UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

        Date of Report (Date of earliest event reported): August 31, 2005

                               Cove Apparel, Inc.
                               ------------------
                 (Exact name of registrant specified in charter)

    Nevada                       000-50290                      95-4891903
   (State of                  (Commission File                 (IRS Employer
Incorporation)                     Number)                   Identification No.)
-------------------------------------------------------------------------------
                             1003 Dormador, Suite 21
                             San Clemente, CA 92672
               (Address of principal executive offices) (Zip Code)

                                 (949) 224-3040
                                 --------------
              (Registrant's telephone number, including area code)



Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ]Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)

[ ]Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)

[ ]Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))

[ ]Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))




                                       1
<PAGE>



ITEM 1.01         ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On August 25, 2005, Cove Apparel, Inc., a Nevada corporation ("Cove"), certain
stockholders of Cove, referred to as the "Cove Principals," Euroseas Acquisition
Company Inc., a Delaware corporation ("Merger Sub") and Euroseas Ltd., a
Marshall Islands corporation ("Euroseas"), signed an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Euroseas, through its
wholly-owned subsidiary, Merger Sub, agreed to acquire Cove in exchange for
shares of Euroseas common stock (the "Merger"). The Cove Principals have agreed
to pledge, or to cause their transferees to pledge, 475,000 of the shares of
Euroseas, they or their transferees are to receive in the Merger, in exchange
for their Cove shares as collateral for their indemnity obligations made
by the Cove Principals to Euroseas in the Merger Agreement.

The Merger will not be effective until the effectiveness of an F-1 or F-4
Registration Statement or comparable form (the "Euroseas Registration
Statement") to be filed in connection with the shares issuable in the Merger is
declared effective by the Securities and Exchange Commission (the "SEC"), Cove's
Information Statement (the "Information Statement") included in the Euroseas
Registration Statement is sent to its shareholders and a majority of Cove's
shareholders approve the Merger.

Set forth below is certain information concerning the principal terms of the
Merger and the business of Euroseas.

Principal Terms of the Merger

STRUCTURE AND EFFECTIVE TIME OF MERGER

At the effective time of the Merger, Cove will merge with and into Merger Sub.
The separate existence of Cove will cease, and Merger Sub will continue as the
surviving corporation (the "Surviving Corporation") as a wholly owned operating
subsidiary of Euroseas under the name Cove Apparel, Inc. The effective time of
the Merger will occur as promptly as possible after the satisfaction or waiver
of all conditions to closing in the Merger Agreement and by filing a certificate
of merger or similar document with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Nevada. We will seek to
complete the Merger in the fourth quarter of 2005. However, we cannot assure you
when, or if, all the conditions to completion of the Merger will be satisfied or
waived.

Certificate of Incorporation; Bylaws

The certificate of incorporation and bylaws of Merger Sub in effect immediately
prior to the effective time of the Merger will become the certificate of
incorporation and bylaws of the Surviving Corporation.

Directors and Officers

The directors and officers of Merger Sub at the effective time of the Merger
will remain the directors and officers of the Surviving Corporation.


                                       2
<PAGE>

Merger Consideration

All the shares of Cove common stock (an aggregate of 10,480,500 shares) will be
converted into an aggregate of 1,079,167 shares of Euroseas common stock, an
exchange ratio in the Merger of 0.102969 (the "Exchange Ratio"), subject to
adjustment in the event of a stock split. There are no outstanding options or
warrants to purchase any shares of Cove common stock or other securities of Cove
and there are no outstanding options or warrants to purchase any shares of
Euroseas or other securities of Euroseas, other than the warrants issued in the
Private Placement, described below.

Recommendations of the Boards of Directors

Each of the Boards of Directors of Cove and Euroseas has determined, by a
unanimous vote, that the Merger is in the best interests of each of their
respective companies and stockholders, and each Board has unanimously approved
the Merger Agreement.

Representations and Warranties

In the Merger Agreement, the parties have made customary representations and
warranties about themselves concerning various business, legal, financial,
regulatory and other pertinent matters. These representations and warranties
survive for a two year period following the Merger. Under certain circumstances,
each of the parties may decline to complete the Merger if the inaccuracy of the
other party's representations and warranties has a material adverse effect on
the other party.

Euroseas Registration Statement

Euroseas has agreed to file with the SEC, as soon as shall be reasonably
practicable following the date of the Merger Agreement (but in no event later
than 60 days following the consummation of the Private Placement (described
below), and provided Cove shall have supplied Euroseas with the Information
Statement to be included therein), at its sole cost and expense, the Euroseas
Registration Statement which shall include the Information Statement relating to
the solicitation of stockholder approval from Cove's stockholders, and covering
the issuance of the Euroseas shares in the Merger, shares of Friends and the
shares of Euroseas common stock issued to the investors in the Private
Placement. Euroseas has agreed to use all reasonable best efforts to have the
Euroseas Registration Statement declared effective by the SEC as promptly as
practicable thereafter. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to the Euroseas Registration
Statement or the Information Statement will be made by Euroseas, without
providing Cove a reasonable opportunity to review and comment thereon. Euroseas
has agreed to advise Cove, promptly after it receives notice thereof, of the
time when the Euroseas Registration Statement has become effective or any
supplement or amendment has been filed to the Euroseas Registration Statement or
the Information Statement, the issuance of any stop order, the suspension of the
qualification of Euroseas shares issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment of
the Euroseas Registration Statement, the Information Statement or comments
thereon and responses thereto or requests by the SEC for additional information.


                                       3
<PAGE>

Cove and Euroseas have agreed to promptly furnish to each other all information,
and take such other actions, as may reasonably be requested in connection with
any action by any of them in relation to the preparation and filing of the
Euroseas Registration Statement, the Information Statement and a Form 8-K and
have agreed to cooperate with one another and use their respective best efforts
to facilitate the expeditious consummation of the transactions contemplated by
the Merger Agreement.




















                                       4
<PAGE>

SEC Filings by Cove.

Cove has agreed to file with the SEC, as soon as reasonably practicable
following the filing of the Euroseas Registration Statement, any document
required to be filed by it in connection with the Merger and obtaining the
approval of the Cove stockholders, including, without limitation, any documents
required under the SEC's Regulation 14A and 14C.

Stockholders' Approval.

Cove has agreed to use its reasonable best efforts to obtain Cove stockholder
approval and adoption of the Merger Agreement, as soon as practicable in
accordance with applicable Nevada law and Cove's bylaws following the date upon
which the Euroseas Registration Statement is declared effective by the SEC.

Stock Exchange Listing/Exchange Act Listing.

Cove and Euroseas have agreed to each use their reasonable best efforts to file,
at or before the effective time of the Merger, authorization for listing of the
Euroseas shares on the NASDAQ SmallCap Market, The American Stock Exchange Inc.
or, if permissible, the NASDAQ National Market (the "Stock Exchange Listing").
In addition, Euroseas has agreed to file the Euroseas Registration Statement
under the Securities Exchange Act of 1934, as amended, and to use its reasonable
best efforts to cause the SEC to declare the Euroseas Registration Statement
effective with respect to the listing of the Euroseas shares issued in the
Merger and the shares of Euroseas common stock issued in the Private Placement
(the "Exchange Act Listing").

Conditions to Each Party's Obligations to Effect the Merger.

The respective obligation of each party to effect the Merger are subject to the
fulfillment at or prior to the closing date of the following conditions:

(a)  Cove shall have obtained approval of the Cove stockholders;

(b)  The Euroseas Registration Statement shall have become effective and shall
     not be the subject of any stop order or proceedings seeking a stop order;

(c)  Euroseas shall have applied for a Stock Exchange Listing and the Exchange
     Act Listing, subject to any notice of issuance or similar requirement;

(d)  No preliminary or permanent injunction or other order or decree by any
     governmental authority which prevents or materially burdens the
     consummation of the Merger shall have been issued and remain in effect
     (each party agreeing to use its reasonable efforts to have any such
     injunction, order or decree lifted);

(e)  No action shall have been taken, and no statute, rule or regulation shall
     have been enacted, by any governmental authority, which would prevent or
     materially burden the consummation of the Merger;


                                       5
<PAGE>


(f)  All consents, orders and approvals legally required for the consummation of
     the Merger and the transactions contemplated hereby shall have been
     obtained and be in effect at the effective time of the Merger without any
     material limitations or conditions.

Conditions to Obligations of Euroseas to Effect the Merger.

Unless waived by Euroseas, the obligation of Euroseas to effect the Merger is
subject to the fulfillment at or prior to the closing date of the following
additional conditions:

(a)  Cove and the Cove Principals shall have performed in all material respects
     their agreements contained in the Merger Agreement required to be performed
     on or prior to the closing date and the representations and warranties of
     Cove and the Cove Principals contained in the Merger Agreement shall be
     true and correct in all material respects (except for those representations
     and warranties which are themselves limited by a reference to materiality,
     which shall be true and correct in all respects other than as modified) on
     and as of (i) the date made and (ii) the closing date (in each case except
     in the case of representations and warranties expressly made solely with
     reference to a particular date which shall be true and correct in all
     material respects as of such date); and Euroseas shall have received a
     certificate of each of the Cove Principals and of the President of Cove to
     that effect;

(b)  Euroseas shall have received an opinion of Kirkpatrick & Lockhart Nicholson
     Graham, LLP ("K&L"), counsel to Cove, dated the closing date, in form and
     substance reasonably satisfactory to Euroseas;

(c)  Euroseas shall have received a "comfort" letter from the independent public
     accountants for Cove, dated the date of the Information Statement and the
     closing date (or such other date reasonably acceptable to Euroseas) with
     respect to certain financial statements of Cove and other related financial
     information included in the Information Statement in customary form;

(d)  Since the date of the Merger Agreement there shall not have been any
     material adverse effect with respect to Cove, the likelihood of which was
     not previously disclosed to Euroseas by Cove and which would have a
     material adverse effect on Euroseas, and Cove shall have engaged in no
     business activity since the date of its incorporation other than conducting
     a public offering of its securities, the apparel business and, thereafter,
     seeking to effect a merger or similar business combination with an
     operating business;

(e)  Euroseas shall have received a certificate from the corporate Secretary of
     Cove, together with a certified copy of the resolutions duly authorized by
     Cove's Board of Directors authorizing the Merger and, if applicable, the
     transactions contemplated by the Merger Agreement;

(f)  Euroseas shall have received a certificate of good standing for Cove from
     the Secretary of State of the State of Nevada dated as of a date that is
     within five (5) days of the closing date;


                                       6
<PAGE>


(g)  Cove shall have furnished to Euroseas such additional certificates and
     other customary closing documents as Euroseas may have reasonably
     requested;

(h)  At the effective time of the Merger, Cove shall have approximately $10,000
     in cash or cash equivalents after giving effect to the payment or accrual
     on or prior to the effective time of the Merger of all fees, costs,
     expenses and liabilities incurred by Cove, including, but not limited to,
     the fees, costs and expenses of (i) Cove's manufacturers, suppliers,
     vendors and third-party providers, (ii) Cove's attorneys, accountants,
     investment bankers and consultants in connection with the transactions
     contemplated by the Merger Agreement and (iii) the repayment of any
     outstanding loans;

(i)  A pledge agreement shall have been executed pursuant to which the Cove
     Principals shall have pledged or caused Euroseas shares to be pledged to
     Euroseas by the Cove Principals or pledgors reasonably acceptable to
     Euroseas and deposited with an independent collateral agent to secure the
     indemnification obligations of the Cove Principals under the Merger
     Agreement;

(j)  Euroseas shall have raised at least $21 million in the Private Placement
     on terms reasonably satisfactory to Euroseas;

(k)  At closing, Cove's capitalization shall be unchanged and all loans made to
     Cove and all other outstanding debt and all other liabilities shall have
     been paid in full;

(l)  Euroseas shall have received written resignations and releases from each of
     Cove's directors and officers and which resignations and releases, by their
     respective terms, shall become effective immediately prior to the effective
     time of the Merger; provided however that Jodi Hunter shall remain an at
     will employee of Cove and the Surviving Corporation;

(m)  Cove shall have conducted the operation of its business in material
     compliance with all applicable laws and all approvals required of Cove
     under applicable law to enable Cove to perform its obligations under the
     Merger Agreement shall have been obtained; and

(n)  All corporate proceedings of Cove in connection with the Merger and the
     other transactions contemplated by the Merger Agreement and all agreements,
     instruments, certificates, and other documents delivered to Euroseas by or
     on behalf of Cove pursuant to the Merger Agreement shall be reasonably
     satisfactory to Euroseas and its counsel.

(o)  Cove shall have moved its principal headquarters from California to the
     Cayman Islands and shall have filed all documentation and paid all fees
     necessary to locate its principal headquarters in the Cayman Islands and to
     terminate its authorization to do business in California: and

Conditions to Obligations of Cove to Effect the Merger.

Unless waived by Cove, the obligations of Cove to effect the Merger are subject
to the fulfillment at or prior to the closing date of the additional following
conditions:

(a)  Euroseas shall have performed in all material respects its agreements
     contained in the Merger Agreement required to be performed on or prior to
     the closing date and the representations and warranties of Euroseas
     contained in the Merger Agreement shall be true and correct in all material
     respects (except for those representations and warranties which are
     themselves limited by a reference to materiality, which shall be true and
     correct in all respects, other than as modified) on and as of (i) the date
     made and (ii) the closing date (in each case except in the case of
     representations and warranties expressly made solely with reference to a
     particular date which shall be true and correct in all material respects as
     of such date); and Cove shall have received a certificate of the President
     of Euroseas to that effect;


                                       7
<PAGE>


(b)  Cove shall have received an opinion of Seward & Kissel LLP, counsel to
     Euroseas, dated the closing date, in form and substance reasonably
     satisfactory to Cove;

(c)  Cove shall have received a "comfort" letter from Deloitte & Touche LLP,
     independent certified public accountants for Euroseas, dated the date of
     the Information Statement and the closing date (or such other date
     reasonably acceptable to Cove) with respect to certain financial statements
     of Euroseas and other related financial information included in the
     Information Statement in customary form;

(d)  At closing, Euroseas' capitalization shall be unchanged, except as may be
     adjusted for the issuance of the shares and warrants, if any, in the
     Private Placement;

(e)  Cove shall have received a certificate of the corporate Secretary of
     Euroseas, together with a certified copy of the resolutions duly authorized
     by the Board of Directors and Euroseas authorizing the Merger and the
     transactions contemplated by the Merger Agreement;

(f)  Cove shall have received a certificate of good standing for Euroseas from
     the Registrar of Corporations of the Republic of the Marshall Islands dated
     as of a date that is within five (5) days of the closing date;

(g)  Euroseas shall have furnished to Cove such additional certificates and
     other customary closing documents as Cove may have reasonably requested;

(h)  Since the date of the Merger Agreement there shall not have been any
     material adverse effect with respect to Euroseas and its subsidiaries, the
     likelihood of which was not previously disclosed to Cove by Euroseas; and

(i)  All corporate proceedings of Euroseas in connection with the Merger and the
     other transactions contemplated by the Merger Agreement and all agreements,
     instruments, certificates and other documents delivered to Cove by or on
     behalf of Euroseas pursuant to the Merger Agreement shall be in
     substantially the form called for hereunder or otherwise reasonably
     satisfactory to Cove and its counsel.

Termination.

The Merger Agreement may be terminated at any time prior to the closing date,
whether before or after approval by the stockholders of Cove:

(a)  by mutual consent in writing of Cove and Euroseas;


                                       8
<PAGE>


(b)  unilaterally upon written notice by Cove to Euroseas upon the occurrence of
     a material adverse effect with respect to Euroseas, the likelihood of which
     was not previously disclosed to Cove in writing by Euroseas prior to the
     date of the Merger Agreement;

(c)  unilaterally upon written notice by Euroseas to Cove upon the occurrence of
     a material adverse effect with respect to Cove, the likelihood of which was
     not previously disclosed to Euroseas in writing by Cove prior to the date
     of the Merger Agreement;

(d)  unilaterally upon written notice by Cove to Euroseas in the event a
     material breach of any material representation or warranty of Euroseas
     contained in the Merger Agreement (unless such breach shall have been cured
     within ten (10) days after the giving of such notice by Cove), or the
     willful failure of Euroseas to comply with or satisfy any material covenant
     or condition of Euroseas contained in the Merger Agreement;

(e)  unilaterally upon written notice by Euroseas to Cove in the event of a
     material breach of any material representation or warranty of Cove or the
     Cove Principals contained in the Merger Agreement (unless such breach shall
     have been cured by Cove or the Cove Principals within ten (10) days after
     the giving of such notice by Euroseas), or Cove's or the Cove Principals'
     willful failure to comply with or satisfy any material covenant or
     condition of Cove or the Cove Principals contained in the Merger Agreement,
     or if Cove fails to obtain the approval of Cove's stockholders;

(f)  unilaterally upon written notice by either Cove or Euroseas to the other if
     the Merger is not consummated for any reason by the close of business on
     February 28, 2006, provided however that no party may avail itself of this
     ground for termination if such failure to consummate the Merger is caused
     by such party either in breach of the Merger Agreement or by not proceeding
     in good faith towards the consummation of the Merger; or

(g)  unilaterally upon written notice by Euroseas to Cove in the event that by
     September 1, 2005, Euroseas shall not have raised at least $21 million in
     the Private Placement on terms reasonably satisfactory to Euroseas.

Effect of Termination.

In the event of termination of the Merger Agreement by either Cove or Euroseas,
the Merger Agreement shall become void and there shall be no further obligation
on the part of either Euroseas or Cove (except with respect to confidential and
nonpublic information and payment of expenses, which shall survive such
termination). No party shall be relieved from liability for any breach of the
Merger Agreement.

Amendment.

The Merger Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto and in compliance with applicable
law.

Expenses.

Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such costs and expenses, except as provided
in that certain Engagement Agreement dated April 21, 2005 between Roth Capital
Partners, LLC and Eurobulk Ltd., which provides for the payment of certain
expenses of the transaction by Eurobulk Ltd., which expenses shall be paid by
Euroseas if the Merger is consummated.


                                       9
<PAGE>


Indemnification.

Euroseas has agreed to indemnify and hold harmless Cove and the Cove
stockholders (in the aggregate, in proportion to each such Cove stockholder's
ownership of the capital stock of Cove, on a fully diluted basis) and each of
their affiliates and their respective fiduciaries, directors, officers,
controlling persons, representatives and agents against and hold them harmless
from any loss, liability, claim, damage or expense (including reasonable legal
fees and expenses and costs of investigation) (a "Loss") arising, directly or
indirectly, out of or in connection with (i) any material breach of any
representation or warranty of Euroseas contained in the Merger Agreement, or
(ii) any breach of any covenant or agreement of Euroseas contained in the Merger
Agreement.

Cove and each of the Cove Principals has jointly and severally agreed to
indemnify and hold harmless Euroseas and each of its affiliates and its
respective fiduciaries, directors, officers, controlling persons,
representatives and agents against and hold them harmless from any Loss arising,
directly or indirectly, out of or in connection with (i) any material breach of
any representation or warranty of Cove or a Cove Principal contained in the
Merger Agreement, (ii) any breach of any covenant or agreement of Cove or a Cove
Principal contained in the Merger Agreement, (iii) any liabilities of Cove
(other than accounts payable incurred in the ordinary course of business to the
extent they do not exceed net current assets) occurring or accruing prior to the
effective time of the Merger, including but not limited to any securities law
violations; (iv) any claim by any Cove stockholder related to any sale or
transfer of shares of Cove common stock by the Cove Principals prior to the
effective time of the Merger. The sole recourse Euroseas shall have against the
Cove Principals for any such Loss shall be to the pledged shares, unless the
Loss arises, directly or indirectly, out of or in connection with any breach of
a representation or warranty that was knowing, intentional, grossly negligent or
reckless (each, a "Significant Breach"), in which event Euroseas' recourse
against the Cove Principals shall not be limited to the pledged shares.

In furtherance of the foregoing, on or prior to the closing date, the Cove
Principals have agreed to pledge or cause to be pledged to Euroseas an aggregate
of at least 475,000 Euroseas shares (after giving effect to the Merger and the
exchange of Cove common stock for Euroseas Shares in connection therewith) by
pledgors reasonably acceptable to Euroseas and such pledged shares shall be
deposited with an independent collateral agent to secure the indemnification
obligations of the Cove Principals under the Merger Agreement.


                                       10
<PAGE>


POST MERGER

Prior to entering the Merger Agreement, Shawn Peterson, Kevin Peterson and Jodi
Hunter were the sole directors and officers of Cove. Jodi Hunter resigned as a
director of Cove effective as of June 20, 2005, but she will continue as an
unpaid employee at will of the Surviving Company.

After the effective time of the Merger, Cove will continue in its existing line
of business for such period of time as is necessary in order to facilitate a tax
free reorganization in the Merger. Euroseas has agreed to use its best efforts
to employ Jodi Hunter as an at will employee for this purpose and Jodi Hunter
has agreed to perform such services for this purpose and to provide an office in
the Cayman Islands at no cost or expense to Euroseas. Euroseas is not required
to provide any financing to Cove and its successor, but rather the expenses of
operation of Cove will be the sole responsibility of Kevin Peterson.

The shares of common stock of Cove are currently traded on the OTC Bulletin
Board under the symbol "CVAP.OB."

Following the Merger, stockholders of Cove will become shareholders of Euroseas.
The current executive officers and directors of Merger Sub will be the executive
officers and directors of the Surviving Corporation after the effective time.
Upon the consummation of the Merger, the Surviving Corporation will become a
wholly-owned subsidiary of Euroseas. Euroseas shares, including those exchanged
for Cove shares in the Merger will initially trade on the OTC Bulletin Board.
Euroseas will seek to obtain a NASDAQ listing or an exchange listing as soon as
practicable after the Merger.

BACKGROUND AND REASONS FOR THE MERGER

Cove

Cove's Board of Directors has determined that the Merger is in the best
interests of Cove and its shareholders. Cove's Board has unanimously approved
the Merger Agreement and the transactions contemplated thereby. In reaching its
determination to recommend approval of the Merger, Cove's Board of Directors
considered a number of factors, including the following:

(a)  Cove only has nominal revenues, and upon analysis of the potential
     opportunity, the Board of Directors of Cove decided to merge with Euroseas
     because the Board was of the view that the Cove stockholders would have a
     better opportunity as shareholders of Euroseas than as stockholders of
     Cove;

(b)  there has been strong raw materials demand in recent years by developing
     countries, particularly China and India, that has resulted in robust growth
     for drybulk shipping as well as increased freight rates, attributable in
     part to industrywide capacity constraints. As a result, the drybulk
     shipping sector has been attracting growing investor interest, with a
     number of drybulk and other seaborne shipping companies recently completing
     or planning public financings in the United States of America and other
     financial markets;



                                       11
<PAGE>


(c)  Euroseas has an experienced, highly regarded management team, which Cove's
     Board believes is well suited to pursue a strategy of acquiring and
     operating drybulk vessels; and

(d)  the fact that the merger should constitute a tax-free reorganization under
     the Internal Revenue Code of 1986, as amended (the "Code").

Cove's Board of Directors also considered potential risks relating to the
Merger, including the following:

(a)  the fact that Euroseas is a recently formed foreign corporation and that
     Cove's stockholders will have minority ownership in Euroseas following
     consummation of the merger;

(b)  a macroeconomic slowdown, particularly in China or India, which would
     reduce the demand for shipping capacity, thereby resulting in reduced
     shipping rates;

(c)  the risks and costs to Cove if the Merger is not completed; and

(d)  the restrictions on the conduct of Cove's business prior to completion of
     the Merger, which may delay or prevent Cove from exploiting business
     opportunities that may arise pending completion of the Merger.

The foregoing discussion of the information and factors considered by Cove's
Board of Directors is not intended to be exhaustive, but includes the material
factors considered by it. In view of the variety of factors considered in
connection with its evaluation of the Merger, Cove's Board of Directors did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination and
recommendation. In addition, individual directors may have given differing
weights to different factors. After weighing all of the different factors,
Cove's Board of Directors unanimously determined to recommend that Cove's
stockholders vote to approve the Merger.

No consideration was given by Cove's Board to securing an opinion of an
independent investment banker or other financial advisor to the effect that the
Merger would be fair, from a financial point of view, to Cove stockholders in
view of the fact that the Cove Board does not believe that the terms of the
Merger give rise to any inherent conflict of interest between Cove's executive
officers, directors and principal stockholders and non-affiliated stockholders.
In this regard, Cove's Board took note of the fact that its current executive
officers, directors and principal stockholders will receive no benefit from the
Merger that would not otherwise be available to the Cove stockholders as a
whole. In addition, Cove's Board took note of the fact that no executive
officers, directors or principal stockholders are to become salaried employees
of Euroseas subsequent to the consummation of the Merger.

Euroseas

Euroseas' Board of Directors has determined that the Merger is in the best
interests of Euroseas and its shareholders. Both the Euroseas Board and its
shareholders have unanimously approved the Merger Agreement and the transactions
contemplated thereby. In reaching its determination, Euroseas' Board of
Directors considered a number of factors, including the following:


                                       12
<PAGE>

(a)  the Merger would afford Euroseas access to a company with a public listing
     whose shares could trade and help develop a market for Euroseas's common
     stock once the Merger was consummated;

(b)  publicly traded securities would afford Euroseas' management, after the
     consummation of the transaction, the opportunity to utilize Euroseas'
     authorized but unissued securities to attempt to acquire other compatible
     businesses; and

(c)  this transaction substantially reduces the uncertainty attendant to
     Euroseas' own public offering of securities as compared to an underwritten
     initial public offering, and the possibility that any such offering might
     not be successfully consummated in view of then prevailing market
     conditions.

Euroseas' Board of Directors also considered potential risks relating to the
Merger, including the following:

(a)  factors beyond Euroseas' control, such as industry economic conditions,
     general economic conditions, terrorism or war, could have an adverse effect
     upon the market price of Euroseas' common stock after the Merger;

(b)  the additional significant expense and responsibility of being a U.S.
     public company, including Sarbanes-Oxley Act compliance, corporate
     governance issues, SEC reporting requirements, and stock exchange listing
     requirements;

(c)  the necessity of ongoing direct communication with the investment
     community, which is time consuming and may detract from executive time that
     would otherwise be devoted to business operations; and

(d)  the risk that the Cove stockholders may not approve the Merger and Euroseas
     would have incurred significant legal, accounting and other expenses in
     connection the proposed transaction.

After a complete review and analysis of the foregoing and other risks, Euroseas'
Board of Directors unanimously concluded that the benefits of the Merger
outweighed the risks involved.

SAFE HARBOR STATEMENT

Statements in this presentation may be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The matters
discussed herein that are forward-looking statements are based on current
management expectations that involve risks and uncertainties that may result in
such expectations not being realized. Actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements due to numerous potential risks and uncertainties including, but not
limited to, the need for Euroseas to manage its growth and integrate additional
capital, acquire additional vessels, volatility in the drybulk shipping business
and vessel charter rates, its ability to obtain sufficient capital, the
volatility of its stock price, and other risks and factors. Forward-looking


                                       13
<PAGE>


statements made during this presentation speak only as of the date on which they
are made, and neither Cove nor Euroseas undertakes any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this presentation.

Because forward-looking statements are subject to risks and uncertainties, we
caution you not to place undue reliance on any forward-looking statements. All
written or oral forward-looking statements by Cove or Euroseas or persons acting
on their behalf are qualified by these cautionary statements.

DESCRIPTION OF EUROSEAS

General

Euroseas is a privately-held, independent commercial shipping company that
operates in the drybulk and container shipping markets through its wholly-owned
subsidiaries. Euroseas was formed on May 5, 2005 under the laws of the Republic
of the Marshall Islands. Its principal offices are located in Maroussi, Greece
and its telephone number is 011 30 210 6105110.

Euroseas' Corporate Structure

Euroseas owns its seven vessels through seven separate wholly-owned
subsidiaries. The operations of the vessels are managed by Eurobulk Ltd.
("Eurobulk"), an affiliated company, under management contracts with each
ship-owning company. These services include technical management, such as
managing day-to-day vessel operations including supervising the crewing,
supplying, maintaining and drydocking of vessels, commercial management
regarding identifying suitable vessel charter opportunities and certain
accounting services. The names of the wholly owned subsidiaries that own each
vessel and the vessel each owns are as follows:

<TABLE>
<CAPTION>
<S>           <C>                           <C>                           <C>                         <C>
             OWNER               COUNTRY OF INCORPORATION                VESSEL                      FLAG
                                                                          NAME
    ------------------------- -------------------------------- ---------------------------- -----------------------
1)     Diana Trading Ltd.        Republic of the Marshall                 IRINI                 Marshall Islands
                                          Islands
    ------------------------- -------------------------------- ---------------------------- -----------------------
2)  Alterwall Business Inc.         Republic of Panama                YM QINGDAO I                Panamanian
    ------------------------- -------------------------------- ---------------------------- -----------------------
3)   Allendale Investments          Republic of Panama                 KUO HSIUNG                 Panamanian
              S.A.
    ------------------------- -------------------------------- ---------------------------- -----------------------
4)  Alcinoe Shipping Limited        Republic of Cyprus                 PANTELIS P.                 Cypriot
    ------------------------- -------------------------------- ---------------------------- -----------------------
5)     Searoute Maritime            Republic of Cyprus                    ARIEL                    Cypriot
            Limited
    ------------------------- -------------------------------- ---------------------------- -----------------------
6)    Oceanpride Shipping           Republic of Cyprus                   JOHN P.                   Cypriot
            Limited
    ------------------------- -------------------------------- ---------------------------- -----------------------
7)    Oceanopera Shipping           Republic of Cyprus                 NIKOLAOS P.                 Cypriot
            Limited
</TABLE>


                                       14
<PAGE>


Euroseas' Fleet

Euroseas' fleet consist of five drybulk carriers and two containerships with an
aggregate of 190,904 deadweight tons, or dwt, for the five drybulk carriers and
2,538 twenty-foot equivalent units, or teu, total capacity, for the two
containerships. The following table describes Euroseas' current fleet:

                            Country                                 TEU Capacity
 Vessel            Dwt       Built     Year Built       Type
 ------            ---       -----     ----------       ----        ------------
 IRINI            69,734     Japan        1988        Dry Bulk           N/A
 YM QINGDAO I     18,253     Japan        1990     Containership        1,269
 KUO HSIUNG       18,154     Japan        1993     Containership        1,269
 PANTELIS P.      26,354    Scotland      1981        Dry Bulk           N/A
 ARIEL            33,712     Japan        1977        Dry Bulk           N/A
 JOHN P.          26,354    Scotland      1981        Dry Bulk           N/A
 NIKOLAOS P.      34,750     Spain        1984        Dry Bulk           N/A

Competitive Strengths

Euroseas believes that it possesses the following competitive strengths:

Experienced Management Team. Euroseas' management team has significant
experience in operating drybulk carriers and expertise in all aspects of
commercial, technical, operational and financial areas of its business. The main
shareholding family of Euroseas has over 100 years experience in shipping and
enjoys a well established reputation.

Strong Customer Relationships. Euroseas, through Eurobulk, its ship management
company, and Eurochart, its chartering broker, each has many long-established
customer relationships with major charterers and shipping pools (Klaveness), and
Euroseas believes it is well regarded within the international shipping
community.

Profitable Operations to Date. Euroseas' main principals have over the years
operated vessels profitably by carefully selecting secondhand vessels,
competitively commissioning and actively supervising cost-efficient shipyards to
perform repair, reconditioning and systems upgrading work, together with a
proactive preventive maintenance program both ashore and at sea, and employing
professional, well-trained masters, officers and crews. Euroseas believes that
this combination allows it to minimize off-hire periods, effectively manage
insurance costs, and control overall operating expenses.


                                       15
<PAGE>

Business Strategy

Euroseas' business strategy is focused on providing reliable seaborne
transportation services at competitive cost, and building and maintaining
relationships with charterers of drybulk carriers, brokers, suppliers,
classification societies and others in the drybulk and container shipping
industry. Additionally, with the proceeds from the Private Placement, Euroseas
plans to expand its fleet to increase its revenues and make its drybulk carrier
business more cost efficient and more attractive to its customers.

Euroseas' Vessel Employment

Euroseas employs its vessels in the spot charter market and under time charters
and pool arrangements. Presently, five of Euroseas' vessels are currently
employed under time charters, while one is in drydock effecting repairs to its
rudder until approximately the end of August (m/v Ariel) and one is employed in
the Klaveness run Baumarine pool (m/v Irini). The owning company of m/v Irini
participates in three short funds managed by Klaveness.

A spot charter is a contract to carry a specific cargo for a per ton carry
amount. Under spot charters, Euroseas pays voyage expenses such as port, canal
and fuel costs. A time charter is a contract to charter a vessel for an agreed
period of time at a set daily rate. Under time charters, the charterer pays
these voyage expenses. A pool charter is essentially a time charter with a
floating charter rate. The actual charter hire the pool vessel receives is its
corresponding share of all the income generated by all vessels that participate
in the pool. A short fund comprises of one or more contracts of affreightment
("COA"). These are contracts which the pool manager has secured to carry via its
ships some specific types and quantities of cargo over a fixed time horizon at a
fixed rate per ton of cargo carried. The combined effect of having a vessel in a
spot pool and securing COA's can be equivalent to establishing a long term time
charter.

Under all types of charters, Euroseas will pay for vessel operating expenses,
which include crew costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs. Euroseas is also responsible for each
vessel's intermediate drydocking and special survey costs.

Vessels operating on time charter provide more predictable cash flows, but can
yield lower profit margins than vessels operating in the spot market during
periods characterized by favorable market conditions. Vessels operating in the
spot market generate revenues that are less predictable but may enable Euroseas
to increase profit margins during periods of improvements in drybulk rates.
However, Euroseas would then be exposed to the risk of declining drybulk rates,
which may be higher or lower than the rates at which Euroseas chartered its
vessels. Euroseas is constantly evaluating opportunities for time charters, but
only expects to enter into additional time charters if Euroseas can obtain
contract terms that satisfy its criteria.


                                       16
<PAGE>

Euroseas Major Customers and Charterers

Euroseas' major charterer customers during the last three years include
Bulkhandling / Klaveness, Cheng Lie, Swiss Marine, Hamburg Bulk Carriers, and
Phoenix. Euroseas is a relationship driven company, and its top 5 customers in
the first quarter of 2005 include four of its top five customers from 2004
(Cheng Lie, Swiss Marine, HBC, Pancoast, and Phoenix). Euroseas' top 5 customers
accounted for approximately 68% of its total revenues for 2004 and 68 % of its
total revenues for 2003. During the first quarter of 2005, Euroseas' top five
customers accounted for 76% of its total revenues.

Euroseas' Ship Management

Euroseas' seven vessel fleet is managed by Eurobulk, an affiliate for which
Euroseas pays 590 Euros/vessel/day, or approximately $700/day, to provide all
ship operations management and oversight, including supervising the crewing,
supplying, maintaining and drydocking of vessels, commercial management
regarding identifying suitable vessel charter opportunities and certain
accounting services. Eurobulk is an ISO 9001 certified ship management company.

Euroseas' Employees

Euroseas' only employees are its CEO and CFO. The total renumeration of these
two employees, either directly or through consulting companies related to them,
is $500,000 per year.

Euroseas' subsidiary shipowning companies recruit through Eurobulk either
directly or through a crewing agent, the senior officers and all other crew
members for Euroseas' vessels.

Euroseas' Property

Euroseas does not at the present time own or lease any real property. As part of
the management services provided by Eurobulk during the period in which Euroseas
conducted business to date, Euroseas has shared, at no additional cost, offices
with Eurobulk. Euroseas does not have current plans to lease or purchase space
for its offices, although it may do so in the future.

Euroseas' Competitors

Euroseas operates in markets that are highly competitive and based primarily on
supply and demand. Euroseas competes for charters on the basis of price, vessel
location, size, age and condition of the vessel, as well as on its reputation.
Eurobulk arranges Euroseas' charters (whether spot charters, time charters or
pools) through the use of Eurochart, an affiliated broking company who
negotiates the terms of the charters based on market conditions. Euroseas
competes primarily with other owners of drybulk carriers in the drybulk
Handysize, Handymax and panamax sectors and the feeder containership sector.
Ownership of drybulk carriers and feeder containerships is highly fragmented and
is divided among state controlled and independent bulk carrier owners. Some of
Euroseas' publicly owned competitors include:

Diana Shipping (NYSE: DSX) - larger vessels (9).

Dryships (Nasdaq: DRYS) - larger vessels (27).

Excel Maritime (NYSE: EXM) - mix of vessels (19) primarily larger size.


                                       17
<PAGE>


Eagle Bulk Shipping (Nasdaq: EGLE) - handymaxes (11)

Euroseas' Seasonality

Coal, iron ore and grains, which are the major bulks of the drybulk shipping
industry, are somewhat seasonal in nature. The energy markets primarily affect
the demand for coal, with increases during hot summer periods when air
conditioning and refrigeration require more electricity and towards the end of
the calendar year in anticipation of the forthcoming winter period. The demand
for iron ore tends to decline in the summer months because many of the major
steel users, such as automobile makers, reduce their level of production
significantly during the summer holidays. Grains are completely seasonal as they
are driven by the harvest within a climate zone. Because three of the five
largest grain producers (the United States of America, Canada and the European
Union) are located in the northern hemisphere and the other two (Argentina and
Australia) are located in the southern hemisphere, harvests occur throughout the
year and grains required drybulk shipping accordingly.

Euroseas' Legal Proceedings

To Euroseas' knowledge, it is not currently a party to any material lawsuit
that, if adversely determined, would have a material adverse effect on its
financial position, results of operations or liquidity.

Euroseas' Exchange Controls

Under Marshall Island law, there are currently no restrictions on the export or
import of capital, including foreign exchange controls or restrictions that
affect the remittance of dividends, interest or other payments to non-resident
holders of Euroseas' shares.

EUROSEAS' MANAGEMENT

The following sets forth the name and position of each of Euroseas' directors
and executive officers immediately after the effective date of the Merger.


NAME                             AGE     POSITION

Aristides J. Pittas              46      Chairman, President and CEO; Director
Dr. Anastasios Aslidis           45      CFO and Treasurer; Director
Aristides P. Pittas              53      Vice Chairman; Director
Stefania Karmiri                 37      Secretary
George Scarvelis                 44      Director
George Taniskides                44      Director
Gerald Turner                    57      Director
Panos Kyriakopoulos              45      Director



                                       18
<PAGE>


Aristides J. Pittas has been a member of the board of directors and Chairman and
CEO of Euroseas since its inception on May 5, 2005. Since 1997, Mr. Pittas has
also been the President of Eurochart S.A., an affiliate of Euroseas. Eurochart
is a shipbroking company specializing in chartering and selling and purchasing
ships. Since 1997, Mr. Pittas has also been the President of Eurotrade, a ship
operating company and an affiliate of Euroseas. Since January 1995, Mr. Pittas
has been the Managing Director of Eurobulk Ltd., an affilate of Euroseas.
Eurobulk is a dry bulk shipping company, which provides ocean transportation
solutions for international commodity companies. From September 1991 to December
1994, Mr. Pittas was the Vice President of Oceanbulk Maritime SA, a ship
management company. From March 1990 to August 1991, Mr. Pittas served both as
the Assistant to the General Manager and the Head of the Planning Department of
Varnima International SA, a shipping company operating tanker vessels. From June
1987 until February 1990, Mr Pittas was the head of the Central Planning
department of Eleusis Shipyards S.A. From January 1987 to June 1987, Mr. Pittas
served as Assistant to the General Manger of Chios Navigation Shipping Company
in London, a company that provides ship management services. From December 1985
to January 1987, Mr. Pittas worked in the design department of Eleusis Shipyards
S.A. where he focused on shipbuilding and ship repair. Mr. Pittas has a B.Sc. in
Marine Engineering from University of Newcastle - Upon-Tyne and a MSc in both
Ocean Systems Management and Navel Architecture and Marine Engineering from the
Massachusetts Institute of Technology.

Dr. Anastasios Aslidis has been a partner at Marsoft, an international
consulting firm focusing on investment and risk management in the maritime
industry since 1989. As of August 2005, he has accepted an offer to join
Euroseas as a director and the CFO. Dr. Aslidis has more than 17 years of
experience in the maritime industry. Since 2003, he has been working on
financial risk management methods for shipowners and banks lending to the
maritime industry, especially as pertaining to compliance to the Basel II
Capital Accords. He has been consultant to the Board of Directors of shipping
companies (public and private) advising in strategy development, asset selection
and investment timing. Between 1993 and 2003, as part of his work at Marsoft, he
worked on various projects including development of portfolio and risk
management methods for shipwoners, establishment of investments funds and
structuring private equity in the maritime industry and business development for
Marsoft's services. Between 1991 and 1993, Dr. Aslidis work on the economics of
the offshore drilling industry. Between 1989 and 1991, he worked on the
development of a trading support system for the dry bulk shipping industry on
behalf of a major European owner. Dr. Aslidis holds a diploma in Naval
Architecture and Marine Engineering from the National Technical University of
Athens (1983), M.S. in Ocean Systems Management (1984) and Operations Research
(1987) from MIT, and a Ph.D. in Ocean Systems Management (1989) also from MIT.


                                       19
<PAGE>

Aristides P. Pittas has been a member of the board of directors and Vice
Chairman of Euroseas since its inception on May 5, 2005. Mr. Pittas has been a
shareholder in over 70 oceangoing vessels during the last 20 years. Since 1993,
Mr. Pittas has been the Vice President of Eurobulk Ltd, an affilate of Euroseas.
Eurobulk is a dry bulk shipping company, which provides ocean transportation
solutions for international commodity companies. Since February 1989, Mr. Pittas
has been the Vice President of Oceanbulk Maritime SA, a ship management company.
From November 1987 to February 1989, Mr. Pittas was employed in the supply
department of Drytank SA, a shipping company. From November 1981 to June 1985,
Mr. Pittas was employed at Trust Marine Enterprises, a brokerage house as a S+P
broker. From September 1979 to November 1981, Mr. Pittas worked at
Gourdomichalis Maritime SA in the operation and Freight Collection department.
Mr Pittas has a B.Sc in Economics from Athens School of Economics.

Stephania Karmiri has been Secretary of Euroseas since its inception on May 5,
2005. Since July 1995, Mrs Karmiri has been executive secretary to Eurobulk
Ltd., an affilate of Euroseas. Eurobulk is a dry bulk shipping company, which
provides ocean transportation solutions for international commodity companies.
At Eurobulk Mrs. Karmiri has been responsible for dealing with sale and purchase
transactions, vessel registrations/deletions, bank loans, supervision of office
administration and office/vessel telecommunication. From May 1992 to June 1995,
she was secretary to the technical department of Oceanbulk Maritime SA, a ship
management company. From 1988 to 1992, Mrs. Karmiri served as assistant to
brokers for Allied Shipbrokers, a company that provides shipbroking services to
sale and purchase transactions. Mrs Karmiri has taken assistant accountant and
secretarial courses from Didacta college.

George Scarvelis has been a director of Euroseas since its inception. He has
been active in shipping since 1982. In 1992, he founded Marine Spirit S.A., a
dry bulk shipping management company. Between 1999 and 2003, Marine Spirit acted
as one of the crewing managers for Eurobulk. From 1986 until 1992, Mr. Scarvelis
was operations director at Markos S. Shipping Ltd. From 1982 until 1986, he
worked with Glysca Compania Naviera, a management company of five vessels. Over
the years Mr Scarvelis has been a shareholder in numerous ships and presently is
one of the shareholders of Friends Investment Company Inc., the principal
shareholder of Euroseas. He has a B.sc. in economics from the Athens University
Law School.

George Taniskides has been a director of Euroseas since its inception. He is the
Chairman and Managing Director of NovaBank and a member of the Board of
Directors of BankEuropa (subsidiary bank of NovaBank in Turkey). He is a member
of the Executive Committee of the Hellenic Banks Association. From 2003 until
2005, he was a member of the Board of Directors of Visa International Europe,
elected by the Visa issuing banks of Cyprus, Malta, Portugal, Israel and Greece.
From 1990 to 1998, Mr. Taniskidis worked at XIOSBANK (until its acquisition by
Piraeus Bank in 1998) in various positions, with responsibility for the bank's
credit strategy and network. Mr. Taniskides studied Law in the National
University of Athens and in the University of Pennsylvania Law School, where he
received a LL.M. After law school, he joined the law firm of Rogers & Wells in
New York, where he worked until 1989 and was also a member of the New York State
Bar Association. He is also a member of the Young Presidents Organization.

Gerald Turner has been a director of Euroseas since its inception. Since 1999,
he has been the Chairman and Managing Director of AON Turner Reinsurance
Services. From 1987 to 1999, he was the Chairman and sole owner of Turner
Reinsurance services. From 1977 to 1987, he was the Managing Director of
E.W.Payne Hellas (member of the Sedgwik group).


                                       20
<PAGE>

Panos Kyriakopoulos has been a director of Euroseas since its inception. Since
July 2002, he has been the C.E.O. of New Television S.A., one of the leading
Mass Media Companies in Greece, running television and radio stations. From July
1997 to July 2002 he was the C.E.O. of the Hellenic Post Group, the Universal
Postal Service Provider, having the largest retail network in Greece for postal
and financial services products. From March 1996 until July 1997, Mr.
Kyriakopoulos was the General Manager of ATEMKE SA, one of the leading
construction companies in Greece listed on the Athens Stock Exchange. From
December 1985 to March 1996, he was the Managing Director of Globe Group of
Companies, a group active in the areas of shipowning and management, textiles
and food and distribution. The company was listed on the Athens Stock Exchange.
From June 1983 to December 1986, Mr. Kyriakopoulos was an assistant to the
Managing Director of Armanda Marine S.A., a company active in international
trading and shipping, owning and managing a fleet of 12 vessels. Presently he is
a member of the Board of Directors of the Hellenic Post, Euroseas Ltd. and
General Secretary of the Hellenic Private Television Owners Union. He has also
been an investor in the shipping industry for more than 20 years. Mr.
Kyriakopoulos has a B.Sc. degree in Marine Engineering from the University of
Newcastle upon Tyne and a MSc.degree in Naval Architecture and Marine
Engineering with specialization in Management from the Massachusetts Institute
of Technology.

Euroseas' Family Relationships

Aristides P. Pittas is the cousin of Aristides J. Pittas, the CEO of Euroseas.

Euroseas' Employment Agreements

Euroseas expects to enter into employment agreements with Mr. Aristides J.
Pittas and Mr. Anastasios Aslidis for work performed in Greece and separate
consulting agreements with companies owned by each of them for work to be
performed outside of Greece.

Euroseas' Director Compensation

Directors who are employees of Euroseas or beneficially own greater than 10% of
the outstanding common stock will receive no compensation for serving on the
Board or its committees. Directors who are not employees of Euroseas and do not
beneficially own greater than 10% of the outstanding common stock will receive
the following compensation: an annual retainer of $10,000, plus an additional
retainer of $5,000, if serving as Chairman of the Audit Committee. All directors
are reimbursed reasonable out-of-pocket expenses incurred in attending meetings
of the Euroseas Board of Directors or any committee of the Board of Directors.

Euroseas' Executive Compensation

Euroseas was formed in 2005 and therefore no compensation was paid in 2004.
Euroseas' expects to pay its two employees an aggregate of $500,000 per year
(before bonuses), commencing June 2005.



                                       21
<PAGE>


Euroseas' Options

Euroseas was formed in 2005 and therefore no options were granted by Euroseas
during the fiscal year ended December 31, 2004. There are currently no options
outstanding to acquire any Euroseas shares.

Euroseas' Option Plans

Euroseas does not currently have any option plans. However, it expects to adopt
an equity incentive plan which will entitle its officers, key employees and
directors to receive options to acquire shares of Euroseas common stock,
restricted shares and stock appreciation rights.

CERTAIN RELATED TRANSACTIONS OF EUROSEAS

Each of Euroseas' vessel owning subsidiaries has entered into a management
contract with Eurobulk, a company affiliated with Euroseas. Pursuant to the
management contracts, Eurobulk is responsible for all aspects of management and
maintenance for each of the vessels. Pursuant to the management agreements,
Euroseas is obligated to pay Eurobulk 590 Euros/vessel/day, or approximately
$700/vessel/day to provide all ship operations management and oversight,
including supervising the crewing, supplying, maintaining and drydocking of
vessels, commercial management regarding identifying suitable vessel charter
opportunities and certain accounting services.

Euroseas receives chartering and S&P services from Eurochart SA, an affiliate,
and pays a commission of 1.25% on charter revenue and 1% on vessel sales price.
Euroseas will pay commissions to major charterers and their brokers as well that
usually range from 3.75% - 5.00%.

More Maritime Agencies Inc. are crewing agents and Sentinel Marine Services Inc.
are insurance brokering companies and affiliates to whom Euroseas will pay a fee
of $50 per crew member/month and a commission on premium not exceeding 5%,
respectively.

Euroseas believes that the fees it pays to affiliated entities are no greater
than what it would pay to non-affiliated third parties and are standard industry
practice. However, there could be conflicts due to these affiliations.

Friends has advanced a loan of $500,000 to Euroseas to cover all of the start-up
costs of Euroseas. This loan will be repaid to Friends, interest free, upon the
earlier of (i) the closing of the Private Placement fund raising and (ii)
December 31, 2005.

EUROSEAS' DIVIDEND POLICY

Euroseas' expects that its dividend policy will be similar to other leading
drybulk ship companies and will be intended to offer shareholders cash flow
while retaining sufficient capital to meet its growth objectives. Euroseas plans
to distribute, on a quarterly basis, substantially all available cash flow
generated by operations less any debt service requirements, expenses and
reserves for scheduled drydockings, intermediate and special surveys and after
establishing a working capital reserve as required by its business needs, the
terms of its credit facilities, its growth strategy and other cash needs as


                                       22
<PAGE>

determined by its Board of Directors or required by prevailing law. However,
the drybulk shipping industry is highly volatile, and Euroseas cannot accurately
predict the amount of cash distributions that it may make in any given quarterly
period. Dividends based on past charter hire rates are not necessarily
representative of future rates, which are subject to volatile changes due to the
cyclical nature of the drybulk shipping industry.

TAX ITEMS DISCUSSION

CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
-----------------------------------------------------

The following is a discussion of certain material U.S. federal income tax
consequences to a Cove stockholder of the exchange of Cove shares for shares of
Euroseas common stock in the Merger. This discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
treasury regulations promulgated under the Code, Internal Revenue Service
("IRS") rulings and pronouncements, and judicial decisions now in effect, all of
which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively.

No party has sought or will seek any rulings from the IRS with respect to the
U.S. federal income tax consequences discussed below. Cove has obtained the
opinion of its counsel, Kirkpatrick & Lockhart Nicholson Graham LLP ("K&L"),
that the Merger should be treated as a non-taxable reorganization for U.S.
federal income tax purposes. Neither the discussion below, nor K&L's opinion, is
in any way binding on the IRS or the courts or in any way constitutes an
assurance that the U.S. federal income tax consequences discussed herein will be
accepted by the IRS or the courts.

The U.S. federal income tax consequences to a holder of Cove shares from the
Merger may vary depending upon such stockholder's particular situation or
status. This discussion is limited to holders of Cove shares who hold their Cove
shares and will hold their Euroseas common stock as capital assets, and it does
not address aspects of U.S. federal income taxation that may be relevant to
holders of either Cove or Euroseas shares who are subject to special treatment
under U.S. federal income tax laws, including but not limited to:

    non-U.S. holders (as defined below);

    dealers in securities;

    banks and other financial institutions;

    insurance companies;

    tax-exempt organizations, plans or accounts;

    persons holding their Cove shares as part of a "hedge," "straddle" or
    other risk reduction transaction;



                                       23
<PAGE>

    persons holding their Cove shares through partnerships, trusts or other
             entities;

    U.S. persons whose functional currency is not the U.S. dollar; and

    controlled foreign corporations or passive foreign investment
             companies, as those terms are defined in the Code.

In addition, this discussion does not consider the effects of any applicable
foreign, state, local or other tax laws, or estate or gift tax considerations,
or the alternative minimum tax.

For purposes of this discussion, a "non-U.S. holder" is a beneficial owner of
Cove shares that is not, for U.S. federal income tax purposes:

    a citizen or resident of the United States;

    a corporation created or organized in or under the laws of the United
             States or any state thereof (including the District of Columbia);

    an estate the income of which is subject to United States federal income
             tax regardless of its source; or

    a trust, if a court within the United States can exercise
             primary supervision over its administration, and one or more
             United States persons have the authority to control all of the
             substantial decisions of that trust (or the trust was in
             existence on August 20, 1996, was treated as a United States
             trust on August 19, 1996 and validly elected to continue to be
             treated as a United States trust).

For purposes of this discussion, a "U.S. holder" is, for U.S. federal income tax
purposes, an individual, trust, or corporation that is a beneficial owner of
Cove shares, who is not a non-U.S. holder.

EACH STOCKHOLDER IS URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
PARTICULAR UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND
OWNERSHIP OF THE EUROSEAS SHARES, AND THE TAX CONSEQUENCES UNDER FOREIGN, STATE,
LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.

TAX CONSEQUENCES OF THE MERGER
------------------------------

The Merger should be treated as a nontaxable reorganization for U.S. federal
income tax purposes under Code Section 368(a). Accordingly, a U.S. holder of
Cove shares should not recognize gain or loss upon the exchange of their shares
of Cove common stock solely for shares of Euroseas common stock pursuant to the
Merger. However, gain should be recognized with respect to cash, if any,
received in whole or in part in exchange for shares of Cove common stock.
Generally, the amount of gain recognized should equal the lesser of (i) the
amount of cash received in the Merger, or (ii) the amount of gain realized in
the Merger. Any gain recognized by a holder generally should be capital gain.
Long-term capital gains are subject to preferential rates of taxation for
certain non-corporate taxpayers. A U.S. holder's aggregate tax basis in the
Euroseas shares received in the transaction should be the same as his or her
aggregate tax basis in the Cove shares surrendered in the transaction, decreased
by the amount of any cash received by the U.S. holder in the Merger, and
increased by the amount of gain recognized by the U.S. holder with respect to
any cash received in the Merger. The holding period of Euroseas shares received
in the Merger should include the holding period of the Cove shares surrendered
in the Merger.


                                       24
<PAGE>


         Distributions

Except as described below under the heading "Passive Foreign Investment Company
and Controlled Foreign Corporation Status," any distributions made by Euroseas
with respect to Euroseas common stock to a U.S. holder should generally
constitute dividends for U.S. federal income tax purposes to the extent such
distribution is attributable to Euroseas' current or accumulated earnings and
profits, as determined under United States federal income tax principles.
Distributions in excess of Euroseas' earnings and profits should be treated
first as a nontaxable return of capital to the extent of the U.S. holder's tax
basis in his or her common stock and thereafter as capital gain.

Dividends paid on Euroseas common stock to a U.S. holder who is an individual,
trust or estate (a "U.S. Individual Holder") should be treated as "qualified
dividend income" that is taxable to such U.S. Individual Holders at preferential
tax rates (through 2008) provided that (1) the Euroseas common stock is readily
tradable on an established securities market in the United States (such as The
NASDAQ National Market); (2) Euroseas is not a PFIC for the taxable year during
which the dividend is paid or the immediately preceding taxable; and (3) the
U.S. Individual Holder has owned the common stock for more than 60 days in the
121-day period beginning 60 days before the date on which the common stock
becomes ex-dividend. Any dividends paid by Euroseas which are not eligible for
these preferential rates should be taxed as ordinary income to a U.S. Individual
Holder. LEGISLATION HAS BEEN RECENTLY INTRODUCED IN THE U.S. SENATE WHICH, IF
ENACTED IN ITS PRESENT FORM, WOULD PRECLUDE EUROSEAS DIVIDENDS FROM QUALIFYING
FOR SUCH PREFERENTIAL RATES.

Special rules may apply to any "extraordinary dividend"--generally, a dividend
equal to or in excess of ten percent of a shareholder's adjusted basis (or fair
market value in certain circumstances) in a share of common stock--paid by
Euroseas. If Euroseas pays an "extraordinary dividend" on its common stock that
is treated as "qualified dividend income," then any loss derived by a U.S.
Individual Holder from the sale or exchange of such common stock should be
treated as long-term capital loss to the extent of such dividend. Depending upon
the amount of a dividend paid by Euroseas, such dividend may be treated as an
"extraordinary dividend."

Because Euroseas is not a United States corporation, U.S. holders that are
corporations should not be entitled to claim a dividends received deduction with
respect to any distributions they receive from Euroseas.

         Sale, Exchange and Redemption of Euroseas Shares


                                       25
<PAGE>


Generally, except as described below under the heading "Passive Foreign
Investment Company and Controlled Foreign Corporation Status," upon the sale or
exchange of Euroseas shares, a U.S. holder should recognize capital gain or loss
equal to the difference between the amount realized on the sale or exchange and
the holder's adjusted tax basis in such Euroseas shares. For non-corporate U.S.
holders, the maximum U.S. federal income tax rate applicable to such gain if
such U.S. holder's holding period for such Euroseas shares exceeds one year and
therefore qualifies as long-term capital gain is 15%. The deductibility of
capital losses is subject to limitations.

Upon redemption of a Euroseas share by Euroseas for cash or property other than
Euroseas shares, the redemption should be treated as a sale or exchange under
Section 302 of the Code and the tendering U.S. holder should recognize capital
gain or loss to the extent the redemption proceeds are greater than the holder's
adjusted tax basis in its Euroseas shares if the redemption proceeds received in
exchange for the Euroseas shares: (i) are not essentially equivalent to a
dividend distribution; (ii) are substantially disproportionate with respect to
the tendering holder; (iii) completely terminate the holder's equity interest in
Euroseas; or (iv) are distributed to a holder as part of a partial liquidation
of Euroseas shares (as defined in Section 302 of the Code). In determining
whether a redemption qualifies for sale or exchange treatment under Section 302
of the Code, a tendering holder must take into account Euroseas shares that are
actually owned by the tendering holder and, in certain situations, shares that
such holder is deemed to own through a related person or entity.

If the redemption does not qualify for sale or exchange treatment under Section
302 of the Code, the redemption proceeds should be treated as a distribution
with respect to the U.S. holder's Euroseas shares. The distribution should be
taxed as a dividend to the extent of Euroseas' current or accumulated earnings
and profits. The amount of the distribution in excess of Euroseas' current or
accumulated earnings and profits would be treated as a tax-free return of basis
to the extent of the U.S. holder's adjusted tax basis in its Euroseas shares and
as capital gain to the extent the distribution exceeds its basis in its Euroseas
shares.

    Passive Foreign Investment Company and Controlled Foreign Corporation Status

If Euroseas qualifies as a passive foreign investment company ("PFIC") or
controlled foreign corporation ("CFC") for U.S. federal income tax purposes,
materially different U.S. federal income tax consequences could arise for a U.S.
holder of Euroseas common stock. A foreign corporation generally is a PFIC if in
any taxable year either (a) 75% or more of its gross income consists of passive
income, or (b) 50% or more of the average value of its assets is attributable to
assets that produce, or are held for the production of, passive income. Subject
to certain limited exceptions, if a foreign corporation is a PFIC under either
of these tests in a particular year, shares of the corporation held by a U.S.
holder in that year are treated as PFIC shares for that year and all subsequent
years in the U.S. holder's holding period even if the corporation fails to meet
either test in a subsequent year. Certain exceptions apply, including if the
U.S. holder makes a timely election to treat the foreign corporation as a
"qualified electing fund."

If Euroseas qualifies as a PFIC, a U.S. holder of Euroseas common stock
generally would be required to pay a special U.S. tax and a deferred interest
charge when the holder either disposes of his Euroseas stock or receives certain
substantial distributions from Euroseas. Generally, the special U.S. tax would
be determined by allocating the gain on disposition or the substantial


                                       26
<PAGE>

distribution (as the case may be) ratably to each day in the U.S. holder's
holding period of Euroseas common stock and multiplying such amounts by the
highest rate of U.S. tax in effect for the taxable years for which such
allocations are made. Alternatively, a U.S. holder could elect to treat Euroseas
as a qualified electing fund. If this election would be made, and Euroseas
satisfies certain reporting requirements, the special U.S. tax and deferred
interest charge described above would not apply to a disposition of Euroseas
stock or substantial distributions. Instead, the U.S. holder would be required
to take into account currently its allocable share of Euroseas income for U.S.
federal income tax purposes. If Euroseas stock is "marketable stock" for
purposes of Section 1296 of the Code, a U.S. holder also may be able to elect to
"mark-to-market" its Euroseas shares on an annual basis. "Marking-to-market," in
this context, means including in gross income each taxable year (and treating as
ordinary income, not net capital gain) the excess, if any, of the fair market
value of the electing holder's Euroseas shares over its adjusted basis therein
as of the end of that year. The U.S. holder's adjusted basis in the shares would
be adjusted to reflect the amounts of income included under the election. The
U.S. federal income tax consequences to a U.S. holder of shares in a PFIC,
including any available elections, are complex. Accordingly, a U.S. holder
should consult its tax advisor to determine the consequences to that holder of
owning shares of a PFIC.

Euroseas would qualify as a CFC if more than 50% of its total combined voting
power or value is owned by U.S. persons who own 10% or more of Euroseas' total
combined voting power ("Ten Percent U.S. Shareholders"). Each Ten Percent U.S.
Shareholder of Euroseas would be required to include in its gross income for
U.S. federal income tax purposes its proportional share of certain items of
Euroseas income, regardless of whether a distribution is made by Euroseas. A
portion of the gain recognized by a Ten Percent U.S. Shareholder upon sale,
exchange, or redemption of the stock in Euroseas could be included in income as
a dividend to the extent of Euroseas earnings and profits that are allocable to
the shares. The U.S. federal income tax consequences to a U.S. holder of shares
in a CFC are complex. Accordingly, a U.S. holder should consult its tax advisor
to determine the consequences to that holder of owning shares of a CFC.

    Backup Withholding Tax and Information Reporting Requirements
    -------------------------------------------------------------

When required, Euroseas or its paying agent will report to the IRS the amount of
proceeds paid for the Cove shares and any dividends paid on Euroseas shares in
each calendar year, and the amount of United States federal income tax withheld,
if any, with respect to these payments.

U.S. holders who are subject to information reporting and who do not provide
appropriate information when requested may be subject to backup withholding at a
rate of 28% on the gross amount of any proceeds or dividends received.


                                       27
<PAGE>

Backup withholding is not an additional tax. The amount of any backup
withholding will be allowed as a credit against the holder's United States
federal income tax liability and may entitle the holder to a refund, provided
the required information is timely furnished to the Internal Revenue Service.

THE PRECEDING DISCUSSION OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES IS NOT TAX ADVICE. ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT
HIS, HER OR ITS OWN TAX ADVSIOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF THE
MERGER AND HOLDING AND DISPOSING OF EUROSEAS SHARES, INCLUDING THE APPLICABILITY
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY PROPOSED CHANGES IN APPLICABLE
LAW.

ENFORCEABILITY OF CIVIL LIABILITIES

Euroseas is a Marshall Islands company and its executive offices are located
outside of the United States of America in Maroussi, Greece. Some of Euroseas'
directors and officers and some of the experts named herein reside outside the
United States of America. In addition, a substantial portion of Euroseas' assets
and the assets of its directors, officers and experts are located outside of the
United States of America. As a result, you may have difficulty serving legal
process within the United States of America upon Euroseas or any of these
persons. You may also have difficulty enforcing, both in and outside the United
States of America, judgments you may obtain in United States of America courts
against Euroseas or these persons in any action, including actions based upon
the civil liability provisions of United States of America federal or state
securities laws. Furthermore, there is substantial doubt that the courts of the
Marshall Islands or Greece would enter judgments in original actions brought in
those courts predicated on United States of America federal or state securities
laws.

ADDITIONAL INFORMATION ABOUT EUROSEAS

Euroseas is a privately owned company that is not currently subject to the
reporting requirements of the SEC. In connection with the Private Placement and
the Merger, Euroseas has agreed to file the Euroseas Registration Statement on
Form F-1, F-4 or comparable form to register with the SEC the offering and sale
of Euroseas shares to be issued in the Private Placement and pursuant to the
Merger. Once Euroseas' Registration Statement is declare effective, Euroseas
will be subject to the reporting requirements of the SEC. You will then be able
to read any reports, statements or other information that Euroseas files with
the SEC over the Internet at the SEC web site at http://www.sec.gov. You will
also be able to read and copy any documents Euroseas files with the SEC at its
public reference facility at 450 Fifth Street, N.W., Washington, D.C. 20549. You
will also be able to obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.


                                       28
<PAGE>


RECENT ISSUANCES OF SECURITIES BY EUROSEAS

Corporate Reorganization

Prior to the formation of Euroseas, various companies owned each of the vessel
owning companies that are now owned by Euroseas. As part of a corporate
reorganization, each of the beneficial owners of such vessel owning companies
exchanged all of their shares in each of the vessel owning companies for shares
in Friends, a newly formed Marshall Islands company, thus becoming the owners of
Friends. Friends then exchanged all of the shares in the vessel owning companies
for shares in Euroseas, a newly formed Marshall Islands company, thus becoming
the sole owner of Euroseas.

Private Placement

On August 25, 2005, Euroseas raised approximately $21 million in gross proceeds
from a private placement transaction (the "Private Placement") of its securities
to a number of institutional and accredited investors. In the Private Placement,
Euroseas issued 7,026,993 shares of common stock at a price of $3.00 per share,
as well as warrants to purchase an additional 1,756,743 shares of common stock.
The warrants have a five year term and an exercise price of $3.60 per share.
Euroseas also agreed to file a registration statement with the Securities and
Exchange Commission covering the resale of the securities issued in the Private
Placement. Forms of the Private Placement transaction documents are attached
hereto as Exhibits 10.1, 10.2, 10.3 and 10.4.

Based on the net proceeds received from the Private Placement, Euroseas intends
to acquire additional ships over an approximately 12 month time frame that will
include panamax, handymax and handysize bulkers or feeder containerships,
assuming it can obtain such ships on terms satisfactory to it. After the Merger
with Cove, the Euroseas Registration Statement covering the newly issued shares
in the Private Placement and to the Cove stockholders will be filed with the SEC
upon closing so those shares can be freely tradable. The public shares of Cove
will trade upon the filing of this8-K.

OWNERSHIP OF EUROSEAS

    Euroseas shares outstanding prior to Merger and Private         29,754,166
    Placement
    New shares issued in Private Placement                          7,026,993
    Shares to be issued pursuant to the Merger                      1,079,167
    Total shares outstanding after the Merger and after Private     37,860,326
    Placement
    Percent owned by Friends (initial owners)1 after Merger and     78.6%
    Private Placement




                                       29
<PAGE>



    Percent owned by former Cove owners after Merger and Private    2.8%
    Placement
    Percent owned by Private Placement investors after Merger and   18.6%
    Private Placement

The above numbers of shares are subject to adjustment in the event of a stock
split and do not include warrants issued in the Private Placement.

                                  RISK FACTORS

                  You should consider carefully the following factors, as well
as the other information set forth herein. 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 shares. Any of the risk factors could significantly and negatively
affect Euroseas' business, financial condition, operating results and stock
price. The risks and uncertainties described below are not the only ones
Euroseas faces. The following risks describe the material risks that are
presently known to us.


















  1 Friends Investment Company Inc. was the sole owner of 100% of the shares
  of Euroseas prior to the merger with Cove. Friends is a Marshall Islands
  company. The major shareholder of Friends is John Pittas, the father of
  Aristides Pittas. John Pittas controls 50.1% of the shares of Friends. No
  other shareholder of Friends controls more than 10% of that company.



                                       30
<PAGE>



                      RISKS FACTORS RELATING TO THE MERGER

THERE MAY NOT BE AN ACTIVE MARKET FOR EUROSEAS' SHARES, WHICH MAY CAUSE ITS
SHARES TO TRADE AT LOWER PRICES AND MAKE IT DIFFICULT TO SELL YOUR SHARES.

                  Prior to the Merger, there will be no public market for
Euroseas' shares. We cannot assure you that an active trading market for
Euroseas' shares will develop or be sustained after the Merger. We 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 LESS THAN YOU
ORIGINALLY PAID FOR YOUR CORRESPONDING SHARES OF COVE COMMON STOCK.

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

     o    actual or anticipated fluctuations in quarterly and annual results;

     o    mergers and strategic alliances in the shipping industry;

     o    market conditions in the industry;

     o    changes in government regulation;

     o    fluctuations in Euroseas' quarterly revenues and earnings and those of
          its publicly held competitors;

     o    shortfalls in Euroseas' operating results from levels forecasted by
          securities analysts;

     o    announcements concerning Euroseas or its competitors; and

     o    the general state of the securities markets.

The international drybulk shipping industry has been highly unpredictable and
volatile. The market for common shares of companies in this industry 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.


                                       31
<PAGE>


COVE SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION AND A REDUCTION IN
PERCENTAGE OWNERSHIP AND VOTING POWER WITH RESPECT TO COVE SHARES AS A RESULT OF
THE MERGER.

                  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.

FUTURE SALES OF EUROSEAS' SHARES COULD DEPRESS ITS STOCK PRICE.

                  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 Euroseas' shares of its common stock by such persons in the public
markets could adversely affect the market price of Euroseas' common stock.

EUROSEAS' SHAREHOLDERS WILL CONTROL APPROXIMATELY 97.2% OF EUROSEAS AFTER THE
MERGER AND 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.

                  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' ARTICLES OF INCORPORATION AND B-LAWS CONTAIN ANTI-TAKEOVER PROVISIONS
THAT MAY DISCOURAGE, DELAY OR PREVENT (1) THE MERGER OR ACQUISITION OF EUROSEAS
AND/OR (2) THE REMOVAL OF INCUMBENT DIRECTORS AND OFFICERS.

                  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.


                                       32
<PAGE>

PROFITABLE OPERATION OF EUROSEAS' BUSINESS WILL BE DEPENDENT UPON THE EFFORTS OF
EUROSEAS', NOT COVE'S, MANAGEMENT.

                  As a condition to the Merger, each of Cove's officers and
directors must resign from their current positions at the effective time of the
Merger. The current officers and directors 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.

                  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. Transaction costs will be recorded directly to stockholders'
equity if the Merger is consummated, and will be expensed by the respective
parties if the Merger is not consummated.

AS A RESULT OF THE MERGER, COVE STOCKHOLDERS WILL BE SOLELY DEPENDENT ON A
SINGLE BUSINESS.

                  As a result of the merger, Cove stockholders will be solely
dependent upon the performance of Euroseas and its drybulk shipping business.
Euroseas will be subject to a number of risks that relate generally to the
shipping industry and other risks that specifically relate to Euroseas. See
"Industry Risk Factors Relating to the Surviving Corporation" and "Company Risk
Factors Relating to the Surviving Corporation."


IF THE MERGER DOES NOT QUALIFY AS A NONTAXABLE REORGANIZATION UNDER THE U.S.
INTERNAL REVENUE CODE, THE TRANSACTION MAY BE A TAXABLE EVENT TO COVE'S
STOCKHOLDERS.

                  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

THE CYCLICAL NATURE OF THE SHIPPING INDUSTRY MAY LEAD TO VOLATILE CHANGES IN
FREIGHT RATES AND VESSEL VALUES WHICH MAY REDUCE EUROSEAS' REVENUES AND NET
INCOME.

                  Euroseas is an independent shipping company that operates in
the drybulk shipping market. 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


                                       33
<PAGE>

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.

                  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:

     o    general economic and market conditions affecting the shipping
          industry;

     o    supply of drybulk vessels;

     o    demand for drybulk vessels;

     o    types and sizes of vessels;

     o    other modes of transportation;

     o    cost of newbuildings;

     o    new regulatory requirements from governments or self-regulated
          organizations; and

     o    prevailing level of charter rates.


                  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. 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.


                                       34
<PAGE>


ALTHOUGH CHARTER RATES IN THE INTERNATIONAL DRYBULK SHIPPING INDUSTRY REACHED
HISTORIC HIGHS RECENTLY, FUTURE PROFITABILITY WILL DEPEND ON CONTINUED ECONOMIC
GROWTH IN THE WORLD ECONOMY THAT EXCEEDS THE CAPACITY OF THE GROWING WORLD
FLEET'S ABILITY TO MATCH IT.

                  Over the last several months, charter rates for the
international drybulk shipping industry have reached record highs; however,
recently rates have declined. Euroseas anticipates that the future demand for
its drybulk carriers and drybulk charter rates 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.

                  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:


     o    supply and demand for drybulk commodities;

     o    global and regional economic conditions;

     o    the distance drybulk commodities are to be moved by sea; and

     o    changes in seaborne and other transportation patterns.

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

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels;

     o    changes in environmental and other regulations that may limit the
          useful life of vessels;

     o    the number of vessels that are laid up; and

     o    changes in global drybulk commodity production.

AN ECONOMIC SLOWDOWN IN THE ASIA PACIFIC REGION COULD HAVE A MATERIAL ADVERSE
EFFECT ON EUROSEAS' BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS.

                  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


                                       35
<PAGE>

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.

EUROSEAS MAY BECOME DEPENDENT ON SPOT CHARTERS IN THE VOLATILE SHIPPING MARKETS.

                  Although each of Euroseas' vessels are currently under time
charters, in the future, Euroseas may spot charter those, or any newly acquired,
vessels. 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 IS SUBJECT TO REGULATION AND LIABILITY UNDER ENVIRONMENTAL LAWS THAT
COULD REQUIRE SIGNIFICANT EXPENDITURES AND AFFECT ITS CASH FLOWS AND NET INCOME.

                  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, 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


                                       36
<PAGE>

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.

INCREASED INSPECTION PROCEDURES AND TIGHTER IMPORT AND EXPORT CONTROLS COULD
INCREASE COSTS AND DISRUPT OUR BUSINESS.

                  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.

RISING FUEL PRICES MAY ADVERSELY AFFECT OUR PROFITS.

                  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 future, which may reduce the profitability and competitiveness of
Euroseas' business versus other forms of transportation, such as truck or rail.


                                       37
<PAGE>

IF EUROSEAS' VESSELS FAIL TO MAINTAIN THEIR CLASS CERTIFICATION AND/OR FAIL ANY
ANNUAL SURVEY, INTERMEDIATE SURVEY, DRYDOCKING OR SPECIAL SURVEY, IT COULD HAVE
A MATERIAL ADVERSE IMPACT ON EUROSEAS' FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

                  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, Euroseas' ship management
company.

                  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.

MARITIME CLAIMANTS COULD ARREST EUROSEAS' VESSELS, WHICH COULD INTERRUPT ITS
CASH FLOW.

                  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.



                                       38
<PAGE>

GOVERNMENTS COULD REQUISITION EUROSEAS' VESSELS DURING A PERIOD OF WAR OR
EMERGENCY, RESULTING IN LOSS OF EARNINGS.

                  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.

WORLD EVENTS OUTSIDE EUROSEAS' CONTROL MAY NEGATIVELY AFFECT ITS OPERATIONS AND
FINANCIAL CONDITION.

                  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 WILL DEPEND ENTIRELY ON EUROBULK TO MANAGE AND CHARTER ITS FLEET.

                  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.


                                       39
<PAGE>


BECAUSE EUROBULK IS A PRIVATELY HELD COMPANY, THERE IS LITTLE OR NO PUBLICLY
AVAILABLE INFORMATION ABOUT IT AND EUROSEAS MAY GET VERY LITTLE ADVANCE WARNING
OF OPERATIONAL OR FINANCIAL PROBLEMS EXPERIENCED BY EUROBULK THAT MAY ADVERSELY
AFFECT EUROSEAS.

                  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.

EUROSEAS AND ITS PRINCIPAL OFFICERS HAVE AFFILIATIONS WITH EUROBULK THAT COULD
CREATE CONFLICTS OF INTEREST DETRIMENTAL TO 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. These conflicts may 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 IT DEPENDS ON THE ABILITY OF ITS SUBSIDIARIES
TO DISTRIBUTE FUNDS TO IT IN ORDER TO SATISFY ITS FINANCIAL OBLIGATIONS OR TO
MAKE DIVIDEND PAYMENTS.

                  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.

EUROSEAS MAY NOT BE ABLE 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 our 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, 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.



                                       40
<PAGE>

COMPANIES AFFILIATED WITH EUROBULK MAY ACQUIRE VESSELS THAT COMPETE WITH
EUROSEAS' FLEET

                  Companies affiliated with Eurobulk 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 us.

If Euroseas fails to manage its planned growth properly, it may not be able to
successfully expand its market share.

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

     o    locating and acquiring suitable vessels;

     o    identifying and consummating acquisitions or joint ventures;

     o    integrating any acquired business successfully with its existing
          operations;

     o    enhancing its customer base;

     o    managing its expansion; and

     o    obtaining required financing.


                  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.

A DECLINE IN THE MARKET VALUE OF EUROSEAS' VESSELS COULD LEAD TO A DEFAULT UNDER
EUROSEAS' LOAN AGREEMENTS AND THE LOSS OF EUROSEAS' VESSELS.

                  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.



                                       41
<PAGE>


EUROSEAS' EXISTING LOAN AGREEMENTS CONTAIN RESTRICTIVE COVENANTS THAT MAY LIMIT
ITS LIQUIDITY AND CORPORATE ACTIVITIES.

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

     o    incur additional indebtedness;

     o    create liens on its assets;

     o    sell capital stock of its subsidiaries;

     o    make investments;

     o    engage in mergers or acquisitions;

     o    pay dividends;

     o    make capital expenditures;

     o    change the management of its vessels or terminate or materially amend
          the management agreement relating to each vessel; and

     o    sell its vessels.

                  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.

SERVICING FUTURE DEBT WOULD LIMIT FUNDS AVAILABLE FOR OTHER PURPOSES.

                  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.

EUROSEAS' ABILITY TO OBTAIN ADDITIONAL DEBT FINANCING MAY BE DEPENDENT ON THE
PERFORMANCE OF ITS THEN EXISTING CHARTERS AND THE CREDITWORTHINESS OF ITS
CHARTERERS.

                  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.



                                       42
<PAGE>

AS EUROSEAS EXPANDS ITS BUSINESS, IT MAY NEED TO UPGRADE ITS OPERATIONS AND
FINANCIAL SYSTEMS, AND ADD MORE STAFF AND CREW. IF IT CANNOT UPGRADE THESE
SYSTEMS OR RECRUIT SUITABLE EMPLOYEES, ITS PERFORMANCE MAY BE ADVERSELY
AFFECTED.

                  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.

IN THE HIGHLY COMPETITIVE INTERNATIONAL DRYBULK SHIPPING INDUSTRY, EUROSEAS MAY
NOT BE ABLE TO COMPETE FOR CHARTERS WITH NEW ENTRANTS OR ESTABLISHED COMPANIES
WITH GREATER RESOURCES.

                  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 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 MAY BE UNABLE TO ATTRACT AND RETAIN KEY MANAGEMENT PERSONNEL AND OTHER
EMPLOYEES IN THE SHIPPING INDUSTRY, WHICH MAY NEGATIVELY AFFECT THE
EFFECTIVENESS OF ITS MANAGEMENT AND ITS RESULTS OF OPERATIONS.

                  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.

RISKS INVOLVED WITH OPERATING OCEAN GOING VESSELS COULD AFFECT EUROSEAS'
BUSINESS AND REPUTATION, WHICH WOULD ADVERSELY AFFECT ITS REVENUES.



                                       43
<PAGE>


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

     o    crew strikes and/or boycotts;

     o    marine disaster;

     o    piracy;

     o    environmental accidents;

     o    cargo and property losses or damage; and

     o    business interruptions caused by mechanical failure, human error, war,
          terrorism, political action in various countries, labor strikes or
          adverse weather conditions.


                  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.

EUROSEAS' VESSELS MAY SUFFER DAMAGE AND IT MAY FACE UNEXPECTED DRYDOCKING COSTS,
WHICH COULD AFFECT ITS CASH FLOW AND FINANCIAL CONDITION.

                  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.

PURCHASING AND OPERATING PREVIOUSLY OWNED, OR SECONDHAND, VESSELS MAY RESULT IN
INCREASED OPERATING COSTS AND VESSELS OFF-HIRE, WHICH COULD ADVERSELY AFFECT
EUROSEAS' 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.



                                       44
<PAGE>

EUROSEAS MAY NOT HAVE ADEQUATE INSURANCE TO COMPENSATE IT IF IT LOSES ITS
VESSELS.

                  Euroseas procures hull and machinery insurance, protection and
indemnity insurance, which includes environmental damage and pollution insurance
and war risk insurance and FD&D 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' OPERATIONS OUTSIDE THE UNITED STATES OF AMERICA EXPOSE IT TO GLOBAL
RISKS THAT MAY INTERFERE WITH THE OPERATION OF ITS VESSELS.

                  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 IS INCORPORATED IN THE REPUBLIC OF THE MARSHALL ISLANDS, WHICH DOES NOT
HAVE A WELL-DEVELOPED BODY OF CORPORATE LAW.

                  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.



                                       45
<PAGE>

OBLIGATIONS ASSOCIATED WITH BEING A PUBLIC COMPANY WILL REQUIRE SIGNIFICANT
COMPANY RESOURCES AND MANAGEMENT ATTENTION

         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 Securities Exchange Act of 1934, as amended, or
the Exchange Act, and the other rules and regulations of the Securities and
Exchange Commission, or the Commission, 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 our 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 will 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.


         In addition, being a public company could make it more difficult or
more costly for Euroseas to obtain certain types of insurance, including
directors' and officers' liability insurance, and Euroseas may be forced to
accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. The impact of these events could also make
it more difficult for Euroseas to attract and retain qualified persons to serve
on its Board of Directors, board committees or as executive officers.



                                       46
<PAGE>

                   ITEM 5.01 CHANGE IN CONTROL OF REGISTRANT.

On August 25, 2005, Cove, the Cove Principals, Merger Sub and Euroseas signed
the Merger Agreement, pursuant to which Euroseas, through its wholly-owned
subsidiary, Merger Sub, agreed to acquire Cove in exchange for shares of
Euroseas common stock. At the effective time of the Merger, Cove will merge with
and into Merger Sub, the separate existence of Cove will cease, and Merger Sub
will be continued as the Surviving Corporation under the name Cove Apparel,
Inc., as a wholly owned operating subsidiary of Euroseas. In connection with the
Merger, Cove's stockholders will become stockholders of Euroseas. The
outstanding shares of Cove common stock (an aggregate of 10,480,500 shares) will
be converted into an aggregate of 1,079,167 shares of Euroseas common stock, an
exchange ratio in the Merger of 0.102969. As a result, at the effective time of
the Merger, Cove shares will be exchanged for 2.8% of Euroseas shares, assuming
all Cove stockholders participate in the Merger. The transaction contemplated by
the Merger Agreement is intended to be a "tax-free" reorganization pursuant to
the provisions of the Internal Revenue Code of 1986, as amended.

The current directors and executive officers of Merger Sub will become the
directors and executive officers of the survivor, a wholly owned subsidiary of
Euroseas. No agreements exist among present or former controlling stockholders
of Cove or present members of Euroseas with respect to the election of the
members of the Euroseas' Board of Directors, and to Cove's knowledge, no other
agreements exist which might result in a change of control of Cove, except for
the Merger Agreement.

OWNERSHIP OF SURVIVING CORPORATION

Upon consummation of the Merger, the Surviving Corporation will be a 100%
wholly-owned subsidiary of Euroseas.

OWNERSHIP OF EUROSEAS

After the Merger with Cove, the Euroseas Registration Statement covering the
newly issued shares in the Private Placement and to the Cove stockholders will
be filed with the SEC upon closing so those shares can be freely tradable. The
public shares of Cove will trade upon the filing of this 8-K. The following
table shows the capital structure of Euroseas after the Merger not including
warrants issued in the Private Placement and subject to adjustment for stock
splits:

      Euroseas shares outstanding prior to Merger and Private         29,754,166
      Placement
      New shares issued in Private Placement                          7,026,993
      Shares to be issued pursuant to the Merger                      1,079,167
      Total shares outstanding after the Merger and after Private     37,860,326
      Placement


                                       47
<PAGE>


      Percent owned by Friends (initial owners)2 after Merger and     78.6%
      Private Placement
      Percent owned by former Cove owners after Merger and Private    2.8%
      Placement
      Percent owned by Private Placement investors after Merger and   18.6%
      Private Placement

                      Beneficial Owners

The following table sets forth certain information regarding the beneficial
ownership of Cove's common stock before and after giving effect to the Merger by
each person or entity known, as of June 30, 2005, by it to be the beneficial
owner of more than 5% of the outstanding shares of Cove's common stock, each of
Cove's directors and executive officers, and all of its directors and executive
officers as a group.
<TABLE>
<CAPTION>
                                                                         Pre-Merger Cove                           Post-Merger
                                                                         Amount of Shares     Pre-Merger Cove   Euroseas Percent
   Title Of Class     Name and Address Of Beneficial Owner              Beneficially Owned    Percent of Class      of Class
   --------------     ------------------------------------              ------------------    ----------------      --------
<S>                           <C>                                              <C>                  <C>                <C>
Common Stock          Kevin Peterson                                           None                  0%               None
                      President, Director, Secretary
                      1003 Dormador, Suite 21
                      San Clemente, CA 92672

Common Stock          Shawn Peterson                                        4,500,000              42.9%                *
                      Treasurer, Director
                      1003 Dormador, Suite 21
                      San Clemente, CA 92672

Common Stock          Daniel Trotter                                        3,000,000              28.6%                *
                      1003 Dormador, Suite 21
                      San Clemente, CA 92672

Common Stock          Jodi Hunter                                           2,700,000              25.8%                *
                      1003 Dormador, Suite 21
                      San Clemente, CA  92672

Common Stock          All directors and officers and 5% owners as a         10,200,000             97.3%
                      group
</TABLE>

*Indicates less than 1.0%

Beneficial ownership is determined in accordance with the Rule 13d-3(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and generally
includes voting or investment power with respect to securities. Except as
subject to community property laws, where applicable, the person named above has
sole voting and investment power with respect to all shares of common stock

shown as beneficially owned by him/her. Of the 1,079,167 Euroseas shares to be
exchanged in the Merger for Cove shares, approximately 97.3% or 1,050,029 shares
are issuable to the Cove Principals who as a group owned 97.3% of Cove Shares,
as of June 30, 2005. These Cove Principals have agreed pursuant to the terms of
the Merger Agreement, to pledge or to cause transferees to pledge, 475,000 of
the Euroseas shares issuable to them in the Merger, in exchange for their Cove
shares, as collateral for the indemnity obligations representations and
warranties made by Cove Principals in the Merger Agreement.


     1 Friends Investment Company Inc. was the sole owner of 100% of the shares
     of Euroseas prior to the merger with Cove. Friends is a Marshall Islands
     company. The major shareholder of Friends is John Pittas, the father of
     Aristides Pittas. John Pittas controls 50.1% of the shares of Friends. No
     other shareholder of Friends controls more than 10% of that company.



                                       48
<PAGE>


There are no further arrangements or understandings in place that may result in
a subsequent change-in-control of Cove, except that (i) Jodi Hunter expects to
sell 1,800,000 of her shares in a private transaction before the Merger, and
(ii) Shawn Peterson and Daniel Trotter expect to sell approximately 7,300,000 of
their shares in the aggregate in a private transaction before the Merger.
Certain of the persons who have purchased these shares from the Cove Principals
have assumed the obligation of the Cove Principals to pledge 475,000 Euroseas
shares which would have been issued to the Cove Principals under the Merger
Agreement, as collateral for the indemnity obligations of the Cove Principals in
the Merger Agreement and have executed pledge agreements in favor of Euroseas to
implement the pledge obligations of the Cove Principals assumed by these
purchasers.

          MANAGEMENT OF EUROSUB AFTER THE EFFECTIVE DATE OF THE MERGER

                   EuroSub's Directors And Executive Officers

In connection with the Merger, all of the directors and executive officers of
will become directors and executive officers of the Surviving Corporation and
the Cove officers and directors will resign as the officers and directors of
Cove. The following sets forth the name and position of each of Euroseas'
directors and executive officers immediately after the effective date of the
Merger.


NAME                           AGE     POSITION

Aristides J. Pittas            46      Chairman, President and CEO; Director
Anastasios Aslidis             45      CFO and Treasurer; Director
Stefania Karmiri               37      Secretary

Aristides J. Pittas has been a member of the board of directors and Chairman and
CEO of Euroseas since its inception on May 5, 2005. Since 1997, Mr. Pittas has
also been the President of Eurochart S.A., an affiliate of Euroseas. Eurochart
is a shipbroking company specializing in chartering and selling and purchasing
ships. Since 1997, Mr. Pittas has also been the President of Eurotrade, a ship
operating company and an affiliate of Euroseas. Since January 1995, Mr. Pittas
has been the Managing Director of Eurobulk Ltd., an affilate of Euroseas.
Eurobulk is a dry bulk shipping company, which provides ocean transportation
solutions for international commodity companies. From September 1991 to December


                                       49
<PAGE>

1994, Mr. Pittas was the Vice President of Oceanbulk Maritime SA, a company that
concentrates in ship management. From March 1990 to August 1991, Mr. Pittas
served both as the Assistant to the General Manager and the Head of the Planning
Department of Varnima International SA, a shipping company operating tanker
vessels. From June 1987 until February 1990, Mr Pittas was the head of the
Central Planning department of Eleusis Shipyards S.A. From January 1987 to June
1987, Mr. Pittas served as Assistant to the General Manger of Chios Navigation
Shipping Company in London, a company that provides ship management services.
From December 1985 to January 1987, Mr. Pittas worked in the design department
of Eleusis Shipyards S.A. where he focused on shipbuilding and ship repair. Mr.
Pittas has a B.Sc. in Marine Engineering from University of Newcastle -
Upon-Tyne and a MSc in both Ocean Systems Management and Navel Architecture and
Marine Engineering from the Massachusetts Institute of Technology.

Dr. Anastasios Aslidis has been a partner at Marsoft, an international
consulting firm focusing on investment and risk management in the maritime
industry since 1989. As of August 2005, he has accepted an offer to join
Euroseas as a director and the CFO. Dr. Aslidis has more than 17 years of
experience in the maritime industry. Since 2003, he has been working on
financial risk management methods for shipowners and banks lending to the
maritime industry, especially as pertaining to compliance to the Basel II
Capital Accords. He has been consultant to the Board of Directors of shipping
companies (public and private) advising in strategy development, asset selection
and investment timing. Between 1993 and 2003, as part of his work at Marsoft, he
worked on various projects including development of portfolio and risk
management methods for shipwoners, establishment of investments funds and
structuring private equity in the maritime industry and business development for
Marsoft's services. Between 1991 and 1993, Dr. Aslidis work on the economics of
the offshore drilling industry. Between 1989 and 1991, he worked on the
development of a trading support system for the dry bulk shipping industry on
behalf of a major European owner. Dr. Aslidis holds a diploma in Naval
Architecture and Marine Engineering from the National Technical University of
Athens (1983), M.S. in Ocean Systems Management (1984) and Operations Research
(1987) from MIT, and a Ph.D. in Ocean Systems Management (1989) also from MIT.

Stephania Karmiri has been Secretary of Euroseas since its inception on May 5,
2005. Since July 1995, Mrs Karmiri has been executive secretary to Eurobulk
Ltd., an affilate of Euroseas. Eurobulk is a dry bulk shipping company, which
provides ocean transportation solutions for international commodity companies.
At Eurobulk Mrs. Karmiri has been responsible for dealing with sale and purchase
transactions, vessel registrations/deletions, bank loans, supervision of office
administration and office/vessel telecommunication. From May 1992 to June 1995,
she was secretary to the technical department of Oceanbulk Maritime SA, a ship
management company. From 1988 to 1992, Mrs. Karmiri served as assistant to
brokers for Allied Shipbrokers, a company that provides shipbroking services to
sale and purchase transactions. Mrs Karmiri has taken assistant accountant and
secretarial courses from Didacta college.



                                       50
<PAGE>


INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Euroseas' bylaws provide that any person who is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another, partnership, joint venture, trust or other
enterprise shall be entitled to be indemnified by the Corporation upon the same
terms, under the same conditions, and to the same extent as authorized by
Section 60 of the Business Corporation Act of the Marshall Islands ("BCA"), if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

Section 60 of the BCA provides as follows:

Indemnification of directors and officers.

(1)    Actions not by or in right of the corporation. A corporation shall have
       power to indemnify any person who was or is a party or is threatened to
       be made a party to any threatened, pending or completed action, suit or
       proceeding whether civil, criminal, administrative or investigative
       (other than an action by or in the right of the corporation) by reason of
       the fact that he is or was a director or officer of the corporation, or
       is or was serving at the request of the corporation as a director or
       officer of another corporation, partnership, joint venture, trust or
       other enterprise, against expenses (including attorneys' fees),
       judgments, fines and amounts paid in settlement actually and reasonably
       incurred by him in connection with such action, suit or proceeding if he
       acted in good faith and in a manner he reasonably believed to be in or
       not opposed to the best interests of the corporation, and, with respect
       to any criminal action or proceeding, had no reasonable cause to believe
       his conduct was unlawful. The termination of any action, suit or
       proceeding by judgment, order, settlement, conviction, or upon a plea of
       no contest, or its equivalent, shall not, of itself, create a presumption
       that the person did not act in good faith and in a manner which he
       reasonable believed to be in or not opposed to the bests interests of the
       corporation, and, with respect to any criminal action or proceedings, had
       reasonable cause to believe that his conduct was unlawful.

(2)    Actions by or in right of the corporation. A corporation shall have the
       power to indemnify any person who was or is a party or is threatened to
       be made a party to any threatened, pending or completed action or suit by
       or in the right of the corporation to procure a judgment in its favor by
       reason of the fact that he is or was a director or officer of the
       corporation, or is or was serving at the request of the corporation, or
       is or was serving at the request of the corporation as a director or
       officer of another corporation, partnership, joint venture, trust or
       other enterprise against expenses (including attorneys' fees) actually
       and reasonably incurred by him or in connection with the defense or
       settlement of such action or suit if he acted in good faith and in a
       manner he reasonably believed to be in or not, opposed to the best
       interests of the corporation and except that no indemnification shall be
       made in respect of any claims, issue or matter as to which such person
       shall have been adjudged to be liable for negligence or misconduct in the
       performance of his duty to the corporation unless and only to the extent
       that the court in which such action or suit was brought shall determine
       upon application that, despite the adjudication of liability but in view
       of all the circumstances of the case, such person is fairly and
       reasonably entitled to indemnity for such expenses which the court shall
       deem proper.


                                       51
<PAGE>

(3)    When director or officer successful. To the extent that director or
       officer of a corporation has been successful on the merits or otherwise
       in defense of any action, suit or proceeding referred to in subsections
       (1) or (2) of this section, or in the defense of a claim, issue or matter
       therein, he shall be indemnified against expenses (including attorneys'
       fees) actually and reasonably incurred by him in connection therewith.

(4)    Payment of expenses in advance. Expenses incurred in defending a civil or
       criminal action, suit or proceeding may be paid in advance of the final
       disposition of such action, suit or proceeding as authorized by the Board
       of Directors in the specific case upon receipt of an undertaking by or on
       behalf of the director or officer to repay such amount if it shall
       ultimately be determined that he is not entitled to be indemnified by the
       corporation as authorized in this section.

(5)    Indemnification pursuant to other rights. The indemnification and
       advancement of expenses provided by, or granted pursuant to, the other
       subsections of this section shall not be deemed exclusive of any other
       rights to which those seeking indemnification or advancement of expenses
       may be entitled under any bylaw, agreement, vote of stockholders or
       disinterested directors or otherwise, both as to action in his official
       capacity and as to action in another capacity while holding such office.

(5)    Continuation of indemnification. The indemnification and advancement of
       expenses provided by, or granted pursuant to, this section shall, unless
       otherwise provided when authorized or ratified, continue as to a person
       who has ceased to be a director, officer, employee or agent and shall
       inure to the benefit of the heirs, executors and administrators of such a
       person.

(6)    Insurance. A corporation shall have power to purchase and maintain
       insurance or behalf of any person who is or was a director or officer of
       the corporation or is or was serving at the request of the corporation as
       a director or officer against any liability asserted against him and
       incurred by him in such capacity whether or not the corporation would
       have the power to indemnify him against such liability under the
       provisions of this section.

POST-MERGER DESCRIPTION OF SECURITIES

Common Stock

Post-merger, Euroseas is authorized to issue up to 100,000,000 shares of common
stock, par value $0.01 per share, of which 36,781,159 are currently issued and
outstanding which includes the 7,026,993 shares sold in the recently completed
Euroseas Private Placement. Each outstanding share of common stock will be
entitled to one vote, either in person or by proxy, on all matters that may be
voted upon by their holders at meetings of the shareholders. Holders of
Euroseas' common stock (i) have equal ratable rights to dividends from funds
legally available therefore, if declared by the Board of Directors; (ii) are
entitled to share ratably in all of Euroseas' assets available for distribution
upon liquidation, dissolution or winding up; and (iii) do not have preemptive,
subscription or conversion rights or redemption or sinking fund provisions. All
issued shares of Euroseas' common stock when issued will be fully paid for and
non-assessable.


                                       52
<PAGE>

Preferred Stock

Post-merger, Euroseas is authorized to issue 20,000,000 shares of preferred
stock, par value $0.01 per share, of which no shares are currently issued and
outstanding. The preferred stock may be issued in one or more series and
Euroseas' Board of Directors, without further approval from its shareholders, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights, liquidation preferences and other rights and
restrictions relating to any series. Issuances of preferred stock, while
providing flexibility in connection with possible financings, acquisitions and
other corporate purposes, could, among other things, adversely affect the voting
power of the holders of Euroseas common stock.

Certain Provisions of Euroseas' Articles of Incorporation and Bylaws

Certain provisions of Marshall Islands law and Euroseas' articles of
incorporation and bylaws could make more difficult the acquisition of it by
means of a tender offer, a proxy contest, or otherwise, and the removal of
incumbent officers and directors. These provisions are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Euroseas. Euroseas' articles of
incorporation and bylaws include provisions that:

     o    allow the Board of Directors to issue, without further action by the
          shareholders, up to 20,000,000 shares of undesignated preferred stock;
     o    require that special meetings of its shareholders be called only by
          the Board of Directors or the Chairman of the Board; and
     o    establish an advance notice procedure for shareholder proposals to be
          brought before an annual meeting of shareholders.

Euroseas' articles of incorporation also prohibit it from engaging in any
"business combination" with any interested shareholder for a period of three
years following the date the shareholder became an interested shareholder,
unless:

     o    prior to such time, the Board of Directors of Euroseas approved either
          the Business Combination or the transaction which resulted in the
          shareholder becoming an Interested Shareholder; or

     o    upon consummation of the transaction which resulted in the shareholder
          becoming an Interested Shareholder, the Interested Shareholder owned
          at least 85% of the voting stock of Euroseas outstanding at the time
          the transaction commenced, excluding for purposes of determining the
          number of shares outstanding those shares owned (i) by persons who are
          directors and also officers and (ii) employee stock plans in which
          employee participants do not have the right to determine
          confidentially whether shares held subject to the plan will be
          tendered in a tender or exchange offer; or


                                       53
<PAGE>

     o    at or subsequent to such time, the Business Combination is approved by
          the Board of Directors and authorized at an annual or special meeting
          of shareholders, and not by written consent, by the affirmative vote
          of at least 51% of the outstanding voting stock that is not owned by
          the interested shareholder; or

     o    the shareholder became an Interested Shareholder prior to the
          consummation of the initial public offering of Euroseas's common stock
          under the United States Securities Act of 1933, as amended.

These restrictions shall not apply if:

     o    A shareholder becomes an Interested Shareholder inadvertently and (i)
          as soon as practicable divests itself of ownership of sufficient
          shares so that the shareholder ceases to be an Interested Shareholder;
          and (ii) would not, at any time within the three-year period
          immediately prior to a Business Combination between Euroseas and such
          shareholder, have been an Interested Shareholder but for the
          inadvertent acquisition of ownership; or

     o    The Business Combination is proposed prior to the consummation or
          abandonment of and subsequent to the earlier of the public
          announcement or the notice required hereunder of a proposed
          transaction which (i) constitutes one of the transactions described in
          the following sentence; (ii) is with or by a person who either was not
          an Interested Shareholder during the previous three years or who
          became an Interested Shareholder with the approval of the Board; and
          (iii) is approved or not opposed by a majority of the members of the
          Board then in office (but not less than one) who were Directors prior
          to any person becoming an Interested Shareholder during the previous
          three years or were recommended for election or elected to succeed
          such Directors by a majority of such Directors. The proposed
          transactions referred to in the preceding sentence are limited to:

               (a)  a merger or consolidation of Euroseas (except for a merger
                    in respect of which, pursuant to the BCA, no vote of the
                    shareholders of Euroseas is required);

               (b)  a sale, lease, exchange, mortgage, pledge, transfer or other
                    disposition (in one transaction or a series of
                    transactions), whether as part of a dissolution or
                    otherwise, of assets of Euroseas or of any direct or
                    indirect majority-owned subsidiary of Euroseas (other than
                    to any direct or indirect wholly-owned subsidiary or to
                    Euroseas) having an aggregate market value equal to 50% or
                    more of either that aggregate market value of all of the
                    assets of Euroseas determined on a consolidated basis or the
                    aggregate market value of all the outstanding shares; or

               (c)  a proposed tender or exchange offer for 50% or more of the
                    outstanding voting shares of Euroseas.


                                       54
<PAGE>

Euroseas' articles of incorporation defines a "business combination" to include:

     o    Any merger or consolidation of Euroseas or any direct or indirect
          majority-owned subsidiary of Euroseas with (i) the Interested
          Shareholder or any of its affiliates, or (ii) with any other
          corporation, partnership, unincorporated association or other entity
          if the merger or consolidation is caused by the Interested
          Shareholder;

     o    Any sale, lease, exchange, mortgage, pledge, transfer or other
          disposition (in one transaction or a series of transactions), except
          proportionately as a shareholder of Euroseas, to or with the
          Interested Shareholder, whether as part of a dissolution or otherwise,
          of assets of Euroseas or of any direct or indirect majority-owned
          subsidiary of Euroseas which assets have an aggregate market value
          equal to 10% or more of either the aggregate market value of all the
          assets of Euroseas determined on a consolidated basis or the aggregate
          market value of all the outstanding shares;

     o    Any transaction which results in the issuance or transfer by Euroseas
          or by any direct or indirect majority-owned subsidiary of Euroseas of
          any shares, or any share of such subsidiary, to the Interested
          Shareholder, except: (i) pursuant to the exercise, exchange or
          conversion of securities exercisable for, exchangeable for or
          convertible into shares, or shares of any such subsidiary, which
          securities were outstanding prior to the time that the Interested
          Shareholder became such; (ii) pursuant to a merger with a direct or
          indirect wholly-owned subsidiary of Euroseas solely for purposes of
          forming a holding company; (iii) pursuant to a dividend or
          distribution paid or made, or the exercise, exchange or conversion of
          securities exercisable for, exchangeable for or convertible into
          shares, or shares of any such subsidiary, which security is
          distributed, pro rata to all holders of a class or series of shares
          subsequent to the time the Interested Shareholder became such; (iv)
          pursuant to an exchange offer by Euroseas to purchase shares made on
          the same terms to all holders of said shares; or (v) any issuance or
          transfer of shares by Euroseas; provided however, that in no case
          under items (iii)-(v) of this subparagraph shall there be an increase
          in the Interested Shareholder's proportionate share of the any class
          or series of shares;

     o    Any transaction involving Euroseas or any direct or indirect
          majority-owned subsidiary of Euroseas which has the effect, directly
          or indirectly, of increasing the proportionate share of any class or
          series of shares, or securities convertible into any class or series
          of shares, or shares of any such subsidiary, or securities convertible
          into such shares, which is owned by the Interested Shareholder, except
          as a result of immaterial changes due to fractional share adjustments
          or as a result of any purchase or redemption of any shares not caused,
          directly or indirectly, by the Interested Shareholder; or

     o    Any receipt by the Interested Shareholder of the benefit, directly or
          indirectly (except proportionately as a shareholder of Euroseas), of
          any loans, advances, guarantees, pledges or other financial benefits
          (other than those expressly permitted above) provided by or through
          Euroseas or any direct or indirect majority-owned subsidiary.

Euroseas' articles of incorporation defines an "interested stockholder" as any
person (other than Euroseas and any direct or indirect majority-owned subsidiary
of Euroseas) that:

     o    is the owner of 15% or more of the outstanding voting shares of
          Euroseas; or

     o    is an affiliate or associate of Euroseas and was the owner of 15% or
          more of the outstanding voting shares of Euroseas at any time within
          the three-year period immediately prior to the date on which it is
          sought to be determined whether such person is an Interested
          Shareholder; and the affiliates and associates of such person;
          provided, however, that the term "Interested Shareholder" shall not
          include any person whose ownership of shares in excess of the 15%
          limitation set forth herein is the result of action taken solely by
          Euroseas; provided that such person shall be an Interested Shareholder
          if thereafter such person acquires additional shares of voting shares
          of Euroseas, except as a result of further Company action not caused,
          directly or indirectly, by such person.



                                       55
<PAGE>



                 COVE AND EUROSEAS AUDITED FINANCIAL STATEMENTS

The financial statements of Cove for the year ended September 30, 2004 are
attached hereto as Exhibit A. These statements have been audited by Hall &
Company independent auditors. The unaudited financial statements of Cove for the
nine months ended June 30, 2005 are attached hereto as Exhibit C. You are
encouraged to review the financial statements and related notes.The finanical
statements for Euroseas will be filed by amdendment.

ITEM 5.02- DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.

(a) Resignation of Officers or Directors. Effective as of June 20, 2005, Jodi
Hunter resigned as a director of Cove and she will resign as an officer prior to
the effective time of the Merger. Prior to the effective time of the Merger,
Shawn Peterson will resign as an officer and director of Cove. Kevin Peterson
will resign as an officer and director at the effective time of the Merger.

(b) Appointment of Officers or Directors. Immediately after the effective time
of the Merger, the officers and directors of EuroSub, Euroseas' wholly owned
subsidiary, will be the officers and directors of the Surviving Corporation.

     ITEM 5.03 - AMENDMENTS TO CERTIFICATE OF INCOPORATION OR BYLAWS; CHANGE IN
FISCAL YEAR END.

Upon consummation of the Merger, the certificate of incorporation and bylaws of
EuroSub, Euroseas' wholly owned subsidiary, will be the articles and bylaws of
the Surviving Corporation. Cove's fiscal year ends September 30. Each of
EuroSub's and Euroseas' fiscal years end December 31.

                  ITEM 9.01- FINANCIAL STATEMENTS AND EXHIBITS.

(a): Financial Statements of Businesses Acquired. The audited financial
statements of Cove Apparel, Inc. for the year ended September 30, 2004 as
Exhibit A. The unaudited financial statements of Cove for the ninemonths ended
June 30, 2005 are attached hereto as Exhibit C.

(b):     Other Exhibits:
         --------------

         2.1      Agreement and Plan of Merger, dated as of August 25, 2005, by
                  and among Cove Apparel, Inc., Principal Shareholders of Cove
                  Apparel, Inc., Euroseas Ltd. and Euroseas Acquisition Company
                  Inc.

         3.1      Articles of Incorporation of Euroseas Ltd.

         3.2      Bylaws of Euroseas Ltd.



                                       56
<PAGE>

         10.1     Form of Euroseas Securities Purchase Agreement

         10.2     Form of Euroseas Registration Rights Agreement

         10.3     Form of Euroseas Warrant Agreement

         10.4     Form of Friends Lock Up Agreement

A.



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                                Cove Apparel, Inc.

                                                By:      /s/ Kevin Peterson
                                                --------------------------------
                                                Name:    Kevin Peterson
                                                Title:    President

Dated: August 31, 2005









                                       57
<PAGE>





                                  Exhibit Index

         2.1      Agreement and Plan of Merger, dated as of August 25, 2005, by
                  and among Cove Apparel, Inc., Principal Shareholders of Cove
                  Apparel, Inc., Euroseas Ltd. and Euroseas Acquisition Company
                  Inc.

         3.1      Articles of Incorporation of Euroseas Ltd.

         3.2      Bylaws of Euroseas Ltd.

         10.1     Form of Euroseas Securities Purchase Agreement

         10.2     Form of Euroseas Registration Rights Agreement

         10.3     Form of Euroseas Warrant Agreement

         10.4     Form of Friends Lock Up Agreement



                                       58
<PAGE>



LA-96941 v4 1003965-0202



                             EXHIBIT A TO ITEM 9.01

                     COVE APPAREL, INC. FINANCIAL STATEMENTS



THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE, "ANTICIPATE",
"PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR SIMILAR TERMS,
VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD- LOOKING
STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR
MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY
MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE
IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE
INFERRED FROM THOSE FORWARD -LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD -LOOKING STATEMENTS SPECIFIED
IN THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE
SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE,
INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND
INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND
SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES REQUIRE THE
EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE
OUTCOME MAY VARY SUBSTAN'T'IALLY FROM ANTICIPATED OR PROJECTED RESULTS, AND,
ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE
FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE
ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE
FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY
SUCH FORWARD-LOOKING STATEMENTS.

CRITICAL ACCOUNTING POLICY AND ESTIMATES

Our Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including those related to
revenue recognition, accrued expenses, financing operations, and contingencies
and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates as to
the appropriate amounts to accrue for accounting and legal expenses. These
accounting policies are described at relevant sections in this discussion and
analysis and in the notes to them consolidated financial statements included in
our Annual Report on Form 10-KSB for the year ended September 30, 2004.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS



                                       59
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2004, we had cash of $15,186 and $6,500 representing
accounts receivable. We do not believe that our available cash is sufficient to
pay our day-to-day expenditures for the next twelve months. As of September 30,
2004, our total liabilities were $ 23,732, which was represented by $21,497 of
accounts payable and accrued payroll and related expenses of $2,236.

RESULTS OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 30, 2004 AS COMPARED TO THE YEAR ENDED SEPTEMBER
30, 2003.

REVENUES

We realized $6,500 in revenues during the year ended September 30, 2004. This is
in comparison to $8,466 in revenues we realized during the year ended September
30, 2003. We hope to continue to generate additional revenues as we commence our
sales operations from our website.

OPERATING EXPENSES

For the year ended September 30, 2004, our total expenses were $83,228, which
were represented solely by general and administrative expenses. After $800 as
provision for income taxes, we had a net loss of $77,528 for the year ended
September 30, 2004. This is in comparison to the year ended September 30, 2003,
where our total expenses were $43,102, which were represented by general and
administrative expenses. Our net loss increased over the most recent period
because our revenues decreased due to lower sales and our operating expenses
increased.

FOR THE PERIOD FROM OUR INCEPTION ON DECEMBER 13, 2001 TO SEPTEMBER 30, 2004

REVENUES

We realized $20,966 in revenues for the period from our inception on December
13, 2001 to September 30, 2004.

OPERATING EXPENSES

For the period from our inception on December 13, 2001 to September 30, 2004,
our total expenses were $177,495, which were represented solely by general and
administrative expenses. Therefore, from our inception on December 13, 2001 to
September 30, 2004, we experienced a cumulative net loss of $157,329, which
includes $800 as provision for income taxes.

OFF-BALANCE SHEET ARRANGEMENTS

There are no off balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.


                                       60
<PAGE>



OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

We have generated minimal revenues from operations. In management's opinion, to
effectuate our business plan in the next twelve months, the following events
should occur or we should reach the following milestones in order for us to
become profitable:

         1.       We must continue to expand our distribution network in the
                  Caribbean Islands to market, distribute and sell surf-inspired
                  clothing and other accessories that we distribute.

         2.       We must continue to develop relationships with third party
                  surf wear and accessories manufacturers to expand the product
                  lines that we distribute.

         3.       We must continue developing our own collection of men's
                  apparel under a new brand name, which we will sell and
                  distribute throughout the United States, Japan and our
                  established distribution network in the Caribbean.

         4.       We must begin researching potential acquisitions or other
                  suitable business partners which will assist us in realizing
                  our business objectives. We hope to acquire several, smaller
                  and more established surf apparel companies with
                  already-established product lines.

We had cash of $15,186 as of September 30, 2004. In the opinion of management,
available funds will not satisfy our working capital requirements for the next
twelve months. Our forecast for the period for which our financial resources
will be adequate to support our operations involves risks and uncertainties and
actual results could fail as a result of a number of factors.

We need to raise additional capital for our operations, and we believe that such
additional capital may be raised through public or private financing as well as
borrowings and other sources. We hope that we will have access to capital
financing because our common stock is eligible for quotation on the OTC Bulletin
Board, although we cannot guaranty that additional funding will be available on
favorable terms, if at all. If adequate funds are not available, then our
ability to expand our operations may be adversely affected. If adequate funds
are not available, we hope that our officers and directors will contribute funds
to pay for our expenses, although we cannot guarantee that our officers will pay
for those expenses.

We are not currently conducting any research and development activities. We do
not anticipate that we will purchase or sell any significant equipment. In the
event that we generate significant revenues and expand our operations, then we
may need to hire additional employees or independent- contractors as well as
purchase or lease additional equipment.

RECENT DEVELOPMENTS

On August 25, 2005, the Company, certain stockholders of the Company, Euroseas
Acquisition Company Inc., a Delaware corporation ("Merger Sub") and Euroseas
Ltd., a Marshall Islands corporation ("Euroseas"), signed an Agreement and Plan
of Merger (the "Merger Agreement"), pursuant to which Euroseas, through its
wholly-owned subsidiary, Merger Sub, agreed to acquire the Company in exchange
for shares of Euroseas common stock (the "Merger"). At the effective time of the
Merger (as defined in the Merger Agreement), the Company is to be merged with
and into Merger Sub. The separate existence of the Company will cease, and
Merger Sub will be continued as the surviving corporation (the "Surviving
Corporation") under the name Cove Apparel, Inc., as a wholly owned operating
subsidiary of Euroseas. All the shares of Cove common stock (an aggregate of
10,480,500 shares) will be converted into 1,079,167 share of Euroseas common
stock, an exchange ratio in the Merger of 0.102969 (the "Exchange Ratio"). After
the effective time of the Merger, Cove will continue in its existing line of
business for such period of time as is necessary in order to facilitate a tax
free reorganization in the Merger.



                                       61
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

The financial statements required by Item 7 are presented in the following
order:

                               COVE APPAREL, INC.
                          (A Development Stage Company)
                              FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004


















                                       62
<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

January 10, 2005
Board of Directors and Stockholders
Cove Apparel, Inc.

We have audited the balance sheet of Cove Apparel, Inc. (a development stage
company) as of September 30, 2004, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Cove Apparel, Inc. as of September 30,
2003, were audited by other auditors whose report dated December 8, 2003,
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the 2004 financial statements referred to above present fairly,
in all material respects, the financial position of Cove Apparel, Inc. (a
development- stage company) as of September 30, 2004, and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raise substantial doubt about- its
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                                                                 HALL & COMPANY



                                       63
<PAGE>



                               COVE APPAREL, INC.
                          (A Development Stage Company)

                                  BALANCE SHEET

                               SEPTEMBER 30, 2004


                                     ASSETS

CURRENT ASSETS
   Cash                                                           $      15,186
   Accounts receivable, net                                               6,500
                                                                  --------------

     Total assets                                                 $      21,686
                                                                  ==============


                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
   Accounts payable and accrued expenses                          $      21,497
   Accrued payroll and related expenses
                                                                          2,236

     Total current liabilities                                           23,732

CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
   Preferred stock, $.001 par value;
     Authorized shares -- 5,000,000
     Issued and outstanding share -- 0
   Common stock, $.001 par value;
     Authorized shares -- 50,000,000
     Issued and outstanding shares -- 10,480,500                         10,481
   Additional paid-in capital                                           144,802
   Deficit accumulated during the development stage                    (157,329)
                                                                  --------------

      Total stockholders' (deficit)                                      (2,046)
                                                                  --------------

        Total liabilities and stockholders' (deficit)             $      21,686
                                                                  ==============





                See accompanying notes to financial statements.

                                       64
<PAGE>




                               COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

                     YEAR ENDED SEPTEMBER 30, 2004 AND 2003


<TABLE>
<CAPTION>
                                                          YEAR  ENDED             YEAR ENDED            INCEPTION -
                                                       SEPTEMBER  30, 2004     SEPTEMBER 30, 2003      SEPT 30, 2004
                                                       -------------------     ------------------     ----------------
<S>                                                            <C>                     <C>                   <C>
NET REVENUES                                           $             6,500     $            8,466     $        20,966

SELLING, GENERAL AND ADMINISTRATIVE                                 83,228                 51,568             177,495
                                                       -------------------     ------------------     ----------------


LOSS BEFORE PROVISION FOR INCOME TAXES                             (76,728)               (43,102)           (156,529)
                                                       -------------------     ------------------     ----------------

PROVISION FOR INCOME TAXES                                             800                    ---                 800
                                                       -------------------     ------------------     ----------------

NET LOSS                                               $           (77,528)    $          (43,102)    $      (157,329)
                                                       ===================     ==================     =================

NET LOSS PER COMMON SHARE -- BASIC AND DILUTED
                                                       $              (---)    $            (0.01)    $         (0.02)
                                                       ===================     ==================     =================

WEIGHTED AVERAGE OF COMMON SHARES -- BASIC AND DILUTED
                                                                10,480,500              8,203,032           8,789,000
                                                       ===================     ==================     =================
</TABLE>






                See accompanying notes to financial statements.

                                       65
<PAGE>






                               COVE APPAREL, INC.
                          (A Development Stage Company)

                             STATEMENT OF CHANGES IN
                  STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                     YEAR ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                       DEFICIT ACCUM.
                                             COMMON STOCK                                 DURING
                                      ----------------------------       PAID IN        DEVELOPMENT
                                         SHARES           AMOUNT         CAPITAL           STAGE          TOTAL
                                      ------------     -----------    -------------    ------------    -----------
<S>                                       <C>              <C>              <C>             <C>             <C>
Balance, September 30, 2002              7,800,000     $     7,800    $      27,433    $    (36,699)   $    (1,466)

Additional paid in capital in
   exchange for office expenses
                                               ---             ---            1,200             ---          1,200

Additional   paid  in   capital  in
   exchange for services
    from officers                              ---             ---           20,800             ---         20,800

Issuance  of common  stock for cash
   at  $0.001  per  share   (August
   2003)                                 2,890,500           2,891           93,459             ---         96,350

Redemption   &   cancellation    of
   common  stock for cash at $0.001
   per share (September 2003)
                                          (210,000)           (210)          (6,790)            ---         (7,000)

Net loss for the year ended
   September 30, 2003                          ---             ---              ---         (43,102)       (43,102)
                                       -----------     -----------    -------------    ------------    -----------

Balance, September 30, 2003             10,480,500     $    10,481   $      136,102    $    (79,801)   $    66,782
                                      ============     ===========    =============    ============    ===========

Additional paid in capital in
   exchange for office expenses
                                               ---             ---              900             ---            900

Additional   paid  in   capital  in
   exchange for services
   from officers                               ---             ---             7,800            ---          7,800

Net loss for the year ended
   September 30, 2004                          ---             ---              ---         (77,528)       (77,528)
                                       -----------     -----------    -------------    ------------    -----------

Balance, September 30, 2004             10,480,500     $    10,481    $     144,802    $   (157,329)   $    (2,046)
                                      ============     ===========    =============    ============    ===========
</TABLE>






                See accompanying notes to financial statements.

                                       66
<PAGE>






                               COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS

                     YEAR ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,           INCEPTION -
                                                                           ---------------------------     SEPT. 30,
                                                                                2004           2003          2004
                                                                           ------------   ------------    ----------
<S>                                                                             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                $    (77,528)  $    (43,102)   $ (157,329)
   Adjustments to reconcile net loss to net cash used in operating
     activities
       Expenses paid with common stock                                              ---            ---         2,000
       Expenses paid by officer                                                     900          1,200         3,000
       Services provided by officers                                              7,800         20,800
                                                                                                              45,933
       Changes in operating assets and liabilities
         Increase in accounts receivable                                         (6,500)           ---        (6,500)
         Increase (decrease) in prepaid merchandise                               5,000         (5,000)          ---
         Increase (decrease) in accounts payable
            and accrued expenses                                                  5,638          7,821        21,496
             Increase in accrued payroll and related expenses                     2,236                        2,236
             Decrease in due to stockholder                                      (7,000)                      (7,000)
                                                                                                   ---
         Increase (decrease) in related party payable                            (5,500)         5,500           ---
                                                                           ------------   -------------   ----------

           Net cash used in operating activities                                (74,954)        (7,781)      (96,164)
                                                                           ------------   -------------   ----------

CASH FLOWS FROM FINANCING ACTVITIES
   Proceeds from issuance of common stock                                           ---         96,350       111,350
                                                                           ------------   -------------   ----------

NET INCREASE (DECREASE) IN CASH                                                 (74,954)        88,569        15,186

CASH, beginning of period                                                        90,140          1,571           ---
                                                                           ------------   -------------   ----------

CASH, end of period                                                        $     15,186   $     90,140    $   15,186
                                                                           ============   =============   ==========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Income taxes paid                                                       $        800   $        ---    $      800
                                                                           ============   =============   ==========
   Interest paid                                                           $        ---   $        ---    $      ---
                                                                           ============   =============   ==========
</TABLE>



                See accompanying notes to financial statements.


                                       67
<PAGE>






                               COVE APPAREL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2004


NOTE 1 - NATURE OF OPERATIONS

Cove Apparel, Inc. (the "Company") is in the process of developing a line of
casual wear to manufacture and distribute. The Company was incorporated in the
state of Nevada on December 13, 2001 and is headquartered in San Clemente,
California. As of September 30, 2004, the Company has produced revenues of
$20,966 since inception but will continue to report as a developmental stage
company until significant revenues are produced.

NOTE 2 - BASIS OF PRESEN'T'ATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant- accounting policies of Cove Apparel, Inc. is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
who is responsible for the integrity and objectivity of the financial
statements. These accounting policies conform to generally accepted accounting
principles in the United States of America and have been consistently applied in
the preparation of the financial statements.

CASH EQUIVALENT'S - For purposes of the balance sheet and statement of cash
flows, the Company considers all. highly liquid debt instruments purchased with
maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE - Receivables, if any, represent valid claims against
debtors for sales or other charges arising on or before the balance -sheet date
and are reduced to their estimated net realizable value.

INVENTORY - Inventory is stated at the lower of cost or market and is relieved
on the first - in, first--out method.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of the Company's
financial instruments, which includes cash, accounts receivable, accounts
payable and accrued expenses approximate their fair value due to the short
period to maturity of these instruments.

REVENUE RECOGNITION - The Company generally recognizes revenues when products
provided to its customers are completed, fees are fixed or determinable, and
collectibility is reasonable assured. The Company's standard shipping terms are
FOB shipping point.


                                       68
<PAGE>

INCOME TAXES - The Company recognizes deferred tax assets and liabilities based
on differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. The Company provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.

NET LOSS PER COMMON SHARE - The Company has adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 requires the reporting of basic and diluted earnings /loss per share.
Basic loss per share is calculated by dividing net income (Loss) by the weighted
average number of outstanding common shares during the year.

COMPREHENSIVE INCOME/LOSS - The Company applies Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SPAS 13011).
SFAS 130 establishes standards for the reporting and display of comprehensive
income, requiring its components to be reported in a financial statement that is
displayed with the same prominence as other financial statements. For the
periods ended September 30, 2004 and 2003, the Company had no other components
of its comprehensive loss other than net loss as reported on the statements of
operations.

ACCOUNTING ES'T'IMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect- the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

NOTE 3 - CONTINGENCIES AND GOING CONCERN

As shown in the accompanying financial statements, the Company has incurred a
net operating loss of $157,329 since inception through September 30, 2004.

The company is subject to those risks associated with development stage
companies. The Company has sustained losses since inception and additional
financing will be required by the Company to fund its development- activities
and to support operations. However, there is no assurance that the Company will
be able to obtain additional financing. Furthermore, there is no assurance that
rapid technological changes, changing customer needs and evolving industry
standards will enable the Company to introduce new products and services on a
continual and timely basis so that profitable operations can be attained.
Management plans to mitigate its losses in the near term through the further
development and marketing of its brand name and increase in apparel lines. In
addition, should management determine it necessary, the Company will seek to
obtain additional financing through the issuance of common stock and increase of
ownership equity. Currently, the Company is dependent on two suppliers, with
which there are no formal written agreements.


                                       69
<PAGE>


NOTE 4 - RELATED PARTY TRANSACTIONS

Office Space

The Company occupied office space provided by an officer from October 2003
through June 2004. Accordingly, occupancy costs of $100 per month have been
allocated to the Company. This expense of $900 is included in total occupancy
expenses shown in the accompanying statement of operations for the nine months
ended June 30, 2004, and were considered additional contributions of capital by
the officer and the Company.

Related Party Payable

An officer made a loan to the Company in the amount- of $5,500. The loan was
non-interest bearing was repaid in full in June 2004.

Due To Stockholder

On September 1, 2003 the Company redeemed and cancelled 210,000 shares of its
common stock from one stockholder in exchange for $7,000.

NOTE 5 - CONSULTING AGREEMENT

On February 19, 2004, the Company entered into an agreement to obtain financial
consulting services through September 1, 2004 for $25,000 to be paid in five
equal monthly installments of $5,000. The Company completed its financial
obligation to the consulting company in August 2004.

NOTE 6 - PROVISION FOR INCOME TAXES

As of September 30, 2004, the Company had a net federal operating loss
carryforward of $157,329, expiring between 2021-2024. During the year ended
September 30, 2004, the valuation allowance increased by $26,360. Deferred tax
assets resulting from the net operating losses are reduced by a valuation
allowance, when, in the opinion of management, utilization is not reasonably
assured. Being headquartered in California requires the Company to pay the
state's minimum franchise tax of $800.

The provision for income taxes is summarized as follows:

Net Operating loss carryforward                             $           157,329
Effective Tax Rate                                          X                34%

Deferred tax asset                                          $               ---

Minimum state franchise tax                                 $               800





                                       70
<PAGE>





                             EXHIBIT C TO ITEM 9.01










                               COVE APPAREL, INC.
                          (A Development Stage Company)


                              FINANCIAL STATEMENTS

                                 JUNE 30, 2005



                                       71
<PAGE>


                               Cove Apparel, Inc.
                          (A Development Stage Company)

                                  BALANCE SHEET

                                  JUNE 30, 2005



                                     ASSETS

CURRENT ASSETS
   Cash                                                               $  21,759
                                                                      ----------

     Total assets                                                     $  21,759
                                                                      ==========



                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable and accrued expenses                              $  95,911
   Loan from stockholder
                                                                         45,000

     Total current liabilities                                          140,911

STOCKHOLDERS' DEFICIT
   Preferred stock, $.001 par value;
     Authorized shares -- 5,000,000
     Issued and outstanding share -- 0
   Common stock, $.001 par value;
     Authorized shares -- 50,000,000
     Issued and outstanding shares -- 10,480,500                         10,481
   Additional paid-in capital                                           144,802
   Deficit accumulated during the development stage                    (274,435)
                                                                      ----------

      Total stockholders' deficit                                      (119,152)
                                                                      ----------

        Total liabilities and stockholders' deficit                   $  21,759
                                                                      ==========





                                       72
<PAGE>




                               COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

               THREE AND NINE MONTHS ENDED JUNE 30, 2005 AND 2004


<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED JUNE 30,    NINE MONTHS ENDED JUNE 30,    INCEPTION -
                                                 ---------------------------   ----------------------------    JUNE 30,
                                                     2005           2004           2005            2004         2005
                                                 ------------   ------------   -------------   ------------   -----------
<S>                                                   <C>           <C>             <C>            <C>            <C>
NET REVENUES                                     $       ---    $        ---   $         ---   $        ---   $    20,966

GENERAL AND ADMINISTRATIVE                            84,358          20,515         116,306         45,827       293,801
                                                 ------------   ------------   -------------   ------------   -----------


LOSS BEFORE PROVISION FOR INCOME TAXES               (84,358)        (20,515)       (116,306)       (45,827)     (272,835)
                                                 ------------   ------------   -------------   ------------   -----------

PROVISION FOR INCOME TAXES                               ---             800             800            800         1,600
                                                 ------------   ------------   -------------   ------------   -----------

NET LOSS                                         $   (84,358)   $    (21,315)  $    (117,106)  $    (46,627)  $  (274,435)
                                                 ============   ============   =============   ============   ===========

NET LOSS PER COMMON SHARE -- BASIC AND DILUTED
                                                 $      (---)   $       (---)  $        (---)  $       (---)  $     (0.03)
                                                 ============   ============   =============   ============   ===========

WEIGHTED AVERAGE OF COMMON SHARES -- BASIC AND
   DILUTED                                        10,480,500      10,480,500      10,480,500     10,480,500     9,151,464
                                                 ============   ============   =============   ============   ===========
</TABLE>




                                       73
<PAGE>




                               COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS

                    NINE MONTHS ENDED JUNE 30, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                                     JUNE 30,              INCEPTION -
                                                                           ----------------------------     JUNE 30,
                                                                                2005           2004           2005
                                                                           ------------   -------------   -----------
<S>                                                                             <C>             <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                $   (117,106)       $ (46,627) $  (274,435)
   Adjustments to reconcile net loss to net cash used in operating
     activities
       Expenses paid with common stock                                              ---            ---          2,000
       Expenses paid by officer                                                     ---            900          3,000
       Services provided by officers                                                ---           7,800        45,933
       Changes in operating assets and liabilities:
         Decrease in accounts receivable                                          6,500            ---            ---
             Increase in prepaid expenses                                           ---          (2,900)          ---
         Increase (decrease) in accounts payable
            and accrued expenses                                                 72,179          (2,606)       95,911
             Increase (decrease) in due to stockholder                           45,000          (7,000)       38,000
             Decrease in related party payable                                      ---          (5,500)          ---
                                                                           ------------   -------------   -----------

           Net cash from (used in) operating activities                           6,573         (55,933)      (89,591)
                                                                           ------------   -------------   -----------


CASH FLOWS FROM FINANCING ACTVITIES
   Proceeds from issuance of common stock                                           ---             ---       111,350
                                                                           ------------   -------------   -----------

NET INCREASE (DECREASE) IN CASH                                                   6,573         (55,933)       21,759

CASH, beginning of period                                                        15,186          90,140           ---
                                                                           ------------   -------------   -----------

CASH, end of period                                                        $     21,759   $      34,207   $    21,759
                                                                           ============   =============   ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Income taxes paid                                                       $        800   $         800   $     1,600
                                                                           ============   =============   ===========
   Interest paid                                                           $        ---   $         ---   $       ---
                                                                           ============   =============   ===========
</TABLE>




                                       74
<PAGE>



                               COVE APPAREL, INC.
                          (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                                 JUNE 30, 2005



NOTE 1 - NATURE OF OPERATIONS


     Cove Apparel, Inc. (the "Company") is in the process of developing a line
     of casual wear to manufacture and distribute. The Company was incorporated
     in the state of Nevada on December 13, 2001 and is headquartered in San
     Clemente, California.


NOTE 2 - BASIS OF PRESENTATION

The unaudited financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, these financial statements and the
related notes should be read in conjunction with the Company's audited financial
statements for the period ended September 30, 2004 included in the Company's
annual report on Form 10-KSB.


NOTE 3 - CONTINGENCIES AND GOING CONCERN

As shown in the accompanying unaudited financial statements, the Company has
incurred a net operating loss of $274,435 since inception through June 30, 2005.

The Company is subject to those risks associated with development stage
companies. The Company has sustained losses since inception and additional
financing will be required by the Company to fund its development activities and
to support operations. However, there is no assurance that the Company will be
able to obtain additional financing. Furthermore, there is no assurance that
rapid technological changes, changing customer needs and evolving industry
standards will enable the Company to introduce new products and services on a
continual and timely basis so that profitable operations can be attained. If the
Company is unable to implement its business plan successfully, it may not be
able to eliminate operating losses, generate positive cash flow or achieve or
sustain profitability which would materially adversely affect its business,
operations and financial results as well as its ability to make payments on its
obligations.

These factors raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.




                                       75
<PAGE>




                               COVE APPAREL, INC.
                          (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS


                                 JUNE 30, 2005



NOTE 4 - RELATED PARTY TRANSACTIONS

Office Space
------------

The Company occupies office space provided by an officer. Accordingly, occupancy
costs of $1,000 per month have been allocated to the Company. Total occupancy
expenses of $8,000 are included in the accompanying statement of operations for
the nine months ended June 30, 2005.

Loan from Stockholder
---------------------

A stockholder made a loan to the Company in the amount of $45,000. The loan is
non-interest bearing and is expected to be repaid within one year.









                                       76
<PAGE>
[{"type": "8-K", "sequence": "1", "filename": "cove_s8k.txt", "secsgml_size_bytes": 217870}]
{"company-data": {"conformed-name": "COVE APPAREL INC", "cik": "0001188915", "assigned-sic": "5600", "irs-number": "954891903", "state-of-incorporation": "NV", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-50290", "film-number": "051062513"}, "business-address": {"street1": "1003 DORMADOR", "street2": "SUITE 21", "city": "SAN CLEMENTE", "state": "CA", "zip": "92672", "phone": "949-218-1795"}, "mail-address": {"street1": "1003 DORMADOR", "street2": "SUITE 21", "city": "SAN CLEMENTE", "state": "CA", "zip": "92672"}}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

        Date of Report (Date of earliest event reported): August 31, 2005

                               Cove Apparel, Inc.
                               ------------------
                 (Exact name of registrant specified in charter)

    Nevada                       000-50290                      95-4891903
   (State of                  (Commission File                 (IRS Employer
Incorporation)                     Number)                   Identification No.)
-------------------------------------------------------------------------------
                             1003 Dormador, Suite 21
                             San Clemente, CA 92672
               (Address of principal executive offices) (Zip Code)

                                 (949) 224-3040
                                 --------------
              (Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ]Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)

[ ]Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)

[ ]Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))

[ ]Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))

                                       1
ITEM 1.01         ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On August 25, 2005, Cove Apparel, Inc., a Nevada corporation ("Cove"), certain
stockholders of Cove, referred to as the "Cove Principals," Euroseas Acquisition
Company Inc., a Delaware corporation ("Merger Sub") and Euroseas Ltd., a
Marshall Islands corporation ("Euroseas"), signed an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Euroseas, through its
wholly-owned subsidiary, Merger Sub, agreed to acquire Cove in exchange for
shares of Euroseas common stock (the "Merger"). The Cove Principals have agreed
to pledge, or to cause their transferees to pledge, 475,000 of the shares of
Euroseas, they or their transferees are to receive in the Merger, in exchange
for their Cove shares as collateral for their indemnity obligations made
by the Cove Principals to Euroseas in the Merger Agreement.

The Merger will not be effective until the effectiveness of an F-1 or F-4
Registration Statement or comparable form (the "Euroseas Registration
Statement") to be filed in connection with the shares issuable in the Merger is
declared effective by the Securities and Exchange Commission (the "SEC"), Cove's
Information Statement (the "Information Statement") included in the Euroseas
Registration Statement is sent to its shareholders and a majority of Cove's
shareholders approve the Merger.

Set forth below is certain information concerning the principal terms of the
Merger and the business of Euroseas.

Principal Terms of the Merger

STRUCTURE AND EFFECTIVE TIME OF MERGER

At the effective time of the Merger, Cove will merge with and into Merger Sub.
The separate existence of Cove will cease, and Merger Sub will continue as the
surviving corporation (the "Surviving Corporation") as a wholly owned operating
subsidiary of Euroseas under the name Cove Apparel, Inc. The effective time of
the Merger will occur as promptly as possible after the satisfaction or waiver
of all conditions to closing in the Merger Agreement and by filing a certificate
of merger or similar document with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Nevada. We will seek to
complete the Merger in the fourth quarter of 2005. However, we cannot assure you
when, or if, all the conditions to completion of the Merger will be satisfied or
waived.

Certificate of Incorporation; Bylaws

The certificate of incorporation and bylaws of Merger Sub in effect immediately
prior to the effective time of the Merger will become the certificate of
incorporation and bylaws of the Surviving Corporation.

Directors and Officers

The directors and officers of Merger Sub at the effective time of the Merger
will remain the directors and officers of the Surviving Corporation.

                                       2
Merger Consideration

All the shares of Cove common stock (an aggregate of 10,480,500 shares) will be
converted into an aggregate of 1,079,167 shares of Euroseas common stock, an
exchange ratio in the Merger of 0.102969 (the "Exchange Ratio"), subject to
adjustment in the event of a stock split. There are no outstanding options or
warrants to purchase any shares of Cove common stock or other securities of Cove
and there are no outstanding options or warrants to purchase any shares of
Euroseas or other securities of Euroseas, other than the warrants issued in the
Private Placement, described below.

Recommendations of the Boards of Directors

Each of the Boards of Directors of Cove and Euroseas has determined, by a
unanimous vote, that the Merger is in the best interests of each of their
respective companies and stockholders, and each Board has unanimously approved
the Merger Agreement.

Representations and Warranties

In the Merger Agreement, the parties have made customary representations and
warranties about themselves concerning various business, legal, financial,
regulatory and other pertinent matters. These representations and warranties
survive for a two year period following the Merger. Under certain circumstances,
each of the parties may decline to complete the Merger if the inaccuracy of the
other party's representations and warranties has a material adverse effect on
the other party.

Euroseas Registration Statement

Euroseas has agreed to file with the SEC, as soon as shall be reasonably
practicable following the date of the Merger Agreement (but in no event later
than 60 days following the consummation of the Private Placement (described
below), and provided Cove shall have supplied Euroseas with the Information
Statement to be included therein), at its sole cost and expense, the Euroseas
Registration Statement which shall include the Information Statement relating to
the solicitation of stockholder approval from Cove's stockholders, and covering
the issuance of the Euroseas shares in the Merger, shares of Friends and the
shares of Euroseas common stock issued to the investors in the Private
Placement. Euroseas has agreed to use all reasonable best efforts to have the
Euroseas Registration Statement declared effective by the SEC as promptly as
practicable thereafter. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to the Euroseas Registration
Statement or the Information Statement will be made by Euroseas, without
providing Cove a reasonable opportunity to review and comment thereon. Euroseas
has agreed to advise Cove, promptly after it receives notice thereof, of the
time when the Euroseas Registration Statement has become effective or any
supplement or amendment has been filed to the Euroseas Registration Statement or
the Information Statement, the issuance of any stop order, the suspension of the
qualification of Euroseas shares issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment of
the Euroseas Registration Statement, the Information Statement or comments
thereon and responses thereto or requests by the SEC for additional information.

                                       3
Cove and Euroseas have agreed to promptly furnish to each other all information,
and take such other actions, as may reasonably be requested in connection with
any action by any of them in relation to the preparation and filing of the
Euroseas Registration Statement, the Information Statement and a Form 8-K and
have agreed to cooperate with one another and use their respective best efforts
to facilitate the expeditious consummation of the transactions contemplated by
the Merger Agreement.

                                       4
SEC Filings by Cove.

Cove has agreed to file with the SEC, as soon as reasonably practicable
following the filing of the Euroseas Registration Statement, any document
required to be filed by it in connection with the Merger and obtaining the
approval of the Cove stockholders, including, without limitation, any documents
required under the SEC's Regulation 14A and 14C.

Stockholders' Approval.

Cove has agreed to use its reasonable best efforts to obtain Cove stockholder
approval and adoption of the Merger Agreement, as soon as practicable in
accordance with applicable Nevada law and Cove's bylaws following the date upon
which the Euroseas Registration Statement is declared effective by the SEC.

Stock Exchange Listing/Exchange Act Listing.

Cove and Euroseas have agreed to each use their reasonable best efforts to file,
at or before the effective time of the Merger, authorization for listing of the
Euroseas shares on the NASDAQ SmallCap Market, The American Stock Exchange Inc.
or, if permissible, the NASDAQ National Market (the "Stock Exchange Listing").
In addition, Euroseas has agreed to file the Euroseas Registration Statement
under the Securities Exchange Act of 1934, as amended, and to use its reasonable
best efforts to cause the SEC to declare the Euroseas Registration Statement
effective with respect to the listing of the Euroseas shares issued in the
Merger and the shares of Euroseas common stock issued in the Private Placement
(the "Exchange Act Listing").

Conditions to Each Party's Obligations to Effect the Merger.

The respective obligation of each party to effect the Merger are subject to the
fulfillment at or prior to the closing date of the following conditions:

(a)  Cove shall have obtained approval of the Cove stockholders;

(b)  The Euroseas Registration Statement shall have become effective and shall
     not be the subject of any stop order or proceedings seeking a stop order;

(c)  Euroseas shall have applied for a Stock Exchange Listing and the Exchange
     Act Listing, subject to any notice of issuance or similar requirement;

(d)  No preliminary or permanent injunction or other order or decree by any
     governmental authority which prevents or materially burdens the
     consummation of the Merger shall have been issued and remain in effect
     (each party agreeing to use its reasonable efforts to have any such
     injunction, order or decree lifted);

(e)  No action shall have been taken, and no statute, rule or regulation shall
     have been enacted, by any governmental authority, which would prevent or
     materially burden the consummation of the Merger;

                                       5
(f)  All consents, orders and approvals legally required for the consummation of
     the Merger and the transactions contemplated hereby shall have been
     obtained and be in effect at the effective time of the Merger without any
     material limitations or conditions.

Conditions to Obligations of Euroseas to Effect the Merger.

Unless waived by Euroseas, the obligation of Euroseas to effect the Merger is
subject to the fulfillment at or prior to the closing date of the following
additional conditions:

(a)  Cove and the Cove Principals shall have performed in all material respects
     their agreements contained in the Merger Agreement required to be performed
     on or prior to the closing date and the representations and warranties of
     Cove and the Cove Principals contained in the Merger Agreement shall be
     true and correct in all material respects (except for those representations
     and warranties which are themselves limited by a reference to materiality,
     which shall be true and correct in all respects other than as modified) on
     and as of (i) the date made and (ii) the closing date (in each case except
     in the case of representations and warranties expressly made solely with
     reference to a particular date which shall be true and correct in all
     material respects as of such date); and Euroseas shall have received a
     certificate of each of the Cove Principals and of the President of Cove to
     that effect;

(b)  Euroseas shall have received an opinion of Kirkpatrick & Lockhart Nicholson
     Graham, LLP ("K&L"), counsel to Cove, dated the closing date, in form and
     substance reasonably satisfactory to Euroseas;

(c)  Euroseas shall have received a "comfort" letter from the independent public
     accountants for Cove, dated the date of the Information Statement and the
     closing date (or such other date reasonably acceptable to Euroseas) with
     respect to certain financial statements of Cove and other related financial
     information included in the Information Statement in customary form;

(d)  Since the date of the Merger Agreement there shall not have been any
     material adverse effect with respect to Cove, the likelihood of which was
     not previously disclosed to Euroseas by Cove and which would have a
     material adverse effect on Euroseas, and Cove shall have engaged in no
     business activity since the date of its incorporation other than conducting
     a public offering of its securities, the apparel business and, thereafter,
     seeking to effect a merger or similar business combination with an
     operating business;

(e)  Euroseas shall have received a certificate from the corporate Secretary of
     Cove, together with a certified copy of the resolutions duly authorized by
     Cove's Board of Directors authorizing the Merger and, if applicable, the
     transactions contemplated by the Merger Agreement;

(f)  Euroseas shall have received a certificate of good standing for Cove from
     the Secretary of State of the State of Nevada dated as of a date that is
     within five (5) days of the closing date;

                                       6
(g)  Cove shall have furnished to Euroseas such additional certificates and
     other customary closing documents as Euroseas may have reasonably
     requested;

(h)  At the effective time of the Merger, Cove shall have approximately $10,000
     in cash or cash equivalents after giving effect to the payment or accrual
     on or prior to the effective time of the Merger of all fees, costs,
     expenses and liabilities incurred by Cove, including, but not limited to,
     the fees, costs and expenses of (i) Cove's manufacturers, suppliers,
     vendors and third-party providers, (ii) Cove's attorneys, accountants,
     investment bankers and consultants in connection with the transactions
     contemplated by the Merger Agreement and (iii) the repayment of any
     outstanding loans;

(i)  A pledge agreement shall have been executed pursuant to which the Cove
     Principals shall have pledged or caused Euroseas shares to be pledged to
     Euroseas by the Cove Principals or pledgors reasonably acceptable to
     Euroseas and deposited with an independent collateral agent to secure the
     indemnification obligations of the Cove Principals under the Merger
     Agreement;

(j)  Euroseas shall have raised at least $21 million in the Private Placement
     on terms reasonably satisfactory to Euroseas;

(k)  At closing, Cove's capitalization shall be unchanged and all loans made to
     Cove and all other outstanding debt and all other liabilities shall have
     been paid in full;

(l)  Euroseas shall have received written resignations and releases from each of
     Cove's directors and officers and which resignations and releases, by their
     respective terms, shall become effective immediately prior to the effective
     time of the Merger; provided however that Jodi Hunter shall remain an at
     will employee of Cove and the Surviving Corporation;

(m)  Cove shall have conducted the operation of its business in material
     compliance with all applicable laws and all approvals required of Cove
     under applicable law to enable Cove to perform its obligations under the
     Merger Agreement shall have been obtained; and

(n)  All corporate proceedings of Cove in connection with the Merger and the
     other transactions contemplated by the Merger Agreement and all agreements,
     instruments, certificates, and other documents delivered to Euroseas by or
     on behalf of Cove pursuant to the Merger Agreement shall be reasonably
     satisfactory to Euroseas and its counsel.

(o)  Cove shall have moved its principal headquarters from California to the
     Cayman Islands and shall have filed all documentation and paid all fees
     necessary to locate its principal headquarters in the Cayman Islands and to
     terminate its authorization to do business in California: and

Conditions to Obligations of Cove to Effect the Merger.

Unless waived by Cove, the obligations of Cove to effect the Merger are subject
to the fulfillment at or prior to the closing date of the additional following
conditions:

(a)  Euroseas shall have performed in all material respects its agreements
     contained in the Merger Agreement required to be performed on or prior to
     the closing date and the representations and warranties of Euroseas
     contained in the Merger Agreement shall be true and correct in all material
     respects (except for those representations and warranties which are
     themselves limited by a reference to materiality, which shall be true and
     correct in all respects, other than as modified) on and as of (i) the date
     made and (ii) the closing date (in each case except in the case of
     representations and warranties expressly made solely with reference to a
     particular date which shall be true and correct in all material respects as
     of such date); and Cove shall have received a certificate of the President
     of Euroseas to that effect;

                                       7
(b)  Cove shall have received an opinion of Seward & Kissel LLP, counsel to
     Euroseas, dated the closing date, in form and substance reasonably
     satisfactory to Cove;

(c)  Cove shall have received a "comfort" letter from Deloitte & Touche LLP,
     independent certified public accountants for Euroseas, dated the date of
     the Information Statement and the closing date (or such other date
     reasonably acceptable to Cove) with respect to certain financial statements
     of Euroseas and other related financial information included in the
     Information Statement in customary form;

(d)  At closing, Euroseas' capitalization shall be unchanged, except as may be
     adjusted for the issuance of the shares and warrants, if any, in the
     Private Placement;

(e)  Cove shall have received a certificate of the corporate Secretary of
     Euroseas, together with a certified copy of the resolutions duly authorized
     by the Board of Directors and Euroseas authorizing the Merger and the
     transactions contemplated by the Merger Agreement;

(f)  Cove shall have received a certificate of good standing for Euroseas from
     the Registrar of Corporations of the Republic of the Marshall Islands dated
     as of a date that is within five (5) days of the closing date;

(g)  Euroseas shall have furnished to Cove such additional certificates and
     other customary closing documents as Cove may have reasonably requested;

(h)  Since the date of the Merger Agreement there shall not have been any
     material adverse effect with respect to Euroseas and its subsidiaries, the
     likelihood of which was not previously disclosed to Cove by Euroseas; and

(i)  All corporate proceedings of Euroseas in connection with the Merger and the
     other transactions contemplated by the Merger Agreement and all agreements,
     instruments, certificates and other documents delivered to Cove by or on
     behalf of Euroseas pursuant to the Merger Agreement shall be in
     substantially the form called for hereunder or otherwise reasonably
     satisfactory to Cove and its counsel.

Termination.

The Merger Agreement may be terminated at any time prior to the closing date,
whether before or after approval by the stockholders of Cove:

(a)  by mutual consent in writing of Cove and Euroseas;

                                       8
(b)  unilaterally upon written notice by Cove to Euroseas upon the occurrence of
     a material adverse effect with respect to Euroseas, the likelihood of which
     was not previously disclosed to Cove in writing by Euroseas prior to the
     date of the Merger Agreement;

(c)  unilaterally upon written notice by Euroseas to Cove upon the occurrence of
     a material adverse effect with respect to Cove, the likelihood of which was
     not previously disclosed to Euroseas in writing by Cove prior to the date
     of the Merger Agreement;

(d)  unilaterally upon written notice by Cove to Euroseas in the event a
     material breach of any material representation or warranty of Euroseas
     contained in the Merger Agreement (unless such breach shall have been cured
     within ten (10) days after the giving of such notice by Cove), or the
     willful failure of Euroseas to comply with or satisfy any material covenant
     or condition of Euroseas contained in the Merger Agreement;

(e)  unilaterally upon written notice by Euroseas to Cove in the event of a
     material breach of any material representation or warranty of Cove or the
     Cove Principals contained in the Merger Agreement (unless such breach shall
     have been cured by Cove or the Cove Principals within ten (10) days after
     the giving of such notice by Euroseas), or Cove's or the Cove Principals'
     willful failure to comply with or satisfy any material covenant or
     condition of Cove or the Cove Principals contained in the Merger Agreement,
     or if Cove fails to obtain the approval of Cove's stockholders;

(f)  unilaterally upon written notice by either Cove or Euroseas to the other if
     the Merger is not consummated for any reason by the close of business on
     February 28, 2006, provided however that no party may avail itself of this
     ground for termination if such failure to consummate the Merger is caused
     by such party either in breach of the Merger Agreement or by not proceeding
     in good faith towards the consummation of the Merger; or

(g)  unilaterally upon written notice by Euroseas to Cove in the event that by
     September 1, 2005, Euroseas shall not have raised at least $21 million in
     the Private Placement on terms reasonably satisfactory to Euroseas.

Effect of Termination.

In the event of termination of the Merger Agreement by either Cove or Euroseas,
the Merger Agreement shall become void and there shall be no further obligation
on the part of either Euroseas or Cove (except with respect to confidential and
nonpublic information and payment of expenses, which shall survive such
termination). No party shall be relieved from liability for any breach of the
Merger Agreement.

Amendment.

The Merger Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto and in compliance with applicable
law.

Expenses.

Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such costs and expenses, except as provided
in that certain Engagement Agreement dated April 21, 2005 between Roth Capital
Partners, LLC and Eurobulk Ltd., which provides for the payment of certain
expenses of the transaction by Eurobulk Ltd., which expenses shall be paid by
Euroseas if the Merger is consummated.

                                       9
Indemnification.

Euroseas has agreed to indemnify and hold harmless Cove and the Cove
stockholders (in the aggregate, in proportion to each such Cove stockholder's
ownership of the capital stock of Cove, on a fully diluted basis) and each of
their affiliates and their respective fiduciaries, directors, officers,
controlling persons, representatives and agents against and hold them harmless
from any loss, liability, claim, damage or expense (including reasonable legal
fees and expenses and costs of investigation) (a "Loss") arising, directly or
indirectly, out of or in connection with (i) any material breach of any
representation or warranty of Euroseas contained in the Merger Agreement, or
(ii) any breach of any covenant or agreement of Euroseas contained in the Merger
Agreement.

Cove and each of the Cove Principals has jointly and severally agreed to
indemnify and hold harmless Euroseas and each of its affiliates and its
respective fiduciaries, directors, officers, controlling persons,
representatives and agents against and hold them harmless from any Loss arising,
directly or indirectly, out of or in connection with (i) any material breach of
any representation or warranty of Cove or a Cove Principal contained in the
Merger Agreement, (ii) any breach of any covenant or agreement of Cove or a Cove
Principal contained in the Merger Agreement, (iii) any liabilities of Cove
(other than accounts payable incurred in the ordinary course of business to the
extent they do not exceed net current assets) occurring or accruing prior to the
effective time of the Merger, including but not limited to any securities law
violations; (iv) any claim by any Cove stockholder related to any sale or
transfer of shares of Cove common stock by the Cove Principals prior to the
effective time of the Merger. The sole recourse Euroseas shall have against the
Cove Principals for any such Loss shall be to the pledged shares, unless the
Loss arises, directly or indirectly, out of or in connection with any breach of
a representation or warranty that was knowing, intentional, grossly negligent or
reckless (each, a "Significant Breach"), in which event Euroseas' recourse
against the Cove Principals shall not be limited to the pledged shares.

In furtherance of the foregoing, on or prior to the closing date, the Cove
Principals have agreed to pledge or cause to be pledged to Euroseas an aggregate
of at least 475,000 Euroseas shares (after giving effect to the Merger and the
exchange of Cove common stock for Euroseas Shares in connection therewith) by
pledgors reasonably acceptable to Euroseas and such pledged shares shall be
deposited with an independent collateral agent to secure the indemnification
obligations of the Cove Principals under the Merger Agreement.

                                       10
POST MERGER

Prior to entering the Merger Agreement, Shawn Peterson, Kevin Peterson and Jodi
Hunter were the sole directors and officers of Cove. Jodi Hunter resigned as a
director of Cove effective as of June 20, 2005, but she will continue as an
unpaid employee at will of the Surviving Company.

After the effective time of the Merger, Cove will continue in its existing line
of business for such period of time as is necessary in order to facilitate a tax
free reorganization in the Merger. Euroseas has agreed to use its best efforts
to employ Jodi Hunter as an at will employee for this purpose and Jodi Hunter
has agreed to perform such services for this purpose and to provide an office in
the Cayman Islands at no cost or expense to Euroseas. Euroseas is not required
to provide any financing to Cove and its successor, but rather the expenses of
operation of Cove will be the sole responsibility of Kevin Peterson.

The shares of common stock of Cove are currently traded on the OTC Bulletin
Board under the symbol "CVAP.OB."

Following the Merger, stockholders of Cove will become shareholders of Euroseas.
The current executive officers and directors of Merger Sub will be the executive
officers and directors of the Surviving Corporation after the effective time.
Upon the consummation of the Merger, the Surviving Corporation will become a
wholly-owned subsidiary of Euroseas. Euroseas shares, including those exchanged
for Cove shares in the Merger will initially trade on the OTC Bulletin Board.
Euroseas will seek to obtain a NASDAQ listing or an exchange listing as soon as
practicable after the Merger.

BACKGROUND AND REASONS FOR THE MERGER

Cove

Cove's Board of Directors has determined that the Merger is in the best
interests of Cove and its shareholders. Cove's Board has unanimously approved
the Merger Agreement and the transactions contemplated thereby. In reaching its
determination to recommend approval of the Merger, Cove's Board of Directors
considered a number of factors, including the following:

(a)  Cove only has nominal revenues, and upon analysis of the potential
     opportunity, the Board of Directors of Cove decided to merge with Euroseas
     because the Board was of the view that the Cove stockholders would have a
     better opportunity as shareholders of Euroseas than as stockholders of
     Cove;

(b)  there has been strong raw materials demand in recent years by developing
     countries, particularly China and India, that has resulted in robust growth
     for drybulk shipping as well as increased freight rates, attributable in
     part to industrywide capacity constraints. As a result, the drybulk
     shipping sector has been attracting growing investor interest, with a
     number of drybulk and other seaborne shipping companies recently completing
     or planning public financings in the United States of America and other
     financial markets;

                                       11
(c)  Euroseas has an experienced, highly regarded management team, which Cove's
     Board believes is well suited to pursue a strategy of acquiring and
     operating drybulk vessels; and

(d)  the fact that the merger should constitute a tax-free reorganization under
     the Internal Revenue Code of 1986, as amended (the "Code").

Cove's Board of Directors also considered potential risks relating to the
Merger, including the following:

(a)  the fact that Euroseas is a recently formed foreign corporation and that
     Cove's stockholders will have minority ownership in Euroseas following
     consummation of the merger;

(b)  a macroeconomic slowdown, particularly in China or India, which would
     reduce the demand for shipping capacity, thereby resulting in reduced
     shipping rates;

(c)  the risks and costs to Cove if the Merger is not completed; and

(d)  the restrictions on the conduct of Cove's business prior to completion of
     the Merger, which may delay or prevent Cove from exploiting business
     opportunities that may arise pending completion of the Merger.

The foregoing discussion of the information and factors considered by Cove's
Board of Directors is not intended to be exhaustive, but includes the material
factors considered by it. In view of the variety of factors considered in
connection with its evaluation of the Merger, Cove's Board of Directors did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination and
recommendation. In addition, individual directors may have given differing
weights to different factors. After weighing all of the different factors,
Cove's Board of Directors unanimously determined to recommend that Cove's
stockholders vote to approve the Merger.

No consideration was given by Cove's Board to securing an opinion of an
independent investment banker or other financial advisor to the effect that the
Merger would be fair, from a financial point of view, to Cove stockholders in
view of the fact that the Cove Board does not believe that the terms of the
Merger give rise to any inherent conflict of interest between Cove's executive
officers, directors and principal stockholders and non-affiliated stockholders.
In this regard, Cove's Board took note of the fact that its current executive
officers, directors and principal stockholders will receive no benefit from the
Merger that would not otherwise be available to the Cove stockholders as a
whole. In addition, Cove's Board took note of the fact that no executive
officers, directors or principal stockholders are to become salaried employees
of Euroseas subsequent to the consummation of the Merger.

Euroseas

Euroseas' Board of Directors has determined that the Merger is in the best
interests of Euroseas and its shareholders. Both the Euroseas Board and its
shareholders have unanimously approved the Merger Agreement and the transactions
contemplated thereby. In reaching its determination, Euroseas' Board of
Directors considered a number of factors, including the following:

                                       12
(a)  the Merger would afford Euroseas access to a company with a public listing
     whose shares could trade and help develop a market for Euroseas's common
     stock once the Merger was consummated;

(b)  publicly traded securities would afford Euroseas' management, after the
     consummation of the transaction, the opportunity to utilize Euroseas'
     authorized but unissued securities to attempt to acquire other compatible
     businesses; and

(c)  this transaction substantially reduces the uncertainty attendant to
     Euroseas' own public offering of securities as compared to an underwritten
     initial public offering, and the possibility that any such offering might
     not be successfully consummated in view of then prevailing market
     conditions.

Euroseas' Board of Directors also considered potential risks relating to the
Merger, including the following:

(a)  factors beyond Euroseas' control, such as industry economic conditions,
     general economic conditions, terrorism or war, could have an adverse effect
     upon the market price of Euroseas' common stock after the Merger;

(b)  the additional significant expense and responsibility of being a U.S.
     public company, including Sarbanes-Oxley Act compliance, corporate
     governance issues, SEC reporting requirements, and stock exchange listing
     requirements;

(c)  the necessity of ongoing direct communication with the investment
     community, which is time consuming and may detract from executive time that
     would otherwise be devoted to business operations; and

(d)  the risk that the Cove stockholders may not approve the Merger and Euroseas
     would have incurred significant legal, accounting and other expenses in
     connection the proposed transaction.

After a complete review and analysis of the foregoing and other risks, Euroseas'
Board of Directors unanimously concluded that the benefits of the Merger
outweighed the risks involved.

SAFE HARBOR STATEMENT

Statements in this presentation may be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The matters
discussed herein that are forward-looking statements are based on current
management expectations that involve risks and uncertainties that may result in
such expectations not being realized. Actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements due to numerous potential risks and uncertainties including, but not
limited to, the need for Euroseas to manage its growth and integrate additional
capital, acquire additional vessels, volatility in the drybulk shipping business
and vessel charter rates, its ability to obtain sufficient capital, the
volatility of its stock price, and other risks and factors. Forward-looking

                                       13
statements made during this presentation speak only as of the date on which they
are made, and neither Cove nor Euroseas undertakes any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this presentation.

Because forward-looking statements are subject to risks and uncertainties, we
caution you not to place undue reliance on any forward-looking statements. All
written or oral forward-looking statements by Cove or Euroseas or persons acting
on their behalf are qualified by these cautionary statements.

DESCRIPTION OF EUROSEAS

General

Euroseas is a privately-held, independent commercial shipping company that
operates in the drybulk and container shipping markets through its wholly-owned
subsidiaries. Euroseas was formed on May 5, 2005 under the laws of the Republic
of the Marshall Islands. Its principal offices are located in Maroussi, Greece
and its telephone number is 011 30 210 6105110.

Euroseas' Corporate Structure

Euroseas owns its seven vessels through seven separate wholly-owned
subsidiaries. The operations of the vessels are managed by Eurobulk Ltd.
("Eurobulk"), an affiliated company, under management contracts with each
ship-owning company. These services include technical management, such as
managing day-to-day vessel operations including supervising the crewing,
supplying, maintaining and drydocking of vessels, commercial management
regarding identifying suitable vessel charter opportunities and certain
accounting services. The names of the wholly owned subsidiaries that own each
vessel and the vessel each owns are as follows:
OWNER               COUNTRY OF INCORPORATION                VESSEL                      FLAG
                                                                          NAME
    ------------------------- -------------------------------- ---------------------------- -----------------------
1)     Diana Trading Ltd.        Republic of the Marshall                 IRINI                 Marshall Islands
                                          Islands
    ------------------------- -------------------------------- ---------------------------- -----------------------
2)  Alterwall Business Inc.         Republic of Panama                YM QINGDAO I                Panamanian
    ------------------------- -------------------------------- ---------------------------- -----------------------
3)   Allendale Investments          Republic of Panama                 KUO HSIUNG                 Panamanian
              S.A.
    ------------------------- -------------------------------- ---------------------------- -----------------------
4)  Alcinoe Shipping Limited        Republic of Cyprus                 PANTELIS P.                 Cypriot
    ------------------------- -------------------------------- ---------------------------- -----------------------
5)     Searoute Maritime            Republic of Cyprus                    ARIEL                    Cypriot
            Limited
    ------------------------- -------------------------------- ---------------------------- -----------------------
6)    Oceanpride Shipping           Republic of Cyprus                   JOHN P.                   Cypriot
            Limited
    ------------------------- -------------------------------- ---------------------------- -----------------------
7)    Oceanopera Shipping           Republic of Cyprus                 NIKOLAOS P.                 Cypriot
            Limited
14
Euroseas' Fleet

Euroseas' fleet consist of five drybulk carriers and two containerships with an
aggregate of 190,904 deadweight tons, or dwt, for the five drybulk carriers and
2,538 twenty-foot equivalent units, or teu, total capacity, for the two
containerships. The following table describes Euroseas' current fleet:

                            Country                                 TEU Capacity
 Vessel            Dwt       Built     Year Built       Type
 ------            ---       -----     ----------       ----        ------------
 IRINI            69,734     Japan        1988        Dry Bulk           N/A
 YM QINGDAO I     18,253     Japan        1990     Containership        1,269
 KUO HSIUNG       18,154     Japan        1993     Containership        1,269
 PANTELIS P.      26,354    Scotland      1981        Dry Bulk           N/A
 ARIEL            33,712     Japan        1977        Dry Bulk           N/A
 JOHN P.          26,354    Scotland      1981        Dry Bulk           N/A
 NIKOLAOS P.      34,750     Spain        1984        Dry Bulk           N/A

Competitive Strengths

Euroseas believes that it possesses the following competitive strengths:

Experienced Management Team. Euroseas' management team has significant
experience in operating drybulk carriers and expertise in all aspects of
commercial, technical, operational and financial areas of its business. The main
shareholding family of Euroseas has over 100 years experience in shipping and
enjoys a well established reputation.

Strong Customer Relationships. Euroseas, through Eurobulk, its ship management
company, and Eurochart, its chartering broker, each has many long-established
customer relationships with major charterers and shipping pools (Klaveness), and
Euroseas believes it is well regarded within the international shipping
community.

Profitable Operations to Date. Euroseas' main principals have over the years
operated vessels profitably by carefully selecting secondhand vessels,
competitively commissioning and actively supervising cost-efficient shipyards to
perform repair, reconditioning and systems upgrading work, together with a
proactive preventive maintenance program both ashore and at sea, and employing
professional, well-trained masters, officers and crews. Euroseas believes that
this combination allows it to minimize off-hire periods, effectively manage
insurance costs, and control overall operating expenses.

                                       15
Business Strategy

Euroseas' business strategy is focused on providing reliable seaborne
transportation services at competitive cost, and building and maintaining
relationships with charterers of drybulk carriers, brokers, suppliers,
classification societies and others in the drybulk and container shipping
industry. Additionally, with the proceeds from the Private Placement, Euroseas
plans to expand its fleet to increase its revenues and make its drybulk carrier
business more cost efficient and more attractive to its customers.

Euroseas' Vessel Employment

Euroseas employs its vessels in the spot charter market and under time charters
and pool arrangements. Presently, five of Euroseas' vessels are currently
employed under time charters, while one is in drydock effecting repairs to its
rudder until approximately the end of August (m/v Ariel) and one is employed in
the Klaveness run Baumarine pool (m/v Irini). The owning company of m/v Irini
participates in three short funds managed by Klaveness.

A spot charter is a contract to carry a specific cargo for a per ton carry
amount. Under spot charters, Euroseas pays voyage expenses such as port, canal
and fuel costs. A time charter is a contract to charter a vessel for an agreed
period of time at a set daily rate. Under time charters, the charterer pays
these voyage expenses. A pool charter is essentially a time charter with a
floating charter rate. The actual charter hire the pool vessel receives is its
corresponding share of all the income generated by all vessels that participate
in the pool. A short fund comprises of one or more contracts of affreightment
("COA"). These are contracts which the pool manager has secured to carry via its
ships some specific types and quantities of cargo over a fixed time horizon at a
fixed rate per ton of cargo carried. The combined effect of having a vessel in a
spot pool and securing COA's can be equivalent to establishing a long term time
charter.

Under all types of charters, Euroseas will pay for vessel operating expenses,
which include crew costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs. Euroseas is also responsible for each
vessel's intermediate drydocking and special survey costs.

Vessels operating on time charter provide more predictable cash flows, but can
yield lower profit margins than vessels operating in the spot market during
periods characterized by favorable market conditions. Vessels operating in the
spot market generate revenues that are less predictable but may enable Euroseas
to increase profit margins during periods of improvements in drybulk rates.
However, Euroseas would then be exposed to the risk of declining drybulk rates,
which may be higher or lower than the rates at which Euroseas chartered its
vessels. Euroseas is constantly evaluating opportunities for time charters, but
only expects to enter into additional time charters if Euroseas can obtain
contract terms that satisfy its criteria.

                                       16
Euroseas Major Customers and Charterers

Euroseas' major charterer customers during the last three years include
Bulkhandling / Klaveness, Cheng Lie, Swiss Marine, Hamburg Bulk Carriers, and
Phoenix. Euroseas is a relationship driven company, and its top 5 customers in
the first quarter of 2005 include four of its top five customers from 2004
(Cheng Lie, Swiss Marine, HBC, Pancoast, and Phoenix). Euroseas' top 5 customers
accounted for approximately 68% of its total revenues for 2004 and 68 % of its
total revenues for 2003. During the first quarter of 2005, Euroseas' top five
customers accounted for 76% of its total revenues.

Euroseas' Ship Management

Euroseas' seven vessel fleet is managed by Eurobulk, an affiliate for which
Euroseas pays 590 Euros/vessel/day, or approximately $700/day, to provide all
ship operations management and oversight, including supervising the crewing,
supplying, maintaining and drydocking of vessels, commercial management
regarding identifying suitable vessel charter opportunities and certain
accounting services. Eurobulk is an ISO 9001 certified ship management company.

Euroseas' Employees

Euroseas' only employees are its CEO and CFO. The total renumeration of these
two employees, either directly or through consulting companies related to them,
is $500,000 per year.

Euroseas' subsidiary shipowning companies recruit through Eurobulk either
directly or through a crewing agent, the senior officers and all other crew
members for Euroseas' vessels.

Euroseas' Property

Euroseas does not at the present time own or lease any real property. As part of
the management services provided by Eurobulk during the period in which Euroseas
conducted business to date, Euroseas has shared, at no additional cost, offices
with Eurobulk. Euroseas does not have current plans to lease or purchase space
for its offices, although it may do so in the future.

Euroseas' Competitors

Euroseas operates in markets that are highly competitive and based primarily on
supply and demand. Euroseas competes for charters on the basis of price, vessel
location, size, age and condition of the vessel, as well as on its reputation.
Eurobulk arranges Euroseas' charters (whether spot charters, time charters or
pools) through the use of Eurochart, an affiliated broking company who
negotiates the terms of the charters based on market conditions. Euroseas
competes primarily with other owners of drybulk carriers in the drybulk
Handysize, Handymax and panamax sectors and the feeder containership sector.
Ownership of drybulk carriers and feeder containerships is highly fragmented and
is divided among state controlled and independent bulk carrier owners. Some of
Euroseas' publicly owned competitors include:

Diana Shipping (NYSE: DSX) - larger vessels (9).

Dryships (Nasdaq: DRYS) - larger vessels (27).

Excel Maritime (NYSE: EXM) - mix of vessels (19) primarily larger size.

                                       17
Eagle Bulk Shipping (Nasdaq: EGLE) - handymaxes (11)

Euroseas' Seasonality

Coal, iron ore and grains, which are the major bulks of the drybulk shipping
industry, are somewhat seasonal in nature. The energy markets primarily affect
the demand for coal, with increases during hot summer periods when air
conditioning and refrigeration require more electricity and towards the end of
the calendar year in anticipation of the forthcoming winter period. The demand
for iron ore tends to decline in the summer months because many of the major
steel users, such as automobile makers, reduce their level of production
significantly during the summer holidays. Grains are completely seasonal as they
are driven by the harvest within a climate zone. Because three of the five
largest grain producers (the United States of America, Canada and the European
Union) are located in the northern hemisphere and the other two (Argentina and
Australia) are located in the southern hemisphere, harvests occur throughout the
year and grains required drybulk shipping accordingly.

Euroseas' Legal Proceedings

To Euroseas' knowledge, it is not currently a party to any material lawsuit
that, if adversely determined, would have a material adverse effect on its
financial position, results of operations or liquidity.

Euroseas' Exchange Controls

Under Marshall Island law, there are currently no restrictions on the export or
import of capital, including foreign exchange controls or restrictions that
affect the remittance of dividends, interest or other payments to non-resident
holders of Euroseas' shares.

EUROSEAS' MANAGEMENT

The following sets forth the name and position of each of Euroseas' directors
and executive officers immediately after the effective date of the Merger.

NAME                             AGE     POSITION

Aristides J. Pittas              46      Chairman, President and CEO; Director
Dr. Anastasios Aslidis           45      CFO and Treasurer; Director
Aristides P. Pittas              53      Vice Chairman; Director
Stefania Karmiri                 37      Secretary
George Scarvelis                 44      Director
George Taniskides                44      Director
Gerald Turner                    57      Director
Panos Kyriakopoulos              45      Director

                                       18
Aristides J. Pittas has been a member of the board of directors and Chairman and
CEO of Euroseas since its inception on May 5, 2005. Since 1997, Mr. Pittas has
also been the President of Eurochart S.A., an affiliate of Euroseas. Eurochart
is a shipbroking company specializing in chartering and selling and purchasing
ships. Since 1997, Mr. Pittas has also been the President of Eurotrade, a ship
operating company and an affiliate of Euroseas. Since January 1995, Mr. Pittas
has been the Managing Director of Eurobulk Ltd., an affilate of Euroseas.
Eurobulk is a dry bulk shipping company, which provides ocean transportation
solutions for international commodity companies. From September 1991 to December
1994, Mr. Pittas was the Vice President of Oceanbulk Maritime SA, a ship
management company. From March 1990 to August 1991, Mr. Pittas served both as
the Assistant to the General Manager and the Head of the Planning Department of
Varnima International SA, a shipping company operating tanker vessels. From June
1987 until February 1990, Mr Pittas was the head of the Central Planning
department of Eleusis Shipyards S.A. From January 1987 to June 1987, Mr. Pittas
served as Assistant to the General Manger of Chios Navigation Shipping Company
in London, a company that provides ship management services. From December 1985
to January 1987, Mr. Pittas worked in the design department of Eleusis Shipyards
S.A. where he focused on shipbuilding and ship repair. Mr. Pittas has a B.Sc. in
Marine Engineering from University of Newcastle - Upon-Tyne and a MSc in both
Ocean Systems Management and Navel Architecture and Marine Engineering from the
Massachusetts Institute of Technology.

Dr. Anastasios Aslidis has been a partner at Marsoft, an international
consulting firm focusing on investment and risk management in the maritime
industry since 1989. As of August 2005, he has accepted an offer to join
Euroseas as a director and the CFO. Dr. Aslidis has more than 17 years of
experience in the maritime industry. Since 2003, he has been working on
financial risk management methods for shipowners and banks lending to the
maritime industry, especially as pertaining to compliance to the Basel II
Capital Accords. He has been consultant to the Board of Directors of shipping
companies (public and private) advising in strategy development, asset selection
and investment timing. Between 1993 and 2003, as part of his work at Marsoft, he
worked on various projects including development of portfolio and risk
management methods for shipwoners, establishment of investments funds and
structuring private equity in the maritime industry and business development for
Marsoft's services. Between 1991 and 1993, Dr. Aslidis work on the economics of
the offshore drilling industry. Between 1989 and 1991, he worked on the
development of a trading support system for the dry bulk shipping industry on
behalf of a major European owner. Dr. Aslidis holds a diploma in Naval
Architecture and Marine Engineering from the National Technical University of
Athens (1983), M.S. in Ocean Systems Management (1984) and Operations Research
(1987) from MIT, and a Ph.D. in Ocean Systems Management (1989) also from MIT.

                                       19
Aristides P. Pittas has been a member of the board of directors and Vice
Chairman of Euroseas since its inception on May 5, 2005. Mr. Pittas has been a
shareholder in over 70 oceangoing vessels during the last 20 years. Since 1993,
Mr. Pittas has been the Vice President of Eurobulk Ltd, an affilate of Euroseas.
Eurobulk is a dry bulk shipping company, which provides ocean transportation
solutions for international commodity companies. Since February 1989, Mr. Pittas
has been the Vice President of Oceanbulk Maritime SA, a ship management company.
From November 1987 to February 1989, Mr. Pittas was employed in the supply
department of Drytank SA, a shipping company. From November 1981 to June 1985,
Mr. Pittas was employed at Trust Marine Enterprises, a brokerage house as a S+P
broker. From September 1979 to November 1981, Mr. Pittas worked at
Gourdomichalis Maritime SA in the operation and Freight Collection department.
Mr Pittas has a B.Sc in Economics from Athens School of Economics.

Stephania Karmiri has been Secretary of Euroseas since its inception on May 5,
2005. Since July 1995, Mrs Karmiri has been executive secretary to Eurobulk
Ltd., an affilate of Euroseas. Eurobulk is a dry bulk shipping company, which
provides ocean transportation solutions for international commodity companies.
At Eurobulk Mrs. Karmiri has been responsible for dealing with sale and purchase
transactions, vessel registrations/deletions, bank loans, supervision of office
administration and office/vessel telecommunication. From May 1992 to June 1995,
she was secretary to the technical department of Oceanbulk Maritime SA, a ship
management company. From 1988 to 1992, Mrs. Karmiri served as assistant to
brokers for Allied Shipbrokers, a company that provides shipbroking services to
sale and purchase transactions. Mrs Karmiri has taken assistant accountant and
secretarial courses from Didacta college.

George Scarvelis has been a director of Euroseas since its inception. He has
been active in shipping since 1982. In 1992, he founded Marine Spirit S.A., a
dry bulk shipping management company. Between 1999 and 2003, Marine Spirit acted
as one of the crewing managers for Eurobulk. From 1986 until 1992, Mr. Scarvelis
was operations director at Markos S. Shipping Ltd. From 1982 until 1986, he
worked with Glysca Compania Naviera, a management company of five vessels. Over
the years Mr Scarvelis has been a shareholder in numerous ships and presently is
one of the shareholders of Friends Investment Company Inc., the principal
shareholder of Euroseas. He has a B.sc. in economics from the Athens University
Law School.

George Taniskides has been a director of Euroseas since its inception. He is the
Chairman and Managing Director of NovaBank and a member of the Board of
Directors of BankEuropa (subsidiary bank of NovaBank in Turkey). He is a member
of the Executive Committee of the Hellenic Banks Association. From 2003 until
2005, he was a member of the Board of Directors of Visa International Europe,
elected by the Visa issuing banks of Cyprus, Malta, Portugal, Israel and Greece.
From 1990 to 1998, Mr. Taniskidis worked at XIOSBANK (until its acquisition by
Piraeus Bank in 1998) in various positions, with responsibility for the bank's
credit strategy and network. Mr. Taniskides studied Law in the National
University of Athens and in the University of Pennsylvania Law School, where he
received a LL.M. After law school, he joined the law firm of Rogers & Wells in
New York, where he worked until 1989 and was also a member of the New York State
Bar Association. He is also a member of the Young Presidents Organization.

Gerald Turner has been a director of Euroseas since its inception. Since 1999,
he has been the Chairman and Managing Director of AON Turner Reinsurance
Services. From 1987 to 1999, he was the Chairman and sole owner of Turner
Reinsurance services. From 1977 to 1987, he was the Managing Director of
E.W.Payne Hellas (member of the Sedgwik group).

                                       20
Panos Kyriakopoulos has been a director of Euroseas since its inception. Since
July 2002, he has been the C.E.O. of New Television S.A., one of the leading
Mass Media Companies in Greece, running television and radio stations. From July
1997 to July 2002 he was the C.E.O. of the Hellenic Post Group, the Universal
Postal Service Provider, having the largest retail network in Greece for postal
and financial services products. From March 1996 until July 1997, Mr.
Kyriakopoulos was the General Manager of ATEMKE SA, one of the leading
construction companies in Greece listed on the Athens Stock Exchange. From
December 1985 to March 1996, he was the Managing Director of Globe Group of
Companies, a group active in the areas of shipowning and management, textiles
and food and distribution. The company was listed on the Athens Stock Exchange.
From June 1983 to December 1986, Mr. Kyriakopoulos was an assistant to the
Managing Director of Armanda Marine S.A., a company active in international
trading and shipping, owning and managing a fleet of 12 vessels. Presently he is
a member of the Board of Directors of the Hellenic Post, Euroseas Ltd. and
General Secretary of the Hellenic Private Television Owners Union. He has also
been an investor in the shipping industry for more than 20 years. Mr.
Kyriakopoulos has a B.Sc. degree in Marine Engineering from the University of
Newcastle upon Tyne and a MSc.degree in Naval Architecture and Marine
Engineering with specialization in Management from the Massachusetts Institute
of Technology.

Euroseas' Family Relationships

Aristides P. Pittas is the cousin of Aristides J. Pittas, the CEO of Euroseas.

Euroseas' Employment Agreements

Euroseas expects to enter into employment agreements with Mr. Aristides J.
Pittas and Mr. Anastasios Aslidis for work performed in Greece and separate
consulting agreements with companies owned by each of them for work to be
performed outside of Greece.

Euroseas' Director Compensation

Directors who are employees of Euroseas or beneficially own greater than 10% of
the outstanding common stock will receive no compensation for serving on the
Board or its committees. Directors who are not employees of Euroseas and do not
beneficially own greater than 10% of the outstanding common stock will receive
the following compensation: an annual retainer of $10,000, plus an additional
retainer of $5,000, if serving as Chairman of the Audit Committee. All directors
are reimbursed reasonable out-of-pocket expenses incurred in attending meetings
of the Euroseas Board of Directors or any committee of the Board of Directors.

Euroseas' Executive Compensation

Euroseas was formed in 2005 and therefore no compensation was paid in 2004.
Euroseas' expects to pay its two employees an aggregate of $500,000 per year
(before bonuses), commencing June 2005.

                                       21
Euroseas' Options

Euroseas was formed in 2005 and therefore no options were granted by Euroseas
during the fiscal year ended December 31, 2004. There are currently no options
outstanding to acquire any Euroseas shares.

Euroseas' Option Plans

Euroseas does not currently have any option plans. However, it expects to adopt
an equity incentive plan which will entitle its officers, key employees and
directors to receive options to acquire shares of Euroseas common stock,
restricted shares and stock appreciation rights.

CERTAIN RELATED TRANSACTIONS OF EUROSEAS

Each of Euroseas' vessel owning subsidiaries has entered into a management
contract with Eurobulk, a company affiliated with Euroseas. Pursuant to the
management contracts, Eurobulk is responsible for all aspects of management and
maintenance for each of the vessels. Pursuant to the management agreements,
Euroseas is obligated to pay Eurobulk 590 Euros/vessel/day, or approximately
$700/vessel/day to provide all ship operations management and oversight,
including supervising the crewing, supplying, maintaining and drydocking of
vessels, commercial management regarding identifying suitable vessel charter
opportunities and certain accounting services.

Euroseas receives chartering and S&P services from Eurochart SA, an affiliate,
and pays a commission of 1.25% on charter revenue and 1% on vessel sales price.
Euroseas will pay commissions to major charterers and their brokers as well that
usually range from 3.75% - 5.00%.

More Maritime Agencies Inc. are crewing agents and Sentinel Marine Services Inc.
are insurance brokering companies and affiliates to whom Euroseas will pay a fee
of $50 per crew member/month and a commission on premium not exceeding 5%,
respectively.

Euroseas believes that the fees it pays to affiliated entities are no greater
than what it would pay to non-affiliated third parties and are standard industry
practice. However, there could be conflicts due to these affiliations.

Friends has advanced a loan of $500,000 to Euroseas to cover all of the start-up
costs of Euroseas. This loan will be repaid to Friends, interest free, upon the
earlier of (i) the closing of the Private Placement fund raising and (ii)
December 31, 2005.

EUROSEAS' DIVIDEND POLICY

Euroseas' expects that its dividend policy will be similar to other leading
drybulk ship companies and will be intended to offer shareholders cash flow
while retaining sufficient capital to meet its growth objectives. Euroseas plans
to distribute, on a quarterly basis, substantially all available cash flow
generated by operations less any debt service requirements, expenses and
reserves for scheduled drydockings, intermediate and special surveys and after
establishing a working capital reserve as required by its business needs, the
terms of its credit facilities, its growth strategy and other cash needs as

                                       22
determined by its Board of Directors or required by prevailing law. However,
the drybulk shipping industry is highly volatile, and Euroseas cannot accurately
predict the amount of cash distributions that it may make in any given quarterly
period. Dividends based on past charter hire rates are not necessarily
representative of future rates, which are subject to volatile changes due to the
cyclical nature of the drybulk shipping industry.

TAX ITEMS DISCUSSION

CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
-----------------------------------------------------

The following is a discussion of certain material U.S. federal income tax
consequences to a Cove stockholder of the exchange of Cove shares for shares of
Euroseas common stock in the Merger. This discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
treasury regulations promulgated under the Code, Internal Revenue Service
("IRS") rulings and pronouncements, and judicial decisions now in effect, all of
which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively.

No party has sought or will seek any rulings from the IRS with respect to the
U.S. federal income tax consequences discussed below. Cove has obtained the
opinion of its counsel, Kirkpatrick & Lockhart Nicholson Graham LLP ("K&L"),
that the Merger should be treated as a non-taxable reorganization for U.S.
federal income tax purposes. Neither the discussion below, nor K&L's opinion, is
in any way binding on the IRS or the courts or in any way constitutes an
assurance that the U.S. federal income tax consequences discussed herein will be
accepted by the IRS or the courts.

The U.S. federal income tax consequences to a holder of Cove shares from the
Merger may vary depending upon such stockholder's particular situation or
status. This discussion is limited to holders of Cove shares who hold their Cove
shares and will hold their Euroseas common stock as capital assets, and it does
not address aspects of U.S. federal income taxation that may be relevant to
holders of either Cove or Euroseas shares who are subject to special treatment
under U.S. federal income tax laws, including but not limited to:

    non-U.S. holders (as defined below);

    dealers in securities;

    banks and other financial institutions;

    insurance companies;

    tax-exempt organizations, plans or accounts;

    persons holding their Cove shares as part of a "hedge," "straddle" or
    other risk reduction transaction;

                                       23
persons holding their Cove shares through partnerships, trusts or other
             entities;

    U.S. persons whose functional currency is not the U.S. dollar; and

    controlled foreign corporations or passive foreign investment
             companies, as those terms are defined in the Code.

In addition, this discussion does not consider the effects of any applicable
foreign, state, local or other tax laws, or estate or gift tax considerations,
or the alternative minimum tax.

For purposes of this discussion, a "non-U.S. holder" is a beneficial owner of
Cove shares that is not, for U.S. federal income tax purposes:

    a citizen or resident of the United States;

    a corporation created or organized in or under the laws of the United
             States or any state thereof (including the District of Columbia);

    an estate the income of which is subject to United States federal income
             tax regardless of its source; or

    a trust, if a court within the United States can exercise
             primary supervision over its administration, and one or more
             United States persons have the authority to control all of the
             substantial decisions of that trust (or the trust was in
             existence on August 20, 1996, was treated as a United States
             trust on August 19, 1996 and validly elected to continue to be
             treated as a United States trust).

For purposes of this discussion, a "U.S. holder" is, for U.S. federal income tax
purposes, an individual, trust, or corporation that is a beneficial owner of
Cove shares, who is not a non-U.S. holder.

EACH STOCKHOLDER IS URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
PARTICULAR UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND
OWNERSHIP OF THE EUROSEAS SHARES, AND THE TAX CONSEQUENCES UNDER FOREIGN, STATE,
LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.

TAX CONSEQUENCES OF THE MERGER
------------------------------

The Merger should be treated as a nontaxable reorganization for U.S. federal
income tax purposes under Code Section 368(a). Accordingly, a U.S. holder of
Cove shares should not recognize gain or loss upon the exchange of their shares
of Cove common stock solely for shares of Euroseas common stock pursuant to the
Merger. However, gain should be recognized with respect to cash, if any,
received in whole or in part in exchange for shares of Cove common stock.
Generally, the amount of gain recognized should equal the lesser of (i) the
amount of cash received in the Merger, or (ii) the amount of gain realized in
the Merger. Any gain recognized by a holder generally should be capital gain.
Long-term capital gains are subject to preferential rates of taxation for
certain non-corporate taxpayers. A U.S. holder's aggregate tax basis in the
Euroseas shares received in the transaction should be the same as his or her
aggregate tax basis in the Cove shares surrendered in the transaction, decreased
by the amount of any cash received by the U.S. holder in the Merger, and
increased by the amount of gain recognized by the U.S. holder with respect to
any cash received in the Merger. The holding period of Euroseas shares received
in the Merger should include the holding period of the Cove shares surrendered
in the Merger.

                                       24
Distributions

Except as described below under the heading "Passive Foreign Investment Company
and Controlled Foreign Corporation Status," any distributions made by Euroseas
with respect to Euroseas common stock to a U.S. holder should generally
constitute dividends for U.S. federal income tax purposes to the extent such
distribution is attributable to Euroseas' current or accumulated earnings and
profits, as determined under United States federal income tax principles.
Distributions in excess of Euroseas' earnings and profits should be treated
first as a nontaxable return of capital to the extent of the U.S. holder's tax
basis in his or her common stock and thereafter as capital gain.

Dividends paid on Euroseas common stock to a U.S. holder who is an individual,
trust or estate (a "U.S. Individual Holder") should be treated as "qualified
dividend income" that is taxable to such U.S. Individual Holders at preferential
tax rates (through 2008) provided that (1) the Euroseas common stock is readily
tradable on an established securities market in the United States (such as The
NASDAQ National Market); (2) Euroseas is not a PFIC for the taxable year during
which the dividend is paid or the immediately preceding taxable; and (3) the
U.S. Individual Holder has owned the common stock for more than 60 days in the
121-day period beginning 60 days before the date on which the common stock
becomes ex-dividend. Any dividends paid by Euroseas which are not eligible for
these preferential rates should be taxed as ordinary income to a U.S. Individual
Holder. LEGISLATION HAS BEEN RECENTLY INTRODUCED IN THE U.S. SENATE WHICH, IF
ENACTED IN ITS PRESENT FORM, WOULD PRECLUDE EUROSEAS DIVIDENDS FROM QUALIFYING
FOR SUCH PREFERENTIAL RATES.

Special rules may apply to any "extraordinary dividend"--generally, a dividend
equal to or in excess of ten percent of a shareholder's adjusted basis (or fair
market value in certain circumstances) in a share of common stock--paid by
Euroseas. If Euroseas pays an "extraordinary dividend" on its common stock that
is treated as "qualified dividend income," then any loss derived by a U.S.
Individual Holder from the sale or exchange of such common stock should be
treated as long-term capital loss to the extent of such dividend. Depending upon
the amount of a dividend paid by Euroseas, such dividend may be treated as an
"extraordinary dividend."

Because Euroseas is not a United States corporation, U.S. holders that are
corporations should not be entitled to claim a dividends received deduction with
respect to any distributions they receive from Euroseas.

         Sale, Exchange and Redemption of Euroseas Shares

                                       25
Generally, except as described below under the heading "Passive Foreign
Investment Company and Controlled Foreign Corporation Status," upon the sale or
exchange of Euroseas shares, a U.S. holder should recognize capital gain or loss
equal to the difference between the amount realized on the sale or exchange and
the holder's adjusted tax basis in such Euroseas shares. For non-corporate U.S.
holders, the maximum U.S. federal income tax rate applicable to such gain if
such U.S. holder's holding period for such Euroseas shares exceeds one year and
therefore qualifies as long-term capital gain is 15%. The deductibility of
capital losses is subject to limitations.

Upon redemption of a Euroseas share by Euroseas for cash or property other than
Euroseas shares, the redemption should be treated as a sale or exchange under
Section 302 of the Code and the tendering U.S. holder should recognize capital
gain or loss to the extent the redemption proceeds are greater than the holder's
adjusted tax basis in its Euroseas shares if the redemption proceeds received in
exchange for the Euroseas shares: (i) are not essentially equivalent to a
dividend distribution; (ii) are substantially disproportionate with respect to
the tendering holder; (iii) completely terminate the holder's equity interest in
Euroseas; or (iv) are distributed to a holder as part of a partial liquidation
of Euroseas shares (as defined in Section 302 of the Code). In determining
whether a redemption qualifies for sale or exchange treatment under Section 302
of the Code, a tendering holder must take into account Euroseas shares that are
actually owned by the tendering holder and, in certain situations, shares that
such holder is deemed to own through a related person or entity.

If the redemption does not qualify for sale or exchange treatment under Section
302 of the Code, the redemption proceeds should be treated as a distribution
with respect to the U.S. holder's Euroseas shares. The distribution should be
taxed as a dividend to the extent of Euroseas' current or accumulated earnings
and profits. The amount of the distribution in excess of Euroseas' current or
accumulated earnings and profits would be treated as a tax-free return of basis
to the extent of the U.S. holder's adjusted tax basis in its Euroseas shares and
as capital gain to the extent the distribution exceeds its basis in its Euroseas
shares.

    Passive Foreign Investment Company and Controlled Foreign Corporation Status

If Euroseas qualifies as a passive foreign investment company ("PFIC") or
controlled foreign corporation ("CFC") for U.S. federal income tax purposes,
materially different U.S. federal income tax consequences could arise for a U.S.
holder of Euroseas common stock. A foreign corporation generally is a PFIC if in
any taxable year either (a) 75% or more of its gross income consists of passive
income, or (b) 50% or more of the average value of its assets is attributable to
assets that produce, or are held for the production of, passive income. Subject
to certain limited exceptions, if a foreign corporation is a PFIC under either
of these tests in a particular year, shares of the corporation held by a U.S.
holder in that year are treated as PFIC shares for that year and all subsequent
years in the U.S. holder's holding period even if the corporation fails to meet
either test in a subsequent year. Certain exceptions apply, including if the
U.S. holder makes a timely election to treat the foreign corporation as a
"qualified electing fund."

If Euroseas qualifies as a PFIC, a U.S. holder of Euroseas common stock
generally would be required to pay a special U.S. tax and a deferred interest
charge when the holder either disposes of his Euroseas stock or receives certain
substantial distributions from Euroseas. Generally, the special U.S. tax would
be determined by allocating the gain on disposition or the substantial

                                       26
distribution (as the case may be) ratably to each day in the U.S. holder's
holding period of Euroseas common stock and multiplying such amounts by the
highest rate of U.S. tax in effect for the taxable years for which such
allocations are made. Alternatively, a U.S. holder could elect to treat Euroseas
as a qualified electing fund. If this election would be made, and Euroseas
satisfies certain reporting requirements, the special U.S. tax and deferred
interest charge described above would not apply to a disposition of Euroseas
stock or substantial distributions. Instead, the U.S. holder would be required
to take into account currently its allocable share of Euroseas income for U.S.
federal income tax purposes. If Euroseas stock is "marketable stock" for
purposes of Section 1296 of the Code, a U.S. holder also may be able to elect to
"mark-to-market" its Euroseas shares on an annual basis. "Marking-to-market," in
this context, means including in gross income each taxable year (and treating as
ordinary income, not net capital gain) the excess, if any, of the fair market
value of the electing holder's Euroseas shares over its adjusted basis therein
as of the end of that year. The U.S. holder's adjusted basis in the shares would
be adjusted to reflect the amounts of income included under the election. The
U.S. federal income tax consequences to a U.S. holder of shares in a PFIC,
including any available elections, are complex. Accordingly, a U.S. holder
should consult its tax advisor to determine the consequences to that holder of
owning shares of a PFIC.

Euroseas would qualify as a CFC if more than 50% of its total combined voting
power or value is owned by U.S. persons who own 10% or more of Euroseas' total
combined voting power ("Ten Percent U.S. Shareholders"). Each Ten Percent U.S.
Shareholder of Euroseas would be required to include in its gross income for
U.S. federal income tax purposes its proportional share of certain items of
Euroseas income, regardless of whether a distribution is made by Euroseas. A
portion of the gain recognized by a Ten Percent U.S. Shareholder upon sale,
exchange, or redemption of the stock in Euroseas could be included in income as
a dividend to the extent of Euroseas earnings and profits that are allocable to
the shares. The U.S. federal income tax consequences to a U.S. holder of shares
in a CFC are complex. Accordingly, a U.S. holder should consult its tax advisor
to determine the consequences to that holder of owning shares of a CFC.

    Backup Withholding Tax and Information Reporting Requirements
    -------------------------------------------------------------

When required, Euroseas or its paying agent will report to the IRS the amount of
proceeds paid for the Cove shares and any dividends paid on Euroseas shares in
each calendar year, and the amount of United States federal income tax withheld,
if any, with respect to these payments.

U.S. holders who are subject to information reporting and who do not provide
appropriate information when requested may be subject to backup withholding at a
rate of 28% on the gross amount of any proceeds or dividends received.

                                       27
Backup withholding is not an additional tax. The amount of any backup
withholding will be allowed as a credit against the holder's United States
federal income tax liability and may entitle the holder to a refund, provided
the required information is timely furnished to the Internal Revenue Service.

THE PRECEDING DISCUSSION OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES IS NOT TAX ADVICE. ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT
HIS, HER OR ITS OWN TAX ADVSIOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF THE
MERGER AND HOLDING AND DISPOSING OF EUROSEAS SHARES, INCLUDING THE APPLICABILITY
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY PROPOSED CHANGES IN APPLICABLE
LAW.

ENFORCEABILITY OF CIVIL LIABILITIES

Euroseas is a Marshall Islands company and its executive offices are located
outside of the United States of America in Maroussi, Greece. Some of Euroseas'
directors and officers and some of the experts named herein reside outside the
United States of America. In addition, a substantial portion of Euroseas' assets
and the assets of its directors, officers and experts are located outside of the
United States of America. As a result, you may have difficulty serving legal
process within the United States of America upon Euroseas or any of these
persons. You may also have difficulty enforcing, both in and outside the United
States of America, judgments you may obtain in United States of America courts
against Euroseas or these persons in any action, including actions based upon
the civil liability provisions of United States of America federal or state
securities laws. Furthermore, there is substantial doubt that the courts of the
Marshall Islands or Greece would enter judgments in original actions brought in
those courts predicated on United States of America federal or state securities
laws.

ADDITIONAL INFORMATION ABOUT EUROSEAS

Euroseas is a privately owned company that is not currently subject to the
reporting requirements of the SEC. In connection with the Private Placement and
the Merger, Euroseas has agreed to file the Euroseas Registration Statement on
Form F-1, F-4 or comparable form to register with the SEC the offering and sale
of Euroseas shares to be issued in the Private Placement and pursuant to the
Merger. Once Euroseas' Registration Statement is declare effective, Euroseas
will be subject to the reporting requirements of the SEC. You will then be able
to read any reports, statements or other information that Euroseas files with
the SEC over the Internet at the SEC web site at http://www.sec.gov. You will
also be able to read and copy any documents Euroseas files with the SEC at its
public reference facility at 450 Fifth Street, N.W., Washington, D.C. 20549. You
will also be able to obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.

                                       28
RECENT ISSUANCES OF SECURITIES BY EUROSEAS

Corporate Reorganization

Prior to the formation of Euroseas, various companies owned each of the vessel
owning companies that are now owned by Euroseas. As part of a corporate
reorganization, each of the beneficial owners of such vessel owning companies
exchanged all of their shares in each of the vessel owning companies for shares
in Friends, a newly formed Marshall Islands company, thus becoming the owners of
Friends. Friends then exchanged all of the shares in the vessel owning companies
for shares in Euroseas, a newly formed Marshall Islands company, thus becoming
the sole owner of Euroseas.

Private Placement

On August 25, 2005, Euroseas raised approximately $21 million in gross proceeds
from a private placement transaction (the "Private Placement") of its securities
to a number of institutional and accredited investors. In the Private Placement,
Euroseas issued 7,026,993 shares of common stock at a price of $3.00 per share,
as well as warrants to purchase an additional 1,756,743 shares of common stock.
The warrants have a five year term and an exercise price of $3.60 per share.
Euroseas also agreed to file a registration statement with the Securities and
Exchange Commission covering the resale of the securities issued in the Private
Placement. Forms of the Private Placement transaction documents are attached
hereto as Exhibits 10.1, 10.2, 10.3 and 10.4.

Based on the net proceeds received from the Private Placement, Euroseas intends
to acquire additional ships over an approximately 12 month time frame that will
include panamax, handymax and handysize bulkers or feeder containerships,
assuming it can obtain such ships on terms satisfactory to it. After the Merger
with Cove, the Euroseas Registration Statement covering the newly issued shares
in the Private Placement and to the Cove stockholders will be filed with the SEC
upon closing so those shares can be freely tradable. The public shares of Cove
will trade upon the filing of this8-K.

OWNERSHIP OF EUROSEAS

    Euroseas shares outstanding prior to Merger and Private         29,754,166
    Placement
    New shares issued in Private Placement                          7,026,993
    Shares to be issued pursuant to the Merger                      1,079,167
    Total shares outstanding after the Merger and after Private     37,860,326
    Placement
    Percent owned by Friends (initial owners)1 after Merger and     78.6%
    Private Placement

                                       29
Percent owned by former Cove owners after Merger and Private    2.8%
    Placement
    Percent owned by Private Placement investors after Merger and   18.6%
    Private Placement

The above numbers of shares are subject to adjustment in the event of a stock
split and do not include warrants issued in the Private Placement.

                                  RISK FACTORS

                  You should consider carefully the following factors, as well
as the other information set forth herein. 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 shares. Any of the risk factors could significantly and negatively
affect Euroseas' business, financial condition, operating results and stock
price. The risks and uncertainties described below are not the only ones
Euroseas faces. The following risks describe the material risks that are
presently known to us.

  1 Friends Investment Company Inc. was the sole owner of 100% of the shares
  of Euroseas prior to the merger with Cove. Friends is a Marshall Islands
  company. The major shareholder of Friends is John Pittas, the father of
  Aristides Pittas. John Pittas controls 50.1% of the shares of Friends. No
  other shareholder of Friends controls more than 10% of that company.

                                       30
RISKS FACTORS RELATING TO THE MERGER

THERE MAY NOT BE AN ACTIVE MARKET FOR EUROSEAS' SHARES, WHICH MAY CAUSE ITS
SHARES TO TRADE AT LOWER PRICES AND MAKE IT DIFFICULT TO SELL YOUR SHARES.

                  Prior to the Merger, there will be no public market for
Euroseas' shares. We cannot assure you that an active trading market for
Euroseas' shares will develop or be sustained after the Merger. We 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 LESS THAN YOU
ORIGINALLY PAID FOR YOUR CORRESPONDING SHARES OF COVE COMMON STOCK.

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

     o    actual or anticipated fluctuations in quarterly and annual results;

     o    mergers and strategic alliances in the shipping industry;

     o    market conditions in the industry;

     o    changes in government regulation;

     o    fluctuations in Euroseas' quarterly revenues and earnings and those of
          its publicly held competitors;

     o    shortfalls in Euroseas' operating results from levels forecasted by
          securities analysts;

     o    announcements concerning Euroseas or its competitors; and

     o    the general state of the securities markets.

The international drybulk shipping industry has been highly unpredictable and
volatile. The market for common shares of companies in this industry 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.

                                       31
COVE SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION AND A REDUCTION IN
PERCENTAGE OWNERSHIP AND VOTING POWER WITH RESPECT TO COVE SHARES AS A RESULT OF
THE MERGER.

                  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.

FUTURE SALES OF EUROSEAS' SHARES COULD DEPRESS ITS STOCK PRICE.

                  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 Euroseas' shares of its common stock by such persons in the public
markets could adversely affect the market price of Euroseas' common stock.

EUROSEAS' SHAREHOLDERS WILL CONTROL APPROXIMATELY 97.2% OF EUROSEAS AFTER THE
MERGER AND 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.

                  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' ARTICLES OF INCORPORATION AND B-LAWS CONTAIN ANTI-TAKEOVER PROVISIONS
THAT MAY DISCOURAGE, DELAY OR PREVENT (1) THE MERGER OR ACQUISITION OF EUROSEAS
AND/OR (2) THE REMOVAL OF INCUMBENT DIRECTORS AND OFFICERS.

                  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.

                                       32
PROFITABLE OPERATION OF EUROSEAS' BUSINESS WILL BE DEPENDENT UPON THE EFFORTS OF
EUROSEAS', NOT COVE'S, MANAGEMENT.

                  As a condition to the Merger, each of Cove's officers and
directors must resign from their current positions at the effective time of the
Merger. The current officers and directors 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.

                  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. Transaction costs will be recorded directly to stockholders'
equity if the Merger is consummated, and will be expensed by the respective
parties if the Merger is not consummated.

AS A RESULT OF THE MERGER, COVE STOCKHOLDERS WILL BE SOLELY DEPENDENT ON A
SINGLE BUSINESS.

                  As a result of the merger, Cove stockholders will be solely
dependent upon the performance of Euroseas and its drybulk shipping business.
Euroseas will be subject to a number of risks that relate generally to the
shipping industry and other risks that specifically relate to Euroseas. See
"Industry Risk Factors Relating to the Surviving Corporation" and "Company Risk
Factors Relating to the Surviving Corporation."

IF THE MERGER DOES NOT QUALIFY AS A NONTAXABLE REORGANIZATION UNDER THE U.S.
INTERNAL REVENUE CODE, THE TRANSACTION MAY BE A TAXABLE EVENT TO COVE'S
STOCKHOLDERS.

                  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

THE CYCLICAL NATURE OF THE SHIPPING INDUSTRY MAY LEAD TO VOLATILE CHANGES IN
FREIGHT RATES AND VESSEL VALUES WHICH MAY REDUCE EUROSEAS' REVENUES AND NET
INCOME.

                  Euroseas is an independent shipping company that operates in
the drybulk shipping market. 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

                                       33
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.

                  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:

     o    general economic and market conditions affecting the shipping
          industry;

     o    supply of drybulk vessels;

     o    demand for drybulk vessels;

     o    types and sizes of vessels;

     o    other modes of transportation;

     o    cost of newbuildings;

     o    new regulatory requirements from governments or self-regulated
          organizations; and

     o    prevailing level of charter rates.

                  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. 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.

                                       34
ALTHOUGH CHARTER RATES IN THE INTERNATIONAL DRYBULK SHIPPING INDUSTRY REACHED
HISTORIC HIGHS RECENTLY, FUTURE PROFITABILITY WILL DEPEND ON CONTINUED ECONOMIC
GROWTH IN THE WORLD ECONOMY THAT EXCEEDS THE CAPACITY OF THE GROWING WORLD
FLEET'S ABILITY TO MATCH IT.

                  Over the last several months, charter rates for the
international drybulk shipping industry have reached record highs; however,
recently rates have declined. Euroseas anticipates that the future demand for
its drybulk carriers and drybulk charter rates 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.

                  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:

     o    supply and demand for drybulk commodities;

     o    global and regional economic conditions;

     o    the distance drybulk commodities are to be moved by sea; and

     o    changes in seaborne and other transportation patterns.

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

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels;

     o    changes in environmental and other regulations that may limit the
          useful life of vessels;

     o    the number of vessels that are laid up; and

     o    changes in global drybulk commodity production.

AN ECONOMIC SLOWDOWN IN THE ASIA PACIFIC REGION COULD HAVE A MATERIAL ADVERSE
EFFECT ON EUROSEAS' BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS.

                  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

                                       35
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.

EUROSEAS MAY BECOME DEPENDENT ON SPOT CHARTERS IN THE VOLATILE SHIPPING MARKETS.

                  Although each of Euroseas' vessels are currently under time
charters, in the future, Euroseas may spot charter those, or any newly acquired,
vessels. 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 IS SUBJECT TO REGULATION AND LIABILITY UNDER ENVIRONMENTAL LAWS THAT
COULD REQUIRE SIGNIFICANT EXPENDITURES AND AFFECT ITS CASH FLOWS AND NET INCOME.

                  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, 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

                                       36
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.

INCREASED INSPECTION PROCEDURES AND TIGHTER IMPORT AND EXPORT CONTROLS COULD
INCREASE COSTS AND DISRUPT OUR BUSINESS.

                  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.

RISING FUEL PRICES MAY ADVERSELY AFFECT OUR PROFITS.

                  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 future, which may reduce the profitability and competitiveness of
Euroseas' business versus other forms of transportation, such as truck or rail.

                                       37
IF EUROSEAS' VESSELS FAIL TO MAINTAIN THEIR CLASS CERTIFICATION AND/OR FAIL ANY
ANNUAL SURVEY, INTERMEDIATE SURVEY, DRYDOCKING OR SPECIAL SURVEY, IT COULD HAVE
A MATERIAL ADVERSE IMPACT ON EUROSEAS' FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

                  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, Euroseas' ship management
company.

                  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.

MARITIME CLAIMANTS COULD ARREST EUROSEAS' VESSELS, WHICH COULD INTERRUPT ITS
CASH FLOW.

                  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.

                                       38
GOVERNMENTS COULD REQUISITION EUROSEAS' VESSELS DURING A PERIOD OF WAR OR
EMERGENCY, RESULTING IN LOSS OF EARNINGS.

                  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.

WORLD EVENTS OUTSIDE EUROSEAS' CONTROL MAY NEGATIVELY AFFECT ITS OPERATIONS AND
FINANCIAL CONDITION.

                  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 WILL DEPEND ENTIRELY ON EUROBULK TO MANAGE AND CHARTER ITS FLEET.

                  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.

                                       39
BECAUSE EUROBULK IS A PRIVATELY HELD COMPANY, THERE IS LITTLE OR NO PUBLICLY
AVAILABLE INFORMATION ABOUT IT AND EUROSEAS MAY GET VERY LITTLE ADVANCE WARNING
OF OPERATIONAL OR FINANCIAL PROBLEMS EXPERIENCED BY EUROBULK THAT MAY ADVERSELY
AFFECT EUROSEAS.

                  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.

EUROSEAS AND ITS PRINCIPAL OFFICERS HAVE AFFILIATIONS WITH EUROBULK THAT COULD
CREATE CONFLICTS OF INTEREST DETRIMENTAL TO 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. These conflicts may 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 IT DEPENDS ON THE ABILITY OF ITS SUBSIDIARIES
TO DISTRIBUTE FUNDS TO IT IN ORDER TO SATISFY ITS FINANCIAL OBLIGATIONS OR TO
MAKE DIVIDEND PAYMENTS.

                  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.

EUROSEAS MAY NOT BE ABLE 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 our 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, 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.

                                       40
COMPANIES AFFILIATED WITH EUROBULK MAY ACQUIRE VESSELS THAT COMPETE WITH
EUROSEAS' FLEET

                  Companies affiliated with Eurobulk 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 us.

If Euroseas fails to manage its planned growth properly, it may not be able to
successfully expand its market share.

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

     o    locating and acquiring suitable vessels;

     o    identifying and consummating acquisitions or joint ventures;

     o    integrating any acquired business successfully with its existing
          operations;

     o    enhancing its customer base;

     o    managing its expansion; and

     o    obtaining required financing.

                  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.

A DECLINE IN THE MARKET VALUE OF EUROSEAS' VESSELS COULD LEAD TO A DEFAULT UNDER
EUROSEAS' LOAN AGREEMENTS AND THE LOSS OF EUROSEAS' VESSELS.

                  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.

                                       41
EUROSEAS' EXISTING LOAN AGREEMENTS CONTAIN RESTRICTIVE COVENANTS THAT MAY LIMIT
ITS LIQUIDITY AND CORPORATE ACTIVITIES.

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

     o    incur additional indebtedness;

     o    create liens on its assets;

     o    sell capital stock of its subsidiaries;

     o    make investments;

     o    engage in mergers or acquisitions;

     o    pay dividends;

     o    make capital expenditures;

     o    change the management of its vessels or terminate or materially amend
          the management agreement relating to each vessel; and

     o    sell its vessels.

                  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.

SERVICING FUTURE DEBT WOULD LIMIT FUNDS AVAILABLE FOR OTHER PURPOSES.

                  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.

EUROSEAS' ABILITY TO OBTAIN ADDITIONAL DEBT FINANCING MAY BE DEPENDENT ON THE
PERFORMANCE OF ITS THEN EXISTING CHARTERS AND THE CREDITWORTHINESS OF ITS
CHARTERERS.

                  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.

                                       42
AS EUROSEAS EXPANDS ITS BUSINESS, IT MAY NEED TO UPGRADE ITS OPERATIONS AND
FINANCIAL SYSTEMS, AND ADD MORE STAFF AND CREW. IF IT CANNOT UPGRADE THESE
SYSTEMS OR RECRUIT SUITABLE EMPLOYEES, ITS PERFORMANCE MAY BE ADVERSELY
AFFECTED.

                  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.

IN THE HIGHLY COMPETITIVE INTERNATIONAL DRYBULK SHIPPING INDUSTRY, EUROSEAS MAY
NOT BE ABLE TO COMPETE FOR CHARTERS WITH NEW ENTRANTS OR ESTABLISHED COMPANIES
WITH GREATER RESOURCES.

                  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 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 MAY BE UNABLE TO ATTRACT AND RETAIN KEY MANAGEMENT PERSONNEL AND OTHER
EMPLOYEES IN THE SHIPPING INDUSTRY, WHICH MAY NEGATIVELY AFFECT THE
EFFECTIVENESS OF ITS MANAGEMENT AND ITS RESULTS OF OPERATIONS.

                  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.

RISKS INVOLVED WITH OPERATING OCEAN GOING VESSELS COULD AFFECT EUROSEAS'
BUSINESS AND REPUTATION, WHICH WOULD ADVERSELY AFFECT ITS REVENUES.

                                       43
The operation of an ocean-going vessel carries inherent risks. These risks
    include, among others, the possibility of:

     o    crew strikes and/or boycotts;

     o    marine disaster;

     o    piracy;

     o    environmental accidents;

     o    cargo and property losses or damage; and

     o    business interruptions caused by mechanical failure, human error, war,
          terrorism, political action in various countries, labor strikes or
          adverse weather conditions.

                  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.

EUROSEAS' VESSELS MAY SUFFER DAMAGE AND IT MAY FACE UNEXPECTED DRYDOCKING COSTS,
WHICH COULD AFFECT ITS CASH FLOW AND FINANCIAL CONDITION.

                  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.

PURCHASING AND OPERATING PREVIOUSLY OWNED, OR SECONDHAND, VESSELS MAY RESULT IN
INCREASED OPERATING COSTS AND VESSELS OFF-HIRE, WHICH COULD ADVERSELY AFFECT
EUROSEAS' 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.

                                       44
EUROSEAS MAY NOT HAVE ADEQUATE INSURANCE TO COMPENSATE IT IF IT LOSES ITS
VESSELS.

                  Euroseas procures hull and machinery insurance, protection and
indemnity insurance, which includes environmental damage and pollution insurance
and war risk insurance and FD&D 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' OPERATIONS OUTSIDE THE UNITED STATES OF AMERICA EXPOSE IT TO GLOBAL
RISKS THAT MAY INTERFERE WITH THE OPERATION OF ITS VESSELS.

                  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 IS INCORPORATED IN THE REPUBLIC OF THE MARSHALL ISLANDS, WHICH DOES NOT
HAVE A WELL-DEVELOPED BODY OF CORPORATE LAW.

                  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.

                                       45
OBLIGATIONS ASSOCIATED WITH BEING A PUBLIC COMPANY WILL REQUIRE SIGNIFICANT
COMPANY RESOURCES AND MANAGEMENT ATTENTION

         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 Securities Exchange Act of 1934, as amended, or
the Exchange Act, and the other rules and regulations of the Securities and
Exchange Commission, or the Commission, 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 our 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 will 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.

         In addition, being a public company could make it more difficult or
more costly for Euroseas to obtain certain types of insurance, including
directors' and officers' liability insurance, and Euroseas may be forced to
accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. The impact of these events could also make
it more difficult for Euroseas to attract and retain qualified persons to serve
on its Board of Directors, board committees or as executive officers.

                                       46
ITEM 5.01 CHANGE IN CONTROL OF REGISTRANT.

On August 25, 2005, Cove, the Cove Principals, Merger Sub and Euroseas signed
the Merger Agreement, pursuant to which Euroseas, through its wholly-owned
subsidiary, Merger Sub, agreed to acquire Cove in exchange for shares of
Euroseas common stock. At the effective time of the Merger, Cove will merge with
and into Merger Sub, the separate existence of Cove will cease, and Merger Sub
will be continued as the Surviving Corporation under the name Cove Apparel,
Inc., as a wholly owned operating subsidiary of Euroseas. In connection with the
Merger, Cove's stockholders will become stockholders of Euroseas. The
outstanding shares of Cove common stock (an aggregate of 10,480,500 shares) will
be converted into an aggregate of 1,079,167 shares of Euroseas common stock, an
exchange ratio in the Merger of 0.102969. As a result, at the effective time of
the Merger, Cove shares will be exchanged for 2.8% of Euroseas shares, assuming
all Cove stockholders participate in the Merger. The transaction contemplated by
the Merger Agreement is intended to be a "tax-free" reorganization pursuant to
the provisions of the Internal Revenue Code of 1986, as amended.

The current directors and executive officers of Merger Sub will become the
directors and executive officers of the survivor, a wholly owned subsidiary of
Euroseas. No agreements exist among present or former controlling stockholders
of Cove or present members of Euroseas with respect to the election of the
members of the Euroseas' Board of Directors, and to Cove's knowledge, no other
agreements exist which might result in a change of control of Cove, except for
the Merger Agreement.

OWNERSHIP OF SURVIVING CORPORATION

Upon consummation of the Merger, the Surviving Corporation will be a 100%
wholly-owned subsidiary of Euroseas.

OWNERSHIP OF EUROSEAS

After the Merger with Cove, the Euroseas Registration Statement covering the
newly issued shares in the Private Placement and to the Cove stockholders will
be filed with the SEC upon closing so those shares can be freely tradable. The
public shares of Cove will trade upon the filing of this 8-K. The following
table shows the capital structure of Euroseas after the Merger not including
warrants issued in the Private Placement and subject to adjustment for stock
splits:

      Euroseas shares outstanding prior to Merger and Private         29,754,166
      Placement
      New shares issued in Private Placement                          7,026,993
      Shares to be issued pursuant to the Merger                      1,079,167
      Total shares outstanding after the Merger and after Private     37,860,326
      Placement

                                       47
Percent owned by Friends (initial owners)2 after Merger and     78.6%
      Private Placement
      Percent owned by former Cove owners after Merger and Private    2.8%
      Placement
      Percent owned by Private Placement investors after Merger and   18.6%
      Private Placement

                      Beneficial Owners

The following table sets forth certain information regarding the beneficial
ownership of Cove's common stock before and after giving effect to the Merger by
each person or entity known, as of June 30, 2005, by it to be the beneficial
owner of more than 5% of the outstanding shares of Cove's common stock, each of
Cove's directors and executive officers, and all of its directors and executive
officers as a group.
Pre-Merger Cove                           Post-Merger
                                                                         Amount of Shares     Pre-Merger Cove   Euroseas Percent
   Title Of Class     Name and Address Of Beneficial Owner              Beneficially Owned    Percent of Class      of Class
   --------------     ------------------------------------              ------------------    ----------------      --------
Common Stock          Kevin Peterson                                           None                  0%               None
                      President, Director, Secretary
                      1003 Dormador, Suite 21
                      San Clemente, CA 92672

Common Stock          Shawn Peterson                                        4,500,000              42.9%                *
                      Treasurer, Director
                      1003 Dormador, Suite 21
                      San Clemente, CA 92672

Common Stock          Daniel Trotter                                        3,000,000              28.6%                *
                      1003 Dormador, Suite 21
                      San Clemente, CA 92672

Common Stock          Jodi Hunter                                           2,700,000              25.8%                *
                      1003 Dormador, Suite 21
                      San Clemente, CA  92672

Common Stock          All directors and officers and 5% owners as a         10,200,000             97.3%
                      group
*Indicates less than 1.0%

Beneficial ownership is determined in accordance with the Rule 13d-3(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and generally
includes voting or investment power with respect to securities. Except as
subject to community property laws, where applicable, the person named above has
sole voting and investment power with respect to all shares of common stock

shown as beneficially owned by him/her. Of the 1,079,167 Euroseas shares to be
exchanged in the Merger for Cove shares, approximately 97.3% or 1,050,029 shares
are issuable to the Cove Principals who as a group owned 97.3% of Cove Shares,
as of June 30, 2005. These Cove Principals have agreed pursuant to the terms of
the Merger Agreement, to pledge or to cause transferees to pledge, 475,000 of
the Euroseas shares issuable to them in the Merger, in exchange for their Cove
shares, as collateral for the indemnity obligations representations and
warranties made by Cove Principals in the Merger Agreement.

     1 Friends Investment Company Inc. was the sole owner of 100% of the shares
     of Euroseas prior to the merger with Cove. Friends is a Marshall Islands
     company. The major shareholder of Friends is John Pittas, the father of
     Aristides Pittas. John Pittas controls 50.1% of the shares of Friends. No
     other shareholder of Friends controls more than 10% of that company.

                                       48
There are no further arrangements or understandings in place that may result in
a subsequent change-in-control of Cove, except that (i) Jodi Hunter expects to
sell 1,800,000 of her shares in a private transaction before the Merger, and
(ii) Shawn Peterson and Daniel Trotter expect to sell approximately 7,300,000 of
their shares in the aggregate in a private transaction before the Merger.
Certain of the persons who have purchased these shares from the Cove Principals
have assumed the obligation of the Cove Principals to pledge 475,000 Euroseas
shares which would have been issued to the Cove Principals under the Merger
Agreement, as collateral for the indemnity obligations of the Cove Principals in
the Merger Agreement and have executed pledge agreements in favor of Euroseas to
implement the pledge obligations of the Cove Principals assumed by these
purchasers.

          MANAGEMENT OF EUROSUB AFTER THE EFFECTIVE DATE OF THE MERGER

                   EuroSub's Directors And Executive Officers

In connection with the Merger, all of the directors and executive officers of
will become directors and executive officers of the Surviving Corporation and
the Cove officers and directors will resign as the officers and directors of
Cove. The following sets forth the name and position of each of Euroseas'
directors and executive officers immediately after the effective date of the
Merger.

NAME                           AGE     POSITION

Aristides J. Pittas            46      Chairman, President and CEO; Director
Anastasios Aslidis             45      CFO and Treasurer; Director
Stefania Karmiri               37      Secretary

Aristides J. Pittas has been a member of the board of directors and Chairman and
CEO of Euroseas since its inception on May 5, 2005. Since 1997, Mr. Pittas has
also been the President of Eurochart S.A., an affiliate of Euroseas. Eurochart
is a shipbroking company specializing in chartering and selling and purchasing
ships. Since 1997, Mr. Pittas has also been the President of Eurotrade, a ship
operating company and an affiliate of Euroseas. Since January 1995, Mr. Pittas
has been the Managing Director of Eurobulk Ltd., an affilate of Euroseas.
Eurobulk is a dry bulk shipping company, which provides ocean transportation
solutions for international commodity companies. From September 1991 to December

                                       49
1994, Mr. Pittas was the Vice President of Oceanbulk Maritime SA, a company that
concentrates in ship management. From March 1990 to August 1991, Mr. Pittas
served both as the Assistant to the General Manager and the Head of the Planning
Department of Varnima International SA, a shipping company operating tanker
vessels. From June 1987 until February 1990, Mr Pittas was the head of the
Central Planning department of Eleusis Shipyards S.A. From January 1987 to June
1987, Mr. Pittas served as Assistant to the General Manger of Chios Navigation
Shipping Company in London, a company that provides ship management services.
From December 1985 to January 1987, Mr. Pittas worked in the design department
of Eleusis Shipyards S.A. where he focused on shipbuilding and ship repair. Mr.
Pittas has a B.Sc. in Marine Engineering from University of Newcastle -
Upon-Tyne and a MSc in both Ocean Systems Management and Navel Architecture and
Marine Engineering from the Massachusetts Institute of Technology.

Dr. Anastasios Aslidis has been a partner at Marsoft, an international
consulting firm focusing on investment and risk management in the maritime
industry since 1989. As of August 2005, he has accepted an offer to join
Euroseas as a director and the CFO. Dr. Aslidis has more than 17 years of
experience in the maritime industry. Since 2003, he has been working on
financial risk management methods for shipowners and banks lending to the
maritime industry, especially as pertaining to compliance to the Basel II
Capital Accords. He has been consultant to the Board of Directors of shipping
companies (public and private) advising in strategy development, asset selection
and investment timing. Between 1993 and 2003, as part of his work at Marsoft, he
worked on various projects including development of portfolio and risk
management methods for shipwoners, establishment of investments funds and
structuring private equity in the maritime industry and business development for
Marsoft's services. Between 1991 and 1993, Dr. Aslidis work on the economics of
the offshore drilling industry. Between 1989 and 1991, he worked on the
development of a trading support system for the dry bulk shipping industry on
behalf of a major European owner. Dr. Aslidis holds a diploma in Naval
Architecture and Marine Engineering from the National Technical University of
Athens (1983), M.S. in Ocean Systems Management (1984) and Operations Research
(1987) from MIT, and a Ph.D. in Ocean Systems Management (1989) also from MIT.

Stephania Karmiri has been Secretary of Euroseas since its inception on May 5,
2005. Since July 1995, Mrs Karmiri has been executive secretary to Eurobulk
Ltd., an affilate of Euroseas. Eurobulk is a dry bulk shipping company, which
provides ocean transportation solutions for international commodity companies.
At Eurobulk Mrs. Karmiri has been responsible for dealing with sale and purchase
transactions, vessel registrations/deletions, bank loans, supervision of office
administration and office/vessel telecommunication. From May 1992 to June 1995,
she was secretary to the technical department of Oceanbulk Maritime SA, a ship
management company. From 1988 to 1992, Mrs. Karmiri served as assistant to
brokers for Allied Shipbrokers, a company that provides shipbroking services to
sale and purchase transactions. Mrs Karmiri has taken assistant accountant and
secretarial courses from Didacta college.

                                       50
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Euroseas' bylaws provide that any person who is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another, partnership, joint venture, trust or other
enterprise shall be entitled to be indemnified by the Corporation upon the same
terms, under the same conditions, and to the same extent as authorized by
Section 60 of the Business Corporation Act of the Marshall Islands ("BCA"), if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

Section 60 of the BCA provides as follows:

Indemnification of directors and officers.

(1)    Actions not by or in right of the corporation. A corporation shall have
       power to indemnify any person who was or is a party or is threatened to
       be made a party to any threatened, pending or completed action, suit or
       proceeding whether civil, criminal, administrative or investigative
       (other than an action by or in the right of the corporation) by reason of
       the fact that he is or was a director or officer of the corporation, or
       is or was serving at the request of the corporation as a director or
       officer of another corporation, partnership, joint venture, trust or
       other enterprise, against expenses (including attorneys' fees),
       judgments, fines and amounts paid in settlement actually and reasonably
       incurred by him in connection with such action, suit or proceeding if he
       acted in good faith and in a manner he reasonably believed to be in or
       not opposed to the best interests of the corporation, and, with respect
       to any criminal action or proceeding, had no reasonable cause to believe
       his conduct was unlawful. The termination of any action, suit or
       proceeding by judgment, order, settlement, conviction, or upon a plea of
       no contest, or its equivalent, shall not, of itself, create a presumption
       that the person did not act in good faith and in a manner which he
       reasonable believed to be in or not opposed to the bests interests of the
       corporation, and, with respect to any criminal action or proceedings, had
       reasonable cause to believe that his conduct was unlawful.

(2)    Actions by or in right of the corporation. A corporation shall have the
       power to indemnify any person who was or is a party or is threatened to
       be made a party to any threatened, pending or completed action or suit by
       or in the right of the corporation to procure a judgment in its favor by
       reason of the fact that he is or was a director or officer of the
       corporation, or is or was serving at the request of the corporation, or
       is or was serving at the request of the corporation as a director or
       officer of another corporation, partnership, joint venture, trust or
       other enterprise against expenses (including attorneys' fees) actually
       and reasonably incurred by him or in connection with the defense or
       settlement of such action or suit if he acted in good faith and in a
       manner he reasonably believed to be in or not, opposed to the best
       interests of the corporation and except that no indemnification shall be
       made in respect of any claims, issue or matter as to which such person
       shall have been adjudged to be liable for negligence or misconduct in the
       performance of his duty to the corporation unless and only to the extent
       that the court in which such action or suit was brought shall determine
       upon application that, despite the adjudication of liability but in view
       of all the circumstances of the case, such person is fairly and
       reasonably entitled to indemnity for such expenses which the court shall
       deem proper.

                                       51
(3)    When director or officer successful. To the extent that director or
       officer of a corporation has been successful on the merits or otherwise
       in defense of any action, suit or proceeding referred to in subsections
       (1) or (2) of this section, or in the defense of a claim, issue or matter
       therein, he shall be indemnified against expenses (including attorneys'
       fees) actually and reasonably incurred by him in connection therewith.

(4)    Payment of expenses in advance. Expenses incurred in defending a civil or
       criminal action, suit or proceeding may be paid in advance of the final
       disposition of such action, suit or proceeding as authorized by the Board
       of Directors in the specific case upon receipt of an undertaking by or on
       behalf of the director or officer to repay such amount if it shall
       ultimately be determined that he is not entitled to be indemnified by the
       corporation as authorized in this section.

(5)    Indemnification pursuant to other rights. The indemnification and
       advancement of expenses provided by, or granted pursuant to, the other
       subsections of this section shall not be deemed exclusive of any other
       rights to which those seeking indemnification or advancement of expenses
       may be entitled under any bylaw, agreement, vote of stockholders or
       disinterested directors or otherwise, both as to action in his official
       capacity and as to action in another capacity while holding such office.

(5)    Continuation of indemnification. The indemnification and advancement of
       expenses provided by, or granted pursuant to, this section shall, unless
       otherwise provided when authorized or ratified, continue as to a person
       who has ceased to be a director, officer, employee or agent and shall
       inure to the benefit of the heirs, executors and administrators of such a
       person.

(6)    Insurance. A corporation shall have power to purchase and maintain
       insurance or behalf of any person who is or was a director or officer of
       the corporation or is or was serving at the request of the corporation as
       a director or officer against any liability asserted against him and
       incurred by him in such capacity whether or not the corporation would
       have the power to indemnify him against such liability under the
       provisions of this section.

POST-MERGER DESCRIPTION OF SECURITIES

Common Stock

Post-merger, Euroseas is authorized to issue up to 100,000,000 shares of common
stock, par value $0.01 per share, of which 36,781,159 are currently issued and
outstanding which includes the 7,026,993 shares sold in the recently completed
Euroseas Private Placement. Each outstanding share of common stock will be
entitled to one vote, either in person or by proxy, on all matters that may be
voted upon by their holders at meetings of the shareholders. Holders of
Euroseas' common stock (i) have equal ratable rights to dividends from funds
legally available therefore, if declared by the Board of Directors; (ii) are
entitled to share ratably in all of Euroseas' assets available for distribution
upon liquidation, dissolution or winding up; and (iii) do not have preemptive,
subscription or conversion rights or redemption or sinking fund provisions. All
issued shares of Euroseas' common stock when issued will be fully paid for and
non-assessable.

                                       52
Preferred Stock

Post-merger, Euroseas is authorized to issue 20,000,000 shares of preferred
stock, par value $0.01 per share, of which no shares are currently issued and
outstanding. The preferred stock may be issued in one or more series and
Euroseas' Board of Directors, without further approval from its shareholders, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights, liquidation preferences and other rights and
restrictions relating to any series. Issuances of preferred stock, while
providing flexibility in connection with possible financings, acquisitions and
other corporate purposes, could, among other things, adversely affect the voting
power of the holders of Euroseas common stock.

Certain Provisions of Euroseas' Articles of Incorporation and Bylaws

Certain provisions of Marshall Islands law and Euroseas' articles of
incorporation and bylaws could make more difficult the acquisition of it by
means of a tender offer, a proxy contest, or otherwise, and the removal of
incumbent officers and directors. These provisions are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Euroseas. Euroseas' articles of
incorporation and bylaws include provisions that:

     o    allow the Board of Directors to issue, without further action by the
          shareholders, up to 20,000,000 shares of undesignated preferred stock;
     o    require that special meetings of its shareholders be called only by
          the Board of Directors or the Chairman of the Board; and
     o    establish an advance notice procedure for shareholder proposals to be
          brought before an annual meeting of shareholders.

Euroseas' articles of incorporation also prohibit it from engaging in any
"business combination" with any interested shareholder for a period of three
years following the date the shareholder became an interested shareholder,
unless:

     o    prior to such time, the Board of Directors of Euroseas approved either
          the Business Combination or the transaction which resulted in the
          shareholder becoming an Interested Shareholder; or

     o    upon consummation of the transaction which resulted in the shareholder
          becoming an Interested Shareholder, the Interested Shareholder owned
          at least 85% of the voting stock of Euroseas outstanding at the time
          the transaction commenced, excluding for purposes of determining the
          number of shares outstanding those shares owned (i) by persons who are
          directors and also officers and (ii) employee stock plans in which
          employee participants do not have the right to determine
          confidentially whether shares held subject to the plan will be
          tendered in a tender or exchange offer; or

                                       53
o    at or subsequent to such time, the Business Combination is approved by
          the Board of Directors and authorized at an annual or special meeting
          of shareholders, and not by written consent, by the affirmative vote
          of at least 51% of the outstanding voting stock that is not owned by
          the interested shareholder; or

     o    the shareholder became an Interested Shareholder prior to the
          consummation of the initial public offering of Euroseas's common stock
          under the United States Securities Act of 1933, as amended.

These restrictions shall not apply if:

     o    A shareholder becomes an Interested Shareholder inadvertently and (i)
          as soon as practicable divests itself of ownership of sufficient
          shares so that the shareholder ceases to be an Interested Shareholder;
          and (ii) would not, at any time within the three-year period
          immediately prior to a Business Combination between Euroseas and such
          shareholder, have been an Interested Shareholder but for the
          inadvertent acquisition of ownership; or

     o    The Business Combination is proposed prior to the consummation or
          abandonment of and subsequent to the earlier of the public
          announcement or the notice required hereunder of a proposed
          transaction which (i) constitutes one of the transactions described in
          the following sentence; (ii) is with or by a person who either was not
          an Interested Shareholder during the previous three years or who
          became an Interested Shareholder with the approval of the Board; and
          (iii) is approved or not opposed by a majority of the members of the
          Board then in office (but not less than one) who were Directors prior
          to any person becoming an Interested Shareholder during the previous
          three years or were recommended for election or elected to succeed
          such Directors by a majority of such Directors. The proposed
          transactions referred to in the preceding sentence are limited to:

               (a)  a merger or consolidation of Euroseas (except for a merger
                    in respect of which, pursuant to the BCA, no vote of the
                    shareholders of Euroseas is required);

               (b)  a sale, lease, exchange, mortgage, pledge, transfer or other
                    disposition (in one transaction or a series of
                    transactions), whether as part of a dissolution or
                    otherwise, of assets of Euroseas or of any direct or
                    indirect majority-owned subsidiary of Euroseas (other than
                    to any direct or indirect wholly-owned subsidiary or to
                    Euroseas) having an aggregate market value equal to 50% or
                    more of either that aggregate market value of all of the
                    assets of Euroseas determined on a consolidated basis or the
                    aggregate market value of all the outstanding shares; or

               (c)  a proposed tender or exchange offer for 50% or more of the
                    outstanding voting shares of Euroseas.

                                       54
Euroseas' articles of incorporation defines a "business combination" to include:

     o    Any merger or consolidation of Euroseas or any direct or indirect
          majority-owned subsidiary of Euroseas with (i) the Interested
          Shareholder or any of its affiliates, or (ii) with any other
          corporation, partnership, unincorporated association or other entity
          if the merger or consolidation is caused by the Interested
          Shareholder;

     o    Any sale, lease, exchange, mortgage, pledge, transfer or other
          disposition (in one transaction or a series of transactions), except
          proportionately as a shareholder of Euroseas, to or with the
          Interested Shareholder, whether as part of a dissolution or otherwise,
          of assets of Euroseas or of any direct or indirect majority-owned
          subsidiary of Euroseas which assets have an aggregate market value
          equal to 10% or more of either the aggregate market value of all the
          assets of Euroseas determined on a consolidated basis or the aggregate
          market value of all the outstanding shares;

     o    Any transaction which results in the issuance or transfer by Euroseas
          or by any direct or indirect majority-owned subsidiary of Euroseas of
          any shares, or any share of such subsidiary, to the Interested
          Shareholder, except: (i) pursuant to the exercise, exchange or
          conversion of securities exercisable for, exchangeable for or
          convertible into shares, or shares of any such subsidiary, which
          securities were outstanding prior to the time that the Interested
          Shareholder became such; (ii) pursuant to a merger with a direct or
          indirect wholly-owned subsidiary of Euroseas solely for purposes of
          forming a holding company; (iii) pursuant to a dividend or
          distribution paid or made, or the exercise, exchange or conversion of
          securities exercisable for, exchangeable for or convertible into
          shares, or shares of any such subsidiary, which security is
          distributed, pro rata to all holders of a class or series of shares
          subsequent to the time the Interested Shareholder became such; (iv)
          pursuant to an exchange offer by Euroseas to purchase shares made on
          the same terms to all holders of said shares; or (v) any issuance or
          transfer of shares by Euroseas; provided however, that in no case
          under items (iii)-(v) of this subparagraph shall there be an increase
          in the Interested Shareholder's proportionate share of the any class
          or series of shares;

     o    Any transaction involving Euroseas or any direct or indirect
          majority-owned subsidiary of Euroseas which has the effect, directly
          or indirectly, of increasing the proportionate share of any class or
          series of shares, or securities convertible into any class or series
          of shares, or shares of any such subsidiary, or securities convertible
          into such shares, which is owned by the Interested Shareholder, except
          as a result of immaterial changes due to fractional share adjustments
          or as a result of any purchase or redemption of any shares not caused,
          directly or indirectly, by the Interested Shareholder; or

     o    Any receipt by the Interested Shareholder of the benefit, directly or
          indirectly (except proportionately as a shareholder of Euroseas), of
          any loans, advances, guarantees, pledges or other financial benefits
          (other than those expressly permitted above) provided by or through
          Euroseas or any direct or indirect majority-owned subsidiary.

Euroseas' articles of incorporation defines an "interested stockholder" as any
person (other than Euroseas and any direct or indirect majority-owned subsidiary
of Euroseas) that:

     o    is the owner of 15% or more of the outstanding voting shares of
          Euroseas; or

     o    is an affiliate or associate of Euroseas and was the owner of 15% or
          more of the outstanding voting shares of Euroseas at any time within
          the three-year period immediately prior to the date on which it is
          sought to be determined whether such person is an Interested
          Shareholder; and the affiliates and associates of such person;
          provided, however, that the term "Interested Shareholder" shall not
          include any person whose ownership of shares in excess of the 15%
          limitation set forth herein is the result of action taken solely by
          Euroseas; provided that such person shall be an Interested Shareholder
          if thereafter such person acquires additional shares of voting shares
          of Euroseas, except as a result of further Company action not caused,
          directly or indirectly, by such person.

                                       55
COVE AND EUROSEAS AUDITED FINANCIAL STATEMENTS

The financial statements of Cove for the year ended September 30, 2004 are
attached hereto as Exhibit A. These statements have been audited by Hall &
Company independent auditors. The unaudited financial statements of Cove for the
nine months ended June 30, 2005 are attached hereto as Exhibit C. You are
encouraged to review the financial statements and related notes.The finanical
statements for Euroseas will be filed by amdendment.

ITEM 5.02- DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.

(a) Resignation of Officers or Directors. Effective as of June 20, 2005, Jodi
Hunter resigned as a director of Cove and she will resign as an officer prior to
the effective time of the Merger. Prior to the effective time of the Merger,
Shawn Peterson will resign as an officer and director of Cove. Kevin Peterson
will resign as an officer and director at the effective time of the Merger.

(b) Appointment of Officers or Directors. Immediately after the effective time
of the Merger, the officers and directors of EuroSub, Euroseas' wholly owned
subsidiary, will be the officers and directors of the Surviving Corporation.

     ITEM 5.03 - AMENDMENTS TO CERTIFICATE OF INCOPORATION OR BYLAWS; CHANGE IN
FISCAL YEAR END.

Upon consummation of the Merger, the certificate of incorporation and bylaws of
EuroSub, Euroseas' wholly owned subsidiary, will be the articles and bylaws of
the Surviving Corporation. Cove's fiscal year ends September 30. Each of
EuroSub's and Euroseas' fiscal years end December 31.

                  ITEM 9.01- FINANCIAL STATEMENTS AND EXHIBITS.

(a): Financial Statements of Businesses Acquired. The audited financial
statements of Cove Apparel, Inc. for the year ended September 30, 2004 as
Exhibit A. The unaudited financial statements of Cove for the ninemonths ended
June 30, 2005 are attached hereto as Exhibit C.

(b):     Other Exhibits:
         --------------

         2.1      Agreement and Plan of Merger, dated as of August 25, 2005, by
                  and among Cove Apparel, Inc., Principal Shareholders of Cove
                  Apparel, Inc., Euroseas Ltd. and Euroseas Acquisition Company
                  Inc.

         3.1      Articles of Incorporation of Euroseas Ltd.

         3.2      Bylaws of Euroseas Ltd.

                                       56
10.1     Form of Euroseas Securities Purchase Agreement

         10.2     Form of Euroseas Registration Rights Agreement

         10.3     Form of Euroseas Warrant Agreement

         10.4     Form of Friends Lock Up Agreement

A.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                Cove Apparel, Inc.

                                                By:      /s/ Kevin Peterson
                                                --------------------------------
                                                Name:    Kevin Peterson
                                                Title:    President

Dated: August 31, 2005

                                       57
Exhibit Index

         2.1      Agreement and Plan of Merger, dated as of August 25, 2005, by
                  and among Cove Apparel, Inc., Principal Shareholders of Cove
                  Apparel, Inc., Euroseas Ltd. and Euroseas Acquisition Company
                  Inc.

         3.1      Articles of Incorporation of Euroseas Ltd.

         3.2      Bylaws of Euroseas Ltd.

         10.1     Form of Euroseas Securities Purchase Agreement

         10.2     Form of Euroseas Registration Rights Agreement

         10.3     Form of Euroseas Warrant Agreement

         10.4     Form of Friends Lock Up Agreement

                                       58
LA-96941 v4 1003965-0202

                             EXHIBIT A TO ITEM 9.01

                     COVE APPAREL, INC. FINANCIAL STATEMENTS

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE, "ANTICIPATE",
"PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR SIMILAR TERMS,
VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD- LOOKING
STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR
MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY
MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE
IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE
INFERRED FROM THOSE FORWARD -LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD -LOOKING STATEMENTS SPECIFIED
IN THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE
SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE,
INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND
INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND
SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES REQUIRE THE
EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE
OUTCOME MAY VARY SUBSTAN'T'IALLY FROM ANTICIPATED OR PROJECTED RESULTS, AND,
ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE
FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE
ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE
FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY
SUCH FORWARD-LOOKING STATEMENTS.

CRITICAL ACCOUNTING POLICY AND ESTIMATES

Our Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including those related to
revenue recognition, accrued expenses, financing operations, and contingencies
and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates as to
the appropriate amounts to accrue for accounting and legal expenses. These
accounting policies are described at relevant sections in this discussion and
analysis and in the notes to them consolidated financial statements included in
our Annual Report on Form 10-KSB for the year ended September 30, 2004.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

                                       59
LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2004, we had cash of $15,186 and $6,500 representing
accounts receivable. We do not believe that our available cash is sufficient to
pay our day-to-day expenditures for the next twelve months. As of September 30,
2004, our total liabilities were $ 23,732, which was represented by $21,497 of
accounts payable and accrued payroll and related expenses of $2,236.

RESULTS OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 30, 2004 AS COMPARED TO THE YEAR ENDED SEPTEMBER
30, 2003.

REVENUES

We realized $6,500 in revenues during the year ended September 30, 2004. This is
in comparison to $8,466 in revenues we realized during the year ended September
30, 2003. We hope to continue to generate additional revenues as we commence our
sales operations from our website.

OPERATING EXPENSES

For the year ended September 30, 2004, our total expenses were $83,228, which
were represented solely by general and administrative expenses. After $800 as
provision for income taxes, we had a net loss of $77,528 for the year ended
September 30, 2004. This is in comparison to the year ended September 30, 2003,
where our total expenses were $43,102, which were represented by general and
administrative expenses. Our net loss increased over the most recent period
because our revenues decreased due to lower sales and our operating expenses
increased.

FOR THE PERIOD FROM OUR INCEPTION ON DECEMBER 13, 2001 TO SEPTEMBER 30, 2004

REVENUES

We realized $20,966 in revenues for the period from our inception on December
13, 2001 to September 30, 2004.

OPERATING EXPENSES

For the period from our inception on December 13, 2001 to September 30, 2004,
our total expenses were $177,495, which were represented solely by general and
administrative expenses. Therefore, from our inception on December 13, 2001 to
September 30, 2004, we experienced a cumulative net loss of $157,329, which
includes $800 as provision for income taxes.

OFF-BALANCE SHEET ARRANGEMENTS

There are no off balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.

                                       60
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

We have generated minimal revenues from operations. In management's opinion, to
effectuate our business plan in the next twelve months, the following events
should occur or we should reach the following milestones in order for us to
become profitable:

         1.       We must continue to expand our distribution network in the
                  Caribbean Islands to market, distribute and sell surf-inspired
                  clothing and other accessories that we distribute.

         2.       We must continue to develop relationships with third party
                  surf wear and accessories manufacturers to expand the product
                  lines that we distribute.

         3.       We must continue developing our own collection of men's
                  apparel under a new brand name, which we will sell and
                  distribute throughout the United States, Japan and our
                  established distribution network in the Caribbean.

         4.       We must begin researching potential acquisitions or other
                  suitable business partners which will assist us in realizing
                  our business objectives. We hope to acquire several, smaller
                  and more established surf apparel companies with
                  already-established product lines.

We had cash of $15,186 as of September 30, 2004. In the opinion of management,
available funds will not satisfy our working capital requirements for the next
twelve months. Our forecast for the period for which our financial resources
will be adequate to support our operations involves risks and uncertainties and
actual results could fail as a result of a number of factors.

We need to raise additional capital for our operations, and we believe that such
additional capital may be raised through public or private financing as well as
borrowings and other sources. We hope that we will have access to capital
financing because our common stock is eligible for quotation on the OTC Bulletin
Board, although we cannot guaranty that additional funding will be available on
favorable terms, if at all. If adequate funds are not available, then our
ability to expand our operations may be adversely affected. If adequate funds
are not available, we hope that our officers and directors will contribute funds
to pay for our expenses, although we cannot guarantee that our officers will pay
for those expenses.

We are not currently conducting any research and development activities. We do
not anticipate that we will purchase or sell any significant equipment. In the
event that we generate significant revenues and expand our operations, then we
may need to hire additional employees or independent- contractors as well as
purchase or lease additional equipment.

RECENT DEVELOPMENTS

On August 25, 2005, the Company, certain stockholders of the Company, Euroseas
Acquisition Company Inc., a Delaware corporation ("Merger Sub") and Euroseas
Ltd., a Marshall Islands corporation ("Euroseas"), signed an Agreement and Plan
of Merger (the "Merger Agreement"), pursuant to which Euroseas, through its
wholly-owned subsidiary, Merger Sub, agreed to acquire the Company in exchange
for shares of Euroseas common stock (the "Merger"). At the effective time of the
Merger (as defined in the Merger Agreement), the Company is to be merged with
and into Merger Sub. The separate existence of the Company will cease, and
Merger Sub will be continued as the surviving corporation (the "Surviving
Corporation") under the name Cove Apparel, Inc., as a wholly owned operating
subsidiary of Euroseas. All the shares of Cove common stock (an aggregate of
10,480,500 shares) will be converted into 1,079,167 share of Euroseas common
stock, an exchange ratio in the Merger of 0.102969 (the "Exchange Ratio"). After
the effective time of the Merger, Cove will continue in its existing line of
business for such period of time as is necessary in order to facilitate a tax
free reorganization in the Merger.

                                       61
ITEM 7.  FINANCIAL STATEMENTS

The financial statements required by Item 7 are presented in the following
order:

                               COVE APPAREL, INC.
                          (A Development Stage Company)
                              FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

                                       62
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

January 10, 2005
Board of Directors and Stockholders
Cove Apparel, Inc.

We have audited the balance sheet of Cove Apparel, Inc. (a development stage
company) as of September 30, 2004, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Cove Apparel, Inc. as of September 30,
2003, were audited by other auditors whose report dated December 8, 2003,
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the 2004 financial statements referred to above present fairly,
in all material respects, the financial position of Cove Apparel, Inc. (a
development- stage company) as of September 30, 2004, and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raise substantial doubt about- its
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                                                 HALL & COMPANY

                                       63
COVE APPAREL, INC.
                          (A Development Stage Company)

                                  BALANCE SHEET

                               SEPTEMBER 30, 2004

                                     ASSETS

CURRENT ASSETS
   Cash                                                           $      15,186
   Accounts receivable, net                                               6,500
                                                                  --------------

     Total assets                                                 $      21,686
                                                                  ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
   Accounts payable and accrued expenses                          $      21,497
   Accrued payroll and related expenses
                                                                          2,236

     Total current liabilities                                           23,732

CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
   Preferred stock, $.001 par value;
     Authorized shares -- 5,000,000
     Issued and outstanding share -- 0
   Common stock, $.001 par value;
     Authorized shares -- 50,000,000
     Issued and outstanding shares -- 10,480,500                         10,481
   Additional paid-in capital                                           144,802
   Deficit accumulated during the development stage                    (157,329)
                                                                  --------------

      Total stockholders' (deficit)                                      (2,046)
                                                                  --------------

        Total liabilities and stockholders' (deficit)             $      21,686
                                                                  ==============

                See accompanying notes to financial statements.

                                       64
COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

                     YEAR ENDED SEPTEMBER 30, 2004 AND 2003
YEAR  ENDED             YEAR ENDED            INCEPTION -
                                                       SEPTEMBER  30, 2004     SEPTEMBER 30, 2003      SEPT 30, 2004
                                                       -------------------     ------------------     ----------------
NET REVENUES                                           $             6,500     $            8,466     $        20,966

SELLING, GENERAL AND ADMINISTRATIVE                                 83,228                 51,568             177,495
                                                       -------------------     ------------------     ----------------

LOSS BEFORE PROVISION FOR INCOME TAXES                             (76,728)               (43,102)           (156,529)
                                                       -------------------     ------------------     ----------------

PROVISION FOR INCOME TAXES                                             800                    ---                 800
                                                       -------------------     ------------------     ----------------

NET LOSS                                               $           (77,528)    $          (43,102)    $      (157,329)
                                                       ===================     ==================     =================

NET LOSS PER COMMON SHARE -- BASIC AND DILUTED
                                                       $              (---)    $            (0.01)    $         (0.02)
                                                       ===================     ==================     =================

WEIGHTED AVERAGE OF COMMON SHARES -- BASIC AND DILUTED
                                                                10,480,500              8,203,032           8,789,000
                                                       ===================     ==================     =================
See accompanying notes to financial statements.

                                       65
COVE APPAREL, INC.
                          (A Development Stage Company)

                             STATEMENT OF CHANGES IN
                  STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                     YEAR ENDED SEPTEMBER 30, 2004 AND 2003
DEFICIT ACCUM.
                                             COMMON STOCK                                 DURING
                                      ----------------------------       PAID IN        DEVELOPMENT
                                         SHARES           AMOUNT         CAPITAL           STAGE          TOTAL
                                      ------------     -----------    -------------    ------------    -----------
Balance, September 30, 2002              7,800,000     $     7,800    $      27,433    $    (36,699)   $    (1,466)

Additional paid in capital in
   exchange for office expenses
                                               ---             ---            1,200             ---          1,200

Additional   paid  in   capital  in
   exchange for services
    from officers                              ---             ---           20,800             ---         20,800

Issuance  of common  stock for cash
   at  $0.001  per  share   (August
   2003)                                 2,890,500           2,891           93,459             ---         96,350

Redemption   &   cancellation    of
   common  stock for cash at $0.001
   per share (September 2003)
                                          (210,000)           (210)          (6,790)            ---         (7,000)

Net loss for the year ended
   September 30, 2003                          ---             ---              ---         (43,102)       (43,102)
                                       -----------     -----------    -------------    ------------    -----------

Balance, September 30, 2003             10,480,500     $    10,481   $      136,102    $    (79,801)   $    66,782
                                      ============     ===========    =============    ============    ===========

Additional paid in capital in
   exchange for office expenses
                                               ---             ---              900             ---            900

Additional   paid  in   capital  in
   exchange for services
   from officers                               ---             ---             7,800            ---          7,800

Net loss for the year ended
   September 30, 2004                          ---             ---              ---         (77,528)       (77,528)
                                       -----------     -----------    -------------    ------------    -----------

Balance, September 30, 2004             10,480,500     $    10,481    $     144,802    $   (157,329)   $    (2,046)
                                      ============     ===========    =============    ============    ===========
See accompanying notes to financial statements.

                                       66
COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS

                     YEAR ENDED SEPTEMBER 30, 2004 AND 2003
SEPTEMBER 30,           INCEPTION -
                                                                           ---------------------------     SEPT. 30,
                                                                                2004           2003          2004
                                                                           ------------   ------------    ----------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                $    (77,528)  $    (43,102)   $ (157,329)
   Adjustments to reconcile net loss to net cash used in operating
     activities
       Expenses paid with common stock                                              ---            ---         2,000
       Expenses paid by officer                                                     900          1,200         3,000
       Services provided by officers                                              7,800         20,800
                                                                                                              45,933
       Changes in operating assets and liabilities
         Increase in accounts receivable                                         (6,500)           ---        (6,500)
         Increase (decrease) in prepaid merchandise                               5,000         (5,000)          ---
         Increase (decrease) in accounts payable
            and accrued expenses                                                  5,638          7,821        21,496
             Increase in accrued payroll and related expenses                     2,236                        2,236
             Decrease in due to stockholder                                      (7,000)                      (7,000)
                                                                                                   ---
         Increase (decrease) in related party payable                            (5,500)         5,500           ---
                                                                           ------------   -------------   ----------

           Net cash used in operating activities                                (74,954)        (7,781)      (96,164)
                                                                           ------------   -------------   ----------

CASH FLOWS FROM FINANCING ACTVITIES
   Proceeds from issuance of common stock                                           ---         96,350       111,350
                                                                           ------------   -------------   ----------

NET INCREASE (DECREASE) IN CASH                                                 (74,954)        88,569        15,186

CASH, beginning of period                                                        90,140          1,571           ---
                                                                           ------------   -------------   ----------

CASH, end of period                                                        $     15,186   $     90,140    $   15,186
                                                                           ============   =============   ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Income taxes paid                                                       $        800   $        ---    $      800
                                                                           ============   =============   ==========
   Interest paid                                                           $        ---   $        ---    $      ---
                                                                           ============   =============   ==========
See accompanying notes to financial statements.

                                       67
COVE APPAREL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2004

NOTE 1 - NATURE OF OPERATIONS

Cove Apparel, Inc. (the "Company") is in the process of developing a line of
casual wear to manufacture and distribute. The Company was incorporated in the
state of Nevada on December 13, 2001 and is headquartered in San Clemente,
California. As of September 30, 2004, the Company has produced revenues of
$20,966 since inception but will continue to report as a developmental stage
company until significant revenues are produced.

NOTE 2 - BASIS OF PRESEN'T'ATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant- accounting policies of Cove Apparel, Inc. is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
who is responsible for the integrity and objectivity of the financial
statements. These accounting policies conform to generally accepted accounting
principles in the United States of America and have been consistently applied in
the preparation of the financial statements.

CASH EQUIVALENT'S - For purposes of the balance sheet and statement of cash
flows, the Company considers all. highly liquid debt instruments purchased with
maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE - Receivables, if any, represent valid claims against
debtors for sales or other charges arising on or before the balance -sheet date
and are reduced to their estimated net realizable value.

INVENTORY - Inventory is stated at the lower of cost or market and is relieved
on the first - in, first--out method.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of the Company's
financial instruments, which includes cash, accounts receivable, accounts
payable and accrued expenses approximate their fair value due to the short
period to maturity of these instruments.

REVENUE RECOGNITION - The Company generally recognizes revenues when products
provided to its customers are completed, fees are fixed or determinable, and
collectibility is reasonable assured. The Company's standard shipping terms are
FOB shipping point.

                                       68
INCOME TAXES - The Company recognizes deferred tax assets and liabilities based
on differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. The Company provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.

NET LOSS PER COMMON SHARE - The Company has adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 requires the reporting of basic and diluted earnings /loss per share.
Basic loss per share is calculated by dividing net income (Loss) by the weighted
average number of outstanding common shares during the year.

COMPREHENSIVE INCOME/LOSS - The Company applies Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SPAS 13011).
SFAS 130 establishes standards for the reporting and display of comprehensive
income, requiring its components to be reported in a financial statement that is
displayed with the same prominence as other financial statements. For the
periods ended September 30, 2004 and 2003, the Company had no other components
of its comprehensive loss other than net loss as reported on the statements of
operations.

ACCOUNTING ES'T'IMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect- the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

NOTE 3 - CONTINGENCIES AND GOING CONCERN

As shown in the accompanying financial statements, the Company has incurred a
net operating loss of $157,329 since inception through September 30, 2004.

The company is subject to those risks associated with development stage
companies. The Company has sustained losses since inception and additional
financing will be required by the Company to fund its development- activities
and to support operations. However, there is no assurance that the Company will
be able to obtain additional financing. Furthermore, there is no assurance that
rapid technological changes, changing customer needs and evolving industry
standards will enable the Company to introduce new products and services on a
continual and timely basis so that profitable operations can be attained.
Management plans to mitigate its losses in the near term through the further
development and marketing of its brand name and increase in apparel lines. In
addition, should management determine it necessary, the Company will seek to
obtain additional financing through the issuance of common stock and increase of
ownership equity. Currently, the Company is dependent on two suppliers, with
which there are no formal written agreements.

                                       69
NOTE 4 - RELATED PARTY TRANSACTIONS

Office Space

The Company occupied office space provided by an officer from October 2003
through June 2004. Accordingly, occupancy costs of $100 per month have been
allocated to the Company. This expense of $900 is included in total occupancy
expenses shown in the accompanying statement of operations for the nine months
ended June 30, 2004, and were considered additional contributions of capital by
the officer and the Company.

Related Party Payable

An officer made a loan to the Company in the amount- of $5,500. The loan was
non-interest bearing was repaid in full in June 2004.

Due To Stockholder

On September 1, 2003 the Company redeemed and cancelled 210,000 shares of its
common stock from one stockholder in exchange for $7,000.

NOTE 5 - CONSULTING AGREEMENT

On February 19, 2004, the Company entered into an agreement to obtain financial
consulting services through September 1, 2004 for $25,000 to be paid in five
equal monthly installments of $5,000. The Company completed its financial
obligation to the consulting company in August 2004.

NOTE 6 - PROVISION FOR INCOME TAXES

As of September 30, 2004, the Company had a net federal operating loss
carryforward of $157,329, expiring between 2021-2024. During the year ended
September 30, 2004, the valuation allowance increased by $26,360. Deferred tax
assets resulting from the net operating losses are reduced by a valuation
allowance, when, in the opinion of management, utilization is not reasonably
assured. Being headquartered in California requires the Company to pay the
state's minimum franchise tax of $800.

The provision for income taxes is summarized as follows:

Net Operating loss carryforward                             $           157,329
Effective Tax Rate                                          X                34%

Deferred tax asset                                          $               ---

Minimum state franchise tax                                 $               800

                                       70
EXHIBIT C TO ITEM 9.01

                               COVE APPAREL, INC.
                          (A Development Stage Company)

                              FINANCIAL STATEMENTS

                                 JUNE 30, 2005

                                       71
Cove Apparel, Inc.
                          (A Development Stage Company)

                                  BALANCE SHEET

                                  JUNE 30, 2005

                                     ASSETS

CURRENT ASSETS
   Cash                                                               $  21,759
                                                                      ----------

     Total assets                                                     $  21,759
                                                                      ==========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable and accrued expenses                              $  95,911
   Loan from stockholder
                                                                         45,000

     Total current liabilities                                          140,911

STOCKHOLDERS' DEFICIT
   Preferred stock, $.001 par value;
     Authorized shares -- 5,000,000
     Issued and outstanding share -- 0
   Common stock, $.001 par value;
     Authorized shares -- 50,000,000
     Issued and outstanding shares -- 10,480,500                         10,481
   Additional paid-in capital                                           144,802
   Deficit accumulated during the development stage                    (274,435)
                                                                      ----------

      Total stockholders' deficit                                      (119,152)
                                                                      ----------

        Total liabilities and stockholders' deficit                   $  21,759
                                                                      ==========

                                       72
COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

               THREE AND NINE MONTHS ENDED JUNE 30, 2005 AND 2004
THREE MONTHS ENDED JUNE 30,    NINE MONTHS ENDED JUNE 30,    INCEPTION -
                                                 ---------------------------   ----------------------------    JUNE 30,
                                                     2005           2004           2005            2004         2005
                                                 ------------   ------------   -------------   ------------   -----------
NET REVENUES                                     $       ---    $        ---   $         ---   $        ---   $    20,966

GENERAL AND ADMINISTRATIVE                            84,358          20,515         116,306         45,827       293,801
                                                 ------------   ------------   -------------   ------------   -----------

LOSS BEFORE PROVISION FOR INCOME TAXES               (84,358)        (20,515)       (116,306)       (45,827)     (272,835)
                                                 ------------   ------------   -------------   ------------   -----------

PROVISION FOR INCOME TAXES                               ---             800             800            800         1,600
                                                 ------------   ------------   -------------   ------------   -----------

NET LOSS                                         $   (84,358)   $    (21,315)  $    (117,106)  $    (46,627)  $  (274,435)
                                                 ============   ============   =============   ============   ===========

NET LOSS PER COMMON SHARE -- BASIC AND DILUTED
                                                 $      (---)   $       (---)  $        (---)  $       (---)  $     (0.03)
                                                 ============   ============   =============   ============   ===========

WEIGHTED AVERAGE OF COMMON SHARES -- BASIC AND
   DILUTED                                        10,480,500      10,480,500      10,480,500     10,480,500     9,151,464
                                                 ============   ============   =============   ============   ===========
73
COVE APPAREL, INC.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS

                    NINE MONTHS ENDED JUNE 30, 2005 AND 2004
JUNE 30,              INCEPTION -
                                                                           ----------------------------     JUNE 30,
                                                                                2005           2004           2005
                                                                           ------------   -------------   -----------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                $   (117,106)       $ (46,627) $  (274,435)
   Adjustments to reconcile net loss to net cash used in operating
     activities
       Expenses paid with common stock                                              ---            ---          2,000
       Expenses paid by officer                                                     ---            900          3,000
       Services provided by officers                                                ---           7,800        45,933
       Changes in operating assets and liabilities:
         Decrease in accounts receivable                                          6,500            ---            ---
             Increase in prepaid expenses                                           ---          (2,900)          ---
         Increase (decrease) in accounts payable
            and accrued expenses                                                 72,179          (2,606)       95,911
             Increase (decrease) in due to stockholder                           45,000          (7,000)       38,000
             Decrease in related party payable                                      ---          (5,500)          ---
                                                                           ------------   -------------   -----------

           Net cash from (used in) operating activities                           6,573         (55,933)      (89,591)
                                                                           ------------   -------------   -----------

CASH FLOWS FROM FINANCING ACTVITIES
   Proceeds from issuance of common stock                                           ---             ---       111,350
                                                                           ------------   -------------   -----------

NET INCREASE (DECREASE) IN CASH                                                   6,573         (55,933)       21,759

CASH, beginning of period                                                        15,186          90,140           ---
                                                                           ------------   -------------   -----------

CASH, end of period                                                        $     21,759   $      34,207   $    21,759
                                                                           ============   =============   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Income taxes paid                                                       $        800   $         800   $     1,600
                                                                           ============   =============   ===========
   Interest paid                                                           $        ---   $         ---   $       ---
                                                                           ============   =============   ===========
74
COVE APPAREL, INC.
                          (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                                 JUNE 30, 2005

NOTE 1 - NATURE OF OPERATIONS

     Cove Apparel, Inc. (the "Company") is in the process of developing a line
     of casual wear to manufacture and distribute. The Company was incorporated
     in the state of Nevada on December 13, 2001 and is headquartered in San
     Clemente, California.

NOTE 2 - BASIS OF PRESENTATION

The unaudited financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, these financial statements and the
related notes should be read in conjunction with the Company's audited financial
statements for the period ended September 30, 2004 included in the Company's
annual report on Form 10-KSB.

NOTE 3 - CONTINGENCIES AND GOING CONCERN

As shown in the accompanying unaudited financial statements, the Company has
incurred a net operating loss of $274,435 since inception through June 30, 2005.

The Company is subject to those risks associated with development stage
companies. The Company has sustained losses since inception and additional
financing will be required by the Company to fund its development activities and
to support operations. However, there is no assurance that the Company will be
able to obtain additional financing. Furthermore, there is no assurance that
rapid technological changes, changing customer needs and evolving industry
standards will enable the Company to introduce new products and services on a
continual and timely basis so that profitable operations can be attained. If the
Company is unable to implement its business plan successfully, it may not be
able to eliminate operating losses, generate positive cash flow or achieve or
sustain profitability which would materially adversely affect its business,
operations and financial results as well as its ability to make payments on its
obligations.

These factors raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

                                       75
COVE APPAREL, INC.
                          (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                                 JUNE 30, 2005

NOTE 4 - RELATED PARTY TRANSACTIONS

Office Space
------------

The Company occupies office space provided by an officer. Accordingly, occupancy
costs of $1,000 per month have been allocated to the Company. Total occupancy
expenses of $8,000 are included in the accompanying statement of operations for
the nine months ended June 30, 2005.

Loan from Stockholder
---------------------

A stockholder made a loan to the Company in the amount of $45,000. The loan is
non-interest bearing and is expected to be repaid within one year.

                                       76