UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended May 31, 2014

or

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

For the transition period from to

Commission file number:  000-24452

PREMIER EXHIBITIONS, INC.

(Exact name of registrant as specified in its charter)

Florida	20-1424922
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3340 Peachtree Road, NE, Suite 900, Atlanta, GA	30326
(Address of principal executive offices)	(Zip Code)

                                   (404) 842-2600                                  

(Registrant's telephone number, including area code)

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

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

 Indicate by check mark 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 [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]

(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 [  ]     No [X]

The number of shares outstanding of the registrant's common stock on July 11, 2014 was 49,053,044.

PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES

QUARTERLY PERIOD ENDED MAY 31, 2014

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.	18
Item 4.	Controls and Procedures.	31
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	32
Item 1A	Risk Factors.	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6.	Exhibits.	32

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

Premier Exhibitions, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	May 31, 2014 (Unaudited)			February 28, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	3,315		$	3,434
Certificates of deposit and other investments		206			407
Accounts receivable, net of allowance for doubtful accountsof $352 and $392, respectively		1,587			1,331
Merchandise inventory, net of reserveof $17		1,145			1,206
Income taxes receivable		190			263
Prepaid expenses		2,418			2,012
Other current assets		401			381
Total current assets		9,262			9,034
Artifacts owned, at cost		2,895			2,901
Salvor's lien		1			1
Property and equipment, net of accumulated depreciationof $20,636 and $19,799, respectively		8,820			9,287
Exhibition licenses, net of accumulated amortization of $5,905 and $5,857, respectively		1,793			1,841
Film, gaming and other application assets, net of accumulated amortization of $1,257 and $1,101, respectively		2,077			2,233
Other receivables, net of allowance for doubtful accounts of $902 and $892, respectively		-			-
Goodwill		250			250
Future rights fees, net of accumulated amortizationof $548 and $438, respectively		3,832			3,942
Restricted cash		223			-
Restricted certificate of deposit		800			-
Deferred income taxes		302			302
Deferred financing costs, net of accumulated amortizationof $0		50			-
Long-term exhibition costs		132			215
Subrogation rights		250			250
Total Assets	$	30,687		$	30,256
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,431		$	3,301
Deferred revenue		3,961			3,076
Deferred income taxes		302			302
Current portion of capital lease obligations		40			39
Current portion of notes payable, net of discount of $0 and $66, respectively		-			170
Total current liabilities		8,734			6,888
Long-Term liabilities:
Lease abandonment		1,323			1,440
Long-term portion of capital lease obligations		51			61
Long-term portion of royalty payable, net ofdiscount of $158		949			-
Long-term portion of notes payable, net of discount of $21 and $134, respectively		179			1,126
Total long-term liabilities		2,502			2,627
Commitment and Contingencies
Shareholders' equity:
Common stock; $.0001 par value; authorized 65,000,000 shares; issued 49,050,377 and 49,044,378 shares, respectively; outstanding 49,048,368 and 49,042,369 shares, respectively		5			5
Additional paid-in capital		53,895			53,822
Accumulated deficit		(36,842	)		(35,630	)
Accumulated other comprehensive loss		(326	)		(326	)
Less treasury stock, at cost; 2,009 shares		(1	)		(1	)
Equity Attributable to Shareholders of Premier Exhibitions, Inc.		16,731			17,870
Equity Attributable to Non-controlling interest		2,720			2,871
Total liabilities and shareholders' equity	$	30,687		$	30,256

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

3

Premier Exhibitions, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended May 31,
	2014			2013
Revenue:
Exhibition revenue	$	6,008		$	6,847
Merchandise revenue		1,345			1,906
Management and booking fee		138			187
Total revenue		7,491			8,940
Cost of revenue:
Exhibition costs		3,821			2,964
Cost of merchandise sold		586			683
Total cost of revenue (exclusive of depreciation and amortization shown separately below)		4,407			3,647
Gross profit		3,084			5,293
Operating expenses:
General and administrative		3,295			3,370
Depreciation and amortization		1,151			985
Contract and legal settlements		-			(297	)
Gain on sale of assets		(4	)		(28	)
Total operating expenses		4,442			4,030
Income/(loss) from operations		(1,358	)		1,263
Other income and (expense)
Interest expense		(23	)		(138	)
Other income/(expense)		18			(7	)
Total other expense		(5	)		(145	)
Income/(loss) before income taxes		(1,363	)		1,118
Income tax expense		-			69
Net income/(loss)		(1,363	)		1,049
Less: Net (income)/loss attributable to non-controlling interest		151			(78	)
Net income/(loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	(1,212	)	$	971
Net income/(loss) per share:
Basic income/(loss) per common share	$	(0.02	)	$	0.02
Diluted income/(loss) per common share	$	(0.02	)	$	0.02
Shares used in basic per share calculations		49,046,687			49,276,792
Shares used in diluted per share calculations		49,046,687			49,511,868
Comprehensive income/(loss):	$	(1,212	)	$	971

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

4

Premier Exhibitions, Inc.

Condensed Consolidated Statements of Cash Flow

(in thousands)

(unaudited)

	Three Months Ended May 31,
	2014			2013
Cash flows from operating activities:
Net income/(loss)	$	(1,363	)	$	1,049
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,151			985
Lease abandonment		(117	)		(135	)
Stock-based compensation		73			66
Allowance for doubtful accounts		10			94
Amortization of debt discount		21			137
Gain on sale of assets		(4	)		(28	)
Changes in operating assets and liabilities:
Increase  in accounts receivable		(59	)		(425	)
(Increase)/decrease in merchandise inventory		61			(95	)
Increase in prepaid expenses		(391	)		(167	)
(Increase)/decrease in other assets		(20	)		292
(Increase)/decrease in income taxes receivable		73			(115	)
Increase in other receivables		(10	)		(98	)
Increase in restricted cash		(8	)		-
(Increase)/decrease in long-term development costs		83			(52	)
Increase/(decrease) in accounts payable and accrued liabilities		1,057			(449	)
Increase/(decrease) in deferred revenue		562			(209	)
Increase in income taxes  payable		-			72
Total adjustments		2,482			(127	)
Net cash provided by operating activities		1,119			922
Cash flows from investing activities:
Purchases of property and equipment		(370	)		(301	)
Redemption of certificates of deposit		201			-
Purchase of restricted certificate of deposit		(800	)		-
Proceeds from disposal of assets		4			28
Decrease in artifacts		6			12
Net cash used in investing activities		(959	)		(261	)
Cash flows from financing activities:
Proceeds from options and warrants exercised		-			185
Payments on capital lease obligations		(9	)		(7	)
Deferred financing costs		(50	)		-
Payments on notes payable		(220	)		(65	)
Net cash provided by/(used in) financing activities		(279	)		113
Effects of exchange rate changes on cash and cash equivalents		-			1
Net increase/(decrease) in cash and cash equivalents		(119	)		775
Cash and cash equivalents at beginning of period		3,434			6,393
Cash and cash equivalents at end of period	$	3,315		$	7,168
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	9		$	7
Cash paid/(received) during the period for taxes	$	(73	)	$	112
Supplemental disclosure of non-cash investing and financing activities:
Unrealized loss on marketable securities	$	-		$	1
Net assets recognized from execution of royalty agreement	$	31		$	-

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

5

PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Background and Basis of Presentation

Description of Business

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

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

Our exhibitions tour regularly outside the U.S.  Approximately 10.2% of our revenues for the three months ended May 31, 2014 resulted from exhibition revenues outside of the U.S. compared with 2.4% for the three months ended May 31, 2013.  Many of our financial arrangements with our international trade partners are based upon the U.S. dollar which limits the Company’s exposure to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring.

Corporate Structure

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

We also formed a new entity, Premier Exhibition Management LLC (“PEM”), in September 2011, to manage all of the Company’s exhibition operations (exhibition division).  This includes the operation and management of our Bodies, Titanic, Pirates and Pompeii exhibitions.  PEM will also pursue “fee for service” arrangements to manage exhibitions based on content owned or controlled by third parties.

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

6

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

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

Basis of Presentation

When we use the terms “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, 2014.  In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation of our financial condition as of May 31, 2014, our results of operations for the three months ended May 31, 2014 and 2013 and cash flows for the three months ended May 31, 2014 and 2013.  The data in the consolidated balance sheet as of February 28, 2014 was derived from our audited consolidated balance sheet as of February 28, 2014, as presented in our Annual Report on Form 10-K for our fiscal year ended February 28, 2014.  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 ended May 31, 2014 are not necessarily indicative of the operating results that may be expected for future periods or the full fiscal year ending February 28, 2015 (“fiscal 2015”).

Significant Accounting Policies

For a description of significant accounting policies, see the Summary of Significant Accounting Policies footnote to the Financial Statements included in the Company’s 2014 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 2014 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.

Recent Accounting Pronouncements

Recently Adopted

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists in Accounting Standards Update 2013-11 (ASU 2013-11)

In July of 2013, the Financial Accounting Standards Board (FASB) issued ASU No. 2013-11, Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward Exists,” which requires tax benefits to be presented in the financial statement as a reduction to deferred tax asset for a net operating loss carryforward or a tax credit carryforward. The Company adopted the guidance effective March 1, 2014.  The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations, or our disclosures.

7

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity Update 2014-08 (ASU 2014-08)

In April of 2014, FASB issued Accounting Standards Update No. 2014-08 that changes the criteria and requires expanded disclosures for reporting discontinued operations. The adoption of the pronouncement is not anticipated to have a material impact on our consolidated financial statements.  This accounting update is effective for annual and interim periods beginning after December 15, 2014 and is to be applied prospectively.  The Company adopted the guidance effective March 1, 2014. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations, or our disclosures.

Recently Issued

Revenue from Contracts with Customers Update 2014-09 (ASU 2014-09)

In May of 2014, FASB issued Accounting Standards Update No. 2014-09 that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The provisions of the guidance will be effective for the Company beginning in the first fiscal quarter of 2018.  The Company is currently evaluating the impact of this accounting pronouncement on our consolidated financial statements.

2. Income 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 income per share.

	Three Months Ended May 31,
	2014			2013
Numerator:
Net income/(loss) attributable to shareholders (in thousands)	$	(1,212	)	$	971
Denominator:
Basic weighted-average shares outstanding		49,046,687			49,276,792
Effect of dilutive stock options and warrants		-			235,076
Diluted weighted-average shares outstanding		49,046,687			49,511,868
Net income/(loss) per share:
Basic	$	(0.02	)	$	0.02
Diluted	$	(0.02	)	$	0.02

Equity based awards are not included in the per share computation because the option exercise price was greater than the average market price of the common shares as reflected in the following table.

	Three Months Ended May 31,
	2014		2013
Warrants		-		6,000
Stock options		911,663		1,145,032
Total		911,663		1,151,032

8

3. Assets Related to 2010 Expedition to Titanic Wreck Site

During August and September 2010, our wholly owned subsidiary RMST, as Salvor-In-Possession of the RMS Titanic (the “Titanic”) and its wreck site, conducted an expedition to the Titanic wreck site.

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

	May 31, 2014		February 28, 2014
3D film	$	1,817	$	1,817
3D exhibitry		857		857
2D documentary		631		631
Gaming application and other application		886		886
Expedition web point of presence		317		317
Total expedition costs capitalized		4,508		4,508
Less: Accumulated amortization		1,257		1,101
Accumulated depreciation		689		645
Expedition costs capitalized, net	$	2,562	$	2,762

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

4. Notes Payable, Royalty Payable, and Capital Lease Obligations

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

As of May 31, 2014, the short-term portion of the note payable was $0 and the long-term portion  as $179 thousand which is payable in the fourth quarter of fiscal 2016.  The long-term portion payable relates to rental and other arrearages payable on behalf of Worldwide.

On April 20, 2012, PEM and PEM Newco, LLC,  both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of AEI.  The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.”  Of these four exhibitions, the Company is currently touring only “Real Pirates”.   The Company issued a non-recourse non-interest bearing note as part of this transaction.  The book value of the note was recorded based upon the expected future cash flows of the exhibitions and discounted to its net present value at an imputed interest rate of 7.0%.

In March 2014, the Company paid $300 thousand and purchased the tangible assets that were required to be returned to AEG Live, LLC at the end of the purchase agreement.

On April 17, 2014, PEM and AEG terminated the Promissory Note. As part of the termination of the Promissory Note, PEM and AEG entered into a Revenue Payment Agreement providing for modified future payments to AEG with respect to bookings of acquired exhibitions.  Pursuant to the Revenue Payment Agreement, going forward PEM will make royalty payments to AEG equal to (a) 90% of net revenues from future bookings and (b) 20% of the net revenues from proposed exhibitions acquired from AEG that are ultimately developed and presented.   “Net Revenues” are determined after deduction by PEM of the direct expenses of operating the exhibitions.  Pursuant to the Revenue Payment Agreement, AEG will pay to PEM a management fee of 10% of gross revenues (after deducting any booking fees) for each calendar year thereafter; provided that the management fee shall not be less than the following minimum fees: $500,000 in calendar year 2014; and $125,000 in calendar years 2015 and 2016.

9

We considered the accounting guidance in ASC 805, 405, and 470 when evaluating the accounting for the note cancellation and execution of the revenue payment agreement. We note that there was no substantive modification of the obligations under the Note that were made in connection with the cancellation of the Note and the execution of the revenue payment agreement.  Accordingly, we do not believe the note was settled and therefore the royalty obligation will continue to be remeasured each period until it is ultimately settled.

Beginning in the first fiscal quarter of 2015, revenues, expenses, assets, and liabilities related to these exhibitions are recorded on a gross reporting basis in the Company’s consolidated financial statements since we are now the primary obligor under these agreements, are fulfilling the customer agreements with assets that the Company has all rights and title to, rather than acting in a management capacity as it was prior to the amendment, have latitude to determine pricing and retain future profits from the arrangement with customers, and retain the credit risk with customers.  The majority of the assets and liabilities added as a result of this are restricted cash and deferred revenue

As of May 31, 2014, the short-term portion of the royalty payable was $0 and the long-term portion was $949 thousand.

Capital lease obligations

The Company leases certain computer and security equipment under capital leases.  As of May 31,  2014, the balance sheet reflects the short-term portion of capital lease obligations of $40 thousand and the long-term portion of $51 thousand.

5. Legal Proceedings and Contingencies

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

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

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

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

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

· RMST must comply with provisions that guarantee the long-term protection of all of the artifacts. These provisions include the creation by RMST of a reserve fund (the “Reserve Fund”). The Reserve Fund is irrevocably pledged to and held for the exclusive purpose of providing a performance guarantee for the maintenance and preservation of the Titanic collection for the public interest. The Company will pay into the Reserve Fund a minimum of twenty five thousand dollars ($25 thousand) for each future fiscal quarter until the corpus of such Reserve Fund equals five million dollars ($5 million). Though not required under the covenants and conditions, the Company may make additional payments into the Reserve Fund as it deems appropriate, consistent with its prior representations to the Court and sound fiscal operations. The Company established the Reserve Fund and funded it with $25 thousand during November 2011 and continues to fund it with quarterly $25 thousand payments.  The balance in the Reserve Fund as of May 31, 2014 is $283 thousand, including interest income.

10

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

Status of International Treaty Concerning the Titanic Wreck

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

 In August 2011, the State Department and NOAA resubmitted draft legislation to Congress.  Since that time, RMST has worked with the U.S. government to develop a number of textual modifications to this proposed implementing legislation to address the Company’s concerns.  The proposed legislation has not passed and for now the legislation process has stalled.

Other Litigation

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

In a related matter, on April 29, 2013, the Company filed suit in the U.S. District Court for the Middle District of Florida, Jacksonville Division against Kingsmen Creatives, LTD, and Kingsmen Exhibits PTE, LTD. Kingsmen Creatives is a publicly traded Singapore based design company and is traded on the Singapore Exchange. Kingsmen Exhibits PTE, LTD. is a wholly-owned subsidiary of Kingsmen Creatives, LTD. and designs exhibition and museum properties.  The Kingsmen companies partnered with Thomas Zaller and his companies in development of their competing Titanic exhibition. The Company alleges that the Kingsmen companies participated in an unlawful conspiracy with Thomas Zaller and his companies which caused injury to the Company.  The Company also made claims against the Kingsmen companies for conversion, misappropriation of trade secrets under Florida law, unjust enrichment, and trade dress violations under the Lanham Act.  The Company sued for unspecified damages. The court recently ruled that it lacked personal jurisdiction over Kingsmen Creatives, LTD and Kingsmen Exhibits PTE, LTD. and dismissed the case.  The Company has filed an appeal of this dismissal, which is pending.

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On April 22, 2013, Kingsmen Exhibits PTE, LTD. filed suit against the Company in the High Court of the Republic of Singapore. This suit followed extensive correspondence between the Company and the Kingsmen companies regarding the allegations of wrongdoing by the Kingsmen companies, along with their partners Thomas Zaller and his companies. Kingsmen seeks a judgment declaring that they did not violate the Singapore Copyright Act and the Singapore Trademark Act and prohibiting the Company from continuing to make claims that Kingsmen infringed the Company’s copyrights and trademarks. Kingsmen also seeks unspecified damages from the Company related to actions taken by the Company to protect its confidential and proprietary intellectual property. On December 18, 2013, the Company filed a counterclaim against Kingsmen Exhibits PTE, LTD. in this lawsuit.  In the counterclaim, the Company alleges that Kingsmen unlawfully competed against the Company in the development and operation of its competing Titanic exhibition. Specifically, the Company alleges that Kingsmen infringed on its copyrights by unlawfully obtaining and using the Company’s design files to build its exhibitions.  The Company seeks to enjoin Kingsmen from continuing to infringe on its rights, and for unspecified damages related to the infringement. The case is still in its early stages and the outcome of the case is not readily determinable at this time.

On February 14, 2014, SeaVentures, LTD.  filed suit against the Company in the Circuit Court for the Ninth Judicial District in Orange County, Florida.  The suit alleges that the Company breached a contract with SeaVentures under which we were required to present one or more Titanic exhibitions jointly presenting Titanic artifacts and artifacts recovered from the RMS Carpathia which are owned by SeaVentures, LTD. SeaVentures seeks $743 thousand plus interest and costs. The case is in its initial stages and the outcome of the case is not readily determinable at this time.

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

Settled Litigation

In April 2011, the Company filed suit in the U.S. District Court for the Northern District of Georgia against Serge Grimaux and his companies, including Serge Grimaux Presents, Inc. and 9104-5773 Quebec, Inc. The suit alleges that Grimeaux failed to pay over $800 thousand due and owing the Company under a series of license agreements pursuant to which Mr. Grimaux and his entities presented the Company’s Titanic and human anatomy exhibitions in venues throughout Canada.  The Company settled this litigation on November 10, 2011 for $375 thousand.  As of May 31, 2014, a receivable of $36 thousand, net of allowance for doubtful accounts of $185 thousand, is included in the Company’s accounts receivable.

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

Revenue and Sales and Use Tax Examinations

As of May 31, 2014, the Internal Revenue Service (“IRS”) completed its examination of the Company’s federal tax returns for the fiscal years ended February 28 (29), 2010, 2009, 2008 and 2007, with no significant adjustments required. The tax years February 28 (29), 2011-2014 remain open to IRS examination.  In addition to the review by the IRS, the Company is, at times, under review by various state revenue authorities.

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As of May 8, 2014, the State of New York has completed its most recent examination of the Company’s sales and use tax returns for all periods through May 31, 2012.  The State of New York has assessed additional sales and use tax of approximately $374 thousand, including interest of $93 thousand, of which $37 thousand is accrued in the Company’s financial statements as of May 31, 2014.  The Company is appealing the remaining balance assessed by the State of New York as it relates to license payments for our Bodies exhibitions.  The Company’s position is that given the terms of the license it is not liable to pay these taxes.

In addition, the specimens were donated so the value was zero; without the plastination process, the specimens could not be exhibited; the royalty payments were payments for the “know-how” associated with the plastination process (which was patented) and not rental of the specimens; the purpose of the Seller, found in the whereas clauses of the Specimen Agreement, was to “promote scientific exchange” and was not purely commercial; the NY Attorney General agrees that these were human bodies based on the 2008 Settlement Agreement. In addition, if the specimens were deemed taxable, the tax base would be minimized since the  fair market value of the specimens was zero since the specimens were donated and the Agreement contains other intangibles such as “non-compete” and “right of first refusal.”

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.

6. Purchase and Registration Rights Agreements

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

The registration statement filed pursuant to the Registration Rights Agreement has been declared effective by the SEC.  The Company generally now has the right, but not the obligation, over a 36-month period, to direct LPC to periodically purchase the Purchase Shares in specific amounts under certain conditions at the Company’s sole discretion. The purchase price for the Purchase Shares will be the lower of (i) the lowest trading price on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the common stock during the 12 consecutive business days ending on the business day immediately preceding the purchase date.  However, we cannot sell shares under this agreement if our share price is below $1. In no event, however, will the Purchase Shares be sold to LPC below the floor price as defined in the LPC Purchase Agreement.

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

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

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

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

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

During the year ended February 29, 2012, the Company sold 275,000 shares for $634,675 and issued 158,632 commitment shares under this agreement.  No shares have been issued or sold since that time.

7. Segment Information

The Company has two reportable segments - Exhibition Management and RMS Titanic.  The Exhibition Management segment involves the management of all of the Company’s exhibition operations, including the operation and management of Premier’s Bodies, Titanic (through an inter-company agreement with RMST), Real Pirates, Extreme Dinosaurs, The Discovery of King Tut, and Pompeii exhibitions. The exhibition management division also includes our exhibition merchandising business, conducted under the Company’s wholly owned subsidiary, Premier Merchandising, LLC.   The RMS Titanic segment manages the Company’s rights to the Titanic assets, including title to all of the recovered artifacts in the Company’s possession and all of the intellectual property (video, photos, maps, etc.) related to the recovery of the artifacts and research of the ship.  In addition, the RMS Titanic segment manages the Company’s responsibilities as salvor-in-possession of the Titanic wreck site.

Revenue derived from exhibitions presented outside of the U.S. was $763 thousand and $218 thousand for the three months ended May 31, 2014 and 2013, respectively.  The Company’s foreign exhibitions are all touring.  As such, the concentration of foreign income in any period is fluid and changes as exhibitions are moved, normally every four to six months.

All reported revenues were derived from external customers, with the exception of $311 thousand and $633 thousand reported for the RMS Titanic segment for the three months ended May 31, 2014 and 2013, respectively.  This revenue represents a royalty fee paid by the Exhibition Management segment for the use of Titanic assets in its exhibits, and is reflected as a corresponding cost of revenue in the Exhibition Management segment.  Revenue earned and expenses charged between segments are eliminated in consolidation.

Certain corporate expenses are allocated to the RMS Titanic segment based on an intercompany agreement between PEM and RMST for corporate shared services.  The remaining corporate expenses and income taxes are allocated to the Exhibition Management segment.

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The following tables reflect the Statements of Operations for the three months ended May 31, 2014 and 2013 by segment (in thousands):

	Three Months Ended May 31, 2014
	(In thousands)
	Exhibition Management			RMS Titanic		Elimination			Total
Revenue	$	7,491		$	311	$	(311	)	$	7,491
Cost of revenue (exclusive of depreciation and amortization)		4,718			-		(311	)		4,407
Gross profit		2,773			311		-			3,084
Operating expenses:
General and administrative		2,998			297		-			3,295
Depreciation and amortization		1,151			-		-			1,151
Gain on disposal of property and equipment		(4	)		-		-			(4	)
Total Operating expenses		4,145			297		-			4,442
Income/(loss) from operations		(1,372	)		14		-			(1,358	)
Other expense		(5	)		-		-			(5	)
Income/(loss) before income tax		(1,377	)		14		-			(1,363	)
Income tax expense		-			-		-			-
Net income/(loss)		(1,377	)		14		-			(1,363	)
Less: Net loss attributable to non-controlling interest		151			-		-			151
Net income/(loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	(1,226	)	$	14	$	-		$	(1,212	)

	Three Months Ended May 31, 2013
	(In thousands)
	Exhibition Management			RMS Titanic		Elimination			Total
Revenue	$	8,940		$	633	$	(633	)	$	8,940
Cost of revenue (exclusive of depreciation and amortization)		4,280			-		(633	)		3,647
Gross profit		4,660			633		-			5,293
Operating expenses:
General and administrative		3,065			305		-			3,370
Depreciation and amortization		934			51		-			985
Contract and legal settlements		(297	)		-		-			(297	)
Gain on disposal of property and equipment		(28	)		-		-			(28	)
Total Operating expenses		3,674			356		-			4,030
Income from operations		986			277		-			1,263
Other expense		(145	)		-		-			(145	)
Income before income tax		841			277		-			1,118
Income tax expense		53			16		-			69
Net income		788			261		-			1,049
Less: Net income attributable to non-controlling interest		(78	)		-		-			(78	)
Net income attributable to the shareholders of Premier Exhibitions, Inc.	$	710		$	261	$	-		$	971

The assets in our Exhibition Management segment include exhibitry, leasehold improvements, and other assets necessary for operation of the Company’s exhibitions.  The RMS Titanic segment contains all of the Titanic assets, including title to all of the recovered artifacts in the Company’s possession and all related intellectual property (video, photos, maps, etc.).  The Company’s assets by segment are reflected in the following table (in thousands).

	As of
	May 31, 2014		February 28, 2014
Assets:
Exhibition Management	$	24,081	$	23,374
RMS Titanic		6,094		6,282
Corporate and unallocated		512		600
Total assets	$	30,687	$	30,256

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Expenditures for additions to long-lived assets by segment for the three months ended May 31, 2014 and 2013 are reflected in the table below (in thousands):

Capital Expenditures:
	May 31, 2014		May 31, 2013
Exhibition Management	$	370	$	301
RMS Titanic		-		-
Total capital expenditures	$	370	$	301

8. Consignment agreement and RMS Titanic Sale

The Company was party to a Consignment Agreement with Guernsey's auction house to sell the Company's Titanic artifacts and related intellectual property.  If and when a transaction is closed, the Company would be required to pay Guernsey's a fee of up to 8% of the sale price if a purchase agreement is entered into within 60 days of the auction deadline, and up to 4% of the sale price if a purchase agreement was entered into thereafter.  The actual amount of the commission would have depended on the sale price, identity of the purchasing party and the date when the sale was closed.   The obligation to pay a fee to Guernsey’s for a Titanic artifact sale has ended pursuant to the terms of the agreement.  In addition, if a transaction to sell the Titanic artifact collection was closed, the Company may have been required to pay a Transaction Bonus to Christopher Davino, former President of RMS Titanic, Inc., dependent upon the sale price, identity of the purchasing party and the date when the sale is closed.  The obligation to pay a transaction bonus to Mr. Davino has ended.  In addition, the Company expects to incur other legal, accounting and investment banking expenses if and when a sale of the Titanic artifacts is completed. Prepaid fees related to the auction and professional fees related to the sale to the Consortium totaled $666 thousand and were written-off in the third quarter of fiscal 2014.

The Company’s Board has authorized management to pursue other strategic alternatives. The Board is working to evaluate all options available to maximize shareholder value.  The Company has retained JP Morgan Securities as its advisor to assist the Board in evaluating other strategic alternatives.  There is no guarantee that a transaction or series of transactions will result from this process.

9. Commitment and Contingencies

On April 9, 2014, the Company entered into a 130-month lease agreement for exhibition and retail space with 417 Fifth Avenue Real Estate, LLC in New York City, New York. This lease includes approximately 51,000 square feet of space at 417 Fifth Avenue between 37th and 38th streets in the Grand Central district and is near Bryant Park, the Empire State Building and only a few blocks east of Times Square.  Specific information about the exhibitions that will be opening in the space will be released at a later date.  In the first fiscal quarter of fiscal 2015, we purchased a $800 thousand certificate of deposit and pledged it as collateral for this lease.   An additional $900 thousand in collateral is due in the first fiscal quarter of 2016.  The lease commenced in July 2014 and we expect to begin presenting exhibitions in the leased space during the fiscal fourth quarter of 2015. Total future minimum payments under this lease are approximately $45.8 million.

10. Subsequent Events

On June 13, 2014, Samuel S. Weiser resigned from his position as President and Chief Executive Officer of Premier Exhibitions, Inc.  Mr. Weiser will remain a director of the Company.

Also on June 13, 2014, the Company appointed Michael J. Little, the Company's Chief Financial Officer and Chief Operating Officer, to the additional position of Interim President and Chief Executive Officer.

On June 20, 2014, the Company entered into a Separation Agreement and Release (the “Separation Agreement”) between the Company and Samuel S. Weiser in connection with Mr. Weiser’s resignation as President and Chief Executive Officer of the Company. Mr. Weiser is currently a director of the Company, and will continue to serve in that capacity.

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Pursuant to the Separation Agreement, Mr. Weiser is entitled to a severance payment equal to one year of salary, payable two-thirds upon execution of the Agreement with the remainder payable in twelve equal monthly installments. Pursuant to the Severance Agreement Mr. Weiser’s existing equity grants, consisting of stock options, stock appreciation rights and restricted stock units, vested in full to the extent they had not previously vested, and remain exercisable. Mr. Weiser will also receive twelve months of reimbursement for health insurance premiums of $2,775 per month and twelve months of office space currently leased by the Company in Chicago, Illinois.  As consideration for the Severance Agreement, in addition to Mr. Weiser’s resignation, Mr. Weiser released the Company and its affiliates from all claims or suits in his favor and agreed not to participate in any proxy solicitation involving the Company for a period of six months.   For twelve months from the date of his resignation, Mr. Weiser is also required to comply with the restrictive covenants set forth in his employment agreement, which are incorporated into the Separation Agreement.

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

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

You are urged to read the risk factors described in our Annual Report on Form 10-K for our fiscal year ended February 28, 2014 (“fiscal 2014”), 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, 2014.

Premier Exhibitions, Inc. and subsidiaries, (the “Company” or “Premier”) principal executive offices are located at 3340 Peachtree Road, NE, Suite 900, Atlanta, Georgia 30326 and the Company’s telephone number is (404) 842-2600.  The Company is a Florida corporation and maintains websites located at www.prxi.com, www.bodiesrevealed.com, www.bodiestheexhibition.com, www.rmstitanic.net, www.thetitanicstore.com, www.titanictheexperience.com, www.thekingtutstore.com and www.dinosaursatlanta.com. Information on Premier’s websites is not part of this report.

Overview

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

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

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

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The exhibition management division includes our exhibition operations and merchandising operations.  We formed the entity, Premier Exhibition Management LLC (“PEM”), in September 2011 to manage all of the Company’s exhibition operations.  This currently includes the operation and management of our Bodies, Titanic, (pursuant to an intercompany agreement with RMST), Real Pirates and Pompeii exhibitions.  PEM will also pursue “fee for service” arrangements to manage exhibitions based on content owned or controlled by third parties.  On April 20, 2012, Premier Exhibition Management LLC and its wholly owned subsidiary, PEM Newco, LLC (“Newco”),  both subsidiaries of the Company, entered into a purchase agreement with AEG Live LLC, AEG Exhibitions LLC, and Arts and Exhibitions International, LLC pursuant to which Newco purchased substantially all of the assets of Arts and Exhibitions International, LLC (“AEI”).  The assets purchased include the rights and tangible assets relating to four touring exhibitions known as “King Tut II,” “Cleopatra,” “America I Am” and “Real Pirates.” Of these four exhibitions, the Company is currently touring only “Real Pirates”.  The acquired assets include rights agreements with the owners of the artifacts and intellectual property comprising the exhibitions, museum/venue agreements for existing exhibition venues, sponsorship agreements, a warehouse lease and an office lease. In addition, the acquired assets include intellectual property related to proposed future exhibitions that the Company may further develop and produce including the exhibit “One Day in Pompeii”, which is currently being toured by the Company.  The Company will operate any such additional properties through its exhibition management subsidiary.  Subsequent to the asset purchase, Newco changed its name to Arts and Exhibitions International, LLC.

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

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

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

As of May 31, 2014, our portfolio of exhibitions contains the following:

	May 31, 2014
	Stationary		Touring		Total
Exhibitions owned or leased:
"Bodies…The Exhibition" and "Bodies Revealed"		3		4		7
"Titanic: The Artifact Exhibition" and "Titanic: The Experience		3		5		8
"Real Pirates"		-		2		2
"One Day in Pompeii"		-		1		1
"The Discovery of King Tut"		-		1		1
"Extreme Dinosaurs"		1		-		1
Total Exhibitions		7		13		20

Our touring exhibitions usually span four to six months.  As of May 31, 2014, our stationary exhibitions, which are longer-term exhibitions, are located in Las Vegas, Nevada, Orlando, Florida, Buena Park, California and Atlanta, Georgia.  Previously the Company had an additional stationary exhibition in New York City, New York which was closed in late October 2012 due to the impact of Hurricane Sandy and subsequent action by governmental authorities and the landlord.  On April 9, 2014, the Company signed a lease to open a new location in New York City, New York.

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

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

We own approximately 5,500 Titanic artifacts recovered from the wreck site 2½ miles below the ocean’s surface which we have the right to present at our exhibitions.  In 1994, a federal district court declared us salvor-in-possession of the Titanic wreck and wreck site, and, as such, we have the exclusive right to recover additional objects from the Titanic wreck site.  Through our explorations, we have obtained and are in possession of the largest collection of data, information, images and cultural materials associated with the Titanic shipwreck. We believe that our salvor-in-possession status puts us in the best position to provide for the archaeological, scientific and educational interpretation, public awareness, historical conservation and stewardship of the Titanic shipwreck.   As of May 31, 2014, we had the ability to present 8 concurrent Titanic exhibitions.  Management continues to explore ways to expand the Titanic model beyond the exhibition business to broaden the Company's reach.

In 2004, we diversified our exhibitions beyond the Titanic and into human anatomy by acquiring licenses that give us rights to present exhibitions of human anatomy sets, each of which contains a collection of whole human body specimens plus single human organs and body parts.  As of May 31, 2014, we had the ability to present 7 concurrent human anatomy exhibitions.

During the past several years the Company has continued to diversify its exhibition content to expand beyond our Titanic and Bodies exhibitions.

Exhibitions

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

By featuring the artifacts recovered from the wreck site, our exhibitions tell the Titanic’s story from construction through her sinking and discovery as well as the Company’s efforts to preserve the wreck site and conserve recovered artifacts.  The artifacts are placed in historically correct re-creations of the significant rooms onboard the ship and are illuminated by moving stories of her passengers and crew.  The Company has supplemented the exhibitions with assets generated during the 2010 Titanic expedition such as 3D exhibitry and film.  The Company’s attendance to its Titanic exhibitions is over 23 million visitors at venues in North America, South America, Asia, Europe and Australia.  During the three months ended May 31, 2014, 7 separate Titanic exhibitions were presented at 8 venues.

Consistent with the Company’s desire to increase its number of permanent exhibitions, on October 17, 2011 the Company purchased the assets of a Titanic-themed exhibition (Titanic: The Experience or “TTE”) in Orlando, Florida.  Through this acquisition, the Company now has a presence in the large Orlando tourist market.  The Company has supplemented the acquired exhibitry with authentic Titanic artifacts from our existing collections and also by including assets generated during the 2010 Titanic expedition such as 3D exhibitry and film.

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

We presently have the right to display multiple human anatomy sets, each of which contains a collection of whole human body specimens plus single human organs and body parts, which are known as “Bodies Revealed” and “Bodies...The Exhibition.”  We secured the rights to produce these two types of human anatomy exhibitions through separate exhibition agreements.  During the three months ended May 31, 2014, 6 separate Bodies exhibitions were presented at 6 venues.

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

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

“Pompeii: One Day in Pompeii”

During the third fiscal quarter of 2014, the Company, in partnership with the Italian Superintendence for Archaeological Heritage of Naples and Pompeii (SANP), developed a new exhibition on the story of Pompeii that features over 150 authentic artifacts on loan from the Naples National Archaeological Museum. The exhibition will be presented through June 2015.

The exhibition offers visitors a rare look at some of the most valuable artifacts recovered from the debris of the city of Pompeii, many of which will be making their North American debut. The Pompeii exhibition will have a limited three-city tour and started at The Franklin Institute in Philadelphia on November 9, 2013.   The opportunity to present this exhibition was acquired as part of the AEG Live, LLC transaction. During the three months ended May 31, 2014, we presented 1 Pompeii exhibit at 2 venues.

 “Real Pirates”

Real Pirates tells the compelling story of the Whydah, the first authenticated pirate shipwreck in U.S. waters, and the stories of the diverse people whose lives converged on the vessel.  Sunk in a fierce storm off the coast of Cape Cod, Massachusetts in April 1717, the Whydah was located in 1984 by underwater explorer Barry Clifford.

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

We obtained the right to manage this exhibition as part of the AEG Live, LLC transaction.  Effective November 13, 2012, the Company signed a binding letter of intent with Barry Clifford to develop and present a second Real Pirates exhibition, which the Company began touring in March 2013.  During the three months ended May 31, 2014, we presented 2 separate Pirates exhibitions at 2 venues.

“The Discovery of King Tut”

During the fourth fiscal quarter of 2014, the Company entered into a License Agreement with Semmel Concerts GmbH, a German entity, ("Semmel") to present an exhibition based on King Tutankhamun. The term of the Agreement is five (5) years from the opening date of the exhibition.  The exhibition, titled The Discovery of King Tut, uses high quality artistic and scientific reproductions of artifacts found in the tomb of King Tutankhamun to recreate the moment of Howard Carter's discovery of the lost tomb.  This exhibition opened at Union Station in Kansas City on April 4, 2014.

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“Extreme Dinosaurs”

During the fourth fiscal quarter of 2014, the Company entered into a License Agreement with Dinosaurs Unearthed Corporation to present an exhibition based on dinosaurs. The term of the Agreement is approximately 9 months from the opening date of the exhibition.  The exhibition, titled Extreme Dinosaurs, features some of the newest dinosaur discoveries from the ‘Golden Age’ of paleontology, and explores why scientists believe these dinosaurs may have had such bizarre features like horns, plates, frills and feathers. Visitors will experience some of the world’s strangest dinosaurs showcased through life-size animatronic models, skeletons, real and replicated fossils, and more.  This exhibition opened at Atlantic Station in Atlanta on March 29, 2014.

New Content

The Company continues to pursue new content opportunities. To mitigate the risk associated with building an exhibition and then attempting to book the exhibition after incurring the capital expenditure, the Company has begun optioning new content opportunities to assess market demand and evaluate the expected return on the investment based on that market assessment. The Company currently has 2 new projects in development.  The Company has an option agreement in place to develop an exhibition featuring characters from the Ice Age movie franchise licensed from 20th Century Fox.  The Company is also in development of an exhibition featuring cases of the Federal Bureau of Investigation.

Titanic Expeditions

In August 1987, TVLP contracted with the Institute of France for the Research and Exploration of the Sea (“IFREMER”) to conduct an expedition and dive to the wreck of the Titanic. Approximately 2,000 objects were recovered and 140 hours of video tape footage and an estimated seven thousand still photographs were taken during the course of the 32 dives in that original expedition.

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

2010 Expedition to Titanic Wreck Site

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

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

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

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

 Merchandising

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

During the fiscal 2011, we launched an e-commerce website that allows us to sell merchandise related to our shows over the internet.  During fiscal 2012, we re-launched our e-commerce website as www.thetitanicstore.com, which offers Titanic-themed merchandise.  During the first quarter of fiscal 2015, the Company launched a King Tut e-commerce website, www.thekingtutstore.com, to maximize our merchandise rights related to the new King Tut related exhibition.

Information Regarding Exhibitions Outside the United States

Our exhibitions tour regularly outside the U.S.  Approximately 10.2% of our revenues for the three months ended May 31, 2014 resulted from exhibition revenues outside of the U.S. compared with 2.4% for the three months ended May 31, 2013.  Many of our financial arrangements with our international trade partners are based upon the U.S. dollar which limits the Company’s exposure to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring.

Results of Operations

The Quarter Ended May 31, 2014 Compared to the Quarter Ended May 31, 2013

An analysis of our condensed consolidated Statements of Operations for the three months ended May 31, 2014 and 2013, with percent changes, follows:

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	Three Months Ended May 31,						% Change
	2014			2013
	(In thousands except percentages)
Revenue	$	7,491		$	8,940			(16.2	) %
Cost of revenue (exclusive of depreciation and amortization)		4,407			3,647			20.8	%
Gross profit		3,084			5,293			(41.7	) %
Gross profit as a percent of revenue		41.2	%		59.2	%
Operating expenses		4,442			4,030			10.2	%
Income/(loss) from operations		(1,358	)		1,263			(207.5	) %
Other expense		(5	)		(145	)		(96.6	) %
Income/(loss) before income tax		(1,363	)		1,118			(221.9	) %
Income tax expense		-			69			(100.0	) %
Effective tax rate		0.0	%		6.2	%
Net income/(loss)		(1,363	)		1,049			(229.9	) %
Less: Net (income)/ loss attributable to non-controlling interest		151			(78	)		(293.6	) %
Net income/(loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	(1,212	)	$	971			(224.8	) %
Income/(loss) per share:
Basic income per share	$	(0.02	)	$	0.02
Diluted income per share	$	(0.02	)	$	0.02

Revenue.  During the quarter ended May 31, 2014, total revenue decreased by $1.4 million, or 16.2% to $7.5 million compared to the same period last year, as reflected in the following table.

	Revenue (in thousands)
	Three Months Ended May 31,
	2014		2013
Exhibition Revenue
Admissions revenue	$	4,665	$	6,115
Non-refundable license fees for current exhibitions		1,343		732
Total Exhibition revenue		6,008		6,847
Merchandise and Other		1,345		1,906
Management and booking fee		138		187
Total Revenue	$	7,491	$	8,940
Key Non-financial Measurements
Total number of exhibitions presented		20		19
Semi-permanent exhibitions presented		6		5
Partnered exhibitions presented		8		12
Exhibitions rented to promoters or museums		6		2
Total operating days for semi-permanent, partner and rented exhibitions		1,426		1,122
Total attendance for semi-permanent and partner presented exhibitions  (in 000's)		496		546
Average attendance per day for semi-permanent and partnered exhibitions presented		462		510
Average ticket price for semi-permanent and partnered exhibitions presented	$	15.18	$	13.62
Average retail per attendee for semi-permanent and partnered exhibitions presented	$	2.67	$	3.67
Semi permanent exhibitions:
Total operating days		552		460
Total attendance (in 000's)		206		172
Average attendance per day		373		374
Average ticket price	$	19.44	$	21.90
Average retail per attendee	$	3.28	$	3.75

The May 31, 2013 key non-financial measurements do not include exhibitions under management.

Exhibition revenue decreased by $839 thousand to $6.0 million primarily due to a decrease in profit share revenue  related to the Titanic brand being in smaller markets in the first quarter of fiscal 2015.  For the three months ended May 31, 2013 we did not recognize exhibition revenue for the AEI exhibitions but instead received a management fee for managing these properties.

With 20 exhibits presented, the Company experienced a decrease in attendance from 546 thousand in the first fiscal quarter of 2014 to 496 thousand in first fiscal quarter of 2015. We attribute this decrease in attendance to smaller markets booked in the current fiscal quarter.    In addition, the Company had an increase in exhibitions rented to promoters and museums.  Exhibitions rented to promoters and museums are generally charged a flat rate fee and not a per ticket fee and do not transmit their attendance.  Thus, these venues are not included in the Company’s attendance numbers.  Revenue from self-run exhibitions was 62.6% of total revenue in the first quarter of fiscal 2015, compared to 49.6% of revenue for the first quarter of fiscal 2014. These comparisons exclude the AEI portfolio.

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Merchandise revenue decreased $0.6 million to $1.3 million for the three months ended May 31, 2014.  Merchandise revenue decreased due to a decrease in attendance at our venues and the decrease in average retail per attendee for semi-permanent and partnered exhibitions.  During the first fiscal quarter of 2014 the Company had 2 touring exhibitions that represented 37% of total merchandise revenue.

Cost of revenue. During the three months ended May 31, 2014, total cost of revenue increased by $0.8 million, or 20.8%, to $4.4 million compared to the same period last year, as reflected in the following table.

	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent Change
	May 31, 2014			May 31, 2013			2014 vs. 2013
Exhibition costs
Production	$	358		$	58			517.2	%
Operating Expenses		2,359			1,838			28.3	%
Marketing		1,104			1,068			3.4	%
		3,821			2,964			28.9	%
Exhibition expense as percent of exhibition revenue		63.6	%		43.3	%
Cost of merchandise		586			683			(14.2	) %
Cost of merchandise as percent of merchandise revenue		43.6	%		35.8	%
Total	$	4,407		$	3,647			20.8	%
Cost of revenue as a percent of total revenue		58.8	%		40.8	%

Exhibition expense increased from 43.3% of exhibition revenue in the first quarter of 2014 to 63.6% in the first quarter of fiscal 2015 primarily due to the addition of our Buena Park location and our new Pompeii exhibition.  These exhibitions had higher start-up cost than expected and are being amortized through the life of the exhibition.

Cost of merchandise as a percent of merchandise revenue increased from 35.8% in the first quarter of fiscal 2014 to 43.6% in the first quarter of fiscal 2015 primarily due to higher retail labor cost and higher cost of freight and shipping.  In the prior fiscal year, the Company ran fewer merchandise shops which reduced our cost and increased our margin.

The decrease in revenue and increase in costs of goods sold resulted in a decrease in our gross profit from $5.3 million or 59.2% during the three months ended May 31, 2013 to $3.1 million or 41.2% of revenue for the three months ended May 31, 2014.

Operating expenses. Our general and administrative expenses decreased by $0.1 million to $3.3 million for the three months ended May 31, 2014 compared to the same period last year.  The decrease is primarily due to a decrease in compensation expense and professional fees offset slightly by an increase in rent and other office expenses.

Our depreciation and amortization expenses increased by  $166 thousand from the prior year. The increase is attributable to the assets placed in service during fiscal 2014 related to our Buena Park location and our Pompeii and Pirates exhibitions.

Other expense.  We recognized interest expense of $23 thousand on the Company’s debt during first quarter of fiscal 2015 as compared to $138 thousand in the first quarter of 2014.

Income tax expense. We recorded zero income tax expense for the three months ended May 31, 2014.The income tax expense for the three months ended May 31, 2013 related primarily to Federal Alternative Minimum Tax and state income taxes.

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Net (income)/loss attributable to non-controlling interest.This represents the (income)/loss attributable to AEG Live, LLC’s 10% interest in Premier Exhibition Management LLC.

Net income/(loss) attributable to the shareholders of Premier Exhibitions, Inc.We realized a net loss  of $1.2 million for the three months ended May 31, 2014 as compared to net income of $1.0 million for the same period last year.

The Quarter Ended May 31, 2014 Compared to the Quarter Ended May 31, 2013 – Segment results

Exhibition Management

An analysis of operations for our Exhibition Management segment for the three months ended May 31, 2014 and 2013, with percent changes, follows:

	Three Months Ended May 31,						% Change
	2014			2013
	(In thousands except percentages)
Revenue	$	7,491		$	8,940			(16.2	) %
Cost of revenue (exclusive of depreciation and amortization)		4,718			4,280			10.2	%
Gross profit		2,773			4,660			(40.5	) %
Gross profit as a percent of revenue		37.0	%		52.1	%
Operating expenses		4,145			3,674			12.8	%
Income/(loss) from operations		(1,372	)		986			(239.1	) %
Other expense		(5	)		(145	)		(96.6	) %
Income/(loss) before income tax		(1,377	)		841			(263.7	) %
Income tax expense		-			53			(100.0	) %
Effective tax rate		0.0	%		6.3	%
Net income/(loss)		(1,377	)		788			(274.7	) %
Less: Net (income)/ loss attributable to non-controlling interest		151			(78	)		(293.6	) %
Net income/(loss) attributable to the shareholders of Premier Exhibitions, Inc.	$	(1,226	)	$	710			(272.7	) %

Revenue.  During the quarter ended May 31, 2014, total revenue decreased by $1.4 million, or 16.2% to $7.5 million compared to the same period last year, as reflected in the following table.

	Revenue (in thousands)
	Three Months Ended
	May 31,
	2014		2013
Exhibition Revenue
Admissions revenue	$	4,665	$	6,115
Non-refundable license fees for current exhibitions		1,343		732
Total Exhibition revenue		6,008		6,847
Merchandise and Other		1,345		1,906
Management and booking fee		138		187
Total Revenue	$	7,491	$	8,940
Key Non-financial Measurements
Total number of exhibitions presented		20		19
Semi-permanent exhibitions presented		6		5
Partnered exhibitions presented		8		12
Exhibitions rented to promoters or museums		6		2
Total operating days for semi-permanent, partner and rented exhibitions		1,426		1,122
Total attendance for semi-permanent and partner presented exhibitions  (in 000's)		496		546
Average attendance per day for semi-permanent and partnered exhibitions presented		462		510
Average ticket price for semi-permanent and partnered exhibitions presented	$	15.18	$	13.62
Average retail per attendee for semi-permanent and partnered exhibitions presented	$	2.67	$	3.67
Semi permanent exhibitions:
Total operating days		552		460
Total attendance (in 000's)		206		172
Average attendance per day		373		374
Average ticket price	$	19.44	$	21.90
Average retail per attendee	$	3.28	$	3.75

The May 31, 2013 key non-financial measurements do not include exhibitions under management.

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Exhibition revenue decreased by $839 thousand to $6.0 million primarily due to a decrease in profit share revenue  related to the Titanic brand being in smaller markets in the first quarter of fiscal 2015.  For the three months ended May 31, 2013 we did not recognize exhibition revenue for the AEI exhibitions but instead received a management fee for managing these properties.

With 20 exhibits presented, the Company experienced a decrease in attendance from 546 thousand in the first fiscal quarter of 2014 to 496 thousand in first fiscal quarter of 2015. We attribute this decrease in attendance to smaller markets booked in the current fiscal quarter.  In addition, the Company had an increase in exhibitions rented to promoters and museums.  Exhibitions rented to promoters and museums are generally charged a flat rate fee and not a per ticket fee and do not transmit their attendance.  Thus, these venues are not included in the Company’s attendance numbers.  Revenue from self-run exhibitions was 62.6% of total revenue in the first quarter of fiscal 2015, compared to 49.6% of revenue for the first quarter of fiscal 2014. These comparisons exclude the AEI portfolio.

Merchandise revenue decreased $0.6 million to $1.3 million for the three months ended May 31, 2014.  Merchandise revenue decreased due to a decrease in attendance at our venues and the decrease in average retail per attendee for semi-permanent and partnered exhibitions.  During the first fiscal quarter of 2014 the Company had 2 touring exhibitions that represented 37% of total merchandise revenue.

Cost of revenue. During the three months ended May 31, 2014, total cost of revenue increased by $0.4 million, or 10.2%, to $4.7 million compared to the same period last year, as reflected in the following table.

	Cost of Revenue
	(in thousands, except percentages)
	Three Months Ended						Percent
	May 31, 2014			May 31, 2013			2014 vs. 2013
Exhibition costs
Production	$	358		$	58			517.2	%
Operating Expenses		2,670			2,471			8.1	%
Marketing		1,104			1,068			3.4	%
		4,132			3,597			14.9	%
Exhibition expense as percent of exhibition revenue		68.8	%		52.5	%
Cost of merchandise		586			683			(14.2	) %
Cost of merchandise as percent of merchandise revenue		43.6	%		35.8	%
Total	$	4,718		$	4,280			10.2	%
Cost of revenue as a percent of total revenue		63.0	%		47.9	%

Exhibition expense increased from 52.5% of exhibition revenue in the first quarter of 2014 to 68.8% in the first quarter of fiscal 2015 primarily due to the addition of our Buena Park location and our new Pompeii exhibition.  These exhibitions had higher start-up cost than expected and are being amortized through the life of the exhibition. This was partially offset by a decrease in our royalty fee our use of Titanic artifacts. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic net revenues decreased to $3.1 million from $6.3 million, royalty revenue decreased accordingly.

Cost of merchandise as a percent of merchandise revenue increased from 35.8% in the first quarter of fiscal 2014 to 43.6% in the first quarter of fiscal 2015 primarily due to higher retail labor cost and higher cost of freight and shipping.  In the prior fiscal year, the Company ran fewer merchandise shops which reduced our cost and increased our margin.

The decrease in revenue and increase in costs of goods sold resulted in a decrease in our gross profit from $4.7 million or 52.1% during the three months ended May 31, 2013 to $2.8 million or 37.0% of revenue for the three months ended May 31, 2014.

Operating expenses. Our general and administrative expenses decreased by $0.1 million to $3.0 million for the three months ended May 31, 2014 compared to the same period last year.  The decrease is primarily due to a decrease in compensation expense and professional fees offset slightly by an increase in rent and other office expenses.

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Our depreciation and amortization expenses increased by $217 thousand from the prior year. The increase is attributable to the assets placed in service during fiscal 2014 related to our Buena Park location and our Pompeii and Pirates exhibitions.

Other expense.  We recognized interest expense of $23 thousand on the Company’s debt during first quarter of fiscal 2015 as compared to $138 thousand in the first quarter of 2014.

Income tax expense. We recorded zero income tax expense for the three months ended May 31, 2014.The income tax expense for the three months ended May 31, 2013 related primarily to Federal Alternative Minimum Tax and state income taxes.

 Net (income)/loss attributable to non-controlling interest.This represents the (income)/loss attributable to AEG Live, LLC’s 10% interest in Premier Exhibition Management LLC.

 Net income/(loss) attributable to the shareholders of Premier Exhibitions, Inc. We realized a net loss of $1.2 million for the three months ended May 31, 2014 as compared to net income of $0.7 million for the same period last year.

RMS Titanic

An analysis of operations for our RMS Titanic segment for the three months ended May 31, 2014 and 2013 with percent changes follows:

	Three Months Ended May 31,						% Change
	2014			2013
	(In thousands except percentages)
Revenue	$	311		$	633			(50.9	) %
Cost of revenue (exclusive of depreciation and amortization)		-			-			-	%
Gross profit		311			633			(50.9	) %
Gross profit as a percent of revenue		100.0	%		100.0	%
Operating expenses		297			356			(16.6	) %
Income from operations		14			277			(94.9	) %
Income tax expense		-			16			(100.0	) %
Net income	$	14		$	261			(94.6	) %

Revenue.  During the three months ended May 31, 2014, total revenue decreased by $322 thousand, or 50.9%, to $311 thousand compared to the same period in the prior year due to the decrease in revenues from Titanic exhibitions and the decrease in merchandise sales.  PEM pays RMST a royalty fee for the use of Titanic artifacts in its exhibits. The royalty fee is calculated based on 10% of revenues generated from Titanic ticket sales, merchandising, and other ancillary revenue-related streams. As Titanic net revenues decreased to $3.1 million from $6.3 million, royalty revenue decreased accordingly.

Gross Profit.Gross profit decreased based on the 50.9% decrease in revenue discussed above.

Operating Expenses.Operating expenses for the three months ended May 31, 2014 decreased 16.6% from the same period in the prior year due to a decrease in the expenses related to the calculation of the administrative fee.

Income tax expense. We recorded zero income tax expense for the three months ended May 31, 2014.The income tax expense for the three months ended May 31, 2014 related primarily to Federal Alternative Minimum Tax and state income taxes.

Net income attributable to shareholders of Premier Exhibitions, Inc.We realized netincome for the three months ended May 31, 2014 of $14 thousand compared to net income of $261 thousand for the same period in the prior year based on the items discussed above.

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Liquidity and Capital Resources

Liquidity

The following tables reflect selected information about our cash flows during the three months ended May 31, 2014 and 2013:

Selected cash flow information:
	Three Months Ended May 31,
	2014			2013
Net cash provided by operating activities	$	1,119		$	922
Net cash used in investing activities		(959	)		(261	)
Net cash  provided by/(used in) financing activities		(279	)		113
Effects of exchange rate changes on cash and cash equivalents		-			1
Net increase/(decrease) in cash and cash equivalents	$	(119	)	$	775

Operating Activities. For the three months ended May 31, 2014, cash provided by operating activities was $ 1.1 million as compared to $922 thousand in the prior year.  The increase in cash flow from operating activities is mainly due to an increase in our accounts payable and other liabilities and deferred revenues.  This was partially offset by the change in net income/(loss).

 Investing Activities.    Cash used in investing activities was $1.0 million for the three months ended May 31, 2014 as compared to $0.3 million in the prior year.  Of the cash used in investing activites in the first fiscal quarter of 2015 the majority, $800 thousand, was used to purchase a restricted certificate of deposit for out New York City lease.  In addition we purchased property and equipment of $370 thousand and $302 thousand for the three months ended May 31, 2014 and 2013, respectively. The majority of the property and equipment purchases for the three months ended May 31, 2014, related to the $300 thousand the Company paid to AEG Live, LLC for the tangible assets that were required to be returned to AEG Live, LLC at the end of the purchase agreement.  For the three months ended May 31, 2013, the majority of the property and equipment purchases related to construction at our Buena Park location.  For the three months ended May 31, 2014, these were partially offset by the redemption of a certificate of deposit of $201 thousand.

Financing Activities.  Cash used in financing activities was $279 thousand for the three months ended May 31, 2014 compared to cash provided of $113 thousand for the three months ended May 31, 2013.  Cash used in financing activities for the first quarter of fiscal 2015 relates primarily to the repayment of $220 thousand of the note payable to AEG Live, LLC and $50 thousand in deferred financing cost paid.  Cash provided by financing activities in fiscal 2013 relates to the proceeds from the exercise of stock options partially offset by the repayment of notes payable.

Capital Resources

Purchase and Registration Rights Agreements

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

The registration statement filed pursuant to the Registration Rights Agreement has been declared effective by the SEC.  The Company generally now has the right, but not the obligation, over a 36-month period, to direct LPC to periodically purchase the Purchase Shares in specific amounts under certain conditions at the Company’s sole discretion. The purchase price for the Purchase Shares will be the lower of (i) the lowest trading price on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the common stock during the 12 consecutive business days ending on the business day immediately preceding the purchase date.  However, we cannot sell shares under this agreement if our share price is below $1. In no event, however, will the Purchase Shares be sold to LPC below the floor price as defined in the LPC Purchase Agreement.

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

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

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

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

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

During the year ended February 29, 2012, we sold 275,000 shares to Lincoln Park Capital, LLC at an average price of $2.31, and issued 158,632 shares as commitment shares under the Purchase Agreement.  No shares have been sold or issued since that time.

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 obtain financing pursuant to the Lincoln Park Capital agreements described above, or 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.

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, 2014 other than the changes noted below.

417 Fifth Avenue - New York City, New York

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On April 9, 2014, the Company entered into a 130-month lease agreement for exhibition and retail space with 417 Fifth Avenue Real Estate, LLC in New York City, New York. This lease includes approximately 51,000 square feet of space at 417 Fifth Avenue between 37th and 38th streets in the Grand Central district and is near Bryant Park, the Empire State Building and only a few blocks east of Times Square.  Specific information about the exhibitions that will be opening in the space will be released at a later date.  In the first fiscal quarter of fiscal 2015, we purchased a $800 thousand certificate of deposit and pledged it as collateral for this lease.   An additional $900 thousand in collateral is due in the first fiscal quarter of 2016.  The lease commenced in July 2014 and we expect to begin presenting exhibitions in the leased space during the fiscal fourth quarter of 2015.   Total future minimum payments under this lease are approximately $45.8 million.

Off-Balance Sheet Arrangements

We have no off-balance sheet financial arrangements.

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, 2014.

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.

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PART II - OTHER INFORMATION

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

Item 1.Legal Proceedings.

There have been no material changes in the legal proceedings discussed in our Annual Report on Form 10-K for the year ended February 28, 2014.

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, 2014.  During the three months ended May 31, 2014, there were no material changes to our Risk Factors.  You should consider carefully the Risk Factors.  If any of these risks actually occur, our business, financial condition or results of operations would likely suffer.  In that case, the trading price of our common stock could decline, and you may lose all or a part of the money you paid to buy our common stock.

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

Item 6.Exhibits.

See Index to Exhibits on page 34 of this Quarterly Report on Form 10-Q.

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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.

PREMIER EXHIBITIONS, INC.
Dated: July 15, 2014	By: /s/ Michael J. Little
	Michael J. Little, Interim President and Chief Executive Officer and Chief Financial Officer and Chief Operating Officer (Interim Principal Executive Officer and Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit		Filed	Incorporated by Reference
No.	Exhibit Description	Herewith	Form	Exhibit	Filing Date
10.1	First Amendment to Employment Agreement, dated July 10, 2014, by and between the Company and John Norman.	X
31.1	Rule 13a-14(a)/15d-14(a) Certification of Interim President and Chief Executive Officer	X
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	X
32.1	Section 1350 Certifications	X
101.INS	XBRL Instance Document (1)	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X
(1)	Attached as Exhibit 101 to this report are the following Interactive Data Files formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of May 31, 2014 and February 28, 2014; (ii) Condensed Consolidated Statements of Operations for the three months ended May 31, 2014 and 2013; (iii) Condensed Consolidated Statements of Cash Flow for the three months ended May 31, 2014 and 2013; and (iv) Notes to Condensed Consolidated Financial Statements.

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