<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 20, 1997
RMS TITANIC, INC.
(Exact name of Registrant as specified in charter)
Florida 000-24452 59-2753162
(State of other juris- (Commission (IRS Employer
diction of incorporation) File No.) Identification No.)
17 Battery Place, Suite 203
New York, New York 10004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 558-6300
<PAGE> 2
Items 5 and 7
As a result of Nicholas Vitti, the Principal Accounting Officer of the
registrant declining to execute the registrant's Form 10-Q for its quarter ended
August 31, 1997 (the "Form 10-Q"), the registrant is filing, as an exhibit
hereto, the form of Form 10-Q that was approved for filing by the Principal
Executive Officer of the registrant. As reflected by Form 8-K dated July 3,
1997, as amended September 2, 1997, Mr. Vitti and certain other directors had
been removed as directors of the registrant, with such removal to become
effective twenty (20) days after distribution of an Information Statement in
accordance with the provisions of the Securities Act of 1934, as amended. To the
best of Mr. Tulloch's knowledge, Mr. Vitti declined to sign the Form 10-Q, as he
had declined to sign the registrant's Form 10-K for its fiscal year ended
February 28, 1997, because he is not sure such filings reflect all necessary
disclosures.
SIGNATURE
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 thereunto duly authorized.
RMS TITANIC, INC.
Dated: October 20, 1997 /s/ George Tulloch
-----------------------------------------
George Tulloch
President and Principal Executive Officer
2
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended August 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number: 000-24452
RMS TITANIC, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2753162
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
17 Battery Place, Suite 203, New York, NY 10004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 558-6300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
--- ---
The number of shares outstanding of the registrant's common stock on
October 17, 1997 was 16,192,119.
<PAGE> 2
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PAGE
NUMBER
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<S> <C>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements of RMS Titanic, Inc. (the "Company"), formerly
First Response Medical, Inc. ("FRM") included herein were prepared, without
audit, pursuant to rules and regulations of the Securities and Exchange
Commission. The Financial Statements include the assets acquired and liabilities
assumed from Titanic Ventures Limited Partnership ("TVLP") on May 4, 1993 (the
"Acquisition"). Since TVLP owns a controlling interest in FRM after the
Acquisition, the transaction has been accounted for as a "reverse acquisition"
with TVLP deemed to be the acquiring entity. Because certain information and
notes normally included in financial statements prepared in accordance with
generally accepted accounting principles were condensed or omitted pursuant to
such rules and regulations, these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
audited financial statements of the Company for the year ended February 28,
1997 as included in the Company's Form 8-K dated July 3, 1997.
3
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<TABLE>
<CAPTION>
RMS TITANIC, INC.
BALANCE SHEET
=========================================================================================================
AUGUST 31, FEBRUARY 28,
1997 1997
- ---------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 135,734 $ 105,854
Accounts receivable 408,225 34,715
Refundable withholding tax -- 87,500
Other current assets -- 4,800
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 543,959 232,869
Artifacts Recovered, at cost 7,714,340 7,714,340
Deferred Income Tax Asset, net of valuation allowance of
$1,560,000 and $1,910,000, respectively -- --
Property and Equipment, net of accumulated depreciation
of $54,258 and $50,036, respectively 17,644 19,564
Other 38,611 38,611
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 8,314,554 $ 8,005,384
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable $ 64,100 $ 128,530
Accounts payable and accrued liabilities 2,895,674 3,093,448
Deferred revenue 373,332 675,000
Loans payable to partners 45,000 45,000
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,378,106 3,941,978
- ---------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock - $.0001 par value; authorized 30,000,000 shares,
issued and outstanding 16,182,128 shares 1,618 1,618
Additional paid-in capital 13,909,999 13,909,999
Accumulated deficit (8,975,169) (9,848,211)
- ---------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 4,936,448 4,063,406
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,314,554 $ 8,005,384
=========================================================================================================
See Notes to Financial Statements
4
</TABLE>
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<TABLE>
<CAPTION>
RMS TITANIC, INC.
STATEMENT OF INCOME
(UNAUDITED)
====================================================================================================================================
THREE-MONTH PERIOD THREE-MONTH PERIOD SIX-MONTH PERIOD SIX-MONTH PERIOD
ENDED AUGUST 31, ENDED AUGUST 31, ENDED AUGUST 31, ENDED AUGUST 31,
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Licensing fees $ 5,308 $ 860,000 $ 5,308 $ 860,000
Exhibitions 1,060,884 -- 1,438,204 --
Merchandise and other 15,638 4,811 43,992 7,906
Sponsorship fees -- 150,000 -- 150,000
Sale of coal 12,986 18,371 12,986 66,096
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,094,816 1,033,182 1,500,490 1,084,002
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
General and administrative 314,909 303,597 660,825 559,736
Depreciation and amortization 2,030 2,072 4,222 4,144
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 316,939 305,669 665,047 563,880
- ------------------------------------------------------------------------------------------------------------------------------------
Income before other income 777,877 727,513 835,443 520,122
Other income 37,600 -- 37,600 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 815,477 $ 727,513 $ 873,043 $ 520,122
====================================================================================================================================
Net income per common share $ .05 $ .05 $ .05 $ .03
====================================================================================================================================
Weighted average common shares outstanding 16,179,519 16,137,128 16,178,324 16,137,128
====================================================================================================================================
See Notes to Financial Statements
5
</TABLE>
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<TABLE>
<CAPTION>
RMS TITANIC, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
====================================================================================================================================
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
1997 1996
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 873,043 $ 520,122
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 4,222 4,144
Reduction in artifacts recovered -- 6,977
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (373,510) 768
Decrease (increase) in refundable withholding tax 87,500 (87,500)
Decrease (increase) in other current assets 4,800 (4,474)
(Decrease) increase in accounts payable and accrued liabilities (197,775) 16,983
(Decrease) increase in deferred revenue (301,668) 350,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS (776,431) 286,898
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 96,612 807,020
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Artifact recovery costs, including related deposits -- (820,000)
Purchases of property and equipment (2,302) (2,084)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (2,302) (822,084)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activity - repayment of notes payable (64,430) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 29,880 (15,064)
Cash at beginning of period 105,854 43,803
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 135,734 $ 28,739
====================================================================================================================================
See Notes to Financial Statements
6
</TABLE>
<PAGE> 7
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - The accompanying financial statements contain all adjustments
necessary to present fairly the financial position of the
Company as of August 31, 1997 and its results of operations
and its cash flows for the three and six months ended August
31, 1997 and 1996. Results of operations for the three and six
month periods ended August 31, 1997 are not necessarily
indicative of the results that may be expected for the year
ending February 28, 1998.
Note 2 - Net income per share on common stock is based upon the
weighted average number of shares outstanding. The dilutive
effect of common stock equivalents is not material.
Note 3 - In April 1996, the Company entered into an agreement with CRE-
CO Finanz GmbH, a German company, for an exhibition of Titanic
artifacts in Europe from May 8, 1997 to November 8, 1997.
Pursuant to the agreement, as amended, the Company will
receive two-thirds of the net profits, as defined, after the
recoupment of certain project expenses aggregating
approximately $2,700,000, as defined. Additionally, the
Company has received guaranteed exhibition fees of $460,000 as
a non-refundable advance against its share of the net profits,
as defined. The Company is recognizing such guaranteed fees
ratably over the term of the exhibition, and accordingly
recognized $230,001 and $306,668 of such fees during the three
and six months ended August 31, 1997, respectively.
The $153,332 balance of such fees has been included in
deferred revenue in the accompanying balance sheet at August
31, 1997.
In August 1996, the Company entered into an agreement with the
City of Memphis, Tennessee, for an exhibition of Titanic
artifacts in Memphis, Tennessee from April 3, 1997 to
September 30, 1997. Pursuant to the agreement, as amended, the
Company will receive guaranteed exhibition fees of $720,000 in
installments between September 1996 and August 1, 1997, and
will receive 65% of the net profits, as defined, derived from
ticket, merchandise and sponsorship revenue in excess of
$5,000,000. The Company is recognizing such guaranteed
exhibition fees ratably over the term of the exhibition, and
accordingly recognized $360,000 and $600,000 of such fees
during the three and six
7
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
months ended August 31, 1997, respectively. The $120,000
balance of such fees has been included in deferred
revenue in the accompanying balance sheet at May 31, 1997. The
Company earned $392,247 of profits from the exhibition during
the three months ended August 31, 1997 in excess of the
guaranteed fees.
In October 1996 the Company entered into an agreement with the
National Maritime Center ("Nauticus"), a political subdivision
of the City of Norfolk, Virginia, for an exhibition of Titanic
artifacts at Nauticus from November 27, 1996 through March 31,
1997. Pursuant to the agreement, the Company received
one-third of revenues from the sale of the first 150,000
tickets, as defined. In addition, the Company received fifty
(50%) percent of net profits, as defined, from the sale of
merchandise at the exhibition.
In December 1996, the Company entered into an agreement with
Florida International Museum, Inc. for an exhibition of
Titanic artifacts in St. Petersburg, Florida, from November
15, 1997 to May 15, 1998. Pursuant to the agreement, the
Company will receive exhibition revenue from attendance fees
ranging from $0.34 to $3.10 per attendee, based upon the total
number of attendees during the exhibition term ("Attendance
Fee"). In addition, the Company will receive 10% of gross
revenue, as defined, from the sale of merchandise at the
exhibition ("Gift Shop Fee"). The minimum combined Attendance
Fee and Gift Shop Fee payable to the Company under the terms
of the agreement is $300,000. As of August 31, 1997, $100,000
of such minimum payment has been received by the Company and
has been included in deferred revenue in the accompanying
balance sheet.
In May 1997 the Company entered into an agreement with the RMS
Foundation, Inc. for the exhibition of artifacts, expedition
equipment, photographs and film footage from the 1996 Titanic
expedition aboard the Queen Mary in Long Beach, California
from June 1, 1997 through January 5, 1998 (the "Queen Mary").
Pursuant to the Queen Mary exhibition agreement, the Company
will receive $2.00 per ticket from the sale of the first
150,000 tickets and $3.00 per ticket from the sale of more
than 150,000
8
<PAGE> 9
tickets. In addition, the Company will receive fifty (50%)
percent of net profits, as defined, from the sale of
merchandise at the Queen Mary exhibition, and fifty (50%) of
any sponsorship revenues.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information to assist in the
understanding of the Company's financial condition and results of operations,
and should be read in conjunction with the financial statements and related
notes appearing elsewhere herein.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED AUGUST 31, 1997 VERSUS
THE QUARTER ENDED AUGUST 31, 1996
FOR THE SIX MONTHS ENDED AUGUST 31, 1997 VERSUS
THE SIX MONTHS ENDED AUGUST 31, 1996
During the second quarter and the first six months of its 1998 fiscal
year (the "1998 fiscal year"), the Company's revenues increased approximately
6% and 38% respectively, as compared to the second quarter and the first six
months of its 1997 fiscal year (the "1997 fiscal year"). This increase was
principally attributable to the receipt of revenue from exhibitions of
$1,060,884 during the second quarter of the 1998 fiscal year and $1,438,204
during the first six months of the 1998 fiscal year, as compared to zero
revenues from exhibitions during the second quarter of the 1997 fiscal year
or the first six months of the 1997 fiscal year. The Company did not have
any exhibition activities during the first six months of its 1997 fiscal year.
During the second quarter of the 1997 fiscal year and the first six
months of the 1997 fiscal year, the Company received revenue of $1,010,000 from
licensing and sponsorship fees related to the Company's 1996 expedition to the
wreck site of the Titanic, as compared to zero revenue from these sources
during the 1998 fiscal year. The Company did not conduct an expedition to the
wreck site of the Titanic during the 1998 fiscal year. Revenue from merchandise
and other activities increased approximately 225% and 456% during the second
quarter and first six months of the 1998 fiscal year respectively, as compared
to corresponding periods of the 1997 fiscal year, primarily as a result of the
receipt of revenue from merchandise sold at the Company's exhibitions at
NAUTICUS and the Queen Mary during the 1998 fiscal year. Revenue from the sale
of Titanic coal decreased approximately 29% and 80% during the second quarter
and first six months of the 1998 fiscal year respectively, as compared to
second quarter
9
<PAGE> 10
and first six months of the 1997 fiscal year, primarily due to a decrease in
efforts to market the coal through direct marketing channels during the first
six months of the 1998 fiscal year. The Company's receipt of other income of
$37,600 during the second quarter of the 1998 fiscal year represents the
settlement of a debt owed to certain vendors for less than the original amount
of the obligation. The Company's general and administrative expenses increased
approximately 4% during the second quarter of its 1998 fiscal year as compared
to the second quarter of the 1997 fiscal year, and increased approximately 18%
during the first six months of the 1998 fiscal year as compared to the
corresponding period of the 1997 fiscal year, primarily as a result of the
combination of an increase of $135,000 during the 1988 fiscal year for
conservation expenses incurred in connection with preparation of the Company's
Titanic artifacts for its Memphis and Hamburg exhibitions, and a decrease of
approximately $40,000 in the Company's legal fees.
LIQUIDITY AND CAPITAL RESOURCES
Note payable as of August 31, 1997 represents the balance owed to LS
Capital Corporation, formerly Lone Star Casino Corporation ("LS Capital"),
pursuant to a promissory note executed in May 1993. As provided in a settlement
agreement to resolve legal proceedings to enforce such promissory note and
counterclaims and third-party claims asserted by the Company, the Company has
agreed to pay LS Capital $154,271.62 in twelve (12) equal monthly installments,
commencing as of January 15, 1997, subject to acceleration in the event that the
Company achieves certain levels of revenue during such period. The Company's
working capital commitments during its 1998 fiscal year also include lease
payments for principal offices in the base amount of $61,000 per annum, and
compensation to its executive officer. Additionally, the Company has agreed to
pay a financial consulting firm the sum of $3,000 per month for a period of one
year commencing April 15, 1997 for financial public relations services.
In connection with its 1994 expedition to the wreck site of the
Titanic, the Company entered into an agreement with IFREMER to charter equipment
and crew necessary to conduct research and recovery efforts. Pursuant to the
terms of such charter agreement, the Company had paid IFREMER the sum of
$300,000 and was obligated to pay an additional $700,000 in two installments of
$350,000 each payable on September 30 and December 1, 1994. The installment due
to IFREMER on September 30, 1994 was paid during the first quarter of the
Company's 1996 fiscal year, payment of the final $350,000 installment was
extended to October 1, 1995. During the 1996 fiscal year, the Company paid
$70,000 on account of such obligation, with the $280,000 balance thereof having
been paid subsequent to February 29, 1996. The source of such $280,000 payment
was from an entity with which the Company entered into an agreement for the
marketing of coal and the sale of cabins of cruise ships which accompanied the
Company on its 1996 research and recovery expedition, and this payment was made
as an advance against the Company's share of profits from Titanic coal sales and
sales of such cruise ship cabins. The $280,000 advance was reduced by
approximately $94,154 from the sale of coal during the year ended February 28,
1997, and approximately $7,237 during the six months ended August 31, 1997,
resulting in an unpaid balance of $178,609 as of August 31, 1997. There
were no
10
<PAGE> 11
profits from sale of cruise ship cabins for the 1996 expedition.
The Company entered into an agreement with IFREMER to charter equipment
and crew necessary to conduct a research and recovery expedition to the wreck
site of the Titanic in the Summer, 1996. Pursuant to the terms of such charter
agreement, the Company agreed to pay IFREMER 2,000,000 French francs
(approximately $400,000 U.S. Dollars) on or before June 20, 1996; 2,100,000
French francs (approximately $420,000 U.S. Dollars) on or before July 15, 1996;
and the sum of $980,000, payable as follows: (a) remittance of fifty (50%) of
the wholesale price of any products sold by the Company involving the 1996
expedition, up to a maximum of $480,000; and (b) up to a maximum of $500,000
payable from the following sources: (i) $.50 per visitor to any exhibition
organized by the Company; (ii) a lump sum of $250,000 for the Memphis
exhibition, payable prior to March 1, 1997; and (iii) one-third of the Company's
revenues received from any exhibition of artifacts organized by a third party,
as described. The agreement further provides that in the event the payments from
these sources do not amount to $980,000 within three (3) years after September
1, 1996, any remaining balance shall be paid from the Company's exhibition
revenues, as defined above. All objects recovered during the 1996 expedition
will be the subject of a lien granted to IFREMER until the Company pays all sums
due and owing to IFREMER for the 1996 expedition. In April 1997 the Company paid
IFREMER the sum of $125,000 on account of its 1996 expedition charter costs,
leaving a balance of $125,000 due from the lump sum of $250,000 from the Memphis
exhibition. Such $125,000 balance was paid in July 1997. The Company has not
paid IFREMER any portion of the revenues received from the exhibition presented
at the National Maritime Center (NAUTICUS) from November 27, 1996 through March
31, 1997 or from the exhibition to be presented at the Queen Mary from June 1,
1997 through January 5, 1998. The Company and IFREMER have been pursuing
negotiations for the re-structuring of the Company's obligations under the 1996
charter agreement so as to provide for the payment of a percentage of revenues
in installments that correspond to the Company's future receipt of revenues from
exhibitions, irrespective of whether such exhibitions have been organized by the
Company. No assurances can be given that such negotiations will be successfully
consummated.
The Company entered into an agreement for a television production
whereby the Company granted certain rights to the production companies for the
production and exploitation of audio and visual recordings related to the 1996
expedition. The Company's obligations to make the June and July 1996 payments to
IFREMER aggregating $820,000 were paid as part of the television production
budget. The Company is obligated to contribute $100,000 to such production,
$40,000 of which was satisfied through the grant of certain rights to present
information and images concerning the 1996 expedition on the Internet, and the
balance of $60,000 of which was due from the Company on April 16, 1997. Such
amount remains outstanding as of the date of this report. The Company has
reached a verbal agreement, subject to the execution of a definitive agreement,
for the satisfaction of such $60,000 balance in exchange for granting rights to
exploit additional audio and visual recordings relating to the 1996 expedition.
The Company has retained the rights for
11
<PAGE> 12
commercial exploitation of recordings made at the Titanic wreck site in a print
format and certain royalty and other rights with respect to the sale of home
videos based upon the 1996 expedition. The Company has also granted to the
television production companies a right of first negotiation with respect to the
Company's next expedition to the Titanic wreck site.
The Company's near term operating needs will be financed principally
from the distribution of revenues to the Company under its agreements for
exhibitions in Memphis, Tennessee; Hamburg, Germany; at the Queen Mary in Long
Beach, California; and in St. Petersburg, Florida. Under its exhibition
agreement with the City of Memphis, the Company received $270,000 in August
1997, representing the balance of the guaranteed exhibition fees payable to the
Company. By agreement between the City of Memphis, the Company and LP3
Conservation ("LP3"), $100,000 of such $270,000 is payable to LP3. In addition
to receipt of such $270,000 payment, the Company received $392,247 from the City
of Memphis, representing the Company's share of ticket, merchandising and
miscellaneous revenue from the Memphis exhibition through August 31, 1997. The
Company will receive an additional $821,827 from the City of Memphis,
representing the Company's share of ticket, merchandising and miscellaneous
revenue from the Memphis exhibition for the period from September 1, 1997
through September 30, 1997, when the Memphis exhibition closed. Such $821,827
will be recognized as revenue during the third quarter of the 1998 fiscal year.
The Company's rights to receive additional revenues from the Hamburg exhibition
will depend upon the revenues derived from such exhibition exceeding
approximately $2,700,000. The Company is entitled to receive $2.00 per ticket
for the first 150,000 tickets sold at the Queen Mary exhibition, and $3.00 per
ticket for tickets in excess of 150,000, plus an amount equal to fifty (50%) of
net merchandising revenues, as defined. Pursuant to its agreement with the
Florida International Museum, the Company will receive exhibition revenue from
attendance fees ranging from $0.34 to $3.10 per attendee, based upon the total
number of attendees during the exhibition term (the "Attendance Fee"). In
addition, the Company will receive 10% of gross revenue, as defined, from the
sale of merchandise at the exhibition (the "Gift Shop Fee"). The minimum
combined Attendance Fee and Gift Shop Fee payable to the Company under terms of
the agreement is $300,000, of which $100,000 was received as of August 31, 1997.
The balance of $200,000 is payable in installments of $50,000 on or before
November 15, 1997 and $150,000 on or before May 15, 1998. Additionally, the
Company will receive the sum of $250,000 on or before December 31, 1997 in the
event that CRE-CO Finanz GmbH exercises an option to present an exhibition of
the Company's Titanic artifacts in Europe is exercised. In the event that cash
flows are not adequate to satisfy the Company's future operating needs,
inclusive of payment of outstanding liabilities, additional debt and/or equity
financing will be required.
In order for the Company to design, construct and embark on the planned
Waterborne Exhibition, additional debt and/or equity financing will be required.
While management believes that such financing will be available, no assurances
can be given that the Company will be successful in its efforts to obtain
additional financing, or that such financing will be available on a satisfactory
timetable. If funding for the planned worldwide Waterborne Exhibition is not
available, the Company intends to pursue the establishment of land-based
exhibitions similar to those presented in Memphis, St. Petersburg and Hamburg.
12
<PAGE> 13
Until such time as the Company, if ever, presents the exhibition of its
artifacts on the Waterborne Exhibition, the Company could experience
difficulties or delays in making arrangements with third parties for the
presentation of exhibitions at land-based venues on terms that are acceptable
and satisfactory to the Company. The Company's ability to present such
exhibitions in association with third parties will be dependent upon the
agreement of such third parties to construct, market and operate the
exhibitions, or the Company having adequate financial resources to construct
and/or operate the exhibitions. Delays or difficulties in making arrangements
for the presentation of exhibitions at land-based venues could have a materially
adverse affect upon the Company's operations. Although the Company is seeking
arrangements for the presentation of "Titanic: The Exhibition" after its
presentation at the Florida International Museum ends on May 15, 1998 and for
the presentation of "Titanic: The Expedition" after its presentation ends at the
Queen Mary on January 5, 1998, no assurances can be made that the Company will
be successful in effectuating such arrangements on terms that are acceptable or
satisfactory to the Company.
The Company could experience difficulties or delays in obtaining
financing for the Waterborne Exhibition, and if financing is obtained on terms
acceptable to the Company, could also experience difficulties or delays in the
construction of the Waterborne Exhibition is subject to all the delays and
uncertainties associated with construction projects generally. Additionally, the
Company has not made arrangements for the presentation of the Waterborne
Exhibition in specific ports and will need to obtain permits and approvals from
local governmental authorities. While management of the Company believes that
such arrangements will be available on terms and conditions acceptable to the
Company, and that the Company will satisfy requirements for such permits and
approvals, difficulties and delays could be encountered in securing prospective
sites and/or the requisite permits and approvals, which, in turn, could delay or
otherwise adversely impact the Company's revenue producing activities.
The Company has been seeking and intends to continue to seek debt
financing to fund as much of the Waterborne Exhibition as may be available on
terms satisfactory to the Company. In connection with any such debt financing
that may be obtained, no assurances of which can be given, the Company expects,
among other things, to be required to pledge its assets to a lender, to be
restricted in its ability to incur additional obligations, and/or to abide by
certain financial covenants.
The Company's strategy for presenting exhibitions of Titanic artifacts
is dependent upon making acceptable arrangements with third parties or hiring
personnel who are experienced and possess expertise in operation and marketing
exhibitions. Management of the Company believes that acceptable arrangements
with such personnel or third-parties can
13
<PAGE> 14
be made within time frames required to implement the Company's exhibition
strategies. However, no assurance can be made that such personnel or
third-parties will be available on satisfactory terms or when needed by the
Company. Delays or difficulties in engaging personnel or third parties for the
operations and marketing of exhibitions, including without limitation the
Waterborne Exhibition, could have a materially adverse affect upon the Company's
operations.
The Company's future business and operating results depend in
significant part upon the continued contributions of George Tulloch, the
Company's President. The Company does not maintain a key person life insurance
policy on Mr. Tulloch. The Company's future business and operating results also
depends in significant part upon its ability to attract and retain qualified
additional management, marketing and support personnel for its operations.
In order to protect its salvor-in-possession status and to prevent
third-parties from salvaging the Titanic wreck and wreck site, or interfering
with the Company's rights and ability to salvage the wreck and wreck site, the
Company may have to commence judicial proceedings against third-parties. Such
proceedings could be expensive and time-consuming. Additionally, the Company, in
order to maintain its salvor-in-possession status, needs to, among other things,
maintain a reasonable presence at the wreck through periodic expeditions. In
addition to the payment of the balance due to IFREMER for the Summer of 1996
Expedition, the Company will be required to incur the costs for future
expeditions so as to maintain its salvor-in-possession status. The Company's
ability to undertake future expeditions may be dependent upon the availability
of financing from the grant of licenses to produce television programming and/or
the grant of expedition sponsorship rights. No assurances can be given that such
financing will be available on satisfactory terms.
The amount spent by consumers on discretionary items, such as
entertainment activities and the purchase of merchandise, is dependent upon
consumers' levels of discretionary income, which may be adversely affected by
general or local economic conditions. A decrease in consumer spending on such
activities could have a material adverse effect on the Company's revenues from
exhibition activities and merchandising efforts.
To the extent that the Company has transactions outside of the United
States, the Company could be affected by nationalizations or unstable
governments or legal systems or intergovernmental disputes. These economic and
political uncertainties may affect the Company's results of operations,
especially to the extent that these matters affect the Company's exhibition
plans in Europe.
In connection with its activities outside of the United States, the
Company is exposed to the risk of currency fluctuations between the United
States dollar and certain foreign currency. If the value of the United States
dollar increases in relation to the foreign currency, the Company's potential
revenues from exhibition and merchandising activities outside of the United
States will be adversely affected. Although the Company's financial
14
<PAGE> 15
arrangements with IFREMER and other entities, including its arrangements for
the exhibition in Hamburg, Germany, have been based in whole or in part upon
foreign currencies, the Company has sought and will continue to seek to base
its financial commitments and understandings upon the United States dollar in
its material business transactions so as to minimize the adverse potential
effect of currency fluctuations. Due to currency fluctuation rates, the
Company's receipt of additional income from the Hamburg exhibition may be
adversely affected.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By written consent of a majority of shareholders dated August
29, 1997, in lieu of an annual meeting, George Tulloch, Allan H. Carlin, Arnie
Geller, G. Michael Harris and Kurt Hothorn were elected as directors of the
Company. This action will become effective twenty (20) days after the mailing to
shareholders of an Information Statement required under the Securities Exchange
Act of 1934, as amended.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
None.
15
<PAGE> 16
(b) REPORTS ON FORM 8-K
On July 3, 1997, the Company filed a report on Form 8-K
reporting on Items 5 and 7. An amendment to such Form 8-K was filed on September
2, 1997.
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 thereunto duly authorized.
RMS TITANIC, INC.
(Registrant)
Dated: By:
--------------------------------------------
George Tulloch, Principal Executive Officer
By:
--------------------------------------------
Nicholas Vitti, Principal Accounting Officer
16
<PAGE> 17
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] FEB-28-1998
[PERIOD-START] MAR-01-1997
[PERIOD-END] AUG-31-1997
[CASH] 135,734
[SECURITIES] 0
[RECEIVABLES] 408,225
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 543,959
[PP&E] 71,902
[DEPRECIATION] 54,258
[TOTAL-ASSETS] 8,314,554
[CURRENT-LIABILITIES] 3,378,106
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1,618
[OTHER-SE] 4,934,830
[TOTAL-LIABILITY-AND-EQUITY] 8,314,554
[SALES] 0
[TOTAL-REVENUES] 1,500,490
[CGS] 0
[TOTAL-COSTS] 665,047
[OTHER-EXPENSES] (37,600)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 873,043
[INCOME-TAX] 0
[INCOME-CONTINUING] 873,043
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 873,043
[EPS-PRIMARY] .05
[EPS-DILUTED] 0
</TABLE>
