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Note 7 - Related Party Transactions | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Related Party Transactions Disclosure [Text Block] |
7. | Related Party Transactions
The Company’s vessel owning companies are parties to management agreements with the Manager which is controlled by members of the Pittas family, whereby the Manager provides technical and commercial vessel management for a fixed daily fee of Euro 685 for each of 2017, 2018 and 2019, under the Company’s Master Management Agreement (“MMA”). An additional fixed management fee (see below) is paid to the Manager for the provision of other management services. Vessel management fees paid to the Manager amounted to $2,632,637, $3,536,094 and $3,671,335 in 2017, 2018 and 2019, respectively, and are recorded in “Related party management fees” in the consolidated statements of operations. The Company’s MMA with Eurobulk provides for an annual adjustment of the daily management fee due to inflation to take effect January 1 of each year. The vessel management fee for laid-up vessels is half of the daily fee for the period they are laid-up. The MMA, as periodically amended and restated, will automatically be extended after the initial five -year period for an additional five -year period unless terminated on or before the 90th day preceding the initial termination date. Pursuant to the MMA, each ship owning company has signed – and each future ship owning company when a vessel is acquired will sign - with the Manager, a management agreement with the rate and term of these agreements set in the MMA effective at such time. The MMA was amended and restated as of January 1, 2012 to provide for a 5% discount of the daily fixed vessel management fee for the period during which the number of the Euroseas-owned vessels (including vessels in which Euroseas is a part owner) managed by the Manager is greater than 20 (“volume discount”). The daily fixed vessel management fee was adjusted to Euro 720 per day per vessel in operation and Euro 360 per day per vessel in lay-up before the 5% discount. The Company was entitled to the 5% discount for each of these years. The fee remained unchanged for the subsequent years starting January 1, 2014, 2015, 2016, 2017. The MMA was renewed as of January 1, 2014 for a new five year term until January 1, 2019. The MMA was further renewed on January 1, 2018 for an additional five year term until January 1, 2023 with the 5% volume discount permanently incorporated in the daily management fee and the daily fixed vessel management fee amounting to Euro 685 per day per vessel in operation and Euro 342.5 for day per vessel in lay-up. The daily fixed vessel management fee remained unchanged for the year 2019 and will be adjusted annually for inflation in the Eurozone. The fee remains unchanged for 2020. In addition to the vessel management services, the Manager provides executive services to the Company. In 2017 and 2018 up to the Spin-off, compensation for such services to the Company as a public company was $2,000,000 per annum for the Company pre Spin-off. The amount of such executive compensation allocated to the Company prior to the Spin-off was based on the proportion of the number of calendar days that related to Euroseas post Spin-off vessels to the number of days of the entire fleet of Euroseas. After the Spin-off, the annual compensation for such services was set at $1,250,000. On November 15, 2019, the Company signed an addendum adjusting the fixed annual executive compensation to $2,000,000 to compensate the Manager for the increase in the fleet and certain management services provided by Synergy Marine Ltd., a company controlled by Andreas Papathomas and which became affiliated with the Company post-acquisition as a result of his appointment to the Board of Directors of the Company in November 2019. As a result, for the year 2019, the fixed cost was calculated at $1,250,000 pro-rated for the period of January 1, 2019 until November 15, 2019 and at $2,000,000 for the period of November 16, 2019 until December 31, 2019. The Company incurred costs of $1,306,476, $1,561,126 and $1,344,250 in 2017, 2018 and 2019, respectively, which are recorded in “General and administrative expenses” in the consolidated statements of operations. 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 off-set exists. As of December 31, 2018 and 2019, the amounts due to related company were $2,672,895 and $795,562, respectively. Based on the MMA between Euroseas Ltd. and Euroseas’ ship owning subsidiaries and the Manager an estimate of the quarter’s operating expenses, expected dry-dock expenses, vessel management fee and fee for management executive services are to be advanced by the Company’s ship-owning subsidiaries in the beginning of each quarter to the Manager. On September 30, 2019, the Company reached an agreement with a related party, Colby Trading Ltd., a company controlled by the Pittas family and affiliated with the Company’s Chief Executive Officer, to draw a $2.5 million loan to finance the special survey and WBT system installation on M/V “Akinada Bridge”. The interest rate applied is 8% per annum. Interest on the loan is payable quarterly. For further details refer to Note 8 -g. On November 1, 2019, the Company entered into a second agreement with Colby Trading Ltd., to draw another $2.5 million loan to finance working capital needs. The interest rate applied is 8% per annum. Interest on the loan is payable quarterly. For further details refer to Note 8 -g. The Company uses brokers for various services, as is industry practice. Eurochart S.A., an affiliated 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. Commissions to Eurochart S.A. for vessel sales were $70,640, $64,500 and nil in 2017, 2018 and 2019, respectively, recorded in “Net gain on sale of vessels” in the consolidated statements of operations. A commission of 1% of the purchase price is also paid to Eurochart S.A. by the seller of the vessel for the acquisitions the Company makes using Eurochart’s services. The Company withheld, on behalf of Eurochart, commissions of $118,526, nil and nil in 2017, 2018 and 2019, respectively, for vessels the Company acquired. Commissions to Eurochart S.A. for chartering services were, $310,467, $453,361 and $493,341 in 2017, 2018 and 2019, respectively, recorded in “Commissions” in the consolidated statements of operations. 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”); and with a crewing agent Technomar Crew Management Services Corp (“Technomar”). Technomar is a company owned by certain members of the Pittas family, together with two other unrelated ship management companies. 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 $89,329 and $101,394 in 2017, $118,684 and $137,385 in 2018, and $106,749 and $142,332 in 2019 respectively. These amounts are recorded in “Vessel operating expenses” in the consolidated statements of operations. In August 2019, the Company completed the acquisition of the four feeder containerships, owned by affiliates of the Pittas family including the Company’s CEO (see Note 1 ), for a consideration of $28.2 million that included a cash payment of $15 million and the issuance of 2,816,901 common shares to the sellers. The vessels acquisition transactions were evaluated and approved by a special committee of independent members of the Board of Directors.

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