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 November 30, 2004
[ ] 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.
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(Exact name of registrant as specified in its charter)
Florida 20-1424922
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(State or other jurisdiction of (IRS Employer Identification No.
incorporation or organization)
3340 Peachtree Road, Suite 2250, Atlanta, GA 30326
- -------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 842-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
The number of shares outstanding of the registrant's common stock on
January 12, 2005 was 22,299,939.
PAGE
NUMBER
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosure About Market Risk 9
Item 4. Controls and Procedures
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits 12
Signatures 13
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The consolidated financial statements of Premier Exhibitions, Inc. and
subsidiaries (collectively, the "Company"), included herein were prepared,
without audit, pursuant to rules and regulations of the Securities and Exchange
Commission. Because certain information and notes normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America were condensed or omitted pursuant to such rules
and regulations, these financial statements should be read in conjunction with
the financial statements and notes thereto included in the audited financial
statements of the Company as included in the Company's Form 10-K for the year
ended February 29, 2004.
1
PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
=========================================================================================================
November 30, February 29,
2004 2004
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 837,000 $ 547,000
Accounts receivable 1,077,000 353,000
Prepaid and Refundable income taxes 221,000 221,000
Prepaid expenses and other current assets 1,566,000 141,000
------------ ------------
TOTAL CURRENT ASSETS 3,701,000 1,262,000
Artifacts owned, at cost 4,476,000 4,479,000
Salvor's lien 1,000 1,000
Salvor-in-Possession Rights 747,000 --
Property and Equipment, net of accumulated depreciation
of $2,062,000 and $1,754,000, respectively 1,394,000 747,000
Other Assets 738,000 764,000
------------ ------------
TOTAL ASSETS $ 11,057,000 $ 7,253,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,970,000 $ 1,249,000
Current maturities of long term liabilities 100,000 --
------------ ------------
TOTAL CURRENT LIABILITIES 2,070,000 1,249,000
Long Term Liabilities:
Note payable (less current maturities) 350,000 --
------------ ------------
TOTAL LONG TERM LIABILITIES 350,000 --
TOTAL LIABILITIES 2,420,000 1,249,000
Commitments and Contingencies
Stockholders' Equity:
Common stock - $.0001 par value; authorized 30,000,000 shares, issued and
outstanding 22,299,939 and 18,550,047 shares,
respectively 2,000 2,000
Additional paid-in capital 20,305,000 17,192,000
Accumulated comprehensive income 18,000 --
Accumulated deficit (11,688,000) (11,190,000)
------------ ------------
STOCKHOLDERS' EQUITY 8,637,000 6,004,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,057,000 $ 7,253,000
============ ============
See Notes to Consolidated Financial Statements
2
PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
==================================================================================================================
THREE-MONTH THREE-MONTH NINE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIODENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Revenue:
Exhibitions and related
merchandise sales $ 2,346,000 $ 631,000 $ 5,045,000 $2,006,000
Merchandise and other 79,000 84,000 131,000 244,000
Sale of coal 7,000 20,000 28,000 62,000
- ------------------------------------------------------------------------------------------------------------------
Total revenue 2,432,000 735,000 5,204,000 2,312,000
- ------------------------------------------------------------------------------------------------------------------
Expenses:
Cost of coal sold 2,000 2,000 7,000 5,000
Cost of merchandise sold 9,000 38,000 24,000 126,000
Exhibition costs 792,000 -- 2,040,000 --
General and administrative 1,243,000 686,000 3,294,000 2,381,000
Depreciation and amortization 132,000 80,000 308,000 229,000
- ------------------------------------------------------------------------------------------------------------------
Total expenses 2,178,000 806,000 5,673,000 2,741,000
- ------------------------------------------------------------------------------------------------------------------
Profit (Loss) from operations 254,000 (71,000) (469,000) (429,000)
Interest income -- 2,000 1,000 9,000
Interest expense (14,000) -- (33,000) --
- ------------------------------------------------------------------------------------------------------------------
Profit (Loss) from operations
before provision
for income taxes 240,000 (69,000) (501,000) (420,000)
Provision for income taxes -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 240,000 $ (69,000) $ (501,000) $ (420,000)
Basic and diluted Loss
Per common shares: $ .01 $ .00 $ (.02) $ (.02)
Weighted-average number
of common shares outstanding 22,299,939 19,125,047 20,818,898 18,903,047
- ------------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 240,000 $ (69,000) $ (501,000) $ (420,000)
Other comprehensive operations:
Foreign currency translation 18,000 -- 18,000 --
- ------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 258,000 $ (69,000) $ (483,000) $ (420,000)
==================================================================================================================
See Notes to Consolidated Financial Statements
3
PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
==================================================================================================================
NINE-MONTH PERIOD ENDED NOVEMBER 30, 2004 2003
----------- -----------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income (loss) $ (501,000) $ (420,000)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 308,000 229,000
Reduction in cost of artifacts 3,000 5,000
Issuance of stock for interest expense 6,000
Issuance of stock in exchange for option 247,000 --
Issuance of stock for services 277,000 108,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (724,000) (26,000)
Decrease in prepaid and refundable income taxes -- 290,000
Decrease in prepaid expenses
and other current assets 27,000 15,000
Decrease(increase) in other assets (118,000) (437,000)
Increase (decrease)in accounts payable and
accrued liabilities 721,000 (10,000)
Increase (decrease) in deferred revenue -- (590,000)
----------- -----------
TOTAL ADJUSTMENTS 747,000 (415,000)
----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 246,000 (835,000)
------------ -----------
Cash flows used in investing activities:
Purchases of property and equipment (955,000) (20,000)
Investment in Salvor-in-Possession Rights (747,000)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (1,702,000) (20,000)
Cash flows provided from financing activities:
Proceeds from Note payable 500,000 --
Payment on Note payable (50,000) --
Proceeds from issuance of common stock 1,278,000 --
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES 1,728,000 --
------------ -----------
Effect of exchange rate changes on cash 18,000 --
------------ -----------
Net (decrease) increase in cash 290,000 (855,000)
Cash and cash equivalents at beginning of period 547,000 1,945,000
----------- -----------
Cash and cash equivalents at end of period $ 837,000 $ 1,090,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the nine-month period for income taxes $ - $ -
=========== ===========
See Notes to Consolidated Financial Statements
4
PREMIER EXHIBITIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - The accompanying consolidated financial information as of November 30,
2004 and 2003 is unaudited and, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments
considered necessary for a fair presentation have been included.
Operating results for any interim period are not necessarily
indicative of the results for any other interim period or for an
entire year.
Note 2 - Basic loss per common share ("EPS") is computed as net loss divided by
the weighted-average number of common shares outstanding for the
period. Diluted EPS representing the potential dilution that could
occur from common shares issuable through stock-based compensation
including stock options, restricted stock awards, warrants and other
convertible securities is not presented for the three and nine month
periods ended November 30, 2004 and 2003 since there was no dilutive
effect of potential common shares or the dilutive effect is not
material.
Note 3 - On May 17, 2004, the Company appeared before the United States
District Court for the Eastern District of Virginia for a pre-trial
hearing to address issues in preparation for an Interim Salvage Award
trial. At that hearing, the Company informed the court that the United
States government has declined the Company's proposal to transfer the
Company's Salvor-in-Possession rights to the government. The Company
confirmed that it intends to retain its Salvor-in-Possession rights in
order to exclusively recover and preserve artifacts from the wreck
site of the Titanic. As a result of that hearing, on July 2, 2004, the
Court rendered an opinion and order that stated the Court will not
recognize the 1993 Proces-Verbal, which granted to the Company all
artifacts recovered from the wreck site during the 1987 expedition,
and that the Company will not be permitted to present evidence at the
Interim Salvage Award trial for the purpose of arguing that it should
be awarded title to the Titanic artifacts under the law of finds. In
part, the Court found that the law of finds does not apply to the
Company because it is the Salvor-in-Possession of the Titanic wreck
and wreck site. The Company has appealed the July 2, 2004 Court Order,
which appeal is now pending in the United States Court of Appeals for
the Fourth Circuit. The Court granted a stay of proceedings on August
2, 2004 which will delay the Interim Salvage Award trial.
Note 4 - The United States Department of State and the National Oceanic and
Atmospheric Administration of the United States Department of Commerce
("NOAA") are working together to implement an International Treaty
with the British, French and Canadian governments which standing alone
will not have any effect on the Company's Salvor-in-Possession rights.
In November 2003, Britain signed the Treaty. In June 2004, the United
States signed the Treaty. The Company's Salvor-in-Possession rights
are administered by the U.S. Federal District Court for the Eastern
District of Virginia as authorized by the Constitution. The Treaty
would become effective in the United States if Congress passes
implementing legislation.
Note 5 - During the quarter ended August 31 2004, the Company issued 900,000
shares of common stock to two officers in exchange for options these
officers held on 1,800,000 shares of common stock at exercise prices
ranging from $1.15 to $1.64 per share for terms up to ten years. This
exchange was required by its investment banker to permit the sale of
the Company's securities in a private placement. The common stock
issued for this exchange vests over twenty-four months beginning in
August 2004. The value of this exchange was $1,179,000, or $1.31 per
share, the market price of the common stock at the time of the
transaction.
Note 6 - On August 18, 2004, the Company had an initial closing on a private
placement in which $1,514,000 of Units were sold, representing
1,469,892 shares of Common Stock and Warrants to purchase an aggregate
5
of 440,968 shares of Common Stock. The maximum amount that can be
funded under this placement (including future closings) is
approximately $2,760,000. The net proceeds of this initial funding
were $1,278,000 after fees, expenses and other costs. Warrants to
purchase 293,978 shares of the Company's common stock were also issued
to its investment banking firm that arranged this equity placement.
All warrants issued in this offering are exercisable over five years
at an exercise price of $1.50 per share. Within this funding, the
Company is obligated to file a registration statement under the
Securities Act within 45 days of the final closing which was extended
to October 24, 2004. In addition, a cash penalty of 1% per month of
the gross proceeds is assessed and payable to holder of these
securities for each month the registration fails to become effective
after 120 days of the final closing or the termination of the
offering.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion provides information to assist in the understanding of
the Company's financial condition and results of operations, and should be read
in conjunction with the financial statements and related notes appearing
elsewhere herein.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED NOVEMBER 30, 2004 VERSUS THE QUARTER ENDED NOVEMBER 30,
2003
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2004 VERSUS THE NINE MONTHS ENDED
NOVEMBER 30, 2003
During the third quarter and the first nine months of its 2005 fiscal year (the
"2005 fiscal year"), the Company's revenues increased approximately 231% from
$735,000 to $2,432,000 and 125% from $2,312,000 to $5,204,000, respectively, as
compared to the third quarter and the first nine months of its 2004 fiscal year
(the "2004 fiscal year"). These changes were principally attributable to
increases in exhibition and related merchandise sales of approximately 272% from
$631,000 to $2,346,000 during the third quarter and approximately 152% from
$2,006,000 to $5,045,000 for the first nine months of the 2005 fiscal year.
These significant increases in revenues for these respective periods reflect the
direct management by the Company of its Titanic Exhibitions that began in the
first quarter of this fiscal year.
Merchandise and other revenue decreased approximately 6% from $84,000 to
$79,000, during the third quarter of the 2005 fiscal year as compared to the
third quarter of the 2004 fiscal year, and 47%, to $131,000 from $244,000 during
the first nine months of the 2005 fiscal year as compared to the first nine
months of the 2004 fiscal year. These decreases are attributed to lower sales
this fiscal year by the Company of Titanic merchandise sold separately from the
exhibitions.
The Company's sale of coal decreased to $7,000 from $20,000, or approximately
65% during the third quarter of the 2005 fiscal year as compared to the third
quarter of the 2004 fiscal year, and 55% from $62,000 to $28,000,during the
first nine months of the 2005 fiscal year as compared to the first nine months
of the 2004 fiscal year. This decrease is attributed to lower exhibit sales of
coal sold separately. Coal related jewelry is included in general merchandise
sales.
The cost of sales of coal and merchandise sold decreased 72% to $11,000 from
$40,000 in the third quarter of the 2005 fiscal year as compared to the third
quarter of the 2004 fiscal year, and 76% from $131,000 to $31,000,during the
first nine months of the 2005 fiscal year as compared to the first nine months
of the 2004 fiscal year. These decreases correspond to lower revenues in each
period.
The Company incurred exhibition costs of $792,000 and $2,040,000, respectively,
for the third quarter and first nine months of the 2005 fiscal year as the
Company now conducts its own exhibitions with museum venues and thereby incurs
costs for advertising, marketing, promotion as well as installation and
de-installation of exhibitry and artifacts. There were no similar costs incurred
in the prior respective periods as those costs were borne by the Company's
licensee who conducted the Titanic exhibitions.
6
The Company's general and administrative expenses increased to $1,243,000 from
$686,000, or approximately 81% during the third quarter of the 2005 fiscal year
as compared to the third quarter of the 2004 fiscal year, and increased to
$3,294,000 from $2,381,000, or approximately 38% during the first nine months of
the 2005 fiscal year as compared to the first nine months of the 2004 fiscal
year. During the 2005 fiscal year, management hired personnel to organize,
administer, and manage its own exhibitions.
For the three months ended November 30, 2004, personnel expenses increased
approximately 108%, or $269,000, to $519,000 as a consequence of this hiring
initiative as compared to the same year ago quarter. Similarly, personnel costs
have increased 76%, or $565,000, to $1,305,000 in the nine-month period ended
November 30, 2004 as compared to the year ago nine-month period. There were
increases in expenses for legal, insurance, conservation and occupancy for the
nine month period ended November 30, 2004 that represented the largest portion
of the remaining increase in general and administrative expenses.
The Company's depreciation and amortization expenses increased $52,000 or 65%
from $80,000 to $132,000, and $79,000, or 35% from $229,000 to $308,000 during
the third quarter and first nine months of the 2005 fiscal year, respectively,
as compared to the corresponding periods of the 2004 fiscal year. These
increases primarily reflect the acquisition of fixed assets during the 2005
fiscal year that includes the five sets of exhibition exhibitry acquired from
the Company's former licensee, and additional investments made in fixed assets
for its exhibitions.
The Company realized a profit of $254,000 from operations during the third
quarter of the 2005 fiscal year as compared to a loss of $71,000 in the same
period in fiscal year 2004. Management attributes this profit to higher revenues
in the current quarter by conducting its own exhibitions, despite increases in
operating and general and administrative expenses. During the first nine months
of the 2005 fiscal year the Company experienced a loss from operations of
$469,000, as compared to a loss of $429,000 in the corresponding period of the
2004 fiscal year. This increase of $48,000, or 11%, in operating loss is
attributed to the loss incurred in the first quarter of this fiscal year as the
Company began its transition from a licensor of Titanic artifacts to an operator
of the Titanic exhibition tours. The last two quarters of the Company's 2005
fiscal year have benefited from profitable operation of these exhibitions.
There was no interest income for the third quarter and $1,000 for the nine
months of the Company's 2005 fiscal year as compared to $2,000 and $9,000 for
the corresponding year ago periods. This decrease in interest income is a
consequence of lower cash balances being maintained by the Company and the
minimal interest earned on the Company's bank accounts. The Company incurred
interest expense of $14,000 and $33,000 for the third quarter and first nine
months of the 2005 fiscal year. The interest expense is for a shareholder loan
of $500,000 that was made in anticipation of the Company's capital needs as it
transitioned to the management of exhibitions. There was not any interest
expense incurred in the same year ago periods as there were no debt.
A net profit of $240,000 was realized for the three months ended November 30,
2004 as compared to a net loss of $69,000 in the same prior year period. During
the first nine months of the 2005 fiscal year the Company experienced a net loss
of $501,000, as compared to a loss of $420,000 in the corresponding period of
the 2004 fiscal year. Basic income (loss) per common share for the three months
and nine months ended November 30, 2004 were $0.01 and ($0.02), respectively,
and the weighted average shares outstanding were 22,299,939 and 20,818,898,
respectively. The losses per share were .00 and .02 for the same respective
periods in fiscal year 2004.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $246,000 for the nine months ended
November 30, 2004 as compared to net cash used in operating activities of
$415,000 in the same prior year period ended November 30, 2003. This increase in
cash provided in operating activities for the current year is primarily
attributed to an increase in accounts payable and the issuance of non-cash
consideration for expenses and services.
For the nine months ended November 30, 2004, the total cash used in investing
activities was $1,702,000 which included acquisition of property and equipment
for $955,000 and an investment by the Company in Salvor-in-Possession rights for
the expenditures in its seventh expedition to the Titanic wreck site during
7
August and September of 2004. A significant portion of the property and
equipment acquisition was $600,000 expended for the exhibitry purchased from the
Company's former licensee to allow the Company to conduct its own Titanic
exhibitions. In the prior year, the Company's expenditure of $20,000 of
investing activity was for furniture and equipment.
For the nine months ended November 30, 2004, cash provided by financing
activities was $1,753,000 that included a private placement of securities and a
loan provided by two shareholders. On August 18, 2004, the Company had a closing
in a private placement in which $1,514,000 of Units were sold, representing
1,469,892 shares of Common Stock, and Warrants to purchase an aggregate of
440,968 shares of Common Stock. The net proceeds of this funding were $1,278,000
after fees, expenses and other costs. Warrants were also issued to an investment
banker who arranged this equity placement, for a right to purchase 293,978
shares of the Company's Common Stock. All warrants issued in this undertaking
are exercisable over a five term at an exercise price of $1.50 per share. Within
this funding, the Company was obligated to file a registration statement under
the Securities Act within 45 days of the final closing that was extended to
October 24, 2004. This equity financing was used to supplement the company's
working capital needs in its transition to manage and administer its exhibition
business. In the prior year period, the Company did not have any financing
activities.
The Company's net working capital and stockholders' equity were $1,631,000 and
$8,637,000, respectively at November 30, 2004 as compared to $13,000 and
$6,004,000, respectively, at February 29, 2004. The Company's working capital
ratio was 1.8 at November 30, 2004 an improvement as compared to 1.0 at February
29, 2004.
The Company recently conducted its seventh research and recovery expedition to
the Titanic wreck site and was successful in rescuing over 75 important historic
artifacts. The Company plans to continue its recovery work by planning future
expeditions to the Titanic wreck-site as it intends to maintain its sole and
exclusive rights as salvor- in-possession as conferred upon it by the U.S.
Federal District Court for the Eastern District of Virginia. Expedition 2004
departed from Halifax, Nova Scotia, Canada on August 25, 2004 and for the first
time allowed the Company to rely exclusively on a deep ocean Remotely Operated
Vehicle that permitted the expedition to utilize round-the-clock underwater
operations. The mission objectives for Expedition 2004, in addition to
recovering important historical objects and identifying artifacts for future
recovery, were to inspect the wreck-site for alleged harm caused by previous
visitors and, if necessary, the Company would establish guidelines for future
visitation. During the second and third quarters of fiscal year 2005, the
Company spent $747,000 on this expedition that it accounted for as a cost of its
Salvor-in-Possession Rights. A previous ruling from the U.S. Federal District
Court for the Eastern District of Virginia, which has jurisdiction over the
Company's salvor activities, declared that the Company's Salvor-in-Possession
Right was its principal asset.
Although no date has been set for an expedition, management continues to plan to
undertake a recovery operation to the RMS CARPATHIA to recover objects. As the
Company owns this sunken vessel, it is the intent of management to sell and/or
exhibit any items recovered.
The Company completed its equity funding in which it raised approximately $1.2
million after costs and expenses. Management expects that it will require
additional outside funding to further implement its plans to conduct future
exhibitions for both Titanic and other newly developed exhibitions. Previously,
the Company relied upon third parties to conduct exhibitions under a licensing
arrangement. There can be no assurances that further outside financing will be
available when needed upon reasonable terms and as timely as management may
require for the proper conduct of these and other future endeavors. If such
further financing is not available, it could have a detrimental impact on the
Company and its businesses.
The exhibition tour agreement license period with Clear Channel Exhibits Inc.
ended on April 25, 2004. Prior to the end of that license agreement, the Company
purchased for $600,000, payable over two years, all Titanic exhibitry owned by
CCE, which included exhibitry for five complete exhibitions of Titanic
artifacts.
8
The Company began its own Titanic Exhibitions in May 2004. Since then the
Company has successfully conducted exhibitions in Philadelphia, Pennsylvania,
Salt Lake City, Utah, and Manchester, England. The Company's Titanic Exhibitions
in Omaha, Nebraska and Shanghai, China ended in September and October 2004,
respectively. In addition, the Company began its new prototype "Bodies Revealed"
Exhibition in Blackpool, England during August 2004 that ended in October 2004.
A second exhibition utilizing this same format will open early the next fiscal
year.
In order to protect its Salvor-in-Possession status and to prevent third-parties
from salvaging the Titanic wreck and wreck site, or interfering with the
Company's rights and ability to salvage the wreck and wreck site, the Company
may have to commence judicial proceedings against third-parties. Such
proceedings could be expensive and time-consuming. Additionally, the Company, in
order to maintain its Salvor-in-Possession status, needs to, among other things,
maintain a reasonable presence over the wreck. The Company may be required to
incur the costs for future expeditions so as to maintain its
Salvor-in-Possession status. The Company's ability to undertake future
expeditions may be dependent upon the availability of financing. No assurances
can be given that any financing will be available on satisfactory terms.
Except for historical information contained herein, this Quarterly Report on
Form 10-Q contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 which involve certain risks and
uncertainties including, without limitation, the Company's needs, as discussed
above, to obtain additional financing in order to achieve its objectives and
plans. The Company's actual results or outcomes may differ materially from those
anticipated. Important facts that the Company believes might cause such
differences are discussed in the cautionary statements accompanying the
forward-looking statements as well as in the risk factors discussed in the
Company's Annual Report on Form 10-K and below. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward looking terminology such as "may", "expect", "will",
"anticipate" "estimate", or "continue" or the negative thereof or other
variations thereon or comparable terminology. The Company does not have any
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by
law. Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements contained in this Report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation of the Company or any other such
person that the objectives and plans of the Company will be achieved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the Company's financial
position due to adverse changes in financial market prices and rates. Market
risk exposure is primarily a result of fluctuations in interest rates and
foreign currency exchange rates. The Company does not hold or issue financial
instruments for trading purposes.
Interest Rate Risk
The Company's has exposure to market rate risk for changes in interest rates
related to our debt financing. Interest income on our cash, cash equivalents,
and short-term investments is subject to interest rate fluctuations, but the
Company believes that the impact of these fluctuations does not have a material
effect on its financial position due to the short-term nature of any such
investments. The Company does have long-term debt. Our interest income and
interest expense are most sensitive to the general level of interest rates in
the United States. Sensitivity analysis is used to measure our interest rate
risk. For the three and nine months ending November 30, 2004, a 100 basis-point
adverse change in interest rates would not have had a material effect on our
consolidated financial position, earnings, or cash flows.
9
Foreign Currency Risk
The Company from time to time conducts business activities outside of the United
States, and thereby is exposed to the risk of currency fluctuations between the
United States dollar and certain foreign currency. If the value of the United
States dollar decreases in relation to the foreign currency, the Company's
potential revenue from exhibition and merchandising activities outside of the
United States will be adversely affected. During the quarter ended November 30,
2004, the Company did not incur any material losses because of changes in the
exchange rates with respect to foreign currencies. Although the Company's
financial arrangements with foreign parties may be based upon foreign
currencies, the Company has sought, and will continue to seek, to make its
financial commitments and understandings based upon the United States Dollar so
as to minimize the adverse potential effect of currency fluctuations.
We have assumed risks from operations because we are now directly conducting
exhibitions of Titanic Artifacts.
Exhibition Risk
The Company terminated its tour agreement with CCE on April 25, 2004 and is now
directly conducting exhibitions of Titanic artifacts with museums and other
parties. The Company will no longer receive guaranteed payments from CCE for
exhibition of Titanic artifacts. As a result of its direct operations, the
Company has incurred substantial expenses for hiring personnel, purchasing
exhibitry, transporting artifacts and exhibitry, administrative expense and
other costs. The revenues that the Company receives from its exhibitions, if
insufficient to offset the Company's overhead, can be expected to have a
material adverse effect on the Company's financial position, results of
operations and prospects.
ITEM 4. CONTROLS AND PROCEDURES
a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including
the Chief Executive Officer and Chief Financial Officer, we have evaluated the
disclosure controls and procedures as of the end of the period covered by this
quarterly report. Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer conclude that the disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of
1934) effectively ensure that information required to be disclosed in our
filings and submissions under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
b) Changes in internal control over financial reporting.
There have been no changes in the Corporation's internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our most
recently completed fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Corporation's internal control over
financial reporting.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On May 17, 2004, the Company appeared before the United States District Court
for the Eastern District of Virginia for a pre-trial hearing to address issues
in preparation for an Interim Salvage Award trial. At that hearing, the Company
informed the court that the United States government has declined the Company's
proposal to transfer the Company's Salvor-in-Possession rights to the
government. The Company confirmed that it intends to retain its
Salvor-in-Possession rights in order to exclusively recover and preserve
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artifacts from the wreck site of the Titanic. As a result of that hearing, on
July 2, 2004, the Court rendered an opinion and order that stated the Court will
not recognize the 1993 Proces-Verbal, which granted to the Company all artifacts
recovered from the wreck site during the 1987 expedition, and that the Company
will not be permitted to present evidence at the Interim Salvage Award trial for
the purpose of arguing that it should be awarded title to the Titanic artifacts
under the law of finds. In part, the Court found that the law of finds does not
apply to the Company because it is the Salvor-in-Possession of the Titanic wreck
and wreck site. The Company has appealed the July 2, 2004 Court Order, which
appeal is now pending in the United States Court of Appeals for the Fourth
Circuit. The Court granted a stay of proceedings on August 2, 2004, which will
delay the Interim Salvage Award trial.
The United States Department of State and the National Oceanic and Atmospheric
Administration of the United States Department of Commerce ("NOAA") are working
together to implement an International Treaty with the British, French and
Canadian governments which standing alone will not have any effect on the
Company's Salvor-in-Possession rights. In November 2003, Britain signed the
Treaty. In June 2004, the United States signed the Treaty. The Company's
Salvor-in-Possession rights are administered by the U.S. Federal District Court
for the Eastern District of Virginia as authorized by the Constitution. The
Treaty would become effective in the United States if Congress passes
implementing legislation.
On August 3, 2004, the Company filed a motion with the United States District
Court for the District of Connecticut against a disgruntled former officer,
director, and lawyer of the Company. In this motion, the Company alleges that
this former officer, director and lawyer secretly spearheaded litigation against
the Company, in direct violation of a release and settlement agreement he
entered into with the Company in January 2000. If the Company prevails on this
motion, it intends to seek substantial damages from the defendant. The final
outcome of this matter cannot now be determined.
There have been no other material changes in the legal proceedings discussed in
the Company's Annual Report on Form 10-K for the year ended February 29, 2004.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Shareholders of the Company was held on
December 10, 2004. Messrs. Arnie Geller, Gerald Couture, Doug Banker and Nick
Cretan were elected directors of the Company until their successors are duly
elected and qualified. The results of the election were as follows:
Voted For Abstained
Arnie Geller 12,276,146 326,261
Gerald Couture 12,276,148 326,261
Doug Banker 12,283,908 318,500
Nick Cretan 12,283,909 318,500
Kempisty and Company, Certified Public Accountants, P.C. was ratified as the
Company's independent certified public accountants for fiscal year 2005 with
12,284,809 shares of common stock voted in favor, 316,501 shares of common stock
voted against, 2,000 abstained.
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ITEM 5. OTHER INFORMATION.
(a) None. (b) None.
ITEM 6. EXHIBITS
31(a) Certification of CEO pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934.
31(b) Certification of CFO pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934.
32(a) Certification of CEO pursuant to 18 U.S.C Section 1350.
32(b) Certification of CFO pursuant to 18 U.S.C Section 1350.
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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.
(Registrant)
Dated: January 21, 2005 By: /s/ Arnie Geller
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Arnie Geller, President