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

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

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		(I.R.S. Employer Identification No.)
incorporation or organization)
3340 Peachtree Road, NE, Suite 900, Atlanta, GA		30326
(Address of principal executive offices)		(Zip Code)

(404) 842-2600

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		Smaller reporting company þ
				(Do not check if a smaller reporting company)

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 January 7, 2011 was 47,067,652.

 

 

PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES

QUARTERLY PERIOD ENDED NOVEMBER 30, 2010

TABLE OF CONTENTS

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			24
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			24
Item 1A Risk Factors			25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 6. Exhibits			27
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements

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

		November 30,				February 28,
		2010				2010
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	6,329			$	10,339
Marketable securities			803				3,308
Accounts receivable, net of allowance for doubtful accounts of $664 and $697, respectively			1,588				2,613
Merchandise inventory, net of reserve of $280 and $281, respectively			1,127				845
Income taxes receivable			521				3,161
Prepaid expenses			4,030				1,666
Other current assets			167				200
Total current assets			14,565				22,132
Artifacts owned, at cost			3,016				3,048
Salvor’s lien			1				1
Property and equipment, net of accumulated depreciation of $14,416 and $11,454, respectively			12,108				13,545
Exhibition licenses, net of accumulated amortization of $5,658 and $4,979, respectively			2,890				3,269
Deferred income taxes			—				927
Other long term assets			829				829
Titanic expedition costs incurred			3,887				—
Total Assets		$	37,296			$	43,751
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$	8,428			$	5,518
Deferred revenue			961				1,705
Total current liabilities			9,389				7,223
Long-term liabilities:
Lease abandonment			3,163				3,666
Income taxes payable			—				1,214
Total long-term liabilities			3,163				4,880
Shareholders’ equity:
Common stock; $.0001 par value; authorized 65,000,000 shares; issued 48,069,661 and 47,804,742 shares, respectively; outstanding 47,067,652 and 46,738,293 shares, respectively			5				5
Additional paid-in capital			58,158				57,759
Accumulated deficit			(25,959	)			(18,613	)
Accumulated other comprehensive loss			(503	)			(313	)
Treasury stock, at cost; 1,002,009 and 1,002,009 shares, respectively			(7,190	)			(7,190	)
Equity Attributable to Shareholders’ of Premier Exhibitions, Inc.			24,511				31,648
Equity Attributable to Noncontrolling Interests			233				—
Total Liabilities and Shareholder’ Equity		$	37,296			$	43,751

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

Premier Exhibitions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)

		Three Months Ended November 30,								Nine Months Ended November 30,
		2010				2009				2010				2009
Revenue:
Exhibition revenue		$	8,870			$	7,949			$	31,744			$	30,302
Merchandise and other			1,352				753				3,249				2,777
Total revenue			10,222				8,702				34,993				33,079
Cost of revenue:
Exhibition costs			10,299				5,719				24,895				15,661
Cost of merchandise sold			370				340				870				805
Total cost of revenue (exclusive of depreciation and amortization shown separately below)			10,669				6,059				25,765				16,466
Gross (loss) profit			(447	)			2,643				9,228				16,613
Operating expenses:
General and administrative			4,627				4,660				13,521				19,433
Depreciation and amortization			1,200				1,412				3,716				4,357
Impairment of goodwill and intangible assets			—				—				—				4,512
Total operating expenses			5,827				6,072				17,237				28,302
Loss from operations			(6,274	)			(3,429	)			(8,009	)			(11,689	)
Other income (expense)			12				(46	)			30				(255	)
Loss before provision for income taxes			(6,262	)			(3,475	)			(7,979	)			(11,944	)
Benefit from income taxes			529				1,305				488				3,457
Net loss			(5,733	)			(2,170	)			(7,491	)			(8,487	)
Plus: Net loss attributable to non-controlling interests			56				—				146				—
Net loss attributable to the shareholders’ of Premier		$	(5,677	)		$	(2,170	)		$	(7,345	)		$	(8,487	)
Net loss per share:
Basic loss per common share		$	(0.12	)		$	(0.05	)		$	(0.16	)		$	(0.25	)
Diluted loss per common share		$	(0.12	)		$	(0.05	)		$	(0.16	)		$	(0.25	)
Shares used in basic per share calculations			46,913,601				41,019,416				46,873,879				33,617,577
Shares used in diluted per share calculations			46,913,601				41,019,416				46,873,879				33,617,577

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

Premier Exhibitions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)

		Nine Months Ended
		November 30,
		2010				2009
Cash flows from operating activities:
Net loss		$	(7,491	)		$	(8,487	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			3,716				4,357
Stock based compensation			418				468
Stock issued in settlement of lawsuit			—				50
Provision for doubtful accounts			(33	)			(588	)
Loss on sale of fixed assets			31				—
Lease abandonment			(503	)			—
Impairment of goodwill and intangible assets			—				4,512
Accrued interest converted into common stock			—				247
Changes in operating assets and liabilities:
Decrease in accounts receivable			1,058				2,599
Increase in merchandise inventories			(282	)			(318	)
Decrease in deferred income taxes			927				36
(Increase) decrease in prepaid expenses			(2,364	)			86
Decrease in other assets			33				1,440
Decrease (increase) in income tax receivable			1,426				(2,904	)
Decrease in deferred revenue			(744	)			(399	)
Increase (decrease) in accounts payable and accrued liabilities			2,910				(7,398	)
Total adjustments			6,593				2,188
Net cash used in operating activities			(898	)			(6,299	)
Cash flows from investing activities:
Purchases of property and equipment			(1,640	)			(1,486	)
Proceeds from sale of property and equipment			9				—
Purchase of exhibition licenses			(300	)			—
Purchase of marketable securities			(87	)			(2,023	)
Sale of marketable securities			2,582				—
Decrease in artifacts			32				—
Titanic expedition costs incurred			(3,887	)			—
Cash provided by non-controlling interest			379				—
Net cash used in investing activities			(2,912	)			(3,509	)
Cash flows from financing activities:
Proceeds from convertible notes			—				12,000
Purchase of treasury stock			(136	)			—
Proceeds from option and warrant exercises			117				261
Net cash (used in) provided by financing activities			(19	)			12,261
Effects of exchange rate changes on cash and cash equivalents			(181	)			22
Net (decrease) increase in cash and cash equivalents			(4,010	)			2,475
Cash and cash equivalents at beginning of period			10,339				4,452
Cash and cash equivalents at end of period		$	6,329			$	6,927
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		$	3			$	670
Cash paid during the period for taxes		$	141			$	967
Supplemental disclosure of non-cash investing and financing activities:
Cashless exercise of stock options		$	—			$	14
Conversion of convertible notes and accrued interest		$	—			$	12,247

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

Description of Business

Premier Exhibitions, Inc. is in the business of presenting to the public museum-quality touring exhibitions around the world. Since our establishment in 1991, 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.

Our exhibitions regularly tour outside the United States. Approximately 13% and 11% of our revenues for the nine months ended November 30, 2010 and 2009, respectively, resulted from exhibition activities outside the United States. As many of our financial arrangements with our foreign vendors are 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.

Basis of Presentation

When we use the terms “Premier,” “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”) and accounting principles generally accepted in the United States (“U.S. GAAP”) regarding interim financial reporting. Accordingly, they do not contain all of the information and notes required by 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. 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 November 30, 2010, our results of operations for the three and nine months ended November 30, 2010 and 2009 and cash flows for the nine months ended November 30, 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, its wholly owned subsidiaries after the elimination of all significant intercompany accounts and transactions, and its consolidated joint venture. Our operating results for the three months and nine months ended November 30, 2010 are not necessarily indicative of the operating results that may be expected for the full fiscal year ending February 28, 2011 (“fiscal 2011”).

Significant Accounting Policies

For a description of significant accounting policies, see the Significant Accounting Policies footnote to the Financial Statements included in the Company’s 2010 Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies since the filing of the Company’s 2010 Annual Report on Form 10-K.

Use of Estimates

The preparation of 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 results using those estimates.

Subsequent Events

The Company has evaluated subsequent events for recognition and disclosure through the date the condensed consolidated financial statements were issued.

2. Income taxes

In October 2010, the Internal Revenue Service (“IRS”) completed its examination of the Company’s U.S. federal tax returns for the year ended February 28, 2007 (“fiscal 2007”) through the year ended February 28, 2009 (“fiscal 2009”) with no adjustments required. Accordingly, during the quarter ended November 30, 2010 the Company released its $1.2 million tax liability balance for uncertain tax provisions as prior period tax positions did not require adjustment. The decrease in unrecognized tax benefits and related interest resulted in an income tax benefit of $0.3 million after consideration of the impact of deferred taxes for the three and nine months ended November 30, 2010.

3. 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. 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 loss per share. Since the three and nine month periods ended November 30, 2010 and 2009 resulted in a net loss, the impact of dilutive effects of stock options was not added to the weighted average shares.

		Three Months Ended November 30,								Nine Months Ended November 30,
		2010				2009				2010				2009
Numerator:
Net loss attributable to the shareholders’ of Premier		$	(5,677	)		$	(2,170	)		$	(7,345	)		$	(8,487	)
Denominator:
Basic weighted-average shares outstanding			46,913,601				41,019,416				46,873,879				33,617,577
Effect of dilutive stock options and warrants			—				—				—				—
Diluted weighted-average shares outstanding			46,913,601				41,019,416				46,873,879				33,617,577
Net loss per share:
Basic		$	(0.12	)		$	(0.05	)		$	(0.16	)		$	(0.25	)
Diluted		$	(0.12	)		$	(0.05	)		$	(0.16	)		$	(0.25	)

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.

		Three Months Ended November 30,								Nine Months Ended November 30,
		2010				2009				2010				2009
Stock options			2,743,115				3,001,453				2,796,449				4,171,453

4. Total Comprehensive Loss

The following table provides a summary of total comprehensive loss for the applicable periods (in thousands):

		Three Months Ended November 30,								Nine Months Ended November 30,
		2010				2009				2010				2009
Net loss attributable to the shareholders’ of Premier		$	(5,677	)		$	(2,170	)		$	(7,345	)		$	(8,487	)
Other comprehensive loss:
Unrealized loss on marketable securities			(10	)			—				(10	)			—
Net foreign currency translation loss			(103	)			(1	)			(181	)			(22	)
Total comprehensive loss		$	(5,790	)		$	(2,171	)		$	(7,536	)		$	(8,509	)

5. 2010 Expedition to Titanic Wreck Site

During August and September 2010, our wholly owned subsidiary RMS Titanic, Inc. (RMST), as Salvor-In-Possession of the RMS Titanic (the “Titanic”) and its wreck site, conducted an expedition to the Titanic wreck site 25 years after its discovery to develop a comprehensive archaeological map of the wreck site utilizing state-of-the-art high definition 2D and 3D cameras and sonar scans. 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.

The general purpose of the expedition was to collect and interpret scientific data for the long-term protection and management of Titanic. The collected information, including 2D and 3D moving imagery, sonar imagery and other data, will be used to educate and enlighten future generations and will be added to the Company’s proprietary collection of Titanic artifacts. This information will provide the basis for an archaeological site plan of the wreck site, and ultimately a comprehensive long-term site management plan. The work product of the dive also has commercial value for public consumption through various distribution channels including movie theatres, our traveling museum exhibitions, straight to home DVD release, and retail merchandise sales in our stores, online and through wholesale and licensing. We have sole legal ownership of the footage taken during the entire expedition. Accordingly, the Company has recorded $3.9 million in long-term assets related to costs incurred to obtain the film footage and still images during the expedition, as well as the establishment of a web point of presence for the expedition, www.expeditiontitanic.com, which allowed visitors to the site to participate in the dive as it was in process.

The costs incurred and capitalized on the Condensed Consolidated Balance Sheets as of November 30, 2010 are summarized as follows:

Ship charter costs, underwater equipment and filming		$	2,935,211
General management			635,270
Titanic Preservation Alliance point of presence			316,997
Total historical costs capitalized		$	3,887,478

The Company has not completed the assignment and allocation of costs to specific assets as of November 30, 2010, as it is currently evaluating the quality of the output and consulting with third parties to determine highest and best uses, budgeted costs, and timelines to completion of each asset in order to place them in service.

6. Non-controlling Interest

On May 14, 2010, the Company entered into a joint venture arrangement with Michael Cohl’s promotional firm, S2BN Entertainment Corporation (“S2BN”), to develop, design and produce future exhibitions. The Company and S2BN each own 50 percent of the joint venture and will share equally in the funding requirements and profits and losses of the joint venture exhibitions. The Company and S2BN will work together to identify, develop and produce mutually agreed upon new exhibitions or entertainment properties within the realm of popular culture. Although a 50/50 profit and loss sharing agreement is in place, other considerations regarding management and advancement of the joint venture have led management to conclude that it has significant control. Therefore, the joint venture’s results have been consolidated into the Company’s financial statements and reflected as a minority interest.

In addition to costs incurred in prior periods, the Company has incurred $206 thousand in expenditures in fiscal 2011 for developing, creating and compiling the business and marketing plans as well as extending the exhibition rights for one such popular culture exhibit. S2BN has agreed to reimburse 50 percent of the enumerated costs incurred related to this initial exhibit concept. During the nine months ended November 30, 2010, the Company received $379 thousand in reimbursements from S2BN for total development costs incurred to date.

7. Stock Repurchase

On July 30, 2010 the Company announced a plan to repurchase up to 1.0 million of the Company’s common stock, and that repurchases may occur on the open market at times and prices considered appropriate by the Board of Directors and management. Furthermore, the Company disclosed repurchases may take place through brokers and dealers or in privately negotiated transactions, and may be made under a Rule 10b5-1 plan. During the second quarter of 2011, the Company repurchased 115,081 shares of common stock pursuant to a Rule 10b5-1 trading plan. The average cost of the shares repurchased was $1.16 and the Company subsequently retired these shares.

8. Legal Proceedings and Contingencies

The Company is party to an ongoing salvage case titled RMS Titanic, Inc. v. The Wrecked and Abandoned Vessel, et al., in rem. The Company has maintained its status as sole Salvor-in-Possession of the Titanic wreck site and is awaiting 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 RMS 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 RMST to create a trust and reserve fund (the “Trust Account”) if the District Court issues RMST 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. 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 Court set at approximately $110 million. The Court has reserved the right to determine the manner in which to pay the award. It will determine by August 15, 2011, whether to pay the Company a cash award from proceeds derived from a judicial sale, or in the alternative, to issue the Company an in specie award of title to the artifacts with certain covenants and conditions which would govern their maintenance and future disposition.

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. 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 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.

The Company has worked with the United States government regarding several draft revisions to the government’s proposed legislation which would implement the Treaty. For years, the U.S. Department of State and NOAA have been working together to implement the Treaty. For nearly as long the Company has opposed the passage of the implementing legislation out of concerns that it failed to protect the Company’s interests in the wreck site and failed to insure continued scientific and historic exploration.

In early 2010, the Department of State and NOAA resubmitted the draft legislation to Congress. RMST worked with the United States government to develop a number of textual modifications to the government’s proposed implementing legislation to address the Company’s concerns. RMST intends to support the passage of the implementing legislation into law. The Company believes that the passage of the legislation as modified by RMST will recognize the Company’s past and future role with regard to the wreck site.

RMST drafted a new section to the legislation which would establish a Titanic Advisory Council comprised of a member from RMST, NOAA, Department of State, and other key constituents of the deep sea community to make recommendations to the Commerce Department of the United States government regarding the protection and preservation of the wreck site through the creation of a long term site management plan. If passed, it would mark the first law requiring governmental agencies to work on an advisory council with specific private entities, including a salvor-in-possession, to jointly protect and oversee the management and protection of a shipwreck. In this respect, the advisory council would codify into law a formal relationship between the U.S. government and RMST as the salvor-in-possession and custodian/owner of a collection, to ensure additional oversight and protection of the wreck site, and to provide recommendations for future protection, preservation, maintenance and care of the wreck site and collection. Based on the Company’s consultations with NOAA, it is RMST’s expectation that the government will support these specific modifications to the legislation.

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 early stages of discovery, 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. 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.

IRS Exams

The IRS has completed its examination of the Company’s federal tax returns for the fiscal years ended 2009, 2008, and 2007 with no adjustments required.

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.

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.

9. Subsequent Events

During December 2010, the Company evaluated the performance of all it’s 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 some of these leases it holds on collections of specimens used in seven of its touring Bodies exhibitions.

On January 11, 2011, the Company announced its intentions to exit the self-operated Bodies exhibitions and focus on touring Bodies with promoters and museums, as well as the Titanic exhibitions, Dialog in the Dark and new content. These reductions will result in $4.0 million less of annual fixed license fees paid for the right to display these specimens, which fees are included in Cost of revenue when the specimens are displayed. Additionally, the Company announced its intentions to make reductions in its staff at its headquarters to achieve savings in General and administrative costs.

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 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.

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, 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 17 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-operated exhibitions or partner managed venues and through co-production agreements, third-party licensing, and sponsorships.

As of November 30, 2010 we were configured to present three different types of exhibitions, as reflected in the following table:

		Stationary				Touring				Total
“Bodies...The Exhibition” and “Bodies Revealed”			3				11				14
“Titanic: The Artifact Exhibiton”			1				6				7
“Dialog in the Dark”			1				0				1
Total Exhibitions			5				17				22

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, and Atlanta, Georgia.

As well as 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.

Formed in 1987, we first became known for our Titanic exhibitions, which we conduct through our wholly-owned subsidiary RMS Titanic, Inc. (“RMST”) and which present the story of the ill-fated ocean liner, the RMS 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 raised in 1987. We have a Salvor’s lien on the remainder of the artifacts in the amount of 100 percent of the fair market value of the artifacts, which has been determined by the court with jurisdiction over the case to be approximately $110 million. Until the court satisfies this lien, either through a judicial sale or the grant of title to the artifacts to the Company, 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 data, archives and expertise, as well as our Salvor-in-Possession status, put 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. As of November 30, 2010, we had 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.

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” exhibition is 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 the year ending February 28, 2010 (“fiscal 2010”), the new Board and senior management began comprehensive efforts to turn around the profitability of the Company by restructuring the business and raising capital. Management reduced the size of the headquarters operations and began to rationalize the number of Bodies shows touring, reducing touring capacity in June of 2009 from 16 to 13 concurrent shows, 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. Then, the Company issued convertible bonds worth $12 million in order to properly capitalize the business. During the last two years, management has worked to mend or end relationships with trade partners that had become strained under the prior management, including advertising agencies, key relationships with museums and independent promoters, and 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 key vendors.

In an effort to further stabilize the Company and grow, management implemented a process designed to identify, quantify and manage the risk and returns associated with taking existing exhibitions into a given market and operate those exhibitions without museums of third party promoters. In certain cases the self-operated production and operating model offers the best opportunity for the highest return to the Company for the presentation of our exhibitions in many markets. If we believe we can drive strong attendance to the exhibition in a particular market, we would prefer to own 100 percent of the profit from that market as opposed to sharing that profit with a museum or promoter. When attendance is strong, this strategy results in higher gross margins and profits than with a promoter-run model. However, this significant upside potential comes with a higher risk to gross margins when in attendance is weak, as the Company bears the full cost of the exhibit whether or not attendance meets the forecast.

Management also created a process to 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. Additionally, management’s plan included 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.

As of November 30, 2010, we had the ability to present 14 concurrent human anatomy exhibitions. Based on the results of operations for the third quarter of year ending February 28, 2011 (“fiscal 2011”), in January 2011, the Company announced its intentions to reduce again the number of touring Bodies exhibitions. As configured for the first nine months of 2011, 11 of our 14 Bodies shows toured in largely self-operated, non-branded, temporary exhibits. These specimens are leased or licensed and are made available to the Company for display at significant cost. With several of the licenses for these specimens expiring, and considering the recent attendance patterns, management has determined the best option is to return the specimens to their owner and cease operating these exhibits. Doing so will result in a significant reduction in fixed operating costs related to 7 of the current 11 touring Bodies shows within six months. The remaining inventory of specimens has a lower fixed carrying cost and will be toured increasingly in conjunction with museums and promoters. In connection with the reduction in Bodies touring capacity, the Company will reduce general and administrative expenses, and focus its human and financial capital on the profitable parts of its operations in addition to new content.

Due to both the lack of historical investment in the core business as well as the scope and breadth of our initiatives themselves, we will require between $6.0 million and $7.0 million of capital investment during fiscal 2011. Through November 30, 2010, approximately $5.0 million has been spent on these initiatives, the majority of which has been capitalized in the 2010 Expedition Titanic Dive costs of $3.9 million. We estimate cash on hand and cash flows from operations will be adequate to fund these remaining 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.expeditiontitanic.com 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, United Kingdom and Australia.

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.

2010 Expedition to Titanic Wreck Site

During August and September 2010, our wholly owned subsidiary RMST, as Salvor-In-Possession of the Titanic and its wreck site, conducted an expedition to the Titanic wreck site 25 years after its discovery to develop a comprehensive archaeological map of the wreck site utilizing state-of-the-art high definition 2D and 3D cameras and sonar scans. 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.

The general purpose of the expedition was to collect and interpret scientific data for the long-term protection and management of Titanic. The collected information, including 2D and 3D moving imagery, sonar imagery and other data, will be used to educate and enlighten future generations and will be added to the Company’s proprietary collection of Titanic artifacts. This information will provide the basis for an archaeological site plan of the wreck site, and ultimately a comprehensive long-term site management plan. The work product of the dive also has commercial value for public consumption through various distribution channels including movie theatres, our traveling museum exhibitions, straight to home DVD release, and retail merchandise sales in our stores, online and through wholesale and licensing. We have sole legal ownership of the footage taken during the entire expedition. Accordingly, the Company has recorded $3.9 million in long-term assets related to costs incurred to obtain the film footage and still images during the expedition, as well as the establishment of a web point of presence for the expedition, www.expeditiontitanic.com, which allowed visitors to the site to participate in the dive as it was in process.

The costs incurred and capitalized on the Condensed Consolidated Balance Sheets as of November 30, 2010 are summarized as follows:

Ship charter costs, underwater equipment and filming		$	2,935,211
General management			635,270
Titanic Preservation Alliance point of presence			316,997
Total historical costs capitalized		$	3,887,478

The Company has not completed the assignment and allocation of costs to specific assets as of November 30, 2010, as it is currently evaluating the quality of the output and consulting with third parties to determine highest and best uses, budgeted costs, and timelines to completion of each asset in order to place them in service.

In addition to the alliance 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 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” exhibition is 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. This right is being considered by the Company through a joint venture arrangement with Michael Cohl’s promotional firm, S2BN Entertainment Corporation (“S2BN”), in which the Company and S2BN each own 50 percent of the joint venture and will share equally in the funding requirements and profits and losses of the joint venture exhibitions. 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 (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 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 2011 we launched an e-commerce website that allows us to sell merchandise related to our shows over the internet.

Information Regarding Exhibitions Outside the United States

Our exhibitions tour regularly outside the U.S. Approximately 15 percent of our revenues and 52 percent of attendance for the quarter ended November 30, 2010 compared with 14 percent and 31 percent for the quarter ended November 30, 2009 resulted from exhibition activities outside the U.S. Many of our financial arrangements in locations outside of the U.S. are based upon foreign currencies, and therefore 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 November 30, 2010 Compared to the Quarter Ended November 30, 2009

Revenue. During the quarter ended November 30, 2010, total revenue increased by $1.5 million or 17% to $10.2 million compared to the same quarter last year primarily due to higher admission revenues.

Exhibition revenue of $8.9 million increased by $1.0 million driven by an increase in exhibition days, self-run exhibitions, and overall attendance during the quarter ended November 30, 2010 compared to the same quarter of last year. Total exhibition days, which is the total number of days our exhibitions were open to the public, increased to 1,613 for the three months ended November 30, 2010 compared to 1,361 for the same period last year. This increase in exhibition days was largely accomplished by having our touring capacity booked fully to 31 venues in the third quarter of fiscal 2011 as compared to having part of our exhibits in storage in the third quarter of fiscal 2010. Revenue from self-run exhibitions was 92% and 77% of revenue for the third quarters of fiscal year 2011 and fiscal year 2010, respectively. Total attendance for the three months ended November 30, 2010 increased by 152,862 from 819,941 for the same quarter last year driven by an increase in exhibition days. Average attendance per exhibition day remained stable, with attendance at many of our touring Bodies exhibitions hovering below break-even gross margin levels, while other locations, like our longer-term exhibitions in Las Vegas and most of the touring Titanic shows, continue to reflect strong or even increased attendance.

Merchandise and other revenue increased $0.5 million to $1.3 million for the quarter ended November 30, 2010. This increase is primarily the result of improved sales of photographs, music, and printed materials in conjunction with the overall increase in exhibition days in the period as well as higher attendance at our exhibitions during the third quarter of 2011.

		Three Months Ended
		November 30,
		2010				2009
Exhibition revenue
Admissions revenue		$	8.3			$	6.9
Non-refundable license fees for current exhibitions			0.6				1.0
Total exhibition revenues			8.9				7.9
Merchandise and other			1.3				0.8
Total revenue		$	10.2			$	8.7
Key non-financial measures
Number of venues presented			31				26
Operating days			1,613				1,361
Attendance (in thousands)			973				820
Average attendance per operating day			603				602

Cost of revenue. Our total cost of revenue increased by $4.6 million or 76% to $10.7 million compared to the same quarter of last year, primarily due to the rise in self-run exhibitions where the Company incurred all costs compared to only minor costs for co-produced or third party licensed exhibitions operated by partners. Self-run exhibitions increased from 8 to 19 for the quarter ended November 30, 2010 versus the same quarter last year.

Cost of merchandise sold remained stable at $0.3 million for both of the quarters ended November 30, 2010 and 2009.

Gross (loss) profit. During the quarter ended November 30, 2010, our gross profit decreased by $3.0 million, as in the third quarter of fiscal 2011 we generated a gross loss of $0.4 million compared to a gross profit of $2.6 million for the same quarter of last year. Our gross profit was down due to generating lower revenue per exhibition day coupled with higher operating costs associated with additional self-operated exhibitions.

Our merchandise gross profit increased by $0.6 million with gross profit margin increasing to 73% compared to 55%. This increase in gross profit reflects increased merchandise sales over more exhibition days than the prior quarter of last year and the ability to maintain stable cost of merchandise sold.

Operating expenses. Our general and administrative expenses of $4.6 million remained stable for both the quarters ended November 30, 2010 and 2009. However, during the current quarter operating expenses decreased due to lower stored exhibits expense and lower legal, accounting and consulting fees of $0.3 and $0.5, respectively. This decline in expense was offset by higher bad debt expense and higher office and other expenses of $0.2 million and $0.5 million, respectively for the quarter ended November 30, 2010.

Our depreciation and amortization expenses decreased $0.2 million to $1.2 million. The decrease in depreciation expense is primarily attributable to lower amortization expense, on licenses that are now fully depreciated, partially offset by increased amortization and depreciation expense on newly acquired licenses and other fixed assets.

Loss from operations. We realized a loss from operations of $6.3 million as compared to $3.4 million for the third quarter of fiscal 2010 as the increase in revenue and the decline in operating expense was more than offset by higher exhibition costs.

Benefit from income taxes. We recorded an income tax benefit of $0.5 million for the three months ended November 30, 2010 versus a tax benefit of $1.3 million for the same period in the prior year. The current period tax benefit reflects the release of the liability for uncertain tax positions, net of the deferred tax impact, as a result of the conclusion of IRS examinations, as well as beneficial adjustments for an amended state return. In fiscal 2011, the Company ceased recording the Federal income tax benefit of net tax losses; therefore there is no provision for Federal taxes included in the current tax benefit, whereas the prior period tax benefit was primarily related to Federal taxes.

Net loss. We realized a net loss of $5.7 million as compared to a net loss of $2.2 million for the same period last year.

Loss per share. Basic and diluted loss per common share for the quarters ended November 30, 2010 and 2009 was $0.12 and $0.05, respectively. The basic and fully diluted weighted average shares outstanding for the quarters ended November 30, 2010 and 2009 were 46,913,601 and 41,019,416 shares, respectively.

The Nine Months Ended November 30, 2010 Compared to the Nine Months Ended November 30, 2009

Revenue. During the period ended November 30, 2010, total revenue increased by $1.9 million or 6% to $35.0 million as compared to the same period of the prior year primarily due to higher admission revenues.

Exhibition revenue of $31.7 million increased by $1.4 million driven by an increase in self-run exhibitions and exhibition days during the nine months ended November 30, 2010 compared to the same period of last year, partially offset by lower overall attendance. Total exhibition days, which is the total number of days our exhibitions were open to the public, remained stable at 4,684 for the nine months ended November 30, 2010 compared to 4,624 for the same period last year. Revenue from self-run exhibitions was 78% and 30% of revenue for the nine months of fiscal year 2011 and fiscal year 2010, respectively. Total attendance for the nine months ended November 30, 2010 decreased by 403,828 from 3,306,979 for the same period last year, reflecting the closing of 3 exhibitions that are no longer presented by the Company, as well as lower attendance at our Bodies and Titanic exhibits. Average attendance per exhibition day decreased 13 percent, with attendance at many of our touring Bodies exhibitions hovering below break-even gross margin levels, while other locations, like our longer-term exhibitions in Las Vegas and most of the touring Titanic shows, continuing to reflect strong or even increased attendance.

Merchandise and other revenue increased by $0.5 million or 17% to $3.2 million. This increase is primarily the result of improved sales of photographs, music, and printed materials in conjunction with the overall increase in exhibition days during the nine months ended November 30, 2010.

		Nine Months Ended
		November 30,
		2010				2009
Exhibition revenue
Admissions revenue		$	28.4			$	25.6
Non-refundable license fees for current exhibitions			3.3				4.7
Total exhibition revenues			31.7				30.3
Merchandise and other			3.3				2.8
Total revenue		$	35.0			$	33.1
Key non-financial measures
Number of venues presented			31				36
Operating days			4,684				4,624
Attendance (in thousands)			2,903				3,307
Average attendance per operating day			620				715

Cost of revenue. Our total cost of revenue for the nine months ended November 30, 2010 increased by $9.2 million or 59% to $25.8 million compared to the same period of last year, primarily due to the rise in self-run exhibitions where the Company incurred all costs compared to only minor costs for co-produced or third party licensed exhibitions operated by partners. Self-run exhibitions increased from 8 to 21 for the nine months ended November 30, 2010 versus the same period last year.

Cost of merchandise sold remained stable at $0.8 million for both of the nine months ended November 30, 2010 and 2009.

Gross profit. During the nine months ended November 30, 2010, our gross profit decreased by $7.4 million or 44% to $9.2 million as compared to the same period of last year. Our gross profit was down due to the overall decline in attendance combined with higher operating costs associated with additional self-operated exhibitions.

Our merchandise gross profit increased by $0.4 million with gross profit margin increasing to 73% compared to 71%. This increase in gross profit reflects increased merchandise sales over more exhibition days than the prior quarter of last year and the ability to maintain stable costs of merchandise sold.

Operating expenses. Our total operating expenses of $17.2 million decreased by $11.0 million as compared to the same period last year primarily due to impairment expense of $4.5 million, a decline in amortization and depreciation expense of $0.6 million, and lower general and administrative expenses of $5.9 million.

Our impairment expense decreased primarily to an impairment of goodwill and intangible assets in fiscal 2010 of $4.5 million. General and administrative expenses declined primarily due to lower stored exhibits expense, bad debt expense, and legal, accounting and consulting fees of $1.0 million, $1.4 million, and $3.2 million, respectively.

Our depreciation and amortization expenses decreased $0.6 million to $3.7 million primarily attributable to lower amortization expense, as certain licenses are now fully depreciated, partially offset by increased amortization and depreciation expense on newly acquired licenses and other fixed assets.

Loss from operations. We realized a loss from operations of $8.0 million as compared to $11.7 million for the same period last year as the increase in revenues coupled with the decline in operating expense, including the reduction due to impairments incurred in the prior period, offset higher exhibition costs.

Benefit from income taxes. We recorded an income tax benefit of $0.5 million for the nine months ended November 30, 2010 versus a tax benefit of $3.5 million for the same period in the prior year. The current period tax benefit reflects the release of the liability for uncertain tax positions, net of the deferred tax impact, as a result of the conclusion of IRS examinations, as well as beneficial adjustments for an amended state return, partially offset by taxes paid in states where we do not have the benefit of net operating loss carryforwards. In fiscal 2011, the Company ceased recording the Federal income tax benefit of net tax losses; therefore there is no provision for Federal taxes included in the current tax benefit, whereas the prior period tax benefit was primarily related to Federal taxes.

Net loss. We realized a net loss of $7.3 million as compared to a net loss of $8.5 million for the same period last year.

Loss per share. Basic and fully diluted loss per common share for the nine months ended November 30, 2010 and 2009 was $0.16 and $0.25, respectively. The basic and fully diluted weighted average shares outstanding for the nine months ended November 30, 2010 and 2009 were 46,873,879 and 33,617,517 shares, respectively.

Liquidity and Capital Resources

The following tables show selected information about our cash flows during the nine months ended November 30, 2010 and 2009 and selected balance sheet data as of November, 2010 and February 28, 2010 (in thousands):

Selected cash flow information:

		As of
		Nine Months Ended November 30,
		2010				2009
Net cash (used in) provided by operating activities		$	(898	)		$	(6,299	)
Net cash used in investing activities			(2,912	)			(3,509	)
Net cash (used in) provided by financing activities			(19	)			12,261
Effects of exchange rate changes on cash and cash equivalents			(181	)			22
Net (decrease) increase in cash and cash equivalents		$	(4,010	)		$	2,475

Selected balance sheet data:

		As of
		November 30,				February 28,
		2010				2010
Cash and cash equivalents		$	6,329			$	10,339
Marketable securities			803				3,308
Working capital			5,176				14,909
Total assets			37,296				43,751
Total shareholders’ equity			24,511				31,648

Operating Activities.

For the nine months ended November 30, 2010, cash used by operations was $0.9 million, compared to $6.3 million period ended November, 2009.

The following table sets forth our working capital (current assets less current liabilities) balances and our current ratio (current assets/current liabilities) at November 30, 2010 and February 28, 2010.

		As of
		November 30,				February 28,
		2010				2010
Working Capital (in millions)		$	5.2			$	14.9
Current Ratio			1.55				3.06

Investing Activities. Cash used in investing activities was $3.0 million for the nine months ended November 30, 2010 compared to $3.5 million for the nine months ended November 30, 2009. Of the cash used by investing activities for the nine months ended November 30, 2010 the majority was used to fund the 2010 Titanic expedition ($3.9 million) and to purchase fixed assets ($1.6 million). These expenditures were partially offset by $2.6 million in cash generated from the sale of marketable securities.

Financing Activities. Cash used in financing activities was $0.02 million for the nine months ended November 30, 2010 compared to $12.2 million for the nine months ended November 30, 2009. In the prior period we issued $12.0 million worth of convertible notes which were convertible into shares of our common stock.

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 with our existing cash 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. Additional indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. 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.

Contractual Obligations

Based on our performance, we do not have access to the Credit Facility we previously had with Bank of America, as previously disclosed in our Form 10-K for the year ended February 28, 2010.

Critical Accounting Policies

There have been no material 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 material 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 currently do not have any outstanding borrowings. Our interest income is most sensitive to the general level of interest rates in the United States Sensitivity analysis which is used to measure our interest rate risk. For the nine months ended November 30, 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 U.S., and are thereby exposed to the risk of currency fluctuations between the U.S. dollar (“USD”) and foreign currencies of the countries in which we are conducting business. If the value of the USD decreases in relation to such foreign currencies, our potential revenue from exhibition and merchandising activities, as well as cash balances held in foreign currencies outside of the U.S. will be adversely affected. During the nine months ended November 30, 2010, we did not incur any material losses because of changes in the exchange rates with respect to foreign currencies, although the impact of changes in exchange rates was greater for the three months ended November 30, 2010, as our Bodies exhibit in London opened in November 2010. 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 USD 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 15d-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 SEC’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 herein by reference.

Item 1. Legal Proceedings.

The Company is party to an ongoing salvage case titled RMS Titanic, Inc. v. The Wrecked and Abandoned Vessel, et al., in rem. The Company has maintained its status as sole Salvor-in-Possession of the Titanic wreck site and is awaiting an interim salvage award, in the form of title to the recovered Titanic artifacts or a monetary award, as discussed in detail in Note 6 to this Form 10-Q, Legal Proceedings and Contingencies. The District Court held an evidentiary hearing from October 26, 2009 through November 2, 2009 on our motion for a salvage award. On August 12, 2010, the District Court issued an opinion granting a salvage award to RMS Titanic, Inc. based upon the Company’s work in recovering and conserving over 3,000 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 Court set at approximately $110 million. The Court has reserved the right to determine the manner in which to pay the award. It will determine by August 15, 2011, whether to pay the Company a cash award from proceeds derived from a judicial sale, or in the alternative, to issue the Company an award of title to the artifacts with certain covenants and conditions which would govern their maintenance and future disposition.

The U.S. Department of State, or State Department, and the National Oceanic and Atmospheric Administration (“NOAA”) 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. As discussed in detail in Note 6 to this Form 10-Q, Legal Proceedings and Contingencies, 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 months ago the Department of State and NOAA resubmitted the draft legislation to Congress. RMST worked with the United States government to develop a number of textual modifications to the government’s proposed implementing legislation to address the Company’s concerns. RMST intends to support the passage of the implementing legislation into law. The Company believes that the passage of the legislation as modified by RMST will recognize the Company’s past and future role with regard to the wreck site.

RMST drafted a new section to the legislation which would establish a Titanic Advisory Council comprised of a member from RMST, NOAA, Department of State, and other key constituents of the deep sea community to make recommendations to the Commerce Department of the United States government regarding the protection and preservation of the wreck site through the creation of a long term site management plan. If passed, it would mark the first law requiring governmental agencies to work on an advisory council with specific private entities, including a salvor-in-possession, to jointly protect and oversee the management and protection of a shipwreck. In this respect, the advisory council would codify into law a formal relationship between the United States government and RMST as the salvor-in-possession and custodian/owner of a collection, to ensure additional oversight and protection of the wreck site, and to provide recommendations for future protection, preservation, maintenance and care of the wreck site and collection. Based on the Company’s consultations with NOAA, it is RMST’s expectation that the government will support these specific modifications to the legislation.

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 several months ago, and they seek fees and stock warrant agreements required 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. The litigation is in its 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 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 nine months ended November 30, 2010, there were no material changes to our Risk Factors other than the changes noted below. 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.

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 Company’s largest shareholder, Sellers Capital Master Fund, Ltd. (“SCF”), informed the Company that at the request of the fund’s investors it intended to return all capital to them. When SCF initially reached this decision in June 2010, it had planned to attempt to locate a single purchaser for the fund’s 46 percent equity investment in Premier’s common stock over the next 12 to 18 months. On October 7, 2010 Mark Sellers, Chairman of the Board of Premier Exhibitions, Inc. and Managing General Partner of Sellers Capital, informed the Company that Sellers Capital is no longer marketing its 46 percent ownership stake in Premier, and further that Sellers Capital no longer has a specific time frame within which to sell its stake in Premier. Instead, Mr. Sellers indicated that Sellers Capital 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.

At the request of the Board and Mr. Sellers, a committee of the Board engaged its investment banker to attempt to locate an appropriate buyer for the fund’s equity investment 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 Proceedings” 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 percent 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.

We may not be granted a salvage award that is commensurate with the efforts we have expended to recover items from the Titanic wreck site or may be prohibited from exhibiting certain of the Titanic artifacts already under our control.

In November 2007, we filed a motion with the U.S. District Court for the Eastern District of Virginia, Norfolk Division seeking an interim salvage award to compensate us for our efforts in recovering certain items from the wreck of the Titanic. The court has recently granted us a salvage award based on the fair market value of the artifacts recovered, however, the court has until August 2011 to determine whether to satisfy the award by a payment in cash or by an in specie award, which would grant us title to the artifacts. As a result, the form of the award is uncertain. Our future plans for our Titanic exhibitions and for expenditures to develop other exhibition properties will depend, in part, on the decision of the court. Our ability or inability to put any cash or in specie award to its best use may affect our results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Maximum number

(or approximate

Total number of

dollar value) of

shares (or units)

shares (or units) that

Total number of

purchased as part of

may yet be

shares (or units)

Average price paid

publicly announced

purchased under the

Period

purchased

per share (or unit)

plans or programs(1)

plans or programs(1)

(a)

(b)

(c)

(d)

July 1, 2010 through July 31, 2010

14,367

$

1.18

14,367

985,633

August 1, 2010 through August 31, 2010

100,714

$

1.15

100,714

884,919

Total

115,081

115,081

Item 6. Exhibits.

See Index to Exhibits on page 29 of this Quarterly Report on Form 10-Q.

SIGNATURES

Pursuant to the requirements 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.

INDEX TO EXHIBITS

Exhibit

Filed

Incorporated by Reference

No.

Exhibit Description

Herewith

Form

Exhibit

Filing Date

10.1

Premier Exhibitions, Inc. Annual Incentive Plan

8-K

10.1

11/23/2010

31.1

Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer

X

31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial

X

32.1

Section 1350 Certifications

X