<PAGE>   1
                              MANUALLY SIGNED COPY

                       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, 1996

[ ]               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 X No

         The number of shares outstanding of the registrant's common stock on
October 18, 1996 was 16,137,119.
<PAGE>   2
                                                                          PAGE
                                                                          NUMBER
                                                                          ------
                                     PART I

                              FINANCIAL INFORMATION

Item 1.           Financial Statements                                       3

Item 2.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations             12

                                     PART II

                                OTHER INFORMATION

Item 1.           Legal Proceedings                                         17

Item 2.           Changes in Securities                                     18

Item 3.           Defaults Upon Senior Securities                           18

Item 4.           Submission of Matters to a Vote of Security Holders       18

Item 5.           Other Information                                         18

Item 6.           Exhibits and Reports on Form 8-K                          18

Signatures                                                                  19

                                        2
<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 as reported on Form 10-K for the
Company's fiscal year ended February 29, 1996.

                                        3
<PAGE>   4
                                                               RMS TITANIC, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                                 BALANCE SHEET

<TABLE>
<CAPTION>
===============================================================================================================

                                                                                  AUGUST 31,         FEBRUARY 28,
                                                                                       1996                 1996
----------------------------------------------------------------------------------------------------------------
                                                                                 (unaudited)
<S>                                                                                 <C>                 <C>
ASSETS

Current Assets:
  Cash                                                                         $     28,739        $     43,803
  Accounts receivable                                                                18,742              19,510
  Refundable withholding tax                                                         87,500
  Other current assets                                                               14,474              10,000
---------------------------------------------------------------------------------------------------------------
      TOTAL CURRENT ASSETS                                                          149,455              73,313

Artifacts Recovered, at cost                                                      7,715,373           5,922,350

Deferred Income Tax Asset, net of valuation allowance of
 $1,910,000 and $1,640,000, respectively

Property and Equipment, net of accumulated depreciation
 of $45,477 and $41,433, respectively                                                24,122              26,182

Other                                                                                38,611              38,611
---------------------------------------------------------------------------------------------------------------

      TOTAL ASSETS                                                             $  7,927,561        $  6,060,456
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Note payable                                                                 $    126,050        $    126,050
  Accounts payable and accrued liabilities                                        3,020,557           2,023,574
  Deferred revenue                                                                  350,000
  Loans payable to partners                                                          45,000              45,000
---------------------------------------------------------------------------------------------------------------
      TOTAL CURRENT LIABILITIES                                                   3,541,607           2,194,624
---------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
  Common stock - $.0001 par value; authorized 30,000,000 shares,
   issued and outstanding 16,137,128 and 16,137,128 shares, respectively              1,614               1,614
  Additional paid-in capital                                                     13,869,963          13,869,963
  Deficit accumulated during the development stage                               (9,485,623)        (10,005,745)

---------------------------------------------------------------------------------------------------------------
      STOCKHOLDERS' EQUITY                                                        4,385,954           3,865,832
---------------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $  7,927,561        $  6,060,456
===============================================================================================================
</TABLE>


                                       4
<PAGE>   5
                                                               RMS TITANIC, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                         STATEMENT OF OPERATIONS
                                                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                   THREE-MONTH PERIOD           THREE-MONTH PERIOD           SIX-MONTH PERIOD      
                                                      ENDED AUGUST 31,             ENDED AUGUST 31,           ENDED AUGUST 31,     
                                                                 1996                         1995                       1996
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                          <C>                        <C>
Revenue:
  Licensing fees                                        $     860,000                                            $    860,000      
  Exhibitions                                                                         $    199,219                                 
  Merchandise and other                                         4,811                       55,322                      7,906      
  Sponsorship fees                                            150,000                                                 150,000      
  Sale of coal                                                 18,371                                                  66,096      
-----------------------------------------------------------------------------------------------------------------------------
Total revenue                                               1,033,182                      254,541                  1,084,002      
-----------------------------------------------------------------------------------------------------------------------------
Expenses:
  General and administrative                                  303,597                      147,555                    559,736      
  Depreciation and amortization                                 2,072                        3,089                      4,144      
  Interest                                                                                                                         
  Financing fees                                                                                                                   
  Acquisition of Management Agreement Option                                                                                       
  Settlement expense                                                                                                               
  Provision for uncollectible advances to affiliates                                                                               
-----------------------------------------------------------------------------------------------------------------------------
Total expenses                                                305,669                      150,644                    563,880      
-----------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                             727,513                 $    103,897               $    520,122      
=============================================================================================================================
Net income per common share                             $         .05                 $            .01          $         .03      
=============================================================================================================================
Weighted average common shares outstanding                 16,137,128                   16,115,172                 16,137,128      
=============================================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                                           PERIOD FROM
                                                                                         AUGUST 5, 1987 
                                                              SIX-MONTH PERIOD              (INCEPTION) 
                                                               ENDED AUGUST 31,            TO AUGUST 31,
                                                                          1995                     1996 
-------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                    <C>         

Revenue:                                                                                                
  Licensing fees                                                                            $ 1,435,000 
  Exhibitions                                                     $    489,735                  865,799 
  Merchandise and other                                                110,809                  256,037 
  Sponsorship fees                                                                              150,000 
  Sale of coal                                                                                   96,801 
-------------------------------------------------------------------------------------------------------                             
Total revenue                                                          600,544                2,803,637 
                                                                                                        
Expenses:                                                                                               
  General and administrative                                           397,437                6,981,861 
  Depreciation and amortization                                          6,178                  110,910 
  Interest                                                              13,826                  915,875 
  Financing fees                                                         6,667                  387,012 
  Acquisition of Management Agreement Option                                                  3,400,000 
  Settlement expense                                                    35,000                  221,715 
  Provision for uncollectible advances to affiliates                                            271,887 
-------------------------------------------------------------------------------------------------------                             
Total expenses                                                         459,108               12,289,260 
-------------------------------------------------------------------------------------------------------
Net income (loss)                                                 $    141,436              $(9,485,623)
=======================================================================================================                             
Net income per common share                                       $        .01                          
=======================================================================================================                             
Weighted average common shares outstanding                          15,535,599                          
=======================================================================================================
</TABLE>






                                       5
<PAGE>   6
                                                               RMS TITANIC, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                         STATEMENT OF CASH FLOWS
                                                                     (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
                                                                                                                      PERIOD FROM
                                                                               SIX-MONTH            SIX-MONTH      AUGUST 5, 1987
                                                                            PERIOD ENDED         PERIOD ENDED      (INCEPTION) TO
                                                                               AUGUST 31,           AUGUST 31,          AUGUST 31,
                                                                                    1996                 1995                1996
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                  <C>               <C>   
Cash flows from operating activities:
  Net income (loss)                                                          $   520,122           $  141,436         $(9,485,623)
---------------------------------------------------------------------------------------------------------------------------------

  Adjustments to reconcile net income (loss) to net cash provided by 
  (used in) operating activities:
    Depreciation and amortization                                                  4,144                6,178             110,910
    Noncash financing costs                                                                             6,667             387,012
    Acquisition of Management Agreement Option
     for noncash consideration                                                                                          3,400,000
    Write-off of advances to affiliates                                                                                   271,887
    Noncash interest expense                                                                            4,500             886,202
    Expenses paid by TVLP partners and TVLP affiliate
     on behalf of TVLP                                                                                                    427,564
    Reduction in artifacts recovered                                               6,977                                    9,977
    Changes in operating assets and liabilities, net of effect from acquisition:
       Increase (decrease) in accounts receivable                                    768             (103,545)            (18,742)
       Increase in refundable withholding tax                                    (87,500)                                 (87,500)
       Decrease (increase) in other current assets                                (4,474)              10,631             (14,474)
       Increase in advances to TVLP affiliates                                                                           (271,887)
       Increase in other assets                                                                                           (38,611)
       Increase in organization costs (fully amortized)                                                                   (60,483)
       (Decrease) increase in note payable, accounts payable and
        accrued liabilities                                                       16,983             (449,349)          3,378,952
       Increase in deferred revenue                                              350,000                                  350,000
---------------------------------------------------------------------------------------------------------------------------------
        TOTAL ADJUSTMENTS                                                        286,898             (524,918)          8,730,807
---------------------------------------------------------------------------------------------------------------------------------
        NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                      807,020             (383,482)           (754,816)
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Artifact recovery costs, including related deposits                           (820,000)                              (4,672,975)
  Purchases of property and equipment                                             (2,084)                                 (74,549)
---------------------------------------------------------------------------------------------------------------------------------
        CASH USED IN INVESTING ACTIVITIES                                       (822,084)                              (4,747,524)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                     (continued)
                                               See Notes to Financial Statements


                                       6
<PAGE>   7
                                                               RMS TITANIC, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                         STATEMENT OF CASH FLOWS
                                                                     (UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                                                                                               PERIOD FROM
                                                                       SIX-MONTH            SIX-MONTH         AUGUST 5, 1987
                                                                     PERIOD ENDED         PERIOD ENDED         (INCEPTION) TO
                                                                        AUGUST 31,           AUGUST 31,             AUGUST 31,
                                                                             1996                 1995                   1996
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                   <C>                  <C>
Cash flows from financing activities:
  Loans from TVLP partners                                                                                      $     432,705
  Proceeds from notes payable                                                                                         650,000
  Proceeds from issuance of common stock and capital contributions                          $  921,956              7,209,446
  Stock issuance costs                                                                                             (1,150,707)
  Repayment of advances from TVLP partner                                                                            (475,000)
  Repayment of notes payable                                                                  (436,492)            (1,135,365)
-----------------------------------------------------------------------------------------------------------------------------
        NET CASH PROVIDED BY FINANCING ACTIVITIES                                              485,464              5,531,079
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                                          $(15,064)             101,982                 28,739

Cash at beginning of period                                                43,803                  531               - 0 -
-----------------------------------------------------------------------------------------------------------------------------
Cash at end of period                                                   $  28,739           $  102,513          $      28,739
=============================================================================================================================
</TABLE>





                                       7
<PAGE>   8
                                                               RMS TITANIC, INC.
                                                    (A DEVELOPMENT STAGE COMPANY
                                                   NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

   

Note 1 -          The accompanying condensed financial statements of RMS
                  Titanic, Inc. (the "Company"), formerly First Response
                  Medical, Inc. ("FRM"), include the assets acquired and the
                  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. Accordingly, the
                  historical financial statements of TVLP prior to May 4, 1993
                  have been substituted for the historical financial statements
                  of FRM.

                  The accompanying financial statements contain all adjustments
                  necessary to present fairly the financial position of the
                  Company as of August 31, 1996 and its results of operations
                  and its cash flows for the three months and six months ended
                  August 31, 1996 and 1995. Results of operations for the three
                  and six month periods ended August 31, 1996 are not
                  necessarily indicative of the results that may be expected for
                  the year ending February 28, 1997.

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-           The Company entered into a charter agreement with
                  IFREMER for the charter of equipment to conduct the
                  Company's fourth expedition to the Titanic wreck site in the
                  Summer of 1996 ("Summer of 1996 Expedition").  Pursuant to
                  the charter agreement, sums aggregating $820,000 were paid to
                  IFREMER during the quarter ended August 31, 1996.  See
                  Note 6 below.  In addition, the Company is obligated to pay
                  additional amounts to IFREMER based upon a percentage of
                  the Company's future revenue, as defined, up to $980,000 due
                  not later that September 1, 2000.  The artifacts recovered
                  during the Summer of 1996 Expedition serve as collateral for
                  this debt.

                                        8
<PAGE>   9
RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)



                  In connection with the Summer of 1996 Expedition, the Company
                  entered into a sponsorship agreement with Guiness Import
                  Company ("GIC"), whereby GIC was designated as an official
                  sponsor of the Summer of 1996 Expedition. Pursuant to the
                  agreement, the Company earned a sponsorship fee of $150,000.

Note 4 -          The Company has entered into an agreement with CRE-CO Finanz
                  GmbH, a German company, for an exhibition of Titanic artifacts
                  in Europe in 1997. Pursuant to the agreement, the Company will
                  receive two-thirds of the net profits, as defined, after the
                  recoupment of certain project expenses, as defined. During the
                  six months ended August 31, 1996 the Company received a
                  $350,000 advance against the Company's share of profits, less
                  a 25% ($87,500) refundable withholding tax. The advance is
                  secured by a lien on the currency recovered from the Titanic
                  until the artifacts are delivered. Such exhibition profit
                  advance is included in deferred revenue in the accompanying
                  August 31, 1996 balance sheet.

                  The Company has 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, the Company will receive $720,000
                  in installments between September 1996 and August 1, 1997, and
                  will receive two-thirds of the net profits, as defined,
                  derived from ticket, merchandise and sponsorship revenues in
                  excess of $4,850,000.

                  Subsequent to August 31, 1996, the Company has 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 will receive one-third of revenues from the sale of
                  the first 150,000 tickets and fifty (50%) percent of revenues
                  from the sale of more than 150,000 tickets. In addition, the
                  Company will receive fifty (50%) percent of net profits, as

                                        9
<PAGE>   10
RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)


                  defined, from the sale of merchandise at the exhibition, and
                  fifty (50%) of sponsorship revenues net of the difference, if
                  any, between $500,000 expended by Nauticus for the design,
                  construction and marketing of the exhibition and Nauticus'
                  share of ticket revenues and net profits from the sale of
                  merchandise at the exhibition.

     

Note 5 -          The Company and two unrelated television productions companies
                  entered into an agreement whereby the Company granted certain
                  rights to the production companies for the production and
                  exploitation of audio and visual recordings with respect to
                  the Summer of 1996 Expedition (the "Productions"). Pursuant to
                  the terms of the agreement, the Company's obligations to pay
                  IFREMER approximately $820,000 prior to the commencement of
                  the Summer of 1996 Expedition were satisfied as a result of
                  entering into this arrangement. The Company agreed to
                  contribute $100,000 to such production, $40,000 of which was
                  satisfied through the grant to one of such unrelated third
                  parties certain rights to present information and images
                  concerning the Summer of 1996 expedition on the Internet, and
                  the balance of $60,000 of which is due from the Company on
                  April 16, 1997. The Company has retained the rights for
                  commercial exploitation of recordings made at the Titanic
                  wreck site in a print format and certain royalty and other
                  rights with respect to the marketing and sale of home videos
                  based upon the Summer of 1996 Expedition.

        
Note 6 -          The Company is a named defendant in a lawsuit commenced in the
                  Supreme Court of the State of New York, County of New York on
                  or about September 22, 1994 (Glenville Properties Incorporated
                  v. RMS Titanic, Inc. et al., 94/127087). The plaintiff therein
                  alleges Lone Star Casino Corporation ("Lone Star") has
                  assigned to it Lone Star's rights under a promissory note (the
                  "Note") executed by the Company in favor of Lone Star in May,
                  1993, certain security interests granted to Lone Star in
                  connection therewith, and other contractual rights related
                  thereto. The complaint alleges, inter alia, that the Company
                  breached its obligations owed under the Note and its

                                       10
<PAGE>   11
RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)


                  obligations under the agreement granting a security interest
                  to Lone Star, misrepresented the value of the property which
                  is the subject of such security interest, and interfered with
                  rights under the agreements relating to the grant of such
                  security interest. The relief sought is an award of
                  compensatory damages approximating $360,000, punitive damages
                  of a minimum of $1,080,000, and declaratory and injunctive
                  relief. The Company denied the material allegations of the
                  Complaint and asserted counterclaims for a judgment declaring
                  the promissory note paid and additional counterclaims and
                  third-party claims seeking an award of compensatory and
                  punitive damages. In July 1996, a settlement of this
                  proceeding was reached, subject to the execution of definitive
                  settlement documents. Pursuant to the contemplated settlement,
                  the Company will pay to Lone Star $154,271.62 in twelve (12)
                  equal monthly installments commencing as of September 15,
                  1996, subject to acceleration if the Company achieves certain
                  revenue levels ("Threshold Amounts") during such twelve month
                  period. The Company has agreed to issue 15,000 shares of its
                  Common Stock in escrow, with such shares to be either released
                  in 5,000 shares increments to Lone Star in the event such
                  Threshold Amounts are not achieved as of the end of the
                  Company's quarterly periods, or to be cancelled in the event
                  such Threshold Amounts are achieved. Additionally, affiliates
                  of Lone Star have agreed to release the Company from
                  liabilities amounting to approximately $40,000, and the
                  Company has agreed to issue 40,000 unregistered shares of
                  Common Stock to Lone Star.

                  On February 20, 1996, a third-party filed a motion pursuant to
                  Rule 60(b) of the Federal Rules of Civil Procedure in the
                  United States District Court for the Eastern District of
                  Virginia motion for an order rescinding the June 7, 1994 award
                  to the Company of salvor-in-possession status with respect to
                  the Titanic (R.M.S. Titanic, Inc. v. The Wrecked and Abandoned
                  Vessel believed to be the RMS TITANIC, in rem, No. 2:93cv902).
                  By order entered May 10, 1996, such motion was denied and the
                  Court modified its June 7, 1994 order awarding

                                       11
<PAGE>   12
RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

                  salvor-in-possession status to the Company to the extent of
                  requiring the Company to file more frequent periodic reports
                  as to the status of its activities. On August 13, 1996, the
                  Court amended such May 10, 1996 order so as to include the
                  award of exclusive rights to photograph the Titanic within the
                  award of salvor-in-possession status. The third-party has
                  filed a notice of appeal from such May 10, 1996 and August 13,
                  1996 orders, and the Company has filed a cross-appeal with
                  respect to the Court having granted standing to such
                  third-party. In October 1996, it was agreed, subject to the
                  execution of definitive agreements relating to the settlement
                  of an unrelated action between such third-party and the
                  principal shareholder of the Company, that such appeals and
                  cross-appeal will be dismissed. In the event that such appeal
                  and cross-appeal are not dismissed by a consummated
                  settlement, management of the Company intends to vigorously
                  defend against such appeal and to vigorously prosecute its
                  cross-appeal.

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, 1996 VERSUS
THE QUARTER ENDED AUGUST 31, 1995

FOR THE SIX MONTHS ENDED AUGUST 31, 1996 VERSUS
THE SIX MONTHS ENDED AUGUST 31, 1995

         During the second quarter of the Company's 1997 fiscal year and the
first six months of its 1997 fiscal year, the Company's total revenues increased
approximately 306% and approximately 81%, respectively, as compared to the
corresponding periods of its 1996 fiscal year. These changes were principally
attributable to the Company having earned licensing fees of $860,000 during the
second quarter of its 1997 fiscal year related to the production and
exploitation of audio and visual recordings with respect to the Company's
expedition to the Titanic wreck site during the Summer of 1996 (the "Summer of
1996 Expedition"), and $150,000 from the granting of sponsorship rights with
respect to the Summer of 1996

                                       12
<PAGE>   13
expedition, as compared to zero revenues during the first six months of the 1996
fiscal year from licensing or sponsorship fees. Additionally, the Company earned
revenue of $66,096 from the sale of coal during the first six months of its 1997
fiscal year, of which $18,371 was earned during the second quarter, as compared
to zero revenue from the sale of coal during the first six months of the 1996
fiscal year. During the second quarter of its 1996 fiscal year and the first six
months of its 1996 fiscal year, the Company earned exhibition revenue of
$199,219 and $489,735, respectively, and merchandise and other revenue of
$55,322 and $110,809, respectively, as compared to zero revenues from exhibition
activities during the first six months of its 1997 fiscal year and $7,906 of
merchandise and other revenue during the first six months of its 1997 fiscal
year, of which $4,811 was earned during the second quarter of its 1997 fiscal
year. This decrease in exhibition and merchandise revenue was principally
attributable to the Company having presented its prelude exhibition at the
National Maritime Museum of Greenwich, London, England (the "National Maritime
Museum") during its 1996 fiscal year, as compared to not having had exhibition
and related merchandise activities during the first six months of its 1997
fiscal year.

         The Company's general and administrative expenses increased
approximately 106% during the second quarter of its 1997 fiscal year as compared
to the second quarter of its 1996 fiscal year, and increased approximately 41%
during the first six months of its 1997 fiscal year as compared to the first six
months of its 1996 fiscal year. Such increases were primarily attributable to
expenses of $100,000 related to the production of audio and visual recordings of
the Summer of 1996 Expedition, travel expenditures related to the Summer of 1996
Expedition and an increase in legal fees attributable to a legal challenge to
the Company's salvor-in-possession status. Interest expenses decreased 100%
during the first six months of the Company's 1997 fiscal year as compared to the
first six months of its 1996 fiscal year, primarily as a result of the reduction
of notes payable. Financing fees attributable to notes payable decreased 100%
during the first six months of the Company's 1997 fiscal year as compared to the
first six months of its 1996 fiscal year.

         The Company has entered into an agreement with the City of Memphis,
Tennessee for the presentation of an exhibition of Titanic artifacts in Memphis,
Tennessee from April 3, 1997 through September 30, 1997. Pursuant to the
exhibition agreement, the City of Memphis is responsible for payment of all
costs and expenses related to the design, construction and operation of the
exhibition. Additionally, pursuant to the agreement, the Company will receive
$720,000 in installments between September 1996 and August 1, 1997, and will
also receive two-thirds of the net profits, as defined, derived from ticket,
merchandise and sponsorship revenues in excess of $4,850,000. The Memphis
exhibition will display in themed galleries approximately 300 artifacts
recovered between 1987 and 1994 by the Company, including a bronze cherub,
stained glass window, ship's binoculars, steward's jacket, wrought-iron bench
end from a deck chair, and antique jewelry. This exhibition will also include an
18-foot scale model of the Titanic, replications of a First Class stateroom,
dining rooms, Third Class and crew cabins and recreational areas of the Titanic,
the Marconi Room, and a model of the wrecked bow.


                                       13
<PAGE>   14
         Additionally, subsequent to August 31, 1996, the Company entered into
an agreement with the National Maritime Center ("Nauticus"), a political
subdivision of the City of Norfolk, Virginia, to exhibit artifacts, expedition
equipment, photographs and film footage from the 1996 Titanic expedition from
November 27, 1996 through March 31, 1996 (the "Norfolk Exhibition").
Approximately twenty-five (25) unrestored artifacts recovered during the Summer
of 1996 expedition (including a telegraph, a large silver soup tureen,
binoculars in a leather case, a ship's whistle and a porthole) and ten (10)
conserved artifacts from prior expeditions will be displayed at the Norfolk
Expedition, together with a life-size rendition of the 20 ton section of the
Titanic hull that the Company sought to raise from the debris field surrounding
the Titanic wreck site during the Summer of 1996 Expedition, a two-ton flotation
bag used in artifact recovery operations, and a full-size replica of a three-ton
light tower that the Company utilized to illuminate portions of the wreck during
the Summer of 1996 Expedition. Pursuant to the Norfolk Exhibition Agreement,
Nauticus is responsible for payment of all costs and expenses related to the
design, construction and operation of the exhibition. The Company will receive
one-third of revenues from the sale of the first 150,000 tickets and fifty (50%)
of revenues from the sale of more than 150,000 tickets. In addition, the Company
will receive fifty (50%) percent of net profits, as defined, from the sale of
merchandise at the Norfolk Exhibition, and fifty (50%) of sponsorship revenues
net of the difference, if any, between $500,000 expended by Nauticus for the
design, construction and marketing of the exhibition and Nauticus' share of
ticket revenues and net profits from the sale of merchandise at the exhibition.

                         LIQUIDITY AND CAPITAL RESOURCES

         Notes payable as of August 31, 1996 represent approximately $126,000
(excluding accrued interest of approximately $25,000) owed to Lone Star Casino
Corporation ("Lone Star") pursuant to a promissory note executed in May 1993.
Pursuant to a settlement agreement to resolve legal proceedings to enforce such
promissory note and counterclaims and third-party claims asserted by the
Company, it was agreed that the Company would pay Lone Star $154,271.62 in
twelve (12) equal monthly installments, commencing as of September 15, 1996,
subject to acceleration in the event that the Company achieves certain levels of
revenue during such period. See Part II, Item 1 of this report. The Company's
capital commitments during its 1997 fiscal year also include lease payments for
principal offices in the base amount of $61,000 per annum, and compensation to
its executive officer. Material contingencies include the outcome of pending
lawsuits. The Company has agreed to pay to LP3 for conservation of the artifacts
to be exhibited at the Memphis exhibition $200,000 of the $720,000 to be paid to
the Company pursuant to the Memphis exhibition agreement.

         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 has 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

                                       14
<PAGE>   15
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 an advance against the Company's share of profits from
Titanic coal sales and sales of cabins of cruise ships which accompanied the
Company on its 1996 research and recovery expedition. The $280,000 was reduced
by approximately $68,000 from the sale of coal during the six months ended
August 31, 1996. There were no profits from sale of cruise ship cabins for the
1996 expedition. The Company cannot forecast when, if ever, reimbursement of
such 1994 charter expenses will be made to the Company by RMS Foundation, Inc.
(an unrelated entity) which had undertaken to provide such funding under its
agreement for the exhibition planned at the Queen Mary Seaport Complex in Long
Beach, California, or when, if ever, construction and fabrication of such
exhibit will commence.

         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 from any exhibition of artifacts organized by a third party. 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. 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 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 is due from the Company on April
16, 1997. The Company has retained the rights for 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

                                       15
<PAGE>   16
to the television production companies a right of first negotiation with respect
to the Company's next expedition to the Titanic wreck site.

         Apart from the Company's obligations to IFREMER in connection with its
1996 research and recovery expedition, the Company's near term operating needs
will be financed principally from the advance distribution of profits paid to
the Company under its agreement for the exhibition of Titanic artifacts in
Europe in 1997, revenues from the Norfolk Exhibition, payment of exhibition fees
to the Company for the Memphis Exhibition, and revenues from its sale of coal
and other merchandise through direct market activities. The Company expects its
conservation expenses to increase in its fiscal year commencing March 1, 1996 as
a result of the need to prepare artifacts for exhibition in Europe and Memphis.
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.

         With respect to its long-term exhibition plans, the Company is
exploring the possibility of arranging other income producing exhibitions
similar to the prelude exhibition at the National Maritime Museum, or the
Norfolk, Memphis and planned 1997 European exhibitions, without the need for
substantial additional capital, prior to the commencement of the planned
worldwide touring Waterborne Exhibition.

         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 the Company is unable to arrange income producing exhibitions
similar to the prelude exhibition at the National Maritime Museum, or the
Norfolk, Memphis and planned 1997 European exhibitions, or funding for the
planned worldwide touring exhibition is not obtained, there could be a
curtailment of the Company's long-term business activities and material delays
in the implementation of its business plans.

         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. During the first six months of its 1997
fiscal year, there were no significant fluctuations in the exchange rates.
Although the Company's financial arrangements with the National Maritime Museum
and other entities 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.


                                       16
<PAGE>   17
         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.

         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 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.

                                     PART II

                                OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS.

         The lawsuit previously reported commenced against the Company in the
Supreme Court of the State of New York, County of New York on or about September
22, 1994 (Glenville Properties Incorporated v. RMS Titanic, Inc. et al.,
94/127087) has been settled, subject to the execution of definitive settlement
documents. Pursuant to the settlement, the Company will pay to an affiliate of
the plaintiff $154,271.62 in twelve (12) equal monthly installments commencing
as of September 15, 1996, subject to acceleration if the Company achieves
certain revenue levels ("Threshold Amounts") during such twelve month period.
The Company has agreed to issue 15,000 shares of its Common Stock in escrow,
with such shares to be either released in 5,000 shares increments to Lone Star
in the event such Threshold Amounts are not achieved as of the end of the
Company's quarterly periods, or to be cancelled in the event such Threshold
Amounts are achieved.

         The appeal and cross-appeal in the legal proceedings in the United
States District Court for the Eastern District of Virginia previously reported
pertaining to the motion of a third-party seeking an order rescinding the
salvor-in-possession status of the Company will be voluntarily dismissed,
subject to the execution of definitive agreements relating to the settlement of
an unrelated action between such third party and other parties, including the
principal shareholder of the Company.



                                       17
<PAGE>   18
         There has been no other material change in litigation reported in the
Company's Annual Report on Form 10-K for its fiscal year ended February 29,
1996.

ITEM 2.           CHANGES IN SECURITIES.

                  None.

ITEM 3.           DEFAULT UPON SENIOR SECURITIES.

                  None.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  None.

ITEM 5.           OTHER INFORMATION.

                  None.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K.

                  (A) EXHIBITS

                  10.1     1996 Charter Agreement with IFREMER.

                  10.2     Agreement dated August 8, 1996 between the Company 
                           and the City of Memphis.

                  10.2     Agreement dated July 22, 1996 between Discovery
                           Communications, Inc., Ellipse Programme and the
                           Company (omitted and filed separately as confidential
                           information).


                  (B) REPORTS ON FORM 8-K

                  None.



                                       18
<PAGE>   19
                                   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:   October 21, 1996        By:  /s/George Tulloch
                                     -------------------------------------------
                                     George Tulloch, Principal Executive Officer





Dated:   October 21, 1996        By: /s/Nicholas Vitti
                                    --------------------------------------------
                                    Nicholas Vitti, Principal Accounting Officer


                                       19