☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________________ to _________________ |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report | ||
Commission file number 001-33283 |
EUROSEAS LTD. | |||
(Exact name of Registrant as specified in its charter) | |||
Not applicable | |||
(Translation of | |||
Republic of the Marshall Islands | |||
(Jurisdiction of incorporation or organization) | |||
4 Messogiou & Evropis Street, 151 24 Maroussi Greece | |||
(Address of principal executive offices) | |||
Tasos Aslidis, Tel: (908) 301-9091, euroseas@euroseas.gr, Euroseas Ltd. c/o Tasos Aslidis, 11 Canterbury Lane, Watchung, NJ 07069 | |||
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act: | |||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
Common shares, $0.03 par value | ESEA | Nasdaq Capital Market | |
Securities registered or to be registered pursuant to Section 12(g) of the Act: |
None | |||
(Title of Class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: |
None | |||
(Title of Class) |
Indicate the number of outstanding shares of each of the | |||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. | |||
☐ Yes ☒ No | |||
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. | |||
☐ Yes ☒ No | |||
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections. | |||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | |||
☒ Yes ☐ No | |||
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, | |||
Large accelerated filer | Accelerated filer | Non-accelerated filer | |
☐ | ☐ | ☒ | |
Emerging growth company | |||
☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐ |
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ |
☒ | U.S. GAAP |
☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board. ☐ Other If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow |
☐ Item 17 ☐ Item 18 | |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | |
☐ Yes ☒ No | |
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) | |
Indicate by check mark whether the registrant has filed all documents and reports to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. | |
☐ Yes ☐ No | |
1 | |||
Part I | |||
Item 1. | Identity of Directors, Senior Management and Advisers | 2 | |
Item 2. | Offer Statistics and Expected Timetable | 2 | |
Item 3. | Key Information | 2 | |
40 | |||
Item 4A. | 59 | ||
Item 5. | 59 | ||
Item 6. | 72 | ||
Item 7. | 77 | ||
Item 8. | |||
81 | |||
83 | |||
Item 10. | Additional Information | 83 | |
Item 11. | Quantitative and Qualitative Disclosures About Market Risk | 96 | |
Item 12. | Description of Securities Other than Equity Securities | 97 | |
Part II | |||
Item 13. | Defaults, Dividend Arrearages and Delinquencies | 97 | |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds | 97 | |
Item 15. | Controls and Procedures | 97 | |
Item 16A. | Audit Committee Financial Expert | 98 | |
Item 16B. | Code of Ethics | 99 | |
Item 16C. | Principal Accountant Fees and Services | 99 | |
Item 16D. | Exemptions from the Listing Standards for Audit Committees | 99 | |
Item 16E. | 99 | ||
Item 16F. | 99 | ||
Item 16G. | 99 | ||
Item 16H. | 100 | ||
Part III | |||
Item 17. | 100 | ||
Item 18. | 100 | ||
Item 19. | 100 | ||
our future operating or financial results; |
Item 1. | Identity of Directors, Senior Management and Advisers |
Item 2. | Offer Statistics and Expected Timetable |
Item 3. | Key Information |
A. | Selected Financial Data |
Euroseas Ltd. – Summary of Selected Historical Financials (in U.S. Dollars except for Fleet Data and number of shares) | |||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
Euroseas Ltd. – Summary of Selected Historical Financials (in U.S. Dollars except for Fleet Data and number of shares) | |||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||||
Statement of Operations Data | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||||||||||
Time charter revenue | 32,587,186 | 35,509,971 | 21,409,236 | 24,278,048 | 36,062,202 | 21,409,236 | 24,278,048 | 36,062,202 | 41,769,278 | 55,681,124 | |||||||||||||||||||||||||||||
Voyage charter revenue | 4,731,423 | - | 47,979 | 559,319 | 206,682 | 47,979 | 559,319 | 206,682 | - | - | |||||||||||||||||||||||||||||
Related party management fee income | 240,000 | 240,000 | 240,000 | 240,000 | - | 240,000 | 240,000 | - | - | - | |||||||||||||||||||||||||||||
Commissions | (1,917,559 | ) | (1,965,466 | ) | (1,151,879 | ) | (1,318,248 | ) | (1,844,147 | ) | (1,151,879 | ) | (1,318,248 | ) | (1,844,147 | ) | (1,745,599 | ) | (2,378,007 | ) | |||||||||||||||||||
Net revenue, continuing operations | 35,641,050 | 33,784,505 | 20,545,336 | 23,759,119 | 34,424,737 | 20,545,336 | 23,759,119 | 34,424,737 | 40,023,679 | 53,303,117 | |||||||||||||||||||||||||||||
Voyage expenses | (3,919,860 | ) | (1,852,482 | ) | (1,209,085 | ) | (1,564,489 | ) | (1,261,088 | ) | (1,209,085 | ) | (1,564,489 | ) | (1,261,088 | ) | (1,055,408 | ) | (1,334,259 | ) | |||||||||||||||||||
Vessel operating expenses | (22,604,520 | ) | (21,833,674 | ) | (13,853,444 | ) | (15,019,342 | ) | (19,986,170 | ) | (13,853,444 | ) | (15,019,342 | ) | (19,986,170 | ) | (23,983,282 | ) | (32,219,689 | ) | |||||||||||||||||||
Other operating income | - | - | - | 499,103 | - | - | 499,103 | - | - | 2,687,205 | |||||||||||||||||||||||||||||
Dry-docking expenses | (1,975,591 | ) | (1,332,378 | ) | (2,204,784 | ) | (571,291 | ) | (2,774,924 | ) | (2,204,784 | ) | (571,291 | ) | (2,774,924 | ) | (2,714,662 | ) | (536,199 | ) | |||||||||||||||||||
Vessel depreciation | (9,791,080 | ) | (8,108,231 | ) | (4,959,487 | ) | (3,585,965 | ) | (3,305,951 | ) | (4,959,487 | ) | (3,585,965 | ) | (3,305,951 | ) | (4,178,886 | ) | (6,605,976 | ) | |||||||||||||||||||
Related party management fees | (4,346,584 | ) | (3,589,167 | ) | (2,399,461 | ) | (2,632,637 | ) | (3,536,094 | ) | (2,399,461 | ) | (2,632,637 | ) | (3,536,094 | ) | (3,671,335 | ) | (5,293,199 | ) | |||||||||||||||||||
Other general and administrative expenses | (2,731,942 | ) | (2,886,884 | ) | (2,673,594 | ) | (2,502,203 | ) | (2,565,502 | ) | |||||||||||||||||||||||||||||
General and administrative expenses | (2,673,594 | ) | (2,502,203 | ) | (2,565,502 | ) | (2,444,495 | ) | (3,041,435 | ) | |||||||||||||||||||||||||||||
Net gain on sale of vessels | - | 461,586 | 10,597 | 803,811 | 1,340,952 | 10,597 | 803,811 | 1,340,952 | - | 2,453,736 | |||||||||||||||||||||||||||||
Loss on write-down of vessels held for sale | (3,500,000 | ) | (1,641,885 | ) | (5,924,668 | ) | (4,595,819 | ) | - | (5,924,668 | ) | (4,595,819 | ) | - | - | (121,165 | ) | ||||||||||||||||||||||
Operating income / (loss), continuing operations | (13,228,527 | ) | (6,978,610 | ) | (12,668,590 | ) | (5,409,713 | ) | 2,335,960 | ||||||||||||||||||||||||||||||
Operating (loss) / income, continuing operations | (12,668,590 | ) | (5,409,713 | ) | 2,335,960 | 1,975,611 | 9,292,136 | ||||||||||||||||||||||||||||||||
Interest and other financing costs | (1,611,178 | ) | (1,398,553 | ) | (1,370,830 | ) | (1,554,695 | ) | (3,050,768 | ) | (1,370,830 | ) | (1,554,695 | ) | (3,050,768 | ) | (3,424,969 | ) | (4,125,150 | ) | |||||||||||||||||||
(Loss)/gain on derivatives, net | (44,648 | ) | (261,674 | ) | (119,154 | ) | 12,389 | (44,343 | ) | (119,154 | ) | 12,389 | (44,343 | ) | (2,885 | ) | (587,988 | ) | |||||||||||||||||||||
Other investment income | 982,978 | 1,212,938 | 1,024,714 | - | - | 1,024,714 | - | - | - | - | |||||||||||||||||||||||||||||
Impairment of other investment | - | - | (4,421,452 | ) | - | - | (4,421,452 | ) | - | - | - | - | |||||||||||||||||||||||||||
Foreign exchange gain / (loss) | 34,006 | 16,711 | (31,033 | ) | (30,214 | ) | 13,963 | ||||||||||||||||||||||||||||||||
Loss on debt extinguishment | - | - | - | (328,291 | ) | (491,571 | ) | ||||||||||||||||||||||||||||||||
Foreign exchange (loss) / gain | (31,033 | ) | (30,214 | ) | 13,963 | 2,024 | (63,007 | ) | |||||||||||||||||||||||||||||||
Interest income | 419,366 | 26,445 | 22,277 | 37,972 | 81,792 | 22,277 | 37,972 | 81,792 | 95,839 | 17,011 | |||||||||||||||||||||||||||||
Equity loss in joint venture | (2,541,775 | ) | (2,158,393 | ) | (2,444,627 | ) | - | - | (2,444,627 | ) | - | - | - | - | |||||||||||||||||||||||||
Impairment in joint venture | - | - | (14,071,075 | ) | - | - | (14,071,075 | ) | - | - | - | - | |||||||||||||||||||||||||||
Net loss, continuing operations | (15,989,778 | ) | (9,541,136 | ) | (34,079,770 | ) | (6,944,261 | ) | (663,396 | ) | |||||||||||||||||||||||||||||
Net (loss)/income, continuing operations | (34,079,770 | ) | (6,944,261 | ) | (663,396 | ) | (1,682,671 | ) | 4,041,431 | ||||||||||||||||||||||||||||||
Dividends to Series B preferred shares | (1,440,100 | ) | (1,639,149 | ) | (1,725,699 | ) | (1,808,811 | ) | (1,335,733 | ) | (1,725,699 | ) | (1,808,811 | ) | (1,335,733 | ) | (1,271,782 | ) | (693,297 | ) | |||||||||||||||||||
Net loss attributable to common shareholders, continuing operations | (17,429,878 | ) | (11,180,285 | ) | (35,805,469 | ) | (8,753,072 | ) | (1,999,129 | ) | |||||||||||||||||||||||||||||
Loss per share attributable to common shareholders- basic and diluted, continuing operations | (3.18 | ) | (1.74 | ) | (4.38 | ) | (0.79 | ) | (0.18 | ) | |||||||||||||||||||||||||||||
Preferred deemed dividend | - | - | - | (504,577 | ) | - | |||||||||||||||||||||||||||||||||
Net (loss)/income attributable to common shareholders, continuing operations | (35,805,469 | ) | (8,753,072 | ) | (1,999,129 | ) | (3,459,030 | ) | 3,348,134 | ||||||||||||||||||||||||||||||
(Loss)/earnings per share attributable to common shareholders- basic and diluted, continuing operations (1) | (35.08 | ) | (6.33 | ) | (1.41 | ) | (1.21 | ) | 0.58 | ||||||||||||||||||||||||||||||
Preferred stock dividends declared | 1,440,100 | 1,639,149 | 1,725,699 | 1,808,811 | 1,335,733 | 1,725,699 | 1,808,811 | 1,335,733 | 1,271,782 | 693,297 | |||||||||||||||||||||||||||||
Preferred dividends declared per preferred share | 44.81 | 48.53 | 48.60 | 48.48 | 68.13 | ||||||||||||||||||||||||||||||||||
Weighted average number of shares outstanding during period, basic and diluted | 5,479,418 | 6,410,794 | 8,165,703 | 11,067,524 | 11,318,197 | ||||||||||||||||||||||||||||||||||
Preferred dividends declared per preferred shares outstanding at end of period | 48.60 | 48.48 | 68.13 | 158.97 | 82.88 | ||||||||||||||||||||||||||||||||||
Weighted average number of shares outstanding during period, basic and diluted (1) | 1,020,713 | 1,383,440 | 1,414,775 | 2,861,928 | 5,753,917 |
Euroseas Ltd. – Summary of Selected Historical Financials (continued) As of December 31, | |||||||||||||||||||||||||||||||||||||||
Euroseas Ltd. – Summary of Selected Historical Financials (continued) As of December 31, | |||||||||||||||||||||||||||||||||||||||
Balance Sheet Data | 2014 | 2015 | 2016 | 2017 | 2018 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||
Current assets, continuing operations | 26,319,030 | 20,872,484 | 8,285,054 | 12,168,251 | 11,994,168 | 8,285,054 | 12,168,251 | 11,994,168 | 6,297,092 | 9,690,793 | |||||||||||||||||||||||||||||
Current assets of discontinued operations | 4,528,350 | 711,815 | 2,159,029 | 3,914,117 | 2,159,029 | 3,914,117 | - | - | - | ||||||||||||||||||||||||||||||
Vessels, net | 71,826,876 | 52,521,193 | 41,145,269 | 52,132,079 | 48,826,128 | 41,145,269 | 52,132,079 | 48,826,128 | 116,230,333 | 98,458,447 | |||||||||||||||||||||||||||||
Deferred assets and other long-term assets, continuing operations | 44,985,424 | 51,185,084 | 33,459,098 | 28,919,785 | 6,134,267 | ||||||||||||||||||||||||||||||||||
Deferred assets and other long term assets, continuing operations | 33,459,098 | 28,919,785 | 6,134,267 | 4,334,267 | 2,433,768 | ||||||||||||||||||||||||||||||||||
Long-term assets of discontinued operations | 42,918,932 | 47,116,387 | 58,645,054 | 65,195,329 | - | 58,645,054 | 65,195,329 | - | - | - | |||||||||||||||||||||||||||||
Total assets | 190,578,612 | 172,406,963 | 143,693,504 | 162,329,561 | 66,954,563 | 143,693,504 | 162,329,561 | 66,954,563 | 126,861,692 | 110,583,008 | |||||||||||||||||||||||||||||
Total current liabilities, continuing operations | 25,691,633 | 20,391,502 | 9,710,927 | 12,649,309 | 11,592,535 | 9,710,927 | 12,649,309 | 11,592,535 | 24,851,259 | 28,645,782 | |||||||||||||||||||||||||||||
Current liabilities of discontinued operations | (501,404 | ) | (1.026.121 | ) | 1,463,708 | 5,883,288 | - | 1,463,708 | 5,883,288 | - | - | - | |||||||||||||||||||||||||||
Long term bank loans, including current portion | 33,417,000 | 22,201,040 | 20,402,911 | 34,014,502 | 36,586,790 | 20,402,911 | 34,014,502 | 36,586,790 | 84,483,105 | 66,865,348 | |||||||||||||||||||||||||||||
Related party loan, current | 2,000,000 | - | - | 5,000,000 | 2,500,000 | ||||||||||||||||||||||||||||||||||
Vessel profit participation liability | - | - | - | 1,297,100 | 1,067,500 | - | 1,297,100 | 1,067,500 | - | - | |||||||||||||||||||||||||||||
Long-term liabilities of discontinued operations | 18,320,000 | 16,440,000 | 28,243,478 | 30,364,035 | - | 28,243,478 | 30,364,035 | - | - | - | |||||||||||||||||||||||||||||
Total liabilities | 59,936,008 | 45,279,121 | 55,781,792 | 80,021,604 | 44,376,584 | 55,781,792 | 80,021,604 | 44,376,584 | 98,753,414 | 75,228,005 | |||||||||||||||||||||||||||||
Preferred shares | 30,440,100 | 32,079,249 | 33,804,948 | 35,613,759 | 18,757,361 | 33,804,948 | 35,613,759 | 18,757,361 | 7,654,577 | 8,019,636 | |||||||||||||||||||||||||||||
Common shares outstanding | 5,715,731 | 8,195,760 | 10,876,112 | 11,274,126 | 12,515,645 | ||||||||||||||||||||||||||||||||||
Number of common shares outstanding (1) | 1,359,514 | 1,409,266 | 1,564,456 | 5,600,259 | 6,708,946 | ||||||||||||||||||||||||||||||||||
Common stock | 171,472 | 245,873 | 326,283 | 338,230 | 375,476 | 40,785 | 42,279 | 46,934 | 168,008 | 201,268 | |||||||||||||||||||||||||||||
Total shareholders' equity | 100,202,504 | 95,048,593 | 54,106,764 | 46,694,198 | 3,820,618 | ||||||||||||||||||||||||||||||||||
Total shareholders’ equity | 54,106,764 | 46,694,198 | 3,820,618 | 20,453,701 | 27,335,367 | ||||||||||||||||||||||||||||||||||
Cash Flow Data | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||||||||||||
Net cash (used in) / provided by operating activities of continuing operations | (5,633,563 | ) | (905,910 | ) | (5,088,067 | ) | 5,053,025 | (1,474,830 | ) | (5,088,067 | ) | 5,053,025 | (1,474,830 | ) | 3,240,429 | 2,409,377 | |||||||||||||||||||||||
Net cash (used in) / provided by investing activities of continuing operations | (848 | ) | 8,904,008 | 1,109,456 | (16,511,220 | ) | 6,253,868 | ||||||||||||||||||||||||||||||||
Net cash provided by / (used in) financing activities of continuing operations | 16,057,159 | (20,058,980 | ) | (6,341,223 | ) | 12,750,658 | 135,403 | ||||||||||||||||||||||||||||||||
Net cash provided by/(used in) investing activities of continuing operations | 1,109,456 | (16,511,220 | ) | 6,253,868 | (55,720,226 | ) | 16,319,307 | ||||||||||||||||||||||||||||||||
Net cash (used in)/ provided by financing activities of continuing operations | (6,341,223 | ) | 12,750,658 | 135,403 | 45,198,270 | (18,320,568 | ) |
Fleet Data(1) | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||
Number of vessels | 13.00 | 12.74 | 8.67 | 9.28 | 11.49 | |||||||||||||||
Calendar days | 4,745 | 4,650 | 3,175 | 3,386 | 4,191 | |||||||||||||||
Available days | 4,677 | 4,587 | 3,028 | 3,285 | 4,115 | |||||||||||||||
Voyage days | 4,564 | 4,285 | 2,844 | 3,184 | 3,814 | |||||||||||||||
Utilization Rate (percent) | 97.6 | % | 93.0 | % | 93.9 | % | 96.9 | % | 92.7 | % | ||||||||||
(In U.S. dollars per day per vessel) | ||||||||||||||||||||
Average TCE rate(2) | 7,319 | 7,855 | 7,120 | 7,309 | 9,179 | |||||||||||||||
Vessel Operating Expenses | 4,764 | 4,695 | 4,363 | 4,436 | 4,769 | |||||||||||||||
Management Fees | 916 | 772 | 756 | 777 | 844 | |||||||||||||||
G&A Expenses | 576 | 621 | 842 | 739 | 612 | |||||||||||||||
Total Operating Expenses excluding drydocking expenses | 6,256 | 6,088 | 5,961 | 5,952 | 6,225 | |||||||||||||||
Drydocking expenses | 416 | 287 | 694 | 169 | 662 |
Euroseas Ltd. – Summary of Selected Historical Financials (continued) | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
Fleet Data (1) | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||
Average number of vessels | 8.67 | 9.28 | 11.49 | 13.10 | 17.23 | |||||||||||||||
Calendar days | 3,175 | 3,386 | 4,191 | 4,782 | 6,306 | |||||||||||||||
Available days | 3,028 | 3,285 | 4,115 | 4,680 | 6,023 | |||||||||||||||
Voyage days | 2,844 | 3,184 | 3,814 | 4,636 | 5,754 | |||||||||||||||
Utilization Rate (percent) | 93.9 | % | 96.9 | % | 92.7 | % | 99.1 | % | 95.5 | % |
(In U.S. Dollars per day per vessel) | ||||||||||||||||||||
Average TCE rate (2) | 7,120 | 7,309 | 9,179 | 8,782 | 9,445 | |||||||||||||||
Vessel Operating Expenses | 4,363 | 4,436 | 4,769 | 5,015 | 5,110 | |||||||||||||||
Management Fees | 756 | 777 | 844 | 768 | 839 | |||||||||||||||
G&A Expenses | 842 | 739 | 612 | 511 | 482 | |||||||||||||||
Total Operating Expenses excluding drydocking expenses | 5,961 | 5,952 | 6,225 | 6,294 | 6,431 | |||||||||||||||
Drydocking expenses | 694 | 169 | 662 | 568 | 85 |
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||
(In U.S. dollars, except for voyage days and TCE rates which are expressed in U.S. dollars per day) | (In U.S. dollars, except for voyage days and TCE rates which are expressed in U.S. dollars per day) | |||||||||||||||||||||||||||||||||||||||
Time charter revenue | 32,587,186 | 35,509,971 | 21,409,236 | 24,278,048 | 36,062,202 | 21,409,236 | 24,278,048 | 36,062,202 | 41,769,278 | 55,681,124 | ||||||||||||||||||||||||||||||
Voyage charter revenue | 4,731,423 | - | 47,979 | 559,319 | 206,682 | 47,979 | 559,319 | 206,682 | - | - | ||||||||||||||||||||||||||||||
Voyage expenses | (3,919,860 | ) | (1,852,482 | ) | (1,209,085 | ) | (1,564,489 | ) | (1,261,088 | ) | (1,209,085 | ) | (1,564,489 | ) | (1,261,088 | ) | (1,055,408 | ) | (1,334,259 | ) | ||||||||||||||||||||
Time Charter Equivalent or TCE Revenues | 33,398,749 | 33,657,489 | 20,248,130 | 23,272,878 | 35,007,796 | 20,248,130 | 23,272,878 | 35,007,796 | 40,713,870 | 54,346,865 | ||||||||||||||||||||||||||||||
Voyage days | 4,564 | 4,285 | 2,844 | 3,184 | 3,814 | 2,844 | 3,184 | 3,814 | 4,636 | 5,754 | ||||||||||||||||||||||||||||||
Average TCE rate | 7,319 | 7,855 | 7,120 | 7,309 | 9,179 | 7,120 | 7,309 | 9,179 | 8,782 | 9,445 |
B. | Capitalization and Indebtedness |
C. | Reasons for the Offer and Use of Proceeds |
D. | Risk Factors |
supply of, and demand for, containerized cargo; |
weather and other natural phenomena. |
the number of newbuilding orders and deliveries including slippage in deliveries; |
prevailing level of charter rates. |
comingthat came into effect on January 1, 2020 may adversely affect our revenues and profitability.due to takethat came into effect on January 1, 2020, ships will have to reduce sulfur emissions, for which the principal solutions are the use of scrubbers or buying fuel with low sulfur content which isWe expect that ourOur fuel costs and fuel inventories will increase beginning in 2019have increased as a result of these sulfur emission regulations.regulations, but the effect is limited by the fact that our vessels are under time charter agreements and these costs are paid by the charterer. However, fuel costs are taken into account by the charterer in determining the amount of time charter hire and, therefore, fuel costs also indirectly affect time charter rates. Low sulfur fuel is more expensive than standard marine fuel containing 3.5% sulfur content and may become more expensive or difficult to obtain as a result of increased demand, which may have a material adverse effect on our business, results of operations, cash flows and financial condition.12 Germanischer Lloyd and Nippon Kaiji Kyokai. ISM and International Ship and Port Facilities Security or ISPS, (“ISPS”) certifications have been awarded to the vessels by Bureau Veritas or Liberian Flag Administration and to the Manager by Bureau Veritas.or IACS.(“IACS”). All of our vessels that we have purchased, and may agree to purchase in the future, must be certified as being "in class" prior to their delivery under our standard purchase contracts and memorandum of agreement. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel. We have all of our vessels, and intend to have all vessels that we acquire in the future, classed by IACS members. See Item 4: "Information“Information on the Company – Business Overview – Environmental and Other Regulations in the Shipping Industry"Industry” for more information.("OPEC"(“OPEC”) and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Fuel prices had been at historically high levels through mid-2014, but by the first quarter of 2016 fuel prices had fallen by more than 50%. Oil prices began rising in February 2016 until June 2016, due to, among other reasons, the war in Syria, oscillated until November 2016, due to movements in the U.S. dollar exchange rate and various geopolitical events, surging again since end-November 2016, due to the announcement by OPEC of future production cuts. In January 2017,By October 2018, oil prices maintained their levels while in February 2017 they further rose, reaching $53.83/reached $76.41/bbl (for West Texas Intermediate, "WTI"“WTI”) on March 1, 2017. Oil prices subsequently oscillated until May 23, 2017 in the $45.5and then fell to $54 range. In the following 30 days oil prices fell 17%, before beginning a rally of more than 40% until December 31, 2017. In 2018, oil prices continued to rise, albeit with significant fluctuations, to $74.15/$42.53/bbl as of June 29, 2018 (+23% year to date) until August 15, 2018, the price corrected by 9.6% to $67.04/bbl. A rising trend resumed until early October, by which time the WTI had gained 14% ($76.41/bbl). In the fourth quarter of 2018, lower demand and the International Monetary Fund's lower GDP forecasts reversed the trend once more, reducing the oil price by 44% to $42.53 by December 24, 2018. Thereafter, oil prices rebounded responding, at least partly, to a 90-day trade wartrade-war truce agreed between the United States and China. By April 1, 2019 the WTI has risenrose by 49.1% to $63.43/bbl. Oil markets faced a steep one-day loss on August 7, 2019 with the WTI closing at $51.09/bbl, after the United States threatened to impose more tariffs on China, then soared to $62.90/bbl in September when key oil facilities in Saudi Arabia were disabled in a missile attack. Prices dropped to around $55.0/bbl in October 2019, and then began rising until the end of the year to approximately $61.0/bbl. However, by February 1, 2020 the price dropped to $52.10/bbl, as concerns over the COVID-19 pandemic started emerging, and further dropped to $20.31/bbl by April 1, 2020, after OPEC and Russia failed to agree on maintaining production cuts, and Saudi Arabia increased its own production. As the COVID-19 pandemic continued to spread around the world, oil prices however, remaindropped to historical lows in April 2020 to $11.26/bbl and closed the year at $43.52/bbl. Oil traded lower throughout the year, as rising COVID-19 infections and the new strain, sparked demand concerns. Prices edged slightly higher in December 2020, ranging around $48/bbl, upon the rolling out of the COVID-19 vaccines, coupled by Saudi Arabia’s announcement regarding a large output reduction for February and March 2021. In January 2021, oil traded at around $52/bbl. In February, the average WTI stood at $59/bbl, the highest value since the start of the pandemic, with hopes of steady vaccination roll out and OPEC production limits having led to cautious optimism at global markets. Still, oil prices are significantly below their 10-year average of ca. $71/circa $68/bbl (for WTI). Any further increases in the price of fuel, especially if exceeding its 10-year average, may adversely affect our operations, especially if such increases are combined with lower containership rates.1314or SEC,(“SEC”), other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws. A number of financial institutions and especially banks that traditionally provide debt to shipping companies like ours have experienced serious financial difficulties and, in some cases, have entered bankruptcy proceedings or are in regulatory enforcement actions. As a result, access to credit markets around the world has been reduced. The extension of Quantitative Easing (or "QE"(“QE”) and more recently the reversal of it, high levels of Non-Performing Loans (or "NPLs"(“NPLs”) in Europe and stricter lending requirements may reduce bank lending capacity and/or make the terms of any lending more onerous.Effects and events related to the Greek sovereign debt and economic crisis may adversely affect our operating results.Greece has experienced a macroeconomic downturn in recent years, partially as a result of the sovereign debt crisis and the related austerity measures implemented by the Greek government. Eurobulk's operations in Greece may be subjected to new regulations or regulatory action that may require us to incur new or additional compliance or other administrative costs and may require that we or Eurobulk pay to the Greek government new taxes or other fees. We and Eurobulk also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt our and Eurobulk's shore-side operations located in Greece. The Greek government's taxation authorities have increased their scrutiny of individuals and companies to secure tax law compliance. If economic and financial market conditions remain uncertain, persist or deteriorate further, the Greek government may impose further changes to tax and other laws to which we and Eurobulk may be subject or change the ways they are enforced, which may adversely affect our business, operating results, and financial condition.15The increased number of our shore personnel working remotely might increase our vulnerability to cyber-attacks and risk of cyber-security breaches which would affect our operations and financial results.vote bywithdrawal of the United Kingdom to leavefrom the European Union could adversely affect us.UK"U.K.") referendum on its membership in the European UnionEU resulted in a majority ofthe U.K. voters voting to exitwithdrawing from the E.U. ("Brexit"EU on January 31, 2020 (“Brexit”). We have operations in the E.U.,EU, and as a result, we face risks associated with the potential uncertainty and disruptions that may follow Brexit, including volatility in exchange rates and interest rates and potential material changes to the regulatory regime applicable to our business or global trading parties. The framework for the U.K. and Europe’s future relationship has been laid out in a Withdrawal Agreement, the final terms of which were agreed on December 24, 2020, and went into effect on January 1, 2021. While the exact way that Brexit will be achieved is uncertain, trade agreement reached contemplates zero tariffs and quotas on goods, some aspects relating to financial services have not been agreed upon. Additionally, the end of free movement could significantly disrupt the exchange of people and services between the U.K. and the EU, resulting in the imposition of impediments to trade. Brexit could adversely affect European orUKU.K., specifically. AnyWhile we have limited exposure to the U.K. or the Pound sterling (“GBP”), any of these effects of Brexit, and others we cannot anticipate or that may evolve over time, could have a material adverse effect on our business, financial condition, results of operations and cash flows.available for distribution towith which we service our shareholders asdebt or could pay dividends, sincebecause our fleet is currently employed on period time charters. However,charters, but this seasonality may materially affect our operating results if our vessels are employed in the spot market in the future, seasonality may materially affect our operating results in the future.We may have difficulty securing profitable employment for our vessels if their charters expire in a depressed market.All of our eleven vessels are currently employed on time charter contracts. Eight of our vessels are under time charters scheduled to expire during 2019 and three are under time charters scheduled to expire in 2020. As of April 1, 2019, the containership charter rates for vessels like ours remain below historical averages. When the current charters of our vessels are due for renewal, we may be unable to re-charter these vessels at similar or better rates or we might not be able to charter them at all. Although we do not receive any revenues from our vessels while not employed, we are required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel. If we cannot re-charter our vessels on time charters or trade them in the spot market profitably, our results of operations and operating cash flow will be adversely affected.have enteredenter into to hedge our exposure to fluctuations in interest rates can result in higher than market rates and reductions in our stockholders'stockholders’ equity as well as charges against our income, while there is no assurance of the credit worthiness of our counterparties.have enteredenter into interest rate swaps generally for purposes of managing our exposure to fluctuations in interest rates applicable to indebtedness under our credit facilities which were advanced at floating rates based on LIBOR.the London Interbank Offered Rate (“LIBOR”). Interest rates and currency hedging may result in us paying higher than market rates. As of December 31, 2018, the aggregate notional amount of interest rate swaps relating to our fleet as of such date was $10$10.0 million. As of December 31, 2019, all previous swap contracts had matured and the Company had no open position in interest rate swaps. In April 2020, we entered into a new interest rate swap agreement for a notional amount of $30.0 million. As of December 31, 2020, the aggregate notional amount of interest rate swaps relating to our fleet was $30.0 million. There is no assurance that our derivative contractsinterest rate swap contract or any other derivative contract that we enter into in the future will provide adequate protection against adverse changes in interest rates or that our bank counterparties will be able to perform their obligations. In addition, as a result of the implementation of new regulation of the swaps markets in the United States, the European Union and elsewhere over the next few years, the cost of interest rate may increase or suitable hedges may not be available. While we monitor the credit risks associated with our bank counterparties, there can be no assurance that these counterparties would be able to meet their commitments under our derivative contractscontract or any future derivative contract. Our bank counterparties include financial institutions that are based in European Union countries that have faced and might face again financial stress. The potential for our bank counterparties to default on their obligations under our derivative contracts may be highest when we are most exposed to the fluctuations in interest and currency rates such contracts are designed to hedge, and several or all of our bank counterparties may simultaneously be unable to perform their obligations due to the same events or occurrences in global financial markets.swaps doswap does not, and future derivative contracts may not, qualify for treatment as hedges for accounting purposes we would recognize fluctuations in the fair value of such contracts in our income statement.statement of operations. In addition, to the16"Accumulated“Accumulated Other Comprehensive Loss"Loss” affecting our accumulated deficit, and may affect compliance with the net worth covenant requirements in our credit facilities. Changes in the fair value of our derivative contracts that do not qualify for treatment as hedges for accounting and financial reporting purposes affect, among other things, our net income and our earnings per share. For additional information see "Item“Item 5. Operating and Financial Review and Prospects"Prospects” and "ItemRisk"Risk”.Manager'sManager’s services or the Manager may fail to perform its obligations to us which could have a material adverse effect on our financial condition and results of our operations. Although we may have rights against our Manager if it defaults on its obligations to us, you will have no recourse against our Manager. Further, we will need to seek approval from our lenders to change the Manager as our ship manager.Manager'sManager’s financial strength, and because the Manager is privately held it is unlikely that information about its financial strength would become public unless the Manager began to default on its obligations. As a result, there may be little advance warning of problems affecting the Manager, even though these problems could have a material adverse effect on us.• the operations of the shipyards that build any newbuild vessels we may order;• • • • • • • • • 17vessel'svessel’s condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for secondhand vessels are difficult tochairmanChairman and chief executive officer,Chief Executive Officer (“CEO”), Aristides J. Pittas, certain members of our senior management and our Manager. Mr. Pittas has substantial experience in the container shipping industry and has worked with us and our Manager for many years. He, our Manager and certain members of our senior management team are crucial to the execution of our business strategies and to the growth and development of our business. If these individuals were no longer to be affiliated with us or our Manager, or if we were to otherwise cease to receive services from them, we may be unable to recruit other employees with equivalent talent and experience, which could have a material adverse effect on our financial condition and results of operations.April 1, 2019,March 31, 2021, Friends Investment Company Inc., (or "Friends"“Friends”), our largest shareholderContainers Shareholders Trinity Ltd., Colby Trading Ltd., Eurobulk Marine Holdings Inc. and an affiliateDiamantis Shareholders Ltd., all affiliates of the Company controlled by the Pittas family and partly owned by our Chairman and CEO, Vice Chairman and people affiliated or working with Eurobulk amongst others, ownsown approximately 29.6%60.2% of the outstanding shares of our common stock and unvested incentive award shares, representing 25.3%58.3% of total voting power (after accounting for the certain voting rights of our Series B Preferred Shares (defined below))before conversion and 56.4% of total voting power on an as converted basis). As a result of this share ownership and for as long as Friends owns a significant percentage of our outstanding common stock, Friends will be able to influence the outcome of any shareholder vote, including the election of directors, the adoption or amendment of provisions in our amended and restated articles of incorporation or bylaws, as amended, and possible mergers, corporate control contests and other significant corporate transactions. In addition, as of April 1, 2019,March 31, 2021, funds advised by Tennenbaum Capital Partners LLC ("TCP"(“TCP”) and Preferred Friends Investment Company Inc., an affiliate of the Company partly owned by our Chairman and CEO, Vice Chairman and people affiliated or working18to which we will refer as the Series B Preferred Shares, that are convertible into 20.8%4.8% and 4.7%3.0%, respectively, of our common shares and unvested incentive award shares on an as-converted basis. In addition, we cannot enter into certain transactions without consent from holders of our Series B Preferred Shares. This concentration of ownership and the consent rights of holders of Series B Preferred Shares may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination involving us, and could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our common stock.Eurobulk currently manages vessels for Euroseas and eight vessels that are not owned by Euroseas, potentially causing conflicts such as those described above. Further, it is possible that in the future Eurobulk may manage additional vessels which will not belong to Euroseas and in which the Pittas family may have non-controlling, little or even no power or participation, and Eurobulk may not be able to resolve all conflicts of interest in a manner beneficial to us and our shareholders. own container carriers and may acquire additional containership vessels in the future. These vessels could be in competition with our fleet and other companies affiliated with Eurobulk might be faced with conflicts of interest with respect to their own interests and their obligations to us. Eurobulk, Friends and Aristides J. Pittas, our Chairman and Chief Executive Officer, have granted us a right of first refusal to acquire any containership that any of them may consider for acquisition in the future. In addition, Aristides J. Pittas will use his best efforts to cause any entity with respect to which he directly or indirectly controls to grant us this right of first refusal. Were we, however, to decline any such opportunity offered to us or if we did not have the resources or desire to accept any such opportunity, Eurobulk, Friends and Aristides J. Pittas, and any of their respective affiliates, could acquire such vessels.19Until January 29, 2019, we were able to pay dividends on ourmust bewere paid in cash. cash until March 31, 2020. On April 1, 2020, the Company agreed with the holders of the Series B Preferred Shares, to have the option to pay the Series B Preferred dividends in-kind at a rate of 9.0% per annum, or 8.0% per annum if paid in cash, until January 29, 2021, after which the dividend rate was set to increase to 14% per annum. On January 29, 2021, we redeemed 2,000 of our Series B Preferred Shares (“Preferred Shares”) outstanding (par value $1,000 per share) and paid $2.0 million to our Preferred Shares shareholders. In connection with the redemption, the Company agreed with its Preferred Shares shareholders to set the dividend rate of its Preferred Shares to 8.0% per annum if paid in cash and 9.0% if paid in-kind at the Company’s option until January 29, 2023, after which date the dividend rate will increase to 14% per annum. In the future, we may have insufficient cash available to redeem our Series B Preferred Shares. The amount we can pay for dividends or use to redeem Series B Preferred Shares depends upon the amount of cash we generate from our operations, which may fluctuate. If we do not have sufficient cash to pay dividends to holders of the Series B Preferred Shares, then our failure to pay such dividends would be a dividend payment default and would therefore cause the dividend rate to increase, pursuant to the terms of the Amended and Restated Statement of DesignationsDesignation of the Series B Preferred Shares. In addition, failure to pay dividends on our Series B Preferred Shares when due will adversely affect our ability to utilize shelf registration statements to sell our securities, which has been an important fund-raising avenue for us in the past.including for our vessel under construction, would limit our ability to continue to operate some of our vessels and could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends. Even if we are successful in obtaining such funds through financings, the terms of such financings could further limit our ability to pay dividends.·incur additional indebtedness; ·create liens on our assets; ·sell capital stock of our subsidiaries; ·make investments; ·engage in mergers or acquisitions; ·pay dividends; ·make capital expenditures; ·change the management of our vessels or terminate or materially amend the management agreement relating to each vessel; and ·sell our vessels. 202018,2020, we had total bank debt of approximately $37.5$67.3 million. Our bank debt repayment schedule as of December 31, 20182020 required us to repay $10.42$29.8 million of bank debt during the next two years and all remaining bank debt in theApril 1, 2019,March 31, 2021, we repaid $1.3$2.2 million of our total bank debt decreasing our outstanding bank debt to $36.2$65.1 million. If we are unable to service our debt, it could have a material adverse effect on our financial condition, results of operations and cash flows. rates in most financing agreements in our industry havehas been based on published LIBOR rates. OurDue in part to uncertainty relating to the LIBOR calculation process in recent years, it is likely that LIBOR will be phased out in the future. As a result, our loan agreements contain provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate if the quoted LIBOR rate does not reflect their true cost-of-funds or if it is unavailable.rate. Since some of our loans have such clauses, our borrowing costs could increase significantly, if there is a market disruption of LIBOR, which couldwould have an adverse effect on our profitability, earnings and cash flows.flow.or "Committee", a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or "SOFR." The impact“SOFR.” On November 30, 2020 the administrator of suchLIBOR, ICE Benchmark Administration (“IBA”), announced that it would consult on ceasing to determine one-week and two-month U.S. dollar LIBOR with effect from December 31, 2021 deadline but ceasing to determine the remaining U.S. dollar LIBOR tenors on June 30, 2023. This announcement coincided with an announcement by the International Swaps and Derivatives Association (“ISDA”) that the IBA announcement was not a transition awaytriggering event which would set the spread to be used in its derivative contracts as part of the risk-free rate determination process. Uncertainty surrounding a phase-out of LIBOR may adversely affect the trading market for LIBOR-based agreements, which could negatively affect our operating results and financial condition as well as our cash flows, including cash available for dividends to our stockholders. We are continuing to evaluate the risks resulting from a termination of LIBOR would be significantand our credit facilities generally have fallback provisions in the event of the unavailability of LIBOR, but those fallback provisions and related successor benchmarks may create additional risks and uncertainties for us because of our substantial indebtedness. us.from time to timein the future use additional interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be given that the use of these derivative instruments if any, may effectively protect us from adverse interest rate movements. The use of interest rate derivatives may21Manager'sManager’s current operating and financial systems may not be adequate if we expand the size of our fleet, and our attempts to improve those systems may be ineffective. In addition, if we expand our fleet, we will have to rely on our Manager to recruit suitable additional seafarers and shore-side administrative and management personnel. Our Manager may not be able to continue to hire suitable employees as we expand our fleet. If our Manager'sManager’s affiliated crewing agent encounters business or financial difficulties, we can make satisfactory arrangements with unaffiliated crewing agents or else we may not be able to adequately staff our vessels. If we are unable to operate our financial and operations systems effectively or to recruit suitable employees, our performance may be materially adversely affected. A delay in the delivery of any of these vessels to us or the failure of the contract counterparty to deliver a vessel at all could cause us to breach our obligations under a related time charter and could adversely affect our earnings, our financial condition and the amount of dividends, if any, that we pay in the future. The delivery of any vessels we might decide to acquire, whether newbuildings or secondhand vessels, could be delayed or certain events may arise which could result in us not taking delivery of a vessel, such as a total loss of a vessel, a constructive loss of a vessel, substantial damage to a vessel prior to delivery or construction not in accordance with agreed upon specification or with substantial defects. A delay in the delivery of any of these vessels to us or the failure of the contract counterparty to deliver a vessel at all could cause us to breach our obligations under a related time charter and could adversely affect our earnings, our financial condition and the amount of dividends, if any, that we pay in the future.We will not be able to take advantage of potentially favorable opportunities in the current market with respect to vessels employed on time charters.As of April 1, 2019, all of our vessels are employed under time charters with remaining terms ranging from less than one month to eleven months based on the minimum duration of the charter contracts. The percentage of our fleet that is under time charter contracts represents approximately 55% of our vessel capacity in the remainder of 2019 and 4% of our capacity in 2020. Although time charters provide relatively steady streams of revenue, vessels committed to time charters may not be available for chartering during periods of increasing charter rates. If we cannot re-charter these vessels on time charters or trade them profitably, our results of operations and operating cash flow may suffer. We may not be able to secure charter rates in the future that will enable us to operate our vessels profitably. Although we do not receive any revenues from certain of our vessels while such vessels are unemployed, we are required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel. Despite the fact that as of April 1, 2019 all of our vessels are employed, we may be forced to lay up vessels if rates drop to levels below daily running expenses or if we are unable to find employment for the vessels for prolonged periods of time.Manager'sManager’s ability to hire additional employees and to retain key members of our management team. The loss of any of these individuals could adversely affect our business prospects and financial condition and operating cash flows. Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not currently intend to maintain "key man" life insurance on any of our officers.22·marine disaster; ·piracy; ·environmental accidents; ·grounding, fire, explosions and collisions; ·cargo and property losses or damage; ·business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, labor strikes, or adverse weather conditions;conditions, natural disasters or other disasters outside our control, such as the COVID-19 outbreak; and·work stoppages or other labor problems with crew members serving on our vessels including crew strikes and/or boycotts. vessels'vessels’ positions. The loss of earnings and any costs incurred while these vessels are forced to wait for space or to steam to more distant drydocking facilities would decrease our earnings.April 1, 2019,March 31, 2021, the vessels in our fleet had an average age of approximately 20.517.0 years. As our vessels age, they may become less fuel efficient and more costly to maintain and will not be as advanced as more recently constructed vessels due to improvements in design and engine technology. Rates for cargo insurance, paid by charterers, also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which our vessels may engage. As23April 1, 2019,March 31, 2021, the vessels in our fleet had an average age of approximately 20.517.0 years. Unless we maintain cash reserves for vessel replacement, we may be unable to replace the vessels in our fleet upon the expiration of their useful lives. We estimate the useful life of our vessels to be 25 years from the completion of their construction. Our cash flows and income are dependent on the revenues we earn by chartering our vessels to customers. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, financial condition and results of operations may be materially adversely affected. Any reserves set aside for vessel replacement would not be available for other cash needs or dividends.Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters would be at lower rates given currently decreased charter rate levels. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters may be at lower rates given currently decreased charter rate levels. As a result, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends in the future and compliance with covenants in our credit facilities.dropdecrease in spot charter rates may provide an incentive for some charterers to default on their charters.drybulk, tanker or offshore support shipping industriesindustry remain significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, which would affect our ability to operate our vessels profitably and may affect our ability to comply with covenants contained in our current or future credit facilities and financing agreements. against by vessel owners and operators which includes hull and machinery insurance, protection and indemnity insurance (which, in turn, includes environmental damage and pollution insurance) and war risk insurance and freight, demurrage and defense insurance for our fleet. We generally do not maintain insurance against loss of hire which covers business interruptions that result in the loss of use of a vessel except in cases we consider such protection appropriate. We may not be adequately insured against all risks and we may not be able to obtain adequate insurance coverage for our fleet in the future. The insurers may not pay particular claims. Even if our insurance coverage is adequate to cover our losses, we may24protection and indemnity associations.P&I Associations.associationsAssociations or clubs. P&I associationsAssociations are mutual insurance associations whose members must contribute to cover losses sustained by other association members. The objective of a P&I associationAssociation is to provide mutual insurance based on the aggregate tonnage of a member'smember’s vessels entered into the association. Claims are paid through the aggregate premiums of all members of the association, although members remain subject to calls for additional funds if the aggregate premiums are insufficient to cover claims submitted to the association. We cannot assure you that the P&I associationAssociation to which we belong will remain viable or that we will not become subject to additional funding calls which could adversely affect us. Claims submitted to the association may include those incurred by members of the association as well as claims submitted to the association from other P&I associationsAssociations with which our P&I associationAssociation has entered into inter-association agreements."war risk"“war risk” zones or Joint War Committee "war“war and strikes"strikes” listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including the employment of onboard security guards, could increase in such circumstances. Furthermore, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charter-hire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not "on-hire"“on-hire” for a certain number of days and is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, any detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability, of insurance for our vessels, could have a material adverse impact on our business, financial condition and earnings.25IMO'sIMO’s Maritime Safety Committee and U.S. agencies indicate that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. This might cause companies to cultivate additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. However, the impact of such regulations is hard to predict at this time. We do not carry cyber-attack insurance, which could have a material adverse effect on our business, financial condition and results of operations.to restrictions,of sanctions or embargoes imposed by the U.S. government, the European Union, the United Nations, andor other governmentsgovernmental authorities it could lead to monetary fines or penalties and/or adversely affect our reputation and the market for our shares of common stock and its trading price.From timetime,take precautions reasonably designed to mitigate such risks, it is possible that, in the future, vessels in our fleet on charterers' instructions may call on ports located in countriesSanctioned Jurisdictions on charterers' instructions and/or without our consent. If such activities result in a violation of applicable sanctions or embargo laws, we could be subject to monetary fines, penalties, or other sanctions, and embargoes imposed byour reputation and the U.S. government and countries identified by the U.S. government, the European Union, the United Nations and other governments. We endeavor to have trade exclusion clauses included in the charter contracts. All ofmarket for our charters contain trade exclusion clauses relating to, among other locations, countries deemed by the United States as state sponsors of terrorism. common stock could be adversely affected.strengthenedexpanded over time. The U.S. government has recently lifted certain sanctionsCurrent or future counterparties of ours, including charterers, may be affiliated with respect to Libya and made changes to the scope of the sanctions regime for Iran. Although the United States suspended certain sanctions against Iran applicable to non-U.S. companies, such as us, on January 16, 2016 pursuant to the Joint Comprehensive Plan of Action, a nuclear agreement reached between Iran, China, France, Germany, Russia, the United Kingdom, the United States and the European Union, in May 2018, President Trump announced the withdrawal of the United States from the Joint Comprehensive Plan of Action and almost all of the U.S. sanctions waived and lifted in January 2016 were reinstated in August 2018 and November 2018.The United States sanctions administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury principally apply, with limited exception, to U.S. persons (defined as any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States,entities that are or any personmay be in the United States) only, not to non-U.S. companies. The United States can, however, extendfuture the subject of sanctions liability to non-U.S. persons, including non-U.S. companies, such as our Company.The United States can also remove sanctions it has previously imposed. On January 16, 2016, the United States suspended certain sanctions against Iran applicable to non-U.S. companies, such as us, pursuant to the nuclear agreement reached between Iran, China, France, Germany, Russia, the United Kingdom, the United States and the European Union. To implement these changes, beginning on January 16, 2016, the United States waived enforcement as to non-U.S. companies of many of the sanctions against Iran's energy and petrochemical sectors described above, among other things, including certain provisions of CISADA, ITRA, and IFCA. In May 2018, President Trump announced the withdrawal of the United States from the Joint Comprehensive Plan of Action and almost all of the U.S. sanctions waived and lifted in January 2016 were reinstated in August 2018 and November 2018, respectively.U.S. sanctions prohibiting certain conduct that is now permitted under the JCPOA have not actually been repealed or permanently terminated at this time. Rather,embargoes imposed by the U.S. government, has implemented changesthe EU, and/or other international bodies. If we determine that such sanctions or embargoes require us to theterminate existing or future contracts to which we, or our subsidiaries, are party or if we are found to be in violation of such applicable sanctions, regime by: (1) issuing waiversour results of certain statutory sanctions provisions; (2) committing to refrain from exercising certain discretionary sanctions authorities; (3) removing certain individuals and entities from OFAC's sanctions lists; and (4) revoking certain Executive Orders and specified sections of Executive Orders. These sanctions will notoperations may be permanently "lifted" until the earlier of "Transition Day," set to occur on October 20, 2023,adversely affected, we could face monetary fines or upon a report from the IAEA stating that all nuclear material in Iran is being used for peaceful activities. On October 13, 2017, President Trump announced he would not certify Iran's compliance with the JCPOA. This did not withdraw the U.S. from the JCPOApenalties, or re-instate any sanctions. However, President Trump must periodically renew sanctions waivers and his refusal to do so could result in the reinstatement of certain sanctions suspended under the JCPOA.we may suffer reputational harm.cargo and does not know the identity of the cargo owner.cargo. The vessel26April 1, 2019,March 31, 2021, none of our vessels have called on ports at the aforementioned countriesin Sanctioned Jurisdictions in the past or are arranged to call such ports in the future. The vessels' shipowningvessels’ ship owning companies do not presently have, and have not in the past had, any agreements, arrangements or contracts with the governments of Iran, North Korea, Sudan,Crimea Region of Ukraine, Syria or Cuba or entities that these countries control.andor embargo laws that are not controlled by the governments of those countries or territories, or engaging in operations associated with those countries or territories pursuant to contracts with third parties that are unrelated to those countries or territories or entities controlled by their governments. Investor perception of the value of our common stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surroundingthe countries or territories that we operate in.inon a number of occasions in other countries following that, as well as continuing or new unrest and hostilities in Iraq, Iran, Afghanistan, Libya, Egypt, Ukraine, Syria and elsewhere in the world, may lead to additional armed conflicts or to further acts of terrorism and civil disturbance. Any such attacks or disturbances may disrupt our business, increase vessel operating costs, including insurance costs, and adversely affect our financial condition and results of operations. Our operations may also be adversely affected by expropriation of vessels, taxes, regulation, economic sanctions or other adverse events or circumstances in or affecting the countries and regions where we operate or where we may operate in the future.President Donald Trump was elected on a platform promoting trade protectionism. The results of the 2020 presidential election in the United thus created significant uncertainty concerningabout the future relationship between the United States, China and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. For example, on January 23, 2017, President Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership, a global trade agreement intended to include the United States, Canada, Mexico, Peru and a number of Asian countries. Inin March 2018, former President Trump announced tariffs on imported steel and aluminum into the United States that could have a negative impact on international trade generally. Ingenerally and in January 2019, the United States announced expanded sanctions against Venezuela, which may have an effect on its oil output, and in turn, affect global oil supply. However, it is not yet clear how the United States administration under President Biden may deviate from the former administration’s protectionist foreign trade policies. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in:(a) the cost of goods exported from regions globally,(b) the length of time required to transport goods and(c) (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the risks associated with exporting goods. 27or the Exchange Act,(the “Exchange Act”), and the other rules and regulations of the SEC, including the Sarbanes-Oxley Act of 2002 or Sarbanes-Oxley.(“Sarbanes-Oxley”). Section 404 of Sarbanes-Oxley requires that we evaluate and determine the effectiveness of our internal control over financial reporting.27%25% of our vessel operating expenses and drydocking expenses, all of our vessel management fees, and approximately 11%7% in 20182020 of our general and administrative expenses in currencies other than the U.S. dollar. This could lead to fluctuations in our operating expenses, which would affect our financial results. Expenses incurred in foreign currencies increase when the valueInterest rates in most loan agreements in our industry are based on variable components, such as LIBOR, and if such variable components increase significantly, it could affect our profitability, earnings and cash flows.LIBOR in the past has been volatile, with the spread between LIBOR and the prime lending rate widening significantly at times. These conditions can be the result of disruptions in the international credit markets. Because the interest rates borne by our outstanding indebtedness fluctuate with changes in LIBOR, if this volatility were to continue, it would affect the amount of interest payable to service our debt, which in turn, could have an adverse effect on our profitability, earnings and cash flows.Furthermore, interest rates in most loan agreements in our industry have been based on published LIBOR rates. Our loan agreements contain provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate if the quoted LIBOR rate does not reflect their true cost-of-funds or if it is unavailable. Since some of our loans have such clauses, our borrowing costs could increase significantly if there is a market disruption of LIBOR, which could have an adverse effect on our profitability, earnings and cash flows.addition, the banks currently reporting information used to set LIBOR will likely stop such reporting after 2021, when their commitment to reporting information ends. The Alternative Reference Rate Committee, or "Committee", a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or "SOFR." The impact of such a transition away from LIBOR would be significant for us because of our substantial indebtedness. In order to manage our2020, we had no exposure to interest rate fluctuations, we may from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The use of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position.GBP.2897% of our revenues derived from our top five charterers. During 201771%, 86%, and 2016, approximately 91% and 83%97%, respectively, of our revenues derived from our top five charterers. If one or more of our charterers chooses not to charter our vessels or is unable to perform under one or more charters with us and we are not able to find a replacement charter, we could suffer a loss of revenues that could adversely affect our financial condition and results of operations."passive“passive foreign investment company,"” or PFIC, for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income"“passive income” or (2) at least 50% of the average value of the corporation'scorporation’s assets produce or are held for the production of those types of "passive“passive income."” For purposes of these tests, "passive income"“passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive“passive income."” United States shareholders of a PFIC are subject to a disadvantageous United States federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. In addition, United States shareholders of a PFIC are required to file annual information returns with the United States Internal Revenue Service, or IRS.U.S.United States federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our shares, as if the excess distribution or gain had been recognized ratably over the United States shareholder's holding period of our shares. See "Taxation — United States Federal Income Taxation of U.S. Holders" in this Annual Report under Item 10 for a more comprehensive discussion of the United States federal income tax consequences to United States shareholders if we are treated as a PFIC.Regulations."Status and Significant Tax Consequences". We urge U.S. Holders to consult with their own tax advisors regarding the possible application of the PFIC rules.management'smanagement’s assessment of the effectiveness of our internal control over financial reporting. If, in such annual reports on Form 20-F, our management cannot provide a report as to the effectiveness of our internal control over financial reporting as required by Section 404, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.29are subjectmay have to United States federal incomepay tax on United States source income, which maywould reduce our earnings. as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselvesus and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code, or Section 883, and the regulationsapplicable Treasury Regulations promulgated thereunder.did not qualifyintend to take the position that we qualified for this statutory tax exemption for United States federal income tax return reporting purposes for our 2020 taxable year and we intend to so qualify for future taxable years. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption for any future taxable year and thereby become subject to United States federal income tax on our U.S.-source shipping income. For example, in certain circumstances we may no longer qualify for exemption under Section 883 for a particular taxable year if shareholders, other than “qualified shareholders”, with a five percent or greater interest in our common shares owned, in the aggregate, 50% or more of our outstanding common shares for more than half the days during the taxable year. Due to the factual nature of the Code for the 2016, 2017 and 2018 taxable years, althoughissues involved, there can be no assurances on our tax-exempt status. In addition, we may be ablefail to qualify for this exemption in future taxable years.if our common stock comes to represent 50% or less of the value or outstanding voting power of our stock.Since and our subsidiaries are not entitled to the exemption under Section 883 of the Code for the 2018any taxable year, we and our subsidiaries arewould be subject for those years to an effective 2% United States federal income tax on the shipping income we derivedderive during 2018 thatthe year which is attributable to the transport of cargoes to or from the United States. The amountimposition of this tax was $21,275taxation would have a negative effect on our business and $15,135would result in decreased earnings available for the 2016 and 2017 taxable years, respectively, and we estimate thisdistribution to be approximately $12,311 for the 2018 taxable year.our shareholders.and on the Nasdaq Global Select Market since January 1, 2008, and have traded on the Nasdaq Capital Market since June 26, 2015, the trading volume hashad been lower over the last couple of years. OurIn recent months, we have seen an increase in trading volume on our shares, which is reflected, in part, by the increased demand in the international containership market. However, our shares may not actively tradeonce again return to lower trading volumes in the public market and any such limited liquidity may cause our common stock to trade at lower prices and make it difficult to sell your common stock.The market price of our common stock has been and may in the future be subject to significant fluctuations.be subject to significant fluctuationsand as a result, investors in our common stock could incur substantial losses on any investment in our common stock.many factors, someour common stock has recently been volatile and may continue to be volatile in the future. For example, the reported closing sale price of which are beyond our control. common stock on the Nasdaq Capital Market was $2.63 per share on November 2, 2020 and $13.26 per share on April 23, 2021. In addition, on February 12, 2021, the intra-day sale price of our common stock reported on the Nasdaq Capital Market fluctuated between a low of $8.63 per share and a high of $11.27 per share without any discernable announcements or developments by the Company or third parties to substantiate the movement of our stock price.·actual or anticipated fluctuations in our quarterly and annual variationsresults and those of other public companies in our results of operations;industry;·changes in market valuations or sales or earnings estimates or publication of research reports by analysts; ·changes in earnings estimates or shortfalls in our operating results from levels forecasted by securities analysts; 30·speculation in the press or investment community about our business or the shipping industry; ·changes in market valuations of similar companies and stock market price and volume fluctuations generally; ·payment of dividends; ·strategic actions by us or our competitors such as mergers, acquisitions, joint ventures, strategic alliances or restructurings; ·changes in government and other regulatory developments; ·additions or departures of key personnel; ·general market conditions and the state of the securities markets; and ·domestic and international economic, market and currency factors unrelated to our performance. OurAs a result of this volatility, our shares may trade at prices lower than you originally paid for such shares.shares and you may incur substantial losses on your investment in our common stock.We received notice from the Nasdaq Stock Market thatdidto hedge existing exposure or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent an aggregate short exposure in our common stock becomes significant, investors with short exposure may have to pay a premium to purchase common stock for delivery to common stock lenders at times if and when the price of our common stock increases significantly, particularly over a short period of time. Those purchases may in turn, dramatically increase the price of our common stock. This is often referred to as a “short squeeze.” A short squeezeMarket'sMarket’s minimum share price requirement, and if we cannot cure such deficiency within the prescribed timeframe, our common stock could be delisted.from the Nasdaq Capital Market (the "Notice") indicating that we are no longer in compliance with Nasdaq's continued listing requirements under Nasdaq Listing Rule 5450(a)(1) because the closing bidas our share price of our common stock over a period oftraded below $1.00 for 30 consecutive business days, however Nasdaq determined that the Company was less than $1.00 per share. The last reported sale price on the Nasdaq Capital Market on April 22, 2019 was $0.73 per share. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have six months following receipt of the Noticeeligible for an additional 180-day period, or until January 13, 2020, to regain compliancecompliance. In December 2019, we effected a 1-for-8 reverse stock split to comply with the minimum share price requirement. We can cure this deficiency if the closing bid price of itsOur common stock ishas been above $1.00 per share or higher for at least ten consecutive business days during the six months following the date of the Notice. Alternatively, we could also take other actions to cure the deficiency, such as asince this reverse stock split (for which we have already received shareholder approval). We intend to cure the deficiency within the prescribed timeframe. During this time, our common stock will continue to be listed and trade on the Nasdaq Capital Market. Our business operations are not affected by the receipt of the Notice.split.remainsfalls below $5.00 per share, under stock exchange rules, our shareholders will not be able to use such shares as collateral for borrowing in margin accounts. This inability to continue to use our common stock as collateral may lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common stock. our merger or acquisition, and/or (2) the removal of incumbent directors and officers and (3) the ability of public shareholders to benefit from a change in control.attemptsattempted to acquire us without the approval of our Board of Directors. These anti-takeover provisions, including provisions of our shareholders' rights plan, either individually or in the aggregate, may discourage, delay or prevent (1) our merger or acquisition by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest, (2) the removal of incumbent directors and officers, and (3) the ability of public shareholders to benefit from a change in control. These anti-takeover provisions could substantially impede the ability of shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and31shareholders' shareholders’ ability to realize any potential change of control premium. We intend to adopt a new shareholders' rights plan to replace the existing shareholders' plan as the rights under the existing shareholders' rights plan are set to expire in May 2019."Securities Act"“Securities Act”), if such shares are sold under the registration statement. On December 29, 2016 we sold 719,42589,928 shares of our common stock to Friends for total proceeds of $1,000,000. Further, on December 23, 2016 we issued 900,000112,500 shares of our common stock to two funds managed by TCP in order to purchase the M/V "RT Dagr"“RT Dagr”. We entered intoPursuant to a registration obligationrights agreement requiring us to register underwith TCP, on March 12, 2020 we filed a registration statement covering among other things the Securities Act the 900,000 shares sold to the funds managed by TCP, andresale of such shares, will become freely tradable without restriction under the Securities Act if they are sold underand the registration statement thatwas declared effective on May 7, 2020. In June 2019, we intendredeemed $11.7 million of our Series B Preferred Shares, leaving an $8 million face value of our Series B Preferred Shares outstanding. In August 2019, we issued 2,816,901 shares of our common stock for the acquisition of M/V “EM Hydra”, M/V “EM Spetses”, M/V “EM Kea” and M/V “Diamantis P”, owned by affiliates of the Pittas family, including our Chief Executive Officer. In November 2019, the acquisition of M/V “Synergy Busan”, M/V “Synergy Keelung”, M/V “Synergy Oakland” and M/V “Synergy Antwerp” (the “Synergy vessels”) was partially financed through a private placement of $6 million, subscribed equally by an entity affiliated with our Chief Executive Officer and an entity controlled by the seller of the Synergy vessels, resulting in the issuance of 1,056,338 shares of our common stock. On November 16, 2020, we issued 161,357 shares to file. Synergy Holdings Ltd. as a result of a contingent payment, which was part of the agreement to purchase the Synergy vessels. On November 24, 2020, we issued 702,247 shares of our common stock to Colby Trading Ltd (“Colby”), a company affiliated with our Chairman and Chief Executive Officer, in connection with the conversion of the outstanding balance of $1.875 million out of the $2.5 million loan Colby had provided us in September 2019. On January 29, 2021, we redeemed 2,000 of our Series B Preferred Shares outstanding (par value $1,000 per share) and paid $2.0 million to the Preferred Shares shareholders. In connection with the redemption, we agreed with our Preferred Shares shareholders to set the dividend rate of our Preferred Shares to 8.0% per annum if paid in cash, and 9.0% per annum if paid in-kind at the Company’s option, until the ninth anniversary of the Preferred Shares on January 29, 2023; the dividend rate was set to increase to 14% per annum on January 29, 2021.("ATM"(“ATM”) offering, shares of our common stock having an aggregate offering price of up to $10 million. From December 21, 2016 through January 26, 2017, we issued and sold 1,280,627160,078 shares of our common stock through the ATM offering for net proceeds of approximately $2.7 million. In October 2018, we filed with the SEC a new prospectus supplement under which we may issue and sell, in an ATM offering, shares of our common stock having an aggregate offering price of up to $4.2 million; as of April 1,in October 2019, we have issued and sold 1,116,069144,727 shares of our common stock in this ATM offering for net proceeds of approximately $2.0 million, leaving approximately $2.2 million$0.85 million. On March 12, 2020, we filed with the SEC a shelf registration statement on Form F-3 and filed amendments thereto on March 27, 2020 and May 4, 2020, which gave us the ability to sell in one or more offerings, within a three-year period, up to 2,369,950 shares of our common stock available for sale.Salesthat were previously acquired in private transactions or in the open market or which are issuable upon conversion of a substantial number ofSeries B Convertible Perpetual Preferred Shares (the “Series B Preferred Shares”) or any ofconvertible notes into which the Series B Preferred Shares may convert. On August 3, 2020, we issued and sold 200,000 shares of common stock mentioned aboveunder our at-the-market offering for net proceeds of approximately $0.7 million. On January 29, 2021, we sold 74,301 shares of common stock under our at-the-market offering for approximately $0.65 million of net proceeds. On February 3, 2021, we filed with the SEC a new prospectus supplement under which may cause the market priceissue and sell, in an ATM offering, shares of our common stock having an aggregate offering price of up to decline.$5,242,800. On February 12, 2021, we sold 8,600 shares of common stock under our at-the-market offering for approximately $0.09 million net proceeds.19,6866,365 are outstanding as of April 1, 2019)March 31, 2021) and may decide in the future to issue preferred shares in one or more series and to determine the rights, preferences, privileges and restrictions with respect to, among other things,shareholders'shareholders’ ability to realize any potential change of control premium.32or the BCA.(the “BCA”). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Stockholder rights may differ as well. For example, under Marshall Islands law, a copy of the notice of any meeting of the shareholders must be given not less than 15 days before the meeting, whereas in Delaware such notice must be given not less than 10 days before the meeting. Therefore, if immediate shareholder action is required, a meeting may not be able to be convened as quickly as it can be convened under Delaware law. Also, under Marshall Islands law, any action required to be taken by a meeting of shareholders may only be taken without a meeting if consent is in writing and is signed by all of the shareholders entitled to vote, whereas under Delaware law action may be taken by consent if approved by the number of shareholders that would be required to approve such action at a meeting. Therefore, under Marshall Islands law, it may be more difficult for a company to take certain actions without a meeting even if a majority of the shareholders approve of such action. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of Delaware and other states with substantially similar legislative provisions, public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction.Item 4. Information on the Company A. History and Development of the Company A.History and Development of the CompanyApril 1, 2019,March 31, 2021, our fleet consisted of eleven14 containerships. The total cargo carrying capacity of the eleven14 containerships is 388,632539,487 dwt or 25,48342,281 teu. Two of our vessels were acquired before January 1, 2004 and were controlled by the Pittas family interests. On June 29, 2005, the shareholders of the two vessels (and of five additional vessels that have since been sold) transferred their ownership in each of the vessels to Euroseas in exchange for shares in Friends, a 100% owner of Euroseas at thattwenty-eight36 vessels, sold 20 vessels and ordered four newbuildings. Euroseas took delivery of three of the newbuildings in February 2016, January 2017 and May 2018, respectively, while one newbuilding vessel contract was cancelled. The Company sold fifteen vessels and spun-off six6 of its vessels into EuroDry on May 30, 2018.2018.2005 and 2007, respectively, the M/V EM Kea, a 3,100 teu feeder containership built in 2007, and the M/V Diamantis P, a 2,008 teu feeder containership built in 1998. In November 2019, we took delivery of four intermediate 4,253 teu containerships, three built in 2009 and one in 2008, and also assumed the charters they were under. The vessels were acquired from companies controlled by Synergy Holdings Limited for approximately $40 million. During 2020, we sold five of our containership vessels. In July 2020, we completed the sale of three of our containership vessels for scrap, the M/V Manolis P, M/V EM Oinousses and M/V Kuo Hsiung, and in September 2020 we completed the sale of the M/V Ninos for scrap, for a total of approximately $9.8 million of net proceeds. In November 2020, we sold the M/V EM Athens for further trading for a total of $4.9 million of net proceeds.B.www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our website address is Business Overviewwww.euroseas.gr. The information contained on our website is not part of this annual report.B. Business Overview of:of containerships that transport container boxes providing scheduled service between ports. Please see the information in the section titled "Our Fleet", below. During 2014, 2015, 2016, 20172018, 2019, and 20182020 we had a fleet utilization of 97.6%92.7%, 93.0%99.1%, 93.9%, 96.9% and 92.7%,95.5% respectively, our vessels achieved daily time charter equivalent rates of $7,319, $7,855, $7,120, $7,309$9,179, $8,782, and $9,179,$9,445 respectively, and we generated voyage charter revenue and time charter revenue totaling $37.32totalling $36.27 million, $35.51 million, $21.46 million, $24.84$41.77 million, and $36.27$55.68 million respectively.shipowningship-owning and management history that dates back to the 19th century, we believe that one of our advantages in the industry is our ability to select and safely operate containership vessels of any age.331, 2019,23, 2021, the profile and deployment of our fleet isare the following:Name Type Dwt TEU Year Built Employment (*) TCE Rate ($/day) Container Carriers EVRIDIKI G (ex-MAERSK NOUMEA) Feeder 34,677 2,556 2001 TC until Sep-19 $12,000 JOANNA Feeder 22,301 1,732 1999 TC until Feb-20 $6,650 MANOLIS P Feeder 20,346 1,452 1995 TC until Mar-20 $6,800 AEGEAN EXPRESS Feeder 18,581 1,439 1997 TC until Apr-19 $7,500 NINOS Feeder 18,253 1,169 1990 TC until Jul-19 $7,750 KUO HSIUNG Feeder 18,154 1,169 1993 TC until Jul-19 $7,750 EM ASTORIA Feeder 35,600 2,788 2004 TC until Aug-19 $9,650 AKINADA BRIDGE Intermediate 71,366 5,610 2001 TC until Sep-19 $8,500 EM CORFU Feeder 34,654 2,556 2001 TC until Feb-20 $11,600 EM ATHENS Feeder 32,350 2,506 2000 TC until Sep-19 $9,000 EM OINOUSSES Feeder 32,350 2,506 2000 TC until Apr-19 $9,500 Total Container Carriers 11 368,632 25,483 Name Type Dwt TEU Year Built Employment (*) AKINADA BRIDGE(*) Intermediate 71,366 5,610 2001 SYNERGY BUSAN(+) Intermediate 50,726 4,253 2009 SYNERGY ANTWERP(*) Intermediate 50,726 4,253 2008 TC until Sep-23 $18,000 (*)TC denotes time charter. All dates listed are the earliest redelivery dates under each TC.41SYNERGY OAKLAND(*) Intermediate 50,787 4,253 2009 TC until Jun-21 SYNERGY KEELUNG(+) Intermediate 50,969 4,253 2009 TC until Jun-22 plus 8-12 months option $10,000 until Jun-21; $11,750 until Jun-22; option $14,500 EM KEA(*) Feeder 42,165 3,100 2007 EM ASTORIA(+) Feeder 35,600 2,788 2004 TC until Feb-22 $18,650 EVRIDIKI G (+) Feeder 34,677 2,556 2001 TC until Dec-21 $15,500 EM CORFU(*) Feeder 34,654 2,556 2001 TC until Sep-21 $10,200 DIAMANTIS P(+) Feeder 30,360 2,008 1998 TC until Aug-21 $6,500 EM SPETSES(+) Feeder 23,224 1,740 2007 TC until Jul-21 $8,100 EM HYDRA(+) Feeder 23,351 1,740 2005 TC until May-21 $7,200 JOANNA(*) Feeder 22,301 1,732 1999 AEGEAN EXPRESS(*) Feeder 18,581 1,439 1997 TC until Mar-22 $11,500 Total Container Carriers 14 539,487 42,281 (*) (**) The CONTEX (Container Ship Time Charter Assessment Index) has been published by the Hamburg and Bremen Shipbrokers’ Association (VHBS) since October 2007. The CONTEX is a company-independent index of time charter rates for containerships. It is based on assessments of the current day charter rates of six selected containership types, which are representative of their size categories: Type 1,100 TEU and Type 1,700 TEU with a charter period of one year, and the Types 2,500, 2,700, 3,500 and 4,250 TEU, all with a charter period of two years. market and through pool arrangements.market. As of April 1, 2019,23, 2021, all of our vessels are employed under time charter contracts.1, 2019,23, 2021, approximately 55%74% of our ship capacity days for the remainder of 2021 and approximately 40% of our ship capacity days in the remainder of 2019 and approximately 4% of our ship capacity days in 20202022 are under contract."Critical“Critical Accounting Policies – Impairment of vessels"vessels” below, we discuss our policy for impairing the carrying values of our vessels. During the past few years, the market values of vessels have experienced extraordinarily high volatility, and substantial declines in many vessel classes. As a result, the charter-free market value, or basic market value, of certain of our vessels may have declined below those vessels'vessels’ carrying value. We may not impair those vessels'vessels’ carrying value under our impairment accounting impairment policy, due to our belief that future undiscounted cash flows expected to be earned by such vessels over their operating lives would exceed such vessels'vessels’ carrying amounts.20172019 and 2018,2020, respectively, (ii) which of our vessels we believe has a basic market value below its carrying value, and (iii) the aggregate difference between carrying and market value represented by such vessels. This aggregate difference represents the approximate analysis of the amount by which we believe we would have to reduce our net income/ (loss) if we sold all of such vessels in the current environment, using industry-standard valuation methodologies, in cash, in arm's-lengtharm’s-length transactions. For purposes of this calculation, we have assumed that the vessels would be sold at a price that reflects our estimate of their current basic market values. However, we are not holding our vessels for sale, except as otherwise noted in this report.······34Name Capacity Purchase Date Carrying Value as of December 31, 2017 Carrying Value as of December 31, 2018 Capacity Purchase Date Carrying Value as of December 31, 2019 (in millions) Carrying Value as of December 31, 2020 (in millions) (teu) (teu) EVRIDIKI 2,556 May-2008 2,556 May-2008 MANOLIS P 1,452 Apr-2007 $2.44 $2.11 1,452 Apr-2007 $1.79 - NINOS 1,169 Feb-2001 $1.51 $1.51 1,169 Feb-2001 $1.51 - KUO HSIUNG 1,169 May-2002 $1.57 - EM OINOUSSES 2,506 Oct-2017 $3.86 - EM ATHENS 2,506 Sep-2017 $3.87 JOANNA 1,732 Jul-2013 $4.21 $3.81 1,732 Jul-2013 $3.40 $3.02 KUO HSIUNG 1,169 May-2002 $1.68 $1.57 AEGEAN EXPRESS 1,439 Sep-2016 $2.80 $2.51 1,439 Sep-2016 $2.25 $1.99 AKINADA BRIDGE 5,610 Dec-2017 $11.10 $10.54 5,610 Dec-2017 $10.33 $9.72 EM ASTORIA 2,788 Jun-2017 $4.68 $4.55 2,788 Jun-2017 $4.42 $4.31 EM ATHENS 2,506 Sep-2017 $4.20 $4.03 EM CORFU 2,556 Nov-2017 $5.60 $5.28 2,556 Nov-2017 $4.95 $4.66 EM OINOUSSES 2,506 Oct-2017 $4.21 $4.04 EM KEA 3,100 Aug-2019 $9.31 $8.91 EM SPETSES 1,740 Aug-2019 $7.40 EM HYDRA 1,740 Aug-2019 $6.57 DIAMANTIS P 2,008 Aug-2019 $4.29 SYNERGY BUSAN 4,253 Nov-2019 $10.12 $10.10 SYNERGY ANTWERP 4,253 Nov-2019 $10.06 $9.82 SYNERGY OAKLAND 4,253 Nov-2019 $10.45 $10.16 SYNERGY KEELUNG 4,253 Nov-2019 $11.36 $11.03 Total Container Carriers 25,483 $52.13 $48.83 42,281 $116.23 $98.46 a container vesselvessels for which we believe, as of December 31, 2017,2019, the basic charter-free market value is lower than the vessel'svessel’s carrying value as of December 31, 2017.2019. We believe that the aggregate carrying value of this vessel,these vessels, assessed separately, of $9.71$13.01 million as of December 31, 20172019 exceeds itstheir aggregate basic charter-free market value of approximately $7.20$11.50 million by approximately $2.51$1.51 million. As further discussed in "Critical“Critical Accounting Policies – Impairment of vessels"vessels” below, we believe that the carrying values of our vessels as of December 31, 20172019 were recoverable.a container vesselvessels for which we believe, as of December 31, 2018,2020, the basic charter-free market value is lower than the vessel'svessel’s carrying value as of December 31, 2018.2020. We believe that the aggregate carrying value of this vessel,these vessels, assessed separately, of $8.88$20.45 million as of December 31, 20182020 exceeds itstheir aggregate basic charter-free market value of approximately $7.70$19.50 million by approximately $1.18$0.95 million. As further discussed in "Critical“Critical Accounting Policies – Impairment of vessels"vessels” below, we believe that the carrying values of our vessels as of December 31, 20182020 were recoverable. currently employed under time charter contracts of durations from less than one to eleven40 months until the earliest redelivery charter period. If we sell those vessels with the charters attached, the sale price may be affected by the relationship of the charter rate to the prevailing market rate for a comparable charter with the same terms."“The market value of our vessels can fluctuate significantly,which may adversely affect our financial condition, cause us to breach financial covenants, result in the incurrence of a loss upon disposal of a vessel or increase the cost of acquiring additional vessels"” and the discussion in Item 3.D under "Industry“Industry Risk Factors".Factors.”ship-owningshipowning company. Eurobulk was founded in 1994 by members of the Pittas family and is a reputable ship management company with strong industry relationships and experience in managing vessels. Under our Master Management Agreement, Eurobulk is responsible for providing us with: (i) executive services associated with us being a public company; (ii) other services to our subsidiaries and commercial management services, which include obtaining employment for our vessels and managing our relationships with charterers; and (iii) technical management services, which include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging our hire of qualified officers and crew, arranging and supervising drydocking and repairs, arranging insurance for vessels, purchasing stores, supplies, spares and new equipment for vessels, appointing supervisors and technical consultants and providing technical support and shoreside personnel who carry out the management functions described above and certain accounting services. roughly 5% discount of the daily vessel management fee for any period during which the number of the Euroseas-owned vessels (including vessels in which Euroseas is a part owner) managed by35("(“volume discount"discount”), which was permanently incorporated into the daily management fee effective January 1, 2018 (see below). The Master Management Agreement can be terminated by Eurobulk only for cause or under other limited circumstances, such as sale of the Company or Eurobulk or the bankruptcy of either party. This Master Management Agreement will automatically be extended after the initial period for an additional five-year period unless terminated on or before the 90th day preceding the initial termination date. Pursuant to the Master Management Agreement, vessels we might acquire in the future will enter into a separate five-year management agreement with Eurobulk.Eurobulk with a term and rate as specified in the Master Management Agreement.During 2016,342.5342.50 Euros) of that amount for any vessel laid-up includinglaid up. The volume discount has been permanently incorporated into the 5% volume discount. Thedaily management fee iswhich remained unchanged at 685 Euros in 2018, 2019 and 2020, and will be adjusted annually for Greek inflation everyin the Eurozone. On May 30, 2018, the Company signed an addendum with the Manager according to which daily management fees were kept at 685 Euros per day per vessel and, effective May 30, 2018, the fixed cost was adjusted to $1,250,000. As a result, for the year 2018, the fixed cost was calculated at $2,000,000 pro-rated for the period of January 1,st. 2018 until May 30, 2018 and at $1,250,000 for the period of May 31, 2018 until December 31, 2018. On November 15, 2019, the Company signed an addendum adjusting the fixed annual cost to $2,000,000 to compensate Eurobulk Ltd. for the increase in the fleet and certain management services provided by Synergy Marine Ltd., a company controlled by Andreas Papathomas and which became affiliated with the Company post-acquisition, as a result of his appointment to the Board of Directors of the Company in November 2019. As a result, for the year 2019, the fixed cost was calculated at $1,250,000 pro-rated for the period of January 1, 2019 until November 15, 2019 and at $2,000,000 for the period of November 16, 2019 until December 31, 2019. There was no adjustment for inflation from January 1, 2016,2020, to date and, hence, we continue to pay Eurobulk an annual fee of $2,000,000 and a fee of 685 Euros per vessel per day in operation and 342.5 Euros per vessel per day in lay-up. In the case of newbuilding vessel contracts, the same management fee of 685 Euros becomes effective when construction of the vessels actually begins. Under the amended and restated Master Management Agreement, as of January 1, 2018, the volume discount has been permanently incorporated into the daily management fee which remained unchanged at 685 Euros in 2018, and will be adjusted annually for inflation in the Eurozone. On May 30, 2018, the Company signed an addendum with the Manager according to which daily management fees were kept at 685 Euros per day per vessel, while as of May 30, 2018, the fixed cost was adjusted to $1,250,000. As a result, for the year 2018, the fixed cost was calculated on $2,000,000 pro-rated for the period of January 1, 2018 until May 30, 2018 and on $1,250,000 for the period of May 30, 2018 until December 31, 2018.·Experienced Management Team. Our management team has significant experience in all aspects of commercial, technical, operational and financial areas of our business. Aristides J. Pittas, our Chairman and Chief Executive Officer, holds a dual graduate degree in Naval Architecture and Marine Engineering and Ocean Systems Management from the Massachusetts Institute of Technology. He has worked in various technical, shipyard and ship management capacities and since 1991 has focused on the ownership and operation of vessels carrying dry cargoes. Dr. Anastasios Aslidis, our Chief Financial Officer, holds a Ph.D. in Ocean Systems Management also from Massachusetts Institute of Technology and has over 20 years of experience, primarily as a partner at a Boston based international consulting firm focusing on investment and risk management in the maritime industry.·Cost Efficient Vessel Operations. We believe that because of the efficiencies afforded to us through Eurobulk, the strength of our management team and the quality of our fleet, we are, and will continue to be, a reliable, low cost vessel operator, without compromising our high standards of performance, reliability and safety. Despite the average age of our fleet being approximately 20.5 years on April 1, 2019, our total vessel operating expenses, including management fees and general and administrative expenses but excluding drydocking expenses were $6,225 per day for the year ended December 31, 2018. We consider this amount to be among the lowest of the publicly listed containerships shipping companies in the United States. Our technical and operating expertise allows us to efficiently manage and transport a wide range of cargoes with a flexible trade route profile, which helps reduce ballast time between voyages and minimize off-hire days. Our professional, well-trained masters, officers and onboard crews further help us to control costs and ensure consistent vessel operating performance. We actively manage our fleet and strive to maximize utilization and minimize maintenance expenditures for operational and commercial utilization. For the year ended December 31, 2018, our operational fleet utilization was 96.0%, down from 99.5% in 2017, while our commercial utilization rate decreased from 97.5% in 2017 to 96.7% in 2018. Our total fleet utilization rate in 2018 was 96.0%.·Strong Relationships with Customers and Financial Institutions. We believe ourselves, Eurobulk and the Pittas family to have developed strong industry relationships and to have gained acceptance with charterers, lenders and insurers because of long-standing reputation for safe and reliable service and financial responsibility through various shipping cycles. Through Eurobulk, we offer reliable service and cargo carrying flexibility that enables us to attract customers and obtain repeat business. We also believe that the established customer base and reputation of ourselves, Eurobulk and the Pittas family help us to secure favorable employment for our vessels with well-known charterers.36Experienced Management Team. Our management team has significant experience in all aspects of commercial, technical, operational and financial areas of our business. Aristides J. Pittas, our Chairman and Chief Executive Officer, holds a dual graduate degree in Naval Architecture and Marine Engineering and Ocean Systems Management from the Massachusetts Institute of Technology. He has worked in various technical, shipyard and ship management capacities and since 1991 has focused on the ownership and operation of vessels carrying dry cargoes. Dr. Anastasios Aslidis, our Chief Financial Officer, holds a Ph.D. in Ocean Systems Management also from Massachusetts Institute of Technology and has over 20 years of experience, primarily as a partner at a Boston based international consulting firm focusing on investment and risk management in the maritime industry.·Renew and Expand our Fleet. We expect to grow our fleet in a disciplined manner through timely and selective acquisitions of quality vessels. We perform in-depth technical review and financial analysis of each potential acquisition and only purchase vessels as market opportunities present themselves. We focus on purchasing well-maintained secondhand vessels, newbuildings or newbuilding resales based on the evaluation of each investment option at the time it is made. Within 2016 we acquired two secondhand containerships. In January 2017, we sold one containership. In June, September, October and December 2017, we took delivery of five secondhand containerships, and in December 2017, we sold one containership.·Maintain Balanced Employment. We intend to employ our fleet on either longer term time charters, i.e. charters with duration of more than a year, or shorter-term time/spot charters. We seek longer term time charter employment to obtain adequate cash flow to cover as much as possible of our fleet's recurring costs, consisting of vessel operating expenses, management fees, general and administrative expenses, interest expense and drydocking costs for the upcoming 12-month period. When we expect charter rates to improve we try to increase the percentage of our fleet employed in shorter term contracts (allowing us to take advantage of higher rates in the future), while when we expect the market to weaken we try to increase the percentage of our fleet employed in longer term contracts (allowing us to take advantage of higher current rates). We believe this balanced employment strategy will provide us with more predictable operating cash flows and sufficient downside protection, while allowing us to participate in the potential upside of the spot market during periods of rising charter rates. As of April 1, 2019, on the basis of our existing time charters, approximately 55% of our vessel capacity in the remainder of 2019 and approximately 4% in 2020 are under time charter contracts, which will ensure employment of a portion of our fleet, partly protect us from market fluctuations and increase our ability to make principal and interest payments on our debt and pay dividends to our shareholders.·Optimize Use of Financial Leverage. We intend to use bank debt to partly fund our vessel acquisitions and increase financial returns for our shareholders. We actively assess the level of debt we incur in light of our ability to repay that debt based on the level of cash flow generated from our balanced chartering strategy and efficient operating cost structure. Our debt repayment schedule as of December 31, 2018 calls for a reduction of more than 13.9% of our debt by the end of 2019 and an additional reduction of about 16.1% by the end of 2020 for a total of 30% reduction over the next two years, excluding any new debt that we assumed or may assume. As our debt is being repaid we expect that our ability to raise or borrow additional funds more cheaply in order to grow our fleet and generate better returns for our shareholders will increase.Ourcharterer customers duringcontainership charterers, which we serve by carrying a variety of cargoes over a multitude of routes around the last three years include CMA-CGM ("CMA"), Golden Sea Shipping ("GSS") and MSC amongst others.globe. We are a relationship driven company, and our top five customers in 20182020 include threefour of our top five customers from 20172019 and three from 2016.2018. Our top five customers accounted for approximately 97%64% of our revenues in 2018, 91%2020, 87% of our revenues in 20172019 and 83%95% of our revenues in 2016.2018. In 2020, Maersk, MSC, CMA and GSS accounted for 19%, 18%, 17% and 10% of our revenues, respectively. In 2019, CMA, GSS, Hapag Lloyd, MSC and Maersk accounted for 24%, 21%, 16%, 15% and 11% of our revenues, respectively. In 2018, CMA, GSS and MSC accounted for 51%, 30% and11%33% and 11%, of our revenues, respectively. In 2017, CMA, GSS, and MSC accounted for 34%, 31% and 17% of our revenues. Our dependence on our key charterer customers is moderate, as in the event of a charterer default our vessels can generally be re-chartered at the market rate, in the spot or charter market, although it is likely that such rate will be lower than the charter rate agreed with the charterer. In addition, as of the date of this report, none of our charterers have reported any inability to pay their obligations to us as a result of the COVID-19 outbreak.twelve-foottwenty-foot equivalent unit ("teu"(“teu”) capacity and whether they have their own gearing (cranes). The different categories of containerships are as follows: (i) Post-Panamax vessels are generally vessels with carrying capacity of more than 4,000 teu; (ii) Panamax vessels are vessels with carrying capacity from 3,000 to 4,000 teu, and, in some designs, even up to 5,000 teu; these vessels are called such because the measurements of their beam and draft are the maximum allowable through the original Panama Canal; and (iii) Feeder containerships are vessels with carrying capacity from 500 to 3,000 teu and are usually equipped with cargo loading and unloading gear. Containerships are primarily employed in time charter contracts with liner companies, which in turn employ them as part of the scheduled liner operations. Feeder containershipcontainerships are put in liner schedules feeding containers to and from central regional ports (hubs) where larger containerships provide cross ocean or longer haul service. The length of the time charter contract can range from several months to years.37("Eurochart"(“Eurochart”), an affiliated brokering company which negotiates the terms of the charters based on market conditions. We compete primarily with other shipowners of carriers primarily in the Handysize, HandymaxFeeder and Panamax containership sectors. Ownership of containerships is highly fragmented and is divided among state controlled and independent shipowners. Some of our publicly listed competitors include Danaos Corporation (NYSE: DAC), Costamare Inc. (NASDAQ: CMRE) and Performance Shipping Inc. (formerly Diana Containerships Inc.) (NYSE: DCIX).industry'sindustry’s seasonal trends are driven by the import patterns of manufactured goods and refrigerated cargoes by the major importers, such as the United States, Europe and Japan. The volume of containerized trade is usually higher in the fall in preparation for the holiday season. During this period, container shipping rates are higher and, as a result, so are charter rates.("USCG"(“USCG”), harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels. ("IMO")IMO,International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels (the “IMO”), has adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as “MARPOL,” the International Convention for the Safety of Life at Sea of 1974 (“SOLAS Convention”), and the International Convention on Load Lines of 1966 (the "LL Convention"“LL Convention”). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to container carriers,drybulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997.1997; new emissions standards, titled IMO-2020, took effect on January 1, 2020.38"deliberate emissions"“deliberate emissions” of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below. Emissions of "volatile“volatile organic compounds"compounds” from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or PCBs)“PCBs”) are also prohibited. We believe that all our vessels are currently compliant in all material respects with these regulations."MEPC"Marine Environment Protection Committee, or “MEPC,” adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%) starting from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels or certain exhaust gas cleaning systems. Once the cap becomes effective, ships will beShips are now required to obtain bunker delivery notes and International Air Pollution Prevention ("IAPP"(“IAPP”) Certificates from their flag states that specify sulfur content.will taketook effect on March 1, 2020. These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs."Emission“Emission Control Areas,"” or ("ECAs"(“ECAs”). As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1%. m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean area. Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China are subject to local regulations that impose stricter emission controls. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency ("EPA"(“EPA”), or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.late 2009.2010. As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.commencinghaving commenced on January 1, 2019. The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.("SEEMPS"(“SEEMPs”), and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index ("EEDI"(“EEDI”). Under these measures, by 2025, all new ships built will be 30% more energy efficient than those built in 2014. Additionally, MEPC 75 adopted amendments to MARPOL Annex VI which brings forward the effective date of the EEDI’s “phase 3” requirements from January 1, 2025 to April 1, 2022 for several ship types, including gas carriers, general cargo ships, and LNG carriers.39"LLMC"“LLMC”) sets limitations of liability for a loss of"ISM Code"International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the “ISM Code”), our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical management team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.vessel'svessel’s management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The documentdocuments of compliance and safety management certificatecertificates are renewed as required.Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers. The SOLAS Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers (GBS Standards).("(“IMDG Code"Code”). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking, packing and classification requirements for dangerous goods and (3) new mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous Goods, including (1) new provisions regarding IMO type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas.("STCW"(“STCW”). As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate. Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.IMO'sIMO’s Maritime Safety Committee and United States agencies indicateindicates that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. For example, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of suchTo comply with these regulations, is hard to predict at this time.we have developed a Cybersecurity Manual for all our vessels, that was reviewed by IMO’s Maritime Safety Committee in March 2021.Ships'Ships’ Ballast Water and Sediments (the "BWM Convention"“BWM Convention”) in 2004. The BWM Convention entered into force on September 9,8, 2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM Convention'sConvention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with40"existing vessels"“existing vessels” and allows for the installation of ballast water management systems on such vessels at the first International Oil Pollution Prevention (IOPP)(“IOPP”) renewal survey following entry into force of the convention. The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At MEPC 71, the schedule regarding the BWM Convention'sConvention’s implementation dates was also discussed and amendments were introduced to extend the date existing vessels are subject to certain ballast water standards. Those changes were adopted at MEPC 72. Ships over 400 gross tons generally must comply with a "D-1“D-1 standard,"” requiring the exchange of ballast water only in open seas and away from coastal waters. The "D-2 standard"“D-2 standard” specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ballast Water Managementwater management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the Ballast Water,ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). As of October 13, 2019, MEPC 72’s amendments to the BWM Convention took effect, making the Code for Approval of Ballast Water Management Systems, which governs assessment of ballast water management systems, mandatory rather than permissive, and formalized an implementation schedule for the D-2 standard. Under these amendments, all ships must meet the D-2 standard by September 8, 2024. Costs of compliance with these regulations may be substantial. Additionally, in November 2020, MEPC 75 adopted amendments to the BWM Convention which would require a commissioning test of the ballast water management system for the initial survey or when performing an additional survey for retrofits. This analysis will not apply to ships that already have an installed BWM system certified under the BWM Convention. These amendments are expected to enter into force on June 1, 2022."Bunker Convention"“Bunker Convention”) to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship'sship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.strict liabilitystrict-liability basis."Anti‑“Anti‑fouling Convention."” The Anti‑fouling Convention, which entered into force on September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the anti‑fouling systems are altered or replaced. We have obtained Anti‑fouling System Certificates for all of our vessels that are subject to the Anti‑fouling Convention.41("OPA"(“OPA”) established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners“owners and operators"operators” whose vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.'s’s territorial sea and its 200-nautical-mile200-nautical mile exclusive economic zone around the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"(“CERCLA”), which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define "owner“owner and operator"operator” in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact our operations."responsible parties"“responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these other damages broadly to include:(i) injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs; (ii) injury to, or economic losses resulting from, the destruction of real and personal property; (iii) loss of subsistence use of natural resources that are injured, destroyed or lost; (iv) net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources; (v) lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and (vi) net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources. December 21, 2015,November 12, 2019, the USCG adjusted the limits of OPA liability for non-tank vessels, edible oil tank vessels, and any oil spill response vessels, to the greater of $1,100$1,200 per gross ton or $939,800$ 997,100 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party'sparty’s gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.USCG'sUSCG’s financial responsibility regulations by providing applicable certificates of financial responsibility.42Enforcement's ("BSEE"Enforcement’s (“BSEE”) revised Production Safety Systems Rule ("PSSR"(“PSSR”), effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR. Additionally, the BSEE released proposed changes toamended the Well Control Rule, effective July 15, 2019, which could rollrolled back certain reforms regarding the safety of drilling operations. In January 2018,operations, and the former U.S. President Trump had proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling, expanding the U.S. waters that are available for such activity over the next five years.drilling. The effects of these proposals and changes are currently unknown.unknown, and recently, current U.S. President Biden signed an executive order temporarily blocking new leases for oil and gas drilling in federal waters. Compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business.owners'owners’ responsibilities under these laws. The Company intendsWe intend to comply with all applicable state regulations in the ports where the Company'sCompany’s vessels call.$1$1.0 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operations.("CAA"(“CAA”) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA requires states to adopt State Implementation Plans, or SIPs,“SIPs,” some of which regulate emissions resulting from vessel loading and unloading operations which may affect our vessels.("CWA"(“CWA”) prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In 2015, the EPA expanded the definition of "waters“waters of the United States" ("WOTUS"States” (“WOTUS”), thereby expanding federal authority under the CWA. Following litigation on the revised WOTUS rule, in December 2018, the EPA and Department of the Army proposed a revised, limited definition of "waters“waters of the United States."” The proposed rule was published in the Federal Register on February 14, 2019 and was subject to public comment. On October 22, 2019, the agencies published a final rule repealing the 2015 Rule defining “waters of the United States” and recodified the regulatory text that existed prior to the 2015 Rule. The final rule became effective on December 23, 2019. On April 21, 2020, the EPA published the “Navigable Waters Protection Rule,” which replaces the rule published on October 22, 2019, and redefines “waters of the United States.” Under the final Navigable Waters Protection Rule, there were four clear categories of jurisdictional waters and 12 categories of exclusions. The final rule became effective on June 22, 2020, although the effective date has been stayed in at least one U.S. state pursuant to court order. The effect of this rule is currently unknown.waters.Waters. The EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act ("VIDA"(“VIDA”), which was signed into law on December 4, 2018 and will replacereplaces the 2013 Vessel General Permit ("VGP"(“VGP”) program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act ("NISA"(“NISA”), such as mid-ocean ballast exchange programs and installation of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters. VIDA establishes a new framework for the regulation of vessel incidental discharges under Clean Water Act (CWA), requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within two years of EPA'sEPA’s promulgation of standards. Under VIDA, all provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized. Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent ("NOI"(“NOI”) or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required. Compliance with the EPA, USCGU.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.43starting on January 1, 2018, which may cause us to incur additional expenses. The maritime EU-MRV regulation applies to all merchant ships of 5,000 gross tons or above on voyages from, to and between ports under jurisdiction of E.U. member states. Ships above 5,000 gross tons account for around 55.0% of the number of ships calling into E.U. ports and represent around 90.0% of the related emissions. Companies operating the vessels will have to monitor the CO2 emissions released while in port and for any voyages to or from a port under the jurisdiction of an E.U. member state and to keep records on CO2 emissions on both per-voyage and annual bases. We submitted a monitoring plan to verifiers for each of our ships indicating the method chosen to monitor and report CO2 emissions and other relevant information, and, as of January 1, 2018, such plans were subsequently dispatched to each of our vessels for implementation. These or other developments may result in financial impacts on our operations that we cannot predict with certainty at this time.ports.member states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.LaborLabour OrganizationLaborLabour Organization (the "ILO"“ILO”) is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 ("(“MLC 2006"2006”). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships abovethat are 500 gross tonstonnage or over and are either engaged in international trade.voyages or flying the flag of a Member and operating from a port, or between ports, in another country. We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.OnThe U.S. initially entered into the agreement, but on June 1, 2017, theformer U.S. presidentPresident Trump announced that it is withdrawingthe United States intends to withdraw from the Paris Agreement, butand the withdrawal became effective on November 4, 2020. On January 20, 2021, U.S. President Biden signed an executive order to rejoin the Paris Agreement, provides for a four-year exit process.which the U.S. officially rejoined on February 19, 2021."levels“levels of ambition"ambition” to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely. The initial strategy notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition. These regulations could cause us to incur additional substantial expenses.44Protocol'sProtocol’s second period from 2013 to 2020. Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other information. As previously discussed, regulations relating to the inclusion of greenhouse gas emissions from the maritime sector in the European Union’s carbon market are also forthcoming.certain large stationary sources. However, in March 2017, theformer U.S. President Trump signed an executive order to review and possibly eliminate the EPA'sEPA’s plan to cut greenhouse gas emissions, and in("MTSA"(“MTSA”). To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.FacilitiesFacility Security Code ("(“the ISPS Code"Code”). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate ("ISSC"(“ISSC”), from a recognized security organization approved by the vessel'svessel’s flag state. Ships operating without a valid certificate may be detained, expelled from or refused entry at port until they obtain an ISSC. The various requirements, some of which are found in the SOLAS Convention, include, for example:example, on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship’s identity, position, course, speed and navigational status; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; the development of vessel security plans; ship identification number to be permanently marked on a vessel’s hull; a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and compliance with flag state security certification requirements.·on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status;·on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore;·the development of vessel security plans;·ship identification number to be permanently marked on a vessel's hull;·a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and·compliance with flag state security certification requirements.vessel'svessel’s compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact on us. We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.45"in class"“in class” by a classification society which is a member of the International Association of Classification Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or the“the Rules,” which apply to oil tankers and bulk carriers constructedcontracted for construction on or after July 1, 2015. The Rules attempt to create a level of consistency between IACS Societies. All of our vessels are certified as being "in class"“in class” by all the applicable Classification Societies. Our vessels are currently classed withSocieties (e.g., American Bureau Veritas, Det Norske Veritas and Nippon Kaiji Kyokai. ISM and ISPS certification have been awarded by Bureau Veritas and the Panama Maritime Authority to our vessels and Eurobulk, our ship management company.of Shipping, Lloyd’s Register of Shipping).vessel'svessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be drydocked every 30 to 36 months for inspection of the underwater parts of the vessel. If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.drydockingupcoming intermediate or special survey for the vessels in our current fleet. Special surveys typically require drydocking of the vessels while intermediate surveys may not, depending on the age of the vessel and its condition. The intermediate surveys listed in the table below will not require drydocking of the vessels, unless otherwise specified below.Vessel Next Type EVRIDIKI G. May 2019June 2021IntermediateSpecial Survey (Drydocking)EM CORFU October 20192021IntermediateSpecial Survey (Drydocking)AKINADA BRIDGE October 2019Special SurveyKUO HSIUNGNovember 20192021Intermediate SurveyMANOLIS PMay 2020Special SurveyEM OINOUSSESSeptember 2020Special SurveyAEGEAN EXPRESS October 20202022IntermediateSpecial Survey (Drydocking)EM ASTORIA SeptemberOctober 2021Intermediate Survey JOANNA P January 2022 Intermediate Survey EM ATHENSSPETSESDecember 2020July 2022Special Survey (Drydocking) EM KEA Dec 2022 Special Survey (Drydocking) EM HYDRA July 2022 Special Survey (Drydocking) DIAMANTIS P September 2021 Intermediate Survey (Drydocking) SYNERGY BUSAN January 2022 Intermediate Survey SYNERGY ANTWERP November 2021 Intermediate Survey SYNERGY OAKLAND February 2022 Intermediate Survey SYNERGY KEELUNG May 2022 Intermediate Survey 46P“P&I Associations,” and covers our third-party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from"clubs."“clubs.”world'sworld’s commercial tonnage and have entered into a pooling agreement to reinsure each association'sassociation’s liabilities. The International Group'sGroup’s website states that the poolPool provides a mechanism for sharing all claims in excess of $10 million up to, currently, approximately $8.2 million. Each P&I Association has capped its exposure to this pooling agreement at $4.5 billion. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations and members of the shipping pool of P&I Associations comprising the International Group.C.Organizational structureC. Organizational structure "Item“Item 18. Financial Statements"Statements” and in Exhibit 8.1 to this annual report.D.Property, plants and equipmentD. Property, plants and equipment "Basis“Basis of Presentation and General Information"Information”, of the attached Financial Statements for a listing of our vessel owning subsidiaries. Our vessels are subject to priority mortgages, which secure our obligations under our various credit facilities. For further details regarding our credit facilities, refer to "Item“Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Credit Facilities."”Item 4A. Unresolved Staff Comments Item 5. Operating and Financial Review and Prospects "Item“Item 3. Key Information – D. Risk Factors"Factors”, "Item“Item 4. Business Overview"Overview”, and our financial statements and footnotes thereto contained in this annual report. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business. Our actual results may differ materially from those contained in the forward-looking statements. Please read "Forward-Looking Statements"“Forward-Looking Statements” for additional information regarding forward-looking statements used in this annual report. Reference in the following discussion to "we," "our"“we,” “our” and "us"“us” refer to Euroseas and our subsidiaries, except where the context otherwise indicates or requires."Critical“Critical Accounting Policies"Policies”, below, for a further discussion of the consequences of selling our vessels for amounts below their carrying values.4759analyzinganalysing trends in the results of our operations consist of the following:surveys.surveys or days of vessels in lay-up. Calendar 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 that period. during which each vessel in our fleet was in our possession net of off-hire days associated with scheduled repairs, drydockings or special or intermediate surveys. surveys, or days of vessels in lay-up. during which each vessel in our fleet was in our possession net of off-hire days associated with scheduled and unscheduled repairs drydockings or special or intermediate surveys or days waiting to find employment but including days our vessels were sailing for repositioning. The shipping industry uses voyage days to measure the number of days in a period during which vessels actually generate revenues.revenues or are sailing for repositioning purposes.company'scompany’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire either waiting to find employment, or commercial off-hire, or for reasons such as unscheduled repairs or other off-hire time related to the operation of the vessels, or operational off-hire. We distinguish our fleet utilization into commercial and operational. We calculate our commercial fleet utilization by dividing our available days net of commercial off-hire days during a period by our available days during that period. We calculate our operational fleet utilization by dividing our available days net of operational off-hire days during a period by our available days during that period.or TCE.(“TCE”). A standard maritime industry performance measure used to evaluate performance is the daily time charter equivalent, or daily TCE. Daily TCE revenues are time charter revenues and voyage charter revenues minus voyage expenses divided by the number of voyage days during the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by a charterer under a time charter whereas under spot market voyage charters, we pay such voyage expenses. ContainershipsWe believe that the daily TCE neutralizes the variability created by unique costs associated with particular voyages or the employment of containerships on time charter or on the spot market (containerships are, generally, chartered on a time charter basis,basis) and therefore, TCE presents a more accurate representation of the revenues generated by our vessels. vessels. Our definition of TCE may not be comparable to that used by other companies in the shipping industry.5%1.25% to other brokers involved in the transaction, plus address commission of up to 3.75% deducted from charter hire. These additional commissions, as well as changes to charter rates will cause our commission expenses to fluctuate from period to period. Eurochart also receives a fee equal to 1% calculated as stated in the relevant memorandum of agreement for any vessel sold by it on our behalf.48contract.contract, as well as commissions. Under time charters, the charterer pays voyage expenses whereas under spot market voyage charters, we pay such expenses. The amounts of such voyage expenses are driven by the mix of charters undertaken during the period.Voyage expenses are also incurred, when our vessels are idle or are sailing for repositioning purposes or for drydocking, which we pay.managersmanager under our management agreements for the technical and commercial management that Eurobulk performs on our behalf.Drydocking andDry-docking expenses. Dry-docking expenses relate to regularly scheduled intermediate survey or special survey expense.necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Our vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are trading. Drydocking and special surveyDry-docking expenses are accounted onfor using the direct expense method as this method eliminates the significant amount of time and subjectivity to determine which costs and activities related to drydocking and special survey should be deferred.expense and loanother financing costs. We traditionally finance vessel acquisitions partly with debtloan facilities on which we incur interest expense. The interest rate we pay is generally linked to the 3-month LIBOR rate, although from time to time we may utilize fixed rate loans or could use interest rate swaps to eliminate our interest rate exposure. Interest due is expensed in the period incurred. LoanWe also incur financing costs in connection with establishing those facilities, which are deferredpresented as a direct deduction from the carrying amount of the relevant debt liability and amortizedamortize them to interest and other financing costs over the periodterm of the loan;underlying obligation using the effective interest method; the un-amortized portion is written-off if the loan is prepaid early.Other general and administrative expenses.Gain / (Loss) on derivatives, net. We incur expenses consisting mainly of executive compensation, professional fees, directors' liability insuranceenter into interest rate swap transactions to manage interest costs and reimbursement ofrisk associated with changing interest rates with respect to our directors' and officers' travel-related expenses. We acquire executive services of our chief executive officer, chief financial officer, chief administrative officer, internal auditor and corporate secretary, through Eurobulkvariable interest loans. Interest rate swaps are recorded in the balance sheet as part of our Master Management Agreement.either assets or liabilities, measured at their fair value (Level 2) with changes in such fair value recognized in earnings under Gain / (loss) on derivatives, net, unless specific hedge accounting criteria are met."Capital Expenditures"“Capital Expenditures” below). In assessing the future performance of our present fleet, the greatest uncertainty relates to the spot market performance which affects those of our vessels that are not employed under fixed time charter contracts as well as the level of the new charter rates for the charters that are to expire. Decisions about the acquisition of additional vessels or possible sales of existing vessels are based on financial and operational evaluation of such action and depend on the overall state of the containership vessel market, the availability of purchase candidates, available employment, anticipated drydocking cost and our general assessment of economic prospects for the sectors in which we operate.20182020 compared to year ended December 31, 20172019 charter revenue and voyage charter revenue. Time charter revenue and voyage charter revenue for 20182020 amounted to $36.27$55.68 million, increasing by 46%33.3% compared to $41.77 million for the year ended December 31, 2017 during which they amounted to $24.84 million.2019. In 2018,2020, we operated an average of 11.4917.23 vessels, a 23.8%32% increase over the average of 9.2813.10 vessels we operated during the same period in 2017.2019. In the year 2018,2020 our fleet had 3,8145,754 voyage days earning revenue as compared to 3,1844,636 voyage days earning revenue in 2017.2019. Market charter rates in the year ended December 31, 20182020 were on average at higher levels for our containership vessels compared to the year ended December 31, 2017,same period of 2019 due to the different composition of our fleet, which in 2020 contained younger and larger vessels on average compared to the corresponding period in 2019, which was reflected in the average earnings of our ships. While employed, our vesselstime-charter equivalent (or "TCE")TCE rate of $9,179$9,445 per day per vessel in 20182020 compared to a TCE rate of $7,309$8,782 per day per vessel in 2017,2019, an increase of 25.6%8%. We had 283 scheduled off-hire days (including drydocking and time during which vessels were not available to generate revenues because they were committed for sale or suffered unrepaired damages), 151 commercial off-hire and 118 operational off-hire days in 2020, compared to 102 scheduled off-hire days, including drydocking, 38 commercial off-hire and 5 operational off-hire days in 2019. The average TCE rate our vessels achieve is a combination of the time charter rate earned by our vessels under time charter contracts, which is not influenced by market developments during the duration of the charter (unless the two charter parties49renegotiate the terms of the charter or the charterer is unable to make the contracted payments or we enter into new charter party agreements), and the TCE rate earned by our vessels employed in the spot market which is influenced by market developments.Commissions. We paid a total of $1.84 million in charter commissions for the year ended December 31, 2018, representing 5.1% of charter revenues. This represents an increase over the year ended December 31, 2017, where commissions paid were $1.32 million, representing 5.3% of charter revenues.Voyage expenses. Voyage expenses for the year were $1.26 million and relate to expenses for a voyage charter, for repositioning voyages betweenfixed term time charter contracts and ballast voyages, and owners' expenses at certain ports. For the year ended December 31, 2017, voyage expenses amounted to $1.56 million and related mainly to expenses for certain voyage charters. Our vessels are generally chartered under time charter contracts. Voyage expenses usually represent a small fraction (3.5% and 6.3% in each of 2018 and 2017, respectively) of charter revenues. Voyage expenses are dependent on the number of voyage charters, the cost of fuel, port costs and canal tolls and the number of days our vessels sailed without a charter.Vessel operating expenses. Vessel operating expenses were $19.99 million in 2018 compared to $15.02 million in 2017. In 2018, we operated an average of 11.49 vessels, a 23.8% increase over the average of 9.28 vessels we operated during the same period in 2017. Further, daily vessel operating expenses per vessel amounted to $4,769 per day in 2018 versus $4,436 per day in 2017, an increase of 7.5%, mainly due to higher costs for lubricants and other vessel supplies. Additionally, our vessel Joanna incurred a lower daily cost due to being laid-up during the first quarter of 2017.Related party management fees. These are part of the fees we pay to Eurobulk under our Master Management Agreement. During 2018, Eurobulk charged us 685 Euros per day per vessel totaling $3.54 million for the year, or $844 per day per vessel. During 2017, Eurobulk charged us 685 Euros per day per vessel totaling $2.63 million for the year, or $777 per day per vessel. The increase in the total amount of U.S. dollars charged within 2018 is due to the higher number of vessels operated within 2018 compared to the previous year and due to unfavorable movement in U.S. dollar/euro exchange rates during 2018 compared to 2017.Other general and administrative expenses. These expenses include the fixed portion of our management fees, incentive awards, legal and auditing fees, directors' and officers' liability insurance and other miscellaneous corporate expenses. In 2018, we had a total of $2.57 million of general and administrative expenses as compared to $2.50 million in 2017.Drydocking expenses. These are expenses we pay for our vessels to complete a drydocking as part of an intermediate or special survey. In 2018, we had three vessels completing their special surveys undergoing drydocking, three vessels completing their intermediate surveys by in-water inspections and a vessel starting its special survey and completing it in 2019, for a total cost of $2.77 million. During 2017, we had one vessel undergoing drydocking for a total of $0.6 million.Vessel depreciation. Vessel depreciation for 2018 was $3.31 million. Comparatively, vessel depreciation for 2017 amounted to $3.59 million. Vessel depreciation in 2018 was lower compared to 2017 because although the average number of vessels increased, the new vessels acquired between September and December 2017 have a lower average daily depreciation charge as a result of their lower acquisition cost and greater remaining useful life compared to the remaining vessels. Further, one of the vessels was fully depreciated in May 2018, therefore there was no depreciation charge for the specific vessel thereafter.Loss on write-down of vessels held for sale. The Company recorded a loss on write-down of a vessel held for sale of $4.6 million in 2017. This amount was booked in order to reduce the carrying value of two vessels to their fair values. These vessels were one dry-bulk vessel (M/V "Monica P") and one containership (M/V "Aggeliki P."), which were both classified as held for sale as of September 30, 2017. M/V "Aggeliki P". was sold in December 2017 for net proceeds of approximately $4.4 million. As of December 31, 2017, M/V "Monica P". was still held for sale. The Company reached an agreement to sell the vessel on March 19, 2018. The vessel was delivered to its buyers on June 25, 2018 for net proceeds of approximately $6.3 million.Interest and other financing costs. Interest expense and other financing costs for the year were $3.05 million. Comparatively, during the same period in 2017, interest and other financing costs amounted to $1.55 million. Interest incurred and loan fees were higher in 2018 due to a higher LIBOR rate, higher average outstanding debt and an increased number of new loan agreements as compared to 2017.Derivatives gain/loss. In 2018, we had a realized loss of $0.20 million from the net interest settlement on our interest rate swap contract that we entered into in October 2014 and an unrealized gain of $0.20 million from the mark to market valuation on the same interest rate swap compared to a marginal realized gain of $0.02 million and a marginal unrealized loss of $0.01 million in 2017. We had entered into the interest rate swap to mitigate our exposure to possible increases in interest rates. The performance of our derivative contracts depends on the movement of interest rates. A decline in interest rates increases our loss in our derivative contracts and vice versa.50Dividend Series B Preferred Shares. The Series B Preferred Shares paid dividends (in cash or in-kind at the option of the Company, subject to certain exceptions) until January 29, 2019 at a rate of 0% or 5%, depending on the trading price of the Company's common stock. At the spin-off date, Euroseas also distributed EuroDry Series B Preferred Shares to holders of Euroseas' Series B Preferred Shares in exchange for a number of such Euroseas Series B Preferred Shares, representing 50% of Euroseas Series B Preferred Shares. In 2018, the Company declared and paid in kind dividends of $1.34 million. In 2017, the Company declared and paid in kind dividends of $1.81 million. The decrease in 2018 is due to the spin-off of the Company and the distribution of 50% of Euroseas Series B Preferred Shares to EuroDry.Net loss attributable to common shareholders. As a result of the above, net loss for the year ended December 31, 2018 was $2.0 million compared to a net loss of $8.75 million for the year ended December 31, 2017.Year ended December 31, 2017 compared to year ended December 31, 2016Time charter revenue and voyage charter revenue . Time charter revenue and voyage charter revenue for 2017 amounted to $24.84 million, increasing by 15.8% compared to the year ended December 31, 2016, during which voyage revenues amounted to $21.46 million. In 2017, we operated an average of 9.28 vessels, a 7% increase over the average of 8.67 vessels we operated during the same period in 2016. In the year 2017, our fleet had 3,184 voyage days earning revenue as compared to 2,844 voyage days earning revenue in 2016. While employed, our vessels generated a TCE rate of $7,309 per day per vessel in 2017 compared to a TCE rate of $7,120 per day per vessel in 2016, an increase of 2.7%. The average TCE rate our vessels achieve is a combination of the time charter rate earned by our vessels under time charter contracts, which is not influenced by market developments during the duration of the charter (unless the two charter parties renegotiate the terms of the charter or the charterer is unable to make the contracted payments or we enter into new charter party agreements), and the TCE rate earned by our vessels employed in the spot market, including time charters linked to an index, which is influenced by market developments.$1.32$2.38 million in charter commissions for the year ended December 31, 2017,2020, representing 5.3%4.3% of charter revenues. This represents ana slight increase over the year ended December 31, 2016,2019, where commissions paid were $1.15$1.75 million, representing 5.4%4.2% of charter revenues.$1.56$1.33 million and relate to expenses for repositioning voyages between time charter contracts and owners’ expenses at certain voyage charters.ports. For the year ended December 31, 2016,2019, voyage expenses amounted to $1.21 million.$1.06 million and related mainly to the types of voyage expenses mentioned above. Our vessels are generally chartered under time charter contracts. Voyage expenses usually represent a small fraction (6.3%(2.4% and 5.6%2.5% in each of 20172020 and 2016,2019, respectively) of charter revenues. Voyage expenses are dependent on the number of voyage charters, the cost of fuel, port costs and canal tolls and the number of days our vessels sailed without a charter.$15.02$32.22 million in 20172020 compared to $13.85$23.99 million in 2016. Daily2019. In 2020, we operated an average of 17.23 vessels, a 32% increase over the average of 13.10 vessels we operated during the same period in 2019. Further, daily vessel operating expenses per vessel amounted to $4,436$5,110 per day in 20172020 versus $4,363$5,015 per day in 2016,2019, an increase of 1.7%, affected by the higher prices paid1.9% mainly due to increased crew costs resulting from difficulties in 2017 for specific vessel consumables such as lubricants and stores.crew rotation due to COVID-19 related restrictions.ManagementRelated party management fees. These are part of the fees we pay to Eurobulk under our Master Management Agreement. During 2017,2020, Eurobulk charged us 685 Euros per day per vessel totaling $2.63totalling $5.29 million for the year, or $777$839 per day per vessel. During 2016,2019, Eurobulk charged us 685 Euros per day per vessel totaling $2.4totalling $3.67 million for the year, or $756$768 per day per vessel. The increase in the total amount of U.S. dollars paidcharged within 20172020 is due to the higher exchange rates of the Euro (€) with respect to the U.S. dollar compared to the previous year and the higher number of vessels operated within the year 20172020 compared to the previous year.year and due to the unfavourable movement in Dollar/Euro exchange rates.Other generalGeneral and administrative expenses. These expenses include the fixed portion of our management fees, incentive awards, legal and auditing fees, directors'directors’ and officers'officers’ liability insurance and other miscellaneous corporate expenses. In 2017,2020, we had a total of $2.50$3.04 million of general and administrative expenses as compared to $2.67$2.44 million in 2016.2019. The increase of $0.6 million is due to the increased fixed annual executive compensation to the Manager during 2020, which has been in effect since November 15, 2019 (see Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions).DrydockingDry-docking expenses. These are expenses we pay for our vessels to complete a drydocking as part of an intermediate or special survey.survey or, in some cases, an in-water survey in lieu of a drydocking. In 2017,2020, we had one vessel undergoing drydockingthat underwent intermediate survey in-water and three vessels that underwent their special surveys in-water for a total cost of $0.6$0.54 million. During 2016,In 2019, we had threeone vessel completing her special survey with drydock, four vessels undergoing drydockingcompleting their intermediate surveys in-water and a vessel completing her special survey with drydock that started in 2018, for a total cost of $2.2$2.71 million.20172020 was $3.59 million. Comparatively, vessel depreciation for 2016 amounted to $4.96 million. Vessel depreciation in 2017 was lower$6.61 million, compared to 2016, despite a higher number of vessels operated in 2017. This$4.18 million for 2019. The increase is due to the higher average number of vessels acquired in 2017 (M/Vs "EM Astoria", "EM Oinousses", "EM Athens" and "EM Corfu") which have lower average daily depreciation charges compared to theour fleet average, due to their lower acquisition cost and greater remaining useful lives compared to the remaining vessels of our fleet.in 2020.vesselsvessel held for salesale. . The CompanyIn 2020, we recorded a loss on write-down of vesselsvessel held for sale of $4.6 million in 2017.$0.12 million. This amount was booked in order to reduce the carrying value of two vessels to their fair values. These vessels are one dry-51bulk vessel (M/the M/V "Monica P") and one containership (M/V "Aggeliki P.")"EM Oinousses", which were both classified as held for sale as of SeptemberJune 30, 2017. M/V "Aggeliki P". was sold in December 2017 for net proceeds of approximately $4.4 million. As of December 31, 2017, M/V "Monica P". was still held for sale. The Company reached an agreement to sell the vessel on March 19, 2018. The vessel was delivered to its buyers in June 2018. The Company recorded a loss on write-down of a vessel held for sale of $5.92 million in 2016. This amount was booked in order to reduce the carrying value of one dry-bulk vessel (M/V "Eleni P") held for sale as of December 31, 20162020 to its fair value less costs to sell, by reference to its negotiated and thereafter agreed sale price. There was no such case in 2019.value that ityear ended December 31, 2020 was actually sold.$2.69 million asended December 31, 20172020 were $1.55$4.13 million. Comparatively, during the same period in 2016,2019, interest and other financing costs amounted to $1.37$3.42 million. Interest incurred and loan fees wereexpense charged was higher in 20172020 due to the higher average outstanding debt, duringpartly offset by the yearlower average LIBOR rate on our loans, as compared to 2016.2019.Derivatives gain/loss.Loss on derivatives, net. In 2017,2020, we had an unrealized loss of $0.57 million from the mark to market valuation on our interest rate swap contract that we entered into in April 2020 and a marginal realized gainloss of $0.02 million for the net interest settlement on our interest rate swap contract, compared to a realized loss of $0.003 million in 2019, from the net interest settlement on our interest rate swap contract that we entered into in October 2014 and a marginal unrealized loss of $0.01 million from the mark to market valuation on the same interest rate swap compared to a realized loss of $0.13 million and unrealized gain of $0.01 millionmatured in 2016.May 2019. We have entered into the interest rate swapswaps to mitigate our exposure to possible increases in interest rates.The performance of our derivative contracts depends on the movement of interest rates. A decline in interest rates increases our loss in our derivative contracts and vice versa.Impairment in Joint Venture. In 2016,For the Company recorded an impairmentyear ended December 31, 2020, loss on debt extinguishment was $0.49 million and related to the conversion of $14.07 million on its investment in Euromar, which was a joint venture between the Company and two private equity firms, reducing the carrying valueone of the investment to zero, due to the persisting depressed market environment and the amended loan agreements based on which the Company concluded that its investment in Euromar was impaired and that the impairment was other than temporary.Equity Loss in Joint Venture. As explained above, due to the impairment in Joint venture no equity loss was recorded in 2017. In 2016, we recognized a $2.44related party loans, with an outstanding balance of $1.875 million, loss as our share in Euromar losses. In September 2017, Euroseas acquired the 85.714% interest in Euromar it did not already own for nominal cost. As a result of the acquisition, Euromar became a wholly-owned subsidiaryinto common shares of the Company. However, its vessels were substantially underThe difference between the controlshare price less the conversion price was reflected in loss on debt extinguishment. For the year ended December 31, 2019, loss on debt extinguishment was $0.33 million and related to the write-off of its lenders and were all soldthe unamortized debt discount in connection with the refinancing of the participating mortgage loan the Company had entered into with Credit Agricole, partly offset by the end of 2017, and, thus, it has not been consolidated in our results nor any gain or loss from itlower amount, at which the vessel profit participation liability was recognized.finally settled.Other Investment Income. In 2016, we recognized $1.02 million income from accrued dividends relating to $5.00 million of funds we made available to Euromar, $4.00 million of which remained in an escrow account as of December 31, 2016 and were available to be invested in Euromar if called by our partners in good faith, and the $1.00 million of such funds contributed to Euromar in 2014 in the form of preferred units (the "Preferred Units"). These funds accrued dividends in Preferred Units of Euromar. In December 2016, we determined that it was unlikely to recover any investment in Preferred Units of Euromar and recorded an impairment of $4.42 million representing the entire value of Preferred Units; we also stopped recognizing any additional accrued dividends. As of December 31, 2016, our Other Investment was shown in our Consolidated balance sheet at $4.00 million which represented the funds in the escrow account. During 2017, we continued not recognizing any accrued dividends and hence, other investment income was nil for the period. The funds held in the escrow account were returned to us in September 2017.Shares.Shares and Preferred deemed dividend. The Series B Preferred Shares paid dividends (in cash or in-kind at the option of the Company, subject to certain exceptions) until January 29, 2019 at a rate of 0% or 5%, depending on per annum. From January 29, 2019 to June 10, 2019, the trading priceSeries B Preferred Shares carried a dividend of 12% per annum, which was paid in cash. On June 10, 2019, we agreed to redeem $11.7 million of the Company's common stock.outstanding Series B Preferred Shares with a simultaneous reduction of the dividend rate for the remaining outstanding shares to 8.0% per annum effective from June 11, 2019 until January 29, 2021, payable in cash. From June 11, 2019 until March 31, 2020, dividends to Preferred shareholders were paid in cash at an annual rate of 8.0% per annum. On April 1, 2020, we agreed with the holders of the Series B Preferred Shares, to have the option to pay the Series B Preferred dividends in-kind at a rate of 9.0% per annum, or at 8.0% per annum if paid in cash, until January 29, 2021, after which it was set to increase to 14% per annum. In 2017,2020, the Company declared andpreferred dividends of $0.69 million, of which $0.15 million were paid in kind dividendscash, $0.37 million were paid in-kind, and $0.17 million were accrued as of $1.81 million.December 31, 2020 and were paid in cash in the first quarter of 2021. In 2016,2019, the Company declared anddividends of $1.27 million, of which $0.08 million were paid in-kind, $1.03 million were paid in kindcash and another $0.16 million were accrued as of December 31, 2019 and were paid in cash in the first quarter of 2020, and recorded preferred deemed dividends of $1.73 million.$0.50 million arising out of the redemption of approximately $11.7 million of Series B Preferred Shares.loss(loss) / income attributable to common shareholders. As a result of the above, net lossincome attributable to common shareholders for the year ended December 31, 20172020 was $8.75$3.35 million, as compared to a net loss of $35.81$3.46 million for the year ended December 31, 2016.2019.52DepreciationWe 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 and impairment (if any). Depreciation is based on cost less the estimated residual scrap value. 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 and possibly an impairment charge. We depreciate our vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from date of initial delivery from the shipyard and the residual value of our vessels is estimated to be $250 per lightweight ton.assetsvessels may not be recoverable. If we identify indicationindicators for impairment for a vessel,are present, we determine future undiscounted projected net operating cash flows for each vesselthe related vessels and compare itthem to the vesseltheir carrying value.values. When the estimate of future undiscounted net operating cash flows, excluding interest charges, expected to be generated by the use and eventual disposition of the assetvessel is less than its carrying amount, we evaluate the asset forrecord an impairment loss. In the event that impairment occurred, we would determine the fair value of the related asset and we record a charge to operations loss calculated by comparing the asset'svessel’s carrying value to theits estimated fair market value. We estimate fair market value primarily through the use of third party valuations performed on an individual vessel basis.Company'sCompany’s vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings.16-year19-year period for 20172020, excluding peak periods, and a 17-yearan 18-year period for 2018,2019, which both start in 2002 and take into account complete market cycles, and which provide a more representative reference for the long-termlong term rates. These rates are used for the period a vessel is not under a charter contract; if there is a contract, the fixed charter rate of the contract is used for the period of the contract.vessel operating costs; it also requires assumptions for:·the effective fleet utilization rate; ·estimated scrap values; ·future drydockingvessel operating costs; and
future drydocking costs; and·probabilities of sale for each vessel.Our estimatesthe time charter rates for the first two years are based on market information available for future rates (based on the length of charters that can be secured at the time of the analysis, generally, one to two years). each vessel.Company'sCompany’s past experience in finding employment for its vessels at comparable market conditions. Cost estimates, like drydocking and operating costs, are based on the Company'sCompany’s data for its own vessels; past estimates for such costs have generally been very close to the actual levels observed. Specifically, we use our budgeted operating expenses escalated by 1.5% per annum and our budgeted drydocking costs, assuming a five-year special survey cycle. Overall,20182020 identified onethree of our vessels with indication for impairment as presented in the following table. For this vessel,these vessels, we performed our impairment analysis which indicated no impairment. Furthermore, we performed sensitivity analysis for the charter rates and operating cost assumptions (which areis the inputsinput most sensitive to variations) allowing for variancesa decrease of up to 10% in the rates used from the third year onwards, or using the average rates from the third year onwards taken over the period after the financial crisis, from 2009 to 2020, without an impairment indication.during the first half of 2018 but retreated in the second half of the year,2020 may still return to their previously very depressed levels which could adversely affect our revenue, and profitability and future assessments of vessel impairment. The53"Item“Item 4.B. Business Overview – Our Fleet"Fleet”.vesselthree vessels which as of December 31, 2020 had impairment indication, a comparison of the average estimated daily time charter equivalent rate used in our impairment analysis with the average "break“break even rate"rate” for the uncontracted period is presented below:Vessel Charter Rate as of 12/31/2018 Remaining Life (years) Rate Year 1 (2018) Rate Year 2 (2019) Rate Year 3+ (2020+) Breakeven Rate (USD/day) Evridiki 12,000 8.0 7 10,189 10,189 14,611 9,623 Evridiki G 15,500 12 5.5 15,500 13,840 11,009 9,206 EM Spetses 8,100 6 11.5 11,655 9,383 8,558 EM Hydra 7,200 5 9.5 11,655 9,383 8,404 attached toincluded in Item 18 of this annual report.\report for a description of recent accounting pronouncements that may apply to us.B.Liquidity and Capital ResourcesB. Liquidity and Capital Resources like our ongoing at-the-market ("ATM") offering (under our filed prospectus about $2.20 million of our stock is still available for sale), and long-termlong term borrowings to meet our liquidity needs going forward and to finance our capital expenditures and working capital needs in 20192021 and beyond.2018,2020, we had a working capital surplusdeficit of $0.4 million and have been incurring losses.$19.0 million. For the year ended December 31, 2020, we generated net cash from operating activities of $2.4 million. Our cash balance amounted to $6.96$3.6 million and cash in restricted and retention accounts amounted to $6.25$2.8 million as of December 31, 2018.two years following January 29, 2019,market, as of the holdersdate of EuroDry Series B Preferred Shares will receive a cash dividend at a dividend ratethis annual report, and the easing of 12% per annum, which will increase to 14% thereafter. the negative impacts caused by the COVID-19 pandemic on the demand in the containership shipping industry. We intend to fund our working capital requirements via cash aton hand and cash flowflows from operations, debt balloon payment refinancing and proceeds from equity offerings.operations. In the unlikely event that these are not sufficient, we may also draw down up to $2.00 million under a commitmentuse funds from COLBY Trading Ltd., a company controlled by the Pittas familydebt refinancing, debt balloon payment refinancing and affiliated with our Chief Executive Officer,equity offerings and possible vessel salessell vessels (where equity will be released), if required, among other options. We believe we will have adequate funding through the sources described above and, accordingly, we believe we have the ability to continue as a going concern and finance our obligations as they come due over the next twelve months following the date of the issuance of our financial statements. Consequently, our consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. cash flow deficit from operating activities for 2018 was $1.48 million as compared to a net surplus from cash flows provided by operating activities for 2020 was $2.4 million as compared to a surplus of $5.05$3.24 million in 2017 and cash flow deficit from operating activities of $5.09 million in 2016.2019.20182020 compared to the year ended December 31, 2017,2019, are the following: the significant recoveryincrease in the average number of vessels in our fleet and an increase of the market rates during the year ended December 31, 2018,2020, which resulted in a significantly higheran increased TCE rate of $9,179$9,445 compared to $7,309$8,782 for the year ended December 31, 2017.2019. The increase in TCE rates as well as the increase in the average number of vessels in our fleet is also reflected in the increase of our operating income (excluding non-cash items) to $4.43$10.88 million for the year ended December 31, 20182020 from $1.59$6.25 million for the corresponding period in 2017.2019. This positive effect was however, offset by (i) a net working capital outflow of $3.48$2.97 million, during the year ended December 31, 2018 compared to a net working capital inflow of $4.82$0.92 million for the year ended December 31, 2017,2019, mainly due to a significant increase in the significant54the Due to related company balance during 2018 as reimbursements weredisbursements made to our Manager and (ii) by higher net interest expense for the year ended December 31, 2018 compared to the corresponding period in 2017.Manager.The positive change in cash flows from operating activities for the year ended December 31, 2017 compared to the year ended December 31, 2016, was due to: (i) the modest recovery of the market rates during the year ended December 31, 2017, which resulted in a slightly higher TCE rate of $7,309 compared to $7,120 for the year ended December 31, 2016. (ii) lower drydocking expenses of $0.57 million for one vessel that underwent drydocking in the year ended December 31, 2017 compared to $2.20 million for three vessels that underwent drydocking in the year ended December 31, 2016. The slight increase in TCE rates and in the average number of vessels in our fleet as well as the decrease in drydocking expenses is also reflected in the increase of our operating income (excluding non-cash items) to $1.59 million for the year ended December 31, 2018 from $1.50 million of operating loss (excluding non-cash items) for the corresponding period in 2016. There was also positive effect from a net working capital inflow of $4.82 million during the year ended December 31, 2017, mainly due to the significant increase of the Due to related company balance during 2017 as payments were made by our Manager on our behalf, compared to a net working capital outflow of $2.22 million for the year ended December 31, 2016..$6.25$16.32 million for the year ended December 31, 20182020 compared to $16.51$55.72 million used in investing activities for the year ended December 31, 2017.2019. The net increase in cash flows provided byfrom investing activities of $22.76$72.04 million from 20172019 is mainly attributable to $14.62 million and $2.34 million in proceeds from vessel sales and insurance, respectively, that took place in 2020, combined with a decrease of $30.0$55.08 million in payments for vessel acquisitions and major improvements during the year ended December 31, 2018 compared to the same period of 2017, partially offset by a net increase of $3.30 million in proceeds from vessel sales during the year ended December 31, 2018, compared to the same period of 2017between 2019 and $4.0 million of increased cash flows for the year ended December 31, 2017 due to a release of funds from other investment that took place during 20172020..67Net cash flows used in investing activities were $16.51 million for the year ended December 31, 2017 compared to cash flows provided by investing activities of $1.11 million for the year ended December 31, 2016. The net decrease in cash flows used in investing activities of $17.62 million is attributable to an increase of $26.98 million in payments for vessel acquisitions and major improvements during the year ended December 31, 2017 compared to the same period of 2016, partially offset by an increase of $5.36 million in proceeds from vessel sales during the year ended December 31, 2017, and $4.0 million of increased cash flows for the year ended December 31, 2017 due to a release of funds from other investment that took place during 2017.provided byused in financing activities were $0.14$18.32 million for the year ended December 31, 2018,2020, compared to net cash flows provided by financing activities of $12.75$45.20 million for the year ended December 31, 2017.2019. This decrease in cash flows provided by financing activities of $12.61$63.52 million, compared to the year ended December 31, 2017,2019, is attributable toto: (i) an increase of $23.11$5.13 million in long term debt principal payments during the year ended December 31, 2018, compared to the same period2020 (including $0.6 million of 2017 (including a $2.0 million related party loan repaid in 2017) and an increaseloan); (ii) a decrease of $3.02 million in net outflow of funds to a spun-off subsidiary (EuroDry) during the year ended December 31, 2018, compared to the same period in 2017, which is partially offset by an increase of $1.74$6.19 million in proceeds from issuance of common stock, net of offering expenses during the year ended December 31, 2018,2020 compared to the same period of 20172020; and an increase(iii) a decrease in proceeds of long term debt (net of loan arrangement fees paid) of $11.76$64.60 million during the year ended December 31, 2018,2020 (including $5.0 million of related party loans), compared to the same period of 2017.2019, partly offset by an outflow of $11.69 million arising from the redemption of the Series B Preferred Shares in 2019 and a decrease in the outflows for dividends on the Series B Preferred Shares paid in cash by $0.71 million between 2019 and 2020.Net cash flows provided by financing activities were $12.75 million forYear ended December 31, 2019 compared to year ended December 31, 20182017, compared to net cash flows used in financing activities of $6.34 million for the year ended December 31, 2016. This increase in cash flows provided by financing activities of $19.09 million,2019 compared to the year ended December 31, 2016, is mainly attributable2018, please refer to an increasePart A, Item 5, “Operating and Financial Review and Prospects” in proceeds from long-term debt (net of loan arrangement fees paid) of $5.82 million duringour Annual Report on Form 20-F for the year ended December 31, 2017, compared to the year ended December 31, 2016 (including proceeds of $2.0 million from a related party loan during 2016), a decrease of $6.88 million in repayments of long term debt during the year ended December 31, 2017 (including a $2.0 million related party loan repaid in 2017), compared to the same period of 2016 and a decrease of $9.27 million in net outflow of funds to a spun-off subsidiary (EuroDry) during the year ended December 31, 2017, compared to the same period in 2016, which is partially offset by a decrease of $2.88 million in proceeds from issuance of common stock, net of offering expenses during the year ended December 31, 2017, compared to the same period of 2016.2019.552018,2020, we had threefive outstanding loans with a combined outstanding balance of $37.49$69.8 million. These loans have maturity within 2021.mature between 2021 and 2023. Our long-term debt as of December 31, 20182020 comprises bank loans granted to our vessel-owning subsidiaries.subsidiaries with a combined outstanding balance of $67.3 million with margins over LIBOR ranging from 2.95% to 3.90%, and a related party loan with a balance of $2.5 million and an interest rate of 8%. A description of our loans as of December 31, 20182020 is provided in Note 78 of our attached financial statements. As of December 31, 2018,2020, we are scheduled to repay approximately $5.21$20.89 million of the above bank loans in 2019.2021, as well as the $2.5 million related party loan.hullsecurity cover ratio cover (the ratio of fair value of vessel to outstanding loan less cash in retention accounts) and restrictions as to changes in management and ownership of the vessel ship-owning companies, distribution of profits or assets (in effect limiting dividends in some loans to 60% of profits, or, not permitting dividend payment or other distributions in cases that an event of default has occurred), additional indebtedness and mortgage of vessels without the lender'slender’s prior consent, sale of vessels, maximum fleet-wide leverage, sale of capital stock of our subsidiaries, ability to make investments and other capital expenditures, entering in mergers or acquisitions, minimum cash balance requirements and minimum cash retention accounts (restricted cash). When necessary, we do provide supplemental collateral in the form of restricted cash or cross-collateralize vessels to ensure compliance with hullsecurity cover ratio ("loan-to-value"(“loan-to-value” ratio). Increases in restricted cash required to satisfy loan covenants would reduce funds available for investment or working capital and could have a negative impact on our operations. If we cannot cure any violated covenants, we might be required to repay all or part of our loans, which, in turn, might require us to sell one or more of our vessels under distressed conditions. As of December 31, 2018,2020, we were not in default of any credit facility covenant.registrationRegistrationDecember 19, 2016,May 7, 2020, the SEC declared effective our shelf registration statement on Form F-3 pursuant to which we registeredmay offer and sell, within a three year period, up to $400,000,000 of our securities, consisting of common shares,up to a total dollar amount of $400,000,000 (about $4.80 million of which were used under our ATM offering), to be sold by the Company, as well as 5,723,3752,369,950 common shares to bethat were previously acquired in private transactions or in the open market or which are issuable upon conversion of the Series B Preferred Shares or any convertible notes into which the Series B Preferred Shares may convert. On August 3, 2020, we issued and sold by certain selling shareholders.200,000 shares of our common stock through our at-the-market offering for net proceeds of approximately $0.7 million. On January 29, 2021, we sold 74,301 shares of common stock under our at-the-market offering for approximately $0.65 million of net proceeds. On February 12, 2021, we sold 8,600 shares of common stock under our at-the-market offering for approximately $0.09 million of net proceeds.2010,2018, we entered into our Euromar joint venture with two private equity firms. The Company has not provided any guarantees to Euromar beyond its capital already invested or funds put in escrow. None of the loans entered into by Euromar have any recourse to the Company. On September 7, 2017, Euroseas became the sole owner of Euromar at a nominal price of $1. The Company acquired the 85.714% interest in Euromar it did not already own and Euromar became a wholly-owned subsidiary of the Company. The Company provided no guarantees to Euromar's lenders, and none of the lenders haveacquire any recourse against the Company. As of December 31, 2017, all vessels of Euromar were sold with the consent of Euromar's lenders; all proceeds from such sales and any funds in excess of other liabilities were applied towards the indebtedness of Euromar with any excess indebtedness written off; Euromar was released from all its corporate guarantees to its lenders.September 2016August 2019 we took delivery of four feeder containerships, the M/V “Diamantis P”, M/V “EM Hydra”, M/V “EM Spetses”, and M/V “EM Kea”, owned by affiliates of the Pittas family including the Company’s CEO, for a total of $28.2 million. The consideration towards the feeder containership MV Aegean Expressvessels included a cash payment of $15.0 million, financed by two bank loans, and the issuance of 2,816,902 shares of common stock to the sellers. In November 2019, we took delivery of four intermediate size containerships, the M/V “Synergy Busan”, M/V “Synergy Antwerp”, M/V “Synergy Oakland” and M/V “Synergy Keelung”, for a cost of $3.1approximately $40 million. The acquisition was financed by bank debt of $32.0 million, existing funds of the Company and $6.0 million raised in private placements. In December 2016November 2020, we purchasedmade a supplementary contingent payment of $0.5 million as part of the feeder containership M/V "RT Dagr" by issuing 0.9 millionacquisition cost of the abovementioned vessels through the issuance of 161,357 shares of our common stock to the Company's common stock.sellers. In June 20172020, we took delivery of the feeder containership M/V "EM Astoria" for $4.75 million. In September 2017 we took delivery of the feeder containership M/V "EM Athens" for $4.2 million. In October 2017 we took delivery of the feeder containership M/V "EM Oinousses" for $4.3 million and the feeder containership M/V "EM Corfu" for $5.7 million. In December 2017 we took delivery of the intermediate containership M/V "Akinada Bridge" for $11 million. All these five containerships were purchased from Euromar for $29.85 million.did not acquire any vessels.foursix vessels scheduled for drydocking over the next 12 months. We may face delays in performing these drydocks or special surveys due to the effects of COVID-19, particularly if travel restrictions persist (refer to section above “B. Liquidity and Capital Resources – Cash Flows” for a discussion of how we plan to cover our working capital requirements and capital commitments).2016, 20172018, 2019 and 2018,2020, the Company declared no dividend on its common stock. During the fourth quarter of 2013, the Company decided to suspend the quarterly dividend on its common stock to focus all its resources in exploiting investment opportunities in the markets. In 2014, the Company paid $13,050 of dividends that accrued before the fourth quarter of 2013 but were previously unpaid. 2016, 2017 and 2018, the Company declared sixteenfour consecutive quarterly dividends on its Series B Preferred Shares, amounting to $1.73 million in 2016, $1.81 million in 2017 and $1.34 million in 2018, all of which were paid in-kind. Within 2019, the Company declared dividends on its Series B Preferred Shares, amounting to $1.27 million, of which $0.08 million were paid in-kind, $1.03 million were paid in cash during 2019, and another $0.16 million were accrued as of December 31, 2019 and were paid in the first quarter of 2020. Within 2020, the Company declared dividends on its Series B Preferred Shares of $0.69 million, of which $0.37 million were paid in-kind, $0.15 million were paid in cash during 2020 and another $0.17 million were accrued as of December 31, 2020 and were paid in February 2021. The Series B Preferred Shares paid dividends in-kind until January 29, 2019 at a rate of 5% per annum. From January 29, 2019 to January 29, 2021, the dividend rate on the Series B Preferred Shares was set to increase to 12% per annum and to 14% per annum thereafter. On June 10, 2019, we redeemed $11.7 million of the Series B Preferred Shares, with a simultaneous reduction of the dividend rate to 8% per annum until January 29, 2021, after which date it would be increased to 14% per annum. From January 29, 2019 to June 11, 2019, the Series B Preferred Shares carried a dividend rate of 12% per annum, and 8% per annum from June 11, 2019 until March 31, 2020, and were paid in cash. On April 1, 2020, we agreed with the holders of the Series B Preferred Shares, to have the option to pay the Series B Preferred dividends in-kind at a rate of 9.0% per annum, or at 8.0% per annum if paid in cash, until January 29, 2021, after which date it was set to increase to 14% per annum. On January 29, 2021, we redeemed 2,000 of our Series B Preferred Shares outstanding and paid $2,000,000 to our Preferred Shares shareholders. In connection with the redemption, we agreed with the Preferred Shares shareholders to set the dividend rate of the Preferred Shares to 8% per annum if paid in cash and 9% if paid in-kind, at the Company’s option until January 29, 2023, after which date the dividend rate will increase to 14%, and will be payable only in cash.5669C.Research and development, patents and licenses, etc.C. Research and development, patents and licenses, etc. D.Trend informationD. Trend information April 1, 2019,March 31, 2021, the capacity of the fully cellular worldwide container vessel fleet was approximately 22.1423.9 million teu with approximately 2.883.7 million teu, or, about 13%15.4% of the present fleet capacity on order,order. If the growing supply of container vessels may exceed future demand.Feedership,Feeder, Handysize and Intermediate size containerships that were scrapped were in excess of 30 years of age. Continued weakness of containership charter rates resulted in increased scrapping rates at even lower vessel scrapping ages. In fact, 2016 saw scrapping rates of more than 500,000 teu, a 35-year record. In 2017 scrapping rates reached 398,610 teu, while in 2018, scrapping rates declined year on year reaching 119,910 teu. In 2019, the scrapping rate increased, reaching 182,560 teu. In 2020, there were 187,640 teu of containerships that were scrapped. So far in 2021, there have been 8,060 teu containerships that have been scrapped.1, 2019,23, 2021, approximately 55%74% of our ship capacity days in remainder of 20192021 and approximately 4%40% of our ship capacity days in 2020,2022, are under time charter contracts. If the market rates decrease from current levels or the supply of vessels increases, our vessels may have difficulty securing employment and, if so, may be employed at rates lower than their present charters.E.In the name of public health, governments around the world have closed non-essential businesses, restricted travel, and put in place other measures which resulted in a dramatic decrease of economic activity, including a reduction of goods imported and exported worldwide. While some economies have begun re-opening in limited capacities, the second and the third “wave” of COVID-19 infections have forced and might continue to cause governments to impose restrictions on economic activity. At the same time, the increased uncertainty may cause restrain in placing orders for the construction of new vessels or may cause increased scrapping of existing vessels resulting in lower growth or even decline in the available number of container vessels; this, in turn, might create tight market conditions when containerized trade increases again. Off-balance Sheet ArrangementsIt is impossible to predict the course COVID-19 will take, how governments would respond, whether an effective vaccine can be distributed successfully at scale, and how the behavior of our clients will change, if at all, due to the COVID-19 pandemic’s economic shock. Some experts fear that the economic consequences of COVID-19 could cause a recession that outlives the pandemic. The extent to which COVID-19 will impact economic growth, consumption patterns, containerized trade and the supply of vessels and, consequently, the Company’s results of operations and financial condition is highly uncertain and cannot be predicted at this time.E. Off-balance Sheet Arrangements 2018,2020, we did not have any off-balance sheet arrangements.F. Tabular Disclosure of Contractual Obligations 57F.Tabular Disclosure of Contractual Obligations2018:2020:In U.S. dollars Total Less Than One Year
Three Years Three to Five Years Total Less Than One Year One to
Three YearsThree to Five Years More Than Five Years Bank debt $ 37,491,000 $ 5,212,000 $ 32,279,000 - Long-term bank loans $67,301,300 $20,891,840 $46,409,460 - - Related party loan $2,500,000 $2,500,000 - - - Interest Payments (1) $ 5,914,860 $ 2,346,082 $ 3,568,778 - $5,400,000 $2,573,000 $2,827,000 - - Vessel Management fees (2) $ 10,660,933 $ 3,153,740 $ 5,164,451 $ 2,342,742 $8,496,000 $4,200,000 $4,296,000 - - Other Management fees (3) $ 5,152,010 $ 1,250,000 $ 2,575,500 $ 1,326,510 $4,046,000 $2,000,000 $2,046,000 - - Total $ 59,218,803 $ 11,961,822 $ 43,587,729 $ 3,669,252 $87,743,300 $32,164,840 $55,578,460 - - 20182020 described above, each loan'sloan’s interest rate margin over LIBOR and average LIBOR rates of about 3.01%0.19%, 2.31%0.23%, 2.11%0.62%, 2.02%, 2.03%1.63% and 3.05% per annum for the five years, respectively, based on the LIBOR yield curve as of December 31, 2018. Also2020. This also includes our obligation to make payments required as of December 31, 20172020 under our related party loan, with an interest rate swap agreements based on the same LIBOR forward rate assumptions (see Item 11).of 8% per annum.Amended and Restated Master Management Agreement and management agreementagreements with the ship-owningshipowning companies in effect as of January 1, 2019December 31, 2020 and expiring on January 1, 2023. The management fees have been computed for 20192021 based on the agreed rate of 685 Euros per day per vessel (approximately $785) and for 2020$822). For the years after 2021, we have assumed an annual increase in the rate of 2% for inflation. We assumed no changesa rate of 1.20 in the U.S. DollarUS dollar to Euro exchange rate (assumed at 1.15 USD/Euro).rate. We further assume that we hold our vessels until they reach 25 years of age, after which they are considered to be scrapped and no longer bear obligations.$1,250,000$2,000,000 per year under our Master Management Agreement with Eurobulk for the cost of providing managementexecutive services to Euroseas as a public company and its subsidiaries.the Company. This fee is adjusted for inflation in Greece during the previous calendar year every January 1st.1. From January 1, 20202022 on, we have assumed an inflation rate of 2.0% per year. The agreement expires on January 1, 2023.G.Safe HarborG. Safe Harbor "Forward-Looking Statements"“Forward-Looking Statements” at the beginning of this annual report.Item 6. Directors, Senior Management and Employees A.Directors and Senior ManagementA. Directors and Senior Management Name Position Aristides J. Pittas 5961Chairman, President and CEO; Class A Director Dr. Anastasios Aslidis 5961CFO and Treasurer; Class A Director Aristides P. Pittas 6769Vice Chairman; Class A Director Stephania Karmiri 5153Secretary Panagiotis Kyriakopoulos 5860Class B Director Christian Donohue 53 Class B Director Andreas Papathomas 69 Class B Director George Taniskidis 5860Class C Director Apostolos Tamvakakis 6163Class C Director (since June 25, 2013)Christian Donohue51Series B Director (since December 7, 2017)58Newcastle-Upon-TyneNewcastle - Upon-Tyne and a MSc in both Ocean Systems Management and Naval Architecture and Marine Engineering from the Massachusetts Institute of Technology., and BoD member of Digea S.A. He has also been an investor in the shipping industry for more than 20 years. Mr. Kyriakopoulos has a B.Sc. degree in Marine Engineering from the University of Newcastle upon Tyne, a MSc. degree in Naval Architecture and Marine Engineering with specialization in Management from the Massachusetts Institute of Technology and a Master degree in Business Administration (MBA) from Imperial College, London.bank'sbank’s credit strategy and network. Mr. Taniskidis studied Law in the National University of Athens and in the University of Pennsylvania Law School, where he received a L.L.M. After law school, he joined the law firm of Rogers & Wells in New York, where he worked until 1989 and was also a member of the New York State Bar Association. He is also a member of the Young Presidents Organization.59"EOS“EOS Hellenic Renaissance Fund"Fund”. He holds the positions of Vice Chairman of Gek Terna, Member of the BoD of Quest Holdings, Chairman of the Liquidations Committee of PQH Single Special Liquidation S.A. and member of the Marketing Commission of the Hellenic Olympic Committee. He is a graduate of the Athens University of Economics and has an M.A. in Economics from the Saskatchewan University in Canada with major in econometrics and economics.Shares.Shares, and on July 29, 2019 was appointed as a Director. Mr. DonahueDonohue is a Managing Director at BlackRock. Prior to joining BlackRock, in 2017and he was a Managing Directorheld the same position at Tennenbaum Capital Partners.Partners before Tennenbaum Capital Partners was acquired by BlackRock in 2018.B.CompensationB. Compensation GreekEurozone inflation to account for the increased management cost associated with us being a public company and other services to our subsidiaries. During 2016 and 2017, under this Master Management Agreement, as amended,Following the spin-off, with effect May 30, 2018, the executive services fee we paidpay to Eurobulk $2,000,000 each year for the services of our executives, Mr. Aristides J. Pittas, Dr. Anastasios Aslidis and Mr. Symeon Pariaros, our Secretary, Mrs. Stephania Karmiri, and our Internal Auditor. AsAuditor, has amounted to $1,250,000. On November 15, 2019, the Company signed an addendum adjusting the fixed annual executive compensation to $2,000,000 to compensate Eurobulk for the increase in the fleet and certain management services provided by Synergy Marine Ltd., a company controlled by Andreas Papathomas and which became affiliated with the Company post-acquisition as a result of May 30, 2018, the executive services fee was adjustedhis appointment to $1,250,000.our Board of Directors in November 2019. As a result, for the year 2018,2019, the executive services feefixed cost was calculated on $2,000,000at $1,250,000 pro-rated based on the proportion of the number of calendar days that related to Euroseas post spin-off vessels to the number of days of the entire fleet of Euroseas for the period of January 1, 20182019 until May 29, 2018November 15, 2019 and on $1,250,000at $2,000,000 for the period of May 30, 2018November 16, 2019 until December 31, 2018. As of January 1, 2019,2019. For the fee remained unchanged at $1,250,000.year 2020, the fixed cost amounted to $2,000,000.will receive no compensation for serving on our Board of Directors or its committees. will receive the following compensation: an annual retainer of $7,500, plus $1,875 for attending a quarterly meeting of the Board of Directors, plus an additional retainer of $3,750 if serving as Chairman of the Audit Committee. They also participate in the Company'sCompany’s Equity Incentive Plan.600,00075,000 shares over 10 years after the 2018 Equity Incentive Plan's adoption date. Officers, directors and employees60(including (including any prospective officer or employee) of the Company and its subsidiaries and affiliates and consultants and service providers to (including persons who are employed by or provide services to any entity that is itself a consultant or service provider to) the Company and its subsidiaries and affiliates are eligible to receive awards under the 2018 Equity Incentive Plan. Awards may be made under the 2018 Equity Incentive Plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock, restricted stock units and performance shares.On November 3, 2014, the Board of Directors awarded 45,000 shares of restricted stock to the directors, officers and key employees of Eurobulk, 50% of which vested on November 16, 2015, and the remainder vested on November 16, 2016. On November 6, 2015, the Board of Directors awarded 68,400 shares of restricted stock to the directors, officers and key employees of Eurobulk, 50% of which vested on July 1, 2016, and the remainder vested on July 1, 2017. On November 3, 2016, the Board of Directors awarded 82,080 shares of restricted stock to the directors, officers and key employees of Eurobulk, 50% of which vested on November 1, 2017, and the remainder vested on November 1, 2018. Vesting of the awards is conditioned on continuous employment throughout the period to the vesting date. On November 2nd, 2017 an award of 100,270 non-vested restricted shares, was made to the directors, officers and key employees of Eurobulk of which 50% vested on July 1, 2018 and 50% will vest on July 1, 2019. 125,45015,681 non-vested restricted shares, was made to 18 key persons of which 50% will vestvested on November 16, 2019 and 50% will vestvested on November 16, 2020; awards to officers and directors amounted to 72,1709,021 shares and the remaining 53,2806,660 shares were awarded to employees of Eurobulk. On November 4,2020,2023, the term of our Class B directordirectors expires in 2021 and the term of our Class C directors expires in 2019.2022.Company'sCompany’s accounting controls and the appointment of the Company'sCompany’s outside auditors. The members of the Audit Committee are Mr. Panos Kyriakopoulos (Chairman and "audit“audit committee financial expert"expert” as such term is defined under SEC regulations), Mr. Apostolos Tamvakakis and Mr. George Taniskidis."Corporate“Corporate Governance." During the year ended December 31, 2018, our Audit Committee granted a waiver of the code of ethics permitting trading of our common stock during a blackout period.” We intend to disclose furtherany waivers of the code of ethics on our website under "Corporate“Corporate Governance."”Company'sCompany’s corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. We are exempt from many of Nasdaq'sNasdaq’s corporate governance practices other than the requirements regarding the disclosure of a going concern audit opinion, submission of a listing agreement, notification of material non-compliance with Nasdaq corporate governance practices, and the establishment and composition of an audit committee and a formal written audit committee charter. The practices that we follow in lieu of Nasdaq'sNasdaq’s corporate governance rules are described below.·We are not required under Marshall Islands law to maintain a Board of Directors with a majority of independent directors, and we may not be able to maintain a Board of Directors with a majority of independent directors in the future.·In lieu of a compensation committee comprised of independent directors, our Board of Directors will be responsible for establishing the executive officers' compensation and benefits. Under Marshall Islands law, compensation of the executive officers is not required to be determined by an independent committee.6175·In lieu of a nomination committee comprised of independent directors, our Board of Directors will be responsible for identifying and recommending potential candidates to become board members and recommending directors for appointment to board committees. Shareholders may also identify and recommend potential candidates to become candidates to become board members in writing. No formal written charter has been prepared or adopted because this process is outlined in our bylaws.·In lieu of obtaining an independent review of related party transactions for conflicts of interests, consistent with Marshall Islands law requirements, a related party transaction will be permitted if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors and the Board of Directors in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, or, if the votes of the disinterested directors are insufficient to constitute an act of the Board of Directors as defined in Section 55 of the Marshall Islands Business Corporations Act, by unanimous vote of the disinterested directors; or (ii) the material facts as to his relationship or interest are disclosed and the shareholders are entitled to vote thereon, and the contract or transaction is specifically approved in good faith by a simple majority vote of the shareholders; or (iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.·As a foreign private issuer, we are not required to solicit proxies or provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance rules or Marshall Islands law. Consistent with Marshall Islands law, we will notify our shareholders of meetings between 15 and 60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our bylaws provide that shareholders must give us advance notice to properly introduce any business at a meeting of the shareholders. Our bylaws also provide that shareholders may designate in writing a proxy to act on their behalf.·In lieu of holding regular meetings at which only independent directors are present, our entire Board of Directors, a majority of whom are independent, will hold regular meetings as is consistent with the laws of the Republic of the Marshall Islands.·The Board of Directors adopted a new Equity Incentive Plan in May 2018. Shareholder approval was not necessary since Marshall Islands law permits the Board of Directors to take such actions.·As a foreign private issuer, we are not required to obtain shareholder approval if any of our directors, officers, or 5% or greater shareholders has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company, or assets to be acquired, or in the consideration to be paid in the transaction(s) and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common stock or voting power of 5% or more.·In lieu of obtaining shareholder approval prior to the issuance of designated securities, the Company will comply with provisions of the Marshall Islands Business Corporations Act, providing that the Board of Directors approves share issuances.2018,2020, approximately 88112 officers and 154207 crew members served on board the vessels in our fleet.62"Item“Item 7. Major Shareholders and Related Party Transactions"Transactions”."Compensation."“Compensation.”2018.2020. There are currently no options outstanding to acquire any of our shares.63Item 7. Major Shareholders and Related Party Transactions A. Major Stockholders A.Major StockholdersApril 22, 2019March 31, 2021 by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of our voting stock, each of our directors and executive officers, and all of our directors and executive officers and 5% owners as a group. All of our shareholders, including the shareholders listed in this table, are entitled to one vote for each share of common stock held.Name of Beneficial Owner (1) Number of Shares of Voting Common Stock Beneficially Owned Percent of Voting of common Stock (13) Number of Shares of Voting Series B Preferred Stock Beneficially Owned (14) Percent of Voting of Series B Preferred Shares (14) Number of Shares of Voting Common Stock Beneficially Owned Upon Conversion; 50% Voting Before Conversion Percent of Total Voting Securities Friends Investment Company Inc.(2) 3,704,048 29.6 % - - 22.0 % Tennenbaum Opportunities Fund VI, LLC (3, 4) 291,600 2.3 % 16,031 81.4 % 3,500,218 22.6 % Tennenbaum Opportunities Partners V, LP (3, 4) 608,400 4.9 % - - - 3.6 % Family United Navigation Co 559,823 4.5 % - - - 3.3 % Preferred Friends Investment Company Inc(4) - - 3,655 18.6 % 798,035 4.8 % Aristides J Pittas(5) 97,093 * - - - * George Taniskidis(6) 4,155 * - - - * Panagiotis Kyriakopoulos(7) 33,415 * - - - * Aristides P Pittas(8) 13,070 * - - - * Anastasios Aslidis(9) 67,186 * - - - * Apostolos Tamvakakis(10) 7,078 * - - - * Christian Donohue - * - - - * Stephania Karmiri(11) - * - - - * Symeon Pariaros(12) 4,155 * - - - * All directors and officers and 5% owners as a group 5,390,023 43.1 % 19,686 100 % 4,298,253 57.6 % Name of Beneficial Owner (1) Number of Shares of Voting Common Stock Beneficially Owned Percent of Voting of common Stock (19) Number of Shares of Voting Series B Preferred Stock Beneficially Owned (20) Percent of Voting of Series B Preferred Shares (20) Number of Shares of Voting Common Stock Beneficially Owned Upon Conversion; 50% Voting Before Conversion Percent of Total Voting Securities Containers Shareholders Trinity Ltd. (2) 2,062,765 30.4 % - - - 29.4 % Colby Trading Ltd. (3) 702,247 10.3 % - - - 10.0 % Synergy Holdings Limited (4) 646,308 9.5 % - - - 9.2 % Friends Investment Company Inc. (5) 552,845 8.1 % - - - 7.9 % Eurobulk Marine Holdings Inc. (6) 528,169 7.8 % - - - 7.5 % Diamantis Shareholders Ltd (7) 243,451 3.6 % - - - 3.5 % Family United Navigation Co. (8) 126,852 1.9 % - - - 1.8 % Tennenbaum Opportunities Fund V, LP (9, 10) 76,050 1.1 % - - - 1.1 % Tennenbaum Opportunities Partners V, LLC (9,10) 36,450 ( *) 3,355 52.7 % 238,790 2.2 % Preferred Friends Investment Company Inc (10) - - 3,010 47.3 % 214,235 1.5 % Aristides J. Pittas(11) 26,437 ( *) - - - .. ( *) Anastasios Aslidis (12) 20,238 ( *) - - - ( *) Panagiotis Kyriakopoulos (13) 21,572 ( *) - - - ( *) Aristides P. Pittas (14) 5,598 ( *) - - - ( *) Apostolos Tamvakakis (15) 2,942 ( *) - - - ( *) George Taniskidis (16) 1,388 ( *) - - - ( *) Christian Donohue - - - - - - Andreas Papathomas - - - - - - Stephania Karmiri (17) - - - - - - Symeon Pariaros (18) 1,388 ( *) - - - ( *) All directors and officers and 5% owners as a group 5,054,700 74.4 % 6,365 100.0 % 453,025 75.2 % (1)Beneficial ownership is determined in accordance with the Rule 13d-3(a) of the Securities Exchange Act of 1934, as amended, and generally includes voting or investment power with respect to securities. Except as subject to community property laws, where applicable, the person named above has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by him/her.(2)Represents 3,704,048 shares of common stock held of record by Friends. A majority of the shareholders of Friends are members of the Pittas family. Investment power and voting control by Friends resides in its Board of Directors which consists of five directors, a majority of whom are members of the Pittas family. Actions by Friends may be taken by a majority of the members on its Board of Directors.
(1)Beneficial ownership is determined in accordance with the Rule 13d-3(a) of the Securities Exchange(3)Tennenbaum Capital Partners, LLC serves as investment advisor to, inter alia, Tennenbaum Opportunities Partners V, LP and Tennenbaum Opportunities Fund VI, LLC, which are the registered holders of the Common Shares and Series B Preferred Shares of Euroseas Ltd. beneficially owned by Tennenbaum Capital Partners, LLC. Tennenbaum Capital Partners, LLC is indirectly controlled by BlackRock, Inc., which may be deemed to have beneficial ownership of shares beneficially owned by Tennenbaum Capital Partners, LLC. The address of Tennenbaum Opportunities Partners V, LP, Tennenbaum Opportunities6477
B.Fund V, LLC and Tennenbaum Capital Partners, LLC is 2951 28th Street, Suite 1000, Santa Monica, CA 90405. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. Tennenbaum Opportunities Partners V, LP and Tennenbaum Opportunities Fund VI, LLC currently hold (a) 900,000 shares of common stock and (b) Series B Preferred Shares that are convertible into 3,500,218 shares of common stock.Related Party Transactions(4)Common shares are issuable upon conversion of Series B Preferred Shares (or any convertible notes into which the Series B Preferred Shares may convert) owned by this shareholder (based on the current conversion ratio).(5)Does not include 482,991 shares of common stock held of record by Friends, by virtue of ownership interest in Friends by Mr. Pittas. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Does not include 1,041 Series B Preferred Shares held of record by Preferred Friends Investment Company Inc., by virtue of ownership interest in Preferred Friends Investment Company Inc. by Mr. Pittas. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Includes 11,140 shares vesting on July 1, 2019, 13,925 shares of common stock vesting on November 16, 2019 and 13,925 shares vesting on November 16, 2020.(6)Does not include 17,005 shares held of record by Friends, by virtue of Mr. Taniskidis' ownership in Friends. Mr. Taniskidis disclaims beneficial ownership except to the extent of his pecuniary interest. Does not include 96 Series B Preferred Shares held of record by Preferred Friends Investment Company Inc., by virtue of ownership interest in Preferred Friends Investment Company Inc. by Mr. Taniskidis and members of his family. Mr. Taniskidis disclaims beneficial ownership except to the extent of his pecuniary interest. Includes 1,185 shares vesting on July 1, 2019, 1,485 shares of common stock vesting on November 16, 2019 and 1,485 shares vesting on November 16, 2020.(7)Includes 1,185 shares vesting on July 1, 2019, 1,485 shares of common stock vesting on November 16, 2019 and 1,485 shares vesting on November 16, 2020.(8)Does not include 427,911 shares of common stock held of record by Friends and Family United Navigation Co., by virtue of ownership interest in Friends and Family United Navigation Co. of Mr. Pittas and members of his family. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Does not include 24 shares of Series B Preferred stock held of record by Preferred Friends Investment Company Inc., by virtue of ownership interest in Preferred Friends Investment Company Inc.by Mr. Pittas and members of his family. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Includes 3,040 shares vesting on July 1, 2019, 3,800 shares of common stock vesting on November 16, 2019 and 3,800 shares vesting on November 16, 2020.(9)Includes 7,560 shares vesting on July 1, 2019, 9,450 shares of common stock vesting on November 16, 2019 and 9,450 shares vesting on November 16, 2020.(10)Includes 1,185 shares vesting on July 1, 2019, 1,485 shares of common stock vesting on November 16, 2019 and 1,485 shares vesting on November 16, 2020.(11)Does not include 465 shares of common stock held of records by Friends, by virtue of Mrs. Karmiri's ownership in Friends. Mrs. Karmiri disclaims beneficial ownership except to the extent of her pecuniary interest.(12)Includes 1,185 shares vesting on July 1, 2019, 1,485 shares of common stock vesting on November 16, 2019 and 1,485 shares vesting on November 16, 2020.(13)Voting stock includes 175,585 unvested shares for a total of 12,515,645 issued and outstanding shares of the Company as of April 22, 2019.(14)As of April 22, 2019, Series B Preferred Shares vote on an as-converted basis weighted by 50%.B.Related Party Transactionsship-owningshipowning company. Under our Master Management Agreement, Eurobulk is responsible for all aspects of management and compliance for the Company, including the provision of the services of our Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Internal Auditor and Secretary. Eurobulk is also responsible for all commercial management services, which include obtaining employment for our vessels and managing our relationships with charterers. Eurobulk also performs technical management services, which include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging our hire of qualified officers and crew,65preceding termination date. Each new vessel we may acquire in the future will enter into a separate management agreement with Eurobulk with a rate and term coinciding with the rate and remaining term of the Master Management Agreement pursuant to the Master Management Agreement. During 2016Under the amended and 2017, under therestated Master Management Agreement, as amended,of January 1, 2018, we paidpay Eurobulk a fixed cost of $2,000,000 annually, which is adjusted for Greek inflation every January 1st, andtogether with a per ship per day cost of 685 Euros (or about $787.75$822 based on $1.15/$1.20/Euro exchange rate) and also adjusted annually for inflation in the Eurozone every January 1st (there was no inflation adjustment on January 1, 2016, 20172019, 2020 or 20182021, as the inflation rate was not positive), reflecting a 5% discount if the number of vessels wholly or partially owned by Euroseas and managed by Eurobulk is more than 20, which has been the case from January 1, 2012close to December 2017 as the total number of vessels owned by us (including the vessels owned by Euromar) was greater than 20. In absence of this discount, the cost per ship per day would have been 720 Euros, or about $828.zero). This cost would have beenis reduced by half (342.5 Euros per vessel per day, or 360 Euros per vessel per day as appropriate)day) for any vessels that are laid up. Vessels under construction start paying the daily management fee after steel cutting. Under the amended and restated Master Management Agreement, as of January 1, 2018, the volume discount has been permanently incorporated into theThe daily management fee which remained at 685 Euros in 20182019, 2020 and 20192021, and will be annually adjusted for Eurozone inflation. As of May 30, 2018, the fixed annual cost was adjusted to $1,250,000. For the year 2018, the fixed annual cost was adjusted tocalculated at $2,000,000 pro-rated for the period from January 1, 2018 until May 29, 2018 and $1,250,000 thereafter for the period from May 30, 2018 until December 31, 2018 for a total amount of $1,561,126. On November 15, 2019, the Company signed an addendum adjusting the fixed annual cost to $2,000,000 to compensate Eurobulk for the increase in the fleet and certain management services provided by Synergy Marine Ltd., a company controlled by Andreas Papathomas and which became affiliated with the Company post-acquisition, as a result of his appointment to our Board of Directors in November 2019. As a result, for the year 2019, the fixed cost was calculated at $1,250,000 pro-rated for the period of January 1, 2019 until November 15, 2019 and at $2,000,000 for the feeperiod of November 16, 2019 until December 31, 2019 for a total amount of $1,344,250. For the year 2020, the fixed annual cost paid to Eurobulk was changed to $1,250,000. $2,000,000.$3,878,835, $3,939,113$5,097,220, $5,015,585, and $5,097,220during, 2016, 2017$7,293,199 during 2018, 2019, and 2018,2020, respectively.We pay additional commissions to major charterers and their brokers as well that usually range from 3.75% to 5.00%. During 2018,2020, Eurochart received: $64,500$153,750 for vessel sales, which is calculated as a 1% commission of the vessel sales pricethere were five vessels sold in 2020, and $453,361$504,892 for chartering services calculated as 1.25% of chartering revenues. During 2019, Eurochart received nil commissions for vessel sales and chartering commissions of $493,341. During 2018, Eurochart received commissions of $64,500 for vessel sales and chartering commissions of $453,361.paidpay a fee of about $50 per crew member per month and pay a commission on premiuminsurance premiums not exceeding 5%, respectively.allboth of which are our affiliates.The Company may also draw down up to $2.00 million under a commitment from COLBY Trading Ltd., a company controlled by the Pittas family and affiliated with the Company's Chief Executive Officer.On March 25, 2010, we entered into the Joint Venture with companies managed by Eton Park and an affiliate of Rhône, two private investment firms, to form Euromar LLC, or Euromar. Eton Park's investments were made through Paros Ltd., a Cayman Islands exempted company, and Rhône's investments were made through the Cayman Islands limited companies All Seas Investors I Ltd., All Seas Investors II Ltd., and the Cayman Islands exempted limited partnership All Seas Investors III LP. Euromar acquired, maintained, managed, operated and disposed of shipping vessels. As part of the Joint Venture, Euroseas and its affiliates provided management services to Euromar, Euroseas granted registration rights to Eton Park and Rhône and Euroseas and certain affiliates granted Euromar certain rights of first refusal in respect of vessel acquisitions which have expired, and made certain arrangements with respect to vessel dispositions and chartering opportunities presented to Euroseas and its affiliates.66On November 29, 2016, Euroseas signed an agreement with Colby Trading Ltd, a company affiliated with its CEO, to draw a $2 million loan to finance working capital needs. Interest on the loan was 10% per annum payable quarterly. The Company repaid the loan at the end of the February 28, 2017 and paid $50,556 for interest. In March 2017, the Company received a commitment by Colby Trading Ltd to provide financing of up to $4.00 million on terms to be mutually agreed to fund the Company's working capital requirements and capital commitments of the Company pre spin-off, extended for an amount up to $2.00 million for the Company post spin-off for the period through June 30, 2020, if needed (see Item 5.B. "Liquidity and Capital Resources" sub-section "Cash Flows").C. Interests of Experts and Counsel On December 23, 2016, the Company acquired M/V "RT Dagr" from entities managed by Tennenbaum Capital Partners, LLC (Tennenbaum Opportunities Fund V, LP and Tennenbaum Opportunities Fund VI, LLC), one of our Series B Preferred Shareholders by issuing 900,000 shares of common stock as consideration for the value of the vessel and fuel on board. The fair value of the shares at issuance was $1.8 million.In 2016, the Company recorded an impairment of $14.07 million on its investment in Euromar reducing the carrying value of the investment to zero, due to the persisting depressed market environment and the amended loan agreements based on which the Company concluded that its investment in Euromar was impaired and that the impairment was other than temporary.On September 7, 2017, Euroseas became the sole owner of Euromar LLC at a nominal price of $1. The Company acquired the 85.714% interest in Euromar it did not already own and Euromar LLC became a wholly-owned subsidiary of the Company. The Company provided no guarantees to Euromar's lenders, and none of the lenders has any recourse against the Company.In June 2017 we took delivery of the feeder containership M/V "EM Astoria" for $4.75 million. In September 2017 we took delivery of the feeder containership M/V "EM Athens" for $4.2 million. In October 2017 we took delivery of the feeder containership M/V "EM Oinousses" for $4.2 million and the feeder containership M/V "EM Corfu" for $5.7 million. In December 2017 we took delivery of the intermediate containership M/V "Akinada Bridge" for $11 million. All these five containerships were purchased from Euromar LLC for $29.85 million.On May 30, 2018, the Company spun-off its drybulk fleet (excluding M/V Monica P, a handymax drybulk carrier, which was agreed to be sold) into EuroDry, a separate publicly listed company also listed on Nasdaq Capital Market. Shareholders of the Company received one EuroDry share for every five shares of the Company they held. As a result of the spin-off and the subsequent sale of M/V Monica P, the Company has become a pure containership company and the only publicly listed company concentrating on the feeder containership sector.C.Interests of Experts and CounselItem 8. Financial Information A. Consolidated Statements and Other Financial Information A.Consolidated Statements and Other Financial InformationTo our knowledge, there are no materialtoin which we are a party or to which any of our properties are subject, other than routine litigation incidental to our business. In our opinion, the disposition of these lawsuits should not have a material impact on our consolidated results of operations, financial position and cash flows.involved.$0.15$1.20 per share (adjusted for the 1-for-10 reverse stock split effected on July 23, 2015)2015 and the 1-for-8 reverse stock split effected on December 18, 2019) was declared in August 2013. The exact timing and amount of any future dividend payments to our common stock will be determined by our Board of Directors and will be dependent upon our earnings, financial condition, cash requirement and availability, restrictions in itsour loan agreements, growth strategy, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors, such as the acquisition of additional vessels.67(in cash or in-kind at the option of the Company, subject to certain exceptions) until January 29, 2019 at a rate of 0% or 5%, depending on the trading price of the Company's common stock. In addition, if a cash dividend is paid on the Company's common stock during such time, then if per annum. From January 29, 2019 to January 29, 2021, the dividend paidrate on the Series B Preferred Shares is 5%,was set to increase to 12% per annum and to 14% per annum thereafter. On June 10, 2019, the holdersBoard of Series B Preferred Shares shall receive such dividend in cash and shall also receive an additional cash dividend in an amount equalDirectors agreed to 40%redeem approximately $11.7 million of the common stock dividend it would have received on an as-converted basis. If, however, the dividend on the Series B Preferred Shares is 0%, thenwith a simultaneous reduction of the holders ofdividend rate to 8% per annum until January 29, 2021, after which date was set to increase to 14% per annum, payable only in cash. From January 29, 2019 to June 19, 2019, the Series B Preferred Shares shall receivecarried a cash dividend equal torate of 12% per annum, and 8% per annum from June 11, 2019 until March 31, 2020. On April 1, 2020, we agreed with the greater of 100%holders of the common stockSeries B Preferred Shares, to have the option to pay the Series B Preferred dividends in-kind at a rate of 9.0% per annum, or at 8.0% per annum if paid in cash, until January 29, 2021, after which it was set to increase to 14% per annum. Subsequently, on January 29, 2021, we agreed to keep the annual dividend it would have received on an as-converted basis,rate at 8.0% per annum for dividends paid in cash, and 5%. If9.0% for dividends paid in-kind, until January 29, 2023. Cash dividends are declared at each quarter and actual payments are made within the following quarter. In addition, if a cash dividend is paid on the Company's common stock after January 29, 2019, the holders of Series B Preferred Shares shall receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. The Series B Preferred Shares' dividend rate increasesShares can be converted at the option of their holders at any time, and at the option of the Company only if certain share price and liquidity milestones are met. Each Series B Preferred Share is convertible into common stock at an initial conversion price of $14.05 (subject to 12% foradjustment, including upon a default). The Series B Preferred Shares are redeemable in cash by the two years followingCompany at any time after the fifth anniversary of the original issue date, i.e. January 29, 2019 and2019. Holders of the Series B Preferred Shares may require the Company to 14% thereafter and is payable in cash. Theredeem their shares only upon the occurrence of certain corporate events. For the year ended December 31, 2018, the Company declared $1.73 million, $1.81 million andfour consecutive dividends totaling $1.34 million, in dividends on its preferred shares during 2016, 2017 and 2018, respectively, all of which were paid in-kind.B.Significant ChangesNo significant change has occurred since For the dateyear ended December 31, 2019 the Company declared dividends of $1.27 million, of which $0.08 million were paid in-kind, $1.03 million were paid in cash during 2019 and another $0.16 million were accrued as of December 31, 2019 and were paid in cash in the first quarter of 2020. In addition, $0.50 million of preferred deemed dividends were recorded as a result of the annual financial statements includedredemption of $11.7 million of the Series B Preferred Shares, representing the difference between (1) the fair value of the consideration transferred to the holders of the Series B Preferred Shares (comprising the cash payment offered) and (2) the carrying amount of the Series B Preferred Shares before the redemption (net of issuance costs). For the year ended December 31, 2020 we declared dividends of $0.69 million, of which $0.37 million were paid in-kind, $0.15 million were paid in this annual report on Form 20-F.cash during 2020, and another $0.17 million were accrued as of December 31, 2020 and were paid in the first quarter of 2021.B. Significant Changes Item 9. The Offer and Listing A. Offer and Listing Details A.Offer and Listing Details Our shares of common stock previously traded on the Nasdaq Global Select Market from January 1, 2008 to June 25, 2015.B. Plan of Distribution B.Plan of DistributionC.MarketsC. Markets "ESEAF.OB"“ESEAF.OB” until October 5, 2006 and then under the symbol "EUSEF.OB"“EUSEF.OB” until January 30, 2007.D.Selling ShareholdersD. Selling Shareholders E.DilutionE. Dilution F.Expenses of the IssueF. Expenses of the Issue 68Item 10. Additional Information A. Share Capital A.Share CapitalB.83Memorandum and Articles of AssociationB. Memorandum and Articles of Association 2019,2021, we are authorized to issue up to 200,000,000 shares of common stock, par value $0.03 per share, of which there are 12,515,6456,791,847, shares issued and outstanding.outstanding (taking into effect the sale of 74,301 and 8,600 common shares under our at-the-market offering on January 29, 2021 and February 12, 2021, respectively). Each outstanding share of common stock is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by their holders at meetings of the shareholders. Holders of our common stock (i) have equal ratable rights to dividends from funds legally available therefore, if declared by the Board of Directors; (ii) are entitled to share ratably in all of our assets available for distribution upon liquidation, dissolution or winding up; and (iii) do not have preemptive, subscription or conversion rights or redemption or sinking fund provisions. All issued shares of our common stock when issued will be fully paid for and non-assessable.2019,2021, we are authorized to issue up to 20,000,000 shares of preferred stock, par value $0.01 per share, of which there are 19,6876,365 shares issued and outstanding. The preferred stock may be issued in one or more series and our Board of Directors, without further approval from our shareholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series. Issuances of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock. On January 27, 2014, the Company entered into an agreement to sell 25,000 shares of its Series B Preferred Shares to a fund managed by TCP and 5,700 shares to Preferred Friends Investment Company Inc., an affiliate of the Company, for net proceeds of approximately $29 million. These shares were issued on January 29, 2014. Additional Series B Convertible Preferred Shares were issued when dividends to preferred shares were paid in-kind (see below).(in cash or in-kind at the option of the Company, subject to certain exceptions) until January 29, 2019 at a rate of 0% or 5% per annum, depending on the trading price of the Company's common stock.annum. The first payment of interest was on March 31, 2014. In addition, if a cashThe dividend is paid onrate was set to increase to 12% for the Company's common stock during such time, then iftwo years following January 29, 2019 and to 14% thereafter, payable only in cash. Cash dividends are declared at eachdividend paid on the Series B Preferred Shares is 5%, the holders of Series B Preferred Shares shall receive such dividend in cash and shall also receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. If, however, the dividend on the Series B Preferred Shares is 0%, then the holders of Series B Preferred Shares shall receive a cash dividend equal to the greater of 100% of the common stock dividend it would have received on an as-converted basis, and 5%.following quarter. If a cash dividend is paid on the Company's common stock after the first five years,January 29, 2019, the holders of Series B Preferred Shares shall receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. The Series B Preferred Shares dividend rate will increase to 12% per annum for the two years following January 29, 2019 and to 14% per annum thereafter. The Series B Preferred Shares can be converted at the option of their holders at any time, and at the option of the Company only if certain share price and liquidity milestones are met, including the Company's common stock trading that a volume-weighted average price of $25.00 (subject to adjustment), the Company having sold69its common stock in a public offering at a per share price of at least $25.00 (subject to adjustment) resulting in gross proceeds of at least $40 million and an effective registration statement for the common stock into which the Series B Preferred Shares would convert being effective.met. Each Series B Preferred Share is convertible into common stock at an initial conversion price of $4.58$14.05 (subject to adjustment, including upon a default). The Series B Preferred Shares are redeemable in cash by the Company at any time after January 29, 2019. Holders of the Series B Preferred Shares may require the Company to redeem their shares only upon the occurrence of certain corporate events.At the spin-off date, Euroseas distributed EuroDry Series B Preferred Shares to holders of Euroseas' Series B Preferred Shares in exchange for a number of such Euroseas Series B Preferred Shares, representing 50% of Euroseas Series B Preferred Shares, i.e., $14,500,000 of the initial preferred shares amount of the Company and $3,692,131 of dividends paid in-kind. Euroseas contributed to EuroDry its interests in seven of its drybulk subsidiaries and related intercompany debts and obligations in exchange for approximately 2,254,830 of EuroDry common shares and 19,042 of EuroDry Series B Preferred Shares (representing all of the EuroDry's issued and outstanding stock as of that time). Euroseas made a special dividend of 100% of EuroDry's outstanding common shares to holders of Euroseas' common stock as of the record date of the special dividend. In addition, Euroseas distributed 100% of EuroDry Series B Preferred Shares to holders of Euroseas' Series B Preferred Shares as described above.4.434.28 hereto and is incorporated by reference herein. except the Series B Director (defined below), are elected by a plurality of the votes cast at a meeting of the shareholders by the holders of shares entitled to vote in the election. Cumulative voting may not be used to elect directors."Classified“Classified Board of Directors."” Each director except the Series B Director, is elected to serve until the third succeeding annual meeting after his election and until his successor shall have been elected and qualified, except in the event of his death, resignation or removal.Our Series B Director was appointed pursuant to the provisions of the Statement of Designation of our Series B Preferred Shares. The holders of Series B Preferred Shares have the right, voting separately as a class, to nominate and elect one member of the Board of Directors (the "Series B Director") who shall (i) have no family relationship with any other officer or director of the Corporation; (ii) be independent pursuant to the rules of Nasdaq if the Corporation is required to be subject to the rules of Nasdaq requiring a listed company to maintain a majority independent board; and (iii) be determined by the Board of Directors to meet its nominating standards. The Series B Director shall be elected by the affirmative vote of the holders of a majority of the outstanding Series B Preferred Shares. Any Series B Director elected as provided herein may be removed and replaced at any time by the affirmative vote of the holders of a majority of the outstanding Series B Preferred Shares. Upon any termination of the right of the holders of the Series B Preferred Shares to vote as a class for a Series B Director, the term of office of the Series B Director then in office elected by such holders voting as a class shall terminate immediately and the number of directors constituting the Board of Directors shall70automatically be reduced by one. The Series B Director is entitled to one vote on any matter before the Board of Directors. The Series B Director is not entitled to remuneration by the Corporation for acting as director, but is entitled to the reimbursement of reasonable expenses, including all out-of-pocket expenses, incurred in connection therewith. The right of the Holders of Series B Preferred Shares to elect a member of the Board of Directors shall terminate once Tennenbaum Opportunities Fund VI, LLC, a fund managed by TCP, and allowed transferees no longer hold at least 65% of the number of shares of Common Stock (on an as-converted basis) that the Series B Preferred Shares acquired by Tennenbaum Opportunities Fund VI, LLC would have converted into at the time of purchase.Dissenters'Company'sCompany’s shares are primarily traded on a local or national securities exchange.directors'directors’ fiduciary duties. Our bylaws, as amended, include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent permitted by law.directors'directors’ and officers'officers’ insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.71 and restated articles of incorporation also provide that our directors may be removed only for cause and only uponby either action of the Board of Directors or the affirmative vote of a majoritythe holders of 51% of the issued and outstanding voting shares of our capital stock entitled to vote for those directors.the Corporation. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.shareholder'sshareholder’s notice must be received at our principal executive offices not less than 150 days nor more than 180 days prior to the one-year anniversary of the immediately preceding annual meeting of shareholders. Our bylaws, as amended, also specify requirements as to the form and content of a shareholder'sshareholder’s notice. These provisions may impede shareholders'shareholders’ ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders."business combination"“business combination” with any interested shareholder for a period of three years following the date the shareholder became an interested shareholder.Shareholders'Weshareholders'shareholder rights plan onagreement effective as of May 18, 200927, 2019 and declared a dividend distribution of one preferred stock purchase right to purchase one one-thousandth of our Series AC Participating Preferred Stock for each outstanding share of our common stock, to shareholders of record at the close of business on May 27, 2009.2019. Each right entitles the registered holder, upon the occurrence of certain events, to purchase from us one one-thousandth of a share of Series AC Participating Preferred Stock at an exercise price of $26,$3.00, subject to adjustment. The rights will expire on the earliest of (i) May 27, 201931, 2029 or (ii) redemption or exchange of the rights. The planshareholder rights agreement was designed to enable us to protect shareholder interests in the event that an unsolicited attempt is made for a business combination with or takeover of the company.Company. We believe that the shareholders'shareholder rights planagreement should enhance the board of directors' negotiating power on behalf of shareholders in the event of a coercive offer or proposal. We are not currently aware of any such offers or proposals and we adopted the plan as a matter of prudent corporate governance. On March 29, 2010, the plan was amended to permit our Euromar Joint Venture partners, Paros Ltd., All Seas Investors I, Ltd., All Seas Investors II, Ltd. and All Seas Investors III LP, to exercise their conversion rights into the Company's shares without violating the plan. In January 2014, the plan was further amended to permit72Tennenbaum Opportunities Fund VI, LLC or allowed transferees managed by TCP to exercise their conversion rights without violating the plan; and in March 2014, the plan was amended to permit 12 West Capital Fund LP, 12 West Offshore Fund LP or allowed transferees managed by 12 West to acquire shares of the Company without violating the plan. On December 22, 2016, the rights plan was further amended to permit affiliates of Tennenbaum Capital Partners, LLC to purchase the Company's common shares in a private transaction with the Company and to make certain additional purchases of the Company's common shares without violating the rights plan. The Company intends to adopt a new shareholders' rights plan to replace the existingThis shareholder rights plan given the upcoming expiration of theagreement replaced our existing, substantially similar shareholder rights as noted above.agreement which expired on May 27, 2019.C.Material ContractsC. Material Contracts banks.banks and related party loans. For a discussion of our facilities, please see the section of this annual report entitled "Item“Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Financing"Financing”, and Note 78 of our attached financial statements."Item“Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions."” Furthermore, we are a party to a registration rights agreement with Synergy Holdings Limited, TCP and 12 West Capital Management LP and a registration obligation agreement with two funds managed by TCP. For a discussion of these agreements, please see the section of this annual report entitled "Item“Item 3—Key Information—D. Risk Factors—Company Risk Factors—Future sales of our stock could cause the market price of our common stock to decline."”We adopted a new Equity Incentive Plan in May 2018. For a discussion of this agreement, please see the section of this annual report entitled "Item 6—B. Compensation—Equity Incentive Plan."D.Exchange ControlsD. Exchange Controls E. Taxation E.Taxation"Business"“Business” above and assumes that we conduct our business as described in that section. References in the following discussion to "we"“we” and "us"“us” are to Euroseas and its subsidiaries on a consolidated basis.73"shipping“shipping income,"” to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States exclusive of certain U.S. territories and possessions constitutes income from sources within the United States, which we refer to as "U.S.-source“U.S.-source shipping income."”·we are organized in a foreign country, or our country of organization, that grants an "equivalent exemption" to corporations organized in the United States; and·more than 50% of the value of our stock is owned, directly or indirectly, by “qualified shareholders,” individuals who are “residents” of our country of organization or of another foreign country that grants an “equivalent exemption” to corporations organized in the United States, which we refer to as the “50% Ownership Test,” or indirectly, by "qualified shareholders," individuals who are "residents" of our country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the United States, which we refer to as the "50% Ownership Test," orour stock is “primarily and regularly traded on an established securities market” in our country of organization, in another country that grants an “equivalent exemption” to United States corporations, or in the United States, which we refer to as the “Publicly-Traded Test.” ·our stock is "primarily and regularly traded on an established securities market" in our country of organization, in another country that grants an "equivalent exemption" to United States corporations, or in the United States, which we refer to as the "Publicly-Traded Test."2018,2020, each grants an "equivalent exemption"“equivalent exemption” to United States corporations. Therefore, we will be exempt from United States federal income taxation with respect to our U.S.-source shipping income if we satisfy either the 50% Ownership Test or the Publicly-Traded Test.We do not believe that we can establish that we satisfied the 50% Ownership Test for the 2018 taxable year due to the widely-held nature of our stock.For the reasons discussed below, we believe that we did not satisfy the Publicly-Traded Test for the 2018 taxable year and therefore we will not qualify for benefits of Section 883 of the Code for the 2018 taxable year.7489"regularly traded"“regularly traded” on an established securities market. Under the Treasury Regulations, our stockcommon shares will be considered to be "regularly traded" on an established securities market if one or more classes of our stock representing more than 50% of our outstanding shares,stock, by both total combined voting power of all classes of stock entitled to vote and by total combined value, of all classes of stock, are listed on one or more established securities markets,such market, to which we refer to as the "listing threshold."Listing Threshold. Our common stock, which is listed on the Nasdaq Capital Market and is our only class of publicly-traded stock, did not constituteconstituted more than 50% of our outstanding shares by value for most of the 20182020 taxable year, and accordingly, we did not satisfybelieve that we satisfied the listing threshold for the 20182020 taxable year. However,possible thatthe case with our common shares, such class of stock may comeis traded on an established securities market in the United States and such class of stock is regularly quoted by dealers making a market in such stock.constitutebe "regularly traded" on an established securities market for any taxable year during which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the vote and value of such class of outstanding shares, to which we refer as the "5% Override Rule."outstanding shares by value in a futurecommon stock for more than half of the days during the taxable year in which case we may be ableyear. We intend to satisfy the listing threshold and possibly the Publicly Traded Test.take this position on our 2020 U.S. federal income tax returns.Becauseof the Code are unavailable for the 2018any taxable year, our U.S.-source shipping income, to the extent not considered to be "effectively connected"“effectively connected” with the conduct of a United States trade or business, as described below, was subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions which we refer to as the "4%“4% gross basis tax regime"regime”. Since under the sourcing rules described above, no more than 50% of our shipping income is treated as being derived from United States sources, the maximum effective rate of United States federal income tax on our shipping income will not exceed 2% under the 4% gross basis tax regime. The amount of this tax for the 2016 taxable year was approximately $21,275, for the 2017 taxable year the amount was approximately $15,135, while for the 2018 taxable year the amount is estimated at $12,311."effectively connected"“effectively connected” with the conduct of a United States trade or business, as described below, any such "effectively connected"“effectively connected” U.S.-source shipping income, net of applicable deductions, would be subject to the United States federal corporate income tax currently imposed at rates of up to 21%. In addition, we may be subject to the 30% United States federal "branch profits"“branch profits” taxes on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of such United States trade or business."effectively connected"“effectively connected” with the conduct of a United·We have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States. ·substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States.operatingsailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believeit is anticipated that none of our U.S.-sourceUnited States source shipping income iswill be "effectively connected" with the conduct of a United States trade or business for the 2018any taxable year."U.S. Holder"“U.S. Holder” means a beneficial owner of common stock that is a United States citizen or resident, United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if (i) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.trust or (ii) the trust has a valid election in effect to be treated as a United States person for United States federal income tax purposes.U.S.United States federal income tax purposes no later than when such income is reported on an "applicable“applicable financial statement"75"qualified“qualified dividend income"income” as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder'sHolder’s tax basis in his common stock on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a United States corporation, U.S. Holders that are corporations generally will not be entitled to claim a dividendsdividend received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common stock will generally be treated as "passive“passive category income"income” or, in the case of certain types of U.S. Holders, "general“general category income" income”"qualified“qualified dividend income"income” that is taxable to such U.S. Individual Holders at preferential tax rates provided that (1) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be), (2) our common stock is readily tradable on an established securities market in the United States (such as the Nasdaq Capital Market, on which our common stock is listed), (3) the U.S. Individual Holder has owned the common stock for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend, and (4) the U.S. Individual Holder is not under an obligation (whether pursuant to a short sale or otherwise) to make payments with respect to positions in similar or related property. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Dividends paid on our stock prior to the date on which our common stock became listed on the Nasdaq Capital Market were not eligible for these preferential rates. Any dividends paid by us which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder."extraordinary dividend"“extraordinary dividend” generally, a dividend paid by us in an amount which is equal to or in excess of ten percent of a shareholder'sshareholder’s adjusted tax basis (or fair market value in certain circumstances) in a share of our common stock. If we pay an "extraordinary dividend"“extraordinary dividend” on our common stock that is treated as "qualified“qualified dividend income,"” then any loss derived by a U.S. Individual Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.Holder'sHolder’s tax basis in such stock. Such gain or loss will generally be treated as long-term capital gain or loss if the U.S. Holder'sHolder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as U.S.-source income or loss, as applicable, for United States foreign tax credit purposes. A U.S. Holder'sHolder’s ability to deduct capital losses is subject to certain limitations.·at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or ·at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income, which we refer to as "passive assets"at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income, which we refer to as “passive assets”.76subsidiary'ssubsidiary’s stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute "passive income"“passive income” unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.Holder'sHolder’s holding period in our common stock, then such U.S. Holder would be subject to different U.S.United States federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a "qualified“qualified electing fund,"” which election we refer to as a "QEF election"“QEF election”. As an alternative to making a QEF election, a U.S. Holder should be able to make a "mark-to-market"“mark-to-market” election with respect to our common stock, as discussed below. In addition, if we were to be treated as a PFIC, a U.S. Holder of our common stock would be required to file annual information returns with the IRS.U.S.United States federal income tax purposes his pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder. Our net operating losses or net capital losses would not pass through to the Electing Holder and will not offset our ordinary earnings or net capital gain reportable to the Electing Holder in subsequent years (although such losses would ultimately reduce the gain, or increase the loss, if any, recognized by the Electing Holder on the sale of his common stock). Distributions received from us by an Electing Holder are excluded from the Electing Holder'sHolder’s gross income to the extent of the Electing Holder'sHolder’s prior inclusions of our ordinary earnings and net capital gain. The Electing Holder'sHolder’s tax basis in his common stock would be increased by any amount included in the Electing Holder'sHolder’s income. Distributions received by an Electing Holder, which are not includible in income because they have been previously taxed, would decrease the Electing Holder'sHolder’s tax basis in the common stock. An Electing Holder would generally recognize capital gain or loss on the sale or exchange of common stock.Holder'sHolder’s income, as ordinary income, any excess of the fair market value of the common stock at the close of the taxable year over the U.S. Holder'sHolder’s then adjusted tax basis in the common stock. The excess, if any, of the U.S. Holder'sHolder’s adjusted tax basis at the close of the taxable year over the then fair market value of the common stock would be deductible in an amount equal to the lesser of the amount of the excess or the net mark-to-market gains that the U.S. Holder included in income in previous years with respect to the common stock. A U.S. Holder'sHolder’s tax basis in his common stock would be adjusted to reflect any income or loss amount recognized pursuant to the mark-to-market election. A U.S. Holder would recognize ordinary income or loss on a sale, exchange or other disposition of the common stock; provided, however, that any ordinary loss on the sale, exchange or other disposition may not exceed the net mark-to-market gains that the U.S. Holder included in income in previous years with respect to the common stock."Non-Electing Holder"“Non-Electing Holder”, would be subject to special rules with respect to (i) any "excess distribution" (generally,“excess distribution”77Holder'sHolder’s holding period for the common stock), and (ii) any gain realized on the sale or other disposition of the common stock. Under these rules, (i) the excess distribution or gain would be allocated ratably over the Non-Electing Holder'sHolder’s holding period for the common stock; (ii) the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, would be taxed as ordinary income; and (iii) the amount allocated to each of the other prior taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. If a Non-Electing Holder dies while owning the common stock, the Non-Electing Holder'sHolder’s successor would be ineligible to receive a step-up in the tax basis of that common stock."Non-U.S. Holders"“Non-U.S. Holders”"Non-U.S.“Non-U.S. Holder."”Holder'sHolder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.·such gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States, if the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or·the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met."branch profits"“branch profits” tax at a rate of 30%, or at a lower rate as may be specified by an applicable United States income tax treaty.·fails to provide an accurate taxpayer identification number;·is notified by the IRS that he failed to report all interest or dividends required to be shown on your United States federal income tax returns; or·in certain circumstances, fails to comply with applicable certification requirements.78shareholder'sshareholder’s United States federal income tax liability by filing a refund claim with the IRS."specified“specified foreign financial assets"assets” (as defined in Section 6038D of the Code and the applicable Treasury Regulations) are required to file IRS Form 8938 (Statement of Specified Foreign Financial Assets) with information relating to each such asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year. Specified foreign financial assets would include, among other assets, our common stock, unless the common stock were held through an account maintained with a United States financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, the statute of limitations on the assessment and collection of United States federal income tax with respect to a taxable year for which the filing of IRS Form 8938 is required may not close until three years after the date on which IRS Form 8938 is filed. U.S. Holders (including United States entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under Section 6038D of the Code.F.Dividends and paying agentsF. Dividends and paying agents G.Statement by expertsG. Statement by experts H.Documents on displayH. Documents on display I.95Subsidiary InformationI. Subsidiary Information Item 11. Quantitative and Qualitative Disclosures about Market Risk capital intensive,capital-intensive, requiring significant amounts of investment. Much of this investment is financed by long term debt. Our debt usually contains interest rates that fluctuate with LIBOR.7920182020 and 20172019 was $10$30 million and $10 million,nil, respectively. The swap has specified rates and duration. Refer to the table in Note 1314 of our financial statements included at the end of this annual report, which summarizes the interest rate swaps in place as of December 31, 20182020 and December 31, 2017. On September 30, 2016, we terminated the $10 million notional amount 1.29% swap with Eurobank which began in July 2014. We paid $32,000 for this termination.2019. Our current swap contract expires in May 2019April 2025. As at December 31, 2020, our average debt coverage for 2021 was approximately 51% and provides effective coveragefor the two-year period of 2022 and 2023 was approximately 27% of our debt until its expiration. We have no effective coverage of our debt after May 2019.90%.ofat December 31, 2018,2020, we had $37.49$67.3 million of floating rate bank debt outstanding with margins over LIBOR ranging from 2.65%2.95% to 4.40%3.90%. Our interest expense is affected by changes in the general level of interest rates. As an indication of the extent of our sensitivity to interest rate changes, an increase of 100 basis points would have increased our net loss and decreased our cash flows in the twelve-month period ended December 31, 20182020 by approximately $155,955$783,445 assuming the same debt profile throughout the year.20182020 in U.S. dollars to a 100 basis points increase in LIBOR during the next five years. Specifically, the interest we will have to pay for our floating rate loans will increase, but net payments we will have to make under our interest rate swap contracts will decrease.Year Ended December 31, Amount in $ (loans) Amount in $ (swap) Amount in $ (floating rate loans) Amount in $ (swap) 2019 342,335 (40,548 ) 2020 290,215 - 2021 167,938 - 610,004 (300,000) 2022 - - 421,094 (300,000) 2023 and thereafter - - 2023 213,050 (300,000) 2024 - (300,000) 2025 thereafter - (95,000) industry'sindustry’s functional currency is the U.S. Dollar.dollar. We generate all of our revenues in U.S. dollars, but incur approximately 27%25% of our vessel operating expenses (excluding depreciation and drydocking expenses in 2020 in currencies other than U.S. dollars. Comparatively, in 2019 approximately 25% of our vessel operating income) in 2018expenses and drydocking expenses were in currencies other than U.S. dollars. In addition, our vessel management fee is denominated in Euros and certain general and administrative expenses (about 11%7% in 2018)2020) are mainly in Euros and some other currencies. OnAs of December 31, 2018,2020, approximately 45%50% of our outstanding trade accounts payable were denominated in currencies other than the U.S. dollar, mainly in Euros. We do not use currency exchange contracts togainloss for the year ended December 31, 20182020 was $0.01 million,$63,007, and for the year ended December 31, 20172019 we had a net foreign exchange lossgain of $0.03 million.$2,024.2018,2020, would have increased our vessel operating expenses by approximately $0.62$0.81 million and the fair value of our outstanding trade accounts payable by approximately $0.1$0.14 million.Item 12. Description of Securities Other than Equity Securities 80Item 13. Defaults, Dividend Arrearages and Delinquencies Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds WeOn May 10, 2019, we adopted a shareholders'shareholder rights plan onagreement effective as of May 18, 200927, 2019 and declared a dividend distribution of one preferred stock purchase right to purchase one one-thousandth of our Series AC Participating Preferred Stock for each outstanding share of our common stock, to shareholders of record at the close of business on May 27, 2009.2019. Each right entitles the registered holder, upon the occurrence of certain events, to purchase from us one one-thousandth of a share of Series AC Participating Preferred Stock at an exercise price of $26,$3.00, subject to adjustment. The rights will expire on the earliest of (i) May 27, 201931, 2029 or (ii) redemption or exchange of the rights. The planshareholder rights agreement was designed to enable us to protect shareholder interests in the event that an unsolicited attempt is made for a business combination with or takeover of the company.Company. We believe that the shareholders'shareholder rights planagreement should enhance the board of directors' negotiating power on behalf of shareholders in the event of a coercive offer or proposal. We are not currently aware of any such offers or proposals and we adopted the plan as a matter of prudent corporate governance. On March 29, 2010, the plan was amended to permitThis shareholder rights agreement replaced our Euromar joint venture partners, Paros Ltd., All Seas Investors I, Ltd., All Seas Investors II, Ltd. and All Seas Investors III LP, to exercise their conversionexisting, substantially similar shareholder rights into the Company's shares without violating the plan. On Januaryagreement which expired on May 27, 2014, the rights plan was further amended to permit Tennenbaum Opportunities Fund VI, LLC to exercise its conversion rights into the Company's common shares without violating the rights plan. On March 14, 2014, the rights plan was further amended to permit 12 West Capital Fund LP and 12 West Capital Offshore Fund LP to purchase the Company's common shares in a private transaction with the Company that closed on that day and to make certain additional purchases of the Company's common shares without violating the rights plan. On December 22, 2016, the rights plan was further amended to permit affiliates of Tennenbaum Capital Partners, LLC to purchase the Company's common shares in a private transaction with the Company and to make certain additional purchases of the Company's common shares without violating the rights plan.2019.Item 15. Controls and Procedures Securities Exchange Act of 1934, as amended, or the Exchange Act, the Company'sCompany’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company'sCompany’s disclosure controls and procedures as of December 31, 2018.2020. The term disclosure controls and procedures is defined under SEC rules as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC'sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer'sissuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.2018,2020, our disclosure controls and procedures, which include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to the management, including our chief executive officerChief Executive Officer and chief financial officer,Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, were effective toManagement'sManagement’s Annual Report on Internal Control over Financial ReportingCompany'sCompany’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is identified in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, the issuer'sissuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer'sissuer’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,81Company'sCompany’s assets that could have a material effect on its consolidated financial statements.Company'sCompany’s internal control over financial reporting as of December 31, 2018.2020. In making this assessment, the Company used the control criteria framework of the Committee of Sponsoring Organizations of the Treadway Commission, or COSO 2013, published in its report entitled 2013 Internal Control-Integrated Framework. As a result of its assessment, the Chief Executive Officer and Chief Financial Officer concluded that the Company'sCompany’s internal controls over financial reporting are effective as of December 31, 2018.2020.Company'sCompany’s internal control over financial reporting occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.system'ssystem’s objectives will be met. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.Item 16A. Audit Committee Financial Expert Committee'sCommittee’s financial expert with Mr. Apostolos Tamvakakis and Mr. George Taniskidis as members.Item 16B. Code of Ethics "Corporate Governance"“Corporate Governance”.82Item 16C. Principal Accountant Fees and Services
(dollars in thousands)
(dollars in thousands) Audit Fees $ 290 $ 288 Audit related fees - - Tax fees - - All other fees / expenses - - Total $ 290 $ 288
(dollars in thousands)
(dollars in thousands) Audit Fees $ 197 $ 259 Audit-Related Fees _ _ Tax Fees _ _ All Other Fes _ _ Total $ 197 $ 259 Committee.Comittee.Item 16D. Exemptions from the Listing Standards for Audit Committees Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers Item 16F. Change in Registrant'sRegistrant’s Certifying AccountantItem 16G. Corporate Governance Item 16H. Mine Safety Disclosure 83Item 17. Financial Statements Item 18. Financial Statements F-50,F-64, together with the report of independent registered public accounting firm, are filed as part of this annual report.Item 19. Exhibits 1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 2.62.7 2.8 3.14.1 4.2 4.3 4.4 4.5 4.6 4.7 4.84.94.104.114.124.134.84.144.154.164.17844.184.194.94.204.104.214.224.234.244.254.264.274.284.294.304.314.324.334.344.354.364.374.384.394.404.414.114.42854.434.444.124.454.134.464.144.474.484.154.494.504.514.164.524.534.544.554.564.57Euroseas 2018 Equity Incentive Plan4.58Revolving Credit Facility Agreement between Euroseas Ltd., as borrower, and Eurobank Ergasias, S.A., as arranger, relating to a revolving credit facility of up to US$45,000,000 dated November 21, 2018(10)4.17 4.18 4.19 4.20 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33 4.34 4.35 8.1 12.1 12.2 13.1 13.2 15.1 101.INS* 101.SCH* 101.CAL* 101.DEF* 101.LAB* 101.PRE* *Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. (1) Filed as an Exhibit to the Company's Registration Statement (File No. 333-129145) on October 20, 2005. 86(2) Filed as an Exhibit to the Company's Amendment No.1 to Registration Statement (File No. 333-129145) on December 5, 2005. (3) Filed as an Exhibit to the Company's Post-Effective Amendment No. 1 to Registration Statement (File No. 333-129145) on September 12, 2006.(4)Filed as an Exhibit to the Company's Registration Statement (File No. 333-138780) on November 17, 2006.(5)Filed as an Exhibit to the Company'sCompany’s Amendment No. 4 to Registration Statement (File No. 333-138780) on January 29, 2007.(6)(4)Filed as an Exhibit to the Company'sCompany’s Annual Report on Form 20-F (File No. 001-33283) on May 13, 2008.(7)(5)Filed as an Exhibit to the Company'sCompany’s Registration Statement (File No. 333-152089) on July 2, 2008.(8)(6)Filed as an Exhibit to the Company's Post-Effective Amendment No. 1 to Registration Statement (File No. 333-148124) on July 17, 2008.(9)Filed as an Exhibit to the Company'sCompany’s Annual Report on Form 20-F (File No. 001-33283) on May 18, 2009.(10)(7)Filed as an Exhibit to the Company's Form 6-K (File No. 001-33283) on May 18, 2009.(11)Filed as an Exhibit to the Company'sCompany’s Annual Report on Form 20-F (File No. 001-33283) on May 28, 2010.(12)(8)Filed as an Exhibit to the Company's Annual Report on Form 20-F (File No. 001-33283) on May 27, 2011. (13)(9)Filed as an Exhibit to the Company'sCompany’s Form 6-K (File No. 001-33283) on May 25, 2012.(14)(10)Filed as an Exhibit to the Company’s Annual Report on Form 20-F (File No. 001-33283) on April 25, 2019. (11) Filed as an Exhibit to the Company’s Form 6-K (File No. 001-33283) on May 28, 2019. (12) Filed as an Exhibit to the Company’s Form 6-K (File No. 001-33283) on February 1, 2021. (13) Filed as an Exhibit to the Company's Annual Report on Form 20-F (File No. 001-33283) on April 27, 2012.30, 2020.(15)(14)Filed as an Exhibit to the Company's Annual Report onCompany’s Form 20-F6-K (File No. 001-33283) on May 2, 2016.29, 2020.87102
SIGNATURESSIGNATURESAmendment to its annual report on its behalf.
(Registrant) (Registrant) By: /s/ Aristides J. Pittas Aristides J. Pittas Chairman, President and CEO Date: April 25, 2019 Pages PagesF-2 F-220172019 and 20182020F-4 F-32016, 20172018, 2019 and 20182020F-6 F-52016, 20172018, 2019 and 20182020F-7 F-62016, 20172018, 2019 and 20182020F-9 F-7F-10F-12 and Shareholders of Euroseas Ltd.20182020 and 2017,2019, the related consolidated statements of operations, shareholders' equity and cash flows, for each of the three years in the period ended December 31, 2018 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with accounting principles generally accepted in the United States of America./s/ /s/ Deloitte Certified Public Accountants S.A.24, 201928, 2021F-2F-320172019 and 20182020 Notes 2017 2018 Assets Current assets Cash and cash equivalents 2,858,927 6,960,258 Restricted cash 7 1,103,953 117,063 Trade accounts receivable, net 885,495 958,705 Other receivables 965,037 2,031,415 Inventories 3 1,193,018 1,704,391 Prepaid expenses 247,039 222,336 Vessel held for sale 4 4,914,782 - Total current assets, continuing operations 12,168,251 11,994,168 Current assets of discontinued operations 3,914,117 - Total current assets 16,082,368 11,994,168 Long-term assets Vessels, net 4 52,132,079 48,826,128 Restricted cash 7 4,334,267 6,134,267 Due from spun-off subsidiary 24,585,518 - Long-term assets of discontinued operations 65,195,329 - Total assets 162,329,561 66,954,563 Liabilities, mezzanine equity and shareholders’ equity Current liabilities Long-term bank loans, current portion 7 4,203,261 4,870,241 Trade accounts payable 1,522,473 2,288,525 Accrued expenses 5 1,117,110 1,301,805 Deferred revenues 590,178 417,634 Due to related company 6 4,986,836 2,672,895 Derivatives 13, 16 229,451 41,435 Total current liabilities, continuing operations 12,649,309 11,592,535 Current liabilities of discontinued operations 5,883,288 - Total current liabilities 18,532,597 11,592,535 Notes 2019 2020 Assets Current assets 8 3 Total current assets 6,297,092 9,690,793 Long-term assets 4 8 Total assets 126,861,692 110,583,008 Liabilities, mezzanine equity and shareholders’ equity Current liabilities 8 7, 8 5 7 14, 16 Total current liabilities 24,851,259 28,645,782 F-3F-420172018 and 20182019(continued) Notes December 31, 2017 December 31, 2018 Long-term liabilities Long-term bank loans, net of current portion 7 29,811,241 31,716,549 Derivatives 13, 16 16,631 - Vessel profit participation liability 7 1,297,100 1,067,500 Total long-term liabilities, continuing operations 31,124,972 32,784,049 Long-term liabilities of discontinued operations 30,364,035 - Total long-term liabilities 61,489,007 32,784,049 Total liabilities 80,021,604 44,376,584 9 15 35,613,759 18,757,361 Shareholders’ equity Common stock (par value $0.03, 200,000,000 shares authorized, 11,274,126 and 12,515,645 issued and outstanding) 18 338,230 375,476 Additional paid-in capital 284,236,597 233,668,127 Accumulated deficit (237,880,629 ) (230,222,985 ) Total shareholders’ equity 46,694,198 3,820,618 Total liabilities, mezzanine equity and shareholders’ equity 162,329,561 66,954,563
(continued) Notes December 31,
2019 Long-term liabilities 8 14,16 6 Total long-term liabilities 73,902,155 46,582,223 Total liabilities 98,753,414 75,228,005 10 15 7,654,577 8,019,636 Shareholders’ equity 18 Total shareholders’ equity 20,453,701 27,335,367 Total liabilities, mezzanine equity and shareholders’ equity 126,861,692 110,583,008 The accompanying notes are an integral part of these consolidated financial statements.F-4Euroseas Ltd. and SubsidiariesConsolidated statements of operationsYears ended December 31, 2016, 2017 and 2018(All amounts, except for share data, expressed in U.S. Dollars) Notes 2016 2017 2018 Revenues Time charter revenue 21,409,236 24,278,048 36,062,202 Voyage charter revenue 47,979 559,319 206,682 Related party management fee income 14 240,000 240,000 - Commissions (including, $268,658, $310,467 and $453,361, respectively, to related party) 6, 12 (1,151,879 ) (1,318,248 ) (1,844,147 ) Net revenue, continuing operations 20,545,336 23,759,119 34,424,737 Operating expenses Voyage expenses 12 1,209,085 1,564,489 1,261,088 Vessel operating expenses (including, $175,761, $190,723 and $256,069, respectively, to related party) 6, 12 13,853,444 15,019,342 19,986,170 Other operating income - (499,103 ) - Dry-docking expenses 2,204,784 571,291 2,774,924 Vessel depreciation 4 4,959,487 3,585,965 3,305,951 Related party management fees 6 2,399,461 2,632,637 3,536,094 Other general and administrative expenses (including $1,479,374, $1,306,476 and $1,561,126, respectively, to related party) 6, 10 2,673,594 2,502,203 2,565,502 Net gain on sale of vessels (including $27,741, $70,640 and $64,500 to related party) 4, 6 (10,597 ) (803,811 ) (1,340,952 ) Loss on write-down of vessels held for sale (including $29,469, $0 and $0, respectively, to related party) 4, 6 5,924,668 4,595,819 - 33,213,926 29,168,832 32,088,777 Operating (loss) / income, continuing operations (12,668,590 ) (5,409,713 ) 2,335,960 Other income/(expenses) Interest and other financing costs (1,370,830 ) (1,554,695 ) (3,050,768 ) 13 (119,154 ) 12,389 (44,343 ) Other investment income 14 1,024,714 - - Impairment of other investment 14 (4,421,452 ) - - Foreign exchange (loss) / gain (31,033 ) (30,214 ) 13,963 Interest income 22,277 37,972 81,792 Other expenses, net, continuing operations (4,895,478 ) (1,534,548 ) (2,999,356 ) Equity loss in joint venture 14 (2,444,627 ) - - Impairment in joint venture 14 (14,071,075 ) - - (34,079,770 ) (6,944,261 ) (663,396 ) Dividends to Series B preferred shares 15 (1,725,699 ) (1,808,811 ) (1,335,733 ) (35,805,469 ) (8,753,072 ) (1,999,129 ) Loss per share attributable to common shareholders - basic and diluted, continuing operations 11 (4.38 ) (0.79 ) (0.18 ) 11 8,165,703 11,067,524 11,318,197 Net (loss) / income attributable to common shareholders, discontinued operations 17 (10,141,353 ) 849,701 554,506 Net loss attributable to common shareholders (45,946,822 ) (7,903,371 ) (1,444,623 ) Notes 2018 2019 2020 Revenues 7, 13 Net revenue, continuing operations 34,424,737 40,023,679 53,303,117 Operating expenses 13 7, 13 4 7 7, 11 4, 7 19 4, 7 Total operating expenses, continuing operations 32,088,777 38,048,068 44,010,981 Operating income, continuing operations 2,335,960 1,975,611 9,292,136 Other income/(expenses) 7, 8 7, 8 14 Other expenses, net, continuing operations (2,999,356 ) (3,658,282 ) (5,250,705 ) (663,396 ) (1,682,671 ) 4,041,431 15 - (1,999,129 ) (3,459,030 ) 3,348,134 17 Net (loss) / income attributable to common shareholders (1,444,623 ) (3,459,030 ) 3,348,134 12 12 12 2016, 20172018, 2019 and 20182020 Balance December 31, 2015 8,195,760 245,873 278,833,156 (184,030,436 ) 95,048,593 Net loss attributable to common shareholders - - - (45,946,822 ) (45,946,822 ) Issuance of shares from private placement, net of issuance costs 719,425 21,583 978,417 - 1,000,000 Issuance of shares for vessel acquisition, net of issuance costs 900,000 27,000 1,773,000 - 1,800,000 Issuance of shares sold at the market (ATM), net of issuance costs 978,847 29,365 1,881,287 - 1,910,652 Issuance of restricted shares for stock incentive award and share-based compensation 82,080 2,462 291,879 - 294,341 Balance December 31, 2016 10,876,112 326,283 283,757,739 (229,977,258 ) 54,106,764 Net loss attributable to common shareholders - - - (7,903,371 ) (7,903,371 ) Issuance of shares sold at the market (ATM), net of issuance costs 301,780 9,060 365,183 - 374,243 Issuance of restricted shares for stock incentive award and share-based compensation 100,270 3,008 113,554 - 116,562 Shares forfeited (4,036 ) (121 ) 121 - - Balance December 31, 2017 11,274,126 338,230 284,236,597 (237,880,629 ) 46,694,198 Net loss attributable to common shareholders - - - (1,999,129 ) (1,999,129 ) Spin-off of EuroDry Ltd. to stockholders - - (52,520,821 ) 9,656,773 (42,864,048 ) Issuance of shares sold at the market (ATM), net of issuance costs 1,116,069 33,482 1,831,628 - 1,865,110 Issuance of restricted shares for stock incentive award and share-based compensation 125,450 3,764 120,723 - 124,487 Balance December 31, 2018 12,515,645 375,476 233,668,127 (230,222,985 ) 3,820,618 Number
of
Shares
Outstanding (*) Common Stock
Amount (*) Additional
Paid – in
Capital (*) Accumulated Deficit Total Balance January 1, 2018 1,409,266 42,279 284,532,548 (237,880,629 ) 46,694,198 Balance December 31, 2018 1,564,456 46,934 233,996,669 (230,222,985 ) 3,820,618 Balance December 31, 2019 5,600,259 168,008 253,967,708 (233,682,015 ) 20,453,701 F-6F-7 Accumulated Deficit Total Balance December 31, 2019 5,600,259 168,008 253,967,708 (233,682,015 ) 20,453,701 Balance December 31, 2020 6,708,946 201,268 257,467,980 (230,333,881 ) 27,335,367 2018 2019 2020 Cash flows from operating activities: (1,474,830 ) 3,240,429 2,409,377 Cash flows from investing activities: 6,253,868 (55,720,226 ) 16,319,307 2018 2019 2020 Cash flows from financing activities: Net cash provided by / (used in) financing activities of continuing operations 135,403 45,198,270 (18,320,568 ) Cash, cash equivalents and restricted cash at end of year, continuing operations 13,211,588 5,930,061 6,338,177 Cash breakdown Total cash, cash equivalents and restricted cash shown in the statement of cash flows, continuing operations 13,211,588 5,930,061 6,338,177 Discontinued operations: 2016, 20172018, 2019 and 20182020 2016 2017 2018 Cash flows from operating activities: Net loss (34,079,770 ) (6,944,261 ) (663,396 ) Adjustments to reconcile net loss to net cash (used in)/ provided by operating activities: Depreciation of vessels 4,959,487 3,585,965 3,305,951 Other operating income - (499,103 ) - Loss on write-down of vessels held for sale 5,924,668 4,595,819 - Amortization and write off of deferred charges 141,883 113,244 321,181 Amortization of debt discount - 60,988 465,507 Net gain on sale of vessels (10,597 ) (803,811 ) (1,340,952 ) Share-based compensation 294,341 116,562 124,487 Unrealized (gain) / loss on derivatives (12,921 ) 5,901 (204,647 ) Other investment income (1,024,714 ) - - Impairment of other investment 4,421,452 - - Equity loss and impairment of investment in joint venture 16,515,702 - - Changes in operating assets and liabilities: (Increase) / decrease in: Trade accounts receivable 217,517 (91,604 ) (73,210 ) Prepaid expenses 2,639 (117,793 ) 24,703 Other receivables 378,811 (210,741 ) (1,066,378 ) Inventories 344,578 329,244 (511,373 ) Increase / (decrease) in: Due to related company (2,876,104 ) 4,314,415 (2,732,256 ) Trade accounts payable 459,912 197,782 766,052 Accrued expenses (654,127 ) 167,016 282,045 Deferred revenues (90,825 ) 233,402 (172,544 ) (5,088,067 ) 5,053,025 (1,474,830 ) Cash flows from investing activities: Cash paid for capitalized expenses and vessel acquisition (3,086,812 ) (30,063,480 ) (1,867 ) Cash released from other investment - 4,000,000 - Proceeds from sale of vessels 4,196,268 9,552,260 6,255,735 1,109,456 (16,511,220 ) 6,253,868 (Consolidated statements of cash flows continues on the next page)F-7Euroseas Ltd. and SubsidiariesConsolidated statements of cash flowsYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars) 2016 2017 2018 Cash flows from financing activities: Proceeds from issuance of common stock, net of commissions paid 3,168,058 549,495 1,975,110 Investment in subsidiary spun-off (8,823,927 ) (915,525 ) (3,298,356 ) Due from spun-off subsidiary (725,620 ) 639,312 - Offering expenses paid (82,377 ) (341,072 ) (22,488 ) Loan arrangement fees paid (260,232 ) (187,637 ) (419,863 ) Proceeds from long-term bank loans 14,500,000 22,250,000 34,250,000 Repayment of long-term bank loans (16,117,125 ) (7,243,915 ) (32,349,000 ) Proceeds from related party loan 2,000,000 - - Repayment of related party loan - (2,000,000 ) - Net cash (used in) / provided by financing activities of continuing operations (6,341,223 ) 12,750,658 135,403 Net (decrease) / increase in cash, cash equivalents and restricted cash (10,319,834 ) 1,292,463 4,914,441 Cash, cash equivalents and restricted cash at beginning of year 17,324,518 7,004,684 8,297,147 Cash, cash equivalents and restricted cash at end of year, continuing operations 7,004,684 8,297,147 13,211,588 Cash breakdown Cash and cash equivalents 2,616,984 2,858,927 6,960,258 Restricted cash, current 153,432 1,103,953 117,063 Restricted cash, long term 4,234,268 4,334,267 6,134,267 Total cash, cash equivalents and restricted cash shown in the statement of cash flows, continuing operations 7,004,684 8,297,147 13,211,588 Discontinued operations: Net cash provided by operating activities of discontinued operations 4,255,829 2,910,287 3,970,170 Net cash used in investing activities of discontinued operations (24,243,012 ) (9,635,504 ) (29,045,685 ) Net cash provided by financing activities of discontinued operations 20,472,737 9,283,359 27,928,885 Financing, and investing activities fees: F-8Euroseas Ltd. and SubsidiariesConsolidated statements of cash flowsYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)(Continued) 1,238,422 1,174,863 2,475,631 Financing, and investing activities fees: Loan arrangement fees accrued - 74,863 - Offering expenses accrued 178,308 12,488 100,000 Payment-in-kind dividends 1,725,699 1,808,811 1,335,733 Capital expenditures included in liabilities 142,947 - - Shares issued as consideration for vessel acquisition including inventory on-board 1,800,000 - - Preferred shares distributed to EuroDry - - 18,192,131 The accompanying notes are an integral part of these consolidated financial statements.F-9F-1120172019 and 20182020 and for the2016, 20172018, 2019 and 201820201.Basis of Presentation and General Information1. Basis of Presentation and General Information Ltd. Euroseas’Ltd at that time. In January 2007, the Company pursued a public offering and its common shares tradestarted trading on the Nasdaq Capital Market under the ticker symbol “ESEA”. on January 31, 2007.6)7).owns 29.6%collectively own 60.2% of the Company’s common shares as of December 31, 2018.2020.and financial condition of EuroDry have been presented in discontinued operations for all historical comparative periods presented.1. Basis of Presentation and General Information - continued 1. Basis of Presentation and General Information - continued 1. Basis of Presentation and General Information - continued ●Allendale Investment S.A. incorporated in Panama on January 22, 2002, owner of the Panama flag 18,154 deadweight tons (“DWT”) / 1,169 twenty-foot equivalent (“TEU” – a measure of carrying capacity in containers) container carrier M/V “Kuo Hsiung”, which was built in 1993 and acquired on May 13, 2002.●Alterwall Business Inc. incorporated in Panama on January 15, 2001, owner of the Panama flag 18,253 DWT / 1,169 TEU container carrier M/V “Ninos” (previously named M/V “Quingdao I”) which was built in 1990 and acquired on February 16, 2001.●Diana Trading Ltd. incorporated in the Republic of Marshall Islands on September 25, 2002, owner of the Marshall Islands flag 69,734 DWT bulk carrier M/V “Irini”, which was built in 1988 and acquired on October 15, 2002. M/V “Irini” was sold on July 10, 2013.F-10F-1520172019 and 20182020 and for the2016, 20172018, 2019 and 201820201.Basis of Presentation and General Information - continued●Xenia International Corp., incorporated in the Republic of Marshall Islands on April 6, 2006, owner of the Marshall Islands flag 22,568 DWT / 950 TEU multipurpose M/V “Tasman Trader”, which was built in 1990 and acquired on April 27, 2006. On March 7, 2012, the vessel was renamed M/V “Anking”. The vessel was sold on June 4, 2013.●Prospero Maritime Inc., incorporated in the Republic of Marshall Islands on July 21, 2006, owner of the Marshall Islands flag 69,268 DWT dry bulk M/V “Aristides N.P.”, which was built in 1993 and acquired on September 21, 2006. The vessel was sold on January 15, 2016.●Xingang Shipping Ltd., incorporated in Republic of Liberia on October 16, 2006, owner of the Liberian flag 23,596 DWT / 1,599 TEU container carrier M/V “YM Xingang I” , which was built in February 1993 and acquired on November 15, 2006. On July 11, 2009, the vessel was renamed M/V “Mastro Nicos” and on November 5, 2009, it was renamed M/V “YM Port Kelang”. On October 25, 2011 the vessel was renamed M/V “Marinos”. The vessel was sold on November 26, 2015.●Manolis Shipping Ltd., incorporated in the Republic of Marshall Islands on March 16, 2007, owner of the Marshall Islands flag 20,346 DWT / 1,452 TEU container carrier M/V “Manolis P”, which was built in 1995 and acquired on April 12, 2007.●Eternity Shipping Company, incorporated in the Republic of Marshall Islands on May 17, 2007, owner of the Marshall Islands flag 30,007 DWT / 1,742 TEU container carrier M/V “Clan Gladiator”, which was built in 1992 and acquired on June 13, 2007. On May 9, 2008, M/V “Clan Gladiator” was renamed M/V “OEL Transworld” and on August 31, 2009 the vessel was renamed M/V “Captain Costas”. The vessel was sold on May 10, 2016.●Pilory Associates Corp., incorporated in Panama on July 4, 2007, owner of the Panamanian flag 33,667 DWT / 1,932 TEU container carrier M/V “Despina P”, which was built in 1990 and acquired on August 13, 2007. The vessel was sold on December 28, 2015.●Tiger Navigation Corp., incorporated in the Republic of Marshall Islands on August 29, 2007, owner of the Marshall Islands flag 31,627 DWT / 2,228 TEU container carrier M/V “Tiger Bridge”, which was built in 1990 and acquired on October 4, 2007. The vessel was sold on November 9, 2015.●Noumea Shipping Ltd, incorporated in the Republic of Marshall Islands on May 14, 2008, owner of the Marshall Islands flag 34,677 DWT / 2,556 TEU container carrier M/V “Maersk Noumea”, renamed “Evridiki G”, which was built in 2001 and acquired on May 22, 2008.●Saf-Concord Shipping Ltd., incorporated in the Republic of Liberia on June 8, 2008, owner of the Liberian flag 46,667 DWT bulk carrier M/V “Monica P”, which was built in 1998 and acquired on January 19, 2009. The vessel was sold on June 25, 2018.F-11Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)1. Basis of Presentation and General Information - continued 1.BasisPresentationthe Liberian flag 22,301 DWT / 1,732 TEU container carrier M/V “Joanna”, which was built in 1999 and General Information - continuedacquired on July 4, 2013. On January 8, 2016, the vessel was renamed M/V “Vento di Grecale”. On March 17, 2017 the vessel was again renamed M/V “Joanna”.●Eleni Shipping Ltd., incorporated in the Republic of Liberia on February 11, 2009, owner of the Liberian flag 72,119 DWT bulk carrier M/V “Eleni P”, which was built in 1997, acquired on March 6, 2009 and sold on January 26, 2017.●Aggeliki Shipping Ltd., incorporated in the Republic of Liberia on May 21, 2010, owner of the Liberian flag 30,306 DWT / 2008 TEU container carrier M/V “Aggeliki P” which was built in 1998, acquired on June 21, 2010 and sold on December 6, 2017.●Joanna Maritime Ltd., incorporated in Liberia on June 10, 2013, owner of the Liberian flag 22,301 DWT / 1,732 TEU container carrier M/V “Joanna” which was built in 1999 and acquired on July 4, 2013. On January 8, 2016, the vessel has been renamed M/V “Vento di Grecale”. On March 17, 2017 the vessel was again renamed M/V “Joanna”.●Jonathan John Shipping Ltd., incorporated in the Republic of the Marshall Islands on August 19, 2016, owner of the Panamanian flag 18,581 DWT / 1,439 TEU container carrier M/V “Aegean Express” which was built in 1997 and acquired on September 29, 2016.●Hull 2 Shipping Ltd., incorporated in the Republic of the Marshall Islands on December 30, 2013, owner of the Marshall Islands flag 20,976 DWT / 1,645 TEU container carrier M/V “RT Dagr” which was built in 1998 and acquired on December 23, 2017. The vessel was sold on January 31, 2017.●Gregos Shipping Ltd., incorporated in the Republic of Liberia on May 25, 2017, owner of the Liberian flag 35,600 DWT / 2,788 TEU container carrier M/V “EM Astoria” which was built in 2004 and acquired on June 20, 2017.●Athens Shipping Ltd., incorporated in the Republic of the Marshall Islands on September 18, 2017, owner of the Marshall Islands flag 32,350 DWT / 2,506 TEU container carrier M/V “EM Athens” which was built in 2000 and acquired on September 29, 2017.●Corfu Navigation Ltd., incorporated in the Republic of the Marshall Islands on September 18, 2017, owner of the Marshall Islands flag 34,654 DWT / 2,556 TEU container carrier M/V “EM Corfu” which was built in 2001 and acquired on October 29, 2017.●Oinousses Navigation Ltd., incorporated in the Republic of the Marshall Islands on September 18, 2017, owner of the Marshall Islands flag 32,350 DWT / 2,506 TEU container carrier M/V “EM Oinousses” which was built in 2000 and acquired on October 23, 2017.●Bridge Shipping Ltd., incorporated in the Republic of the Marshall Islands on September 18, 2017, owner of the Marshall Islands flag 71,366 DWT / 5,610 TEU container carrier M/V “Akinada Bridge” which was built in 2001 and acquired on December 21, 2017.Eurocon Ltd. is an intermediate holding company between the vessel owning subsidiaries and Euroseas Ltd. Eurocon Ltd. was incorporated in the Republic of the Marshall Islands on September 18, 2017, owner of the Marshall Islands flag 32,350 DWT / 2,506 TEU container carrier M/V “EM Athens”, which was built in 2000 and acquired on September 29, 2017. The vessel was sold on November 9, 2020.F-12F-1620172019 and 20182020 and for the2016, 20172018, 2019 and 201820201.1. Basis of Presentation and General Information - continued PresentationLiberia on June 3, 2019, owner of the Liberian flag 23,351 DWT / 1,740 TEU container carrier M/V “EM Hydra”, which was built in 2005 and General Information - continuedacquired on August 2, 2019.1. Basis of Presentation and General Information - continued 2018,2020, the Company had a working capital surplusdeficit of $0.4 million and has been incurring losses.$19.0 million. For the year ended December 31, 2020, the Company generated net cash from operating activities of $2.4 million. The Company’s cash balance amounted to $6.96$3.6 million and cash in restricted retention accounts amounted to $6.25$2.8 million as of December 31, 2018. For the two years following January 29, 2019 the holders of EuroDry Series B Preferred Shares will receive a cash dividend at a dividend rate of 12% per annum, which will increase to 14% thereafter (Note 15).2020. The Company intends to fund its working capital requirements via cash aton hand and cash flowflows from operations, debt balloon payment refinancing and equity offerings.operations. In the unlikely event that these are not sufficient, the Company may also draw down up to $2.00 million under a commitmentuse funds from COLBY Trading Ltd., a company controlled by the Pittas familydebt refinancing, debt balloon payment refinancing and affiliated with the Company’s Chief Executive Officer,equity offerings and possible vessel salessell vessels (where equity will be released), if required, among other options. The Company believes it will have adequate funding through the sources described above and, accordingly, it believes it has the ability to continue as a going concern and finance its obligations as they come due over the next twelve months following the date of the issuance of these financial statements. Consequently, the consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.2016, 20172018, 2019 and 2018,2020, the following charterers individually accounted for more than 10% of the Company’s revenues as follows: Year ended December 31, Year ended December 31, Charterer 2016 2017 2018 2018 2019 2020 Maersk Line A/S MSC Geneva CMA CGM, Marseille 19 % 34 % 51 % New Golden Sea Shipping Pte. Ltd., Singapore 30 % 31 % 33 % MSC Geneva 22 % 17 % 11 % Hapag-Lloyd AG, Hamburg F-13F-1820172019 and 20182020 and for the2016, 20172018, 2019 and 201820202.Significant Accounting Policies2. Significant Accounting Policies F-14F-1920172019 and 20182020 and for the2016, 20172018, 2019 and 201820202.Significant Accounting Policies - continued2. Significant Accounting Policies - continued pricesprice less reasonably predictable costs of disposal and transportation. Inventories are valued using the FIFO (First-In First-Out) method.AssetsVessels Held for Saleassetsa vessel as being held for sale when the following criteria are met: (i) management ishas committed to a plan to sell the asset;vessel; (ii) the assetvessel is available for immediate sale in its present condition; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the assetvessel have been initiated; (iv) the sale of the assetvessel is probable, and transfer of the assetvessel is expected to qualify for recognition as a completed sale within one year; (v) the assetvessel is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.Long-lived assetsVessels classified as held for sale are measured at the lower of their carrying amount or fair value less the cost to sellsell. The resulting difference, if any, is recorded under “Loss on write-down of vessel held for sale” in the asset. These assetsconsolidated statements of operations. The vessels are no longer depreciated once they meet the criteria of beingto be classified as held for sale.F-15F-2020172019 and 20182020 and for the2016, 20172018, 2019 and 201820202.Significant Accounting Policies - continued2. Significant Accounting Policies - continued straight linestraight-line basis over the estimated useful life of the vessel with reference to the cost of the vessel, and estimated scrap value. Remaining useful lives of vessels are periodically reviewed and revised to recognize changes in conditions and such revisions, if any, are recognized over current and future periods. The Company estimates that its vessels have a useful life of 25 years from the completion of their construction. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations are adopted. The estimated salvage value of each vessel is $250 per light weight ton as of December 31, 2020 and 2019.2. Significant Accounting Policies - continued 840 “Leases”, according which revenues under operating lease arrangements are recognized when a charter agreement exists, the charter rate is fixed and determinable,842, because (i) the vessel is made availablean identifiable asset, (ii) the Company does not have substantive substitution rights and (iii) the charterer has the right to control the use of the vessel, during the term of the contract, and derives the economic benefits from such use. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubricants. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period.lesseeconsolidated financial statementscollection2020 and for the2. Significant Accounting Policies – continued the related revenue is reasonably assured. Revenuestime. The performance obligations in a time charter contract are recognized ratably on a straight linestraight-line basis over the periodterm of the respective time charter agreementagreements, beginning when the vessel is delivered to the charterer until it is redelivered back to the Company, and are recorded in accordance with guidance ASC 840 related to leases, adjusted“Time charter revenue” in the consolidated statements of operations for the off-hire days that a vessel spends undergoing repairs, maintenance or upgrade work. A timeyears ended December 31, 2018, 2019 and 2020. Time charter contract is deemed to commence fromagreements may include ballast bonus payments made by the time ofcharterer which serve as compensation for the deliveryballast trip of the vessel to an agreedthe delivery port, which are deferred and is deemed to end uponalso recognized on a straight-line basis over the re-delivery of the vessel at an agreed port.charter period.The Company adopted the provisions of the new standard on revenue from contracts with customers (ASC 606) on January 1, 2018, using the modified retrospective transition method applied to those contracts which were not completed as of that date. Voyage charter agreements are considered service contracts that fall under the provisions of ASC 606, because the Company as the shipowner retains the control over the operation of the vessel such as directing the routes taken or the vessel speed. The Company considered the provisions of ASC 842 and determined that its voyage charter agreements do not contain a lease because the charterer under such contracts does not have the right to control the use of the vessel since the Company, as the ship-owner, retains control over the operations of the vessel, provided also that the terms are pre-determined and any change requires the Company’s consent. The Company accounts for a voyage charter when all the following criteria are met: (i) the parties to the contract have approved the contract in the form of a written charter agreement or fixture recap and are committed to perform their respective obligations, (ii) the Company can identify each party’s rights regarding the services to be transferred, (iii) the Company can identify the payment terms for the services to be transferred, (iv) the charter agreement has commercial substance (that is, the risk, timing, or amount of the future cash flows is expected to change as a result of the contract) and (v) it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the services that will be transferred to the charterer. The Company has determined that there is one single performance obligation for each of its voyage contracts, which is to provide the charterer with an integrated transportation service within a specified time period. In addition, the Company has concluded that a contract for a voyage charter meets the criteria to recognize revenue over time because the charterer simultaneously receives and consumes the benefits of the Company’s performance as the Company performs. Therefore, since the Company’s performance obligation under each voyage contract is met evenly as the voyage progresses, revenue is recognized on a straight linestraight-line basis over the voyage days from the loading of cargo to its discharge. Prior to the adoption of ASC 606, revenue from voyage contracts was recognized from the later of the discharge of the vessel’s previous cargo or the time it receives a contract that is not cancelable, until the discharge of the current cargo. The majority of revenue from voyage charter agreements is usually collected in advance. During the years ended December 31, 2016, 2017 and 2018, there has been no voyage charter in 2016 and only one instance in each of 2017 and 2018 where a vessel was employed under a voyage charter and in both cases the voyage began and ended in the same period.earned.earned and collection is reasonably assured. Demurrage income for the years ended December 31, 2016, 20172018, 2019 and 20182020 was not material.2. Significant Accounting Policies - continued CostsAll voyage costs are expensed as incurred priorwith the exception of the contract fulfilment costs that are incurred from the later of the end of the previous vessel employment and the contract date and until the commencement of loading the cargo on the relevant vessel, which are capitalized to loading whichthe extent the Company, in its reasonable judgement, determines that they (i) are directly related to a contract, (ii) will be recoverable and (iii) enhance the voyage may beCompany’s resources by putting the Company’s vessel in a location to satisfy its performance obligation under a contract pursuant to the provisions of ASC 340-40 “Other assets and deferred if they meet certain conditions, andcosts”. These capitalized contract fulfilment costs are amortized overon a straight-line basis as the duration of the voyage from load port to discharge port. Costs incurred during the voyagerelated performance obligations are expensed as incurred.satisfied. Under time charter agreements, voyage expenses which are also recognized as incurred by the Company include costs for draft surveys, holdholds cleaning, postage, extra war risk insurance bunkers during ballast period and other minor miscellaneous expenses related to the voyage. The charterer is responsible for paying the cost of bunkers and other voyage expenses.expenses whilst the vessel is on time charter. Certain voyage expenses paid by the Company, such as extra war risk insurance and holds cleaning may be recovered from the charterer; such amounts recovered are recorded as other income within time“Time charter revenue.revenue” in the consolidated statements of operations.F-16Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)2.Significant Accounting Policies - continued2. Significant Accounting Policies - continued Loan arrangement fees Fees paid to lenders or required to be paid to third parties on the lenders’ behalf for obtaining new loans or for refinancing or amending existing loans, are deferredpresented on the balance sheet as a direct deduction from the carrying amount of that debt liability, similar to debt discounts. These costs are amortized as interest and amortized to interest expenseother financing costs over the duration of the underlying loan using the effective interest method. Unamortized feesAny unamortized balance of costs relating to loansdebt repaid or refinanced arethat meet the criteria for Debt Extinguishment pursuant to the provisions of Subtopic 470-50, is expensed in the period in which the repayment is made or refinancing occurs. DeferredAny unamortized balance of costs relating to debt refinanced that do not meet the criteria for Debt Extinguishment, are amortized over the term of the refinanced debt.expenses are chargeddeferred and are either presented against proceeds from the offering within paid-in capital when financing is completed or expensedare written-off and charged to other general“General and administrative expensesexpenses” in the consolidated statements of operations when financing efforts are terminated.it is probable that the offering will be aborted.chartercharters acquiredrecords all identified tangible and intangible assetsvalues any asset or liability arising from the market value of any liabilities associated with the acquisition oftime charter assumed when a vessel at fair value.is acquired. Where vessels are acquired with existing time charters, the Company determines the present value of the difference between: (i) the contractual charter rate and (ii) the prevailing market rate for a charter of equivalent duration.duration prevailing at the time the vessels are delivered. In discounting the charter rate differences in future periods, the Company uses its Weighted Average Cost of Capital (WACC) adjusted to account for the credit quality of the charterer.counterparties, as deemed necessary. The cost of the acquisition is allocated to the vessel and the in-place time charter attached on the basis of their relative fair values. The capitalized above-market (assets) and below-market (liabilities) charters are amortized as a reduction and increase, respectively, to Timetime charter revenues over the remaining term of the assumed time charter.“Other general“General and administrative expenses” in the “Consolidatedconsolidated statements of operations.” The shares to employees and directors as well as to non-employees are measured at their fair value equal to the market value of the Company's common stock on the grant date. The shares that do not contain any future service vesting conditions are considered vested shares and the total fair value of such shares is expensed on the grant date. The shares that contain a time-based service vesting condition are considered non-vested shares on the grant date and the total fair value of such shares is recognized on a straight-line basis over the requisite service period. In addition, non-vested awards granted to non-employees are recognized on a straight-line basis over the remaining period service is provided. The fair value of the awards granted to non-employees are measured at the fair value at each reporting period until the non-vested shares vest and performance is complete.F-17F-2520172019 and 20182020 and for the2016, 20172018, 2019 and 201820202. Significant Accounting Policies - continued Investment in Joint VentureInvestments in companies over which the Company believes it exercises significant influence over operating and financial policies, are accounted for using the equity method. Under this method the investment is carried at cost, and is adjusted to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition and is adjusted for impairment whenever facts and circumstances determine that a decline in fair value below the cost basis is other than temporary. The amount of the adjustment is included in the determination of net income / (loss). The investment is also adjusted to reflect the Company’s share of changes in the investee’s capital.long-lived assetsvesselslong-lived assets “held and used”vessels held for use for impairment whenever events or changes in circumstances indicate that the carrying amount of the assetsvessels may not be recoverable. If indicators of impairment are present, the Company performs an analysis of the future undiscounted net operating cash flows of the related vessels. When the estimate of future undiscounted net operating cash flows, excluding interest charges, expected to be generated by the use and eventual disposition of the asset is less than its carrying amount, the Company evaluates the asset forrecords an impairment loss. Measurement ofloss to the impairment loss is based onextent the vessel’s carrying value exceeds its fair value of the asset.market value. In this respect, management regularly reviews the carrying amount of the vessels in connection with the estimated recoverable amount for each of the Company’s vessels.Other investmentsIn developing its estimates of future undiscounted net operating cash flows, the Company makes assumptions and estimates about vessels’ future performance, with the significant assumptions being related to charter rates, fleet utilization, vessel operating expenses, drydocking costs, vessels’ residual value and the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations.InvestmentsThe Company determines the rates to be used in its impairment analysis based on the prevailing market charter rates for the first two years and on inflation-unadjusted historical average rates for similar size vessels, from the third year onwards. The Company calculates the historical average rates over a 19-year period for 2020, excluding peak periods, and a 18-year period for 2019, which both start in 2002 and take into account complete market cycles. These rates are used for the Company believes it doesperiod a vessel is not exercise any influenceunder a charter contract; if there is a contract, the charter rate of the contract is used for the period of the contract. Vessel utilization estimates are carriedbased on the status of each vessel at the book value and are adjusted to recognize accrued income and are adjusted for impairment whenever facts and circumstances determine that they are not recoverable. The amounttime of the adjustmentassessment and the Company's past experience in finding employment for its vessels at comparable market conditions. Cost estimates, like drydocking and operating costs, are based on the Company's data for its own vessels. Specifically, the Company’s management uses the Company’s internal budget for operating expenses escalated by 1.5% per annum and the Company’s budgeted drydocking costs. The estimated salvage value of each vessel is included$250 per light weight ton, in accordance with the Company’s vessel depreciation policy. The Company uses a probability weighted approach for developing estimates of future cash flows used to test its vessels for recoverability when alternative uses are under consideration (i.e. sale or continuing operation of a vessel).determinationconsolidated statements of net income / (loss) (Note 14).operations.F-18F-2720172019 and 20182020 and for the2016, 20172018, 2019 and 201820202. Significant Accounting Policies - continued earnings/earnings / (loss) per share is computed by dividing net income/income / (loss) attributable to common shareholders, after the deduction of dividends paid (in cash or in-kind) to preferred shareholders, by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding does not include any potentially dilutive securities or any non-vested restricted shares of common stock. These non-vested restricted shares, although classified as issued and outstanding as of December 31, 20172019 and 2018,2020, are considered contingently returnable until the restrictions lapse and will not be included in the basic net incomeearnings / (loss) per share calculation until the shares are vested.F-19Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)2.Significant Accounting Policies - continuedRecent accounting pronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, "Revenue from Contracts with Customers", which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This standard is effective for public entities with reporting periods beginning after December 15, 2017 and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company adopted this ASU for its revenues from voyage charters for its reporting period commencing January 1, 2018 and elected to use the modified retrospective transition method for the implementation of this standard. The implementation of this standard did not have an impact on the Company’s financial statements, as the Company did not have any voyage charters in progress as of December 31, 2017 and 2018. Voyage charter revenues represent less than 3% of total revenues for each of the years in the three year period ended December 31, 2018.In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which amends the existing accounting standard for lease accounting and adds additional disclosures about leasing arrangements. ASC 842 requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by most leases, while lessor accounting remains largely unchanged. ASC 842, as amended, subject to certain transition relief options, requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, or allows entities to elect not to recast the comparative periods presented when transitioning to ASC 842 and to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASC 842 also provides a practical expedient to lessors by class of underlying asset, to not separate non lease components from the associated lease component, similar to the expedient provided for lessees, when the following criteria are met i) the timing and pattern of transfer for the lease component is the same as those for the non-lease component associated with that lease component and (ii) the lease component, if accounted for separately, would be classified as an operating lease. ASC 842 is effective for public entities with reporting periods beginning after December 15, 2018, including interim periods within those fiscal periods. Early adoption is permitted for all entities. The Company will adopt ASC 842 for its reporting period commencing January 1, 2019 and has elected not to recast the comparative periods presented when transitioning to ASC 842. The Company’s time charter agreements will be classified as operating leases pursuant to ASC 842, because (i) the vessel is an identifiable asset, (ii) the Company does not have substantive substitution rights and (iii) the charterer has the right to control the use of the vessel, during the term of the contract, and derives the economic benefits from such use. The nature of the lease component and non-lease component that will be combined as a result of applying the practical expedient are the contract for the hire of a vessel and the fees for operating and maintaining the vessel respectively. The Company has elected not to separate the lease and non-lease components. The lease component is the predominant component and the Company accounts for the combined component as an operating lease in accordance with Topic 842. Since lessor accounting remains largely unchanged from current U.S. GAAP, the implementation of this standard will not have a significant impact on the Company’s financial statements, however it will increase the disclosures relating to the Company’s leasing arrangements.F-20F-2820172019 and 20182020 and for the2016, 20172018, 2019 and 201820202. Significant Accounting Policies - continued ASUAccounting Standards Update (“ASU”) 2016-13, Financial“Financial Instruments - Credit Losses.Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The main objective of this Updateupdate is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this Updateupdate replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topicTopic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. For public business entities, the amendments in this Updateupdate are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. The adoption of this ASU is not expected to have a material effect on the Company’s consolidated financial statements and accompanying notes.In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (Topic 718). ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. For public entities, the amendments in ASU 2018-07 are effective for annual periods beginning after 15 December 2018, and interim periods within those annual periods. The Company is currently assessing theadopted ASC 326 for its reporting period commencing January 1, 2020 with no impact that adopting this new accounting guidance will have on its consolidated financial statements and related disclosures.F-21
statements.Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)2.Significant Accounting Policies - continuedFair“Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the disclosure requirements for fair value measurement.measurement”. The amendments in this Updateupdate modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance ofThe amendments in this Update.Update became effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Updateupdate and delay adoption of the additional disclosures until their effective date. The adoptionCompany adopted ASC 820 for its reporting period commencing January 1, 2020 with no impact on its consolidated financial statements.thisDecember 31, 2019 and 2020 and for the2. Significant Accounting Policies - Continued not expected to haveeffective for adoption at any time between March 12, 2020 and December 31, 2022. In January 2021, the FASB issued ASU 2021-01 (Topic 848), which amends and clarifies the existing accounting standard issued in March 2020, ASU 2020-04 for Reference Rate Reform. Reference rates such as LIBOR, are widely used in a materialbroad range of financial instruments and other agreements. The Company is still evaluating the timing of the adoption and the optional expedients and exceptions it may adopt, as well as the effect of the adoption on the Company’sits consolidated financial statements and accompanying notes.statements.3. Inventories 2017 2018 2019 2020 Lubricants 1,107,571 1,043,763 Victualing 85,447 79,965 Bunkers - 580,663 1,193,018 1,704,391 1,889,164 1,662,422 F-22F-3020172019 and 20182020 and for the2016, 20172018, 2019 and 201820204. Vessels, net
Costs Balance, January 1, 2017 58,665,385 (17,520,010 ) 41,145,375 - Depreciation for the year - (3,585,965 ) (3,585,965 ) - Vessel Acquisitions 30,015,188 - 30,015,188 - Sale of vessels (9,318,842 ) 2,110,762 (7,208,080 ) - Vessels held for sale (18,081,755 ) 9,847,316 (8,234,439 ) Balance, December 31, 2017 61,279,976 (9,147,897 ) 52,132,079 - Depreciation for the year - (3,305,951 ) (3,305,951 ) Balance, December 31, 2018 61,279,976 (12,453,848 ) 48,826,128 Costs Accumulated Depreciation Net Book Value Balance, January 1, 2019 61,279,976 (12,453,848 ) 48,826,128 Balance, December 31, 2019 132,863,067 (16,632,734 ) 116,230,333 Balance, December 31, 2020 116,331,440 (17,872,993 ) 98,458,447 F-23F-3120172019 and 20182020 and for the2016, 20172018, 2019 and 201820204. Vessels, net - continued On May 10, 2016, the Company soldIn January 2020, M/V “Captain Costas”“EM Oinousses”, oneexperienced an engine room fire while sailing off Mozambique carrying empty containers. The fire was extinguished without any injuries to the crew. The Company agreed with the Hull & Machinery (“H&M”) underwriters to sell the vessel for scrap as is without effecting permanent repairs (see Note 19). As of June 30, 2020 M/V “EM Oinousses” was classified as vessel held for sale and was written down to its fair market value less costs to sell amounting to $3.7 million, resulting in a non-cash loss of $0.1 million compared to its net book value of $3.8 million. This amount is presented in the "Loss on write-down of vessel held for sale" line in the "Operating Expenses" section of the Company's containership vessels, for a net priceconsolidated statements of $2.65 million. After sales commissions of 4%, which includes the 1% payable to Eurochart S.A. (see Note 6), and other sale expenses, the Company realized a gain of $10,597.September 29, 2016, the Company acquired M/V “Aegean Express”, a 1,439 teu containership vessel, for a purchase price plus costs required to make the vessel available for use of $3,151,940. On December 23, 2016, the Company signed a memorandum of agreement to purchase M/V “RT Dagr”, a 1,645 teu feeder containership vessel built in 1998 in Germany, for approximately $1.81 million by issuing 864,292 shares of the Company's common stock and payment of acquisition expenses of $77,821 with another 35,708 common shares issued as payment for the amount of fuel that was acquired along with the vessel. On January 13, 2017,July 6, 2020 the Company agreed to sell for scrap M/V “RT Dagr”“EM Oinousses”, for a net price of $2.3$3.6 million. The vessel was delivered to its buyers on January 31, 2017.July 17, 2020. The Company recorded a gainloss on sale of approximately $0.5$0.1 million presented in the “Net gain on sale of vessels” line in the “Operating Expenses” section of the “Consolidated Statementsconsolidated statement of Operations”.operations.December 20, 2016,June 19, 2020 the Company agreed to sell for scrap M/V "Eleni P"“Manolis P.”, for a 72,119 dwt 1997-built drybulk carrier. The vessel was written down to its fair market value less costs to sell resulting in a non-cash lossnet price of $5.92 million, or $0.73 loss per share basic and diluted. This amount is presented in the "Loss on write-down of vessels held for sale" line in the "Operating Expenses" section of the "Consolidated Statements of Operations".$2.0 million. The vessel was delivered to its buyers on January 26, 2017.On September 30, 2017 the Company decided to sell for scrap M/V “Aggeliki P.” a 2,008 teu 1998-built container carrier and M/V “Monica P” a 46,667 dwt 1998-built drybulk carrier. Both vessels were written down to their fair market value, resulting in a non-cash loss of $4.6 million, or $0.42 loss per share basic and diluted. These amounts are presented in the "Loss on write-down of vessels held for sale" line in the "Operating Expenses" section of the "Consolidated Statements of Operations".July 2, 2020. The Company sold the vessel on December 6, 2017 for net proceeds of approximately $4.4 million and recorded a gain on sale of approximately $0.3 million for the year ended December 31, 2017, presented in the “Net gain on sale of vessels” line in the "Operating Expenses"“Operating Expenses” section of the "Consolidated Statementsconsolidated statement of Operations".operations.“Aggeliki P”“Kuo Hsiung”, for a net price of $1.9 million. The vessel was solddelivered to its buyers on December 6, 2017. M/V “Monica P” was still held for sale as of December 31, 2017 with a value of $4.9 million that was presented in "Vessel held for sale" in the "Consolidated Balance Sheets” as of December 31, 2017 and was sold on June 25, 2018.July 30, 2020. The sale resulted inCompany recorded a gain on sale of $1.34approximately $0.3 million, which is presented in the “Net gain on sale of vessels” line in the "Operating Expenses"“Operating Expenses” section of the "Consolidated Statementsconsolidated statement of Operations".operations.June 20, 2017September 17, 2020 the Company acquired the feeder containership (2,788 teu, 2004 built)agreed to sell for scrap M/V “EM Astoria”“Ninos”, for a purchasenet price of $4.75$2.3 million.On The vessel was delivered to its buyers on September 29, 201730, 2020. The Company recorded a gain on sale of approximately $0.8 million presented in the Company acquired“Net gain on sale of vessels” line in the feeder containership (2,506 teu, 2000 built) M/V “EM Athens” for a purchase price“Operating Expenses” section of $4.24 million.On October 23, 2017 the Company acquired the feeder containership (2,506 teu, 2000 built) M/V “EM Oinousses” for a purchase priceconsolidated statement of $4.25 million.operations.20172020 the Company acquired the feeder containership (2,556 teu, 2001 built)agreed to sell for further trading M/V “EM Corfu”Athens”, for a purchasenet price of $5.66 million.$4.9 million, in line with the Company’s strategy to dispose older vessels, combined with the increased drydocking expenses required. The vessel was delivered to its buyers on November 9, 2020. The Company recorded a gain on sale of approximately $1.2 million presented in the “Net gain on sale of vessels” line in the “Operating Expenses” section of the consolidated statement of operations.F-24F-3220172019 and 20182020 and for the2016, 20172018, 2019 and 201820204. Vessels, net - continued December 21, 2017August 2, 2019 the Company acquired the feeder containership (1,740 teu, 2005-built) M/V “EM Hydra” and its attached time charter for a purchase price of $6.73 million.(5,610(4,253 teu, 2001 built)2008-built) M/V “Akinada Bridge”“Synergy Antwerp” for a purchase price of $11.12$10.11 million.20172019 and 20182020 for those operating vessels whose carrying values were above their respective market values and determined that the net book value of its vessels held for use was recoverable.AllAs of December 31, 2020, all vessels are used as collateral under the Company’s vessels have been mortgaged as security for the Company’s loans.loan agreements (refer Note 8).F-25F-3320172019 and 20182020 and for the2016, 20172018, 2019 and 201820205.Accrued Expenses5. Accrued Expenses
2017
2018 December 31, 2019 December 31, 2020 Accrued payroll expenses 210,664 93,404 Accrued interest expense 262,546 565,623 Accrued deferred charges 74,863 - Accrued general and administrative expenses 209,161 348,761 Accrued commissions 100,793 39,545 Other accrued expenses 259,083 254,472 Total 1,117,110 1,301,805 1,725,321 1,300,420 6. Fair Value of Below Market Time Charters Acquired F-26F-3420172019 and 20182020 and for the2016, 20172018, 2019 and 201820206.7.Related Party Transactions 2016, 20172018, 2019 and 2018,2020, under the Company’s Master Management Agreement. An additional fixed management fee (see below) is paid to the Manager for the provision of various management executive services. Vessel management fees paid to the Manager amounted to $2,399,461, $2,632,637 and $3,536,094 in 2016, 2017 and 2018, respectively.In the case of newbuilding vessel contracts, the same management fee of Euro 685 becomes effective when construction of the vessels actually begins. The Master Management Agreement,MMA, as periodically amended and restated, will automatically be extended after the initial five-year period for an additional five-year period unless terminated on or before the 90th day preceding the initial termination date. Pursuant to the Master Management Agreement,MMA, each ship owning company has signed – and each future ship owning company when a vessel is acquired will sign - with the Manager, a management agreement with the rate and term of these agreements set in the Master Management AgreementMMA effective at such time.Euroseas ownedEuroseas-owned vessels (including vessels in which Euroseas is a part owner) managed by the Manager is greater than 20 (“volume discount”); it was further renewed as of January 1, 2014 for a new five year term until January 1, 2019.Starting January 1, 2013, the. The daily vessel management fee was adjusted toset at Euro 720685 per day per vessel in operation and 360342.5 Euros per day per vessel in lay-up beforeafter the 5% discount. The fee remained unchanged for the subsequent years starting January 1, 2014, 2015, 2016, 2017.yearyears ended December 31, 2018, 2019 and 2020 and will be adjusted annually for inflation in the Eurozone. The fee remainedremains unchanged for 2019. These2021.“Consolidatedconsolidated statements of operations”.operations.7. Related Party Transactions - Continued 2016, 2017 and 2018 up to the Spin-off, compensation for such services to the Company as a public company was $2,000,000 per annum for the Company pre Spin-off. For the Company post Spin-off the annual compensation for such services was set at $1,250,000. The amount of such executive compensation allocated to the Company preprior to the Spin-off was based on the proportion of the number of calendar days that related to Euroseas post spin-offSpin-off vessels to the number of days of the entire fleet of Euroseas. These amounts amountedAfter the Spin-off, the annual compensation for such services was set at $1,250,000.$1,479,374, $1,306,476$2,000,000 to compensate the Manager for the increase in the fleet and certain management services provided by Synergy Marine Ltd., a company controlled by Andreas Papathomas and which became affiliated with the Company post-acquisition, as a result of his appointment to the Board of Directors of the Company in November 2019. As a result, for the year 2019, the fixed cost was calculated on $1,250,000 pro-rated for the period of January 1, 2019 until November 15, 2019 and on $2,000,000 for the period of November 16, 2019 until December 31, 2019. The Company incurred costs of $1,561,126, $1,344,250 and $2,000,000 in 2016, 20172018, 2019 and 2018,2020, respectively, andwhich are recorded in “Other general“General and administrative expenses” in the “Consolidatedconsolidated statements of operations.”F-27Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)6.Related Party Transactions - continued20172019 and 2018,2020, the amounts due to related company were $4,986,836$795,562 and $2,672,895,$24,072, respectively. Based on the MMA between Euroseas Ltd. and Euroseas’ ship owning subsidiaries and the Manager an estimate of the quarter’s operating expenses, expected dry-dock expenses, vessel management fee and fee for management executive services are to be advanced by the Company’s ship-owning subsidiaries in the beginning of theeach quarter to the Manager. in November 2016 reached an agreement with a related party, COLBYColby Trading Ltd., a company controlled by the Pittas family and affiliated to its CEO,with the Company’s Chief Executive Officer, to draw a $2$2.5 million loan to finance the special survey and WBT system installation on M/V “Akinada Bridge”. The interest rate applied is 8% per annum. Interest on the loan is payable quarterly. Within the second quarter of 2020 the Company repaid $625,000 of the above loan. In November 2020, the outstanding amount of the loan was converted into Company’s common shares. For further details refer to Note 8-e.7. Related Party Transactions - continued needs with anneeds. The interest rate of 10%applied is 8% per annum. Interest on the loan wasis payable quarterly, there were no principal repayments until January 2018 when the loan matured and there was no prepayment penalty. The Company fully repaid this loan along with the first interest payment of $50,556 earlier than scheduled at the end of February 2017.quarterly. For further details refer to Note 8-e.$55,796, $70,640$64,500, nil and $64,500$153,750 in 2016, 20172018, 2019 and 2018,2020, respectively, recorded in “Net gain on sale of vessels” and “Loss on write-down of vessels held for sale” in the “Consolidatedconsolidated statements of operations”.operations. A commission of 1% of the purchase price is also paid to Eurochart S.A. by the seller of the vessel for the acquisitions the Company makes; The Company withheld, on behalf of Eurochart, commissions of $30,000, $118,526 and nil in 2016, 2017 and 2018, respectively, for vessels the Company acquired.makes using Eurochart’s services. Commissions to Eurochart S.A. for chartering services were, $268,658, $310,467$453,361, $493,341 and $453,361$504,892 in 2016, 20172018, 2019 and 2018,2020, respectively, recorded in “Commissions” in the “Consolidatedconsolidated statements of operations”.operations.; and with a crewing agent. Technomar Crew Management Services Corp (“Technomar”). Technomar is a company owned by certain members of the Pittas family, together with two other unrelated ship management companies.companies, which provides crewing services. Sentinel is paid a commission on premiuminsurance premiums not exceeding 5%; Technomar is paid a fee of about $50 per crew member per month. Total fees charged by Sentinel and Technomar were $78,530 and $97,231 in 2016, $89,329 and $101,394 in 2017 and $118,684 and $137,385 in 2018, $106,749 and $142,332 in 2019, and $100,837 and $203,678 in 2020, respectively. These amounts are recorded in “Vessel operating expenses” in the “Consolidatedconsolidated statements of operations.”On December 23, 2016, the Company acquired M/V “RT Dagr” from entities managed by Tennenbaum Capital Partners (Tennenbaum Opportunities Fund V, LP and Tennenbaum Opportunities Fund VI, LLC), one of the Company’s Series B Preferred Shareholders (see Note 15), by issuing 900,000 shares of common stock as consideration for the value of the vessel and fuel on board. The fair value of the shares at issuance was $1.8 million.F-28F-3720172019 and 20182020 and for the2016, 20172018, 2019 and 201820207.8.Long-Term DebtBank LoansThis consistsThese consist of bank loans of the ship-owning companies and isare as follows:Borrower
2017
2018 Noumea Shipping Ltd. (a) 5,640,000 3,341,000 Gregos Shiping Ltd. (b) 4,550,000 4,150,000 Alterwall Business Inc. / Allendale Investments S.A. / Manolis Shipping Ltd. / Joanna Maritime Ltd. / Jonathan John Shipping Ltd. (c) 7,900,000 - Athens Shipping Ltd. / Oinousses Navigation Ltd. / Corfu Navigation ltd. / Bridge Shipping Ltd. (d) 17,500,000 - Alterwall Business Inc. / Allendale Investments S.A. / Manolis Shipping Ltd. / Joanna Maritime Ltd. / Jonathan John shipping Ltd. / Athens Shipping Ltd. / Oinousses Navigation Ltd. / Corfu Navigation Ltd. / Bridge Shipping Ltd. (e) - 30,000,000 35,590,000 37,491,000 Less: Current portion (4,699,028 ) (5,212,000 ) Long-term portion (30,890,972 ) (32,279,000 ) Deferred charges, current portion 142,767 125,357 Deferred charges, long-term portion 196,619 237,848 Debt discount, current portion 353,000 216,402 Debt discount, long-term portion 883,112 324,603 Long-term debt, current portion net of deferred charges and debt discount 4,203,261 4,870,241 Long-term debt, long-term portion net of deferred charges and debt discount 29,811,241 31,716,549 Borrower December 31,
2019 December 31,
2020 (a) (b) (c) (d) Long-term portion 72,665,380 46,409,460 Long-term bank loans, current portion net of deferred charges 12,295,320 20,645,320 Long-term bank loans, long-term portion net of deferred charges 72,187,785 46,220,028 Loan from related party, current (e) F-29F-3820172019 and 20182020 and for the2016, 20172018, 2019 and 201820207.Long-Term Debt - continued8. Long-Term Bank Loans – continued None of the above loans is registered in the U.S. The future annual loan repayments are as follows:To December 31: 2019 5,212,000 2020 5,212,000 2021 27,067,000 2022 - 2023 - Thereafter - Total 37,491,000 67,301,300 (a)On December 22, 2016, the supplemental agreement with Noumea Shipping Ltd., owner of M/V “Evridiki G” was signed in order to refinance the final quarterly instalment of $720,000 and the balloon payment of $6,360,000 originally due in December 2016. The borrower and the lender agreed to amend the repayment profile in respect of the loan of which $7,080,000 remained outstanding as of the date of the supplemental agreement and to extend the final maturity date to January 2018. The loan will be repaid with three repayments of $720,000 each, due in December 2016, in July 2017 and in January 2018 together with the balloon payment of $4,920,000 due in January 2018. On February 27, 2018, the Company signed and drew a term loan facility with Credit Agricole in order to refinance the existing indebtedness of M/V “Evridiki G” with the bank. This is a $4,250,000 loan drawn by Noumea Shipping Ltd. as Borrower. The loan is payable in fourteen consecutive quarterly instalments. Thirteen of $303,000 each and a final instalment in the amount of $311,000. The margin of the loan is 3.00% above LIBOR. The security cover ratio covenant is set to 130%. The loan is secured with the following: (i) first priority mortgages over M/V “Evridiki G” and collateral vessel (M/V “EM Astoria”), (ii) first assignment of earnings and insurance and (iii) other covenants and guarantees similar to the remaining loans of the Company.F-30F-3920172019 and 20182020 and for the2016, 20172018, 2019 and 201820208. 7.Long-Term Debt - continued(b)On June 15, 2017, the Company signed a term loan facility with Credit Agricole and on June 19, 2017 a loan of $4,750,000 was drawn by Gregos Shipping Ltd. to partly finance the purchase of M/V “EM Astoria”. The loan is payable in twenty or sixteen consecutive equal quarterly installments of $100,000 plus a balloon amount of $2,750,000 or $3,150,000 (the debt repayment schedule shown in the previous table assumes repayment in sixteen quarters). The margin of the loan is 2.65% above LIBOR. The loan is secured with (i) first priority mortgages over M/V “EM Astoria”, (ii) first assignment of earnings and insurance of M/V “EM Astoria”, (iii) a corporate guarantee of Euroseas Ltd. and other covenants and guarantees similar to remaining loans of the Company. The Company paid a loan arrangement fee of $50,000 for this loan. The Company has also entered into a profit sharing agreement with Credit Agricole whereby it will share with the bank 35% of the excess of the fair market value of the vessel over the outstanding loan when the vessel is sold or when the loan matures. As a result of the lender's entitlement to participate in the appreciation of the market value of the mortgaged vessel, the Company has recognized a participation liability of amount $1,297,100 and $1,067,500 as of December 31, 2017 and 2018, respectively, presented in "Vessel profit participation liability" in the accompanying “Consolidated balance sheets”, with a corresponding debit to a debt discount account, presented contra to the loan balance. In addition, 35% of the cash flow after debt service will be set aside and be used to repay the balloon payment with any excess funds to be paid to the bank.(c)On February 12, 2016, the Company signed and drew a term loan facility with Eurobank Ergasias S.A in order to refinance all of its existing facilities with the bank. This is a $14,500,000 loan drawn by Saf-Concord Shipping Ltd, Eternity Shipping Company, Allendale Investments S.A., Manolis Shipping Limited, Alterwall Business Inc., Aggeliki Shipping Ltd and Jonathan John Shipping Ltd. (which was cross-collateralized as per supplemental agreement dated September 27, 2016 replacing Eternity Shipping Company, the owner of M/V “Captain Costas” that was sold in 2016) as Borrowers. The loan is payable in twelve equal consecutive quarterly instalments of $460,000 each, with a balloon payment of $8,980,000 to be paid together with the last instalment in February 2019. The interest was based on LIBOR plus a margin of 6.00%. The loan is secured with the following: (i) first priority mortgages over M/V “Monica P”, M/V “Captain Costas” replaced by M/V “Aegean Express” after her sale, M/V “Kuo Hsuing”, M/V “Manolis P”, M/V “Ninos”, M/V “Aggeliki P”, (ii) first assignment of earnings and insurance, (iii) a corporate guarantee of Euroseas Ltd and other covenants and guarantees similar to the rest of the loans of the Company, and (iv) a $2,800,000 cash collateral deposit pledged in favor of the bank. The Company paid loan arrangement fees of $247,500 for this loan. In August 2017, the Company applied $1 million from the pledged amount against the loan and prepaid an amount of $540,000 deducted from the balloon payment and made a prepayment of $460,000 that referred to the installment of the fourth quarter of 2017. In November 2017, the Company agreed with the lender to release M/V “Monica P.” from the mortgage and substitute it with M/V “Joanna”. In connection with this substitution, the Company prepaid an amount of $460,000 referring to the installment due in the first quarter of 2018 and another $280,000 deducted from the balloon payment. In December 2017, M/V “Aggeliki P.” was sold for scrap. An amount of $2,100,000 from the sale of the vessel was prepaid, from which an amount of $1,840,000 was applied against the final four instalments and an amount of $260,000 was deducted from the balloon payment of the loan. Following the prepayments mentioned above, the balloon payment was reduced to $7.9 million with the repayment of the loan resuming in February 2019. The loan was refinanced in November 2018 (See note 7-(e)).F-31Euroseas Ltd. and SubsidiariesNotes to consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)7.Long-Term Debt - continued(d)On October 19, 2017, the Company signed a term loan facility with Eurobank Ergasias S.A for an amount of $17,500,000. The loan was used to partially finance the acquisition of M/V “EM Athens”, M/V “EM Oinousses”, M/V “EM Corfu” and M/V “Akinada Bridge”. The loan was drawn in tranches upon the delivery of each vessel to the Company with the last drawdown taking place on December 21, 2017.The loan is payable in five consecutive equal quarterly installments of $500,000 followed by eleven consecutive equal quarterly installments of $800,000 and a balloon payment of $6,200,000. The loan bears interest at LIBOR plus a margin of 4.5%. The loan is secured with (i) first priority mortgages over M/V “EM Athens”, M/V “EM Oinousses”, M/V “EM Corfu” and M/V “Akinada Bridge”, (ii) first assignment of earnings and insurance of the abovementioned vessels, (iii) a corporate guarantee of Euroseas Ltd and other covenants and guarantees similar to the remaining loans of the Company. The Company paid loan arrangement fees of $137,638 within 2017 and another $54,862 within 2018 for this loan. The loan was refinanced in November 2018 (See note 7-(e)).(e)(a)On November 21, 2018, the Company signed a reducing revolving credit facility with Eurobank Ergasias S.A (the “Lender”) for an amount of up to $45,000,000. A loan of $30,000,000 was drawn on November 21, 2018 by Alterwall Business Inc., Allendale Investments S.A., Manolis Shipping Ltd., Joanna Maritime Ltd., Jonathan John Shipping Ltd., Athens Shipping Ltd., Oinousses Navigation Ltd., Corfu Navigation Ltd. and Bridge Shipping Ltd. to fully refinance all of the Company’s existing facilities with this bank and provide working capital. The revolving tranche will bewas available for a period of 18 months from signing of the loan agreement for the purpose of partly financing new vessel acquisitions or providing working capital and can be renewed subject to the bank’s approval and a fee to be determined. The loan is payable in 12 equal consecutive quarterly principal installments of $900,000 and the balance willfollowed by a balloon amount of $19,200,000 to be repaid through balloon payment of $19,200,000paid together with the last principal installment in November 2021. Each quarterly principal instalment paid is added to the revolving tranche and may be redrawn. The interest rate margin is 3.90% over LIBOR, reduced from 4.40% over LIBOR. The loan is secured with (i) first priority mortgage over M/V “Ninos”, M/V “Kuo Hsiung”, M/V “Aegean Express”, M/V “Manolis P.” M/V “Joanna”, M/V “EM Athens”, M/V “EM Oinousses”, M/V “EM Corfu” and M/V “Akinada Bridge”, (ii) first assignment of earnings and insurance of the aforementioned vessels, (iii) a corporate guarantee of Euroseas Ltd and other covenants and guarantees similar to the remaining loan of the Company. The Company has the option (at the Lender’s absolute discretion) to substitute a Vessel by notifying the Lender in writing at least one (1) month prior to the intended substitution date, provided that: a) the substitute vessel is of a similar type, of the same or younger age, having the same or enhanced characteristics (including, without limitation, deadweight, lightweight, shipyard pedigree and technical specifications) and will be 100% owned by a shipowning company, incorporated in a jurisdiction acceptable to the Lender and owned by a ship owning company owned by the Company (directly or indirectly) and b) the new shipowning company provides a first preferred mortgage over the new vessel and a corporate guarantee in favor of the Lender and executes any other security documentation as may be requested by the Lender at its discretion. The Company paid loan arrangement fees of $300,000 for this loan. The remaining $15,000,000 of the revolving facility remains available to the company in order to finance up to 55% of the market value of post 2001 built ships. The new tranches will be repaid through sixteen quarterly principal instalments with the amount of each such instalment being equal to such amount so that the balloon amount to be equal to 50% of the initially drawn relevant tranche.described below.F-32F-4020172019 and 20182020 and for the2016, 20172018, 2019 and 201820208. Long-Term Bank Loans – continued 7.Long-Term Debt – continued8. Long-Term Bank Loans – continued (b) On July 29, 2019, the Company signed a term loan facility with Piraeus Bank S.A. for an amount not exceeding the lesser between $4,000,000 and 90% of the scrap value of M/V “Diamantis P”. On July 31, 2019, a loan of $3,667,680 was drawn by Diamantis Shipping Ltd. to partly finance the acquisition of M/V “Diamantis P”. The loan is payable in twelve equal consecutive quarterly instalments of $160,460 plus a balloon amount of $1,742,160 to be paid together with the last instalment in July 2022. The margin of the loan is 3.50% over LIBOR. The loan is secured with (i) first priority mortgage over M/V “Diamantis P”, (ii) first assignment of earnings and insurance of M/V “Diamantis P”, (iii) a corporate guarantee of Euroseas Ltd. and other covenants and guarantees similar to remaining loans of the Company. The Company paid a loan arrangement fee of $32,000 within 2019 for this loan. The security cover ratio covenant for the facility is set to 110% until the first anniversary of the drawdown date and 120% thereafter. On July 29, 2020, the Company signed a supplemental agreement with Piraeus Bank S.A. under which it was agreed to defer the amount of $160,460, representing half of the installments of the third and the fourth quarter of 2020 to be repaid together with the balloon payment in July 2022, increasing the balloon amount to $1,902,620. (c) On July 30, 2019, the Company signed a term loan facility with HSBC Bank Plc. for an amount of $12,500,000. The loan was used to partly finance the acquisition of M/V “EM Hydra”, M/V “EM Kea” and M/V “EM Spetses”. The loan was drawn in tranches upon the delivery of each vessel to the Company with the last drawdown taking place on August 8, 2019. The loan is payable in fourteen consecutive equal quarterly installments of $450,000 plus a balloon payment of $6,200,000 to be paid together with the last instalment in February 2023. The loan bears interest at LIBOR plus a margin of 2.95%. The loan is secured with (i) first priority mortgages over M/V “EM Hydra”, M/V “EM Kea” and M/V “EM Spetses” (ii) first assignment of earnings and insurance of the abovementioned vessels, (iii) a corporate guarantee of Euroseas Ltd. and other covenants and guarantees similar to the remaining loans of the Company. The Company paid loan arrangement fees of $62,500 within 2019 for this loan. The security cover ratio covenant for the facility is set to 130%. On September 30, 2020, the Company signed a supplemental agreement with HSBC Bank Plc. under which it was agreed to defer the amount of $900,000, representing the installments of the third and the fourth quarter of 2020, to be repaid together with the balloon payment in February 2023, increasing the balloon amount to $7,100,000. 8. Long-Term Bank Loans – continued (d) On November 8, 2019, the Company signed a term loan facility with Piraeus Bank S.A. for an amount of $32,000,000. The loan was used to partly finance the acquisition of M/V “Synergy Antwerp”, M/V “Synergy Busan”, M/V “Synergy Keelung” and M/V “Synergy Oakland”. The loan was drawn in tranches upon the delivery of each vessel to the Company with the last drawdown taking place on November 18, 2019. The loan is payable in three consecutive equal quarterly instalments of $1,400,000 followed by thirteen consecutive equal quarterly instalments of $800,000 and a balloon payment of $17,400,000 to paid together with the last instalment in November 2023. The loan bears interest at LIBOR plus a margin of 3.50%. The loan is secured with (i) first priority mortgages over M/V “Synergy Antwerp”, M/V “Synergy Busan”, M/V “Synergy Keelung” and M/V “Synergy Oakland” (ii) first assignment of earnings and insurance of the abovementioned vessels, (iii) a corporate guarantee of Euroseas Ltd. and other covenants and guarantees similar to the remaining loans of the Company. The Company paid loan arrangement fees of $352,000 within 2019 for this loan. The security cover ratio covenant for the facility is set to 125%. On July 7, 2020, the Company signed a supplemental agreement with Piraeus Bank S.A. under which it was agreed to defer the amount of $1,500,000 from the installments of the third and the fourth quarter of 2020, to be repaid together with the balloon payment in November 2023, increasing the balloon amount to $18,900,000. undrawnloan was payable in four repayment instalments of a principal amount of $625,000 each, maturing by November 2020. The first repayment instalment was paid on May 15, 2020 and the remaining three instalments, which were payable on a quarterly basis, were rescheduled to be paid at the maturity of the loan in November 2020.Under certain limited circumstances, the Company can pay principal in equity, and the loan is convertible in common stock of the Company at the option of the lender at certain times. The Company paid $51,111 and $160,035 on interest for the years ended December 31, 2019 and 2020, respectively. On November 24, 2020, Colby exercised its right to convert the outstanding balance of the loan of $1,875,000 into the Company’s common shares as per the terms of the loan agreement. As a result, on November 25, 2020, the Company issued 702,247 shares to Colby. The conversion price was the lowest closing price over the fifteen business days prior to the conversion notice as per the terms of the loan, amounting to approximately $2.67 per share. The Company incurred a loss on the extinguishment of the above debt of $491,571, deriving from the difference between the conversion price and the closing price of the Company’s common shares on the Nasdaq Capital Market on the date of issuance of approximately $3.37 per share. The specific amount is recorded under “Loss on debt extinguishment” in the consolidated statement of operations.available underexpressed in U.S. Dollars)8. Long-Term Bank Loans – continued revolving facility pay an annual commitment of 0.40%loan is 8% per annum and any amount drawn will pay a 1% underwriting fee.is payable quarterly. This loan was fully repaid upon its maturity on March 31, 2021. The Company paid $33,333 and $201,248 on interest for this loan for the years ended December 31, 2019 and 2020, respectively.hullsecurity cover ratio covercovenant (the ratio of fair value of vessel to outstanding loan less cash in retention accounts ranging from 100% to 140%)accounts), restrictions as to changes in management and ownership of the ship-owning companies, distribution of profits or assets (i.e. limiting dividends in some loans to 60% of profits, or, not permitting dividend payment or other distributions in cases that an event of default has occurred), additional indebtedness and mortgage of vessels without the lender’s prior consent, sale of vessels, maximum fleet-wide leverage, sale of capital stock of ourthe Company’s subsidiaries, ability to make investments and other capital expenditures, entering in mergers or acquisitions, minimum cash balance requirements and minimum cash retention accounts (restricted cash). The loan agreements also require the Company to make deposits in retention accounts with certain banks that can only be used to pay the current loan instalments. Minimum cash balance requirements are in addition to cash held in retention accounts. These cash deposits amounted to $4,903,953$4,410,376 and $ 5,717,063$2,245,010 as of December 31, 20172019 and 2018,2020, respectively, and are included in “Restricted cash” under “Current assets” and “Long-term assets” in the consolidated balance sheets. As of December 31, 2018,2020, all the debt covenants are satisfied.2016, 20172018, 2019 and 20182020 amounted to $1,228,947, $1,380,458$2,703,845, $3,219,471 and 2,703,845,$3,836,985 respectively.F-33F-4420172019 and 20182020 and for the2016, 20172018, 2019 and 201820208.Income Taxes9. Income Taxes accompanying “Consolidatedconsolidated statements of operations.”2016, 2017 and 2018 the Company did not qualify for this exemption. The Company is subject to an effective 2% United States federal tax on the U.S. source shipping income that is attributable to the transport of cargoes to or from the United States which is not considered an income tax. The amount of this tax for the years ended December 31, 2016 and 2017 was $21,275 and $15,135, respectively, and for the year ended December 31, 2018 is estimated at $12,311.was $15,135. The amount of the 20162018 tax was paid on June 16, 2017 and the amount of the 2017 tax was paid on September 17, 201815, 2019 and was recorded within "Vessel operating expenses" in the accompanying consolidated statements of operations when paid. The amount2018 hasthe respective years, because the non-qualified 5% shareholders did not yet been paid.own more than 50% of the Company’s common stock for more than half of the days during the taxable years.9.10.Commitments and Contingencies a) As of December 31, 2020 a subsidiary of the Company, Alterwall Business Inc., owner of M/V “Ninos”, is involved in a dispute with a fuel oil supplier who claimed a maritime lien against the vessel after the company which had time-chartered the vessel from the Company went bankrupt in October 2009 and failed to pay certain invoices. The vessel was arrested in Karachi in November 2009 and released after a bank guarantee for an amount of $0.53 million was provided on behalf of the Company, for which the bank has restricted an equal amount of the Company's cash which is presented within “Restricted Cash” under “Long-term assets” in the consolidated balance sheets. The legal proceedings are ongoing. Although the Company believes it will be successful in its claim, it made a provision of $0.15 million in prior years for any costs that may be incurred. b) AsBased on the above agreement the Company issued on November 16, 2020 161,357 shares to Synergy Holdings Limited based on the 20-day volume weighted average price of the Company’s common Shares calculated on November 16, 2020 which was $3.09871. The supplementary contingent payment was recorded as part of the acquisition cost of the abovementioned vessels, using the closing price of the Company’s common shares on the Nasdaq Capital Market on the date of issuance of $3.40 per share.a subsidiary of the Company, Alterwall Business Inc. owner of M/V “Ninos”, has a dispute with a fuel oil supplier who claimed a maritime lien against the vessel after the company which had time-chartered the vessel from the Company went bankrupt2019 and 2020October 2009 and failed to pay certain invoices. The vessel was arrested in Karachi in November 2009 and released after a bank guarantee for an amount of $0.53 million was provided on behalf of the Company, for which the bank has restricted an equal amount of the Company's cash which is presented within Restricted Cash. Legal proceedings continue. Although the Company believes it will be successful in its claim, it has made a provision of $0.15 million, included in “Other general and administrative expenses” in “Consolidated statements of operations”, for any costs that may be incurred.U.S. Dollars)10. Commitments and Contingencies - continued F-34F-4720172019 and 20182020 and for the2016, 20172018, 2019 and 2018202010.Stock Incentive Plan11. Stock Incentive Plan 600,00075,000 shares, respectively, over 10 years after the 2018 Plan’s adoption date. The persons eligible to receive awards under the 2018 Plan are officers, directors, and executive, managerial, administrative and professional employees of the Company or Eurobulk or Eurochart (collectively, “key persons”) as the Board, in its sole discretion, shall select based upon such factors as the Board shall deem relevant. Awards may be made under the 2018 Plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock, restricted stock units and performance shares. Details of awards granted under the 2014 Plan and the 2018 Plan during the three year period ended December 31, 20182020 are noted below.a) On November 3, 2016 an award of 82,080 non-vested restricted shares, was made to 19 key persons of which 50% vested on November 1, 2017 and 50% vested on November 1, 2018; awards to officers and directors amounted to 48,048 shares and the remaining 34,032 shares were awarded to employees of Eurobulk.b)On November 2, 2017 an award of 100,27012,534 non-vested restricted shares, was made to 18 key persons of which 50% vested on July 1, 2018 and 50% will vestvested on July 1, 2019; awards to officers and directors amounted to 57,7007,213 shares and the remaining 42,5705,321 shares were awarded to employees of Eurobulk.c)b)125,45015,681 non-vested restricted shares, was made to 18 key persons of which 50% will vestvested on November 16, 2019 and 50% will vestvested on November 16, 2020; awards to officers and directors amounted to 72,1709,021 shares and the remaining 53,2806,660 shares were awarded to employees of Eurobulk.c) d) estimates the forfeitures of non-vestedaccounts for restricted shares to be immaterial and hence accounts forshare awards forfeitures as they occur. During 2017, 4,306the year ended December 31, 2020, 817 shares were forfeited with a weighted-average grant-date fair value of $2.78$8.39 per share. No forfeitures occurred in the years ended December 31, 20162018 and 2018.2019.F-35F-4811. Stock Incentive Plan – continued Non-vested Shares Number of shares Weighted-Average Grant-Date Fair Value 17,545 12.80 15,681 8.56 (11,278 12.16 21,948 10.16 21,948 10.16 15,444 8.13 (14,108 11.01 23,284 8.28 23,284 8.28 45,900 2.71 (15,064 8.34 (817 8.39 53,303 3.46 20172019 and 20182020 and for the2016, 20172018, 2019 and 2018202010.Stock Incentive Plan - continuedThe compensation cost that has been charged against income for awards was $294,341, $116,562 and $124,487, for the years ended December 31, 2016, 2017 and 2018, respectively, and is included within “Other general and administrative expenses” in the “Consolidated statements of operations”. The Company has used the straight-line method to recognize the cost of the awards.A summary of the status of the Company’s non-vested shares as of December 31, 2018 and changes during the year ended December 31, 2018, are presented below:Non-vested Shares Shares Non-vested on January 1, 2018 140,362 1.60 Granted 125,450 1.07 Vested (90,227 ) 1.52 Non-vested on December 31, 2018 175,585 1.27 As of December 31, 2018, there was $127,278 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2014 Plan and the 2018 Plan and is expected to be recognized over a weighted-average period of 0.96 years. The total fair value at grant-date of shares granted during the year ended December 31, 2016, December 31, 2017, and December 31, 2018 was $99,317, $176,475 and $134,232, respectively.11.12.LossEarnings / (Loss) Per Shareareis computed as follows: 2016 2017 2018 Income: Net loss attributable to common shareholders, continuing operations (35,805,469 ) (8,753,072 ) (1,999,129 ) Basic and diluted earnings per share: 8,165,703 11,067,524 11,318,197 Basic and diluted loss per share, continuing operations (4.38 ) (0.79 ) (0.18 ) Net loss attributable to common shareholders, discontinued operations (10,141,353 ) 849,701 554,506 Net loss attributable to common shareholders (45,946,822 ) (7,903,371 ) (1,144,623 ) Basic and diluted loss per share (5.63 ) (0.71 ) (0.10 ) 2018 2019 2020 Income: During 2016, 2017For the years ended December 31, 2018, 2019 and 2018,2020, the effect of the21,948, 23,284 and 53,303 non-vested stock awards, respectively, and of 19,605, 8,000, and 8,365 Series B Preferred Shares, respectively, was anti-dilutive. The number of dilutive securities was nil shares in 2016, 20172018, 2019 and 2018.2020.F-36F-5020172019 and 20182020 and for the2016, 20172018, 2019 and 2018202012.Voyage and Vessel Operating Expenses13. Voyage and Vessel Operating Expenses Year ended December 31, Year ended December 31, 2016 2017 2018 2018 2019 2020 Voyage expenses Port charges and canal dues 386,290 1,156,511 384,893 Bunkers 822,795 407,978 876,195 Total 1,209,085 1,564,489 1,261,088 1,261,088 1,055,408 1,334,259 Vessel operating expenses Crew wages and related costs 8,049,555 8,771,386 11,020,924 Insurance 1,249,942 1,261,976 1,537,539 Repairs and maintenance 232,082 643,788 1,043,632 Lubricants 1,190,137 1,169,412 1,665,849 Spares and consumable stores 2,290,196 2,391,420 3,445,422 Professional and legal fees 116,733 10,037 252,156 Other 724,799 771,323 1,020,648 Total 13,853,444 15,019,342 19,986,170 19,986,170 23,983,282 32,219,689 13.Derivative Financial Instruments14. Derivative Financial Instruments EffectiveOn October 17, 2014, the Company entered into one interest rate swap contract with Eurobank – Ergasias S.A. (“Eurobank”) onfor a notional amount of $10.0 million, with inception date on October 14, 2014 and maturity date on May 28, 2019, in order to manage interest costs and the risk associated with changing interest rates of the Company’s loans. Under the terms of the swap, Eurobank makesmade a quarterly payment to the Company equal to the 3-month LIBOR while the Company payspaid an adjustable rate averaging 1.97% (Eurobank makes a quarterly payment to(more specifically, the Company equal to the 3-month LIBOR while the Company payspaid the fixed rate of 0.50% until November 28, 2016, then 0.95% until November 28, 2017 and then 3.55% until May 28, 2019) based on the relevant notional amount.F-37F-5120172019 and 20182020 and for the2016, 20172018, 2019 and 2018202013.Derivative Financial Instruments - continued14. Derivative Financial Instruments - continued
On April 16, 2020, the Company entered into one interest rate swap contract with Eurobank on a notional amount of $30.0 million, with inception date on April 24, 2020 and maturity date on April 24, 2025. Under the terms of the swap, Eurobank makes a quarterly payment to the Company equal to the 3-month LIBOR while the Company pays a fixed rate of 0.78% based on the relevant notional amount.swapsswap contract did not qualify for hedge accounting as of December 31, 2017 and 2018.2020. As of December 31, 2019, the Company had no interest rate swaps open positions.Derivatives not designated as hedging instruments
2017 Interest rate swap contracts Current liabilities – Derivatives 229,451 41,435 Interest rate swap contracts Long-term liabilities – Derivatives 16,631 - Total derivative liabilities 246,082 41,435 Derivatives not designated as hedging instruments Balance Sheet Location December 31, 2019 December 31, 2020 Interest rate swap contract Current liabilities – Derivative - 203,553 Interest rate swap contract Long-term liabilities – Derivative - 362,195 Total derivative liabilities - 565,748 Derivatives not designated as hedging instruments Interest rate swap contracts– Fair value (Loss) / gain on derivatives, net 12,921 (5,901 ) 204,647 Interest rate swap contracts - Realized (loss) / gain (Loss) / gain on derivatives, net (132,075 ) 19,071 (201,745 ) Total (Loss) / gain on interest rate swap contracts (119,154 ) 13,170 2,902 Derivatives not designated as hedging instruments Location of gain (loss) recognized Year Ended December 31, 2018 Year Ended December 31, 2019 Year Ended December 31, 2020 Interest rate swap contract– Unrealized gain / (loss) Loss on derivatives, net 204,647 - (565,748) Interest rate swap contract- Realized loss Loss on derivatives, net (201,745) (2,885) (22,240) Total net gain / (loss) on interest rate swap contract 2,902 (2,885) 587,988 14. Derivative Financial Instruments - continued F-38Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)13.Derivative Financial Instruments - continuedFFA contracts not designated as hedging instruments Location of gain (loss) recognized Year Ended December 31, 2017 Year Ended December 31, 2018 FFA contracts – Fair value (Loss)/gain on derivatives, net (781) - FFA contracts – Realized gain/(loss) (Loss)/gain on derivatives, net - (47,245) Total loss on FFA contracts (781) (47,245) FFA contracts not designated as hedging instruments Location of gain (loss) recognized Year Ended December 31, 2018 Year Ended December 31, 2019 Year Ended December 31, 2020 FFA contracts – Unrealized loss Loss on derivatives, net - - - FFA contracts – Realized loss Loss on derivatives, net (47,245) - - Total loss on FFA contracts (47,245) - - F-39F-5320172019 and 20182020 and for the2016, 20172018, 2019 and 2018202014.Investment in Joint Venture and Other InvestmentOn March 25, 2010, the Company entered into a partnership (the “Joint Venture”) with companies managed by Eton Park Capital Management, L.P. ("Eton Park") and Rhône Capital III L.P. ("Rhône") to form Euromar LLC. Eton Park’s investments were made through Paros Ltd., a Cayman Islands exempted company, and Rhône’s investments were made through the Cayman Islands limited companies All Seas Investors I Ltd., All Seas Investors II Ltd., and the Cayman Islands exempted limited partnership All Seas Investors III LP. Euromar LLC was set up to acquire, maintain, manage, operate and dispose of shipping vessels. The Company invested $25.0 million for a 14.286% interest in the Joint Venture, while Eton Park and Rhône each invested to $75.0 million for a 42.857% interest for a total of $175 million. Management of the vessels and various administrative services pertaining to the vessels were performed by Euroseas and its affiliates; strategic, financial and reporting services were provided by Euroseas. For these services, Euroseas earned $240,000 in 2017 and 2016. These amounts are recorded in “Related party management fee income” under “Revenues”.The Company accounted for its investment in the Joint Venture using the equity method of accounting despite the fact that it was a minority partner as it had significant influence in the operations and management of Euromar LLC (see “Significant Accounting Policies” – Note 2). The Company’s share of the results of operations of the Joint Venture is included in the “Consolidated statements of operations” as “Equity loss in joint venture”.The Company’s share of the results of operations of the Joint Venture amounted to a loss of $2.4 million and $0 million for the years 2016 and 2017, respectively. Euromar LLC restructured its credit facilities between 2013 and 2016. As a consequence of the restructured credit facilities and continued adverse market developments, during 2016, the Company determined in June 2016 that its investment in the joint venture was not recoverable and as a result it recorded a $14.0 million impairment and recorded an additional impairment of $0.1 million in December 2016 for a total of $14.1 million for the year ended December 31, 2016 which is presented in the line “Impairment in joint venture” in the “Consolidated statements of operations”. The carrying value of the Company’s investment in Euromar LLC as of December 31, 2016 was zero and is presented in the “Investment in joint venture” in the “Consolidated balance sheets”. In June 2017, the Company acquired one of the vessels of Euromar with the consent of its lender by assuming debt equal to the market value of the vessel with any excess indebtedness to the lender written off and Euromar released from any guarantees to the lender. In September 2017, Euroseas acquired the 85.714% interest in Euromar it did not already own for nominal cost. As a result of the acquisition, Euromar, which was a joint venture among the Company and two private equity firms, became a wholly-owned subsidiary of the Company. However, Euromar vessels were substantially under the control of its lenders. The Company provided no guarantees to Euromar's lenders, and none of the lenders had any recourse against the Company. As of December 31, 2017, all vessels of Euromar were sold with the consent of Euromar’s lenders; all proceeds from such sales and any funds in excess of other liabilities were applied towards the indebtedness of Euromar with any excess indebtedness written off; Euromar was released from all its corporate guarantees to its lenders. As a result of the above, Euromar has not been consolidated in our results nor any gain or loss from it has been recognized.F-40Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)14.Investment in Joint Venture and Other Investment - continuedOn October 15, 2013 by and among the Company, Paros Ltd., All Seas Investors I Ltd., All Seas Investors II Ltd. and All Seas Investors III LP, a Contribution Agreement was signed. Under this agreement Euroseas agreed to deposit an amount of $5,000,000 into an escrow account (“Escrowed Funds”) controlled by Paros Ltd., All Seas Investors I Ltd., All Seas Investors II Ltd. and All Seas Investors III LP which can distribute part or all of the funds to Euromar LLC until December 31, 2018. With the distribution of the Escrowed Funds, Euromar LLC will issue to the Company (or a subsidiary thereof) units representing a preferred membership interest in Euromar LLC (each, a “Preferred Unit”) in respect of the Escrowed Funds based on the following ratio: one Preferred Unit in exchange for each $1,000 of the Escrowed Cash, or 5,000 Preferred Units in total (assuming $5 million of Escrowed Cash). In March 2014, in relation to the acquisition of a vessel by Euromar LLC, $1,000,000 of the Escrowed Funds was contributed into Euromar LLC .The Company is entitled to a “payment-in-kind” dividend at a rate of 19% per year compounded annually from the date of issuance. Euromar LLC can return any undistributed Escrowed Funds to the Company after the second anniversary of the agreement while after the fifth anniversary any undistributed Escrowed Funds will be returned to the Company and Preferred Units will be issued by Euromar LLC for any accrued dividends at the time. Euroseas recorded accrued dividend income of $1,024,714, $0 and $0 for the years ended December 31, 2016, 2017 and 2018, respectively, which is presented in the “Consolidated statements of operations” as “Other Investment Income”. In the fourth quarter of 2016, the Company determined that its “Other investment” was not recoverable except for the undistributed Escrowed Funds ($4,000,000) and as a result it recorded a $4,421,452 impairment which is presented in the “Consolidated statements of operations” in the year ended December 31, 2016. The Company stopped recognizing dividend income from its “Other investment” from October 1, 2016. The Escrowed Funds were returned to Euroseas in September 2017.(In USD)15.Other InvestmentBalance, January 1, 20167,396,738Total gain for the period included in Investment income1,024,714Impairment of other investment(4,421,452)Balance, December 31, 20164,000,000Return of funds, September 22, 2017(4,000,000)Balance, December 31, 2017-Preferred shares F-41Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars) Number of Shares Preferred
Shares Amount Dividends
paid-in-kind Total 37,314 35,613,759 - (14,500,000 ) 19,605 18,757,361 - 8,000 6,849,522 805,055 7,654,577 8,365 6,849,522 1,170,114 8,019,636 15.Preferred shares
Shares
paid-in-kind Total 33,779 29,000,000 3,079,249 32,079,249 Dividends declared 1,726 - 1,725,699 1,725,699 35,505 29,000,000 4,804,948 33,804,948 Dividends declared 1,809 - 1,808,811 1,808,811 37,314 29,000,000 6,613,759 35,613,759 Dividends declared 1,333 - 1,335,733 1,335,733 Shares distributed to EuroDry (19,042 ) (14,500,000 ) (3,692,131 ) (18,192,131 ) 19,605 14,500,000 4,257,361 18,757,361 (in cash or in-kind at the option of the Company, subject to certain exceptions) until January 29, 2019 at a rate of 0% or 5%, depending on the trading price of the Company's common stock. In addition, if a cash dividend is paid on the Company's common stock during such time, then if the dividend paid on the Series B Preferred Shares is 5%, the holders of Series B Preferred Shares shall receive such dividend in cash.shall also receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. If, however, the dividend on the Series B Preferred Shares is 0%, then the holders of Series B Preferred Shares shall receive a cash dividend equalSubsidiariesgreaterconsolidated financial statements100% ofDecember 31, 2019 and 2020 and for the common stock15. Preferred shares - continued it would have received on an as-converted basisrate increased to 12% for the two years following January 29, 2019 and 5%.to 14% thereafter and is payable only in cash. Cash dividends are declared at each quarter and actual payments are made within the following quarter. If a cash dividend is paid on the Company's common stock after January 29, 2019, the holders of Series B Preferred Shares shall receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis.F-42Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)15.Preferred shares - continuedThe dividend rate will increase to 12% for the two years following January 29, 2019 and to 14% thereafter. The Series B Preferred Shares can be converted at the option of their holders at any time, and at the option of the Company only if certain share price and liquidity milestones are met. Each Series B Preferred Share is convertible into common stock at a conversion price of $12.25$15.58 (as adjusted in September 2015 following the shareholders’ rights offering of the Company) subject to further adjustment for certain events. The Series B Preferred Shares are redeemable in cash by the Company at any time after the fifth anniversary of the original issue date. Holders of the Series B Preferred Shares may require the Company to redeem their shares only upon the occurrence of certain corporate events., $14,500,000 of the initial preferred shares amount of the Company and $3,692,131 of dividends paid in kind. Euroseas contributed to EuroDry its interests in seven of its drybulk subsidiaries and related intercompany debts and obligations in exchange for approximately 2,254,830 of EuroDry common shares and 19,042 of EuroDry Series B Preferred Shares (representing all of the EuroDry's issued and outstanding stock as of that time). Euroseas made a special dividend of 100% of EuroDry's outstanding common shares to holders of Euroseas' common stock as of the record date of the special dividend. In addition, Euroseas distributed 100% of EuroDry Series B Preferred Shares to holders of Euroseas' Series B Preferred Shares as described above.is $19,607,358. After January 2019 the dividend will be payable onlyand 2020cash as described above.U.S. Dollars)15. Preferred shares - continued F-43Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)16.Financial Instruments16. Financial Instruments including interest rate swaps, trade accounts payable, accrued expenses and amount due to related company.debt.bank loans. Under the terms of the interest rate swaps the Company and the bank agreedagree to exchange, at specified intervals the difference between a paying fixed rate and receiving floating rate interest amount calculated by reference to the agreed principal amounts and maturities.maturities. Interest rate swaps allow the Company to convert long-term borrowings issued at floating rates into equivalent fixed rates. Even though the interest rate swaps were entered into for economic hedging purposes, as noted in Note 1314 they do not qualify for hedge accounting, under the guidance relating to Derivatives and Hedging, as the Company does not have currently written contemporaneous documentation identifying the risk being hedged and, both on a prospective and retrospective basis, performing an effectiveness test to support that the hedging relationship is highly effective. Consequently, the Company recognizes the change in fair value of these derivatives in the “(Loss)/ gain“Loss on derivatives, net” in the “Consolidatedconsolidated statements of operations.” As of December 31, 2018,2020 the Company had one open swap contract for a notional amount of $10.0$30.0 million.16. Financial Instruments - continued F-44Euroseas Ltd. and SubsidiariesNotes to the consolidated financial statementsas of December 31, 2017 and 2018 and for theYears ended December 31, 2016, 2017 and 2018(All amounts expressed in U.S. Dollars)16.Financial Instruments - continuedswapswaps determined through Level 2 of the fair value hierarchy as defined in guidance relating to "Fair value measurements" are derived principally from or corroborated by observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow value to be determined.Recurring Fair Value Measurements Fair Value Measurement as of December 31, 2018 Total (Level 1) (Level 2) (Level 3) $41,435 $41,435 Fair Value Measurement as of December 31, 2017 Total (Level 1) (Level 2) (Level 3) Interest rate swap contracts, current portion $229,451 - $229,451 - $16,631 - $16,631 - Asset Measured at Fair Value on a Non-recurring BasisVessels Held for Sale (see Note 4) are measured at fair value less estimated costs to sell. The fair value is based for M/V “Aggeliki P” on the scrap price per ton as quoted by industry sources in October 2017 with the vessel sold in December 2017, and for M/V “Monica P” on market price estimates for sale to unrelated parties provided by Eurochart and third party brokers also in October 2017, respectively and are considered good estimates of the fair value of the vessels as of December 31, 2017.F-45F-5720172019 and 20182020 and for the2016, 20172018, 2019 and 2018202016. Financial Instruments - continued Fair Value Measurement as of December 31, 2020 Total (Level 1) (Level 2) (Level 3) 16.Financial Instruments - continued16. Financial Instruments - continued On December 20, 2016, the Company agreed to sell for scrap M/V "Eleni P” with a carrying amount of $8.74 million, which was classified as vessel held for sale and written down to its fair value of $2.95 million (based on the price agreed by the Company to sell the vessel to unrelated parties in a transaction that was concluded in January 2017), less estimated costs to sell of $0.13 million resulting in a loss of $5.92 million (Note 4), which was included in the accompanying consolidated statements of operations under “Loss on write down of vessel held for sale”. The fair value of M/V “Eleni P” is considered Level 2. has also entered into a profit sharing agreement with Credit Agricole whereby it willwould share with the bank 35% of the excess of the fair market value of M/V “EM Astoria” over the outstanding loan when the vessel iswas sold or when the loan matures.matured. As a result of the lender's entitlement to participate in the appreciation of the market value of the mortgaged vessel, the Company has recognized a participation liability of amount $1,297,100 and $1,067,500 as of December 31, 2017 and 2018, respectively, presented in "Vessel profit participation liability" in the accompanying “Consolidatedconsolidated balance sheets”,sheets, with a corresponding debit to a debt discount account, presented contra to the loan balance. The fair value of this participation agreement is considered Level 2, as it directly depends on the fair value or expected fair value of M/V “EM Astoria”. The Company completed the refinancing of the specific loan in June 2019 using its revolving loan facility with Eurobank Ergasias S.A., as explained in Note 8-(a) above, with the final participation liability paid amounting to $950,000. For the year ended December 31, 2019, loss on debt extinguishment was $0.3 million and related to the write-off of the unamortized debt discount in connection with the refinancing of the participating mortgage loan, partly offset by the lower amount, at which the vessel profit participation liability was finally settled, recorded in “Loss on debt extinguishment” in the consolidated statement of operations.SeptemberJune 30, 20172020 the vessel M/V “Monica P”"EM Oinousses" with a carrying amount of $8.23$3.77 million, was classified as vessel held for sale and written down to its fair value of $5.0$3.87 million, less estimated costs to sell of $0.10$0.22 million, resulting in a loss of $3.33$0.12 million, (Note 4), which was included in the accompanying consolidated statementsstatement of operations under “Loss on write downwrite-down of vesselsvessel held for sale”. The fair value of M/V “Monica P”"EM Oinousses" was determined by reference to its negotiated and thereafter agreed sale price and is considered levelLevel 2.As of September 30, 2017 the vessel M/V “Aggeliki P” with a carrying amount of $5.39 million, was classified as vessel held for sale and written down to its fair value of $4.3 million, less estimated costs to sell of $0.17 million, resulting in a loss of $1.26 million (Note 4), which was included in the accompanying consolidated statements of operations under “Loss on write down of vessels held for sale”. The fair value of M/V “Aggeliki P” is considered level 2.During the second quarter of 2016 and in December 2016, the Company concluded that its equity investment in Euromar was impaired and wrote it down to its estimated fair value. The impairment was due both to changes in the terms of its investment during the period as well as continuing less favorable market developments. The change in the terms of the Company’s investment resulted from the conclusion of loan restructuring agreements between Euromar and its lenders that provided the latter with increased payments before any capital is returned to Euromar’s partners, which include the Company, and, in addition, participation of the lenders in the profits of and any distributions made by Euromar. The fair value of the Company’s “Investment in joint venture” is considered a Level 3 item (see Note 14 – “Investment in Joint Venture and Other Investment”).The key input that determines the fair value of the Company’s “Investment in joint venture” is the cost of capital for investments in containership vessels which is not observable and hence is considered a level 3 item. The Company estimated the cost of capital in the range of 9-10% p.a. based on its return threshold in considering investments in containerships which, in turn take into consideration the historical returns and volatility of such investments. Additional inputs required include earnings and operating cost assumptions for each vessel as well other expenses and liabilities of Euromar. As of December 31, 2016, the Company used the Discounted Cash Flow technique and a cost of capital of 9.5% p.a. to calculate the fair value of its equity investment in Euromar.F-46F-5920172019 and 20182020 and for the2016, 20172018, 2019 and 2018202016.Financial Instruments - continued16. Financial Instruments - continued Furthermore, as a result of the same analysis described above, the Company determined that the fair value of its “Other investment”, which consists of preferred units in Euromar was also impaired and recognized a $4,421,452 impairment as of December 31, 2016, which is shown under “Impairment in other investment”. The key input that determined the fair value of the Company’s “Other investment” was the required rate of return of 19% p.a. for preferred equity investments in investment opportunities of similar risk which was not observable and hence is considered a Level 3 item. The Company considered the initial dividend rate of 19% p.a. as the appropriate rate for its fair value calculation and monitored market conditions for similar investment and other possible developments specific to its investment that might provide indications for changes in the required rate of return it used in its fair value measurement. As of December 31, 2016, the Company did not identify indications that would require changes in the required rate of return. The fair value of the Company’s other investment was calculated using the discounted cash flow technique.Nonrecurring Fair Value Measurements at Reporting Date December 31, 2016 Fair Value Level 1 Level 2 Level 3 Loss 2016 Vessels held for sale $ 2,946,923 - $ 2,946,923 - $ 5,924,668 Other investment $ 4,000,000 - - $ 4,000,000 $ 4,421,452 Investment in joint venture 0 - - 0 $ 14,071,075 December 31, 2017 Fair Value Level 1 Level 2 Level 3 Loss 2017 Vessels held for sale $ 5,000,000 - $ 5,000,000 - $ 4,595,819 Vessel profit participating liability $ 1,297,100 - $ 1,297,100 - - December 31, 2018 Fair Value Level 1 Level 2 Level 3 Loss 2018 Vessel profit participating liability $ 1,067,500 - $ 1,067,500 - - 20172019 and 2018,2020, due to their short-term maturity. Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. The fair value of the Company’s total borrowingslong-term bank loans, bearing interest at variable interest rates approximates $36.9 milliontheir recorded values as of December 31, 2018 or $0.6 million less than its carrying value of $37.5 million. The fair value of the long term borrowings are estimated based on current interest rates offered2020, due to the Company for similar loans.variable interest rate nature thereof. LIBOR rates are observable at commonly quoted intervals for the full terms of the loans and hence fair values of the long-term bank loans are considered Level 2 items in accordance with the fair value hierarchy due to their variable interest rate, being the LIBOR. The fair value of the Company’s related party loan is estimated based on current interest rates offered to the Company for similar loans and approximates its individual carrying amount due to its short-term maturity. The fair value of the Company’s interest rate swap is the estimated amount the Company would pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the Company and its counter parties.F-47F-6020172019 and 20182020 and for the2016, 20172018, 2019 and 2018202017. Discontinued Operations presented.presented. The revenue and loss for the discontinued operations for the periodsyears ended December 31, 2016, 20172018, 2019 and 20182020 are analyzed as follows: 2016 2017 2018 2018 2019 2020 Statement of Operations Data Voyage revenue 8,331,821 20,280,215 25,934,204 (452,868 ) (1,122,196 ) (1,411,333 ) Voyage expenses (82,627 ) (2,396,318 ) (410,676 ) (4,308,418 ) (6,892,388 ) (9,183,152 ) Drydocking expenses - (127,509 ) (1,465,079 ) Related party management fees (780,135 ) (1,409,716 ) (1,701,340 ) Vessel depreciation (3,828,634 ) (4,786,272 ) (5,422,155 ) (798,828 ) (917,160 ) (2,346,502 ) Loss on termination and impairment of shipbuilding contracts (7,050,179 ) - - Operating (loss) / income (8,969,868 ) 2,628,656 3,993,967 Operating income 3,993,967 - - Total other expenses, net (1,171,485 ) (1,778,955 ) (2,874,232 ) Net income (10,141,353 ) 849,701 1,119,735 1,119,735 - - Dividend Series B Preferred Shares - - (565,229 ) Net income attributable to discontinued operations (10,141,353 ) 849,701 554,506 Earnings per share attributable to common shareholders, basic and diluted (6.21 ) 0.38 0.25 Weighted average number of shares outstanding during period, basic and diluted 1,633,141 2,213,505 2,232,821 Net income attributable to common shareholders 554,506 - - F-48F-6120172019 and 20182020 and for the2016, 20172018, 2019 and 2018202017. Discontinued Operations - continued As of December 31, 2017, the amount due from spun-off subsidiary (EuroDry) was $24.6 million included in “Long-term liabilities of discontinued operations” in the “Consolidated balance sheets”. This amount refers to payments made by Euroseas on behalf of the subsidiaries in relation to the shipbuilding contracts for the construction of the newbuilding vessels “Alexandros P.” and “Ekaterini” contributed to EuroDry amounting to $29.8 million, restricted cash requirements amounting to $1.2 million and the acquisition of the secondhand vessel "Tasos" amounting to $4.5 million less an amount of $10.9 million relating to the loan drawn by one of the EuroDry subsidiaries during 2017 using as collateral the newbuilding vessel "Alexandros P". The amount due from EuroDry of $24.6 million was allocated during 2018 as follows: (i) $17.8 million as a reduction in the Series B Preferred shares balance of the Company outstanding as of 31.12.2017 as a result of the distribution of EuroDry Series B Preferred Shares representing 50% of the outstanding Series B Preferred stock of the Company on the Spin-off date (refer to Note 15 above), (ii) $5.5 million was allocated to equity contributed to EuroDry for contributions for the vessels spun-off paid in prior years relating to the amount recognized as loss on termination of the shipbuilding contract of Hull No. DY 161 and impairment of the shipbuilding contract of Hull No. YZJ2013-1153 (named “Ekaterini”) and (iii) $1.3 million as a reduction to the "Due to related companies" liability.In the year 2018 Euroseas paid the amount of $3.3 million for expenses concerning the construction cost of M/V Ekaterini (Hull No. YZJ2013-1153) and general administrative expenses allocated to EuroDry. Up to the Spin-off date, Euroseas had contributed to EuroDry an amount of $52.52 million as equity in order to partly finance the acquisition of the vessels contributed to EuroDry (M/V Pantelis, M/V Eirini, M/V Xenia and M/V Ekaterini), other general and administrative expenses allocated from the Company to EuroDry as well as the amounts recognized as loss on termination and impairment of shipbuilding contracts described above. An amount of $9.66 million was also allocated to EuroDry from the Company’s accumulated deficit, comprising the accumulated deficit of the subsidiaries contributed to EuroDry.Subsidiaries. In total an amount of $42.86 million was allocated from the Company’s shareholders’ equity to EuroDry’s shareholders’ equity.18. Common Stock F-49F-6220172019 and 20182020 and for the2016, 20172018, 2019 and 2018202018. Common Stock - continued 18.Common StockFollowing the Company’s prospectus supplement filed with the SEC on December 20, 2016,In August 2019, the Company issued 2,816,901 common shares for the acquisition of M/V “EM Hydra”, M/V “EM Spetses”, M/V “EM Kea” and sold at-the-market (ATM) 978,847 shares of common stock during December 2016 for gross proceeds net of commissions of $2.2 million.On December 14, 2016, the Company reached an agreement with Friends Investment Co.M/V “Diamantis P”, an affiliate and its largest shareholder, to sell to Friends 719,425 shares of common stock at $1.39 per share, the closing priceowned by affiliates of the Company shares on December 14, 2016, for total proceeds of $1,000,000.On December 23, 2016,Pittas family, including the Company issued 900,000 shares of common stock at $2.00 per share in order to purchase M/V “RT Dagr” from a related party (Tennenbaum Capital Partners, a holder of the Company's Series B Preferred Shares), a feeder containership vessel.Company’s Chief Executive Officer (refer Note 1).January 2017,October 2019, following the Company’s prospectus supplement filed with the SEC on December 20, 2016, as further supplemented by the prospectus dated January 13, 2017, October 30, 2018 and May 30, 2019, the Company issued and sold at-the-market (ATM) 301,780144,727 shares of common stock for gross proceeds net of commissions of $0.6$0.9 million.November 2018,August 2020, following the Company’s prospectus supplement filed with the SEC on December 20, 2016, as further supplemented by the prospectus dated January 13, 2017, October 12,30, 2018 and May 30, 2019, the Company issued and sold at-the-market (ATM) 1,116,069200,000 shares of common stock for gross proceeds net of commissions of $2.0$0.7 million.19. Other operating income 20. Subsequent Events F-50(a) (b) In January and February 2021, the Company sold 82,901 shares of common stock under its at-the-market offering for approximately $0.74 million of net proceeds.
F-64