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Premier Exhibitions, Inc. (NASDAQ:PRXI)

F4Q 2014 Earnings Conference Call

May 27, 2014 5:30 p.m. ET

Executives

Samuel Weiser – President and CEO

Michael Little – CFO and COO

Analysts

Brian Murphy – Merriman Capital

Andrew Shapiro – Lawndale Capital Management

Tom Olander – Dougherty & Co.

Operator

Good afternoon and welcome to the Premier Exhibitions' Fourth Quarter and Fiscal Year 2014 Earnings Conference Call.

Today's call is being recorded.

I would like to remind everyone that the company will be making forward-looking statements on today's call and these forward-looking statements are based on current expectations and are subject to a number of risks and uncertainties. Although Premier Exhibitions believes that assumptions underlying these forward-looking statements contained herein are reasonable, any such assumptions could prove to be inaccurate. Therefore, Premier Exhibitions can provide no assurance that any of the forward-looking statements will prove to be accurate.

In light of the significant uncertainties and risks inherent in the forward-looking statements included in this call, such information should not be regarded as a representation by Premier Exhibitions that its objective or plans will be achieved.

Included in these uncertainties and risks are, among other things, fluctuations in operating results, general economic conditions, uncertainties regarding financing alternatives and competition. Because they are forward-looking, such statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Premier Exhibitions' most recent annual and quarterly reports filed with the Securities and Exchange Commission, including under the heading entitled Risk Factors. Premier Exhibitions does not undertake an obligation to update publicly any of its forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

And now I'd like to turn the conference over to Mr. Sam Weiser, Chief Executive Officer and President of Premier Exhibitions. Please go ahead, sir.

Samuel Weiser

Thank you, operator, and good afternoon everyone. Before we begin, I would also like to remind you that in today's call we will discuss adjusted EBITDA, a non-GAAP financial measure that our company uses as a key metric for evaluating performance internally. Adjusted EBITDA also provides investors with additional information to facilitate the comparison of past and present performance. And an explanation and reconciliation table to the nearest GAAP measure can be found in our earnings release.

As we conducted a business update call just last month regarding several initiatives that we are pursuing, along with the expected benefits, I'm going to limit my opening remarks today and then turn things over to Michael Little, our Chief Financial Officer and Chief Operating Officer. He will walk you through our performance for the three-month period.

Overall, the company remains revenue challenged. We had a strong year in fiscal 2013 as a result of increased attendance at our Titanic exhibition in the 100th anniversary year of the ship's tragic voyage. The results for that year were dampened somewhat by the shutdown of our Seaport location as a result of Hurricane Sandy. However, the ongoing combination of diminished demand for museums for Titanic, ongoing decline in demand for Bodies, and the loss of our New York location had a significant negative effect on fiscal 2014 results.

Recognizing the declining demand for Titanic and the impact of the Seaport shutdown, our fiscal 2014 plan was focused on reopening a semi-permanent location in New York, opening a new location in Buena Park to drive revenue and margins, and building a strong pipeline of new content opportunities that would sustain revenue growth for the future. Unfortunately, we were unable to secure our New York location and we opened Buena Park later than anticipated.

Although we were successful in developing a strong pipeline of new content opportunities, some of which we've discussed and some we will announce shortly, the combination of failing to open in New York and the ongoing decline of demand for Titanic and Bodies had a significant negative impact on our fiscal 2014 results.

Although fiscal 2014 was disappointing in terms of operational results, over the past two years, we have built a stronger infrastructure capable of growing the revenue base and delivering the types of quality exhibitions Premier is known for over the next two years. We have done this without significantly increasing our overhead year over year. We are close to securing the growth capital we need to make the strategic vision we have developed for Premier, a reality with a firm belief that we will expand both our revenues and our earnings in fiscal 2015 and beyond.

I now want to turn my attention to the strategic alternatives process that we are pursuing in conjunction with JPMorgan. The process is ongoing, and JPMorgan has completed its initial valuation work and is focusing on the next phase of the process. Although we have nothing definitive to announce at the present time and no timetable for when we would be making any announcement, the process is proceeding. While JPMorgan is evaluating the full scope of strategic alternatives, they have no ability to assess the collectible value of the Titanic collection owned by the company. As we announced on an earlier call, we have engaged independent appraisers to complete new appraisals of the entire collection, including all the artifacts and intellectual property, including our intellectual property obtained and developed subsequent to the last appraisal in 2009.

Management continues to work to develop a plan for monetizing the Titanic assets. This includes evaluating all options from securing a single buyer to supporting a public/private initiative to take control of the assets. Although no formal plan is in place for pursuing a monetization transaction, management remains committed to finding a solution that will maximize the value of this collection for the company's shareholders.

As I discussed earlier, we have made progress in expanding the breadth of our exhibition offerings and new partner relationships. Our artifact-based exhibition detailing the life and death of the City of Pompeii recently moved from the Franklin Institute in Philadelphia to the California Science Center in Los Angeles. In Philadelphia, the exhibit attracted over 211,000 visitors in five-and-a-half months, exceeding our expectations and those of the Franklin. Pompeii will now be on exhibit in Los Angeles for approximately eight months, after which it will move to an engagement at the Pacific Science Center in Seattle.

In late March, we debuted Extreme Dinosaurs in Atlantic Station in Atlanta in partnership with Dinosaurs on Earth. This is an educational and entertaining exhibition that features life-like and life-sized animatronic dinosaurs alongside full-scale skeletons and real and replica fossils.

And last month, we began touring a new exhibition titled The Discovery of King Tut, which is now in Kansas City, at Union Station. After Kansas City, Tut will travel to San Diego for another six-month engagement. We anticipate that this exhibit will tour North America over the next five years. The Discovery of King Tut was produced by our partner on this endeavor, Semmel Concerts GmBH.

In addition to these -- to the management of these three exhibitions, we have an additional three exhibitions in development with more on the way. We also continue to seek out existing exhibition content we can acquire that can be marketed through our existing distribution channels. We are also in discussions with entities that can assist Premier in opening new distribution channels in managing tours for our existing content into markets we are unable to tap.

Overall, the expansion of our content portfolio (inaudible) after the opening of our New York location, our primary focus for the current fiscal year and beyond.

Before I turn the call over to Michael, let me conclude by saying that everyone on the executive team is [resolved] (ph) strengthening our organization by attaining growth capital, successfully opening our New York location, and continuing to bring new content to market. We have spent considerable time and effort over the past few years to change the perception of Premier within the museum community, and the venues we've secured to host the limited Pompeii exhibition is a testament to the success of that effort.

Equally important, we have spent considerable effort to increase our cooperation with content providers to expand their reach through initiatives of Premier on new projects. I am certain these efforts to both improve relations with the museum community while also fostering relationships with content providers will in the long run pay dividends for Premier shareholders.

I will now turn the call over to Michael. After Michael concludes his remarks, we will be happy to take your questions. Mike?

Michael Little

Thank you, Sam, and hello everyone. I'm going to start off by reviewing our overall performance for the fourth quarter and delve more deeply into a full P&L discussion.

For the three-month period ending February 28, total revenues fell 7% to $6.2 million from $6.7 million in the fiscal fourth quarter of last year. Although exhibition revenues rose more than 11%, this was not significant to offset a significant decline in merchandise revenue. This merchandise decrease was a result of prior-year AEI merchandise sales relating to King Tut and Cleopatra properties, which are inactive this fiscal year.

Total cost of revenue held steady at $3.9 million compared to the same period last year, as higher exhibition costs were offset by lower cost of merchandise as we sold fewer items. Gross profits were $2.3 million compared to $2.8 million last year, which on a percentage basis reflects a decline of 15.8%. Gross margin was 37.6%, which compared unfavorably with 41.6% margin we achieved last year as we are unable to reduce expenses to the level that matched the revenue decline.

Adjusted EBITDA decreased by $0.8 million to a negative $612,000 compared to a positive of $158,000 in the year-ago period. Please review the reconciliation tables at the end of this earnings release to see how we arrived at these calculations.

Finally, net loss after non-controlling interests fell to $1.4 million from a net loss of $1.1 million or a loss of $0.03 on a share base of 49 million shares, which compared to a loss of $0.03 on a share base of $48.7 million last year.

So with that overview, let's delve into our results in a greater detail.

Exhibition revenue increased by $511,000 to $5.1 million. We had a total of 17 exhibits presented in the fourth quarter, which compared to 16 a year-ago period. And this resulted in a 128 additional operating days. Of the 17 exhibits presented in the quarter, four were rented to promoters, three of which were located in Europe, generating $700,000 in non-refundable licensing fee for the quarter. Last year we had one exhibition overseas which generated $298,000 of non-refundable licensing revenue.

This exhibition model that we have adopted in the overseas markets has allowed us to explore these new foreign markets, with promoters/partners on a very limited risk basis. Since we do not record attendance from these rented exhibits, our attendance metric statistic reflects a 25% decline to 344,000 from 459,000, driven by the increase in the rented exhibitions in these international markets.

Average daily attendance at the semi-permanent and non-rented partner exhibitions fell 11%, 357 people compared to 399 given the smaller markets we are currently operating in compared to the earlier periods. Average ticket price increased 1.3% to $14.81.

Specifically, our semi-permanent exhibitions in Buena Park on line increased operating days by 36% to 607 from 448 and total attendance rose 26% from 135,000 to 170,000. However, average daily attendance fell 7% to 281 people and average ticket price fell 11% to $20.04.

Merchandise revenues decreased 48% to 981,000. The majority of this decrease was previous year retail and total revenue from our formerly managed King Tut and Cleopatra exhibitions. As we have previously stated, those exhibitions were closed last year and we have not replaced those revenue streams.

Merchandise per ticket sold per semi-permanent and partner exhibitions fell 10.9% to $2.70 from $3.03 and fell 5.8% to $3.40 from $3.61 per ticket sold at the semi-permanent exhibitions due to weaker demand for our product.

In the fourth quarter, the management fee related through the ADI transactions fell to 145,000 from 208,000 in the same period last year.

Turning to G&A, our corporate expense fell by $280,000 to $2.9 million, compared to $3.2 million in the year-ago period. And this was primarily due to the lower compensation expenses.

Depreciation and amortization expense rose by $206,000 due to the fixed asset purchases related to the Buena Park venue and the Pompeii exhibitions.

Finally, loss from operations was $1.4 million in the fourth quarter compared to a loss from operations of $1.1 million in the period year ago. Interest expense was $39,000 for the quarter on our notes payable, mainly related to the ADI transaction, which compares against the $138,000 in interest expense in the same period last year.

In terms of the balance sheet, cash and marketable securities were $3.8 million on February 28, 2004, which is about 600,000 below our third quarter level of $4.4 million. Part of the variance -- part of the variance is relating to an increase in prepaid expenses, but we also are cognizant [ph] of our cash burn rate and the importance of having sufficient capital on hand to execute our initiatives.

With that, operator, let's open the lines for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]

And we will go to our first question from Brian Murphy with Merriman Capital.

Samuel Weiser

Hey, Brian. How are you?

Brian Murphy – Merriman Capital

Good. Thanks. Thanks for taking my question.

Sam, you may have covered this in your opening remarks, and if so I apologize for missing it, but can you tell us if we're still on track for the September open for the New York location?

Samuel Weiser

Yeah, I think that it's probably a little too early to say for sure. We're just wrapping up the bid process. I don't think it'll be significantly delayed if we don't get it open by the end of September, but I think, you know, we're still shooting for mid to the end of September, but it may get delayed another 15 days. But I think we're, you know, we're working on the timeline right now. We'll have more information shortly.

Brian Murphy – Merriman Capital

Got it. And can you remind us what the average attendance per day for that location is, what do you expect?

Samuel Weiser

I'd have to look through -- I don't know that I have that off the top of my head. I think that, you know, the one thing I will point out is that September is a notoriously slow month in New York. So, our goal really to open in September was to kind of, you know, get ahead of the holiday traffic that tends to materialize in New York starting around the middle of October. So I don't think that, you know, if we're delaying till the end of September or early October, but it won’t have a significant impact.

I do believe that, you know, our revenue projections on an annual basis are roughly for about 540,000 people in New York. So, while we don't really straight-line it, we’d be looking at months like September, January, February as slower months. You can kind of take an average of that by taking roughly 270,000 per exhibition because there'll be two, and then kind of dividing it by 12 is kind of roughly where we are in terms of average daily attendance.

Brian Murphy – Merriman Capital

Perfect. Thank you.

Samuel Weiser

Brian, just so you know, give Mike and I a call, we can kind of walk you through the specifics if you're interested.

Brian Murphy – Merriman Capital

Okay, yeah, I would appreciate that.

Also, Mike, could you give us the headcount at year-end?

Michael Little

Headcount from corporate?

Brian Murphy – Merriman Capital

Yes.

Michael Little

Yeah. The number is around 51 from the corporate staffing.

Brian Murphy – Merriman Capital

Okay. And what are your expectations? Where do you think that'll end up next year?

Michael Little

We continue to monitor our headcount and certainly look at those expenses. So, what we see even without adding on these new initiatives getting New York online, we see that number hold pretty consistent around that mid-50 -- 50, 55-employee mark.

Brian Murphy – Merriman Capital

Okay. Does that imply that the part-time headcount sort of on a relative basis is going to go up?

Michael Little

Well, yes. So, yeah. The part-time headcount is not part of that 55 type of number. But yes, as we bring on line New York, New York will have -- will be employing more part-time headcount to run and manage that property out there.

Brian Murphy – Merriman Capital

Okay. And also, Mike, you may have covered this, but if you did I missed it. Can you just talk about the merchandise gross margin in the fourth quarter? That's sort of the lowest number that I've seen in a while. Anything in particular going on there and sort of any expectations for that to bounce back?

Michael Little

Yeah. A year and a half ago, yeah, about a year and a half ago, we acquired a company called Exhibit Merchandising. They had the rights to the AEI King Tut and Cleopatra show. So we had -- we saw, as you look at last year results, we had a tick-up from merchandise top line and gross margin perspective from that. Those properties had been returned back to Egypt, as we've previously disclosed, so that revenue source kind of dried up.

Now one of the things, as we're looking at these new content properties, we're also looking at the merchandise rights and are [indiscernible] merchandise for these new properties. So, as we move forward in time, we expect that revenue -- that merchandise revenue trend to turn around and start heading back up.

Brian Murphy – Merriman Capital

Got it. Thanks very much. That's all for me.

Samuel Weiser

Thanks, Brian.

Operator

And we'll move now to Andrew Shapiro with Lawndale Capital Management.

Andrew Shapiro – Lawndale Capital Management

Hi, thanks. I have a few questions, and I'll back out into the queue, but please come back to me --

Samuel Weiser

Hey, Andrew, can you speak up a little bit?

Andrew Shapiro – Lawndale Capital Management

Sure. Is that better?

Samuel Weiser

That's better. Thank you.

Andrew Shapiro – Lawndale Capital Management

Okay. Sorry.

Samuel Weiser

No problem.

Andrew Shapiro – Lawndale Capital Management

I have a few questions and then I'll back into the queue, but I have some more, so please come back to me.

If I could just get some clarifications on the strategic process, the appraisals and the JPMorgans to the extent that you can answer, the thing I wanted to understand is, are the 1987 expedition artifacts considered part of Premier's collection and being appraised in the new appraisal?

Samuel Weiser

Yes.

Andrew Shapiro – Lawndale Capital Management

And am I correct, in the 2009 appraisal, which was around $110 million, the 87 expedition artifacts were not included?

Samuel Weiser

That's correct.

Andrew Shapiro – Lawndale Capital Management

Okay. And what else was not included -- obviously, I think, if you could just kind of summarize the items subsequent to the 2009 appraisal or things that weren't included in the 2009 appraisal that are now being included in this appraisal?

Samuel Weiser

Yeah, that would include all the 3D and 2D imagery that was shot in the 2010 expedition. It includes all of the derivative product that's being developed using all of that imagery. It's the, you know, the value of that, that's a metric information that's being used for 3D analysis of the site and also the mapping that was done in order to create the Titanic mapping project. So there's a fair amount of new intellectual property that's been developed and that was obtained subsequent to the last appraisal.

Andrew Shapiro – Lawndale Capital Management

Plus the 87 exhibition. And is there -- the way this process works, is there any, I guess, reason that you feel that values of this kind of artifacts over the last I guess it would be five years, would have deteriorated or depreciated or declined?

Samuel Weiser

Honestly, that's why we're having them appraised. We don't have, you know, we don't have an opinion on that.

One of the things I want to clarify for you is, is that the reason that the 2009 appraisal only updated the appraisal on the post-87 artifacts was because those were the only artifacts that were in question [ph] in the court proceedings in Virginia with respect to the in specie award, because the company already titles in the 87 artifacts.

In 2007 the artifact appraisal that came to the $189 million figure included both the 87 and the post-87 artifacts, plus all the related intellectual property that had to do with the provenance of the artifacts themselves.

With respect to whether or not the collection has appreciated or depreciated, we don't have an opinion on that. We've obviously monitored what's gone on at Aldridge [ph] and what's gone on with the violin and some of the other artifacts that have come to market from people who took artifacts when they were rescued from the ship. So, you know, you can infer what you want, we're going to look at this thing as an entire collection and wait till the appraisal comes in. And when it does, we'll let you know.

Andrew Shapiro – Lawndale Capital Management

Okay. And then with respect to JPMorgan, you updated us in April, I know it's not been long, but they're providing you, I would think, periodic updates in things. And I guess based on those periodic updates, their last update was the current market values undervalued and do not adequately reflect the non-Titanic assets. Has anything changed since April in their view?

Samuel Weiser

I think that, you know, the comments that we made in April was based upon their valuation work. You know, I think that, you know, the process is ongoing but there haven't been any substantial changes in our position with respect to the value of the company versus the current market value of the stock.

Andrew Shapiro – Lawndale Capital Management

Okay. Do you still plan to have two exhibitions in New York and project attendance at that location that may more than double what you were getting at the Seaport?

Samuel Weiser

Yeah.

Andrew Shapiro – Lawndale Capital Management

And at the Seaport, what were the two exhibitions you had, and do you -- you have not, have you determined what exhibitions will go into New York?

Samuel Weiser

We have. One of them is still -- we're still finalizing the details on -- so we haven't announced it, but in the Seaport, we had the Bodies exhibition for the first three and a half years exclusively there. But tenants obviously started to decline over time, but I think in the last year we still hit roughly 250,000 to 270,000 people in the last full year. What we did was, somewhere in the middle of 2009 we made the decision to open up a dialogue in the dark exhibition that was New York centric in the same space and reduced the amount of square footage that we allocated to the Bodies exhibition.

Unfortunately, Dialogue was not profitable, so it was actually a drag on the earnings that we had from the Seaport, because it lost money, while Bodies made money at the Seaport.

Overall, the Seaport was a profitable location, and we do believe that we're in a better location, and that ultimately we will hopefully have better properties and more, you know, inspiring properties for the markets that -- the tourist market and the local market in New York, that we will be able to do at least the numbers we project and hopefully much more.

Andrew Shapiro – Lawndale Capital Management

So if I could just probe or clarify here, one of the exhibitions you're planning for New York, you haven't signed up and choose not to announce, but was the second exhibition announceable in terms of your plans or not?

Samuel Weiser

You know, for purposes of marketing and for PR, we've decided not to announce anything until we're ready to announce something, and then we'll announce both. And I think that, you know, New York is a very noisy, crowded entertainment market, and we're being very judicious in how we approach it to make sure that what we do and how we open in New York is absolutely proper in terms of maximizing our visibility in that space.

Andrew Shapiro – Lawndale Capital Management

Okay. I have more questions, so please come back to me. But I'll step back and let others ask.

Samuel Weiser

No problem. Thanks, Andrew. We'll be back to you shortly.

Operator

We move now to Ethan Starr [ph], a private investor.

Samuel Weiser

Good afternoon, Ethan [ph]. How are you?

Unidentified Participant

Good, thanks. How are you?

Samuel Weiser

Not too bad. Thanks.

Unidentified Participant

Okay. You know, I'm sorry to hear Dialogue in the Dark was not profitable. I went to it and I actually enjoyed it.

Samuel Weiser

Well, you and me both. I thought it was an absolutely moving experience. Unfortunately, the cost and the throughput just didn't justify keeping it open. And we tried to find a solution to keep the license agreement active, but we just couldn't -- we couldn't seem to find a way to execute against it profitably. But you're right, it was an amazing experience.

Unidentified Participant

Okay. Is the build-out for the New York location already starting in process?

Samuel Weiser

The demolition work is complete. We're moving forward. This is all in a very compressed timeframe, but the bids are starting to come in. We've ordered some of the heavier equipment that we need in terms of vertical transportation and things like that. But it's probably another week or two away before we secure all of the various trades so that we can figure out an exact timeline and actually an exact cost for opening the exhibitions.

Unidentified Participant

Okay. In last month's update call there was a mention that a company might possibly be looking to borrow some money. What's happening with that?

Samuel Weiser

We're still engaged in discussions. We're getting closer to securing the growth capital that we need and we consider the growth capital to be essential in order for us to meet our objectives in terms of revenue growth and diversification, revenue diversification. So hopefully we'll have something new to announce very shortly on that.

Unidentified Participant

Okay. Do you think -- could you fund the work in New York on a build-out without additional growth capital?

Samuel Weiser

Probably, but it will, you know, it would put the company at risk, and that's not something we're interested in doing. I think that we have sufficient resources and allowances to get New York open without the growth capital, but I think that in order to get the quality of the exhibitions in the space that we want and all the other things that we need in order to support that we need to growth capital.

Unidentified Participant

Okay. Thanks. I look forward to the next quarter.

Samuel Weiser

All right.

Operator

We go next to Terrence Chandra [ph] with -- private investor.

Samuel Weiser

Good afternoon.

Unidentified Participant

Hi, Sam and Mike. Hi.

Samuel Weiser

Hello.

Unidentified Participant

I've got a question with respect to the appraisers that have been hired [indiscernible] I'm curious to know if you have any update with respect to the appraisal process. Last phone call you mentioned that it would take between 60 to 90 -- 60 to -- 90 to 120 days. And how the appraisal numbers on that tie to -- tie back to JPMorgan Chase. Is their PM [ph] by any chance waiting for this appraisal number or if these two independent processes and you still --

Samuel Weiser

As I said in my comments, JPMorgan is an investment bank. They're not equipped to appraise or evaluate the collectible value of the artifacts. So what we've done is engaged in a process of getting the artifacts re-appraised. That process has started. We are still on that 90 to 120-day timeframe. And as soon as we have something to announce, we will.

You know, obviously, JPMorgan utilized traditional methods to look at the company and its intrinsic value. That process has concluded, but that process does not include the collectible value of the artifacts. So, obviously they are, as you say, independent.

Unidentified Participant

Is that a number you are willing to share on this conference call, with respect to what their valuation of the company minus the assets worth?

Samuel Weiser

No, we're not in the position to do that.

Unidentified Participant

Okay. One other question. I know the company recently announced that [indiscernible] from SSA. I'm curious to know what is being done with respect to that. Any upgrade would be great.

Samuel Weiser

The -- all I can say is that we're aware of it. We've made it public. We don't intend to be delisted, so the board is considering the appropriate actions to ensure that that doesn't occur.

Unidentified Participant

Is there any possible routes that you're planning to take and is there something you could share on this call?

Samuel Weiser

Again, not at this time.

Unidentified Participant

Okay. Thank you, Sam.

Samuel Weiser

No problem.

Operator

[Operator Instructions]

And we will return now to Andrew Shapiro.

Andrew Shapiro – Lawndale Capital Management

Hi. On the --

Samuel Weiser

Welcome back.

Andrew Shapiro – Lawndale Capital Management

-- on the last call we talked about you were seeking $10 million of debt financing and you gave a range of which the terms might cost the company, which were, I guess, were quite high, maybe even attractive to some, although we never got a phone call about it. But one of the things that was raised on that call and I raised with you was to -- that $10 million was to satisfy a wish list of about five, maybe six separate and somewhat mutually exclusive growth activities, and that if this debt was going to be recoursed to the corporation and the corporation only has so much in assets to provide collateral security to a lender, that prospectively or potentially you could get a lower cost of capital by going for, let's say, $5 million of that and allocating that $5 million to, you know, two or three of your highest priority of those six on the wish list, getting you closer to profitability for where you would go and borrow the second $5 million, potentially from a less riskier pedestal and thus a lower cost than the full 10 would cost. What was -- you were going to take those thoughts to the board and also to your lending advisers. Can you provide a little bit more feedback on this suggested scenario that I provided?

Samuel Weiser

Well, I want to clarify a few things. There is a detailed "wish list," but all of our strategic initiatives and all of our growth initiatives are inextricably intertwined. There are some that are more high priority than others. For example, our digital platform is a significant need because most of our marketing efforts are gearing towards, especially in New York, a very digital campaign. Without the adequate platform to support, that probably will be less effective. So I would, you know, want to clarify that these are not mutually exclusive or independent elements.

What we have done is gone back, and Mike and I have, you know, evaluated the sequencing of the demand for capital to get most of these initiatives achieved over the next 12 to 15 months. And we have had discussions with our lending advisers and with our board. And we have addressed the issues.

Again, I can't foreshadow where we are on this, but we did hear very clearly the requests and the comments of shareholders on the last call, and we put that under advisement. I will say that the lenders all were very receptive. They all took a long time, the ones that moved forward in the process, to understand our business. I think that they, you know, after having us, to use a colloquialism, opened up the kimono, they have a fairly good understanding of what the risks are associated with Premier. And I think that all of them would be excellent partners for us that would allow us as we "de-risk" the situation to revisit whatever the terms are. But I think that, you know, the reality is, is that the growth capital is vitally important to this company, and we believe that this is the appropriate route to take. So, hopefully, as I said earlier on one of the questions, we'll have some definitive information for the shareholders in the next couple of weeks.

Andrew Shapiro – Lawndale Capital Management

And has the term still remained, albeit high, still a fixed percentage rather than dilutive equity participation?

Samuel Weiser

Obviously, you know, again, we've been in negotiation with a number of different parties for a period of time. We are in the final stages of this process. And I think the deals are taking shape. I mean they're obviously subject to a discussion by us and by them, but ultimately I think the management and the board will make a decision that we believe is in the best interest of shareholders, and that's where we're going to go.

Andrew Shapiro – Lawndale Capital Management

All right. Because if they're issuing equity, that's going to be a big problem for your other issues as well, because it's going to be dilutive, you mean equity and holding company up while we have, albeit a non-collateralizable asset in the Titanic which is worth hundreds or, you know, over $100 million bucks, that would be extraordinarily dilutive to be giving up equity in our entity.

Samuel Weiser

I think we understand the consequences of all of our actions. And what we're doing is trying to balance all the demands of the lender against what's in the best interest of shareholders, in order for us to achieve the growth metrics that we need in order to get the company on firmer foundation.

Andrew Shapiro – Lawndale Capital Management

Yeah --

Samuel Weiser

As the CEO of this company -- hold on one second, Andrew. Andrew, let me finish please.

As the CEO of the company, my primary objective is to get this company back to a position of sustainable growth and sustainable revenue expansion.

We've had some setbacks and it's imperative that we change the dynamic -- the opportunity to turn this company around and develop those growth initiatives. So what I've said, and I'll stick to it, is that we've balanced the cost benefit of the demands of the lenders in order to find the right balance to achieve company's objectives at the most appropriate cost. Whatever that is, it is. And when we announce it, at that point we could have a further discussion about it.

Andrew Shapiro – Lawndale Capital Management

Okay. Because if you're giving up equity, you might as well go to your equity holders and offer it to them.

Samuel Weiser

I understand.

Andrew Shapiro – Lawndale Capital Management

You mentioned about the digital platform being essential, particularly for the rollout of New York, but it's also part of your overall marketing initiatives that you've done. So I have a few questions to follow up on that. How often do you update the PRXI website? Because we've noticed on the site, the Pompeii exhibit is listed as coming soon to L.A., and when you click on the Buy Tickets link, we're directed to the Franklin Institute website. So I'm just wondering if your updating in your digital presence is something that is going to get fixed even before you do this lending to raise the monies to do a new platform.

Samuel Weiser

Andrew, we're well aware of our limitations on the digital front, and all of that is being addressed. I understand the issues. We've had more than one situation on these phone calls where shareholders had pointed out issues with respect to what comes up on our website. But we will address that particular issue immediately. And I think that the whole idea here is to develop a digital presence that is sustainable and workable, to ensure that these kinds of issues do not continue into the future.

Andrew Shapiro – Lawndale Capital Management

When was Crossmedia engaged and what has been the experience and payback on that investment so far?

Samuel Weiser

Crossmedia was engaged I believe in the calendar first quarter, January. And they really got up to speed and began looking at our paid, owned and earned media situation I think kind of in the middle of February, and have put together plans. We're starting to see some payoff from their efforts, but again they have a great deal of experience with entities that are clients of theirs that sell tickets. We believe that they will ultimately be successful with Premier. We need to provide them with that digital platform that they need in order to be successful with the internet activities and the app activities that they want to be able to support, as well as social media. But as far as the paid media, they're doing a great job so far in terms of changing our messaging in our bigger markets like Las Vegas and Buena Park and targeting and doing better research on our core constituent visitor and basically doing a better job of targeting those individuals.

Andrew Shapiro – Lawndale Capital Management

Okay. With Pompeii now closed, I think you gave us -- did you give us an update on the attendance and profit figures from that exhibition?

Samuel Weiser

I gave you the attendance of 211,000 total attendance. This final settlement with the museum generally takes 30 to 45 days, so we're not there yet.

Andrew Shapiro – Lawndale Capital Management

But in general, this was a nice and profitable good return project for us?

Samuel Weiser

It was a strong project for us. In terms of the ultimate return, we view this as a three-city engagement, and when we're done with the three cities, we'll know exactly how profitable it was.

Andrew Shapiro – Lawndale Capital Management

Okay. And with respect to the second city, you're now in L.A., you're at the Science Center. Do you project that the attendance and cash flow generated from that location, which is arguably a bigger market, will be greater than or less than Philadelphia?

Samuel Weiser

Obviously we're going to be there longer and we have good track record with Cleopatra and other exhibitions that have been at the CSC. It's impossible for me to look into a crystal ball and know what the attendance is going to be. Obviously we have reason to believe and hope that the numbers will be stronger than they were overall in Philadelphia. But the reality is, is that -- the reality is, is that, you know, hope is not a strategy. So we're doing what we need to do, we're working with the museum, and we're trying to take advantage of the summer months in Los Angeles, the tourist months in Los Angeles, and we'll see what those numbers are.

Andrew Shapiro – Lawndale Capital Management

Now when you -- yes?

Samuel Weiser

Say it again?

Andrew Shapiro – Lawndale Capital Management

When you unveil Pompeii in Philadelphia, I think it was concurrent with the unveiling of that movie. Obviously the movie has come and done, and I don't know to what extent you felt traffic that may have been generated in Philadelphia as a result of concurrently occurring with the movie.

Samuel Weiser

I don't think the movie had any impact.

Andrew Shapiro – Lawndale Capital Management

Okay.

Samuel Weiser

Personally.

Andrew Shapiro – Lawndale Capital Management

What's the progress you've made on the Ice Age exhibition, and when might a formal announcement on this project be?

Samuel Weiser

I think, as I said in my announcement, we're working on three new projects, which we hope to announce shortly. So, you know, we've been working with Fox on Ice Age for a long time. We're getting close to finishing that. And as soon as we have it completely finished, we'll let you know.

Andrew Shapiro – Lawndale Capital Management

Okay. I have some more questions. I'll back out again to allow for others if there are any in the queue. But come back to me, would you?

Samuel Weiser

Okay.

Operator

And we move now to Tom Olander with Dougherty & Company.

Samuel Weiser

Hey, Tom.

Tom Olander – Dougherty & Co.

Yes. Good afternoon guys. Sam, how many shares of Premier do you own right now? And Mike, how many shares do you own?

Samuel Weiser

That's a matter of public record. You know, you can go to the Form 4's and find that out. Obviously Mike and I have significant option and stock positions in the company.

Tom Olander – Dougherty & Co.

But you don't know off the top -- I don't have that information right in front of me.

Samuel Weiser

I do. But I'd rather, Tom, I'd rather not discuss that on an open call. I mean it's a matter of public record, but, you know, if you want, you can call into the office and we'll provide you with information on how to get that information.

Tom Olander – Dougherty & Co.

Okay. Okay, thank you.

Samuel Weiser

Is that it?

Tom Olander – Dougherty & Co.

That covers it for now.

Samuel Weiser

Okay. Thanks.

Operator

[Operator Instructions]

And we move to Andrew Shapiro with Lawndale Capital Management.

Samuel Weiser

Hi, Andrew. Let's finish it up, okay?

Andrew Shapiro – Lawndale Capital Management

All right.

Samuel Weiser

Go through the rest of your questions.

Andrew Shapiro – Lawndale Capital Management

I will. Okay.

So what steps have you taken or do you plan to take to reverse the trend in the decline in the merchandising revenue? It seems like it's above and beyond just a decline in attendance that's contributing to that, or is it just attendance related?

Samuel Weiser

I think a lot of it is attendance related. I think it's also, you know, we've had a couple of new exhibitions. We introduced Dinosaurs, we introduced Pompeii. We've spent a lot of time focusing on these new exhibitions. We've got some new exhibitions obviously that are coming down the pipeline, that are in development.

I think our merchandising folks are focusing on turning over the inventory, reducing the old SKUs, adding some new SKUs to that inventory, and trying to change, you know, the mix, the product mix.

Obviously, Buena Park is a different market than Las Vegas. Orlando is a different market. We're getting a better handle on the Buena Park consumer. And so I think our merchandising people do an excellent job. These numbers tend to fluctuate. They're not, you know, numbers that I'm terribly worried about right now. Obviously if the trends continue, we'll have to address it. But I think that this was anticipated and I think that the research that's being done and the work that's being done by our merchandising folks will reverse this trend pretty significantly in the upcoming months, especially if we're successful with the marketing efforts to kind of reverse the trends on the attendance size.

Andrew Shapiro – Lawndale Capital Management

Okay. And with the gross margins dropping 400 basis points, can you discuss the fixed costs or the other factors that are contributing to the decline in the margins?

Samuel Weiser

So first of all, first of all, the margins are a function of the mix between permanent and touring exhibitions. Touring exhibitions tend to have higher margins because we don't absorb any of those costs on our balance sheet and on our income statement. So as a result, they have a higher -- they have a higher margin.

The mix this time was I think due to a slight decline in our touring margin and also a slight decline in our permanent margin. I don't consider the 400 basis points to be nearly as significant as you do, because we had a higher mix of semi-permanent locations with the opening of Buena and adding Dinos to Atlanta. So, you know, Titanic had fallen off pretty dramatically in Atlanta, so that would have required us to still maintain the fixed costs, to your point, without the variable revenue that comes from having the adequate attendance numbers.

To the point about fixed costs, obviously when you operate an exhibition with priceless artifacts like to do with Titanic, there's a certain amount of fixed costs in terms of security, overhead, the number of [indiscernible] that need to be present, regardless of the traffic through the exhibition. We are constantly monitoring those activities and do everything we possibly can to mitigate and minimize our fixed costs in each of these locations. That's a big reason for why we have a significant part-time staff that operate within these venues, so that they can be more variable and we can allocate their hours according to the trends and the timing that requires to meet peak flow. But with respect to HVAC, humidity control, things like that, for the specimens and for the artifacts, there's not much we can do about it. So really what we need to do is drive more traffic to these exhibitions. I think our fixed costs are pretty well on hand.

Andrew Shapiro – Lawndale Capital Management

So the way you describe the differences between a stationary installation and a touring installation, if you had your druthers and you could have enough demand for touring, you would just do touring versus stationary? Because it seems like that isn't the optimal type of return on asset and return on capital. Is that right?

Samuel Weiser

I think, you know, listen, I think demand for exhibitions and content ebbs and flows. I think Titanic is an evergreen property. I think Bodies is an evergreen property. The company hasn't refreshed either one of those exhibitions. Again we're getting to this "intertwined" wish list for the growth capital. These exhibitions need to be refreshed. The best place to refresh that is inside a semi-permanent exhibition, which will ultimately lead to museum partners and other promoters seeing those refreshed exhibitions and the demand in them for the touring side of the business.

Obviously what we want is a good mix, because while the touring side is a lower risk, it's also a lower revenue. On the semi-permanent side, we're able to have a lot more pricing autonomy and the ability to manage the costs more effectively, so that ultimately we can I think drive higher profits from the semi-permanent locations if they're operated properly and effectively, which is what we try to do. So our goal is really to find an optimal mix between them.

In addition, there are certain kinds of exhibitions that lend themselves more to a semi-permanent location, because they're more entertainment and less science or natural history. And I think that we're exploring more of those opportunities today than we ever have in the past, which makes having semi-permanent locations very important because those are the kinds of exhibitions that tend to need to be in tourist destinations.

Andrew Shapiro – Lawndale Capital Management

Three other questions, one on the business and two on the public [ph] listing and your annual meeting. In your experience to date, what's your experience to date in Dinosaurs in Atlanta and Kansas City versus your expectations? Are you getting the initial levels of interest and attendance that you thought?

Samuel Weiser

I think that both exhibitions are performing well. They could be doing better. I think that with Dinosaurs, we're learning from our partner Dinosaurs on Earth, you know, how to effectively market the exhibition. And we're seeing results from that collaboration with them, and our Crossmedia partners.

I think that Tut in Kansas City is doing just fine and probably meeting our expectations. Again it's a new show for us, and so we're learning as we go in terms of how to effectively communicate to the museum how to market that in their local market, how to access their built-in consumer base and how to activate it. So I think that as Tut continues to move around, we'll get better at it and hopefully be more successful with it, but I don't think it's underperforming at all.

Andrew Shapiro – Lawndale Capital Management

When is the annual meeting scheduled for, for the company?

Samuel Weiser

We haven't announced it, but it will be, as it's always been, in late August.

Andrew Shapiro – Lawndale Capital Management

And someone mentioned that you've had noticed or are going to get notice regarding listing requirements. The particular listing requirement issues are, what, the dollar per share, stock price for so many days, or something else?

Samuel Weiser

Right. It's the -- if you go back to the 8-K that we filed, which has a copy of the letter, it has to do with the share price being below $1. But again, as I said earlier, the board is addressing the issue, and as soon as we have a plan, we'll announce it.

Andrew Shapiro – Lawndale Capital Management

When was that 8-K or the date of the letter?

Samuel Weiser

I don't know exactly, but I think it was in April -- I think if you look towards the end of April, early May, for 8-K filings, you'll find it.

Andrew Shapiro – Lawndale Capital Management

You've requested or have your hearing date, has that been established?

Samuel Weiser

I don't believe that that's -- I don't believe that that's part of the process. Again I would -- I think there's a timeline here that the NASDAQ has given us to get ourselves in compliance. I think that we will fulfill our compliance within that timeline. As I said, the board is addressing the issue and is cognizant of the issue and will -- I don't think that we are concerned at this point that we're going to have a problem. But at the end of the day, we're going to have to make sure that we get back in compliance.

The notice was on April 24th. I think they gave us 180 days.

Andrew Shapiro – Lawndale Capital Management

Stock's got to trade about $1 -- close above $1 for how many days straight?

Samuel Weiser

Ten consecutive days.

Andrew Shapiro – Lawndale Capital Management

Ten consecutive days over $1, and then that resets any clock anyway.

Samuel Weiser

Exactly.

Andrew Shapiro – Lawndale Capital Management

And I think you'll also get an opportunity for either an extension or a hearing if you propose a particular course of action or plan.

Samuel Weiser

Right. It's all in that letter. But yes, there are remedies that we can avail ourselves of with the SEC should we not be able to meet that requirement within a 180-day timeline.

Andrew Shapiro – Lawndale Capital Management

One of them, not that I would prefer it or like it, one of them of course is sizable reverse stock split, and that would require a shareholder vote for this company, wouldn't it?

Samuel Weiser

Yes, it would.

Andrew Shapiro – Lawndale Capital Management

Let's hope we don't have to go that route, but that's why I asked about the annual meeting date as well.

Samuel Weiser

Right.

Andrew Shapiro – Lawndale Capital Management

Okay. Thank you.

Samuel Weiser

Right, Andrew. Thanks. If there's anything else that comes up, let us know.

Operator, anybody else?

Operator

At this time there are no further questions.

Samuel Weiser

Okay. Well, listen, thanks everyone for taking the time. We had a very good I think Q&A.

Obviously we continue to work hard to reverse the trends and continue to move forward on New York. We hope to have some updates for you in the near term when the first quarter ends at the end of May, so we'll be back with you sometime in July at the latest to give you another update.

Thanks so much, and we'll talk to you all soon.

Operator

And this concludes our conference. Thank you for your participation.

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