Summary of PREMIER EXHIBITIONS, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This quarterly report contains forward-looking statements and information relating to subsidiaries and us. The words "believes," "expects," "may," "should," "projects," "anticipates," "forecasts," "intends," or similar terminology identify forward-looking statements. These statements are based on the beliefs of management as well as assumptions made using information currently available to management. Because these statements reflect current views of management concerning future events, they involve risks, uncertainties and assumptions; therefore, actual results may differ significantly from the results discussed in the forward-looking statements. When we use the terms "Premier," "PRXI," "Company," "we," "us" and "our," we mean Premier Exhibitions, Inc., a Florida corporation, and its subsidiaries.
You are urged to read the risk factors described in our Annual Report on Form 10-K for our fiscal year ended February 28, 2009, 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, 2009.
Overview
We are in the business of developing and touring museum quality exhibitions. We generate income from our exhibitions primarily through ticket sales, third-party licensing, sponsorships and merchandise sales.
We presently operate and/or present and promote or have plans to operate and/or present and promote four different types of exhibitions.
Titanic
The R.M.S. Titanic has continued to captivate the thoughts and imaginations of millions of people throughout the world since 1912 when she struck an iceberg and sank in the North Atlantic Ocean on her maiden voyage. Through our explorations, we have obtained and are in possession of the largest collection of artifacts, data, information, images, and cultural materials associated with the shipwreck which we present to the public through our exhibitions. Our Titanic exhibitions have been presented in more than 60 venues throughout the world, including in the U.S., Canada, Germany, Norway, France, Greece, Japan, Switzerland, Chile, Argentina, China, Mexico, Hungary, South Korea and England. We have the capabilities to present eight concurrent Titanic exhibitions.
Bodies
We presently have the rights to multiple human anatomy sets, each of which contains a collection of whole human body specimens plus single human organs and body parts. We acquired the rights to produce these exhibitions through separate exhibition agreements. These specimens are assembled into anatomy-based exhibitions featuring preserved human bodies, organs and body parts to offer the public an opportunity to view the intricacies and complexities of the human body. The exhibitions include displays of dissected human bodies which are permanently preserved through a process called polymer preservation, also known as plastination. In essence, the bodies are drained of all fat and fluids, which are replaced with polymers such as silicone rubber, epoxy and polyester. This preserves the flesh and maintains its natural look. Skin from the bodies is removed, or partially removed, to reveal musculoskeletal, nervous, circulatory and reproductive or digestive systems. The full body specimens are complimented by presentation cases of related individual organs and body parts, both healthy and diseased, that provide a detailed look into the elements that comprise each system.

Table of Contents

Dialog in the Dark
On February 25, 2008, we expanded our exhibition portfolio beyond those related to the Titanic and human anatomy when we entered into a long-term license agreement to present an exhibition series entitled "Dialog in the Dark." Our "Dialog in the Dark" exhibitions are intended to provide visitors with an opportunity to experience the paradox of learning to "see" without the use of sight. Visitors are escorted through a series of galleries immersed in total darkness and challenged to perform tasks without the use of vision. Our first "Dialog in the Dark" exhibition opened in August 2008.
Star Trek
On June 4, 2008, we entered into a long-term license agreement to present, promote and conduct "Star Trek, The Exhibition" exhibitions. This multi-city, touring exhibition contains the world's most comprehensive collection of authentic Star Trek ships, sets, costumes and props from five television series and ten films over the last 40 years. "Star Trek, the Exhibition" fully immerses the visitor in the legendary journey that has become synonymous with scientific innovation and ingenuity. Highlights of the experience include: the opportunity to ride through a Star Trek adventure in full-motion, Star Trek-based flight simulators; the ability for visitors to sit on a full-size U.S.S. Enterprise bridge from the original television series; and detailed re-creations of original sets.
Merchandise
We also earn revenue from the sale of merchandise, such as apparel, catalogs, posters and Titanic-related jewelry (which utilizes coal we have recovered from the shipwreck). In addition, we also publish exhibition catalogs, which are sold at our exhibition gift shops.
Information Regarding Exhibitions Outside the United States Our exhibitions regularly tour outside the United States. Approximately 16% and 13% of our revenues in the quarter ended May 31, 2009 and 2008, respectively, resulted from exhibition activities outside the United States. Because our financial arrangements with our foreign vendors have historically been based upon foreign currencies, we are exposed to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which our exhibitions are touring. See "Quantitative and Qualitative Disclosures About Market Risk" in this report for more information.
The Quarter Ended May 31, 2009 Compared to the Quarter Ended May 31, 2008 Revenue. During the quarter ended May 31, 2009, our revenue decreased by $4.3 million or 28.2% to $10.9 million. Our exhibition revenue decrease of $3.4 million or 25.7% to $9.8 million is primarily attributable to the general decline in economic conditions, which resulted in a decrease in total attendance at our exhibition venues. Attendance decreased to 1,188,219 for the three months ended May 31, 2009 compared to 1,520,046 for the same three month period ended May 31, 2008. Total days of operation, a non-financial measurement, which is the total number of days in which our venues were in operations, increased to 1,624 for the three months ended May 31, 2009 compared to 1,598 for the same three months ended May 31, 2008.
Merchandise and other revenue decreased approximately $0.9 million or 44.9% to $1.1 million during the quarter ended May 31, 2009 as compared to the quarter ended May 31, 2008, is primarily the result of the disposition of the live music aspect of our merchandising business, in which we recognized an additional $1.3 million of merchandise revenue during the quarter last year.
Cost of revenue. Our total cost of revenue of $5.1 million, which consists of exhibition costs, including marketing expenses, and cost of merchandise sold, decreased by $2.2 million or 29.9% for our first quarter ended May 31, 2009 as compared to our first quarter ended May 31, 2008.
Our exhibition costs decreased by $1.4 million or 23.1% to $4.9 million for our first quarter this year as compared to the same quarter in fiscal year 2009. Our exhibition costs as a percentage of revenue was 47% for the three months ending May 31, 2009 compared to 48.1% for the same period last year.

Table of Contents

Marketing expense decreased by $1.3 million or 82.9% to $0.3 million during our first quarter ended May 31, 2009 as compared to our first quarter ended May 31, 2008.
Cost of merchandise sold decreased by $0.7 million or 74.1% to $0.3 million for the quarter ended May 31, 2009 as compared to the quarter ended May 31, 2008, is primarily a result of the disposition of the live music aspect of our merchandising business.
Gross profit. During the quarter ended May 31, 2009, our gross profit decreased $2.1 million or 26.6% to $5.8 million as compared to the quarter ended May 31, 2008. The decrease in our gross profit is primarily attributable to the general decline in market conditions resulting in decreased revenue, which prompted the storage of several human anatomy sets. Gross profit margin was 53.0% and 51.9% for the quarters ended May 31, 2009 and 2008, respectively.
Operating expenses. Our general and administrative expenses of $7.3 million decreased $0.7 million or approximately 8.7% during the quarter ended May 31, 2009 as compared to the quarter ended May 31, 2008. The decrease in general and administrative expenses is primarily attributable to reduced compensation expense of 35.6%, reduced travel and office expense of 89.9% and reduced stock compensation expense of 83.8%. These reductions were partially offset by licensing fees for non-operating human anatomy sets and the marketing function provided by an outside vendor totaling $1.1 million.
Our depreciation and amortization expenses increased $0.3 million or 25.6% to $1.6 million during the quarter ended May 31, 2009 as compared to the quarter ended May 31, 2008, which is primarily attributable to an increase in property and equipment located at the Luxor in Las Vegas.
In the first quarter, management assessed the amount of human anatomical displays it has to exhibit and compared that amount to the estimated addressable market for such exhibitions. In management's judgment, the company currently maintains an excess capacity of human anatomical displays, and we intend to reduce the amount of capacity by negotiating a return of certain specimens. Consequently, those specimens have no future estimated cash flows associated with them and the previously capitalized and yet unamortized costs of such specimens are no longer considered recoverable; therefore, we recorded an impairment charge of $1.9 million to reduce the carrying value of the finite lived intangibles related to those specimens to zero. Because there was goodwill associated with the original acquisition of those specimen sets, we recorded an impairment charge of $2.6 million to reduce the carrying value of goodwill to zero.
Loss from operations. We realized a loss from operations of $7.7 million during the quarter ended May 31, 2009 as compared to a loss from operations of $1.4 million in the same prior year period.
Loss before benefit from income taxes. We realized a net loss before provision for income taxes of $7.7 million and $1.3 million for the quarters ended May 31, 2009 and 2008, respectively.
Benefit from income taxes. We recorded an income tax benefit of $1.9 million for the three months ended May 31, 2009 at an effective rate of 25% versus a tax benefit of $0.4 million at an effective rate of 32% for the same period in the prior year. The decrease in the effective rate is primarily due to the impairment charge of $4.5 million that is not a tax deductible item; accordingly, it is not considered in the tax benefit calculation. Not considering the non-deductibility of the impairment charge, our effective tax rate would have been 37%.
Net loss. We realized a net loss of $5.8 million during the quarter ended May 31, 2009 as compared to a net loss of $0.9 million in the prior year period.
Loss per share. Basic and diluted loss per common share for the quarters ended May 31, 2009 and 2008 was $(0.20) and $(0.03), respectively. The basic and diluted weighted average shares outstanding for each of the quarters ended May 31, 2009 and 2008 were 29,696,954 and 30,041,614, respectively.

Table of Contents