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 28, 2001

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

     For the transition period from to

                          Commission File No. 000-24452

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

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

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

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

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

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

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

         Check  if  disclosure  of  delinquent  filers  pursuant  to Item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant, as of June 1, 2001, was: $12,651,000.

     The number of shares  outstanding  of each of the  registrant's  classes of
common stock, as of June 1, 2001, were:

                                                      NUMBER OF SHARES
            TITLE OF EACH CLASS                        OUTSTANDING

            Common Stock, par value $.0001
            per share                                   16,953,117

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

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

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

ITEM 1.  BUSINESS

         BACKGROUND

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

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

The  Company  was formed in 1987 for the  purposes  of  exploring  the wreck and
surrounding oceanic areas of the TITANIC, which sank in 1912, and lies more than
12,500  feet  below  the  surface  of  the  Atlantic  Ocean.  This  location  is
approximately 400 miles off the 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 from touring  exhibitions,  television  programs,  and the
sales of still photographs.

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

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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.

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 74
objects and produced  approximately  125 hours of videotape  footage  during its
fourth expedition to the TITANIC wreck site.

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 70 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 1993, 1994,  1996, and 1998 TITANIC  expeditions were completed by
charter  agreements with IFREMER.  The objects recovered in the 1993, 1994, 1996
and  1998  expeditions  were  transported  to  a  privately-owned   conservation
laboratory in France for restoration and  preservation  processes in preparation
for exhibition,  except for the "Big Piece", that is using on-going conservation
processes  while on exhibit as part of the  Company's  exhibition of its TITANIC
artifacts 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 deep manned submersibles- the "MIR-1" and "MIR-2". The
Keldysk is a 400 foot,  6,340 ton  research  vessel that was ideally  suited for
operation in the North Atlantic  Ocean.  The  expedition  resulted in a total of
twenty-eight dives over a four week period that resulted in the recovery of more
than 900 objects from the wreck site and the  discovery  of a new debris  field.
Among the  artifacts  recovered in this  expedition  were:  the ship's wheel and
stand, whistle control timer from the navigation bridge, the main telegraph base
and the docking bride telephone. Among personal items recovered were binoculars,
a pair of  opera  glasses,  sixty-five  intact  perfume  ampoules  belonging  to
passenger Mr. Adolphe Saalfeld, 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

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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  future
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 upcoming  expedition to
the TITANIC wreck site during that summer.  This vessel was acquired on June 30,
2000 from the  Natural  Environment  Research  Council,  a British  governmental
agency.  The name of the  vessel  was  changed  to the SV  EXPLORER.  During the
expedition,  the Company utilized this ship for fifty-three  days. At the end of
the expedition,  the Explorer  delivered the recovered  artifacts to a warehouse
facility in Norfolk, Virginia for eventual delivery to the conservation facility
the Company recently  established with Eastern  Michigan State  University.  The
intent of  management  is to  utilize  the SV  Explorer  for its own  search and
recovery operations when it is not chartered by other companies.  Presently, the
SV  Explorer  has  completed  one of three  charters  scheduled  this  year with
European companies.


PLAN OF OPERATIONS

The TITANIC  continues to captivate the thoughts and  imagination of millions of
people  throughout  the world since 1912,  when it struck an iceberg and sank in
the North  Atlantic,  causing  the loss of more than 1,500 of the 2,228 lives on
board.  The  depth  of this  international  interest  in the  TITANIC  has  been
continuous  since  sinking more than  eighty-nine  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 in the
TITANIC.  As the only enterprise that has recovered and conserved items from the
TITANIC,  the Company is in a unique position to present  exhibitions of TITANIC
artifacts for viewing by the public.  Management  intends to continue to present
exhibitions  throughout  the  world as  demand  for  these  tours is  warranted.
Management  will also continue to conduct these  exhibitions in an  enlightening
and dignified manner that embodies respect for those who lost their lives in the
disaster.

The  principal  sources of revenues of the Company have been payment  guarantees
for Exhibit attendance, ticket sales for admission to exhibitions, merchandising
revenues, licensing revenues and sponsorship revenues.

The Company's two most important  obligations are to maximize  shareholder value
and secure the future of the TITANIC  artifacts.  While the Company continues to
maintain  its  status  as  Salvor-in-Possession  it  will  actively  search  out
opportunities  leading to permanent  placement of the Artifacts.  As long as the
Company maintains its Salvor-in-Possession  status, any disposition of Artifacts
will be done with the knowledge of the Federal  Courts and without  compromising
the obligations of the Company.


EXHIBITIONS

The Company has  presented  exhibitions  in  association  with third  parties in
cities in the United  States,  Europe,  and Japan and over seven million  people
have  attended  these  exhibits.  The  Company  plans  to  continue  to  present
exhibition tours of TITANIC artifacts in cities throughout the world.

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Agreement with Subsidiary of SFX Entertainment, Inc.

In  March  1999,  the  Company   entered  into  an  agreement  with   Magicworks
Entertainment,  Inc., a direct  subsidiary  of PACE  Entertainment,  Inc. and an
indirect subsidiary of SFX Entertainment, Inc. (collectively "SFX"), in which we
granted SFX an exclusive  worldwide license to exhibit our TITANIC artifacts for
the payment of at least $8.5 million  annually.  This license  agreement  had an
initial term of one year,  commencing  September  15, 1999,  with SFX having the
option  to  extend  the term for up to four  additional  one-year  periods.  All
obligations of Magicworks Entertainment,  Inc. under this license agreement were
guaranteed  by SFX  Entertainment,  Inc. The original  agreement  was amended on
September  18, 2000  between the  Company  and SFX Family  Entertainment,  Inc.,
successor to Magicworks Entertainment,  Inc.. Furthermore, another extension was
granted on May 7, 2001 to extend this  agreement to December 31, 2002. The first
amendment required a minimum annual payment of $2,000,000, which was made during
the fiscal year ended February 28, 2001. Upon execution of the second amendment,
the Company received a payment of $750,000.

Pursuant to the license agreement,  as amended,  the Company will receive twenty
percent of the ticket,  merchandise,  sponsorship,  and ancillary  revenues over
$10,000,000.  In addition,  proceeds from the South  American  exhibition  tour,
after  deduction  of certain  related  expenses,  shall be shared  with SFX on a
fifty-fifty  basis.  The license  agreement,  as amended,  requires that certain
conservation costs be equally shared between SFX and the Company.

During fiscal year ended  February 28, 2001,  we removed our artifacts  from the
TITANIC themed  exhibition in Orlando,  Florida  previously  operated by SFX and
third parties. At that time, a former officer and director of the Company was an
owner in that exhibition.

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

Current Exhibitions

SFX is presenting  TITANIC exhibits in Seattle,  Washington that began in March;
Kansas  City,  Missouri  and  Baltimore,  Maryland  which  began in  April;  and
Nashville,  Tennessee that began in May. The South American tour includes Buenos
Aires, Argentina and Santiago, Chile.

MERCHANDISING

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

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MARKETING

The Company  intends to market perfume from the TITANIC,  based upon  fragrances
recovered  during  Expedition  2000 by awarding  licenses  to third  parties for
replication  of certain  fragrances.  It is  contemplated  that the Company will
receive a royalty from the sale of the perfume for granting  such  licenses.  No
assurances can be given that such licensing  arrangements  will be  successfully
consummated,  or if  consummated,  will  result  in  the  Company's  receipt  of
significant revenues. The Company also intends to pursue the direct marketing of
merchandise  and archive  through its web site  (http://www.rmsTITANIC.net)  and
through third parties.

The marketing and  promotion of TITANIC  Exhibitions  is handled and paid by SFX
and other third parties involved with the presentation of Exhibits.

EXPEDITIONS TO THE TITANIC

With the depth of the TITANIC wreck  approximately  two and one-half miles below
the surface of the ocean in the North  Atlantic,  the Company is dependent  upon
chartering  vessels  outfitted with highly advanced deep sea technology in order
to conduct  expeditions  to the site. In its 1987,  1993,  1994,  1996, and 1998
expeditions,  the Company entered into charter agreements with IFREMER, pursuant
to which IFREMER  supplied the crew and equipment  necessary to conduct research
and recovery  efforts.  In addition to utilization of the research vessel NADIR,
recovery efforts were undertaken through the manned submersible NAUTILE.  Small,
hard-to-reach areas necessary for visual reconnaissance efforts were accessed by
a small robot, known as ROBIN,  controlled by crewmen on board the NAUTILE.  The
dive team had the  capability of retrieving  heavy  objects,  such as a lifeboat
davit weighing  approximately  4,000 lbs., to fragile objects weighing but a few
ounces. Because of the immense pressure of approximately 6,000 pounds per square
inch at the wreck site,  it is  impossible  for a dive team to reach such depths
and explore  the wreck site  through  any means  other than a  submersible.  The
NAUTILE and ROBIN were each  equipped with video and still cameras that recorded
all recovery and exploration  efforts.  In connection with its 1987, 1993, 1994,
1996,  and 1998  expeditions  to the wreck site,  the Company  engaged  maritime
scientists and other  professional  experts,  to assist in the  exploration  and
recovery efforts.  Management intends to engage experts from such fields for its
future  expeditions  to the  TITANIC,  one of which is planned for the summer of
2002.

During the Company's 1998  expedition to the TITANIC,  in addition to recovering
the largest  artifact to date -- a 26 foot by 20 foot outer  section of the hull
of TITANIC  weighing  approximately  20 tons,  known as the "Big  Piece",  other
objects recovered during this expedition  included a port-side gangway door from
D-Deck,  found on the sea bed with its latch mechanism open; a golden chandelier
from one of the ship's first class public rooms;  a stateroom coat hook; a light
switch  control  panel from the galley  area;  a skylight  from the first  class
elevator  shaft; a small 60-second  hourglass used for navigation;  a round dial
with spindle and spring  mechanism that may be an electronic wall clock from the
Marconi radio room.

Additionally, by using ultra-high resolution digital underwater technology, more
than 3,000  individual  digital  photographs  were captured of the TITANIC site.
These   photographs   have  been  compiled  and  processed   utilizing   special
computerized software into the world's first high-resolution photo-mosaic of the
wreck site,  including the  first-ever  composition  of the entire mangled stern
section as well as portions of the debris field surrounding the wreck.

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

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

Danepath Ltd., the Company's  wholly-owned United Kingdom  subsidiary,  acquired
the SV Explorer,  a research and recovery vessel in June 2000. This ship will be
utilized to do future search and recovery  work at various  wreck sites.  The SV
Explorer operated as a support vessel during Expedition 2000 to the Titanic.


RESTORATION AND CONSERVATION

Upon  recovery  from  the  wreck  site,  artifacts  are  in  varying  states  of
deterioration  and  fragility.  Having been submerged in the depths of the ocean
for more than 89 years,  objects have been subjected to the corrosive effects of
chlorides  present in sea water. The restoration of many of the metal,  leather,
and paper artifacts  requires the application of sophisticated  electrolysis and
other electrochemical  techniques.  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, all artifacts recovered from the 1993, 1994, 1996 and
1998 expeditions are either undergoing or have undergone  conservation processes
at LP3, a privately-owned conservation laboratory in Semur-en-Auxois, France.

On May 17, 2001, the Company and Eastern  Michigan  University  announced  their
partnership in the conservation of the artifacts  recovered from the wreck site.
Eastern Michigan  University is located in Ypsilanti,  Michigan and is the fifth
largest university in Michigan with an enrollment  exceeding 23,000. Among EMU's
more than 200 graduate and  undergraduate  programs,  its Historic  Preservation
Program  ranks among the finest.  The EMU Regents  approved the program in 1979,
and in 1989, the program received the coveted "Certificate of Commendation" from
the American  Association  of State & Local  History for ten years of nationally
recognized performance within the field of historic preservation education.

Dr. Ted Ligibel is the  Director of the Historic  Preservation  Programs and Dr.
Lauren  Sickels-Taves is assistant professor and head conservator of the TITANIC
effort. Dr. Sickels-Taves  earned an M.S., Historic  Preservation and a Ph.D. in

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Architecture.  She has been a pioneer in the application of rigorous  scientific
methodology   and  advanced   technology  to  materials   analysis  in  historic
preservation.

The Company  intends to have all its artifacts  delivered to EMU for  continuing
conservation.  Presently,  all the  artifacts  recovered  during the  expedition
conducted  in  2000  are  being   preserved  at  the  facility   established  in
co-operation with EMU.

SCIENCE AND ARCHAEOLOGY

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

The  Company is in the best  position  to  provide  for  archaeological  survey,
scientific interpretation, and stewardship of the TITANIC shipwreck. The Company
possesses the largest  collection  of data,  information,  images,  and cultural
materials associated with the shipwreck.

Work has  already  begun with an  agreement  between  the  company  and  Eastern
Michigan  University for  conservation  of artifacts from the site. In addition,
the  Company  has  developed  a  partnership  with the  Center  for  Maritime  &
Underwater  Resource  Management,  a  nonprofit  corporation,  for  services  in
archaeology, scientific research, and resource management.

The Company  intends to present  their  collection  of  knowledge  and  cultural
materials of TITANIC to researchers,  educators, and other audiences in the form
of a scientific report,  associated  interactive website, and other intellectual
products  that advance the purposes of the  company.  Revenues  from the sale of
these  intellectual  products are expected to at least meet the total production
costs.

The scientific  report will integrate the results of all  expeditions to TITANIC
wreck site since its discovery.  In addition,  the publication  will include the
first  comprehensive  site plan of the  TITANIC,  which will  assist  greatly in
determining future products in research, materials conservation,  and education.
The  interactive  website will  virtually  share with the world this  scientific
knowledge as well as its entire collection of cultural materials.

SALVAGE RIGHTS

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

                                       8
<PAGE>

In February  1996, a  third-party  instituted  a motion in the Federal  District
Court for the Eastern  District of Virginia  seeking  rescission  of the June 7,
1994 order  awarding  salvor-in-possession  status to the  Company.  By an order
dated May 10, 1996, the motion was denied. The court also modified its June 1994
order to require the Company to file more frequent reports about its activities.
In August 1996, the Court amended the May 1996 order to include the award to the
Company  of  exclusive  rights to  photograph  the  TITANIC  within the award of
salvor-in-possession  status, and enjoined third parties from entering the wreck
site for purposes of obtaining photography or for other purposes.

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

Future   photographic   expeditions  to  the  TITANIC  have  been  announced  by
third-parties.  In the event that such  photographic  expeditions are undertaken
while the Company is conducting its  expedition,  safety  hazards  regarding the
deployment of submersibles chartered by the Company while other submersibles are
deployed could interfere with the Company conducting its expeditions.

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

The loss of exclusive photographic rights could 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

COMPETITION

The entertainment and exhibition industries are intensely competitive. There can
be no assurances given the Company's limited capital resources,  that we will be
able to compete  effectively.  Many  enterprises  with which the Company will be
competing have substantially  greater resources than the Company.  Additionally,
following the success of the motion picture "TITANIC" in December 1997, a number
of entities have undertaken,  or announced an intention to offer, exhibitions or
events  with the  theme of  TITANIC  or  involving  memorabilia  related  to its
sinking.  Although  the  Company  is the only  entity  that  exhibits  artifacts
recovered  from the wreck site of the TITANIC,  competition  may be  encountered
from these  exhibitions or events for the consumer's  interest in TITANIC or the
Company's TITANIC exhibitions. Management intends to compete with other entities
based  upon  the  mass  appeal  of  its  planned   exhibits  to   consumers   of
entertainment, museum, scientific and educational offerings, and the quality and
value of the entertainment experience. The Company will emphasize the unique and
distinctive   perspective   of  the  TITANIC  into  its  exhibits  as  TITANIC's
salvor-in-possession and as the only entity that has ownership rights to objects
recovered from the wreck site.

                                       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, 2001, the Company had five  employees.  The Company is not a party
to any collective bargaining agreement.

ENVIRONMENTAL MATTERS

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

ITEM 2.  DESCRIPTION OF PROPERTY

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

The  Company has an lease  obligation  for office  space at 401 Corbett  Street,
Clearwater,   Florida.   This   location   previously   housed   the   Company's
administrative and marketing  activities until those functions were relocated to
the Atlanta  office.  Presently,  a sublease  has been  arranged for this office
space  that  is  equivalent  to  the  master  lease  obligation.  The  Company's
obligation on the master lease is for a five-year  term ending May 30, 2005 with
annual lease payments of $36,570.

The Company's  former office  located at 17 Battery Place in New York was closed
during April 2000.  The  obligation  under a lease was settled with the landlord
during September 2000. The market value of other similar rentals at the New York
location were higher than the Company's lease rate.


ITEM 3.  LEGAL PROCEEDINGS

Legal Action by Former Officers and Directors

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

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

                                       10
<PAGE>

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

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

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

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

Other Legal Proceedings

The Company was a party to certain  litigations  that have been resolved  during
the year ended  February 29, 2000  resulting in  settlements  of $391,000  being
charged to operations for such year.  The $391,000  consists of cash and 100,000
shares of the Company's common stock.

The United States  Department of State and the National  Oceanic and Atmospheric
Administration  of the United  States  Department  of Commerce  (the "NOAA") are
working together to implement an International  Agreement (the "Agreement") with
entities in the United  Kingdom,  France and Canada that would  diminish  and/or
divest the Company of its  salvor-in-possession  rights to the TITANIC which had
been awarded by the Federal  District Court for the Eastern District of Virginia

                                       11
<PAGE>

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

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

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

On September 7, 2000,  Mr. G. Michael  Harris,  a former officer and director of
the Company filed suit in the Circuit Court of the Sixth Judicial Circuit in and
for Pinellas  County,  Florida,  Civil  Division.  In that suit,  Mr. Harris has
alleged that the Company breached an employment  agreement  entered into between
him and the Company, and that he has been damaged by the breach. The Company has
responded  to this  Complaint,  denying the  validity or  enforceability  of the
employment  agreement  and setting  forth the  Company's  position that it acted
appropriately  and  within  its  rights.  Moreover,  the  Company  has  filed  a
counter-suit  against Mr. Harris and others,  to recover  $84,000 of monies that

                                       12
<PAGE>

the Company believes were  misappropriated  and a complaint has been made to the
appropriate law enforcement authorities in Pinellas County, Florida. The Company
is continuing its  investigation  of Mr. Harris' conduct while an officer of the
Company.  The outcome of these  matters is uncertain at the present time and the
effect  they  may  have on the  Company's  financial  position  and  results  of
operations is not currently determinable.

On January  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 in association  with the Company's  Expedition  2000. The
Company has filed an answer that included a setoff for damages that is sustained
and continues to sustain as a result of Oceaneering's acts and omissions.  These
include  Oceaneering's  failure to provide an appropriate vessel,  equipment and
personnel  for  conducting   maritime  operations  in  the  North  Atlantic  for
Expedition  2000. The Company is in the discovery  stage of this  litigation and
the outcome of this matter at the present time is uncertain.

On May 3, 2001, the Company was served with a lawsuit by Westgate  Entertainment
Corporation,  a California corporation,  and Weyland & Chase Engineering,  NV, a
Netherlands  Antilles  corporation,  both under the  control of John  Joslyn,  a
California  resident.  In that lawsuit,  Mr. Joslyn claims a breach of purported
five year, oral, non-cancelable, "pay or play" consulting agreement for $300,000
per year,  among other claims.  The Company has no written  consulting  contract
with any Joslyn entity. The Company intends to file a counterclaim.  This matter
is in the preliminary stages and the outcome is uncertain at the present time.


ITEM 4.  SUBMISSION OF MATTERS OF VOTE OF SECURITY HOLDERS

None.

                                     PART II

ITEM 5.  PRICE RANGE OF SECURITIES

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

FISCAL PERIOD
                                           COMMON STOCK

                                HIGH                         LOW
                                BID                          BID

2001

1st Quarter                   2.825                         1.025
2nd Quarter                   3.125                         1.385
3rd Quarter                   1.75                           .56
4th Quarter                   1.4375                         .4125


                                       13
<PAGE>

2000

1st Quarter                   2.875                         1.375
2nd Quarter                   2.56                          1.72
3rd Quarter                   4.375                         1.66
4th Quarter                   3.8125                        2.4375


     (b) HOLDERS.  The number of holders of record of the Company's Common Stock
as of June 8, 2001 was 1445.

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

ITEM 6.  SELECTED FINANCIAL INFORMATION

The selected  financial  data set forth below is qualified by reference  to, and
should be read in conjunction  with, the Financial  Statements and Notes thereto
and Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  included  elsewhere in this Form 10-K.  The selected  financial data
have been  derived  from the  Company's  Financial  Statements  which  have been
audited by independent certified public accountants. The financial statements as
of February 28, 2001,  February 29, 2000,  and February 28, 1999 and for each of
the three years in the period ended  February 28, 2001 is included  elsewhere in
this Form 10-K.


YEAR ENDED FEBRUARY 28(29)

<TABLE>
<CAPTION>

                                    1997          1998         1999          2000        2001

<S>                             <C>          <C>           <C>          <C>         <C>
Statement of Operations Data:
(In thousands, except per share
 and weighted average shares)

   Revenue                         $  1,247       4,658         9,857        6,433       5,699
   Net income (loss)               $    158       3,367         4,063          (21)        (21)
   Income (loss)
      per share (1)                $    .01         .21           .25           -0-        -0-

   Weighted average number of
   common shares
   outstanding                  16,141,950   16,181,868    16,187,128    16,187,128 16,732,991

FEBRUARY 28(29),                   1997           1998         1999          2000        2001
Balance Sheet Data:
  (In thousands)
   Total Assets                    $ 8,005       10,079       13,910       15,372       15,002
   Long Term Obligations                --           --           --           --           --
Total Liabilities                  $ 3,942         2,642       2,410        3,569        2,251
   Shareholders' Equity            $ 4,063         7,437      11,500       11,803       12,751
</TABLE>

                                       14
<PAGE>

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


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

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

                              5/31/99    8/31/99     11/30/99    2/29/00

       Revenues               $ 1,312    $ 1,424     $ 1,882     $ 1,815
       Expenses                   646        778         762       4,381
       Net income/(loss)          427        413         473      (1,334)
       Net income/(loss)
        per share                 .03        .03         .03        (.09)


The Company has declared no cash dividends.

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

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following  discussion provides information to assist in the understanding of
the Company's financial condition and results of operations,  and should be read
in  conjunction  with the  financial  statements  and  related  notes  appearing
elsewhere herein.

RESULTS OF OPERATIONS

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

During its fiscal year ended February 28, 2001 ("2001 fiscal  year"),  Company's
revenues  decreased  to  $5,699,000  from  $6,433,000  in the fiscal  year ended
February 29, 2000 ("2000 fiscal year").  This decrease of  approximately  11% as
compared  to the prior  fiscal  year is  primarily  as a result of a decrease of
$672,000 in the Company's  exhibition and related  merchandise  sales during its
2001 fiscal year as compared to 2000 fiscal year. The revenue from the Company's
SFX agreement has been renegotiated from the original arrangement as a result of
the parties  experience in the first year of operation.  The amendments that the
Company has executed more clearly reflect the current  realities of the economic
prospects  of  exhibition  of  its  artifacts.  The  Company  is  reviewing  the
opportunity to conduct its own  exhibitions  in the future.  At this time, it is
the  opinion of  management  that the present  arrangement  with SFX is the most
effective way to address the revenue  producing  opportunities  of exhibition of
its artifacts.

In 2001 fiscal year, there was an aggregate  decrease from $297,000 to $235,000,
or $62,000,  for other  revenues as  compared  to the 2000  fiscal  year.  Other
revenue includes licensing fees,  merchandise,  and the sale of coal.  Licensing
fees increased  during the 2001 fiscal year because of the recent  expedition to
the TITANIC wreck site during the summer of 2000. Revenue from merchandise, book
and other activities decreased  approximately 73% during the 2001 fiscal year as
compared to the 2000 fiscal year.  This decrease  resulted  primarily from lower

                                       15
<PAGE>

revenues  derived from  merchandising  because of the  inclusion of such revenue
sources within the amended SFX agreement. The Company's revenue from the sale of
coal increased  approximately 14% during the 2001 fiscal year as compared to the
2000 fiscal year.  Such coal sales are being made  directly  from the  Company's
offices to Events  Management,  Inc for exhibitions.  The Company's cost of coal
sold increased  approximately 33% during the 2001 fiscal year as compared to the
2000 fiscal  year as a result of an increase in the volume of coal sales  during
these corresponding periods.

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

General and  administrative  expenses of the Company  decreased  $1,747,000,  or
approximately  28%,  from $6,154,  000 in 2000 fiscal year to  $4,407,000 in the
2001 fiscal  year.  During the 2000 fiscal  year,  the Company  settled  certain
lawsuits,  one of which was with former  management that included the payment of
$1,671,000.  In addition, two other litigation matters were resolved by $392,000
charged to operations  during the 2000 fiscal year. During the 2001 fiscal year,
consulting expenses amounted to $892, 000 from $195,000 in the prior year. Legal
expenses  declined in the fiscal year 2001 to $944,000  from  $1,039,000  in the
prior fiscal year.

Operating  expenses of $41,000 were incurred during the 2001 fiscal year for the
Company's  SV  Explorer,  a 178 foot-  1050 ton,  ship  acquired  in June  2000,
exclusive of $204,000 of direct costs for recovery of the  artifacts  during the
Expedition  2000. There are not comparable costs for the 2000 fiscal year. It is
estimated  that the use of the  Company's  own vessel  resulted  in  substantial
savings  during  the  fifty-three  days that this  vessel  was  engaged  in that
expedition.  The SV  Explorer  delivered  the  recovered  artifacts  to Norfolk,
Virginia at the end of the expedition for eventual  delivery to the conservation
facility  the  Company   recently   established   with  Eastern  Michigan  State
University.  SV Explorer is owned by Danepath Ltd, a wholly owned  subsidiary of
the Company.  The intent of management is to utilize the SV Explorer for its own
salvage  and  recovery  operations  when  it is not  being  chartered  by  other
companies  The SV  Explorer  has  recently  completed  one  charter  and has two
additional charter commitments with European companies during this summer.

The Company's  depreciation and amortization expenses increased to $587,000 from
$303,000,  or 94%,  during the 2001  fiscal  year as compared to the 2000 fiscal
year.  This  increase is primarily  attributed  to the  amortization  of certain
intangibles  which  the  Company  acquired  in early  2000 for  $900,000.  These
intangibles  are  related  to  prospective  salvage   opportunities  for  twelve
shipwrecks  throughout the world.  These  intangibles were exchanged in May 2001
for the ownership rights to the "Carpathia".

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

The Company's loss from operations decreased to $112,000 in the fiscal year 2001
as compared to  $134,000  in the fiscal year 2000,  a decrease of  approximately
16%. Interest income for the 2001 fiscal year amounted to $76,000 as compared to
$113,000 in the prior fiscal year. This decrease is attributed to lower interest
derived from the  Company's  interest  bearing  bank  account  during the recent
fiscal year.  During the 2001 fiscal year the Company  received  other income of
$15,000, thus total other income was $81,000 for this year.

                                       16
<PAGE>


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


YEAR ENDED FEBRUARY 29, 2000 AS COMPARED TO YEAR ENDED FEBRUARY 28, 1999

During its fiscal year ended  February  29, 2000 (the "2000 fiscal  year"),  the
Company's  revenues  decreased to  $6,433,000  as compared to  $9,857,000 in the
fiscal year ended February 28, 1999 (the "1999 fiscal  year").  This decrease of
$3,424,000,  or 35%,  primarily  reflects lower licensing fee income in the 2000
fiscal  year.  In the  1999  year,  licensing  fee  income  benefited  from  the
production  and  exploitation  of audio and visual  recordings for the Company's
expedition  to the TITANIC wreck site during the summer of 1998 in the amount of
approximately $3,300,000.

Exhibition and  merchandising  revenue was $6,136,000 in the 2000 fiscal year as
compared to $5,460,000  in the 1999 fiscal year for an increase of $676,000,  or
12%. This increase in revenues was principally  attributable to the presentation
of major exhibitions in Atlantic City, St. Paul and Japan, as well as the income
received  from  Magicworks,  a subsidiary of SFX for their  licensing  agreement
executed during the year.

The  Company's  merchandise  and  other  revenues,  that  included  the  sale of
merchandise,  books and royalty payments, decreased to $221,000 from $680,000 in
the prior  fiscal  year.  This  decrease of $459,000,  or 67% is  attributed  to
substantially lower sales in each category for the current fiscal year. The sale
of coal  recovered  from the  TITANIC  was  $59,000 in the  current  fiscal year
compared  to  $222,000 in the prior year.  This  decrease is  attributed  to the
curtailing of marketing  efforts during the recent year as compared to the prior
years marketing emphasis.

General and administrative  expenses were $6,154,000 for the 2000 fiscal year as
compared to $1,733,000 in the 1999 fiscal year. This increase of $4,421,000,  or
255%,  is attributed to  $2,230,000  incurred for the  settlement  with previous
management that was charged to operations  including the related legal expenses,
additional  legal  expenses of $272,000  which were  primarily the result of the
legal  matters  surrounding  the change in  management,  the  settlement  of two
litigations  for  $694,000  including  legal  expenses,  a bad debt  expense  of
$250,000 for the Japan exhibitions, and higher exhibition expenses.

Depreciation and  amortization  expense for the 2000 fiscal year was $303,000 as
compared to $246,000 in the 1999 fiscal year. This increase of $57,000,  or 23%,
is  attributed  to  the  impact  of  depreciation  charges  for a full  year  as
depreciation  of certain  exhibitry in the prior year was only for a part of the
full year.

Expenses  for  expedition  costs were only  $11,000  for the 2000 fiscal year as
compared to $1,845,000 in the 1999 fiscal year.  During the 1999 fiscal year the
Company undertook the "Summer of 1998  Expedition".  There was not an expedition
conducted during the 2000 fiscal year.

There  was a loss  from  operations  of  $134,000  for the 2000  fiscal  year as
compared to income from  operations of  $5,818,000 in the 1999 fiscal year.  The
decrease in income from operations is attributed to the lower revenue for fiscal
year 2000 while the Company incurred higher expenses as detailed above.

                                       17
<PAGE>

During the 2000 fiscal year, the Company earned  interest  income of $113,000 as
compared  to $52,000 in the prior  year.  The  Company  maintained  higher  cash
balances during the 2000 fiscal year.

Income  (loss)  before  provision  for income taxes was  ($21,000)  for the 2000
fiscal year as compared to  $5,875,000 in the 1999 fiscal year The Company has a
loss of $21,000 for the 2000 fiscal year as compared to net income of $4,063,000
in the 1999 fiscal year.  Basic and diluted  earnings per common share were $-0-
and $0.25 for the 2000 and 1999 fiscal years, respectively. The weighted average
common  shares  outstanding  were  16,187,128  for both the 2000 and 1999 fiscal
years.


LIQUIDITY AND CAPITAL RESOURCES

Net cash  provided  by  operating  activities  was  $472,000  for the year ended
February  28, 2001 as  compared to  $2,381,000  in the 2000  fiscal  year.  This
decrease  in cash  provided  by  operating  activities  for this  fiscal year is
primarily  attributed to the reduction in accounts  payable and accrued expenses
of $1,948,000 during the year.

For the year ended  February 28, 2001,  cash used in  investing  activities  was
$2,883,000 of which $2,107,000 was expended for artifact recovery as the Company
conducted an  expedition to the TITANIC wreck site during the summer of 2000 and
the purchase of property and equipment for $776,000.  The property and equipment
purchases  include  $529,000  for the ship,  SV  Explorer,  and  related  marine
equipment,  $128,000  for office  equipment,  and  $119,000  for  furniture  and
fixtures.

During late July 2000, the Company borrowed  $250,000 from a financing source to
provide  for its short term needs that was to be repaid  from income tax refunds
anticipated from the federal government. In September 2000, this loan was repaid
with interest.

The Company's net working capital  (deficiency)  and  stockholders'  equity were
$(854,000)  and  $12,751,000  at February 28, 2001 as compared to $1,080,000 and
$11,803,000 at February 29, 2000. The Company's current ratio was .6 at February
28, 2001 as compared to 1.3 at February 29, 2000.  The present  working  capital
situation is attributed the investment  that  management has made to provide for
new  sources of  revenue.  These  include the  utilization  of our ship,  the SV
Explorer,  for both  ship  charter  engagements,  and  thereby  reduce  expenses
relating to using this vessel for our own salvage and recovery operations. These
operations  will be conducted  within the Company's  wholly owned United Kingdom
subsidiary,  Danepath Limited.  Management expects future income to offset costs
of its internally planned operations.

Management plans to continue the exploration of the TITANIC and an expedition is
planned for the summer of 2002 to recover artifacts. With this business strategy
and the  development  of its  Danepath  operations,  management  believes  it is
focusing on the key elements necessary for the Company to be both profitable and
successful over the long-term.

Management expects that it will be able to arrange for the financial  resources,
including  licensing  arrangements,  to  properly  execute its  strategic  plan,
although  no  assurances  can be  given  that  it  will  be  successful  in such
endeavors.

The Company has  sufficient  working  capital to meet its planned  needs for the
next twelve months without any significant  additional  funding.  The exhibition
tour  agreement  with a  subsidiary  of SFX  Entertainment,  Inc.,  as  amended,
requires a minimum of $2,000,000 annually for the grant of exhibition rights for
a  one-year  period  commencing  November  14,  2001.  On May 7, 2001 the second
amendment to the  Exhibition  Tour  Agreement  was executed  between SFX and the
Company.

                                       18
<PAGE>

In order to protect its salvor-in-possession status and to prevent third-parties
from  salvaging  the  TITANIC  wreck and wreck  site,  or  interfering  with the
Company's  rights and ability to salvage  the wreck and wreck site,  the Company
may  have  to  commence  judicial   proceedings  against   third-parties.   Such
proceedings could be expensive and time-consuming. Additionally, the Company, in
order to maintain its salvor-in-possession status, needs to, among other things,
maintain a reasonable  presence at the wreck through periodic  expeditions.  The
Company will be required to incur the costs for future  expeditions  to maintain
its  salvor-in-possession  status.  The  Company  plans to conduct a dive in the
summer of 2002. The Company's  ability to undertake  future  expeditions  may be
dependent  upon the  availability  of  financing  from the grant of  licenses to
produce  television  programming  and/or  the  grant of  expedition  sponsorship
rights.  No  assurances  can be given that such  financing  will be available on
satisfactory terms.

In connection with its activities  outside of the United States,  the Company is
exposed to the risk of currency  fluctuations  between the United  States dollar
and certain foreign currency. If the value of the United States dollar increases
in relation to the foreign  currency,  the  Company's  potential  revenues  from
exhibition  and  merchandising  activities  outside of the United States will be
adversely  affected.  During the fiscal year ended February 28, 2001, there were
fluctuations  in the exchange rates with respect to foreign  currencies in which
the Company transacts  business that resulted in the Company realizing a foreign
currency  translation  loss of  $31,000.  Future  losses may be  realized as the
Company  develops  its  Danepath  business  operation.  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.



ITEM 8.  FINANCIAL STATEMENTS
                                                                           Page
                                                                           ----
Independent Auditor's Report                                               F-1

Consolidated Balance Sheet at February 29, 2000
and February 28,2001                                                       F-2

Consolidated Statement of Operations and Comprehensive
Operations for the years ended
February 28 (29), 1999, 2000 and 2001                                      F-3

Consolidated Statement of Stockholders' Equity for the years ended
February 28(29), 1999, 2000 and 2001                                       F-4

Consolidated Statement of Cash Flows for the years ended
February 28(29), 1999, 2000 and 2001                                       F-5

Notes to Consolidated Financial Statements                                 F-7


                                       19
<PAGE>

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

         None.

                                    PART III

ITEM 10.  MANAGEMENT

OFFICERS AND DIRECTORS

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

Name                    Age         Position
----                    ---         --------
Arnie Geller            60          President, Chief Executive Officer, Director

Gerald Couture          55          Vice President, Secretary,  Director and
                                    Chief Financial Officer

Nick N. Cretan          66          Director

Doug Banker             49          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.

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

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

Doug Banker has served as a Director  of the  Company  since  August  2000.  Mr.
Banker has more than twenty-five years experience in the entertainment  industry
that includes providing  management services to musicians and recording artists;
marketing,  merchandising,  licensing,  and sales of music media  products;  the
development  and  management of concerts and similar  events.  Mr. Banker is the

                                       20
<PAGE>

manager and principal stockholder in Skillet Records, LLC, an independent record
label business that provides national distribution for music artists. Mr. Banker
also has authored  several  significant  software  programs  that have  achieved
commercial  success and which he has been  involved  with the  management of the
enterprises created for their commercialization. Mr. Banker was President of the
Board of the Motor City Music Foundation in Detroit, Michigan from 1996 to 2000.

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

The Board of  Directors  held  eleven  meetings  during  the  fiscal  year ended
February  28,  2001,  At the  present  time,  the  Company  has  no  nominating,
executive, or compensation committees. The full board presently functions as the
audit committee.

                                       21
<PAGE>


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, 1999,
February 29, 2000 and February 28, 2001.

<TABLE>
<CAPTION>

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

George Tulloch(1)
Former President and Chief
Financial Officer                       2001               -0-         $3,270               -0-
                                        2000          $210,000            -0-           500,000
                                        1999          $120,000            -0-               -0-


Allan Carlin(1)
Former Secretary and General
Counsel                                 2001          $ 48,000         $8,911               -0-
                                        2000          $220,000            -0-               -0-
                                        1999          $215,000            -0-           500,000


G. Michael Harris (2)
Former Vice President and Chief
Operating Officer                       2001          $325,000          $ 710               -0-
                                        2000           $79,200            -0-               -0-
                                        1999               -0-            -0-               -0-

Current Officers:

Arnie Geller(3) (4)
President and Chief
Executive Officer                       2001          $292,220        $22,759           875,000
                                        2000           $79,200            -0-               -0-
                                        1999               -0-            -0-               -0-


Gerald Couture(5)
Vice President Finance
Chief Financial Officer                 2001         $ 100,769        $ 5,905           375,000
                                        2000               -0-            -0-               -0-
                                        1999               -0-            -0-               -0-
</TABLE>

                                       22
<PAGE>

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

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

(3)  Mr.  Geller was  appointed  President  and Chief  Executive  Officer of the
     Company on November 26, 1999.  Mr.  Geller was elected a director on August
     9,  1999 The  Employment  Agreement  between  the  Company  and Mr.  Geller
     provides for an annual base salary of $300,000.  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 a stock option to purchase  500,000 shares of the Company's  common
     stock at a price of $1.75 per  share  which  was the  closing  price of the
     stock on June 28, 2000.  Mr. Geller has also been granted a stock option to
     purchase  375,000 shares of the Company's  common stock at a price of $1.15
     per share  which was the closing  price of the stock on January  26,  2001.
     Both these options expire in ten years.

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

(5)  On April 25, 2000, the Company  engaged Mr. Couture as its Chief  Financial
     Officer.  The  Employment  Agreement  between the  Company and Mr.  Couture
     provides for an annual base salary of $120,000. 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 has also 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. In addition,  Mr.  Couture was granted a option to
     acquire  75,000  shares of common  stock at a price of $1.15  which was the
     closing  price of the common stock on January 26, 2001.  Both these options
     expire in ten years.

Option Exercises and Holdings

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

No  executive  officer of the Company  exercised  any stock  options  during the
fiscal year ended February 28, 2001.

Compensation of Directors

The Company  presently  compensates  all  directors by issuing  25,000 shares of
common stock for appointment as a director and subsequently, options to purchase
common  stock of the Company for each year of service.  On January 27, 2000 each
director was granted an option to purchase  75,000 shares of the common stock of

                                       23
<PAGE>

the  Company at an exercise  price of $1.15  which was the closing  price of the
Company's  common  stock as of January  26,  2001.  The purpose of this grant of
options and shares of common stock was to align the  interests of the  directors
with that of the Company's shareholders.


ITEM. 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


        The following table enumerates,  as of June 12, 2001, the name, address,
and ownership,  both by numerical  holding and  percentage of interest,  of each
beneficial  owner or more than five  percent (5%) of the  Company's  outstanding
Common Stock, the directors of the Company,  individually, and its directors and
executive officers as a group.

<TABLE>
<CAPTION>

                                                     Amount
Name and Address of                               Beneficially      Common Stock
Beneficial Owner                          Class      Owned           Percentage
-------------------                       -----      -----           ----------

<S>                                     <C>      <C>                  <C>
Joe Marsh (1)                             Common   3,327,363            19.0
605 Southside Drive
Akron, Ohio  44317

William S. Gasparrini                     Common   2,328,937            13.5
23 Oak Street
Greenwich, CT06831

Arnie Geller (2)
c/o RMS Titanic, Inc.                     Common   1,475,000             8.7
3340 Peachtree Road, N.E, Suite 1225.
Atlanta, GA 30326

Lawrence A. D'Addario                     Common     923,566             6.0
3 Pray Trust #2
Box 78
Quechee, VT 05059

Nick Cretan (3)                           Common     100,000              --
Suite 913
17 Battery Place
New York, NY 10004

Stephen Sybesma                           Common   1,000,000             5.6
9658 Springstone Rd.
McCordsville, IN 46005

Gerald Couture (4)                        Common     375,000             2.2
901 Chestnut Street, Suite A
Clearwater, FL 33767

Doug Banker (5)                           Common     136,000              --
6508 Crane Road
Ypsilanti, MI 48197

All Officers and Directors as a Group     Common   2,050,000            12.1
   (4 persons)
</TABLE>

                                       24
<PAGE>

(1)  Includes Mr.  Marsh's  latest Form 4 filing and the recent  issuance by the
     Company of 25,000 shares of common stock for  re-imbursement of indemnified
     expenses.
(2)  Common  stock  held as tenancy by the  entireties  with his wife.  Excludes
     options to purchase 875,000 shares of common stock.
(3)  Includes options to purchase 75,000 shares of common stock.
(4)  Includes options to purchase 375,000 shares of common stock; 375,000.
(5)  Includes options to purchase 75,000 shares of common stock.


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

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

At the present time,  two officers who are also on the Board of  Directors,  and
the two other  directors  have not filed their Forms 3 and 4 for the fiscal year
ended February 28, 2001.  The Company is aware of one  beneficial  owner of more
than 10% of the Company's Common Stock who has not filed a report as required by
Section 16 of the Securities Exchange Act of 1934.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the fiscal year ended  February  28,  2001,  the Company  entered into an
amended  agreement  with a subsidiary of SFX  Entertainment,  Inc.,  pursuant to
which,  among other things,  the Company licensed to SFX the worldwide rights to
exhibit the  Company's  TITANIC  artifacts  for fourteen  and  one-half  months,
commencing September 15, 2000 (the "License Agreement").

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

PART IV

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

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

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

Independent Auditor's Report                                               F-1

Consolidated Balance Sheet at February 29, 2000
and February 28, 2001                                                      F-2

                                       25
<PAGE>

Consolidated  Statement of Operations
and Comprehensive Operations  for the years ended
February 28(29), 1999, 2000 and 2001                                       F-3

Consolidated  Statement of Stockholders' Equity
for the years ended February 28(29), 1999, 2000 and 2001                   F-4

Consolidated  Statement of Cash Flows for the years ended
February 28(29), 1999, 2000 and 2001                                       F-5

Notes to Financial Statements                                              F-7

(b)  Reports on Form 8-K

1.      Form 8-K filed on September 7, 2000 containing termination of employment
        of G. Michael  Harris as Executive  Vice  President and Chief  Operating
        Officer.

2.      Form 8-K filed on September 14, 2000 containing the change of by-laws to
        remove a director  for cause and the removal of G.  Michael  Harris as a
        director.

(c)  Exhibits.

3.1     Articles of Incorporation, as amended.

4.1     First Amendment to By-Laws of the Registrant.

4.2     Second Amendment to By-Laws of the Registrant.

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

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

10.1.2  Lease Agreement between the Company and Tower Park Place

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

10.3    Pledge  Agreement  dated April 15,  1996  between the Company and CRE-CO
        Finanz GmbH.(5)

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

10.5    1996 Charter Agreement with IFREMER.

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

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

                                       26
<PAGE>

10.8    Agreement  dated May 23, 1997  between  the Company and RMS  Foundation,
        Inc.

10.9    Amendment  to  Agreement  dated April 15,  1997  between the Company and
        CRE-CO Finanz GmbH.

10.10   Agreement  between the registrant and Resource Plus and Event Management
        International None dated April 24, 1998.

10.11   Agreement between the registrant and TITANIC Exhibition Japan Inc. dated
        May 17, 1998.

10.12   Agreement between the registrant and CRE-CO Finanz dated April 15, 1998.

10.13   1998 Charter Agreement with IFREMER.

10.14   1998 Charter Agreement with Oceaneering International, Inc.

10.15   Agreement dated July 15, 1998 between Discovery  Communications  and the
        Company.

10.16   1998 Charter Agreement with Aqua Plus.

10.17   1998 Charter  Agreement with Les Abeilles  International,  Travocean and
        the Company.

10.18   Amendment  to  Agreement  dated  August 4, 1998  between the Company and
        CRE-CO Finanz GmbH.

10.19   Agreement  dated  September 25, 1998 between the Company and Media Rare,
        Inc.

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

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

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

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

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

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.

                                       27
<PAGE>


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

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

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

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

10.24   The Company's 2000 Stock Option Plan.

10.30   Exhibition  Agreement dated April 5, 1999 between the Company and Adamar
        New Jersey, Inc. is incorporated by reference to the Company's report on
        Form 10-Q for the fiscal quarter ended May 31, 1999.

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

10.32   Second Amendment to Exhibition Tour Agreement, dated May 7, 2001 between
        the  Company  and SFX  Family  Entertainment  Inc.  is  incorporated  by
        reference to the Company's  report on Form 10-Q for fiscal quarter ended
        August 31, 2000.

10.33   Agreement  dated  December 1, 2000  between  International  Institute of
        Oceanographic Exploration, LLC and the Company.

10.34   Reserved

10.35   Reserved

99      Additional Exhibits

        Subsidiaries of RMS TITANIC


                                       28
<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 15, 2001                           By: /s/ Arnie Geller
                                        ---------------------------------------
                                        Arnie Geller, President and Chief
                                        Executive Officer

SIGNATURES

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

/s/ Arnie Geller                                     June 15, 2001
-----------------------------
Arnie Geller, President.
Chief Executive Officer, Director

/s/ Gerald Couture                                   June 15, 2001
-----------------------------
Gerald Couture, Vice President, Chief
Financial Officer, Secretary,
Director

/s/ Nick Cretan                                      June 15, 2001
-----------------------------
Nick Cretan, Director

/s/ Doug Banker                                      June 15, 2001
-----------------------------
Doug Banker, Director

                                       29

<PAGE>


RMS TITANIC, INC.

FINANCIAL STATEMENTS

FEBRUARY 28, 2001


<PAGE>



                                             RMS TITANIC, INC. AND SUBSIDIARIES


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

<TABLE>
<CAPTION>


<S>                                                                             <C>
Independent Auditor's Report                                                     F-1


Consolidated Financial Statements:

   Consolidated Balance Sheet at February 29, 2000 and February 28, 2001         F-2

   Consolidated Statement of Operations and Comprehensive Operations for the
    Years Ended February 28, 1999, February 29, 2000 and February 28, 2001       F-3

   Consolidated Statement of Stockholders' Equity for the Years Ended
    February 28, 1999, February 29, 2000 and February 28, 2001                   F-4

   Consolidated Statement of Cash Flows for the Years Ended February 28, 1999,
    February 29, 2000 and February 28, 2001                                      F-5 - F-6

   Notes to Consolidated Financial Statements                                    F-7 - F-21

</TABLE>


<PAGE>



INDEPENDENT AUDITOR'S REPORT




To the Board of Directors
RMS Titanic, Inc.


We have audited the  accompanying  consolidated  balance  sheets of RMS Titanic,
Inc. and  Subsidiaries  as of February  28, 2001 and February 29, 2000,  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
28, 2001. 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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of RMS Titanic,  Inc.
and  Subsidiaries as of February 28, 2001 and February 29, 2000, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  February 28,  2001,  in  conformity  with  accounting  principles
generally accepted in the United States of America.




GOLDSTEIN GOLUB KESSLER LLP
New York, New York

June 4, 2001


                                      F-1
<PAGE>

<TABLE>
<CAPTION>

                                                                          RMS TITANIC, INC. AND SUBSIDIARIES

                                                                                  CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------------------------------------------

                                                                         February 29,         February 28,
                                                                            2000                  2001
-------------------------------------------------------------------------------------------------------------

<S>                                                                   <C>                <C>
ASSETS

Current Assets:
  Cash and cash equivalents                                             $  3,065,000        $     623,000
  Accounts receivable                                                        371,000               36,000
  Prepaid and refundable taxes                                             1,163,000              585,000
  Prepaid expenses and other current assets                                   50,000              153,000
-------------------------------------------------------------------------------------------------------------

      Total current assets                                                 4,649,000            1,397,000

Artifacts Recovered, at cost                                               9,175,000           11,282,000

Deferred Income Tax Asset                                                    634,000              303,000

Property and Equipment, net of accumulated depreciation
 of $622,000 and $936,000, respectively                                      866,000            1,328,000

Other Assets                                                                  48,000              692,000
-------------------------------------------------------------------------------------------------------------
      Total Assets                                                      $ 15,372,000        $  15,002,000
=============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued liabilities                              $  2,886,000        $     938,000
  Deferred income tax liability                                               79,000               72,000
  Deferred revenue                                                           604,000            1,241,000
-------------------------------------------------------------------------------------------------------------
      Total current liabilities                                            3,569,000            2,251,000
-------------------------------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity:
  Common stock - $.0001 par value; authorized 30,000,000 shares,
   issued and outstanding 16,187,128 and 16,947,928 shares, respectively       2,000                2,000
  Additional paid-in capital                                              14,240,000           15,240,000
  Accumulated other comprehensive operations                                       -              (31,000)
  Accumulated deficit                                                     (2,439,000)          (2,460,000)
-------------------------------------------------------------------------------------------------------------
      Stockholders' equity                                                 11,803,000           12,751,000
-------------------------------------------------------------------------------------------------------------
      Total Liabilities and Stockholders' Equity                         $ 15,372,000       $   15,002,000
=============================================================================================================
</TABLE>

See Notes to Financial Statements


                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                                                                          RMS TITANIC, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE OPERATIONS
-------------------------------------------------------------------------------------------------------------

                                                           February 28,      February 29,       February 28,
Year ended                                                     1999              2000               2001
-------------------------------------------------------------------------------------------------------------

<S>                                                      <C>               <C>                <C>
Revenue:
  Exhibitions and related merchandise sales               $  5,460,000      $  6,136,000       $  5,464,000
  Licensing fees                                             3,495,000            17,000            108,000
  Merchandise and other                                        680,000           221,000             60,000
  Sale of coal                                                 222,000            59,000             67,000
-------------------------------------------------------------------------------------------------------------
Total revenue                                                9,857,000         6,433,000          5,699,000
-------------------------------------------------------------------------------------------------------------

Expenses:
  General and administrative                                 1,733,000         6,154,000          4,407,000
  Depreciation and amortization                                246,000           303,000            587,000
  Expedition costs attributable to licensing fees            1,845,000            11,000            763,000
  Cost of merchandise sold                                      46,000            18,000              5,000
  Cost of coal sold                                             19,000             6,000              8,000
  Operating costs                                                    -                 -             41,000
  Impairment loss on exhibitry equipment                       150,000            75,000                  -

-------------------------------------------------------------------------------------------------------------
Total expenses                                               4,039,000         6,567,000          5,811,000
-------------------------------------------------------------------------------------------------------------

Income (loss) from operations                                5,818,000          (134,000)          (112,000)

Other income:
  Interest                                                      52,000           113,000             76,000
  Other                                                          5,000                 -             15,000
-------------------------------------------------------------------------------------------------------------

Income (loss) before provision for income taxes              5,875,000           (21,000)           (21,000)

Provision for income taxes                                   1,812,000                 -                  -
-------------------------------------------------------------------------------------------------------------
Net income (loss)                                        $   4,063,000      $    (21,000)       $   (21,000)
=============================================================================================================

Earnings per common share, basic and diluted             $         .25      $        -0-        $       -0-
=============================================================================================================

Weighted-average number of
 common shares outstanding                                  16,187,128        16,187,128         16,732,991
=============================================================================================================

Net income (loss)                                        $   4,063,000      $    (21,000)       $   (21,000)

Other comprehensive operations:
  Foreign currency translation                                       -                 -            (31,000)
-------------------------------------------------------------------------------------------------------------
Comprehensive net income (loss)                          $   4,063,000      $    (21,000)       $   (52,000)
=============================================================================================================
</TABLE>

See Notes to Financial Statements


                                      F-3

<PAGE>

<TABLE>
<CAPTION>

                                                                                       RMS TITANIC, INC. AND SUBSIDIARIES

                                                                           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------------

Years ended February 28, 1999, February 29, 2000 and February 28, 2001
--------------------------------------------------------------------------------------------------------------------------

                                                                               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 March 1, 1998                16,187,128   $2,000 $13,916,000             -    $(6,481,000)  $  7,437,000

Net income                                          -       -            -             -      4,063,000      4,063,000
---------------------------------------------------------------------------------------------------------------------------

Balance as of February 28, 1999            16,187,128   2,000   13,916,000             -     (2,418,000)    11,500,000

Issuance of compensatory stock options              -       -      133,000             -              -        133,000

Common stock to be issued in settlement
 of litigation                                      -       -      191,000             -              -        191,000

Net loss                                            -       -            -             -        (21,000)       (21,000)
---------------------------------------------------------------------------------------------------------------------------

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

Common stock issued for acquisition of
 intangibles                                 600,000        -       900,000            -              -        900,000

Issuance of common stock in settlement
 of litigation as of February 29, 2000       100,000        -             -            -              -              -

Issuance of common stock for services         60,000        -       100,000            -              -        100,000

Foreign currency translation adjustment            -        -             -     $(31,000)             -        (31,000)

Net loss                                           -        -             -            -        (21,000)       (21,000)

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

See Notes to Financial Statements


                                      F-4

<PAGE>

<TABLE>
<CAPTION>

                                                                                    RMS TITANIC, INC. AND SUBSIDIARIES

                                                                                  CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------------------

                                                                           February 28,    February 29,   February 28,
Year ended                                                                    1999            2000           2001
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>              <C>
Cash flows from operating activities:
  Net income (loss)                                                     $  4,063,000   $   (21,000)     $    (21,000)
-----------------------------------------------------------------------------------------------------------------------
  Adjustments  to reconcile  net income (loss) to net
   cash provided by operating activities:
    Depreciation and amortization                                            246,000       303,000           599,000
    Impairment loss on exhibitry equipment                                   150,000        75,000                 -
    Amortization of deferred revenue                                         (15,000)      104,000                 -
    Noncash settlements                                                            -       191,000                 -
    Noncash exhibition revenue                                              (750,000)            -                 -
    Issuance of common stock for services                                          -             -           100,000
    Issuance of compensatory stock options                                         -       133,000                 -
    Net deferred income tax benefit (expense)                               (509,000)      (46,000)          324,000
    Other                                                                    (57,000)       (3,000)                -
    Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                          (1,005,000)    1,274,000           335,000
      (Increase) decrease in prepaid and refundable taxes                   (383,000)     (734,000)          578,000
      Decrease (increase) in prepaid expenses and other current assets      (179,000)      129,000          (103,000)
      Decrease in other assets                                                     -             -           (29,000)
      Increase (decrease) in income taxes payable                           (144,000)            -                 -
      Increase in deferred revenue                                           500,000             -           637,000
      Increase (decrease) in accounts payable and accrued liabilities       (573,000)      976,000        (1,948,000)
-----------------------------------------------------------------------------------------------------------------------
        Total adjustments                                                 (2,719,000)    2,402,000           493,000
-----------------------------------------------------------------------------------------------------------------------
        Net cash provided by operating activities                          1,344,000     2,381,000           472,000
-----------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Artifact recovery costs                                                 (1,500,000)            -        (2,107,000)
  Purchases of property and equipment                                       (124,000)      (36,000)         (776,000)
-----------------------------------------------------------------------------------------------------------------------
        Cash used in investing activities                                 (1,624,000)      (36,000)       (2,883,000)
-----------------------------------------------------------------------------------------------------------------------

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

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

Net increase (decrease) in cash and cash equivalents                        (280,000)    2,345,000        (2,442,000)

Cash and cash equivalents at beginning of year                             1,000,000       720,000         3,065,000
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                $    720,000   $ 3,065,000      $    623,000
=======================================================================================================================


Supplemental disclosure of cash flow information:
  Cash paid during the year for income taxes                            $  2,355,000   $ 1,207,000      $        -0-
=======================================================================================================================
</TABLE>

(continued)

See Notes to Financial Statements

                                      F-5
<PAGE>

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

                                                                                  CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------------------

                                                                           February 28,    February 29,   February 28,
Year ended                                                                    1999            2000           2001
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>              <C>

Supplemental schedule of noncash financing and
 investing activities:
  Property and equipment acquired in settlement of certain
   exhibition obligations                                               $    750,000   $     - 0 -       $    - 0 -

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

  Noncash purchases of property and equipment                           $     77,000   $     - 0 -       $    - 0 -
=======================================================================================================================

  Issuance of compensatory stock options                                $      - 0 -   $   133,000       $    - 0 -
=======================================================================================================================

  Common stock to be issued in settlement litigation                    $      - 0 -   $   191,000       $    - 0 -
=======================================================================================================================

  Common stock issued for intangible assets                             $      - 0 -   $     - 0 -       $  900,000
=======================================================================================================================
</TABLE>

See Notes to Financial Statements


                                      F-6

<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED 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.

The accompanying  consolidated  financial statements include the accounts of the
Company  and its  wholly  owned  subsidiaries.  All  intercompany  accounts  and
transactions have been eliminated.

The  Company  was formed in 1987 for the  purposes  of  exploring  the wreck and
surrounding  oceanic  area  of the  vessel  the  RMS  Titanic  (the  "Titanic");
obtaining  oceanic  material and scientific data available  therefrom 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,  the sole and
exclusive  owner of any items  recovered  from the  Titanic  and, so long as the
Company is salvor-in-possession, the sole and exclusive owner of items recovered
from the  Titanic in the future,  pursuant to a judgment  entered in the Federal
District Court for the Eastern District of Virginia.

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

Artifacts  recovered  from  the  Titanic  are  carried  at the  lower of cost of
recovery or net realizable  value ("NRV").  The costs of recovery are the direct
costs of  chartering  of vessels and  related  crews and  equipment  required to
complete the dive  operations.  Costs  associated with the care,  management and
preservation of recovered Artifacts are expensed as incurred.  A majority of the
Artifacts are located outside the United States.

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

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

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


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

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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

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

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

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

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

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

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

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

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

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

Statement of Financial  Accounting  Standards  ("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


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

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


stock awards,  warrants and other, is not presented for the years ended February
28,  1999,  February  29, 2000 and February 28, 2001 since there was no dilutive
effect of potential common shares or the dilutive effect is not material.

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

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

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


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

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

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

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


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

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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

At February 29, 2000, accounts payable and accrued liabilities include a balance
of  $1,608,000  payable to  Messrs.  Tulloch  and Carlin  under the terms of the
Settlement Agreement.  At February 28, 2001, there were no amounts due under the
terms of the  Settlement  Agreement.  During the year ended  February  29, 2000,
$1,672,000  was  charged  to  operations  in  connection  with  this  Settlement
Agreement.

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

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


                                      F-10
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


3. PROPERTY AND EQUIPMENT:

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

                                     February 29,    February 28,     Estimated
                                        2000            2001        Useful Life
--------------------------------------------------------------------------------

Exhibitry equipment                 $1,385,000      $1,378,000         5 years
Office equipment                        58,000         175,000         5 years
Marine vessel and related equipment          -         529,000   5 to 10 years
Furniture and fixtures                  45,000         182,000         5 years
--------------------------------------------------------------------------------
                                     1,488,000       2,264,000
Less accumulated depreciation          622,000         936,000
--------------------------------------------------------------------------------
                                    $  866,000      $1,328,000
================================================================================


4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:


Accounts payable and accrued liabilities consist of the following:

                                                    February 29,    February 28,
                                                        2000            2001
--------------------------------------------------------------------------------

Accrued amounts under Settlement Agreement            $1,608,000             -
Amounts payable for professional and consulting fees     694,000      $492,000
Common stock to be issued                                      -       235,000
Other miscellaneous liabilities                          584,000       211,000
--------------------------------------------------------------------------------
                                                      $2,886,000      $938,000
================================================================================


5. INCOME TAXES:

The provision for income taxes consists of the following components:

                         February 28,        February 29,        February 28,
    Year ended              1999                2000                 2001
--------------------------------------------------------------------------------

    Current:
     Federal              $1,761,000                 -            $(257,000)
     State and local         560,000          $ 46,000              (35,000)
--------------------------------------------------------------------------------
                           2,321,000            46,000             (292,000)
--------------------------------------------------------------------------------

    Deferred:
     Federal                (386,000)          (86,000)             257,000
     State and local        (123,000)           40,000               35,000
--------------------------------------------------------------------------------
                            (509,000)          (46,000)             292,000
--------------------------------------------------------------------------------
                          $1,812,000          $  - 0 -            $   - 0 -
================================================================================


                                      F-11
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED 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:

                                     February 28,  February 29,  February 28,
Year ended                               1999         2000          2001
--------------------------------------------------------------------------------

Statutory federal income tax rate        34.0 %      (34.0)%      (34.0)%
Effect of federal graduated tax
 rates                                      -       (293.6)        (5.2)
State income taxes, net of federal
 benefit                                  9.5        327.6          6.0
Valuation allowance of temporary
 differences                             (8.7)           -            -
Foreign tax credits                      (2.0)           -            -
Other, net                               (2.0)           -         33.2
--------------------------------------------------------------------------------
    Effective income tax rate            30.8 %      - 0 - %      - 0 - %
================================================================================

The net deferred income tax asset consists of the following:

                                                February 29,       February 28,
                                                   2000                2001
--------------------------------------------------------------------------------

Deferred tax asset - expenses not currently
 deductible                                      $634,000           $303,000
Deferred tax liability - depreciation             (79,000)           (72,000)
--------------------------------------------------------------------------------
    Net deferred tax                             $555,000           $231,000
================================================================================


A valuation allowance of 100% of the deferred income tax asset had been provided
at  February  28,  1998 due to the  uncertainty  of  future  realization  of net
operating  loss  carryforwards.  During the year ended  February 28,  1999,  the
entire  valuation  allowance was reversed due to the  increased  earnings of the
Company. Based on management's  assessment,  it is more likely than not that all
the deferred tax assets will be realized through future taxable earnings.


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, 2001, 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  are  5,556  warrants
outstanding as of February 28, 2001.

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


                                      F-12
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


In April 2000, the Company  acquired certain  intangible  assets in exchange for
600,000  shares of its common  stock valued at $900,000  after giving  effect to
certain  restrictions  placed on such common  stock.  Concurrently,  the Company
entered into an agreement  for the services of an individual to January 3, 2003.
Since the individual will assist the Company in exploiting the intangible assets
acquired,  the  assets  are being  amortized  over the term of the  individual's
service  agreement.  The assets are included in other assets in the accompanying
balance  sheet.  Amortization  expense for the year ended  February 28, 2001 and
accumulated   amortization  at  February  28,  2001  amounted  to  approximately
$285,000.


7. STOCK OPTIONS:


Transactions relating to stock options are as follows:

                                                                Weighted-
                                          Number of              Average
                                          Shares and             Exercise
                                           Options                Price
                                         Exercisable            per Share
--------------------------------------------------------------------------------

   Balance at March 1, 1998                830,000                $1.33

Canceled                                  (500,000)               $1.25
Granted                                    500,000                $1.25
--------------------------------------------------------------------------------

   Balance at February 28, 1999            830,000                $1.33

Expired                                   (330,000)               $1.46
Granted                                    500,000                $2.00
--------------------------------------------------------------------------------

   Balance at February 29, 2000          1,000,000                $1.63

Canceled                                  (500,000)               $1.15
Granted                                  2,150,000                $1.79

--------------------------------------------------------------------------------
   Balance at February 28, 2001          2,650,000                $1.60
================================================================================


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

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

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


                                      F-13
<PAGE>


                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


In April 2000, the Company  adopted an incentive  stock option plan (the "Plan")
under which options to purchase  3,000,000 shares of common stock may be granted
to certain key employees,  directors or consultants.  The exercise price will be
based on the fair  market  value of such  shares as  determined  by the board of
directors  at the date of the grant of such  options.  As of February  28, 2001,
options to purchase 1,400,000 shares of common stock have been granted under the
Plan.

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

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

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

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

The following table summarizes the information  about stock options  outstanding
at February 28, 2001:

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

        $1.15            600,000               9.83                $1.15

        $1.25            500,000               3.10                $1.25

        $1.63            300,000               9.83                $1.63

        $1.75            500,000               9.83                $1.75

        $2.00            500,000               3.24                $2.00

$3.00 - $5.00            250,000               2.00                $4.00
--------------------------------------------------------------------------------
$1.25 - $5.00          2,650,000                                   $1.77
================================================================================


                                      F-14
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


The Company has elected,  in accordance  with the provisions of SFAS No. 123, to
apply the  current  accounting  rules  under  APB  Opinion  No.  25 and  related
interpretations in accounting for stock options and, accordingly,  has presented
the disclosure-only  information as required by SFAS No. 123. If the Company had
elected to  recognize  compensation  cost based on the fair value of the options
granted at the grant date as  prescribed  by SFAS No.  123,  the  Company's  net
income and income per common share for the years ended  February 28 (29),  1999,
2000 and 2001 would approximate the pro forma amounts shown in the table below:


                              February 28,      February 29,     February 28,
Year ended                       1999              2000             2001
--------------------------------------------------------------------------------

Reported net income (loss)    $4,063,000       $   (21,000)    $   (21,000)
================================================================================

Pro forma net income (loss)   $4,018,000       $(1,261,000)    $(2,896,000)
================================================================================

Reported net income (loss)
 per common share             $      .25       $     - 0 -     $     - 0 -
================================================================================

Pro forma net income (loss)
 per common share             $      .25       $      (.08)    $      (.17)
================================================================================


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

                              February 28,      February 29,     February 28,
Year ended                       1999              2000             2001
--------------------------------------------------------------------------------

Expected life of options        5 years            5 years      9.07 years
================================================================================

Risk-free interest rate            4.60%             5.75%           5.85%
================================================================================

Expected volatility of RMS
 Titanic, Inc.                    113.3%            113.0%          116.7%
================================================================================

Expected dividend yield on
 RMS Titanic, Inc.              $ - 0 -            $ - 0 -         $ - 0 -
================================================================================

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

                              February 28,      February 29,     February 28,
Year ended                       1999              2000             2001
--------------------------------------------------------------------------------

Fair value of each
 option granted                 $   .90            $ 1.87          $  1.38

Total number of
 options granted                500,000           500,000        2,150,000
--------------------------------------------------------------------------------
  Total fair value of all
   options granted             $450,000          $937,500       $2,962,000
================================================================================


                                      F-15
<PAGE>


                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED 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 Company was a party to certain  litigations  that have been resolved  during
the year ended  February 29, 2000  resulting in  settlements  of $391,000  being
charged to operations for such year.  The $391,000  consists of cash and 100,000
shares of the  Company's  common stock that are issuable as of February 29, 2000
and issued in 2000.

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

The  Company  was a  defendant  in  an  action  brought  by  Suarez  Corporation
Industries ("SCI") in the United States District Court for the Southern District
of New York.  Between  October 1995 and March 1997,  the Company and SCI entered
into various  agreements  providing for the  exploitation of artifacts and other
merchandise  and  arranging  for a cruise and  ancillary  events  including  the
financing and sharing of the division of  contractual  defined  profits all with
respect to the 1996  expedition  of the  Titanic  by the  Company.  SCI  brought
various  claims  that  included  co-salvor  status  and breach of  contract.  On


                                      F-16
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


February 8, 2001, the Company, as defendant, was granted a judgment in its favor
as the  lawsuit was not timely  filed and was  time-barred  from  consideration.
Suarez did not appeal this judgment within the prescribed time.

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

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

On January  27,  2000,  the  Company  was served  with a lawsuit by  Oceaneering
International, Inc. ("Oceaneering") for monies purportedly owed under a June 27,
2000  contract for maritime  services in  association  with the  Company's  2000
expedition.  The Company has filed an answer that  included a setoff for damages
that it sustained and continues to sustain as a result of Oceaneering's acts and
omissions. These include Oceaneering's failure to provide an appropriate vessel,
equipment and personnel for conducting maritime operations in the North Atlantic
for Expedition  2000. The litigation is currently in the discovery stage and the
outcome of this matter at the present time is uncertain.

On May 3, 2001, the Company was served with a lawsuit by Westgate  Entertainment
Corporation,  a California corporation,  and Weyland & Chase Engineering,  NV, a
Netherlands  Antilles  corporation,  both under the  control of John  Joslyn,  a
California  resident.  In that lawsuit,  Mr. Joslyn claims a breach of purported
five year, oral, non-cancelable, "pay or play" consulting agreement for $300,000
per year,  among other claims.  The Company has no written  consulting  contract
with any Joslyn entity. The Company intends to file a counterclaim.  This matter
is in the preliminary stages and the outcome is uncertain at the present time.


                                      F-17
<PAGE>


                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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


9. COMMITMENTS AND CONTINGENCIES:

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

During the year ended February 28, 2001, the Company entered into agreements for
the services of two individuals for an annual aggregate  amount of $245,000.  An
individual,  at his option,  may elect to receive his  compensation in shares of
the Company's common stock. For this purpose, the common stock will be valued at
50% of its closing bid price as of the date of the election.

On June 29,  2000,  the  Company  finalized  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 $300,000 per year.

Subsequent  to  year-end,  the  Company  entered  into a  three-year  employment
agreement  with an  individual  providing  for salary of $130,000 - $150,000 per
year. In addition,  this individual  received options to purchase 250,000 shares
of common stock at an exercise price of $.88 per share.

The Company has noncancelable  operating leases for office space. The leases are
subject to  escalation  for the  Company's  pro rata share of  increases in real
estate  taxes and  operating  costs.  During the fiscal year ended  February 28,
2001, the Company entered into another noncancelable  operating lease for office
space and vacated one of its  previously  used offices.  Subsequent to year-end,
the Company  entered into an agreement to sublease  certain office space through
May 2003.

Future  minimum lease  payments for leases in effect as of February 28, 2001 and
entered into  subsequent  to that date,  reduced by the minimum  lease  payments
required by the sublease agreement, are as follows:

   Year ending February 28(29),

            2002                                               $  70,000
            2003                                                  59,000
            2004                                                  91,000
            2005                                                 100,000
            2006                                                  18,000
--------------------------------------------------------------------------------
                                                                $338,000
================================================================================

Rent expense charged to operations amounted to $88,000, $84,000 and $147,000 for
the years ended  February  28,  1999,  February  29, 2000 and February 28, 2001,
respectively.

                                      F-18
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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

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


10. OTHER RELATED PARTY TRANSACTIONS:

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

Included in accounts  payable and accrued  liabilities  at February 29, 2000 and
February 28, 2001 is $25,000 due to certain partners of TVLP.


11. EXHIBITIONS:

During the three-year period ended February 28, 2001 and subsequent to year-end,
the  Company  has  presented,  through  licensing  arrangements,  the  following
exhibitions of Titanic's Artifacts and other Titanic memorabilia.


Location                                          Dates
--------                                          -----
St. Petersburg, Florida                           November 1997 - May 1998
United States

Long Beach, California                            May 1997 - March 1999
United States

Boston, Massachusetts                             July 1998 - November 1998
United States

Japan (various cities)                            July 1998 - July 1999

Zurich, Switzerland                               November 1998 - May 1999


                                      F-19
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


St. Paul, Minnesota                               January 1999 - May 1999
United States

Atlantic City, New Jersey                         May 1999 - September 1999
United States

Las Vegas, Nevada                                 January 1999 - October 2000
United States

Chicago, Illinois                                 February 2000 - October  2000
United States

Dallas, Texas                                     March 2000 - June 2000
United States

Cincinnati, Ohio                                  November 2000 - March 2001
United States

Seattle, Washington                               Began in March 2001
United States

Buenos Aires                                      Began in March 2001
Argentina

Kansas City, Missouri                             Began in April 2001
United States

Baltimore, Maryland                               Began in April 2001
United States

Nashville, Tennessee                              Began in May 2001
United States

During the year ended February 28, 1999, the Company received ownership interest
in certain  exhibitry  and equipment  aggregating  $750,000 in  satisfaction  of
exhibition fees due to the Company.

In  March  1999,  the  Company   entered  into  an  agreement  with   Magicworks
Entertainment,  Inc., a direct  subsidiary  of PACE  Entertainment,  Inc. and an
indirect subsidiary of SFX Entertainment,  Inc.  (collectively  "SFX"), in which
the Company granted SFX an exclusive  worldwide license to exhibit the Company's
Titanic  artifacts for a minimum payment of $8,500,000,  annually.  This license
agreement had an initial term of one year,  commencing  September 15, 1999, with
SFX  having the  option to extend  the term for up to four  additional  one-year
periods.  All obligations of Magicworks  Entertainment,  Inc. under this license
agreement were guaranteed by SFX Entertainment,  Inc. The original agreement was
amended on September 18, 2000 by the Company and SFX Family Entertainment, Inc.,
successor to Magicworks  Entertainment,  Inc. Another amendment was agreed to on
May 7, 2001 which  extended  the  agreement  to  December  31,  2002.  The first
amendment  required a minimum  annual  payment of  $2,000,000  that was received
during  fiscal  year ended  February  28,  2001.  Upon  execution  of the second
amendment,  an  additional  payment of $750,000  was  received.  Pursuant to the
license  agreement,  as amended,  the Company will receive twenty percent of the


                                      F-20
<PAGE>

                                             RMS TITANIC, INC. AND SUBSIDIARIES

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


ticket, merchandise, and sponsorship and ancillary revenues over $10,000,000. In
addition, the Company has the opportunity to receive additional revenue from the
South American exhibition tour, after deduction of certain related expenses,  at
fifty percent of the income received by SFX. Furthermore, the license agreement,
as amended,  requires that certain  conservation costs be equally shared between
SFX and the Company.  Upon recoupment of the project  expenses,  the Company has
the right to select and obtain legal title to, without the payment of additional
consideration,  certain of the  exhibitry  built for the  exhibitions  presented
during the term of the agreement.


12. SUBSEQUENT EVENTS:

In January  2001 the Company  entered  into  agreements  with a group of related
entities  (unrelated to the Company)  whereby these  entities  would provide the
Company future publicity services.  In exchange for these services,  the Company
was to issue these entities 200,000 shares of common stock, warrants to purchase
500,000 shares of common stock and $50,000.  Subsequent to year-end, the Company
and these entities agreed to terminate the agreements. The entities returned the
200,000 shares of common stock they received (issued after year-end),  cancelled
the warrant agreement and kept $28,000 of the amount advanced them for printing,
design and other services provided in March and April 2001.

In May 2001, the Company  acquired the rights to the shipwreck the RMS Carpathia
(the "Carpathia").  The Carpathia was the vessel that rescued the survivors from
the  Titanic.  The value that will be assigned to this asset is the  unamortized
value of other  intangible  assets  purchased  by the Company in April 2000 from
this same entity, plus the fair market value of 1,104,545 newly issued shares of
common stock. At February 28, 2001, the carrying value of the intangible  assets
returned,  which are included in other assets in the accompanying balance sheet,
was approximately $615,000.


                                      F-21