SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September
30, 1999
[ ] 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 33-61894-FW
STARSHIP CRUISE LINE, INC.
(Exact Name of small Business issues as specified in its Charter)
Delaware 72-1235450
(State or other Jurisdiction of I.R.S. Employer
Incorporation or Organization Identification No.)
220 Camp Street, New Orleans, Louisiana 70130
(Address of Principal Executive Offices) (Zip Code)
(504) 524-1801
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (i) 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 (of for such shorter period that the
Registrant was required to file such reports) and (ii) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Preferred Stock, $100.00 par value 15,000
Common Stock, $1.00 par value 54,900
- ---------------------------------- -------------------
Title of Class Number of Shares outstanding
at September 30, 1999
Exhibit Index - NONE.
<PAGE>
<TABLE>
<CAPTION>
STARSHIP CRUISE LINE, INC.
BALANCE SHEETS
ASSETS
September 30, March 31,
1999 1999
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 8,348 $ 45,813
Inventory 12,023 --
Total Current Assets $ 20,371 $ 45,813
Fixed Assets
Construction in progress $ 4,556,078 $ 3,193,896
Office equipment 90,564 --
Leasehold Improvements 56,722 --
Total Fixed Assets $ 4,703,364 $ 3,193,896
Total Assets $ 4,723,735 $ 3,239,709
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable $ 3,033,639 $ 900,000
Accounts Payable 159,799 506,600
Preferred Stock Dividends Payable 129,760 54,760
Total Current Liabilities $ 3,323,198 $ 1,461,360
Stockholders' Equity:
Preferred Stock, $1.00 par value;
2,000,000 shares authorized;
15,000 shares subscribed, issued
and outstanding 1,500,000 1,500,000
Common Stock, $1.00 par value; 20,000,000 shares
authorized; 54,900 shares issued and outstanding 54,900 54,900
Additional Paid-in Capital 379,431 379,431
Accumulated Deficit (533,794) (155,982)
Total Stockholders' Equity (99,463) 278,349
Total Liabilities and Stockholders' Equity $ 4,723,735 $ 3,239,709
</TABLE>
The accompanying notes are an integral part of these
financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
STARSHIP CRUISE LINE, INC.
STATEMENT OF OPERATIONS
FOR THE FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
REVENUES -
<S> <C> <C> <C> <C>
Interest Income $ -- $ 4,730 $ -- $ 1,065
COSTS AND EXPENSES
General and Administrative 302,812 6,698 165,154 3,043
TOTAL COSTS AND EXPENSES 302,812 6,698 165,154 3,043
NET INCOME (LOSS) (302,812) (1,968) (165,154) (1,978)
PREFERRED STOCK DIVIDEND (75,000) -- (37,500) --
NET INCOME (LOSS) AVAILABLE FOR
COMMON SHAREHOLDERS (377,812) (1,968) (202,812) (1,978)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 54,900 43,600 54,900 43,600
INCOME (LOSS) PER
COMMON SHARE $ (6.88) $ (.05) $ (3.69) $ (.05)
</TABLE>
The accompanying notes are an integral part of
these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
STARSHIP CRUISE LINE, INC.
STATEMENT OF CASH FLOWS
FOR THE FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net Income (Loss) $ (302,812) $ (1,968) $ (165,154) $ (1,978)
Add item not affecting
cash-amortization -- 140 -- 70
Adjustments to reconcile
net income (loss)
to net cash used by
operating activities
(Increase) decrease in
inventory (12,023) -- (12,023) --
(Increase) decrease
interest receivable -- -- -- 1,085
Increase (decrease) in
accounts payable (346,801) (5,062) (361,775) (1,200)
Total Cash Flow From
Operating Activities (661,636) (6,890) (538,952 (2,023)
CASH FLOW USED BY
INVESTMENT ACTIVITIES
(Increase) decrease in
Construction in progress (1,362,182) (228,704) (636,124) (227,103)
Office Equipment (90,564) -- (90,564) --
Leasehold Improvements (56,722) -- (56,722) --
Total (Increase) decrease
from Investment Activities (1,509,468) (228,704) (783,410) (227,103)
CASH FLOW FROM
FINANCING ACTIVITIES
Increase (Decrease) in
notes payable 2,133,639 -- 1,318,639 --
Total Cash Flows from
financing activities 2,133,639 -- 1,318,639 --
INCREASE (DECREASE) IN CASH (37,465) (235,594) (3,723) (229,126)
CASH BALANCE - BEGINNING 45,813 290,457 12,071 283,989
CASH BALANCE - ENDING $ 8,348 $ 54,863 $ 8,348 $ 54,863
</TABLE>
The accompanying notes are an integral part of
these financial statements.
4
<PAGE>
STARSHIP CRUISE LINE, INC.
NOTES TO FINANCIAL STATEMENTS
(All information as of September 30, 1999 and 1998 is unaudited)
1. DESCRIPTION OF ORGANIZATION
Starship Cruise Line, Inc., formerly Emerging Beta Corporation (the
"Company") was incorporated under the laws of the State of Delaware on
February 10, 1993, for the purpose of seeking out business opportunities,
including acquisitions, that the board of directors, in their discretion,
believe to be good opportunities. The Company, which is in the
development stage, has begun construction of a vessel it intends to use
in the dinner cruise business and anticipates completion in November
1999. The Company plans to operate the vessel on the Mississippi Gulf
Coast, primarily serving that region's tourism market.
The Company is highly leveraged and has no operating history. The Company
has committed bank financing in place for $5.225 million, (of which
$3,033,639 was outstanding at September 30, 1999). The bank financing is
being increased by $1,435,000 and a $500,000 working capital line is
being arranged, which the Company believes will be sufficient to complete
the vessel, dockside facilities, and fund any working capital needs for
the first year of the vessel's operations. The increased bank financing
should be completed in November 1999. The Company believes the vessel
will be able to generate positive cash flow by the end of its first year
of operations, but there is no guarantee that this will occur. However,
one of the Company's principals has committed to provide the funding, if
necessary, to cover any working capital deficiencies during initial
operations.
There currently are no dinner cruise vessels operating on the Mississippi
Gulf Coast and while the Company believes demand will be sufficient,
there is no assurance that market demand will be able to support the
vessel.
2. SIGNIFICANT ACCOUNTING POLICIES
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
There are no temporary differences between financial reporting and tax
basis of assets and liabilities. The Company has incurred a cumulative
loss from operations since inception. Therefore, a valuation allowance
was provided against the deferred tax asset resulting from the net
operation loss (NOL) carryforward. In 1998 this valuation allowance was
reduced in an amount equivalent to the NOL utilization and therefore no
tax provision was recorded. This asset has been reduced to zero by a
valuation allowance. The net operating loss carryforward at March 31,
1999 was approximately $105,000 and will expire in 2010 and 2014.
The preparation of financial statements in conformity with generally
accepted accounting principles 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 results of
operations during the reporting period. Actual results could differ from
those estimates.
The expenses related to entering the dinner cruise business including
marketing expenses are being expensed as incurred.
3. RELATED PARTY TRANSACTIONS
Offices and directors will be compensated based on actual time and
expenses devoted to the Company's business. During the six months ended
September 30, 1999 and 1998 consulting fees paid to Directors were $3,000
and $4,500, respectively.
5
<PAGE>
4. CONSTRUCTION IN PROGRESS
The Company is constructing a dinner cruise vessel to operate on the
Mississippi Gulf Coast in support of the gaming and resort industry. The
total estimated cost of the project is $7.4 million with delivery
scheduled for November 1999.
As of September 30, 1999, interest capitalized during construction is
$85,463.
5. NOTE PAYABLE
The Company is financing the construction of the dinner cruise vessel
with bank financing and preferred stock (see note 6).
In May 1999 the Company executed a construction financing agreement in
the amount of $5,225,000, with interest only payments due September 30
and December 31, 1999. At September 30, 1999 the amount outstanding under
the construction financing agreement is $3,033,639. Upon completion of
the vessel, the construction financing will be converted to term
financing in the amount of $5,225,000 for a five year period with
payments based on ten year amortization with unpaid balance due after the
five years. The vessel financing is being increased by $1,435,000 to
$6,660,000 and a $500,000 working capital line is being arranged. The
interest rate on the incremental financing is 8.25%. The increased
financing should be completed in November 1999. The payments are due
quarterly beginning March 31, 2000 (interest only at March 31, 2000) with
interest fixed at a rate of 8%. The financing is secured by a lien on the
dinner cruise vessel a limited guarantee from the vendor who supplied the
vessel's engines and the personal guarantee of Burt H. Keenan, the
Company's founder.
The term financing is subject to certain financial and non-financial
covenants. The financial covenants, which go into effect January 1, 2000
include minimum cash flow coverage of debt payments of 1.25 to 1, minimum
working capital of $250,000 and minimum net worth, including preferred
stock, of $1,000,000.
6. MANDATORILY REDEEMABLE PREFERRED STOCK
The Company issued 15,000 shares of mandatorily redeemable convertible
preferred stock in November 1998. The Preferred Stock bears annual
dividends of $10.00 per share payable quarterly in arrears. Each
preferred share is convertible into one share of common stock at the
option of the holder. The Company has the option to redeem the preferred
shares in whole or part at a price of $100.00 plus accrued dividends as
of December 31, 2001; and the obligation to redeem all shares at a price
of $100.00 on December 31, 2004, plus accrued dividends. The holders of
the preferred shares have no voting rights except at any time the
equivalent of three quarterly dividends are unpaid or company fails to
make any mandatory redemption of the preferred shares at which time the
number of directors of the Company will be increased by two and elected
by the preferred shareholders.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Prior to fiscal 1999 the Company's activities were limited to
organizational matters, raising financing, and seeking a suitable acquisition.
The Company earned $4,730 in interest income during the six months ending
September 30, 1998.
In July 1998 the Company began developing a dinner cruise business
centered in Biloxi, Mississippi. The dinner cruise vessel is approximately 80%
complete at September 30, 1999 and scheduled to begin operations in December
1999. No revenues are expected from this business until the cruise vessel begins
operations in December 1999. The Company has a loss before preferred stock
dividend in the six months ended September 30, 1999 of $302,812, compared to
loss of $1,968 in the preceding year. The loss in 1999 is almost entirely the
result of the Company's expenses for general and administrative expenses and
marketing expenses related to the dinner cruise business. These expenses are
expected to increase significantly upon commencement of operations. The Company
has not yet obtained firm bookings or entered into contracts and there can be no
assurance as to the level of revenues which may be derived nor as to
profitability, if any.
The Company had a working capital deficit of $3,302,827 as of September
30, 1999 and shareholders' equity of $1,400,527 as of September 30, 1999.
Substantially all of the Company's assets are comprised of construction in
progress on the cruise vessel. The Company has financed its operations and the
construction with proceeds from its initial public offering of 30,000 shares of
Common Stock at $10 per share, proceeds from the sale of 15,000 shares of
preferred stock at $100 per share, the exercise of stock options by officers and
directors at $12 or $15 per share, and from debt financing provided by Whitney
Bank. In May 1999 the Company and Whitney Bank entered into a permanent
financing agreement pursuant to which the Company may borrow up to $5,225,000.
The loan bears interest at the rate of 8% per annum, is secured by the cruise
vessel, a limited guarantee from the vendor who supplied the vessel's engines
and is guaranteed by Mr. Burt Keenan. The vessel financing is being
increased by $1,435,000 to $6,660,000 and a $500,000 working line is being
arranged. The additional financing should be completed in November 1999. The
interest rate on the incremental financing is 8.25%. The Company anticipates
that the above source of cash will be sufficient to complete construction of the
cruise vessel and provide sufficient cash to fund startup of operations. In the
event of any cost overrun on the cruise vessel, any delay in delivery, or the
failure to meet the Company's projections of revenue and expense, additional
funds may be required. There can be no assurance that such funds will be
available when needed, nor that they can be obtained on terms satisfactory to
the Company.
The Company has evaluated the impact of year 2000 on its operations. The
Company has been assured by vendors that the software proposed to be utilized in
its operations takes into consideration the changes required by calendar year
2000. On this basis the Company believes that the onset of the year 2000 will
have no material impact on the Company and will not impose any significant
additional cost on the Company.
7
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3. Certificate of Incorporation and Bylaws
3.1 Restated Certificate of Incorporation*
3.2 Bylaws*
3.3 Proposed Certificate of Amendment to the Restated Certificate
of Incorporation*
3.4 Amendment to Certificate of Incorporation (Name Change) Filed
with the June 1999 10-QSB and incorporated by reference.
10. Material Contracts
10.1 1993 Stock Option Plan*
10.2 Form of Stock Option Agreements with Messrs. Keenan, Killeen,
Jarrell and Chaffe with Schedule of
Details*
* Incorporated by reference to such exhibit as filed with the Company's
registration statement on Form SB-2, file no. 33- 61894-FW (the "Registration
Statement") on April 29, 1993.
(b) Reports on Form 8-K: None
8
<PAGE>
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.
Date: November 5, 1999 By: /s/ Jerry W. Jarrell
--------------------
Jerry W. Jarrell
Chief Financial Officer (chief financial officer and
accounting officer and duly authorized officer)
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND AS OF SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000904144
<NAME> STARSHIP CRUISE LINE
<MULTIPLIER> 1
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-START> Apr-01-1999
<PERIOD-END> Sep-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,348
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 12,023
<CURRENT-ASSETS> 20,371
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,703,364
<CURRENT-LIABILITIES> 3,323,198
<BONDS> 0
0
1,500,000
<COMMON> 54,900
<OTHER-SE> (154,363)
<TOTAL-LIABILITY-AND-EQUITY> 4,723,735
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 302,812
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (377,812)
<INCOME-TAX> 0
<INCOME-CONTINUING> (377,812)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (377,812)
<EPS-BASIC> (6.88)
<EPS-DILUTED> (6.88)
</TABLE>
