Premier Exhibitions 10K 2013 Annual report

Premier Exhibitions (PRXI) Inactive 10-K2013 FY Annual report

Content analysis

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended February 28, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NO. 000-24452

PREMIER EXHIBITIONS, INC.

(Exact name of registrant as specified in its charter)

Florida

20-1424922

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3340 Peachtree Rd., N.E., Suite 900

Atlanta, GA 30326

(Address of principal executive offices)

Registrant’s telephone number, including area code: 404-842-2600

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, par value $0.0001 per share

The NASDAQ Stock Market LLC

(NASDAQ Global Market)

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At August 31, 2012 the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $58,804,000 based upon the closing price for such Common Stock as reported on the NASDAQ Global Market on August 31, 2012. For purposes of the foregoing calculation only, all directors and officers of the registrant have been deemed affiliates.

The number of shares outstanding of the registrant’s common stock, as of May 26, 2013, was 49,339,642.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement, which will be filed within 120 days of the end of the registrant’s fiscal year in connection with the registrant’s 2013 annual meeting of shareholders, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS


FORWARD-LOOKING STATEMENTS			1

EXPLANATORY NOTE			1

Part I			2
ITEM 1. BUSINESS			2
ITEM 1A. RISK FACTORS			13
ITEM 1B. UNRESOLVED STAFF COMMENTS			19
ITEM 2. PROPERTIES			19
ITEM 3. LEGAL PROCEEDINGS			21
ITEM 4. MINING SAFETY DISCLOSURE			24

Part II			25
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			25
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			87
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			147
ITEM 9A. CONTROLS AND PROCEDURES			147
ITEM 9B. OTHER INFORMATION			148

Part III			148
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE			148
ITEM 11. EXECUTIVE COMPENSATION			149
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			149
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE			149
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES			149

Part IV			150
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES			150

As used in this Annual Report on Form 10-K for the year ended February 28, 2013 (the “Form 10-K”), the terms “Company,” “our,” “us” or “we” refer to Premier Exhibitions, Inc. a Florida corporation.

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to revenue growth, improvements to margin and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, such statements are dependent upon, and can be influenced by, a number of external variables over which management has little or no control, including but not limited to, general economic conditions, public tastes and demand, competition, the availability of venues, the results of certain legal matters described herein, governmental regulation and the efforts of co-sponsors and joint venture participants. As a result, caution should be taken not to place undue reliance on any such forward-looking statements. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Forward-looking statements should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the performance that is ultimately achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements.

EXPLANATORY NOTE

BACKGROUND OF THE RESTATEMENT

On May 1, 2013, the Audit Committee of Premier Exhibitions, Inc. (the “Company”), together with its independent registered public accounting firm, concluded that certain previously issued financial statements should no longer be relied upon because of an error in such financial statements as addressed in Accounting Standards Codification 805 “Business Combinations”.

The financial statements that should no longer be relied upon are those reported in the Forms 10-Q for the quarters ending May 31, 2012, August 31, 2012 and November 30, 2012 and the Form 8-K/A dated July 6, 2012.

During fiscal year 2013, the Company and its subsidiaries, Premier Exhibition Management, LLC (“PEM”) and PEM Newco, LLC (“Newco”), entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC (together, “AEG”) pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The purchase of the assets (the “AEI Acquisition”) was completed contemporaneous with the signing of the Purchase Agreement in April 2012 and the acquisition was reported on a Current Report on Form 8-K filed April 20, 2012. The related audited financial statements of the acquired assets and unaudited proforma information were filed on a Current Report on Form 8-K/A on July 6, 2012. The errors in the Company’s financial statements relate to the purchase accounting for the AEI Acquisition and will result in a restatement of the Company’s balance sheet for those affected periods with resulting immaterial adjustments to the statements of operations and cash flows. None of the adjustments impacted operating income for those affected periods.

The consideration for the AEI acquisition was a 10% equity interest in PEM and a non-recourse and non-interest bearing promissory note in the initial principal amount of $14,187,000 and with a maturity date of February 28, 2017 (the “Promissory Note”). Pursuant to the Promissory Note, Newco will make payments to AEG equal to (a) 100% of net revenues from exhibition bookings entered into by AEG or pending as of closing and transferred to Newco pursuant to the Purchase Agreement, (b) 100% of net revenues from future bookings, after payment to PEM of a 10% booking fee, (c) 100% of the net revenues from the future sale of any tangible exhibitry, equipment and other fixed assets comprising the acquired assets, and (d) 20% of the net revenues from proposed exhibitions acquired from AEG that are ultimately developed and presented. “Net Revenues” are determined after deduction by Newco of the direct expenses of operating the exhibitions. Newco is also entitled to retain, before remitting any payments on the Promissory Note, a management fee in the following amount: (a) 5% of gross revenues (after deducting any PEM booking fees) for calendar year 2012; and (b) 10% of gross revenues (after deducting any PEM booking fees) for each calendar year thereafter; provided that the management fee shall not be less than the following minimum fees: $694,164 in calendar year 2012; $750,000 in calendar year 2013; $500,000 in calendar year 2014; and $250,000 in calendar years 2015 and 2016.

If the Promissory Note is not satisfied in full at the maturity date, Newco shall satisfy any shortfall by, at its option, selling some or all of the remaining acquired tangible assets, returning some or all the remaining acquired tangible assets to AEG, or paying the applicable portion of the value of the remaining tangible assets to AEG. Due to the non-recourse nature of the Promissory Note, if the proceeds from the acquired exhibitions and asset sales described above are not sufficient to satisfy the Promissory Note in full on or prior to the maturity date, then none of the Company, PEM or Newco will have any liability with respect to any shortfall.

Due to the nature of the Promissory Note, it was accounted for on the purchase date with a discount for the amount of the Promissory Note not expected to be repaid in accordance with Generally Accepted Accounting Principles. This valuation was based on information about the assets acquired and expected revenues. As management operated the assets during the fiscal year and repayments of the Promissory Note exceeded expectations, management decided to retain an external valuation expert to review the Company’s original valuation of the Promissory Note as of the purchase date. As a result of this review, additional work was performed by management to evaluate the facts and circumstances as of the acquisition date. After consultation with the Audit Committee and the Company’s independent registered public accounting firm, the Company has determined that the accounting for the acquisition was incorrect. As a result of the incorrect accounting treatment, at the date of acquisition:

•

Prepaid expenses were overstated by $1.536 million, property and equipment were overstated by $560 thousand and the equity interest in PEM transferred as part of the purchase price was overstated by $1.782 million;

•

Goodwill was understated by $250 thousand, future rights fees were understated by $4.38 million and the note payable was understated by $4.316 million;

•

On the statement of operations, interest expense was understated and net income attributable to non-controlling members was overstated; as a result Net Income was overstated by $17 thousand in the quarter ended May 31, 2012, $81 thousand in the quarter ended August 31, 2012, and $201 thousand in the quarter ended November 30, 2012; and

•

There were no changes to cash reported and minimal changes to the Statement of Cash Flows.

In this Form 10-K, we therefore amend or restate the following types of financial information as of and for the reference periods in Note 23 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K. The following items of this Form 10-K are impacted as a result of this restatement:

•

Part I, Item 1A, Risk Factors

•

Part II, Item 8, Financial Statements and Supplementary Data

•

Part II, Item 9A, Controls and Procedures

PART I

ITEM 1.

BUSINESS

Titanic Ventures Limited Partnership (“TVLP”), a Connecticut limited partnership, was formed in 1987 for the purposes of exploring the wreck of the R.M.S. Titanic and its surrounding oceanic areas. In May of 1993, RMS Titanic, Inc. (“RMST”) entered into a reverse merger under which RMST acquired all of the assets and assumed all of the liabilities of TVLP and TVLP became a shareholder of RMST. In October of 2004, we reorganized and Premier Exhibitions, Inc. became the parent company of RMST and RMST became a wholly-owned subsidiary. Additional wholly-owned subsidiaries were established in order to operate the various domestic and international exhibitions of the Company.

On September 29, 2011, the Company announced that it intended to separate its operations into two operating subdivisions. The change is intended to better position the Company to pursue strategic alternatives and manage both businesses independently.

Our business has been divided into an exhibition management division and a content division. The content division is the Company’s existing subsidiary, RMST, which holds all of the Company’s rights with respect to the Titanic assets and is the salvor-in-possession of the Titanic wreck site. These assets include title to all of the recovered artifacts in the Company’s possession, in addition to all of the intellectual property (data, video, photos, maps, etc.) related to the recovery of the artifacts and scientific study of the ship.

The exhibition management division includes our exhibition operations and merchandising operations. We formed a new entity, Premier Exhibition Management LLC (“PEM”), to manage all of the Company’s exhibition operations. This includes the operation and management of our Bodies, Titanic (pursuant to an intercompany agreement with RMST) and Dialog in the Dark exhibitions and merchandising related to these exhibits. PEM will also pursue “fee for service” arrangements to manage exhibitions based on content owned or controlled by third parties. On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (“Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The acquired assets include rights agreements with the owners of the artifacts and intellectual property comprising the exhibitions, museum/venue agreements for existing exhibition venues, sponsorship agreements, a warehouse lease and an office lease. In addition, the acquired assets include intellectual property related to proposed future exhibitions that the Company may further develop and produce. The Company will operate any such additional properties under its exhibition management subsidiary. Subsequent to the asset purchase, Newco changed its name to Arts and Exhibitions International, LLC.

As part of the purchase price for the assets of AEI, 10% of the ownership interest in Premier Exhibition Management LLC was transferred to AEG Live LLC. This ownership interest is reported as a “non-controlling interest” in our financial statements, and the financials of Premier Exhibition Management LLC are reported on a consolidated basis.

The exhibition management division also includes our exhibition merchandising business, conducted under the Company’s wholly owned subsidiary, Premier Merchandising, LLC. This entity has purchased the merchandise rights related to the AEI exhibition properties, and also pursues other exhibition merchandising opportunities.

The restructuring of the Company and changes in its management reflect that Premier has two operating segments – Exhibition Operations and Content Management.

Overview

Premier Exhibitions, Inc. and subsidiaries, (the “Company” or “Premier”) is in the business of presenting to the public museum-quality touring exhibitions around the world. Since our establishment, we have developed, deployed, and operated unique exhibition products that are presented to the public in exhibition centers, museums, and non-traditional venues. Income from exhibitions is generated primarily through ticket sales, third-party licensing, sponsorships and merchandise sales. As of February 28, 2013, we are configured to present three different types of exhibitions, as reflected in the following table:


	Year Ended February 28, 2013
	Stationary		Touring		Total
“Bodies... The Exhibition” and “Bodies Revealed”		3		5		8
“Titanic: The Artifact Exhibition” and “Titanic: The Experience”		3		6		9
Exhibitions under management:
“Real Pirates”		—		1		1

Total Exhibitions		6		12		18

In addition to developing new content for future exhibitions, the Company continually evaluates its touring capacity and may expand or contract to suit the addressable market for its content.

We first became known for our Titanic exhibitions which present the story of the ill-fated ocean liner, the R.M.S. Titanic (the “Titanic”). The Titanic has captivated the imaginations of millions of people throughout the world since 1912 when she struck an iceberg and sank in the North Atlantic on her maiden voyage approximately 400 miles off the coast of Newfoundland. More than 1,500 of the 2,228 lives on board the Titanic were lost.

We own approximately 5,500 Titanic artifacts recovered from the wreck site 2¹/₂ miles below the ocean’s surface which we have the right to present at our exhibitions. In 1994, a federal district court declared us salvor-in-possession of the Titanic wreck and wreck site, and, as such, we have the exclusive right to recover additional objects from the Titanic wreck site. Through our explorations, we have obtained and are in possession of the largest collection of data, information, images and cultural materials associated with the Titanic shipwreck. We believe that our salvor-in-possession status puts us in the best position to provide for the archaeological, scientific and educational interpretation, public awareness, historical conservation and stewardship of the Titanic shipwreck. As of February 28, 2013 we had the ability to present 9 concurrent Titanic exhibitions. Management continues to explore ways to expand the Titanic model beyond the exhibition business to broaden the Company’s reach.

In 2004, we diversified our exhibitions beyond the Titanic and into human anatomy by acquiring licenses that give us rights to present exhibitions of human anatomy sets, each of which contains a collection of whole human body specimens plus single human organs and body parts. As of February 28, 2013 we had the ability to present 8 concurrent human anatomy exhibitions of which 2 sets are being used by S2BN under a Co-promotion agreement.

In February 2012 the Company decided to close its Atlanta, Georgia “Dialog in the Dark” exhibition effective March 6, 2012, which resulted in an impairment charge of $60 thousand for exhibition licenses and $282 thousand of property and equipment related to our “Dialog in the Dark” exhibitions as these assets were determined to no longer be of use to the Company. In addition, as part of our annual impairment testing of long-lived assets it was determined that the property and equipment related to our New York City “Dialog in the Dark” exhibition were impaired resulting in an impairment charge of $648 thousand. The total impairment charge of $990 thousand related to “Dialog in the Dark” is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012. Our final remaining Dialog in the Dark exhibition became inactive when our facility at the South Street Seaport was closed due to Hurricane Sandy and subsequent action by governmental authorities and the landlord, and management has decided not to reopen that exhibition. As of February 28, 2013 we have closed all of our “Dialog in the Dark” exhibitions and have no plans to re-open any “Dialog in the Dark” exhibitions.

South Street Seaport

The Company’sBodies andDialog in the Dark exhibitions at The South Street Seaport in New York City were closed during the end of October and remained closed through fiscal year ending February 28, 2013 due to complications from Hurricane Sandy and subsequent action by governmental authorities and the landlord. The exhibitions remain closed. Municipal authorities have ordered that the building may not be reopened to the public until the landlord makes the necessary repairs. In December 2012, the landlord notified the Company that it had no estimate for the date the facility would be reopened. On January 2, 2013, the landlord notified the Company that it intended to terminate the Company’s South Street Seaport lease on June 30, 2013.

During the months of November 2012 through February 2013, the Company received no revenue at the Seaport. The revenue earned at the Seaport for the same months of fiscal 2012 was approximately $1.8 million. In addition, the Company incurred approximately $828 thousand of operating costs at the Seaport in November 2012 through February 2013, as many advertising and other expenses could not be mitigated in the short term. The Company will not be resuming operations at the Seaport.

The Company has property and business interruption coverage at the Seaport and has submitted claims for each. The carrier has denied coverage under both policies, and the Company and the carrier are entering into a mediation regarding the coverage decision. The amount of potential recovery for these claims is uncertain at this time, and the Company has not recorded a receivable for insurance proceeds.

Corporate Management

On November 30, 2011, the Company announced a change in its management structure due to the realignment of its business. Effective November 28, 2011, the Company entered into an Amendment to the Employment Agreement between the Company and its then President and Chief Executive Officer, Christopher Davino. Pursuant to the Amendment, Mr. Davino relinquished the title of Chief Executive Officer and President of the Company and was appointed as President of RMST. Effective April 30, 2012, Mr. Davino’s employment as President of RMST ended upon the expiration of the term of his employment agreement. Pursuant to the terms of his employment agreement, Mr. Davino resigned as a director effective that date.

Effective June 29, 2012, the Board of Directors of the Company appointed Samuel Weiser to the position of President and Chief Executive Officer. Mr. Weiser is currently a director of the Company, and will continue to serve in that capacity. Mr. Weiser, age 53, served as Interim Chief Financial Officer of the Company from May 2011 until June 27, 2011, and as Interim President and Chief Executive Officer from November 28, 2011 through June 29, 2012.

On June 29, 2012, the Company and Mr. Weiser also entered into an Employment Agreement (the “Agreement”). The Agreement provides for Mr. Weiser’s employment for an indefinite term as President and Chief Executive Officer of the Company. The Agreement may be terminated by either party at any time, subject to certain severance provisions provided in the Agreement. Pursuant to the agreement, the Company will pay Mr. Weiser a salary of $360,000 per year. In addition, Mr. Weiser will receive 250,000 stock appreciation rights and 99,074 restricted stock units under the Premier Exhibitions, Inc. 2009 Equity Incentive Plan. 48,611 stock appreciation rights and 79,681 restricted stock units vested immediately, with the remainder vesting in thirty equal parts each month thereafter. The stock appreciation rights will be settled in cash, and expire five years from the date of grant. The restricted stock units will be settled in stock. Upon a termination without cause or by Mr. Weiser for good reason, as such terms are defined in the employment agreement. Mr. Weiser would be entitled to six months’ salary as severance plus vesting of his equity awards. Effective with the signing of this Agreement, the parties terminated the existing consulting agreement between the Company, Foxdale Management, LLC and Mr. Weiser pursuant to which he provided services as Interim President and Chief Executive Officer.

The Company also announced on July 2, 2012, that the Board of Directors of the Company appointed John Norman to the position of President of Arts and Exhibitions International, LLC (formerly PEM Newco, LLC), a subsidiary of Premier Exhibition Management LLC, which is a subsidiary of the Company, effective June 25, 2012. Mr. Norman, age 53, previously served as President of the Arts and Exhibitions International division of AEG Live, until the Company’s April 2012 acquisition of substantially all of its assets. Mr. Norman previously served as Co-President and Chief Operating Officer of Clear Channel Exhibitions, and prior thereto as Senior Vice President of SFX Entertainment. On April 2, 2013, the Company appointed Mr. Norman to the additional position of President of Premier Exhibition Management, LLC, the Company’s exhibition operations subsidiary.

On June 25, 2012, Arts and Exhibitions International, LLC, and Mr. Norman also entered into an Employment Agreement (the “Norman Agreement”). The Norman Agreement provides for Mr. Norman’s employment for a two year term as President of Arts and Exhibitions International, LLC (formerly PEM Newco, LLC). The Agreement may be terminated by either party at any time, subject to certain severance provisions provided in the Agreement. Pursuant to the agreement, the Company will pay Mr. Norman a salary of $320,000 per year. In addition, Mr. Norman has the opportunity to earn an annual cash bonus of up to 100% of his base salary. The bonus is calculated as (a) 15% of the management fee earned by Arts and Exhibitions International, LLC, above the minimum management fee earned pursuant to the AEI Purchase Agreement with AEG Live, LLC, plus (b) 10% of the gross profit of Arts and Exhibitions International, LLC, that is based on new content, plus (c) 2.5% of the annual EBITDA of Premier Exhibition Management LLC. Upon a termination without cause or by Mr. Norman for good reason, as such terms are defined in the Norman Agreement; Mr. Norman would be entitled to six months’ salary as severance.

On December 5, 2012, the Company also announced that Robert Brandon, General Counsel and Senior Vice President Business Affairs of the Company, would not be extending his employment agreement and would cease being an officer of the Company as of January 4, 2013.

Strategic Restructuring

On September 29, 2011, the Company announced that it intended to separate its operations into two operating subdivisions, which function as separate divisions of Premier. The change is intended to better position the Company to pursue strategic alternatives and manage both businesses independently.

Our business has been divided into an exhibition management subsidiary and a content subsidiary. The content division is the Company’s existing subsidiary, RMST, which holds all of the Company’s rights with respect to the Titanic assets and is the salvor-in-possession of the Titanic wreck site. These assets include title to all of the recovered artifacts in the Company’s possession, in addition to all of the intellectual property (data, video, photos, maps, etc.) related to the recovery of the artifacts and scientific study of the ship.

We also formed a new entity, Premier Exhibition Management LLC (“PEM”), to manage all of the Company’s exhibition operations. This includes the operation and management of our Bodies, Titanic and Dialog in the Dark exhibitions. PEM will also pursue “fee for service” arrangements to manage exhibitions based on content owned or controlled by third parties.

Sale of Titanic Artifacts

On December 20, 2011, Premier entered into an agreement with Guernsey’s auction house to conduct a sale of the Company’s Titanic artifact collection and related intellectual property. The artifacts—coupled with the work product, intellectual property and certain undertakings of the Company including the costs of salvage, lab operations and exhibition rights—were appraised in 2007 at a total value of approximately $189 million. The appraised value of $189 million has not been updated in the last several years and does not include the intellectual property acquired from the 2010 expedition. In addition, this appraisal does not ascribe any value to the Company’s salvor-in-possession rights and does not consider the court ordered covenants and conditions to a sale. These assets are reflected in the Consolidated Balance Sheet dated February 28, 2013, at a book value of $7.1 million.

The formal auction process ended on April 10, 2012, and the Company announced that it was in discussions with multiple parties for the potential purchase of its Titanic artifacts collection and would conduct these negotiations and due diligence in confidence. Consequently, the Company indicated it would provide an additional update to shareholders as soon as practical and the press conference originally scheduled for April 11, 2012, was postponed accordingly.

On October 15, 2012, the Company announced that it had entered into a non-binding letter of intent with an entity representing a group of individuals (the “Consortium”) working to effect a purchase of the stock of RMS Titanic, Inc., for educational, regional economic development and cultural purposes. The letter of intent is confidential, and is subject to the parties negotiating binding purchase agreements, obtaining requisite financing commitments and other approvals. The letter of intent is designed to allow the Consortium the opportunity to secure its financing sources, prepare to handle and house the collection of artifacts and to continue its efforts to establish public and private support for the venture. While this process is ongoing, the Company’s Board has authorized management to consider, and if appropriate to pursue, other strategic alternatives. The Board is working to evaluate all options available to maximize shareholder value. There is no guarantee that a transaction or series of transactions will result from this process.

AEI Transaction

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I AM” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The acquired assets include rights agreements with the owners of the artifacts and intellectual property comprising the exhibitions, museum/venue agreements for existing exhibition venues, sponsorship agreements, a warehouse lease and an office lease. In addition, the acquired assets include intellectual property related to proposed future exhibitions that the Company may further develop and produce. The Company will operate any such additional properties under its exhibition management subsidiary.

Exhibit Merchandising Transaction

On July 12, 2012 the Company purchased substantially all of the assets of Exhibit Merchandising, LLC for $125 thousand. As part of the acquisition of the assets of Exhibit Merchandising, LLC, we obtained the rights to sell all merchandise related to “Tutankhamun and the Golden Age of the Pharaohs”, “Cleopatra: The Exhibition” and “Real Pirates”. These merchandising rights are operated under our Premier Merchandising, LLC subsidiary.

Premier’s principal executive offices are located at 3340 Peachtree Road, NE, Suite 900, Atlanta, Georgia 30326 and the Company’s telephone number is (404) 842-2600. The Company is a Florida corporation and maintains websites located atwww.prxi.com,http://www.rmstitanic.net,http://bodiestheexhibition.com,www.bodiesrevealed.com,www.thetitanicstore.com, http://prxi.com/exhibitions/titanic-the-artifact-exhibition.html,http://prxi.com/exhibitions/titanic-the-experience.html,http://prxi.com/exhibitions/bodies-the-exhibition.html,http://prxi.com/exhibitions/dialog-in-the-dark.html,http://prxi.com/exhibitions/bodies-revealed.html,http://prxi.com/exhibitions/tutankhamun.html,

http://prxi.com/exhibitions/real-pirates.html,http://prxi.com/exhibitions/cleopatra, htmlhttp://prxi.com/exhibitions/america-i-am.html.Information on Premier’s websites are not part of this report.

Exhibitions

“Titanic: The Artifact Exhibition” and “Titanic: The Experience”

By featuring the artifacts recovered from the wreck site, our exhibitions tell the Titanic’s story from construction through her sinking and discovery as well as the Company’s efforts to preserve the wreck site and conserve recovered artifacts. The artifacts are placed in historically correct re-creations of the significant rooms onboard the ship and are illuminated by moving stories of her passengers and crew. The Company has supplemented the exhibitions with assets generated during the 2010 Titanic expedition such as 3D exhibitry and film. Approximately 23 million visitors have attended our Titanic exhibitions at venues throughout the world, including in the United States (“U.S.”), Canada, Czech Republic, Germany, Norway, France, Greece, Japan, Switzerland, Chile, Argentina, China, Mexico, Hungary, South Korea, Spain, Brazil, the United Kingdom, and Australia. During fiscal 2013, we presented 9 separate Titanic exhibitions at 18 venues, including “Titanic: The Experience”.

The Company has supplemented the current exhibition with authentic Titanic artifacts from our existing collections and also by including assets generated during the 2010 Titanic expedition such as 3D exhibitry and film. In addition, this exhibition will increase the Company’s penetration into the Orlando market for merchandise sales.

“Bodies... The Exhibition” and “Bodies Revealed”

We presently have the right to display multiple human anatomy sets, each of which contains a collection of whole human body specimens plus single human organs and body parts, which are known as “Bodies Revealed” and “Bodies... The Exhibition.” We secured the rights to produce these two types of human anatomy exhibitions through separate exhibition agreements. During the fiscal 2013, we presented 8 separate Bodies exhibitions at 14 venues.

These specimens are assembled into anatomy-based exhibitions featuring preserved human bodies, organs and body parts to offer the public an opportunity to view the intricacies and complexities of the human body. The exhibitions include displays of dissected human bodies which are permanently preserved through a process called polymer preservation, also known as plastination. In essence, the bodies are drained of all fat and fluids, which are replaced with polymers such as silicone rubber, epoxy and polyester. This preserves the flesh and maintains its natural look. Skin from the bodies is removed, or partially removed, to reveal musculoskeletal, nervous, circulatory, and reproductive or digestive systems. The full body specimens are complimented by presentation cases of related individual organs and body parts, both healthy and diseased, that provide a detailed look into the elements that comprise each system of the body. Using more than 200 specimens, each exhibition follows a systems-based approach to human anatomy which examines the skeletal, muscular, nervous, digestive, respiratory, circulatory, urinary, integumentary (skin, sweat glands, hair, and nails), and reproductive systems.

Our full-body specimens and individual organs were obtained through plastination facilities mostly in China. The full body specimens are persons who lived in China and died from natural causes. Most of the bodies were unclaimed at death, and were ultimately delivered to medical schools for education and research. Where known, information about the identities, medical history and causes of death is kept strictly confidential. China has a large and highly competent group of anatomists and dissectors, who are essential to properly preparing these specimens for exhibition and educational purposes. In a number of cases, our medical director has been able to identify medical problems that were present in certain organs and, where appropriate, those organs were clearly labeled in the exhibitions. For example, an emphysema-diseased lung is displayed and identified, giving the visitors a visual understanding of the effects of the disease.

Arts and Exhibitions International, LLC (“AEI”)

On April 20, 2012, we expanded our exhibition portfolio through the purchase of the exhibition business of AEI which gave us the rights to present the following four exhibitions:

“Tutankhamun and the Golden Age of the Pharaohs”

For the first time in a generation, King Tut’s treasures were under license from Egypt’s Supreme Council of Antiquities and drew record-breaking crowds at museums around the world. The exhibition includes an array of possessions unearthed from Tutankhamun’s tomb, including King Tut’s golden canopic coffinette and the crown found on his head when the tomb was discovered. Attendees learn about the extraordinary discovery of King Tut’s tomb and the belief and burial processes of Ancient Egypt, and view results from the latest scientific testing conducted on King Tut’s mummy and what it is telling researchers about his life and death. More than nine million visitors have attended the exhibition to date. This exhibition was closed in January 2013.

“Cleopatra: The Exhibition”

The world of Cleopatra lost to the sea and sand for nearly 2,000 years, surfaced inCleopatra: the Exhibition. Never-before-seen artifacts and multi-media atmospheres give visitors a front-row seat in the riveting present-day quest for Cleopatra VII, which extends from the sands of Egypt to the depths of the Mediterranean Sea. More than 150 artifacts from Cleopatra’s world represent facets of her elusive history, from her family to the places she lived, walked and worshiped. These artifacts were on view in the U.S. for the first time, bringing with them new insights into the tragedies and triumphs of one of the most remarkable and intriguing leaders in history. This exhibition was closed in January 2013 as the artifacts were returned to Egypt.

“Real Pirates”

Real Pirates tells the compelling story of the Whydah, the first authenticated pirate shipwreck in U.S. waters, and the stories of the diverse people whose lives converged on the vessel. Sunk in a fierce storm off the coast of Cape Cod, Massachusetts in April 1717, the Whydah was located in 1984 by underwater explorer Barry Clifford, who had been fascinated with finding the ship since tales from his youth. Many before him tried and failed, and only after decades of tireless searching did Clifford discover the wreck site, which he’s still actively excavating today.

The exhibition features more than 200 authentic items recovered from the Whydah – real treasure last touched by real pirates. Ranging from canons and coins and from the massive ship’s bell to personal items that the pirates wore, visitors are given an unprecedented glimpse into unique economic, political and social circumstances of the early 18th-century Caribbean.

Effective November 13, 2012, the Company signed a binding letter of intent with Barry Clifford to develop and present a second Real Pirates exhibition, which the Company began touring in March 2013.

“America I AM: The African American Imprint”

Presented in partnership with broadcaster Tavis Smiley, this unprecedented travelling museum exhibition celebrates the extraordinary impact of African Americans on our nation and the world. From the first Africans who arrived in Jamestown to the nation’s first black president, this award-winning exhibition takes visitors from all walks of life on an emotional journey through history. Spanning 500 years, the exhibition includes artifacts, documents, multimedia, photos and music that have helped shape the nation and the way we live today. This exhibition was closed in March 2013.

New Content

The Company continues to pursue new content opportunities. To mitigate the risk associated with building an exhibition and then trying to book the exhibition after incurring the capital expenditure, the Company has begun optioning new content opportunities to assess market demand and evaluate the expected return on the investment based on that market assessment. The Company currently has 4 new projects optioned and one new project in development. In November 2013, we plan to open an exhibition at the Franklin Institute that tells the story of Pompeii. Through a license with an agency of the Italian government, the Company can present up to three Pompeii exhibitions using the artifacts from Pompeii’s ruins.

Other Exhibitions

Playboy

On May 20, 2008 the Company entered into a License Agreement (the “Agreement”) with Playboy Enterprises International, Inc. (“Playboy”) for the right to present and promote new exhibitions related to the Playboy brand. We paid a $250 thousand license fee advance to Playboy under this agreement in May 2008, and agreed to pay certain additional advances through the five year term of the agreement. The Company and S2BN Entertainment Corporation (“S2BN”) entered into a joint venture agreement on May 14, 2010 and agreed to jointly develop, design, and produce a Playboy exhibit. S2BN agreed to reimburse 50 percent of the enumerated costs incurred related to the initial exhibit concept. During fiscal 2011, we amended our May 2008 agreement to revise the payment due dates for $300 thousand of license fee advances due for each of calendar years 2010 and 2011 and to establish a $300 thousand license fee advance payable for each of calendar years 2013 and 2014, subject to a unilateral termination right to which the Company was entitled. The unilateral termination right required the Company to pay a $300 thousand termination fee unless the termination right was exercised on or prior to August 31, 2011, in which case the Company was entitled to apply the 2011 license fee advance of $300 thousand to the termination fee that would otherwise be payable.

On August 25, 2011, the Company notified Playboy that the joint venture was terminating the Agreement pursuant to the unilateral termination right the Company had negotiated, which resulted in the automatic waiver of the $300 thousand termination fee otherwise payable if the termination was effected prior to the end of August, 2011. While the Agreement provided that the joint venture would still owe Playboy a final license fee installment of $150 thousand despite any such termination, the Company and S2BN also contended that Playboy had previously breached the License Agreement, and the joint venture accordingly reserved its rights to pursue all remedies and damages (and accordingly withheld such final license fee installment to cover a portion of those damages sustained by us). Due to the termination of the agreement with Playboy, the Company recorded an impairment charge of $217 thousand for Playboy licenses, net of accumulated amortization. The Company also recorded an impairment charge of $141 thousand for construction in progress, comprised of expenses incurred in the creation of the Playboy exhibit. The total impairment charge of $358 thousand related to Playboy is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012.

Due to the termination of the Agreement and the related impairments, S2BN’s investment in the joint venture through its payment of 50 percent of the costs of the potential exhibit was fully impaired in the second quarter of fiscal 2012. An impairment charge of $197 thousand is reflected in Net loss attributable to non-controlling interest on the Consolidated Statements of Operations for the fiscal year ended February 29, 2012.

Dialog in the Dark

In 2008, we further expanded our exhibition portfolio when we entered into a long-term license agreement to present an exhibition series entitled “Dialog in the Dark.” Our “Dialog in the Dark” exhibitions were intended to provide visitors with an opportunity to experience the paradox of learning to “see” without the use of sight. As of February 28, 2013 we have closed all of our “Dialog in the Dark” exhibitions and have no plans to re-open any “Dialog in the Dark” exhibitions. All assets related to this exhibition were impaired as of February 29, 2012.

We intend to acquire, develop and present additional new exhibitions for presentation in the future, including exhibitions both related and unrelated to our currently ongoing exhibitions. Management has created a process to evaluate and develop new content that can be used to create new touring exhibitions.

Titanic Expeditions

In August 1987, TVLP contracted with the Institute of France for the Research and Exploration of the Sea (“IFREMER”) to conduct an expedition and dive to the wreck of the Titanic. Approximately 2,000 objects were recovered and 140 hours of video tape footage and an estimated seven thousand still photographs were taken during the course of the 32 dives in that original expedition. A French maritime tribunal subsequently conveyed to us title to these artifacts. In 1993, RMST acquired all of the assets and assumed all of the liabilities of TVLP. In July 2004, the U.S. District Court for the Eastern District of Virginia (the “District Court”) concluded that such conveyance by the French tribunal was not valid and sought to deprive us of title to these artifacts. We appealed that decision to the U.S. Court of Appeals for the Fourth Circuit (the “Appellate Court”). On January 31, 2006, the Court of Appeals reversed and vacated the ruling of the lower court. This decision reaffirmed the validity of our title to the approximately 2,000 artifacts recovered during the 1987 expedition.

We completed additional expeditions to the wreck of the Titanic in 1994, 1996, 1998, 2000 and 2004 recovering approximately 3,500 additional artifacts and additional video tape footage and still photographs. With the depth of the Titanic wreck approximately two and one-half miles below the surface of the North Atlantic Ocean, our ability to conduct expeditions to the Titanic has been subject to the availability of necessary research and recovery vessels and equipment for chartering by us from June to September, which is the “open weather window” for such activities.

2010 Expedition to Titanic Wreck Site

During August and September 2010, our wholly owned subsidiary RMST, as salvor-in-possession of the RMS Titanic (the “Titanic”) and its wreck site, conducted an expedition to the Titanic wreck site. RMST brought together an alliance of the world’s leading archaeologists, oceanographers and scientists together with U.S. governmental agencies to join RMST in the 2010 expedition to the wreck site and the post-expedition scientific study. This alliance included the Woods Hole Oceanographic Institution (“WHOI”), the Institute of Nautical Archaeology (“INA”), the National Oceanic Atmospheric Administration’s Office of the National Marine Sanctuaries (“NOAA/ONMS”), The National Park Service’s Submerged Resources Center (“NPS”) and the Waitt Institute. Never before had all of these entities partnered to work together on one project. While all of these parties worked together to participate in the expedition, RMST has sole legal ownership of the film footage, data, and other assets generated from the expedition.

While the general purpose of the expedition was to collect and interpret archeological and scientific data utilizing state-of-the-art high definition 2D and 3D cameras and sonar scanning equipment, the Company also planned and executed the expedition in order to create digital assets for commercial purposes, including a 2D documentary that was aired by a major cable network in April 2012, a separate HD3D film featuring a tour of the bow and stern sections of the ship that is now being distributed, and assets to be utilized in enhancing the Titanic exhibitions, as well as other applications. The collected data will also provide the basis for an archaeological site plan, and ultimately a long-term management plan for the Titanic wreck site.

We have capitalized $4.5 million of costs related to the expedition, discussed in more detail below, which have been allocated to specific assets as reflected in the following table (in thousands).


	February 28, 2013		February 29, 2012
3D film	$	1,817	$	1,817
3D exhibitry		857		857
2D documentary		631		631
Gaming application and other application		886		886
Expedition web point of presence		317		317

Total expedition costs capitalized		4,508		4,508
Less: Accumulated amortization		475		175
Accumulated depreciation		421		158

Expedition costs capitalized, net	$	3,612	$	4,175

In order to increase interest in the expedition, the Company established a central web point of presence for the expedition (ExpeditionTitanic.com), which will also continue to serve as the central site to convey the ongoing efforts to preserve the legacy of the Titanic. During the 2010 expedition, the website featured updates from the crew and other expedition participants, images of the wreck site, and photo/live feed updates that allowed visitors to the site to follow the expedition as it was in process. These features account for most of the capitalized website costs of $317 thousand, which were capitalized in accordance with ASC 350, “Intangibles – Goodwill and Other” (“ASC 350”), as they served as a significant draw to the website and also have future value as assets to be used in our exhibits and/or movies. The remaining capitalized website costs were for additional graphics, which were also capitalized in accordance with ASC 350. Website costs are depreciated on a straight-line basis, using a three year useful life.

In addition, during fiscal 2011 the Company capitalized an additional $3.9 million in costs related to the expedition, comprised of $562 thousand in general management costs and $3.3 million in ship charter costs, underwater gear, and filming costs. Costs directly related to the 2D documentary, 3D film, 3D exhibitry or gaming and other applications were separately ascribed to the respective assets; additional costs related to all four types of assets were allocated ratably based on the anticipated future revenue associated with the asset, based on the reasonable expectations of management. Included in these costs is $2.0 million related to agreements with WHOI for optical services and the use of two autonomous underwater vehicles.

During fiscal 2012, as additional assets were developed by our vendors, an additional $262 thousand in underwater gear and filming cost was capitalized.

In addition, a significant project such as this requires management by a team of professionals, from the Expedition Leader to other individuals specializing in project management, legal and other specialties which were necessary to ensure that the expedition was conducted efficiently and effectively. A portion of the general management expenses that we capitalized is an allocation of production overhead, which, in accordance with Accounting Standards Codification 926-20-25-2, includes an allocation of costs of the individuals with either exclusive or significant responsibility for the production of a film. For those individuals with a significant, but not an exclusive responsibility, we allocated their costs based on hours worked related to the expedition and tasks related to the development of the film versus hours worked on other matters. In addition, included in capitalized general management expenses are legal and public relations costs incurred associated with the creation of the digital assets.

The web point of presence and 3D exhibitry assets are included in Property and equipment on the Consolidated Balance Sheets. The 3D film, 2D documentary, gaming, and other application assets are included in Film, gaming and other application assets on the Consolidated Balance Sheets.

Certain costs related to the expedition were expensed as incurred, and not included in the capitalized assets discussed above. Examples of these expenditures include costs to advertise the expedition, ongoing maintenance of the expedition web point of presence, certain legal and public relations fees, mapping and profiling of Titanic artifacts, and any management costs subsequent to the ship’s return in September 2010.

Estimated depreciation and amortization expense for the 3D exhibitry, 2D and 3D film, gaming and other application and web point of presence for each of the five succeeding fiscal years is as follows:


Fiscal Year	Amount
2014	$	850
2015		797
2016		797
2017		797
2018		371

Total	$	3,612

Science, Archaeology and Conservation Related to the Titanic and Titanic Artifacts

In addition to being important to our exhibition business, the Titanic is an important archaeological, historical and cultural site. In addition to the alliance brought together for the 2010 expedition described above, we have long standing relationships with several other archaeologists and conservators for services to aid in stewardship of the Titanic wreck site. Upon recovery from the Titanic wreck site, artifacts are in varying states of deterioration. Having been submerged in the ocean for almost 100 years, artifacts have been subjected to the corrosive effects of seawater. The conservation of all artifacts recovered from the wreck site of the Titanic is an extensive process that employs many techniques in order to stabilize them for display in our exhibitions. We also own and maintain an extensive database, together with digital and photographic archives, that establish, with certainty, the origin of the artifacts.

Merchandising

We earn revenue from the sale of exclusively sourced merchandise, such as apparel, posters, gifts and Titanic-related jewelry (some of which utilizes coal we have recovered from the shipwreck). In addition, we also publish exhibition catalogs and provide ancillary services such as audio tours and visitor exhibition themed photographs, which are sold at our exhibition gift shops. We intend to continue to focus on merchandising activities at all our exhibition locations to increase revenue per attendee and our margins on these sales.

During the second quarter of fiscal 2011, we launched an e-commerce website that allows us to sell merchandise related to our shows over the internet. Also, at the end of the third quarter of fiscal 2012, we re-launched our e-commerce website aswww.thetitanicstore.com, which offers Titanic-themed merchandise.

Consistent with the Company’s desire to take advantage of additional distribution channels for our merchandise, we entered into agreements with a direct response marketer, and an online and television retailer, to produce, market, and sell Titanic-themed merchandise in order to capitalize on the 100^th anniversary of the sinking of the Titanic in April 2012. The agreement with the direct response marketer is for the development and promotion, via direct channels of distribution, of Titanic commemorative jewelry and other items. The agreement with the online and television retailer was for the development and promotion of jewelry, housewares, fragrances, and other Titanic-themed merchandise inspired by, or replicated based on authentic artifacts. This merchandise was launched during a television program aired in April 2012. Due to the strength of the April 2012 show an additional airing was done during the same month. In addition, the merchandise is also available on the retailer’s website.

Information Regarding Exhibitions Outside the United States

Our exhibitions tour regularly outside the U.S. Approximately 3.0% of our revenues and 12.3% of attendance in fiscal 2013 resulted from exhibition activities outside the U.S, as compared to 20.7% and 24.9% in fiscal 2012. Many of our financial arrangements with our international trade partners are based upon foreign currencies, which exposes the Company to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring. See “Risk Factors” in this report for more information.

Competition

The entertainment and exhibition industries are highly competitive. In addition to competition from other exhibition offerings, we face competition with the broader market for consumer entertainment and discretionary spending. We believe that our many years of experience in the exhibition industry have enabled us to present exhibitions with mass appeal to consumers of entertainment, museum, scientific and educational offerings. These consumers recognize the quality and value of the educational experience that our exhibitions offer.

Environmental Matters

We are subject to environmental laws and regulation by federal, state and local authorities in connection with our planned exhibition activities. We do not anticipate that the costs to comply with such laws and regulations will have material effect on our capital expenditures, earnings or competitive position.

Employees

As of February 28, 2013, we had 68 full-time employees. We are not a party to any collective bargaining agreements and we believe that our relations with our employees are good. Additionally, from time to time we rely upon part-time employees and contractors for the production and operations of our self run exhibitions. As of February 28, 2013, we employed 123 part-time employees. Contractors are hired on an as needed basis.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, therefore, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).

Our corporate website is www.prxi.com. On our website, we make available, free of charge, documents we have filed with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed with or furnished to the SEC. This information is available on our website as soon as reasonably practicable after we electronically file such materials with, or furnish such information to the SEC. Our SEC reports can be accessed through the “Investor Relations” subsection under “The Company” heading on our website. The other information found on our website is not part of this or any other report we file with, or furnish to, the SEC.

In addition, our Code of Ethics and the charters for our Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are available on our website.

ITEM 1A.

RISK FACTORS

If any of the risks or uncertainties discussed below and elsewhere in this report, including, but not limited to, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the consolidated financial statements and the related notes included in this report, were to occur, our business, financial condition and results of operations could be seriously harmed. Additional risks and uncertainties not currently known to us or that we presently deem to be immaterial could also seriously harm our business, financial condition and results of operations.

If we are unable to effectively manage the integration of the Arts and Exhibitions International, LLC properties into our existing operations, it could negatively impact our results of operations and financial condition.

We have recently acquired the assets of Arts and Exhibitions International, LLC, including the touring exhibition properties “Tutankhamun: The Golden King and the Great Pharaohs”, “Cleopatra: The Search for the Last Queen of Egypt”, “Real Pirates”, and “America I AM”. Due to the nature of the asset purchase transaction, no cash was required to complete the transaction other than transaction costs such as investment banking, legal and accounting fees and the promissory note will be repaid only from revenues derived from the assets. However, integration of these exhibitions into our operations will require significant management attention, and our failure to effectively and efficiently operate these assets could harm our relationships with partners in exhibition community, limit our future opportunities for fee for service arrangements or cause us to incur losses.

The restatement of our consolidated financial statements may affect shareholder confidence, may consume a significant amount of our time and resources and may have an adverse effect on our business.

As discussed in Note 23 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K and the Explanatory Note above, we have restated in this Form 10-K our consolidated financial statements for the quarters ended May 31, 2012, August 31, 2012 and November 30, 2012 to correct certain errors in those financial statements. The errors related to our historical purchase accounting as it relates to our purchase of the assets of Arts and Exhibition International, LLC, as further discussed in Note 23.

While we have taken measures to prevent future restatements we cannot be certain that the measures we have taken since we completed the restatement process will ensure that restatements will not occur in the future. The restatement may affect investor confidence in the accuracy of our financial disclosures and may raise reputational issues for our business.

The restatement process was resource-intensive and involved a significant amount of attention from management, and significant accounting costs. Although we have now completed the restatement, we cannot guarantee that we will not receive inquiries from the Securities and Exchange Commission (the “SEC”) or the Nasdaq Stock Market LLC (“Nasdaq”) regarding our restated financial statements or matters relating thereto. Any future inquiries from the SEC or the Nasdaq as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our internal resources and result in additional legal and accounting costs.

Each of these risks described above could have an adverse effect on our business, results of operations and financial condition.

We cannot assure investors that remediation efforts we have taken to address the material weaknesses in our internal controls that led to our restatement will prevent future material weaknesses.

We have identified control deficiencies in our financial reporting process that constituted a material weakness, leading to the restatement of our previously issued quarterly financial statements. We have undertaken measures to remediate these weaknesses. There can be no assurance that we will not suffer from other material weaknesses in the future. If we fail to remediate these material weaknesses or fail to otherwise maintain effective internal controls over financial reporting in the future, it could result in a material misstatement of our annual or quarterly financial statements that would not be prevented or detected on a timely basis and which could cause investors and other users to lose confidence in our financial statements, limit our ability to raise capital and have a negative effect on the trading price of our common stock.

Our cash flows from operations may not improve sufficiently to finance our ongoing operations or to make investments necessary for future growth without the need for additional financing.

We can provide no assurances that our cash flow from operations will improve sufficiently to finance our ongoing operations or to make investments necessary for future growth. During fiscal 2013, we had net income of approximately $2.0 million and our cash balance was approximately $6.4 million as of February 28, 2013. We currently do not have access to a revolving credit facility. There can be no assurance that our cash flows from operations will improve sufficiently during the next 12 months to fund our ongoing operations beyond that time. We might need to raise additional financing, which might not be available to us or might only be available to us on terms that are not favorable. If we are unable to sufficiently improve our financial performance or obtain financing, if and when we may need it, we may not be able to continue operations as they are currently anticipated or we may be unable to make capital investments needed for our existing exhibits or to develop new exhibits.

We have announced our intention to sell the artifacts we have recovered from the Titanic wreck site. We may not be able to maximize the full value associated with title to these artifacts.

In August, 2011 the U.S. District Court for the Eastern District of Virginia, Norfolk Division issued an Order granting us anin-specie award to all of the artifacts we have recovered from the Titanic wreck since after the Company’s first expedition in 1987. Together with the October, 1993 Order from the French Maritime Tribunal granting us an in specie award to all of the artifacts recovered in our 1987 expedition, we now have title to all of the artifacts we have recovered from the Titanic wreck. Both of thesein-specie awards come with certain limitations which govern how we care for the artifacts and how they may be sold.

We have recently announced our intent to pursue a sale of the artifacts by auction or privately negotiated sale and our entry into a consignment agreement with Guernsey’s auction house to pursue a sale. We could fail to sell the artifacts in a timely manner or fail to sell the artifacts at or above their appraised value. Our ability or inability to successfully complete a sale of the artifacts may affect our results of operations and financial condition. The sale process will also consume significant management time and Company resources, which may impact our operations. In addition, the announcement by the Company that the sale process will require more time than was originally anticipated may negatively impact our share price and/or our ability to complete a sale on favorable terms.

If we do not successfully complete a sale of the artifacts, or cannot complete a sale on terms favorable to the Company, we could be less able to put the artifacts to good and profitable use in the future, particularly in light of the uncertainty created by the sale process. In addition, our stock price may be negatively impacted if we are unable to sell the assets on favorable terms, which may reduce our ability to raise capital that may be necessary to fund ongoing operations. If we do sell the artifacts, we might lose the right to exhibit the artifacts or to use the associated intellectual property, which would reduce our revenues. Any of these factors could affect our results of operations and financial condition.

Our inability to develop new exhibitions could seriously harm our results of operations and financial condition.

Our business depends on our ability to develop and execute new exhibitions to complement our existing exhibitions. If we are unable to identify new exhibitions or if we do not have sufficient capital to develop new exhibitions, our results of operations and financial condition could be seriously harmed.

The success of our businesses is dependent on the existence and maintenance of intellectual property rights in the products and services we create.

The value to us of our intellectual property is dependent on a number of factors, including the existence and application of laws in the U.S. and in jurisdictions around the world, the manner in which those laws are applied, and the efforts taken by the Company to protect and enforce its rights.

The unauthorized use of our intellectual property by others may reduce our revenues and increase the cost of protecting our intellectual property. The unauthorized use of intellectual property in the entertainment industry in general continues to pose significant challenges. Inadequate laws or weak enforcement mechanisms to protect intellectual property in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its intellectual property. The international nature of our entertainment business requires us to devote substantial resources to protecting our intellectual property against unlicensed use.

With respect to intellectual property owned by the Company, the Company is subject to challenges by third parties. Successful challenges to the ownership of our intellectual property may result in increased costs or the loss of the opportunity to earn revenue derived from the intellectual property that is the subject of challenged rights.

The sale of our common stock to LPC may cause dilution and the sale of the shares of common stock acquired by LPC could cause the price of our common stock to decline.

In connection with entering into the Purchase Agreement with Lincoln Park Capital Fund, LLC (“LPC”), we authorized the issuance to LPC of up to 5,298,330 shares of our common stock and filed a registration statement allowing the resale of those shares. The number of shares ultimately offered for sale by LPC is dependent upon the number of shares the Company sells to LPC under the agreement. While we have been unable to sell shares to LPC from the date we discovered errors in our quarterly financial statements until the date we filed the restated financial statements on this Form 10-K, we could sell additional shares in the future. The purchase price for the common stock to be sold to LPC pursuant to the Purchase Agreement will fluctuate based on the price of our common stock. As of May 20, 2013, we have sold 275,000 shares to LPC at an average price of $2.31, and have also issued 158,632 shares as commitment shares under the Purchase Agreement. All shares sold by the Company to LPC are expected to be freely tradable. Depending upon market liquidity at the time, a sale of shares by LPC at any given time could cause the trading price of our common stock to decline. We can elect to direct purchases in our sole discretion but no sales may occur if the price of our common stock is below $1.00 and therefore, LPC may ultimately purchase all or some portion of the 5,298,330 shares of common stock. After it has acquired such shares, it may sell all, some or none of such shares. Therefore, sales to LPC by us under the agreement may result in substantial dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock under this offering, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to LPC and the agreement may be terminated by us at any time at our discretion without any cost to us.

If we are unable to maintain our salvor-in-possession rights to the Titanic wreck and wreck site, our Titanic exhibitions could face increased competition.

We are the exclusive salvor-in-possession of the Titanic wreck and wreck site. Our salvor-in-possession status enables us to prevent third parties from salvaging the Titanic wreck and wreck site and from interfering with our rights to salvage the wreck and wreck site. To maintain our salvor-in-possession rights, we must maintain a presence over the wreck site as interpreted by the courts. In addition, we may have to commence legal proceedings against third parties who attempt to violate our rights as salvor-in-possession, which may be expensive and time-consuming. Moreover, the court may not continue to recognize us as the sole and exclusive salvor-in-possession of the Titanic wreck and wreck site. If we were to lose our salvor-in-possession rights, our Titanic exhibitions could be exposed to competition, which could harm our operating results.

We have recently made changes to key management positions and our failure to successfully adapt to changes in key management, and/or our inability to fill other vacant key positions, may adversely affect our business.

During fiscal years 2012 and 2013 our Board of Directors appointed a new President and Chief Executive Officer, added the title of Chief Operating Officer to our Chief Financial Officer, and appointed a new executive to lead our exhibition subsidiary. These changes in key management and the potential for additional appointments could create uncertainty among our employees, customers, partners and promoters and could result in changes to the strategic direction of our business, which could negatively affect our business, operating results and financial position. In addition, the changes in management have resulted in a higher level of overall compensation for the executive team. Any failure of our management to work together to effectively manage our operations, our inability to hire other key management, and any failure to effectively integrate new management into our controls, systems and procedures may materially adversely affect our business, results of operations and financial condition.

We believe that our future success depends to a significant degree on the skills and efforts of our management team. If we lose the services of any of our current senior executive officers and key employees, our ability to achieve our business objectives could be seriously harmed, in turn adversely affecting our business and operating results.

The price of our common stock may fluctuate significantly, and investors in our common stock could see the value of our common stock decline materially.

The stock market has recently experienced, and may experience in the future, extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. Such changes may occur without regard to the operating performance of these companies. In addition, the uncertainty related to our efforts to monetize the Titanic artifact collection has and may continue to add to this price volatility. These fluctuations, both those related to our company and those related to factors that have little to nothing to do with our Company, have and could materially reduce our stock price in the future.

Moreover, companies that have had volatile market prices for their securities have been subject to securities class action lawsuits. Any such lawsuit filed against us, regardless of the outcome, could result in substantial legal costs and a diversion of our management’s attention and resources, which in turn could seriously harm our business, results of operations and financial condition.

Our largest shareholder is an equity fund, and the plans of this fund could have an effect on our stock price and could result in changes to the strategic direction of the Company.

The largest shareholder of the Company is Sellers Capital Master Fund, Ltd. (“SCF”) which is controlled by Mark Sellers, who is Chairman of the Board of Premier Exhibitions, Inc. and Managing Member of SCF’s general partner. SCF purchased debt that was converted into shares of the Company’s common stock in a financing transaction in fiscal year 2010. In addition, it has acquired common stock through open market purchases.

In June 2010, SCF informed the Company that at the request of the fund’s investors it intended to return all capital to them. On October 7, 2010 Mr. Sellers informed the Company that SCF is no longer marketing its 46 percent ownership stake in Premier, and further that SCF no longer has a specific time frame within which to sell its stake in Premier. Instead, Mr. Sellers indicated that SCF would retain its shares in the Company until such time as it could obtain what he believes to be a better value for the shares. Management does recognize, however, that if a suitable buyer is not identified at the appropriate time, Mr. Sellers may choose to take another course of action, including potentially selling the shares in the open market or in a privately negotiated transaction or distributing the SCF shares to the fund’s limited partners.

The concentration of our equity ownership in an equity fund controlled by a Company director, and the potential that it could sell its blocks of common stock, could have an effect on our stock price and could result in changes to the strategic direction of the Company. In addition, a single purchaser of the SCF block of common stock could also acquire effective control of the Company. Such a shareholder may not agree with the present strategic direction of the board of directors and management, creating uncertainty that the current strategic focus of the Company will continue over the longer term.

Our business may be harmed as a result of litigation.

We are a party to several ongoing material legal proceedings. These proceedings are described below in Item 3 of Part I of this report under the heading “Legal Proceedings” and also in the “Litigation and Other Legal Matters” footnote to our Consolidated Financial Statements included in Item 8 of Part II of this report. Should an unfavorable outcome occur in some or all of our current legal proceedings, or if successful claims and other actions are brought against us in the future, our business, results of operations and financial condition could be seriously harmed.

We may have a risk of collection of our revenue from exhibitions presented by third parties.

We rely upon third parties to present some of our exhibitions and in many cases those third parties operate the box office and control the sale of the tickets. As a result, we are subject to the risk that we will be unable to collect our portion of the revenue from the exhibitions presented by third party partners. Where we are unable to collect these revenues in accordance with the terms of the contract, we may incur the cost of litigation to recover the amounts owed to us and may ultimately not recover the full value of the receivable.

General economic weakness may have a negative impact on our revenues and make it difficult for us to obtain financing to operate our business.

Our results of operations are sensitive to changes in general economic conditions that impact consumer spending, including discretionary spending for our exhibitions, both domestically and in international markets where we operate. Discretionary consumer spending is impacted by higher levels of unemployment, fuel prices, weakness in the housing markets, higher consumer debt levels, declines in consumer confidence in future economic conditions, higher tax rates, higher interest rates, and other adverse economic conditions. The economic slowdown, and other factors that cause consumers to reduce their discretionary spending to a point where attendance at our exhibitions declines, negatively affect our revenues and results of operations.

The economic weakness that continues in the financial markets and in the housing markets has resulted in declines in consumer confidence and spending, volatility in securities prices, diminished liquidity and credit availability and declining valuations of many investments. If the national or global economy or credit market conditions in general were to deteriorate further in the future, it is possible that such changes could put additional negative pressure on discretionary consumer spending and other consumer purchasing habits, which would adversely affect our operating results and make it more difficult for us to obtain financing to operate our business.

Our exhibition business is sensitive to public tastes. If we are unable to anticipate or respond to changes in consumer preferences, demand for our exhibitions could decrease.

Our ability to generate revenue from our exhibitions is highly sensitive to changes in public tastes. Our success depends in part on our ability to anticipate the preferences of consumers and to offer appealing exhibitions. We typically book each exhibition venue several months in advance of an exhibition’s opening and incur certain upfront costs prior to our receiving any operating income. Therefore, if the public is not receptive to a particular exhibition or location, we could incur a loss depending on the amount of the incurred costs. Moreover, if we are not able to anticipate, identify or react to changes in public tastes, reduced demand for our exhibitions will likely result. Any of the foregoing could adversely affect our results of operations and financial condition.

If our advertising, promotional and other marketing campaigns are not successful, our results of operations could be harmed.

Like many other companies that make entertainment available to the public, we utilize significant resources to advertise, promote and provide marketing support for our exhibitions. For fiscal 2013 and 2012 we incurred marketing and advertising expenses of $5.4 million and $4.4 million, respectively. We are also party to agreements pursuant to which we engage third-parties to assist us in the production, design, promotion and marketing of our exhibitions. If our advertising, promotional and other marketing campaigns are not successful, or if we are not able to continue to secure on commercially reasonable terms the assistance of third-parties in our marketing and promotional activities, our results of operations will be harmed.

Events harming our reputation could adversely affect our business prospects, financial results and stock price.

We are dependent on our reputation. Events that can damage our reputation include, but are not limited to, legal violations, actual or perceived ethical problems, particularly related to our human anatomy exhibitions, actual or perceived poor employee relations, actual or perceived poor customer service, venue appearance or operational issues, or events outside of our control that generate negative publicity with respect to our company. Any event that has the potential to negatively impact our reputation could negatively affect our business prospects, financial results and stock price.

We are dependent upon our ability to locate effective venues for exhibitions, either in museums or in leased exhibition space. If we are unable to lease exhibition venues on acceptable terms or to partner with museums to present our exhibitions, our results of operations could be adversely affected.

We require access to exhibition venues owned or leased by third parties to conduct our stationary exhibitions. Our long-term success depends, in part, on our ability to utilize such venues on commercially reasonable terms. We also present our exhibitions in museums. If we are unable to develop and maintain relationships with museums to present our exhibits, or if demand for our exhibits from the museum community declines, our results of operations and financial condition could be harmed.

Our exhibitions are becoming subject to increasing competition that could negatively impact our operating results and financial condition.

Titanic exhibitions. Although we are currently the only entity that exhibits artifacts recovered from the wreck site of the Titanic, we currently encounter competition from other Titanic exhibitions that exhibit replicas of artifacts and memorabilia not obtained directly from the wreck site. In addition, in the future we may encounter competition from other Titanic exhibitions or events, as our Titanic exhibition business continues to change. For example, an adverse ruling in 1999 by the U.S. Court of Appeals for the Fourth Circuit left us with non-exclusive rights to photograph and film the Titanic wreck site. As a result of this ruling, other companies can now photograph and film the Titanic wreck site, which exposes us to increased competition that could, for example, result in our loss of future exhibitions or other opportunities, such as documentary film rights. Moreover, it is possible that other companies may, albeit in violation of our Salvor-in-Possession rights, attempt to explore the Titanic wreck site in the future. If any of these companies were successful, we would face increased competition as well as increased costs necessary to defend and preserve our rights. The availability of remotely-operated vehicles for charter from third-parties to conduct expeditions may make it easier for others to gain access to the Titanic site in violation of our Salvor-in-Possession rights. In addition, the anniversary of the Titanic’s sinking may make it more attractive for competitors to present competing Titanic themed exhibitions or products. Any of these developments could have an adverse impact on our financial performance.

Human anatomy exhibitions. Our human anatomy exhibitions face intense competition with other human anatomy exhibitions similar to ours offered by various companies in the U.S. and around the world. As a result, we may lose visitors to our exhibits based on competitors’ claims, the proximity of competing exhibitions to ours, and our ability to advertise and otherwise entice visitors to our exhibits in the extremely competitive marketplace. In addition, if a significant number of new human anatomy exhibitions were to enter the same markets in which our exhibitions are offered or are planned to be offered, attendance at our human anatomy exhibitions could decline and our results of operations and financial condition could be harmed.

Other exhibitions. If we are successful in presenting our new exhibitions, competitors may bring similar exhibitions of their own to the market. To the extent competitors are successful at marketing and promoting competing exhibitions, our results of operations and financial condition could be harmed.

Through our co-promoters, we conduct exhibitions outside of the United States, which subjects us to additional business risks that could increase our costs and cause our profitability to decline.

During fiscal 2013, we derived approximately $1.2 million or 3.0% of our total revenue from exhibitions located outside of the U.S., which represents12.3% of our total attendance. We intend to continue to pursue international exhibition opportunities. Our international exhibitions are subject to a number of risks, including the following:

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changes in foreign regulatory requirements;

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difficulties in staffing, training and managing foreign operations;

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changing and irregular enforcement of legal regulations;

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difficulties in collecting amounts due from foreign partners; and

•

political and economic instability.

We are also subject to risks arising from currency exchange rate fluctuations, which could increase our costs and cause our profitability to decline. Our financial arrangements with foreign vendors are mostly based upon foreign currencies. As a result, we are exposed to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring. The U.S. dollar value of our foreign-generated revenues varies with currency exchange rate fluctuations. Significant volatility in the value of the U.S. dollar relative to foreign currencies could harm our results of operations and financial condition.

Certain aspects of our operations are subject to governmental regulation, and our failure to comply with any existing or future regulations could seriously harm our business, results of operations and financial condition.

Our exhibitions are subject to federal, state and local laws, both domestically and internationally, governing various matters, such as:

•

licensing and permitting;

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health, safety, environmental and sanitation requirements;

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working conditions, labor, minimum wage and hour, citizenship and employment laws; and

•

sales, use and other taxes and withholding.

We cannot predict the extent to which existing or future laws or regulations could impact our operations. Although we generally contract with a third party for various services at our venues, we cannot provide assurances that we or our third-parties are in full compliance with all applicable laws and regulations at all times, that we or our third-parties will be able to comply with any future laws and regulations or that we will not incur liabilities for violations by us or third-parties with which we maintain a relationship. Our failure or the failure of any of our third-parties with which we maintain a relationship to comply with laws and regulations could also cause us to be subject to investigations or governmental actions that could seriously harm our business.

We may be unable to hire and retain the personnel we need and, as a result, could lose our competitive position.

To meet our business objectives, we must continue to attract and retain skilled technical, operational, managerial and sales and marketing personnel. We face significant competition for these skilled professionals from other companies, research and academic institutions, government entities and other organizations. If we fail to attract and retain the necessary personnel, we may be unable to achieve our business objectives and may lose our competitive position, which could harm our business revenue. In addition, our recent efforts to reduce headcount and general and administrative expenses may harm our ability to attract or retain the personnel we need.

Severe weather may impact our operations at our stationary exhibitions, which contribute a significant portion of our revenue and income.

Recent severe weather has significantly impacted our operations in New York City. Severe weather may impact our operations and prohibit us from presenting exhibitions. Particularly where such severe weather impacts our stationary exhibit operations in New York City, Atlanta, Georgia, Las Vegas, Nevada or Orlando, Florida, the inability to operate may significantly impact our revenues and income. While the Company maintains property insurance and, where appropriate, business interruption coverage, insurance proceeds may not fully compensate the Company for its loss of revenue and business opportunity.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Principal Executive Offices

Our principal executive office is located at 3340 Peachtree Road, N.E., Suite 900, Atlanta, Georgia. This space, which consists of 10,715 square feet, is used for management, administration and marketing purposes. The Company entered into a seventh amendment to the lease for its principal executive office space in Atlanta, Georgia effective January 1, 2012. Under this amendment, the square footage leased is reduced to approximately 10,715 square feet and the lease term has been extended for an additional twenty-four months.

Warehouse Space for Artifacts and Other Exhibitry

The Company leases warehouse and lab space for the conservation, conditioning and storage of artifacts and other exhibitry. On October 12, 2011, the Company entered into a lease agreement for approximately 48,000 square feet of warehouse and lab space in Atlanta, Georgia. The agreement is for a five year term with two additional options to extend for up to an additional ten years. For security purposes, we do not disclose the location of this property. Other storage space has been rented on a month-to-month basis, in various locations, as needed.

Warehouse Space for Exhibitry Assets

The Company leases warehouse space to store the Arts and Exhibition, LLC exhibitry. On January 16, 2013, the Company entered into a 6¹/₂ month lease agreement for approximately 21,000 square feet of warehouse space in Atlanta, Georgia.

Warehouse Space for Merchandise Inventory

The Company leases warehouse space for its merchandise inventory under a lease assumed as part of the Exhibit Merchandising, LLC acquisition. Under the fifth amendment to the lease dated March 2011 the Company approximately 20,000 square feet of warehouse space in Statesboro, Ohio under a lease that expires in August 2013.

Luxor Hotel and Casino – Las Vegas, Nevada

On March 12, 2008, the Company entered into a ten year lease agreement for exhibition space with Ramparts, Inc., owner and operator of The Luxor Hotel and Casino in Las Vegas, Nevada, with an option to extend for up to an additional ten years. This lease includes approximately 36,141 square feet of space within the Luxor Hotel and Casino. We use the space, among other things, to present our “Bodies... The Exhibition” and “Titanic: The Experience” exhibitions. The lease commenced with the completion of the design and construction work which related to the opening of our “Bodies... The Exhibition” exhibition in August 2008 and the opening of the Titanic exhibition in December 2008. See discussion inNote 11. Lease Abandonmentregarding abandonment of a portion of the leased space.

Atlantic Station – Atlanta, Georgia

On July 2, 2008, the Company entered into a lease agreement for exhibition space with Atlantic Town Center in Atlanta, Georgia. Until March 6, 2012 we used the space to present our “Bodies...The Exhibition” and our “Dialog in the Dark” exhibitions. This space is currently being used to present our “Bodies... The Exhibition” and our “Titanic: The Artifact Exhibition” exhibitions. The initial lease term was for three years with four one-month renewal options and was scheduled to expire in February 2012. On September 30, 2011, the Company entered into a first amendment to this lease. The first amendment extended the lease term for an additional 16 months, with a two year extension option, and expired January 31, 2013. On October 22, 2012, the Company entered into a second amendment to the lease for its exhibition space in Atlantic Station in Atlanta, Georgia. The lease term is for an additional 24 months from February 1, 2013 through January 31, 2015.

Seaport – New York City, New York

On April 7, 2008 the Company entered into a lease agreement for exhibition space with General Growth Properties, Inc. in New York City, New York. We use the space to present our “Bodies... The Exhibition” exhibition and opened a “Dialog in the Dark” exhibition in a portion of the leased space in the summer of 2011. On July 26, 2012, the Company entered into a first amendment to the lease for an additional 12 months from January 1, 2013 through December 31, 2013 pursuant to the first amendment, the lease could be terminated by the lessor with a ninety day written notice, but not prior to June 30, 2013. The South Street Seaport in New York City was closed during the end of October and remained closed through fiscal year ending February 28, 2013 due to complications from Hurricane Sandy and subsequent action by governmental authorities and the landlord. On January 2, 2013, the landlord notified the Company that it intended to terminate the Company’s lease on June 30, 2013.

Buena Park, California

On April 3, 2013, the Company entered into a lease agreement for exhibition space with the Successor Agency of the Community Redevelopment Agency of the City of Buena Park, California. We intend to open the space in the second quarter of 2014 and will present “Bodies…The Exhibition” and “Titanic: The Experience” exhibitions in the space. The Company leased the exhibition space for $1 per month through January 1, 2015, and has agreed to make capital improvements to the space and to maintain the facility during the term.

“Titanic – The Experience” – Orlando, Florida

On October 17, 2011, the Company entered into the assignment and second amendment to lease for exhibition space with George F. Eyde Orlando, LLC and Louis J. Eyde Orlando, LLC. We use the space to present our “Titanic – The Experience” exhibition and dinner theatre. The lease term is for five years and expires in September 2016.

Touring Exhibitions

From time to time the Company enters into short-term lease agreements for exhibition space for its touring exhibitions. At February 28, 2013, the Company had no obligations under lease agreements its touring exhibits.

ITEM 3. LEGAL PROCEEDINGS

Status of Salvor-in-Possession and Interim Salvage Award Proceedings

The Company has been party to a salvage case titledRMS Titanic, Inc. v. The Wrecked and Abandoned Vessel, et al., in rem for nearly 20 years. The Company has served as sole salvor-in-possession of the Titanic wreck site since 1994. On August 12, 2010, the U. S. District Court for the Eastern District of Virginia (the “District Court”) issued an opinion granting a salvage award to RMST based upon the Company’s work in recovering and conserving over three thousand artifacts from the wreck of Titanic during its expeditions conducted in 1993, 1994, 1996, 1998, 2000, and 2004 (the “Post 1987 Artifacts”). The Company was awarded 100 percent of the fair market value of the artifacts, which the District Court set at approximately $110 million. The District Court reserved the right to determine whether to pay the Company a cash award from proceeds derived from a judicial sale, or in the alternative, to issue the Company anin-specie award of title to the artifacts with certain covenants and conditions which would govern their maintenance and future disposition.

On August 15, 2011, the District Court granted anin-specie award of title to the artifacts to RMST for the Post 1987 Artifacts. Title to the Post 1987 Artifacts comes with certain covenants and conditions drafted and negotiated by the Company and the United States government. These covenants and conditions govern the maintenance and future disposition of the artifacts. These covenants and conditions include the following:

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The approximately 2,000 “1987 Artifacts” and the approximately 3,500 “Post 1987 Artifacts” must be maintained as a single collection;

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The combined collections can only be sold together, in their entirety, and any buyer would be subject to the same conditions applicable to RMST; and

•

RMST must comply with provisions that guarantee the long-term protection of all of the artifacts. These provisions include the creation by RMST of a reserve fund (the “Reserve Fund”). The Reserve Fund is irrevocably pledged to and held for the exclusive purpose of providing a performance guarantee for the maintenance and preservation of the Titanic collection for the public interest. The Company will pay into the Reserve Fund a minimum of twenty five thousand dollars ($25 thousand) for each future fiscal quarter until the corpus of such Reserve Fund equals five million dollars ($5 million). Though not required under the covenants and conditions, the Company may make additional payments into the Reserve Fund as it deems appropriate, consistent with its prior representations to the Court and sound fiscal operations. The Company established the Reserve Fund and funded it with $25 thousand during November 2011 and continues to fund it with quarterly $25 thousand payments. The current balance in the Reserve Fund is $150,141, including interest income.

During these proceedings, on July 2, 2004, the District Court also rendered an opinion and order in which it held that it would not recognize a 1993 Proces-Verbal, pursuant to which the government of France granted RMST title to all artifacts recovered from the wreck site during the 1987 expedition (the “1987 Artifacts”). RMST appealed the July 2, 2004 District Court order to the Appellate Court. On January 31, 2006, the Appellate Court reversed the lower court’s decision to invalidate the 1993 Proces-Verbal, pursuant to which the government of France granted RMST title to all artifacts recovered from the wreck site during the 1987 expedition. As a result, the Appellate Court tacitly reconfirmed that RMST owns the approximately 2,000 artifacts recovered during the 1987 expedition. These artifacts were not part of the August 2011 award, but are now subject to the covenants and conditions agreed to by the Company.

Status of International Treaty Concerning the Titanic Wreck

The U.S. Department of State (the “State Department”) and the National Oceanic and Atmospheric Administration of the U.S. Department of Commerce (“NOAA”) are working together to implement an international treaty (the “Treaty”) with the governments of the United Kingdom, France and Canada concerning the Titanic wreck site. If implemented in this country, this treaty could affect the way the District Court monitors our salvor-in-possession rights to the Titanic. These rights include the exclusive right to recover artifacts from the wreck site, claim possession of and perhaps title to artifacts recovered from the site, and display recovered artifacts. Years ago we raised objections to the State Department regarding the participation of the U.S. in efforts to reach an agreement governing salvage activities with respect to the Titanic. The proposed Treaty, as drafted, did not recognize our existing salvor-in-possession rights to the Titanic. The United Kingdom signed the Treaty in November 2003, and the U.S. signed the Treaty in June 2004. For the Treaty to take effect, the U.S. must enact implementing legislation. As no implementing legislation has been passed, the Treaty currently has no binding legal effect.

In August, 2011, the State Department and NOAA resubmitted draft legislation to Congress. Since that time, RMST has worked with the U.S. government to develop a number of textual modifications to this proposed implementing legislation to address the Company’s concerns. Recently, the members of the United States Congress have sponsored this revised legislation and it is now making its ways through the legislative process. RMST has taken efforts support the passage of this revised implementing legislation into law. The Company believes that the passage of this legislation, as modified by RMST, will recognize the Company’s past and future role with regard to the wreck site.

Other Litigation

The Company is also from time to time party to collection actions to recover amounts owed by promoters and other parties, particularly international promoters and partners. InRMS Titanic, Inc. v. Citywest Productions and H.S.S. Trading as the Mansfield Group, we sued in Dublin, Ireland to collect approximately $1.3 million owed by a promoter who licensed and presented a Titanic exhibition in Dublin. We were successful in obtaining judgment against the parties for the full amount of the claim. During the proceedings, the defendants went into receivership, which is an insolvency process under the laws of Ireland. This receivable was fully reserved in fiscal year 2011 and written off in fiscal year 2012. Recovery in this case is unlikely.

On February 26, 2013 the Company filed suit in the U.S. District Court for the Northern District of Georgia, Atlanta Division against Thomas Zaller and his companies, Imagine Exhibitions, Inc. and Imagine Exhibitions, PTE, LTD. Mr. Zaller is a former executive of the Company. The suit alleges that Mr. Zaller and his companies fraudulently obtained certain of the Company’s confidential and proprietary intellectual property related to the design of its Titanic exhibitions. The Company claims that Mr. Zaller and his companies unlawfully used such property in the development of their own competing Titanic exhibition which was presented this year at the Venetian Macau, and which is now being marketed around the world. In the suit, the Company makes claims against Mr. Zaller personally for conversion, breach of contract, and misappropriation of trade secrets under Georgia law. The Company makes claims against Mr. Zaller and his companies for unjust enrichment, fraud, fraudulent inducement, and trade dress violations under the Lanham Act. The Company has sued for unspecified damages. The case is still in its early stages and the outcome of the case is not readily predictable at this time.

In a related matter, on April 29, 2013, the Company filed suit in the U.S. District Court for the Middle District of Florida, Jacksonville Division against Kingsmen Creatives, LTD, and Kingsmen Exhibits PTE, LTD. Kingsmen Creatives is a publicly traded Singapore based design company and is traded on the Singapore Exchange. Kingsmen Exhibits PTE, LTD. is a wholly-owned subsidiary of Kingsmen Creatives, LTD. and designs exhibition and museum properties. The Kingsmen companies partnered with Thomas Zaller and his companies in development of their competing Titanic exhibition. The Company alleges that the Kingsmen companies participated in an unlawful conspiracy with Thomas Zaller and his companies which caused injury to the Company. The Company also makes claims against the Kingsmen companies for conversion, misappropriation of trade secrets under Florida law, unjust enrichment, and trade dress violations under the Lanham Act. The Company has sued for unspecified damages. The case is still in its early stages and the outcome of the case is not readily predictable at this time.

On April 22, 2013, Kingsmen Exhibits PTE, LTD. filed suit against the Company in the High Court of the Republic of Singapore. This suit followed extensive correspondence between the Company and the Kingsmen companies regarding the allegations of wrongdoing by the Kingsmen companies, along with their partners Thomas Zaller and his companies. Kingsmen seeks a judgment declaring that they did not violate the Singapore Copyright Act and the Singapore Trademark Act and prohibiting the Company from continuing to make claims that Kingsmen infringed the Company’s copyrights and trademarks. Kingsmen also seeks unspecified damages from the Company related to actions taken by the Company to protect its confidential and proprietary intellectual property. The case is still in its early stages and the outcome of the case is not readily predictable at this time.

From time to time the Company is or may become involved in other legal proceedings that result from the operation of its exhibitions and business.

Settled Litigation

On July 30, 2009, Sports Immortals, Inc. and its principals, Joel Platt and Jim Platt (together, “Sports Immortals”), filed an action against the Company in the Circuit Court of the Fifteenth Judicial District in Palm Beach County, Florida for claims arising from their license agreement with the Company under which the Company obtained rights to present sports memorabilia exhibitions utilizing the Sports Immortals, Inc. collection. The plaintiffs alleged that the Company breached the contract when the Company purported to terminate it in April of 2009, and they sought fees and stock warrant agreements required under the agreement. The Company filed its answer and counterclaims on September 7, 2009. Answering the complaint, the Company denied plaintiffs’ allegations and maintained that the Sports Immortals, Inc. license agreement was properly terminated. The Company counterclaimed against the plaintiffs for breach of contract, fraudulent inducement and misrepresentation, breach of the covenant of good faith and fair dealing, and violation of Florida’s deceptive and unfair practices act. On August 16, 2011, the Company and Sports Immortals entered into a Settlement and Release Agreement (the “Agreement”). In exchange for full settlement and release of all claims of Sports Immortals, pursuant to the Agreement the Company agreed to pay $475 thousand currently, $475 thousand on the first anniversary of settlement, and to exchange certain warrants previously issued to Jim Platt and Joel Platt for warrants with an exercise price set at the market price on the date of settlement of $1.82. An expense of $6 thousand for the exchange of these warrants is included in General and administrative expenses for the year ended February 29, 2012. In third quarter of fiscal 2010, the Company accrued $167 thousand as an estimate of the cost to settle this litigation. An additional expense of $783 thousand was recorded in second quarter of fiscal 2012. The first installment of the settlement agreement of $475 thousand was paid on September 7, 2011. The remaining $475 thousand settlement payable was paid during the second quarter of fiscal 2013.

In April 2011, the Company filed suit in the U.S. District Court for the Northern District of Georgia against Serge Grimaux and his companies, including Serge Grimaux Presents, Inc. and 9104-5773 Quebec, Inc. The suit alleges that Grimeaux failed to pay over $800 thousand due and owing the Company under a series of license agreements pursuant to which Mr. Grimaux and his entities presented the Company’s Titanic and human anatomy exhibitions in venues throughout Canada. The Company settled this litigation on November 10, 2011 for $375 thousand, of which $175 thousand has been received and the remainder of which is subject to collection. As of February 28, 2013 a net receivable of $148 thousand is included in the Company’s accounts receivable.

On August 5, 2011, the Company filed suit in the U.S. District Court for the Southern District of New York against Gunther Von Hagens and his company, Plastination Company, Inc. The suit alleged that Von Hagens and Plastination breached a settlement agreement with the Company, tortiously interfered with the Company’s business, conspired against the Company and engaged in unfair competition practices. These claims related to information Von Hagens and Plastination provided to ABC News and other third-parties about the origin of the human anatomy specimens licensed by the Company and used in its human anatomy exhibitions. The Company sued for unspecified damages. On April 23, 2013, the parties entered into a confidential settlement agreement under which the lawsuit has been dismissed. The proceeds related to this settlement will be recorded in the first quarter of fiscal 2014.

On February 24, 2012, the Company filed suit against Dr. Hong-Jin Sui, Hoffen Global Ltd., and Arnie Geller in the Circuit Court in and for Hillsborough County, Florida. The Company alleged that Messrs. Sui and Hoffen breached certain contractual obligations relating to rights of first refusal and opportunities to match competing offers for the lease of sets of plastinated human anatomical specimens, leading to the opening of a series of exhibitions in Europe competitive with those of the Company. Mr. Geller, the Company’s former CEO, was alleged to have tortiously interfered with the Company’s contractual rights in connection with the European exhibitions. On February 15, 2013, the parties entered into a confidential settlement agreement under which the lawsuit has been dismissed.

On August 7, 2012, the Company filed suit against Marmargar, Inc. in the United States District Court for the Northern District of Georgia, Atlanta Division. The Company filed suit in response to a claim by Marmargar regarding amounts allegedly due Marmargar pursuant to two alleged contracts with the Company. In particular, Marmargar sought four percent of all monies received by the Company from a future sale of the Titanic artifacts. The Company denied all claims of Marmargar. In its lawsuit, the Company sought a judgment from the Court declaring that the alleged contracts were unenforceable and that the Company did not owe Marmargar any monies. The case was transferred to the United States District Court for the Eastern District of Virginia, Norfolk Division, where Marmargar has consented to jurisdiction. Marmargar filed a counterclaim seeking to enforce the two alleged contracts. On April 4, 2013, the parties entered into a confidential settlement agreement under which the lawsuit has been dismissed.

Proposed Legislation and Government Inquiries

On May 23, 2008, the Company entered into an Assurance of Discontinuance (the “Assurance”) with the Attorney General of the State of New York. The Assurance resolves the inquiry initiated by the Attorney General’s Office regarding our New York City exhibition, “Bodies... The Exhibition.” Subject to the provisions of the Assurance, the Company has continued to operate the exhibition in New York City. Although most of its requirements under the Assurance have now been concluded, the Company will continue to post certain disclosures regarding the sourcing of the specimens in the exhibition as long as that exhibition operates in New York City. The Company has voluntarily agreed to similar disclosures with the states of Washington, Missouri, and Oklahoma.

Legislatures in a few states have considered legislation or passed bills that would restrict our ability to present human anatomy exhibitions in their states, such as by banning human anatomy exhibitions, requiring a permit to present such an exhibition, or imposing restrictions on how or where such exhibitions could be presented. The Company cannot predict whether any such legislation will be adopted or, if adopted, how such legislation might affect its ability to conduct human anatomy exhibitions. Additional states could introduce similar legislation in the future. Any such legislation could prevent or impose restrictions on the Company’s ability to present our human anatomy exhibitions in the applicable states.

From time to time, the Company has or may receive requests and inquiries from governmental entities which result from the operation of our exhibitions and business. As a matter of policy, the Company will cooperate with any such inquiries.

Revenue Examinations

As of February 28, 2013, the Internal Revenue Service (“IRS”) has completed its examination of the Company’s federal tax returns for the fiscal years ended February 28(29), 2010, 2009, 2008 and 2007, with no significant adjustments required. The tax years February 28, 2012 and 2011 remain open to IRS examination. In addition to the review by the IRS, the Company is, at times, under review by various state revenue authorities. The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses and that the ultimate outcome of these actions will not have a material adverse effect on the Company’s financial condition.

ITEM 4. MINING SAFETY DISCLOSURE

Not applicable.

EXECUTIVE OFFICERS

The following table sets forth information about our executive officers as of the date of this report.

Samuel S. Weiser, President, Chief Executive Officer and Director

Mr. Weiser has served as our President and Chief Executive Officer since June 29, 2012. Mr. Weiser has previously served as our Interim President and Chief Executive Officer from November 28, 2011 until June 29, 2012 and served as our Interim Chief Financial Officer from May 19, 2011 until June 27, 2011. Prior to his appointment as Interim Chief Financial Officer, Mr. Weiser had been serving as a consultant to the Company and overseeing the Company’s finance function while the Company began conducting a search for a permanent Chief Financial Officer. Mr. Weiser served as the Chief Operating Officer of Sellers Capital LLC where he was responsible for all non-investment activities from 2007 to 2010. Mr. Weiser is also a member of Sellers Capital LLC and an indirect investor in Sellers Capital Master Fund, Ltd., the Company’s largest shareholder and an investment fund managed by Sellers Capital LLC. From April 2005 to 2007, he was a Managing Director responsible for the Hedge Fund Consulting Group within Citigroup Inc.’s Global Prime Brokerage division. Mr. Weiser is also a former partner in Ernst & Young. He received a Bachelor of Arts in Economics from Colby College and a Master of Science in Accounting from George Washington University. Mr. Weiser is a Certified Public Accountant.

Michael J. Little, Chief Financial Officer and Chief Operating Officer

Mr. Little has served as our Chief Financial Officer since June 27, 2011 and our Chief Operating Officer since November 28, 2011. Mr. Little was formerly a consultant with The Edge Group, LLC, a consulting practice specializing in strategic and tactical planning, acquisition services, complex financial modeling, investor presentations, organizational structure analysis, and new system implementation. From 1997 through 2009, Mr. Little was employed by Feld Entertainment, a worldwide producer of live family entertainment, in various financial and strategic planning roles. He served as Chief Financial Officer of Feld Entertainment from 2004 to 2009. Mr. Little received a Bachelor of Science degree from Towson State University and a Master of Science in Business from John Hopkins University.

John Norman, President of Premier Exhibition Management, LLC

Mr. Norman has served as President of Arts and Exhibition International, LLC (formerly PEM Newco, LLC), a subsidiary of Premier Exhibition Management, LLC, since June 25, 2012 and as President of Premier Exhibition Management, LLC since April 2, 2013. Mr. Norman, previously served as President of the Arts and Exhibitions International division of AEG Live, until the Company’s April 2012 acquisition of substantially all of its assets. Mr. Norman previously served as Co-President and Chief Operating Officer of Clear Channel Exhibitions, and prior thereto as Senior Vice President of SFX Entertainment.

Executive Officer Changes

On December 5, 2012, the Company announced that Robert Brandon, General Counsel and Senior Vice President Business Affairs of the Company, would not be extending his employment agreement and would cease being an officer of the Company as of January 4, 2013.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Since November 16, 2006, our common stock has been quoted on the NASDAQ Global Market under the symbol “PRXI.” The following table provides the high and low sales prices for our common stock for fiscal 2013 and fiscal 2012.

Prices of our Common Stock


	High		Low
Fiscal 2013
Fourth Quarter ended February 28, 2013	$	2.86	$	2.12
Third Quarter ended November 30, 2012		2.99		2.16
Second Quarter ended August 31, 2012		2.86		2.10
First Quarter ended May 31, 2012		3.75		2.15
Fiscal 2012
Fourth Quarter ended February 29, 2012	$	2.57	$	1.62
Third Quarter ended November 30, 2011		1.87		1.61
Second Quarter ended August 31, 2011		1.88		1.47
First Quarter ended May 31, 2011		1.90		1.47

During the year ended February 28, 2013, employees of the Company surrendered 52,847 shares of stock worth approximately $145 thousand to satisfy their tax obligations with respect to the vesting of restricted stock issued pursuant to the Company’s Equity Incentive Plan. These shares were repurchased at the share price based upon the closing date on the day of vesting.

During the year ended February 29, 2012, employees of the Company surrendered 18,361 shares of stock worth approximately $36 thousand to satisfy their tax obligations with respect to the vesting of restricted stock issued pursuant to the Company’s Equity Incentive Plan. These shares were repurchased in December 2011 for a price of $1.65 per share based upon the closing date on the day of vesting.

During the year ended February 28, 2008, the Company repurchased 1 million shares of its stock, which were held in a brokerage account and reported as Treasury stock on the Consolidated Balance Sheets. On August 29, 2011, the Company formally retired these Treasury shares, which reduced the Common stock issued and corresponding Treasury shares as reported in the Consolidated Balance Sheets.

Holders

On February 28, 2013, we had approximately 2,074 holders of record of our common stock. This number does not include shareholders for whom shares are held in a “nominee” or “street” name.

Dividends

We have never declared or paid cash dividends on our common stock. We currently intend to retain any future earnings generated from our operations to finance operations and future growth.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, many of which are outside of our control and are difficult for us to forecast or mitigate. The factors that could cause our actual results to differ materially from those expressed or implied by us in any forward-looking statements contained herein or made elsewhere by or on behalf of us include the risks described elsewhere in this Form 10-K and in certain of our other Securities and Exchange Act Commission filings.

The consolidated results of operations for the years ended February 28, 2013 and February 29, 2012 are not necessarily indicative of the results that may be expected for any future period. The following discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Part II, Item 8 of this Form 10-K and in conjunction with the “Risk Factors” included in Part I, Item 1A of this Form 10-K.

Introduction

The following discussion provides information to assist in the understanding of our financial condition and results of operations, and should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis is organized into the following sections:

•

Restatement of Previously Issued Quarterly Financial Statements;

•

Overview;

•

Key Exhibitions;

•

Results of Operations;

•

Liquidity and Capital Resources;

•

Contractual Obligations;

•

Off-Balance Sheet Arrangements;

•

Critical Accounting Policies; and

•

Recent Accounting Pronouncements.

Restatement of Previously Issued Quarterly Financial Statements

•

Goodwill was understated by $250 thousand, future rights fees were understated by $4.38 million and the note payable was understated by $4.316 million;

•

There were no changes to cash reported and minimal changes to the Statement of Cash Flows.

The Company’s restatement of quarterly financial statements would immaterially change the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the affected periods, as the amount of the change related to the results of operations is immaterial and does not impact our liquidity. As a result, the Management’s Discussion and Analysis of Financial Condition and Results of Operations for these period have not been restated herein, but the financial statements are included in full at Note 23 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K.

Overview

The restructuring of the Company and changes in its management reflect that Premier has two operating segments – Exhibition Operations and Content Management.

In this report, the terms “Premier Exhibitions, Inc.,” the “Company,” “Premier”, “we,” “us,” and “our” mean Premier Exhibitions, Inc., a Florida corporation, and its subsidiaries.

As of February 28, 2013, we are configured to present three different types of exhibitions, as reflected in the following table:


	Year Ended February 28, 2013
	Stationary		Touring		Total
“Bodies... The Exhibition” and “Bodies Revealed”		3		5		8
“Titanic: The Artifact Exhibition” and “Titanic: The Experience”		3		6		9
Exhibitions under management:
“Real Pirates”		—		1		1

Total Exhibitions		6		12		18

Our touring exhibitions usually span four to six months. The stationary exhibitions are longer-term engagements which are located in New York, New York, Las Vegas, Nevada, Orlando, Florida, and Atlanta, Georgia. In fiscal 2013, our New York, New York location was closed starting in late October 2012 due to the impact of Hurricane Sandy and subsequent action by governmental authorities and the landlord. We are currently in negotiations to open a new location in New York City scheduled to open in the fall of 2014 which would include a “Bodies…The Exhibition” and a “Titanic: The Experience” exhibition. In addition, we have leased an exhibition facility in Buena Park, California which will include a “Bodies…The Exhibition and a “Titanic: The Experience” and is scheduled to open in the second quarter of 2014. In fiscal 2012, we opened a new stationary “Dialog in the Dark” exhibit in New York City on August 20, 2011, which was closed in October 2012 due to the impact of Hurricane Sandy and subsequent action by governmental authorities and the landlord, and acquired a new exhibit known as “Titanic: The Experience” in Orlando, Florida on October 17, 2011.

In addition to developing new content for future exhibitions, the Company continually evaluates its touring capacity and may expand or contract to suit the addressable market for its content.

Key Exhibitions

“Titanic: The Artifact Exhibition” and “Titanic: The Experience”

Consistent with the Company’s desire to increase its number of permanent exhibitions, on October 17, 2011 the Company purchased the assets of a Titanic-themed exhibition (Titanic: The Experience or “TTE”) in Orlando, Florida. The Company believes that it has not historically fully realized the Orlando market, as a heavily tourist market, and seeks to do so through this acquisition. The Company has supplemented the current exhibition with authentic Titanic artifacts from our existing collections and also by including assets generated during the 2010 Titanic expedition such as 3D exhibitry and film. In addition, this exhibition will increase the Company’s penetration into the Orlando market for merchandise sales.

“Bodies... The Exhibition” and “Bodies Revealed”

Arts and Exhibitions International, LLC (“AEI”)

On April 20, 2012, we expanded our exhibition portfolio through the purchase of the exhibition business of AEI which gave us the rights to present the following four exhibitions:

“Tutankhamun and the Golden Age of the Pharaohs”

“Cleopatra: The Exhibition”

“Real Pirates”

Effective November 13, 2012, the Company signed a binding letter of intent with Barry Clifford to develop and present a second Real Pirates exhibition, which the Company began touring in March 2013.

“America I AM: The African American Imprint”

New Content

Discontinued Exhibitions

Playboy

Due to the termination of the Agreement and the related impairments, S2BN’s investment in the joint venture through its payment of 50 percent of the costs of the potential exhibit was fully impaired in the second quarter of fiscal 2012. An impairment charge of $197 thousand is reflected in net loss attributable to non-controlling interest on the Consolidated Statements of Operations for the fiscal year ended February 29, 2012.

“Dialog in the Dark”

In 2008, we further expanded our exhibition portfolio when we entered into a long-term license agreement to present an exhibition series entitled “Dialog in the Dark.” Our “Dialog in the Dark” exhibitions were intended to provide visitors with an opportunity to experience the paradox of learning to “see” without the use of sight. We closed our “Dialog in the Dark” exhibit in Atlanta, Georgia in March 2012. We closed our “Dialog in the Dark” exhibit in New York City due to Hurricane Sandy and subsequent action by governmental authorities and the landlord. At this time we have no future plans to open any “Dialog in the Dark” exhibitions.

Co-Promotion Agreements

The Company is party to a co-promotion agreement with S2BN Entertainment Corporation (“S2BN”) to present certain “Bodies” touring exhibitions. S2BN is successor in interest to Live Nation, Inc. (“Live Nation”) and CPI Entertainment Rights Inc. (“CPI”), each of which entered into co-promotion agreements with the Company in 2007.

Pursuant to the co-promotion agreements, S2BN was granted the exclusive right to jointly present along with the Company twenty (20) “Bodies” exhibitions anywhere in the world except for North America, Buenos Aires, Argentina, Santiago, Chile and Madrid, Spain and two (2) “Bodies” exhibitions in Europe. In an amendment to the agreement originally entered with CPI, the Company and S2BN agreed that instead of the two exhibitions originally contemplated to be presented in Europe, S2BN would instead be entitled to co-present with the Company a single exhibition in a city in the United States, which has since been fulfilled. S2BN retained a right under the amendment to present two exhibitions in Europe, provided that it shall pay the Company an additional $500 thousand non-refundable License Fee (upon opening) for each exhibition. As previously reported and provided for in the Company’s financial statements, the Company received a total of $12.0 million in prior periods as consideration under the co-promotion agreements. The majority of these exhibitions have already been presented, thereby fulfilling many obligations of the Company.

In a September 25, 2009 amendment of the agreement originally entered with Live Nation, the Company finalized our current co-promotion arrangement with S2BN (the “September 2009 Amendment”), and restated substantially the same financial terms for settling the remaining exhibitions to be co-promoted and also provided that:

•

We obtained sole possession of and operating rights to the New York Bodies exhibition, and retain 100% of the revenue and profits from that exhibition.

•

We have rights to present five human anatomy exhibitions in the European, Asian and other territories previously reserved exclusively for S2BN.

S2BN continues to utilize certain Bodies specimen sets and to book the remaining exhibitions to which it is entitled under the September 2009 Amendment. The Amendment’s restated financial terms provide that revenue from each of the remaining exhibitions will be allocated as follows (subject to certain provisions for cumulating the settlements for such remaining exhibitions): revenue is first used to reimburse the parties for their recoupable expenses; thereafter, the next $700 thousand of revenue are split in a percentage ratio favoring S2BN and finally, all remaining revenues are split in a percentage ratio favoring the Company.

Results of Operations

An analysis of our consolidated statements of operations for fiscal 2013 and fiscal 2012, with percent changes for 2013 vs. 2012 follows:


	Analysis of Consolidated Statements of Operations
	2013			2012			% Change
	(In thousands except percentages and per share data)
Revenue	$	39,465		$	31,710			24.5	%
Cost of revenue (exclusive of depreciation and amortization)		18,745			17,264			8.6	%

Gross profit		20,720			14,446			43.4	%

Gross profit as a percent of revenue		52.5	%		45.6	%
Operating expenses		17,997			20,267			(11.2	)%

Income/(loss) from operations		2,723			(5,821	)		146.8	%
Other expense		(577	)		(23	)		2,408.7	%

Income/(loss) before income tax		2,146			(5,844	)		136.7	%
Income tax expense		279			176			58.5	%

Effective tax rate		13.0	%		-3.0	%
Net income/(loss)		1,867			(6,020	)		131.0	%
Less: Net income/(loss) attributable to non-controlling interests		(83	)		(239	)		65.3	%

Net income/(loss) attributable to the shareholders’ of Premier Exhibitions, Inc.	$	1,950		$	(5,781	)		133.7	%

Net income/(loss) per share
Basic income/(loss) per share	$	0.04		$	(0.12	)

Diluted net income/(loss) per share	$	0.04		$	(0.12	)

Revenue.During the year ended February 28, 2013 revenue increased by $7.8 million or 24.5% compared to prior year. The following table illustrates revenue for fiscal 2013 and fiscal 2012.


	Revenue
	2013		2012
	(in thousands)
Exhibition Revenue
Admissions revenue	$	25,450	$	24,601
Non-refundable license fees for current exhibitions		4,134		3,673

Total Exhibition revenue		29,584		28,274
Merchandise and Other		8,988		3,436
Management fee		819		—
Licensing fee		74		—

Total Revenue	$	39,465	$	31,710

Key Non-financial Measurements
Number of venues presented		34		31
Operating days		5,355		4,755
Attendance (in 000’s)		2,704		2,135
Average attendance per operating day		505		449
Average ticket price at permanents, museums and other locations	$	15.09	$	16.51
Average retail sales per attendee	$	3.73	$	2.17

These key non-financial measures do not include AEI properties or merchandise sales.

Exhibition revenue increased $1.3 million to $29.6 million mainly driven by the increase in the number of venues presented from 31 in fiscal 2012 compared to 34 in fiscal 2013. During the third and fourth quarters of fiscal 2013 revenue was negatively affected by Hurricane Sandy and subsequent action by governmental authorities and the landlord, which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This closing is estimated to have decreased revenue by approximately $1.8 million. We do not recognize exhibition revenue for the four AEI exhibitions but instead receive a management fee for managing these properties.

During fiscal years ended 2013 and 2012, under the Co-promotion agreement, 2 of the touring exhibitions related to “Bodies” were promoted by S2BN.

We attribute this increase in attendance in large part to better venue selection, having 1 additional touring Bodies and 1 additional stationary Titanic exhibition, and to a lesser extent the Titanic’s 100th year anniversary. With more exhibitions presented the Company experienced a 26.7% increase in attendance from 2.1 million in fiscal 2012 to 2.7 million in fiscal 2013. Revenue from self-run exhibitions was 59.4% of revenue for fiscal 2013, compared to 77% of revenue for fiscal 2012. Revenue from self-run exhibits was comprised of 100% stationary exhibits in fiscal 2013, as compared to 91% stationary exhibits and 9% touring exhibits for fiscal 2012.

Merchandise revenue increased $5.6 million to $9.0 million for the year ended February 28, 2013. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary, and increase in per ticket sales, and the purchase of the assets of Exhibit Merchandising, LLC during the third quarter of fiscal 2013. Sales related to the Exhibit Merchandising, LLC assets were approximately $1.9 million in during fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for fiscal 2013. This is a new revenue stream in fiscal 2013.

Cost of Revenue.During fiscal year 2013 cost of revenue as a percent of revenue was 47.5% as compared to 54.4% for fiscal 2012, as reflected in the following table.


	Cost of Revenue
	2013			2012			% Change
	(in thousands, except percentages)
Exhibition costs
Production	$	598		$	978			(38.9	)%
Operating Expenses		9,290			10,463			(11.2	)%
Marketing		5,401			4,440			21.6	%

		15,289			15,881			(3.7	)%

Exhibition expense as percent of exhibition revenue		51.7	%		56.2	%
Cost of merchandise		3,456			1,383			149.9	%
Cost of merchandise as percent of merchandise revenue		38.5	%		40.3	%

Total	$	18,745		$	17,264			8.6	%

Percent of total revenue		47.5	%		54.4	%

Our exhibition costs of $15.3 million, decreased 3.7% or $0.6 million compared to the prior year, due to lower production and operating expenses only partially offset by an increase in marketing expense.

Cost of merchandise as a percent of merchandise revenue decreased from 40.3% in fiscal 2012 to 38.5% in fiscal 2013 primarily due to better vendor contracts.

Gross Profit.During the year ended February 28, 2013, our total gross profit increased by $6.3 million or 43.4% as compared to the prior fiscal year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above. However, gross margin and net income was negatively affected by approximately $0.8 million and $0.7 million, respectively, due to Hurricane Sandy and subsequent action by governmental authorities and the landlord, which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This amount reflects the unavoidable expenses incurred in late October through February 2013, during which no revenue was earned at the Seaport.

Operating Expenses.Operating expense decreased by 11.2% in fiscal 2013 compared to fiscal 2012. The following table illustrates operating expenses and percentage changes for fiscal 2012 vs. fiscal 2012:


	Operating expenses
	2013			2012		% Change
	(in thousands, except percentage data)
General and administrative	$	14,647		$	13,958		4.9	%
Depreciation and amortization		3,525			3,922		(10.1	)%
Net loss on disposal of assets		134			256		(47.7	)%
Impairment of intangibles and property and equipment		—			1,348		(100.0	)%
Contract and legal settlements		(309	)		783		(139.5	)%

Total	$	17,997		$	20,267		(11.2	)%

General and administrative.General and administrative (“G&A”) expense increased by $0.7 million, as reflected in the following table:


	2013		2012			Increase (decrease)
	(in thousands)
Exhibition expense	$	531	$	653		$	(122	)
Artifact expense		151		766			(615	)
Compensation		7,385		5,819			1,566
Employee benefits		179		280			(101	)
Insurance		790		767			23
Office expense		1,353		1,580			(227	)
Travel		394		480			(86	)
Professional fees		2,657		2,650			7
Stock compensation		866		705			161
Bad debt expense		14		(64	)		78
Other		327		322			5

	$	14,647	$	13,958		$	689

As reflected by the table above, the significant increase in G&A expense related to compensation related expenses which was only partially offset by the decrease in artifact expenses.

Depreciation and Amortization.Our depreciation and amortization expense decreased by $0.4 million to $3.5 million. The decrease is primarily attributable to assets that have been fully depreciated or amortized. This was partially offset by an increase in amortization related to the 2D and 3D film assets as well as the gaming and other application assets being placed in service in fiscal 2013.

Net Loss From Disposition of Assets.We incurred a loss of $134 thousand in fiscal 2013, mainly due to losses on Bodies leasehold improvements related to Hurricane Sandy and subsequent action by governmental authorities and the landlord in our New York location.We incurred a loss of $256 thousand in fiscal 2012, mainly due to losses on Titanic exhibitry disposed of in fiscal 2012.

Impairment of Intangibles assets and property and equipment.We incurred an impairment of intangible assets and property and equipment of $1.3 million in fiscal year 2012.

On August 25, 2011, the Company notified Playboy that the joint venture was terminating the Agreement pursuant to the unilateral termination right the Company had negotiated, which included the waiver of the $300 thousand termination fee otherwise payable if the termination was effected prior to the end of August, 2011. While the Agreement provided that the joint venture would still owe Playboy a final license fee installment of $150 thousand despite any such termination, the Company and S2BN also contended that Playboy had previously breached the License Agreement, and the joint venture accordingly reserved its rights to pursue all remedies and damages (which would include withholding any such final license fee installment). Due to the termination of the agreement with Playboy, the Company recorded an impairment charge of $217 thousand for Playboy licenses, net of accumulated amortization. The Company also recorded an impairment charge of $141 thousand for construction in progress, comprised of expenses incurred in the creation of the Playboy exhibit. The total impairment charge of $358 thousand related to Playboy is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012.

In February 2012, the Company decided to close its Atlanta, Georgia “Dialog in the Dark” exhibition effective March 6, 2012, which resulted in an impairment charge of $60 thousand for exhibition licenses and $282 thousand of property and equipment related our “Dialog in the Dark” exhibitions as these assets were determined to no longer be of use to the Company. In addition, as part of our annual impairment testing of long-lived assets it was determined that the property and equipment related to our New York City “Dialog in the Dark” exhibition were impaired resulting in an impairment charge of $648 thousand. The total impairment charge of $990 thousand related to “Dialog in the Dark” is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012. At this time the Company has closed all of its “Dialog in the Dark” exhibitions.

Contract and Legal Settlements.In April 2013, the Company received a payment from a venue partner in settlement of a contractual dispute. As this amount had not been accrued as exhibition revenue during the term of the presentation of the exhibition, it is included in Contract and Legal Settlements for the fiscal year ended February 28, 2013. On April 4, 2013, the Company entered into a confidential settlement agreement with Marmargar, Inc. under which the lawsuit was dismissed. On August 16, 2011, we entered into an agreement to fully settle all claims of Sports Immortals, Inc. against the Company. The agreement called for a cash payment of $950 thousand. As we had previously accrued $167 thousand for this legal action in fiscal 2010, we recorded an additional $783 thousand of expense in fiscal 2012.

Income/(loss) from Operations. We realized income from operations of $2.7 million in fiscal 2013 as compared to a loss from operations of $5.8 million for fiscal 2012. This is mainly due to higher revenues from ticket and merchandise sales and the decrease of $1.3 million in impairment losses and $1.1 million related to contract and legal settlements as compared to prior year.

Other Expense.In fiscal 2013, other expense totaled $577 thousand, primarily comprised of $681 thousand in interest expense primarily related to the AEI transaction, offset partially by an $81 thousand gain on debt modification related to the purchase of a Titanic exhibition in Orlando, Florida. During fiscal 2012, other expense totaled $23 thousand, primarily composed of $33 thousand in interest expense.

Income tax expense.Our provision for income tax expense for the year ended February 28, 2013 was $279 thousand compared to a $176 thousand for the year ended February 29, 2012. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax. The provision for income taxes for the year ended February 29, 2012 mainly related to foreign tax expense for our London and Singapore Titanic exhibitions.

Net loss attributable to non-controlling interest.For 2013, this represents the loss attributable to AEG Live, LLC’s 10% interest in Premier Exhibition Management LLC. For 2012, this related to our joint venture with S2BN.

Net income/ (loss).We realized net income of $2.0 million for the fiscal year ended February 28, 2013 as compared to a net loss of $5.8 million for the same period last year. In the current year, a net loss of $0.7 million is attributable to the closing of our location at The South Street Seaport in late October thorough February 2013.

Net income/(loss) per share.Basic and fully diluted income/(loss) per common share for fiscal 2013 and fiscal 2012 was $0.04 and $(0.12), respectively. The basic and fully diluted weighted average shares outstanding for fiscal 2013 were 48,159,918 and 48,560,663, respectively. The basic and fully diluted weighted average shares outstanding for fiscal 2012 were 47,418,894.

Fiscal 2013 as Compared to Fiscal 2012 – Segment results

Exhibition Management Segment

An analysis of operations for our Exhibition Management segment for fiscal 2013 and fiscal 2012, with percent changes for 2013 vs. 2012 follows:


	Year Ended
	2013			2012			% Change
	(In thousands, except percentages)
Revenue	$	39,465		$	31,710			24.5	%
Cost of revenue (exclusive of depreciation and amortization)		21,098			18,704			12.8	%

Gross profit		18,367			13,006			41.2	%

Gross profit as a percent of revenue		46.5	%		41.0	%
Operating expenses		16,599			18,648			(11.0	)%

Income/(loss) from operations		1,768			(5,642	)		131.3	%

Other expense		577			23			2,408.7	%

Income/(loss) before income tax		1,191			(5,665	)		121.0	%
Income tax expense		193			176			9.7	%

Effective tax rate		16.2	%		-3.0	%
Net income/(loss)		998			(5,841	)		117.1	%
Less: Net income/(loss) attributable to non-controlling interests		(83	)		(239	)		(65.3	)%

Net income/(loss) attributable to the shareholders’ of Premier Exhibitions, Inc.	$	1,081		$	(5,602	)		119.3	%

Revenue.During the year ended February 28, 2013 revenue increased by $7.8 million or 24.5% compared to prior year. The following table illustrates revenue for fiscal 2013 and fiscal 2012.


	Revenue (in thousands)
	2013		2012
Exhibition Revenue
Admissions revenue	$	25,450	$	24,601
Non-refundable license fees for current exhibitions		4,134		3,673

Total Exhibition revenue		29,584		28,274
Merchandise and Other		8,988		3,436
Management fee		819		—
Licensing fee		74		—

Total Revenue	$	39,465	$	31,710

Key Non-financial Measurements
Number of venues presented		34		31
Operating days		5,355		4,755
Attendance (in 000’s)		2,704		2,135
Average attendance per operating day		505		449
Average ticket price at permanents, museums and other locations	$	15.09	$	16.51
Average retail sales per attendee	$	3.73	$	2.17

These key non-financial measures do not include AEI properties or merchandise sales.

During fiscal years ended 2013 and 2012, under the Co-promotion agreement, 2 of the touring exhibitions related to “Bodies” were promoted by S2BN.

Management fee revenue increased due to the management of the AEI properties for fiscal 2013. This is a new revenue stream in fiscal 2013.

Cost of Revenue.During fiscal year 2013 cost of revenue as a percent of revenue was 53.5%, as compared to 59.0% for fiscal 2012, as reflected in the following table:


	Cost of Revenue
	2013			2012			% Change
	(In thousands, except percentages)
Exhibition costs
Production	$	598		$	978			(38.9	)%
Operating Expenses		11,643			11,903			(2.2	)%
Marketing		5,401			4,440			21.6	%

		17,642			17,321			1.9	%

Exhibition expense as percent of exhibition revenue		59.6	%		61.3	%
Cost of merchandise		3,456			1,383			149.9	%
Cost of merchandise as percent of merchandise revenue		38.5	%		40.3	%

Total	$	21,098		$	18,704			12.8	%

Cost of revenue as a percent of total revenue		53.5	%		59.0	%

Our exhibition costs of $17.6 million increased 1.9% or $0.3 million compared to the prior year, due to higher marketing cost only partially offset by an lower production and operating costs.

Cost of merchandise as a percent of merchandise revenue decreased from 40.3% in fiscal 2012 to 38.5% in fiscal 2013 primarily due to better vendor contracts.

Gross Profit.During the year ended February 28, 2013, our total gross profit increased by $5.4 million or 41.2% as compared to the prior fiscal year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above. However, gross margin and net income was negatively affected by approximately $0.8 million and $0.7 million, respectively, due to Hurricane Sandy and subsequent action by governmental authorities and the landlord, which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This amount reflects the unavoidable expenses incurred in late October through February 2013, during which no revenue was earned at the Seaport.

Operating Expenses.Operating expense decreased 11.0% during fiscal 2013 compared to fiscal 2012. The following table illustrates operating expenses and percentage changes for fiscal 2013 vs. fiscal 2012.


	Operating expenses
	2013			2012		% Change
	(in thousands, except percentage data)
General and administrative	$	13,355		$	12,444		7.3	%
Depreciation and amortization		3,419			3,817		(10.4	)%
Net loss on disposal of assets		134			256		(47.7	)%
Impairment of intangibles and property and equipment		—			1,348		(100.0	)%
Contract and legal settlements		(309	)		783		(139.5	)%

Total	$	16,599		$	18,648		(11.0	)%

General and Administrative Expense.As reflected by the table above, the significant increase in G&A expense related to compensation related expenses which was only partially offset by the decrease in artifact expenses.

Depreciation and Amortization.Our depreciation and amortization expense decreased by $0.4 million to $3.4 million. The decrease is primarily attributable to assets that have been fully depreciated or amortized. This was partially offset by an increase in amortization related to the 2D and 3D film assets as well as the gaming and other application assets being placed in service in fiscal 2013.

Net Loss From Disposition of Assets.We incurred a loss of $134 thousand in fiscal 2013, due to losses on Bodies leasehold improvements related to Hurricane Sandy and subsequent action by governmental authorities and the landlord in our New York location.We incurred a loss of $256 thousand in fiscal 2012, mainly due to losses on Titanic exhibitry disposed of in fiscal 2012.

Impairment of Intangibles assets and property and equipment.We incurred an impairment of intangible assets and property and equipment of $1.3 million in fiscal year 2012.

On August 25, 2011, the Company notified Playboy that the joint venture was terminating the Agreement pursuant to the unilateral termination right the Company had negotiated, which included the waiver of the $300 thousand termination fee otherwise payable if the termination was effected prior to the end of August, 2011. While the Agreement provided that the joint venture would still owe Playboy a final license fee installment of $150 thousand despite any such termination, the Company and S2BN also contended that Playboy had previously breached the License Agreement, and the joint venture accordingly reserved its rights to pursue all remedies and damages (which would include withholding any such final license fee installment). Due to the termination of the agreement with Playboy, the Company recorded an impairment charge of $217 thousand for Playboy licenses, net of accumulated amortization. The Company also recorded an impairment charge of $141 thousand for construction in progress, comprised of expenses incurred in the creation of the Playboy exhibit. The total impairment charge of $358 thousand related to Playboy is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012.

In February 2012, the Company decided to close its Atlanta, Georgia “Dialog in the Dark” exhibition effective March 6, 2012, which resulted in an impairment charge of $60 thousand for exhibition licenses and $282 thousand of property and equipment related our “Dialog in the Dark” exhibitions as these assets were determined to no longer be of use to the Company. In addition, as part of our annual impairment testing of long-lived assets it was determined that the property and equipment related to our New York City “Dialog in the Dark” exhibition were impaired resulting in an impairment charge of $648 thousand. The total impairment charge of $990 thousand related to “Dialog in the Dark” is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012. At this time the Company has no future plans for its “Dialog in the Dark” exhibition.

Contract and Legal Settlements.In April 2013, the Company received a payment from a venue partner in settlement of a contractual dispute. As this amount had not been accrued as exhibition revenue during the term of the presentation of the exhibition, it is included in Contract and Legal Settlements for the fiscal year ended February 28, 2013. On April 4, 2013, the Company entered into a confidential settlement agreement with Marmargar, Inc. under which the lawsuit was been dismissed. On August 16, 2011, we entered into an agreement to fully settle all claims of Sports Immortals, Inc. against the Company. The agreement called for a cash payment of $950 thousand. As we had previously accrued $167 thousand for this legal action in fiscal 2010, we recorded an additional $783 thousand of expense in fiscal 2012.

Income/(loss) from Operations We realized income from operations of $1.8 million in fiscal 2013 as compared to a loss from operations of $5.6 million for fiscal 2012. This is mainly due to higher revenue from ticket and merchandise sales and the decrease of $1.3 million in impairment losses and $1.1 million related to contract and legal settlements as compared to prior year.

Other Expense.In fiscal 2013, other expense totaled $577 thousand, primarily comprised of $681 thousand in interest expense primarily related to the AEI transactions, offset partially by an $81 thousand gain on debt modification related to the purchase of a Titanic exhibition in Orlando, Florida. During fiscal 2012, other expense totaled $23 thousand, primarily composed of $33 thousand in interest expense.

Income tax expense. Our provision for income tax expense for the year ended February 28, 2013 was $193 thousand compared to a $176 thousand for the year ended February 29, 2012. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax. The provision for income taxes for the year ended February 29, 2012 mainly related to foreign tax expense for our London and Singapore Titanic exhibitions.

Net income/(loss.)We realized net income of $1.1 million for the fiscal year ended February 28, 2013 as compared to a net loss of $5.6 million for the same period last year. In the current year, a net loss of $0.7 million is attributable to the closing of our location at The South Street Seaport in late October thorough February 2013.

RMS Titanic Segment

An analysis of operations for our RMS Titanic segment for fiscal 2013 and fiscal 2012, with percent changes for 2013 vs. 2012 follows:


	Year Ended
	2013			2012			% Change
	(In thousands, except percentages)
Revenue	$	2,353		$	1,440			63.4	%
Cost of revenue (exclusive of depreciation and amortization)		—			—			—	%

Gross profit		2,353			1,440			63.4	%

Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		1,398			1,619			(13.7	)%

Income/(loss) from operations		955			(179	)		633.5	%

Other income		—			—			—	%

Income/(loss) before income tax		955			(179	)		633.5	%

Income tax expense		86			—			N/A	%
Effective tax rate		9.0	%		0.0	%

Net income/(loss)	$	869		$	(179	)		585.5	%

Revenue.During the fiscal year 2013, total revenue increased by $913 thousand, or 63.4%, to $2.4 million compared to the fiscal year 2012 due to the increase in revenues from Titanic exhibitions and the increase in merchandise sales. PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic exhibition revenues increased to $23.5 million from $14.4 million, royalty revenue increased accordingly.

Gross Profit. Gross profit increased based on the 63.4% increase in revenue discussed above.

Operating Expenses. Operating expenses decreased 13.7% during fiscal 2013 as compared to fiscal 2012 due to a revision in the formula used to calculate the administrative fee charged to RMS Titanic.

Income tax expense. We recorded income tax of $86 thousand for fiscal 2013 as compared to $0 thousand in income tax for fiscal 2012. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates to the Federal Alternative Minimum Tax.

Net income (loss). Income for the year ended February 28, 2013 was $869 thousand compared to a loss of $179 thousand for the same period in the prior year based on the items discussed above.

Restated – Results of Operations

The Quarter Ended May 31, 2012 Compared to the Quarter Ended May 31, 2011

An analysis of our condensed consolidated Statements of Operations for the three months ended May 31, 2012 and 2011, with percent changes, follows:


	Analysis of Condensed Consolidated Statements of Operations
							Percent Change
	May 31, 2012			May 31, 2011			2012 vs. 2011
	(In thousands, except percentages and per share data)
	(Restated)						(Restated)
Revenue	$	11,460		$	9,724			17.9	%
Cost of revenue (exclusive of depreciation and amortization)		5,188			4,186			23.9	%

Gross profit		6,272			5,538			13.3	%

Gross profit as a percent of revenue		54.7	%		57.0	%
Operating expenses		4,850			4,467			8.6	%

Income from operations		1,422			1,071			32.8	%
Interest expense		(110	)		—			100.0	%
Other income		12			7			71.4	%

Income before income tax		1,324			1,078			22.8	%
Income tax expense		112			—			100.0	%

Effective tax rate		8.5	%		0.0	%
Net income		1,212			1,078			12.4	%
Less: Net (income)/loss attributable to non-controlling interests		(13	)		25			152.0	%

Net income attributable to the shareholders of Premier Exhibitions, Inc.	$	1,199		$	1,103			8.7	%

Income per share:
Basic income per share	$	0.03		$	0.02

Diluted net income per share	$	0.02		$	0.02

Revenue. During the three months ended May 31, 2012, total revenue increased by $1.7 million, or 17.9%, to $11.5 million compared to the same period last year, as reflected in the following table.


	Revenues (in thousands)
	Three Months Ended
	May 31,
	2012		2011
Exhibition Revenue
Admissions revenue	$	7,513	$	7,613
Non-refundable license fees for current exhibitions		1,476		1,058

Total Exhibition revenue		8,989		8,671
Merchandise Revenue		2,310		1,053
Management Fee		111		—
Licensing Fee		50		—

Total Revenue	$	11,460	$	9,724

Key Non-financial Measurements
Number of venues presented		18		17
Operating days		1,361		1,213
Attendance (in thousands)		824		669
Average attendance per operating day		605		551
Average ticket price at permanants, museums and other locations	$	15.06	$	16.29
Average retail per attendee	$	3.12	$	2.16

These key non-financial measurements do not include the AEI properties.

Exhibition revenue

Exhibition revenue increased by $0.3 million to $9.0 million mainly driven by the increase in the number of exhibition from 17 in the first quarter of fiscal 2012 to 18 in the first quarter of fiscal 2013. We do not recognize exhibition revenue or merchandise revenue for the four exhibitions purchased from AEI but instead receive a management fee for managing these properties.

As of May 31, 2012, our portfolio of touring exhibitions contains the following:


	Stationary		Touring		Total
“Titanic: The Artifact Exhibiton and “Titanic: The Experience”		3		6		9
“Bodies... The Exhibition” and “Bodies Revealed”		2		5		7
“Dialog in the Dark”		2		—		2
Exhibitions under Management
“Tutankhamun and the Golden Age of the Pharoahs”		—		1		1
“Cleopatra: The Exhibition”		—		1		1
“Real Pirates”		—		1		1
“America I AM”		—		1		1

Total Exhibitions		7		15		22

With 18 exhibitions presented, the Company experienced a corresponding increase in attendance from approximately 669,000 in the first quarter of fiscal 2012 to approximately 824,000 in the first quarter of fiscal 2013. We attribute this increase in exhibitions and attendance in large part to the to the Titanic’s 100 year anniversary. Revenue from self-run exhibitions was 69% of total revenue in the first quarter of fiscal 2013, compared to 76% of revenue for the first quarter of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits and 0% of touring exhibits for the first quarter of fiscal 2013, as compared to 80% stationary exhibits and 20% touring exhibits for the first quarter of fiscal 2012. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $1.3 million to $2.3 million for the three months ended May 31, 2012. This increase is primarily the result of online merchandise sales on our e-commerce website, which was re-launched during the third quarter of fiscal 2012, an increase in Titanic exhibitions from 6 in the first quarter of fiscal 2012 to 9 in the first quarter of 2013, and special events with a direct response marketer, and an online and television retailer, to produce, market, and sell Titanic-themed merchandise in order to capitalize on the 100 year anniversary of the sinking of the Titanic.

Management fee revenue increased due to the management of the AEI properties from April 20, 2012 through May 31, 2012. This is a new revenue stream in fiscal 2013.

Licensing revenue increased due to revenue received for the use of our intellectual property by a magazine during the first quarter of fiscal 2013.

Cost of revenue. During the three months ended May 31, 2012, total cost of revenue increased by $1.0 million, or 23.9%, to $5.2 million compared to the same period last year, as reflected in the following table.


	Cost of Revenue
	May 31,
	2013			2012			%Change
	(in thousands, except percentages)
Exhibition costs
Production	$	147		$	367			(59.9	)%
Operating Expenses		2,481			2,863			(13.3	)%
Marketing		1,762			618			185.1	%

		4,390			3,848			14.1	%

Exhibition expense as percent of exhibition revenue		48.8	%		44.4	%
Cost of merchandise		798			338			136.1	%

Cost of merchandise as percent of merchandise revenue		34.5	%		32.1	%

Total	$	5,188		$	4,186			23.9	%

Percent of total revenue		45.3	%		43.0	%

Our exhibition costs of $4.4 million for the three months ended May 31, 2012 increased 14.1%, or $0.5 million, compared to the same period last year due mainly to an increase in marketing expense only partially offset by decreases in production and operating expenses.

Cost of merchandise as a percent of merchandise revenue increased from 32.1% in the first quarter of fiscal 2012 to 34.5% in the first quarter of fiscal 2013 primarily due to higher freight and handling costs.

Gross profit. During the three months ended May 31, 2012, our total gross profit increased by $0.8 million as we generated a gross profit of $6.3 million compared to $5.5 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above.

Operating expenses. Our general and administrative expenses increased by $524 thousand to $3.9 million for the three months ended May 31, 2012 compared to the same period last year. The increase relates mainly to higher professional fees related to the AEI acquisition and an increase in severance and bonus expense.

Our depreciation and amortization expenses decreased $141 thousand in the three months ended May 31, 2012 compared to the same period last year. The decrease is primarily attributable to lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

No assets were disposed of in the first quarter of fiscal 2013 or 2012.

Income from operations. We realized income from operations of $1.4 million in the first quarter of fiscal 2013 as compared to $1.1 million for the first quarter of fiscal 2012 mainly due to $1.7 million in higher revenue offset primarily by $1.0 million in higher cost of revenues and $0.4 million in higher operating expenses.

Other Income (expense). We recognized interest expense of $110 thousand on our notes payable during the first quarter of fiscal 2013 as compared to $0 in the first quarter of fiscal 2012.

Income tax expense. We recorded income tax expense for the three months ended May 31, 2012 of $112 thousand as compared to no income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net income attributable to non-controlling interest. This represents the income AEI earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income. We realized net income of $1.2 million for the three months ended May 31, 2012 as compared to $1.1 million for the same period last year.

Income per share. Basic income per common share for the quarters ended May 31, 2012 and 2011 was $0.03 and $0.02, respectively. Diluted income per share for the quarters ended May 31, 2012 and 2011 was $0.02 and $0.02, respectively. The basic and fully diluted weighted average shares outstanding for the three months ended May 31, 2012 and 2011 were as follows:


	Three Months Ended May 31,
	2012		2011
Basic weighted-average shares outstanding		47,938,614		47,240,449
Effect of dilutive stock options and warrants		1,156,593		721,663

Diluted weighted-average shares outstanding		49,095,207		47,962,112

The Quarter Ended May 31, 2012 Compared to the Quarter Ended May 31, 2011 – Segment results

Exhibition Management Segment

An analysis of operations for our Exhibition Management segment for the three months ended May 31, 2012 and 2011, with percent changes, follows:


	Three Months Ended May 31,						% Change
	2012			2011
	(In thousands, except percentages)
	(Restated)						(Restated)
Revenue	$	11,460		$	9,724			17.9	%
Cost of revenue (exclusive of depreciation and amortization)		5,875			4,640			26.6	%

Gross profit		5,585			5,084			9.9	%

Gross profit as a percent of revenue		48.7	%		52.3	%
Operating expenses		4,239			4,001			5.9	%

Income from operations		1,346			1,083			24.3	%

Other (expense)/income		(98	)		7			1,500.0	%

Income before income tax		1,248			1,090			14.5	%
Income tax expense		112			—			100.0	%

Effective tax rate		9.0	%		0.0	%
Net income		1,136			1,090			4.2	%
Less: Net (income)/ loss attributable to non-controlling interest		(13	)		25			152.0	%

Net income attributable to the shareholders of Premier Exhibitions, Inc.	$	1,123		$	1,115			0.7	%


	Revenue (in thousands)
	Three Months Ended
	May 31,
	2012		2011
Exhibition Revenue
Admissions revenue	$	7,513	$	7,613
Non-refundable license fees for current exhibitions		1,476		1,058

Total Exhibition revenue		8,989		8,671
Merchandise Revenue		2,310		1,053
Management Fee		111		—
Licensing Fee		50		—

Total Revenue	$	11,460	$	9,724

Key Non-financial Measurements
Number of venues presented		18		17
Operating days		1,361		1,213
Attendance (in thousands)		824		669
Average attendance per operating day		605		551
Average ticket price at permanent, museums and other locations	$	15.06	$	16.29
Average retail per attendee	$	3.12	$	2.16

These key non-financial measurements do not include the AEI properties or merchandise sales.

Exhibition revenue

Exhibition revenue increased by $0.3 million to $9.0 million mainly driven by the increase in the number of exhibitions from 17 in the first quarter of fiscal 2012 to 18 in the first quarter of fiscal 2013. We do not recognize exhibition revenue or merchandise revenue for the four exhibitions purchased from AEI but instead receive a management fee for managing these properties.

As of May 31, 2012, our portfolio of touring exhibitions contains the following:


	Stationary		Touring		Total
“Titanic: The Artifact Exhibiton and “Titanic: The Experience”		3		6		9
“Bodies... The Exhibition” and “Bodies Revealed”		2		5		7
“Dialog in the Dark”		1		—		1
Exhibitions under Management
“Tutankhamun and the Golden Age of the Pharoahs”		—		1		1
“Cleopatra: The Exhibition”		—		1		1
“Real Pirates”		—		1		1
“America I AM”		—		1		1

Total Exhibitions		6		15		21

With 18 exhibitions presented, the Company experienced a corresponding increase in attendance from approximately 669,000 in the first quarter of fiscal 2012 to approximately 824,000 in the first quarter of fiscal 2013. We attribute this increase in exhibitions and attendance in large part to the Titanic’s 100 year anniversary. Revenue from self-run exhibitions was 69% of total revenue in the first quarter of fiscal 2013, compared to 76% of revenue for the first quarter of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits and 0% of touring exhibits for the first quarter of fiscal 2013, as compared to 80% stationary exhibits and 20% touring exhibits for the first quarter of fiscal 2012. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $1.3 million to $2.3 million for the quarter ended May 31, 2012. This increase is primarily the result of online merchandise sales on our e-commerce website, which was re-launched during the third quarter of fiscal 2012, an increase in Titanic exhibitions from 6 in the first quarter of fiscal 2012 to 9 in the first quarter of 2013, and special events with a direct response marketer, and an online and television retailer, to produce, market, and sell Titanic-themed merchandise in order to capitalize on the 100 year anniversary of the sinking of the Titanic.

Management fee revenue increased due to the management of the AEI properties from April 20, 2012 through May 31, 2012. This is a new revenue stream in fiscal 2013.

Licensing revenue increased due to revenue received for the use of our intellectual property by a magazine during the first quarter of fiscal 2013.

Cost of revenue. During the three months ended May 31, 2012, total cost of revenue increased by $1.2 million, or 26.6%, to $5.9 million compared to the same period last year as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent Change
	May 31, 2012			May 31, 2011			2012 vs. 2011
Exhibition costs
Production	$	147		$	367			(59.9	)%
Operating Expenses		3,168			3,317			(4.5	)%
Marketing		1,762			618			185.1	%

		5,077			4,302			18.0	%

Exhibition expense as percent of exhibition revenue		56.5	%		49.6	%
Cost of merchandise		798			338			136.1	%
Cost of merchandise as percent of merchandise revenue		34.5	%		32.1	%

Total	$	5,875		$	4,640			26.6	%

Cost of revenue as a percent of total revenue		51.3	%		47.7	%

Gross profit. During the three months ended May 31, 2012, our total gross profit increased by $0.5 million, as in the first quarter of fiscal 2013 we generated a gross profit of $5.6 million compared to a gross profit of $5.1 million for the same quarter of last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue, as outlined above.

Operating expenses. Our general and administrative expenses increased by $408 thousand to $3.4 million in the first quarter of fiscal 2013 compared to the same period in fiscal 2012. The increase relates mainly to higher professional fees related to the AEI acquisition and an increase in severance and bonus expense.

Our depreciation and amortization expenses decreased $170 thousand in the three months ended May 31, 2012 compared to the same period last year. The decrease is primarily attributable to lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

No assets were disposed of in the first quarter of fiscal 2013 or 2012.

Income from operations. We realized income from operations of $1.3 million in the first quarter of fiscal 2013 as compared to $1.2 million for the first quarter of fiscal 2012 mainly due to $1.7 million in higher revenue offset slightly by $1.2 million in higher cost of revenues and $0.2 million in higher operating expenses.

Other Income (expense). We recognized interest expense of $110 thousand on our notes payable during the first quarter of fiscal 2013 as compared to $0 in the first quarter of fiscal 2012.

Net income. We realized net income of $1.1 million for the three months ended May 31, 2012 as compared to $1.1 million for the same period last year.

RMS Titanic Segment

An analysis of operations for our RMS Titanic segment for the three months ended May 31, 2012 and 2011 with percent changes, follows:


	Three Months Ended May 31,						% Change
	2012			2011
	(In thousands except percentages)
Revenue	$	687		$	454			51.3	%
Cost of revenue (exclusive of depreciation and amortization)		—			—			—	%

Gross profit		687			454			51.3	%

Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		611			466			31.1	%

Net income (loss)	$	76		$	(12	)		733.3	%

Revenue. During the three months ended May 31, 2012, total revenue increased by $233 thousand, or 51.3%, to $0.7 million compared to the same period in the prior year due to the increase in revenues from Titanic exhibitions and the increase in merchandise sales. PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic sales. As Titanic revenues increased to $6.9 million from $4.5 million, royalty revenue increased accordingly.

Gross Profit. Gross profit increased based on the 51.3% increase in revenue discussed above.

Operating Expenses. Operating expenses for the three months ended May 31, 2012 increased 31.1% from the same period in the prior year mainly due to an increase in severance and bonus expense.

Net income (loss). Income for the three months ended May 31, 2012 was $76 thousand compared to a loss of $12 thousand for the same period in the prior year based on the items discussed above.

Restated – Results of Operations

The Quarter Ended August 31, 2012 Compared to the Quarter Ended August 31, 2011

An analysis of our condensed consolidated statements of operations for the three months ended August 31, 2012 and 2011, with percent changes, follows:


	Analysis of Condensed Consolidated Statements of Operations
							Percent Change
	August 31, 2012			August 31, 2011			2012 vs. 2011
	(In thousands, except percentages and per share data)
	(Restated)						(Restated)
Revenue	$	13,430		$	8,215			63.5	%
Cost of revenue (exclusive of depreciation and amortization)		5,242			4,689			11.8	%

Gross profit		8,188			3,526			132.2	%

Gross profit as a percent of revenue		61.0	%		42.9	%
Operating expenses		5,053			5,502			(8.2	)%

Income (loss) from operations		3,135			(1,976	)		258.7	%
Other income (expense)		(146	)		7			(2,185.7	)%

Income (loss) before income tax		2,989			(1,969	)		251.8	%
Income tax expense		116			39			197.4	%

Effective tax rate		3.9	%		-2.0	%
Net income (loss)		2,873			(2,008	)		243.1	%
Less: Net (income) loss attributable to non-controlling interest		(194	)		214			190.7	%

Net income (loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	2,679		$	(1,794	)		249.3	%

Net income (loss) per share:
Basic income (loss) per share	$	0.06		$	(0.04	)

Diluted net income (loss) per share	$	0.06		$	(0.04	)

Revenue.During the quarter ended August 31, 2012, total revenue increased by $5.2 million, or 63.5% to $13.4 million compared to the same period last year, as reflected in the following table:


	Revenue (in thousands)
	Three Months Ended
	August 31,
	2012		2011
Exhibition Revenue
Admissions revenue	$	9,268	$	6,600
Non-refundable license fees for current exhibitions		1,314		738

Total Exhibition revenue		10,582		7,338
Merchandise revenue		2,589		877
Management fee		250		—
Licensing fee		9		—

Total Revenue	$	13,430	$	8,215

Key Non-financial Measurements
Number of venues presented		18		17
Operating days		1,598		1,099
Attendance (in thousands)		924		498
Average attendance per operating day		578		453
Average ticket price at permanent, museums and other locations	$	14.32	$	17.54
Average retail per attendee	$	3.21	$	2.32

These key non-financial measurements do not include the AEI properties or merchandise sales.

Exhibition revenue increased by $3.2 million to $10.6 million mainly driven by an increase in attendance at the Company’s exhibits. We do not recognize exhibition revenue for the four AEI exhibitions but instead receive a management fee for managing these properties.

With 18 exhibits presented, the Company experienced a corresponding increase in attendance from 497,547 in the second quarter of fiscal 2012 to 924,129 in the second quarter of fiscal 2013. We attribute this increase in exhibitions and attendance in large part to better venue selection and to a lesser extent the Titanic’s 100th year anniversary. Revenue from self-run exhibitions was 54.9% of total revenue in the second quarter of fiscal 2013, compared to 79.8% of revenue for the second quarter of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits for the second quarter of fiscal 2013, as compared to 71.1% stationary exhibits and 28.9% touring exhibits for the second quarter of fiscal 2012. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $1.7 million to $2.6 million for the three months ended August 31, 2012. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary and the purchase of the assets of Exhibit Merchandising, LLC during the second quarter of fiscal 2013. Sales related to these merchandising assets were approximately $550 thousand in the second quarter of fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for the second quarter of fiscal 2013. This is a new revenue stream in fiscal 2013.

Cost of revenue. During the three months ended August 31, 2012, total cost of revenue increased by $553 thousand, or 11.8%, to $5.2 million compared to the same period last year, as reflected in the following table.


	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent Change
	August 31, 2012			August 31, 2011			2012 vs. 2011
Exhibition costs
Production	$	196		$	91			115.4	%
Operating Expenses		2,477			2,697			(8.2	)%
Marketing		1,584			1,606			(1.4	)%

		4,257			4,394			(3.1	)%

Exhibition expense as percent of exhibition revenue		40.2	%		59.9	%
Cost of merchandise		985			295			233.9	%
Cost of merchandise as percent of merchandise revenue		38.0	%		33.6	%

Total	$	5,242		$	4,689			11.8	%

Cost of revenue as a percent of total revenue		39.0	%		57.1	%

Our exhibition costs of $4.3 million for the three months ended August 31, 2012 decreased by 3.1%, or $137 thousand, compared to the same period last year as all exhibition costs categories remained relatively flat.

Cost of merchandise as a percent of merchandise revenue increased from 33.6% in the second quarter of fiscal 2012 to 38.0% in the second quarter of fiscal 2013 primarily due to higher freight and handling costs.

Gross profit. During the three months ended August 31, 2012, our total gross profit increased by $4.7 million as we generated a gross profit of $8.2 million compared to $3.5 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above.

Operating expenses. Our general and administrative expenses increased by $829 thousand to $4.2 million for the three months ended August 31, 2012 compared to the same period last year. The increase relates mainly to compensation related expenses.

Our depreciation and amortization expenses decreased $138 thousand in the three months ended August 31, 2012 compared to the same period last year. The decrease is primarily attributable to lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

During the second quarter of 2011 we recognized an impairment charge related to the termination of our License Agreement with Playboy. Due to the termination of the License Agreement with Playboy, we recorded an impairment charge of $217 thousand for Playboy licenses net of accumulated depreciation and an impairment charge of $141 thousand for construction in progress comprised of expenses incurred in the creation of the Playboy exhibit. Of the total impairment of $358 thousand, $197 thousand was allocated to the non-controlling interest and therefore the net impact of the impairment to Premier is $161 thousand.

Additionally, on August 16, 2011, we entered into an agreement to fully settle all claims of Sports Immortals against the Company. The agreement calls for a cash payment of $950 thousand. As we had previously accrued $167 thousand for this legal action in fiscal 2010, we recorded an additional $783 thousand of expense in the second quarter of fiscal 2012.

Income (loss) from operations.We realized income from operations of $3.1 million in the second quarter of fiscal 2013 as compared to a loss from operations of $2.0 million for the second quarter of fiscal 2012. This is mainly due to higher income only partially offset by higher expenses and the decrease of $0.4 million in impairment losses and $0.8 million related to legal settlements as compared to prior year.

Other Income (expense).We recognized interest expense of $222 thousand on our notes payable during the second quarter of fiscal 2013 as compared to $0 in the second quarter of fiscal 2012. This was only partially offset by a $71 thousand gain on debt modification in the second quarter of fiscal 2013.

Income tax expense.We recorded income tax expense for the three months ended August 31, 2012 of $116 thousand as compared to $39 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest.This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income (loss).We realized net income of $2.7 million for the three months ended August 31, 2012 as compared to a net loss of $1.8 million for the same period last year.

The Quarter Ended August 31, 2012 Compared to the Quarter Ended August 31, 2011 – Segment results

Exhibition Management Segment

An analysis of operations for our Exhibition Management segment for the three months ended August 31, 2012 and 2011, with percent changes, follows:


	Three Months Ended August 31,						% Change
	2012			2011
	(In thousands, except percentages)
	(Restated)						(Restated)
Revenue	$	13,430		$	8,215			63.5	%
Cost of revenue (exclusive of depreciation and amortization)		6,052			5,022			20.5	%

Gross profit		7,378			3,193			131.1	%

Gross profit as a percent of revenue		54.9	%		38.9	%
Operating expenses		4,947			5,138			(3.7	)%

Income (loss) from operations		2,431			(1,945	)		(225.0	)%

Other income (expense)		(146	)		7			(2,185.7	)%

Income before income tax		2,285			(1,938	)		217.9	%
Income tax expense		73			39			87.2	%

Effective tax rate		3.2	%		-2.0	%
Net income (loss)		2,212			(1,977	)		211.9	%
Less: Net (income)/ loss attributable to non-controlling interest		(194	)		214			190.7	%

Net income (loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	2,018		$	(1,763	)		214.5	%

Revenue.During the quarter ended August 31, 2012, total revenue increased by $5.2 million, or 63.5% to $13.4 million compared to the same period last year, as reflected in the following table.


	Revenue (in thousands)
	Three Months Ended
	August 31,
	2012		2011
Exhibition Revenue
Admissions revenue	$	9,268	$	6,600
Non-refundable license fees for current exhibitions		1,314		738

Total Exhibition revenue		10,582		7,338
Merchandise revenue		2,589		877
Management fee		250		—
Licensing fee		9		—

Total Revenue	$	13,430	$	8,215

Key Non-financial Measurements
Number of venues presented		18		17
Operating days		1,598		1,099
Attendance (in thousands)		924		498
Average attendance per operating day		578		453
Average ticket price at permanent, museums and other locations	$	14.32	$	17.54
Average retail per attendee	$	3.21	$	2.32

These key non-financial measurements do not include the AEI properties or merchandise sales.

With 18 exhibits presented, the Company experienced a corresponding increase in attendance from 497,547 in the second quarter of fiscal 2012 to 924,129 in the second quarter of 2013. We attribute this increase in exhibitions and attendance in large part to better venue selection and to a lesser extent the Titanic’s 100th year anniversary. Revenue from self-run exhibitions was 54.9% of total revenue in the second quarter of fiscal 2013, compared to 79.8% of revenue for the second quarter of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits for the second quarter of fiscal 2013, as compared to 71.1% stationary exhibits and 28.9% touring exhibits for the second quarter of fiscal 2012. These comparisons exclude the AEI portfolio.

Management fee revenue increased due to the management of the AEI properties for the second quarter of fiscal 2013. This is a new revenue stream in fiscal 2013.

Cost of revenue. During the three months ended August 31, 2012, total cost of revenue increased by 1.0 million, or 20.5%, to $6.1 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent Change
	August 31, 2012			August 31, 2011			2012 vs. 2011
Exhibition costs
Production	$	196		$	91			115.4	%
Operating Expenses		3,287			3,030			8.5	%
Marketing		1,584			1,606			(1.4	)%

		5,067			4,727			7.2	%

Exhibition expense as percent of exhibition revenue		47.9	%		64.4	%
Cost of merchandise		985			295			233.9	%
Cost of merchandise as percent of merchandise revenue		38.0	%		33.6	%

Total	$	6,052		$	5,022			20.5	%

Cost of revenue as a percent of total revenue		45.1	%		61.1	%

Our exhibition costs of $5.1 million for the three months ended August 31, 2012 increased by 7.2%, or $340 thousand, compared to the same period last year as RMS Titanic royalty expense increased by $477 thousand.

Cost of merchandise as a percent of merchandise revenue increased from 38.0% in the second quarter of fiscal 2012 to 33.6% in the second quarter of fiscal 2013 primarily due to higher freight and handling costs.

Gross profit. During the three months ended August 31, 2012, our total gross profit increased by $4.2 million as we generated a gross profit of $7.4 million compared to $3.2 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above.

Operating expenses. Our general and administrative expenses increased by $1.1 million to $4.1 million for the three months ended August 31, 2012 compared to the same period last year. The increase relates mainly to compensation related expenses and a decrease in administrative fees charged to our RMS Titanic segment.

Our depreciation and amortization expenses decreased $109 thousand in the three months ended August 31, 2012 compared to the same period last year. The decrease is primarily attributable to lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

Income (loss) from operations. We realized income from operations of $2.4 million in the second quarter of fiscal 2013 as compared to a loss from operations of $1.9 million for the second quarter of fiscal 2012. This is mainly due to higher income only partially offset by higher expenses and the decrease of $0.4 million in impairment losses and $0.8 million related to legal settlements as compared to prior year.

Other Income (expense). We recognized interest expense of $222 thousand on our notes payable during the second quarter of fiscal 2013 as compared to $0 in the second quarter of fiscal 2012. This was only partially offset by a $71 thousand gain on debt modification in the second quarter of fiscal 2013.

Income tax expense. We recorded income tax expense for the three months ended August 31, 2012 of $73 thousand as compared to $39 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income (loss). We realized net income of $2.0 million for the three months ended August 31, 2012 as compared to a net loss of $1.8 million for the same period last year.

RMS Titanic Segment

An analysis of operations for our RMS Titanic segment for the three months ended August 31, 2012 and 2011 with percent changes, follows:


	Three Months Ended August 31,						% Change
	2012			2011
	*(In thousands, except percentages)*
Revenue	$	810		$	333			143.2	%
Cost of revenue (exclusive of depreciation and amortization)		—			—			—	%

Gross profit		810			333			143.2	%

Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		106			364			(70.9	)%

Income (loss) before tax		704			(31	)		2,371.0	%
Income tax expense		43			—			N/A	%

Net income (loss)	$	661		$	(31	)		2,232.3	%

Revenue. During the three months ended August 31, 2012, total revenue increased by $477 thousand, or 143.2%, to $0.8 million compared to the same period in the prior year due to the increase in revenues from Titanic exhibitions and the increase in merchandise sales. PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic exhibition revenues increased to $8.1 million from $3.3 million, royalty revenue increased accordingly.

Gross Profit. Gross profit increased based on the 143.2% increase in revenue discussed above.

Operating Expenses. Operating expenses for the three months ended August 31, 2012 decreased 70.9% from the same period in the prior year mainly due to a change in the methodology used to calculate the administrative fee charged to RMS Titanic.

Income tax expense. We recorded income tax expense for the three months ended August 31, 2012 of $43 thousand as compared to $0 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates to the Federal Alternative Minimum Tax.

Net income (loss). Income for the three months ended August 31, 2012 was $661 thousand compared to a loss of $31 thousand for the same period in the prior year based on the items discussed above.

The Six Months Ended August 31, 2012 Compared to the Six Months Ended August 31, 2011

An analysis of our condensed consolidated statements of operations for the six months ended August 31, 2012 and 2011, with percent changes, follows:


	Analysis of Condensed Consolidated Statements of Operations
							Percent Change
	August 31, 2012			August 31, 2011			2012 vs. 2011
	(In thousands, except percentages and per share data)
	(Restated)						(Restated)
Revenue	$	24,890		$	17,940			38.7	%
Cost of revenue (exclusive of depreciation and amortization)		10,430			8,875			17.5	%

Gross profit		14,460			9,065			59.5	%

Gross profit as a percent of revenue		58.1	%		50.5	%
Operating expenses		9,903			9,969			(0.7	)%

Income (loss) from operations		4,557			(904	)		604.1	%

Other income		(244	)		14			(1,842.9	)%

Income (loss) before income tax		4,313			(890	)		584.6	%
Income tax expense		228			39			(484.6	)%

Effective tax rate		5.3	%		-4.4	%
Net income (loss)		4,085			(929	)		539.7	%
Less: Net (income) loss attributable to non-controlling interest		(207	)		239			186.6	%

Net income (loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	3,878		$	(690	)		662.0	%

Net income (loss) per share:
Basic income (loss) per share	$	0.08		$	(0.01	)

Diluted net income (loss) per share	$	0.08		$	(0.01	)

Revenue.During the quarter ended August 31, 2012, total revenue increased by $7.0 million, or 38.7% to $24.9 million compared to the same period last year, as reflected in the following table.


	Revenue (in thousands)
	Six Months Ended
	August 31,
	2012		2011
Exhibition Revenue
Admissions revenue	$	16,781	$	14,213
Non-refundable license fees for current exhibitions		2,790		1,797

Total Exhibition revenue		19,571		16,010
Merchandise revenue		4,899		1,930
Management fee		361		—
Licensing fee		59		—

Total Revenue	$	24,890	$	17,940

Key Non-financial Measurements
Number of venues presented		23		20
Operating days		2,959		2,312
Attendance (in thousands)		1,748		1,166
Average attendance per operating day		591		505
Average ticket price at permanent, museums and other locations	$	14.67	$	16.82
Average retail per attendee	$	3.05	$	2.22

These key non-financial measurements do not include the AEI properties or merchandise sales.

Exhibition revenue increased by $3.5 million to $19.6 million mainly driven by an increase in attendance at the Company’s exhibits. We do not recognize exhibition revenue for the four AEI exhibitions but instead receive a management fee for managing these properties.

With 23 exhibits presented, the Company experienced a corresponding increase in attendance from 1,166,494 in the first six months of fiscal 2012 to 1,747,967 in the first six months of 2013. We attribute this increase in exhibitions and attendance in large part to better venue selection and to a lesser extent the Titanic’s 100th year anniversary. Revenue from self-run exhibitions was 61.3% of total revenue in the first half of fiscal 2013, compared to 77.5% of revenue for the first half of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits for the six months ended August 31, 2012, as compared to 84.5% stationary exhibits and 15.5% touring exhibits for the six months ended August 31, 2011. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $3.0 million to $4.9 million for the three months ended August 31, 2012. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary and the purchase of the assets of Exhibit Merchandising, LLC during the second quarter of fiscal 2013. Sales related to these merchandising assets were approximately $550 thousand in the second quarter of fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for the first six months of fiscal 2013. This is a new revenue stream in fiscal 2013.

Licensing fee revenue increased due to revenue received for the use of our intellectual property.

Cost of revenue. During the three months ended August 31, 2012, total cost of revenue increased by $1.6 million, or 17.5%, to $10.4 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Six Months Ended						Percent Change
	August 31, 2012			August 31, 2011			2012 vs. 2011
Exhibition costs
Production	$	343		$	458			(25.1	)%
Operating Expenses		4,958			5,561			(10.8	)%
Marketing		3,346			2,223			50.5	%

		8,647			8,242			4.9	%

Exhibition expense as percent of exhibition revenue		44.2	%		51.5	%
Cost of merchandise		1,783			633			181.7	%
Cost of merchandise as percent of merchandise revenue		36.4	%		32.8	%

Total	$	10,430		$	8,875			17.5	%

Cost of revenue as a percent of total revenue		41.9	%		49.5	%

Our exhibition costs of $8.6 million for the six months ended August 31, 2012 increased by 4.9%, or $405 thousand, compared to the same period last year due mainly to an increase of marketing expense only partially offset by decreases in production and operating expenses.

Cost of merchandise as a percent of merchandise revenue increased from 32.8% in the first half of fiscal 2012 to 36.4% in the first half of fiscal 2013 primarily due to higher freight and handling costs.

Gross profit. During the six months ended August 31, 2012, our total gross profit increased by $5.4 million as we generated a gross profit of $14.5 million compared to $9.1 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above.

Operating expenses. Our general and administrative expenses increased by $1.4 million to $8.2 million for the six months ended August 31, 2012 compared to the same period last year. The increase relates mainly to compensation related expenses.

Our depreciation and amortization expenses decreased $279 thousand in the six months ended August 31, 2012 compared to the same period last year. The decrease is primarily attributable to lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

Income (loss) from operations. We realized income from operations of $4.6 million in the second half of fiscal 2013 as compared to a loss from operations of $0.9 million for the first half of fiscal 2012. This is mainly due to higher income only partially offset by higher expenses and the decrease of $0.4 million in impairment losses and $0.8 million related to legal settlements as compared to prior year.

Other Income (expense). We recognized interest expense of $332 thousand on our notes payable during the first half of fiscal 2013 as compared to $0 in the second quarter of fiscal 2012. This was only partially offset by a $71 thousand gain on debt modification in the first half of fiscal 2013.

Income tax expense. We recorded income tax expense for the six months ended August 31, 2012 of $228 thousand as compared to $39 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income (loss). We realized net income of $3.9 million for the three months ended August 31, 2012 as compared to a net loss of $0.7 million for the same period last year.

The Six Months Ended August 31, 2012 Compared to the Six Months Ended August 31, 2011 – Segment results

Exhibition Management Segment

An analysis of operations for our Exhibition Management segment for the six months ended August 31, 2012 and 2011, with percent changes, follows:


	Six Months Ended August 31,						% Change
	2012			2011
	(In thousands, except percentages)
	(Restated)						(Restated)
Revenue	$	24,890		$	17,940			38.7	%
Cost of revenue (exclusive of depreciation and amortization)		11,927			9,662			23.4	%

Gross profit		12,963			8,278			56.6	%

Gross profit as a percent of revenue		52.1	%		46.1	%
Operating expenses		9,186			9,140			0.5	%

Income (loss) from operations		3,777			(862	)		(538.2	)%

Other income (expense)		(244	)		14			1,842.9	%

Income before income tax		3,533			(848	)		(516.6	)%
Income tax expense		185			39			374.4	%

Effective tax rate		5.2	%		-4.6	%
Net income (loss)		3,348			(887	)		477.5	%
Less: Net (income)/ loss attributable to non-controlling interest		(207	)		239			186.6	%

Net income (loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	3,141		$	(648	)		584.7	%

Revenue.During the quarter ended August 31, 2012, total revenue increased by $7.0 million, or 38.7% to $24.9 million compared to the same period last year, as reflected in the following table:


	Revenue (in thousands)
	Six Months Ended
	August 31,
	2012		2011
Exhibition Revenue
Admissions revenue	$	16,781	$	14,213
Non-refundable license fees for current exhibitions		2,790		1,797

Total Exhibition revenue		19,571		16,010
Merchandise revenue		4,899		1,930
Management fee		361		—
Licensing fee		59		—

Total Revenue	$	24,890	$	17,940

Key Non-financial Measurements
Number of venues presented		23		20
Operating days		2,959		2,312
Attendance (in thousands)		1,748		1,166
Average attendance per operating day		591		505
Average ticket price at permanent, museums and other locations	$	14.67	$	16.82
Average retail per attendee	$	3.05	$	2.22

These key non-financial measurements do not include the AEI properties or merchandise sales.

Merchandise revenue increased $3.0 million to $4.9 million for the six months ended August 31, 2012. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary and the purchase of the assets of Exhibit Merchandising, LLC during the second quarter of fiscal 2013. Sales related to these merchandising assets were approximately $550 thousand in the second quarter of fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for the first six months of fiscal 2013. This is a new revenue stream in fiscal 2013.

Licensing fee revenue increased due to revenue received for the use of our intellectual property.

Cost of revenue. During the three months ended August 31, 2012, total cost of revenue increased by $2.3 million, or 23.4%, to $11.9 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Six Months Ended						Percent Change
	August 31, 2012			August 31, 2011			2012 vs. 2011
Exhibition costs
Production	$	343		$	458			(25.1	)%
Operating Expenses		6,455			6,348			1.7	%
Marketing		3,346			2,223			50.5	%

		10,144			9,029			12.3	%

Exhibition expense as percent of exhibition revenue		51.8	%		56.4	%
Cost of merchandise		1,783			633			181.7	%
Cost of merchandise as percent of merchandise revenue		36.4	%		32.8	%

Total	$	11,927		$	9,662			23.4	%

Cost of revenue as a percent of total revenue		47.9	%		53.9	%

Our exhibition costs of $10.1 million for the six months ended August 31, 2012 increased by 12.3%, or $1.0 million, compared to the same period last year due mainly to an increase of marketing expense, and an increase in RMS Titanic royalty fees only partially offset by decreases in production and other operating expenses.

Gross profit. During the six months ended August 31, 2012, our total gross profit increased by $4.7 million as we generated a gross profit of $13.0 million compared to $8.3 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above.

Operating expenses. Our general and administrative expenses increased by $1.5 million to $7.5 million for the six months ended August 31, 2012 compared to the same period last year. The increase relates mainly to compensation related expenses as well as a decrease in administrative fees charged to our RMS Titanic segment.

Income (loss) from operations. We realized income from operations of $3.8 million in the second half of fiscal 2013 as compared to a loss from operations of $0.9 million for the first half of fiscal 2012. This is mainly due to higher income only partially offset by higher expenses and the decrease of $0.4 million in impairment losses and $0.8 million related to legal settlements as compared to prior year.

Income tax expense. We recorded income tax expense for the six months ended August 31, 2012 of $185 thousand as compared to $39 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income (loss). We realized net income of $3.1 million for the six months ended August 31, 2012 as compared to a net loss of $0.6 million for the same period last year.

RMS Titanic Segment

An analysis of operations for our RMS Titanic segment for the six months ended August 31, 2012 and 2011 with percent changes, follows:


	Six Months Ended August 31,						% Change
	2012			2011
	(In thousands, except percentages)
Revenue	$	1,497		$	787			90.2	%
Cost of revenue (exclusive of depreciation and amortization)		—			—			—	%

Gross profit		1,497			787			90.2	%

Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		717			829			(13.5	)%

Income (loss) before tax		780			(42	)		1,957.1	%
Income tax expense		43			—			N/A	%

Net income (loss)	$	737		$	(42	)		1,854.8	%

Revenue. During the six months ended August 31, 2012, total revenue increased by $710 thousand, or 90.2%, to $1.5 million compared to the same period in the prior year due to the increase in revenues from Titanic exhibitions and the increase in merchandise sales. PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic exhibition revenues increased to $15.0 million from $7.9 million, royalty revenue increased accordingly.

Gross Profit. Gross profit increased based on the 90.2% increase in revenue discussed above.

Operating Expenses. Operating expenses for the six months ended August 31, 2012 decreased 13.5% from the same period in the prior year mainly due to a change in the methodology used to calculate the administrative fee charged to RMS Titanic.

Income tax expense. We recorded income tax expense for the six months ended August 31, 2012 of $43 thousand as compared to $0 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates to the Federal Alternative Minimum Tax.

Net income (loss). Income for the six months ended August 31, 2012 was $737 thousand compared to a loss of $42 thousand for the same period in the prior year based on the items discussed above.

Restated – Results of Operations

The Quarter Ended November 30, 2012 Compared to the Quarter Ended November 30, 2011

An analysis of our condensed consolidated statements of operations for the three months ended November 30, 2012 and 2011, with percent changes, follows:


	Analysis of Condensed Consolidated Statements of Operations
							Percent Change
	November 30, 2012			November 30, 2011			2012 vs. 2011
	(In thousands, except percentages and per share data)
	(Restated)						(Restated)
Revenue	$	7,912		$	6,226			27.1	%
Cost of revenue (exclusive of depreciation and amortization)		4,422			3,958			11.7	%

Gross profit		3,490			2,268			53.9	%

Gross profit as a percent of revenue		44.1	%		36.4	%
Operating expenses		4,222			4,444			(5.0	)%

Loss from operations		(732	)		(2,176	)		66.4	%
Other income (expense)		(198	)		(12	)		1,550.0	%

Loss before income taxes		(930	)		(2,188	)		57.5	%
Income tax expense		49			—			N/A	%

Effective tax rate		-5.3	%		0.0	%
Net income (loss)		(979	)		(2,188	)		55.3	%
Less: Net loss attributable to non-controlling interest		149			—			N/A	%

Net loss attributable to the shareholders of Premier Exhibitions, Inc.	$	(830	)	$	(2,188	)		62.1	%

Net loss per share:
Basic loss per share	$	(0.01	)	$	(0.05	)

Diluted net loss per share	$	(0.01	)	$	(0.05	)

Revenue.During the quarter ended November 30, 2012, total revenue increased by $1.7 million, or 27.1% to $7.9 million compared to the same period last year, as reflected in the following table:


	Revenue (in thousands)
	Three Months Ended
	November 30,
	2012		2011
Exhibition Revenue
Admissions revenue	$	4,876	$	4,827
Non-refundable license fees for current exhibitions		577		755

Total Exhibition revenue		5,453		5,582
Merchandise revenue		2,209		644
Management fee		250		—

Total Revenue	$	7,912	$	6,226

Key Non-financial Measurements
Number of venues presented		26		18
Operating days		1,246		1,244
Attendance (in thousands)		497		373
Average attendance per operating day		399		304
Average ticket price at permanent, museums and other locations	$	16.00	$	16.48
Average retail per attendee	$	3.54	$	1.99

These key non-financial measurements do not include the AEI properties or merchandise sales.

Exhibition revenue decreased by $0.1 million to $5.5 million. During the third quarter of fiscal 2013 revenue was negatively affected by Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This closing is estimated to have decreased revenue by approximately $400,000. We do not recognize exhibition revenue for the four AEI exhibitions but instead receive a management fee for managing these properties.

With 26 exhibits presented, the Company experienced a corresponding increase in attendance from 372,683 in the third quarter of fiscal 2012 to 496,895 in the third quarter of fiscal 2013. We attribute this increase in attendance in large part to better venue selection, having 1 additional touring Bodies and 1 additional stationary Titanic exhibition, and to a lesser extent the Titanic’s 100th year anniversary. Revenue from self-run exhibitions was 58.1% of total revenue in the third quarter of fiscal 2013, compared to 91.8% of revenue for the third quarter of fiscal 2012. During the third quarter of fiscal 2012 and 2013, all of our revenue from self-run exhibitions was derived from stationary exhibits. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $1.6 million to $2.2 million for the three months ended November 30, 2012. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary and the purchase of the assets of Exhibit Merchandising, LLC during the third quarter of fiscal 2013. Sales related to the Exhibit Merchandising, LLC assets were approximately $824 thousand in the third quarter of fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for the third quarter of fiscal 2013. This is a new revenue stream in fiscal 2013.

Cost of revenue. During the three months ended November 30, 2012, total cost of revenue increase by $464 thousand, or 11.7%, to $4.4 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent Change
	November 30, 2012			November 30, 2011			2012 vs. 2011
Exhibition costs
Production	$	198		$	211			(6.2	)%
Operating Expenses		2,485			2,424			2.5	%
Marketing		876			1,054			(16.9	)%

		3,559			3,689			(3.5	)%

Exhibition expense as percent of exhibition revenue		65.3	%		66.1	%
Cost of merchandise		863			269			220.8	%
Cost of merchandise as percent of merchandise revenue		39.1	%		41.8	%

Total	$	4,422		$	3,958			11.7	%

Cost of revenue as a percent of total revenue		55.9	%		63.6	%

Our exhibition costs of $3.6 million for the three months ended November 30, 2012 decreased by 3.5%, or $130 thousand, compared to the same period last year as all exhibition costs categories remained relatively flat.

Cost of merchandise as a percent of merchandise revenue decreased from 41.8% in the third quarter of fiscal 2012 to 39.1% in the third quarter of fiscal 2013 primarily due to lower merchandise costs based on better vendor contracts.

Gross profit. During the three months ended November 30, 2012, our total gross profit increased by $1.2 million as we generated a gross profit of $3.5 million compared to $2.3 million for the same period last year. Our gross profit increased primarily due to the increase in merchandise and management fee revenues as outlined above. However, gross margin and net income was negatively affected by approximately $320 thousand due to Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This amount reflects the unavoidable expenses incurred in late October and November 2012, during which no revenue was earned at the Seaport.

Operating expenses. Our general and administrative expenses decreased by $212 thousand to $3.3 million for the three months ended November 30, 2012 compared to the same period last year. The decrease is primarily due to a decrease in professional fees and office expenses only partially offset by an increase in compensation related expenses.

Our depreciation and amortization expenses were relatively flat with prior year as we placed our 3D and 2D film assets in service during the 3^rd quarter of fiscal 2013. This increase in amortization expense was offset by lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

Loss from operations. We realized loss from operations of $0.7 million in the third quarter of fiscal 2013 as compared to a loss from operations of $2.2 million for the third quarter of fiscal 2012. This is mainly due to higher merchandise and management fee revenues.

Other Income (expense). We recognized interest expense of $211 thousand on our notes payable during the third quarter of fiscal 2013 as compared to $4 thousand in the third quarter of fiscal 2012.

Income tax expense. We recorded income tax expense for the three months ended November 30, 2012 of $49 thousand as compared to $0 in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net loss. We realized net loss of $0.8 million for the three months ended November 30, 2012 as compared to a net loss of $2.2 million for the same period last year. Of this amount, a net loss of $270 thousand is attributable to our location at The South Street Seaport in late October and November 2012.

The Quarter Ended November 30, 2012 Compared to the Quarter Ended November 30, 2011 – Segment results

Exhibition Management Segment

An analysis of operations for our Exhibition Management segment for the three months ended November 30, 2012 and 2011, with percent changes, follows:


	Three Months Ended November 30,						% Change
	2012			2011
	(In thousands, except percentages)
	(Restated)						(Restated)
Revenue	$	7,912		$	6,226			27.1	%
Cost of revenue (exclusive of depreciation and amortization)		4,847			4,233			14.5	%

Gross profit		3,065			1,993			53.8	%

Gross profit as a percent of revenue		38.7	%		32.0	%
Operating expenses		4,038			4,014			0.6	%

Loss from operations		(973	)		(2,021	)		(51.9	)%

Other expense		(198	)		(12	)		1,550.0	%

Loss before income tax		(1,171	)		(2,033	)		42.4	%
Income tax expense		15			—			N/A	%

Effective tax rate		-1.3	%		0.0	%
Net loss		(1,186	)		(2,033	)		41.7	%
Less: Net loss attributable to non-controlling interest		149			—			N/A	%

Net loss attributable to the shareholders of Premier Exhibitions, Inc.	$	(1,037	)	$	(2,033	)		49.0	%

Revenue.During the quarter ended November 30, 2012, total revenue increased by $1.7 million, or 27.1% to $7.9 million compared to the same period last year, as reflected in the following table:


	Revenue (in thousands)
	Three Months Ended
	November 30,
	2012		2011
Exhibition Revenue
Admissions revenue	$	4,876	$	4,827
Non-refundable license fees for current exhibitions		577		755

Total Exhibition revenue		5,453		5,582
Merchandise revenue		2,209		644
Management fee		250		—

Total Revenue	$	7,912	$	6,226

Key Non-financial Measurements
Number of venues presented		26		18
Operating days		1,246		1,244
Attendance (in thousands)		497		373
Average attendance per operating day		399		304
Average ticket price at permanent, museums and other locations	$	16.00	$	16.48
Average retail per attendee	$	3.54	$	1.99

These key non-financial measurements do not include the AEI properties or merchandise sales.

With 26 exhibits presented, the Company experienced a corresponding increase in attendance from 372,683 in the third quarter of fiscal 2012 to 496,895 in the third quarter of fiscal 2013. We attribute this increase in attendance in large part to better venue selection, having 1 additional touring Bodies and 1 additional stationary Titanic exhibition, and to a lesser extent the Titanic’s 100th year anniversary Revenue from self-run exhibitions was 58.1% of total revenue in the third quarter of fiscal 2013, compared to 91.8% of revenue for the third quarter of fiscal 2012. During the third quarter of fiscal 2012 and 2013, all of our revenue from self-run exhibitions was derived from stationary exhibits. These comparisons exclude the AEI portfolio.

Management fee revenue increased due to the management of the AEI properties for the third quarter of fiscal 2013. This is a new revenue stream in fiscal 2013.

Cost of revenue. During the three months ended November 30, 2012, total cost of revenue increased by $614 thousand, or 14.5%, to $4.8 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent Change
	November 30, 2012			November 30, 2011			2012 vs. 2011
Exhibition costs
Production	$	198		$	211			(6.2	)%
Operating Expenses		2,910			2,699			7.8	%
Marketing		876			1,054			(16.9	)%

		3,984			3,964			0.5	%

Exhibition expense as percent of exhibition revenue		73.1	%		71.0	%
Cost of merchandise		863			269			220.8	%
Cost of merchandise as percent of merchandise revenue		39.1	%		41.8	%

Total	$	4,847		$	4,233			14.5	%

Cost of revenue as a percent of total revenue		61.3	%		68.0	%

Our exhibition costs of $4.0 million for the three months ended November 30, 2012 were relatively flat compared to the same period last year as the RMS Titanic royalty expense increase of $150 thousand was offset by a decrease in marketing expenses.

Gross profit. During the three months ended November 30, 2012, our total gross profit increased by $1.1 million as we generated a gross profit of $3.1 million compared to $2.0 million for the same period last year. Our gross profit increased primarily due to the increase in merchandise and management fee revenues as outlined above. However, gross margin and net income was negatively affected by approximately $320 thousand due to Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This amount reflects the unavoidable expenses incurred in late October and November 2012, during which no revenue was earned at the Seaport.

Operating expenses. Our general and administrative expenses was relatively flat with prior year as a decrease in professional fees and office expenses only was offset by an increase in compensation related expenses and a decrease in administrative fees charged to our RMS Titanic segment.

Our depreciation and amortization expenses were relatively flat with prior year as we placed our 3D and 2D film assets in service during the 3^rd quarter of 2013. This increase in amortization expense was offset by lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012.

Loss from operations. We realized loss from operations of $1.0 million in the third quarter of fiscal 2013 as compared to a loss from operations of $2.0 million for the third quarter of fiscal 2012. This is mainly due to higher merchandise and management fee revenues.

Income tax expense. We recorded income tax expense for the three months ended November 30, 2012 of $15 thousand as compared to $0 in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net loss. We realized net loss of $1.0 million for the three months ended November 30, 2012 as compared to a net loss of $2.0 million for the same period last year. Of this amount, a net loss of $270 thousand is attributable to our location at The South Street Seaport in late October and November 2012.

RMS Titanic Segment

An analysis of operations for our RMS Titanic segment for the three months ended November 30, 2012 and 2011 with percent changes follows:


	Three Months Ended November 30,						% Change
	2012			2011
	(In thousands, except percentages)
Revenue	$	425		$	275			54.5	%
Cost of revenue (exclusive of depreciation and amortization)		—			—			N/A	%

Gross profit		425			275			54.5	%

Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		184			430			(57.2	)%
								��
Income (loss) before tax		241			(155	)
Income tax expense		34			—			N/A	%

Net income (loss)	$	207		$	(155	)		33.5	%

Revenue. During the three months ended November 30, 2012, total revenue increased by $125 thousand, or 54.5%, to $0.4 million compared to the same period in the prior year due to the increase in revenues from Titanic exhibitions and the increase in merchandise sales. PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic exhibition revenues increased to $4.3 million from $2.8 million, royalty revenue increased accordingly.

Gross Profit. Gross profit increased based on the 54.5% increase in revenue discussed above.

Operating Expenses. Operating expenses for the three months ended November 30, 2012 decreased 57.2% from the same period in the prior year mainly due to a change in the methodology used to calculate the administrative fee charged to RMS Titanic.

Income tax expense. We recorded income tax expense for the three months ended November 30, 2012 of $34 thousand as compared to $0 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates to the Federal Alternative Minimum Tax.

Net income (loss). Income for the three months ended November 30, 2012 was $207 thousand compared to a loss of $155 thousand for the same period in the prior year based on the items discussed above.

The Nine Months Ended November 30, 2012 Compared to the Nine Months Ended November 30, 2011

An analysis of our condensed consolidated statements of operations for the nine months ended November 30, 2012 and 2011, with percent changes, follows:


	Analysis of Condensed Consolidated Statements of Operations
							Percent Change
	November 30, 2012			November 30, 2011			2012 vs. 2011
	(In thousands, except percentages and per share data)
	(Restated)						(Restated)
Revenue	$	32,802		$	24,166			35.7	%
Cost of revenue (exclusive of depreciation and amortization)		14,852			12,834			15.7	%

Gross profit		17,950			11,332			58.4	%

Gross profit as a percent of revenue		54.7	%		46.9	%
Operating expenses		14,125			14,412			(2.0	)%

Income (loss) from operations		3,825			(3,080	)		224.2	%

Other income (expense)		(442	)		2			(22,200.0	)%

Income (loss) before income tax		3,383			(3,078	)		209.9	%
Income tax expense		277			39			(610.3	)%

Effective tax rate		8.2	%		-1.3	%
Net income (loss)		3,106			(3,117	)		199.6	%
Less: Net (income) loss attributable to non-controlling interest		(58	)		239			124.3	%

Net income (loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	3,048		$	(2,878	)		205.9	%

Net income (loss) per share:
Basic income (loss) per share	$	0.06		$	(0.06	)

Diluted net income (loss) per share	$	0.06		$	(0.06	)

Revenue.During the nine months ended November 30, 2012, total revenue increased by $8.6 million, or 35.7% to $32.8 million compared to the same period last year, as reflected in the following table:


	Revenue (in thousands)
	Nine Months Ended
	November 30,
	2012		2011
Exhibition Revenue
Admissions revenue	$	21,657	$	19,040
Non-refundable license fees for current exhibitions		3,367		2,552

Total Exhibition revenue		25,024		21,592
Merchandise revenue		7,108		2,574
Management fee		611		—
Licensing fee		59		—

Total Revenue	$	32,802	$	24,166

Key Non-financial Measurements
Number of venues presented		32		28
Operating days		4,205		3,368
Attendance (in thousands)		2,245		1,517
Average attendance per operating day		534		451
Average ticket price at permanent, museums and other locations	$	14.93	$	16.98
Average retail per attendee	$	3.25	$	2.17

These key non-financial measurements do not include the AEI properties or merchandise sales.

Exhibition revenue increased by $3.4 million to $25.0 million mainly driven by an increase in attendance at the Company’s exhibits. During the third quarter of fiscal 2013 revenue was negatively affected by Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This closing is estimated to have decreased revenue by approximately $400,000. We do not recognize exhibition revenue for the four AEI exhibitions but instead receive a management fee for managing these properties.

With 32 exhibits presented, the Company experienced a corresponding increase in attendance from 1,517,383 in the first nine months of fiscal 2012 to 2,244,862 in the first nine months of 2013. We attribute this increase in attendance in large part to better venue selection, having 1 additional touring Bodies and 1 additional stationary Titanic exhibition, and to a lesser extent the Titanic’s 100th year anniversary. Revenue from self-run exhibitions was 60.6% of total revenue in the first nine months of fiscal 2013, compared to 78.4% of revenue for the first nine months of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits for the nine months ended November 30, 2012, as compared to 88.6% stationary exhibits and 11.4% touring exhibits for the nine months ended November 30, 2011. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $4.5 million to $7.1 million for the nine months ended November 30, 2012. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary and the purchase of the assets of Exhibit Merchandising, LLC during the second quarter of fiscal 2013. Sales related to the Exhibit Merchandising, LLC assets were approximately $1.4 million in fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for the first nine months of fiscal 2013. This is a new revenue stream in fiscal 2013.

Licensing fee revenue increased due to revenue received for the use of our intellectual property.

Cost of revenue. During the nine months ended November 30, 2012, total cost of revenue increased by $2.0 million, or 15.7%, to $14.9 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Nine Months Ended						Percent Change
	November 30, 2012			November 30, 2011			2012 vs. 2011
Exhibition costs
Production	$	542		$	669			(19.0	)%
Operating Expenses		7,442			7,985			(6.8	)%
Marketing		4,222			3,277			28.8	%

		12,206			11,931			2.3	%

Exhibition expense as percent of exhibition revenue		48.8	%		55.3	%
Cost of merchandise		2,646			903			193.0	%
Cost of merchandise as percent of merchandise revenue		37.2	%		35.1	%

Total	$	14,852		$	12,834			15.7	%

Cost of revenue as a percent of total revenue		45.3	%		53.1	%

Our exhibition costs of $12.2 million for the nine months ended November 30, 2012 increased by 2.3%, or $275 thousand, compared to the same period last year due mainly to an increase of marketing expense only partially offset by decreases in production and operating expenses.

Cost of merchandise as a percent of merchandise revenue increased from 35.1% in the nine months ended November 30, 2011 compared to 37.2% in the nine months ended November 30, 2012 primarily due to higher freight and handling costs offset partially by better vendor contracts.

Gross profit. During the nine months ended November 30, 2012, our total gross profit increased by $6.6 million as we generated a gross profit of $18.0 million compared to $11.3 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above. However, gross margin and net income was negatively affected by approximately $320 thousand due to Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This amount reflects the unavoidable expenses incurred in late October and November 2012, during which no revenue was earned at the Seaport.

Operating expenses. Our general and administrative expenses increased by $1.1 million to $11.4 million for the nine months ended November 30, 2012 compared to the same period last year. The increase relates mainly to compensation related expenses.

Our depreciation and amortization expenses decreased $289 thousand in the nine months ended November 30, 2012 compared to the same period last year. The decrease is primarily attributable to lower depreciation expense as many fixed assets are now fully depreciated or were impaired as part of the impairment charge in the fourth quarter of fiscal 2012. This was partially offset by an increase in amortization related to the 2D and 3D film assets being placed in service in fiscal 2013.

During the second quarter of fiscal 2011 we recognized an impairment charge related to the termination of our License Agreement with Playboy. Due to the termination of the License Agreement with Playboy, we recorded an impairment charge of $217 thousand for Playboy licenses net of accumulated depreciation and an impairment charge of $141 thousand for construction in progress comprised of expenses incurred in the creation of the Playboy exhibit. Of the total impairment of $358 thousand, $197 thousand was allocated to the non-controlling interest and therefore the net impact of the impairment to Premier is $161 thousand.

Income (loss) from operations. We realized income from operations of $3.8 million in the first nine months of fiscal 2013 as compared to a loss from operations of $3.1 million for the first nine months of fiscal 2012. This is mainly due to higher income only partially offset by higher expenses and the decrease of $0.4 million in impairment losses and $0.8 million related to legal settlements as compared to prior year.

Other Income (expense). We recognized interest expense of $543 thousand on our notes payable during the nine months ended November 30, 2012 as compared to $4 thousand during the nine months ended November 30, 2011 This was only partially offset by a $81 thousand gain on debt modification in the first nine months of fiscal 2013.

Income tax expense. We recorded income tax expense for the nine months ended November 30, 2012 of $277 thousand as compared to $39 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income (loss). We realized net income of $3.0 million for the nine months ended November 30, 2012 as compared to a net loss of $2.9 million for the same period last year. Of this amount, a net loss of $270 thousand is attributable to our location at The South Street Seaport in late October and November 2012.

The Nine Months Ended November 30, 2012 Compared to the Nine Months Ended November 30, 2011 – Segment results

Exhibition Management Segment

An analysis of operations for our Exhibition Management segment for the nine months ended November 30, 2012 and 2011, with percent changes, follows:


	Nine Months Ended November 30,						% Change
	2012			2011
	(In thousands, except percentages)
	(Restated)						(Restated)
Revenue	$	32,802		$	24,166			35.7	%
Cost of revenue (exclusive of depreciation and amortization)		16,774			13,895			20.7	%

Gross profit		16,028			10,271			56.1	%

Gross profit as a percent of revenue		48.9	%		42.5	%
Operating expenses		13,224			13,196			0.2	%

Income (loss) from operations		2,804			(2,925	)		195.9	%

Other income (expense)		(442	)		2			(22,200.0	)%

Income before income tax		2,362			(2,923	)		180.8	%
Income tax expense		200			39			412.8	%

Effective tax rate		8.5	%		-1.3	%
Net income (loss)		2,162			(2,962	)		173.0	%
Less: Net (income)/ loss attributable to non-controlling interest		(58	)		239			124.3	%

Net income (loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	2,104		$	(2,723	)		177.3	%


	Revenue (in thousands)
	Nine Months Ended
	November 30,
	2012		2011
Exhibition Revenue
Admissions revenue	$	21,657	$	19,040
Non-refundable license fees for current exhibitions		3,367		2,552

Total Exhibition revenue		25,024		21,592
Merchandise revenue		7,108		2,574
Management fee		611		—
Licensing fee		59		—

Total Revenue	$	32,802	$	24,166

Key Non-financial Measurements
Number of venues presented		32		28
Operating days		4,205		3,368
Attendance (in thousands)		2,245		1,517
Average attendance per operating day		534		451
Average ticket price at permanent, museums and other locations	$	14.93	$	16.98
Average retail per attendee	$	3.25	$	2.17

These key non-financial measurements do not include the AEI properties or merchandise sales.

Exhibition revenue increased by $3.4 million to $25.0 million mainly driven by an increase in attendance at the Company’s exhibits. During the third quarter of fiscal 2013, revenue was negatively affected by Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This closing is estimated to have decreased revenue by approximately $400,000. We do not recognize exhibition revenue for the four AEI exhibitions but instead receive a management fee for managing these properties.

With 32 exhibits presented, the Company experienced a corresponding increase in attendance from 1,517,383 in the first nine months of fiscal 2012 to 2,244,862 in the first nine months of 2013. We attribute this increase in attendance in large part to better venue selection, having 1 additional touring Bodies and 1 additional stationary Titanic exhibition, and to a lesser extent the Titanic’s 100th year anniversary. Revenue from self-run exhibitions was 58.1% of total revenue in the first nine months of fiscal 2013, compared to 78.4% of revenue for the first nine months of fiscal 2012. The Company’s revenue from self-run exhibitions was comprised of 100% stationary exhibits for the nine months ended November 30, 2012, as compared to 88.6% stationary exhibits and 11.4% touring exhibits for the nine months ended November 30, 2011. These comparisons exclude the AEI portfolio.

Merchandise revenue increased $4.5 million to $7.1 million for the nine months ended November 30, 2012. Merchandise revenue increased due to an increase in attendance at our venues, sales related to the Titanic’s 100 year anniversary and the purchase of the assets of Exhibit Merchandising, LLC during the second quarter of fiscal 2013. Sales related to Exhibit Merchandising, LLC assets were approximately $1.4 million in fiscal 2013.

Management fee revenue increased due to the management of the AEI properties for the first nine months of fiscal 2013. This is a new revenue stream in fiscal 2013.

Licensing fee revenue increased due to revenue received for the use of our intellectual property.

Cost of revenue. During the nine months ended November 30, 2012, total cost of revenue increased by $2.9 million, or 20.7%, to $16.8 million compared to the same period last year, as reflected in the following table:


	Cost of Revenue
	(in thousands, except percentages)
	Nine Months Ended						Percent Change
	November 30, 2012			November 30, 2011			2012 vs. 2011
Exhibition costs
Production	$	542		$	669			(19.0	)%
Operating Expenses		9,364			9,046			3.5	%
Marketing		4,222			3,277			28.8	%

		14,128			12,992			8.7	%

Exhibition expense as percent of exhibition revenue		56.5	%		60.2	%
Cost of merchandise		2,646			903			193.0	%
Cost of merchandise as percent of merchandise revenue		37.2	%		35.1	%

Total	$	16,774		$	13,895			20.7	%

Cost of revenue as a percent of total revenue		51.1	%		57.5	%

Our exhibition costs of $14.1 million for the nine months ended November 30, 2012 increased by 8.7%, or $1.1 million, compared to the same period last year due mainly to an increase of marketing expense and an increase in RMS Titanic royalty fees only partially offset by decreases in production and other operating expenses.

Gross profit. During the nine months ended November 30, 2012, our total gross profit increased by $5.8 million as we generated a gross profit of $16.0 million compared to $10.3 million for the same period last year. Our gross profit increased primarily due to the increase in exhibition and merchandise revenue as outlined above. However, gross margin and net income was negatively affected by approximately $320 thousand due to Hurricane Sandy which closed the Company’s “Bodies the Exhibition” and “Dialog in the Dark” exhibitions at The South Street Seaport in New York City. This amount reflects the unavoidable expenses incurred in late October and November 2012, during which no revenue was earned at the Seaport.

Operating expenses. Our general and administrative expenses increased by $1.4 million to $10.7 million for the nine months ended November 30, 2012 compared to the same period last year. The increase relates mainly to compensation related expenses and a decrease in administrative fees charged to our RMS Titanic segment.

Income (loss) from operations. We realized income from operations of $2.8 million in the first nine months of fiscal 2013 as compared to a loss from operations of $2.9 million for the first nine months of fiscal 2012. This is mainly due to higher income only partially offset by higher expenses and the decrease of $0.4 million in impairment losses and $0.8 million related to legal settlements as compared to prior year.

Income tax expense. We recorded income tax expense for the nine months ended November 30, 2012 of $200 thousand as compared to $39 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates primarily to foreign tax expense for our Singapore Titanic exhibition and Federal Alternative Minimum Tax.

Net (income) loss attributable to non-controlling interest. This represents the income AEG Live, LLC earned on its 10% interest in Premier Exhibition Management LLC in the current year. In the prior year this related to our joint venture with S2BN.

Net income (loss). We realized net income of $2.1 million for the nine months ended November 30, 2012 as compared to a net loss of $2.7 million for the same period last year. Of this amount, a net loss of approximately $270 thousand is attributable to our location at The South Street Seaport in late October and November 2012.

RMS Titanic Segment

An analysis of operations for our RMS Titanic segment for the nine months ended November 30, 2012 and 2011 with percentage changes follows:


	Nine Months Ended November 30,						% Change
	2012			2011
	(In thousands, except percentages)
Revenue	$	1,922		$	1,061			81.1	%
Cost of revenue (exclusive of depreciation and amortization)		—			—			—	%

Gross profit		1,922			1,061			81.1	%

Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		901			1,216			(25.9	)%

Income (loss) before tax		1,021			(155	)
Income tax expense		77			—			N/A	%

Net income (loss)	$	944		$	(155	)		709.0	%

Revenue. During the nine months ended November 30, 2012, total revenue increased by $861 thousand, or 81.1%, to $1.9 million compared to the same period in the prior year due to the increase in revenues from Titanic exhibitions and the increase in merchandise sales. PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic exhibition revenues increased to $19.2 million from $10.6 million, royalty revenue increased accordingly.

Gross Profit. Gross profit increased based on the 81.1% increase in revenue discussed above.

Operating Expenses. Operating expenses for the nine months ended November 30, 2012 decreased 25.9% from the same period in the prior year mainly due to a change in the methodology used to calculate the administrative fee charged to RMS Titanic.

Income tax expense. We recorded income tax expense for the nine months ended November 30, 2012 of $77 thousand as compared to $0 thousand in income tax for the same period in the prior year. The Company has prior operating losses that are being carried forward and mostly offset current taxable income. The fiscal 2013 income tax expense relates to the Federal Alternative Minimum Tax.

Net income (loss). Income for the nine months ended November 30, 2012 was $944 thousand compared to a loss of $155 thousand for the same period in the prior year based on the items discussed above.

Liquidity and Capital Resources

Liquidity

The following tables reflect selected information about our cash flows during the fiscal year ended 2013 and 2012:

Selected cash flow information:


	2013			2012
Net cash provided by (used in) operating activities	$	5,314		$	(808	)
Net cash used in investing activities		(1,125	)		(897	)
Net cash (used in) provided by financing activities		(153	)		310
Effects of exchange rate changes on cash and cash equivalents		13			(25	)

Net increase (decrease) in cash and cash equivalents	$	4,049		$	(1,420	)

Cash flows from operating activities

Net cash provided by operating activities was $5.3 million as compared to ($0.8) million for fiscal 2012. This increase in operating cash flows is primarily due to a $7.9 million change in net income offset partially by a decrease of $0.7 million in non-cash operating items and a $1.1 million change in operating assets and liabilities.

We currently do not have access to a revolving credit facility. As of April 30, 2013 our cash balance was $8.4 million. During fiscal 2012, the Company entered into an agreement with Lincoln Park Capital Fund, LLC, whereby the Company may access additional funds for working capital or other initiatives. This agreement is discussed in further detail under “Capital Resources” below. During the year ended February 28, 2012 we did not sell shares to Lincoln Park Capital, LLC (“LPC”). During the year ended February 29, 2012 we sold 275,000 shares to Lincoln Park Capital, LLC (“LPC”) at an average price of $2.31, and issued 158,632 shares as commitment shares under the Purchase Agreement. The Company believes that its existing cash balances and funds available under the agreement with Lincoln Park Capital Fund, LLC are sufficient to fund operations for the next twelve months. While the Company has undertaken efforts to reduce expenses we may not be able to make capital investments needed to improve existing exhibits and/or develop new exhibits without access to additional funds.

Cash flows from investing activities

For fiscal 2013, cash used for investing activities was $1.1 million as compared to $0.9 million in fiscal 2012. Cash of $1.1 million was used to purchase property and equipment and $125 thousand was used to purchase Exhibit Merchandising, LLC during fiscal 2013. For fiscal 2012, cash used in investing activities included $1.2 million used to purchase property and equipment and $262 thousand related to the 2010 expedition to the Titanic wreck site. These uses were partially offset by the redemption of certificates of deposit of $402 thousand.

Cash flows from financing activities

For fiscal 2013, cash used for financing activities was $0.2 million as compared to cash provided by financing activities of $0.3 million in fiscal 2012. In fiscal 2013, the Company repaid notes payable of $758 thousand and purchased treasury stock of $145 thousand. These amounts were partially offset by proceeds from options and warrants exercised of $758 thousand. In fiscal 2012, the Company issued stock for $635 thousand which was partially offset by the repayment of notes payable of $297 thousand.

The Company believes that existing cash, cash flows from operations and available funding under the Purchase and Registration Rights Agreements is sufficient to fund operations for the next twelve months.

Restated – Liquidity

The following tables reflect selected information about our cash flows during the three months ended May 31, 2012 and 2011:

Selected cash flow information:


	Three Months Ended May 31,
	2012			2011
	(Restated)
Net cash provided by operating activities	$	2,522		$	1,229
Net cash used in investing activities		(152	)		(313	)
Net cash (used in) provided by financing activities		(29	)		5
Effects of exchange rate changes on cash and cash equivalents		6			22

Net increase in cash and cash equivalents	$	2,347		$	943

Operating Activities.For the three months ended May 31, 2012, cash provided by operating activities was $2.5 million, compared to cash provided by operations of $1.2 million for the period ended May 31, 2011. The increase is primarily due to the change in our operating assets and liabilities.

Investing Activities.Cash used in investing activities was $152 thousand for the three months ended May 31, 2012 compared to $313 thousand for the three months ended May 31, 2011. Of the cash used by investing activities, the majority was used to purchase property and equipment of $174 thousand and $346 thousand for the three months ended May 31, 2012 and 2011, respectively.

Financing Activities. Cash used in financing activities was $29 thousand for the three months ended May 31, 2012 compared to cash provided of $5 thousand for the three months ended May 31, 2011. Cash used in financing activities in fiscal 2013 relates to repayment of notes payable which was largely offset by proceeds related to the exercise of stock options and warrants. Cash provided by financing for the first quarter of fiscal 2012 related to proceeds from stock option and warrant exercises.

Arts and Exhibitions International, LLC Non-Recourse Promissory Note

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four currently touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” The Company issued a non-recourse non-interest bearing note of $14.2 million as part of this transaction. The Company originally recorded the note at $16.4 million. The increase from $14.2 million to $16.4 million was mainly for prepaid licenses and expenses paid by Arts and Exhibition, LLC that were added to the note balance. The book value of the note was reduced by $3.7 million for the amount that is not expected to be repaid based upon the terms of the note related to the expected future cash flows of the AEI exhibitions and $1.3 million related to the discount of the note to its net present value at an imputed interest rate of 7.0%. Based upon the expected repayment amount of $12.7 million and an imputed interest rate of 7.0%, the fair value of this note was approximately $11.4 million as of April 20, 2012. As of May 31, 2012 the short-term portion of the note payable was $5.2 million and the long-term portion was $7.3 million, including accrued interest.

Restated – Liquidity

The following tables reflect selected information about our cash flows during the six months ended August 31, 2012 and 2011 (in thousands):

Selected cash flow information:


	Six Months Ended August 31,
	2012			2011
	(Restated)
Net cash provided by operating activities	$	4,107		$	1,108
Net cash used in investing activities		(433	)		(806	)
Net cash (used in) provided by financing activities		(422	)		8
Effects of exchange rate changes on cash and cash equivalents		7			20

Net increase in cash and cash equivalents	$	3,259		$	330

Operating Activities.

For the six months ended August 31, 2012, cash provided by operating activities was $4.1 million as compared to $1.1 million in the prior year. The increase in cash flow from operating activities is mainly due to the increase in net income from the prior year of approximately $5.0 million offset partially by changes in our operating assets and liabilities.

Investing Activities.

Cash used in investing activities was $0.4 million for the six months ended August 31, 2012 as compared to $0.8 million in the prior year. Of the cash used in investing activities the majority was used in the purchase of property and equipment of $345 thousand and $910 thousand for the six months ended August 31, 2012 and 2011, respectively. In addition in the current year cash of $125 thousand was used for the acquisition of the assets of Exhibit Merchandising, LLC.

Financing Activities.

Cash used in financing activities for the six months ended August 31, 2012 was $422 thousand compared to $8 thousand in cash provided in the prior year. The majority of the cash used in financing activities relates to the repayment of debt of $480 thousand.

AEI – Note Payable

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased tangible assets relating to four currently touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” The Company issued a non-recourse non-interest bearing note of $14.2 million as part of this transaction. The Company originally recorded the note at $16.4 million. The increase from $14.2 million to $16.4 million was mainly for prepaid licenses and expenses paid by Arts and Exhibition, LLC that were added to the note balance. The book value of the note was reduced by $3.7 million for the amount that is not expected to be repaid based upon the terms of the note related to the expected future cash flows of the AEI exhibitions and $1.3 million related to the discount of the note to its net present value at an imputed interest rate of 7.0%. Based upon the expected repayment amount of $12.7 million and an imputed interest rate of 7.0%, the fair value of this note was approximately $11.4 million as of April 20, 2012. As of August 31, 2012, the balance sheet reflects the short-term portion of the note payable at $9.2 million and the long-term portion at $2.6 million, including accrued interest.

Restated – Liquidity

The following tables reflect selected information about our cash flows during the nine months ended November 30, 2012 and 2011 (in thousands):


	Nine Months Ended November 30,
	2012			2011
	(Restated)
Net cash provided by operating activities	$	5,009		$	599
Net cash used in investing activities		(623	)		(1,114	)
Net cash used in financing activities		(587	)		(153	)
Effects of exchange rate changes on cash and cash equivalents		7			(20	)

Net increase (decrease) in cash and cash equivalents	$	3,806		$	(688	)

Operating Activities.

For the nine months ended November 30, 2012, cash provided by operating activities was $5.0 million as compared to $0.6 million in the prior year. The increase in cash flow from operating activities is mainly due to the increase in net income from the prior year of approximately $6.2 million offset partially by changes in our operating assets and liabilities.

Investing Activities.

Cash used in investing activities was $0.6 million for the nine months ended November 30, 2012 as compared to $1.1 million in the prior year. Of the cash used in investing activities the majority was used in the purchase of property and equipment of $545 thousand and $966 thousand for the nine months ended November 30, 2012 and 2011, respectively. In addition in the current year cash of $125 thousand was used for the acquisition of the assets of Exhibit Merchandising, LLC. In the prior year $262 thousand was spent on the Titanic expedition.

Financing Activities.

Cash used in financing activities for the nine months ended November 30, 2012 was $587 thousand compared to $153 thousand in cash provided in the prior year. The majority of the cash used in financing activities relates to the repayment of debt of $625 thousand.

AEI – Note Payable

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased tangible assets relating to four currently touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” The Company issued a non-recourse non-interest bearing note of $14.2 million as part of this transaction. The Company originally recorded the note at $16.4 million. The increase from $14.2 million to $16.4 million was mainly for prepaid licenses and expenses paid by Arts and Exhibition, LLC that were added to the note balance. The book value of the note was reduced by $3.7 million for the amount that is not expected to be repaid based upon the terms of the note related to the expected future cash flows of the AEI exhibitions and $1.3 million related to the discount of the note to its net present value at an imputed interest rate of 7.0%. Based upon the expected repayment amount of $12.7 million and an imputed interest rate of 7.0%, the fair value of this note was approximately $11.4 million as of April 20, 2012. As of November 30, 2012, the balance sheet reflects the short-term portion of the note payable at $9.3 million and the long-term portion at $2.6 million, including accrued interest.

Capital Resources

Purchase and Registration Rights Agreements

On October 31, 2011, the Company and Lincoln Park Capital Fund, LLC (“LPC”), entered into a Purchase Agreement (the “LPC Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”), whereby the Company has the right to sell, at its sole discretion, to LPC up to $10 million of the Company’s common stock, over a 36-month period (any such shares sold being referred to as the “Purchase Shares”). Under the Registration Rights Agreement, the Company agreed to file a registration statement with the SEC covering the Purchase Shares and the Commitment Shares (as defined below).

The LPC Purchase Agreement and Registration Rights Agreement were entered into following the termination by mutual agreement of previous purchase agreements and registration rights agreements dated May 20, 2011 and October 19, 2011, which provided for a substantially similar financing transaction between the Company and LPC. The October 19, 2011 agreements were terminated in order to enable the parties to reduce the maximum number of shares of the Company’s common stock issuable in connection with the proposed financing transaction. The October 19, 2011 agreements replaced a previous purchase agreement and registration rights agreement dated May 20, 2011. The previous agreements were terminated by mutual agreement of the Company and LPC in order to eliminate the ability of the Company to sell Initial Purchase Shares of $1.25 million to LPC on the commencement of the Agreement, and to eliminate warrants that may have been issued under the original agreements if the Company had elected to sell the Initial Purchase Shares.

The registration statement filed pursuant to the Registration Rights Agreement has been declared effective by the SEC. The Company generally now has the right, but not the obligation, over a 36-month period, to direct LPC to periodically purchase the Purchase Shares in specific amounts under certain conditions at the Company’s sole discretion. The purchase price for the Purchase Shares will be the lower of (i) the lowest trading price on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the common stock during the 12 consecutive business days ending on the business day immediately preceding the purchase date. In no event, however, will the Purchase Shares be sold to LPC below the floor price as defined in the LPC Purchase Agreement. While we have been unable to sell shares to LPC from the date we discovered errors in our quarterly financial statements until the date we filed the restated financial statements on this Form 10-K, we could sell additional shares in the future.

In consideration for entering into the purchase agreement between the Company and LPC dated May 20, 2011, the Company issued to LPC 149,165 shares of common stock as an initial commitment fee. Under the October 30, 2011 Purchase Agreement, the Company is also required to issue up to 149,165 shares of common stock as commitment shares on a pro rata basis as the Company directs LPC to purchase the Company’s shares under the Purchase Agreement. The LPC Purchase Agreement may be terminated by the Company at any time at the Company’s discretion without any cost to the Company. The proceeds that may be received by the Company under the LPC Purchase Agreement are expected to be used for general corporate purposes, including working capital.

Under the LPC Purchase Agreement, the Company has agreed that, subject to certain exceptions, it will not, during the term of the LPC Purchase Agreement, effect or enter into an agreement to effect any issuance of common stock or securities convertible into, exercisable for or exchangeable for common stock in a “Variable Rate Transaction,” which means a transaction in which the Company:

•

issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to our business or the market for the common stock; or

•

enters into any agreement, including, but not limited to, an equity line of credit, whereby it may sell securities at a future determined price.

The Company has also agreed to indemnify LPC against certain losses resulting from its breach of any of its representations, warranties or covenants under the agreements with LPC.

During the year ended February 28, 2013 we sold no shares to Lincoln Park Capital, LLC. During the year ended February 29, 2012 we sold 275,000 shares to Lincoln Park Capital, LLC at an average price of $2.31, and have also issued 158,632 shares as commitment shares under the Purchase Agreement.

Contractual Obligations

Lease Arrangements

Specimens

The Company has non-cancelable operating leases for the rental of certain specimens used in its exhibitions. The leases are payable quarterly, have a term of five years and five annual options to extend. During December 2010, the Company evaluated the performance of recently opened touring exhibitions and determined that the weak performance of several of the Bodies self-operated shows in unbranded facilities were well below expectations. Consequently, the Company elected not to renew certain of the leases it held on collections of specimens used in its touring Bodies exhibitions. After these agreements were not extended, at February 28, 2011, the Company had three lease agreements remaining for specimens, with expiration dates of September 2011 and June 2012. During fiscal year ended 2012 another of these agreements was allowed to expire. The Company currently has two lease agreements for specimens with expiration dates in February and March 2014.

Principal Executive Offices

Warehouse Space for Artifacts and Other Exhibitry

Warehouse Space for Exhibitry Assets

Warehouse Space for Merchandise Inventory

Luxor Hotel and Casino – Las Vegas, Nevada

On March 12, 2008, the Company entered into a ten year lease agreement for exhibition space with Ramparts, Inc., owner and operator of The Luxor Hotel and Casino in Las Vegas, Nevada, with an option to extend for up to an additional ten years. This lease includes approximately 36,141 square feet of space within the Luxor Hotel and Casino. We use the space, among other things, to present our “Bodies... The Exhibition” and “Titanic: The Artifact Exhibition” exhibitions. The lease commenced with the completion of the design and construction work which related to the opening of our “Bodies... The Exhibition” exhibition in August 2008 and the opening of the Titanic exhibition in December 2008. See discussion inNote 11. Lease Abandonmentregarding abandonment of a portion of the leased space.

Atlantic Station – Atlanta, Georgia

On July 2, 2008, the Company entered into a lease agreement for exhibition space with Atlantic Town Center in Atlanta, Georgia. Until March 6, 2012 we used the space to present our “Bodies... The Exhibition” and our “Dialog in the Dark” exhibitions. This space is currently being used to present our “Bodies... The Exhibition” and our “Titanic: The Artifact Exhibition” exhibitions. The initial lease term was for three years with four one-month renewal options and was scheduled to expire in February 2012. On September 30, 2011, the Company entered into a first amendment to this lease. The first amendment extended the lease term for an additional 16 months, with a two year extension option, and expired January 31, 2013. On October 22, 2012, the Company entered into a second amendment to the lease for its exhibition space in Atlantic Station in Atlanta, Georgia. The lease term is for an additional 24 months from February 1, 2013 through January 31, 2015.

Seaport – New York City, New York

Buena Park, California

“Titanic – The Experience” – Orlando, Florida

Touring Exhibitions

Notes Payable

On October 17, 2011, the Company entered into an Asset Purchase Agreement to purchase the assets of a Titanic-themed exhibition (Titanic: The Experience or “TTE”) in Orlando, Florida from Worldwide Licensing & Merchandising, Inc. and its shareholder, G. Michael Harris (together, “Worldwide”). Pursuant to the Agreement, the Company purchased the assets of the Orlando exhibition from Worldwide in an installment sale. The Company agreed to pay Worldwide directly a total of $800 thousand over a two-year period, and also agreed to assume rental and other arrearages owed by Worldwide, totaling $720 thousand, which the Company will pay over a four-year period. Based upon an interest rate of 7.6% the net present value of these payments was approximately $1,377,000 as of the date of the transaction.

On June 29, 2012 the Asset Purchase Agreement was amended to accelerate certain payments to Worldwide. To induce the Company into this agreement, Worldwide agreed to forgive one payment of $90 thousand. Based upon the imputed interest rate of 7.6%, this represented a decrease in the note of approximately $71 thousand, which is included in non-operating income (expense) as a gain on debt modification.

On November 26, 2012 the Asset Purchase Agreement was amended to accelerate the final payment to Worldwide. To induce the Company into this agreement, Worldwide agreed to reduce the final payment by approximately $12 thousand dollars. The final payment was also reduced by approximately $6 thousand to repay accounts receivable owed to the Company. Based upon the imputed interest rate of 7.6%, this represented a decrease in the note of approximately $10 thousand, which is included in non-operating income (expense) as a gain on debt modification. The final payment of $62 thousand was made to Worldwide in December 2012.

As of February 28, 2013 the short-term portion of the note payable was $124 thousand and the long-term portion was $167 thousand.

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC, both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The Company issued a non-recourse non-interest bearing note of $14.2 million as part of this transaction. The Company originally recorded the note at $16.4 million. The increase from $14.2 million to $16.4 million was mainly for prepaid licenses and expenses paid by Arts and Exhibition, LLC that were added to the note balance. The book value of the note was reduced by $3.7 million for the amount that is not expected to be repaid based upon the terms of the note related to the expected future cash flows of the AEI exhibitions and $1.3 million related to the discount of the note to its net present value at an imputed interest rate of 7.0%. Based upon the expected repayment amount of $12.7 million and an imputed interest rate of 7.0%, the fair value of this note was approximately $11.4 million as of April 20, 2012. As of February 28, 2013 the balance sheet reflects the short-term portion of the note payable at $4.9 million and the long-term portion at $2.5 million, including accrued interest.

Capital lease obligations

Contractual Obligations and Commitments

The following table illustrates our contractual obligations and commitments as of February 28, 2013, assuming we do not exercise any of our options to extend (in thousands):


	Payments Due by Period
			Less than						More than
Contractual Obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years
Specimen fixed rentals	$	1,286	$	1,165	$	60	$	60	$	1
Real estate operating leases		21,448		4,400		8,160		7,415		1,473
Capital lease obligations		107		24		51		32		—
Interest payable on capital lease obligation		17		7		8		2		—
Notes payable		7,709		5,080		1,125		1,504		—
Interest payable on notes payable		701		241		351		109		—
Equipment leases		70		35		35		—		—

Total	$	31,338	$	10,952	$	9,790	$	9,122	$	1,474

Titanic Artifact Sale Transaction Costs

The Company is party to a Consignment Agreement with Guernsey's auction house to sell the Company's Titanic artifacts and related intellectual property. If and when a transaction is closed, the Company will be required to pay Guernsey's a fee of up to 8% of the sale price if a purchase agreement is entered into within 60 days of the auction deadline, and up to 4% of the sale price if a purchase agreement is entered into thereafter. The actual amount of the commission will depend on the sale price, identity of the purchasing party and the date when the sale is closed. In addition, if and when a transaction to sell the Titanic artifact collection is closed, the Company may be required to pay a Transaction Bonus to Christopher Davino, former President of RMS Titanic, Inc., dependent upon the sale price, identity of the purchasing party and the date when the sale is closed. If a Transaction Bonus is paid to Mr. Davino, it is expected to be in the range of $625 thousand to $5.25 million, as previously disclosed by the Company. In addition, the Company expects to incur other legal, accounting and investment banking expenses if and when a sale of the Titanic artifacts is completed.

Off-Balance Sheet Arrangements

We have no off-balance sheet financial arrangements.

Critical Accounting Policies

The Company has identified the policies below as critical to the business operations and the understanding of the results of operations.

(a) Revenue Recognition

When evaluating multiple element arrangements, the Company considers whether the components of the arrangement represent separate units of accounting.

The Company recognizes revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable, and (4) the fee is probable of collection. The Company allocates the fees in a multi-element arrangement to each element based on the relative fair value of each element, using vendor-specific objective evidence (“VSOE”) of the fair value of each of the elements, if available. VSOE is generally determined based on the price charged when an element is sold separately. In the absence of VSOE of fair value, the fee is allocated among each element based on third-party evidence (“TPE”) of fair value, which is determined based on competitor pricing for similar deliverables when sold separately. When the Company is unable to establish fair value using VSOE or TPE, the Company uses estimated selling price (“ESP”) to allocate value to each element. The objective of ESP is to determine the price at which the Company would transact a sale if the product or service were sold separately. The Company determines ESP for deliverables by considering multiple factors including, but not limited to, prices it charges for similar offerings, market conditions, competitive landscape and pricing practices.

Deferred revenue includes payments or billings recorded prior to performance and amounts received under multiple element arrangements in which the fair value for the undelivered elements does not exist. In these instances, revenue is recognized when the fair value for the undelivered elements is established or when all contractual elements have been completed and delivered.

(i) Exhibition Revenue

The Company recognizes exhibition revenue for exhibits when earned and reasonably estimable. The exhibition agreements may have a fixed fee, may be based on a percentage of gross profit, or a combination of the two. A variable fee arrangement may include a nonrefundable or recoupable guarantee paid in advance or over the exhibition period. The following are the conditions that must be met in order to recognize revenue:

•

persuasive evidence of an exhibition arrangement with a customer exists;

•

the exhibition is complete and in accordance with the terms of the arrangement;

•

the exhibition period of the arrangement has begun and/or the customer can begin its exploitation, exhibition or sale;

•

the arrangement fee is fixed or determinable; and

•

collection of the arrangement fee is reasonably assured.

If all of the conditions as outlined above are not met, revenue is recorded as deferred revenue until all conditions are met.

Exhibition Revenue is primarily comprised of the following: Admissions, Licensing, and Audio Tour Revenue. All revenues are shown net of any applicable sales or use taxes.

Admissions Revenue

Admissions revenue includes ticket sales from the Company’s self run exhibitions and partner gross profit distribution.

Revenue from the self run exhibitions is derived from ticket sales at venues operated solely by the Company. The revenue is recorded upon the customer’s ticket purchase. Advance ticket sales are recorded as deferred revenue pending the “event date” on the ticket.

Partner gross profit distribution represents the Company’s share of gross profit from partner run exhibitions. Exhibition gross profit is generally calculated as net ticket sales and other ancillary revenue less exhibition expenses as stated in the exhibition agreement. The Company’s share or percentage is defined in the exhibition agreement and recognized over the duration of the exhibition. Independent partners provide the Company with box office information, operational expenses, marketing costs, and other exhibition expenses. The Company utilizes this information to determine the amount of revenue to recognize by applying the contractual provisions included in the exhibition agreement. The amount of revenue recognized for the period depends on timing, accuracy and completeness of information received from independent partners.

Licensing Revenue

Licensing revenue is derived from fees paid by independent partners to co-produce, display and promote our exhibitions. The Company recognizes license fees ratably over the duration of the exhibition.

Audio Tour Revenue

Revenue derived from equipping and operating an audio tour is recognized upon customer purchase.

(ii) Merchandise and Other Revenue

Merchandise revenue includes self- run and the Company’s share of independent partner merchandise gross profit. Revenues from the Company’s self-run exhibitions are recorded upon customer purchase. In most cases, independent partner revenue is derived as a percentage of the merchandise gross profit and typically recorded on a consignment basis.

(b) Exhibition Licenses

Exhibition licenses primarily represent exclusive rights to exhibit certain anatomical specimens and organs acquired for the use of the licensor’s technology, documentation, and know-how with respect to the plastination of human body specimens and organs. Depending upon the agreement with the rights holder, the Company may obtain the rights to use anatomical specimens and organs in multiple exhibitions over multiple years. In addition, licenses have been obtained to exhibit the Company’s “Dialog in the Dark” exhibitions and for Playboy exhibitions, both of which were impaired during the year ended February 29, 2012. Costs are capitalized and amortized over the term of the agreement commencing with the related exhibition’s public debut. Costs incurred to renew or extend license agreements are capitalized upon renewal of the license and are amortized over the term of the agreement.

Quarterly, the Company evaluates the future recoverability of any unamortized exhibition license costs based on the exhibition’s performance, success of other exhibitions, whether there are any exhibitions planned for the future, and/or specific events that would impair recoverability. An impairment charge may result if the actual exhibition revenues, combined with currently forecasted future exhibition revenues, are less than the revenue required to amortize the remaining licensing costs. The Company expenses exhibition license costs when it believes such amounts are not recoverable. Capitalized exhibition license costs for those exhibitions that are cancelled are charged to expense in the period of cancellation.

When we test for impairments, the valuation techniques used to determine the value of our exhibition licenses are based on unobservable inputs (Level 3 per ASC 820). Based upon the results of our impairment tests in fiscal 2013 and fiscal 2012, impairments were $0 thousand and $426 thousand, respectively.

(c) Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the basis of assets and liabilities reported for financial statement and tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized. As of February 28, 2013 and February 29, 2012, the Company established a valuation allowance of $11.3 million and $12.4 million, respectively against all net deferred tax assets.

The Company utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured at the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon final settlement. The term “more likely than not” is interpreted to mean that the likelihood of occurrence is greater than 50%.

(d) Stock Compensation

The Company follows the fair value recognition provisions in the FASB guidance for stock compensation. The Company’s stock-based compensation expense is measured at the grant date based on the fair value of the award and is amortized on a straight-line basis over the awards’ vesting period. Stock compensation expense of $866 thousand and $705 thousand for fiscal 2013 and 2012, respectively, is included in General and administrative expenses in the Consolidated Statements of Operations.

Stock Options. Fair value of stock options is determined using the Black-Scholes pricing model using weighted-average assumptions including expected volatility, risk-free interest rates, and the expected life of the award. Expected volatilities are based on the historical volatility of the Company’s common stock. The Company uses the simplified method for estimating the expected life within the valuation model which is the period of time that options granted are expected to be outstanding. The risk free rate for periods within the expected life of the option is based on the U.S. Treasury Note rate.

Restricted Stock. The Company grants restricted stock or restricted stock units (“RSUs”) to certain of its employees and directors. Fair value of restricted stock and RSUs is determined based on the fair value of the Company’s stock on the date of grant.

Warrants. The Company granted warrants under various service agreements. Warrants related to one of these agreements entered into March 2008 remains outstanding at February 28, 2013. If assumptions change during the life of the awards’ vesting period, the Company may modify or reverse the related stock compensation expense in accordance with current FASB guidance. The Company has experienced a reversal of stock compensation expense in prior years related to forfeitures of options and RSUs in instances where forfeitures were not anticipated or incorporated into the stock compensation expense calculation.

Stock Appreciation Rights.The Company granted stock appreciation rights to one of its executive officers. Fair value of stock appreciation rights is determined using the Black-Scholes pricing model using weighted-average assumptions including expected volatility, risk-free interest rates, and the expected life of the award. Expected volatilities are based on the historical volatility of the Company’s common stock. The Company uses the simplified method for estimating the expected life within the valuation model which is the period of time that stock appreciation rights granted are expected to be outstanding. The risk free rate for periods within the expected life of the stock appreciation rights is based on the U.S. Treasury Note rate. Fair value is recalculated at the end of each reporting period.

(e) 2010 Titanic Expedition Costs

We have capitalized $4.5 million of costs related to the expedition to the Titanic wreck site conducted during August and September of 2010. With the exception of the web point of presence, each asset that resulted from the expedition has been valued by: 1) including any costs that are directly related to the production of a specific asset in that asset’s value, and 2) allocating costs for the ship and necessary equipment used during the expedition to each resulting asset based on current and future estimated revenue streams. The capitalized web point of presence costs were based solely on costs incurred to add new functionality to the expedition website. Estimated revenue streams were also used as part of the calculation to determine amortization related to the development of the 2D film in fiscal 2011. Beginning in fiscal 2013 the 3D and 2D film and gaming and other application assets were placed into service at our exhibitions and are being amortized over a five year useful life. SeeNote 6. 2010 Expedition to Titanic Wreck Site in our consolidated financial statements, included in Item 8 of Part II of this report, for further details.

Recent Accounting Pronouncements

Recently Adopted

Presentation of Comprehensive Income

In June 2011, the FASB issued new accounting guidance related to the presentation of other comprehensive income (“OCI”). This guidance eliminates the option to present components of OCI as part of the statement of changes in shareholders’ equity, which was the option that the Company used to present OCI. The guidance allows for a one-statement or two-statement approach, outlined as follows:

•

One-statement approach: Present the components of net income and total net income, the components of OCI and a total for OCI, along with the total of comprehensive income in a single continuous statement.

•

Two-statement approach: Present the components of net income and total net income in the statement of net income. A statement of OCI would immediately follow the statement of net income and include the components of OCI and a total for OCI, along with the total of comprehensive income.

The guidance also requires an entity to present on the face of the financial statements any reclassification adjustments for items that are reclassified from OCI to net income. The guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted the guidance effective March 1, 2012. The adoption of this guidance did not have an effect on the Company’s financial position or results of operations, but only impacted how certain information related to OCI is presented in the financial statements.

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2013-02 (ASU2013-02)

In February 2013, the FASB issued guidance relating to the disclosure of items reclassified out of accumulated other comprehensive income. The new guidance requires that for those items that are reclassified out of accumulated other comprehensive income and into net income in their entirety, the effect of the reclassification on each affected net income line item be disclosed. For accumulated other comprehensive income reclassification items that are not reclassified in their entirety into net income, a cross reference must be made to other required disclosures. The guidance is effective prospectively for annual reporting periods beginning after December 15, 2012, and interim periods within those annual periods. Early adoption is permitted. The update impacts presentation and disclosure only, and therefore adoption is did not have a material impact on our Consolidated Financial Statements.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs

In May 2011, the FASB issued amendments to its accounting guidance related to fair value measurements in order to more closely align its disclosure requirements with those in International Financial Reporting Standards (“IFRS”). This guidance clarifies the application of existing fair value measurement and disclosure requirements and also changes certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted the guidance effective March 1, 2012. The adoption of this guidance did not have a material effect on the Company’s financial position or results of operations.

Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-05)

In December 2011, the FASB amended its recently issued accounting guidance by deferring the effective date pertaining to the presentation of reclassifications of items out of accumulated comprehensive income. All other requirements in ASU 2011-05 are not affected by this deferral. The guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted the guidance effective March 1, 2012. The adoption of this guidance did not have an effect on the Company’s financial position or results of operations, but only impacted how certain information related to OCI is presented in the financial statements.

Testing Goodwill for Impairment Update No. 2011-08 (ASU 2011-08)

In September 2011, the FASB issued FASB Accounting Standards Update No. 2011-08 "Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment" ("ASU 2011-08"). Under ASU 2011-08, an entity is permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described Topic 350. Under ASU 2011-08, the two-step goodwill impairment test is not required under ASU 2011-08 unless the more-likely-than-not threshold is met. For public entities, the amendments in ASU 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company elected early adoption of ASU 2011-08 on December 1, 2011. The adoption of ASU 2011-08 did not have a material impact on the Company's consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


	Page
Report of Independent Registered Public Accounting Firm		88
Consolidated Balance Sheets at February 28, 2013 and February 29, 2012		89
Consolidated Statements of Operations for the years ended February 28, 2013 and February 29, 2012		90
Consolidated Statements of Comprehensive Income (Loss) for the years ended February 28, 2013 and February 29, 2012		91
Consolidated Statements of Cash Flow for the years ended February 28, 2013 and February 29, 2012		92
Consolidated Statements of Shareholders' Equity for the years ended February 28, 2013 and February 29, 2012		93
Notes to Consolidated Financial Statements		94

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Premier Exhibitions, Inc.:

We have audited the accompanying consolidated balance sheets of Premier Exhibitions, Inc. and subsidiaries (the Company) as of February 28, 2013 and February 29, 2012, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years ended February 28, 2013 and February 29, 2012. We have also audited the accompanying consolidated financial statement schedule for the years ended February 28, 2013 and February 29, 2012 listed in the index at Item 15. These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation and schedule. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Premier Exhibitions, Inc. and subsidiaries at February 28, 2013 and February 29, 2012 and the consolidated results of their operations, comprehensive income (loss) and their cash flows for the years ended February 28, 2013 and February 29, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We were not engaged to examine management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of February 28, 2013, included in Management’s Report on Internal Control Over Financial Reporting, referred to in Item 9A of the Company’s Annual Report on Form 10-K, and, accordingly, we do not express an opinion thereon.

/s/ Cherry Bekaert LLP

Atlanta, Georgia

May 29, 2013

Premier Exhibitions, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


	February 28,			February 29,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	6,393		$	2,344
Certificates of deposit and other investments		407			405
Accounts receivable, net of allowance for doubtful accounts of $325 and $311, respectively		1,370			1,390
Merchandise inventory, net of reserve of $25 and $22, respectively		1,205			1,082
Deferred income taxes		8			44
Income taxes receivable		167			246
Prepaid expenses		1,177			1,078
Other current assets		562			88

Total current assets		11,289			6,677
Artifacts owned, at cost		2,933			2,990
Salvor’s lien		1			1
Property and equipment, net of accumulated depreciation of $17,333 and $14,183, respectively		9,280			10,298
Exhibition licenses, net of accumulated amortization of $5,664 and $5,470, respectively		2,034			2,228
Film, gaming and other application assets, net of accumulated amortization of $475 and $175, respectively		2,858			3,158
Other receivable, net of allowance for doubtful accounts of $574 and $206, respectively		34			15
Goodwill		250			—
Future rights fees		4,380			—
Restricted assets		3,618			—
Long-term exhibition costs		843			—
Subrogation rights		250			250

Total Assets	$	37,770		$	25,617

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,146		$	4,707
Income taxes payable		175			3
Deferred revenue		2,363			2,254
Current portion of capital lease obligations		24
Current portion of notes payable		5,080			505

Total current liabilities		11,788			7,469
Long-Term liabilities:
Lease abandonment		1,903			2,397
Deferred income taxes		8			44
Long-term portion of capital lease obligations		83			—
Long-term portion of notes payable		2,629			575

Total long-term liabilities		4,623			3,016
Commitment and Contingencies
Shareholders’ equity:
Common stock; $.0001 par value; authorized 65,000,000 shares; issued 49,072,364 and 47,883,927 shares, respectively; outstanding 49,070,355 and 47,881,918 shares, respectively		5			5
Additional paid-in capital		53,807			52,479
Accumulated deficit		(34,916	)		(36,866	)
Accumulated other comprehensive loss		(471	)		(485	)
Less treasury stock, at cost; 2,009 shares		(1	)		(1	)

Equity Attributable to Shareholders’ of Premier Exhibitions, Inc.		18,424			15,132

Equity Attributable to Non-controlling interest		2,935			—

Total liabilities and shareholders’ equity	$	37,770		$	25,617

The accompanying notes are an integral part of the consolidated financial statements.

Premier Exhibitions, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)


	Year Ended February 28 (29),
	2013			2012
Revenue:
Exhibition revenue	$	29,584		$	28,274
Merchandise and other		8,988			3,436
Management fee		819			—
Licensing fee		74			—

Total revenue		39,465			31,710
Cost of revenue:
Exhibition costs		15,289			15,881
Cost of merchandise sold		3,456			1,383

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		18,745			17,264

Gross profit		20,720			14,446

Operating expenses:
General and administrative		14,647			13,958
Depreciation and amortization		3,525			3,922
Net loss on disposal of assets		134			256
Impairment of intangibles and property and equipment		—			1,348
Contract and legal settlements		(309	)		783

Total operating expenses		17,997			20,267
Income/(loss) from operations		2,723			(5,821	)
Interest expense		(681	)		(33	)
Gain on debt modification		81			—
Other income		23			10

Income/(loss) before income taxes		2,146			(5,844	)
Income tax expense		279			176

Net income/(loss)		1,867			(6,020	)
Less: Net loss attributable to non-controlling interest		(83	)		(239	)

Net income/(loss) attributable to the shareholders’ of Premier Exhibitions, Inc.	$	1,950		$	(5,781	)

Net income/(loss) per share:
Basic income/(loss) per common share	$	0.04		$	(0.12	)

Diluted income/(loss) per common share	$	0.04		$	(0.12	)

Shares used in basic per share calculations		48,159,918			47,418,894

Shares used in diluted per share calculations		48,560,663			47,418,894

The accompanying notes are an integral part of the consolidated financial statements.

Premier Exhibitions, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)


	Year Ended February 28 (29),
	2013			2012
Net income/(loss)	$	1,867		$	(6,020	)
Other comprehensive income/(loss)
Currency translation adjustments		13			(25	)
Unrealized gain/(loss) on marketable securities		1			(5	)

Other comprehensive income/(loss)		14			(30	)

Comprehensive income/(loss)		1,881			(6,050	)
Comprehensive loss attributable to non-controlling interest		(83	)		(239	)

Comprehensive income/(loss) attributable to Premier Exhibitions, Inc.	$	1,964		$	(5,811	)

The accompanying notes are an integral part of the consolidated financial statements.

Premier Exhibitions, Inc.

Consolidated Statements of Cash Flow

(in thousands)


	Year Ended February 28 (29),
	2013			2012
Cash flows from operating activities:
Net income/(loss)	$	1,867		$	(6,020	)

Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		3,525			3,922
Impairment of intangibles		—			1,348
Lease abandonment		(494	)		(617	)
Gain on debt modification		(81	)		—
Stock based compensation		866			705
Allowance for doubtful accounts		382			143
Amortization of debt discount		678			—
Net loss on disposal of assets		134			256
Changes in operating assets and liabilities, net of effect of acquisitions:
Decrease in accounts receivable		6			1,040
Increase in merchandise inventory, net of reserve		(98	)		(330	)
Decrease in note receivable		—			200
Decrease in prepaid expenses		82			29
(Increase) decrease in other assets		(474	)		58
Decrease in income taxes receivable		79			112
Increase in other receivable		(387	)		(221	)
Increase in long-term exhibition costs		(341	)		—
Increase (decrease) in deferred revenue		109			(342	)
Increase (decrease) in accounts payable and accrued liabilities		(711	)		(1,091	)
Decrease in income taxes payable		172			—

Total adjustments		3,447			5,212

Net cash provided by (used in) operating activities		5,314			(808	)

Cash flows from investing activities:
Purchases of property and equipment		(1,059	)		(1,167	)
Proceeds from disposal of assets		3			37
Purchase of assets of Exhibit Merchandising, LLC		(125	)		—
Purchase of certificates of deposit		(1	)		(5	)
Redemption of certificates of deposit		—			402
Decrease in artifacts		57			21
Titanic expedition costs incurred		—			(262	)
Non-controlling investment in consolidated joint venture		—			77

Net cash used in investing activities		(1,125	)		(897	)

Cash flows from financing activities:
Proceeds from stock issuance		—			635
Payments on notes payable		(758	)		(297	)
Payments on capital lease obligations		(8	)		—
Purchase of treasury stock		(145	)		(36	)
Proceeds from option and warrant exercises		758			8

Net cash (used in) provided by financing activities		(153	)		310

Effects of exchange rate changes on cash and cash equivalents		13			(25	)

Net increase (decrease) in cash and cash equivalents		4,049			(1,420	)
Cash and cash equivalents at beginning of year		2,344			3,764

Cash and cash equivalents at end of year	$	6,393		$	2,344

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	61		$	20

Cash paid during the period for taxes	$	29		$	60

Supplemental disclosure of non-cash investing and financing activities:
Unrealized gain (loss) on marketable securities	$	1		$	(5	)

Assets purchased with notes payable	$	—		$	1,377

Assets purchased with notes payable and equity in Premier Exhibitions Management, LLC	$	14,451		$	—

Purchases of property and equipment under capital leases	$	115		$	—

Non-cash debt repayment through restricted assets	$	4,644		$	—

The accompanying notes are an integral part of the consolidated financial statements.

Premier Exhibitions, Inc.

Consolidated Statements of Shareholders’ Equity

Years Ended February 28, 2013 and February 29, 2012

(in thousands except for number of shares)


									(Accumulated			Accumulated
	Common Stock					Additional			Deficit)/			Other			Treasury			Premier
	Number of					Paid-In			Retained			Comprehensive			Stock, at			Shareholders’			Non-controlling
	Shares			Amount		Capital			Earnings			Income (Loss)			Cost			Equity			Interest
Balance, February 28, 2011		47,203,652		$	5	$	58,356		$	(31,085	)	$	(455	)	$	(7,190	)	$	19,631		$	214

Common stock issued for exercise of options		25,800			—		8			—			—			—			8			—
Issuance of Restricted Stock		237,195			—		—			—			—			—			—			—
Purchase of Treasury Stock		(18,361	)		—		(36	)		—			—			—			(36	)		—
Sale of Common Stock		275,000			—		635			—			—			—			635			—
Issurance of Common Stock		158,632			—		—			—			—			—			—			—
Retirement of shares		—			—		(7,189	)		—			—			7,189			—			—
Stock compensation costs		—			—		705			—			—			—			705			—
Non-controlling investment in consolidated joint venture		—			—		—			—			—			—			—			25
Net loss		—			—		—			(5,781	)		—			—			(5,781	)		(239	)
Foreign currency translation loss		—			—		—			—			(25	)		—			(25	)		—
Unrealized loss on marketable securities		—			—		—			—			(5	)		—			(5	)		—

Balance, February 29, 2012		47,881,918		$	5	$	52,479		$	(36,866	)	$	(485	)	$	(1	)	$	15,132		$	—

Common stock issued for exercise of options and warrants		976,051			—		758			—			—			—			758			—
Issuance of Restricted Stock		265,233			—		—			—			—			—			—			—
Purchase of Treasury Stock		(52,847	)		—		(145	)		—			—			—			(145	)		—
Stock compensation costs		—			—		715			—			—			—			715			—
Equity to AEG Live, LLC		—			—		—			—			—			—			—			3,018
Net income (loss)		—			—		—			1,950			—			—			1,950			(83	)
Foreign currency translation income		—			—		—			—			13			—			13			—
Unrealized gain on marketable securities		—			—		—			—			1			—			1			—

Balance, February 28, 2013		49,070,355		$	5	$	53,807		$	(34,916	)	$	(471	)	$	(1	)	$	18,424		$	2,935

The accompanying notes are an integral part of the consolidated financials statements.

PREMIER EXHIBITIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Background and Basis of Presentation

Description of Business

Premier Exhibitions, Inc. and subsidiaries (the “Company”) is in the business of presenting to the public museum-quality touring exhibitions around the world. Since our establishment, we have developed, deployed and operated unique exhibition products that are presented to the public in exhibition centers, museums and non-traditional venues. Income from exhibitions is generated primarily through ticket sales, third-party licensing, sponsorships and merchandise sales.

Titanic Ventures Limited Partnership (“TVLP”), a Connecticut limited partnership, was formed in 1987 for the purposes of exploring the wreck of the Titanic and it’s surrounding oceanic areas. In May of 1993, R.M.S. Titanic, Inc. (“RMST”) entered into a reverse merger under which RMST acquired all of the assets and assumed all of the liabilities of TVLP and TVLP became a shareholder of RMST. In October of 2004, we reorganized and Premier Exhibitions, Inc. became the parent company of RMST and RMST became a wholly-owned subsidiary. Additional wholly-owned subsidiaries were established in order to operate the various domestic and international exhibitions of the Company.

Our exhibitions regularly tour outside the United States of America (“U.S.”). Approximately 3.0% and 20.7% of our revenues for the years ending February 28, 2013 (“fiscal 2013”) and February 29, 2012 (“fiscal 2012”), respectively, resulted from exhibition activities outside the U.S. The exhibition activities outside the U.S. represent 12.3% and 24.9% of our total attendance for fiscal 2013 and fiscal 2012, respectively. Many of our financial arrangements with our international trade partners are based upon foreign currencies, which exposes the Company to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring.

Corporate Structure and Management

We also formed a new entity, Premier Exhibition Management LLC (“PEM”), to manage all of the Company’s exhibition operations (exhibition division). This includes the operation and management of our Bodies, Titanic and Dialog in the Dark exhibitions. PEM will also pursue “fee for service” arrangements to manage exhibitions based on content owned or controlled by third parties.

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The acquired assets include rights agreements with the owners of the artifacts and intellectual property comprising the exhibitions, museum/venue agreements for existing exhibition venues, sponsorship agreements, a warehouse lease and an office lease. In addition, the acquired assets include intellectual property related to proposed future exhibitions that the Company may further develop and produce. The Company will operate any such additional properties under its exhibition management subsidiary.

The restructuring of the Company and changes in its management, reflect that Premier has two operating segments – Exhibition Operations (PEM) and Content Management (RMST).

Basis of Presentation

When we use the terms the “Company,” “Premier”, “we,” “us,” and “our,” we mean Premier Exhibitions, Inc., a Florida corporation and its subsidiaries. The consolidated financial statements include the accounts of Premier, its wholly owned subsidiaries after the elimination of all significant intercompany accounts and transactions, and its consolidated joint venture.

We have prepared the accompanying consolidated financial statements and notes pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported amounts using those estimates.

Note 2. Summary of Significant Accounting Policies

The Company has identified the policies below as significant to the business operations and the understanding of the results of operations.

(a) Revenue Recognition

When evaluating multiple element arrangements, the Company considers whether the components of the arrangement represent separate units of accounting.

(i)

Exhibition Revenue

•

persuasive evidence of an exhibition arrangement with a customer exists;

•

the exhibition is complete and in accordance with the terms of the arrangement;

•

the exhibition period of the arrangement has begun and/or the customer can begin its exploitation, exhibition or sale;

•

the arrangement fee is fixed or determinable; and

•

collection of the arrangement fee is reasonably assured.

If all of the conditions as outlined above are not met, revenue is recorded as deferred revenue until all conditions are met.

Exhibition Revenue is primarily comprised of the following: Admissions, Licensing, and Audio Tour Revenue. All revenues are shown net of any applicable sales or use taxes.

Admissions Revenue

Admissions revenue includes ticket sales from the Company’s self run exhibitions and partner gross profit distribution.

Licensing Revenue

Audio Tour Revenue

Revenue derived from equipping and operating an audio tour is recognized upon customer purchase.

(ii)

Merchandise and Other Revenue

(b) Cash and Cash Equivalents

The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses on these accounts. The Company considers highly liquid investments with original maturities of 90 days or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company’s cash equivalents are primarily invested in money market funds. The Company performs periodic evaluations of the relative credit standing of the financial institutions and issuers of its cash equivalents.

(c) Certificates of Deposit

Certificates of deposit (the “Certificates”) amount to $405 thousand at February 28, 2013 and are carried at cost plus accrued interest and mature in August 2013 and August 2014. The Certificates are issued by one bank and currently exceed federally insured limits of $250 thousand. The Company has not experienced any losses in these Certificates and performs periodic evaluation of the relative credit standings of the bank.

(d) Accounts Receivable

Accounts receivable represent presenting partner and other obligations due under normal trade terms. The Company regularly evaluates the need for an allowance for uncollectible accounts for accounts receivable by taking into consideration factors such as the type of client (governmental agencies or private sector), trends in actual and forecasted credit quality of the client (including delinquency and late payment history) and current economic conditions that may affect a client’s ability to pay. In certain circumstances, depending on customer creditworthiness, the Company may require a bank letter of credit or escrow arrangement to guarantee the collection of its receivables. The allowance for bad debt for accounts receivable is determined based on a percentage of aged receivables, plus specific reserves for receivables that are not considered collectible. The Company’s bad debt expense for fiscal 2013 and fiscal 2012 was $14 thousand and $(63) thousand, respectively. The Company’s ending bad debt allowance for fiscal year end 2013 and 2012 was $325 thousand and 311 thousand, respectively, which represents management’s best estimate of uncollectible amounts and is considered adequate.

(e) Merchandise Inventory

Merchandise inventory consists of finished goods purchased for resale at our exhibitions. Inventory cost is determined based on purchase price and is carried at the lower of cost or market value. The Company accounts for all inventories based on the average cost method. Estimates for reserves for inventory obsolescence are based on management’s judgment of future realization. The Company’s inventory obsolescence expense for fiscal 2013 and fiscal 2012 was $120 thousand and $167 thousand, respectively.

(f) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets primarily consist of prepaid lease payments and prepaid services that are expensed when services are received or over the term of the exhibition, and reimbursable expenses that are capitalized and recovered from museums, promoters or our co-presentation partner.

(g) Artifacts

Costs associated with the care, management and preservation of approximately 5,500 artifacts recovered from the wreck of the RMS Titanic (the “Titanic”) during the course of 32 dives in 1987, are expensed as incurred.

To ascertain that the aggregate net recoverable value of Titanic artifacts exceeds the direct costs of recovery of such artifacts, the Company evaluates various evidential matters. Such evidential matters include documented sales and offerings of Titanic-related memorabilia, insurance coverage obtained in connection with the potential theft, damage or destruction of all or part of the artifacts and other identical matter regarding the public interest in the Titanic.

(h) Salvor’s lien

In 1994, the U.S. District Court for the Eastern District Court of Virginia (the “District Court”) issued an order declaring RMST, a wholly owned subsidiary, Salvor-in-Possession of the Titanic wreck and wreck site. As Salvor-in-Possession, RMST has the exclusive right to recover artifacts from the wreck. RMST continues to serve as Salvor-in-Possession.

On August 12, 2010, the District Court issued an opinion granting a salvage award to RMST based upon the Company’s work in recovering and conserving over three thousand artifacts from the wreck of Titanic during its expeditions conducted in 1993, 1994, 1996, 1998, 2000, and 2004. The Company was awarded 100 percent of the fair market value of the artifacts, which the District Court set at approximately $110 million.

•

The approximately 2,000 “1987 Artifacts" and the approximately 3,500 "Post 1987 Artifacts" must be maintained as a single collection;

•

The combined collections can only be sold together, in their entirety, and any buyer would be subject to the same conditions applicable to RMST; and

•

RMST must comply with provisions that guarantee the long-term protection of all of the artifacts. These provisions include the creation by RMST of a trust and reserve fund (the “Trust Account”). The Trust Account will be irrevocably pledged to and held for the exclusive purpose of providing a performance guarantee for the maintenance and preservation of the Titanic collection for the public interest. The Company will pay into the Trust Account a minimum of twenty five thousand dollars ($25 thousand) for each future fiscal quarter until the corpus of such Trust Account equals five million dollars ($5 million). Though not required under the covenants and conditions, Company will make additional payments into the Trust Account as it deems appropriate consistent with its prior representations to the Court and sound fiscal operations. The Company established the Trust Account and funded it with $25 thousand during November 2011 and continues to fund it with quarterly $25 thousand payments. The current balance in the Reserve Fund is $150,141, including interest income.

(i) Property and Equipment

Property and equipment are stated at cost. Depreciation of property and equipment is provided for by the straight-line method over the following estimated lives of the related assets.


Exhibitry		5 years
Vehicles		5 years
Tools and equipment		5 years
Computers and software		3 years
Furniture and fixtures		5 years
Leasehold improvements		Shorter of useful life of asset or remaining lease term

The Company had $26.6 million and $24.5 million in property and equipment at February 28, 2013 and February 29, 2012, respectively. Depreciation expense on property and equipment as calculated using the methodology and lives as discussed above was $3.0 million and $3.6 million for fiscal 2013 and 2012, respectively. Accumulated depreciation totaled $17.3 million and $14.2 million at February 28, 2013 and February 29, 2012, respectively. During the year ended February 28, 2013 the Company disposed of property and equipment resulting in a loss on disposal of $134 thousand. During the year ended February 29, 2012 the Company disposed of property and equipment resulting in a loss on disposal of $256 thousand and impaired property and equipment with a net book value of approximately $0.9 million at the time of its impairment to zero.

(j) Exhibition Licenses

Quarterly, the Company evaluates the future recoverability of any unamortized exhibition license costs based on the exhibition’s performance, success of other exhibitions, whether there are any exhibitions planned for the future, and/or specific events that would impair recoverability. An impairment charge may result if the actual exhibition revenues, combined with currently forecasted future exhibition revenues, are less than the revenue required to amortize the remaining licensing costs. No such impairment charges were recorded during fiscal 2013. The Company had $426 thousand in impairments in fiscal year 2012. The Company expenses exhibition license costs when it believes such amounts are not recoverable. Capitalized exhibition license costs for those exhibitions that are cancelled are charged to expense in the period of cancellation.

(k) Long-term exhibition costs

Long-term exhibition costs are costs associated with exhibitions that have a useful life of greater than one year. These costs are expensed over the length of the exhibitions contract or five years whichever is shorter. These costs are reviewed annually for impairment.

(l) Goodwill and Purchased Finite-Lived Intangible Assets

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets. Although goodwill is not amortized, we review our goodwill for impairment annually, or more frequently, if events or changes in circumstances warrant a review. We completed our annual impairment test of our single reporting unit in the fourth quarter of fiscal year 2013 and determined that there was no impairment. The Company had no goodwill during fiscal 2012.

Acquired intangible assets with finite lives, including future rights fees, are amortized over their estimated useful lives and reflected in the Depreciation and Amortization line item on our consolidated statements of operations. Our acquired intangible assets are reviewed for impairment whenever an impairment indicator exists. We continually monitor events or changes in circumstances that could indicate that the carrying amounts of our long-lived assets, including our intangible assets, may not be recoverable. When such events or changes in circumstances occur, we assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Fair value is determined using a discounted cash flow analysis that involves the use of significant estimates and assumptions, some of which may be based in part on historical experience, forecasted information and discount rates. No such impairment charges were recorded during the year ended February 28, 2013. The Company had $426 thousand in impairments in fiscal year 2012.

(m) Restricted assets

Restricted assets are amounts held to repay AEG Live, LLC under the promissory note and are not available for use by the Company.

(n) Income Taxes

The Company utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured at the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon final settlement. The term “more likely than not” is interpreted to mean that the likelihood of occurrence is greater than 50%.

(o) Earnings (Loss) Per Share

Basic earnings (loss) per share is computed based on the weighted-average number of common shares outstanding. Diluted earnings per share is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of common stock include non-qualified stock options and non-vested share awards. The computation of dilutive shares outstanding excludes the out-of-the-money non-qualified stock options because such outstanding options’ exercise prices were greater than the average market price of our common shares and, therefore, the effect would be anti-dilutive (i.e., including such options would result in higher earnings per share).

(p) Legal Contingencies

The Company is currently involved in certain legal proceedings. To the extent that a loss related to a contingency is reasonably estimable and probable, the Company accrues an estimate of that loss. Because of the uncertainties related to both the amount and range of loss on certain pending litigation, the Company may be unable to make a reasonable estimate of the liability that could result from an unfavorable outcome of such litigation. As information becomes available, the Company assesses any potential liability related to pending litigation and makes or, if necessary, revises its estimates. Such revisions in estimates of potential liability could materially impact the Company’s results of operations and financial position.

(q) Leases

The Company enters into leases for exhibit space for its exhibitions, corporate office space, warehouse space, print and copying equipment, and certain specimens used in its human anatomy exhibitions. Lease expense is recorded in the period incurred. Lease expense for corporate office space, print and copying equipment, warehouse space, and specimens not exhibited is included in General and administrative expenses in the Company’s Consolidated Statements of Operations. Lease expense for exhibit space and specimens used in exhibitions are included in Exhibition costs in the Company’s Consolidated Statement of Operations. The Company currently has two leases for computer equipment that qualify as capital leases.

(r) Consolidation

The Company consolidates its wholly owned subsidiaries, all entities that it controls by ownership of a majority voting interest, and its portion of a joint venture, and eliminates all significant intercompany activity. Although the Company does not have a controlling financial interest in the joint venture, we have determined that consolidation is appropriate due to assessment of the Company’s participation in the financial and operational decisions of the joint venture made in the ordinary course of business, as outlined in ASC 810, “Consolidation.” Therefore, the Company’s portion of the joint venture’s results has been consolidated into our financial statements and the portion not owned by us is reflected as a non-controlling interest.

(s) Other Taxes

The Company incurs and remits certain taxes assessed by governmental authorities on revenue producing transactions, such as sales taxes. The Company’s revenue is presented net of sales taxes in its Consolidated Statement of Operations.

(t) Advertising Costs

In the course of the Company’s business we incur advertising costs in order to promote our exhibitions. Advertising costs are budgeted for each temporary exhibition prior to its opening and the costs are expensed over the life of the exhibit. Costs incurred above or below budget are adjusted for as incurred. For permanent exhibitions, advertising is expensed as incurred. For fiscal 2013 and 2012, the Company incurred marketing and advertising expense of $5.4 million and $4.4 million, respectively, which is included in Exhibition costs on the Company’s Consolidated Statements of Operations.

100

(u) Stock Compensation

(v) 2010 Titanic Expedition Costs

(w) Fair Value Measurements

The Company is required to categorize its financial assets and liabilities into a three level hierarchy based on the priority of inputs to the valuation technique in accordance with Financial Accounting Statement Board (“FASB”) Accounting Standards Codification 820, “Fair Value Measurements and Disclosures” (“ASC 820”). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the Consolidated Balance Sheets are categorized as follows:

•

Level 1—Unadjusted quoted prices for identical assets or liabilities in an active market.

101

•

Level 2—Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Inputs other than quoted market prices that are observable; and

Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

•

Level 3—Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These valuations, whether derived internally or obtained from a third party, use critical assumptions that are not widely available to estimate market participant expectations in valuing the asset or liability.

(x) Restatement

The Company restated herein its unaudited interim consolidated financial statements as of and for the quarters ended May 31, 2012, August 31, 2012, and November 30, 2012. See Note 23 for additional information.

Note 3. Recent Accounting Pronouncements

Recently Adopted

Testing Goodwill for Impairment

Presentation of Comprehensive Income

•

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2013-02 (ASU 2013-02)

102

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs

Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-05)

Note 4. Balance Sheet Details

The composition of cash and cash equivalents, certificates of deposits, and other investments is as follows (in thousands):


	February 28, 2013		February 29, 2012
Cash and cash equivalents:
Cash	$	6,393	$	2,344

Total	$	6,393	$	2,344

Certificates of deposit and other investments:
Certificates of deposit	$	405	$	404
Marketable securities, available-for-sale		2		1

Total	$	407	$	405

Marketable securities, available-for-sale, are carried at fair market value, based on quoted market price for identical assets in an active market, and accordingly, are categorized as Level 1 assets in accordance with ASC 820, “Fair Value Measurements and Disclosures”, (“ASC 820”). Cost basis of marketable securities, available-for-sale at February 28, 2013 and February 29, 2012 was $14 thousand, and related unrealized loss was $12 thousand and $13 thousand, respectively, and is reflected in Accumulated other comprehensive income in the Consolidated Balance Sheets.

103

The composition of prepaid expenses is as follows (in thousands):


	February 28, 2013		February 29, 2012
Prepaid insurance	$	97	$	94
Prepaid licenses		136		210
Prepaid advertising		—		38
Prepaid exhibit build costs		259		231
Prepaid transaction fees		586		250
Prepaid other operating costs		99		255

Total	$	1,177	$	1,078

The composition of other current assets is as follows (in thousands):


	February 28, 2013		February 29, 2012
Deposits and advances	$	29	$	17
Titanic trust fund		150		50
Contract and legal settlements		383		—
Other receivables		—		21

Total	$	562	$	88

The composition of property and equipment, which is stated at cost, is as follows (in thousands):


	February 28, 2013		February 29, 2012
Exhibitry	$	14,455	$	12,904
Vehicles		14		14
Tools and equipment		511		511
Office equipment		1,356		1,350
Computers and software		1,218		1,083
Leasehold improvements		7,523		7,587
Furniture and fixtures		1,058		1,033
Construction in progress		478		—

		26,613		24,482
Less accumulated depreciation		17,333		14,184

Property & equipment, net	$	9,280	$	10,298

Depreciation expense on property and equipment was $3.0 million and $3.6 million for fiscal 2013 and 2012, respectively.

104

The composition of accounts payable and accrued liabilities is as follows (in thousands):


	February 28, 2013		February 29, 2012
Operations	$	1,121	$	1,738
Professional and consulting fees payable		138		188
Payroll and payroll taxes		162		182
Bonus accrual		801		—
Contract and Legal settlements		15		475
Sales and use taxes		73		87
Exhibit build costs		4		76
Marketing costs		103		113
Merchandise		95		262
Rent		894		898
Unclaimed property		18		17
Lease abandonment, current portion		506		616
Travel and related expenses		57		52
Stock appreciation rights		151		—
Other		8		3

Total accounts payable and accrued liabilities	$	4,146	$	4,707

Note 5. Artifacts

In 1993, the government of France granted the Company ownership of the artifacts recovered in the 1987 Titanic expedition. The artifacts are carried at recovery cost or net recovery value, which include the direct costs of chartering of vessels and related crews and equipment required to complete the dive operations for that expedition. The coal recovered in the expedition is the only item available for sale. Periodically, as sales of coal occur, ten percent of the sale value is deducted from the carrying costs of artifacts recovered. During fiscal 2013 and 2012, $57 thousand and $21 thousand, respectively, were deducted from artifacts.

Note 6. 2010 Expedition to Titanic Wreck Site

105

We have capitalized $4.5 million of costs related to the expedition, discussed in more detail below, which have been allocated to specific assets as reflected in the following table (in thousands).


	February 28, 2013		February 29, 2012
3D film	$	1,817	$	1,817
3D exhibitry		857		857
2D documentary		631		631
Gaming application and other application		886		886
Expedition web point of presence		317		317

Total expedition costs capitalized		4,508		4,508
Less: Accumulated amortization		475		175
Accumulated depreciation		421		158

Expedition costs capitalized, net	$	3,612	$	4,175

In order to increase interest in the expedition, the Company established a central web point of presence for the expedition (ExpeditionTitanic.com), which will also continue to serve as the central site to convey the ongoing efforts to preserve the legacy of the Titanic. During the 2010 expedition, the website featured updates from the crew and other expedition participants, images of the wreck site, and photo/live feed updates that allowed visitors to the site to follow the expedition as it was in process. These features account for most of the capitalized website costs of $317 thousand, which were capitalized in accordance with ASC 350, “Intangibles – Goodwill and Other” (“ASC 350”), as they served as a significant draw to the website and also have future value as use in our exhibits and/or movies. The remaining capitalized website costs were for additional graphics, which were also capitalized in accordance with ASC 350.

As of February 28, 2013 all assets are being depreciated or amortized. The web point of presence and 3D exhibitry assets are included in Property and equipment on the Consolidated Balance Sheets. The 3D film, 2D documentary, gaming, and other application assets are included in Film, gaming and other application assets on the Consolidated Balance Sheets.

106


Fiscal Year	Amount
2014	$	850
2015		797
2016		797
2017		797
2018		371

Total	$	3,612

Note 7. Stock Repurchase

During the year ended February 29, 2012 employees of the Company surrendered 18,361 shares of stock worth approximately $36 thousand to satisfy their tax obligations with respect to the vesting of restricted stock issued pursuant to the Company’s Equity Incentive Plan.

During the year ended February 28, 2008, the Company repurchased 1 million shares of its stock, which were held in a brokerage account since their purchase and reported as Treasury stock on the Consolidated Balance Sheets. On August 29, 2011, the Company formally retired these Treasury shares, which reduced the Common stock issued and corresponding Treasury shares as reported in the Consolidated Balance Sheets.

Note 8. Goodwill and Other Intangible Assets

The following table presents the fiscal year 2013 activity for the Company’s goodwill (in thousands):


Goodwill:
Balance as of February 29, 2012	$	—
AEI Acquisition (Note 21)		250

Balance as of February 28, 2013	$	250

The composition of the Company’s exhibition licenses, as reported in Exhibition licenses on the Consolidated Balance Sheets, is as follows (in thousands):


	February 28, 2013		February 29, 2012
Anatomical specimen licenses	$	6,786	$	6,786
Carpathia licenses		912		912

		7,698		7,698
Less: Accumulated amortization		5,664		5,470

Exhibition licenses, net	$	2,034	$	2,228

107

From April 2004 through fiscal 2013, the Company entered into agreements to license the rights to exhibit anatomical specimens. The aggregate amount paid for the anatomical specimens exhibition license agreements totaled $9.6 million. After termination of a $2.8 million agreement during fiscal 2010 the remaining $6.8 million in specimen licenses are being amortized over the useful life of the agreements which coincides with the terms of the agreements for periods of five to ten years. The Company also entered into lease agreements for certain of its anatomical specimens. As such, these agreements are accounted for as lease agreements and not as intangible assets.See Note 15. Commitments and Contingent Liabilities for a discussion of these agreements.

The Company entered into a twenty-year license agreement effective February 28, 2007 whereby the Company received exclusive rights to present Carpathia artifacts in the Company’s exhibitions in exchange for funding an expedition to the Carpathia, and providing research and recovery expertise. As of February 29, 2012 and February 28, 2013 these costs were fully amortized.

On February 25, 2008, the Company entered into a five-year license agreement to promote, present and produce the exhibition “Dialog in the Dark”, which provides insight and experience to the paradox of learning to see without the use of sight. In February 2012 the Company decided to close its Atlanta, Georgia “Dialog in the Dark” exhibition effective March 6, 2012, which resulted in an impairment charge of $60 thousand for exhibition licenses and $282 thousand of property and equipment related to our “Dialog in the Dark” exhibitions as these assets were determined to no longer be of use to the Company. In addition, as part of our annual impairment testing of long-lived assets it was determined that the property and equipment related to our New York City “Dialog in the Dark” exhibition were impaired resulting in an impairment charge of $648 thousand. The total impairment charge of $990 thousand related to “Dialog in the Dark” is included in Impairment of intangibles and property and equipment on the Consolidated Statement of Operations for the fiscal year ended February 29, 2012. At this time the Company has no future plans for its “Dialog in the Dark” exhibition.

108

The following is a summary of the changes in the carrying value for in fiscal 2013 and fiscal 2012 (in thousands):


Intangibles: Exhibition licenses
Balance as of February 28, 2011	$	2,987
Impairment of licenses		(426	)
Amortization during the year		(333	)

Balance as of February 29, 2012	$	2,228
Amortization during the year		(194	)

Balance as of February 28, 2013	$	2,034

The following is a summary of the changes in the carrying value for future rights fees in fiscal 2013 and fiscal 2012 (in thousands):


Intangibles: Future rights fees
Balance as of February 29, 2012	$	—
Acquisition of future rights fees		4,380
Amortization during the year		—

Balance as of February 28, 2013	$	4,380

No impairments were deemed necessary during fiscal 2013, after review of the intangible asset balances for impairment per ASC 350.

Amortization Expense

Total intangible asset amortization for license agreements totaled $0.2 million and 0.3 million for fiscal 2013 and fiscal 2012, respectively. Estimated aggregate amortization expense for license agreements for the five succeeding fiscal years is reflected in the following table (in thousands):


Fiscal Year	Amount
2014	$	193
2015		193
2016		193
2017		188
2018		105
Thereafter		1,162

Total	$	2,034

109

Total intangible asset amortization for future rights fees totaled $0.0 million for fiscal 2013. Amortization for these assets will begin in March 2013, the date when the first of the exhibitions related to the future rights fees opened, on a straight-line basis for 10 years. Estimated aggregate amortization expense for future rights fees for the five succeeding fiscal years is reflected in the following table (in thousands):


Fiscal Year	Amount
2014	$	438
2015		438
2016		438
2017		438
2018		438
Thereafter		2,190

Total	$	4,380

Note 9. Notes Payable and Capital Lease Obligations

On October 17, 2011, the Company entered into an Asset Purchase Agreement to purchase the assets of a Titanic-themed exhibition (Titanic: The Experience or “TTE”) in Orlando, Florida from Worldwide Licensing & Merchandising, Inc. and its shareholder, G. Michael Harris (together, “Worldwide”). Pursuant to the agreement, the Company purchased the assets of the Orlando exhibition from Worldwide in an installment sale. The Company agreed to pay Worldwide a total of $800 thousand over a two-year period, and also agreed to assume rental and other arrearages owed by Worldwide, totaling $720 thousand, which the Company will pay over a four-year period. Based upon an imputed interest rate of 7.6%, the net present value of these payments was approximately $1.4 million as of the date of the transaction.

On November 26, 2012 the Asset Purchase Agreement was further amended to accelerate the final payment to Worldwide. To induce the Company into this agreement, Worldwide agreed to reduce the final payment by approximately $12 thousand dollars. The final payment was also reduced by approximately $6 thousand to repay accounts receivable owed to the Company. Based upon the imputed interest rate of 7.6%, this represented a decrease in the note of approximately $10 thousand, which is included in non-operating income (expense) as a gain on debt modification. The final payment of $62 thousand was made in December 2012.

As of February 28, 2013 the short-term portion of the note payable was $124 thousand and the long-term portion was $167 thousand, all of which is related to the assumed rental and other arrearages.

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC, both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The Company issued a non-recourse non-interest bearing note of $14.2 million as part of this transaction. The Company originally recorded the note at $16.4 million. The book value of the note was reduced by $3.7 million for the amount that is not expected to be repaid based upon the terms of the note related to the expected future cash flows of the AEI exhibitions and $1.3 million related to the discount of the note to its net present value at an imputed interest rate of 7.0%. Based upon the expected repayment amount of $12.7 million and an imputed interest rate of 7.0%, the fair value of this note was approximately $11.4 million as of April 20, 2012. As of February 28, 2013 the balance sheet reflects the short-term portion of the note payable at $4.9 million and the long-term portion at $2.5 million, including accrued interest.

110

The contractual future maturities of long-term debt as of February 28, 2013 are as follows:


Fiscal Year	Amount
2014	$	5,321
2015		474
2016		1,002
2017		1,065
2018		548

Total future minimum note payments		8,410
Less: amount of note payments representing interest		(701	)

Present value of future minumum note payments		7,709
Less: Current portion of notes payable		(5,080	)

Long-term portion of notes payable	$	2,629

On October 8, 2012, the Company entered into two capital leases for the use of computer equipment. The value of the equipment leased was $115 thousand. Future payments are $2,600 per month for the first three years and $1,700 per month for the final two years of leases. As of February 28, 2013, the balance sheet reflects the short-term portion of capital lease obligations of $24 thousand and the long-term portion of $83 thousand.

The following table summarizes as of February 28, 2013, our minimum rental commitment under capital leases:


Fiscal Year	Amount
2014	$	31
2015		31
2016		27
2017		21
2018		14

Total future minimum lease payments		124
Less: amount of lease payments representing interest		(17	)

Present value of future minumum lease payments		107
Less: Current obligations under capital leases		(24	)

Long-term capital lease obligations	$	83

Note 10. Stock Compensation

Stock Compensation. The Company maintains certain stock compensation plans providing for incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance share units, performance shares, dividend equivalents and other awards relating to the Company’s common stock. In August 2009, our stockholders approved the 2009 Equity Incentive Plan, effective June 17, 2009 (the “2009 Plan”) which, among other things, made 3,000,000 shares available for grant to directors, employees and consultants to provide the Company the ability to offer a full range of equity and cash-based awards. The 2009 Plan replaced the Amended and Restated 2007 Restricted Stock Plan, 2000 Stock Option Plan, and Amended and Restated 2004 Stock Option Plan, all of which terminated immediately after the 2009 Annual Meeting. The Company will not grant any new awards under these terminated plans, but any outstanding awards under the plans will remain outstanding in accordance with their terms.

On August 23, 2012, at the Annual Meeting of Shareholders, our shareholders approved the Premier Exhibitions, Inc. 2009 Equity Incentive Plan, as amended (the “Amended 2009 Plan”). The Amended 2009 Plan became effective as of June 6, 2012, the date the Board approved the Amended 2009 Plan subject to shareholder approval, and will continue in effect until June 6, 2022, or such earlier date as our Board of Directors may determine.

111

The Amended 2009 Plan increased the number of shares available for grant under the 2009 Equity Incentive Plan from 3,000,000 to 5,000,000. The Amended 2009 Plan provides that “full-value awards,” meaning all awards other than stock options and stock appreciation rights, will be counted against the Amended 2009 Plan limit in a 2-to-1 ratio. Stock options and stock appreciation rights will be counted against the Amended 2009 Plan limit in a 1-to-1 ratio. The amendments also provide that dividend equivalents with respect to awards that vest based on the achievement of performance objectives shall be accumulated until such awards are earned, and the dividend equivalents shall not be paid if the performance objectives are not satisfied.

Our non-employee Directors, employees and consultants are eligible to participate in the Amended 2009 Plan, which provides for a full range of awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, dividend equivalents, and other awards relating to shares of our common stock. The awards are payable in shares, in cash, in a combination of shares and cash, or by any other method determined by our Compensation Committee.

As of February 28, 2013, we had 2,109,652 shares available for future grants under the 2009 Plan, which is the only plan open to new grants. As of February 28, 2013, our current stock option plan, terminated plans and grants outside of plans provided for the issuance of 2,362,896 shares of common stock if all outstanding options were exercised, restricted stock vested, warrants were exercised and additional shares available were granted.

During the year ended February 28, 2013, the Company’s Chief Executive Officer and President received 250,000 stock appreciation rights and 99,074 restricted stock units under the Premier Exhibitions, Inc. 2009 Equity Incentive Plan. 48,611 stock appreciation rights and 79,681 restricted stock units vested on June 29, 2012, with the remainder vesting in thirty equal parts each month thereafter. The stock appreciation rights will be settled in cash, and expire five years from the date of grant. The restricted stock units will be settled in stock and have a weighted average price of $2.70 per share.

The grant price of the stock appreciation rights is $2.70, with a fair market value at the date of grant of $1.72. We used the Black-Scholes model to calculate the fair value using a risk-free interest rate of 0.4%, a volatility rate of 80.47%, an annual dividend rate of 0% and an expiration date of June 29, 2017.

As of February 28, 2013 the Company has accrued a liability of approximately $151 thousand for the stock appreciation rights that is included in accounts payable and accrued liabilities on the Consolidated Balance Sheet. We used the Black-Scholes model to calculate the fair value using a risk-free interest rate of 0.6%, a volatility rate of 90.16%, an annual dividend rate of 0% and an expiration date of June 29, 2017 to calculate the liability at February 28, 2013. Stock appreciation rights are categorized as Level 3 liabilities in accordance with ASC 820, “Fair Value Measurements and Disclosures”, (“ASC 820”).


	Year Ended
	2013
Fair value liability, beginning of period	$	—
Level 3 additions		151

Fair value liability, end of period	$	151

During the year ended February 28, 2013, the Company’s Chief Executive Officer and President surrendered 28,577 shares of stock worth approximately $78 thousand to satisfy his tax obligations with respect to the vesting of restricted stock units issued pursuant to the Company’s Equity Incentive Plan. These shares were surrendered at an average price of $2.70 per share based upon the closing price of the Company’s common stock on the day of vesting.

During the year ended February 28, 2013, the Company’s General Counsel and Senior Vice President Business Affairs surrendered 6,690 shares of stock worth approximately $18 thousand to satisfy his tax obligations with respect to the vesting of restricted stock units issued pursuant to the Company’s Equity Incentive Plan. These shares were surrendered at an average price of $2.80 per share based upon the closing price of the Company’s common stock on the day of vesting.

112

The Company follows the fair value recognition provisions in the FASB guidance for stock compensation. Stock-based compensation expense recognized during the year includes the expense for all share-based payments granted on or prior to the end of the period, but not yet vested, based on the estimated grant date fair value. The following table reflects stock-based compensation expense included in General and administrative expenses in our Consolidated Statements of Operations (in thousands):


	February 28, 2013		February 29, 2012
Grant type:
Stock options	$	226	$	313
Restricted stock		489		381
Stock appreciation rights		151		—
Warrants		—		11

	$	866	$	705

Stock Options. The fair value of options is amortized to expense on a straight-line basis over the options’ vesting period. The Company did not grant any stock options during fiscal 2013. Fair value of stock options granted during fiscal 2012 was determined on the date of grant using the Black-Scholes option-pricing model, using the following weighted-average assumptions:


	Fiscal 2012
Dividend yield		0	%
Expected volatility		86	%
Risk-free interest rate		0.9	%
Expected lives in years		4.00

Expected volatilities are based on the historical volatility of the Company’s common stock. The Company uses the simplified method for estimating the expected life within the valuation model which is the period of time that options granted are expected to be outstanding. The risk free rate for periods within the expected life of the option is based on the U.S. Treasury Note rate.

The aggregate intrinsic value for the stock options outstanding and exercisable in the table represents the total pretax value, based on our closing stock price of $2.30 and $2.45 as of February 28, 2013 and February 29, 2012, respectively. The aggregate intrinsic value of the stock options exercised was $1.8 million and $33 thousand for fiscal 2013 and 2012, respectively. A summary of our stock options awarded under the plans and changes during fiscal 2013 and 2012 is presented below:


	February 28, 2013							February 29, 2012
				Weighted		Aggregate					Weighted		Aggregate
				Average		Intrinsic					Average		Intrinsic
	Number of			Exercise		Value		Number of			Exercise		Value
	Options			Price		(000)		Options			Price		(000)
Outstanding at beginning of year		2,904,742		$	2.18	$	2,433		2,630,542		$	2.22	$	1,275
Granted		—			—		—		300,000			1.66		—
Exercised		(922,051	)		0.72		1,766		(25,800	)		0.32		33
Forfeited or expired		—			—		—		—			—		—

Outstanding at end of year		1,982,691		$	2.86	$	670		2,904,742		$	2.18	$	2,433

Exercisable at end of year		1,849,354		$	2.95	$	614		2,214,741		$	2.51	$	1,510

113

In addition, the Company issued stock options outside of its stock compensation plans, summarized as follows:


					Weighted
					Average
					Remaining		Aggregate
			Weighted		Contractual		Intrinsic
			Average		Life		Value
Stock Options Issued Outside of Plans	Options		Price		(Years)		(000)
Outstanding at February 28, 2011		55,000	$	3.25		7.00	$	—

Outstanding at February 29, 2012		55,000	$	3.25		6.00	$	—

Outstanding at February 28, 2013		55,000	$	3.25		5.00	$	—

The following table summarizes information about stock options outstanding by price range at February 28, 2013.


	Options Outstanding						Options Exercisable
			Weighted
	Options		Average				Options
	Outstanding		Remaining		Weighted-		Exercisable		Weighted-
	at		Contractual		Average		at		Average
	February 28,		Life		Exercise		February 28,		Exercise
Range of Exercise Prices	2013		(Years)		Price		2013		Price
$ .00 to $ .50		—		—	$	—		—	$	—
$ .51 to $1.00		277,658		6.35		0.70		277,658		0.70
$1.01 to $2.00		333,334		2.31		1.66		199,998		1.66
$2.01 to $3.00		281,666		2.55		2.15		281,666		2.15
$3.01 to $4.00		734,167		3.08		3.66		734,167		3.66
$4.01 to $9.93		410,865		3.15		4.41		410,865		4.41

		2,037,690		3.34	$	2.87		1,904,354	$	2.96

As of February 28, 2013, we had $221 thousand of total unrecognized compensation expense related to non-vested stock options expected to be recognized over a weighted average period of 2.33 years. The stock-based compensation expense for stock options was based on grant date fair value of the awards for the remaining unvested periods. The total fair value of shares vested during the years ended February 28, 2013 and February 29, 2012 was $417 thousand and $246 thousand, respectively.

Restricted Stock Activity. The Company grants restricted stock or RSUs to certain of its employees and directors. Fair value of restricted stock and RSUs is determined based on the fair value of the Company’s stock on the date of grant. The fair value of restricted stock and RSUs is amortized to expense on a straight-line basis over the restricted stock and RSU vesting period.

114

The aggregate intrinsic value for the restricted stock outstanding in the table represents the total pretax value, based on our closing stock price of $2.30 and $2.45 as of February 28, 2013 and February 29, 2012, respectively. The weighted average grant date fair value of the restricted stock granted was $2.71 during fiscal 2013. A summary of our restricted stock and changes during the years ended February 28, 2013 and February 29, 2012 is presented below:


						Weighted
						Average		Aggregate
				Weighted		Contractual		Intrinic
				Average		Life		Value
Restricted Stock Issued Within Plan	Shares			Price		(Years)		(000)
Non-vested at February 28, 2011		427,163		$	1.86		1.58	$	743
Granted		123,174			1.78		1.00		—
Forfeited or expired		(249,529	)		1.85		—		—
Vested or Exercised		(108,531	)		1.87		—		—

Non-vested at February 29, 2012		192,277			1.80		0.81		471

Granted		154,239			2.71		1.43		202
Forfeited or expired		(11,978	)		1.78		—		—
Vested or Exercised		(265,232	)		2.06		—		—

Non-vested at February 28, 2013		69,306		$	2.72		1.02	$	158

In addition, the Company issued restricted stock outside of plans, summarized as follows:


						Weighted
						Average
						Remaining		Aggregate
				Weighted		Contractual		Intrinsic
				Average		Life		Value
Restricted Stock Issued Outside of Plan	Shares			Price		(Years)		(000)
Non-vested at February 28, 2011		5,000			1.57		0.28		9
Granted		12,500			0.78		—		—
Vested		(17,500	)		0.97		—		—

Non-vested at February 29, 2012		—		$	—		—	$	—

Granted		—			—		—		—
Forfeited or expired		—			—		—		—
Vested		—			—		—		—

Non-vested at February 29, 2013		—		$	—		—	$	—

As of February 28, 2013, we had $185 thousand in unrecognized compensation cost related to non-vested restricted stock awards expected to be recognized over a weighted average period of 1.03 years. The stock-based compensation expense for restricted stock was based on grant date fair value of the awards for the remaining unvested periods. The total fair value of shares vested during fiscal 2013 and 2012 was $549 thousand and $423 thousand, respectively.

Warrants. The Company granted warrants under various agreements. Warrants related to these agreements entered into in March 2008 remain outstanding at February 28, 2013. Fair value of warrants issued under these agreements was determined based on the Black-Scholes pricing model using the following weighted-average assumptions:


	Fiscal 2009
Dividend yield		0	%
Expected volatility		120	%
Risk-free interest rate		4.2	%
Expected lives in years		5.0

115

The Company’s warrants position is summarized as follows:

Warrants Outstanding

Warrants Exercisable

Weighted

Warrants

Average

Warrants

Outstanding

Weighted-

Remaining

Exercisable

Weighted-

Average

Contractual

Average

February 28,

Exercise

Life

February 28,

Exercise

Range of Exercise Prices

2013

Price

(Years)

2013

Price

$4.01 to $5.00

6,000

4.57

0.04

6,000

4.57

6,000

4.57

0.04

6,000

4.57

A summary of warrants issued and changes during fiscal 2013 and 2012 is presented below:


	February 28, 2013					February 29, 2012
				Weighted					Weighted
				Average					Average
	Number of			Exercise		Number of			Exercise
	Warrants			Price		Warrants			Price
Outstanding at beginning of year		60,000		$	2.10		110,000		$	4.30
Issued		—			—		54,000			1.82
Exercised		(54,000	)		1.82		—			—
Forfeited or expired		—			—		(104,000	)		4.29

Outstanding at end of year		6,000		$	4.57		60,000		$	2.10

Exercisable at end of year		6,000		$	4.57		60,000		$	2.10

No warrants were granted during the fiscal years ended February 28, 2013 or February 29, 2012.

As of February 28, 2013, we had no unrecognized compensation cost related to non-vested warrants. The stock-based compensation expense for warrants was based on grant date fair value of the awards for the remaining unvested periods.

Stock Appreciation Rights.

On June 29, 2012, the Company granted its Chief Executive Officer 250,000 stock appreciation rights under the Premier Exhibitions, Inc. 2009 Equity Incentive Plan. Of these rights 48,611 stock appreciation rights vested immediately, with the remainder vesting in thirty equal parts each month thereafter. The stock appreciation rights will be settled in cash, and expire five years from the date of grant. As of February 28, 2013, 104,171 of the stock appreciation rights have vested. Fair value of stock appreciation rights is determined using the Black-Scholes pricing model using weighted-average assumptions including expected volatility, risk-free interest rates, and the expected life of the award. Expected volatilities are based on the historical volatility of the Company’s common stock. The Company uses the simplified method for estimating the expected life within the valuation model which is the period of time that stock appreciation rights granted are expected to be outstanding. The risk free rate for periods within the expected life of the stock appreciation rights is based on the U.S. Treasury Note rate. Fair value is recalculated at the end of each reporting period. As of February 28, 2013 $151 thousand has been included in accounts payable and accrued liabilities and represents the liability under this plan.

Note 11. Lease Abandonment

In 2008, the Company entered into a lease for exhibition space with Ramparts, Inc., the owner and operator of the Luxor Hotel and Casino in Las Vegas, Nevada. The Company’s initial plans for the space were to operate three exhibitions and several ancillary attractions. During the third quarter of fiscal 2009, the Company opened two of three exhibitions. There were deficiencies with the third exhibition which, in the Company’s judgment, prevented the Company from proceeding with the original plan. During the fourth quarter of fiscal 2010, the Company decided it was no longer feasible to open a third exhibition and committed to a plan to exit the space. Accordingly, the Company recorded lease abandonment expense of $4.4 million during fiscal 2010 based on the remaining payments under a non-cancellable operating lease and adjusted for expected sublease rent. The related long-term lease abandonment liability of $1.9 million and $2.6 million at February 28, 2013 and February 29, 2012, respectively is reflected in Lease abandonment in the Consolidated Balance Sheets. The related current portion lease abandonment liability of $0.5 million and $0.6 million at February 28, 2013 and February 29, 2012, respectively is reflected in Accounts payable and accrued liabilities in the Consolidated Balance Sheets.

116

On July 19, 2010, the Company entered into a sublease agreement with Image Quest Worldwide, Inc. (“Image Quest”), under which they agreed to sublease the abandoned space to present a sports themed exhibition. Under the terms of the agreement Image Quest agreed to pay Premier monthly rent equal to the greater of $30 thousand or 10% of gross sales (“rental charges”) and additional charges under the lease, such as common area maintenance charges, (“additional charges”) as allocated based on square footage of the subleased area. The Company has agreed to waive these rental charges and additional charges for August 2010 through July 2011. For the next twenty four months of the lease term (August 2011 – July 2013), 50% of the monthly rental charges and all additional charges will accrue, but are not payable to Premier until August 1, 2013, when the entire balance plus interest at 5% will become due and shall be paid in equal monthly installments over twelve months.

Note 12. Income Taxes

A summary of the components of the provision for income taxes for fiscal 2013 and 2012 consists of the following:


	February 28, 2013		February 29, 2012
Current income tax expense:
Federal	$	121	$	—
State		70		42
Foreign		88		134

Total current income tax expense		279		176

Deferred income tax expense:
Federal		—		—
State		—		—

Total deferred income tax expense		—		—

Total Income tax expense	$	279	$	176

The total provision for income taxes differs from the amount computed by applying the U.S. statutory federal income tax rate to income before income tax, as follows:


	February 28, 2013			February 29, 2012
Statutory federal income tax rate		34.0	%		34.0	%
State taxes, net of federal tax benefit		2.1			—
Nondeductible expenses		1.9			(0.5	)
Adjustments of prior year amounts		0.9			—
Change in valuation allowance		(34.8	)		(34.1	)
Foreign taxes, net of federal benefit		4.1			(2.1	)
Other		4.8			(0.3	)

		13.0	%		(3.0	)%

117

Deferred income taxes recorded on the Company’s Consolidated Balance Sheets result from temporary differences between the basis of assets and liabilities reported for financial statement purposes and such amounts reported under the tax laws and regulations. The net deferred income asset consists of the following (in thousands):


		February 28, 2013			February 29, 2012
Current deferred assets (liabilities):
Accrued expenses		$	660		$	1,085
Accounts receivable			103			112
Inventory			28			64
Other			5			10
Prepaid insurance			(34	)		(34	)

Current deferred tax assets			762			1,237
Less: valuation allowance			(754	)		(1,193	)

Net current tax asset		$	8		$	44

Noncurrent deferred tax assets (liabilities):
Equity compensation		$	1,491		$	2,131
Accrued expenses			766			726
Foreign net operating loss carryforward			714			732
Federal net operating loss carryforward			2,993			5,665
State net operating loss carryforward			539			604
Contribution carryforwards			132			100
Intangible assets	��		845			789
Federal tax credits			874			752
Investment in subsidiary			2,789			—
Fixed assets			(570	)		(363	)

Noncurrent deferred tax assets			10,573			11,136
Less: valuation allowance			(10,581	)		(11,180	)

Net noncurrent deferred tax assets (liabilities)			(8	)		(44	)

Net deferred tax assets		$	—		$	—

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company currently has approximately $9.1 million of U.S. federal net operating losses that are available as carryforwards. The net operating losses may be limited under Section 382 of the Internal Revenue Code. The Company has performed an analysis to determine how much of these losses may be limited and the impact of such limitations is not material.

As of February 28, 2013, the Company has $698 thousand of foreign tax credits and $177 thousand of minimum tax credits available to offset future payments of U.S. Federal income tax. If not used, the foreign tax credits will expire beginning in 2018. The minimum tax credits can be carried forward indefinitely. The Company also has approximately $11.6 million of state net operating losses that are available as either carryforwards or carrybacks. The majority of these losses were generated in fiscal 2012, 2011, 2010 and 2009, and will expire beginning in the fiscal year ending February 28, 2014.

Realization of the tax benefits of net operating loss carryforwards and tax credit carryforwards is dependent upon the Company’s ability to generate sufficient future taxable income in the appropriate taxing jurisdictions and within the applicable carryforward periods. After giving consideration to current forecasts of future taxable income and the expiration period of the carryforward tax benefits, the Company has recorded a valuation allowance of $11.3 million to offset all net deferred income tax assets. This reflects a decrease of $1.1 million from the valuation allowance of $12.4 million for fiscal 2012.

Deferred tax assets relating to the tax benefits of employee stock options have been reduced to reflect exercises through the fiscal year ended February 28, 2013. Certain exercises resulted in tax deductions in excess of previously recorded tax benefits. The Company’s net operating loss carryforwards referenced above at February 28, 2013 include $301 thousand of income tax deductions in excess of previously recorded tax benefits. Although these additional tax deductions are reflected in net operating loss carryforwards referenced above, the tax benefit will not be recognized until they reduce taxes payable. Accordingly, since the tax benefit did not reduce the Company’s taxes payable in prior years, these tax benefits are not reflected in the Company’s deferred tax assets as presented above. The tax benefit of these excess deductions will be reflected as a credit to additional paid-in capital when recognized.

The Company has elected to record interest and penalties as a component of General and administrative expenses on the Consolidated Statement of Operations. Interest and penalties for fiscal 2013 and 2012 were immaterial.

118

Revenue Examinations

As of February 28, 2013 the Company has determined no liabilities for uncertain tax positions should be recorded. The Company does not anticipate a material change in the amount of unrecognized tax benefits over the next twelve months.

Note 13. Net Income (Loss) Per Share

Basic per share amounts exclude dilution and are computed using the weighted average number of common shares outstanding for the period. Diluted per share amounts reflect the potential reduction in earnings per share that could occur if equity based awards were exercised or converted into common stock, unless the effects are anti-dilutive (i.e., the exercise price is greater than the average market price of the common shares). Potential common shares are determined using the treasury stock method and include common shares issuable upon exercise of outstanding stock options and warrants.

The following table sets forth the computation of basic and diluted net income (loss) per share. For the year ended February 29, 2012 resulted in a net loss, the impact of dilutive effects of stock options was not added to the weighted average shares.


	February 28, 2013		February 29, 2012
Numerator:
Net income (loss) attributable to shareholders	$	1,950	$	(5,781	)
Denominator:
Basic weighted-average shares outstanding		48,159,918		47,418,894
Effect of dilutive stock options and warrants		400,745		—

Diluted weighted-average shares outstanding		48,560,663		47,418,894

Net income (loss) per share:
Basic	$	0.04	$	(0.12	)

Diluted	$	0.04	$	(0.12	)

Equity based awards not included in the per share computation because the option exercise price was greater than the average market price of the common shares are reflected in the following table.


	February 28, 2013		February 29, 2012
Warrants		6,000		6,000
Stock options		1,145,032		1,446,698

Total		1,151,032		1,452,698

Note 14. Employee Savings Plans

The Company sponsors the Premier Exhibitions 401(k) and Profit Sharing Plan (the “Plan”) under section 401(k) of the Internal Revenue Code of 1986, as amended. Under the Plan, all employees eligible to participate may elect to contribute up to the lesser of 60% of their salary or the maximum allowed under the Code. All employees who are at least age 21 and have completed three months of service with the Company are eligible to participate. Effective June 1, 2012, the Plan was amended to allow for Company matching of employee contributions at a rate of 100% of up to 3% of eligible compensation and 50% for 4%-5% of employee eligible contributions. Prior to this amendment, the Company matching of employee contributions was at a rate of 50% of up to 6% of eligible contributions. During fiscal 2013 and 2012, the Company made $104 thousand and $45 thousand in qualified matching contributions to the Plan, respectively.

119

Note 15. Commitments and Contingencies

Lease Arrangements

Specimens

Principal Executive Offices

Warehouse Space for Artifacts and Other Exhibitry

Warehouse Space for Exhibitry Assets

Warehouse Space for Merchandise Inventory

Luxor Hotel and Casino – Las Vegas, Nevada

On March 12, 2008, the Company entered into a ten year lease agreement for exhibition space with Ramparts, Inc., owner and operator of The Luxor Hotel and Casino in Las Vegas, Nevada, with an option to extend for up to an additional ten years. This lease includes approximately 36,141 square feet of space within the Luxor Hotel and Casino. We use the space, among other things, to present our “Bodies... The Exhibition” and “Titanic: The Artifact Exhibition” exhibitions. The lease commenced with the completion of the design and construction work which related to the opening of our “Bodies... The Exhibition” exhibition in August 2008 and the opening of the Titanic exhibition in December 2008. See discussion inNote 11. Lease Abandonmentregarding abandonment of a portion of the leased space.

120

Atlantic Station – Atlanta, Georgia

On July 2, 2008, the Company entered into a lease agreement for exhibition space with Atlantic Town Center in Atlanta, Georgia. Until March 6, 2012 we used the space to present our “Bodies... The Exhibition” and our “Dialog in the Dark” exhibitions. This space is currently being used to present our “Bodies... The Exhibition” and our “Titanic: The Artifact Exhibition” exhibitions. The initial lease term was for three years with four one-month renewal options and was scheduled to expire in February 2012. On September 30, 2011, the Company entered into a first amendment to this lease. The first amendment extended the lease term for an additional 16 months, with a two year extension option, and expired January 31, 2013. On October 22, 2012, the Company entered into a second amendment to the lease for its exhibition space in Atlantic Station in Atlanta, Georgia. The lease term is for an additional 24 months from February 1, 2013 through January 31, 2015.

Seaport—New York City, New York

Buena Park, California

On April 3, 2013, the Company entered into a lease agreement for exhibition space with the Successor Agency of the Community Redevelopment Agency of the City of Buena Park, California. We intend to open the space in the second quarter of 2014 and will present “Bodies… The Exhibition” and “Titanic: The Experience” exhibitions in the space. The Company leased the exhibition space for $1 per month through January 1, 2015, and has agreed to make capital improvements to the space and to maintain the facility during the term.

“Titanic – The Experience” – Orlando, Florida

Touring Exhibitions

Lease Expense and Commitments

Lease expense charged to operations under these agreements was as follows:


	February 28, 2013		February 29, 2012
Specimen fixed rentals	$	1,646	$	2,517
Real estate rentals		5,087		4,980
Equipment rentals		67		66

Total rent expense	$	6,800	$	7,563

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Aggregate minimum lease commitments at February 28, 2013, are as follows:


Fiscal Year	Amount
2014	$	5,600
2015		4,294
2016		3,961
2017		3,867
2018		3,608
Thereafter		1,474

Total	$	22,804	***

***	Amounts have been reduced by sublease rental income of $150 thousand for fiscal years 2014 and 2015. In addition, the specimen licenses fees for our leased bodies include a charge of $1 per ticket sold after the first 225,000 tickets that are not estimated above.

Titanic Artifact Sale Transaction Costs

The Company is party to a Consignment Agreement with Guernsey’s auction house to sell the Company’s Titanic artifacts and related intellectual property. If and when a transaction is closed, the Company will be required to pay Guernsey’s a fee of up to 8% of the sale price if a purchase agreement is entered into within 60 days of the auction deadline, and up to 4% of the sale price if a purchase agreement is entered into thereafter. The actual amount of the commission will depend on the sale price, identity of the purchasing party and the date when the sale is closed. In addition, if and when a transaction to sell the Titanic artifact collection is closed, the Company may be required to pay a Transaction Bonus to Christopher Davino, former President of RMS Titanic, Inc., dependent upon the sale price, identity of the purchasing party and the date when the sale is closed. If a Transaction Bonus is paid to Mr. Davino, it is expected to be in the range of $625 thousand to $5.25 million, as previously disclosed by the Company. In addition, the Company expects to incur other legal, accounting and investment banking expenses if and when a sale of the Titanic artifacts is completed.

Legal Proceedings

Concentrations

The Company conducts business with certain third party presenters in order to bring its exhibitions to market. If relationships with any or all of these presenters is damaged or the presenters decide to no longer conduct business with the Company, it is possible that the Company’s ability to bring its exhibits to market could be delayed or otherwise impaired. There is currently no indication that these relationships are impaired or that the presenters intend to terminate their business relationship with the Company.

In addition, the Company currently presents three types of exhibits, two of which are dependent upon license agreements in order to present the exhibitions. If license agreements related to the Company’s “Real Pirates” or “Bodies… The Exhibition” exhibitions are not renewed in the future, it could prevent the Company from presenting these exhibitions. There is currently no indication that these licenses would not be able to be renewed.

The Company currently conducts much of its business outside of the U.S. At February 28, 2013, the Company had 2 of its total 17 exhibits located in China and Serbia.

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Note 16. Related Party Transactions

Consulting Agreements

On February 2, 2009, the Company entered into a month to month consulting agreement with Foxdale Management, LLC and Mr. Samuel Weiser whereby Mr. Weiser provides advice and other consulting services to the Company at a rate which was originally not to exceed $20 thousand per month and amended in January 2011 not to exceed $25 thousand per month. The Company incurred $100 thousand and $295 thousand in expenses under this agreement for fiscal 2013 and 2012, respectively. Mr. Weiser has served as a member of the Company’s Board of Directors since August 2009 and was previously the Chief Operating Officer of Sellers Capital, LLC. Pursuant to this consulting agreement, Mr. Weiser served as Interim Chief Financial Officer of the Company from May 17, 2011 to June 27, 2011 and served as Interim President and Chief Executive Officer until June 29, 2012 when he was named President and Chief Executive Officer and this consulting agreement was cancelled. Prior to his appointment as Interim Chief Financial Officer, Mr. Weiser had been serving as a consultant to the Company and overseeing the Company’s finance function while the Company began conducting a search for a permanent Chief Financial Officer.

Note 17. Non-controlling Interest

S2BN Entertainment Corporation

The Company and S2BN Entertainment Corporation (“S2BN”) terminated their joint venture to develop, design and produce future exhibitions. The Company and S2BN entered into this joint venture arrangement on May 14, 2010 whereby each entity owned 50 percent of the joint venture and shared equally in the funding requirements and profits and losses of the joint venture exhibitions.

The Company entered into a License Agreement (the “Agreement”) with Playboy Enterprises International, Inc. (“Playboy”) in May of 2008 for the right to present and promote new exhibitions related to the Playboy brand. The Company and S2BN agreed to jointly develop, design, and produce a Playboy exhibit, and S2BN agreed to reimburse 50 percent of the enumerated costs incurred related to this initial exhibit concept under the joint venture arrangement.

Although the Company did not have a controlling financial interest in the joint venture, we determined that consolidation was appropriate due to assessment of the Company’s participation in the financial and operational decisions of the joint venture made in the ordinary course of business, as outlined in Accounting Standards Codification (“ASC”) ASC 810-10-25. Therefore, the joint venture’s results were consolidated into the Company’s financial statements and reflected as a non-controlling interest.

On August 25, 2011, the Company notified Playboy that the joint venture was terminating the Agreement pursuant to a unilateral termination right the Company had negotiated that included the waiver of the $300 thousand termination fee otherwise payable, if the termination was effected prior to the end of August 2011. While the Agreement provided that the joint venture would still owe Playboy a final license fee installment of $150 thousand despite any such termination, the Company and S2BN also contend that Playboy had previously breached the Agreement, and the joint venture accordingly reserved its rights to pursue all remedies and damages (which would include withholding any such final license fee installment). Due to the termination of the agreement with Playboy, the Company recorded an impairment charge of $217 thousand for Playboy licenses, net of accumulated amortization. The Company also recorded an impairment charge of $141 thousand for construction in progress comprised of expenses incurred in the creation of the Playboy exhibit. The total impairment charge of $358 thousand is included in Impairment of intangibles and fixed assets on the Consolidated Statement of Operations for the year ended February 29, 2012.

Due to the termination of the Agreement and the related impairments, S2BN’s investment in the joint venture through its payment of 50 percent of the costs of the potential exhibit has been fully impaired. An impairment charge of $197 thousand is reflected in Net loss attributable to non-controlling interest on the Consolidated Statements of Operations for the year ended February 29, 2012.

During the portion of fiscal 2012 that the Agreement was in effect, the Company incurred expenditures for exhibition rights of $50 thousand and received $77 thousand in reimbursements from S2BN for its share of total development costs incurred to date.

123

Arts and Exhibitions International, LLC

On April 20, 2012, the Company’s Premier Exhibition Management LLC subsidiary and its wholly owned subsidiary, PEM Newco, LLC (“Newco”), entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The Company granted a 10% interest in Premier Exhibition Management LLC (“PEM”) to AEG Live valued at $4.8 million as part of this transaction. The Company used level 3 inputs based upon Financial Accounting Statement Board (“FASB”) Accounting Standards Codification 820, “Fair Value Measurements and Disclosures” (“ASC 820”) to value AEG Live’s interest in PEM. The Company projected the future discounted cash flow by projecting the statement of operations and the probability of achievement to determine the fair value of the assets. During the year ended February 28, 2013, the net loss related to the non-controlling interest in PEM was $83 thousand.

Note 18. Purchase and Registration Rights Agreements

•

enters into any agreement, including, but not limited to, an equity line of credit, whereby it may sell securities at a future determined price.

124

The Company has also agreed to indemnify LPC against certain losses resulting from its breach of any of its representations, warranties or covenants under the agreements with LPC.

During the year ended February 29, 2012 the Company sold 275,000 shares for $634,675 and issued 158,632 commitment shares under this agreement. No shares were issued or sold during the year ended February 28, 2013.

Note 19. Litigation and Other Legal Matters

Status of Salvor-in-Possession and Interim Salvage Award Proceedings

•

The approximately 2,000 “1987 Artifacts” and the approximately 3,500 “Post 1987 Artifacts” must be maintained as a single collection;

•

The combined collections can only be sold together, in their entirety, and any buyer would be subject to the same conditions applicable to RMST; and

•

125

Status of International Treaty Concerning the Titanic Wreck

Other Litigation

126

From time to time the Company is or may become involved in other legal proceedings that result from the operation of its exhibitions and business.

Settled Litigation

127

Revenue Examinations

Note 20. Foreign Operations

Our exhibitions regularly tour outside the U.S. Approximately 3% and 20.7% of our revenues for fiscal 2013 and fiscal 2012, respectively, resulted from exhibition activities outside the U.S. Exhibition activities outside the U.S. represented 12.3% and 24.9% of our total attendance for fiscal 2013 and fiscal 2012, respectively.

Many of our financial arrangements with our international trade partners are based upon foreign currencies, which exposes the Company to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring. Aggregate foreign currency transaction loss included in Net income (loss) in the Consolidated Statement of Comprehensive Income was $0 and $9 thousand for fiscal 2013 and 2012, respectively. Foreign currency translation adjustments, as presented in Other comprehensive loss in the Consolidated Balance Sheet, are reflected in the following table (in thousands):


Foreign currency translation gain (loss):
Balance as of February 28, 2011	$	(447	)
Translation adjustment		(25	)

Balance as of February 29, 2012		(472	)
Translation adjustment		13

Balance as of February 28, 2013	$	(459	)

Note 21. Asset Purchase Agreement and Related Matters

Transaction – Orlando

On October 17, 2011, the Company entered into an Asset Purchase Agreement to purchase the assets of a Titanic-themed exhibition (Titanic: The Experience or “TTE”) in Orlando, Florida from Worldwide Licensing & Merchandising, Inc. and its shareholder, G. Michael Harris (together, “Worldwide”). Pursuant to the Agreement, the Company purchased the assets of the Orlando exhibition from Worldwide in an installment sale. The Company agreed to pay Worldwide directly a total of $800 thousand over a two-year period, and also agreed to assume rental and other arrearages owed by Worldwide, totaling $720 thousand, which the Company will pay over a four-year period. On June 29, 2012 the Company and Worldwide entered into an amendment to the Asset Purchase Agreement to amend the payment schedule in exchange for a reduction in the total payments to $1,430,000. On November 26, 2012 the Company and Worldwide entered into a further amendment to the Asset Purchase Agreement to amend the payment schedule in exchange for a reduction in the total payments to $1,418,000.

We have also entered into an Assignment of and Second Amendment to Lease (the “Lease Agreement”) with George F. Eyde Orlando, LLC and Louis J. Eyde Orlando, LLC (together, “Landlord”) and Worldwide, which provides for a lease of the current exhibition space for five years, with an optional early termination after three years. The Lease Agreement reflects the Company’s rental obligations and also the assumed rental arrearages paid on behalf of Worldwide as part of the consideration for the Asset Purchase Agreement.

128

Assets Acquired and Liabilities Assumed

Based upon the facts and circumstances of the acquisition, the Company has determined that it qualifies as a business purchase in accordance with ASC 805, Business Combinations, (“ASC 805”), which requires that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

Fair value of acquired assets was determined based on a combination of the market and cost approaches. The market approach indicates asset value should be measured by reference to prices for recent transactions involving identical or comparable assets. The cost approach estimates fair value by determining the current cost to acquire or construct a comparable asset. We used the market approach to estimate fair value for certain exhibitry and leasehold improvement assets where we had purchased comparable assets for our other exhibitions. For all other assets acquired, we used the cost approach. The fair value of the liabilities assumed as part of the Asset Purchase Agreement was determined by calculating their present value using an estimated incremental borrowing rate.

The following table summarizes the allocation of the purchase price of the Orlando acquisition to the estimated fair values of the assets and liabilities assumed at the date of acquisition (in thousands):


Assets acquired:
Fixed assets:
Exhibitry	$	1,077
Leasehold improvments		237
Other fixed assets		53
Other assets:
Security deposit		10

Total assets acquired	$	1,377

Liabilities:
Note payable—Seller		743
Assumed lease arrearages		634

Total liabilities assumed	$	1,377

Net assets acquired	$	—

As the fair value of the assets purchased equals the fair value of liabilities assumed no goodwill was created by the transaction.

Transaction—Arts and Exhibitions International, LLC

On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (“Newco”), both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased, effective April 20, 2012, substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”). The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”. The acquired assets include rights agreements with the owners of the artifacts and intellectual property comprising the exhibitions, museum/venue agreements for existing exhibition venues, sponsorship agreements, a warehouse lease and an office lease. Unless renewed, our license to exhibit “King Tut II” will expire during fiscal 2013. We have been notified by the Egyptian government that the license to exhibit “Cleopatra”, originally set to expire during fiscal 2014, will be terminated by the end of fiscal 2013. In addition, the acquired assets include intellectual property related to proposed future exhibitions that the Company may further develop and produce. The Company will operate any such additional properties under its exhibition management subsidiary.

Pursuant to the Purchase Agreement, Newco purchased the exhibition properties and assets of AEI in exchange for the issuance to AEG of a 10% equity interest in PEM and a non-recourse and non-interest bearing promissory note in the initial principal amount of $14,187,000 and with a maturity date of February 28, 2017 (the “Promissory Note”). While no cash consideration was paid upon the closing of the transaction, the Company incurred approximately $660,000 in transaction related expenses for investment banking, legal, and accounting fees of the acquired business, of which $550,000 was recognized in fiscal year 2013 and $110,000 in fiscal year 2012 which are included in general and administrative expenses. Newco has also assumed substantially all of the agreements and obligations associated with the acquired assets arising after the closing date, but AEG will retain the obligation to pay the rights fees that accrue on existing exhibitions, which payments totaled $2.2 million. When AEG paid these fees, the balance of the Promissory Note was increased by the amount of the payment(s).

129

Pursuant to the Promissory Note, Newco will make payments to AEG equal to (a) 100% of net revenues from exhibition bookings entered into by AEG or pending as of closing and transferred to Newco pursuant to the Purchase Agreement, (b) 100% of net revenues from future bookings, after payment to PEM of a 10% booking fee, (c) 100% of the net revenues from the future sale of any tangible exhibitry, equipment and other fixed assets comprising the acquired assets, and (d) 20% of the net revenues from proposed exhibitions acquired from AEG that are ultimately developed and presented. “Net revenues” are determined after deduction by Newco of the direct expenses of operating the exhibitions. Newco is also entitled to retain, before remitting any payments on the Promissory Note, a management fee in the following amount: (a) 5% of gross revenues (after deducting any PEM booking fees) for calendar year 2012; and (b) 10% of gross revenues (after deducting any PEM booking fees) for each calendar year thereafter; provided that the management fee shall not be less than the following minimum fees: $697 thousand in calendar year 2012; $750 thousand in calendar year 2013; $500 thousand in calendar year 2014; and $250 thousand in each of calendar years 2015 and 2016.

If the face value of the Promissory Note is paid in full prior to the maturity date, Newco will pay AEG 40% of any additional net revenues derived from operation of the acquired assets thereafter through the maturity date, after deduction of the 10% management fee and the 10% booking fee, if applicable. If the face value of the Promissory Note is not satisfied in full at the maturity date, Newco shall satisfy any shortfall by, at its option, selling some or all of the remaining acquired tangible assets, returning some or all the remaining acquired tangible assets to AEG, or paying the applicable portion of the value of the remaining tangible assets to AEG.

Due to the non-recourse nature of the Promissory Note, if the proceeds from the acquired exhibitions and asset sales described above are not sufficient to satisfy the Promissory Note in full on or prior to the maturity date, then none of the Company, PEM or Newco will have any liability with respect to any shortfall.

The following table summarizes the allocation of the purchase price of the Arts and Exhibition International, LLC acquisition to the estimated fair values of the assets and assets assumed at the date of acquisition (in thousands):


Consideration:
Non-recourse note payable	$	11,433
Non-controlling interest in PEM, LLC		3,018

Total consideration given		14,451
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash		2,481
Prepaid expenses		6,200
Property, plant, and equipment		3,003
Long-term exhibition costs		618
Identifiable intangible assets		4,380
Deferred revenue		(2,481	)

Total identifiable net assets		14,201

Goodwill	$	250

130

The proforma results below include the effect of the acquisitions as if they had been consummated as of March 1, 2011 (in thousands). The unaudited proforma financial information is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of March 1, 2011.


	February 28, 2013		February 29, 2012
Total revenue	$	39,354	$	33,334
Income/(loss) from operations		2,571		(5,276	)
Net income (loss)		2,195		(5,963	)

Transaction – Exhibit Merchandising, LLC

On July 12, 2012 the Company purchased substantially all of the assets of Exhibit Merchandising, LLC for $125 thousand from TIX Corporation and Exhibit Merchandising, LLC. The assets purchased consisted of inventory valued at $25 thousand and fixed assets valued at $100 thousand.

As part of the asset purchase of Exhibit Merchandising, LLC, we obtained the rights to sell all merchandise related to “Tutankhamun and the Golden Age of the Pharaohs”, “Cleopatra: The Exhibition” and “Real Pirates.”

Note 22—Segment Information

The Company has two reportable segments—Exhibition Management and RMS Titanic. The Exhibition Management segment involves the management of all of the Company’s exhibition operations, including the operation and management of Premier’s Bodies, Titanic (through an inter-company agreement with RMST), and Dialog in the Dark exhibitions as well as the operation and management of the AEI properties known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” The exhibition management division also includes our exhibition merchandising business, conducted under the Company’s wholly owned subsidiary, Premier Merchandising, LLC. The RMS Titanic segment manages the Company’s rights to the Titanic assets, including title to all of the recovered artifacts in the Company’s possession and all of the intellectual property (video, photos, maps, etc.) related to the recovery of the artifacts and research of the ship. In addition, the RMS Titanic segment manages the Company’s responsibilities as salvor-in-possession of the Titanic wreck site.

Revenue derived from exhibitions presented outside of the U.S. was $1.2 million and $6.6 million for fiscal year 2013 and 2012, respectively. The Company’s foreign exhibitions are all touring. As such, the concentration of foreign income in any period is fluid and changes as exhibitions are moved, normally every four to six months.

All reported revenues were derived from external customers, with the exception of $2.4 million and $1.5 million reported for the RMS Titanic segment for fiscal 2013 and 2012, respectively. This revenue represents a royalty fee paid by the Exhibition Management segment for the use of Titanic assets in its exhibits, and is reflected as a corresponding cost of revenue in the Exhibition Management segment. Revenue earned and expenses charged between segments are eliminated in consolidation.

Certain corporate expenses are allocated based on intercompany agreements between PRXI, PEM and RMST for shared services.

131

The following tables reflect the Statements of Operations for fiscal 2013 and 2012, respectively by segment.


	Year Ended February 28, 2013
	(In thousands)
	Exhibition Management			RMS Titanic			Elimination			Total
Revenue	$	39,465		$	2,353		$	(2,353	)	$	39,465
Cost of revenue (exclusive of depreciation and amortization)		21,098			—			(2,353	)		18,745

Gross profit		18,367			2,353			—			20,720

Operating expenses:
General and administrative		13,355			1,292			—			14,647
Depreciation and amortization		3,419			106			—			3,525
Loss on disposal of assets		134			—			—			134
Contract and legal settlements		(309	)		—			—			(309	)

Total Operating expenses		16,599			1,398			—			17,997

Income from operations		1,768			955			—			2,723
Other income and (expenses)
Other income		23			—			—			23
Gain on debt modification		81			—			—			81
Interest expense		(681	)		—			—			(681	)

Income before income tax		1,191			955			—			2,146
Income tax expense		193			86			—			279

Net income		998			869			—			1,867
Less: Net loss attributable to non-controlling interest		(83	)		—			—			(83	)

Net income attributable to the shareholders of Premier Exhibitions, Inc.	$	1,081		$	869		$	—		$	1,950


	Year Ended February 29, 2012
	(In thousands)
	Exhibition Management			RMS Titanic			Elimination			Total
Revenue	$	31,710		$	1,440		$	(1,440	)	$	31,710
Cost of revenue (exclusive of depreciation and amortization)		18,704			—			(1,440	)		17,264

Gross profit		13,006			1,440			—			14,446

Operating expenses:
General and administrative		12,444			1,514			—			13,958
Depreciation and amortization		3,817			105			—			3,922
Loss on disposal of assets		256			—			—			256
Impairment of intangibles and fixed assets		1,348			—			—			1,348
Contract and legal settlements		783			—			—			783

Total Operating expenses		18,648			1,619			—			20,267

Loss from operations		(5,642	)		(179	)		—			(5,821	)
Other income and (expenses)
Other income		10			—			—			10
Interest expense		(33	)		—			—			(33	)

Loss before income tax		(5,665	)		(179	)		—			(5,844	)
Income tax expense		176			—			—			176

Net loss		(5,841	)		(179	)		—			(6,020	)
Less: Net loss attributable to non-controlling interest		(239	)		—			—			(239	)

Net loss attributable to the shareholders of Premier Exhibitions, Inc.	$	(5,602	)	$	(179	)	$	—		$	(5,781	)

132

The assets in our Exhibition Management segment include exhibitry, leasehold improvements, and other assets necessary for operation of the Company’s exhibitions. The RMS Titanic segment contains all of the Titanic assets, including title to all of the recovered artifacts in the Company’s possession and all related intellectual property (video, photos, maps, etc.). The Company’s assets by segment are reflected in the following table (in thousands).


	As of
	February 28, 2013		February 29, 2012
Assets:
Exhibition Management	$	28,634	$	15,438
RMS Titanic		7,088		7,465
Corporate and unallocated		1,756		2,714

Total assets	$	37,478	$	25,617

Expenditures for additions to long-lived assets by segment for the year ended February 28, 2013 and February 29, 2012 are reflected in the table below (in thousands).



	February 28, 2013		February 29, 2012
Capital Expenditures:
Exhibition Management	$	906	$	2,544
RMS Titanic		153		262

Total capital expenditures	$	1,059	$	2,806

Note 23 – Restatement

Restatement of prior period quarterly financial statements

133

•

Goodwill was understated by $250 thousand, future rights fees were understated by $4.38 million and the note payable was understated by $4.316 million;

•

There were no changes to cash reported and minimal changes to the Statement of Cash Flows.

We have restated our consolidated financial statements for the first three quarters of the year ended February 28, 2013 to correct the manner in which the Company recorded the purchase accounting of its acquisition of Arts and Exhibition International, LLC on April 20, 2012. This change had no impact on our RMS Titanic segment and is entirely related to our Exhibition Management segment.

The financial statements below in Note 23 have been restated to reflect the corrections of these errors. On the balance sheet, prepaid expenses, property equipment, and equity attributable to non-controlling shareholders were decreased and goodwill, future rights fees, restricted assets and notes payable were increased. On the statement of operations interest expense and the net income (loss) attributable to non-controlling interest were affected.

The financial statements included in this filing for the year, or any period within, February 29, 2012, were not impacted by these changes.

134

Premier Exhibitions, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except share and share data)

(unaudited)


	As Previously
	Reported						Restated
	May 31,			Restatement			May 31,
	2012			Adjustment			2012
ASSETS
Current assets:
Cash and cash equivalents	$	4,691		$	—		$	4,691
Certificates of deposit and other investments		405			—			405
Accounts receivable, net of allowance for doubtful accounts of $311		1,507			—			1,507
Merchandise inventory, net of reserve of $28 and $22, respectively		1,383			—			1,383
Income taxes receivable		50			—			50
Deferred income taxes		44			—			44
Prepaid expenses		8,718			(1,519	)		7,199
Other current assets		121			—			121

Total current assets		16,919			(1,519	)		15,400

Artifacts owned, at cost		2,968			—			2,968
Salvor’s lien		1			—			1
Property and equipment, net of accumulated depreciation of $15,064 and $14,183 respectively		13,146			(551	)		12,595
Exhibition licenses, net of accumulated amortization of $5,519 and $5,470, respectively		2,179			—			2,179
Other receivable, less allowance for doubtful accounts of $296 and $206, respectively		14			—			14
Subrogation rights		250			—			250
Film and gaming assets, net of accumulated amortization of $206 and $175, respectively		3,127			—			3,127
Goodwill		—			250			250
Future rights fees		—			4,380			4,380
Restricted assets		—			1,020			1,020
Long-term development cost		618			—			618

Total Assets	$	39,222		$	3,580		$	42,802

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	5,082		$	(40	)	$	5,042
Income taxes payable		—			40			40
Deferred revenue		2,285			—			2,285
Short-term portion of notes payable		4,351			1,322			5,673

Total current liabilities		11,718			1,322			13,040

Long-Term liabilities:
Lease abandonment		2,253			—			2,253
Deferred income taxes		44			—			44
Long-term portion of notes payable		3,636			4,097			7,733

Total long-term liabilities		5,933			4,097			10,030

Commitment and Contingencies
Shareholders’ equity:
Common stock; $.0001 par value; authorized 65,000,000 shares;issued 47,957,927 and 47,883,927 shares, respectively; outstanding 47,955,918 and 47,881,918 shares, respectively		5			—			5
Additional paid-in capital		52,845			—			52,845
(Accumulated deficit) retained earnings		(35,651	)		(17	)		(35,668	)
Accumulated other comprehensive loss		(480	)		—			(480	)
Less treasury stock, at cost; 2,009 shares		(1	)		—			(1	)

Equity Attributable to Shareholders’ of Premier Exhibitions, Inc.		16,718			(17	)		16,701

Equity Attributable to Non-controlling interest		4,853			(1,822	)		3,031

Total liabilities and shareholders’ equity	$	39,222		$	3,580		$	42,802

135

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Comprehensive Income

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended May 31, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Revenue:
Exhibition revenue	$	8,989			—			8,989
Merchandise and other		2,310			—			2,310
Management fee		111			—			111
Film revenue		50			—			50

Total revenue		11,460			—			11,460
Cost of revenue:
Exhibition costs		4,390			—			4,390
Cost of merchandise sold		798			—			798

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		5,188			—			5,188

Gross profit		6,272			—			6,272

Operating expenses:
General and administrative		3,936			—			3,936
Depreciation and amortization		914			—			914

Total operating expenses		4,850			—			4,850
Income from operations		1,422			—			1,422
Other income and (expense)
Interest expense		(53	)		(57	)		(110	)
Other income		12						12

Total other expense		(41	)		(57	)		(98	)
Income before income taxes		1,381			(57	)		1,324
Income tax expense		112			—			112

Net income		1,269			(57	)		1,212
Plus: Net income (loss) attributable to non-controlling interest		(53	)		40			(13	)

Net income attributable to the shareholders’ of Premier Exhibitions, Inc.	$	1,216		$	(17	)	$	1,199

Net income per share:
Basic income per common share	$	0.03					$	0.03

Diluted income per common share	$	0.02					$	0.02

Shares used in basic per share calculations		47,938,614						47,938,614

Shares used in diluted per share calculations		49,095,207						49,095,207

Comprehensive income:	$	1,222					$	1,205

136

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Cash Flow

(in thousands)

(unaudited)


	Three Months Ended May 31, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Cash flows from operating activities:
Net income		1,269			(57	)		1,212

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		914			—			914
Lease abandonment		(144	)		—			(144	)
Stock-based compensation		230			—			230
Allowance for doubtful accounts		90			—			90
Amortization of debt discount		—			110			110
Changes in operating assets and liabilities, net of effect of acquisitions:
Increase in accounts receivable		(117	)		—			(117	)
Increase in merchandise inventory, net of reserve		(301	)		—			(301	)
(Increase)/decrease in prepaid expenses		95			(44	)		51
Increase in other assets		(33	)		—			(33	)
Decrease in income taxes receivable		196			—			196
Increase in other receivables		(89	)		—			(89	)
Increase in accounts payable and accrued liabilities		335			—			335
Increase in deferred revenue		31			—			31
Increase in income taxes payable		37			—			37

Total adjustments		1,244			66			1,310

Net cash provided by operating activities		2,513			9			2,522

Cash flows from investing activities:
Purchases of property and equipment		(174	)		—			(174	)
Decrease in artifacts		22			—			22

Net cash used in investing activities		(152	)		—			(152	)

Cash flows from financing activities:
Proceeds from option and warrant exercises		136			—			136
Payments on notes payable		(156	)		(9	)		(165	)

Net cash used in financing activities		(20	)		(9	)		(29	)

Effects of exchange rate changes on cash and cash equivalents		6			—			6

Net increase in cash and cash equivalents		2,347			—			2,347
Cash and cash equivalents at beginning of period		2,344			—			2,344

Cash and cash equivalents at end of period	$	4,691		$	—		$	4,691

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	20		$	—		$	20

Cash received during the period for taxes	$	(120	)	$	—		$	(120	)

Supplemental disclosure of non-cash investing and financing activities:
Assets purchased with notes payable and equity in Premier Exhibitions Management, LLC	$	11,917		$	2,534		$	14,451

137

Premier Exhibitions, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except share and share data)

(unaudited)


	As Previously
	Reported						Restated
	August 31,			Restatement			August 31,
	2012			Adjustment			2012
ASSETS
Current assets:
Cash and cash equivalents	$	5,603		$	—		$	5,603
Certificates of deposit and other investments		405			—			405
Accounts receivable, net of allowance for doubtful accounts of $325 and $311, respectively		2,554						2,554
Merchandise inventory, net of reserve of $82 and $22, respectively		1,465			—			1,465
Income taxes receivable		110			—			110
Deferred income taxes		44			—			44
Prepaid expenses		5,588			(1,262	)		4,326
Other current assets		143			—			143

Total current assets		15,912			(1,262	)		14,650

Artifacts owned, at cost		2,953			—			2,953
Salvor’s lien		1			—			1
Property and equipment, net of accumulated depreciation of $15,987 and $14,183 respectively		12,465			(523	)		11,942
Exhibition licenses, net of accumulated amortization of $5,567 and $5,470, respectively		2,131			—			2,131
Other receivable, less allowance for doubtful accounts of $387 and $206, respectively		6			—			6
Subrogation rights		250			—			250
Film and gaming assets, net of accumulated amortization of $206 and $175, respectively		3,127			—			3,127
Goodwill		—			250			250
Future rights fees		—			4,380			4,380
Restricted assets		—			3,289			3,289
Long-term development cost		580			—			580

Total Assets	$	37,425		$	6,134		$	43,559

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,398		$	—			4,398
Income taxes payable		122			—			122
Deferred revenue		1,740			—			1,740
Short-term portion of notes payable		4,053			5,519			9,572

Total current liabilities		10,313			5,519			15,832

Long-Term liabilities:
Lease abandonment		2,108			—			2,108
Deferred income taxes		44			—			44
Long-term portion of notes payable		167			2,555			2,722

Total long-term liabilities		2,319			2,555			4,874

Commitment and Contingencies
Shareholders’ equity:
Common stock; $.0001 par value; authorized 65,000,000 shares; issued 48,018,753 and 47,883,927 shares, respectively; outstanding 48,016,744 and 47,881,918 shares, respectively		5			—			5
Additional paid-in capital		53,090			—			53,090
(Accumulated deficit) retained earnings		(32,890	)		(98	)		(32,988	)
Accumulated other comprehensive loss		(478	)		—			(478	)
Less treasury stock, at cost; 2,009 shares		(1	)		—			(1	)

Equity Attributable to Shareholders’ of Premier Exhibitions, Inc.		19,726			(98	)		19,628

Equity Attributable to Non-controlling interest		5,067			(1,842	)		3,225

Total liabilities and shareholders’ equity	$	37,425		$	6,134		$	43,559

138

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Comprehensive Income

(in thousands, except share and per share data)

(unaudited)


	Three Months August 31, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Revenue:
Exhibition revenue	$	10,582			—			10,582
Merchandise and other		2,589			—			2,589
Management fee		250			—			250
Film revenue		9			—			9

Total revenue		13,430			—			13,430
Cost of revenue:
Exhibition costs		4,257			—			4,257
Cost of merchandise sold		985			—			985

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		5,242			—			5,242

Gross profit		8,188			—			8,188

Operating expenses:
General and administrative		4,236			—			4,236
Depreciation and amortization		817			—			817

Total operating expenses		5,053			—			5,053
Income from operations		3,135			—			3,135
Other income and (expense)
Interest expense		(121	)		(101	)		(222	)
Gain on debt modification		71			—			71
Other income and (expense)		5			—			5

Total other expense		(45	)		(101	)		(146	)
Income before income taxes		3,090			(101	)		2,989
Income tax expense		116			—			116

Net income		2,974			(101	)		2,873
Plus: Net income (loss) attributable to non-controlling interest		(214	)		20			(194	)

Net income attributable to the shareholders’ of Premier Exhibitions, Inc.	$	2,760		$	(81	)	$	2,679

Net income per share:
Basic income per common share	$	0.06					$	0.06

Diluted income per common share	$	0.06					$	0.05

Shares used in basic per share calculations		47,997,541						47,997,541

Shares used in diluted per share calculations		49,058,133						49,058,133

Comprehensive income:	$	2,761					$	2,680

139

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Comprehensive Income

(in thousands, except share and per share data)

(unaudited)


	Six Months August 31, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Revenue:
Exhibition revenue	$	19,571			—			19,571
Merchandise and other		4,899			—			4,899
Management fee		361			—			361
Film revenue		59			—			59

Total revenue		24,890			—			24,890
Cost of revenue:
Exhibition costs		8,647			—			8,647
Cost of merchandise sold		1,783			—			1,783

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		10,430			—			10,430

Gross profit		14,460			—			14,460

Operating expenses:
General and administrative		8,172			—			8,172
Depreciation and amortization		1,731			—			1,731

Total operating expenses		9,903			—			9,903
Income from operations		4,557			—			4,557
Other income and (expense)
Interest expense		(174	)		(158	)		(332	)
Gain on debt modification		71			—			71
Other income and (expense)		17			—			17

Total other expense		(86	)		(158	)		(244	)
Income before income taxes		4,471			(158	)		4,313
Income tax expense		228			—			228

Net income		4,243			(158	)		4,085
Plus: Net income (loss) attributable to non-controlling interest		(267	)		60			(207	)

Net income attributable to the shareholders’ of Premier	$	3,976		$	(98	)	$	3,878

Net income per share:
Basic income per common share	$	0.08					$	0.08

Diluted income per common share	$	0.08					$	0.08

Shares used in basic per share calculations		47,968,077						47,968,077

Shares used in diluted per share calculations		49,079,563						49,079,563

Comprehensive income:	$	3,983					$	3,885

140

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Cash Flow

(in thousands)

(unaudited)


	Six Months Ended August 31, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Cash flows from operating activities:
Net income	$	4,243		$	(158	)	$	4,085

Adjustments to reconcile net income to net cashprovided by operating activities:
Depreciation and amortization		1,731			—			1,731
Lease abandonment		(289	)		—			(289	)
Gain on debt modification		(71	)		—			(71	)
Stock-based compensation		553			—			553
Amortization of debt discount		—			329			329
Allowance for doubtful accounts		195			—			195
Changes in operating assets and liabilities, net of effect of acquisitions:
Increase in accounts receivable		(1,178	)		—			(1,178	)
Increase in merchandise inventory, net of reserve		(358	)		—			(358	)
(Increase)/decrease in prepaid expenses		76			(171	)		(95	)
Increase in other assets		(55	)		—			(55	)
Decrease in income taxes receivable		136			—			136
Increase in other receivables		(172	)		—			(172	)
Decrease in accounts payable and accrued liabilities		(309	)		—			(309	)
Decrease in deferred revenue		(514	)		—			(514	)
Increase in income taxes payable		119			—			119

Total adjustments		(136	)		158			22

Net cash provided by operating activities		4,107			—			4,107

Cash flows from investing activities:
Purchases of property and equipment		(345	)		—			(345	)
Acquisition of assets of Exhibit Merchandising, LLC		(125	)		—			(125	)
Decrease in artifacts		37			—			37

Net cash used in investing activities		(433	)		—			(433	)

Cash flows from financing activities:
Proceeds from option and warrant exercises		136			—			136
Purchase of treasury stock		(78	)		—			(78	)
Payments on notes payable		(480	)		—			(480	)

Net cash used in financing activities		(422	)		—			(422	)

Effects of exchange rate changes on cash and cash equivalents		7			—			7

Net increase in cash and cash equivalents		3,259			—			3,259
Cash and cash equivalents at beginning of period		2,344			—			2,344

Cash and cash equivalents at end of period	$	5,603		$	—		$	5,603

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	42		$	—		$	42

Cash received during the period for taxes	$	(26	)	$	—		$	(26	)

Supplemental disclosure of non-cash investing and financing activities:
Assets purchased with notes payable and equity in Premier Exhibitions Management, LLC	$	11,917		$	2,534		$	14,451

141

Premier Exhibitions, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except share and share data)

(unaudited)


	As Previously
	Reported						Restated
	November 30,			Restatement			November 30,
	2012			Adjustment			2012
ASSETS
Current assets:
Cash and cash equivalents	$	6,150		$	—		$	6,150
Certificates of deposit and other investments		405			—			405
Accounts receivable, net of allowance for doubtful accounts of $325 and $311, respectively		1,672			—			1,672
Merchandise inventory, net of reserve of $82 and $22, respectively		1,367			—			1,367
Income taxes receivable		155			—			155
Deferred income taxes		44			—			44
Prepaid expenses		3,332			(960	)		2,372
Other current assets		166			—			166

Total current assets		13,291			(960	)		12,331

Artifacts owned, at cost		2,943			—			2,943
Salvor’s lien		1			—			1
Property and equipment, net of accumulated depreciation of $16,893 and $14,183 respectively		11,847			(496	)		11,351
Exhibition licenses, net of accumulated amortization of $5,615 and $5,470, respectively		2,083			—			2,083
Other receivable, less allowance for doubtful accounts of $480 and $206, respectively		14			—			14
Subrogation rights		250			—			250
Film and gaming assets, net of accumulated amortization of $319 and $175, respectively		3,015			—			3,015
Goodwill		—			250			250
Future rights fees		—			4,380			4,380
Restricted assets		—			5,680			5,680
Long-term development cost		700			—			700

Total Assets	$	34,144		$	8,854		$	42,998

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,343		$	—		$	4,343
Income taxes payable		156			—			156
Deferred revenue		2,090			—			2,090
Short-term portion of capital lease obligations		24			—			24
Short-term portion of notes payable		1,283			8,338			9,621

Total current liabilities		7,896			8,338			16,234

Long-Term liabilities:
Lease abandonment		1,958			—			1,958
Deferred income taxes		44			—			44
Long-term portion of capital lease obligations		89			—			89
Long-term portion of notes payable		166			2,555			2,721

Total long-term liabilities		2,257			2,555			4,812

Commitment and Contingencies
Shareholders’ equity:
Common stock; $.0001 par value; authorized 65,000,000 shares; issued 48,047,430 and 47,883,927 shares, respectively; outstanding 48,045,421 and 47,881,918 shares, respectively		5			—			5
Additional paid-in capital		53,168			—			53,168
(Accumulated deficit) retained earnings		(33,519	)		(299	)		(33,818	)
Accumulated other comprehensive loss		(478	)		—			(478	)
Less treasury stock, at cost; 2,009 shares		(1	)		—			(1	)

Equity Attributable to Shareholders’ of Premier Exhibitions, Inc.		19,175			(299	)		18,876

Equity Attributable to Non-controlling interest		4,816			(1,740	)		3,076

Total liabilities and shareholders’ equity	$	34,144		$	8,854		$	42,998

142

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Consolidated Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended November 30, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Revenue:
Exhibition revenue	$	5,453			—			5,453
Merchandise and other		2,209			—			2,209
Management fee		250			—			250

Total revenue		7,912			—			7,912
Cost of revenue:
Exhibition costs		3,559			—			3,559
Cost of merchandise sold		863			—			863

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		4,422			—			4,422

Gross profit		3,490			—			3,490

Operating expenses:
General and administrative		3,304			—			3,304
Depreciation and amortization		918						918

Total operating expenses		4,222			—			4,222
Income from operations		(732	)		—			(732	)
Other income and (expense)
Interest expense		(112	)		(99	)		(211	)
Gain on debt modification		10			—			10
Other income		3			—			3

Total other expense		(99	)		(99	)		(198	)
Income before income taxes		(831	)		(99	)		(930	)
Income tax expense		49			—			49

Net loss		(880	)		(99	)		(979	)
Plus: Net income (loss) attributable to non-controlling interest		251			(102	)		149

Net loss attributable to the shareholders’ of Premier Exhibitions, Inc.	$	(629	)	$	(201	)	$	(830	)

Net loss per share:
Basic loss per common share	$	(0.01	)				$	(0.02	)

Diluted loss per common share	$	(0.01	)				$	(0.02	)

Shares used in basic per share calculations		48,029,592						48,029,592

Shares used in diluted per share calculations		48,029,592						48,029,592

Comprehensive loss:	$	(629	)				$	(830	)

143

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Comprehensive Income

(in thousands, except share and per share data)

(unaudited)


	Nine Months Ended November 30, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Revenue:
Exhibition revenue	$	25,024			—			25,024
Merchandise revenue		7,108			—			7,108
Management fee		611			—			611
License fee		59			—			59

Total revenue		32,802			—			32,802
Cost of revenue:
Exhibition costs		12,206			—			12,206
Cost of merchandise sold		2,646			—			2,646

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		14,852			—			14,852

Gross profit		17,950			—			17,950

Operating expenses:
General and administrative		11,476			—			11,476
Depreciation and amortization		2,649			—			2,649

Total operating expenses		14,125			—			14,125
Income from operations		3,825			—			3,825
Other income and (expense)
Interest expense		(286	)		(257	)		(543	)
Gain on debt		81			—			81
Other income		20			—			20

Total other expense		(185	)		(257	)		(442	)
Income before income taxes		3,640			(257	)		3,383
Income tax expense		277			—			277

Net income		3,363			(257	)		3,106
Plus: Net loss attributable to non-controlling interest		(16	)		(42	)		(58	)

Net income attributable to the shareholders’ of Premier Exhibitions, Inc.	$	3,347		$	(299	)	$	3,048

Net income per share:
Basic income per common share	$	0.07					$	0.06

Diluted income per common share	$	0.07					$	0.06

Shares used in basic per share calculations		47,988,433						47,988,433

Shares used in diluted per share calculations		49,094,927						49,094,927

Comprehensive income:	$	3,354					$	3,055

144

Premier Exhibitions, Inc.

Condensed Consolidated Statement of Cash Flow

(in thousands)

(unaudited)


	Nine Months Ended November 30, 2012
	As Previously			Restatement
	Reported			Adjustments			Restated
Cash flows from operating activities:
Net income	$	3,363		$	(257	)	$	3,106

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,649			—			2,649
Lease abandonment		(439	)		—			(439	)
Gain on debt modification		(81	)		—			(81	)
Stock-based compensation		649			—			649
Amortization of debt discount		—			540			540
Allowance for doubtful accounts		288			—			288
Changes in operating assets and liabilities:
Increase in accounts receivable		(296	)		—			(296	)
Increase in merchandise inventory, net of reserve		(260	)		—			(260	)
Increase in prepaid expenses		(69	)		(283	)		(352	)
Increase in other assets		(78	)		—			(78	)
Increase in long-term development costs		(160	)		—			(160	)
Decrease in income taxes receivable		91			—			91
Increase in other receivables		(273	)		—			(273	)
Decrease in deferred revenue		(164	)		—			(164	)
Decrease in accounts payable and accrued liabilities		(364	)		—			(364	)
Increase in income taxes payable		153			—			153

Total adjustments		1,646			257			1,903

Net cash provided by operating activities		5,009			—			5,009

Cash flows from investing activities:
Purchases of property and equipment		(545	)		—			(545	)
Acquisition of Exhibition Merchandise, LLC		(125	)		—			(125	)
Decrease in artifacts		47			—			47

Net cash used in investing activities		(623	)		—			(623	)

Cash flows from financing activities:
Proceeds from option and warrant exercises		136			—			136
Purchase of Treasury stock		(96	)		—			(96	)
Payments on capital leases		(2	)		—			(2	)
Payments on notes payable		(625	)		—			(625	)

Net cash used in financing activities		(587	)		—			(587	)

Effects of exchange rate changes on cash and cash equivalents		7			—			7

Net increase in cash and cash equivalents		3,806			—			3,806
Cash and cash equivalents at beginning of period		2,344			—			2,344

Cash and cash equivalents at end of period	$	6,150		$	—		$	6,150

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	52		$	—		$	52

Cash paid during the period for taxes	$	33		$	—		$	33

Supplemental disclosure of non-cash investing and financing activities:
Assets purchased with notes payable and equity in Premier Exhibitions Management, LLC	$	11,917		$	2,534		$	14,451

Purchases of property and equipment under capital leases	$	115		$	—		$	115

145

Note 24—Consignment agreement

Note 25—RMS Titanic Sale

Letter of Intent

146

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on our management’s evaluation (with the participation of our Chief Executive Officer and Chief Financial Officer), as of the end of the period covered by this Annual Report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were not effective as of February 28, 2013 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Notwithstanding the ineffectiveness of our disclosure controls and procedures as of February 28, 2013 and the material weaknesses in our internal control over financial reporting that existed as of that date as described below, management believes that (i) this Form 10-K does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this Report and (ii) the consolidated financial statements, and other financial information, included in this Report fairly present in all material respects in accordance with generally accepted accounting principles (“GAAP”) our financial condition, results of operations and cash flows as of, and for, the dates and periods presented.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

As of February 28, 2013, our management (with the participation of our Chief Executive Officer and our Chief Financial Officer) conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of February 28, 2013 based on criteria in Internal Control —Integrated Framework issued by the COSO.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management concluded that we did not maintain effective internal control over financial reporting as of February 28, 2013 because of the identified control deficiencies related to the recording of the purchase accounting under Accounting Standards Codification 805 “Business Combinations”. These control deficiencies resulted in adjustments for the first three quarters in the year ended February 28, 2013.

147

Remediation Efforts to Address Material Weaknesses

Our management has worked, and continues to work, to strengthen our internal control over financial reporting. We are committed to ensuring that such controls are operating effectively. Since identifying the material weaknesses in our internal control over financial reporting, we have corrected the identified errors in the manner in which we implement purchase accounting valuations and accounting of these transactions in the financial statements.

We will also enhance the design and operation of our controls related to recording of purchase accounting transactions by improving our controls and documentation related to our accounting policies and practices to identify, document and periodically assess whether all key judgments, conventions and estimates used in computing the purchase accounting conform to accounting principles generally accepted in the United States. We believe we have remediated the material weaknesses that existed at February 28, 2013, and believe that the actions we have taken subsequent to year end will prevent the recurrence of circumstances such as those that resulted in our determination to restate prior period financial statements.

We will continue to seek to actively identify, develop and implement additional measures that are reasonably likely to materially improve and strengthen our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the fourth quarter of the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors and all fraud. Any controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls will be met. The design of controls must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all controls, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Except as set forth below, the information required by this Item 10 is: (1) incorporated into this report by reference from our proxy statement to be issued in connection with our Annual Meeting of Shareholders under the headings “Election of Directors,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance,” which proxy statement will be filed within 120 days after our fiscal year ended February 28, 2013 and (2) as set forth under “Directors and Executive Officers” in Part I of this report.

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer. Our Code of Ethics also applies to all of our other employees and, as set forth therein, to our directors. Our Code of Ethics is posted on our website atwww.prxi.comunder the heading “The Company.” We intend to satisfy any disclosure requirements pursuant to Item 5.05 of Form 8-K regarding any amendment to, or a waiver from, certain provisions of our Code of Ethics by posting such information on our website under the heading “The Company.”

148

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated into this report by reference from our proxy statement to be issued in connection with our Annual Meeting of Shareholders under the headings “Executive Compensation” and “Corporate Governance,” which proxy statement will be filed within 120 days after our fiscal year ended February 28, 2013.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Except as set forth below, the information required by this Item 12 is incorporated into this report by reference from our proxy statement to be issued in connection with our Annual Meeting of Shareholders under the heading “Security Ownership of Certain Beneficial Owners and Management,” which proxy statement will be filed within 120 days after our fiscal year ended February 28, 2013.

Securities Authorized for Issuance under Equity Compensation Plans as of February 28, 2013

Number of Securities

Number of Securities to

Weighted-Average

Remaining Available for

be Issued Upon Exercise

Exercise Price of

Future Issuance Under

of Outstanding Options,

Outstanding Options,

Equity Compensation

Restricted Stock Units

Plans (Excluding Securities

Plan Category

and Warrants (1)

and Warrants

Reflected in Column (a)) (2)

(a)

(b)

(c)

Equity compensation plans approved by security holders

2,051,896

2.86

2,109,652

Equity compensation plans not approved by security holders (3)

61,000

3.38

N/A

Total

2,112,896

2.87

2,109,652

⁽¹⁾

Column (a) represents the number of shares of our common stock that may be issued in connection with the exercise or conversion of 1,414,741outstanding stock options granted under our Amended and Restated 2004 Stock Option Plan (the “2004 Plan”) and 637,155 outstanding stock options and restricted stock units granted under the 2009 Equity Incentive Plan (the “2009 Plan”).

⁽²⁾	Column (c) shares that may be issued under our 2009 Plan.

⁽³⁾	Represents 55,000 outstanding stock option awards made to employees outside pursuant to individual employment agreements and 6,000 warrants to promoters and licensors outside of our 2000 Plan and 2004 Plan.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is incorporated into this report by reference from our proxy statement to be issued in connection with our Annual Meeting of Shareholders under the headings “Certain Relationships and Related Transactions” and “Corporate Governance,” which proxy statement will be filed within 120 days after our fiscal year ended February 28, 2013.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated into this report by reference from our proxy statement to be issued in connection with our Annual Meeting of Shareholders under the heading “Ratification of Our Independent Registered Public Accounting Firm,” which proxy statement will be filed within 120 days after our fiscal year ended February 28, 2013.

149

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(a)

Financial Statements.

The following financial statements of the Company are included in Item 8 of this Annual Report:


	Page
Report of Independent Registered Public Accounting Firm		88
Consolidated Balance Sheets at February 28, 2013 and February 29, 2012		89
Consolidated Statements of Operations for the years ended February 28, 2013 and February 29, 2012		90
Consolidated Statements of Comprehensive Income (Loss) for the years ended February 28, 2013 and February 29, 2012		91
Consolidated Statements of Cash Flow for the years ended February 28, 2013 and February 29, 2012		92
Consolidated Statements of Shareholders’ Equity for the years ended February 28, 2013 and February 29, 2012		93
Notes to Consolidated Financial Statements		94

150

Schedule II

Valuation and Qualifying Accounts

For the Years Ended February, 28, 2013 and February 29, 2012

(in thousands)


			Additions
	Balance at		Charged to			Charged		Deductions		Balance at
	beginning		costs and			to other		charged to		end of
	of period		expenses			accounts		reserve		period
Year ended February 28, 2013
Allowance for doubtful accounts—accounts receivable	$	311	$	14		$	—	$	—	$	325
Year ended February 29, 2012
Allowance for doubtful accounts—accounts receivable	$	1,044	$	(64	)	$	—	$	669	$	311
Allowance for doubtful accounts—notes receivable	$	425	$	—		$	—	$	425	$	—

(b)

See Index to Exhibits.

151

SIGNATURES

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


	Premier Exhibitions, Inc.

By:	/s/ Samuel S. Weiser	Dated: May 29, 2013
	Samuel S. Weiser President and Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


/s/ Samuel S. Weiser		May 29, 2013
President and Chief Executive Officer (Principal Executive Officer)

/s/ William M. Adams		May 29, 2013
William M. Adams, Director

/s/ Doug Banker		May 29, 2013
Doug Banker, Director

/s/ Ronald C. Bernard		May 29, 2013
Ronald C. Bernard, Director

/s/ Stephen W. Palley		May 29 2013
Stephen W. Palley, Director

/s/ Mark A. Sellers, III		May 29, 2013
Mark A. Sellers, III
Chairman of the Board of Directors

/s/ Bruce D. Steinberg		May 29, 2013
Bruce D. Steinberg, Director

152

INDEX TO EXHIBITS


Exhibit		Filed	Incorporated by Reference
No.	Exhibit Description	Herewith	Form	Exhibit	Filing Date

2.1	Purchase Agreement		8-K	2.1	04-25-12

2.2	Promissory Note		8-K	2.2	04-25-12

3.1	Articles of Incorporation (Commission File Number 000-24452)		8-K	3.1	10-20-04

3.2	Amendment to Articles of Incorporation		SB-2	3.2	01-05-06

3.3	Second Amendment to Articles of Incorporation		S-8	4.3	08-17-09

3.4	Amended and Restated Bylaws, dated October 18, 2012		8-K	3.1	10-19-12

4.1	Form of Common Stock Certificate (Commission File Number 000-24452)		8-K/A	4.1	11-01-04

10.1	Form of Exhibition Tour Agreement between the Company and Dr. Hong-Jin Sui and Dr. Shuyan Wang President of Dalian Hoffen Bio Technique Company Limited		10-K	10.29	06-01-06

10.2	Option Agreement, dated February 28, 2007, between the Company and Seaventures, Ltd.		8-K	99.2	03-02-07

10.3	Purchase and Sale Agreement, dated February 28, 2007, between the Company and Seaventures, Ltd.		8-K	99.1	03-02-07

10.4	Memorandum Opinion and Order of the United States District Court of the Eastern District of Virginia, Norfolk Division, issued on October 16, 2007		8-K	99.2	10-30-07

10.5	License Agreement, dated March 13, 2008, between the Company and Sports Immortals, Inc.		10-K	10.23	05-07-08

10.6	Lease Agreement, dated March 12, 2008, between the Company and Ramparts, Inc.		10-K	10.24	05-07-08

10.7	Premier Exhibitions/Live Nations Agreement, dated November 28, 2007, by and between the Company, Live Nation, Inc. and JAM Exhibitions, LLC		8-K	99.2	12-04-08

10.8	First Amendment to Premier Exhibitions/Live Nation Agreement, dated November 29, 2008, by and among JAM Exhibitions, LLC, Soon To Be Named Corporation, as successor in interest to Live Nation, Inc., and the Company		8-K	99.1	12-04-08

10.9	Indemnification Agreement, dated December 17, 2008, between the Company and Douglas Banker		8-K	99.1	12-19-08

10.10	Indemnification Agreement, dated December 17, 2008, between the Company and N. Nick Cretan		8-K	99.2	12-19-08

10.11	Indemnification Agreement, dated December 17, 2008, between the Company and Alan Reed		8-K	99.3	12-19-08

10.12	Asset Purchase Agreement, dated December 29, 2008, between Premier Merchandising, LLC and Dreamer Media, LLC		8-K	99.1	01-05-09

10.13	Promissory Note, dated December 29, 2008, between Dreamer Media, LLC, as maker, and Premier Merchandising, LLC, as payee		8-K	99.2	01-05-09

153


Exhibit		Filed	Incorporated by Reference
No.	Exhibit Description	Herewith	Form	Exhibit	Filing Date

10.14#	Premier Exhibitions, Inc. 2000 Stock Option Plan and Form of Stock Option Agreement (Commission File Number 000-24452)		8-K	10.1	10-20-04

10.15#	Premier Exhibitions, Inc. 2004 Stock Option Plan and Form of Stock Option Agreement (Commission File Number 000-24452)		8-K	10.2	10-20-04

10.16#	Amended and Restated Premier Exhibitions, Inc. 2004 Stock Option Plan		Proxy	App. A	06-28-06

10.17#	Employment Agreement, effective as of January 28, 2009, between the Company and Christopher J. Davino		8-K	10.1	04-24-09

10.18#	Amended and Restated Premier Exhibitions, Inc. 2007 Restricted Stock Plan		8-K	10.1	04-29-09

10.19#	Form of 2009 Non-Employee Director Restricted Stock Unit Grant Notice Under the Amended and Restated Premier Exhibitions, Inc. 2007 Restricted Stock Plan		8-K	10.2	04-29-09

10.20	Amendment to Exhibitions Rights Agreement (Europe) and Premier Exhibitions / Live Nation Agreement, dated April 1, 2009, by and among S2BN, f/k/a Soon To Be Named Corporation, the Company and JAM Exhibitions, LLC		10-K	10.41†	05-27-09

10.21	Convertible Note Purchase Agreement, dated May 6, 2009, by and between Premier Exhibitions, Inc. and Sellers Capital Master Fund, Ltd.		8-K	10.1	05-13-09

10.22	Letter Agreement dated May 6, 2009, by and between Premier Exhibitions, Inc. and Sellers Capital Master Fund, Ltd.		8-K	10.2	05-13-09

10.23	Form of Convertible Note issued by Premier Exhibitions, Inc. to Sellers Capital Master Fund, Ltd.		8-K	10.3	05-13-09

10.24	Form of Warrant issued by Premier Exhibitions, Inc. to Sellers Capital Master Fund, Ltd.		8-K	10.4	05-13-09

10.25	Form of Registration Rights Agreement by and between Premier Exhibitions, Inc. and Sellers Capital Master Fund, Ltd.		8-K	10.4	05-13-09

10.26#	Consulting Agreement, dated February 2, 2009, by and among Premier Exhibitions, Inc., Foxdale Management, LLC and Samuel S. Weiser		10-Q	10.6	07-10-09

10.27#	Premier Exhibitions, Inc. 2009 Equity Incentive Plan		S-8	10.1	08-17-09

10.28#	Form of Premier Exhibitions, Inc. 2009 Equity Incentive Plan Nonqualified Stock Option Agreement		S-8	10.2	08-17-09

10.29#	Form of Premier Exhibitions, Inc. 2009 Equity Incentive Plan Restricted Shares Agreement		S-8	10.3	08-17-09

10.30#	Employment Agreement, dated September 3, 2009, by and between the Company and Christopher J. Davino		8-K	10.1	09-08-09

10.31#	Nonqualified Stock Option Agreement, dated September 3, 2009, by and between the Company and Christopher J. Davino		8-K	10.2	09-08-09

10.32#	Letter Agreement, entered into as of September 25, 2009, by and between the Company and S2BN Entertainment Corporation		8-K	10.1	10-01-09

154


Exhibit		Filed	Incorporated by Reference
No.	Exhibit Description	Herewith	Form	Exhibit	Filing Date

10.33#	Employment Agreement, dated June 2009, by and between the Company and John A. Stone		10-Q	10.6	10.13.09

10.34#	Restricted Shares Agreement, dated August 6, 2009, by and between the Company and John A. Stone		10-Q	10.7	10-13-09

10.35#	Consulting Agreement, dated October 8, 2009, by and between the Company and Douglas Banker		10-Q	10.8	10-13-09

10.36#	Form of Premier Exhibitions, Inc. 2009 Equity Incentive Plan Non-Employee Director Restricted Stock Unit Grant Notice		10-K	10.46	05-14-10

10.37#	Employment Agreement, dated May 11, 2010, by and between the Company and Kris Hart		8-K	10.1	05-13-10

10.38#	Amended Employment Agreement, dated May 11, 2010, by and between the Company and Robert A. Brandon		8-K	10.2	05-13-10

10.39	Optical Services Agreement between RMS Titanic, Inc. and Woods Hole Oceanographic Institution, dated July 30, 2010		8-K	10.1	08-05-10

10.40	Charter Agreement between RMS Titanic, Inc. and Hays Ships Limited, dated August 19, 2010		8-K	10.1	08-25-10

10.41#	Premier Exhibitions, Inc. Annual Incentive Plan		8-K	10.1	11-23-10

10.42#	Separation and Release Agreement, dated January 19, 2011, by and between Premier Exhibitions, Inc. and John A. Stone		8-K	10.1	01-25-11

10.43	Purchase Agreement dated October 31, 2011, by and between Premier Exhibitions, Inc. and Lincoln Park Capital Fund, LLC		8-K	10.1	05-24-11

10.44	Registration Rights Agreement dated October 31, 2011, by and between Premier Exhibitions, Inc. and Lincoln Park Capital Fund, LLC		8-K	10.2	05-24-11

10.45	Form of Common Stock Purchase Warrant, by and between Premier Exhibitions, Inc. and Lincoln Park Capital Fund, LLC		8-K	10.3	05-24-11

10.46	Industrial Lease Agreement, Dated October 12, 2011, by and between Premier Exhibitions, Inc. and Selig Enterprises, Inc.		10-Q/A	10.1	12-09-11

10.47	Consignment Agreement between Premier Exhibitions, Inc., RMS Titanic, Inc. and Guernsey’s, a Division of Barlan Enterprises, Ltd., dated December 20 2011		8-K	10.1	12-23-11

10.48#	Employment Agreement, effective June 27, 2011, by and between the Company and Michael J. Little		8-K	10.1	06-23-11

10.49#	Form of Nonqualified Stock Option Agreement between the Company and Michael J. Little		8-K	10.2	06-23-11

10.50#	Employment Agreement, dated February 14, 2012, by and between the Company and Robert Brandon		8-K	10.1	02-17-12

10.51#	Employment Agreement, effective June 29, 2012, by and between the Company and Samuel S. Weiser		8-K	10.1	07-03-12

155

Exhibit

Filed

Incorporated by Reference

No.

Exhibit Description

Herewith

Form

Exhibit

Filing Date

10.52#

Stock Appreciation Rights Agreement, by and between the Company and Samuel S. Weiser, dated June 29, 2012

8-K

10.2

07-03-12

10.53#

Restricted Stock Unit Agreement, by and between the Company and Samuel S. Weiser, dated June 29, 2012

8-K

10.3

07-03-12

10.54#

Employment Agreement, effective June 25, 2012, by and between the Arts and Exhibitions International, LLC and John Norman

8-K

10.4

07-03-12

10.55#

Premier Exhibitions, Inc. 2009 Equity Incentive Plan, as amended

14A

06-28-12

10.56#

Form of Premier Exhibitions, Inc. 2009 Equity Incentive Plan Nonqualified Stock Option Agreement

10-Q

10.2

10-15-12

10.57#

Form of Premier Exhibitions, Inc. 2009 Equity Incentive Plan Restricted Shares Agreement

10-Q

10.3

10-15-12

10.58#

Form of 2012 Non-Employee Director Restricted Stock Unit Award Agreement Under the 2009 Premier Exhibitions, Inc. Equity Incentive Plan, as amended

10-Q

10.1

01-10-13

10.59

First Modification Agreement of Exhibition Tour Agreement Ex 2006A between Premier Exhibitions, Inc. and Dalian Hoffen Biotechnique Co. Ltd. dated February 21, 2013

8-K

10.1

02-27-13

10.60

Second Modification Agreement of Exhibition Tour Agreement Ex 2006B between Premier Exhibitions, Inc. and Dalian Hoffen Biotechnique Co. Ltd. dated February 21, 2013

8-K

10.2

02-27-13

14.1

Premier Exhibitions, Inc. Code of Ethics

10-K

14.1

05-14-10

21.1

Subsidiaries of the Company

23.1

Consent of Cherry Bekaert LLP

31.1

Certification of President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of President and Chief Executive Officer, and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.1

Audited carve-out financial statements of Arts and Exhibition, International as of December 31, 2011 and 2010 and for the years ended December 31, 2011 and 2010 and the accompanying notes thereto

8-K/A

99.1

05-23-13

99.2

Unaudited proforma condensed combined financial statements as of February 29, 2012 and for the year ended February 29, 2012 and the accompanying Notes thereto

8-K/A

99.2

05-23-13

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Extension Calculation Linkbase

156

Exhibit

Filed

Incorporated by Reference

No.

Exhibit Description

Herewith

Form

Exhibit

Filing Date

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

#	Management contract or compensatory plan or arrangement.

†

The Company has requested confidential treatment of certain information contained in this Exhibit. Such information has been filed separately with the Securities and Exchange Commission pursuant to an application by the Company for confidential treatment under 17 C.F.R. §200.80(b)(4) and §240.24b-2.

*	Schedules to this exhibit omitted pursuant to Item 601 (b)(2) Regulation S-K. The Company agrees to furnish a copy of any omitted schedules to the Securities and Exchange Commission upon request.

157

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company