certificatesof financial responsibility provide, in accordance with OPA, thatclaimants may bring suit directly against an insurer or guarantor thatfurnishes certificates of financial responsibility. In the event thatsuch insurer or guarantor is sued directly, it is prohibited fromasserting any contractual defense that it may have had against theresponsible party and is limited to asserting those defenses availableto the responsible party and the defense that the incident was causedby the willful misconduct of the responsible party. Certainorganizations, which had typically provided certificates of financialresponsibility under pre-OPA laws, including the major protection andindemnity organizations, have declined to furnish evidence of insurancefor vessel owners and operators if they are subject to direct actionsor required to waive insurance policy defenses.

The UnitedStates Coast Guard’s financial responsibility regulations mayalso be satisfied by evidence of surety bond, guaranty or byself-insurance. Under the self-insurance provisions, the ship

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owner or operator must have a net worth andworking capital, measured in assets located in the United Statesagainst liabilities located anywhere in the world, that exceeds theapplicable amount of financial responsibility. We have complied withthe United States Coast Guard regulations by providing a certificate ofresponsibility from third party entities that are acceptable to theUnited States Coast Guard evidencing sufficient self-insurance.

OPA specifically permits individual states to impose their ownliability regimes with regard to oil pollution incidents occurringwithin their boundaries, and some states have enacted legislationproviding for unlimited liability for oil spills. In some cases,states, that have enacted such legislation have not yet issuedimplementing regulations defining vessels owners’responsibilities under these laws. We intend to comply with allapplicable state regulations in the ports where our vessels call.

Other Environmental Initiatives

The European Unionis considering legislation that will affect the operation of vesselsand the liability of owners for oil pollution. It is difficult topredict what legislation, if any, may be promulgated by the EuropeanUnion or any other country or authority.

Although the UnitedStates is not a party thereto, many countries have ratified and followthe liability scheme adopted by the IMO and set out in theInternational Convention on Civil Liability for Oil Pollution Damage,1969, as amended, or the CLC, and the Convention for the Establishmentof an International Fund for Oil Pollution of 1971, as amended. Underthese conventions, a vessel’s registered owner is strictly liablefor pollution damage caused on the territorial waters of a contractingstate by discharge of persistent oil, subject to certain completedefenses. Many of the countries that have ratified the CLC haveincreased the liability limits through a 1992 Protocol to the CLC. Theliability limits in the countries that have ratified this Protocol arecurrently approximately $4.0 million plus approximately $566.0per gross registered ton above 5,000 gross tons with an approximatemaximum of $80.5 million per vessel, with the exact amount tiedto a unit of account which varies according to a basket of currencies.The right to limit liability is forfeited under the CLC where the spillis caused by the owner’s actual fault or privity and, under the1992 Protocol, where the spill is caused by the owner’sintentional or reckless conduct. Vessels trading to contracting statesmust provide evidence of insurance covering the limited liability ofthe owner. In jurisdictions where the CLC has not been adopted, variouslegislative schemes or common law govern, and liability is imposedeither on the basis of fault or in a manner similar to the CLC.

|              |                     |
|--------------|---------------------|
| Vessel  | SecurityRegulations |

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

|  |              |                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------|
|  | •  | on-board installation ofautomatic information systems, or AIS, to enhance vessel-to-vessel andvessel-to-shore communications; |

|  |              |                                                      |
|--|--------------|------------------------------------------------------|
|  | •  | on-boardinstallation of ship security alert systems; |

|  |              |                                              |
|--|--------------|----------------------------------------------|
|  | •  | the development of vessel security plans;and |

|  |              |                                                                |
|--|--------------|----------------------------------------------------------------|
|  | •  | compliance with flag state securitycertification requirements. |

The United States Coast Guardregulations, intended to align with international maritime securitystandards, exempt non-United States vessels from MTSA vessel securitymeasures provided such 

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vessels have on board a valid InternationalShip Security Certificate, or ISSC, that attests to the vessel’scompliance with SOLAS security requirements and the ISPS Code. We haveimplemented the various security measures addressed by the MTSA, SOLASand the ISPS Code.

Inspection by ClassificationSocieties

Every seagoing vessel must be‘‘classed’’ by a classification society. Theclassification society certifies that the vessel is ‘‘inclass,’’ signifying that the vessel has been built andmaintained in accordance with the rules of the classification societyand complies with applicable rules and regulations of thevessel’s country of registry and the international conventions ofwhich that country is a member. In addition, where surveys are requiredby international conventions and corresponding laws and ordinances of aflag state, the classification society will undertake them onapplication or by official order, acting on behalf of the authoritiesconcerned.

The classification society also undertakes on requestother surveys and checks that are required by regulations andrequirements of the flag state. These surveys are subject to agreementsmade in each individual case and /or to the regulations of the countryconcerned.

For maintenance of the class, regular andextraordinary surveys of hull, machinery, including the electricalplant, and any special equipment classed are required to be performedas follows:

|  |              |                                                                                                                                                                                                                                                                                                                      |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | AnnualSurveys.    For seagoing ships, annual surveys are conducted forthe hull and the machinery, including the electrical plant and whereapplicable for special equipment classed, at intervals of12 months from the date of commencement of the class periodindicated in the certificate. |

|  |              |                                                                                                                                                                                                                                                                                                       |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Intermediate Surveys.    Extendedannual surveys are referred to as intermediate surveys and typicallyare conducted two and one-half years after commissioning and each classrenewal. Intermediate surveys may be carried out on the occasion of thesecond or third annual survey. |

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

All areas subject tosurvey as defined by the classification society are required to besurveyed at least once per class period, unless shorter intervalsbetween surveys are prescribed elsewhere. The period between twosubsequent surveys of each area must not exceed five years. Vesselsunder 5 years of age can waive drydocking in order to increaseavailable days and decrease capital expenditures, provided that thevessel is inspected underwater.

Most vessels are also drydockedevery 30 to 36 months for inspection of the underwater parts andfor repairs related to inspections. If any defects are found, theclassification surveyor will issue a‘‘recommendation’’ which must be rectified bythe ship owner within prescribed time limits.

Most insuranceunderwriters make it a condition for insurance coverage that a vesselbe certified as ‘‘in class’’ by aclassification society which is a member of the InternationalAssociation of Classification Societies, or IACS. All our vessels thatwe have purchased and may agree to purchase in the future must becertified as being ‘‘in class’’ prior to theirdelivery under our standard purchase 

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contracts and memorandum of agreement. Ifthe vessel is not certified on the date of closing, we have noobligation to take delivery of the vessel. We have all of our vessels,and intend to have all vessels that we acquire in the future, classedby IACS members.

Risk of Loss and LiabilityInsurance

General

The operation of any dry bulkvessel includes risks such as mechanical failure, collision, propertyloss, cargo loss or damage and business interruption due to politicalcircumstances in foreign countries, hostilities and labor strikes. Inaddition, there is always an inherent possibility of marine disaster,including oil spills (from fuel oil) and other environmental mishaps,and the liabilities arising from owning and operating vessels ininternational trade. OPA, which imposes virtually unlimited liabilityupon owners, operators and demise charterers of vessels trading in theUnited States exclusive economic zone for certain oil pollutionaccidents in the United States, has made liability insurance moreexpensive for ship owners and operators trading in the United Statesmarket.

We maintain hull and machinery insurance, war risksinsurance, protection and indemnity cover, and freight, demurrage anddefense cover for our operating fleet in amounts that we believe to beprudent to cover normal risks in our operations. We may not be able toachieve or maintain this level of coverage throughout a vessel’suseful life. Furthermore, not all risks can be insured, and there canbe no guarantee that any specific claim will be paid, or that we willalways be able to obtain adequate insurance coverage at reasonablerates.

Hull & Machinery and War RisksInsurance

We maintain marine hull and machinery and war risksinsurances, which cover the risk of actual or constructive total loss,for all of our vessels. Our vessels are each covered up to at leasttheir fair market value with deductibles of $75,000-$100,000 per vesselper incident.

Protection & IndemnityInsurance

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

Our current protection andindemnity insurance coverage for pollution is $1 billion pervessel per incident. The fourteen P&I Associations that comprisethe International Group insure approximately 90% of theworld’s commercial tonnage and have entered into a poolingagreement to reinsure each association’s liabilities. As a memberof a P&I Association, which is a member of the International Group,we are subject to calls payable to the associations based on thegroup’s claim records as well as the claim records of all othermembers of the individual associations and members of the pool ofP&I Associations comprising the International Group.

Competition

We compete with a large number ofinternational fleets. The international shipping industry is highlycompetitive and fragmented with many market participants. There areapproximately 6,400 drybulk carriers aggregating approximately367  million dwt, and the ownership of these vessels is dividedamong approximately 1,400 mainly private independent dry bulk vesselowners with no one shipping group owning or controlling more than5.0% of the world dry bulk fleet. We primarily compete withother owners of dry bulk vessels in the Handymax class that are mainlyprivately owned fleets.

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Competition in the ocean shippingindustry varies primarily according to the nature of the contractualrelationship as well as with respect to the kind of commodity beingshipped. Our business will fluctuate in line with the main patterns oftrade of dry bulk cargoes and varies according to changes in the supplyand demand for these items. Competition in virtually all bulk trades isintense and based primarily on supply and demand. We compete forcharters on the basis of price, vessel location, size, age andcondition of the vessel, as well as on our reputation as an owner andoperator. Increasingly, major customers are demonstrating a preferencefor modern vessels based on concerns about the environmental andoperational risks associated with older vessels. Consequently, ownersof large modern fleets have gained a competitive advantage over ownersof older fleets.

As in the spot market, the time charter marketis price sensitive and also depends on our ability to demonstrate thehigh quality of our vessels and operations to chartering customers.However, because of the longer term commitment, customers entering timecharters are more concerned about their exposure and image fromchartering vessels that do not comply with environmental regulations orthat will be forced out of service for extensive maintenance andrepairs. Consequently, in the time charter market, factors such as theage and quality of a vessel and the reputation of the owner andoperator tend to be more significant than in the spot market incompeting for business.

Value of Assets and CashRequirements 

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

TheCompany’s results of operations and cash flow may besignificantly affected by future charter markets.

ExchangeControls

Under Marshall Islands law, there are currently norestrictions on the export or import of capital, including foreignexchange controls or restrictions that affect the remittance ofdividends, interest or other payments to non-resident holders of ourcommon stock.

United States TaxConsiderations

The following is a discussion of certainUnited States federal income tax considerations relevant to owning ourcommon stock by a United States Holder, as defined below. Thisdiscussion does not purport to deal with the tax consequences of owningthe Company’s common stock to all categories of investors, someof which (such as financial institutions, regulated investmentcompanies, real estate investment trusts, tax-exempt organizations,insurance companies, persons holding our common stock as part of ahedging, integrated, conversion or constructive sale transaction or astraddle, traders in securities that have elected the mark-to-marketmethod of accounting for their securities, persons liable foralternative minimum tax, persons who are investors in pass-throughentities, dealers in securities or currencies, persons who own10% or more of our common stock and investors whose functionalcurrency is not the United States dollar) may be subject to specialrules. Shareholders are encouraged to consult their own tax advisorsconcerning the overall tax consequences arising in any particularsituation under United States federal, state, local or foreign law ofthe ownership of our common stock.

United States FederalIncome Taxation of Our Company

Taxation of OperatingIncome

The Company anticipates that it will derivesubstantially all of its gross income from the use and operation ofvessels in international commerce and that this income will principallyconsist of hire from time and voyage charters for the transportation ofcargoes and the performance of services directly related thereto, whichis referred to herein as ‘‘shippingincome.’’

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

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

While webelieve that we qualify for exemption from tax under Section 883 for2006, we can give no assurance that changes in the ownership of ourstock will permit us to qualify for the Section 883 exemption in thefuture. If we do not qualify for an exemption pursuant to Section 883of the Code, we will be subject to U.S. federal income tax imposed on agross basis at 4% on our U.S. source shipping income. In such acase, our net income and cash flow will be reduced by the amount ofsuch tax.

If the Section 883 exemption were not available to theCompany for 2006, the 4% tax so imposed would be approximately$862,000. However, since no more that 50% of our shipping incomewould be treated as derived from U.S. sources, our maximum taxliability under the 4% tax regime would never exceed 2%of our shipping income.

No assurance can be given that changes inor interpretation of existing laws will not occur or will not beretroactive or that anticipated future circumstances will in factoccur. The Company’s views should not be considered official, andno assurances on the conclusions discussed above can begiven.

United States Federal Income Taxation of UnitedStates Holders

Passive Foreign Investment Company Statusand Significant Tax Consequences

Special United States federalincome tax rules apply to a United States Holder (as used herein meansa beneficial owner of common stock that is an individual United Statescitizen or resident, a United States corporation or other United Statesentity taxable as a corporation, an estate the income of which issubject to United States federal income taxation regardless of itssource, or a trust if a court within the United States is able toexercise primary jurisdiction over the administration of the trust andone or more United States persons have the authority to control allsubstantial decisions of the trust) that holds stock in a foreigncorporation classified as a ‘‘passive foreign investmentcompany’’ for United States federal income tax purposes.In general, the Company will be treated as a passive foreign investmentcompany with respect to a United States Holder if, for any taxable yearin which such holder holds the Company’s common stock,either

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

|  |              |                                                                                                                                   |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------|
|  | •  | atleast 50% of the average value of our assets during such taxableyear produce, or are held for the production of, passiveincome. |

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

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Based on the Company’s currentoperations and future projections, we do not believe that the Companyhas been or is, nor do we expect the Company to become, a passiveforeign investment company with respect to any taxable year. Althoughthere is no legal authority directly on point, our belief is basedprincipally on the position that, for purposes of determining whetherthe Company is a passive foreign investment company, the gross incomeit derives from its time chartering and voyage chartering activitiesshould constitute services income, rather than rental income.Accordingly, such income should not constitute passive income, and theassets that the Company owns and operates in connection with theproduction of such income, in particular, the vessels, should notconstitute passive assets for purposes of determining whether theCompany is a passive foreign investment company. We believe there issubstantial legal authority supporting our position consisting of caselaw and IRS pronouncements concerning the characterization of incomederived from time charters and voyage charters as services income forother tax purposes. In addition, we have obtained an opinion from ourcounsel, Seward & Kissel LLP, that, based upon the Company’soperations as described herein, its income from time charters andvoyage charters should not be treated as passive income for purposes ofdetermining whether it is a passive foreign investment company.However, in the absence of any legal authority specifically relating tothe statutory provisions governing passive foreign investmentcompanies, the Internal Revenue Service or a court could disagree withour position. In addition, although the Company intends to conduct itsaffairs in a manner to avoid being classified as a passive foreigninvestment company with respect to any taxable year, we cannot assureyou that the nature of its operations will not change in thefuture.

As discussed more fully below, if the Company were to betreated as a passive foreign investment company for any taxable year, aUnited States Holder would be subject to different taxation rulesdepending on whether the United States Holder makes an election totreat the Company as a ‘‘Qualified ElectingFund,’’ which election we refer to as a‘‘QEF election.’’ As an alternative tomaking a QEF election, a United States Holder should be able to make a‘‘mark-to-market’’ election with respect tothe Company’s common stock, as discussed below.

Taxationof United States Holders Making a Timely QEF Election

If aUnited States Holder makes a timely QEF election, which United StatesHolder we refer to as an ‘‘ElectingHolder,’’ the Electing Holder must report for UnitedStates federal income tax purposes its pro rata share of theCompany’s ordinary earnings and net capital gain, if any, foreach taxable year of the Company for which it is a passive foreigninvestment company that ends with or within the taxable year of theElecting Holder, regardless of whether or not distributions werereceived from the Company by the Electing Holder. No portion of anysuch inclusions of ordinary earnings will be treated as‘‘qualified dividend income.’’ Net capitalgain inclusions of United States Non-Corporate Holders would beeligible for preferential capital gains tax rates. The ElectingHolder’s adjusted tax basis in the common stock will beincreased to reflect taxed but undistributed earnings and profits.Distributions of earnings and profits that had been previously taxedwill result in a corresponding reduction in the adjusted tax basis inthe common stock and will not be taxed again once distributed. AnElecting Holder would not, however, be entitled to a deduction for itspro rata share of any losses that the Company incurs with respect toany year. An Electing Holder would generally recognize capital gain orloss on the sale, exchange or other disposition of the Company’scommon stock. A United States Holder would make a timely QEF electionfor shares of the Company by filing one copy of IRS Form 8621 with hisUnited States federal income tax return for the first year in which heheld such shares when the Company was a passive foreign investmentcompany. If the Company were to be treated as a passive foreigninvestment company for any taxable year, the Company would provide eachUnited States Holder with all necessary information in order to makethe QEF election described above.

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

Alternatively, if the Company were to be treated as apassive foreign investment company for any taxable year and, as weanticipate, its stock is treated as ‘‘marketablestock,’’ a United States Holder would be allowed to makea ‘‘mark-to-market’’ election with respectto the Company’s common stock, 

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provided the United States Holder completesand files IRS Form 8621 in accordance with the relevant instructionsand related Treasury regulations. If that election is made, the UnitedStates Holder generally would include as ordinary income in eachtaxable year the excess, if any, of the fair market value of the commonstock at the end of the taxable year over such holder’s adjustedtax basis in the common stock. The United States Holder would also bepermitted an ordinary loss in respect of the excess, if any, of theUnited States Holder’s adjusted tax basis in the common stockover its fair market value at the end of the taxable year, but only tothe extent of the net amount previously included in income as a resultof the mark-to-market election. A United States Holder’s taxbasis in his common stock would be adjusted to reflect any such incomeor loss amount. Gain realized on the sale, exchange or otherdisposition of the Company’s common stock would be treated asordinary income, and any loss realized on the sale, exchange or otherdisposition of the common stock would be treated as ordinary loss tothe extent that such loss does not exceed the net mark-to-market gainspreviously included by the United States Holder. No ordinary incomeinclusions under this election will be treated as‘‘qualified dividendincome.’’

Taxation of United States Holders NotMaking a Timely QEF or Mark-to-Market Election

Finally, if theCompany were to be treated as a passive foreign investment company forany taxable year, a United States Holder who does not make either a QEFelection or a ‘‘mark-to-market’’ electionfor that year, whom we refer to as a ‘‘Non-ElectingHolder,’’ would be subject to special rules with respectto (1) any excess distribution (i.e., the portion of any distributionsreceived by the Non-Electing Holder on the common stock in a taxableyear in excess of 125% of the average annual distributionsreceived by the Non-Electing Holder in the three preceding taxableyears, or, if shorter, the Non-Electing Holder’s holding periodfor the common stock), and (2) any gain realized on the sale, exchangeor other disposition of the Company’s common stock. Under thesespecial rules:

|  |              |                                                                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the excess distribution orgain would be allocated ratably over the Non-Electing Holder’saggregate holding period for the commonstock; |

|  |              |                                                                                                                                                                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the amount allocated to the currenttaxable year, and any taxable year prior to the first taxable year inwhich the Company was a passive foreign investment company, would betaxed as ordinary income and would not be ‘‘qualifieddividend income’’; and |

|  |              |                                                                                                                                                                                                                                                                                                                             |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | theamount allocated to each of the other taxable years would be subject totax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferralbenefit would be imposed with respect to the resulting tax attributableto each such other taxable year. |

These special rules would notapply to a qualified pension, profit sharing or other retirement trustor other tax-exempt organization that did not borrow money or otherwiseutilize leverage in connection with its acquisition of theCompany’s common stock. If the Company is a passive foreigninvestment company and a Non-Electing Holder who is an individual dieswhile owning the Company’s common stock, such holder’ssuccessor generally would not receive a step-up in tax basis withrespect to such stock.

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GLOSSARY OF SHIPPINGTERMS

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

AnnualSurvey   —   The inspection of a vessel by aclassification society, on behalf of a flag state, that takes placeevery year.

BareboatCharter   —   Also known as ‘‘demisecharter.’’ Contract or hire of a ship under which theshipowner is usually paid a fixed amount of charter hire rate for acertain period of time during which the charterer is responsible forthe operating costs and voyage costs of the vessel as well as arrangingfor crewing.

BulkVessels/Carriers   —   Vessels which are speciallydesigned and built to carry large volumes of cargo in bulk cargoform.

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

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

Charter   —   The hire of a vesselfor a specified period of time or to carry a cargo for a fixed fee froma loading port to a discharging port. The contract for a charter iscalled a charterparty.

Charterer   —   The individual orcompany hiring a vessel.

Charter HireRate   —   A sum of money paid to the vessel ownerby a charterer under a time charterparty for the use of a vessel.

Classification Society   —   Anindependent organization which certifies that a vessel has been builtand maintained in accordance with the rules of such organization andcomplies with the applicable rules and regulations of the country ofsuch vessel and the international conventions of which that country isa member.

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

DemiseCharter   —   See bareboat charter

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

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

Drydocking   —   The removal of avessel from the water for inspection and/or repair of submergedparts.

Gross Ton   —   Unit of100 cubic feet or 2.831 cubic meters used in arriving at thecalculation of gross tonnage.

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

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

Hull   —   The shell or body of avessel.

International Maritime Organization—‘‘IMO’’   —   AUnited Nations agency that issues international trade standards forshipping.

IntermediateSurvey   —   The inspection of a vessel by aclassification society surveyor which takes place between two and threeyears before and after each Special Survey for such vessel pursuant tothe rules of international conventions and classificationsocieties.

ISM Code   —   TheInternational Management Code for the Safe Operation of Ships and forPollution Prevention, as adopted by the IMO.

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

Newbuilding   —   Anewly constructed vessel.

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

Orderbook   —   A reference tocurrently placed orders for the construction of vessels (e.g., thePanamax orderbook).

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

Protection & IndemnityInsurance   —   Insurance obtained through amutual association formed by shipowners to provide liability insuranceprotection from large financial loss to one member throughcontributions towards that loss by all members.

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

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

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

SOLAS   —   The InternationalConvention for the Safety of Life at Sea 1974, as amended, adoptedunder the auspices of the IMO.

SpecialSurvey   —   The inspection of a vessel by aclassification society surveyor which takes place a minimum of everyfour years and a maximum of every five years.

SpotMarket   —   The market for immediate charteringof a vessel usually for single voyages.

StrictLiability   —   Liability that is imposed withoutregard to fault.

Supramax   —   Anew class of Handymax dry bulk carrier of approximately 50,000 to60,000 dwt.

TimeCharter   —   Contract for hire of a ship. Acharter under which the ship-owner is paid charter hire rate on a perday basis for a certain period of time, the shipowner being responsiblefor providing the crew and paying operating costs while the chartereris responsible for paying the voyage costs. Any delays at port orduring the voyages are the responsibility of the charterer, save forcertain specific exceptions such as loss of time arising from vesselbreakdown and routine maintenance.

Ton   —   A metric ton.

Voyage Charter   —   Contract forhire of a vessel under which a shipowner is paid freight on the basisof moving cargo from a loading port to a discharge port. The shipowneris responsible for paying both operating costs and voyage costs. Thecharterer is typically responsible for any delay at the loading ordischarging ports.

Available Information 

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

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ITEM1A.    RISK FACTORS

We operate in an intensely competitiveindustry. Some of the following risks relate principally to theindustry in which we operate and our business in general. Other risksrelate principally to the securities market and ownership of our commonstock. The occurrence of any of the events described in this sectioncould cause results to differ materially from those contained in theforward-looking statements made in this report, and could significantlyand negatively affect our business, financial condition, operatingresults or cash available for dividends.

Industry SpecificRisk Factors

Charter hire rates for dry bulk vesselsmay decrease in the future, which may adversely affect ourearnings.    The dry bulk shipping industry is cyclical withattendant volatility in charter hire rates and profitability. Thedegree of charter hire rate volatility among different types of drybulk vessels has varied widely, and charter hire rates for dry bulkvessels have recently declined from historically high levels.Fluctuations in charter rates result from changes in the supply anddemand for vessel capacity and changes in the supply and demand for themajor commodities carried by water internationally. Because the factorsaffecting the supply and demand for vessels are outside of our controland are unpredictable, the nature, timing, direction and degree ofchanges in industry conditions are also unpredictable.

Factors that influence demand for vessel capacityinclude:

|  |              |                                                |
|--|--------------|------------------------------------------------|
|  | •  | demand for and productionof dry bulk products; |

|  |              |                                         |
|--|--------------|-----------------------------------------|
|  | •  | global andregional economic conditions; |

|  |              |                                             |
|--|--------------|---------------------------------------------|
|  | •  | distancedry bulk is to be moved by sea; and |

|  |              |                                                       |
|--|--------------|-------------------------------------------------------|
|  | •  | changes in seaborne and othertransportation patterns. |

Factors that influence the supplyof vessel capacity include:

|  |              |                                  |
|--|--------------|----------------------------------|
|  | •  | numberof newbuilding deliveries; |

|  |              |                            |
|--|--------------|----------------------------|
|  | •  | scrapping ofolder vessels; |

|  |              |                       |
|--|--------------|-----------------------|
|  | •  | vessel casualties;and |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | number of vessels that are out ofservice. |

We anticipate that the future demand for our dry bulkvessels will be dependent upon continued economic growth in theworld’s economies, including China and India, seasonal andregional changes in demand, changes in the capacity of the global drybulk fleet and the sources and supply of dry bulk cargo to betransported by sea. The capacity of the global dry bulk carrier fleetseems likely to increase and there can be no assurance that economicgrowth will continue. Adverse economic, political, social or otherdevelopments could have a material adverse effect on our business andoperating results.

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

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

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The market values of our vessels maydecrease, which could limit the amount of funds that we can borrowunder our credit facility.    The fair market values of ourvessels have generally experienced high volatility. Market prices forsecondhand dry bulk vessels have recently been at historically highlevels. You should expect the market values of our vessels to fluctuatedepending on general economic and market conditions affecting theshipping industry and prevailing charter hire rates, competition fromother shipping companies and other modes of transportation, the types,sizes and ages of our vessels, applicable governmental regulations andthe cost of newbuildings. If the market value of our fleet declines, wemay not be able to draw down the full amount of our credit facility andwe may not be able to obtain other financing or incur debt on termsthat are acceptable to us or at all.

The market values ofour vessels may decrease, which could cause us to breach covenants inour credit facility and adversely affect our operatingresults.    If the market values of our vessels, which haverecently been at historically high levels, decrease, we may breach someof the covenants contained in the financing agreements relating to ourindebtedness at the time, including covenants in our credit facility.If we do breach such covenants and we are unable to remedy the relevantbreach, our lenders could accelerate our debt and foreclose on ourfleet. In addition, if the book value of a vessel is impaired due tounfavorable market conditions or a vessel is sold at a price below itsbook value, we would incur a loss that could adversely affect ouroperating results.

World events could affect our results ofoperations and financial condition.    Terrorist attacks suchas the attacks on the United States on September  11,  2001and in London on July  7,  2005 and the continuing responseof the United States to these attacks, as well as the threat of futureterrorist attacks in the United States or elsewhere, continues to causeuncertainty in the world financial markets and may affect our business,operating results and financial condition. The continuing conflict inIraq may lead to additional acts of terrorism and armed conflict aroundthe world, which may contribute to further economic instability in theglobal financial markets. These uncertainties could also adverselyaffect our ability to obtain additional financing on terms acceptableto us or at all. In the past, political conflicts have also resulted inattacks on vessels, mining of waterways and other efforts to disruptinternational shipping, particularly in the Arabian Gulf region. Actsof terrorism and piracy have also affected vessels trading in regionssuch as the South China Sea. Any of these occurrences could have amaterial adverse impact on our operating results, revenues andcosts.

Our operating results will be subject to seasonalfluctuations, which could affect our operating results and the amountof available cash with which we can pay dividends.    Weoperate our vessels in markets that have historically exhibitedseasonal variations in demand and, as a result, in charter hire rates.To the extent we operate vessels in the spot market, this seasonalitymay result in quarter-to-quarter volatility in our operating results,which could affect the amount of dividends that we pay to ourstockholders from quarter to quarter. The dry bulk shipping market istypically stronger in the fall and winter months in anticipation ofincreased consumption of coal and other raw materials in the northernhemisphere during the winter months. In addition, unpredictable weatherpatterns in these months tend to disrupt vessel scheduling and suppliesof certain commodities. While this seasonality will not affect ouroperating results, as long as our fleet is employed on time charters,if our vessels are employed in the spot market in the future, it couldmaterially affect our operating results and cash available fordistribution to our stockholders.

We are subject tointernational safety regulations and the failure to comply with theseregulations may subject us to increased liability, may adversely affectour insurance coverage and may result in a denial of access to, ordetention in, certain ports.    The operation of our vesselsis affected by the requirements set forth in the United Nation’sInternational Maritime Organization’s International ManagementCode for the Safe Operation of Ships and Pollution Prevention, or theISM Code. The ISM Code requires shipowners, ship managers and bareboatcharterers to develop and maintain an extensive ‘‘SafetyManagement System’’ that includes the adoption of a safetyand environmental protection policy setting forth instructions andprocedures for safe operation and describing procedures for dealingwith emergencies. The failure of a shipowner or bareboat charterer tocomply with the ISM Code may subject it to increased liability, mayinvalidate existing insurance or decrease available insurance coveragefor the affected vessels and may result in a denial of access to, or

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detention in, certain ports. Each of thevessels that has been delivered to us is ISM Code-certified and weexpect that each other vessel that we have agreed to purchase will beISM Code-certified when delivered to us.

Maritime claimantscould arrest one or more of our vessels, which could interrupt our cashflow.    Crew members, suppliers of goods and services to avessel, shippers of cargo and other parties may be entitled to amaritime lien against a vessel for unsatisfied debts, claims ordamages. In many jurisdictions, a claimant may seek to obtain securityfor its claim by arresting a vessel through foreclosure proceedings.The arrest or attachment of one or more of our vessels could interruptour cash flow and require us to pay large sums of money to have thearrest or attachment lifted. In addition, in some jurisdictions, suchas South Africa, under the ‘‘associated ship’’theory of liability, a claimant may arrest both the vessel which issubject to the claimant’s maritime lien and any‘‘associated’’ vessel, which is any vesselowned or controlled by the same owner. Claimants could attempt toassert ‘‘associated ship’’ liability againstone vessel in our fleet for claims relating to another of ourvessels.

Governments could requisition our vessels during aperiod of war or emergency, resulting in a loss ofearnings.    A government could requisition one or more of ourvessels for title or for hire. Requisition for title occurs when agovernment takes control of a vessel and becomes her owner, whilerequisition for hire occurs when a government takes control of a vesseland effectively becomes her charterer at dictated charter rates.Generally, requisitions occur during periods of war or emergency,although governments may elect to requisition vessels in othercircumstances. Although we would be entitled to compensation in theevent of a requisition of one or more of our vessels, the amount andtiming of payment would be uncertain. Government requisition of one ormore of our vessels may negatively impact our revenues and reduce theamount of cash we have available for distribution as dividends to ourstockholders.

Company Specific RiskFactors

We are a recently formed company and have alimited operating history.    Our company and our predecessorcompany, Eagle Holdings LLC, were formed in March  2005 andJanuary  2005, respectively, and we did not own or operate anyvessels prior to April  2005. We, therefore, have a limitedoperating history and limited historical financial data on which toevaluate our operations or our ability to implement and achieve ourbusiness strategy.

We cannot assure you that our board ofdirectors will declare dividends.    Our policy is to declarequarterly dividends to stockholders in February, April, July andOctober in amounts that are substantially equal to our available cashfrom operations during the previous quarter less any cash reserves fordrydockings and working capital. The declaration and payment ofdividends, if any, will always be subject to the discretion of ourboard of directors, restrictions contained in our credit facility andthe requirements of Marshall Islands law. The timing and amount of anydividends declared will depend on, among other things, our earnings,financial condition and cash requirements and availability, our abilityto obtain debt and equity financing on acceptable terms as contemplatedby our growth strategy, the terms of our outstanding indebtedness andthe ability of our subsidiaries to distribute funds to us. Although ourfleet is currently committed to time charters, the international drybulk shipping industry is highly volatile, and we cannot predict withcertainty the amount of cash, if any, that will be available fordistribution as dividends in any period. Also, there may be a highdegree of variability from period to period in the amount of cash thatis available for the payment of dividends.

We may incur expensesor liabilities or be subject to other circumstances in the future thatreduce or eliminate the amount of cash that we have available fordistribution as dividends, including as a result of the risks describedin this Annual Report. Our growth strategy contemplates that we willfinance our acquisitions of additional vessels through debt financingsor the net proceeds of future equity issuances on terms acceptable tous. If financing is not available to us on acceptable terms, our boardof directors may determine to finance or refinance acquisitions withcash from operations, which would reduce or even eliminate the amountof cash available for the payment of dividends.

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Under the terms of our credit facility, wewill not be permitted to pay dividends if there is a default or abreach of a loan covenant. In addition, we are permitted to paydividends only in amounts up to our EBITDA (as defined in our creditagreement) less the aggregate amount of interest incurred and netamounts payable under interest rate hedging agreements during therelevant period and an agreed upon reserve for drydockings. Please seethe section of this Annual Report entitled ‘‘CreditFacility’’ for more information relating to restrictions onour ability to pay dividends under the terms of our creditfacility.

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

We mayhave difficulty managing our planned growth properly.    Therecent formation of our company and our initial public offering and theacquisition and management of the 16 vessels in our operating fleethave imposed, as well as additional dry bulk vessels that we mayacquire in the future, will impose, significant responsibilities on ourmanagement and staff. The addition of vessels to our fleet may requireus to increase the number of our personnel. We will also have to manageour customer base so that we can provide continued employment for ourvessels upon the expiration of our existing time charters.

Weintend to continue to grow our business. Our future growth willprimarily depend on:

|  |              |                                         |
|--|--------------|-----------------------------------------|
|  | •  | locating andacquiring suitable vessels; |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | identifyingand consummating acquisitions; |

|  |              |                              |
|--|--------------|------------------------------|
|  | •  | enhancing our customer base; |

|  |              |                             |
|--|--------------|-----------------------------|
|  | •  | managing our expansion; and |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | obtaining required financing on acceptableterms. |

Growing any business by acquisition presents numerousrisks, such as undisclosed liabilities and obligations, the possibilitythat indemnification agreements will be unenforceable or insufficientto cover potential losses and difficulties associated with imposingcommon standards, controls, procedures and policies, obtainingadditional qualified personnel, managing relationships with customersand integrating newly acquired assets and operations into existinginfrastructure. We cannot give any assurance that we will be successfulin executing our growth plans or that we will not incur significantexpenses and losses in connection with our future growth.

Wecannot assure you that we will be able to borrow amounts under ourcredit facility and restrictive covenants in our credit facility mayimpose financial and other restrictions on us

We entered into asenior secured revolving credit facility in July  2005. We usedborrowings under the revolving credit facility to refinance a portionof our outstanding indebtedness at the time of our initial publicoffering in June  2005 and to fund vessel acquisitions. We haveamended and enhanced our credit facility in July  2006 andNovember  2006 with the most recent amendment enabling us toenter into a vessel newbuilding program. Our ability to borrow futureamounts under our credit facility will be subject to the satisfactionof certain customary conditions precedent and compliance with terms andconditions included in the loan documents. In connection with vesselacquisitions, amounts borrowed may not exceed 75% of the valueof the vessels securing our obligations under the credit facility. Ourability to borrow such amounts, in each case, will be subject to ourlender’s approval of the vessel acquisition. Our lender’sapproval will be based on the lender’s satisfaction of ourability to raise additional capital through equity issuances in amountsacceptable to our lender and the proposed employment of the vessel tobe acquired. To the extent that we are not able to satisfy theserequirements, including as a result of a decline in the value of ourvessels, we may not be able to draw down the credit facility inconnection with a vessel acquisition without obtaining a waiver orconsent from the lender.

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The credit facility also imposes operatingand financial restrictions on us. These restrictions may limit ourability to, among other things:

|  |              |                                                                                                                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | paydividends in amounts exceeding our EBITDA, less the aggregate amount ofinterest incurred and net amounts payable under interest rate hedgingagreements during the relevant period and an agreed upon reserve fordrydockings; |

|  |              |                                                                       |
|--|--------------|-----------------------------------------------------------------------|
|  | •  | change our Chief ExecutiveOfficer without the approval of our lender; |

|  |              |                                |
|--|--------------|--------------------------------|
|  | •  | incur additional indebtedness; |

|  |              |                                                     |
|--|--------------|-----------------------------------------------------|
|  | •  | change the flag, class or management of ourvessels; |

|  |              |                            |
|--|--------------|----------------------------|
|  | •  | create liens on ourassets; |

|  |              |                   |
|--|--------------|-------------------|
|  | •  | sell our vessels; |

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

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | enter into a new line of business; and |

|  |              |                                                                                                                                                                 |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | enter into a time charter or consecutivevoyage charters that has a term that exceeds, or which by virtue of anyoptional extensions may exceed, thirteen months. |

In addition, wemay not pay dividends if there is a default or a breach of a loancovenant under the credit facility or if the payment of the dividendswould result in a default or breach of a loan covenant. Ourindebtedness may also be accelerated if we experience a change ofcontrol. Therefore, we may need to seek permission from our lender inorder to engage in some corporate actions. Our lender’s interestsmay be different from ours and we cannot guarantee you that we will beable to obtain our lender’s permission when needed. This maylimit our ability to pay dividends to you, finance our futureoperations, make acquisitions or pursue business opportunities.

We cannot assure you that we will be able to refinanceindebtedness incurred under our credit facility.    Ourbusiness strategy contemplates that we repay all or a portion of ouracquisition related debt from time to time with the net proceeds ofequity issuances. We cannot assure you that we will be able torefinance our indebtedness through equity offerings or otherwise onterms that are acceptable to us or at all. If we are not able torefinance our indebtedness, we will have to dedicate a portion of ourcash flow from operations to pay the principal and interest of thisindebtedness. We cannot assure you that we will be able to generatecash flow in amounts that are sufficient for these purposes. If we arenot able to satisfy these obligations, we may have to undertakealternative financing plans or sell our assets. The actual or perceivedcredit quality of our charterers, any defaults by them, and the marketvalue of our fleet, among other things, may materially affect ourability to obtain alternative financing. In addition, debt servicepayments under our credit facility or alternative financing may limitfunds otherwise available for working capital, capital expenditures,payment of dividends and other purposes. If we are unable to meet ourdebt obligations, or if we otherwise default under our credit facilityor an alternative financing arrangement, our lender could declare thedebt, together with accrued interest and fees, to be immediately dueand payable and foreclose on our fleet, which could result in theacceleration of other indebtedness that we may have at such time andthe commencement of similar foreclosure proceedings by otherlenders.

Purchasing and operating secondhand vessels mayresult in increased operating costs and reduced fleetutilization.    The 16 Handymax dry bulk vessels in ouroperating fleet, at December  31,  2006, are all secondhandvessels. We have entered into contracts for 2 newbuilding vessels. Wealso may enter into additional newbuilding contracts and purchaseadditional secondhand vessels in the future. While we have the right toinspect previously owned vessels prior to purchase, such an inspectiondoes not provide us with the same knowledge about their condition thatwe would have if these vessels had been built for and operatedexclusively by us. A secondhand vessel may have conditions or defectsthat we were not aware of when we bought the vessel and which mayrequire us to incur costly repairs to the vessel. These repairs mayrequire us to put a vessel into drydock, which would reduce our fleetutilization. Furthermore, we usually do not receive the benefit ofwarranties on secondhand vessels.

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We depend upon a few significantcustomers for a large part of our revenues and the loss of one or moreof these customers could adversely affect our financialperformance.    We derive a significant part of our revenuesfrom a small number of charterers. The charterers’ payments to usunder their charters are our sole source of revenue. Some of ourcharterers are privately owned companies for which limited credit andfinancial information was available to us in making our assessment ofcounterparty risk when we entered into our charter. If one or more ofthese charterers terminates its charter or chooses not to re-charterour vessel or is unable to perform under its charter with us and we arenot able to find a replacement charter, we could suffer a loss ofrevenues that could adversely affect our financial condition, resultsof operations and cash available for distribution as dividends to ourstockholders. In addition, we may be required to change the flagging orregistration of the related vessel and may incur additional costs,including maintenance and crew costs if a charterer were to default onits obligations. Our stockholders do not have any recourse against ourcharterers.

In the highly competitive international shippingindustry, we may not be able to compete for charters with new entrantsor established companies with greater resources.    Ourvessels are employed in a highly competitive market that is capitalintensive and highly fragmented. Competition arises primarily fromother vessel owners, some of whom have substantially greater resourcesthan we do. Competition for the transportation of dry bulk cargo by seais intense and depends on price, location, size, age, condition and theacceptability of the vessel and its operators to the charterers. Due inpart to the highly fragmented market, competitors with greaterresources could enter the dry bulk shipping industry and operate largerfleets through consolidations or acquisitions and may be able to offerlower charter rates and higher quality vessels than we are able tooffer.

We may be unable to attract and retain key managementpersonnel and other employees in the shipping industry, which maynegatively impact the effectiveness of our management and results ofoperations.    Our success depends to a significant extentupon the abilities and efforts of our management team. We have enteredinto an employment contract with our Chairman and Chief ExecutiveOfficer, Sophocles Zoullas. Our success will depend upon our ability toretain key members of our management team and to hire new members asmay be necessary. The loss of any of these individuals could adverselyaffect our business prospects and financial condition. Difficulty inhiring and retaining replacement personnel could have a similar effect.We do not intend to maintain ‘‘key man’’ lifeinsurance on any of our officers.

Risks associated withoperating ocean going vessels could affect our business and reputation,which could adversely affect our revenues and stockprice.    The operation of ocean going vessels carriesinherent risks. These risks include the possibility of:

|  |              |                  |
|--|--------------|------------------|
|  | •  | marine disaster; |

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | environmental accidents; |

|  |              |                                      |
|--|--------------|--------------------------------------|
|  | •  | cargo and property losses or damage; |

|  |              |                                                                                                                                                                         |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | business interruptions caused by mechanicalfailure, human error, war, terrorism, political action in variouscountries, labor strikes or adverse weather conditions; and |

|  |              |         |
|--|--------------|---------|
|  | •  | piracy. |

Any of these circumstancesor events could increase our costs or lower our revenues. Theinvolvement of our vessels in an environmental disaster may harm ourreputation as a safe and reliable vessel owner and operator.

The shipping industry has inherent operational risks that maynot be adequately covered by our insurance.    We procureinsurance for our fleet against risks commonly insured against byvessel owners and operators, including hull and machinery insurance,war risks insurance and protection and indemnity insurance (whichinclude environmental damage and pollution insurance). We can give noassurance that we are adequately insured against all risks or that ourinsurers will pay a particular claim. Even if our insurance coverage isadequate to cover our losses, we may not be able to timely obtain areplacement vessel in the event of a loss. Furthermore, in the future,we may not be able to obtain adequate insurance coverage at reasonablerates for our fleet. We may also be subject to calls, 

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or premiums, in amounts based not only on ourown claim records but also the claim records of all other members ofthe protection and indemnity associations through which we receiveindemnity insurance coverage for tort liability. Our insurance policiesalso contain deductibles, limitations and exclusions which, although webelieve are standard in the shipping industry, may neverthelessincrease our costs or decrease our recovery in the event of a loss.

The aging of our fleet may result in increased operating costsin the future, which could adversely affect ourearnings.    In general, the cost of maintaining a vessel ingood operating condition increases with the age of the vessel. Althoughthe dwt weighted average age of the 16 Handymax dry bulk vessels in ouroperating fleet is approximately six years as of December31,  2006, one of our vessels is 22 years old. As our fleet ages,we will incur increased costs. Older vessels are typically less fuelefficient and more costly to maintain than more recently constructedvessels due to improvements in engine technology. Cargo insurance ratesincrease with the age of a vessel, making older vessels less desirableto charterers. Governmental regulations and safety or other equipmentstandards related to the age of vessels may also require expendituresfor alterations or the addition of new equipment, to our vessels andmay restrict the type of activities in which our vessels may engage. Wecannot assure you that, as our vessels age, market conditions willjustify those expenditures or enable us to operate our vesselsprofitably during the remainder of their useful lives.

Wemay have to pay tax on United States source income, which would reduceour earnings.    Under the United States Internal Revenue Codeof 1986, as amended, or the Code, 50% of the gross shippingincome of a vessel owning or chartering corporation, such as ourselvesand our subsidiaries, that is attributable to transportation thatbegins or ends, but that does not both begin and end, in the UnitedStates is characterized as United States source shipping income andsuch income is subject to a 4% United States federal income taxwithout allowance for any deductions, unless that corporation qualifiesfor exemption from tax under Section 883 of the Code and the Treasuryregulations promulgated thereunder.

While we believe that wequalify for exemption under Section 883 for 2006, our ability toqualify for this statutory tax exemption is dependent on certaincircumstances related to the ownership of our common stock which arebeyond our control and on interpretations of existing Treasuryregulations and we can therefore give no assurance that we in fact willbe eligible to qualify for exemption under Section 883 for futureyears.

In addition, changes in the Code, the Treasuryregulations or the interpretation thereof by the Internal RevenueService or the courts could adversely affect our ability to takeadvantage of the exemption under Section 883.

If we are notentitled to this exemption under Section 883 for any taxable year, wewould be subject for such taxable year to a 4% United Statesfederal income tax on our United States source shipping income. Theimposition of this taxation could have a negative effect on ourbusiness and would result in decreased earnings available fordistribution to our stockholders.

Based on the current operationof our vessels, if we were subject to this tax, our United Statesfederal income tax liability would be approximately $862,000 per year.Because the operations of our vessels are under the control of thirdparty charterers, we can give no assurance that our United Statesfederal income tax liability would be substantially higher. However,since no more that 50% of our shipping income would be treatedas derived from U.S. sources, our maximum tax liability under the4% tax regime would never exceed 2% of our shippingincome.

United States tax authorities could treat us as a‘‘passive foreign investment company,’’ whichcould have adverse United States federal income tax consequences toUnited States holders.    A foreign corporation will betreated as a ‘‘passive foreign investmentcompany,’’ or PFIC, for United States federal income taxpurposes if either (1) at least 75% of its gross income for anytaxable year consists of certain types of ‘‘passiveincome’’ or (2) at least 50% of the average value ofthe corporation’s assets produce or are held for the productionof those types of ‘‘passive income.’’ Forpurposes of these tests, ‘‘passive income’’includes dividends, interest, and gains from the sale or exchange ofinvestment property and rents and royalties other than rents androyalties which are received from 

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unrelated parties in connection with theactive conduct of a trade or business. For purposes of these tests,income derived from the performance of services does not constitute‘‘passive income.’’ United States stockholdersof a PFIC are subject to a disadvantageous United States federal incometax regime with respect to the income derived by the PFIC, thedistributions they receive from the PFIC and the gain, if any, theyderive from the sale or other disposition of their shares in thePFIC.

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

There is, however, no direct legalauthority under the PFIC rules addressing our method of operation.Accordingly, no assurance can be given that the United States InternalRevenue Service, or IRS, or a court of law will accept our position,and there is a risk that the IRS or a court of law could determine thatwe are a PFIC. Moreover, no assurance can be given that we would notconstitute a PFIC for any future taxable year if there were to bechanges in the nature and extent of our operations.

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

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

We are a holding company, and wedepend on the ability of our subsidiaries to distribute funds to us inorder to satisfy our financial obligations and to make dividendpayments.    We are a holding company and our subsidiariesconduct all of our operations and own all of our operating assets. Wehave no significant assets other than the equity interests in oursubsidiaries. As a result, our ability to make dividend paymentsdepends on our subsidiaries and their ability to distribute funds tous. If we are unable to obtain funds from our subsidiaries, our boardof directors may exercise its discretion not to declare or paydividends. We do not intend to obtain funds from other sources to paydividends.

As we expand our business, we may need to improveour operating and financial systems and will need to recruit suitableemployees and crew for our vessels.    Our current operatingand financial systems may not be adequate as we implement our plan toexpand the size of our fleet and our attempts to improve those systemsmay be ineffective. In addition, as we expand our fleet, we will needto recruit suitable additional seafarers and shore side administrativeand management personnel. We cannot guarantee that we will be able tohire suitable employees as we expand our fleet. If we or our crewingagent encounters business or financial difficulties, we may not be ableto adequately staff our vessels. If we are unable to grow our financialand operating systems or to recruit suitable employees as we expand ourfleet, our financial performance may be adversely affected and, amongother things, the amount of cash available for distribution asdividends to our stockholders may be reduced.

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Risks Relating to Our CommonStock

We are incorporated in the Marshall Islands,which does not have a well-developed body of corporatelaw.    Our corporate affairs are governed by our amended andrestated articles of incorporation and bylaws and by the MarshallIslands Business Corporations Act, or the BCA. The provisions of theBCA resemble provisions of the corporation laws of a number of statesin the United States. However, there have been few judicial cases inthe Marshall Islands interpreting the BCA. The rights and fiduciaryresponsibilities of directors under the laws of the Marshall Islandsare not as clearly established as the rights and fiduciaryresponsibilities of directors under statutes or judicial precedent inexistence in the United States. The rights of stockholders of companiesincorporated in the Marshall Islands may differ from the rights ofstockholders of companies incorporated in the United States. While theBCA provides that it is to be interpreted according to the laws of theState of Delaware and other states with substantially similarlegislative provisions, there have been few, if any, court casesinterpreting the BCA in the Marshall Islands and we can not predictwhether Marshall Islands courts would reach the same conclusions asUnited States courts. Thus, you may have more difficulty in protectingyour interests in the face of actions by the management, directors orcontrolling stockholders than would stockholders of a corporationincorporated in a United States jurisdiction which has developed arelatively more substantial body of case law.

Future sales ofour common stock could cause the market price of our common stock todecline.    Sales of a substantial number of shares of ourcommon stock in the public market, or the perception that these salescould occur, may depress the market price for our common stock. Thesesales could also impair our ability to raise additional capital throughthe sale of our equity securities in the future. We intend to issueadditional shares of our common stock in the future and ourstockholders. Our amended and restated articles of incorporationauthorize us to issue 100  million shares of common stock ofwhich 35,900,001 shares are outstanding currently.

Anti-takeover provisions in our organizational documents couldmake it difficult for our stockholders to replace or remove our currentboard of directors or have the effect of discouraging, delaying orpreventing a merger or acquisition, which could adversely affect themarket price of our common stock.    Several provisions of ouramended and restated articles of incorporation and bylaws could make itdifficult for our stockholders to change the composition of our boardof directors in any one year, preventing them from changing thecomposition of management. In addition, the same provisions maydiscourage, delay or prevent a merger or acquisition that stockholdersmay consider favorable. These provisions will include:

|  |              |                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------|
|  | •  | authorizing our board of directors to issue‘‘blank check’’ preferred stock withoutstockholder approval; |

|  |              |                                                                                |
|--|--------------|--------------------------------------------------------------------------------|
|  | •  | providing for aclassified board of directors with staggered, three year terms; |

|  |              |                                                                                                                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | authorizing vacancies on our board ofdirectors to be filled only by a vote of the majority of directors thenin office and specifically denying our stockholders the right to fillvacancies on the board; |

|  |              |                                                                                                                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | establishingcertain advance notice requirements for nominations for election to ourboard of directors or for proposing matters that can be acted on bystockholders at stockholder meetings; |

|  |              |                                                                |
|--|--------------|----------------------------------------------------------------|
|  | •  | prohibiting cumulative voting in the electionof directors; and |

|  |              |                                                                    |
|--|--------------|--------------------------------------------------------------------|
|  | •  | limiting the personswho may call special meetings of stockholders. |

|  |              |                                                                                                                                                                                                    |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | authorizing the removal of directors only forcause and only upon the affirmative vote of the holders of a majorityof the outstanding shares of our common stock entitled to vote for thedirectors; |

|  |              |                                                       |
|--|--------------|-------------------------------------------------------|
|  | •  | prohibiting stockholder actionby written consent; and |

|  |              |                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | establishingsupermajority voting provisions with respect to amendments to certainprovisions of our amended and restated articles of incorporation andbylaws. |

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These anti-takeover provisions couldsubstantially impede the ability of public stockholders to benefit froma change in control and, as a result, may adversely affect the marketprice of our common stock and your ability to realize any potentialchange of control premium.

We expect that the composition ofour board of directors may change in thenear-term.    Currently, Michael B. Goldberg and Frank J.Loverro, both managing directors of Kelso, are members of our board ofdirectors. Until recently, Kelso, the majority owner of Eagle Ventures,beneficially held a significant portion of our outstanding sharesthrough Eagle Ventures LLC. As of the date of this report, EagleVentures beneficially owns only 0.04% of our shares. Consistentwith Kelso’s practice of not having its managing directors serveon the boards of directors of public companies unless Kelso’slevel of beneficial stock ownership in the company is significant andwarrants such participation, we expect that Mr.  Goldberg andMr.  Loverro may resign from our board of directors. In addition,there may be other changes to the composition of our board of directorsas a result of Kelso’s reduced beneficial ownership or otherwise.In order to ease this transition, we have underway an active process toidentify persons qualified to serve as members of our board ofdirectors and may propose such persons for election or appointment inthe future.

ITEM 1B.    UNRESOLVED STAFFCOMMENTS

None

ITEM 2.    PROPERTIES

We do notown any real property. We lease office space at 477 Madison Avenue, NewYork, New York 10022.

ITEM 3.    LEGALPROCEEDINGS

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

ITEM4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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PARTII

|               |                                                                                                                  |
|---------------|------------------------------------------------------------------------------------------------------------------|
| ITEM 5.  | MARKET FORREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES |

Common Stock

The trading market for shares of our common stock is the NasdaqGlobal Select, on which our shares are quoted under the symbol‘‘EGLE.’’ As of February  27,  2007the number of stockholders of record of the Company’s commonstock was approximately 20,000. The following table sets forth the highand low closing prices for shares of our common stock since our initialpublic offering of common stock at $14.00 per share on June 23,2005, as reported by the Nasdaq Global Select:

|                                      |  |  |      |   |       |     |  |  |  |   |       |  |
|--------------------------------------|--|--|------|---|-------|-----|--|--|--|---|-------|--|
| Fortheperiod:                        |  |  | High |   |       | Low |
| Jan1, 2006 to March  31,2006         |  |  |      | $ | 16.07 |     |  |  |  | $ | 11.90 |  |
| April1,  2006 to June  30,2006       |  |  |      | $ | 14.25 |     |  |  |  | $ | 12.65 |  |
| July1,  2006 to September  30,2006   |  |  |      | $ | 16.08 |     |  |  |  | $ | 13.96 |  |
| October1,  2006 to December  31,2006 |  |  |      | $ | 17.43 |     |  |  |  | $ | 15.80 |  |
| June23,  2005 to June  30,2005       |  |  |      | $ | 13.50 |     |  |  |  | $ | 12.90 |  |
| July1,  2005 to September  30,2005   |  |  |      | $ | 17.57 |     |  |  |  | $ | 12.36 |  |
| October1,  2005 to December  31,2005 |  |  |      | $ | 17.74 |     |  |  |  | $ | 14.38 |  |
|                                      |

On June28,  2006, we completed an offering of 2,750,000 shares of ourcommon stock to certain institutional investors pursuant to asecurities purchase agreement dated June  22,  2006.

On October  28,  2005, we completed an offering of6,000,000 shares of our common stock. Please see Item 7,‘‘Sale of Common Stock’’, for additionalinformation relating to this offering.

Restricted Stock

None.

Equity Compensation Plans

None.

Payment of Dividends to Stockholders

In 2005, the Company declared and paid a quarterlydividend on its common stock in the amount of $0.54 per share inOctober  2005 to its shareholders. The aggregate amount of thiscash dividend payment was $14.7  million. In 2006, the Companydeclared four quarterly dividends in the aggregate amount of $2.08 pershare of its common stock to its shareholders in January, April, Julyand October  2006. Aggregate payments were $71.7  millionfor dividends declared in 2006. In February  2007, the Companydeclared a dividend of $0.51 per share to be paid on March2,  2007 to holders of record on February  28,  2007.The aggregate amount of this cash dividend is $18.3  million.

The Company currently intends to pay quarterly dividends tostockholders in February, April, July and October in amounts that aresubstantially equal to our available cash from operations during theprevious quarter less any cash reserves for drydockings and workingcapital; however, any determination to pay dividends in the future willbe at the discretion of the Board of Directors and will depend upon theCompany’s results of operations, financial condition, covenantsand other factors deemed relevant by the Board of Directors. Payment ofdividends is limited by Marshall Islands law and the terms of certaincredit agreements to which the Company and its subsidiaries are party.(See Notes to the Consolidated Financial Statements and page 54 ofManagement’s Discussion & Analysis.)

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|               |                        |
|---------------|------------------------|
| ITEM 6.  | SELECTEDFINANCIAL DATA |

We were incorporated on March 23, 2005and our predecessor, Eagle Holdings LLC, was formed onJanuary 26, 2005. The following selected consolidated financialdata are derived from the audited consolidated financial statements ofthe Company included elsewhere in this report. The data presentedherein should be read in conjunction with the consolidated financialstatements, related notes and other financial information includedherein. In accordance with standard shipping industry practice, we didnot obtain from the sellers historical operating data for the vesselsthat we acquired, as that data was not material to our decision topurchase the vessels. Accordingly, we have not included any historicalfinancial data relating to the results of operations of our vesselsfrom the period before our acquisition of them. Please see the sectionof this annual report entitled ‘‘Management’sDiscussion and Analysis of Financial Condition and Results ofOperations – Lack of Historical Operating Data for Vessels Beforetheir Acquisition.’’

|                                                                     |  |  |                                      |   |            |                                                               |  |  |  |   |            |   |
|---------------------------------------------------------------------|--|--|--------------------------------------|---|------------|---------------------------------------------------------------|--|--|--|---|------------|---|
| (Dollaramounts in thousands except Per Share amounts and FleetData) |  |  | YearendedDecember 31, 2006 |   |            | Period fromJanuary  26,  2005 (inception) toDecember31,  2005 |
| Income Statement Data                                               |  |  |                                      |   |       |                                                               |  |  |  |   |       |   |
| Revenues, net ofcommissions                                         |  |  |                                      | $ | 104,648    |                                                               |  |  |  | $ | 56,066     |   |
| VesselExpenses                                                      |  |  |                                      |   | 21,562     |                                                               |  |  |  |   | 11,053     |   |
| DepreciationandAmortization                                         |  |  |                                      |   | 21,813     |                                                               |  |  |  |   | 10,412     |   |
| Generaland AdministrativeExpenses                                   |  |  |                                      |   | 5,223      |                                                               |  |  |  |   | 3,491      |   |
| Managementand Other Fees toAffiliates                               |  |  |                                      |   | —    |                                                               |  |  |  |   | 6,175      |   |
| Non-cashCompensationExpense                                         |  |  |                                      |   | 13,070     |                                                               |  |  |  |   | 11,735     |   |
| TotalOperating Expenses                                             |  |  |                                      |   | 61,668     |                                                               |  |  |  |   | 42,866     |   |
| NetInterestExpense                                                  |  |  |                                      |   | 9,179      |                                                               |  |  |  |   | 6,547      |   |
| NetIncome                                                           |  |  |                                      | $ | 33,801     |                                                               |  |  |  | $ | 6,653      |   |
| Shareand Per Share Data                                             |  |  |                                      |   |       |                                                               |  |  |  |   |       |   |
| Basic andDiluted Income pershare                                    |  |  |                                      | $ | 0.98       |                                                               |  |  |  | $ | 0.30       |   |
| Weighted AverageShares Outstanding –Diluted                   |  |  |                                      |   | 34,543,862 |                                                               |  |  |  |   | 21,968,824 |   |
| CashDividends Declared pershare                                     |  |  |                                      | $ | 2.08       |                                                               |  |  |  | $ | 0.54       |   |
| ConsolidatedCash Flow Data                                          |  |  |                                      |   |       |                                                               |  |  |  |   |       |   |
| Net cash fromoperatingactivities                                    |  |  |                                      | $ | 70,535     |                                                               |  |  |  | $ | 26,616     |   |
| Net cashused in investingactivities                                 |  |  |                                      |   | (130,759   | )                                                             |  |  |  |   | (427,966   | ) |
| Netcash from financingactivities                                    |  |  |                                      |   | 57,973     |                                                               |  |  |  |   | 425,877    |   |
|                                                                     |

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|                                              |  |  |                             |   |         |                             |  |  |  |   |         |   |
|----------------------------------------------|--|--|-----------------------------|---|---------|-----------------------------|--|--|--|---|---------|---|
|                                         |  |  | December 31, 2006 |   |         | December 31, 2005 |
| Consolidated Balance SheetData               |  |  |                             |   |    |                             |  |  |  |   |    |   |
| CurrentAssets                                |  |  |                             | $ | 27,652  |                             |  |  |  | $ | 33,829  |   |
| TotalAssets                                  |  |  |                             |   | 568,791 |                             |  |  |  |   | 462,344 |   |
| TotalLiabilities                             |  |  |                             |   | 247,215 |                             |  |  |  |   | 146,551 |   |
| Long-termDebt                                |  |  |                             |   | 239,975 |                             |  |  |  |   | 140,000 |   |
| Stockholders’Equity                    |  |  |                             |   | 321,576 |                             |  |  |  |   | 315,793 |   |
| OtherData                                    |  |  |                             |   |    |                             |  |  |  |   |    |   |
| EBITDA(a)                                    |  |  |                             | $ | 82,695  |                             |  |  |  | $ | 43,075  |   |
| CapitalExpenditures:                         |  |  |                             |   |    |                             |  |  |  |   |    |   |
| Vessels                                      |  |  |                             | $ | 130,759 |                             |  |  |  | $ | 427,966 |   |
| Paymentsfor Drydockings                      |  |  |                             | $ | 2,325   |                             |  |  |  | $ | 422     |   |
| Ratio ofTotal Debt to TotalCapitalization(b) |  |  |                             |   | 42.7    | %                           |  |  |  |   | 30.7    | % |
| Fleet Data                                   |  |  |                             |   |    |                             |  |  |  |   |    |   |
| Number ofVessels                             |  |  |                             |   | 16      |                             |  |  |  |   | 13      |   |
| Average Age of Fleet(in dwt weighted years)  |  |  |                             |   | 6       |                             |  |  |  |   | 6       |   |
| FleetOwnership Days                          |  |  |                             |   | 5,288   |                             |  |  |  |   | 2,531   |   |
| FleetAvailable Days                          |  |  |                             |   | 5,224   |                             |  |  |  |   | 2,507   |   |
| FleetOperating Days                          |  |  |                             |   | 5,203   |                             |  |  |  |   | 2,500   |   |
| FleetUtilizationDays                         |  |  |                             |   | 99.6    | %                           |  |  |  |   | 99.7    | % |
|                                              |

|  |
|--|
|  |  |
|  |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)  | Ourrevolving credit facility permits us to pay dividends in amounts up toour earnings before extraordinary or exceptional items, interest,taxes, depreciation and amortization (Credit Agreement EBITDA), lessthe aggregate amount of interest incurred and net amounts payable underinterest rate hedging agreements during the relevant period and anagreed upon reserve for dry-docking. Therefore, we believe that thisnon-GAAP measure is important for our investors as it reflects ourability to pay dividends. The Company’s computation of EBITDAmay not be comparable to similar titled measures of other companies.The following table is a reconciliation of net income, as reflected inthe consolidated statements of operations, to the Credit AgreementEBITDA: |

|                                            |  |  |                                      |   |            |                                                          |  |  |  |   |            |  |
|--------------------------------------------|--|--|--------------------------------------|---|------------|----------------------------------------------------------|--|--|--|---|------------|--|
|                                       |  |  | YearendedDecember 31, 2006 |   |            | PeriodfromJanuary 26, 2005(inception) toDecember 31,2005 |
| NetIncome                                  |  |  |                                      | $ | 33,801,540 |                                                          |  |  |  | $ | 6,653,400  |  |
| InterestExpense                            |  |  |                                      |   | 10,548,616 |                                                          |  |  |  |   | 7,208,641  |  |
| DepreciationandAmortization                |  |  |                                      |   | 21,812,486 |                                                          |  |  |  |   | 10,412,227 |  |
| Amortizationof Prepaid and DeferredRevenue |  |  |                                      |   | 3,462,000  |                                                          |  |  |  |   | 890,500    |  |
| EBITDA                                     |  |  |                                      |   | 69,624,642 |                                                          |  |  |  |   | 25,164,768 |  |
| Adjustmentsfor Exceptional Items:          |  |  |                                      |   |       |                                                          |  |  |  |   |       |  |
| Management and Other Fees toAffiliates(1)  |  |  |                                      |   | —    |                                                          |  |  |  |   | 6,175,046  |  |
| Non-cashCompensation Expense(2)            |  |  |                                      |   | 13,070,473 |                                                          |  |  |  |   | 11,734,812 |  |
| CreditAgreementEBITDA                      |  |  |                                      | $ | 82,695,115 |                                                          |  |  |  | $ | 43,074,626 |  |
|                                            |

|  |
|--|
|  |  |  |
|  |

|  |     |                                                        |
|--|-----|--------------------------------------------------------|
|  | (1) | Onetime charge (see Notes to the financial statements) |

|  |     |                                                                                                                   |
|--|-----|-------------------------------------------------------------------------------------------------------------------|
|  | (2) | Management’s participation in profitsinterests in Eagle Ventures LLC (see Notes to the financialstatements) |

|     |                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|
| (b) | Ratio of Total Debt to TotalCapitalization was calculated as debt divided by capitalization (debtplus stockholders’equity). |

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|              |                                                                                           |
|--------------|-------------------------------------------------------------------------------------------|
| ITEM7.  | MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATION |

The following is adiscussion of the Company’s financial condition and results ofoperation for the year ended December  31,  2006 and theperiod from January  26,  2005 (inception) toDecember  31,  2005. This section should be read inconjunction with the consolidated financial statements includedelsewhere in this report and the notes to those financialstatements.

This discussion contains forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, asamended and Section 21E of the Securities Exchange Act of 1934, asamended and the Private Securities Litigation Reform Act of 1995 andare intended to be covered by the safe harbor provided for under thesesections. These statements may include words such as‘‘believe,’’‘‘estimate,’’‘‘project,’’‘‘intend,’’‘‘expect,’’‘‘plan,’’‘‘anticipate,’’ and similar expressions inconnection with any discussion of the timing or nature of futureoperating or financial performance or other events. Forward lookingstatements reflect management’s current expectations andobservations with respect to future events and financial performance.Where we express an expectation or belief as to future events orresults, such expectation or belief is expressed in good faith andbelieved to have a reasonable basis. However, our forward-lookingstatements are subject to risks, uncertainties, and other factors,which could cause actual results to differ materially from futureresults expressed, projected, or implied by those forward-lookingstatements. The principal factors that affect our financial position,results of operations and cash flows include, charter market rates,which have recently increased to historic highs, and periods of charterhire, vessel operating expenses and voyage costs, which are incurredprimarily in U.S. dollars, depreciation expenses, which are a functionof the cost of our vessels, significant vessel improvement costs andour vessels’ estimated useful lives, and financing costs relatedto our indebtedness. Our actual results may differ materially fromthose anticipated in these forward looking statements as a result ofcertain factors which could include the following: (i) changes indemand in the dry bulk market, including, without limitation, changesin production of, or demand for, commodities and bulk cargoes,generally or in particular regions; (ii)  greater thananticipated levels of dry bulk vessel new building orders or lower thananticipated rates of dry bulk vessel scrapping; (iii) changes in rulesand regulations applicable to the dry bulk industry, including, withoutlimitation, legislation adopted by international bodies ororganizations such as the International Maritime Organization and theEuropean Union or by individual countries; (iv) actions taken byregulatory authorities; (v) changes in trading patterns significantlyimpacting overall dry bulk tonnage requirements; (vi) changes in thetypical seasonal variations in dry bulk charter rates; (vii) changes inthe cost of other modes of bulk commodity transportation; (viii)changes in general domestic and international political conditions;(ix) changes in the condition of the Company’s vessels orapplicable maintenance or regulatory standards (which may affect, amongother things, our anticipated dry docking costs); (x) and other factorslisted from time to time in our filings with the Securities andExchange Commission. This discussion also includes statistical dataregarding world dry bulk fleet and orderbook and fleet age. Wegenerated some of these data internally, and some were obtained fromindependent industry publications and reports that we believe to bereliable sources. We have not independently verified these data norsought the consent of any organizations to refer to their reports inthis annual report. We disclaim any intent or obligation to updatepublicly any forward-looking statements, whether as a result of newinformation, future events or otherwise, except as may be requiredunder applicable securities laws.

Overview 

Weare Eagle Bulk Shipping Inc., a Marshall Islands corporationheadquartered in New York City. We are the largest U.S. based owner ofHandymax dry bulk vessels. Handymax dry bulk vessels range in size from35,000 to 60,000 deadweight tons, or dwt, and transport a broad rangeof major and minor bulk cargoes, including iron ore, coal, grain,cement and fertilizer, along worldwide shipping routes. As ofDecember  31,  2006, we owned and operated a modern fleetof 16 Handymax dry bulk vessels. In addition to our operating fleet of16 vessels, we had two newbuilding vessels under construction which arescheduled to be delivered to us in early 2010, bringing our totaloperating and newbuild fleet to 18 vessels.

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We are focused on maintaining a highquality fleet that is concentrated primarily in one vessel type –Handymax dry bulk carriers and its sub-category of Supramax vesselswhich are Handymax vessels ranging in size from 50,000 to 60,000 dwt.Twelve of the 16 vessels in our operating fleet are classed as Supramaxdry bulk vessels. These vessels have the cargo loading and unloadingflexibility of on-board cranes while offering cargo carrying capacitiesapproaching that of Panamax dry bulk vessels, which range in size from60,000 to 100,000 dwt and must rely on port facilities to load andoffload their cargoes. We believe that the cargo handling flexibilityand cargo carrying capacity of the Supramax class vessels make themattractive to potential charterers. The 16 vessels in our operatingfleet have a combined carrying capacity of 796,663 dwt and an averageage of only 6 years, as compared to an average age for the worldHandymax dry bulk fleet of over 15 years.

Our financialperformance is based on the following key elements of our businessstrategy:

|  |           |                                                                                                                                                                               |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (1)  | our strategy is to concentrate inone vessel category: Handymax dry bulk vessels, which offer size,operational and geographical advantages (over Panamax and Capesizevessels). |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (2)  | our strategy is to charter ourvessels primarily pursuant to one- to three-year time charters to allowus to take advantage of the stable cash flow and high utilization ratesthat are associated with medium to long-term time charters. Reliance onthe spot market contributes to fluctuations in revenue, cash flow, andnet income. On the other hand, time charters provide a shipping companywith a predictable level of revenues. We have entered into timecharters for all of our vessels which range in length from one to threeyears and provide for fixed semi-monthly payments in advance. We havealso entered into contracts with fixed minimum rates and profit sharingarrangements, enabling us to benefit from an increasing rateenvironment while still minimizing downside risk. This strategy iseffective in strong and weak dry bulk markets, giving us security andpredictability of cashflows relative to the volatility inherent inshipping markets. |

|  |           |                                                                                                                                                                                  |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (3)  | our strategy is to maintainhigh quality vessels and improve standards of operation throughimproved environmental procedures, crew training and maintenance andrepair procedures. |

|  |           |                                                                                                                                                                            |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (4)  | our strategy is to maintaina balance between purchasing vessels as market conditions andopportunities arise and maintaining prudent financial ratios (e.g.leverage ratio). |

The following are several significant itemsthat occurred during 2006:

|  |              |                                                                                                                     |
|--|--------------|---------------------------------------------------------------------------------------------------------------------|
|  | •  | Weexpanded our fleet from 13 vessels to 16 vessels by acquiring theKESTREL I, TERN and JAEGER in June and July2006. |

|  |              |                                                                                                                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | On June  28,  2006,we completed an offering of 2,750,000 shares of common stock at $12.00per share to certain institutional investors pursuant to a securitiespurchase agreement dated June  22,  2006. |

|  |              |                                                                                  |
|--|--------------|----------------------------------------------------------------------------------|
|  | •  | In July  2006, we increased our creditfacility from $330,000,000 to$450,000,000. |

|  |              |                                                                                                                                                                                                                                                                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | In November  2006, weentered into two vessel newbuilding contracts with IHI Marine UnitedInc., a Japanese shipyard, for the construction of two‘Future-56’ class Supramax vessels at a contract price ofequivalent US$33,500,000 each. These 56,000 deadweight ton vessels areexpected to be delivered in January and February of 2010. |

|  |              |                                                                     |
|--|--------------|---------------------------------------------------------------------|
|  | •  | In November  2006, we increased ourcredit facility to $500,000,000. |

The following are severalsignificant items that occurred during2005:

|  |              |                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------|
|  | •  | We incorporated on March23,  2005 as a Marshall Islands corporation headquartered inNew  York City. |

|  |              |                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------|
|  | •  | In April2005, we acquired the vessels CARDINAL, CONDOR, FALCON,HARRIER, HAWK I, and SHIKRA. |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | In May  2005, we acquired the vesselKITE. |

|  |              |                                                            |
|--|--------------|------------------------------------------------------------|
|  | •  | In June  2005, weacquired the vessel GRIFFON andPEREGRINE. |

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|  |              |                                                                                                                             |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------|
|  | •  | On June23,  2005, we completed our initial public offering by selling14,400,000 shares of common stock at $14.00 per share. |

|  |              |                                               |
|--|--------------|-----------------------------------------------|
|  | •  | In July  2005, we acquired the vesselSPARROW. |

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

|  |              |                                                                                                                                  |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------|
|  | •  | On October  28,  2005, we sold6,000,000 shares of our common stock in a follow-on public offering ata price of $14.50 per share. |

|  |              |                                                 |
|--|--------------|-------------------------------------------------|
|  | •  | InOctober  2005, we acquired the vessel MERLIN. |

|  |              |                                                 |
|--|--------------|-------------------------------------------------|
|  | •  | In December  2005, we acquired thevessel HERON. |

We have employed all of our vessels on timecharters for periods ranging from one to three years. The followingtable represents certain information about the Company’s vesselacquisition and revenue earningcharters:

|               |  |  |                    |  |  |                       |  |  |                                 |  |  |                           |
|---------------|--|--|--------------------|--|--|-----------------------|--|--|---------------------------------|--|--|---------------------------|
| Vessel        |  |  | VesselAcquired     |  |  | Delivered toCharterer |  |  | Time CharterExpiration(1)       |  |  | Daily TimeCharterHireRate |
| Cardinal(2)   |  |  | April 18,2005 |  |  | April19,2005          |  |  | March2007 to June2007           |  |  | $26,500                   |
| Condor(3)     |  |  | April29,  2005     |  |  | April  30,2005        |  |  | November  2006 to March2007     |  |  | $24,000                   |
| Falcon        |  |  | April21,  2005     |  |  | April  22,2005        |  |  | February  2008 to June2008      |  |  | $20,950                   |
| Griffon(4)    |  |  | June  1,  2005     |  |  | February17,  2006     |  |  | January  2007 to March2007      |  |  | $13,550                   |
| Harrier(5)    |  |  | April19,  2005     |  |  | April  21,2005        |  |  | March  2007 to June2007         |  |  | $23,750                   |
| HawkI(6)      |  |  | April  26,2005     |  |  | April  28,  2005      |  |  | March  2007 toJune2007          |  |  | $23,750                   |
| Heron         |  |  | December1,  2005   |  |  | December  11,2005     |  |  | December  2007 to February2008  |  |  | $24,000                   |
| Jaeger(7)     |  |  | July7,  2006       |  |  | July  7,  2006        |  |  | April2007 to June  2007         |  |  | $18,550                   |
| KestrelI(8)   |  |  | June  30,  2006    |  |  | July1,  2006          |  |  | December  2007 to April2008     |  |  | $18,750                   |
| Kite(9)       |  |  | May9,  2005        |  |  | April  18,2006        |  |  | March  2007 to May2007          |  |  | $14,750                   |
| Merlin        |  |  | October26,  2005   |  |  | October  26,2005      |  |  | October  2007 to December2007   |  |  | $24,000                   |
| OspreyI(10)   |  |  | August  31,2005    |  |  | September  1,  2005   |  |  | July  2008to November2008       |  |  | $21,000                   |
| Peregrine(11) |  |  | June  30,  2005    |  |  | December16,  2006     |  |  | December  2008 to February2009  |  |  | $20,500                   |
| Shikra(12)    |  |  | April29,  2005     |  |  | September  10,2006    |  |  | September  2007 to December2007 |  |  | $14,800                   |
| Sparrow(13)   |  |  | July19,  2005      |  |  | July  20,2005         |  |  | November  2006 to February2007  |  |  | $22,500                   |
| Tern(14)      |  |  | July3,  2006       |  |  | July  3,2006          |  |  | December  2007 to April2008     |  |  | $19,000                   |
|               |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Thedate range provided represents the earliest and latest date on whichthe charterer may redeliver the vessel to the Company upon thetermination of the charter. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (2) | Upon completion of the currentcharter the CARDINAL will enter a new time charter at $28,000 per dayfor 11 to 13months. |

|     |                                                                                                                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Upon completionof the current charter the CONDOR will enter a new time charter at$20,500 per day for 26 to 29 months. The charterer has an option toextend the charter period by 11 to 13 months at a time charter rate of$22,000 per day. |

|     |                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------|
| (4) | Uponcompletion of the current charter the GRIFFON will enter a new timecharter at $20,075 per day for 24 to 26months. |

|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (5) | The charter forthe HARRIER has been renewed at $24,000 per day commencing inJune  2007 for 24 to 27months. |

|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (6) | The charter forthe HAWK I has been renewed at $22,000 per day commencing inApril  2007 for 24 to 26months. |

|     |                                                                                                                                                                                                                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Upon completionof the current charter, the JAEGER commences a new time charter with arate of $27,500 per day for 12-14 months. The charter rate may reset atthe beginning of each month based on the average time charter rate forthe Baltic Supramax Index, but in no case less than $22,500 perday. |

|     |                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------|
| (8) | The charterer ofthe KESTREL I has an option to extend the charter period by 11 to 13months at a daily time charter rate of $20,000 perday. |

|     |                                                                                                                     |
|-----|---------------------------------------------------------------------------------------------------------------------|
| (9) | Upon conclusion ofthe current charter, the KITE commences a new time charter at $21,000per day for 26 to 29 months. |

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|      |                                                                                                                                   |
|------|-----------------------------------------------------------------------------------------------------------------------------------|
| (10) | Thecharterer of the OSPREY I has an option to extend the charter period byup to 26 months at a daily time charter rate of$25,000. |

|      |                                                                                                                                           |
|------|-------------------------------------------------------------------------------------------------------------------------------------------|
| (11) | Upon conclusionof the initial charter in December  2006, the PEREGRINE commenceda new time charter at $20,500 per day for 24 to 26months. |

|      |                                          |
|------|------------------------------------------|
| (12) | The SHIKRA wassold on February  27,2007. |

|      |                                                                                                                                                                                                                                      |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (13) | Upon completion ofthe current charter in January  2007, the SPARROW commenced a newtime charter at a base rate of $24,000 per day for 11 to 13 months witha profit share of 30% of up to the first $3,000 per day over thebase rate. |

|      |                                                                                                                                 |
|------|---------------------------------------------------------------------------------------------------------------------------------|
| (14) | The chartererof the TERN has an option to extend the charter period by 11 to 13months at a time charter rate of $20,500 perday. |

Market Overview 

The internationalshipping industry is highly competitive and fragmented with many marketparticipants. There are approximately 6,400 drybulk carriers of over10,000 dwt aggregating approximately 367  million dwt, and theownership of these vessels is divided among approximately 1,400 mainlyprivate independent dry bulk vessel owners with no one shipping groupowning or controlling more than 5.0% of the world bulker fleet.We primarily compete with other owners of dry bulk vessels in theHandymax and Handysize class and Panamax class sectors that are mainlyprivately owned fleets.

Competition in virtually all bulk tradesis intense and based primarily on supply and demand. Such demand is afunction of world economic conditions and the consequent requirementfor commodities, production and consumption patterns, as well as eventswhich interrupt production, trade routes and consumption. We competefor charters on the basis of price, vessel location, size, age andcondition of the vessel, as well as on our reputation as an owner andoperator. Increasingly, major customers are demonstrating a preferencefor modern vessels based on concerns about the environmental andoperational risks associated with older vessels. Consequently, ownersof large modern fleets have gained a competitive advantage over ownersof older fleets.

Our strategy is to concentrate in one vesselcategory of the dry bulk segment of the shipping industry – theHandymax sector. Handymax dry bulk vessels range in size from 35,000 to60,000 dwt. Within the Handymax sector, the industry has migrated to alarger size of vessel class called the Surpamax class of dry bulkvessels which range in size from 50,000 dwt to 60,000 dwt. vessel.These vessels have the cargo loading and unloading flexibility ofon-board cranes while offering cargo carrying capacities approachingthat of Panamax dry bulk vessels, which range in size from 60,000 to100,000 dwt and must rely on port facilities to load and offload theircargoes. We believe that the cargo handling flexibility and cargocarrying capacity of the Supramax class vessels make them attractive topotential charterers. Twelve of the 16 vessels in our operating fleetare classed as Supramax vessels, as are the two vessels underconstruction.

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Thesupply of dry bulk vessels depends primarily on the level of theorderbook, the fleet age profile, and the operating efficiency of theexisting fleet. As of January  2007, 33% of the worldHandymax fleet is 20 years or older. The 16 Handymax vessels in ouroperating fleet have an average age of approximately 6 years as ofDecember  31,  2006, compared to an average age for theworld Handymax dry bulk fleet of over 15 years. The Handymaxnewbuilding orderbook currently stands at 21% of the worldHandymax fleet. The number of Handymax vessels over 20 years is doubletheorderbook.

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The Handymax Market

Unlike 2005,when the dry bulk charter market was very strong in the first half, andthe average time charter rates for Handymax vessels was at an all-timehigh, the first half of 2006 saw a sharp market slump. This was causedby delays in commodity contract price negotiations between producersand consumers which resulted in a slowdown in inventory build-up incommodity consuming nations, primarily China, coupled with an increasein supply of vessels. However, once the commodity contract prices for2006 were fixed by May  2006, commodity trades resumed and thecharter market reverted to strength by June  2006 with theseasonal fourth quarter seeing favorable movement in charter rates aswell as vessel prices. The market strength in the latter part of 2006was in contrast to the weak market conditions in the latter part of2005 when charter rates eased considerably from their all-time highs asthe inventory build-up of commodities at consuming economies declinedalong with an easing of port congestion. The primary drivers in 2005and 2006 continues to be sustained demand in East Asia led by strongdemand for commodities in China and increasingly India. Demand forvessels was further boosted by port congestion and shifts in tradepatterns which increased distances or ton-miles, especially the droughtin Australia which is resulting in grain being shipped from increasingdistances as importers turn to other producers.

We believeindustry fundamentals remain attractive as ongoing global economicactivity continues to foster demand for dry bulk commodities. RobustChinese steel demand continues to stimulate iron ore and coal tradegrowth. Global infrastructure building programs have also boosted tradeof minor bulks such as cement. Minor bulks provide a secure, protectivemarket for Handymax vessels vastly benefiting the Supramax class withtheir superior cargo capacity and gear. Additionally due to longer haulroutes ton-mile demand is increasing at a faster pace than tradegrowth. On the supply side, although there has been a surge innewbuildings, sharply higher tanker and container orders have placedlimits on drybulk shipyard capacities and deliveries until after 2009,further calibrating drybulk demand and supply.

Lack ofHistorical Operating Data for Vessels Before theirAcquisition

Consistent with shipping industry practice,other than inspection of the physical condition of the vessels andexaminations of classification society records, there is no historicalfinancial due diligence process when we acquire vessels. Accordingly,we do not obtain the historical operating data for the vessels from thesellers because that information is not material to our decision tomake acquisitions, nor do we believe it would be helpful to potentialinvestors in our common stock in assessing our business orprofitability. Most vessels are sold under a standardized agreement,which, among other things, provides the buyer with the right to inspectthe vessel and the vessel’s classification society records. Thestandard agreement does not give the buyer the right to inspect, orreceive copies of, the historical operating data of the vessel. Priorto the delivery of a purchased vessel, the seller typically removesfrom the vessel all records, including past financial records andaccounts related to the vessel. In addition, the technical managementagreement between the seller’s technical manager and the selleris automatically terminated and the vessel’s trading certificatesare revoked by its flag state following a change in ownership.

Consistent with shipping industry practice, we treat the acquisitionof a vessel (whether acquired with or without charter) as theacquisition of an asset rather than a business. Although vessels aregenerally acquired free of charter, we have acquired (and may in thefuture acquire) some vessels with time charters. Where a vessel hasbeen under a voyage charter, the vessel is delivered to the buyer freeof charter, and it is rare in the shipping industry for the lastcharterer of the vessel in the hands of the seller to continue as thefirst charterer of the vessel in the hands of the buyer. In most cases,when a vessel is under time charter and the buyer wishes to assume thatcharter, the vessel cannot be acquired without the charterer’sconsent and the buyer’s entering into a separate direct agreementwith the charterer to assume the charter. The purchase of a vesselitself does not transfer the charter, because it is a separate serviceagreement between the vessel owner and thecharterer.

Critical Accounting Policies

Thediscussion and analysis of our financial condition and results ofoperations is based upon our consolidated financial statements, whichhave been prepared in accordance with U.S. GAAP. The 

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preparation of those financial statementsrequires us to make estimates and judgments that affect the reportedamounts of assets and liabilities, revenues and expenses and relateddisclosure of contingent assets and liabilities at the date of ourfinancial statements. Actual results may differ from these estimatesunder different assumptions and conditions.

Critical accountingpolicies are those that reflect significant judgments of uncertaintiesand potentially result in materially different results under differentassumptions and conditions. We have described below what we believe areour most critical accounting policies, because they generally involve acomparatively higher degree of judgment in their application. For adescription of all our significant accounting policies, see Note 2 toour consolidated financial statements included herein.

RevenueRecognition

We currently generate all of our revenue from timecharters. Time charters are for a specific period of time at a specificrate per day or month, and are generally not as complex or assubjective as voyage charters. If we had a vessel on a voyage charter,or a charter in the spot market, we would agree to provide a vessel forthe transport of specific goods between specific ports in return forthe payment of an agreed upon freight per ton of cargo or,alternatively, for a specified total amount. All operating costs wouldbe for our account. Voyage expenses, such as fuel and port charges, arerecognized ratably over the duration of the voyage and, therefore, areallocated between reporting periods based on the relative transit timein each period. Estimated losses under a voyage charter are providedfor in full at the time such losses become evident.

Revenuerecognition for voyage charters may be calculated on either aload-to-load basis or on a discharge-to-discharge basis. Our accountingpolicy for recognition of voyage freight for vessels operating onvoyage charters would be on a discharge-to-discharge basis. Under thismethod, voyage revenue is recognized evenly over the period from thedeparture of a vessel from its prior discharge port to departure fromthe next discharge port. We believe that the discharge-to-dischargemethod is preferable because it eliminates the uncertainty associatedwith the location of the next load port. This method is the predominantone used by the industry.

Vessel Lives and Impairment

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

The carrying values of the Company’svessels may not represent their fair market value at any point in timesince the market prices of second-hand vessels tend to fluctuate withchanges in charter rates and the cost of newbuildings. Historically,both charter rates and vessel values tend to be cyclical. We evaluatethe carrying amounts and periods over which long-lived assets aredepreciated to determine if events have occurred which would requiremodification to their carrying values or useful lives. In evaluatinguseful lives and carrying values of long-lived assets, we reviewcertain indicators of potential impairment, such as undiscountedprojected operating cash flows, vessel sales and purchases, businessplans and overall market conditions. We determine undiscountedprojected net operating cash flow for each vessel and compare it to thevessel carrying value. This assessment is made at the 

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individual vessel level since separatelyidentifiable cash flow information for each vessel is available. Indeveloping estimates of future cash flows, the Company must makeassumptions about future charter rates, ship operating expenses, andthe estimated remaining useful lives of the vessels. These assumptionsare based on historical trends as well as future expectations. Althoughmanagement believes that the assumptions used to evaluate potentialimpairment are reasonable and appropriate, such assumptions are highlysubjective. In the event that an impairment were to occur, we woulddetermine the fair value of the related asset and record a charge tooperations calculated by comparing the asset’s carrying value tothe estimated fair value. We estimate fair value primarily through theuse of third party valuations performed on an individual vesselbasis.

Deferred Drydock Cost

There are three methods thatare used by the shipping industry to account for drydockings; first isthe prepaid method where drydock costs are capitalized when incurredand amortized over the period to the next scheduled drydock; second, isthe accrual method where the estimated cost of the next scheduleddrydock is accrued over the period preceding such drydock, and lastly;expensing drydocking costs in the period it is incurred. We use theprepaid method of accounting for drydock expenses. Under the prepaidmethod, drydock expenses are capitalized and amortized on astraight-line basis until the next drydock, which we estimate to be aperiod of two to three years. We believe the prepaid method bettermatches costs with revenue and minimizes any significant changes inestimates associated with the accrual method, including the disposal ofvessels before a drydock which has been accrued before it is performed.We use judgment when estimating the period between drydocks performed,which can result in adjustments to the estimated amortization ofdrydock expense. If the vessel is disposed of before the next drydock,the remaining balance in prepaid drydock is written-off to the gain orloss upon disposal of vessels in the period when contracted. We expectthat our vessels will be required to be drydocked approximately every30 to 60 months for major repairs and maintenance that cannot beperformed while the vessels are operating. Costs capitalized as part ofthe drydocking include actual costs incurred at the drydock yard andparts and supplies used in making such repairs.

VesselAcquisitions

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

Where we have assumed an existingcharter obligation or enter into a time charter with the existingcharterer in connection with the purchase of a vessel at charter ratesthat are less than market charter rates, we record a liability inDeferred Revenues based on the difference between the assumed charterrate and the market charter rate for an equivalent vessel. Conversely,where we assume an existing charter obligation or enter into a timecharter with the existing charterer in connection with the purchase ofa vessel at charter rates that are above market charter rates, werecord an asset in Prepaid Charter Revenue, based on the differencebetween the market charter rate and the contracted charter rate for anequivalent vessel. This determination is made at the time the vessel isdelivered to us, and such assets and liabilities are amortized torevenue over the remaining period of the charter. The determination ofthe fair value of acquired assets and assumed liabilities requires usto make significant assumptions and estimates of many variablesincluding market charter rates, expected future charter rates, futurevessel operation expenses, the level of utilization of our vessels andour weighted average cost of capital. The use of different assumptionscould result in a material change in the fair value of these items,which could have a material impact on our financial position andresults of operations. In the event that the market charter ratesrelating to the acquired vessels are lower than the contracted charterrates at the time of their respective deliveries to us, our netearnings for the remainder of the terms of the charters may beadversely affected although our cash flows will not be soaffected.

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Results of Operations for theyear ended December  31,  2006 and period fromJanuary  26,  2005 (inception) to December31,  2005

Factors Affecting Our Results ofOperations

We believe that the important measures for analyzingfuture trends in our results of operations consist of thefollowing:

|                  |  |  |                            |  |       |                                                           |  |  |  |  |       |   |
|------------------|--|--|----------------------------|--|-------|-----------------------------------------------------------|--|--|--|--|-------|---|
|             |  |  | YearendedDecember 31, 2006 |  |       | Period from January 26,2005(inception) toDecember 31,2005 |
| OwnershipDays    |  |  |                            |  | 5,288 |                                                           |  |  |  |  | 2,531 |   |
| AvailableDays    |  |  |                            |  | 5,224 |                                                           |  |  |  |  | 2,507 |   |
| OperatingDays    |  |  |                            |  | 5,203 |                                                           |  |  |  |  | 2,500 |   |
| FleetUtilization |  |  |                            |  | 99.6  | %                                                         |  |  |  |  | 99.7  | % |
|                  |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Ownershipdays:    We define ownership days as the aggregate number of daysin a period during which each vessel in our fleet has been owned by us.Ownership days are an indicator of the size of our fleet over a periodand affect both the amount of revenues and the amount of expenses thatwe record during a period. 2006 was the first full calendar year ofownership for our initial fleet of 13 vessels. Ownership days in 2006were further increased by our acquisition of three additional vesselsin June and July2006. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Available days:    Wedefine available days as the number of our ownership days less theaggregate number of days that our vessels are off-hire due to vesselfamiliarization upon acquisition, scheduled repairs or repairs underguarantee, vessel upgrades or special surveys and the aggregate amountof time that we spend positioning our vessels. The shipping industryuses available days to measure the number of days in a period duringwhich vessels should be capable of generating revenues. Available daysin 2006 increased due to larger fleet size. In 2006, six of our vesselswere drydocked and we incurred less than one takeover day for theadditional acquisitions. During the period the fleet was in operationin 2005, we drydocked one vessel and incurred eleven days in vesseltakeover days. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Operatingdays:    We define operating days as the number of our availabledays in a period less the aggregate number of days that our vessels areoff-hire due to any reason, including unforeseen circumstances. Theshipping industry uses operating days to measure the aggregate numberof days in a period during which vessels actually generaterevenues. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Fleetutilization:    We calculate fleet utilization by dividing thenumber of our operating days during a period by the number of ouravailable days during the period. The shipping industry uses fleetutilization to measure a company’s efficiency in finding suitableemployment for its vessels and minimizing the amount of days that itsvessels are off-hire for reasons other than scheduled repairs orrepairs under guarantee, vessel upgrades, special surveys or vesselpositioning. Our fleet continues to perform at very high utilizationrates. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TCE rates:    We defineTCE rates as our voyage and time charter revenues less voyage expensesduring a period divided by the number of our available days during theperiod, which is consistent with industry standards. TCE rate is astandard shipping industry performance measure used primarily tocompare daily earnings generated by vessels on time charters with dailyearnings generated by vessels on voyage charters, because charter hirerates for vessels on voyage charters are generally not expressed in perday amounts while charter hire rates for vessels on time chartersgenerally are expressed in such amounts. All our vessels are employedon time charters hence our TCE rate is equal to the time charterrate. |

Voyage and Time Charter Revenue

Shippingrevenues are highly sensitive to patterns of supply and demand forvessels of the size and design configurations owned and operated by aCompany and the trades in which those vessels 

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operate. In the drybulk sector of theshipping industry, rates for the transportation of drybulk cargoes suchas ores, grains, steel, fertilizers, and similar commodities, aredetermined by market forces such as the supply and demand for suchcommodities, the distance that cargoes must be transported, and thenumber of vessels expected to be available at the time such cargoesneed to be transported. The demand for shipments then is significantlyaffected by the state of the economy globally and in discretegeographical areas. The number of vessels is affected by newbuildingdeliveries and by the removal of existing vessels from service,principally because of scrapping.

Revenues are also affected bythe mix of charters between spot (voyage charter) and long-term (timecharter). Because shipping revenues and voyage expenses aresignificantly affected by the mix between voyage charters and timecharters, we manage our vessels based on time charter equivalent(‘‘TCE’’) revenues. TCE revenue comprisesrevenue from vessels operating on time charters, or TC revenue, andvoyage revenue less voyage expenses from vessels operating on voyagecharters in the spot market. TCE revenue serves as a measure ofanalyzing fluctuations between financial periods and as a method ofequating revenue generated from a voyage charter to time charterrevenue. TCE revenue also serves as an industry standard for measuringrevenue and comparing results between geographical regions and amongcompetitors.

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

|  |              |                              |
|--|--------------|------------------------------|
|  | •  | the duration of ourcharters; |

|  |              |                                                             |
|--|--------------|-------------------------------------------------------------|
|  | •  | our decisions relating tovessel acquisitions and disposals; |

|  |              |                                                         |
|--|--------------|---------------------------------------------------------|
|  | •  | theamount of time that we spend positioning ourvessels; |

|  |              |                                                                         |
|--|--------------|-------------------------------------------------------------------------|
|  | •  | the amount of time that ourvessels spend in dry-dock undergoingrepairs; |

|  |              |                              |
|--|--------------|------------------------------|
|  | •  | maintenance and upgradework; |

|  |              |                                                      |
|--|--------------|------------------------------------------------------|
|  | •  | the age, condition andspecifications of our vessels; |

|  |              |                                                                  |
|--|--------------|------------------------------------------------------------------|
|  | •  | levels ofsupply and demand in the dry bulk shipping industry;and |

|  |              |                                                                         |
|--|--------------|-------------------------------------------------------------------------|
|  | •  | other factors affecting spot marketcharter rates for dry bulk carriers. |

All our revenues for theyear ended December  31,  2006 and the period frominception on January  26,  2005 to December31,  2005 were earned from time charters hence our TCE revenue isequal to the TC revenue. As is common in the shipping industry, we paycommissions ranging from 1.25% to 6.25% of the totaldaily charter hire rate of each charter to unaffiliated ship brokersand in-house brokers associated with the charterers, depending on thenumber of brokers involved with arranging the charter.

Netrevenues for the year ended December  31,  2006 were$104,648,197 compared to $56,066,058 for the period since inception onJanuary  26,  2005 to December  31,  2005. Theincrease in net revenue is attributable to a larger fleet size and theconsequent increase in available days.

Net revenues, for the yearended December  31,  2006, of $104,648,197 includes timecharter revenues of $113,900,922 and deductions for brokeragecommissions of $5,790,725 and $3,462,000 in amortization of net prepaidand deferred charter revenue.

Net revenues, for the period sinceinception on January  26,  2005 to December31,  2005, of $56,066,058 includes time charter revenues of$59,997,448 and deductions for brokerage commissions of $3,040,890 and$890,500 in amortization of net prepaid and deferred charterrevenue.

Voyage Expenses

To the extent that we employour vessels on voyage charters, we will incur expenses that includeport and canal charges, bunker (fuel oil) expenses and commissions, asthese expenses are borne by 

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the vessel owner on voyage charters. Portand canal charges and bunker expenses primarily increase in periodsduring which vessels are employed on voyage charters because theseexpenses are for the account of the vessels. Currently all our vesselsare employed under time charters that require the charterer to bear allof those expenses, hence we expect that any port and canal charges andbunker expenses, if incurred, will represent a relatively minor portionof our vessels’ overall expenses.

VesselExpenses

Vessel expenses for the year ended December31,  2006 were $21,562,034 compared to $11,052,429 for the periodsince inception on January  26,  2005 to December31,  2005. The increase in vessel expense is attributable to alarger fleet size in operation for 2006 which increased ownership daysfrom 2,531 days in 2005 to 5,288 days in 2006.

Vessel expensesfor the year ended December  31,  2006 included $20,070,181in vessel operating costs and $1,491,853 in technical management fees.For the period since inception on January  26,  2005 toDecember  31,  2005, vessel expenses included $10,359,824in vessel operating costs and $692,605 in technical managementfees.

Vessel operating expenses include crew wages and relatedcosts, the cost of insurance, expenses relating to repairs andmaintenance, the cost of spares and consumable stores and relatedinventory, tonnage taxes, pre-operating costs associated with thedelivery of acquired vessels including providing the newly acquiredvessels with initial provisions and stores, other miscellaneousexpenses, and technical management fees.

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

With regard to vessel operatingexpenses, we have entered into technical management agreements for eachof our vessels with V. Ships Management Ltd, our independent technicalmanager. In conjunction with our management, V. Ships has establishedan operating expense budget for each vessel and performs the technicalmanagement of our vessels. All deviations from the budgeted amounts arefor our account.

Included in Vessel Expenses is a fixedmanagement fee for each vessel in our operating fleet paid to ourindependent technical manager, V. Ships, in respect of which itprovides technical management services. For the year endedDecember  31,  2006, this technical management fee amountedto $8,583 per month compared to $8,333 per month for the period thefleet was in operation in 2005. Technical management services includemanaging day-to-day vessel operations, performing general vesselmaintenance, ensuring regulatory and classification society compliance,supervising the maintenance and general efficiency of vessels,arranging the hire of qualified officers and crew, arrangingdry-docking and repairs, purchasing stores, supplies, spare parts andnew equipment, appointing supervisors and technical consultants andproviding technical support.

Our vessel expenses, which generallyrepresent costs under the vessel operating budgets, cost of insuranceand vessel registry and other regulatory fees, will increase with theenlargement of our fleet. Other factors beyond our control, some ofwhich may affect the shipping industry in general, may also cause theseexpenses to increase, including, for instance, developments relating tomarket prices for crew, insurance and petroleum-based lubricants andsupplies.

Depreciation and Amortization

The cost of ourvessels is depreciated on a straight-line basis over the expecteduseful life of each vessel. Depreciation is based on the cost of thevessel less its estimated residual value. We estimate the useful lifeof our vessels to be 28 years from the date of initial delivery fromthe shipyard to the original owner. Furthermore, we estimate theresidual values of our vessels to be $150 per lightweight 

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ton, which we believe is common in the drybulk shipping industry. Our depreciation charges will increase as ourfleet is enlarged which will lead to an increase in ownership days. Forthe year ended December  31,  2006 total depreciation andamortization expense was $21,812,486 compared to $10,412,227 for theperiod since inception on January  26,  2005 toDecember  31,  2005. Total depreciation and amortizationexpense for 2006 includes $21,031,357 of depreciation and $781,129relating to the amortization of deferred drydocking costs. Comparableamounts for 2005 were $10,384,247 in depreciation and $27,980 inamortization of deferred drydocking costs, respectively.

Amortization of deferred financing costs is included in interestexpense. For the year ended December  31,  2006 theamortization of deferred financing costs was $178,246. For the periodsince inception on January  26,  2005 to December31,  2005 these amortization costs amounted to $1,228,777 whichincluded a write-off of $1,130,712 relating to deferred financing feesassociated with our term loan facility which was entirely repaid uponrefinancing with our revolving credit facility in July  2005, and$98,065 relating to amortization of financing costs associated with ourrevolving credit facility.

General and AdministrativeExpenses

Our general and administrative expenses includerecurring administrative costs and non-recurring formation and advisorycosts. Recurring costs include our onshore vessel administrationrelated expenses such as legal and professional expenses andadministrative and other expenses including payroll and expensesrelating to our executive officers and office staff, office rent andexpenses, directors fees, and directors and officers insurance.Non-recurring costs include costs relating to the formation of ourcompany and related advisory costs.

General and AdministrativeExpenses for the year ended December  31,  2006 were$5,222,875 compared to $3,491,330 in the period since inception onJanuary  26,  2005 to December  31,  2005. Theincrease in General and Administrative Expenses is attributed to 2006being our first full calendar year and the expenses associated with alarger fleet. In 2006, all of these expenses were of a recurringnature. For the period from inception on January  26,  2005to December  31,  2005, recurring administrative costsamounted to $2,681,063 and non-recurring costs amounted to $810,267. Weexpect general and administrative expenses to increase as our fleet isenlarged.

Financial Advisory Fees

In 2006, we did notincur any financial advisory fees.

In 2005, for the period sinceinception on January  26,  2005 to December31,  2005, we recorded an expense of $5,175,046 in connectionwith an investment banking and financial advisory fee paid to Kelso& Company, L.P. (‘‘Kelso’’) and certainnon-management affiliates of Eagle Ventures LLC pursuant to thefinancial advisory agreement that we entered into with Kelso. This feewas incurred in the quarter ended June  30,  2005 and waspayable in connection with Kelso assisting us in our strategicplanning, obtaining debt and equity financing and acquiring vessels. Inaddition, we recorded an expense of $1,000,000 in the quarter endedJune  30,  2005 in connection with a payment made to Kelsoin order to terminate certain of our obligations under the financialadvisory agreement including our obligation to pay an annual $500,000fee thereunder.

Non-Cash Compensation Expense    

Members of the Company’s management have been awarded profitsinterests in Eagle Ventures LLC that may entitle such persons to aneconomic interest of up to 16.7% on a fully diluted basis(assuming all profits interests were vested) in any appreciation in thevalue of the assets of Eagle Ventures LLC (including shares of theCompany’s common shares owned by Eagle Ventures LLC when sold).The vesting of profits interests may be further accelerated in thefuture by the compensation committee of Eagle Ventures LLC. Theseprofits interests will dilute only the interests of owners of EagleVentures LLC, and will not dilute direct holders of the Company’scommon shares. However, the Company’s statement of operationsreflects non-cash charges for compensation related to the profitsinterests.

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For the year ended December 31, 2006 theCompany recorded non-cash compensation charges of $13,070,473. Theexpense for the year includes $13,023,440 in non-cash, non-dilutivecharges relating to profits interests awarded to members of theCompany’s management by the Company’s principal shareholderEagle Ventures LLC, and a non-cash amount of $47,033 which relates tothe fair value of the stock options granted on March 17, 2006 tocertain directors of the Company under the 2005 Stock IncentivePlan.

These non-cash, non-dilutive charges relate to profitsinterests awarded to members of the Company’s management by theCompany’s principal shareholder Eagle Ventures LLC. These profitsinterests will dilute only the interests of the owners of EagleVentures LLC, and will not dilute the direct holders of theCompany’s common shares. The non-cash compensation charge isbeing recorded as an expense over the estimated service period inaccordance with SFAS No. 123(R). The non-cash compensation charges willbe based on the fair value of the profits interests which will be‘‘marked to market’’ at the end of eachreporting period. The impact of any changes in the estimated fair valueof the profits interests will be recorded as a change in estimatecumulative to the date of change. The impact on the amortization of thecompensation charge of any changes to the estimated vesting periods forthe performance related profits interests will be adjustedprospectively as a change in estimate.

On January 28, 2006, thelimited liability company agreement of Eagle Ventures LLC was amendedand restated (the ‘‘Third LLC Agreement’’).This provided for the award of additional profits interests in EagleVentures LLC to certain management employees and provided for certainadjustments in the manner distributions are made by Eagle Ventures inconnection with such newly awarded profits interests.

On March8, 2006, the Third LLC Agreement was amended and restated (the‘‘Fourth LLC Agreement’’). Pursuant to theFourth LLC Agreement, an adjustment was made in the schedule governingthe management members’ retention of service-related profitsinterests upon their termination of employment with Eagle Ventures LLCor its subsidiaries (including the Company). In addition, under theFourth LLC Agreement one-fourth of the service-related profitsinterests granted on January 28, 2006 were immediately vested and theremaining newly granted service-related profits interests were madesubject to a three-year retention schedule.

On September 12,2006, Eagle Ventures, sold 2,300,000 shares of the Company’scommon shares in a secondary offering. The Company did not receive anyproceeds from this offering. Eagle Ventures distributed the proceeds ofthis secondary offering to its members in accordance with the FourthLLC Agreement. Named executive officers of the Company receivedproceeds from this distribution (in respect of vested profitsinterests) as follows: Sophocles Zoullas ($1,497,107) and Alan Ginsberg($99,807). Named executive officers of the Company received additionalproceeds from this distribution (in respect of their common ownershipinterests in Eagle Ventures) as follows: Sophocles Zoullas ($481,704)and Alan Ginsberg ($3,030).

On November 9, 2006, the limitedliability company agreement of Eagle Ventures LLC was amended andrestated (the ‘‘Fifth LLC Agreement’’).Pursuant to the Fifth LLC Agreement, the unvested portion of theperformance-related profits interests that previously vested ratablybased on Kelso affiliates achieving a multiple (ranging from two tofour times) on their original investment in the Company will now vestratably based on Kelso affiliates achieving a multiple (ranging fromtwo to 3.25 times) on their original investment in the Company. Inaddition, a first priority catch-up payment was added so that certainmembers of Eagle Ventures receive a first priority distribution fromEagle Ventures, prior to other distributions to members of EagleVentures, in an aggregate amount of approximately $100,000, in order toadjust for the interest payments received by Eagle Ventures on loansmade by Eagle Ventures to the Company prior to its initial publicoffering. Furthermore, all of the service-related profits intereststhat are subject to a three-year vesting schedule are now consideredfully vested for purposes of determining participation in distributionsfrom Eagle Ventures. Finally, a second priority catch-up payment wasadded so that management members receive a second priority distributionfrom Eagle Ventures, prior to other distributions to members of EagleVentures (other than the first priority catch-up payment describedabove), in an aggregate amount of approximately $740,000, as a catch-upin respect of such newly vested service-related profits interests.

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On November 14, 2006, Eagle Ventures,sold 2,700,000 shares of the Company’s common shares in asecondary offering. The Company did not receive any proceeds from thisoffering. Eagle Ventures distributed the proceeds of this secondaryoffering to its members in accordance with the Fifth LLC Agreement.Named executive officers of the Company received distributions (inrespect of vested profits interests) as follows: Sophocles Zoullas($4,154,904) and Alan Ginsberg ($287,131). Named executive officers ofthe Company received distributions (in respect of their commonownership interests in Eagle Ventures) as follows: Sophocles Zoullas($563,162) and Alan Ginsberg ($3,542).

On January 8, 2007, EagleVentures distributed 94,543 shares of the Company’s common sharesto Sophocles Zoullas, one of our named executive officers, in fullliquidation of the common interests held by Mr. Zoullas in EagleVentures.

On January 9, 2007, Eagle Ventures, sold 7,202,679shares of the Company’s common shares in a secondary offering.The Company did not receive any proceeds from this offering. Based onthe discretion of the compensation committee of Eagle Ventures,exercised in accordance with the Fifth LLC Agreement, Eagle Venturesredeemed and retired the common interests held by certain members infull liquidation of the common interests held such members. AlanGinsberg, a named executive officer of the Company, received adistribution (in respect of his common ownership interests in EagleVentures) of $10,061. The remaining proceeds received by Eagle Ventureswill be retained until a future distribution is determined to be madeby the compensation committee of Eagle Ventures. Future distributionsof the remaining cash proceeds, and the proceeds received from the saleof the 127,778 common shares held by Eagle Ventures, will bedistributed to the remaining members of Eagle Ventures, including anaffiliate of Kelso and members of our management that hold profitsinterests, in accordance with the Fifth LLC Agreement, as modified bythe permitted discretion of the compensation committee of EagleVentures reflected in an amendment to the Fifth LLC Agreement. Inparticular, Eagle Ventures retained $13,733,491 in cash, plus futureaccrued interest thereon, in respect of Mr. Zoullas’ profitsinterests and $2,961,868, plus future accrued interest thereon, inrespect of Mr. Ginsberg’s profits interests. Further, EagleVentures retained 90,133 common shares in respect of Mr. Zoullas’profit interests and 19,439 of our common shares in respect of Mr.Ginsberg’s profit interests. The Company will record a non-cashcompensation charge of approximately $3,137,812 in the first quarter of2007 as a result of this amendment.

In addition, in fiscal year2005, the Company declared one quarterly dividend in the aggregateamount of $0.54 per share of its common stock to its shareholders.Eagle Ventures distributed the proceeds of these dividends to itsmembers in accordance with the Second Amended and Restated LimitedLiability Company Agreement of Eagle Ventures. Named executive officersof the Company received aggregate proceeds from these distributions inrespect of their common ownership interest in Eagle Ventures) asfollows: Sophocles Zoullas ($212,649) and Alan Ginsberg ($1,337). Infiscal year 2006, the Company declared four quarterly dividends in theaggregate amount of $2.08 per share of its common stock to itsshareholders in January, April, July and October 2006. Eagle Venturesdistributed the proceeds of these dividends to its members inaccordance with the Amended and Restated Limited Liability CompanyAgreement of Eagle Ventures, as amended at the time each dividend wasdeclared and paid. Named executive officers of the Company receivedaggregate proceeds from these distributions (in respect of vestedprofits interests) as follows: Sophocles Zoullas ($[22,314])and Alan Ginsberg ($[1,647]). Named executive officers of theCompany received aggregate additional proceeds from these distributions(in respect of their common ownership interests in Eagle Ventures) asfollows: Sophocles Zoullas ($[261,805]) and Alan Ginsberg($[1,647].

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Interest and FinanceCosts

Interest Expense, exclusive of capitalized interest,consists of:

|                                        |  |  |                             |   |            |                                                              |  |  |  |   |           |  |
|----------------------------------------|--|--|-----------------------------|---|------------|--------------------------------------------------------------|--|--|--|---|-----------|--|
|                                   |  |  | Yearended December 31, 2006 |   |            | Period from January 26,2005 (inception) to December 31, 2005 |
| LoanInterest                           |  |  |                             | $ | 9,694,244  |                                                              |  |  |  | $ | 4,855,054 |  |
| CommitmentFees                         |  |  |                             |   | 676,126    |                                                              |  |  |  |   | 516,588   |  |
| Eagle VenturesNoteInterest             |  |  |                             |   | —    |                                                              |  |  |  |   | 608,222   |  |
| Amortizationof Deferred FinancingCosts |  |  |                             |   | 178,246    |                                                              |  |  |  |   | 98,065    |  |
| Write-off ofDeferred Financing Costs   |  |  |                             |   | —    |                                                              |  |  |  |   | 1,130,712 |  |
| TotalInterestExpense                   |  |  |                             | $ | 10,548,616 |                                                              |  |  |  | $ | 7,208,641 |  |
|                                        |

Interestexpense during 2006 includes loan interest incurred on borrowings fromthe Company’s revolving credit facility, commitment feesincurred on the unused portion of the revolving credit facility, andthe amortization of financing costs associated with the revolvingcredit facility. Interest expense during 2005 includes loan interestincurred on borrowings from the Company’s initial term loanfacility which was refinanced with the revolving credit facility,commitment fees incurred on the unused portion of the revolving creditfacility, and amortization of financing costs associated with therevolving credit facility (see section Revolving CreditFacility).

Interest expense increased in 2006 as a result ofan increase in debt drawn from our revolving credit facility to financethe acquisition of three additional vessels. Interest expense on thedebt borrowed to fund the deposits for the two newbuilding vesselsamounted to $259,580 ($236,152 in financing costs and $23,428 inamortization of financing expenses) and this amount has beencapitalized as part of the cost of the newbuilding vessels and isincluded in Advances for Vessel Construction in our financialstatements as of December  31,  2006.

AtDecember  31,  2005, our debt consisted of $140,000,000 inborrowings under the revolving credit facility. In 2006, we borrowed$74,800,000 to partly fund the acquisition of the KESTREL I, TERN andJAEGER, and $25,174,820 to meet funding for deposits of on thenewbuilding vessels GOLDEN EAGLE and IMPERIAL EAGLE and associatedcapitalized interest and financing costs. At December  31,2006, our debt consisted of $239,974,820.

For the year endedDecember  31,  2006, interest rates on our outstanding debtranged from 4.97% to 6.32%, including a margin over LIBORapplicable under the terms of the amended revolving credit facility.The weighted average effective interest rate was 5.39%.Commitment fees incurred on the undrawn portion of the facility rangedfrom 0.25% to 0.4% on the unused portions of therevolving credit facility. During 2005, from inception of theCompany’s debt through December  31,  2005, interestrates on our outstanding debt ranged from 4.10% to 5.49%,including a margin of 0.95% over LIBOR. The weighted averageeffective interest rate was 4.69%. Commitment fees in 2005 wereincurred at 0.4% on the unused portion of the revolving creditfacility.

Interest Rate Swaps

We have enteredinto interest rate swaps to effectively convert a portion of our debtfrom a floating to a fixed-rate basis. The swaps are designated andqualify as cash flow hedges.

During 2006, we entered intointerest rate swap contracts for notional amounts of $84,800,000 and$25,048,118. These contracts mature in September  2009 andDecember  2011. On these contracts, exclusive of applicablemargin, the Company will pay fixed-rate interest of 5.24% and4.74% respectively, and receive floating-rate interest amountsbased on three month LIBOR settings. The Company has two other interestrate swap contracts for notional amounts of $100,000,000 and$30,000,000 which were entered into in 2005. These contracts mature inSeptember  2010. On these contracts, exclusive of applicablemargin, the Company pays 4.22% and 4.54% fixed-rateinterest, respectively, and receives floating-rate interest amountsbased on three-month LIBOR settings.

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We record the fair value of the interestrate swap as an asset or liability in our financial statement. Theeffective portion of the swap is recorded in accumulated othercomprehensive income. Accordingly, $2,936,803 and $2,647,077 has beenrecorded in Other Assets in our financial statements as ofDecember  31,  2006 and December  31,  2005,respectively.

Foreign Currency Swaps

The shippingindustry’s functional currency is the U.S. dollar. All ourrevenues and the majority of our operating expenses and the entirety ofour management expenses are in U.S. dollars. Therefore we do not use orintend to use financial derivatives to mitigate the risk of exchangerate fluctuations for our revenues and expenses.

However, as wehave entered into a newbuilding program for vessels to be built inJapan and which are priced in Japanese yen, we have entered intoforeign exchange swap transactions to hedge foreign currency risks toour vessel newbuilding contracts. These swaps are designated andqualify as cash flow hedges. In 2006, we entered into foreign exchangeswap transactions to hedge the Japanese yen exposure into US dollarsfor the purchase price in Japanese yen of two new-build vessels whichare expected to be delivered to us in January  2010 andFebruary  2010. We have swapped a total of 7,310,000,000 in yencurrency exposure into equivalent US $67,108,583. We record the fairvalue of the currency swaps as an asset or liability in our financialstatement. The effective portion of the swap is recorded in accumulatedother comprehensive income. Accordingly, an amount of $359,180 has beenrecorded in Other Liabilities in the accompanying financial statementsas of December  31,2006.

EBITDA

EBITDA represents operating earningsbefore extraordinary items, depreciation and amortization, interestexpense, and income taxes, if any. EBITDA is included because it isused by certain investors to measure a company’s financialperformance. EBITDA is not an item recognized by GAAP and should not beconsidered a substitute for net income, cash flow from operatingactivities and other operations or cash flow statement data prepared inaccordance with accounting principles generally accepted in the UnitedStates or as a measure of profitability or liquidity. EBITDA ispresented to provide additional information with respect to theCompany’s ability to satisfy its obligations including debtservice, capital expenditures, and working capital requirements. WhileEBITDA is frequently used as a measure of operating results and theability to meet debt service requirements, the definition of EBITDAused here may not be comparable to that used by other companies due todifferences in methods of calculation.

Our revolving creditfacility permits us to pay dividends in amounts up to our earningsbefore extraordinary or exceptional items, interest, taxes,depreciation and amortization (Credit Agreement EBITDA), less theaggregate amount of interest incurred and net amounts payable underinterest rate hedging agreements during the relevant period and anagreed upon reserve for dry-docking. Therefore, we believe that thisnon-GAAP measure is important for our investors as it reflects ourability to pay dividends. The following table is a reconciliation ofnet income, as reflected in the consolidated statements of operations,to the Credit Agreement EBITDA:

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|                                            |  |  |                             |   |            |                                                              |  |  |  |   |            |  |
|--------------------------------------------|--|--|-----------------------------|---|------------|--------------------------------------------------------------|--|--|--|---|------------|--|
|                                       |  |  | Yearended December 31, 2006 |   |            | Period from January 26,2005 (inception) to December 31, 2005 |
| NetIncome                                  |  |  |                             | $ | 33,801,540 |                                                              |  |  |  | $ | 6,653,400  |  |
| InterestExpense                            |  |  |                             |   | 10,548,616 |                                                              |  |  |  |   | 7,208,641  |  |
| DepreciationandAmortization                |  |  |                             |   | 21,812,486 |                                                              |  |  |  |   | 10,412,227 |  |
| Amortizationof Prepaid and DeferredRevenue |  |  |                             |   | 3,462,000  |                                                              |  |  |  |   | 890,500    |  |
| EBITDA                                     |  |  |                             |   | 69,624,642 |                                                              |  |  |  |   | 25,164,768 |  |
| Adjustmentsfor ExceptionalItems:           |  |  |                             |   |       |                                                              |  |  |  |   |       |  |
| Management and OtherFees to Affiliates(1)  |  |  |                             |   | —    |                                                              |  |  |  |   | 6,175,046  |  |
| Non-cashCompensation Expense(2)            |  |  |                             |   | 13,070,473 |                                                              |  |  |  |   | 11,734,812 |  |
| CreditAgreement EBITDA                     |  |  |                             | $ | 82,695,115 |                                                              |  |  |  | $ | 43,074,626 |  |
|                                            |

|  |
|--|
|  |  |
|  |

|     |                                                        |
|-----|--------------------------------------------------------|
| (1) | Onetime charge (see Notes to our financial statements) |

|     |                                                                                                                   |
|-----|-------------------------------------------------------------------------------------------------------------------|
| (2) | Management’s participation in profitsinterests in Eagle Ventures LLC (see Notes to our financialstatements) |

Effects of Inflation 

TheCompany does not believe that inflation has had or is likely, in theforeseeable future, to have a significant impact on vessel operatingexpenses, drydocking expenses and general and administrativeexpenses.

Liquidity and Capital Resources

Netcash provided by operating activities during the year endedDecember  31,  2006 was $70,535,078 compared to $26,615,839during the period from inception on January  26,  2005 toDecember  31,  2005. This increase was primarily due tocash generated from the operation of a fleet of 16 vessels for 5,288operating days in the period for 2006 compared to 2,531 operating daysfrom 11 vessels during the period of operations in 2005.

Net cashused in investing activities during the year ended December31,  2006, was $130,759,211. We used an aggregate sum of$105,591,698 for vessel acquisitions and vessel improvements, and a sumof $25,167,513 for advances for new vessel construction. The Companyexpanded its fleet to 16 vessels by acquiring three Supramax classvessels, KESTREL I, TERN and JAEGER for a contract price of$105,000,000 and $112,609 in additional costs associated with theacquisition. We also incurred $479,089 in improvements to the vesselsin the fleet. For our vessel newbuilding program, we placed deposits inJapanese yen of an equivalent $24,798,118 for the two vessels to beconstructed, the GOLDEN EAGLE and IMPERIAL EAGLE, and incurredassociated capitalized interest costs of $259,580 ($236,152 infinancing costs and $23,428 in amortization of financing expenses) andlegal and technical supervision costs of $133,242. In 2005, net cashused in investing activities during the corresponding period frominception on January  26,  2005 to December31,  2005 was $427,965,857 as the Company acquired its initialeleven vessels and placed deposits for two additional vessels.

Net cash provided by financing activities during the year endedDecember  31,  2006, was $57,973,096 which primarilyconsisted of $33,000,000 in gross proceeds from a private placement ofour common stock and borrowings of $99,974,820 from its revolvingcredit facility, net of $71,729,500 in dividends paid. Net cashprovided by financing activities during the corresponding period frominception on January  26,  2005 to December31,  2005 was $425,876,546 primarily consisting of net proceedsof $186,529,290 from our initial public offering, capital contributionsof $40,843,662 and net borrowings of $157,000,000 from its creditfacilities.

As of December  31,  2006, our cashbalance was $22,275,491 compared to a cash balance of $24,526,528 atDecember  31,  2005. In addition, $6,400,000 in cashdeposits are maintained with our 

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lender for loan compliance purposes and thisamount is recorded in Restricted Cash in our financial statements as ofDecember  31,  2006. The cash deposit amount at the end ofDecember  31,  2005 was $6,500,000. Also recorded inRestricted Cash is an amount of $124,616 which is collateralizing aletter of credit relating to our office lease.

During 2006, weamended and increased our original $330,000,000 long-term revolvingcredit facility which we had entered into in July  2005. AtDecember  31,  2006, the enhanced facility stood at$500,000,000 of which $260,025,180 was unused as of December31,  2006. The amended revolving credit agreement also providesus with the ability to borrow up to $15,000,000 for working capitalpurposes. (See section entitled ‘‘Revolving CreditFacility’’ for a description of the facility andsubsequent changes to the credit facility).

We anticipate thatour current financial resources, together with cash generated fromoperations and, if necessary, borrowings under our revolving creditfacility will be sufficient to fund the operations of our fleet,including our working capital requirements, for at least the next 12months. We were in compliance with all of the financial covenantscontained in our debt agreements as of December  31,2006.

It is our intention to fund our future acquisition relatedcapital requirements initially through borrowings under the amended andincreased revolving credit facility and to repay all or a portion ofsuch borrowings from time to time with the net proceeds of equityissuances. On September  5,  2006, the Company filed an S-3shelf registration which would enable the Company to issue up to$220,500,000 in securities. On December  29,  2006, theCompany filed an S-3 shelf registration which retained this amount inany proposed primary offering. We believe that funds will be availableto support our growth strategy, which involves the acquisition ofadditional vessels, and will allow us to pay dividends to ourstockholders as contemplated by our dividend policy.

Subsequentto December  31,  2006, the Company has entered intocertain vessel sale and purchase agreements. It has agreed to purchase3 modern Supramax vessels for a total contract price of $138,700,000,agreed to sell the SHIKRA, a 1984-built Handymax vessel to an unrelatedthird party for $12,525,000, and signed letters of intent for theconstruction of two 56,000 dwt vessel newbuilding contracts with IHIMarine United Inc., a Japanese shipyard which are expected to bedelivered in the fourth quarter of 2008 and the first quarter of 2009,respectively.

The three Supramax vessels are expected to bedelivered in April, June and July of 2007. The vessel delivering inApril  2007 will enter into a two year charter at a daily rate of$24,600. The vessel delivering in June  2007 will enter into atwo year charter at a daily rate of $24,200. The vessel delivering inJuly  2007 will enter into a one-year employment at rate of$30,400 per day and this charter rate may reset at the beginning ofeach month based on the average time charter rate for the BalticSupramax Index, but in no case less than $24,400 perday.

Dividends

Our policy is to declarequarterly dividends to stockholders in February, April, July andOctober in amounts that are substantially equal to our available cashfrom operations during the previous quarter less any cash reserves fordrydocking and working capital.

Our revolving credit facilitypermits us to pay quarterly dividends in amounts up to our quarterlyearnings before extraordinary or exceptional items, interest, taxes,depreciation and amortization (Credit Agreement EBITDA), less theaggregate amount of interest incurred and net amounts payable underinterest rate hedging agreements during the relevant period and anagreed upon reserve for drydocking for the period, provided that thereis not a default or breach of loan covenant under the credit facilityand the payment of the dividends would not result in a default orbreach of a loan covenant. Depending on market conditions in the drybulk shipping industry and acquisition opportunities that may arise, wemay be required to obtain additional debt or equity financing whichcould affect our dividend policy.

In 2005, the Company declaredand paid a quarterly dividend on its common stock in the amount of$0.54 per share in October  2005 to its shareholders. Theaggregate amount of this cash dividend paid to shareholders was$14,661,000.

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In 2006, the Company declared fourquarterly dividends in the aggregate amount of $2.08 per share of itscommon stock in January, April, July and October  2006. Aggregatepayments to shareholders were $71,729,500  million for dividendsdeclared in 2006.

On February 15, 2007 the Company’sBoard of Directors declared a cash dividend for the fourth quarter of2006 of $0.51 per share to be paid on March  2,  2007 toall shareholders of record as of February 28, 2007. Theaggregate amount of this cash dividend is $18,309,000.

Saleof Common Stock

On June 23, 2005, the Companycompleted its initial public offering by issuing and selling to thepublic 14,400,000 shares of common stock at $14.00 per share, raisinggross proceeds of $201,600,000 before deduction of underwritingdiscounts, commissions and expenses of $15,070,710. The Company used$185,288,656 of the net proceeds from the offering to repay$125,950,000 of the indebtedness under its existing loan facility and$59,338,656 owed to Eagle Ventures under a promissory note, includingaccrued interest.

On October  28,  2005, the Companysold 6,000,000 shares of its common stock in a public offering at aprice of $14.50 per share, raising gross proceeds of $87,000,000 beforededuction of underwriting discounts, commissions and expenses of$4,954,227. The sale included an over-allotment portion of 825,000shares of which 325,000 shares were offered by Eagle Ventures LLC. Weused $80,000,000 of the net proceeds from the offering to repay$48,500,000 of our outstanding indebtedness under the revolving creditfacility, which reduced our outstanding debt to $140,000,000, and used$31,500,000 of the net proceeds to pay the balance of the purchaseprice for the HERON which was acquired in December2005.

On June  28,  2006 the Company sold 2,750,000shares of its common stock to certain institutional investors in aprivate placement at $12.00 per share, pursuant to a securitiespurchase agreement dated June  22,  2006, raising grossproceeds of $33,000,000 before deduction of fees and expenses of$1,770,811. The Company used the proceeds from the offering to fund aportion of the acquisition of three vessels KESTREL I, TERN andJAEGER.

Revolving Credit Facility

In July2005, we entered into a 10-year $330,000,000 revolving credit facility.As of December  31,  2005, the outstanding indebtednessunder the revolving credit facility was $140,000,000. In July2006, we amended and increased our initial revolving credit facility to$450,000,000 with a new term of ten years expiring in July  2016.The entire facility will be available for a period of six years fromJuly  30,  2006, compared to four years remaining in thecommitment period of the Company’s initial facility. We paid anarrangement fee of $900,000 to our lender in connection with theamended credit facility. In November  2006, we further enhancedour facility to $500,000,000 to facilitate our newbuilding program. Thestructure of the financing will enable us to capitalize pre-deliverypayments under our vessel newbuilding contracts and costs associatedwith supervision and financing the new vessels. There are no principalrepayment obligations under the amended facility until July2012. Over the remaining four years until maturity in July  2016,the facility will reduce in semi-annual amounts of $28,750,000 with afinal reduction of $270,000,000 occurring simultaneously with the lastsemi-annual reduction. All other terms and conditions of the amendedfacility remain the same as the existing facility. We paid anarrangement fee of $250,000 to our lender in connection with theamended credit facility.

As of December  31,  2006,we had borrowed a total of $239,974,820 under our revolving creditfacility. As a result of the amendments to the facility, atDecember  31,  2006, the Company has increased itsremaining undrawn capacity to $260,025,180, including amounts availableto borrow for working capital purposes as described below, inconnection with future acquisitions of dry bulk carriers between 25,000dwt and 85,000 dwt that are not older than 10 years.

We arepermitted to borrow up to $15,000,000 (increased from $10,000,000 underthe initial revolving credit facility) at any one time for workingcapital purposes during an initial period of 18 

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months from the first draw down date, afterwhich time our ability to borrow amounts for working capital purposesis subject to review and reapproval on an annual basis.

Theamended facility bears interest at the rate of 0.75% to0.85% over LIBOR (decreased from 0.95% over LIBOR underthe initial facility), depending upon the amount of debt drawn as apercentage of the value of the Company’s vessels. The Companypays a commitment fee of 0.25% per annum (decreased from0.40% under its initial facility) on the undrawn amount of theamended facility.

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

Our obligations under the amended revolving creditfacility are secured by a first priority mortgage on each of thevessels in our fleet and such other vessels that we may from time totime include with the approval of our lender, and by a first assignmentof all freights, earnings, insurances and requisition compensationrelating to our vessels. The facility also limits our ability to createliens on our assets in favor of other parties. We may grant additionalsecurities from time to time in the future.

The revolving creditfacility, as amended, contains financial covenants requiring us, amongother things, to ensure that:

|  |              |                                                                                                                                                                                                                                                                                                                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | theaggregate market value of the vessels in our fleet that secure ourobligations under the revolving credit facility, as determined by anindependent shipbroker on a charter free basis, at all times exceeds125% of the aggregate principal amount of debt outstanding underthe new credit facility and the notional or actual cost of terminatingany related hedging arrangements; |

|  |              |                                                                                                                                                                                                                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | to theextent our debt during any accounting period is less than $250,000,000,our total assets minus our debt will not be less than $100,000,000; tothe extent our debt during any accounting period is greater than$250,000,000, our total assets minus our debt will not be less than$150,000,000; |

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

|  |              |                                                                                                                                                                 |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | we maintain with the lender $400,000per vessel in addition to an amount adequate to meet anticipatedcapital expenditures for the vessel over a 12 month period. |

Forthe purposes of the revolving credit facility, our ‘‘totalassets’’ includes our tangible fixed assets and our currentassets, as set forth in our consolidated financial statements, exceptthat the value of any vessels in our fleet that secure our obligationsunder the facility are measured by their fair market value rather thantheir carrying value on our consolidated balance sheet.

Therevolving credit facility permits us to pay dividends in amounts up toour earnings before extraordinary or exceptional items, interest,taxes, depreciation and amortization (EBITDA), less the aggregateamount of interest incurred and net amounts payable under interest ratehedging agreements during the relevant period and an agreed uponreserve for dry-docking, provided that there is not a default or breachof loan covenant under the credit facility and the payment of thedividends would not result in a default or breach of a loancovenant.

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ContractualObligations

The following table sets forth our expectedcontractual obligations and their maturity dates as of December31,  2006:

|                              |  |  |                              |   |         |                    |  |  |                    |   |         |                     |  |  |       |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|------------------------------|--|--|------------------------------|---|---------|--------------------|--|--|--------------------|---|---------|---------------------|--|--|-------|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                         |  |  | WithinOne Year               |   |         | One to Three Years |  |  | Three to FiveYears |   |         | More than Fiveyears |  |  | Total |
|                         |  |  | (in thousands ofU.S.dollars) |
| Vessels(1)                   |  |  |                              | $ | — |                    |  |  |                    | $ | 42,310  |                     |  |  |       | $ | — |  |  |  |  | $ | — |  |  |  |  | $ | 42,310  |  |
| BankLoans               |  |  |                              | $ | — |                    |  |  |                    | $ | — |                     |  |  |       | $ | — |  |  |  |  | $ | 239,975 |  |  |  |  | $ | 239,975 |  |
| Interestand borrowingfees(2) |  |  |                              |   | 13,852  |                    |  |  |                    |   | 27,742  |                     |  |  |       |   | 27,704  |  |  |  |  |   | 62,352  |  |  |  |  |   | 131,649 |  |
| Officelease(3)               |  |  |                              |   | 250     |                    |  |  |                    |   | 501     |                     |  |  |       |   | 313     |  |  |  |  |   | — |  |  |  |  |   | 1,065   |  |
| Total                        |  |  |                              | $ | 14,102  |                    |  |  |                    | $ | 70,553  |                     |  |  |       | $ | 28,017  |  |  |  |  | $ | 302,327 |  |  |  |  | $ | 414,999 |  |
|                              |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                              |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Balanceof the contract price in US dollars of the newbuilding vessels GOLDENEAGLE and IMPERIAL EAGLE which are to be constructed and delivered inearly 2010. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The Company is aparty to floating-to-fixed interest rate swaps covering notionalamounts of $100,000,000, $30,000,000, $84,800,000 and $25,048,118 as ofDecember  31,  2006 that effectively convert theCompany’s interest rate exposure from a floating rate based onLIBOR to a fixed rate of 4.22%, 4.54%, 5.24% and4.74% respectively, plus applicable margin.Interest andborrowing fees includes capitalized interest for the newbuildingvessels. |

|     |                                                                     |
|-----|---------------------------------------------------------------------|
| (3) | Remainder of the63-month lease on the office space which we occupy. |

CapitalExpenditures

We make capital expenditures from time to time inconnection with our vessel acquisitions. Our vessel acquisitions in2005 consisted of 13 Handymax dry bulk vessels with a total cost of$427,144,953. We funded the acquisitions of our vessels with acombination of equity contributions that we received from EagleVentures, borrowings under our credit facilities, debt incurred under apromissory note that we issued to Eagle Ventures, proceeds from ourinitial public offering and proceeds from our follow-on publicoffering. In 2006, we acquired three vessels for $105,112,609. Wefunded these acquisitions with proceeds from issuance of stock andborrowings under revolving credit facility.

In addition to thevessel acquisitions, in 2006, we spent $479,089 on capital improvementsto our vessels. The corresponding amounts spent on capital improvementsto our vessels in 2005 was $820,904. These improvements are expected toenhance the revenue earning capabilities and safety of thesevessels.

In addition to acquisitions that we may undertake infuture periods, other major capital expenditures include funding theCompany’s maintenance program of regularly scheduled drydockingnecessary to preserve the quality of our vessels as well as to complywith international shipping standards and environmental laws andregulations. Although the Company has some flexibility regarding thetiming of its dry docking, the costs are relatively predictable.Management anticipates that vessels are to be drydocked every two and ahalf years. Funding of these requirements is anticipated to be met withcash from operations. We anticipate that this process ofrecertification will require us to reposition these vessels from adischarge port to shipyard facilities, which will reduce our availabledays and operating days during that period.

In the year endedDecember  31,  2006 and for the period endedDecember  31,  2005, we spent $2,324,726 and $421,682respectively on vessel drydockings. These amounts are amortized toexpense on a straight-line basis over the period through the date thenext drydockings are scheduled to become due. The following tablerepresents certain information about the estimated costs foranticipated vessel drydockings in 2007 along with the allocation ofanticipated off-hire days:

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|                    |  |  |                 |  |    |                   |  |  |              |
|--------------------|--|--|-----------------|--|----|-------------------|--|--|--------------|
| QuarterEnding      |  |  | Off-hireDays(1) |  |    | ProjectedCosts(2) |
| March  31,2007     |  |  |                 |  | 30 |                   |  |  | $0.80million |
| June  30,2007      |  |  |                 |  | 15 |                   |  |  | $0.40million |
| September  30,2007 |  |  |                 |  | 30 |                   |  |  | $0.80million |
| December  31,2007  |  |  |                 |  | 30 |                   |  |  | $0.80million |
|                    |

|  |
|--|
|  |  |
|  |

|     |                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------|
| (1) | Actual length ofdrydocking will vary based on the condition of the vessel, yardschedules and other factors. |

|     |                                                                                                   |
|-----|---------------------------------------------------------------------------------------------------|
| (2) | Actual costsvary based on various factors, including where the drydockings areactually performed. |

Contracted Time CharterRevenue

We have time charter contracts currently for all ourvessels. The contracted time charter revenue schedule, as shown below,reduces future contracted revenue for any estimated off-hire daysrelating to dry-docks.

The following table represents certaininformation about the Company’s revenue earningcharters:

|               |  |  |                       |  |  |                                 |  |  |                            |
|---------------|--|--|-----------------------|--|--|---------------------------------|--|--|----------------------------|
| Vessel        |  |  | Deliveredto Charterer |  |  | Time CharterExpiration(1)       |  |  | Daily Time CharterHireRate |
| Cardinal(2)   |  |  | April19,2005          |  |  | March2007 to June2007           |  |  | $26,500                    |
| Condor(3)     |  |  | April30,  2005        |  |  | November  2006 to March2007     |  |  | $24,000                    |
| Falcon        |  |  | April22,  2005        |  |  | February  2008 to June2008      |  |  | $20,950                    |
| Griffon(4)    |  |  | February  17,  2006   |  |  | January2007 to March2007        |  |  | $13,550                    |
| Harrier(5)    |  |  | April21,  2005        |  |  | March  2007 to June2007         |  |  | $23,750                    |
| HawkI(6)      |  |  | April  28,2005        |  |  | March  2007 to June2007         |  |  | $23,750                    |
| Heron         |  |  | December11,  2005     |  |  | November  2007 to February2008  |  |  | $24,000                    |
| Jaeger(7)     |  |  | July7,  2006          |  |  | April  2007 to June2007         |  |  | $18,550                    |
| KestrelI(8)   |  |  | July  1,2006          |  |  | December  2007 to April2008     |  |  | $18,750                    |
| Kite(9)       |  |  | April17,  2006        |  |  | March  2007 to May2007          |  |  | $14,750                    |
| Merlin        |  |  | October26,  2005      |  |  | October  2007 to December2007   |  |  | $24,000                    |
| OspreyI(10)   |  |  | September  1,2005     |  |  | July  2008 to November2008      |  |  | $21,000                    |
| Peregrine(11) |  |  | December  16,  2006   |  |  | December2008 to February2009    |  |  | $20,500                    |
| Shikra(12)    |  |  | September10,  2006    |  |  | September  2007 to December2007 |  |  | $14,800                    |
| Sparrow(13)   |  |  | July20,  2005         |  |  | November  2006 to February2007  |  |  | $22,500                    |
| Tern(14)      |  |  | July3,  2006          |  |  | December  2007 to April2008     |  |  | $19,000                    |
|               |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Thedate range provided represents the earliest and latest date on whichthe charterer may redeliver the vessel to the Company upon thetermination of the charter. |

|     |                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------|
| (2) | Upon completion of the current charterthe CARDINAL will enter a new time charter at $28,000 per day for 11 to13 months. |

|     |                                                                                                                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Upon completion ofthe current charter the CONDOR will enter a new time charter at $20,500per day for 26 to 29 months. The charterer has an option to extend thecharter period by 11 to 13 months at a time charter rate of $22,000 perday. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (4) | Upon completion of thecurrent charter the GRIFFON will enter a new time charter at $20,075per day for 24 to 26 months. |

|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (5) | Thecharter for the HARRIER has been renewed at $24,000 per day commencingin June  2007 for 24 to 27months. |

|     |                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------|
| (6) | The charter for the HAWKI has been renewed at $22,000 per day commencing in April  2007for 24 to 26 months. |

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|     |                                                                                                                                                                                                                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Uponcompletion of the current charter, the JAEGER commences a new timecharter with a rate of $27,500 per day for 12-14 months. The charterrate may reset at the beginning of each month based on the average timecharter rate for the Baltic Supramax Index, but in no case less than$22,500 per day. |

|     |                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------|
| (8) | The chartererof the KESTREL I has an option to extend the charter period by 11 to 13months at a daily time charter rate of $20,000 perday. |

|     |                                                                                                                     |
|-----|---------------------------------------------------------------------------------------------------------------------|
| (9) | Upon conclusion of thecurrent charter, the KITE commences a new time charter at $21,000 perday for 26 to 29 months. |

|      |                                                                                                                                   |
|------|-----------------------------------------------------------------------------------------------------------------------------------|
| (10) | Thecharterer of the OSPREY I has an option to extend the charter period byup to 26 months at a daily time charter rate of$25,000. |

|      |                                                                                                                                           |
|------|-------------------------------------------------------------------------------------------------------------------------------------------|
| (11) | Upon conclusion of theinitial charter in December  2006, the PEREGRINE commenced a newtime charter at $20,500 per day for 24 to 26months. |

|      |                                          |
|------|------------------------------------------|
| (12) | The SHIKRA was sold onFebruary  27,2007. |

|      |                                                                                                                                                                                                                                      |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (13) | Upon completion of thecurrent charter in January  2007, the SPARROW commenced a newtime charter at a base rate of $24,000 per day for 11 to 13 months witha profit share of 30% of up to the first $3,000 per day over thebase rate. |

|      |                                                                                                                                        |
|------|----------------------------------------------------------------------------------------------------------------------------------------|
| (14) | The charterer of theTERN has an option to extend the charter period by 11 to 13 months at adaily time charter rate of $20,500 per day. |

Off-balanceSheet Arrangements

We do not have any off-balance sheetarrangements.

Item 7A.    Quantitative and QualitativeDisclosures about Market Risk

Interest RateRisk

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

As of December 31, 2006, theCompany’s debt consisted of $239,974,820 in loans under therevolving credit facility at a margin plus variable rates above theLIBOR. During the year ended December  31,  2006, interestrates on the outstanding debt ranged from 4.97% to 6.32%(including margins). The weighted average effective interest rates was5.39%.

The Company entered into interest rate swaps toeffectively convert a portion of its debt from a floating to afixed-rate basis. The swaps are designated and qualify as cash flowhedges. During 2006, the Company entered into interest rate swapcontracts for notional amounts of $84,800,000 and $25,048,118. Thesecontracts mature in September  2009 and December  2011. Onthis contract, exclusive of applicable margin, the Company will payfixed-rate interest of 5.24% and 4.74% respectively, andreceive floating-rate interest amounts based on three month LIBORsettings. The Company has two other interest rate swap contracts fornotional amounts of $100,000,000 and $30,000,000 which were enteredinto in 2005. These contracts mature in September  2010. On thesecontracts, exclusive of applicable margin, the Company pays4.22% and 4.54% fixed-rate interest, respectively, andreceives floating-rate interest amounts based on three-month LIBORsettings. The Company records the fair value of the interest rate swapas an asset or liability in our financial statement. The effectiveportion of the swap is recorded in accumulated other comprehensiveincome. Accordingly, $2,936,804 has been recorded in Other Assets inthe accompanying financial statements as of December  31,2006.

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Foreign Currency and Exchange RateRisk

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

The Company has entered into foreign exchange swap transactions tohedge foreign currency risks on its capital asset transactions (vesselnewbuildings). The swaps are designated and qualify as cash flowhedges. In 2006, the Company has entered into foreign exchange swaptransactions to hedge the Japanese yen (JPY) exposure into US dollarsfor the purchase price in Japanese yen of two new-build vessels whichare expected to be delivered to the Company in January  2010 andFebruary  2010. At December  31,  2006, the Companyhad outstanding foreign currency swap contracts for notional amountsaggregating JPY 4,386,000,000 swapped into equivalent US $42,310,465.The Company records the fair value of the currency swaps as an asset orliability in our financial statement. The effective portion of the swapis recorded in accumulated other comprehensive income. Accordingly, anamount of $359,180 has been recorded in Other Liabilities in theaccompanying financial statements as of December  31,2006.

Item 8.    Financial Statements and SupplementaryData

The information required by this item iscontained in the financial statements set forth in Item 15(a) under thecaption ‘‘Consolidated FinancialStatements’’ as part of this Annual Report on Form10-K.

Item 9.    Changes in and Disagreements withAccountants on Accounting and FinancialDisclosure

None.

Item 9A.    Controlsand Procedures

Disclosure Controls andProcedures

Our management, including our ChiefExecutive Officer and Chief Financial Officer, has conducted anevaluation of the effectiveness of our disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934) as of the end of the period covered bythis report. Based upon that evaluation, our Chief Executive Officerand Chief Financial Officer have concluded that our disclosure controlsand procedures are effective to ensure that information required to bedisclosed by the Company in the reports that it files or submits to theSEC under the Securities Exchange Act of 1934, as amended, is recorded,processed, summarized and reported within the time periods specified inSEC rules and forms.

Management’s Report on InternalControl over Financial Reporting 

Management is responsiblefor establishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Rule 13a-15(f) of theExchange Act. The Company’s internal control over financialreporting is a process designed under the supervision of theCompany’s Chief Executive Officer and Chief Financial Officer toprovide reasonable assurance regarding the reliability of financialreporting and the preparation of the Company’s financialstatements for external reporting purposes in accordance withaccounting principles generally accepted in the United States.

Management has conducted an assessment of the effectiveness of theCompany’s internal control over financial reporting based on theframework established in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the TreadwayCommission. Based on this assessment, management has determined thatthe Company’s internal control over financial reporting as ofDecember  31,  2006 is effective.

Our internalcontrol over financial reporting includes policies and procedures thatpertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect transactions and 

55

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dispositions of assets; provide reasonableassurances that transactions are recorded as necessary to permitpreparation of financial statements in accordance with accountingprinciples generally accepted in the United States, and that receiptsand expenditures are being made only in accordance with authorizationsof management and the directors of the Company; and provide reasonableassurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets thatcould have a material effect on the financial statements.

Management’s assessment of the effectiveness of theCompany’s internal control over financial reporting as ofDecember  31,  2006 has been audited by Ernst & YoungLLP, an independent registered public accounting firm, as stated intheir report appearing on page [58].

InternalControl Over Financial Reporting

In addition, weevaluated our internal control over financial reporting, (as defined inRules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934),and there have been no changes in our internal control over financialreporting that occurred during the fourth quarter of 2006 thatmaterially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

InherentLimitations on Effectiveness of Controls 

Our management,including our chief executive officer and our chief financial officer,does not expect that our disclosure controls or our internal controlover financial reporting will prevent or detect all error and allfraud. A control system, no matter how well designed and operated, canprovide only reasonable, not absolute, assurance that the controlsystem’s objectives will be met. Our disclosure controls andprocedures are designed to provide reasonable assurance of achievingtheir objectives. The design of a control system must reflect the factthat there are resource constraints, and the benefits of controls mustbe considered relative to their costs. Further, because of the inherentlimitations in all control systems, no evaluation of controls canprovide absolute assurance that misstatements due to error or fraudwill not occur or that all control issues and instances of fraud, ifany, within the Company have been detected. These inherent limitationsinclude the realities that judgments in decision-making can be faultyand that breakdowns can occur because of simple error or mistake.Controls can also be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management overrideof the controls. The design of any system of controls is based in parton certain assumptions about the likelihood of future events, and therecan be no assurance that any design will succeed in achieving itsstated goals under all potential future conditions. Projections of anyevaluation of controls effectiveness to future periods are subject torisks. Over time, controls may become inadequate because of changes inconditions or deterioration in the degree of compliance with policiesor procedures.

Item 9B.    OtherInformation

On March  17,  2006, the Companygranted 56,666 shares of the Company’s stock in options to itsindependent non-employee directors. These options vested and becameexercisable on the grant date at an exercise price of $13.23 per share.All options expire ten years from the date of grant.

OnJune  28,  2006, the Company issued an aggregate of2,750,000 shares of its common stock, par value $0.01, to certaininstitutional investors pursuant to a securities purchase agreementdated June  22,  2006, for an aggregate purchase price of$33,000,000, or $12.00 per share of common stock. The shares of commonstock were sold pursuant to an exemption from registration afforded bySection 4(2) of the Securities Act of 1933, as amended, and Rule 506 ofRegulation D promulgated thereunder. The offering incurred costs of$1,770,811 in fees and expenses and the balance of the proceeds wasused to fund a portion of the acquisition of three vessels, KESTREL I,TERN and JAEGER.

On September  12,  2006, EagleVentures LLC, sold 2,300,000 shares from its holdings of theCompany’s common stock in a secondary offering. The Company didnot receive any proceeds from this secondary sale. The sale incurredcosts of $198,200.

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On November  14,  2006, EagleVentures LLC, sold 2,700,000 shares from its holdings of theCompany’s common stock in a secondary offering. The Company didnot receive any proceeds from this secondary sale. The sale incurredcosts of $321,123.

On January  9,  2007, EagleVentures, sold 7,202,679 shares from its holdings of theCompany’s common stock in a secondary offering. The Company didnot receive any proceeds from thisoffering.

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PARTIII

Item 10.    Directors, Executive Officers andCorporate Governance

Directors

The informationconcerning our directors required under this Item is incorporatedherein by reference from our proxy statement, which will be filed withthe Securities and Exchange Commission, relating to our Annual Meetingof Stockholders (our ‘‘2007 ProxyStatement’’).

Executive Officers

Theinformation concerning our Executive Officers required under this Itemis incorporated herein by reference from our 2007 Proxy Statement.

Code of Ethics

The information concerning our Code ofConduct is incorporated herein by reference from our 2007 ProxyStatement.

Audit Committee

The informationconcerning our Audit Committee is incorporated herein by reference fromour 2007 Proxy Statement.

Audit Committee FinancialExperts

The information concerning our Audit CommitteeFinancial Experts is incorporated herein by reference from our 2007Proxy Statement.

Item 11.    ExecutiveCompensation

The information required under this Item isincorporated herein by reference from our 2007 Proxy Statement.

|                |                                                                                              |
|----------------|----------------------------------------------------------------------------------------------|
| Item 12.  | Security Ownership of CertainBeneficial Owners and Management and Related StockholderMatters |

The information required under this Item isincorporated herein by reference from our 2007 Proxy Statement.

Item 13.    Certain Relationships and RelatedTransactions

The information required under this Itemis incorporated herein by reference from our 2007 Proxy Statement.

Item 14.    Principal Accountant Fees andServices

Information about the fees for 2006 forprofessional services rendered by our independent registered publicaccounting firm is incorporated herein by reference from our 2007 ProxyStatement. Our Audit Committee’s policy on pre-approval of auditand permissible non-audit services of our independent registered publicaccounting firm is incorporated by reference from our 2007 ProxyStatement.

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PART IV

Item15.    Exhibits, Financial Statement Schedules

|           |                                                           |
|-----------|-----------------------------------------------------------|
| (a)  | Documents filed as part of this AnnualReport on Form 10-K |

|  |          |                                                                                               |
|--|----------|-----------------------------------------------------------------------------------------------|
|  | 1.  | Consolidated FinancialStatements: See accompanying Index to Consolidated FinancialStatements. |

|  |          |                                                                                                                                                  |
|--|----------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 2.  | Consolidated Financial StatementSchedule: Financial statement schedules are omitted due to the absenceof conditions under which they arerequired |

|           |          |
|-----------|----------|
| (b)  | Exhibits |

|  |    |      |  |  |  |                                                                                                 |
|--|----|------|--|--|--|-------------------------------------------------------------------------------------------------|
|  | 3  | .1   |  |  |  | Amendedand Restated Articles of Incorporation of theCompany*                                    |
|  | 3  | .2   |  |  |  | Amended and Restated Bylaws ofthe Company*                                                      |
|  | 4  | .1   |  |  |  | Form of Share Certificateof the Company*                                                        |
|  | 10 | .1   |  |  |  | Form of RegistrationRights Agreement*                                                           |
|  | 10 | .2   |  |  |  | Form of ManagementAgreement*                                                                    |
|  | 10 | .3   |  |  |  | Form of Amended and RestatedCredit Agreement**                                                  |
|  | 10 | .3.1 |  |  |  | Form of SecondAmended and Restated CreditAgreement***                                           |
|  | 10 | .4   |  |  |  | Eagle Bulk Shipping Inc.2005 Stock Incentive Plan*                                              |
|  | 10 | .5   |  |  |  | EmploymentAgreement for Mr. Sophocles N.Zoullas*                                           |
|  | 10 | .6   |  |  |  | Form of Fourth Amended andRestated Limited Liability Company Agreement of Eagle VenturesLLC**** |
|  | 10 | .7   |  |  |  | Form of Fifth Amended andRestated Limited Liability Company Agreement of Eagle VenturesLLC****  |
|  | 21 | .1   |  |  |  | Subsidaries of theRegistrant                                                                    |
|  | 23 | .1   |  |  |  | Consent of Ernst & YoungLLP                                                                 |
|  | 31 | .1   |  |  |  | Rule 13a-14(d) /15d-14(a)_Certification ofCEO                                                   |
|  | 31 | .2   |  |  |  | Rule 13a-14(d) /15d-14(a)_Certification ofCFO                                                   |
|  | 32 | .1   |  |  |  | Section 1350 Certification ofCEO                                                                |
|  | 32 | .2   |  |  |  | Section 1350 Certification ofCFO                                                                |
|  |

|  |
|--|
|  |  |
|  |

|   |                                                                                                 |
|---|-------------------------------------------------------------------------------------------------|
| * | Incorporatedby reference to the Registration Statement on Form S-1, RegistrationNo. 333-123817. |

|    |                                                                                    |
|----|------------------------------------------------------------------------------------|
| ** | Incorporated byreference to the Current Report on Form 8-K filed on July31,  2006. |

|     |                                                                                                 |
|-----|-------------------------------------------------------------------------------------------------|
| *** | Incorporated byreference to the Quarterly Report on Form 10-Q deemed filed on November14, 2006. |

|      |                                                                                                                                                 |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| **** | Incorporated byreference to the Registrant’s Annual Report on Form 10-K for theperiod ending December  31,  2005 filed on March14,  2006. |

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SIGNATURES

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

|        |  |  |                                                                                                                                                                                                                  |
|--------|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |  |  | EAGLEBULK SHIPPINGINC.                                                                                                                                                                                           |
|   |  |  | By:   /s/SophoclesZoullas                             |
|   |  |  |           Name:Sophocles Zoullas          Title:    Chief ExecutiveOfficer               |
|        |

February  28,2007

Pursuant to the requirements of the Securities Exchange Actof 1934, this report has been signed below by the following persons onbehalf of the registrant and in the capacities indicated onFebruary  28,  2007.

|                        |  |                                      |
|------------------------|--|--------------------------------------|
| Signature              |  | Title                                |
|                        |
| /s/Sophocles Zoullas   |  | Chief Executive Officer, andDirector |
|                        |
| SophoclesZoullas       |
|                        |
| /s/ Michael B.Goldberg |  | Director                             |
|                        |
| Michael B.Goldberg     |
|                        |
| /s/ Frank J.Loverro    |  | Director                             |
|                        |
| Frank J.Loverro        |
|                        |
| /s/ David B.Hiley      |  | Director                             |
|                        |
| David B.Hiley          |
|                        |
| /s/ Douglas P.Haensel  |  | Director                             |
|                        |
| Douglas P.Haensel      |
|                        |
| /s/ JosephCianciolo    |  | Director                             |
|                        |
| JosephCianciolo        |
|                        |
| /s/ MichaelMitchell    |  | Director                             |
|                        |
| MichaelMitchell        |
|                        |

60

----

INDEXTO CONSOLIDATED FINANCIALSTATEMENTS

|                                                                                                                                                                             |  |  |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-----|
| Reportsof Independent Registered Public AccountingFirm                                                                                                                      |  |  | F-2 |
| ConsolidatedBalance Sheets at December 31, 2006 and December31, 2005                                                                                                        |  |  | F-4 |
| Consolidated Statementsof Operations for the Year ended December 31, 2006 andfor the period from January 26, 2005 (inception) toDecember 31,2005                            |  |  | F-5 |
| Consolidated Statements of Changesin Stockholders’ Equity for the Year ended December 31,2006 and for the period from January 26, 2005 (inception)to December 31,2005 |  |  | F-6 |
| Consolidated Statements of CashFlows for the Year ended December 31, 2006 and for theperiod from January 26, 2005 (inception) toDecember 31, 2005                           |  |  | F-7 |
| Notes toConsolidated FinancialStatements                                                                                                                                    |  |  | F-8 |
|                                                                                                                                                                             |

F-1

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

The Board of Directors andStockholders of Eagle Bulk Shipping Inc.

We have audited theaccompanying consolidated balance sheets of Eagle BulkShipping Inc. and subsidiaries as of December  31,2006 and 2005, and the related consolidated statements of operations,stockholders’ equity, and cash flows for the year endedDecember  31,  2006 and for the period fromJanuary 26, 2005 (inception) through December  31,2005. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinionon these financial statements based on our audits.

We conductedour audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. Anaudit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made bymanagement, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis forour opinion.

In our opinion, the financial statements referredto above present fairly, in all material respects, the consolidatedfinancial position of the Company and its subsidiaries atDecember 31, 2006 and 2005, and the consolidated results oftheir operations and their cash flows for the year endedDecember  31,  2006 and for the period fromJanuary 26, 2005 to December 31, 2005, in conformity withU.S. generally accepted accounting principles.

We also haveaudited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the effectiveness of EagleBulk Shipping Inc.’s internal control over financial reportingas of December  31,  2006, based on criteria established inInternal Control – Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission and our reportdated February  28,  2007 expressed an unqualified opinionthereon.

|  | /s/ Ernst & YoungLLP                     |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------|

New York, NewYorkFebruary  28,  2007

F-2

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REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

The Board of Directors and Stockholdersof Eagle Bulk Shipping Inc.

We have audited management’sassessment, included in the accompanying Management’s Report onInternal Control over Financial Reporting, that Eagle Bulk ShippingInc. maintained effective internal control over financial reporting asof December  31,  2006, based on criteria established inInternal Control – Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (the COSOcriteria). Eagle Bulk Shipping Inc.’s management is responsiblefor maintaining effective internal control over financial reporting andfor its assessment of the effectiveness of internal control overfinancial reporting. Our responsibility is to express an opinion onmanagement’s assessment and an opinion on the effectiveness ofthe company’s internal control over financial reporting based onour audit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal controlover financial reporting was maintained in all material respects. Ouraudit included obtaining an understanding of internal control overfinancial reporting, evaluating management’s assessment, testingand evaluating the design and operating effectiveness of internalcontrol, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides areasonable basis for our opinion.

A company’s internalcontrol over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includesthose policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets thatcould have a material effect on the financial statements.

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to therisk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies orprocedures may deteriorate.

In our opinion, management’sassessment that Eagle Bulk Shipping Inc. maintained effective internalcontrol over financial reporting as of December  31,  2006,is fairly stated, in all material respects, based on the COSO criteria.Also, in our opinion, Eagle Bulk Shipping Inc. maintained, in allmaterial respects, effective internal control over financial reportingas of December  31,  2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidatedbalance sheets of Eagle Bulk Shipping Inc. as of December31,  2006 and 2005, and the related consolidated statements ofoperations, stockholders’ equity and cash flows for the yearended December  31,  2006 and the period fromJanuary  26,  2005 (inception) to December31,  2005 and our report dated February  28,  2007expressed an unqualified opinion thereon.

|  | /s/ Ernst & YoungLLP                     |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------|

New York,NYFebruary  28,  2007

F-3

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EAGLE BULKSHIPPING INC.CONSOLIDATED BALANCESHEETS

|                                                                                                                                                                   |  |  |                  |   |             |                  |  |  |  |   |             |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|------------------|---|-------------|------------------|--|--|--|---|-------------|---|
|                                                                                                                                                              |  |  | December31, 2006 |   |             | December 31,2005 |
| ASSETS:                                                                                                                                                           |  |  |                  |   |        |                  |  |  |  |   |        |   |
| CurrentAssets:                                                                                                                                                    |  |  |                  |   |        |                  |  |  |  |   |        |   |
| Cash                                                                                                                                                              |  |  |                  | $ | 22,275,491  |                  |  |  |  | $ | 24,526,528  |   |
| AccountsReceivable                                                                                                                                                |  |  |                  |   | 616,205     |                  |  |  |  |   | 281,094     |   |
| PrepaidCharterRevenue                                                                                                                                             |  |  |                  |   | 3,740,000   |                  |  |  |  |   | 8,508,000   |   |
| PrepaidExpenses                                                                                                                                                   |  |  |                  |   | 1,020,821   |                  |  |  |  |   | 513,145     |   |
| TotalCurrentAssets                                                                                                                                                |  |  |                  |   | 27,652,517  |                  |  |  |  |   | 33,828,767  |   |
| FixedAssets:                                                                                                                                                      |  |  |                  |   |        |                  |  |  |  |   |        |   |
| Vessels andVessel Improvements, at cost, net of Accumulated Depreciation of$31,415,604 and $10,384,247 as of December 31, 2006 and 2005,respectively              |  |  |                  |   | 502,141,951 |                  |  |  |  |   | 417,581,610 |   |
| Advancesfor VesselConstruction                                                                                                                                    |  |  |                  |   | 25,190,941  |                  |  |  |  |   | —     |   |
| RestrictedCash                                                                                                                                                    |  |  |                  |   | 6,524,616   |                  |  |  |  |   | 6,624,616   |   |
| DeferredDrydock Costs, net of Accumulated Amortizationof      $809,109 and$27,980 at December  31,  2006 and 2005respectively       |  |  |                  |   | 1,937,299   |                  |  |  |  |   | 393,702     |   |
| DeferredFinancing Costs, net of Accumulated Amortization of $276,311 and$98,065 at December  31,  2006 and 2005respectively                                       |  |  |                  |   | 2,406,839   |                  |  |  |  |   | 1,268,209   |   |
| OtherAssets                                                                                                                                                       |  |  |                  |   | 2,936,804   |                  |  |  |  |   | 2,647,077   |   |
| TotalAssets                                                                                                                                                       |  |  |                  | $ | 568,790,967 |                  |  |  |  | $ | 462,343,981 |   |
| LIABILITIES& STOCKHOLDERS’EQUITY                                                                                                                        |  |  |                  |   |        |                  |  |  |  |   |        |   |
| CurrentLiabilities:                                                                                                                                               |  |  |                  |   |        |                  |  |  |  |   |        |   |
| AccountsPayable                                                                                                                                                   |  |  |                  | $ | 1,650,159   |                  |  |  |  | $ | 1,861,145   |   |
| AccruedInterest                                                                                                                                                   |  |  |                  |   | 800,683     |                  |  |  |  |   | 514,631     |   |
| OtherAccruedLiabilities                                                                                                                                           |  |  |                  |   | 1,717,124   |                  |  |  |  |   | 424,669     |   |
| DeferredRevenue                                                                                                                                                   |  |  |                  |   | —     |                  |  |  |  |   | 1,306,000   |   |
| UnearnedCharter HireRevenue                                                                                                                                       |  |  |                  |   | 2,713,060   |                  |  |  |  |   | 2,444,522   |   |
| TotalCurrentLiabilities                                                                                                                                           |  |  |                  |   | 6,881,026   |                  |  |  |  |   | 6,550,967   |   |
| Long-termDebt                                                                                                                                                     |  |  |                  |   | 239,974,820 |                  |  |  |  |   | 140,000,000 |   |
| OtherLiabilities                                                                                                                                                  |  |  |                  |   | 359,180     |                  |  |  |  |   | —     |   |
| TotalLiabilities                                                                                                                                                  |  |  |                  |   | 247,215,026 |                  |  |  |  |   | 146,550,967 |   |
| CommitmentandContingencies                                                                                                                                        |  |  |                  |   |        |                  |  |  |  |   |        |   |
| Stockholders’Equity:                                                                                                                                        |  |  |                  |   |        |                  |  |  |  |   |        |   |
| Preferred Stock, $.01par value, 25,000,000 shares authorized, noneissued                                                                                          |  |  |                  |   | —     |                  |  |  |  |   | —     |   |
| Commonstock, $.01 par value, 100,000,000 shares authorized, 35,900,001 and33,150,000 shares issued and outstanding as of December31,  2006, and 2005,respectively |  |  |                  |   | 359,000     |                  |  |  |  |   | 331,500     |   |
| AdditionalPaid-InCapital                                                                                                                                          |  |  |                  |   | 364,574,877 |                  |  |  |  |   | 320,822,037 |   |
| RetainedEarnings (net of Dividends declared of $86,390,500 and $14,661,000 asof December  31,  2006 and 2005,respectively)                                        |  |  |                  |   | (45,935,560 | )                |  |  |  |   | (8,007,600  | ) |
| AccumulatedOther ComprehensiveIncome                                                                                                                              |  |  |                  |   | 2,577,624   |                  |  |  |  |   | 2,647,077   |   |
| TotalStockholders’Equity                                                                                                                                    |  |  |                  |   | 321,575,941 |                  |  |  |  |   | 315,793,014 |   |
| TotalLiabilities and Stockholders’Equity                                                                                                                    |  |  |                  | $ | 568,790,967 |                  |  |  |  | $ | 462,343,981 |   |
|                                                                                                                                                                   |

Theaccompanying notes are an integral part of these Consolidated FinancialStatements.

F-4

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Table of Contents

EAGLE BULKSHIPPING INC.CONSOLIDATED STATEMENTS OFOPERATIONS

|                                       |  |  |                  |   |             |                                                                    |  |  |  |   |            |   |
|---------------------------------------|--|--|------------------|---|-------------|--------------------------------------------------------------------|--|--|--|---|------------|---|
|                                  |  |  | December31, 2006 |   |             | Period fromJanuary 26,2005(inception) toDecember 31,2005 |
| Revenues, net ofcommissions           |  |  |                  | $ | 104,648,197 |                                                                    |  |  |  | $ | 56,066,058 |   |
| VesselExpenses                        |  |  |                  |   | 21,562,034  |                                                                    |  |  |  |   | 11,052,429 |   |
| DepreciationandAmortization           |  |  |                  |   | 21,812,486  |                                                                    |  |  |  |   | 10,412,227 |   |
| Generaland AdministrativeExpenses     |  |  |                  |   | 5,222,875   |                                                                    |  |  |  |   | 3,491,330  |   |
| Managementand Other Fees toAffiliates |  |  |                  |   | —     |                                                                    |  |  |  |   | 6,175,046  |   |
| Non-cashCompensationExpense           |  |  |                  |   | 13,070,473  |                                                                    |  |  |  |   | 11,734,812 |   |
| TotalOperatingExpenses                |  |  |                  |   | 61,667,868  |                                                                    |  |  |  |   | 42,865,844 |   |
| OperatingIncome                       |  |  |                  |   | 42,980,329  |                                                                    |  |  |  |   | 13,200,214 |   |
| InterestExpense                       |  |  |                  |   | 10,548,616  |                                                                    |  |  |  |   | 7,208,641  |   |
| InterestIncome                        |  |  |                  |   | (1,369,827  | )                                                                  |  |  |  |   | (661,827   | ) |
| NetInterestExpense                    |  |  |                  |   | 9,178,789   |                                                                    |  |  |  |   | 6,546,814  |   |
| NetIncome                             |  |  |                  | $ | 33,801,540  |                                                                    |  |  |  | $ | 6,653,400  |   |
| WeightedAverage SharesOutstanding:    |  |  |                  |   |        |                                                                    |  |  |  |   |       |   |
| Basic                                 |  |  |                  |   | 34,543,836  |                                                                    |  |  |  |   | 21,968,824 |   |
| Diluted                               |  |  |                  |   | 34,543,862  |                                                                    |  |  |  |   | 21,968,824 |   |
| PerShare Amounts:                     |  |  |                  |   |        |                                                                    |  |  |  |   |       |   |
| Basic NetIncome                       |  |  |                  | $ | 0.98        |                                                                    |  |  |  | $ | 0.30       |   |
| DilutedNet Income                     |  |  |                  | $ | 0.98        |                                                                    |  |  |  | $ | 0.30       |   |
| Cashdividends declared andpaid        |  |  |                  | $ | 2.08        |                                                                    |  |  |  | $ | 0.54       |   |
|                                       |

Theaccompanying notes are an integral part of these Consolidated FinancialStatements.

F-5

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Table of Contents

EAGLE BULKSHIPPING INC.

CONSOLIDATED STATEMENT OFSTOCKHOLDER’S EQUITYFOR THE YEAR ENDED DECEMBER 31,2006

|                                                  |  |  |        |  |            |              |  |  |                          |   |         |                  |  |  |               |   |             |                    |  |  |                          |   |            |                                |  |  |  |   |             |   |  |  |  |   |             |   |  |  |  |   |           |   |  |  |  |   |             |   |
|--------------------------------------------------|--|--|--------|--|------------|--------------|--|--|--------------------------|---|---------|------------------|--|--|---------------|---|-------------|--------------------|--|--|--------------------------|---|------------|--------------------------------|--|--|--|---|-------------|---|--|--|--|---|-------------|---|--|--|--|---|-----------|---|--|--|--|---|-------------|---|
|                                             |  |  |   |  |            |         |  |  |                     |   |         | RetainedEarnings |  |  |          |   |             |               |
|                                             |  |  | Shares |  |            | CommonShares |  |  | AdditionalPaid-InCapital |   |         | NetIncome        |  |  | CashDividends |   |             | AccumulatedDeficit |  |  | OtherComprehensiveIncome |   |            | TotalStockholders’Equity |
| Balanceat January  26,2005                       |  |  |        |  | —    |              |  |  |                          | $ | — |                  |  |  |               | $ | —     |                    |  |  |                          | $ | —    |                                |  |  |  | $ | —     |   |  |  |  | $ | —     |   |  |  |  | $ | —   |   |  |  |  | $ | —     |   |
| ComprehensiveIncome:                             |  |  |        |  |       |              |  |  |                          |   |    |                  |  |  |               |   |        |                    |  |  |                          |   |       |                                |  |  |  |   |        |   |  |  |  |   |        |   |  |  |  |   |      |   |  |  |  |   |        |   |
| NetIncome                                        |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | 6,653,400  |                                |  |  |  |   | —     |   |  |  |  |   | 6,653,400   |   |  |  |  |   | —   |   |  |  |  |   | 6,653,400   |   |
| NetUnrealized gains onderivatives                |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | 2,647,077 |   |  |  |  |   | 2,647,077   |   |
| ComprehensiveIncome                              |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 9,300,477   |   |
| Issuanceof Common Stock and CapitalContributions |  |  |        |  | 12,750,000 |              |  |  |                          |   | 127,500 |                  |  |  |               |   | 40,716,162  |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 40,843,662  |   |
| InitialPublic Offering, net of issuancecosts     |  |  |        |  | 14,400,000 |              |  |  |                          |   | 144,000 |                  |  |  |               |   | 186,385,290 |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 186,529,290 |   |
| PublicOffering, net of issuancecosts             |  |  |        |  | 6,000,000  |              |  |  |                          |   | 60,000  |                  |  |  |               |   | 81,985,773  |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 82,045,773  |   |
| CashDividends                                    |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | —    |                                |  |  |  |   | (14,661,000 | ) |  |  |  |   | (14,661,000 | ) |  |  |  |   | —   |   |  |  |  |   | (14,661,000 | ) |
| Non-cashCompensation                             |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | 11,734,812  |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 11,734,812  |   |
| Balanceat December  31,2005                      |  |  |        |  | 33,150,000 |              |  |  |                          | $ | 331,500 |                  |  |  |               | $ | 320,822,037 |                    |  |  |                          |   |       |                                |  |  |  |   |        |   |  |  |  | $ | (8,007,600  | ) |  |  |  | $ | 2,647,077 |   |  |  |  | $ | 315,793,014 |   |
| ComprehensiveIncome:                             |  |  |        |  |       |              |  |  |                          |   |    |                  |  |  |               |   |        |                    |  |  |                          |   |       |                                |  |  |  |   |        |   |  |  |  |   |        |   |  |  |  |   |      |   |  |  |  |   |        |   |
| NetIncome                                        |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | 33,801,540 |                                |  |  |  |   | —     |   |  |  |  |   | 33,801,540  |   |  |  |  |   | —   |   |  |  |  |   | 33,801,540  |   |
| NetUnrealized losses onderivatives               |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | (69,453   | ) |  |  |  |   | (69,453     | ) |
| ComprehensiveIncome                              |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 33,732,087  |   |
| PublicOffering, net of issuancecosts             |  |  |        |  | 2,750,001  |              |  |  |                          |   | 27,500  |                  |  |  |               |   | 30,682,367  |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 30,709,867  |   |
| CashDividends                                    |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | —     |                    |  |  |                          |   | —    |                                |  |  |  |   | (71,729,500 | ) |  |  |  |   | (71,729,500 | ) |  |  |  |   | —   |   |  |  |  |   | (71,729,500 | ) |
| Non-cashCompensation                             |  |  |        |  | —    |              |  |  |                          |   | — |                  |  |  |               |   | 13,070,473  |                    |  |  |                          |   | —    |                                |  |  |  |   | —     |   |  |  |  |   | —     |   |  |  |  |   | —   |   |  |  |  |   | 13,070,473  |   |
| Balanceat December  31,2006                      |  |  |        |  | 35,900,001 |              |  |  |                          | $ | 359,000 |                  |  |  |               | $ | 364,574,877 |                    |  |  |                          |   |       |                                |  |  |  |   |        |   |  |  |  | $ | (45,935,560 | ) |  |  |  | $ | 2,577,624 |   |  |  |  | $ | 321,575,941 |   |
|                                                  |

Theaccompanying notes are an integral part of these Consolidated FinancialStatements.

F-6

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Table of Contents

EAGLE BULK SHIPPING INC.CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                |  |  |                  |   |              |                                                                     |  |  |  |   |              |   |
|----------------------------------------------------------------------------------------------------------------|--|--|------------------|---|--------------|---------------------------------------------------------------------|--|--|--|---|--------------|---|
|                                                                                                           |  |  | December31, 2006 |   |              | Period fromJanuary 26,2005(inception) to December 31,2005 |
| Cash Flows from OperatingActivities                                                                            |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| NetIncome                                                                                                      |  |  |                  | $ | 33,801,340   |                                                                     |  |  |  | $ | 6,653,400    |   |
| Adjustmentsto Reconcile Net Income to Net Cash provided by OperatingActivities:                                |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| Itemsincluded in net income not affecting cashflows:                                                           |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| Depreciation                                                                                                   |  |  |                  |   | 21,031,357   |                                                                     |  |  |  |   | 10,384,247   |   |
| Amortizationof Deferred DrydockingCosts                                                                        |  |  |                  |   | 781,129      |                                                                     |  |  |  |   | 27,980       |   |
| Amortizationof Deferred FinancingCosts                                                                         |  |  |                  |   | 178,246      |                                                                     |  |  |  |   | 98,065       |   |
| Write-offof Deferred FinancingCosts                                                                            |  |  |                  |   | —      |                                                                     |  |  |  |   | 1,130,712    |   |
| Amortizationof Prepaid and Deferred CharterRevenue                                                             |  |  |                  |   | 3,462,000    |                                                                     |  |  |  |   | 890,500      |   |
| Non-cashCompensationExpense                                                                                    |  |  |                  |   | 13,070,473   |                                                                     |  |  |  |   | 11,734,812   |   |
| Changesin Operating Assets andLiabilities:                                                                     |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| AccountsReceivable                                                                                             |  |  |                  |   | (335,111     | )                                                                   |  |  |  |   | (281,094     | ) |
| PrepaidCharterRevenue                                                                                          |  |  |                  |   | —      |                                                                     |  |  |  |   | (10,149,000  | ) |
| PrepaidExpenses                                                                                                |  |  |                  |   | (507,676     | )                                                                   |  |  |  |   | (513,145     | ) |
| AccountsPayable                                                                                                |  |  |                  |   | (469,199     | )                                                                   |  |  |  |   | 1,620,722    |   |
| AccruedInterest                                                                                                |  |  |                  |   | 286,052      |                                                                     |  |  |  |   | 514,631      |   |
| AccruedExpenses                                                                                                |  |  |                  |   | 1,292,455    |                                                                     |  |  |  |   | 424,669      |   |
| DeferredRevenue                                                                                                |  |  |                  |   | —      |                                                                     |  |  |  |   | 2,056,500    |   |
| DrydockingExpenses                                                                                             |  |  |                  |   | (2,324,726   | )                                                                   |  |  |  |   | (421,682     | ) |
| UnearnedCharter HireRevenue                                                                                    |  |  |                  |   | 268,538      |                                                                     |  |  |  |   | 2,444,522    |   |
| NetCash Provided by OperatingActivities                                                                        |  |  |                  |   | 70,535,078   |                                                                     |  |  |  |   | 26,615,839   |   |
| CashFlows from InvestingActivities                                                                             |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| Purchase of VesselsandImprovements                                                                             |  |  |                  |   | (105,591,698 | )                                                                   |  |  |  |   | (427,965,857 | ) |
| Advancesfor VesselConstruction                                                                                 |  |  |                  |   | (25,167,513  | )                                                                   |  |  |  |   | —      |   |
| NetCash Used in InvestingActivities                                                                            |  |  |                  |   | (130,759,211 | )                                                                   |  |  |  |   | (427,965,857 | ) |
| CashFlows from FinancingActivities                                                                             |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| CapitalContribution                                                                                            |  |  |                  |   | —      |                                                                     |  |  |  |   | 40,843,662   |   |
| Issuanceof CommonStock                                                                                         |  |  |                  |   | 33,000,000   |                                                                     |  |  |  |   | 288,600,000  |   |
| EquityIssuanceCosts                                                                                            |  |  |                  |   | (2,031,920   | )                                                                   |  |  |  |   | (19,784,514  | ) |
| BankBorrowings                                                                                                 |  |  |                  |   | 99,974,820   |                                                                     |  |  |  |   | 314,450,000  |   |
| Repaymentof BankDebt                                                                                           |  |  |                  |   | —      |                                                                     |  |  |  |   | (174,450,000 | ) |
| RestrictedCash                                                                                                 |  |  |                  |   | 100,000      |                                                                     |  |  |  |   | (6,624,616   | ) |
| DeferredFinancingCosts                                                                                         |  |  |                  |   | (1,340,304   | )                                                                   |  |  |  |   | (2,496,986   | ) |
| Borrowingsfrom Eagle VenturesLLC                                                                               |  |  |                  |   | —      |                                                                     |  |  |  |   | 58,730,434   |   |
| Repayment ofEagle Ventures LLCNote                                                                             |  |  |                  |   | —      |                                                                     |  |  |  |   | (58,730,434  | ) |
| CashDividend                                                                                                   |  |  |                  |   | (71,729,500  | )                                                                   |  |  |  |   | (14,661,000  | ) |
| NetCash Provided by FinancingActivities                                                                        |  |  |                  |   | 57,973,096   |                                                                     |  |  |  |   | 425,876,546  |   |
| NetIncrease inCash                                                                                             |  |  |                  |   | (2,251,037   | )                                                                   |  |  |  |   | 24,526,528   |   |
| Cashat Beginning ofPeriod                                                                                      |  |  |                  |   | 24,526,528   |                                                                     |  |  |  |   | —      |   |
| Cashat End ofPeriod                                                                                            |  |  |                  | $ | 22,275,491   |                                                                     |  |  |  | $ | 24,526,528   |   |
| SupplementalCash Flow Information:                                                                             |  |  |                  |   |         |                                                                     |  |  |  |   |         |   |
| Cashpaid during the period for Interest (including Capitalized interest of$126,702 in 2006 and CommitmentFees) |  |  |                  | $ | 10,321,584   |                                                                     |  |  |  | $ | 5,465,233    |   |
|                                                                                                                |

Theaccompanying notes are an integral part of these Consolidated FinancialStatements.

F-7

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Table of Contents

EAGLEBULK SHIPPING INC. NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

Note 1.    Basis of Presentation andGeneral Information:

The accompanying consolidated financialstatements include the accounts of Eagle Bulk Shipping Inc. andits wholly-owned subsidiaries (collectively, the‘‘Company’’). The Company is engaged in theocean transportation of dry bulk cargoes worldwide through theownership and operation of dry bulk vessels. The Company’s fleetis comprised of Handymax bulk carriers and the Company operates itsbusiness in one business segment.

The Company is a holdingcompany incorporated in 2005, under the laws of the Republic of theMarshall Islands and was a wholly-owned subsidiary of Eagle VenturesLLC, a Marshall Islands limited liability company. Eagle Ventures LLCis owned by affiliates of Kelso & Company, L.P.(‘‘Kelso’’), members of management, adirector, and outside investors. Eagle Ventures has sold the majorityof its holdings in the Company. Eagle Ventures LLC currently ownsapproximately 0.4% of the Company’s outstanding commonstock.

The Company is the sole owner of all of the outstandingshares of the Marshall Island incorporated wholly-owned subsidiarieslisted below. The primary activity of each of these subsidiaries is theownership of a vessel.

|                             |  |  |                |  |  |        |  |  |       |  |  |                    |
|-----------------------------|--|--|----------------|--|--|--------|--|--|-------|--|--|--------------------|
| Company                     |  |  | Ownerof Vessel |  |  | dwt.   |  |  | Built |  |  | DateAcquired       |
| Cardinal ShippingLLC        |  |  | Cardinal       |  |  | 55,408 |  |  | 2004  |  |  | April 18,2005 |
| Condor ShippingLLC          |  |  | Condor         |  |  | 50,296 |  |  | 2001  |  |  | April29,  2005     |
| Falcon ShippingLLC          |  |  | Falcon         |  |  | 50,296 |  |  | 2001  |  |  | April21,  2005     |
| Griffon ShippingLLC         |  |  | Griffon        |  |  | 46,635 |  |  | 1995  |  |  | June1,  2005       |
| Harrier ShippingLLC         |  |  | Harrier        |  |  | 50,296 |  |  | 2001  |  |  | April19,  2005     |
| Hawk Shipping LLC           |  |  | HawkI          |  |  | 50,296 |  |  | 2001  |  |  | April  26,2005     |
| Heron ShippingLLC           |  |  | Heron          |  |  | 52,827 |  |  | 2001  |  |  | December1,  2005   |
| Jaeger ShippingLLC          |  |  | Jaeger         |  |  | 52,248 |  |  | 2004  |  |  | July7,  2006       |
| Kestrel Shipping LLC        |  |  | KestrelI       |  |  | 50,326 |  |  | 2004  |  |  | June  30,2006      |
| Kite ShippingLLC            |  |  | Kite           |  |  | 47,195 |  |  | 1997  |  |  | May9,  2005        |
| Merlin ShippingLLC          |  |  | Merlin         |  |  | 50,296 |  |  | 2001  |  |  | October26,  2005   |
| Osprey Shipping LLC         |  |  | OspreyI        |  |  | 50,206 |  |  | 2002  |  |  | August  31,2005    |
| Peregrine ShippingLLC       |  |  | Peregrine      |  |  | 50,913 |  |  | 2001  |  |  | June30,  2005      |
| Shikra ShippingLLC          |  |  | Shikra         |  |  | 41,096 |  |  | 1984  |  |  | April29,  2005     |
| Sparrow ShippingLLC         |  |  | Sparrow        |  |  | 48,225 |  |  | 2000  |  |  | July19,  2005      |
| Tern ShippingLLC            |  |  | Tern           |  |  | 50,200 |  |  | 2003  |  |  | July3,  2006       |
| Golden Eagle ShippingLLC    |  |  | GoldenEagle    |  |  | 56,000 |  |  | 2010  |  |  | Newbuilding        |
| Imperial Eagle Shipping LLC |  |  | ImperialEagle  |  |  | 56,000 |  |  | 2010  |  |  | Newbuilding        |
|                             |

Theoperations of the vessels are managed by a wholly-owned subsidiary ofthe Company, Eagle Shipping International (USA) LLC, a Marshall Islandslimited liability company.

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The following table represents certaininformation about the Company’s revenue earning charters, as ofDecember  31,  2006:

|               |  |  |                       |  |  |                                 |  |  |                           |
|---------------|--|--|-----------------------|--|--|---------------------------------|--|--|---------------------------|
| Vessel        |  |  | Deliveredto Charterer |  |  | Time CharterExpiration(1)       |  |  | Daily TimeCharterHireRate |
| Cardinal(2)   |  |  | April19,2005          |  |  | March2007 to June2007           |  |  | $26,500                   |
| Condor(3)     |  |  | April30,  2005        |  |  | November  2006 to March2007     |  |  | $24,000                   |
| Falcon        |  |  | April22,  2005        |  |  | February  2008 to June2008      |  |  | $20,950                   |
| Griffon(4)    |  |  | February  17,  2006   |  |  | January2007 to March2007        |  |  | $13,550                   |
| Harrier(5)    |  |  | April21,  2005        |  |  | March  2007 to June2007         |  |  | $23,750                   |
| HawkI(6)      |  |  | April  28,2005        |  |  | March  2007 to June2007         |  |  | $23,750                   |
| Heron         |  |  | December11,  2005     |  |  | December  2007 to February2008  |  |  | $24,000                   |
| Jaeger(7)     |  |  | July7,  2006          |  |  | April  2007 to June2007         |  |  | $18,550                   |
| KestrelI(8)   |  |  | July  1,2006          |  |  | December  2007 to April2008     |  |  | $18,750                   |
| Kite(9)       |  |  | April18,  2006        |  |  | March  2007 to May2007          |  |  | $14,750                   |
| Merlin        |  |  | October26,  2005      |  |  | October  2007 to December2007   |  |  | $24,000                   |
| OspreyI(10)   |  |  | September  1,2005     |  |  | July  2008 to November2008      |  |  | $21,000                   |
| Peregrine(11) |  |  | December  16,  2006   |  |  | December2008 to February2009    |  |  | $20,500                   |
| Shikra(12)    |  |  | September10,  2006    |  |  | September  2007 to December2007 |  |  | $14,800                   |
| Sparrow(13)   |  |  | July20,  2005         |  |  | November  2006 to February2007  |  |  | $22,500                   |
| Tern(14)      |  |  | July3,  2006          |  |  | December  2007 to April2008     |  |  | $19,000                   |
|               |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Thedate range provided represents the earliest and latest date on whichthe charterer may redeliver the vessel to the Company upon thetermination of the charter. |

|     |                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------|
| (2) | Upon completionof the current charter the CARDINAL will enter a new time charter at$28,000 per day for 11 to 13 months. |

|     |                                                                                                                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Uponcompletion of the current charter the CONDOR will enter a new timecharter at $20,500 per day for 26 to 29 months. The charterer has anoption to extend the charter period by 11 to 13 months at a timecharter rate of $22,000 per day. |

|     |                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------|
| (4) | Uponcompletion of the current charter the GRIFFON will enter a new timecharter at $20,075 per day for 24 to 26months. |

|     |                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------|
| (5) | The charter for the HARRIER has beenrenewed at $24,000 per day commencing in June  2007 for 24 to 27months. |

|     |                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------|
| (6) | The charter for the HAWK I has beenrenewed at $22,000 per day commencing in April  2007 for 24 to 26months. |

|     |                                                                                                                                                                                                                                                                                                          |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Upon completion of the currentcharter, the JAEGER commences a new time charter with a rate of $27,500per day for 12 to 14 months. The charter rate may reset at thebeginning of each month based on the average time charter rate for theBaltic Supramax Index, but in no case less than $22,500 perday. |

|     |                                                                                                                                             |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|
| (8) | The charterer of the KESTREL I has anoption to extend the charter period by 11 to 13 months at a daily timecharter rate of $20,000 per day. |

|     |                                                                                                                     |
|-----|---------------------------------------------------------------------------------------------------------------------|
| (9) | Uponconclusion of the current charter, the KITE commences a new timecharter at $21,000 per day for 26 to 29 months. |

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|      |                                                                                                                                     |
|------|-------------------------------------------------------------------------------------------------------------------------------------|
| (10) | The chartererof the OSPREY I has an option to extend the charter period by up to 26months at a time charter rate of $25,000 perday. |

|      |                                                                                                                                           |
|------|-------------------------------------------------------------------------------------------------------------------------------------------|
| (11) | Upon conclusion of theinitial charter in December  2006, the PEREGRINE commenced a newtime charter at $20,500 per day for 24 to 26months. |

|      |                                          |
|------|------------------------------------------|
| (12) | The SHIKRA was sold onFebruary  27,2007. |

|      |                                                                                                                                                                                                                                      |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (13) | Upon completion of thecurrent charter in January  2007, the SPARROW commenced a newtime charter at a base rate of $24,000 per day for 11 to 13 months witha profit share of 30% of up to the first $3,000 per day over thebase rate. |

|      |                                                                                                                                  |
|------|----------------------------------------------------------------------------------------------------------------------------------|
| (14) | The charterer of theTERN has an option to extend the charter period by 11 to 13 months at atime charter rate of $20,500 per day. |

The following tabledescribes the revenue concentration:

|            |  |  |                             |  |      |                                                  |  |  |  |  |      |   |
|------------|--|--|-----------------------------|--|------|--------------------------------------------------|--|--|--|--|------|---|
|       |  |  | %of time charterrevenue     |
| Charterer  |  |  | Yearended December 31, 2006 |  |      | Period from January 26,2005 to December 31, 2005 |
| ChartererA |  |  |                             |  | 15.1 | %                                                |  |  |  |  | 19.9 | % |
| ChartererB |  |  |                             |  | 19.2 | %                                                |  |  |  |  | 17.2 | % |
| ChartererC |  |  |                             |  | 13.2 | %                                                |  |  |  |  | 11.3 | % |
| ChartererD |  |  |                             |  | 12.2 | %                                                |  |  |  |  | 10.4 | % |
|            |

Note 2.    SignificantAccounting Policies:

|           |                                                                                                                                                                                                                                                                                                                                                                              |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)  | Principlesof Consolidation:    The accompanying consolidated financialstatements have been prepared in accordance with U.S. generallyaccepted accounting principles and include the accounts of Eagle BulkShipping Inc. and its wholly-owned subsidiaries. All significantintercompany balances and transactions were eliminated uponconsolidation. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b)  | Use ofEstimates:    The preparation of consolidated financialstatements in conformity with U.S. generally accepted accountingprinciples requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from thoseestimates. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (c)  | Other ComprehensiveIncome:    The Company follows the provisions of Statement ofFinancial Accounting Standards (‘‘SFAS’’)No. 130, ‘‘Reporting ComprehensiveIncome’’, which requires separate presentation of certaintransactions, which are recorded directly as components ofstockholders’ equity. The Company records the fair value ofinterest rate swaps and foreign currency swaps as an asset or liabilityon the balance sheet. The effective portion of the swap is recorded inaccumulated other comprehensive income. Comprehensive Income iscomposed of net income and gains or losses relating to the swaps. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (d)  | Cash, Cash Equivalents and RestrictedCash:    The Company considers highly liquid investments such astime deposits and certificates of deposit with an original maturity ofthree months or less to be cash equivalents. Restricted Cash includesminimum cash deposits required to be maintained with a bank for loancompliance purposes and an amount of $124,616 which is collateralizinga letter of credit. |

|           |                                                                                                                                                                                                                                                                         |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (e)  | AccountsReceivable:    Accounts receivable includes receivables fromcharterers for hire. At each balance sheet date, all potentiallyuncollectible accounts are assessed for purposes of determining theappropriate provision for doubtful accounts. |

|           |                                                                                                                                                                                                                                                                                                                                        |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (f)  | Insurance Claims:    Insuranceclaims are recorded on an accrual basis and represent the claimableexpenses, net of deductibles, incurred through each balance sheet date,which are expected to be recovered from insurance companies. Anyremaining costs to complete the claims are included in accruedliabilities. |

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|           |                                                                                                                                                                                                        |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (g)  | Vessels atCost:    Vessels are stated at cost which consists of thecontract price and any material expenses incurred upon acquisition formajor improvements and delivery expenses. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (h)  | Intangibles:    Where theCompany identifies any intangible assets or liabilities associated withthe acquisition of a vessel, the Company records all identifiedtangible and intangible assets or liabilities at fair value. Fair valueis determined by reference to market data and the amount of expectedfuture cash flows. The Company values any asset or liability arisingfrom the market value of the time charters assumed when a vessel isacquired. When the time charters assumed are above market charterrates, the difference between the market charter rate and assumedcharter rate is recorded as Prepaid Charter Revenue. When the timecharters assumed are below market charter rates, the difference betweenthe market charter rate and assumed charter rate is recorded asDeferred Revenue. Such assets and liabilities are amortized to revenueover the remaining period of the time charters. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (i)  | Impairment of Long-LivedAssets:    The Company uses SFAS No. 144‘‘Accounting for the Impairment or Disposal of Long-livedAssets,’’ which addresses financial accounting andreporting for the impairment or disposal of long-lived assets. Thestandard requires that, long-lived assets and certain identifiableintangibles held and used or disposed of by an entity be reviewed forimpairment whenever events or changes in circumstances indicate thatthe carrying amount of the assets may not be recoverable. When theestimate of undiscounted cash flows, excluding interest charges,expected to be generated by the use of the asset is less than itscarrying amount, the Company should evaluate the asset for animpairment loss. Measurement of the impairment loss is based on thefair value of the asset as provided by third parties or discounted cashflow analyses. In this respect, management regularly reviews thecarrying amount of the vessels in connection with the estimatedrecoverable amount for each of the Company’s vessels. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (j)  | VesselDepreciation:    Depreciation is computed using thestraight-line method over the estimated useful life of the vessels,after considering the estimated salvage value. Each vessel’ssalvage value is equal to the product of its lightweight tonnage andestimated scrap rate. Management estimates the useful life of theCompany’s vessels to be 28 years from the date of initialdelivery from the shipyard to the original owner. Management estimatesthe scrap rate to be $150 per lightweight ton. Secondhand vessels aredepreciated from the date of their acquisition through their remainingestimated useful life. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (k)  | Accountingfor Dry-Docking Costs:    The Company follows the deferralmethod of accounting for dry-docking costs whereby actual costsincurred are deferred and are amortized on a straight-line basis overthe period through the date the next dry-docking is scheduled to becomedue. Unamortized dry-docking costs of vessels that are sold are writtenoff and included in the calculation of the resulting gain or loss inthe year of the vessels’ sale. |

|           |                                                                                                                                                                                                                                                                                                                   |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (l)  | Financing Costs:    Feesincurred for obtaining new loans or refinancing existing ones aredeferred and amortized to interest expense over the life of the relateddebt. Unamortized fees relating to loans repaid or refinanced areexpensed in the period the repayment or refinancing is made. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (m)  | Accounting for Revenues andExpenses:    Revenues are generated from voyage and time charteragreements. Time charter revenues are recognized on a straight-linebasis over the term of the respective time charter agreements asservice is provided. Under a voyage charter the revenues and associatedvoyage costs are recognized on a pro-rata basis over the duration ofthe voyage. Probable losses on voyages are provided for in full at thetime such losses can be estimated. A voyage is deemed to commence uponthe completion of discharge of the vessel’s previous cargo and isdeemed to end upon the completion of discharge of the current cargo.Voyage expenses primarily include only those specific costs which areborne by the Company in connection with voyage charters which wouldotherwise have been borne by the charterer under time charteragreements. These expenses principally consist of fuel and portcharges. Demurrage income represents payments by the charterer to thevessel owner when loading or discharging time exceeded the stipulatedtime in the voyage charter and is recognized as incurred. Time charterhire and voyage charter revenue brokerage Commissions are recorded inthe same period as these revenues are recognized. Vessel operatingexpenses are accounted for on the accrual basis. |

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|           |                                                                                                                                                                                                                                                         |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (n)  | UnearnedCharter Hire Revenue:    Unearned charter hire revenuerepresents cash received from charterers prior to the time such amountsare earned. These amounts are recognized as revenue as services areprovided in future periods. |

|           |                                                                                                                                                |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------|
| (o)  | Repairs andMaintenance:    All repair and maintenance expenses are expensedas incurred and is recorded in Vessel Expenses. |

|           |                                                                                                                                                                                                                                                                                                                                      |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (p)  | Protection and IndemnityInsurance:    The Vessel’s Protection and IndemnityInsurance is subject to additional premiums referred to as‘‘back calls’’ or ‘‘supplementalcalls’’ which are accounted for on an accrual basis and isrecorded in VesselExpenses. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (q)  | Derivatives:    SFASNo. 133, ‘‘Accounting for Derivative Instruments andHedging Activities’’ as amended establishes accounting andreporting standards requiring that every derivative instrument(including certain derivative instruments embedded in other contracts)be recorded in the balance sheet as either an asset or liabilitymeasured at its fair value, with changes in the derivatives’ fairvalue recognized currently in earnings unless specific hedge accountingcriteria are met. |

|           |                                                                                                                                                                                                                                                        |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (r)  | Earnings PerShare:    Earnings per share is computed by dividing the netincome by the weighted average number of common shares outstandingduring the period. During 2005, the Company did not have dilutivesecurities outstanding. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (s)  | SegmentReporting:    The Company reports financial information andevaluates its operations by charter revenues and not by the length ofship employment for its customers, i.e., spot or time charters. TheCompany does not use discrete financial information to evaluate theoperating results for each such type of charter. Although revenue canbe identified for these types of charters, management cannot and doesnot identify expenses, profitability or other financial information forthese charters. As a result, management, including the chief operatingdecision maker, reviews operating results solely by revenue per day andoperating results of the fleet and thus the Company has determined thatit operates under one reportable segment. Furthermore, when the Companycharters a vessel to a charterer, the charterer is free to trade thevessel worldwide and, as a result, the disclosure of geographicinformation is impracticable. |

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

|           |                                                                                                                                                                                                                                                                                                                                    |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (u)  | Income Taxes:    The Companyis a Marshall Islands Corporation. Pursuant to various tax treaties andthe current United States Internal Revenue Code, the Company does notbelieve its operations are subject to federal income taxes in theUnited States of America and other jurisdictions in which itoperates. |

Note 3.    Vessels and VesselImprovements

The Company acquired three vessels in 2006 and 13vessels in 2005. Vessel and vessel improvements costs in 2006 amountedto $105,591,698. These costs consist of aggregate purchase contractprice of $105,000,000 and $112,609 in additional costs relating to theacquisition of the three vessels and $479,089 in costs relating toimprovements to its fleet. During the year 2005, the Company throughits subsidiaries acquired 13 vessels at a total cost of $427,144,953.These costs consists of aggregate purchase contract price of$434,877,903, $359,550 in additional costs relating to the acquisitionof the vessels, and $8,092,500 in net prepaid charter revenueadjustments relating to the assumption of time charters associated withcertain of the acquired vessels. The Company has also capitalized$820,904 of costs relating to vessel improvements.

Vessel andvessel improvement costs have been depreciated from the date of theiracquisition through their remaining estimated useful life. Depreciationexpense for 2006 and 2005 was $21,037,357 and $10,384,247respectively.

In 2006, the Company, through its subsidiaries,entered into two vessel newbuilding contracts for the construction oftwo 56,000 deadweight ton vessels which are expected to be delivered inJanuary 

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and February of 2010, respectively. Thecontract price for each vessel is 3.655  billion Japanese Yen orapproximately $33.5  million after giving effect to currencyhedges. The Company has placed deposits for the two newbuidling vesselswhich amount to an equivalent $24,798,118. Included in Advances forVessel Construction, as of December  31,  2006, arecapitalized costs of $392,823 which consists of interest expense of$259,580 ($236,152 in financing costs and $23,428 in amortization offinancing expenses) and legal and technical supervision fees of$133,243.

Note 4.    Accrued Liabilities

OtherAccrued Liabilities consist of:

|                                              |  |  |                  |   |           |                   |  |  |  |   |         |  |
|----------------------------------------------|--|--|------------------|---|-----------|-------------------|--|--|--|---|---------|--|
|                                         |  |  | December31, 2006 |   |           | December 31, 2005 |
| VesselExpenses                               |  |  |                  | $ | 623,935   |                   |  |  |  | $ | 261,496 |  |
| Generaland Administrative, and OtherExpenses |  |  |                  |   | 1,093,189 |                   |  |  |  |   | 163,173 |  |
| Balance                                      |  |  |                  |   | 1,717,124 |                   |  |  |  | $ | 424,669 |  |
|                                              |

Note 5.    Long-TermDebt

Prior to the Company’s initial public offering ofJune  2005, the Company’s subsidiaries had initiallyentered into a term loan facility to partially fund the purchase of theinitial 11 vessel of the fleet and the aggregate principal balanceunder the term loan facility was $185,950,000. The Company used aportion of the proceeds from the initial public offering to repay$125,950,000 of the principal balance under the term loan facility.Subsequent to the offering, in June  2005 the Company borrowed anadditional $28,500,000 to partially fund a vessel purchase. InJuly  2005, the Company refinanced the $88,500,000 outstandingunder term loan with a $330,000,000 revolving credit facility. Duringthe remainder of 2005, the Company borrowed an additional $100,000,000from the revolving credit facility to fund vessel purchases. TheCompany used a portion of the proceeds from its follow-on equityoffering in October  2005 to repay $48,500,000 of the principalbalance under the revolving credit facility. As of December31,  2005, the Company’s debt consisted of $140,000,000 inborrowings under the revolving credit facility.

In June andJuly  2006, the Company borrowed an aggregate of $74,800,000 topartially fund the acquisition of the three additional vessels KESTRELI, TERN and JAEGER. In July  2006, the Company amended andincreased its initial $330,000,000 revolving credit facility to$450,000,000 with a new term of ten years expiring in July  2016.The Company incurred arrangement fees of $900,000 which was paid to itslender in connection with the amended credit facility. InNovember  2006, the Company further enhanced its facility to$500,000,000 to facilitate its newbuilding program. The Company paid anarrangement fee of $250,000 to its lender in connection with the latestamendment to the credit facility. In November  2006, the Companyborrowed $25,174,820 to place vessel contract deposits and pay for thecapitalized interest costs associated with the two newbuilding vesselsGOLDEN EAGLE and IMPERIAL EAGLE. At December  31,  2006,the Company’s debt consisted of $239,974,820 in borrowings underthe revolving credit facility.

The amended facility will beavailable for a period of six years from July  30,  2006.The structure of the financing will enable the Company to capitalizepre-delivery payments under the vessel newbuilding contracts and costsassociated with supervision and financing of those vessels. There areno principal repayment obligations under the amended facility untilJuly  2012. Over the remaining four years until maturity inJuly  2016, the facility will reduce in semi-annual amounts of$28,750,000 with a final reduction of $270,000,000 occurringsimultaneously with the last semi-annual reduction. All other terms andconditions of the amended facility remain the same as the existingfacility.

The Company is permitted to borrow up to $15,000,000at any one time for working capital purposes during an initial periodof 18 months from the first draw down date, after which time ourability to borrow amounts for working capital purposes is subject toreview and reapproval on an annual basis. The amended facility bearsinterest at the rate of 0.75% to 0.85% over LIBOR

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(decreased from 0.95% over LIBOR underits initial revolving facility), depending upon the amount of debtdrawn as a percentage of the value of the Company’s vessels. TheCompany also pays on a quarterly basis a commitment fee of 0.25%per annum on the undrawn amount of the amended facility.

AtDecember  31,  2006, the Company has remaining undrawncapacity of $260,025,180, including amounts available to borrow forworking capital purposes as described below, and in connection withfuture acquisitions of dry bulk carriers between 25,000 dwt and 85,000dwt that are not older than 10 years.

The Company is permittedto borrow up to $15,000,000 (increased from $10,000,000 under theinitial revolving credit facility) at any one time for working capitalpurposes during an initial period of 18 months from the first draw downdate, after which time its ability to borrow amounts for workingcapital purposes is subject to review and reapproval on an annualbasis.

The Company’s ability to borrow amounts under thenew credit facility is subject to satisfaction of certain customaryconditions precedent and compliance with terms and conditions includedin the loan documents. In connection with vessel acquisitions, amountsborrowed may not exceed 60% of the value of the vessels securingthe Company’s obligations under the credit facility. TheCompany’s ability to borrow such amounts, in each case, issubject to its lender’s approval of the vessel acquisition. Thelender’s approval will be based on the lender’ssatisfaction of the Company’s ability to raise additional capitalthrough equity issuances in amounts acceptable to the lender and theproposed employment of the vessel to be acquired.

TheCompany’s obligations under the credit facility is secured by afirst priority mortgage on each of the vessels in its fleet and suchother vessels that it may from time to time include with the approvalof the lender, a first assignment of all freights, earnings, issuancesand compensation. The Company’s new credit facility will alsolimit its ability to create liens on its assets in favor of otherparties. The Company may grant additional security from time to time inthe future.

The new credit facility, as amended, containsfinancial covenants requiring the Company, among other things, toensure that: (1) the aggregate market value of the vessels inthe Company’s fleet that secure its obligations under the newcredit facility, as determined by an independent shipbroker on acharter-free basis, at all times exceeds 125% of the aggregateprincipal amount of debt outstanding under the new credit facility andthe notional or actual cost of terminating any related hedgingarrangements; (2) to the extent the Company’s debt duringany accounting period is less than $250,000,000, the Company’stotal assets minus debt will not be less than $100,000,000; to theextent the Company’s debt during any accounting period isgreater than $250,000,000, the Company’s total assets minus debtwill not be less than $150,000,000; (3) the Company’sEBITDA, as defined in the credit agreement, will at all times be notless than 2.0x the aggregate amount of interest incurred and netamounts payable under interest rate hedging arrangements during therelevant period; and (4) the Company maintains with the lender$400,000 per vessel in addition to an amount adequate to meetanticipated capital expenditures for the vessel over a 12 monthperiod. Such cash deposits are recorded in Restricted Cash.

Forthe purposes of the credit facility, the Company’s‘‘total assets’’ will be defined to include itstangible fixed assets and its current assets, as set forth in theconsolidated financial statements, except that the value of any vesselsin its fleet that secure its obligations under the new credit facilitywill be measured by their fair market value rather than their carryingvalue on its consolidated balance sheet.

The Company’srevolving credit facility permits it to pay dividends in amounts up toits earnings before extraordinary or exceptional items, interest,taxes, depreciation and amortization (EBITDA), less the aggregateamount of interest incurred and net amounts payable under interest ratehedging agreements during the relevant period and an agreed uponreserve for dry-docking, provided that there is not a default or breachof loan covenant under the credit facility and the payment of thedividends would not result in a default or breach of a loancovenant.

For the year ended December  31,  2006,interest rates on the Company’s outstanding debt ranged from4.97% to 6.32%, including a margin over LIBOR applicableunder the terms of the facility. The 

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weighted average effective interest rate was5.39%. During 2005, from inception of the Company’s debtthrough December  31,  2005, interest rates ranged on ouroutstanding debt from 4.10% to 5.49%, including a marginof 0.95% over LIBOR. The weighted average effective interestrate was 4.69%.

Interest Expense, exclusive ofcapitalized interest, consists of:

|                                        |  |  |                           |   |            |                            |  |  |  |   |           |  |
|----------------------------------------|--|--|---------------------------|---|------------|----------------------------|--|--|--|---|-----------|--|
|                                   |  |  | YearendedDecember 31,2006 |   |            | Year ended December31,2005 |
| LoanInterest                           |  |  |                           | $ | 9,694,244  |                            |  |  |  | $ | 4,855,054 |  |
| CommitmentFees                         |  |  |                           |   | 676,126    |                            |  |  |  |   | 516,588   |  |
| Eagle VenturesNoteInterest             |  |  |                           |   | —    |                            |  |  |  |   | 608,222   |  |
| Amortizationof Deferred FinancingCosts |  |  |                           |   | 178,246    |                            |  |  |  |   | 98,065    |  |
| Write-off ofDeferred Financing Costs   |  |  |                           |   | —    |                            |  |  |  |   | 1,130,712 |  |
| TotalInterestExpense                   |  |  |                           | $ | 10,548,616 |                            |  |  |  | $ | 7,208,641 |  |
|                                        |

Interestexpense on the debt borrowed to fund the deposits for the twonewbuilding vessels amounted to $259,580 ($236,152 in financing costsand $23,428 in amortization of financing expenses) and this amount hasbeen capitalized as part of the cost of the newbuilding vessels and isincluded in Advances for Vessel Construction in our financialstatements as of December  31,  2006.

Interest-RateSwaps

The Company has entered into interest rate swaps toeffectively convert a portion of its debt from a floating to afixed-rate basis. The swaps are designated and qualify as cash flowhedges.

During 2006, the Company entered into interest rate swapcontracts for notional amounts of $84,800,000 and $25,048,118. Thesecontracts mature in September  2009 and December  2011. Onthese contracts, exclusive of applicable margin, the Company will payfixed-rate interest of 5.24% and 4.74% respectively, andreceive floating-rate interest amounts based on three month LIBORsettings. The Company has two other interest rate swap contracts fornotional amounts of $100,000,000 and $30,000,000 which were enteredinto in 2005. These contracts mature in September  2010. On thesecontracts, exclusive of applicable margin, the Company pays4.22% and 4.54% fixed-rate interest, respectively, andreceives floating-rate interest amounts based on three-month LIBORsettings.

The Company records the fair value of the interestrate swap as an asset or liability in its financial statements. Theeffective portion of the swap is recorded in accumulated othercomprehensive income. Accordingly, $2,936,804 and $2,647,077 has beenrecorded in Other Assets in the financial statements as ofDecember  31,  2006 and December  31,  2005,respectively.

Foreign Currency Swaps

The Company hasentered into foreign exchange swap transactions to hedge foreigncurrency risks on its capital asset transactions (vessel newbuildings).The swaps are designated and qualify as cash flow hedges. In 2006, theCompany entered into foreign exchange swap transactions to hedge theJapanese yen exposure into US dollars for the purchase price inJapanese yen of two new-build vessels which are expected to bedelivered to the Company in January  2010 and February2010. In 2006, the Company has swapped a total of 7,310,000,000 in yencurrency exposure into equivalent US $67,108,583. At December31,  2006, the Company had outstanding foreign currency swapcontracts for notional amounts aggregating JPY 4,386,000,000 swappedinto equivalent US $42,310,465. The Company records the fair value ofthe currency swaps as an asset or liability in its financial statement.The effective portion of the swap is recorded in accumulated othercomprehensive income. Accordingly, an amount of $359,180 has beenrecorded in Other Liabilities in the accompanying financial statementsas of December  31,  2006.

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Note 6.    Fair Value ofFinancial Instruments

The following methods and assumptions wereused to estimate the fair value of each class of financialinstrument:

Cash and cashequivalents   —   The carrying amounts reported inthe consolidated balance sheet for interest-bearing depositsapproximate their fair value due to their short-term naturethereof.

Debt   —   The carrying amountsof borrowings under the credit agreement and the other floating rateloans approximate their fair value, due to the variable interest ratenature thereof.

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

Foreign currency swaps   — The fair value offoreign currency swaps (used for hedging purposes) is the estimatedamount that the Company would receive or pay to terminate the swaps atthe reporting date.

Note 7.    Related PartyTransactions

The Company did not incur any related partyexpenses in 2006.

In 2005 the Company had a financial advisoryagreement dated February  1,  2005 with Kelso. Under theterms of the agreement the Company was to pay Kelso annual fees of upto $500,000. The agreement had also provided for Kelso to be paid feesin connection with other financial advisory services. In June2005, the Company terminated certain of its obligations under thisagreement, including its obligation to pay the annual fees of $500,000,for a one-time payment of $1,000,000. The Company recorded an expenseof $6,175,046 in the quarter ended June  30,  2005 for feesincurred under such agreement.

Note 8.    Commitmentsand Contingencies

Vessel Technical ManagementContract

The Company has entered into technical managementagreements for each of its vessels with V. ShipsManagement Ltd., an independent technical manager. The Companypaid V. Ships monthly technical management fees of $8,583 and $8,333per vessel in 2006 and 2005, respectively.

Operating Lease

In December  2005, the Company entered into a lease for officespace. The lease is secured by a Letter of Credit backed by cashcollateral of $124,616 which amount is recorded under Restricted Cash.The Letter of Credit amounts decline to zero at the conclusion of thelease. The future minimum commitments under lease obligations foroffice space are as follows, and will be recorded:

|       |  |  |  |   |           |  |
|-------|--|--|--|---|-----------|--|
| 2007  |  |  |  | $ | 250,521   |  |
| 2008  |  |  |  |   | 260,634   |  |
| 2009  |  |  |  |   | 270,814   |  |
| 2010  |  |  |  |   | 273,193   |  |
| 2011  |  |  |  |   | 68,858    |  |
| Total |  |  |  | $ | 1,124,020 |  |
|       |

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Note 9.    Earnings Per CommonShare

The computation of earnings per share is based on theweighted average number of common shares outstanding during the period.In March  2006, the Company granted options to purchase 56,666shares of the Company’s stock under the 2005 Stock IncentivePlan (see Note 12). Diluted net income per share gives effect to theaforementioned stock options.

|                                       |  |  |                           |   |            |                                                                      |  |  |  |   |            |  |
|---------------------------------------|--|--|---------------------------|---|------------|----------------------------------------------------------------------|--|--|--|---|------------|--|
|                                  |  |  | YearendedDecember 31,2006 |   |            | Period fromJanuary 26, 2005 (inception) toDecember 31,2005 |
| NetIncome/(Loss)                      |  |  |                           | $ | 33,801,540 |                                                                      |  |  |  | $ | 6,653,400  |  |
| WeightedAverage Shares –Basic   |  |  |                           |   | 34,543,836 |                                                                      |  |  |  |   | 21,968,824 |  |
| Dilutiveeffect of stock options       |  |  |                           |   | 26         |                                                                      |  |  |  |   | —    |  |
| Weighted Average Shares–Diluted |  |  |                           |   | 34,543,862 |                                                                      |  |  |  |   | 21,968,824 |  |
| BasicEarnings PerShare                |  |  |                           | $ | 0.98       |                                                                      |  |  |  | $ | 0.30       |  |
| Diluted EarningsPerShare              |  |  |                           | $ | 0.98       |                                                                      |  |  |  | $ | 0.30       |  |
|                                       |

Note 10.    Non-cashCompensation

Members of the Company’s management have beenawarded profits interests in Eagle Ventures LLC that may entitle suchpersons to an economic interest of up to 16.7% on a fullydiluted basis (assuming all profits interests were vested) in anyappreciation in the value of the assets of Eagle Ventures LLC(including shares of the Company’s common shares owned by EagleVentures LLC when sold). The vesting of profits interests may befurther accelerated in the future by the compensation committee ofEagle Ventures LLC. These profits interests will dilute only theinterests of owners of Eagle Ventures LLC, and will not dilute directholders of the Company’s common shares. However, theCompany’s statement of operations reflects non-cash charges forcompensation related to the profits interests.

For the yearended December 31, 2006 the Company recorded non-cash compensationcharges of $13,070,473. The expense for the year includes $13,023,440in non-cash, non-dilutive charges relating to profits interests awardedto members of the Company’s management by the Company’sprincipal shareholder Eagle Ventures LLC, and a non-cash charge of$47,033 which relates to the fair value of the stock options granted onMarch 17, 2006 to certain directors of the Company under the 2005 StockIncentive Plan.

These non-cash, non-dilutive charges relate toprofits interests awarded to members of the Company’s managementby the Company’s principal shareholder Eagle Ventures LLC. Theseprofits interests will dilute only the interests of the owners of EagleVentures LLC, and will not dilute the direct holders of theCompany’s common shares. The non-cash compensation charge isbeing recorded as an expense over the estimated service period inaccordance with SFAS No. 123(R). The non-cash compensation charges willbe based on the fair value of the profits interests which will be‘‘marked to market’’ at the end of eachreporting period. The impact of any changes in the estimated fair valueof the profits interests will be recorded as a change in estimatecumulative to the date of change. The impact on the amortization of thecompensation charge of any changes to the estimated vesting periods forthe performance related profits interests will be adjustedprospectively as a change in estimate.

On January 28, 2006, thelimited liability company agreement of Eagle Ventures LLC was amendedand restated (the ‘‘Third LLC Agreement’’).This provided for the award of additional profits interests in EagleVentures LLC to certain management employees and provided for certainadjustments in the manner distributions are made by Eagle Ventures inconnection with such newly awarded profits interests.

On March8, 2006, the Third LLC Agreement was amended and restated (the‘‘Fourth LLC Agreement’’). Pursuant to theFourth LLC Agreement, an adjustment was made in the schedule governingthe management members’ retention of service-related profitsinterests upon their 

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termination of employment with EagleVentures LLC or its subsidiaries (including the Company). In addition,under the Fourth LLC Agreement one-fourth of the service-relatedprofits interests granted on January 28, 2006 were immediately vestedand the remaining newly granted service-related profits interests weremade subject to a three-year retention schedule

On September 12,2006, Eagle Ventures, sold 2,300,000 shares of the Company’scommon shares in a secondary offering. The Company did not receive anyproceeds from this offering. Eagle Ventures distributed the proceeds ofthis secondary offering to its members in accordance with the FourthLLC Agreement. Named executive officers of the Company receivedproceeds from this distribution (in respect of vested profitsinterests) as follows: Sophocles Zoullas ($1,497,107) and Alan Ginsberg($99,807). Named executive officers of the Company received additionalproceeds from this distribution (in respect of their common ownershipinterests in Eagle Ventures) as follows: Sophocles Zoullas ($481,704)and Alan Ginsberg ($3,030).

On November 9, 2006, the limitedliability company agreement of Eagle Ventures LLC was amended andrestated (the ‘‘Fifth LLC Agreement’’).Pursuant to the Fifth LLC Agreement, the unvested portion of theperformance-related profits interests that previously vested ratablybased on Kelso affiliates achieving a multiple (ranging from two tofour times) on their original investment in the Company will now vestratably based on Kelso affiliates achieving a multiple (ranging fromtwo to 3.25 times) on their original investment in the Company. Inaddition, a first priority catch-up payment was added so that certainmembers of Eagle Ventures receive a first priority distribution fromEagle Ventures, prior to other distributions to members of EagleVentures, in an aggregate amount of approximately $100,000, in order toadjust for the interest payments received by Eagle Ventures on loansmade by Eagle Ventures to the Company prior to its initial publicoffering. Furthermore, all of the service-related profits intereststhat are subject to a three-year vesting schedule are now consideredfully vested for purposes of determining participation in distributionsfrom Eagle Ventures. Finally, a second priority catch-up payment wasadded so that management members receive a second priority distributionfrom Eagle Ventures, prior to other distributions to members of EagleVentures (other than the first priority catch-up payment describedabove), in an aggregate amount of approximately $740,000, as a catch-upin respect of such newly vested service-related profits interests.

On November 14, 2006, Eagle Ventures, sold 2,700,000 shares of theCompany’s common shares in a secondary offering. The Company didnot receive any proceeds from this offering. Eagle Ventures distributedthe proceeds of this secondary offering to its members in accordancewith the Fifth LLC Agreement. Named executive officers of the Companyreceived distributions (in respect of vested profits interests) asfollows: Sophocles Zoullas ($4,154,904) and Alan Ginsberg ($287,131).Named executive officers of the Company received distributions (inrespect of their common ownership interests in Eagle Ventures) asfollows: Sophocles Zoullas ($563,162) and Alan Ginsberg ($3,542).

On January 8, 2007, Eagle Ventures distributed 94,543 shares of theCompany’s common shares to Sophocles Zoullas, one of our namedexecutive officers, in full liquidation of the common interests held byMr. Zoullas in Eagle Ventures.

On January 9, 2007, EagleVentures, sold 7,202,679 shares of the Company’s common shares ina secondary offering. The Company did not receive any proceeds fromthis offering. Based on the discretion of the compensation committee ofEagle Ventures, exercised in accordance with the Fifth LLC Agreement,Eagle Ventures redeemed and retired the common interests held bycertain members in full liquidation of the common interests held suchmembers. Alan Ginsberg, a named executive officer of the Company,received a distribution (in respect of his common ownership interestsin Eagle Ventures) of $10,061. The remaining proceeds received by EagleVentures will be retained until a future distribution is determined tobe made by the compensation committee of Eagle Ventures. Futuredistributions of the remaining cash proceeds, and the proceeds receivedfrom the sale of the 127,778 common shares held by Eagle Ventures, willbe distributed to the remaining members of Eagle Ventures, including anaffiliate of Kelso and members of our management that hold profitsinterests, in accordance with the Fifth LLC Agreement, as modified bythe permitted discretion of the compensation committee of EagleVentures reflected in an amendment to the Fifth LLC Agreement. Inparticular, Eagle Ventures retained $13,733,491 in cash, plus futureaccrued interest 

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thereon, in respect of Mr. Zoullas’profits interests and $2,961,868, plus future accrued interest thereon,in respect of Mr. Ginsberg’s profits interests. Further, EagleVentures retained 90,133 common shares in respect of Mr. Zoullas’profit interests and 19,439 of our common shares in respect of Mr.Ginsberg’s profit interests. The Company will record a non-cashcompensation charge of approximately $3,137,812 in the first quarter of2007 as a result of this amendment.

In addition, in fiscal year2005, the Company declared one quarterly dividend in the aggregateamount of $0.54 per share of its common stock to its shareholders.Eagle Ventures distributed the proceeds of these dividends to itsmembers in accordance with the Second Amended and Restated LimitedLiability Company Agreement of Eagle Ventures. Named executive officersof the Company received aggregate proceeds from these distributions (inrespect of their common ownership interest in Eagle Ventures) asfollows: Sophocles Zoullas ($212,649) and Alan Ginsberg ($1,337). Infiscal year 2006, the Company declared four quarterly dividends in theaggregate amount of $2.08 per share of its common stock to itsshareholders in January, April, July and October 2006. Eagle Venturesdistributed the proceeds of these dividends to its members inaccordance with the Amended and Restated Limited Liability CompanyAgreement of Eagle Ventures, as amended at the time each dividend wasdeclared and paid. Named executive officers of the Company receivedaggregate proceeds from these distributions (in respect of vestedprofits interests) as follows: Sophocles Zoullas ($334,710) and AlanGinsberg ($22,314). Named executive officers of the Company receivedaggregate additional proceeds from these distributions (in respect oftheir common ownership interests in Eagle Ventures) as follows:Sophocles Zoullas ($261,805) and Alan Ginsberg ($1,647).

Note 11.    Capital Stock

Common Stock

OnJune  23,  2005, the Company completed its initial publicoffering by issuing and selling to the public 14,400,000 shares ofcommon stock at $14.00 per share, raising gross proceeds of$201,600,000 before deduction of underwriting discounts, commissionsand expenses of $15,070,710. The Company used $185,288,656 of the netproceeds from the offering to repay $125,950,000 of the indebtednessunder its existing loan facility and $59,338,656 owed to Eagle Venturesunder a promissory note, including accrued interest.

OnOctober  28,  2005, the Company sold 6,000,000 shares ofits common stock in a public offering at a price of $14.50 per share,raising gross proceeds of $87,000,000 before deduction of underwritingdiscounts, commissions and expenses of $4,954,227. The sale included anover-allotment portion of 825,000 shares of which 325,000 shares wereoffered by Eagle Ventures LLC. The Company used $80,000,000 of the netproceeds from the offering to repay $48,500,000 of its outstandingindebtedness under its revolving credit facility, which reduced itsoutstanding debt to $140,000,000, and used $31,500,000 of the netproceeds to pay the balance of the purchase price for the HERONwhich was acquired in December  2005.

On June28,  2006 the Company sold 2,750,000 shares of its common stockto certain institutional investors in a private placement at $12.00 pershare raising gross proceeds of $33,000,000 before deduction of feesand expenses of $1,770,811. The Company used the proceeds from theoffering to fund a portion of the acquisition of three vessels KESTRELI, TERN and JAEGER.

On September  5,  2006, theCompany filed an S-3 shelf registration which would enable the Companyto issue upto $220,500,000 in securities. On December  29,2006, the Company filed an S-3 shelf registration which retained thisamount in any proposed primary offering.

Dividends

TheCompany’s current policy is to declare quarterly dividends tostockholders in February, April, July and October. Payment of dividendsis limited by the terms of certain agreements to which the Company andits subsidiaries are party. The Company’s revolving creditfacility permits it to pay quarterly dividends in amounts up to itsquarterly earnings before extraordinary or exceptional items,

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interest, taxes, depreciation andamortization (Credit Agreement EBITDA), less the aggregate amount ofinterest incurred and net amounts payable under interest rate hedgingagreements during the relevant period and an agreed upon reserve fordry-docking for the period, provided that there is not a default orbreach of loan covenant under the credit facility and the payment ofthe dividends would not result in a default or breach of a loancovenant. Depending on market conditions in the dry bulk shippingindustry and acquisition opportunities that may arise, the Company maybe required to obtain additional debt or equity financing which couldaffect its dividend policy. However, any determination to pay dividendsin the future will be at the discretion of the Board of Directors andwill depend upon the Company’s results of operations, financialcondition, capital restrictions, covenants and other factors deemedrelevant by the Board of Directors.

In 2006, the Companydeclared four quarterly dividends in the aggregate amount of $2.08 pershare of its common stock in January, April, July and October.Aggregate payments were $71.7  million for dividends declared in2006. In 2005, the Company declared and paid a quarterly dividend onits common stock in the amount of $0.54 per share in October2005. The aggregate amount of this cash dividend payment was$14.7  million.

Note 12.    2005 Stock IncentivePlan

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

An aggregate of2.6 million shares of the Company’s common stock has beenauthorized for issuance under the plan. As of December31,  2005, no grants had been made under the plan. OnMarch  17,  2006, the Company granted options to purchase56,666 shares of the Company’s common stock to its independentnon-employee directors. These options vested and became exercisable onthe grant date at an exercise price of $13.23 per share. All optionsexpire ten years from the date of grant. As of December31,  2006, no other grants have been made under the plan.

In 2006, the Company recorded a non-cash compensation charge of$47,033 relating to the fair value of these stock options. For purposesof determining compensation cost for the Company’s stock optionplans using the fair value method of FAS 123(R), the fair value of theoptions granted was estimated on the date of grant using theBlack-Scholes option pricing model with the following weighted averageassumptions: risk free interest rate of 5%, dividend yield of14%, expected stock price volatility factor of 0.33.

OnMarch  17,  2006, the Company also granted a DividendEquivalent Rights Award to its independent non-employee directorsequivalent to 62,964 shares of the Company’s common stock. Thisaward entitles the participant to receive a Dividend Equivalent paymenteach time the Company pays a dividend to the Company’sstockholders. The amount of the Dividend Equivalent payment is equal tothe number of Dividend Equivalent Rights multiplied by the amount ofthe per share dividend paid by the Company on its stock on the date thedividend is paid. In 2006, the Company recorded $95,267 as compensationexpense for the Dividend Equivalent payments.

Subsequent toDecember  31,  2006, the Company has granted options topurchase an additional 13,334 shares of the Company’s commonstock to its independent non-employee directors. The Company has alsogranted options to purchase 524,000 shares of the Company’scommon stock to its management.

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Note  12A.    2006 and 2005Quarterly Results of Operations(Unaudited)

|                                     |  |  |                           |   |            |                          |  |  |                                |   |            |                              |  |  |  |   |            |  |  |  |  |   |            |  |
|-------------------------------------|--|--|---------------------------|---|------------|--------------------------|--|--|--------------------------------|---|------------|------------------------------|--|--|--|---|------------|--|--|--|--|---|------------|--|
| ConsolidatedStatement of Operations |  |  | ThreeMonthsendedMarch 31, |   |            | Three MonthsendedJune30, |  |  | Three MonthsendedSeptember 30, |   |            | ThreeMonthsendedDecember 31, |
| (Unaudited)                         |  |  |                      |   |            |                     |  |  |                           |   |            |                         |
| 2006                                |  |  |                           |   |       |                          |  |  |                                |   |       |                              |  |  |  |   |       |  |  |  |  |   |       |  |
| Revenues,net ofcommissions          |  |  |                           | $ | 23,790,052 |                          |  |  |                                | $ | 24,105,383 |                              |  |  |  | $ | 28,358,830 |  |  |  |  | $ | 28,393,932 |  |
| TotalOperatingExpenses              |  |  |                           |   | 11,262,744 |                          |  |  |                                |   | 12,910,077 |                              |  |  |  |   | 16,442,389 |  |  |  |  |   | 21,052,658 |  |
| OperatingIncome                     |  |  |                           |   | 12,527,308 |                          |  |  |                                |   | 11,195,306 |                              |  |  |  |   | 11,916,441 |  |  |  |  |   | 7,341,274  |  |
| NetIncome                           |  |  |                           |   | 10,792,501 |                          |  |  |                                |   | 9,391,736  |                              |  |  |  |   | 9,100,737  |  |  |  |  |   | 4,516,566  |  |
|                                |  |  |                           |   |       |                          |  |  |                                |   |       |                              |  |  |  |   |       |  |  |  |  |   |       |  |
| BasicNetIncome                      |  |  |                           | $ | 0.33       |                          |  |  |                                | $ | 0.28       |                              |  |  |  | $ | 0.27       |  |  |  |  | $ | 0.13       |  |
| DilutedNetIncome                    |  |  |                           | $ | 0.33       |                          |  |  |                                | $ | 0.28       |                              |  |  |  | $ | 0.27       |  |  |  |  | $ | 0.13       |  |
| Cashdividends declared andpaid      |  |  |                           | $ | 0.57       |                          |  |  |                                | $ | 0.50       |                              |  |  |  | $ | 0.50       |  |  |  |  | $ | 0.51       |  |
|                                     |

|                                |  |  |                                                        |  |         |                          |  |  |                                |   |             |                                                       |  |  |  |   |            |  |  |  |  |   |            |  |
|--------------------------------|--|--|--------------------------------------------------------|--|---------|--------------------------|--|--|--------------------------------|---|-------------|-------------------------------------------------------|--|--|--|---|------------|--|--|--|--|---|------------|--|
|                           |  |  | Periodfrom January  26, 2005 (inception) toMarch31,(a) |  |         | Three MonthsendedJune30, |  |  | Three MonthsendedSeptember 30, |   |             | PeriodfromJanuary  26, 2005 (inception) toDecember31, |
| 2005                           |  |  |                                                        |  |    |                          |  |  |                                |   |        |                                                       |  |  |  |   |       |  |  |  |  |   |       |  |
| Revenues,net ofcommissions     |  |  |                                                        |  | — |                          |  |  |                                | $ | 10,615,879  |                                                       |  |  |  | $ | 21,137,615 |  |  |  |  | $ | 24,312,564 |  |
| TotalOperatingExpenses         |  |  |                                                        |  | — |                          |  |  |                                |   | 19,565,687  |                                                       |  |  |  |   | 12,160,758 |  |  |  |  |   | 10,333,186 |  |
| OperatingIncome(Loss)          |  |  |                                                        |  | — |                          |  |  |                                |   | (8,949,808  | )                                                     |  |  |  |   | 8,976,857  |  |  |  |  |   | 13,979,378 |  |
| NetIncome(Loss)                |  |  |                                                        |  | — |                          |  |  |                                | $ | (12,088,544 | )                                                     |  |  |  | $ | 7,394,289  |  |  |  |  |   | 12,153,868 |  |
| BasicNetIncome                 |  |  |                                                        |  | — |                          |  |  |                                | $ | (0.87       | )                                                     |  |  |  | $ | 0.27       |  |  |  |  | $ | 0.39       |  |
| DilutedNetIncome               |  |  |                                                        |  | — |                          |  |  |                                | $ | (0.87       | )                                                     |  |  |  | $ | 0.27       |  |  |  |  | $ | 0.39       |  |
| Cashdividends declared andpaid |  |  |                                                        |  | — |                          |  |  |                                |   | —     |                                                       |  |  |  |   | —    |  |  |  |  | $ | 0.54       |  |
|                                |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                   |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|
| (a) | TheCompany’s inception was on January 26, 2005 and it began vesseloperations in April 2005. It issued shares to the public on June 23,2005. |

Note 13.    SubsequentEvents

Dividend

On February 15, 2007 theCompany’s Board of Directors declared a cash dividend for thefourth quarter of 2006 of $0.51 per share to be paid on March2,  2007 to all shareholders of record as of February 28,2007. The aggregate amount of this cash dividend is $18,309,000.

Vessels

Subsequent to December  31,  2006, theCompany entered into vessel sale and purchase agreements. It has agreedto purchase 3 modern Supramax vessels for a total contract price of$138,700,000, agreed to sell the SHIKRA, a 1984-built Handymax vesselto an unrelated third party for $12,500,000, and signed letters ofintent for the construction of two 56,000 dwt vessel newbuildingcontracts with IHI Marine United Inc., a Japanese shipyard which areexpected to be delivered in the fourth quarter of 2008 and the firstquarter of 2009, respectively.

The three Supramax vessels will bedelivered in April, June and July of 2007. The vessel delivering inApril  2007 will enter into a two year charter at a daily rate of$24,600. The vessel delivering in June  2007 will enter into atwo year charter at a daily rate of $24,200. The vessel delivering inJuly  2007 will enter into a one-year employment at rate of$30,400 per day. The charter rate may reset at the beginning of eachmonth based on the average time charter rate for the Baltic SupramaxIndex, but in no case less than $24,400 per day.

In order toeffectively eliminate currency risk on the vessel newbuildingsdescribed above, the Company has entered into forward currency hedgesto swap an equivalent of $66,400,000 in Japanese yen into U.S.dollars.

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