6.	Long-Term Debt

Long-term debt represents bank loans of the Company. Outstanding long-term debt as of

December 31, 2016

and

June 30, 2017

is as follows:

Borrower	December 31, 2016			June 30, 2017
Xingang Shipping Ltd. / Joanna Maritime Ltd.		1,103,915			-
Pantelis Shipping Corp.		4,840,000			4,440,000
Noumea Shipping Ltd.		6,360,000			6,360,000
Eirini Shipping Ltd. / Eleni Shipping Ltd. / Areti Shipping Ltd.		11,600,000			11,600,000
Allendale Investments S.A. / Alterwall Business Inc. / Manolis Shipping Ltd. / Saf Concord Shipping Ltd. / Aggeliki Shipping Ltd. /Eternity Shipping Company / Jonathan John Shipping Ltd.		13,120,000			12,200,000
Ultra One Shipping Ltd.		-			10,702,757
Gregos Shipping Ltd.		-			4,750,000
Kamsarmax One Shipping Ltd.		13,333,000			12,866,000
		50,356,915			62,918,757
Less: Current portion		(5,697,915	)		(11,432,972	)
Long-term portion		44,659,000			51,485,785
Deferred Charges, current portion		148,697			282,976
Deferred charges, long-term portion		292,024			483,929
Long-term debt, current portion net of deferred charges		5,549,218			11,149,996
Long-term debt, long-term portion net of deferred charges		44,366,976			51,001,856
Debt discount		-			(487,900	)
Long-term debt, long-term portion net of deferred charges and debt discount		44,366,976			50,513,956

Loan from related party
Euroseas Ltd.		2,000,000			-

None

of the above loans are registered in the U.S. The future annual loan repayments are as follows:

To June 30:
2018			11,432,972
2019			27,112,972
2020			10,758,813
2021			4,484,000
2022			934,000
Thereafter			8,196,000
Total			62,918,757

Details of the loans are discussed in Notes

and

(d) of our consolidated financial statements for the year ended

December 31, 2016

included in the Company’s annual report on Form

-F and are supplemented by the changes noted below.

May 2017,

the Company repaid in full the loan of Xingang Shipping Ltd. guaranteed by Joanna Maritime Ltd. of

$1,103,915

earlier than scheduled, and made a pre-payment of

$400,000

against the balloon of the loan of Pantelis Shipping Corp. As a result, Joanna Maritime Ltd. was released from its mortgage and guarantee and M/V Joanna has become unencumbered.

June 2017,

the Company entered into a loan agreement to draw

$4,750,000

guaranteed by Euroseas Ltd. to finance the acquisition of M/V EM Astoria. The loan has a margin over LIBOR of

2.65%

and will be repaid in either

sixteen

twenty

quarterly installments of

$100,000

(at the option of the bank) with a balloon payment of

$3,150,000

with the

sixteenth

instalment or

$2,750,000

with the

twentieth

instalment (the debt repayment schedule shown in the previous table assumes repayment in

sixteen

quarters). The Company has also entered into a profit sharing agreement with the bank financing M/V EM Astoria whereby it will share with the bank

35%

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

$487,900,

presented in “Vessel profit participation liability” in the unaudited condensed consolidated balance sheet, 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.

Interest expense, including loan fee amortization net of any imputed interest for the

six

-month periods ended

June 30, 2016

and

2017

amounted to

$915,774

and

$1,626,900,

respectively. Imputed interest for the

six

-month periods ended

June 30, 2016

was

$437,895,

while there was

none

for the

six

-month period ended

June 30, 2017.

June 30, 2017,

LIBOR for the Company’s loans was on average approximately

1.0%

per year, the average interest rate margin over LIBOR on our debt was approximately

4.2%

per year for a total average interest rate of approximately

5.2%

per year.

The Company’s loans are secured with

one

or more of the following:

first

priority mortgage over the respective vessels on a joint and several basis.

first

assignment of earnings and insurance.

a corporate guarantee of Euroseas Ltd.

a pledge of all the issued shares of each borrower.

The loan agreements contain covenants such as minimum requirements regarding the hull ratio cover (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 vessel shipowning 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 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). 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. Restricted cash under “Current Assets” and “Long-term assets” amounts to

$5,605,740

and

$7,911,808

as of

December 31, 2016

and

June 30, 2017

and is comprised of deposits held in retention accounts and deposits required to be maintained as certain minimum cash balances per mortgaged vessel. As of

June 30, 2017,

the Company satified all its debt covenants.