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 December
31, 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 December 31, 1999
Exhibit Index - NONE.
<PAGE>
<TABLE>
<CAPTION>
STARSHIP CRUISE LINE, INC.
BALANCE SHEETS
ASSETS
December 31, March 31,
1999 1999
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 82,067 $ 45,813
Accounts Receivable 3,955 --
Inventory 40,430 --
Other 1,700 --
Total Current Assets $ 128,152 $ 45,813
Fixed Assets
Marine Equipment $ 7,042,531 $ --
Office equipment 122,275 --
Leasehold Improvements 428,039 --
Construction in progress $ -- $ 3,193,896
Less Accumulated Depreciation (27,250) --
Total Fixed Assets $ 7,565,595 $ 3,193,896
Total Assets $ 7,693,747 $ 3,239,709
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable, current portion $ 499,500 $ 900,000
Accounts Payable 458,372 506,600
Preferred Stock Dividends Payable 167,260 54,760
Total Current Liabilities $ 1,125,132 $ 1,461,360
Long Term Note Payable $ 5,684,698 --
Mandatorily Redeemable Preferred Stock, $1.00 par value; 2,000,000 shares
authorized; 15,000 shares subscribed,
issued and outstanding 1,500,000 1,500,000
Stockholders' Equity:
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 (1,050,414) (155,982)
Total Stockholders' Equity (616,083) 278,349
Total Liabilities and Stockholders' Equity $ 7,693,747 $ 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
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
REVENUES -
<S> <C> <C> <C> <C>
Cruise Revenue $ 116,284 $ -- $ 116,284 $ --
Interest Income -- 10,412 -- 5,682
TOTAL REVENUE 116,284 10,412 116,284 5,682
COSTS AND EXPENSES
Operating Expenses 272,387 -- 219,316 --
Sales and Marketing 250,682 -- 174,862 --
General and Administrative 310,090 55,919 136,169 49,221
Interest Expense 37,807 -- 37,807 --
Depreciation and Amortization 27,250 -- 27,250 --
TOTAL COSTS AND EXPENSES 898,216 55,919 595,404 49,221
NET INCOME (LOSS) (781,932) (45,507) (479,120) (43,539)
PREFERRED STOCK DIVIDEND (112,500) (17,260) (37,500) (17,260)
NET INCOME (LOSS) AVAILABLE FOR
COMMON SHAREHOLDERS (894,432) (62,767) (516,620) (60,799)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 54,900 45,903 54,900 50,483
INCOME (LOSS) PER
COMMON SHARE $ (16.29) $ (1.37) $ (9.41) $ (1.20)
</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
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net Income (Loss) $ (781,932) $ (45,507) $ (479,120) $ (43,539)
Add item not affecting
cash-depreciation and amortization 27,250 210 27,250 70
Adjustments to reconcile
net income (loss)
to net cash used by
operating activities
(Increase) decrease in
inventory (40,430) -- (28,407) --
(Increase) decrease
receivables and other (5,655) -- (5,655) --
Increase (decrease) in
accounts payable (48,228) 885,940 298,573 891,002
Total Cash Flow From
Operating Activities (848,995) 840,643 (187,359) 847,533
CASH FLOW USED BY
INVESTMENT ACTIVITIES
(Increase) decrease in
Construction in progress (3,848,635) (2,065,504) (2,486,453) (1,836,800)
Office Equipment (122,275) -- (31,711) --
Leasehold Improvements (428,039) -- (371,317) --
Total (Increase) decrease
from Investment Activities (4,398,949) (2,065,504) (2,889,481) (1,836,800)
CASH FLOW FROM
FINANCING ACTIVITIES
Proceeds from issuing Preferred
Stock; 15,000 shares -- 1,500,000 -- 1,500,000
Proceeds for exercise of
stock options; 6,300 shares -- 88,500 -- 88,500
Proceeds from issuing common
stock; 5,000 shares -- 50,000 -- 50,000
Increase (Decrease) in
notes payable 5,284,198 225,000 3,150,559 225,000
Total Cash Flows from
financing activities 5,284,198 1,863,500 3,150,559 1,863,500
INCREASE (DECREASE) IN CASH 36,254 638,639 73,719 874,233
CASH BALANCE - BEGINNING 45,813 290,457 8,348 54,863
CASH BALANCE - ENDING $ 82,067 $ 929,096 $ 82,067 $ 929,096
</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 December 31, 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, completed construction in
early December 1999 of a vessel to be used in the dinner cruise business.
The Company began operating the vessel in early December 1999 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 $6.660 million, (of which
$6,184,198 was outstanding at December 31, 1999 and a $500,000 working
capital line. The Company believes the bank financing will be sufficient
to fund the working capital needs for the first year of the vessel's
operations. 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.
Interest capitalized during construction of the vessel is $139,513.
5
<PAGE>
The Company began depreciating and amortizing equipment and leasehold
improvements, on December 1, 1999. The methods used are:
<TABLE>
<CAPTION>
Salvage
Method Life Value
<S> <C> <C> <C>
Marine Equipment straight-line 25 years 20%
Office Equipment straight-line 5 years None
Leasehold Improvements straight-line 6 years None
</TABLE>
3. RELATED PARTY TRANSACTIONS
Offices and directors will be compensated based on actual time and
expenses devoted to the Company's business. During the nine months ended
December 31, 1999 and 1998 consulting fees paid to Directors were $4,500
and $6,000, respectively.
4. NOTE PAYABLE
The Company financed the construction of the dinner cruise vessel with
bank financing and preferred stock (see note 5).
The Company has executed a construction financing agreement in the amount
of $6,660,000. At December 31, 1999 the amount outstanding under the
construction financing agreement is $6,184,178. The construction
financing has been converted to term financing in the amount of
$6,660,000 for a five year period with payments based on ten year
amortization with unpaid balance due after the five years. The payments
are due quarterly beginning March 31, 2000 (interest only at March 31,
2000) with blended interest fixed at a rate of 8.05%. The Company also
has a $500,000 working capital line with the bank. As of December 31,
1999 no amounts were outstanding under the working capital line. 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, company founder. The Company is not
in compliance with the financial covenants as of December 31,1 999,
however does not expect having any problem with having the bank waive the
non compliance.
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 and
minimum net worth, including preferred stock, of $1,000,000.
5. 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. No dividends have been paid on preferred
shares; no action has been taken by the preferred shareholders and no
action is expected to be taken.
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 $10,412 in interest income during the nine months ending
December 31, 1998.
In July 1998 the Company began developing a dinner cruise business
centered in Biloxi, Mississippi. The dinner cruise vessel was completed in early
December 1999 and began operations in December 1999. The revenues from the
cruise vessel in December 1999 were $116,284. The Company has a loss before
preferred stock dividend in the nine months ended December 31, 1999 of $781,932,
compared to loss of $45,507 in the preceding year. The loss in 1999 is almost
entirely the result of the Company's expenses for general and administrative
expenses, marketing expenses and operating expenses related to the dinner cruise
business. The Company has obtained some firm bookings and entered into some
contracts however, 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 $996,980 as of December 31,
1999 and shareholders' equity of ($616,083) as of December 31, 1999. 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. The Company and Whitney Bank entered into a
permanent financing agreement pursuant to which the Company may borrow up to
$6,660,000. The Company also has a $500,000 working capital line with the bank.
The loan bears interest at the blended rate of 8.05% 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 Company anticipates that the
above source of cash will be sufficient to fund startup of operations. The
Company anticipates generating positive cash flow from operations by December
2000. In the event of 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 had no impact of year 2000 on its operations. The Company has
been assured by vendors that the software being utilized in its operations takes
into consideration the changes required by calendar year 2000.
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)**
.
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.
Incorporated by reference to such exhibit as filed with the Company's
Quartely Report on Form 10-QSB for the quarter ended June 30, 1999.
(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: January 31, 2000 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 NINE MONTHS ENDED DECEMBER 31, 1999 AND AS OF DECEMBER 31,
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> 9-MOS
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-START> Apr-01-1999
<PERIOD-END> Dec-30-1999
<EXCHANGE-RATE> 1
<CASH> 82,067
<SECURITIES> 0
<RECEIVABLES> 3,955
<ALLOWANCES> 0
<INVENTORY> 40,430
<CURRENT-ASSETS> 128,152
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,693,747
<CURRENT-LIABILITIES> 1,125,132
<BONDS> 0
0
1,500,000
<COMMON> 54,900
<OTHER-SE> (670,983)
<TOTAL-LIABILITY-AND-EQUITY> 7,693,747
<SALES> 0
<TOTAL-REVENUES> 116,284
<CGS> 0
<TOTAL-COSTS> 898,216
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (894,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> (894,432)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (894,432)
<EPS-BASIC> (16.29)
<EPS-DILUTED> (16.29)
</TABLE>
