1. Basis of Presentation and General Information

Euroseas Ltd. was formed on May 5, 2005 under the laws of the Republic of the Marshall Islands to consolidate the beneficial owners of certain ship-owning companies. Euroseas Ltd., through its wholly owned vessel owning subsidiaries (collectively the "Company" or “Euroseas”) is engaged in the ocean transportation of containers through ownership and operation of containerships. Euroseas’ common shares trade on the Nasdaq Capital Market under the ticker symbol “ESEA”.

The operations of the vessels are managed by Eurobulk Ltd. (“Eurobulk” or “Management Company” or “Manager”), a corporation controlled by members of the Pittas family. Eurobulk has an office in Greece located at 4 Messogiou & Evropis Street, Maroussi, Greece. The Manager provides the Company with a wide range of shipping services such as technical support and maintenance, insurance consulting, chartering, financial and accounting services and executive management services, in consideration for fixed and variable fees (see Note 5).

The Pittas family is the controlling shareholder of Friends Investment Company Inc., Containers Shareholders Trinity Ltd., Eurobulk Marine Holdings Inc. and Family United Navigation Co., which, in turn, collectively own 58.9% of the Company’s shares as of June 30, 2026.

The accompanying unaudited condensed consolidated financial statements include the accounts of Euroseas Ltd., and its subsidiaries (vessel owning entities it controls) and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025 as filed with the U.S. Securities and Exchange Commission ("SEC") on Form 20-F on April 29, 2026.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) for interim financial information. Accordingly, they do not include all the information and notes required by US GAAP for complete financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. Operating results for the six-month period ended June 30, 2026 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2026.

On January 3, 2025, the Company announced its intent to spin-off the Company’s older three vessels, M/V “Aegean Express”, M/V “Diamantis P” and M/V “Joanna”, into a separate company, Euroholdings Ltd. (“Euroholdings”), which applied for listing on the NASDAQ Capital Market. The Company contributed the three vessel owning companies to Euroholdings on January 8, 2025 in exchange for 100% of the shares of Euroholdings, which it would then distribute to its shareholders upon the spin-off distribution. Shares of Euroholdings Ltd. were distributed on March 17, 2025 (the “Distribution Date”) to shareholders of record of the Company as of March 7, 2025 (the “Record Date”). The Company’s shareholders received one share of common stock of Euroholdings Ltd. for every two and a half shares of common stock of the Company they owned as of the Record Date. Beginning on March 18, 2025, the common shares of Euroholdings Ltd. began trading on NASDAQ under the symbol “EHLD".

The transaction was accounted for as a transfer of net assets between entities under common control in accordance with ASC 805-50. Accordingly, the assets and liabilities were transferred at their historical carrying amounts, and no gain or loss was recognized. The assets and liabilities that were transferred to Euroholdings Ltd. on March 17, 2025 at their recorded amounts (no impairment of value was required) were as follows:

(*) Subsequent to the Distribution Date and up to March 31, 2025, the Company transferred to a bank account of Euroholdings Ltd the proceeds from the sale of vessel Diamantis P amounting to $13,129,541, settling the “Due from former parent company” balance presented above.

2. Significant Accounting Policies

A summary of the Company's significant accounting policies and recent accounting pronouncements are included in Note 2 of the Company’s consolidated financial statements, included in the Annual Report on Form 20-F for the fiscal year ended December 31, 2025 (the “2025 Annual Report”). There have been no material changes to the Company’s significant accounting policies and recent accounting pronouncements in the six months ended June 30, 2026, except for as discussed below:

3.  Advances for Vessels under Construction

Advances for vessels under construction as of June 30, 2026 mainly represent progress payments according to the agreements entered into with the shipyards since June 2024 for the construction of twelve eco-design fuel efficient intermediate containerships, as well as capitalized interest and legal and other costs related to the construction. See Note 8 for the outstanding commitments to the shipyards. The amounts in the accompanying unaudited condensed consolidated balance sheets are as follows:

4. Vessels, net

The amounts in the accompanying unaudited condensed consolidated balance sheets are as follows:

Vessel improvements for the six-month period ended June 30, 2026, mainly refer to a number of other energy saving and monitoring devices installed on twenty of our vessels. All these installations qualified as vessel improvements and were therefore capitalized.

As of June 30, 2026, twelve vessels with a net book value of $342.5 million are used as collateral under the Company’s loan agreements (see Note 7). Title of ownership is held by the relevant lender for another vessel with a net book value of $42.9 million to secure the relevant sale and lease back financing transaction (see Note 7). Eight of the Company’s vessels, M/V “Evridiki”, M/V “EM Hydra”, M/V “EM Spetses”, M/V “EM Corfu”, M/V “Jonathan P”, M/V “Emmanuel P”, M/V “Rena P” and M/V “EM Kea” are unencumbered.  

Sale of vessel

The Company considers the potential sale of its vessels, for scrap or further trading, depending on a vessel’s age, any additional capital expenditures required, the expected revenues from continuing to own the vessel and the overall market prospects.

On January 10, 2025, the Company entered into a memorandum of agreement to sell M/V “Diamantis”, a 30,360 DWT / 2,008 TEU 1998-built feeder container carrier, for further trading, at a gross price of $13.2 million, following a strategy of disposing older vessels and renewing its fleet.

The vessel was delivered to her new owners on January 15, 2025. The gain on the sale of the vessel is $10.2 million and is presented in the “Gain on sale of vessel” line in the unaudited condensed consolidated statement of comprehensive income for the six-month period ended June 30, 2025.

No such case existed during the first half of 2026.

5. Related Party Transactions

The Company’s vessel owning companies are parties to management agreements with the Management Company (see Note 1), which is controlled by members of the Pittas family, whereby the Management Company provides technical and commercial vessel management for a fixed daily fee of Euro 840 and Euro 875 for the six-month periods ended June 30, 2025 and 2026, respectively, under the Company’s Master Management Agreement (“MMA”) with Eurobulk. Vessel management fees paid to the Management Company amounted to $3,908,030 and $3,954,320 in the six-month periods ended June 30, 2025 and 2026, respectively. The MMA was extended on January 1, 2023 for a further five-year term until January 1, 2028. The Company’s MMA with the Management Company provides for an annual adjustment of the daily vessel management fee due to inflation in the Eurozone to take effect January 1 of every year. These fees are recorded under "Related party management fees" in the unaudited condensed consolidated statements of comprehensive income.

In addition to the vessel management services, the Management Company provides executive services to the Company. For each of the six-month periods ended June 30, 2025 and 2026, compensation paid to the Management Company for such additional services to the Company was $1,150,000 and $1,180,000 respectively. This amount is included in “General and administrative expenses” in the unaudited condensed consolidated statements of comprehensive income.

Amounts due to or from related company represent net disbursements and collections made on behalf of the vessel-owning companies by the Management Company during the normal course of operations for which a right of offset exists. As of December 31, 2025 and June 30, 2026, the amount due to related company was $1,821,723 and $994,870, respectively.

The Company uses brokers for various services, as is industry practice. Eurochart S.A. (“Eurochart”), a company controlled by certain members of the Pittas family, provides vessel sale and purchase services, and chartering services to the Company whereby the Company pays commission of 1% of the vessel sales price and 1.25% of charter revenues. A commission of 1% of the purchase price is also paid to Eurochart by the seller of the vessel for acquisitions the Company makes using Eurochart's services. Commissions to Eurochart S.A. for chartering services were $1,366,387 and $1,437,424 for the six-month periods ended June 30, 2025 and 2026, respectively, recorded in “Commissions” in the unaudited condensed consolidated statements of comprehensive income. There were no commissions payable to Eurochart in connection with vessel sales during the six-month period ended June 30, 2026. Commission to Eurochart amounted to $131,500 for the sale of M/V “Diamantis P” in the six-month period ended June 30, 2025, recorded in “Gain on sale of vessel” in the unaudited condensed consolidated statement of comprehensive income.

Certain members of the Pittas family, together with another unrelated ship management company, have formed a joint venture with the insurance broker Sentinel Maritime Services Inc. (“Sentinel”). Technomar Crew Management Services Corp (“Technomar”) is a company owned by certain members of the Pittas family, together with another unrelated ship management company, which provides crewing services. Sentinel is paid a commission on insurance 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 $83,532 and $164,196 in the first six months of 2025, respectively. In the first six months of 2026, total fees charged by Sentinel and Technomar were $74,968 and $149,679, respectively. These amounts are recorded in “Vessel operating expenses” in the unaudited condensed consolidated statements of comprehensive income.

6. Other operating income / (expenses)

For the six-month period ended June 30, 2025, the Company recorded other operating income of $0.12 million that relates to an insurance claim for loss of hire for one of the vessels. Other operating expenses of $0.44 million recognized in the first half of 2026 refer to expenses incurred for the formation of the Partnership (as defined below in note 14) of $0.60 million, partly offset by an operating income from a settlement and closure of a claim with a charterer of $0.16 million. 

7. Long-Term Debt

This consists of bank loans of the ship-owning companies guaranteed by Euroseas Ltd., as well as a sale and leaseback financing arrangement. Outstanding long-term debt as of December 31, 2025 and June 30, 2026 is as follows:

The future annual debt repayments are as follows:

Details of the loans are discussed in Note 9 of our consolidated financial statements for the year ended December 31, 2025 included in the 2025 Annual Report.

During the six months ended June 30, 2026 there were no changes in the Company’s financing agreements and related terms.

The Company’s bank loans are secured with one or more of the following:

The bank loan agreements also contain covenants such as minimum requirements regarding the security cover ratio covenant (the ratio of fair value of vessel to outstanding loan less cash in retention accounts), restrictions as to changes in management and ownership of the ship-owning companies, distribution of profits or assets (i.e. 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 the 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 installments. Minimum cash balance requirements are in addition to cash held in retention accounts.

These cash deposits amounted to $6,864,027 and $6,961,050 as of December 31, 2025 and June 30, 2026, respectively, and are included in "Restricted cash" under "Current assets" and "Long-term assets" in the unaudited condensed consolidated balance sheets. As of June 30, 2026, the Company satisfied all its debt covenants.

Interest expense, including loan fee amortization for the six-month periods ended June 30, 2025 and 2026 amounted to $7,877,401 and $5,683,352, respectively, after capitalized interest on vessels under construction was recorded for the six-month periods ended June 30, 2025 and 2026 of $115,788 and $nil, respectively.

8. Commitments and Contingencies

As of June 30, 2026, future gross minimum revenues under non-cancellable time charter agreements total $600.1 million, $199.9 million of which is due in the period ending June 30, 2027, $172.4 million is due in period ending June 30, 2028, $103.1 million is due in period ending June 30, 2029, $51.7 million is due in period ending June 30, 2030, $50.5 million is due in period ending June 30, 2031 and $22.5 million is due in the period ending June 30, 2032. In arriving at the future gross minimum revenues, the Company has deducted an estimated one off-hire day per quarter plus estimated off-hire time required for scheduled intermediate and special surveys of the vessels, if applicable. Such off-hire estimate may not be reflective of the actual off-hire in the future. In addition, the actual revenues could be affected by early delivery of the vessel by the charterers or any exercise of the charterers’ options to extend the terms of the charters, which however cannot be estimated and hence not reflected above.

As of June 30, 2026, the Company had under construction twelve container carriers with a total contracted amount of $553.4 million. As of June 30, 2026 the Company has paid an amount of $55.7 million as part of the instalments of the contracts of the abovementioned vessels, leaving an outstanding amount of approximately $479.7 million, $54.5 million of which is due in the period ending June 30, 2027, $269.6 million of which is due in the period ending June 30, 2028 and $155.6 million is due in the period ending June 30, 2029. The Company intends to finance these commitments with a combination of own cash and debt.

There are no material legal proceedings to which the Company is a party or to which any of its properties are subject, other than routine litigation incidental to the Company's business. In the opinion of the management, the disposition of these lawsuits should not have a material impact on the consolidated results of operations, financial position and cash flows.

9. Stock Incentive Plan

A summary of the status of the Company’s unvested shares as of January 1, 2026, and changes during the six-month period ended June 30, 2026, are presented below:

As of June 30, 2026, there was $2,638,642 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted. That cost is expected to be recognized over a weighted-average period of 0.58 years. The share-based compensation recognized relating to the unvested shares was $1,023,848 and $1,678,215 for the six -month periods ended June 30, 2025 and 2026, respectively, and is included within “General and administrative expenses” in the unaudited condensed consolidated statements of comprehensive income.

The unvested shares will accrue dividends as declared which will be retained by the Company until the shares vest at which time they are payable to the grantee. As of June 30, 2026 the unvested restricted shares accrued dividends of $286,505, presented as “Accrued dividends” in the unaudited condensed consolidated balance sheet. As unvested restricted share grantees accrue dividends on awards that are expected to vest, such dividends are charged to retained earnings.

10. Earnings Per Share

Basic and diluted earnings per common share attributable to controlling shareholders are computed as follows:

For the six-month periods ended June 30, 2025 and 2026, the denominator of the diluted earnings per share calculation includes 23,100 and 38,938 common shares, respectively, being the number of incremental shares assumed issued under the treasury stock method.

11.  Common shares and Additional paid-in capital  

On May 23, 2022, the Company announced that its Board of Directors has approved a share repurchase program (“the Share Repurchase Program”) for up to a total of $20 million of the Company's common stock. The Board would review the program after a period of 12 months. This period was extended in each of May 2023, 2024, 2025 and 2026 for an additional period of 12 months. To date, about $11.4 million has been used to repurchase 480,460 shares of the Company. Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors. The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time at the Company's discretion and without notice.

During the six months ended June 30, 2025, the Company repurchased 40,925 common shares under the Share Repurchase Program in open market transactions for an aggregate consideration of approximately $1.3 million. The repurchased shares were cancelled and removed from the Company’s share capital. During the six months ended June 30, 2026, the Company did not repurchase any shares.

In the first six months of 2025, the Company declared a cash dividend of $0.65 per common share in each of February and June 2025, totalling $9.13 million. The $4.52 million were paid within the six-month period. As of June 30, 2025, $4.50 million of dividends were payable and subsequently settled in July 2025, and $0.24 million were accrued related to dividends on unvested restricted shares. In the first six months of 2026, the Company declared a cash dividend of $0.75 per common share in February and a cash dividend of $0.80 per common share in June 2025, totalling $10.9 million. The $10.8 million were paid within the six-month period. As of June 30, 2026, $0.29 million were accrued related to dividends on unvested restricted shares.

12. Financial Instruments

The principal financial assets of the Company consist of cash and cash equivalents, restricted cash, trade accounts receivable, other receivables and investments in debt and equity securities. The principal financial liabilities of the Company consist of long-term debt, trade accounts payable, accrued expenses and amount due to related company.

Interest rate risk

The Company enters into interest rate swap contracts as economic hedges to manage some of its exposure to variability in its floating rate long-term debt. Under the terms of the interest rate swaps the Company and the bank agreed 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. Interest rate swaps allow the Company to convert long-term debt issued at floating rates into equivalent fixed rates. Even though the interest rate swaps were entered into for economic hedging purposes, they did not qualify for hedge accounting, under the guidance relating to Derivatives and Hedging, as the Company did not have 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 was highly effective. Consequently, the Company recognized the change in fair value of these derivatives in “L on derivative, net” in the unaudited condensed consolidated statements of comprehensive income. As of June 30, 2026, the Company had no open swap contracts and hence, the Company is exposed to increases in interest rates on its interest-bearing debt.

Concentration of credit risk

Financial instruments, which potentially subject the Company to significant concentration of credit risk consist primarily of cash, trade accounts receivable and investments in debt and equity securities. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluation of the relative credit standing of these financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with trade accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable as the Company in most cases gets paid in advance. The Company may be exposed to credit risk in the event of non-performance by its counterparties to investments in debt and equity securities; however, the Company limits its exposure by transacting with counterparties with high credit ratings.

Fair value of financial instruments

The Company follows guidance relating to “Fair value measurements”, which establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosure about fair value measurements.  This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities;

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;

Level 3: Unobservable inputs that are not corroborated by market data.

The estimated fair values of the Company's financial instruments such as cash and cash equivalents, restricted cash, trade accounts receivable, trade accounts payable and amount due to related company approximate their individual carrying amounts as of December 31, 2025 and June 30, 2026, 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 long-term debt, bearing interest at variable interest rates approximate their recorded values as of June 30, 2026, due to the variable interest rate nature thereof. SOFR rates are observable at commonly quoted intervals for the full terms of the financing arrangements and hence fair value of the long-term debt is considered Level 2 item in accordance with the fair value hierarchy due to their variable interest rate, being the SOFR.

Investments in equity and debt securities are measured at fair value on a recurring basis. Financial instruments included in investments in equity and debt securities. The fair value of these investments are based on their quoted prices in active market and falls within Level 1 of the fair value hierarchy.

Fair value of financial instruments - continued

The amount of loss on derivative, net recognized in the unaudited condensed consolidated statements of comprehensive income, is analyzed as follows:

13. Non-controlling interest in subsidiary

In May 2026, the Company formed a partnership (the “Partnership”) with a group of investors represented by NRP Project Finance AS (“NRP Investors”) in relation to the ownership of the third 4,484 TEU vessel in the series of four 4,484 TEU vessels as per the shipbuilding contracts signed on June 28, 2024. The vessel, M/V Thrylos, is expected to be delivered in the first quarter of 2028. Under the terms of the transaction, the NRP Investors will acquire a 49% non-controlling interest in the respective vessel-owning company for total consideration of approximately $14.8 million, including certain transaction structuring costs, with the assumption that the vessel will be financed with at least 60% of debt, with the Company holding the remaining 51% controlling interest. During the six month period ended June 30, 2026, NRP investors contributed to the Company the amount of $5,625,249. Net loss attributable to the non-controlling interest for the six-month period ended June 30, 2026, was $608,115, which was in full allocated to and reduced the “Non-controlling interest” presented in the unaudited condensed consolidated balance sheet as of June 30, 2026.

14. Segment reporting

The Company reports financial information and evaluates its operations and operating results by total consolidated net income and not by the type of vessel, length of vessel employment, customer or type of charter. Although revenue can be identified for these types of charters or vessels, management cannot and does not identify expenses, profitability or other financial information for these various types of charters or vessels. As a result, the Company’s management, including its Chief Executive Officer, Mr. Aristides J. Pittas, who is the chief operating decision maker (“CODM”), does not use discrete financial information to evaluate the operating results for each such type of charter or vessel, but is instead regularly provided with only the Net revenue and significant segment expenses as noted in the table below. In addition, the CODM reviews segment assets as these reported on the unaudited condensed consolidated balance sheets as “Total Assets”.

The CODM evaluates performance and allocates resources based on consolidated net income, which represents the Company’s measure of segment profit or loss. Net income is used to monitor budget versus actual results of the Company. The Company’s consolidated financial results are used in assessing the performance of the segment and in deciding whether to reinvest profits in the Company. As a result, the Company’s management, including the CODM, reviews operating results solely by consolidated net income of the fleet, and thus the Company has determined that it operates under one operating and one reportable segment, that of operating container carriers. When the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographical information is impracticable.

The following table summarizes the Company’s significant segment information:

15. Investments

The Company invests a portion of its excess liquidity in marketable securities in accordance with its treasury and investment policies. The Company's investment portfolio is intended to preserve capital, maintain liquidity and generate investment returns while supporting the Company's operational and strategic objectives.

Debt Securities

In February 2026 the Company acquired debt securities of initial cost of $20.0 million. The Company's debt securities consist of investment-grade fixed income securities. These investments are classified as available-for-sale and are recorded at fair value. Unrealized gains and losses are recorded within accumulated other comprehensive income / (loss), while realized gains and losses and credit-related impairments, if any, are recognized in earnings.

As of June 30, 2026, the Company held debt securities with an amortized cost of $20 million and fair value of approximately $18.9 million. These were classified as available-for-sale under US GAAP, for which an unrealized loss of $1.1 million was recorded in “Other comprehensive loss”.

As of June 30, 2026, no allowance for credit losses has been recorded on the available-for-sale debt securities, consistent with the Company’s assessment that the securities are investment-grade and show no indication of credit impairment. Interest income is accrued using the effective interest method and reported under Interest income in the unaudited condensed consolidated statement of comprehensive income.

Equity Securities

The Company made an investment in mutual funds accounted for as equity securities with an initial cost of $20.0 million acquired in the first quarter of 2026 and fair valued at $19.9 million as of June 30, 2026. Equity securities are measured at fair value with changes in fair value recognized in earnings in accordance with ASC 321, Investments - Equity Securities.

For the six-month period ended June 30, 2026, the Company recognized an unrealized loss of $0.1 million related to its equity securities, which is included in "Loss on investments in equity securities" in the accompanying Consolidated Statements of Comprehensive income.

16. Subsequent Events

The following event occurred after June 30, 2026:

In August 2026, the Company declared a dividend of $0.80 per share of common stock, which was paid on September 16, 2026, to holders of record on September 9, 2026.