Non-controlling Interest

6 Months Ended

Aug. 31, 2011

5. Non-controlling Interest

On May 14, 2010, the Company entered into a joint venture arrangement with S2BN Entertainment Corporation (“S2BN”), to develop, design and produce future exhibitions. The Company and S2BN each own 50 percent of the joint venture and share equally in the funding requirements and profits and losses of the joint venture exhibitions. The Company and S2BN work together to identify, develop and produce mutually agreed upon new exhibitions or entertainment properties within the realm of popular culture.

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 810-10-25. Therefore, the joint venture’s results have been consolidated into the Company’s financial statements and reflected as a non-controlling interest.

The Company had previously 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. 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. 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 is entitled. The unilateral termination right requires the Company to pay a $300 thousand termination fee unless the termination right is exercised on or prior to August 31, 2011, in which case the Company would be entitled to apply the $300 thousand 2011 license fee advance against the termination fee that would otherwise be payable.

In addition to $840 thousand in costs incurred in prior periods for developing, creating and compiling the business and marketing plans as well as extending the exhibition rights for a potential Playboy exhibit, during the six months ended August 31, 2011 the Company incurred expenditures for exhibition rights of $50 thousand. During the six months ended August 31, 2011 the Company received $77 thousand in reimbursements from S2BN for its share of total development costs incurred to date. No expenses were incurred or reimbursements received during the three months ended August 31, 2011. Costs incurred and related reimbursements from S2BN by type are reflected in the following table (in thousands).


	Total		50% S2BN
	Costs		Portion
License fees paid	$	650	$	325
Expenses paid		190		95

Total		840		420


License fees reimbursed by S2BN				(275	)
Expenses reimbursed by S2BN				(93	)


Receivable balance at February 28, 2011				52


*Fiscal 2012 activity:*

License fees paid		50		25
Expenses paid		—		—

Total		50		25


License fees reimbursed by S2BN				(75	)
Expenses reimbursed by S2BN				(2	)


Receivable balance at August 31, 2011			$	—

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 Condensed Consolidated Statement of Operations for the three and six months ended August 31, 2011.

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 Condensed Consolidated Statements of Operations for the three and six months ended August 31, 2011.