SEC Info - Commodore Holdings Ltd - IPO: ‘424A’ on 6/17/96

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Commodore Holdings Ltd – IPO: ‘424A’ on 6/17/96

As of: Monday, 6/17/96 · Accession #: 891092-96-106 · File #: 333-01270

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/17/96  Commodore Holdings Ltd            424A                   1:316K                                   Doremus Fin… Printing/FA

Initial Public Offering (IPO): Prospectus — Rule 424(a)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424A        Prospectus                                            84    517K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Additional Information Business Capitalization Certain Foreign Issuer Considerations Certain Tax Considerations Certain Transactions Combined Balance Sheet December 31, 1994 Commodore Acquisition, The Common Stock Company, The Compensation of Executive Officers Competition Concurrent Registration of Common Stock Consolidated Balance Sheets Consolidated Statements of Stockholders' Equity Description of Securities Dilution Dividend Policy Employees Employment Agreements Enforceability of Civil Liabilities Under United States Federal Securities Laws Experts Government Regulation Index to Financial Statements Insurance Joint Venture, The Legal Matters Management Management's Discussion and Analysis of Financial Condition and Results of Operations Market Position Notes to Combined Financial Statements Notes to consolidated financial statements Offering, The On-Board and Other Revenues Preferred Stock Private Offering, The Prospectus Summary Report of Independent Certified Public Accountants Risk Factors Securities Ownership of Principal and Initial Selling Stockholders Selected Financial Data Series A Preference Shares Settlement Agreement Shares Eligible For Future Sale Stock Option Plan Summary Financial Information Taxation of the Company's Stockholders The Commodore Acquisition The Company The Joint Venture The Offering The Private Offering Ticket Revenues Trademark Protection Underwriting Units Use of Proceeds Warrants
1	1st Page - Filing Submission
3	Enforceability of Civil Liabilities Under United States Federal Securities Laws
4	Prospectus Summary
"	The Company
5	The Commodore Acquisition
"	The Offering
6	Series A Preference Shares
7	Summary Financial Information
8	Risk Factors
17	Use of Proceeds
"	Dividend Policy
18	Dilution
19	Capitalization
20	Selected Financial Data
21	Management's Discussion and Analysis of Financial Condition and Results of Operations
25	Business
26	Settlement Agreement
27	The Private Offering
28	Market Position
31	Ticket Revenues
"	On-Board and Other Revenues
"	Competition
32	The Joint Venture
35	Employees
36	Insurance
"	Government Regulation
38	Trademark Protection
39	Certain Tax Considerations
41	Taxation of the Company's Stockholders
44	Management
45	Compensation of Executive Officers
47	Employment Agreements
"	Stock Option Plan
48	Securities Ownership of Principal and Initial Selling Stockholders
49	Certain Transactions
"	Description of Securities
50	Units
"	Common Stock
"	Warrants
51	Preferred Stock
55	Shares Eligible For Future Sale
"	Certain Foreign Issuer Considerations
56	Underwriting
58	Concurrent Registration of Common Stock
"	Legal Matters
"	Experts
"	Additional Information
59	Index to Financial Statements
60	Report of Independent Certified Public Accountants
61	Consolidated Balance Sheets
63	Consolidated Statements of Stockholders' Equity
65	Notes to consolidated financial statements
73	Combined Balance Sheet December 31, 1994
78	Notes to Combined Financial Statements

424A 1st Page of 84 TOC ↑Top Previous Next ↓Bottom Just 1st
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.

Subject to Completion, dated May 28, 1996
PROSPECTUS
1,000,000 Units

[COMMODORE LOGO]

COMMODORE HOLDINGS LIMITED

Commodore Holdings Limited, a Bermuda corporation (the "Company"), hereby
offers for sale (the "Offering") 1,000,000 units (the "Units") of the Company.
Each Unit consists of one share of Common Stock, $.01 par value per share (the
"Common Stock") and one redeemable warrant to purchase one-half share of Common
Stock (the "Warrants") for $6.00 per share. The Warrants are exercisable only in
pairs, with two Warrants entitling the registered holder to purchase one share
of Common Stock. The Warrants are exercisable for a period of four years
commencing one year from the date of issuance, subject to prior redemption. The
Warrants may be redeemed by the Company on 25 days' notice at any time after one
year from the date of issuance for $.05 per Warrant if the closing bid price of
the Common Stock exceeds $9.00 per share for 20 consecutive trading days ending
not more than 15 days prior to the date of any redemption notice. See
"Description of Securities -- Warrants." The Common Stock and Warrants will be
detachable and separately tradeable upon issuance. See "Underwriting" and
"Description of Securities -- Warrants."

Of the 1,000,000 shares of Common Stock underlying the Units, 500,000
shares are being sold by the Company and 500,000 shares are being sold by
certain of the selling stockholders (the "Initial Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of Common Stock by
the Initial Selling Stockholders. The share of Common Stock underlying each Unit
accounts for $4.50 of the $4.60 price of each Unit.

Prior to the Offering, there has been no public market for the Units,
Common Stock or Warrants, and there can be no assurance that any such market
will develop. The offering price for the Units has been determined by
negotiations between the Company and First Hanover Securities, Inc. (the
"Underwriter") and is not necessarily related to the Company's asset value, net
worth or other established criteria of value. See "Underwriting." The Company
has applied to The Nasdaq National Market for inclusion, respectively, of the
Common Stock and Warrants. The proposed trading symbols for the Common Stock and
Warrants are __________ and __________, respectively. See "Underwriting."

See "Risk Factors" beginning on page 8 for a discussion of certain factors
that should be considered in connection with an investment in the Units.

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

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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

[Enlarge/Download Table]

Proceeds to
Price to Underwriting Discounts Proceeds to Initial
Public and Commissions(1) Company(2) Selling Stockholders
--------------------------------------------------------------------------------------------------------

Per Unit ...... $ 4.60 $ .46 $ 4.14(3) $ 4.05
--------------------------------------------------------------------------------------------------------
Total(4) ...... $4,600,000 $460,000 $2,115,000 $2,025,000

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

(1) Does not include additional compensation to the Underwriter consisting of:
(a) a non-accountable expense allowance equal to 3% of the gross proceeds
of the Offering; (b) a five-year warrant, exercisable after one year, to
purchase 100,000 Units at $6.90 per Unit; (c) a management and financial
consulting agreement for a period of twenty-four months for an aggregate
consideration of $48,000 payable on the closing of the Offering; and (d) a
right of first refusal with respect to certain public or private sales of
securities by the Company during the next year. The Company has also agreed
to pay to the Underwriter, a warrant solicitation fee of 5% under certain
circumstances and to indemnify the Underwriter against certain liabilities
including those arising under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."

(2) After deducting discounts and commissions payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance and
other expenses of the Offering (estimated at $449,716), payable by the
Company. See "Underwriting."

(3) The Company will receive $4.14 in proceeds from the sale of Units in which
newly issued shares constitute the underlying Common Stock, and $.09 in
proceeds from the sale of Units in which the Initial Selling Stockholders'
shares constitute the underlying Common Stock. Such $.09 represents the
proceeds from the Warrant underlying each Unit.

(4) The Company has granted the Underwriter an option, exercisable for 30
calendar days after the closing of the Offering (the "Closing"), to
purchase up to 150,000 additional Units, upon the same terms and conditions
set forth above, solely for the purpose of covering over-allotments, if any
(the "Over-Allotment Option"). If the Over-Allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
and Proceeds to the Company will be $3,040,000, $304,000 and $2,736,000,
respectively. All shares of Common Stock underlying the Units comprising
the Over-Allotment Option will be sold by the Company. Accordingly, no
proceeds from the sale therefrom will be paid to the Initial Selling
Stockholders. See "Underwriting."

The Units are offered by the Underwriter on a firm commitment basis,
subject to prior receipt and acceptance, the approval of certain legal matters
by counsel and prior sale, when, as and if issued. The Underwriter reserves the
right to withdraw, cancel or modify the Offering and to reject any order, in
whole or in part. It is expected that delivery of the certificates representing
the Units will be made against payment therefor at the offices of the
Underwriter, 100 Wall Street, New York, New York on or about ____________, 1996.

---------------
[LOGO]
FIRST HANOVER SECURITIES, INC.

The date of this Prospectus is ____________, 1996

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[INSIDE FRONT COVER PAGE]

This Prospectus also relates to the offer and sale by certain persons (the
"Selling Stockholders") of up to 5,338,912 shares of Common Stock, which include
1,006,979 shares of Common Stock, which presently may be issued upon the
conversion of the Company's Convertible Series A Preference Shares (the "Series
A Preference Shares"). All of the Selling Stockholders are prohibited from
selling any of such shares for a period of one year without the prior written
consent of the Underwriter. See "Concurrent Registration of Common Stock."

424A 3rd Page of 84 TOC 1st Previous Next ↓Bottom Just 3rd
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS

The Company is a Bermuda company and certain of its directors are residents
of jurisdictions outside the United States. All or a substantial portion of the
assets of such directors and of the Company are or may be located in
jurisdictions outside the United States. Therefore, it ordinarily could be
difficult for investors to effect service of process within the United States on
any of these parties who reside outside the United States or to recover against
them on judgments of U.S. courts predicated upon civil liability under the U.S.
federal securities laws.

The Company has been advised by its legal advisor in Bermuda, Richards,
Francis & Francis, that the United States and Bermuda do not have a treaty
providing for the reciprocal recognition and enforcement of judgments (other
than arbitration awards) in civil and commercial matters. Therefore, a final
judgment for the payment of money rendered by any federal or state court in the
United States based on civil liability, whether or not predicated solely upon
the U.S. federal securities laws, would not be automatically enforceable in
Bermuda. However, a final and conclusive judgment of a state or federal court of
the United States under which a sum of money is payable (not being a sum payable
in respect of taxes or other charges of a like nature, in respect of a fine or
penalty, or in respect of multiple damages as defined in The Protection of
Trading Interests Act 1981 Bermuda) may be the subject of enforcement
proceedings in the Supreme Court of Bermuda under the common law doctrine of
obligation by action for the debt evidenced by the United States court's
judgment. On general principles, such proceedings should be successful upon
proof that the sum of money is due and payable, and without having to prove the
facts supporting the underlying judgment, provided that (i) such court had
proper jurisdiction over the parties subject to such judgment, (ii) such court
did not contravene the rules of natural justice of Bermuda, (iii) such judgment
was not obtained by fraud, (iv) the enforcement of the judgment would not be
contrary to the public policy of Bermuda, (v) no new admissible evidence
relevant to the action is submitted prior to the rendering of the judgment by
the courts of Bermuda and (vi) due compliance was made with the correct
procedures under the laws of Bermuda. Based on the foregoing, there can be no
assurance that U.S. investors will be able to enforce in Bermuda judgments in
civil and commercial matters obtained in any federal or state court in the
United States. A Bermuda court may impose civil liability on the Company or the
Company's directors or officers in a suit brought in the Supreme Court of
Bermuda against the Company or such persons with respect to a violation of U.S.
federal securities laws, provided that the facts surrounding such violation
would constitute or give rise to a cause of action under Bermuda law.

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

PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information and
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. As used in this Prospectus, (i) all references to "U.S." mean the
United States of America, its states, its territories, its possessions and all
areas subject to its jurisdiction; (ii) references to a "fiscal" year or
references to the Company's operating results and other data in respect of a
specific year shall be references to the year ended September 30; and (iii) the
source of all industry data except where otherwise indicated is as reported by
Cruise Lines International Association ("CLIA"), an industry trade group,
without any independent verification. References in this Prospectus to the
Company include references to the Company's subsidiaries whenever appropriate.

The Company
General

Commodore Holdings Limited, a Bermuda exempted company (the "Company"),
owns two cruise ships, the S/S Enchanted Isle (the "Enchanted Isle") and the S/S
Universe Explorer (formerly the S/S Enchanted Seas) (the "Universe Explorer" or
the "Enchanted Seas"). The Enchanted Isle offers Caribbean cruises from New
Orleans and the Universe Explorer is chartered to Sea-Comm, Ltd., a Liberian
corporation ("Sea-Comm"), a joint venture between the Company and Seawise
Foundation, Inc. ("Seawise"), which in turn has space-chartered the vessel to
Seawise, which operates the educational "Semester at Sea" program during a
portion of the year. Sea-Comm will operate cruises to Alaska aboard the Universe
Explorer during the balance of the year. The Company acquired the Enchanted Isle
and the Enchanted Seas in July 1995 from Commodore Cruise Line Limited, a Cayman
Islands Company and certain of its subsidiaries ("Old Commodore").

Since April 1995, the Enchanted Isle has offered seven day cruises from New
Orleans to the Western Caribbean with ports-of-call at Cancun, Cozumel, Grand
Cayman and Montego Bay (alternately, Key West). It is a 23,395 gross registered
ton cruise vessel, has nine passenger decks, a capacity of approximately 729
passengers in 366 cabins (on a double occupancy basis), is of Panamanian
registry and was built in 1958. The Enchanted Isle is designed to be a seagoing
resort containing a casino, nightclub, movie theater, swimming pool,
restaurants, workout room, sundeck and deck activities. Old Commodore acquired
the Enchanted Isle in May 1989, and from May 1989 until May 1993, the Enchanted
Isle was operated as a cruise ship. From May 1993 until August 1994, Old
Commodore chartered the Enchanted Isle to an entity which operated it as a
floating hotel in St. Petersburg, Russia. The ship was then removed from service
before being renovated between August 1994 and December 1994 and returned to
Caribbean cruise service. In December 1994, while on a cruise to Barbados, the
cruise vessel caught fire near San Juan, Puerto Rico and was out of service for
repair until February 1995 when it began an itinerary from Barbados to
ports-of-call in the Caribbean. In April 1995, the Enchanted Isle was
repositioned to New Orleans.

Revenues from the Enchanted Isle are derived from ticket sales and from
certain on-board activities and services operated by the Company including
casino gambling, liquor sales in a variety of bars, restaurants, lounges, and a
discotheque. Additional revenue is earned from the sale of pre- and post-cruise
packages in the vessel's city of embarkation. The Company earns concession
revenue from duty-free shops, gift shops, the sale of photographs to passengers,
shore excursions and from the beauty salon. See "Business -- On-Board and Other
Revenues."

The Universe Explorer is a 23,900 gross registered ton cruise vessel, has
nine passenger decks, a capacity of approximately 739 passengers in 363 cabins
(on a double occupancy basis), is of Panamanian registry and was built in 1958.
The Universe Explorer was designed to be a seagoing resort containing a casino,
discotheque, movie theater, library, reading room, restaurants, full service
communication facilities, two pools, jogging course, aerobic classes, workout
room, sun deck areas and deck activities. Old Commodore acquired the Enchanted
Seas in May 1989. The Enchanted Seas operated as a cruise ship on different
itineraries between May 1989 and April 1995. The Enchanted Seas was then laid up
and placed in drydock for maintenance and refurbishing between April 1995 and
January 1996. During this time, the Company renovated portions of it to prepare
it for use both as a cruise vessel and for use in the Semester at Sea program.
The Company removed the vessel's casino to install a library, and installed
various partitions so that certain lounges and dining areas could be easily
converted to classrooms when needed for the Semester at Sea program and returned
to their prior state when used for cruises. The Company also renamed the vessel
the "Universe Explorer." See "Business -- The Joint Venture."

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Revenues from the Universe Explorer are derived from charter revenue.
Sea-Comm derives revenues from different sources depending on whether the vessel
is being used as a cruise vessel or for the Semester at Sea program. Cruise
revenues include those from ticket sales and certain on-board activities and
services such as beverage sales, shore excursions, and concession revenue.
Revenues from the Semester at Sea program are derived from space charter fees
and ticket sales to adult (non-student) passengers, who may represent up to 24%
of the passengers on each voyage. Seawise has guaranteed ticket sales to 60
adult passengers on each voyage during 1996, which number increases in
subsequent years. Additional revenue is earned from beverage and snack bar sales
and from other miscellaneous on-board services. See "Business -- The Joint
Venture", "Business -- Ticket Revenues" and "Business -- On-Board and Other
Revenues."

Cruises in general are differentiated primarily by cruise cost, length and
itinerary. Segments within the cruise industry include the standard, premium and
luxury cruises, each of which, the Company believes, appeals to different
population segments and attracts varying demographic groups. The standard
market, in which the Company competes, is the largest of the three segments,
comprising approximately 55% of industry-wide capacity. See "Business -- Market
Position."

The Company believes that the Semester at Sea program is unique, and to
its knowledge, the Universe Explorer is the only such floating university in the
world. The program competes indirectly, however, with land-based semester or
year abroad programs offered to college students. See "Business -- Competition."

The Company was incorporated in Bermuda on April 13, 1995. The executive
offices of the Company are located at 4000 Hollywood Boulevard, Suite 385, South
Tower, Hollywood, Florida 33021, and its telephone number is (954) 967-2100.

The Commodore Acquisition

The Company and its wholly-owned subsidiaries were established for the
purpose of acquiring certain assets (the "Commodore Acquisition") of an existing
cruise line operation from Old Commodore. The Commodore Acquisition included the
trade names "Commodore" and "Commodore Cruise Line" ("Commodore"), as well as
certain related trade names and trademarks (collectively, the "Trademarks"), the
Enchanted Isle and the Enchanted Seas, and all of Old Commodore's existing
operations with regard to the Enchanted Isle and the Enchanted Seas (together
the "Cruise Ships"), including certain advance ticket sales, marketing and sales
information, and certain shoreside assets (collectively, the "Commodore
Assets").

The Company closed the Commodore Acquisition on July 14, 1995 (the
"Commodore Closing"). The purchase price for the Commodore Assets was
$33,500,000. The Company paid $5,000,000 to Old Commodore, which represented the
cash portion of the purchase price. In addition, the Company issued 1,000,000
shares of its convertible series A preference shares (the "Series A Preference
Shares") at an agreed value of $4.00 per share to EffJohn International B.V.
("EffJohn"), the parent company of Old Commodore, as partial payment of the
purchase price. EffJohn International Cruise Holdings, Inc. (the "Lender"), an
affiliate of EffJohn, loaned the balance of the purchase price, $24,500,000, to
the Company (the "Loan"), which is secured by substantially all of the assets of
the Company's wholly-owned subsidiary New Commodore Cruise Line Limited, a
Bermuda exempted company ("New Commodore"), including first preferred ship's
mortgages on the Cruise Ships. For additional terms of the Commodore
Acquisition, see "Business -- The Commodore Acquisition." References herein to
the operations of the Company are to the historical operations of Old Commodore
prior to the Commodore Closing and to those of the Company subsequent thereto.

The Offering

Securities Offered ........... 1,000,000 Units. Each Unit consists of one share
of Common Stock and one Warrant to purchase
one-half share of Common Stock. See "Description
of Securities."

Terms of Warrants ............ The Warrants are exercisable only in pairs, with
two Warrants entitling the holder to purchase
one share of Common Stock for an exercise price
of $6.00 per share commencing one year after the
date of this Prospectus and terminating five
years after the date of this Prospectus (the
"Expiration Date"), subject, in certain
circumstances, to earlier redemption by the
Company. The exercise price and number of shares
issuable upon exercise of the Warrants are
subject to adjustment in certain circumstances.

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The Warrants will be detachable from the Common
Stock and separately tradeable upon issuance.
See "Description of Securities-- Warrants."

Common Stock Outstanding
Prior to Offering(1)(2) ... 4,931,933 shares of Common Stock.

Common Stock to be
Outstanding After
the Offering(1)(2)(3) ..... 5,431,933 shares of Common Stock and warrants to
purchase 1,575,000 shares of Common Stock
(assuming the Underwriter does not exercise the
Over-Allotment Option.) See "Management,"
"Principal Stock-holders" and "Certain
Transactions."

Warrants Outstanding Prior
to Offering(4) ............ 1,075,000 warrants.

Warrants to be Outstanding
After the Offering(5) ..... 1,000,000 Warrants and 1,075,000 warrants.

Series A Preference Shares
Outstanding(6) ............. 1,006,979 shares.

Use of Proceeds ............. The net proceeds to the Company from the sale of
the Units will be $1,665,284, after deducting
commissions and expenses of the Offering
estimated at $684,716. The Company intends to
use the net proceeds of this Offering for
renovations to its vessels and for working
capital purposes. See "Use of Proceeds."

Risk Factors ................ An investment in the Units is speculative and
involves a high degree of risk and should not be
purchased by anyone who cannot afford the loss
of his entire investment. See "Risk Factors" and
"Dilution."

Proposed Nasdaq National
Market Symbols(7) ......... Common Stock -- ___________
Warrants -- ___________

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

(1) Does not include an aggregate of 500,000 shares of Common Stock reserved
for issuance upon the exercise of options available for future grant under
the Company's stock option plan (the "Plan"). See "Management -- Stock
Option Plan."

(2) Does not include the Series A Preference Shares, which are currently
convertible into shares of Common Stock at the conversion rate of the
higher of US$4.00 or eight times the annual primary earnings per share of
Common Stock for the previous fiscal year.

(3) Does not include 225,000 shares of Common Stock issuable upon exercise in
full of the Over-Allotment Option and the Warrants and underlying shares of
Common Stock included therein, or 150,000 shares of Common Stock issuable
upon exercise of the Underwriter's Warrant and the shares of Common Stock
underlying the Warrants contained therein. See "Underwriting."

(4) These warrants do not contain the same terms as the Warrants offered
herein. See "Description of Securities."

(5) Does not include 150,000 Warrants underlying the Units in the
Over-Allotment Option or 100,000 Warrants underlying the Units in the
Underwriter's Warrant.

(6) Convertible into Common Stock at the conversion rate of the higher of
US$4.00 or eight times the annual primary earnings per share of Common
Stock for the previous fiscal year. See "Description of Securities --
Series A Preference Shares."

(7) The proposed symbols do not imply that a liquid and active market will
develop or be sustained for the securities upon completion of the Offering.

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SUMMARY FINANCIAL INFORMATION

The following summary financial information has been extracted from, and
should be read in conjunction with, the Consolidated Financial Statements and
related Notes thereto of the Company and the Combined Financial Statements of
the S/S Enchanted Seas and S/S Enchanted Isle, operating units of EffJohn
International B.V. (the "Predecessor") included elsewhere in this Prospectus.
Pro forma information is presented assuming the acquisition of the Cruise Ships
and the associated secured indebtedness, and the elimination of the redemption
feature of the Series A Preference Shares, as of October 1, 1994.

(Dollars in thousands, except per share data)

[Enlarge/Download Table]

New
Commodore New
Period Pro forma Predecessor Commodore
Predecessor Ended Year Ended Six Months Ended
Years Ended December 31, September 30, September 30, March 31,
----------------------------------------------- ------------ ------------ ----------------------
1991 1992 1993 1994 1995(1) 1995 1995 1996
------ ------ ------ ------ ------ ------ ------ ------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

INCOME STATEMENT DATA:
Total revenues $ 60,465 $ 54,368 $ 45,650 $ 41,860 $ 7,256 $ 35,075 $ 17,606 $19,174
Operating expenses 45,705 44,229 34,265 28,527 4,941 34,704 18,244 13,955
Selling & adminis-
trative expenses 12,261 11,114 6,833 6,484 1,664 9,899 5,609 3,766
Depreciation and
amortization 5,139 5,530 4,903 3,599 198 1,693 1,780 620
Interest Expense, net 3,277 1,980 1,682 1,294 133 1,929 1,367 486
Write-off of goodwill -- -- 6,023 -- -- -- -- --
Other Income -- -- -- -- -- 4 -- (341)
Loss on Vessel Fire -- -- -- 1,367 -- -- 1,367 --
Minority interest in
earnings of con-
solidated joint
venture -- -- -- -- -- -- -- 412
Net earnings (loss)
before tax (5,917) (8,485) (8,056) 589 320 (13,154) (10,761) 276
Provision for taxes -- -- -- -- 8 -- -- --
Net earnings (loss)
before preferred
stock dividend $ (5,917) $ (8,485) $ (8,056) $ 589 $ 312 $(13,154) $(10,761) $ 276
Provision for preferred
stock dividend -- -- -- -- 60 280 -- 140
Net earnings (loss)
available for
Common Stock-
holders $ (5,917) $ (8,485) $ (8,056) $ 589 $ 252 $(13,434) $(10,761) 136
======== ======== ======== ===== ===== ======== ======== ======
Net earnings (loss)
per share(2)(3) -- -- -- -- 0.06 (2.59) .03
======== ======== ======== ===== ===== ======== ======
Average shares
outstanding (000's) 4,378 5,185 5,185
===== ======== ======
BALANCE SHEET DATA:
Property and equipment,
net of depreciation $ 37,565 $33,085 $37,450
Total assets $ 40,232 $44,097 $47,751
Total borrowings $ 30,020 $28,500 $24,367
Total stockholders'
equity (deficit) ($ 5,585) $ 8,519 $ 8,795

---------------
(1) The period is from April 13, 1995 (date of inception) through September 30,
1995; however, the Company commenced cruise operations on July 15, 1995
when the Company acquired the vessels.

(2) Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and equivalents outstanding during each period
after giving effect for dividends on the Series A Preference Shares.

(3) Earnings per share does not apply to fiscal years 1991-1994 and the six
months ended March 31, 1995 because during such periods Old Commodore was
an operating unit of EffJohn International B.V.

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RISK FACTORS

THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT IN THE
COMPANY. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, AS WELL AS ALL OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS.

1. Lack of Operating History of the Company; Lack of Experience of
Management

The Company was formed in April 1995 for the purpose of acquiring the
Commodore Assets. Although certain members of the Company's management have
experience in the operation of cruise ship lines while in the employ of others,
a number of members of the Company's management lack such experience, and those
members of management with such experience have not necessarily worked together
as a management team previously. In addition, although the Cruise Ships have an
audited operating history, such operating history may not be indicative of the
results of the Company if the Company's cost structure and planned operations
vary from that of the Predecessor. Accordingly, prospective investors should
recognize that as a new venture, the Company lacks a substantial operating
history, as a result of which no assurance can be given as to its ability to
operate profitably or to sustain profitability if achieved. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
"Management," "Consolidated Financial Statements" and "Combined Financial
Statements."

2. History of Losses; Working Capital Deficits

During the six months ended March 31, 1996, the Company had net income of
$275,708 resulting, in large part, from $425,000 in revenue from the
cancellation of a charter agreement with an affiliate, as well as $340,000 in
other income. Absent such revenue, the Company would have incurred a net loss
for this period. During the five and one-half month period ended September 30,
1995, the Company had net income of $311,535, which also resulted, in large
part, from $425,000 in revenue from the cancellation of a charter agreement with
an affiliate. Absent such revenue, the Company would have incurred a net loss
for the five and one-half month period ended September 30, 1995 as well.
Moreover, for the six and one-half month period ended July 14, 1995, the
Predecessor incurred a net loss of $17,093,049. For the years ended December 31,
1994 and 1993, the Predecessor earned income of $589,151, and incurred a net
loss of $8,056,183. Furthermore, the Company also had a working capital
deficiency at March 31, 1996 of $5,078,070, respectively. There can be no
assurance as to when, if ever, the Company will achieve profitability. See
"Business," "Consolidated Financial Statements" and "Combined Financial
Statements."

3. Need for Additional Financing

The Company estimates that the net proceeds of the Offering and operating
cash flow from the Cruise Ships will be sufficient to satisfy its anticipated
cash requirements for a period of approximately 12 months following the
consummation of the Offering. In the event that such proceeds prove to be
insufficient, and the Company does not generate sufficient cash flow from
operations to satisfy cash requirements, the Company may find itself in a
position in which it may be required to seek additional equity or debt financing
to support its ongoing operations. No assurance can be given that such funds, if
required, will be available on terms that are satisfactory to the Company, if
they are available at all. If the Company is unable to obtain such financing
when needed, it might default under the Loan, cause the Cruise Ships to be
foreclosed upon and cease its operations. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

4. Substantial Indebtedness; Existence of Liens on All Assets

Upon the Commodore Closing, the Company became indebted to the Lender in
the amount of U.S. $24,500,000 (the "Acquisition Indebtedness"), which
indebtedness is secured by a lien on substantially all of New Commodore's
assets. While the Acquisition Indebtedness may increase the potential return on
invested capital, it also presents additional elements of risk, including the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, ship and other acquisitions,
general corporate purposes or other purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the

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payment of the principal and interest on its indebtedness and if such funds are
insufficient the Company will be forced to raise additional funds or curtail
activities such as marketing; (iii) the Company's degree of leverage may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures; and (iv) the Company's borrowing at variable rates of
interest will subject the Company to fluctuations in interest rates. Moreover,
to the extent that the Company's assets continue to be pledged to secure the
Acquisition Indebtedness, such assets will be unavailable to secure additional
debt financing, which may adversely affect the Company's ability to borrow in
the future. A substantial portion of the Company's cash flow will be used for
debt service. If the Company fails to satisfy obligations with respect to the
Acquisition Indebtedness, including without limitation making required payments
of principal and interest, the Acquisition Indebtedness could be declared in
default and the Company's assets foreclosed upon. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "The Company
-- The Commodore Acquisition."

5. Exemption from Certain U.S. Income Taxes

The Company is a foreign corporation which is engaged in a trade or
business in the United States. The Internal Revenue Code of 1986, as amended
(the "Code") provides a complex set of tax rules concerning the taxation of
foreign corporations engaged in business in the United States. Under these
rules, such a foreign corporation may be subject to various U.S. taxes,
including the regular U.S. corporation income tax (or alternative minimum tax);
an additional branch profits tax; a gross basis tax on certain gross rentals
derived from bareboat charters of ships to affiliated or unaffiliated companies;
and branch taxes on certain interest paid or accrued. The Company expects that,
unless and except to the extent that it qualifies for the tax exemption provided
by Code section 883(a), it will be subject to these U.S. income taxes.

The Company anticipates that upon completion of this Offering it will
qualify for this exemption because Code section 883(c) generally makes eligible
for the Code section 883(a) exemption wholly-owned foreign subsidiaries of a
foreign corporation, provided that both the country of incorporation of the
foreign subsidiary, and the country of incorporation of the foreign parent,
reciprocally exempt the international shipping income of U.S. shipping
corporations, and the foreign parent's stock is primarily and regularly traded
on an established securities market in the United States or in certain foreign
countries.

However, there is no assurance that the Company will successfully complete
this Offering. Even if this Offering is completed, there are certain events,
such as decline in the market value of the Company's Common Stock relative to
the value of its Series A Preference Shares, a de-listing from Nasdaq, a change
in the Bermuda or Panama tax laws governing shipping income, or a change in Code
section 883(a) or regulations issued thereunder, which could cause the Company
to not qualify for the reciprocal exemption provided by that section. Therefore
there can be no absolute assurance that the corporate tax exemption provided by
Code section 883(a) will be available. See "Certain Tax Considerations --
Taxation of the Company -- Possible U.S. Tax Exemption under Section 883(a) of
the Code."

6. Competition

The cruise line industry is extremely competitive. The Company operates in
the Gulf of Mexico, the Caribbean and in Alaska, and competition for passengers
in such geographic areas is intense. The Company competes with other cruise ship
lines in the standard segment that offer the same type of products in several
markets, and land-based resorts, many of which have significantly greater
financial resources and experience, and are more well known than the Company.
The Company competes with its competitors principally on the basis of quality of
service, type and variety of itineraries and price. In particular, since the
Company presently has only two vessels, with limited itineraries, it may be
disadvantaged in attracting passengers. Fixed costs represent the major portion
of a cruise line's operating expenses and cannot be reduced when competition
causes a reduction in load factors or ticket prices. In addition, cruise demand
declined slightly during 1994 and 1995 for the first time in several years. As a
result, there can be no assurance that satisfactory occupancy percentages will
be reached and maintained or that the Company will be able to sustain or enhance
any penetration and competitive position.

Recent statistics indicate that the larger cruise lines are increasing
existing capacity by acquiring new ships, making it very difficult for smaller
operators, such as the Company, to compete with the glamorous new ships for
passengers. Industry sources predict that the increase in capacity will not be
matched by a sufficient increase in passenger volume and that the older ships
will not operate at full capacity. Various articles concerning the cruise line

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industry note that this trend is expected to continue in the foreseeable future.
If this trend continues, the Company's ability to compete with these larger
operators may be substantially impaired.

Although the Company believes that the Universe Explorer offers the only
ocean-going accredited educational program, such as the Semester at Sea program,
this program competes for student passengers with operators of land-based
university programs, such as semesters abroad. Many of these universities have
substantially greater experience and resources than the operators of the
Semester at Sea program. In addition, the Semester at Sea program competes for
adult passengers with extended cruise providers, such as freighters which offer
passenger quarters. In the event such programs are not successful, the operator
could, in certain circumstances, cancel the charter of the Universe Explorer,
and the Company would have to seek another use of this vessel. There can be no
assurance that the Company could successfully identify a profitable alternative
for such vessel.

7. The Cruise Ships; Purchase of Commodore Assets "AS IS"

The Enchanted Isle underwent an overhaul and refitting from August 1994
until December 1994. The Company just completed a substantial overhaul on the
Universe Explorer to prepare it for the Semester at Sea program. There can be no
assurance, however, that required drydock maintenance will be completed in the
future on a timely basis. Delays in completing future maintenance may be caused
by technical matters, strikes, acts of God, or negligence. The Cruise Ships were
built in 1958. Their age makes them particularly susceptible to this risk. In
the event of any such delay, the Company would likely lose substantial revenue
while such vessel was out of service. Although the Company has obtained
insurance to recover lost revenues when either of the Cruise Ships is out of
service due to a covered event for more than two weeks, there can be no
assurance that insurance proceeds will be adequate to cover the Company's
losses.

Moreover, the Company acquired the Commodore Assets "AS IS", and thus did
not receive any assurances from EffJohn as to the condition of the Commodore
Assets. The Company did, however, have a professional surveyor survey the Cruise
Ships and EffJohn was obligated to deliver them to the Company in substantially
the same condition as each vessel was in at the time of its inspection. In
addition, EffJohn was obligated to perform specified maintenance and repairs on
the Universe Explorer and deliver this vessel to the Company upon satisfactory
completion of such repairs as confirmed by the vessel's classification society.
Each vessel was inspected by its respective classification society prior to
delivery to the Company and was delivered up to its class standards. Despite
these inspections, deficiencies in one or both of the vessels may exist which
were not noted by the surveyor. In addition, although management of the Company
has attempted to review the operations of Old Commodore and the other assets of
Old Commodore which the Company acquired, it may not have uncovered all material
problems or defects which exist with respect to the Commodore Assets. If the
Company discovers any such defects or deficiencies with respect to the Commodore
Assets, including the vessels, in the future, it will not have any recourse
against EffJohn or Old Commodore, and will have to bear any such loss without
contribution from such entities. See "Business -- The Commodore Acquisition."

8. Government Regulation

The Cruise Ships are registered in Panama, and are subject to regulations
issued by Panama, including regulations issued pursuant to international
treaties governing the safety of the ships and its passengers. The country of
registry will conduct periodic inspections to verify compliance with these
regulations. The United States Coast Guard periodically carries out Port State
control verification of the condition of the Cruise Ships and their compliance
with international and Panama regulations, as permitted under international
treaties. The Company believes that the Cruise Ships are in substantial
compliance with all applicable regulations and that they have the licenses
necessary to conduct their business; however, there can be no assurance that the
Cruise Ships comply with all such regulations.

The Company is also subject to international treaties prohibiting ocean
dumping and to various U.S. laws and regulations relating to environmental
protection. Under such laws and regulations, the Company will be prohibited
from, among other things, discharging materials, such as petrochemicals and
plastics, into the waterways. The Company has obtained insurance against the
costs of environmental damage due to oil pollution occasioned at, or in transit
to, sea. However, the civil and criminal fines that may be imposed for
environmental damage or for illegal ocean dumping are not and cannot be insured
against and the Company remains exposed to this risk although the Company does

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have and expects to continue regular training and to maintain established
procedures to prohibit and prevent the discharge or dumping of prohibited
substances. Although the financial costs relating to U.S. environmental laws and
regulations are not expected to have a material adverse impact on the Company's
results of operations, financial condition or liquidity, there can be no
assurance that an uninsured loss will not occur.

The Company believes that it is in substantial compliance with all
regulations applicable to the operation of the Cruise Ships and has the licenses
necessary to conduct its business, however, there can be no assurance thereof.
From time to time, legislation has been introduced and new regulations proposed
which could have an impact upon the Company's operations. During recent years,
the International Convention on Safety of Life at Sea ("SOLAS") has been amended
and will, among other things, require most passenger vessels not fitted with
sprinkler systems to install such systems and other safety arrangements,
including smoke detection systems, low-location lighting and enclosed escape
stairwells, by October 1997. In the event a vessel meets certain requirements
under SOLAS as amended through 1974, but without reference to any subsequent
amendments thereto ("SOLAS 1974"), it will not be required to be fitted with a
sprinkler system or to make other required safety modifications until on or
before October 1, 2005. The Cruise Ships are not currently fitted with sprinkler
systems. The Company believes that the Cruise Ships meet the necessary
requirements under SOLAS 1974 and thus that it will not have to fit them with
sprinkler systems or make other modifications until October 1, 2005. Neither the
U.S. Coast Guard nor either of the Cruise Ships' classification societies has
definitely confirmed that the Cruise Ships meet the SOLAS 1974 requirements.
Thus, there is a risk that the Company will have to install such systems and
make such modifications aboard the vessels in 1997. The cost of such
installation and modifications is presently estimated to be approximately
$3,000,000 per vessel. The Company has not set aside or otherwise anticipated
where it will obtain such funds if it must meet the 1997 deadline. In addition,
the installation of the sprinkler systems could require that the Cruise Ships be
out of service for approximately three months with the attendant loss of
revenue. The installation of sprinkler systems aboard the Cruise Ships in 1997,
if required, could have a material adverse effect on the financial condition of
the Company.

There have been efforts in prior Congresses to adopt bills that would apply
United States labor laws to non-resident alien crews of foreign registered ships
sailing from U.S. ports and to exclude certain foreign-built ships from U.S.
ports if they received construction subsidies of a particular type. With respect
to the ship construction subsidies, the Cruise Ships are U.S. built and thus
would be at risk to such legislation only if it were to apply to conversion and
maintenance work performed on the vessels in foreign countries. The application
of U.S. labor laws to foreign-registered passenger ships would have a very
substantial impact on the cruise industry as a whole and the Company cannot
predict the implications on its operations. Such proposed legislation is not
presently under consideration by the 104th Congress, but there can be no
assurance that it will not be re-introduced. See "Business -- Government
Regulation."

9. International Factors

The Company's itineraries typically include ports outside the U.S. Thus,
the Company and its business may be affected by the risks of doing business
abroad, including changes in foreign governments, foreign laws and regulations,
economic and political conditions, restrictions on currency transfer, exchange
fluctuations, currency devaluations, customs duties, tariffs, import quotas and
other possible adverse regulations, which could result in increased costs,
delayed or reduced revenues from foreign operations, adverse effects on the
Company's ability to generate revenue and other adverse consequences. See
"Business -- Government Regulation."

10. No Dividends

To date, the Company has not paid any dividends on its Common Stock and
does not expect to declare or pay dividends on the Common Stock in the
foreseeable future. The Loan documents and the terms of the Series A Preference
Shares contain additional restrictions on the Company's ability to pay a
dividend on the Common Stock. See "Business", "Description of Securities --
Series A Preference Shares" and "Dividend Policy."

11. Joint Venture Risks

Pursuant to the agreement governing the joint venture between the Company
and Seawise (the "Agreement"), Seawise has the right to terminate the Agreement,

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and thus the Company's charter of the Universe Explorer for use in the Semester
at Sea and Alaska cruise programs, on 15 months' notice at any time after
January 14, 1999. In the event Seawise terminates the Agreement, there can be no
assurance that the Company will find an acceptable alternate use for the
Universe Explorer. See "Business -- The Joint Venture."

12. Damage to or Destruction of the Cruise Ships

The Company's profitability is dependent on the operation of the Cruise
Ships. If either of the Cruise Ships were to be damaged due to a hurricane,
storm, or other natural disaster or for some other reason, the Company's
operations could be terminated until such Cruise Ship was repaired or replaced.
Furthermore, such repairs or replacement could be delayed if funds are not
available to pay for such repairs or replacement. The Company maintains hull and
machinery insurance as well as increased value insurance on both the Universe
Explorer and the Enchanted Isle, as required by the terms of the Loan, as well
as loss of hire insurance to cover loss of revenues in certain situations. See
"Business -- Insurance." Despite such insurance coverage, there can be no
assurance that the insurance proceeds will be sufficient to fully compensate the
Company for its losses. See "Business --Insurance."

13. Certain Business Risks

The Company's operations may be adversely affected by numerous other
factors, including, among others, labor disturbances or strikes, either by
shipboard employees or land based personnel, government regulatory orders or
rules, or the failure of its reservations system. The Company's activities will
also be subject to risks generally associated with the operation of a business,
including changes in general and local economic conditions, fiscal policies
affecting the business and related industries, acts of God and other factors
which are beyond the control of the Company. Finally, the Company's business
will be faced with risks generally found in the cruise business, such as
fluctuations in the cost of fuel, claims for property damage or personal injury
to passengers or crew. The Company has obtained insurance to protect it against
these types of claims, but there can be no assurance that such insurance will
provide coverage for all types of claims or that the amount of coverage will be
sufficient in all cases. See "Business-Insurance."

14. Trademark Protection

The Company owns the Trademarks, which include Commodore Cruise Line and
the distinctive Commodore logo. The Company believes that the Trademarks are
widely recognized and have considerable value, of which no assurance can be
given. The Company has not yet recorded the transfer of certain of its foreign
Trademarks to it due to the substantial cost involved and the potentially
limited value of certain of such Trademarks. The Company is not aware of any
actions against its Trademarks and, to the Company's knowledge, no notice or
claim of infringement in respect of its Trademarks exists. There can be no
assurance that the Company's Trademarks do not violate the proprietary rights of
others, that they would be upheld if challenged, that the Company would not, in
such an event, be prevented for using the Trademarks or that its failure to
record the transfer of certain of its foreign Trademarks will not have an
adverse effect on the Company. See "Business -- Trademark Protection."

15. Reliance on Current Management

The Company's operations and future success are greatly dependent upon
certain members of its senior management, particularly the services of its
Vice-Chairman, Frederick A. Mayer, New Commodore's President, James R. Sullivan,
and New Commodore's Chief Financial Officer, Alan Pritzker. Mr. Mayer, Mr.
Sullivan and Mr. Pritzker have executed employment agreements with New
Commodore; however, the Company does not maintain key-man life insurance on any
of their lives. The termination of any of their employment or loss of any of
their services for any other reason could have a significant adverse effect upon
the Company's operations.

The Company's success is also dependent upon the ability of the Company to
hire and retain additional financial and marketing personnel. Competition for
qualified employees among cruise line companies is intense, and the inability to
attract, retain and motivate additional highly skilled employees, could
adversely affect the Company's business and prospects. There can be no assurance
that the Company will be able to retain its existing personnel or attract
additional qualified employees. See "Business -- Employees" and "Management."

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16. Broad Discretion in Application of Proceeds

A substantial portion of the net proceeds from this Offering will be
applied to working capital and general corporate purposes. Accordingly, the
Company will have broad discretion as to the application of such proceeds. See
"Use of Proceeds."

17. Control by Management and Principal Stockholders

After completion of the Offering, the Company's officers and directors will
own, in the aggregate, approximately 26.6% of the issued and outstanding shares
of Common Stock of the Company, excluding any Common Stock which may be issued
upon the conversion of the Series A Preference Shares, the exercise of the
Warrants or the exercise of certain outstanding warrants to purchase Common
Stock. Mr. Binder, the Chairman of the Company, and Mr. Mayer, the Vice-Chairman
of the Company, will beneficially own approximately 18.4% and 8.9% of the
outstanding Common Stock of the Company, respectively, excluding any shares of
Common Stock which may be issued upon the conversion of the Series A Preference
Shares, the exercise of the Warrants or the exercise of certain outstanding
warrants to purchase Common Stock. The foregoing computations assume that none
of the Company's officers or directors will purchase any Units in the Offering.
In the event that any of such persons purchase Units, such ownership percentages
will increase. Accordingly, management will be able to substantially influence
the election of the Company's board of directors and have the ability to
influence the Company's affairs and the conduct of its business. See
"Management" and "Securities Ownership of Principal and Initial Selling
Stockholders."

18. Rights of Security Holders Under Bermuda Law May Be Less Than Under
U.S. Jurisdictions

The Company's corporate affairs are governed by its Memorandum of
Association, Bye-laws, and the corporate law of Bermuda. Principles of law
relating to such matters as the validity of company procedures, the fiduciary
duties of management and the rights of the Company's security holders may differ
from those that would apply if the Company were incorporated in a jurisdiction
within the United States. The rights of security holders under Bermuda law are
not as extensive as are the rights of security holders under the law or judicial
precedent in many United States jurisdictions. Thus, the holders of securities
of the Company may have more difficulty in protecting their interests from
actions by the Company's Board of Directors than they might have as security
holders of a company incorporated in many United States jurisdictions. In
addition, there is uncertainty whether the courts of Bermuda would enforce
judgments of the courts of the United States and of other foreign jurisdictions.
There is also uncertainty whether the courts of Bermuda would entertain actions
brought in Bermuda which are predicated upon the securities laws of the United
States. See "Enforceability of Civil Liabilities," "Description of Securities"
and "Certain Foreign Issuer Considerations."

19. Authorization of Preference Shares

The Company's Bye-Laws authorize the issuance of 10,000,000 preference
shares, including 9,000,000 "blank check" preference shares with such
designations, rights and preferences as may be determined from time to time by
the Company's Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue additional preference shares
with dividend, liquidation, conversion, voting, or other rights which could
adversely affect the voting power or other rights of the holders of the Common
Stock. In the event of issuance, the preference shares could be utilized, under
certain circumstances, as a method of discouraging, delaying, or preventing a
change in control of the Company. The Company issued 1,000,000 Series A
Preference Shares to EffJohn in connection with the Commodore Acquisition. The
Series A Preference Shares are convertible into Common Stock and have other
rights which could discourage a takeover of the Company and which could dilute
the Common Stock. See "Description of Securities -- Series A Preference Shares."

20. Certain Rights of Series A Preference Shares

The Series A Preference Shares are entitled to a preference with respect to
liquidation or the distribution of assets of the Company over any other shares
of capital stock of the Company. In the event of any such liquidation or
distribution of assets, the holders of the Series A Preference Shares will

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receive any accrued but unpaid dividends and USD$4.00 per Series A Preference
Share before the holders of other series of preferred stock or the Common Stock
receive any distribution of the Company's assets. In addition, the holders of
the Series A Preference Shares are entitled to receive a dividend equal to seven
percent of the issuance price of the Series A Preference Shares per annum before
the Company may pay any dividends on the Common Stock. See "Dividend Policy" and
"Description of Securities -- Series A Preference Shares."

21. Substantial and Immediate Dilution

Purchasers of Units in the Offering will suffer immediate dilution of $2.37
per share, or 52.7%, in the net tangible book value of their Common Stock from
the initial public offering price of $4.60 per Unit, or $4.50 per share of
Common Stock (assuming that the Warrants are valued at $.10 as of the date
hereof). See "Dilution."

22. Determination of Offering Price and Exercise Price; No Assurance of
Public Market

Prior to the Offering, there has been no public trading market for the
Company's securities. Consequently, the initial public offering price of the
Units, and the exercise price of the Warrants was determined through
negotiations between the Company and the Underwriter, and bears no relationship
whatsoever to the Company's asset value, book value or other such criteria of
value. Factors considered in determining the offering price included, among
other things, the prospects for the industry in which the Company operates, the
Company's management, the general condition of the securities markets and the
demand for securities in similar industries. There can be no assurance that an
active trading market for any of the Company's securities will develop after the
Offering or that, if developed, it will be sustained. The exercise price of the
Warrants also has been determined by the Company and the Underwriter and does
not relate to any recognized criteria of value. In no event should the exercise
price of the Warrants be considered an indication of the future market price of
the Common Stock, should a market develop therefor. See "Underwriting."

23. Underwriter's Limited Underwriting Experience

While certain of the officers of the Underwriter have significant
experience in corporate finance and the underwriting of securities, the
Underwriter has previously underwritten only one public offering. Accordingly,
there can be no assurance that the Underwriter's limited public offering
experience will not affect the Company's Offering of the Units and subsequent
development of a trading market, if any, in the Company's securities. See
"Underwriting."

24. Stock Options and Warrants

As of the date of this Prospectus, there are 500,000 shares of Common Stock
reserved for issuance upon the exercise of stock options under the Plan, of
which no options have been granted to date, and 1,075,000 shares of Common Stock
reserved for issuance upon the exercise of outstanding warrants. In addition,
the Company plans to issue 1,000,000 Warrants in connection with this Offering
(an aggregate of 1,150,000 Warrants if the Over-Allotment Option is exercised in
full and 100,000 Warrants which will underlie the Underwriter's Warrant). Each
two Warrants entitle the holder to purchase one share of Common Stock. Exercise
of any such options or warrants could have an adverse effect on the terms upon
which the Company may be able to obtain additional equity, since the holders of
the options and warrants can be expected to exercise them, if at all, at a time
when the Company would, in all likelihood, be able to obtain any needed capital
on terms more favorable to the Company than those provided in the options or
warrants. See "Description of Securities" and "Underwriting."

25. Shares Eligible for Future Sale

All of the 4,931,933 shares of Common Stock outstanding as of the date of
this Prospectus are restricted securities, as that term is defined in Rule 144,
promulgated under the Securities Act, and 4,831,933 of such shares have been
registered for sale concurrently herewith. Except for the 500,000 shares being
offered by the Initial Selling Stockholders herein as part of the Units, such
shares may not be sold, transferred or otherwise disposed of for a period of one
year without the prior written consent of the Underwriter. Of the 4,931,933
shares, 1,300,000 shares are owned by affiliates of the Company, as that term is
defined under the Securities Act. Absent registration under the Securities Act,
the sale of such shares is subject to Rule 144, as promulgated under the
Securities Act. In general, under Rule 144, subject to satisfaction of certain
other conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least two years, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the

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same class, or if the Common Stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned the shares of Common Stock for
at least three years is entitled to sell such shares under Rule 144 without
regard to any of the volume limitations described above. No prediction can be
made as to the effect, if any, that sales of shares or the availability of such
shares for sale will have on the market prices prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital in the
future through the sale of equity securities. See "Shares Eligible For Future
Sale."

26. Nasdaq Maintenance Requirements; Possible De-Listing of Securities From
Nasdaq System; Risks of Low-Priced Stocks

The Securities and Exchange Commission (the "Commission") has approved
rules imposing stringent criteria for the listing of securities on Nasdaq,
including standards for maintenance of such listing. The Company has applied for
listing on The Nasdaq National Market, although it has not yet been accepted for
listing on Nasdaq. Assuming the Company's securities are accepted on Nasdaq, it
still must meet certain maintenance criteria. If the Company is unable to
satisfy Nasdaq's maintenance criteria in the future, its securities will be
subject to being de-listed and trading, if any, would thereafter be conducted in
the over-the-counter market in the so-called "pink sheets," or the "electronic
bulletin board" of the National Association of Securities Dealers, Inc.
("NASD"). As a consequence of such de-listing, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's securities.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission recently
adopted regulations that generally define a penny stock to be any equity
security that has a market value of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on
Nasdaq, and any equity security issued by an issuer that has: (i) net tangible
assets of at least $2 million, if such issuer has been in continuous operation
for three (3) years; (ii) net tangible assets of at least $5 million, if such
issuer has been in continuous operation for less than three (3) years; or (iii)
average annual revenue of at least $6 million, for the last three (3) years.
Unless an exception is available, the regulations require delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.

In addition, if the Company's securities are not quoted on Nasdaq, or the
Company does not have $2 million in net tangible assets, trading in the Common
Stock would be covered by Rule 15g-9, promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), for non-Nasdaq and non-Exchange-listed
securities. Under such Rule, broker-dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination for the customer, and receive the
purchaser's written agreement to a transaction prior to sale. Securities are
also exempt from this Rule if the market price is at least $5.00 per share.

Although the Company's Common Stock should be, as of the date of this
Prospectus, outside the definitional scope of the penny stock rules, as it is
proposed to be listed on Nasdaq, in the event the Common Stock is not accepted
for listing on Nasdaq, or was subsequently to become characterized as a penny
stock, the market liquidity for the Company's securities could be severely
affected. In such an event, the regulations on penny stocks could limit the
ability of broker-dealers to sell the Company's securities, and thus the ability
of purchasers of the Company's securities to sell their securities in the
secondary market.

27. Selling Stockholder Risks

The Initial Selling Stockholders will sell their Common Stock pursuant to
this Prospectus for $4.50 per share of Common Stock underlying each Unit, less
underwriting discounts of approximately $.45 per share of Common Stock. The
other Selling Stockholders may not sell their Common Stock for up to one year in
the discretion of the Underwriter. As a result of such timing differences, the
price per share of Common Stock received by the Initial Selling Stockholders
could be materially higher or lower than that which the other Selling
Stockholders receive. See "Selling Stockholders."

424A 16th Page of 84 TOC 1st Previous Next ↓Bottom Just 16th
28. Requirements to Exercise Warrants; Adverse Effect of Redemption of
Warrants

The Warrants, which are part of the Units offered hereby, will be
detachable from the Units and separately tradeable upon issuance. Although the
Units will not knowingly be sold to purchasers in jurisdictions in which the
Units are not registered or otherwise qualified for sale, purchasers may buy
Units (or the components thereof) in the aftermarket who so reside in or move to
jurisdictions in which the securities underlying the Warrants are not so
registered or qualified during the period that the Warrants are exercisable. In
this event, the Company would be unable to issue securities to those persons
desiring to exercise their Warrants unless and until the underlying securities
could be qualified for sale in the jurisdictions in which such purchasers
reside, or an exemption to such qualification exists in such jurisdictions. No
assurance can be given that the Company will be able to effect any such required
registration or qualification.

Additionally, purchasers of the Units will be able to exercise the Warrants
included therein only if a current prospectus relating to the securities
underlying the Warrants is then in effect under the Securities Act and such
securities are qualified for sale or exempt from qualification under the
applicable securities or "blue sky" laws of the states in which the various
holders of the Warrants then reside. Although the Company has undertaken to use
reasonable efforts to maintain the effectiveness of a current prospectus
covering the securities underlying the Warrants, there can be no assurance that
the Company will be able to do so. The value of the Warrants may be greatly
reduced if a current prospectus covering the securities issuable upon the
exercise of the Warrants is not kept effective or if such securities are not
qualified or exempt from qualification in the states in which the holders of the
Warrants then reside.

The Warrants are also subject to redemption by the Company, commencing on
the date one year from the date of this Prospectus, on at least 25 days' prior
written notice if the closing bid price of the Common Stock for 20 consecutive
business days ending not more than 15 days prior to the date any redemption
notice exceeds $9.00 per share. If the Warrants are redeemed, holders of
Warrants will lose their right to exercise the Warrants, except during such
25-day notice of redemption period. Upon the receipt of a notice of redemption
of the Warrants, the holders thereof would be required to exercise the Warrants
and pay the exercise price at a time when it may be disadvantageous for them to
do so; sell the Warrants at the then market price (if any) when they might
otherwise wish to hold the Warrants; or accept the redemption price, of $.05 per
Warrant, which is likely to be substantially less than the market value of the
Warrants at the time of redemption. See "Description of Securities - The
Warrants."

424A 17th Page of 84 TOC 1st Previous Next ↓Bottom Just 17th
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Units
after deducting underwriting discounts and commissions and other expenses of the
Offering (estimated to be $449,716), are estimated to be approximately
$1,665,284. The Company anticipates that the net proceeds of the Offering will
be utilized substantially as follows:

Application of Proceeds Amount Percentage
-------------------- -------- ----------
Renovations to Cruise Ships (1) ......... $1,500,000 90%
Working capital and general
corporate purposes (2) ............... $ 165,284 10%

------------
(1) The Company plans to upgrade its vessels, cosmetically and mechanically, so
that they will remain in compliance with applicable law, be more
aesthetically pleasing, and operate more efficiently with the intent that
they will ultimately be more profitable to the Company.

(2) Working capital includes, but is not limited to, fees and expenses
associated with marketing, promotion and advertising.

The foregoing table represents the Company's best estimate of its
allocation of the net proceeds of this Offering based upon the Company's current
plans and estimates regarding its anticipated expenditures. Actual expenditures
may vary substantially from these estimates, and the Company may find it
necessary or advisable to use portions of the net proceeds for other purposes.
The foregoing gives effect to the sale of the Units offered hereby, and the
receipt of $1,665,284 of net proceeds therefrom.

Pending utilization, the net proceeds of this Offering will be invested in
short-term bank certificates of deposit, interest bearing savings accounts,
United States government obligations or other short-term interest bearing
investments.

The Company believes that the net proceeds from the Offering, along with
the cash flow from its operations, will be sufficient to meet its anticipated
cash requirements for a period of approximately 12 months following the
consummation of the Offering.

DIVIDEND POLICY

The payment by the Company of dividends, if any, rests within the
discretion of its Board of Directors and, among other things, will depend upon
the Company's earnings, capital requirements and financial condition, as well as
other relevant factors. The Company has not declared any dividends on its Common
Stock since its inception, has no present intention of paying any dividends on
its Common Stock in the foreseeable future, and intends to use its earnings, if
any, to generate increased growth.

Pursuant to the terms of the Series A Preference Shares, the Company is
required to pay the holders of the Series A Preference Shares a cumulative
dividend equal to seven per cent per annum before it may pay dividends on the
Common Stock. In addition, the terms of the Loan prohibit the Company from
paying a dividend that exceeds 50% of the Company's net profits within eighteen
months following the Commodore Closing, unless the Common Stock has first been
listed on Nasdaq.

424A 18th Page of 84 TOC 1st Previous Next ↓Bottom Just 18th
DILUTION

At March 31, 1996, the Company had a net tangible book value of $8,330,216,
or approximately $1.61 per share of Common Stock. The net tangible book value
per share is equal to the Company's tangible assets less its total liabilities,
divided by the number of shares of Common Stock outstanding on such date
(attributing $4.50 of the Unit purchase price to each share of Common Stock sold
as a component of the Unit). Assuming that the 1,006,979(1) Series A Preference
Shares were included in stockholders equity, the net tangible book value would
be $12,330,216 or $1.99 per share. For purposes of calculating dilution, all
Warrants offered hereby were deemed not to have been exercised because exercise
would be anti-dilutive. The net tangible book value after the Offering (after
deducting the underwriting discount and other expenses of the Offering) will be
$14,235,422, or $2.13 per share, representing an immediate increase in net
tangible book value of $0.14 per share of Common Stock to the existing
stockholders and an immediate dilution of $2.37 per share of Common Stock, or
52.7%, to new investors. "Dilution" is the difference between the initial public
offering price and the net tangible book value per share.

The following table illustrates the per share dilution to the new investors
as of March 31, 1996:

Public offering price per share of Common Stock ....... $ 4.50
----
Net tangible book value ............................... 1.61
Increase attributable to elimination of redemption
feature of Series A Preference Shares ............. 0.38
Increase attributable to new investors ................ 0.14
-----
Net tangible book value per share of Common Stock
after Offering .................................... 2.13
----
Dilution (to new investors)(2) ........................ 2.37
====
----------------
(1) Includes 6,979 shares issued on April 1, 1996 as partial payment of the
dividend on the Series A Preference Shares.

(2) Does not include; (i) 500,000 shares of Common Stock reserved for issuance
under the Plan; (ii) 750,000 shares of Common Stock reserved for issuance
upon the exercise of outstanding warrants; (iii) 225,000 shares of Common
Stock received for issuance upon the exercise of the Over-Allotment Option
(including the shares of Common Stock underlying the Warrants); (iv)
500,000 shares of Common Stock reserved for issuance upon exercise of the
Warrants; and (v) 150,000 shares of Common Stock reserved for issuance upon
exercise of the Underwriter's Warrant and the Warrants underlying the
Underwriter's Warrant. The calculation includes 325,000 shares of Common
Stock issuable upon exercise of the warrants held by certain executives
officers as they are dilutive. See "Management -- Stock Option Plan,"
"Management -- Employment Agreements," "Certain Transactions" and
"Underwriting."

The following table summarizes the number of shares of Common Stock
purchased from the Company, the total consideration and the average price per
share paid to the Company by existing stockholders or their predecessors and to
be paid by purchasers in the Offering:

[Enlarge/Download Table]

Percentage of Average
Outstanding Percent of Price Per
Shares of Total Total Share of
Shares of Common Consideration Consideration Common
Common Stock Stock Paid Paid Stock
------------ -------- ------------- ------------- ---------

Existing Stockholders(1) 5,938,912 92.2% $12,207,895 88.6% $2.06
New Investors(2) 500,000 7.8% $1,575,284(3) 11.4% $3.15
------- --- ------------ ---- -----
Total 6,438,912 100.0% $13,783,179 100.0% $2.14
========= ===== =========== ===== =====

---------
(1) Assumes that the holders of the Series A Preference Shares converted their
stock into 1,006,979 shares of Common Stock.

(2) The exercise of the Underwriter's Over-Allotment Option would reduce the
dilution to purchasers in the Offering by increasing the net tangible book
value after the Offering from $14,235,422 to $14,856,422.

(3) Does not include consideration paid for Warrants.

424A 19th Page of 84 TOC 1st Previous Next ↓Bottom Just 19th
CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996, and as adjusted to give effect to the sale of Units pursuant to the
Offering and the application of the net proceeds therefrom and the elimination
of the redemption feature of the Series A Preference Shares. See "Use of
Proceeds." The information set forth below should be read in conjunction with
the Company's Consolidated Financial Statements and related notes thereto,
included elsewhere in this Prospectus.

March 31, 1996
-------------------------------
(amounts in
thousands, except
per share data)
Actual As Adjusted(1)(2)
-------- ----------------

Current portion of long-term debt $ 201 $ 201
======= =======
Long-term debt:
Total long-term debt .................... $24,166 $24,166
Series A Preference Shares ................... $ 4,000 --
Stockholders' equity:
Series A Preference Shares ($.01 par
value, 10,000,000 shares authorized;
1,006,979 shares of Series A issued
and outstanding) .................... $ -- $ 10
Common Stock ($.01 par value;
100,000,000 shares authorized;
4,931,933 shares outstanding,
actual; 5,431,933 shares outstanding,
pro forma) .......................... $ 49 $ 54
Paid in capital ........................ $ 8,159 $13,837
Retained earnings ...................... $ 587 $ 587
Total stockholders' equity ............. $ 8,795 $14,488
Total capitalization ......................... $36,961 $38,654

---------------
(1) Gives effect to the elimination of the right of the holders of the Series A
Preference Shares to require redemption of the Series A Preference Shares.
See Note D to the consolidated financial statements.

(2) Gives effect to the sale of the Units offered hereby, and the receipt of
$1,665,284 of net proceeds therefrom. Assumes that the Over-Allotment
Option is not exercised.

424A 20th Page of 84 TOC 1st Previous Next ↓Bottom Just 20th
SELECTED FINANCIAL DATA

The following is a summary of the Company's financial information extracted
from the indicated year-end audited Combined or Consolidated Financial
Statements of the Predecessor and the Company, and is qualified in its entirety
by the detailed financial information appearing in the Combined and Consolidated
Financial Statements and the Notes thereto. The unaudited Combined and
Consolidated Financial Statements of the Predecessor and the Company for the
interim periods ended March 31, 1995 and 1996, respectively, have been prepared
by management from the books and records of each of the Predecessor and the
Company, respectively, and reflect, in the opinion of management, all
adjustments (consisting of normally occurring accruals), necessary for a fair
presentation of the financial position and results of operations of each of the
Predecessor and the Company, as at the periods indicated therein. Results for
interim periods are not necessarily indicative of results which can be expected
for the entire year.

(Dollars in thousands, except per share data)

[Enlarge/Download Table]

New
Commodore New
Period Pro forma Predecessor Commodore
Predecessor Ended Year Ended Six Months Ended
Years Ended December 31, September 30, September 30, March 31,
--------------------------------------------- ------------- ------------- ----------------------
1991 1992 1993 1994 1995(2) 1995(1) 1995 1996
------ ------ ------ ------ ------ ------ ------ ------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

INCOME STATEMENT DATA:
Total revenues $60,465 $ 54,368 $ 45,650 $ 41,860 $ 7,256 $35,075 $17,606 $19,174
Operating expenses 45,705 44,229 34,265 28,527 4,941 34,704 18,244 13,955
Selling & administrative
expenses 12,261 11,114 6,833 6,484 1,664 9,899 5,609 3,766
Depreciation and
amortization 5,139 5,530 4,903 3,599 198 1,693 1,780 620
Interest Expense, net 3,277 1,980 1,682 1,294 133 1,929 1,367 486
Write-off of goodwill -- -- 6,023 -- -- -- -- --
Other Income -- -- -- -- -- 4 -- (341)
Loss on Vessel Fire -- -- -- 1,367 -- -- 1,367 --
Minority interest in
earnings of consolidated
joint venture -- -- -- -- -- -- -- 412
Net earnings (loss)
before tax (5,917) (8,485) (8,056) 589 320 (13,154) (10,761) 276
Provision for taxes -- -- -- -- 8 -- -- --
Net earnings (loss)
before preferred
stock dividend $(5,917) $(8,485) $(8,056) $589 $312 $(13,154) $(10,761) $276
Provision for preferred
stock dividend -- -- -- -- 60 280 -- 140
Net earnings (loss)
available for Common
Stockholders $(5,917) $(8,485) $(8,056) $589 $252 $(13,434) $(10,761) 136
======= ======= ======= ==== ==== ======== ======== ===
Net earnings (loss)
per share(3)(4) -- -- -- -- 0.06 (2.59) 03
======= ======= ======= ==== ==== ======== ===
Average shares
outstanding (000's) 4,378 5,185 5,185
===== ======== =====
OPERATING DATA (Unaudited):

Sailings 94 98 64 53 11 64 34 26
Traffic days(5) 715 673 466 371 77 444 234 239
Passenger days(6) 461,672 452,394 316,157 271,075 53,221 271,171 137,065 163,833
Load factor(7) 88.57% 92.21% 92.67% 100.22% 94.81% 83.78% 80.35% 94.03%

BALANCE SHEET DATA:

Property and equipment,
net of depreciation $37,565 $33,085 $37,450
Total assets $40,232 $44,097 $47,751
Total borrowings $30,020 $28,500 $24,367
Total stockholders'
equity (deficit) ($ 5,585) $ 8,519 $ 8,795

-----------
(1) Assumes the Commodore Acquisition occurred and the redemption feature of
the Series A Preference Shares was eliminated.

(2) Such period begins April 13, 1995 (date of inception) and terminates on
September 30, 1995; however, the Company commenced cruise operations July
15, 1995, immediately following the Commodore Closing.

(3) Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and equivalents outstanding during each period
after giving effect for dividends on the Series A Preference Shares.

(4) Earnings per share does not apply to fiscal years 1991-1994 and the six
months ended March 31, 1995 because during such periods Old Commodore was
an operating unit of EffJohn International B.V.

(5) Represents the number of sailings, multiplied by the number of days per
cruise.

(6) Represents the number of passengers, multiplied by the number of days of
their respective cruises.

(7) In accordance with cruise industry practice, total capacity is calculated
based on double occupancy per cabin even though some cabins accommodate
three or four passengers. A percentage in excess of 100% indicates that
more than two passengers occupied some cabins.

424A 21st Page of 84 TOC 1st Previous Next ↓Bottom Just 21st
MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Company's Consolidated
Financial Statements and the Predecessor's Combined Financial Statements and the
related matters thereto contained elsewhere in the Prospectus.

General

With respect to the Company's cruise operations, the Company earns revenues
primarily from: (i) the sale of passenger tickets, which include accommodations,
meals, substantially all shipboard activities, and airfare and hotel packages,
if applicable; and (ii) the sale of goods and services on board the Cruise Ships
including, but not limited to, casino gambling, liquor sales and concession
income.

The Company's operating expenses include travel agency commissions,
shipboard costs of goods sold and all shipboard operating expenses, including
food, fuel, port charges, crew wages and benefits, cabin consumables,
entertainment, ship insurance, ship maintenance expenses, vessel management fees
and transportation and lodging (airfare, hotel, and transfer costs), if
applicable. Travel agency commissions, passenger food, port charges and air
transportation and hotel lodging expenses generally vary directly with the
number of passengers while most of the shipboard operating expenses are fixed
per voyage.

The Company's marketing, selling and administrative expenses include media
advertising, brochures and promotional materials, costs of the Company's direct
sales force and related selling activities, all shoreside activities such as
reservations, inventory control, air transportation coordination, human
resources, finance and information technology. Other income (expense) includes
interest expense and interest income. The majority of the Company's transactions
are in U.S. dollars.

With respect to Sea-Comm's (as hereafter defined) operations, the Company
earns revenue primarily from: (i) reimbursements from Sea-Comm for all operating
costs, food costs and all of the principal and interest due on the portion of
the Loan attributable to the Universe Explorer during the approximately 320 days
each year the vessel is used in the Semester at Sea and Alaska programs; and
(ii) approximately 50% of Sea-Comm's net profits, which Sea-Comm net distributes
to its shareholders. See "Business -- The Joint Venture."

The following table presents statements of operations data as a percentage
of total revenues:

[Enlarge/Download Table]

Predecessor New
and the Commodore New
Predecessor Company For the Predecessor Commodore
For the Year Ended Pro Forma Period Ended Six Months Ended
December 31, September 30, September 30, March 31,
------------------------ ---------------------
1993 1994 1995 1995 1995 1996
---- ---- ----- ----- ----- -----
(Unaudited) (Unaudited) (Unaudited)

Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Expenses:
Operating 75.06 68.15 98.94 68.1 111.4 72.8
Selling and
Administrative 14.97 15.49 28.22 22.9 31.9 19.6
Depreciation and
Amortization 10.74 8.60 4.83 2.7 4.8 3.2
Loss on Vessel fire 3.27
------ ----- ------ ------ ------ -----
Total 100.77 95.51 131.99 93.7 148.10 95.6%
====== ===== ====== ==== ====== ====
Operating Income (loss) (.77) 4.49 (31.99) 6.3 (48.1) 4.4%
Other Income (Expenses) (16.88) (3.09) (5.51) (2.0) (5.2) (.8%)
Minority Interest
in Earnings (2.2%)
Net Earnings (Loss)
before Provision for
Preferred Stock
Dividend (17.65)% 1.40% (37.50) 4.3% (53.3) 1.4%
====== ==== ====== === ===== ===

424A 22nd Page of 84 TOC 1st Previous Next ↓Bottom Just 22nd
Due to its New Orleans point of embarkation, the Company's revenues are
more seasonal than other cruises with similar itineraries that depart from
Florida ports. The greatest demand for the Company's cruises occurs in June
through August, and demand from February through May and November through
December is also very good. The Company's slowest months are January, September
and October.

The Company's operations began on July 15, 1995, following the Commodore
Closing. For the two and one-half months ended September 30, 1995, revenues from
the operation of one cruise vessel were $7,256,000 including charter
cancellation fees of $425,000. In January 1996, the Company placed its second
vessel into service. As a result, for the six months ended March 31, 1996,
revenues from the operation of two cruise vessels increased to $19,174,089,
which included charter cancellation fees of $425,000.

The results of operations for the years ended December 31, 1993 and
December 31, 1994 are of the Predecessor. The Company's fiscal year ends on
September 30. As a result, the results of operations for the pro forma year
ended September 30, 1995 include the fourth calendar quarter of 1994, which is
also included in the December 31, 1994 fiscal year. The pro forma 1995 fiscal
year includes results of operations of the Predecessor from September 30, 1994
until July 14, 1995, and those of the Company for the balance of such fiscal
year. Old Commodore operated two vessels during the 1995 fiscal year. Old
Commodore operated the Enchanted Seas primarily on the New Orleans itinerary
during fiscal 1995 and placed this vessel in drydock just prior to the Commodore
Closing. Concurrently therewith, Old Commodore placed the Enchanted Isle on the
New Orleans itinerary.

Prior to such time in fiscal 1995, Old Commodore operated the Enchanted
Isle for 73 days on a Barbados itinerary, and before that, chartered the vessel
to a company that operated it as a floating hotel in St. Petersburg, Russia. All
of these activities occurred during fiscal 1995. The Company, however, operated
only one vessel on the New Orleans itinerary during the 1995 fiscal year. As a
result of the differences in the number of ships operated, the itinerary served,
and the use of each ship by each of Old Commodore and the Company, a comparison
of the 1995 fiscal year to the 1994 and 1993 fiscal years may not be
representative of the Company's future performance. The historical operating
results for the Predecessor were prepared by management from the books and
records of Old Commodore. Revenues and ship operating expenses are specifically
those of the Cruise Ships. However, Old Commodore operated up to five ships
during the period since January 1, 1993. As a result, administration and
marketing expenses were commingled and have been allocated to the Predecessor
based on the number of traffic days of all of Old Commodore's ships. This may
not be indicative of actual expenses which would have been incurred in
connection with the operation of one ship by the Company. In addition, the
Predecessor's depreciation expenses vary from those of the Company primarily due
to its higher cost basis on the vessels. Accordingly, such expenses are not
comparable.

Results of Operations

Six Months Ended March 31, 1996, Compared to Six Months Ended March 31, 1995

Revenues increased by $1,568,133, or 8.9%, for the first half of fiscal
1996 compared to the first half of fiscal 1995, primarily due to the Company's
profitable joint venture for the Universe Explorer in fiscal 1996 as compared to
the unprofitable Barbados cruise operation, which commenced during the first
half of 1995. Included in the fiscal 1996 revenues are non-recurring charter
cancellation fees of $425,000. See "Business -- The Commodore Acquisition --
Settlement Agreement."

The Company's operating expenses decreased by $5,655,767, or 28.8%, for the
first half of fiscal 1996 compared to the first half of fiscal 1995. This
decline was due in part to the termination of the Barbados itinerary in April
1995, as well as the impact of the fire aboard the Enchanted Isle in December
1994, which resulted in a loss of $1,367,347, and which also had a negative
impact on the selling and marketing of this itinerary.

Marketing, selling and administrative expenses decreased by $1,842,009, or
32.8%, for the first six months of fiscal 1996 compared to the first six months
of fiscal 1995 due to the introduction of the Barbados program in February 1995.

The foregoing results may not be representative of the Company's future
performance due to the different manner in which Old Commodore and the Company
report expenses. In addition, in the first half of fiscal 1995, Old Commodore
operated the Enchanted Seas on the New Orleans itinerary. In the first half of
fiscal 1996, the Company operated the Enchanted Isle on this route. Although

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these two ships were built as "sister ships," and are similar, they are not
identical either with respect to number of cabins or costs of operation. As a
result, a comparison of their results from operations may not be meaningful.

Pro Forma For the Year Ended September 30, 1995, Compared to the Year Ended
December 31, 1994

Revenues decreased by $6,785,649, or 16.2%, for fiscal 1994 compared to pro
forma 1995 primarily due to (i) an 11.9% reduction in the number of passengers
carried as well as a reduction in the average rate per passenger on the
Company's New Orleans itinerary, and (ii) low load factors and average rates on
Old Commodore's Barbados itinerary. This decrease was partially offset by the
receipt of $425,000 in pro forma 1995 from the cancellation of a charter
agreement. The Company received an additional cancellation fee of $425,000 in
fiscal 1996, but does not anticipate that it will receive such fees in future
years. See "Business -- The Commodore Acquisition --Settlement Agreement." The
load factor for the New Orleans itinerary decreased to 89.54% in pro forma 1995
from 100.23% in 1994.

The Company's operating expenses increased by $6,176,847, or 21.7%, in pro
forma 1995 compared to fiscal 1994. This increase was due to a fire on the
Enchanted Isle on December 28, 1994, the termination of Old Commodore's Barbados
itinerary, which operated for only 73 days in 1995, as well as increased
competition in the New Orleans market. The Barbados itinerary was cancelled in
April 1995, in connection with the Commodore Acquisition.

Marketing, selling and administrative expenses increased by $3,414,416, or
52.7%, in pro forma 1995 to fiscal 1994 due to a variation in the way Old
Commodore and the Company attribute such expenses. Given that the Company
acquired the vessels in the fourth quarter of pro forma 1995, the full effect of
such variations is not reflected herein.

Depreciation and amortization decreased by $1,905,975, or 53.0%, in pro
forma 1995 compared to fiscal 1994 due to the difference in cost basis of the
assets acquired by the Company as compared to Old Commodore. Interest expenses
increased by $635,960 from fiscal 1994 to pro forma 1995 due to the Company's
acquisition of Commodore Cruise Line and the financing procured to consummate
the acquisition.

For the Year Ended December 31, 1994, Compared to the Year Ended December 31,
1993

Total revenues decreased by $3,789,643, or 8.3%, in fiscal 1994 compared to
fiscal 1993. This decrease is attributable primarily to the Enchanted Isle being
out of cruise service for most of 1994 while under charter as a floating hotel
in St. Petersburg, Russia. Old Commodore received charter income of $10,000 per
day from an affiliate during such period. This decline was offset in part by an
increase in revenues related to the New Orleans itinerary of $4,710,908, or
14.4%, from fiscal 1993 to fiscal 1994. This increase is attributable primarily
to an increase in the number of passengers on that itinerary as well as higher
ticket prices. The load factor for the New Orleans itinerary increased to 100.2%
in 1994 from 95.4% in 1993. In 1994, New Orleans passenger loads totaled 271,075
passenger days, 12.4% above the volume who sailed from New Orleans in 1993.

Operating expenses decreased by $5,738,041, or 16.7% in fiscal 1994
compared to fiscal 1993, due to the Enchanted Isle's withdrawal from cruise
service. On the New Orleans itinerary, operating expenses increased by
$1,158,517, or 4.7%, from 1993 to 1994. This increase in costs was due to
increases in the variable costs of the Company, such as food and port charges,
which increase when the number of passengers aboard a vessel increases.

Marketing, selling and administrative expenses decreased by $348,982, or
5.1%, in fiscal 1994 compared to fiscal 1993 resulting from a decrease in
marketing expenses.

Depreciation and amortization decreased by $1,303,253, or 26.6%, in fiscal
1994 compared to fiscal 1993 in part due to a one-time write-off of goodwill in
the amount of $6,023,118 during 1993. In connection with the anticipated sale of
the vessels, the Predecessor determined that the goodwill was not recoverable
and accordingly wrote-off the remaining goodwill balance.

Interest expenses decreased by $388,930, or 23.1%, in fiscal 1994 compared
to fiscal 1993 due to a reduction in the principal amount due by the
Predecessor. In addition, other income increased in fiscal 1994 since the
Predecessor had a one-time write-off of goodwill, described previously, during
1993.

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Liquidity and Capital Resources

The Company's working capital deficiency was $5,078,070 and $916,161 at
March 31, 1996 and September 30, 1995, respectively. The Company's working
capital deficit at March 31, 1996 and September 30, 1995 was primarily due to
the inclusion, in non-current assets, of a $4,629,000 deposit securing the
Company's FMC bond. The corresponding liability, customer deposits, is included
in current liabilities. The other increases in working capital at March 31, 1996
and September 30, 1995 were the result of cash flow provided by operations, and
particularly the $425,000 in income from the cancellation of the charter
agreement. The Company also received working capital from the proceeds of its
Private Offering (as hereinafter defined) during its 1995 fiscal year.

See "Business -- The Private Offering."

Cash flows from operations provided $3,451,324 and $661,137, for the first
half of fiscal 1996, and fiscal 1995, respectively. Cash flows for the first
half of fiscal 1996 consisted primarily of increases in customer deposits,
accounts payable and accrued liabilities.

At March 31, 1996, the Company owed $24,366,985 to the Lender in connection
with the Commodore Acquisition. The Loan is secured by substantially all of the
assets of New Commodore, including preferred ships mortgages on both Cruise
Ships, and bears interest at LIBOR plus 2%. The Loan must be repaid in 12
semi-annual installments of principal and interest beginning January 14, 1997.
Interest which accrues during the first year following the Commodore Closing
will be paid to the Lender on a monthly basis. See "Business -- The Commodore
Acquisition." On November 15, 1995, the Company and the Lender amended the terms
of the Loan to require the Company to remit monthly installments of principal
and interest toward the January 14, 1997 payment. Such monthly payment schedule
will end on January 14, 1997. See "Business -- The Commodore Acquisition." In
the event that the Company is required to withhold income tax on any amounts due
to the Lender, the Company has agreed to pay the required amount to be withheld
and pay the Lender the full amount of interest due under its agreements with the
Company.

The terms of the Loan place certain restrictions on the Company. First, the
Company is not permitted to place any additional liens on any of its assets
(including the Cruise Ships) without the prior consent of the Lender. Second,
the Company is prohibited from paying any dividends on its Common Stock until
the earlier of such time as its Common Stock becomes traded on Nasdaq or a U.S.
stock exchange, or 18 months after the Commodore Closing and, after such time,
the Company may not pay more than 50% of its net profits as dividends. Third,
beginning in February 1997, the Company must make monthly payments into a
restricted retention account in an amount estimated to pay the next installment
of principal and interest under the Loan, divided by the number of months before
the next installment is due. In addition to the foregoing, New Commodore must
maintain a minimum cash balance in its operating accounts of $1 million, after
deducting amounts of principal and interest due to the Lender.

The Universe Explorer was in drydock between the Commodore Closing and
January 1996. Because the Company received charter cancellation fees for
charters scheduled between the Commodore Closing and December 1995, the time the
vessel was out of service is not expected to have an adverse effect on the
Company's fiscal 1996 revenues. In November 1995, the Company began to prepare
the vessel for use in the Semester at Sea program. See "Business -- the Joint
Venture." The Company used approximately $535,000, which it received from
EffJohn, to repair certain technical items aboard the vessel. The Company also
paid the first $200,000 of renovations to the ship to convert it for use in the
Semester at Sea program. Any excess amounts which the Company requires for such
conversion will be paid by Seawise. The vessel departed on its first Semester at
Sea voyage in January 1996.

The Enchanted Isle was sent to drydock in February 1996 for approximately
two weeks to repair its propeller and complete certain other repairs. EffJohn
reimbursed the Company for approximately $140,000 of such costs. See "Business
-- The Commodore Acquisition -- The Settlement Agreement." The time the vessel
was out of service for such repairs is not expected to have a material adverse
effect on the Company's fiscal 1996 net income.

Inflation

The impact on the Company's operations has not been significant to date.
There can be no assurance that a high rate of inflation in the future would not
have an adverse effect on the Company's operations.

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BUSINESS

General

The Company owns two Cruise Ships. The Enchanted Isle offers Caribbean
cruises from New Orleans and the Universe Explorer is chartered to Sea-Comm,
which in turn has space-chartered the vessel to an organization which operates
the educational "Semester at Sea" program during a portion of the year. Sea-Comm
will operate cruises to Alaska aboard the Universe Explorer during the balance
of the year.

The Commodore Acquisition

The Acquisition Agreements. The Company entered into definitive agreements
with EffJohn, Old Commodore, and its subsidiaries on April 28, 1995 (the
"Acquisition Agreements"). Pursuant to the Acquisition Agreements, the Company
acquired the Trademarks, two cruise vessels known as the Enchanted Seas (now
known as the "Universe Explorer") and the Enchanted Isle, substantially all of
Old Commodore's existing operations, certain advance ticket sales, marketing and
sales personnel and information and certain shoreside assets from EffJohn and
its subsidiaries. The Commodore Acquisition closed on July 14, 1995. The Company
purchased all of the Commodore Assets "AS IS", and thus did not receive any
assurances from, EffJohn as to the condition of the Commodore Assets. See "Risk
Factors -- The Cruise Ships;" and "Risk Factors -Purchase of Commodore Assets
"AS IS"." The Company did, however, have a professional surveyor survey the
Cruise Ships and EffJohn was obligated to deliver them in substantially the same
condition as each vessel was in at the time of its inspection. In addition,
EffJohn was obligated to perform specified maintenance and repairs on the
Enchanted Seas and deliver this vessel to the Company following the satisfactory
completion of such repairs, as confirmed by the vessel's classification society.
Each vessel was inspected by its respective classification society prior to
delivery to the Company and was delivered up to its class standards.

The purchase price (the "Purchase Price") for the Commodore Assets was
$33,500,000 payable at the Commodore Closing as follows: $5,000,000 in cash;
$4,000,000 through the Company's issuance of 1,000,000 redeemable Series A
Preference Shares at an agreed value of $4.00 per share; and $24,500,000 in
promissory notes issued by the Company. The promissory notes are secured by
substantially all of the assets of New Commodore, including first preferred
ships mortgages on the Cruise Ships.

Pursuant to the Acquisition Agreements, Old Commodore and EffJohn agreed
not to compete with the Company for up to ten years with respect to all routes
in and out of the Port of New Orleans, and for up to eight years with respect to
all routes commencing and terminating in any North American port at which port
the Company operates or has publicly announced an intention to operate.

Customer Deposits and the FMC Certificates of Financial Responsibility. As
part of the Commodore Assets, the Company received customer deposits for future
cruises and related items such as hotel and airfare packages. The Company placed
$4,629,000 on deposit with a bank to secure the U.S. Federal Maritime Commission
("FMC") Certificate of Financial Responsibility in the Event of Non-Performance
of Obligations to Passengers as required by the FMC (the "Certificate of
Financial Responsibility"). The FMC requires companies to establish a
Certificate of Financial Responsibility in amounts and through methods set by
the FMC. Since the Universe Explorer does not depart from any U.S. port, the
Company presently needs to post a bond with the FMC only with respect to the
Enchanted Isle's customer deposits. See "Business -- The Joint Venture."

Consumable Items. The Commodore Assets included consumable items intended
for use on board the Cruise Ships, regardless of where such items were stored or
located as of the Commodore Closing. At the Commodore Closing, Old Commodore
supplied consumables for use on the Enchanted Isle to the Company in the amount
of $500,000, calculated by reference to the cost thereof to Old Commodore.
Subsequent to the Commodore Closing, Old Commodore provided the Company with an
adjustment to the Purchase Price in exchange for the cancellation of its
obligation to provide consumables for use on the Enchanted Seas to the Company
in an amount not less than $500,000. The Company did not pay any additional
consideration for such consumables.

Drydock of Enchanted Seas. As of April 15, 1995, EffJohn caused the
Enchanted Isle to discontinue its cruises from Barbados and delivered the
Enchanted Isle to New Orleans to replace the Enchanted Seas so that the
Enchanted Seas could undergo maintenance while at drydock. EffJohn bore all
costs relating to the termination of the Barbados itinerary as well as all costs

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associated with the Enchanted Seas while it remained out of service during
drydock, including the costs of insurance. EffJohn paid for maintenance and
repairs to the Enchanted Seas while it was in drydock up to certain agreed upon
limits. The required repairs are set forth in detail in the Acquisition
Agreements. Once the repairs were completed, the vessel was returned to New
Orleans. The Company then refitted the vessel to prepare it for the Semester at
Sea program.

The Loans. The Lender loaned the Company $24,500,000 for purposes of
acquiring the Cruise Ships. The Loan is secured by substantially all of the
assets of New Commodore including first preferred ships mortgages on both Cruise
Ships. The Loan bears interest at LIBOR plus 2% (currently 7.875%) and must be
repaid in 12 semi-annual installments of principal and interest beginning on
January 14, 1997. On November 15, 1995, the Company and the Lender amended the
terms of the Loan to require the Company to remit monthly installments of
principal and interest toward the January 14, 1997 payment. Such monthly payment
schedule will end on January 14, 1997. In connection with the Loan, the Company
also paid, at the Commodore Closing, $50,000 of duties, stamp fees and
attorneys' fees rendered in connection with the Commodore Acquisition and the
Loan, and an arrangement fee of $100,000 to the Lender. In the event that the
Company is required to withhold income tax on any interest due to the Lender,
the Company has agreed to pay the required amount to be withheld and pay the
Lender the full amount of interest due under its agreements with the Company.

The terms of the Loan place certain restrictions on the Company. First, the
Company is not permitted to place any additional liens on any of the Commodore
Assets (including the Cruise Ships) without the prior consent of the Lender.
Second, the Company is prohibited from paying any dividends on its Common Stock
until the earlier of such time as its Common Stock becomes traded on Nasdaq or a
U.S. Stock Exchange, or 18 months after the Commodore Closing and, after such
time, the Company cannot pay more than 50% of its net profits as dividends.
Third, the Company was required to make a monthly payment into a restricted
retention account, in an amount estimated to pay the next installment of
principal and interest under the Loan, divided by the number of months before
the installment is due. In November 1995, the Company and the Lender amended the
Loan to temporarily eliminate the segregated account and require the Company to
pay the monthly retention amount directly to the Lender until January 1997. In
February 1997, the Company must resume setting aside monthly payments in the
retention account. Fourth, in addition to the foregoing requirement, New
Commodore must maintain a minimum cash balance in its operating accounts of $1
million throughout the term of the Loan. If the Company fails to meet any of the
foregoing requirements or cure any defaults within the permitted time periods,
the Lender could declare the Company in default under the Loan, and potentially
foreclose upon the Cruise Ships and the Company's other assets.

Series A Preference Shares. As part of the consideration for the Commodore
Assets, the Company issued EffJohn 1,000,000 of its Series A Preference Shares.
The Series A Preference Shares are entitled to a cumulative 7% dividend on an
annual basis. This dividend is payable from a maximum of 10% of New Commodore's
net profits for such year. EffJohn, as holder of the Series A Preference Shares,
is entitled to elect one member of the Board of Directors of the Company, as
long as it owns at least 125,000 Series A Preference Shares. EffJohn may convert
its Series A Preference Shares into Common Stock of the Company at any time at a
conversion rate equal to the greater of USD$4.00 per share or a price per share
equal to 8 times the Company's earnings per share for its prior fiscal year.
EffJohn may sell to third parties up to a maximum of approximately 45,000 Series
A Preferred Shares in any 90 day period at any time after the Commodore Closing,
subject to compliance with applicable securities laws. The Company has the
option to redeem all or any part of the Series A Preference Shares at USD$4.00
per share at any time commencing three years after their issuance. EffJohn may
not sell, transfer, or otherwise dispose of shares of Common Stock issued upon
conversion of the Series A Preference Shares for a period of one year from the
date of this Prospectus without the prior consent of the Underwriter, except
that EffJohn may sell, transfer or dispose of up to 45,454 of such shares
without the Underwriter's consent. See "Description of Securities -- Series A
Preference Shares."

Settlement Agreement. At the Commodore Closing, the Company and EffJohn
entered into a settlement agreement (the "Settlement Agreement") to resolve
certain issues with respect to repairs to the Cruise Ships and with respect to
EffJohn's prior agreement to charter the Enchanted Seas. EffJohn agreed to pay
the Company a total of $535,000 for repairs to be made to the Enchanted Seas,
which amount was paid in two installments: $460,000 on July 31, 1995, and
$75,000 on September 15, 1995. Of this amount, $189,000 was allocated to
specific repairs to the vessel. EffJohn further agreed to pay the Company
$50,000 to offset insurance costs from July 14, 1995 until December 14, 1995,
while the Enchanted Seas was to be under charter by EffJohn.

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Pursuant to the Settlement Agreement, EffJohn also paid $140,000 for
damage to the propeller of the Enchanted Isle, the costs associated with the
initial damage survey and temporary repairs, and the cost of agreed repairs to
shafting, bearings, and struts. EffJohn also paid $53,750 to the Company for the
cost of additional fuel required as a result of the lost efficiency due to the
damaged propeller. The Enchanted Isle was placed in drydock for two weeks in
February 1996 for such repairs.

With respect to the charter of the Enchanted Seas, EffJohn agreed that if
it did not enter into a bareboat charter for the vessel by September 1, 1995, it
would pay the Company $425,000 within 15 days thereafter. EffJohn did not
charter the vessel, and paid this sum in fiscal 1995. EffJohn further agreed
that if it did not enter into a bareboat charter for the vessel by October 15,
1995, it would pay the Company an additional $425,000. EffJohn paid this
additional sum to the Company in October 1995.

The Private Offering

Contemporaneously with the Commodore Closing, the Company consummated a
private offering of 1,500,000 shares of the Company's Common Stock at a price of
$4.00 per share (the "Private Offering"). The Company used the proceeds of the
sale of Common Stock in the Private Offering primarily to consummate the
Commodore Acquisition.

Pursuant to the terms of the Private Offering, the Company agreed to effect
an initial public offering of its Common Stock as soon as possible after the
Commodore Closing. The Company also agreed to register in such public offering
the sale of the Common Stock purchased by investors in the Private Offering. As
a result, the Company has registered such shares, subject to a 12 month
"lock-up" period. Thus, the investors may not sell such Common Stock prior to
the expiration of such period without the consent of the Underwriter. See
"Concurrent Registration of Common Stock."

Industry Overview

Cruise lines compete intensely for consumer disposable leisure time dollars
with other vacation alternatives, such as land based resort hotels and
sightseeing destinations. Public demand for such activities is influenced by
general economic conditions.

The Company believes that the modern passenger cruise industry has
experienced substantial growth over the past 25 years. The industry has evolved
from a trans-ocean carrier service into a vacation alternative to land-based
resorts and sightseeing destinations. According to CLIA, an industry trade
group, in 1982 approximately 1.5 million North American passengers took cruises
for two days or more. In comparison, the following table sets forth data
regarding industry growth over the past five years.

Calendar Year North American Cruise Passengers(1)
------------- -----------------------------------
(in millions)
1990 ................... 3.6
1991 ................... 4.0
1992 ................... 4.1
1993 ................... 4.5
1994 ................... 4.4
1995 ................... 4.5

-------------
(1) Source: CLIA

The North American cruise industry accounts for approximately 80% of the
world market. According to CLIA, the number of overall industry North American
cruise passengers in 1994 was .7% below the 1993 figure, with demand increasing
only slightly during 1995. The average growth rate for North American cruise
passengers from 1980 through 1994 was approximately 9.2% per year.

The Company believes that "repeat cruising" is a large source of business
in the cruise industry. Of all passengers who have cruised in the past five
years, CLIA estimates that the average number of cruises per person is 2.4.

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CLIA has estimated that, in 1982, the capacity of Cruise Ships serving the
North American markets offering voyages of two or more days was approximately
43,848 berths. According to CLIA's most recent estimate, in 1995, the North
American market was served by 39 cruise lines, operating 133 vessels. Aggregate
1995 market capacity is estimated at 112,869 berths, an increase of 7.4% over
the previous year. In addition, according to an article in Lloyd's List dated
February 22, 1996, an estimated 29 new cruise vessels offering 50,000 additional
berths will be added to the market by 1998.

Numerous industry analysts, as reported in various newspaper articles,
predict a trend toward the continued growth of the large cruise lines and
decline of the smaller ones in the North American cruise industry. The larger
lines such as Carnival Cruise Lines, Royal Caribbean Cruise Lines and Princess
Cruises, with whom the Company competes, have been purchasing new vessels and
thereby adding to their fleets. These larger lines benefit from increased
economies of scale and have historically operated at higher capacity than the
smaller lines. In addition, the smaller lines, such as the Company, own older
ships with fewer amenities. Such ships will require costly renovations and
retrofitting in order to meet new industry safety guidelines. See "Risk Factors
--Regulation." Industry analysts predict that discounting of fares will play a
large part in cruise ticket sales in response to the relatively flat growth of
the North American market and the substantial increases in capacity planned over
the next few years. Despite the recent softening in demand and future increase
in capacity, the Company believes that the cruise industry should continue to
represent an attractive growth segment of the leisure market.

Market Position

The cruise industry is generally viewed as the composite of three partially
overlapping segments, differentiated primarily by cruise cost, length and
itinerary. The standard, premium and luxury segments provide a wide assortment
of cruise experiences, appeal to different population segments and attract
varying demographic groupings. CLIA's luxury segment of the cruise industry
represents 10% of the total industry capacity. With list per diem rates in
excess of $400, the Company believes this market caters to the most affluent
segment of the population. Luxury market cruises are generally ten nights or
more. CLIA's premium segment is somewhat more up-scale than the standard market,
but not as up-scale as the luxury segment, and represents 32% of the total
cruise capacity. The Company believes this market attracts an older, more
affluent and experienced clientele, with list per diem rates in the range of
$291-$399 and itineraries which typically range from seven to 14 days. CLIA's
standard market, in which market the Company competes, is the largest segment
within the cruise industry, comprising 55% of industry-wide capacity. The
remaining 3% can be attributed to non-CLIA member lines. The Company believes
the standard market is characterized by affordable, shorter cruises primarily
serving first-time passengers with list per diem rates generally of $290 or
less. Standard market cruises range from three to ten days in the most popular
cruising areas. The Company believes that the standard segment represents the
greatest opportunity for growth, although no assurance can be given that this
will prove to be correct.

The Company seeks to position itself within the standard market to capture
the first-time cruising passenger with list per diem rates for its Caribbean
cruises that range from $84-$208. In accordance with industry practice, such
prices may be discounted by the Company. The Company believes that the Commodore
name appeals to both first-time cruising passengers and repeat passengers due to
its presence in the Gulf of Mexico, Caribbean and embarkation from the Port of
New Orleans. The Port of New Orleans is a port offering many alternatives,
particularly for those who prefer to drive, rather than fly, to begin their
cruise vacation.

Operating Strategies

The Company believes that Old Commodore consistently delivered an
innovative, value-oriented standard market cruise product. The Company seeks to
maintain such standard by providing maximum value, emphasizing "old world"
tradition and a friendly and informal atmosphere combined with value and
service.

Fleet configuration is a primary distinguishing variable in the cruise
industry, differentiating competitors serving a common passenger base. The
Company's vessels are older and smaller than those of most of its competitors.
The Company believes that these smaller vessels will enable it to provide
value-oriented service and a more personalized maritime environment than the
Company's giant vessel competitors. The Company believes that good service,
coupled with a reputation for more personalized attention, will enable the
Company to command prices comparable to its competitors. Although the Company's
older vessels will probably cost more to operate than new vessels, the Company

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believes that its cost savings in debt service payments will more than offset
the higher maintenance and operating expenses. There can be no assurance,
however, that the Company can operate its vessels profitably.

Both the Universe Explorer and the Enchanted Isle were constructed in the
United States. As a result, the Company may, in the future, be able to change
the flag of the Cruise Ships from that of a foreign country to the U.S. A U.S.
flag vessel may carry passengers between U.S. ports, an option which is
unavailable to foreign flag vessels. If the Company is able to change the flags
of its fleet, and chooses to do so, it could offer seminars at sea and other
off-shore activities between U.S. ports. Companies who choose to provide
seminars or meetings aboard the Company's ships could, under current tax laws,
deduct a portion of the cost of such seminars or meetings, and individual
participants could, under current tax laws and subject to certain limits, deduct
the cost of attending such seminars. The Company has not yet determined whether
it wishes to incur the additional costs associated with operating a U.S.
subsidiary and U.S. flag vessels, which include potential additional labor,
insurance and income tax costs. Accordingly, there can be no assurance that the
Company will change the flags of any of its vessels.

Cruise Operations

Facilities, On-Board Services and Programs

The Enchanted Isle was originally constructed by Ingals Shipbuilding
Corporation in the United States in 1958 and was most recently refurbished in
1994. The Enchanted Isle is designed to be a seagoing resort with restaurants,
discotheques, movie theaters, libraries, reading rooms, full service
communication facilities, jogging courses, aerobic classes, workout rooms,
numerous bars, two pools, sun deck areas and deck activities. The Enchanted Isle
has a complete casino with various gaming opportunities. Entertainment is
provided nightly and includes shipboard productions of Broadway show tunes and
Las Vegas-style revues, as well as performances by a variety of celebrity
entertainers. In addition, all passengers may take shore excursions provided at
various ports-of-call, including guided tours, visits to local attractions and
free time to explore on their own. Although the Enchanted Isle may not be as
modern, as large or contain all the amenities of newer ships, the Company
believes that it provides the cruise environment that its passengers expect.

Marketing and Promotion

The Company has committed significant resources to marketing and promotion
through advertising, public relations, and additional sales personnel. To
enhance the Company's awareness in, and coverage of travel agents and consumer
marketplaces, the Company employs a variety of complementary marketing and
promotional programs incorporating media, direct marketing and sales aids,
public relations, special events and strategic business alliances, with special
emphasis on trade and consumer advertising. The Company has initiated a new
advertising campaign to reestablish its image as a provider of value-oriented
cruises with high quality service at sea in a larger geographic region than Old
Commodore has solicited in the past few years. This new advertising campaign is
based upon travel agent and consumer research and is placed in media reaching a
wider audience than those historically employed. In the past, Old Commodore
advertised mainly in the five-state area around Louisiana, including Texas. The
Company's new marketing plan extends such advertising to at least five
additional states in which residents have historically purchased the most
cruises. These states are California, New York, Pennsylvania, New Jersey and
Florida.

The Company focuses on consumer and trade advertising, particularly through
the use of newspaper advertising. The Company believes that this media is
equally effective in reaching both consumers and the travel agency trade. In
addition, the Company places advertisements on radio stations and television.
Developing a strong cooperative marketing programs directly links travel agent
marketing and promotional efforts to those of the Company.

The Company places a strong emphasis on collateral development and
distribution to key producing travel agents for the Company. The Company
believes that detailed descriptions of the Company's ships, services,
itineraries and activities, pre- and post-cruise land package opportunities and
various elements of the product programs, are a significant factor in converting
the initial interest of consumers into actual cruise sales. The Company may use
direct marketing to target past passengers and various affinity organizations.
The Company views past Commodore passengers and leisure travelers using travel

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organizations as persons with a high propensity to cruise with the Company. The
Company may also place travel trade advertising via the most popular trade
publications, expanding the awareness of the Company's product and services.

The foregoing marketing strategy requires a significant amount of the
Company's cash resources. In the event that the Company is short on working
capital, the Company may delay or cancel certain components of the foregoing
marketing plan.

Travel Agency Relationships

The Company sells cruise vacations in the United States and Canada almost
exclusively through the travel agency distribution system. According to CLIA, an
estimated 95% of cruise packages are sold with the assistance of travel agents,
who normally receive commissions in the range of 10-15% of the sale. Additional
commission incentives are made available for volume producers that consistently
support the cruise line. In order to maintain personal contact with travel
agency owners, managers and front-line retail agents, the Company maintains a
field sales staff of at least eight, supported by an in-house service staff.

The Company's cruises, consistent with industry trends, are marketed to
passengers via travel agents in the United States. Well informed travel agencies
are therefore crucial to the Company's effort in maintaining and expanding its
customer base. Accordingly, the Company places considerable emphasis on its
contacts with travel agencies and fostering goodwill towards the Company's
products, maximizing this efficient and productive relationship although there
can be no assurance that the Company will succeed in its efforts.

Reservations and Passenger Services

Reservations are taken by trained reservations sales agents on a computer
and software system, capable of accepting reservations for a fleet of at least
10 vessels. The Company purchased this reservations system and software from
EffJohn as part of the Commodore Assets. Staffing levels are maintained per
industry standards to ensure that calls are taken promptly. Reservations are the
first point of contact for most travel agents and, as such, play a key role in
the sales process. A full time staff of approximately 18 people assist agents in
securing passenger reservations, arranging flights for air/sea passengers,
coordinating ground transportation and pre- and post-cruise tour hotel packages.
In the event the Company does not have sufficient working capital to implement
the foregoing plan, it may reduce the number of people it employs in
reservations. Accordingly, there can be no assurance that the Company will be
able to maintain optimum staffing levels.

International Sales

The Company intends to devote a portion of its sales resources to
developing sales from the European and Latin American marketplaces. Although the
North American market is static, the European cruise market has been growing.
According to industry publications, in 1995 the European cruise market reached 1
million passengers, up from 300,000 in 1988. Europe is, by far, the largest
market outside of North America, with Germany and the U.K. comprising the
largest constituent parts. Management has begun discussions with several major
European travel operators. The Company's president, Mr. Sullivan, has
substantial previous experience developing the cruise market in England. See
"Management." The Company is also considering expanding its sales to Latin
America, which is also a significant resource for potential passengers to the
Company due to an established network of tour operators.

Market Presence

The Company intends to continue to expand Commodore's image as an operator
of value-oriented cruises in the standard market. The selection of a cruise line
for travel agents and passengers depends upon the reputation of the line and
recommendations. The Company believes that Commodore has a 28-year history of
serving travel agents and passengers with friendly service and consistent
quality. The Company believes that the Caribbean itinerary, intimacy and grace
of "old world" service, combined with a Port of New Orleans embarkation are
significant factors supporting a strong foundation for attracting passengers
seeking an affordable cruise vacation product. The Company's choice of New
Orleans as its point of embarkation will allow it access to passengers who might
not otherwise choose to take a cruise. Although not considered a traditional
cruise port, both the allure of New Orleans as a vacation destination, and the
convenience for local residents make New Orleans an attractive alternative to
Florida and New York based cruises. However, since Commodore provides one of

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only three regularly scheduled cruises from New Orleans, New Commodore will
continue to devote significant resources to develop consumer awareness and
acceptance.

Facilities, On-Board Services and Programs

Ticket Revenues

New Commodore's cruises are list-priced per person per day (based on double
occupancy) from $84 to $208, excluding commissions to travel agents. The Company
offers discounts, particularly during off-season periods, as is the practice in
the industry. Prices vary depending on size and location of cabin and the time
of year in which the trip occurs. The cruise price includes shipboard
accommodations, use of all of the shipboard amenities and all meals.

On-Board and Other Revenues

Revenues from the Enchanted Isle are derived from certain on-board
activities and services operated by the Company including, casino gambling,
liquor sales in a variety of bars, restaurants, lounges and discotheques.
Additional revenue is earned from pre- and post-cruise packages in each vessels'
point of embarkation. The Company also earns concession revenue from sales at
duty-free shops, gift shops, the sale of photographs to passengers, shore
excursions and from the beauty salon.

Competition

Competition in the industry in which the Company competes is intense. The
Company competes with other cruise ship lines in the standard segment that offer
the same type of products in several markets and land-based resorts, many of
which have significantly greater financial resources and experience, and are
more well known than the Company. The Company also competes for consumer
disposable leisure time dollars with other vacation alternatives such as land
based resort hotels and sight-seeing destinations, in addition to approximately
25 other cruise lines operating in the standard segment. In addition, public
demand for such activities is influenced by general economic conditions. The
Company operates in the Caribbean where its principal competitors are Carnival
Cruise Lines, Royal Caribbean Cruise Lines, Norwegian Cruise Lines and Dolphin
Cruise Line. However, the Enchanted Isle is currently one of only three
regularly scheduled cruise vessels, including one Carnival Cruise Lines ship,
that embarks passengers from the Port of New Orleans.

According to CLIA, prior to the end of 1996, eight additional ships
(representing approximately 14,040 berths) will be placed in service by the
Company's competitors and eight additional ships (representing approximately
10,114 berths) will be placed in service by other cruise lines in the North
American market. The number of ships which will be retired from service during
the next two years cannot accurately be predicted. In addition, CLIA reported
that cruise demand declined by .7% during 1994 and increased only slightly in
1995. While there can be no assurance that the cruise ship industry will not
experience an imbalance between supply and demand following the introduction of
such additional capacity, the aforementioned currently known level of capacity
increases through 1996 is lower on a percentage increase basis than the industry
experienced over the past 12 years.

Competition in the standard cruise market is highly concentrated, with
three companies accounting for an estimated 71% of the available berths. Recent
statistics indicate that the large cruise lines are growing increasingly larger
and running at full capacity while the smaller lines, such as the Company's, are
forced to discount and run at approximately 70% of capacity. The three largest

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cruise operators in the North American cruise industry are increasing market
share by adding new vessels to their fleets. Various articles concerning the
cruise line industry note that this trend is expected to continue for at least
the next few years. If this trend continues, the Company's ability to compete
with these larger operators may be substantially impaired.

The Joint Venture

On October 30, 1995, the Company entered into the Agreement with Seawise
establishing Sea-Comm. Pursuant to the Agreement, the Company purchased 50.005%
of Sea-Comm's Common Stock, and 50% of Sea-Comm's outstanding Preferred Stock.
Seawise purchased 49.995% of Sea-Comm's Common Stock and 50.0% of Sea-Comm's
Preferred Stock.

The purpose of Sea-Comm is to space charter the Universe Explorer to an
entity who operates the Semester at Sea program, an educational program
conducted by the Institute for Shipboard Education, a Delaware not-for-profit
corporation ("ISE"), and the University of Pittsburgh. Seawise has a contract
with the ISE pursuant to which it has operated the Semester at Sea program
aboard its own vessel for the last 20 years. In addition, Sea-Comm will operate
cruises to Alaska (the "Alaska Program") through World Explorer Cruises and
Tours Inc. ("WEC") and Hemisphere Cruises & Tours, Inc. ("Hemisphere"), during
summer periods when the Universe Explorer is not being used for the Semester at
Sea program. Seawise is party to a tripartite agreement with WEC and Hemisphere
pursuant to which it has operated the Alaska Program for the past 19 years (the
"Alaska Agreement"). As part of the joint venture, Seawise has assigned its
rights under the Alaska Agreement to Sea-Comm.

Pursuant to the Agreement, the Company has chartered the Universe Explorer
to Sea-Comm. Sea-Comm, in turn, has chartered the Universe Explorer to Seawise
so that it may operate the Semester at Sea program exclusively aboard the
vessel. In return for such charter, Seawise reimburses Sea-Comm for 76% of its
operating costs, 100% of food costs and 76% of the principal and interest due on
the portion of the Loan attributable to the Universe Explorer. Sea-Comm also
earns revenue from the sale of the other 24% of the cabins on the vessel, which
hold approximately 176 persons, to non-student passengers. Seawise has
guaranteed the sale of tickets to 60 non-student passengers on each voyage at
pre-determined rates during 1996. The number of guaranteed non-student
passengers increases in subsequent years.

During a portion of the year when the Semester at Sea program is not
operating (approximately 49 days), Sea-Comm operates the Universe Explorer under
the Alaska Agreement. WEC enjoys certain permits issued by the U.S. Parks
Service to cruise in the Glacier Bay, Alaska area. Pursuant to the Alaska
Agreement, Sea-Comm will earn revenues from ticket sales for all cabins and pay
license fees to WEC and Hemisphere for providing certain services to Sea-Comm.

For the use of the Universe Explorer in both the Semester at Sea and Alaska
programs, Sea-Comm has agreed to reimburse the Company for all of its operating
costs, all food costs and all of the principal and interest due on the portion
of the Loan attributable to the Universe Explorer which is incurred during the
approximate 320 days each year that the Universe Explorer is under charter to
Sea-Comm. Seawise also reimbursed the Company for $250,000 in expenses it
incurred due to the cancellation by the Company of other arrangements for the
use of the vessel. The Company used approximately $535,000, which it received
from EffJohn pursuant to the Settlement Agreement, to repair certain technical
items aboard the vessel. The Company also paid the first $200,000 of renovations
to the ship to convert it for use in the Semester at Sea program. Any excess
amounts which the Company requires for such conversion will be paid by Seawise.

Sea-Comm is managed by a board of directors, which consists of five people,
three of which are appointed by the Company and two of which are appointed by
Seawise. Two of the Company's executive officers, Messrs. Frederick A. Mayer and
Alan Pritzker, the Company's Chief Executive officer and Chief Financial
Officer, respectively, act as directors of Sea-Comm. Mr. Mayer and Mr. Pritzker
also act as Sea-Comm's President and Secretary, respectively. Sea-Comm's
Treasurer was appointed by Seawise.

Pursuant to the Agreement, the Company granted Seawise warrants to purchase
250,000 shares of the Company's Common Stock. The warrants are presently
exercisable at $6.00 per share and expire on January 7, 2001.

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The Semester at Sea Program

The Semester at Sea, which is administered by the ISE and academically
sponsored by the University of Pittsburgh, is a program that takes approximately
500 students from colleges and universities across the United States and abroad
around the world each fall and spring semester. Since 1963, over 28,000 students
have studied and traveled to 60 countries around the world through this program.
Seawise is operating the Semester at Sea program for the first time beginning in
the Spring of 1996 aboard the Universe Explorer. The first Semester at Sea
voyage operated by Seawise sailed on February 3, 1996 on a 100-day around the
world voyage with approximately 580 students. Semester at Sea gives students an
opportunity to broaden their horizons through educated travel. Students will
travel around the world aboard the Universe Explorer and participate in a unique
and dynamic learning environment. A limited number of "non-student passengers"
will also participate in each Semester at Sea voyage.

Students can choose from approximately 50 lower and upper division courses
in a variety of disciplines, including such offerings as anthropology, biology,
English, geology, history, fine arts, music, political science, religious
studies and theater arts. A number of one-credit courses are also available.
Non-student passengers may also attend courses. Courses are accredited by the
University of Pittsburgh and are fully transferable to most institutions.
Students are required to enroll in a minimum of 12 semester credits during the
fall and spring semesters and two courses, or 6 credits, during the summer
semester. Each program includes a mandatory three-credit core course which
provides an overview of the culture, environment, geography, history and
politics of the regions visited.

The fall and spring Semester at Sea programs last approximately 100 days.
The spring semesters begin in late January or early February and end in early
May, and fall voyages depart in mid-September and return in mid-December. A new
summer session will be offered in 1996 and will last approximately 56 days. The
Universe Explorer will stop at approximately nine ports during the regular
semesters and seven ports during the summer session. The summer 1996 itinerary
includes the ports of Ensenada, Mexico; Papeete, Tahiti; Auckland, New Zealand;
Sydney, Australia; Suva, Fiji; Hilo, Hawaii; and San Diego, California. Ports
change with each voyage.

While in port, students take advantage of field trips which provide both
structured and informal activities enabling them to observe, interact and
participate in the local culture. Students may also choose to travel
independently. Excursions typically include university visits, cultural
performances, visits to archeological sites, museums, orphanages and rural
areas. Students are also frequently given opportunities to interact with
students and faculty at local universities. Stays in port typically range from
two to six days.

The Alaska Program

Sea-Comm plans to operate one 7-day and three 14-day Alaska cruises in the
summer of 1996 onboard the Universe Explorer. All Alaska cruises will begin and
end in Vancouver, British Columbia. Ports of call for the 7-day cruise are
Ketchikan, Juneau, Wrangell, and Glacier Bay. The 14-day cruises will call at
the same ports as well as Sitka, Yakutat Bay/Hubbard Glacier, Seward, Skagway,
and Victoria.

WEC has been operating Alaska cruises for 19 years. The Company believes
that Sea-Comm's operation of WEC's established program will offer a unique
opportunity to cruise to Alaska due to its unmatched educational seminars and
over 40 optional shore excursions. Although the Alaska program is not part of
the Semester at Sea program, the 15,000 volume library will remain on board the
Universe Explorer in place of a casino. The passengers are free to use the
library to enhance the presentations by guest lecturers or simply to relax and
enjoy a quiet place to read. Passengers are also offered unique presentations
and educational lectures by guest professors and nature experts from around the
world. These presentations provide information about the art, culture, geology
and history of the ports-of-call and the region in general. The Company believes
that Sea-Comm will be the only operator of Alaska cruises that offers
educational seminars in conjunction with a cruise experience.

Marketing and Promotion

The ISE promotes the Semester at Sea program through its own network. The
ISE recruits campus volunteers on over 200 campuses in the United States and
abroad and such volunteers distribute brochures and respond to questions from
interested students. In addition, the ISE maintains a list of Semester at Sea
alumni and encourages such persons to recruit students for the program. Because

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of the way Sea-Comm earns revenue from the Semester at Sea program (through a
charter), its revenue will not vary materially based on the number of students
aboard the vessel. As a result, marketing to student passengers is not of
material importance to Sea-Comm.

Seawise, on behalf of Sea-Comm, markets Semester at Sea voyages, primarily
through the ISE, to non-student passengers through college alumni associations
and other education-related groups. Of the 176 berths available for non-student
passengers, Seawise has guaranteed that it will procure at least 60 non-student
passengers for each voyage during 1996 at pre-set rates. This number will
increase in subsequent years.

With respect to the Alaska program, Sea-Comm anticipates that WEC will
market its cruises through travel agents, and, in general, through the same
avenues that the Company markets its Caribbean cruises.

WEC's cruise experience can be differentiated from that of its competitors
both based on the length of the cruise and on its focus. Although WEC's Alaska
cruises will feature all of the cuisine, entertainment and services that cruise
passenger have come to expect, they will offer a unique educational
undercurrent, which WEC promotes as a unique adventure for the body and soul.
The Universe Explorer will feature an extensive library in place of the casino
and allow passengers to study the ports the ship visits in depth if they so
desire.

Facilities, On-Board Services and Programs

The Universe Explorer is a 23,900 gross ton registered vessel, which has
nine passenger decks and a capacity for approximately 860 passengers in 363
cabins (based on double occupancy). During the Semester at Sea program, the
shipboard campus consists of classrooms with closed circuit television
capabilities, a student union, a theater, a 15,000 volume core library, study
lounges, and a cafeteria, in addition to standard facilities of any oceangoing
vessel. Living areas are supervised by a support team which includes a complete
student life staff. The physical set-up on the Universe Explorer has been
specifically designed for academic ventures and includes classrooms with
blackboards, not substantially different from land-based campuses. A
closed-circuit video system further supports classroom instruction. At the
students' disposal are also a computer lab, exercise room, swimming pool, campus
store, snack bar, and a sports deck for volleyball, basketball and aerobics.
Laundry facilities and satellite phone calls and faxes are also available on
board. Cabins are available in double, triple and quadruple occupancy for
students and single and double occupancy for non-students.

The amenities on the Universe Explorer during the Semester at Sea program;
however, are not necessarily the same as those aboard the Enchanted Isle. There
are no formal dinners (except on a few special occasions), no ballroom and no
professional entertainers. However, the program staff includes an adult
coordinator who organizes a program of activities specifically geared for the
student/adult community. Cabin stewards provide daily limited cleaning and linen
services and all meals are served cafeteria-style for students, faculty and
staff. Attire is generally casual. The Universe Explorer houses 4 lounges and 2
bars available for students, with alcoholic beverage service limited to beer and
wine, and an additional 2 lounges for faculty, staff and adult passengers, which
serve a full range of alcoholic beverages.

During the months when the Universe Explorer sails on its Alaska itinerary,
it is easily transformed back into a luxury cruise chip. Classrooms are restored
to lounges and dining areas, and the crew resumes formal meals, maid service and
room service. In addition, the ship features all of the amenities and
entertainment offered by the Company's other Cruise Ship, the Enchanted Isle,
except for casino gambling. Even during the Alaska program, the Universe
Explorer retains its substantial library offering passengers the opportunity to
learn all about the ports they will visit during their voyage.

Ticket Revenues

The cost of Semester at Sea tuition ranges from $12,580 to $14,880 for
standard accommodations during the full semesters, and ranges from $6,775 to
$8,275 for standard accommodations during the summer semester. Such rates are
per person and include tuition, passage fare, room, board, and student fees.
Travel to and from ports of embarkation and debarkation, text books, in-country
travel, personal expenses and incidental fees are additional. Financial aid is
available to some students. Because the Semester at Sea is operated by Seawise,
neither the Company nor Sea-Comm earn revenue from student ticket sales.
Sea-Comm does, however, earn revenue from ticket sales to non-student
passengers.

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WEC's Alaska cruises are list-priced per person (based on double occupancy)
from $1,145 to $1,995 for the 7-day cruise and $2,295 to $3,995 for the 14 day
cruises, excluding commissions to travel agents, which will be paid by Sea-Comm.
Prices vary depending on size and location of cabin. The cruise price includes
shipboard accommodations, use of all the shipboard amenities and all meals.

On-Board and Other Revenues

Sea-Comm earns revenues from the Universe Explorer during the Semester at
Sea program from beverage and snack bar sales and miscellaneous services. While
the vessel is used in the Alaska program, Sea-Comm earns on-board revenue from
certain on-board activities and services including beverage sales in a variety
of bars, restaurants and lounges, and shore excursions. Additional concession
revenue is earned from gift ship sales and the sale of photographs to
passengers.

Competition

Seawise is the exclusive operator of the Semester at Sea program. To the
Company's knowledge, there is no other entity which operates a similar shipboard
educational program. Seawise competes for student passengers with operators of
land-based international educational programs, such as semesters abroad. With
respect to adult passengers, Sea-Comm competes with long cruise providers, such
as freighters with passenger accommodations and world cruises, and to a lesser
degree with traditional world cruises and land-based vacation alternatives.

With respect to the Alaska program, Sea-Comm competes with other cruise
operators who operate cruises to this region. Some of these operators carry
passengers from Canadian ports to Alaska and then return them by air, while
other operators carry passengers on a round trip voyage. Sea-Comm also competes
for consumer disposable leisure time dollars with other vacation alternatives.

Ship Maintenance and Operation

In addition to routine maintenance and repairs performed on an ongoing
basis, a vessel is generally taken out of service once every two or three years
for a period ranging from one to two weeks, during which time more substantial
maintenance work, repairs and improvements are performed in drydock. The
Universe Explorer was last taken out of service for maintenance in April 1995
and the Enchanted Isle was last taken out of service for maintenance in February
1996. This work typically is performed during non-peak periods to minimize
disruption of the Company's operations and any adverse effect on revenues. To
the extent practicable, the ship's crew, catering and hotel staff remain with
the ship during such period and assist in performing maintenance and repair
work.

The Company placed the Universe Explorer in drydock for the purpose of
carrying out the repairs detailed in the Settlement Agreement at the Commodore
Closing. All such repairs were performed at EffJohn's expense. While the
Universe Explorer was in drydock, the Enchanted Isle operated on the itinerary
previously served by the Universe Explorer. Following the completion of the
repairs, the Universe Explorer commenced operations for Sea-Comm.

Due to the age of the Cruise Ships, they are expected to require more
maintenance than new vessels. In addition, they are more likely to break down
and be removed from service at unscheduled times, which could result in loss of
revenue for the Company. During 1994, however, the Universe Explorer was not out
of service for unscheduled maintenance. Because the Enchanted Isle was used as a
floating hotel during most of 1994, comparable statistics for this vessel are
unavailable.

Suppliers

The Company purchases air transportation, bunker and diesel fuel, food and
related products and hotel supplies from independent suppliers and does not
expect difficulties in obtaining adequate supplies of these items. The Company
is not dependent upon any one supplier for its needs.

Employees

The Company employs approximately 562 people, of whom 505 serve as officers
and crew on the Cruise Ships and approximately 57 are employed shoreside in
various sales and marketing, as well as administrative and management positions.

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Pursuant to the terms of the Commodore Acquisition, the Company renewed Old
Commodore's contract with the employees who work aboard the Enchanted Isle and
Universe Explorer for three month renewable terms.

Insurance

The Company has procured protection and indemnity coverage and oil
pollution coverage, as well as other coverage through its insurers for the
Cruise Ships. The Company maintains insurance on the hull and machinery of the
Cruise Ships in an amount equal to the greater of 100% of the market value of
the ship, as such value is agreed upon with the insurer and the mortgage holder
of the vessel, or 120% of the outstanding amount of the Loan on the vessel.
Coverage for hull and passenger interests (which includes earnings and increased
value) is maintained in amounts related to the value of the ship and its
anticipated revenues. In addition, the Company maintains war risk insurance on
the ship in amounts in excess of the market value of the ship as agreed upon
with the insurer. War risk insurance includes protection against liability
claims by passengers and crew, as well as other indemnity risks for which
coverage would be excluded under the Company's protection and indemnity coverage
by reason of war exclusion clauses.

The Company also maintains coverage on the Cruise Ships in various amounts
for the loss of revenue in the event that either such vessel is unable to
operate during scheduled cruise periods as a result of an accident, mechanical
failure, or certain additional covered perils. In such event, the Company's
insurance would pay up to $53,000 and $60,000 per day of lost service for the
Enchanted Isle and Universe Explorer, respectively, up to a maximum of 90 days,
subject to a 14-day waiting period. The Company, as required by the FMC, has
established insurance coverage in connection with liability for death or injury
to passengers with respect to the Enchanted Isle. Such coverage has no
limitation, but is subject to a deductible equal to $50,000 per occurrence. The
Company also provides a guaranty in respect of liability for non-performance of
transportation as required by the FMC with respect to the Enchanted Isle. The
Universe Explorer does not sail from U.S. ports, and as such, the Company is not
required to maintain such coverages for this vessel.

Government Regulation

The Company's vessels are registered in Panama, and are subject to
regulations issued by Panama, including regulations issued pursuant to
international treaties governing the safety of the ships and its passengers. The
country of registry conducts periodic inspections to verify compliance with
these regulations.

Every five years, the Cruise Ships are subject to an inspection of the hull
structure and plating. In addition, ships operating out of U.S. ports are
subject to control verification by the U.S. Coast Guard for compliance with
international treaties, and by the U.S. Public Health Service for sanitary
conditions. The Universe Explorer and The Enchanted Isle will be inspected at
least annually by the Panamanian authorities and quarterly by the U.S. Coast
Guard, and on a regular basis by the U.S. Public Health Service. The Company
believes that the Cruise Ships are in substantial compliance with all applicable
regulations and that they have the licenses necessary to conduct their business.

The Company has obtained certificates from the FMC relating to its ability
to meet obligations to passengers for non-performance of cruises. The Company
received certain passenger deposits as part of the Commodore Assets necessary to
obtain this certificate. In the future, the Americans with Disabilities Act
("ADA") may be applied to the Cruise Ships to make the Cruise Ships more
accessible to disabled persons. The Company cannot project how the ADA will be
applied to the Cruise Ships or the costs of compliance.

The Company is also subject to various U.S. laws and regulations relating
to environmental protection. Under such laws and regulations, the Company will
be prohibited from, among other things, discharging materials, such as
petrochemicals and plastics, into the waterways. The Company has obtained
insurance against the costs of oil pollution occasioned at, or in transit to,
sea. The financial costs relating to U.S. environmental laws and regulations are
not expected to have a material adverse impact on the Company's results of
operations, financial condition or liquidity.

The Company believes that it is in compliance with all regulations
applicable to the Cruise Ships and has the licenses necessary to conduct its
business, however, there can be no assurance thereof. From time to time,
legislation and proposed regulations have been introduced which could have an
impact upon the Company's operations. During recent years, SOLAS has been

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amended and will, among other things, require most passenger vessels not fitted
with sprinkler systems to install such systems and other safety arrangements,
including the addition of smoke detector systems, low-location lighting and
enclosed escape stairwells by October 1997. In the event a vessel meets the
SOLAS 1974 requirements (without reference to any subsequent amendments
thereto), it will not be required to be fitted with a sprinkler system and other
safety equipment until on or before October 1, 2005. The Cruise Ships are not
currently fitted with any sprinkler systems. The Company believes that the
Cruise Ships comply with the SOLAS 1974 requirements, and thus that it will not
have to fit them with sprinkler systems and other safety equipment until 2005.
Neither the U.S. Coast Guard nor either of the Cruise Ships' classification
societies has definitely confirmed that the Cruise Ships meet the SOLAS 1974
requirements. Thus, there is a risk that the Company will have to install such
systems aboard the vessels in 1997. The cost of such installation is presently
estimated to be approximately $3,000,000 per vessel. The Company has not set
aside or otherwise anticipated where it will obtain such funds if it must meet
the 1997 deadline. In addition, the installation of the sprinkler systems could
require that the Cruise Ships be out of service for as long as three months.

There have been efforts in prior Congresses to adopt bills that would apply
United States labor laws to non-resident alien crew of foreign registered ships
sailing from U.S. ports and to exclude certain foreign-built ships from U.S.
ports if they received construction subsidies of a particular type. With respect
to the ship construction subsidies, the Cruise Ships are U.S. built and thus
would be at risk to such legislation only if it were to apply to conversion and
maintenance work performed on the vessels in foreign countries. The application
of U.S. labor laws to foreign-registered passenger ships would have a very
substantial impact on the cruise industry as a whole and the Company cannot
predict the implications on its operations. Such proposed legislation is not
presently under consideration by the 104th Congress.

The Cruise Ships have been built and they maintain the standards of design,
construction and maintenance appropriate to their trades and they are operated
and maintained under the continuous maintenance survey system of the American
Bureau of Shipping and Lloyds Register of Shipping, respectively. In order for
the Company to insure the Cruise Ships, it must comply with the survey and
maintenance requirements of each ship's respective classification society. The
cost of such required maintenance for older vessels, such as the Cruise Ships,
could be high.

Legal Proceedings

Except as described herein, neither of the Cruise Ships nor the Company is
a party to any material legal proceedings, whether pending or known to be
contemplated, and the Company knows of no material legal proceedings, pending or
threatened, or judgments entered against any director or officer of the Company
in his capacity as such.

In October 1995, Kristian Stensby filed an action in the Circuit Court in
Dade County, Florida against EffJohn, the Lender, the Company, Mr. Mayer and
others, alleging that due to the tortious acts or breaches of agreements by
various defendants, he did not receive certain fees and/or commissions to which
he was allegedly entitled upon the consummation of the sale of the Commodore
Assets or use of such assets in a joint venture. Mr. Stensby has not alleged the
amount of damages to which he believes he is entitled as a result of the alleged
behavior of the various defendants. Recently, the court denied the motion of the
Company and its subsidiaries to dismiss this action; however, the Company does
not believe that the ultimate resolution of this action will have a material
adverse effect on its financial condition.

The Company anticipates that it will be subject to claims and suits in the
ordinary course of its business in the future, including those arising from
personal injury to its passengers. The Company believes that it has obtained
insurance in the proper types and amounts to cover such anticipated claims. See
"Risk Factors - Certain Business Risks."

Description of Property

New Commodore subleases from EffJohn, on a pass thru basis, approximately
16,000 square feet of office space in Hollywood, Florida. The sublease
terminates in June 2000. The Company uses such space for its administrative and
management operations. The annual lease payment of approximately $13.50 per
square foot does not include taxes, utilities, or certain other operating costs.
The base rent will increase by 4% each year during the term of the lease. Taxes,
utilities and operating costs amount to approximately an additional $8.22 per
square foot.

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The Company also utilizes a pier at the Port of New Orleans, pursuant to a
written agreement, from which one of its Cruise Ships will depart, and port
facilities at various Caribbean locations, pursuant to oral agreements with the
respective authorities, as is the custom in the Caribbean. The agreement with
the Port of New Orleans, which was assigned to the Company, permits the Company
to operate a vessel from New Orleans for six years. The Company has priority use
of the terminal on weekends. In the event the Company does not complete 300
sailings during such period (or 50 sailings per year), the Company may extend
the agreement for one year, pay a predetermined cancellation fee, or place
another vessel in service in New Orleans. No assurance can be given that the
Company will be able to continue to use the Caribbean ports under oral
agreements, or that if such oral agreements are terminated, the Company will be
able to locate acceptable substitute ports.

Trademark Protection

At the Commodore Closing, the Company acquired domestic and foreign
trademark registrations relating to the name "Commodore" and the distinctive
Commodore logo. Pursuant to the Acquisition Agreement, the Company has agreed to
allow EffJohn to use the name Commodore in connection with a class of ferry
service it provides. The Company does not believe that such use will materially
interfere with its proposed use of the Trademarks. The Company believes such
trademarks are widely recognized throughout North America, although it has not
independently verified this belief. The Company has not yet recorded the
assignment of certain of the foreign Trademarks due to the costs involved and
the potentially limited benefit of certain of such Trademarks, and has not yet
determined whether it will do so. As a result, there can be no assurance that
the Trademarks do not or will not violate the proprietary rights of others, that
the Trademarks would be upheld if challenged or that the Company would not be
prevented from using the Trademarks, any of which could have an adverse effect
on the Company. In addition, there can be no assurance that the Company will
have the financial resources necessary to enforce or defend the Trademarks. The
Company is not aware of any actions against the Trademarks and has not received
any notice or claims of infringement in respect of the Trademarks.

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CERTAIN TAX CONSIDERATIONS

The following discussion summarizes certain U.S. Federal income tax
consequences to the Company and to U.S. persons holding the Company's Common
Stock. This discussion is a summary for general information only, and is not a
complete analysis of the tax considerations that may be applicable to the
Company or to a prospective investor. This discussion also does not address the
tax consequences that may be relevant to income of the Company other than from
the international operation of ships, as defined in the Code, nor to particular
categories of Company stockholders subject to special treatment under certain
Federal income tax laws, such as dealers in securities, tax-exempt entities,
banks, insurance companies and foreign individuals and entities. In addition, it
does not describe any tax consequences arising out of the tax laws of any state,
locality or foreign jurisdiction. The discussion is based upon currently
existing provisions of the Code, existing and proposed regulations thereunder
and current administrative rulings and court decisions. All of the foregoing are
subject to change and any such change could affect the continuing validity of
this discussion. In connection with the foregoing, investors should be aware
that the Tax Reform Act of 1986, as amended (hereinafter, the "1986 Tax Act")
changed significantly the U.S. Federal income tax rules applicable to the
Company and, in certain cases, to certain holders of its Common Stock (including
the Principal Stockholders). Although the relevant provisions of the 1986 Tax
Act are discussed herein, those provisions have not yet been the subject of
extensive administrative or judicial interpretation. Accordingly, there can be
no assurance that such interpretation will not have an adverse impact on an
investment in the Company's Common Stock.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF ANY INVESTMENT IN THE COMPANY'S COMMON
STOCK, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

Taxation of the Company - Possible U.S. Tax Exemption Under Section 883(a) of
the Code.

Code section 883(a) generally exempts from U.S. corporate tax the shipping
income derived by a foreign corporation whose country of incorporation
reciprocally exempts from foreign tax the income of U.S. corporate shipping
companies. The Company anticipates that substantially all its income will be
from its subsidiaries', that is from New Commodore's, Almira's and Azure's,
international operation of ships, as described in Code section 883(a).

The Company and New Commodore are incorporated in Bermuda, and New
Commodore's subsidiaries, Almira and Azure, are incorporated in Panama. With
respect to New Commodore's separate income, Bermuda counsel has advised that
there is no corporate income tax in Bermuda. U.S. Treasury regulations indicate
that countries that do not impose a corporate income tax such as Bermuda, are
viewed as providing a reciprocal exemption. With respect to the bareboat charter
income of Almira and Azure from their leases of the vessels to New Commodore,
Panama counsel has advised the Company that Panama's exemption from corporate
income tax for income earned by a U.S. corporation from maritime activities is
broad enough to cover both charter income and operating income. Based upon this
advice from Bermuda and Panamanian counsel, the Company believes that Bermuda
and Panama will be viewed as providing a reciprocal exemption. Because
substantially all the Company's income is anticipated to be derived from foreign
corporations whose countries of incorporation, Bermuda and Panama, reciprocally
exempt from U.S. tax the income of U.S. corporate shipping companies, the
Company would qualify under Section 883(a) for an exemption from U.S. corporate
tax on substantially all its income.

Section 883(c), however, generally provides that the corporate tax
exemption provided by Section 883(a) does not apply unless the stock of the
foreign corporate parent or grandparent of the foreign corporation earning the
shipping income is "primarily and regularly traded on an established securities
market...in the United States" or the corporation is a "Controlled Foreign
Corporation" ("CFC") as described below in the section "Taxation of the
Company's Stockholders," or certain other criteria are met. Prior to the
completion of this Offering, the Company Common Stock has not been "primarily
and regularly traded on an established securities market...in the United
States"; nor has any of the alternative methods of avoiding the restrictions of
Section 883(c) been met. Therefore, since its formation, the Company has been
subject to U.S. taxation, although it believes its U.S. tax liability to date
has not been material.

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The Company anticipates, however, that upon completion of this Offering,
its Common Stock will be viewed as "primarily and regularly traded on an
established securities market...in the United States." In that case, the
restrictions of Code section 883(c) would be avoided, and Code section 883(a),
which generally exempts from U.S. corporate tax the shipping income derived by a
foreign corporation whose country of incorporation reciprocally exempts from its
foreign tax the income of U.S. corporate shipping companies, should apply to
exempt the shipping income of the Company's subsidiaries.

Although no Treasury regulations have been promulgated that explain when a
foreign corporation's stock will be considered "primarily and regularly traded
on an established securities market" for purposes of Code section 883(c),
Treasury regulations have been promulgated interpreting a similar phrase under
Section 884 of the Code which, like the phrase in Code section 883, was enacted
in the Tax Reform Act of 1986. Under these regulations, the stock exchange must
be a U.S. over-the-counter market, such as Nasdaq, or meet certain other
criteria. In addition, the stock listed on the exchange must represent 80
percent or more of the total combined voting power and value of the
corporation's stock. Thus, for example, if the Series A Preference Shares were
to represent more than 20% of the Company's total stock value (due to a decline
in value of the listed Common Stock relative to the Series A Preference Shares)
during a year, the Company would not be viewed as meeting the "primarily and
regularly traded on an established securities market" test. The regulation
further generally requires that the stock is regularly quoted by brokers or
dealers holding themselves out to buy or sell the stock at the quoted prices, or
that trades in the shares take place on at least 60 days during the year and
that the annual trading volume is at least 10 percent of the average number of
shares outstanding. The regulations further require that 50% or more of the
outstanding shares of the listed stock are not owned, directly or indirectly,
for more than 30 days during the relevant year by persons who each own 5% or
more of the value of the outstanding shares of stock and (a) are not "qualifying
stockholders" for purposes of Code section 884 or (b) fail to provide to the
Company the required proof of their qualifying status.

The Company believes that upon completion of this Offering and the trading
of its Common Stock on Nasdaq NMS, its Company Stock will meet the requirements
set forth in Code section 883(c) that it be "primarily and regularly traded on
an established securities market...in the United States." This will qualify the
Company for the tax exemption provided by Code section 883(a), if the quoted
phrase in Code section 883(c) is interpreted similarly to the way it is
interpreted in the regulations under Code section 884. However, because there
are no regulations to date interpreting Code section 883(c), and because
satisfying the Regulations under Code section 884 depends upon meeting certain
factual tests (e.g., that the Company's Common Stock represents at least 80
percent of the combined value of the Company's Common Stock and Series A
Preference Shares) there is no assurance that the Company will qualify for the
tax exemption provided by Code section 883(a). Also, other factors could lead to
a loss of the reciprocal exemption, such as a de-listing of the Common Stock
from Nasdaq (NMS and the Small Cap Market), a change in foreign corporate tax
law on shipping income, or a change in Code section 883.

In the event that the Company were not eligible for the Code section 883(a)
exemption, its international shipping income would be subject to a complex set
of tax rules concerning the taxation of foreign corporations engaged in business
in the United States. Under these rules, such a foreign corporation may be
subject to various U.S. taxes, including the regular U.S. corporation income tax
(or alternative minimum tax); an additional branch profits tax; a gross basis
tax on certain gross rentals derived from bareboat charters of ships to
affiliated or unaffiliated companies; and branch taxes on certain interest paid
or accrued. The Company expects that, unless and except to the extent that the
Company qualifies for the tax exemption provided by Code section 883(a), it will
be subject to these U.S. income taxes.

Sea-Comm, the Company's majority owned subsidiary, is incorporated in
Liberia. Counsel familiar with Liberian law has advised that Liberia provides a
corporate income tax exemption for income earned by a U.S. corporation from the
international operating and chartering of ships, including passenger operations,
and chartering on a bareboat, time or voyage basis. Based on this advice from
counsel familiar with Liberian law, the Company believes that Liberia will be
viewed as providing a reciprocal exemption. The Company therefore believes that
under Section 883(a) it will be eligible for the exemption from U.S. corporate
income tax based on its income from international shipping income. The Section
883(a) exemption should extend to the payments received from Seawise, in the
nature of time-charter payments, and also to the passenger revenue derived by
Sea-Comm with respect to non-student passengers, during the approximately 258
days per year that the Universe Explorer is used in connection with the Semester
at Sea Program. The Section 883(a) exemption should also extend to the passenger
revenues from the Universe Explorer's Vancouver to Alaska route.

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Under Section 883(c), however, the U.S. corporate tax reciprocal exemption
otherwise provided to Sea-Comm for its international shipping income under
Section 883(a), will not be available unless either the Common Stock of the
Company, which is the indirect majority shareholder of Sea-Comm, is "primarily
and regularly traded on an established securities market in the United States,"
or certain alternative tests, which may not be met here, are satisfied. The
Company believes that, to date, Sea-Comm's potential U.S. corporate tax
liability is not material. Moreover, as discussed above, the Company believes
that, upon completion of this Offering and the trading of its Common Stock on
Nasdaq NMS, its stock will be viewed as being "primarily and regularly traded on
an established securities market in the United States," thereby permitting
Sea-Comm to qualify for the U.S. corporate tax exemption under Section 883(a).
Nevertheless, as discussed above, there are certain risk factors concerning the
ability of the Company's stock to be qualified as "primarily and regularly
traded on an established securities market in the United States." If the
Company's stock is unable to qualify as being "primarily and regularly traded on
an established securities market in the United States," then the Company expects
that Sea-Comm, like the Company itself, could be liable for significant U.S.
taxes on its international shipping income.

Moreover, the Internal Revenue Service has ruled that, in any case, the tax
exemption provided under Section 883(a) does not include income from voyages
that begin and end in the U.S. and do not stop at any foreign ports. Therefore,
the income of Sea-Comm from the approximately 49 days that it is on the Alaska
route, which route involves stops only at U.S. ports, will be subject to full
U.S. corporate tax as well as U.S. branch tax, even if the Company's stock does
qualify as being "primarily and regularly traded on an established securities
market in the United States. As a consequence, Sea-Comm's effective U.S.
corporate tax rate on such income may be very high.

Foreign Income Taxation

The Company and New Commodore are incorporated in Bermuda. Bermuda counsel
has advised the Company that Bermuda does not impose a corporate income tax.
Almira and Azure are incorporated in Panama. Panama counsel has advised the
Company that Panama does not impose a corporate income tax on the non-Panamanian
source income of a Panamanian corporation. The Company does not expect that
itself or any of its subsidiaries will have an office in Panama, or that its
ships will visit ports in Panama. In that case, Panama counsel has advised that
the Company and its subsidiaries will have no Panama source income, and
therefore not be subject to Panamanian corporate income tax.

Panama counsel has also advised that dividends and interest paid by a
Panamanian corporation with no Panamanian source income are not subject to
Panamanian withholding tax. Accordingly, New Commodore should not be subject to
Panama withholding tax on dividends and interest received from Almira or Azure.

Counsel familiar with Liberian law has advised that the Company will not be
subject to Liberian tax on its charter payments from Sea-Comm, if, as the
Company expects, the Universe Explorer does not make any trips between two
Liberian ports. Liberian counsel has also advised that Sea-Comm will not be
subject to Liberian tax on its either its direct passenger revenue, or on the
receipt of its charter payments from WEC, Hemisphere, or Seawise, if, as the
Company expects, the Universe Explorer does not make any trips between two
Liberian ports. Counsel familiar with Liberian law has also advised that the
Company will not be subject to Liberian tax on any preferred or common dividends
received from Sea-Comm, if, as the Company expects, the Universe Explorer does
not make any trips between two Liberian ports.

The vessels leased by Almira and Azure, and operated or chartered by New
Commodore, may visit ports in different foreign countries. In addition, New
Commodore may have some incidental business contacts in those or other foreign
countries. When the Company is finalizing its routes and related business plan,
it will then review the corporate tax laws of those foreign countries to
determine how much, if any, corporate income tax liability may be imposed on the
Company and its subsidiaries by reason of activities in the those foreign
countries. At present, such corporate tax liability cannot be estimated.

Taxation of the Company's Stockholders

Dividends; Undistributed Income of the Company. A United States person
whose holdings of the Company's Common Stock (including shares such person is
considered to own under applicable constructive ownership rules) are less than
ten percent of the Company's outstanding Common Stock generally is not required
to recognize income by reason of the Company's earnings until such earnings are
distributed. Dividends paid by the Company to such a stockholder will be taxable

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to such stockholder as dividend income to the extent of the Company's current or
accumulated earnings and profits. Such dividends generally will not be eligible
for any dividends-received deduction. The Company's ability to pay dividends to
the holders of its Common Stock is restricted by the terms of the Series A
Preference Shares and the Loan. See "Description of Securities Series A
Preference Shares" and "Business - the Commodore Acquisition." Regardless of
such restrictions, the Company does not anticipate that it will pay dividends on
the Common Stock in the foreseeable future.

The Company also does not anticipate that it will be a CFC. This is because
the Company does not believe that, at any time, United States Ten Percent
Stockholders will own a majority in vote or value of its stock. However, due to
inter-stockholder purchases and sales, it is conceivable that at some future
time the Company will become a CFC.

If, contrary to its expectation, the Company is a CFC for an uninterrupted
period of 30 days during any taxable year of the Company, a United States Ten
Percent Stockholder who owns (or is considered to own) 10% or more of the
Company's voting power on the last day of such taxable year on which the Company
is a CFC, will generally be required to include in ordinary income his pro rata
share of the Company's "subpart F income" for that taxable year and, in
addition, certain other items, including, under certain circumstances, the
Company's increase in earnings invested in United States property, and amounts
of previously excluded subpart F income withdrawn by the Company from investment
in certain shipping and related assets, whether or not any amounts are actually
distributed to stockholders. Even if, contrary to the Company's expectations,
the Company is a CFC, Company stockholders who are not United States Ten Percent
Stockholders will not be affected by the CFC and subpart F income provisions.
"Subpart F income" includes, among other things, "foreign base company shipping
income," which is defined to include income derived from using or chartering a
vessel in foreign commerce or from the sale, exchange or other disposition of a
vessel. Accordingly, if the Company is a CFC, all but an insubstantial part of
the Company's earnings is expected by the Company to be "subpart F income,"
which will be taxable currently to the Company's United States Ten Percent
Stockholders to the extent of their pro rata share. Earnings and profits of the
Company already included in income by a United States Ten Percent Stockholder by
reason of the CFC provisions discussed above are not again included in income by
such United States Ten Percent Stockholder or his assignee when an actual
distribution is made. Other distributions by the Company by way of dividends
with respect to the Common Stock out of current or accumulated earnings and
profits will be taxed to United States Ten Percent Stockholders as ordinary
income. In the event that a United States Ten Percent Stockholder is required to
include his pro rata share of the Company's "subpart F income" in his ordinary
income, the Company will declare a dividend on its Common Stock, if permitted to
do so, equal to the highest U.S. income tax rate multiplied by the Company's
"subpart F income" for such year. The dividend will be paid pro rata to all
Common Stock holders, whether they are United States Ten Percent Stockholders or
not. The ability of the Company to pay any such dividend could be limited by the
Company's obligations to pay dividends to the holders of the Series A Preference
Shares. See "Description of Securities - Series A Preference Shares."

Dispositions of Company Common Stock. In general, any gain or loss on the
sale or exchange of Common Stock of the Company by a stockholder will be capital
gain or loss, provided such stock is held as a capital asset. However, if,
contrary to the Company's expectations, the Company has been a CFC, any person
who was a United States Ten Percent Stockholder of the Company at any time
during the five-year period ending on the date of sale or exchange (or a
distribution liquidation) when the Company was a CFC may be required to treat
all or a portion of the gain from a sale or exchange of Common Stock as ordinary
income (to the extent of his proportionate share of certain earnings and profits
of the Company) rather than as capital gain. Any capital gain or loss recognized
on a sale or exchange of Common Stock will be long-term capital gain or loss if
the stockholder has held the Common Stock for more than one year.

Other Anti-Deferral Rules. The U.S. also imposes various anti-tax-deferral
rules to passive foreign investment companies, personal holding companies,
foreign personal holding companies, foreign investment companies, and foreign
corporations unreasonably accumulating taxable U.S. earnings. These rules can
apply to the foreign corporation, and to U.S. stockholders of a foreign
corporation, even if the foreign corporation is not a CFC, and even if the
foreign corporation is publicly traded. Where applicable, these rules can
directly cause the stockholder to be taxed on the undistributed income of the
foreign corporation, or they can impose an interest charge on a U.S.
stockholder's deferred tax liability when dividends are actually received or the
foreign corporation's stock is sold; or they can impose an additional tax on the
foreign corporation on its undistributed income, thereby practically forcing
current dividend distributions. However, these rules generally do not apply

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where substantially all the foreign corporation's activities consist of
conducting an active business rather than earning passive income. The Company
therefore does not believe that any of these rules will apply to the Company.
However, these rules are quite technical and depend heavily on factual
determinations, and thus conceivably could apply at some time in the future.

Absence of Bermuda Taxation

Bermuda counsel has advised that Bermuda does not impose a dividend
withholding tax, a capital gains tax, or other type of income tax. Therefore
dividends received on the Company's Common Stock will not be subject to any
Bermuda dividend withholding tax, and gains on sales of the Company's Common
Stock will not be subject to Bermuda capital gains tax. Bermuda counsel has also
advised that Bermuda does not impose a gift tax, inheritance tax, or estate tax.

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MANAGEMENT

Directors and Executive Officers

The directors and executive officers of the Company are as follows:

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Term as
Name Age Position Director Expires
---- --- ------ ------------

Jeffrey I. Binder ....................... 49 Chairman of the Board 1998
Frederick A. Mayer ...................... 62 Vice Chairman of the Board 1998
James R. Sullivan ....................... 59 President N/A
Alan Pritzker ........................... 41 Chief Financial Officer N/A
Arnold Adolphus Francis, Q.C.(1) ........ 74 Director 1996
A. Robert Miller(1) ..................... 55 Director 1996
Hon. Wayne L. Furbert, C.P.A.,
J.P., M.P.(1) ........................ 40 Alternate Director 1996
Robin L. Todd(1) ........................ 29 Alternate Director 1996

--------------------
(1) Under Bermuda law, the Company must have two directors who reside in
Bermuda. Accordingly, Messrs. Francis and Miller are Bermuda residents who
were appointed to satisfy the requirements of the Companies Act 1981 of
Bermuda, and Hon. Furbert and Ms. Todd are their respective alternates.
Neither of them nor their alternates has expertise in U.S. law or in the
cruise line industry.

Jeffrey I. Binder has been Chairman of the Board of the Company since its
inception. Since 1991, he has also been Chairman of the Board and a director of
TelMed, Inc., a publicly traded company which develops medical products and
provides medical related services. From 1989 to the present, he has been the
Chairman of the Board and a director of JeMJ Financial Services, Inc., a private
holding company. Mr. Binder also served as a director of NAL Financial Group,
Inc., a publicly traded company that acquires and services auto leases and
loans, from November 1994 until July 1995. Between March 1989 and October 1993,
he was the President and a director of Sector Associates, Ltd., a public company
engaged, at the time, in the furniture retail business. Due to Mr. Binder's
involvement with TelMed, Inc., he will not devote his full time to the Company.

Frederick A. Mayer has been Vice-Chairman of the Board and Chief Executive
Officer of the Company since its inception. Mr. Mayer has 40 years of experience
in the travel and cruise industry. He was a co-founder and Vice Chairman of
Regency Cruises, Inc. ("Regency"), which was a publicly traded cruise line
company between 1985 and 1993, until March 1995 when he joined the Company.
Beginning in 1955, and concurrently with his association with Regency, Mr. Mayer
was also President of Exprinter International USA, a travel organization
affiliated with Exprinter Panama. He has developed and marketed over 200 theme
cruises. Mr. Mayer is also Chairman of the Board and President of Marmara
Marine, Inc., which owns the S/S United States. In November 1995, Regency filed
for Chapter 11 bankruptcy protection.

James R. Sullivan was appointed President of the Company in May 1995. Prior
to such time he was President of the Sullivan Group, a marketing consulting
company located in Weston, Connecticut, which he formed in 1993. Prior to 1993,
Mr. Sullivan was a senior executive with Cunard Line Ltd. ("Cunard") for 20
years in the company's cruise and hotel/resort sectors. He joined Cunard as Vice
President of Marketing and Sales of Cunard's hotels and resorts in 1973, and
became Vice President of Sales for Ships and Hotels in 1977. In 1981, he became
Senior Vice President of Marketing and Sales and was named to Cunard's Board of
Directors in London. During this period, Cunard acquired Norwegian American
Cruises and Sea Goddess Cruises. He also served two different terms as Vice
Chairman of CLIA, the national cruise industry trade group, during the 1980's,
and was Chairman of CLIA's marketing committee during this period. From 1989 to
1993, Mr. Sullivan was Senior Vice President, Director of Cunard's Eastern
Hemisphere, headquartered in London.

Alan Pritzker was appointed Chief Financial Officer of the Company in May
1995. Prior to such time, Mr. Pritzker was employed by Regency. Mr. Pritzker
acted as Regency's Controller between 1985 and 1989, and then as its Senior Vice
President Finance, until joining the Company. While at Regency, he was

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responsible for all accounting and financing functions, information filings as
well as the quarterly filings with the Securities and Exchange Commission. In
November 1995, as described previously, Regency filed for Chapter 11 bankruptcy
protection. Prior to joining Regency, Mr. Pritzker was employed by Holland
America Line and Vacation Travel Concepts, a travel wholesaler, in various
positions.

Arnold Adolphus Francis, CBE, Q.C., J.P. has been a Director of the Company
since its formation. Mr. Francis has been a partner in Richards, Francis &
Francis, a law firm based in Bermuda since 1980. Richards, Francis & Francis
acts as Bermuda counsel to the Company.

A. Robert Miller has been a Director of the Company since its formation.
Mr. Miller has been an associate in Richards, Francis & Francis. Prior to 1992,
Mr. Miller was self-employed as an attorney.

Robin L. Todd was appointed as an Alternate Director for Mr. Miller upon
the Company's formation. Ms. Todd has been an associate in Richards, Francis &
Francis. From 1993 until 1994, she was an attorney with Jacques & Lewis in
London. Prior to 1993, Ms. Todd was a student.

Honorable Wayne L. Furbert, C.P.A., J.P., M.P. was appointed as an
Alternate Director for Mr. Francis upon the Company's formation. Mr. Furbert has
been the financial controller of Richards, Francis & Francis, since 1983. He has
also been Chairman of the Finance Committee of the Bermuda Hospitals Board since
1982 and is Minister of Community and Cultural Affairs in Bermuda.

For as long as it holds at least 125,000 Series A Preference Shares,
EffJohn has the right to designate one member of the Company's Board of
Directors. To date, EffJohn has not exercised that right. The Company has also
agreed to appoint a representative of the Underwriter as an advisor to, or in
lieu thereof, as a member of, the Company's Board of Directors for three years
after the date of this Prospectus. In addition to the foregoing, the Company
plans to appoint up to three additional directors, including two non-employee
directors, to its Board. The identities of such persons are unknown as of the
date of this Prospectus.

Classified Board of Directors

The Board of Directors is divided into three classes. One class holds
office initially for a term expiring at the annual meeting of stockholders to be
held in 1996, a second class will hold office initially for a term expiring at
the annual meeting of stockholders to be held in 1997 and a third class holds
office initially for a term expiring at the annual meeting of stockholders to be
held in 1998. Each Director will hold office for the term to which he is elected
and until his successor is duly elected and qualified. Messrs. Francis and
Miller have terms expiring in 1996, the directors to be appointed will have
terms expiring in 1997, and Messrs. Binder and Mayer have terms expiring in
1998. At each annual meeting of the stockholders of the Company, the successors
to the class of Directors whose terms expire at such meeting will be elected to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election. The Board of Directors
elects officers annually and such officers serve at the discretion of the Board
of Directors. At present the Board of Directors has not established any
committees. After the completion of this Offering, the Board of Directors plans
to establish both an audit committee and a compensation committee. The majority
of the members of each such committee will be outside directors.

Compensation of Directors

Members of the Company's Board of Directors currently do no receive any
compensation for service as members of the Board. Directors, however, are
entitled to reimburse-ment for reasonable expenses incurred in connection with
attending any Board meeting.

Compensation of Executive Officers

Summary Compensation Table

The following table sets forth information with respect to total
compensation earned or paid by the Company to the Chief Executive Officer of the
Company during the fiscal year ended September 30, 1995. Because the Company was

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only formed in April 1995, none of the Company's other executive officers earned
cash compensation in excess of $100,000 during such fiscal year.

Long Term
Compensation
Annual Compensation (1) Awards
----------------------- Number of
Name and Principal Position Year Salary Bonus Warrants
--------------------------- ---- ------ ------ ----------
Frederick A. Mayer, Vice- 1995 $37,019(2) $ -- 200,000
Chairman of the Board and
Chief Executive Officer

----------------
(1) The Company was formed in April 1995. As a result, the compensation shown
in this table reflects amounts paid to the Company's executive officers for
only a portion of a fiscal year. If the Company's current executive
officers had been employed for a full fiscal year as of September 30, 1995,
the following additional officers would have been included in this table at
the following annualized salaries: Jeffrey I. Binder, Chairman of the
Board, $150,000; and James A. Sullivan, President, $150,000. See
"Employment Agreements" below.

(2) Reflects amounts earned by Mr. Mayer since he began his employment with the
Company in May 1995. Mr. Mayer's annualized salary is $175,000. See
"Employment Agreements" below.

Warrant Grants in Last Fiscal Year

The following table provides information regarding the grant of stock
warrants to the Chief Executive Officer in fiscal 1995. In addition,
hypothetical gains of 5% and 10% are shown for these stock warrants. These
hypothetical gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the stock warrants were granted over
the full warrant term. No stock warrants were exercised in fiscal year 1995.

[Enlarge/Download Table]

Potential Realizable
Value at Assumed
Annual Rates of Stock
% of Total Appreciation for
Number of Warrants Granted Exercise Warrants Term(3)
Warrants to Employees in Price per Expiration --------------------
Name(1) Granted(2) Fiscal Year 1995 Share(3) Date 5% 10%
-------- --------- --------------- -------- ---- -- ---

Frederick A. Mayer 200,000 24% $1.00 May 4, 2002 $81,420 $189,743

----------
(1) If the Company's current executive officers had been employed for a full
fiscal year as of September 30, 1995, the following additional officers
would have been included in this table: Jeffrey I. Binder and James A.
Sullivan. See "Compensation of Executive Officers." The terms of the stock
warrants granted to such officers are summarized elsewhere herein. See
"Employment Agreements."

(2) All warrants are fully vested.

(3) If the 5% or 10% annual compound stock price appreciation shown in the
table were to occur, the per share price of the Common Stock would be
$1.40, and $1.95, on May 4, 2002, respectively.

Fiscal Year-End Warrant Values

The following table provides information regarding the warrants held by the
named executive officer as of September 30, 1995. The named executive officer
did not exercise any warrants in fiscal 1995.

Number of Securities Value of
Underlying Unexercised Unexercised in-the-Money
Warrants at Fiscal Warrants at Fiscal
Name(1) Year-End(2) Year-End
------- --------------------- ------------------------
Frederick A. Mayer 200,000 $600,000

-------------
(1) If the Company's current executive officers had been employed for a full
fiscal year as of September 30, 1995, the following additional executive
officers would have been included in this table: Jeffrey I. Binder and
James A. Sullivan. Mr. Binder and his affiliates own warrants to purchase
500,000 shares of Common Stock. All of such warrants are presently
exerciseable, but none of such warrants is in-the-money. Mr. Sullivan owns
warrants to purchase 100,000 shares of Common Stock. None of Mr. Sullivan's
warrants is exercisable but their value at 1995 fiscal year-end was
$300,000.

(2) All warrants are presently exercisable.

424A 47th Page of 84 TOC 1st Previous Next ↓Bottom Just 47th
Employment Agreements

As of May 3, 1995, the Company entered into a five year employment
agreement with its Chairman of the Board, Mr. Jeffrey I. Binder. Pursuant to
such employment agreement, Mr. Binder receives an annual salary of $150,000, to
be increased 4% annually, and certain perquisites. Mr. Binder's employment
agreement is renewable, at the option of the Company, for two additional years.
Upon termination of Mr. Binder's employment, he has agreed not to compete with
the Company for one year under certain circumstances described therein. In the
event a change of control of the Board of Directors of the Company occurs, he
shall receive compensation for the greater of one year or the remainder of his
employment term.

As of May 3, 1995, the Company entered into a two year employment agreement
with Mr. Frederick A. Mayer, its Chairman of the Board of Directors, and Chief
Executive Officer. Pursuant to the employment agreement, Mr. Mayer receives an
annual salary of $175,000, to be increased 4% annually, and certain perquisites.
Mr. Mayer also received a seven year warrant to purchase 200,000 shares of
Common Stock at an exercise price of $1.00 per share. Mr. Mayer has certain
rights to demand registration of the shares of Common Stock underlying his
warrant; however, the sale of such shares is subject to a 12 month lock-up
period. The Company has the option to renew Mr. Mayer's employment agreement for
two additional years. Upon termination of Mr. Mayer's employment, he has agreed
not to compete with the Company for one year under certain circumstances
described therein. In the event a change of control of the Board of Directors of
the Company occurs, he shall receive compensation for the greater of one year or
the remainder of his employment term.

As of May 3, 1995, the Company entered into a two year employment agreement
with Mr. James A. Sullivan, its President. Pursuant to the employment agreement,
Mr. Sullivan receives an annual salary of $150,000 and certain perquisites. Mr.
Sullivan also received a seven year warrant to purchase 100,000 shares of Common
Stock at an exercise price of $1.00 per share. The Company has the option to
renew Mr. Sullivan's employment agreement for two additional years. Upon
termination of Mr. Sullivan's employment, he has agreed not to compete with the
Company for one year under certain circumstances described therein. In the event
a change of control of the Board of Directors of the Company occurs, he shall
receive compensation for the greater of one year or the remainder of his
employment term.

As of May 3, 1995, the Company entered into a two year employment agreement
with Mr. Alan Pritzker, its Vice President, Finance and Chief Financial Officer.
Pursuant to the employment agreement, Mr. Pritzker receives an annual salary of
$99,000. Mr. Pritzker also received a seven year warrant to purchase 25,000
shares of Common Stock at an exercise price of $1.00 per share. The Company has
the option to renew Mr. Pritzker's employment agreement for two additional
years. Upon termination of Mr. Pritzker's employment, he has agreed not to
compete with the Company for one year under certain circumstances described
therein.

Stock Option Plan

In April 1995, the Company adopted the Plan pursuant to which 500,000
shares of Common Stock have been reserved for issuance upon exercise of options
designated as "incentive stock options" or "non-qualified options" within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"). The purpose of the Plan is to encourage stock ownership by certain
officers and employees of the Company, and give them a greater personal interest
in the success of the Company. The Plan is administered by the Board of
Directors of the Company, or a committee appointed by the Board of Directors,
which determines among other things, the persons to be granted options under the
Plan, the number of shares subject to each option and the option price.

The exercise price of any stock option granted under the Plan may not be
less than the fair market value of the shares subject to the option on the date
of grant, provided, however, that the exercise price of any incentive option
granted to an eligible employee owning more than 10% of the outstanding Common
Stock may not be less than 110% of the fair market value of the shares
underlying such option on the date of grant.

The term of each option and the manner in which it may be exercised is
determined by the Board of Directors, or a committee appointed by the Board of
Directors, provided that no option may be exercisable more than 10 years after
the date of grant and, in the case of an incentive option granted to an eligible
employee owning more than 10% of the Common Stock, such option shall be
exercisable no more than five years after the date of grant. Options may be
granted to officers and employees. In the event of death or disability, options
may be exercised during a twelve month period following such event. In the event
of retirement of an option holder who is an officer or employee of the Company,
an option must be exercised within three months of the date of termination. In
the event that an option holder is terminated other than pursuant to death,
disability or retirement, all options must be exercised by the date of
termination. Options will not be transferable, except upon death of the
optionee.

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As of the date of this Prospectus, there were no outstanding options under
the Plan.

Compensation Committee Interlocks and Insider Participation

The Company's Board of Directors sets the compensation for the Company's
executive officers. At present, the Board has not appointed a separate committee
to perform this function. Two executive officers of the Company, Messrs. Binder
and Mayer, are members of the Company's Board of Directors. Each of Mr. Binder
and Mr. Mayer, respectively, abstains from voting on issues concerning his own
proposed compensation.

SECURITIES OWNERSHIP OF
PRINCIPAL AND INITIAL SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of the date of this
Prospectus, and as adjusted to reflect the sale of all the Common Stock offered
by the Initial Selling Stockholders as part of the Units offered hereunder, by:
(i) each of the Company's directors and named executive officers, (ii) each
person who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (iii) all of the Company's directors and executive
officers as a group, and (iv) each Initial Selling Stockholder. Except as
indicated below, the address for each 5% stockholder is c/o Commodore Holdings
Limited, 4000 Hollywood Boulevard, Suite 385, South Tower, Hollywood, Florida
33021.

[Enlarge/Download Table]

Shares
Beneficial Ownership Being Beneficial Ownership
Prior to Offering(2) Offered After the Offering(2)
Name and Address of ----------------------- ------- ----------------------
Beneficial Owner Number Percent Number Percent
------------------ ------- ------- ------- -------

Eff-Shipping, Ltd.(1) 1,006,979 17.0% 0 1,006,979 15.6%
c/o EffJohn North America
Suite 108, The Atrium Center
1515 N. Federal Highway
Boca Raton, Florida 33432
Jeffrey I. Binder, 1,000,000 20.3% 0 1,000,000 18.4%
Rosalie Binder and
JeMJ Financial Services, Inc.(3)
Frederick A. Mayer(4) 500,000 9.7% 0 500,000 8.9%
Arnold Adolphus Francis, Q.C. 0 0% 0 0 0%
Hon. Wayne L. Ferbert,
C.P.A., J.P., M.P. 0 0% 0 0 0%
A. Robert Miller 0 0% 0 0 0%
Robin L. Todd 0 0% 0 0 0%
[add Initial Selling Stockholders]
Directors and Officers
as a Group(5) (6 persons) 1,500,000 29.2% 0 1,500,000 26.6%

-------------
(1) Represents Series A Preference Shares, which Eff-Shipping may convert into
1,006,979 shares of Common Stock. In the event the Company's earnings per
share increase, this number may decrease accordingly. See "Description of
Securities -- Series A Preference Shares."

(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. The percentages beneficially owned
assume that none of the Series A Preference Shares has been converted into
Common Stock and that the Over-Allotment Option is not exercised.

(3) Mr. Binder owns 500,000 shares of Common Stock together with his wife, as
tenants-by-the-entireties. JeMJ Financial Services, Inc., a company
controlled by Mr. Binder, owns 500,000 shares of Common Stock. This amount
excludes 500,000 shares of Common Stock which Mr. Binder, his wife and JeMJ
have a right to purchase at $6.00 per share pursuant to warrants, which
warrants are presently exercisable.

(4) Includes a warrant to purchase 200,000 shares of Common Stock, which is
presently exercisable. (5) Excludes 500,000 shares of Common Stock which
such persons may acquire pursuant to warrants which are presently
exercisable at $6.00 per share.

424A 49th Page of 84 TOC 1st Previous Next ↓Bottom Just 49th
CERTAIN TRANSACTIONS

In April 1995, the Company issued 12,000 shares of its Common Stock to
Jeffrey I. Binder, the Company's Chairman, for $12,000 in conjunction with the
organization of the Company. On April 26, 1995, the Company authorized the split
of its Common Stock, and each share of its outstanding Common Stock was
exchanged for 100 shares of Common Stock. Subsequent to such date, Mr. Binder
contributed approximately an additional $988,000 for such Common Stock and
transferred half of such Common Stock to an affiliate. On May 12, 1995, the
Company repurchased 200,000 shares of Common Stock from Mr. Binder for par
value.

On May 4, 1995, the Company issued warrants at what it considered present
market value to purchase a total of 325,000 shares of Common Stock to Messrs.
Mayer, Sullivan and Pritzker, who are executive officers of the Company and/or
its subsidiaries. Such warrants were issued pursuant to each such officer's
respective employment agreement and are exercisable at $1.00 per share, at
varying vesting periods. The Company also issued 300,000 shares of Common Stock
to Mr. Mayer on May 12, 1995 for $200,000.

On July 14, 1995, the Company issued warrants to its Chairman, Mr. Jeffrey
I. Binder and his wife, Rosalie Binder, as well as to JeMJ Financial Services,
Inc., a company controlled by Mr. Binder (the "Binder Warrants"). The Binder
Warrants entitle the holders to purchase collectively up to 500,000 shares of
Common Stock at an exercise price of $6.00 per share. The Binder Warrants expire
seven years after the date of their issuance. The Binder Warrants became
exercisable upon issuance, and contain certain anti-dilution and registration
rights provisions and other terms as were determined by the Board of Directors
of the Company. The sale of the Common Stock underlying the Binder Warrants is
subject to a 12 month lock-up period.

As part of the Purchase Price for the Commodore Assets, the Company paid
$5,000,000 to EffJohn and issued it 1,000,000 Series A Preference Shares. In
addition, the Lender loaned the Company $24,500,000 pursuant to the Loan. The
Loan is secured by substantially all of the assets of the Company, including
first preferred ship's mortgages on the Cruise Ships. See "Business -- The
Commodore Acquisition."

Several of the Company's stockholders are principals in International
Marine Carriers ("IMC"), a vessel manager employed by the Company. The Company
has entered into an agreement with IMC to act as manager for the Cruise Ships
for two years, subject to successive one year renewals at the written request of
the Company. The Company paid IMC $130,235 for services rendered during the
partial fiscal year ended September 30, 1995 and has agreed to pay IMC $585,000
during the 1996 fiscal year for the management of the Enchanted Isle and
$219,000 for the management of the Universe Explorer.

During fiscal 1995, the Company used several bank facilities, primarily for
credit card processing and deliveries of cash to and from the Company's vessels,
that belonged to affiliates of EffJohn. The Company has since arranged for its
own processing services.

On July 14, 1995, the Company and EffJohn entered into the Settlement
Agreement related to the Commodore Acquisition. In this agreement, EffJohn
agreed to fix certain technical deficiencies in both the Universe Explorer and
the Enchanted Isle and to pay the Company charter fees if EffJohn did not
charter the Universe Explorer. EffJohn paid the Company $425,000 pursuant to
this agreement in fiscal 1995 and paid the Company an additional $425,000 in
fiscal 1996.

As part of the Commodore Acquisition, the Company entered into a sublease
agreement with Old Commodore to lease an IBM AS/400 computer system. The lease
is treated as a capital lease for financial statement purposes, and the Company
owed $223,960 at September 30, 1995.

DESCRIPTION OF SECURITIES

General

The Company is a Bermuda "exempted company," which means that it is exempt
from the requirement of the Companies Act 1981, as amended (the "Companies
Act"), that "local" companies be at least 60% owned and controlled by Bermudans.
The following summary is a description of certain provisions of the Company's
Memorandum of Association ("Memorandum") and Bye-laws. Such summary does not
purport to be complete and is subject to, and is qualified in its entirety by,
all of the provisions of the Memorandum and Bye-laws, including the definitions
therein of certain terms.

424A 50th Page of 84 TOC 1st Previous Next ↓Bottom Just 50th
Units

Each Unit consists of one share of Common Stock and one redeemable Warrant
to purchase one-half share of Common Stock for $6.00 per share. The Warrants are
exercisable only in pairs, with each two Warrants entitling the registered
holder to purchase one share of Common Stock. The Common Stock and Warrants,
which constitute a Unit, will be detachable and separately tradeable upon
issuance. The Units will not be quoted on any stock exchange or automated
quotation system.

Common Stock

The Company is authorized to issue 100 million shares of Common Stock.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50 percent of the shares who vote in the election of directors can elect
all of the directors except the director that may be elected by EffJohn during
the time it owns at least 125,000 Series A Preference Shares. Holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors of the Company out of funds legally available therefor
and after payments to holders of the Series A Preference Shares and any other
series of preferred stock outstanding. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company after payment of all debts and liabilities
and payments to holders of the Company's Series A Preference Shares and any
other series of preferred stock outstanding. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.

The Company's Bye-laws provide that the quorum required for a meeting of
stockholders is stockholders representing more than 50% of the total votes able
to be cast. An amalgamation of the Company, which includes a merger or
consolidation, requires the approval of stockholders representing more than 50%
of the total votes cast at a meeting at which a quorum is established. The
Company's Bye-laws further provide that the approval of stockholders
representing more than 50% of the total votes able to be cast is required to
amend the Memorandum and Bye-laws with respect to certain matters, including,
without limitation, the voting provisions and other matters set forth above.

The outstanding shares of Common Stock are, and the Shares of Common Stock
offered by the Company in this Offering, when issued and paid for, will be,
fully paid and non-assessable. Prior to the Offering, there were 4,931,933
shares of Common Stock outstanding held by 130 stockholders of record.

Warrants

The Company proposes to issue an aggregate of 1,000,000 Warrants to
purchase up to an aggregate of 500,000 shares of Common Stock in this Offering.
The Warrants are exercisable only in pairs, with each two Warrants entitling the
registered holder to purchase one share of Common Stock. The Warrants will be
issued pursuant to an agreement (the "Warrant Agreement") between the Company
and Stock Trans, Inc., as warrant agent (the "Warrant Agent"). None of the
Warrants have been issued prior to the Offering. The following discussion of
certain terms and provisions of the Warrants is qualified in its entirety by
reference to the detailed provisions of the Warrant Agreement and the Warrant
certificates, the forms of which have been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

Each two Warrants entitle the holder to purchase one share of Common Stock
at an exercise price of $6.00 per share. The Warrants may be exercised at any
time commencing one year after the date of this Prospectus until they expire
five years after the date of this Prospectus. The Warrants may be redeemed by
the Company at any time, commencing one year after the date of this Prospectus,
at a redemption price of $.05 per Warrant upon 25 days prior written notice,
provided the average closing bid price of the Common Stock for 20 consecutive
trading days ending not more than 15 days prior to the date of any redemption
notice is in excess of $9.00 per share. Warrant holders shall have exercise
rights until the close of the business day preceding the date fixed for
redemption.

In order for a holder to exercise a Warrant, and as required in the Warrant
Agreement, there must be a current registration statement on file with the
Securities and Exchange Commission pertaining to the shares of Common Stock
underlying the Warrants, and such shares must be registered or qualified for
sale under the securities laws of the state in which such Warrant holder resides
or such exercise must be exempt from registration in such state. The Company
will be required to file post-effective amendments to the Registration
Statement, of which this Prospectus forms a part, during the nine-month period

424A 51st Page of 84 TOC 1st Previous Next ↓Bottom Just 51st
from the date hereof, when events require such amendments. In addition, the
Company has agreed with the Underwriter to use its best efforts to keep the
Registration Statement covering the shares underlying the Warrants current and
effective. There can be no assurance however, that such Registration Statement
(or any other Registration Statement filed by the Company to cover shares of
Common Stock underlying the Warrants) can be kept current. If a Registration
Statement covering such shares of Common Stock is not kept current for any
reason, of if the shares underlying the Warrants are not registered in the state
in which a holder resides, the Warrants will not be exercisable and will be
deprived of any value.

Holders of the Warrants will be protected against dilution upon the
occurrence of certain events, including, but not limited to the issuance of any
Common Stock or other securities convertible or exercisable for Common Stock at
a price per share less than the exercise price or the market price of the Common
Stock, or in the event of any stock dividend, stock split, reclassification,
recapitalization, stock combination or similar transaction. However, holders of
the Warrants will have no voting rights and will not be entitled to dividends.
In the event of liquidation, dissolution or winding up of the Company, holders
of Warrants will not be entitled to participate in any distribution of the
Company's assets.

The purchase price payable upon exercise of the Warrants is to be paid in
lawful money of the United States. The Company is not required to issue
certificates representing fractions of shares of Common Stock upon the exercise
of Warrants, but with respect to any fraction of a share, it will make payment
in cash based upon the market price of the Common Stock as determined by the
Warrant Agent.

Transfer Agent and Warrant Agent

The transfer agent and registrar for the Common Stock and the Warrants is
Stock Trans, Inc., 7 East Lancaster Avenue, Ardmore, Pennsylvania 19003.

Preferred Stock

The Company is authorized to issue 10 million shares of preferred stock.
The Bye-laws authorize the Board of Directors (without stockholder approval),
among other things, to issue such preferred stock, with such rights and
limitations as the Board of Directors may subsequently determine. Among other
designations, the Board of Directors may determine (i) the dividend rate and
conditions and the dividend preferences, if any; (ii) whether dividends would be
cumulative and, if so, the date from which dividends on such series would
accumulate; (iii) whether, and to what extent, the holders of such series would
enjoy voting rights, if any, in addition to those prescribed by law; (iv)
whether, and upon what terms, such series would be convertible into or
exchangeable for shares of any other class of capital stock or other series of
preferred shares; (v) whether, and upon what terms, such series would be
redeemable; (vi) whether or not a sinking fund would be provided for the
redemption of such series and if so, the terms and conditions thereof; and (vii)
the preference, if any, to which such series would be entitled in the event of
voluntary or involuntary liquidation, dissolution or winding up of the Company.
Any particular series of preferred shares may rank junior to, on a parity with
or senior to any other class of the Company's capital stock, including any other
series of preferred shares, except that no such series of preferred stock may
rank senior to or on a parity with the Series A Preference Shares, without the
approval of the holders of the Series A Preference Shares. Thus, the Board of
Directors, without the approval of the holders of Common Stock, could authorize
the issuance of a series of preferred shares with voting, conversion and other
rights that could affect the voting power and other rights of the holders of
Common Shares or that could have the effect of delaying, deferring or preventing
a change in control of the Company.

Series A Preference Shares

In July 1995, the Company issued 1,000,000 Series A Preference Shares to
EffJohn at the Commodore Closing in partial payment for the Commodore Assets. On
April 1, 1996, the Company issued an additional 6,979 Series A Preference Shares
to EffJohn in satisfaction of a dividend obligation. The following is a summary
of the principal features of the Series A Preference Shares. This summary does
not address all of the rights and preferences of the Series A Preference Shares.

The Series A Preference Shares are entitled to a preference with respect
to dividends, liquidation or a distribution of assets of the Company over any
other shares of capital stock of the Company. In the event of any such

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liquidation or distribution of assets, the holders of the Series A Preference
Shares will receive any accrued but unpaid dividends and USD$4.00 per Series A
Preference Share before the holders of other series of preferred stock or the
Common Stock receive any distribution of the Company's assets.

The holders of the Series A Preference Shares are entitled to receive a
dividend equal to seven (7) percent of the issuance price of the Series A
Preference Shares prior to the payment of dividends on the Common Stock. Unpaid
dividends will accumulate from year to year, and the maximum amount which may be
paid to the holders of the Series A Preference Shares in any year is 10 percent
of the net profits of the Company for such year. Dividends in excess of this
amount may be paid in additional Series A Preference Shares or Common Stock.

The Series A Preference Shares are not entitled to vote except on the
following matters: (i) matters relating to the winding up of the Company, (ii)
matters relating to the alteration of the terms of the Series A Preference
Shares, or (iii) in the event that the Company has not paid any part of the
dividend on the Series A Preference Shares for two consecutive years, on all
matters on which holders of Common Stock would be entitled to vote. When voting,
each Series A Preference Share receives one vote.

The holders of the Series A Preference Shares shall have the option, at any
time, to convert any or all of their Series A Preference Shares into Common
Stock of the Company at a conversion rate equal to the greater of USD$4.00 per
share or a price per share equal to 8 times the Company's earnings per share for
its prior fiscal year. In addition, the holders of the Series A Preference
Shares may sell up to approximately 45,000 such shares in any 90-day period to
third parties at any time after the Commodore Closing and prior to the date upon
which the Common Stock becomes listed on Nasdaq, subject to compliance with
applicable securities laws.

The Company has the option to redeem all or any part of the Series A
Preference Shares at USD$4.00 per share at any time commencing three years after
their issuance subject to the right of EffJohn to convert its Series A
Preference Shares upon receipt of the notice. As long as EffJohn holds at least
125,000 Series A Preference Shares, it has the nontransferable right to appoint
one person to the Company's Board of Directors.

Differences in Corporate Law

The Companies Act of Bermuda differs in certain respects from laws
generally applicable to U.S. corporations and their stockholders. Set forth
below is a summary of certain significant provisions of the Companies Act
(including any modifications adopted pursuant to the Company's Bye-laws)
applicable to the Company, which differ in certain respects from provisions of
Delaware corporate law. The comparison of the Companies Act to Delaware law
provides only a basis of comparison and in no way means that the corporate law
of Delaware is the same as that of other U.S. states. The following statements
are summaries of some of the provisions of the Companies Act, and do not purport
to deal with all aspects of Bermuda law that may be relevant to the Company, its
officers, directors and its stockholders. See "Risk Factors -- Rights of
Security Holders Under Bermuda Law May Be Less Than Under U.S. Jurisdictions."

Interested Directors. The Bye-laws provide that any transaction entered
into by the Company in which a director has an interest is not voidable by the
Company nor can such director be liable to the Company for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity: (i) at a meeting of directors or in writing to the
directors, and (ii) to the Company's auditors, upon their request. Under
Delaware law no such transaction would be voidable if (i) the material facts as
to such interested director's relationship or interests are disclosed or are
known to the board of directors and the board in good faith authorizes the
transaction by the affirmative vote of a majority of the disinterested
directors, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) the
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified.

Loans to Directors. The Companies Act generally forbids loans to directors
without the prior approval of stockholders who hold 90% of the Common Stock of
the Company at a general meeting of stockholders. Delaware law does not contain
a similar provision.

Mergers and Similar Arrangements. The Company may acquire the business of
another Bermuda company similarly exempt from Bermuda taxes or a company
incorporated outside Bermuda and carrying on such business when it is within the
objects of its Memorandum. The Company may "amalgamate" (merge or consolidate)
with another Bermuda company or a foreign corporation if such amalgamation is

424A 53rd Page of 84 TOC 1st Previous Next ↓Bottom Just 53rd
approved by the board of directors and the holders of a majority of the Common
Stock at a meeting at which a quorum is established. While a dissenting
stockholder may have the right to express to a Bermuda court his view that the
transaction sought to be approved would not provide the stockholders with the
fair value of their shares, the court ordinarily would not disapprove the
transaction on such ground absent evidence of fraud or bad faith. The Bermuda
court would, however, assess the fair value of such dissenting stockholder's
Common Stock, and the dissenting stockholder would be entitled to receive this
amount, in cash, in lieu of the consideration such dissenting stockholder would
otherwise receive in the transaction. Under Delaware law, with certain
exceptions, any merger, consolidation or sale of all or substantially all the
assets of a corporation must be approved by the board of directors and a
majority of the outstanding shares entitled to vote. Under Delaware law, a
stockholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to appraisal rights
pursuant to which such stockholder may receive cash in the amount of the fair
market value of the shares held by such stockholder (as determined by a court or
by agreement of the corporation and the stockholder) in lieu of the
consideration such stockholder would otherwise receive in the transaction.
Delaware law does not provide stockholders of a corporation with voting or
appraisal rights when the corporation acquires another business through the
issuance of its stock or other consideration (i) in exchange for the assets of
the business to be acquired, (ii) in exchange for the outstanding stock of the
corporation to be acquired or (iii) in a merger of the corporation to be
acquired with a subsidiary of the acquiring corporation.

Takeovers. Bermuda law provides that where an offer is made for shares of
another company and, within four months of the offer the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering stockholders to transfer their shares on
the terms of the offer. Dissenting stockholders may apply to the court within
one month of the notice objecting to the transfer. The burden is on the
dissenting stockholders to show that the court should exercise its discretion to
enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion as between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out a minority stockholder. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any stockholder
vote, may merge with any 90% or more owned subsidiary. Upon any such merger,
dissenting stockholders of the subsidiary would have appraisal rights.

Acquisition of Minority Shares. The holders of at least 95% of the Common
Stock (the "Majority Stockholders") may force the holders of 5% or less of the
Common Stock (the "Remaining Stockholders") to sell their Common Stock to the
Majority Stockholders under Bermuda law. If the Remaining Stockholders are
dissatisfied with the price offered by the Majority Stockholders, they may apply
to a Bermuda court for an appraisal of their shares. The appraisal is binding on
the Remaining Stockholders.

Stockholder's Suit. Class action and derivative actions are generally not
available to stockholders under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law precedent, which would
permit a stockholder to commence an action in the name of the Company to remedy
a wrong done to the Company where the act complained of is alleged to be beyond
the corporate power of the Company or is illegal or would result in the
violation of the Memorandum and Bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a fraud against the
minority stockholders or where an act requires the approval of a greater
percentage of the Company's stockholders than actually approved it. The winning
party in such an action generally would be able to recover a portion of its
attorney fees incurred in connection with such action. Class actions and
derivative actions generally are available to stockholders under Delaware law
for, among other things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover attorney fees incurred in
connection with such action.

Indemnification of Directors. The Company has agreed to indemnify its
directors or officers in their capacity as such in respect of any loss arising
or liability attaching to them by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which a director or
officer may be guilty in relation to the Company other than in respect of his
own wilful default, wilful neglect, fraud or dishonesty. Under Delaware law, a
corporation may adopt a provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for breaches of the director's
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, for improper payment of

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dividends or for any transaction from which the director derived an improper
personal benefit. Delaware law has provisions and limitations similar to Bermuda
regarding indemnification by a corporation of its directors or officers, except
that under Delaware law the statutory rights to indemnification may not be as
limited. Both Bermuda and Delaware law allow a company to obtain directors and
officers liability insurance. The Company has not yet decided whether it will
purchase such insurance.

Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda, which will include the Memorandum
(including its objects and powers) and any alteration to the Memorandum, and
documents relating to an increase or reduction of authorized capital. The
stockholders have the additional right to inspect the Bye-laws, minutes of
general meetings and audited financial statements of the Company, which must be
presented to the annual meeting of stockholders. The register of stockholders of
the Company is also open to inspection by stockholders without charge, and to
members of the public for a fee. The Company is required to maintain its share
register in Bermuda but may establish a branch register outside of Bermuda. The
Company is required to keep at its registered office a register of its directors
and officers which is open for inspection by members of the public without
charge.

Local Directors. The Companies Act requires that a quorum of a company's
directors be residents of Bermuda unless a company's common shares are listed on
an appointed stock exchange (including Nasdaq), in which case a company may have
a resident representative in Bermuda instead of resident directors. Accordingly,
at this time, two of the Company's directors, Messrs. Francis and Miller, are
Bermuda residents and the Company's Bye-Laws establish a quorum for meetings of
directors at two members.

Warrants. Under the provisions of the Companies Act, it is unlawful for any
company to issue "bearer" shares of stock, which are defined as shares that may
be transferred by delivery of the warrant or certificate relating thereto. The
term "warrant" is used in Bermuda law only in this bearer stock context.
Accordingly, under Bermuda law, any reference to "warrant" must be construed as
an option, which is an instrument entitling the holder to subscribe to the
Common Stock in accordance with the terms of the instrument. References herein
to either the Binder Warrant or the Warrants should not be construed as enabling
the underlying Common Stock to be transferred upon delivery of such certificate
alone.

Anti-Takeover Provisions

Although the Board of Directors is not presently aware of any takeover
attempts, the Bye-laws of the Company contain certain provisions which may be
deemed to be "anti-takeover" in nature in that such provisions may deter,
discourage or make more difficult the assumption of control of the Company by
another corporation or person through a tender offer, merger, proxy contest or
similar transaction or series of transactions. These provisions were adopted
unanimously by the Board of Directors and approved by the stockholders of the
Company.

Authorized but Unissued Shares. The Company has authorized 100 million
shares of Common Stock and ten million shares of preferred stock. These shares
of Common Stock were authorized for the purpose of providing the Board of
Directors of the Company with as much flexibility as possible to issue
additional shares for proper corporate purposes including equity financing,
acquisitions (including the Commodore Acquisition), stock dividends, stock
splits, the Plan, stock options (including the Binder Warrants and the
Warrants), and other purposes. The Company has no agreements, commitments or
plans at this time for the sale or use of the additional shares of Common Stock
or preferred stock except for potential conversion of the Series A Preference
Shares into Common Stock. The issuance of shares of preferred stock may have an
adverse effect on the Company's stockholders. See "Preferred Stock."
Stockholders of the Company do not have preemptive rights with respect to the
purchase of these shares. Therefore such issuance could result in a dilution of
voting rights and book value per share as to Common Stock of the Company. See
"Business -- Commodore Acquisition" and "Description of Securities -- Series A
Preference Shares."

No Cumulative Voting. The Company's Bye-laws do not contain any provisions
for cumulative voting. Cumulative voting entitles stockholders to as many votes
as equal the number of shares owned by such holder multiplied by the number of
directors to be elected. A stockholder may cast all these votes for one
candidate or distribute them among any two or more candidates. Thus, cumulative
voting for the election of directors allows a stockholder or group of
stockholders who hold less than 50 percent of the outstanding shares voting to
elect one or more members of a Board of Directors. Without cumulative voting for

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the election of directors, the vote of holders of a plurality of the shares
voting is required to elect any member of a Board of Directors and would be
sufficient to elect all the members of the board being elected.

Classified Board of Directors. The Board of Directors is divided into three
classes. One class holds office initially for a term expiring at the annual
meeting of stockholders to be held in 1996, a second class will hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1997 and a third class holds office initially for a term expiring at the
annual meeting of stockholders to be held in 1998. Approximately one-third of
the total number of directors will serve as members of each such class. As a
result, it would take a person who wanted to gain control of the Company a
minimum of two annual meetings of stockholders before he could gain control of
the Company's Board of Directors.

General Effect of Anti-Takeover Provisions. The overall effect of these
provisions may be to deter a future tender offer or other takeover attempt that
some stockholders might view to be in their best interest as the offer might
include a premium over the market price of the Company's Common Stock at that
time. In addition, these provisions may have the effect of assisting the
Company's current management in retaining its position and place it in a better
position to resist changes which some stockholders may want to make if
dissatisfied with the conduct of the Company's business.

SHARES ELIGIBLE FOR FUTURE SALE

All of the 4,931,933 shares of Common Stock of the Company outstanding as
of the date of this Prospectus are restricted securities, as that term is
defined in Rule 144 promulgated under the Securities Act and 4,831,933 shares
have been registered for sale concurrently herewith. Except for the 500,000
shares being sold by the Initial Selling Shareholders herein, such shares may
not be sold, transferred or otherwise disposed of for a period of one year
without the prior consent of the Underwriter. Of the 4,931,933 shares, 1,300,000
shares are owned by affiliates of the Company, as that term is defined under the
Securities Act. Absent registration under the Securities Act, the sale of such
shares is subject to Rule 144, as promulgated under the Securities Act. In
general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned the shares of Common Stock for
at least three years is entitled to sell such shares under Rule 144 without
regard to any of the volume limitations described above. No prediction can be
made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
prices for the Common Stock and could impair the Company's ability to raise
capital in the future through the sale of equity securities.

CERTAIN FOREIGN ISSUER CONSIDERATIONS

The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority, Foreign Exchange Control.

THE BERMUDA MONETARY AUTHORITY AND THE REGISTRAR OF COMPANIES IN BERMUDA
WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF ANY SCHEMES OR FOR
THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH REGARD
TO THEM.

There are no limitations on the rights of non-Bermuda owners of the
Company's Common Stock to hold or vote their voting shares. Because the Company
has been designated as a non-resident for Bermuda exchange control purposes,
there are no restrictions on its ability to transfer funds into and out of
Bermuda or to pay dividends to United States residents who are holders of the
Company's Series A Preference Shares or Common Stock, other than in respect of
local Bermuda currency.

In accordance with Bermuda law, share certificates are only issued in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, the Company

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is not bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust. The Company will take no notice of
any trust applicable to any of its securities whether or not it had notice of
such trust.

As an "exempted company," the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company, the Company may not participate in certain business
transactions, including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an
amount in excess of $50,000 without the consent of the Minister of Finance of
Bermuda; (3) the acquisition of securities created or issued by, or any interest
in, any local company or business, other than certain types of Bermuda
government securities or securities of another "exempted company," partnership
or other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Minister of Finance of Bermuda.

The Bermuda government actively encourages foreign investment in "exempted"
entities like the Company that are based in Bermuda, but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign exchange controls in Bermuda. In
addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by the Company, as required, without limitation under Bermuda law.

The Company is required to pay certain annual government fees based upon
its assessable capital (i.e., its authorized share capital and share premium).
The fees are based upon a sliding scale. The maximum fee payable by an exempt
company is USD$25,000 based upon an assumed capital of USD$500,000,000 or more.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, the Underwriter has agreed to purchase 500,000
shares of Common Stock and 1,000,000 Warrants from the Company and 500,000
shares of Common Stock from the Initial Selling Stockholders, less the
underwriting discounts set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the Underwriter will be obligated to
purchase all of the Units offered on a "firm commitment" basis, if any are
purchased.

The Underwriter has advised the Company that it proposes initially to offer
the Units to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such prices less
concessions not in excess of $__________ per Unit. After the Offering, the
offering price and the concessions may be changed at the discretion of the
Underwriter.

The Company has granted to the Underwriter an option exercisable during the
30-day period after the Closing, to purchase from the Company at the initial
public offering price less underwriting discounts and the non-accountable
expense allowance, up to an aggregate of 150,000 additional Units, for the sole
purpose of covering over-allotments, if any.

The Company has agreed to pay to the Underwriter a non-accountable expense
allowance of 3% of the gross proceeds of the Offering. Further, the Company has
agreed to reimburse the Underwriter and its counsel for certain accountable
expenses relating to the Offering.

All of the Company's current stockholders, except for the Initial Selling
Stockholders, have agreed not to sell or otherwise dispose of any of their
shares of Common Stock, or shares of Common Stock issuable upon conversion or
exercise of securities convertible into Common Stock, for a period of 12 months
from the date of this Prospectus without the prior written consent of the
Underwriter. Notwithstanding these lock-up agreements, such persons may make
intra-family transfers. An appropriate legend will be marked on the face of
stock certificates representing all such shares of Common Stock.

In connection with the Offering, the Company has agreed to sell to the
Underwriter, for nominal consideration, non-redeemable warrants to purchase from
the Company 100,000 Units (the "Underwriter's Warrants"). The Underwriter's
Warrants are exercisable at a price of $6.90 per Unit (150% of the initial
public offering price per Unit) for a period of four years commencing one year

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from the date of this Prospectus. The Units contained in the Underwriter's
Warrants will be identical to the Units being offered hereby. The Underwriter's
Warrants contain anti-dilution provisions providing for adjustment of the
exercise price upon the occurrence of certain events, including the issuance of
any Common Stock or other securities convertible into or exercisable for Common
Stock at a price per share less than the exercise price or the market price of
the Common Stock, or in the event of any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. The
Underwriter's Warrants provide that for a period of four years commencing one
year from the date of this Prospectus, at the request of the holders of a
majority of the total Underwriter's Warrants, the Company will register, in
whole or in part, at the Company's sole cost and expense, the Underwriter's
Warrants and/or the underlying Common Stock and Warrants. In addition, the
holders of the Underwriter's Warrants have the right to "piggyback" all or any
part of the Underwriter's Warrants, or the underlying Common Stock or Warrants,
on any registration statement filed by the Company or its principal stockholders
at any time during the stated term of the Underwriter's Warrants.

During the term of the Underwriter's Warrants, the holders of the
Underwriter's Warrants are given the opportunity to profit from a rise in the
market price of the Units, the Common Stock or the Warrants. To the extent that
the Underwriter's Warrants are exercised, dilution of the interest of the
Company's stockholders will occur. Furthermore, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected since
the holders of the Underwriter's Warrants can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital on the terms more favorable to the Company than those provided in the
Underwriter's Warrants. See "Risk Factors - Stock Options and Warrants."

The Company has agreed to retain the Underwriter for two years as a
management and financial consultant for a fee of $48,000, which is payable at
the Closing of the Offering. The Company has also agreed to appoint a
representative of the Underwriter as an advisor to, or in lieu thereof, as a
member of, the Company's Board of Directors for three years.

The Company has granted the Underwriter a right of first refusal for two
years to underwrite any public or private securities offering of the Company
which does not exceed $5,000,000. The Company has also agreed to pay the
Underwriter a commission of five percent (5%) of the exercise price of any
Warrants offered herein which are exercised more than one year after the date of
this Prospectus.

The Underwriting Agreement provides for reciprocal indemnification among
the Company, the Underwriter and the Initial Selling Stockholders against
certain liabilities in connection with the Registration Statement of which this
Prospectus forms a part, including liabilities under the Securities Act. To the
extent this section may purport to provide exculpation from possible liabilities
arising under the federal securities laws, it is the opinion of the Securities
and Exchange Commission that such indemnification is against public policy and
is therefore unenforceable.

The foregoing is a summary of the principal terms of the Underwriting
Agreement and the Underwriter's Warrants, and does not purport to be complete.
Reference is made to the copies of the Underwriting Agreement and the
Underwriter's Warrant Agreement, which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.

Prior to the Offering, there has been no public market for the Company's
securities offered hereby. Consequently, the initial public offering price of
the Units has been determined by the Company and the Underwriter and is not
related to the Company's asset value, earnings, book value or other such
criteria of value. Factors considered in determining the initial public offering
price of the Units include principally, the prospects for the industry in which
the Company operates, the Company's management, the general condition of the
securities markets and the demand for securities in similar industries. The
exercise price of the Warrants also has been determined by the Company and the
Underwriter and does not relate to any recognized criteria of value.

Although certain of the officers of the Underwriter have significant
experience in corporate finance and the underwriting of securities, the
Underwriter has previously acted as the principal underwriter in only one "firm
commitment" offering. Such limited experience could adversely affect the
Offering as well as the future development of a trading market for the Common
Stock and Warrants. See "Risk Factors - Underwriter's Limited Underwriting
Experience."

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CONCURRENT REGISTRATION OF COMMON STOCK

Concurrently with this Offering, 4,331,933 shares of Common Stock have been
registered under the Securities Act. Such shares may not be sold, transferred or
otherwise disposed of for a period of one year without the prior written consent
of the Underwriter.

LEGAL MATTERS

Certain legal matters with respect to the issuance of the securities
offered hereby will be passed upon for the Company by Broad and Cassel, a
partnership including professional associations, Miami Center, 201 South
Biscayne Boulevard, Suite 3000, Miami, Florida 33131 and, with respect to
Bermudan law, by Richards, Francis & Francis. Gersten, Savage, Kaplowitz &
Curtin, LLP has acted as counsel for the Underwriter in connection with the
Offering.

EXPERTS

The financial statements of the Company from April 13, 1995 (date of
inception) through September 30, 1995 are included herein and in the
registration statement in reliance upon the report of Grant Thornton LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in auditing and accounting. The combined
financial statements of the S/S Enchanted Seas and the S/S Enchanted Isle
(operating units of EffJohn International B.V.) for each of the two years in the
two-year period ended December 31, 1994, and for the period from January 1, 1995
through July 14, 1995, are included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission, a Registration Statement on Form
S-1 with respect to the securities being offered hereby. This Prospectus does
not contain all the information set forth in such Registration Statement, as
permitted by the Rules and Regulations of the Commission. For further
information with respect to the Company and such securities, reference is made
to the Registration Statement and to the exhibits and schedules filed herewith.
Each statement made in this Prospectus referring to a document filed as an
exhibit to the Registration Statement is qualified by reference to the exhibit
for a complete statement of its terms and conditions. The Registration
Statement, including exhibits thereto, may be inspected, without charge, by
anyone at the principal office of the Commission in Washington, D.C. and copies
of all or any part thereof may be obtained from the Commission's principal
office in Washington, D.C. upon payment of the Commission's charge for copying.

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INDEX TO FINANCIAL STATEMENTS

Commodore Holdings Limited and Subsidiaries

Report of Independent Certified
Public Accountants .................................................. F-2

Consolidated Balance Sheets -- September 30, 1995 and
March 31, 1996 (Unaudited) .......................................... F-3

Consolidated Statements of Earnings -- April 13, 1995
through September 30, 1995, Six Months Ended
March 31, 1995 (Predecessor Company, Unaudited),
Six Months Ended March 31, 1996 (Unaudited) ........................ F-4

Consolidated Statements of Stockholders'
Equity -- April 13, 1995 through September 30, 1995,
Six Months Ended March 31, 1996 (Unaudited) ......................... F-5

Consolidated Statements of Cash Flows -- April 13, 1995 through
September 30, 1995, Six Months Ended March 31, 1995
(Predecessor Company, Unaudited), Six Months Ended
March 31, 1996 (Unaudited) .......................................... F-6

Notes to consolidated financial statements ............................. F-7

S/S Enchanted Seas and S/S Enchanted Isle (Predecessor Company)

Report of Independent Certified Public Accountants ..................... F-14

Combined Balance Sheet December 31, 1994 ............................... F-15

Combined Statements of Operations Years Ended December 31,
1993, 1994, Period from January 1 through July 14, 1995 ............ F-16

Combined Statements of Operating Units' Equity
Cash Flows Years Ended December 31,
1993, 1994, Period from January 1 through July 14, 1995 ............. F-17

Notes to Combined Financial Statements ................................. F-20

Pro forma Condensed Financial Statement (Unaudited)

Pro forma Condensed Statement of Earnings (Unaudited) .................. F-24

Notes to Pro forma Condensed Statement of Earnings ..................... F-25

F-1

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[LETTERHEAD OF GRANT THORNTON]

REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board of Directors
Commodore Holdings Limited and Subsidiaries

We have audited the accompanying consolidated balance sheet of Commodore
Holdings Limited and Subsidiaries as of September 30, 1995 and the related
consolidated statements of earnings, stockholders' equity, and cash flows from
April 13, 1995, (date of inception), through September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly,
in all material respects, the consolidated financial position of Commodore
Holdings Limited and Subsidiaries as of September 30, 1995 and the consolidated
results of their operations and their consolidated cash flows from April 13,
1995 through September 30, 1995 in conformity with generally accepted accounting
principles.

/s/ Grant Thornton LLP

Miami, Florida
November 28, 1995

F-2

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Commodore Holdings Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

September 30, March 31,
1995 1996
-------------- -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents ....................... $ 3,274,993 $ 1,937,805
Restricted cash ................................. 363,462 252,076
Trade and other receivables, net ................ 79,069 264,941
Due from Affiliate .............................. 456,878 166,541
Inventories ..................................... 691,001 935,101
Prepaid expenses ................................ 592,664 1,690,549
Other current assets ............................ 700,000 --
----------- -----------
Total current assets ........................ 6,158,067 5,247,013
Property and equipment, net ........................ 33,085,209 37,450,152
Investments restricted ............................. 4,629,000 4,629,000
Other assets ....................................... 225,000 425,000
----------- -----------
$44,097,276 $47,751,165
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt ............... $ -- $ 201,301
Accounts payable ................................ 1,868,415 4,026,674
Accrued liabilities ............................. 219,683 892,149
Customer and other deposits ..................... 4,344,657 5,035,652
Accrued interest ................................ 412,672 72,603
Income taxes payable ............................ 4,841 4,841
Capital lease obligations ....................... 223,960 91,863
----------- -----------
Total current liabilities ................... 7,074,228 10,325,083
Long-term debt ..................................... 24,500,000 24,165,684
Deferred income taxes .............................. 3,618 3,618
Minority interest in subsidiary .................... -- 461,642
Preferred stock .................................... 4,000,000 4,000,000
Stockholders' equity
Preferred stock -- authorized 10,000,000 shares
of $.01 par value; issued 1,000,000 ........... -- --
Common stock -- authorized 100,000,000 shares
of $.01 par value; issued 4,931,933 ........... 49,319 49,319
Paid-in capital ................................. 8,158,576 8,158,576
Retained earnings ............................... 311,535 587,243
----------- -----------
Total stockholders' equity .................. 8,519,430 8,795,138
----------- -----------
$44,097,276 $47,751,165
=========== ===========

The accompanying notes are an integral part of these statements.

F-3

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Commodore Holdings Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

[Enlarge/Download Table]

(Predecessor
Company)
April 13, Six Months Six Months
1995 through Ended Ended
September 30, March 31, March 31,
1995 1995 1996
------------ ------------ ------------
(Unaudited) (Unaudited)

Revenues .................................................... $ 7,255,830 $ 17,605,955 $ 19,174,089
Expenses
Operating ................................................. 4,940,637 18,243,713 13,955,294
Marketing, selling and administrative ..................... 1,664,478 5,608,586 3,766,577
Depreciation and amortization ............................. 197,926 1,780,141 620,099
Loss on vessel fire ....................................... -- 1,367,347 --
------------ ------------ ------------
6,803,041 26,999,787 18,341,970
------------ ------------ ------------
Operating income (loss) ..................................... 452,789 (9,393,832) 832,119
Other income (expense)
Other income .............................................. -- -- 340,641
Interest income ........................................... 79,054 40,836 194,130
Interest expense .......................................... (211,849) (1,408,105) (679,535)
Minority interest in earnings of consolidated joint venture -- -- (411,647)
------------ ------------ ------------
(132,795) (1,367,269) (556,411)
------------ ------------ ------------
Earnings (loss) before provision for income taxes and
provision for preferred stock dividend .............. 319,994 (10,761,101) 275,708
Provision for income taxes .................................. 8,459 -- --
------------ ------------ ------------
Net earnings (loss) before provision for preferred
stock dividend ....................................... 311,535 (10,761,101) 275,708
Provision for preferred stock dividend ...................... 60,000 -- 140,000
------------ ------------ ------------
Net earnings (loss) available for common stockholders .. $ 251,535 $(10,761,101) $ 135,708
============ ============ ============
Earnings per share .......................................... $ 0.06 $ 0.03
============ ============
Weighted average number of common stock outstanding ........ 4,377,593 5,184,711
============ ============

The accompanying notes are an intgral part of these statements.

F-4

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Commodore Holdings Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

April 13, 1995 Through September 30, 1995,
Six Months Ended March 31, 1996 (Unaudited)

[Enlarge/Download Table]

Common Stock
--------------------- Additional
Number Paid-In Retained
of Shares Par Value Capital Earnings Total
---------- --------- ---------- ----------- ---------

Balance at April 13, 1995 ........... -- $ -- $ -- $ -- $ --
Issuance of common stock (Note G) ... 4,931,933 49,319 8,158,576 -- 8,207,895
Net income .......................... -- -- -- 311,535 311,535
---------- ---------- ---------- ---------- ----------
Balance at September 30, 1995 ....... 4,931,933 49,319 8,158,576 311,535 8,519,430
Net income .......................... -- -- -- 275,708 275,708
---------- ---------- ---------- ---------- ----------
Balance at March 31, 1996 (Unaudited) 4,931,933 $ 49,319 $8,158,576 $ 587,243 $8,795,138
========== ========== ========== ========== ==========

The accompanying notes are an intgral part of these statements.

F-5

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Commodore Holdings Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Enlarge/Download Table]

(Predecessor
Company)
April 13, Six Months Six Months
1995 through Ended Ended
September 30, March 31, March 31,
1995 1995 1996
------------ ------------ -----------
(Unaudited) (Unaudited)

Cash flows from operating activities:
Net income (loss) ............................................ $ 311,535 $(10,761,101) $ 275,708
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation of property and equipment ................. 197,926 1,652,612 620,099
Amortization of deferred drydock ....................... -- 841,212 --
Changes in operating assets and liabilities
(Increase) decrease in restricted cash .............. (363,462) (512,109) 111,386
(Increase) in investments-- restricted .............. (4,629,000) -- --
(Increase) in trade and other receivables ........... (79,069) (122,149) (185,872)
(Increase) decrease in due from affiliate ........... (375,950) -- 290,337
Decrease (increase) in inventory .................... 69,271 (327,928) (244,100)
(Increase) in prepaid expenses and other
current assets .................................... (892,663) (236,217) (397,885)
(Increase) in other assets .......................... (225,000) -- (200,000)
Increase in accounts payable ........................ 1,868,415 -- 2,158,259
Increase in accrued liabilities ..................... 219,683 -- 672,466
Increase in due to affiliate ........................ -- 13,758,326 --
Increase in income taxes payable-- current .......... 4,841 -- --
Increase in income taxes payable-- deferred ......... 3,617 -- --
Increase (decrease) in advance deposits ............. 4,344,657 (413,571) 690,995
Increase (decrease) in accrued interest ............. 206,336 -- (340,069)
------------ ------------ ------------
Net cash provided by operating activities ......... 661,137 3,879,075 3,451,324
Cash flows from investing activities:
Capital expenditures ...................................... (672,960) (3,789,278) (4,985,042)
(Decrease) in capital leases obligation ................... (53,079) -- (132,097)
Cost of acquisition, net of cash acquired ................. (4,868,000) -- --
Increase in minority interest ............................. -- -- 461,642
------------ ------------ ------------
Net cash used in investing activities ............. (5,594,039) (3,789,278) (4,655,497)
Cash flows from financing activities:
Proceeds from debt ........................................ -- 369,327 --
Proceeds from initial issuance of common stock ............ 8,207,895 -- --
Principal payments of long-term debt ...................... -- -- (133,015)
------------ ------------ ------------
Net cash provided by (used in) financing activities 8,207,895 369,327 (133,015)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents ......... $ 3,274,993 $ 459,124 $ (1,337,188)
Cash and cash equivalents at beginning of period ............. -- 522,319 3,274,993
------------ ------------ ------------
Cash and cash equivalents at end of period ................... $ 3,274,993 $ 981,443 $ 1,937,805
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest .................. $ -- $ -- $ 1,320,834
============ ============ ============
Cash paid during the period for taxes ..................... $ -- $ -- $ --
============ ============ ============

Supplemental schedule of noncash investing and financing activities:

As part of the purchase price of acquisition (see Note A), the Company
issued notes payable totalling $24,500,000 and 1,000,000 shares of redeemable
preferred convertible stock totalling $4,000,000.

In 1995 and the six months ended March 31, 1996, the Company capitalized
$206,336 and $294,766 of interest to property and equipment, respectively.
Interest was not paid as of September 30, 1995 and is recorded in accrued
interest. In 1995, the Chairman of the Board and a company he controls, paid
approximately $1,000,000 of the Company's costs in exchange for 1,000,000 shares
of the Company's common stock.

Simultaneously to the acquisition, the Company assumed a capital lease
obligation of $277,039 from a related party (see Note F). The Company recorded
$277,039 in equipment and $277,039 in capital lease obligations.

The accompanying notes are an intgral part of these statements.

F-6

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Commodore Holdings Limited ("CHL") and its wholly-owned subsidiary New
Commodore Cruise Lines Limited ("NCCL") were organized under the laws of Bermuda
on April 13, 1995. Almira Enterprises Inc. ("Almira") and Azure Investments Inc.
("Azure"), owners of the cruise vessels Enchanted Isle and Enchanted Seas (the
"Vessels"), respectively, were organized under the laws of the Republic of
Panama on January 18, 1995 and are the wholly-owned subsidiaries of NCCL. CHL,
NCCL, Almira and Azure are collectively referred to as the ("Company").

Acquisition of Commodore Cruise Line

On July 14, 1995, the Company completed an acquisition, through the
purchase of the assets, of Commodore Cruise Lines Limited, a business consisting
of two ships, certain shoreside assets, trademarks, passenger lists and advance
ticket sales, from EffJohn International B.V. ("EffJohn"). The Company completed
the transaction, for a total consideration of $33,500,000 by paying $5,000,000
in cash, entering into a loan agreement with EffJohn for $24,500,000 and
granting EffJohn 1,000,000 7% Cumulative Convertible Redeemable Series A
Preferred Stock at an agreed value of $4.00 per share. Of the $33,500,000
purchase price, $31,600,000 was allocated to the vessels and the remaining
$1,900,000 was allocated to cash, inventory, prepaids and shoreside assets.

At the closing, EffJohn transferred to the Company approximately $5,300,000
of cash representing the balance of customer deposits outstanding for future
sailings. Additionally, the Company reimbursed EffJohn for certain advances made
prior to the closing and paid EffJohn fees and expenses totaling $150,000.

The operations of the Enchanted Isle from July 15, 1995 through September
30, 1995, are included in the accompanying financial statements. The Enchanted
Seas was undergoing significant renovations and had no operations for that
period, and began operations in January 1996.

Basis of Consolidation

The consolidated financial statements include the accounts of CHL and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.

Revenue and Expense Recognition

Deposits received on sales of passenger cruises are recorded as customer
deposits and are recognized, together with revenues from shipboard activities
and all associated direct costs of a voyage upon completion of voyages with
durations of 10 days or less and on a pro rata basis for voyages in excess of 10
days. In addition, the Company received non-recurring charter cancellation fees
of $425,000 in September 1995, and $425,000 in October 1995. Revenues in the
accompanying statement of earnings include the first $425,000. (Note F).

Cash and Cash Equivalents

The Company considers all highly liquid investments with original
maturities of three months or less when purchased to be cash equivalents.

Restricted Cash

As part of the loan agreement with EffJohn, the Company is required to
place approximately $181,731 each month in a retention account to be applied to
the first principal and interest payment due in January 1997. At September 30,
1995, this amounted to $363,462. In November 1995, the loan agreement was
amended to pay the monthly retention amount directly to the lender. The balance
of the retention account was paid to the lender in November 1995.

F-7

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
September 30, 1995

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first out method.

Dry-Docking

Costs associated with the dry-docking of the vessels will be charged to
prepaid expenses when incurred and expensed over the estimated period until the
next scheduled dry-dock (not to exceed two years).

Other Current Assets

Other current assets represents a deposit securing the Company's FMC Bond
for the Enchanted Seas (See Note E).

Property and Equipment

Ship, property and equipment are stated at cost. Significant vessel
refurbishing costs are capitalized as additions to the vessel, while costs of
repairs and maintenance are charged to expense as incurred. Depreciation has
been provided using the straight-line method over useful lives of 18 years after
a reduction for estimated salvage value for vessels and five years for furniture
and fixtures, and other property and equipment.

Investments -- Restricted

The Company placed $4,629,000 on deposit with a bank, securing its Federal
Maritime Commission ("FMC) Bond for the Enchanted Isle (See Note E).

Advertising Costs

Advertising costs are expensed as incurred and are included in marketing,
selling and administrative expenses.

Income Taxes

Deferred tax assets and liabilities are recorded based on the difference
between the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes. In addition, the current or deferred tax
consequences of a transaction are measured by applying the provisions of enacted
tax laws to determine the amount of taxes payable currently or in future years.

Earnings Per Share

Net earnings per common equivalent share is based upon the weighted average
number of shares and equivalents outstanding during each period after giving
effect for dividends on the Class A Preference Stock.

The weighted average number of common and common equivalent shares
outstanding for the period year ended September 30, 1995 is 4,377,593. Weighted
average shares includes the effect of the warrants issued with exercise prices
below the IPO price, as calculated under the treasury stock method. The
calculation also gives retroactive effect (as if to the beginning of the period)
to those shares issued to founders at par value.

F-8

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
September 30, 1995

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

Interim Financial Statements

The interim financial statements included herein have been prepared by the
Company and S/S Enchanted Seas and S/S Enchanted Isle (Operating Units of
EffJohn International B.V. (the predecessor company see Note 1a on page F-20))
and are unaudited, pursuant to the rules and regulations of the Securities and
Exchange Commission. All adjustments which are, in the opinion of management,
necessary for a fair statement for the results of the six months have been
included. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These interim financial statements should be read in conjunction
with the financial statements for the year ended September 30, 1995 and the
predecessor company's financial statements on F-14 through F-23. The Company's
interim financial statements are not comparable to the predecessor company's
interim financial statements for the six months ended March 31, 1995 due to the
changes in the entity as a result of the acquisition of the vessels by the
Company in July 1995. The historical operating results of the six months ending
March 31, 1995 were prepared from the books and records of the predecessor
company which included certain commingled expenses which were allocated to these
vessels on an estimated basis. Also, the Company's cost basis in the vessels and
its debt structure is significantly different than that in the previous period.

NOTE B -- PROPERTY AND EQUIPMENT

Vessels ..................................... $32,272,960
Equipment and other ............................ 803,839
Capitalized interest ........................... 206,336
-----------
33,283,135
Accumulated depreciation ....................... (197,926)
-----------
$33,085,209
===========
NOTE C -- INVENTORIES
Food, beverage and supplies ................. $482,273
Fuel ........................................ 208,728
--------
$691,001
========
NOTE D -- LONG-TERM DEBT AND PREFERRED STOCK

Long-Term Debt

In July, 1995 the Company entered into a loan agreement with an affiliate
of EffJohn (the "Lender") in the amount of $24,500,000. The loan is secured by
first preferred ship mortgages on both the Enchanted Isle and the Enchanted
Seas. In addition the loan is guaranteed by CHL and NCCL. The loan bears
interest at LIBOR plus 2% and will be repaid in 12 semi-annual installments
beginning in January, 1997. However, the interest is fixed at 7.875% for the
first 18 months.

In the event that the Company is required to pay tax on any interest due to
the Lender, the Company has agreed to pay the required amount to be withheld and
pay the Lender the full amount of interest due. The loan agreement includes
covenants as defined, including a requirement that the Company maintain a
minimum amount of $1,000,000 in the operating bank account.

F-9

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
September 30, 1995

NOTE D -- LONG TERM DEBT AND PERFERRED STOCK--CONTINUED

Preferred Stock

As part of the consideration for the sale of the cruise line, EffJohn
received 1,000,000 7% Cumulative Convertible Redeemable Series A Preferred Stock
at a value of $4.00 per share totalling $4,000,000. This payment of the dividend
is limited to 10% of the Company's net profits for such year. At September 30,
1995, dividends in arrears amounted to approximately $60,000.

Preferred Stock is convertible at any time at the option of the holder into
common stock at the higher rate of $4.00 or eight times the annual earnings per
common share of the Company for the previous fiscal year.

In the event the Company is not listed on a major exchange, as defined,
before January 1997, the holders of the Preferred Stock may submit the shares to
the Company for redemption limited to 10 percent of the Company's net profits
for each previous fiscal year. During the period between January 7, 1997 and the
date the Company is listed on a major exchange as defined the preferred
shareholders may submit the Preferred Stock for redemption at the rate of
$45,454 per fiscal quarter. Upon the receipt of a redemption notice the Company
may arrange for a third party to purchase these shares at a price equal to the
redemption price. In addition, for such time as the preferred shareholders have
at least 125,000 shares of Preferred Stock the listing shall not be cancelled by
the Company without prior approval of the preference shareholder. All redemption
rights are terminated when the Company is first listed on said exchange.

The minimum required principal payments as of September 30, 1995 on
long-term debt and Preferred Stock are as follows:

September 30,
1995
-------------
1997 .......................................... $4,446,964
1998 .......................................... 4,810,590
1999 .......................................... 4,810,590
2000 .......................................... 4,810,596
Thereafter .................................... 9,621,260
-----------
$28,500,000
===========

NOTE E -- COMMITMENTS AND CONTINGENCIES

Employment Agreements

In May 1995, the Company signed employment agreements with four of its
executive employees with terms ranging from 2 -- 5 years. These agreements
contain provisions for compensation, benefits, and covenants not-to-compete for
the longer of one year from termination, or the unexpired term of the agreement.

Litigation

In September 1995 the Company, along with its vice-chairman and EffJohn
were named in a lawsuit brought by an individual who had made an offer to buy
the cruise line from EffJohn in 1993. The Company believes that it has no
liability in this case and that the lawsuit is frivolous. The Company is
vigorously defending itself in this lawsuit and management believes that this
case will not have a material impact on the Company's results of operations or
financial position.

The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will either be covered
by insurance or will not materially affect the financial position of the
Company.

F-10

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
September 30, 1995

NOTE E -- COMMITMENTS AND CONTINGENCIES--CONTINUED

Federal Maritime Commission Bond

In order to operate a passenger cruise vessel from U.S. ports, the Company
is required to post a bond with the FMC. The amount of the bonds is $5,329,000.
To guarantee its FMC Bonds, the Company has deposited funds in favor of the
Company's Protection and Indemnity Club, the Steamship Mutual Underwriting
Association (Bermuda) Limited, which has in turn issued its guaranty to the FMC.
These deposits are included, on the Company's Balance Sheet under Investments --
Restricted and Other Current Assets (See Note A).

Premises

As part of its acquisition, the Company agreed to the assignment, by
EffJohn, of its rights to a lease for approximately 16,000 square feet of office
space in Hollywood, Florida where the Company maintains its corporate
headquarters. Additionally, the Company's computerized reservations system
hardware was subleased to the company by EffJohn (see Note F).

Future minimum annual lease commitments at September 30, 1995 are as
follows:

1996 ........................................... $ 164,166
1997 ........................................... 169,760
1998 ........................................... 236,120
1999 ........................................... 244,268
2000 ........................................... 187,920
----------
$1,002,234
==========

Rental and lease expense for the period ending September 30, 1995 amounted
to approximately $75,000.

Port of New Orleans

As part of the acquisition, the Company had EffJohn assign it the rights to
an agreement with the Port of New Orleans. The agreement committed Commodore
Cruise Lines Limited to operate a vessel from New Orleans for six years for
which the Company received priority use of the cruise terminal on Saturdays and
Sundays. In the event the Company does not complete a total of 300 required
sailings, it may at its option:

a) extend the term of the agreement up to one additional year before
expiration of the agreement;

b) pay a cancellation fee equivalent to the Port's principal balance
remaining on the capital expenditures of $895,000 incurred to
construct the terminal at the Port; or

c) place another vessel in service in New Orleans.

The Company had its commitment reduced for each call of other cruise
vessels at the terminal. At September 30, 1995, the Company's commitment was
approximately $313,000. The Company expects that its commitment will be
completed within the next year and a half.

Stock Option Plan

In 1995, the Company adopted a Stock Option Plan (the "Plan") pursuant to
which 500,000 shares of Common Stock have been reserved for issuance upon
exercise of options designated as "incentive stock options" or "qualified
options" within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"). The purpose of the Plan is to encourage stock
ownership by certain officers and employees of the Company, and give them a
greater personal interest in the success of the Company. The Plan is
administered by the Board of Directors of the Company, or a committee appointed
by the Board of Directors, which determines among other things, the persons to
be granted options under the Plan, the number of shares subject to each option
and the option price.

F-11

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
September 30, 1995

NOTE E -- COMMITMENTS AND CONTINGENCIES--CONTINUED

Warrants

In July 1995, the Company issued 250,000 warrants to a company controlled
by the Chairman of the Board and 250,000 warrants to the Chairman of the Board.
These warrants were issued at $6.00 per share and are exercisable through July
14, 2002.

In May 1995, certain employees were issued warrants to acquire a total of
325,000 shares of the Company's common stock. These warrants were issued with an
exercise price of $1.00 per share and become exercisable at various future dates
and expire in the year 2002.

NOTE F -- RELATED PARTIES

The Chairman of the Board personally and through a company he controls,
invested approximately $1,000,000 in the Company by funding its cash needs prior
to and during its formation in exchange for 1,000,000 shares of the Company's
common stock.

Several of the Company's shareholders are principals in International
Marine Carriers (IMC), a vessel manager employed by the Company to manage the
Enchanted Isle and the Enchanted Seas at a rate of $585,000 and $219,000 per
annum, respectively. During the period ended September 30, 1995, this amounted
to $130,235.

The Company used several bank facilities, primarily for credit card
processing and deliveries of cash to and from the Company's vessels, that belong
to affiliates of EffJohn. Accordingly, the Company has reflected a net
receivable from EffJohn under the heading due from affiliate. The Company has
since arranged for its own processing services. This receivable has been paid
subsequent to year end.

The Company and EffJohn entered into an agreement that amended certain of
the conditions of the original sale of the cruise line from EffJohn. Originally
EffJohn was to charter the Enchanted Seas for up to six months at which time the
Company would put the Enchanted Seas back into service. EffJohn, in this
agreement, agreed to fix certain technical deficiencies in both the Enchanted
Seas and the Enchanted Isle and agreed to pay the Company charter fees if
EffJohn did not charter the vessel in July or in October. The amount of the
charter fee received is included on the Company's statement of operations under
Revenues (see Note A).

As part of the original acquisition agreement, it was agreed that EffJohn
would sub-charter the Enchanted Seas to an unrelated third party, and the
Company would receive 50% of the charter income. In July 1995, the Company and
EffJohn were informed that the sub-charterer had reneged on their offer for the
Enchanted Seas. Accordingly, the Company and EffJohn entered into a settlement
agreement whereas, EffJohn agreed that if it did not re-charter the vessel by
September 1, 1995, it would pay the Company a $425,000 cancellation fee, and if
it did not charter the vessel by October 15, 1995, it would pay the Company an
additional $425,000 cancellation fee. As EffJohn did not charter the vessel, the
Company received $425,000 in September 1995 from EffJohn, and recorded these
damages as part of operating income in the 1995 statement of earnings. In
October 1995, the Company received the remaining $425,000 and it will be
recorded as operating income in fiscal 1996.

Simultaneously to the acquisition, the Company entered into a sublease
agreement with Commodore Cruise Line Limited to lease an IBM AS/400 computer
system. The lease is treated as a capital lease for financial statement
purposes, and the obligation is $223,960 at September 30, 1995. The related cost
of $277,039 is recorded in property and equipment at September 30, 1995. The
lease expires in 1996.

F-12

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Commodore Holdings Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
September 30, 1995

NOTE G -- COMMON STOCK

The Company issued 3,431,933 shares of Common Stock for a total
consideration of approximately $3,012,000 which was used to finance the start-up
of the Company. On July 15, 1995, the company closed on its private placement of
equity having sold 1,500,000 shares of its common stock for net proceeds of
approximately $5,196,000.

NOTE H -- INCOME TAXES

Income tax expense consists of the following:
Current Deferred Total
------- -------- --------
1995
Federal ............ $4,841 $3,618 $8,459
====== ====== ======

The temporary differences that gives rise to a significant portion of the
deferred tax liability is the excess of tax over book depreciation.

The provision for federal income taxes for the year ended September 30,
1995 differs from that computed at the statutory federal corporate tax rate as
follows:

Amount
---------
Provision at statutory rate .............................. $108,800
Statutory tax exempted due to foreign source income ...... (89,625)
Effect of graduated tax rates ............................ (10,716)
--------
Total tax provision ...................................... $ 8,459
========

As of September 30, 1995, the Company has net operating loss carryforwards
for federal income tax purposes of $5,244 and alternative minimum tax credits of
$1,786 which are available to offset taxable income and income taxes, if any,
through the year 2010.

NOTE I -- SUBSEQUENT EVENTS

In October 1995, the Company entered into a joint venture agreement with
the Seawise Foundation ("Seawise"), a Liberian Corporation. The Company has
chartered the Universe Explorer (formerly the Enchanted Seas) to Sea-Comm, Ltd.,
a Liberian Corporation ("Sea-Comm") formed pursuant to the joint venture
agreement, for a fee equivalent to all operating costs plus principal and
interest on its ship mortgage.

The joint venture (Sea-Comm) has in turn chartered the ship to Seawise. The
terms of the charter provide that Seawise has the use of 76% of the cabins in
exchange for payment of 76% of the operating costs, including 76% of the labor,
100% of food costs and 76% of the principal and interest due on the Company's
ship mortgage. Sea-Comm will earn additional revenue from the sale of the 24% of
the cabins on the vessel and onboard revenues. Seawise has guaranteed the sale
of 60 adults on each voyage in addition to the 76% of the cabins they will
purchase.

F-13

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[LETTERHEAD OF KPMG PEAT MARWICK LLP]

Independent Auditors' Report

The Board of Directors
EffJohn International B.V.:

We have audited the accompanying combined balance sheet of the S/S
Enchanted Seas and S/S Enchanted Isle, (operating units of EffJohn International
B.V.), as of December 31, 1994, and the related statements of operations,
operating units' equity and cash flows for the period from January 1, 1995
through July 14, 1995 and for each of the years in the two-year period ending
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the combined financial position of the S/S Enchanted
Seas and S/S Enchanted Isle, (operating units of EffJohn International B.V.), as
of December 31, 1994, and the results of its operations and its cash flows for
the period from January 1, 1995 through July 14, 1995 and for each of the years
in the two-year period ended December 31, 1994 in conformity with generally
accepted accounting principles.

As discussed in note 3, the Company and EffJohn International B.V. have
incurred significant accumulated losses and a working capital deficit. The
Company and EffJohn will remain economically dependent on its parent for
additional advances until they achieve profitable operations.

/s/KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Fort Lauderdale, Florida
May 7, 1996

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Combined Balance Sheet
December 31, 1994

Assets
Current assets:
Cash and cash equivalents ................................ $ 824,870
Restricted cash .......................................... 234,966
Accounts receivable:
Trade ................................................. 138,351
Other ................................................. 525,699
------------
664,050
------------
Inventories .............................................. 728,363
Prepaid expenses and other current assets ................ 215,431
------------
Total current assets ............................ 2,667,680
------------
Property and equipment ...................................... 60,324,248
Less accumulated depreciation and amorization ......... (22,759,478)
------------
37,564,770
------------
$ 40,232,450
============

Liabilities and Operating Units' Equity
Current liabilities:
Due to affiliates ........................................ 10,564,903
Passenger deposits ....................................... 5,231,861
Current maturities of affiliate long-term debt ........... 7,713,546
------------
Total current liabilities ......................... 23,510,310
Affiliate long-term debt .................................... 22,306,802
------------
Total liabilities ............................... 45,817,112
------------
Operating units' equity ..................................... (5,584,662)
------------
Commitments and contingencies ............................... --
------------
Total liabilities and operating units' equity ......... $ 40,232,450
============

See accompanying notes to combined financial statements.

F-15

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Statements of Operations

For the years ended December 31, 1993 and 1994 and
for the period from January 1, 1995 to July 14, 1995

For the period
Year ended December 31, January 1
---------------------------- through July 14,
1993 1994 1995
------------- ------------ -------------
Revenues:
Passengers fares ............. $ 31,660,394 26,493,185 13,241,158
Port charges ................. 3,450,607 3,313,599 1,926,605
On board revenues ............ 8,015,525 7,531,592 3,972,362
Charter revenue .............. 2,420,000 4,511,224 --
Miscellanceous revenues ...... 103,530 10,813 --
------------ ------------ ------------
Total revenues ......... 45,650,056 41,860,413 19,140,125
------------ ------------ ------------
Operating expenses:
Technical and running costs .. 16,951,387 14,201,427 11,188,132
Ships operating expenses ..... 14,258,345 12,368,986 6,771,538
Repairs and maintenance ...... 3,055,405 1,956,683 2,168,105
------------ ------------ ------------
Total operating expenses 34,265,137 28,527,096 20,127,775
------------ ------------ ------------
Gross profit (loss) .... 11,384,919 13,333,317 (987,650)
Other operating expenses:
Administrative expenses ...... 4,664,866 3,798,194 3,175,947
Marketing expenses ........... 2,168,286 2,685,976 2,704,143
Depreciation and amortization 4,902,487 3,599,234 1,910,413
Loss on vessel fire .......... -- 1,367,347 --
------------ ------------ ------------
Operating income (loss) (350,720) 1,882,566 (8,778,153)
Other income (expense):
Interest income .............. 33,984 68,921 41,317
Interest expense ............. (1,716,329) (1,362,336) (2,232,347)
Write-off of goodwill ........ (6,023,118) -- --
Loss on sale of assets ....... -- -- (6,123,866)
------------ ------------ ------------
(7,705,463) (1,293,415) (8,314,896)
------------ ------------ ------------
Net income (loss) ...... $ (8,056,183) 589,151 (17,093,049)
============ ============ ============

See accompanying notes to combined financial statements.

F-16

424A 75th Page of 84 TOC 1st Previous Next ↓Bottom Just 75th
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Statements of Operating Units' Equity

Year ended December 31, 1994

Balance at December 31, 1992 ................................... $ (8,714,121)
Net loss .................................................... (8,056,183)
Capital contributions - forgiveness of affiliate debt ....... 10,596,491
------------

Balance at December 31, 1993 ................................... (6,173,813)
Net income .................................................. 589,151
------------
Balance at December 31, 1994 ................................... (5,584,662)
Net loss .................................................... (17,093,050)
------------
Balance at July 14, 1995 ....................................... $(22,677,712)
============

See accompanying notes to combined financial statements.

F-17

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Cash Flow Statements

For the years ended December 31, 1993 and 1994 and
for the period from January 1, 1995 to July 14, 1995

[Enlarge/Download Table]

For the period
Year ended December 31, January 1
---------------------------- through July 14,
1993 1994 1995
------------- ------------ -------------

Net income (loss) .......................................... $ (8,056,183) 589,151 (17,093,049)
Depreciation and amortization .............................. 14,902,487 3,599,234 1,910,413
Loss on sale of assets ..................................... -- -- 6,123,866
Amortization of deferred drydock ........................... 1,778,407 1,116,367 1,254,921
Write-off of goodwill ...................................... 6,023,118 -- --
Changes in:
Restricted cash ......................................... (1,158) (10,404) 234,965
Accounts receivable ..................................... (293,573) 15,621 (625,476)
Inventories ............................................. 398,952 (231,094) (371,637)
Prepaids and other assets ............................... (128,267) (10,145) 215,431
Passenger deposits ...................................... 1,794,478 (676,606) (5,231,861)
Due to/from affiliates .................................. 836,339 4,076,254 2,299,934
------------ ------------ ------------
Net cash (used in) provided by operations ......... 7,254,600 8,468,378 (11,282,493)
------------ ------------ ------------
Proceeds from sale of assets ............................ 149,415 42,000 5,000,000
Capital expenditures .................................... (1,177,642) (2,508,024) (1,448,017)
------------ ------------ ------------
Net cash provided by (used in) investing activities (1,028,227) (2,466,024) 3,551,983
------------ ------------ ------------
Proceeds from debt ...................................... 1,021,272 184,126 8,985,735
Repayments of debt ...................................... (7,943,713) (5,800,202) (1,127,551)
------------ ------------ ------------
Net cash provided by (used in) financing activities (6,922,441) (5,616,076) 7,858,184
------------ ------------ ------------
Net change in cash and cash equivalents ................. (696,068) 386,278 127,674
Beginning cash and cash equivalents ..................... 1,134,660 438,592 824,870
------------ ------------ ------------
Ending cash and cash equivalents .................. $ 438,592 824,870 952,544
============ ============ ============

See accompanying notes to combined financial statements.

F-18

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Cash Flow Statements (Continued)

For the years ended December 31, 1993 and 1994 and
for the period from January 1, 1995 to July 14, 1995

Supplemental cash flow disclosure:

The following summarizes non-cash activities related to the sale of the
Company's assets:

Vessels ............................................... $(36,500,000)
Inventories ........................................... ( 1,100,000)
Liabilities incurred .................................. (2,023,866)
Promissory note received .............................. 24,500,000
Preferred stock received .............................. 4,000,000
Cash received ......................................... 5,000,000
-------------
Loss on sale of assets ................................ $ 6,123,866
=============

See accompanying notes to combined financial statements.

F-19

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Notes to Combined Financial Statements

December 31, 1993 and 1994, July 14, 1995

(1) Business Organization and Summary of Significant Accounting Policies

(a) Business Organization

Brasil Caribean Shipping, Inc. ("Brasil") and Argentina Caribean Shipping
Inc. ("Argentina") (both Panamanian corporations) are wholly-owned subsidiaries
of EffJohn International B.V. ("EffJohn") (a Dutch corporation). EffJohn is
ultimately owned by Silja OY AB, a Scandinavian publicly held entity.

Brasil owned the cruise vessel S/S Enchanted Seas ("Seas"), which operated
primarily in the Caribbean markets out of New Orleans, Louisiana. Argentina
owned the cruise vessel S/S Enchanted Isle ("Isle"), which operated out of San
Diego to Mexico through April 1993, in the Caribbean market out of Barbados and
out of New Orleans in 1995 and also operated as a hotel in St. Petersburg,
Russia from May 1993 through August 1994. Both vessels were operated and managed
by Commodore Cruise Line Limited ("Commodore"), a wholly-owned subsidiary of
EffJohn. Commodore also operates or operated the vessels Caribe 1, Crown
Monarch, Crown Jewel and Crown Dynasty.

These financial statements have been prepared on a combined basis
representing the activities of Brasil and Argentina and the revenues and direct
and allocated expenses of Commodore from operations of the Seas and Isle. The
combined operations are herein referred to as the "Company." All material
intercompany balances and transactions have been eliminated in combination.

(b) Revenue and Expense Recognition

Passenger ticket revenue, onboard revenues and related expenses are
recognized as earned when voyages are completed. Fares received from customers
for future voyages are recorded as liabilities. Onboard revenues consist of
income from concession agreements (note 9), casino, bar operation and shore tour
activities.

Travel agent commissions, air transportation and land excursions costs, and
onboard cost of sales and expenses are included in ships operating expenses in
the accompanying combined financial statements.

Certain expenses common to vessels operated by Commodore have been
allocated to the Seas and Isle, primarily based on a pro rata share of the
number of traffic days of each vessel. Allocated expenses consist principally of
marketing and advertising, shore payroll, benefits, and other administrative
costs. See note 6 as to allocation of interest expense.

Management believes that the methodology used in allocating expenses is
reasonable. As all expenses of EffJohn have been subject to allocation,
management believes that the expenses of the Company would not be materially
different on a stand alone basis.

Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method.

(d) Property and Equipment

Vessels, property and equipment are recorded at cost. Major renewals and
improvements which extend the useful lives of the assets are capitalized.
Drydocking costs are deferred and amortized over 24 months.

(e) Income Taxes

The operations of the Isle and Seas are not subject to U.S. income taxes
due to an international shipping exemption and no income taxes in the country of
incorporation. Accordingly, no provision for income taxes has been recorded.

F-20

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Notes to Combined Financial Statements--Continued

(f) Cash and Cash Equivalents

Cash includes purser funds, casino cash and bank account used solely for
the Seas and Isle. The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.

(g) Due to Affiliates

Due to affiliates consists principally of amounts owed to Commodore and
EffJohn for various operating and administrative activities. Commodore manages
certain cash disbursements, including payments to vendors. Cash balances and
transactions recorded through operating cash accounts used by Commodore for the
operations of vessels are reflected in due to affiliates.

(h) Restricted Cash

The Company placed $234,966 on deposit with a bank to secure a letter of
credit with a United States government agency.

(i) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

(2) Sale of the Seas and the Isle and Related Assets

On July 14, 1995, the Company sold the S/S Enchanted Seas and the S/S
Enchanted Isle, certain shoreside assets, trademarks, passenger lists and
advanced ticket sales to Commodore Holdings Limited and Subsidiaries, an
unrelated entity. Total proceeds received for the transaction were $33,500,000,
which consisted of $5,000,000 in cash, a loan made to the purchasers of
$24,500,000 and 1,000,000 shares of seven percent cumulative convertible
redeemable Series A Preferred Stock at value of $4.00 per share. The loss
associated with his sale was $6,123,866.

(3) Liquidity

The Company's current liabilities exceed current assets and total
liabilities exceed total assets. Although the Company recognized a profit in
1994, it incurred losses in 1995 and 1993 and has received capital contributions
and loans from EffJohn to cover its operating cash needs. The parent company of
EffJohn has agreed to provide additional cash advances or obtain external
financing, if required, in 1996. The Company and EffJohn will remain
economically dependent on its parent for additional advances until it achieves
sustained profitable operations.

(4) Inventories

At December 31, 1994, inventories consist of:
1994
----
Food, beverage and supplies ............................... $633.952
Fuel ...................................................... 94.411
--------
$728,363
========

F-21

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Notes to Combined Financial Statements--Continued

(5) Property ant Equipment

At December 31, 1994, property and equipment consist of:

Estimated
1994 Useful Lives
---- ----------
Vessels $53,839,340 15 years
Equipment 2,957,367 3 to 5 years
Dry/Wet docking 3,527,541 2 years
-----------
$60,324,248
===========

Depreciation expense for the years ended December 31, 1993 and 1994 and for
the period January I through July 14, 1995 amounted to $3,586,654, $3,567,550
and $l,771,035, respectively.

(6) Affiliate Long-Term Debt

EffJohn provides financing to the vessels operated by Commodore through
external loans obtained from third parties. Debt amounts have been allocated to
the Seas and Isle based on acquisition debt, funding of capital improvements and
working capital needs. Debt repayments and interest expense have been allocated
based on a pro rata share of outstanding debt and capital contributions made by
EffJohn. Certain debt incurred by EffJohn to fund the Company is secured by the
Seas and the Isle. Interest rates on the external debt range from .18 percent to
7.82 percent.

The allocated minimum annual repayment requirements as of December 31,
1994, are as follows:

Long-term
Year ending December 31, debt, affiliate
----------------------- ------------
1995 ........................................... $ 7,713,546
1996 ........................................... 7,215,243
1997 ........................................... 6,436,345
1998 ........................................... 4,841,173
Thereafter ..................................... 3,814,041
-----------
$30,020,348
===========

(7) Write Off of Goodwill

The Company recorded goodwill in 1989 resulting from the excess of the
purchase cost of the Company over fair market value of net assets acquired,
which was amortized over ten years on a straight-line basis. The Company
continually evaluated the existence of goodwill impairment on the basis of
whether goodwill was fully recoverable from projected, undiscounted net cash
flows. In 1993, in connection with the anticipated sale of the vessels, the
Company determined that goodwill no longer had continuing value based on the
expected future cash flows from the sale of the vessel and from operations.
Accordingly, the Company recorded a charge to income in the accompanying
statement of operations sufficient to fully write-off all goodwill.

(8) Commitments and Contingencies

The Company is a defendant in various lawsuits incidental to its operation.
Such claims are generally covered by insurance, less a deductible payable by the
Company. In the opinion of management, the ultimate resolution of these matters
will not have a material effect on the Company's financial position, results of
operations or liquidity.

F-22

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S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)

Notes to Combined Financial Statements--Continued

(9) Concession Agreements

The Company had entered into concession agreements with independent third
parties for the operations of the gift shop, beauty shop and photography
services.

Fringe revenues from concessions were computed based upon information
contained in each specific agreement. Generally, such agreements call for
payments to the Company based upon number of passengers or a percentage of
sales.

(10) Fire Loss on the Isle

On December 28, 1994, a fire occurred on the S/S Enchanted Isle. The
Company incurred expenses for damages arising out of the incident of
approximately $1.4 million. The loss is included in other operating expenses in
the accompanying statement of operations for the year ended December 31, 1994.

(11) Charter Revenue

From May 1993 through August 1994, the Isle was chartered to an affiliated
company and operated as a hotel in St. Petersburg, Russia. Charter revenue
received amounted to $2,420,000 and $4,036,224 and in 1993 and 1994,
respectively. Charter revenue from a third-party amounted to $475,000 in 1994.

F-23

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Commodore Holdings Limited and Subsidiaries

PRO FORMA CONDENSED STATEMENT OF EARNINGS

Year Ended September 30, 1995
(Unaudited)

[Enlarge/Download Table]

New Old
Commodore Commodore Pro Forma Pro Forma
--------- --------- --------- ---------

Total revenues ......................... $ 7,255,830 $ 27,818,934 $ -- $ 35,074,764
Operating expenses ..................... 4,940,637 28,395,959 -- 33,336,596
Marketing, selling and administrative .. 1,664,478 8,234,108 -- 9,898,586
Depreciation and amortization .......... 197,926 2,832,666(1) (1,337,333)(1) 1,693,259
Interest expense, net .................. 132,795 2,704,855 (904,275)(2) 1,933,375
Loss on vessel fire .................... -- 1,367,347 -- 1,367,347
----------- ------------ ------------ ------------
Net earnings (loss) .................... 319,994 (15,716,001) 2,241,608 (13,154,399)
Discontinued operations ................ -- 6,123,866 (6,123,866)(5) --
Provision for taxes .................... 8,459 -- (8,459)(4) --
----------- ------------ ------------ ------------
Net earnings (loss) before provision for
preferred stock dividend ............ 311,535 (21,839,867) 8,373,933 (13,154,399)
Provision for preferred stock dividend . 60,000 -- 220,000(3) 280,000
----------- ------------ ------------ ------------
Net earnings ........................... $ 251,535 $(21,839,867) $ 8,153,933 $(13,434,399)
=========== ============ ============ ============
Net income (loss) per share ............ 0.06 (2.59)
=========== ============
Weighted average number of common
stock outstanding ................... 4,377,593 5,184,711
=========== ============

F-24

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Commodore Holdings Limited and Subsidiaries

PRO FORMA CONDENSED STATEMENT OF EARNINGS

Year Ended September 30, 1995
(Unaudited)

NOTE 1--PRO FORMA CONDENSED FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed statements of earnings have
been derived from the audited statement of earnings of the Company for the
period from April 13, 1995 (date of inception) through September 30, 1995
and the revenues and expenses of the S/S Enchanted Seas and S/S Enchanted
Isle (Operating Units of EffJohn International B.V. (the Predecessor
Company see Note 1a on page F-20) from October 1, 1994 through July 14,
1995 (date of acquisition). Although the date of inception of the Company
was April 13, 1995, actual operations of the Company began on July 15,
1995.

The unaudited pro forma condensed financial statements are presented for
informational purposes only and do not purport to be indicative of the
operating results that actually would have occurred if the acquisition had
been consummated as of October 1, 1994, nor which may result from future
operations. The pro forma adjustments are based upon available information
and certain assumptions that the Company believes are reasonable. The 1994
acquisition has been accounted for using the purchase method of accounting.
These pro forma financial statements should be read in conjunction with the
historical financial statements in related notes of the Company, the
acquisition information included elsewhere in this document.

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Earnings Per Share

Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and common stock equivalents outstanding during
each period after giving effect for dividends on the Class A preferred
stock.

The weighted average number of common and common equivalent shares
outstanding for the pro forma year ended September 30, 1995 is 5,184,611.
Weighted average shares includes the effect of the warrants issued with
exercise prices below the IPO price, as calculated under the treasury stock
method. The calculation also gives retroactive effect (as if to the
beginning of the period) to those shares issued to founders at par value.

NOTE C--PRO FORMA ADJUSTMENTS

(1) Adjustment to depreciation expense resulting from the difference in
cost basis of the assets acquired by the Company as compared to the
Predecessor Company.

(2) Adjustment to interest expense for lower borrowings of approximately
$4,617,000 of the Company as compared to the Predecessor Company. The
actual interest rate at the time of acquisition was used to determine
these amounts.

(3) Adjustment to reflect the provision for preferred stock dividend on
$4,000,000 of 7% Series A cumulative preferred stock.

(4) No provision for income taxes is reflected due to the pro forma net
operating loss. The Company expects that once it becomes primarily and
regularly traded on an established securities market in the U.S. such
as NASDAQ, it will be able to claim the shipping exemption under
Section 883(a) of the Internal Revenue Code. Accordingly, the
Company's effective tax rate will then be zero.

(5) This amount represent the loss on sale of the vessels and has been
adjusted to reflect the Company as a going concern.

F-25

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

No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied on as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy, by any person
in any jurisdiction in which it is unlawful for such person to make such offer
or solicitation. Neither the delivery of this Prospectus nor any offer,
solicitation or sale made hereunder, shall under any circumstances create an
implication that the information herein is correct as of any time subsequent to
the date of the Prospectus.

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

TABLE OF CONTENTS
Page
----
ENFORCEABILITY OF CIVIL LIABILITIES
UNDER UNITED STATES FEDERAL
SECURITIES LAWS ....................................................... 3
PROSPECTUS SUMMARY ..................................................... 4
SUMMARY FINANCIAL INFORMATION .......................................... 7
RISK FACTORS ........................................................... 8
USE OF PROCEEDS ........................................................ 17
DIVIDEND POLICY ........................................................ 17
DILUTION ............................................................... 18
CAPITALIZATION ......................................................... 19
SELECTED FINANCIAL DATA ................................................ 20
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ............................................. 21
BUSINESS ............................................................... 25
CERTAIN TAX CONSIDERATIONS ............................................. 39
MANAGEMENT ............................................................. 44
SECURITIES OWNERSHIP OF
PRINCIPAL AND INITIAL SELLING
STOCKHOLDERS .......................................................... 48
CERTAIN TRANSACTIONS ................................................... 49
DESCRIPTION OF SECURITIES .............................................. 49
SHARES ELIGIBLE FOR FUTURE SALE ........................................ 55
CERTAIN FOREIGN ISSUER
CONSIDERATIONS ........................................................ 55
UNDERWRITING ........................................................... 56
CONCURRENT REGISTRATION OF
COMMON STOCK .......................................................... 58
LEGAL MATTERS .......................................................... 58
EXPERTS ................................................................ 58
ADDITIONAL INFORMATION ................................................. 58
INDEX TO FINANCIAL STATEMENTS .......................................... F-1

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

Until ____________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

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

1,000,000 Units

[LOGO] COMODORE CRUISE LINE

COMMODORE HOLDINGS LIMITED

-------------
PROSPECTUS
-------------

, 1996

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

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424A’ Filing	Date	First	Last	Other Filings

	10/1/05	11	37
	7/14/02	70
	5/4/02	46
	1/7/01	32
	1/14/99	12
	1/14/97	24	26	DEF 14A
	1/7/97	68
Filed on:	6/17/96
	5/28/96	1		S-1/A
	5/7/96	72
	4/1/96	18	51
	3/31/96	8	64
	2/22/96	28
	2/3/96	33
	12/14/95	26
	11/28/95	60
	11/15/95	24	26
	10/30/95	32
	10/15/95	27	70
	9/30/95	7	83
	9/15/95	26
	9/1/95	27	70
	7/31/95	26
	7/15/95	7	83
	7/14/95	5	83
	5/12/95	49
	5/4/95	49
	5/3/95	47
	4/28/95	25
	4/26/95	49
	4/15/95	25
	4/13/95	5	83
	3/31/95	7	67
	1/18/95	65
	1/1/95	58	77
	12/31/94	8	81
	12/28/94	23	81
	10/1/94	7	83
	9/30/94	22
	12/31/93	8	80
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Filing Submission 0000891092-96-000106 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Commodore Holdings Ltd – IPO: ‘424A’ on 6/17/96

As of: Monday, 6/17/96 · Accession #: 891092-96-106 · File #: 333-01270

Initial Public Offering (IPO): Prospectus — Rule 424(a)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Initial Public Offering (IPO): Prospectus — Rule 424(a)
Filing Table of Contents