5.	Long-Term Debt

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

December 31, 2017

and

June 30, 2018

is as follows:

Borrower	December 31, 2017			June 30, 2018
Allendale Investments S.A. / Alterwall Business Inc. / Manolis Shipping Ltd. / Saf Concord Shipping Ltd. / Aggeliki Shipping Ltd. / Jonathan John Shipping Ltd. / Joanna Maritime Ltd.		7,900,000			7,900,000
Bridge Shipping ltd. / Oinousses Navigation Ltd. / Corfu Navigation Ltd. / Athens Shipping Ltd.		17,500,000			16,500,000
Noumea Shipping Ltd.		5,640,000			3,947,000
Gregos Shipping Ltd.		4,550,000			4,350,000
		35,590,000			32,697,000
Less: Current portion		(4,699,028	)		(3,912,000	)
Long-term portion		30,890,972			28,785,000
Deferred Charges, current portion		142,767			126,098
Deferred charges, long-term portion		196,619			188,511
Long-term debt, current portion net of deferred charges		4,556,261			3,785,902
Long-term debt, long-term portion net of deferred charges		30,694,353			28,596,489
Debt discount, current portion		(353,000	)		(586,009	)
Debt discount, long-term portion		(883,112	)		(1,155,962	)
Long-term debt, current portion net of deferred charges and debt discount		4,203,261			3,199,893
Long-term debt, long-term portion net of deferred charges and debt discount		29,811,241			27,440,527

None

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

To June 30:
2019		3,912,000
2020		5,212,000
2021		8,362,000
2022		15,211,000
Total		32,697,000

Details of the loans are discussed in Notes

and

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

December 31, 2017

included in the Company’s annual report on Form

-F/A.

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

$4,903,953

and

$3,919,399

as of

December 31, 2017

and

June 30, 2018

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

June 30, 2018,

the Company satisfied all its debt covenants.

Interest expense, including loan fee amortization for the

six

-month periods ended

June 30, 2017

and

2018

amounted to

$589,013

and

$1,072,734,

respectively. At

June 30, 2018,

LIBOR for the Company’s loans was on average approximately

1.88%

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

4.61%

per year for a total average interest rate of approximately

6.49%

per year.

June 15, 2017,

the Company 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 M/V "EM Astoria" 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

$2,005,500

and

$1,297,100

as of

June

30,2018

and

December 31, 2017,

presented in "Vessel profit participation liability" in the accompanying unaudited condensed 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.