6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the
Securities Exchange Act of 1934

For the month of December 2007

Commission File Number: 000-51672

FreeSeas Inc.

89 Akti Miaouli & 4 Mavrokordatou Street
185 38 Piraeus, Greece
(Address of principal executive offices)

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

Form 20-F þ Form 40-F o

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

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

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-     .

     This report on Form 6-K and the exhibits attached thereto are incorporated by reference into the Registrant’s Registration Statement on Form F-3, File No. 333-145098.

SUBMITTED HEREWITH:

Exhibits
99.1	Management’s Discussion and Analysis for the three and nine months ended September 30, 2007
99.2	Interim Financial Statements for the three and nine months ended September 30, 2007

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SIGNATURES

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

Date: December 20, 2007	FreeSeas Inc.
	By:	Dimitris D. Papadopoulos
		Name:	Dimitris D. Papadopoulos
		Title:	Chief Financial Officer

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EX-99.1

Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

     The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements include information about our possible or assumed future results of operations or our performance. Words such as “expects,” “intends,” “plans,” “believes,” “anticipates,” “estimates,” and variations of such words and similar expressions are intended to identify the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements.

     Forward-looking statements include statements regarding:

• our future operating or financial results;

• future, pending or recent acquisitions, business strategy, areas of possible expansion, and expected capital spending or operating expenses;

• drybulk shipping industry trends, including charter rates and factors affecting vessel supply and demand;

• our financial condition and liquidity, including our ability to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;

• our ability to pay dividends in the future;

• availability of crew, number of off-hire days, dry-docking requirements and insurance costs;

• our expectations about the availability of vessels to purchase or the useful lives of our vessels;

• our ability to leverage to our advantage our manager’s relationships and reputations in the drybulk shipping industry;

• changes in seaborne and other transportation patterns;

• changes in governmental rules and regulations or actions taken by regulatory authorities;

• potential liability from future litigation and incidents involving our vessels;

• global and regional political conditions;

• acts of terrorism and other hostilities; and

• other factors discussed in the section titled “Risk Factors” in our Annual Report on Form 20-F as filed with the U.S. Securities and Exchange Commission.

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     We undertake no obligation to publicly update or revise any forward-looking statements contained in this report, or the documents to which we refer you in this report, to reflect any change in our expectations with respect to such statements or any change in events, conditions or circumstances on which any statement is based.

     FreeSeas Inc. is a Republic of the Marshall Islands company that is referred to in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, together with its subsidiaries, as “FreeSeas Inc.,” “FreeSeas,” “the company,” “we,” “us,” or “our.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes thereto, which are included elsewhere in this report.

     General

     We are a shipping company that currently operates five vessels in the drybulk shipping market through our wholly owned subsidiaries. We were formed on April 23, 2004 under the name “Adventure Holdings S.A.” pursuant to the laws of the Republic of the Marshall Islands to serve as the parent holding company of the ship-owning entities. On April 27, 2005, we changed our name to “FreeSeas Inc.”

     On December 15, 2005, we completed a merger with Trinity Partners Acquisition Company Inc., a blank check corporation organized under the laws of the State of Delaware. Under the terms of the merger, we were the surviving corporation. Each outstanding share of Trinity’s common stock and Class B common stock was converted into the right to receive an equal number of shares of our common stock, and each Trinity Class W warrant and Class Z warrant was converted into the right to receive an equal number of our Class W warrants and Class Z warrants.

     Our common stock, Class W warrants and Class Z warrants began trading on the NASDAQ Capital Market on December 16, 2005 under the trading symbols FREE, FREEW and FREEZ, respectively. As a result of the merger, Trinity’s former securities, including the Trinity Class A Units and the Class B Units, ceased trading on the OTC Bulletin Board.

     The operations of our vessels are managed by Free Bulkers, S.A., or Free Bulkers, an affiliated Marshall Islands corporation. Free Bulkers provides us with a wide range of shipping services. These services include, at a monthly fee per vessel, the required technical management, such as managing day-to-day vessel operations including supervising the crewing, supplying, maintaining and dry-docking of vessels. Also for a fee, Free Bulkers covers the commercial management of our fleet, such as identifying suitable vessel charter opportunities, which are provided by Safbulk Pty, Ltd., a company controlled by one of our affiliates, under a subcontract agreement from Free Bulkers. In addition, Free Bulkers provides us with all the necessary accounting services and, effective July 1, 2007, all the necessary financial reporting services for a fixed quarterly fee.

     During the nine-month period ended September 30, 2007, our fleet consisted of three Handysize vessels and one Handymax vessel that carried a variety of drybulk commodities, including coal, iron ore, and grains, or major bulks, as well as bauxite, phosphate, fertilizers and steel products, or minor bulks. We sold one of the three Handysize vessels, the M/V Free Fighter, on April 27, 2007 for gross proceeds of $11,075,000, and net proceeds of $10,606,000 after deducting selling costs. Therefore, as of September 30, 2007, our fleet consisted of three Handysize vessels, the M/V Free Destiny built in 1982 with a carrying capacity of 25,240 dwt, the M/V Free Envoy built in 1984 with a carrying capacity of 26,318 dwt and the M/V Free Hero, built in 1995 with carrying capacity of 24,318 dwt plus one Handymax vessel, the M/V Free Jupiter, built in 2002 with a carrying capacity of 47,777 dwt.

     Subsequent to the quarter ended September 30, 2007, we took delivery of the M/V Free Goddess built in 1995 with a carrying capacity of 22,051 dwt for $25,200,000. See Note 18.A to our interim financial statements for additional details on the acquisitions of the M/V Free Hero, the M/V Free Jupiter and the M/V Free Goddess.

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     The following table details the vessels presently owned:

Name	Class	DWT		Built		Flag	Purchase Price	Delivery Date	Employment
Free Envoy	Handysize		26,318		1984	Marshall Islands	$9.50 million	September 20, 2004	One-year time charter through April 2008 at $17,000 per day
Free Destiny	Handysize		25,240		1982	Marshall Islands	$7.60 million	August 3, 2004	Currently on spot charter at $28,000 per day
Free Hero	Handysize		24,318		1995	Marshall Islands	$25.25 million	July 3, 2007	Two-year time charter through December 2008/February 2009 at $14,500 per day
Free Jupiter	Handymax		47,777		2002	Marshall Islands	$47.00 million	September 5, 2007	Currently in dry dock for unscheduled repairs following a grounding incident; upon repair completion to be delivered for a three-year time charter through October 2010 at $32,000 per day for the first year, $28,000 per day for the second year, and $24,000 per day for the third year
Free Goddess	Handysize		22,051		1995	Marshall Islands	$25.20 million	October 30, 2007	Two-year time charter until December 2009 at $19,250 per day

     One of our vessels, the M/V Free Jupiter, is undergoing an unscheduled dry-docking for repairs necessitated by a grounding incident off the coast of the Philippines on September 21, 2007 resulting in severe bottom damage. The vessel was refloated and temporary repairs were carried out before she proceeded to its destination under own power to discharge her cargo. After completion of discharge, the vessel sailed to a shipyard to undergo permanent repairs which are presently under way. No estimated completion date has yet been given by the shipyard. We expect that the vessel’s insurance will cover the vessel’s repairs and related expenses, less applicable deductibles. While repairs are underway, the vessel will remain off hire. At the present time, we are not able to accurately estimate the period the vessel will be out of service or the impact the dry-docking will have on our results of operations.

     Acquisition of Vessels

     From time to time as opportunities arise, we intend to acquire additional secondhand drybulk carriers. We recently accepted delivery of the M/V Free Goddess, as described in Note 18.A to our unaudited condensed consolidated financial statements. Vessels are generally acquired free of charter. The M/V Free Hero and the M/V Free Goddess were acquired subject to a novation, or assumption, of their existing charters, and the M/V Free Jupiter was acquired free of charter. If no charter is assumed or novated when a vessel is acquired, we usually enter into a new charter contract. The shipping industry uses income days (also referred to as “voyage” or “operating” days) to measure the number of days in a period during which vessels actually generate revenues.

     Consistent with shipping industry practice, we treat the acquisition of a vessel (whether acquired with or without a charter) as the acquisition of an asset rather than a business. When we acquire a vessel, we conduct, also consistent with shipping industry practice, an inspection of the physical condition of the vessel, unless practical considerations do not allow such an inspection. We also examine the vessel’s classification society records. We do not obtain any historical operating data for the vessel from the seller. We do not consider that information material to our decision on acquiring the vessel.

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     Prior to the delivery of a purchased vessel, the seller typically removes from the vessel all records and log books, including past financial records and accounts related to the vessel. Upon the change in ownership, the technical management agreement between the seller’s technical manager and the seller is automatically terminated and the vessel’s trading certificates are revoked by its flag state, in the event the buyer determines to change the vessel’s flag state.

     It is rare in the shipping industry for the last charterer of a vessel from a seller to continue as the first charterer of the vessel from the buyer. Where a vessel has been under a voyage charter, the seller delivers the vessel free of charter to the buyer. When a vessel is under time charter and the buyer wishes to assume that charter, the buyer cannot acquire the vessel without the charterer’s consent and an agreement between the buyer and the charterer for the buyer to assume the charter. The purchase of a vessel does not in itself transfer the charter because the charter is a separate service agreement between the former vessel owner and the charterer.

     When we acquire a vessel and want to assume or renegotiate a related time charter, we must take the following steps:

• Obtain the charterer’s consent to us as the new owner;

• Obtain the charterer’s consent to a new technical manager;

• Obtain the charterer’s consent to a new flag for the vessel, if applicable;

• Arrange for a new crew for the vessel;

• Replace all hired equipment on board the vessel, such as gas cylinders and communication equipment;

• Negotiate and enter into new insurance contracts for the vessel through our own insurance brokers;

• Register the vessel under a flag state and perform the related inspections in order to obtain new trading certificates from the flag state, if we change the flag state;

• Implement a new planned maintenance program for the vessel; and

• Ensure that the new technical manager obtains new certificates of compliance with the safety and vessel security regulations of the flag state.

     Our business comprises the following primary components:

• Employment and operation of our drybulk carriers; and

• Management of the financial, general and administrative elements involved in the ownership and operation of our drybulk vessels.

     The employment and operation of our vessels involve the following activities:

• Vessel maintenance and repair;

• Planning and undergoing dry-docking, special surveys and other major repairs;

• Organizing and undergoing regular classification society surveys;

• Crew selection and training;

• Vessel spares and stores supply;

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• Vessel bunkering;

• Contingency response planning;

• Onboard safety procedures auditing;

• Accounting;

• Vessel insurance arrangements;

• Vessel chartering;

• Vessel hire management; and

• Vessel performance monitoring.

Important Measures for Analyzing Our Results of Operations

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

• Ownership days. We define ownership days as the total number of calendar days in a period during which each vessel in the fleet was owned by us. Ownership days are an indicator of the size of the fleet over a period and affect both the amount of revenues and the amount of expenses that we record during that period.

• Available days. We define available days as the number of ownership days less the aggregate number of days that our vessels are off-hire due to major repairs, dry-dockings or special or intermediate surveys. The shipping industry uses available days to measure the number of ownership days in a period during which vessels are actually capable of generating revenues.

• Operating days. Operating days are the number of available days in a period less the aggregate number of days that vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.

• Fleet utilization. We calculate fleet utilization by dividing the number of operating days during a period by the number of ownership days during that period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for any reason including scheduled repairs, vessel upgrades, dry-dockings or special or intermediate surveys.

• Off-hire. The period a vessel is unable to perform the services for which it is required under a charter. Off-hire periods typically include days spent undergoing repairs and dry-docking, whether or not scheduled.

• Time charter. A time charter is a contract for the use of a vessel for a specific period of time during which the charterer pays substantially all of the voyage expenses, including port costs, canal charges and bunkers expenses. The vessel owner pays the vessel operating expenses, which include crew wages, insurance, technical maintenance costs, spares, stores and supplies and commissions on gross voyage revenues. Time charter rates are usually fixed during the term of the charter. Prevailing time charter rates do fluctuate on a seasonal and year-to-year basis and may be substantially higher or lower from a prior time charter agreement when the subject vessel is seeking to renew the time charter agreement with the existing charterer or enter into a new time charter agreement with another charterer. Fluctuations in time charter rates are influenced by changes in spot charter rates.

• Voyage charter. A voyage charter is an agreement to charter the vessel for an agreed per-ton amount of freight from specified loading port(s) to specified discharge port(s). In contrast to a time charter, the vessel owner is required to pay substantially all of the voyage expenses, including port costs, canal charges and bunkers expenses, in addition to the vessel operating expenses.

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• Time charter equivalent (TCE). The time charter equivalent equals voyage revenues minus voyage expenses divided by the number of operating days during the relevant time period, including the trip to the loading port. TCE is a standard seaborne transportation industry performance measure used primarily to compare period-to-period changes in a seaborne transportation company’s performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed during a specific period.

• EBITDA. We consider EBITDA to represent net earnings before interest, taxes, depreciation and amortization. Under the laws of the Marshall Islands, we are not subject to tax on international shipping income. However, we are subject to registration and tonnage taxes, which have been included in vessel operating expenses. Accordingly, no adjustment for taxes has been made for purposes of calculating EBITDA. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is an alternative measure of our liquidity performance and indebtedness.

     The following performance measures were derived from our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2007 and 2006, included elsewhere in this report. The historical data included below is not necessarily indicative of our future performance.

     All amounts in the tables below are in thousands of U.S. dollars, except for fleet data and average daily results.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
PERFORMANCE INDICATORS
Adjusted EBITDA (1)	$	2,371		$	1,403		$	7,372		$	2,085
Fleet Data:
Average number of vessels (2)		3.24			3.00			2.85			3.00
Ownership days (3)		298			276			776			819
Available days (4)		269			276			747			819
Operating days (5)		254			240			715			740
Fleet utilization (6)		85.2	%		87.0	%		92.1	%		90.4	%
Average Daily Results:
Average TCE rate (7)	$	17.028		$	12.771		$	16.271		$	10.081
Vessel operating expenses (8)		4.426			4.011			4.680			3.873
Management fees (9)		0.755			0.489			0.754			0.495
General and administrative expenses (10)		1.299			1.163			1.838			1.489
Total vessel operating expenses (11)	$	5.181		$	4.500		$	5.434		$	4.368

(1) Adjusted EBITDA. We consider Adjusted EBITDA to represent net earnings before interest, taxes, depreciation, amortization and change in the fair value of derivatives. Under the laws of the Marshall Islands, we are not subject to tax on international shipping income. However, we are subject to registration and tonnage taxes, which have been included in vessel operating expenses. Accordingly, no adjustment for taxes has been made for purposes of calculating Adjusted EBITDA. Adjusted EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of Adjusted EBITDA may not be comparable to that reported by other companies. Adjusted EBITDA is included herein because it is an alternative measure of our liquidity, performance and indebtedness. The following is a reconciliation of Adjusted EBITDA to net income:

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007		2006
Net income (loss)	$	(498	)	$	(111	)	$	2,125	$	(2,370	)
Depreciation and amortization of deferred charges		1,354			1,295			3,218		3,738
Change in derivatives fair value		362						362
Interest and finance cost, net		1,153			219			1,667		717
Adjusted EBITDA	$	2,371		$	1,403		$	7,372	$	2,085

(2)	Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.
(3)	Ownership days are the total number of days in a period during which the vessels in our fleet have been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(4)	Available days are the number of ownership days less the aggregate number of days that our vessels are off-hire due to major repairs, dry-dockings or special or intermediate surveys. The shipping industry uses available days to measure the number of ownership days in a period during which vessels should be capable of generating revenues.
(5)	Operating days are the number of available days less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(6)	We calculate fleet utilization by dividing the number of our fleet’s operating days during a period by the number of ownership days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons such as scheduled repairs, vessel upgrades, or dry-dockings or other surveys.
(7)	Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing operating revenues (net of voyage expenses) by operating days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Operating Revenues	$	4,879		$	3,320		$	12,709		$	8,614
Voyage Expenses & Commissions		(554	)		(255	)		(1,075	)		(1,154	)
Net Operating Revenues		4,325			3,065			11,634			7,460
Operating Days		254			240			715			740
Time Charter Equivalent daily rate	$	17.028		$	12.771		$	16.271		$	10.081

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(8) Average daily operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, are calculated by dividing vessel operating expenses by ownership days for the relevant period:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Vessel operating expenses	$	1,319	$	1,107	$	3,632	$	3,172
Ownership days		298		276		776		819
Daily vessel operating expense	$	4.426	$	4.011	$	4.680	$	3.873

(9)	Daily management fees are calculated by dividing total management fees paid on ships owned by ownership days for the relevant time period.
(10)	Average daily general and administrative expenses are calculated by dividing general and administrative expenses by operating days for the relevant period.
(11)	Total vessel operating expenses, or TVOE, is a measurement of our total expenses associated with operating our vessels. TVOE is the sum of daily vessel operating expense and daily management fees. Daily TVOE is calculated by dividing TVOE by fleet ownership days for the relevant time period.

     Results of Operations

     Three and nine months ended September 30, 2007 as compared to the three and nine months ended September 30, 2006

     REVENUES — Operating revenues for three months ended September 30, 2007 were $4,879,000, an increase of $1,559,000 or 47% over the comparable period in 2006. For the nine months ended September 30, 2007 operating revenues were $12,709,000, an increase of $4,095,000 or 47.5% over the $8,614,000 in operating revenues for the nine months ended September 30, 2006. Revenues increased primarily as a result of improved time charter rates and despite an overall reduction of 25 operating days resulting from the combination of the sale of the M/V Free Fighter on April 27, 2007 and the scheduled dry-docking of the M/V Free Destiny for the month of September 2007.

     OPERATING EXPENSES — Vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, totaled $1,319,000 and $3,632,000 in the three and nine months ended September 30, 2007, respectively, as compared to $1,107,000 and $3,172,000 in the three and nine months ended September 30, 2006, respectively. The increase of $212,000 in vessel operating expenses during the three months ended September 30, 2007 as compared to the comparable period in 2006, results primarily from the operation of an additional vessel, the M/V Free Jupiter, which was delivered to the Company on September 5, 2007 plus an amount of approximately $230,000 associated with two unscheduled repairs during February 2007, (i.e., main engine turbocharger of the M/V Free Envoy; main generator of the M/V Free Destiny) causing expenses beyond normal daily operation and maintenance costs. Consequently, the daily vessel operating expenses per vessel owned, not including the management fees paid to our affiliate, Free Bulkers, were $4,426 and $4,680 for the three and nine months ended September 30, 2007, respectively, as compared to $4,011 and $3,873 for the comparable periods in 2006 an increase of 10.3% and 20.8% for the three and nine month periods, respectively. There were no costs incurred or accrued during the three and nine month period ended September 30, 2007 relating to the grounding incident of the M/V Free Jupiter since only no-cure-no-pay contracted operations were underway but not completed.

     VOYAGE EXPENSES — Voyage expenses, which include bunkers, cargo expenses, port expenses, port agency fees, tugs, extra insurance and various expenses, were $289,000 and $328,000 for the three and nine months ended September 30, 2007, respectively, as compared to $nil and $550,000 for the three and nine months ended September 30, 2006, respectively.

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     DEPRECIATION AND AMORTIZATION — For the three and nine months ended September 30, 2007, depreciation expense totaled $1,148,000 and $2,615,000, respectively, as compared to $1,129,000 and $3,350,000, respectively, for the same periods in 2006. The increase in depreciation expense resulted primarily from the acquisitions of the M/V Free Hero, on July 3, 2007, and the M/V Free Jupiter, on September 5, 2007, partially offset by the change of the estimated useful life of the M/V Free Fighter to 30 years from 27 years, based on management’s re-evaluation of the useful life following the vessel’s regularly scheduled fifth special survey and docking as well as the subsequent sale of the M/V Free Fighter on April 27, 2007. For the three months ended September 30, 2007, amortization of dry-dockings, special survey costs and financing costs totaled $206,000, an increase of $40,000 from the same period in 2006. For the nine months ended September 30, 2007, amortization of dry-dockings, special survey costs and financing costs totaled $603,000 as compared to $388,000 for the nine months ended September 30, 2006. The increase in amortization expenses resulted primarily from incurring $1,882 of financing costs related to the availability of the credit facilities secured for the purchase of the new vessels M/V Free Hero, M/V Free Jupiter and M/V Free Goddess as discussed in Notes 6 and 18.A to our interim financial statements.

     MANAGEMENT FEES — Management fees for each of the three and nine months ended September 30, 2007 totaled $225,000 and $585,000, respectively, as compared to $135,000 and $405,000 for the comparable periods in 2006, respectively. The increase resulted primarily from the fees paid in connection with the acquisitions of the new vessels. Management fees are paid to our affiliate, Free Bulkers, for the technical management of our vessels and for certain accounting services related to the vessels’ operations. Pursuant to the management agreements related to each of our current vessels, we pay Free Bulkers a monthly management fee of $15,000 per vessel, commencing from the date of the relevant purchase memorandum of agreement. In addition, we reimburse at cost the travel and other personnel expenses of the Free Bulkers staff, including the per diem paid by Free Bulkers, when Free Bulkers’ employees are required to attend our vessels at port, both prior to and after taking delivery. These agreements have no specified termination date. We anticipate that Free Bulkers would manage any additional vessels that we may acquire in the future on comparable terms. We believe that the management fees paid to Free Bulkers are comparable to those charged by unaffiliated management companies.

     COMMISSIONS AND GENERAL AND ADMINISTRATIVE EXPENSES — For the three months ended September 30, 2007, commissions paid amounted to $265,000 as compared to $255,000 for the three months ended September 30, 2006. Commissions paid during the nine months ended September 30, 2007 totaled $747,000, compared to $604,000 for the nine months ended September 30, 2006. The commission fees represent commissions paid to Free Bulkers and unaffiliated third parties. Commissions paid to Free Bulkers equal 1.25% of freight or hire collected from the employment of our vessels. Free Bulkers has entered into a commercial sub-management agreement with Safbulk, an affiliate of FS Holdings Limited, one of our principal shareholders, pursuant to which Safbulk has agreed to perform charter and post charter management services for our fleet. Free Bulkers has agreed to pay Safbulk a fee equal to 1.25% of freight or hire collected from the employment of our vessels. The increase of $10,000 and $143,000 for the three and nine months ended September 30, 2007, respectively, as compared to the same periods in 2006 relate directly to the increase of operating revenues in the respective periods. General and administrative expenses, which included, among other things, international safety code compliance expenses, travel expenses, communications expenses, rental expense and legal and auditor review fees for the 6-K and F-3 SEC filings, totaled $330,000 and $1,314,000 for the three and nine months ended September 30, 2007, respectively, as compared to $279,000 and $1,102,000 for the three and nine months ended September 30, 2006, respectively. Our general and administrative expenses increased by $51,000 and $212,000 during the three and nine months ended September 30, 2007 primarily because of additional fees paid to our auditors and legal counsel relating to the reviews of our quarterly financial statements and SEC filings in 2007.

     STOCK-BASED COMPENSATION EXPENSE — For the three and nine months ended September 30, 2007, compensation cost totaled $25,000 and $75,000, respectively, as compared to $270,000 and $649,000 for the three and nine months ended September 30, 2006, respectively. Compensation costs reflect non-cash, equity based compensation of our executive officers. The decrease is primarily a result of the departure of two of our executive officers in January 2007.

     INTEREST AND FINANCING COSTS — For the three months ended September 30, 2007 financing costs were $1,310,000, an increase of $1,088,000 from the $222,000 in the three month period ended September 30, 2006. Financing costs for the nine months ended September 30, 2007 were $1,863,000 as compared to $733,000 for the nine months ended September 30, 2006. Our interest and financing costs represent mainly interest paid in connection with the loans outstanding used for the acquisition of our vessels. The increase in interest and financing costs resulted primarily from financing the acquisition of our new vessels, the M/V Free Hero and the M/V Free Jupiter.

9

     NET (LOSS)/INCOME — Net (loss)/income for the three and nine months ended September 30, 2007 was $(498,000) and $2,125,000, respectively, as compared to net loss of $(111,000) and $(2,370,000) for the three and nine months ended September 30, 2006, respectively. The $4,495,000 increase of net income for the nine month period ended September 30, 2007 compared to the same period in 2006, resulted primarily from increased revenues due to our fleet growth and increased charter rates enhanced by the recognition of a gain of $1,369,000 from the sale of the M/V Free Fighter, discussed above. The loss for the three month period ended September 30, 2007 was primarily caused by a non-cash expense of $362,000 in connection with the valuation of interest rate swap contracts, required by the loan terms of the HSH Nordbank senior loan discussed above, the lack of revenue associated with the scheduled dry-docking of the M/V Free Destiny during the month of September 2007 and the higher interest expense attributable to the higher interest rate bearing bridge loan facilities described above which were used to finance the purchase of the M/V Free Hero and M/V Free Jupiter.

     Liquidity and Capital Resources

     Our principal sources of funds have been equity provided by our shareholders, operating cash flows and long-term borrowings. Our principal use of funds has been capital expenditures to acquire and maintain our fleet, comply with international shipping standards and environmental laws and regulations, fund working capital requirements and make principal repayments on outstanding loan facilities. We expect to rely upon operating cash flows, long-term borrowings, and the working capital available to us, as well as possible future equity financings, to implement our growth plan. In addition, to the extent that the options and warrants currently issued are subsequently exercised, the proceeds from those exercises would provide us with additional funds.

     Based on current market conditions, we believe that our current cash balance as well as operating cash flows will be sufficient to meet our liquidity needs for our existing vessels for the next 18 months, as well as the additional vessel we are currently under contract to purchase (as described in Note 16 to our interim financial statements).

     We took delivery of the M/V Free Hero and the M/V Free Jupiter on July 3, 2007 and September 5, 2007, respectively, and paid the remaining balance of the respective purchase prices, net of the deposit paid, from cash on hand from operations and funds obtained from the following credit facilities available to us: (i) $68,000,000 senior secured loan from HSH Nordbank AG; (ii) $21,500,000 junior loan from BTMU Capital Corporation, an affiliate of the Bank of Tokyo Mitsubishi; (iii) the remaining $8,500,000 of the $14,000,000 unsecured shareholder loan (which was drawn down on June 22, 2007 as discussed further below); and (iv) an overdraft credit facility of $4,000,000 available from Hollandsche Bank — Unie N.V. See Note 16 to our interim financial statements for detailed information regarding the amounts used from each source.

     Subsequent to September 30, 2007, as previously planned, we paid, upon delivery the remaining balance of the purchase price of the M/V Free Goddess on October 30, 2007, net of deposits, by utilizing $20,474,000 available under the existing facilities described above and $2,206,000 from cash available from operations.

     During the three-month period ended September 30, 2007, 434,505 Class W and 87,300 Class Z warrants were exercised for shares of common stock, at $5.00 per share, yielding net proceeds to the Company of $2,467,000. Subsequent to September 30, 2007, an additional 480,107 Class W, 101,444 Class Z and 700,000 Class B warrants were exercised for shares of common stock, at $5.00 per share, yielding net proceeds to the Company of $6,200,000.

     On October 30, 2007, the Company concluded a public offering of 11,000,000 common shares at a price of $8.25 per share and, on November 6, 2007 the underwriters’ over-allotment option for another 1,650,000 common shares was exercised at the price of $8.25 per share. The net proceeds to the Company from such stock offering after deducting underwriting discounts and commissions, but before related expenses, was $97,057,000.

     On October 30, 2007, the Company accepted an offer for a senior secured credit facility from Credit Suisse in the aggregate amount of $87,000,000 consisting of a $48,700,000 loan to refinance up to 50% of the purchase price paid for the M/V Free Hero, the M/V Free Jupiter, and the M/V Free Goddess and a $38,300 facility for the purchase of additional vessels. The $48,700,000 loan will have an eight year term, with 31 equal quarterly installments and a balloon payment of $ 9,950,000 at an adjustable interest rate based on LIBOR plus 1%.

10

     On November 6, 2007 the Company repaid fully the outstanding Junior loan due to BTMU Capital Corporation,, and on December 7, 2007 the Company also repaid $30,671,000 against the HSH Nordbank Senior loan, as per their respective terms, leaving a balance of $28,000,000 to be fully repaid upon preparation and execution, presently under way, of the loan documentation of the Credit Suisse credit facility described above.

     The M/V Free Jupiter, will remain off-hire while repairs are underway during the unscheduled dry-docking necessitated by the grounding incident described in Note 18.D above. As we expect that the vessel’s insurance will cover the vessel’s repairs and related expenses, less applicable deductible, the Company does not expect to experience a material liquidity drain, other than the postponement of revenue generation.

     With the liquidity provided by the stock offering, the warrants’ conversions and the Credit Suisse facility discussed above, we are actively seeking to acquire additional vessels in the near future. We intend to rely on funds drawn from our existing or new debt facilities, our working capital, proceeds from concluded or possible future equity offerings, and revenues from operations to meet our liquidity needs going forward.

     Our business is capital intensive and our future success will depend on our ability to maintain a high-quality fleet through the timely acquisition of additional vessels and the possible sale of selected vessels. Such acquisitions will be principally subject to management’s expectation of future market conditions as well as our ability to acquire drybulk carriers on favorable terms.

     Cash Flows

     OPERATING ACTIVITIES — Net cash from operating activities increased by $2,772,000 for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. This increase is primarily the result of an increase in charter revenues.

     INVESTING ACTIVITIES — We used $64,256,000 of cash in investing activities during the nine months ended September 30, 2007 as compared to no cash used in investing activities during the comparable period in 2006. The increase was primarily a result of the the purchases of the M/V Free Hero and the M/V Free Jupiter, and the deposit related to the anticipated purchase of one additional vessel, the M/V Free Goddess, that was subsequently delivered (see Note 18.A to our interim financial statements) which was offset by the proceeds received from the sale of the M/V Free Fighter.

     FINANCING ACTIVITIES — Net cash from financing activities during the nine months ended September 30, 2007 was $62,140,000 as compared to net cash used in financing activities of $3,775,000 for the nine months ended September 30, 2006. The net cash from financing activities during the nine months ended September 30, 2007 includes $14,000,000 of proceeds from a shareholder loan, $58,070,000 in proceeds from long term bank loans, $2,467,000 from shareholder contributions from exercise of warrant and the draw-down of a loan with First Business Bank offset by the payments of $2,000,000 of short term debt, $6,300,000 of long term debt, $750,000 of shareholders’ loans and $2,647,000 of deferred financing cost incurred in connection with securing the availability of financing sources for the acquisition of the three new vessels.

     Capital Requirements

     We took delivery of the M/V Free Hero and the M/V Free Jupiter on July 3, 2007 and September 5, 2007, respectively, as per the memoranda of agreement entered into by our wholly owned subsidiaries on May 1, 2007.

     On August 20, 2007, we entered into a memorandum of agreement pursuant to which we agreed to purchase a secondhand drybulk carrier, the M/V Free Goddess, from an unaffiliated third party for a purchase price of $25,200,000. We took delivery of the M/V Free Goddess in October 30, 2007.

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     The M/V Free Hero and the M/V Free Jupiter were acquired for a total price of $72,250,000 from non-affiliated parties. The M/V Free Goddess will be acquired for a total price of $25,200,000 from non-affiliated parties. The acquisition of the M/V Free Hero, the M/V Free Jupiter, and the M/V Free Goddess were financed through a combination of bank debt, a shareholder loan and our available cash on hand as previously discussed. Please see “—Liquidity and Capital Resources” for more information about these pending acquisitions and the related financing.

     Long-Term Debt

     Our subsidiaries have obtained financing from unaffiliated lenders for their vessels.

     Adventure Two owns the M/V Free Destiny subject to a mortgage securing a loan in the original principal amount of $3,700,000 from Hollandsche Bank — Unie N.V. The loan bears interest at 1.95% above LIBOR, matures in 2008, and is payable in eight quarterly installments of $75,000 each beginning December 27, 2005, followed by one quarterly installment of $100,000, two quarterly installments of $500,000 each, and a balloon payment of $2,000,000 in 2008. The loan is secured by a first preferred mortgage on the vessel, our guarantee of $500,000 of the principal amount plus interest and costs, joint and several liability of Adventure Three, and pledges of (1) the rights and earnings under time charter contracts present or future, (2) rights under insurance policies and (3) goods and documents of title that may come into the bank’s possession for the benefit of Adventure Two. During the three and nine month periods ended September 30, 2007, the Company repaid the amounts of $75,000 and $225,000, respectively, leaving a balance of $3,100,000.

     Adventure Three owns the M/V Free Envoy subject to a mortgage securing a loan in the original principal amount of $6,000,000 from Hollandsche Bank — Unie N.V. The loan was amended in September 2005, pursuant to which the interest was reduced to 1.95% above LIBOR. The loan matures in December 2007, and is payable in 12 quarterly installments of $425,000 each commencing December 2005 with a balloon payment of $900,000 at final maturity. The loan is secured by a first preferred mortgage on the vessel, our guarantee of $500,000 of the principal amount plus interest and costs and pledges of (1) the rights and earnings under time charter contracts present or future, (2) rights under insurance policies and (3) goods and documents of title that may come into the bank’s possession for the benefit of Adventure Three. In June 2006, we borrowed an additional $2,000,000 from Hollandsche Bank — Unie, which amounts were also secured by the M/V Free Envoy and were used to pay principal and interest due to Egnatia Bank, S.A. under its loan to Adventure Four. On January 12, 2007, the additional $2,000,000 borrowed from Hollandsche Bank — Unie was paid off from the proceeds of a loan. During the three and nine month periods ended September 30, 2007 the Company repaid the amounts of $425,000 and $1,275,000, respectively, leaving a balance of $900,000 due in December 2007.

     Adventure Four owned the M/V Free Fighter subject to a mortgage securing a loan in the original principal amount of $4,800,000 from First Business Bank, the outstanding amount of $4,485,000 of which was repaid in April 2007 in connection with the sale of the M/V Free Fighter.

     Each of the loan agreements also includes affirmative and negative covenants of the subsidiaries, such as maintenance of operating accounts, minimum cash deposits and minimum market values. Each subsidiary is restricted under its respective loan agreement from incurring additional indebtedness, changing the vessels’ flags and distributing earnings without the prior written consent of the lenders.

     We also had outstanding, as of September 30, 2007, two interest-free loans from our former principal shareholders with an aggregate principal balance, net of discount which results from accounting for the loans at their fair value, of $1,864,000, the proceeds of which were used in previous years to acquire our vessels. These loans were modified in April 2005 and October 2005 to provide for a repayment schedule for each loan of eight equal quarterly installments of $125,000 each in 2006 and 2007, commencing on March 31, 2006, with a balloon payment of the balance due on each loan on January 1, 2008. Additionally, the amended terms provide that the loans will become immediately due and payable in the event that we raise additional capital of at least $12,500,000. Before these modifications, the loans were repayable from time to time based on our available cash flow, and matured on the earlier of the sale date of the applicable vessel or December 31, 2006. On January 5, 2007, the shareholder loans due to one of our former shareholders were sold to The Mida’s Touch, S.A., a company controlled by Ion G. Varouxakis, our chairman, chief executive officer and president and one of our principal shareholders, for the principal amount then outstanding. The Mida’s Touch subsequently sold a portion of this loan to FS Holdings Limited, also one of our principal shareholders. Subsequent to September 30, 2007, and following our public offering, discussed in Liquidity and Capital Resources paragraph above, we fully repaid that $1,864,000 shareholder loan as per its terms.

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     As September 30, 2007, we financed with $55,600,000 a portion of the purchase price of the M/V Free Hero and the M/V Free Jupiter, and intend to partially finance by $20,473,500, the purchase of the M/V Free Goddess and draw an additional amount of $1,000,000 against the M/V Free Jupiter, under the terms of the senior and junior loan commitments from HSH Nordbank AG and BTMU Capital Corporation totaling $89,500,000. We have also amended our existing credit agreement with Hollandsche Bank — Unie N.V. to provide for an additional $4,000,000 overdraft facility. Subsequent to September 30, 2007, and following our public offering, discussed in Liquidity and Capital Resources paragraph above, we fully repaid the BTMU junior loan of $18,402,500, as per their terms, related to the financing of the M/V Free Hero, the M/V Free Jupiter and the M/V Free Goddess, and reduced the HSH Nordbank senior loan by $30,671,000 leaving a balance of $28,000,000 related to the financing of the M/V Free Jupiter. These three vessels will be fully refinanced by making use of the Credit Suisse facility discussed above in Liquidity and Capital resources.

     FS Holdings Limited Loan. On May 7, 2007, FS Holdings Limited, one of our principal shareholders, agreed to loan us up to $14,000,000 pursuant to an unsecured promissory note for the purpose of partially financing the acquisition of our new vessels (including the M/V Free Goddess). The loan was fully drawn during the period ended September 30, 2007. The note accrues interest on the then-outstanding principal balance at the annual rate of 12.0%, payable upon maturity of the loan. The loan is due at the earlier of (i) May 7, 2009, (ii) the date of a “Capital Event,” which is defined as any event in which we raise gross proceeds of not less than $40,000,000 in an offering of our common stock or other equity securities or securities convertible into or exchangeable for our equity securities or (iii) the date of acceleration due to default of the amounts due under the note. The loan is prepayable by us, upon 30 days’ prior written notice to FS Holdings, in whole or in part, in increments of not less than $500,000. Additionally, we agreed to issue to FS Holdings, for every $1,000,000 drawn under the loan, $50,000 warrants to purchase shares of our common stock at an exercise price of $5.00 per share. Each warrant is exercisable to purchase one share of our common stock. We issued 700,000 warrants to acquire shares of our common stock pursuant to this loan. Subsequent to September 30, 2007, and following our public offering, discussed in Liquidity and Capital Resources paragraph above, we fully repaid the $14,000,000 unsecured shareholder loan, as per its terms and FS Holdings exercised its 700,000 warrants, for net proceeds to the Company of $3,500,000.

     Hollandsche Bank — Unie N.V.Credit Facility. We have renegotiated our credit agreement with Hollandsche Bank — Unie N.V. to provide for an additional $4,000,000 overdraft facility. Our borrowing limit under this new portion of the overdraft facility will be reduced to zero on June 1, 2008. The amended credit agreement also provides that this $4,000,000 overdraft facility will be repaid from the proceeds of a private placement or a public offering of equity securities. The maturity date of the facility may be extended in the discretion of the bank, depending on our financial condition. The security for this facility includes, (i) mortgages on the M/V Free Destiny and the M/V Free Envoy, (ii) pledges of rights and earnings under time charter contracts, (iii) pledges of rights under certain insurance policies and (iv) our $500,000 corporate guarantee.

     Critical Accounting Policies

     The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our interim financial statements. Actual results may differ from these estimates under different assumptions or conditions.

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

     Impairment of long-lived assets. We evaluate the carrying amounts and periods over which long-lived assets are depreciated to determine if events or changes in circumstances have occurred that would require modification to their carrying values or useful lives. In evaluating useful lives and carrying values of long-lived assets, we review certain indicators of potential impairment, such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions. We determine undiscounted projected net operating cash flows for each vessel and compare it to the vessel carrying value. In the event that impairment occurred, we would determine the fair value of the related asset and we record a charge to operations calculated by comparing the asset’s carrying value to the estimated fair market value. We estimate fair market value primarily through the use of third-party valuations performed on an individual vessel basis.

13

     Depreciation. We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate each of our vessels on a straight-line basis over its estimated useful life, which during fiscal 2006 was estimated to be 27 years from date of initial delivery from the shipyard for all of our vessels. We believe that a 27-year depreciable life is consistent with that of other shipping companies. During the nine months ended September 30, 2007, we changed the estimated useful life for the M/V Free Fighter to 30 years. Depreciation is based on cost less the estimated residual scrap value. Furthermore, we estimate the residual values of our vessels to be $250 per lightweight ton, as of December 31, 2006, which we believe is common in the shipping industry. Prior to July 1, 2005, we had estimated the residual value of our vessels to be $150 per lightweight ton. An increase in the useful life of the vessel or in the residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of the vessel or in the residual value would have the effect of increasing the annual depreciation charge. See “Liquidity and Capital Resources” for a discussion of the factors affecting the actual useful lives of our vessels. However, when regulations place limitations on the ability of a vessel to trade on a worldwide basis, the vessel’s useful life is adjusted to end at the date such regulations become effective.

     Deferred dry-dock and special survey costs. Our vessels are required to be dry-docked approximately twice in any 60-month period for major repairs and maintenance that cannot be performed while the vessels are operating. The vessels are required to undergo special surveys every 60 months that occasionally coincide with dry-docking due dates, in which case the procedures are combined in a cost-efficient manner. We follow the deferral method of accounting for special survey and dry-docking costs, whereby actual costs incurred are deferred and amortized on a straight line basis over the period through the date the next dry-docking or special survey becomes due. If a special survey or dry-docking is performed prior to the scheduled date, the remaining unamortized balances are immediately written off.

     Costs capitalized as part of the dry-dock include all work required by the vessel’s classification societies, which may consist of actual costs incurred at the dry-dock yard, including but not limited to, dry-dock dues and general services for vessel preparation, coating of water ballast tanks, cargo holds, steelworks, piping works and valves, machinery work and electrical work.

     All work that may be carried out during dry-dock time for routine maintenance according to our planned maintenance program and not required by the vessel’s classification societies are not capitalized but expensed as incurred. Unamortized dry-docking costs of vessels that are sold are written off and included in the calculation of resulting gain or loss in the year of the vessel’s sale.

     Accounting for revenues and expenses. Revenues and expenses resulting from each time charter are accounted for on an accrual basis. Time charter revenues are recognized on a straight-line basis over the rental periods of such signed charter agreements, as service is performed, except for loss generating time charters, in which case the loss is recognized in the period when such loss is determined. Time charter revenues received in advance are recorded as a liability until charter service is rendered.

     Vessel operating expenses are accounted for on an incurred basis. Certain vessel operating expenses payable by us are estimated and accrued at period end.

     We generally enter into profit-sharing arrangements with charterers, whereby we may receive additional income equal to an agreed upon percentage of net earnings earned by the charterer, where those earnings are over the base rate of hire, to be settled periodically, during the term of the charter agreement. Revenues generated from profit-sharing arrangements are recognized based on the amounts settled for a respective period.

     We obtain valuations from independent brokers of any below or above market time charters assumed when a vessel is acquired. The difference between market and assumed below-market value is discounted using the weighted average cost of capital method and is recorded as deferred revenue and amortized, on a straight line basis, to revenue over the remaining life of the assumed time charter.

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     Insurance claims. Insurance claims comprise claims submitted and/or claims in the process of compilation or submission (claims pending) relating to hull and machinery or protection and indemnity insurance coverage. The insurance claim recoveries receivable are recorded, net of any deductible amounts, at the time when the fixed asset suffers the insured damages and the damage is quantified by the insurance adjuster’s preliminary report or when crew medical expenses are incurred and management believes that recovery of an insurance claim is probable. The non-recoverable amounts are classified as operating expenses in our statement of operations. Probability of recovery of a receivable is determined on the basis of the nature of the loss or damage covered by the policy, the history of recoverability of such claims in the past and the receipt of the adjuster’s preliminary report on the quantification of the loss. We pay the vendors involved in remedying the insured damage, submit claim documentation and upon collection offset the receivable. The classification of insurance claims (if any) into current and non-current assets is based on management’s expectations as to their collection dates.

     Interest rate swaps. Derivative financial instruments are recognized in the balance sheets at their fair values as either assets or liabilities. Changes in the fair value of derivatives that are designated and qualify as cash flow hedges, and that are highly effective, are recognized in other comprehensive income. If derivative transactions do not meet the criteria to qualify for hedge accounting, any unrealized changes in fair value are recognized immediately in the income statement.

     Amounts receivable or payable arising on the termination of interest rate swap agreements qualifying as hedging instruments are deferred and amortized over the shorter of the life of the hedged debt or the hedge instrument.

     New Accounting Policy

     Effective January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for income taxes recognized in financial statements in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that we determine whether the benefits of our tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. We did not have any unrecognized tax benefits and there was no effect on the financial condition or results of operations as a result of implementing FIN 48.

     Recent Accounting Pronouncements

     In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combinations” (FAS 141(R)), which establishes accounting principles and disclosure requirements for all transactions in which a company obtains control over another business.

     In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (FAS 160), which prescribes the accounting by a parent company for minority interests held by other parties in a subsidiary of the parent company.

     The provisions of FAS 141(R) and FAS 160 become effective as of the beginning of our 2010 fiscal year. We are currently evaluating the impact that these pronouncements will have on our financial statements.

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EX-99.2

Exhibit 99.2

FREESEAS INC.

INDEX TO UNAUDITED CONSENSED CONSOLIDATED FINANCIAL STATEMENTS

	Page
	Number
Condensed Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006	F-2
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2007 and 2006	F-3
Unaudited Condensed Consolidated Statements of Cash Flows for the Three and Nine Months ended September 30, 2007 and 2006	F-4
Notes to Condensed Consolidated Financial Statements	F-5 to F-12

F-1

FREESEAS INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(All amounts in tables in thousands of United States dollars, except for share data)

	September 30,			December 31,
	2007			2006
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,881		$	372
Trade receivables, net		337			278
Insurance claims		13			485
Due from related party					40
Inventories		390			242
Prepayments and other		1,411
Total current assets	$	5,032		$	1,417
Advances for acquisition of vessels		2,536
Fixed Assets, net		84,158			19,369
Deferred charges, net		2,741			2,300
Restricted cash		700
Total non-current assets	$	90,135		$	21,669
Total Assets	$	95,167		$	23,086
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Account payable	$	3,088		$	2,003
Accrued liabilities		1,788			1,515
Unearned revenue		213			179
Due to related parties		148
Shareholders loans, current portion		1,864			1,218
Bank overdraft					2,000
Deferred revenue — current portion		1,873
Bank loans — current portion		8,030			3,345
Total current liabilities	$	17,004		$	10,260
Derivatives at fair value		362
Shareholders loans, net of current portion		12,422			1,334
Deferred revenue, net of current portion		277
Bank loans — net of current portion		51,570			4,485
Total long term liabilities	$	64,631		$	5,819
SHAREHOLDERS’ EQUITY:
Common stock		6			6
Additional paid-in capital		14,104			9,703
Retained (deficit)		(578	)		(2,702	)
Total shareholders’ equity	$	13,532		$	7,007
Total Liabilities and Shareholders’ Equity	$	95,167		$	23,086

The accompanying notes are an integral part of these condensed consolidated financial statements

F-2

FREESEAS INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in tables in thousands of United States dollars, except for share data)

	For three months ended						For nine months ended
	30-Sep-07			30-Sep-06			30-Sep-07			30-Sep-06
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
OPERATING REVENUES	$	4,879		$	3,320		$	12,709		$	8,614
OPERATING EXPENSES:
Vessel operating expenses		(1,319	)		(1,107	)		(3,632	)		(3,172	)
Voyage expenses		(289	)		0			(328	)		(550	)
Depreciation expense		(1,148	)		(1,129	)		(2,615	)		(3,350	)
Amortization of deferred charges		(206	)		(166	)		(603	)		(388	)
Management fees to a related party		(225	)		(135	)		(585	)		(405	)
Commissions		(265	)		(255	)		(747	)		(604	)
Stock-based compensation expense		(25	)		(270	)		(75	)		(649	)
General and administrative expenses		(330	)		(279	)		(1,314	)		(1,102	)
Gain on sale of vessel								1,369
Income (loss) from operations	$	1,072		$	(21	)	$	4,179		$	(1,606	)
OTHER INCOME (EXPENSE):
Interest and finance costs	$	(1,310	)	$	(222	)		(1,863	)		(733	)
Change in derivatives fair value		(362	)					(362	)
Interest income		157			3			196			16
Other		(55	)		129			(25	)		(47	)
Other (expense)	$	(1,570	)	$	(90	)	$	(2,054	)	$	(764	)
Net income (loss)	$	(498	)	$	(111	)	$	2,125		$	(2,370	)
Basic earnings (loss) per share	$	(0.07	)	$	(0.02	)	$	0.33		$	(0.38	)
Diluted earnings (loss) per share	$	(0.07	)	$	(0.02	)	$	0.30		$	(0.38	)
Basic weighted average number of shares		6,674,627			6,290,100			6,347,850			6,290,100
Diluted weighted average number of shares		6,674,627			6,290,100			6,996,198			6,290,100

The accompanying notes are an integral part of these condensed consolidated financial statements

F-3

FREESEAS INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(All amounts in tables in thousands of United States dollars, except for share data)

	Nine Months Ended			Nine Months Ended
	30-Sep-07			30-Sep-06
	(Unaudited)			(Unaudited)
Cash Flows from Operating Activities:
Net income (loss)	$	2,125		$	(2,370	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		2,615			3,350
Amortization of deferred charges		603			388
Amortization of debt discount		341			68
Change in fair value of derivatives		362
Amortization of deferred revenue		(562	)
Compensation cost for stock options granted		75			649
(Gain) loss on sale of vessel		(1,369	)
Changes in:
Trade receivables		(59	)		268
Inventories		(148	)		(206	)
Due from related party		188			(276	)
Insurance claims		472			473
Accounts payable		1,086			236
Unearned revenue		34			145
Accrued liabilities		273			(736	)
Due to related party
Other liabilities					(136	)
Prepayments & other		(1,411	)
Net Cash from Operating activities	$	4,625		$	1,853
Cash flows from (used in) Investing Activities:
Advances for vessels acquisitions		(2,536	)
Vessel acquisitions		(72,326	)
Cash from sale of vessel, net		10,606
Net Cash (used in) Investing activities	$	(64,256	)	$
Cash flows from (used in) Financing Activities:
Increase in restricted cash		(700	)
Net movement in bank overdraft		(2,000	)		2,000
Proceeds from long term loan		58,070
Payments of bank loans		(6,300	)		(4,670	)
Payments of loan from shareholders		(750	)		(500	)
Shareholders contributions-exercise of warrants		2,467
Proceeds from promissory note		14,000
Deferred financing cost		(2,647	)		(605	)
Net Cash from (used in) Financing Activities	$	62,140		$	(3,775	)
Net (decrease) increase in cash in hand and at bank	$	2,509		$	(1,922	)
Cash and cash equivalents, Beginning of period		372			3,285
Cash and cash equivalents, End of period	$	2,881		$	1,363
Supplemental Cash Flow Information:
Cash paid for interest	$	402		$	554
Non-cash shareholder distributions	$	6		$	19
Discount on promissory note	$	1,865
Liability assumed in connection with vessel acquisition	$	2,712

The accompanying notes are an integral part of these condensed consolidated financial statements

F-4

FREESEAS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in footnotes in thousands of United States dollars, except for share data)

1. Interim Financial Statements

The unaudited condensed consolidated financial statements include the accounts of FreeSeas Inc. required to be consolidated in accordance with U.S. generally accepted accounting principles. The unaudited condensed consolidated financial statements have been prepared in accordance with the accounting policies described in the Company’s 2006 Annual Report on Form 20-F and should be read in conjunction with the consolidated financial statements and notes thereto.

The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2007 and 2006 included herein have been prepared in accordance with Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain only normal reoccurring adjustments necessary to present fairly the Company’s financial position as of September 30, 2007, and the results of its operations for the three and nine months ended September 30, 2007 and 2006, and the results of its cash flows for the nine months ended September 30, 2007 and 2006.

2. Organization

FreeSeas Inc., formerly known as Adventure Holdings S.A., was incorporated in the Marshall Islands on April 23, 2004, for the purpose of being the ultimate holding company of the ship-owning companies Adventure Two S.A., Adventure Three S.A., Adventure Four S.A., Adventure Five S.A., Adventure Six S.A., Adventure Seven S.A. and Adventure Eight S.A. Hereinafter, the consolidated companies referred to above will be referred to as “FreeSeas,” “the Group” or “the Company.”

During the nine months period ended September 30, 2007, the Group owned and operated four Handysize drybulk carriers, one of which was sold on April 27, 2007, and one Handymax drybulk carrier. Free Bulkers S.A., a Marshall Islands company (“Free Bulkers”), which manages the vessels, is a company owned by the chief executive officer of FreeSeas. The management company is excluded from the Group.

FreeSeas consists of the companies listed below:

FreeSeas Inc.
Adventure Two S.A.
Adventure Three S.A.
Adventure Four S.A.
Adventure Five S.A.
Adventure Six S.A.
Adventure Seven S.A.
Adventure Eight S.A.

The four vessels owned by the Group as of September 30, 2007 included three Handysize drybulk carriers, the M/V Free Destiny, the M/V Free Envoy, and the M/V Free Hero, purchased respectively by the subsidiaries Adventure Two S.A. on August 3, 2004, Adventure Three S.A. on September 20, 2004 and Adventure Six S.A. on July 3, 2007, and one Handymax drybulk carrier, the M/V Free Jupiter, which was purchased by Adventure Eight S.A. on September 5, 2007. Adventure Four S.A., owner of the M/V Free Fighter, sold that vessel on April 27, 2007. All vessels were purchased from or sold to unrelated third parties.

The Company organized Adventure Five, S.A. and Adventure Seven, S.A. for the purpose of purchasing additional vessels. Subsequent to September 30, 2007, Adventure Five, S.A., pursuant to a memorandum of agreement signed on August 20, 2007, purchased the M/V Free Goddess which was delivered to it on October 30, 2007 — See Note 18.A — Subsequent Events. Adventure Seven, S.A. is available for the purchase of an additional vessel in the future.

3. New Accounting Policy

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for income taxes recognized in financial statements in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company determine whether the benefits of the Company’s tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company did not have any unrecognized tax benefits and there was no effect on the financial condition or results of operations as a result of implementing FIN 48.

F-5

Recent Accounting Pronouncements

In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combinations” (FAS 141(R)), which establishes accounting principles and disclosure requirements for all transactions in which a company obtains control over another business.

In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (FAS 160), which prescribes the accounting by a parent company for minority interests held by other parties in a subsidiary of the parent company.

The provisions of FAS 157 and FAS 159 become effective as of the beginning of our 2009 fiscal year. The provisions of FAS 141(R) and FAS 160 become effective as of the beginning of our 2010 fiscal year. We are currently evaluating the impact that these pronouncements will have on our financial statements.

4. Fixed Assets, net

				Accumulated
	Vessel Cost			depreciation			Net book value
December 31, 2006	$	28,273		$	(8,904	)	$	19,369
Depreciation nine months period					(2,615	)		(2,615	)
Disposal of vessel		(11,213	)		3,579			(7,634	)
Additions new vessels		75,038						75,038
September 30, 2007	$	92,098		$	(7,940	)	$	84,158

On April 27, 2007, the Company sold the M/V Free Fighter recognizing a gain of $1,369. During the quarter ended September 30, 2007 the Group purchased the M/V Free Hero and the M/V Free Jupiter on July 3, 2007 and September 5, 2007, respectively, at respective cash purchase prices of $25,250 and $47,000 and related purchase costs of $76. The purchase of the M/V Free Hero was accompanied by the assumption of an existing charter employment the independently determined fair value of which resulted in the recorded increase of the vessel’s purchase cost by $2,712 and a corresponding liability for the unfavourable charter contract — see Note 8 “Deferred Revenue”.

5. Advances for Acquisition of Vessels

As of September 30, 2007, prepaid purchase related costs of $16 and an advance of $2,520 to the sellers were paid in connection with the acquisition of M/V Free Goddess — See Note 18.A — Subsequent Events.

6. Deferred Charges, net

	Dry-docking
	costs			Special survey costs			Financing costs			Total
December 31, 2006	$	730		$	1,453		$	117		$	2,300
Additions		135			630			1,882			2,647
Written-off		(323	)		(1,234	)		(46	)		(1,603	)
Amortization		(262	)		(179	)		(162	)		(603	)
September 30, 2007	$	280		$	670		$	1,791		$	2,741

For the three months ended September 30, 2007 and 2006, the amortization of vessels’ dry-docking, special surveys and financing costs was $206 and $166 respectively. During the nine month period ending September 30, 2007 the deferred financing fees incurred in connection with credit facilities used for vessel acquisitions, described below in Note 18.A — “Subsequent Events”, were $1,882. The dry docking and special survey costs of $135 and $630, respectively, relate to the special survey and dry-docking of the M/V Free Destiny which was completed in October 2007 and its amortization commenced as of the date of completion. The unamortized balance of deferred charges for the M/V Free Fighter was written off at the time of the sale of that vessel on April 27, 2007 and was included in the determination of the gain from sale of this vessel.

F-6

7. Accrued Liabilities

Accrued liabilities comprise the following amounts:

	September 30, 2007		December 30, 2006
Accrued wages	$	111	$	28
Accrued interest		1,103		42
Accrued insurance and related liabilities		49		226
Accrued drydocking and special survey costs		8		865
Accrued financial advisory costs		228		155
Other Accrued Liabilities		289		199
Total	$	1,788	$	1,515

8. Deferred Revenue

The Company obtains valuations from independent brokers of any below or above market time charters assumed when a vessel is acquired. The difference between market and assumed below-market charter value is discounted using the weighted average cost of capital method and is recorded as deferred revenue and amortized, on a straight line basis, to revenue over the remaining life of the assumed time charter. The Company recognized $562 of deferred revenue amortization during the three month and nine-month periods ending September 30, 2007.

9. Interest Rate Swaps

Derivative financial instruments are recognized in the balance sheets at their fair values as either assets or liabilities. Changes in the fair value of derivatives that are designated and qualify as cash flow hedges, and that are highly effective, are recognized in other comprehensive income. If derivative transactions do not meet the criteria to qualify for hedge accounting, any unrealized changes in fair value are recognized immediately in the income statement.

Amounts receivable or payable arising on the termination of interest rate swap agreements qualifying as hedging instruments are deferred and amortized over the shorter of the life of the hedged debt or the hedge instrument.

During the period ended September 30, 2007, the Company entered into interest rate swap agreements that did not qualify for hedge accounting. As such, the fair value of these agreements and changes therein are recognized in the balance sheets and statements of income, respectively. The marking to market of the Company’s two interest rate swaps in existence as of September 30, 2007, contracted pursuant to the terms of the Senior Loan described in Note 10 below, resulted in an unrealized loss of $362 for the three and nine month periods ending September 30, 2007. There were no interest rate swaps contracted in 2006.

10. Long-Term Bank Debt

							HSH
							NORDBANK
							&		BANK
	FBB			HBU			BTMU		OVERDRAFT			TOTAL
December 31, 2006	$	2,330		$	5,500		$	—	$	2,000		$	9,830
Additions		2,470			—			55,600		—			58,070
Payments		(4,800	)		(1,500	)		—		(2,000	)		(8,300	)
September 30, 2007	$	—		$	4,000		$	55,600	$	—		$	59,600

In January 2007, the Company drew down Advance B of $2,470,000 of the loan with First Business Bank to repay the overdraft facility of $2,000,000 granted to Adventure Four S.A by Hollandsche Bank — Unie N.V. The remaining balance of $ 470,000 was used to finance the special survey and drydocking costs of the M/V Free Fighter.

F-7

To partially finance the purchase of the M/V Free Hero and M/V Free Jupiter, at a cash purchase price of $25,250 and $47,000 respectively, —See Note 2 and Note 18 A “Subsequent Events”, the Company drew $42,736 under a $68,000 Senior Loan commitment provided by HSH-Nordbank A.G. and $12,864 under a $21,500 Junior Loan commitment provided by BTMU Capital Corporation, leaving available loan funds of $25,264 and $8,636 under the respective Senior and Junior Loans for partially financing the purchase of additional vessels, including the purchase of the M/V Free Goddess which was concluded on October 30, 2007—See Note 18.A “Subsequent Events”. Pursuant to the terms of the related loan agreements, upon a successful public offering in excess of $50,000 the Company is obligated to make mandatory prepayments first against the full amount of the Junior Loan then outstanding and then towards the reduction of the Senior Loan to the lower of (a) $39,500 or (b) 50% of the aggregate market value of the financed/mortgaged vessels. Such mandatory prepayments were effected upon the successful completion of the Company’s public offering concluded on October 30, 2007 — See Note 18.C below “Subsequent Events”.

11. Shareholders’ Loans

As of September 30, 2007, the Company had an interest-free loan from its former principal shareholders with an aggregate principal balance of $1,864, net of discount. The discount was recorded at the time of borrowing in order to record the loan at its fair value and is amortized using the effective interest method. The proceeds of the loan were used to acquire our vessels. The loan was modified in April 2005 and October 2005 to provide for a repayment schedule of eight equal quarterly installments of $250 each in 2006 and 2007, commencing on March 31, 2006, with a balloon payment of $1,367 for the balance due on January 1, 2008. This shareholders’ loan was fully repaid on November 2, 2007 from the net proceeds of the public offering concluded on October 30, 2007 (see Note 18.C below- “Subsequent Events”).

Also as of September 30, 2007 the Company had outstanding the principal amount of $14,000 under an unsecured loan from one of the Company’s principal shareholders drawn in May and June 2007, in order to partially finance the purchase the M/V Free Hero, the M/V Free Jupiter and the M/V Free Goddess —see Note 2 above and Note 18.C — Subsequent Events below. This unsecured shareholder loan accrues interest at the annual rate of 12.0%, payable upon maturity of the loan. The loan is due at the earlier of (i) May 7, 2009, (ii) the date of a “Capital Event,” which is defined as any event in which we raise gross proceeds of not less than $40,000 in an offering of the Company’s common stock. Pursuant to the terms of the loan, the Company agreed to issue to the note holder 50,000 warrants for every $1,000 drawn down under the loan. The warrants expire in five years and have an exercise price of $5.00 per share. As of September 30, 2007, the Company has issued to the warrant holder 700,000 warrants described above in connection with such draw downs. This shareholder’s loan as per its terms, was fully prepaid on November 2, 2007 from the net proceeds of the public offering successfully concluded on October 30, 2007 — See Note 18.C below- “Subsequent Events”.

The warrants described above qualify for equity classification and are recorded in accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.” Accordingly, the proceeds from draw downs and corresponding warrant issuances are allocated to the debt and the warrants based on their relative fair values as of the date of draw down as determined by an independent valuator. The $1,865 valued portion of the proceeds allocated to the warrants was accounted for as additional paid-in capital. The corresponding discount on the debt is amortized over the life of the note, using the effective interest rate method, and accounted for as interest expense. For the nine months ended September 30, 2007, the amortization of the debt discount amounted to $287.

The above described warrants were exercised on November 14, 2007, thereby increasing the number of outstanding shares of common stock by 700,000, concurrent with the payment to the Company of $3,500 as per the terms of the warrants — See Note 18.B “Subsequent Events”.

12. Related Party Transactions

Purchases of services

All the active vessels listed in Note 2 receive management services from Free Bulkers, pursuant to ship management agreements between each of the ship-owning companies and Free Bulkers. Each agreement calls for a monthly technical management fee of $15. FreeSeas also pays Free Bulkers a fee equal to 1.25% of the gross freight or hire collected from the employment of FreeSeas’ vessels and a 1% commission to be paid to Free Bulkers on the gross purchase price of any new vessels acquired or the gross sales price of any vessels sold by FreeSeas with the assistance of Free Bulkers. FreeSeas also reimburses, at cost, the travel and other personnel expenses of the Free Bulkers staff, including the per diem paid by Free Bulkers to its staff, when they are required to attend FreeSeas’ vessels at port. FreeSeas believes that it pays Free Bulkers industry standard fees for these services. In turn, Free Bulkers has entered into an agreement with Safbulk Pty Ltd., a company controlled by one of the Group’s affiliates, for the outsourcing of the commercial management of the fleet. Commencing July 1, 2007 an additional fee of $300 annually is paid to Freebulkers as compensation for services related to its accounting and financial reporting obligations and implementation of Sarbanes-Oxley internal control over financial reporting procedures. The agreement for such additional fee is for an initial term of 12 months.

The expenses related to the technical management fee and the accounting and financial reporting services from Freebulkers are reflected in the accompanying condensed consolidated statements of operations as “Management Fees to a Related Party”. The total amounts paid for the nine month periods ended September 30, 2007 and 2006 amounted to $585 and $405 respectively, and for the three months ended September 30, 2007 and 2006 to $225 and $135, respectively.

F-8

The balance due from or (to) related party as of September 30, 2007 and December 31, 2006 was $(148) and $40, respectively. Amounts paid to related parties for office space during the three and nine month periods ended September 30, 2007 were $16 and $49, respectively (based on an exchange rate of $1.37 to €1.00).

13. Earnings per Share

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period.

The components of the denominator for the calculation of basic earnings per share and diluted earnings per share are as follows:

	Three months			Three months			Nine months		Nine months
	ended			ended			ended		ended
	September,			September,			September,		September,
	2007			2006			2007		2006
Numerator:
Net income/(loss)	$	(498	)	$	(111	)	$	2,125	$	(2,370	)
Weighted average common shares outstanding		6,674,627			6,290,100			6,347,850		6,290,100
Diluted Weighted average common shares outstanding		6,674,627			6,290,100			6,996,198		6,290,100
Dilutive potential common shares:
Options								65,455
Warrants								582,893
Dilutive effect								648,348
Earning per share:
Basic earnings/(loss) per common share	$	(0.07	)	$	(0.02	)	$	0.33	$	(0.38	)
Diluted earnings/(loss) per common share	$	(0.07	)	$	(0.02	)	$	0.30	$	(0.38	)

For the nine months ended September 30, 2007, the Company excluded from its earnings per share calculations all common stock equivalents if their effect was anti-dilutive. For the three and nine months ended September 30, 2006 and for the three months ended September 30, 2007, the Company excluded from its loss per share calculations all common stock equivalents because their effect on earnings per share was anti-dilutive.

The Series B Units, issuable upon exercise of the purchase option granted to HCFP Brenner Securities, the lead underwriter for the initial public offering of the common stock of the Company’s predecessor (“HCFP”), for shares and warrants, were excluded from computing the diluted earnings per share of the Company for the nine months ended September 30, 2007 because their effect was anti-dilutive due to the average market price of the Company’s stock being less than the exercise price for the options and warrants. The Series A Units, however, held by HCFP, had a dilutive impact of 974 shares for the nine-month period ended September 30, 2007 since the average market price of the Company’s common stock was greater than the exercise price of the options and warrants.

The outstanding options for 166,667 shares and 200,000 Class A warrants granted to the Company’s executive officers or entities controlled by them (see Note 15) had a dilutive impact of 64,480 shares for the nine-month period ended September 30, 2007, since the average market price of the Company’s common stock was greater than the exercise price of the options and warrants.

The 700,000 Class B warrants held by a major shareholder in connection with an unsecured shareholder loan — See Note 11 — and 1,394,245 Class W and 1,756,450 Class Z warrants publicly traded were dilutive for the nine-month period ended September 30, 2007 because the average market price of the Company’s common stock was greater than the exercise price of the options and warrants.

14. Commitments and Contingencies

FreeSeas entered into an agreement with a financial advisor whereby the terms of compensation required the Company to pay $200 upon closing of the Transaction (December 15, 2005) with Trinity and $400 payable in 20 equal monthly installments commencing upon closing of the Transaction. The Company has accrued the liability at its present value. The amounts outstanding at September 30, 2007 and December 31, 2006 are $0 and $154, respectively. The amounts are included in accrued liabilities in the accompanying condensed consolidated balance sheets.

F-9

The Company has assumed an obligation of its predecessor, Trinity Partners Acquisition Company Inc., to pay HCFP Brenner Securities a fee equal to 5% of the warrant exercise price for the solicitation of the exercise by HCPF under certain circumstances, No such fees were paid for the three month and nine month period ended September 30, 2007.

On February 5, 2007 the Company entered into an agreement with a related party pursuant to which the Company uses office space. The annual expense under such agreement is $63 (based on an exchange rate of $1.37 to €1.00), for the first eleven months. The rent amount is adjustable thereafter based on the Greek consumer price index.

On August 14, 2007, the Company received a letter from counsel representing two former executive officers of the Company alleging that the Form F-3 filed on August 3, 2007 misstated the number of shares beneficially owned by the two executive officers. The two former executive officers allege that they continue to beneficially own 500,000 shares of common stock underlying options granted to them in connection with their employment with the Company. The Company has responded that it believes that these options expired unexercised pursuant to the Plan and intends to vigorously defend its position — See Note 15 “Stock Based Compensation”.

15. Stock-Based Compensation

FreeSeas’ Stock Incentive Plan (the “Plan”) became effective on April 26, 2005, and was amended and restated on May 24, 2006. An aggregate of 1,500,000 shares of the Company’s common stock were reserved for issuance under the Plan. In accordance with the Plan, in April 2005, the Company’s Board of Directors granted 750,000 options, with an exercise price of $5.00, to its executive officers, which were subject to signing of the employment agreements and consummation of the Transaction with Trinity. The employment agreements were signed and the Transaction with Trinity consummated on December 15, 2005. On December 16, 2005, the Board of Directors ratified, adopted and approved the grant of options to the executive officers. The options vest at a rate of 1/3 per year, with the initial 1/3 vesting upon signing the employment agreement, the second 1/3 vesting on the first anniversary of the employment agreement, and the final 1/3 vesting on the second anniversary of the employment agreement. The options expire on December 16, 2010.

Prior to January 1, 2006 the Company accounted for the Plan under SFAS No. 123, “Accounting for Stock-Based Compensation” and under APB Opinion No. 25 using the intrinsic value method and using guidance in FIN 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans,” FIN 38, “Determining the Measurement Date for Stock Option, Purchase, and Award Plans Involving Junior Stock,” and FIN 44, “Accounting for Certain Transactions involving Stock Compensation”. As of January 1, 2006, the Company is recognizing stock-based compensation expense in accordance with SFAS No. 123(R).

In April 2005, FreeSeas’ Board of Directors approved the issuance of Class A warrants to entities who, immediately prior to the closing of the Transaction, owned 100% of the outstanding FreeSeas’ common stock. The beneficial owners of these entities were the then executive officers of FreeSeas. These warrants, the issuance of which was ratified, adopted and approved by the Board on December 16, 2005, entitle the holders to purchase an aggregate of 200,000 shares of the Company’s common stock at an exercise price of $5.00 per share. These warrants were exercisable immediately upon the closing of the Transaction on December 15, 2005.

These warrants have been treated as similar to options and have been accounted for by the Company under APB Opinion No. 25 and following the guidance in FIN 38 and FIN 44. Since the warrants are exercisable immediately upon issuance, these were considered to have been fully vested on the date of grant and expensed.

							Exercise		Options		Warrants
	Options		Warrants		Total		Price		Exersisable		Exersisable		Total
December 31, 2006		750,000		200,000		950,000	$	5.00		500,000		200,000		700,000
Options forfeited		500,000				500,000				333,333				333,333
September 30, 2007 (Unaudited)		250,000		200,000		450,000	$	5.00		166,667		200,000		366,667

Stock options granted to the Company’s executive officers have been adjusted for the exit of two officers — See Note 14. Options that were vested but not exercised by April 5, 2007 were forfeited and amount to 333,333, or two -thirds of the options that were expected to be fully vested at December 16, 2007.

As of September 30, 2007, the remaining contractual life of the options is 3.22 years and the total compensation costs related to non-vested awards not yet recognized is $21 and will be expensed in the fourth quarter of 2007. The Company did not grant any stock options during 2006 or in the first nine months of 2007.

For the three and nine month periods ended September 30, 2007 and 2006, total stock-based compensation expense was $25 and $270 and $75 and $649, respectively.

F-10

16. Shareholders’ Equity

In January 2007, an entity controlled by Mr. Ion Varouxakis, the Company’s chief executive officer (“CEO”), purchased an aggregate of 2,812,500 shares of the Company’s common stock and pre-existing promissory notes issued by the Company to the two other principal shareholders with an aggregate amount outstanding of $1,309. The entity controlled by the CEO simultaneously sold and transferred 70,600 shares to family members and 2,108,782 shares to FS Holdings Limited, a company controlled by members of the Restis family. Also, the entity controlled by the CEO sold 305,921 shares to an institutional investor. As a result of the transactions, the CEO now beneficially owns 2,248,031 shares of common stock. Immediately following the closing of these transactions, the Company’s Board of Directors appointed Mr. Varouxakis Chairman of the Board and President and elected three new independent directors. There was no impact to the total shares outstanding as a result of this transaction.

The Company had 6,811,905 and 6,290,100 common stock shares issued and outstanding as of September 30, 2007 and September 30, 2006 respectively. As of the same respective dates the Company also had 1,394,245 and 1,828,750 of Class W and 1,756,450 and 1,843,750 of Class Z warrants issued and outstanding since 434,505 of Class W and 87,300 of Class Z warrants were exercised for shares of common stock during the quarter ended September 30, 2007. The net proceeds of these transactions were $2,467.

17. Taxes

Under the laws of the countries of the Group’s incorporation and/or vessels’ registration, the Group is not subject to tax on international shipping income; however, they are subject to registration and tonnage taxes, which have been included in vessel operating expenses in the accompanying condensed consolidated statements of operations.

Pursuant to the Internal Revenue Code of the United States (the “Code”), U.S. source gross transportation income is subject to certain income taxes (section 887), with exemption from such tax allowed under certain conditions (section 883). The Company believes that it qualifies for said tax exemption and therefore, no tax obligation is recorded.

18.A Subsequent Events — New Vessel Addition & Financing

On August 20, 2007 the Company had entered into a memorandum of agreement with an unrelated party, pursuant to which the Company agreed to purchase the M/V Free Goddess built 1995 with carrying capacity of 22,051 DWT for the purchase price of $25,200. This vessel was delivered to the Company on October 30, 2007 and was immediately delivered to her charterers for a short time charter through November 2007 at a daily rate of $13.00, thereafter to be delivered for an agreed 22-25 month charter at a daily rate of $19.25. During the quarter ended September 30, 2007 the Company provided the seller with a deposit of $2,520 in connection with the execution of the memorandum of agreement for the purchase of this vessel.

On October 30, 2007, the Company accepted an offer for a senior secured credit facility from Credit Suisse in the aggregate amount of $87,000,000 consisting of a $48,700,000 loan to refinance up to 50% of the purchase price paid for the M/V Free Hero, the M/V Free Jupiter, and the M/V Free Goddess and a $38,300 facility for the purchase of additional vessels. The $48,700,000 loan will have an eight year term, with 31 equal quarterly installments and a balloon payment of $ 9,950,000 at an adjustable interest rate based on LIBOR plus 1%.

As of September 30, 2007, the Company had financed with $55,600,000 a portion of the purchase price of the M/V Free Hero and the M/V Free Jupiter. Upon delivery of the M/V Free Goddess, on October 30, 2007, the Company drew an additional $20,473,500 for this vessel’s purchase and drew an additional amount of $1,000,000 against the M/V Free Jupiter, under the terms of the senior and junior loan commitments from HSH Nordbank AG and BTMU Capital Corporation totaling $89,500,000. Subsequent to September 30, 2007, and following our public offering, discussed in Note 18.B “Subsequent Events — Issued and Outstanding Shares” below, we fully repaid the outstanding BTMU junior loan of $18,402.5, as per its terms, related to the financing of the M/V Free Hero, the M/V Free Jupiter and the M/V Free Goddess, and reduced the HSH Nordbank senior loan by $30,671 leaving a balance of $28,000 related only to the financing of the M/V Free Jupiter. These three vessels will be fully refinanced by making use of the Credit Suisse facility discussed above, upon finalization and execution of the relative loan documentation presently under preparation.

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The following table details the vessels acquired during the three month period ended September 30, 2007 and those acquired subsequent to such period.

Name	Class	DWT		Built		Flag	Purchase Price		Delivery Date	Employment
Free Hero	Handysize		24,318		1995	Marshall Islands	$	25,250	July 3, 2007	Time charter through December 2008 /February 2009 at $14.5 per day
Free Jupiter	Handymax		47,777		2002	Marshall Islands	$	47,000	September 5, 2007	Currently in dry-dock for unscheduled repairs following a grounding incident; upon repair completion to be delivered for a three-year time charter through October 2010 at $32.0 per day for the first year, $28.0 per day for the second year, and $24.0 per day for the third year. See Note 18.D
Free Goddess	Handysize		22,051		1995	Marshall Islands	$	25,200	October 30, 2007	Two-year time charter until December 2009 at $19.25 per day

18.B Subsequent Events — Issued and Outstanding Shares

Subsequent to the three month period ended September 30, 2007 and as of November 14, 2007, another 480,107 of Class W, 101,444 of Class Z warrants and all of 700,000 of Class B warrants held by F S Holdings Ltd., one of the Company’s major shareholders, were exercised for shares of common stock. The Company received a total $6,200 of net proceeds from these exercises.

On August 7, 2007, the Company had filed a Registration Statement on Form F-1 under the Securities Act in connection with a public offering of the Company’s common stock. On October 30, 2007, the Company completed the sale of 11,000,000 shares of common stock at $8.25 per share. Credit Suisse and Cantor Fitzgerald & Co. served as the joint book running managers and Oppenheimer & Co., and DVB Capital Markets served as the co-managers. On November 6, 2007 the underwriters exercised their over-allotment option to purchase an additional 1,650,000 shares of common stock at the price of $8.25. Total net proceeds from the stock offering after deducting underwriting discounts and commissions, but before expenses, are expected to be approximately $97,057.

Following the issuance of the shares pursuant to the completed offering on October 30, 2007 described above, as well as the conversion of additional 480,107 Class W and 101,444 Class Z warrants and 700,000 Class B warrants after September 30, 2007, the aggregate number of outstanding shares of common stock as of November 14, 2007 was 20,743,456.

18.C Subsequent Events — Repayment of BTMU Junior, HSH NORDBANK Senior and Shareholders Loans.

In November 2007, using the proceeds from the public offering and the exercised warrants, the Company fully repaid the BTMU Capital Corporation junior loan, by paying $18,402 and in December 2007 prepaid $30,671 of the HSH Nordbank senior loan, as per their respective loan terms, described in Notes 10 and 18.A. As a result of such repayments, the Company will write off $1,350 of already incurred but deferred financing costs related to these loans. Consequently, net income for the three month period ending December 31, 2007 will be negatively affected by the amount of this non-cash charge.

Similarly, in November 2007, the Company also fully repaid the $14,000 shareholder loan, according to its terms (see Note 11 above). Of such amount, $12,516 will be recorded against the discounted debt outstanding on the date of repayment and $1,484 will be recorded as an expense in the Statements of Operations in accordance with APB 26, “Early Extinguishment of Debt.”

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In November 2007, the Company also repaid the $1,864 interest-free shareholders loan, described in Note 11 above, using funds from the net proceeds of the offering described above in Note 18.B.

18.D Subsequent Events-Vessel’s Grounding

On September 21, 2007 the M/V Free Jupiter had a grounding incident off the coast of the Philippines suffering severe bottom damage. The vessel was refloated and temporary repairs were carried out before the vessel proceeded to her destination under own power to discharge her cargo. After completion of discharge the vessel sailed to a shipyard in order to undertake permanent repairs in drydock which are presently underway. No estimated completion date has yet been given by the shipyard. The Company expects that the vessel’s insurance will cover the vessel’s repairs and related expenses, less the applicable deductibles. While repairs are underway, the vessel will remain off hire.

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