RISK FACTORS

      Any investment in Euroseas stock involves a high degree of risk. You should consider carefully the following factors, as well as the other information set forth in this joint Information Statement/ prospectus, before making a decision on the Merger. Some of the following risks relate principally to the industry in which Euroseas operates and its business in general. Other risks relate to the securities market for and ownership of Euroseas common stock. Any of the risk factors could significantly and negatively affect Euroseas’ business, financial condition, operating results and common stock price. The following risk factors describe the material risks that are presently known to Euroseas and Cove.

Risk Factors Relating to Euroseas Common Stock

      Prior to the Merger, there will be no public market for Euroseas’ shares. Euroseas cannot assure you that it will be successful in obtaining a public listing for its stock or that an active trading market for Euroseas’ shares will develop or be sustained after the Merger. Euroseas cannot predict at this time how actively Euroseas’ shares will trade in the public market subsequent to the Merger, if at all, or whether the price of Euroseas’ shares in the public market will reflect its actual financial performance.

      The price of Euroseas’ shares after the Merger may be volatile, and may fluctuate due to factors such as:

      The international drybulk and containership shipping industries have been highly unpredictable and volatile. The market for common shares of companies in these industries may be equally volatile. The Euroseas’ shares that you receive in the Merger may trade at prices lower than you originally paid for your corresponding shares of Cove common stock.

      There has been a limited trading market for Cove shares which will be converted at the effective time of the Merger into Euroseas’ shares.

      Cove shareholders will experience significant dilution and a substantial reduction in their percentage ownership interests and effective voting power relative to their respective percentage ownership interests in Cove prior to the Merger. If the Merger is consummated and all of the Cove stockholders receive Euroseas shares in the Merger, current Cove shareholders will own approximately 2.8% of the shares of Euroseas and Euroseas stockholders, including the investors in the Private Placement, will own approximately 97.2% of the shares of Euroseas.

      Upon consummation of the Merger, Euroseas’ present shareholders will own approximately 97.2% of its outstanding common stock. Euroseas has agreed to register the shares acquired by the investors in the Private Placement for resale. Sales or the possibility of sales of substantial amounts of Euroseas’ shares of its common stock by such persons in the public markets could adversely affect the market price of Euroseas’ common stock.

      If the Merger is consummated and all of the Cove stockholders receive Euroseas’ shares in the Merger, the current Euroseas shareholders will own approximately 97.2% of the shares of Euroseas. While the existing Euroseas shareholders have no agreement, arrangement or understanding relating to the voting of their shares following the Merger, they will effectively control the outcome of matters on which Euroseas shareholders are entitled to vote, including the election of directors and other significant corporate actions. The interests of these shareholders may be different from Cove stockholder interests.

      Euroseas’ current Articles of Incorporation and Bylaws contain certain anti-takeover provisions. These provisions include blank check preferred stock, the prohibition of cumulative voting in the election of directors, a classified board of directors, advance written notice for shareholder nominations for directors, removal of directors only for cause, advance written notice of shareholder proposals for the removal of directors and limitations on action by shareholders. These provisions, either individually or in the aggregate, may discourage, delay or prevent (1) the merger or acquisition of Euroseas by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest and (2) the removal of incumbent directors and officers.

      As a condition to the Merger, Cove’s sole officer and director must resign from his current positions at or prior to the effective time of the Merger. The current officer and director of Cove will have no role in the management of Euroseas after the Merger. Instead, the current management of Euroseas will remain in place. Although Cove has researched and assessed Euroseas’ management, Cove cannot assure you that its assessment of Euroseas’ management will prove to be correct and that Euroseas’ management will be successful in its operation of Euroseas’ business after the Merger.

      Cove and Euroseas expect to incur significant costs associated with the Merger, whether or not the Merger is completed and the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes.

      The unaudited pro forma financial information contained in this joint Information Statement/ prospectus is presented for illustrative purposes only and is not necessarily indicative of the financial position of Euroseas for future periods. Cove and Euroseas have estimated the impacts of the transaction in developing the related

pro forma information. These estimates are subject to change pending a final analysis after completion of the transaction. The impact of these changes could materially reduce Euroseas’ actual post-transaction net worth from the pro forma amount.

      The Merger has been structured to qualify as a nontaxable reorganization for U.S. federal income tax purposes. If the Merger does not qualify as a nontaxable reorganization for federal income tax purposes, then the Merger may result in the recognition of gain or loss to Cove stockholders. In the event that the Merger resulted in the recognition of gains to Cove stockholders, Cove stockholders will not receive any cash as a portion of the Merger consideration that could be used by them to satisfy any tax liability created by the Merger.

Industry Risk Factors Relating to Euroseas

      Euroseas is an independent shipping company that operates in the drybulk and containership shipping markets. Euroseas’ profitability is dependent upon the freight rates Euroseas is able to charge. The supply of and demand for shipping capacity strongly influences freight rates. The demand for shipping capacity is determined primarily by the demand for the type of commodities carried and the distance that those commodities must be moved by sea. The demand for commodities is affected by, among other things, world and regional economic and political conditions (including developments in international trade, fluctuations in industrial and agricultural production and armed conflicts), environmental concerns, weather patterns, and changes in seaborne and other transportation costs. The size of the existing fleet in a particular market, the number of new vessel deliveries, the scrapping of older vessels and the number of vessels out of active service (i.e., laid-up, drydocked, awaiting repairs or otherwise not available for hire), determines the supply of shipping capacity, which is measured by the amount of suitable tonnage available to carry cargo. The cyclical nature of the shipping industry may lead to volatile changes in freight rates which may reduce Euroseas’ revenues and net income.

      In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance and insurance coverage, the efficiency and age profile of the existing fleet in the market and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of Euroseas’ control, and it cannot predict the nature, timing and degree of changes in industry conditions. Some of these factors may have a negative impact on Euroseas’ revenues and net income.

      The market value of Euroseas’ vessels can fluctuate significantly. The market value of Euroseas’ vessels may increase or decrease depending on the following factors:

      As vessels grow older, they generally decline in value. Due to the cyclical nature of the dry bulk and container vessel markets, if for any reason Euroseas sells vessels at a time when prices have fallen, it could incur a loss and its business, results of operations, cash flow, financial condition and ability to pay dividends could be adversely affected.

      Due to the fact that the market value of Euroseas’ vessels may fluctuate significantly, Euroseas may incur losses when it sells vessels, which may adversely affect its earnings. In addition, any determination that a vessel’s remaining useful life and earnings requires an impairment of its value on Euroseas’ financial statements could result in a charge against Euroseas’ earnings and a reduction in Euroseas’ shareholders’ equity. Any change in the assessed value of a Euroseas vessel might cause a violation of the covenants of each secured credit agreement which in turn might restrict Euroseas’ cash and affect its liquidity. If for any reason Euroseas sells its vessels at a time when prices have fallen, the sale may be less than such vessel’s carrying amount on its financial statements, and Euroseas would incur a loss and a reduction in earnings.

      Charter rates for the international shipping industry have reached record highs during the past year; however, recently rates have declined. Euroseas anticipates that the future demand for its drybulk carriers and containership vessels and the charter rates of the corresponding markets will be dependent upon continued economic growth in China, India and the world economy, seasonal and regional changes in demand, and changes to the capacity of the world fleet. The capacity of the world fleet seems likely to increase and there can be no assurance that economic growth will continue. Adverse economic, political, social or other developments could also have a material adverse effect on Euroseas’ business and results of operations. If the number of new ships delivered exceeds the number of vessels being scrapped and lost, vessel capacity will increase. For instance, given that as of the end of 2004 the capacity of the worldwide container vessel fleet was approximately 7.4 million teu, with approximately 3.4 million teu of additional capacity on order, the growing supply of container vessels may exceed future demand, particularly in the short term. If the supply of vessel capacity increases but the demand for vessel capacity does not increase correspondingly, charter rates and vessel values could materially decline.

      The factors affecting the supply and demand for vessels are outside of Euroseas’ control, and the nature, timing and degree of changes in industry conditions are unpredictable. Some of the factors that influence demand for vessel capacity include:

      Some of the factors that influence the supply of vessel capacity include:

      A significant number of the port calls made by Euroseas’ vessels involve the loading or discharging of raw materials and semi-finished products in ports in the Asia Pacific region. As a result, a negative change in economic conditions in any Asia Pacific country, but particularly in China or India, may have an adverse effect on Euroseas’ business, financial position and results of operations, as well as its future prospects. In particular, in recent years, China has been one of the world’s fastest growing economies in terms of gross domestic product. Euroseas cannot assure you that such growth will be sustained or that the Chinese economy will not experience contraction in the future. Moreover, any slowdown in the economies of the United States of America, the European Union or certain Asian countries may adversely effect economic growth in China and elsewhere. Euroseas’ business, financial position and results of operations, as well as its future prospects, will likely be materially and adversely affected by an economic downturn in any of these countries.

      Although most of Euroseas’ vessels are currently under longer term time charters, in the future, Euroseas may have more of these vessels and/or any newly acquired vessels on spot charters. The spot charter market is highly competitive and rates within this market are subject to volatile fluctuations, while longer-term time charters provide income at pre-determined rates over more extended periods of time. If Euroseas decides to spot charter its vessels, there can be no assurance that Euroseas will be successful in keeping all its vessels fully employed in these short-term markets or that future spot rates will be sufficient to enable its vessels to be operated profitably. A significant decrease in charter rates could affect the value of Euroseas’ fleet and could adversely affect its profitability and cash flows with the result that its ability to pay debt service to its lenders and dividends to its shareholders could be impaired.

      Euroseas’ business and the operation of its vessels are materially affected by government regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration. Because such conventions, laws, and regulations are often revised, Euroseas cannot predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale prices or useful lives of its vessels. Additional conventions, laws and regulations may be adopted which could limit Euroseas’ ability to do business or increase the cost of its doing business and which may materially adversely affect its operations. Euroseas is required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to its operations.

      The operation of Euroseas’ vessels is affected by the requirements set forth in the International Maritime Organization’s (“IMO’s”) International Management Code for the Safe Operation of Ships and Pollution Prevention (“ISM Code”). The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels, and/or may result in a denial of access to, or detention in, certain ports. Currently, each of Euroseas’ vessels and Eurobulk Ltd. (“Eurobulk”), Euroseas’ ship management company, are ISM Code-certified, however, there can be no assurance that such certification will be maintained indefinitely.

      Although the United States of America is not a party, many countries have ratified and follow the liability scheme adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended (the “CLC”), and the Convention for the Establishment of an International Fund for Oil Pollution of 1971, as amended. Under these conventions, a vessel’s registered owner

is strictly liable for pollution damage caused on the territorial waters of a contracting state by discharge of persistent oil, subject to certain complete defenses. Many of the countries that have ratified the CLC have increased the liability limits through a 1992 Protocol to the CLC. The right to limit liability is also forfeited under the CLC where the spill is caused by the owner’s actual fault or privity and, under the 1992 Protocol, where the spill is caused by the owner’s intentional or reckless conduct. Vessels trading to contracting states must provide evidence of insurance covering the limited liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to the CLC.

      The United States Oil Pollution Act of 1990 (“OPA”) established an extensive regulatory and liability regime for the protection and clean-up of the environment from oil spills. OPA affects all owners and operators whose vessels trade in the United States of America or any of its territories and possessions or whose vessels operate in waters of the United States of America, which includes the territorial sea of the United States of America and its 200 nautical mile exclusive economic zone. OPA allows for potentially unlimited liability without regard to fault of vessel owners, operators and bareboat charterers for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel), in the U.S. waters. OPA also expressly permits individual states to impose their own liability regimes with regard to hazardous materials and oil pollution materials occurring within their boundaries.

      While Euroseas does not carry oil as cargo, it does carry fuel oil (bunkers) in its drybulk carriers. Euroseas currently maintains, for each of its vessels, pollution liability coverage insurance of $1 billion per incident. If the damages from a catastrophic spill exceeded its insurance coverage, that would have a material adverse affect on Euroseas’ financial condition.

      Changes in governmental regulations, safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations and customer requirements or competition, may require Euroseas to make additional expenditures. In order to satisfy these requirements, Euroseas may, from time to time, be required to take its vessels out of service for extended periods of time, with corresponding losses of revenues. In the future, market conditions may not justify these expenditures or enable Euroseas to operate some or all of its vessels profitably during the remainder of their economic lives.

      International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination. Inspection procedures can result in the seizure of contents of Euroseas’ vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against Euroseas.

      It is possible that changes to inspection procedures could impose additional financial and legal obligations on Euroseas. Furthermore, changes to inspection procedures could also impose additional costs and obligations on Euroseas’ customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on Euroseas’ business, financial condition and results of operations.

      Fuel (bunkers) is a significant, if not the largest, operating expense for many of Euroseas’ shipping operations when its vessels are not under time charter. The price and supply of fuel is unpredictable and fluctuates based on events outside Euroseas’ control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. As a result, an increase in the price of

fuel may adversely affect Euroseas’ profitability. Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of Euroseas’ business versus other forms of transportation, such as truck or rail.

      The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention (“SOLAS”). Euroseas’ vessels are currently classed with Lloyd’s Register of Shipping, Bureau Veritas and Nippon Kaiji Kyokai. ISM and International Ship and Port Facilities Security (“ISPS”) certification have been awarded by Bureau Veritas and the Panama Maritime Authority to Euroseas’ vessels and Eurobulk.

      A vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be drydocked every two to three years for inspection of the underwater parts of such vessel.

      If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause Euroseas to be in violation of certain covenants in its loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on Euroseas’ financial condition and results of operations. That status could cause Euroseas to be in violation of certain covenants in its loan agreements.

      Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a vessel through foreclosure proceedings. The arresting or attachment of one or more of Euroseas’ vessels could interrupt its cash flow and require it to pay large sums of funds to have the arrest lifted which would have a material adverse effect on Euroseas’ financial condition and results of operations.

      In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one of Euroseas’ vessels for claims relating to another of its vessels.

      A government could requisition for title or seize Euroseas’ vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition Euroseas’ vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of Euroseas’ vessels could have a material adverse effect on Euroseas’ financial condition and results of operations.

      Terrorist attacks such as the attacks on the United States of America on September 11, 2001, on London, England on July 7, 2005, and the response to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty in the world financial markets and may affect Euroseas’ business, results of operations and financial condition. The continuing conflict in Iraq may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also have a material adverse effect on Euroseas’ ability to obtain additional financing on terms acceptable to it or at all.

      Terrorist attacks may also negatively affect Euroseas’ operations and financial condition and directly impact its vessels or its customers. Future terrorist attacks could result in increased volatility of the financial markets in the United States of America and globally and could result in an economic recession in the United States of America or the world. Any of these occurrences could have a material adverse impact on Euroseas’ financial condition and costs.

Company Risk Factors Relating to Euroseas

      Euroseas currently contracts the commercial and technical management of its fleet, including crewing, maintenance and repair, to Eurobulk, an affiliated company with which Euroseas is under common control. The loss of Eurobulk’s services or its failure to perform its obligations to Euroseas could have a material adverse effect on Euroseas’ financial condition and results of its operations. Although Euroseas may have rights against Eurobulk if it defaults on its obligations to Euroseas, you will have no recourse against Eurobulk. Further, Euroseas expects that it will need to seek approval from its lenders to change Eurobulk as its ship manager.

      The ability of Eurobulk to continue providing services for Euroseas’ benefit will depend in part on its own financial strength. Circumstances beyond Euroseas’ control could impair Eurobulk’s financial strength. Because Eurobulk is privately held it is unlikely that information about its financial strength would become public unless Eurobulk began to default on its obligations. As a result, there may be little advance warning of problems affecting Eurobulk, even though these problems could have a material adverse effect on Euroseas.

      The principal officers of Euroseas are also principals, officers and employees of Eurobulk, which is Euroseas’ ship management company. These responsibilities and relationships could create conflicts of interest between Euroseas and Eurobulk. Conflicts may also arise in connection with the chartering, purchase, sale and operations of the vessels in Euroseas’ fleet versus drybulk carriers that may be managed in the future by Eurobulk. Circumstances in any of these instances may make one decision advantageous to Euroseas but detrimental to Eurobulk and vice versa. There can be no assurance that Eurobulk will resolve all conflicts of interest in a manner beneficial to Euroseas.

      Euroseas is a holding company and its subsidiaries, which are all wholly-owned by it either directly or indirectly, conduct all of its operations and own all of its operating assets. Euroseas has no significant assets

other than the equity interests in its wholly-owned subsidiaries. As a result, its ability to make dividend payments to you depends on its subsidiaries and their ability to distribute funds to it. If Euroseas is unable to obtain funds from its subsidiaries, it may be unable or its Board of Directors may exercise its discretion not to pay dividends.

      Subject to the limitations discussed below, Euroseas currently intends to pay cash dividends on a quarterly basis. However, Euroseas may incur other expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends. Euroseas’ loan agreements may also prohibit its declaration and payment of dividends under some circumstances.

      If Euroseas is not successful in acquiring additional vessels, any unused net proceeds from its Private Placement offering may be used for other corporate purposes or held pending investment in other vessels. Identifying and acquiring vessels may take a significant amount time. The result may be that proceeds of the offering are not invested in additional vessels, or are so invested but only after some delay. In either case, Euroseas will not be able to earn charterhire consistent with its current anticipations, and its profitability and its ability to pay dividends will be affected.

      In addition, the declaration and payment of dividends will be subject at all times to the discretion of Euroseas’ Board of Directors. The timing and amount of dividends will depend on its earnings, financial condition, cash requirements and availability, restrictions in its loan agreements, growth strategy, the provisions of Marshall Islands law affecting the payment of dividends and other factors. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividends. There can be no assurance that dividends will be paid in the anticipated amounts and frequency set forth herein.

      Companies affiliated with Eurobulk or Euroseas’ officers and directors own drybulk carriers and may acquire additional drybulk carriers in the future. These vessels could be in competition with Eursoseas’ fleet and other companies affiliated with Eurobulk might be faced with conflicts of interest with respect to their own interests and their obligations to Euroseas.

      In order to fund its capital expenditures, Euroseas may be required to incur borrowings or raise capital through the sale of debt or equity securities. Euroseas’ ability to access the capital markets through future offerings may be limited by its financial condition at the time of any such offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond its control. Euroseas’ failure to obtain the funds for necessary future capital expenditures would limit its ability to continue to operate some of its vessels and could have a material adverse effect on its business, results of operations and financial condition and its ability to pay dividends. Even if Euroseas is successful in obtaining such funds through financings, the terms of such financings could further limit its ability to pay dividends.

      Euroseas intends to continue to grow its fleet. Euroseas’ growth will depend on:

      Growing any business by acquisition presents numerous risks, such as undisclosed liabilities and obligations and difficulty experienced in (1) obtaining additional qualified personnel, (2) managing relationships with customers and suppliers and (3) integrating newly acquired operations into existing infrastructures. Euroseas cannot give any assurance that it will be successful in executing its growth plans or that it will not incur significant expenses and losses in connection with the execution of those growth plans.

      Euroseas has incurred secured debt under loan agreements for its vessels and currently expects to incur additional secured debt in connection with its acquisition of other vessels. If the market value of Euroseas’ fleet declines, Euroseas may not be in compliance with certain provisions of its existing loan agreements and it may not be able to refinance its debt or obtain additional financing. If Euroseas is unable to pledge additional collateral, its lenders could accelerate its debt and foreclose on its fleet.

      Euroseas’ existing loan agreements impose operating and financial restrictions on it. These restrictions may limit its ability to:

      Therefore, Euroseas may need to seek permission from its lenders in order to engage in some corporate actions. The lenders’ interests may be different from those of Euroseas, and Euroseas cannot guarantee that it will be able to obtain the lenders’ permission when needed. This may prevent Euroseas from taking actions that are in its best interest.

      To finance Euroseas’ fleet, it has incurred secured debt under loan agreements for its vessels. Euroseas also currently expects to incur additional secured debt to finance the acquisition of additional vessels. Euroseas must dedicate a portion of its cash flow from operations to pay the principal and interest on its debt. These payments limit funds otherwise available for working capital expenditures and other purposes. As of June 30, 2005, Euroseas had total bank debt of approximately $40 million. If Euroseas was unable to service its debt, it could have a material adverse effect on Euroseas’ financial condition and results of operations.

      A rise in interest rates could cause an increase in Euroseas’ costs and have a material adverse effect on its financial condition and results of operations. Euroseas has purchased, and may purchase in the future, vessels under loan agreements that provide for periodic interest payments based on indices that fluctuate with changes in market interest rates. If interest rates increase significantly, it would increase Euroseas’ costs of financing its acquisition of vessels, which could have a material adverse effect on Euroseas’ financial condition and results of operations. Any increase in debt service would also reduce the funds available to Euroseas to purchase other vessels.

      The actual or perceived credit quality of Euroseas’ charterers, and any defaults by them, may materially affect its ability to obtain the additional debt financing that Euroseas will require to purchase additional vessels or may significantly increase its costs of obtaining such financing. Euroseas’ inability to obtain additional financing at all or at a higher than anticipated cost may materially affect its results of operation and its ability to implement its business strategy.

      Euroseas’ current operating and financial systems may not be adequate if it expands the size of its fleet, and its attempts to improve those systems may be ineffective. In addition, if Euroseas expands its fleet, it will have to rely on Eurobulk to recruit suitable additional seafarers and shoreside administrative and management personnel. Euroseas cannot assure you that Eurobulk will be able to continue to hire suitable employees as Euroseas expands its fleet. If Eurobulk’s unaffiliated crewing agent encounters business or financial difficulties, Euroseas may not be able to adequately staff its vessels. If Euroseas is unable to operate its financial and operations systems effectively or to recruit suitable employees, its performance may be materially adversely affected.

      Euroseas may be subject to calls in amounts based not only on its claim records but also the claim records of other members of the protection and indemnity associations through which Euroseas receives insurance coverage for tort liability, including pollution-related liability. Euroseas’ payment of these calls could result in significant expense to it, which could have a material adverse effect on its business, results of operations, cash flows, financial condition and ability to pay dividends.

      Euroseas’ vessels are manned by masters, officers and crews that are employed by third parties. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder Euroseas’ operations from being carried out normally and could have a material adverse effect on its business, results of operations, cash flows, financial condition and ability to pay dividends.

      Euroseas employs its vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom have substantially greater resources than Euroseas. Competition for the transportation of drybulk and containership cargoes can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its managers

to the charterers. Due in part to the highly fragmented market, competitors with greater resources could operate larger fleets through consolidations or acquisitions that may be able to offer better prices and fleets.

      Euroseas’ success depends to a significant extent upon the abilities and efforts of its management team. Euroseas’ success will depend upon its ability to hire additional employees and to retain key members of its management team. The loss of any of these individuals could adversely affect Euroseas’ business prospects and financial condition. Difficulty in hiring and retaining personnel could adversely affect Euroseas’ results of operations. Euroseas does not currently intend to maintain “key man” life insurance on any of its officers.

      The operation of an ocean-going vessel carries inherent risks. These risks include, among others, the possibility of:

      The involvement of any of the vessels in an environmental disaster may harm Euroseas’ reputation as a safe and reliable vessel operator. Any of these circumstances or events could increase Euroseas’ costs or lower its revenues.

      If Euroseas’ vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. Euroseas may have to pay drydocking costs that its insurance does not cover. The loss of earnings while these vessels are being repaired and reconditioned, as well as the actual cost of these repairs, would decrease its earnings.

      Although Euroseas inspects the secondhand vessels prior to purchase, this inspection does not provide Euroseas with the same knowledge about their condition and cost of any required (or anticipated) repairs that it would have had if these vessels had been built for and operated exclusively by Euroseas. Generally, Euroseas does not receive the benefit of warranties on secondhand vessels.

      In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.

      Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to Euroseas’ vessels and may restrict the type of

activities in which the vessels may engage. Euroseas cannot assure you that, as Euroseas’ vessels age, market conditions will justify those expenditures or enable it to operate its vessels profitably during the remainder of their useful lives. If Euroseas sells vessels, it is not certain that the price for which it sells them will equal their carrying amount at that time.

      Euroseas procures hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance and war risk insurance and freight, demurrage and defence insurance for its fleet. Euroseas does not maintain insurance against loss of hire, which covers business interruptions that result in the loss of use of a vessel. Euroseas can give no assurance that it is adequately insured against all risks. Euroseas may not be able to obtain adequate insurance coverage for its fleet in the future. The insurers may not pay particular claims. Euroseas’ insurance policies contain deductibles for which it will be responsible and limitations and exclusions which may increase its costs or lower its revenue. Moreover, Euroseas cannot assure that the insurers will not default on any claims they are required to pay. If Euroseas’ insurance is not enough to cover claims that may arise, it may have a material adverse effect on Euroseas’ financial condition and results of operations.

      Euroseas is an international company and primarily conducts its operations outside the United States of America. Changing economic, political and governmental conditions in the countries where Euroseas is engaged in business or where Euroseas’ vessels are registered affect Euroseas’ operations. In the past, political conflicts, particularly in the Arabian Gulf, resulted in attacks on vessels, mining of waterways and other efforts to disrupt shipping in the area. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea. The likelihood of future acts of terrorism may increase, and Euroseas’ vessels may face higher risks of being attacked. In addition, future hostilities or other political instability in regions where Euroseas’ vessels trade could have a material adverse effect on its trade patterns and adversely affect its operations and performance.

      Euroseas’ corporate affairs are governed by its Articles of Incorporation and By-laws and by the Marshall Islands Business Corporations Act (the “BCA”). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States of America. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain jurisdictions in the United States of America. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States of America.

      Euroseas has operated as a private company since its inception. Shortly after the completion of this Merger, Euroseas intends to become subject to the reporting requirements of the Exchange Act, and the other rules and regulations of the SEC, including the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act requires that Euroseas evaluate and determine the effectiveness of its internal control over financial

reporting. If Euroseas has a material weakness in its internal control over financial reporting, it may not detect errors on a timely basis and its financial statements may be materially misstated. Euroseas will have to dedicate a significant amount of time and resources to ensure compliance with these regulatory requirements. In addition, shortly after the completion of this offering, Euroseas intends to apply to list the common stock on the Nasdaq National Market or another national exchange and may therefore be subject to the listing requirements of the Nasdaq National Market or such other exchange.

      Euroseas will work with its legal, accounting and financial advisors to identify any areas in which changes should be made to its financial and management control systems to manage its growth and its obligations as a public company. Euroseas will evaluate areas such as corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. Euroseas will make changes in any of these and other areas, including its internal control over financial reporting, which Euroseas believes are necessary. However, these and other measures it may take may not be sufficient to allow it to satisfy its obligations as a public company on a timely and reliable basis. In addition, compliance with reporting and other requirements applicable to public companies will create additional costs for Euroseas and will require the time and attention of management. Euroseas’ limited management resources may exacerbate the difficulties in complying with these reporting and other requirements while focusing on executing its business strategy. Euroseas cannot predict or estimate the amount of the additional costs it may incur, the timing of such costs or the degree of impact that its management’s attention to these matters will have on its business.

      Euroseas’ historical financial and operating data may not be representative of its future results because it is a newly formed company with no operating history as a stand-alone entity or as a publicly traded company. Euroseas’ combined financial statements included in this joint Information Statement/ prospectus have been carved out of the consolidated financial statements of shipowning companies managed by Eurobulk and majority owned by the Pittas family. Consistent with shipping industry practice, Euroseas has not obtained, nor does it present in this joint Information Statement/ prospectus, historical operating data for its vessels prior to their acquisition. Although Euroseas’ results of operations, cash flows and financial condition reflected in its combined financial statements include all expenses allocable to its business, due to factors such as the additional administrative and financial obligations associated with operating as a publicly traded company, they may not be indicative of the results of operations that Euroseas would have achieved had it operated as a public entity for all periods presented or of future results that it may achieve as a publicly traded company with its current holding company structure.

      Euroseas has historically derived a significant part of its revenue from a small number of charterers. Euroseas’ top five customers accounted for approximately 68% of its total revenues for 2004 and 54% of its total revenues for 2003. During the half of 2005, Euroseas’ top five customers accounted for 60% of its total revenues. If Euroseas loses any of these charterers, or if any of these charterers significantly reduce its use of Euroseas’services or was unable to make charter payments to Euroseas, Euroseas’ results of operations, cash flows and financial condition would be adversely affected.

      Euroseas generates all its revenues in U.S. dollars, but its ship manager, Eurobulk, incurs approximately 30% of vessel operating expenses and Euroseas incurs general and administrative expenses in currencies other than the U.S. dollar. This difference could lead to fluctuations in Euroseas’ vessel operating expenses, which

would affect its financial results. Expenses incurred in foreign currencies increase when the value of the U.S. dollar falls, which would reduce Euroseas’ profitability.

      A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime applicable to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

      Based on Euroseas’ proposed method of operation, it does not believe that it will be a PFIC. In this regard, Euroseas intends to treat the gross income it derives or are deemed to derive from its time chartering activities as services income, rather than rental income. Accordingly, Euroseas believes that its income from its time chartering activities does not constitute “passive income,” and the assets that it owns and operates in connection with the production of that income do not constitute passive assets.

      There is, however, no direct legal authority under the PFIC rules addressing Euroseas’ proposed method of operation. Accordingly, no assurance can be given that the U.S. Internal Revenue Service, or IRS, or a court of law will accept Euroseas’ position, and there is a risk that the IRS or a court of law could determine that Euroseas is a PFIC. Moreover, no assurance can be given that Euroseas would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of its operations.

      If the IRS were to find that Euroseas is or has been a PFIC for any taxable year, its U.S. shareholders will face adverse U.S. tax consequences. Under the PFIC rules, unless those shareholders make an election available under the United States Internal Revenue Code of 1986, or the Code, such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of Euroseas’ common shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of Euroseas’ common shares. Please read “Tax Items Discussion — Passive Foreign Investment Company and Controlled Foreign Corporation Status” for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if Euroseas is treated as a PFIC.

      Under the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as Euroseas and its subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and will be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the related Treasury Regulations, which the IRS has adopted and which became effective on January 1, 2005 for calendar year taxpayers such as Euroseas and its subsidiaries.

      Euroseas expects that it and each of its subsidiaries qualify for this statutory tax exemption, and will take this position for United States federal income tax reporting purposes. However, there are factual circumstances beyond Euroseas’ control that could cause it to lose the benefit of this tax exemption and thereby become subject to United States federal income tax on its United States source income. Due to the factual nature of the issues involved, Euroseas can give no assurances regarding its tax-exempt status or that of any of its subsidiaries.

      If Euroseas or its subsidiaries are not entitled to exemption under Section 883 of the Code for any taxable year, the imposition of a 4% U.S. federal income tax on its U.S. source shipping income and that of its subsidiaries could have a negative effect on its business and would result in decreased earnings available for distribution to its shareholders.