U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                               AMENDMENT NO.1 TO
                                   FORM 10-K

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

     FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2002

[ ]  TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

     For the transition period from              to

     Commission File No. 000-24452

                                RMS TITANIC, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        Florida                                             59-2753162
        -------                                             ----------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

              3340 Peachtree Rd, NE, Suite 1225, Atlanta, GA 30326
              ----------------------------------------------------
                     Address of principal executive offices

     Issuer's telephone number, including area code: (404) 842-2600

     Securities registered pursuant to Section 12(b) of the Act: None

Securities  registered  pursuant to Section 12(g) of the Act: Common Stock,  par
value $.0001 per share

         Check whether the issuer (1) has filed all reports required to be filed
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes [ ] No [X]

         Check  if  disclosure  of  delinquent  filers  pursuant  to Item 405 of
Regulation S-K is not contained herein,  and will not 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-K or any amendment to this
Form 10-K [X].

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant, as of May 31, 2002, was: $2,023,606.

     The number of shares  outstanding  of each of the  registrant's  classes of
common stock, as of May 31, 2002, were:
                                                      NUMBER OF SHARES
            TITLE OF EACH CLASS                        OUTSTANDING

            Common Stock, par value $.0001
            per share                                    18,550,847

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE: The registrant's definitive proxy statement
to be filed pursuant to Regulation 14A or definitive information statement to be
filed pursuant to Regulation 14C.

              SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE
                    SECURITIES LITIGATION REFORM ACT OF 1995

Except for historical  information  contained herein, this Annual Report on Form
10-K  contains  forward-looking  statements  within the  meaning of the  Private
Securities Reform Act of 1995 that involves certain risks and uncertainties. The
Company's   actual  results  or  outcomes  may  differ   materially  from  those
anticipated.  Although the Company believes that the assumptions  underlying the
forward-looking   statements  contained  herein  are  reasonable,   any  of  the
assumptions could be inaccurate,  and therefore,  there can be no assurance that
the  forward-looking  statements  contained  in  the  Report  will  prove  to be
accurate.   In  light  of  the   significant   uncertainties   inherent  in  the
forward-looking  statements  included  herein,  such  information  should not be
regarded as a representation by the Company that the objectives and plans of the
Company will be achieved.  The Company  does not have any  obligation  to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.

ITEM 1.  BUSINESS

BACKGROUND

On May 4, 1993,  RMS Titanic,  Inc.  acquired all the assets and assumed all the
liabilities of TITANIC  Ventures  Limited  Partnership  ("TVLP"),  a Connecticut
limited  partnership  (the  "Acquisition").  References to the "Company" in this
Report relate to TVLP prior to the Acquisition and the combined entities of TVLP
and RMS Titanic, Inc. after the Acquisition.

Pursuant  to a judgment  entered in the Federal  District  Court for the Eastern
District   of   Virginia   on  June  7,   1994,   the   Company   was   declared
salvor-in-possession  of the  vessel  RMS  Titanic  ("TITANIC"),  the  sole  and
exclusive  owner of any  items  recovered  from the  TITANIC  and so long as the
Company is salvor-in-possession, the sole and exclusive owner of items recovered
from the TITANIC in the future (the "Order").  The Order was  re-affirmed by the
Federal  District  Court for the Eastern  District of Virginia in 1996. In March
1999,  the United  States Court of Appeals for the Fourth  Circuit  affirmed the
Company's status as  salvor-in-possession,  however,  it reversed the portion of
the 1996  decision that the Company could exclude other parties from viewing and
photographing  the TITANIC  site.  The United States  Supreme Court  declined to
review the Company's appeal of this decision.

 On April 12, 2002,  the United  States Court of Appeals for the Fourth  Circuit
(the "Fourth  Circuit")  affirmed two orders of the United States District Court
for the Eastern District of Virginia,  Norfolk Division. R.M.S. Titanic, Inc. v.
The  Wrecked and  Abandoned  Vessel . . ., 2002 U.S.  App.  LEXIS 6799 (4th Cir.
2002).  Dated September 26, 2001 and October 19, 2001,  these orders  restricted
the sale of artifacts  recovered by the Company from the RMS Titanic wreck site.
In rendering its opinion, the Fourth Circuit reviewed and declared ambiguous the
June 7, 1994 order of the  District  Court  that had  awarded  ownership  to the
Company of all items then  salvaged from the wreck of the Titanic as well as all
items  to be  salvaged  in the  future  by the  Company  so long as the  Company
remained  salvor-in-possession  of the  Titanic.  Having  found the June 7, 1994
order  ambiguous,  the Fourth  Circuit  reinterpreted  the order to convey  only
possession,  not title,  pending  determination of a salvage award. This opinion
conflicts with previous  rulings that were rendered by both the Fourth  Circuit,
R.M.S.  Titanic,  Inc.  v.  Haver,  et al, 171 F.3d 943 (4th Cir.  1999) and the
District  Court all of which  rulings the Company  relied upon in the conduct of
its business. Furthermore, based on a June 7th 1994 order of the District Court,
the Company  believed it was the exclusive  owner of the artifacts.  The Company
intends to petition the United  States  Supreme  Court to hear its appeal of the
April 12, 2002 decision of the Fourth Circuit.

In its April 12, 2002 Opinion, the Fourth Circuit indicated that the Company, as
salvor,  has a  lien  in the  previously  recovered  artifacts  and  that  it is
necessary for the District  Court to determine  the Company's  salvage award and
satisfy  the award with the  proceeds  from a sale of the  artifacts.  Should it


                                       2
<PAGE>

become  apparent  to the  District  Court  that the  proceeds  of any sale would
clearly be inadequate  to pay the salvor its full reward,  then the court might,
as a matter of discretion, award the salvor title to the property in lieu of the
proceeds  of sale,  thus  saving the costs of sale.  The salvor  does not have a
direct  right,  however,  to title in the  property.  As a result of the  Fourth
Circuit's opinion, the Company does not own the artifacts under the jurisdiction
of the United  States  District  Court for the  Eastern  District  of  Virginia,
Norfolk Division but instead has a salvor's lien.

The  Company  was formed in 1987 for the  purposes  of  exploring  the wreck and
surrounding oceanic areas of the TITANIC, which sank in 1912, and lies more than
12,500  feet  below  the  surface  of  the  Atlantic  Ocean.  This  location  is
approximately 400 miles off the southern coast of Newfoundland.  The Company has
obtained  oceanic  material and scientific  data available in various forms that
include still and moving  photography  and artifacts from the wreck site; and is
utilizing  this  data and  artifacts  for  historical  verification,  scientific
education  and  public  awareness.  All these  activities  are  directed  toward
producing income for the company  resulting in touring  exhibitions,  television
programs, and the sales of still photographs.

In August  1987,  the Company  contracted  with the  Institute of France for the
Research and Exploitation of the Sea  ("IFREMER"),  which is owned by the French
Government, to conduct an expedition and dive to the wreck of the TITANIC. Using
state-of-the-art  technology  from IFREMER (the  world's  largest  oceanographic
institute),  approximately  sixty days of research and recovery  operations were
performed  at the  TITANIC  wreck  site in  1987  through  the  use of a  manned
submersible  NAUTILE.  Approximately  1,800  objects were  recovered  during the
course of the thirty-two dives in that expedition.

The recovered  objects were  conserved and  preserved by  Electricite  de France
("EDF"),  the French  government-owned  utility.  In addition to the recovery of
historic objects, the Company's 1987 expedition also produced  approximately 140
hours of videotape  footage and an estimated  7,000 still  photographs  from the
wreck site. These artifacts from the 1987 expedition were  subsequently  awarded
to the Company by the government of France.

In June 1993, the Company  successfully  completed its second  expedition to the
TITANIC wreck site,  during which it recovered  approximately  800 artifacts and
produced  approximately  105 hours of  videotape  footage  during  the course of
fifteen  dives.  In July 1994,  the  Company  recovered  over 1,000  objects and
produced   approximately  125  hours  of  videotape  footage  during  its  third
expedition  to the TITANIC  wreck site.  In August 1996,  the Company  recovered
numerous  objects and  produced  approximately  125 hours of  videotape  footage
during its fourth  expedition to the TITANIC wreck site.  Present  management is
reviewing recovery details of the 1996 expedition.

With the Company's cooperation,  Discovery  Communications,  Inc. produced three
hours  of  television  programming  based  upon  the  Company's  activities  and
scientific  studies  undertaken  during the 1996  expedition.  Two hours of this
programming,  presented  in "TITANIC:  Anatomy of A  Disaster,"  was the highest
rated  program in the history of The  Discovery  Channel  when it aired in April
1997. In addition to obtaining videotape footage for the television productions,
a substantial  portion of the 1996  expedition  was devoted to the recovery of a
section of the  TITANIC  hull,  measuring  approximately  26 feet by 20 feet and
weighing  approximately  20 tons,  from the debris field  surrounding the wreck.
Although the Company raised the "Big Piece" to within  approximately 200 feet of
the  surface of the ocean,  efforts to recover it were  unsuccessful  because of
stormy weather conditions and severe ocean turbulence.

In  August  1998,   the  Company   recovered   numerous   objects  and  produced
approximately  350 hours of videotape footage during its fifth expedition to the
TITANIC  wreck site.  This  expedition,  again  undertaken in  cooperation  with
Discovery  Communications,  Inc., produced five hours of television  programming
about the  expedition,  including the first-ever live broadcast from the TITANIC
wreck site and a one hour Dateline NBC special  broadcast.  Among the highlights
of the 1998  expedition  was the  successful  recovery  of the "Big  Piece"  and
extensive  mapping of the  TITANIC and  portions  of the wreck site  through the
capture of thousands  of  high-resolution  color  digital  photographs.  Present
management is also reviewing recovery details of the 1998 expedition.

                                       3
<PAGE>

The  Company's  1987,  1993,  1994,  1996,  and 1998  TITANIC  expeditions  were
completed by charter  agreements with IFREMER.  The objects recovered from those
expeditions  were  ultimately  transported  to  a  privately-owned  conservation
laboratory in France for restoration and  preservation  processes in preparation
for exhibition,  except for several objects conserved by EDF that were recovered
in 1987 and the "Big Piece",  which went through its conservation process in the
United States.

During the summer of 2000,  the Company  conducted  its most  recent  expedition
("Expedition 2000") to the TITANIC wreck site in the North Atlantic. During this
expedition,  the Company utilized the services of the P.P. Shirshov Institute of
Oceanology  of Moscow,  Russia,  which  provided the research  vessel  "Akademik
Mstislav  Keldysh"  and two  manned  submersibles-  the  "MIR-1"  and "MIR-2 The
expedition  resulted  in a total of  twenty-eight  dives over a four week period
that  resulted in the  recovery of more than 900 objects from the wreck site and
the  discovery  of a new debris  field.  Among the  artifacts  recovered in this
expedition  were the ship's  wheel and  stand,  whistle  control  timer from the
navigation  bridge,  the main telegraph  base and the docking bridge  telephone.
Among  personal  items  recovered  were  binoculars,  a pair of  opera  glasses,
sixty-five intact perfume ampoules, a camera,  bowler hat, first class demitasse
and dinner plate. A base for a cherub, likely from the Grand Staircase,  as well
as gilded wood from a  balustrade  were also  recovered.  The nine  leather bags
provided more than one hundred  additional  objects.  Some medicinal  items were
recovered  that included a cobalt blue bottle that reads:  BROMOSELTZER  EMERSON
DRUG CO. BALTIMORE  MARYLAND.  For the first time, two toilets, a wok, an intact
deck light, circulating fans, thermometers,  four eggcups, and a metal megaphone
were  recovered.  These  items  will  further  provide a clearer  picture of the
workings of the TITANIC at that time period, and will further enhance exhibition
presentations.  This  expedition  was  conducted  during  the months of July and
August 2000.

In June 2000, the Company  established a wholly owned United Kingdom subsidiary,
Danepath  Ltd.,  for  the  purpose  of  purchasing  the  research  vessel,   RRS
Challenger,  a 178 foot- 1050 ton ship that was to be utilized in the expedition
to the TITANIC  wreck site during that summer.  This vessel was acquired on June
30, 2000 from the Natural Environment  Research Council, a British  governmental
agency.  The name of the vessel was changed to the SV EXPLORER.  During the 2000
expedition,  the Company utilized this ship for fifty-three  days. At the end of
the expedition, the Explorer landed the recovered artifacts in Norfolk, Virginia
for eventual delivery to the conservation  facility the Company established with
Eastern  Michigan State  University.  During the summer of 2001, the SV Explorer
had several charters for a total of 49 days.

In May 2001, the Company  acquired  ownership of the RMS Carpathia that was sunk
in 1918 off the coast of the United Kingdom.  This ship rescued the survivors of
the Titanic.  This ship wreck will play a role in the Company's  future business
plan.

On April 2, 2002, the Company entered into a Purchase  Agreement for the sale of
the common stock,  representing 100% ownership,  of its Danepath Ltd. subsidiary
to Argosy International Ltd. The purchase price, as amended by Agreement on June
1, 2002,  was $1.5  million.  Danepath's  principal  asset is the  research  and
recovery  vessel "SV Explorer".  Under the terms of the Purchase  Agreements the
Company  received  $100,000  upon  execution  and an obligation of $1.4 million,
bearing  interest  at 8% per annum  that will be paid  within six  months.  This
obligation  is  collateralized  with both a first  mortgage  on the  vessel  "SV
Explorer",  the principal  asset owned by Danepath,  and all the common stock of
the Company owned by Argosy International,  Ltd. On March 6, 2002, in a separate
agreement, the Company sold to Argosy International,  for minimal consideration,
its 100%  ownership  interest  in White Star  Marine  Recovery,  Ltd.  That sale
terminated its obligation under an agreement with Argosy  International  for the
consulting  services  of Graham  Jessop.  At the time of this  sale,  White Star
Marine Recovery had no assets other than this consulting contract.


PLAN OF OPERATIONS

The TITANIC  continues to captivate the thoughts and  imagination of millions of
people  throughout  the world since 1912,  when it struck an iceberg and sank in
the North  Atlantic,  causing  the loss of more than 1,500 of the 2,228 lives on
board.  The  depth  of this  international  interest  in the  TITANIC  has  been
continuous  since  sinking more than ninety years ago. The December 1997 release
of the highest  grossing  motion  picture of all time,  "TITANIC,"  as well as a

                                       4
<PAGE>

prodigious  volume of works  that have been  published  about all  facets of its
story,  the production of other feature length movies and plays about its tragic
voyage,  and the broadcast of television  programs  about its 1985 discovery and
scientific  examinations of the wreck approximately two and one-half miles below
the surface of the ocean attests to the public's  continuing  fascination in the
TITANIC.  As the only enterprise that has recovered and conserved items from the
TITANIC,  the Company is in a unique position to present  exhibitions of TITANIC
artifacts for viewing by the public.  Management  intends to continue to present
exhibitions  throughout the world as demand for these tours is warranted subject
to a Federal  District  Court salvage  award.  Management  will also continue to
conduct these  exhibitions in an enlightening and dignified manner that embodies
respect for those who lost their lives in the disaster.

The  principal  sources of revenues of the Company have been payment  guarantees
and applicable overage payments for exhibits including but not limited to ticket
sales for admission to  exhibitions,  merchandising  revenues,  and  sponsorship
revenues. Additional revenues include other merchandise and licensing sources.

The Company's two most important  obligations are to maximize  shareholder value
and  secure a salvage  award  from the  District  Court  regarding  the  TITANIC
artifacts.

SALVOR LIEN

In its April 12, 2002  Opinion,  the Fourth  Circuit held that the  Company,  as
salvor,  has a lien in the recovered  artifacts and that it is necessary for the
District  Court to determine the  Company's  salvage award and satisfy the award
with the proceeds from a sale of the artifacts. Should it become apparent to the
District  Court that the proceeds of any sale would clearly be inadequate to pay
the salvor its full  reward,  then the court might,  as a matter of  discretion,
award the salvor  title to the  property in lieu of the  proceeds of sale,  thus
saving the costs of sale. The salvor does not have a direct right,  however,  to
title in the property.  As a result of the Fourth Circuit's opinion, the Company
does not own the artifacts under the  jurisdiction of the United States District
Court for the Eastern  District of Virginia,  Norfolk Division but instead has a
salvor's  lien.  The process to  determine  what award  should be granted to the
Company for its efforts, undertaken in the salvage of artifacts from the Titanic
is left to the discretion of the District  Court. In this process of determining
the appropriate  award,  courts generally rely on the six factors set out in The
Blackwall,  77. U.S. (10 Wall.) 1,14 (1869) that include: (1) the labor expended
by the salvors in rendering the salvage service. (2) the promptitude, skill, and
energy displayed in rendering the service and saving the property. (3) the value
of the property employed by the salvors in rendering the service, and the danger
to which such  property  was  exposed.  (4) the risk  incurred by the salvors in
securing the property  from the impending  peril.  (5) the value of the property
saved. (6) the degree of danger from which the property was rescued.

EXHIBITIONS

The  Company  has  presented  exhibitions  in  association  with  third  parties
throughout the world and nearly ten million people have attended these exhibits.
The Company, subject to a salvage award, plans to continue to present exhibition
tours of TITANIC artifacts.

Agreement with Subsidiary of SFX Entertainment, Inc.

In  March  1999,  the  Company   entered  into  an  agreement  with   Magicworks
Entertainment,  Inc., a direct  subsidiary  of PACE  Entertainment,  Inc. and an
indirect subsidiary of SFX Entertainment,  Inc.  (collectively  "SFX"), in which
SFX was granted an exclusive  worldwide license to exhibit TITANIC artifacts for
the payment of at least $8.5 million  annually.  This license  agreement  had an
initial term of one year,  commencing  September  15, 1999,  with SFX having the
option  to  extend  the term for up to four  additional  one-year  periods.  All
obligations of Magicworks Entertainment,  Inc. under this license agreement were
guaranteed  by SFX  Entertainment,  Inc. The original  agreement  was amended on
September  18, 2000  between the  Company  and SFX Family  Entertainment,  Inc.,
successor  to  Magicworks  Entertainment,   Inc.  Furthermore,   two  additional
extensions  have been  granted  which now extends the  agreement to December 31,
2003. Each amendment required a guaranteed minimum annual payment of $2,000,000.

                                       5
<PAGE>

For the amendment period ended November 31, 2001, the Company received  payments
of $616,000 over the guaranteed  minimum annual payments pursuant to the revenue
sharing  provisions of the agreement.  Upon execution of the fourth amendment in
May 2002, the Company received a payment of $750,000.  The most recent amendment
was with Clear Channel Entertainment  Exhibits,  Inc. ("CCEE") formerly known as
SFX Family Entertainment, Inc.

From 1997 through the present time,  exhibitions  of objects  recovered from the
TITANIC were presented in association  with the Company in the following  cities
and countries:  Norfolk,  Virginia from November 1996 until March 1997; Memphis,
Tennessee from April 1997 to September 1997;  Hamburg,  Germany from May 1997 to
September  1998;  at the Queen Mary in Long Beach,  California  from May 1997 to
March 1999;  in St.  Petersburg,  Florida  from  November  1997 to May 1998;  in
Boston,   Massachusetts  from  July  1998  through  November  1998;  in  Zurich,
Switzerland  from November 1998 through May 1999;  in St. Paul,  Minnesota  from
January 1999 through May 1999; a tour of several  cities in Japan from July 1998
through July 1999; Atlantic City, New Jersey from May 1999 until September 1999;
Las Vegas, Nevada from January 1999 through October 2000; Chicago, Illinois from
February  through  October  2000;  Dallas,  Texas from March  through June 2000;
Cincinnati,  Ohio from November 2000 through March 2001; in Seattle,  Washington
from  March 2001 to  October  2001;  Kansas  City,  Missouri  from April 2001 to
September 2001; Baltimore, Maryland from April 2001 to February 2002; Nashville,
Tennessee  from May 2001 to September  2001;  St. Louis,  Missouri from December
2001 to April 2002; a South American tour included Buenos Aires,  Argentina from
April 2001 to June 2001 and Santiago, Chile from August 2001 to December 2001.

Current Exhibitions

CCEE is presenting TITANIC exhibits in Phoenix, Arizona,  Norwalk,  Connecticut,
Cleveland Ohio and Houston, Texas.

MERCHANDISING

The Company has an ongoing  arrangement with Events  Management,  Inc. (the gift
shop  operator at all  domestic  Exhibits)  and  receives  monthly  payments for
certain  items that are sold in the Exhibit  gift shops,  on their  web-site and
marketed  through  other  channels of  distribution.  These  payments  equal ten
percent of gross  revenue  received  from sales to third  parties  and an amount
equal to five  percent of the retail  price on products  bearing  the  Company's
logos or incorporating those proprietary rights. The Company participates in all
other income from gift shop sales through its contract with CCEE.  Certain items
such as coal  recovered  from the  TITANIC  wreck site are sold  directly by the
Company to third parties  including Events Management Inc. An exhibit catalog is
published  by the  Company and the  profits  from sales at  exhibits  are shared
equally between CCEE, Events Management Inc. and the Company.


MARKETING

The  Company has  developed  several  retail  products  utilizing  coal from the
Titanic  that have been  incorporated  into jewelry and  necklaces.  The Company
intends to continue  developing  such  products to  increase  its  merchandizing
revenues. The Company also intends to pursue the direct marketing of merchandise
and archive through its web site  (http://www.rmsTITANIC.net)  and through third
parties.

The marketing and  promotion of TITANIC  Exhibitions  is handled and paid for by
CCEE and other third parties involved with the presentation of exhibits.

EXPEDITIONS TO THE TITANIC

With the depth of the TITANIC wreck  approximately  two and one-half miles below
the surface of the ocean in the North  Atlantic,  the Company is dependent  upon
chartering  vessels  outfitted with highly advanced deep sea technology in order
to conduct  expeditions  to the site. In its 1987,  1993,  1994,  1996, and 1998
expeditions,  the Company entered into charter agreements with IFREMER, pursuant

                                       6
<PAGE>

to which IFREMER  supplied the crew and equipment  necessary to conduct research
and recovery  efforts.  In addition to utilization of the research vessel NADIR,
recovery efforts were undertaken through the manned submersible NAUTILE.  Small,
hard-to-reach areas necessary for visual reconnaissance efforts were accessed by
a small robot, known as ROBIN,  controlled by crewmen on board the NAUTILE.  The
dive team had the  capability of retrieving  heavy  objects,  such as a lifeboat
davit weighing  approximately  4,000 lbs. to fragile objects  weighing but a few
ounces. Because of the immense pressure of approximately 6,000 pounds per square
inch at the wreck site,  it is  impossible  for a dive team to reach such depths
and explore  the wreck site  through  any means  other than a  submersible.  The
NAUTILE and ROBIN were each  equipped with video and still cameras that recorded
all recovery and exploration  efforts.  In connection with its 1987, 1993, 1994,
1996, 1998, and 2000 expeditions to the wreck site, the Company engaged maritime
scientists  and other  professional  experts  to assist in the  exploration  and
recovery efforts.

In its most recent recovery  operation in Expedition 2000, the Company conducted
twenty-eight  dives over a four-week  period that  recovered more than 900 items
from the wreck site,  which included the discovery of a new debris field.  Among
the artifacts  recovered in this  expedition,  were: the ship's Wheel and Stand,
whistle  control timer from the navigation  bridge,  the main telegraph base and
the docking bridge telephone.  Personal items recovered included  binoculars,  a
pair of opera glasses, sixty-five intact perfume ampoules, a camera, bowler hat,
first class  demitasse and dinner plate.  A base for a bronze cherub likely from
the Grand Staircase was recovered as well as gilded wood from a balustrade.  The
nine leather bags found  provided more than one hundred  items.  Some  medicinal
items were recovered that included a cobalt blue bottle that reads: BROMOSELTZER
EMERSON DRUG CO. BALTIMORE MARYLAND.  For the first time, two toilets, a wok, an
intact deck light,  circulating fans,  thermometers,  four eggcups,  and a metal
megaphone were recovered.

The Company's  ability to conduct  expeditions  to the TITANIC is subject to the
availability  of  necessary  research  and recovery  vessels and  equipment  for
chartering by the Company during the months between June and September, which is
the "open weather  window" for such  activities.  Research and recovery  efforts
with a manned  submersible  are presently  limited to the  availability  and the
co-operation with:  NAUTILE through charter  arrangements with IFREMER and MIR I
and  MIR  II  using  charter   arrangements  with  P.P.  Shirshov  Institute  of
Oceanology. To the Company's knowledge, no other submersible with the capability
of reaching  the depth of the TITANIC is  presently  commercially  available  or
acceptable  to the Company for such  chartering.  The Company could also conduct
operations with unmanned,  surface-controlled,  remote operated vehicles,  which
may be available for chartering on suitable terms from other sources.

Danepath Ltd., the Company's  wholly-owned United Kingdom  subsidiary,  acquired
the SV Explorer,  a research and recovery  vessel in June 2000.  The SV Explorer
operated  as a  support  vessel  during  Expedition  2000 to the  Titanic.  This
Danepath subsidiary was sold to Argosy International Ltd. in April 2002.

EXPEDITION TO THE CARPATHIA

The Company plans a recovery  operation to the RMS Carpathia  wreck  location to
recover  objects  that the Company owns as a result of its purchase of ownership
rights for that vessel. At the present time, a definitive  schedule has not been
set for this endeavor but it is expected to occur during this calendar year.


RESTORATION AND CONSERVATION

Upon recovery from the Titanic  wreck site,  artifacts are in varying  states of
deterioration  and  fragility.  Having been submerged in the depths of the ocean
for more than 90 years,  objects have been subjected to the corrosive effects of
chlorides  present in seawater.  The restoration of many of the metal,  leather,
and paper artifacts  requires the application of sophisticated  electrolysis and
other electrochemical  techniques. Some of the artifacts recovered from the 1987
expedition  were restored and conserved by the  laboratories  of  Electricite de
France, the French  government-owned  utility.  Except for un-restored artifacts

                                       7
<PAGE>

that are currently  being  exhibited,  many of the artifacts  recovered from the
1987,1993, 1994, 1996 and 1998 expeditions have undergone conservation processes
at LP3, a privately-owned conservation laboratory in Semur-en-Auxois, France.

During  2001,  the Company had a  conservation  program  with  Eastern  Michigan
University, located in Ypsilanti, Michigan to utilize their conservation program
for the Titanic 2000  artifacts.  This program was  initiated in May of 2001 and
concluded on December 31, 2001.

All Titanic artifacts that are not being exhibited as part of the SFX Exhibition
Tour Agreement are presently housed in the Company's  conservation and warehouse
facility located in Atlanta.


SCIENCE AND ARCHAEOLOGY

TITANIC was a great luxury liner that bequeathed to the world a classic story of
tragedy at sea.  Today,  this  shipwreck is treated as an  archaeological  site,
historic  structure,  attraction for adventure tourism,  ecological  phenomenon,
international memorial, and as valuable property to be recovered and shared with
humanity. The Company as  salvor-in-possession  of the shipwreck,  believes that
all of these purposes are legitimate and beneficial to society. The Company also
believes that the multiple values of TITANIC and its status as a social-cultural
icon demand the  perspectives of many experts in scientific  interpretation  and
stewardship of the site.

The  Company is in the best  position  to  provide  for  archaeological  survey,
scientific interpretation, and stewardship of the TITANIC shipwreck. The Company
possesses the largest  collection  of data,  information,  images,  and cultural
materials associated with the shipwreck. The Company has developed a partnership
with the Center for  Maritime &  Underwater  Resource  Management,  a  nonprofit
corporation,  for services in  archaeology,  scientific  research,  and resource
management.

The Company  intends to present  their  collection  of  knowledge  and  cultural
materials of TITANIC to researchers,  educators, and other audiences in the form
of a scientific report,  associated  interactive website, and other intellectual
products  that advance the purposes of the  company.  Revenues  from the sale of
these  intellectual  products are expected to at least meet the total production
costs.  The scientific  report will integrate the results of all  expeditions to
TITANIC  wreck site since its  discovery.  In  addition,  the  publication  will
include  the first  comprehensive  site plan of the  TITANIC,  which will assist
greatly in determining future products in research, materials conservation,  and
education.  The  interactive  website will  virtually  share with the world this
scientific knowledge as well as its entire collection of cultural materials.

SALVAGE RIGHTS

Pursuant to the judgment  entered in the Federal  District Court for the Eastern
District   of   Virginia   on  June  7,   1994,   the   Company   was   declared
salvor-in-possession  of the wreck and wreck site of the  TITANIC,  the sole and
exclusive  owner of any items  recovered  from the  TITANIC  and, so long as the
Company  is  salvor-in-possession,  the sole and  exclusive  owner of all  items
recovered from the TITANIC in the future. The Court's judgment includes, without
limitation,  the contents, cargo, hull, machinery,  engine, tackle, apparel, and
appurtenances  of the TITANIC,  and provides  that all  potential  claimants are
barred  and   precluded   from   filing   claims  so  long  as  the  Company  is
salvor-in-possession. No other entity has the right to salvage the TITANIC while
the Company is salvor-in-possession.  To maintain  salvor-in-possession  status,
the Company, among other things must maintain a reasonable presence at the wreck
through  periodic  expeditions and continue salvage efforts and the preservation
of artifacts during the period between salvage expeditions.

In February  1996, a  third-party  instituted  a motion in the Federal  District
Court for the Eastern  District of Virginia  seeking  rescission  of the June 7,
1994 order  awarding  salvor-in-possession  status to the  Company.  By an order
dated May 10, 1996, the motion was denied. The court also modified its June 1994
order to require the Company to file more frequent reports about its activities.
In August 1996, the Court amended the May 1996 order to include the award to the

                                       8
<PAGE>

Company  of  exclusive  rights to  photograph  the  TITANIC  within the award of
salvor-in-possession  status, and enjoined third parties from entering the wreck
site for purposes of obtaining photography or for other purposes.

An  unrelated  entity  announced  the  intention of  conducting  a  photographic
expedition,  known as Operation TITANIC, to the TITANIC wreck site during August
1998,  when the Company  intended to conduct  its 1998  expedition.  The Company
commenced  legal  proceedings  and  obtained  an  injunction   prohibiting  such
photographic  expedition  during August 1998 or at any other time so long as the
Company  is  salvor-in-possession  of the wreck and wreck  site of the  TITANIC.
Notwithstanding such injunction,  the Operation TITANIC photographic  expedition
occurred in September 1998. In March 1999, the District  Court's  granting of an
injunction  prohibiting the  photographic  expedition was reversed by the Fourth
Circuit of the United States.  The Company appealed the reversal of the District
Court's  determination  to the United States  Supreme  Court.  The Supreme Court
declined  to review  this matter in October  1999.  As a result,  the Company no
longer has exclusive photographic rights to the TITANIC.

On April 12, 2002,  the United  States  Court of Appeals for the Fourth  Circuit
(the "Fourth  Circuit")  affirmed two orders of the United States District Court
for the Eastern District of Virginia, Norfolk Division. R.M.S. Titanic, Inc. vs.
The Wrecked and Abandoned  Vessel [ 2002 U.S. App. LEXIS 6799 (4th Cir.  2002)].
Dated September 26, 2001 and October 19, 2001, these orders  restricted the sale
of  artifacts  recovered  by the  Company  from the RMS Titanic  wreck site.  In
rendering its opinion,  the Fourth Circuit  reviewed and declared  ambiguous the
June 7, 1994 order of the  District  Court  that had  awarded  ownership  to the
Company of all items then  salvaged from the wreck of the Titanic as well as all
items  to be  salvaged  in the  future  by the  Company  so long as the  Company
remained  salvor-in-possession  of the  Titanic.  Having  found the June 7, 1994
order  ambiguous,  the Fourth  Circuit  reinterpreted  the order to convey  only
possession, not title, pending determination of a salvage award and further held
that the Company  currently has no title to any artifacts that it had previously
recovered  from the  wreck of the  Titanic  nor to any  artifacts  that it might
recover in the future.  This opinion  conflicts with previous  rulings that were
rendered by both the Fourth Circuit,  R.M.S.  Titanic, Inc. v. Haver, et al, 171
F.3d 943 (4th Cir.  1999) and the District  Court and upon which the Company had
relied on in the conduct of its business.  Furthermore, based on a June 7th 1994
order of the District Court,  the Company believed it was the exclusive owner of
the artifacts.  The Company  intends to petition the United States Supreme Court
to hear its appeal of the April 12, 2002 decision of the Fourth Circuit.

Entities within the United States, United Kingdom, France and Canada are working
together to implement an  international  agreement that could diminish or divest
the Company of its  salvor-in-possession  rights. See Item 3- Legal Proceedings.
Management  believes that all requirements to maintain its  salvor-in-possession
status have been  satisfied by the Company.  Should the Company not maintain its
salvor-in-possession status, other entities could conduct salvage operations and
recover  items from the TITANIC  wreck site.  Management  believes  that salvage
operations by other entities,  if successful,  would not have a material adverse
affect upon the Company's exhibition activities.

The loss of exclusive  photographic  rights could  continue to have a materially
adverse  affect upon the Company's  ability to generate  revenues from ancillary
activities,  such as television  productions,  or passenger cruises accompanying
research and recovery  expeditions  There was not a television or video contract
for the Company's last Titanic expedition in 2000.


COMPETITION

The entertainment and exhibition industries are intensely competitive. There can
be no assurances given the Company's limited capital resources,  that we will be
able to compete  effectively.  Many  enterprises  with which the Company will be
competing have substantially  greater resources than the Company.  Additionally,
following the success of the motion picture "TITANIC" in December 1997, a number
of entities have undertaken,  or announced an intention to offer, exhibitions or
events  with the  theme of  TITANIC  or  involving  memorabilia  related  to its
sinking.  Although  the  Company  is the only  entity  that  exhibits  artifacts
recovered  from the wreck site of the TITANIC,  competition  may be  encountered

                                       9
<PAGE>

from these  exhibitions or events for the consumer's  interest in TITANIC or the
Company's TITANIC exhibitions. Management intends to compete with other entities
based  upon  the  mass  appeal  of  its  planned   exhibits  to   consumers   of
entertainment, museum, scientific and educational offerings, and the quality and
value of the entertainment experience. The Company will emphasize the unique and
distinctive   perspective   of  the  TITANIC  into  its  exhibits  as  TITANIC's
salvor-in-possession and as the only entity that has ownership rights to objects
recovered from the wreck site.

The success of the Company's  merchandising efforts will depend largely upon the
consumer  appeal  of  its  merchandise  and  the  success  of  its  exhibitions.
Management  believes that its merchandise will compete  primarily because of its
unique character and quality.

EMPLOYEES

As of June 3, 2002, the Company had five  employees.  The Company is not a party
to any collective bargaining agreement.

ENVIRONMENTAL MATTERS

The Company will be subject to  environmental  laws and  regulation  by federal,
state  and  local   authorities  in  connection  with  its  planned   exhibition
activities.  The Company does not anticipate  that the costs to comply with such
laws and  regulations  will have any material  effect on the  Company's  capital
expenditures, earnings, or competitive position.


ITEM 2.  DESCRIPTION OF PROPERTY

The Company has its principal  executive  offices  located at Tower Place,  3340
Peachtree Road N.E., Suite 1225, Atlanta,  Georgia.  This space of approximately
2,759 square feet is used for management,  administration, and marketing for its
operations.  The lease  commenced on April 18, 2000 and is for a five-year  term
and requires base lease payments of $64,836 annually.

The  Company had a lease  obligation  for office  space at 401  Corbett  Street,
Clearwater,   Florida.   This   location   previously   housed   the   Company's
administrative and marketing  activities until those functions were relocated to
the Atlanta  office.  The Company had entered into a settlement  agreement which
was completed on May 29, 2002  relieving  the Company of any further  obligation
under this lease.

The Company  leased  4,000 sq. ft of warehouse  space at 224 Airport  Industrial
Drive,  Ypsilanti,  Michigan from December 4, 2000 through December 31, 2001 for
conservation  purposes. The lease was for $12,800 for the first six month period
and $2,200 per month thereafter.

The Company has a thirty-eight  month lease  obligation  commencing  November 1,
2001 for  approximately  10,080 square feet of space at an undisclosed  location
for  security  purposes  in  Atlanta,   Georgia.   This  facility  is  used  for
conservation,  restoration,  and storage of Titanic artifacts. The monthly rents
are $5,460 through  October 31, 2002; and thereafter  $6,090 through October 21,
2003 and finally $6,720 through December 31, 2004.


ITEM 3.  LEGAL PROCEEDINGS

Legal Action by Former Officers and Directors

On  November  26,  1999,  two of the  six  members  of the  Company's  Board  of
Directors,  Messrs.  Geller  and  Harris,  and  others;  acting via an action by
written  consent of the holders of a majority of voting  rights of the Company's
common stock, in lieu of a meeting; removed Messrs. Tulloch, Hothorn, Nargeolet,
and Carlin as  Directors  of the Company  and  subsequently  Messrs  Tulloch and
Carlin as  Officers.  This action was  similar to that used by Mr.  Tulloch as a
director to remove other directors in July 1997.

                                       10
<PAGE>

The  removed  officers  and  directors  brought an action in the  United  States
District  Court for  Connecticut  against  Messrs.  Geller and Harris and others
seeking to obtain a judicial  reversal of their  removal from power.  Because of
the uncertainty as to the  individuals  who could conduct  business on behalf of
the Company  during the time from  November  26, 1999 to the  resolution  of the
dispute,  the  Company's  bank  stopped  honoring  checks and froze all funds on
deposit. In addition, a creditor notified the company that it would not tender a
$2,000,000 payment otherwise due and payable until the dispute among current and
former directors was resolved or settled.

The legal action was  resolved on January 21, 2000 with a  Settlement  Agreement
wherein the Company agreed,  among other things, to: (a) pay to Messrs.  Tulloch
and Carlin an aggregate  amount of $2,500,000 in three equal  installments to be
completed  within six months of the date of the  settlement;  (b) allow  Messrs.
Tulloch and Carlin to submit documented requests for reimbursement of previously
un-reimbursed business expenses; (c) review/revise payment information submitted
to the Internal  Revenue  Service with respect to the nature of previously  made
payments  to Mr.  Carlin;  (d) the  authority  of Messrs.  Tulloch and Carlin to
exercise  previously  issued options to acquire an aggregate of 1,000,000 shares
of the  Company's  common stock and to cause the company to file a  Registration
Statement with respect to the options and underlying shares of common stock; (e)
indemnify the former  Officers and Directors who  participate  in the Settlement
Agreement to the full extent of applicable law and to the extent of Officers and
Directors Liability under the existing Company policy; and (f) reimburse Messrs.
Tulloch and Carlin for the costs of health insurance for a period of 18 months.

Messrs.  Tulloch  and Carlin  agreed,  among  other  things,  to: (a) accept the
$2,500,000  as full monetary  payment  (with the  exception of previously  noted
un-reimbursed  business  expenses) for any claims  against the Company,  Messrs.
Geller  and  Harris  and  others in  connection  with this  action  and  amounts
otherwise due them in  connection  with their roles as Officers and Directors of
the  Company;   (b)  send   appropriate   letters  to  the  Company's  bank  and
aforementioned  creditor to "unfreeze"  corporate funds and to allow operational
cash flow to resume;  (c) entered into an eighteen  month  standstill  agreement
which precludes them from  interfering in Company  management  without the prior
approval of the Board of  Directors  and  shareholders;  (d)  discontinue  their
efforts to have the TITANIC  determined  to be a monument  and to  restrict  the
removal of materials  from the TITANIC wreck site;  (e) return all the Company's
property  in their  possession,  including  records  and  files,  and  provide a
complete list of Company  Artifacts which are located anywhere in the world; (f)
provide,  for a three month  period,  cooperation  in  effecting a  professional
management  transfer;  (g) return all monies held in Mr. Carlin's attorney trust
account  along with an  accounting of such;  and (h)  discontinue  access to the
Company's  internet site and to sell back to the company,  at cost,  another web
site utilizing the name "TITANIC".

At February 29, 2000 accounts payable and accrued liabilities includes a balance
of  $1,608,000  payable to  Messrs.  Tulloch  and Carlin  under the terms of the
Settlement  Agreement.  These obligations were paid during the fiscal year ended
February 28, 2001.  During the year ended  February  29,  2000,  $1,672,000  was
charged to operations in connection with this Settlement Agreement.

The Company has  indemnified  all  defendants in the legal action brought by the
removed  Officers and Directors from all legal fees and expenses and other costs
associated with the action.

Other Legal Proceedings

The United States  Department of State and the National  Oceanic and Atmospheric
Administration  of the United  States  Department  of Commerce  (the "NOAA") are
working together to implement an International  Agreement (the "Agreement") with
entities in the United  Kingdom,  France and Canada that would  diminish  and/or
divest the Company of its  salvor-in-possession  rights to the TITANIC which had
been awarded by the Federal  District Court for the Eastern District of Virginia
(the "District Court"). The Company has raised numerous objections to the United
States  Department  of State  regarding  the  actions  of the  United  States to
participate in efforts to reach an agreement governing salvage activities of the
TITANIC.  The Agreement,  as drafted,  does not recognize the existing rights of
the Company in the TITANIC,  that has been re-affirmed in the District Court and

                                       11
<PAGE>

affirmed by the Court of Appeals of the Fourth  Circuit,  and provides  that the
Agreement becomes effective when any two of the party states sign it. The United
States  Department of Justice has represented that the United States believed it
had  complied  with  the RMS  TITANIC  Memorial  Act in the  development  of the
international  guidelines to implement the Agreement, but would solicit comments
from the public at large  regarding the draft  international  guidelines and the
NOAA will  consider  the  comments,  and then  publish  the final  international
guidelines. On April 3, 2000 the Company filed a motion for declaratory judgment
asking that the District Court declare  unconstitutional  and  inappropriate the
efforts of the United States to reach an international  agreement with the other
parties and that it be precluded from seeking to implement such an agreement. On
September  15, 2000,  in a decision by the Court it was ruled that the Company's
motion was not ripe for  consideration at the present time, and that the Company
may renew its motion  when and if an  international  Agreement  is agreed to and
signed by the  parties to the  Agreement,  final  guidelines  are  drafted,  and
Congress passes implementing legislation. The Company expects, that whatever the
outcome of this matter, there will be no impact on artifacts it owns.

The Company was defendant in an action brought by Suarez Corporation  Industries
("SCI") in the United  States  District  Court for the Southern  District of New
York.  Between  October  1995 and March 1997,  the Company and SCI entered  into
various  agreements  providing  for the  exploitation  of  artifacts  and  other
merchandise  and  arranging  for a cruise and  ancillary  events  including  the
financing and sharing of the division of  contractual  defined  profits all with
respect to the 1996  Research  and  Recovery  Expedition  of the  TITANIC by the
Company.  SCI has brought various claims that included co-salvor status,  breach
of contract for which SCI is seeking  $8,000,000 among other claims. On February
8, 2001, the Company,  as defendant,  was granted a judgment in its favor as the
lawsuit was not timely filed and was time-barred from consideration.  Suarez did
not appeal this judgment within the prescribed time.

On May 10, 2001, the Company received a subpoena duces tecum from the Securities
and Exchange  Commission  requesting  various documents relating to, among other
things, the change in control of the Company that occurred during November 1999;
any solicitations that may have been made without a written proxy statement or a
filing; the purchase of the Company's common stock by certain shareholders;  the
accuracy of the Company's financial statements;  information about the Company's
accounting procedures and controls; documents about its subsidiaries;  and other
information   about   consulting   agreements,   communications   with   certain
individuals,  employment of its officers, and other company matters. The Company
was not been  notified by the SEC of the  purpose and nature of the  proceedings
for which the subpoena duces tecum was served. The Company has complied with the
subpoena.  The Company now knows that G. Michael  Harris,  a former  officer and
director,  had filed a complaint with the SEC. The basis for this knowledge is a
letter from Mr. Harris'  attorney.  Mr. Harris'  employment with the Company was
terminated because of evidence he  misappropriated  corporate monies for his own
purposes and a complaint  was made to law  enforcement  authorities  in Pinellas
County, Florida.

On September 7, 2000,  Mr. G. Michael  Harris,  a former officer and director of
the Company filed suit in the Circuit Court of the Sixth Judicial Circuit in and
for Pinellas  County,  Florida,  Civil  Division.  In that suit,  Mr. Harris has
alleged that the Company breached an employment  agreement  entered into between
him and the Company, and that he has been damaged by the breach. The Company has
responded  to this  Complaint,  denying the  validity or  enforceability  of the
employment  agreement  and setting  forth the  Company's  position that it acted
appropriately  and  within  its  rights.  Moreover,  the  Company  has  filed  a
counter-suit  against Mr. Harris and others,  to recover  $84,000 of monies that
the Company believes were  misappropriated  and a complaint has been made to the
appropriate law enforcement authorities in Pinellas County, Florida. The outcome
of these  matters is  uncertain at the present time and the effect they may have
on the Company's  financial  position and results of operations is not currently
determinable.

On January  27,  2000,  the  Company  was served  with a lawsuit by  Oceaneering
International,  Inc. for monies  purportedly owed under a June 27, 2000 contract
for maritime  services for the Company's  Expedition  2000. The Company filed an
answer  that  included  a setoff  for  damages.  On May 8,  2002,  this case was
dismissed  with  prejudice  with each party  paying its own legal  expenses  and
executing a confidentiality agreement. The Company did not pay any consideration
for this settlement.

                                       12
<PAGE>

On May 3, 2001,  the Company was served with a lawsuit in Superior  Court in the
State of California  which later was removed to the United States District Court
for the Central District of California by Westgate Entertainment  Corporation, a
California  corporation,  and  its  wholly  owned  subsidiary,  Weyland  & Chase
Engineering,  NV, a Netherlands Antilles corporation.  The complaint claims that
on January 18, 2000, the plaintiffs  entered into oral five year,  "pay or play"
contracts of $200,000 per year for Westgate  Entertainment and $100,000 per year
for Weyland & Chase. Westgate Entertainment further claims the Company agreed to
pay or provide  other  additional  considerations.  The Central  District  Court
entered an order denying the Company's motion for summary judgment.  Thereafter,
in March of 2002,  the Central  District  Court  denied the  Company's  right to
appeal  its  interlocutory  order  denying  the  Company's  motion  for  summary
judgment.  The trial is scheduled in the District  Court for the summer of 2002.
The eventual outcome of this matter is uncertain at the present time.

On April 12, 2002,  the United  States  Court of Appeals for the Fourth  Circuit
(the "Fourth  Circuit")  affirmed two orders of the United States District Court
for the Eastern District of Virginia, Norfolk Division. R.M.S. Titanic, Inc. vs.
The Wrecked and Abandoned  Vessel [ 2002 U.S. App. LEXIS 6799 (4th Cir.  2002)].
Dated September 26, 2001 and October 19, 2001, these orders  restricted the sale
of  artifacts  recovered  by the  Company  from the RMS Titanic  wreck site.  In
rendering its opinion,  the Fourth Circuit  reviewed and declared  ambiguous the
June 7, 1994 order of the  District  Court  that had  awarded  ownership  to the
Company of all items then  salvaged from the wreck of the Titanic as well as all
items  to be  salvaged  in the  future  by the  Company  so long as the  Company
remained  salvor-in-possession  of the  Titanic.  Having  found the June 7, 1994
order  ambiguous,  the Fourth  Circuit  reinterpreted  the order to convey  only
possession,  not title,  pending  determination of a salvage award. This opinion
conflicts with previous  rulings that were rendered by both the Fourth  Circuit,
R.M.S.  Titanic,  Inc.  v.  Haver,  et al, 171 F.3d 943 (4th Cir.  1999) and the
District  Court all of which rulings the Company had relied on in the conduct of
its business. Furthermore, based on a June 7th 1994 order of the District Court,
the Company  believed it was the exclusive  owner of the artifacts.  The Company
intends to petition the United  States  Supreme  Court to hear its appeal of the
April 12, 2002 decision of the Fourth Circuit.

On April 25, 2002, the Company was served with notice of litigation initiated by
Lawrence D'Addario, et al vs. Arnie Geller, G. Michael Harris, Joe Marsh, Gerald
Couture, Nick Cretan, Doug Banker and the Company. In the United States District
Court for the Eastern District of Virginia, Norfolk Division Case No. 2:02cv250.
The suit alleges  fraud,  self-dealing,  mismanagement,  diversion  and waste of
corporate  assets by the  individuals  in their  capacity  as  directors  and/or
officers  of the Company and for Joe Marsh,  as a principal  shareholder  of the
Company.  The Company  intends to vigorously  defend itself and its officers and
directors in this matter.  No  determination  can be made at this time as to the
likely outcome of this matter or what the consequences could be for the Company.

ITEM 4.  SUBMISSION OF MATTERS OF VOTE OF SECURITY HOLDERS

None.


PART II



ITEM 5.  PRICE RANGE OF SECURITIES

(a)        MARKET  INFORMATION.  The  Company's  Common  Stock is  traded on the
           over-the-counter   market  on  a  limited  and  sporadic  basis.  The
           following  table sets forth the range of high and low bid  quotations
           of the  Company's  Common Stock for the periods set forth  below,  as
           reported by OTC Bulletin Board of Nasdaq  Trading & Market  Services.
           Such quotations represent inter-dealer quotations, without adjustment
           for retail markets, markdowns or commissions,  and do not necessarily
           represent actual transactions.

                                       13
<PAGE>


     (b) FISCAL PERIOD

                                                  COMMON STOCK

                                  HIGH                       LOW
                                  BID                        BID
2002

1st Quarter                      1.20                         0.42
2nd Quarter                      0.85                         0.65
3rd Quarter                      0.80                         0.42
4th Quarter                      0.52                         0.34

2001

1st Quarter                      2.83                         1.03
2nd Quarter                      3.13                         1.39
3rd Quarter                      1.75                         0.56
4th Quarter                      1.44                         0.41

     (b) HOLDERS.  The number of holders of record of the Company's Common Stock
as of May 31, 2002 was 1895.

     (c) DIVIDENDS.  The Company has not paid or declared any dividends upon its
Common Stock since its inception,  and intends to re-invest earnings, if any, in
the  Company  to  accelerate  its  growth.  Accordingly,  the  Company  does not
contemplate  or  anticipate  paying any  dividends  upon its Common Stock in the
future.

ITEM 6.  SELECTED FINANCIAL INFORMATION

The selected  financial  data set forth below is qualified by reference  to, and
should be read in conjunction  with, the Financial  Statements and Notes thereto
and Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  included  elsewhere in this Form 10-K.  The selected  financial data
have been  derived  from the  Company's  Financial  Statements.

<TABLE>
<CAPTION>

YEAR ENDED FEBRUARY 28(29)
                                              1998         1999          2000         2001        2002
---------------------------------------------------------------------------------------------------------
Statement of Operations Data:
( In thousands, except per share
   and weighted average shares)

<S>                                     <C>            <C>            <C>         <C>         <C>
   Revenues:
     Continuing operations               $ 4,658           9,857          6,433          5,699      2,768
     Discontinued operations                  --              --             --             14        504

   Net income (loss)
      Continuing operations               $3,367           4,063            (21)            36     (7,260)
      Discontinued operations                 --              --             --            (88)      (168)
      Gain on sale                                                                                    644
</TABLE>


                                       14
<PAGE>

<TABLE>
<S>                                <C>               <C>            <C>         <C>           <C>

   Income (loss) per share:
       Continuing operations             $    .21            .25             --             --       (.38)
       Discontinued operations                 --             --             --             --         --

   Weighted average number of
   common shares
   outstanding                         16,181,868     16,187,128     16,187,128     16,732,991  18,058,573

</TABLE>

<TABLE>
<CAPTION>

FEBRUARY 28(29),                    1998             1999          2000           2001         2002
----------------------------------------------------------------------------------------------------
<S>                           <C>            <C>            <C>            <C>            <C>
Balance Sheet Data:
  (In thousands)
   Total Assets                  $ 10,079           13,910       15,372          15,002        8,839
   Long Term Obligations               --               --           --              --           --
  Total Liabilities              $  2,642            2,410        3,569           2,251        1,497
   Shareholders' Equity          $  7,437           11,500       11,803          12,751        7,342

</TABLE>

<TABLE>
<CAPTION>

Selected Quarterly Financial Information (unaudited)
          (in thousands, except per share data)

                                         5/31/01      8/31/01   11/30/01     2/28/02
-------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>          <C>
      Revenues:
          Continuing operations         $   612     $    923    $  780        $ 453
          Discontinued operations             -          438        66            -
                                        ----------------------------------------------
                                            612        1,361       846          453
      Expenses:
          Continuing operations             827          937       845        7,427
          Discontinued operations           111          337       145           79
                                        ----------------------------------------------
                                            938        1,274       990        7,506
      Net income/(loss):
          Continuing operations            (213)         (12)      (65)      (6,224)
          Discontinued operations          (118)         101       (79)         (72)
                                        ----------------------------------------------
                                           (323)          89      (143)      (6,296)
      Net income/(loss) per share:
          Continuing operations            (.01)         .00       .00         (.35)
          Discontinued operations          (.01)         .00      (.01)         .00
                                        ---------------------------------------------
                                           (.02)         .00      (.01)        (.35)

</TABLE>
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------
                                          5/31/00      8/31/00    11/30/00   2/28/01
-------------------------------------------------------------------------------------


<S>                                    <C>         <C>          <C>         <C>
       Revenues                           $ 2,158     $ 2,149       $ 886       $   506
       Expenses                             1,642       1,817       1,040         1,312
       Net income/(loss)                      322         236        (149)         (430)
       Net income/(loss) per share            .02         .01        (.01)         (.02)
</TABLE>

                                       15
<PAGE>


The Company has declared no cash dividends. Basic income (loss) per common share
("EPS") is computed as net income (loss) divided by the weighted  average number
of common shares outstanding for the period.  Diluted EPS is not presented since
there was no effect of potential  common  shares or the dilution  effect of such
potential common shares is not material.

ITEM 7. 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

YEAR ENDED FEBRUARY 28, 2002 AS COMPARED TO YEAR ENDED FEBRUARY 28, 2001

During its fiscal year ended  February  28, 2002 (the "2002 fiscal  year"),  the
Company's  revenues  decreased to  $2,768,000  as compared to  $5,699,000 in the
fiscal year ended February 28, 2001 (the "2001 fiscal  year").  This decrease of
$2,931,000,  or 51%,  primarily  reflects lower licensing fee income in the 2002
fiscal year. In the 2001 year,  licensing fee income  benefited  from the higher
guaranteed  annual  payment on the first year of the  Exhibition  Tour Agreement
with SFX.

Exhibition  revenue and related sales were $2,354,000 in the 2002 fiscal year as
compared to $5,464,000 in the 2001 fiscal year for a decrease of $3,110,000,  or
57%. This decrease in revenues was  principally  attributable  to lower payments
under  the  Exhibition  Tour  Agreement  with  SFX.  SFX  declined  to renew the
agreement on  essentially  similar terms during 2001 and  consequently a revised
agreement was negotiated which resulted in lower annual guaranteed payments.

The  Company's  merchandise  and  other  revenues,  that  included  the  sale of
merchandise,  books and royalty payments, increased to $414,000 from $235,000 in
the prior fiscal year. This increase of $179,000, or 76% is primarily attributed
to the  contribution  of  catalog  income  from  the  sale of  catalogs  at each
exhibition venue during the 2002 fiscal year. There was not any catalog sales in
the 2001 fiscal year. The sale of coal recovered from the TITANIC was $62,000 in
the current fiscal year compared to $67,000 in the prior year. In addition,  the
Company  received  an  insurance  payment of $95,000  during  fiscal  year ended
February  28,  2002  for the  loss of  artifacts  in a theft  that  occurred  in
Nashville,  Tennessee  on January  28, 2001 of 10 coins and nine bank notes that
were recovered from the Titanic wreck site in 1987.

Cost of goods sold were  $91,000 for the 2002 fiscal year as compared to $13,000
in the 2002 fiscal year. This increase of $78,000 is primarily attributed to the
costs  associated with the catalogs sold during the 2002 fiscal year. There were
no catalogs sales in the prior year's period.

Expenses  for  expedition  costs were only  $32,000  for the 2002 fiscal year as
compared to $763,000  in the 2001 fiscal  year.  During the 2001 fiscal year the
Company undertook the summer of 2000 expedition to the Titanic wreck site. There
was not a similar  expedition  conducted  during the 2002 fiscal year although a
survey was undertaken in early 2002 in Papua New Guinea territorial waters.

General and administrative  expenses were $3,391,000 for the 2002 fiscal year as
compared to $4,405,000 in the 2001 fiscal year. This decrease of $1,014,000,  or
23%, is primarily  attributed to reductions in consulting  expenses,  accounting
fees, and legal expenses over the prior year.

Depreciation and  amortization  expense for the 2002 fiscal year was $374,000 as
compared to $558,000 in the 2001 fiscal year. This decrease of $184,000, or 33%,
is primarily  attributed to the reduction of  amortization  expenses  during the
year for intangibles  acquired in the 2001 fiscal year that were sold as part of
the Carpathia acquisition transaction.

                                       16
<PAGE>

As a result of The United States Court of Appeals for the Fourth Circuit finding
the June 7, 1994 order ambiguous,  the Fourth Circuit reinterpreted the order to
convey only possession,  not title, pending determination of a salvage award and
further held that the Company  currently has no title to any  artifacts  that it
had previously recovered from the wreck of the Titanic nor to any artifacts that
it  might  recover  in  the  future.  In  light  of  the  requirements  of  SFAS
121-impairment  of long-lived  assets and SFAS 142-the valuation of non-goodwill
intangibles, the value of a salvor lien that may be granted to the Company is at
present   undeterminable  and  uncertain  and  cannot  be  reliably   estimated,
management elected to establish an impairment charge of $8.1 million to costs of
artifacts  recovered in  expeditions  that  occurred  after 1987.  This loss was
reduced by expected tax benefits of $2.1 million. The artifacts recovered in the
1987 expedition that the Company was awarded by the Government of France remains
a Company asset and is valued at $3.2 million, the cost of recovery.

There was a loss from  continuing  operations of $7,268,000  for the 2002 fiscal
year as compared to a loss from  operations  of $40,000 in the 2001 fiscal year.
The substantial  decrease in income from  operations is primarily  attributed to
the write down of the valuation of artifacts recovered that is attributed to the
recent Fourth Circuit Appellate Court decision.  This loss is also attributed to
the lower  revenues  for fiscal  year 2002  while the  Company  incurred  higher
proportionate direct and general and administrative expenses although there were
overall reductions in those expenses.

During the 2002 fiscal year,  the Company  earned  interest  income of $8,000 as
compared  to $76,000 in the prior  year.  The  Company  maintained  higher  cash
balances during the 2001 fiscal year at higher interest rates.

On April 2, 2002, the Company entered into a Purchase  Agreement for the sale of
the common stock,  representing 100% ownership,  of its Danepath Ltd. subsidiary
to Argosy International Ltd. The purchase price, as amended by Agreement on June
1, 2002,  was $1.5  million.  Danepath's  principal  asset is the  research  and
recovery  vessel "SV Explorer".  Under the terms of the Purchase  Agreements the
Company  received  $100,000  upon  execution  and an obligation of $1.4 million,
bearing  interest  at 8% per annum  that will be paid  within six  months.  This
obligation  is  collateralized  with both a first  mortgage  on the  vessel  "SV
Explorer",  the principal  asset owned by Danepath,  and all the common stock of
the  Company  owned by Argosy  International,  Ltd.  For the  fiscal  year ended
February 28, 2002,  the Danepath  subsidiary  had an operating loss of $168,000.
The Company  realized a gain of  $644,000  on the sale of Danepath  for the 2002
fiscal year.

Income (loss) after income taxes for continuing  operations was ($7,260,000) for
the 2002  fiscal  year as  compared  to $36,000  in the 2001  fiscal  year.  For
discontinued operations,  the Company had a loss of $168,000 for the 2002 fiscal
year,  but realized a gain of $644,000 on the sale of this  business.  Basic and
diluted  earnings  per common share were $(0.38) and $ -0- for the 2002 and 2001
fiscal  years,  respectively.  The loss per  common  share for the  discontinued
operation was not material.  The weighted average common shares outstanding were
18,058,573 and 16,732,991 for the 2002 and 2001 fiscal years, respectively.


YEAR ENDED FEBRUARY 28, 2001 AS COMPARED TO YEAR ENDED FEBRUARY 29, 2000

During its fiscal year ended February 28, 2001 ("2001 fiscal  year"),  Company's
revenues  decreased  to  $5,699,000  from  $6,433,000  in the fiscal  year ended
February 29, 2000 ("2000 fiscal year").  This decrease of  approximately  11% as
compared  to the  prior  fiscal  year is  primarily  a result of a  decrease  of
$672,000 in the Company's  exhibition and related  merchandise  sales during its
2001 fiscal year as compared to 2000 fiscal year. The revenue from the Company's
SFX agreement has been renegotiated from the original arrangement as a result of
the parties  experience in the first year of operation.  The amendments that the
Company has executed more clearly reflect the current  realities of the economic
prospects of exhibition of its  artifacts.  The Company  continues to seek other
revenue producing opportunities.

                                       17
<PAGE>

In 2001 fiscal year, there was an aggregate  decrease from $297,000 to $235,000,
or $62,000 for other revenues as compared to the 2000 fiscal year. Other revenue
includes  licensing  fees,  merchandise,  and the sale of coal.  Licensing  fees
increased  during the 2001 fiscal year because of the recent  expedition  to the
TITANIC wreck site during the summer of 2000.  Revenue from  merchandise,  book,
and other activities decreased  approximately 73% during the 2001 fiscal year as
compared to the 2000 fiscal year.  This decrease  resulted  primarily from lower
revenues  derived from  merchandising  because of the  inclusion of such revenue
sources within the amended SFX agreement. The Company's revenue from the sale of
coal increased  approximately 14% during the 2001 fiscal year as compared to the
2000 fiscal year.  Such coal sales are being made  directly  from the  Company's
offices to Events Management,  Inc. for exhibitions.  The Company's cost of coal
sold increased  approximately 33% during the 2001 fiscal year as compared to the
2000 fiscal  year as a result of an increase in the volume of coal sales  during
these corresponding periods.

With the  expedition  in the summer of 2000,  the  Company  expended  $2,107,000
during the 2001 fiscal year for  recovering  900 new artifacts  from the TITANIC
wreck site. These costs increased the carrying value of the artifacts. There was
not an  expedition  to the TITANIC  wreck site during the 2000 fiscal  year.  In
addition,  the Company incurred  approximately  $605,000 of expenses relating to
this expedition.  These expenses are not directly  related to artifact  recovery
operations. Also, the Company incurred $157,000 of expense for a salvage project
in the Pacific Ocean.

General and  administrative  expenses of the Company  decreased  $1,749,000,  or
approximately 28%, from $6,154,000 in 2000 fiscal year to $4,405,000 in the 2001
fiscal year.  During the 2000 fiscal year, the Company settled certain lawsuits,
one of which was with former management that included the payment of $1,671,000.
In addition,  two other litigation  matters were resolved by $392,000 charged to
operations during the 2000 fiscal year. During the 2001 fiscal year,  consulting
expenses  amounted to $892, 000 from $195,000 in the prior year.  Legal expenses
declined in the fiscal year 2001 to $944,000 from $1,039,000 in the prior fiscal
year.

Operating  expenses of $41,000 were incurred during the 2001 fiscal year for the
Company's  SV  Explorer,  a 178  foot -- 1050 ton ship  acquired  in June  2000,
exclusive of $204,000 of direct costs for recovery of the  artifacts  during the
Expedition  2000. There are not comparable costs for the 2000 fiscal year. It is
estimated  that the use of the  Company's  own vessel  resulted  in  substantial
savings  during  the  fifty-three  days that this  vessel  was  engaged  in that
expedition.  The SV  Explorer  delivered  the  recovered  artifacts  to Norfolk,
Virginia at the end of the expedition for eventual  delivery to the conservation
facility the Company established with Eastern Michigan  University.  SV Explorer
is owned by Danepath  Ltd.,  until  recently,  a wholly owned  subsidiary of the
Company.  The Company's  depreciation  and  amortization  expenses  increased to
$587,000 from $303,000,  or 94%,  during the 2001 fiscal year as compared to the
2000 fiscal year. This increase is primarily  attributed to the  amortization of
certain intangibles which the Company acquired in early 2000 for $900,000. These
intangibles  are  related  to  prospective  salvage   opportunities  for  twelve
shipwrecks  throughout the world.  These  intangibles were exchanged in May 2001
for the ownership rights to the "Carpathia".

During  the 2000  fiscal  year,  the  Company  incurred  an  impairment  loss on
exhibitry  equipment.  There was not a similar  expense  during the 2001  fiscal
year.  Total  expenses  for the fiscal year 2001  decreased to  $5,811,000  from
$6,567,000, or 12%, which was similar to the decrease in total revenues over the
same period.

The Company's loss from operations  decreased to $40,000 in the fiscal year 2001
as compared to  $134,000  in the fiscal year 2000,  a decrease of  approximately
30%. Interest income for the 2001 fiscal year amounted to $76,000 as compared to
$113,000 in the prior fiscal year. This decrease is attributed to lower interest
derived from the  Company's  interest  bearing  bank  account  during the recent
fiscal  year.  The loss from  discontinued  operations  was $88,000 for the 2001
fiscal year. This business was established during the 2001 fiscal year.

                                       18
<PAGE>

The Company's income before provision for income taxes was $36,000 in the fiscal
year 2001 as compared to a loss of $21,000 in the 2000 fiscal year. There was no
provision for income taxes in either fiscal year.  Consequently,  the net profit
was  $36,000  for the 2001 fiscal year and the net loss was $21,000 for the 2000
fiscal year.  Basic and diluted earnings per common share were $-0- for both the
2001 and 2000 fiscal years. The weighted average common shares  outstanding were
16,732,991 and 16,187,128 for the 2001 and 2000 fiscal years, respectively.


LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating  activities  was $441,000 for the year ended February
28, 2002 as compared to cash provided of $472,000 in the 2001 fiscal year.  This
decrease  in cash  provided  by  operating  activities  for this  fiscal year is
primarily  attributed  to the  increase  in  prepaid  and  refundable  taxes,  $
1,345,000,  and the net loss $6,841,000,  that was not offset by the decrease in
other  assets,  $6,786,000,  and the  reduction in accounts  payable and accrued
expenses of $292,000 during the year.

For the year ended February 28, 2002, cash used in investing activities included
$23,000 for the purchase of property and equipment.  In the prior year cash used
in investing  activities  was  $2,883,000 of which  $2,107,000  was expended for
artifact  recovery as the Company  conducted an  expedition to the TITANIC wreck
site during the summer of 2000.

The Company's net working capital  (deficiency)  and  stockholders'  equity were
$2,241,000 and $7,342,000 at February 28, 2002 as compared to a working  capital
deficit of $854,000 and stockholders'  equity  $12,751,000 at February 28, 2001.
The  Company's  current ratio was 2.5 at February 28, 2002 as compared to 0.8 at
February 28, 2001.  The present  improvement  in the Company's  working  capital
position is  attributed to the sale of the Company's  Danepath  subsidiary,  the
increase in refundable  taxes and a reduction in accounts  payables.  Management
expects future income to offset the costs of its internally planned operations.

In May 2001, the Company  acquired the ownership rights to the shipwreck the RMS
Carpathia  (the  "Carpathia").  The  Carpathia  was the vessel that  rescued the
survivors  from  the  Titanic.  The  value  that  was  assigned  to  this  asset
($1,374,000) is the un-amortized  value of other intangible assets purchased by
the Company in April 2000 from this same entity ($555,000), plus the fair market
value of 1,104,545 newly issued shares of common stock ($819,000).

Management plans to undertake a recovery  operation to the Carpathia in calendar
year 2002 to recover  objects.  As the  Company  owns the  Carpathia,  it is the
intent of management to sell and/or exhibit those items recovered As part of the
Danepath  sale  transaction,  the  Company  has a priority  use of the  Danepath
personnel and equipment,  including the SV Explorer.  It is anticipated that the
costs of this operation can be conducted without any outside funding. Management
expects that it will be able to arrange for the financial  resources,  including
licensing  arrangements,  to properly  execute its strategic  plan,  although no
assurances can be given that it will be successful in such endeavors.

The Company has  sufficient  working  capital to meet its planned  needs for the
next twelve months without any significant  additional  funding.  The exhibition
tour agreement with CCEE requires a minimum of $2,000,000 annually for the grant
of exhibition  rights for a one-year period. On May 1, 2002 the fourth amendment
to the Exhibition Tour Agreement was executed between CCEE and the Company.

SALVOR-IN-POSSESSION STATUS RISK

In order to protect its salvor-in-possession status and to prevent third-parties
from  salvaging  the  TITANIC  wreck and wreck  site,  or  interfering  with the
Company's  rights and ability to salvage  the wreck and wreck site,  the Company
may  have  to  commence  judicial   proceedings  against   third-parties.   Such
proceedings could be expensive and time-consuming. Additionally, the Company, in
order to maintain its salvor-in-possession status, needs to, among other things,
maintain a reasonable  presence at the wreck through periodic  expeditions.  The
Company will be required to incur the costs for future  expeditions  to maintain
its  salvor-in-possession  status.  The  Company's  ability to undertake  future

                                       19
<PAGE>

expeditions  may be dependent upon the  availability of financing from the grant
of licenses to produce  television  programming  and/or the grant of  expedition
sponsorship  rights.  No  assurances  can be given that such  financing  will be
available on satisfactory terms.


INTERNATIONAL CURRENCY RISKS

In connection with its activities  outside of the United States,  the Company is
exposed to the risk of currency  fluctuations  between the United  States dollar
and certain foreign currency. If the value of the United States dollar increases
in relation to the foreign  currency,  the  Company's  potential  revenues  from
exhibition  and  merchandising  activities  outside of the United States will be
adversely  affected.  Although the  Company's  financial  arrangements  with its
foreign  vendors  and  exhibition   organizers  have  been  based  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.

THE FOURTH CIRCUIT COURT'S RULING - A NEW SUBSTANTIAL RISK FACTOR

The Fourth  Circuit  decision to declare the June 7, 1994  District  Court order
ambiguous in its recent ruling on April 12, 2002 has introduced substantial risk
and uncertainty in the future of the Company.  Prior to that ruling, the Company
conducted it business  relying on its ownership of artifacts  recovered from the
wreck site as its property. The Fourth Circuit's ruling voided that ownership of
those artifacts  recovered on expeditions  after 1987, some 1800 artifacts.  The
Company is relying on the award of the  government  of France for  ownership  of
those  artifacts  recovered in the 1987  expedition and continues to recognize a
carrying cost of $3.2 million for those  artifacts.  Subsequent to the ruling by
the Fourth Circuit,  the Company had filed a mandate with the Appellate Court to
forestall the issuance of the Fourth Circuit's opinion until the opportunity for
a Supreme  Court review had passed.  That motion to stay the mandate is attached
in this filing. That motion was denied on April 26, 2002.

In eliminating  ownership by the Company of a majority of artifacts,  the Fourth
Circuit  declared  that the  Company  was  entitled  to a salvor's  lien for its
expedition  efforts  over the years.  The  Company had  expended  more than $8.1
million for expeditions after the 1987 expedition.  This revocation of ownership
of  artifacts  recovered  after 1987 has  resulted  in an  impairment  charge of
approximately $6.1 million, net of taxes.

The  monetary  award  that may be  granted  for a salvor  lien is subject to the
consideration  by a  maritime  court of the  "Blackwall  factors"  which  impart
substantial  uncertainty as to the amount and appropriateness of the award to be
granted.  These Blackwall factors include: (1) the labor expended by the salvors
in  rendering  the  salvage  service.  (2) the  promptitude,  skill,  and energy
displayed in the rendering the service and saving the property. (3) the value of
the property employed by the salvor in rendering the service,  and the danger to
which such property was exposed. (4) the risk incurred by the salvor in securing
the property from the impending  peril. (5) the value of the property saved. (6)
the degree of danger from which the property was rescued.

The Company has taken a position that after  relying on the 1994 district  court
order for eight years in the conduct of its business and within previous rulings
the Fourth  Circuit  had ample  opportunity  to rescind  that 1994 order when it
reviewed the case in 1999,  and it is  demonstrably  unfair and  unwarranted  to
deprive  the  Company  of  ownership  of  those  artifacts  that are  under  the
jurisdiction of the federal  district court.  Despite that, the Company's effort
to file a Petition for  Certiorari  with the United States Supreme Court may not
meet with success as only a small  percentage-less  than 5% are  considered  for
review by that court.

In light of these  circumstances  and the  likelihood  of the  Fourth  Circuit's
ruling being binding on the district court and the Company,  management  intends
to immediately seek a salvage award for all the applicable recovery  expeditions
that it conducted to the Titanic  wreck site.  It is uncertain at this time what
the award shall be or how long it will take to obtain an award.

                                       20
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS
                                                                         Page

Independent Auditors' Report                                             F-1

Consolidated Balance Sheets at February 28, 2001
 and  February 28,2002                                                   F-2

Consolidated Statements of Operations and Comprehensive
 Operations for the years ended
 February 28 (29), 2000, 2001 and 2002                                   F-3

Consolidated Statements of Stockholders' Equity for the years ended
 February 28(29), 2000, 2001 and 2002                                    F-4

Consolidated Statements of Cash Flows for the years ended
 February 28(29), 2000, 2001 and 2002                                    F-5


Notes to Financial Statements                                            F-7



ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

On January 15, 2002 the Company  dismissed  Goldstein  Golub  Kessler LLP as the
Company's principal accountant and engaged Kempisty & Company,  Certified Public
Accountants,   P.C.,as  its  principal  independent  accountants  to  audit  the
financial statements of the Company for the year ended February 28, 2002.

The reports of Goldstein Golub Kessler LLP on the Company's financial statements
for the years ended  February  28, 2001 and February 29, 2000 did not contain an
adverse  opinion or a disclaimer of opinion,  and were not qualified or modified
as to uncertainty, audit scope or accounting principles.

The  decision  to change  accountants  was  approved by the  Company's  Board of
Directors.  The Board of Directors  determined that the Company's auditing needs
could be handled by Kempisty & Company, Certified Public Accountants,  P. C., as
efficiently and more economically compared to the former accounting firm.

During the years  ended  February  28,  2001 and  February  29, 2000 and through
January 14, 2002, there were no  disagreements  with Goldstein Golub Kessler LLP
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosures or audit scope or procedure,  which disagreements if not resolved to
the  satisfaction  of Goldstein Golub Kessler LLP would have caused them to make
reference thereto in their reports on the financial statements for such periods.

Goldstein  Golub  Kessler LLP  furnished a letter  addressed  to the  Commission
stating that it agrees with the above paragraph 1, 2 and 4.

                                       21
<PAGE>

                                    PART III

ITEM 10.  MANAGEMENT

OFFICERS AND DIRECTORS

The directors, executive officers, and significant employees of the Company are:

Name                     Age     Position

Arnie Geller             61      President, Chief Executive Officer, Director

Gerald Couture           56      Vice President, Secretary,  Director and
                                  Chief Financial Officer

Dik Barton               42      Vice President, Director of Operations

Nick N. Cretan           67      Director

Doug Banker              50      Director


Arnie  Geller  serves as  President  and as a director of the  Company  from his
reappointment  in  November  1999 as an officer of the  Company.  Previously  he
served as President  from May 1993 to May 1995,  and has served as a director of
the Company since May 26,1999.  Prior to 1993, Mr. Geller had  principally  been
engaged in various executive capacities in the record industry for approximately
27 years.  Mr.  Geller was a  self-employed  corporate  consultant  prior to his
appointment  as  President  of the  Company.  Mr.  Geller is on the board of the
Titanic Foundation Inc., an unaffiliated non-profit entity.

Gerald Couture serves as Vice President-  Finance,  Chief Financial  Officer and
director  of the  Company  since  April  2000.  Mr.  Couture  is a  partner  and
principal,  in Couture & Company, Inc., a private corporate financial consulting
firm formed in 1973. Over the last  twenty-five  years, Mr. Couture has, through
his  consulting   firm,   been  involved  in  public   offerings,   mergers  and
acquisitions, venture capital investing, crisis management,  reorganizations and
the  financial  management  a number of growth  enterprises.  Mr.  Couture  is a
director and officer of Alpha Resources,  Inc., a registered  reporting  entity.
Mr.  Couture  has a MBA from  Temple  University,  Philadelphia,  and a B.S.  in
Chemical Engineering from the University of Massachusetts.

Nick Cretan has served as a Director of the Company  since May 2000.  Mr. Cretan
has more than  thirty  years of  management  experience  including  his  present
position as Chief Operating  Officer of the non-profit  Maritime  Association of
the Port of New York and New Jersey.  He also serves as  President of Friends of
the Statue of Liberty, Ellis Island Foundation,  President of Friends of Gateway
National  Parks  Foundation and as Executive  Director of the American  Merchant
Marine Memorial  Foundation.  Previously he served as Deputy Director of the San
Francisco  Marine  Exchange and staff  assistant at the National  Federation  of
Independent Business.

Doug Banker has served as a Director  of the  Company  since  August  2000.  Mr.
Banker has more than twenty-five years experience in the entertainment  industry
that includes providing  management services to musicians and recording artists;
marketing,  merchandising,  licensing,  and sales of music media  products;  the
development  and  management of concerts and similar  events.  Mr. Banker is the
manager and principal stockholder in Skillet Records, LLC, an independent record
label business that provides national distribution for music artists. Mr. Banker
also has authored  several  significant  software  programs  that have  achieved
commercial  success and which he has been  involved  with the  management of the
enterprises created for their commercialization.  Mr. Banker is President of the
Board of the Motor City Music Foundation in Detroit, Michigan.

                                       22
<PAGE>

No family  relationship  exists between or among any of the members of the board
of directors and executive  officers of the Company.  Except as disclosed above,
none of the nominees are directors of any other company having a class of equity
securities registered under or required to file periodic reports pursuant to the
Securities  Exchange Act of 1934,  as amended,  or any company  registered as an
investment company under the Investment Company Act of 1940, as amended.

The Board of Directors held four meetings  during the fiscal year ended February
28, 2002 At the present  time,  the Company  has no  nominating,  executive,  or
compensation  committees.  The  full  board  presently  functions  as the  audit
committee.

ITEM 11.  EXECUTIVE COMPENSATION

The following table sets forth a summary of  compensation  paid to the executive
officers of the Company for the fiscal years ended,  February 29, 2000, February
28, 2001 and February 28, 2002.

<TABLE>
<CAPTION>

                                                                Long-Term
                                                                Compensation

                                                             ---------------------
                                                                           Common
Name                                                        Other          Shares
and                              Year                       Annual         Subject to
Principal                    Ended February                 Compen-        Options
Position                      28th(29th)       Salary        sation        Granted
----------------------      ---------------    ------       -------        -------
Former Officers:
<S>                           <C>        <C>          <C>           <C>

George Tulloch(1)
Former President and Chief
Financial Officer                2002            -0-        $ 3,269           -0-
                                 2001            -0-          3,270           -0-
                                 2000      $ 210,000            -0-       500,000

Allan Carlin(1)
Former Secretary and General
Counsel                          2002            -0-        $ 2,668           -0-
                                 2001      $  48,000          8,911           -0-
                                 2000        220,000            -0-           -0-

G. Michael Harris (2)
Former Vice President and
Chief Operating Officer          2002            -0-            -0-           -0-
                                 2001      $ 325,000        $   710           -0-
                                 2000         79,200            -0-           -0-


Current Officers:

Arnie Geller(3) (4)(5)
President and Chief
Executive Officer                2002      $  358,463      $ 48,101       500,000
                                 2001         292,220        22,759       875,000
                                 2000          79,200           -0-           -0-
</TABLE>

                                       23
<PAGE>
<TABLE>

<S>                           <C>        <C>          <C>           <C>
Gerald Couture(6)(7)
Vice President Finance
Chief Financial Officer          2002      $  225,687      $113,059       600,000
                                 2001         100,769         5,905       375,000
                                 2000             -0-          -0-            -0-

Dik Barton (8)
Vice President and               2002        $134,361      $  3,619       250,000
Director of Operations           2001          79,073           -0-           -0-
                                 2000             -0-           -0-           -0-
</TABLE>


(1)  Messrs  Tulloch and Carlin  served as directors and officers of the Company
     until November 26, 1999. See "LEGAL  PROCEEDINGS." The above table excludes
     settlement  payments  made to Messrs.  Tulloch and Carlin that  amounted to
     $2.5 million.  See LEGAL  PROCEEDINGS-  Legal Action by Former Officers and
     Directors

(2)  Mr.  Harris was appointed  Executive  Vice  President  and Chief  Operating
     Officer of the  Company on  November  26,  1999.  Mr.  Harris was elected a
     director on August 9, 1999. Mr. Harris' employment was terminated on August
     27, 2000 and he was removed from the Board of  Directors  on September  12,
     2000.  During the year,  Mr.  Harris was  issued a stock  option  which was
     cancelled at the time of this termination. See "LEGAL PROCEEDINGS."

(3)  Mr.  Geller was  appointed  President  and Chief  Executive  Officer of the
     Company on November 26, 1999.  Mr.  Geller was elected a director on August
     9, 1999. A new Employment  Agreement between the Company and Mr. Geller was
     executed  on February  2, 2002 that  provides  for an annual base salary of
     $330,000 with 5% per year increases.  At Mr. Geller's option,  he may elect
     to receive his  compensation in shares of the Company's  common stock.  For
     this  purpose,  the common  stock will be valued at 50% of its  closing bid
     price as of the date of the  election.  Mr.  Geller has been granted  stock
     options as an officer and director to purchase  1.375 million shares of the
     Company's common stock at price ranging from $0.40 to $1.75 per share which
     were closing prices of the stock at the respective  times of issuance.  All
     of these options expire in ten years.

(4)  In February 2000, the Company paid accrued salary to Mr. Geller of $400,000
     for the period May 1993 to May 1995, during which time Mr. Geller served as
     President.

(5)  Includes  in  other   compensation,   medical  payments  including  medical
     insurance of $36,101 and a car allowance of $12,000.

(6)  On April 25, 2000,  the Company  engaged Mr.  Couture as Vice President and
     its Chief Financial  Officer pursuant to a one-year  employment  agreement.
     After that employment  agreement  expired Mr. Couture continued to serve as
     an officer of the Company with his compensation dependent upon the services
     he performed.  On February 2, 2002, Mr. Couture and the Company  executed a
     new employment  agreement for a term of four years at an annual base salary
     of $270,000 with 5% per year increases.  At Mr.  Couture's  option,  he may
     elect to receive his  compensation in shares of the Company's common stock.
     For this purpose, the common stock will be valued at 50% of its closing bid
     price as of the date of the  election.  Mr.  Couture  had  previously  been
     granted a stock option to purchase  300,000 shares of the Company's  common
     stock at a price of $1.625 per share,  which was the  closing  price of the
     stock on April 24, 2000. Mr. Couture received an option to purchase 600,000
     shares  at a price of $.40 per  share  that  was the  closing  price of the
     Company's  common  stock on February 1, 2002 as part of his new  employment
     agreement. In addition on February 2, 2002, Mr. Couture's option to acquire
     75,000 shares of common stock was reset to an exercise  price of $0.40 that
     was the closing price of the common stock on February 1, 2002. All of these
     options expire in ten years.

                                       24
<PAGE>

(7)  Includes  in  other   compensation,   medical  payments  including  medical
     insurance of $10,782 and a car allowance of $7,500,  an office allowance of
     $10,000,  payments to his consulting firm for the professional  services of
     others of $7,415 and the election to receive  compensation in the Company's
     common  stock of $77,362  that was  delivered  in fiscal  year 2002 but was
     primarily earned in the prior fiscal year.

(8)  On May 6, 2001 Mr. Barton  previously a consultant to the Company  became a
     Vice  President  and  Director  of  Operations  for the  Company  with  the
     execution  of a three  year  employment  agreement  at a annual  salary  of
     $130,000 for the first year,  $143,000 for the second year and $157,000 for
     the final year. As part of his compensation,  Mr. Barton was issued options
     to purchase  250,000  shares of the  Company's  common stock at an exercise
     price of $0.88 per share,  the common stock price at the time of the grant.
     This stock  option has a five-year  term.  On March 22,  2002,  Mr.  Barton
     resigned as an officer of the Company and again became a consultant  to the
     Company.


Option Exercises and Holdings

Stock options  granted to Mr.  Tulloch during the fiscal year ended February 29,
2000 consist of options to purchase 500,000 shares of the Company's common stock
at an exercise price of $2.00 with an expiration of May 26, 2004.

No  executive  officer of the Company  exercised  any stock  options  during the
fiscal year ended February 28, 2002.

Compensation of Directors

The Company  presently  compensates  all  directors by issuing  25,000 shares of
common stock for appointment as a director and subsequently, options to purchase
common stock of the Company for each year of service.  On January 27, 2000, each
director was granted an option to purchase  75,000 shares of the common stock of
the  Company at an  exercise  price of $1.15 that was the  closing  price of the
Company's  common  stock as of January  26,  2001.  The purpose of this grant of
options and shares of common stock was to align the  interests of the  directors
with that of the  Company's  shareholders.  On February 2, 2002 the strike price
for these options were reset to $0.40 the closing price of the Company's  common
stock as of February 1, 2002.

                                       25
<PAGE>

ITEM. 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table  enumerates,  as of May 30, 2002,  the name,  address,  and
ownership,  both by  numerical  holding  and  percentage  of  interest,  of each
beneficial  owner or more than five  percent (5%) of the  Company's  outstanding
Common Stock, the directors of the Company,  individually, and its directors and
executive officers as a group.

                                                      Amount
Name and Address of                                Beneficially    Common Stock
Beneficial Owner                        Class          Owned       Percentage
--------------------------------------------------------------------------------
Joe Marsh (1)                           Common       2,515,568        13.6
605 Southside Drive
Akron, Ohio  44317

William S. Gasparrini                   Common       2,328,937        12.6
23 Oak Street
Greenwich, CT 06831

Argosy International , Ltd.             Common       1,704,545         9.2
PO Box 260
Providenciales
Turks & Caicos, B.W.I.

Arnie Geller (2)
c/o RMS Titanic, Inc.                   Common       1,475,000         8.0
3340 Peachtree Road, N.E, Suite 1225.
Atlanta, GA 30326

Nick Cretan (3)                         Common          25,000          --
Suite 913
17 Battery Place
New York, NY 10004

Gerald Couture (4)                      Common         358,764         1.9
901 Chestnut Street, Suite A
Clearwater, FL 33756

Doug Banker (5)                         Common          25,000          --
6508 Crane Road
Ypsilanti, MI 48197

All Officers and Directors as a Group   Common       1,883,764        10.1
   (4 persons)


(1)  Includes Mr. Marsh's latest Form 13D filing.
(2)  Common  stock  held as tenancy by the  entireties  with his wife.  Excludes
     options to purchase 1,375,000 shares of common stock.
(3)  Excludes options to purchase 75,000 shares of common stock.
(4)  Excludes options to purchase 975,000 shares of common stock.
(5)  Excludes options to purchase 75,000 shares of common stock.


Other  than  as set  forth  above,  the  Company  is  not  aware  of  any  other
stockholders who beneficially own, individually or as a group, 5% or more of the
outstanding shares of Common Stock.

                                       26
<PAGE>

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors and executive  officers,  and persons who own more than ten percent of
the Company's  outstanding  shares of Common Stock,  to file with the Securities
and Exchange  Commission (the "SEC") initial reports of ownership and reports of
changes  in  ownership  of  Common  Stock.  Such  persons  are  required  by SEC
regulation  to furnish the Company  with  copies of all such  reports  that they
file.

At the present time all officers  and  directors  have filed their Forms 3 and 4
for the  fiscal  year  ended  February  28,  2002.  The  Company is aware of one
beneficial  owner of more  than 10% of the  Company's  Common  Stock who has not
filed a report as required by Section 16 of the Securities Exchange Act of 1934.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the fiscal year ended  February  28,  2002,  the Company  entered into an
amended  agreement  with a subsidiary of SFX  Entertainment,  Inc.,  pursuant to
which,  among other things,  the Company licensed to SFX the worldwide rights to
exhibit the Company's  TITANIC  artifacts for an extension period  commencing on
November 30, 2001 through December 31, 2002.  Furthermore,  on March 2, 2002, an
extension  was granted SFX  Entertainment,  Inc. for an extension  commencing on
November  30, 2001  through  January 5, 2003.  In  addition,  on May 1, 2002,  a
further extension was granted to Clear Channel Entertainment  Exhibits,  Inc., a
Delaware  corporation formerly known as SFX Family  Entertainment,  Inc. for the
period commencing on January 6, 2003 until December 31, 2003.

On January 27, 2001, the Company  entered into an agreement  with  International
Institute of Oceanographic  Exploration,  LLC ("IIOE"), a British Virgin Islands
company,  to co-venture to search,  identify and salvage  shipwrecks  located in
certain  territorial  waters in the Pacific Ocean.  The president of the Company
holds  an  equity  interest  in  this  company.  IIOE  has an  agreement  with a
governmental  agency to conduct marine survey operations that includes searching
for and recovering shipwrecks and their contents.  The Company agreed to finance
a marine survey  operation  utilizing  its  personnel.  The Company's  financial
commitment is for a maximum of $250,000.

A consulting firm in which the Company's Chief Financial Officer is a principal,
has  rendered  services  to the  Company  for the time of  other  professionals.
Payment for these services  amounted to $7,415 in Fiscal Year 2002 and $5,905 in
the prior year.


PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K

The following documents are filed as part of this Report on Form 10-K:

(a)  Financial Statements. The following financial statements of the Company are
     included in this Annual Report:

Independent Auditors' Report                                              F-1

Consolidated Balance Sheets at February 28, 2001
    and February 28, 2002                                                 F-2

Consolidated  Statements of Operations
 and Comprehensive Operations  for the years ended
 February 28(29), 2000, 2001 and 2002                                     F-3

Consolidated  Statements of Stockholders' Equity
 for the years ended February 28(29), 2000, 2001 and 2002                 F-4

                                       27
<PAGE>

Consolidated  Statements of Cash Flows for the years ended
 February 28(29), 2000, 2001 and 2002                                     F-5

Notes to Financial Statements                                             F-7

(b)  Reports on Form 8-K

Form 8-K filed on January 15, 2002 regarding change of auditors.

Form 8-K filed on April 17, 2002 regarding sale of Danepath, Ltd.

Form 8-K filed on April 30, 2002  regarding the Fourth Circuit  Appellate  Court
decision regarding the appeal of the District Court decisions.


(c)  Exhibits.
<TABLE>

<S>      <C>
3.1      Articles of Incorporation, as amended.

4.1      First Amendment to By-Laws of the Registrant.

4.2      Second Amendment to By-Laws of the Registrant.

9.1      Voting Trust Agreement among Titanic Ventures Limited Partnership,
         George Tulloch, Allan H. Carlin, Arnie Geller, G. Michael Harris, Kurt
         Hothorn, Cheryl Hothorn, Westgate Entertainment Corp., Anne A. Hill,
         Diane Carlin, Shirley A. Hill, James A. Hill, and D. Michael Harris.

10.1.1   Lease Agreement between the Company and 17 Battery Place North
         Associates.

10.1.2   Lease Agreement between the Company and Tower Park Place

10.2     Agreement dated April 15, 1996 between the Company and CRE-CO Finanz
         GmbH.

10.13  1998 Charter Agreement with IFREMER.

10.14  1998 Charter Agreement with Oceaneering International, Inc.

10.20    Promissory Note dated January 5, 1999 executed by George Tulloch in favor of the registrant.

10.21    Pledge Agreement dated January 5, 1999 between George Tulloch and the
         registrant.

10.22.1  Exhibition Tour Agreement dated March 31, 1999 between the Company and Magicworks Entertainment
         Inc. is incorporated by reference to the Company's report on Form 10-Q for the fiscal quarter
         ended May 31, 1999.

10.22.2  Agreement dated April 18, 2000 by and among Whitestar Marine Recover, Ltd. Argosy International,
         ltd. Graham Jessop and the Company.

10.22.3  Agreement dated April 18, 2000 by and among the Company, Argosy International, Inc. and Graham
         Jessop.
</TABLE>

                                       28
<PAGE>
<TABLE>

<S>      <C>
10.22.4  Agreement dated May 7, 2001 by and among the Company, Argosy International, Inc. and Graham
         Jessop(*3)

10.23    Lease dated March 27, 2000 for offices in Atlanta, Georgia.

10.23.1  Employment Agreement dated April 25, 2000 between the Company and Gerald
         Couture.

10.23.2  Stock  Option  Agreement  dated April 25, 2000  between the Company and
         Gerald Couture.

10.23.3  Employment  Agreement dated June 29, 2000 between the Company and Arnie
         Geller is  incorporated  by reference to the  Company's  report on Form
         10-Q for the fiscal quarter ended August 31, 2000.

10.23.4  Stock  Option  Agreement  dated June 29,  2000  between the Company and
         Arnie Geller is  incorporated  by reference to the Company's  report on
         Form 10-Q for the fiscal quarter ended August 31, 2000.

10.23.5  Employment  Agreement  dated June 29,  2000  between the Company and G.
         Michael Harris is incorporated by reference to the Company's  report on
         Form 10-Q for the fiscal quarter ended August 31, 2000.

10.23.6  Stock Option  Agreement  dated June 29, 2000 between the Company and G.
         Michael Harris is incorporated by reference to the Company's  report on
         Form 10-Q for the fiscal quarter ended August 31, 2000.

10.23.7  Employment Agreement dated May 6, 2001 between the Company and Dik Barton.

10.23.8  Employment Agreement dated February 2, 2002 between the Company and Arnie Geller.(*3)

10.23.9  Employment Agreement dated February 2, 2002 between the Company and Gerald Couture.(*3)

10.24    The Company's 2000 Stock Option Plan and form of stock option.


10.30    Amendment to  Exhibition  Tour  Agreement,  dated  September  18, 2000,
         between the Company and SFX Family Entertainment Inc.

10.31    Second Amendment to Exhibition Tour Agreement, dated May 7, 2001 between the Company and SFX
         Family Entertainment Inc.

10.32    Third Amendment to Exhibition Tour Agreement, dated March 7, 2002 between the Company and SFX
         Family Entertainment Inc.(*3)

10.33    Fourth Amendment to Exhibition Tour Agreement, dated May 1, 2002 between the Company and Clear
         Channel Entertainment Exhibits, Inc.(*3)

10.34    Form of lease dated October 16, 2001 for offices and warehouse in Atlanta, Georgia. (*3)

10.35    Agreement dated April 2, 2002, between the Company, Argosy International Ltd, Danepath Ltd and
         Graham Jessop. (*1)

10.36    Stock Pledge Agreement dated April 2, 2002, between the Company and Argosy International, Ltd. (*1)

10.37    Deed of Covenant from Danepath Ltd to the Company. (*1)
</TABLE>

                                       29
<PAGE>
<TABLE>

<S>      <C>
10.38    Letter Modification Agreement dated April 4, 2002, between the Company, Argosy International  Ltd,
         Danepath Ltd and Graham Jessop. (*1)

10.39    United States Court of Appeals R.M.S. Titanic, Inc. v. The Wrecked and Abandoned Vessel. Opinion
         No. 01-2227 (*2)

10.40    Motion for Stay of Mandate as filed on April 22,2002.(*3)

10.41    Letter Modification Agreement dated June 1, 2002, between the Company, Argosy International  Ltd,
         Danepath Ltd and Graham Jessop.(*3)


99       Additional Exhibits

         Subsidiaries of RMS TITANIC
</TABLE>


(*1)  -- incorporated herein as referenced to an 8-K filing of April 17, 2002.
(*2)  -- incorporated herein as referenced to an 8-K filing of April 30, 2002.
(*3)  -- incorporated herein as referenced to our 10-K filed June 18, 2002.


                                       30
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  had duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      RMS TITANIC, INC.

June 25, 2002                         By: /s/ Arnie Geller
                                      ---------------------------------------
                                      Arnie Geller, President and Chief
                                                    Executive Officer

SIGNATURES

Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated:


/s/ Arnie Geller                                     June 25, 2002
-----------------------------
Arnie Geller, President.
Chief Executive Officer, Director


/s/ Gerald Couture                                   June 25, 2002
-----------------------------
Gerald Couture, Vice President, Chief
Financial Officer, Secretary,
Director



                                       31
<PAGE>

RMS TITANIC, INC.

FINANCIAL STATEMENTS

FEBRUARY 28, 2002


<PAGE>


<TABLE>
<CAPTION>


                                                         RMS TITANIC, INC. AND SUBSIDIARY


                                               INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------


<S>                                                                           <C>
Independent Auditors' Report                                                           F-1


Consolidated Financial Statements:

   Consolidated Balance Sheets at February 28, 2001 and February 28, 2002              F-2

   Consolidated Statements of Operations and Comprehensive Operations for the
    Years Ended February 29, 2000, February 28, 2001 and February 28, 2002             F-3

   Consolidated Statements of Stockholders' Equity for the Years Ended
    February 29, 2000, February 28, 2001 and February 28, 2002                         F-4

   Consolidated Statements of Cash Flows for the Years Ended
    February 29, 2000, February 28, 2001 and February 28, 2002                   F-5 - F-6

   Notes to Financial Statements                                                F-7 - F-23

</TABLE>

<PAGE>


INDEPENDENT AUDITORS' REPORT




To the Board of Directors
RMS Titanic, Inc.


We have audited the accompanying consolidated balance sheet of RMS Titanic, Inc.
and Subsidiary as of February 28, 2002 and the related  statements of operations
and comprehensive operations,  stockholders' equity, and cash flows for the year
ended  February  28,  2002.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of RMS Titanic,  Inc.
and  Subsidiary as of February 28, 2002 and the results of their  operations and
their cash flows the year ended February 28, 2002, in conformity with accounting
principles generally accepted in the United States of America.



Kempisty & Company
Certified Public Accountants, P. C.
New York, New York

June 5, 2002

                                      F-1
<PAGE>

<TABLE>
<CAPTION>

                                                                                      RMS TITANIC, INC. AND SUBSIDIARY

                                                                                           CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------------
                                                                                      February 28,         February 28,
                                                                                          2001                 2002
                                                                                       (unaudited)
-----------------------------------------------------------------------------------------------------------------------

<S>                                                                                 <C>               <C>
ASSETS

Current Assets:
  Cash and cash equivalents                                                            $  610,000        $     146,000
  Accounts receivable                                                                      36,000               40,000
  Prepaid and refundable taxes                                                            585,000            2,261,000
  Prepaid expenses and other current assets                                               153,000               70,000

  Net assets of discontinued operations                                                   470,000            1,221,000
-----------------------------------------------------------------------------------------------------------------------
      Total current assets                                                              1,884,000            3,738,000

Artifacts owned, at cost                                                               11,282,000            4,495,000

Salvor's lien                                                                                 -                  1,000

Deferred Income Tax Asset                                                                 303,000                  -

Property and Equipment, net of accumulated depreciation
 of $936,000 and $1,210,000, respectively                                                 841,000              544,000

Other Assets                                                                              692,000               61,000

-----------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                    $15,002,000           $8,839,000
=======================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued liabilities                                             $  938,000        $     709,000
  Deferred income tax liability                                                            72,000                  -
  Deferred revenue                                                                      1,241,000              788,000

-----------------------------------------------------------------------------------------------------------------------
      Total current liabilities                                                         2,251,000            1,497,000
-----------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity:
  Common stock - $.0001 par value; authorized 30,000,000 shares,
   issued and outstanding 16,947,128 and 18,550,047 shares, respectively                    2,000                2,000
  Additional paid-in capital                                                           15,240,000           16,615,000
  Accumulated other comprehensive operations                                              (31,000)             (31,000)
  Accumulated deficit                                                                  (2,460,000)          (9,244,000)
-----------------------------------------------------------------------------------------------------------------------
      Stockholders' equity                                                             12,751,000            7,342,000
-----------------------------------------------------------------------------------------------------------------------
      Total Liabilities and Stockholders' Equity                                      $15,002,000           $8,839,000
=======================================================================================================================
</TABLE>


See Notes to Financial Statements

                                      F-2
<PAGE>
<TABLE>
<CAPTION>


                                                                                RMS TITANIC, INC. AND SUBSIDIARY


                                              CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
-----------------------------------------------------------------------------------------------------------------
                                                                February 29,      February 28,       February 28,
Year ended                                                         2000              2001               2002
                                                                (Unaudited)       (Unaudited)
-----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>              <C>
Revenue:
  Exhibitions and related merchandise sales                    $ 6,136,000        $5,464,000       $  2,354,000
  Licensing fees                                                    17,000           108,000            313,000
  Merchandise and other                                            221,000            60,000             39,000
  Sale of coal                                                      59,000            67,000             62,000

-----------------------------------------------------------------------------------------------------------------
Total revenue                                                    6,433,000         5,699,000          2,768,000
-----------------------------------------------------------------------------------------------------------------
Expenses:
  General and administrative                                     6,154,000         4,405,000          3,391,000
  Depreciation and amortization                                    303,000           558,000            374,000
  Expedition costs                                                  11,000           763,000             32,000
  Cost of merchandise sold                                          18,000             5,000             85,000
  Cost of coal sold                                                  6,000             8,000              6,000
  Impairment loss on exhibitry equipment                            75,000                 -                 -
  Impairment charge for artifacts recovered, net of taxes                -                 -          6,148,000
-----------------------------------------------------------------------------------------------------------------
Total expenses                                                   6,567,000         5,739,000         10,036,000
-----------------------------------------------------------------------------------------------------------------

Income (loss) from continuing operations                          (134,000)          (40,000)        (7,268,000)
Other income:
  Interest                                                         113,000            76,000              8,000
  Other                                                                  -                 -                  -
-----------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes                    (21,000)           36,000         (7,260,000)

Provision (benefit) for income taxes                                     -                 -              -
-----------------------------------------------------------------------------------------------------------------
Net income (loss) from Continuing Operations before
   discontinued operations and extra-ordinary gain              $  (21,000)       $   36,000        $(7,260,000)
=================================================================================================================
Discontinued operations:
     Loss from operations of Danepath subsidiary disposed of:            -           (88,000)          (168,000)
     Gain on disposal of Danepath including provision in 2002 of
       a $46,000 operating loss during phase out period.                 -                 -            644,000
=================================================================================================================
                                                                $  (21,000)         $(52,000)       $(6,784,000)
-----------------------------------------------------------------------------------------------------------------
Net income (loss) for basic and diluted common shares from
  Continuing operations                                         $    - 0 -          $  - 0 -        $     (0.38)
Net income (loss) for basic and diluted common shares from
  discontinued operations                                       $    - 0 -          $  - 0 -        $        -0-

Earnings (loss) per common share, basic and diluted             $    - 0 -          $  - 0 -        $     (0.38)
=================================================================================================================

Weighted-average number of common shares outstanding            16,187,128        16,732,991         18,058,573
=================================================================================================================
</TABLE>

See Notes to Financial Statements


                                      F-3
<PAGE>

<TABLE>
<CAPTION>




                                                                                                   RMS TITANIC, INC. AND SUBSIDIARY

                                                                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Years ended February 29, 2000, February 28, 2001 and February 28, 2002
     (Amounts for the years ended February 29, 2000 and February 28, 2001 are unaudited)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Accumulated
                                                           Common StockAdditional            Other
                                              Number                        Paid-in      Comprehensive   Accumulated   Stockholders'
                                            of Shares       Amount          Capital        Operation       Deficit        Equity
------------------------------------------------------------------------------------------------------------------------------------

<S>                                       <C>             <C>          <C>              <C>         <C>             <C>
Balance as of March 1, 1999                 16,187,128       $2,000         $13,916,000        -        $(2,418,000)    $11,500,000

Issuance of compensatory stock options                -           -             133,000        -                  -         133,000
Common stock to be issued in settlement
 of litigation                                        -           -             191,000        -                  -         191,000
Net loss                                              -           -                   -        -            (21,000)        (21,000)
------------------------------------------------------------------------------------------------------------------------------------

Balance as of February 29, 2000              16,187,128      $2,000         $14,240,000        -        $(2,439,000)    $11,803,000

Common stock issued for acquisition of
 intangibles                                    600,000           -             900,000        -                  -         900,000
Issuance of common stock in settlement
 of litigation as of February 29, 2000          100,000           -                   -        -                  -               -
Issuance of common stock for services            60,000           -             100,000        -                  -         100,000
Foreign currency translation adjustment               -           -                   - $(31,000)                 -         (31,000)
Net loss                                              -           -                   -        -            (21,000)        (21,000)

------------------------------------------------------------------------------------------------------------------------------------
Balance as of February 28, 2001              16,947,128      $2,000         $15,240,000 $(31,000)       $(2,460,000)    $12,751,000

Common stock issued for acquisition
 of ownership of RMS Carpathia                1,704,545           -             819,000                                     819,000
Return of common stock for sale
 of intangibles                                (600,000)
Issuance of common stock for services           498,374           -             343,000        -                 -          343,000
Issuance of compensatory stock options                                          213,000                                     213,000
Net income                                                                                               (6,784,000)     (6,784,000)
------------------------------------------------------------------------------------------------------------------------------------
Balance as of February 28, 2002              18,550,047      $2,000         $16,615,000 $(31,000)       $(9,244,000)     $7,342,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements


                                      F-4
<PAGE>

<TABLE>
<CAPTION>




                                                                                           RMS TITANIC, INC. AND SUBSIDIARY

                                                                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------------------------

                                                                          February 29,       February 28,        February 28,
Year ended                                                                    2000               2001                2002
                                                                          (Unaudited)        (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>              <C>              <C>
Cash flows from operating activities:
  Net income (loss)                                                     $   (21,000)      $    (21,000)   $     (6,841,000)
  Deduct Loss from discontinued operation                                         -                  -            (168,000)
-----------------------------------------------------------------------------------------------------------------------------
 Income (Loss) from continuing operations                               $   (21,000)      $    (21,000)   $     (6,673,000)
 Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
    Net gain on sale of business                                                  -                  -             644,000
    Depreciation and amortization                                           303,000            599,000             374,000
    Impairment loss on exhibitry equipment                                   75,000                  -                   -
    Amortization of deferred revenue                                        104,000                  -                   -
    Issuance of common stock for services                                         -            100,000                   -
    Issuance of compensatory stock options                                  133,000                  -             213,000
    Net deferred income tax benefit (expense)                               (46,000)           324,000
    Other                                                                    (3,000)                 -                   -
    Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                          1,274,000            335,000              (3,000)
      (Increase) decrease in prepaid and refundable taxes                  (734,000)           578,000          (1,365,000)
      Decrease (increase) in prepaid expenses and other current assets      129,000           (103,000)            365,000
      Decrease (decrease) in other assets                                         -            (29,000)          6,749,000
      Increase in deferred revenue                                                -            637,000            (453,000)
      Increase (decrease) in accounts payable and accrued liabilities       976,000         (1,948,000)           (292,000)
------------------------------------------------------------------------------------------------------------------------------
        Total adjustments                                                 2,402,000            493,000           6,232,000
------------------------------------------------------------------------------------------------------------------------------
        Net cash provided by operating activities                         2,381,000            472,000            (441,000)
------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Artifact recovery costs                                                         -         (2,107,000)                  -
  Purchases of property and equipment                                       (36,000)          (776,000)            (23,000)
------------------------------------------------------------------------------------------------------------------------------
        Cash used in investing activities                                   (36,000)        (2,883,000)            (23,000)
------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from debt                                                              -            250,000                   -
  Repayment of debt                                                               -           (250,000)                  -
------------------------------------------------------------------------------------------------------------------------------
        Cash used in financing activities                                         -                  -                   -
------------------------------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash                                           -            (31,000)                  -
------------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                      2,345,000         (2,442,000)           (464,000)

Cash and cash equivalents at beginning of year                              720,000          3,065,000             610,000
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                  3,065,000          $ 623,000        $    146,000
==============================================================================================================================

Supplemental disclosure of cash flow information:
  Cash paid during the year for income taxes                            $ 1,207,000          $   - 0 -        $      - 0 -
==============================================================================================================================
</TABLE>


                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                                   CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
------------------------------------------------------------------------------------------------------------------

                                                                  February 29,      February 28,     February 28,
Year ended                                                            2000              2001             2002
                                                                  (Unaudited)       (Unaudited)
------------------------------------------------------------------------------------------------------------------

<S>                                                         <C>                   <C>            <C>
Supplemental schedule of non-cash financing and
 investing activities:

  Issuance of compensatory stock options                      $     133,000        $   - 0 -          $   213,000
==================================================================================================================
  Common stock to be issued in settlement litigation          $     191,000        $   - 0 -          $     - 0 -
==================================================================================================================
  Common stock issued for assets                              $        - 0 -       $ 900,000          $  819,000
==================================================================================================================
</TABLE>


                                      F-6
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

RMS Titanic,  Inc.  initially  conducted  business as Titanic  Ventures  Limited
Partnership  ("TVLP").  In 1993, RMS Titanic, Inc. acquired all of TVLP's assets
and assumed all of TVLP's  liabilities.  The  transaction was accounted for as a
"reverse  acquisition" with TVLP deemed to be the acquiring entity. RMS Titanic,
Inc. and TVLP are referred to as the "Company" as the context dictates.

In June 2000, the Company  established a wholly owned United Kingdom subsidiary,
Danepath Ltd. for the purpose of purchasing the research vessel, RRS Challenger,
a 178 foot- 1050 ton ship that was  utilized  in the  expedition  to the TITANIC
wreck site during the summer of 2000.  This vessel was acquired on June 30, 2000
from the Natural Environment  Research Council, a British  governmental  agency.
The name of the vessel was changed to the "SV EXPLORER".

In May 2001, the Company  acquired the ownership rights to the shipwreck the RMS
Carpathia  (the  "Carpathia").  The  Carpathia  was the vessel that  rescued the
survivors  from  the  Titanic.  The  value  that  was  assigned  to  this  asset
($1,374,000) is the un-amortized  value of other intangible  assets purchased by
the Company in April 2000 from this same entity ($555,000), plus the fair market
value of 1,104,545 newly issued shares of common stock ($819,000).

On April 2, 2002, the Company entered into a Purchase  Agreement for the sale of
the common stock,  representing 100% ownership,  of its Danepath Ltd. subsidiary
to Argosy International Ltd. The purchase price, as amended by Agreement on June
1, 2002,  was $1.5  million.  Danepath's  principal  asset is the  research  and
recovery  vessel "SV Explorer".  Under the terms of the Purchase  Agreements the
Company  received  $100,000  upon  execution  and an obligation of $1.4 million,
bearing  interest  at 8% per annum  that will be paid  within six  months.  This
obligation  is  collateralized  with both a first  mortgage  on the  vessel  "SV
Explorer",  the principal  asset owned by Danepath,  and all the common stock of
the Company owned by Argosy International,  Ltd. On March 6, 2002, in a separate
agreement, the Company sold to Argosy International,  for minimal consideration,
its 100%  ownership  interest  in White Star  Marine  Recovery,  Ltd.  That sale
terminated its obligation under an agreement with Argosy  International  for the
consulting  services  of Graham  Jessop.  At the time of this  sale,  White Star
Marine Recovery had no assets other than this consulting contract.

The accompanying  consolidated  financial statements include the accounts of the
Company  and  its  wholly  owned  subsidiary.  All  inter-company  accounts  and
transactions have been eliminated.

The  Company  was formed in 1987 for the  purposes  of  exploring  the wreck and
surrounding  oceanic  area  of the  vessel  the  RMS  Titanic  (the  "Titanic");
obtaining  oceanic material and scientific data available  there-from in various
forms,  including still and moving photography and artifacts  ("Artifacts") from
the wreck site;  and  utilizing  such data and  Artifacts  in  revenue-producing
activities  such as touring  exhibitions,  television  programs  and the sale of
still  photography.  The Company  also earns  revenue  from the sale of coal and
Titanic-related products.

The Company was declared  salvor-in-possession  of the  Titanic,  so long as the
Company is  salvor-in-possession,  pursuant to a judgment entered in the Federal
District  Court for the Eastern  District of Virginia.  On April 12,  2002,  the
United  States Court of Appeals for the Fourth  Circuit  (the "Fourth  Circuit")
affirmed two orders of the United States District Court for the Eastern District
of Virginia, Norfolk Division. R.M.S. Titanic, Inc. v. The Wrecked and Abandoned

                                      F-7
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

Vessel ., 2002 U.S. App. LEXIS 6799 (4th Cir.  2002).  Dated  September 26, 2001
and October 19, 2001, these orders restricted the sale of artifacts recovered by
the Company  from the RMS Titanic  wreck site.  In rendering  its  opinion,  the
Fourth  Circuit  reviewed and declared  ambiguous  the June 7, 1994 order of the
District  Court  that had  awarded  ownership  to the  Company of all items then
salvaged  from the wreck of the  Titanic as well as all items to be  salvaged in
the future by the Company so long as the Company  remained  salvor-in-possession
of the  Titanic.  Having  found the June 7, 1994  order  ambiguous,  the  Fourth
Circuit  reinterpreted the order to convey only possession,  not title,  pending
determination of a salvage award.

As a consequence  of the Fourth  Circuit's  decision,  the Company  reviewed the
carrying  cost of  artifacts  recovered  from Titanic  expeditions  to determine
impairment of values. Up until the ruling by the Fourth Circuit, the Company was
carrying the value of the  artifacts  that it recovered  from the Titanic  wreck
site at the respective  costs of the expeditions as the Company  believed it was
the owner of all artifacts recovered.  The Company had relied on ownership being
granted by the United States Federal  District Court in a June 7, 1994 order. As
a  consequence  of this  review  and in  compliance  with  the  requirements  of
Statement  of  Financial   Accounting  Standards  ("SFAS")  142-  impairment  of
long-lived assets and SFAS 121-the valuation of non-goodwill intangibles, it was
determined that an impairment of realizable  values had occurred  because of the
Fourth  Circuit's  ruling that removed  ownership of certain  artifacts from the
Company that are under the jurisdiction of the United States District Court. The
District Court has  jurisdiction  of all artifacts that have been recovered from
the Titanic  wreck site except for those 1800  artifacts  recovered  in the 1987
expedition.  These 1987 artifacts were previously  awarded to the Company by the
government  of France in 1993.  Furthermore,  the Salvor's  Lien that the Fourth
Circuit   Court   acknowledged   the   Company   was   entitled   to  under  its
Salvor-in-Possession  status could not be quantified other than for a de minimus
amount  because of the  uncertainty  of the wide latitude  given a United States
Federal  Maritime  Court to evaluate the Blackwall  factors for a salvor's award
and the  adjustment  to such an award,  if any,  for  revenues  the  Company has
derived from the  exhibition  of artifacts  since 1994.  Therefore an impairment
charge of an amount  equal to the costs of recovery  for all  expeditions  after
1987, net of tax benefit,  was established less a re-classification of $1,000, a
de minimus amount, for the value of a salvor's lien.

Since August 1987,  the Company has completed six  expeditions to the wreck site
of the Titanic and has recovered approximately 6,000 artifacts, a section of the
Titanic's hull and coal used on the Titanic.

Artifacts  recovered in the 1987 Titanic  expedition are carried at the lower of
cost of recovery or net realizable value ("NRV").  The costs of recovery are the
direct costs of chartering  of vessels and related crews and equipment  required
to complete the dive operations for that expedition.

Costs  associated  with the  care,  management  and  preservation  of  recovered
Artifacts  are expensed as  incurred.  A majority of the  Artifacts  are located
within the United States.

To ascertain that the aggregate NRV of the Artifacts exceeds the direct costs of
recovery of such Artifacts,  the Company  evaluates various  evidential  matter.
Such   evidential   matter   includes   documented   sales  and   offerings   of
Titanic-related  memorabilia by auction houses and private dealers, an appraisal
of  certain  Artifacts,  insurance  coverage  obtained  in  connection  with the
potential theft, damage or destruction of all or part of the Artifacts and other
evidential matter regarding the public interest in the Titanic.

                                      F-8
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS


(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

Under the 1998 Charter  Agreement  with the Institute of France for the Research
and Exploitation of the Sea ("IFREMER"), the Company is contractually restricted
from selling certain Artifacts except to an entity that will make them available
for exhibition to the public, as defined.

At each balance sheet date, the Company  evaluates the period of amortization of
intangible  assets.  The factors used in evaluating  the period of  amortization
include: (i) current operating results, (ii) projected future operating results,
and (ii) other material factors that affect the continuity of the business.

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  investments  with  maturities  of  three  months  or  less  to  be  cash
equivalents.

The Company maintains cash in bank accounts that, at times, may exceed federally
insured limits. The Company has not experienced any losses on these accounts.

Revenue  from the  licensing of the  production  and  exploitation  of audio and
visual  recordings by third parties,  related to the Company's  expeditions,  is
recognized at the time that the expedition and dive take place.

Revenue from the licensing of still  photographs  and video is recognized at the
time the rights are granted to the licensee.

Revenue  from the  granting  of  sponsorship  rights  related  to the  Company's
expeditions and dives is recognized at the completion of the expedition.

Revenue  sharing from the sale of  Titanic-related  products by third parties is
recognized when the item is sold.

Revenue from license  agreements  is  recognized  pro-rata  over the life of the
agreements.  Amounts  received in excess of amounts earned are shown as deferred
revenue.

Coal recovered from the Titanic wreck site is sold by the Company.  Revenue from
sales of such coal is recognized at the date of shipment to customers.  Recovery
costs  attributable  to the coal are charged to  operations as revenue from coal
sales are recognized.

Income tax expense  includes income taxes  currently  payable and deferred taxes
arising from temporary  differences  between financial  reporting and income tax
bases of assets and  liabilities.  They are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.

Depreciation  of property and  equipment  is provided  for by the  straight-line
method over the estimated lives of the related assets.

SFAS No. 123, Accounting for Stock-Based Compensation,  encourages, but does not
require,   companies  to  record  compensation  cost  for  stock-based  employee
compensation  plans at fair  value.  The  Company has elected to account for its
stock-based  compensation  plans using the intrinsic value method  prescribed by

                                      F-9
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

Accounting  Procedures  Bulletin  ("APB")  Opinion No. 25,  Accounting for Stock
Issued to  Employees,  and to present  pro forma  earnings  (loss) and per share
information  as though it had adopted SFAS No. 123.  Under the provisions of APB
Opinion No. 25,  compensation  cost for stock options is measured as the excess,
if any, of the quoted market price of the Company's  common stock at the date of
the grant over the amount an employee must pay to acquire the stock.

Basic  earnings per common share ("EPS") is computed as net earnings  divided by
the weighted-average number of common shares outstanding for the period. Diluted
EPS,  representing  the  potential  dilution that would occur from common shares
issuable through stock-based compensation,  including stock options,  restricted
stock awards,  warrants and other, is not presented for the years ended February
29,  2000,  February  28, 2001 and February 28, 2002 since there was no dilutive
effect of potential common shares or the dilutive effect is not material.

The Company does not believe that any recently  issued,  but not yet  effective,
accounting  standards  will have a material  effect on the  Company's  financial
position, results of operations or cash flows.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts in the financial statements. Actual results could differ
from those estimates.

All amounts in the  accompanying  financial  statements have been rounded to the
nearest thousand dollar.

2. CORPORATE GOVERNANCE, DIRECTORS, OFFICERS AND OTHER MATTERS:

On  November  26,  1999,  two of the  six  members  of the  Company's  Board  of
Directors,  Messrs.  Geller  and  Harris,  and  others;  acting via an action by
written  consent of the holders of a majority of voting  rights of the Company's
common stock, in lieu of a meeting; removed Messrs. Tulloch, Hothorn, Nargeolet,
and Carlin as  Directors  of the Company  and  subsequently  Messrs  Tulloch and
Carlin as Officers.

The  removed  officers  and  directors  brought an action in the  United  States
District  Court for  Connecticut  against  Messrs.  Geller and Harris and others
seeking to obtain a judicial  reversal of their removal from office.  Because of
the uncertainty as to the  individuals  who could conduct  business on behalf of
the Company  during the time from  November  26, 1999 to the  resolution  of the
dispute,  the  Company's  bank  stopped  honoring  checks and froze all funds on
deposit. In addition, a creditor notified the Company that it would not tender a
$2,000,000 payment otherwise due and payable until the dispute among current and
former directors was resolved or settled.

The legal  action was  resolved on or about  January 21, 2000 with a  Settlement
Agreement whereby the Company agreed, among other things, to: (a) pay to Messrs.
Tulloch and Carlin an aggregate amount of $2,500,000 in three equal installments
to be  completed  within  six  months of the date of the  settlement;  (b) allow
Messrs.  Tulloch and Carlin to submit  documented  requests for reimbursement of
previously   un-reimbursed   business   expenses;   (c)  review/revise   payment
information submitted to the Internal Revenue Service with respect to the nature
of payments  previously made to Mr. Carlin; (d) give Messrs.  Tulloch and Carlin
the authority to exercise  previously  issued options to acquire an aggregate of
1,000,000  shares of the Company's common stock and to cause the Company to file
a Registration  Statement  with respect to the options and underlying  shares of
common stock; (e) indemnify the former officers and directors who participate in
the Settlement  Agreement to the full extent of applicable law and to the extent
of officers' and directors' liability under the existing Company policy; and (f)
reimburse  Messrs.  Tulloch and Carlin for the costs of health  insurance  for a
period of 18 months.

                                      F-10
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

Messrs.  Tulloch  and Carlin  agreed,  among  other  things,  to: (a) accept the
$2,500,000  as full monetary  payment  (with the  exception of previously  noted
un-reimbursed  business  expenses) for any claims  against the Company,  Messrs.
Geller  and  Harris  and  others in  connection  with this  action  and  amounts
otherwise due them in  connection  with their roles as officers and directors of
the  Company;   (b)  send   appropriate   letters  to  the  Company's  bank  and
aforementioned  creditor to "unfreeze"  corporate funds and to allow operational
cash flow to  resume;  (c) enter into an  18-month  standstill  agreement  which
precludes them from interfering in Company management without the prior approval
of the board of directors and  shareholders;  (d)  discontinue  their efforts to
have the Titanic  determined  to be a monument  and to  restrict  the removal of
materials from the Titanic wreck site; (e) return all the Company's  property in
their  possession,  including  records and files, and provide a complete list of
Company  Artifacts which are located anywhere in the world;  (f) provide,  for a
three-month period, cooperation in effecting a professional management transfer;
(g) return all monies held in Mr. Carlin's  attorney trust account along with an
accounting of such; and (h)  discontinue  access to the Company's  Internet site
and to sell back to the Company,  at cost,  another Web site  utilizing the name
"Titanic."

At February 29, 2000, accounts payable and accrued liabilities include a balance
of  $1,608,000  payable to  Messrs.  Tulloch  and Carlin  under the terms of the
Settlement Agreement.  At February 28, 2002, there were no amounts due under the
terms of the  Settlement  Agreement.  During the year ended  February  29, 2000,
$1,672,000  was  charged  to  operations  in  connection  with  this  Settlement
Agreement.

The Company has  indemnified  all  defendants in the legal action brought by the
removed  officers and directors from all legal fees and expenses and other costs
associated with the action.

The Company has not  properly  filed fully  executed  Form 10-Ks for each of the
years ended  February 28, 1997 and 1998. As a result of the Company's  principal
accounting officer and a majority of the board of directors declining to execute
the Company's Form 10-K for the year ended February 28, 1997, the Company filed,
as an exhibit to its Form 8-K, the form of Form 10-K that had been  approved for
filing by Mr. Tulloch, the Company's principal executive officer and a director.
It is believed that the Company's  principal  accounting  officer and certain of
its directors refused to execute the Form 10-K because they were uncertain as to
whether  the  Form  10-K  reflected  all  necessary   disclosures  or  contained
disclosures   that  were  materially   inaccurate  or  misleading  or  otherwise
inappropriate.  Similarly,  for the year ended  February 28,  1998,  the Company
filed,  as an  exhibit  to its Form  8-K,  the form of Form  10-K  that had been
approved for filing by Mr. Tulloch.

                                      F-11
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

3. PROPERTY AND EQUIPMENT:

Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>

                                            February 28,    February 28,       Estimated
                                                2001            2002           Useful Life
-------------------------------------------------------------------------------------------------

<S>                                         <C>             <C>                  <C>
Exhibitry equipment                         $1,378,000      $1,378,000           5 years
Office equipment                               175,000         188,000           5 years
Furniture and fixtures                         164,000         188,000           5 years
-------------------------------------------------------------------------------------------------
                                             1,717,000       1,754,000
Less accumulated depreciation                  936,000       1,210,000
-------------------------------------------------------------------------------------------------
                                           $   692,000       $ 544,000
=================================================================================================
</TABLE>


4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

                                                    February 28,    February 28,
                                                        2001            2002
--------------------------------------------------------------------------------

Amounts payable for professional and consulting fees    492,000        $ 413,000
Other miscellaneous liabilities                         211,000          296,000
--------------------------------------------------------------------------------
                                                       $938,000        $ 709,000
================================================================================

5. INCOME TAXES

The provision for income taxes consists of the following components:
<TABLE>

                                  February 29,            February 28,        February 28,
Year ended                            2000                   2001                 2002
-------------------------------------------------------------------------------------------------
<S>                              <C>                   <C>                <C>
Current:
   Federal                          $      -              $(257,000)         $(2,720,000)
   State and local                  $ 46,000                (35,000)            (786,000)
-------------------------------------------------------------------------------------------------
                                      46,000               (292,000)          (3,506,000)
-------------------------------------------------------------------------------------------------
Less: Tax effect
        of impairment charge                                                   1,954,000

Deferred:
  Federal                            (86,000)               257,000            1,230,000
  State and local                     40,000                 35,000              322,000
-------------------------------------------------------------------------------------------------
                                     (46,000)               292,000            1,552,000
-------------------------------------------------------------------------------------------------
Provision for income taxes         $     -0-              $     -0-           $      -0-
-------------------------------------------------------------------------------------------------

</TABLE>

                                      F-12
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

The total  provision  for income  taxes  differs from that amount which would be
computed by applying the U.S. federal income tax rate to income before provision
for income taxes. The reasons for these differences are as follows:

<TABLE>

                                            February 29,      February 28,       February 28,
Year ended                                      2000             2001                2002
-------------------------------------------------------------------------------------------------
<S>                                      <C>             <C>                  <C>

Statutory federal income tax rate             (34.0)%            (34.0)%           (34.0)%
Effect of federal graduated tax
 rates                                      -(293.6)              (5.2)                -
State income taxes, net of federal
 benefit                                      327.6                6.0              (6.0)%
Net Operating Loss Carry-forward                  -                  -              21.0%
Impairment Charge -                               -                  -              19.0%
Other, net                                        -               33.2                 -

--------------------------------------------------------------------------------------------------
      Effective income tax rate                 -0-%               -0-%              -0-%
==================================================================================================
</TABLE>

The net deferred income tax asset consists of the following:

                                               February 28,         February 28,
                                                  2001                  2002
--------------------------------------------------------------------------------
Net Operating loss carry-forward                                     $1,552,000
Deferred tax asset - expenses not currently
 deductible                                       $303,000              294,000
Deferred tax liability - depreciation              (72,000)                   -
Valuation allowance for doubtful tax assets                          (1,846,000)
--------------------------------------------------------------------------------
 Net deferred tax                                 $231,000                 $-0-


The net operating loss  carry-forward  of  approximately  $3,900,000  expires in
2022. A valuation  allowance  of 100% of the deferred  income tax asset has been
provided at February 28, 2002 because of the  uncertainties  as to the amount of
taxable  income that will be  generated  in the future  years as a result of the
determination  by the federal court of appeals that the Company does not own the
Titanic artifacts. During the years ended February 28, 1999 through February 28,
2001, the Company had no valuation allowance.

6. STOCKHOLDERS' EQUITY:

Prior to the  acquisition  of TVLP's assets,  the Company  initiated an exchange
agreement  with the  holders of certain  Class B warrants  in which the  holders
would receive shares of the Company's common stock in exchange for certain Class
B warrants.  Through  February 28, 2002, the Company had received 20,700 Class B
warrants to be exchanged  for 20,700  shares of common stock of the Company,  of
which  16,500  shares  still  remain to be issued.  There  were  5,556  warrants
outstanding as of February 28, 2002.

During the year ended  February 28, 2001,  the Company  issued 100,000 shares of
common stock to a third party as settlement of certain litigation.

During the year ended  February 28, 2002,  the Company  issued 333,767 shares of
common stock as compensation.

                                      F-13
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

In April 2000, the Company  acquired certain  intangible  assets in exchange for
600,000  shares of its common  stock valued at $900,000  after giving  effect to
certain  restrictions  placed on such common  stock.  Concurrently,  the Company
entered into an agreement  for the services of an individual to January 3, 2003.
Since the  individual  was  primarily  responsible  in assisting  the Company in
exploiting the intangible assets acquired,  the assets were being amortized over
the term of the individual's service agreement. The assets are included in other
assets in the  accompanying  balance  sheet.  Amortization  expense for the year
ended  February  28, 2001 and  accumulated  amortization  at  February  28, 2001
amounted  to  approximately  $285,000.  Amortization  expense for the year ended
February  28,  2002  amounted  to  approximately  $60,000.  In May of 2001 these
intangibles  were  exchanged  in a  transaction  for  the  ownership  of the RMS
Carpathia as discussed below.

In May 2001, the Company  acquired the rights to the shipwreck the RMS Carpathia
(the "Carpathia").  The Carpathia was the vessel that rescued the survivors from
the  Titanic.  The value that was  assigned  to this asset  ($1,374,000)  is the
un-amortized  value of other intangible assets purchased by the Company in April
2000 from this same entity  ($555,000),  plus the fair market value of 1,104,545
newly issued shares of common stock ($819,000).

On April 2, 2002, the Company entered into a Purchase  Agreement for the sale of
the common stock,  representing 100% ownership,  of its Danepath Ltd. subsidiary
to Argosy International Ltd. The purchase price, as amended by Agreement on June
1, 2002,  was $1.5  million.  Danepath's  principal  asset is the  research  and
recovery  vessel "SV Explorer".  Under the terms of the Purchase  Agreements the
Company  received  $100,000  upon  execution  and an obligation of $1.4 million,
bearing  interest  at 8% per annum  that will be paid  within six  months.  This
obligation  is  collateralized  with both a first  mortgage  on the  vessel  "SV
Explorer",  the principal  asset owned by Danepath,  and all the common stock of
the Company owned by Argosy International,  Ltd. On March 6, 2002, in a separate
agreement, the Company sold to Argosy International,  for minimal consideration,
its 100%  ownership  interest  in White Star  Marine  Recovery,  Ltd.  That sale
terminated its obligation under an agreement with Argosy  International  for the
consulting  services  of Graham  Jessop.  At the time of this  sale,  White Star
Marine Recovery had no assets other than this consulting contract.


                                      F-14
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

7. STOCK OPTIONS:

Transactions relating to stock options are as follows:
<TABLE>
<CAPTION>

                                                                                                              Weighted-
                                                           Number of              Average
                                                          Shares and             Exercise
                                                            Options                Price
                                                          Exercisable            per Share
-------------------------------------------------------------------------------------------------
<S>                                                <C>                    <C>
Balance at March 1, 1999                                    830,000                $1.33
Expired                                                    (330,000)               $1.46
Granted                                                     500,000                $2.00
-------------------------------------------------------------------------------------------------
Balance at February 29, 2000                              1,000,000                $1.63
Canceled                                                   (500,000)               $1.15
Granted                                                   2,150,000                $1.79
-------------------------------------------------------------------------------------------------
Balance at February 28, 2001                              2,650,000                $1.60
Canceled                                                         -0-                 -0-
Granted                                                   1,350,000                $0.48
-------------------------------------------------------------------------------------------------
Balance at February 28, 2002                              4,000,000                $1.22
=================================================================================================
</TABLE>

In January 1999, the Company  extended the expiration date from April 6, 1999 to
April 6, 2004 of an immediately exercisable option to purchase 500,000 shares of
the  Company's  common  stock at a price  of  $1.25  per  share.  For  financial
reporting  purposes,  this  has  been  treated  as a new  option  grant  and the
cancellation of an existing option.

In July 1999, the Company granted to its President  options to purchase  500,000
shares of common stock.  The options are  exercisable at $2.00 per share through
May 26,  2004.  Compensation  expense of $133,000 was charged to  operations  in
connection with these options.

During the year ended  February  28,  2001,  the Company  granted to an employee
options, expiring March 31, 2003, to acquire: (a) 83,333 shares of the Company's
common stock at an exercise  price of $3.00 per share;  (b) 83,333 shares of the
Company's  common stock at an exercise price of $4.00 per share;  and (c) 83,334
shares of the Company's common stock at an exercise price of $5.00 per share.

In April 2000, the Company  adopted an incentive  stock option plan (the "Plan")
under which options to purchase  3,000,000 shares of common stock may be granted
to certain key employees,  directors or consultants.  The exercise price will be
based on the fair  market  value of such  shares as  determined  by the board of
directors  at the date of the grant of such  options.  As of February  28, 2002,
options to purchase 3,000,000 shares of common stock have been granted under the
Plan.

In April  2000,  the  Company  granted  an  officer/director  a stock  option to
purchase  300,000 shares of the Company's  common stock at a price of $1.625 per
share,  which was the market value of the stock at the time of grant. The option
expires in 10 years.

                                      F-15
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

In June 2000,  the Company  granted an option to purchase  500,000 shares of the
Company's  common stock at $1.75 per share to its President and Chief  Executive
Officer. This option has a 10-year maturity.

In June 2000,  the Company  granted an option to purchase  500,000 shares of the
Company's  common  stock  at  $1.75  per  share  to  an  officer  and  director.
Subsequently, this option was cancelled.

In January  2001,  options  were issued to employees  and  directors to purchase
600,000  shares of common  stock at $1.15 per share.  The  options  expire in 10
years.

In May 2001,  the Company  granted an option to purchase  250,000  shares of the
Company's  common stock at $0.88 per share to its Vice President and Director of
Operations. This option has a 5-year maturity.

In February  2002, the Company  granted an option to purchase  500,000 shares of
the  Company's  common stock at $0.40 per share to its Vice  President and Chief
Financial Officer. This option has a 10-year maturity.

In February  2002, the Company  granted an option to purchase  500,000 shares of
the  Company's  common  stock at $0.40  per  share to its  President  and  Chief
Executive Officer. This option has a 10-year maturity.

In  February  2002,  the  Company  reset the  option  strike  price for  300,000
outstanding options owned by its directors to $0.40.

The following table summarizes the information  about stock options  outstanding
at February 28, 2002:

                                Options Outstanding and Exercisable
                        ------------------------------------------------------
                                             Weighted-
                                              Average           Weighted-
                                             Remaining           Average
     Range of              Number           Contractual         Exercise
  Exercise Price        Outstanding         Life (Years)           Price
--------------------------------------------------------------------------------
      $0.40             1,400,000               9.92                $0.40
      $0.88               250,000               9.25                $0.88
      $1.15               300,000               8.83                $1.15
      $1.25               500,000               2.10                $1.25
      $1.63               300,000               8.17                $1.63
      $1.75               500,000               8.33                $1.75
      $2.00               500,000               2.24                $2.00
  $3.00 - $5.00           250,000               1.00                $4.00
--------------------------------------------------------------------------------
  $0.40 - $5.00         4,000,000                                   $1.28
================================================================================

                                      F-16
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

The Company has elected,  in accordance  with the provisions of SFAS No. 123, to
apply the  current  accounting  rules  under  APB  Opinion  No.  25 and  related
interpretations in accounting for stock options and, accordingly,  has presented
the disclosure-only  information as required by SFAS No. 123. If the Company had
elected to  recognize  compensation  cost based on the fair value of the options
granted at the grant date as  prescribed  by SFAS No.  123,  the  Company's  net
income and income per common share for the years ended  February 28 (29),  2000,
2001 and 2002 would approximate the pro forma amounts shown in the table below:

                          February 29,        February 28,       February 28,
 Year ended                   2000               2001                2002
--------------------------------------------------------------------------------

Reported net income (loss)     $(21,000)      $     (21,000)   $     (6,784,000)
================================================================================

Pro forma net income (loss) $(1,261,000)        $(2,896,000)   $     (6,784,000)
================================================================================
Reported net income (loss)
 per common share           $     - 0 -       $       - 0 -    $           (.38)

Pro forma net income (loss)
 per common share           $      (.08)      $        (.17)   $           (.38)
================================================================================
The fair value of options granted (which is amortized to expense over the option
vesting period in determining  the pro forma impact) is estimated on the date of
grant  using  the   Black-Scholes   option-pricing   model  with  the  following
weighted-average assumptions:

--------------------------------------------------------------------------------
                          February 29,        February 28,    February 28,
Year ended                     2000                2001           2002
--------------------------------------------------------------------------------
Expected life of options          5 years          9.07 years       9.07 years
================================================================================
Risk-free interest rate           5.75%            5.85%            4.75%
================================================================================
Expected volatility of RMS
Titanic, Inc.                   113.3%             116.7%          100.0%
================================================================================
Expected dividend yield on
RMS Titanic, Inc.               $ - 0 -          $ - 0 -           $ - 0 -
================================================================================

The  weighted-average  fair  value of  options  granted  during  the years is as
follows:

                            February 29,      February 28,       February 28,
Year ended                      2000              2001               2002
--------------------------------------------------------------------------------
Fair value of each
 option granted           $       1.87   $          1.38        $         .16
Total number of
 options granted               500,000         2,150,000            1,350,000
--------------------------------------------------------------------------------
Total fair value of all
 options granted          $    937,500   $     2,962,000        $     212,600
================================================================================

In  accordance  with SFAS No.  123,  the  weighted-average  fair  value of stock
options granted is based on a theoretical  statistical model using the preceding
Black-Scholes assumptions. In actuality,  because the Company's stock options do
not trade on a secondary exchange,  employees can receive no value or derive any
benefit from holding stock options under these arrangements  without an increase
in the market  price of the  Company.  Such an  increase  in stock  price  would
benefit all stockholders commensurately.


                                      F-17
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

8. LITIGATION:

The United States  Department of State and the National  Oceanic and Atmospheric
Administration  of the United  States  Department  of Commerce  (the "NOAA") are
working together to implement an International  Agreement (the "Agreement") with
entities in the United  Kingdom,  France and Canada that would  diminish  and/or
divest the Company of its  salvor-in-possession  rights to the Titanic which had
been awarded by the Federal  District Court for the Eastern District of Virginia
(the "District Court"). The Company has raised numerous objections to the United
States  Department  of State  regarding  the  actions  of the  United  States to
participate in efforts to reach an agreement governing salvage activities of the
Titanic.  The Agreement,  as drafted,  does not recognize the existing rights of
the Company in the Titanic that have been  reaffirmed in the District  Court and
affirmed  by the Court of Appeals of the Fourth  Circuit and  provides  that the
Agreement enters into force when any two of the party states sign it. The United
States  Department of Justice has represented that the United States believed it
had  complied  with  the RMS  Titanic  Memorial  Act in the  development  of the
international  guidelines to implement the Agreement, but would solicit comments
from the public at large  regarding the draft  international  guidelines and the
NOAA will  consider  the  comments,  and then  publish  the final  international
guidelines.  On April 3,  2000,  the  Company  filed a  motion  for  declaratory
judgment   asking  that  the  District   Court  declare   unconstitutional   and
inappropriate  the  efforts  of the  United  States  to reach  an  international
agreement  with the other  parties  and that it be  precluded  from  seeking  to
implement  such an agreement.  On September 15, 2000, in a decision by the Court
it was ruled that the  Company's  motion was not ripe for  consideration  at the
present  time,  and  that  the  Company  may  renew  its  motion  when and if an
international Agreement is agreed to and signed by the parties to the Agreement,
final guidelines are drafted, and Congress passes implementing legislation.  The
Company  expects,  that  whatever the outcome of this  matter,  there will be no
impact on artifacts it already owns.

The  Company  was a  defendant  in  an  action  brought  by  Suarez  Corporation
Industries ("SCI") in the United States District Court for the Southern District
of New York.  Between  October 1995 and March 1997,  the Company and SCI entered
into various  agreements  providing for the  exploitation of artifacts and other
merchandise  and  arranging  for a cruise and  ancillary  events  including  the
financing and sharing of the division of  contractual  defined  profits all with
respect to the 1996  expedition  of the  Titanic  by the  Company.  SCI  brought
various  claims  that  included  co-salvor  status  and breach of  contract.  On
February 8, 2001, the Company, as defendant, was granted a judgment in its favor
as the  lawsuit was not timely  filed and was  time-barred  from  consideration.
Suarez did not appeal this judgment within the prescribed time.

On September 7, 2000,  Mr. G. Michael  Harris,  a former officer and director of
the Company,  filed suit in the Circuit Court of the Sixth  Judicial  Circuit in
and for Pinellas County,  Florida,  Civil Division. In that suit, Mr. Harris has
alleged that the Company breached an employment  agreement  entered into between
him and the Company, and that he has been damaged by the breach. The Company has
responded  to this  complaint,  denying the  validity or  enforceability  of the
employment  agreement  and setting  forth the  Company's  position that it acted

                                      F-18
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

appropriately  and  within  its  rights.  Moreover,  the  Company  has  filed  a
counter-suit against Mr. Harris and others to recover $84,000 of monies that the
Company  believes  were  misappropriated  and a  complaint  has been made to the
appropriate law enforcement authorities in Pinellas County, Florida. The Company
is continuing the  investigation  of Mr. Harris'  conduct during his tenure with
the Company.  The outcome of these  matters is uncertain at the present time and
the effect  they may have on the  Company's  financial  position  and results of
operations is not currently determinable.

On January 16, 2001, the Securities and Exchange  Commission (the  "Commission")
authorized its staff to conduct a formal order of investigation.  The Commission
has requested various documents  relating to, among other things,  the change in
control of the Company that occurred  during  November 1999;  any  solicitations
that may have been  made  without a written  proxy  statement  or a filing;  the
purchase of the Company's common stock by certain shareholders;  the accuracy of
the Company's financial  statements;  information about the Company's accounting
procedures and controls; documents about its subsidiaries; and other information
about consulting agreements, communications with certain individuals, employment
of its officers,  and other Company matters. The Company is cooperating with the
investigation  and has  produced  documents  requested  by the  Commission.  The
Company is unable to predict the outcome of this matter.

On January  27,  2001,  the  Company  was served  with a lawsuit by  Oceaneering
International, Inc. ("Oceaneering") for monies purportedly owed under a June 27,
2000  contract for maritime  services in  association  with the  Company's  2000
expedition.  The Company filed an answer that included a setoff for damages that
it  sustained  and  continues to sustain as a result of  Oceaneering's  acts and
omissions.  On May 8, 2002,  this case was dismissed  with  prejudice  with each
party paying its own legal expenses and executing a  confidentiality  agreement.
The Company did not pay any additional consideration for this settlement.

On May 3, 2001,  the Company was served with a lawsuit in Superior  Court in the
State of California  which later was removed to the United States District Court
for the Central District of California by Westgate Entertainment  Corporation, a
California  corporation,  and  its  wholly  owned  subsidiary,  Weyland  & Chase
Engineering,  NV, a Netherlands Antilles corporation.  The complaint claims that
on January 18, 2000, the plaintiffs  entered into oral five year,  "pay or play"
contracts of $200,000 per year for Westgate  Entertainment and $100,000 per year
for Weyland & Chase. Westgate Entertainment further claims the Company agreed to
pay or provide  other  additional  considerations.  The Central  District  Court
entered an order denying the Company's motion for summary judgment.  Thereafter,
in March of 2002,  the Central  District  Court  denied the  Company's  right to
appeal  its  interlocutory  order  denying  the  Company's  motion  for  summary
judgment.  The trial is scheduled in the District  Court for the summer of 2002.
The eventual outcome of this matter is uncertain at the present time.

On April 12, 2002,  the United  States  Court of Appeals for the Fourth  Circuit
(the "Fourth  Circuit")  affirmed two orders of the United States District Court
for the Eastern District of Virginia,  Norfolk Division. R.M.S. Titanic, Inc. v.
The  Wrecked and  Abandoned  Vessel . . ., 2002 U.S.  App.  LEXIS 6799 (4th Cir.
2002).  Dated September 26, 2001 and October 19, 2001,  these orders  restricted

                                      F-19
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

the sale of artifacts  recovered by the Company from the RMS Titanic wreck site.
In rendering its opinion, the Fourth Circuit reviewed and declared ambiguous the
June 7, 1994 order of the  District  Court  that had  awarded  ownership  to the
Company of all items then  salvaged from the wreck of the Titanic as well as all
items  to be  salvaged  in the  future  by the  Company  so long as the  Company
remained  salvor-in-possession  of the  Titanic.  Having  found the June 7, 1994
order  ambiguous,  the Fourth  Circuit  reinterpreted  the order to convey  only
possession,  not title,  pending  determination of a salvage award. This opinion
conflicts with previous  rulings that were rendered by both the Fourth  Circuit,
R.M.S.  Titanic,  Inc.  v.  Haver,  et al, 171 F.3d 943 (4th Cir.  1999) and the
District  Court,  all of which the Company had relied upon in the conduct of its
business.  Furthermore, based on a June 7, 1994 Order of the District Court, the
Company  believed  it was the  exclusive  owner of the  artifacts.  The  Company
intends to petition the United  States  Supreme  Court to hear its appeal of the
April 12, 2002 decision of the Fourth Circuit.

On April 25, 2002, the Company was served with notice of litigation initiated by
Lawrence D'Addario,  et al v. Arnie Geller, G. Michael Harris, Joe Marsh, Gerald
Couture,  Nick Cretan, Doug Banker and the Company in the United States District
Court for the Eastern District of Virginia, Norfolk Division Case No. 2:02cv250.
The suit alleges  fraud,  self-dealing,  mismanagement,  diversion  and waste of
corporate  assets by the  individuals  in their  capacity  as  directors  and/or
officers  of the Company and for Joe Marsh,  as a principal  shareholder  of the
Company.  The Company  intends to vigorously  defend itself and its officers and
directors in this matter.  No  determination  can be made at this time as to the
likely outcome of this matter or what the consequences could be for the Company.

The Company is involved in various claims and other legal actions arising in the
ordinary  course of  business.  Management  is of the opinion  that the ultimate
outcome  of these  matters  would  not have a  material  adverse  impact  on the
financial position of the Company or the results of its operations.

9. COMMITMENTS AND CONTINGENCIES:

Compensation  amounting  to $120,000 was charged to  operations  during the year
ended February 28, 1999,  pursuant to a certain  employment-related  arrangement
with an individual who was the former President and former Chairman of the Board
of Directors  of the Company and  $430,000 for the year ended  February 29, 2000
for  that  individual  and  another  individual  who was a  former  officer  and
director. Additionally, accounts payable and accrued liabilities include amounts
payable to these  individuals in the aggregate amount of $-0- and  approximately
$1,196,000  at  February  28,  2001 and  February  29,  2000,  respectively,  in
connection with these arrangements.

During the year ended February 28, 2002, the Company entered into agreements for
the services of two individuals for an annual aggregate amount of $600,750. Each
individual,  at his option,  may elect to receive his  compensation in shares of
the Company's common stock. For this purpose, the common stock will be valued at
50% of its closing bid price as of the date of the election.

On February 2, 2002, the Company  executed a revised  employment  agreement with
its President and Chief  Executive  Officer.  The employment  agreement is for a
five-year term and provides for annual base salaries of $330,750 per year,  with
annual 5% increases.

                                      F-20
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

On February 2, 2002, the Company  executed a revised  employment  agreement with
its Vice President and Chief Financial Officer.  The employment agreement is for
a four-year  term and  provides  for annual base  salaries of $270,000 per year,
with annual 5% increases.

On May 6, 2001, the Company entered into a three-year  employment agreement with
an individual  as Vice  President  and Director of  Operations,  providing for a
salary of $130,000,  $143,000, and $157,850  respectively,  for each year of the
three-year  term.  In addition,  this  individual  received  options to purchase
250,000 share of common stock at an exercise price of $.88 per share. Subsequent
to year-end, on March 22, 2002, this individual resigned his position and became
a consultant to the Company.

The Company has non-cancelable operating leases for office space. The leases are
subject to  escalation  for the  Company's  pro rata share of  increases in real
estate  taxes and  operating  costs.  During the fiscal year ended  February 28,
2002, the Company entered into another non-cancelable operating lease for office
space and vacated one of its  previously  used offices.  Subsequent to year-end,
the Company  entered  into an agreement to lease  certain  office and  warehouse
space through December 31, 2004.

Future  minimum lease  payments for leases in effect as of February 28, 2002 and
entered into subsequent to that date are as follows:

 Year ending February 28(29),

          2003                                $  195,000
          2004                                   150,000
          2005                                   144,000
          2006                                     7,000
          2007                                       -0-
----------------------------------------------------------------
                                                $496,000
================================================================

Rent expense  charged to operations  amounted to $84,000,  $147,000 and $167,000
for the years ended, February 29, 2000, February 28, 2001, and February 28, 2002
respectively.

On January 27, 2001, the Company  entered into an agreement  with  International
Institute of Oceanographic  Exploration,  LLC ("IIOE"), a British Virgin Islands
company,  to  search,  identify,  and  salvage  shipwrecks  located  in  certain
territorial  waters in the Pacific Ocean.  The President of the Company holds an
equity  interest  in IIOE.  IIOE has an  agreement  with a foreign  governmental
agency to conduct  marine  survey  operations  that  includes  searching for and
recovering shipwrecks and their contents. The Company agreed to finance a marine
survey operation with its personnel up to a maximum of $250,000.  The Company is
entitled  to recover its cash outlay  prior to any  distribution  of proceeds by
IIOE from these  ventures,  and then is entitled to receive 22% of the  contents
recovered from the shipwrecks salvaged. As of February 28, 2002, the Company had
expended  approximately  $157,000 toward this agreement.  Due to the uncertainty
regarding  the  recoverability  of the  amounts  expended on this  project,  the
Company  has  charged  "expedition  costs"  in  the  accompanying  statement  of
operations  for the full amount  expended.  The agreement has a term of eighteen
months.

During the year ended  February 28, 2001, the Company  borrowed  $250,000 from a
nonaffiliated  party.  This obligation had an interest rate of 12% per annum and
was secured with the Company's pending income tax refunds.  The lender will also
receive $25,000 worth of restricted common stock as consideration for this loan.
On September 30, 2000, this loan was repaid with interest.

                                      F-21
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

10. OTHER RELATED PARTY TRANSACTIONS:

Included in prepaid  expenses and other current assets at February 29, 2000 were
loans to the Company's former president in the aggregate amount of $73,000. Such
amount was discharged as a result of the settlement  agreement discussed in Note
2.

Included in accounts  payable and accrued  liabilities  at February 28, 2001 and
February 28, 2002 is $25,000 due to certain partners of TVLP.

11. EXHIBITIONS:

During the three-year period ended February 28, 2002 and subsequent to year-end,
the  Company  has  presented,  through  licensing  arrangements  exhibitions  of
Titanic's Artifacts and other Titanic memorabilia.

In  March  1999,  the  Company   entered  into  an  agreement  with   Magicworks
Entertainment,  Inc., a direct  subsidiary  of PACE  Entertainment,  Inc. and an
indirect subsidiary of SFX Entertainment,  Inc.  (collectively  "SFX"), in which
the Company granted SFX an exclusive  worldwide license to exhibit the Company's
Titanic  artifacts for a minimum payment of $8,500,000,  annually.  This license
agreement had an initial term of one year,  commencing  September 15, 1999, with
SFX  having the  option to extend  the term for up to four  additional  one-year
periods.  All obligations of Magicworks  Entertainment,  Inc. under this license
agreement were guaranteed by SFX Entertainment,  Inc. The original agreement was
amended on September 18, 2000 by the Company and SFX Family Entertainment, Inc.,
successor to Magicworks  Entertainment,  Inc. Another amendment was agreed to on
May 7, 2001 which  extended  the  agreement  to  December  31,  2002.  The first
amendment  required a minimum  annual  payment of  $2,000,000  that was received
during  fiscal  year ended  February  28,  2001.  Upon  execution  of the second
amendment,  an  additional  payment of $750,000  was  received.  Pursuant to the
license  agreement,  as amended,  the Company will receive twenty percent of the
ticket,  merchandise,  and sponsorship and ancillary  revenues over $10,000,000.
Furthermore,  two additional  extensions have been granted which now extends the
agreement to December 31, 2003.  Each  amendment  required a guaranteed  minimum
annual payment of $2,000,000.  For the amendment period ended November 31, 2001,
the Company  received  payments of $616,000 over the  guaranteed  minimum annual
payments  pursuant to the revenue  sharing  provisions  of the  agreement.  Upon
execution of the fourth amendment in May 2002, the Company received a payment of
$750,000.  The most  recent  amendment  was  with  Clear  Channel  Entertainment
Exhibits, Inc. ("CCEE"), formerly known as SFX Family Entertainment, Inc.


12. SUBSEQUENT EVENTS:

On April 2, 2002, the Company entered into a Purchase  Agreement for the sale of
the common stock,  representing 100% ownership,  of its Danepath Ltd. subsidiary
to Argosy International Ltd. The purchase price, as amended by Agreement on June
1, 2002,  was $1.5  million.  Danepath's  principal  asset is the  research  and
recovery  vessel "SV Explorer".  Under the terms of the Purchase  Agreements the
Company  received  $100,000  upon  execution  and an obligation of $1.4 million,
bearing  interest  at 8% per annum  that will be paid  within six  months.  This
obligation  is  collateralized  with both a first  mortgage  on the  vessel  "SV
Explorer",  the principal  asset owned by Danepath,  and all the common stock of
the Company owned by Argosy International,  Ltd. On March 6, 2002, in a separate
agreement, the Company sold to Argosy International,  for minimal consideration,
its 100%  ownership  interest  in White Star  Marine  Recovery,  Ltd.  That sale
terminated its obligation under an agreement with Argosy  International  for the
consulting  services  of Graham  Jessop.  At the time of this  sale,  White Star
Marine Recovery had no assets other than this consulting contract.

                                      F-22
<PAGE>
                                                RMS TITANIC, INC. AND SUBSIDIARY

                                                   NOTES TO FINANCIAL STATEMENTS

(Amounts  and  disclosures  at February 28, 2001 and the two years in the period
ended February 28, 2001 are unaudited)

--------------------------------------------------------------------------------

On April 12, 2002,  the United  States  Court of Appeals for the Fourth  Circuit
(the "Fourth  Circuit")  affirmed two orders of the United States District Court
for the Eastern District of Virginia,  Norfolk Division. R.M.S. Titanic, Inc. v.
The Wrecked and Abandoned  Vessel,  2002 U.S. App.  LEXIS 6799 (4th Cir.  2002).
Dated September 26, 2001 and October 19, 2001, these orders  restricted the sale
of  artifacts  recovered  by the  Company  from the RMS Titanic  wreck site.  In
rendering its opinion,  the Fourth Circuit  reviewed and declared  ambiguous the
June 7, 1994 order of the  District  Court  that had  awarded  ownership  to the
Company of all items then  salvaged from the wreck of the Titanic as well as all
items  to be  salvaged  in the  future  by the  Company  so long as the  Company
remained  salvor-in-possession  of the  Titanic.  Having  found the June 7, 1994
order  ambiguous,  the Fourth  Circuit  reinterpreted  the order to convey  only
possession,  not title,  pending  determination of a salvage award. This opinion
conflicts with previous  rulings that were rendered by both the Fourth  Circuit,
R.M.S.  Titanic,  Inc.  v.  Haver,  et al, 171 F.3d 943 (4th Cir.  1999) and the
District  Court all of which the  Company  had relied upon in the conduct of its
business.  Furthermore, based on a June 7, 1994 Order of the District Court, the
Company  believed  it was the  exclusive  owner of the  artifacts.  The  Company
intends to petition the United  States  Supreme  Court to hear its appeal of the
April 12, 2002 decision of the Fourth Circuit.

On April 25, 2002, the Company was served with notice of litigation initiated by
Lawrence D'Addario, et al vs. Arnie Geller, G. Michael Harris, Joe Marsh, Gerald
Couture,  Nick Cretan, Doug Banker and the Company in the United States District
Court for the Eastern District of Virginia, Norfolk Division Case No. 2:02cv250.
The suit alleges  fraud,  self-dealing,  mismanagement,  diversion  and waste of
corporate  assets by the  individuals  in their  capacity  as  directors  and/or
officers  of the Company and for Joe Marsh,  as a principal  shareholder  of the
Company.  The Company  intends to vigorously  defend itself and its officers and
directors in this matter.  No  determination  can be made at this time as to the
likely outcome of this matter or what the consequences could be for the Company.

                                      F-23