Filed pursuant to Rule No. 424(b)(3)
                                                         File Number: 333-129145

                                  EUROSEAS LTD.

                           PROSPECTUS SUPPLEMENT NO. 1
                             DATED FEBRUARY 15, 2006

                               TO PROSPECTUS DATED
                                FEBRUARY 6, 2006


     This Prospectus Supplement No. 1 supplements information contained in our
prospectus dated February 6, 2006, as amended and supplemented from time to time
(the "Euroseas Prospectus"). The information in this Supplement No. 1
supplements, modifies and supersedes some of the information contained in the
Euroseas Prospectus.

     The primary purpose of this Prospectus Supplement No.1 is to update certain
financial information of Euroseas Ltd. to September 30, 2005.

     You should read this Prospectus Supplement No. 1 in conjunction with the
Euroseas Prospectus. This Prospectus Supplement No. 1 is not complete without,
and may not be delivered or utilized except in connection with, the Euroseas
Prospectus including any amendments or supplements thereto.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.







                         EUROSEAS LTD. AND SUBSIDIARIES

                         Unaudited Consolidated Financial Statements
                         for the Nine Month Periods Ended
                         September 30, 2004 and 2005





Euroseas Ltd. and Subsidiaries
Unaudited Consolidated Financial Statements
September 30, 2004 and 2005
--------------------------------------------------------------------------------


              Index to Unaudited Consolidated Financial Statements


                                                                           Pages

Unaudited Consolidated Balance Sheets as of December 31, 2004
    and September 30, 2005                                                 -

Unaudited Consolidated Statements of Income for the nine
    month periods ended September 30, 2004 and 2005                        -

Unaudited Consolidated Statements of Shareholders' Equity
    for the nine month period ended September 30, 2005                     -

Unaudited Consolidated Statements of Cash Flows for the
    nine month periods ended September 30, 2004 and 2005                   -

Notes to the Unaudited Consolidated Financial Statements                   -




Euroseas Ltd. and Subsidiaries
Unaudited Consolidated Balance Sheets
(All amounts expressed in U.S. Dollars)
--------------------------------------------------------------------------------


                                                    December 31,  September 30,
                                           Notes       2004           2005
                                                                    (Unaudited)
--------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents                            15,497,482       5,243,612
Accounts receivable trade, net                          245,885          75,547
Prepaid expenses                                        207,551         166,560
Claims and other receivables                            137,783         422,939
Due from related party                       5                -      24,438,888
Inventories                                  3          303,478         306,008
Restricted cash                                          68,980       1,166,827
--------------------------------------------------------------------------------
Total current assets                                 16,461,159      31,820,381
--------------------------------------------------------------------------------

Fixed assets
Vessels, net                                         34,171,164      32,382,377
--------------------------------------------------------------------------------
Total fixed assets                                   34,171,164      32,382,377
--------------------------------------------------------------------------------

Other long-term assets
Deferred charges, net                                 2,205,178       1,963,298
--------------------------------------------------------------------------------
Total long-term assets                                2,205,178       1,963,298
--------------------------------------------------------------------------------
Total assets                                         52,837,501      66,166,056
--------------------------------------------------------------------------------

Liabilities and shareholders' equity
Current liabilities
Long-term debt, current portion                       6,030,000      12,854,998
Trade accounts payable                                  879,541         881,246
Accrued expenses                                        321,056       1,565,292
Deferred revenue                             4        1,908,189       1,064,217
Due to related parties                       5        4,626,060               -
--------------------------------------------------------------------------------
Total current liabilities                            13,764,846      16,365,753
--------------------------------------------------------------------------------

Long-term liabilities
Long-term debt, net of current portion                7,960,000      24,375,002
--------------------------------------------------------------------------------
Total long-term liabilities                           7,960,000      24,375,002
--------------------------------------------------------------------------------
Total liabilities                                    21,724,846      40,740,755
--------------------------------------------------------------------------------

Commitments and contingencies                8                                -

Shareholders' equity
Common stock (par value $0.01,
100,000,000 shares
authorized, 36,781,159 issued
and outstanding)                                        297,542         367,812
Preferred shares (par value $0.01,
20,000,000 liquidation
preference shares authorized,
no shares issued and outstanding)                             -               -
Additional paid-in capital                           17,073,381      18,383,781
Retained earnings                                    13,741,732       6,673,708
--------------------------------------------------------------------------------
Total shareholders' equity                           31,112,655      25,425,301
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity           52,837,501      66,166,056
--------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.


Euroseas Ltd. and Subsidiaries
Unaudited Consolidated Statements of Income
(All amounts expressed in U.S. Dollars)
--------------------------------------------------------------------------------


                                                         Nine months ended
                                                            September 30,
                                                        2004        2005
                                            Notes    (Unaudited)  Unaudited)
--------------------------------------------------------------------------------
Revenues
Voyage revenue                                      32,930,177    34,091,505
Commissions                                         (1,601,152)   (1,847,900)
--------------------------------------------------------------------------------
Net revenue                                         31,329,020    32,243,605
--------------------------------------------------------------------------------

Operating expenses
Voyage expenses                                        243,796       136,224
Vessel operating expenses                            6,782,495     6,322,677
Management fees                                      1,472,501     1,430,464
General and administrative expenses                          -       130,864
Amortization and depreciation                        2,474,524     2,806,348
Gain on sale of vessel                              (2,315,508)            -
--------------------------------------------------------------------------------
Total operating expenses                             8,657,808    10,826,577
--------------------------------------------------------------------------------

Operating income                                    22,671,212    21,417,028
--------------------------------------------------------------------------------

Other income/(expenses)
Interest and finance costs                            (435,530)   (1,109,262)
Derivative loss                                6       (91,433)     (100,029)
Foreign exchange gain/(loss)                            (3,867)          539
Interest income                                         49,582       248,700
--------------------------------------------------------------------------------
Other income/(expenses), net                          (481,248)     (960,052)

--------------------------------------------------------------------------------
Net income for the period                           22,189,964    20,456,976
--------------------------------------------------------------------------------

Earnings per share - basic                     7         0.746         0.664
              - diluted                        7         0.746         0.658
--------------------------------------------------------------------------------

Weighted average number of shares
outstanding during the period - basic          7    29,754,166    30,821,557
              - diluted                        7    29,754,166    31,088,404
--------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.




Euroseas Ltd. and Subsidiaries
Unaudited Consolidated Statements of Changes in Shareholders' Equity
For the nine month period ended September 30, 2005
(All amounts, except per share data, expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------------------------------------------



                                                             Common     Preferred
                              Comprehensive    Number        Shares     Shares        Paid-in        Retained
                              Income           of Shares     Amount     Amount        Capital        Earnings         Total
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Balance,
December 31, 2004                              29,754,166    297,542           -      17,073,381     13,741,732      31,112,655
Net income                    20,456,976                -          -           -             -       20,456,976      20,456,976
Issuance of shares,
net of issuance  costs                          7,026,993     70,270           -      18,010,400              -      18,080,670
costs
Dividends/return of capital                             -          -           -     (16,700,000)   (27,525,000)    (44,225,000)
-----------------------------------------------------------------------------------------------------------------------------------

Balance
September 30, 2005                             36,781,159    367,812           -      18,383,781      6,673,708      25,425,301
(unaudited)
-----------------------------------------------------------------------------------------------------------------------------------


                        The accompanying notes are an integral part of these consolidated financial statements.






Euroseas Ltd. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(All amounts expressed in U.S. Dollars)
----------------------------------------------------------------------------------------------------------------


                                                                            Nine months ended September 30,
                                                                    --------------------------------------------
                                                                                 2004                  2005
                                                                             (Unaudited)           (Unaudited)
----------------------------------------------------------------------------------------------------------------
                                                                                              
Cash flows from operating activities:
Net income                                                                    22,189,964            20,456,976
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation                                                                   1,931,671             1,788,788
Amortization for deferred dry-docking expenses                                   543,853             1,017,560
Amortization for deferred finance costs                                           35,796                71,159
Gain on sale of vessel                                                        (2,315,508)                    -
Provision for doubtful accounts                                                  (27,907)                    -
Loss on derivative                                                                91,433               100,029
Investment in associate                                                           22,856                     -

Changes in operating assets and liabilities:
(Increase)/decrease in:
Accounts receivable trade                                                       (109,654)              170,338
Prepaid expenses                                                                (154,335)               40,991
Claims and other receivables                                                     227,845              (385,185)
Inventories                                                                       60,515                (2,530)
Due from related companies                                                    (9,415,719)          (29,064,948)
Increase/(decrease) in:
Trade accounts payable                                                           655,726                 1,705
Accrued expenses                                                                (180,985)              (52,464)
Deferred revenue                                                                (160,428)             (843,972)
Deferred dry-docking expenses                                                 (2,267,918)             (689,339)
----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                     11,127,205            (7,390,892)
----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
(Increase)/decrease in cash retention accounts                                    49,037            (1,097,848)
Proceeds from sale of vessel                                                   6,723,050                     -
----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                          6,772,087            (1,097,848)
----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Loan arrangement fees paid                                                             -              (157,500)
Dividends paid/ return of capital                                            (11,547,551)          (44,225,000)
Issuance of share capital                                                              -                70,270
Proceeds from shares issued in a private placement                                     -            19,307,099
Proceeds from long term debt                                                           -            37,700,000
Repayment of long-term debt                                                   (5,885,000)          (14,459,999)
----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities                                        (17,432,551)           (1,765,130)
----------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                        466,741           (10,253,870)
Cash and cash equivalents at beginning of period                               8,100,047            15,497,482
----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                     8,566,788             5,243,612
----------------------------------------------------------------------------------------------------------------
Cash paid for interest                                                           342,977               942,620
----------------------------------------------------------------------------------------------------------------

                        The accompanying notes are an integral part of these consolidated financial statements.




1.   Basis of Presentation and General Information

Euroseas  Ltd. (the  "Company")  was formed on May 5, 2005 under the laws of the
Republic of the Marshall  Islands to consolidate  the  beneficial  owners of the
ship owning  companies  listed below.  On June 28, 2005, the  beneficial  owners
exchanged  all their shares in the  ship-owning  companies for shares in Friends
Investment  Company Inc., a newly formed Marshall Islands  company.  On June 29,
2005,  Friends  Investment  Company Inc.  then  exchanged  all the shares in the
ship-owning  companies  for shares in  Euroseas  Ltd.,  thus  becoming  the sole
shareholder  of Euroseas  Ltd. The  transaction  described  above  constitutes a
reorganization of companies under common control,  and has been accounted for in
a manner  similar to a pooling of  interests,  as each  ship-owning  company was
under the common control of the Pittas family prior to the transfer of ownership
of the companies to Euroseas Ltd.  Accordingly,  the  accompanying  consolidated
financial  statements have been presented as if the  ship-owning  companies were
consolidated subsidiaries of the Company for all periods presented and using the
historical  carrying costs of the assets and the  liabilities of the ship-owning
companies listed below.

On August 25, 2005,  Euroseas Ltd. sold 7,026,993 common shares at $3.00 each in
an institutional  private placement,  together with 0.25 of detachable  warrants
for each  common  share to  acquire up to  1,756,743  common  shares.  The total
proceeds,  net of issuance  costs of  $3,000,000  amounted to  $18,010,400.  The
warrants  allow their holders to acquire one share of Euroseas  stock at a price
of $3.60 per share and are exercisable for a period of five years from the issue
of the warrant. The Company and investors in the institutional private placement
have entered into a  registration  rights  agreement to register the shares that
were  issued in such  private  placement  and the shares  that will be issued to
satisfy the exercise of the warrants. The registration rights agreement contains
a liquidated damages provision plus an estimated penalty provision.

On  August  25,  2005,  as a  condition  to the  institution  private  placement
described  above,  the Company and Cove Apparel,  Inc. (Cove, an unrelated party
and  public  shell  corporation)  signed an  Agreement  and Plan of Merger  (the
"Merger  Agreement").  The Merger Agreement  provides for the merger of Cove and
Euroseas  Acquisition  Company Inc., a Delaware  corporation  and a wholly-owned
subsidiary  of  Euroseas  Ltd.  formed on June 21,  2005 (see Note 8),  with the
current  stockholders of Cove receiving  0.102969 shares of Euroseas Ltd. common
stock for each share of Cove  common  stock they  presently  own. As part of the
merger,  Euroseas  Ltd.  has agreed to file a  registration  statement  with the
Securities  and Exchange  Commission to register the shares issued in the merger
to the Cove  stockholders.  The  consummation of the merger is expected in March
2006.  Upon  consummation  of the merger,  the  separate  existence of Cove will
cease,  and Euroseas  Acquisition  Company Inc.  will  continue as the surviving
corporation  and as a wholly owned  operating  subsidiary of Euroseas Ltd. under
the name Cove Apparel,  Inc. On the date of the merger,  the parties agreed that
Cove will only have cash of approximately $10,000 and equity of the same amount.
In the event the Merger  does not occur,  Friends is  entitled to receive for no
additional  consideration  such shares of common stock that would have otherwise
been issued in connection with the Merger (refer to note 9).

The  operations of the vessels are managed by Eurobulk Ltd. (the  "manager"),  a
corporation  controlled by the Pittas Family -- the  controlling  shareholder of
Friends Investment Company Inc.

The manager has an office in Greece located at 40 Ag.  Konstantinou  Street, 151
24, Maroussi, Athens, 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, as well as executive
management services, in consideration for fixed and variable fees (Note 4).

The Company is engaged in the ocean  transportation  of dry bulk and  containers
through the  ownership  and  operation of the  following  dry bulk and container
carriers:

o    Searoute Maritime Ltd. incorporated in Cyprus on May 20, 1992, owner of the
     Cyprus flag 33,712 DWT bulk carrier motor vessel  "Ariel",  which was built
     in 1977 and acquired on March 5, 1993.

o    Oceanopera Shipping Ltd.  incorporated in Cyprus on June 26, 1995, owner of
     the Cyprus flag 34,750 DWT bulk carrier  motor vessel  "Nikolaos  P", which
     was built in 1984 and acquired on July 22, 1996.

o    Oceanpride Shipping Ltd.  incorporated in Cyprus on March 7, 1998, owner of
     the Cyprus flag 26,354 DWT bulk  carrier  motor  vessel "John P", which was
     built in 1981 and acquired on March 7, 1998.

o    Alcinoe  Shipping Ltd.  incorporated in Cyprus on March 20, 1997,  owner of
     the Cyprus flag 26,354 DWT bulk carrier  motor vessel  "Pantelis  P", which
     was built in 1981 and acquired on June 4, 1997.

o    Alterwall  Business Inc.  incorporated in Panama on January 15, 2001, owner
     of the Panama flag 18,253 DWT container  carrier motor vessel "HM Qingdao1"
     (ex Kuo Jane), which was built in 1990 and acquired on February 16, 2001.

o    Allendale Investment S.A. incorporated in Panama on January 22, 2002, owner
     of the Panama flag 18,154 DWT container  carrier motor vessel "Kuo Hsiung",
     which was built in 1993 and acquired on May 13, 2002.

o    Diana Trading Ltd.  incorporated  in the Marshall  Islands on September 25,
     2002,  owner of the Marshall  Islands  flag 69,734 DWT bulk  carrier  motor
     vessel "Irini", which was built in 1988 and acquired on October 15, 2002.

In addition,  the historical  financial  statements  include the accounts of the
following vessel owning companies which were managed by Eurobulk Ltd. during the
periods presented:

(a)  Silvergold Shipping Ltd. incorporated in Cyprus on May 16, 1994. Up to June
     3, 1996, the Company was engaged in ship owning activities, but thereafter,
     the  Company's  assets and  liabilities  were  liquidated  and the retained
     earnings were distributed to the shareholders. The Company remained dormant
     until  October  10,  2000 when it  acquired  the  18,000  DWT  Cyprus  flag
     container carrier motor vessel "Widar", which was built in 1986. The vessel
     was sold on April 24, 2004. The Pittas family, the controlling shareholders
     of  Friends   Investment   Company  Ltd.,  who  is  the  Company's  largest
     shareholder,  also own the ship owning  company  Silvergold  Shipping Ltd.,
     and, accordingly,  these accompanying financial statements also consolidate
     the accounts of Silvergold Shipping Ltd until May 31, 2005, when Silvergold
     Shipping Ltd declared a final dividend of $35,000 to its shareholders.

During the nine month periods ended  September 30, 2004 and 2005,  the following
charterers  individually accounted for more than 10% of the Company's voyage and
time charter revenues as follows:

                                     Nine months ended September 30,
Charterer                           2004                       2005
--------------------------------------------------------------------------

A                                    -                         24.75%
B                                    -                         17.75%
C                                   19.5%                      16.12%
D                                   14.01%                      -
E                                   13.9%                       -
F                                   11.0%                       -

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance  with  U.S.  generally  accepted  principles  for  interim  financial
information.  Accordingly  they do not  include  all the  information  and notes
required by U.S. generally accepted accounting principles 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
flow for the periods  presented.  Operating  results  for the nine month  period
ended  September  30, 2005 are not  necessarily  indicative  of the results that
might be expected for the fiscal year ending December 31, 2005.

The consolidated financial statements as of and for the nine months period ended
September  30,  2005 and 2004  should be read in  conjunction  with the  audited
consolidated  financial statements for the year ended December 31, 2004 as filed
on Form F-1/A.

2.   Inventories

The amounts shown in the accompanying  consolidated  balance sheets consisted of
the following:

                                          December 31,         September 30,
                                               2004                 2005
                                                                (Unaudited)
 -----------------------------------------------------------------------------

 Lubricants                                  256,223                  238,251
 Victualling                                  47,255                   67,757
 -----------------------------------------------------------------------------
 Total                                       303,478                  306,008
 -----------------------------------------------------------------------------

3.   Deferred Revenue

The account  relates to deferred  voyage revenue that  represents  cash received
from charterers prior to it being earned. These amounts are recognized as income
in the periods the services are provided.

4.   Related Party Transactions

The Company's vessel owning companies are parties to management  agreements with
Eurobulk Ltd.  ("Management  Company"),  also  controlled by the Pittas  family,
whereby the Management Company provides technical and commercial  management for
a fixed daily fee of Euro 590 per vessel for the  periods  ended  September  30,
2004 and 2005.  Such  management  fees amounted to $1,472,501  and $1,430,464 in
2004 and 2005,  respectively.  These agreements were renewed on January 31, 2005
with an initial term of five years and will  automatically be extended after the
initial term until terminated by the parties. Termination is not effective until
two months  following  notice  having been  delivered in writing by either party
after the expiration of the initial five-year period.

The Company uses brokers to provide services, as is industry practice. Eurochart
S.A.,  a company  also  controlled  by the  Pittas  family,  provides  sales and
purchases  (S&P) and chartering  services to the Company.  A commission of 1% on
vessel sales price and 1%-1.25%,  on charter  revenue is paid to Eurochart  S.A.
for these  services.  The amount paid to Eurochart  S.A.  for the 1%  commission
amounted  to $70,000  in the period  ended  September  30,  2004 and none in the
period ended  September  30, 2005.  There were no vessel sales during the period
ended  September 30, 2005. The commission on charter  revenue for the nine month
periods  ended  September  30, 2004 and 2005  amounted to $411,068 and $402,809,
respectively.

The former  shareholders of the  ship-owning  companies that became wholly owned
subsidiaries of the Company, together with another ship management company, have
one joint venture with the insurance broker Sentinel  Maritime Services Inc. and
one with the  crewing  agent  More  Maritime  Agencies  Inc.  The  shareholders'
percentage  participation  in these  joint  ventures  was 35% in 2004 and 58% in
2005.  These companies  handle certain  insurance fees and crewing costs for the
shipowning subsidiaries and their fees are included in operating expenses.

Amounts due to related parties  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 September
30, 2005,  the amount due from related  companies  was $24 million  which mainly
reflect  proceeds  from the  offering of $20 million as well as charter hire for
m/v Nikolaos P, John P and Pantelis P up to May 31, 2005 and for m/v Irini up to
June 30, 2005. The proceeds or collection  from the charter hires were deposited
in the bank accounts of  Silvergold  Shipping Ltd (see Note 1), the company that
owned m/v Widar which was sold on April 24, 2004. The accompanying  consolidated
financial statements consolidated the accounts of Silvergold Shipping Ltd. until
May 31, 2005 when  Silvergold  Shipping Ltd. paid a final dividend of $35,000 to
its  shareholders.  Silvergold  Shipping  Ltd.,  as the related party which is a
company also  controlled by the Pittas  family,  continued to perform a treasury
function for us as of September  30, 2005,  and  therefore the cash balance that
date  remained  in the related  party's  account.  The Company has  subsequently
opened bank  accounts in the name of Euroseas and the majority of the funds have
been transferred to these accounts.

5.   Long-term Debt

Long-term debt comprises  bank loans granted to the  vessel-owning  companies as
follows:

                                      December 31,          September 30, 2005
                                          20004                (Unaudited)
--------------------------------------------------------------------------------
Diana Trading Limited                    4,140,000 (a)            7,230,000
Alterwall Shipping Inc.
Allendale Investments S.A.               8,250,000 (b)           18,500,000
Alcinoe Shipping Limited
Oceanpride Shipping Limited
Searoute Maritime Limited
Oceanopera Shipping Limited              1,600,000 (c)           11,500,000
--------------------------------------------------------------------------------
                                        13,990,000               37,230,000
--------------------------------------------------------------------------------
Current portion                         (6,030,000)             (12,854,998)
--------------------------------------------------------------------------------
Long-term portion                        7,960,000               24,595,002

The future annual loan repayments are as follows:

To September 30
--------------------------------------------------------------------------------
2006                                                             12,854,998
2007                                                              8,630,000
2008                                                              8,955,000
2009                                                              2,640,000
2010                                                              1,800,000
2011 and thereafter                                               2,350,002
--------------------------------------------------------------------------------
Total                                                            37,230,000
--------------------------------------------------------------------------------

(a)  Diana  Trading  Limited  (the owner of M/V Irini) has drawn  $4,900,000  on
     October 16, 2002 and $1,000,000 on December 2, 2002 under a loan agreement.
     The loan is repayable in twenty-four  consecutive quarterly installments of
     $220,000 each, and a balloon payment of $600,000  payable together with the
     last  installment  due in October 2008. The interest is based on LIBOR plus
     1.6% per annum.

     On May 9, 2005, an additional  loan agreement was entered into amounting to
     $4,200,000  which was drawn down on May 9, 2005.  The loan is  repayable in
     twelve  consecutive  quarterly  installments  being  four  installments  of
     $450,000  each,  and  eight  installments  of  $300,000  each with the last
     installment  due in May 2008. The first  installment  was payable in August
     2005. The interest is calculated at LIBOR plus 1.25% per annum.

(b)  Alcinoe  Shipping  Limited (the owner of M/V  Pantelis  P.) and  Oceanpride
     Shipping  Limited (the owner of M/V John P.) had drawn  $3,000,000 on April
     1, 2003 against a loan  facility  for which they are jointly and  severally
     liable.  The  balance  of the  loan at  December  31,  2004 is  $1,600,000.
     Interest is based on LIBOR plus 1.75% per annum.

     Alcinoe Shipping Ltd.,  Oceanpride  Shipping Ltd.,  Searoute  Maritime Ltd.
     (the owner of M/V Ariel) and  Oceanopera  Shipping  Ltd.  (the owner of M/V
     Nikolaos P) had drawn  $13,500,000  against a loan  facility for which they
     are jointly and severally liable. Prior to obtaining the loan, an amount of
     $1,400,000 was paid in settlement of the outstanding  loans as at March 31,
     2005 for Alcinoe Shipping Ltd. and Oceanpride Shipping Ltd. The new loan is
     repayable  in  twelve   consecutive   quarterly   installments   being  two
     installments  of $2,000,000  each,  one  installment  of  $1,500,000,  nine
     installments of $600,000 each and a balloon  payment of $2,600,000  payable
     with the last  installment  in May 2008. The first  installment  was due in
     August 2005. Interest is based on LIBOR plus 1.5% per annum.

(c)  Allendale  Investments  S.A.  (the  owner  of M/V  Kuo  Hsiung)  had  drawn
     $6,000,000 on May 31, 2002 under a loan agreement, the balance of which was
     $4,500,000 at December 31, 2004. The interest was based on LIBOR plus 1.75%
     per annum.

     Alterwall  Business  Inc.  (the owner of M/V HM Qingdao I, formerly M/V Kuo
     Jane) had drawn $6,000,000 under a loan agreement, the balance of which was
     $3,750,000 at December 31, 2004. Interest was calculated at LIBOR plus 1.5%
     per annum.

     Allendale   Investments   S.A.  and  Alterwall   Business  Inc.  had  drawn
     $20,000,000  on May 26,  2005  against a loan  facility  for which they are
     jointly and severally liable.  The outstanding amount of the old loans from
     the same creditor bank was  $7,800,000  and was repaid in full. The loan is
     repayable in twenty-four  unequal  consecutive  quarterly  installments  of
     $1,500,000  each in the first  year,  $1,125,000  each in the second  year,
     $775,000 each in the third year,  $450,000 each in the fourth through sixth
     years and a balloon payment of $1,000,000 payable with the last installment
     due in May 2011.  The  interest  is based on LIBOR  plus 1.25% per annum as
     long as the  outstanding  amount remains below 60% of the fair market value
     (FMV) of M/V HM Qingdao I and M/V Kuo Hsiung and 1.375% if the  outstanding
     amount is above 60% of the FMV of such vessels.

The loans are secured with one or more of the following:

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

o    first assignment of earnings and insurance.

o    a personal guarantee of one shareholder.

o    a corporate guarantee of Eurobulk Ltd.

o    a pledge of all the issued shares of each borrower.

     The loan agreements contain ship finance covenants  including  restrictions
     as to changes in management and ownership of the vessels,  distribution  of
     profits  or  assets,  additional  indebtedness  and  mortgaging  of vessels
     without the lender's prior consent, the sale of vessels, as well as minimum
     requirements  regarding the hull ratio cover. The Company is not in default
     of any credit facility covenant.

6.   Derivative Losses

     The losses for the period ended September 30, 2005 arose from interest rate
     swaps  that did not meet  the  criteria  for  hedge  accounting  treatment.
     Accordingly,  all gains or losses have been  recorded in the  statement  of
     income for the period. The fair value at December 31, 2004 was $27,029. The
     swap was settled in the period ended September 30, 2005 resulting in losses
     of $100,029.

7.   Earnings Per Share

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

                                    September 30, 2004     September 30, 2005
                                          (Unaudited)           (Unaudited)
--------------------------------------------------------------------------------

 Income:
 Net income                               22,189,964             20,456,976
 Basic earnings per share:
 Weighted average common shares -
     outstanding                          29,754,166             30,821,557
 Diluted earnings per share:
 Weighted average common shares -
    Diluted                               29,754,166             31,088,404
 Basic earnings per share:                     0.746                  0.664
 Diluted earnings per share:                   0.746                  0.658

8.   Commitments and Contingencies

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.

The  distribution  of the net earnings by one of the chartering  pools which has
one of the  Company's  vessels  in its pool has not yet been  finalized  for the
period ended  September 30, 2005. Any effect on the Company's  income  resulting
from any future reallocation of pool income cannot be reasonably estimated.

9.   Subsequent Events

On  October  25,  2005,  the  Company  acquired a 2,083 TEU  containership  (M/V
Artemis),  built in 1987,  for $20.65  million.  The vessel was delivered to the
Company on November 25, 2005.

On November  2, 2005,  the Board of  Directors  declared a dividend of $0.07 per
share subject to the consent of Cove's shareholders,  which consent was received
pursuant to an amendment to the Merger  Agreement dated as of November 22, 2005.
The  dividend  was paid (i) on or about  December  19, 2005 to those  holders of
record of common stock of the Company on December 16, 2005;  and (ii) (A) to the
stockholders of Cove Apparel,  Inc.  ("Cove") who are entitled to receive shares
of the  Company's  common  stock  in  connection  with  Cove's  merger  with the
Company's  wholly-owned  subsidiary,  Euroseas  Acquisition  Company,  with such
payment  being made only to those  holders of record of Cove common  stock as of
the  effective  date of the merger  and such  dividend  payment  being made upon
exchange of their Cove shares for 1,079,167 shares of the Company's common stock
(assuming such merger is consummated), or (B) to Friends Investment Company Inc.
("Friends") if such merger is not  consummated  since Friends will be issued the
shares that would have otherwise been issued in the merger.

On November 2, 2005,  the Board  authorized a 1:2 reverse stock split subject to
consent of Cove's  shareholders,  which  consent  was  received  pursuant  to an
amendment to the Merger  Agreement dated as of November 22, 2005. The Management
was  authorized,  to decide not to  proceed,  on the  reverse  stock split if it
determines  that it is no longer in the best  interests  of the  Company and its
shareholders.  No date for the  split  has been set and the  Management  has not
indicated  whether it will or will not  proceed  with the split.  On February 7,
2006, the Board of Directors decided to defer the decision regarding the reverse
stock split and the ratio of the split to the Annual Shareholders Meeting.

Salina Shipholding Corp. (the owner of the vessel M/V Artemis;  which vessel was
acquired  on October  25,  2005) had drawn  $15,500,000  on  December  30,  2005
pursuant to a loan agreement.  The loan is repayable in ten consecutive  monthly
installments  being six installments of $1,750,000 each and four installments of
$650,000  each  and a  balloon  payment  of  $2,400,000  payable  with  the last
installment in January 2011. The first installment is due in June 2006. Interest
is based on LIBOR plus a margin that ranges between  0.9-1.1%,  depending on the
asset cover ratio.  The loan is secured with the  following:  (i) first priority
mortgage  over the  respective  vessel,  (ii) first  assignment  of earnings and
insurance,  (iii) a corporate  guarantee  of Euroseas  Ltd.,  and (iv) a minimum
liquidity  balance equal to an amount of no less than  $300,000  standing to the
credit of the Operating Account  throughout the life of the facility for each of
the  Company's  vessels.  The loan  agreement  contains  ship finance  covenants
including  restrictions as to changes in management and ownership of the vessel,
distribution  of  dividends  or any other  distribution  of profits  and assets,
additional  indebtedness and mortgaging of the vessel without the lender's prior
consent, the sale of the vessel,  minimum requirements  regarding the hull ratio
cover and minimum cash retention account.

On February 3, 2006, the SEC declared  effective our F-4 registration  statement
concerning the proposed merger between Cove Apparel,  Inc.  (OTCBB:CVAP.OB)  and
our wholly-owned subsidiary,  Euroseas Acquisition Company Inc. Under the merger
agreement,  Cove  stockholders  will receive  0.102969 shares of Euroseas common
stock for each share of Cove common stock owned.  On  September  26, 2005,  four
stockholders  of Cove  representing  67.25%  of the  outstanding  shares of Cove
common stock took action by written consent  approving the merger.  A definitive
joint information  statement/prospectus describing the merger was mailed to Cove
stockholders  on or about February 8, 2006.  Until  consummation  of the merger,
Cove's  common  stock will  continue to trade on the OTC  Bulletin  Board.  Upon
consummation  of the  merger,  Cove will  become a  wholly-owned  subsidiary  of
Euroseas  and Cove's  stock  will be  de-listed  and no longer  trade on the OTC
Bulletin Board. The merger is subject to customary closing conditions.

On February 3, 2006, the SEC declared  effective the Company's F-1  registration
statement  that  registers the re-sale of the Company's  common stock and shares
underlying  the  warrants  issued in  connection  with our $21  million  private
placement that was consummated on August 25, 2005. In the private placement, the
Company  sold  7,026,993  shares of common  stock at a price of $3.00 per share.
Investors also received  warrants to acquire 1,756,743 shares of common stock at
an exercise price of $3.60 per share for a 5 year period.  The Company is in the
process  of  applying  to list its  shares of common  stock on the OTC  Bulletin
Board. Once approved, its shares will trade on the OTC Bulletin Board until such
time as the Company qualifies to list its shares on the Nasdaq National Market.

On February 7, 2006 the Board of Directors  declared a dividend in the amount of
$0.06 per share (i) payable on or about March 2, 2006 to those holders of record
of common stock of Euroseas on February  28,  2006,  and (ii) (A) payable to the
stockholders  of Cove  who  are  entitled  to  receive  shares  of  Euroseas  in
connection with the merger,  with such payment being made only to the holders of
record of Cove  common  stock as of the  effective  date of the  merger and such
dividend  payment  being made upon  exchange  of their Cove shares for shares of
Euroseas common stock (assuming such merger is  consummated),  or (B) payable to
Friends Investment Company,  Inc.  ("Friends") if such merger is not consummated
since Friends will be issued the shares that would  otherwise been issued in the
merger.