5.	Long-Term Debt

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

December 31, 2018

and

June 30, 2019

is as follows:

Borrower	December 31, 2018		June 30, 2019
Noumea Shipping Ltd.	3,341,000		-
Gregos Shipping Ltd.	4,150,000		-
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.	30,000,000		-
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. / Noumea Shipping Ltd. / Gregos Shipping Ltd.	-		40,200,000
	37,491,000		40,200,000
Less: Current portion	(5,212,000	)	(5,100,000	)
Long-term portion	32,279,000		35,100,000
Deferred charges, current portion	125,357		130,000
Deferred charges, long-term portion	237,848		235,173
Debt discount, current portion	216,402		-
Debt discount, long-term portion	324,603		-
Long-term debt, current portion net of deferred charges and debt discount	4,870,241		4,970,000
Long-term debt, long-term portion net of deferred charges and debt discount	31,716,549		34,864,827

None

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

To June 30:
2020			5,100,000
2021			5,100,000
2022			22,500,000
2023			7,500,000
Total			40,200,000

Details of the loans are discussed in Note

of our consolidated financial statements for the year ended

December 31, 2018

included in the Company’s annual report on Form

-F.

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 cover ratio (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. Minimum cash balance requirements are in addition to cash held in retention accounts. These cash deposits amounted to

$5,717,063

and

$1,454,268

as of

December 31, 2018

and

June 30, 2019,

respectively, and are included in "Restricted cash" under "Current assets" and "Long-term assets" in the accompanying unaudited condensed consolidated balance sheets. As of

June 30, 2019,

the Company satisfied all its debt covenants.

Interest expense, including loan fee amortization for the

six

-month periods ended

June 30, 2018

and

2019

amounted to

$1,142,511

and

$1,366,764,

respectively. At

June 30, 2019,

LIBOR for the Company’s loans was on average approximately

2.61%

per year, the average interest rate margin over LIBOR on the Company’s debt was approximately

4.10%

per year for a total average interest rate of approximately

6.71%

per year.

May 30, 2019,

the Company agreed to draw new loans totaling

$12,000,000

from its revolving loan facility with Eurobank Ergasias S.A. in order to repay existing indebtedness of

$7,088,000

of Noumea Shipping Ltd. and Gregos Shipping Ltd., owners of

two

of its vessels, the M/V “Evridiki G” and the M/V “EM Astoria”, and also repay a fee of

$950,000

relating to the lender’s entitlement to participate in the appreciation in the market value of the latter mortgaged vessel described below. Following this refinancing, all of the Company’s existing vessels are financed by the same bank, which as part of the arrangement agreed to reduce the loan margin of the facility by

0.5%;

the bank, furthermore, agreed to release

$4,000,000

of the total

$5,000,000

of security deposit required by the loan to be used to redeem the Company’s Series B Preferred Shares.

June 15, 2017,

the Company entered into a profit sharing agreement with Credit Agricole whereby it would 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 had recognized participation liability amount of

$1,067,500

as of

December 31, 2018,

presented in "Vessel profit participation liability" in the 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 would be set aside and be used to repay the balloon payment with any excess funds to be paid to the bank. The Company completed the refinancing of the specific loan in

June 2019

using its revolving loan facility with Eurobank Ergasias S.A. (as described above) with the final participation liability paid amounting to

$950,000

included in the “Repayment of long-term bank loans and vessel profit participation liability” in the unaudited condensed consolidated statements of cash flows. The portion of debt discount remaining unamortized by the time of the refinancing was written-off and presented as “Loss on debt extinguishment” in the unaudited condensed consolidated statements of operations, partly offset by the lower amount of

$950,000

at which the vessel profit participation liability was finally settled as described above.