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

                                    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 29, 2004

     [ ]  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 2250, 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 June 1, 2004, was: $19,911,886

     The number of shares outstanding of each of the registrant's classes of
common stock, as of June 1, 2004 were:
                                                     NUMBER OF SHARES
            TITLE OF EACH CLASS                        OUTSTANDING

            Common Stock, par value $.0001
            per share                                   19,275,047

<PAGE>
          SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE
                    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 Litigation 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 and risks 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. Included in these risks is the Company's expectation
that it does not have sufficient working capital for the next 12 months of
operations and its resultant need for financing, its history of losses, its
fluctuations in operating results, uncertainty regarding the results of certain
legal proceedings, competition and other risks set forth herein and in other
reports the Company has filed. Such statements consist of any statement other
than a recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may", "expect", "will", "anticipate",
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. 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

INTRODUCTION

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 the sinking more than ninety years ago. The December 1997
release of the highest grossing motion picture of all time, "Titanic" as well as
a 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 with 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 warrants. 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 revenue of the Company up to the present time have been
guaranteed payments and applicable overage payments for ticket sales of
admission to exhibitions, merchandising revenues, and sponsorship revenues.
Additional revenues include other merchandise and licensing income.


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.

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


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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 sale of still photographs.

In August 1987, the Company contracted with the Institute of France for the
Research and Exploration 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 granted
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
approximately 6,000 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.

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


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the discovery of a new debris field. Among the artifacts recovered in this
expedition were the ship's wheel and stand, nine leather bags, 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. On April 2, 2002,
the Company sold its Danepath subsidiary to Argosy International Ltd., an
affiliated party ("Argosy"). In January 2003, in order to avoid a costly
international foreclosure process, the Company entered into a settlement of the
outstanding obligation from Argosy from this Danepath transaction that included
acquiring the vessel, SV EXPLORER, and related marine equipment in its new
wholly owned United Kingdom subsidiary - Seatron Limited.

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 shipwreck will play a role in the Company's future business
plan.


SALVAGE RIGHTS

Pursuant to the judgment entered in the United States District Court for the
Eastern District of Virginia ("District Court") 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 "June 1994 Order"). The District
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 District Court
seeking rescission of the June 1994 Order awarding salvor-in-possession status
to the Company. By an order dated May 10, 1996 (the "May 1996 Order"), the
motion was denied. The Court also modified the 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 an award to the Company of exclusive
rights to photograph and video 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 video footage 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 United


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States Court of Appeals for the Fourth Circuit (the "Fourth Circuit"). 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 has not enjoyed exclusive photographic
and video rights to the TITANIC since that time. 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.

On April 12, 2002, the Fourth Circuit affirmed two orders of the District Court
in which the Company is a party ("R.M.S. Titanic, Inc. v. The Wrecked and
Abandoned Vessel . . ."). These orders, dated September 26, 2001 and October 19,
2001, respectively, restricted the sale of artifacts recovered by the Company
from the TITANIC wreck site. In its opinion, the Fourth Circuit reviewed and
declared ambiguous the June 1994 Order 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 1994 Order ambiguous,
the Fourth Circuit reinterpreted the order to convey only possession, and a
salvor's lien, but not title, pending determination of a salvage award. This
opinion overruled the previous rulings that were rendered by both the Fourth
Circuit in "R.M.S. Titanic, Inc. v. Haver, et al" and the District Court, all of
which rulings the Company relied upon in the conduct of its business.
Furthermore, based on the June 1994 Order, the Company believed it was the
exclusive owner of the artifacts. The Company petitioned the Supreme Court to
hear its appeal of the April 12, 2002 decision of the Fourth Circuit. However,
the Company's Petition for Certiorari was denied on October 7, 2002.

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
become apparent to the District Court that the proceeds of any sale would
clearly be inadequate to pay the Company, as salvor, its full reward, then the
court might, as a matter of discretion, award the Company, as salvor, title to
the property in lieu of the proceeds of sale, thus saving the costs of sale. The
Company, as 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 District Court but instead has a
salvor's lien and possession.

SALVAGE AWARD

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 includes: (1) the labor expended by 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 salvors in rendering the service, and the danger to which such
property was exposed; (4) the risk incurred by salvors in securing the property
from the impending peril; (5) the value of the property saved; and (6) the
degree of danger from which the property was rescued.

Although the method for obtaining a salvage award is established in the federal
court system, any amount awarded is subject to considerable latitude by the
judge presiding over the case. The Company in its salvor-in-possession
proceedings has been subject to the jurisdiction of the District Court in
Norfolk since 1994. During this period, representations have been made regarding
keeping the artifacts recovered from RMS TITANIC wreck site together for the
benefit of the viewing public.

We understand that the District Court will grant an award to the Company based
upon the Blackwall factors, in accordance with the Fourth Circuit's opinion.
Such an award may vary from a monetary award to complete ownership of the
artifacts. It is impossible for management to anticipate what value the District
Court will determine for an award. The District Court and the Company are of a
single mind that the artifact collection should be kept together in the public
interest. Management believes, under these circumstances, it may be a prudent
decision to donate the TITANIC artifact collection to a nationally recognized
entity in order to preserve status quo of the collection and to preserve the
business exhibition opportunity for the Company.

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PRESENT OPERATIONS

EXHIBITIONS

The Company has presented exhibitions in association with third parties
throughout the world and nearly fifteen million people have attended these
exhibits. The Company plans to continue to present exhibitions of TITANIC
artifacts.

Agreement  with  Subsidiary  of  Clear  Channel  Communications   (formerly  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. As SFX did not intend to extend its one
year license with a $8.5 million payment provision, the original agreement was
amended on September 18, 2000 between the Company and SFX Family Entertainment,
Inc., successor to Magicworks Entertainment, Inc. The Company has executed six
amendments, the last three of which have been with Clear Channel Exhibitions,
Inc. The first two amendments required a guaranteed minimum annual payment of
$2,000,000. For these two amendment periods ended November 31, 2001 and January
3, 2003, the Company received payments of $616,000 and $683,242, respectively,
over the guaranteed minimum annual payments pursuant to the revenue sharing
provisions of the agreement. The third amendment extended the license period to
January 4, 2004 with the other terms remaining the same. The fifth amendment
extended the term to April 28, 2004 and provided for a purchase by the Company
of Titanic exhibitry owned by CCE for consideration of $600,000. The Sixth
amendment, dated May 26, 2004, further modified the payment arrangement for the
CCE exhibitry.

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 through May 1999; a tour of several cities in Japan from July 1998
through July 1999; Atlantic City, New Jersey from May 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 to October 2001; Kansas City, Missouri from April to September 2001;
Baltimore, Maryland from April 2001 to February 2002; Nashville, Tennessee from
May to September 2001; St. Louis, Missouri from December 2001 to April 2002; a
South American tour included Buenos Aires, Argentina from April to June 2001 and
Santiago, Chile from August to December 2001; in Phoenix, Arizona from December
2001 to June 2002; Norwalk, Connecticut from January to September 2002,
Cleveland, Ohio from March to September 2002; Houston, Texas from May 2002 to
January 2003; in Chicago, Illinois, a second time, from July 2002 to January
2003; Richmond, Virginia from October 2002 to January 2003; Oklahoma City from
January 2003 to July 2003; Detroit Michigan from February 2003 to September
2003; Los Angeles, California from February 2003 to September 2003; Lafayette,
Louisiana from February to May, 2003; Paris, France from March 2003 to August
2003; London, UK from May 2003 to November 2003; Raleigh, North Carolina from
August 2003 to April 2004; Tampa, Florida from October 2003 to May 2004;
Indianapolis, Indiana from June 2003 to September 2003; Lafayette, Louisiana
from February to May 2004; and Birmingham, Alabama from September 2003 to May
2004.

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Current Exhibitions

The Company is now presenting its own TITANIC exhibitions in Omaha, Nebraska and
Salt Lake City, Utah. Pending openings during the summer of 2004 include
Manchester, England; Philadelphia, Pennsylvania and Shanghai, China. An
exhibition is also being presented in association with the Maryland Science
Center at the Oregon Museum of Science and Industry, Portland, Oregon.

Exhibition Plan

With the Company presenting its own exhibitions, it has necessitated the hiring
of additional personnel to both efficiently and effectively manage the Titanic
exhibition projects. The Company's intends to continue TITANIC exhibits in both
international and domestic venues. The Company's sole control of all aspects of
the TITANIC exhibitions would provide an opportunity for its business to be
expanded to other formidable presentations of similar quality and substance.

MERCHANDISING

The Company has an ongoing arrangement with Events Management, Inc. (the gift
shop operator) and receives monthly payments for certain items that are sold in
the exhibit gift shops, on its 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 at a rate
equal to 30% of gross revenue less certain deductions. 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 profits from sales at exhibits are now being shared by 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 merchandising
revenues. The Company also intends to pursue the direct marketing of merchandise
and it video archives through its web site (http://www.rmsTITANIC.net) and
through third parties.

The marketing and promotion of TITANIC exhibitions is now being handled and paid
for by the Company and other third parties involved with the presentation of
exhibits. Previously, CCE paid for marketing and promotion along with third
parties.

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
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. and 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.

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The Company's ability to conduct expeditions to the TITANIC has been 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 manned submersible with the
capability of reaching the depth of the TITANIC is presently commercially
available however remote operated vehicles are more prevalent and could be
acceptable to the Company for such chartering.


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, no definitive schedule has been set
for this endeavor.

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
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.

Essentially all TITANIC artifacts when not being exhibited or not being
conserved at other conservation facilities are housed in the Company's
conservation and warehouse facility located in Atlanta, Georgia.


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 TITANIC shipwreck believes
that all of these purposes are legitimate and beneficial to society with the
exception of adventure tourism. 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 believes it 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.

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The Company intends to work with a United States government agency to present
its 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.


DONATION INITIATIVE

On September 14, 2002, the Board of Directors of the Company unanimously adopted
a corporate resolution providing that the Company has completed the salvage
service that it intends to perform on the wreck of the TITANIC; the Company
shall voluntarily surrender its status as salvor-in-possession of the wreck of
the TITANIC; and the Company shall proceed to move the District Court for the
entry of a full and final salvage award pursuant to the ruling of the Fourth
Circuit.

Among the considerations that were reviewed prior to the decision of the Board
of Directors of the Company were the opinion of the Fourth Circuit on April 12,
2002 that the Company does not own any of the artifacts that it has recovered
from the wreck of the TITANIC, but, instead, holds only an inchoate lien in said
artifacts; and that, unless the Company intends to seek periodic awards, it
cannot seek to enforce its lien against the artifacts until it has completed all
of the salvage service that it intends to perform and its salvage award has been
determined by the District Court; and that the Company can only obtain title to
the artifacts it has recovered if, in the discretion of the District Court, the
salvage award due the Company cannot be satisfied by sale of the artifacts; and
the District Court has expressly forbidden the Company from cutting into the
wreck or detaching any part of the wreck since July 28, 2000; and further there
is an international convention pending that will designate the TITANIC an
international maritime memorial and restrict all future salvage of the wreck. At
the present time, the Company has a representative sample of artifacts from the
TITANIC debris field and furthermore, has more artifacts than are required for
exhibitions. In addition, the maintenance of the Company's salvor-in-possession
status requires periodic expeditions to the TITANIC wreck site that would
require substantial further investment on behalf of the Company and
uncertainties surround what the District Court may decide is an appropriate
financial return for the Company for any future expenditures.

Subsequently, on April 5, 2003 the Board of Directors rescinded the unilateral
relinquishment of the Company's salvor-in-possession status and instead endorsed
an initiative to explore donating both the salvor in possession status and the
entire Titanic artifact collection which would of course be subject to an in
specie award and approval by the District Court and the Company's shareholders.
This new plan involves the consideration that a tax credit or benefit could
accrue to the Company from such donations, or in the alternative, to a third
party. The Company is actively pursuing this plan.

COMPETITION

The entertainment and exhibition industries are intensely competitive. There can
be no assurances given the Company's limited capital resources that it 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
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 in its exhibits and as the only entity
that has ownership rights to objects recovered from the wreck site.

                                       9
<PAGE>

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 1, 2004, the Company had fourteen employees. The Company is not a
party to any collective bargaining agreement and believe employee relations are
good.

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. It is undetermined, at the present time, what environmental laws may
need to be complied with when the Company undertakes an expedition to the RMS
CARPATHIA. 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.  PROPERTIES

The Company has its principal executive offices located at Tower Place, 3340
Peachtree Road N.E., Suite 2250, Atlanta, Georgia. This space of approximately
4,706 square feet is used for management, administration, and marketing for its
operations. The lease commenced in April 2000 and was amended on August 8, 2003,
whereby the term was extended until February 29, 2008, and it provides for base
lease payments of $110,591 annually with a 2.5% annual adjustment 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 $6,720 through December 31, 2004.


ITEM 3.  LEGAL PROCEEDINGS

The United States Department of State and the National Oceanic and Atmospheric
Administration of the United States Department of Commerce ("NOAA") are working
together to implement an International Treaty (the "Agreement") with entities in
Britain France and Canada that could diminish or otherwise impact the Company's
salvor-in-possession rights to the TITANIC which had been awarded by 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 re-affirmed in the District Court and affirmed by
the Fourth Circuit, and provides that the Agreement becomes effective when any
two of the party states sign it. During November 2003, the Britain signed the
Treaty. 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 the Agreement. On September 15, 2000, the Court ruled that
the Company's motion was not ripe for consideration at the present time, and

                                       10
<PAGE>

that the Company may renew its motion when and if the Agreement is agreed to and
signed by the parties, 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 that have already been recovered,
but the Company does not know what effect, if any, this Agreement will have on
future Company operations.

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
has complied with the subpoena.

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 alleged
that the Company breached an employment agreement entered into between him and
the Company, that he was damaged by the breach, that he was wrongfully
terminated and had been defamed. The Company denied the validity and
enforceability of the employment agreement. Moreover, the Company filed a
counter-suit against Mr. Harris and others, to recover monies that the Company
believed were misappropriated. On April 23, 2003, after a jury trial, a verdict
was rendered that affirmed the unenforceability of any of Mr. Harris' employment
agreements and further found that $70,000 of Company monies were misappropriated
by Mr. Harris and others. During the quarter ended August 31, 2003, the Company
settled this litigation by agreeing to certain payments and an exchange of
releases. Upon the advice of counsel, this settlement is less than the expected
legal costs and expenses of continuing litigation.

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.

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 claimed the Company agreed
to pay or provide other additional consideration. The Central District Court
entered an order denying the Company's motion for summary judgment. In July
2002, the matter was settled between the parties whereby the Company agreed to
pay $388,000 over a thirty-month period, releases were exchanged and certain
restrictive covenants were agreed upon, among other considerations.

On April 12, 2002, the Fourth Circuit affirmed two orders of the District Court
in which the Company is a party ("R.M.S. Titanic, Inc. v. The Wrecked and
Abandoned Vessel . ."). These orders, dated September 26, 2001 and October 19,
2001, respectively, restricted the sale of artifacts recovered by the Company
from the TITANIC wreck site. In its opinion, the Fourth Circuit reviewed and
declared ambiguous the June 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 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 in "R.M.S. Titanic, Inc. v. Haver, et al" and the District Court, all of


                                       11
<PAGE>

which rulings the Company relied upon in the conduct of its business.
Furthermore, based on the June 1994 Order, the Company believed it was the
exclusive owner of the artifacts. The Company petitioned the United States
Supreme Court to hear its appeal of the April 12, 2002 decision of the Fourth
Circuit. However, the Company's Petition for Certiorari was denied on October 7,
2002.

On May 17, 2004, the Company appeared before the District Court for a pre-trial
hearing to address issues in preparation for the Salvage Award trial that is
scheduled to begin October 18, 2004. The court intends to issue a pretrial order
relating to the salvage award trial no later than mid-August 2004. At that
hearing, the Company informed the court that the United States government has
declined the Company's proposal to transfer the Company's salvor-in-possession
status to the government. The Company confirmed that it intends to retain its
salvor-in-possession status in order to preserve the wreck site of the Titanic,
and intends to conduct another expedition to the wreck site either this year or
next year. The Court indicated that a ruling on the pending motion of
abandonment is forthcoming no later than the middle of August 2004.

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 alleged 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. On April 23, 2004, the United States District Judge for the Eastern
District of Virginia, Rebecca B. Smith, dismissed the lawsuit filed by Lawrence
D'Addario against the Company and Arnie Geller and Gerald Couture, two officers
and directors of the Company. Specifically, the Court approved and adopted in
full the findings and recommendations set forth in the Magistrate Judge Tommy
Miller's reports and recommendations of March 5, 2004 whereby summary judgment
as to Counts I, II and III of the D'Addario Complaint was granted in favor of
Geller and Couture. Summary judgment was also granted in favor of defendants Mr.
Joe Marsh, a principal shareholder and G. Michael Harris, a former officer and
director. By Order dated December 19, 2003, the Court had previously dismissed
Count IV of the Complaint as moot. On May 24, 2004, the Company received notice
that the plaintiff had appealed the court orders to the Fourth Circuit.

On March 22, 2004, the Company was served with a lawsuit filed by David Shuttle
and Barbara Shuttle vs. Arnie Geller, G. Michael Harris, Gerald Couture and the
Company in the United States District Court for the Middle District of Florida.
The suit seeks to recover damages to the plaintiffs and to all minority
shareholders allegedly caused by defendants' alleged breaches of their fiduciary
duties in connection with an alleged hostile takeover of the Company in November
1999. The Company provides indemnification for its present officers and
directors. 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 but the Company
will vigorously defend itself, its officers and directors in this matter as it
successfully did in the D'Addario litigation, and expects to seek recovery of
all costs and expenses in defending this litigation from the plaintiffs once
this matter is adjudicated.

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


The Annual Meeting of the Shareholders of the Company was held on December 12,
2003. Messrs. Arnie Geller, Gerald Couture, Doug Banker and Nick Cretan were
elected directors of the Company until their successors are duly elected and
qualified. The results of the election were as follows:

                                       12
<PAGE>

                                                  Shares           Shares
                                                   Voted          Withheld
                                                    For         or Abstained
                                Arnie
                                Geller          11,845,376              -0-
                                Gerald
                                Couture         11,845,376              -0-
                                Doug Banker     11,845,376              -0-
                                Nick Cretan     11,845,376              -0-


Also at that Annual Meeting, Kempisty and Company, Certified Public Accountants,
P.C. was ratified as the Company's independent certified public accountants for
fiscal year 2004 with 11,611,711 shares of common stock voted in favor and
233,805 shares of common stock abstained.


PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASE OF EQUITY SECURITIES.

       MARKET INFORMATION. The Company's common stock is traded on the
       over-the-counter market. 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.

       FISCAL PERIOD
                                                     COMMON STOCK

                                             HIGH                       LOW
                                             BID                        BID

2004
-----
1st Quarter ending 5/31/03             $   0.49                      $  0.04
2nd Quarter ending 8/31/03                 0.45                         0.20
3rd Quarter ending 11/30/03                0.30                         0.21
4th Quarter ending 2/29/04                 1.90                         0.26


2003
-------
1st Quarter ending 5/31/02                 0.35                         0.15
2nd Quarter ending 8/31/02                 0.29                         0.19
3rd Quarter ending 11/30/02                0.29                         0.09
4th Quarter ending 2/28/03                 0.14                         0.05


                                       13
<PAGE>

2002
--------
1st Quarter ending 5/31/01                 1.20                         0.42
2nd Quarter ending 8/31/01                 0.85                         0.65
3rd Quarter ending 11/30/01                0.80                         0.39
4th Quarter ending 2/28/02                 0.55                         0.34


     Common Stock

     On June 10, 2004 there were 2,267 stockholders of record of common stock.

     The Company has not paid or declared any dividends upon its common stock
     since its inception, and intends to reinvest earnings, if any, in the
     Company for future growth. Accordingly, the Company does not contemplate or
     anticipate paying any dividends upon its common stock in the future.

     The following is a summary of securities authorized for issuance under
     equity compensation plans as of February 29, 2004:

<TABLE>
<CAPTION>
    ----------------------------------------- --------------- ----------------- ---------------------
<S>                                          <C>              <C>               <C>
                                                                                     Number of
                                                                                     securities
                                                Number of                       remaining available
                                               shares to be                     for future issuance
                                               issued upon        Weighted          under equity
                                               exercise of       average of      compensation plans
                                               outstanding     exercise price        (excluding
                                                 options,      of outstanding        securities
                                               warrants and       options,      reflected in column
                                                  rights        warrants and            (a)
                                                   (a)             rights               (c)
                                                                    (b)
    ----------------------------------------- --------------- ----------------- ---------------------
      Equity compensation plans                     --               --                  --
     approved by security holders
    ----------------------------------------- --------------- ----------------- ---------------------
      Equity compensation plans not
     approved by security holders             5,450,000             1.03              550,000
    ----------------------------------------- --------------- ----------------- ---------------------
                                       Total  5,450,000             1.03              550,000
    ----------------------------------------- --------------- ----------------- ---------------------

</TABLE>


ITEM 6.  SELECTED FINANCIAL DATA

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 that have been audited
by independent certified public accountants. The financial statements as of
February 29, 2004, February 28, 2003, and February 28, 2002 and for each of the
three years in the period ended February 29, 2004 is included elsewhere in this
Form 10-K.

                                       14
<PAGE>

<TABLE>
<CAPTION>

YEAR ENDED FEBRUARY 28(29)     2000          2001         2002             2003               2004
-----------------------------------------------------------------------------------------------------
Statement of Operations Data:
( In thousands, except per share
   and weighted average shares)

<S>                          <C>         <C>           <C>                 <C>            <C>
   Revenues:
     Continuing operations    $6,433        5,699           2,768                2,861          2,864
     Discontinued operations      --           14             504                   --             --

  Net income (loss)
      Continuing operations   $  (21)          36          (7,260)                (827)        (1,088)
      Discontinued operations     --          (88)           (168)                  --             --
      Gain on sale                                            644

Income (loss) per share:
 Continuing operations        $   --           --            (.38)                (.04)          (.06)
 Discontinued operations          --           --              --                   --             --

   Weighted average number of
   common shares
   outstanding            16,187,128   16,732,991      18,058,573           18,615,294     18,960,047
</TABLE>

<TABLE>

FEBRUARY 28(29)                      2000           2001         2002           2003           2004
-------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>           <C>          <C>          <C>
Balance Sheet Data:
  (In thousands)
   Total Assets                     $ 15,372       15,002        8,839         8,399         7,253
   Long Term Obligations                  --           --           --            --            --
  Total Liabilities                 $  3,569        2,251        1,497         1,849         1,249
   Shareholders' Equity             $  1,803       12,751        7,342         6,550         6,004

</TABLE>

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


              Period ended       5/31/03    8/31/03     11/30/03    2/29/04
-------------------------------------------------------------------------------
Revenues:                       $   836     $    741    $  735        $  552

Expenses:                         1,113          822       806         1,220

Net income (loss):                 (273)         (78)      (69)         (668)

Net income (loss) per share:       (.01)          --        --          (.05)


                                       15
<PAGE>


             Period ended        5/31/02    8/31/02     11/30/02    2/28/03
-------------------------------------------------------------------------------
     Revenues:                 $   565     $    595    $  525        $1,176

     Expenses:                     852        1,237     1,075           822

     Net income (loss):           (242)        (611)     (549)          575

     Net income (loss) per share: (.01)        (.03)     (.03)          .03


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 29, 2004 AS COMPARED TO YEAR ENDED FEBRUARY 28, 2003

During its fiscal year ended February 29, 2004 (the "2004 fiscal year"), the
Company's revenues increased to $2,864,000 as compared to $2,861,000 in the
fiscal year ended February 28, 2003 (the "2003 fiscal year"). This increase of
$3,000 in the 2004 fiscal year primarily reflects higher exhibition income to
the extent not offset by a sale of coal revenue decrease in the 2003 fiscal
year.

Exhibition revenue and related sales were $2,677,000 in the 2004 fiscal year as
compared to $2,646,000 in the 2003 fiscal year for an increase of $31,000, or
1%. This increase in these revenues was principally attributable to higher
catalog sales during the 2004 fiscal year.

The Company's merchandise and other revenues, that included the sale of
merchandise, books and royalty payments, decreased slightly to $119,000 from
$121,000 in the prior fiscal year. This decrease of $2,000, or about 2%, is
primarily attributed to the lower contribution of poster income at each
exhibition venue during the 2004 fiscal year. The sale of coal recovered from
the TITANIC was $68,000 in the current fiscal year compared to $94,000 in the
prior year and this decrease is attributed to lower demand at the exhibitions.

Cost of goods sold were $131,000 for the 2004 fiscal year as compared to
$175,000 in the 2003 fiscal year. This decrease of $44,000 is primarily
attributed to lower total cost of goods on the lower merchandise revenues
experienced for these products sold during the 2004 fiscal year.

General and administrative expenses were $3,402,000 for the 2004 fiscal year as
compared to $2,809,000 in the 2003 fiscal year. This increase of $593,000, or
21%, is primarily attributed to charges of $434,000 incurred in expensing of
options and warrants granted to employees, directors and consultants during the
2004 fiscal year. The Company has now elected to fully charge its operations for
employee stock options issued in the year granted.

                                       16
<PAGE>

Depreciation and amortization expense for the 2004 fiscal year was $253,000 as
compared to $293,000 in the 2003 fiscal year. This decrease of $40,000, or 14%,
is primarily lower charges for depreciation as the fixed asset lives of
depreciable assets are realized.

In the 2003 fiscal year, the Company incurred a write-down of a note receivable
in the amount of $296,000. There was not a comparable charge for the 2004 fiscal
year. During the 2004 fiscal year, the Company incurred a charge of $175,000 for
the settlement of litigation that compared to a charge in the prior fiscal year
of $413,000 for litigation settlement. These litigation settlements were
unrelated.

There was a loss from continuing operations of $1,097,000 for the 2004 fiscal
year as compared to a loss from operations of $1,125,000 in the 2003 fiscal
year. This decrease in income from operations is primarily attributed to higher
general and administrative expense in the 2004 fiscal year that was not offset
by the slightly higher revenues.

During the 2004 fiscal year, the Company earned interest income of $9,000 as
compared to $298,000 in the prior year. The Company maintained higher cash
balances during the 2003 fiscal year and also benefited from interest earned on
tax refunds received during that fiscal year.

Income (loss) after provision for income taxes was ($1,088,000) for the 2004
fiscal year as compared to ($827,000) in the 2003 fiscal year. Basic and diluted
earnings per common share were $(0.06) and $(0.04) for the 2004 and 2003 fiscal
years, respectively. The weighted average common shares outstanding were
18,960,047 and 18,615,294 for the 2004 and 2003 fiscal years, respectively.


YEAR ENDED FEBRUARY 28, 2003 AS COMPARED TO YEAR ENDED FEBRUARY 28, 2002

During its fiscal year ended February 28, 2003, the Company's revenues increased
to $2,861,000 from $2,768,000 in the fiscal year ended February 28, 2002. This
increase of approximately 3% as compared to the prior fiscal year is primarily a
result of an increase of $292,000 in the Company's exhibition and related
merchandise sales, smaller increases in merchandise and coal sales during its
2003 fiscal year as compared to 2002 fiscal year that more than offset a decline
in licensing fees.

The Company's revenue from the sale of coal increased from $62,000 to $94,000 or
approximately 52% during the 2003 fiscal year as compared to the 2002 fiscal
year as the Company has incorporated coal into jewelry items that have been well
received by patrons at the TITANIC exhibits.

The Company's cost of coal sold, which now includes other related costs for the
jewelry items increased approximately 483% from $6,000 to $35,000 during the
2003 fiscal year as compared to the 2002 fiscal year as a result of an increase
in the cost of components.

General and administrative expenses of the Company decreased $582,000, or
approximately 17%, from $3,391,000 in 2002 fiscal year to $2,809,000 in the 2003
fiscal year. Legal expenses continue to be incurred at a high level and amounted
to $833,000 during the 2003 fiscal year as compared to $810,000 during the prior
year. Consulting expenses were reduced during the 2003 fiscal year and amounted
to $194,000 as compared to $420,000 in the prior year. There was a reduction of
$225,000 in compensation paid to personnel during the 2003 fiscal year over the
prior fiscal year. There were also other reduced administrative expenses during
the current year.

The Company's depreciation and amortization expenses decreased to $293,000 from
$374,000, or 22%, during the 2003 fiscal year as compared to the 2002 fiscal
year. This decrease is primarily attributed to the reduction in amortization of
certain intangibles related to prospective salvage opportunities for twelve
shipwrecks that the Company acquired in early 2000 for $900,000 and which were
exchanged in May 2001 for the ownership rights to the "RMS CARPATHIA".

                                       17
<PAGE>

During the 2003 fiscal year, the Company incurred a write down of a note
receivable relating to the Danepath transaction in the net amount of $296,000.
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., an affiliated party who owned 1,704,545 shares of
the Company. The purchase price, as amended by Agreement on June 1, 2002, was
for $1.5 million. Danepath's principal asset was the research and recovery
vessel "SV EXPLORER". Under the terms of the Purchase Agreement, the Company
received $100,000 upon execution and an obligation of $1.4 million, bearing
interest at 8% per annum that was to be paid within six months. This obligation
was collateralized with 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. The note receivable was not paid at its maturity
on October 2, 2002. To avoid a costly international foreclosure process, the
Company entered into a Settlement Agreement whereby the Company received a
cancellation fee from Argosy of $250,000 in the form of a note with a one-year
maturity, cancellation of a vendor payable of $240,000, and acquisition by deed
in lieu of foreclosure of the marine vessel, "SV EXPLORER" and related marine
equipment for consideration of $750,000 in its new wholly owned United Kingdom
subsidiary - Seatron Limited. The ownership of the vessel was subject to a
mortgage with the Company for all monies advanced to this subsidiary. With this
settlement agreement, the Company released Argosy of the original purchase debt
obligation of $1.4 million.

Also during the 2003 fiscal year, the Company settled two lawsuits for a total
charge of $413,000. One of these lawsuits included a one-time charge of $388,000
that includes payments over a thirty-month period and the other required a
one-time payment of approximately $25,000. There were not similar charges during
the 2002 fiscal year, although the Company incurred an impairment charge for
artifacts recovered, net of taxes, of $6,148,000 because the Fourth Circuit
reviewed and declared ambiguous the June 1994 Order 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 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 no
longer owning these artifacts, an impairment charge was recorded to reflect this
judicial decision. Total expenses for the 2003 fiscal year decreased to
$3,986,000 from $10,036,000, or 60%, primarily as a result of the reduction in
impairment charges.

The Company's loss from operations decreased to $1,125,000 in the 2003 fiscal
year as compared to $7,268,000 in the 2002 fiscal year, a decrease of
approximately 85%. Interest income for the 2003 fiscal year amounted to $298,000
as compared to $8,000 in the prior fiscal year. This increase is attributed to
interest derived from the Company's tax refunds received in the final quarter of
the fiscal year.

The Company's loss from continuing operations before provision for income taxes
was $827,000 in fiscal year 2003 as compared to a loss from continuing
operations of $7,260,000 in the 2002 fiscal year. There was no provision for
income taxes in either fiscal year. Consequently, the net loss from continuing
operations before discontinued operations and an extraordinary gain was $827,000
for the 2003 fiscal year whereas there was a net loss from continuing operations
before discontinued operations and an extraordinary gain of $7,260,000 for the
prior fiscal year.

The loss from operations was $827,000 for the 2003 fiscal year as compared to a
loss of $6,784,000 in the prior fiscal year which included a loss from
operations of discontinued business in the amount of $168,000 and a gain on
disposal of a subsidiary of $644,000.

Basic and diluted earnings (loss) per common share were $(.04) and $(.38),
respectively, for the 2003 and 2002 fiscal years. The weighted average common
shares outstanding were 18,615,294 and 18,058,573 for the 2003 and 2002 fiscal
years, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $1,377,000 for the 2004 fiscal year as
compared to cash provided of $2,526,000 in the 2003 fiscal year. This increase


                                       18
<PAGE>

in cash used in operating activities for this fiscal year is primarily
attributed to the increases in the loss from operations coupled with decreases
in deferred revenues of $735,000 and increases in accounts receivables of
$225,000 and other assets of $715,000.

For the 2004 fiscal year, cash used in investing activities included $21,000 for
the purchase of property and equipment. In the prior year cash used in investing
activities was $727,000, which included the acquisition of a marine vessel.

The Company's net working capital and stockholders' equity were $13,000 and
$6,004,000, respectively, at February 29, 2004 as compared to working capital of
$1,042,000 and stockholders' equity of $6,550,000 at February 28, 2003. The
Company's Current Ratio was 1.0 at February 29, 2004 as compared to 1.6 at
February 28, 2003. The Company's working capital position at year-end has
declined from the prior year, as the Company transitions to operator of its
TITANIC exhibitions rather than a licensor of TITANIC artifacts. Such a
transition necessitates a period where working capital is used that is not
replenished by profits.

Management continues to plan to undertake a recovery operation to the RMS
CARPATHIA to recover objects. As the Company owns this vessel, it is the intent
of management to sell and/or exhibit those items recovered. No definite time
schedule has, as yet, been set by management for this undertaking.

The Company does not have sufficient working capital to meet its needs for the
next twelve months. The exhibition tour agreement with CCE expired on May 29,
2004 with the closing of the Tampa exhibition. Management expects that it will
require additional outside funding to implement its plan to conduct its own
exhibitions that have begun in May 2004. Previously, the Company relied upon
third parties to conduct exhibitions under a licensing arrangement. There can be
no assurances that this outside financing can be made available upon reasonable
terms and as timely as management may require for the proper conduct of these
and other future endeavors. If the required financing is not available, it could
be seriously detrimental to the Company and its business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported therein. The estimates that
required management's most difficult, subjective or complex judgments are
described below.

Impairment of assets held for use

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
requires management to assess the recoverability of the carrying value of
long-lived assets when an event of impairment has occurred. Management must
exercise judgment in assessing whether an event of impairment has occurred. The
Company concluded an event of impairment occurred in the carrying values of its
artifacts in the fourth quarter of the 2002 fiscal year and the Company recorded
a pre-tax charge totaling $8.1 million. In this circumstance, a judicial ruling
prompted the determination that an assessment for impairment was required.
Management must also exercise judgment in the determination of expected future
cash flows against which to compare the carrying value of the assets being
evaluated. In this measurement, the carrying value far exceeded the expected
cash flows. Management then exercised judgment in determining the fair value of
the assets from which the impairment charge was measured.

In the event that facts and circumstances indicate that the carrying value of
long lived assets, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset to the assets carrying amount
to determine if a write down to market value or discounted cash flows is
required.

                                       19
<PAGE>

Probability of litigation outcomes

SFAS No. 5, "Accounting for Contingencies," requires management to make
judgments about future events that are inherently uncertain. In making its
determinations of likely outcomes of litigation matters, management considers
the evaluation of outside counsel knowledgeable about each matter, as well as
known outcomes in case law. See Item 3, "Legal Proceedings" for a detailed
discussion of the key litigation matters the Company faces.


SALVOR-IN-POSSESSION

In order to maintain its salvor-in-possession status as presently required by
the District Court and to prevent third-parties from salvaging the TITANIC wreck
and wreck site, or interfering with the Company's rights 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 is actively pursuing the donation of
its salvor status. Maintaining salvor status is entirely dependent upon a
mandate from the District Court in which the Company is subject to jurisdiction.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not presently exposed to interest rate risk but is exposed to
foreign currency exchange rate risk. The Company does not hold any derivative
financial instruments.


BUSINESS RISKS

Our business is subject to a number of uncertainties, including those discussed
below.

The Company may not be able to raise the required capital to conduct our
operations.

The Company does not have sufficient working capital to meet its needs for the
next twelve months. The exhibition tour agreement with CCE expired on May 29,
2004 with the closing of the Tampa exhibition. Management expects that it will
require additional outside funding to implement its plan to conduct its own
exhibitions that have begun in May 2004. Previously, the Company relied upon
third parties to conduct exhibitions under a licensing arrangement. There can be
no assurances that this outside financing can be made available upon reasonable
terms and as timely as management may require for the proper conduct of these
and other future endeavors. If the required financing is not available, it could
be seriously detrimental to the Company and its business.

The successful implementation of our business strategy depends on our ability to
generate cash flows from exhibition and other factors.

We have changed our business model from that of a licensor of artifacts
recovered from the TITANIC to that of direct exhibitor of these artifacts. The
success of our future operating results depends on our ability to implement our
business strategy by successfully operating these exhibitions, and others we may
develop and produce and by further exploiting our attractions assets. Our
ability to do this depends upon many factors, some of which are beyond our
control. These include:

     o    our  ability  to achieve  positive  cash flow from  operations  of our
          TITANIC exhibitions within the anticipated ramp-up period;
     o    our  ability  to  hire  and  retain  staff  skilled  in the  areas  of
          management and exhibition for our exhibition tours;
     o    our ability to capitalize on the strong brand  recognition of TITANIC;
          and
     o    the continued  popularity  and demand of the public to attend  TITANIC
          exhibitions.

                                       20
<PAGE>

If we are unable to successfully implement the business strategies described
above, our cash flows and eventual profitability will suffer.


Dependence on Key Management Personnel

The Company's future business and operating results depend in significant part
upon the continued contributions of Arnie Geller, the Company's President,
Gerald Couture, its Vice President of Finance and Tom Zaller, its Vice President
of Exhibitions. The Company does not maintain any key person life insurance
policies on Mr. Geller, Mr. Couture or Mr. Zaller. The Company's future business
and operating results also depends in significant part upon its ability to
attract and retain other qualified additional management and support personnel
for its operations.

Costs of Maintaining Salvor-in-possession Status.

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 so as to
maintain its salvor-in-possession status. The Company's ability to undertake
future expeditions may be dependent upon the availability of financing.

Dependence on Consumer Discretionary Spending.

The amount spent by consumers on discretionary items, such as entertainment
activities and the purchase of merchandise, is dependent upon consumers' levels
of discretionary income, which may be adversely affected by general or local
economic conditions. A decrease in consumer spending on such activities could
have a material adverse effect on the Company's revenues from exhibition
activities and merchandising efforts.

International Exchange Rate Fluctuations.

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 issuance of additional common stock for funding has the potential for
substantial dilution.

As noted above, the Company will need additional equity funding to provide the
needed capital to achieve our objectives. At the current market prices, such
equity issuance would cause a substantially larger number of shares to be
outstanding and would dilute the ownership interest of existing shareholders.

Stock price volatility.

The market price of shares of the Company's common stock has been volatile,
ranging in closing price between $0.32 and $2.39 during the last six months with
a June 1, 2004 closing price of $1.41. The price of the Company's common stock
may continue to fluctuate in response to a number of factors, such as:

                                       21
<PAGE>

     o    the  amount of cash  resources  and the  Company's  ability  to obtain
          additional funding;
     o    announcements of business developments or future exhibition projects;
     o    entering into or terminating strategic business relationships;
     o    changes in government regulations;  o changes in the Company's revenue
          or expense levels;
     o    reports by security analysts; and o status of the investment markets.

Any of these events may cause the price of the Company's shares to fall, which
may adversely affect its business and financing opportunities. In addition, the
stock market in general and the market prices for other media companies have
experienced volatility that often has been unrelated to the operating
performance or financial condition of such companies. Any broad market or
industry fluctuations may adversely affect the trading price of the Company's
stock, regardless of operating performance or prospects.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                           Page

Report of Independent Registered Public Accounting Firm                    F-1

Consolidated Balance Sheets at February 28, 2003
 and February 29, 2004                                                     F-2

Consolidated Statements of Operations and Comprehensive
Operations for the years ended
    February 28(29), 2002, 2003 and 2004                                   F-3

Consolidated Statements of Stockholders' Equity for the years ended
February 28(29), 2002, 2003 and 2004                                       F-4

Consolidated Statements of Cash Flows for the years ended
February 28(29), 2002, 2003 and 2004                                       F-5

Notes to Financial Statements                                              F-7


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

Not applicable.


ITEM 9A. CONTROLS AND PROCEDURES.

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's reports f8iled
pursuant to the Securities Act of 1934, as amended (the "Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's (the "SEC") rules and forms, and
that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this annual report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure


                                       22
<PAGE>

controls and procedures. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in alerting them in a timely manner to material
information relating to the Company required to be included in periodic filings
with the SEC. There have been no significant changes in the Company's internal
controls over financial reporting (as such term is defined in Rules 13a-15(f)
and 15(d)-15(f) under the Exchange Act during the most recent fiscal quarter
that have materially affected or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

Name                Age                    Position
-------------------------------------------------------------------------------
Arnie Geller        63           President, Chief Executive Officer, Director

Gerald Couture      58            Vice President, Secretary, Director and
                                  Chief Financial Officer

Tom Zaller          32            Vice President, Exhibitions

Nick N. Cretan      69            Director

Doug Banker         52            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  of 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.

Tom Zaller serves as Vice President - Exhibitions since August 2003. Mr. Zaller
has more than twenty years experience in the production of exhibitions both
internationally and domestically. Prior to his appointment with the Company, Mr.
Zaller was Vice President for Production at Clear Channel International
Exhibitions where he collaborated on the development, design, and production of
numerous Clear Channel exhibitions that were shown internationally. While he was
with Clear Channel, Mr. Zaller was production manager for "Titanic: The Artifact
Exhibition" which included twenty domestic and nine foreign exhibitions. These
exhibitions were viewed by over 13 million visitors worldwide and made Titanic
the world's most popular exhibition.

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


                                       23
<PAGE>

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 and the
development and management of concerts and similar events. Mr. Banker is
presently the manager and principal stockholder of Madhouse Management, Inc., a
nationally known firm that represents several prominent music artists.
Previously, he was a principal in Skillet Records LLC, an independent record
label business that provides national distribution for music artists. Mr. Banker
has also authored several commercially significant software programs and was
involved with the management of the enterprises created for their
commercialization. Mr. Banker is former president of the Board of the Motor City
Music Award Foundation in Detroit, Michigan.

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
Exchange Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended.

The Board of Directors held seven meetings during the fiscal year ended February
29, 2004. 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 28, 2002, February
28, 2003 and February 29, 2004 in excess of $50,000.

<TABLE>
<CAPTION>

                                                                             Long-Term
                                                                             Compensation
                                                                             ------------
                                                                               Common
Name                                                            Other          Shares
and                                     Year                    Annual         Subject to
Principal                           Ended February              Compen-        Options
Position                            28 (29)th         Salary    sation         Granted
------------------------------------------------------------------------------------------

<S>                               <C>              <C>       <C>            <C>
Current Officers:
Arnie Geller(1) (2)
President and Chief
Executive Officer                 2004              $370,997    $91,813        475,000
                                  2003               331,659     37,961            -0-
                                  2002               358,463     48,101        500,000
Gerald Couture(3)(4)
Vice President - Finance
Chief Financial Officer           2004              $298,373   $ 68,661        375,000
                                  2003               272,467     51,849            -0-
                                  2002               225,687    113,059        600,000


                                       24
<PAGE>

Thomas Zaller (5)
Vice President - Exhibitions      2004             $  86,537  $   6,296        250,000

Former
Officers:
Dik Barton (6)
Vice President and
Director of Operations            2004                   -0-        -0-            -0-
                                  2003                   -0-        -0-            -0-
                                  2002              $134,361   $  3,619            -0-
</TABLE>


     1.   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.  An employment  agreement  between the Company and Mr.
          Geller was  executed on February 2, 2002 that  provided  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
          prices  ranging  from $0.40 to $1.75 per share  that were the  closing
          prices of the stock at the respective times of issuance.  All of these
          options expire ten years from the date of their grant. On December 12,
          2003,  Mr. Geller  received as a director,  options to acquire  75,000
          shares of common  stock at $.32 per  share.  On April  10,  2004,  Mr.
          Geller's employment  agreement was extended two additional years until
          February 2, 2009 and options to acquire 400,000 shares of common stock
          at a price of $1.64 were granted.

     2.   Included in other  compensation  for fiscal year 2004, was a charge of
          $50,000 for Mr.  Geller's  election to receive  compensation in common
          stock at a 50%  discount to the then market  price;  medical  payments
          including  medical insurance of $29,813 and a car allowance of $12,000
          for the current fiscal year.

     3.   On April 25, 2000,  the Company  engaged Mr. Couture as Vice President
          and  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 an 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. Mr. Couture received as a director, options
          to acquire  75,000  shares of common  stock at $.32 per share.  All of
          these options expire ten years from the date of their grant.  On April
          10, 2004, Mr.  Couture's  employment  agreement was extended two years
          until February 2, 2008 and options to acquire 300,000 shares of common
          stock at a price of $1.64 were granted.

     4.   Included  in other  compensation  for fiscal year 2004 was a charge of
          $50,000 for Mr. Couture's  election to receive  compensation in common
          stock at a 50%  discount to the then market  price;  medical  payments
          including medical insurance of $18,661,  a car allowance of $7,500 and
          an office allowance of $12,000.

                                       25
<PAGE>

     5.   On August 4, 2003, the Company  engaged Mr. Zaller as Vice President -
          Exhibitions  for a term of three  years at an  annual  base  salary of
          $150,000.  Mr.  Zaller  was also  granted a stock  option to  purchase
          250,000  shares of the Company's  common stock at an exercise price of
          $.28 per share.

     6.   On May 6, 2001,  Mr.  Barton,  previously a consultant to the Company,
          became a Vice President and Director of Operations of the Company with
          the execution of a three year employment agreement at an 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 had a five-year  term but
          expired by its terms during June 2002.  On March 22, 2002,  Mr. Barton
          resigned as an officer of the Company and became a  consultant  to the
          Company. Mr. Barton resigned as a consultant during June 2002.


Option Exercises and Holding.

No executive officer of the Company exercised any stock options during the
fiscal year ended February 29, 2004.

Aggregated  Option /SAR  Exercises  in Last  Fiscal Year and FY-End  Options/SAR
Values

<TABLE>
<CAPTION>

------------------ -------------- ----------------- --------------------------------- --------------------------------
                                                    Number of Securities Underlying        Value of Unexercised
                      Shares           Value              Unexercised Options         In-the-Money Options at Fiscal
      Name          Acquired On       Realized                                                 Year End ($)*
                   Exercise (#)         ($)

------------------ -------------- ----------------- --------------------------------- --------------------------------
                                                    Exercisable    Unexercisable      Exercisable    Unexercisable
------------------ -------------- ----------------- -------------- ------------------ -------------- -----------------
<S>                <C>             <C>              <C>             <C>               <C>            <C>
A. Geller                    -0-               -0-      1,450,000                  0       $541,000                 0
------------------ -------------- ----------------- -------------- ------------------ -------------- -----------------
G. Couture                   -0-               -0-      1,050,000                  0       $606,000                 0
------------------ -------------- ----------------- -------------- ------------------ -------------- -----------------
T. Zaller                    -0-               -0-        250,000                  0       $230,000                 0
------------------ -------------- ----------------- -------------- ------------------ -------------- -----------------
</TABLE>

* The difference between the option exercise price and the market price of
Company common stock at fiscal year end. The actual gain, if any, an executive
realizes will depend on the market price of the Company common stock at the time
of exercise. "In-the-money" means the market price of the common stock is
greater than the exercise price of the option on the date specified

Compensation of Directors

The Company presently compensates all directors by issuing 25,000 shares of
common stock for appointment as a director and subsequently, issues options to
purchase common stock of the Company for each year of service. The purpose of
the grant of options and shares of common stock is to align the interests of the
directors with that of the Company's shareholders. During fiscal year 2003, the
two independent directors were granted 100,000 shares of common stock each,
having a fair market value of $24,000, for their continued services on behalf of
the Company with the issuance of this common stock deferred until the second
quarter of fiscal year 2004. On December 12, 2003, each director was issued an
option to acquire 75,000 shares of common stock at the then market price of $.32
per share. These options will expire ten years from the date of grant. During
the 2004 fiscal year, each of the two independent directors received cash
compensation for meeting attendance of $2,100.

ITEM. 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table enumerates, as of June 1, 2004, the name, address, and
ownership, both by numerical holding and percentage of interest, of each


                                       26
<PAGE>

beneficial owner or more than five percent (5%) of the Company's outstanding
common stock (based solely on schedules filed by such holders with the Company
pursuant to Section 13(d) of the Exchange Act), 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       2,908,768                 14.3
605 Southside Drive
Akron, Ohio  44317

Arnie Geller (2)
c/o RMS Titanic, Inc.            Common       3,637,500                 19.0
3340 Peachtree Road, N.E,
Suite 2250.
Atlanta, GA 30326

Nick Cretan (3)                  Common         275,000                    *
Suite 913
17 Battery Place
New York, NY 10004

Gerald Couture (4)               Common       2,020,874                 10.6
901 Chestnut Street, Suite A
Clearwater, FL 33756

Doug Banker (5)                  Common         311,000                    *
6508 Crane Road
Ypsilanti, MI 48197

Tom Zaller (6)                   Common         250,000                    *
c/o RMS Titanic, Inc.
3340 Peachtree Road, N.E,
Suite 2250.
Atlanta, GA 30326

All Officers and
 Directors as a Group            Common       6,519,374                 34.1
   (5 persons)


(1)      Includes Mr. Marsh's latest Schedule 13D filing.
(2)      Common  stock held as tenancy by the  entireties with his wife.
         Includes  options to purchase  1,875,000 shares of common stock.
(3)      Includes options to purchase 150,000 shares of common stock.
(4)      Includes options to purchase 1,375,000 shares of common stock.
(5)      Includes options to purchase 150,000 shares of common stock.
(6)      Includes options to purchase 250,000 shares of common stock.


o Owns less that 5% of the Company's outstanding common stock.


Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than ten percent of the Company's outstanding


                                       27
<PAGE>

shares of common stock, to file with 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 are current in their Forms 3 and
4 filings for the fiscal year ended February 29, 2004.

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.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On August 15, 2003, a fifth amendment to the license agreement with CCE was
executed whereby the term was extended to April 25, 2004 wherein the exhibitry
owned by CCE was sold to the Company for $600,000 with $300,000 forthcoming from
overage payments during the final extended term and the balance to be paid by
the Company in $150,000 installments due annually over the next two years. On
May 26, 2004, a sixth amendment to this same license agreement was executed
which provided that the two installment payments of $150,000 were changed
whereby CCE was granted a security interest in the exhibitry being acquired by
the Company and the necessity of a letter of credit was waived for a new payment
schedule that included all overage payments due from CCE and payments of $50,000
every six months until the remaining obligation is paid in full.

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 $8,922, $10,750, and $7,415 for fiscal
years 2004, 2003, and 2002, respectively.

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, a party who owned 1,704,545 shares of the Company. The purchase
price, as amended by agreement on June 1, 2002, was for $1.5 million. Danepath's
principal asset was the research and recovery vessel "SV EXPLORER". Under the
terms of the Purchase Agreement, the Company received $100,000 upon execution
and an obligation of $1.4 million, bearing interest at 8% per annum that was to
be paid within six months. This obligation was collateralized with 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. The note receivable was not
paid at its maturity on October 2, 2002. In order to avoid a costly
international foreclosure process, the Company entered into a Settlement
Agreement whereby the Company received a cancellation fee of $250,000 from
Argosy in the form of a note with a one-year maturity, cancellation of a
$240,000 vendor payable, and acquired by deed in lieu of foreclosure the marine
vessel, "SV EXPLORER" and related marine equipment for consideration of $750,000
in its new wholly owned United Kingdom subsidiary - Seatron Limited. The
ownership of the vessel was subject to a mortgage with the Company for all
monies advanced to this subsidiary. With this settlement agreement, the Company
released Argosy of the original purchase debt obligation of $1.4 million.

On May 5, 2004, an unsecured loan in the amount of $500,000 was advanced to the
Company from two shareholders, one of whom is Joe Marsh, a beneficial owner of
more than 10% of the Company's outstanding common stock. The loan is for a
five-year term with interest at 6% over the prime rate, now 10%, and requires
quarterly payments of interest and principal beginning July 26, 2004. As
additional consideration for this loan, the Company will issue 30,000 shares of
restricted common stock.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Fees for audit services provided by our principal accountant during the years
ended February 28 (29), 2004, 2003 and 2002 were $35,000, $35,000 and $43,000,
respectively. Audit services consisted primarily of the annual audits, review of


                                       28
<PAGE>

our financial statements, and services that are normally provided by our
accountants in connection with statutory and regulatory filings or engagements
for those fiscal years.

Audit-related Fees

There were no fees billed for services reasonably related to the performance of
the audit or review of our financial statements outside of those fees disclosed
above under the caption Audit Fees for fiscal years 2004, 2003 and 2002.

Tax Fees

There were no fees billed for any tax services.

All Other Fees


There were no other fees billed for services.



PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND 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:

Report of Independent Registered Public Accounting Firm                     F-1

Consolidated Balance Sheets at February 28, 2003
    and February 29, 2004                                                   F-2

Consolidated Statements of Operations
 and Comprehensive Operations  for the years ended
February 28(29), 2002, 2003 and 2004                                        F-3

Consolidated  Statements of Stockholders' Equity
for the years ended February 28(29), 2002, 2003 and 2004                    F-4

Consolidated  Statements of Cash Flows for the years ended
February 28(29), 2002, 2003 and 2004                                        F-5

Notes to Financial Statements                                               F-7

(b) Reports on Form 8-K during the fiscal quarter ended February 29, 2004

Date of event:    February 11, 2004
Item reported:    5

Date of event:    February 25, 2004
Item reported:    5


   (c)   Exhibits.

                                       29
<PAGE>

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 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 Recovery,
          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.

10.22.4   Agreement  dated  May  7,  2001  by  and  among  the  Company,  Argosy
          International, Inc. and Graham Jessop.

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.

                                       30
<PAGE>

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.(*1)

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.

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

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. (*3.1)

10.36     Stock Pledge  Agreement  dated April 2, 2002,  between the Company and
          Argosy International, Ltd. (*3.1)

10.37     Deed of Covenant from Danepath Ltd. to the Company. (*3.1)

10.38     Letter  Modification  Agreement  dated  April  4,  2002,  between  the
          Company,  Argosy  International Ltd., Danepath Ltd. and Graham Jessop.
          (*3.1)

10.39     United States Court of Appeals R.M.S. Titanic, Inc. v. The Wrecked and
          Abandoned Vessel. Opinion No. 01-2227 (*3.2)

10.40     Motion for Stay of Mandate as filed on April 22, 2002. (*3.2)

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

10.42     Form of Settlement  Agreement between Argosy International Ltd and the
          Company is incorporated  by reference to the Company's  report on Form
          10-Q for the fiscal quarter ended November 30, 2002.

10.43     Form of Stock Pledge Agreement  between Argosy  International  Ltd and
          the Company is  incorporated  by reference to the Company's  report on
          Form 10-Q for the fiscal quarter ended November 30, 2002. .(*3.3)

10.44     Form of Settlement  Agreement and Mutual General Release of all Claims
          Known and Unknown.(*3.3)

                                       31
<PAGE>

10.45     Form of Stipulation  and [Proposed]  Order for Dismissal of Action and
          Retention of Jurisdiction. (*3.3)

10.46     Form of Judgment  pursuant to Stipulation for Entry of Judgment in the
          Event of Default. (*3.3)

10.47     Form of  Stipulation  for Entry of  Judgment  in the Event of Default.
          (*3.3)

10.48     Fifth Amendment to Exhibition  Tour  Agreement,  dated August 15, 2003
          between the Company and Clear Channel Entertainment  Exhibits,  Inc is
          incorporated by reference to the Company's report on Form 10-Q for the
          fiscal quarter ended August 31, 2003

10.49     Lease   amendment  dated  August  8,  2003  for  offices  in  Atlanta,
          Georgia.(*5)

10.50     Amendment  to  Employment  Agreement  dated April 10, 2004 between the
          Company and Arnie Geller.(*5)

10.51     Amendment  to  Employment  Agreement  dated April 10, 2004 between the
          Company and Gerald Couture.(*5)

10.52     Sixth  Amendment  to  Exhibition  Tour  Agreement,  dated May 26, 2004
          between the Company and Clear Channel Entertainment Exhibits, Inc.(*5)

10.53     The Company's 2004 Stock Option Plan and form of stock option.(*5)

10.54     Employment  Agreement dated August 4, 2003 between the Company and Tom
          Zaller. (*5)



(*1)     Incorporated hereby by reference to Form 10-K for year ended
         February 29, 2000
(*2)     Incorporated hereby by reference to Form 10-K for year ended
         February 28, 2001
(*3)     Incorporated hereby by reference to Form 10-K for year ended
         February 28, 2002
(*3.1)   Incorporated hereby by reference to Form 8-K filing of April 17, 2002.
(*3.2)   Incorporated hereby by reference to Form 8-K filing of April 30, 2002.
(*3.3)    Incorporated hereby by reference to Form 8-K filing of July 16, 2002.
(*4)     Incorporated hereby by reference to Form 10-K for year ended
         February 28, 2003
(*5)     Filed herein.


         99    Additional Exhibits

              21      Subsidiaries of the Company
              31(a)   Certificate of Company's Chief Executive Officer required
                      by Section 302 of the Sarbanes-Oxely Act of 2002
              31(b)   Certificate of Company's Chief Financial Officer required
                      by Section 302 of the Sarbanes-Oxely Act of 2002
              32      Certificate of Company's Chief Executive Officer and Chief
                      Financial Officer required by Section 906 of the
                      Sarbanes-Oxely Act of 2002

                                       32
<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 14, 2004                                 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 as of the date indicated:


/s/ Arnie Geller                                     June 14, 2004
-----------------------------
Arnie Geller, President,
Chief Executive Officer, Director


/s/ Gerald Couture                                   June 14, 2004
-----------------------------
Gerald Couture, Vice President, Chief
Financial Officer, Secretary,
Director


/s/ Nick Cretan                                      June 14, 2004
-----------------------------
Nick Cretan, Director


/s/ Doug Banker                                      June 14, 2004
-----------------------------
Doug Banker, Director

RMS TITANIC, INC.

FINANCIAL STATEMENTS

FEBRUARY 29, 2004


<PAGE>

<TABLE>
<CAPTION>


                                                                                       RMS TITANIC, INC. AND SUBSIDIARY


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


<S>                                                                                            <C>
Report of Independent Registered Public Accounting Firm                                                      F-1


Consolidated Financial Statements:

   Consolidated Balance Sheets at February 28, 2003 and February 29, 2004                                    F-2

   Consolidated Statements of Operations and Comprehensive Operations for the
    Years Ended February 28, 2002, February 28, 2003 and February 29, 2004                                   F-3

   Consolidated Statements of Stockholders' Equity for the Years Ended
    February 28, 2002, February 28, 2003 and February 29, 2004                                               F-4

   Consolidated Statements of Cash Flows for the Years Ended
    February 28, 2002, February 28, 2003 and February 29, 2004                                            F-5 - F-6

   Notes to Financial Statements                                                                          F-7 - F-23
</TABLE>



<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors
RMS Titanic, Inc.


We have audited the accompanying consolidated balance sheets of RMS Titanic,
Inc. and Subsidiary as of February 29, 2004 and February 28, 2003, and the
related statements of operations and comprehensive operations, stockholders'
equity, and cash flows for each of the three years in the period ended February
29, 2004. 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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 29, 2004 and February 28, 2003, and 2002 and the
results of their operations and their cash flows for each of the three years in
the period ended February 29, 2004, in conformity with U.S. generally accepted
accounting principles.



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

June 4, 2004


                                      F-1
<PAGE>

<TABLE>
<CAPTION>
                                                                                       RMS TITANIC, INC. AND SUBSIDIARY

                                                                                      See Notes to Financial Statements
                                                                                                                    F-1
                                                                                            CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------------

                                                                                      February 28,         February 29,
-----------------------------------------------------------------------------------------------------------------------
                                                                                             2003                 2004
-----------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>                <C>
ASSETS

Current Assets:
  Cash and cash equivalents                                                           $ 1,945,000        $     547,000
  Accounts receivable                                                                     128,000              353,000
  Prepaid and refundable taxes                                                            511,000              221,000
  Prepaid expenses and other current assets                                               307,000              141,000
-----------------------------------------------------------------------------------------------------------------------

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

      Total current assets                                                              2,891,000            1,262,000

Artifacts owned, at cost (Note 2)                                                       4,484,000            4,479,000
Salvor's lien                                                                               1,000                1,000
Property and Equipment, net of accumulated depreciation
 of $1,501,000 and $1,754,000, respectively (Note 3)                                      979,000              747,000
Other Assets                                                                               44,000              764,000
-----------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                     $8,399,000           $7,253,000
=======================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued liabilities (Note 4)                                  $  1,114,000      $     1,249,000
   Deferred revenue                                                                       735,000                 --
-----------------------------------------------------------------------------------------------------------------------
      Total current liabilities                                                         1,849,000            1,249,000
-----------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies (Notes 8 & 9)

Stockholders' Equity: (Note 6)
  Common stock - $.0001 par value; authorized 30,000,000 shares,
   issued and outstanding 18,675,047 and 19,125,047 shares, respectively                    2,000                2,000
  Additional paid-in capital                                                           16,650,000           17,192,000
  Accumulated deficit                                                                 (10,102,000)         (11,190,000)
      Stockholders' equity                                                              6,550,000            6,004,000

-----------------------------------------------------------------------------------------------------------------------
      Total Liabilities and Stockholders' Equity                                       $8,399,000           $7,253,000
=======================================================================================================================


                                                                                      See Notes to Financial Statements
</TABLE>

                                      F-2
<PAGE>

<TABLE>
<CAPTION>



                                                                CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                  February 28,      February 28,       February 29,
Year ended                                                                               2002              2003               2004
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>              <C>                <C>
Revenue:
  Exhibitions and related merchandise sales                                       $ 2,354,000      $  2,646,000       $  2,677,000
  Licensing fees                                                                      313,000             -                   -
  Merchandise and other                                                                39,000           121,000            119,000
  Sale of coal                                                                         62,000            94,000             68,000

-----------------------------------------------------------------------------------------------------------------------------------
Total revenue                                                                       2,768,000         2,861,000          2,864,000
-----------------------------------------------------------------------------------------------------------------------------------
Expenses:
 General and administrative                                                         3,391,000         2,809,000          3,402,000
  Depreciation and amortization                                                       374,000           293,000            253,000
  Expedition costs                                                                     32,000               -                 -
  Cost of merchandise sold                                                             85,000           140,000            110,000
  Cost of coal sold                                                                     6,000            35,000             21,000
 Write down of note receivable                                                            -             296,000                -
  Expenses for settlement of litigation                                                   -             413,000            175,000
Impairment charge for artifacts recovered, net of taxes                             6,148,000               -                 -
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses                                                                     10,036,000         3,986,000          3,961,000
-----------------------------------------------------------------------------------------------------------------------------------

Income (loss) from continuing operations                                           (7,268,000)       (1,125,000)        (1,097,000)
Other income:
  Interest                                                                              8,000           298,000              9,000
  Other                                                                                 -                 -                    -
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes                                    (7,260,000)         (827,000)        (1,088,000)

Provision (benefit) for income taxes                                                      -               -              -

-----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) from Continuing Operations                                    $  (7,260,000)      $  (827,000)     $  (1,088,000)
===================================================================================================================================
Discontinued operations:
===================================================================================================================================
     Loss from operations of Danepath subsidiary disposed of:                        (168,000)                -                  -
     Gain on disposal of Danepath including provision in 2002 of
       a $46,000 operating loss during phase out period.                              644,000                 -                  -
===================================================================================================================================
                                                                                $  (6,784,000)       $ (827,000)       $(1,088,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) for basic and diluted common shares from
===================================================================================================================================
  Continuing operations                                                            $    (0.38)      $    (0.04)        $      (0.06)
Net income (loss) for basic and diluted common shares from
  discontinued operations                                                          $    - 0 -
$    - 0 -                                                                         $    - 0 -

Earnings (loss) per common share, basic and diluted                                $    (0.38)      $    (0.04)        $      (0.06)
===================================================================================================================================

Weighted-average number of common shares outstanding                               18,058,573       18,615,294           18,960,047
===================================================================================================================================



                                                                                                  See Notes to Financial Statements
</TABLE>

                                      F-3
<PAGE>

<TABLE>
<CAPTION>



                                                                                                   RMS TITANIC, INC. AND SUBSIDIARY


                                                                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                 Accumulated
                                              Common Stock         Additional      Other
                                            Number                   Paid-in    Comprehensive   Accumulated     Stockholders'
                                            Of Shares    Amount      Capital      Operation       Deficit         Equity
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>          <C>        <C>            <C>           <C>             <C>
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               1,104,545        -         819,000                                      819,000
Issuance of common stock for compensation     453,374        -         314,000           -                -         314,000
Issuance of common stock for services          45,000        -          29,000           -                -          29,000
Issuance of compensatory stock options                                 213,000                                      213,000
Net loss                                                                                         (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

Reclass of foreign currency translation                                             31,000          (31,000)              -
Issuance of common stock for services         125,000        -          35,000           -                -          35,000
Net loss                                                     -               -           -         (827,000)       (827,000)
-----------------------------------------------------------------------------------------------------------------------------------

Balance as of February 28, 2003            18,675,047   $2,000     $16,650,000           -     $(10,102,000)     $6,550,000
-----------------------------------------------------------------------------------------------------------------------------------

Issuance of common stock for services         450,000        -         108,000           -                -         108,000
Issuance of compensatory stock options                                 434,000                                      434,000

Net loss                                                     -               -           -       (1,088,000)     (1,088,000)
-----------------------------------------------------------------------------------------------------------------------------------

Balance as of February 29, 2004            19,125,047   $2,000     $17,192,000           -     $(11,190,000)     $6,004,000

===================================================================================================================================



                                                                                                  See Notes to Financial Statements

</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>


                                                                                                   RMS TITANIC, INC. AND SUBSIDIARY
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
===================================================================================================================================
<S>                                                                         <C>                 <C>               <C>

                                                                                 February 28,       February 28,        February 29,
Year ended                                                                           2002               2003                2004
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
  Net income (loss)                                                           $   (6,784,000)    $     (827,000)   $     (1,088,000)
-----------------------------------------------------------------------------------------------------------------------------------
  Deduct Loss from discontinued operation                                           (168,000)              -                    -

 Income (Loss) from continuing operations                                     $   (6,616,000)     $    (827,000)   $     (1,088,000)
 Adjustments to reconcile net income (loss) to net
   cash provided (used) by operating activities:
    Net gain on sale of business                                                     644,000                -                   -
    Depreciation and amortization                                                    374,000             293,000            253,000
    Issuance of common stock for services                                            100,000             35,000             108,000
    Issuance of compensatory stock options                                           213,000               -                434,000
      Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                                      (3,000)           (88,000)           (225,000)
      (Increase) decrease in prepaid and refundable taxes                         (1,365,000)         1,750,000             290,000
      Decrease (increase) in prepaid expenses and other current assets                208,000           983,000             166,000
      Decrease (increase) in other assets                                           6,749,000            28,000            (715,000)
      Increase (decrease) in deferred revenue                                        (453,000)          (53,000)           (735,000)
      Increase (decrease) in accounts payable and accrued liabilities                (292,000)          405,000             135,000
-----------------------------------------------------------------------------------------------------------------------------------
        Total adjustments                                                           6,175,000         3,353,000            (289,000)
-----------------------------------------------------------------------------------------------------------------------------------
        Net cash provided (used) by operating activities                             (441,000)        2,526,000          (1,377,000)
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
    Purchases of property and equipment                                               (23,000)         (727,000)            (21,000)
-----------------------------------------------------------------------------------------------------------------------------------
        Cash used in investing activities                                             (23,000)         (727,000)            (21,000)
-----------------------------------------------------------------------------------------------------------------------------------


Net increase (decrease) in cash and cash equivalents                                 (464,000)        1,799,000          (1,398,000)

Cash and cash equivalents at beginning of year                                        610,000           146,000           1,945,000
-----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                            $ 146,000     $   1,945,000          $  547,000
===================================================================================================================================

Supplemental disclosure of cash flow information:
  Cash paid during the year for income taxes                                         $    - 0 -   $      - 0 -         $      - 0 -
===================================================================================================================================



                                                                                                  See Notes to Financial Statements

</TABLE>

                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                                                                                   RMS TITANIC, INC. AND SUBSIDIARY
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                      CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
===================================================================================================================================




                                                                       February 28,       February 28,       February 29,
Year ended                                                                 2002               2003               2004
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                                  <C>                 <C>               <C>
Supplemental schedule of non-cash financing and
 investing activities:
  Issuance of compensatory stock options                               $     213,000      $        -0-      $   434,000

===================================================================================================================================
   Common stock issued for assets                                      $     819,000      $        -0-      $       -0-
===================================================================================================================================


                                                                                                  See Notes to Financial Statements

</TABLE>

                                      F-6
<PAGE>

                        RMS TITANIC, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

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.  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 to be utilized in the expedition
to the RMS TITANIC (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.  On April 2, 2002, the Company sold its Danepath  subsidiary to Argosy
International  Ltd., an affiliated  party.  In January 2003, in settlement of an
outstanding  obligation  from Argosy,  the Company  acquired the vessel,  the SV
EXPLORER,  and  related  marine  equipment  in a  wholly  owned  United  Kingdom
subsidiary of the Company, Seatron Limited.

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  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 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  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  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


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

                          NOTES TO FINANCIAL STATEMENTS

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  District  Court in the 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 were
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 granted 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
apply the Blackwall  factors for a salvor's  award and the adjustment to such an
award,  if any, for  revenues the Company may have derived from the  Artifacts .
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 including a large
section of the TITANIC's hull along with coal from the wreck site.

Costs  associated  with the  care,  management  and  preservation  of  recovered
Artifacts  are  expensed  as  incurred.  A  majority  of  the  Artifacts  not in
exhibition are located within the United States.

To ascertain  that the aggregate net  realizable  value ("NRV") of the Artifacts
exceeds the direct costs of recovery of such  Artifacts,  the Company  evaluates
various evidential  matters.  Such evidential matters includes  documented sales
and offerings of  TITANIC-related  memorabilia,  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.

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.

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

                          NOTES TO FINANCIAL STATEMENTS

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 takes 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.

The Company sells coal recovered from the TITANIC wreck site. 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
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
28,  2002,  February  28, 2003 and February 29, 2004 since there was no dilutive
effect of potential common shares or the dilutive effect is not material.

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

                          NOTES TO FINANCIAL STATEMENTS

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.

Impairment  of  Long-Lived  Assets.  In the event that  facts and  circumstances
indicate  that the carrying  value of long lived  assets,  including  associated
intangibles  may be impaired,  an evaluation of  recoverability  is performed by
comparing the estimated future undiscounted cash flows associated with the asset
to the assets  carrying  amount to  determine if a write down to market value or
discounted cash flows is required.

New Standard Adopted. In August 2001, the FASB issued SFAS No. 144,  "Accounting
for the Impairment or Disposal of Long-Lived  Assets." This standard  supercedes
SFAS No.  121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and for
Long-Lived  Assets to Be  Disposed  Of." The  standard  retains  the  previously
existing accounting  requirements  related to the recognition and measurement of
the  impairment  of  long-lived  assets to be held and used while  expanding the
measurement  requirements  of  long-lived  assets to be  disposed  of by sale to
include  discontinued  operations.  It also expands on the  previously  existing
reporting requirements for discontinued  operations to include a component of an
entity that either has been disposed of or is  classified as held for sale.  The
Company  adopted SFAS No.144  during fiscal 2002. As a result of the adoption of
SFAS No. 144, the Company wrote down its artifacts by $8.1 million.

In May 2003,  the FASB issue SFAS No. 150,  "Accounting  for  Certain  Financial
Instruments with Characteristics of both Liabilities and Equity".  This standard
establishes how an issuer classifies and measures certain financial  instruments
with  characteristics  of both  liabilities  and equity.  This  standard  became
effective for any financial  instruments  entered into or modified after May 31,
2003.  Management does not expect the adoption of FAS No. 150 to have a material
effect on our financial statements.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  This  statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging  activities under FAS
No. 133, "Accounting for Derivative  Instruments and Hedging Activities" entered
into after June 30, 2003. Management does not expect the adoption of FAS No. 149
to have a material effect on our financial statements.

In  January  2003,  the FASB  issued  FASB  Interpretation  No.  46 ("FIN  46"),
"Consolidation  of  Variable  Interest  Entities".   This  interpretation  gives
guidance that determines whether  consolidation of a Variable Interest Equity is
required  and is  effective  for all variable  interest  entities  with which we
become  involved  beginning  in February  2003,  and all  pre-existing  entities
beginning after June 15, 2003. Management does not expect the adoption of FIN 46
to have a material effect on our financial statements.

In  December  2002,  FASB  issued  Financial   Accounting   Standards  No.  148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS No.
148").  SFAS  No.  148,  amends  SFAS  No.  123,   "Accounting  for  Stock-Based
Compensation",  to provide  alternative  methods of  transition  for a voluntary


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

                          NOTES TO FINANCIAL STATEMENTS

change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition,  SFAS No. 148 amends the disclosure  requirements of
SFAS No. 123 to require prominent disclosures about the method of accounting for
stock-based employee  compensation and the effect of the method used on reported
results.  RMS Titanic,  Inc. has adopted the disclosure-only  provisions of SFAS
No. 148 at February 29, 2004.

In  November  2002,  the FASB  issued  FAS  Interpretation  No.  45 ("FIN  45"),
"Guarantor's Accounting and Disclosure  Requirements for Guarantees",  Including
Guarantees of Indebtedness  of Others".  FIN 45 requires that upon issuance of a
guarantee,  the guarantor  must  recognize a liability for the fair value of the
obligation  it  assumes  under  that  guarantee.  The  initial  recognition  and
measurement  should be applied on a prospective  basis to  guarantees  issued or
modified  after  December 31, 2002.  Disclosure  requirements  are effective for
financial  statements of both interim and annual periods that end after December
15, 2002.  The Company has no  guarantees to  unaffiliated  third parties so the
adoption of FIN 45 had no impact on the Company's financial statements.

In June 2002, the FASB issued FAS No. 146, ("FAS No. 146") "Accounting for Costs
Associated  with Exit or  Disposal  Activities".  This  standard  addresses  the
recognition, measurement and reporting of costs that are associated with exit or
disposal  activities.  FAS No. 146 is effective for exit or disposal  activities
that are initiated  after  December 31, 2002. The adoption of FAS No. 146 had no
impact on the Company's financial statements.

2. ARTIFACTS:

Artifacts  recovered in the 1987 TITANIC  expedition are carried at the lower of
cost of recovery or NRV.  The  ownership of these  Artifacts  was granted to the
Company by the Government of France.  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.  Coal recovered in two expeditions is
the only item  available  for sale.  Periodically,  as sales of coal occur,  ten
percent of the sale  value is  deducted  from the  carrying  costs of  Artifacts
recovered.   During  2004,  2003  and  2002,   $6,000,   $11,000,   and  $5,000,
respectively, were deducted from the Artifacts cost.

Artifacts, at cost, consists of the following:
                                February 28,          February 29,
                                   2003                  2004
-------------------------------------------------------------------------------
 Artifacts recovered, TITANIC           $ 3,110,000            $  3,105,000
 Artifacts, CARPATHIA                     1,374,000               1,374,000
-------------------------------------------------------------------------------
                                        $ 4,484,000            $  4,479,000


                                      F-11
<PAGE>

                       RMS TITANIC, INC. AND SUBSIDIARY

                          NOTES TO FINANCIAL STATEMENTS

3. PROPERTY AND EQUIPMENT:


Property and equipment, at cost, consists of the
following:

<TABLE>


                                                                         February 28,    February 29,       Estimated
                                                                                2003             2004      Useful Life
-----------------------------------------------------------------------------------------------------------------------

<S>                                                                       <C>             <C>                  <C>
                              Exhibitry equipment                         $1,378,000      $1,378,000           5 years
                              Marine equipment                               750,000         750,000          10 years
                              Office equipment                               188,000         208,000           5 years
                              Furniture and fixtures                         164,000         164,000           5 years
-----------------------------------------------------------------------------------------------------------------------
                                                                           2,480,000       2,501,000
                              Less accumulated depreciation                1,501,000       1,754,000
-----------------------------------------------------------------------------------------------------------------------
                                                                         $   979,000       $ 747,000
=======================================================================================================================
</TABLE>


4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                                          February 28,    February 29,
                              ----------------------------------------------------------------------------------------
                                                                                                  2003            2004
                              ----------------------------------------------------------------------------------------

<S>                                                                                         <C>              <C>
                              Amounts payable for professional and consulting fees          $ 440,000        $ 419,000
                              Settlement accrual                                              322,000          248,000
                              Other miscellaneous liabilities                                 352,000          582,000
-----------------------------------------------------------------------------------------------------------------------
                                                                                           $1,114,000       $1,249,000
=======================================================================================================================
</TABLE>

5. INCOME TAXES

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

                                                               February 28,            February 28,          February 29,
                              Year ended                            2002                   2003                 2004
-----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                     <C>                  <C>
                              Current:
                                Federal                        $(2,720,000)             $(264,000)           $(300,000)
                                State and local                   (786,000)               (50,000)             (90,000)
-----------------------------------------------------------------------------------------------------------------------
                                                                (3,506,000)              (314,000)            (390,000)
-----------------------------------------------------------------------------------------------------------------------
                              Less: Tax effect
                                      of impairment charge       1,954,000                      -                  -

                              Deferred:
                                Federal                          1,230,000                264,000              300,000
                                State and local                    322,000                 50,000               90,000
-----------------------------------------------------------------------------------------------------------------------
                                                                 1,552,000                314,000              390,000
-----------------------------------------------------------------------------------------------------------------------
                              Provision for income taxes             $- 0 -              $  - 0 -               $  -0-
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


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

                          NOTES TO FINANCIAL STATEMENTS

                              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>
<CAPTION>

                                                                         February 28,      February 28,       February 29,
                              Year ended                                      2002             2003                2004
-----------------------------------------------------------------------------------------------------------------------

<S>                                                                         <C>                <C>               <C>
                              Statutory federal income tax rate             (34.0)%            (34.0)%           (34.0)%
                              Effect of federal graduated tax
                               rates benefit                                 (6.0)              (4.0)             --
                              Net Operating Loss Carry-forward               21.0               38.0              34.0
                              Impairment Charge -                            19.0                -                 -
                              Other, net                                      -                  -                 -

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


The net deferred income tax asset consists of the following:

<TABLE>
<CAPTION>

                                                                                      February 28,         February 29,
                                                                                         2003                  2004
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                   <C>
                              Net Operating loss carry-forward                         $1,788,000           $2,180,000
                              Deferred tax asset - expenses not currently
                               deductible                                             $   100,000                   --
                              Valuation allowance for doubtful tax assets              (1,888,000)          (2,180,000)

                                    Net deferred tax                                         $-0-                 $-0-
</TABLE>


                              The net operating loss carry-forwards of
                              approximately $5,700,000 expire in varying amounts
                              from 2019 to 2024. A valuation allowance of 100%
                              of the deferred income tax asset has been provided
                              at February 29, 2004 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.

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, 2003, 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 29, 2004.

During the year ended  February 28, 2002,  the Company  issued 498,374 shares of
common stock having a value of $343,000 of which  $314,000 was for  compensation
and $29,000 was for services.

During the year ended  February 28, 2003,  the Company  issued 125,000 shares of
common stock as payment for conservation services having a value of $35,000.

During the year ended  February 29, 2004,  the Company  issued 450,000 shares of
common  stock  as  payment  for  services  and  compensation  having  a value of
$108,000.

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

                          NOTES TO FINANCIAL STATEMENTS

In April 2000,  the Company  acquired  certain  intangible  assets that included
confidential  research data to be utilized in locating the wreck sites of twelve
sunken vessels  containing  valuable cargo 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,
2002 and accumulated amortization at February 28, 2002 amounted to approximately
$285,000.  Amortization expense for the year ended February 28, 2003 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 RMS 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 the
twelve wreck sites  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).  The Company has the right of first refusal to salvage
the twelve wreck sites.

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  Agreement the
Company  received  $100,000  upon  execution  and an obligation of $1.4 million,
bearing  interest at 8% per annum that was to be paid  within six  months.  This
obligation  was  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. The note receivable was not paid
at its  maturity  on October 2, 2002.  In order to avoid a costly  international
foreclosure  process,  the Company entered in a Settlement Agreement whereby the
Company  received a  cancellation  fee of $250,000  from Argosy in the form of a
note with a one-year  maturity,  cancellation of a $240,000 vendor payable,  and
acquired by deed in lieu of  foreclosure  the marine  vessel,  "SV EXPLORER" and
related marine  equipment for  consideration of $750,000 in its new wholly owned
United  Kingdom  subsidiary  Seatron  Limited.  The  ownership of the vessel was
subject  to a  mortgage  with  the  Company  for  all  monies  advanced  to this
subsidiary. With this settlement agreement, the Company released Argosy from the
original purchase obligation of $1.4 million.

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

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 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
                              Canceled                                                    250,000                $0.88
                              Granted                                                          -0-                 -0-
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
                              Balance at February 28, 2003                              3,750,000                $1.24
                              Canceled                                                    250,000                 4.00
                              Granted                                                     940,000                 0.31
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
                              Balance at February 29, 2004                              4,440,000                $1.05
=======================================================================================================================
</TABLE>


In April 2000,  the Company  adopted an  incentive  stock option plan (the "2000
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
was 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.  In  December  2003,  the
Company  adopted a second  incentive  stock  option plan (the "2004 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 is 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.

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. 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 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.

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.
These options expired March 31, 2003 without being exercised.

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

                          NOTES TO FINANCIAL STATEMENTS

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 from the date of grant.

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  from the date of grant.  This
option was  canceled by its term ninety  days after the  employee's  resignation
during the fiscal year ended February 28, 2003.

In February  2002, the Company  granted an option to purchase  600,000 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 from the date of grant.

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 from the date of grant.

In  February  2002,  the  Company  reset the  option  strike  price for  300,000
outstanding  options owned by its directors to $0.40.  A charge to  compensation
was not necessary.

In December  2003,  the Company  established  a 2004 Stock  Incentive  Plan that
included  3,000,000  shares of common stock.  In addition,  the Company  granted
options to employees  and directors on 940,000  shares of the  Company's  common
stock at $0.32 per share. These options have a 10-year maturity from the date of
grant.

As of February 29, 2004,  options to purchase  2,750,000  shares of common stock
have been granted  under the 2000 Plan and 940,000  shares of common stock under
the 2004 Plan. The following table  summarizes the  information  about all stock
options outstanding at February 29, 2004:

<TABLE>
<CAPTION>


                                                                             Options Outstanding and Exercisable
                                                                      ------------------------------------------------
                                                                                           Weighted-
                                                                                            Average           Weighted-
                                                                                           Remaining           Average
                                  Range of                             Number             Contractual         Exercise
                              Exercise Price                         Outstanding         Life (Years)           Price
-----------------------------------------------------------------------------------------------------------------------

<S>                            <C>                                <C>                   <C>                 <C>
                                    $0.28                              250,000               9.5                 $0.28

                                    $0.32                              690,000               9.75                $0.32

                                    $0.40                            1,700,000               7.72                $0.40

                                    $1.25                              500,000               0.10                $1.25

                                    $1.63                              300,000               6.17                $1.63

                                    $1.75                              500,000               6.33                $1.75

                                    $2.00                              500,000               0.24                $2.00
-----------------------------------------------------------------------------------------------------------------------

                              $0.40 - $5.00                          4,440,000                                   $1.05
=======================================================================================================================
</TABLE>

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

                          NOTES TO FINANCIAL STATEMENTS

The Company  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, 2002,  2003
and February 29, 2004 would approximate the pro forma amounts shown in the table
below:

<TABLE>
<CAPTION>


                                                                   February 28,        February 28,       February 29,
                              Year ended                                2002               2003                2004
-----------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                    <C>               <C>

                              Reported net income (loss)           $(6,784,000)     $     (827,000)   $     (1,088,000)
=======================================================================================================================

                              Pro forma net income (loss)          $(6,784,000)     $     (827,000)   $     (1,088,000)
=======================================================================================================================
                              Reported net income (loss)
                              per common share                    $      (0.38)     $        (0.04)   $          (0.06)

                              Pro forma net income (loss)
                              per common share                    $      (0.38)     $        (0.04)   $          (0.06)
=======================================================================================================================

</TABLE>

The fair value of options granted (which is amortized to expense over the option
vesting period in determining  the proforma  impact) is estimated on the date of
grant  using  the   Black-Scholes   option-pricing   model  with  the  following
weighted-average assumptions:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------
                                                                       February 28,        February 28,    February 29,
                           Year ended                                       2002                2003           2004
-----------------------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>                  <C>             <C>
                              Expected life of options                   9.07 years           8.07 years      7.07 years
=============================================================================================================================

                              Risk-free interest rate                      4.75%                4.75%           4.75%
=============================================================================================================================

                              Expected volatility of RMS
                               Titanic, Inc.                              100.0%               100.0%          100.0%
=============================================================================================================================

                              Expected dividend yield on
                               RMS Titanic, Inc.                         $ - 0 -             $ - 0 -         $ - 0 -
=============================================================================================================================
</TABLE>


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

<TABLE>
<CAPTION>


                                                                       February 28,        February 28,    February 29,
                           Year ended                                       2002                2003           2004
-----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                   <C>             <C>
                              Fair value of each option granted   $          0.16       $    --            $     --
                              Total number of options granted           1,350,000            --             940,000
-----------------------------------------------------------------------------------------------------------------------
                                    Total fair value of all
                                     options granted                     $212,600       $    --            $     --
=======================================================================================================================
</TABLE>

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

                          NOTES TO FINANCIAL STATEMENTS

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.

8. LITIGATION:


The United States  Department of State and the National  Oceanic and Atmospheric
Administration  of the United States Department of Commerce ("NOAA") are working
together to implement an International Treaty (the "Agreement") with entities in
Britain France and Canada that could diminish or otherwise  impact the Company's
salvor-in-possession  rights  to the  TITANIC  which  had  been  awarded  by 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  re-affirmed  in the District Court and affirmed by
the Fourth Circuit,  and provides that the Agreement  becomes effective when any
two of the party states sign it. During  November  2003,  the Britain signed the
Treaty.  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 the Agreement.  On September 15, 2000, the Court 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  Agreement is agreed to and
signed by the  parties,  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 that have already been  recovered,
but the Company does not know what effect,  if any, this  Agreement will have on
future Company operations.

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 alleged
that the Company breached an employment  agreement  entered into between him and
the  Company,  that  he  was  damaged  by the  breach,  that  he was  wrongfully
terminated   and  had  been  defamed.   The  Company  denied  the  validity  and
enforceability  of the  employment  agreement.  Moreover,  the  Company  filed a
counter-suit  against Mr. Harris and others,  to recover monies that the Company
believed were misappropriated.  On April 23, 2003, after a jury trial, a verdict
was rendered that affirmed the unenforceability of any of Mr. Harris' employment
agreements and further found that $70,000 of Company monies were misappropriated
by Mr. Harris and others.  During the quarter ended August 31, 2003, the Company
settled  this  litigation  by  agreeing to certain  payments  and an exchange of
releases.  Upon the advice of counsel, this settlement is less than the expected
legal costs and expenses of continuing litigation.

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

                          NOTES TO FINANCIAL STATEMENTS

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 eventual outcome of this matter.

On January  27,  2001,  the  Company  was served  with a lawsuit by  Oceaneering
International,  Inc. 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. 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 claimed 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. In July 2002, the matter was settled whereby the Company agreed to pay
$388,000 over a thirty-month  period and the parties further exchanged  releases
and agreed to certain restrictive covenants, among other considerations.

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 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 petitioned the
United States Supreme Court to hear its appeal of the April 12, 2002 decision of
the Fourth Circuit. However, that petition was denied on October 7, 2002.

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

                          NOTES TO FINANCIAL STATEMENTS

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.  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. On April 23, 2004,
the United States District Judge for the Eastern District of Virginia Rebecca B.
Smith dismissed the lawsuit filed by Lawrence  D'Addario against the Company and
Arnie Geller and Gerald  Couture,  two  officers  and  directors of the company.
Specifically,   the  Court  approved  and  adopted  in  full  the  findings  and
recommendations  set forth in the Magistrate Judge's reports and recommendations
of March 5,  2004  whereby  summary  judgment  as to Counts I, II and III of the
D'Addario Complaint was granted in favor of Messrs. Geller and Couture.  Summary
judgment was also granted in favor of defendants  Mr. Joseph Marsh,  a principal
shareholder and Mr. G. Michael Harris, a former officer and director.  By Order,
dated  December 19, 2003,  the Court had  previously  dismissed  Count IV of the
Complaint as moot.  The Court's  final order is subject to a possible  appeal to
the Fourth Circuit Court of Appeals.

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:

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.  However,  for
financial  statement  purposes  the  Company  will  charge the full value of the
common stock issued to compensation expense.

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.  On March
22, 2002, this  individual  resigned his position and became a consultant to the
Company, and thereafter ended his consulting arrangement in May 2002.

On February 2, 2002,  the Company  executed  an  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.  On April 10, 2004, this employment  agreement was extended
on the same terms and  conditions  with a new  termination  date of  February 2,
2009.

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

                          NOTES TO FINANCIAL STATEMENTS

On February 2, 2002, the Company executed an 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 April 10, 2004, this employment  agreement was extended
on the same terms and  conditions  with a new  termination  date of  February 2,
2008.

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 29,
2004, the Company entered into another  non-cancelable  operating lease for more
office space and vacated one of its previously used offices.  During this fiscal
year 2003,  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 29, 2004 and
entered into subsequent to that date are as follows:

 Year ending February 28(29),

            2005                                        $179,000
            2006                                         115,000
            2007                                         118,000
            2008 and thereafter                          244,000

--------------------------------------------------------------------------
                                                        $656,000
==========================================================================

Rent expense charged to operations  amounted to $167,000,  $205,000 and $132,000
for the years ended February 28, 2002, February 28, 2003, and February 29, 2004,
respectively.

10. OTHER RELATED PARTY TRANSACTIONS:

Included in accounts  payable and accrued  liabilities  at February 28, 2003 and
February 29, 2004 is $25,000 due to certain partners of TVLP.

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., an affiliated party who owned 1,704,545 shares of
the Company.  The purchase  price,  as amended by agreement on June 1, 2002, was
$1.5 million.  Danepath's  principal  asset was 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  was to be paid  within  six  months.  This  obligation  was
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. The note receivable was not paid at its maturity
on October 2, 2002. To avoid a costly  international  foreclosure  process,  the
Company  entered  into a  Settlement  Agreement  whereby the Company  received a
cancellation  fee from  Argosy of $250,000 in the form of a note with a one-year
maturity,  cancellation of a $240,000  vendor  payable,  and acquired by deed in
lieu of  foreclosure  the  marine  vessel,  "SV  EXPLORER"  and  related  marine
equipment for  consideration  of $750,000 in its new wholly owned United Kingdom
subsidiary  - Seatron  Limited.  The  ownership  of the vessel was  subject to a
mortgage with the Company for all monies advanced to this subsidiary.  With this
settlement  agreement,  the Company  released Argosy from the original  purchase
obligation of $1.4 million.

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

                          NOTES TO FINANCIAL STATEMENTS

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.

11. EXHIBITIONS:

During the three-year period ended February 29, 2004 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  extended the
agreement  to January 3, 2003.  The first  amendment  required a minimum  annual
payment of $2,000,000  that was received  during fiscal year ended  February 28,
2002. Pursuant to the license agreement,  as amended, the Company was to receive
twenty  percent  of the  ticket,  merchandise,  and  sponsorship  and  ancillary
revenues over $10,000,000.  Each amendment  required a guaranteed minimum annual
payment of  $2,000,000.  For the amendment  periods ended  November 31, 2001 and
January 3, 2003,  the  Company  received  payments  of  $616,000  and  $683,242,
respectively,  over the  guaranteed  minimum  annual  payments  pursuant  to the
revenue  sharing  provisions  of the  agreement.  On August  15,  2003,  a Fifth
Amendment to the license agreement was executed whereby the term was extended to
April  25,  2004.  In this  amendment,  the  exhibitry  owned by  Clear  Channel
Exhibitions,  Inc.  ("CCE") was sold to the Company for $600,000  with  $300,000
forthcoming from overage payments during the final extended term and the balance
to be paid by the Company in $150,000  installments  due annually  over the next
two years. On May 26, 2004, a Sixth Amendment to this same license agreement was
executed  which  provided  that the two  installment  payments of $150,000  were
changed  whereby CCE was  granted a security  interest  in the  exhibitry  being
acquired by the Company and the necessity of a letter of credit was waived for a
new  payment  schedule  that  included  all  overage  payments  due from CCE and
payments of $50,000 every six months until the  remaining  obligation is paid in
full. The last three  amendments  were executed with CCE,  formerly known as SFX
Family Entertainment, Inc.


12. SUBSEQUENT EVENT:

On May 5, 2004, an unsecured  loan in the amount of $500,000 was advanced to the
Company from two  shareholders,  one of whom is Joe Marsh, a beneficial owner of
more  than 10% of the  Company's  outstanding  common  stock.  The loan is for a
five-year  term with  interest at 6% over the prime rate,  now 10%, and requires
quarterly  payments  of interest  and  principal  beginning  July 26,  2004.  As
additional  consideration for this loan, the Company will issue 30,000 shares of
restricted common stock.