1. Basis of Presentation and General Information

EuroDry Ltd. (the “Company” or “EuroDry”) was formed by Euroseas Ltd. (“Euroseas”) 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. 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. EuroDry’s common shares trade on the Nasdaq Capital Market under the ticker symbol “EDRY”.

The operations of the vessels are managed by Eurobulk Ltd. ("Eurobulk" or “Manager”) and Eurobulk (Far East) Ltd. Inc. (“Eurobulk FE”), collectively the “Managers” or the “Management Companies”, corporations controlled by members of the Pittas family. Eurobulk has an office in Greece located at 4 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 5).

The Pittas family is the controlling shareholder of Friends Dry Investment Company Inc., Family United Navigation Co. and Ergina Shipping Ltd., which, in turn, own 47.3% of the Company’s shares as of June 30, 2026. Mr. Aristides J. Pittas is the Chairman and Chief Executive Officer of the Company and Euroseas.

The accompanying unaudited condensed consolidated financial statements include the accounts of EuroDry Ltd., and its subsidiaries (vessel owning entities it controls), and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025 as filed with the U.S. Securities and Exchange Commission ("SEC") on Form 20-F on April 28, 2026.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) for interim financial information. Accordingly, they do not include all the information and notes required by US GAAP 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 flows for the periods presented. Operating results for the six-month period ended June 30, 2026, are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2026.

2. Significant Accounting Policies and Recent Accounting Pronouncements

A summary of the Company's significant accounting policies and recent accounting pronouncements are included in Note 2 of the Company’s consolidated financial statements, included in the Annual Report on Form 20-F for the fiscal year ended December 31, 2025 (the “2025 Annual Report”). Except for the recent accounting pronouncements described below, there have been no changes to the Company’s significant accounting policies and recent accounting pronouncements in the six-month period ended June 30, 2026.

In May 2026, the FASB issued Accounting Standards Update No. 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), which establishes guidance for the recognition, measurement, presentation and disclosure of environmental credits and related environmental credit obligations. The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods, with early adoption permitted, and are required to be applied retrospectively. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and related disclosures.

3. Advances for vessels under construction

On October 14, 2024, the Company signed two contracts for the construction of two 63,500 DWT eco-design fuel efficient ultramax bulk carriers. The vessels will be built at Nantong Xiangyu Shipbuilding in China. The two newbuildings are scheduled to be delivered during the second and third quarter of 2027. The total contracted consideration for the construction of the two vessels is approximately $71.8 million and will be financed with a combination of debt (see below) and equity. As of June 30, 2026, the Company has paid $14.4 million related to shipyard installments as well as other costs related to the construction of these two vessels. All the payments are guaranteed by the Company. In addition, on November 3, 2025, the Company signed a loan agreement with Credia Bank S.A., to partly finance on pre-delivery basis the construction of one of the above new building vessels, for a loan of up to $26.9 million mortgaging as collateral the aforementioned vessel from its delivery onwards. On December 5, 2025, the Company signed a loan agreement with Eurobank S.A., to partly finance on pre-delivery basis the construction of the second new building vessel, for a loan up to of $26.0 million and refinance the outstanding loan of M/V Yannis Pittas, with a loan of up to $13.5 million, for estimated additional loan proceeds of approximately $5 million, mortgaging as collateral the M/V Yannis Pittas, and from its delivery onwards, for the second new building vessel

On April 20, 2026 and May 15, 2026, the Company signed two contracts for the construction of two 82,000 DWT eco-design fuel efficient kamsarmax bulk carriers. The vessels will be built at Hengli Shipbuilding (Dalian) Co., Ltd. in China. The two newbuildings are scheduled to be delivered during the first and second quarter of 2028. The total contracted consideration for the construction of the two vessels is approximately $74.0 million, which the Company intends to finance with a combination of debt and equity.

The amounts shown in the unaudited condensed consolidated balance sheets are analyzed as follows:

4. Vessels, net

The amounts in the accompanying unaudited condensed consolidated balance sheets are as follows:

Sale of vessel

On January 29, 2025, the Company signed an agreement to sell M/V Tasos, a 75,100 dwt drybulk vessel, built in 2000, for demolition, for $5.0 million, following a strategy of disposing older vessels.

The vessel was delivered to its buyers, an unaffiliated third party, on March 17, 2025, resulting in a gain on sale of $2,083,596, presented in the “Net gain on sale of vessel” line in the “Operating expenses / (income)” section of the unaudited condensed consolidated statements of operations for the six months period ended June 30, 2025. No case of vessel sale exists within the first half of 2026.

As of June 30, 2026, all vessels are mortgaged as collateral under the Company’s loan agreements (see Note 6).

5. Related Party Transactions

Each of the Company’s vessel owning companies is party to a management agreement with one of the Management Companies, both of which are controlled by members of the Pittas family, whereby the Management Companies provide technical and commercial vessel management for a fixed daily fee of Euro 840 and Euro 875 for the six months ended June 30, 2025 and 2026, respectively, under the Company’s Master Management Agreements (“MMAs”) with the Management Companies. For the six months ended June 30, 2025, an additional amount of Euro 10 per day per vessel in operation was charged as a management fee for the administration of EU-ETS and Fuel EU regulations. No extra fee has been charged for the administration of the EU-ETS and Fuel EU regulations in 2026. Vessel management fees paid to the Management Companies amounted to $2,182,187 and $2,082,405 in the six-month periods ended June 30, 2025 and 2026, respectively. The MMAs were extended on January 1, 2023 for a further five-year term until January 1, 2028. The Company’s MMAs with the Managers provide for an annual adjustment of the daily vessel management fee due to inflation to take effect January 1 of each year. These fees are recorded under “Related party management fees” in the unaudited condensed consolidated statements of operations.

In addition to the vessel management services, the Manager provides executive services to the Company. For each of the six months ended June 30, 2025 and 2026, compensation paid to the Manager for such services to the Company was $727,500 and $740,000, respectively. This amount is included in “General and administrative expenses” in the unaudited condensed consolidated statements of operations.

Amounts due to or from related companies represent net disbursements and collections made on behalf of the vessel-owning companies by the Management Companies during the normal course of operations for which a right of offset exists. As of December 31, 2025 and June 30, 2026, the amount due to related companies was $627,231 and $181,743, respectively.

The Company uses brokers for various services, as is industry practice. Eurochart S.A. (“Eurochart”), a company controlled by certain members of the Pittas family, provides vessel sale and purchase services, and chartering services to the Company whereby the Company pays commission of 1% of the vessel sales price and 1.25% of charter revenues. A commission of 1% of the purchase price is also paid to Eurochart by the seller of the vessel for acquisitions the Company makes using Eurochart's services. There were no commissions to Eurochart for vessel sales during the six months period ended June 30, 2026. For the six months period ended June 30, 2025, the Company paid to Eurochart a commission amounting to $50,200 for the sale of M/V Tasos, which was recorded in “Net gain on sale of vessel” in the unaudited condensed consolidated statement of operations. Commissions to Eurochart S.A. for chartering services were $267,942 and $403,181 for the six-month periods ended June 30, 2025 and 2026, respectively, recorded in “Commissions” in the unaudited condensed consolidated statements of operations. 

Certain members of the Pittas family, together with another unrelated ship management company, have formed a joint venture with the insurance broker Sentinel Maritime Services Inc. (“Sentinel”). Technomar Crew Management Services Corp (“Technomar”) is a company owned by certain members of the Pittas family, together with another unrelated ship management company, which provides crewing services. Sentinel is paid a commission on insurance premiums not exceeding 5%; Technomar is paid a fee of about $50 per crew member per month. Total fees charged by Sentinel and Technomar were $50,423 and $98,773 in the first six months of 2025, respectively. In the first six months of 2026, total fees charged by Sentinel and Technomar were $43,598 and $85,000, respectively. These amounts are recorded in “Vessel operating expenses” in the accompanying unaudited condensed consolidated statements of operations.

On October 13, 2023, Christos Ultra LP and Maria Ultra LP, owners of M/V “Christos K” and M/V “Maria”, signed with Eurobulk Ltd. an administration contract under which Eurobulk Ltd. will receive an amount of $15,000 per business year in order to provide various accounting and business transactions. For each of the six-month periods ended June 30, 2025 and 2026, an amount of $7,500 has been accrued in order to cover such costs, which are recorded under “General and administrative expenses” in the unaudited condensed consolidated statements of operations.

6. Long-Term Bank Loans

These consist of bank loans of the ship-owning companies guaranteed by EuroDry Ltd. and are as follows:

The future annual loan repayments are as follows:

Details of the loans are discussed in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2025, included in the 2025 Annual Report. There have been no changes in the terms of the loans during the six months ended June 30, 2026.

The Company’s bank loans are secured with one or more of the following:

The loan agreements also contain covenants such as minimum requirements regarding the security cover ratio covenant (the ratio of fair value of vessel to outstanding loan less cash in retention accounts) ranging from 120% to 125%, restrictions as to changes in management and ownership of the ship-owning companies, distribution of profits or assets (i.e. not permitting dividend payment or other distributions in cases that an event of default has occurred), additional indebtedness and mortgage of vessels without the lender’s prior consent, sale of vessels, maximum fleet-wide leverage, sale of capital stock of the Company’s subsidiaries, ability to make investments and other capital expenditures, entering in mergers or acquisitions, minimum cash balance requirements and minimum cash retention accounts (restricted cash). The loan agreements also require the Company to make deposits in retention accounts with certain banks that can only be used to pay the current loan installments, as well as deposits to dry docking reserve accounts that can only be used to cover the cost of the next scheduled drydocking of the respective collateral vessel. Minimum cash balance requirements are in addition to cash held in retention accounts. These cash deposits (including the cash collateral required under certain of the Company’s FFAs, if any, as described in Note 10) amounted to $5,356,922 and $5,726,051 as of December 31, 2025 and June 30, 2026, respectively, and are included in "Restricted cash" under "Current assets" and "Long-term assets" in the unaudited condensed consolidated balance sheets. As of June 30, 2026, the Company satisfied all its debt covenants.

Interest expense for the six-month periods ended June 30, 2025 and 2026, amounted to $3,387,607 and $2,901,834, respectively.

7. Commitments and Contingencies

As of June 30, 2026, future gross minimum revenues under non-cancellable time charter agreements total $10.0 million. The entire amount is due in the period ending June 30, 2027. Future gross minimum revenues also include revenues deriving from four index linked charter agreements using the index rate at the commencement date of the agreement, in compliance with ASC 842. In arriving at the future gross minimum revenues, the Company has deducted an estimated one off-hire day per quarter plus estimated off-hire time required for scheduled intermediate and special surveys of the vessels, if applicable. Such off-hire estimate may not be reflective of the actual off-hire in the future. In addition, the actual revenues could be affected by early delivery of the vessel by the charterers or any exercise of the charterers’ options to extend the terms of the charters, which however cannot be estimated and hence not reflected above.

As of June 30, 2026, the Company had under construction two ultramax bulk carriers and two kamsarmax bulk carriers with an outstanding amount of $131.5 million. An amount of $56.2 million is payable in the period ending June 30, 2027 and an amount of $75.3 million is payable in the period ending June 30, 2028. The Company intends to finance these commitments with debt financing and own cash.

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.

8. Stock Incentive Plan

A summary of the status of the Company’s unvested shares as of January 1, 2026, and changes during the six-month period ended June 30, 2026, are presented below:

As of June 30, 2026, there was $669,243 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted. That cost is expected to be recognized over a weighted-average period of 0.55 years. The share-based compensation recognized relating to the unvested shares was $494,250 and $473,214 for the six-month periods ended June 30, 2025 and 2026, respectively, and is included within “General and administrative expenses” in the unaudited condensed consolidated statements of operations.

9. (Loss) / Earnings Per Share

Basic and diluted (loss) / earnings per common share attributable to controlling shareholders are computed as follows:

For the six-month periods ended June 30, 2025, during which the Company incurred losses, the effect of 89,400 non-vested stock awards was anti-dilutive. For the six-month periods ended June 30, 2026, the denominator of the diluted earnings per share calculation includes 45,884 common shares, being the number of incremental shares assumed issued under the treasury stock method.

10. Financial Instruments

The principal financial assets of the Company consist of cash and cash equivalents, restricted cash, trade accounts receivable, other receivables and derivative. The principal financial liabilities of the Company consist of long-term bank loans, trade accounts payable, derivatives, amount due to related companies and accrued expenses.

Interest rate risk

The Company enters into interest rate swap contracts from time to time as economic hedges to manage some of its exposure to variability in its floating rate long-term bank loans. Under the terms of the interest rate swaps the Company and the bank agreed to exchange, at specified intervals, the difference between a paying fixed rate and receiving floating rate interest amount calculated by reference to the agreed principal amounts and maturities. Interest rate swaps allow the Company to convert portion of long-term bank loans issued at floating rates into equivalent fixed rates. Even though the interest rate swaps were entered into for economic hedging purposes, they did not qualify for hedge accounting, under the guidance relating to Derivatives and Hedging, as the Company did not have currently written contemporaneous documentation identifying the risk being hedged and, both on a prospective and retrospective basis, performing an effectiveness test to support that the hedging relationship is highly effective. Consequently, the Company recognized the change in fair value of the derivatives under “Loss on derivatives, net” in the unaudited condensed consolidated statements of operations. As of June 30, 2026, the Company had no open interest rate swap contracts and hence, the Company is exposed to increases in interest rates on the outstanding amount of its interest-bearing debt.

Concentration of credit risk

Financial instruments, which potentially subject the Company to significant concentration of credit risk consist primarily of cash and trade accounts receivable. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluation of the relative credit standing of these financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with trade accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable as the Company in most cases gets paid in advance. The Company may be exposed to credit risk in the event of non-performance by its counterparties to derivative instruments; however, the Company limits its exposure by transacting with counterparties with high credit ratings.

Fair value of financial instruments

The Company follows guidance relating to “Fair value measurements”, which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements.  This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities;

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;

Level 3: Unobservable inputs that are not corroborated by market data.

The estimated fair values of the Company's financial instruments such as cash and cash equivalents, restricted cash, trade accounts receivable, other receivables, trade accounts payable, accrued expenses and amount due to related companies approximate their individual carrying amounts as of December 31, 2025 and June 30, 2026, due to their short-term maturity.  Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. The fair value of the Company’s long-term bank loans, bearing interest at variable interest rates approximates their recorded values as of June 30, 2026, due to the variable interest rate nature thereof. SOFR rates are observable at commonly quoted intervals for the full terms of the loans and hence fair values of the long-term bank loans are considered Level 2 items in accordance with the fair value hierarchy due to their variable interest rate, being the SOFR.

The fair value of the Company’s FFA contracts is determined based on quoted prices from the applicable exchanges and therefore are considered Level 1 of the fair value hierarchy as defined in guidance relating to "Fair value measurements".

Recurring Fair Value Measurements

The amount of loss on derivatives, net recognized in the unaudited condensed consolidated statements of operations, is analyzed as follows:

The Company’s FFA contracts require the Company to periodically post additional collateral depending on the level of any open position under such financial instruments, which as of December 31, 2025, and June 30, 2026, amounted to $284,460 and $576,840, respectively, and is included within “Restricted cash” under "Current assets" in the condensed consolidated balance sheets.

11. Segment reporting

The Company reports financial information and evaluates its operations and operating results by total consolidated net income and not by the type of vessel, length of vessel employment, customer or type of charter. Although revenue can be identified for these types of charters or vessels, management cannot and does not identify expenses, profitability or other financial information for these various types of charters or vessels. As a result, the Company’s management, including its Chief Executive Officer, Mr. Aristides J. Pittas, who is the chief operating decision maker (“CODM”), does not use discrete financial information to evaluate the operating results for each such type of charter or vessel, but is instead regularly provided with only the Net revenue and significant segment expenses as noted in the table below. In addition, the CODM reviews segment assets as these reported on the unaudited condensed consolidated balance sheets  as “Total Assets”.

The CODM assesses performance for the vessel operations segment and decides how to allocate resources based on consolidated net income. Net income is used to monitor budget versus actual results of the Company. The Company’s consolidated financial results are used in assessing the performance of the segment and in deciding whether to reinvest profits in the Company. As a result, management, including the CODM, reviews operating results solely by consolidated net income of the fleet, and thus the Company has determined that it operates under one operating and one reportable segment, that of operating dry bulk vessels. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographical information is impracticable.

12. Subsequent Events

The following events occurred after June 30, 2026: