UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q




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


For
the quarterly period ended September 30, 2010




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


For
the transition period
from           to


Commission
File Number 000-53656





III
to I Maritime Partners Cayman I, L.P.


(Exact
name of registrant as specified in its charter)




Cayman
      Islands
              
              98-0516465(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (I.R.S.
      Employer
                Identification
      No.)5580
      Peterson Lane
                Suite
      155
                Dallas,
      Texas
              
              75240(Address
      of principal executive offices)
              
              (Zip
      Code)




(972)
392-5400


(Registrant’s
telephone number, including area code)




Not
applicable


(Former
name, former address and former fiscal year, if changed since last
report)







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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). o Yes  o No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer o
                
                Accelerated
      filer oNon-accelerated
      filer o
                (Do
      not check if a smaller reporting company)
                Smaller
      reporting company x





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




APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS:


Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. o
Yes  o
No





APPLICABLE
ONLY TO CORPORATE ISSUERS:


Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.










III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




INDEX




Page
                        NumberForward-Looking
      Statements
                      
                      3PART
      I.
                      
                      Financial
      Information
                      
                      4Item
      1.
                      
                      Financial
      Statements
                      
                      4Consolidated
      Balance Sheets as of September 30, 2010 (unaudited) and December 31,
      2009
                      
                      4Consolidated
      Statements of Operations for the three and nine months ended September 30,
      2010 and 2009 (unaudited)
                      
                      5Consolidated
      Statement of Equity as of September 30, 2010 (unaudited)
                      
                      6Consolidated
      Statements of Cash Flows for the nine months ended September 30, 2010 and
      2009 (unaudited)
                      
                      7Consolidated
      Statements of Comprehensive Income (Loss) for the three and nine months
      ended September 30, 2010 and 2009 (unaudited)
                      
                      8Notes
      to Consolidated Financial Statements (unaudited)
                      
                      9Item
      2.
                      
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      30Item
      4.
                      
                      Controls
      and Procedures
                      
                      50PART
      II.
                      
                      Other
      Information
                      
                      51Item
      1.
                      
                      Legal
      Proceedings
                      
                      51Item
      1A.
                      
                      Risk
      Factors
                      
                      51Item
      2.
                      
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      
                      51Item
      6.
                      
                      Exhibits
                      
                      52


2


Forward-Looking
Statements





Certain
statements contained or incorporated by reference in this Form 10-Q including
without limitation statements containing the words “believe,” “anticipate,”
“attainable,” “forecast,” “will,” “may,” “expect(ation),” “envision,” “project,”
“budget,” “objective,” “goal,” “target(ing),” “estimate,” “could,” “should,”
“would,” “conceivable,” “intend,” “possible,” “prospects,” “foresee,” “look(ing)
for,” “look to,” and words of similar import, are forward-looking statements
within the meaning of the federal securities laws. Forward-looking statements
appear in a number of places and include statements with respect to, among other
things:





·
            forecasts
      about our ability to make cash distributions on the
  units;


·
            planned
      capital expenditures and availability of capital resources to fund capital
      expenditures;


·
            future
      supply of, and demand for, products that will be shipped, supplied or
      otherwise supported by our vessels;


·
            expected
      demand in the maritime shipping industry in general and for our vessels in
      particular;


·
            our
      ability to maximize the use of our
vessels;


·
            estimated
      future capital maintenance
expenditures;


·
            the
      absence of future disputes or other
  disturbances;


·
            increasing
      emphasis on environmental and safety
concerns;


·
            our
      future financial condition or results of operations and our future
      revenues and expenses;


·
            our
      business strategy and other plans and objectives for future operations;
      and


·
            any
      statements contained herein that are not statements of historical
      fact.





These
statements are not guarantees of future performance and involve a number of
risks, uncertainties and assumptions. Accordingly, our actual results or
performance may differ significantly, positively or negatively, from
forward-looking statements. Unanticipated events and circumstances are likely to
occur. Important factors that could cause our actual results of operations or
financial condition to differ include, but are not limited to:





·
            inability
      to raise sufficient capital;


·
            fluctuations
      in charter rates or operating
expenses;


·
            insufficient
      cash or losses from operations;


·
            inability
      to achieve or maintain sufficient utilization of our vessels to cover debt
      service payments and operating
expenses;


·
            intense
      competition in the anchor handling tug supply ship or multipurpose bulk
      carrier industries;


·
            the
      occurrence of marine accidents or other
hazards;


·
            fluctuations
      in currency exchange rates and/or interest
  rates;


·
            changes
      in international trade agreements;


·
            adverse
      developments in the marine transportation business;
  and


·
            other
      financial, operational and legal risks and uncertainties detailed from
      time to time in our Securities and Exchange Commission filings, including
      those set forth in our Annual Statement on Form 10-K for the year ended
      December 31, 2009, under Item 1A. Risk
Factors.





All
forward-looking statements included in this Form 10-Q and all subsequent written
or oral forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by these cautionary statements.
The forward-looking statements speak only as of the date made and, other than as
required by law, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.


3


PART
I. Financial Information





Item
1. Financial Statements




III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




CONSOLIDATED
BALANCE SHEETS




(Unaudited)




September 30,
                            
                            
                            December 31,2010
                            
                            
                            2009ASSETSCash
                            
                            $
                            3,390,220
                            
                            
                            $
                            18,267,260Cash
      held in escrow
                            
                            
                            25,000
                            
                            
                            
                            -Related
      party receivables
                            
                            
                            145,403
                            
                            
                            
                            1,949,363Due
      from charterers
                            
                            
                            9,573,450
                            
                            
                            
                            3,263,009Other
      receivables
                            
                            
                            352,693
                            
                            
                            
                            28,788Prepaid
      assets
                            
                            
                            89,406
                            
                            
                            
                            214,490Current
      derivative assets
                            
                            
                            41,482
                            
                            
                            
                            2,773,820Other
      current assets
                            
                            
                            897,037
                            
                            
                            
                            1,142,499Current
      assets
                            
                            
                            14,514,691
                            
                            
                            
                            27,639,229Vessels
                            
                            
                            516,058,359
                            
                            
                            
                            168,478,062Vessel
      construction in progress
                            
                            
                            -
                            
                            
                            
                            111,152,161On
      board equipment
                            
                            
                            19,220,635
                            
                            
                            
                            11,912,779535,278,994
                            
                            
                            
                            291,543,002Less
      accumulated depreciation
                            
                            
                            (18,927,344
                            )
                            
                            
                            (5,003,164
                            )Vessels
      and equipment, net
                            
                            
                            516,351,650
                            
                            
                            
                            286,539,838Investment
      in unconsolidated entities
                            
                            
                            2,231,825
                            
                            
                            
                            2,977,432Deferred
      loan fees, net
                            
                            
                            3,182,138
                            
                            
                            
                            3,554,818Derivative
      assets, net of current portion
                            
                            
                            35,943
                            
                            
                            
                            2,797,433Long-term
      related party receivable
                            
                            
                            909,723
                            
                            
                            
                            -Other
      assets
                            
                            
                            -
                            
                            
                            
                            207Total
      assets
                            
                            $
                            537,225,970
                            
                            
                            $
                            323,508,957LIABILITIES AND EQUITYAccounts
      payable and other accrued liabilities
                            
                            $
                            7,712,177
                            
                            
                            $
                            15,400,959Vessel
      construction installments payable
                            
                            
                            -
                            
                            
                            
                            65,019,372Accrued
      interest payable
                            
                            
                            2,710,928
                            
                            
                            
                            173,608Due
      to related party
                            
                            
                            1,731,274
                            
                            
                            
                            852,663Unaccepted
      equity contributions
                            
                            
                            25,000
                            
                            
                            
                            -Current
      derivative liabilities
                            
                            
                            11,044,138
                            
                            
                            
                            4,522,274Current
      portion of long-term debt
                            
                            
                            35,779,986
                            
                            
                            
                            17,858,391Current
      portion of note payable to related party
                            
                            
                            449,000
                            
                            
                            
                            -Current
      liabilities
                            
                            
                            59,452,503
                            
                            
                            
                            103,827,267Long-term
      derivative liabilities
                            
                            
                            21,591,939
                            
                            
                            
                            5,007,963Long-term
      payable to related party
                            
                            
                            2,382,100
                            
                            
                            
                            -Notes
      payable to related party
                            
                            
                            -
                            
                            
                            
                            477,500Long-term
      debt, net of current portion
                            
                            
                            419,539,299
                            
                            
                            
                            140,527,679Total
      liabilities
                            
                            
                            502,965,841
                            
                            
                            
                            249,840,409Commitments
      and contingenciesIII
      to I Maritime Partners Cayman I, L.P. partners' equity:General
      partner
                            
                            
                            102,914
                            
                            
                            
                            514,138Class
      A limited partners (units issued and outstanding:September
      30, 2010 - 615,885, December 31, 2009 - 612,244)
                            
                            
                            11,311,420
                            
                            
                            
                            36,459,320Class
      B limited partners (units issued and outstanding:September
      30, 2010 - 84,313, December 31, 2009 - 84,313)
                            
                            
                            1,286,929
                            
                            
                            
                            4,789,036Class
      D limited partners (units issued and outstanding:September
      30, 2010 - 2,000, December 31, 2009 - 2,000)
                            
                            
                            (188,328
                            )
                            
                            
                            (105,253
                            )Accumulated
      other comprehensive (loss) income
                            
                            
                            (1,814,978
                            )
                            
                            
                            6,456,857III
      to I Maritime Partners Cayman I, L.P. partners' equity
                            
                            
                            10,697,957
                            
                            
                            
                            48,114,098Non-controlling
      interest
                            
                            
                            23,562,172
                            
                            
                            
                            25,554,450Total
      equity
                            
                            
                            34,260,129
                            
                            
                            
                            73,668,548Total
      liabilities and equity
                            
                            $
                            537,225,970
                            
                            
                            $
                            323,508,957





See Notes
to Consolidated Financial Statements.


4


III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




CONSOLIDATED
STATEMENTS OF OPERATIONS




(Unaudited)




Three Months Ended September 30,
                            
                            
                            Nine Months Ended September 30,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009Time
      charter revenue
                            
                            $
                            17,283,060
                            
                            
                            $
                            5,886,791
                            
                            
                            $
                            38,366,324
                            
                            
                            $
                            11,105,681Operating
      expenses:Vessel
      operating expenses
                            
                            
                            13,489,401
                            
                            
                            
                            3,692,518
                            
                            
                            
                            29,849,970
                            
                            
                            
                            7,894,193Depreciation
      expense
                            
                            
                            6,595,787
                            
                            
                            
                            1,485,303
                            
                            
                            
                            13,715,739
                            
                            
                            
                            2,573,269Professional
      fees
                            
                            
                            725,177
                            
                            
                            
                            549,205
                            
                            
                            
                            1,756,675
                            
                            
                            
                            2,489,317Brokerage
      and representation fees
                            
                            
                            -
                            
                            
                            
                            232,408
                            
                            
                            
                            -
                            
                            
                            
                            560,533Other
      operating expenses
                            
                            
                            415,255
                            
                            
                            
                            197,167
                            
                            
                            
                            1,222,508
                            
                            
                            
                            430,250Total
      operating expenses
                            
                            
                            21,225,620
                            
                            
                            
                            6,156,601
                            
                            
                            
                            46,544,892
                            
                            
                            
                            13,947,562Operating
      loss
                            
                            
                            (3,942,560
                            )
                            
                            
                            (269,810
                            )
                            
                            
                            (8,178,568
                            )
                            
                            
                            (2,841,881
                            )Other
      income (expense):Interest
      income
                            
                            
                            168,851
                            
                            
                            
                            70,387
                            
                            
                            
                            279,103
                            
                            
                            
                            935,719Gain
      on extinguishment of debt
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            5,300,000
                            
                            
                            
                            -Interest
      expense
                            
                            
                            (6,284,217
                            )
                            
                            
                            (563,937
                            )
                            
                            
                            (12,180,947
                            )
                            
                            
                            (2,404,448
                            )Net
      loss on interest rate swaps
                            
                            
                            (3,375,998
                            )
                            
                            
                            (6,199,724
                            )
                            
                            
                            (22,293,395
                            )
                            
                            
                            (9,767,863
                            )Foreign
      currency transaction gain (loss)
                            
                            
                            (3,801,347
                            )
                            
                            
                            407,429
                            
                            
                            
                            (1,010,798
                            )
                            
                            
                            180,601Equity
      in loss of unconsolidated entities
                            
                            
                            (287,570
                            )
                            
                            
                            (284,897
                            )
                            
                            
                            (576,484
                            )
                            
                            
                            (593,926
                            )Total
      other expense
                            
                            
                            (13,580,281
                            )
                            
                            
                            (6,570,742
                            )
                            
                            
                            (30,482,521
                            )
                            
                            
                            (11,649,917
                            )Net
      loss
                            
                            
                            (17,522,841
                            )
                            
                            
                            (6,840,552
                            )
                            
                            
                            (38,661,089
                            )
                            
                            
                            (14,491,798
                            )Net
      loss attributable to the non-controlling interest
                            
                            
                            3,997,709
                            
                            
                            
                            1,344,176
                            
                            
                            
                            10,005,996
                            
                            
                            
                            2,331,361Net
      loss attributable to III to I MaritimePartners
      Cayman I, L.P.
                            
                            
                            (13,525,132
                            )
                            
                            
                            (5,496,376
                            )
                            
                            
                            (28,655,093
                            )
                            
                            
                            (12,160,437
                            )Less
      general partner interest in net loss
                            
                            
                            (188,285
                            )
                            
                            
                            (78,078
                            )
                            
                            
                            (399,324
                            )
                            
                            
                            (176,520
                            )Limited
      partner interest in net loss
                            
                            $
                            (13,336,847
                            )
                            
                            $
                            (5,418,298
                            )
                            
                            $
                            (28,255,769
                            )
                            
                            $
                            (11,983,917
                            )Net
      loss per general partner unit:Basic
      and diluted
                            
                            $
                            (19.02
                            )
                            
                            $
                            (7.89
                            )
                            
                            $
                            (40.34
                            )
                            
                            $
                            (17.83
                            )Weighted
      average general partner units outstanding
                            
                            
                            9,900
                            
                            
                            
                            9,900
                            
                            
                            
                            9,900
                            
                            
                            
                            9,900Net
      loss per limited partner unit:Basic
      and diluted
                            
                            $
                            (19.02
                            )
                            
                            $
                            (7.89
                            )
                            
                            $
                            (40.34
                            )
                            
                            $
                            (17.83
                            )Weighted
      average limited partner units outstanding
                            
                            
                            701,251
                            
                            
                            
                            687,016
                            
                            
                            
                            700,527
                            
                            
                            
                            672,125





See Notes
to Consolidated Financial Statements.


5


III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




CONSOLIDATED
STATEMENT OF EQUITY




(Unaudited)




III to I Maritime Partners Cayman I, L.P.AccumulatedClass A
                                                            
                                                            
                                                            Class B
                                                            
                                                            
                                                            Class D
                                                            
                                                            
                                                            OtherGeneral
                                                            
                                                            
                                                            Limited
                                                            
                                                            
                                                            Limited
                                                            
                                                            
                                                            Limited
                                                            
                                                            
                                                            Comprehensive
                                                            
                                                            
                                                            Non-controllingPartner
                                                            
                                                            
                                                            Partners
                                                            
                                                            
                                                            Partners
                                                            
                                                            
                                                            Partners
                                                            
                                                            
                                                            Income
      (Loss)
                                                            
                                                            
                                                            Interest
                                                            
                                                            
                                                            TotalBalance
      at December 31, 2009
                                                            
                                                            $
                                                            514,138
                                                            
                                                            
                                                            $
                                                            36,459,320
                                                            
                                                            
                                                            $
                                                            4,789,036
                                                            
                                                            
                                                            $
                                                            (105,253
                                                            )
                                                            
                                                            $
                                                            6,456,857
                                                            
                                                            
                                                            $
                                                            25,554,450
                                                            
                                                            
                                                            $
                                                            73,668,548Contributions,
      net of syndication costs
                                                            
                                                            
                                                            (11,900
                                                            )
                                                            
                                                            
                                                            (373,566
                                                            )
                                                            
                                                            
                                                            (101,342
                                                            )
                                                            
                                                            
                                                            (2,405
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            10,514,036
                                                            
                                                            
                                                            
                                                            10,024,823Net
      loss
                                                            
                                                            
                                                            (399,324
                                                            )
                                                            
                                                            
                                                            (24,774,334
                                                            )
                                                            
                                                            
                                                            (3,400,765
                                                            )
                                                            
                                                            
                                                            (80,670
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (10,005,996
                                                            )
                                                            
                                                            
                                                            (38,661,089
                                                            )Forward
      currency exchange contracts
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (4,023,991
                                                            )
                                                            
                                                            
                                                            (1,341,330
                                                            )
                                                            
                                                            
                                                            (5,365,321
                                                            )Foreign
      currency translation adjustment
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (4,247,844
                                                            )
                                                            
                                                            
                                                            (1,158,988
                                                            )
                                                            
                                                            
                                                            (5,406,832
                                                            )Balance
      at September 30, 2010
                                                            
                                                            $
                                                            102,914
                                                            
                                                            
                                                            $
                                                            11,311,420
                                                            
                                                            
                                                            $
                                                            1,286,929
                                                            
                                                            
                                                            $
                                                            (188,328
                                                            )
                                                            
                                                            $
                                                            (1,814,978
                                                            )
                                                            
                                                            $
                                                            23,562,172
                                                            
                                                            
                                                            $
                                                            34,260,129





See Notes
to Consolidated Financial Statements.


6


III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




CONSOLIDATED
STATEMENTS OF CASH FLOWS




(Unaudited)




Nine Months Ended September 30,2010
                          
                          
                          2009Operating
      activities:Net
      loss
                          
                          $
                          (38,661,089
                          )
                          
                          $
                          (14,491,798
                          )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
                          
                          
                          13,715,739
                          
                          
                          
                          2,573,269Amortization
      of deferred loan fees
                          
                          
                          187,565
                          
                          
                          
                          24,467Foreign
      currency transaction (gain) loss
                          
                          
                          (686,167
                          )
                          
                          
                          1,775,465Net
      gain on forward currency exchange contracts
                          
                          
                          (267,471
                          )
                          
                          
                          (1,956,066
                          )Net
      loss on interest rate swaps
                          
                          
                          22,293,395
                          
                          
                          
                          9,767,864Settlement
      of hedge instruments
                          
                          
                          1,964,436
                          
                          
                          
                          -Gain
      on extinguishment of debt
                          
                          
                          (5,300,000
                          )
                          
                          
                          -Equity
      in loss of unconsolidated entities
                          
                          
                          576,484
                          
                          
                          
                          593,926Payment
      of interest on Berenberg Facility
                          
                          
                          -
                          
                          
                          
                          (4,109,718
                          )Changes
      in assets and liabilities:Due
      from charterers
                          
                          
                          (6,474,582
                          )
                          
                          
                          (2,205,941
                          )Other
      receivables
                          
                          
                          (325,354
                          )
                          
                          
                          174,079Prepaid
      and other assets
                          
                          
                          302,930
                          
                          
                          
                          (542,572
                          )Accounts
      payable and accrued liabilities
                          
                          
                          (5,269,415
                          )
                          
                          
                          6,803,211Accrued
      interest payable
                          
                          
                          2,543,069
                          
                          
                          
                          (291,375
                          )Net
      cash used in operating activities
                          
                          
                          (15,400,460
                          )
                          
                          
                          (1,885,189
                          )Investing
      activities:Net
      related party receivable
                          
                          
                          893,102
                          
                          
                          
                          (118,692
                          )Advances
      for vessel acquisitions
                          
                          
                          (312,243,185
                          )
                          
                          
                          (82,842,251
                          )Purchase
      of on board equipment
                          
                          
                          (7,907,111
                          )
                          
                          
                          (7,147,349
                          )Decrease
      in restricted cash
                          
                          
                          -
                          
                          
                          
                          55,967,374Net
      cash used in investing activities
                          
                          
                          (319,257,194
                          )
                          
                          
                          (34,140,918
                          )Financing
      activities:Proceeds
      from Berenberg Facility
                          
                          
                          -
                          
                          
                          
                          1,314,005Repayments
      on Berenberg Facility
                          
                          
                          -
                          
                          
                          
                          (55,435,008
                          )Proceeds
      from NORD/LB Sr. Loan
                          
                          
                          286,239,940
                          
                          
                          
                          102,282,624Repayments
      on NORD/LB Sr. Loan
                          
                          
                          (16,896,107
                          )
                          
                          
                          (3,196,332
                          )Proceeds
      from borrowing on NORD/LB Credit Facility
                          
                          
                          1,391,445
                          
                          
                          
                          -Proceeds
      from RHKG Loan Agreements
                          
                          
                          23,773,358
                          
                          
                          
                          -Proceeds
      from Hartmann Loans
                          
                          
                          9,011,144
                          
                          
                          
                          -Net
      proceeds from borrowing on Asia Hartmann Loans
                          
                          
                          6,414,199
                          
                          
                          
                          -Deferred
      loan fees
                          
                          
                          -
                          
                          
                          
                          (9,527
                          )Repayment
      of related party note payable
                          
                          
                          (28,500
                          )
                          
                          
                          (11,513,487
                          )Net
      accounts payable to related party
                          
                          
                          921,504
                          
                          
                          
                          7,501,011Contributions
      from partners
                          
                          
                          339,100
                          
                          
                          
                          5,542,172Unaccepted
      equity contributions
                          
                          
                          25,000
                          
                          
                          
                          (289,500
                          )Syndication
      costs
                          
                          
                          (457,151
                          )
                          
                          
                          (1,597,500
                          )Contributions
      from non-controlling interests
                          
                          
                          10,798,474
                          
                          
                          
                          5,897,680Distributions
      to non-controlling interests
                          
                          
                          -
                          
                          
                          
                          (689,986
                          )Net
      cash provided by financing activities
                          
                          
                          321,532,406
                          
                          
                          
                          49,806,152Effect
      of exchange rate changes on cash
                          
                          
                          (1,751,792
                          )
                          
                          
                          2,626,103Net
      (decrease) increase in cash
                          
                          
                          (14,877,040
                          )
                          
                          
                          16,406,148Cash,
      beginning of period
                          
                          
                          18,267,260
                          
                          
                          
                          2,222,196Cash,
      end of period
                          
                          $
                          3,390,220
                          
                          
                          $
                          18,628,344Non-cash
      financing and investing activities:Vessel
      construction installments financed through accounts
payable
                          
                          $
                          -
                          
                          
                          $
                          29,499,771Deposits
      on asset acquisition financed through assumption of
payable
                          
                          $
                          -
                          
                          
                          $
                          5,300,000Construction
      in progress reclassed to delivered vessels
                          
                          $
                          105,560,819
                          
                          
                          $
                          35,762,585Related
      party receivables and accrued interest reclassed to long-term
      receivable
                          
                          $
                          909,723
                          
                          
                          $
                          -Syndication
      costs reclassed to long-term payable
                          
                          $
                          2,382,100
                          
                          
                          $
                          -Syndication
      costs financed through accounts payable
                          
                          $
                          -
                          
                          
                          $
                          2,371,200





See Notes
to Consolidated Financial Statements.


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CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)




(Unaudited)




Three Months Ended September 30,
                      
                      
                      Nine Months Ended September 30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Net
      loss
                      
                      $
                      (17,522,841
                      )
                      
                      $
                      (6,840,552
                      )
                      
                      $
                      (38,661,089
                      )
                      
                      $
                      (14,491,798
                      )Foreign
      currency exchange forward contracts
                      
                      
                      8,756,323
                      
                      
                      
                      4,935,865
                      
                      
                      
                      (5,365,321
                      )
                      
                      
                      7,688,972Foreign
      currency translation adjustment
                      
                      
                      5,192,687
                      
                      
                      
                      2,433,472
                      
                      
                      
                      (5,406,832
                      )
                      
                      
                      3,466,111Comprehensive
      income (loss)
                      
                      $
                      (3,573,831
                      )
                      
                      $
                      528,785
                      
                      
                      $
                      (49,433,242
                      )
                      
                      $
                      (3,336,715
                      )





See Notes
to Consolidated Financial Statements.


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





1.
    Nature of Partnership’s Business and Summary of
Significant Accounting Policies





References
herein to III to I Maritime Partners Cayman I, L.P. (“Cayman I”) include III to
I Maritime Partners Cayman I, L.P. and its consolidated subsidiaries. In
accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English”
guidelines, these financial statements have been written in the first person. In
this document, the words “we,” “our,” “ours” and “us” refer only to III to I
Maritime Partners Cayman I, L.P. and its consolidated subsidiaries or to III to
I Maritime Partners Cayman I, L.P. or an individual subsidiary and not to any
other person.





The
accompanying unaudited consolidated interim financial statements have been
prepared in accordance with the rules applicable to Form 10-Q and include all
information and footnotes required for interim financial statement presentation,
but do not include all disclosures required under accounting principles
generally accepted in the United States (“U.S. GAAP”) for complete financial
statements. In the opinion of management, these financial statements include all
adjustments, consisting only of normal recurring adjustments and accruals, that
in our opinion are necessary for a fair presentation of our financial position
as of September 30, 2010 and December 31, 2009, and the results of operations
for the three and nine months ended September 30, 2010 and 2009 and cash flows
for the nine months ended September 30, 2010 and 2009. These financial
statements should be read in conjunction with the consolidated financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2009 as filed with the SEC. Interim results of operations are not
necessarily indicative of the results to be expected for the full
year.





Our
functional currency is the U.S. dollar. However, the functional currency of many
of our subsidiaries is the Euro. All amounts are stated in U.S. dollars (“USD”),
and where the amount relates to a subsidiary, the amount has been translated to
Euros (“EUR”) following the USD amount. Amounts related to future payments which
are payable in EUR have been stated in USD and translated using the exchange
rate as of September 30, 2010. Amounts shown in narrative statements related to
payments made in the past have been translated using the exchange rate on the
date the transaction occurred. When comparisons are made between balance sheet
dates, the appropriate exchange rate for the given balance sheet date is used.
When comparisons are made related to statement of operations amounts, the
average exchange rate for the given period is used.





Nature
of the Business





Cayman I,
a Cayman Islands exempted limited partnership, was formed October 18, 2006.
Cayman I and its consolidated subsidiaries were formed for the primary purpose
of acquiring, managing and operating maritime vessels. Our primary focus has
been the purchase and operation of nine anchor-handling tug supply (“AHTS”)
vessels, but we also purchased a non-controlling interest in two multipurpose
bulk carrier vessels (“mini-bulkers”). As of September 30, 2010, delivery of all
nine of our AHTS vessels had occurred from the shipyard, Fincantieri Cantieri
Navali Italiani SpA (“Fincantieri”) in Italy. We are also authorized to engage
in other activities if III to I International Maritime Solutions Cayman, Inc., a
Cayman Islands exempted company with limited liability (“General Partner”),
believes such activities will benefit our core business of shipping operations.
We are currently authorized to issue Class A, Class B, Class C and Class D
limited partner units as well as general partner units. To date we have issued
Class A, Class B and Class D limited partner units and general partner
units.


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





Delivery
of our AHTS vessels occurred as follows:





AHTS SPV
              
              Vessel Name
              
              Date Delivered6160
      –  MS Juist
              
              UOS
      Atlantis
              
              February
      27, 20096161
      –  MS Norderney
              
              UOS
      Challenger
              
              May
      28, 20096162
      –  Isle of Baltrum
              
              UOS
      Columbia
              
              October
      2, 20096163
      –  Isle of Langeoog
              
              UOS
      Discovery
              
              February
      16, 20106168
      –  Isle of Amrum
              
              UOS
      Endeavour
              
              March
      11, 20106169
      –  Isle of Sylt
              
              UOS
      Enterprise
              
              July
      2, 20106171
      –  Isle of Wangerooge
              
              UOS
      Explorer
              
              March
      15, 20106172
      –  Isle of Neuwerk
              
              UOS
      Freedom
              
              June
      29, 20106173
      –  Isle of Usedom
              
              UOS
      Liberty
              
              June
      23, 2010





Initially,
we owned approximately 96% of the units of I-A Suresh Capital Maritime Partners
Limited, a limited liability company formed under the laws of Cyprus (our
“Cyprus Subsidiary”). On April 28, 2009, having received approval from our
limited partners, we underwent a reorganization in order to simplify our
ownership structure, streamline the calculation of allocations and distributions
by incorporating economic rights in our Second Amended and Restated Agreement of
Limited Partnership (“Partnership Agreement”) that formerly resided in the
organizational documents of our Cyprus Subsidiary and simplify the financial
statements by eliminating the non-controlling interest component related to the
Cyprus Subsidiary. The reorganization was effective on April 1, 2009. Pursuant
to the reorganization, one of the non-controlling unitholders in our Cyprus
Subsidiary contributed its units in the Cyprus Subsidiary for newly created
Class D units of Cayman I. The newly created Class D units are structured to
represent, in total, substantially the same allocation rights in the results of
operations and similar rights of control as the interest in the Cyprus
Subsidiary which was the consideration for their issuance. Our general partner,
the other non-controlling unitholder, contributed its units in the Cyprus
Subsidiary in exchange for the contribution by the other unitholder and the
adoption of the Partnership Agreement. As a result of the reorganization, we now
own 100% of our Cyprus Subsidiary.





In
accordance with FASB ASC 810, Consolidation -Non-controlling Interest in a
Subsidiary, we have treated the acquisition of the non-controlling
interest in our Cyprus Subsidiary as an equity transaction, and have recorded a
decrease in the equity of the Class D unitholders and of the general partner
equal to the negative carrying value of the non-controlling interest
attributable to the acquired interests effective April 1, 2009.





Suresh
Capital Maritime Partners Germany GmbH (“German Subsidiary”), a German limited
liability company and a wholly owned subsidiary of the Cyprus Subsidiary, was
formed for the purpose of acquiring, managing and operating our maritime
vessels.





In May
2007, we acquired a 75% limited partnership interest in 12 separate special
purpose entities (“SPVs”), each a Kommanditgesellschaft (“KG”), German limited
partnership, in order to secure a position in 12 AHTS vessels available from the
Fincantieri Shipyards in Italy with expected deliveries through 2010. The
remaining 25% of each SPV is owned by Reederei Hartmann GmbH & Co. KG
(“Reederei Hartmann”), a Hartmann Group company, and affiliates of Reederei
Hartmann. Additionally, Hartmann Offshore GmbH (“Hartmann Offshore”), a Hartmann
Group company, was retained to provide management services for our AHTS vessels.
Each SPV was formed for the purpose of acquiring, managing and operating a
single AHTS vessel. In December 2007 and January 2008, we transferred our
interest in three of the 12 AHTS SPVs for their approximate carrying value to
our affiliate, FLTC Fund I.


10


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





During
2007, we also acquired a 49% interest in two additional SPVs, each of which
acquired and operates one mini-bulker. The operations of each mini-bulker are
managed by Reederei Hesse GmbH & Co. KG (“Reederei Hesse”) with the
remaining 51% ownership held by affiliates of Reederei Hesse and the Hartmann
Group. See Note 3 for additional information.





Profits
and losses are allocated among our partners in accordance with the Partnership
Agreement. Distributions, based on available cash flows, will be made to the
partners in accordance with the Partnership Agreement. The Partnership Agreement
entitles our general partner to a portion of all amounts which would otherwise
be distributable to our Class A limited partners from distributions of cash flow
provided by operations (but not from distributions of capital proceeds), which
portion is equal to (i) ten percent until the limited partners have received
returns up to the amount of their capital contributions, (ii) twenty percent
until the limited partners have received returns equal to twice their capital
contributions and (iii) thirty percent thereafter.







Significant
Accounting Policies





Principles of
Consolidation


Significant
intercompany balances and transactions have been eliminated. We consolidate
investments in entities in which we have a controlling interest. Investments in
unconsolidated entities where we have the ability to exercise significant
influence over operating and financial policies (generally 20% to 50% ownership)
are accounted for using the equity method.





Business
Geographics


Non-U.S.
operations accounted for 100% of our revenues. Vessels will regularly move
between countries in international waters. It is therefore impracticable to
assign revenues or earnings from operations by geographical area.





Segment
Reporting


Our AHTS
vessels, which are currently the only vessels which we consolidate in our
operations, serve the same type of customer, participate equally in a common
revenue sharing pool, have similar operations and maintenance requirements,
operate in the same regulatory environment and are subject to similar economic
characteristics. Based on this, we have determined that we operate in one
reportable segment.





Use of
Estimates


The
preparation of financial statements in accordance with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.





Concentrations of Credit
Risk


We
maintain deposit accounts with U.S. financial institutions that, at times,
exceed the federally insured limits and with foreign financial institutions.
Management believes the financial strength of the U.S. and foreign financial
institutions minimizes the credit risk related to our deposits. We have not
experienced any losses from this credit risk.





Cash


Our cash
balance will from time to time include amounts which may be subject to the
conditions under the agreement with Norddeutsche Landesbank Girozentrale
(“Nord/LB”) for the senior loan facility (“Senior Loan”). The Nord/LB Senior
Loan conditions for each SPV prohibit us from making distributions unless
payment of any AHTS vessels’ operating costs and all amounts due and payable
under the Senior Loan are secured for a 12 month period via either cash reserves
or charter coverage.


11


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





Due from
Charterers


Customer
obligations due under normal trade terms are recorded as due from charterers. An
allowance for doubtful accounts would represent our estimate of the amount of
probable credit losses existing in our accounts receivable. We have a limited
number of customers with individually large amounts due at any given date. Any
unanticipated change in any one of these customers’ credit worthiness or other
matters affecting the collectability of amounts due from such customers could
have a material effect on the results of operations in the period in which such
changes or events occur. We regularly review all aged accounts receivable for
collectability and establish an allowance as necessary for individual customer
balances. As of September 30, 2010 and December 31, 2009, we had recorded no
allowance for doubtful accounts.





Derivatives


We
account for derivatives and derivatives classified as hedges in accordance with
FASB ASC 815, Derivatives and
Hedging. All our derivative and hedge positions are stated at fair value
on our consolidated balance sheet.





Realized
and unrealized gains and losses related to our foreign currency exchange
contracts not classified as hedges are reported in our consolidated statements
of operations in foreign currency transaction gain (loss). Gains and losses
related to foreign currency exchange contracts designated for hedge accounting
are included in foreign currency transaction gain (loss) on the consolidated
statement of operations to the extent they are ineffective, with the effective
portion of the fair value gains or losses recorded as part of accumulated other
comprehensive income (loss) on the consolidated balance sheet. The gain or loss
related to changes in the fair value of our interest rate swap contracts, none
of which are classified as hedges, is reported in loss on interest rate swaps on
the consolidated statement of operations.





Vessels and
Equipment


Vessels
are stated at cost less accumulated depreciation. Vessel costs include
acquisition costs directly attributable to the vessel and expenditures made to
prepare the vessel for its initial voyage. On board equipment represents all the
equipment required to operate a vessel. Vessels, net of salvage value, and on
board equipment are depreciated on a straight-line basis over their estimated
useful lives, which have been determined to be 20 years and 10 years,
respectively, from the initial delivery date from the shipyard.





The costs
of significant replacements, renewals or betterments will be capitalized over
the shorter of the vessel’s and equipment’s remaining useful lives or the lives
of the renewals or betterments. The net book value of any asset component being
replaced will be written off as part of vessel operating expenses. Expenditures
for routine maintenance and repairs are expensed as incurred.





Vessel
construction in progress represents the cost of acquiring contracts to build
vessels, installments paid to the shipyards, certain other payments made to
third parties and capitalized interest costs incurred during the construction of
each vessel until the vessel is substantially complete and ready for its
intended use.





Impairment of Long-Lived
Assets


We assess
long-lived assets for recoverability in accordance with FASB ASC 360, Property, Plant and
Equipment, which requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets is
measured by comparing the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. These evaluations for
impairment are significantly impacted by estimates of revenues, costs, expenses
and other factors. If these assets are considered to be impaired, the impairment
to be recognized is calculated as the excess of the asset’s carrying value over
its estimated fair value. As of December 31, 2009, we evaluated our intentions
with respect to the chemical tanker and determined that the asset was impaired.
We therefore recorded an impairment to the deposit on asset acquisition on our
balance sheet to reduce the carrying value of this asset to zero in December
2009. No indicators of potential impairment were noted for the period ended
September 30, 2010.


12


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





Deferred Loan
Fees


Costs
incurred in connection with the issuance of debt have been capitalized and are
being amortized on an effective interest basis to interest expense over the life
of the related debt agreements. Deferred loan fees at September 30, 2010 and
December 31, 2009 amounted to $3,182,138 and $3,554,818, respectively, net of
accumulated amortization of $254,149 and $63,482, respectively.





Non-controlling
Interest


The
non-controlling interest in our consolidated balance sheet reflects the original
investment by non-controlling unitholders in the consolidated subsidiaries along
with their proportional share of the earnings or losses of the subsidiaries,
which are consolidated in our financial statements, less any distributions
received by them from our consolidated subsidiaries. The non-controlling
interest also receives a portion of the cumulative foreign currency translation
adjustment and syndication costs.





Syndication
Costs


Syndication
costs are costs or fees incurred for financial services including, but not
limited to, the procurement of equity at any level within Cayman I. Such costs
are netted against non-controlling interest and partners’ equity in proportion
to the ownership of each class of partner. See Note 6 for additional
information.





Revenue
Recognition


Our
revenue is earned primarily from time chartering of vessels to charterers
based upon daily rates of hire. A time charter is a lease arrangement under
which we provide a vessel to a charterer and we are responsible for all crewing,
insurance and other operating expenses. Time charters may be long term charters
for six months to several years, or short-term charters, typically called “spot
charters” measured in days or weeks. Our AHTS SPVs participate in a pool
arrangement (“UOS AHTS Pool”) with three SPVs to be owned by FLTC Fund I under
which they will pool their revenue less voyage expenses (“Voyage Results”).
Revenue from charters, including any mobilization fees, is generally recorded
when services are rendered, estimates are reasonably determinable and collection
is reasonably assured. Revenue is recognized net of price adjustments and other
potential adjustments based upon the daily charter rate for the reporting
period. Our pooling arrangement under the UOS AHTS Pool will not have any
bearing on our revenue until such time as one of the vessels to be owned by FLTC
Fund I begins to participate in the UOS AHTS Pool. The first of FLTC Fund I’s
vessels was delivered September 21, 2010, and is expected to begin to
participate in the UOS AHTS Pool in the fourth quarter 2010, along with the
other two vessels of FLTC Fund I, which were delivered October 12th and
October 27th,
respectively. After such time, our revenue will be recorded taking into account
potential pool adjustments for the period.





Five
customers represented 85.7% and 90.1%, respectively, of our revenue for the
three and nine months ended September 30, 2010. During the three and nine months
ended September 30, 2009, two customers represented 100% of our revenue. These
customers’ accounts receivable balances represented 74.7% and 100% of our
accounts receivable at September 30, 2010 and December 31, 2009,
respectively.





Other
revenue (i.e. Fuel Revenue, Oil & Lube Revenue, etc.), which is included in
charter revenue, is reported gross according to FASB ASC 605 Revenue Recognition,as we
are the primary obligor in the arrangement. Whether a supplier or our entity is
responsible for providing the product or service desired by the charterer is a
strong indicator of our entity’s role in the transaction. If we are responsible
for fulfillment, including the acceptability of the products or services ordered
or purchased by the charterer, that fact is a strong indicator that we have
risks and rewards of a principal in the transaction and that we should record
revenue gross based on the amount billed to the charterer. Representations
(written or otherwise) made by our entity during marketing and the terms of the
sales contract generally will provide evidence as to whether we or the supplier
is responsible for fulfilling the ordered product or service. Due to these
indications of our role as primary obligor, the revenue is recorded gross based
on the amount billed to the charterer.


13


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





Foreign Currency
Translation


The
functional currency of the majority of our subsidiaries is the Euro (“EUR”).
Assets and liabilities of foreign currency-denominated financial statements are
translated into the U.S. dollar (“USD”), our functional currency, at the
exchange rate as of the balance sheet date. Revenues, costs and expenses are
translated at the weighted-average exchange rate for the reporting period.
Exchange gain and loss adjustments resulting from the translation of the
financial statements are reflected in other comprehensive income (loss) in
accordance with FASB ASC 830, Foreign Currency
Matters.





During
the three and nine months ended September 30, 2010 and 2009, we incurred a
foreign currency transaction gain (loss) of ($3,801,347) and ($1,010,798) and
$407,429 and $180,601, respectively. These amounts include the effect of changes
in the valuation of the forward currency exchange contracts as well as
translation of certain cash deposit balances held in EUR to USD at the reporting
dates.





Included
in accumulated other comprehensive income (loss) at September 30, 2010 and
December 31, 2009 are the cumulative changes in foreign currency translation
adjustments representing a gain (loss) of ($1,615,410) and $2,632,434,
respectively, which resulted from the translation of our financial statements
from the functional currency of EUR to the reporting currency of
USD.





We
exclude foreign currency transaction gains and losses resulting from
intercompany foreign currency transactions that are long-term in nature from the
determination of net income (loss).





Income
Taxes


We are
not subject to U.S. federal or state income taxes. Our taxable income and losses
are reported on the income tax returns of the respective partners and
non-controlling unitholders. Based on the current structure and activity of the
Cyprus Subsidiary and on current tax laws in Cyprus, the Cyprus Subsidiary is
subject to income tax in Cyprus. The German Subsidiary is treated as a German
corporation for tax purposes and is subject to German corporate income
taxes.





German
income taxes are accounted for under FASB ASC 740, Income Taxes, which requires
an assets and liabilities approach to financial accounting and reporting for
deferred income taxes. Deferred income taxes and liabilities are computed for
differences between financial statement and tax bases of assets and liabilities
that result in taxable or deductible amounts in the future based on enacted laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances may be established to reduce
deferred taxes to the amount expected to be realized. We had no deferred taxes
as of September 30, 2010 and December 31, 2009.





We are
subject to foreign income taxes in Cyprus and Germany. Accordingly, all tax
years since inception are still subject to audit by the taxing authorities in
those jurisdictions. Our AHTS SPVs are subject to the tonnage tax regime in
Germany, which results in the AHTS SPVs being taxed on the net tonnage of the
AHTS vessels rather than the income generated in the AHTS SPVs.





Our
policy is to recognize potential interest and penalties related to income tax
matters in income tax expense. We believe we have appropriate support for the
income tax positions taken and to be taken on our income tax returns and that
our accruals for tax liabilities are adequate for all open years based on an
assessment of many factors, including past experience and interpretations of tax
law applied to the facts of each matter.







Recent
Accounting Pronouncements





In
October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic
605)—Multiple-Deliverable Revenue Arrangements, which amends ASC 605,
Revenue Recognition, to
require companies to allocate revenue in multiple-element arrangements based on
an element’s estimated selling price if vendor-specific or other third-party
evidence of value is not available. ASU 2009-13 is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Earlier application is permitted. The
adoption of this ASU is not expected to have a material impact on the
Partnership’s financial position, results of operations or cash
flows.


14


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TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





2.
    Maritime Vessels





As of
September 30, 2010, the construction and delivery of all nine AHTS vessels which
we committed to purchase was complete. The cost of each AHTS vessel ranged from
$50,724,710 (EUR 37,264,700) to $59,300,313 (EUR 43,564,732) for a total
acquisition cost of $497,629,060 (EUR 365,581,149). Under the contracts,
installments were due upon certain milestones being met during the construction.
Approximately 30% of the total construction costs required deposits, some of
which were funded with equity while others were funded through draws on our
former credit facility with Berenberg Bank, loans from Reederei Hartmann and
their affiliates, and our Senior Loan. Amounts drawn on our Senior Loan required
either that each AHTS SPV be fully funded based on the capital as called for in
the AHTS SPV company agreements, or provision of a guarantee acceptable to
Nord/LB. A guarantee from Reederei Hartmann, our primary non-controlling
interest holder and the 25% owner of the three AHTS SPVs of FLTC Fund I,
(“Hartmann Guarantee”) in the amount of $45,932,786 (EUR 32,046,875) was
outstanding at December 31, 2009. There is no outstanding amount under the
Hartmann Guarantee at September 30, 2010. As of September 30, 2010 and December
31, 2009, we incurred $535,278,994 and $291,543,002, respectively, in connection
with the acquisition of the AHTS vessels and on board equipment.





In
addition to our AHTS vessels and our interests in the mini-bulkers, we entered
into an agreement related to the potential acquisition of a chemical tanker,
which would have been owned by Kronos Shipping I, Ltd. (“Kronos”). On November
13, 2007, III to I IMS Holdings, LLC (“IMS Holdings”), the sole shareholder of
our general partner, entered into a Memorandum of Agreement (“MOA”) with the
Schulte Group relating to the acquisition of the chemical tanker. Pursuant to
the MOA, IMS Holdings placed an order for the chemical tanker through the
Schulte Group for the purchase price of $41,500,000 to be paid in five equal
installments. The Schulte Group agreed to loan IMS Holdings up to $8,300,000 for
the first installment payment (“Schulte Group Facility”) and to facilitate a
bank guarantee for the second installment payment of $8,300,000. The Schulte
Group formed Anthos Shipping Co. Limited (“Anthos”), a Cyprus SPV, to own the
chemical tanker. The equity of Anthos was to be assigned to Kronos upon
repayment of the loan, retirement of the bank guarantee and payment of all fees
due to the Schulte Group. Kronos was not formed at the time the MOA was signed;
therefore, the chemical tanker transaction was undertaken through an affiliate
of IMS Holdings, IMS Capital Partners, LLC (“IMS Capital Partners”) on behalf of
Kronos.





Effective
April 2009, we entered into an agreement whereby all of the rights retained by
IMS Capital Partners and IMS Holdings with respect to the chemical tanker
pursuant to the MOA between IMS Holdings and Schulte Group were transferred to
Kronos, the new obligor under an amended version of the MOA between Kronos and
Conway Shipping I, Ltd (“Amended MOA”). As consideration for and to give effect
to this transfer, we assigned the receivables from IMS Holdings, through which
the transaction was undertaken, to IMS Capital Partners in exchange for the
consent of IMS Capital Partners to the execution of the Amended MOA. This amount
was credited by Kronos as additional paid in capital, and Kronos accepted the
rights to the chemical tanker pursuant to the Amended MOA. The outcome left
Kronos as the sole holder of all rights and obligations with respect to the
potential acquisition of the chemical tanker and resulted in IMS Capital
Partners and IMS Holdings each holding directly offsetting note obligations. By
entering into a Note Cancellation Agreement, the note obligations between IMS
Holdings and IMS Capital Partners were terminated.


15


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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





In light
of the global downturn in the economy and the resulting decrease in charter
rates for chemical tankers and decreases in the value of similar vessels, on
April 9, 2010, we elected to abandon our option to purchase the chemical tanker.
We recognized an impairment to the deposit on asset acquisition on our balance
sheet as of December 31, 2009 to reduce the carrying value of this asset,
resulting in the recognition of a loss on impairment of $9,874,907. On April 9,
2010, we abandoned our option to acquire the tanker, and under the terms of the
Amended MOA, we became subject to the $3,000,000 in liquidated damages and the
principal balance of $5,300,000 due under the facility was extinguished, and we
therefore recognized a gain on the extinguishment of debt of $5,300,000. The
result is a net loss between these two events of approximately $4,574,907, which
in the end represents liquidating damages of $3,000,000, plus the loss of our
capitalized costs approximating $1,574,907. In addition, we recognized interest
expense on the Schulte Group Facility for the period ended September 30, 2010
totaling $62,946.





Since
that time, we have undertaken a review of the Schulte Group’s role in the
acquisition of the tanker. This review includes a review of their contractual
responsibilities with respect to efforts to achieve pricing for the tanker
consistent with market fluctuations, and their construction oversight for our
vessels and the other pool vessels to assure that the shipyard was in a position
to timely fulfill its responsibilities under the shipbuilding contracts, among
other items. Management is reviewing all options available to us should we
determine that further action is required against either the Schulte Group,
Conway Shipping I, Ltd, or the Hanseatic Tanker Pool.







3.
    Investment in Unconsolidated Entities





During
2007, we purchased a 49% interest in two additional SPVs, Hesse Schiffahrts GmbH
& Co. MS “Markasit” KG and ATL Reederei GmbH & Co. MS “Larensediep” KG,
each holding a single mini-bulker. The equity investment made in each SPV was
$2,022,450 (EUR 1,500,000) and $2,161,650 (EUR 1,500,000), respectively, at the
exchange rate on the date the commitments were funded. Permanent financing at
the SPV level amounting to approximately 70% of the vessel cost for each vessel
was put in place upon vessel delivery. The mini-bulkers are merchant ships
specially designed to transport bulk cargo such as grains, fertilizer, quick
lime, soda ash, forest and paper products and cement in their cargo holds. The
mini-bulkers began operations in August and December 2007, respectively, and
currently operate in liner services between the Baltic area and Northern Spain,
Portugal, Mediterranean Sea, Greece, Turkey and Israel where the operator has
established long-term partners.





These
investments are accounted for under the equity method. As such, assets,
liabilities and results of operations are not consolidated with our operations.
Rather, the net investment in the mini-bulker SPVs is presented on our
consolidated balance sheet in investment in unconsolidated entities as a single
line item and includes our equity contributions, distributions and interest in
the income or loss of each SPV. The results of operations for the mini-bulkers
SPVs for the given period are presented on our consolidated statements of
operations in equity in loss of unconsolidated entities.


16


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TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





The
following presents summarized financial information for the unconsolidated
entities, in dollars:





September 30,
                    
                    
                    December 31,2010
                    
                    
                    2009Assets
                    
                    $
                    24,680,218
                    
                    
                    $
                    24,901,430Liabilities
                    
                    $
                    20,028,355
                    
                    
                    $
                    18,722,777Equity
                    
                    
                    4,651,863
                    
                    
                    
                    6,178,653Total
      liabilities and equity
                    
                    $
                    24,680,218
                    
                    
                    $
                    24,901,430





Three Months Ended September 30,
                
                
                Nine Months Ended September 30,2010
                
                
                2009
                
                
                2010
                
                
                2009For
      the PeriodRevenue
                
                $
                980,351
                
                
                $
                1,909,989
                
                
                $
                5,470,367
                
                
                $
                4,944,435Expenses
                
                
                (1,567,139
                )
                
                
                (2,491,411
                )
                
                
                (6,646,775
                )
                
                
                (6,156,529
                )Net
      loss
                
                $
                (586,788
                )
                
                $
                (581,422
                )
                
                $
                (1,176,408
                )
                
                $
                (1,212,094
                )Interest
      in net loss of unconsolidated entities
                
                $
                (287,570
                )
                
                $
                (284,897
                )
                
                $
                (576,484
                )
                
                $
                (593,926
                )





The
functional currency of the mini-bulker SPVs is the EUR. The financial statements
above were translated from EUR to USD with the balance sheet translated at the
exchange rate at the balance sheet date and the income statement translated at
the weighted-average exchange rate for the period. The equity accounts were
translated at historical rates. The investment in unconsolidated entities on our
consolidated balance sheet was translated at the exchange rate at the balance
sheet date.





The
difference of $47,588 between the amount at which the investment is reflected on
our consolidated balance sheet as of September 30, 2010, $2,231,825, and 49% of
the equity shown on the financial information above, $2,279,413, is related to
the difference in the rates utilized to translate the equity accounts and the
investment in unconsolidated entities on our consolidated balance sheet at
September 30, 2010.





For the
period ended December 31, 2009, the difference of $50,108 between the amount at
which the investment is reflected on our consolidated balance sheet as of
December 31, 2009, $2,977,432, and 49% of the equity shown on the financial
information above, $3,027,540, is related to the difference in the rates
utilized to translate the equity accounts and the investment in unconsolidated
entities on our consolidated balance sheet at December 31,
2009.


17


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TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





4.
    Long-Term Debt




September 30,
                    
                    
                    December 31,2010
                    
                    
                    2009RHKG
      Loan Agreements
                    
                    $
                    31,008,136
                    
                    
                    $
                    7,617,990Hartmann
      Loan Agreement
                    
                    
                    9,011,144
                    
                    
                    
                    -Hartmann
      Asia Agreement
                    
                    
                    6,414,199
                    
                    
                    
                    -Nord/LB
      Facility
                    
                    
                    408,885,806
                    
                    
                    
                    145,468,080Schulte
      Group Facility
                    
                    
                    -
                    
                    
                    
                    5,300,000Total
      debt
                    
                    
                    455,319,285
                    
                    
                    
                    158,386,070Current
      portion of long-term debt
                    
                    
                    (35,779,986
                    )
                    
                    
                    (17,858,391
                    )Total
      debt classified as long-term
                    
                    $
                    419,539,299
                    
                    
                    $
                    140,527,679





German Subsidiary
Loans


RHKG
Loan Agreements





In late
January 2010 and in March 2010, our German Subsidiary entered into four loan
agreements with Reederei Hartmann, which is the primary non-controlling interest
holder of our AHTS SPVs (the “RHKG Loan Agreements”). Each of the individual
agreements is separately related to a corresponding AHTS SPV, and provides for
loans (“RHKG Loans”) equal to the remaining amount of capital outstanding from
our German Subsidiary to the AHTS SPV to which the agreement relates. The
execution of the agreements and the subsequent recognition of the contribution
of capital by the AHTS SPV results in our satisfying the capital contribution in
the full amount called for under the company agreement of the respective AHTS
SPVs.





The loan
agreement for the AHTS SPV Isle of Baltrum differs slightly from the others in
that the event giving rise to our liability is the assumption of the AHTS SPV’s
liability to Reederei Hartmann in the amount of $7,752,459 (EUR 5,315,000) as of
October 2, 2009, in exchange for being credited with making a capital
contribution to Isle of Baltrum in such amount. The original proceeds are stated
below:





Borrower
                        
                        AHTS SPV
                          Associated with
                          Loan
                        
                        Date of Loan
                        
                        EUR
                        
                        
                        Rate
                        
                        
                        USDSCMP
      GmbH
                        
                        Isle
      of Baltrum
                        
                        October
      2, 2009
                        
                        
                        5,315,000
                        
                        
                        
                        1.45860
                        
                        
                        $
                        7,752,459SCMP
      GmbH
                        
                        Isle
      of Langeoog
                        
                        February
      10, 2010
                        
                        
                        5,350,000
                        
                        
                        
                        1.37180
                        
                        
                        
                        7,339,130SCMP
      GmbH
                        
                        Isle
      of Amrum
                        
                        March
      5, 2010
                        
                        
                        6,050,000
                        
                        
                        
                        1.36300
                        
                        
                        
                        8,246,150SCMP
      GmbH
                        
                        Isle
      of Wangerooge
                        
                        March
      5, 2010
                        
                        
                        6,065,000
                        
                        
                        
                        1.36300
                        
                        
                        
                        8,266,59522,780,000
                        
                        
                        
                        
                        
                        
                        $
                        31,604,334





The RHKG
Loan Agreements mature five years from the date of signing. The agreements call
for interest to be calculated at 6% per annum, due annually at each anniversary
date of signing. There is no penalty for pre-payment of all or any portion of
the loans prior to the end of the respective loan periods. The terms of the
agreements include the granting of a security interest in our ownership interest
in the corresponding AHTS SPV, and in the dividends from the AHTS SPV arising
from the pro-rata percentage of the loan amount as compared to our total share
capital.





We are
subject to various warranties, representations, and covenants under the RHKG
Loan Agreements, such as limitations on our entering into asset dispositions or
restructuring arrangements unreasonably detrimental to Reederei Hartmann’s
security interest in the respective AHTS SPV, and the reserving of distributions
received from the respective AHTS SPV for repayment of the RHKG Loan
Agreements.


18


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TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





In
connection with each of the loans from RHKG with respect Isle of Langeoog, Isle
of Amrum, and Isle of Wangerooge, RHKG obtained the funds for their loan to our
German Subsidiary pursuant to a loan on nearly identical terms from Fincantieri,
the shipyard constructing the vessels.





During
the three and nine months ended September 30, 2010, we incurred interest expense
of $451,801 (EUR 350,179) and $1,146,718 (EUR 870,705), respectively, related to
the RHKG Loan Agreements. Accrued interest of $1,293,725 (EUR 950,430) was
outstanding at September 30, 2010.





Hartmann
Loan





On June
17, 2010, our German Subsidiary entered into a loan agreement with Captain
Alfred Hartmann (“Capt. Hartmann”), who is the chairman of the board for
Hartmann AG, which is a member of the Hartmann Group (“Hartmann Loan
Agreement”). Reederei Hartmann GmbH & Co., KG and certain other members of
the Hartmann Group are the non-controlling interest holders of our AHTS SPVs,
each of which holds an AHTS vessel. Pursuant to the Hartmann Loan Agreement, our
German Subsidiary received proceeds of $8,147,896 (EUR 6,620,000). The loan
proceeds (“Hartmann Loan”) were paid to the three AHTS SPVs which had not yet
had their vessels delivered to them, and resulted in the recognition of capital
contributions from our German Subsidiary to our AHTS SPVs Isle of Sylt, Isle of
Neuwerk, and Isle of Usedom, totaling $2,338,520 (EUR 1,900,000), $2,584,680
(EUR 2,100,000), and $3,224,696 (EUR 2,620,000), respectively.





These
capital contributions allowed us to draw on the Senior Loan Facility, and as a
result, the vessels UOS Liberty and UOS Freedom were delivered on June 23 and
June 29, 2010, respectively, to our AHTS SPVs Isle of Usedom and Isle of
Neuwerk, and the vessel UOS Enterprise was delivered to our AHTS SPV Isle of
Sylt on July 2, 2010.





The
Hartmann Loan Agreement matures 5 years from the date of signing. The agreement
calls for interest to be calculated at 6% per annum, due annually at the
anniversary of the date of signing. There is no penalty for pre-payment of all
or any portion of the loan prior to the end of the loan period. The terms of the
agreement include the granting of a security interest in our ownership interest
in the corresponding AHTS SPVs, and in the dividends from the AHTS SPVs arising
from the pro-rata percentage of the loan amount as compared to our total share
capital.





We are
subject to various warranties, representations, and covenants under the Hartmann
Loan Agreement, such as limitations on our entering into asset dispositions or
restructuring arrangements unreasonably detrimental to Capt. Hartmann’s security
interest in the AHTS SPVs, and the reserving of distributions received from an
involved AHTS SPV for repayment of the Hartmann Loan Agreement.





During
the three and nine months ended September 30, 2010, we incurred interest expense
of $130,964 (EUR 101,507) and $152,574 (EUR115,850). Accrued interest of
$157,695 (EUR 115,850) was outstanding at September 30, 2010.





AHTS SPV
Loans


Hartmann
Asia Loan Agreement





On August
31, 2010, our AHTS SPV Isle of Usedom entered into a loan agreement (“Hartmann
Asia Loan Agreement”) with Hartmann Asia Holding PTE Ltd (“Hartmann Asia”), a
member of the Hartmann Group and an affiliate of the non-controlling interest
holders of our AHTS SPVs. Pursuant to the Hartmann Asia Loan Agreement, Hartmann
Asia loaned a total of $6,000,000 to Usedom. Related to the Hartmann Asia Loan
Agreement, an inter-creditor agreement was also entered into between our AHTS
SPV Isle of Usedom, Hartmann Asia, and Nord/LB on August 31, 2010, confirming
the Hartmann Asia Loan Agreement as subordinate to the Senior Loan. On September
27, 2010, Addendum No. 1 to the Hartmann Asia Loan Agreement was entered into,
which increased the loan by $3,400,000, to a total of
$9,400,000.


19


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TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





The loan
proceeds will fund operating activities, including interest and redemption
payments to Nord/LB, of the AHTS SPV Isle of Usedom, as well as providing funds
for similar purposes to the other either AHTS SPVs via loans between the AHTS
SPVs. The agreement calls for interest to be calculated at 6% per annum. There
is no penalty for pre-payment of all or any portion of the loan prior to the end
of the loan period. See Note 10 for more information.





During
the three and nine months ended September 30, 2010, we incurred interest expense
of $30,472 (EUR 23,618). Accrued interest of $32,149 (EUR 23,618) was
outstanding at September 30, 2010.





Nord/LB
Facility





On
December 19, 2008, we entered into a $572,479,884 (EUR 420,570,000) Senior Loan
with Nord/LB as administrative agent, with a term of 12 years from the delivery
of each AHTS vessel. The proceeds from the loan were initially to be used to
fund preconstruction costs (“Pre-Delivery Facility”), outstanding balances due
to the shipyard at delivery and working capital requirements of each AHTS SPV. A
post-delivery credit facility (“Revolving Credit Facility”) in the amount of
$114,495,977 (EUR 84,114,000) can also be used to extend the Senior Loan from 12
to 15 years. However, in no case can the total loans be in excess of 75% of the
aggregate costs of all ships covered by the Senior Loan.





The
Senior Loan is a fleet financing arrangement which covers all our AHTS vessels
plus the three AHTS vessels purchased or being purchased by FLTC Fund I. The 12
ships serve individually and collectively as the collateral for the Senior Loan,
and the AHTS SPVs have joint and several liability. In connection with the
Senior Loan, a commitment fee of 0.20% to 0.45% is due semi-annually in arrears
as determined by our bank internal rating class based on the unused Senior Loan
balance and the elapsed days within the year. An agency fee of $13,612 (EUR
10,000) per ship was due each year payable at the end of each quarter until the
delivery of the applicable ship. After the delivery of the applicable AHTS
vessel, the agency fee, payable quarterly, is $6,806 (EUR 5,000) per year per
vessel until the Senior Loan is paid in full. There is also a financial
guarantee for up to 70% of the loan balance issued by S.P.A. of Roma, Italy,
which is the Italian export credit and reinsurance agency (“SACE”).





Interest
on the borrowings is based upon the EURIBOR, the Euro Interbank Offered Rate.
For the portion of the Senior Loan not guaranteed by SACE, the applicable
interest rate is EURIBOR plus 1.375% per annum plus a fixed funds cost to be
determined prior to each drawdown. For the portion of the Senior Loan that is
guaranteed by SACE, the applicable interest rate is EURIBOR plus 1.375% per
annum. With respect to the Revolving Credit Facility, the applicable interest
rate is (i) EURIBOR plus 1.600% per annum or (ii) the lenders’ funding costs, as
conclusively to be agreed and determined by the lenders, plus 1.600% per annum.
Upon the fifth anniversary of the Senior Loan, each interest rate will be
subject to renegotiation. Interest incurred before the delivery of each AHTS
vessel will be rolled into the loan balance of the corresponding tranche of the
Senior Loan until ship delivery up to a maximum of $1,361,200 (EUR 1,000,000).
If interest incurred exceeds $1,361,200 (EUR 1,000,000), the excess interest
will be due at each interest payment date which can be every three to six
months.





On
January 31, 2009, in order to comply with the conditions of the Senior Loan, we
passed a Resolution increasing the total share capital of one of our AHTS SPVs,
Isle of Usedom, from $17,378,550 (EUR 13,500,000) to $48,917,400 (EUR
38,000,000) based on the exchange rate at January 31, 2009. This resulted in an
increase in our capital commitment to Isle of Usedom from $13,782,150 (EUR
10,125,000) to $38,794,200 (EUR 28,500,000), based on current exchange
rates.





20




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TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)




The
drawdowns on the Senior Loan to date as of September 30, 2010 are as
follows:





AHTS SPV
                  AHTS Vessel
                  Date of Drawdown
                  
                  ProceedsMS
      Juist
                  UOS
      Atlantis
                  February
      25, 2009
                  
                  $
                  44,689,067MS
      Norderney
                  UOS
      Challenger
                  May
      25, 2009
                  
                  $
                  49,080,519Isle
      of Baltrum
                  UOS
      Columbia
                  October
      2, 2009
                  
                  $
                  51,120,284Isle
      of Langeoog
                  UOS
      Discovery
                  February
      15, 2010
                  
                  $
                  47,790,771Isle
      of Amrum
                  UOS
      Endeavour
                  March
      10, 2010
                  
                  $
                  47,629,553Isle
      of Wangerooge
                  UOS
      Explorer
                  March
      12, 2010
                  
                  $
                  47,871,380Isle
      of Neuwerk
                  UOS
      Freedom
                  June
      25, 2010
                  
                  $
                  43,175,015Isle
      of Usedom
                  UOS
      Liberty
                  June
      22, 2010
                  
                  $
                  43,413,338Isle
      of Sylt
                  UOS
      Enterprise
                  July
      1, 2010
                  
                  $
                  42,936,692





On
October 28, 2010, Nord/LB and ATL Offshore GmbH & Co., which acts as the
personally liable partner of each of our AHTS SPVs, entered into an addendum
(“Addendum No. 1”) to our Nord/LB Senior Loan. The terms of Addendum No. 1 were
effective as of September 17, 2010.





Among
other changes, Addendum No. 1 allows our nine AHTS SPVs and the three AHTS SPVs
of FLTC Fund I, which are the co-borrowers with joint and several liability
under the Senior Loan, to make loans to one another for the purpose of covering
any liquidity shortfalls of the AHTS SPVs. Such intra AHTS SPV loans are also to
be used for the purpose of financing any shortfall in the actual amount
available under the last tranche of the Senior Loan, and the amount required to
allow one of our affiliate’s AHTS SPVs to take delivery of the last AHTS
vessel.





In
addition, Addendum No. 1 adds a requirement that, in the event the average fair
market value of the three vessels to be acquired by the SPVs of our affiliate is
less than the average fair market value of the vessels held by our nine AHTS
SPVs, would require a portion of the senior loans applicable to the AHTS SPVs of
our affiliate to be repaid or additional security acceptable to Nord/LB to be
provided, prior to any distributions being permitted from any of the AHTS
SPVs.





Addendum
No. 1 also changes a clause in the Nord/LB Loan, to remove the restriction
previously present which limited the ownership of RHKG to 25%, and required our
ownership to remain at 75%.





On
September 21, 2010, a KG owned by FLTC Fund I accepted delivery of one AHTS
vessel. Related to the delivery of this vessel, FLTC Fund I accepted a drawdown
on the Senior Loan of $45,758,016 (EUR 35,047,500) on September 20,
2010.





At
September 30, 2010 and December 31, 2009, a total of $455,201,020 (EUR
334,411,563) and $145,468,080 (EUR 101,491,719), respectively, was outstanding
under the Senior Loan.  Of this amount, $47,706,657 (EUR 35,047,500)
is related to the AHTS SPVs of FLTC Fund I, and the remaining amount of
$407,494,363 (EUR 299,364,063) is related to our AHTS SPVs.  This
amount bears an effective interest rate of 2.736% and 2.791% as of September 30,
2010 and December 31, 2009, respectively.  The outstanding balance
will be due in full in June 2022.  During the three and nine months
ended September 30, 2010 and 2009, we incurred interest of $2,620,051 (EUR
2,030,732) and $5,646,796 (EUR 4,287,620) and $784,842 (EUR 549,147) and
$1,474,323 (EUR 1,078,589), respectively, related to the drawdowns on the Senior
Loan.  Accrued interest of $1,207,868 (EUR 887,355) and $590,725 (EUR
412,143) was outstanding at September 30, 2010 and December 31, 2009,
respectively.





21


III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)


The
following presents summarized combined financial information for the three AHTS
SPVs of FLTC Fund I:


September 30,2010Assets
                  
                  $
                  125,108,378Liabilities
                  
                  $
                  87,617,169Equity
                  
                  
                  37,491,209Total
      liabilities and equity
                  
                  $
                  125,108,378





Nine Months Ended
                    September 30,2010Revenue
                  
                  $
                  -Expenses
                  
                  
                  (10,289,189
                  )Net
      loss
                  
                  $
                  (10,289,189
                  )





During
the three months ended September 30, 2010, we elected to draw on the Revolving
Credit Facility, which allows us to make draws at each quarterly principal
redemption date to result in a net principal payment based on a loan
amortization of 15 years versus the 12 years under the Senior
Loan.  At September 30, 2010, a total of $1,391,444 (EUR 1,022,219)
was outstanding under the Revolving Credit Facility with an effective interest
rate of 3.295%.  The outstanding balance will be due in full in June
2025.  During the three and nine months ended September 30, 2010, we
incurred interest of $2,969 (EUR 2,301) related to the drawdowns on the
Revolving Credit Facility.  Accrued interest of $3,132 (EUR 2,301) was
outstanding at September 30, 2010.





We are
subject to various covenants for the duration of the Senior Loan, associated,
for example, with the amount of capital infusions from outside investors into
the AHTS SPVs, limits on additional financing, restrictions of cargo and
weapons, directives regarding the structure and duration of charters related to
the AHTS vessels, and certain restrictions on distributions.





A summary
of the total interest incurred, capitalized and expensed is shown
below:





Three Months Ended
                    
                    
                    Nine Months EndedSeptember 30,
                    
                    
                    September 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Interest
      capitalized to vessel construction in progress:Beginning
      of period
                    
                    $
                    1,083,175
                    
                    
                    $
                    2,872,169
                    
                    
                    $
                    4,581,469
                    
                    
                    $
                    3,448,928Currency
      translation change related to beginning balance
                    
                    
                    612,174
                    
                    
                    
                    133,093
                    
                    
                    
                    (314,372
                    )
                    
                    
                    121,105Interest
      incurred
                    
                    
                    6,522,133
                    
                    
                    
                    1,360,842
                    
                    
                    
                    13,991,935
                    
                    
                    
                    3,795,361Interest
      expense
                    
                    
                    (6,284,217
                    )
                    
                    
                    (563,937
                    )
                    
                    
                    (12,180,947
                    )
                    
                    
                    (2,404,448
                    )Amount
      reclassed to delivered vessels
                    
                    
                    (1,933,265
                    )
                    
                    
                    (44,873
                    )
                    
                    
                    (6,078,085
                    )
                    
                    
                    (1,203,652
                    )End
      of period
                    
                    $
                    -
                    
                    
                    $
                    3,757,294
                    
                    
                    $
                    -
                    
                    
                    $
                    3,757,294Interest
      paid
                    
                    $
                    5,381,292
                    
                    
                    $
                    1,336,824
                    
                    
                    $
                    10,358,319
                    
                    
                    $
                    3,177,335Interest
      added to principal on borrowings
                    
                    $
                    -
                    
                    
                    $
                    24,017
                    
                    
                    $
                    -
                    
                    
                    $
                    618,026


22


III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





5.      Derivative
Instruments





We are
exposed to global market risks, including the effect of changes in interest
rates and foreign currency fluctuations.  Foreign currency denominated
debt and derivative instruments are used to mitigate the impact of these
changes.  We do not use derivatives or hedges with a level of
complexity or with a risk higher than the exposures to be hedged and do not hold
or issue derivatives for trading purposes.





On March
6, 2009 and March 11, 2009, respectively, two of our AHTS SPVs, MS Juist and MS
Norderney, entered into forward currency exchange contracts for a portion of
their future expected USD charter revenue, to hedge the currency risk related to
expenses and debt redemption that are denominated in EUR.  The
original notional amount of these forward currency exchange contracts was
$10,800,000 and $7,500,000, respectively.  The contract for MS Juist
covered the one year period beginning May 26, 2009 through May 26, 2010 and the
contract for MS Norderney covered the period from May 20, 2009 through November
26, 2009.  These contracts were not designated for hedge accounting
under FASB ASC 815, Derivatives and
Hedging.





Between
March 27, 2009 and May 25, 2009, our AHTS SPVs entered into interest rate swap
agreements, which began between February 2010 and March 2010 and expire between
February 2019 and April 2020, in order to hedge the risk of rising interest
rates related to the Senior Loan, which is based on the three-month EURIBOR
rate.  The total notional value of these agreements is $408,488,251
(EUR 300,094,219) at September 30, 2010.  Through these agreements, we
have effectively fixed our debt service cost related to our AHTS SPVs for the
period covered by the agreement at rates between 3.465% and 3.885% plus the
applicable margin and funding costs.  By entering into these interest
rate swap agreements, we are protecting against interest rate fluctuations on
the variable three-month EURIBOR rate component of the outstanding borrowings
under our Senior Loan which matures in June 2022.  The interest rate
swaps contain no credit-risk-related contingent features and are not
collateralized.  These instruments are not designated for hedge
accounting under FASB ASC 815,
Derivatives and Hedging.





During
the current year, seven of our AHTS SPVs amended their former interest rate swap
agreements, to adjust the start dates to coincide with the delivery dates of the
vessels.





May 25, 2009 Agreements
                        
                        New AgreementsStart Date
                        
                        End Date
                        
                        Notional Amt.
                        
                        
                        Fixed Rate
                        
                        Start Date
                        
                        End Date
                        
                        Notional Amt.
                        
                        
                        Fixed RateMS
      Baltrum
                        03/30/10
                        
                        09/30/19
                        
                        
                        33,587,188
                        
                        
                        
                        3.705%
                        
                        04/01/10
                        
                        10/01/19
                        
                        
                        33,587,188
                        
                        
                        
                        3.705%MS
      Langeoog
                        05/31/10
                        
                        11/30/19
                        
                        
                        33,587,188
                        
                        
                        
                        3.750%
                        
                        05/17/10
                        
                        11/15/19
                        
                        
                        33,587,188
                        
                        
                        
                        3.748%MS
      Amrum
                        03/31/10
                        
                        12/31/19
                        
                        
                        34,317,344
                        
                        
                        
                        3.720%
                        
                        03/10/10
                        
                        12/10/19
                        
                        
                        34,317,344
                        
                        
                        
                        3.717%MS
      Sylt
                        07/15/10
                        
                        04/15/20
                        
                        
                        34,317,344
                        
                        
                        
                        3.865%
                        
                        07/15/10
                        
                        04/01/20
                        
                        
                        35,047,500
                        
                        
                        
                        3.865%MS
      Wangerooge
                        04/30/10
                        
                        01/31/20
                        
                        
                        34,317,344
                        
                        
                        
                        3.760%
                        
                        03/12/10
                        
                        12/12/19
                        
                        
                        34,317,344
                        
                        
                        
                        3.715%MS
      Neuwerk
                        06/30/10
                        
                        03/31/20
                        
                        
                        34,317,344
                        
                        
                        
                        3.845%
                        
                        07/13/10
                        
                        03/25/20
                        
                        
                        35,047,500
                        
                        
                        
                        3.845%MS
      Usedom
                        07/30/10
                        
                        04/30/20
                        
                        
                        34,317,344
                        
                        
                        
                        3.885%
                        
                        07/30/10
                        
                        03/23/20
                        
                        
                        35,047,500
                        
                        
                        
                        3.885%





On May 11
and May 22, 2009, our AHTS SPVs entered into forward currency exchange contracts
for a portion of their future expected USD charter revenue, to hedge the
currency risk related to expenses and debt redemption that are denominated in
EUR.  The forward currency exchange contracts, which have been
designated for hedge accounting under FASB ASC 815, Derivatives and Hedging, have
a notional value totaling $81,000,000 at September 30, 2010.  The
contracts run from December 2009 through December 2011.





On March
3, 2010, our AHTS SPVs entered into forward exchange contracts to adjust for
anticipated currency needs between USD and EUR.  The notional value of
the contracts totals $20,250,000 at September 30, 2010.  The contracts
run from April 2010 through December 2011.  These contracts are not
designated for hedge accounting under FASB ASC 815, Derivatives and
Hedging.


23


III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




SEPTEMBER
30, 2010




(Unaudited)





Derivative
instruments, including those classified as hedges, are reported as either assets
or liabilities at their individual fair values, and the amounts are classified
as short term where appropriate. The offset is dependent upon the nature of the
derivative, and whether or not it is designated as a hedge. The change in the
fair value of our interest rate swaps, none of which are classified as hedges,
is included in loss on interest rate swaps on the consolidated statement of
operations. Changes in the value of forward currency exchange contracts not
classified as hedges are offset to foreign currency transaction gain (loss) on
the consolidated statement of operations. Changes in the fair value of forward
currency exchange contracts classified as hedges are recognized as gains or
losses. Such gains or losses are included in foreign currency transaction gain
(loss) on the consolidated statement of operations to the extent that testing
shows them to be ineffective, with the effective portion of the fair value gains
or losses recorded as part of accumulated other comprehensive income on the
consolidated balance sheet. For purposes of testing our derivatives classified
as hedges, no portion of the contracts was excluded from testing.





The fair
value of our derivative instruments as of September 30, 2010 is as
follows:





Fair Value
                
                
                Fair Value
                
                
                Fair Value
                
                
                Fair Valueof Short-Term
                
                
                of Derivative
                
                
                of Short-Term
                
                
                of DerivativeDerivative
                
                
                Assets, net of
                
                
                Derivative
                
                
                Liabilities, net ofDerivatives by hedge designation
                
                Assets
                
                
                short-term portion
                
                
                Liabilities
                
                
                short-term portionDesignated
      as hedging instruments:Forward
      currency exchange contracts
                
                $
                -
                
                
                $
                -
                
                
                $
                368,811
                
                
                $
                174,846Not
      designated as hedging instruments:Forward
      currency exchange contracts
                
                
                41,482
                
                
                
                35,943
                
                
                
                -
                
                
                
                -Interest
      rate swap agreements
                
                
                -
                
                
                
                -
                
                
                
                10,675,327
                
                
                
                21,417,093Total
      derivatives
                
                $
                41,482
                
                
                $
                35,943
                
                
                $
                11,044,138
                
                
                $
                21,591,939





The fair
value of our derivative instruments as of December 31, 2009 is as
follows:





Fair Value
                
                
                Fair Value
                
                
                Fair Value
                
                
                Fair Valueof Short-Term
                
                
                of Derivative
                
                
                of Short-Term
                
                
                of DerivativeDerivative
                
                
                Assets, net of
                
                
                Derivative
                
                
                Liabilities, net ofDerivatives by hedge designation
                
                Assets
                
                
                short-term portion
                
                
                Liabilities
                
                
                short-term portionDesignated
      as hedging instruments:Forward
      currency exchange contracts
                
                $
                2,271,928
                
                
                $
                2,797,433
                
                
                $
                -
                
                
                $
                -Not
      designated as hedging instruments:Forward
      currency exchange contracts
                
                
                501,892
                
                
                
                -
                
                
                
                -
                
                
                
                -Interest
      rate swap agreements
                
                
                -
                
                
                
                -
                
                
                
                4,522,274
                
                
                
                5,007,963Total
      derivatives
                
                $
                2,773,820
                
                
                $
                2,797,433
                
                
                $
                4,522,274
                
                
                $
                5,007,963





24




III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER
30, 2010
  (Unaudited)
   
 Derivatives by hedge
                        
                        Classification of gains
                        
                        For the Three Months Ended September 30,
                        
                        
                        For the Nine Months Ended September 30,designation
                        
                        (losses)
                        
                        2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Designated
      ashedging
      instruments:Cash
      flow hedges:Forward
      currency exchange contracts
                        
                        Foreign
      currency transaction gain (loss)
                        
                        $
                        (1,359,533
                        )
                        
                        $
                        (12,075
                        )
                        
                        $
                        (1,964,436
                        )
                        
                        $
                        (86,543
                        )Not
      designated as hedging instruments:Forward
      currency exchange contracts
                        
                        Foreign
      currency transaction gain (loss)
                        
                        $
                        (2,413,423
                        )
                        
                        $
                        524,126
                        
                        
                        $
                        267,470
                        
                        
                        $
                        2,042,609Interest
      rate swap agreements - Unmatured
                        
                        Loss
      on interest rate swaps
                        
                        $
                        (3,375,998
                        )
                        
                        $
                        (6,199,724
                        )
                        
                        $
                        (22,293,395
                        )
                        
                        $
                        (9,767,863
                        )Interest
      rate swap agreements - Close-to-Maturity and Matured
                        
                        Interest
      expense
                        
                        $
                        (2,828,824
                        )
                        
                        $
                        -
                        
                        
                        $
                        (4,582,883
                        )
                        
                        $
                        -
 
 For the
three and nine months ended September 30, 2010, the foreign currency transaction
loss related to forward currency exchange contracts designated as cash flow
hedges was $1,359,533 and $1,964,436, respectively, of which a loss of $69,618
and a gain of $7,072 is related to the fair value of the ineffective portion of
the forward currency exchange contracts and by a loss of $1,289,915 and
$1,971,508 related to matured contracts. As the contracts mature, the fair value
amounts related to the effective portion of the unmatured foreign currency
forward exchange contracts, which are currently recorded as accumulated other
comprehensive income, will be recorded to our consolidated statement of
operations under foreign currency transaction gain (loss). The current effective
loss portion of $352,748 (EUR 259,145) is expected to be reclassified into net
income (loss) in this manner within the next twelve months.
 
 For the
three and nine months ended September 30, 2009, the foreign currency transaction
loss related to forward currency exchange contracts designated as cash flow
hedges was $12,075 and $86,543, which is related to the fair value of the
ineffective portion of the forward currency exchange contracts.
 
 For the
three and nine months ended September 30, 2010, the foreign currency transaction
gain (loss) related to derivatives not designated as hedging instruments is
($2,413,423) and $267,470, respectively. Of these amounts, a gain of $283,796
and $192,559, respectively is related the forward currency exchange contracts
not designated as hedging instruments which have matured, and the residual loss
of ($2,697,219) and gain of $74,911, respectively is due to the change in fair
value of the remaining contracts.
 
 For the
three and nine months ended September 30, 2009, the foreign currency transaction
gain related to derivatives not designated as hedging instruments is $524,126
and $2,042,609, respectively. Included in both of these amounts is a gain of
$610,339 and $806,101, which is related to the matured contracts not designated
as hedging instruments. The residual gain (loss) for the three and nine months
ended September 30, 2009 of ($86,213) and $1,236,508, respectively is due to the
fair value of the remaining contracts.
 
 6.
                Related
      Party Transactions
 
 In April
2008, we entered into an agreement, effective January 1, 2008, to retain Dental
Community Management, Inc. (“DCMI”), an entity owned in part by Jason M. Morton,
a director and the Chief Financial Officer of our general partner, to perform
administrative and professional services (“Services Agreement”). The Services
Agreement was amended and restated in June 2008 and January 2009. Pursuant to
the most recent amended and restated Services Agreement, the term of such
agreement ends on December 31, 2013 with automatic one-year renewal periods
thereafter. Under the Services Agreement, DCMI provides us various general and
administrative services, such as technical, commercial, regulatory, financial,
accounting, treasury, tax and legal staffing and related support services. In
exchange for such services, we pay a monthly fixed administrative fee of
$100,000.
  25
  III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER
30, 2010
  (Unaudited)
 
 In
November 2006, we entered into a management agreement (“Management Agreement”)
with Suresh Capital Maritime Holdings, LLC (“SCMH”), which until April 1, 2009,
held an approximate 2% ownership in our Cyprus Subsidiary. The Management
Agreement provided for a three year management fee of $4,200,000, payable in 12
quarterly installments of $350,000 each. The initial installment was paid in
October 2006. The remaining installments were due at the beginning of each
quarter commencing January 2007 and ending July 2009.
 
 Effective
January 1, 2007, the terms of the Management Agreement were amended. We entered
into a letter agreement with SCMH (“Letter Agreement”) which replaced the
Management Agreement. The Letter Agreement provided for us to advance funds as a
loan, which are unsecured, totaling $3,237,500 to SCMH on a quarterly basis. The
Letter Agreement provided for repayment of the advances with interest at a rate
equal to 5% per annum. As of September 30, 2010 and December 31, 2009, the
amount receivable from SCMH in connection with the Letter Agreement was $909,723
and $1,842,324 , respectively, including accrued interest of $251,907 and
$209,340, respectively. During the three and nine months ended September 30,
2010 and 2009, we recognized interest income of $11,707 and $42,567 and $22,669
and $67,872, respectively related to the advances to SCMH.
 
 Effective
January 1, 2009, we entered into an Amended and Restated Shareholders’ Agreement
in our Cyprus Subsidiary. As a result of this agreement, the Letter Agreement
with SCMH was terminated. The repayment terms of the outstanding advances remain
unchanged.
 
 As of
December 31, 2008, we had $4,278,164, including accrued interest of $283,164,
due from IMS Holdings resulting from short-term advances we made to IMS Holdings
relating primarily to the acquisition of the chemical tanker prior to the
formation of Kronos (the “Partnership Notes”). Each advance bore interest at 8%
with a final maturity date of December 2018. As of June 24, 2009, the amount due
from IMS Holdings was $4,238,983, including accrued interest of $361,983. The
cost basis of the investment in the chemical tanker on the financial statements
of IMS Capital Partners was $4,138,946. Therefore, $4,138,946 of the note
receivable balance, the portion related to the chemical tanker acquisition, was
transferred to IMS Capital Partners in exchange for the consent of IMS Capital
Partners to the execution of the Amended MOA, under which Kronos was the
obligor. See Note 2, Maritime Vessels, for additional information regarding our
option to purchase the chemical tanker.
 
 On March
15, 2010, an additional $31,000 was loaned by us to IMS Holdings, our general
partner. As of September 30, 2010, we had amounts receivable of $144,403,
including accrued interest income of $13,366, from IMS Holdings related to these
short-term advances. During the three and nine months ended September 30, 2010,
we recognized interest income of $2,621 and $7,364. This outstanding balance as
of September 30, 2010 is unrelated to the chemical tanker.
 
 During
October 2008, we were advanced $1,000,000 in the form of a loan from III:I
Emerging Market Partners Real Estate Investment Fund I, L.P. (“EMP Fund I”), an
affiliate of our General Partner. This loan, which is unsecured, bears interest
at a rate of 12% and matures in August 2012. In connection with this loan, we
paid a $20,000 commitment fee to EMP Fund I upon execution of the promissory
note. This fee was included in interest expense on our consolidated statement of
operations. The loan balance at September 30, 2010 and December 31, 2009 was
$449,000 and $477,500, respectively. $16,359 and $59,338 of interest was accrued
at September 30, 2010 and December 31, 2009. During the three and nine months
ended September 30, 2010 and 2009, we incurred interest of $16,359 and $50,641
and $19,688 and $71,128, respectively.
  26
  III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER
30, 2010
  (Unaudited)
 
 In May
2007, the AHTS SPVs entered into a ship management agreement with Hartmann
Offshore, an affiliate of Reederei Hartmann, the non-controlling interest owner
of the AHTS SPVs. The fees are included in vessel operating expenses. For the
three and nine months ended September 30, 2010 and 2009, we incurred $569,419
(EUR 441,341) and $1,378,251 (EUR 1,046,508) and $252,130 (EUR 176,413) and
$453,118 (EUR 331,493), respectively.
 
 The AHTS
SPVs paid technical and commercial management fees to Hartmann Offshore. These
fees are included in vessel construction in progress or vessels on our
consolidated balance sheet, and as of September 30, 2010 and December 31, 2009
were $6,124,500 (EUR 4,500,000) and $5,195,713 (EUR 3,625,000),
respectively.
 
 The AHTS
SPVs paid construction fees to Hartmann Offshore. These fees are included in
vessel construction in progress or vessels on our consolidated balance sheet,
and as of September 30, 2010 and December 31, 2009 totaled $3,062,700
(EUR2,250,000) and $2,149,950 (EUR 1,500,000), respectively.
 
 Each AHTS
SPV entered into a contract with the German Subsidiary, whereby the German
Subsidiary or its assignee would provide financial services including, but not
limited to, the procurement of equity during the building period of the relevant
AHTS vessel. Under such agreements, the German Subsidiary would have received
fees of $680,600 (EUR 500,000) payable in four equal installments, each due at
(i) the beginning of steel cutting, (ii) installation of the main engines, (iii)
launching of the vessel and (iv) delivery of the completed vessel. The German
Subsidiary subcontracted the requirement to provide these services and the right
to receive these payments to Suresh Capital Consulting & Finance Ltd.,
Maritime Funding Group LLC and Churada Investments Limited, all of which are
affiliates of SCMH. As of September 30, 2010 and December 31, 2009, we had
incurred to date $4,594,050 (EUR 3,375,000) and $3,896,784 (EUR 2,718,750),
respectively, in syndication costs. These costs are translated using historical
rates and they are included as an offset to non-controlling interest and
partners’ equity on our consolidated balance sheet.
 
 7.
                Fair
      Value of Financial
Instruments
 
 Fair
value is defined under FASB ASC 820, Fair Value Measurements and
Disclosures as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to
measure fair value under FASB ASC 820, Fair Value Measurements and
Disclosures must maximize the use of the observable inputs and minimize
the use of unobservable inputs. The standard established a fair value hierarchy
based on three levels of inputs, of which the first two are considered
observable and the last unobservable.
 
 ·
              Level
      1 - Quoted prices in active markets for identical assets or liabilities.
      These are typically obtained from real-time quotes for transactions in
      active exchange markets involving identical
  assets.
 ·
              Level
      2 - Quoted prices for similar assets and liabilities in active markets;
      quoted prices included for identical or similar assets and liabilities
      that are not active; and model-derived valuations in which all significant
      inputs and significant value drivers are observable in active markets.
      These are typically obtained from readily-available pricing sources for
      comparable instruments.
 ·
              Level
      3 - Unobservable inputs, where there is little or no market activity for
      the asset or liability. These inputs reflect the reporting entity’s own
      assumptions about the assumptions that market participants would use in
      pricing the asset or liability, based on the best information available in
      the circumstances.
 
 The
estimated fair value of cash, due from charterers, accounts payable, accrued
interest, related party receivables and payables approximate their carrying
amounts due to the relatively short period to maturity of these instruments. The
estimated fair value of all debt as of September 30, 2010 and December 31, 2009
approximated the carrying value since the draws on the Senior Loan incur
interest at a variable rate and mature every three months, and our RHKG,
Hartmann and Hartmann Asia loans were issued at fixed rates which are comparable
to rates available in the market as of September 30, 2010 given similar
collateral arrangements. The estimates presented are not necessarily indicative
of the amounts that would be realized in a current market
exchange.
  27
  III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER
30, 2010
  (Unaudited)
 
 The fair
value of the interest rate swaps and the forward currency exchange contracts
discussed in Note 5 are included in current and long-term derivative assets and
liabilities in our consolidated balance sheet. The fair value of the interest
rate swap (used for non-speculative purposes) is based on the relative fair
values of the discounted future stream of interest payments under the original
floating interest facility using rates derived based on a forward curve of the
three-month EURIBOR, upon which the terms of the Senior Loan are based, versus
the future interest payments due under the fixed rate obtained in the interest
rate swap agreement of 3.748%. The fair values of the forward currency exchange
contracts are based on the relative exchange rates per the forward currency
exchange contracts versus the forward exchange rate curve as of September 30,
2010. The fair values of the derivative instruments are determined with
reference to observable rates which are commonly quoted on a forward basis, and
are therefore classified as Level 2 items.
 
 Our
assets and liabilities as of September 30, 2010 and December 31, 2009 that are
measured at fair value on a recurring basis are summarized below (in
dollars):
 
 September 30, 2010Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3
                    
                    
                    TotalAssetsForward
      currency exchange contracts
                    
                    $
                    -
                    
                    
                    $
                    77,425
                    
                    
                    $
                    -
                    
                    
                    $
                    77,425LiabilitiesForward
      currency exchange contracts
                    
                    $
                    -
                    
                    
                    $
                    543,657
                    
                    
                    $
                    -
                    
                    
                    $
                    543,657Interest
      rate swap agreements
                    
                    $
                    -
                    
                    
                    $
                    32,092,420
                    
                    
                    $
                    -
                    
                    
                    $
                    32,092,420
 
 December 31, 2009Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3
                  
                  
                  TotalAssetsForward
      currency exchange contracts
                  
                  $
                  -
                  
                  
                  $
                  5,571,253
                  
                  
                  $
                  -
                  
                  
                  $
                  5,571,253LiabilitiesInterest
      rate swap agreements
                  
                  $
                  -
                  
                  
                  $
                  9,530,237
                  
                  
                  $
                  -
                  
                  
                  $
                  9,530,237
 
 8.
              Legal
      Proceedings
 
 We may in
the future be involved as a party to various legal proceedings, which are
incidental to the ordinary course of business.  We regularly analyze
current information and, as necessary, provide accruals for probable liabilities
on the eventual disposition of these matters.  In the opinion of
management, as of September 30, 2010, there were no threatened or pending legal
matters that would have a material impact on our consolidated results of
operations, financial position or cash flows.
  28
  III
TO I MARITIME PARTNERS CAYMAN I, L.P. AND SUBSIDIARIES
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER
30, 2010
  (Unaudited)
 
 9.
              Other
      Comprehensive Income
 
 The
components of other comprehensive income (loss) are as follows:
 
 ThreeMonthsEndedSeptember30,
                    
                    
                    NineMonthsEndedSeptember30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Unrealized
      (loss) gain on forward currency exchange contract hedge
                    
                    $
                    8,756,323
                    
                    
                    $
                    4,935,865
                    
                    
                    $
                    (5,365,321
                    )
                    
                    $
                    7,688,972Foreign
      currency translation adjustment
                    
                    
                    5,192,687
                    
                    
                    
                    2,433,472
                    
                    
                    
                    (5,406,832
                    )
                    
                    
                    3,466,111Other
      comprehensive (loss) income
                    
                    
                    13,949,010
                    
                    
                    
                    7,369,337
                    
                    
                    
                    (10,772,153
                    )
                    
                    
                    11,155,083Less
      other comprehensive loss (income) attributable to non-controlling
      interest
                    
                    
                    (4,408,608
                    )
                    
                    
                    (1,636,313
                    )
                    
                    
                    2,500,318
                    
                    
                    
                    (2,011,890
                    )Other
      comprehensive (loss) income attributable to III to I
    MaritimePartners
      Cayman I, L.P.
                    
                    $
                    9,540,402
                    
                    
                    $
                    5,733,024
                    
                    
                    $
                    (8,271,835
                    )
                    
                    $
                    9,143,193
 
 Accumulated
other comprehensive income in the partners’ equity section of the consolidated
balance sheets includes:
 
 September 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Unrealized
      (loss) income on forward currency exchange contract hedge
                  
                  $
                  (199,568
                  )
                  
                  $
                  3,824,423Foreign
      currency translation adjustment
                  
                  
                  (1,615,410
                  )
                  
                  
                  2,632,434Accumulated
      other comprehensive (loss) income
                  
                  $
                  (1,814,978
                  )
                  
                  $
                  6,456,857
 
 10.
                Subsequent
      Events
 
 On
October 12, 2010, an AHTS SPV owned by FLTC Fund I accepted delivery of the AHTS
vessel UOS Pathfinder. On October 11, 2010, FLTC Fund I accepted a drawdown on
the Senior Loan related to the upcoming delivery totaling $48,880,748 (EUR
35,047,500).
 
 On
October 27, 2010, an AHTS SPV owned by FLTC Fund I accepted delivery of the AHTS
vessel UOS Navigator, which is the last of the three AHTS vessels to be
delivered to FLTC Fund I. On October 26, 2010, FLTC Fund I accepted a drawdown
on the Senior Loan related to the upcoming delivery totaling $27,874,414 (EUR
20,042,000).
 
 On
October 25, 2010, related to the delivery of UOS Navigator to FLTC Fund I, we
made loans from our AHTS SPVs to the AHTS SPVs of FLTC Fund I in the aggregate
amount of $21,033,841 (EUR 15,063,984) in order to bring the available
borrowings under the Nord/LB Senior Loan to a net amount for each AHTS SPV
representing 75% of the aggregate investment costs of their respective AHTS
vessel acquisition.
 
 Addendum
2 to the Hartmann Asia Loan Agreement was entered into on October 27, 2010, and
increases the amount to be loaned under the Hartmann Asia Loan Agreement to
$26,400,000, providing an additional $17,000,000 in funds for the purposes
mentioned above, and extends the maturity date to January 1, 2013.
  29
  Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
 
 The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations presents our operating results for the three and nine
months ended September 30, 2010 and 2009. This report represents an update to
the more detailed and comprehensive disclosures included in our Annual Report on
Form 10-K for the year ended December 31, 2009. Accordingly, the following
discussion should be read in conjunction with the information included in our
Form 10-K filed with the Securities and Exchange Commission (“SEC”), and with
our unaudited consolidated financial statements and related notes as presented
in this Form 10-Q under Part I, Item 1. Financial Statements.
 
 The
discussion includes forward-looking statements. As such, the cautionary language
applicable to such forward-looking statements described above in Forward-Looking Statements is
incorporated by reference into this section. Forward-looking statements are
management’s best estimates, and actual results could differ substantially from
those estimates. Among the factors that could cause actual results to differ
materially are those discussed in Item 1A. Risk Factors of our Annual Report on
Form 10-K for the year ended December 31, 2009.
 
 Our
functional currency is the U.S. dollar. However, the functional currency of many
of our subsidiaries is the Euro. All amounts are stated in U.S. dollars (“USD”),
and where the amount relates to a subsidiary, the amount has been restated in
Euros (“EUR”) following the USD amount. Amounts related to future payments which
are payable in EUR have been stated in USD and translated using the exchange
rate as of September 30, 2010. Amounts shown in narrative statements related to
payments made in the past have been translated using the exchange rate on the
date the transaction occurred. When comparisons are made between balance sheet
dates, the appropriate exchange rate for the given balance sheet date is used.
When comparisons are made related to income statement amounts, the average
exchange rate for the given period is used.
 
  Overview
 
 The
partnership is a Cayman Islands exempted limited partnership formed in October
2006 with III to I International Maritime Solutions Cayman, Inc., a Cayman
Islands exempted company with limited liability, as our general partner. Through
our subsidiaries, we own controlling interests in nine anchor-handling tug
supply (“AHTS”) vessels, and non-controlling interests in two multipurpose bulk
carrier vessels (“mini-bulkers”), all of which are currently in
operation.
 
 AHTS
Vessels
 The AHTS
vessel industry supports the exploration, development and production stages of
offshore oil and gas drilling. Our AHTS vessels are specialized vessels built to
tow deepwater drilling rigs into position and deploy and recover the mooring
systems for the rig. The vessels may also be used for rig and platform supply,
transportation of bulk and deck cargo and in emergency situations such as
fire-fighting, evacuation of personnel or oil recovery operations. The market
for our AHTS vessels, which currently represents the majority of our operations,
is dependent upon the numerous factors which drive demand for offshore oil and
gas exploration and development. This demand is ultimately tied to oil and gas
prices that are determined by the supply and demand relationship for
oil.
 
 Our AHTS
vessels could support offshore deep sea oil and gas drilling in any of the
following locations: the North Sea, Gulf of Mexico, Mediterranean Sea, Brazil,
Indian Ocean, West Africa, Southeast Asia and Australia. They will generally be
available to work worldwide, with the exception of the United States due to
Jones Act restrictions.
 
 Our first
three AHTS vessels were delivered in 2009, and our remaining six AHTS vessels
were delivered in 2010. Our AHTS vessels generally operate under time charter
leasing arrangements with oil companies under either short-term “spot market”
charters, which are measured in days or weeks, or longer-term charters, which
typically range from six months to three years, including renewal
options.
  30
  Our AHTS
vessels under longer term charters are:
 
 ·
              UOS
      Atlantis, under charter through March 2011, with potential extensions
      through March 2012
 ·
              UOS
      Challenger, under charter through December 31, 2010, with potential
      extensions through March 2011
 ·
              UOS
      Discovery, under charter through February 2011, with potential extensions
      through May 2011
 ·
              UOS
      Explorer, under charter through October 2012, with potential extensions
      through October 2014
 ·
              UOS
      Enterprise and UOS Freedom, under charter through June 2011,
      and
 ·
              UOS
      Liberty, which left the spot market and entered into a charter in November
      2010 that runs through September
2011.
 
 The UOS
Columbia is currently uncommitted, and is currently undergoing warranty
work.
 
 The
average charter rate per day of our active longer-term charters at September 30,
2010 was $35,230 per day. The average longer-term charter rate per day,
factoring in the utilization of our vessels, was $22,699 and $23,687 per day,
respectively, for the three and nine month period ended September 30,
2010.
 
 Our
vessels recently working in the spot market include:
 
 ·
              UOS
      Endeavour working in the North Sea spot
market
 ·
              UOS
      Discovery, which worked in the Australasia spot market through late
      August, at which point it was repositioned in a longer-term charter in the
      same area.
 ·
              UOS
      Liberty, which worked in the spot market through mid-October 2010, and has
      since been repositioned to a longer-term charter in
  Brazil.
 
 The
average spot charter rate per day experienced by our vessels in the spot market
was $29,312 and $30,995 for the three and nine months ended September 30, 2010,
respectively. The average spot charter rate per day, factoring in the
utilization to consider the effect of off-hire days experienced by the vessels
during the three and nine months ended September 30, 2010, was $15,780 and
$13,267, respectively.
 
 Each of
the special purposes entities (“SPVs”) holding one of our AHTS vessels (each an
“AHTS SPV”) has entered into a ship management agreement with Hartmann Offshore
for the management of its respective vessel. The commercial management of the
vessel under this agreement has been sub-contracted to United Offshore Support
GmbH & Co. KG (“UOS”). Affiliates of the Hartmann Group collectively own the
remaining ownership of our AHTS vessels.
 
 In March
2009, we entered into an agreement (“AHTS Pool Agreement”) with UOS, to
participate in a revenue pool comprised of our nine AHTS SPVs and three AHTS
SPVs owned by our affiliate, FLTC Fund I (the “Pool Members,” and collectively
the “UOS AHTS Pool”). The agreement names UOS as the “Pool Manager,” with
responsibility for the management and accounting of the pool and also for
monitoring Pool Members’ compliance with the AHTS Pool Agreement. Under the AHTS
Pool Agreement, each of our AHTS SPVs has agreed to pool its revenue less voyage
expenses (“Voyage Results”) with the other Pool Members to achieve an even
distribution of the risks resulting from the fluctuation in the offshore
chartering business. Under these arrangements, our AHTS SPVs will typically be
responsible for their individual vessel operating expenses such as crew costs,
class costs, insurance on the vessel and routine maintenance. Class costs
represent the cost of maintaining our vessels to the level which permits them to
obtain annual quality certificates applicable to the AHTS vessel class,
mandatory inspections every two and one half years and dry docking, which is
mandatory every five years. Crew costs represent the cost of employing the
crews, including wages, which operate the vessel.
 
 The AHTS
Pool Agreement will have no effect on our consolidated revenues until such time
one or more of the FLTC Fund I vessels are delivered and begin to participate in
the UOS AHTS Pool, which is expected to occur in the fourth quarter
2010.
  31
 
 AHTS
Vessel Net Daily Earnings
 Our AHTS
SPVs are typically responsible for the vessel’s operating expenses such as crew
wages, class costs, insurance on the vessel and routine maintenance, as well as
management fees as described below. A vessel’s net daily earnings consists of
the revenue earned under that vessel’s charters, less that vessel’s operating
expenses, which does not include interest expense on acquisition debt. Results
are adjusted for increases (decreases) in revenue resulting from the pooling
agreement. A description of the current AHTS vessels and their net daily
earnings during the three and nine months ended September 30, 2010, is set forth
in the table below.
 
 Net daily earnings (deficit)AHTS SPV
                              
                              Date
                              
                              
                              
                              Operating
                              
                              Three months
                                ended
                              
                              
                              Nine months
                                endedAHTS Vessel
                              
                              Delivered
                              
                              Charter Information
                              
                              Region
                              
                              September 30, 2010MS
      Juist
                                UOS
      Atlantis
                              
                              February
      27, 2009
                              
                              Under
      extension of original charter, which began in March 2009, through March
      2011.
                              
                              Egypt
                              
                              $
                              19,238
                              
                              
                              $
                              16,118MS
      Norderney
                                UOS
      Challenger
                              
                              May
      28, 2009
                              
                              Under
      extension of original charter, which began in May 2009, through December
      2010.
                              
                              Gulf
      of Mexico
                              
                              
                              28,041
                              
                              
                              
                              18,057Isle
      of Baltrum
                                UOS
      Columbia
                              
                              October
      5, 2009
                              
                              The
      UOS Columbia is not currently under charter, and is undergoing warranty
      repair work
                              
                              Uncommitted
                              
                              
                              13,839
                              
                              
                              
                              19,298Isle
      of Langeoog
                                UOS
      Discovery
                              
                              February
      16, 2010
                              
                              Began
      operating in September 2010 under a five month charter with provision for
      five, fifteen day extensions and three, five day
    extensions.
                              
                              Australia
                              
                              
                              (6,066
                              )
                              
                              
                              (11,844
                              )Isle
      of Amrum
                                UOS
      Endeavour
                              
                              March
      11, 2010
                              
                              The
      UOS Endeavour operates in the North Sea spot market.
                              
                              North
      Sea
                              
                              
                              10,587
                              
                              
                              
                              5,055Isle
      of Sylt
                                UOS
      Enterprise
                              
                              July
      2, 2010
                              
                              Began
      operating in October 2010 under a nine month charter with provision for
      three, three-month extensions
                              
                              Egypt
                              
                              
                              (17,721
                              )
                              
                              
                              (18,089
                              )Isle
      of Wangerooge
                                UOS
      Explorer
                              
                              March
      15, 2010
                              
                              Upon
      cancellation of its charter by the charterer, began operating in October
      2010 under a two year charter with provision for two one-year
      extensions
                              
                              Egypt
                              
                              
                              12,197
                              
                              
                              
                              (1,104
                              )Isle
      of Neuwerk
                                UOS
      Freedom
                              
                              June
      29, 2010
                              
                              Began
      operating in September 2010 under a nine month charter with provision for
      three, three-month extensions
                              
                              Egypt
                              
                              
                              (16,880
                              )
                              
                              
                              (19,598
                              )Isle
      of Usedom
                                UOS
      Liberty
                              
                              June
      23, 2010
                              
                              Began
      operating in October 2010 under a nine-month charter with provision for
      one three-month extension
                              
                              Brazil
                              
                              
                              (5,128
                              )
                              
                              
                              (7,152
                              )
 
 The
combined results of our nine AHTS vessels in service resulted in average net
daily earnings of $4,556 and $4,917 for the three and nine months ended
September 30, 2010. The daily earnings are based on a total of 826 and 1,732
days in service for the three and nine months ended September 30, 2010, which is
based on the total days in service of all of the vessels combined, with six of
our vessels delivered during the current nine month period. Those vessels for
which losses are reported typically are those which were not chartered
immediately upon their delivery from the shipyard, or otherwise had insufficient
utilization during the given period. Included in vessel operating expense is
$569,424 and $1,378,251 of vessel management fees to Hartmann Offshore during
the three and nine months ended September 30, 2010, respectively. In addition to
vessel operating expenses, which is included in the net daily earnings, we
recognized $6,532,401 and $13,715,739 of depreciation expense for the three and
nine months ended September 30, 2010, respectively.
 
 Our
commercial manager, UOS, is currently pursuing opportunities with charterers for
our idle vessel, UOS Columbia, and for those vessels nearing the end of their
current charters. The current AHTS market continues to reflect day rates which
are significantly off the high day rates experienced at the peak of the market
during 2007. This can be traced to the weakening of the global economy and the
resulting decrease in the price of oil, combined with the contraction in the
credit markets, which resulted in reduced credit availability for the second
tier oil companies. All of these factors negatively impacted budgets for
exploration and development, especially outside of the major oil companies. If
economic expectations and the price of oil continue to stabilize, we expect day
rates to continue the firming trend we have seen in the past six months.
However, we do not expect significant strengthening of day rates until the
credit markets fully recover, allowing both the major oil companies and the
smaller second-tier oil companies to expand their exploration and development
budgets.
  32
 
 If the
economic environment were to reverse its trend toward recovery and instead
worsen, and we were unable to achieve adequate utilization of our vessels and/or
experience day rates below break-even levels, the combination of idle capacity
and a decline in day rates would negatively impact our liquidity and our
financial results given the debt service costs of our vessels.
 
 Other
Vessel Investments
 Each of
our mini-bulkers is managed by Reederei Hesse. Reederei Hesse and their
affiliates and affiliates of the Hartmann Group collectively own the remaining
ownership of the mini-bulkers.
 
 The
mini-bulkers are merchant ships specially designed to transport bulk cargo and
typically operate under short-term leases in established liner services between
the Baltic area and Northern Spain, Portugal, the Mediterranean Sea, Greece,
Turkey and Israel where the operator has established long-term
partners.
 
 In
addition to our AHTS vessels acquisitions and mini-bulker investments, we had
advanced funds for the potential purchase of a chemical tanker to be held in a
separate SPV which would have been owned by Kronos Shipping I, Ltd. (“Kronos”).
In light of the global downturn in the economy and the resulting decrease in
charter rates for chemical tankers and decreases in the value of such vessels,
we formally forfeited our option to acquire the tanker. Please refer to Chemical Tanker Transaction/Schulte
Group Facility/Kronos under Financing Arrangements for more information
regarding this transaction.
  33
  Results
of Operations
 
 Three Months Ended September 30,
                            
                            
                            Nine Months Ended September 30,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009Time
      charter revenue
                            
                            $
                            17,283,060
                            
                            
                            $
                            5,886,791
                            
                            
                            $
                            38,366,324
                            
                            
                            $
                            11,105,681Operating
      expenses:Vessel
      operating expenses
                            
                            
                            13,489,401
                            
                            
                            
                            3,692,518
                            
                            
                            
                            29,849,970
                            
                            
                            
                            7,894,193Depreciation
      expense
                            
                            
                            6,595,787
                            
                            
                            
                            1,485,303
                            
                            
                            
                            13,715,739
                            
                            
                            
                            2,573,269Professional
      fees
                            
                            
                            725,177
                            
                            
                            
                            549,205
                            
                            
                            
                            1,756,675
                            
                            
                            
                            2,489,317Brokerage
      and representation fees
                            
                            
                            -
                            
                            
                            
                            232,408
                            
                            
                            
                            -
                            
                            
                            
                            560,533Other
      operating expenses
                            
                            
                            415,255
                            
                            
                            
                            197,167
                            
                            
                            
                            1,222,508
                            
                            
                            
                            430,250Total
      operating expenses
                            
                            
                            21,225,620
                            
                            
                            
                            6,156,601
                            
                            
                            
                            46,544,892
                            
                            
                            
                            13,947,562Operating
      loss
                            
                            
                            (3,942,560
                            )
                            
                            
                            (269,810
                            )
                            
                            
                            (8,178,568
                            )
                            
                            
                            (2,841,881
                            )Other
      income (expense):Interest
      income
                            
                            
                            168,851
                            
                            
                            
                            70,387
                            
                            
                            
                            279,103
                            
                            
                            
                            935,719Gain
      on extinguishment of debt
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            5,300,000
                            
                            
                            
                            -Interest
      expense
                            
                            
                            (6,284,217
                            )
                            
                            
                            (563,937
                            )
                            
                            
                            (12,180,947
                            )
                            
                            
                            (2,404,448
                            )Net
      loss on interest rate swaps
                            
                            
                            (3,375,998
                            )
                            
                            
                            (6,199,724
                            )
                            
                            
                            (22,293,395
                            )
                            
                            
                            (9,767,863
                            )Foreign
      currency transaction gain (loss)
                            
                            
                            (3,801,347
                            )
                            
                            
                            407,429
                            
                            
                            
                            (1,010,798
                            )
                            
                            
                            180,601Equity
      in loss of unconsolidated entities
                            
                            
                            (287,570
                            )
                            
                            
                            (284,897
                            )
                            
                            
                            (576,484
                            )
                            
                            
                            (593,926
                            )Total
      other expense
                            
                            
                            (13,580,281
                            )
                            
                            
                            (6,570,742
                            )
                            
                            
                            (30,482,521
                            )
                            
                            
                            (11,649,917
                            )Net
      loss
                            
                            
                            (17,522,841
                            )
                            
                            
                            (6,840,552
                            )
                            
                            
                            (38,661,089
                            )
                            
                            
                            (14,491,798
                            )Net
      loss attributable to thenon-controlling
    interest
                            
                            
                            3,997,709
                            
                            
                            
                            1,344,176
                            
                            
                            
                            10,005,996
                            
                            
                            
                            2,331,361Net
      loss attributable to III to I MaritimePartners Cayman I,
      L.P.
                            
                            
                            (13,525,132
                            )
                            
                            
                            (5,496,376
                            )
                            
                            
                            (28,655,093
                            )
                            
                            
                            (12,160,437
                            )Less
      general partner interest in net loss
                            
                            
                            (188,285
                            )
                            
                            
                            (78,078
                            )
                            
                            
                            (399,324
                            )
                            
                            
                            (176,520
                            )Limited
      partner interest in net loss
                            
                            $
                            (13,336,847
                            )
                            
                            $
                            (5,418,298
                            )
                            
                            $
                            (28,255,769
                            )
                            
                            $
                            (11,983,917
                            )Net
      loss per general partner unit:Basic
      and diluted
                            
                            $
                            (19.02
                            )
                            
                            $
                            (7.89
                            )
                            
                            $
                            (40.34
                            )
                            
                            $
                            (17.83
                            )Weighted
      average general partner units outstanding
                            
                            
                            9,900
                            
                            
                            
                            9,900
                            
                            
                            
                            9,900
                            
                            
                            
                            9,900Net
      loss per limited partner unit:Basic
      and diluted
                            
                            $
                            (19.02
                            )
                            
                            $
                            (7.89
                            )
                            
                            $
                            (40.34
                            )
                            
                            $
                            (17.83
                            )Weighted
      average limited partner units outstanding
                            
                            
                            701,251
                            
                            
                            
                            687,016
                            
                            
                            
                            700,527
                            
                            
                            
                            672,125
  34
 
 Three
Months Ended September 30, 2010 Compared to the Three Months Ended September 30,
2009 and the Nine Months Ended September 30, 2010 Compared to the Nine Months
Ended September 30, 2009
 
 Revenues
 Revenues
consist of charter revenue earned by our AHTS vessels.
 
 Revenues
increased approximately $11,396,000 for the three months ended September 30,
2010 compared to the three months ended September 30, 2009. Revenues increased
approximately $27,261,000 for the nine months ended September 30, 2010 compared
to the nine months ended September 30, 2009. These increases are due to our
having all nine vessels in service during substantially all of the three and
nine months ended September 30, 2010, in contrast with only two vessels in
service during the three and nine months ended September 30, 2009.
 
 Vessel Operating
Expenses
 Vessel
operating expenses consist of expenses related to the operation of our vessels,
and do not include interest expense related to acquisition debt. The largest
line items in our vessel operating expenses for the three and nine months ended
September 30, 2010 are costs related to crewing our vessels, including crew
wages, and fuel costs. We expect that our fuel costs will decline in the future,
since the costs of initial fueling are typically borne by us, and once our
vessels are under charter, they will typically be borne by the
charterer.
 
 Vessel
operating expenses increased approximately $9,796,000, from approximately
$3,693,000 for the three months ended September 30, 2009 compared to
approximately $13,489,000 for the three months ended September 30, 2010. The
increase is due to our having all nine vessels in operation during the current
three months, whereas during the three months ended September 30, 2009, only two
of our AHTS vessels had been delivered. The increases from our additional
vessels in service were partially offset by a decrease in certain repair costs
of approximately $1,439,000, which was related primarily to damage to the main
winch of UOS Challenger sustained during operations in 2009 and costs related to
adjustments needed to new equipment, and decreases in travel costs and costs of
inspections carried out by the ABS class society at the shipyard which were
incurred during construction.
 
 Vessel
operating expenses increased approximately $21,956,000, from approximately
$7,894,000 for the nine months ended September 30, 2009 compared to
approximately $29,850,000 for the nine months ended September 30, 2010. The
increase is due to our having all nine vessels in operation during the current
nine months, whereas during the nine months ended September 30, 2009, only two
of our AHTS vessels had been delivered.
 
 Depreciation
expense
 Depreciation
expense increased approximately $5,111,000, from approximately $1,485,000 for
the three months ended September 30, 2009 compared to approximately $6,596,000
for the three months ended September 30, 2010. Depreciation expense increased
approximately $11,143,000 from approximately $2,573,000 for the nine months
ended September 30, 2009 compared to approximately $13,716,000 for the nine
months ended September 30, 2010.
 
 These
increases are due to our having nine vessels in operation during the current
three and nine months ended September 30, 2010, whereas during the three and
nine months ended September 30, 2009, only two of our AHTS vessels had been
delivered.
 
 Professional
Fees
 Professional
fees consist of legal, accounting, audit, tax, management and consulting
fees.
 
 The
increase in professional fees of approximately $176,000, or 32%, from
approximately $549,000 for the three months ended September 30, 2009 compared to
approximately $725,000 for the three months ended September 30, 2010, was due to
an increase in consulting and professional fees of approximately $115,000, an
increase in legal fees of approximately $26,000, and an increase in audit fees
of approximately $35,000, which was related to increased vessel activity
including charter activity. Our administrative fees remained consistent between
the two periods.
 
 The
decrease in professional fees of approximately $732,000, or 29%, from
approximately $2,489,000 for the nine months ended September 30, 2009 compared
to approximately $1,757,000 for the nine months ended September 30, 2010, was
due to expenses incurred during the nine months ended September 30, 2009
surrounding our restructuring and our initial registration statement with the
SEC, which was filed in April 2009. This amount includes decreases in legal and
professional fees of $678,000, and a decrease in audit and tax consulting fees
of approximately $54,000.
  35
 
 We expect
that our legal and professional fees will increase over time as our regulatory
and compliance costs increase, both due to our status as an SEC registrant and
due to the increasing activity of our vessels.
 
 Brokerage and Representation
Fees
 Brokerage
and representation fees consist of fees paid to providers of our ship brokerage,
representation and consulting services. The last payment under our current
agreement, which is related to the acquisition of the AHTS vessels, fell due
during the fourth quarter of 2009.
 
 Our
brokerage and professional fees for the three and nine months ended September
30, 2010 as compared to that for the three and nine months ended September 30,
2009 decreased by approximately $232,000 and $561,000, respectively, due to the
expiration of our agreement related to consulting services in negotiations for
the acquisition of the AHTS vessels.
 
 Other Operating
Expenses
 Other
operating expenses consist of office and administrative expenses, travel
expenses and bank fees that are not directly related to financing
arrangements.
 
 The
increase in other operating expenses of approximately $218,000, or 111%, from
approximately $197,000 for the three months ended September 30, 2009 to
approximately $415,000 for the three months ended September 30, 2010, was due to
an increase in commissions related to the chartering of our vessels of
approximately $124,000,and an increase of approximately $118,000 in office and
miscellaneous costs, including bank fees unrelated to financing arrangements,
from increasing operations, which was offset by decreases in travel and other
costs of approximately $24,000 due to normal fluctuations.
 
 The
increase in other operating expenses of approximately $793,000, or 184%, from
approximately $430,000 for the nine months ended September 30, 2009 to
approximately $1,223,000 for the nine months ended September 30, 2010, was due
to an increase in commissions related to the chartering of our vessels of
approximately $429,000 and an increase in shipping costs of approximately
$201,000, and increases in office and miscellaneous costs of $231,000. These
increases were partially offset by decreases in travel and other costs of
$68,000 due to normal fluctuations.
 
 Interest
Income
 Interest
income is earned on balances in various operating and money market accounts in
which our funds are held. In the past as funds were raised, they were deposited
in operating accounts in the United States and in interest bearing accounts in
foreign countries. Amounts necessary for operations and payment of upcoming AHTS
vessel construction installments were held in these accounts. As construction
payments came due, funds held were moved to the restricted cash accounts and
pledged as collateral for the loans that funded the AHTS vessel construction
payments to the shipyard, Fincantieri Cantieri Navali Italiani SpA
(“Fincantieri”). As the balance of these pledged funds grew, so too did the
interest earned on the funds.
 
 During
the three and nine months ended September 30, 2009, funds were released and the
related loans were repaid with the pledged funds in mid-2009. Interest was also
earned on short-term loans to a related party.
 
 Interest
income increased approximately $99,000, or 140%, from approximately $70,000 for
the three months ended September 30, 2009 to approximately $169,000 for the
three months ended September 30, 2010. Interest income decreased approximately
$657,000, or 70%, from approximately $936,000 for the nine months ended
September 30, 2009 to approximately $279,000 for the nine months ended September
30, 2010. The decrease was due to a decrease in funds held in interest bearing
pledged accounts due to repayment of the related loans with the pledged funds in
mid-2009, and a decrease in interest income from our related party notes
receivable, which were repaid to us during the second and third quarters of
2009.
  36
  Interest
Expense
 Interest
expense was incurred on the senior loan facility (“Senior Loan”) with
Norddeutsche Landesbank Girozentrale (“Nord/LB”) which was entered into on
December 19, 2008 and the related matured portions of our interest rate swaps,
two related party loans which were entered into during the fourth quarter of
2008, and loan agreements entered into with Reederei Hartmann GmbH & Co. KG
(“RHKG Loan Agreements”) and their affiliates Captain Alfred Hartmann (“Hartmann
Loan Agreement”) and Hartmann Asia Holding PTE, Ltd. (“Hartmann Asia Loan
Agreement”), discussed further under Financing Arrangementsunder the Liquidity and Capital
Resourcessection
of this Item 2. The amount included in interest expense is the amount incurred
less the amount allocated to our assets under construction plus the amortization
of debt issuance costs. Each of our assets under construction was allocated a
portion of the total interest incurred on all of our debt instruments for the
period based on the product of the weighted average accumulated expenditures and
the weighted average interest rate for the period. The amount of interest
allocated to our assets under construction was capitalized rather than
expensed.
 
 The
increase in interest expense of approximately $5,720,000, or 1,014%, from
approximately $564,000 for the three months ended September 30, 2009 to
approximately $6,284,000 for the three months ended September 30, 2010, was
primarily due to interest expense related to the drawdowns on our Senior Loan
facility for the delivery of our AHTS vessels, interest expense incurred on our
matured interest rate swaps related to our Senior Loan facility, interest costs
to the shipyard on late payment of construction installments, and interest
expense incurred on our RHKG Loan Agreements and Hartmann Loan Agreement. The
amortization expense on the deferred loan costs also contributed to the increase
in interest expense.
 
 The
increase in interest expense of approximately $9,777,000, or 407%, from
approximately $2,404,000 for the nine months ended September 30, 2009 to
approximately $12,181,000 for the nine months ended September 30, 2010, was due
to the additional deliveries of vessels and related interest expense under our
Senior Loan facility and related matured interest rate swaps, and the RHKG Loan
Agreements and Hartmann Loan Agreement, in addition to the interest expense paid
to the shipyard on the late payment of construction installments. The agency and
commitment fees related to the Senior Loan and the guarantee fees due under the
guarantee provided by Reederei Hartmann also contributed to the
increase.
 
 Loss on Interest Rate
Swaps
 The
decrease in the loss on interest rate swaps of approximately $2,824,000, from
$6,200,000 for the three months ended September 30, 2009 to $3,376,000 for the
three months ended September 30, 2010 is due to the recognition of changes in
the value of the interest rate swap agreements related to the Nord/LB senior
loan facility for our nine AHTS SPVs, which values fluctuate with interest rate
expectations, among other factors. If interest rates are expected to rise, it
would be reasonable to expect an increase in the valuation of the interest rate
swaps, and thus a decrease in the loss on the interest rate swaps from period to
period. The reverse is also true. If interest rates are expected to fall, a
decrease in the valuation of the interest rate swaps would be likely and
therefore an increase in the loss on the interest rate swaps would be
recognized. These instruments have not been designated for hedge accounting, and
therefore the entire change in the fair value of the positions from period to
period is recorded in our results of operations as loss on interest rate swaps.
The agreements are effective from 2010 through 2019, and are currently recorded
as a derivative liability totaling approximately $32,092,000, due to the
relatively low variable rates being experienced as compared with the fixed rates
under the swap agreements.
 
 The
increase in the loss on interest rate swaps of approximately $12,525,000, from
$9,768,000 for the nine months ended September 30, 2009 to $22,293,000 for the
nine months ended September 30, 2010 is due to the recognition of decreases in
the valuations of the interest rate swaps from period to period as mentioned
above.
 
 We
entered into the interest rate swap agreements to mitigate the uncertainty in
interest costs under the variable rate in our Senior Loan. The losses recognized
for the change in fair value of our swap positions from period to period are
indicative of the comparison between the fixed interest rate under our swap
agreement to the variable rate under our Nord/LB facility, the valuation of
which is influenced by current expectations regarding when, if at all, and by
how much the variable interest rate under our Senior Loan with Nord/LB will
increase.
  37
 
 Foreign Currency Transaction
Gain (Loss)
 Foreign
currency transaction gain (loss) is the amount of gain or loss realized when the
cash balances held in EUR by our Cayman partnership are converted to our
functional currency, USD, on each balance sheet date. Also included are amounts
related to recording the current fair value of currency forward exchange
contracts which are not designated as cash flow hedges and the ineffective
portion of currency forward exchange contracts which are designated as cash flow
hedges, and gains and losses from maturing of currency forward exchange
contracts whether or not they are designated as hedges.
 
 The
change in our foreign currency transaction gain (loss) from the three and nine
months ended September 30, 2009 to the three and nine months ended September 30,
2010 was caused by a continuation of a period of relatively high volatility in
exchange rates. A portion of the change in our foreign currency transaction gain
(loss) is related to the recording of the current fair value of our currency
forward exchange contracts which are not designated as cash flow hedges, under
which we have contracted to sell Euros and purchase US dollars at pre-agreed
upon prices in the future. The change in value of these contracts from period to
period is recognized in our results of operations. The losses recognized on
these contracts for the three and nine months ended September 30, 2010 are
related primarily to the strengthening of the Euro against the US dollar during
the three months ended September 30, 2010, and the fact that the price at which
we agreed to sell Euros and purchase US dollars is less favorable to us than
those currently expected to be available in the market at the future execution
dates.
 
 The
remaining change in our foreign currency transaction gain (loss) is related to
the recognition of losses on our foreign exchange contracts designated as hedges
in our results of operations as they mature. Due to the rates under the
contracts being less favorable than those available in the market during the
period, a loss was recognized on the maturation of these contracts.
 
 Future
fluctuations in rates will further affect the recognition of gains and losses
under these contracts.
 
 Equity in Loss of
Unconsolidated Entities
 Equity in
loss of unconsolidated entities represents our share of the income or loss
reported for the operations of the bulk carrier vessels in which we own a
non-controlling interest.
 
 The
increase of approximately $3,000 in the loss recognized from the operations of
the bulk carrier vessels, from a loss of $285,000 for the three months ended
September 30, 2009 to a loss of $288,000 for the three months ended September
30, 2010, and the decrease in the loss recognized of approximately $18,000, from
a loss of approximately $594,000 for the nine months ended September 30, 2009 to
a loss of $576,000 for the nine months ended September 30, 2010, represents
normal fluctuations in the activity of the vessels.
 
 Non-controlling
interest
 Non-controlling
interest represents the amount of income or loss allocable to other parties
where their share has been included in our consolidated results of
operations.
 
 The
comparative effect on our allocation of income or loss to the non-controlling
interest holders between the three and nine months ended September 30, 2009 and
the three and nine months ended September 30, 2010, was primarily due to the
difference in income for the periods presented.
 
  Liquidity
and Capital Resources
 
 As of
September 30, 2010, we had cash of $3,390,220. Since inception through September
30, 2010, we have raised approximately $66,129,178, net of syndication costs of
approximately $4,880,642, through the private placement of our limited partner
units. As discussed above, the funds from the offering were utilized primarily
to collateralize loans, the proceeds of which were used to pay the first two of
five installments to Fincantieri for the construction of our AHTS vessels and to
pay for related expenditures as shown in our consolidated financial statements.
The payments to Fincantieri were made via draws on our Berenberg Facility
attributable to each AHTS SPV which then paid Fincantieri. The pledged funds
were later utilized to repay the loans under the Berenberg Facility, and that
facility was terminated. The net result of this is that the majority of the
funds raised were ultimately used to pay the first two of five installments to
Fincantieri for the construction of the AHTS vessels.
  38
 
 As
delivery of the AHTS vessels approached, funds were drawn on the RHKG and
Hartmann loans to increase our capital in our AHTS SPVs. Upon the deliveries of
the AHTS vessels, funds were drawn on the Senior Loan. Those funds were used to
repay outstanding balances on loans from Reederei Hartmann in the case of the
first two vessels, and to pay the outstanding installments on each vessel to
Fincantieri. The remaining funds, where available, were utilized to pay for
outfitting costs for the AHTS vessels and to provide operating reserves for the
AHTS SPVs.
 
 Operating Cash
Flows
 Operating
activities produced a net use of cash of approximately $15,400,000 for the nine
months ended September 30, 2010, as compared to net cash used of approximately
$1,885,000 for the nine months ended September 30, 2009, for an increase in net
cash used of approximately $13,515,000. Net cash used in operations increased
between periods primarily due to our additional vessel deliveries and related
costs, as well as increases in accounts receivable due from charterers. During
the nine months ended September 30, 2009, accounts payable and accrued expenses
increased approximately $6,803,000 related to our vessels under construction,
whereas accounts payable and accrued expenses decreased approximately $4,026,000
during the nine months ended September 30, 2010, indicating the use of cash to
pay accrued expenses upon delivery of our AHTS vessels. These effects were
offset somewhat by decreases in prepaid assets and increases in accrued interest
payable comparing the two periods. The decrease in prepaid assets is mainly due
to vessels being placed in service and the related prepaid assets being
recognized in expense. The increase in accrued interest payable is related to
increased borrowings between the two periods related to our delivered
vessels.
 
 Investing Cash
Flows
 Investing
activities used cash of approximately $319,257,000 for the nine months ended
September 30, 2010, as compared to $34,141,000 for the nine months ended
September 30, 2009, for an increase in net cash used of approximately
$285,116,000. This was due primarily to the use of approximately $312,243,000
for advances for vessel acquisitions and construction costs during the nine
months ended September 30, 2010, the majority of which was related to the
deliveries of six vessels, the UOS Discovery, UOS Endeavour, UOS Explorer, UOS
Freedom, UOS Liberty and UOS Enterprise in February, March, June and July 2010,
in comparison to $82,842,000 for the two vessels delivered during the nine
months ended September 30, 2009, the UOS Atlantis and UOS Challenger and the
construction installments paid on the remaining seven vessels. Related to our
vessels, on board equipment totaling approximately $7,907,000 was purchased
during the nine months ended September 30, 2010, whereas during the nine months
ended September 30, 2009, $7,147,000 of on board equipment was purchased.
Additionally, during the nine months ended September 30, 2009, restricted cash
provided approximately $55,967,000 toward investing activities, and due to our
use of the restricted cash in 2009 to fund our capital contributions to the AHTS
SPVs, we no longer hold restricted cash. These factors were partially offset by
a decrease of $1,012,000 in amounts due from related parties comparing the two
periods.
 
 Financing Cash
Flows
 Net cash
provided by financing activities was approximately $321,532,000 for the nine
months ended September 30, 2010 as compared to approximately $49,806,000 for the
nine months ended September 30, 2009. The increase of $271,726,000 is primarily
related to increased financing activity with the deliveries of our AHTS vessels.
The deliveries of UOS Discovery, UOS Endeavour, UOS Explorer, UOS Freedom, UOS
Liberty and UOS Enterprise and the related proceeds drawn on the Senior Loan of
$286,240,000, and the RHKG Loans and Hartmann Loan proceeds through which we
funded our capital contributions to the AHTS SPVs Baltrum, Langeoog, Amrum,
Sylt, Wangerooge, Neuwerk and Usedom of $32,785,000 occurred during the nine
months ended September 30, 2010, in comparison with $102,283,000 of Senior Loan
proceeds drawn in the same period of 2009 for the deliveries of UOS Atlantis and
UOS Challenger. In addition, during the nine months ended September 30, 2010
proceeds of $6,414,000 were drawn on our Hartmann Asia Loan Agreement, and
$1,391,000 was drawn on the Nord/LB Revolving Credit Facility, and these
facilities did not exist during the equivalent nine month period in
2009.
 
 Also
contributing to the increase was a decrease in repayments net of amounts drawn
on our related party liabilities of $4,905,000. During the nine months ended
September 30, 2009, cash of approximately $54,121,000 was utilized in net
repayments on the Berenberg facility, and as we no longer utilize the Berenberg
facility, there were no similar expenditures in the current nine month period.
In addition, during the nine months ended September 30, 2010, our
non-controlling interest contributed $10,798,000 to the AHTS SPVs and received
no distributions, and in contrast, only $5,898,000 was received and
distributions of $690,000 were recognized to the non-controlling interest during
the nine months ended September 30, 2009.
  39
 
 These
activities were offset slightly by principal repayments to Nord/LB of
$16,896,000 during the nine months ended September 30, 2010, versus only
$3,196,000 in principal repayments during the equivalent nine month period in
2009. In addition, contributions from partners were approximately $339,000 for
the nine months ended September 30, 2010, as compared with approximately
$5,542,000 for the nine months ended September 30, 2009. This was offset
somewhat by a decrease in syndication costs of $1,140,000, which are netted
against contributions recognized.
 
 Financing
Arrangements
 RHKG
Loan Agreements
 In late
January 2010 and in March 2010, our German Subsidiary entered into four loan
agreements with Reederei Hartmann, which is the non-controlling interest holder
of our AHTS SPVs. Each of the agreements is related to a corresponding AHTS SPV,
and provides for loans equal to the remaining amount of capital outstanding from
our German Subsidiary to the AHTS SPV to which the agreement relates. The
execution of the agreements and the subsequent recognition of the contribution
of capital by the AHTS SPV results in our satisfying the capital contribution in
the full amount called for under the Company Agreement of the respective AHTS
SPV, and satisfied the necessary funding under the terms of the Senior Loan,
allowing for delivery of the respective vessel.
 
 These
four agreements relate to the AHTS SPVs Isle of Baltrum, Isle of Langeoog, Isle
of Amrum, and Isle of Wangerooge, and under these agreements, loans totaling
$31,008,136 (EUR 22,780,000) (“RHKG Loans”) were made from Reederei Hartmann to
our German Subsidiary. In connection with Langeoog, Amrum and Wangerooge, the
loan proceeds were paid directly to the respective AHTS SPV, thereby fulfilling
the remaining capital contribution obligations of our German Subsidiary with
respect to each of those AHTS SPVs. The loan agreement for the AHTS SPV Isle of
Baltrum differs slightly from the others in that the event giving rise to our
liability is the assumption of the AHTS SPV’s liability to Reederei Hartmann in
the amount of $7,752,459 (EUR 5,315,000) as of October 2, 2009, in exchange for
being credited with making a capital contribution to Isle of Baltrum in such
amount.
 
 Each of
the four RHKG Loan Agreements currently in place matures 5 years from the date
of signing, with maturity dates therefore falling between January and March 2015
for the agreements currently in place. The agreements each call for interest to
be calculated at 6% per annum, due annually at each anniversary date of signing,
with the first of these dates falling between January and March 2011. There is
no penalty for pre-payment of all or any portion of the loans prior to the end
of the respective loan periods. The terms of the agreements include the granting
of a security interest in our ownership interest in the corresponding AHTS SPV,
and in the dividends from the AHTS SPV arising from the pro-rata percentage of
the loan amount as compared to our total share capital.
 
 Under the
RHKG Loan Agreements, if additional financing is granted by Nord/LB to one of
the AHTS SPVs to which an RHKG Loan Agreement relates via a potential increase
in the amount guaranteed by SACE S.P.A. of Roma, Italy, which is the Italian
export credit and reinsurance agency (“SACE”) under the Senior Loan, the RHKG
Loan Agreements state that our German Subsidiary shall use its best endeavors to
have the AHTS SPV receiving the proceeds distribute funds from the financing to
our German Subsidiary sufficient to allow it to repay the RHKG Loan Agreement.
Currently, we do not anticipate an increase in the amount guaranteed by SACE
leading to additional financing from Nord/LB.
 
 We are
subject to various warranties, representations, and covenants under the RHKG
Loan Agreements, such as limitations on our entering into asset dispositions or
restructuring arrangements unreasonably detrimental to Reederei Hartmann’s
security interest in the AHTS SPVs, and the reserving of distributions received
from an involved AHTS SPV for repayment of the related RHKG Loan
Agreement.
 
 In
connection with each of the loans from RHKG with respect Isle of Langeoog, Isle
of Amrum, and Isle of Wangerooge, RHKG obtained the funds for their loan to our
German Subsidiary pursuant to a loan on nearly identical terms from Fincantieri,
the shipyard constructing the vessels.
 
 During
the three and nine months ended September 30, 2010, we incurred interest expense
of $451,801 (EUR 350,179) and $1,146,718 (EUR 870,705), respectively, related to
the RHKG Loan Agreements. Accrued interest of $1,293,725 (EUR 950,430) was
outstanding at September 30, 2010.
  40
 
 Hartmann
Loan
 On June
17, 2010, our German Subsidiary entered into a loan agreement with Captain
Alfred Hartmann (“Capt. Hartmann”), who is the chairman of the board for
Hartmann AG, which is a member of the Hartmann Group. Reederei Hartmann GmbH
& Co., KG and certain other members of the Hartmann Group are the
non-controlling interest holders of our single purpose entities, each of which
holds an AHTS vessel. Pursuant to the Hartmann Loan Agreement, a total of
$8,147,896 (EUR 6,620,000) was loaned to our German Subsidiary. The loan
proceeds (“Hartmann Loan”) were paid to the three AHTS SPVs which had not yet
had their vessels delivered to them, and resulted in the recognition of capital
contributions from our German Subsidiary to our AHTS SPVs Isle of Sylt, Isle of
Neuwerk, and Isle of Usedom, totaling $2,338,520 (EUR 1,900,000), $2,584,680
(EUR 2,100,000), and $3,224,696 (EUR 2,620,000), respectively.
 
 These
capital contributions allowed us to draw on the Senior Loan facility, and as a
result, the vessels UOS Liberty, UOS Freedom, and UOS Enterprise were delivered
on June 23, June 29, and July 2, 2010, respectively, to our AHTS SPVs Isle of
Usedom, Isle of Neuwerk, and Isle of Sylt.
 
 The
Hartmann Loan Agreement matures five years from the date of signing. The
agreement calls for interest to be calculated at 6% per annum, due annually at
the anniversary of the date of signing. There is no penalty for pre-payment of
all or any portion of the loan prior to the end of the loan period. The terms of
the agreement include the include the granting of a security interest in our
ownership interest in the corresponding AHTS SPVs, and in the dividends from the
AHTS SPVs arising from the pro-rata percentage of the loan amount as compared to
our total share capital.
 
 We are
subject to various warranties, representations, and covenants under the Hartmann
Loan Agreement, such as limitations on our entering into asset dispositions or
restructuring arrangements unreasonably detrimental to Hartmann’s security
interest in the AHTS SPVs, and the reserving of distributions received from an
involved AHTS SPV for repayment of the Hartmann Loan Agreement.
 
 During
the three and nine months ended September 30, 2010, we incurred interest expense
of $130,964 (EUR 101,507) and $152,574 (EUR115,850). Accrued interest of
$157,695 (EUR 115,850) was outstanding at September 30, 2010.
 
 Hartmann
Asia Loan Agreement
 On August
31, 2010, our AHTS SPV Isle of Usedom entered into the Hartmann Asia Loan
Agreement with Hartmann Asia Holding PTE Ltd (“Hartmann Asia”), a member of the
Hartmann Group and an affiliate of the non-controlling interest holders of our
AHTS SPVs. Pursuant to the Hartmann Asia Loan Agreement, Hartmann Asia loaned a
total of $6,000,000 to our AHTS SPV Isle of Usedom. Related to the Hartmann Asia
Loan Agreement, an inter-creditor agreement was also entered into between our
AHTS SPV Isle of Usedom, Hartmann Asia, and Nord/LB on August 31, 2010,
confirming the Hartmann Asia Loan Agreement as subordinate to the Senior
Loan.
 
 On
September 27, 2010, Addendum No. 1 to the Hartmann Asia Loan Agreement was
entered into, which increased the loan by $3,400,000, to a total of $9,400,000,
and extended the maturity date from September 30, 2010 to October 29, 2010.
Addendum 2 was entered into on October 27, 2010, which increased the amount to
be loaned under the Hartmann Asia Loan Agreement to $26,400,000, providing an
additional $17,000,000 in funds, and extended the maturity date to January 1,
2013.
 
 The
Hartmann Asia Loan Agreement calls for interest to be calculated at 6% per
annum. There is no penalty for pre-payment of all or any portion of the loan
prior to the end of the loan period. The loan proceeds will fund operating
activities, including interest and redemption payments to Nord/LB, of the AHTS
SPV Isle of Usedom, as well as providing funds for similar purposes to the other
either AHTS SPVs via loans between the AHTS SPVs.
 
 At
September 30, 2010, a total of $6,414,199 (EUR 4,712,165), was outstanding under
the Hartmann Asia Loan. During the three and nine months ended September 30,
2010, we incurred interest expense of $30,472 (EUR 23,618). Accrued interest of
$32,149 (EUR 23,618) was outstanding at September 30, 2010.
  41
 
 Nord/LB
Facility
 On
December 19, 2008, we entered into a $572,479,884 (EUR 420,570,000) senior loan
facility (“Senior Loan”) with Nord/LB as administrative agent and lender, with a
term of 12 years from the delivery of each ship. The proceeds from the Senior
Loan were used to fund outstanding balances due to the shipyard at delivery, and
any excess will be retained toward working capital requirements of each AHTS
SPV. A post-delivery credit facility (“Revolving Credit Facility”) in the amount
of $114,495,977 (EUR 84,114,000) can also be used to extend the Senior Loan from
12 to 15 years. However, in no case can the total loans be in excess of 75% of
the aggregate investment costs of all vessels, which is defined to include the
construction price, building supervision, financing, initial equipment and other
costs, of all the ships covered by the Senior Loan. Additionally, the Senior
Loan conditions require, among other things, that amounts sufficient to cover
operating costs and all amounts due and payable under the Senior Loan for a one
year period be secured by each AHTS SPV before any dividends can be
considered.
 
 The
Senior Loan is a fleet financing arrangement which covers all our AHTS vessels
plus three AHTS vessels purchased or being purchased by FLTC Fund I. The 12 AHTS
vessels serve as the collateral for the Senior Loan. In connection with the
Senior Loan, a commitment fee of 0.20% to 0.45% is due semi-annually in arrears
as determined by our internal rating class assigned within Nord/LB based on the
unused Senior Loan balance and the elapsed days within the year. An agency fee
of $13,612 (EUR 10,000) per ship is due each year payable at the end of each
quarter until the delivery of the applicable ship. After the delivery of the
applicable AHTS vessel, the agency fee, payable quarterly, is $6,806 (EUR 5,000)
per year per vessel until the Senior Loan is paid in full. There is also a
financial guarantee for up to 70% of the loan balance issued by SACE of Roma,
Italy, which is the Italian export credit and reinsurance agency.
 
 Interest
on the borrowings is based upon the EURIBOR, the Euro Interbank Offered Rate.
For the portion of the Senior Loan not guaranteed by SACE, the applicable
interest rate is EURIBOR plus 1.375% per annum plus a fixed funds cost
determined prior to each drawdown. For the portion of the Senior Loan that is
guaranteed by SACE, the applicable interest rate is EURIBOR plus 1.375% per
annum. With respect to the Revolving Credit Facility, the applicable interest
rate is (i) EURIBOR plus 1.600% per annum or (ii) the lenders’ funding costs, as
conclusively to be agreed and determined by the lenders, plus 1.600% per annum.
Upon the fifth anniversary of the Senior Loan, each interest rate will be
subject to renegotiation. Interest incurred before the delivery of each AHTS
vessel will be rolled into the loan balance of the corresponding tranche of the
Senior Loan until ship delivery up to a maximum of $1,361,200 (EUR 1,000,000).
If interest incurred exceeds $1,361,200 (EUR 1,000,000), the excess interest
will be due at each interest payment date which can be every three to nine
months.
 
 Amounts
drawn on the Pre-Delivery Facility of the Senior Loan, which were intended to
fund installments to the shipyard during constructions, required either that
each AHTS SPV is fully funded based on the capital as called for in the AHTS SPV
company agreements, or provision of a guarantee acceptable to Nord/LB to provide
assurance of repayment of the Pre-Delivery Facility. A guarantee from Reederei
Hartmann, our non-controlling interest holder and the 25% owner of the three
AHTS SPVs of FLTC Fund I (“Hartmann Guarantee”) in the amount of $45,932,786
(EUR 32,046,875) was outstanding at December 31, 2009. The Pre-Delivery Facility
was not utilized, and there was no amount outstanding under the Hartmann
Guarantee at September 30, 2010.
  42
  The
drawdowns accepted under the Senior Loan are as follows:
 
 AHTS SPV
                          
                          AHTS Vessel
                          
                          Date of Drawdown
                          
                          
                          Proceeds
                          
                          
                          Amounts paid
                            toFincantieriMS
      Juist
                          
                          UOS
      Atlantis
                          
                          February
      25, 2009
                          
                          
                          $
                          44,689,067
                          
                          
                          $
                          38,092,384
                          (1)MS
      Norderney
                          
                          UOS
      Challenger
                          
                          May
      25, 2009
                          
                          
                          $
                          49,080,519
                          
                          
                          $
                          42,249,368
                          (1)Isle
      of Baltrum
                          
                          UOS
      Columbia
                          
                          October
      2, 2009
                          
                          
                          $
                          51,120,284
                          
                          
                          $
                          49,179,033Isle
      of Langeoog
                          
                          UOS
      Discovery
                          
                          February
      15, 2010
                          
                          
                          $
                          47,790,771
                          
                          
                          $
                          46,304,079Isle
      of Amrum
                          
                          UOS
      Endeavour
                          
                          March
      10, 2010
                          
                          
                          $
                          47,629,553
                          
                          
                          $
                          50,840,227Isle
      of Wangerooge
                          
                          UOS
      Explorer
                          
                          March
      12, 2010
                          
                          
                          $
                          47,871,380
                          
                          
                          $
                          52,817,807Isle
      of Neuwerk
                          
                          UOS
      Freedom
                          
                          June
      25, 2010
                          
                          
                          $
                          43,175,015
                          
                          
                          $
                          47,626,402Isle
      of Usedom
                          
                          UOS
      Liberty
                          
                          June
      22, 2010
                          
                          
                          $
                          43,413,338
                          
                          
                          $
                          47,817,206Isle
      of Sylt
                          
                          UOS
      Enterprise
                          
                          July
      1, 2010
                          
                          
                          $
                          42,936,692
                          
                          
                          $
                          46,193,217
 
 (1)
              Amounts
      paid to Fincantieri for UOS Atlantis and UOS Challenger included
      $4,698,317 and $5,150,531 due to Reederei Hartmann for advances to pay for
      the 4th
      installment under the shipbuilding
contracts.
 
 In each
case above, any remaining cash from each of the drawdowns was used to fund
operations and provide cash reserves to the respective SPV for future
operations. Any shortfalls between the Senior Loan proceeds and the amount
outstanding to the shipyard at delivery were funded with cash reserves from the
respective AHTS SPV, or with proceeds from borrowings between the AHTS
SPVs.
 
 At
September 30, 2010 and December 31, 2009, a total of $407,494,362 (EUR
299,364,063) and $145,468,080 (EUR 101,491,719), respectively, was outstanding
under the Senior Loan with an effective interest rate of 2.736% and 2.791%,
respectively. The outstanding balance will be due in full in June 2022. During
the three and nine months ended September 30, 2010 and 2009, we incurred
interest of $2,620,051 (EUR 2,030,732) and $5,646,796 (EUR 4,287,620) and
$784,842 (EUR 549,147) and $1,474,323 (EUR 1,078,589), respectively, related to
the drawdowns on the Senior Loan. Accrued interest of $1,207,868 (EUR 887,355)
and $590,725 (EUR 412,143) was outstanding at September 30, 2010 and December
31, 2009, respectively.
 
 During
the three months ended September 30, 2010, we elected to draw on the Revolving
Credit Facility, which allows us to make draws at each quarterly principal
redemption date to result in a net principal payment based on a loan
amortization of 15 years versus the 12 years under the Senior Loan. At September
30, 2010, a total of $1,391,444 (EUR 1,022,219) was outstanding under the
Revolving Credit Facility with an effective interest rate of 3.295%. The
outstanding balance will be due in full in June 2025. During the three and nine
months ended September 30, 2010, we incurred interest of $2,969 (EUR 2,301)
related to the drawdowns on the Revolving Credit Facility. Accrued interest of
$3,132 (EUR 2,301) was outstanding at September 30, 2010.
 
 We are
subject to various covenants for the duration of the Senior Loan, associated,
for example, with the amount of capital infusions from outside investors into
the AHTS SPVs, limits on additional financing, restrictions of cargo and
weapons, directives regarding the structure and duration of charters related to
the ships, and certain restrictions on distributions.
 
 In order
to obtain more favorable financing terms under the Senior Loan, we agreed to a
fleet financing arrangement whereby the Senior Loan would be secured by, among
other things, our nine AHTS vessels and three AHTS vessels owned by FLTC Fund I.
In connection with this fleet financing arrangement, we entered into a mutual
indemnity agreement in May 2009 with the three AHTS SPVs owned by FLTC Fund I
(the “AHTS Mutual Indemnity Agreement”). Pursuant to the AHTS Mutual Indemnity
Agreement, we agreed to indemnify the AHTS SPVs owned by FLTC Fund I for all
liabilities suffered by such SPVs arising out of or associated with any breach
by us (or resulting from any payment or performance by such AHTS SPVs in order
to avoid a breach by us) under the Senior Loan with Nord/LB or the AHTS Mutual
Indemnity Agreement. Conversely, the AHTS SPVs owned by FLTC Fund I agreed to
provide us with reciprocal indemnification obligations pursuant to the AHTS
Mutual Indemnity Agreement.
  43
 
 Chemical
Tanker Transaction/Schulte Group Facility/Kronos
 On
November 13, 2007, III to I IMS Holdings, LLC (“IMS Holdings”), the sole
shareholder of our general partner, entered into a Memorandum of Agreement
(“MOA”) with the Schulte Group relating to the acquisition of the chemical
tanker. Pursuant to the MOA, the Schulte Group placed an order for the chemical
tanker for IMS Holdings for the purchase price of $41,500,000 to be paid in five
equal installments. The Schulte Group agreed to loan IMS Holdings up to
$8,300,000 for the first installment payment (“Schulte Group Facility”) and to
facilitate a bank guarantee for the second installment payment of $8,300,000.
The Schulte Group formed Anthos Shipping Co. Limited (“Anthos”), a Cyprus SPV,
to own the chemical tanker. The equity of Anthos would have been assigned to
Kronos upon repayment of the loan, retirement of the bank guarantee facilitated
by the Schulte Group and payment of all fees due to the Schulte Group. Kronos
was not formed at the time the MOA was signed; therefore, the chemical tanker
transaction was undertaken through an affiliate of IMS Holdings on behalf of
Kronos. As of September 30, 2010 and December 31, 2009, $8,300,000 had been paid
toward the option to purchase the chemical tanker.
 
 IMS
Holdings repaid $3,000,000 on the Schulte Group Facility through its affiliate
to the Schulte Group by January 15, 2008, in compliance with the terms of the
MOA. As of December 31, 2008, we had advanced $4,278,164, including accrued
interest, to IMS Holdings to allow IMS Holdings to provide funds to its
affiliate to make the required payments to the Schulte Group under the MOA and
other expenses related to the option to purchase the chemical tanker. An
addendum to the MOA was executed in July 2008 to extend the loan through
November 30, 2008, extend the time period allowed for IMS Holdings to secure
financing and increase the amount of possible liquidated damages. As of December
31, 2008, no agreement had been reached on a further extension of the terms of
the MOA, and IMS Holdings was technically in default on their loan and required
to pay liquidating damages.
 
 Effective
April 2009, we entered into an agreement whereby all of the rights retained by
IMS Holdings’ affiliate, IMS Capital Partners, LLC (“IMS Capital Partners”) and
IMS Holdings with respect to the chemical tanker pursuant to the MOA between IMS
Holdings and Schulte Group were transferred to Kronos, the new obligor under an
amended version of the MOA (“Amended MOA”) between Kronos and Conway Shipping I,
Ltd. (“Conway”), an affiliate of the Schulte Group. As consideration for and to
give effect to this transfer, we assigned the receivables from IMS Holdings
through which the transaction was undertaken to IMS Capital Partners in exchange
for the consent of IMS Capital Partners to the execution of the Amended MOA.
This amount was credited by Kronos as additional paid in capital, and Kronos
accepted the rights to the chemical tanker pursuant to the Amended MOA. The
outcome left Kronos as the sole holder of all rights and obligations with
respect to the potential acquisition of the chemical tanker and resulted in IMS
Capital Partners and IMS Holdings each holding directly offsetting note
obligations. By entering into a Note Cancellation Agreement, the note
obligations between IMS Holdings and IMS Capital Partners were
terminated.
 
 The
Amended MOA was entered into on April 25, 2009. It extended the term of the loan
and bank guarantee through July 30, 2010, increased the interest rate and the
possible liquidated damages, required us to pay a lump sum amount of $200,000 as
a fee for providing the extension of the bank guarantee, waived any prior
default and clarified certain other terms of the original MOA. The interest on
the Schulte Group Facility is based on the three-month US LIBOR rate plus a
margin of 4.50%. Interest is due quarterly. As part of the changes, the parties
to the MOA were formally changed to be between Kronos in place of IMS Holdings
and Conway in place of the Schulte Group. As a result of the amended MOA, the
payable to Schulte Group and the offsetting deposits on the chemical tanker
transaction were recorded on the books of Kronos.
 
 In light
of the global downturn in the economy and the resulting decrease in charter
rates for chemical tankers, and product tankers in general, we have elected to
abandon our option to purchase the chemical tanker. We recognized an impairment
to the deposit on asset acquisition on our balance sheet as of December 31, 2009
to reduce the carrying value of this asset, resulting in the recognition of a
loss on impairment of $9,874,907. On April 9, 2010, we abandoned our option to
acquire the tanker, and under the terms of the Amended MOA, we became subject to
the $3,000,000 in liquidated damages and the principal balance of $5,300,000 due
under the facility was extinguished, resulting in recognition of a $5,300,000
gain on the extinguishment of debt. The result is a net loss between these two
events of approximately $4,574,907, which in the end represents liquidating
damages of $3,000,000, plus the loss of our capitalized costs approximating
$1,574,907. In addition, we recognized interest expense on the Schulte Group
Facility for the period ended September 30, 2010 totaling
$62,946.
  44
 
 Since
that time, we have undertaken a review of the Schulte Group’s role in the
acquisition of the tanker. This review includes a review of their contractual
responsibilities with respect to efforts to achieve pricing for the tanker
consistent with market fluctuations, and their construction oversight for our
vessels and the other pool vessels to assure that the shipyard was in a position
to timely fulfill its responsibilities under the shipbuilding contracts, among
other items. Management is reviewing all options available to us should we
determine that further action is required against either the Schulte Group,
Conway Shipping I, Ltd, or the Hanseatic Tanker Pool.
 
 The table
below includes the assets and liabilities recorded on our consolidated balance
sheet related to the option to purchase the equity in Anthos, associated debt
with Deutsche Schiffsbank and other expenses of Kronos.
 
 September 30,
                        
                        
                        December 31,2010
                        
                        
                        2009Cash
      and cash equivalents
                        
                        $
                        164
                        
                        
                        $
                        956Related
      party receivable
                        
                        
                        -
                        
                        
                        
                        -Deferred
      loan fees
                        
                        
                        -
                        
                        
                        
                        -Total
      assets
                        
                        
                        164
                        
                        
                        
                        956Accounts
      payable and other accrued liabilities
                        
                        
                        95,169
                        
                        
                        
                        97,297Due
      to related party
                        
                        
                        137,117
                        
                        
                        
                        137,117Schulte
      Group note payable
                        
                        
                        -
                        
                        
                        
                        5,300,000Total
      liabilities
                        
                        
                        232,286
                        
                        
                        
                        5,534,414Net
      liabilities
                        
                        $
                        (232,122
                        )
                        
                        $
                        (5,533,458
                        )
 
 Ongoing Capital
Expenditures
 We had a
commitment to purchase one remaining AHTS vessel under construction as of June
30, 2010 at an estimated cost of $56,292,426 (EUR 41,355,000). This acquisition
was completed on July 2, 2010, and completed our planned AHTS vessel
acquisitions. Under the AHTS shipbuilding contracts, installments were due in
five stages based upon certain milestones being met during construction.
Approximately 30% of the total construction costs required deposits, some of
which were to be funded with equity while others were expected to be funded from
the Senior Loan or its Pre-Delivery Facility. Amounts drawn on the Pre-Delivery
Facility required either (i) that each AHTS SPV was fully funded based on the
capital as called for in the applicable SPV agreements or (ii) the provision of
a guarantee acceptable to Nord/LB. For the nine months ended September 30, 2010,
we have incurred expenses of $273,342 (EUR 207,549), related to the guarantee.
There was no expense incurred related to the guarantee for the three months
ended September 30, 2010. The Hartmann Guarantee in the amount of $45,932,786
(EUR 32,046,875) was outstanding at December 31, 2009. The Pre-Delivery Facility
was not utilized, and there was no amount outstanding under the Hartmann
Guarantee as of September 30, 2010. The construction installments to have been
paid with the Pre-Delivery Facility were postponed under amendments to the
shipbuilding contracts until delivery of the applicable AHTS vessel, and
interest was paid to Fincantieri on the outstanding installment payments at a
rate based on the nine-month EURIBOR plus 2%. As of September 30, 2010 and
December 31, 2009, we incurred $535,278,994 and $291,543,002, respectively, in
connection with the AHTS vessel acquisitions.
 
 In
addition to our obligations to Fincantieri, there are agreements between the
AHTS SPVs and Hartmann Offshore for vessel construction oversight and commercial
and technical management during construction. Additionally, each AHTS SPV
entered into a contract with the German Subsidiary, whereby the German
Subsidiary or its assignee would provide financial services including, but not
limited to, the procurement of equity during the building period of the relevant
AHTS vessel. Under such agreements, the German Subsidiary would have received
fees of $680,600 (EUR 500,000) payable in four equal installments, each due at
(i) the beginning of steel cutting, (ii) installation of the main engines, (iii)
launching of the vessel and (iv) delivery of the completed vessel. The German
Subsidiary subcontracted the requirement to provide these services and the right
to receive these payments to Suresh Capital Consulting & Finance Ltd.,
Maritime Funding Group LLC and Churada Investments Limited which are affiliates
of SCMH.
  45
  Discussion of Short- and
Long-Term Liquidity Needs
 Our
short- and long-term liquidity needs in our AHTS SPVs relate primarily to the
need for operating capital for our AHTS vessels and funding our debt service
obligations, including both our Senior Loan with Nord/LB and the Hartmann Asia
Loan Agreement. In addition to the operations and debt service obligations of
our AHTS SPVs, we have operating expenses in our Cayman partnership and our
German and Cyprus subsidiaries, and debt service obligations in our German
subsidiary.
 
 The
delivery of the last three of the twelve AHTS vessels covered under the Senior
Loan with Nord/LB to the AHTS SPVs of FLTC Fund I occurred during September and
October 2010, with the last of those three vessels being delivered to FLTC Fund
I’s AHTS SPV Isle of Fehmarn on October 27, 2010. Just prior to that delivery,
an evaluation was performed of the aggregate investment costs of all twelve AHTS
vessels financed under the Senior Loan facility for purposes of determining the
extent of restrictions on proceeds available under the Senior Loan, under which
total loan proceeds are limited to 75% of the aggregate investment costs.
Aggregate investment costs is defined by the Nord/LB Senior Loan to include the
construction price, building supervision, financing, initial equipment and other
costs, of all the ships covered by the Senior Loan.
 
 Related
to this requirement, our nine AHTS SPVs loaned approximately $21,033,841 (EUR
15,063,984) to the three AHTS SPVs of FLTC Fund I, which represents the
approximate amount by which our nine AHTS SPVs aggregate borrowing under the
Nord/LB Loan exceeded 75% of the aggregate investment costs of vessel
acquisitions for our nine AHTS SPVs. This loan was funded primarily with the
proceeds of the Hartmann Asia Loan Agreement to our AHTS SPV Isle of Usedom,
supplemented by operating cash held in our nine AHTS SPVs. The terms of the
Hartmann Asia Loan Agreement include interest at a rate of 6% per annum, with
repayment of outstanding principal and interest due on January 1,
2013.
 
 Our
primary source of funding for our AHTS vessel operations and our debt service
obligations is the results of operations of our AHTS vessels. If the net results
of operations are not sufficient due to charter rates below break even, low
utilization, unexpected increases in expenses or some combination thereof or
other factors, then we would likely first seek debt financing in our AHTS SPVs
in the form of additional funding from Nord/LB, or
additional financing from elsewhere, which Nord/LB would likely be required to
approve.
 
 If debt
financing was not available, then there is the potential that ATL Offshore GmbH
(“ATL Offshore”), which serves as the general partner of each AHTS SPV and is a
member of the Hartmann Group, would be forced to call in the remaining unfunded
share capital in order to meet obligations of the SPVs. If additional capital
were called, we would be required pursuant to the AHTS SPV formation documents
(“Company Agreements”) to fund the capital call up to our maximum share of the
Capital Commitment. If we were unable to fund the capital call from additional
limited partner contributions, we would likely seek additional financing sources
or equity investors, which could include the sale of debt or equity securities
through either our Cayman Partnership or our Cyprus or German
subsidiaries.
 
 If our
liquidity from operations was insufficient to fund our obligations, and ATL
Offshore was therefore forced to call additional capital, and we were unable to
secure the additional funding for the capital called, our fellow limited
partner, Reederei Hartmann, could fund our unfunded portion under the Company
Agreements for each AHTS SPV to provide the needed liquidity. The addendum to
the Share Transfer Agreement executed on February 10, 2010 calls for funding by
Reederei Hartmann to give rise to a loan from Reederei Hartmann to our German
Subsidiary. There can be no guarantee that Reederei Hartmann or any member of
the Hartmann Group will be willing or able to extend additional loan agreements
on the same terms or at all for the remaining capital contribution obligations.
In the event that Reederei Hartmann is unable or unwilling to fund our unfunded
capital to meet the obligations of the AHTS SPVs, ATL would likely seek to raise
capital from other sources, which could dilute our ownership, or ATL could seek
to sell all or partial interest in a vessel or vessels.
 
 Under the
Company Agreements, we have committed to contribute capital to these entities
totaling $142,926,000 (EUR 105,000,000) (“Capital Commitment”). This amount
reflects an increase in our share capital commitment for the Isle of Usedom SPV
from $13,782,150 (EUR 10,125,000) to $38,794,200 (EUR 28,500,000) in order to
comply with the terms of the Senior Loan. Through contributions made to each
SPV, we had funded $96,502,274 (EUR 70,895,000) as of September 30, 2010,
leaving our remaining capital contribution obligation of $46,423,726 (EUR
34,105,000). Our limited partners are not subject to additional capital calls
under our Agreement of Limited Partnership.
  46
 
 In
addition to the operations and debt service obligations of our AHTS SPVs, we
have operating expenses in our Cayman partnership and our German and Cyprus
subsidiaries, and debt service obligations in our German subsidiary. Our debt
service obligations are primarily related to the RHKG Loan Agreements and
Hartmann Loan Agreements, through which we funded a portion of our capital
contribution obligation to the AHTS SPVs. The terms of these loans are as
discussed under RHKG Loan
Agreements and Hartmann
Loan Agreement above, and include the granting of a security interest in
our interest in the respective AHTS SPV, and restrictions on the use of
dividends from the AHTS SPV for repayment of the loan agreements. Interest is
due annually upon each anniversary date.
 
 Our
sources of liquidity include funds from operations of our AHTS SPVs, to the
extent we are able to operate them profitably, if at all. Our share of profits
will first be utilized to service this debt and to fund our remaining capital
contribution obligations. Additional liquidity may come from proceeds from the
continuing private placement of our limited partnership units, and potential
funding from sales of additional debt or equity interests in our Cayman
partnership or our Cyprus or German subsidiaries. Our short term liquidity needs
include the first of the annual interest payments on the RHKG and Hartmann Loan
Agreements, which fall due in February, March, and June 2011. If we are unable
to meet these obligations, the potential consequences include RHKG exercising
its security interests in the AHTS SPVs under the agreements, which could dilute
our ownership in the AHTS SPVs.
 
 Outlook for
Distributions
 The
combined terms of the Share Transfer Agreement as amended and the RHKG Loan
Agreements and Hartmann Loan Agreement require the German Subsidiary to reserve
distributions from the AHTS SPV’s for repayment of the RHKG and Hartmann Loan
Agreements, and additionally require that distributions either outside the scope
of the RHKG and Hartmann Loan Agreements or beyond amounts required to repay the
RHKG and Hartmann Loans be maintained in an escrow account for purpose of
funding capital contributions with respect to the other AHTS SPVs until all such
SPVs are fully funded. Therefore, we do not anticipate making distributions in
the future until this funding stage is completed. Our ability to make
distributions thereafter will be heavily influenced by the dividend restrictions
currently in the Senior Loan, and ultimately will depend on day rates achieved
and the results of operations of our vessels, which will impact our ability to
repay our debt and the amounts available for distribution after those repayments
and payment of all expenses.
 
  Critical
Accounting Estimates
 
 The
preparation of financial statements in accordance with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Our significant accounting policies, which are reviewed by management
on a regular basis, are described in Note 1 Nature of Partnership’s Business and
Summary of Significant Accounting Policies in our Notes to Consolidated
Financial Statements.
 
 We deem
an accounting policy to be critical if it requires an accounting estimate to be
made based on assumptions about matters that are uncertain at the time the
estimate is made, and if different estimates that reasonably could have been
used, or changes in the accounting estimates that are reasonably likely to occur
periodically, could materially impact the financial statements. Management
believes the following critical accounting policies reflect its more significant
estimates and assumptions used in the preparation of our Consolidated Financial
Statements.
 
 Revenue
Recognition
 Our
revenue is earned primarily from time chartering of vessels to charterers based
upon daily rates of hire. Our AHTS SPVs participate in the UOS AHTS Pool under
which they pool their Voyage Results, which is their revenue less voyage
expenses. Revenue from charters is generally recorded when services are
rendered, estimates are reasonably determinable and collection is reasonably
assured. Revenue is recognized net of price adjustments and other potential
adjustments based upon the daily charter rate for the reporting period. Our
pooling arrangement under the UOS AHTS Pool will not have any bearing on our
revenue until such time as one of the vessels owned by FLTC Fund I begins to
participate in the UOS AHTS Pool, which is expected during the fourth quarter
2010. After such time, our revenue will be recorded taking into account
potential pool adjustments for the period. The period in which management
estimates revenues have been earned and the extent to which those revenues are
deemed collectible, and estimates of any adjustments to revenues, could have a
material effect on the net recognized revenue in any given
period.
  47
 
 Valuation of Derivative
Financial Instruments
 We
account for derivatives and derivatives classified as hedges in accordance with
FASB ASC 815, Derivatives and
Hedges. All our derivative and hedge positions are stated at fair value
within either current derivative assets, non-current derivative assets, current
derivative liabilities or long-term derivative liabilities on our consolidated
balance sheet. Realized and unrealized gains and losses related to our foreign
currency exchange contracts not classified as hedges are reported in our
consolidated statements of operations in foreign currency transaction gain
(loss), while those related to foreign currency exchange contracts designated
for hedge accounting are included in foreign currency transaction gain (loss) on
the consolidated statement of operations with the effective portion of the fair
value gains or losses recorded as part of accumulated other comprehensive income
(loss) on the consolidated balance sheet. The gain or loss related to our
interest rate swap contracts, none of which are classified as hedges, is
reported in loss on interest rate swaps.
 
 In order
to value the derivatives, management must make estimates regarding the future
values of interest and currency exchange rates. Management relies on published
forward estimates of EURIBOR rates and currency exchange rates when estimating
the fair value of its derivatives. These estimates could materially change from
what was available at the balance sheet date.
 
 We
evaluate the risk of counterparty default by monitoring the financial condition
of the financial institutions and counterparties involved and primarily
conducting business with well-established financial institutions. We do not
currently anticipate nonperformance by any of our counterparties.
 
 Fixed
Assets
 Vessels
are stated at cost less accumulated depreciation. Vessel costs include
acquisition costs directly attributable to the vessel and expenditures made to
prepare the vessel for its initial voyage. Vessels are depreciated on a
straight-line basis over their estimated useful lives which have been determined
to be 20 years from the initial delivery date from the shipyard.
 
 The
estimated useful life was determined based on the historical useful lives of
like-kind vessels. The actual useful life could be more or less than estimated,
and this could result in the vessels being stated at values materially above or
below their actual value. Factors that could result in a shorter useful life,
and thus an actual value of less than the stated value, include the unexpected
emergence of new technology making our vessels obsolete sooner than expected, or
changes in maritime or environmental law which are unpredictable but could
result in a shorter than expected useful life for our vessels. If the useful
life is materially less than that estimated for depreciation purposes, it could
result in our having to record an impairment to the value of the asset. A
similar situation could arise if a vessel which we have an intention to sell is
found to have a fair value less cost to sell lower than its stated value at the
time it is reclassified as held for sale, due to a shorter useful life than that
estimated in computing depreciation. In this case we would be required to record
an allowance against the asset at the time it is reclassified as held for sale
for the difference between the carrying value and the fair value less cost to
sell.
 
 Dry
Docking
 We
estimate expenses for periodic maintenance, which is referred to as dry docking
expense. These costs are incurred approximately every two and one-half years.
These costs will be capitalized once they have occurred and amortized over two
and a half years until the next dry docking occurs.
 
 Impairment of Long-Lived
Assets
 We assess
long-lived assets for recoverability in accordance with FASB ASC 360, Property, Plant and
Equipment, which requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets is
measured by comparing the carrying amount of an asset, which is based on cost
less depreciation taken to date, to future undiscounted net cash flows expected
to be generated by the asset. These evaluations for impairment are significantly
impacted by estimates of revenues, costs, expenses and other factors. As such,
the outcome of the evaluation analysis is subject to management’s estimates,
which could differ from actual. This could potentially cause us to fail to
record an impairment, when actual circumstances later result in realization of a
loss on the asset, or to record an impairment when none actually exists. If
these assets are considered to be impaired, the impairment to be recognized is
calculated as the excess of the asset’s carrying value over its fair
value.
  48
 
 New
Accounting Pronouncements
 
 In
October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic
605)—Multiple-Deliverable Revenue Arrangements, which amends ASC 605,
Revenue Recognition, to
require companies to allocate revenue in multiple-element arrangements based on
an element’s estimated selling price if vendor-specific or other third-party
evidence of value is not available. ASU 2009-13 is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Earlier application is permitted. The
adoption of this ASU is not expected to have a material impact on the
Partnership’s financial position, results of operations or cash
flows.
  49
  Item
4.  Controls and Procedures
 
 As of
September 30, 2010, our general partner’s chief executive officer and chief
financial officer evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 (“Securities Exchange Act”)), and concluded that, as of
such date, our disclosure controls and procedures were adequate and effective
for the purpose of ensuring that information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange Act (15 U.S.C
78a et seq.) is
recorded, processed, summarized and reported, within the time periods specified
by the SEC’s rules and forms and is accumulated and communicated to our
management, including the principal executive and principal financial officers
of our general partner, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosures.
 
 During
the period ended September 30, 2010, there have been no changes in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, those internal controls subsequent to
the date of the evaluation. As a result, no corrective actions were required or
undertaken.
  50
  PART
II.  Other Information
 
  Item
1.  Legal Proceedings
 
 We may in
the future be involved as a party to various legal proceedings, which are
incidental to the ordinary course of business. We regularly analyze current
information and, as necessary, provide accruals for probable liabilities on the
eventual disposition of these matters. No director, executive officers or
affiliate of ours or owner of record or beneficially of more than five percent
of any class of our limited partner units is a party adverse to us or has a
material interest adverse to us in any proceeding. In the opinion of management,
as of September 30, 2010, there were no threatened or pending legal matters that
would have a material impact on our consolidated results of operations,
financial position or cash flows.
 
 Item
1A.  Risk Factors
 
 Investing
in us involves a degree of risk, including the risks described in our Annual
Report on Form 10-K for the year ended December 31, 2009 as filed with the SEC.
Our operating results have been, and will continue to be, affected by a wide
variety of risk factors, many of which are beyond our control, that could have
adverse effects on profitability during any particular period. Additional risks
and uncertainties not currently known or deemed to be immaterial may also
materially and adversely affect our business operations. If any of the risks
referred to above were to actually occur, our business, financial condition or
results of operations could be materially and adversely affected. Limited
partner units are inherently different from the capital stock of a corporation,
although many of our business risks are similar to those that would be faced by
a corporation engaged in a similar business.
 
  Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 During
the three months ended September 30, 2010, we issued and sold approximately
1,450 Class A limited partnership units to our partners at a purchase price of
$100.00 per unit.
 
  Exemption
from registration for Sales of Restricted Securities
 None of
these sales were registered with the SEC. Each of these sales were deemed to be
exempt from registration under the Securities Act pursuant to Section 4(2) and
Rule 506 of Regulation D thereof, as transactions by an issuer not involving a
public offering. No underwriting discounts or commissions were paid in these
transactions and we conducted no general solicitation in connection with the
offer or sale of the securities. The purchasers of the securities in each
transaction were accredited investors as defined in Regulation D, and such
purchasers made representations to us regarding their status as accredited
investors and their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof.
Registration of sales to accredited investors is preempted from state regulation
by Section 18 of the Securities Act, though states may require the filing of
notices, a fee and other administrative documentation. All purchasers were
provided a private placement memorandum containing all material information
concerning the partnership and the offering. All purchases were made with cash
and the total amount of cash consideration for those securities was
approximately $145,000.
 
  Use
of Proceeds of Registered Securities
 The
proceeds from the sale of limited partnership units have been used to provide
funding for our operating activities, and to provide equity in our AHTS vessel
entities.
  51
  Item
6.  Exhibits
 
 Exhibit
                      Number
                    
                    Title of Document10.1
                    
                    Addendum
      No. 1 to the Loan Agreement by and among Norddeutsche Landesbank
      Girozentrale, as Lender, Mandated Lead Arranger and Agent, ATL Offshore
      GmbH & Co. MS “Juist” KG, ATL Offshore GmbH & Co. MS “Norderney”
      KG, ATL Offshore GmbH & Co. “Isle of Baltrum” KG, ATL Offshore GmbH
      & Co. “Isle of Langeoog” KG, ATL Offshore GmbH & Co. “Isle of
      Amrum” KG, ATL Offshore GmbH & Co. “Isle of Sylt” KG, ATL Offshore
      GmbH & Co. “Isle of Wangerooge” KG, ATL Offshore GmbH & Co. “Isle
      of Neuwerk” KG, ATL Offshore GmbH & Co. “Isle of Usedom” KG, ATL
      Offshore GmbH & Co. “Isle of Fehmarn” KG, ATL Offshore GmbH & Co.
      “Isle of Memmert” KG, and ATL Offshore GmbH & Co. “Isle of Mellum” KG,
      as jointly and severally liable borrowers.  (Incorporated by
      reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the
      SEC on November 2, 2010)10.2
                    
                    Intercreditor
      Agreement 12 A.H.T.S. Vessels built by Fincantieri Cantieri Navali S.p.A.
      between Norddeutsche Landesbank Girozentrale, Hannover, Germany, and
      Hartmann Asia Holding PTE Ltd, Singapore and ATL Offshore GmbH & Co.
      “Isle of Usedom” KG, Leer Germany  (Incorporated by reference to
      Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on
      November 2, 2010)10.3
                    
                    Loan
      Agreement between Hartmann Asia Holding PTE Ltd, as Lender, and ATL
      Offshore GmbH & Co. “Isle of Usedom” KG, as Borrower, dated
      August 31, 2010.  (Incorporated by reference to Exhibit
      10.3 to our Current Report on Form 8-K filed with the SEC on November 2,
      2010)10.4
                    
                    Addendum
      1 to the Loan Agreement dated August 31, 2010 between Hartmann Asia
      Holding PTE Ltd, as Lender, and ATL Offshore GmbH & Co. “Isle of
      Usedom” KG, as Borrower, dated September 28, 2010. (Incorporated by
      reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the
      SEC on November 2, 2010)10.5
                    
                    Addendum
      2 to the Loan Agreement dated August 31, 2010 between Hartmann Asia
      Holding PTE Ltd, as Lender, and ATL Offshore GmbH & Co. “Isle of
      Usedom” KG, as Borrower, dated October 27, 2010. (Incorporated by
      reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the
      SEC on November 2, 2010)10.6
                    
                    Revised
      Intercreditor Agreement - 12 A.H.T.S. Vessels built by Fincantieri
      Cantieri Navali S.p.A. between Norddeutsche Landesbank Girozentrale,
      Hannover, Germany, and Hartmann Asia Holding PTE Ltd, Singapore and ATL
      Offshore GmbH & Co. “Isle of Usedom” KG, Leer
  Germany.31.1*
                    
                    Certification
      (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Executive
      Officer31.2*
                    
                    Certification
      (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Financial
      Officer32.1*
                    
                    Section
      1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief
      Executive Officer32.2*
                    
                    Section
      1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief
      Financial Officer
 
 *
              Filed
      herewith.
  52
  SIGNATURE
  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.
  III
      to I Maritime Partners Cayman I, L.P.(Registrant)By:
                III
      to I International Maritime Solutions Cayman, Inc.Its
      General PartnerBy:
                /s/  Jason M.
    MortonJason
      M. MortonDirector
      and Chief Financial Officer(Duly
      authorized to sign this report on behalf of the
                  Registrant)Date:  November
      15, 2010
  53
  Exhibits
 
 Exhibit
                      Number
                    
                    Title of Document10.1
                    
                    Addendum
      No. 1 to the Loan Agreement by and among Norddeutsche Landesbank
      Girozentrale, as Lender, Mandated Lead Arranger and Agent, ATL Offshore
      GmbH & Co. MS “Juist” KG, ATL Offshore GmbH & Co. MS “Norderney”
      KG, ATL Offshore GmbH & Co. “Isle of Baltrum” KG, ATL Offshore GmbH
      & Co. “Isle of Langeoog” KG, ATL Offshore GmbH & Co. “Isle of
      Amrum” KG, ATL Offshore GmbH & Co. “Isle of Sylt” KG, ATL Offshore
      GmbH & Co. “Isle of Wangerooge” KG, ATL Offshore GmbH & Co. “Isle
      of Neuwerk” KG, ATL Offshore GmbH & Co. “Isle of Usedom” KG, ATL
      Offshore GmbH & Co. “Isle of Fehmarn” KG, ATL Offshore GmbH & Co.
      “Isle of Memmert” KG, and ATL Offshore GmbH & Co. “Isle of Mellum” KG,
      as jointly and severally liable borrowers.  (Incorporated by
      reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the
      SEC on November 2, 2010)10.2
                    
                    Intercreditor
      Agreement 12 A.H.T.S. Vessels built by Fincantieri Cantieri Navali S.p.A.
      between Norddeutsche Landesbank Girozentrale, Hannover, Germany, and
      Hartmann Asia Holding PTE Ltd, Singapore and ATL Offshore GmbH & Co.
      “Isle of Usedom” KG, Leer Germany  (Incorporated by reference to
      Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on
      November 2, 2010)10.3
                    
                    Loan
      Agreement between Hartmann Asia Holding PTE Ltd, as Lender, and ATL
      Offshore GmbH & Co. “Isle of Usedom” KG, as Borrower, dated
      August 31, 2010.  (Incorporated by reference to Exhibit
      10.3 to our Current Report on Form 8-K filed with the SEC on November 2,
      2010)10.4
                    
                    Addendum
      1 to the Loan Agreement dated August 31, 2010 between Hartmann Asia
      Holding PTE Ltd, as Lender, and ATL Offshore GmbH & Co. “Isle of
      Usedom” KG, as Borrower, dated September 28, 2010. (Incorporated by
      reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the
      SEC on November 2, 2010)10.5
                    
                    Addendum
      2 to the Loan Agreement dated August 31, 2010 between Hartmann Asia
      Holding PTE Ltd, as Lender, and ATL Offshore GmbH & Co. “Isle of
      Usedom” KG, as Borrower, dated October 27, 2010. (Incorporated by
      reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the
      SEC on November 2, 2010)10.6
                    
                    Revised
      Intercreditor Agreement - 12 A.H.T.S. Vessels built by Fincantieri
      Cantieri Navali S.p.A. between Norddeutsche Landesbank Girozentrale,
      Hannover, Germany, and Hartmann Asia Holding PTE Ltd, Singapore and ATL
      Offshore GmbH & Co. “Isle of Usedom” KG, Leer
  Germany.31.1*
                    
                    Certification
      (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Executive
      Officer31.2*
                    
                    Certification
      (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief Financial
      Officer32.1*
                    
                    Section
      1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief
      Executive Officer32.2*
                    
                    Section
      1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief
      Financial Officer
 
 *
              Filed
      herewith.
  54