d995391a_6-k.htm

6-K/A 1 d995391a_6-k.htm d995391a_6-k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K/A

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2009

Commission File Number: 001-33655

Paragon Shipping Inc.

(Translation of registrant's name into English)

15 Karamanli Ave., GR 166 73, Voula, Greece

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [X] Form 40-F [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ___

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)7: ___

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

EXPLANATORY NOTE

This amendment no. 1 to Form 6-K amends the Form 6-K filed on May 20, 2009 by Paragon Shipping Inc. for the sole purpose of correcting typographical errors.

INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K/A

Attached as Exhibit 1 to this Report on Form 6-K/A is an amended copy of the Management's Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2009 of Paragon Shipping Inc. (the "Company") and unaudited interim consolidated financial statements of the Company for the three months ended March 31, 2009 and the accompanying notes thereto.

This Report on Form 6-K/A is hereby incorporated by reference into the Company's Registration Statement on Form F-3 (Registration No. 333-152979) that was declared effective on August 21, 2008 and related prospectus supplement dated April 15, 2009.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our financial condition and results of operations for the three months ended March 31, 2009 and 2008. Unless otherwise specified herein, references to the "Company" or "we" shall include Paragon Shipping Inc. and its subsidiaries. You should read the following discussion and analysis together with the financial statements and related notes included elsewhere in this report. For additional information relating to our management's discussion and analysis of financial condition and results of operation, please see our annual report on Form 20-F for the year ended December 31, 2008. This discussion includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

Overview

We are Paragon Shipping Inc., a company incorporated in the Republic of the Marshall Islands in April 2006 to provide drybulk shipping services worldwide. We are a provider of international seaborne transportation services, carrying various drybulk cargoes including iron ore, coal, grain, bauxite, phosphate and fertilizers. We commenced operations in December 2006 and completed our initial public offering in August 2007. Our current fleet consists of seven Panamax drybulk carriers, two Supramax drybulk carriers and three Handymax drybulk carriers.

Vessel Management

Allseas Marine is responsible for all commercial and technical management functions for our fleet. Allseas is an affiliate of our chairman and chief executive officer, Michael Bodouroglou.

We primarily employ our vessels on period charters. We may also employ our vessels in the spot charter market, on voyage charters or trip time charters, which generally last from 10 days to three months.

A spot market voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed upon total amount. Under spot market voyage charters, we pay voyage expenses such as port, canal and fuel costs. A spot market trip time charter and a period time charter are generally contracts to charter a vessel for a fixed period of time at a set daily rate. Under trip time charters and period time charters, the charterer pays voyage expenses. Whether our drybulk carriers are employed in the spot market or on time charters, we pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs. We are also responsible for each vessel's intermediate and special survey costs.

Results of Operations

Our revenues consist of earnings under the charters on which we employ our vessels. We believe that the important measures for analyzing trends in the results of our operations consist of the following:

Calendar days. We define calendar days as the total number of days in a period during which each vessel in our fleet was owned including off-hire days associated with major repairs, dry dockings or special or intermediate surveys. Calendar days are an indicator of the size of the fleet over a period and affect both the amount of revenues and the amount of expenses that are recorded during that period.

Voyage days (also referred to as available days). We define voyage days as the total number of days in a period during which each vessel in the fleet was owned net of off-hire days associated with major repairs, dry dockings or special or intermediate surveys. The shipping industry uses voyage days to measure the number of days in a period during which vessels actually generate revenues.

Fleet utilization. We calculate fleet utilization by dividing the number of voyage days during a period by the number of calendar days during that period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons such as scheduled repairs, vessel upgrades, dry dockings or special or intermediate surveys.

Charter contracts. A time charter is a contract for the use of a vessel for a specific period of time during which the charterer pays substantially all of the voyage expenses, including port and canal charges, and bunkers (fuel) expenses, but the vessel owner pays the vessel operating expenses and commissions on gross voyage revenues. In the case of a spot market charter, the vessel owner pays voyage expenses (less specified amounts, if any, covered by the voyage charterer), commissions on gross revenues and vessel operating expenses. Time charter rates are usually fixed during the term of the charter. Prevailing time charter rates fluctuate on a seasonal and year to year basis and may be substantially higher or lower from a prior time charter contract when the subject vessel is seeking to renew that prior charter or enter into a new charter with another charterer. Fluctuations in charter rates are caused by imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes. Fluctuations in time charter rates are influenced by changes in spot charter rates.

Time Charter Revenues

Time charter revenues are driven primarily by the number of vessels that we have in our fleet, the number of voyage days during which our vessels generate revenues and the amount of daily charter hire that our vessels earn under 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 drybulk carrier market and other factors affecting spot market charter rates for our vessels.

Vessels operating on period time charters provide more predictable cash flows, 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 are exposed to the risk of declining charter 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.

Time Charter Equivalent (TCE)

A standard maritime industry performance measure used to evaluate performance is the daily time charter equivalent, or daily TCE. Daily TCE revenues are voyage revenues minus voyage expenses divided by the number of voyage days during 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 a charterer under a time charter, as well as commissions. We believe that the daily TCE neutralizes the variability created by unique costs associated with particular voyages or the employment of vessels on time charter or on the spot market and presents a more meaningful representation of the revenues generated by our vessels. Please see section headed "Time Charter Equivalents Reconciliation"

Out of Market Acquired Time Charters

When vessels are acquired with time charters attached and the charter rate on such charters is above or below market, we include the fair value of the above or below market charter in the cost of the vessel on a relative fair value basis and record a corresponding asset or liability for the above or below market charter. The fair value is computed as the present value of the difference between the contractual amount to be received over the term of the time charter and the management's estimate of the then current market charter rate for equivalent vessels at the time of acquisition. The asset or liability recorded is amortized over the remaining period of the time charter as a reduction or addition to time charter revenue.

Vessel Operating Expenses

Our vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes, other miscellaneous expenses and drydocking. We anticipate that our vessel operating expenses, which generally represent fixed costs, will increase as a result of the enlargement of our fleet. 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 and difficulty in obtaining crew, may also cause these expenses to increase.

Dry-docking expenses

We expense drydocking costs as incurred as we believe that the direct expense method eliminates the significant amount of time and subjectivity that is needed to determine which costs and activities related to dry-docking should be deferred.

Depreciation and Amortization

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 estimated residual value.

Management Fees

We pay Allseas management fees that are adjusted according to the management agreements based on the Euro/U.S. dollar exchange rate as published by EFG Eurobank Ergasias S.A. two days prior to the end on the previous calendar quarter.

We entered into an administrative service agreement with Allseas on November 12, 2008. Under the agreement, Allseas will provide telecommunication services, secretarial and reception personnel and equipment, security facilities and cleaning for our offices, and information technology services. The agreement provides that all costs and expenses incurred in connection with the provision of the above services by Allseas be reimbursed on a quarterly basis.

For the three months ended March 31, 2009, an additional amount of $50,000 was paid to Allseas for legal, accounting and finance services that were provided during the period as per the accounting agreement dated February 19, 2008. For the three months ended March 31, 2008, an additional amount of $50,000 was also paid to Allseas for legal, accounting and finance services that were provided during the period as per the same agreement.

General and Administrative Expenses

General and administrative expenses include share based compensation. In addition, general and administrative expenses include the cost of remuneration to directors and officers, a bonus award for executive officers, other professional services, fares and traveling expenses, directors and officers insurance and other expenses for our operations.

Interest and Finance Costs

We incur interest expense and financing costs in connection with the vessel specific debt relating to the acquisition of our vessels.

Three months ended March 31, 2009 and March 31, 2008

The average daily TCE rate of our fleet of vessels acquired and delivered as of March 31, 2009 was $37,179 for the three months ended March 31, 2009. The average daily TCE rate for the fleet of 11 vessels acquired and delivered as of March 31, 2008 was $39,098 for the three months ended March 31, 2008. The decrease in the average daily TCE rate of our fleet reflects the lower time charter rates prevailing in the market during the first quarter of 2009 compared to the same period in 2008, offset slightly by the change in the composition of our fleet of vessels during the three months ended March 31, 2009, which consisted of seven Panamax drybulk carriers, three Handymax drybulk carriers and two Supramax drybulk carriers during the three months ended March 31, 2009, compared with seven Panamax drybulk carriers, three Handymax drybulk carriers and one Supramax drybulk carrier operating for an aggregate of 1,001 calendar days during the three months ended March 31, 2008.

The following analysis exhibits the primary driver of differences between these periods, which is the additional vessel in our fleet during 2009.

Time charter revenue—Time charter revenue, for the three months ended March 31, 2009, was $41.6 million, compared to $40.5 million for the three months ended March 31, 2008. The increase in time charter revenue reflects principally the increase in the average number of vessels in our fleet from 11, for the three months ended March 31, 2008, to 12 for the three months ended March 31, 2009, and a corresponding increase in the number of calendar days of our fleet from 1,001, for the three months ended March 31, 2008, to 1,080 for the three months ended March 31, 2009. The daily average time charter equivalent rate and the fleet utilization rate, for the three months ended March 31, 2009, was $37,179 and 98%, respectively, compared to a $39,098 daily average time charter equivalent and 99% utilization rate for the three months ended March 31, 2008. In addition, the amortization of below and above market acquired time charters increased total net revenue by $4.6 million for the three months ended March 31, 2009, compared to $7.5 million for the three months ended March 31, 2008. After deducting commissions of $2.2 million, we had net revenue of $39.4 million, for the three months ended March 31, 2009, compared to $38.7 million net revenue after deducting commissions of $1.7 million for the three months ended March 31, 2008. The increase in commissions, for the three months ended March 31, 2009, compared to commissions for the three months ended March 31, 2008, is mainly due to the increase in the average number of vessels and the number of calendar days of our fleet. The charter rates earned by the vessels may be negatively affected in the future following expiration of current charters if the current weak charter market environment persists or worsens.

Vessel operating expenses—Vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, for the three months ended March 31, 2009, amounted to $5.3 million, compared to $4.1 million, for the three months ended March 31, 2008, as a result of the increase in the average number of vessels in our fleet for the three months ended March 31, 2009, compared to the three months ended March 31, 2008, the corresponding increase in the number of calendar days of our fleet and a general increase in operating expenses. Vessel operating expenses also including manning agency expenses charged by a related party of $48,200 and $18,240, for the three months ended March 31, 2009 and 2008, respectively.

Dry-docking expenses—We incurred an aggregate of $39,664 in dry-docking expenses, for the three months ended March 31, 2009, compared to $112,522 in dry-docking expenses for the three months ended March 31, 2008.

Management fees charged by a related party— We incurred an aggregate of $895,640 in management fees, for the three months ended March 31, 2009, compared to $764,764 in management fees, for the three months ended March 31, 2008, reflecting the increase in the average number of vessels in our fleet for the three months ended March 31, 2009, compared to the three months ended March 31, 2008 and the corresponding increase in the number of calendar days of our fleet, as well as the adjustment to the management fee per day per vessel in line with the management agreement. We paid Allseas an average management fee of $783 per day per vessel during the three months ended March 31, 2009, and an amount of $50,000 that was charged by Allseas to us for legal, accounting and finance services that were provided throughout the period as per signed agreement date February 19, 2008. The management fee was adjusted according to the management agreement based on the Euro/U.S. dollar exchange rate, as published by EFG Eurobank Ergasias S.A. two days prior to the end on the previous calendar quarter. We paid a management fee to Allseas of $764 per day per vessel during the three months ended March 31, 2008, pursuant to the management agreement for the management services. For the three months ended March 31, 2008, an amount of $50,000 was also paid for legal, accounting and finance services that were provided during the period and was not covered by a signed agreement.

Depreciation—Depreciation of vessels, for the three months ended March 31, 2009, amounted to $8.6 million, compared to $7.8 million for the three months ended March 31, 2008, reflecting the increase in the average number of vessels in our fleet for the three months ended March 31, 2009, compared to the three months ended March 31, 2008.

General and administrative expenses—General and administrative expenses, for the three months ended March 31, 2009, were $1.0 million, including share-based compensation of $150,493, compared to $1.3 million general and administrative expenses, including the share-based compensation of $134,416, for the three months ended March 31, 2008. The $0.3 million decrease in general and administrative expenses relates mainly to the decreased cost by $0.2 million for professional services and other related costs incurred in connection with publicly listed company requirements. In addition, the decrease in general and administrative expenses is also due to the aggregate decrease of $0.1 million in the cost of remuneration to directors and officers and the decrease in other general and administrative expenses, which was partially offset by an increase in other expenses for officers and directors and a small increase in share-based compensation for the three months ended March 31, 2009.

Interest and finance costs—Interest and finance costs, for the three months ended March 31, 2009, were $4.3 million, compared to $4.1 million for the three months ended March 31, 2008, resulting primarily from the increase in the outstanding indebtedness incurred to acquire vessels.

Loss on interest rate swaps—Loss on interest rate swaps, for the three months ended March 31, 2009, of $0.3 million consists of unrealized gain of $0.7 million, representing a gain to record at fair value six interest rate swaps, for the three months ended March 31, 2009, and realized expenses of $1.0 million incurred during the three months ended March 31, 2009. Loss on interest rate swaps, for the three months ended March 31, 2008, of $5.2 million represents unrealized loss to record at fair value four interest rate swaps for the three months ended March 31, 2008. No realized expense or income was incurred during the three months ended March 31, 2008.

Interest income—Interest income, for the three months ended March 31, 2009, was $220,202, compared to $560,006 for the three months ended March 31, 2008, reflecting differences in the average amount of cash on hand that was held in interest bearing accounts and lower interest rates on such deposits.

Foreign currency profit/(losses)—For the three months ended March 31, 2009, we had $62,326 in foreign currency gain, compared to $91,352 in foreign currency losses for the three months ended March 31, 2008. This change resulted from our decreased expenses denominated in currencies other than the U.S. dollar and primarily in Euro.

Net income—As a result of the above factors, net income for the three months ended March 31, 2009 was $19.2 million, compared to $15.8 million net income for the three months ended March 31, 2008.

Cash Flows

There was $37.0 million in cash and cash equivalents at March 31, 2009, compared to $68.4 million at December 31, 2008. We define working capital as current assets minus current liabilities. Working capital was negative $7.3 million as of March 31, 2009, compared to working capital surplus of $3.1 million as of December 31, 2008. This decrease is mainly due to the decrease in cash and cash equivalents by $31.4 million, offset in part by the increase from December 31, 2008 in current restricted cash by $22.5 million and, to a lesser extent, to other fluctuations in the rest of current assets and current liabilities. We consider our liquidity sufficient for our operations and we expect to finance all our working capital requirements from cash generated from the employment of our vessels. The overall cash position in the future may be negatively impacted by the recent severe decline in drybulk market rates if the current economic environment persists or worsens.

Net cash from operating activities was $23.3 million for the three months ended March 31, 2009, compared to $17.0 million for the three months ended March 31, 2008. This is primarily attributable to net income of $19.2 million for the three months ended March 31, 2009, compared to net income of $15.8 million for the three months ended March 31, 2008, which is primarily attributable to an increase in the average number of vessels in our fleet from 11, in the three months ended March 31, 2008, to 12 in the three months ended March 31, 2009, a corresponding increase in the number of calendar days of our fleet from 1,001, in the three months ended March 31, 2008, to 1,080 in the three months ended March 31, 2009. This increase was mainly offset by the aggregate increase of $0.8 million, for the three months ended March 31, 2009, in voyage expenses, vessel operating expenses, dry-docking expenses, management fees charged by a related party, general and administrative expenses excluding share based compensation and in interest and finance costs excluding the amortization of financing costs, over the relevant amounts for the three months ended March 31, 2008.

Net cash used in investing activities was $43.0 million, for the three months ended March 31, 2009, which reflects a net increase by $43.0 million on restricted cash for the three months ended March 31, 2009. Net cash from investing activities, for the three months ended March 31, 2008, was $3.0 million, representing a reduction of restricted cash.

Net cash used in financing activities was $11.7 million for the three months ended March 31, 2009, which is the result of the repayment of long-term debt in the amount of $41.6 million that was offset by proceeds from loans of $30.0 million as well as payments of financing costs of $0.1 million. Net cash used in financing activities was $2.0 million, for the three months ended March 31, 2008, which is the result of the proceeds from the issuance of our Class A common shares from the exercise of warrants and options of $11.9 million and offset mainly by the repayment of long-term debt in the amount of $2.3 million and by dividends paid of $11.6 million.

Loan Facilities

For information relating to our credit facilities, please see Note 10 to our audited financial statements included in our annual report on Form 20-F for the year ended December 31, 2008.

Liquidity and Capital Resources

Our principal sources of funds are our operating cash flows, borrowings under our credit facilities and equity provided by our shareholders. Our principal uses of funds are capital expenditures to grow our fleet in the future, maintenance costs to ensure the quality of our drybulk carriers, compliance with international shipping standards and environmental laws and regulations, fund working capital requirements, make principal repayments on loan facilities, and, with the discretion of our board of directors and subject to the consent of our lenders, pay dividends to our shareholders. If we do not acquire any additional vessels beyond our current fleet, we believe that our forecasted operating cash flows will be sufficient to meet our liquidity needs for the next 12 to 24 months assuming the charter market does not further deteriorate. If we do acquire additional vessels, we will rely on additional borrowings under credit facilities that we would seek to enter into, proceeds from future equity offerings and revenues from operations to meet our liquidity needs going forward.

As of March 31, 2009, we had approximately $375.9 million of outstanding indebtedness, of which $52.4 million was payable within the next 12 months, and no undrawn borrowing capacity under our credit facilities as amended. Restricted cash increased by $43.0 million, to $49.0 million as of March 31, 2009, from $6.0 million as of December 31, 2008, reflecting increased cash balance requirements under the credit facility amendments we entered into in the first quarter of 2009.

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 vessels and the selective sale of older drybulk vessels. 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. Our dividend policy will also impact our future liquidity position.

We have limited our exposure to interest rate fluctuations that will impact our future liquidity position through the swap agreements.

Interest Rate Swaps

For information relating to our swap agreements, please see Note 11 to our audited financial statements included in our annual report on Form 20-F for the year ended December 31, 2008.

Subsequent Events

Dividend Declaration Subsequent to Quarter-End

The Company's Board of Directors declared a quarterly dividend of $0.05 per share with respect to the first quarter of 2009, payable on June 9, 2009 to shareholders of record as of May 29, 2009.

Controlled Equity Offering

On April 15, 2009 we entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. as sales agent, and on the same date we filed a prospectus supplement to the shelf registration statement relating to the offer and sale of up to 10,000,000 common shares, par value $0.001 per share, from time to time through Cantor Fitzgerald & Co., as agent for the offer and sale of the common shares. As of May 19, 2009, 6,243,500 common shares had been sold under the Controlled Equity Offering with net proceeds to us amounting to $22,784,278.

Significant Accounting Policies and Critical Accounting Policies

For a description of all of our significant accounting policies, see Note 2 to our audited financial statements included in our annual report on Form 20-F for the year ended December 31, 2008. For a discussion on our critical accounting policies please see Item 5 included in our annual report on Form 20-F for the year ended December 31, 2008.

Recent Accounting Pronouncements:

For a description of our recent accounting pronouncements, see Note 2 to our unaudited condensed consolidated financial statements included elsewhere herein.

CAPITALIZATION

The following table sets forth our consolidated capitalization as of March 31, 2009:

·	On an actual basis;

·	As adjusted to give effect to the following transactions which occurred between April 1, 2009 and May 19, 2009: the repayment of loans amounting to $7.0 million, the first quarter 2009 dividend of $0.05 per common share, declared on May 19, 2009, computed based on 33,422,615 common shares, representing the number of outstanding shares as of May 19, 2009, amounting to $1.67 million, and the issuance of 6,243,500 common shares pursuant to the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. as agent, dated April 15, 2009 (the "CEO Sales Agreement"), resulting in net proceeds of $22.8 million less legal and other related expenses of $225,000; and

·	As further adjusted to give effect to our issuance and sale of the remaining 3,756,500 common shares pursuant to the Registration Statement on Form F-3 at an assumed offering price of $4.74 per share, the last reported closing price of our common stock on May 19, 2009, resulting in net proceeds of $17.2 million, on the basis of a commission of 3.0% of gross proceeds.

(in thousands of U.S. Dollars)	Actual		As adjusted		As Further Adjusted
Debt:
Current portion of long term debt		52,350		45,375		45,375
Long-term debt, net of current portion		323,560		323,560		323,560
Total Debt (1)		375,910		368,935		368,935
Shareholders'equity (2):
Preferred shares, $0.001 par value; 25,000,000 authorized, none issued and outstanding		-		-		-
Class A common shares, $0.001 par value; 120,000,000 authorized on an actual, as adjusted and as further adjusted basis, 27,179,115 issued and outstanding on an actual basis, 33,422,615 issued and outstanding on as adjusted basis, and 37,179,115 issued and outstanding on as further adjusted basis		27		33		37
Class B common shares, $0.001 par value, 5,000,000 authorized, none issued and outstanding		-		-		-
Additional paid-in capital		318,666		341,219		358,487
Accumulated profit		7,715		6,044		6,044
Total shareholders' equity		326,408		347,296		364,568
Total capitalization	$	702,318	$	716,231	$	733,503

________________________

(1) All of our indebtedness is secured.

(2) The table does not reflect 32,000 outstanding stock options awarded under our equity incentive plan, at an exercise price of $12.00, or warrants to purchase 290,001 of our common shares at an exercise price of $10.00 per common share.

Updated Fleet List

The following table represents our fleet as of May 19, 2009.

Name	Type	Dwt	Year Built
Panamax
Deep Seas	Panamax	72,891	1999
Calm Seas	Panamax	74,047	1999
Kind Seas	Panamax	72,493	1999
Pearl Seas	Panamax	74,483	2006
Diamond Seas	Panamax	74,274	2001
Coral Seas	Panamax	74,477	2006
Golden Seas	Panamax	74,475	2006
Total Panamax	7	517,140
Handymax
Blue Seas	Handymax	45,654	1995
Clean Seas	Handymax	46,640	1995
Crystal Seas	Handymax	43,222	1995
Total Handymax	3	135,516
Supramax
Sapphire Seas	Supramax	53,702	2005
Friendly Seas	Supramax	58,779	2008
Total Supramax	2	112,481
Grand Total	12	765,137

Summary Fleet Data

	Quarter Ended March 31, 2008			Quarter Ended March 31, 2009
FLEET DATA
Average number of vessels (1)		11			12
Available days for fleet (2)		989			1,057
Calendar days for fleet (3)		1,001			1,080
Fleet utilization (4)		99	%		98	%
AVERAGE DAILY RESULTS
Time charter equivalent (5)		39,098			37,179
Vessel operating expenses (6)		4,092			4,913
Management fees (7)		764			829
General and administrative expenses (8)		1,278			927
Total vessel operating expenses (9)		6,134			6,669

(1)	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 calendar days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.

(2)	Available days for the fleet are the total calendar days the vessels were in our possession for the relevant period after subtracting for off hire days with major repairs, dry-docks or special or intermediate surveys.

(3)	Calendar days are the total days we possessed the vessels in our fleet for the relevant period including off hire days associated with major repairs, dry-dockings or special or intermediate surveys.

(4)	Fleet utilization is the percentage of time that our vessels were available for revenue generating available days and is determined by dividing available days by fleet calendar days for the relevant period.

(5)

Time charter equivalent or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing revenue generated from charters net of voyage expenses by available days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, as well as commissions. TCE is a non-GAAP 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 voyage charters, time charters and bareboat charters) under which the vessels may be employed between the periods.

(6)	Daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, is calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period.

(7)	Daily management fees is calculated by dividing management fees by fleet calendar days for the relevant time period.

(8)	Daily general and administrative expenses is calculated by dividing general and administrative expense by fleet calendar days for the relevant time period.

(9)

Total vessel operating expenses, or TVOE, is a measurement of our total expenses associated with operating our vessels. TVOE is the sum of vessel operating expenses, dry-docking expenses, management fees and general and administrative expenses. Daily TVOE is calculated by dividing TVOE by fleet calendar days for the relevant time period.

Time Charter Equivalents Reconciliation

(Expressed in United States Dollars)

	Quarter Ended March 31, 2008			Quarter Ended March 31, 2009
Time Charter Revenues		40,454,094			41,598,840
Less Voyage Expenses		(51,897	)		(56,295	)
Less Commission		(1,733,853	)		(2,243,951	)
Total Revenue, net of voyage expenses and commissions		38,668,344			39,298,594
Total available days		989			1,057
Time Charter Equivalent		39,098			37,179

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Page

Unaudited condensed consolidated balance sheets as of December 31, 2008 and March 31, 2009	F-2
Unaudited condensed consolidated statements of income for the three months ended March 31, 2008 and March 31, 2009	F-3
Unaudited condensed consolidated statements of shareholders' equity for the three months ended March 31, 2009	F-4
Unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2008 and March 31, 2009	F-5
Notes to the unaudited condensed consolidated financial statements	F-6

F-1

Paragon Shipping Inc. Unaudited Condensed Consolidated Balance Sheets As of December 31, 2008 and March 31, 2009 (Expressed in United States Dollars)
Assets Current assets	December 31, 2008			March 31, 2009
Cash and cash equivalents		68,441,752			37,011,898
Restricted cash		-			22,450,000
Trade receivables		372,965			919,905
Other receivables		1,209,230			1,186,552
Prepaid expenses		379,140			321,163
Due from management company		985,960			1,502,265
Inventories		885,665			921,776
Total current assets		72,274,712			64,313,559
Fixed assets
Vessels at cost		713,373,186			713,373,186
Less: accumulated depreciation		(51,142,696	)		(59,695,005	)
Total fixed assets		662,230,490			653,678,181
Other assets		1,787,988			1,476,705
Restricted cash		6,010,000			26,560,000
Above market acquired time charters		43,304			22,350
Other long-term receivables		74,760			-
Total Assets		742,421,254			746,050,795
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable (including balance due to a related party of $500 and $449,063 as of December 31, 2008 and March 31, 2009 respectively)		2,538,796			2,477,278
Accrued expenses and dividends payable		4,098,929			6,816,389
Interest rate swaps		6,407,751			6,672,472
Deferred income		3,024,423			3,262,490
Current portion of long-term debt		53,150,000			52,350,000
Total current liabilities		69,219,899			71,578,629
Long-Term Liabilities
Long-term debt		334,335,000			323,560,000
Deferred income		703,863			365,840
Interest rate swaps		5,247,391			4,256,349
Below market acquired time charters		24,483,822			19,882,234
Total long-term liabilities		364,770,076			348,064,423
Total Liabilities		433,989,975			419,643,052
Commitments and Contingencies
Shareholders' equity
Preferred shares, $0.001 par value; 25,000,000 authorized, none issued, none outstanding at December 31, 2008 and
March 31, 2009		-			-
Class A common shares, $0.001 par value; 120,000,000 authorized 27,138,515 issued and outstanding at December 31, 2008 and 27,179,115 issued and outstanding at March 31, 2009		27,139			27,180
Class B common shares, $0.001 par value; 5,000,000 authorized, none issued and outstanding at December 31, 2008 and March 31, 2009		-			-
Additional paid-in capital		318,515,490			318,665,942
Accumulated (deficit)/earnings		(10,111,350	)		7,714,621
Total shareholders' equity		308,431,279			326,407,743
Total Liabilities and Shareholders' Equity		742,421,254			746,050,795

F-2

Paragon Shipping Inc. Unaudited Condensed Consolidated Statement of Income For the three months ended March 31, 2008 and 2009 (Expressed in United States Dollars)
	Three Months Ended			Three Months Ended
	March 31, 2008			March 31, 2009
Revenue
Time charter revenue (including amortization of below and above market acquired time charters of $7,533,493 and $4,580,635 for the three months ended March 31, 2008 and 2009, respectively)		40,454,094			41,598,840
Less: commissions		1,733,853			2,243,951
Net Revenue		38,720,241			39,354,889
Expenses
Voyage expenses		51,897			56,295
Vessels operating expenses (including expenses charged by a related party of $18,240 and $48,200 for the three months ended
March 31, 2008 and 2009, respectively)		4,095,654			5,305,995
Dry-docking expenses		112,522			39,664
Management fees charged by a related party		764,764			895,640
Depreciation		7,848,566			8,552,309
General and administrative expenses (including share based compensation of $134,416 and $150,493 for the three months ended
March 31, 2008 and 2009, respectively)		1,279,271			1,001,440
Operating Income		24,567,567			23,503,546
Other Income/(Expenses)
Interest and finance costs		(4,088,598	)		(4,308,367	)
Loss on interest rate swaps		(5,182,783	)		(292,930	)
Interest income		560,006			220,202
Foreign currency (loss)/gain		(91,352	)		62,326
Total Other Expenses, net		(8,802,727	)		(4,318,769	)
Net Income		15,764,840			19,184,777

Earnings per Class A common share, basic	$	0.60		$	0.71
Earnings per Class A common share, diluted	$	0.59		$	0.71
Weighted average number of Class A common shares, basic		26,272,702			27,077,348
Weighted average number of Class A common shares, diluted		26,735,470			27,077,348

F-3

Paragon Shipping Inc.

Unaudited Condensed Consolidated Statement of Shareholders' Equity

For the three months ended March 31, 2009

(Expressed in United States Dollars, except for number of shares)

	Class A Shares
	Number of Shares		Par Value		Additional Paid-in Capital		Accumulated (Deficit)/ Earnings			Total
Balance January 1, 2009		27,138,515		27,139		318,515,490		(10,111,350	)		308,431,279
Issuance of Class A common shares and share based compensation		40,600		41		150,452					150,493
Dividends declared (0.05 per share)								(1,358,806	)		(1,358,806	)
Net Income								19,184,777			19,184,777
Balance March 31, 2009		27,179,115		27,180		318,665,942		7,714,621			326,407,743

F-4

Unaudited Condensed Consolidated Statement of Cash Flows For the three months ended March 31, 2008 and 2009 (Expressed in United States Dollars)
Cash flows from operating activities	Three Months Ended March 31, 2008			Three Months Ended March 31, 2009
Net Income		15,764,840			19,184,777
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		7,848,566			8,552,309
Amortization of below and above market acquired time charters		(7,533,493	)		(4,580,635	)
Amortization of financing costs		117,474			501,201
Share based compensation		134,416			150,493
Unrealized loss/(gain) on interest rate swaps		5,182,783			(726,321	)
Changes in assets and liabilities
Decrease/(Increase) in trade receivables		138,965			(546,940	)
(Increase)/Decrease in other receivables		(246,738	)		22,678
Decrease in prepaid expenses		653,741			57,977
Decrease/(Increase) in inventories		18,405			(36,111	)
Increase in due from management company		(681,826	)		(516,305	)
(Increase)/Decrease in other long term receivables		(457,103	)		74,760
Increase/(Decrease) in trade accounts payable		122,411			(61,518	)
(Decrease)/Increase in accrued expenses		(2,962,723	)		1,328,757
Decrease in due to management company		(1,642,805	)		-
Increase/(Decrease) in deferred income		576,963			(99,956	)
Net cash from operating activities		17,033,876			23,305,166
Cash flow from Investing Activities
Repayment of restricted cash		3,000,000
Increase in restricted cash					(43,000,000	)
Net cash from (used in) investing activities		3,000,000			(43,000,000	)
Cash flows from financing activities
Proceeds from long-term debt					30,000,000
Repayment of long-term debt		(2,250,000	)		(41,575,000	)
Payment of financing costs		(47,923	)		(160,020	)
Proceeds from the issuance of Class A common shares from the exercise of warrants and options		11,921,290
Dividends paid		(11,572,960	)
Net cash used in financing activities		(1,949,593	)		(11,735,020	)
Net Increase/(Decrease) in cash and cash equivalents		18,084,283			(31,429,854	)
Cash and cash equivalents at the beginning of the period		31,328,637			68,441,752
Cash and cash equivalents at the end of the period		49,412,920			37,011,898
Supplemental disclosure of cash flow information
Cash paid during the period for interest		4,259,341			1,991,608

F-5

Paragon Shipping Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Expressed in United States Dollars except for number of shares data)

1. Basis of Presentation and General Information

Basis of Presentation: Paragon Shipping Inc. is a public company incorporated in the Republic of the Marshall Islands on April 26, 2006 to act as a holding company. In December 2006, the Company established a branch in Greece under the provision of Law 89 of 1967, as amended. The accompanying consolidated condensed financial statements include the accounts of Paragon Shipping Inc., and its wholly owned vessel owning subsidiaries (collectively the "Company") as noted in Note 1 to the consolidated financial statements for the year ended December 31, 2008 included in the Company's Annual Report on Form 20-F.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of Paragon Shipping Inc ., all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, operating results and cash flows have been included in the statements. Interim results are not necessarily indicative of results that may be expected for the year ended December 31, 2009. These financial statements should be read in conjunction with the consolidated financial statements and footnotes for the year ended December 31, 2008 included in the Company's Annual Report on Form 20-F.

2. Significant Accounting Policies

A summary of the Company's significant accounting policies is identified in Note 2 of the Company's consolidated financial statements for the year ended December 31, 2008 included in the Company's Annual Report on Form 20-F. There have been no changes to the Company's significant accounting policies.

Recent Accounting Pronouncements: In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"). SFAS 157 addresses standardizing the measurement of fair value for companies that are required to use a fair value measure for recognition or disclosure purposes. The FASB defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." The new standard provides a single definition of fair value, together with a framework for measuring it and requires additional disclosure about the use of fair value to measure assets and liabilities. While the statement does not require any new fair value measurements, it does change certain current practices. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.

The effective date of SFAS 157 had been delayed for all nonfinancial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year end entities. The Company has adopted SFAS 157 for financial assets and liabilities for the fiscal year starting January.1,2008. The Company has also adopted SFAS 157, as it relates to nonfinancial assets and liabilities, starting January 1, 2009 and its adoption did not have a material impact on its financial position, results of operations or cash flows.

In March 2008 the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("FASB No. 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company's adoption of SFAS 161 starting January 1, 2009, did not have a material impact on its financial position, results of operations or cash flows as it relates to expanded disclosures.

On June 16, 2008, the FASB issued FSP EITF 03-6-1 "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities". The FASB concluded that all unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of FSP EITF 03-6-1 did not have a material impact on our consolidated financial statements.

F-6

In April 2009, the Financial Accounting Standards Board (FASB) issued Staff Position ("FSP") Interim Disclosures about Fair Value of Financial Instruments ("No. SFAS 107-1 and APB 28-1"). The FSP amends FASB Statement ("SFAS") No. 107, Disclosures about the Fair Value of Financial Instruments, and APB No. 28, Interim Financial Reporting to include disclosures about the fair value of its financial instruments whenever summarized financial information for interim reporting periods is issued. The FSP is effective for interim periods ending after June 15, 2009. The Company is currently evaluating the impact that FSP SFAS 107-1 and APB 28-1 will have on its consolidated financial statements.

3. Vessels, Net

The Company did not take delivery of or dispose of any vessels during the 3 months ended March 31, 2009. The depreciation charge of $8.6 million for the quarter ended March 31, 2009 represents the movement in vessels, net for the period ended March 31, 2009.

All of the vessels are first-priority mortgaged as collateral to the loan facilities outstanding as of March 31, 2009.

4. Long-Term Debt and Restricted Cash

Debt	December 31 , 2008		March 31, 2009
Long-term debt	$	334,335,000	$	323,560,000
Current portion of long-term debt	$	53,150,000	$	52,350,000
Total long-term debt	$	387,485,000	$	375,910,000

On March 30, 2009 the Company entered into a secured revolving credit facility with the Bank of Ireland for up to $30.0 million for the purpose of refinancing a secured revolving credit facility entered into on June 6, 2008. Upon draw down of the $30.0 million refinancing facility, the existing loan facility was fully repaid. In addition the Company concluded supplemental agreement for the remaining facilities during the three month period ended March 31, 2009. Details of the amendments to the loan facilities and of the new facility are discussed in note 10 of our consolidated financial statements for the year ended December 31, 2008 included in our annual report on Form 20-F. In accordance with the terms of the amended loan agreements and new loan facility, the Company has agreed to maintain certain minimum cash accounts. As a result the Company's restricted cash has increased by $43 million from December 31, 2008 and amounts to $49.0 million as of March 31, 2009 of which $22.4 million is current and $26.6 million is long term.

The decrease in total long-term debt is attributable to the scheduled loan repayments of $11.6 million, as well as, the draw down of the $30.0 million refinancing facility, which was offset in full by the repayment of the existing loan facility.

5. Financial Derivative Instruments

The Company enters into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate loans and credit facilities. These interest rate swap transactions fix the interest rates based on predetermined ranges in current LIBOR rates. As of March 31, 2009, the Company's outstanding interest rate swaps had a combined notional amount of $265 million.

The Company's interest rate swaps did not qualify for hedge accounting. Under SFAS 133, the Company marks to market the fair market value of the interest rate swaps at the end of every period and reflects the resulting unrealized loss during the period in "Loss on interest rate swaps" on its consolidated condensed statement of income as well as presenting the fair value at the end of each period in the balance sheet. Information on the location and amounts of derivative fair values in the condensed consolidated balance sheets and derivative losses in the condensed consolidated income statements are shown below:

F-7

	Liability Derivatives
Interest Rate Swaps not designated as hedging instruments		December 31, 2008		March 31, 2009
under Statement 133	Balance Sheet Location	Fair Value		Fair Value
Interests rate contracts	Current liabilities – Interest rate swaps	$	6,407,751	$	6,672,472
Interest rate contracts	Long-Term Liabilities – Interest rate swaps	$	5,247,391	$	4,256,349
Total derivatives		$	11,655,142	$	10,928,821

Derivatives Instruments not		Three Months Ended		Three Months Ended
designated as hedging instruments under Statement 133	Location of (Loss) Recognized	March 31, 2008		March 31, 2009
Interest rate swaps – Fair value	Loss/(gain) on interest rate swaps	$	5,182,783	$	(726,321	)
Interest rate swaps – Realized Loss	Loss on interest rate swaps		-	$	1,019,251
Total loss on interest rate swaps		$	5,182,783	$	292,930

The Company's interest rate swap agreements are based on LIBOR swap rates. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and therefore are considered Level 2 items in accordance with the fair value hierarchy as defined in SFAS 157 "Fair Value Measurements". The following table summarizes the valuation of our financial instruments as of March 31, 2009.

Fair Value Measurement at Reporting Date Using

Total

Quoted Prices in Active Markets for Identical Assets

Significant Other

Observable Inputs

Significant Other

Unobservable Inputs

(Level 1)

(Level 2)

(Level 3)

Interest rate swaps

10,928,821

6. Earnings per Share (EPS)

All shares issued (including the restricted shares issued under the Equity Incentive Plan, as amended) are the Company's common stock and have equal rights to vote and participate in dividends. The calculation of basic earnings per share, does not consider the none-vested shares as outstanding until the time-based vesting restriction has lapsed. Income attributable to restricted shares is deducted from the net income reported for purposes of calculating net income available to common shareholders for the computation of basic earnings per share.

The Company excluded the dilutive effect of 32,000 stock option awards, 290,001 warrants and 101,767 restricted shares in calculating dilutive EPS for our Class A Common Shares as of March 31, 2009, as they were anti-dilutive.

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 31, 2008 and 2009:

	Three Months Ended			Three Months Ended
Numerators	March 31, 2008			March 31, 2009
Net income	$	15,764,840		$	19,184,777
Less: Income attributable to restricted shares		(59,554	)		(71,834	)
Net Income available to common shareholders	$	15,705,286		$	19,112,943
Denominators
Weighted average common shares outstanding, basic		26,272,702			27,077,348
Effect of dilutive securities		462,768			-
Weighted average common shares outstanding, diluted		26,735,470			27,077,348
Net income per common share:
Basic	$	0.60		$	0.71
Diluted	$	0.59		$	0.71

F-8

7. Contingencies

From time to time the Company expects to be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Such claims, even if lacking in merit, could result in the expenditure of significant financial and managerial resources. As of March 31, 2009 the Company is not aware of any other claim or contingent liability, which should be disclosed, or for which a provision should be established in the accompanying financial statements.

8. Subsequent Events

On May 19, 2009, the Company's Board of Directors declared a quarterly dividend of $ 0.05 per share with respect to the first quarter of 2009, payable on June 9, 2009 to shareholders of record as of May 29, 2009.

F-9

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Paragon Shipping Inc.


Dated: May 21, 2009	By:	/s/ Christopher J. Thomas
	Name:	Christopher J. Thomas
	Title:	Chief Financial Officer

SK 25744 0001 995391a v7