SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 2000
[ ] 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.
(FORMERLY EMERGING BETA CORPORATION)
(Exact name of small business issuer in its charter)
DELAWARE 72-1235450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
315 BEACH BLVD., BILOXI, MISSISSIPPI 39530
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (228) 374-7475
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 X NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year: $370,803
The aggregate market value of the voting stock held by non- affiliates of
the registrant as of March 31, 2000 was $315,250.
The number of shares outstanding of the issuer's classes of Common Stock as
of March 31, 2000: Common Stock, $1.00 Par Value - 54,900 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY AND ORGANIZATION
Starship Cruise Line, Inc., formerly Emerging Beta Corporation (the "Company"),
is a Delaware corporation. The Company operates a dinner cruise vessel on the
Mississippi Gulf Coast (the "Coast"), primarily serving the region's tourism
market. Operations commenced in December 1999.
The Company is highly leveraged and has limited operating history. The Company
believes the vessel will be able to generate positive cash flow by the end of
its first year of operations, but can provide no assurance that this will occur.
However, one of the Company's principal stockholders has committed to provide
the funding, if necessary, to cover any working capital deficiencies during
initial operations.
The Company owns and operates the first dinner cruise vessel 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.
THE INDUSTRY AND MARKET OVERVIEW
The combination of casino gaming and the natural beauty of the Mississippi Gulf
Coast has provided an impetus to the tourism business which is now one of the
fastest growing segments of the Coast economy. Tourism has increased from
approximately 6.5 million visitors in 1996 to approximately 20 million in 1999.
There are currently 15,000 hotel rooms in service with 2,700 additional rooms
planned. Hotel occupancy levels averaged nearly 75% in 1999. The average daily
room rate for 1999 was $62.
Several factors contributed to these increases:
1. Continued growth in casino gaming, resulting in new hotel rooms and 24 hour
entertainment to increase the Coast's product mix.
2. Increased national recognition as a destination in the trade and consumer
press, including over 200 national and regional articles.
3. Increased consumer awareness in primary markets due to an additional $15
million of private sector marketing, supplementing Tourism Commission
marketing efforts.
4. Dramatic increase in golf rounds during the fall and winter seasons, due to
new signature course development and product appeal.
5. Strong consumer response to unique special events such as Mardi Gras,
Spring Pilgrimage, Blessing of the Fleet, and Cruising the Coast
(automobile retro rally with 1950s-60s theme) have extended the traditional
visitor season.
6. Development of new and existing charter and jet services
allowing more visitors to the area as a destination.
7. Increase in airport size and current expansion from one to
three airport terminals.
Through the cooperative efforts of both the public and private sectors the
growth of tourism on the Mississippi Gulf Coast is expected to continue at a
rapid pace with continued capital investment in new and existing facilities.
This is targeted to a more diversified product, a value pricing strategy and
growth in the trade show, convention and meetings market. The introduction of
air inclusive packages and increased marketing through travel agents and
wholesalers are expected to enhance the Coast attractiveness as a destination.
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Through 1999, over $2 billion has been invested in casino resort development on
the Gulf coast. The region has 15,000 hotel rooms (including four 1000+ room
hotels and 7,000 casino hotel rooms), a state of the art Convention Center with
180,000 square feet of meeting space, 22 golf courses and 1.32 million square
feet of retail space.
DINNER CRUISE VESSEL
The Company owns and operates the only dinner cruise vessel operating on the
Mississippi Gulf Coast. The Company's strategy was to build a yacht type dinner
cruise vessel suitable for operation in these waters. The primary area of
operation is in Biloxi between the end of the channel by the lighthouse, inside
of Deer Island and the Biloxi Gulf Coast (an area of about 8 miles). A flexible
program has been developed for special events/private charters at other
locations nearby as demand dictates.
Description of Vessel
LOA 180'
Beam 40'
Draft 5.5'
Construction material: Steel
Passenger Decks: Three - 2 x Encloses the aft open area and 1 x
open pilot house top deck with metal sun cover
Tonnage: Under 100 Gross
Power: 2 Detroit Diesel Series 60 (8 cylinder) 400 HP
Generators: 2 280KW Detroit Diesel Series 60
Bow Thruster: 250 hp Detroit Diesel Series 50
AC: 700 tons
Speed 10-11 knots-cruise speed 5 knots.
Fuel consumption (main engines) & generators 40 gallons/hr
Certificate: 600 passengers
Operational capacity as dinner cruise - up to 400 persons
Top deck to hold up to 200 passengers
Toilet facilities-one each of three decks
Bar on each deck (snack bar and beverages on all decks)
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Concession area near main boarding door-main deck Galley area on main deck A and
upper enclosed deck B Two main boarding areas and two alternate areas on each
side of vessel to facilitate board and use for private parties Handicap
facilities (elevator and toilet rooms) No accommodation for crew on board No
opening windows; complete climate control spaces No smoking in interior of
vessel Interior to be executed in manner of modern cruise ships Headroom 8'6"
between decks with 10 ft. between decks to allow for ducting, piping, etc.
The vessel was constructed to give substantial flexibility:
Top deck - open air with cover (metal) for sightseeing or cocktail charter B
Deck (enclosed upper deck) for dinner cruise, private parties, weddings or
charter, dinner dances (first class deck) A Deck (main deck) flex deck for
sightseeing, snacks, concessions, dinner cruise etc.
C Deck machinery space storage and service. Design of the vessel includes a
large picture window with deck recess 18" on each side to provide crew with
cleaning and service walkways.
Vessel food service and pantry area includes holding ovens equipment, reefers,
dishwashers, prep areas, plate and glass storage, and all necessary food
preparation and service facilities.
The vessel was designed by the firm of naval architects and marine engineers,
Dejong and Lebet Inc., of Jacksonville, Florida. In business since 1968, this
firm specializes in coastal passenger vessels and casino projects. They have
designed many other dinner cruise vessels and are considered leading designers
in this field. This particular vessel has the unique ability to operate in
extremely shallow water at this location sight (a requirement not met by
existing vessels of this size.)
The vessel was constructed by Freeport Shipbuilding Inc., Freeport, Florida.
Freeport Shipbuilding specializes in dinner cruise vessels and is considered one
of the top value builders in the field.
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The sailing schedule is three trips a day, each with a duration of one hour to
three hours, including lunch, sightseeing, hor d'oeuvres, dinner and late night
starlight dinner dance cruises.
The vessel's typical cruise route is approximately 3.5 miles behind Deer Island
from lighthouse to eastern tip cruising at about 4-5 miles per hour in protected
waters.
Charters can be booked during open times, depending on seasonal load factors
during certain times of the year. Clients include businesses, weddings, casinos
and tour and convention groups.
EMPLOYEES
As of March 31, 2000, the Company had 47 employees, including its officers.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases 3,000 square feet of office space and has its dock facilities
at 315 Beach Blvd., Biloxi, Mississippi 39530, and its phone number is (228)
374-7475. The lease is for an initial term of three years with an option for an
additional three years.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has not traded. As of March 31, 2000, there were
340 stockholders of record. Holders of the Series A Preferred Stock are entitled
to receive cumulative cash dividends at the rate of $10 per share. As of March
31, 2000, $204,760 in dividends had been declared and accrued but had not been
paid.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SELECTED FINANCIAL INFORMATION
The following sets forth selected financial information as of March 31,
1996, 1997, 1998, 1999 and 2000 and is qualified in its entirety by the
financial statements appearing elsewhere in this Report. The Company's fiscal
year end is March 31st.
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue $ 21,121 $ 15,818 $ 16,276 $ 10,758 $ 370,203
Cost of Sales and Expenses 24,319 20,287 14,082 (110,540) 1,928,781
Operating Income (Loss) (3,198) (4,469) 2,194 (99,782) (1,5112,140)
Net Income (Loss)
attributable to common
stock (3,198) (4,469) 2,194 (154,542) (1,662,140)
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash $ 297,673 $ 290,600 $290,457 $ 45,813 $ 68,912
Property and equipment,
net -- -- 9,156 3,207,342 7,607,779
Total Assets 298,692 292,687 299,893 3,239,709 7,740,319
Total Liabilities 2,026 1,050 5,502 1,461,360 7,624,110
Preferred Stock -- -- -- 1,500,000 1,500,000
Stockholders' Equity 296,666 292,197 294,391 278,349 (1,383,791)
</TABLE>
RESULTS OF OPERATIONS
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements and notes included
elsewhere in this report.
Prior to fiscal 2000, the Company's activities were limited to
organizational matters, raising financing, and seeking a suitable acquisition.
The Company had no sales revenue prior to fiscal 2000.
In July 1998, the Company began developing a dinner cruise business
centered in Biloxi, Mississippi. The dinner cruise business commenced operations
in December 1999. The net cruise revenue for the four months ended March 31,
2000 was $370,803 from approximately 5,300 passengers. The cost of sales and
other operating expenses in fiscal 2000 were $1,882,943 of which $419,451 was
incurred in the eight months prior to commencing operations in December 1999.
The Company had a loss before preferred stock dividend in the year ended March
31, 2000 of $1,512,140 compared to a loss before preferred stock dividend in
1999 of $99,782. Preferred stock dividends accrued were $150,000 in fiscal 2000
compared to $54,760 in fiscal 1999. The loss in 2000 was primarily the result of
the Company's expenses for marketing, sales and start up operational expenses
related to the initial operations of the dinner cruise business.
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The Company had a working capital deficit of $1,287,555 and negative
stockholders' equity of $(1,383,741) as of March 31, 2000. Substantially all of
the Company's assets are comprised of the cruise vessel and related on shore
facilities. The Company has financed it operations and the construction with
proceeds of a private placement 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 bank debt financing. At March 31, 2000, term financing was in
place in the amount of $6,660,000 for a five year period with the unpaid balance
due after the five years. The payments are due quarterly beginning June 30, 2000
(interest only at March 31, 2000) with interest fixed at a rate of 8.05%. The
Company also has a $1,000,000 working capital revolving line of credit with the
bank. As of March 31, 2000, the amount outstanding under the working capital
line was $443,198. 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 have been waived by the Company's lender until April
1, 2001, include minimum cash flow coverage of debt payments of 1.25 to 1 and
minimum net worth, including preferred stock of, $1,000,000.
While the financial covenants discussed above do not become effective until
after March 31, 2001, as discussed in Note 1 to the financial statements, the
Company's initial operations have not been profitable, and the Company is in the
deficit working capital position as of March 31, 2000. Should such losses
continue, the Company's operations alone will not provide adequate performance
to meet the financial covenants under the Company's debt agreement once
effective, subsequent to March 31, 2001. Management is currently developing a
plan to amend its debt agreement to enable the Company to continue to meet its
obligations as they become due from funds generated by operations and maintain
compliance under the terms of its debt agreement. However, if management is
unsuccessful in that effort, consideration may be given to seeking additional
capital and/or other financial support from the Company's principal
stockholders. The Company's management believes the vessel will be able to
generate positive cash flow by the end of its first year of operations, but
there is no assurance this will occur. However, one of the Company's principal
stockholders has committed to provide the funding, if necessary, to cover any
working capital deficiencies through March 31, 2001.
The Company's debt obligations and its mandatorily redeemable preferred
stock represent financial instruments subject to changes in market risk
(primarily interest rate risk). The Company's revolving line of credit has a
variable interest rate and is therefore less subject to interest rate risk. The
Company's term financing carries a fixed rate of interest and its mandatorily
redeemable preferred stock has a fixed dividend rate. All other things being
equal, the fair value of debt and debt equivalent instruments with fixed accrual
rates will increase as market interest rates decline, and conversely the fair
value of such instruments will decrease as market interest rates rise.
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IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS.
In connection with certain forward-looking statements contained in this
Form 10-KSB and those that may be made in the future by or on behalf of the
Company which are identified as forward-looking, the Company notes that there
are various factors that could cause actual results to differ materially
form those set forth in any such forward-looking statements. The forward-looking
statements contained in this Form 10-KSB were prepared by management and are
qualified by, and subject to, significant business, economic, competitive,
regulatory and other uncertainties and contingencies, all of which are difficult
or impossible to predict and many of which are beyond the control of the
Company. Accordingly, there can be no assurance that the forward-looking
statements contained in this Form 10-KSB will be realized or the actual results
will not be significantly higher or lower. These forward looking statements have
not been audited by, examined by, compiled by or subjected to agreed-upon
procedures by independent accountants, and no third-party has independently
verified or reviewed such statements. Readers of this Form 10-KSB should
consider these facts in evaluating the information contained herein. In
addition, the business and operations of the Company are subject to substantial
risks which increase the uncertainty inherent in the forward-looking statements
contained in this Form 10-KSB. The inclusion for the forward-looking statements
contained in this Form 10-KSB should not be regarded as a representation by the
Company or any other person that the forward-looking statements contained in
this Form 10-KSB will be achieved. In light of the foregoing, readers of this
Form 10-KSB are cautioned not to place undue reliance on the forward-looking
statements contained herein.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be
included in Item 7 are set forth in the financial statements beginning on page
F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.
DIRECTORS AND EXECUTIVE OFFICERS
Directors are elected to serve until the annual meeting of shareholders and
until their successors have been elected and have qualified. Officers are
appointed to serve, subject to the discretion of the Board of Directors, until
the meeting of the Board following the annual meeting of shareholders and until
their successors have been elected and have qualified. All directors and
officers have held their positions since inception, with the exception of Mr.
Jarrell, who was elected in 1994 and Mr. Manthey who was elected in March 2000.
NAME AGE POSITION(S)
---- --- -----------
Burt H. Keenan 60 Chairman of the Board
Troy M. Manthey 33 President, Chief Executive
Officer and Director
George F. Sustendal III 60 Director
Jerry W. Jarrell 58 Chief Financial Officer and
Director
Richard D. Stewart 47 Director
D. B. H. Chaffe III 66 Director
Daniel B. Killeen 66 Director
Each officer and director will devote only such time to the business
affairs of the Company as he deems appropriate, as discussed under the caption
"Executive Compensation."
BURT H. KEENAN is a director and founder of Independent Energy Holdings
PLC, a U.K. public company trading on the London Stock Exchange and the Nasdaq
National Market. From April 1991 to June 1998, Mr. Keenan was the executive
Chairman and Chief Executive Officer of Independent Energy. Since 1987, he has
been associated with Chaffe & Associates, Inc., an investment banking firm
located in New Orleans, Louisiana, where he specializes in capital formation for
emerging and middle market companies. From 1969 to 1986, Mr. Keenan was the
Founder, Chairman and CEO of Offshore Logistics, Inc., a Nasdaq traded oil and
gas service company operating a fleet of marine service vessels and helicopters
worldwide. Mr. Keenan was a member of the National Advisory Council on Oceans
and Atmosphere, a United States Presidential Commission, and of various industry
associations. Mr. Keenan received Bachelors and Masters degrees in business
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administration from Tulane University. He is also a Director of Telescan
Incorporated, a Nasdaq traded technology company, and several private companies
in the United States and Canada.
TROY M. MANTHEY has been President, Chief Executive Officer and Director
since March 2000. From May 1999 until joining the Company, he served owner's
representative and project manager for BB Riverboats, Inc., where he managed the
conversion of a casino vessel to a dinner/sightseeing vessel. From May 1998 to
May 1999, he was vice president of marine operations for Premier Yachts, Inc.
From May 1984 to December 1997, he was senior vice president of marine
operations for New Orleans Paddlewheels, Inc.
GEORGE F. SUSTENDAL III was President and Chief Executive Officer of the
Company through March 2000 and continues to serve as a director. He is founder
and has been President of Sustendal & Co., a marine marketing firm operating
since 1981. It specializes in business planning, marketing programs, strategy,
and communications for international shipyards, manufacturers, and maritime
related businesses. From 1974 to 1980, he managed and operated Choice and
Windward Charters in the Caribbean. He was a founder, and Vice President
operating manager of Forte Food, Inc., a company that owned three Ruth's Chris
Steakhouses in South Florida from 1986 until 1988. Mr. Sustendal holds a
Bachelors degree in Government and Public Law, Columbia University, and
completed a Master's program from School of Public Communication, Boston
University. He completed additional postgraduate work at the RCA Institute. Mr.
Sustendal is affiliated with several business and trade societies and is a Board
member of the International Super Yacht Society.
JERRY W. JARRELL is a director and founder of Independent Energy Holdings
PLC. He served as finance director of Independent Energy from April 1991 to May
1998. He was chief financial officer for the Woodson Companies, an oilfield
construction company from 1977 to 1990. From 1971 to 1977, he was secretary,
treasurer and controller of Offshore Logistics, Inc. Prior to joining Offshore
Logistics, he was a certified public accountant with Arthur Andersen & Company
between 1966 and 1971. He earned a BS degree in accounting from Louisiana Tech
University.
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RICHARD D. STEWART is President of Robert's Gumbo Shop, Inc. From 1979 to
1993 he was Vice President of Operations and Product Development for Roberts
Food Services. He received a degree in Hotel, Restaurant and Tourism
Administration from the University of New Orleans. He serves on several
professional and civic organizations related to the restaurant and tourism
industries.
D. B. H. CHAFFE III has been President and Chief Executive Officer of
Chaffe & Associates, Inc., an investment banking firm located in New Orleans,
Louisiana, since 1982. From 1981 to 1985, Mr. Chaffe was President, Chief
Executive Officer and Treasurer of Becker & Associates, Inc., a marine
contracting firm, following a leveraged buy-out by Mr. Chaffe and two other
individuals. From 1971 to 1981, he was Executive Vice President and Director of
Howard, Weil, Labouisse, Friedrichs Incorporated and the head of corporate
finance for this regional investment banking firm. From 1969 to 1971, he was a
general partner of Howard, Weil, Labouisse, Friedrichs & Company. He has served
on advisory committees and has been a member of National Securities Associations
and stock exchanges. Mr. Chaffe received a Bachelors degree in Engineering from
Tulane University. Mr. Chaffe is a director of Telescan, Inc.
DANIEL B. KILLEEN has been an associate professor in information systems in
the A. B. Freeman School of Business at Tulane University since 1983. From 1967
to 1983, he was Director of Computing at the University, responsible for all
computing activities and a staff of fifty. Mr. Killeen performs consulting work
for business and industry throughout the Gulf South. Mr. Killeen has received
degrees in Physics and a Ph.D in Engineering, and is affiliated with several
honorary business and scientific societies. He is a registered Louisiana
professional engineer.
INDEMNIFICATION
The Delaware Supreme Court has held that directors' duty of care to a
corporation and its stockholders requires the exercise of an informed business
judgment. Having become informed of all material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its certificate of incorporation to exonerate or indemnify its directors from
personal liability to the corporation or its stockholders for monetary damages
for breach of fiduciary duty of care as a director, with certain exceptions. The
Company has adopted these exoneration and indemnification provisions in the
Delaware General Corporation Law in their respective certificates of
incorporation and bylaws. The exceptions include a breach of the director's duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of law, improper declarations of dividends, and
transaction from which the directors derived an improper personal benefit. The
Company's Certificate of Incorporation exonerates its directors, acting in such
capacity, from monetary liability to the extent permitted by this statutory
provision. The limitation of liability provision does not eliminate a
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stockholder's right to seek non-monetary, equitable remedies such as an
injunction or recision to redress an action taken by directors. However, as a
practical matter, equitable remedies may not be available in all situations, and
there may be instances in which no effective remedy is available.
The extent to which the indemnification provisions of the Delaware General
Corporation Law and the Company's Certificate of Incorporation and bylaws
provide indemnification to officers and directors for violations of the federal
securities laws has not been settled by court precedent. The Company understands
that, in the position of the Securities and Exchange Commission, such
indemnification is against public policy and is unenforceable.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation of the Company's
executive officers and directors during each of the last three fiscal years. The
remuneration described in the table does not include the cost to the Company of
benefits furnished to the named executive officers, including premiums for
health insurance and other benefits provided to such individual that are
extended in connection with the conduct of the Company's business. The value of
such benefits cannot be precisely determined, but the executive officers named
below did not receive other compensation in excess of the lesser of $25,000 or
10% of such officer's cash compensation.
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<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------- --------------
COMPENSATION SECURITIES
----------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- ------ ----- ------- ------------
<S> <C> <C> <C> <C>
Troy M. Manthey 2000 - - 5,712 -
President and Chief 1999 - - - -
Executive Officer 1998 - - - -
George F. Sustendal III 2000 $60,000 - 5,000 -
President and Chief 1999 30,000 - - -
Operating Officer 1998 - - -
Jerry W. Jarrell 2000 $50,000 - - -
Chief Financial Officer 1999 16,500 - 2,500 -
1998 9,000 - - -
Richard Stewart 2000 $6,000 - - -
Director 1999 2,500 - 1,000 -
1998 - - - -
</TABLE>
No executive officer or director is currently covered by an employment
agreement. The Company does not maintain any pension plan, profit sharing plan
or similar retirement or employee benefit plans.
OPTIONS GRANTED IN FISCAL 2000
PERCENT OF
TOTAL
NUMBER OPTIONS
OF GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED 1999 V ($/SHARE) DATE
---- ------- ------ --------- ----
Troy M. Manthey 5,712 53.3% $15.00 March 13, 2006
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The following table contains information concerning the exercise of stock
options and employment related options and information in unexercised stock
options held as of March 31, 2000 by the named executive officers:
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1999 AT MARCH 31, 2000
ON VALUE -------------------------- ----------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE
---- -------- ----------- ------------ ------------- ---------------------
<S> <C> <C> <C> <C> <C>
George Sustendal 0 0 0 5,000 0
Jerry Jarrell 2,000 0 0 2,500 0
Troy Manthey 0 0 0 5,712 0
</TABLE>
(1) Market Value at time of exercise less exercise price. Since the Common
Stock does not currently trade the Market Value is based upon the offering
price of the Company's initial public offering at $10.00 per share.
Prior to Fiscal 1999, the Company granted a total of 4,300 options to
purchase Common Stock under its 1993 Stock Option Plan, as follows: Burt H.
Keenan, 2,600 shares; D.B.H. Chaffe, III, 1,200 shares; and Daniel B. Killeen,
500 shares; all exercisable at $15.00 per share at any time until December 31,
1999; and options to purchase 2,000 shares to $12.00 per share at any time until
December 31, 1999. All of these options were exercised in Fiscal 1999. (See
"Stock Option Plan.")
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 31, 2000, the stock ownership
of all persons known to own beneficially five percent or more of the Company's
Common Stock and all directors and officers of the Company, individually and as
a group. Each person has sole voting and investment power over the shares
indicated, except as noted.
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY NUMBER OF
SHARES OF COMMON STOCK
NAME BENEFICIALLY OWNED PERCENT
---- ------------------ -------
Burt H. Keenan(1) 11,170 20.3%
George F. Sustendal III 5,000 9.1
D. B. H. Chaffe III(1) 4,320 7.9
Daniel B. Killeen 760 1.4
Jerry W. Jarrell 2,125 3.9
Troy M. Manthey -- --
Richard D. Stewart -- --
All Officers and Directors as
a Group (6 persons) 23,375 42.6%
-----------------
(1) The business address of this stockholder is 220 Camp Street, New Orleans,
Louisiana 70130.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an oral agreement with Jerry W. Jarrell, a director, to
provide consulting services to the Company. The agreement, which commenced on
January 1, 1995, is for a term of 24 months and provides for $1,250 compensation
per month, plus a one-time grant of options to purchase 2,000 shares of Common
Stock at $12.00 per share. On January 1, 1997 the agreement was renewed but the
compensation reduced to $750 per month. See "Stock Option Plan" below. On
October 1, 1998 the compensation was increased to $2,000 per month.
All shares of Common Stock presently issued and outstanding are "restricted
securities" as that term is defined under the Securities Act and may not be sold
in the absence of registration or exemption under the Securities Act. Under
current law, the shares cannot be sold for two years from the date they are
purchased, and then only under limited circumstances. See "Description of
Securities."
15
<PAGE>
STOCK OPTION PLAN
The Company, by resolution of its Board of Directors and stockholders,
adopted its 1993 Stock Option Plan (the "Plan") on February 16, 1993. The Plan
enables each Company to offer an incentive based compensation system to
employees, officers and directors and to employees of companies who do business
with the Company.
In the discretion of a committee comprised of non-employee directors (the
"Committee"), directors, officers, and key employees of the Company and its
subsidiaries or employees of companies with which the Company does business
become participants in the Plan upon receiving grants in the form of stock
options or restricted stock. A total of 2,000,000 shares are authorized for
issuance under the Plan, of which 22,212 shares are issuable under options
granted to officers, directors and key employees at $15.00 per share, all become
exercisable in March 2002 and 2003 and expire in March 2005 and 2006. The
Company may increase the number of shares authorized for issuance under the Plan
or may make other material modifications to the Plan without shareholder
approval. However, no amendment may change the existing rights of any option
holder. Currently, the Company's Certificate of Incorporation authorizes the
issuance of only 200,000 shares of Common Stock, but the shareholders and Board
of Directors have approved an increase to up to 20,000,000 shares of Common
Stock.
In October 1998 directors and officers exercised stock options for 4,300
shares at $15.00 per share and 2,000 shares at $12.00 per share.
Any shares which are subject to an award but are not used because the terms
and conditions of the award are not met, or any shares which are used by
participants to pay all or part of the purchase price of any option may again be
used for awards under the Plan. However, shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.
16
<PAGE>
Stock options may be granted as non-qualified stock options or incentive
stock options, but incentive stock options may not be granted at a price less
than 110% of the fair market value of the stock as of the date of grant (110% as
to any 10% shareholder at the time of grant); non-qualified stock options may
not be granted at a price less than 85% of fair market value of the stock as of
the date of grant. Restricted stock may not be granted under the Plan in
connection with incentive stock options.
Stock options may be exercised during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability, whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock acquired through the exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination of notes, cash and shares of the Company's Common Stock or a
combination thereof. Incentive stock options may only be issued to directors,
officers and employees of the Company.
Stock options may be granted under the Plan may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If an option
grant contains the AO feature and if a participant pays all or part of the
purchase price of the option with shares of the Company's Common Stock, then
upon exercise of the option the participant is granted an AO to purchase, at the
fair market value as of the date of the AO grant, the number of shares of common
stock the Company equal to the sum of the number of whole shares used by the
participant in payment of the purchase price and the number of whole shares, if
any, withheld by the Company as payment for withholding taxes. An AO may be
exercised between the date of grant and the date of expiration, which will be
the same as the date of expiration of the option to which the AO is related.
Stock appreciation rights and/or restricted stock may be granted in
conjunction with, or may be unrelated to stock options. A stock appreciation
right entitles a participant to receive a payment, in cash or common stock or a
combination thereof, in an amount equal to the excess of the fair market value
of the stock at the time of exercise over the fair market value as of the date
of grant. Stock appreciation rights may be exercised during a period of time
fixed by the Committee not to exceed ten years after the date of grant or three
years after death or disability, whichever is later. Restricted stock requires
17
<PAGE>
the recipient to continue in service as an officer, director, employee or
consultant for a fixed period of time for ownership of the shares to vest. If
restricted shares or stock appreciation rights are issued in tandem with
options, the restricted stock or stock appreciation right is canceled upon
exercise of the option and the option will likewise terminate upon vesting of
the restricted shares.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits of the Company are
included herein.
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*
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*
--------------------
* Filed in original registration statement on Form SB-2, File No. 33-61894-FW
(the "Registration Statement") and incorporated herein by reference.
(b) Reports on Form 8-K.
Not Applicable.
18
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-2
Balance Sheet as of March 31, 2000 F-3
Statements of Operations for the Years Ended March 31, 2000 and 1999 F-4
Statements of Stockholders' Equity for the Years Ended
March 31, 2000 and 1999 F-5
Statements of Cash Flows for the Years Ended March 31,
2000 and 1999 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Starship Cruise Line, Inc.:
We have audited the accompanying balance sheet of Starship Cruise Line, Inc. (a
Delaware corporation) as of March 31, 2000, and the related statements of
operations, stockholders' equity and cash flows for the years ended March 31,
2000 and 1999. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the 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 audits provide a reasonable basis for our
opinion.
As discussed in Note 6, the Company's financial performance covenants under its
debt agreement do not become effective until after March 31, 2001. The Company's
initial operations have not been profitable, and should such losses continue,
the Company's operations alone will not provide adequate performance to meet the
financial covenants under the Company's debt agreement once effective,
subsequent to March 31, 2001. Management is currently developing a plan to amend
its debt agreement to enable the Company to continue to meet its obligations as
they become due from funds generated by operations and maintain compliance under
the terms of its debt agreement. However, if management is unsuccessful in that
effort, consideration may be given to seeking additional capital and/or other
financial support from the Company's principal stockholders.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Starship Cruise Line, Inc. as
of March 31, 2000, and the results of its operations and its cash flows for the
years ended March 31, 2000 and 1999, in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
New Orleans, Louisiana,
May 26, 2000
F-2
<PAGE>
STARSHIP CRUISE LINE, INC.
BALANCE SHEET
MARCH 31, 2000
CURRENT ASSETS:
Cash and cash equivalents $ 68,912
Accounts receivable 12,081
INVENTORY 35,873
PREPAID EXPENSES 15,674
-----------
Total current assets 132,540
-----------
PROPERTY AND EQUIPMENT, net 7,607,779
-----------
Total assets $ 7,740,319
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable $ 455,985
Revolving line of credit 443,198
Accounts payable 116,463
Preferred stock dividends payable 204,760
Accrued liabilities 93,061
Unearned revenue 106,628
-----------
Total current liabilities 1,420,095
-----------
LONG-TERM NOTES PAYABLE, less current portion 6,204,015
MANDATORILY REDEEMABLE PREFERRED STOCK, $1.00 par 1,500,000
value,
2,000,000 shares authorized; 15,000 shares
subscribed, issued and outstanding
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value; 20,000,000 shares 54,900
authorized; 54,900 issued and outstanding
Additional paid-in capital 379,431
Accumulated deficit (1,818,122)
-----------
Total stockholders' equity (1,383,791)
-----------
Total liabilities and stockholders' equity $ 7,740,319
===========
The accompanying notes are an integral part of this
financial statement.
F-3
<PAGE>
STARSHIP CRUISE LINE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
----------- ---------
REVENUES:
Gross Revenues $ 416,641 $ --
Complimentary Items (45,838) --
----------- ---------
Net revenues 370,803 --
----------- ---------
COSTS AND EXPENSES:
Operating Expenses 711,008 --
Sales and Marketing 414,475 --
General and Administrative 464,578 110,260
Interest, net 170,901 (10,758)
Depreciation and Amortization 121,981 280
----------- ---------
Total costs and expenses 1,882,943 99,782
----------- ---------
NET LOSS BEFORE INCOME TAXES (1,512,140) (99,782)
INCOME TAXES -- --
----------- ---------
NET LOSS (1,512,140) (99,782)
PREFERRED STOCK DIVIDENDS (150,000) (54,760)
----------- ---------
NET LOSS ATTRIBUTABLE TO COMMON STOCK $(1,662,140) $(154,542)
=========== =========
BASIC AND DILUTED LOSS PER SHARE $ (30.28) $ (3.21)
=========== =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 54,900 48,121
=========== =========
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
STARSHIP CRUISE LINE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - March 31, 1998 43,600 $43,600 $252,231 $ (1,440) $ 294,391
Issuance of Common Shares 5,000 5,000 45,000 -- 50,000
Exercise of Stock Options 6,300 6,300 82,200 -- 88,500
Preferred Stock Dividends -- -- -- (54,760) (54,760)
Net Loss -- -- -- (99,782) (99,782)
------ ------- -------- ----------- -----------
Balance - March 31, 1999 54,900 54,900 379,431 (155,982) 278,349
Preferred Stock Dividends -- -- -- (150,000) $ (150,000)
Net Loss -- -- -- (1,512,140) (1,512,140)
------ ------- -------- ----------- -----------
Balance - March 31, 2000 54,900 $54,900 $379,431 $(1,818,122) $(1,383,791)
====== ======= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-5
<PAGE>
STARSHIP CRUISE LINE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(1,512,140) $ (99,782)
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization 121,981 280
Increase in accounts payable 98,832 13,098
Increase in accounts receivable (12,081) --
Increase in inventory (35,873) --
Increase in prepaid expenses (15,674) --
Increase in accrued liabilities 198,720 --
----------- -----------
Net cash used in operating activities (1,156,235) (86,404)
----------- -----------
CASH FLOW USED IN INVESTMENT ACTIVITIES:
Capital expenditures (5,023,864) (2,696,740)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock -- 1,500,000
Proceeds from exercise of stock options -- 88,500
Proceeds from issuance of common stock -- 50,000
Proceeds from long-term debt 6,203,198 900,000
----------- -----------
Net cash provided by financing activities 6,203,198 2,428,980
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,099 (244,644)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 45,813 290,457
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 68,912 $ 45,813
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid, net of amounts capitalized $ 170,801 $ --
=========== -----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-6
<PAGE>
STARSHIP CRUISE LINE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
1. DESCRIPTION OF ORGANIZATION:
Starship Cruise Line, Inc. (the "Company") is a Delaware Corporation. The
Company operates a dinner cruise vessel on the Mississippi Gulf Coast, primarily
serving that region's tourism market. Operations commenced in December, 1999.
The Company is highly leveraged and has limited operating history. Initial
operations have not been profitable and the Company is in a deficit working
capital position. The Company's management believes the vessel will be able to
generate positive cash flow by the end of its first year of operations, but
there is no assurance that this will occur. However, one of the Company's
principal stockholders has committed to provide the funding, if necessary, to
cover any working capital deficiencies during initial operations (at a minimum
through March 31, 2001).
This is the first such dinner cruise vessel operating on the Mississippi Gulf
Coast and while the Company's management 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.
Inventory, which is recorded at the lower of actual cost or market, represents
amounts on hand related to food and beverages used in the dinner cruise
operation as well as other miscellaneous items held for sale through the
Company's gift shop.
The Company's property and equipment consists primarily of the cruise vessel,
related leasehold improvements and office equipment for shoreside facilities.
These assets are recorded at cost less accumulated depreciation calculated using
the straight-line method over the estimated useful lives of the respective
F-7
<PAGE>
classes of depreciable assets, net of salvage value (if any). Expenditures for
maintenance and repairs are expensed when incurred. Major expenditures for
renewals and improvements that extend the useful lives of existing assets and
interest incurred during vessel construction are capitalized.
Unearned revenue represents amounts received in advance for future cruises and
for the sale of gift certificates outstanding as of the financial statement
date.
There are no significant 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 full valuation allowance was
provided against the net deferred tax asset primarily resulting from the
Company's net operating loss (NOL ) carryforwards. Total net operating loss
carryforwards at March 31, 2000 were approximately $1,600,000 and they expire in
varying amounts in the years 2010 through 2020.
Cruise revenues are recognized at the time of voyage and gift shop revenues are
recognized upon the sale of goods. In the case of cruises not taken, the
nonrefundable portion of amounts received are recognized as revenue on the
scheduled date of the cruise, with any additional amount on deposit relieved
from unearned revenues and refunded to the customer.
Complimentary items represent free voyage passes and other items extended in
gratis to certain customers. Such amounts are recorded at retail value as a
reduction to gross revenues.
All expenses related to entering the dinner cruise business including marketing
expenses were expensed as incurred.
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.
F-8
<PAGE>
3. RELATED PARTY TRANSACTIONS:
Officers and directors are compensated based on actual time and expenses devoted
to the Company's business. During 2000 and 1999 consulting fees paid to
Directors were $8,000 and $61,500, respectively. Revenue derived from a
transaction with a principal stockholder during 2000 was approximately $13,000.
4. STOCK OPTION PLAN:
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based
Compensation, and continues to apply " Accounting Principles Board (APB) Opinion
No. 25 "Accounting for Stock Issued to Employees," and related interpretations
in accounting for its stock option plan. The disclosure requirements of SFAS 123
are effective for options granted in fiscal year 1996 and thereafter.
The Company's 1993 Stock Option Plan (the "Plan") provides for the issuance of
up to 2 million shares of common stock at no less than 84% of market value at
the time of grant (for non-qualified options) and no less than 110% of market
value for incentive stock options.
A summary of stock option activity follows:
Number Weighted Average
of Options Exercise Price
---------- --------------
Balance at March 31, 1998 6,300 $ 14.05
Options exercised (6,300) $ 14.05
Options granted 17,750 $ 15.00
------
Balance at March 31, 1999 17,750 $ 15.00
Options forfeited (3,750) $ 15.00
Options granted 8,212 $ 15.00
Balance at March 31, 2000 22,212 $ 15.00
F-9
<PAGE>
The options granted in 2000 and 1999 had a fair value of $0.86 and $2.08 per
share, respectively. These valuations were determined using the Black-Scholes
pricing model, using assumptions of risk-free interest rates of 5.80% and 5.35%,
no dividends, and volatility of 25%. If the Company were to have adopted the
expense recognition provisions of SFAS 123, the Company's net loss would have
been approximately $1,668,000 ($30.38 per share) and $161,000 ($3.35 per share)
in 2000 and 1999. No options were exercisable at March 31, 2000.
5. PROPERTY AND EQUIPMENT:
The major classifications and estimated useful lives of property and equipment
follow:
Amount Estimated Useful Life
---------- ---------------------------
Cruise vessel $7,127,753 25 years, 20% salvage value
Leasehold improvements 456,961 6 years, no salvage value
Office equipment 145,046 4-6 years, no salvage value
Subtotal 7,729,760
Accumulated depreciation (121,981)
----------
Property and equipment, net $7,607,779
==========
During the years ended March 31, 2000 and 1999 $124,262 and $15,251,
respectively, of interest related to vessel construction was capitalized and is
included within the cumulative cruise vessel cost reflected above.
6. NOTE PAYABLE:
The Company financed the construction of the cruise vessel with bank financing
and manditorily redeemable preferred stock (see Note 7).
F-10
<PAGE>
At March 31, 2000 the Company had in place term financing in the amount of
$6,660,000 for a five year period with payments based on a ten year amortization
schedule with the remaining unpaid balance due after five years. The payments
are due quarterly beginning June 30, 2000 (interest only at March 31, 2000) with
interest fixed at a rate of 8.05%. The Company also has a $1,000,000 revolving
line of credit (used for working capital purposes) with the bank. As of March
31, 2000 the amount outstanding under the revolving line of credit was $443,198.
Interest on the revolving line of credit is based upon the Lender's floating
prime rate (9.00% at March 31, 2000). The combined term and revolving financing
arrangement is secured by a lien on the cruise vessel, a limited guarantee from
the vendor who supplied the vessel's engines and the personal guarantee of Mr.
Burt H. Keenan, a principal stockholder.
Maturities of the notes payable and line of credit for the years ended March 31
are as follows:
2001 $ 899,183
2002 492,169
2003 532,905
2004 577,009
2005 4,601,932
The carrying values of the note payable and the revolving line of credit
approximate their respective fair values.
The term financing is subject to certain financial and non- financial covenants.
The Company has obtained a waiver from its lender with respect to compliance
with the financial covenants extending until April 2001. The financial
covenants, which become effective subsequent to March 31, 2001, include minimum
cash flow coverage of debt payments of 1.25 to 1 and minimum net worth,
including preferred stock, of $1,000,000.
While the financial covenants discussed above do not become effective until
after March 31, 2001, as discussed in Note 1, the Company's initial operations
have not been profitable, and the Company is in a deficit working capital
position as of March 31, 2000. Should such losses continue, the Company's
operations alone will not provide adequate performance to meet the financial
covenants under the Company's debt agreement once effective, subsequent to March
31, 2001. Management is currently developing a plan to amend its debt agreement
F-11
<PAGE>
to enable the Company to continue to meet its obligations as they become due
from funds generated by operations and maintain compliance under the terms of
its debt agreement. However, if management is unsuccessful in that effort,
consideration may be given to seeking additional capital and/or other financial
support from the Company's principal stockholders.
7. 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 in 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
holder of the preferred shares has no voting rights except at any time when the
equivalent of three quarterly dividends are unpaid or the 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
shareholder. No dividends on the Preferred Stock have been paid since issuance;
the amount of dividends payable at March 31, 2000 is $204,760 and is included
within current liabilities in the accompanying balance sheet. The holder of the
Preferred Shares has taken no action as a result of the nonpayment of the
dividends.
F-12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on June 29, 2000.
STARSHIP CRUISE LINE, INC.
BY: /S/ BURT H. KEENAN
-----------------------
Burt H. Keenan
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on June 29, 2000.
By: /S/ BURT H. KEENAN Chairman of the Board and Director
----------------------------
Burt H. Keenan
By: /S/ TROY M. MANTHEY President, Chief Executive Officer and
---------------------------- Director
Troy M. Manthey
By: /S/ GEORGE F. SUSTENDAL III Director
----------------------------
George F. Sustendal III
By: /S/ RICHARD D. STEWART Director
----------------------------
Richard D. Stewart
By: /S/ D. B. H. CHAFFE III Director
----------------------------
D. B. H. Chaffe III
By: /S/ DANIEL B. KILLEEN Director
----------------------------
Daniel B. Killeen
By: /S/ JERRY W. JARRELL Chief Financial Officer, Secretary and
---------------------------- Director (Principal Financial and
Jerry W. Jarrell Accounting Officer)
