##### 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
   PREMIER EXHIBITIONS, INC.  (Exact name of registrant as specified in its charter)
 Florida
    
    20-1424922(State or other jurisdiction of
incorporation or organization)
    
    (IRS Employer Identification No.)
 3340 Peachtree Road, Suite 2250, Atlanta, GA
    
    30326(Address of principal executive offices)
    
    (Zip Code)
 (404) 842-2600(Registrants telephone number, including area code)
 X
  Large accelerated filer ___
    
    Accelerated filer ___
    
    Non-accelerated filer X
 X




---



##### Table of Contents



TABLE OF CONTENTS
  
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    1Item 2.
    
    Managements Discussion and Analysis ofFinancial Condition and Results of Operations
    
    
    9Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    21PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    23Signatures
    
    
    24Index to Exhibits
    
    
    25EX-10.1EX-10.2EX-11.1EX-31.1EX-31.2EX-32.1




---



##### Table of Contents



PART I
 FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.




---



##### Table of Contents



Premier Exhibitions, Inc. and Subsidiaries
Consolidated Balance Sheets
 February 28,
    
    
    May 31,2006
    
    
    2006(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,129,000
    
    
    $
    2,465,000Marketable securities
    
    
    570,000
    
    
    
    528,000Accounts receivable
    
    
    1,585,000
    
    
    
    4,559,000Prepaid expenses and other current assets
    
    
    3,458,000
    
    
    
    4,264,000Total current assets
    
    
    9,742,000
    
    
    
    11,816,000Artifacts owned, at cost
    
    
    4,476,000
    
    
    
    4,476,000Salvors lien
    
    
    1,000
    
    
    
    1,000Salvor-in-possession rights
    
    
    879,000
    
    
    
    879,000Property and equipment, net
    
    
    2,033,000
    
    
    
    2,945,000Exhibition licenses, net
    
    
    3,607,000
    
    
    
    3,435,000Deferred income taxes
    
    
    2,100,000
    
    
    
    1,384,000Other assets
    
    
    132,000
    
    
    
    111,000$
    22,970,000
    
    
    $
    25,047,000Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    
    1,038,000
    
    
    
    1,660,000Deferred revenue
    
    
    300,000
    
    
    
    Notes payable
    
    
    1,350,000
    
    
    
    1,358,000Total current liabilities
    
    
    2,688,000
    
    
    
    3,018,000Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock; $.0001 par value; authorized 40,000,000 shares;issued and outstanding 26,062,089 and 26,778,728 sharesat February 28, 2006 and May 31, 2006, respectively
    
    
    3,000
    
    
    
    3,000Common stock payable
    
    
    920,000
    
    
    
    14,000Additional paid-in capital
    
    
    27,178,000
    
    
    
    28,793,000Accumulated deficit
    
    
    (7,717,000
    )
    
    
    (6,643,000
    )Accumulated other comprehensive income (loss)
    
    
    (102,000
    )
    
    
    (138,000
    )Total shareholders equity
    
    
    20,282,000
    
    
    
    22,029,000$
    22,970,000
    
    
    $
    25,047,000
  2




---



##### Table of Contents



Premier Exhibitions, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 Three Months Ended May 31,2005
    
    
    2006Revenue:Exhibition revenues
    
    $
    2,393,000
    
    
    $
    5,460,000Merchandise and other
    
    
    92,000
    
    
    
    328,000Sale of coal
    
    
    47,000
    
    
    
    36,000Total revenue
    
    
    2,532,000
    
    
    
    5,824,000Cost of revenue:Exhibition costs
    
    
    796,000
    
    
    
    1,105,000Cost of merchandise sold
    
    
    12,000
    
    
    
    56,000Cost of coal sold
    
    
    7,000
    
    
    
    4,000Total cost of revenue
    
    
    815,000
    
    
    
    1,165,000Gross profit
    
    
    1,717,000
    
    
    
    4,659,000Operating expenses:General and administrative
    
    
    1,091,000
    
    
    
    2,198,000Depreciation and amortization
    
    
    74,000
    
    
    
    330,000Litigation settlement
    
    
    
    
    
    
    350,000Loss on sale of fixed assets
    
    
    84,000
    
    
    
    Total operating expenses
    
    
    1,249,000
    
    
    
    2,878,000Income from operations
    
    
    468,000
    
    
    
    1,781,000Other income and expenses:Interest income
    
    
    4,000
    
    
    
    32,000Interest expense
    
    
    (17,000
    )
    
    
    (34,000
    )Other income
    
    
    
    
    
    
    11,000Total other income and expenses
    
    
    (13,000
    )
    
    
    9,000Income before provision for income taxes
    
    
    455,000
    
    
    
    1,790,000Provision (benefit) for income taxes
    
    
    
    
    
    
    716,000Net income
    
    $
    455,000
    
    
    $
    1,074,000Net income per share:Basic income per common share
    
    $
    0.02
    
    
    $
    0.04Diluted income per common share
    
    $
    0.02
    
    
    $
    0.04Shares used in basic per share calculations
    
    
    22,299,939
    
    
    
    26,344,856Shares used in diluted per share calculations
    
    
    24,949,939
    
    
    
    30,465,215
  3




---



##### Table of Contents



Premier Exhibitions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended May 31,2005
    
    
    2006Cash flows from operating activities:Net income
    
    $
    455,000
    
    
    $
    1,074,000Adjustments to reconcile net income to net cash 
provided (used) by
operating activities:Depreciation and amortization
    
    
    74,000
    
    
    
    330,000Issuance of compensatory stock options
    
    
    
    
    
    
    412,000(Increase) decrease in cost of artifacts
    
    
    (1,000
    )
    
    
    Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    352,000
    
    
    
    (2,974,000
    )(Increase) decrease in deferred income taxes
    
    
    
    
    
    
    716,000(Increase) decrease in prepaid expenses and other current assets
    
    
    99,000
    
    
    
    (806,000
    )(Increase) decrease in other assets
    
    
    605,000
    
    
    
    21,000Increase (decrease) in deferred revenue
    
    
    (425,000
    )
    
    
    (300,000
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    (377,000
    )
    
    
    622,000Total adjustments
    
    
    327,000
    
    
    
    (1,979,000
    )Net cash provided (used) by operating activities
    
    
    782,000
    
    
    
    (905,000
    )Cash flows used by investing activities:Purchases of property and equipment
    
    
    (303,000
    )
    
    
    (1,070,000
    )Purchase of exhibition licenses
    
    
    (2,016,000
    )
    
    
    Net cash used by investing activities
    
    
    (2,319,000
    )
    
    
    (1,070,000
    )Cash flows from financing activities:Proceeds from notes payable
    
    
    2,425,000
    
    
    
    342,000Principal payments on notes payable
    
    
    
    
    
    
    (333,000
    )Proceeds from option and warrant exercises
    
    
    64,000
    
    
    
    296,000Proceeds from sale of common stock
    
    
    500,000
    
    
    
    Net cash provided by financing activities
    
    
    2,989,000
    
    
    
    305,000Effects of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    6,000Net increase (decrease) in cash and cash equivalents
    
    
    1,452,000
    
    
    
    (1,670,000
    )Cash and cash equivalents at beginning of period
    
    
    1,258,000
    
    
    
    4,129,000Cash and cash equivalents at end of period
    
    $
    2,710,000
    
    
    $
    2,465,000Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    11,000
    
    
    $
    10,000


4



---



##### Table of Contents



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




---



##### Table of Contents



Premier Exhibitions, Inc. and Subsidiaries
Computation of Net Income Per Share
 Three Months Ended May 31,2005
    
    
    2006Numerator:Net income
    
    $
    455,000
    
    
    $
    1,074,000Denominator:Basic weighted-average shares outstanding
    
    
    22,299,939
    
    
    
    26,344,856Effect of dilutive stock options & warrants
    
    
    2,650,000
    
    
    
    4,120,359Diluted weighted-average shares outstanding
    
    
    24,949,939
    
    
    
    30,465,215Net income per share:Basic
    
    $
    0.02
    
    
    $
    0.04Diluted
    
    $
    0.02
    
    
    $
    0.04
 3. Equity Transactions
     4. Legal Proceedings
  6




---



##### Table of Contents



Plastination Company v. Premier Exhibitions, Inc.
  5. Commitments
     7




---



##### Table of Contents



6. Subsequent Events
    8




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  9




---



##### Table of Contents



Overview
       RMS 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);
 10




---



##### Table of Contents




    
    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); and
    
    The Metreon, San Francisco, California (June 10 to
January 2007).
  
    
    The Tropicana Resort and Casino, Las Vegas, Nevada (June 1 to an undetermined date).
  Bodies...The Exhibition and Bodies Revealed Exhibitions
    
    
    Bodies...The Exhibition, Museum of Science and Industry, Tampa, Florida (August 18, 2005 to February 26, 2006, extended to September 5, 2006);
    
    Bodies...The Exhibition, South Street Seaport, New York, New York (November 19, 2005 to December 2006);
 11




---



##### Table of Contents




    
    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); and
    
    Bodies...The Exhibition, Earls Court Exhibition Centre, London, England (April
12 to July 30, 2006).
  
    
    Bodies...The Exhibition, The Tropicana Resort and Casino, Las Vegas, Nevada (June
23, 2006 to an undetermined date).
  Co-Production Agreements
  Additional Exhibitions
  12




---



##### Table of Contents



Results of Operations
 The Quarter Ended May 31, 2006 Compared to the Quarter Ended May 31, 2005
      13




---



##### Table of Contents



Liquidity and Capital Resources
    14




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Critical Accounting Policies
  15




---



##### Table of Contents




    
    Revenue recognition;
    
    Accounts receivables;
    
    Accounting for income taxes;
    
    Legal contingencies;
    
    Property and equipment; and
    
    Impairment of long-lived and intangible assets.
 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.
    16




---



##### Table of Contents



Audio Tour Revenue
 Merchandise Revenue
 Sponsorship Revenue
 Licensing Revenue
 Accounts Receivable
  Accounting for Income Taxes
   Legal Contingencies
  17




---



##### Table of Contents



Property and Equipment
  Impairment of Long-Lived Assets and Other Intangibles
      Recent Accounting Pronouncements
  18




---



##### Table of Contents



19




---



##### Table of Contents



Forward-Looking Statements
  20




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Interest Rate Risk
  Foreign Currency Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
   21




---



##### Table of Contents



PART II
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
 Exhibit Human: The Wonders Within, Inc. v. RMS Titanic, Inc.
 Premier Exhibitions, Inc. v. Exhibit Human: The
Wonders Within, Inc.
 Stefano Arts v. Exhibitions
International, LLC, et.al.
 Plastination Company v. Premier Exhibitions, Inc.
   22




---



##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
   
 ITEM 5. OTHER INFORMATION.
   
 ITEM 6. EXHIBITS.
  23




---



##### Table of Contents



SIGNATURES
  PREMIER EXHIBITIONS, INC.Dated: July 13, 2006
    
    By:
    
    /s/ Arnie GellerArnie Geller, Presidentand Chief Executive OfficerDated: July 13, 2006
    
    By:
    
    /s/ Stephen CoutureStephen Couture, Vice Presidentand Chief Financial Officer
 24




---



##### Table of Contents



INDEX TO EXHIBITS
 Exhibit
    
    
    
    Location10.1
    
    Third Amendment dated May 1, 2006 to that
Certain Tower Place Office Lease dated March 27, 2000
    
    Filed herewith10.2
    
    Settlement Agreement and Mutual Special Release
between Premier Exhibitions, Inc. and
William Morris Agency dated June 1, 2006
    
    Filed herewith11.1
    
    Statement re: computation of per share earnings
    
    Filed herewith31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Vice President
And Chief Financial Officer
    
    Filed herewith32.1
    
    Section 1350 Certifications.
    
    Filed herewith
 25