SEC Form 6-K filed by Euroseas Ltd.

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 6).

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 57.8% of the Company’s shares as of June 30, 2025.

The accompanying unaudited condensed consolidated financial statements include the accounts of Euroseas Ltd., and its wholly owned vessel owning subsidiaries and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024 as filed with the U.S. Securities and Exchange Commission ("SEC") on Form 20-F on May 15, 2025.

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, 2025 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2025.

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 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, 2024 (the “2024 Annual Report”). There have been no changes to the Company’s significant accounting policies and recent accounting pronouncements in the six-month period ended June 30, 2025.

3.  Advances for Vessels under Construction

During the six-month period ended June 30, 2025, two newbuilding vessels were delivered to the Company. The total cost of their construction amounting to $94,440,687 was transferred to “Vessels, net” in the unaudited condensed consolidated balance sheet upon their delivery from the shipyard (please refer to Note 4). Advances for vessels under construction as of June 30, 2025 mainly represent progress payments according to the agreements entered into with the shipyard in June 2024 for the construction of two eco-design fuel efficient intermediate containerships, as well as capitalized interest and legal and other costs related to the construction. See Note 9 for the outstanding commitments to the shipyard. 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, 2025, mainly refer a number of other energy saving and monitoring devices in fifteen of our vessels. All these installations qualified as vessel improvements and were therefore capitalized.

On January 7, 2025, the Company took delivery of the newbuilding M/V “Dear Panel”, an eco-design fuel efficient feeder containership. The vessel was ordered on May 20, 2022 from Hyundai Mipo Dockyard Co. in South Korea. The total cost for the construction of the vessel amounts to $47,284,892 and is presented within “Vessels, net” in the unaudited condensed consolidated balance sheet.

On January 8, 2025, the Company took delivery of the newbuilding M/V “Symeon P”, an eco-design fuel efficient feeder containership. The vessel was ordered on May 20, 2022 from Hyundai Mipo Dockyard Co. in South Korea. The total cost for the construction of the vessel amounts to $47,155,795 and is presented within “Vessels, net” in the unaudited condensed consolidated balance sheet.

As of June 30, 2025, twelve vessels with a net book value of $356,545,427 are used as collateral under the Company’s loan agreements (see Note 8). Title of ownership is held by the relevant lender for another vessel with a net book value of $44,624,867 to secure the relevant sale and lease back financing transaction (see Note 8). Nine 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”, M/V “Marcos V” 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.

On May 14, 2025, Marcos Shipping Ltd. signed a memorandum of agreement to sell M/V “Marcos V”, a 72,968 DWT / 6,350 TEU 2005-built intermediate container carrier, for further trading, at a gross price of $50.0 million, following a strategy of disposing older vessels and renewing its fleet. On the date of the agreement, the vessel was classified as held for sale according to the provisions of ASC 360, as all criteria required for this classification were met, at carrying value of $39,776,546, measured at the lower of carrying value and fair value (sale price) less costs to sell. The vessel will be delivered to her new owners at the end of October 2025. As a security for the fulfilment of the agreement, the Company has received a deposit of $5.0 million, representing 10% of the purchase price, in an escrow account. This amount is presented as “Restricted cash, current” in the unaudited condensed consolidated balance sheet.

5. Fair Value of Below Market Time Charters Acquired

Details of the Company’s fair value of below market acquired time charters acquired are discussed in Note 7 of the Company’s consolidated financial statements, included in the 2024 Annual Report and no change took place in the six-month period ended June 30, 2025, other than the amortization for the period.

The unamortized balance of this intangible liability as of June 30, 2025 of $176,115 (net of accumulated amortization of $17,515,583) will be amortized by the end of July 2025. 

6. 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 810 and Euro 840 for the six-month periods ended June 30, 2024 and 2025, respectively, under the Company’s Master Management Agreement (“MMA”) with Eurobulk. Vessel management fees paid to the Management Company amounted to $3,255,269 and $3,908,030 in the six-month periods ended June 30, 2024 and 2025, 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, 2024 and 2025, compensation paid to the Management Company for such additional services to the Company was $1,125,000 and $1,150,000 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, 2024 and June 30, 2025, the amount due to related company was $1,662,306 and $3,948,758, 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 $1,224,513 and $1,366,387 for the six-month periods ended June 30, 2024 and 2025, respectively, recorded in “Commissions” in the unaudited condensed consolidated statements of comprehensive income. Commission to Eurochart amounted to $131,500 for the sale of M/V “Diamantis P” in the six-month period ended June 30, 2025 and $100,000 for the sale of M/V “EM Astoria” in the six-month period ended June 30, 2024, 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 $69,880 and $145,760 in the first six months of 2024, respectively. In the first six months of 2025, total fees charged by Sentinel and Technomar were $83,532 and $164,196, respectively.  These amounts are recorded in “Vessel operating expenses” in the unaudited condensed consolidated statements of comprehensive income.

7. Other operating income

For the six-month period ended June 30, 2025, the Company recorded other operating income of $0.12 million that relates to loss of hire insurance for one of our vessels. No such case existed in the six-month period ended June 30, 2024.

8. 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, 2024 and June 30, 2025 is as follows:

The future annual loan repayments are as follows:

Details of the loans are discussed in Note 9 of our consolidated financial statements for the year ended December 31, 2024 included in the 2024 Annual Report.

During the six months ended June 30, 2025 there were no changes in the Company’s loans and terms other than scheduled payments of $29,882,531 and the following new financing agreements:

On December 16, 2024, the Company signed a loan agreement with Eurobank S.A. for a loan up to the lesser of $26.0 million and 65% of the vessel’s market value for the financing of the delivery instalment of M/V “Symeon P” (Hull No. 4252). The drawdown of $26.0 million took place on January 2, 2025. The loan is payable in twenty-eight consecutive quarterly instalments in the amount of $460,000, with a $13,120,000 balloon payment to be made with the last installment. The interest rate margin is 1.80% over SOFR. The loan is secured with (i) first priority mortgage over M/V "Symeon P", (ii) first assignment of earnings and insurance of M/V "Symeon P" and (iii) other covenants and guarantees similar to the remaining loans of the Company.

On January 28, 2025, the Company amended and restated the loan signed on April 18, 2024 of Leonidas Shipping Ltd. with First-Citizens Bank & Trust Company. Dear Panel Shipping Ltd. was added as an additional borrower to the existing loan and made available a second tranche of $26.0 million with the purpose to finance part of the construction cost of M/V “Dear Panel” (Hull No. 4251). The drawdown of $26.0 million took place on January 29, 2025. The second tranche is payable in 20 quarterly instalments, the first twelve of $650,000 each and the next eight of $275,000 each. A balloon instalment of $16,000,000 will be paid together with the last installment. The interest rate margin for the second tranche is 1.80% over SOFR. The loan is secured with (i) first priority mortgage over M/V "Dear Panel", (ii) first assignment of earnings and insurance of M/V "Dear Panel" and (iii) other covenants and guarantees similar to the remaining loans of the Company.

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 $6,926,823 and $7,175,206 as of December 31, 2024 and June 30, 2025, 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, 2025, the Company satisfied all its debt covenants.

Interest expense, including loan fee amortization for the six-month periods ended June 30, 2024 and 2025 amounted to $3,854,370 and $7,877,401, respectively, after capitalized interest on vessels under construction was recorded for the six-month period ended June 30, 2024 and 2025 of $2,591,847 and $115,788, respectively.

9. Commitments and Contingencies

As of June 30, 2025, future gross minimum revenues under non-cancellable time charter agreements total $393.2 million, $208.5 million of which is due in the period ending June 30, 2026, $114.4 million is due in period ending June 30, 2027, $67.9 million is due in period ending June 30, 2028 and $2.4 million is due in the period ending June 30, 2029. 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, 2025, the Company had under construction two container carriers with a total contracted amount of $120.5 million. As of June 30, 2025 the Company has paid an amount of $18.1 million as part of the instalments of the contracts of the abovementioned vessels, leaving an outstanding amount of approximately $102.4 million, $30.1 million of which is due in the period ending June 30, 2027 and $72.3 million is due in the period ending June 30, 2028. The Company intends to finance these commitments with a combination of own cash and bank 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.

10. Stock Incentive Plan

A summary of the status of the Company’s unvested shares as of January 1, 2025, and changes during the six-month period ended June 30, 2025, are presented below:

As of June 30, 2025, there was $1,646,691 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 0.83 years. The share-based compensation recognized relating to the unvested shares was $711,121 and $1,023,848 for the six-month periods ended June 30, 2024 and 2025, 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, 2025 the unvested restricted shares accrued dividends of $237,245, 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.

11. Earnings Per Share

Basic and diluted earnings per common share is computed as follows:

For the six-month periods ended June 30, 2024 and 2025, the denominator of the diluted earnings per share calculation includes 50,642 and 23,100 common shares, respectively, being the number of incremental shares assumed issued under the treasury stock method.

12. 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 and 2025 for an additional period of 12 months. To date, about $10.5 million has been used to repurchase 466,374 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, 2024, the Company did not repurchase any shares in the open market under the Share Repurchase Program. 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.

The Company declared a cash dividend of $0.60 per common share in each of February and May 2024, totalling $8.4 million. The $8.31 million were paid within the six-month period and another $0.11 million were accrued, relating to dividends of unvested restricted 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.

13. Financial Instruments

The principal financial assets of the Company consist of cash and cash equivalents, restricted cash, trade accounts receivable, other receivables and derivative. 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 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 “Gain / (loss) on derivative, net” in the unaudited condensed consolidated statements of comprehensive income. As of June 30, 2025, the Company had one open swap contract for a notional amount of $20.0 million and hence, the Company is exposed to increases in interest rates on the remaining amount of 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 derivative. 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 derivative instruments; 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, 2024 and June 30, 2025, 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, 2025, 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.

The fair value of the Company’s interest rate swap agreement is determined using a discounted cash flow approach based on market-based SOFR swap rates. SOFR swap rates are observable at commonly quoted intervals for the full terms of the swap and therefore are considered Level 2 items. The fair value of the interest rate swap determined through Level 2 of the fair value hierarchy is 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

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

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 consolidated expenses as noted on the face of the unaudited condensed consolidated statements of comprehensive income. The CODM assesses performance for the vessel operations segment and decides how to allocate resources based on consolidated net income. 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, 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. Furthermore, 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.

15. Subsequent Events

The following event occurred after June 30, 2025: