1.	Basis of Presentation and General Information

EuroDry Ltd. (the “Company” or “EuroDry”) was formed by Euroseas Ltd. (“Euroseas” or “former Parent Company”) on

January 8, 2018

under the laws of the Republic of the Marshall Islands to serve as the holding company of

seven

subsidiaries (the "Subsidiaries") contributed by Euroseas to EuroDry in connection with the spin-off of Euroseas' drybulk vessels held for use as of

December 31, 2017 (

the "Spin-off"). On

May 30, 2018,

Euroseas contributed these Subsidiaries to EuroDry in exchange for

2,254,830

common shares in EuroDry, which Euroseas, distributed to holders of Euroseas common stock on a pro rata basis. Further, on

May 30, 2018

Euroseas distributed shares of the Company’s Series B Preferred Stock (the “EuroDry Series B Preferred Shares”) to holders of Euroseas’ Series B Preferred Shares, representing

50%

of Euroseas Series B Preferred Stock. For periods up to

May 30, 2018,

the accompanying financial statements reflect the financial position and results of the carve-out operations of the Subsidiaries that were contributed to the Company.

The operations of the vessels are managed by Eurobulk Ltd. ("Eurobulk" or “Manager”) and Eurobulk (Far East) Ltd. Inc. (“Eurobulk FE”)

collectively the “Managers”, corporations controlled by members of the Pittas family. Eurobulk has an office in Greece located at

Messogiou & Evropis Street, Maroussi, Greece; Eurobulk FE has an office at Manilla, Philippines Suite

1003,

10th

Floor Ma. Natividad Building,

470

T.M. Kalaw cor. Cortada Sts., Ermita. Both provide the Company with a wide range of shipping services such as technical support and maintenance, insurance consulting, chartering, financial and accounting services, while Eurobulk also provides executive management services, in consideration for fixed and variable fees (see Note

The Pittas family is the controlling shareholder of Friends Dry Investment Company Inc. which, in turn, owns

39.3%

of the Company’s shares as of

December 31, 2019.

Mr. Aristides J. Pittas is the Chairman and Chief Executive Officer of the Company and Euroseas.

The Company is engaged in the ocean transportation of dry bulk through ownership and operation of dry bulk ship-owning companies. Details of the Company’s wholly owned subsidiaries are set out below:

Pantelis Shipping Corp., incorporated in the Republic of Liberia on

December 4, 2009,

owner of the Liberian flag

74,020

DWT bulk carrier M/V "Pantelis" which was built in

2000

and acquired on

July 23, 2009.

Eirini Shipping Ltd., incorporated in the Republic of Liberia on

February 2, 2014,

owner of the Liberian flag

76,466

DWT bulk carrier M/V “Eirini P” which was built in

2004

and acquired on

May 26, 2014.

Ultra One Shipping Ltd., incorporated in the Republic of Liberia on

November 21, 2013,

owner of Liberian flag

63,500

DWT bulk carrier M/V "Alexandros P." (ex- Hull DY

160

). M/V "Alexandros P", which is a new build, was delivered on

January 16, 2017.

Ultra Two Shipping Ltd., incorporated in the Republic of Liberia on

November 21, 2013,

entered on

November 29, 2013,

into a shipbuilding contract with Yangzhou Dayang Shipbuilding Co., Ltd. and Sumec Marine Co., Ltd., for the construction of a

63,500

DWT bulk carrier (Hull

No.

DY161

). The shipbuilding contract was cancelled on

September 2, 2016

due to excessive construction delays. Ultra Two Shipping Ltd. has

assets and operations as of

December 31, 2017,

2018

and

2019

and it was dissolved effective

February 1, 2020.

Kamsarmax One Shipping Ltd., incorporated in the Republic of the Marshall Islands on

April 4, 2014,

owner of the Marshall Islands flag

82,000

DWT bulk carrier M/V "Xenia". M/V "Xenia", which is a new build, was delivered on

February 25, 2016.

Kamsarmax Two Shipping Ltd., incorporated in the Republic of the Marshall Islands on

April 4, 2014,

owner of the Marshall Islands flag

82,000

DWT bulk carrier M/V “Ekaterini”. M/V “Ekaterini”, which is a new build, was delivered on

May 7, 2018.

Areti Shipping Ltd., incorporated in the Republic of the Marshall Islands on

November 15, 2016,

owner of the Cypriot flag

75,100

DWT bulk carrier M/V “Tasos” which was built in

2000

and acquired on

January 9, 2017.

Light Shipping Ltd., incorporated in the Republic of the Marshall Islands on

November 6, 2018,

owner of the Cypriot flag

75,845

DWT bulk carrier M/V “Starlight” which was built in

2004

and acquired on

November 30, 2018.

As of

December 31, 2019,

the Company had a working capital deficit of

$1.6

million, and for the year ended

December 31, 2019

generated nominal net income, incurred a net loss attributable to common shareholders of

$1.9

million and generated net cash from operating activities of

$15.1

million. The Company’s cash balance amounted to

$5.40

million and cash in restricted retention accounts amounted to

$3.73

million as of

December 31, 2019.

The holders of EuroDry Series B Preferred Shares will receive a cash dividend at an annual dividend rate of

9.25%

until

January 2021,

which will increase to

14%

thereafter (Note

). The Company intends to fund its working capital requirements via cash on hand and cash flows from operations. In the event that these are

not

sufficient the Company

may

also use funds from debt refinancing, debt balloon payment refinancing and equity offerings, sell vessels (where equity will be released) and drawdown funds under a commitment from a company controlled by the Pittas family and affiliated with our Chief Executive Officer, if required, among other options. The Company believes it will have adequate funding through the sources described above and, accordingly, it believes it has the ability to continue as a going concern and finance its obligations as they come due over the next

twelve

months following the date of the issuance of these financial statements. Consequently, the consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The following charterers individually accounted for more than

10%

of the Company’s revenues as follows:

	Year ended December 31,
Charterer		2017		2018		2019
A/S Klaveness Chartering		26	%	32	%	35	%
Quadra Commodities S.A.		-		-		16	%
Guardian Navigation GMax LLC pool		-		-		15	%
Amaggi Europe B.V.		17	%	11	%	-
Dampskibsselskabet Norden A/S		18	%	-		-
China National Chartering (Hong Kong) Co., Limited		13	%	-		-