##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended August 31, 2006
 Commission file number: 000-24452
 PREMIER EXHIBITIONS, INC.
 (Exact name of registrant as specified in its charter)
 Florida
    
    20-1424922(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 3340 Peachtree Road, NE, Suite 2250, Atlanta, GA
    
    30326(Address of principal executive offices)
    
    (Zip Code)
 (404) 842-2600  (Registrants telephone number, including area code)
 þ o
  o o þ
 o þ




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##### Table of Contents



TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    1Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    25PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    25Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    26Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    28Signatures
    
    
    29Index to Exhibits
    
    
    30EX-11.1EX-31.1EX-31.2EX-32.1




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.




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##### Table of Contents



Premier Exhibitions, Inc. and Subsidiaries
Consolidated Balance Sheets
 February 28,
    
    
    August 31,2006
    
    
    2006restated
    
    
    (unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,129,000
    
    
    $
    2,951,000Marketable securities
    
    
    570,000
    
    
    
    515,000Accounts receivable
    
    
    1,585,000
    
    
    
    6,308,000Prepaid expenses and other current assets
    
    
    3,458,000
    
    
    
    4,493,000Total current assets
    
    
    9,742,000
    
    
    
    14,267,000Artifacts owned, at cost
    
    
    4,476,000
    
    
    
    4,476,000Salvors lien
    
    
    1,000
    
    
    
    1,000Property and equipment, net
    
    
    2,033,000
    
    
    
    3,513,000Exhibition licenses, net
    
    
    3,475,000
    
    
    
    3,097,000Deferred income taxes
    
    
    2,504,000
    
    
    
    2,891,000Other assets
    
    
    132,000
    
    
    
    128,000$
    22,363,000
    
    
    $
    28,373,000Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    
    1,038,000
    
    
    
    1,767,000Deferred revenue
    
    
    300,000
    
    
    
    175,000Notes payable
    
    
    1,350,000
    
    
    
    250,000Total current liabilities
    
    
    2,688,000
    
    
    
    2,192,000Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock; $.0001 par value; authorized 40,000,000 shares;
issued and outstanding
26,062,089 and 28,139,603
shares
at February 28, 2006 and August 31, 2006, respectively
    
    
    3,000
    
    
    
    3,000Common stock payable
    
    
    920,000
    
    
    
    261,000Additional paid-in capital
    
    
    27,178,000
    
    
    
    32,189,000Accumulated deficit
    
    
    (8,324,000
    )
    
    
    (5,931,000
    )Accumulated other comprehensive income (loss)
    
    
    (102,000
    )
    
    
    (47,000
    )Treasury stock, at cost; 42,000 shares at August 31, 2006
    
    
    
    
    
    
    (294,000
    )Total shareholders equity
    
    
    19,675,000
    
    
    
    26,181,000$
    22,363,000
    
    
    $
    28,373,000
  2




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##### Table of Contents



Premier Exhibitions, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 Three Months Ended August 31,
    
    Six Months Ended August 31,2005
    
    2006
    
    2005
    
    2006restated
    
    
    
    
    
    restatedRevenue:Exhibition revenues
    
    $
    3,497,000
    
    
    $
    5,887,000
    
    
    $
    5,890,000
    
    
    $
    11,347,000Merchandise and other
    
    
    218,000
    
    
    
    371,000
    
    
    
    310,000
    
    
    
    699,000Sale of coal
    
    
    19,000
    
    
    
    20,000
    
    
    
    66,000
    
    
    
    56,000Total revenue
    
    
    3,734,000
    
    
    
    6,278,000
    
    
    
    6,266,000
    
    
    
    12,102,000Cost of revenue:Exhibition costs
    
    
    627,000
    
    
    
    1,432,000
    
    
    
    1,423,000
    
    
    
    2,537,000Cost of merchandise sold
    
    
    6,000
    
    
    
    19,000
    
    
    
    18,000
    
    
    
    75,000Cost of coal sold
    
    
    1,000
    
    
    
    2,000
    
    
    
    8,000
    
    
    
    6,000Total cost of revenue (exclusive of depreciation and
amortization shown separately below)
    
    
    634,000
    
    
    
    1,453,000
    
    
    
    1,449,000
    
    
    
    2,618,000Gross profit
    
    
    3,100,000
    
    
    
    4,825,000
    
    
    
    4,817,000
    
    
    
    9,484,000Operating expenses:General and administrative
    
    
    1,308,000
    
    
    
    2,260,000
    
    
    
    2,399,000
    
    
    
    4,458,000Depreciation and amortization
    
    
    272,000
    
    
    
    365,000
    
    
    
    363,000
    
    
    
    712,000Litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000Loss on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    84,000
    
    
    
    Total operating expenses
    
    
    1,580,000
    
    
    
    2,625,000
    
    
    
    2,846,000
    
    
    
    5,520,000Income from operations
    
    
    1,520,000
    
    
    
    2,200,000
    
    
    
    1,971,000
    
    
    
    3,964,000Other income and expenses:Interest income
    
    
    
    
    
    
    20,000
    
    
    
    4,000
    
    
    
    52,000Interest expense
    
    
    (34,000
    )
    
    
    (5,000
    )
    
    
    (51,000
    )
    
    
    (39,000
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,000Total other income and expenses
    
    
    (34,000
    )
    
    
    15,000
    
    
    
    (47,000
    )
    
    
    24,000Income before provision for income taxes
    
    
    1,486,000
    
    
    
    2,215,000
    
    
    
    1,924,000
    
    
    
    3,988,000Provision for income taxes
    
    
    
    
    
    
    886,000
    
    
    
    
    
    
    
    1,595,000Net income
    
    $
    1,486,000
    
    
    $
    1,329,000
    
    
    $
    1,924,000
    
    
    $
    2,393,000Net income per share:Basic income per common share
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.08
    
    
    $
    0.09Diluted income per common share
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08Shares used in basic per share calculations
    
    
    23,074,939
    
    
    
    27,372,761
    
    
    
    22,927,113
    
    
    
    26,857,721Shares used in diluted per share calculations
    
    
    25,315,631
    
    
    
    31,155,333
    
    
    
    25,167,805
    
    
    
    30,352,591
 The accompanying notes are
an integral part of the consolidated financial statements. 3




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Premier Exhibitions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended August 31,2005
    
    
    2006restatedCash flows from operating activities:Net income
    
    $
    1,924,000
    
    
    $
    2,393,000Adjustments to reconcile net income to net cash
provided (used) by operating activities:Depreciation and amortization
    
    
    363,000
    
    
    
    712,000Issuance of compensatory stock options
    
    
    
    
    
    
    679,000Issuance of stock for services
    
    
    
    
    
    
    191,000Issuance of warrant for services
    
    
    
    
    
    
    10,000(Increase) decrease in cost of artifacts
    
    
    (1,000
    )
    
    
    Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    198,000
    
    
    
    (4,723,000
    )(Increase) decrease in deferred income taxes
    
    
    181,000
    
    
    
    (387,000
    )(Increase) decrease in prepaid expenses and other current assets
    
    
    (578,000
    )
    
    
    (1,035,000
    )(Increase) decrease in other assets
    
    
    607,000
    
    
    
    4,000Increase (decrease) in deferred revenue
    
    
    (1,000,000
    )
    
    
    (125,000
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    126,000
    
    
    
    729,000Total adjustments
    
    
    (104,000
    )
    
    
    (3,945,000
    )Net cash provided (used) by operating activities
    
    
    1,820,000
    
    
    
    (1,552,000
    )Cash flows used by investing activities:Purchases of property and equipment
    
    
    (683,000
    )
    
    
    (1,814,000
    )Purchase of exhibition licenses
    
    
    (2,082,000
    )
    
    
    Net cash used by investing activities
    
    
    (2,765,000
    )
    
    
    (1,814,000
    )Cash flows from financing activities:Proceeds from notes payable and credit facility
    
    
    2,479,000
    
    
    
    342,000Principal payments on notes payable and credit facility
    
    
    (1,083,000
    )
    
    
    (1,434,000
    )Proceeds from option and warrant exercises
    
    
    64,000
    
    
    
    1,188,000Excess tax benefit on the exercise of employee stock options
    
    
    
    
    
    
    1,982,000Proceeds from sale of common stock
    
    
    500,000
    
    
    
    Net cash provided by financing activities
    
    
    1,960,000
    
    
    
    2,078,000Effects of exchange rate changes on cash and cash equivalents
    
    
    (30,000
    )
    
    
    110,000Net increase (decrease) in cash and cash equivalents
    
    
    985,000
    
    
    
    (1,178,000
    )Cash and cash equivalents at beginning of period
    
    
    1,258,000
    
    
    
    4,129,000Cash and cash equivalents at end of period
    
    $
    2,243,000
    
    
    $
    2,951,000Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    10,000
    
    
    $
    15,000Non-cash investing and financing transactions:Cashless exercise of stock options
    
    $
    
    
    
    $
    294,000
  4




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PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
     2. Earnings Per Share Data
   5




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Three Months Ended August 31,
    
    Six Months Ended August 31,2005
    
    2006
    
    2005
    
    2006Numerator:Net income
    
    $
    1,486,000
    
    
    $
    1,329,000
    
    
    $
    1,924,000
    
    
    $
    2,393,000Denominator:Basic weighted-average shares outstanding
    
    
    23,074,939
    
    
    
    27,372,761
    
    
    
    22,927,113
    
    
    
    26,857,721Effect of dilutive stock options and warrants
    
    
    2,240,692
    
    
    
    3,782,572
    
    
    
    2,240,692
    
    
    
    3,494,870Diluted weighted-average shares outstanding
    
    
    25,315,631
    
    
    
    31,155,333
    
    
    
    25,167,805
    
    
    
    30,352,591Net income per share:Basic
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.08
    
    
    $
    0.09Diluted
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08
 3. Equity Transactions
        6




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4. Legal Proceedings
   Plastination Company v. Premier
Exhibitions, Inc.
   5. Credit Facility
   7




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6. Commitments
     7. Subsequent Events
    8




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9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  Overview
       10




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Titanic Exhibitions
  
    
    St. Louis Science Center, St. Louis, Missouri (November 11, 2005 to April 15,
2006);
    
    Queen Mary, Long Beach, California (December 17, 2005 to September 4, 2006);
    
    OshKosh Public Museum, OshKosh, Wisconsin (February 4 to April 30, 2006);
    
    Science Center of Iowa, Des Moines, Iowa (May 20 to August 20, 2006);
    
    Miami Museum of Science and Planetarium, Miami, Florida (March 25 to October 15,
2006);
    
    The Tropicana Resort and Casino, Las Vegas, Nevada (June 1 to an undetermined
date); and
    
    The Metreon, San Francisco, California (June 10 to January 2007).
  
    
    El Paso Science Museum, El Paso, Texas (September 16 to December 31, 2006);
    
    Cincinnati Museum Center at Union Terminal, Cincinnati, Ohio (November 4 to an
undetermined date);
    
    Foro Polanco, Mexico City, Mexico (October 14 to an undetermined date);
    
    Science Spectrum, Lubbock, Texas (October 5 to an undetermined date); and
    
    Royal BC Museum, Victoria, British Columbia (April 14, 2007 to an undetermined
date).
  Bodies...The Exhibition and Bodies Revealed Exhibitions
   11




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
    
    Bodies...The Exhibition, Museum of Science and Industry, Tampa, Florida (August
18 to February 26, 2006, extended to September 5, 2006);
    
    Bodies...The Exhibition, South Street Seaport, New York, New York (November 19 to
December 31, 2006);
    
    Bodies...The Exhibition, Atlanta Civic Center, Atlanta, Georgia (March 4 to
September 4, 2006);
    
    Bodies Revealed, Mexico City, Mexico (March 11 to September 11, 2006);
    
    Bodies...The Exhibition, Earls Court Exhibition Centre, London, England (April
12 to July 30, 2006); and
    
    Bodies...The Exhibition, The Tropicana Resort and Casino, Las Vegas, Nevada (June
23 to an undetermined date).
  
    
    Bodies...The Exhibition, The Shops at Sunset Place, Miami, Florida (September 22
to an undetermined date);
    
    Bodies...The Exhibition, 800 Pike Street (across from the Washington State
Convention Center), Seattle, Washington (September 30 to an undetermined date); and
    
    Bodies Revealed, Campus De La Salud, Technologico de Monterrey, Monterrey, Mexico
(September 29 to undetermined date).
  Co-Presentation Agreement
   12




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Additional Exhibitions
  Results of Operations
  Three Months Ended August 31,
    
    Six Months Ended August 31,2005
    
    2006
    
    2005
    
    2006Revenue:Exhibition revenues
    
    
    93.7
    %
    
    
    93.8
    %
    
    
    94.0
    %
    
    
    93.8
    %Merchandise and other
    
    
    5.8
    %
    
    
    5.9
    %
    
    
    4.9
    %
    
    
    5.8
    %Sale of coal
    
    
    0.5
    %
    
    
    0.3
    %
    
    
    1.1
    %
    
    
    0.5
    %Total revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue:Exhibition costs
    
    
    16.8
    %
    
    
    22.8
    %
    
    
    22.7
    %
    
    
    21.0
    %Cost of merchandise sold
    
    
    0.2
    %
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    0.6
    %Cost of coal sold
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.0
    %Total cost of revenue (exclusive of depreciation and
amortization shown separately below)
    
    
    17.0
    %
    
    
    23.1
    %
    
    
    23.1
    %
    
    
    21.6
    %Gross profit
    
    
    83.0
    %
    
    
    76.9
    %
    
    
    76.9
    %
    
    
    78.4
    %Operating expenses:General and administrative
    
    
    35.0
    %
    
    
    36.0
    %
    
    
    38.3
    %
    
    
    36.8
    %Depreciation and amortization
    
    
    7.3
    %
    
    
    5.8
    %
    
    
    5.8
    %
    
    
    5.9
    %Litigation settlement
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    2.9
    %Loss on sale of fixed assets
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    1.3
    %
    
    
    0.0
    %Total operating expenses
    
    
    42.3
    %
    
    
    41.8
    %
    
    
    45.4
    %
    
    
    45.6
    %Income from operations
    
    
    40.7
    %
    
    
    35.0
    %
    
    
    31.5
    %
    
    
    32.8
    %Other income and expenses:Interest income
    
    
    0.0
    %
    
    
    0.3
    %
    
    
    0.1
    %
    
    
    0.4
    %Interest expense
    
    
    -0.9
    %
    
    
    -0.1
    %
    
    
    -0.8
    %
    
    
    -0.3
    %Other income
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.1
    %Total other income and expenses
    
    
    -0.9
    %
    
    
    0.2
    %
    
    
    -0.8
    %
    
    
    0.2
    %Income before provision for income taxes
    
    
    39.8
    %
    
    
    35.3
    %
    
    
    30.7
    %
    
    
    33.0
    %Provision (benefit) for income taxes
    
    
    0.0
    %
    
    
    14.1
    %
    
    
    0.0
    %
    
    
    13.2
    %Net income
    
    
    39.8
    %
    
    
    21.2
    %
    
    
    30.7
    %
    
    
    19.8
    %
 13




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The Quarter Ended August 31, 2006 Compared to the Quarter Ended August 31, 2005
       14




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The Six Month Period Ended August 31, 2006 Compared to the Six Month Period Ended August 31,
2005
    15




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16




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Liquidity and Capital Resources
 Cash flows from operating activities
   As of February 28,
    
    As of August 31,2006
    
    2006(unaudited)Working Capital (in thousands)
    
    $
    7,054
    
    
    $
    12,075Current Ratio
    
    
    3.62
    
    
    
    6.51
  Cash flows from investing activities
  17




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Cash flows from financing activities
       18




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Off-Balance Sheet Arrangements
  Critical Accounting Policies
   
    
    Revenue recognition;
    
    Accounts receivables;
    
    Accounting for income taxes;
    
    Legal contingencies;
    
    Property and equipment;
    
    Impairment of long-lived and intangible assets; and
    
    Accounting policy for capitalizing exhibition license costs.
 Revenue Recognition
 Exhibition Revenue.
 
    
    persuasive evidence of an exhibition arrangement with a customer exists;
    
    the exhibit is complete and, in accordance with the terms of the
arrangement, has been delivered;
    
    the exhibition period of the arrangement has begun and/or the customer
can begin its exploitation, exhibition or sale;
    
    the arrangement fee is fixed or determinable; and
    
    collection of the arrangement fee is reasonably assured.
   19




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Audio Tour Revenue.
 Merchandise Revenue.
 Sponsorship Revenue.
 Licensing Revenue.
 Accounts Receivable
  Accounting for Income Taxes
  20




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Legal Contingencies
  Property and Equipment
  Impairment of Long-Lived Assets and Other Intangibles
      21




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Accounting Policy for Capitalizing Exhibition License Costs
     Recent Accounting Pronouncements
  22




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23




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Forward-Looking Statements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Interest Rate Risk
  Foreign Currency Risk
  24




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ITEM 4. CONTROLS AND PROCEDURES
   
 PART II
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
  RMS Titanic, Inc. v. Georgette Alithinos,
International Advantage, Inc. and Renaissance Entertainment, EPE
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
   25




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  1.
    
    Elected Arnie Geller, Stephen Couture, Alan Reed, N. Nick Cretan, and
Douglas Banker to serve as directors until our 2007 Annual Meeting of Stockholders
and until their respective successors are elected and have been qualified or until
their earlier resignation, removal or death.2.
    
    Approved an Amendment to our 2004 Stock Option Plan in order to increase
the authorized number of shares available for issuance by 1,000,000.3.
    
    Ratified the selection of Kempisty & Company, Certified Public Accountants,
P.C. as our independent registered public accounting firm for the fiscal year ending
February 28, 2007.
    Votes in Favor
    
    Votes WithheldArnie Geller
    
    
    21,945,644
    
    
    
    10,900Stephen Couture
    
    
    21,594,070
    
    
    
    362,474Alan Reed
    
    
    21,948,171
    
    
    
    8,373N. Nick Cretan
    
    
    21,933,621
    
    
    
    22,923Douglas Banker
    
    
    21,663,621
    
    
    
    292,923
  Votes in favor
    
    
    10,343,096Votes against
    
    
    365,687Abstentions
    
    
    30,879Broker non-votes
    
    
    11,216,882
  Votes in favor
    
    
    20,288,250Votes against
    
    
    1,667,173Abstentions
    
    
    1,121Broker non-votes
    
    
    0
 26




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##### Table of Contents



ITEM 5. OTHER INFORMATION.
  
 ITEM 6. EXHIBITS.
  27




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##### Table of Contents



SIGNATURES
  PREMIER EXHIBITIONS, INC.Dated: October 10, 2006
    By:
    /s/ Arnie GellerArnie Geller, Presidentand Chief Executive Officer Dated:  October 10, 2006
    By:
    /s/ Stephen CoutureStephen Couture, Vice Presidentand Chief Financial Officer 28




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit
    
    
    
    Location11.1
    
    Statement RE:  Computation of per share earnings
    
    Filed herewith4.1
    
    Amended and Restated 2000 Stock Option Plan
    
    Incorporated byreference fromthe Companys Definitive Proxy Statementfiled on 06-28-06 (Exhibit A)10.1
    
    Note and Agreement dated as of June 27, 2006 between
    
    Incorporated bythe Company and Bank of America, N.A.
    
    reference from theCompanys Current Report on
form 8-K filed on 07-07-06 (Exhibit 99.1)10.2
    
    Settlement Agreement and Mutual Special Release between
    
    Incorporated byThe Company and William Morris Agency dated June 1, 2006
    
    reference from the CompanysQuarterly Report form 10-Q filed On 07-14-06 
(Exhibit 10.2)10.3
    
    Settlement Agreement among the Company, SAM Tour
    
    Incorporated by(USA), Inc., JAM Exhibitions, LLC and Concert
    
    reference from theProductions International dated September 20, 2006
    
    Companys CurrentReport on form 8-Kfiled on 09-21-06(Exhibit 99.1)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of President and
    
    Filed herewithChief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Vice President
    
    Filed herewithand Chief Financial Officer32.1
    
    Section 1350 Certifications.
    
    Filed herewith
 29