Management
Christopher J. Davino – President, Chief Executive Officer and Director
Samuel S. Weiser – Interim Chief Financial Officer
Brian Wainger – Vice President and Chief Legal Counsel
Analyst
Norman Klein – Private Investor
Sam Yake – BGB Securities, Inc.
Jason Braswell – Private Investor
Anthony Bozanich – Bgi Capital Management Inc
Premier Exhibitions, Inc (PRXI) Q4 2011 Earnings Call May 24, 2011 9:00 AM ET
Operator
Good day and welcome to the Premier Exhibitions, fourth quarter and fiscal year 2011 earnings results conference call. Today’s conference is being recorded. I will remind everyone that we will be making forward-looking statements on today's call. These forward-looking statements are based on our current expectations and are subject to a number of risks and uncertainties.
Actual results may differ materially. Please refer to the risk factors identified in our Form 10-K for the period ended February 28th, 2010, and our subsequent filings with the Securities and Exchange Commission.
And now, I will hand the call over to Christopher Davino, Chief Executive Officer of Premier Exhibitions, Inc. Please go ahead.
Christopher J. Davino
Good morning everyone. In a moment, I am going to turn the call over to Sam Weiser, our Interim CFO, who will address our fourth quarter results. But first I want to provide some perspective on the full-year fiscal ’11. I will describe our efforts to scale back the business over the last few months and lastly, give some color regarding strategic initiatives that we currently have underway.
In fiscal ’11, I think it is fair to say that management pursued relatively bold strategic initiative in an attempt to dramatically reposition the Company. We did that in a few regards. First, we attempted to unlock value inherent in the collection. We focused on building a dynamic business model around Titanic going well beyond the narrow confines of the exhibition business, creating new assets and revenue streams and establishing real brand ownership of Titanic, which we believe is critical in realizing on those opportunities.
Next, we pursued a relatively aggressive plan to relaunch Bodies. That included reimagining the exhibition itself, and obviously expanding the self-operated touring model. And last, we pursued a new content development by focusing on instilling best practices, with regard to the development effort, bringing in proven capabilities on a contracted as-needed basis, as well as identifying certain opportunities for our future pipeline.
Let me briefly recap those initiatives where I believe we were successful, areas where we fell short and one in particular where we performed poorly. Let me take that last issue first. Clearly, with regard to the Bodies self-operated touring model, our results were poor. The bottom line is, in my tenure here at Premier we have put 30 shows in the marketplace. One or two have done reasonably well, a handful have had breakeven, some modest results. The balance, candidly, lost money. In some cases, significant amounts.
As a consequence of those results, we have made the strategic decision to take advantage of certain Bodies leases terming out and returning three full Bodies sets to Dr. Sui. With that, we took the opportunity to dramatically scale back the infrastructure and to take significant costs out of the system on a permanent basis. Sam will go into some detail about that.
I think, it is fair to say that, other than the Bodies touring model, I believe our other initiatives were largely successful. For Titanic, we successfully executed the expedition to the wreck site. In this regard, importantly, we were able to bring in, as partners to the mission, leaders in the oceanographic and archaeological space, really spanning both the public and private sectors. The mission produced our key objectives. We created the first ever comprehensive self-survey map of the wreck site. We generated the data sets and imagery to produce “Virtual Titanic”, which I have talked about in the past, which are the mosaics of the bow and the stern sections of the ship. And we really did, I think, a good job in setting the table to produce multiple revenue streams down the road.
In addition to that, I believe we made significant strides with regard to our web and social media platforms, together with our partnership with NBC and its affiliates, allowed people the world over to follow this groundbreaking mission to Titanic. And really establish RMST as the rightful owner of the brand.
In addition to Titanic, I believe the relaunch of the Bodies exhibition was also successful. We reopened the show in January and I believe what we put out to the marketplace is a much more vibrant, educational and visually engaging experience grounded in the storyline, Your Amazing Body.
The show has been well received by the media and consumers and we are hopeful that the show will reverse the attendance declines that we have experienced over the last several years. In terms of new content, I believe we have also made relatively significant strides. I think that will be evident in the launch of Dialog In The Dark in New York. I would classify Dialog as new content due to the dramatic changes that we are implementing as compared to the Atlanta show, but I will get into that in a minute.
Also, for new content, we have gone public with the Playboy project where we put substantial development efforts into that over the last year. Not to spend a lot of time on it, but suffice it to say that we believe we have created a very unique and compelling experience that goes well beyond the historical static exhibition model. We are in the process of seeking partners and investors, so that should bring needed promotional capabilities to the table and to share in development costs.
But before I get into where we are heading next, I am going to turn the call over to Sam to go into some detail about our fourth quarter results. Sam?
Samuel S. Weiser
Thank you, Chris. Hello everyone and thank you for joining us today. Before we review our financial results for the fourth quarter, I want to again remind everyone that part of our discussion this morning includes forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore undue reliance should not be placed upon them as actual results might differ materially.
We refer you to the risk factors identified in our filings with the Securities and Exchange Commission for a more detailed discussion of these risks that may have a direct bearing on our operating results, performance and financial condition.
With regard to the fourth quarter results, lower than anticipated exhibition attendance, fewer operating days, and lower ticket prices negatively impacted gross profit. However, there was progress in other parts of our business including a 25% increase in merchandize sales and improved operational efficiency with regard to our permanent venue/location.
During the fourth quarter, we also engaged in a restructuring effort to downsize the business and improve operating results by exiting the self-operating Bodies touring business segment and generating more than $4 million in annualized cost savings from headcount reductions, reduced marketing expenditures, and structural changes in permanent venue operations.
I will discuss the restructuring in the greater detail later but the objectives of restructuring exercise was to achieve positive cash flow, improved operational efficiency and narrow and eliminate the loss from operation. The restructuring was company wide and affected all areas of the business. Before discussing some of the changes we have made on a going forward basis, I'd like to discuss the results for the fourth quarter and year ended February 28, 2011.
Exhibition revenue fell 4.9% to $9.8 million from $10.3 million in the year-earlier year period. As noted we had fewer operating days, lower average attendance and lower average ticket prices for the period. Our fewer operating days were due in part to our decision to exit self-run Bodies touring segment of our business.
Many of these self-run shows closed during the fourth quarter and as Chris mentioned, three specimen sets were returned by the Company to their owner. Attendance for the quarter was softer for a couple of reasons. First, we closed our New York Exhibition in January and refurbished the exhibition space, relaunched the Bodies exhibit, incorporating many of the design changes developed over the last year and made room for Dialog in the Dark, which will now share the space with Bodies. This cost us about a month of attendance. Second, while our self-run exhibitions benefited from lower production cost in many markets the daily attendance for those markets was also lower than expected.
Finally, the decline in average ticket price was due in large part to the discounting required in many of the self-run markets that drive the attendance. Cost of exhibition revenue was steady compared to the fourth quarter of 2010. For the year, the significant increase in cost of exhibition revenue was directly related to our self-operated exhibitions where the company bore the full cost of marketing, production and operation.
While we changed strategy in the fourth quarter by exiting our self run, there was little benefit realized in the quarter as most of the costs to market, operate and remove the exhibition was recognized during the period. We anticipate the real benefit in terms of reduced cost of exhibition revenue will materialize in the first and second quarters of the current fiscal year and to-date our results for the first quarter reflect a decrease in this area. Over the past few calls, a lot has been said about the financial results and the losses stemming from the self-operated Bodies touring segment of our business.
With the full year and the fourth quarter gross profit was impacted. Rather than rehash old discussions let me just recap the results and move on. In the fiscal fourth quarter self-operated touring Bodies lost $1 million. All other segments of our operating mix contributed $2.8 million to the gross profit margin. For the full fiscal year the total impact of self-operated bodies was a loss of $2 million while the rest of our business mix contributed positive growth margin of $13 million.
In both the fourth quarter and the full year results our self-run exhibition in Mexico City was responsible for half of the total losses from the self-run Bodies exhibition.
Looking forward, although we anticipate that gross revenue will decline in fiscal ’12 due to fewer exhibitions in the market, we should see a corresponding decline in exhibition costs having retired six Bodies exhibitions in the fourth quarter and two more by the end of the summer.
With an exhibition portfolio that now carries far less risk and attendance patterns at our permanent locations that we consider more predictable, we believe our gross profit margin should be significantly improved on the year-to-year basis.
I now want to address G&A. For Premier to achieve its objectives in generating positive cash flow and flow EBITDA gross profit margin must exceed General and Administrative expenses. G&A for the most part represents overhead for the business and the cost of carrying the infrastructure necessary to sell, market, fill and operate exhibition.
Our restructuring initiative is focused on this equation and I will talk more about the progress we made, but first let me recap the fourth quarter and full-year results.
G&A for the fourth quarter increased by $543,000 while for the full-year G&A declined by $5.4 million. The increase in G&A for the quarter was largely driven by an increase in stock compensation and additional reserves for bad debt expense. However the full-year decline in G&A was driven by significantly lower compensations costs, lower legal cost and lower bad debt losses.
As I have already mentioned repeatedly, the Company has been restructuring its operations since we announced in January our intent to reduce our Bodies’ inventory. We are attempting to drive efficiencies in our production models, reduce overhead costs, and restructure our venue operations. The result has been substantial progress in rightsizing our organization.
To-date we have stripped out more than $4 million in operating costs and we continue to look for further cost savings. The benefit of these efforts, while not widely apparent in the fourth quarter results, will begin to appear in the results for the first quarter and in subsequent quarters throughout fiscal ’12. The steps we have taken include a 40% reduction in headcount that includes permanent staff and dedicated consultant resources such as reduced operating expenses by more than $3 million, both at the G&A and cost of goods sold level.
These savings include salary expense for our former CFO and CMO as well as other individuals who have left the company voluntarily and who at this point, have not been replaced. To some extent, these personnel savings have exceeded our goals and going forward some of these cost savings may be redeployed to hire new professionals whose skills specifically address our business needs.
We have also reduced our marketing expenditures by more than $1 million on the annualized basis as we look to redeploy marketing dollars in different areas that we think will enhance the efficacy of reaching our target market at a lower cost of acquisition. We have also reviewed our permanent venue operations and for staff reductions and efficiency efforts our operating costs in New York, Atlanta and Las Vegas have been reduced by more than $750,000 on an annualized basis.
The effort to rest additional cost savings out of our permanent venue operations continues. In fact management has been charged with instituting sound and consistent business policies across these venues and as the process evolve, we expect additional cost savings will materialize.
We have returned three specimen sets. While most of the cost of these specimen sets was reflected at the gross margin level, when these specimen sets were not being exhibited the cost of those obligations were reflected in G&A. We will be recruiting an additional set of specimens currently supporting two touring exhibitions at the end of summer, which will further reduce our exposure to those obligations at the G&A level.
We have taken significant steps to rein in spending across the entire organization. Upon my taking control of the finance organization, one of our first measures was an across-the-board reduction in approval authorities and spending limits. All significant expenditures now require senior management approval, which was not previously the case. The result has been better transparency into the business, and a better ability to manage costs and cash flow. We’ve already begun to see the savings from these efforts in the first quarter.
Finally, we have also taken steps to impose new policies and procedures on the business to limit costs in other areas. From cell phones to Internet cards to travel costs and other overhead expenditures, we have imposed over safe controls to better manage better manage the business overall.
As discussed earlier, no level of cost management will account for an attendance shortfall. Premier is a revenue-driven business and we are focused on finding new ways to drive traffic. From a finance perspective, we are working to associate all costs with revenue production and where appropriate determine where we can continue to trend overhead.
Our loss on operations narrowed in the fourth quarter to $5 million from $8.4 million. For the full year loss on operations declined from a loss of $20.3 million in fiscal 2010 to a loss of $13 million in fiscal 2011. In the fourth quarter of last year, the company took a restructuring charge related to its lease at the Luxor in Las Vegas resulting in a charge of almost $4.4 million. For the full year ended February 28, 2010, the company also recorded an impairment charge related to the return of certain specimen sets that resulted in a loss of more than $4.5 million. When eliminating these one-time charges operationally the company’s performance declined in both the fourth quarter and fiscal 2011 versus comparable fiscal 2010 period.
Our primary focus for 2012 is to reverse this trend. Last year’s results were mainly the result of poor market selection and a bad business mix that was heavily depended on self-run exhibitions. Simply stated attendance in the markets where we self-operated the Bodies shows simply didn't draw sufficient numbers to offset the cost of advertising, marketing and operation.
By exiting this segment the company will be better positioned to achieve his financial objective. One area where we are beginning to make improvements is in the area of merchandise and other revenue, which increase 24.7% during the fourth quarter of fiscal 2011. While we were just scratching the surface of this initiative, here are a few highlights.
Spending on a per visitor basis increased slightly in the fourth quarter but remained below our targeted levels. Product mix in each permanent venue has been evaluated to ensure that inventory better reflects consumer demand in those markets.
A complete review of the inventory was completed and a new inventory management system was installed to control costs, manage inventory levels at specific venues and track better selling items to ensure adequate inventory levels are maintained. Contracts with vendors are being re-negotiated to reduce costs and improve margin. Margins are already improving on merchandise and we are now tracking those margins by property.
New products are being introduced primarily for Titanic and will be available on the third quarter well in advance of the 100 anniversary.
As I have mentioned earlier our venue operations professionals are reducing operating costs. When combined with the initiatives to improve merchandise sales, we anticipate that this segment of the business will continue to improve and make a stronger contribution to our gross margin.
In terms of the balance sheet, cash and marketable securities combined were $4.6 million at the end of the fourth quarter. At the end of April, cash and marketable securities totaled $5.7 million. We’ve had some early success in fiscal 2012 managing our cash more judiciously. However the business can still be very volatile.
In addition new projects and financing new revenue sources require capital, which has been limited in the last few months, but we are hopeful that will continue to see improvement.
Our focus is on continuing to carefully manage cash flow, but we're mindful of the impact economic changes can have on our business.
That said it is important to maintain financial flexibility. So the company has entered into an agreement with Lincoln Park Capital Fund that will allow us access of the $10 million in additional funds for working capital and other initiatives over a 36-month period. The details of the agreement could be found in our 10-K, which was filed this morning. But please note that the agreement itself can be terminated by us at any time and without any cause.
While we presently have no intention to access this line, the company’s performance over the past two years has limited its access to traditional sources of financing. Therefore, management and the board elected to enter this agreement with Lincoln Park Capital provide the company with a backup source of financing and the flexibility to respond to opportunities that meet our return on invested thresholds should the need arise.
Moreover, Lincoln Park Capital has taken the time to understand Premier’s business and we believe they will be strong partners in helping during the operations of the company around.
Before I turn the call back over to Chris, I would like to briefly provide some additional color around fourth quarter results. While it is not our practice to provide guidance during the cyclicality and volatility of our attendance patterns. We’re beginning to see the benefits of some of our restructuring efforts.
Attendance for March and April was strong, benefiting from the late Easter holiday, although May has been weaker than expected. We are also seeing improvement in our G&A run rate. We’ve cut more than $4 million in annualized costs from the business and the benefits of those cuts are becoming evident in the results we've seen for March and April.
While we will discuss this in more detail on the first quarter call, we believe all the moves we have made to restructure the business including the G&A reductions we have initiated will have a positive impact on the company’s fiscal results for 2012. Chris?
Christopher Davino
Thanks Sam. You covered a lot of ground there. I am sure there will be a lot of questions, which we will take after this brief commentary on where we are now. So what is the focus going forward, really it's in three areas. As Sam said focusing on driving profitability of our permanent installations, in that regard continuing to refine our marketing approach to have it work harder with an overall [dollar] spend. It also means building up on our recent initiatives in the online and the social realm.
Obviously, continuing to focus on improving operations across the board. As Sam indicated, we’ve taken significant costs out of the venues in addition to G&A. We will look to continue to streamline operations and begin to focus on improving retail both in the venues on our e-commerce platform.
The second area of focus is clearly Titanic. Our goal here is to bring a final successful conclusion to the court case. We expect a final ruling in August. We are continuing to build out the business model and in doing so, beginning to address monetizing the assets created during the expedition. At this stage I really can't provide too many details on where that’s going, but suffice to say that we feel pretty good about the value creation opportunities that we have on Titanic.
The third area of focus is successfully launching Dialog in the Dark in New York, in terms of the experience itself, we believe we made significant strides in evolving the property as compared to what we have in Atlanta. Visitors will experience New York centric environments in total darkness, where the scents, sounds, and textures of various city street scenes will create an unforgettable experience.
Importantly, like Titanic, we are working to build a 360 degree business model around the experience itself with regard to various forms of programming. That will include diversity and corporate training and entertainment programming such as dating and dining in the dark, which are areas that we've created and honed in our Atlanta installation. Not only will these various forms of programming produce multiple revenue streams, but it will also allow us to engage the community from a B2B and B2C perspective, generating awareness, buzz, and ultimately advocacy to this truly unique property.
With that I’m going to open the call up to questions.
Question-and-Answer Session
Operator
Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions) Our first question today will come from Norman Klein.
Norman Klein
Hi, Chris, how are you?
Christopher Davino
Good. How are you?
Norman Klein
Fine. Thank you. A couple of questions, you both talked a lot about reducing G&A and what you have done so far to accomplish that. This is what I don't understand. The Company is clearly downsizing in size and with the eliminating the self-run Bodies. Why do we still need six paid directors? Why do we need eight directors? Why can't we go down to three paid directors and you and Sellers as the unpaid directors and eliminate $300,000 in annual savings? Why do we still need to be listed on NASDAQ? Why can't we go to the pink sheets and save how many hundreds of thousands of dollars we are spending on compliance costs? I don't understand that?
Christopher Davino
Let me take the first issue Norman, look the board here is, look it's obviously a relatively large Board given the size of the operations, I will tell you that the Board as I said in the past is completely engaged everyone that is on the Board provides great value. As I said in the past, look, we're trying to expand this business well beyond what we’ve had in the past, which has been a pure play, relatively static exhibition model.
And we are making strides in areas where this company really had no prior proven core competencies. All the things we were doing on Titanic, the things that we are doing on Dialog, all require experience and judgment, and I can tell you that the Board has been invaluable to me and the management team in thinking through all these aspects of the business. As, again, we’re trying to make significant strides in areas where we really haven’t been before.
So, while it does come with some costs, in my mind anyway it’ been extremely value added. In terms of that being listed, look, for us, we’re trying to grow this company and make it more profitable, and we think it’s appropriate that we continue to be listed. I think that’s relatively self evident. Obviously, you could debate the points, but for us it’s a relatively easy decision.
Norman Klein
Okay. I guess you are talking about growing and expanding, but in the mean time, we are burning some cash, we are having to go to outside financing possibly if we needed, and here is an opportunity to literally save $1 million with little impact. I mean to me, it's do what you got to do now and then as you start growing again, then you add more directors, then you relist. But I just don't understand why we’re not doing those things. But that’s my opinion. Are we finished with Hole? And have they completed their terms of the contract?
Christopher Davino
Certainly not completed. In fact, I think we’ve only really begun to reap the benefits of the relationships that we’ve forged over the last year starting with this expedition. We’ve got a lot of work in front of us, to process the data and imagery from the machine, which Hole is critical to that, producing, all this will produce various assets, as I said before, the mosaics, interactive site survey map, all having various uses to create various revenue streams. And again, all of these partners and particularly with Hole are critical to those efforts. We’ve got a court hearing in late June, we expect to bring our partners to that hearing to put on the great testimony with regard to what this mission has produced for the public benefit.
So obviously, as I said again, Norman, Woods Hole is a critical partner with regard to all of our future work on Titanic. They’ve really been invaluable and will continue to be so at least in my judgment.
Norman Klein – Private Investor
And you’re still planning to produce a CD?
Christopher Davino
Yes, several assets. One, we’re working with a major cable network to produce a documentary on the expedition. In addition to that, we’ve gotten, produced, I don’t know, 70 hours or so of high-def 3D footage that will in part be used for the documentary, but also give us the opportunity to produce a separate piece, maybe a Blu-Ray, the DVD, straight-to-home unit that might be a narrated high-def 3D tour this year. So a separate asset we’re hoping to create over the next couple of months and bring to market in addition to all the other assets that we’ve generated here.
Norman Klein – Private Investor
Okay. And just one last one. On the Bodies, we physically returned three and we’re going to return one more at the end of the summer. Is that what I heard?
Christopher Davino
Yes, I believe it is mid-summer. Yes.
Norman Klein – Private Investor
And so how many does that leave us with?
Samuel Weiser
Leave us with two bodies of the exhibition sets and four bodies of real sets. So we will end up with, after the summer, we will have three permanent locations and four touring units.
Christopher Davino
And the benefits there, Norman, in addition to the audits (inaudible) that we’re taking $3 million or $4 million and take these cost out of the system. With regard to the touring model, the sets that we will have available to tour won't have fixed lease costs associated with them so we can be much more opportunistic in putting those shows out to the marketplace. It is different than the pressure that we faced over the last couple of years when we had to carry $6 million in lease costs and therefore having the need to put the shares into the market continuously.
Norman Klein – Private Investor
All right.
Christopher Davino
It’s a very important change. The permanent equation, at least two of them will have the Sui sets and those inspirations take money obviously.
Norman Klein – Private Investor
Okay. Thank you very much. Good luck.
Christopher Davino
Thanks, Norman. Appreciate the questions.
Operator
We’ll go next to Sam Yake with BGB Securities.
Sam Yake – BGB Securities, Inc.
Yes. Hello, thanks for taking my questions.
Christopher Davino
Good morning, Sam.
Sam Yake – BGB Securities, Inc.
Yes, I was just wondering what is your understanding, I’m trying to figure out, if the court has a judicially approved auction in their ruling coming up and you have an auction, I know they put a price, I think it was like $110 million of the appraisal. I’m just wondering, let's say, when I study Titanic auctions, every time an artifact comes up, it realizes way, way more than the pre-auction estimates. And I’m just wondering if you have an auction and say things sell for $200 million, is it clear that Premier gets to keep anything over that amount, over the $110 million?
Samuel Weiser
Look, I think the short answer is yes. I mean I don't want to get into the various ways that this might play out, but hypothetically, if down the road there was an auction, yes, I think we would clearly get the benefits of those proceeds.
Sam Yake – BGB Securities, Inc.
So it's pretty clear the court said you’re entitled to 100% of the value of those artifacts then?
Christopher Davino
Absolutely.
Sam Yake – BGB Securities, Inc.
Okay.
Brian Wainger
Chris, may I interject?
Christopher Davino
Please, Brian. Go ahead.
Brian Wainger
This is Brian Wainger. And I work with the company, represent the company in that salvage case. The value of the salvage lien has been placed at $110 million. We believe there is some expectation that if there were to be an auction that perhaps Premier could obtain 100% of the auction price. But we should understand that right now the salvage lien has been set at $110 million. So we should not have expectations that any additional monies beyond that would come in if there were an auction. And so that’s where we should set our expectations. If more money were to come in and the court were to determine that because it has already decided that the company is entitled to 100% of the value of the artifacts and therefore the best way to determine the value the artifacts if that price were above $110 million would be to pay the company the full auction price. That is a possibility. But for now, our expectation should be set at the award of the salvage lien of $110 million.
Sam Yake – BGB Securities, Inc.
Okay, I understand that. So it’s not entirely clear then, it’s a little bit up in the air?
Brian Wainger
I would say it is a little bit up in the air.
Sam Yake – BGB Securities, Inc.
Okay. And then I had one other question maybe you can help clear me up. Do you have any clear guidance from the courts? When you, can you go to the wreck site and salvage more artifacts and is there clear title if you do that? I mean, I have trouble figuring out what is the standard on that? I mean, your ability to go to the wreck site and salvage more artifacts and then who has title to them? Is there, do you have clear guidance on that?
Samuel S. Weiser
Is that for Chris or for Brian?
Christopher Davino
Take it away, Brian. You will articulate that better than I.
Brian Wainger
The company continues to maintain its salvor-in-possession rights. The company can go back and recover artifacts from the wreck site. If those artifacts are recovered and the company brings those artifacts back to the court, which has jurisdiction over the wreck site, with regard to those artifacts, we would go through the same process that we have gone through with respect to all the other artifacts that have been recovered since 1987. That is, we would present them to the court, we would move that some point for a salvage lien, we would obtain a fair market appraisal on those new artifacts and we would ask the court to give us a Salvor award, either through an in specie award or through a sale of those artifacts as well.
Sam Yake – BGB Securities, Inc.
I see. Thank you very much.
Christopher Davino
Thank you, Sam.
Operator
We’ll go next to Jacob Wolinsky with Value Advisors.
Christopher Davino
Jacob?
Operator
Our network was disconnected.
Christopher Davino
Okay.
Operator
We’ll go next to Jason Braswell.
Jason Braswell
Good morning, Chris and Sam. Thanks for taking my call.
Christopher Davino
Good morning.
Jason Braswell
I had two questions for you. The first question is the salvage award. If Premier Exhibitions did receive the $110 million from the court, can you give me any clarity on the tax implications of receiving that cash award?
Samuel Weiser
Yes. The company has very limited basis in the assets. And in the event that the cash award was set at $110 million and that’s what we receive, we would have ordinary income obligations from a tax perspective although we are taking steps and continue to work with our advisors at PricewaterhouseCoopers to mitigate any tax implications that might arise from a cash award.
Jason Braswell
Thank you. When you say basis, can you give me an idea of what you’re looking at right now?
Samuel Weiser
Yes, I think our specific assets is somewhere in the neighborhood of about $40 million.
Jason Braswell
Okay, thank you. And then you think anything above that would just be tax and ordinary income rates depending on what your auditor or accountant works out?
Samuel Weiser
Yes.
Jason Braswell
Okay. All right. Thank you. And the second question is, can you give us an update on the joint venture with Michael Cohl, any new update there?
Christopher Davino
I guess I would characterize it this way that it has been a great working relationship as to the end not only the potential capitals to the table for projects like Playboy, but they’ve got relationships the world over promotional capabilities, a lot of development resources. So they’ve been a very good partner. We are continuing to look at projects together. Not all the projects that we look at are we contemplating doing with STBN, but they’ve been a really valued partner and they bring a lot to the table.
Jason Braswell
All right. Thank you
Christopher Davino
Thanks, Jason.
Operator
(Operator Instructions) Our next question will come from Anthony Bozanich with Bgi Capital.
Anthony Bozanich – Bgi Capital Management Inc
Yes, hello. I had a question about the Lincoln Park Capital potential financing. If that should be necessary, what valuation are they willing to invest at?
Christopher Davino
Quite frankly, I don't have all the specifics, but it is a multiple based upon the market value of the stock as the time in which the company accesses the line. So I think it’s detailed, let me see if I could pull up the press release information very quickly. But it’s roughly a variation like about 90% of the market at the time we draw on the line.
Anthony Bozanich – Bgi Capital Management Inc
Okay. Yes, I didn't see it in the press release. But it’s about a 10% discount to the market price when you need it.
Christopher Davino
Correct.
Anthony Bozanich – Bgi Capital Management Inc
Okay. Thank you.
Operator
We have no further questions at this time. At this time, I would like to turn the conference back over to today’s speakers for any additional or closing remarks.
Christopher Davino
Well, thank you everyone again for attending this morning. As always, Sam and I are available to answer any questions after today. Don’t hesitate to call to the office. Thank you and have a great day.
Operator
Thank you for your participation in the Premier Exhibitions, Inc. earnings call. If you have any further questions or comments, you may contact the company directly. This concludes today’s call.
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