UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
20-F




[_]
            REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) or 12 (g) OF THE
              SECURITIES
      EXCHANGE ACT OF 1934OR[X]
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES
      EXCHANGE ACT OF 1934For
      the fiscal year ended December 31, 2009OR[_]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from _____________ to[_]
            SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES
      EXCHANGE ACT OF 1934Date
      of event requiring this shell company reportFor
      the transition period from  ___________ toCommission
      file numberSTAR
      BULK CARRIERS CORP.(Exact
      name of Registrant as specified in its charter)(Translation
      of Registrant's name into English)Republic
      of the Marshall Islands(Jurisdiction
      of incorporation or organization)7, Fragoklisias Street,
      2ndfloor, Maroussi 151 25,
      Athens, Greece(Address
      of principal executive offices)Prokopios
      Tsirigakis, 011 30 210 617 8400, atsirigakis@starbulk.com,
              c/o
      Star Bulk Carriers Corp., 7, Fragoklisias Street, 2nd
      floor
              Maroussi
      151 25, Athens, Greece(Name,
      telephone, email and/or facsimile number and
              address
      of Company Contact Person)

















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




Title of each class
            Name of exchange on which
      registeredCommon
      Stock, par value $0.01 per share
            NASDAQ Global
      Market




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






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






Indicate
the number of outstanding shares of each of the issuer's classes of capital or
common stock as of the close of the period covered by the annual
report:  As of
December 31, 2009, there were 61,104,760 shares of common stock and 5,916,150
warrants of the registrant outstanding.  The warrants expired on March
15, 2010.






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




[_]
      Yes
            [X] No




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




[_]
      Yes
            [X] No




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




[X] Yes
            [_]
      No




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




[_] Yes
            [_]
      No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.




Large
      accelerated filer [  ]
            Accelerated
      filer  [X]
            Non-accelerated
      filer  [  ]




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




[X] US
    GAAP
            [_]
      International Financial Reporting Standards as issued by the International
      Accounting Standards Board
            [_]
      Other - If "Other" has been checked in response to the previous question,
      indicate by check mark which financial statement item the registrant has
      elected to follow.
              [_]
      Item 17 or [_] Item 18.




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




[  ]
      Yes
            [X] No











FORWARD-LOOKING
STATEMENTS




Star Bulk
Carriers Corp. and its wholly owned subsidiaries, or the Company, desires to
take advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and is including this cautionary statement in
connection with this safe harbor legislation. This document and any other
written or oral statements made by us or on our behalf may include
forward-looking statements, which reflect our current views with respect to
future events and financial performance. The words "believe," "anticipate,"
"intends," "estimate," "forecast," "project," "plan," "potential," "may,"
"should," "expect" and similar expressions identify forward-looking
statements.





The
forward-looking statements in this document are based upon various assumptions,
many of which are based, in turn, upon further assumptions, including without
limitation, management's examination of historical operating trends, data
contained in our records and other data available from third parties. Although
we believe that these assumptions were reasonable when made, because these
assumptions are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are beyond our
control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.





In
addition, important factors that, in our view, could cause actual results to
differ materially from those discussed in the forward-looking statements
include; (i) the strength of world economies; (ii) fluctuations in currencies
and interest rates; (iii) general market conditions, including fluctuations in
charterhire rates and vessel values; (iv) changes in demand in the drybulk
shipping industry; (v) changes in the Company's operating expenses, including
bunker prices, drydocking and insurance costs; (vi) changes in governmental
rules and regulations or actions taken by regulatory authorities; (vii)
potential liability from pending or future litigation; (viii) general domestic
and international political conditions; (ix) potential disruption of shipping
routes due to accidents or political events; and (x) other important factors
described from time to time in the reports filed by the Company with the
Securities and Exchange Commission, or the Commission.

















TABLE
OF CONTENTS


PART
      I
              
              1Item
      1.
              Identity
      of Directors, Senior Management and Advisers
              1Item
      2.
              Offer
      Statistics and Expected Timetable
              1Item
      3.
              Key
      Information
              1Item
      4.
              Information
      on the Company
              27Item
      5.
              Operating
      and Financial Review and Prospects
              45Item
      6.
              Directors,
      Senior Management and Employees
              69Item
      7.
              Major
      Shareholders and Related Party Transactions
              75Item
      8.
              Financial
      Information
              79Item
      9.
              The
      Offer and Listing
              82Item
      10.
              Additional
      Information
              85Item
      11.
              Quantitative
      and Qualitative Disclosures about Market Risk
              96Item
      12.
              Description
      of Securities Other than Equity Securities
              98PART
      II
              
              
              99Item
      13.
              Defaults,
      Dividend Arrearages and Delinquencies
              99Item
      14.
              Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
              99Item
      15.
              Controls
      and Procedures
              99Item
      16A.
              Audit
      Committee Financial Expert
              102Item
      16B.
              Code
      of Ethics
              102Item
      16C.
              Principal
      Accountant Fees and Services
              102Item
      16D.
              Exemptions
      from the Listing Standards for Audit Committees
              103Item
      16E.
              Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers
              103Item
      16F.
              Change
      in Registrants Certifying Accountant
              103Item
      16G.
              Corporate
      Governance
              103PART
      III
              
              
              105Item
      17.
              Financial
      Statements
              105Item
      18.
              Financial
      Statements
              105Item
      19.
              Exhibits
              105
  PART
I





Item
      1.
            Identity
      of Directors, Senior Management and
Advisers





Not
Applicable.





Item
      2.
            Offer
      Statistics and Expected Timetable





Not
Applicable.





Item
      3.
            Key
      Information





Throughout
this report, the "Company," "Star Bulk," "we," "us" and "our" all refer to Star
Bulk Carriers Corp. and its wholly owned subsidiaries. We use the term
deadweight ton, or dwt, in describing the size of vessels. Dwt, expressed in
metric tons, each of which is equivalent to 1,000 kilograms, refers





1





to the
maximum weight of cargo and supplies that a vessel can carry. The Company
operates drybulk vessels of two sizes: Capesize, which are vessels with carrying
capacities of more than 85,000 dwt, and Supramax, which are vessels with
carrying capacities of between 45,000 and 60,000 dwt. Unless otherwise
indicated, all references to "Dollars" and "$" in this report are to U.S.
Dollars.





Financial
data presented herein include the accounts of the Company and of Star Maritime
Acquisition Corp., or Star Maritime.





Star
Maritime was organized under the laws of the State of Delaware on May 13, 2005
as a blank check company formed to acquire, through a merger, capital stock
exchange, asset acquisition or similar business combination, one or more assets
or target businesses in the shipping industry. Star Maritime's common stock and
warrants started trading on the American Stock Exchange under the symbols, SEA
and SEA.WS, respectively, on December 21, 2005.  Star Bulk was
incorporated in the Republic of the Marshall Islands on December 13, 2006 as a
wholly-owned subsidiary of Star Maritime.





On
November 27, 2007, Star Maritime obtained shareholder approval for the
acquisition of the initial fleet of eight drybulk carriers and for effecting a
redomiciliation merger whereby Star Maritime merged with and into its wholly
owned subsidiary at the time Star Bulk with Star Bulk as the surviving entity,
or the Redomiciliation Merger. The Redomiciliation Merger was completed on
November 30, 2007 as a result of which each outstanding share of Star Maritime
common stock was converted into the right to receive one share of Star Bulk
common stock and each outstanding warrant of Star Maritime was assumed by Star
Bulk with the same terms and restrictions except that each became exercisable
for common stock of Star Bulk. Star Bulk's common stock and warrants are listed
on the Nasdaq Global Market under the symbols "SBLK" and "SBLKW,"
respectively.





We
commenced operations on December 3, 2007, which is the date we took delivery of
our first vessel.  During the period from Star Maritime's inception on
May 13, 2005 to December 3, 2007, we were a development stage
enterprise.





A.           Selected
Consolidated Financial Data





The table
below summarizes the Company's recent financial information. The historical
information was derived from the audited consolidated financial statements of
Star Maritime and its subsidiaries for the period from May 13, 2005 (date of
Star Maritime's inception) through December 31, 2005, and for the fiscal year
ended December 31, 2006.  The information of Star Bulk and its wholly
owned subsidiaries for the fiscal years ended December 31, 2007 includes the
results for Star Maritime from January 1, 2007 to November 30, 2007, which is
the date that the Redomiciliation Merger was completed. We refer you to the
notes to our consolidated financial statements for a discussion of the basis on
which our consolidated financial statements are presented. The information
provided below should be read in conjunction with "Item 5. Operating and
Financial Review and Prospects" and the consolidated financial statements,
related notes and other financial information included herein.





The
historical results included below and elsewhere in this document are not
necessarily indicative of the future performance of Star Bulk.





2








3.A.
(i) CONSOLIDATED STATEMENT OF OPERATIONS





(In
      thousands of U.S. Dollars, except
              per
      share and share data)
            
            May
      13, 2005
              (date
      of inception) to December 31,
            
            
            Year
      Ended December 31,2005
            
            
            2006
            
            
            2007
            
            
            2008
            
            
            2009Voyage
      revenues
            
            
            -
            
            
            
            -
            
            
            
            3,633
            
            
            
            238,883
            
            
            
            142,351Voyage
      expenses
            
            
            -
            
            
            
            -
            
            
            
            43
            
            
            
            3,504
            
            
            
            15,374Vessel
      operating expenses
            
            
            -
            
            
            
            -
            
            
            
            622
            
            
            
            26,198
            
            
            
            30,168Management
      fees
            
            
            -
            
            
            
            -
            
            
            
            23
            
            
            
            1,367
            
            
            
            771Drydocking
      expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,881
            
            
            
            6,122Depreciation
            
            
            -
            
            
            
            1
            
            
            
            745
            
            
            
            51,050
            
            
            
            58,298Vessel
      impairment loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,646
            
            
            
            75,208(Gain)/loss
      on derivative instruments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (251
            )
            
            
            2,154(Gain)
      on time charter agreement termination
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (9,711
            )
            
            
            (16,219
            )Loss
      on time charter agreement termination
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            11,040General
      and administrative expenses
            
            
            50
            
            
            
            1,210
            
            
            
            7,756
            
            
            
            12,424
            
            
            
            8,742Operating
      (loss)/ income
            
            
            (50
            )
            
            
            (1,211
            )
            
            
            (5,556
            )
            
            
            142,775
            
            
            
            (49,307
            )Interest
      and Finance costs
            
            
            -
            
            
            
            -
            
            
            
            (45
            )
            
            
            (10,238
            )
            
            
            (9,914
            )Interest
      income
            
            
            183
            
            
            
            4,396
            
            
            
            9,021
            
            
            
            1,201
            
            
            
            806Net
      income/ (loss), before taxes
            
            
            133
            
            
            
            3,185
            
            
            
            3,420
            
            
            
            133,738
            
            
            
            (58,415
            )Income
      taxes
            
            
            (23
            )
            
            
            (207
            )
            
            
            (9
            )
            
            
            -
            
            
            
            -Net
      Income/(loss)
            
            
            110
            
            
            
            2,978
            
            
            
            3,411
            
            
            
            133,738
            
            
            
            (58,415
            )Earnings/(loss)
      per share, basic
            
            
            0.01
            
            
            
            0.10
            
            
            
            0.11
            
            
            
            2.55
            
            
            
            (0.96
            )Earnings/(loss)
      per share, diluted
            
            
            0.01
            
            
            
            0.10
            
            
            
            0.09
            
            
            
            2.46
            
            
            
            (0.96
            )Weighted
      average number of shares outstanding, basic
            
            
            9,918,282
            
            
            
            29,026,924
            
            
            
            30,065,923
            
            
            
            52,477,947
            
            
            
            60,873,421Weighted
      average number of shares outstanding, diluted
            
            
            9,918,282
            
            
            
            29,026,924
            
            
            
            36,817,616
            
            
            
            54,447,985
            
            
            
            60,873,421








3








3.A.
(ii) CONSOLIDATED BALANCE SHEET AND OTHER FINANCIAL DATA


(In thousands of
      Dollars,
              except
      per share and share data)
            
            May
      13, 2005
              (date
      of inception) to December 31,
            
            
            Year
      Ended December 31,2005
            
            
            2006
            
            
            2007
            
            
            2008
            
            
            2009Cash
      and cash equivalents
            
            
            593
            
            
            
            2,118
            
            
            
            18,985
            
            
            
            29,475
            
            
            
            40,142Investments
      in Trust Account
            
            
            188,859
            
            
            
            192,915
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      assets
            
            
            189,580
            
            
            
            195,186
            
            
            
            403,742
            
            
            
            891,376
            
            
            
            760,641Current
      liabilities
            
            
            4,345
            
            
            
            6,973
            
            
            
            3,057
            
            
            
            57,287
            
            
            
            71,092Common
      stock
            
            
            3
            
            
            
            3
            
            
            
            425
            
            
            
            584
            
            
            
            611Stockholders'
      equity
            
            
            120,555
            
            
            
            123,533
            
            
            
            375,378
            
            
            
            560,140
            
            
            
            499,257Total
      liabilities and stockholders' equity
            
            
            189,580
            
            
            
            195,186
            
            
            
            403,742
            
            
            
            891,376
            
            
            
            760,641OTHER
      FINANCIAL DATADividends
      declared and paid ($0.98 and $0.10 per share,
respectively)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            52,614
            
            
            
            6,185Net
      cash (used in) / provided by operating activities
            
            
            (27
            )
            
            
            1,699
            
            
            
            370
            
            
            
            110,747
            
            
            
            65,878Net
      cash (used in)/ provided by investing activities
            
            
            (188,675
            )
            
            
            (4
            )
            
            
            12,963
            
            
            
            (423,305
            )
            
            
            (1,431
            )Net
      cash provided by /(used in) financing activities
            
            
            189,295
            
            
            
            (170
            )
            
            
            3,534
            
            
            
            323,048
            
            
            
            (53,780
            )FLEET
      DATAAverage
      number of vessels (1)
            
            
            -
            
            
            
            -
            
            
            
            0.21
            
            
            
            10.76
            
            
            
            11.97Total
      ownership days for fleet (2)
            
            
            -
            
            
            
            -
            
            
            
            75
            
            
            
            3,933
            
            
            
            4,370Total
      available days for fleet (3)
            
            
            -
            
            
            
            -
            
            
            
            71
            
            
            
            3,712
            
            
            
            4,240Total
      voyage days for fleet (4)
            
            
            -
            
            
            
            -
            
            
            
            69
            
            
            
            3,618
            
            
            
            4,117Fleet
      utilization (5)
            
            
            -
            
            
            
            -
            
            
            
            93
            %
            
            
            98
            %
            
            
            97
            %AVERAGE
      DAILY RESULTS (In Dollars)Time
      charter equivalent (6)
            
            
            -
            
            
            
            -
            
            
            
            31,203
            
            
            
            42,799
            
            
            
            29,450Vessel
      operating expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,661
            
            
            
            6,903Management
      fees
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            348
            
            
            
            176General
      and administrative expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,159
            
            
            
            2,000Total
      vessel operating expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            10,168
            
            
            
            9,079





(1)
            Average
      number of vessels is the number of vessels that comprised our fleet for
      the relevant period, as measured by the sum of the number of days each
      vessel was a part of our fleet during the period divided by the number of
      calendar days in that period.





(2)
            Ownership
      days are the total calendar days each vessel in the fleet was owned by us
      for the relevant period.





(3)
            Available
      days for the fleet are the ownership days after subtracting for off-hire
      days with major repairs dry-docking or special or intermediate surveys or
      transfer of ownership.





(4)
            Voyage
      days are the total days the vessels were in our possession for the
      relevant period after subtracting all off-hire days incurred for any
      reason (including off-hire for dry-docking, major repairs, special or
      intermediate surveys).





(5)
            Fleet
      utilization is calculated by dividing voyage days by available days for
      the relevant period and takes into account the dry-docking
      periods.





(6)
            Represents
      the weighted average time charter equivalent, or TCE, of our entire
      fleet.  TCE rate is a measure of the average daily revenue
      performance of a vessel on a per voyage basis. Our method of calculating
      TCE rate is determined by dividing voyage revenues (net of voyage expenses
      and amortization of fair value of above/below market acquired time charter
      agreements) by voyage days





4





for
      the relevant time period. Voyage expenses primarily consist of port, canal
      and fuel costs that are unique to a particular voyage, which would
      otherwise be paid by the charterer under a time charter contract, as well
      as commissions. TCE rate is a standard shipping industry performance
      measure used primarily to compare period-to-period changes in a shipping
      company's performance despite changes in the mix of charter types (i.e.,
      spot charters, time charters and bareboat charters) under which the
      vessels may be employed between the periods.  We included TCE
      revenues, a non-GAAP measure, as it provides additional meaningful
      information in conjunction with voyage revenues, the most directly
      comparable GAAP measure, because it assists our management in making
      decisions regarding the deployment and use of its vessels and in
      evaluating their financial performance. TCE rate is also included herein
      because it is a standard shipping industry performance measure used
      primarily to compare period-to-period changes in a shipping company's
      performance despite changes in the mix of charter types (i.e., spot
      charters, time charters and bareboat charters) under which the vessels may
      be employed between the periods and because we believe that it presents
      useful information to investors. For further information concerning our
      calculation of TCE rate, please see Item 5. "Operating and Financial
      Review and Prospects – Operating
Results."





B.           Capitalization
and Indebtedness





Not
Applicable.





C.           Reasons
for the Offer and Use of Proceeds





Not
Applicable.





D.           Risk
factors





Some of
the following risks relate principally to the industry in which we operate and
our business in general. Other risks relate principally to the securities market
and ownership of our common stock. The occurrence of any of the events described
in this section could significantly and negatively affect our business,
financial condition, operating results or cash available for dividends or the
trading price of our common stock.





Industry
Specific Risk Factors





Charterhire
rates for drybulk carriers are volatile and may decrease in the future, which
would adversely affect our earnings and ability to pay dividends





We
currently own and operate a fleet of 11 vessels consisting of three Capesize and
eight Supramax drybulk carriers with an average age of 10.3 years and a combined
cargo carrying capacity of approximately 931,178 dwt. The drybulk shipping
industry is cyclical with attendant volatility in charterhire rates and
profitability. The degree of charterhire rate volatility among different types
of drybulk carriers varies widely. The Baltic Dry Index, or the BDI, which is
published daily by the Baltic Exchange Limited, or the Baltic Exchange, a
London-based membership organization that provides daily shipping market
information to the global investing community, is an average of selected ship
brokers' assessments of time charter rates paid by a customer to hire a drybulk
vessel to transport drybulk cargoes by sea.  The BDI has long been
viewed as the main benchmark to monitor the movements of the drybulk vessel
charter market and the performance of the entire drybulk shipping
market.  The BDI declined from a high of 11,793 in May 2008 to a low
of 663 in December 2008, which represents a decline of 94%.  The BDI
fell over 70% during the month of October, 2008, alone.  During 2009,
the BDI remained volatile, reaching a low of 772 on January 5, 2009 and a high
of 4,661 on November 19, 2009. The decline in time charter rates was due to
various factors, including reduced shipments of bulk materials following the
economic recession in the United States and other parts of the world. A lack of
trade financing for





5





purchases
of commodities carried by sea resulted in a significant decline in cargo
shipments during late 2008. Reduced activity in China affected the market most
severely, evidenced by falling iron ore prices and increased stockpiles of ore
at Chinese ports.  If the drybulk shipping market remains depressed in
the future our earnings and available cash flow may decrease. Our ability to
re-charter our vessels on the expiration or termination of their current time
charters and the charter rates payable under any renewal or replacement charters
will depend upon, among other things, economic conditions in the drybulk
shipping market. Fluctuations in charter rates and vessel values result from
changes in the supply and demand for drybulk cargoes carried internationally at
sea, including coal, iron, ore, grains and minerals.





The
factors affecting the supply and demand for vessel capacity are outside of our
control, and the nature, timing and degree of changes in industry conditions are
unpredictable.





The
factors that influence demand for vessel capacity include:





·
            demand
      for and production of drybulk
products;





·
            global
      and regional economic and political
conditions;





·
            the
      distance drybulk cargo is to be moved by sea;
  and





·
            changes
      in seaborne and other transportation
patterns.





The
factors that influence the supply of vessel capacity include:





·
            the
      number of new building deliveries;





·
            port
      and canal congestion;





·
            the
      scrapping of older vessels;





·
            vessel
      casualties; and





·
            the
      number of vessels that are out of
service.





We
anticipate that the future demand for our drybulk carriers will be dependent
upon continued economic growth in the world's economies, including China and
India, seasonal and regional changes in demand, changes in the capacity of the
global drybulk carrier fleet and the sources and supply of drybulk cargo to be
transported by sea. The capacity of the global drybulk carrier fleet seems
likely to increase and economic growth may not continue. Adverse economic,
political, social or other developments could also have a material adverse
effect on our business and operating results.





An
over-supply of drybulk carrier capacity may prolong or further depress the
current low charter rates and, in turn, adversely affect our
profitability





The
market supply of drybulk carriers has been increasing, and the number of drybulk
carriers on order is near historic highs. These newbuildings were delivered in
significant numbers starting at the beginning of 2006 and continued to be
delivered in significant numbers through 2008. Although many newbuildings
cancellations occurred in 2009, a significant number of newbuildings continued
to be delivered in 2009. As of December 31, 2009, newbuilding orders had been
placed for an aggregate of about 59% of the current global drybulk fleet, with
deliveries expected during the next 48 months. According to market sources about
40% of the drybulk carriers originally scheduled for delivery within 2009 were
canceled or delayed. Due to lack of financing many analysts expect significant
cancellations and slippage of newbuilding orders. While vessel supply will
continue to be affected by the delivery of new vessels and the removal of
vessels from the global fleet, either through scrapping or accidental losses, an
over-supply of drybulk carrier capacity, particularly in conjunction with the
currently low level





6





of
demand, could exacerbate the recent decrease in charter rates or prolong the
period during which low charter rates prevail. If the current low charter rate
environment persists, or a further reduction occurs, during a period when the
current charters for our drybulk carriers expire or are terminated, we may only
be able to recharter those vessels at reduced rates or we may not be able to
charter our vessels at all. The charters for three of our vessels expire in
2010.





Sharp
declines in the spot drybulk charter market may affect our earnings and cash
flows from the vessels we operate in the spot market





We
currently do not employ any of our vessels in the spot market; however, we may
in the future determine to employ some of our vessels in the spot market. During
2009, our revenues that were derived from the spot market were approximately 1%
of our total voyage revenues. Vessels trading in the spot market are exposed to
increased risk of declining charter rates and freight rate volatility compared
to vessels employed on time charters. Since mid-August 2008, the spot day rates
in the drybulk charter market have declined significantly, and drybulk vessel
values have also declined both as a result of a slowdown in the availability of
global credit and the significant deterioration in charter rates. Charter rates
and vessel values have been affected in part by the lack of availability of
credit to finance both vessel purchases and purchases of commodities carried by
sea, resulting in a decline in cargo shipments, and the excess supply of iron
ore in China which resulted in falling iron ore prices and increased stockpiles
in Chinese ports. Charter rates may remain at depressed levels for some time
which will adversely affect our revenue and profitability.





The
market values of our vessels have declined and may further decline, which could
limit the amount of funds that we can borrow or trigger certain financial
covenants under our current or future credit facilities and/or we may incur a
loss if we sell vessels following a decline in their market value





The fair
market values of our vessels have generally experienced high volatility and
have  declined significantly. The market prices for secondhand
Capesize and Supramax drybulk carriers have decreased sharply from their
historically high levels.





The fair
market value of our vessels may continue to fluctuate (i.e., increase and
decrease) depending on a number of factors including:





·
            prevailing
      level of charter rates;





·
            general
      economic and market conditions affecting the shipping
      industry;





·
            types
      and sizes of vessels;





·
            supply
      and demand for vessels;





·
            other
      modes of transportation;





·
            cost
      of newbuildings;





·
            governmental
      or other regulations; and





·
            technological
      advances.





In
addition, as vessels grow older, they generally decline in value. If the fair
market value of our vessels decline further, we may not be in compliance with
certain provisions of our amended term loans and we may not be able to refinance
our debt or obtain additional financing. In addition, if we sell one or more of
our vessels at a time when vessel prices have fallen, the vessel or the vessels
must be classified as assets held for sale, resulting in a loss and a reduction
in earnings.





7











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





Acts of
piracy have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea, the Gulf of Aden and off the Nigerian coast.
Throughout 2008 and 2009, the frequency of incidents of piracy has increased
significantly, particularly in the Gulf of Aden, with drybulk vessels and
tankers particularly vulnerable to such attacks. For example, in November 2008,
the Sirius Star, a
tanker vessel not affiliated with us, was captured by pirates in the Indian
Ocean while carrying crude oil estimated to be worth $100.0 million. In February
2009, the Saldanha, a
drybulk carrier not related to us, was seized by pirates while transporting coal
through the Gulf of Aden.  If these piracy attacks result in regions
in which our vessels are deployed being characterized by insurers as "war risk"
zones, as the Gulf of Aden temporarily was in May 2008, or Joint War Committee
(JWC) "war and strikes" listed areas, premiums payable for such coverage could
increase significantly and such insurance coverage may be more difficult to
obtain.  Crew costs, including those due to employing onboard security
guards, could increase in such circumstances.  In addition, while we
believe the charterer remains liable for charter payments when a vessel is
seized by pirates, the charterer may dispute this and withhold charter hire
until the vessel is released.  A charterer may also claim that a
vessel seized by pirates was not "on-hire" for a certain number of days and it
is therefore entitled to cancel the charter party, a claim that we would
dispute.  We may not be adequately insured to cover losses from these
incidents, which could have a material adverse effect on us.  In
addition, detention hijacking as a result of an act of piracy against our
vessels, or an increase in cost, or unavailability of insurance for our vessels,
could have a material adverse impact on our business, financial condition,
results of operations and cash flows.





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





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





During
2008 and 2009, a number of financial institutions have experienced serious
financial difficulties and, in some cases, have entered bankruptcy proceedings
or are in regulatory enforcement actions. The uncertainty surrounding the future
of the credit markets in the United States and the rest of the world has
resulted in reduced access to credit worldwide. As of March 23, 2010, we had
total outstanding indebtedness of $231.0 million under our existing credit
facilities.





We face
risks attendant to changes in economic environments, changes in interest rates,
and instability in the banking and securities markets around the world, among
other factors. Major market disruptions and the current adverse changes in
market conditions and regulatory climate in the United States and worldwide may
adversely affect our business or impair our ability to borrow amounts under our
credit facilities or any future financial arrangements. We cannot predict how
long the current market conditions will last. However, these recent and
developing economic and governmental factors, together with the concurrent
decline in charter rates and vessel values, may have a material adverse effect
on our





8





results
of operations, financial condition or cash flows, have caused the trading price
of our common shares on the Nasdaq Global Market to decline precipitously and
could cause the price of our common shares to continue to decline or impair our
ability to make distributions to our shareholders.





Charter
rates are subject to seasonal fluctuations and market volatility, which may
adversely affect our financial condition and ability to pay
dividends





We
charter all of our vessels on medium- to long-term time charters with an average
remaining term of approximately 1.3 years, other than the Star Ypsilon, which is
currently employed under a contract of affreightment, or COA.  We may
in the future determine to employ some of our vessels in the spot
market.  Demand for vessel capacity has historically exhibited
seasonal variations and, as a result, fluctuations in charter rates. This
seasonality may result in quarter-to-quarter volatility in our operating results
for vessels trading in the spot market. The drybulk sector is typically stronger
in the fall and winter months in anticipation of increased consumption of coal
and other raw materials in the northern hemisphere. As a result, our revenues
from our drybulk carriers may be weaker during the fiscal quarters ended June 30
and September 30, and, conversely, our revenues from our drybulk carriers may be
stronger in fiscal quarters ended December 31 and March 31. Seasonality in the
sector in which we operate could materially affect our operating results and
cash available for dividends in the future.





Rising
fuel prices may adversely affect our profits





Fuel is a
significant, if not the largest, expense in our shipping operations when vessels
are not under period charter. Changes in the price of fuel may adversely affect
our profitability. The price and supply of fuel is unpredictable and fluctuates
based on events outside our control, including geopolitical developments, supply
and demand for oil and gas, actions by the Organization of the Petroleum
Exporting Countries (OPEC) and other oil and gas producers, war and unrest in
oil producing countries and regions, regional production patterns and
environmental concerns. Further, fuel may become much more expensive in the
future, which may reduce the profitability and competitiveness of our business
versus other forms of transportation, such as truck or rail.





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





Our
business and the operation of our vessels are materially affected by government
regulation in the form of international conventions, national, state and local
laws and regulations in force in the jurisdictions in which the vessels operate,
as well as in the country or countries of their registration. Because such
conventions, laws, and regulations are often revised, we cannot predict the
ultimate cost of complying with such conventions, laws and regulations or the
impact thereof on the resale prices or useful lives of our vessels. Additional
conventions, laws and regulations may be adopted which could limit our ability
to do business or increase the cost of our doing business and which may
materially adversely affect our operations. We are required by various
governmental and quasi-governmental agencies to obtain certain permits,
licenses, certificates, and financial assurances with respect to our
operations.





The
operation of our vessels is affected by the requirements set forth in the United
Nations' International Maritime Organization's International Management Code for
the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM Code
requires shipowners, ship managers and bareboat charterers to develop and
maintain an extensive "Safety Management System" that includes the adoption of a
safety and environmental protection policy setting forth instructions and
procedures for safe operation and describing procedures for dealing with
emergencies. The failure of a shipowner or bareboat charterer to comply with the
ISM Code may subject it to increased liability, may invalidate existing
insurance or decrease available insurance coverage for the affected vessels and
may result in a denial of





9





access
to, or detention in, certain ports. If we are subject to increased liability for
noncompliance or if our insurance coverage is adversely impacted as a result of
noncompliance, we may have less cash available for distribution to our
stockholders as dividends. If any of our vessels are denied access to, or are
detained in, certain ports, this may decrease our revenues.





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





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





International
shipping is subject to various security and customs inspection and related
procedures in countries of origin and destination and trans-shipment
points.  Inspection procedures can result in the seizure of the cargo
and/or our vessels, delays in the loading, offloading or delivery and the
levying of customs duties, fines or other penalties against us. It is possible
that changes to inspection procedures could impose additional financial and
legal obligations on us. Furthermore, changes to inspection procedures could
also impose additional costs and obligations on our customers and may, in
certain cases, render the shipment of certain types of cargo uneconomical or
impractical. Any such changes or developments may have a material adverse effect
on our business, results of operations, cash flows, financial condition and
available cash and ability to pay dividends.





Political instability, terrorist
attacks and international hostilities can affect the seaborne transportation industry, which could
adversely affect our business





We
conduct most of our operations outside of the United States, and our business,
results of operations, cash flows, financial condition and ability to pay
dividends if reinstated in the future may be adversely affected by changing
economic, political and government conditions in the countries and regions where
our vessels are employed or registered. Moreover, we operate in a sector of the
economy that is likely to be adversely impacted by the effects of political
instability, terrorist or other attacks, war or international hostilities.
Terrorist attacks such as the attacks on the United States on September 11,
2001, the bombings in Spain on March 11, 2004, in London on July 7, 2005 and in
Mumbai on November 26, 2008 and the continuing response of the United States and
other countries to these attacks, as well as the threat of future terrorist
attacks, continue to contribute to world economic instability and uncertainty in
global financial markets. Future terrorist attacks could result in increased
volatility of the financial markets in the United States and globally and could
result in an economic recession in the United States or the world. These
uncertainties could also adversely affect our ability to obtain additional
financing on terms acceptable to us or at all.





In the
past, political conflicts have also resulted in attacks on vessels, such as the
attack on the Limburgin October 2002, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region. Acts of
terrorism and piracy have also affected vessels trading in regions such as the
South China Sea. Any of these occurrences could have a material adverse impact
on our business, financial condition, results of operations and ability to pay
dividends.





10








Increased
inspection procedures and tighter import and export controls could increase
costs and disrupt our business





International
shipping is subject to various security and customs inspection and related
procedures in countries of origin and destination. Inspection procedures may
result in the seizure of contents of our vessels, delays in the loading,
offloading or delivery and the levying of customs duties, fines or other
penalties against us.





It is
possible that changes to inspection procedures could impose additional financial
and legal obligations on us. Changes to inspection procedures could also impose
additional costs and obligations on our customers and may, in certain cases,
render the shipment of certain types of cargo uneconomical or impractical. Any
such changes or developments may have a material adverse effect on our business,
financial condition and results of operations.





Maritime
claimants could arrest one or more of our vessels, which could interrupt our
cash flow





Crew
members, suppliers of goods and services to a vessel, shippers of cargo and
other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a claimant may seek
to obtain security for its claim by arresting a vessel through foreclosure
proceedings. The arrest or attachment of one or more of our vessels could
interrupt our cash flow and require us to pay large sums of money to have the
arrest or attachment lifted. In addition, in some jurisdictions, such as South
Africa, under the "sister ship" theory of liability, a claimant may arrest both
the vessel which is subject to the claimant's maritime lien and any "associated"
vessel, which is any vessel owned or controlled by the same owner. Claimants
could attempt to assert "sister ship" liability against one vessel in our fleet
for claims relating to another of our vessels.





Governments
could requisition our vessels during a period of war or emergency, resulting in
a loss of earnings





A
government could requisition one or more of our vessels for title or for hire.
Requisition for title occurs when a government takes control of a vessel and
becomes its owner, while requisition for hire occurs when a government takes
control of a vessel and effectively becomes its charterer at dictated charter
rates. Generally, requisitions occur during periods of war or emergency,
although governments may elect to requisition vessels in other circumstances.
Although we would be entitled to compensation in the event of a requisition of
one or more of our vessels, the amount and timing of payment would be uncertain.
Government requisition of one or more of our vessels may negatively impact our
revenues and reduce the amount of cash we have available for distribution as
dividends to our stockholders.





Company
Specific Risk Factors





Substantial
debt levels could limit our flexibility to obtain additional financing or pursue
other business opportunities





As of
March 23, 2010, we had outstanding indebtedness of $231.0 million and we expect
to incur additional indebtedness as we continue to grow our fleet. Currently, we
do not have any additional borrowing capacity under our existing loan
facilities. This level of debt could have important consequences to us,
including the following:





·
            we
      may not be able to obtain additional financing, if necessary, for working
      capital, capital expenditures, acquisitions or other purposes may be
      impaired or such financing may be unavailable on favorable
      terms;





11











·
            we
      may need to use a substantial portion of our cash from operations to make
      principal and interest payments on our debt, reducing the funds that would
      otherwise be available for operations, future business opportunities and
      dividends to our shareholders;





·
            our
      debt level could make us more vulnerable than our competitors with less
      debt to competitive pressures or a downturn in our business or the economy
      generally; and





·
            our
      debt level may limit our flexibility in responding to changing business
      and economic conditions.





Our
ability to service our debt will depend upon, among other things, our future
financial and operating performance, which will be affected by prevailing
economic conditions and financial, business, regulatory and other factors, some
of which are beyond our control. If our operating income is not sufficient to
service our current or future indebtedness, we will be forced to take actions
such as reducing or delaying our business activities, acquisitions, investments
or capital expenditures, selling assets, restructuring or refinancing our debt
or seeking additional equity capital. We may not be able to effect any of these
remedies on satisfactory terms, or at all. In addition, a lack of liquidity in
the debt and equity markets could hinder our ability to refinance our debt or
obtain additional financing on favorable terms in the future.  In
addition, our loan agreements may impose operation restrictions on us such as
changing the management of our vessels.  Please see "Item 5. Operating
and Financial Review and Prospects – Liquidity and Capital Resources – Senior
Secured Credit Facilities."





The
Company was in compliance with the financial covenants in the amended waiver
agreements as of December 31, 2009.





We
may be unable to comply with the covenants contained in our loan agreements,
which would affect our ability to conduct our business





Our loan
agreements for our borrowings, which are secured by liens on our vessels,
contain various financial and other covenants. Among those covenants are
requirements that relate to our financial position, operating performance and
liquidity. For example, under certain provisions of our loan agreements we are
required to maintain a ratio of the fair market value of our vessels to the
aggregate amounts outstanding of 125% for the first three years and 135%
thereafter.





The
market value of drybulk vessels is sensitive, among other things, to changes in
the drybulk charter market, with vessel values deteriorating in times when
drybulk charter rates are falling and improving when charter rates are
anticipated to rise. The current decline in charter rates in the drybulk market
coupled with the prevailing difficulty in obtaining financing for vessel
purchases have adversely affected drybulk vessel values, including the vessels
in our fleet. As a result, we may not meet certain minimum asset coverage
covenants in our loan agreements.





In March
and December 2009, we entered into agreements with each of our lenders to obtain
waivers for certain covenants including minimum asset coverage covenants
contained in our loan agreements. See Item 5, "Liquidity and Capital Resources -
Senior Secured Credit Facilities."





12







Under the
terms of our waiver agreements, as amended, our dividend payments, share
repurchases and investments are subject to the prior written consent of our
lenders.  In addition, for the duration of the waiver periods the
interest spread for each of the above referenced loans will be adjusted to 2%
per annum.  Followng the waiver period, the interest spread under our
$150.0 million and $35.0 million loan facilities will be adjusted to 1.5% and
under our $120 million loan facility the interest spread will be adjusted to
that provided in the initial loan agreement.  Please see "Item 5.
Operating and Financial Review and Prospects – Liquidity and Capital Resources –
Senior Secured Credit Facilities."




If we are
not in compliance with our covenants and we are not able to obtain additional
covenant waivers or modifications, our lenders could require us to post
additional collateral, enhance our equity and liquidity, increase our interest
payments or pay down our indebtedness to a level where we are in compliance with
our loan covenants, sell vessels in our fleet, or they could accelerate our
indebtedness, which would impair our ability to continue to conduct our
business. If our indebtedness is accelerated, we might not be able to refinance
our debt or obtain additional financing and could lose our vessels if our
lenders foreclose their liens. In addition, if we find it necessary to sell our
vessels at a time when vessel prices are low, we will recognize losses and a
reduction in our earnings, which could affect our ability to raise additional
capital necessary for us to comply with our loan agreements.





13











We may be unable
to renew our waivers





In March
and December 2009, we entered into agreements with our lenders to obtain waivers
for certain covenants including minimum asset coverage covenants contained in
our loan agreements that expire in early 2010 and 2011, respectively. Please see
"Item 5.Operating and Financial Review and Prospects – Liquidity and Capital
Resources – Senior Secured Credit Facilities."





If we are
not in compliance with our covenants and we are not able to obtain additional
covenant waivers or modifications, our lenders could require us to post
additional collateral, enhance our equity and liquidity, increase our interest
payments or pay down our indebtedness to a level where we are in compliance with
our loan covenants, sell vessels in our fleet, or they could accelerate our
indebtedness, which would impair our ability to continue to conduct our
business. If our indebtedness is accelerated, we might not be able to refinance
our debt or obtain additional financing and could lose our vessels if our
lenders foreclose their liens. In addition, if we find it necessary to sell our
vessels at a time when vessel prices are low, we will recognize losses and a
reduction in our earnings, which could affect our ability to raise additional
capital necessary for us to comply with our loan agreements.





Our
lenders have imposed a restriction on our dividend payments under the terms of
our waiver agreements





As a
result of restrictions imposed by our lenders, including the restriction on
dividend payments under the terms of our waiver agreements, we may not be able
to pay dividends.





We
previously paid regular dividends on a quarterly basis from our operating
surplus, in amounts that allowed us to retain a portion of our cash flows to
fund vessel or fleet acquisitions, and for debt repayment and other corporate
purposes, as determined by our management and board of directors. Under the
terms of our waiver agreements with our lenders, payment of dividends and
repurchases of our shares and warrants are subject to the prior written consent
of our lenders.





In June
2009, with the consent of our lenders, we declared a dividend of $0.05 per
outstanding share of our common stock for the three months ended June 30, 2009
which was paid on or about July 14, 2009 to shareholders as of record on July 7,
2009.  Our lenders consented to our declaration and payment of this
quarterly dividend.  In November 2009, with the consent of our
lenders, we declared a dividend of $0.05 per outstanding share of our common
stock for the three months ended September 30, 2009, which was paid on or about
December 4, 2009 to shareholders of record as of November 27,
2009.  In February 2010, with the consent of our lenders, we declared
a dividend of $0.05 per outstanding share of our common stock for the three
months ending December 31, 2009, which was paid on March 11, 2010 to
shareholders of record as of March 8, 2010.





In
addition, the payment of any future dividends will be subject at all times to
the discretion of our board of directors and the consent of our lenders. The
timing and amount of dividends will depend on our earnings, financial condition,
cash requirements and availability, fleet renewal and expansion, restrictions in
our loan agreements, the provisions of Marshall Islands law affecting the
payment of dividends and other factors. Marshall Islands law generally prohibits
the payment of dividends other than from surplus or while a company is insolvent
or would be rendered insolvent upon the payment of such dividends, or if there
is no surplus, dividends may be declared or paid out of net profits for the
fiscal year





14








We
are dependent on medium- to long-term time charters in a volatile shipping
industry and a decline in charterhire rates would affect our results of
operations and ability to pay dividends





We
charter all of our vessels on medium- to long-term time charters with an average
remaining term of approximately 1.3 years, other than the Star Ypsilon, which is
currently employed under a COA. The time charter market is highly competitive
and spot market charterhire rates (which affect time charter rates) may
fluctuate significantly based upon available charters and the supply of, and
demand for, seaborne shipping capacity. Our ability to re-charter our vessels on
the expiration or termination of their current time charters and the charter
rates payable under any renewal or replacement charters will depend upon, among
other things, economic conditions in the drybulk shipping market. The drybulk
carrier charter market is volatile, and in the past, time charter and spot
market charter rates for drybulk carriers have declined below operating costs of
vessels. If future charterhire rates are depressed, we may not be able to
operate our vessels profitably or to pay you dividends. Under the terms of our
waiver agreements with our lenders, payment of dividends and repurchases of our
shares and warrants are subject to the prior written consent of our lenders.
Please see "Item 5. Operating and Financial Review and Prospects – Liquidity and
Capital Resources – Senior Secured Credit Facilities."





Default
by our charterers may lead to decreased revenues and a reduction in
earnings





Consistent
with drybulk shipping industry practice, we have not independently analyzed the
creditworthiness of the charterers. Our revenues may be dependent on the
performance of our charterers and, as a result, defaults by our charterers may
materially adversely affect our revenues.





We
depend upon a few significant customers for a large part of our revenues and the
loss of one or more of these customers could adversely affect our financial
performance





We derive
a significant part of our charterhire from a small number of customers, with 65%
of our voyage revenues, as presented in our statement of operations, for the
fiscal year ended December 31, 2009 generated from five charterers. Currently,
ten of our vessels are employed under fixed rate period charters to six
customers. If one or more of these customers is unable to perform under one or
more charters with us and we are not able to find a replacement charter, or if a
customer exercises certain rights to terminate the charter, we could suffer a
loss of revenues that could materially adversely affect our business, financial
condition, results of operations and cash available for distribution as
dividends to our shareholders.





We could
lose a customer or the benefits of a time charter if, among other
things:





·
            the
      customer fails to make charter payments because of its financial
      inability, disagreements with us or
otherwise;





·
            the
      customer terminates the charter because we fail to deliver the vessel
      within a fixed period of time, the vessel is lost or damaged beyond
      repair, there are serious deficiencies in the vessel or prolonged periods
      of off-hire, default under the charter;
or





·
            the
      customer terminates the charter because the vessel has been subject to
      seizure for more than a specified number of
  days.





If we
lose a key customer, we may be unable to obtain charters on comparable terms or
may become subject to the volatile spot market, which is highly competitive and
subject to significant price fluctuations.  Two of our time charters
on which we deploy our vessels provide for charter rates that are significantly
above current market rates, particularly spot market rates that most directly
reflect the current depressed levels of the drybulk charter market. If it were
necessary to secure substitute





15





employment,
in the spot market or on time charters, for any of these vessels due to the loss
of a customer in these market conditions, such employment would be at a
significantly lower charter rate than currently generated by such vessel, or we
may be unable to secure a charter at all, in either case, resulting in a
significant reduction in revenues. The loss of any of our customers or time
charters, or a decline in payments under our charters, could have a material
adverse effect on our business, results of operations and financial condition
and our ability to pay dividends.





The
failure of our charterers to meet their obligations under our time charter
agreements, on which we depend for substantially all of our revenues, could
cause us to suffer losses or otherwise adversely affect our
business





As of
March 23, 2010, we employed all of our vessels under time charter agreements,
other than the Star
Ypsilon, which is currently employed under a COA, with an average
remaining duration of approximately 1.3 years. For the year ended December 31,
2009, 65% of our voyage revenues-net of commissions- were generated from five
charterers. The ability and willingness of each of our counterparties to perform
its obligations under a time charter agreement with us will depend on a number
of factors that are beyond our control and may include, among other things,
general economic conditions, the condition of the drybulk shipping industry and
the overall financial condition of the counterparties. Charterers are sensitive
to the commodity markets and may be impacted by market forces affecting
commodities such as iron ore, coal, grain, and other minor bulks. In addition,
in these depressed market conditions, certain charterers, including some of our
charterers, are renegotiating the terms of the charters or defaulting on their
obligations under the charters. The time charters for two of our vessels, Star Zeta and Star Omicron, provide for
charter rates that are significantly above market rates as of March 23,
2010.  Should a counterparty fail to honor its obligations under
agreements with us, it may be difficult to secure substitute employment for such
vessel, and any new charter arrangements we secure in the spot market or through
a time charter would be at lower rates because of the currently depressed
drybulk carrier charter rate levels. The Star Epsilon and the Star Kappa were previously
time chartered until 2014 and Star Ypsilon until 2011. We
withdrew the vessels from their charterers' service because of the charterers'
repudiatory breach of time charter agreements.  Arbitration
proceedings have commenced against the vessels' charterers in London to pursue
damages arising from such breach, which will include the loss of
hire.  We have employed the vessels under new time charter agreements
at rates that are lower than we would have earned under the previous charter
agreements.  The Star Sigmawas previously
fixed for a minimum of 36 months and a maximum of 41 months and following
renegotiation with the charterer, we agreed to amend the charter to provide for
a minimum of 56 months and a maximum of 61 months at a lower rate.  If
our charterers fail to meet their obligations to us or attempt to renegotiate
our charter agreements, we could sustain significant losses which could have a
material adverse effect on our business, financial condition, results of
operations and cash flows, as well as our ability to pay dividends, if any, in
the future.





We
are subject to certain risks with respect to our counterparties on contracts,
and failure of such counterparties to meet their obligations could cause us to
suffer losses or otherwise adversely affect our business





We enter
into bunker swaps and freight forward agreements. Such agreements subject us to
counterparty risks. The ability of each of our counterparties to perform its
obligations under a contract with us will depend on a number of factors that are
beyond our control and may include, among other things, general economic
conditions, the condition of the maritime and offshore industries and the
overall financial condition of the counterparty. We seek to minimize our
counterparty risk by doing business only with well established financial
institutions such as the London Clearinghouse (LCH).  Should a
counterparty fail to honor its obligations under agreements with us, we could
sustain significant losses which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.





16











Investment
in derivative instruments such as freight forward agreements or other derivative
instruments could result in losses





From time
to time, we may take positions in derivative instruments including freight
forward agreements, or FFAs and other derivative instruments. Generally, FFAs
and other derivative instruments may be used to hedge a vessel owner's exposure
to the charter market for a specified route and period of time. Upon settlement,
if the contracted charter rate is less than the average of the rates, as
reported by an identified index, for the specified route and time period, the
seller of the FFA is required to pay the buyer an amount equal to the difference
between the contracted rate and the settlement rate, multiplied by the number of
days in the specified period. Conversely, if the contracted rate is greater than
the settlement rate, the buyer is required to pay the seller the settlement sum.
If we take positions in FFAs or other derivative instruments we could suffer
losses in the settling or termination of the FFA or other derivative
instruments. This could adversely affect our results of operation and cash
flow.





We
may have difficulty managing our planned growth properly.





We intend
to continue to expand our fleet. Our growth will depend on:





·
            locating
      and acquiring suitable vessels;





·
            identifying
      and consummating acquisitions or joint
ventures;





·
            obtaining
      required financing;





·
            integrating
      any acquired vessels successfully with our existing
      operations;





·
            enhancing
      our customer base; and





·
            managing
      our expansion.





Growing
any business by acquisition presents numerous risks such as undisclosed
liabilities and obligations, difficulty experienced in obtaining additional
qualified personnel and managing relationships with customers and suppliers and
integrating newly acquired operations into existing infrastructures. We may not
be successful in executing our growth plans and may incur significant expenses
and losses.





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





Interest
in most loan agreements in our industry has been based on published LIBOR rates.
The London market for Dollar loans between banks has recently been volatile,
with the spread between published LIBOR and the lending rates actually charged
to banks in the London interbank market widening significantly at times. These
conditions are the result of the recent disruptions in the international credit
markets. Because the interest rates borne by our outstanding indebtedness
fluctuate with changes in LIBOR, if this volatility were to continue, it would
affect the amount of interest payable on our debt, which in turn, could have an
adverse effect on our profitability, earnings and cash flow.





In
addition, in the waiver agreements with our lenders, we have agreed to replace
published LIBOR as the base for the interest calculation with their
cost-of-funds rate.  This could increase our lending costs
significantly, which would have an adverse effect on our profitability, earnings
and cash flow.





17








In
the highly competitive international drybulk shipping industry, we may not be
able to compete for charters with new entrants or established companies with
greater resources which may adversely affect our results of
operations





We employ
our vessels in a highly competitive market that is capital intensive and highly
fragmented. Competition arises primarily from other vessel owners, some of whom
have substantially greater resources than us. Competition for the transportation
of drybulk cargoes can be intense and depends on price, location, size, age,
condition and the acceptability of the vessel and its managers to the
charterers. Due in part to the highly fragmented market, competitors with
greater resources could operate larger fleets through consolidations or
acquisitions and may be able to offer more favorable terms.





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





Our
success depends to a significant extent upon the abilities and efforts of our
management team. As of March 23, 2010, we had thirty-two
employees.  Thirty of our employees, through our wholly owned
subsidiaries, Star Bulk Management Inc., or Star Bulk Management, and Starbulk
S.A, are engaged in the day to day management of the vessels in our fleet. Our
success depends upon our ability to retain key members of our management team
and the ability of Star Bulk Management to recruit and hire suitable employees.
The loss of any members of our senior management team could adversely affect our
business prospects and financial condition. Difficulty in hiring and retaining
personnel could adversely affect our results of operations. We do not maintain
"key-man" life insurance on any of our officers or employees of Star Bulk
Management and/or Starbulk S.A.





We
depend on officers who may engage in other business activities in the
international shipping industry which may create conflicts of
interest





Prokopios
(Akis) Tsirigakis, our Chief Executive Officer and a member of our board of
directors, and George Syllantavos, our Chief Financial Officer, Secretary and
member of our board of directors participate in business activities not
associated with the Company. As a result, Mr. Tsirigakis and Mr. Syllantavos may
devote less time to the Company than if they were not engaged in other business
activities and may owe fiduciary duties to the shareholders of both the Company
as well as shareholders of other companies with which they may be affiliated,
which may create conflicts of interest in matters involving or affecting the
Company and its customers. It is not certain that any of these conflicts of
interest will be resolved in our favor.





In
accordance with our code of ethics, which is located on our website at
www.starbulk.com, all ongoing and future transactions between us and any of its
officers and directors or their respective affiliates, will be on terms believed
by us to be no less favorable than are available from unaffiliated third
parties, and such transactions will require prior approval, in each instance by
a majority of our uninterested "independent" directors or the members of our
board who do not have an interest in the transaction, in either case who had
access, at our expense, to its attorneys or independent legal
counsel.





As
we expand our fleet, we will need to expand our operations and financial systems
and hire new shoreside staff and seafarers to staff our vessels; if we cannot
expand these systems or recruit suitable employees, our performance may be
adversely affected





Our
operating and financial systems may not be adequate as we expand our fleet, and
our attempts to implement those systems may be ineffective. In addition, we rely
on our wholly-owned subsidiaries, Star Bulk Management and Starbulk S.A., to
recruit shoreside administrative and





18





management
personnel. Shoreside personnel are recruited by Star Bulk Management and
Starbulk S.A. through referrals from other shipping companies and traditional
methods of securing personnel, such as placing classified advertisements in
shipping industry periodicals. Star Bulk Management has sub-contracted crew
management, which includes the recruitment of seafarers, to Bernhardt Schulte
Shipmanagement Ltd., or Bernhardt, a major international third-party technical
management company, and Union Commercial Inc., or Union. Star Bulk Management
and its crewing agent may not be able to continue to hire suitable employees as
Star Bulk expands its fleet. If we are unable to operate our financial and
operations systems effectively, recruit suitable employees or if Star Bulk
Management's unaffiliated crewing agent encounters business or financial
difficulties, our performance may be materially adversely affected.





Labor
interruptions could disrupt our business





Our
vessels, for which Star Bulk Management and Starbulk S.A. provide the crew (the
Star Gamma, Star Delta and Star Omicron), are manned by
masters, officers and crews that are employed by our shipowning
subsidiaries.  If not resolved in a timely and cost-effective manner,
industrial action or other labor unrest could prevent or hinder our operations
from being carried out normally and could have a material adverse effect on our
business, results of operations, cash flows and financial
condition.





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





Our
operations are subject to numerous laws and regulations in the form of
international conventions and treaties, national, state and local laws and
national and international regulations in force in the jurisdictions in which
our vessels operate or are registered, which can significantly affect the
ownership and operation of our vessels.  These requirements include,
but are not limited to, the International Convention on Civil Liability for Oil
Pollution Damage of 1969, the International Convention for the Prevention of
Pollution from Ships of 1975, the International Maritime Organization, or IMO,
International Convention for the Prevention of Marine Pollution of 1973, the IMO
International Convention for the Safety of Life at Sea of 1974, the
International Convention on Load Lines of 1966, the U.S. Oil Pollution Act of
1990, or OPA, the U.S. Clean Air Act, U.S. Clean Water Act and the U.S. Marine
Transportation Security Act of 2002.  Compliance with such laws,
regulations and standards, where applicable, may require installation of costly
equipment or operational changes and may affect the resale value or useful lives
of our vessels.  We may also incur additional costs in order to comply
with other existing and future regulatory obligations, including, but not
limited to, costs relating to air emissions, the management of ballast waters,
maintenance and inspection, elimination of tin-based paint, development and
implementation of emergency procedures and insurance coverage or other financial
assurance of our ability to address pollution incidents.  These costs
could have a material adverse effect on our business, results of operations,
cash flows and financial condition.  A failure to comply with
applicable laws and regulations may result in administrative and civil
penalties, criminal sanctions or the suspension or termination of our
operations.  Environmental laws often impose strict liability for
remediation of spills and releases of oil and hazardous substances, which could
subject us to liability without regard to whether we were negligent or at
fault.  Under OPA, for example, owners, operators and bareboat
charterers are jointly and severally strictly liable for the discharge of oil
within the 200-mile exclusive economic zone around the United
States.  An oil spill could result in significant liability, including
fines, penalties and criminal liability and remediation costs for natural
resource damages under other federal, state and local laws, as well as
third-party damages.  We are required to satisfy insurance and
financial responsibility requirements for potential oil (including marine fuel)
spills and other pollution incidents.  Although we have arranged
insurance to cover certain environmental risks, such insurance may not be
sufficient to cover all such risks or any claims will not have a material
adverse effect on our business, results of operations, cash flows and financial
condition and our ability to pay dividends, if any, in the future.





19











If
our vessels fail to maintain their class certification and/or fail any annual
survey, intermediate survey, dry-docking or special survey, that vessel would be
unable to carry cargo, thereby reducing our revenues and profitability and
violating certain covenants under our credit facilities





The hull
and machinery of every commercial drybulk vessel must be classed by a
classification society authorized by its country of registry.  The
classification society certifies that a vessel is safe and seaworthy in
accordance with the applicable rules and regulations of the country of registry
of the vessel and the Safety of Life at Sea Convention, or SOLAS.  All
of our vessels are certified as being "in class" by major Classification
Societies (e.g., RINA and Nippon Kaiji Kyokai).





A vessel
must undergo annual surveys, dry-dockings and special surveys.  In
lieu of a special survey, a vessel's machinery may be on a continuous survey
cycle, under which the machinery would be surveyed periodically over a five-year
period.  Every vessel is also required to be dry-docked every two to
three years for inspection of the underwater parts of such vessel.





If any
vessel does not maintain its class and/or fails any annual survey, intermediate
survey, dry-docking or special survey, the vessel will be unable to carry cargo
between ports and will be unemployable and uninsurable which could cause us to
be in violation of certain covenants in our credit facilities.  Any
such inability to carry cargo or be employed, or any such violation of
covenants, could have a material adverse impact on our financial condition and
results of operations.  That status could cause us to be in violation
of certain covenants in our credit facility.





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





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





The operation of drybulk carriers
involves certain unique operational risks





The
operation of drybulk carriers has certain unique operational risks. With a
drybulk carrier, the cargo itself and its interaction with the ship can be a
risk factor. By their nature, drybulk cargoes are often heavy, dense, easily
shifted, and react badly to water exposure. In addition, drybulk carriers are
often subjected to battering treatment during unloading operations with grabs,
jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers.
This treatment may cause damage to the drybulk carrier. Drybulk carriers damaged
due to treatment during unloading procedures may be more susceptible to a breach
to the sea. Hull breaches in drybulk carriers may lead to the flooding of their
holds. If a drybulk carrier suffers flooding in its forward holds, the bulk
cargo may become so dense and waterlogged that its pressure may buckle the
drybulk carrier's bulkheads leading to the loss of the drybulk
carrier.





20








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





Purchasing
and operating secondhand vessels may result in increased operating costs and
vessel off-hire, which could adversely affect our earnings





Our
inspection of secondhand vessels prior to purchase does not provide us with the
same knowledge about their condition and cost of any required or anticipated
repairs that we would have had if these vessels had been built for and operated
exclusively by us. We will not receive the benefit of warranties on secondhand
vessels.





Typically,
the costs to maintain a vessel in good operating condition increase with the age
of the vessel. Older vessels are typically less fuel efficient and more costly
to maintain than more recently constructed vessels. Cargo insurance rates
increase with the age of a vessel, making older vessels less desirable to
charterers.





Governmental
regulations, safety or other equipment standards related to the age of vessels
may require expenditures for alterations, or the addition of new equipment, to
our vessels and may restrict the type of activities in which the vessels may
engage. As our vessels age, market conditions may not justify those expenditures
or enable us to operate our vessels profitably during the remainder of their
useful lives.





We
inspected the thirteen vessels that we acquired from both related and unrelated
third parties, considered the age and condition of the vessels in budgeting for
their operating, insurance and maintenance costs, and if we acquire additional
secondhand vessels in the future, we may encounter higher operating and
maintenance costs due to the age and condition of those additional
vessels.





We
may not have adequate insurance to compensate us for the loss of a vessel, which
may have a material adverse effect on our financial condition and results of
operation





We have
procured hull and machinery insurance, protection and indemnity insurance, which
includes environmental damage and pollution insurance coverage and war risk
insurance for our fleet. We do not maintain, for our vessels, insurance against
loss of hire, which covers business interruptions that result from the loss of
use of a vessel. We may not be adequately insured against all risks. We may not
be able to obtain adequate insurance coverage for our fleet in the future. The
insurers may not pay particular claims. Our insurance policies may contain
deductibles for which we will be responsible and limitations and exclusions
which may increase our costs or lower our revenue. Moreover, insurers may
default on claims they are required to pay. If our insurance is not enough to
cover claims that may arise, the deficiency may have a material adverse effect
on our financial condition and results of operations.





We may be subject to calls because we
obtain some of our insurance through protection and indemnity
associations





We may be
subject to increased premium payments, or calls, in amounts based on our claim
records and the claim records of our fleet managers as well as the claim records
of other members of the protection and indemnity associations through which we
receive insurance coverage for tort liability, including pollution-related
liability. In addition, our protection and indemnity associations may not have
enough resources to cover claims made against them. Our payment of these calls
could result in significant expense to us, which could have a material adverse
effect on our business, results of operations, cash flows and financial
condition.





21











Because we generate all of our
revenues in dollars but incur a significant portion of our expenses in other
currencies, exchange rate fluctuations could have an adverse impact on our results
of operations





We
generate all of our revenues in dollars but we incur a portion of our expenses
in currencies other than the dollar. This difference could lead to fluctuations
in net income due to changes in the value of the dollar relative to the other
currencies, in particular the Euro. Expenses incurred in foreign currencies
against which the dollar falls in value can increase, decreasing our revenues.
Further declines in the value of the dollar could lead to higher expenses
payable by us.





We
are a holding company, and depend on the ability of our subsidiaries to
distribute funds to us in order to satisfy our financial obligations or to make
dividend payments





We are a
holding company, and our subsidiaries, which are all wholly owned by us, either
directly or indirectly, conduct all of our operations and own all of our
operating assets.  As a result, our ability to satisfy our financial
obligations and to pay dividends to our shareholders depends on the ability of
our subsidiaries to generate profits available for distribution to us and, to
the extent that they are unable to generate profits, we may be unable to pay
dividends to our shareholders.





We
are incorporated in the Republic of the Marshall Islands, which does not have a
well-developed body of corporate law, which may negatively affect the ability of
public shareholders to protect their interests





We are
incorporated under the laws of the Republic of the Marshall Islands, and our
corporate affairs are governed by our articles of incorporation and bylaws and
by the Marshall Islands Business Corporations Act, or BCA. The provisions of the
BCA resemble provisions of the corporation laws of a number of states in the
United States. However, there have been few judicial cases in the Republic of
the Marshall Islands interpreting the BCA. The rights and fiduciary
responsibilities of directors under the law of the Republic of the Marshall
Islands are not as clearly established as the rights and fiduciary
responsibilities of directors under statutes or judicial precedent in existence
in certain United States jurisdictions. Shareholder rights may differ as well.
While the BCA does specifically incorporate the non-statutory law, or judicial
case law, of the State of Delaware and other states with substantially similar
legislative provisions, public shareholders may have more difficulty in
protecting their interests in the face of actions by the management, directors
or controlling shareholders than would shareholders of a corporation
incorporated in a United States jurisdiction.





All of
our assets are located outside of the United States. Our business is operated
primarily from our offices in Athens, Greece. In addition, our directors and
officers are non-residents of the United States, and all or a substantial
portion of the assets of these non-residents are located outside the United
States. As a result, it may be difficult or impossible for you to bring an
action against us or against these individuals in the United States if you
believe that your rights have been infringed under securities laws or otherwise.
Even if you are successful in bringing an action of this kind, the laws of the
Marshall Islands and of other jurisdictions may prevent or restrict you from
enforcing a judgment against our assets or the assets of our directors and
officers. Although you may bring an original action against us, our officers and
directors in the courts of the Marshall Islands based on U.S. laws, and the
courts of the Marshall Islands may impose civil liability, including monetary
damages, against us, our officers or directors for a cause of action arising
under Marshall Islands law, it may be impracticable for you to do so given the
geographic location of the Marshall Islands.





22








There
is a risk that we could be treated as a U.S. domestic corporation for U.S.
federal income tax purposes after the merger of Star Maritime with and into Star
Bulk, with Star Bulk as the surviving corporation, or the Redomiciliation
Merger, which would adversely affect our earnings





Section
7874(b) of the U.S. Internal Revenue Code of 1986, as amended, or the Code,
provides that, unless certain requirements are satisfied, a corporation
organized outside of the United States which acquires substantially all of the
assets (through a plan or a series of related transactions) of a corporation
organized in the United States will be treated as a U.S. domestic corporation
for U.S. federal income tax purposes if shareholders of the U.S. corporation
whose assets are being acquired own at least 80% of the non-U.S. acquiring
corporation after the acquisition. If Section 7874(b) of the Code were to apply
to Star Maritime and the Redomiciliation Merger, then, among other consequences,
the Company, as the surviving entity of the Redomiciliation Merger, would be
subject to U.S. federal income tax as a U.S. domestic corporation on its
worldwide income after the Redomiciliation Merger. Upon completion of the
Redomiciliation Merger and the concurrent issuance of stock to TMT Co. Ltd., or
TMT, a shipping company headquartered in Taiwan, under the acquisition
agreements, the stockholders of Star Maritime owned less than 80% of the
Company. Therefore, the Company believes that it should not be subject to
Section 7874(b) of the Code after the Redomiciliation Merger. Star Maritime
obtained an opinion of its counsel, Seward & Kissel LLP, that Section
7874(b) should not apply to the Redomiciliation Merger. However, there is no
authority directly addressing the application of Section 7874(b) of the Code to
a transaction such as the Redomiciliation Merger where shares in a foreign
corporation such as the Company are issued concurrently with (or shortly after)
a merger. In particular, since there is no authority directly applying the
"series of related transactions" or "plan" provisions to the post-acquisition
stock ownership requirements of Section 7874(b) of the code, the U.S. Internal
Revenue Service, or the IRS, may not agree with Seward & Kissel's opinion on
this matter. Moreover, Star Maritime has not sought a ruling from the IRS on
this point. Therefore, the IRS may seek to assert that we are subject to U.S.
federal income tax on our worldwide income for taxable years after the
Redomiciliation Merger, although Seward & Kissel is of the opinion that such
an assertion should not be successful.





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





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





We expect
that we will qualify for this statutory tax exemption and we have taken this
position for U.S. federal income tax return reporting purposes for 2009 and we
intend to take this position for 2010. However, there are factual circumstances
beyond our control that could cause us to lose the benefit of this tax exemption
and thereby become subject to U.S. federal income tax on our U.S. source
shipping income. For instance, we would no longer qualify for exemption under
Section 883 of the Code for a particular taxable year if shareholders with a 5%
or greater interest in our common stock owned, in the aggregate, 50% or more of
our outstanding common stock for more than half the days during the taxable
year. Due to the factual nature of the issues involved, we can give no
assurances with regard to our tax-exempt status or that of any of our
subsidiaries.





If we are
not entitled to the exemption under Section 883 of the Code for any taxable
year, we would be subject during those years to a 4% U.S. federal income tax on
our U.S. source shipping income. The imposition of this tax would have a
negative effect on our business and would result in decreased
earnings.





23











The
preferential tax rates applicable to "qualified dividend income" are temporary,
and the enactment of proposed legislation could affect whether dividends paid by
us constitute "qualified dividend income" eligible for the preferential tax
rates





Certain
of our distributions may be treated as "qualified dividend income" eligible for
preferential rates of U.S. federal income tax to U.S. taxpayers. In the absence
of legislation extending the term for these preferential tax rates, all
dividends received by such U.S. taxpayers in tax years beginning on January 1,
2011 or later will be subject to U.S. federal income tax at the graduated tax
rates applicable to ordinary income.





In
addition, legislation has been proposed in the U.S. Congress that would, if
enacted, deny the preferential rates of U.S. federal income tax currently
imposed on "qualified dividend income" with respect to dividends received from a
non-U.S. corporation if the non-U.S. corporation is created or organized under
the laws of a jurisdiction that does not have a comprehensive income tax system.
Because the Marshall Islands imposes only limited taxes on entities organized
under its laws, it is likely that if this legislation were enacted, the
preferential tax rates of U.S. federal income tax may no longer be applicable to
distributions received from us. As of the date hereof, it is not possible to
predict with certainty whether this proposed legislation will be
enacted.





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





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





Based on
our method of operation, we take the position for U.S. federal income tax
purposes that we have not been, and are not currently, a PFIC with respect to
any taxable year. In this regard, we intend to treat the gross income we derive
or are deemed to derive from our time chartering activities as services income,
rather than rental income. Accordingly, we take the position that our income
from our time chartering activities does not constitute "passive income," and
the assets that we own and operate in connection with the production of that
income do not constitute "passive assets."





There is,
however, no direct legal authority under the PFIC rules addressing our method of
operation. In addition, we have not received an opinion of counsel with respect
to this issue. We believe there is substantial legal authority supporting our
position consisting of case law and IRS pronouncements concerning the
characterization of income derived from these time charters as services income
for other tax purposes. However, we note that there is also authority which
characterizes time charter income as rental income rather than services income
for other tax purposes. Accordingly, there is a risk that the IRS or a court of
law may not accept our position, and treat us as a PFIC. Moreover, we may
constitute a PFIC for any future taxable year if there were to be changes in the
nature and extent of our operations.





24








If the
IRS on a count were to find that we are or have been a PFIC for any taxable
year, our U.S. shareholders may face adverse U.S. federal income tax
consequences. Under the PFIC rules, unless such U.S. shareholders make an
election available under the Code (which election could itself have adverse
consequences), such U.S. shareholders would be subject to U.S. federal income
tax at the then highest income tax rates on ordinary income plus interest upon
excess distributions and upon any gain from the disposition of our common stock,
as if the excess distribution or gain had been recognized ratably over the U.S.
shareholder's holding period of our common stock.





Risks
Relating to Our Common Stock





There
may be no continuing public market for you to resell our common
stock





Our
common shares commenced trading on the Nasdaq Global Market in December 2007. We
cannot assure you that an active and liquid public market for our common shares
will continue. The price of our common stock may be volatile and may fluctuate
due to factors such as:





·
            actual
      or anticipated fluctuations in our quarterly and annual results and those
      of other public companies in our
industry;





·
            mergers
      and strategic alliances in the drybulk shipping
  industry;





·
            market
      conditions in the drybulk shipping industry and the general state of the
      securities markets;





·
            changes
      in government regulation;





·
            shortfalls
      in our operating results from levels forecast by securities analysts;
      and





·
            announcements
      concerning us or our competitors.





You may
not be able to sell your shares of our common stock in the future at the price
that you paid for them or at all. In addition, if the price of our common stock
falls below $1.00, we may be involuntarily delisted from the Nasdaq Global
Market.





Certain
stockholders hold registration rights, which may have an adverse effect on the
market price of our common stock





Initial
stockholders of Star Maritime who purchased common stock and units in private
transactions prior to Star Maritime's initial public offering have certain
registration rights which require us, under certain circumstances, to register
the resale of their shares at any time following the release of the shares from
escrow which occurred on December 15, 2008. Pursuant to those registration
rights, we have included in a universal shelf registration statement (File No.
333-156843), which was declared effective by the Commission on February 17,
2009, the resale registration of 14,305,599 shares of common stock, of which
11,981,766  are currently eligible for trading in the public market.
The resale of these common shares in addition to the registration of other
securities included in such registration statement, may have an adverse effect
on the market price of our common stock.





Future
sales of our common stock could cause the market price of our common stock or
warrants to decline





Sales of
a substantial number of shares of our common stock in the public market, or the
perception that these sales could occur, may depress the market price for our
common stock. These sales could also impair our ability to raise additional
capital through the sale of our equity securities in the future.





25








As noted
above, we have filed a universal shelf registration statement pursuant to which
we may offer and sell different types of securities and that includes the resale
registration of an aggregate of 11,981,766 common shares.  We may
issue additional shares of our common stock, warrants or other equity securities
or securities convertible into our equity securities in the future and our
stockholders may elect to sell large numbers of shares held by them from time to
time. Our amended and restated articles of incorporation authorize us to issue
300,000,000 common shares with par value $0.01 per share. As of December 31,
2009 and March 23, 2010, we had 61,104,760 shares outstanding.  As of
December 31, 2009, we had 5,916,150 warrants outstanding, all of which expired
on March 15, 2010.





Anti-takeover
provisions in our organizational documents could make it difficult for our
stockholders to replace or remove our current board of directors or have the
effect of discouraging, delaying or preventing a merger or acquisition, which
could adversely affect the market price of our common stock





Several
provisions of our amended and restated articles of incorporation and bylaws
could make it difficult for our stockholders to change the composition of our
board of directors in any one year, preventing them from changing the
composition of management. In addition, the same provisions may discourage,
delay or prevent a merger or acquisition that stockholders may consider
favorable.





These
provisions include:





·
            authorizing
      our board of directors to issue "blank check" preferred stock without
      stockholder approval;





·
            providing
      for a classified board of directors with staggered, three year
      terms;





·
            prohibiting
      cumulative voting in the election of directors;
  and





·
            authorizing
      the board to call a special meeting at any
time.





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





The
market price of our common shares has fluctuated widely since our common shares
and warrants began trading in the Nasdaq Global Market in December 2007, and may
continue to do so as a result of many factors such as actual or anticipated
fluctuations in our quarterly and annual results and those of other public
companies in our industry, mergers and strategic alliances in the shipping
industry, market conditions in the shipping industry, changes in government
regulation, shortfalls in our operating results from levels forecast by
securities analysts, announcements concerning us or our competitors and the
general state of the securities market.





The
market price of our common shares has dropped below $5.00 per share, and the
last reported sale price on The Nasdaq Global Market on March 22, 2009 was $2.82
per share. If the market price of our common shares remains below $5.00 per
share, under stock exchange rules, our shareholders will not be able to use such
shares as collateral for borrowing in margin accounts. This inability to
continue to use our common shares as collateral may lead to sales of such shares
creating downward pressure on and increased volatility in the market price of
our common shares.





The
shipping industry has been highly unpredictable and volatile. The market for
common shares in this industry may be equally volatile. Therefore, we cannot
assure you that you will be able to sell any of our common shares you may have
purchased at a price greater than or equal to its original purchase
price.





26








Item
      4.
            Information
      on the Company





A.           History
and development of the Company





We were
incorporated in the Marshall Islands on December 13, 2006. Our executive offices
are located at 7 Fragoklisias Street, 2nd
floor, Maroussi 151 25, Athens, Greece and our telephone number is 011 30 210
617 8400.





Star
Maritime Acquisition Corp., or Star Maritime, was organized under the laws of
the State of Delaware on May 13, 2005 as a blank check company formed to
acquire, through a merger, capital stock exchange, asset acquisition or similar
business combination, one or more assets or target businesses in the shipping
industry. Following the formation of Star Maritime, our officers and directors
were the holders of 9,026,924 shares of common stock representing all of our
then issued and outstanding capital stock. On December 21, 2005, Star Maritime
consummated its initial public offering of 18,867,500 units, at a price of
$10.00 per unit, each unit consisting of one share of Star Maritime common stock
and one warrant to purchase one share of Star Maritime common stock at an
exercise price of $8.00 per share. In addition, Star Maritime completed during
December 2005 a private placement of an aggregate of 1,132,500 units each unit
consisting of one share of common stock and one warrant, to Messrs. Tsirigakis
and Syllantavos, our Chief Executive Officer and Chief Financial Officer,
respectively, and Messrs. Pappas and Erhardt, our Chairman of the Board and one
of our directors. The gross proceeds of the private placement of $11.3 million
were used to pay all fees and expenses of the initial public offering and as a
result, the entire gross proceeds of the initial public offering amounting to
$188.7 million were deposited in a trust account maintained by American Stock
Transfer & Trust Company. Star Maritime's common stock and warrants started
trading on the American Stock Exchange under the symbols, SEA and SEA.WS,
respectively on December 21, 2005.





On
January 12, 2007, Star Maritime and Star Bulk entered into definitive agreements
to acquire a fleet of eight drybulk carriers with a combined cargo-carrying
capacity of approximately 692,000 dwt. from certain subsidiaries of TMT. These
eight drybulk carriers are referred to as the initial fleet. The aggregate
purchase price specified in the Master Agreement by and among the Company, Star
Maritime and TMT, or the Master Agreement for the initial fleet was $224.5
million in cash and 12,537,645 shares of our common stock, which were issued on
November 30, 2007. As additional consideration for eight vessels, we agreed to
issue 1,606,962 shares of our common stock to TMT in two installments as
follows: (i) 803,481 additional shares of our common stock, no more than 10
business days following the filing of our Annual Report on Form 20-F for the
fiscal year ended December 31, 2007, and (ii) 803,481 additional shares of our
common stock, no more than 10 business days following the filing of our Annual
Report on Form 20-F for the fiscal year ended December 31, 2008. The shares in
respect of the first installment were issued to a nominee of TMT on July 17,
2008 and the shares in respect of the second installment were issued to a
nominee of TMT on April 28, 2009.





On
November 2, 2007, the Commission declared effective our joint proxy/registration
statement filed on Forms F-1/F-4 and on November 27, 2007 we obtained
shareholder approval for the acquisition of the initial fleet and for effecting
the Redomiciliation Merger as a result of which Star Maritime merged into Star
Bulk with Star Maritime merging out of existence and Star Bulk being the
surviving entity.  Each share of Star Maritime common stock was
exchanged for one share of Star Bulk common stock and each warrant of Star
Maritime was assumed by Star Bulk with the same terms and conditions except that
each became exercisable for common stock of Star Bulk.  The
Redomiciliation Merger became effective after stock markets closed on Friday,
November 30, 2007 and the common shares and warrants of Star Maritime ceased
trading on the American Stock Exchange under the symbols SEA and SEA.WS,
respectively.  Star Bulk shares and warrants started trading on the
Nasdaq Global Market on Monday, December 3, 2007 under the ticker symbols SBLK
and SBLKW, respectively. Immediately following the





27





effective
date of the Redomiciliation Merger, TMT and its affiliates owned 30.2% of our
outstanding common stock.  F5 Capital filed a Schedule 13D/A on July
29, 2008 reporting beneficial ownership of 7.0% of our outstanding common
stock.  Mr. Nobu Su, a former member of our board of directors,
exercises voting and investment control over the securities held of record by F5
Capital, a Cayman Islands corporation, which is a nominee of TMT.





We began
our operations on December 3, 2007 with the delivery of our first vessel Star Epsilon. Three of the
eight vessels comprising our initial fleet were delivered to us by the end of
December 2007. Additionally, on December 3, 2007, we entered into an agreement
to acquire an additional Supramax vessel, Star Kappa from TMT, which
was not included in the initial fleet and was delivered to us on December 14,
2007. In 2008, we took delivery of the remaining five vessels that we purchased
from TMT, plus an additional four vessels. In April 2008 and July 2009, we
entered into agreements to sell Star IotaandStar Alpha, which were
delivered to their new owners in October 2008 and December 2009, respectively,
bringing our fleet to its current total of eleven vessels.





Vessel
Acquisitions, Dispositions and Other Significant Transactions





Vessel
Acquisitions





On
January 12, 2007, pursuant to the Master Agreement, we agreed to acquire our
initial fleet of eight drybulk carriers with a combined cargo-carrying capacity
of approximately 692,000 dwt. from certain subsidiaries of TMT. The aggregate
purchase price specified in the Master Agreement for the initial fleet was
$224.5 million in cash and 12,537,645 shares of our common stock.  As
additional consideration for the eight vessels, we agreed to issue 1,606,962
additional shares of our common stock to TMT in two installments as described
above.





On
December 3, 2007, we entered into an agreement with TMT, a company affiliated
with Mr. Nobu Su, one of our former directors, to acquire Star Kappa, a 2001 built
Supramax drybulk carrier for the aggregate purchase price of $72.0 million with
a cargo carrying capacity of approximately 52,055 dwt. We financed the total
purchase price of the initial fleet and the Star Kappa with proceeds from
Star Maritime's initial public offering, which were deposited in a trust
account. Following the delivery of this vessel to us in December 2007, it
commenced a three year time charter at an average daily hire rate of
$47,800.





On
January 22, 2008, we entered into an agreement to acquire Star Sigma, a 1991 built
Capesize drybulk carrier for the aggregate purchase price of $82.6 million,
which includes a discount of $1.1 million related to the late delivery of the
vessel to us by the sellers, with a cargo carrying capacity of approximately
184,403 dwt. We financed approximately $65.0 million of the purchase price with
borrowings under the Piraeus Bank term loan facility dated April 14, 2008, as
amended.  Star
Sigma,which was on time charter to a Japanese charterer at a gross daily
charter rate of $100,000 per day from April 2008 until March 2009 (earliest
redelivery), was redelivered to us earlier pursuant to an agreement whereby the
charterer agreed to pay the contracted rate less $8,000 per day, which is the
approximate operating cost for the vessel, from the date of the actual
redelivery in November 2008 through March 1, 2009. We received payment in full
and the vessel was trading in the spot market at a rate of approximately $14,100
per day, resulting in revenue for the vessel that is effectively higher than it
would have been under the original charter at the rate of $100,000. In March
2009, the vessel was delivered to its new charterers and commenced a three year
time charter at a gross daily average charter rate of $63,000.





On March
11, 2008, we entered into an agreement to acquire Star Omicron, a 2005 built
Supramax drybulk carrier for the aggregate purchase price of $72.0 million with
a cargo carry capacity of approximately 53,489 dwt. We financed the purchase
price through a combination of the proceeds received from the conversion of our
warrants, working capital and borrowings under our Piraeus Bank term loan
facility dated April 14, 2008, as amended. Following the delivery of this vessel
to us in April 2008, it commenced a three year time charter at a daily hire rate
of $43,000.





28








On May
22, 2008, we entered into an agreement to acquire Star Cosmo, a 2005 built
Supramax drybulk carrier for the aggregate purchase price of $70.2 million,
which includes a $1.4 million payment by us to the seller as additional
compensation for the early delivery of the vessel to us, with a cargo carry
capacity of approximately 52,247 dwt. We financed the purchase price through a
combination of the proceeds received from the conversion of our warrants and
borrowings under our Piraeus Bank term loan facility dated July 1, 2008. We
entered into a three year time charter agreement to employ this vessel at an
average daily hire rate of $39,868 following its delivery to us in July
2008.





On June
3, 2008, we entered into an agreement to acquire Star Ypsilon, a 1991 built
Capsize drybulk carrier for the aggregate purchase price of $86.9 million, which
includes a discount of $0.3 million related to the late delivery of the vessel
to us by the sellers, with a cargo carry capacity of approximately 150,940 dwt.
We financed the purchase price through a combination of the proceeds received
from the conversion of our warrants and borrowings under our Piraeus Bank term
loan facility dated April 14, 2008, as amended.  We entered into a
three year time charter agreement to employ this vessel at an average daily hire
rate of $91,932 following its delivery to us in September 2008.





On
February 18, 2010, we entered into an agreement to acquire from an unaffiliated
third party, a 2000 built, 171,000 dwt., Capesize drybulk carrier Nord-Kraft (to
be renamed Star Aurora)
vessel for approximately $42.5 million.  We plan to finance the
purchase of this vessel with a combination of cash and bank debt.  We
expect this vessel to be delivered between the third quarter of 2010 and the
first quarter of 2011.  In March 2010, we entered into a time charter
agreement with Rio Tinto for the Star
Aurora for a period of approximately three years at a gross daily rate of
$27,500.





Vessel
Dispositions





On April
24, 2008, we entered into an agreement to sell Star Iota for gross proceeds
of $18.4 million less $1.8 million of costs associated with the sale. We
delivered this vessel to its purchasers on October 6, 2008.





On July
21, 2009, we entered into agreements to sell the Star Alpha to an unaffiliated
third party for gross proceeds of approximately $19.9 million.  We
classified the Star
Alpha as an asset held for sale during the third quarter 2009 and as a
result recorded an impairment loss of $75.2 million during the year ended
December 31, 2009. We delivered the vessel to its new owners on December 21,
2009.





On
January 18, 2010, we entered into agreements to sell the Star Beta to an unaffiliated
third party for gross proceeds of approximately $22.0 million.  We
expect to deliver the vessel to its purchasers in the second quarter of 2010
following the redelivery under its current time charter.





Other
Significant Transactions





In March
2009 and December 2009, we entered into agreements with our lenders to obtain
waivers for certain covenants including minimum asset coverage covenants
contained in our loan agreements.  Please see "Item 5. Operating and
Financial Review and Prospects – Liquidity and Capital Resources – Senior
Secured Credit Facilities."





On
November 23, 2009 at our annual meeting of shareholders, our shareholders voted
to approve an amendment to our Amended and Restated Articles of Incorporation
increasing the number of common shares that we are authorized to issue from
100.0 million registered common shares, par value $0.01 per share, to 300.0
million registered common shares, par value $0.01 per share.





29








In
addition, our shareholders voted to approve an amendment to our Amended and
Restated Articles of Incorporation as set forth below that would grant the
Chairman of our Board of Directors a tie- breaking vote in the event the Board
vote is evenly split or deadlocked on a matter presented for vote. The BCA does
not currently provide for granting the Chairman a tie-breaking vote where, as in
the Company's case, there is only one class of shares outstanding. However,
there is a proposed amendment to the BCA pending before the current Session of
the Marshall Islands legislature which would allow the granting of such
tie-breaking vote to the Chairman. This amendment mirrors and is drawn from a
similar existing provision in the Delaware General Corporation Law. The Board
has deferred authorizing the necessary actions to effect such amendment to our
Amended and Restated Articles of Incorporation until such time as the BCA has
been amended to permit such amendment.





The text
of the proposed amendment to our Amended and Restated Articles of Incorporation
is set forth below.





"To the
fullest extent permitted by law, the Chairman of the Corporation's Board of
Directors shall be entitled, in his or her sole discretion, to cast an
additional vote in any situation where the votes of directors (including the
first vote of the Chairman and abstentions, if any) are evenly split on a
matter, including, without limitation, if such even split results
from:





(a)
            a
      vote of the entire membership of the Board of
  Directors;





(b)
            a
      vote of the Directors constituting a quorum at a meeting of the Board of
      Directors, or





(c)
            a
      vote of Directors actually voting at a meeting of the Board of
      Directors."





B.           Business
overview





Introduction





We are an
international company providing worldwide transportation of drybulk commodities
through our vessel-owning subsidiaries for a broad range of customers of major
and minor bulk cargoes including iron ore, coal, grain, cement and fertilizer.
We were incorporated in the Marshall Islands on December 13, 2006 as a
wholly-owned subsidiary of Star Maritime Acquisition Corp., or Star Maritime. We
merged with Star Maritime on November 30, 2007 and commenced operations on
December 3, 2007, which was the date we took delivery of our first
vessel.





Our
Fleet





We own
and operate a fleet of 11 vessels consisting of three Capesize and eight
Supramax drybulk carriers with an average age of 10.3 years and a combined cargo
carrying capacity of approximately 931,178 dwt. Our fleet carries a variety of
drybulk commodities including coal, iron ore, and grains, or major bulks, as
well as bauxite, phosphate, fertilizers and steel products, or minor bulks. We
charter all of our vessels on medium- to long-term time charters with an average
remaining term of approximately 1.3 years, other than the Star Ypsilon which is
currently employed under a COA with Companhia Vale de Rio Doce, or Vale, dated
July 14, 2009, or the Vale COA.  Under the terms of the Vale COA, we
expect to transport approximately 1,280 to 1,360 metric tons of iron ore between
Brazil and China in eight separate Capesize vessel shipments. We expect to
complete the first of eight shipments under the Vale COA by the end of April
2010.  Under the terms of our previous COA with Vale, we transported
approximately 700,000 metric tons of iron ore between Brazil and China in four
separate Capesize vessel shipments. In November 2009, we chartered-in a Capesize
vessel from a third party for a minimum of three months and a maximum of five
months at a gross daily rate of $50,000 to complete the fourth shipment under
the COA.





30








The
following table presents summary information concerning our fleet as of March
23, 2010:





Vessel
      Name
            Vessel
              Type
            
            Size
              (dwt.)
            
            
            Year
              Built
            
            
            Daily
      Gross
              Hire
      Rate
            
            Type/
              Maximum
      Remaining TermStar
      Gamma
            Supramax
            
            
            53,098
            
            
            
            2002
            
            
            $
            38,000
            
            Time
      charter/
              1.8
      yearsStar
      Delta(1)
            Supramax
            
            
            52,434
            
            
            
            2000
            
            
            $
            11,250/14,000
            
            Time
      charter/
              1.8
      yearStar
      Epsilon(2)
            Supramax
            
            
            52,402
            
            
            
            2001
            
            
            $
            16,000
            
            Time
      charter/
              0.6
      yearsStar
      Zeta
            Supramax
            
            
            52,994
            
            
            
            2003
            
            
            $
            42,500
            
            Time
      charter/
              1.0
      yearsStar
      Theta(3)
            Supramax
            
            
            52,425
            
            
            
            2003
            
            
            $
            11,300
            
            Time
      charter/
              0.2
      yearStar Kappa(4)
            Supramax
            
            
            52,055
            
            
            
            2001
            
            
            $
            14,500
            
            Time
      charter/
              1.6
      yearsStar Sigma(5)
            Capesize
            
            
            184,403
            
            
            
            1991
            
            
            $
            38,000
            
            Time
      charter/
              3.8
      yearsStar
      Omicron
            Supramax
            
            
            53,489
            
            
            
            2005
            
            
            $
            43,000
            
            Time
      charter/
              0.9
      yearsStar
      Cosmo
            Supramax
            
            
            52,247
            
            
            
            2005
            
            
            $
            35,615
            
            Time
      charter/
              0.9
      yearsStar Ypsilon(6)
            Capesize
            
            
            150,940
            
            
            
            1991
            
            
            
            
            
            COAVessel
      to be soldStar Beta (7)
            Capesize
            
            
            174,691
            
            
            
            1993
            
            
            $
            32,500
            
            Time
      Charter/
              0.1
      yearsVessel
      to be AcquiredNord-Kraft
              (TBRStar
      Aurora)
            Capesize
            
            
            171,000
            
            
            
            2000
            
            
            
            
            
            Expected
      delivery date: Q3 2010 to Q1 2011





(1)
            On
      January 30, 2009, we entered into a  time charter agreement for
      the Star Deltafor a minimum of 11 months and a maximum of 13 months, at a gross
      daily rate of $11,250. The vessel was delivered to the new charterer on
      February 7, 2009. On October 8, 2009, we agreed with the current
      charterers of the Star
      Delta to an additional two year time charter agreement, which is
      scheduled to commence immediately following the current time charter, at a
      gross daily rate of $14,000.





(2)
            On
      April 3, 2009, we entered into a time charter agreement for the Star Epsilon with the
      existing charterer, for a minimum of 63 months and a maximum of 65 months,
      at a gross daily rate of $25,500. The new time charter agreement was
      effective as of April 12, 2009 and replaced the existing charter dated
      April 30, 2008, which was for a minimum of 59 months and a maximum of 61
      months, at a gross daily rate of $32,400. In November 2009, we withdrew
      the vessel from its charterer's service due to repudiatory breach of the
      time charter contract by the charterer. We commenced arbitration
      proceedings against the charterers in London to pursue damages arising
      from such breach, which will include loss of hire. On November 6, 2009, we
      entered into a new one-year time charter agreement for the Star Epsilon with a new
      charterer at a gross daily rate of
$16,000.





31











(3)
            On
      April 17, 2009, we entered into a  time charter agreement for
      the Star Theta,for a minimum of 11 months and a maximum of 13 months, at a gross
      daily rate of $11,300. The vessel was delivered to the new charterer on
      May 17, 2009.





(4)
            On
      April 3, 2009, we entered into a  time charter agreement for the
      Star Kappa with
      the existing charterer, for a minimum of 63 months and a maximum of 65
      months, at a gross daily rate of $25,500. The new time charter agreement
      was effective as of April 7, 2009 and replaced the existing charter dated
      September 20, 2007, which was for a minimum of 35 months and a maximum of
      37 months, at a gross daily rate of $47,800. In November 2009, we withdrew
      the vessel from its charterer's service due to repudiatory breach of the
      time charter contract by the charterer. We commenced arbitration
      proceedings against the charterers in London to pursue damages arising
      from such breach, which will include loss of hire. On November 6, 2009, we
      entered into a new two year time charter agreement for the Star Kappa with a new
      charterer, at a gross daily rate of
$14,500.





(5)
            On
      May 21, 2009, we amended the existing time charter agreement for the Star Sigma with the
      existing charterer, to a minimum of 56 months and a maximum of 61 months,
      at a gross daily rate of $38,000. The new time charter agreement was
      effective as of May 1, 2009 and replaces the existing charter dated March
      6, 2008, which was for a minimum of 36 months and a maximum of 41 months,
      at an average daily rate of $63,000. In addition, the amended time charter
      agreement includes an index-based profit sharing arrangement effective as
      of March 1, 2012, pursuant to which the charterer is obligated to pay us,
      in addition to the above daily rate, 50% of the amount by which the Baltic
      Capesize Index rate exceeds
$49,000.





(6)
            On
      January 22, 2010 we nominated the Star Ypsilon to serve
      the first shipment of the Vale COA.  We expect to complete the
      first of eight shipments under the Vale COA by the end of April
      2010.





(7)
            On
      February 10, 2009, we entered into a time charter agreement for the Star Beta, for a
      minimum of 13 months and a maximum of 15 months, at a gross daily rate of
      $32,500. The vessel was delivered to the new charterer on February 14,
      2009. On September 13, 2009, we chartered-in the vessel from its charterer
      to serve the third shipment under the first COA described above. The Star Betacompleted the
      third shipment under the COA in the fourth quarter of
  2009.





On
      January 18, 2010, we entered into agreements to sell the Star Beta to an
      unaffiliated third party for a contracted sale price of $22.0 million. We
      expect to deliver the vessel to its purchasers in the second quarter of
      2010 following the redelivery from its current time
    charter.





We
actively manage the
deployment of our fleet on time charters, which generally can last up to
several years. We charter all of our vessels on medium- to long-term time
charters with an average remaining term of approximately 1.3 years, other than
the Star Ypsilon
whichis currently
employed under the Vale COA. Under time charters, the charterer pays voyage
expenses such as port, canal and fuelcosts.  Wepay
for vessel operating
expenses, which include crew costs, provisions, deck and engine stores,
lubricating oil, insurance, maintenance and repairs, as well as for
commissions.  We are also responsible for the drydocking costs
relating to each vessel. COAs relate to the carriage of multiple cargoes over
the same route and enables the COA holder to nominate different ships to perform
individual voyages. Essentially, it constitutes a number of voyage charters to
carry a specified amount of cargo during the term of the COA, which usually
spans a number of years. All of the vessel's operating, voyage and capital costs
are borne by the ship owner. The freight rate is generally set on a per cargo
ton basis.





Our
vessels operate worldwide within the trading limits imposed by our insurance
terms and do not operate in areas where United States, European Union or United
Nations sanctions have been imposed.





32








Competition





Demand
for drybulk carriers fluctuates in line with the main patterns of trade of the
major drybulk cargoes and varies according to changes in the supply and demand
for these items. We compete with other owners of drybulk carriers in the
Capesize, and Supramax size sectors. Ownership of drybulk carriers is highly
fragmented and is divided among approximately 1,500 independent drybulk carrier
owners. We compete for charters on the basis of price, vessel location, size,
age and condition of the vessel, as well as on our reputation as an owner and
operator.





Our
wholly owned subsidiary, Star Bulk Management arranges our charters (whether
voyage charters, period time charters, bareboat charters or pools) through the
use of a worldwide network of shipbrokers, who negotiate the terms of the
charters based on market conditions.  These shipbrokers advise Star
Bulk Management on a continuous basis of the availability of cargo for any
particular vessel. There may be several shipbrokers involved in any one charter.
The negotiation for a charter typically begins prior to the completion of the
previous charter in order to avoid any idle time. The terms of the charter are
based on industry standards.





Customers





As of
December 31, 2009, our vessels were chartered as follows: Dieulemar for Star Beta, KLC, for Star GammaandStarCosmo, GMI for Star DeltaandStar Omicron, Cargill for
Star Epsilon, Star ThetaandStar Kappa,
Norden A/S for Star
Zeta, Pacific Bulk for Star Sigma, and Noble
for Star
Ypsilon.  For the year ended December 31, 2009, we derived 65%
of our voyage revenues from five of our customers.





Seasonality





Demand
for vessel capacity has historically exhibited seasonal variations and, as a
result, fluctuations in charter rates.  This seasonality may result in
quarter-to-quarter volatility in our operating results for vessels trading in
the spot market.  The drybulk sector is typically stronger in the fall
and winter months in anticipation of increased consumption of coal and other raw
materials in the northern hemisphere.  As a result, our revenues from
our drybulk carriers may be weaker during the fiscal quarters ended June 30 and
September 30, and, conversely, our revenues from our drybulk carriers may be
stronger in fiscal quarters ended December 31 and March 31. Seasonality in the
sector in which we operate could materially affect our operating results and
cash available for dividends in the future.





Management
of the Fleet





As of
December 31, 2009, we had thirty-one employees. Twenty-nine of our employees,
through Star Bulk Management and Starbulk S.A., were engaged in the day to day
management of the vessels in our fleet. Star Bulk Management and Starbulk S.A.
performs operational and technical management services for the vessels in our
fleet, including chartering, marketing, capital expenditures, personnel,
accounting, paying vessel taxes and maintaining insurance.  Our Chief
Executive Officer and Chief Financial Officer are also the senior management of
Star Bulk Management. Star Bulk Management employs such number of additional
shore-based executives and employees designed to ensure the efficient
performance of its activities.





We
reimburse and/or advance funds as necessary to Star Bulk Management and Starbulk
S.A.in order for it to conduct its activities and discharge its obligations, at
cost.  We also maintain working capital reserves as may be agreed
between us and Star Bulk Management from time to time.





33








Star Bulk
Management is responsible for the management of the vessels. Star Bulk
Management's responsibilities include, inter alia, locating, purchasing,
financing and selling vessels, deciding on capital expenditures for the vessels,
paying vessels' taxes, negotiating charters for the vessels, managing the mix of
various types of charters, developing and managing the relationships with
charterers and the operational and technical management of the vessels.
Technical management includes maintenance, drydocking, repairs, insurance,
regulatory and classification society compliance, arranging for and managing
crews, appointing technical consultants and providing technical
support.





Since our
inception, we subcontracted the technical and crew management of all of our
vessels other than Star
Cosmo to Bernard Schulte Shipmanagement Ltd., or Bernhardt. Since March
14, 2009, Starbulk S.A., our wholly owned subsidiary, gradually started to
provide in-house technical management to our vessels. By November 6, 2009,
Starbulk S.A. provided the technical management to all of the vessels previously
managed by Bernhardt (i.e., all of our vessels other than the Star Cosmo).





Star Bulk
Management has entered into an agreement with Union Commercial Inc, or Union to
provide the technical and crew management for the Star Cosmo.  Under
that agreement, we pay a daily fee of $450, which is reviewed two months before
the beginning of each calendar year. The agreement continues indefinitely unless
either party terminates the agreement upon two months' written notice or a
certain termination event occurs.





Crewing





Star Bulk
Management is responsible for recruiting, either directly or through a technical
manager or a crew manager, the senior officers and all other crew members for
the vessels in our fleet.  Star Bulk Management has the responsibility
to ensure that all seamen have the qualifications and licenses required to
comply with international regulations and shipping conventions, and that the
vessels are manned by experienced and competent and trained personnel. Star Bulk
Management is also responsible for insuring that seafarers' wages and terms of
employment conform to international standards or to general collective
bargaining agreements to allow unrestricted worldwide trading of the
vessels.  Star Bulk Management has subcontracted the crewing of our
entire fleet to Bernhardt and Union. Since January 19, 2010, Star Bulk
Management and Starbulk S.A., our wholly owned subsidiaries, gradually started
to provide in-house crewing management to our vessels. As of March 23, 2010 Star
Bulk Management provides the crewing management for the Star Gamma and Starbulk S.A.
for the Star Deltaand
Star Omicron. We intend
to transfer the crewing management of all of our vessels, except for Star Cosmo, to Starbulk S.A.
by the end of September 2010.





The
International Drybulk Shipping Industry





Drybulk
cargo is cargo that is shipped in large quantities and can be easily stowed in a
single hold with little risk of cargo damage. In 2009, based on preliminary
figures, Clarksons estimates that approximately 5 billion tons of drybulk cargo
was transported by sea.





The
demand for drybulk carrier capacity is determined by the underlying demand for
commodities transported in drybulk carriers, which in turn is influenced by
trends in the global economy. The demand for drybulk carriers is determined by
the volume and geographical distribution of seaborne dry bulk trade, which in
turn is influenced by trends in the global economy. During the 1980s and 1990s
seaborne dry bulk trade increased by 1-2% per annum. However, between 2000 and
2009, seaborne dry bulk trade increased at a compound annual growth rate of
3.7%. Although no final data is available for dry bulk seaborne trade in 2009 it
is clear that the slowdown in the world economy has had an adverse impact on
trade figures for 2008 and 2009. The global drybulk carrier fleet may be divided
into four categories based on a vessel's carrying capacity.  These
categories consist of:





34











·
            Capesize
      vessels, which have carrying capacities of more than 85,000 dwt. These
      vessels generally operate along long-haul iron ore and coal trade routes.
      There are relatively few ports around the world with the infrastructure to
      accommodate vessels of this size.





·
            Panamax
      vessels have a carrying capacity of between 60,000 and 85,000 dwt. These
      vessels carry coal, grains, and, to a lesser extent, minor bulks,
      including steel products, forest products and fertilizers. Panamax vessels
      are able to pass through the Panama Canal making them more versatile than
      larger vessels.





·
            Handymax
      vessels have a carrying capacity of between 35,000 and 60,000 dwt. The
      subcategory of vessels that have a carrying capacity of between 45,000 and
      60,000 dwt are called Supramax. These vessels operate along a large number
      of geographically dispersed global trade routes mainly carrying grains and
      minor bulks. Vessels below 60,000 dwt are sometimes built with on-board
      cranes enabling them to load and discharge cargo in countries and ports
      with limited infrastructure.





·
            Handysize
      vessels have a carrying capacity of up to 35,000 dwt. These vessels carry
      exclusively minor bulk cargo. Increasingly, these vessels have operated
      along regional trading routes. Handysize vessels are well suited for small
      ports with length and draft restrictions that may lack the infrastructure
      for cargo loading and unloading.





The
supply of drybulk carriers is dependent on the delivery of new vessels and the
removal of vessels from the global fleet, either through scrapping or
loss.  As of end of February 2010, the global drybulk carrier
orderbook amounted to 277.8 million dwt, or 60% of the existing fleet at that
time, with most vessels on the orderbook expected to be delivered within 48
months. The level of scrapping activity is generally a function of scrapping
prices in relation to current and prospective charter market conditions, as well
as operating, repair and survey costs. Drybulk carriers at or over 25 years old
are considered to be scrapping candidate vessels.





Charterhire
Rates





Charterhire
rates paid for drybulk carriers are primarily a function of the underlying
balance between vessel supply and demand, although at times other factors may
play a role. Furthermore, the pattern seen in charter rates is broadly mirrored
across the different charter types and between the different drybulk carrier
categories. However, because demand for larger drybulk carriers is affected by
the volume and pattern of trade in a relatively small number of commodities,
charterhire rates (and vessel values) of larger ships tend to be more volatile
than those for smaller vessels.





In the
time charter market, rates vary depending on the length of the charter period
and vessel specific factors such as age, speed and fuel consumption. In the
voyage charter market, rates are influenced by cargo size, commodity, port dues
and canal transit fees, as well as delivery and redelivery regions. In general,
a larger cargo size is quoted at a lower rate per ton than a smaller cargo size.
Routes with costly ports or canals generally command higher rates than routes
with low port dues and no canals to transit.





Voyages
with a load port within a region that includes ports where vessels usually
discharge cargo or a discharge port within a region with ports where vessels
load cargo also are generally quoted at lower rates, because such voyages
generally increase vessel utilization by reducing the unloaded portion (or
ballast leg) that is included in the calculation of the return charter to a
loading area.





35








Within
the drybulk shipping industry, the charterhire rate references most likely to be
monitored are the freight rate indices issued by the Baltic Exchange. These
references are based on actual charterhire rates under charter entered into by
market participants as well as daily assessments provided to the Baltic Exchange
by a panel of major shipbrokers. The Baltic Panamax Index is the index with the
longest history. The Baltic Capesize Index and Baltic Handymax Index are of more
recent origin.





Charterhire
rates have fallen sharply from the highs recorded in 2008. The Baltic Dry Index,
or BDI, a daily average of charter rates in 26 shipping routes measured on a
time charter and voyage basis and covering Supramax, Panamax, and Capesize
drybulk carriers, declined from a high of 11,793 in May 2008 to 1,986 at the end
of February 2009 after reaching a low of 663 in December 2008, which represents
a decline of 94%. The BDI fell over 70% in October 2008 alone.  During
2009, the BDI was volatile, reaching a low of 772 on January 5, 2009 and a high
of 4,661 on November 19, 2009.





Vessel
Prices





Newbuilding
prices are determined by a number of factors, including the underlying balance
between shipyard output and capacity, raw material costs, freight markets and
sometimes exchange rates. In the last few years high levels of new ordering were
recorded across all sectors of shipping. As a result, most of the major
shipyards in Japan, South Korea and China have full orderbooks until the end of
2010, although the downturn in freight rates and the lack of funding to the
wider global financial crisis will lead to some of these orders being cancelled
or delayed.





Newbuilding
prices have increased significantly since 2003, due to tightness in shipyard
capacity, high levels of new ordering and stronger freight rates. However, with
the sudden and steep decline in freight rates, secondhand values and lack of new
vessel ordering, newbuilding prices have started to decline.





In the
secondhand market, the steep increase in newbuilding prices and the strength of
the charter market have also affected values, to the extent that prices rose
sharply in 2004/2005, before dipping in the early part of 2006, only to rise
thereafter to new highs in the first half of 2008. However, the sudden and sharp
downturn in freight rates since August 2008 has had a very negative impact on
secondhand values. Since then secondhand values have risen by more than 20%, but
remain well below the highs of 2008.





Environmental
and Other Regulations in the Drybulk Shipping Industry





Government
regulation and laws significantly affect the ownership and operation of our
fleet. We are subject to international conventions and treaties, national, state
and local laws and regulations in force in the countries in which our vessels
may operate or are registered relating to safety and health and environmental
protection including the storage, handling, emission, transportation and
discharge of hazardous and non-hazardous materials, and the remediation of
contamination and liability for damage to natural resources. Compliance with
such laws, regulations and other requirements entails significant expense,
including vessel modifications and implementation of certain operating
procedures.





A variety
of government and private entities subject our vessels to both scheduled and
unscheduled inspections. These entities include the local port authorities
(applicable national authorities such as the United States Coast Guard, harbor
master or equivalent), classification societies; flag state administrations
(countries of registry) and charterers, particularly terminal operators. Certain
of these entities require us to obtain permits, licenses, certificates and other
authorizations for the operation of our vessels. Failure to maintain necessary
permits or approvals could require us to incur substantial costs or temporarily
suspend the operation of one or more of our vessels.





36








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





International
Maritime Organization





The
International Maritime Organization, the United Nations agency for maritime
safety and the prevention of pollution by ships, or the IMO, has adopted the
International Convention for the Prevention of Marine Pollution, 1973, as
modified by the related Protocol of 1978 relating thereto, which has been
updated through various amendments, or the MARPOL Convention. The MARPOL
Convention establishes environmental standards relating to oil leakage or
spilling, garbage management, sewage, air emissions, handling and disposal of
noxious liquids and the handling of harmful substances in packaged forms. The
IMO adopted regulations that set forth pollution prevention requirements
applicable to drybulk carriers. These regulations have been adopted by over 150
nations, including many of the jurisdictions in which our vessels
operate.





In
September 1997, the IMO adopted Annex VI to the MARPOL Convention, Regulations
for the Prevention of Pollution from Ships, to address air pollution from ships.
Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide
emissions from all commercial vessel exhausts and prohibits deliberate emissions
of ozone depleting substances (such as halons and chlorofluorocarbons),
emissions of volatile compounds from cargo tanks, and the shipboard incineration
of specific substances. Annex VI also includes a global cap on the sulfur
content of fuel oil and allows for special areas to be established with more
stringent controls on sulfur emissions. We believe that all our vessels are
currently compliant in all material respects with these regulations. Additional
or new conventions, laws and regulations may be adopted that could require the
installation of expensive emission control systems and could adversely affect
our business, results of operations, cash flows and financial condition. In
October 2008, the IMO adopted amendments to Annex VI regarding nitrogen oxide
and sulfur oxide emissions standards which are expected to enter into force on
July 1, 2010. The amended Annex VI would reduce air pollution from vessels by,
among other things, (i) implementing a progressive reduction of sulfur oxide
emissions from ships, with the global sulfur cap reduced initially to 3.50%
(from the current cap of 4.50%), effective from January 1, 2012, then
progressively to 0.50%, effective from January 1, 2020, subject to a feasibility
review to be completed no later than 2018; and (ii) establishing new tiers of
stringent nitrogen oxide emissions standards for new marine engines, depending
on their date of installation. U.S. air emissions standards are now equivalent
to these amended Annex VI requirements, and once these amendments become
effective, we may incur costs to comply with these revised
standards.





Safety
Management System Requirements





IMO also
adopted the International Convention for the Safety of Life at Sea, or SOLAS and
the International Convention on Load Lines, or the LL Convention, which impose a
variety of standards that





37





regulate
the design and operational features of ships. The IMO periodically revises the
SOLAS and LL Convention standards. We believe that all our vessels are in
substantial compliance with SOLAS and LL Convention standards.





Under
Chapter IX of SOLAS, the International Safety Management Code for the Safe
Operation of Ships and for Pollution Prevention, or ISM Code, our operations are
also subject to environmental standards and requirements contained in the ISM
Code promulgated by the IMO. The ISM Code requires the party with operational
control of a vessel to develop an extensive safety management system that
includes, among other things, the adoption of a safety and environmental
protection policy setting forth instructions and procedures for operating its
vessels safely and describing procedures for responding to emergencies. We rely
upon the safety management system that we and our technical manager have
developed for compliance with the ISM Code. The failure of a shipowner or
bareboat charterer to comply with the ISM Code may subject such party to
increased liability, may decrease available insurance coverage for the affected
vessels and may result in a denial of access to, or detention in, certain ports.
As of the date of this filing, each of our vessels is ISM
code-certified.





The ISM
Code requires that vessel operators obtain a safety management certificate for
each vessel they operate. This certificate evidences compliance by a vessel's
management with the ISM Code requirements for a safety management system. No
vessel can obtain a safety management certificate unless its manager has been
awarded a document of compliance, issued by classification societies under the
authority of each flag state, under the ISM Code. Both Starbulk S.A. and our
appointed ship managers have obtained documents of compliance for their offices
and safety management certificates for all of our vessels for which the
certificates are required by the IMO. The document of compliance, or the DOC,
and safety management certificate, or the SMC, are renewed every five years but
the DOC is subject to audit verification annually and the SMC at least every 2.5
years.





Pollution
Control and Liability Requirements





IMO has
negotiated international conventions that impose liability for oil pollution in
international waters and the territorial waters of the signatory to such
conventions. For example, IMO adopted an International Convention for the
Control and Management of Ships' Ballast Water and Sediments, or the BWM
Convention, in February 2004. The BWM Convention's implementing regulations call
for a phased introduction of mandatory ballast water exchange requirements
(beginning in 2009), to be replaced in time with mandatory concentration limits.
The BWM Convention will not become effective until 12 months after it has been
adopted by 30 states, the combined merchant fleets of which represent not less
than 35% of the gross tonnage of the world's merchant shipping. To date there
has not been sufficient adoption of this standard for it to take
force.





Although
the United States is not a party to these conventions, many countries have
ratified and follow the liability plan adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage of 1969, as
amended in 2000, or the CLC. Under this convention and depending on whether the
country in which the damage results is a party to the 1992 Protocol to the CLC,
a vessel's registered owner is strictly liable for pollution damage caused in
the territorial waters of a contracting state by discharge of persistent oil,
subject to certain defenses. The limits on liability outlined in the 1992
Protocol use the International Monetary Fund currency unit of Special Drawing
Rights, or SDR. Under an amendment to the 1992 Protocol that became effective on
November 1, 2003, for vessels between 5,000 and 140,000 gross tons (a unit of
measurement for the total enclosed spaces within a vessel), liability is limited
to approximately $7.01 million (4.51 million SDR) plus $980.44 (631 SDR) for
each additional gross ton over 5,000. For vessels of over 140,000 gross tons,
liability is limited to $139.48 million (89.77 million SDR). As the convention
calculates liability in terms of a basket of currencies, these figures are based
on currency exchange rates of 0.643590 SDR per U.S. dollar on February 3, 2010.
The right to limit liability is forfeited under the CLC where the spill is
caused by the shipowner's actual fault and





38





under the
1992 Protocol where the spill is caused by the shipowner's intentional or
reckless conduct. Vessels trading with states that are parties to these
conventions must provide evidence of insurance covering the liability of the
owner. In jurisdictions where the CLC has not been adopted, various legislative
schemes or common law govern, and liability is imposed either on the basis of
fault or in a manner similar to that of the convention. We believe that our
protection and indemnity insurance will cover the liability under the plan
adopted by the IMO.





In March
2006, the IMO amended Annex I to MARPOL, including a new regulation relating to
oil fuel tank protection, which became effective August 1, 2007. The new
regulation will apply to various ships delivered on or after August 1, 2010. It
includes requirements for the protected location of the fuel tanks, performance
standards for accidental oil fuel outflow, a tank capacity limit and certain
other maintenance, inspection and engineering standards.





The IMO
adopted the International Convention on Civil Liability for Bunker Oil Pollution
Damage, or the Bunker Convention, to impose strict liability on shipowners for
pollution damage in jurisdictional waters of ratifying states caused by
discharges of bunker fuel. The Bunker Convention, which became effective on
November 21, 2008, requires registered owners of ships over 1,000 gross tons to
maintain insurance for pollution damage in an amount equal to the limits of
liability under the applicable national or international limitation regime (but
not exceeding the amount calculated in accordance with the Convention on
Limitation of Liability for Maritime Claims of 1976, as amended). With respect
to non-ratifying states, liability for spills or releases of oil carried as fuel
in ship's bunkers typically is determined by the national or other domestic laws
in the jurisdiction where the events or damages occur.





IMO
regulations also require owners and operators of vessels to adopt Ship Oil
Pollution Emergency Plans. Periodic training and drills for response personnel
and for vessels and their crews are required.





Compliance
Enforcement





The flag
state, as defined by the United Nations Convention on Law of the Sea, has
overall responsibility for the implementation and enforcement of international
maritime regulations for all ships granted the right to fly its flag. The
"Shipping Industry Guidelines on Flag State Performance" evaluates flag states
based on factors such as sufficiency of infrastructure, ratification of
international maritime treaties, implementation and enforcement of international
maritime regulations, supervision of surveys, casualty investigations and
participation at IMO meetings. All of our vessels are flagged in the Marshall
Islands.  Marshall Islands flagged vessels have historically received
a good assessment in the shipping industry. We recognize the importance of a
credible flag state and do not intend to use flags of convenience or flag states
with poor performance indicators.





Noncompliance
with the ISM Code or other IMO regulations may subject the shipowner or bareboat
charterer to increased liability, may lead to decreases in available insurance
coverage for affected vessels and may result in the denial of access to, or
detention in, some ports. The U.S. Coast Guard and European Union authorities
have indicated that vessels not in compliance with the ISM Code by the
applicable deadlines will be prohibited from trading in U.S. and European Union
ports, respectively. As of the date of this report, each of our vessels is ISM
Code certified. However, there can be no assurance that such certificate will be
maintained.





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





39








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





The U.S.
Oil Pollution Act of 1990, or OPA, established an extensive regulatory and
liability regime for the protection and cleanup of the environment from oil
spills. OPA affects all owners and operators whose vessels trade in the United
States, its territories and possessions or whose vessels operate in United
States waters, which includes the United States' territorial sea and its 200
nautical mile exclusive economic zone. The United States has also enacted the
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
which applies to the discharge of hazardous substances other than oil, whether
on land or at sea. Both OPA and CERCLA impact our operations.





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





·
            natural
      resources damage and the costs of assessment
  thereof;





·
            real
      and personal property damage;





·
            net
      loss of taxes, royalties, rents, fees and other lost
    revenues;





·
            lost
      profits or impairment of earning capacity due to property or natural
      resources damage;





·
            net
      cost of public services necessitated by a spill response, such as
      protection from fire, safety or health hazards;
  and





·
            loss
      of subsistence use of natural
resources.





Effective
July 31, 2009, the U.S. Coast Guard adjusted the limits of OPA liability for
non-tank vessels to the greater of $1,000 per gross ton or $0.85 million per
non-tank (e.g. drybulk) vessel that is over 3,000 gross tons (subject to
periodic adjustment for inflation). CERCLA, which applies to owners and
operators of vessels, contains a similar liability regime and provides for
cleanup, removal and natural resource damages. Liability under CERCLA is limited
to the greater of $300 per gross ton or $5 million for vessels carrying a
hazardous substance as cargo and the greater of $300 per gross ton or $0.5
million for any other vessel. These OPA and CERCLA limits of liability do not
apply if an incident was directly caused by violation of applicable U.S. federal
safety, construction or operating regulations or by a responsible party's gross
negligence or willful misconduct, or if the responsible party fails or refuses
to report the incident or to cooperate and assist in connection with oil removal
activities.





OPA and
the U.S. Coast Guard also require owners and operators of vessels to establish
and maintain with the U.S. Coast Guard evidence of financial responsibility
sufficient to meet the limit of their potential liability under OPA and CERCLA.
Vessel owners and operators may satisfy their financial responsibility
obligations by providing a proof of insurance, a surety bond, self-insurance or
a guaranty. We plan to comply with the U.S. Coast Guard's financial
responsibility regulations by providing a certificate of responsibility
evidencing sufficient self-insurance.





We
currently maintain pollution liability coverage insurance in the amount of $1.0
billion per incident for each of our vessels. If the damages from a catastrophic
spill were to exceed our insurance coverage it could have an adverse effect on
our business and results of operation.





40








OPA
specifically permits individual states to impose their own liability regimes
with regard to oil pollution incidents occurring within their boundaries, and
some states have enacted legislation providing for unlimited liability for oil
spills. In some cases, states, which have enacted such legislation, have not yet
issued implementing regulations defining vessels owners' responsibilities under
these laws. We intend to comply with all applicable state regulations in the
ports where our vessels call. We believe that we are in substantial compliance
with all applicable existing state requirements. In addition, we intend to
comply with all future applicable state regulations in the ports where our
vessels call.





Other
Environmental Initiatives





The U.S.
Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances
in U.S. navigable waters unless authorized by a duly-issued permit or exemption,
and imposes strict liability in the form of penalties for any unauthorized
discharges. The CWA also imposes substantial liability for the costs of removal,
remediation and damages and complements the remedies available under OPA and
CERCLA. In addition, most U.S. states that border a navigable waterway have
enacted environmental pollution laws that impose strict liability on a person
for removal costs and damages resulting from a discharge of oil or a release of
a hazardous substance. These laws may be more stringent than U.S. federal
law.





The U.S.
Environmental Protection Agency, or the EPA, regulates the discharge of ballast
water and other substances in U.S. waters under the CWA.  Effective
February 6, 2009, EPA regulations require vessels 79 feet in length or longer
(other than commercial fishing and recreational vessels) to comply with a Vessel
General Permit authorizing ballast water discharges and other discharges
incidental to the operation of vessels.  The Vessel General Permit
imposes technology and water-quality based effluent limits for certain types of
discharges and establishes specific inspection, monitoring, recordkeeping and
reporting requirements to ensure the effluent limits are met. U.S. Coast Guard
regulations adopted under the U.S. National Invasive Species Act, or NISA, also
impose mandatory ballast water management practices for all vessels equipped
with ballast water tanks entering or operating in U..S. waters, and the Coast
Guard recently proposed new ballast water management standards and practices,
including limits regarding ballast water releases.  Compliance with
the EPA and the U.S. Coast Guard regulations could require the installation of
equipment on our vessels to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at
potentially substantial cost, and/or otherwise restrict our vessels from
entering U.S. waters.





The U.S.
Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and
1990, or the CAA, requires the EPA to promulgate standards applicable to
emissions of volatile organic compounds and other air contaminants. Our vessels
are subject to vapor control and recovery requirements for certain cargoes when
loading, unloading, ballasting, cleaning and conducting other operations in
regulated port areas. Our vessels that operate in such port areas with
restricted cargoes are equipped with vapor recovery systems that satisfy these
requirements. The CAA also requires states to draft State Implementation Plans,
or SIPs, designed to attain national health-based air quality standards in
primarily major metropolitan and/or industrial areas. Several SIPs regulate
emissions resulting from vessel loading and unloading operations by requiring
the installation of vapor control equipment. As indicated above, our vessels
operating in covered port areas are already equipped with vapor recovery systems
that satisfy these existing requirements.





European
Union Regulations





In
October 2009, the European Union amended a directive to impose criminal
sanctions for illicit ship-source discharges of polluting substances, including
minor discharges, if committed with intent, recklessly or with serious
negligence and the discharges individually or in the aggregate result in
deterioration of the quality of water. Criminal liability for pollution may
result in substantial penalties or fines and increased civil liability
claims.





Greenhouse
Gas Regulation





The IMO
is evaluating various mandatory measures to reduce greenhouse gas emissions from
international shipping, which may include market-based instruments or a carbon
tax.  Any passage of climate control legislation or other regulatory
initiatives by the IMO, EU, the U.S. or other countries where we operate that
restrict emissions of greenhouse gases could require us to make significant
financial expenditures that we cannot predict with certainty at this
time.





Vessel
Security Regulations





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





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





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





·
            the
      development of a ship security
plan;





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





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





·
            compliance
      with flag state security certification requirements, which are reviewed
      every five years and are subject to intermediate verification every 2.5
      years.





The U.S.
Coast Guard regulations, intended to align with international maritime security
standards, exempt from MTSA vessel security measures non-U.S. vessels that have
on board, as of July 1, 2004, a valid International Ship Security Certificate
attesting to the vessel's compliance with SOLAS security requirements and the
ISPS Code. Our managers intend to implement the various security measures
addressed by MTSA, SOLAS and the ISPS Code, and we intend that our fleet will
comply with applicable security requirements. We have implemented the various
security measures addressed by the MTSA, SOLAS and the ISPS Code.





41








Inspection
by Classification Societies





Every
oceangoing vessel must be "classed" by a classification society. The
classification society certifies that the vessel is "in class," signifying that
the vessel has been built and maintained in accordance with the rules of the
classification society and complies with applicable rules and regulations of the
vessel's country of registry and the international conventions of which that
country is a member. In addition, where surveys are required by international
conventions and corresponding laws and ordinances of a flag state, the
classification society will undertake them on application or by official order,
acting on behalf of the authorities concerned.





The
classification society also undertakes on request other surveys and checks that
are required by regulations and requirements of the flag state. These surveys
are subject to agreements made in each individual case and/or to the regulations
of the country concerned.





For
maintenance of the class certification, regular and extraordinary surveys of
hull, machinery, including the electrical plant, and any special equipment
classed are required to be performed as follows:





Annual Surveys. For seagoing
ships, annual surveys are conducted for the hull and the machinery, including
the electrical plant and where applicable for special equipment classed, at
intervals of 12 months from the date of commencement of the class period
indicated in the certificate.





Intermediate Surveys.
Extended annual surveys are referred to as intermediate surveys and typically
are conducted two and one-half years after commissioning and each class renewal.
Intermediate surveys may be carried out on the occasion of the second or third
annual survey.





Class Renewal Surveys. Class
renewal surveys, also known as special surveys, 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 the
hull. At the special survey the vessel is thoroughly examined, including
audio-gauging to determine the thickness of the steel structures. Should the
thickness be found to be less than class requirements, the classification
society would prescribe steel renewals. The classification society may grant a
one-year grace period for completion of the special survey. Substantial amounts
of money may have to be spent for steel renewals to pass a special survey if the
vessel experiences excessive wear and tear. In lieu of the special survey every
four or five years, depending on whether a grace period was granted, a shipowner
has the option of arranging with the classification society for the vessel's
hull or machinery to be on a continuous survey cycle, in which every part of the
vessel would be surveyed within a five-year cycle. Upon a shipowner's request,
the surveys required for class renewal may be split according to an agreed
schedule to extend over the entire period of class. This process is referred to
as continuous class renewal.





All areas
subject to survey as defined by the classification society are required to be
surveyed at least once per class period, unless shorter intervals between
surveys are prescribed elsewhere. The period between two subsequent surveys of
each area must not exceed five years. Vessels under five years of age can waive
drydocking in order to increase available days and decrease capital
expenditures, provided the vessel is inspected underwater.





Most
vessels are also drydocked every 30 to 36 months for inspection of the
underwater parts and for repairs related to inspections. If any defects are
found, the classification surveyor will issue a "recommendation" which must be
rectified by the shipowner within prescribed time limits.





42








Most
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as "in class" by a classification society which is a member of the
International Association of Classification Societies. All our vessels are
certified as being "in class" by major Classification Societies (e.g., RINA and
Nippon Kaiji Kyokai). All new and secondhand vessels that we purchase must be
certified prior to their delivery under our standard purchase contracts and
memorandum of agreement. If the vessel is not certified on the date of closing,
we have no obligation to take delivery of the vessel.





Risk
of Loss and Liability Insurance





The
operation of any drybulk vessel includes risks such as mechanical failure, hull
damage, collision, property loss, cargo loss or damage and business interruption
due to political circumstances in foreign countries, hostilities and labor
strikes. In addition, there is always an inherent possibility of marine
disaster, including oil spills and other environmental incidents, and the
liabilities arising from owning and operating vessels in international trade.
OPA, which imposes virtually unlimited liability upon owners, operators and
demise charterers of vessels trading in the United States exclusive economic
zone for certain oil pollution accidents in the United States, has made
liability insurance more expensive for shipowners and operators trading in the
United States market.





We
maintain hull and machinery insurance, war risks insurance, protection and
indemnity cover, and freight, demurrage and defense cover for our fleet in
amounts that we believe to be prudent to cover normal risks in our operations.
However, we may not be able to achieve or maintain this level of coverage
throughout a vessel's useful life. Furthermore, while we believe that the
insurance coverage that we will obtain is adequate, not all risks can be
insured, and there can be no guarantee that any specific claim will be paid, or
that we will always be able to obtain adequate insurance coverage at reasonable
rates.





Hull
& Machinery and War Risks Insurance





We
maintain marine hull and machinery and war risks insurance, which includes the
risk of actual or constructive total loss, for all of our vessels. Our vessels
are each covered up to at least fair market value with deductibles of
$100,000—$150,000 per vessel per incident. We also maintain increased value
coverage for most of our vessels. Under this increased value coverage, in the
event of total loss of a vessel, we will be able to recover the sum insured
under the increased value policy in addition to the sum insured under the hull
and machinery policy. Increased value insurance also covers excess liabilities
which are not recoverable under our hull and machinery policy by reason of under
insurance.





Protection
and Indemnity Insurance





Protection
and indemnity insurance is provided by mutual protection and indemnity
associations, or P&I Associations, which insure liabilities to third parties
in connection with our shipping activities. This includes third-party liability
and other related expenses resulting from the injury or death of crew,
passengers and other third parties, the loss or damage to cargo, claims arising
from collisions with other vessels, damage to other third-party property,
pollution arising from oil or other substances and salvage, towing and other
related costs, including wreck removal. Our P&I coverage is subject to and
in accordance with the rules of the P&I Association in which the vessel is
entered. Protection and indemnity insurance is a form of mutual indemnity
insurance, extended by protection and indemnity mutual associations, or "clubs."
Our coverage is limited to approximately $4.25 billion, except for pollution
which is limited $1 billion and passenger and crew which is limited to $3
billion.





Our
current protection and indemnity insurance coverage for pollution is $1 billion
per vessel per incident. The fourteen P&I Associations that comprise the
International Group insure approximately 90% of the world's commercial tonnage
and have entered into a pooling agreement to reinsure each





43





association's
liabilities. Each P&I Association has capped its exposure to this pooling
agreement at $4.25 billion. As a member of a P&I Association which is a
member of the International Group, we are subject to calls payable to the
associations based on the group's claim records as well as the claim records of
all other members of the individual associations and members of the pool of
P&I Associations comprising the International Group.





Permits
and Authorizations





We are
required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses and certificates with respect to our vessels. The
kinds of permits, licenses and certificates required depend upon several
factors, including the commodity transported, the waters in which the vessel
operates, the nationality of the vessel's crew and the age of a vessel. We have
been able to obtain all permits, licenses and certificates currently required to
permit our vessels to operate. Additional laws and regulations, environmental or
otherwise, may be adopted which could limit our ability to do business or
increase the cost of us doing business.





C.           Organizational
structure





As of
December 31, 2009, the Company is the sole owner of all of the outstanding
shares of the subsidiaries listed in Note 1 of our consolidated financial
statements under Item 18. "Financial Statements."





D.           Property,
plant and equipment





We do not
own any real property. Our interests in the vessels in our fleet are our only
material properties. See Item 4. "Information on the Company—Our
Fleet."





Item
      4A.
            Unresolved
      Staff Comments





None.





Item
      5.
            Operating
      and Financial Review and Prospects





Overview





The
following management's discussion and analysis of financial condition and
results of operations should be read in conjunction with "Item 3. Key
Information – Selected Financial Data", "Item 4. Information on the Company" and
our historical consolidated financial statements and accompanying notes included
elsewhere in this report. This discussion contains forward-looking statements
that reflect our current views with respect to future events and financial
performance. Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors, such as those
set forth in the section entitled "Risk Factors" and elsewhere in this
report.





We are an
international company providing worldwide transportation solutions in the
drybulk sector through our vessels-owning subsidiaries for a broad range of
customers of major and minor bulk cargoes including iron ore, coal, grain,
cement, fertilizer, along worldwide shipping routes.





44








A.           Operating
Results





Factors
Affecting Our Results of Operations





We
charter all of our vessels on medium- to long-term time charters with terms of
approximately one to four years, other than the Star Ypsilon which is
currently employed under a COA.  Under our time charters, the
charterer typically pays us a fixed daily charterhire rate and bears all voyage
expenses, including the cost of bunkers (fuel oil) and port and canal charges.
We remain responsible for paying the chartered vessel's operating expenses,
including the cost of crewing, insuring, repairing and maintaining the vessel,
the costs of spares and consumable stores, tonnage taxes and other miscellaneous
expenses, and we also pay commissions to affiliated and unaffiliated ship
brokers and to in-house brokers associated with the charterer for the
arrangement of the relevant charter.





On
January 20, 2009, we entered into a COA with Vale.  Under the terms of
the COA, we transported approximately 700,000 metric tons of iron ore between
Brazil and China in four separate Capesize vessel shipments. In November 2009,
we chartered-in a Capesize vessel from a third party for a minimum of three
months and a maximum of five months at a gross daily rate of $50,000 to complete
the fourth shipment under the COA.  On July 14, 2009, we entered into
a second COA with Vale, or the Vale COA. Under the terms of the Vale COA, we
expect to transport approximately 1,280 to 1,360 metric tons of iron ore between
Brazil and China in eight separate Capesize vessel shipments. We expect to
complete the first of eight shipments under the Vale COA by the end of April
2010.  COAs relate to the carriage of multiple cargoes over the same
route and enables the COA holder to nominate different ships to perform
individual voyages. Essentially, it constitutes a number of voyage charters to
carry a specified amount of cargo during the term of the COA, which usually
spans a number of years. All of the vessel's operating, voyage and capital costs
are borne by the ship owner. The freight rate is generally set on a per cargo
ton basis.  Although the vessels in our fleet are primarily employed
on medium- to long-term time charters ranging from one to five years, we may
employ these and additional vessels under COAs, bareboat charters, in the spot
market or in drybulk carrier pools in the future.





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





·
            Average number of
      vessels is the number of vessels that constituted our fleet for the
      relevant period, as measured by the sum of the number of days each vessel
      was a part of our fleet during the period divided by the number of
      calendar days in that period.





·
            Ownership days are the
      total calendar days each vessel in the fleet was owned by us for the
      relevant period.





·
            Available daysare the
      total calendar days the vessels were in possession for the relevant period
      after subtracting for off-hire days with major repairs drydocking or
      special or intermediate surveys or transfer of
  ownership.





·
            Voyage daysare the
      total days the vessels were in our possession for the relevant period
      after subtracting all off-hire days incurred for any reason (including
      off-hire for drydocking, major repairs, special or intermediate
      surveys).





·
            Fleet utilization is
      calculated by dividing voyage days by available days for the relevant
      period and takes into account the dry-docking
  periods.





45








The
following table reflects our voyage days, ownership days, fleet utilization and
TCE rates for the periods indicated:





(TCE
      rates expressed in U.S. dollars)
            Year
      Ended
            
            Year
      EndedDecember
              31,
      2008
            
            December
              31,
      2009Average
      number of vessels
            
            10.76
            
            
            
            11.97Number
      of vessels (as of the last day of the periods reported)
            
            12
            
            
            
            11Average
      age of operational fleet (in years)
            
            9.7
            
            
            
            10.0Ownership
      days
            
            3,933
            
            
            
            4,370Available
      days
            
            3,712
            
            
            
            4,240Voyage
      days for fleet
            
            3,618
            
            
            
            4,117Fleet
      Utilization
            
            98
            %
            
            
            97
            %Time
      charter equivalent rate
            $
            42,799
            
            
            $
            29,450





Time
Charter Equivalent (TCE)





Time charter equivalent rate, or TCE
rate, is a measure of the average daily revenue performance of a vessel
on a per voyage basis. Our method of calculating TCE rate is determined by
dividing voyage revenues (net of voyage expenses and amortization of fair value
of above/below market acquired time charter agreements) by voyage days for the
relevant time period. Voyage expenses primarily consist of port, canal and fuel
costs that are unique to a particular voyage, which would otherwise be paid by
the charterer under a time charter contract, as well as commissions. TCE rate is
a standard shipping industry performance measure used primarily to compare
period-to-period changes in a shipping company's performance despite changes in
the mix of charter types (i.e., spot charters, time charters and bareboat
charters) under which the vessels may be employed between the
periods.  We included TCE revenues, a non-GAAP measure, as it provides
additional meaningful information in conjunction with voyage revenues, the most
directly comparable GAAP measure, because it assists our management in making
decisions regarding the deployment and use of our vessels and in evaluating
their financial performance.  TCE rate is also included herein because
it is a standard shipping industry performance measure used primarily to compare
period-to-period changes in a shipping company's performance despite changes in
the mix of charter types (i.e. spot charters, time charters and bareboat
charters) under which the vessels may be employed between the periods and
because we believe that it presents useful information to investors, and our
calculation of TCE may not be comparable to that reported by other
companies.





The
following table reflects the calculation of our TCE rates and reconciliation of
TCE revenue as reflected in the consolidated statement of income:





(In
      thousands of Dollars)
            
            Year
      Ended
              December 31,
      2007
            
            
            Year
      Ended
              December
      31, 2008
            
            
            Year
      Ended December 31, 2009Voyage
      revenues
            
            
            3,633
            
            
            
            238,883
            
            
            
            142,351Less:Voyage
      expenses
            
            
            (43
            )
            
            
            (3,504
            )
            
            
            (15,374
            )Amortization
      of fair value of above/below market acquired time charter
      agreements
            
            
            (1,437
            )
            
            
            (80,533
            )
            
            
            (5,735
            )Time
      Charter equivalent revenues
            
            
            2,153
            
            
            
            154,846
            
            
            
            121,242Total
      voyage days for fleet
            
            
            69
            
            
            
            3,618
            
            
            
            4,117Time
      charter equivalent (TCE) rate (in Dollars)
            
            
            31,203
            
            
            
            42,799
            
            
            
            29,450








46








Voyage
Revenues





Voyage
revenues are driven primarily by the number of vessels in our fleet, the number
of voyage days and the amount of daily charterhire, or time charter equivalent,
that our vessels earn under period charters, which, in turn, are affected by a
number of factors, including our decisions relating to vessel acquisitions and
disposals, the amount of time that we spend positioning our vessels, the amount
of time that our vessels spend in drydock undergoing repairs, maintenance and
upgrade work, the age, condition and specifications of our vessels, levels of
supply and demand in the seaborne transportation market and other factors
affecting spot market charter rates for vessels.





Vessels
operating on time charters for a certain period of time provide more predictable
cash flows over that period of time, but can yield lower profit margins than
vessels operating in the spot charter market during periods characterized by
favorable market conditions. Vessels operating in the spot charter market
generate revenues that are less predictable but may enable us to capture
increased profit margins during periods of improvements in charter rates
although we would be exposed to the risk of declining vessel rates, which may
have a materially adverse impact on our financial performance. If we employ
vessels on period time charters, future spot market rates may be higher or lower
than the rates at which we have employed our vessels on period time
charters.





Vessel
Voyage Expenses





Voyage
expenses include hire paid for chartered-in vessels, port and canal charges,
fuel (bunker) expenses and brokerage commissions payable to related and third
parties.





Our
voyage expenses primarily consist of hire paid for chartered-in vessels and
commissions paid for the chartering of our vessels.





Vessel
Operating Expenses





Vessel
operating expenses include crew wages and related costs, the cost of insurance
and vessel registry, expenses relating to repairs and maintenance, the costs of
spares and consumable stores, tonnage taxes, regulatory fees, technical
management fees and other miscellaneous expenses. Other factors beyond our
control, some of which may affect the shipping industry in general, including,
for instance, developments relating to market prices for crew wages, bunkers and
insurance, may also cause these expenses to increase. Technical vessel managers
established an operating expense budget for each vessel and perform the
day-to-day management of the vessels. Star Bulk Management monitors the
performance of each of the technical vessel managers by comparing actual vessel
operating expenses with the operating expense budget for each vessel. We are
responsible for the costs of any deviations from the budgeted
amounts.





Depreciation





We
depreciate our vessels on a straight-line basis over their estimated useful
lives determined to be 25 years from the date of their initial delivery from the
shipyard. Depreciation is based on cost less the estimated residual
value.





Vessel
Management





Our
vessels operate worldwide within the trading limits imposed by our insurance
terms and do not operate in areas where United States, European Union or United
Nations sanctions have been imposed.





47











We
reimburse and/or advance funds as necessary to Star Bulk Management in order for
it to conduct its activities and discharge its obligations, at cost. We also
maintain working capital reserves as may be agreed between us and Star Bulk
Management from time to time.





Star Bulk
Management is responsible for the management of the vessels. Star Bulk
Management's responsibilities include, inter alia, locating, purchasing,
financing and selling vessels, deciding on capital expenditures for the vessels,
paying vessels' taxes, negotiating charters for the vessels, managing the mix of
various types of charters, developing and managing the relationships with
charterers and the operational and technical management of the vessels.
Technical management includes maintenance, drydocking, repairs, insurance,
regulatory and classification society compliance, arranging for and managing
crews, appointing technical consultants and providing technical
support.  Please see Item 4. "Information on the Company – History and
development of the Company – Management of the Fleet" for a discussion of our
management fees.





General
and Administrative Expenses





We incur
general and administrative expenses, including our onshore personnel related
expenses, legal and accounting expenses.





Interest
and Finance Costs





We defer
financing fees and expenses incurred upon entering into our credit facility and
amortize them to interest and financing costs over the term of the underlying
obligation using the effective interest method.





Interest
income





We earn
interest income on our cash deposits with our lenders.





Inflation





Inflation
does not have a material effect on our expenses given current economic
conditions. In the event that significant global inflationary pressures appear,
these pressures would increase our operating, voyage, administrative and
financing costs.





Special
or Intermediate Survey and Drydocking Costs





We
utilize  the direct expense method, under which we expense all
drydocking costs as incurred.





Lack
of Historical Operating Data for Vessels before Their Acquisition by
Us





Consistent
with shipping industry practice, other than inspection of the physical condition
of the vessels and examinations of classification society records, there is no
historical financial due diligence process when we acquire vessels. Accordingly,
we do not obtain the historical operating data for the vessels from the sellers
because that information is not material to our decision to make vessel
acquisitions, nor do we believe it would be helpful to potential investors in
our stock in assessing our business or profitability. Most vessels are sold
under a standardized agreement, which, among other things, provides the buyer
with the right to inspect the vessel and the vessel's classification society
records. The standard agreement does not give the buyer the right to inspect, or
receive copies of, the historical operating data of the vessel. Prior to the
delivery of a purchased vessel, the seller typically





48





removes
from the vessel all records, including past financial records and accounts
related to the vessel. In addition, the technical management agreement between
the seller's technical manager and the seller is automatically terminated and
the vessel's trading certificates are revoked by its flag state following a
change in ownership.





Consistent
with shipping industry practice, we treat the acquisition of a vessel (whether
acquired with or without charter) as the acquisition of an asset rather than a
business, which we believe to be in accordance with applicable US GAAP and
Commission rules. Where a vessel has been under a voyage charter, the vessel is
delivered to the buyer free of charter, and it is rare in the shipping industry
for the last charterer of the vessel in the hands of the seller to continue as
the first charterer of the vessel in the hands of the buyer. All of the vessels
in our current fleet have been acquired with time charters attached, with the
exception of the Star Beta,the Star Sigma
and the Star Omicron.
In most cases, when a vessel is under time charter and the buyer wishes to
assume that charter, the vessel cannot be acquired without the charterer's
consent and the buyer entering into a separate direct agreement (called a
"novation agreement") with the charterer to assume the charter. The purchase of
a vessel itself does not transfer the charter because it is a separate service
agreement between the vessel owner and the charterer.





Where we
identify any intangible assets or liabilities associated with the acquisition of
a vessel, we allocate the purchase price of acquired tangible and intangible
assets based on their relative fair values. Where we have assumed an existing
charter obligation or entered into a time charter with the existing charterer in
connection with the purchase of a vessel with the time charter agreement at
charter rates that are less than market charter rates, we record a liability,
based on the difference between the assumed charter agreement rate and the
market charter rate for an equivalent charter agreement. Conversely, where we
assume an existing charter obligation or enter into a time charter with the
existing charterer in connection with the purchase of a vessel with the charter
agreement at charter rates that are above prevailing market charter rates, we
record an asset, based on the difference between the market charter rate and the
assumed contracted charter rate for an equivalent vessel. This determination is
made at the time the vessel is delivered to us, and such assets and liabilities
are amortized to revenue over the remaining period of the charter.





When we
purchase a vessel and assume or renegotiate a related time charter, we must take
the following steps before the vessel will be ready to commence
operations:





·
            obtain
      the charterer's consent to us as the new
owner;





·
            obtain
      the charterer's consent to a new technical
  manager;





·
            in
      some cases, obtain the charterer's consent to a new flag for the
      vessel;





·
            arrange
      for a new crew for the vessel, and where the vessel is on charter, in some
      cases, the crew must be approved by the
  charterer;





·
            replace
      all hired equipment on board, such as gas cylinders and communication
      equipment;





·
            negotiate
      and enter into new insurance contracts for the vessel through our own
      insurance brokers;





·
            register
      the vessel under a flag state and perform the related inspections in order
      to obtain new trading certificates from the flag
  state;





·
            implement
      a new planned maintenance program for the vessel;
  and





·
            ensure
      that the new technical manager obtains new certificates for compliance
      with the safety and vessel security regulations of the flag
      state.





49








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





Our
business is comprised of the following main elements:





·
            employment
      and operation of our drybulk vessels;
and





·
            management
      of the financial, general and administrative elements involved in the
      conduct of our business and ownership of our drybulk
    vessels.





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





·
            vessel
      maintenance and repair;





·
            crew
      selection and training;





·
            vessel
      spares and stores supply;





·
            contingency
      response planning;





·
            onboard
      safety procedures auditing;





·
            accounting;





·
            vessel
      insurance arrangement;





·
            vessel
      chartering;





·
            vessel
      security training and security response plans
  (ISPS);





·
            obtain
      ISM certification and audit for each vessel within the six months of
      taking over a vessel;





·
            vessel
      hire management;





·
            vessel
      surveying; and





·
            vessel
      performance monitoring.





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





·
            management
      of our financial resources, including banking relationships (i.e.,
      administration of bank loans and bank
accounts);





·
            management
      of our accounting system and records and financial
    reporting;





·
            administration
      of the legal and regulatory requirements affecting our business and
      assets; and





·
            management
      of the relationships with our service providers and
    customers.





The
principal factors that affect our profitability, cash flows and shareholders'
return on investment include:





·
            rates
      and periods of charterhire;





·
            levels
      of vessel operating expenses;





·
            depreciation
      and amortization expenses;





50











·
            financing
      costs; and





·
            fluctuations
      in foreign exchange rates.





Critical
Accounting Policies





We make
certain estimates and judgments in connection with the preparation of our
consolidated financial statements, which are prepared in accordance with
accounting principles generally accepted in the United States, or US GAAP, that
affect the reported amount of assets and liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities at the date of our
consolidated financial statements. Actual results may differ from these
estimates under different assumptions or conditions.





Critical
accounting policies are those that reflect significant judgments or
uncertainties, and potentially result in materially different results under
different assumptions and conditions. We have described below what it believes
will be the most critical accounting policies that involve a high degree of
judgment and the methods of their application.





Impairment of long-lived
assets.We follow guidance related to Impairment or Disposal
of Long-lived Assets, which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The standard requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. When the
estimate of undiscounted cash flows, excluding interest charges, expected to be
generated by the use of the asset is less than its carrying amount, we should
evaluate the asset for an impairment loss. Measurement of the impairment loss is
based on the fair value. In this respect, management regularly reviews the
carrying amount of the vessels on vessel by vessel basis when events and
circumstances indicate that the carrying amount of the vessels might not be
recoverable.  As of December 31, 2008 and 2009, we performed an
impairment review of our vessels due to the global economic downturn and the
prevailing conditions in the shipping industry.  We compared
undiscounted cash flows to the carrying values for our vessels to determine if
the assets were impaired.  Our management's subjective judgment is
required in making assumptions that are used in forecasting future operating
results used in this method.  Such judgment is based on historical
trends as well as future expectations regarding future charter rates, vessel
operating expenses and fleet utilization that were applied over the remaining
useful life of the vessel.  Expected expenditures for scheduled
vessels' maintenance and vessels' operating expenses are based on historical
data and adjusted annually for inflation.  The Company has assumed no
change in the remaining useful life of the current fleet.  These
estimates are consistent with the plans and forecasts used by management to
conduct our business.  As a result of this analysis, no assets were
considered to be impaired, and we did not recognize any impairment charge for
our vessels other than Star
Iota which was classified as held for sale during the year ended December
31, 2008 and Star Alpha
during the year ended December 31, 2009.





Vessel
Acquisitions.  Vessels are stated at cost, which consists of
the purchase price and any material expenses incurred upon acquisition, such as
initial repairs, improvements, delivery expenses and other expenditures to
prepare the vessel for its initial voyage. Otherwise these amounts are charged
to expense as incurred.





The
aggregate purchase price paid for the eight vessels in our initial fleet from
certain subsidiaries of TMT consisted of cash and our common shares. The stock
consideration was measured based on the fair market value of the shares at the
time each vessel was delivered.  The additional stock consideration of
1,606,962 common shares was measured when TMT's performance under the Master
Agreement was complete when it delivered the last of the eight vessels in our
initial fleet on March 7, 2008. The aggregate purchase price, which consisted of
cash and stock consideration, was allocated to the acquired vessels based on the
relative fair values of the vessels on their respective dates of delivery to
us.





51








Depreciation.The cost of
each of our vessels is depreciated beginning when the vessel is ready for its
intended use, on a straight-line basis over the vessel's remaining economic
useful life, after considering the estimated residual value. Management
estimates the useful life of our vessels to be 25 years from the date of initial
delivery from the shipyard. When regulations place limitations over the ability
of a vessel to trade on a worldwide basis, its remaining useful life is adjusted
at the date such regulations are adopted. Depreciation expense is calculated
based on cost less the estimated residual scrap value. We estimate scrap value
by taking the cost of steel times the weight of the ship noted in lightweight
ton, or lwt. There was no change in this estimate during the years ending
December 31, 2007, 2008 and 2009 and we believe there will be no change in the
near future.





Fair value of above/below market
acquired time charter: We record all
identified tangible and intangible assets associated with the acquisition of a
vessel or liabilities at their relative fair value.  Fair value of
above or below market acquired time charters is determined by comparing existing
charter rates in the acquired time charter agreements with the market rates for
equivalent time charter agreements prevailing at the time the foregoing vessels
are delivered. The present values representing the fair value of the above or
below market acquired time charters are recorded as an intangible asset or
liability, respectively.  Such intangible asset or liability is
recognized ratably as an adjustment to revenues over the remaining term of the
assumed time charter.





As a
result of downturn in the shipping industry during the fourth quarter of 2008,
we revised our original assumptions of the latest available redelivery dates
used in determining the term of its below and above market acquired time charter
agreements. Under the guidance related to Accounting Changes and Error
Corrections this revision was treated as a change in accounting estimate and was
accounted for prospectively beginning October 1, 2008. The unamortized balance
of below market acquired time charter agreements was amortized on an accelerated
basis assuming the earliest redelivery dates of vessels under existing time
charter agreements. This change had a positive impact on revenue of $13.0
million for the year ended December 31, 2008.





Due to
early time charter terminations during the year ended December 31, 2009, the
remaining unamortized balances of the intangible assets and liabilities
associated with such below or above market acquired time charters were
recognized in revenue upon respective time charter termination. Refer to note 6
of our consolidated financial statements.








52








Equity incentive plan
awards.Stock-based
compensation represents vested and non-vested restricted shares granted to
employees and to non-employee directors, for their services as directors, and is
included in "General and administrative expenses" in the consolidated statements
of operations. These shares are measured at their fair value equal to the market
value of our common stock on the grant date. The shares that do not contain any
future service vesting conditions are considered vested shares and a total fair
value of such shares is expensed on the grant date. The shares that contain a
time-based service vesting conditions are considered non-vested shares on the
grant date and a total fair value of such shares is recognized using the
accelerated method.





We
currently assume that all non-vested shares will vest and do not include
estimated forfeitures in determining the total stock-based compensation expense.
We will, however, re-evaluate the reasonableness of our assumption at each
reporting period. We pay dividends on all non-vested shares regardless of
whether they have has vested and there is an obligation of the employee to
return the dividend when employment ceases. The retained dividends on restricted
share grantee awards that are expected to vest were charged to retained
earnings.





Recent
Accounting Pronouncements





(i)
            In
      March 2008, new guidance was issued with the intent to provide users of
      financial statements with an enhanced understanding of derivative
      instruments and hedging activities. The new guidance requires qualitative
      disclosures about objectives and strategies for using derivatives,
      quantitative disclosures about fair value amounts of and gains and losses
      on instruments, and disclosures about credit-risk-related contingent
      features in derivative agreements. This guidance was effective for
      financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008. This guidance does not require comparative
      disclosures for earlier periods at initial adoption. The Company adopted
      this guidance in the first quarter of
2009.





(ii)
            In
      June 2008, new guidance clarified that all outstanding non-vested
      share-based payment awards that contain rights to nonforfeitable dividends
      participate in undistributed earnings with common shareholders. Awards of
      this nature are considered participating securities, and the two-class
      method of computing basic and diluted earnings per share must be applied.
      The guidance was effective for fiscal years beginning after December 15,
      2008. The adoption of this new guidance did not have an impact on our
      condensed consolidated financial statements as dividends are required to
      be returned to the entity if the employee forfeits the
    award.





(iii)
            In
      June 2009, the Financial Accounting Standards Board ("FASB") issued
      Accounting Standards Codification and the Hierarchy of Generally Accepted
      Accounting Principles (the "ASC" or the "Codification"), which became the
      single source of authoritative U.S. GAAP recognized by the FASB to be
      applied by nongovernmental entities. The Codification's content carries
      the same level of authority, effectively superseding previous guidance. In
      other words, the GAAP hierarchy was modified to include only two levels of
      GAAP: authoritative and no authoritative. The guidance is effective for
      financial statements issued for interim and annual periods ending after
      September 15, 2009. The Company adopted the new guidance in the third
      quarter of 2009 and revised references to US GAAP in these condensed
      consolidated financial statements to reflect the guidance in the
      Codification.





53








(iv)
            In
      June 2009, new guidance was issued with regards to the consolidation of
      variable interest entities ("VIE"). This guidance responds to concerns
      about the application of certain key provisions of the FASB
      Interpretation, including those regarding the transparency of the
      involvement with VIEs. The new guidance revises the approach to
      determining the primary beneficiary of a VIE to be more qualitative in
      nature and requires companies to more frequently reassess whether they
      must consolidate a VIE. Specifically, the new guidance requires a
      qualitative approach to identifying a controlling financial interest in a
      VIE and requires ongoing assessment of whether an entity is a VIE and
      whether an interest in a VIE makes the holder the primary beneficiary of
      the VIE. In addition, the standard requires additional disclosures about
      the involvement with a VIE and any significant changes in risk exposure
      due to that involvement.  This new guidance is effective from
      January 1, 2010. The adoption of this pronouncement is not expected to
      have a significant impact on the Company's financial
      statements.





Results
of Operations





Star
Maritime was organized under the laws of the State of Delaware on May 13, 2005
as a blank check company formed to acquire, through a merger, capital stock
exchange, asset acquisition or similar business combination, one or more assets
or target businesses in the shipping industry.





On
November 27, 2007, the Company obtained shareholder approval for the acquisition
of the initial fleet of eight drybulk carriers and for effecting the
Redomiciliation Merger whereby Star Maritime merged with and into its wholly
owned subsidiary at the time Star Bulk with Star Bulk as the surviving
entity.  The Redomiciliation Merger was completed on November 30,
2007.  Our first vessel was delivered on December 3,
2007.  Thus, we cannot present a meaningful comparison of our results
of operations for the years ended December 31, 2008 to any of the prior
reporting periods.





During
the period from the Star Maritime's inception to the date Star Bulk commenced
operations, the Company was a development stage enterprise in accordance with
guidance related to Accounting and Reporting By Development Stage
Companies.





Year
ended December 31, 2009 compared to the year ended December 31,
2008





Voyage
Revenues: Voyage revenues for the years ended December 31, 2009 and 2008
were approximately $142.4 million and $238.9 million, respectively. This
decrease is mainly due to the decreased amortization of fair value of
below/above market acquired time charters to $5.7 million for the year ended
December 31, 2009 compared to $80.5 million for the year ended December 31,
2008. Although the average number of vessels was increased to 11.97 vessels for
the year ended December 31, 2009 as compared to 10.76 vessels for the year ended
December 31, 2008, lower charter rates earned for most of our vessels during
2009 resulted in a decrease in the average TCE rate, a non US GAAP measure,
which was $29,450 per day during the year ended December 31, 2009 as compared to
$42,799 per day for the year ended December 31, 2008. For further information
concerning our calculation of TCE rate, please see Item 5. "Operating and
Financial Review and Prospects - Operating Results."





Voyage
Expenses: For the years ended December 31, 2009 and 2008, voyage
expenses, which mainly consisted of commissions payable to brokers for the year
2008, were approximately $15.4 million and $3.5 million, respectively.
Consistent with drybulk industry practice, we paid broker commissions ranging
from 0% to 2.50% of the total daily charterhire rate of each charter to ship
brokers associated with the charterers, depending on the number of brokers
involved with arranging the charter. Voyage expenses also consist of hire paid
for chartered-in vessels, port, canal and fuel costs. There was an increase of
$11.9 million in voyage expenses in 2009 as compared to 2008. The increase is
mainly due to





54





the fact
that on September 13, 2009 we chartered-in the vessel Star Beta from its charterer
to serve the third shipment under the COA with Vale and on November 6, 2009 we
also chartered-in a third party vessel to serve the fourth shipment under the
same COA.





Vessel
Operating Expenses: For
the years ended December 31, 2009 and 2008, our vessel operating expenses were
approximately $30.2 million and $26.2 million, respectively. Vessel operating
expenses include crew wages and related costs, the cost of insurance, expenses
relating to repairs and maintenance, the cost of spares and consumable stores,
tonnage taxes and other miscellaneous expenses. The increase in operating
expenses during the year ended December 31, 2009, was primarily due to the
operation of a larger fleet, higher stores and spares expenses related to the
change of management of our vessels.





Drydocking
Expenses: For the year ended December 31, 2009 and 2008, our drydocking
expenses were $6.1 million and $7.9 million. During the years ended December 31,
2009 and 2008, four and five vessels, respectively, underwent their periodic
drydocking survey. In 2008 one vessel underwent unscheduled
repairs.





Depreciation:
We depreciate our vessels based on a straight line basis over the expected
useful life of each vessel, which is 25 years from the date of their initial
delivery from the shipyard. Depreciation is based on the cost of the vessel less
its estimated residual value, which is estimated at $200 per lwt, at the date of
the vessel's acquisition. Secondhand vessels are depreciated from the date of
their acquisition through their remaining estimated useful life. For years ended
December 31, 2009 and 2008, we recorded vessel depreciation charges of
approximately $58.3 million and $51.1 million, respectively. The increase was
primarily due to the operation of a larger fleet.





Vessel Impairment
Loss: On July 21, 2009, we agreed to sell the Star Alpha, a vessel from
our initial fleet, to a third party for a contracted sale price of $19.9
million.  We delivered this vessel to its purchasers on December 21,
2009.  Star Alpha was classified as asset held for sale during the
third quarter of 2009 which resulted in an impairment loss of $75.2 million as
the vessel was recorded at the lower of its carrying amount or fair value less
cost to sell.





On April
24, 2008, we entered into an agreement to sell the Star Iota for gross proceeds
of $18.4 million less $1.8 million of costs associated with the
sale.  We delivered this vessel to its purchasers on October 6,
2008.  The Star
Iota was classified as a vessel held for sale during the first quarter of
2008 which resulted in an impairment loss of $3.6 million as the vessel was
recorded at the lower of its carrying amount or fair value less cost to
sell.





Gain/loss on
derivative: Effective December 2008, we entered into several FFAs on the
Capesize and Panamax index.  We also entered into bunkers swap
agreements during the fourth quarter of 2009. During the years ended December
31, 2009 and 2008, both the change in fair market value and the settlements of
our FFAs and bunker swaps resulted in a loss of $2.2 million and a gain of $0.25
million, respectively.





Gain on time
charter agreement termination:Star Alpha, which was on time
charter at a gross daily charter rate of $47,500 per day for the period from
January 9, 2008 until January 16, 2009, and was redelivered to us by its
charterers approximately one month prior to the earliest redelivery date per the
time charter agreement. Under the accounting provisions applicable to intangible
assets, we recognized a gain on a time charter agreement termination of $10.1
million, which relates to the unamortized fair value of below market acquired
time charter on a vessel redelivery date.





55








Star Theta was also
redelivered to us by its charterers on March 15, 2009, approximately twenty-nine
days prior to the earliest redelivery date per the time charter
agreement.  We recognized a gain on time charter agreement termination
amounting to $ 0.8 million. In addition, we received $0.3 million from its
charterers relating to the early termination of this charter party, which was
also recorded as a gain on time charter termination.





The Star Sigma,which was on time
charter to a Japanese charterer at a gross daily charter rate of $100,000 per
day from April 2008 until March 2009 (earliest redelivery), was redelivered to
us earlier, in mid-November 2008, pursuant to an agreement whereby the charterer
agreed to pay the contracted rate less $8,000 per day, which is the approximate
operating cost for the vessel, from the date of the actual redelivery in
November 2008 through March 1, 2009.  This amount net of commissions
was approximately $9.7 million, which was collected and recognized under
operating results in the consolidated statements of operations for the year
ended December 31, 2008.





Loss on time
charter agreement termination: The vessel Star Kappa, which was on time
charter at an average gross daily charter rate of $25,500 per day for the period
from April 12, 2009 until July 12, 2014, was redelivered to us by its charterers
prior to the earliest redelivery date per the time charter agreement. We have
recognized the loss on time charter agreement termination of $0.9, which relates
to the unamortized fair value of above-market acquired time charter on a vessel
redelivery date.





The
vessel Star Ypsilon,
which was on time charter at an average gross daily charter rate of $91,932 per
day for the period from September 18, 2008 until July 4, 2011, was redelivered
to us by its charterers prior to the earliest redelivery date per the time
charter agreement. We have recognized the loss on time charter agreement
termination of $10.1 million, which relates to the unamortized fair value of
above-market acquired time charter on a vessel redelivery date. In addition, we
recognized a gain amounting to $5.0 million which represents the deferred
revenue from the terminated time charter contract.





General and
Administrative Expenses: For the years ended December 31, 2009 and 2008,
we incurred general and administrative expenses of approximately $8.7 million
and $12.4 million, respectively. For the year ended December 31, 2009, our
general and administrative expenses include the salaries and other related costs
of the executive officers and other employees ($3.3 million), our office
renovation costs and rents, legal, accounting costs and consultancy fees,
regulatory compliance costs ($3.6 million related to professional fees) and
costs related to non-vested stock grants under the equity incentive plan ($1.8
million). Furthermore, for the year ended December 31, 2008, our general and
administrative expenses include the salaries and other related costs of the
executive officers and other employees ($2.9 million), our office renovation
costs and rents, legal, accounting costs and consultancy fees, regulatory
compliance costs ($3.8 million related to professional fees) and costs related
to non-vested stock grants under the equity incentive plan ($4.0
million).





Interest Expenses
and Finance Costs: For the year ended December 31, 2009 and 2008, our
interest and finance costs under our term loan facilities totaled approximately
$9.9 million and $10.2 million, respectively. Although the weighted average
interest decreased in 2009 to 3.33% from 4.39% for 2008, the average loan
outstanding increased in 2009 to $273.1 million as compared to $217.1 million
for 2008.





Interest
Income: For the years ended December 31, 2009 and 2008, interest income
was $0.8 million and $1.2 million, respectively.





56








Year
ended December 31, 2008 compared to the year ended December 31,
2007





Voyage
Revenues: Voyage revenues for the years ended December 31, 2008 and 2007
were approximately $238.9 million and $3.6 million, respectively, which amounts
include the amortization of the fair value of below/above market attached time
charters in the amount of $80.5 million and $1.4 million,
respectively.  The increase in voyage revenues was primarily due to
the fact that an average of 10.8 vessels were owned and operated during the year
ended December 31, 2008, earning an average TCE rate, a non US GAAP measure of
$42,799 per day as compared to an average of 0.21 vessels owned and operated
during the year ended December 31, 2007, earning an average TCE rate of $31,203
per day. For further information concerning our calculation of TCE rate, please
see Item 5. "Operating and Financial Review and Prospects - Operating
Results."





Voyage
Expenses: For the years ended December 31, 2008 and 2007, voyage
expenses, which mainly consist of commissions payable to brokers, were
approximately $3.5 million and $0.04 million, respectively. Consistent with
drybulk industry practice, we paid broker commissions ranging from 0% to 2.50%
of the total daily charterhire rate of each charter to ship brokers associated
with the charterers, depending on the number of brokers involved with arranging
the charter.





Vessel Operating
Expenses: For the years ended December 31, 2008 and 2007, our vessel
operating expenses were approximately $26.2 million and $0.6 million,
respectively. Vessel operating expenses include crew wages and related costs,
the cost of insurance, expenses relating to repairs and maintenance, the cost of
spares and consumable stores, tonnage taxes and other miscellaneous expenses.
Other factors beyond our control, some of which may affect the shipping industry
in general, including, for instance, developments relating to market prices for
insurance, may also cause these expenses to increase. The increase in operating
expenses during the year ended December 31, 2008, was primarily due to the
growth of our fleet.





Drydocking
Expenses: For the year ended December 31, 2008, our drydocking expenses
were $7.9 million. During the year ended December 31, 2008, five vessels
underwent their periodic drydocking survey and one vessel underwent unscheduled
repairs.  For the year ended December 31, 2007, we did not incur any
drydocking expenses.





Depreciation:
We depreciate our vessels based on a straight line basis over the expected
useful life of each vessel, which is 25 years from the date of their initial
delivery from the shipyard. Depreciation is based on the cost of the vessel less
its estimated residual value, which is estimated at $200 per lwt, at the date of
the vessel's acquisition. Secondhand vessels are depreciated from the date of
their acquisition through their remaining estimated useful life. For years ended
December 31, 2008 and 2007, we recorded vessel depreciation charges of
approximately $51.1 million and $0.7 million, respectively.





Vessel Impairment
Loss: On April 24, 2008, we entered into an agreement to sell the Star Iota for gross proceeds
of $18.4 million less $1.8 million of costs associated with the
sale.  We delivered this vessel to its purchasers on October 6,
2008.  The Star
Iota was classified as a vessel held for sale during the first quarter of
2008 which resulted in an impairment loss of $3.6 million as the vessel was
recorded at the lower of its carrying amount or fair value less cost to
sell.





Gain on forward
freight agreements: During December 2008, we entered into two FFAs on the
Capesize index.  During the year ended December 31, 2008, the change
in fair market value of our FFAs resulted in a gain of $0.25
million.





57








Time charter
agreement termination fees: The Star Sigma,which was on time
charter to a Japanese charterer at a gross daily charter rate of $100,000 per
day from April 2008 until March 2009 (earliest redelivery), was redelivered to
us earlier, in mid-November 2008, pursuant to an agreement whereby the charterer
agreed to pay the contracted rate less $8,000 per day, which is the approximate
operating cost for the vessel, from the date of the actual redelivery in
November 2008 through March 1, 2009.  This amount net of commissions
was approximately $9.7 million, which was collected and recognized under
operating results in the consolidated statements of income for the year ended
December 31, 2008.





General and
Administrative Expenses: For the years ended December 31, 2008 and 2007,
we incurred general and administrative expenses of approximately $12.4 million
and $7.8 million, respectively. For the year ended December 31, 2008, our
general and administrative expenses include the salaries and other related costs
of the executive officers and other employees ($2.9 million), our office
renovation costs and rents, legal, accounting costs and consultancy fees,
regulatory compliance costs ($3.8 million related to professional fees) and
costs related to restricted stock grants under the equity incentive plan ($4.0
million).





Interest Expenses
and Finance Costs: For the year ended December 31, 2008, our interest and
finance costs under our term loan facilities totaled approximately $10.2
million. In 2007, we did not pay interest under our term loan facility, since we
had not drawn down any amount as of December 31, 2007.





Interest
Income: For the years ended December 31, 2008 and 2007, interest income
was $1.2 million and $9.0 million, respectively. Star Maritime did not have any
operations for the period from May 13, 2005 (date of inception of Star Maritime)
to December 3, 2007 (date of operations of Star Bulk).  During this
period, all of our income was derived from interest income, and unrealized and
realized gains on investments, the majority of which was earned on the proceeds
of $188.7 million from Star Maritime's initial public offering which were held
in a trust account.  On November 2, 2007, the Commission declared
effective our joint proxy/registration statement on Forms F-1/F-4 and on
November 27, 2007 we obtained shareholder approval for the acquisition of our
initial fleet and for effecting the Redomiciliation Merger.  All trust
account proceeds were released to us on November 28, 2007 to complete the
transaction pursuant to the terms of the Master Agreement. The Redomiciliation
Merger was effective as of November 30, 2007.





B.           Liquidity
and Capital Resources





Our
principal source of funds has been equity provided by our shareholders,
long-term borrowing, and operating cash flow.  Our principal use of
funds has been capital expenditures to establish and grow our fleet, maintain
the quality of our drybulk carriers, comply with international shipping
standards and environmental laws and regulations, fund working capital
requirements, make interest and principal repayments on outstanding loan
facilities, and pay dividends.





Our
short-term liquidity requirements relate to servicing our debt, payment of
operating costs, funding working capital requirements and maintaining cash
reserves against fluctuations in operating cash flows and paying cash dividends
when permissible. Sources of short-term liquidity include our revenues earned
from our charters.





We
believe that our current cash balance and our operating cash flow will be
sufficient to meet our 2010 liquidity needs despite that the drybulk charter
market declined sharply beginning in the third quarter of 2008 and has remained
at depressed levels throughout 2009. Our results of operations may be adversely
affected if market conditions do not improve.





58








Our
medium- and long-term liquidity requirements include funding the equity portion
of investments in additional vessels and repayment of long-term debt balances.
Sources of funding for our medium- and long-term liquidity requirements include
new loans or equity issuance or vessel sales. As of December 31, 2009, we had
outstanding borrowings of $247.3 million, which is the maximum amount permitted
under our current credit facilities. As of March 23, 2010, we had outstanding
borrowings of $231.0 million under our loan facilities.  If the
current conditions in the credit market continue, we may not be able to
refinance our existing credit facilities or secure new credit facilities at all
or on terms agreeable to us.





We may
fund possible growth through our cash balances, operating cash flow, additional
long-term borrowing and the issuance of new equity.  Our practice has
been to acquire drybulk carriers using a combination of funds received from
equity investors and bank debt secured by mortgages on our drybulk carriers. Our
business is capital-intensive and its future success will depend on our ability
to maintain a high-quality fleet through the acquisition of newer drybulk
carriers and the selective sale of older drybulk carriers. These acquisitions
will be principally subject to management's expectation of future market
conditions as well as our ability to acquire drybulk carriers on favorable
terms.  As of December 31, 2009, we did not have any capital
commitments to acquire vessels.





As of
December 31, 2009, we had cash and cash equivalents of approximately $40.1
million excluding $38.3 million of restricted cash due to minimum liquidity
covenants contained in our loan agreements and margin collateral with London
Clearing House, or LCH.




Cash
Flows





For the
year ended December 31, 2009, cash and cash equivalents increased to $40.1
million compared to $29.5 million for the year ended December 31, 2008, which is
primarily due to decreased capital expenditure in 2009 compared to
2008.  Our working capital is equal to current assets minus current
liabilities, including the current portion of long-term debt.  Our
working capital deficit was $10.3 million for the year ended December 31, 2009,
compared to a working capital deficit of $15.0 million for the year ended
December 31, 2008.  Our working capital deficit primarily decreased
due to the significant increase of both cash and cash equivalents and short term
restricted cash by $16.5 million, offset by an increase in short term loan
payable of $10.4 million





If our
working capital deficit continues to exist, lenders may be unwilling to provide
future financing or will provide future financing at significantly increased
interest rates, which will negatively affect our earnings, liquidity and capital
position.





For the
year ended December 31, 2009, current and non-current restricted cash increased
to $38.3 million compares to $14.5 million as of December 31, 2008, in order to
meet our obligations under the terms of the waiver agreements. For further
information please see Item 5. "Operating and Financial Review and Prospects –
Senior Secured Credit Facilities".  Restricted cash also consists of
the restricted portion of both forward freight agreements (FFAs) and bunker
swaps base and margin collaterals with the London Clearing House (LCH). and
Marfin Bank, respectively.





We
believe that our current cash balance and our operating cash flow will be
sufficient to meet our current liquidity needs.





59











Year
ended December 31, 2009 compared to year ended December 31, 2008





Net
Cash Provided By Operating Activities





Net cash
provided by operating activities for the year ended December 31, 2009 and 2008,
was $65.9 million and $110.7 million, respectively.  Net cash provided
by operating activities for the year ended December 31, 2009 was primarily a
result of recorded net loss of $58.4 million, adjusted for depreciation of $58.3
million, and an impairment loss from sale of vessel Star Alpha of $75.2 million,
and offset by amortization of fair value of below/above market acquired time
charter agreements of $5.7 million. Net cash provided by operating activities
for the year ended December 31, 2008 was primarily a result of recorded net
income of $133.7 million, adjusted for depreciation, stock based compensation
and the vessel impairment loss related to the sale of the vessel Star Iota of
$58.7 million offset by the amortization of the fair value of below/above market
acquired time charter agreements of $80.5 million.





Net
Cash Used In Investing Activities





Net cash
used in investing activities for the years ended December 31, 2009 and 2008 was
$1.4 million and $423.3 million, respectively.  Net cash used in
investing activities for the year ended December 31, 2009 was primarily a result
of the proceeds from sale of vessel Star Alpha amounting to $19.1 million offset
by an increase in restricted cash of $20.5 million relating to the waivers
obtained for existing loan agreements.  For the year ended December
31, 2008 the cash used in investing activities related mainly to the payment of
the cash consideration of $413.5 million for our initial fleet and additional
vessels, $14.4 million related to the purchase price allocated to the
above-market time charters and 12.0 million related to an increase in restricted
cash, which was offset by $16.6 million which represented proceeds from the sale
of the Star Iota.





Net
Cash Provided By/ Used In Financing Activities





Net cash
used in financing activities for the year ended December 31, 2009 was $53.8
million as compared to $323.0 million of net cash provided by financing
activities for the year ended December 31, 2008. For the year ended December 31,
2009, net cash used in financing activities consisted of loan installment
payments amounting to $49.3 million and cash dividend payments of $6.2 million,
offset by cash provided from our directors' dividend reinvestment of $1.9
million. For the year ended December 31, 2008 net cash provided by financing
activities consisted of the drawdown of $317.5 million related to our loan
facilities and the proceeds from exercise of warrants of $94.2 million mainly
offset by $52.6 million of cash dividends paid, $21.0 million of repayments
under our loan agreements and payments of $13.4 million in connection with our
repurchase of common stock and warrants.





Year
ended December 31, 2008 compared to year ended December 31, 2007





Net
Cash Provided By Operating Activities





Net cash
provided by operating was $110.7 million for the year ended December 31, 2008
compared to $0.4 million for the year ended December 31, 2007. This increase is
primarily due to the growth of our fleet.





Net
Cash Provided By/Used In Investing Activities





Net cash
used in investing activities was $423.3 for the year ended December 31, 2008 of
which $413.5 million was paid for our initial fleet and the respective purchases
of additional vessels, $14.4





60





million
represented amounts attributable to the fair value of above market time charters
and $12.0 million represented an increase in restricted cash due to loan
covenants, which was offset by $16.6 million which represented amounts received
from the sale of the Star
Iota.





Net cash
provided by investing activities for the year ended December 31, 2007 was $13.0
million of which $194.1 million represented amounts received from a trust
account which consisted of the gross proceeds of the initial public offering in
the amount of $188.7 million. During 2007, following the Redomiciliation Merger,
the funds were released to us from a trust account and were used to purchase
vessels from our initial fleet. This amount was partially offset by $179.1
million including the amounts we paid to acquire the vessels delivered in 2007
and advances we made for vessels to be acquired.  It also includes a
$2.0 million payment for the above market acquired time charter agreement for
the Star
Kappa.





Net
Cash Provided By Financing Activities





Net cash
provided by financing activities was $323.0 million for the year ended December
31, 2008 representing $120.0 million from borrowings under our Commerzbank AG
loan facility, $197.5 million from borrowings under our Piraeus Bank term loan
facilities and $94.2 million received from the exercise of warrants, offset
mainly by $52.6 million of cash dividends paid, $21.0 million of repayments
under our loan agreements and payments of $13.4 million in connection with our
repurchase of our common stock and warrants.





Net cash
provided by financing activities was $3.5 million for the year ended December
31, 2007 representing $7.5 million received from warrants exercised, offset by
$4.0 million of deferred underwriting fees paid based on the underwriting
agreement signed prior to the initial public offering in December
2005.





Senior
Secured Credit Facilities





As of
December 31, 2009, we had total indebtedness of $247.3 million, which is the
maximum amount available under our three senior secured credit
facilities.





Commerzbank
AG





On
December 27, 2007, we entered into a loan agreement with Commerzbank AG,
Commerzbank, in the amount of up to $120.0 million to partially finance the
acquisition of the secondhand vessels theStar Gamma,the Star Delta,the Star Epsilon,the Star Zeta,andthe Star Theta, which also
provide the security for this loan agreement.  Under the terms of this
loan facility, the repayment of $120.0 million is over a nine year term and
divided into two tranches. The first tranche of up to $50.0 million is repayable
in twenty-eight consecutive quarterly installments commencing twenty-seven
months after the initial borrowings but no later than March 31, 2010 as follows:
(i) the first four installments amount to $2.25 million each, (ii) the next
thirteen installments amount to $1.0 million each (iii) the remaining eleven
installments amount to $1.3 million each and a final balloon payment of $13.7
million is payable together with the last installment. The second tranche of up
to $70.0 million is repayable in twenty-eight consecutive quarterly installments
commencing twenty-seven months after draw down but no later than March 31, 2010
as follows: (i) the first four installments amount to $4.0 million each (ii) the
remaining twenty-four installments amount to $1.75 million each and a final
balloon payment of $12.0 million is payable together with the last installment.
The loan bears interest at LIBOR plus a margin at a minimum of 0.8% per annum to
a maximum of 1.25% per annum depending on whether the aggregate drawdown ranges
from 60% up to 75% of the aggregate market value of the 'initial
fleet'.





61








This loan
contains financial covenants, including requirements to maintain (i) a minimum
liquidity of $10.0 million or $1.0 million per vessel, whichever is greater (ii)
a market value adjusted equity ratio of not less than 25%, as defined therein
and (iii) an aggregate market value of the vessels pledged as security under
this loan agreement of not less than (a) 125% of the then outstanding borrowings
for the first three years and (b) 135% of the then outstanding borrowings
thereafter. As of December 31, 2008, our recognized restricted cash based on
this covenant amounted to $12.0 million.





The
Company was in compliance with the financial covenants in the amended waiver
agreements as of December 31, 2009.





On March
13, 2009, we entered into an agreement with Commerzbank to obtain waivers for
certain covenants on the following terms: during the waiver period from December
31, 2008 to January 31, 2010, the required loan to value ratio, which is the
ratio of outstanding indebtedness to the aggregate market value of the
collateral vessels, was amended to 90% from 80% including the value of the
additional security that will be provided by us pursuant to the
waiver.  In connection with this waiver, as further security for this
facility, we agreed to provide a first preferred mortgage on the Star Alpha and a pledge
account containing $6.0 million.  During the waiver period LIBOR will
be adjusted to the cost of funds, the interest spread was increased to 2%, and
the payment of dividend and the repurchase of our common shares and warrants are
subject to the prior written consent of the lenders.





On
December 24, 2009, we entered into agreement with Commerzbank to obtain waivers
for certain covenants. During the waiver period from February 1, 2010 to June
30, 2010 and from July 1, 2010 to January 31, 2011 the security cover was
amended to 111% and 118%, respectively. Pursuant to the waiver agreement (i) the
bank consented to the sale of the Star Alpha; (ii) we are
permitted to pay dividends not exceeding $0.05 per share in each quarter; (iii)
the minimum liquidity requirement was reduced from $1.0 million to $0.7 million
per vessel; and (iv) the amount deposited in the pledged was increased by $1.3
million from $6.0 million to $7.3 plus a total minimum liquidity of $7.2
million. The interest spread was also maintained to 2.00% per annum for the
duration of the waiver period.





As of
March 23, 2010, the Company had outstanding borrowings of $113.8million, which
is the maximum amount of borrowings permitted under this loan
facility.





Piraeus
Bank A.E. Loan Facility dated April 14, 2008, as amended





On April
14, 2008, we entered into a loan agreement with Piraeus Bank A.E., or Piraeus
Bank, as agent, which was subsequently amended on April 17, 2008 and September
18, 2008. Under the amended terms, the agreement provides for a term loan of
$150.0 million to partially finance the acquisition of theStar Omicron,theStar Sigma and theStar
Ypsilon.  This loan agreement is secured by the Star Omicron,theStar Beta,andtheStar Sigma. Under the terms
of this term loan facility, the repayment period is six years, beginning three
months after our first draw down and is divided into twenty-four consecutive
quarterly installments as follows: (i) the first installment amounts to $7.0
million, (ii) the second through fifth installments amount to $10.5 million
each, (iii) the sixth to eighth installments amount to $8.8 million each, (iv)
the ninth through fourteenth installments amount to $4.4 million each, (v) the
fifteenth through twenty-fourth installments amount to $2.7 million each, and a
final balloon payment in the amount of $21.2 million is payable together with
the last installment. The loan bears interest at LIBOR plus a margin of 1.3% per
annum. This loan agreement contains financial covenants, including requirements
to maintain (i) a minimum liquidity of $0.5 million per vessel, (ii) total
indebtedness over the market value of all vessels owned not greater than 0.6:1,
(iii) the interest coverage ratio not less than 2:1 and (iv) an aggregate market
value of the vessels pledged as security under this loan agreement of not less
than (a) 125% of the then outstanding borrowings for the first three years and
(b) 135% of the then outstanding borrowings thereafter.





62











The
Company was in compliance with the financial covenants in the amended waiver
agreements as of December 31, 2009.





On March
11, 2009, we entered into an agreement with Piraeus Bank to obtain waivers for
certain covenants on the following terms: during the waiver period from December
31, 2008 to February 28, 2010, the required security cover ratio, which is the
ratio of the aggregate market value of the collateral vessels and the
outstanding loan amount, will be waived and for the period ended February 28,
2011, the minimum security cover requirement will be reduced to 110% from 125%
of the outstanding loan amount. The lenders also waived the required 60%
corporate leverage ratio, which is the ratio of our total indebtedness net of
any unencumbered cash divided by the market value of our vessels, through
February 28, 2010. In connection with this waiver, as further security for this
facility we agreed to provide (i) first preferred mortgages on and first
priority assignments of all earnings and insurances of the Star Kappa and the Star Ypsilon; (ii) corporate
guarantees from each of the collateral vessel owning limited liability
companies; (iii) a subordination of the technical and commercial manager's
rights to payment; and (iv) a pledge account containing $9.0
million.




In
addition, during the waiver period the interest spread was increased to 2% per
annum and thereafter will be adjusted to 1.5% per annum until the margin review
date of the facility, and the payment of dividend and the repurchase of our
common shares and warrants are subject to the prior written consent of the
lenders.





As of
March 23, 2010, we had outstanding borrowings of $92.2 million which is the
maximum amount of borrowings permitted under this loan facility.





Piraeus
Bank A.E. Loan Facility dated July 1, 2008





On July
1, 2008, we entered into a loan agreement with Piraeus Bank, as lender, in the
amount of $35.0 to partially finance the acquisition of the Star Cosmo, which also
provides the security for this loan agreement. Under the terms of this term loan
facility, the repayment of $35.0 million is over six years and begins three
months following the full drawn down of the loan amount, which was July 1, 2008,
and is divided into twenty-four consecutive quarterly installments as follows:
(i) the first through fourth installments amount to $1.5 million each, (ii) the
fifth through eighth installments amount to $1.250 million each, (iii) the ninth
to twelfth installments amount to $0.875 million each, (iv) the thirteenth
through twenty-fourth installments amount to $0.5 million each and a final
balloon payment of $14.5 is payable together with the last installment. The loan
bears interest at LIBOR plus a margin of 1.325% per annum.





The loan
agreement contains financial covenants, including requirements to maintain (i) a
minimum liquidity of $0.5 million per vessel, (ii) the total indebtedness of the
borrower over the market value of all vessels owned shall not be greater than
0.6:1, (iii) the interest coverage ratio shall not be less than 2:1 and (iv) an
aggregate market value of the vessels pledged as security under this loan
agreement not less than (a) 125% of the then outstanding borrowings for the
first three years and (b) 135% of the then outstanding borrowings
thereafter.





The
Company was in compliance with the financial covenants in the amended waiver
agreements as of December 31, 2009.





63








On March
11, 2009, we entered into agreements with Piraeus Bank to obtain waivers for
certain covenants on the following terms: during the waiver period from December
31, 2008 to February 28, 2010, the required security cover ratio was waived and
for the year ended February 28, 2011 and the minimum security cover requirement
will be reduced to 110% from 125% of the outstanding loan amount. The lender
will also waive the required 60% corporate leverage ratio through February 28,
2010. In connection with this waiver, as further security for this facility
agreed to provide (i) second preferred mortgages on and second priority
assignments of all earnings and insurances of the Star Alpha; (ii) a corporate
guarantee from Star Alpha'svessel owning limited liability company; (iii) a subordination of the
technical and commercial managers rights to payment; and (iv) a pledge account
containing $5.0 million.  This facility is repayable beginning on
April 2, 2009, in 22 consecutive quarterly installments: (i) the first two
installments in the amount of $2.0 million each; (ii) the third installment in
the amount of $1.75 million; (iii) the fourth installment in the amount of $1.25
million; (iv) the fifth through tenth installment in the amount of $875,000
each; and (v) the final 12 installments in the amount of $500,000 each plus a
balloon payment of $13.75 million payable with the final
installment.





In
addition, during the waiver period the interest spread was increased to 2% per
annum and thereafter will be adjusted to 1.5% per annum until the margin review
date of the facility, and the payment of dividend and the repurchase of our
common shares and warrants are subject to the prior written consent of the
lenders. In December 2009, Piraeus Bank released the second priority mortgage on
the Star Alpha and
consented to its sale.





In
December 2009, Piraeus Bank released the second priority mortgage on the Star Alphaand consented to
its sale.  As of March 23, 2010, we had outstanding borrowings of
$25.0 million which is the maximum amount of borrowings permitted under this
loan facility.





Dividend
Payments





On
February 14, April 16, and July 29, 2008, we declared dividends amounting to
approximately $4.6 million ($0.10 per share, paid on February 28, 2008 to the
shareholders of record on February 25, 2008), approximately $18.8 million ($0.35
per share, paid on May 23, 2008 to the shareholders of record on May 16, 2008),
and approximately $19.4 million ($0.35 per share, paid on August 18, 2008 to the
shareholders of record on August 8, 2008), respectively.  On November
17, 2008, we declared a cash and stock dividend on our common stock totaling
$0.36 per common share for the quarter ended September 30, 2008. The cash
portion of the dividend in the amount of $9.8 million was paid on December 5,
2008 to stockholders of record on November 28, 2008. The dividend payment
consisted of a cash portion in the amount of $0.18 per share with the remaining
half of the dividend paid in the form of newly issued common shares. The amount
of 4,255,002 newly issued shares was based on the volume weighted average price
of our shares on the Nasdaq Global Market during the five trading days before
the ex-dividend date or November 25, 2008. In addition, as of January 20, 2009
management and the directors reinvested the cash portion of their dividend for
the quarter ended September 30, 2008 in the amount of $1.9 million into 818,877
newly issued shares in a private placement at the same weighted average price as
the stock portion of such dividend, effectively electing to receive the full
amount of the dividend in the form of newly issued shares.





Under the
terms of our waiver agreements with our lenders, payment of dividends and the
repurchasing of our common shares is subject to the prior written consent of our
lenders.  Please see "Item 5. Operating and Financial Review and
Prospects – Liquidity and Capital Resources – Senior Secured Credit
Facilities."





64








In June
2009, with the consent of our lenders, we declared a dividend of $0.05 per
outstanding share of our common stock for the three months ended June 30, 2009
which was paid on or about July 14, 2009 to shareholders as of record on July 7,
2009.  In November 2009, with the consent of our lenders, we declared
a dividend of $0.05 per outstanding share of our common stock for the three
months ended September 30, 2009, which was paid on or about December 4, 2009 to
shareholders of record as of November 27, 2009.  In February 2010,
with the consent of our lenders, we declared a dividend of $0.05 per outstanding
share of our common stock for the three months ending December 31, 2009, which
is was paid on March 11, 2010 to shareholders of record as of March 8,
2010.





C.           Research
and Development, Patents and Licenses





Not
Applicable.





D.           Trend
Information





Please
see Item 5.A, "Operating Results - Factors Affecting Our Results of
Operations."





E.           Off-balance
Sheet Arrangements





As of the
date of this annual report, we do not have any off-balance sheet
arrangements.





F.           Tabular
Disclosure of Contractual Obligations





The
following table presents our contractual obligations as of December 31,
2009:





In
      thousands of Dollars
            
            Payments
      due by periodObligations
            
            Total
            
            
            Less
      than 1 year
            
            
            1-3
      years (2011-2012)
            
            
            3-5
      years (2013-2014)
            
            
            More
      than 5 years (After January 1, 2015)Principal
      Loan Payments(1)
            
            
            247,250
            
            
            
            59,675
            
            
            
            57,225
            
            
            
            80,250
            
            
            
            50,100Interest
      payments (1)
      (2)
            
            
            26,993
            
            
            
            7,277
            
            
            
            10,574
            
            
            
            6,760
            
            
            
            2,382Operating
      lease obligation(3)
            
            
            3,634
            
            
            
            277
            
            
            
            596
            
            
            
            657
            
            
            
            2,104Total
            
            
            277,877
            
            
            
            67,229
            
            
            
            68,395
            
            
            
            87,667
            
            
            
            54,586





(1)
            Based
      on our outstanding indebtedness as of December 31,
  2009.





(2)
            Based
      on an estimated interest rate of 3.33% which is the weighted average
      interest rate on all our outstanding indebtedness for the year ended
      December 31, 2009.





(3)
            In
      April 2008, we entered into a twelve-year operating lease for our new
      office facilities which will expire in April 2020.  For the
      first year our monthly lease payments are $21,300 (14,500
      Euros).  Our monthly payments are adjusted annually according to
      the inflation rate plus 2% and it is estimated at
  5%.





G.           Safe
Harbor





See
section "forward looking statements" at the beginning of this annual
report.





65








Item
      6.
            Directors,
      Senior Management and Employees





A.           Directors,
Senior Management and Employees





Set forth
below are the names, ages and positions of our directors, executive officers and
key employees. The board of directors is elected annually on a staggered basis,
and each director elected holds office until his successor shall have been duly
elected and qualified, except in the event of his death, resignation, removal or
the earlier termination of his term of office. Officers are elected from time to
time by vote of our board of directors and hold office until a successor is
elected.





In
accordance with the Company's Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws, on October 1, 2009, the Board increased the number
of its directors from six (6) to seven (7) and appointed Ms. Milena Pappas, the
daughter of Mr. Petros Pappas, the Chairman of the Board, to fill the vacancy
created by the increase in the size of the Board until her successor was duly
elected and qualified at our 2009 annual general meeting.  Messrs
Espig and Erhardt and Ms. Pappas were elected as Class B directors at the 2009
annual general meeting.





Name
            
            Age
            
            PositionProkopios
      (Akis) Tsirigakis
            
            53
            
            Chief
      Executive Officer, President and Class C DirectorGeorge
      Syllantavos
            
            46
            
            Chief
      Financial Officer, Secretary and Class C DirectorPetros
      Pappas
            
            55
            
            Chairman
      and Class A DirectorTom
      Søfteland
            
            48
            
            Class
      A DirectorPeter
      Espig
            
            43
            
            Class
      B DirectorKoert
      Erhardt
            
            52
            
            Class
      B DirectorMilena
      Pappas
            
            26
            
            Class
      B Director





Prokopios (Akis)
Tsirigakis serves as our Chief Executive Officer, President and director.
He served as Star Maritime's Chairman of the Board, Chief Executive Officer and
President since its inception. Mr. Tsirigakis is experienced in ship management,
ship ownership and overseeing new shipbuilding projects. Since November 2003, he
has been the Joint Managing Director of Oceanbulk Maritime S.A., a dry cargo
shipping company that has operated and managed vessels aggregating as much as
1.6 million deadweight tons of cargo capacity and which is part of the Oceanbulk
Group of affiliated companies involved in the service sectors of the shipping
industry. Since November 1998, Mr. Tsirigakis has been the Managing Director of
Combine Marine Inc., a company which he founded that provides ship management
services to third parties and which is part of the Oceanbulk Group. From 1991 to
1998, Mr. Tsirigakis was the Vice-President and Technical Director of Konkar
Shipping Agencies S.A. of Athens, after having served as Konkar's Technical
Director from 1984 to 1991, which at the time managed 16 drybulk carriers,
multi-purpose vessels and tanker/combination carriers. From 1982 to 1984, Mr.
Tsirigakis was the Technical Manager of Konkar's affiliate, Arkon Shipping
Agencies Inc. of New York, a part of the Archirodon Construction Group. He is a
member of the Technical Committee (CASTEC) of Intercargo, the International
Association of Dry Cargo Shipowners, and of the Technical Committees of
Classification Societies. Mr. Tsirigakis received his Masters and B.Sc. in Naval
Architecture from The University of Michigan, Ann Arbor and has three years of
seagoing experience. Mr. Tsirigakis formerly served on the board of directors of
Dryships Inc., a company listed on the Nasdaq Global Market which provides
international seaborne transportation services carrying various dry-bulk
cargoes.





George
Syllantavos serves as our Chief Financial Officer, Secretary and
director. He served as Star Maritime's Chief Financial Officer, Secretary and a
member of its board of directors since its inception. From May 1999 to December
2007, he was the President and General Manager of Vortex Ltd.,





66





an
aviation consulting firm specializing in strategic and fleet planning. From
January 1998 to April 1999, he served as a financial advisor to Hellenic
Telecommunications Organization S.A., where, on behalf of the Chief Executive
Officer, he coordinated and led the company's listing on the New York Stock
Exchange (NYSE:OTE) and where he had responsibilities for the strategic planning
and implementation of multiple acquisitions of fixed-line telecommunications
companies, including RomTelecom. Mr. Syllantavos served as a financial and
strategic advisor to both the Greek Ministry of Industry & Energy (from June
1995 to May 1996) and the Greek Ministry of Health (from May 1996 to January
1998), where, in 1997 and 1998, he helped structure the equivalent of a US$700
million bond issuance for the payment of outstanding debts to the supplier of
the Greek National Health System. From 1998 to 2004, he served as a member of
the Investment Committee of Rand Brothers & Co., a small U.S. merchant
banking firm, where he reviewed and analyzed more than 35 acquisition targets of
small or medium sized privately-held manufacturing firms in the U.S. and
internationally, of which he negotiated, structured and directed the acquisition
of three such firms with transactions ranging in size from $7 million to $11
million. Mr. Syllantavos has a B.Sc. in Industrial Engineering from Roosevelt
University and an MBA in Operations Management, International Finance and
Transportation Management from Northwestern University (Kellogg).





Petros
Pappas serves as our non-executive Chairman of the board of directors. He
served as a member of Star Maritime's board of directors since its inception.
Throughout his career as a principal and manager in the shipping industry, Mr.
Pappas has been involved in over 120 vessel acquisitions and disposals. In 1989,
he founded Oceanbulk Maritime S.A., a dry cargo shipping company that has
operated managed vessels aggregating as much as 1.6 million deadweight tons of
cargo capacity. He also founded the Oceanbulk Group of affiliated companies,
which are involved in the service sectors of the shipping industry. The
Oceanbulk Group is comprised of Oceanbulk Maritime S.A., Interchart Shipping
Inc., Oceanbulk Shipping and Trading S.A., Oceanbulk S&P, Combine Marine
Inc., More Maritime Agencies Inc., and Sentinel Marine Services
Inc.  Additionally, Mr. Pappas ranked among the top 25 Greek ship
owners (by number of ocean going vessels) as evaluated by the U.S. Department of
Commerce's 2004 report on the Greek shipping industry. Mr. Pappas has been a
Director of the UK Defense Club, a leading insurance provider of legal defense
services in the shipping industry worldwide, since January 2002, and is a member
of the Union of Greek Shipowners (UGS). Mr. Pappas received his B.A. in
Economics and his MBA from The University of Michigan, Ann Arbor.





Tom
Søfteland serves as a member of our board of directors. He served as a
member of Star Maritime's board of directors since its inception. Since October
1996, he has been the Chief Executive Officer of Capital Partners A.S. of
Bergen, Norway, a financial services firm that he founded and which specializes
in shipping and asset finance. From 1990 to October 1996, he held various
positions at Industry & Skips Banken, ASA, a bank specializing in shipping,
most recently as its Deputy Chief Executive Officer. Mr. Søfteland received his
B.Sc. in Economics from the Norwegian School of Business and Administration
(NHH).





Peter
Espig serves and has served since November 2007 as a member of our board
of directors.  Mr. Espig is experienced in the analysis of investment
opportunities, raising capital, deal sourcing and financial structuring. In
August 2006, he founded and currently serves as CEO of Advance Capital Japan, a
private equity and consulting firm focused on raising capital for mid-sized
companies and pre-IPO investment and consulting. From 2005 to 2006, Mr. Espig
served as Vice-President of the Principal Finance and Securitization Group and
Asia Special Situations Group for Goldman Sachs Japan where he was responsible
for sourcing and analyzing investment opportunities, balance sheet restructuring
and IPO and exit preparations for various corporate and real estate investments.
Prior to joining Goldman Sachs, Mr. Espig served from 2004 to 2005 as
Vice-President of the New York private equity firm, Olympus Capital, where he
participated in corporate restructurings, investment analysis and financing
negotiations for both domestic and international investments. From 2003 to 2004,
Mr. Espig worked as a leveraged finance, special situations banker for Shinsei
bank where he participated in leverage buyouts and debt





67





restructurings.
In 1989, Mr. Espig received his B.A. from the University of British Columbia and
in 2003, Mr. Espig received his MBA from Columbia Business School where he was
honored as a Chazen Society International Scholar.





Koert
Erhardt serves as a member of our board of directors. He served as a
member of Star Maritime's board of directors since its inception. From September
2004 to December 2004, he served as the Chief Executive Officer and a member of
the board of directors of CC Maritime S.A.M., an affiliate of the Coeclerici
Group, an international conglomerate whose businesses include shipping and
transoceanic transportation of drybulk materials. From 1998 to September 2004,
he served as General Manager of Coeclerici Armatori S.p.A. and Coeclerici
Logistics S.p.A., affiliates of the Coeclerici Group, where he created a
shipping pool that commercially managed over 130 vessels with a carrying volume
of 72 million tons and developed the use of Freight Forward Agreement trading as
a hedging mechanism to the pool's exposure and positions. From 1994 to 1998, he
served as the General Manager of Bulkitalia, a prominent shipping concern which
at the time owned and operated over 40 vessels. From 1990 to 1994, Mr. Erhardt
served in various positions with Bulk Italia. From 1988 to 1990, he was the
Managing Director and Chief Operating Officer of Nedlloyd Drybulk, the drybulk
arm of the Nedlloyd Group, an international conglomerate whose interests include
container ship liner services, tankers, oil drilling rigs, pipe laying vessels
and ship brokering. Mr. Erhardt received his Diploma in Maritime Economics and
Logistics from Hogere Havenen Vervoersschool (now Erasmus University),
Rotterdam, and received his MBA International Executive Program at INSEAD,
Fontainebleau, France. Mr. Erhardt has also studied at the London School of
Foreign Trade.





Milena
Pappas has served as a member of the Board since October 1,
2009.  Milena Pappas is the daughter of the Chairman of the Board, Mr.
Petros Pappas.  Since 2008, Ms. Pappas has served as a chartering
broker.  Ms. Pappas also serves as a consultant in the commercial
department of Interchart Shipping Inc., a company affiliated with the Oceanbulk
Group, a group of companies founded by Mr. Petros Pappas.  From 2006
until the end of 2007, Ms. Pappas worked for Oceanbulk Maritime S.A., a company
affiliated with the Oceanbulk Group, in its financial and analyst
departments.  From 2004 to 2005, she served as a trainee with both
Merrill Lynch in its private wealth department and with the CoeClerici Group in
its risk management department. In 2004, while at Merrill Lynch, she assisted in
the foundation of the "Women's Milestones" program.  In 2005, Ms.
Pappas received a bachelor of arts degree from Cornell University, N.Y. and in
2007 she received a master of science (MSc) in Shipping, Trade and Finance from
Cass University, London.





B.           Compensation
of Directors and Senior Management





For the
period ended December 31, 2009, our Chief Executive Officer and President
Prokopios Tsirigakis and Chief Financial Officer and Secretary, George
Syllantavos received aggregate compensation from the Company in the amount of
$541,849 and $374,921, respectively. Non-employee directors of Star Bulk receive
an annual cash retainer of $15,000, plus a fee of $1,000 for each board and
committee meeting attended, including meetings attended telephonically. The
chairman of the audit committee receives an additional $7,500 per year and each
chairman of our other standing committees will receive an additional $5,000 per
year. In addition, each director is reimbursed for out-of-pocket expenses in
connection with attending meetings of the board of directors or committees. We
do not have a retirement plan for our officers or directors.





68








The table
below summarizes the fees of the board of directors for the year ended December
31, 2009.





In
      DollarsProkopios
      Tsirigakis
            
            
            -George
      Syllantavos
            
            
            5,000Petros
      Pappas
            
            
            22,000Tom
      Softeland
            
            
            37,500Peter
      Espig
            
            
            22,000Koert
      Erhardt
            
            
            34,000Milena
      Pappas
            
            
            5,781126,281





Equity
Incentive Plan





On
February 23, 2010, we adopted an equity incentive plan, which we refer to as the
2010 Equity Incentive Plan, under which officers, key employees, directors and
consultants of the Company and its subsidiaries will be eligible to receive
options to acquire shares of common stock, stock appreciation rights, restricted
stock and other stock-based or stock-denominated awards. We reserved a total of
2,000,000 shares of common stock for issuance under the plan, subject to
adjustment for changes in capitalization as provided in the plan. The purpose of
the 2010 Equity Incentive Plan is to encourage ownership of shares by, and to
assist us in attracting, retaining and providing incentives to, its officers,
key employees, directors and consultants whose contributions to us are or will
be important to our success and to align the interests of such persons with our
stockholders. The various types of incentive awards that may be issued under the
2010 Equity Incentive Plan will enable us to respond to changes in compensation
practices, tax laws, accounting regulations and the size and diversity of its
business. The plan is administered by our compensation committee, or such other
committee of our board of directors as may be designated by the board to
administer the plan. The plan permits grants of options to purchase common
stock, stock appreciation rights, restricted stock, restricted stock units and
unrestricted stock.





Under the
terms of the plan, stock options and stock appreciation rights granted under the
plan will have an exercise price per common share equal to the fair market value
of a common share on the date of grant, unless otherwise determined by the plan
administrator, but in no event will the exercise price be less than the fair
market value of a common share on the date of grant. Options and stock
appreciation rights are exercisable at times and under conditions as determined
by the plan administrator, but in no event will they be exercisable later than
ten years from the date of grant.





The plan
administrator may grant shares of restricted stock and awards of restricted
stock units subject to vesting and forfeiture provisions and other terms and
conditions as determined by the plan administrator. Upon the vesting of a
restricted stock unit, the award recipient will be paid an amount equal to the
number of restricted stock units that then vest multiplied by the fair market
value of a common share on the date of vesting, which payment may be paid in the
form of cash or common shares or a combination of both, as determined by the
plan administrator. The plan administrator may grant dividend equivalents with
respect to grants of restricted stock units.





69








Adjustments
may be made to outstanding awards in the event of a corporate transaction or
change in capitalization or other extraordinary event. In the event of a "change
in control" (as defined in the plan), unless otherwise provided by the plan
administrator in an award agreement, awards then outstanding shall become fully
vested and exercisable in full.





The Board
may amend or terminate the plan and may amend outstanding awards, provided that
no such amendment or termination may be made that would materially impair any
rights, or materially increase any obligations, of a grantee under an
outstanding award. Stockholder approval of plan amendments may be required in
certain definitive, pre-determined circumstances if required by applicable rules
of a national securities exchange or the Commission. Unless terminated earlier
by the board of directors, the plan will expire ten years from the date on which
the plan was adopted by the board of directors.





In 2007,
the Company adopted the 2007 Equity Incentive Plan, or the 2007 Plan, and
reserved for issuance 2,000,000 shares of the Company's common stock under that
plan.  As of March 23, 2010, all of the shares which were reserved
under the 2007 Plan have been issued and the related share grants remain in full
force and effect.  The terms and conditions of the 2010 Plan are
substantially similar to those of the 2007 Plan.





Pursuant
to the 2010 and 2007 Plans, we have issued the following
securities:





·
            On
      December 3, 2007, 90,000 restricted non-vested common shares to
      Prokopios (Akis) Tsirigakis, our President and Chief Executive Officer,
      subject to applicable vesting of 30,000 common shares on each of July 1,
      2008, 2009 and 2010;





·
            On
      December 3, 2007, 75,000 restricted non-vested common shares to George
      Syllantavos, our Chief Financial Officer and Secretary, subject to
      applicable vesting of 25,000 common shares on each of July 1, 2008, 2009
      and 2010;





·
            On
      March 31, 2008, 150,000 restricted non-vested common shares to Peter
      Espig, our Director, subject to applicable vesting of 75,000 common shares
      on each of April 1, 2008 and 2009;





·
            On
      December 5, 2008, an aggregate of 130,000 restricted non-vested common
      shares to all of our employees and an aggregate of 940,000 non-vested
      restricted common shares to the members of our board of
      directors.  All of these shares vested on January 31,
      2009;





·
            On
      February 4, 2010, an aggregate of 115,600 restricted non-vested common
      shares to all of our employees subject to applicable vesting of 69,360
      common shares on June 30, 2010 and 46,240 common shares on June 30, 2011;
      and





·
            On
      February 23, 2010, an aggregate of 980,000 restricted non-vested common
      shares to the members of our board of directors subject to applicable
      vesting of 490,000 common shares on each of June 30 and September 30,
      2010.





As of
March 23, 2010, 1,519,400 shares were available for issuance under the 2010
Plan.





C.           Board
Practices





Our board
of directors is divided into three classes with only one class of directors
being elected in each year and following the initial term for each such class,
each class will serve a three-year term. The initial term of our board of
directors is as follows:





·
            The
      term of the Company's Class A directors expires in
  2011;





70











·
            The
      term of Class B directors expires in 2012;
and





·
            The
      term of Class C directors expires in
2010.





Employment
and Consultancy Agreements





Star Bulk
Management has entered into an employment agreements with Mr. Prokopios
Tsirigakis and George Syllantavos for work performed for Star Bulk after the
consummation of the Redomiciliation Merger.  Star Bulk has entered
into separate consulting agreements with companies owned and controlled by Mr.
Tsirigakis and Mr. Syllantavos respectively, for work performed for by them
outside of Greece.  Each of these agreements will have a term of three
years unless terminated earlier in accordance with the terms of such
agreements.  Under their employment agreements, Mr. Tsirigakis and Mr.
Syllantavos will each receive an annual base salary of €80,000 and €70,000
respectively, which is subject to increase based on annual review by the
compensation committee of our board of directors. Under the consulting
agreements, each company controlled by Mr. Tsirigakis and Mr. Syllantavos respectively, is
expected to receive an annual consulting fee of €370,000 and €250,000. Mr.
Tsirigakis and Mr. Syllantavos will also receive a discretionary bonus and
additional incentive compensation as determined annually by the compensation
committee of our board of directors. In addition to any grant of shares as part
of the annual incentive compensation program.





Pursuant
to the agreements, Mr. Tsirigakis and Mr. Syllantavos may engage in other
business activities with companies in the international shipping industry
provided that such companies are not publicly traded drybulk shipping companies.
Mr. Tsirigakis and Mr. Syllantavos will be prohibited for a period of three
months after the termination of their employment from participating in business
activities with publicly traded companies in competition with Star Bulk unless
they obtain Star Bulk's prior written consent.





Mr.
Tsirigakis and Mr. Syllantavos are also entitled to receive benefits under each
of their consultancy agreements with Star Bulk, including, receipt of an annual
discretionary bonuses, to be determined by Star Bulk's board of directors in its
sole discretion; stock options and other equity grants pursuant to the 2007
equity incentive plan; a monthly car allowance in the amount of
€1,500.





Messrs.
Tsirigakis and Syllantavos are entitled to severance payments upon the
termination of their respective positions.  In the event they are
terminated without cause, Messrs. Tsirigakis and Syllantavos will each receive
under their respective employment and consultancy agreements all accrued and
unpaid salary through the date of termination, an amount equal to two times
their annual salary plus the average of their annual incentive awards for each
of the three years preceding the year of the termination and a pro rata bonus
for the year in which the termination occurs.





Officers
of Star Bulk will be eligible to receive discretionary bonus awards and/or
awards under Star Bulk's 2007 Equity Incentive Plan in such amounts, if any, as
determined by the board of directors of Star Bulk, in its sole discretion. In
making such determinations, Star Bulk's board of directors will consider the
then prevailing operations and financial condition of Star Bulk, including any
contingencies that are then known, as well as the amount of compensation paid to
similarly situated officers of other companies in the seaborne transportation
industry.





Committees
of the Board of Directors





We have
established an audit committee comprised of two independent members of our board
of directors who are responsible for reviewing our accounting controls and
recommending to the board of directors the engagement of our outside auditors.
Our audit committee is responsible for reviewing all





71





related
party transactions for potential conflicts of interest and all related party
transactions are subject to the approval of the audit committee. We have
established a compensation committee comprised of three independent directors
which is responsible for recommending to the board of directors our senior
executive officers' compensation and benefits. We have also established a
nominating and corporate governance committee comprised of two members which is
responsible for recommending to the board of directors nominees for director and
directors for appointment to board committees and advising the board with regard
to corporate governance practices. Shareholders may also nominate directors in
accordance with procedures set forth in our bylaws. The members of the audit,
compensation and nominating and corporate governance committees are Mr. Tom
Softeland, who also serves as the chairman of our audit committees, Mr. Koert
Erhardt who also acts as the chairman of our nominating and corporate governance
committee, and Mr. George Syllantavos who serves only on the compensation
committee and acts as its chairman.





D.           Employees





As of
December 31, 2009, we had 31 employees and as of March 23, 2010, we had 32
employees including our Chief Executive Officer and Chief Financial
Officer.  As of December 31, 2009 and March 23, 2010, 29 and 30
employees, respectively, were engaged in the day to day management of the
vessels in our fleet.





As of
December 31, 2008 and 2007, we had 22 and 10 employees, respectively, including
our Chief Executive Officer and Chief Financial Officer.  As of
December 31, 2008 and 2007, 20 and 8 employees, respectively, were engaged in
the day to day management of the vessels in our fleet.





E.           Share
Ownership





With
respect to the total amount of common stock owned by all of our officers and
directors, individually and as a group, see Item 7 "Major Shareholders and
Related Party Transactions."





Item
      7.
            Major
      Shareholders and Related Party
Transactions





A.           MAJOR
SHAREHOLDERS





The
following table presents certain information as of March 23, 2010 regarding the
ownership of our shares of common stock with respect to each shareholder, who we
know to beneficially own more than five percent of our outstanding shares of
common stock, and our directors.





Beneficial
      Owner
            
            Shares
      of common stockAmount(1)
            
            
            Percentage(1)Petros
      Pappas (2)
            
            
            8,122,094
            
            
            
            13.3
            %Giovine
      Capital Group LLC (3)
            
            
            7,576,941
            
            
            
            12.4
            %F5
      Capital (4)
            
            
            3,803,481
            
            
            
            6.2
            %Prokopios
      Tsirigakis
            
            
            1,987,345
            
            
            
            3.3
            %George
      Syllantavos
            
            
            755,015
            
            
            
            1.2
            %Koert
      Erhardt
            
            
            523,471
            
            
            
            *
            %Tom
      Softeland
            
            
            297,827
            
            
            
            *
            %Peter
      Espig
            
            
            378,879
            
            
            
            *
            %








72








(1)
            Percentage
      amounts based on 61,104,760 shares of our common stock outstanding as of
      March 23, 2010.





(2)
            Information
      derived from the Schedule 13G/A of Mr. Pappas which was filed with the
      Commission on February 12, 2010.  Mr. Pappas is the Chairman of
      our board of directors.





(3)
            Information
      derived from the Schedule 13G/A of Giovine Capital Group LLC which was
      filed with the Commission on January 14,
2010.





(4)
            Information
      derived from the Schedule 13D/A of F5 Capital which was filed with the
      Commission on July 29, 2008.  According to such filing, Mr. Nobu
      Su, a former member of our board of directors, exercises voting and
      investment control over the securities held of record by F5 Capital, a
      Cayman Islands corporation, which is the nominee of
  TMT.





*
            Less
      than 1%





Our major
shareholders have the same voting rights as our other shareholders. No
corporation or foreign government owns more than 50% of our outstanding shares
of common stock. We are not aware of any arrangements, the operation of which
may at a subsequent date result in a change in control of Star
Bulk.





B.
Related Party Transactions





Under the
Master Agreement Star Bulk and Star Maritime agreed to acquire a fleet of eight
drybulk carriers with a combined cargo-carrying capacity of approximately
692,000 dwt. from certain subsidiaries of TMT, a company controlled by Nobu Su,
a former director of Star Bulk. The aggregate purchase price specified in the
Master Agreement for the initial fleet was $224.5 million in cash and 12,537,645
shares of our common stock, issued on November 30, 2007. As additional
consideration for eight vessels, 1,606,962 shares of common stock of Star Bulk
to be issued to TMT in two installments as follows: (i) 803,481 additional
shares of our common stock, no more than 10 business days following the filing
of our Annual Report on Form 20-F for the fiscal year ended December 31, 2007,
and (ii) 803,481 additional shares of our common stock, no more than 10 business
days following the filing of our Annual Report on Form 20-F for the fiscal year
ended December 31, 2008. The shares in respect of the first installment were
issued to a nominee of TMT on July 17, 2008.  The shares in respect of
the second installment were issued to a nominee of TMT on April 28,
2009.





Under the
Master Agreement we agreed, with some limited exceptions, to include the shares
of our common stock comprising the stock consideration portion of the aggregate
purchase price and the additional stock consideration (collectively the
"Registrable Securities"), in our registration statement filed in connection
with the Redomiciliation Merger. In addition, we granted TMT (on behalf of
itself or its affiliates that hold Registrable Securities) the right, under
certain definitive, pre-determined circumstances and subject to certain
restrictions, including lock-up and market stand-off restrictions, to require us
to in the future register the Registrable Securities under the Securities Act.
Under the Master Agreement, TMT also had the right to require us to make
available shelf registration statements (if Star Bulk is eligible to do so)
permitting sales of shares into the market from time to time over an extended
period. In addition, TMT had the ability to exercise certain piggyback
registration rights, 180 days following the effective date of the
Redomiciliation Merger. All expenses relating to such registration
were  borne by us. On September 2, 2008, we filed a registration
statement on Form F-3 (File No. 333-153304), which was declared effective on
November 3, 2008, registering for resale an aggregate of 4,606,962 shares on
behalf of F5 Capital, a company related to TMT.





Star
Gamma LLC, a wholly-owned subsidiary of Star Bulk, entered into time a charter
agreement dated, February 23, 2007, with TMT for the Star Gamma. Star Iota Inc., a
wholly-owned subsidiary of





73





Star
Bulk, entered into a time charter agreement, dated February 26, 2007, with TMT
for the Star Iota. Both
time charters commenced on the date of their delivery to us, had a duration of
one year and daily charterhire rates of $28,500 and $18,000
respectively.  Neither of the above mentioned vessels were delivered
to the Company as of December 31, 2007, consequently no amounts relating thereto
have been included in the consolidated statement of operations in
2007.  For the years ended December 31,2009 and 2008, the Company
earned $0.3 million and $13.0 million net revenue, respectively under the time
charter party agreements with TMT and included in Voyage revenues in the
Consolidated Statements of Operations





Star
Maritime used the services of Combine to conduct certain vessel inspection
services for the vessels in the initial fleet. Under an agreement dated May 4,
2007 we appointed Combine, a company affiliated with our Chief Executive
Officer, Mr. Tsirigakis and our directors Messrs. Pappas and Anagnostou as
interim manager of the vessels in the initial fleet. Given the start-up nature
of Star Bulk, under the agreement, Combine provided technical management and
associated services, including legal services, to the vessels so as to affect
the smooth delivery and operation of the vessels to Star Bulk. Such services
provided at a lump-sum fee of $10,000 per vessel for services leading up to and
including taking delivery of each vessel and at a daily fee of $450 per vessel
from the delivery of each vessel to Star Bulk onwards during the term of the
agreement. Combine was entitled to be reimbursed at cost by Star Bulk for any
and all expenses incurred by them in the management of the vessels, was
obligated to provide Star Bulk the full benefit of all discounts and rebates
enjoyed by them. The term of the agreement is for one year from the date of
delivery of each vessel. As of December 31, 2009, none of Star Bulk's vessels
were managed by Combine.





During
2007, Combine charged us approximately $91,000 for legal and other services,
which are included in the consolidated statement of operations for the year
ended December 31, 2007, $84,000 related to vessel pre-delivery expenses, which
represents $10,000 per vessel from initial fleet plus $4,000 of other
capitalized expenses that were capitalized as vessel cost as of December 31,
2007 and $0 for daily management fees since there were no vessels under its
management. During the years ended December 31, 2009 and 2008, we incurred costs
of approximately $0, and $2.1 million, respectively for operational and
technical management services of Combine.  As of December 31, 2009 and
2008, we had an outstanding receivable balance of $0 and $11,345,
respectively.





Oceanbulk
Maritime, S.A., a related party, has paid for certain expenses on behalf of Star
Maritime. Star Bulk's director Mr. Petros Pappas is also the Honorary Chairman
of Oceanbulk, a ship management company of drybulk vessels.  Star
Bulk's Chief Executive Officer, Mr. Prokopios (Akis) Tsirigakis, as well as its
officer Mr. Christos Anagnostou had been employees of Oceanbulk until November
30, 2007.  Included in the consolidated statement of income for
December 31, 2007 are legal and office support expenses paid to Oceanbulk
Maritime S.A. in the amount of approximately $196,000.  For the years
ended December 31, 2009 and 2008, we earned $16.5 million and $11.6 million net
revenue, respectively under the time charter party agreements with Vinyl
Navigation which is included in voyage revenues in the consolidated statements
of operations.  We also paid to Oceanbulk brokerage commissions in the
amount of $99,250 and $183,500, respectively regarding the sale of Star Iotain 2008 and the
sale of vesselStar Alphain 2009.  As of December 31, 2009 and 2008, we had an
outstanding receivable balance of $2,507,000 and a payable balance of $418,000,
respectively.





On
December 3, 2007, we entered into an agreement with TMT, a company affiliated
with Nobu Su, one of our former directors, to acquire, Star Kappa, a 2001 built
Supramax drybulk carrier for the aggregate purchase price of $72.0 million with
a cargo carrying capacity of approximately 52,055 dwt.





On March
24, 2008, Mr. Tsirigakis, our President and Chief Executive Officer transferred
in a private transaction an aggregate of 2,473,893 of his shares and 300,000 of
his warrants to Mr. Petros Pappas, the Company's Chairman.





74











On March
24, 2008, Mr. George Syllantavos, our Chief Financial Officer and Secretary
transferred in a private transaction an aggregate of 981,524 of his shares and
102,500 of his warrants to Mr. Petros Pappas, the Company's
Chairman.





On June
3, 2008, we entered into an agreement with Vinyl Navigation, a company
affiliated with Oceanbulk Maritime, S.A., a company founded by Star Bulk's
Chairman, Mr. Petros Pappas, to acquire the Star Ypsilon, a Capesize
drybulk carrier for the purchase price of $87.2 million, which was the same
price that Vinyl Navigation had paid when it acquired the vessel from an
unrelated third party. We ultimately paid $86.9 million due to the late delivery
of the vessel to us.  The Star Ypsilon was delivered to
us on September 18, 2008. No commissions were charged to us on the sale or the
chartering of the Star
Ypsilon.  We
acquired the Star
Ypsilon with an existing above market time charter at an average daily
hire rate of $91,932, and we recorded the fair market value of time charter
acquired at $14.4 million which was amortized as a decrease to revenues until
the early termination of the time charter agreement. Vinyl Navigation had a
back-to back charter agreement with TMT, a company controlled by a former
director of the Company, Mr. Nobu Su, on the same terms as Star Bulk's charter
agreement with Vinyl Navigation. Arbitration proceedings commenced on July 27,
2009 against TMT seeking damages resulting from TMT's repudiation of this
charter relating to the Star Ypsilon.





Interchart
Shipping Inc. or Interchart, a company affiliated with Oceanbulk, a company
controlled by our Chairman, acts as a chartering broker for all of the Company's
vessels except the Star
Kappa.  As of December 31, 2009 and 2008 Star Bulk had an
outstanding liability of $189,968 and $6,450, respectively to Interchart. During
the years ended December 31, 2009, 2008 and 2007 the brokerage commission of
1.25% on charter revenue paid to Interchart amounted $1,471,975, $396,533 and
$0, respectively and is included in Voyage expenses in the Consolidated
Statements of Operations.





On July
10, 2007, we entered into separate employment agreements with each of Mr.
Tsirigakis and Mr. Syllantavos to employ them in their capacities as Chief
Executive Officer and President, and Chief Financial Officer and Secretary,
respectively.  Each of these agreements has a term of three years
unless terminated earlier in accordance with the terms of such agreements. Under
the employment agreements, each of Mr. Tsirigakis and Mr. Syllantavos is
expected to receive an annual salary of €80,000, or approximately $118,000 and
€70,000, or approximately $103,000, respectively. Mr. Tsirigakis and Mr.
Syllantavos will also receive additional incentive compensation as determined
annually by the compensation committee of our board of directors.





On
October 3, 2007, we also entered into separate consulting agreements with
companies owned and controlled by our Chief Executive Officer and Chief
Financial Officer respectively. Each of these agreements has a term of three
years unless terminated earlier in accordance with the terms of such agreements.
Under the consulting agreements, each company controlled by Mr. Tsirigakis and
Mr. Syllantavos respectively, is expected to receive an annual consulting fee of
€370,000, or approximately $544,000 and €250,000, or approximately $368,000. Mr.
Tsirigakis and Mr. Syllantavos will also receive a discretionary bonus and
additional incentive compensation as determined annually by the compensation
committee of our board of directors.  The related expenses for 2007,
2008 and 2009 were $658,777, $968,552 and 916,769, respectively, and are
included in general and administrative expenses in the consolidated statement of
operations.





Our Chief
Executive Officer and Chief Financial Officer are also subject to
non-competition and non-solicitation covenants during the term of the agreement
and for a period of three months following termination for any
reason.





75








On
January 20, 2009, management and the directors reinvested the cash portion of
their dividend for the quarter ended September 30, 2008, in the amount of $1.9
million, into 818,877 newly issued shares in a private placement effectively
electing to receive the full amount of the dividend in the form of newly issued
shares.





On March
20, 2009, Mr. Petros Pappas, our Chairman transferred in a private transaction
an aggregate of 75,000 of his shares to Mr. Peter Espig, a director of the
Company.





All
ongoing and future transactions between us and any of our officers and directors
or their respective affiliates, including loans by our officers and directors,
if any, will be on terms believed by us to be no less favorable than are
available from unaffiliated third parties, and such transactions or loans,
including any forgiveness of loans, will require prior approval, in each
instance by a majority of our uninterested "independent" directors or the
members of our board who do not have an interest in the transaction, in either
case who had access, at our expense, to our attorneys or independent legal
counsel.





C.           Interests
of Experts and Counsel





Not
Applicable.





Item
      8.
            Financial
      Information





A.           Consolidated
statements and other financial information.





See Item
18. "Financial Statements."





Legal
Proceedings





In August
2008, TMT, an indirect shareholder of Star Bulk through its nominee, F5 Capital,
alleged that it had suffered unspecified damages arising from an alleged breach
by Star Bulk of a purported obligation under the Master Agreement to maintain a
registration statement in effect so as to permit TMT to sell its 13,341,126 Star
Bulk shares freely on the open market. Among other things, TMT had demanded that
Star Bulk repurchase approximately 3.8 million shares from TMT at a share price
of $14.04 per share, which was the closing price of Star Bulk's common shares on
the Nasdaq Global Market on June 2, 2008, which demand was withdrawn by TMT in
connection with discussions between Star Bulk and TMT. Star Bulk denies that it
has any such obligation under the Master Agreement. On November 3, 2008, the
Commission declared effective a registration statement on Form F-3 relating to
the resale of shares held by F5 Capital. As of the date hereof, no claim has
been filed by TMT or any affiliate thereof against Star Bulk.





In the
first quarter of 2009 the Star
Alphaunderwent unscheduled repairs which resulted in a 25 day off-hire
period. Following the completion of the repairs, the Star Alphawas redelivered to
us by its charterers approximately one month prior to the earliest redelivery
date allowed under the time charter agreement.  Arbitration
proceedings have commenced pursuant to disputes that have arisen with the
charterers of the Star
Alpha.  The disputes relate to vessel performance
characteristics and hire. We are seeking damages for repudiations of the charter
due to the early redelivery of the vessel as well as unpaid hire, while the
charterers are seeking contingent damages resulting from the vessel's
off-hire.  Defense and counterclaim submissions have been filed by the
parties with the arbitration panel.  The arbitration panel is also
handling additional proceedings between third parties that sub-chartered the
vessel.  The Company has received the charterer's Reply and Defense to
Owners's Defense and Counterclaim Submissions and on December 11, 2009, the
Company filed its reply submission.





76








We
commenced an arbitration proceeding as complainant against Oldendorff Gmbh &
Co. KG of Germany, or Oldendorff, seeking damages resulting from Oldendorff's
repudiation of a charter relating to the Star Beta. The Star Beta had been time
chartered by a subsidiary of the Company to Industrial Carriers Inc. of Ukraine,
or ICI.  Under that time charter, ICI was obligated to pay a gross
daily charterhire rate of $106,500 until February 2010. In January 2008, ICI
sub-chartered the vessel to Oldendorff for one year at a gross daily charterhire
rate of $130,000 until February 2009. In October 2008, ICI assigned its rights
and obligations under the sub-charter to one of our subsidiaries in exchange for
ICI being released from the remaining term of the ICI charter. Oldendorff
notified us that it considers the assignment of the sub-charter to be an
effective repudiation of the sub-charter by ICI.  ICI subsequently
filed an application for protection from its creditors in a Greek insolvency
proceeding which was dismissed. ICI is appealing the dismissal. In January 2009,
we made a written submission to our appointed arbitrator asserting claims
against Oldendorff and alleged damages in the amount of approximately $14.8
million. In March 2009, the Company made a written submission to respond to a
counterclaim that hire was overpaid under the relevant time charter
agreement.  The arbitration proceedings are scheduled to enter into
"discovery" and will be followed by a hearing.  We believe that the
assignment was valid and that Oldendorff has erroneously repudiated the
sub-charter.





Vinyl
Navigation Inc., which is acting for and on behalf of the Company, has commenced
an arbitration proceeding against TMT Bulk Corp., or TMT Bulk, for repudiatory
breach of the charterparty due to the nonpayment of charterhire related to the
Star
Ypsilon.  Vinyl Navigation Inc. is pursuing an award for such
nonpayment of charterhire and an award for the loss of charterhire for the
remaining period of the charterparty.





The
Company has commenced an arbitration proceeding against Ishaar Overseas FZE of
Dubai, or Ishaar, for repudiatory breach of the charterparty due to the
nonpayment of charterhire related to the Star Epsilon.  Both
the Company and Ishhar have appointed arbitrators and the Company has filed
claim submissions against the charterers Ishhar.  The Company is
pursuing an interim award for such nonpayment of charterhire and an award for
the loss of charterhire for the remaining period of the charterpartyThe Company
has commenced an arbitration proceeding against Ishhar for repudiatory breach of
the charterparty due to the nonpayment of charterhire related to the Star Kappa.  Both
the Company and Ishaar have appointed arbitrators and the Company has filed
claim submissions against the charterers Ishaar.  The Company is
pursuing an interim award for such nonpayment of charterhire and an award for
the loss of charterhire for the remaining period of the
charterparty.  We have not been involved in any legal proceedings
which we believe may have, or have had, a significant effect on our business,
financial position, results of operations or liquidity, nor are we aware of any
proceedings that are pending or threatened which we believe may have a
significant effect on our business, financial position, results of operations or
liquidity. From time to time, we may be subject to legal proceedings and claims
in the ordinary course of business, principally personal injury and property
casualty claims. We expect that these claims would be covered by insurance,
subject to customary deductibles. Those claims, even if lacking merit, could
result in the expenditure of significant financial and managerial
resources.





Dividend
Policy





Under the
terms of our waiver agreements with our lenders, payment of dividends and
repurchases of our shares and warrants are subject to the prior written consent
of our lenders. Please see "– Senior Secured Credit Facilities."  We
previously paid regular dividends on a quarterly basis from our operating
surplus, in amounts that allowed us to retain a portion of our cash flows to
fund vessel or fleet acquisitions, and for debt repayment and other corporate
purposes, as determined by our management and board of directors. The
declaration and payment of dividends will be subject at all times to the
discretion of our board of directors. The timing and amount of dividends will
depend on our earnings, financial condition, cash requirements and availability,
fleet renewal and expansion, restrictions in our loan





77





agreements,
the provisions of Marshall Islands law affecting the payment of dividends and
other factors. Marshall Islands law generally prohibits the payment of dividends
other than from surplus or while a company is insolvent or would be rendered
insolvent upon the payment of such dividends, or if there is no surplus,
dividends may be declared or paid out of net profits for the fiscal year in
which the dividend is declared and for the preceding fiscal year.





We
believe that, under current law, our dividend payments from earnings and profits
would constitute "qualified dividend income" and as such will generally be
subject to a 15% United States federal income tax rate with respect to
non-corporate individual stockholders. Distributions in excess of our earnings
and profits will be treated first as a non-taxable return of capital to the
extent of a United States stockholder's tax basis in its common stock on a
Dollar-for-Dollar basis and thereafter as capital gain. Please see Item 10
"Additional Information—Taxation" for additional information relating to the tax
treatment of our dividend payments.





Under the
terms of our waiver agreements with our lenders, payment of dividends and the
repurchasing of our common shares is subject to the prior written consent of our
lenders.  Please see "Item 5. Operating and Financial Review and
Prospects – Liquidity and Capital Resources – Senior Secured Credit
Facilities."





In June
2009, with the consent of our lenders, we declared a dividend of $0.05 per
outstanding share of our common stock for the three months ended June 30, 2009
which was paid on or about July 14, 2009 to shareholders as of record on July 7,
2009.  Our lenders have consented to our declaration and payment of
this quarterly dividend.  In November 2009, with the consent of our
lenders, we declared a dividend of $0.05 per outstanding share of our common
stock for the three months ended September 30, 2009, which was paid on or about
December 4, 2009 to shareholders of record as of November 27,
2009.  In February 2010, with the consent of our lenders, we declared
a dividend of $0.05 per share for the three months ending December 31, 2009,
which was paid on March 12, 2010to shareholders of record as of March 8,
2010.





B.           Significant
Changes.





On
January 18, 2010 we concluded a Memorandum of Agreement for the sale of the
vessel Star Beta to a third party for a sales price of $22 million and we expect
to deliver the vessel to the buyers in the second quarter of 2010.





On
February 18, 2010, we concluded a Memorandum of Agreement for the acquisition of
the vessel Nord-Kraft (to be renamed Star Aurora) for a purchase price of $42.5
million.  The vessel is expected to be delivered between the third
quarter of 2010 and the first quarter of 2011.





On
February 23, 2010, we declared a dividend of $0.05 per share for the three
months ending December 31, 2009, which was paid on March 12, 2010, to the
stockholders of record as of March 8, 2010.





On
February 23, 2010 our Board of Directors adopted and approved the terms and
provisions of the Company's 2010 Plan.   Under the 2010 Plan,
officers, key employees, directors and consultants of Star Bulk and its
subsidiaries will be eligible to receive options to acquire shares of common
stock, stock appreciation rights, restricted stock and other stock-based or
stock-denominated awards. Star Bulk has reserved a total of 2,000,000 shares of
common stock for issuance under the 2010 plan, subject to adjustment for changes
in capitalization as provided in the 2010 Plan.





78








Pursuant
to the 2010 and 2007 Plans, we have issued the following
securities:





·
            On
      February 4, 2010, an aggregate of 115,600 restricted non-vested common
      shares to all of our employees subject to applicable vesting of 69,360
      common shares on June 30, 2010 and 46,240 common shares on June 30,
      2011.





·
            On
      February 24, 2010, an aggregate of 980,000 restricted non-vested common
      shares to the members of our board of directors subject to applicable
      vesting of 490,000 common shares on each of June 30 and September 30,
      2010.





On March
15, 2010, our 5,916,150 outstanding warrants expired and ceased trading on the
Nasdaq Global Market.












Item
      9.
            The
      Offer and Listing





A.           Offer
and Listing Details





The
Company's common stock and warrants are traded on the Nasdaq Global Market under
the symbols "SBLK" and "SBLKW," respectively. Since the Redomiciliation Merger
on November 30, 2007, the price history of our common stock and warrants was as
follows:





COMMON
STOCK





2010
            
            High
            
            
            LowJanuary
      2010
            
            $
            3.20
            
            
            $
            2.53February
      2010
            
            $
            2.79
            
            
            $
            2.63March
      2010*
            
            $
            2.89
            
            
            $
            2.71





2009
            
            High
            
            
            Low1st
      Quarter ended March 31, 2009
            
            $
            3.34
            
            
            $
            1.212nd
      Quarter ended June 30, 2009
            
            $
            5.37
            
            
            $
            2.29Six
      months ended June 30, 2009
            
            $
            5.37
            
            
            $
            1.213rd
      Quarter ended September 30, 2009
            
            $
            3.97
            
            
            $
            3.184th
      Quarter ended December 31, 2009
            
            $
            3.65
            
            
            $
            2.69Six
      months ended December 31, 2009
            
            $
            3.97
            
            
            $
            2.69For
      the year ended December 31, 2009
            
            $
            5.37
            
            
            $
            1.21September
      2009
            
            $
            3.97
            
            
            $
            3.37October
      2009
            
            $
            3.65
            
            
            $
            3.00November
      2009
            
            $
            3.58
            
            
            $
            3.05December
      2009
            
            $
            3.25
            
            
            $
            2.69





2008
            
            High
            
            
            Low1st
      Quarter ended March 31, 2008
            
            $
            12.37
            
            
            $
            9.362nd
      Quarter ended June 30, 2008
            
            $
            14.34
            
            
            $
            11.39Six
      months ended June 30, 2008
            
            $
            14.34
            
            
            $
            9.363rd
      Quarter ended September 30, 2008
            
            $
            11.47
            
            
            $
            6.734th
      Quarter ended December 31, 2008
            
            $
            7.03
            
            
            $
            1.80Six
      months ended December 31, 2008
            
            $
            11.47
            
            
            $
            1.80For
      the year ended December 31, 2008
            
            $
            14.34
            
            
            $
            1.80








79








2007
            
            High
            
            
            LowDecember
      3, 2007 to December 31, 2007
            
            $
            14.05
            
            
            $
            13.34





* Through
March 22, 2010.





WARRANTS


2010
            
            High
            
            
            LowJanuary
      2010
            
            $
            0.08
            
            
            $
            0.025February
      2010
            
            $
            0.025
            
            
            $
            0.0105March
      2010*
            
            $
            0.018
            
            
            $
            0.005





2009
              
              High
              
              
              Low1st  Quarter
      ended March 31, 2009
              
              $
              0.25
              
              
              $
              0.042nd
      Quarter ended June 30, 2009
              
              $
              0.41
              
              
              $
              0.04Six
      months ended June 30, 2009March 2009
              
              $
              0.41
              
              
              $
              0.043rd  Quarter
      ended September 30, 2009
              
              $
              0.12
              
              
              $
              0.064th
      Quarter ended December 31, 2009
              
              $
              0.08
              
              
              $
              0.04Six
      months ended December 31, 2009
              
              $
              0.12
              
              
              $
              0.04For
      the year ended December 31, 2009
              
              $
              0.41
              
              
              $
              0.04September
      2009
              
              $
              0.10
              
              
              $
              0.07October
      2009
              
              $
              0.08
              
              
              $
              0.04November
      2009
              
              $
              0.08
              
              
              $
              0.041December
      2009
              
              $
              0.075
              
              
              $
              0.043
  2008
              
              High
              
              
              Low1st
      Quarter ended March 31, 2008
              
              $
              4.46
              
              
              $
              1.992nd
      Quarter ended June 30, 2008
              
              $
              6.40
              
              
              $
              3.70Six
      months ended June 30, 2008
              
              $
              6.40
              
              
              $
              1.993rd
      Quarter ended September 30, 2008
              
              $
              3.74
              
              
              $
              1.524th
      Quarter ended December 31, 2008
              
              $
              1.50
              
              
              $
              0.10Six
      months ended December 31, 2008
              
              $
              3.74
              
              
              $
              0.10For
      the year ended December 31, 2008
              
              $
              6.40
              
              
              $
              0.10





2007
            
            High
            
            
            LowDecember
      3, 2007 to December 31, 2007
            
            $
            7.03
            
            
            $
            0.72





*
            Through
      March 15, 2010.





Until
November 30, 2007, Star Maritime's common stock and warrants traded on the
American Stock Exchange under the symbols "SEA" and SEA.WS," respectively, Since
Star Maritime's initial public offering in December 2005, the price history of
its common stock and warrants was as follows:





COMMON
STOCK





2007
            
            High
            
            
            Low1st
      Quarter ended March 31, 2007
            
            $
            10.30
            
            
            $
            9.862nd
      Quarter ended June 30, 2007
            
            $
            12.31
            
            
            $
            10.34Six
      months ended June 30, 2007
            
            $
            12.31
            
            
            $
            9.863rd
      Quarter ended September 30, 2007
            
            $
            14.03
            
            
            $
            11.304th
      Quarter ended December 31, 2007
            
            $
            14.05
            
            
            $
            13.34Six
      months ended December 31, 2007
            
            $
            14.05
            
            
            $
            11.30For
      the year ended December 31, 2007
            
            $
            14.05
            
            
            $
            9.86








80








2006
            
            High
            
            
            Low1st
      Quarter ended March 31, 2006
            
            $
            9.92
            
            
            $
            9.622nd
      Quarter ended June 30, 2006
            
            $
            10.16
            
            
            $
            9.47Six
      months ended June 30, 2006
            
            $
            10.16
            
            
            $
            9.473rd
      Quarter ended September 30, 2006
            
            $
            9.74
            
            
            $
            9.454th
      Quarter ended December 31, 2006
            
            $
            9.90
            
            
            $
            9.60Six
      months ended December 31, 2006
            
            $
            9.90
            
            
            $
            9.45For
      the year ended December 31, 2006
            
            $
            10.16
            
            
            $
            9.45





2005
            
            High
            
            
            LowDecember
      15, 2005 to December 31, 2005
            
            
            N/A
            
            
            
            N/A





WARRANTS




2007
            
            High
            
            
            Low1st
      Quarter ended March 31, 2007
            
            $
            2.15
            
            
            $
            0.722nd
      Quarter ended June 30, 2007
            
            $
            4.25
            
            
            $
            2.18Six
      months ended June 30, 2007
            
            $
            4.25
            
            
            $
            0.723rd
      Quarter ended September 30, 2007
            
            $
            5.85
            
            
            $
            3.104th
      Quarter ended December 31, 2007
            
            $
            7.03
            
            
            $
            4.36Six
      months ended December 31, 2007
            
            $
            7.03
            
            
            $
            3.10For
      the year ended December 31, 2007
            
            $
            7.03
            
            
            $
            0.72





2006
            
            High
            
            
            Low1st
      Quarter ended March 31, 2006
            
            $
            1.25
            
            
            $
            0.872nd
      Quarter ended June 30, 2006
            
            $
            1.20
            
            
            $
            0.87Six
      months ended June 30, 2006
            
            $
            1.25
            
            
            $
            0.873rd
      Quarter ended September 30, 2006
            
            $
            1.06
            
            
            $
            0.704th
      Quarter ended December 31, 2006
            
            $
            0.84
            
            
            $
            0.55Six
      months ended December 31, 2006
            
            $
            1.06
            
            
            $
            0.55For
      the year ended December 31, 2006
            
            $
            1.25
            
            
            $
            0.55





2005
            
            High
            
            
            LowDecember
      15, 2005 to December 31, 2005
            
            
            N/A
            
            
            
            N/A





B.           Plan
of Distribution





Not
Applicable.





C.           Markets





Shares of
our common stock and warrants trade on the Nasdaq Global Market under the
symbols "SBLK" and "SBLKW," respectively.





D.           Selling
Shareholders





Not
Applicable.





E.           Dilution





Not
Applicable.





81





F.           Expenses
of the Issue





Not
Applicable.





Item
      10.
            Additional
      Information





A.
Share Capital





Not
Applicable.





B.           Memorandum
and Articles of Association





Directors





Our
directors are elected by a majority of the votes cast by stockholders entitled
to vote in an election. Our amended and restated articles of incorporation
provide that cumulative voting shall not be used to elect directors. Our board
of directors must consist of at least three members. The exact number of
directors is fixed by a vote of at least 66 2/3% of the entire board. Our
amended and restated articles of incorporation provide for a staggered board of
directors whereby directors shall be divided into three classes: Class A, Class
B and Class C which shall be as nearly equal in number as possible.
Shareholders, acting as at a duly constituted meeting, or by unanimous written
consent of all shareholders, initially designated directors as Class A, Class B
or Class C with only one class of directors being elected in each year and
following the initial term for each such class, each class will serve a
three-year term. The initial term of our board of directors is as follows: (i)
the term of the Company's Class A directors expires in 2011; (ii) the term of
Class B directors expires in 2012; and (iii) the term of Class C directors
expires in 2010. Each director serves his respective term of office until his
successor has been elected and qualified, except in the event of his death,
resignation, removal or the earlier termination of his term of office. Our board
of directors has the authority to fix the amounts which shall be payable to the
members of the board of directors for attendance at any meeting or for services
rendered to us.





On
November 23, 2009 at our annual meeting of shareholders, our shareholders voted
to approve an amendment to our Amended and Restated Articles of Incorporation as
set forth below that would grant the Chairman of our Board of Directors a tie-
breaking vote in the event the Board vote is evenly split or deadlocked on a
matter presented for vote. The BCA does not currently provide for granting the
Chairman a tie-breaking vote where, as in the Company's case, there is only one
class of shares outstanding.  However, there is a proposed amendment
to the BCA pending before the current Session of the Marshall Islands
legislature which would allow the granting of such tie-breaking vote to the
Chairman.  This amendment mirrors and is drawn from a similar existing
provision in the Delaware General Corporation Law.  The Board has
deferred authorizing the necessary actions to effect such amendment to our
Amended and Restated Articles of Incorporation until such time as the BCA has
been amended to permit such amendment.





The text
of the proposed amendment to our Amended and Restated Articles of Incorporation
is set forth below.





"To the
fullest extent permitted by law, the Chairman of the Corporation's Board of
Directors shall be entitled, in his or her sole discretion, to cast an
additional vote in any situation where the votes of directors (including the
first vote of the Chairman and abstentions, if any) are evenly split on a
matter, including, without limitation, if such even split results
from:





(a)
            a
      vote of the entire membership of the Board of
  Directors;





82











(b)
            a vote of the Directors
      constituting a quorum at a meeting of the Board of Directors,
      or





(c)
            a vote of Directors actually
      voting at a meeting of the Board of
  Directors."





Stockholder
Meetings





Under our
amended and restated bylaws, annual stockholder meetings will be held at a time
and place selected by our board of directors. The meetings may be held in or
outside of the Marshall Islands. Special meetings may be called by the board of
directors, chairman of the board or by the president. Our board of directors may
set a record date between 10 and 60 days before the date of any meeting to
determine the stockholders that will be eligible to receive notice and vote at
the meeting.





Dissenters'
Rights of Appraisal and Payment





Under the
BCA, our stockholders have the right to dissent from various corporate actions,
including any merger or consolidation, sale of all or substantially all of our
assets not made in the usual course of our business, and receive payment of the
fair value of their shares. In the event of any further amendment of our amended
and restated articles of incorporation, a stockholder also has the right to
dissent and receive payment for his or her shares if the amendment alters
certain rights in respect of those shares. The dissenting stockholder must
follow the procedures set forth in the BCA to receive payment. In the event that
we and any dissenting stockholder fail to agree on a price for the shares, the
BCA procedures involve, among other things, the institution of proceedings in
the high court of the Republic of the Marshall Islands or in any appropriate
court in any jurisdiction in which the Company's shares are primarily traded on
a local or national securities exchange.





Stockholders'
Derivative Actions





Under the
BCA, any of our stockholders may bring an action in our name to procure a
judgment in our favor, also known as a derivative action, provided that the
stockholder bringing the action is a holder of common stock both at the time the
derivative action is commenced and at the time of the transaction to which the
action relates.





Indemnification
of Officers and Directors





Our
amended and restated bylaws includes a provision that entitles any our directors
or officers to be indemnified by us upon the same terms, under the same
conditions and to the same extent as authorized by the BCA if he acted in good
faith and in a manner reasonably believed to be in and not opposed to our best
interests, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.





We are
also authorized to carry directors' and officers' insurance as a protection
against any liability asserted against our directors and officers acting in
their capacity as directors and officers regardless of whether we would have the
power to indemnify such director or officer against such liability bylaw or
under the provisions of our bylaws. We believe that these indemnification
provisions and insurance are useful to attract and retain qualified directors
and executive officers.





The
indemnification provisions in our amended and restated bylaws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of reducing the
likelihood of derivative litigation against directors and officers, even though
such an action, if successful, might otherwise benefit us and our stockholders.
There is currently no pending material litigation or proceeding involving any of
our directors, officers or employees for which indemnification is
sought.





83








Anti-takeover
Provisions of our Charter Documents





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





Blank
Check Preferred Stock





Under the
terms of our amended and restated articles of incorporation, our board of
directors has authority, without any further vote or action by our stockholders,
to issue up to 25.0 million shares of blank check preferred stock. Our board of
directors may issue shares of preferred stock on terms calculated to discourage,
delay or prevent a change of control of our company or the removal of our
management.





Classified
Board of Directors





Our
amended and restated articles of incorporation provide for a board of directors
serving staggered, three-year terms. Approximately one-third of our board of
directors will be elected each year. The classified board provision could
discourage a third party from making a tender offer for our shares or attempting
to obtain control of our company. It could also delay stockholders who do not
agree with the policies of the board of directors from removing a majority of
the board of directors for two years.





Election
and Removal of Directors





Our
amended and restated articles of incorporation prohibit cumulative voting in the
election of directors. Our articles of incorporation also require shareholders
to give advance written notice of nominations for the election of directors. Our
articles of incorporation further provide that our directors may be removed only
for cause and only upon affirmative vote of the holders of at least 70% of the
outstanding voting shares of the Company. These provisions may discourage, delay
or prevent the removal of incumbent officers and directors.





Limited
Actions by Stockholders





Our
bylaws provide that if a quorum is present, and except as otherwise expressly
provided by law, the affirmative vote of a majority of the shares of stock
represented at the meeting shall be the act of the shareholders. Shareholders
may act by way of written consent in accordance with the provisions of Section
67 of the BCA.





Advance
Notice Requirements for Shareholder Proposals and Director
Nominations





Our
amended and restated articles of incorporation provide that shareholders seeking
to nominate candidates for election as directors or to bring business before an
annual meeting of shareholders must provide timely notice of their proposal in
writing to the corporate secretary. Generally, to be timely, a shareholder's
notice must be received at our principal executive offices not less than 120
days nor more than 180 days prior to the one year anniversary of the preceding
year's annual meeting. Our articles of incorporation also specify requirements
as to the form and content of a shareholder's notice. These provisions may
impede shareholders' ability to bring matters before an annual meeting of
shareholders or make nominations for directors at an annual meeting of
shareholders.





84











C.           Material
Contracts





We have
entered into three credit facilities with Commerzbank A.G. and Piraeus Bank, as
agent and as lender. For a discussion of our term loan facilities, please see
the section of this annual report entitled "Operating and Financial Review and
Prospects – Liquidity and Capital Resources – Senior Secured Credit
Facilities."  We have no other material contracts, other than
contracts entered into in the ordinary course of business, to which the Company
or any member of the group is a party.





D.           Exchange
Controls





Under
Marshall Islands and Greek law, there are currently no restrictions on the
export or import of capital, including foreign exchange controls or restrictions
that affect the remittance of dividends, interest or other payments to
non-resident holders of our common stock.





E.           Taxation





United
States Taxation





The
following discussion is based upon the provisions of the U.S. Internal Revenue
Code of 1986, as amended, or the "Code", existing and proposed U.S. Treasury
Department regulations, or the "Treasury Regulations," administrative rulings,
pronouncements and judicial decisions, all as of the date of this Annual Report.
This discussion assumes that decisions, all as of the date of this Annual
Report.





Tax
Classification of the Company





Star
Maritime was a Delaware corporation which merged into the Company pursuant to
the Redomiciliation Merger as more specifically described above.





Section
7874(b) of the Code, or "Section 7874(b)," provides that a corporation organized
outside the United States, such as the Company, which acquires (pursuant to a
"plan" or a "series of related transactions") substantially all of the assets of
a corporation organized in the United States, such as Star Maritime, will be
treated as a U.S. domestic corporation for U.S. federal income tax purposes if
shareholders of the U.S. corporation whose assets are being acquired own at
least 80% of the non-U.S. acquiring corporation after the acquisition. If
Section 7874(b) were to apply to Star Maritime and the Redomiciliation Merger,
then the Company, as the surviving entity of the Redomiciliation Merger, would
be subject to U.S. federal income tax as a U.S. domestic corporation on its
worldwide income after the Redomiciliation Merger. In addition, as a U.S.
domestic corporation, any dividends paid by us to a Non-U.S. Holder, as defined
below, would be subject to a U.S. federal income tax withholding at the rate of
30% or such lower rate as provided by an applicable U.S. income tax
treaty.





After the
completion of the Redomiciliation Merger, the shareholders of Star Maritime
owned less than 80 % of the Company. Star Maritime received an opinion of its
counsel, Seward & Kissel LLP, that Star Bulk should not be subject to
Section 7874(b) after the Redomiciliation Merger. Based on the structure of the
Redomiciliation Merger, the Company believes that it is not subject to U.S.
federal income tax as a U.S. domestic corporation on its worldwide income for
taxable years after the Redomiciliation Merger. However, there is no authority
directly addressing the application of Section 7874(b) to a transaction such as
the Redomiciliation Merger where shares in a foreign corporation, such as the
Company are issued concurrently with (or shortly after) a merger. In particular,
since there is no authority directly applying the "series of related
transactions" or "plan" provisions to the post-acquisition stock ownership
requirements of Section 7874(b), there is no assurance that the IRS on a count
will agree





85





with
Seward & Kissel's opinion on this matter. Moreover, Star Maritime has not
sought a ruling from the IRS on this point. Therefore, there is no assurance
that the IRS would not seek to assert that the Company is subject to U.S.
federal income tax on its worldwide income after the Redomiciliation Merger,
although the Company believes that such an assertion should not be
successful.





The
remainder of this discussion assumes that the Company will not be treated as a
U.S. domestic corporation for any taxable year.





Taxation
of the Company's Shipping Income





We
anticipate that we will derive substantially all of our gross income from the
use and operation of vessels in international commerce and that this income will
principally consist of freights from the transportation of cargoes (including
COAs), hire or lease from time or voyage charters and the performance of
services directly related thereto, which we refer to collectively as "shipping
income."





Shipping
income that is attributable to transportation that begins or ends, but that does
not both begin and end, in the United States will be considered to be 50%
derived from sources within the United States. Shipping income attributable to
transportation that both begins and ends in the United States will be considered
to be 100% derived from sources within the United States. We are not permitted
by law to engage in transportation that gives rise to 100% U.S. source shipping
income. Shipping income attributable to transportation exclusively between
non-U.S. ports will be considered to be 100% derived from sources outside the
United States. Shipping income derived from sources outside the United States
will not be subject to U.S. federal income tax.





Based
upon our anticipated shipping operations, our vessels will operate in various
parts of the world, including to or from U.S. ports. Unless exempt from U.S.
federal income tax under Section 883 of the Code, we will be subject to U.S.
federal income tax, in the manner discussed below, to the extent our shipping
income is considered derived from sources within the United States.





Application
of Section 883 of the Code





Under the
relevant provisions of Section 883 of the Code and the Treasury Regulations
promulgated thereunder, we will be exempt from U.S. federal income tax on our
U.S. source shipping income if:





(i)
            we
      are organized in a "qualified foreign country," which is one that grants
      an equivalent exemption from tax to corporations organized in the United
      States in respect of each category of shipping income for which exemption
      is being claimed under Section 883 of the Code, and which we refer to as
      the "Country of Organization Requirement";
and





(ii)
            we
      can satisfy any one of the following two (2) stock ownership
      requirements:





(a)
            more
      than 50% of our stock, in terms of value, is beneficially owned by
      individuals who are residents of a "qualified foreign country," which the
      Company refers to as the "50% Ownership Test";
  or





(b)
            our
      stock is "primarily and regularly" traded on an "established securities
      market" located in the United States or in a "qualified foreign country,"
      which we refer to as the "Publicly-Traded
Test".





The U.S.
Treasury Department has recognized the Marshall Islands, our country of
incorporation and the country of incorporation of our ship-owning subsidiaries,
as "qualified foreign countries." Accordingly, we satisfy the Country of
Organization Requirement.





86








Therefore,
our eligibility to qualify for exemption under Section 883 of the Code is wholly
dependent upon being able to satisfy one of the stock ownership
requirements.





The
Treasury Regulations provide that stock of a foreign corporation will be
considered to be "primarily traded" on an "established securities market" if the
number of shares of each class of stock that are traded during any taxable year
on all "established securities markets" in that country exceeds the number of
shares in each such class that are traded during that year on "established
securities markets" in any other single country. Our common stock is "primarily
traded" on the Nasdaq Global Market.





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





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





Notwithstanding
the foregoing, our common stock would not be considered to be "regularly traded"
on an "established securities market" if 50% or more of the outstanding shares
of our common stock is owned, actually or constructively under specified stock
attribution rules, on more than half the days during the taxable year by persons
who each own 5% or more of our common stock, which we refer to as the "5%
Override Rule."





For
purposes of determining the persons who own 5% or more of our common stock, or
"5% Stockholders," the Treasury Regulations permit us to rely on Schedule 13G
and Schedule 13D filings with the U.S. Securities and Exchange Commission, or
the "SEC," to identify persons who have a 5% or greater beneficial interest in
our common stock. The Treasury Regulations further provide that an investment
company which is registered under the Investment Company Act of 1940, as
amended, will not be treated as a 5% Stockholder for such purposes.





In the
event the 5% Override Rule is triggered, the Treasury Regulations provide that
the 5% Override Rule will nevertheless not apply if we can establish, in
accordance with specified ownership certification procedures, that within the
group of 5% Stockholders there are sufficient "qualified shareholders" for
purposes of Section 883 of the Code to preclude "non-qualified shareholders" in
such group from owning actually or constructively 50% or more of our common
stock for more than half the number of days during the taxable
year.





For the
2009 taxable year, we were not subject to the 5% Override Rule and, therefore,
we believe that we satisfied the Publicly-Traded Test.  Accordingly,
we believe that we were exempt from U.S. federal income tax on our U.S. source
shipping income for the 2009 taxable year, and we intend to





87





take this
position on our 2009 U.S. federal income tax return.  However, there
is no assurance that we will continue to qualify for the benefits of Section 883
of the Code for any future taxable year.





Taxation
in Absence of Exemption under Section 883 of the Code





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





Gain
on Sale of Vessels





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





United
States Federal Income Taxation of Holders of Common Stock





The
following is a discussion of the material U.S. federal income tax consequences
applicable to a U.S. Holder and a Non-U.S. Holder, each as defined below, of the
ownership and disposition of our common stock. This discussion does not purport
to deal with the tax consequences of owning common stock to all categories of
investors, some of which, such as dealers in securities, investors whose
functional currency is not the U.S. Dollar and investors that own, actually or
under applicable constructive ownership rules, 10% or more of our common stock,
may be subject to special rules. This discussion deals only with holders who own
our common stock as a capital asset. Holders of our common stock are encouraged
to consult their own tax advisors concerning the overall tax consequences
arising in their particular situation under U.S. federal, state, local or
foreign law of the ownership of our common stock.





United
States Federal Income Taxation of U.S. Holders





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





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





Distributions





Subject
to the discussion of "passive foreign investment companies" below, any
distributions made by us with respect to our common stock to a U.S. Holder will
generally constitute dividends, which may be taxable as ordinary income or
"qualified dividend income," as described in more detail below, to





88





the
extent of our current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. Distributions in excess of our earnings and
profits will be treated first as a nontaxable return of capital to the extent of
the U.S. Holder's tax basis in its common stock on a Dollar-for-Dollar basis and
thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders
that are corporations will not be entitled to claim a dividends received
deduction with respect to any distributions they receive from us. Dividends paid
with respect to our common stock will generally be treated as "passive category
income" or, in the case of certain types of U.S. Holders, "general category
income" for purposes of computing allowable foreign tax credits for U.S. foreign
tax credit purposes.





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





Special
rules may apply to any "extraordinary dividend," generally, a dividend in an
amount which is equal to or in excess of 10% of a stockholder's adjusted basis
(or fair market value in certain circumstances) in our common stock. If we pay
an "extraordinary dividend" on our common stock that is treated as "qualified
dividend income," then any loss derived by a U.S. Individual Holder from the
sale or exchange of such common stock will be treated as long-term capital loss
to the extent of such dividend.





Sale,
Exchange or other Disposition of Common Stock





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





Passive
Foreign Investment Company Status and Significant Tax Consequences





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





·
            at
      least 75% of our gross income for such taxable year consists of passive
      income (e.g.,
      dividends, interest, capital gains and rents derived other than in the
      active conduct of a rental business);
or





89








·
            at
      least 50% of the average value of the assets held by the corporation
      during such taxable year produce, or are held for the production of,
      passive income, what we refer to as "passive
  assets."





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





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





As
discussed more fully below, if we were to be treated as a PFIC for any taxable
year, a U.S. Holder would be subject to different taxation rules depending on
whether the U.S. Holder makes an election to treat us as a "qualified electing
fund," which election we refer to as a "QEF election." As an alternative to
making a QEF election, a U.S. Holder could make a "mark-to-market" election with
respect to our common stock, as discussed below.





Taxation
of U.S. Holders Making a Timely QEF Election





If a U.S.
Holder makes a timely QEF election, which U.S. Holder we refer to as an
"Electing Holder," the Electing Holder must report each year for U.S. federal
income tax purposes its pro rata share of our ordinary earnings and net capital
gain, if any, for our taxable year that ends with or within the taxable year of
the Electing Holder, regardless of whether or not distributions were received by
the Electing Holder from us. The Electing Holder's adjusted tax basis in the
common stock would be increased to reflect taxed but undistributed earnings and
profits. Distributions of earnings and profits previously taxed would result in
a corresponding reduction in the adjusted tax basis in the common stock and will
not be taxed again once distributed. An Electing Holder would generally
recognize capital gain or loss on the sale, exchange or other disposition of our
common stock. A U.S. Holder would make a QEF election with respect to any
taxable year that our company is a PFIC by filing IRS Form 8621 with his U.S.
federal income tax return. If we became aware that we were to be treated as a
PFIC for any taxable year, we would provide each U.S. Holder with all necessary
information in order to make the QEF election described above.





90











Taxation
of U.S. Holders Making a "Mark-to-Market" Election





Alternatively,
if we were to be treated as a PFIC for any taxable year and, as we anticipate,
our common stock is treated as "marketable stock," a U.S. Holder would be
allowed to make a "mark-to-market" election with respect to our common stock,
provided the U.S. Holder completes and files IRS Form 8621 in accordance with
the relevant instructions and related Treasury Regulations. If that election is
made, the U.S. Holder generally would include as ordinary income in each taxable
year the excess, if any, of the fair market value of the common stock at the end
of the taxable year over such U.S. Holder's adjusted tax basis in the common
stock. The U.S. Holder would also be permitted an ordinary loss in respect of
the excess, if any, of the U.S. Holder's adjusted tax basis in the common stock
over its fair market value at the end of the taxable year, but only to the
extent of the net amount previously included in income as a result of the
mark-to-market election. A U.S. Holder's tax basis in its common stock would be
adjusted to reflect any such income or loss amount. Gain realized on the sale,
exchange or other disposition of our common stock would be treated as ordinary
income, and any loss realized on the sale, exchange or other disposition of the
common stock would be treated as ordinary loss to the extent that such loss does
not exceed the net mark-to-market gains previously included by the U.S.
Holder.





Taxation
of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election





Finally,
if we were to be treated as a PFIC for any taxable year, a U.S. Holder who does
not make either a QEF election or a "mark-to-market" election for that year,
whom we refer to as a "Non-Electing Holder," would be subject to special rules
with respect to (1) any excess distribution (i.e., the portion of any
distributions received by the Non-Electing Holder on our common stock in a
taxable year in excess of 125% of the average annual distributions received by
the Non-Electing Holder in the three preceding taxable years, or, if shorter,
the Non-Electing Holder's holding period in the common stock), and (2) any gain
realized on the sale, exchange or other disposition of our common stock. Under
these special rules:





·
            the
      excess distribution or gain would be allocated ratably over the
      Non-Electing Holders' holding period in the common
  stock;





·
            the
      amount allocated to the current taxable year and any taxable year before
      we became a PFIC would be taxed as ordinary income;
  and





·
            the
      amount allocated to each of the other taxable years would be subject to
      tax at the highest rate of tax in effect for the applicable class of
      taxpayer for that taxable year, and an interest charge for the deemed
      deferral benefit would be imposed with respect to the resulting tax
      attributable to each such other taxable
year.





These
penalties would not apply to a pension or profit sharing trust or other
tax-exempt organization that did not borrow funds or otherwise utilize leverage
in connection with its acquisition of our common stock. If a Non-Electing Holder
who is an individual dies while owning our common stock, such Non-Electing
Holder's successor generally would not receive a step-up in tax basis with
respect to such common stock.





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





A
beneficial owner of our common stock (other than a foreign partnership) that is
not a U.S. Holder is referred to herein as a "Non-U.S. Holder."





91








Dividends
on Common Stock





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





Sale,
Exchange or Other Disposition of Common Stock





Non-U.S.
Holders generally will not be subject to U.S. federal income or withholding tax
on any gain realized upon the sale, exchange or other disposition of our common
stock, unless:





·
            the
      gain is "effectively connected" with the Non-U.S. Holder's conduct of a
      trade or business in the United States. If the Non-U.S. Holder is entitled
      to the benefits of a U.S. income tax treaty with respect to that gain,
      that gain is subject to U.S. federal income tax only if it is attributable
      to a permanent establishment maintained by the Non-U.S. Holder in the
      United States; or





·
            the
      Non-U.S. Holder is an individual who is present in the United States for
      183 days or more during the taxable year of disposition and other
      conditions are met.





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





Backup
Withholding and Information Reporting





In
general, dividend payments, or other taxable distributions, made within the
United States will be subject to information reporting requirements. Such
payments will also be subject to "backup withholding" if you are a non-corporate
U.S. Holder and you:





·
            fail
      to provide an accurate taxpayer identification
  number;





·
            are
      notified by the IRS that you have failed to report all interest or
      dividends required to be shown on your U.S. federal income tax returns;
      or





·
            in
      certain circumstances, fail to comply with applicable certification
      requirements.





Non-U.S.
Holders may be required to establish their exemption from information reporting
and "backup withholding" by certifying their status on IRS Form W-8BEN, W-8ECI
or W-8IMY, as applicable.





If a
stockholder sells its common stock to or through a U.S. office or broker, the
payment of the proceeds is subject to both U.S. "backup withholding" and
information reporting unless you certify, under penalties of perjury, that you
are a non-U.S. person or you otherwise establish an exemption. If a stockholder
sells its common stock through a non-U.S. office of a non-U.S. broker and the
sales proceeds





92





are paid
outside the United States, then information reporting and "backup withholding"
generally will not apply to that payment. However, U.S. information reporting
requirements, but not "backup withholding", will apply to a payment of sales
proceeds, even if that payment is made outside the United States, if a
stockholder sells its common stock through a non-U.S. office of a broker that is
a U.S. person or has some other contacts with the United States.





"Backup
withholding" is not an additional tax. Rather, a taxpayer generally may obtain a
refund of any amounts withheld under "backup withholding" rules that exceed the
taxpayer's U.S. federal income tax liability by filing a refund claim with the
IRS.





Marshall
Islands Tax Consequences





We are
incorporated in the Marshall Islands. Under current Marshall Islands law, we are
not subject to tax on income or capital gains, and no Marshall Islands
withholding tax will be imposed upon payments of dividends by us to our
stockholders.





F.           Dividends
and paying agents





Not
Applicable.





G.           Statement
by experts





Not
Applicable.





H.           Documents
on display





We file
reports and other information with the Commission. These materials, including
this annual report and the accompanying exhibits, may be inspected and copied at
the public reference facilities maintained by the Commission at 100 F Street,
N.E., Washington, D.C. 20549, or from the Commission's website
http://www.sec.gov. You may obtain information on the operation of the public
reference room by calling 1 (800) SEC-0330 and you may obtain copies at
prescribed rates.





I.           Subsidiary
information





Not
Applicable.





Item
      11.
            Quantitative
      and Qualitative Disclosures about Market
Risk





Interest
Rates





The
international drybulk industry is a capital intensive industry, requiring
significant amounts of investment. Much of this investment is provided in the
form of long-term debt. Our debt contains interest rates that fluctuate with
LIBOR. During the waiver period, LIBOR is adjusted to the cost of funds.
Increasing interest rates could adversely impact future earnings.





Under our
amended term loans with both Commerzebank AG and Piraeus Bank we pay an interest
rate of LIBOR plus a margin of 2%. As of March 23, 2010, we had $113.8 million
outstanding under our term loan with Commerzebank AG and a total of $117.2
million outstanding under our term loans with Piraeus Bank.





93








Our
interest expense for the year ended December 31, 2009 was $9.9
million.  Our estimated interest expense for the year ending December
31, 2010 is $7.3 million.  Our interest expense estimate is based on
the amount of our outstanding borrowings under our term loan facilities as of
December 31, 2009 and the weighted average interest rate of our term loan
facilities for the year ended December 31, 2009, which amounted to
3.33%.  Our interest expense is affected by changes in the general
level of interest rates. As an indication of the extent of our sensitivity to
interest rate changes, an increase of 100 basis points will increase our
interest expense for the year ended December 31, 2010 by $2.2 million assuming
the same debt profile throughout the year.





The
following table sets forth the sensitivity of loans in millions of Dollars to a
100 basis points increase in LIBOR during the next five years:





For
      the year
              ended
              December
      31,
            
            Estimated
      amount
              of
      interest expense
            
            Estimated
      amount
              of
      interest expense after an increase of 100 basis points
            
            Sensitivity2010
            
            7.3
            
            9.5
            
            2.22011
            
            5.8
            
            7.6
            
            1.82012
            
            4.8
            
            6.2
            
            1.42013
            
            4.0
            
            5.2
            
            1.22014
            
            2.8
            
            3.6
            
            0.8





Currency
and Exchange Rates





We
generate all of our revenues in Dollars and operating expenses in currencies
other than the Dollar are approximately 17% of total operation expenses.
However, 57% of our general and administrative expenses including consulting
fees, salaries and traveling expenses were incurred in Euros. For accounting
purposes, expenses incurred in Euros are converted into Dollars at the exchange
rate prevailing on the date of each transaction. Because a significant portion
of our expenses are incurred in currencies other than the Dollar, our expenses
may from time to time increase relative to our revenues as a result of
fluctuations in exchange rates, particularly between the Dollar and the Euro,
which could affect the amount of net income that we report in future periods. As
of December 31, 2009, the effect of a 1% adverse movement in Dollar/Euro
exchange rates would have resulted in an increase of $50,062 and $51,796 in our
general and administrative expense and our operating expenses, respectively.
While we historically have not mitigated the risk associated with exchange rate
fluctuations through the use of financial derivatives, we may determine to
employ such instruments from time to time in the future in order to minimize
this risk. The use of financial derivatives, including foreign exchange forward
agreements, would involve certain risks, including the risk that losses on a
hedged position could exceed the nominal amount invested in the instrument and
the risk that the counterparty to the derivative transaction may be unable or
unwilling to satisfy its contractual obligations, which could have an adverse
effect on our results.





Forward
Freight Agreements





From time
to time, we may take positions in derivative instruments including freight
forward agreements, or FFAs. Generally, FFAs and other derivative instruments
may be used to hedge a vessel owner's exposure to the charter market for a
specified route and period of time. Upon settlement, if the contracted charter
rate is less than the average of the rates, as reported by an identified index,
for the





94





specified
route and time period, the seller of the FFA is required to pay the buyer an
amount equal to the difference between the contracted rate and the settlement
rate, multiplied by the number of days in the specified period. Conversely, if
the contracted rate is greater than the settlement rate, the buyer is required
to pay the seller the settlement sum. If we take positions in FFAs or other
derivative instruments we could suffer losses in the settling or termination of
the FFA. This could adversely affect our results of operation and cash
flow.





During
the years ended December 31, 2009 and 2008, we entered into a limited number of
FFAs on the Capesize and Panamax indexes.  The FFAs are intended to
serve as an approximate hedge for our  vessels trading in the spot
market for 2009 and 2010, effectively locking-in the approximate amount of
revenue that we expect to receive from such vessels for the relevant periods.
Our FFAs do not qualify as cash flow hedges for accounting purposes and
therefore gains or losses are recognized in the accompanying consolidated
statements of operations.  As all of our FFAs are settled on a daily
basis through London Clearing House (LCH), the fair value of these instruments
as of December 31, 2009 was $0.  During the years ended December 31,
2009 and 2008, the loss/gain from FFAs amounted to $2.4 million and $0.3
million, respectively.





Bunker
swaps agreements





Bunker
swaps are agreements between two parties to exchange cash flows at a fixed price
on bunkers, where volume, time period and price are agreed in advance. During
2009, we entered into four bunker swap contracts for 18,000 metric tons of fuel
oil up to December 31, 2011.  These swaps are traded as derivatives on
the over-the-counter (OTC) market.





During
the year ended December 31, 2009 gain from bunker swaps amounted to $0.3
million.





Item
      12.
            Description
      of Securities Other than Equity
Securities





A.           Debt
securities





Not
Applicable.





B.           Warrants
and rights





Not
Applicable.





C.           Other
securities





Not
Applicable.





D.           American
depository shares





Not
Applicable.








95





PART
II





Item
      13.
            Defaults,
      Dividend Arrearages and
Delinquencies





None.





Item
      14.
            Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds





None.





Item
      15.
            Controls
      and Procedures





(a)           Disclosure
Controls and Procedures





Management,
including the Chief Executive Officer and the Chief Financial Officer have
conducted an evaluation of the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of December
31, 2009. Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective as of the evaluation date to ensure that information
required to be disclosed by the Company in the reports that it files or submits
to the Commission under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the Commission's rules and forms.





(b)           Management's
Annual Report on Internal Control Over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities and Exchange Act of 1934, as amended. The Company's internal control
over financial reporting is a process designed under the supervision of the
Company's Chief Executive Officer and Chief Financial Officer, and carried out
by our board of directors, management, and other personnel, to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and the preparation of the Company's consolidated financial statements
for external reporting purposes in accordance with US GAAP. The Company's
internal control over financial reporting includes policies and procedures
that:





·
            Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect transactions and dispositions of assets of the
      Company;





·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of consolidated financial statements in accordance with US
      GAAP, and that receipts and expenditures are being made only in accordance
      with authorizations of management and directors of the Company;
      and





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of the Company's assets that
      could have a material effect on the consolidated financial
      statements.





Management
has conducted an assessment of the effectiveness of the Company's internal
control over financial reporting based on the framework established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO").





Based on
this assessment, management has determined that the Company's internal control
over financial reporting as of December 31, 2009 is effective.





96







(c)           Attestation
Report of the Registered Public Accounting Firm





Deloitte,
Hadjipavlou Sofianos & Cambanis S.A., our independent registered public
accounting firm, as auditors of the consolidated financial statements of the
Company for the year ended December 31, 2009, has also audited the effectiveness
of the Company's internal control over financial reporting as stated in their
audit report which is included below.





(d)           Changes
in Internal Control over Financial Reporting





There
were no other changes in our internal controls over financial reporting that
occurred during the period covered by this Annual Report that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.





Inherent
Limitations on Effectiveness of Controls





Management,
including the Chief Executive Officer and the Chief Financial Officer, does not
expect that our disclosure controls or our internal control over financial
reporting will prevent or detect all error and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control system's objectives will be met. Our
disclosure controls and procedures are designed to provide reasonable assurance
of achieving their objectives. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time, controls may
become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures.





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and Stockholders of Star Bulk Carriers Corp.


Majuro,
Republic of the Marshall Islands





We have
audited the internal control over financial reporting of Star Bulk Carriers
Corp. and subsidiaries (the "Company") as of December 31, 2009, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.  The Company's management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's Annual Report on Internal Control over
Financial Reporting.  Our responsibility is to express an opinion on
the Company's internal control over financial reporting based on our
audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects.  Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances.  We
believe that our audit provides a reasonable basis for our opinion.





97




A
company's internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
 
 Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
 
 In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the criteria
established in Internal
Control — Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission.
 
 
 We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and
for the year ended December 31, 2009 of the Company and our report dated March
23, 2010 expressed an unqualified opinion on those financial
statements.
 
 /s/
Deloitte
 Hadjipavlou
Sofianos & Cambanis S.A.
 Athens,
Greece
 
 March 23,
2010


Item
      16A.
            Audit
      Committee Financial Expert





The Board
of Directors of the Company has determined that Mr. Softeland, whose
biographical details are included in Item 6. "Directors and Senior Management,"
a member of our Audit Committee qualifies as a financial expert and is
considered to be independent according to the Commission rules.





Item
      16B.
            Code
      of Ethics





The
Company has adopted a code of ethics that applies to its directors, officers and
employees. A copy of our code of ethics is posted in the "Investor Relations"
section of the Star Bulk Carriers Corp. website, and may be viewed at http://www.starbulk.com.
Shareholders may be direct their requests to the attention of Investor
Relations, Star Bulk Carriers Corp., 7, Fragoklisias Street, 2nd
floor, Maroussi 151 25, Athens, Greece.





98








Item
      16C.
            Principal
      Accountant Fees and Services





Deloitte,
Hadjipavlou, Sofianos & Cambanis S.A., Certified Auditors Accountants S.A,
or Deloitte, have audited our annual consolidated financial statements acting as
our Independent Registered Public Accounting Firm for the fiscal years ended
December 31, 2007, 2008 and 2009.





The table
below sets forth the total fees for the services performed by Deloitte in 2007,
2008 and 2009, and breaks these amounts by category of services.





(In thousands of
      Dollars)
            
            2007
            
            
            2008
            
            
            2009Audit
      fees
            
            
            748
            
            
            
            1,183
            
            
            
            738Audit-related
      fees
            
            
            -
            
            
            
            -
            
            
            
            -Tax
      fees
            
            
            -
            
            
            
            -
            
            
            
            -All
      other fees
            
            
            -
            
            
            
            -
            
            
            
            -Total
      fees
            
            
            748
            
            
            
            1,183
            
            
            
            738





The Audit
Committee is responsible for the appointment, replacement, compensation,
evaluation and oversight of the work of the independent auditors. As part of
this responsibility, the Audit Committee pre-approves the audit and non-audit
services performed by the independent auditors in order to assure that they do
not impair the auditor's independence from the Company. The Audit Committee has
adopted a policy which sets forth the procedures and the conditions pursuant to
which services proposed to be performed by the independent auditors may be
pre-approved.





Item
      16D.
            Exemptions
      from the Listing Standards for Audit
Committees





Not
Applicable.





Item
      16E.
            Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers





Not
Applicable.





Item
      16F.
            Change
      in Registrants Certifying
Accountant





Not
Applicable.





Item
      16G.
            Corporate
      Governance





We have
certified to Nasdaq that our corporate governance practices are in compliance
with, and are not prohibited by, the laws of the Marshall Islands.  As
a foreign private issuer, we will be exempt from many of Nasdaq's corporate
governance practices other than the requirements regarding the disclosure of a
going concern audit opinion, submission of a listing agreement, notification of
material noncompliance with Nasdaq corporate governance practices and the
establishment and composition of an audit committee and a formal written audit
committee charter.  A description of the significant differences
between our corporate governance practices and the Nasdaq's requirements are as
follows:





·
            Our
      board is comprised of seven
directors.





·
            Consistent
      with Marshall Islands law requirements, in lieu of obtaining an
      independent review of related party transactions for conflicts of
      interests, our amended and restated





99





bylaws
require any director who has a potential conflict of interest to identify and
declare the nature of the conflict to the board of directors at the next meeting
of the board of directors. Our amended and restated bylaws additionally provide
that related party transactions must be approved by independent and
disinterested directors.





·
            In
      accordance with Marshall Islands law, we will not be required to obtain
      shareholder approval if it chooses to issue additional
      securities.





As a
foreign private issuer, we are not required to solicit proxies or provide proxy
statements to Nasdaq pursuant to Nasdaq corporate governance rules or Marshall
Islands law.  Consistent with Marshall Islands law and as provided in
our amended and restated bylaws, we will notify our shareholders of meetings
between 15 and 60 days before the meeting.  This notification will
contain, among other things, information regarding business to be transacted at
the meeting.  In addition, our amended and restated bylaws provide
that shareholders must give between 150 and 180 days advance notice to properly
introduce any business at a meeting of the shareholders.





Other
than as noted above, we are in full compliance with applicable Nasdaq corporate
governance standard requirements for foreign private issuers.








100





PART
III





Item
      17.
            Financial
      Statements





See Item
18. "Financial Statements."





Item
      18.
            Financial
      Statements





The
following consolidated financial statements, beginning on page F-1, together
with the report of Deloitte thereon, are filed as a part of this
report.





Item
      19.
            Exhibits








Number
            Description
      of Exhibition1.1
            Amended
      and Restated Articles of Incorporation of Star Bulk Carriers Corp. (1)1.2
            Amended
      and Restated bylaws of the Company (2)2.1
            Form
      of Share Certificate (3)2.2
            Form
      of Warrant Certificate (4)2.3
            Form
      of 2007 Equity Incentive Plan (5)2.4
            Stock
      Escrow Agreement (6)2.5
            Form
      of Warrant Agreement between American Stock Transfer & Trust Company
      and the Registrant (7)2.6
            Registration
      Rights Agreement (8)4.1
            Management
      Agreement with Combine Marine Inc. (9)4.2
            Agreement
      and Plan of Merger (10)4.3
            Master
      Agreement, as amended (11)4.4
            Supplemental
      Agreement (12)4.5
            Loan
      Agreement with Commerzbank AG dated December 27, 2007 (13)4.6
            Loan
      Agreement with Piraeus Bank A.E. dated April 14, 2008 (14)4.7
            Amendment
      No. 1 to Loan Agreement with Piraeus Bank A.E. dated April 17, 2008 (15)4.8
            Amendment
      No. 2. to Loan Agreement with Piraeus Bank A.E. dated September 18, 2008
      (16)4.9
            Loan
      Agreement with Piraeus Bank A.E. dated July 1, 2008 (17)4.10
            Waiver
      Agreement with Commerzbank AG dated March 12, 2009 (18)4.11
            Waiver
      Agreement with Piraeus Bank A.E., as Agent, dated March 10, 2009 (19)4.12
            Waiver
      Agreement with Piraeus Bank A.E. dated March 10, 2009 (20)4.13
            Amendment
      No. 1 to the Waiver Agreement with Commerzbank AG dated December 11,
      20098.1
            Subsidiaries
      of the Company12.1
            Certification
      of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended12.2
            Certification
      of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended13.1
            Certification
      of the Principal Executive Officer pursuant to 18 USC Section 1350, as
      adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
      200213.2
            Certification
      of the Principal Financial Officer pursuant to 18 USC Section 1350, as
      adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
      200215.1
            Consent
      of Independent Registered Public Accounting Firm
  (Deloitte)(1)
            Incorporated
      by reference to Exhibit 3.2 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      March 14, 2007.





101








(2)
            Incorporated
      by reference to Exhibit 3.1 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      March 14, 2007.(3)
            Incorporated
      by reference to Exhibit 4.1 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      March 14, 2007.(4)
            Incorporated
      by reference to Exhibit 4.3 of Star Maritime's Registration Statement
      (File No. 333-125662), which was filed with the Commission on October 26,
      2005.(5)
            Incorporated
      by reference to Exhibit 10.2 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      March 14, 2007.(6)
            Incorporated
      by reference to Exhibit 10.9 of Star Maritime's Registration Statement
      (File No. 333-125662), which was filed with the Commission on June 9,
      2005.(7)
            Incorporated
      by reference to Exhibit 4.4 of Star Maritime's Registration Statement
      (File No. 333-125662), which was filed with the Commission on June 9,
      2005.(8)
            Incorporated
      by reference to Exhibit 10.13 of Star Maritime's Registration Statement
      (File No. 333-125662), which was filed with the Commission on June 9,
      2005.(9)
            Incorporated
      by reference to Exhibit 10.16 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      May 24, 2007.(10)
            Incorporated
      by reference to Exhibit 1.1 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      March 14, 2007.(11)
            Incorporated
      by reference to Exhibit 10.19 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      October 12, 2007.(12)
            Incorporated
      by reference to Exhibit 10.11 of the Company's Joint Proxy/Registration
      Statement (File No. 333-141296), which was filed with the Commission on
      March 14, 2007.(13)
            Incorporated
      by reference to Exhibit 4.5 of he Company's Annual Report for the year
      ended December 31, 2007 (File No. 001-33869), which was filed with the
      Commission on June 30, 2008.(14)
            Incorporated
      by reference to Exhibit 4.6 of the Company's Annual Report for the year
      ended December 31, 2007 (File No. 001-33869), which was filed with the
      Commission on June 30, 2008.(15)
            Incorporated
      by reference to Exhibit 4.7 of the Company's Annual Report for the year
      ended December 31, 2007 (File No. 001-33869), which was filed with the
      Commission on June 30, 2008.(16)
            Incorporated
      by reference to Exhibit 10.24 of the Company's Registration Statement on
      Form F-3 (File No. 333-153304), which was filed with the Commission on
      October 10, 2008.(17)
            Incorporated
      by reference to Exhibit 10.23 of the Company's Registration Statement on
      Form F-3 (File No. 333-153304), which was filed with the Commission on
      September 2, 2008.(18)
            Incorporated
      by reference to Exhibit 4.10 of the Company's Annual Report for the year
      ended December 31, 2008 (File No. 001-33869), which was filed with the
      Commission on April 16, 2009.(19)
            Incorporated
      by reference to Exhibit 4.11 of the Company's Annual Report for the year
      ended December 31, 2008 (File No. 001-33869), which was filed with the
      Commission on April 16, 2009.(20)
            Incorporated
      by reference to Exhibit 4.12 of the Company's Annual Report for the year
      ended December 31, 2008 (File No. 001-33869), which was filed with the
      Commission on April 16, 2009.








102





SIGNATURES





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





Star
      Bulk Carriers Corp.(Registrant)Date:
      March 23, 2010
            
            By:
            /s/
      Prokopios TsirigakisName:
            Prokopios
      (Akis) TsirigakisTitle:
            President
      and Chief Executive Officer















































SK 25767
0001 1081340 v3





S-1





STAR
BULK CARRIERS CORP.


INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm (Deloitte. Hadjipavlou,
      Sofianos & Cambanis S.A.)
            
            F-2Consolidated
      Balance Sheets as of December 31, 2008 and 2009
            
            F-3Consolidated
      Statements of Operations for the years ended December 31, 2007, 2008 and
      2009
            
            F-4Consolidated
      Statements of Stockholders' Equity for the years ended December 31, 2007,
      2008 and 2009
            
            F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2007, 2008 and
      2009
            
            F-6Notes
      to Consolidated Financial Statements
            
            F-7








F-1








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and stockholders of Star Bulk Carriers Corp.
 Majuro,
Republic of the Marshall Islands
 
 
 We have
audited the accompanying consolidated balance sheets of Star Bulk Carriers Corp.
and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31,
2009.  These consolidated financial statements are the responsibility
of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Star Bulk Carriers Corp. and subsidiaries as
of December 31, 2009 and 2008, and the results of their operations and their
cash flows for each of the three  years in the period
ended  December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
 
 We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company's internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 23, 2010 expressed an unqualified
opinion on the Company's internal control over financial reporting.
 
 
 
 
 /s/
Deloitte.
 Hadjipavlou,
Sofianos & Cambanis S.A.
 Athens,
Greece
 March  23,
2010


F-2







STAR
      BULK CARRIERS CORP.Consolidated
      Balance SheetsAs
      of December 31, 2008 and 2009(Expressed
      in thousands of U.S. dollars except for share and per share
      data)2008
              
              
              2009ASSETSCurrent
      AssetsCash
      and cash equivalents
              
              $
              29,475
              
              
              $
              40,142Restricted
      cash (Note 2i)
              
              
              2,486
              
              
              
              8,353Trade
      accounts receivable
              
              
              3,379
              
              
              
              5,449Inventories
      (Note 4)
              
              
              1,276
              
              
              
              982Due
      from related parties (Note 3)
              
              
              465
              
              
              
              2,507Due
      from managers
              
              
              1,747
              
              
              
              147Derivative
      instruments (Note 15)
              
              
              251
              
              
              
              128Prepaid
      expenses and other receivables
              
              
              680
              
              
              
              3,120Deposit
      on forward freight agreements
              
              
              2,514
              
              
              
              -Total
      Current Assets
              
              
              42,273
              
              
              
              60,828FIXED
      ASSETSVessels
      and other fixed assets, net  (Note 5)
              
              
              821,284
              
              
              
              668,698Total
      Fixed Assets
              
              
              821,284
              
              
              
              668,698OTHER
      NON-CURRENT ASSETSDeferred
      finance charges
              
              
              1,391
              
              
              
              1,041Due
      from managers
              
              
              270
              
              
              
              -Fair
      value of above market acquired time charter (Note 6)
              
              
              14,148
              
              
              
              -Derivative
      instruments (Note 15)
              
              
              -
              
              
              
              154Restricted
      cash (Note 2i)
              
              
              12,010
              
              
              
              29,920TOTAL
      ASSETS
              
              $
              891,376
              
              
              $
              760,641LIABILITIES
      & STOCKHOLDERS' EQUITYCurrent
      LiabilitiesCurrent
      portion of long-term debt (Note 7)
              
              $
              49,250
              
              
              $
              59,675Accounts
      payable
              
              
              1,031
              
              
              
              3,977Due
      to related parties (Note 3)
              
              
              156
              
              
              
              336Accrued
      liabilities (Note 11)
              
              
              3,296
              
              
              
              2,293Deferred
      revenue
              
              
              3,554
              
              
              
              4,811Total
      Current Liabilities
              
              
              57,287
              
              
              
              71,092NON
      CURRENT LIABILITIESLong
      term debt (Note 7)
              
              
              247,250
              
              
              
              187,575Fair
      value of below market acquired time charter  (Note
      6)
              
              
              21,574
              
              
              
              1,812Deferred
      revenue
              
              
              5,072
              
              
              
              847Other
      non-current liability
              
              
              53
              
              
              
              58TOTAL
      LIABILITIES
              
              
              331,236
              
              
              
              261,384Commitments
      & Contingencies (Note 13)Stockholders'
      EquityPreferred
      Stock; $0.01 par value authorized 25,000,000 shares; none issued or
      outstanding at December 31, 2008 and 2009 (Note 8)
              
              
              -
              
              
              
              -Common
      Stock, $0.01 par value, 100,000,000 and 300,000,000 shares authorized at
      December 31, 2008 and 2009, respectively;  58,412,402 and
      61,104,760 shares issued and outstanding at December 31, 2008 and 2009,
      respectively (Note 8)
              
              
              584
              
              
              
              611Additional
      paid in capital  (Note 8)
              
              
              479,592
              
              
              
              483,282Retained
      earnings
              
              
              79,964
              
              
              
              15,364Total
      Stockholders' Equity
              
              
              560,140
              
              
              
              499,257TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              891,376
              
              
              $
              760,641
 The
accompanying notes are an integral part of these consolidated financial
statements








F-3








STAR
      BULK CARRIERS CORP.Consolidated
      Statements of OperationsFor
      the years ended December 31, 2007, 2008 and 2009
              (Expressed
      in thousands of U.S. dollars except for share and per share
      data)





Year
      ended
              
              
              Year
      ended
              
              
              Year
      endedDecember
      31,
              
              
              December
      31,
              
              
              December
      31,2007
              
              
              2008
              
              
              2009REVENUES:Voyage
      revenues
              
              $
              3,633
              
              
              $
              238,883
              
              
              $
              142,351EXPENSES/(INCOME):Voyage
      expenses (Note 14)
              
              
              43
              
              
              
              3,504
              
              
              
              15,374Vessel
      operating expenses (Note 14)
              
              
              622
              
              
              
              26,198
              
              
              
              30,168Management
      fees
              
              
              23
              
              
              
              975
              
              
              
              771Management
      fees-related party
              
              
              -
              
              
              
              392
              
              
              
              -Drydocking
      expenses
              
              
              -
              
              
              
              7,881
              
              
              
              6,122Depreciation
      (Note 5)
              
              
              745
              
              
              
              51,050
              
              
              
              58,298Vessel
      impairment loss (Note 5)
              
              
              -
              
              
              
              3,646
              
              
              
              75,208(Gain)/Loss
      on derivative instruments (Note 15)
              
              
              -
              
              
              
              (251
              )
              
              
              2,154Gain
      on time charter agreement termination (Note 6)
              
              
              -
              
              
              
              (9,711
              )
              
              
              (16,219
              )Loss
      on time charter agreement termination (Note  6)
              
              
              -
              
              
              
              -
              
              
              
              11,040General
      and administrative expenses
              
              
              7,756
              
              
              
              12,424
              
              
              
              8,7429,189
              
              
              
              96,108
              
              
              
              191,658Operating
      (loss)/profit
              
              
              (5,556
              )
              
              
              142,775
              
              
              
              (49,307
              )OTHER
      INCOME/(EXPENSES):Interest
      and finance costs (Note 7)
              
              
              (45
              )
              
              
              (10,238
              )
              
              
              (9,914
              )Interest
      and other income
              
              
              9,021
              
              
              
              1,201
              
              
              
              806Total
      other income/(expense), net
              
              
              8,976
              
              
              
              (9,037
              )
              
              
              (9,108
              )Income
      /(loss) before income taxes
              
              
              3,420
              
              
              
              133,738
              
              
              
              (58,415
              )Income
      taxes (Note 12)
              
              
              (9
              )
              
              
              -
              
              
              
              -Net
      income /(loss)
              
              $
              3,411
              
              
              $
              133,738
              
              
              $
              (58,415
              )Earnings/(loss)
      per share, basic (Note  9)
              
              $
              0.11
              
              
              $
              2.55
              
              
              $
              (0.96
              )Earnings/(loss)
      per share, diluted (Note 9)
              
              $
              0.09
              
              
              $
              2.46
              
              
              $
              (0.96
              )Weighted
      average number of shares outstanding, basic (Note 9)
              
              
              30,065,923
              
              
              
              52,477,947
              
              
              
              60,873,421Weighted
      average number of shares outstanding, diluted (Note 9)
              
              
              36,817,616
              
              
              
              54,447,985
              
              
              
              60,873,421
  The
      accompanying notes are an integral part of these consolidated financial
      statements





F-4








STAR
      BULK CARRIERS CORP.Consolidated
      Statements of Stockholders EquityFor
      the years ended December 31, 2007, 2008 and 2009(Expressed
      in thousands of U.S. dollars except for share and per share
      data)





Common
      Stock
              
              
              Additional
              
              
              
              
              
              Total#
      of Shares
              
              
              Par
      Value
              
              
              Paid-inCapital
              
              
              Retained
      earnings
              
              
              stockholders'EquityBALANCE,
      January 1, 2007
              
              $
              29,026,924
              
              
              $
              3
              
              
              $
              120,442
              
              
              $
              3,088
              
              
              $
              123,533Net
      income for the year ended December 31, 2007
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              3,411
              
              
              $
              3,411Redomiciliation
      Merger common stock par value change
              
              
              
              
              
              
              287
              
              
              
              (287
              )
              
              
              -
              
              
              
              -Issuance
      of common stock to TMT
              
              
              12,537,645
              
              
              
              125
              
              
              
              175,830
              
              
              
              -
              
              
              
              175,955Warrants
      exercised
              
              
              951,864
              
              
              
              10
              
              
              
              7,605
              
              
              
              -
              
              
              
              7,615Reclassification
      of common stock subject to redemption
              
              
              
              
              
              
              -
              
              
              
              64,680
              
              
              
              
              
              
              
              64,680Stock-based
      compensation
              
              
              
              
              
              
              -
              
              
              
              184
              
              
              
              -
              
              
              
              184BALANCE,
      December 31, 2007
              
              $
              42,516,433
              
              
              $
              425
              
              
              $
              368,454
              
              
              $
              6,499
              
              
              $
              375,378Net
      income for the year ended December 31, 2008
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              133,738
              
              
              $
              133,738Warrants
      exercised
              
              
              11,769,486
              
              
              
              118
              
              
              
              94,038
              
              
              
              -
              
              
              
              94,155Warrants
      and common stock buyback
              
              
              (1,247,000
              )
              
              
              (12
              )
              
              
              (13,437
              )
              
              
              -
              
              
              
              (13,449
              )Issuance
      of common stock to TMT
              
              
              803,481
              
              
              
              8
              
              
              
              18,938
              
              
              
              -
              
              
              
              18,946Issuance
      of common stock to stockholders
              
              
              4,255,002
              
              
              
              42
              
              
              
              7,617
              
              
              
              (7,659
              )
              
              
              -Issuance
      of vested and non-vested shares and amortization of stock based
      compensation
              
              
              315,000
              
              
              
              3
              
              
              
              3,983
              
              
              
              -
              
              
              
              3,986Dividends
      declared and paid ($0.98  per share)
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (52,614
              )
              
              
              (52,614
              )BALANCE,
      December 31, 2008
              
              $
              58,412,402
              
              
              $
              584
              
              
              $
              479,592
              
              
              $
              79,964
              
              
              $
              560,140Net
      loss for the year ended December 31, 2009
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (58,415
              )
              
              $
              (58,415
              )Issuance
      of common stock to TMT
              
              
              803,481
              
              
              
              8
              
              
              
              (8
              )
              
              
              -
              
              
              
              -Issuance
      of common stock
              
              
              818,877
              
              
              
              8
              
              
              
              1,877
              
              
              
              -
              
              
              
              1,885Issuance
      of vested and non-vested shares and amortization of stock based
      compensation
              
              
              1,070,000
              
              
              
              11
              
              
              
              1,821
              
              
              
              -
              
              
              
              1,832Dividends
      declared and paid ($0.10  per share)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,185
              )
              
              
              (6,185
              )BALANCE,
      December 31, 2009
              
              $
              61,104,760
              
              
              $
              611
              
              
              $
              483,282
              
              
              $
              15,364
              
              
              $
              499,257
  The
      accompanying notes are an integral part of these consolidated financial
      statements








F-5





STAR
      BULK CARRIERS CORP.Consolidated
      Statements of Cash FlowsFor
      the years ended December 31, 2006, 2007 and 2008(Expressed
      in thousands of U.S. dollars)Year
      ended
              
              
              Year
      ended
              
              
              Year
      endedDecember
      31,
              
              
              December
      31,
              
              
              December
      31,2007
              
              
              2008
              
              
              2009Cash
      Flows from Operating Activities:Net
      income/(loss)
              
              $
              3,411
              
              
              $
              133,738
              
              
              $
              (58,415
              )Adjustments
      to reconcile net income /(loss) to net cash provided by operating
      activities:Depreciation
              
              
              745
              
              
              
              51,050
              
              
              
              58,298Amortization
      of  fair value of above market acquired time
    charter
              
              
              28
              
              
              
              2,221
              
              
              
              3,108Amortization
      of  fair value of below market acquired time
    charter
              
              
              (1,465
              )
              
              
              (82,754
              )
              
              
              (8,843
              )Amortization
      of deferred finance charges
              
              
              -
              
              
              
              234
              
              
              
              350Loss
      on time charter agreement termination
              
              
              -
              
              
              
              -
              
              
              
              121Vessel
      impairment loss
              
              
              -
              
              
              
              3,646
              
              
              
              75,208Stock-
      based compensation
              
              
              184
              
              
              
              3,986
              
              
              
              1,832Change
      in fair value of derivatives
              
              
              -
              
              
              
              (251
              )
              
              
              (31
              )Other
      non-cash charges
              
              
              -
              
              
              
              53
              
              
              
              5Deferred
      interest
              
              
              (2,163
              )
              
              
              -
              
              
              
              -Changes
      in operating assets and liabilities:(Increase)/Decrease
      in:Fair
      value of trust account
              
              
              (1,179
              )
              
              
              -
              
              
              
              -Restricted
      cash for forward freight and bunkers  agreements
              
              
              
              
              
              
              (2,486
              )
              
              
              (3,267
              )Trade
      accounts receivable
              
              
              -
              
              
              
              (3,379
              )
              
              
              (2,070
              )Inventories
              
              
              (598
              )
              
              
              (678
              )
              
              
              294Prepaid
      expenses and other receivables
              
              
              (68
              )
              
              
              (462
              )
              
              
              (2,440
              )Deposit
      on forward freight agreements
              
              
              -
              
              
              
              (2,514
              )
              
              
              2,514Due
      from related parties
              
              
              -
              
              
              
              (465
              )
              
              
              (2,042
              )Due
      from managers
              
              
              (120
              )
              
              
              (1,897
              )
              
              
              1,870Increase/(Decrease)
      in:Accounts
      payable
              
              
              (31
              )
              
              
              864
              
              
              
              2,946Due
      to related parties
              
              
              480
              
              
              
              (324
              )
              
              
              180Accrued
      liabilities
              
              
              437
              
              
              
              2,455
              
              
              
              (773
              )Income
      taxes payable
              
              
              (207
              )
              
              
              -
              
              
              
              -Deferred
      revenue
              
              
              916
              
              
              
              7,710
              
              
              
              (2,968
              )Net
      Cash provided by Operating Activities
              
              
              370
              
              
              
              110,747
              
              
              
              65,877Cash
      Flows from Investing Activities:Cash  disbursements
      from trust account
              
              
              194,094
              
              
              
              -
              
              
              
              -Advances
      for vessels to be acquired
              
              
              (83,444
              )
              
              
              -
              
              
              
              -Additions
      to vessel cost and other fixed assets
              
              
              (95,707
              )
              
              
              (413,457
              )
              
              
              (49
              )Cash
      paid for above market acquired time charter
              
              
              (1,980
              )
              
              
              (14,417
              )
              
              
              -Cash
      proceeds from vessel sale
              
              
              -
              
              
              
              16,579
              
              
              
              19,129Increase
      in restricted cash
              
              
              -
              
              
              
              (12,010
              )
              
              
              (20,510
              )Net
      cash provided by/(used in) Investing Activities
              
              
              12,963
              
              
              
              (423,305
              )
              
              
              (1,430
              )Cash
      Flows from Financing Activities:Proceeds
      from bank loans
              
              
              -
              
              
              
              317,500
              
              
              
              -Loan
      repayment
              
              
              -
              
              
              
              (21,000
              )
              
              
              (49,250
              )Repurchase
      of shares and warrants
              
              
              -
              
              
              
              (13,449
              )
              
              
              -Proceeds
      from exercise of warrants
              
              
              7,534
              
              
              
              94,236
              
              
              
              -Proceeds
      from dividend reinvestment
              
              
              -
              
              
              
              -
              
              
              
              1,885Deferred
      underwriting fees paid
              
              
              (4,000
              )
              
              
              -
              
              
              
              -Financing
      fees paid
              
              
              -
              
              
              
              (1,625
              )
              
              
              (230
              )Cash
      dividend
              
              
              -
              
              
              
              (52,614
              )
              
              
              (6,185
              )Net
      cash provided by/(used in) Financing Activities
              
              
              3,534
              
              
              
              323,048
              
              
              
              (53,780
              )Net
      increase in cash and cash equivalents
              
              
              16,867
              
              
              
              10,490
              
              
              
              10,667Cash
      and cash equivalents at beginning of year
              
              
              2,118
              
              
              
              18,985
              
              
              
              29,475Cash
      and cash equivalents at end of the year
              
              $
              18,985
              
              
              $
              29,475
              
              
              $
              40,142SUPPLEMENTAL
      CASH FLOW INFORMATIONCash
      paid during the year for:Interest
              
              
              -
              
              
              
              9,378
              
              
              
              9,206Income
      taxes
              
              
              216
              
              
              
              -
              
              
              
              -Non-cash
      items:
                Issue
      of common stock at fair value for delivery of vessels
              
              
              175,955
              
              
              
              18,946
              
              
              
              -Deferred
      finance charges
              
              
              600
              
              
              
              -
              
              
              
              -Receivable
      from exercise of warrants
              
              
              81
              
              
              
              -
              
              
              
              -Amount
      owed for capital expentitures
              
              
              52
              
              
              
              -
              
              
              
              -Fair
      value of below market acquired time charters
              
              
              26,772
              
              
              
              79,021
              
              
              
              -Issuance
      of common stock to stockholders (non-cash stock
      dividend) -
              -
              
              
              
              7,659
              
              
              
              -
  The
      accompanying notes are an integral part of these consolidated financial
      statements











F-6





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





1.           Basis
of Presentation and General Information:





On
November 30, 2007, Star Maritime Acquisition Corp. ("Star Maritime")
incorporated in the state of Delaware, merged into its wholly-owned subsidiary
at the time, Star Bulk Carriers Corp. ("Star Bulk") a company incorporated in
Marshall Islands, with Star Bulk being the surviving entity (collectively, the
"Company," "we" or "us").  This merger is referred to as
"Redomiciliation Merger" or the "Merger".





The
accompanying consolidated financial statements as of and for the years ended
December 31, 2007, 2008 and 2009 include the accounts of Star Bulk and its
wholly owned subsidiaries.  The accompanying consolidated financial
statements for the period from January 1, 2007 to November 30, 2007 (the date of
Redomiciliation Merger) include the accounts of Star Maritime.





Star Bulk
was incorporated on December 13, 2006 under the laws of the Marshall Islands and
is the sole owner of all of the outstanding shares of Star Bulk Management Inc.
and the ship-owning subsidiaries as set forth below.





Star
Maritime was organized on May 13, 2005 as a blank check company formed to
acquire, through a merger, capital stock exchange, asset acquisition or similar
business combination, one or more assets or target businesses in the shipping
industry.  On December 21, 2005, Star Maritime consummated its initial
public offering of 18,867,500 units, at a price of $10.00 per unit, each unit
consisting of one share of Star Maritime common stock and one warrant to
purchase one share of Star Maritime common stock at an exercise price of $8.00
per share.  In addition, during December 2005 the Company completed a
private placement of an aggregate of 1,132,500 units, each unit consisting of
one share of common stock and one warrant.  The entire gross proceeds
of the initial public offering amounting to $188,675 were deposited in a trust
account (the "Trust Account").





On
January 12, 2007, Star Maritime and Star Bulk entered into definitive agreements
(the "Master Agreement") to acquire a fleet of eight drybulk carriers (the
"Transaction") from certain subsidiaries of TMT Co. Ltd. ("TMT"), a shipping
company headquartered in Taiwan that is controlled by Mr. Nobu Su, a former
director of the Company. These eight drybulk carriers are referred to as the
"initial fleet", or the "initial vessels".  The aggregate purchase
price specified in the Master Agreement for the initial fleet was $224,500 in
cash and 12,537,645 shares of common stock of Star Bulk that were issued on
November 30, 2007.  The Company also agreed to issue to TMT additional
stock consideration of 1,606,962 common shares of Star Bulk in two equal
installments in 2008 and 2009.  On July 17, 2008 the Company issued
803,481 shares out of additional stock consideration of 1,606,962 of common
stock of Star Bulk to TMT.  On April 28, 2009 the remaining 803,481
shares of Star Bulk's common stock were issued to TMT.








F-7





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





1.      Basis
of Presentation and General Information-(continued):





On
November 27, 2007 the Company obtained shareholder approval for the acquisition
of the initial fleet and for effecting the Redomiciliation Merger, which became
effective on November 30, 2007. The shares of Star Maritime were exchanged on
one-for-one basis with shares of Star Bulk and Star Bulk assumed the outstanding
warrants of Star Maritime.  Subsequently, Star Maritime shares ceased
trading on the American Stock Exchange.





Holders
of Star Maritime common stock had the right to redeem their shares for cash by
voting against the Redomiciliation Merger.  Accordingly, at December
31, 2005, the Company had a liability of $64,680 due to a possible redemption of
6,599,999 shares of common stock.  Upon completion of the
Redomiciliation Merger none of the redemption rights were exercised and the
liability for the possible redemption was reclassified as additional paid-in
capital during the year ended December 31, 2007.  Deferred interest
attributable to common stock subject to a possible redemption in the amount of
$2,163 was recognized in the consolidated statement of operations during the
year ended December 31, 2007.





In
addition, upon completion of the Redomiciliation Merger, all Trust Account
proceeds were released to the Company to complete the Transaction as per the
Master Agreement.  Star Bulk shares and warrants started trading on
the NASDAQ Global Select Market on December 3, 2007 under the ticker symbols
SBLK and SBLKW, respectively.  Immediately following the effective
date of the Redomiciliation Merger, TMT and its affiliates owned 30.2% of Star
Bulk's outstanding common stock.





The
Company began operations on December 3, 2007 with the delivery of its first
vessel Star Epsilon.








F-8





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





1.      Basis
of Presentation and General Information-(continued):





Below is
the list of the Company's wholly owned ship-owning subsidiaries as of December
31, 2009:





Wholly
      Owned
              Subsidiaries
            Vessel
              Name
            DWT
            
            Date
              Delivered
      to Star Bulk
            Year
              BuiltStar
      Bulk Management Inc.
            -
            -
            
            -
            -Starbulk
      S.A.***
            -
            -
            
            -
            - Vessels
      in operation at December 31, 2009Star
      Epsilon LLC
            Star
      Epsilon (ex G Duckling)*
            52,402
            
            December
      3, 2007
            2001Star
      Theta LLC
            Star
      Theta (ex J Duckling)*
            52,425
            
            December
      6, 2007
            2003Star
      Kappa LLC
            Star
      Kappa (ex E Duckling)
            52,055
            
            December
      14, 2007
            2001Star
      Beta LLC
            Star
      Beta (ex B Duckling)*
            174,691
            
            December
      28, 2007
            1993Star
      Zeta LLC
            Star
      Zeta (ex I Duckling)*
            52,994
            
            January
      2, 2008
            2003Star
      Delta LLC
            Star
      Delta (ex F Duckling)*
            52,434
            
            January
      2, 2008
            2000Star
      Gamma LLC
            Star
      Gamma (ex C Duckling)*
            53,098
            
            January
      4, 2008
            2002Lamda
      LLC
            Star
      Sigma
            184,403
            
            April
      15, 2008
            1991Star
      Omicron LLC
            Star
      Omicron
            53,489
            
            April
      17, 2008
            2005Star
      Cosmo LLC
            Star
      Cosmo
            52,247
            
            July
      1, 2008
            2005Star
      Ypsilon LLC
            Star
      Ypsilon
            150,940
            
            September
      18, 2008
            1991Vessels
      soldStar
      Iota LLC
            Star
      Iota**
            78,585
            
            March
      7, 2008
            1983Star
      Alpha LLC
            Star
      Alpha (ex A Duckling)****
            175,075
            
            January
      9, 2008
            1992





*
            Initial
      fleet or initial vessels




**
            On
      April 24, 2008 the Company entered into an agreement to sell Star Iota
      (which was a vessel in the initial fleet) for gross proceeds of $18.4
      million less costs to sell of $1.8 million.  The vessel was
      delivered to its purchasers on October 6,
2008.




***
            Starbulk
      S.A. was incorporated on January 28, 2009 for the purpose of acting as the
      technical manager of the Company's
vessels.




****
            On
      July 21, 2009 the Company entered into an agreement to sell Star Alpha
      (which was also a vessel in the initial fleet) for gross proceeds of $19.9
      million less costs to sell of $0.8 million.  The vessel was
      delivered to itspurchasers on
      December 21, 2009.










F-9





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





1.      Basis
of Presentation and General Information-(continued):





The
charterers that individually accounting for more than 10% of the Company's
voyage revenues during the years ended December 31, 2007, 2008 and 2009 are as
follows:





Charterer
            
            
            2007
            
            
            2008
            
            
            2009A
            
            
            
            44
            %
            
            
            -
            
            
            
            -B
            
            
            
            36
            %
            
            
            -
            
            
            
            -C
            
            
            
            20
            %
            
            
            -
            
            
            
            12
            %D
            
            
            
            -
            
            
            
            19
            %
            
            
            -E
            
            
            
            -
            
            
            
            10
            %
            
            
            -F
            
            
            
            -
            
            
            
            -
            
            
            
            20
            %G
            
            
            
            -
            
            
            
            -
            
            
            
            12
            %H
            
            
            
            -
            
            
            
            -
            
            
            
            11
            %I
            
            
            
            -
            
            
            
            -
            
            
            
            10
            %





2.      Significant
Accounting Policies:





a)   Principles
of Consolidation: The accompanying consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"), which include the accounts of Star
Maritime, prior to the Redomiciliation Merger, and of Star Bulk and its wholly
owned subsidiaries referred to in Note 1 above. All inter-company accounts and
transactions have been eliminated in consolidation.





b)   Use
of estimates:The preparation of the
accompanying consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent assets and
liabilities at the date of the accompanying consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.





c)  Other
Comprehensive Income:The Company follows guidance related to Reporting
Comprehensive Income,  which requires separate presentation of certain
transactions, which are recorded directly as components of stockholders' equity.
The Company has no such transactions which affect comprehensive income and,
accordingly, comprehensive income equals net income / (loss) for all periods
presented.





F-10





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2. Significant
Accounting Policies – (continued):





d)  Concentration
of Credit Risk:Financial instruments, which potentially subject the
Company to significant concentrations of credit risk, consist principally of
cash and cash equivalents, short-term investments, trade accounts receivable and
derivative contracts (bunker swaps and forward freight
agreements).  The Company's policy is to place cash and cash
equivalents and short-term investments with financial institutions evaluated as
being creditworthy.  The Company may be exposed to credit risk in the
event of non-performance by counterparties to derivative instruments; however,
the Company a) in over-the-counter transactions limits its exposure by
diversifying among counter parties with high credit ratings, and b) all of the
Company's forward freight agreements ("FFA's") are settled on a daily basis
through London Clearing House ("LCH"). The Company, consistent with drybulk
shipping industry practice, has not independently analyzed the creditworthiness
of the charterers and generally does not require collateral for its trade
accounts receivable.





e)   Income
taxes:





e.i)Star Bulk: is not liable for
any income tax on its income derived from shipping operations because the
countries in which the Company's ship-owning and management subsidiaries and
management company are incorporated do not levy tax on income, but rather a
tonnage tax on vessels.





e.ii)Star Maritime:
was incorporated in Delaware, thus, deferred income taxes were provided for the
differences between the bases of assets and liabilities for financial reporting
and income tax purposes. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized.





f)  Foreign Currency
Translation: The functional currency of the Company is the U.S. Dollar
since the Company's vessels operate in international shipping markets, and
therefore primarily transact business in U.S. Dollars. The Company's books of
accounts are maintained in U.S. Dollars. Transactions involving other currencies
during the year are converted into U.S. Dollars using the exchange rates in
effect at the time of the transactions. At the consolidated balance sheet dates,
monetary assets and liabilities, which are denominated in other currencies, are
translated into U.S. Dollars at the year-end exchange rates. Resulting gains or
losses are included in General and administrativeexpenses in the
accompanying consolidated statements of operations.





F-11








STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





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





h)  Cash
Held in Trust:  Investments held in trust during the year
ending December 31, 2007, were held in short-term investments.  The
Company invested in various short-term tax free money market funds promulgated
under the Investment Company Act of 1940.  Interest income earned on
such investments and unrealized and realized gains and losses were the Company's
source of income until the consummation of the Merger.  For the year
ended December 31, 2007, the realized gain on such investments amounted to
$1,179.





i)  Restricted
Cash: Restricted cash reflects deposits that are required to be
maintained with certain banks under the Company's loan agreements (Note 7).
Restricted cash also consists of the restricted portion of both FFAs and bunker
swaps base and margin collaterals with LCH and Marfin Bank,
respectively.  As of December 31, 2008 and 2009, the restricted
balance with LCH and Marfin Bank amounted to $2,486 and $5,753, respectively,
and is presented under current assets in the accompanying consolidated balance
sheet. Furthermore, as of December 31, 2008 and 2009, minimum liquidity required
by the Company's lenders amounted to $12,000 and $11,000, respectively, pledged
amounts amounted to $0 and $21,500, respectively. Effective February 1, 2010,
based on the waiver dated December 24, 2009 (Note 7), minimum liquidity
decreased by $3,850 and the pledged accounts increased by $1,250. The
amount of $2,600 representing minimum liquidity and the pledge account
requirements is presented in restricted cash under current assets in the
accompanying consolidated balance sheet.  As of December 31, 2008 and
2009, letters of guarantee for statutory registration amounted to $10 and $20,
respectively, and are presented in restricted cash under non-current assets in
the accompanying consolidated balance sheet.





j)  Trade
accounts receivable: The amount shown as trade accounts
receivable, at each balance sheet date, includes estimated recoveries from each
voyage or time charter. At each balance sheet date, the Company provides for
doubtful accounts on the basis of specific identified doubtful
receivables.  At December 31, 2008 and 2009, no provision for doubtful
debts was considered necessary.





k)  Inventories:
Inventories consist of consumable bunkers and lubricants, which are stated at
the lower of cost or market value. Cost is determined by the first in, first out
method.








F-12





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





l)  Vessels,
Net:Vessels are stated at
cost, which consists of the purchase price and any material expenses incurred
upon acquisition, such as (initial repairs, improvements, delivery expenses and
other expenditures to prepare the vessel for her initial
voyage).  Otherwise these amounts are charged to expense as
incurred.





The
aggregate purchase price paid to TMT for the eight vessels in the initial fleet
consisted of cash and Star Bulk common shares. The stock consideration was
measured based on the fair market value of the Company's common shares at the
time each vessel was delivered. The additional stock consideration of 1,606,962
common shares (Note 1) was measured when TMT completed its performance under the
Master Agreement when it delivered to the Company the last vessel of the initial
fleet on March 7, 2008. The aggregate purchase price consisting of cash and
stock consideration was allocated to the acquired vessels based on the relative
fair values of the vessels on their respective dates of delivery to Star
Bulk.





The cost
of each of the Company's vessels is depreciated beginning when the vessel was
ready for its intended use, on a straight-line basis over the vessel's remaining
economic useful life, after considering the estimated residual value (a vessel's
residual value is equal to the product of its lightweight tonnage and estimated
scrap rate per ton).  Management estimates the useful life of the
Company's vessels to be 25 years from the date of initial delivery from the
shipyard.  When regulations place limitations over the ability of a
vessel to trade on a worldwide basis, its remaining useful life is adjusted at
the date such regulations are adopted.





m) Fair value of
above/below market acquired time charter: The Company records all
identified tangible and intangible assets associated with the acquisition of a
vessel or liabilities at fair value.  Fair value of above or below
market acquired time charters is determined by comparing existing charter rates
in the acquired time charter agreements with the market rates for equivalent
time charter agreements prevailing at the time the foregoing vessels are
delivered. The present values representing the fair value of the above or below
market acquired time charters are recorded as an intangible asset or liability,
respectively.  Such intangible asset or liability is recognized
ratably as an adjustment to revenues over the remaining term of the assumed time
charter.








F-13





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.           Significant
Accounting Policies – (continued):





n)  Impairment
of Long-Lived Assets: The Company follows guidance related to Impairment
or Disposal of Long-lived Assets which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. The standard
requires that long-lived assets and certain identifiable intangibles held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. When the estimate of undiscounted cash flows, excluding interest
charges, expected to be generated by the use of the asset is less than its
carrying amount, the Company should evaluate the asset for an impairment loss.
Measurement of the impairment loss is based on the fair value.  In
this respect, management regularly reviews the carrying amount of the vessels on
vessel by vessel basis when events and circumstances indicate that the carrying
amount of the vessels might not be recoverable.





At
December 31, 2008 and 2009, the Company performed an impairment review of the
Company's vessels due to the global economic downturn and the prevailing
conditions in the shipping industry. The Company compared undiscounted cash
flows to the carrying values for the Company's vessels to determine if the
assets were impaired. Significant management judgment is required in forecasting
future operating results used in this method. These estimates are consistent
with the plans and forecasts used by management to conduct its business. As a
result of this analysis, no assets were considered to be impaired and the
Company has not recognized any impairment charge for its vessels, for the years
ended December 31, 2008 and 2009, other than vessels classified as held for sale
during the years ended December 31, 2008 and 2009 (Note 5).








F-14





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.           Significant
Accounting Policies – (continued):





o) Vessels held
for sale:It is the Company's policy to dispose of vessels when suitable
opportunities occur and not necessarily to keep them until the end of their
useful life. The Company classifies vessels as being held for sale when:
management has committed to a plan to sell the vessels; the vessels are
available for immediate sale in their present condition; an active program to
locate a buyer and other actions required to complete the plan to sell the
vessels have been initiated; the sale of the vessels is probable, and transfer
of the asset is expected to qualify for recognition as a completed sale within
one year; the vessels are being actively marketed for sale at a price that is
reasonable in relation to their current fair value and actions required to
complete the plan indicate that it is unlikely that significant changes to the
plan will be made or that the plan will be withdrawn.





Vessels
classified as held for sale are measured at the lower of their carrying amount
or fair value less cost to sell.  These vessels are not depreciated
once they meet the criteria to be classified as held for sale.





p)  Financing
Costs: Fees paid to lenders or required to be paid to third parties on
the lender's behalf for obtaining loans or refinancing existing ones are
recorded as deferred charges.  Unamortized fees relating to loans
repaid or refinanced as debt extinguishment are expensed as interest and finance
costs in the period the repayment or extinguishment is made using the effective
interest method.





q)  Pension
and retirement benefit obligations—crew:The ship-owning
subsidiaries included in the consolidated financial statements employ the crew
on board under short-term contracts (usually up to eight months) and,
accordingly, are not liable for any pension or post-retirement
benefits.





F-15





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





r)  Pension
and retirement benefit obligations—administrative
personnel:   Administrative employees are covered by
state-sponsored pension funds. Both employees and the Company are required to
contribute a portion of the employees' gross salary to the fund.  The
related expense is recorded under "General and administration expenses" in the
Consolidated Statements of Operations. Upon retirement, the state-sponsored
pension funds are responsible for paying the employees retirement benefits
without recourse to the Company.





s)  Stock
incentive plan awards:  Share-based compensation represents
vested and non-vested shares granted to employees and to non-employee directors,
for their services as directors, and is included in "General and administrative
expenses" in the consolidated statements of operations. These shares are
measured at their fair value equal to the market value of the Company's common
stock on the grant date. The shares that do not contain any future service
vesting conditions are considered vested shares and the total fair value of such
shares is expensed on the grant date. Guidance related to stock compensation
describes two generally accepted methods of recognizing expense for non-vested
share awards with a graded vesting schedule for financial reporting purposes: 1)
the "accelerated method," which treats an award with multiple vesting dates as
multiple awards and results in a front-loading of the costs of the award and 2)
the "straight-line method" which treats such awards as a single award and
results in recognition of the cost ratably over the entire vesting
period.  The shares that contain a time-based service vesting
condition are considered non-vested shares on the grant date and a total fair
value of such shares is recognized using the accelerated method.





t)  Dry-docking
and special survey expenses:Dry-docking and special survey
expenses are expensed when incurred.








F-16





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





u)  Accounting
for Revenue and Related Expenses:The Company generates
its revenues from charterers for the charterhire of its vessels. Vessels are
chartered mainly using time charters, where a contract is entered into for the
use of a vessel for a specific period of time and a specified daily charterhire
rate. Under time charters, voyage costs, such as fuel and port charges are borne
and paid by the charterer.  Company's time charters agreements are
classified as operating leases. Revenues under operating lease arrangements are
recognized when a charter agreement exists, charter rate is fixed and
determinable, the vessel is made available to the lessee, and collection of the
related revenue is reasonably assured. Revenues are recognized ratably on a
straight line basis over the period of the respective charter agreement in
accordance with guidance related to leases.





Voyage
charter agreements are charterhires, where a contract is made in the spot market
for the use of a vessel for a specific voyage at a specified charter rate.
Revenue from voyage charter agreements is recognized on a pro-rata basis over
the duration of the voyage. Under voyage charter agreements, all voyage costs
are borne and paid by the Company.  Demurrage income, which is
included in voyage revenues, represents payments by the charterer to the vessel
owner when loading or discharging time exceeds the stipulated time in the voyage
charter and is recognized when arrangement exists, services have been performed,
the amount is fixed or determinable and collection is reasonably
assured.





Deferred
revenue includes cash received prior to the consolidated balance sheet date and
is related to revenue earned after such date. The portion of the deferred
revenue that will be earned within the next twelve months is classified as
current liability and the remaining as long term liability.





Vessel
operating expenses include crew wages and related costs, the cost of insurance
and vessel registry, expenses relating to repairs and maintenance, the costs of
spares and consumable stores, tonnage taxes, regulatory fees, technical
management fees and other miscellaneous expenses.


Brokerage
commissions are paid by the Company. Brokerage commissions are recognized over
the related charter period and included in voyage expenses. Voyage expenses and
vessel operating expenses are expensed as incurred.








F-17





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





v)  Fair
value of financial instruments:On January 1, 2008, the Company adopted
guidance related to Fair Value Measurements & Disclosures for financial
assets and liabilities and any other assets and liabilities carried at fair
value and are measured on recurring basis. This pronouncement defines fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The Company's adoption of this guidance did not
have a material effect on the Company's Consolidated Financial Statements for
financial assets and liabilities and any other assets and liabilities carried at
fair value. The Company has provided additional fair value disclosures in Note
15.





w) Earnings per
Common Share:  Earnings per
share are computed in accordance with guidance related to Earnings per
Share.  Basic earnings or loss per share are calculated by dividing
net income or loss available to common shareholders by the basic weighted
average number of common shares outstanding during the
period.  Diluted  income per share reflects the potential
dilution assuming common shares were issued for the exercise of outstanding
in-the-money warrants and non-vested shares and assuming the hypothetical
proceeds, including proceeds from warrant exercise and average unrecognized
stock-based compensation cost, thereof were used to purchase common shares at
the average market price during the period such warrants and non-vested shares
were outstanding (Note 9).





x)  Segment
Reporting: The Company reports financial information and evaluates its
operations by total charter revenues and not by the type of vessel, length of
vessel employment, customer or type of charter. As a result, management,
including the chief operating decision makers, reviews operating results solely
by revenue per day and operating results of the fleet, and thus, the Company has
determined that it operates under one reportable segment. Furthermore, when the
Company charters a vessel to a charterer, the charterer is free to trade the
vessel worldwide and, as a result, the disclosure of geographic information is
impracticable.








F-18





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





y)  Recent
Accounting Pronouncements:





(i) In
March 2008, new guidance was issued to provide users of financial statements
with an enhanced understanding of derivative instruments and hedging activities.
The new guidance requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on instruments, and disclosures about
credit-risk-related contingent features in derivative agreements. This guidance
was effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. This guidance does not require
comparative disclosures for earlier periods at initial adoption. The Company
adopted this guidance in the first quarter of 2009 (Note 15).





(ii) In
June 2008, new guidance clarified that all outstanding non-vested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities, and the two-class method of computing basic
and diluted earnings per share must be applied. The guidance was effective for
fiscal years beginning after December 15, 2008. The adoption of this new
guidance did not have an impact on the Company's consolidated financial
statements as dividends are required to be returned to the entity if the
employee forfeits the award.








F-19





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





2.       Significant
Accounting Policies – (continued):





(iii)  In
June 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles(the "ASC"
or the "Codification"), which became the single source of authoritative U.S.
GAAP recognized by the FASB to be applied by nongovernmental entities. The
Codification's content carries the same level of authority, effectively
superseding previous guidanceand includes only two levels of GAAP: authoritative
and no authoritative. The guidance is effective for financial statements issued
for interim and annual periods ending after September 15, 2009. The Company
adopted the new guidance in the third quarter of 2009 and revised references to
US GAAP in these consolidated financial statements to reflect the guidance in
the Codification.




(iv) In
June 2009, new guidance was issued with regards to the consolidation of variable
interest entities ("VIE"). This guidance responds to concerns about the
application of certain key provisions of the FASB Interpretation, including
those regarding the transparency of the involvement with VIEs. The new guidance
revises the approach to determining the primary beneficiary of a VIE to be more
qualitative in nature and requires companies to more frequently reassess whether
they must consolidate a VIE. Specifically, the new guidance requires a
qualitative approach to identifying a controlling financial interest in a VIE
and requires ongoing assessment of whether an entity is a VIE and whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. In
addition, the standard requires additional disclosures about the involvement
with a VIE and any significant changes in risk exposure due to that involvement.
This new guidance is effective from January 1, 2010. The adoption of this
pronouncement is not expected to have a significant impact on the Company's
financial statements.





F-20





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





3.      Transactions
with Related Parties





Transactions
and balances with related parties are analyzed as follows:





Balance
Sheet





December
      31, 2008
            
            
            December
      31, 2009AssetsTMT
      Co Ltd. (a)
            
            $
            454
            
            
            $
            -Combine
      Marine S.A. (b)
            
            
            11
            
            
            
            -Oceanbulk
      Maritime, S.A.(c)
            
            
            -
            
            
            
            2,507Total
      assets
            
            $
            465
            
            
            $
            2,507LiabilitiesOceanbulk
      Maritime, S.A.(c)
            
            $
            1
            
            
            $
            -Interchart
      Shipping Inc. (d)
            
            
            6
            
            
            
            190Management
      and Directors
            
            
            149
            
            
            
            146Total
      Liabilities
            
            $
            156
            
            
            $
            336




Statement
of operations





Year
      ended December 31,2007
            
            
            2008
            
            
            2009Revenues-TMT
      (a)
            
            $
            
            
            
            $
            13,009
            
            
            $
            309Voyage
      expenses-Combine (b)
            
            
            -
            
            
            
            95
            
            
            
            -Operating
      expenses-Combine (b)
            
            
            -
            
            
            
            1,440
            
            
            
            -Management
      fees-Combine (b)
            
            
            -
            
            
            
            434
            
            
            
            -General
      and Administrative-Combine (b)
            
            
            91
            
            
            
            67
            
            
            
            -Revenues
      Vinyl (c )
            
            
            -
            
            
            
            11,611
            
            
            
            16,508Voyage
      expenses-Interchart (d)
            
            
            -
            
            
            
            396
            
            
            
            1,472Executive
      directors consultancy fees (e)
            
            
            659
            
            
            
            969
            
            
            
            917Non-executive
      directors compensation (e)
            
            
            -
            
            
            
            149
            
            
            
            126








F-21





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





3.      Transactions
with Related Parties-(continued):





(a) TMT Co.
Ltd.:Under the Master Agreement (Note 1) the Company issued
to TMT 12,537,645 shares of Star Bulk's common stock representing the stock
consideration portion of the aggregate purchase price of initial vessels and
agreed to issue to TMT additional stock consideration of 1,606,962 common shares
of Star Bulk in two equal installments in 2008 and 2009.  On July 17,
2008, the Company issued 803,481 of the additional stock consideration of
1,606,962 shares of common stock of Star Bulk.  On April 28, 2009 the
remaining 803,481 shares of Star Bulk's common stock were issued to TMT. Under
the Master Agreement, Star Bulk filed with the Commission a universal shelf
registration statement, as amended, on Form F-3 (File No. 333-153304), which was
declared effective on November 3, 2008 permitting TMT sales of shares into the
market from time to time over an extended period.





Under the
Master Agreement, as of December 31, 2007, Star Bulk took delivery of three
vessels in the initial fleet as indicated in Note 1.   In
addition, in December 2007, Star Bulk took delivery of the Star Kappa from TMT,
which was not part of the initial fleet for a cash consideration of $72,000.
During the year ended December 31, 2008, Star Bulk took delivery of the
remaining five vessels in the initial fleet as indicated in Note 1.





Star
Gamma LLC, a wholly-owned subsidiary of Star Bulk, entered into a time charter
agreement dated, February 23, 2007, with TMT for the Star Gamma. The charter
rate for the Star Gamma was $28.5 per day for a term of one year. Star Iota LLC,
a wholly-owned subsidiary of Star Bulk, entered into a time charter agreement,
dated February 26, 2007, with TMT for the Star Iota. The charter rate for the
Star Iota was $18 per day for a term of one year. Neither of the above mentioned
vessels were delivered to the Company as of December 31, 2007, consequently no
amounts relating thereto have been included in the consolidated statement of
operations in 2007. For the years ended December 31, 2008 and 2009, the Company
earned $13,009 and $309, respectively, net revenue under the time charter party
agreements with TMT and included in Voyage revenues in the Consolidated
Statements of operations.





TMT is a
company controlled by Mr. Nobu Su, a former director of the Company. During the
second quarter of 2008, Mr. Nobu Su's beneficial ownership decreased to 7%, and
on October 20, 2008, he resigned from the board of directors of Star Bulk with
immediate effect. As a result, TMT ceased to be a related party to Star
Bulk.





As of
December 31, 2008, the outstanding balance of $454 with TMT mainly represented
receivable for bunkers.





F-22





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





3.      Transactions
with Related Parties-(continued):





(b) Combine Marine S.A. or
("Combine"):Under an agreement dated May 4, 2007, Star Bulk
appointed Combine, a company affiliated with Mr. Tsirigakis, Mr. Pappas and Mr.
Christos Anagnostou, as interim manager of the vessels in the initial fleet.
Under the agreement, Combine provided interim technical management and
associated services, including legal services, to the vessels starting with
their delivery to Star Bulk, and also provided such services and shore personnel
prior to and during vessel delivery to Star Bulk in exchange for a flat fee of
$10 per vessel prior to delivery and at a daily fee of $450 U.S. dollars per
vessel after vessel's delivery and during the term of the agreement. Combine was
entitled to be reimbursed by Star Bulk for out-of-pocket expenses incurred by
Combine while managing the vessels and was obligated to provide Star Bulk with
the full benefit of all discounts and rebates available to Combine. The term of
the agreement was for one year from the date of delivery of each vessel. Either
party may terminate the agreement upon thirty days' notice. As of December 31,
2008 and 2009, none of Star Bulk's vessels were managed by Combine.





As of
December 31, 2008 and 2009 Star Bulk has an outstanding receivable balance of
$11, and $0 respectively from Combine.  During the years ended
December 31, 2007, 2008 and 2009 Combine Marine S.A. charged $91, $2,059 and $0
respectively for operational and technical management services. Combine also
charged $84 related to vessel pre-delivery expenses, which represents $10 per
vessel from initial fleet plus $4 of other capitalized expenses that were
capitalized as vessel cost as of December 31, 2007.





(c) Oceanbulk Maritime, S.A., or
Oceanbulk:Oceanbulk Maritime, S.A., a related party, has paid for
certain expenses on behalf of Star Maritime. Star Bulk's director Mr. Petros
Pappas is also the Honorary Chairman of Oceanbulk, a ship management company of
drybulk vessels.  Star Bulk's Chief Executive Officer, Mr. Prokopios
(Akis) Tsirigakis, as well as its officer Mr. Christos Anagnostou had been
employees of Oceanbulk until November 30, 2007.





On June
3, 2008, we entered into an agreement with Vinyl Navigation a company affiliated
with Oceanbulk Maritime, S.A., a company founded by Star Bulk's Chairman, Mr.
Petros Pappas, to acquire the Star Ypsilon, a Capesize drybulk carrier for the
purchase price of $87,180, which was the same price that Vinyl Navigation had
paid when it acquired the vessel from an unrelated third party. The Company
eventually paid $86,940 due to the late delivery of the vessel.  Star
Ypsilon was delivered to the Company on September 18, 2008. No commissions were
charged to us on the purchase or the chartering of the Star
Ypsilon.








F-23





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





3.      Transactions
with Related Parties-(continued):





Oceanbulk
Maritime, S.A., or Oceanbulk -(continued):





We
acquired the Star Ypsilon with an existing above market time charter at an
average daily hire rate of $91,932, and we recorded the fair market value of
time charter acquired at $14,417 (Note 6) which during 2009 was amortized as a
decrease to revenues until the early termination of the time charter agreement.
Vinyl Navigation had a back-to back charter agreement with TMT, a company
controlled by a former director of the Company, Mr. Nobu Su, on the same terms
as Star Bulk's charter agreement with Vinyl Navigation.





On July
17, 2009, TMT repudiated the time charter agreement relating to Star
Ypsilon.  Arbitration proceedings commenced on July 27, 2009 against
TMT seeking damages resulting from TMT's repudiation of this time
charter.





Included
in the consolidated statement of operations for December 31, 2007 are legal and
office support expenses paid to Oceanbulk Maritime S.A. in the amount of
$196.  For the years ended December 31, 2008 and 2009, the Company
earned $11,611 and $ 16,508, respectively for net revenue under the time charter
party agreements with Vinyl and included in Voyage revenues in the Consolidated
Statements of Operations.  The Company also paid to Oceanbulk a
brokerage commission amounting to $99 regarding the sale of vessel Star Iota
during the year ended December 31, 2008 and $184 regarding the sale of vessel
Star Alpha during the year ended December 31, 2009 (Note 5). As of December 31,
2008 and 2009, Star Bulk had an outstanding payable balance of $1 and an
outstanding receivable of $2,507, respectively, resulting from chartering and
brokerage activities with Oceanbulk.





(d) Interchart Shipping Inc. or
Interchart:Interchart, a company affiliated to Oceanbulk- acting as a
chartering broker of of all Company's vessels except from Star Kappa.As of
December 31, 2008 and 2009, Star Bulk had an outstanding liability of $6 and
$190, respectively to Interchart. During the years ended December 31, 2007, 2008
and 2009 the brokerage commission of 1.25% on charter revenue paid to Interchart
amounted $0, $396 and $1,472, respectively and included in Voyage expenses in
the Consolidated Statements of Operations.











F-24





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





3.      Transactions
with Related Parties-(continued):





(e)  Management and
Directors Fees:On October 3, 2007, Star Bulk has entered into separate
consulting agreements with companies owned and controlled by the Chief Executive
Officer and the Chief Financial Officer, for the services provided by the Chief
Executive Officer and the Chief Financial Officer, respectively.  Each
of these agreements has a term of three years unless terminated earlier in
accordance with the terms of such agreements.  Under the consulting
agreements, each company controlled by the Chief Executive Officer and the Chief
Financial Officer is expected to receive an annual consulting fee of €370
(approx. $517) and €250 (approx. $349), respectively, commencing on the Merger
date on a pro-rata basis.





Additionally,
the Chief Executive Officer and the Chief Financial Officer are entitled to
receive benefits under each of their consultancy agreements with Star Bulk,
among other things each is entitled to receive an annual discretionary bonus, to
be determined by Star Bulk's board of directors in its sole
discretion.  The related expenses for the years ended December 31,
2007, 2008 and 2009 were $659, $969 and $917, respectively and are included
under general and administrative expenses.





Non-employee
directors of Star Bulk receive an annual cash retainer of $15, plus a fee of $1
for each board and committee meeting attended, including meetings attended
telephonically. The chairman of the audit committee receives an additional $7.5
per year and each chairman of each other standing committees will receive an
additional $5 per year.





As of
December 31, 2008 and December 31, 2009, Star Bulk had an outstanding payable
balance of $149 and $146, respectively, with its management and directors,
representing unpaid fees.





F-25





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars – except for share and per share data,
unless otherwise stated)





4.      Inventories:





The
amounts shown in the accompanying consolidated balance sheets are analyzed as
follows:





2008
            
            
            2009Bunkers
            
            $
            412
            
            
            $
            -Lubricants
            
            
            864
            
            
            
            982$
            1,276
            
            
            $
            982





5.      Vessels
and other fixed assets:





The
amount shown in the accompanying consolidated balance sheets are analyzed as
follows:





2008
            
            
            2009CostVessels
            
            $
            872,577
            
            
            $
            760,474Other
      fixed assets
            
            
            502
            
            
            
            556Total
      cost
            
            
            873,079
            
            
            
            761,030Accumulated
      depreciation
            
            
            (51,795
            )
            
            
            (92,332
            )Vessels
      and other fixed assets, net
            
            $
            821,284
            
            
            $
            668,698





The
impact of cash and stock consideration on the financial statements for the
vessels acquired in 2007 and 2008 and sold during 2008 and 2009 is analyzed as
follows:








F-26





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





5.
Vessels and other fixed assets-(continued):





Consolidated
      statements of cash flows
            
            
            Consolidated
      statements of stockholders' equity
            
            
            Consolidated
      balance sheetsCash
      paid for vessels to be acquired
            
            
            Cash
      paid for vessels delivered and time charters acquired
            
            
            Stock
      consideration
            
            
            Additions/
      Disposals
            
            
            Fair
      value of (below)/above market acquired time charterYear
      ended December 31, 2007Initial
      vessels
            
            $
            83,444
            
            
            $
            25,541
            
            
            $
            175,955
            
            
            $
            193,522
            
            
            $
            (26,772
            )Star
      Kappa
            
            
            -
            
            
            
            72,043
            
            
            
            -
            
            
            
            70,063
            
            
            
            1,980Other
      fixed assets
            
            
            -
            
            
            
            103
            
            
            
            -
            
            
            
            103
            
            
            
            -Total
            
            $
            83,444
            
            
            $
            97,687
            
            
            $
            175,955
            
            
            $
            263,688
            
            
            $
            (24,792
            )Year
      ended December 31, 2008Initial
      vessels
            
            $
            -
            
            
            $
            115,696
            
            
            $
            18,946
            
            
            $
            327,974
            
            
            $
            (75,164
            )Disposal
      of initial vessel
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (20,204
            )
            
            
            -Additional
      vessels
            
            
            -
            
            
            
            311,783
            
            
            
            -
            
            
            
            301,222
            
            
            
            10,561Other
      fixed assets
            
            
            
            
            
            
            395
            
            
            
            -
            
            
            
            395
            
            
            
            -Total
            
            $
            -
            
            
            $
            427,874
            
            
            $
            18,946
            
            
            $
            609,387
            
            
            $
            (64,603
            )Year
      ended December 31, 2009Disposal
      of initial vessel
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (94,338
            )
            
            $
            -Other
      fixed assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            50
            
            
            
            -Total
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (94,288
            )
            
            $
            -




















F-27





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





5.     
Vessels and other fixed assets-(continued):





Vessels
acquisitions for the year ended December 31, 2007




Following
the consummation of the Redomiciliation Merger, Star Bulk took delivery from TMT
of three out of eight initial vessels indicated in Note 1. The total purchase
price for all eight vessels included stock consideration of 12,537,645 shares
and cash consideration of $224,500. The purchase price of the first three
vessels of the initial fleet delivered to Star Bulk in December, 2007 was first
satisfied by issuing 12,537,645 shares to TMT and a cash payment of $25,541. In
addition, Star Bulk paid in advance to TMT the amount of $83,444 for vessels
from initial fleets that were delivered in 2008. The stock consideration of
$175,955 was measured based on the fair market value of Star Bulk's shares at
the time of vessel delivery.





The total
purchase price for all eight vessels from initial fleet consisting of cash and
stock consideration included in the table above was allocated to the acquired
vessels based on the relative fair values of the vessels on the date of delivery
of each vessel in 2007 and 2008.





The total
purchased price of $263,585 for vessels delivered in 2007 also includes cash
consideration of $72,043 for Star Kappa and the above market acquired time
charter (Note 6), which was on additional vessel acquired by Star Bulk from TMT
and delivered to the Company on December 14, 2007.





Vessels
acquisition for the year ended December 31, 2008





During
the first quarter of 2008, Star Bulk took delivery of the remaining five vessels
of the initial fleet (Note 1) and paid the remaining cash consideration of
$115,515 to TMT and $181 of capitalizable costs. The additional stock
consideration of 1,606,962 common shares (Note 1) was determined to be $18,946
and was measured based on the Company's share price on March 7, 2008 when
performance by TMT was complete upon delivery of the last initial vessel, Star
Iota.





In
addition to the initial vessels, during the year ended December 31, 2008 the
Company acquired four additional vessels: Star Sigma, Star Omicron, Star Cosmo
and Star Ypsilon (Note 3) and the related time charter agreements (Note 6) for
an aggregate cash purchase price of $311,783.








F-28





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





5.     
Vessels and other fixed assets-(continued):





Vessel
disposed during the year ended December 31, 2008





On April
24, 2008, the Company entered into an agreement to sell the Star Iota, a vessel
from initial fleet for gross proceeds of $18,350 less costs to sell of
$1,771.  The Company delivered this vessel to its purchasers on
October 6, 2008. Star Iota was classified as vessel held for sale during the
first quarter of 2008 resulting in $3,646 of impairment loss to record vessel at
a lower of its carrying amount or fair value less cost to sell that is included
in the accompanying consolidated statements of operations for the year ended
December 31, 2008.




Vessel
disposed during the year ended December 31, 2009





On July
21, 2009, the Company entered into a Memorandum of Agreement to sell the Star
Alpha, a vessel from initial fleet, to a third party for a contracted sales
price of $19,850 less costs to sell of $721.  The vessel was delivered
to its purchaser on December 21, 2009.  Star Alpha was classified as
asset held for sale during the third quarter of 2009 and recorded at the lower
of its carrying amount or fair value less costs to sell.  The
resulting impairment loss of $75,208 is included in the accompanying
consolidated statements of operations for the year ended December 31,
2009.





F-29





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars – except for share and per share data,
unless otherwise stated)





6.
Fair value of acquired time charters:





The fair
value of the time charters acquired at below/above fair market charter rates on
the acquisition of the vessels is summarized below.  These amounts are
amortized on a straight-line basis to the end of each charter
period.





Vessel
            
            Fair
      value of acquired time charter
            
            
            Amortization
      2007
            
            
            Balance
      December 31, 2007
            
            
            Amortization
      2008
            
            
            Balance
      December 31, 2008
            
            
            Amortization
      2009
            
            
            Balance
      December 31, 2009Fair
      value of belowmarket
              acquired
      time charterStar
      Epsilon
            
            $
            14,375
            
            
            $
            889
            
            
            $
            13,486
            
            
            $
            12,469
            
            
            $
            1,017
            
            
            $
            1,017
            
            
            $
            -Star
      Theta
            
            
            12,397
            
            
            
            576
            
            
            
            11,821
            
            
            
            8,745
            
            
            
            3,076
            
            
            
            3,076
            
            
            
            -Star
      Alpha
            
            
            46,966
            
            
            
            -
            
            
            
            -
            
            
            
            34,462
            
            
            
            12,504
            
            
            
            12,504
            
            
            
            -Star
      Delta
            
            
            13,815
            
            
            
            -
            
            
            
            -
            
            
            
            12,011
            
            
            
            1,804
            
            
            
            1,804
            
            
            
            -Star
      Gamma
            
            
            11,649
            
            
            
            -
            
            
            
            -
            
            
            
            11,649
            
            
            
            -
            
            
            
            -
            
            
            
            -Star
      Zeta
            
            
            2,735
            
            
            
            -
            
            
            
            -
            
            
            
            2,735
            
            
            
            -
            
            
            
            -
            
            
            
            -Star
      Cosmo
            
            
            3,856
            
            
            
            -
            
            
            
            -
            
            
            
            683
            
            
            
            3,173
            
            
            
            1,361
            
            
            
            1,812Total
            
            $
            105,793
            
            
            $
            1,465
            
            
            $
            25,307
            
            
            $
            82,754
            
            
            $
            21,574
            
            
            $
            19,762
            
            
            $
            1,812Fair
      value of above market
              acquired
      time charterStar
      Kappa
            
            
            1,980
            
            
            
            28
            
            
            
            1,952
            
            
            
            746
            
            
            
            1,206
            
            
            
            1,206
            
            
            
            -Star
      Ypsilon
            
            
            14,417
            
            
            
            -
            
            
            
            -
            
            
            
            1,475
            
            
            
            12,942
            
            
            
            12,942
            
            
            
            -Total
            
            $
            16,397
            
            
            $
            28
            
            
            $
            1,952
            
            
            $
            2,221
            
            
            $
            14,148
            
            
            $
            14,148
            
            
            $
            -





As a
result of downturn in the shipping industry during the fourth quarter of 2008,
the Company has revised its original assumptions of the latest available
redelivery dates used in determining the term of its below and above market
acquired time charter agreements. Under the provision of guidance related to
Accounting Changes and Error Corrections this revision was treated as a change
in accounting estimate and was accounted for prospectively beginning October 1,
2008.  The unamortized balance of below market acquired time charter
agreements was amortized on an accelerated basis assuming the earliest
redelivery dates of vessels under existing time charter agreements. This change
had a positive impact on revenue of $13,018 ($0.25 and $0.24 per basic and
diluted share) for the year ended December 31, 2008.





F-30





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





6.      
Fair value of acquired time charters-(continued):





Gain/Loss
on time charter agreement termination





For
the year ended December 31, 2008





The
vessel Star Sigma, which was on time charter to a charterer at a gross daily
charter rate of $100,000 per day from April 2008 until March 2009, was
redelivered to the Company prior to the redelivery date under the time charter
pursuant to an agreement whereby the charterer agreed to pay the contracted rate
less $8,000 per day, which is the approximate operating cost for the vessel,
from the date of the actual redelivery in November 2008 through March 1,
2009.  The total amount received (net of commissions) was
$9,711.





For
the year ended December 31, 2009





The
vessel Star Alpha, which was on time charter at a gross daily charter rate of
$47,500 per day for the period from January 9, 2008 until January 16, 2009, was
redelivered to the Company by its charterers approximately one month prior to
the earliest redelivery date under the time charter agreement. The Company,
under the accounting provisions applicable to intangible assets, recognized a
gain on a time charter agreement termination of $10,077, which relates to the
write-off of the unamortized fair value of below market acquired time charter on
a vessel redelivery date.





The
vessel Star Theta was also redelivered to the Company by its charterers on March
15, 2009, approximately twenty-nine days prior to the earliest redelivery date
under the time charter agreement.  The Company recognized a gain on
time charter agreement termination amounting to $842 which relates to the
write-off of the unamortized fair value of below market acquired time charter on
a vessel redelivery date. In addition, the Company received $260 from its
charterers relating to the early termination of this charter party, which was
also recorded as a gain on time charter termination.





The
vessel Star Kappa, which was on time charter at an average gross daily charter
rate of $25,500 per day for the period from April 12, 2009 until July 12, 2014,
was redelivered to the Company by its charterers prior to the earliest
redelivery date under the time charter agreement. The Company recognized a loss
on time charter agreement termination of $903, which relates to the write-off of
the unamortized fair value of above-market acquired time charter on a vessel
redelivery date.








F-31





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





6.     
Fair value of acquired time charters-(continued):





Star
Ypsilon, which was on time charter at an average gross daily charter rate of
$91,932 per day for the period from September 18, 2008 until July 4, 2011, was
redelivered to the Company by its charterers prior to the earliest redelivery
date under the time charter agreement. The Company recognized the loss on time
charter agreement termination of $10,137, which relates to the unamortized fair
value of above-market acquired time charter on a vessel redelivery date. In
addition, the Company recognized a gain amounting to $5,040, which represents
the deferred revenue from the terminated time charter contract.





All
amounts presented above are included under Gain on time charter agreement
termination or Loss on time charter agreement termination in the accompanying
consolidated statements of operations for years ended December 31, 2008 and
2009.





Amortization
expenses related to Star Cosmo for the years ended December 31, 2010 and 2011
will be $1,360 and $452, respectively.








F-32





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





7.      Long-term
Debt:





a)
            On
      December 27, 2007, the Company entered into a loan agreement with
      Commerzbank AG in the amount of up to $120,000 in order to partially
      finance the acquisition cost of the second hand vessels, Star Gamma, Star
      Delta, Star Epsilon, Star Zeta, and Star Theta, that also provide the
      security for this loan agreement.  Under the terms of this loan
      facility, the repayment of $120,000 is over a nine year term and divided
      into two tranches. The first of up to $50,000 is repayable in twenty-eight
      consecutive quarterly installments commencing twenty-seven months after
      the initial borrowings but no later than March 31, 2010: (i) the first
      four installments amount to $2,250 each, (ii) the next thirteen
      installments amount to $1,000 each (iii) the remaining eleven installments
      amount to $1,300 each and a final balloon payment of $13,700 is payable
      together with the last installment. The second tranche of up to $70,000 is
      repayable in twenty-eight consecutive quarterly installments commencing
      twenty-seven months after draw down but no later than March 31, 2010: (i)
      the first four installments amount to $4,000 each (ii) the remaining
      twenty-four installments amount to $1,750 each and a final balloon payment
      of $12,000 is payable together with the last installment. The loan bears
      interest at LIBOR plus a margin at a minimum of 0.8% per annum (p.a.) to a
      maximum of 1.25% p.a. depending on whether the aggregate drawdown ranges
      from 60% up to 75% of the aggregate market value of the initial
      fleet.





The loan
contains financial covenants, including requirements to maintain (i) a minimum
liquidity of $10,000 or $1,000 per vessel, whichever is greater (ii) the market
value adjusted equity ratio shall not be less than 25%, as defined therein and
(iii) an aggregate market value of the vessels pledged as security under this
loan agreement not less than (a) 125% of the then outstanding borrowings for the
first three years and (b) 135% of the then outstanding borrowings thereafter. As
of December 31, 2008 the Company's recognized restricted cash based on this
covenant amounted to $12,000.





On March
13, 2009, the Company entered into agreement with Commerzbank to obtain waivers
for certain covenants and the following loan and covenants amendments were
agreed: during the waiver period from December 31, 2008 to January 31, 2010, the
loan to value covenant shall at all times be less than 90% including the value
of the additional securities provided by the waiver. As further security for
this facility, the Company shall provide a first preferred mortgage on Star
Alpha and shall pledge an amount of $6,000 to the lenders. Furthermore, the
interest spread was increased to 2.00% p.a. for the duration of the waiver
period and LIBOR was replaced by cost of funds. In addition, during the waiver
period, payments of dividend, share repurchases and investments are subject to
the prior written consent of the lenders.








F-33





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





7.      Long-term
Debt-(continued):





On
December 24, 2009, the Company entered into agreement with Commerzbank to obtain
waivers for certain covenants and the following loan and covenants amendments
were agreed: during the waiver period from February 1, 2010 to June 30, 2010 and
from July 1, 2010 to January 31, 2011 the security cover shall be at least 111%
and 118%, respectively. Furthermore, the bank consented to: i) the sale of Star
Alpha, ii) the payment of dividends not exceeding $0.05 per share in each
quarter iii) the reduction of minimum liquidity from $1,000 to $650 per fleet
vessel, iv) the increase of the pledged deposit by $1,250 from $6,000 to $7,250
plus a minimum liquidity of $7,150.  The interest spread was also
maintained to 2.00% p.a. for the duration of the waiver period.





As of
December 31, 2008 and 2009, the Company had outstanding borrowings of $120,000
and $120,000, respectively, which is the maximum amount of borrowings permitted
under this loan facility.





b)
            On
      April 14, 2008, the Company entered into a loan agreement with Piraeus
      Bank A.E., acting as an agent, which was subsequently amended on April 17,
      2008 and September 18, 2008.  Under the amended terms, the
      agreement provides for a term loan of $150,000 to partially finance the
      acquisition of the Star Omicron, the Star Sigma and Star
      Ypsilon.  This loan agreement is secured by the vessels Star
      Omicron, the Star Beta, and the Star Sigma. Under the terms of this term
      loan facility, the repayment of $150,000 is over six years and begins
      three months after the Company's first draw down amount and is divided
      into twenty-four consecutive quarterly installments: (i) the first
      installment amounts to $7,000, (ii) the second through fifth installments
      amount to $10,500 each, (iii) the sixth to eighth installments amount to
      $8,800 each, (iv) the ninth through fourteenth installments amount to
      $4,400 each, (v) the fifteenth through twenty-fourth installments amount
      to $2,700 each, and a final balloon payment in the amount of $21,200 is
      payable together with the last installment.  The loan bears
      interest at LIBOR plus a margin of 1.3%
p.a.





This loan
agreement with Piraeus Bank A.E. contains financial covenants, including
requirements to maintain (i) a minimum liquidity of $500 per vessel, (ii) the
total indebtedness of the borrower over the market value of all vessels owned
shall not be greater than 0.6:1, (iii) the interest coverage ratio shall not be
less than 2:1 and (iv) an aggregate market value of the vessels pledged as
security under this loan agreement should not be less than (a) 125% of the then
outstanding borrowings for the first three years and (b) 135% of the then
outstanding borrowings thereafter.





F-34





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





7.      Long-term
Debt-(continued):




On March
11, 2009, the Company entered into agreements with Piraeus Bank to obtain
waivers for certain covenants and the followings loan and covenants amendments
were agreed: during the waiver period from December 31, 2008 to February 28,
2010, the required security cover covenant of 125% shall be waived. After the
end of the waiver period, for the period from February 28, 2010 to February 28,
2011 the required security cover shall be reduced to 110% from 125% of the
outstanding loan amount. The lenders shall waive the 60% corporate leverage
ratio, which is the ratio of the Company's total indebtedness net of any
unencumbered cash balances over the market value of all vessels owned by the
Company, through February 28, 2010. As further security for this facility, the
Company shall provide (i) first priority mortgages on and first priority
assignments of all earnings and insurances of Star Kappa and Star Ypsilon; (ii)
corporate guarantees from each of the collateral vessel owning limited liability
companies; (iii) a subordination of the technical and commercial manager's
rights to payment; (iv) a pledge amount of $9,000 to the lenders; and (v) the
hedging obligation of the Company shall be waived until December 31, 2009.
Furthermore, the interest spread was increased to 2% p.a. applicable for the
period from January 1, 2009 to December 31, 2010, and thereafter shall be
adjusted to 1.5% per annum until the margin review date of the facility. In
addition, during the waiver period, payments of dividend are subject to the
prior written consent of the lenders.





As of
December 31, 2008, and 2009, the Company had outstanding borrowings of $143,000
and $101,000, respectively, which is the maximum amount of borrowings permitted
under this loan facility.





c)
            On
      July 1, 2008, the Company entered into a loan agreement with Piraeus Bank
      A.E., acting as an agent, in the amount of $35,000 to partially finance
      the acquisition of the Star Cosmo, which also provides the security for
      this loan agreement. The full amount of the loan was drawn down, on the
      same date. Under the terms of this term loan facility, the repayment of
      $35,000 is over six years and begins three months after the Company draw
      down the full amount but no later than July 30, 2008 and is divided into
      twenty-four consecutive quarterly installments: (i) the first through
      fourth installments amounts to $1,500 each, (ii) the fifth through eighth
      installments amount to $1,250 each, (iii) the ninth to twelfth
      installments amount to $875 each, (iv) the thirteenth through
      twenty-fourth installments amount to $500 each and a final balloon payment
      of $14,500 is payable together with the last installment. The loan bears
      interest at LIBOR plus a margin of 1.325%
p.a.








F-35





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009


(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





7.       Long-term
Debt-(continued):




The loan
agreement contains financial covenants, including requirements to maintain (i) a
minimum liquidity of $500 per vessel, (ii) the total indebtedness of the
borrower over the market value of all vessels owned shall not be greater than
0.6:1, (iii) the interest coverage ratio shall not be less than 2:1 and (iv) an
aggregate market value of the vessels pledged as security under this loan
agreement not less than (a) 125% of the then outstanding borrowings for the
first three years and (b) 135% of the then outstanding borrowings
thereafter.





On March
11, 2009, the Company entered into agreements with Piraeus Bank to obtain
waivers for certain covenants and the followings loan and covenants amendments
were agreed: during the waiver period from December 31, 2008 to February 28,
2010, the required security cover covenant of 125% shall be waived. After the
end of the waiver period, for the period from February 28, 2010 to February 28,
2011 the required security cover shall be reduced to 110% from 125% of the
outstanding loan amount. The lender shall waive the 60% corporate leverage
ratio, which is the ratio of the Company's total indebtedness net of any
unencumbered cash balances over the market value of all vessels owned by the
Company, through February 28, 2010. Also, during the waiver period, no dividend
payments are made without the prior written consent of the lenders.





As
further security for this facility the Company agreed to provide: (i) second
priority mortgage on and second priority assignment of all earnings and
insurances of Star Alpha; (ii) a corporate guarantee from Star Alpha's vessel
owning limited liability company; (iii) a subordination of the technical and
commercial managers rights to payment; and (iv) shall pledge an amount of $5,000
to the lenders. This facility was repayable beginning on April 2, 2009, in
twenty-two consecutive quarterly installments: (i) the first two installments in
the amount of $2,000 each; (ii) the third installment in the amount of $1,750;
(iii) the fourth installment in the amount of $1,250; (iv) the fifth through
tenth installment in the amount of $875 each; and (v) the final twelve
installments in the amount of $500 each plus a balloon payment of $13,750 is
payable together with the last installment.  In addition, the interest
spread was adjusted to 2% p.a. applicable for the period from March 1, 2009 to
February 28, 2010, and thereafter shall be adjusted to 1.5% p.a. until the final
maturity date of the facility. On December 2009, Piraeus Bank consented to the
sale of vessel Star Alpha. Consequently, the second priority mortgage on Star
Alpha was released.








F-36





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





7.       Long-term
Debt-(continued):





As of
December 31, 2008 and 2009, the Company had outstanding borrowings of $33,500
and $26,250, respectively, which is the maximum amount of borrowings permitted
under this loan facility.





The
Company was in compliance with the financial covenants in the amended waiver
agreements as of December 31, 2009.





The
weighted average interest rate (including the margin) as of December 31, 2008
and 2009 was 3.63% and 2.65%, respectively.





The
principal payments required to be made after December 31, 2009, are as
follows:





Years
      ending
            
            Amount2010
            
            $
            59,6752011
            
            
            31,7252012
            
            
            25,5002013
            
            
            23,8002014
            
            
            56,4502015
      and thereafter
            
            
            50,100Total
            
            $
            247,250





Interest
expense for the years ended December 31, 2008 and 2009 amounting to $9,655 and
$9,217, respectively, amortization of deferred finance fees amounting to $234
and $350, respectively, and other finance fees amounting to $349 and $347,
respectively, and are included under "Interest and finance costs" in the
accompanying consolidated statements of operations.








F-37





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





8.      Preferred,
Common stock and Additional paid in capital:





As of
December 31, 2008 and 2009, the Company had common stock and warrants
outstanding.





Preferred
Stock:Star Bulk is authorized to issue up to 25,000,000
shares of preferred stock, $0.01 par value with such designations, as voting,
and other rights and preferences, as determined by the board of directors. As of
December 31, 2008 and 2009, the Company had not issued any preferred
stock.





Common Stock:Star Bulk was
authorized to issue 100,000,000 shares of common stock, par value $0.01. On
November 23, 2009 at the Company's annual meeting of shareholders, the Company's
shareholders voted to approve an amendment to our Amended and Restated Articles
of Incorporation increasing the number of common shares that the Company is
authorized to issue from 100,000,000 registered common shares, par value $0.01
per share, to 300,000,000 registered common shares, par value $0.01 per
share.








F-38





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated





8.      Preferred,
Common stock and Additional paid in capital-(continued):





Each
outstanding share of Star Bulk common stock entitles the holder to one vote on
all matters submitted to a vote of shareholders. Subject to preferences that may
be applicable to any outstanding shares of preferred stock, holders of shares of
common stock are entitled to receive ratably all dividends, if any, declared by
Star Bulk's board of directors out of funds legally available for dividends.
Holders of common stock do not have conversion, redemption or preemptive rights
to subscribe to any of Star Bulk's securities. All outstanding shares of common
stock are fully paid and non-assessable. The rights, preferences and privileges
of holders of common stock are subject to the rights of the holders of any
shares of preferred stock which Star Bulk may issue in the future.





On
November 30, 2007, the date of consummation of the Redomiciliation Merger, Star
Bulk had outstanding 41,564,569 shares of common stock. This included the
12,537,645 shares of common stock that had been issued to TMT in connection with
the Master Agreement (Note 1). On July 17, 2008 the Company issued 803,481
shares out of additional stock consideration of 1,606,962 of common stock of
Star Bulk to TMT. The remaining 803,481 shares of Star Bulk's common stock were
issued to TMT on April 28, 2009 (Note 1).The stock consideration was measured
based on the fair market value of the shares at the time the vessels were
delivered (Note 5) amounting to $175,955 for the initial 12,537,645 shares
issued in 2007.  The additional stock consideration of 1,606,962
common shares (Note 1) was determined to be $18,946 and was measured based on
the Company's share price on March 7, 2008 when TMT completed its performance
under the Master Agreement by delivering Star Iota, the lost vessel in the
initial fleet (Note 5).





For the
year ended December 31, 2008, Star Bulk repurchased under the share and warrant
repurchase program announced on January 24, 2008, a total of 1,247,000 of its
common shares at an aggregate purchase price of $7,976.





Warrants:





Each
warrant entitles the registered holder to purchase one share of common stock at
a price of $8.00 per share, subject to adjustment as discussed below. The
warrants were initially scheduled to expire on December 16, 2009.  In
November 2009, the Company extended the expiration date of its 5,916,150
outstanding warrants to March 15, 2010.





F-39





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





8.      Preferred,
Common stock and Additional paid in capital-(continued):





There is
no cash settlement option for the Warrants.





Star Bulk
may call the warrants for redemption:





·
            in
      whole and not in part;




·
            at
      a price of $0.01 per warrant at any time after the warrants become
      exercisable;




·
            upon
      not less than 30 days' prior written notice of redemption to each warrant
      holder; and




·
            if,
      and only if, the reported last sale price of the common stock equals or
      exceeds $14.25 per share, for any 20 trading days within a 30 trading day
      period ending on the third business day prior to the notice of redemption
      to warrant holders.





During
the years ended December 31, 2007 and 2008, warrant holders exercised their
right to purchase shares of the Company's common stock and the Company received
a total of $7,534, and $94,236 respectively, representing 951,864 and 11,769,486
warrants respectively, at $8.00 per warrant exercised.  Following the
exercise of 951,864 and 11,769,486 warrants in 2007 and 2008 respectively,
19,048,136 and 5,916,150 warrants remained outstanding as of December 31, 2007
and 2008, respectively. During the year ended December 31, 2009 no warrants were
exercised.





Share and Warrant re-purchase
plan:  Following the consummation of the Redomiciliation Merger
in 2008, the Company announced a repurchase plan of common shares and warrants
of up to an aggregate value of $50,000.  As at December 31,
2008,  1,247,000 of common shares and  1,362,500 of warrants
had been repurchased.  The Company paid $7,976 for the shares and
$5,473 for the above mentioned warrants. Under the terms of the waiver
agreements (Note 7) with the Company's lenders, any share and warrant repurchase
are subject to their prior written consent. During the year ended December 31,
2009 there were no warrant or share repurchases.











F-40





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





8.      Preferred,
Common stock and Additional paid in capital-(continued):





Transfer of Shares and Warrants from
Directors:  On March 24, 2008, Mr. Tsirigakis, our President
and Chief Executive Officer transferred in a private transaction an aggregate of
2,473,893 of his Star Bulk shares and 300,000 of his Star Bulk warrants to Mr.
Petros Pappas, the Company's Chairman.





On March
24, 2008, Mr. George Syllantavos, our Chief Financial Officer and Secretary
transferred in a private transaction an aggregate of 981,524 of his shares and
102,500 of his Star Bulk warrants to Mr. Petros Pappas, the Company's
Chairman.




Declaration of dividends:On
February 14, 2008, the Company declared dividends amounting to $4,599 or $0.10
per share paid on February 28, 2008, to the stockholders of record as of
February 25, 2008. On April 16, 2008, the Company declared dividends amounting
to $18,844 or $0.35 per share paid on May 23, 2008, to the stockholders of
record as of May 16, 2008.





On July
29, 2008, the Company declared dividend amounting to $19,371 or $0.35 per share
paid on August 18, 2008, to the stockholders of record as of August 8, 2008.On
November 17, 2008, the Company declared a cash dividend ($0.18 per share),
amounting to $9,800, and stock dividend (4,255,002 shares issued) on Star Bulk's
common stock totaling $0.36 equivalent per common share for the quarter ended
September 30, 2008.  This cash dividend was paid and shares were
issued on December 5, 2008 to stockholders of record on November 28,
2008.  The number of newly issued shares was based on the volume
weighted average price of Star Bulk's shares on the Nasdaq Global Market during
the five trading days before the ex-dividend date or November 25, 2008. The
stock dividend issue of 4,255,002 shares was valued at $7,659, fair value based
on the date shares were issued, on December 5, 2008. This equity value was
deducted from the retained earnings and included in the additional paid in
capital and common stock as indicated in the Consolidated Statements of
Shareholders Equity. On January 20, 2009, management and the directors
reinvested the cash portion of their dividend for the quarter ended September
30, 2008, declared on November 17, 2008, and amounting to $1,886, into 818,877
newly-issued shares in a private placement.





Under the
terms of the waiver agreements dated in March 2009 (Note 7) with the Company's
lenders, any dividend payments are subject to their prior written consent. On
June 25 and November 16, 2009, the Company declared cash dividends on its common
stock amounting $0.05 per share.  The dividends were paid on or about
July 14, and December 4, 2009 to stockholders on record as of July 7 and
November 27, 2009, respectively.





The
Company received written consent from each of its lenders for the declaration
and payment of these two dividends.





F-41





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





9.     
Earnings/Losses per Share:





The
Company calculates basic and diluted earnings/loss per share as
follows:





Year
      ended
            
            
            Year
      ended
            
            
            Year
      endedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,2007
            
            
            2008
            
            
            2009Income/Loss:Net
      income / (loss)
            
            $
            3,411
            
            
            $
            133,738
            
            
            $
            (58,415
            )Basic
      earnings / (loss) per share:Weighted
      average common shares outstanding, basic
            
            $
            30,065,923
            
            
            $
            52,477,947
            
            
            $
            60,873,421Basic
      earnings / (loss) per share
            
            $
            0.11
            
            
            $
            2.55
            
            
            $
            (0.96
            )Effect
      of dilutive securities:Dilutive
      effect of Warrants and non-vested shares
            
            $
            6,751,693
            
            
            $
            1,970,038
            
            
            $
            -Weighted
      average common shares outstanding, diluted
            
            
            36,817,616
            
            
            
            54,447,985
            
            
            
            60,873,421Diluted
      earnings / (loss) per share
            
            $
            0.09
            
            
            $
            2.46
            
            
            $
            (0.96
            )





During
the years ended December 31, 2007 and 2008 951,864 and 11,769,486 (Note 8)
warrants were exercised, respectively.  As of December 31, 2008 and
2009, a total of 5,916,150 warrants were outstanding, respectively for both
years, at an exercise price of $8 per warrant.  The exercise price of
warrants was below the average market price of the Company's shares during the
year ended December 31, 2008.  Consequently, the Company's warrants
were dilutive and included in the computation of the diluted weighted average
common shares outstanding based on the treasury stock
method.   The weighted average diluted common shares outstanding
for the year ended December 31, 2008 includes the effect of 1,255,000 (Note 10)
of non-vested shares, as their effect was dilutive.








F-42





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





10.  
 Equity Incentive Plan:




On
February 8, 2007 the Company's board of directors adopted a resolution approving
the terms and provisions of the Company's Equity Incentive Plan (the
"Plan").  The Plan is designed to provide certain key persons, whose
initiative and efforts are deemed to be important to the successful conduct of
the business of the Company with incentives to enter into and remain in the
service of the Company, acquire a propriety interest in the success of the
Company, maximize their performance and enhance the long-term performance of the
Company.


Under the
Plan, officers, key employees, directors and consultants of Star Bulk and its
subsidiaries will be eligible to receive options to acquire shares of common
stock, stock appreciation rights, restricted stock and other stock-based or
stock-denominated awards. Star Bulk has reserved a total of 2,000,000 shares of
common stock for issuance under the plan, subject to adjustment for changes in
capitalization as provided in the Plan.





i) On
December 3, 2007, the Company granted to Mr. Tsirigakis, Chief Executive
Officer, and Mr. Syllantavos, Chief Financial Officer, 90,000 and 75,000
non-vested shares of Star Bulk common stock, respectively.  The fair
value of each share was $15.34, which is equal to the market value of the
Company's common stock on the grant date. The shares vest in three equal
installments on July 1, 2008, 2009 and 2010. All 165,000 shares granted under
this Plan were issued during 2008.





ii) On
March 31, 2008, the Company concluded an agreement with Company's Director Mr.
P. Espig.  Under this agreement, which is part of Company's Equity
incentive plan, Mr. Espig received 150,000 non-vested shares of Star Bulk common
stock. The fair value of each share was $11.39 which is equal to the market
value of the Company's common stock on the grant date. The shares vest in two
equal installments on April 1, 2008 and 2009. All 150,000 shares granted under
this Plan were issued during 2008.





iii) On
December 5, 2008, pursuant to the terms of the Plan the Company authorized the
issuance of an aggregate of 130,000 non-vested common shares to all of our
employees and an aggregate of 940,000 restricted non-vested common shares
to the members of board of directors.  The fair value of each share
was $1.80 which is equal to the market value of the Company's common stock on
the grant date.  These shares were issued on January 20, 2009 and were
vested on January 31, 2009.








F-43





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





10.   
Equity Incentive Plan-(continued):





All
non-vested shares are conditional upon the grantee's continued service as an
employee of the Company, or as a director until the applicable vesting
date.  The grantee does not have the right to vote such non-vested
shares until they vest or exercise any right as a shareholder of these shares,
however, the non-vested shares will accrue dividends as declared and paid which
will be retained by the Company until the share vest at which time they are
payable to the grantee. For the years ended December 31, 2008 and 2009, the
Company paid dividends on non-vested shares which amounted to $206 and $6,
respectively. As non-vested share grantees retained dividends on awards that are
expected to vest, such dividends were charged to retained earnings.





The
Company estimates the forfeitures of non-vested shares to be
immaterial.





For the
years ended December 31, 2007, 2008 and 2009, stock based compensation was $184,
$3,986 and $1,832, respectively and is included in the general and
administrative expenses in the accompanying consolidated statement of operations
and the deferred compensation costs from non-vested stock have been classified
as a component of paid-in capital in accordance with guidance related to Stock
Compensation.





A summary
of the status of the Company's non-vested shares as of December 31, 2009, and
during the year ended December 31, 2009, is presented below.








F-44





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





10.   
Equity Incentive Plan-(continued):





Number
      of shares
            
            
            Weighted
      Average Grant Date Fair ValueNon-vested
      as at January 1, 2009
            
            
            1,255,000
            
            
            $
            3.56Granted
            
            
            -
            
            
            
            -Vested
            
            
            (1,200,000
            )
            
            
            3.02Non-vested
      as at December  31, 2009
            
            
            55,000
            
            
            $
            15.34





As of
December 31, 2009, there was $163 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted under the
Plan. That cost is expected to be recognized over a weighted-average period of
0.5 years. The total fair value of shares vested during the years ended December
31, 2008 and 2009 was $1,484 and $2,732, respectively.





11.   
Accrued liabilities





The
amounts shown in the accompanying consolidated balance sheets are analyzed as
follows:





2008
            
            
            2009Audit
      fees
            
            $
            644
            
            
            $
            321Legal
      fees
            
            
            64
            
            
            
            127Other
      professional fees
            
            
            90
            
            
            
            187Operating
      and voyage expenses
            
            
            1,764
            
            
            
            1,324General
      and administrative expenses
            
            
            168
            
            
            
            8Loan
      interest and financing fees
            
            
            566
            
            
            
            326Totals:
            
            $
            3,296
            
            
            $
            2,293








F-45





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





12.  
 Income Taxes:





a)
Taxation on Marshall Islands registered companies





Under the
laws of the countries where (i) the Company and its subsidiaries are
incorporated and (ii) the Company's vessels are registered, the Company and its
subsidiaries are not subject to tax on international shipping income. However,
they are subject to registration and tonnage taxes, which have been included in
vessel operating expenses.





b)
Taxation on US source income – shipping income





The
Company believes that it and its subsidiaries are exempt from the 4% U.S.
federal income tax on U.S. source shipping income, as each vessel-operating
subsidiary is organized in a foreign country that grants an equivalent exemption
to corporations organized in the United States and the Company's stock is
primarily and regularly traded on an established securities market in the United
States, as defined by the Internal Revenue  ("IRS") Code of the United
States.  Under IRS regulations, a Company's stock will be considered
to be regularly traded on an established securities market if (i) one or more
classes of its stock representing 50% or more of its outstanding shares, by
voting power and value, is listed on the market and is traded on the market,
other than in minimal quantities, on at least 60 days during the taxable year;
and (ii) the aggregate number of shares of stock traded during the taxable year
is at least 10% of the average number of shares of the stock outstanding during
the taxable year.





F-46





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





12.  
Income Taxes-(continued):





c)
Taxation on US source income – pre-Redomiciliation Merger





The
provision of income taxes for Star Maritime, prior to merging into Star Bulk
(Note 1) consists of the following:





2007Current-Federal
            
            $
            9Current-State
      and Local
            
            
            -Deferred-Federal
            
            
            -Deferred-State
      and Local
            
            
            -Total
            
            $
            9




13.     Commitments
and Contingencies:





Various
claims, suits, and complaints, including those involving government regulations
and product liability, arise in the ordinary course of the shipping business. In
addition, losses may arise from disputes with charterers, agents, insurance and
other claims with suppliers relating to the operations of the Company's
vessels.





The
Company commenced an arbitration proceeding as claimant against Oldendorff Gmbh
& Co. KG of Germany ("Oldendorff"), seeking damages resulting from
Oldendorff's repudiation of a charter relating to Star Beta. Star Beta had been
time chartered by a subsidiary of the Company to Industrial Carriers Inc. of the
Marshall Islands ("ICI"). Under that time charter, ICI was obligated to pay a
gross daily charter hire rate of $106,500 until February 2010. In January 2008,
ICI sub-chartered the vessel to Oldendorff for one year at a gross daily charter
hire rate of $130,000 until February 2009. In October 2008, ICI assigned its
rights and obligations under the sub-charter to one of our subsidiaries in
exchange for ICI being released from the remaining term of the ICI charter.
According to press reports, ICI subsequently filed an application for protection
from its creditors in a Greek insolvency proceeding which was
dismissed.





In
January 2009, the Company made a written submission to its appointed arbitrator
asserting claims against Oldendorff and alleged damages in the amount of
approximately $14,709. The Company believes that the assignment was valid and
that Oldendorff has erroneously repudiated the sub-charterter.








F-47





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





13.    Commitments
and Contingencies-(continued):





Arbitration
proceedings have commenced pursuant to disputes that have arisen with the
charterers of Star Alpha.  The disputes relate to vessel performance
characteristics and hire. Star Bulk is seeking damages for repudiations of the
charter due to early redelivery of the vessel as well as unpaid hire of $2,096,
while the charterers are seeking contingent damages resulting from the vessel's
off-hire. Claim, counterclaim and defense submissions have been filed by parties
with the arbitration panel. Arbitration proceedings, before a common panel, are
also running between third parties that sub-chartered the vessel. In the first
quarter of 2009 the vessel underwent unscheduled repairs which resulted in a 25
day off-hire period. Following the completion of the repairs, the Star Alpha was
redelivered to the Company by its charterers approximately one month prior to
the earliest redelivery date allowed under the time charter
agreement.





Arbitration
proceedings commenced against TMT seeking damages resulting from TMT's
repudiation of the charter of Star Ypsilon due to the nonpayment of charterhire
of $2,606 related to this vessel.  An award for such nonpayment of
charterhire and an award for the loss of charterhire for the remaining period of
the charterparty are being pursued. Claim submissions have been
filed.





The
Company has commenced arbitration proceedings against the previous charterer of
Star Epsilon and Star Kappa for repudiatory breach of the charter party due to
the nonpayment of charter hire related to these vessels. The Company will pursue
an interim award for such nonpayment of charterhire and an award for the loss of
charterhire for the remaining period of the charterparties. Claim submissions
have been filed.





The
Company accrues for the cost of environmental liabilities when management
becomes aware that a liability is probable and is able to reasonably estimate
the probable exposure. Currently, management is not aware of any such claims or
contingent liabilities, which should be disclosed, or for which a provision
should be established in the accompanying consolidated financial
statements.  Up to $1 billion of the liabilities associated with the
individual vessels' actions, mainly for sea pollution, are covered by the
Protection and Indemnity (P&I) Club Insurance.





In May
2007, the Company entered into a one-year cancelable operating lease for its
office facilities that terminated in May 2008.  In May 2008, the
Company extended the operating lease for its office facilities until August
2008. In April 2008 the company entered into a twelve-year cancelable operating
lease for its new office facilities that will be terminated in April
2020.  For the years ended December 31, 2008 and 2009, monthly lease
payments were $21.3 and 21.9, respectively.  The obligation's
calculation is adjusted annually to the inflation rate plus 2% and it is
estimated to be 5%.








F-48





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





13.    Commitments
and Contingencies-(continued):





Rental
expense for the year ended December 31, 2007, 2008 and 2009 was $11, $179 and
$245, respectively.





Future
rental commitments were payable as follows:





Years
      endingDecember
      31,
            
            Amount2010
            
            $
            2772011
            
            
            2912012
            
            
            3052013
            
            
            3212014
            
            
            3372015
      and thereafter
            
            
            2,103Total
            
            $
            3,634





Future
minimum contractual charter revenue, based on vessels committed to
noncancelable, long-term time charter contracts as of December 31, 2009 will
be:





Years
      endingDecember
      31,
            
            Amount*2010
            
            $
            84,5642011
            
            
            42,6782012
            
            
            13,9082013
            
            
            13,870Total
            
            $
            155,020





*These
amounts do not include any assumed off–hire.











F-49





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





14.       Voyage
and Vessel Operating Expenses:





The
amounts in the accompanying consolidated statements of operations are analyzed
as follows:





2007
            
            
            2008
            
            
            2009Voyage expensesPort
      charges
            
            $
            7
            
            
            $
            660
            
            
            $
            1,940Bunkers
            
            
            3
            
            
            
            571
            
            
            
            3,637Commissions
      paid – third parties
            
            
            33
            
            
            
            1,824
            
            
            
            1,460Commissions
      paid – related parties
            
            
            -
            
            
            
            396
            
            
            
            1,472Chartered-in
      vessel expenses
            
            
            -
            
            
            
            -
            
            
            
            6,732Miscellaneous
            
            
            -
            
            
            
            53
            
            
            
            133Total
      voyage expenses
            
            $
            43
            
            
            $
            3,504
            
            
            $
            15,374Vessel operating expensesCrew
      wages and related costs
            
            $
            417
            
            
            $
            10,350
            
            
            $
            13,342Insurances
            
            
            40
            
            
            
            2,225
            
            
            
            2,198Maintenance,
      Repairs, Spares and Stores
            
            
            126
            
            
            
            6,037
            
            
            
            9,671Lubricants
            
            
            -
            
            
            
            2,147
            
            
            
            2,456Tonnage
      taxes
            
            
            35
            
            
            
            120
            
            
            
            123Upgrading
      expenses
            
            
            -
            
            
            
            4,580
            
            
            
            1,526Miscellaneous
            
            
            4
            
            
            
            739
            
            
            
            852Total
      vessel operating expenses
            
            $
            622
            
            
            $
            26,198
            
            
            $
            30,168





15.   
Fair value disclosures:





The
guidance related to Fair Value Measurements requires that assets and liabilities
carried at fair value should be classified and disclosed in one of the following
three categories based on the inputs used to determine its fair
value:





Level 1:
Quoted market prices in active markets for identical assets or
liabilities;





Level 2:
Observable market based inputs or unobservable inputs that are corroborated by
market data;





Level 3:
Unobservable inputs that are not corroborated by market data.





F-50





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





15.  
 Fair value disclosures-(continued):





The
Company trades in the FFAs and bunker swap markets with an objective to utilize
those instruments as economic hedge instruments that are highly effective in
reducing the risk on specific vessels trading in the spot market and to take
advantage of short term fluctuations in the market prices. FFAs and bunker swap
trading do not qualify for cash flow hedges for accounting purposes, therefore
resulting gains or losses are recognized in the accompanying consolidated
statements of operations.





Dry bulk
shipping FFAs generally have the following characteristics: they cover periods
from several days and months to one year; they can be based on time charter
rates or freight rates on specific quoted routes; they are executed between two
parties.  All of the Company's FFA's are cleared
transactions.





As all of
the Company's FFAs are settled on a daily basis through LCH, the fair value of
these instruments as of December 31, 2009 was $0. There is also a margin
maintenance requirement based on marking the contract to
market.




Bunker
swaps are agreements between two parties to exchange cash flows at a fixed price
on bunkers, where volume, time period and price are agreed in advance. The
Company's swaps are traded as a derivative on the over-the-counter (OTC) market.
During 2009, the Company entered into four bunker swap contracts for 18,000
metric tons of fuel oil up to December 31, 2011.





The cash
margin requirement for future trades (of both FFAs and Bunkers swaps) was $5,753
and is classified as short-term restricted cash in the accompanying consolidated
balance sheets as of December 31, 2009.





As of
December 31, 2009, fair value of the Company's investments in bunkers swaps
contracts are determined through Level 2 of the fair value hierarchy as defined
in the related guidance and are derived principally from or corroborated by
observable market data and other items that allow value to be
determined.








F-51








STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





15.   
Fair value disclosures-(continued):





For the
year ended December 31, 2009, losses recognized on FFA and bunker swap contracts
amounted to $2,154 and are included under Gain/ Loss on derivative instruments
in the accompanying consolidated statements of operations.





Amount
      of Gain / (Loss) Recognized on DerivativesYear
      ended December 31,2008
            
            
            2009FFAs
            
            $
            251
            
            
            $
            (2,436
            )Bunker
      swaps
            
            
            -
            
            
            
            282$
            251
            
            
            $
            (2,154
            )





As of
December 31, 2009 no fair value measurements for assets or liabilities under
Level 1 and 3 were recognized in the Company's consolidated financial
statements.





Fair
      Value Measurements UsingDescription
            
            
            Total
      December 31, 2009
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)AssetsBunker
      swaps
            Current
            
            
            128
            
            
            
            -
            
            
            
            128
            
            
            
            -Non-current
            
            
            154
            
            
            
            -
            
            
            
            154
            
            
            
            -





The
carrying value of cash and cash equivalents, trade accounts receivable, accounts
payable and current accrued liabilities approximates their fair value due to the
short term nature of these financial instruments. The fair values of long-term
variable rate bank loans approximate the recorded values, due to their variable
interest rate.





F-52





STAR
BULK CARRIERS CORP.


Notes
to Consolidated Financial Statements


December
31, 2008 and 2009





(Expressed
in thousands of United States Dollars - except for share and per share data,
unless otherwise stated)





16.  Subsequent
Events:





a.
            On
      January 18, 2010, the Company entered into a Memorandum of Agreement for
      the sale of Star Beta to a third party for a sales price of $22,000 and
      expects to deliver the vessel to the buyers in the second quarter of
      2010.  Vessel's net book value as of December 31, 2009 was
      $55,306.




b.
            On
      February 18, 2010, the Company entered into a Memorandum of Agreement for
      the acquisition of the vessel Nord-Kraft (to be re-named Star Aurora) for
      a sales price of $42,500.  The vessel is expected to be
      delivered between the third quarter of 2010 and the first quarter of
      2011.




c.
            On
      February 23, 2010, the Company declared a dividend of $0.05 per share,
      which is  payable on March 11, 2010, to stockholders of record
      as of March 8, 2010.




d.
              
              
              
              
              
              
              
              
              
              
              
              
              
              e.
            On
      February 23, 2010, the Company adopted a resolution approving the terms
      and provisions of the Company's new Equity Incentive Plan (the 2010
      Plan).   Under the 2010 Plan, officers, employees,
      directors and consultants of Star Bulk and its subsidiaries will be
      eligible to receive options to acquire shares of common stock, stock
      appreciation rights, restricted stock and other stock-based or
      stock-denominated awards. The Company has reserved a total of 2,000,000
      shares of common stock for issuance under the 2010 plan, subject to
      adjustment for changes in capitalization as provided in the 2010 Plan. All
      provisions of the 2010 Plan are similar with the 2007 Plan provisions
      described in Note 10.
              
              Pursuant to Company's 2010 and 2007 Equity Incentive
      Plans, the Company issued the following securities:
              
              On
      February 4, 2010, an aggregate of 115,600 non-vested common shares to all
      Company's employees subject to applicable vesting of 69,360 common shares
      on June 30, 2010 and 46,240 common shares on June 30, 2011.
              
              On February 24, 2010, an aggregate of 980,000
      non-vested common shares to the members of Company's Board of Directors
      subject to applicable vesting of 490,000 common shares on each of June 30
      and September 30, 2010.
              
              On February 23, 2010, the Company's Board of Directors
      adopted a new stock repurchase plan for up to $30,000 to be used for
      repurchasing the Company's common shares until December 31, 2011. 
      All repurchased common shares shall be cancelled and removed from the
      Company's share capital.  We expect the plan to be effective when our
      lenders remove the relevant covenant from our loan agreements.






















F-53