10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended May 31, 2010


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

For the transition period from to

Commission file number: 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 Road, NE, Suite 900, Atlanta, GA		30326

(Address of principal executive offices)		(Zip Code)

(404) 842-2600

(Registrant’s telephone number, including area code)

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 at least the past 90 days. Yes þ No o

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 o No o

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. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting Company þ

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

The number of shares outstanding of the registrant’s common stock on July 7, 2010 was 47,879,742.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Premier Exhibitions, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)


	May 31,			February 28,
	2010			2010
	(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	9,134		$	10,339
Marketable securities		3,304			3,308
Accounts receivable, net of allowance for doubtful accounts of $755 and $697, respectively		2,860			2,613
Merchandise inventory, net of reserve of $255 and $281, respectively		766			845
Income taxes receivable		3,107			3,161
Prepaid expenses and other current assets		2,771			1,866

Total current assets		21,942			22,132

Artifacts owned, at cost		3,041			3,048
Salvor’s lien		1			1
Property and equipment, net of accumulated depreciation of $12,445 and $11,454, respectively		12,875			13,545
Exhibition licenses, net of accumulated amortization of $5,270 and $4,979, respectively		3,278			3,269
Deferred income taxes		928			927
Other assets		829			829

Total Assets	$	42,894		$	43,751


Liabilities and Shareholders’ Equity

Current liabilities:
Accounts payable and accrued liabilities	$	6,111		$	5,518
Deferred revenue		1,502			1,705

Total current liabilities		7,613			7,223

Long-term liabilities:
Lease abandonment		3,478			3,666
Income taxes payable		1,226			1,214

Total long-term liabilities		4,704			4,880

Shareholders’ equity:
Common stock; $.0001 par value; authorized 65,000,000 shares; issued 47,879,742 and 47,804,742 shares, respectively; outstanding 46,813,293 and 46,738,293 shares, respectively		5			5
Additional paid-in capital		57,915			57,759
Accumulated deficit		(20,134	)		(18,613	)
Accumulated other comprehensive loss		(310	)		(313	)
Treasury stock, at cost; 1,066,449 shares		(7,190	)		(7,190	)

Equity Attributable to Shareholders’ of Premier Exhibitions, Inc.		30,286			31,648
Equity Attributable to Noncontrolling Interests		291			—

Total Liabilities and Shareholder’ Equity	$	42,894		$	43,751

The accompanying notes are an integral part of the condensed consolidated financial statements.

Premier Exhibitions, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)


	Three Months Ended May 31,
	2010			2009

Revenue:
Exhibition revenues	$	10,233		$	9,850
Merchandise and other		828			1,087

Total revenue		11,061			10,937

Cost of revenue:
Exhibition costs		6,116			4,890
Cost of merchandise sold		202			252

Total cost of revenue (exclusive of depreciation and amortization shown separately below)		6,318			5,142


Gross profit		4,743			5,795


Operating expenses:
General and administrative		4,930			7,324
Depreciation and amortization		1,303			1,627
Net loss on disposal of assets		29			—
Impairment of goodwill and intangible assets		—			4,512

Total operating expenses		6,262			13,463


Loss from operations		(1,519	)		(7,668	)

Other income (expense)		11			(39	)


Loss before income taxes		(1,508	)		(7,707	)

(Provision for) benefit from income taxes		(12	)		1,902


Net loss	$	(1,520	)	$	(5,805	)
Plus: Net loss attributable to noncontrolling interests		33			—

Net loss attributable to shareholders’ of Premier Exhibitions, Inc.	$	(1,487	)	$	(5,805	)


Net loss per share:
Basic loss per common share	$	(0.03	)	$	(0.20	)

Diluted loss per common share	$	(0.03	)	$	(0.20	)


Shares used in basic per share calculations		46,749,831			29,696,954

The accompanying notes are an integral part of the condensed consolidated financial statements.

Premier Exhibitions, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)


	Three Months Ended May 31,
	2010			2009

Cash flows from operating activities:
Net loss	$	(1,520	)	$	(5,805	)
Adjustments to reconcile net loss to net cash (used) by operating activities:
Depreciation and amortization		1,303			1,627
Stock based compensation		126			212
Allowance for doubtful accounts		58			(439	)
Impairment of goodwill and intangible assets		—			4,512
Lease abandonment		(188	)		—
Loss on disposal of assets		(29	)
Stock issued in connection with lawsuit settlement		—			50
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		(305	)		1,100
Increase in deferred income taxes		—			(983	)
Decrease in prepaid expenses and other current assets		(574	)		851
Decrease in artifacts owned		7			—
Increase in inventory		79			—
Decrease (increase) in income tax receivable		54			(364	)
Decrease in deferred revenue		(203	)		(435	)
Increase (decrease) in accounts payable and accrued liabilities		593			(2,600	)

Total adjustments		921			3,531

Net cash used in operating activities		(599	)		(2,274	)


Cash flows used by investing activities:
Purchases of property and equipment		(321	)		(642	)
Purchase of exhibition licenses		(300	)		—
Marketable securities		4			—

Net cash used by investing activities		(617	)		(642	)


Cash flows from financing activities:
Proceeds from issuance of convertible notes		—			6,000
Proceeds from option exercises		30			261

Net cash provided by financing activities		30			6,261


Effects of exchange rate changes on cash and cash equivalents		(19	)		6

Net increase (decrease) in cash and cash equivalents		(1,205	)		3,351
Cash and cash equivalents at beginning of year		10,339			4,452

Cash and cash equivalents at end of period		9,134		$	7,803


Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	3		$	48


Supplemental disclosure of non-cash investing and financing activities:
Cashless exercise of stock options	$	—		$	14

Receivable from noncontrolling interest	$	324		$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Background and Basis of Presentation

Premier Exhibitions, Inc. is in the business of presenting to the public museum-quality touring exhibitions around the world. Since 1993, we have developed, deployed and operated exhibitions in exhibition centers, museums and non-traditional venues. Income from exhibitions is generated primarily through ticket sales, third-party licensing, sponsorships and merchandise sales.

When we use the terms the “Company,” “we,” “us” and “our,” we mean Premier Exhibitions, Inc., a Florida corporation and its subsidiaries. We have prepared the accompanying unaudited condensed consolidated financial statements and condensed notes pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not contain all of the information and notes required by United States generally accepted accounting principles (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for our fiscal year ended February 28, 2010 (“fiscal 2010”). In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation of our financial condition as of May 31, 2010, our results of operations for the three months ended May 31, 2010 and 2009 and cash flows for the three months ended May 31, 2010 and 2009. The data in the consolidated balance sheet as of February 28, 2010 was derived from our audited consolidated balance sheet as of February 28, 2010, as presented in our Annual Report on Form 10-K for our fiscal year ended February 28, 2010. The unaudited condensed consolidated financial statements include the accounts of Premier Exhibitions, Inc. and its wholly and partially owned subsidiaries after the elimination of all significant intercompany accounts and transactions. Our operating results for the three months ended May 31, 2010 are not necessarily indicative of the operating results that may be expected for the full fiscal year ending February 28, 2011 (“fiscal 2011”).

2. Loss Per Share Data

Basic per share amounts exclude dilution and are computed using the weighted average number of common shares outstanding for the period. Unless the effects are anti-dilutive, 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. For the three months ended May 31, 2010 and 2009, basic per share amounts are calculated using the weighted average number of common shares outstanding during the respective periods and, if dilutive, potential common shares outstanding during the period. 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 loss per share:


	Three Months Ended May 31,
	2010			2009
	(in thousands, except share and per share data)
Numerator:
Net loss	$	(1,520	)	$	(5,805	)

Denominator:
Basic weighted-average shares outstanding		46,749,831			29,696,954
Effect of dilutive stock options and warrants		—			—

Diluted weighted-average shares outstanding		46,749,831			29,696,954


Net loss per share:
Basic	$	(0.03	)	$	(0.20	)

Since the three-month periods ended May 31, 2010 and 2009 resulted in net losses, the impact of dilutive effects of stock options and warrants was not added to the weighted average shares. Common stock options and warrants were not included in the diluted loss per share computation for the three months ended May 31, 2010 and 2009 because the option exercise price was greater than the average market price of the common shares. The number of shares not included was 2,796,449 and 3,246,655 for the three months ended May 31, 2010 and 2009, respectively.

3. Noncontrolling Interest

On May 14, 2010, the Company entered into a joint venture arrangement with a third party promoter to develop, design and produce future exhibitions. The Company and the third party each own 50% of the joint venture and will share equally in the funding requirements and profits and losses of the joint venture exhibitions. The Company and their joint venture partner will work together to identify, develop and produce mutually agreed upon new exhibitions or entertainment properties within the realm of popular culture. To date the Company has incurred several hundred thousand dollars in out of pocket expenditures in developing, creating and compiling the business and marketing plans as well as acquiring the exhibition rights for one such popular culture exhibit. The joint venture partner has agreed to 50% of the inumerated costs incurred related to this initial exhibit concept.

4. Legal Proceedings and Contingencies

The Company is party to an ongoing salvage case titled R.M.S. Titanic, Inc. v. The Wrecked and Abandoned Vessel, et al., in rem. The Company seeks to maintain its status as sole Salvor-in-Possession of the Titanic wreck site and is seeking an interim salvage award, in the form of title to the recovered Titanic artifacts or a monetary award.

In June 1994, the U. S. District Court for the Eastern District of Virginia awarded ownership to our wholly-owned subsidiary R.M.S. Titanic, Inc., or RMST, of all items then salvaged from the wreck of the Titanic as well as all items to be salvaged in the future so long as RMST remained Salvor-in-Possession. However, in two orders, dated September 26, 2001 and October 19, 2001, respectively, the district court restricted the sale of artifacts recovered by RMST from the Titanic wreck site. On April 12, 2002, the U.S. Court of Appeals for the Fourth Circuit affirmed the two orders of the district court. In its opinion, the appellate court reviewed and declared ambiguous the June 1994 order of the district court that had awarded ownership to RMST of the salvaged items. Having found the June 1994 order ambiguous, the court of appeals reinterpreted the order to convey only possession of the artifacts with a lien on them, not title, pending determination of a salvage award. On October 7, 2002, the U.S. Supreme Court denied RMST’s petition of appeal.

On May 17, 2004, RMST appeared before the U.S. District Court for the Eastern District of Virginia for a pre-trial hearing to address issues in preparation for an interim salvage award trial. At that hearing, RMST confirmed its intent to retain its Salvor-in-Possession rights in order to exclusively recover and preserve artifacts from the wreck site of the Titanic. In addition, RMST stated its intent to conduct another expedition to the wreck site. As a result of that hearing, on July 2, 2004, the court 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 court also held that RMST would not be permitted to present evidence at the interim salvage award trial for the purpose of arguing that RMST should be awarded title to the Titanic artifacts through the law of finds.

RMST appealed the July 2, 2004 court order to the U.S. Court of Appeals for the Fourth Circuit. On January 31, 2006, the court of appeals 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. The appellate court affirmed the lower court’s ruling that RMST will not be permitted to present evidence at the interim salvage award trial for the purpose of arguing that RMST should be awarded legal title to the remainder of the Titanic artifacts through the law of finds.

On November 30, 2007, RMST filed a motion with the U.S. District Court for the Eastern District of Virginia, Norfolk Division seeking an interim salvage award. On March 25, 2008, the court entered an order granting permission to the U.S. to file an amicus curiae (friend of the court) response regarding RMST’s motion for an interim salvage award. The U.S. response states that an interim in specie award (an award of the artifacts instead of a monetary salvage award) with limitations, made by the court to RMST, could serve as an appropriate mechanism to satisfy RMST’s motion for a salvage award and to help ensure that the artifacts recovered by RMST from the wreck of the Titanic are conserved and curated together in an intact collection that is available to the public for historical review, educational purposes, and scientific research in perpetuity. On April 15, 2008, the District Court entered an order requesting us to propose suggested covenants that would be included in an in specie award. The order also outlines a process for further discussion pertaining to such covenants should the court decide to issue an in specie award.

In September 2008, RMST submitted revised covenants and conditions in connection with our request for an in specie award for the remaining Titanic artifacts. This submission was made pursuant to the order issued by the U.S. District Court in April 2008. As part of developing the revised covenants and restrictions, we engaged in consultative discussions with the U.S. government. On October 14, 2008, the U.S. filed an amicus response to RMST’s proposed revised covenants, and by leave of the District Court granted on October 31, 2008, RMST in turn filed a reply brief on November 12, 2008. On November 18, 2008, we attended a status conference at the District Court. At the conclusion of that hearing, the District Court asked for certain additional submissions from RMST and the U.S., which were provided.

On October 23, 2009, the Board of Directors approved a resolution obligating RMS Titanic Inc. to create a trust and reserve fund (the “Trust Account”) if the District Court issues RMS Titanic, Inc. an in-specie award in response to its motion for a salvage award and such in-specie award is issued subject only to the covenants and conditions already presented to and filed with the Court in conjunction with the Company’s motion for a salvage award. 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. If the Trust Account is created, the Company will make an initial payment of five hundred thousand dollars ($500 thousand) and will subsequently 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). This resolution was presented to the District Court in connection with the Company’s motion for a salvage award.

The District Court held an evidentiary hearing from October 26, 2009 through November 2, 2009 on our motion for a salvage award. The District Court has not yet ruled on the motion and we cannot predict how or when the District Court will ultimately rule.

Status of International Treaty Concerning the Titanic Wreck

The U.S. Department of State, or State Department, and the National Oceanic and Atmospheric Administration of the U.S. Department of Commerce are working together to implement an international 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 U.S. District Court for the Eastern District of Virginia, Norfolk Division, 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.. We have raised numerous 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, does 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.

Several years ago we initiated legal action to protect our rights to the Titanic wreck site from this treaty. On April 3, 2000, we filed a motion for declaratory judgment in U.S. District Court for the Eastern District of Virginia asking that the court declare unconstitutional the efforts of the U.S. to implement the treaty. On September 15, 2000, the court ruled that our motion was not ripe for consideration and that we may renew our motion when and if the treaty is agreed to and signed by the parties, final guidelines are drafted, and Congress passes implementing legislation. As discussed above, the treaty has been finalized but is not yet in effect because Congress has not adopted implementing legislation; thus, it is not yet time for us to consider refiling our motion. Neither the implementation of the treaty nor our decision whether to refile the legal action regarding its constitutionality will likely have an impact on our ownership interest over the artifacts that we have already recovered.

As discussed in more detail above, in light of the January 31, 2006 decision by the U.S. Court of Appeals for the Fourth Circuit, title to approximately 2,000 artifacts recovered during the 1987 expedition now rests firmly with us. Title to the remaining artifacts should be resolved through our salvage litigation.

Other Litigation

On July 30, 2009, Sports Immortals, Inc. and its principals, Joel Platt and Jim Platt, 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 allege that the Company breached the contract when the Company purported to terminate it several months ago, and they seek 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. The litigation is in its very early stages, and the Company intends to vigorously defend the case and pursue its counterclaims.

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.

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 its financial condition.

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.

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.

The Company’s federal tax return for the fiscal years ended 2009, 2008, and 2007 is under examination by the Internal Revenue Service (“IRS”).

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.

Settled Litigation

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 volume growth, share of sales 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 join 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.

In this report, the terms “Premier Exhibitions, Inc.,” “Company,” “we,” “us,” and “our” mean Premier Exhibitions, Inc. and all entities included in our consolidated financial statements.

You are urged to read the risk factors described in our Annual Report on Form 10-K for our fiscal year ended February 28, 2010 (“fiscal 2010”), as filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available. The following discussion should be read in conjunction with the unaudited condensed financial statements and notes appearing elsewhere herein and our Annual Report on Form 10-K for our fiscal year ended February 28, 2010.

Overview

Premier Exhibitions, Inc. is in the business of presenting to the public museum-quality touring exhibitions around the world. For over 20 years, we have created, designed, marketed and presented educational and entertaining exhibitions. Our unique exhibition products are presented to the public in exhibition centers, museums, retail locations and other venues with high traffic such as the Luxor Hotel and Casino, Las Vegas, Nevada. Exhibitions revenue is generated primarily through admission ticket sales from either self-run venues or partner managed venues and through co-production agreements, third-party licensing, and sponsorships. We are currently configured to present 22 concurrent exhibitions, of which 17 are touring exhibitions that usually span four to six months. The remaining five are longer-term engagements which are located in New York, New York; Las Vegas, Nevada and Atlanta, Georgia. We currently operate and/or present and promote three different types of exhibitions:

•

“Titanic: The Artifact Exhibition,” (seven exhibitions)

•

“Bodies...The Exhibition,” and “Bodies Revealed” (fourteen exhibitions)

•

“Dialog in the Dark;” (one exhibition)

Additionally, we may expand or contract our current exhibitions; in addition, we are evaluating other exhibitions’ concepts for presentation to the public.

Formed in 1987, we first became known for our Titanic exhibitions, which we conduct through our wholly-owned subsidiary R.M.S. Titanic, Inc. (“RMST”) and 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 have approximately 5,500 Titanic artifacts to present at our exhibitions. We own approximately 2,000 of the artifacts. We have a Salvor’s lien on the remainder of the artifacts and, pending the federal court’s ruling on that lien, we have the right to exhibit these artifacts. 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 objects from the Titanic wreck site. Through our explorations, we have obtained and are in possession of the largest collection of authentic 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 survey, scientific and educational interpretation, public awareness, historical conservation and stewardship of the Titanic shipwreck. We currently have the ability to operate seven concurrent Titanic exhibitions.

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. We currently have the ability to present 14 concurrent human anatomy exhibitions.

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 are intended to provide visitors with an opportunity to experience the paradox of learning to “see” without the use of sight. Visitors are escorted through a series of galleries immersed in total darkness and challenged to perform tasks without the use of vision. We currently operate one “Dialog in the Dark” venue and future expansion is under review.

In the year ending February 28, 2009 (“fiscal 2009”), the Company began to see a decline in attendance at both the Bodies and Titanic exhibitions, which adversely impacted earnings. Also, the Company spent significant capital pursuing new exhibition concepts that never materialized. By the end of fiscal 2009, with senior members of management leaving the Company and the Company under significant financial distress, shareholders voted to change the composition of the Board of Directors. In January of 2009, the new Board terminated the Chief Executive Officer, and installed new senior management.

During fiscal 2010, the new Board and senior management began comprehensive efforts to turn around the profitability of the Company by:

•

Restructuring the business — First, management executed a reduction-in-force to align the human resources properly against the business. Then management began to rationalize the number of Bodies shows touring, reducing touring capacity from 16 to 13, and also negotiated the early termination of the Star Trek exhibition, three touring shows. Dialog in the Dark was scaled back to only one show installed long-term in Atlanta. These touring capacity adjustments were made to eliminate unprofitable shows and bring capacity in line with the Company’s ability to keep shows touring profitably.

•

Raising capital — After an exhaustive process to identify potential sources of capital, the Company issued convertible bonds worth $12 million in order to properly capitalize the business.

•

Repairing or severing ties with key trading partners — Management also worked to mend or end relationships with trade partners that had become strained under the prior management. To begin with, the Company changed advertising agencies to achieve greater media buying leverage and cost effectiveness as advertising is a significant operating cost. Key relationships with museums and independent promoters required attention as did relationships with members of the Maritime community surrounding the Titanic. Ending some relationships required capital and significant working capital was also required to return the Company to trading terms with its vendors.

These activities taken together served to stabilize the Company. However, they came at great cost. The results of operations for fiscal 2010 included charges totaling approximately $20 million relating to the cost of restructuring the business, raising capital, mending key relationships, exiting portions of the business, negotiating early terminations to agreements, and defending and settling litigation and claims related to all these activities.

As we continue to take measures to stabilize the company management has implemented a cross-functional process for identifying potential markets to produce our existing exhibitions, optimal locations within those potential markets, and to identify and plan for potential issues that might arise going into markets being considered. This process is designed to identify, quantify and manage the risk and returns associated with taking existing exhibitions into a given market. Management also implemented a process and structure to identify, evaluate and develop new content that can be used to create new touring exhibitions. Other more generic processes were implemented to support traditional business decisions ranging from human resources management to financial planning and analysis. While these processes will evolve, management believes the business has a repeatable process to manage its operations that is broader than any one member of management and thereby decreases the risk profile and increases the likelihood of profitable operations.

Now, from a more stabilized base, management is embarking on a plan that focuses on growth and value creation over the longer term as well as repositioning the Company as the innovator in the entertainment industry.

The plan has several components including the re-launching of its core exhibitions; expanding the Titanic model beyond the exhibition business to broaden the Company’s reach and to capitalize on the ship’s 100 year anniversary in 2012; and developing new content to be presented through various channels to appeal to a broader consumer market.

Due to the lack of both historical investment in the core business as well as scope and breadth of our initiatives themselves, we will require between $7 million and $8 million of capital investment during the year ending February 28, 2011 (“fiscal 2011”). We estimate cash on hand and cash flows from operations will be adequate to fund these initiatives.

Our principal executive offices are located at 3340 Peachtree Road, NE, Suite 900, Atlanta, Georgia 30326 and our telephone number is (404) 842-2600. We are a Florida corporation and maintain websites located at www.prxi.com, www.rmstitanic.net, www.bodiestheexhibition.com, www.bodiestickets.com, www.titanictix.com, and www.bodiesrevealed.com. Information on our websites is not part of this report.

Our Exhibitions

“Titanic: The Artifact Exhibition”

By featuring the artifacts recovered from the wreck site, our exhibitions tell the Titanic’s story from construction through her sinking, discovery and conservation. These objects 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. Approximately 20 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 and United Kingdom.

Titanic Expeditions

Titanic Ventures Limited Partnership (“TVLP”), a Connecticut limited partnership, was formed in 1987 for the purposes of exploring the wreck of the Titanic and the surrounding oceanic areas. 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 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. 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.

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. We have developed a partnership with the Center for Maritime & Underwater Resource Management, a nonprofit corporation, for services in archaeology, scientific research and resource management 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 own and maintain an extensive database, together with digital and photographic archives, that establish, with certainty, the origin of the artifacts.

“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 exhibitions through separate exhibition agreements.

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. Using more than 200 specimens, each exhibition follows a systems-based approach to human anatomy which examines our 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 an organ 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.

“Dialog in the Dark”

In 2008, we 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 are intended to provide insight and experience to the paradox of learning to “see” without the use of sight. Small groups of visitors navigate this exhibition, with the help of their visually impaired guide, through a series of galleries immersed in total darkness and are challenged to perform tasks without the use of vision. We currently operate one “Dialog in the Dark” venue and future expansion is under review.

Other Exhibitions

During our first fiscal quarter of 2011 we advanced approximately $300 thousand to a licensor for the right to develop, present and promote additional exhibitions, which are currently under development. 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.

Merchandising

We earn revenue from the sale of merchandise, such as apparel, posters and Titanic-related jewelry (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 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.

Information Regarding Exhibitions Outside the United States

Our exhibitions tour regularly outside the U.S. Approximately 8% of our revenues and 24% of attendance for the quarter ended May 31, 2010 compared with 16% and 34% for the quarter ended May 31, 2009 resulted from exhibition activities outside the U.S. Historically, since our financial arrangements with our international trade partners have been based upon foreign currencies, 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. See “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk” in this report for more information.

The Quarter Ended May 31, 2010 Compared to the Quarter Ended May 31, 2009

Revenue. During the quarter ended May 31, 2010, our revenue increased by $0.1 million or 1% to $11.1 million primarily attributable to an increase in exhibition revenue of $0.4 million. Management was able to maintain a stable revenue stream while taking the Company in a new strategic direction of performing more self operated shows. This offers the potential for a greater revenue stream, but also exposes the Company to potential fluctuations in attendance as witnessed in the first fiscal quarter 2011. Attendance decreased to 753,875 for the three months ended May 31, 2010 compared to 1,188,219 for the same three month period ended May 31, 2009. Total exhibition days which is the total number of days in which our venues were open to the public, decreased to 1,314 for the three months ended May 31, 2010 compared to 1,624 for the same three months ended May 31, 2009. The decrease in operating days relates to management's decision to reduce the touring capacity of Bodies and eliminate the Star Trek Exhibition in fiscal 2010. Average daily attendance declined as well, but was partially offset by higher average ticket prices.

Our exhibition revenue and attendance for the quarters ended May 31, 2010 and 2009 may be summarized as follows (in thousands):


	Three Months Ended
	May 31,
	2010		2009

Exhibition revenue
Admissions revenue	$	9,096	$	7,930
Non-refundable license fees for current exhibitions		1,137		1,920

Total exhibition revenue		10,233		9,850
Merchandise and other		828		1,087

Total revenue	$	11,061	$	10,937


Key non-financial measurements
Number of venues presented		24		22
Operating days		1,314		1,624
Attendance (in thousands)		754		1,188
Average attendance per operating day		574		732

Merchandise and other revenue decreased approximately $0.3 million or 23.8% to $0.8 million during the quarter ended May 31, 2010 as compared to the quarter ended May 31, 2009.

Cost of revenue. Our total cost of sales of $6.3 million, which consists of exhibition costs, including marketing expenses, and cost of merchandise sold, increased by $1.2 million or 22.9% for our first quarter ended May 31, 2010 as compared to our first quarter ended May 31, 2009.


	Cost of Revenue
	(in thousands, except percentages)
							Change
	2010			2009			Amount			Percent

Exhibition costs

Production	$	767		$	1,235		$	(468	)		(37.9	%)
Operating expenses		3,564			3,393			171			5.0	%
Marketing		1,785			262			1,523			581.3	%

		6,116			4,890			1,226			25.1	%

Exhibition expense as percent of exhibition revenue		59.8	%		49.6	%

Cost of merchandise		202			252			(50	)		(19.8	%)

Cost of merchandise as percent of merchandise revenue		24.4	%		23.2	%

Total	$	6,318		$	5,142			1,176			22.9	%

Percent of total revenue		57.1	%		47.0	%

Our exhibition costs increased by $1.2 million or 25.1% to $6.1 million for our first quarter this year as compared to the same quarter in fiscal year 2009. Our exhibition costs as a percentage of revenue was 59.8% for the three months ending May 31, 2010 compared to 49.6% for the same period last year. Marketing expense increased by $1.5 million as the Company curtailed marketing in the prior year quarter due to working capital constraints.

Cost of merchandise sold remained relatively unchanged for the quarter ended May 31, 2010 as compared to the quarter ended May 31, 2009.

Gross profit. During the quarter ended May 31, 2010, our gross profit decreased $1.1 million or 18.1% to $4.7 million as compared to the quarter ended May 31, 2009. The decrease in our gross profit is primarily related to increased advertising and venue operating costs as the Company shifts toward presenting more self-operated exhibitions. These increases were offset by lower storage and production costs. Gross profit margin was 43% and 53% for the quarters ended May 31, 2010 and 2009, respectively, also reflecting a higher percentage of self-operated exhibitions in the current quarter and lower admission revenue due to lower attendance.

Operating expenses. Our overall operating expenses decreased $7.2 million or 53.4% during the quarter ended May 31, 2010 as compared to the quarter ended May 31, 2009.

The prior year expenses included an impairment charge of $4.5 million.

Our general and administrative expenses of $4.9 million decreased $2.4 million or approximately 32.7% during the quarter ended May 31, 2010 as compared to the quarter ended May 31, 2009. The decrease in general and administrative expenses is primarily attributable to lower litigation and settlement expense, paid license fees for non-touring exhibitions and lower compensation expense.

Our depreciation and amortization expenses decreased $0.3 million or 19.9% to $1.3 million during the quarter ended May 31, 2010 as compared to the quarter ended May 31, 2009.

Loss from operations. We realized a loss from operations of $1.5 million during the quarter ended May 31, 2010 as compared to a loss from operations of $7.7 million during the quarter ended May 31, 2009.

Loss before income taxes. We realized a net loss before provision for income taxes of $1.5 million and $7.7 million for the quarters ended May 31, 2010 and 2009, respectively.

(Provision for) benefit from income taxes. We recorded income tax expense of $.01 million for the three months ended May 31, 2010 at an effective rate of 0.8% versus a tax benefit of $1.9 million at an effective rate of 25% for the same period in the prior year. The change in the effective rate is primarily due to the effect of the valuation allowance applied against substantially all net deferred tax assets in the fourth quarter of fiscal 2010 and the first quarter of fiscal 2011 that resulted in the non-recognition of tax benefits in the U.S. tax jurisdiction.

Net loss. We realized a net loss of $1.5 million during the quarter ended May 31, 2010 as compared to a net loss of $5.8 million in the prior year period.

Loss per share. Basic and diluted loss per common share for the quarters ended May 31, 2010 and 2009 was $(0.03) and $(0.20), respectively. The basic and diluted weighted average shares outstanding for each of the quarters ended May 31, 2010 and 2009 were 46,749,831 and 29,696,954, respectively.

Liquidity and Capital Resources

The following tables show selected information about our cash flows during the three months ended May 31, 2010 and 2009 and selected balance sheet data as of May 31, 2010 and February 28, 2010 (in thousands):

Selected cash flow information:


	As of
	Three Months Ended May 31,
	2010			2009

Net cash used by operating activities	$	(599	)	$	(2,274	)
Net cash used by investing activities		(617	)		(642	)
Net cash provided by financing activities		30			6,261
Effects of exchange rate changes on cash and cash equivalents		(19	)		6

Net decrease (increase) in cash and cash equivalents	$	(1,205	)	$	3,351

Selected balance sheet data:


	As of
	May 31, 2010		February 28, 2010

Cash and cash equivalents	$	9,134	$	10,339
Marketable securities		3,304		3,308
Total assets		42,894		43,751
Total stockholders’ equity		30,286		31,648

Operating Activities. For the three months ended May 31, 2010, cash used by operations was $0.6 million, compared to $2.3 million cash used by operations for the period ended May 31, 2009.

The following table sets forth our working capital (current assets less current liabilities) balances and our current ratio (current assets/current liabilities) May 31, 2010 and February 28 2010.


	As of

	May 31, 2010		February 28, 2010
Working Capital	$	14,329	$	14,909
Current Ratio		2.88		3.06

Investing Activities. Cash used by investing activities was $0.6 million for the three months ended May 31, 2010 and for the three months ended May 31, 2009.

All cash used by investing activities for the three months ended May 31, 2010 was for the purchase of property and equipment and exhibition licenses.

Financing Activities. Cash from financing activities was $0.03 million for the three months ended May 31, 2010 compared to $6.3 million for the three months ended May 31, 2009.

Capital requirements. We believe that our expected cash flows from operations together with our existing cash will be sufficient to meet our anticipated cash needs for working capital requirements, debt obligations and capital expenditures for the next 12 months. If cash generated from operations is insufficient to satisfy our liquidity requirements, we may seek additional financing, which could include the issuance of equity or debt securities. The sale of equity or convertible debt securities could result in additional dilution to our shareholders. We cannot assure that financing will be available in amounts or on terms acceptable to us, or at all.

Off-Balance Sheet Arrangements

We have no off-balance sheet financial arrangements.

Critical Accounting Policies

There have been no significant changes to our critical accounting policies as disclosed in our Annual Report filed on Form 10-K for our fiscal year ended February 28, 2010.

Contractual Obligations

There have been no significant changes to our contractual obligations as disclosed in our Annual Report filed on Form 10-K for our fiscal year ended February 28, 2010.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes.

Interest Rate Risk

Interest income on our cash, cash equivalents and short-term investments is subject to interest rate fluctuations, but we believe that the impact of these fluctuations does not have a material effect on our financial position due to the short-term nature of any such investments. We do not have any debt. Our interest income is most sensitive to the general level of interest rates in the United States. Sensitivity analysis is used to measure our interest rate risk. For the quarter ended May 31, 2010, a 100 basis-point adverse change in interest rates would not have had a material effect on our consolidated financial position, earnings or cash flow.

Foreign Currency Risk

We conduct a portion of our business activities outside of the United States, and are thereby exposed to the risk of currency fluctuations between the United States dollar and foreign currencies of the countries in which we are conducting business. If the value of the United States dollar decreases in relation to such foreign currencies, our potential revenue from exhibition and merchandising activities outside of the United States will be adversely affected. During the quarter ended May 31, 2010, we did not incur any material losses because of changes in the exchange rates with respect to foreign currencies. Although our financial arrangements with foreign parties may be based upon foreign currencies, we have sought, and will continue to seek where practicable, to make our financial commitments and understandings based upon the United States dollar in order to minimize the adverse potential effect of currency fluctuations.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Information presented in PART I of this FORM 10-Q is incorporated by reference.

Item 1. Legal Proceedings.

On July 30, 2009, Sports Immortals, Inc. and its principals, Joel Platt and Jim Platt, filed an action against us in the Circuit Court of the Fifteenth Judicial District in Palm Beach County, Florida for claims arising from their license agreement with us under which we obtained rights to present sports memorabilia exhibitions utilizing the Sports Immortals, Inc. collection. The plaintiffs allege that we breached the contract when we purported to terminate it in April of 2009, and they seek fees and stock warrant agreements provided for under the agreement. We filed our answer and counterclaims on September 7, 2009. Answering the complaint, we denied plaintiffs’ allegations and maintained that the Sports Immortals, Inc. license agreement was properly terminated. We 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 June 22, 2010, the plaintiffs amended their original complaint to include damages related to loss of royalties and increased the total amount claimed in the suit to approximately $16 million. The amendment of the complaint did not change the Company’s assessment of the merits of the case or the amount of the Company’s reserve related to this case. The litigation is in early stages of discovery, and we intend to vigorously defend the case and pursue our counterclaims.

There have been no other material changes in the legal proceedings discussed in our Annual Report on Form 10-K for the fiscal year ended February 28, 2010.

Item 1A. Risk Factors.

For a complete list of our Risk Factors, please refer to our Annual Report on Form 10-K for our fiscal year ended February 28, 2010. During the three months ended May 31, 2010, there were no material changes to our Risk Factors. You should consider carefully the Risk Factors. If any of these risks actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could decline, and you may lose all or a part of the money you paid to buy our common stock.

On June 21, 2010, the Company’s largest shareholder, Sellers Capital Master Fund, Ltd. (SCF), informed the Company that at the request of the fund’s investors it intends to return all capital to them over the next 12 to 18 months. Mr. Mark Sellers, who is Chairman of the Board of Premier Exhibitions, Inc. and managing member of Sellers Capital LLC, informed the Company that he intends to look for a single buyer of the fund’s 46% equity investment in Premier’s common stock and does not intend to sell the shares in the open market. At the request of the Board and Mr. Sellers, a committee of the Board has engaged its investment banker to attempt to locate an appropriate buyer who will commit to the multi-year plan presented to the U.S. District Court for the Eastern District of Virginia, Norfolk Division, in November 2009 regarding expanding the Company’s role as trustee of the Titanic wreck site in conjunction with the ongoing litigation described under “Legal Matters” in this Form 10-Q. Management does recognize, however, that if a suitable buyer is not identified, Mr. Sellers may choose to take another course of action, including potentially selling his shares in the open market or in a privately negotiated transaction or distributing the (SCF) shares to his limited partners.

The plans of our largest shareholder to sell his block of common stock could have an effect on our stock price and could result in changes to the strategic direction of the Company. The announcement will not likely result in a change in the Company’s ownership in the short term, but could serve to destabilize the trading price of our common stock in the short term. In addition, a single purchaser of the 46% 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.

Item 6. Exhibits.

See Index to Exhibits on page 21 of this Quarterly Report on Form 10-Q.


	PREMIER EXHIBITIONS, INC.
Dated: July 9, 2010	By:	/s/ Christopher J. Davino
		Christopher J. Davino
		President and Chief Executive Officer (Principal Executive Officer)

Dated: July 9, 2010	By:	/s/ John A. Stone
		John A. Stone
		Chief Financial Officer
		(Principal Financial Officer)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents


	Page

PART I. — FINANCIAL INFORMATION

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

Item 3. Quantitative and Qualitative Disclosures About Market Risk		17

Item 4. Controls and Procedures		18

PART II. — OTHER INFORMATION

Item 1. Legal Proceedings		19

Item 1A. Risk Factors		19

Item 6. Exhibits		21

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1