**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-Q**
| **x**                                                   | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| **For the quarterly period ended March 31,  2007** |
| **OR**                                                  |
| **o**                                                   | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

€

**Forthe transition periodfrom                 to**

**CommissionFile No. 000-17436**

**CKX, INC.**

(Exact name of Registrantas specified in its charter)
| **Delaware**                                                     | **27-0118168**                           |
|------------------------------------------------------------------|------------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) | (I.R.S. Employer  Identification Number) |

 

**650 Madison AvenueNew York, New York 10022**

(Address of PrincipalExecutive Offices and Zip Code)

Registrant’s TelephoneNumber, Including Area Code: **(212) 838-3100**

Securities Registered Pursuantto Section 12(b) of the Act: **None**

Securities RegisteredPursuant to Section 12(g) of the Act:

**CommonStock, Par Value $0.01 Per Share**

Indicate by check mark whether the registrant (1) filedall reports required to be filed by Section 13 or 15(d) of theExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past90 days. Yes x   No o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer (asdefined in Rule 12b-2 of the Exchange Act).
| Large accelerated  filer  o | Accelerated filer  x | Non-accelerated filer  o |
|---------------------------------------|--------------------------------|------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the ExchangeAct). Yes o   No x

Asof May 7, 2007, there were 97,059,164 shares of the registrant’s commonstock outstanding.

 

----

**TABLEOF CONTENTS**
| Part I. |   | FINANCIAL INFORMATION                                                                                                                          |   |   |   |   |
|--------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Item 1       |   | Financial Statements                                                                                                                           |   |   |   |   |
|         |   | Condensed Consolidated Balance Sheets (Unaudited) at  March 31, 2007 and December 31, 2006        |   |   | 2      |   |
|         |   | Condensed Consolidated Statements of Operations  (Unaudited) for the three months ended March 31, 2007 and 2006 (as  restated)            |   |   | 3      |   |
|         |   | Condensed Consolidated Statements of Cash Flows  (Unaudited) for the three months ended March 31, 2007 and 2006 (as  restated)            |   |   | 4      |   |
|         |   | Notes to Condensed Consolidated Financial Statements  (Unaudited)                                                                              |   |   | 6      |   |
| Item 2       |   | Management’s Discussion and Analysis of Financial  Condition and Results of  Operations                                                   |   |   | 14     |   |
| Item 3       |   | Quantitative and Qualitative Disclosures About Market  Risk                                                                                    |   |   | 25     |   |
| Item 4       |   | Controls and Procedures                                                                                                                        |   |   | 26     |   |
| Part II |   | OTHER INFORMATION                                                                                                                              |   |   |   |   |
| Item 6       |   | Exhibits                                                                                                                                       |   |   | 27     |   |

 

1

----

**CKX, INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)**
|                                                                                                                                                                                                    | ** ** | **March 31,  2007**                                                                  | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                         | ** ** | **(in thousands, except share  and per share information)** | ** ** |
| **ASSETS**                                                                                                                                                                                         | ** ** |                                                                                      | ** ** |                        |       |   | ** ** | ** ** |   |
| Current assets:                                                                                                                                                                                    |       |                                                                                      |       |                        |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                          |       |                                                                                      | $          | 30,141                      |       |   |   | $ | 36,610 |   |   |
| Receivables, net of  allowance for doubtful accounts of $475 at March 31, 2007 and $457 at  December 31, 2006                                                                  |       |                                                                                      | 29,478     |                        |       |   | 23,364 |   |   |
| Inventories, net of  allowance for obsolescence of $656 at March 31, 2007 and $636 at  December 31, 2006                                                                            |       |                                                                                      | 2,321      |                        |       |   | 2,192 |   |   |
| Prepaid expenses                                                                                                                                                                                   |       |                                                                                      | 4,233      |                        |       |   | 2,758 |   |   |
| Prepaid income taxes                                                                                                                                                                               |       |                                                                                      | 2,496      |                        |       |   | 7,014 |   |   |
| Deferred tax assets                                                                                                                                                                                |       |                                                                                      | 932        |                        |       |   | 760 |   |   |
| Total current assets                                                                                                                                                                               |       |                                                                                      | 69,601     |                        |       |   | 72,698 |   |   |
| Property and  equipment—net                                                                                                                                                                   |       |                                                                                      | 42,430     |                        |       |   | 35,329 |   |   |
| Receivables                                                                                                                                                                                        |       |                                                                                      | 620        |                        |       |   | 1,274 |   |   |
| Deferred production costs                                                                                                                                                                          |       |                                                                                      | 1,218      |                        |       |   | — |   |   |
| Other assets                                                                                                                                                                                       |       |                                                                                      | 21,307     |                        |       |   | 20,394 |   |   |
| Goodwill                                                                                                                                                                                           |       |                                                                                      | 142,486    |                        |       |   | 143,946 |   |   |
| Other intangible  assets—net                                                                                                                                                                  |       |                                                                                      | 194,967    |                        |       |   | 199,805 |   |   |
| Deferred tax assets                                                                                                                                                                                |       |                                                                                      | 1,107      |                        |       |   | 1,199 |   |   |
| **TOTAL ASSETS**                                                                                                                                                                                   |       |                                                                                      | $          | 473,736                     |       |   |   | $ | 474,645 |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                      | ** ** |                                                                                      | ** ** |                        |       |   | ** ** | ** ** |   |
| Current liabilities:                                                                                                                                                                               |       |                                                                                      |       |                        |       |   |   |   |   |
| Accounts payable                                                                                                                                                                                   |       |                                                                                      | $          | 9,917                       |       |   |   | $ | 9,612 |   |   |
| Accrued expenses                                                                                                                                                                                   |       |                                                                                      | 15,393     |                        |       |   | 16,831 |   |   |
| Current portion of  long-term debt                                                                                                                                                                 |       |                                                                                      | 652        |                        |       |   | 631 |   |   |
| Income taxes payable                                                                                                                                                                               |       |                                                                                      | 255        |                        |       |   | — |   |   |
| Other current liabilities                                                                                                                                                                          |       |                                                                                      | 439        |                        |       |   | 497 |   |   |
| Deferred revenue                                                                                                                                                                                   |       |                                                                                      | 10,686     |                        |       |   | 12,492 |   |   |
| Total current liabilities                                                                                                                                                                          |       |                                                                                      | 37,342     |                        |       |   | 40,063 |   |   |
| Long-term liabilities:                                                                                                                                                                             |       |                                                                                      |       |                        |       |   |   |   |   |
| Long-term debt                                                                                                                                                                                     |       |                                                                                      | 2,627      |                        |       |   | 3,070 |   |   |
| Deferred revenue                                                                                                                                                                                   |       |                                                                                      | 2,500      |                        |       |   | 2,566 |   |   |
| Other long-term  liabilities                                                                                                                                                                       |       |                                                                                      | 4,389      |                        |       |   | 4,359 |   |   |
| Deferred tax liabilities                                                                                                                                                                           |       |                                                                                      | 25,335     |                        |       |   | 26,623 |   |   |
| Total liabilities                                                                                                                                                                                  |       |                                                                                      | 72,193     |                        |       |   | 76,681 |   |   |
| Minority interest                                                                                                                                                                                  |       |                                                                                      | 3,686      |                        |       |   | 3,953 |   |   |
| Redeemable restricted  common stock—1,672,170 shares outstanding at March 31, 2007 and  December 31, 2006                                                                      |       |                                                                                      | 23,002     |                        |       |   | 23,002 |   |   |
| Commitments and contingencies                                                                                                                                                                      |       |                                                                                      |       |                        |       |   |   |   |   |
| Stockholders’ equity:                                                                                                                                                                         |       |                                                                                      |       |                        |       |   |   |   |   |
| Preferred stock, $.01 par value, authorized  75,000,000 shares:                                                                                                                               |       |                                                                                      |       |                        |       |   |   |   |   |
| Series B—1,491,817  outstanding                                                                                                                                                          |       |                                                                                      | 22,825     |                        |       |   | 22,825 |   |   |
| Series C—1 share  outstanding                                                                                                                                                            |       |                                                                                      | —     |                        |       |   | — |   |   |
| Common stock, $0.01 par  value: authorized 200,000,000 shares, 95,236,994 and  94,237,075 shares issued and outstanding at March 31, 2007 and  December 31, 2006, respectively |       |                                                                                      | 952        |                        |       |   | 942 |   |   |
| Additional  paid-in-capital                                                                                                                                                                        |       |                                                                                      | 373,720    |                        |       |   | 373,115 |   |   |
| Accumulated deficit                                                                                                                                                                                |       |                                                                                      | (33,732    | )                           |       |   | (36,562 | ) |   |
| Accumulated other  comprehensive income                                                                                                                                                            |       |                                                                                      | 11,090     |                        |       |   | 10,689 |   |   |
| Total stockholders’  equity                                                                                                                                                                   |       |                                                                                      | 374,855    |                        |       |   | 371,009 |   |   |
| **TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                |       |                                                                                      | $          | 473,736                     |       |   |   | $ | 474,645 |   |   |

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

----

**CKX, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**
|                                                                                          | ** ** | **Three Months Ended  March 31, 2007**                                | ** ** | **Three Months Ended  March 31, 2006  (as restated)(1)** | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **(in thousands, except share and per  share information)** | ** ** |
| Revenue                                                                                  |       |                                                                                      | $          | 49,598                                                                            |       |   |   | $ | 41,109 |   |   |
| Operating expenses:                                                                      |       |                                                                                      |       |                                                                              |       |   |   |   |   |
| Cost of sales                                                                            |       |                                                                                      | 11,554     |                                                                              |       |   | 13,254 |   |   |
| Selling, general  and administrative expenses                                            |       |                                                                                      | 19,312     |                                                                              |       |   | 13,236 |   |   |
| Corporate  expenses                                                                      |       |                                                                                      | 4,970      |                                                                              |       |   | 4,063 |   |   |
| Depreciation and  amortization                                                           |       |                                                                                      | 5,572      |                                                                              |       |   | 4,737 |   |   |
| Other costs                                                                              |       |                                                                                      | 70         |                                                                              |       |   | 291 |   |   |
| Total operating  expenses                                                                |       |                                                                                      | 41,478     |                                                                              |       |   | 35,581 |   |   |
| Operating income                                                                         |       |                                                                                      | 8,120      |                                                                              |       |   | 5,528 |   |   |
| Interest income                                                                          |       |                                                                                      | 290        |                                                                              |       |   | 739 |   |   |
| Interest expense                                                                         |       |                                                                                      | (416       | )                                                                                 |       |   | (135 | ) |   |
| Other income  (expense)                                                                  |       |                                                                                      | 2          |                                                                              |       |   | (151 | ) |   |
| Income before  income taxes, equity in earnings of affiliates and minority interest |       |                                                                                      | 7,996      |                                                                              |       |   | 5,981 |   |   |
| Income tax  expense                                                                      |       |                                                                                      | 4,809      |                                                                              |       |   | 2,746 |   |   |
| Income before  equity in earnings of affiliates and minority interest                    |       |                                                                                      | 3,187      |                                                                              |       |   | 3,235 |   |   |
| Equity in  earnings (losses) of affiliates                                               |       |                                                                                      | 377        |                                                                              |       |   | (102 | ) |   |
| Minority interest                                                                        |       |                                                                                      | (208       | )                                                                                 |       |   | (162 | ) |   |
| Net income                                                                               |       |                                                                                      | 3,356      |                                                                              |       |   | 2,971 |   |   |
| Dividends on  preferred stock                                                            |       |                                                                                      | (456       | )                                                                                 |       |   | (456 | ) |   |
| Net income  available to common stockholders                                             |       |                                                                                      | $          | 2,900                                                                             |       |   |   | $ | 2,515 |   |   |
| Income per share:                                                                        |       |                                                                                      |       |                                                                              |       |   |   |   |   |
| Basic income per  share                                                                  |       |                                                                                      | $          | 0.03                                                                              |       |   |   | $ | 0.03 |   |   |
| Diluted income  per share                                                                |       |                                                                                      | $          | 0.03                                                                              |       |   |   | $ | 0.03 |   |   |
| Average number of common  shares outstanding:                                            |       |                                                                                      |       |                                                                              |       |   |   |   |   |
| Basic                                                                                    |       |                                                                                      | 96,737,982 |                                                                              |       |   | 92,204,229 |   |   |
| Diluted                                                                                  |       |                                                                                      | 96,947,282 |                                                                              |       |   | 96,205,957 |   |   |

----

(1)          See Note 1 to theUnaudited Condensed Consolidated Financial Statements

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

----

**CKX,INC**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**
|                                                                                         | ** ** | **Three Months  Ended  March 31, 2007** | ** ** | **Three Months  Ended  March 31, 2006  (as restated)(1)** | ** ** |
|-----------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **                                                                              | ** ** | **(in thousands)**                                | ** ** |
| **Cash flows from operating activities:**                           | ** ** |                                                   | ** ** | ** **                                                                    |       |   | ** ** | ** ** |   |
| Net income                                                                              |       |                                                   | $          | 3,356                                                                         |       |   |   | $ | 2,971 |   |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                                                   |       |                                                                          |       |   |   |   |   |
| Depreciation and  amortization                                                          |       |                                                   | 5,572      |                                                                          |       |   | 4,737 |   |   |
| Unrealized foreign  currency gains and losses                                           |       |                                                   | —     |                                                                          |       |   | 151 |   |   |
| Share-based payments                                                                    |       |                                                   | 296        |                                                                          |       |   | 256 |   |   |
| Equity in earnings  (losses) of affiliates, net of cash received                        |       |                                                   | 404        |                                                                          |       |   | 91 |   |   |
| Deferred income  taxes                                                                  |       |                                                   | 466        |                                                                          |       |   | (597 | ) |   |
| Non-cash interest  expense                                                              |       |                                                   | 158        |                                                                          |       |   | — |   |   |
| Provision for  accounts receivable allowance                                            |       |                                                   | 18         |                                                                          |       |   | 7 |   |   |
| Provision for  inventory allowance                                                      |       |                                                   | 20         |                                                                          |       |   | (13 | ) |   |
| Minority interest                                                                       |       |                                                   | 208        |                                                                          |       |   | 162 |   |   |
| Changes in operating assets and liabilities:                                            |       |                                                   |       |                                                                          |       |   |   |   |   |
| Receivables                                                                             |       |                                                   | (5,478     | )                                                                             |       |   | (3,232 | ) |   |
| Inventory                                                                               |       |                                                   | (149       | )                                                                             |       |   | 565 |   |   |
| Prepaid expenses                                                                        |       |                                                   | (1,475     | )                                                                             |       |   | 593 |   |   |
| Prepaid income  taxes                                                                   |       |                                                   | 4,518      |                                                                          |       |   | — |   |   |
| Other assets                                                                            |       |                                                   | (2,535     | )                                                                             |       |   | (1,400 | ) |   |
| Accounts payable  and accrued expenses                                                  |       |                                                   | (1,133     | )                                                                             |       |   | (4,447 | ) |   |
| Deferred revenue                                                                        |       |                                                   | (1,872     | )                                                                             |       |   | (1,287 | ) |   |
| Income taxes  payable                                                                   |       |                                                   | —     |                                                                          |       |   | 3,063 |   |   |
| Other                                                                                   |       |                                                   | (44        | )                                                                             |       |   | (339 | ) |   |
| Net cash provided  by operating activities                                              |       |                                                   | 2,330      |                                                                          |       |   | 1,281 |   |   |
| **Cash flows from investing activities:**                                               | ** ** |                                                   | ** ** | ** **                                                                    |       |   | ** ** | ** ** |   |
| Acquisition of  certain assets of Elvis-themed museum                                   |       |                                                   | —     |                                                                          |       |   | (3,888 | ) |   |
| Acquisition of  additional interest in affiliate                                        |       |                                                   | —     |                                                                          |       |   | (2,838 | ) |   |
| Proceeds from sale  of marketable securities                                            |       |                                                   | —     |                                                                          |       |   | 3,500 |   |   |
| Purchases of property  and equipment                                                    |       |                                                   | (7,729     | )                                                                             |       |   | (3,097 | ) |   |
| Net cash used in  investing activities                                                  |       |                                                   | (7,729     | )                                                                             |       |   | (6,323 | ) |   |
| **Cash flows from financing activities:**                                               | ** ** |                                                   | ** ** | ** **                                                                    |       |   | ** ** | ** ** |   |
| Exercise of  warrants                                                                   |       |                                                   | 243        |                                                                          |       |   | — |   |   |
| Distributions to  minority interest shareholders                                        |       |                                                   | (475       | )                                                                             |       |   | (611 | ) |   |
| Principal payments  on debt                                                             |       |                                                   | (422       | )                                                                             |       |   | (362 | ) |   |
| Dividends paid on  preferred stock                                                      |       |                                                   | (456       | )                                                                             |       |   | (456 | ) |   |
| Net cash used in  financing activities                                                  |       |                                                   | (1,110     | )                                                                             |       |   | (1,429 | ) |   |
| Effect of exchange  rate changes on cash                                                |       |                                                   | 40         |                                                                          |       |   | 277 |   |   |
| **Net  decrease in cash and equivalents**                                               |       |                                                   | (6,469     | )                                                                             |       |   | (6,194 | ) |   |
| **Cash and  cash equivalents—beginning of period**                                 |       |                                                   | 36,610     |                                                                          |       |   | 36,979 |   |   |
| **Cash and  cash equivalents—end of period**                                       |       |                                                   | $          | 30,141                                                                        |       |   |   | $ | 30,785 |   |   |
| **Supplemental cash flow data:**                                                        | ** ** |                                                   | ** ** | ** **                                                                    |       |   | ** ** | ** ** |   |
| Cash paid during the period for:                                                        |       |                                                   |       |                                                                          |       |   |   |   |   |
| Interest                                                                                |       |                                                   | $          | 336                                                                           |       |   |   | $ | 188 |   |   |
| Income taxes                                                                            |       |                                                   | 95         |                                                                          |       |   | 296 |   |   |

----

(1)          See Note 1 to the Unaudited CondensedConsolidated Financial Statements

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

----

**Supplemental CashFlow Information**

TheCompany had the following non-cash investing and financing activities in thethree months ended March 31, 2007 (in thousands):

| Accrued but unpaid  Series B Convertible Preferred Stock Dividends |   | $ | 456 |   |
|-------------------------------------------------------------------------|--------|---|-----|--------|

 

The Company had the following non-cash investing andfinancing activities in the three months ended March 31, 2006 (inthousands):

| Accrued but unpaid  Series B Convertible Preferred Stock Dividends                       |   | $   | 456    |   |
|-----------------------------------------------------------------------------------------------|--------|-----|--------|--------|
| Issuance of note in  connection with the acquisition of certain assets of Elvis-themed museum |   | 750 |   |

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

----

**CKX, INC.**

**NOTESTO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

**1.   Overview andBasis of Presentation**

**General**

CKX, Inc. (the “Company”)is engaged in the ownership, development and commercial utilization ofentertainment content. Our primary assets and operations include the rights tothe name, image and likeness of Elvis Presley and the operation of Graceland,the rights to the name, image and likeness of Muhammad Ali and proprietaryrights to the *IDOLS*televisionbrand, including the *American Idol*series in the United States and local adaptations of the *IDOLS*television show format which,collectively with *American Idol*, air in over 100countries around the world.

The financial information in this report for the threemonths ended March 31, 2007 and 2006 has not been audited, but in theopinion of management all adjustments (consisting only of normal recurringadjustments) considered necessary to present fairly such information have beenincluded. The operating results for the three months ended March 31, 2007and 2006 are not necessarily indicative of the results to be expected for thefull year due to the seasonal nature of some of the Company’s businesses. Thefinancial statements included herein should be read in conjunction with thefinancial statements and notes included in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2006. Certain prior year amounts have beenreclassified to conform to the Company’s current presentation.

**Accounting Policies**

During the three months endedMarch 31, 2007, there have been no significant changes to the Company’saccounting policies and estimates as disclosed in the Company’s Form 10-Kfor the year ended December 31, 2006. The Company adopted the provisionsof Financial Accounting Standards Board (“FASB”) Interpretation No. 48, *Accounting for Uncertainty in Income Taxes* (“FIN 48”), aninterpretation of Statement of Financial Accounting Standards (“SFAS”) No. 109,*Accounting for Income Taxes* (“SFAS 109”)on January 1, 2007. See Note 7.

**Restatement**

Subsequent to the issuance of the Company’s condensedconsolidated financial statements for the period ended March 31, 2006, theCompany’s management determined that certain foreign exchange losses onshort-term intercompany loans were incorrectly recorded in accumulated othercomprehensive income on the Company’s balance sheet rather than as a componentof other income (expense). 19 Entertainment transferred cash generatedfrom operations to the parent company at various times throughout 2006 throughintercompany loans. The cash transfers were expected to be settled with thedeclaration of a dividend, which subsequently occurred in November 2006. TheCompany subsequently determined that the loans were not considered permanentunder FASB No. 52, *Foreign CurrencyTranslation*, and therefore the foreign currency movements on theloans prior to the date of the dividend declaration should have been recordedas a component of other income (expense).

The Company alsodetermined that it was more appropriate to disclose operating-related foreignexchange gains and losses as a component of operating income rather than as acomponent of other income (expense) in its consolidated statement of operationswhich had been its practice in its 2006 interim financial statements. TheCompany therefore restated its financial information for the three months endedMarch 31, 2006 to reflect this reclassification, which is consistent withhow the Company reflected this in its Annual Report on Form 10-K forthe year ended December 31, 2006.

6

----

A summary of the significant effects of therestatement is as follows:
|                                                                                     | ** ** | **Three Months Ended  March 31, 2006** | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| **Statement of  Operations**                                                        | ** ** | **As previously  reported**                           | ** ** | **As restated** | ** ** |
| ** **                                                                          | ** ** | **(in thousands)**                                    | ** ** |
| Other costs                                                                         |       |                                                       | $          | — |   |   |   | $ | 291 |   |   |
| Total operating  expenses                                                           |       |                                                       | 35,290     |   |   |   | 35,581 |   |   |
| Operating income                                                                    |       |                                                       | 5,819      |   |   |   | 5,528 |   |   |
| Other income  (expense)                                                             |       |                                                       | (291       | ) |   |   | (151 | ) |   |
| Income before  income taxes, equity in earnings of affiliates and minority interest |       |                                                       | 6,132      |   |   |   | 5,981 |   |   |
| Income tax  expense                                                                 |       |                                                       | 2,815      |   |   |   | 2,746 |   |   |
| Income before  equity in earnings of affiliates and minority interest               |       |                                                       | 3,317      |   |   |   | 3,235 |   |   |
| Net income                                                                          |       |                                                       | 3,053      |   |   |   | 2,971 |   |   |
| Net income available to  common stockholders                                        |       |                                                       | 2,597      |   |   |   | 2,515 |   |   |

 
|                                                                                    | ** ** | **Three Months Ended  March 31, 2006** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| **Statement of Cash  Flows**                                                       | ** ** | **As previously  reported**                           | ** ** | **As restated** | ** ** |
| ** **                                                                         | ** ** | **(in thousands)**                                    | ** ** |
| Adjustments to reconcile  net income to net cash provided by operating activities: |       |                                                       |       |   |   |   |   |   |   |
| Unrealized  foreign currency gains and losses                                      |       |                                                       | $          | — |   |   |   | $ | 151 |   |   |
| Changes in operating  assets and liabilities:                                      |       |                                                       |       |   |   |   |   |   |   |
| Income taxes payable                                                               |       |                                                       | 3,132      |   |   |   | 3,063 |   |   |
|                                                                                    |            |                                                            |            |  |  |  |  |  |  |  |  |

 

**2.   ComprehensiveIncome**

Thefollowing table is a reconciliation of the Company’s net income tocomprehensive income for the three months ended March 31, 2007 and 2006,respectively (in thousands):
|                                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Net income                                |       | $                                                | 3,356      |   | $ | 2,971 |   |
| Other  comprehensive income:              |       |                                             |       |   |   |
| Foreign currency  translation adjustments |       | 401                                              |       | 2,001 |   |
| Comprehensive income                      |       | $                                                | 3,757      |   | $ | 4,972 |   |

 

Foreign currency translation adjustments result fromthe conversion of 19 Entertainment’s financial statements.

**3.   EarningsPer Share/Common Shares Outstanding**

Earnings per share is computed in accordance with SFASNo. 128, *Earnings Per Share*.Basic earnings per share is calculated by dividing net income available tocommon stockholders by the weighted-average number of shares outstandingduring the period. Diluted earnings per share includes the determinants ofbasic earnings per share and, in addition, gives effect to potentially dilutivecommon shares. Basic and diluted earnings per share for the three months ended March 31,2007 and 2006 are $0.03. The diluted earnings per share calculations excludethe impact of the conversion of 1,491,817 shares of Series B ConvertiblePreferred shares and the impact of all employee share-based stock plan awardsbecause the 

7

----

effect would beanti-dilutive. As a result, 2,100,317 and 1,749,817 shares are excluded fromthe calculation of diluted earnings per share for the three months ended March 31,2007 and 2006, respectively.

Thefollowing table shows the computation of the Company’s basic and dilutedearnings per share for the  three monthsended March 31, 2007 and 2006:
|                                                                                      | ** ** | **Three Months Ended  March 31,**                                              | ** ** |
|--------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|
| ** **                                                                           | ** ** | **2007**                                                                                      | ** ** | **2006** | ** ** |
| ** **                                                                           | ** ** | **(in thousands, except share and per share information)** | ** ** |
| Basic income per share  computation:                                                 |       |                                                                                          |       |   |   |
| Net income available to common stockholders                                          |       | $                                                                                             | 2,900      |   | $ | 2,515 |   |
| Basic common shares outstanding (including  redeemable restricted common stock) |       | 96,737,982                                                                                    |       | 92,204,229 |   |
| Basic income per share                                                               |       | $                                                                                             | 0.03       |   | $ | 0.03 |   |
| Diluted income per share  computation:                                               |       |                                                                                          |       |   |   |
| Net income available to common stockholders                                          |       | $                                                                                             | 2,900      |   | $ | 2,515 |   |
| Basic common shares outstanding (including  redeemable restricted common stock) |       | 96,737,982                                                                                    |       | 92,204,229 |   |
| Incremental shares for assumed exercise of warrants                                  |       | 209,300                                                                                       |       | 4,001,728 |   |
| Diluted common shares outstanding (including  redeemable restricted common stock)    |       | 96,947,282                                                                                    |       | 96,205,957 |   |
| Diluted income  per share                                                            |       | $                                                                                             | 0.03       |   | $ | 0.03 |   |

 

**4.**   IntangibleAssets and Goodwill

Intangibleassets as of March 31, 2007 consist of (dollar amounts in thousands): 

| ** **                                                                                     | ** ** | **Weighted  Average  Remaining  Useful Life** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Amount** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|---------------------------|------------|
| Definite Lived  Intangible Assets:                                                             |       |                                               |       |                        |       |                          |       |                      |       |   |   |
| Presley record, music  publishing, film and  video rights                                      |       | 12.8 years                                         |       | $                           | 28,900     |                          |       | $                         | (3,952     | ) |   | $ | 24,948 |   |
| Other Presley  intangible assets                                                               |       | 14.9 years                                         |       | 13,622                      |       |                          | (3,032     | )                         |       | 10,590 |   |
| 19 Entertainment  IDOLS television programming, merchandising and sponsorship contracts   |       | 5.0 years                                          |       | 79,461                      |       |                          | (21,727    | )                         |       | 57,734 |   |
| 19 Entertainment  other artist management, recording, merchandising, and sponsorship contracts |       | 2.1 years                                          |       | 16,078                      |       |                          | (8,201     | )                         |       | 7,877 |   |
| MBST artist  contracts, profit participation rights and other intangible assets                |       | 4.6 years                                          |       | 4,270                       |       |                          | (1,216     | )                         |       | 3,054 |   |
|                                                                                           |       |                                               |       | $                           | 142,331    |                          |       | $                         | (38,128    | ) |   | $ | 104,203 |   |

 

| Indefinite Lived Intangible Assets:             |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Trademarks, publicity  rights and other intellectual  property |   |   |   |   |   |   |   | $      | 90,764 |   |
|                                                                |        |        |        |        |        |        |        |        |        |  |

 

8

----

Intangible assetsas of December 31, 2006 consist of (in thousands): 

| ** **                                                                                          | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Amount** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|---------------------------|------------|
| Definite Lived  Intangible Assets:                                                                  |       |                        |       |                          |       |                      |       |   |   |
| Presley record,  music publishing, film and video rights                                       |       | $                           | 28,900     |                          |       | $                         | (3,466     | ) |   | $ | 25,434 |   |
| Other Presley  intangible assets                                                                    |       | 13,622                      |       |                          | (2,715     | )                         |       | 10,907 |   |
| 19 Entertainment  IDOLS television programming, merchandising and  sponsorship relationships   |       | 79,340                      |       |                          | (18,812    | )                         |       | 60,528 |   |
| 19 Entertainment  other artist management, recording, merchandising, and sponsorship  relationships |       | 16,054                      |       |                          | (7,126     | )                         |       | 8,928 |   |
| MBST artist  contracts, profit participation rights and other intangible assets                     |       | 4,270                       |       |                          | (1,026     | )                         |       | 3,244 |   |
|                                                                                                |       | $                           | 142,186    |                          |       | $                         | (33,145    | ) |   | $ | 109,041 |   |

 

| Indefinite Lived Intangible Assets:             |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Trademarks, publicity  rights and other intellectual  property |   |   |   |   |   |   |   | $      | 90,764 |   |
|                                                                |        |        |        |        |        |        |        |        |        |  |

 

Amortizationexpense for definite lived intangible assets was $4.9 million and $4.2 millionfor the three months ended March 31, 2007 and 2006, respectively. At March 31,2007, projected future amortization expense of definite lived intangible assetsis as follows: 

| ** **                              | ** ** | **(in thousands)** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|
| For the remaining  nine months of 2007  |       |                    | $          | 14,500 |   |   |
| For the years  ending December 31, |       |                    |       |   |   |
| 2008                                    |       |                    | 18,300     |   |   |
| 2009                                    |       |                    | 16,600     |   |   |
| 2010                                    |       |                    | 15,900     |   |   |
| 2011                                    |       |                    | 14,800     |   |   |

 

Goodwill as of March 31,2007 consists of (dollar amounts in thousands): 

| ** **                       | ** ** | **Balance at  December 31,  2006** | ** ** | **2007  Foreign  Currency  Translation  Adjustment** | ** ** | **Other  Adjustments** | ** ** | **Balance at  March 31,  2007** | ** ** |
|----------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------|------------|------------------------|------------|-------------------------------------------|------------|
| Presley royalties  and licensing |       |                                         | $          | 2,432                                                |       |                   |       | $                                         | —     |   |   |   | $ | — |   |   | $ | 2,432 |   |
| Presley Graceland  operations    |       |                                         | 7,675      |                                                 |       |                   | —     |                                      |       |   | — |   |   | 7,675 |   |
| 19 Entertainment                 |       |                                         | 123,742    |                                                 |       |                   | 189        |                                      |       |   | (1,649 | ) |   | 122,282 |   |
| MBST                             |       |                                         | 10,097     |                                                 |       |                   | —     |                                      |       |   | — |   |   | 10,097 |   |
| Total                            |       |                                         | $          | 143,946                                              |       |                   |       | $                                         | 189        |   |   |   | $ | (1,649 | ) |   | $ | 142,486 |   |

 

The implementation of FIN 48 resulted in an increasein goodwill of $0.2 million as of January 1, 2007. The utilization of aportion of the Company’s long-term deferred tax asset resulted in a decrease ingoodwill and the valuation allowance of $1.8 million in the three monthsended March 31, 2007.

**5.   Debt**

At March 31,2007, the Company had $2.8 million outstanding under a subordinated promissorynote issued in connection with the acquisition of the Presley Business, whichbears interest at the rate of 5.385% per annum, and $0.5 million outstandingunder a note issued in conjunction with the Presley Business’ 

9

----

acquisition of memorabilia and certain other assets ofa Las Vegas-based Elvis-themed museum during the first quarter of 2006, whichbears interest at 5% per annum.

On May 24,2006, the Company entered into a $125.0 million revolving credit agreement (the“Credit Facility”) with various lenders, including Bear, Stearns & Co.Inc. As of March 31, 2007, the Company had not drawn on the CreditFacility. A commitment fee of 0.50% on the daily unused portion of the CreditFacility is payable monthly in arrears. The Credit Facility also contains covenants that regulate the Company’sand its subsidiaries’ incurrence of debt, disposition of property and capitalexpenditures.

**6.   Stockholders’Equity**

During the three months ended March 31, 2007,1,096,378 warrants with an exercise price of $2.00 per share wereexercised.  Of these, warrantsrepresenting 121,315 shares of common stock were exercised for cash resultingin cash proceeds to the Company of $0.2 million, and warrants representing975,063 shares of common stock were exercised pursuant to a cashless exerciseoption which resulted in the issuance of 813,227 shares of common stock.

**7.**   IncomeTaxes

In calculating the provision for income taxes on aninterim basis, the Company uses an estimate of the annual effective tax ratebased upon the facts and circumstances known at that time. The Company’seffective tax rate is based on expected income, statutory tax rates andpermanent differences applicable to the Company in various jurisdictions inwhich the Company operates.

For the three months ended March 31, 2007, the Companyrecorded a provision for income taxes of $4.8 million.  The provision is comprised of $3.3 million,reflecting the Company's estimated 2007 effective tax rate of 41.9%, and $1.5million related to a change in the expected historical U.K. income tax filingposition which resulted in the reversal of a previously recorded deferred taxassset. As this reversal related to the purchase of 19 Entertainment, there wasa decrease in the valuation allowance, offset by a decrease in goodwill, of$1.8 million.

Forthe three months ended March 31, 2006, the Company’s estimated effective taxrate was 45.9%.  The Company recorded aprovision for income taxes of $2.7 million for the three months ended March 31,2006.

Thedecrease in the 2007 effective tax rate relates primarily to the Company’sexpected use in 2007 of its foreign tax credits to offset a significant portionof its U.K. tax expense.  The Company wasunable to offset a significant portion of its U.K. tax expense with foreigncredits in 2006.

TheCompany adopted the provisions of FIN 48, an interpretation of SFAS 109 on January 1,2007. In response to the issuance of FIN 48, the Company reviewed its uncertaintax positions in accordance with the recognition standards established by FIN48. As a result of this review, the Company has adjusted its estimate of itsuncertain tax positions by recognizing an additional liability (includinginterest and penalties) of approximately $0.2 million through a charge togoodwill and an additional liability (including interest and penalties) ofapproximately $0.1 million through a charge to accumulated deficit. Theliability is included in income taxes payable. The Company does not expect anymaterial changes to the estimated amount of liability associated with itsuncertain tax positions through January 1, 2008. If all the uncertain taxpositions were settled with the taxing authorities, there would be no effect onthe effective tax rate.

TheCompany generally recognizes interest and penalties related to uncertain taxpositions through income tax expense. As of January 1, 2007, the Companyhad accrued approximately $0.1 million for the payment of tax-related interestand penalties.

Thereare no federal, state or city audits in process as of March 31, 2007. Opentax years related to federal filings are for the years ended December 31, 2003,2004 and 2005.  Open tax years for stateand 

10

----

local jurisdictions are not expected to have amaterial impact on the financial statements in the event of an examination.

The U.K.’s Revenue & Customs (“HMRC”) hasreviewed the historic 19 Entertainment Ltd. UK group through December 2005.HMRC usually has twelve months from the end of the accounting period to reviewand query each return.

**8.   Commitments andContingencies**

There are variouslawsuits and claims pending against the Company. The Company believes that anyultimate liability resulting from these actions or claims will not have amaterial adverse effect on the Company’s results of operations, financialcondition or liquidity.

In addition to scheduledmaturities of debt, obligations to redeem preferred stock and obligations tothe seller of the Presley Business, to certain sellers of 19 Entertainmentand to the sellers of MBST and the Ali Business, the Company has future cashobligations under various types of contracts. The Company leases office spaceand equipment under long-term operating leases. The Company has also enteredinto long-term employment agreements with certain of its executives and otherkey employees. These employment agreements typically contain provisions thatallow the Company to terminate the contract with good cause.

OnAugust 17, 2006, the Company announced that, together with itssubsidiaries, Elvis Presley Enterprises, Inc. and Elvis PresleyEnterprises LLC, it has reached an agreement with Cirque du Soleil and MGMMIRAGE (“MGM”) to create a permanent Elvis Presley show at MGM’s CityCenterhotel/casino, which is currently under construction in Las Vegas. The new ElvisPresley show is expected to open with the CityCenter hotel/casino inNovember 2009. CKX and Cirque du Soleil have each agreed to pay one-halfof the creative development and production costs of the new Elvis Presley show.CKX expects its portion of the investment to be approximately $24 million, withthe largest amount expected to be funded in the later stages of development.

**9.   SegmentInformation**

Asof March 31, 2007, the Company has four reportable segments: PresleyBusiness—Royalties and Licensing, Presley Business—Graceland Operations, 19Entertainment and the Ali Business. The operating results of MBST are reportedas part of Corporate and Other for segment purposes. These designations havebeen made as the discrete operating results of these segments are reviewed bythe Company’s chief operating decision maker to assess performance and makeoperating decisions. All inter-segment transactions have been eliminatedin the condensed consolidated financial statements.

The Company evaluates itsoperating performance based on several factors, including a financial measureof operating income (loss) before non-cash depreciation of tangibleassets and non-cash amortization of intangible assets and non-cashcompensation (which we refer to as “OIBDAN”). The Company considers OIBDAN tobe an important indicator of the operational strengths and performance of itsbusinesses and the critical measure the chief operating decision maker (CEO)uses to manage and evaluate its businesses, including the ability to providecash flows to service debt. However, a limitation of the use of OIBDAN as aperformance measure is that it does not reflect the periodic costs of certaincapitalized tangible and intangible assets used in generating revenue in ourbusinesses or stock-based compensation expense. Accordingly, OIBDAN should beconsidered in addition to, not as a substitute for, operating income (loss),net income (loss) and other measures of financial performance reported inaccordance with US GAAP as OIBDAN is not a GAAP equivalent measurement.

11

----

 

| ** **                                   | ** ** | **Presley Business**            | ** ** | ** **                        | ** ** | ** **                | ** ** | ** **            | ** ** | ** **            | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|-----------------------------------|------------|---------------------------|------------|-----------------------|------------|-----------------------|------------|
| **Segment Information**                 | ** ** | ** **                           | ** ** | **Royalties and  Licensing** | ** ** | **Graceland  Operations** | ** ** | **19  Entertainment** | ** ** | **Ali Business** | ** ** | **Corporate  and other** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | **(amounts in thousands)** | ** ** |
| **Three months ended  March 31, 2007:** | ** ** |                                 | ** ** | ** **                        |       |                      | ** ** | ** **            |       |                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Revenue                                      |       |                                 | $          | 3,759                             | ** ** |                      |       | $                     | 6,162      |                  |       |   | $ | 37,406 | ** ** |   |   | $ | 1,373 | ** ** |   |   | $ | 898 |   |   | $ | 49,598 |   |
| Operating income (loss)                      |       |                                 | $          | 631                               | ** ** |                      |       | $                     | (1,255     | )                     |       |   | $ | 13,642 | ** ** |   |   | $ | 716 | ** ** |   |   | $ | (5,614 | ) |   | $ | 8,120 |   |
| Depreciation and  amortization               |       |                                 | $          | 645                               | ** ** |                      |       | $                     | 502        |                  |       |   | $ | 4,189 | ** ** |   |   | $ | 9 | ** ** |   |   | $ | 227 |   |   | $ | 5,572 |   |
| OIBDAN                                       |       |                                 | $          | 1,283                             | ** ** |                      |       | $                     | (742       | )                     |       |   | $ | 17,886 | ** ** |   |   | $ | 729 | ** ** |   |   | $ | (5,168 | ) |   | $ | 13,988 |   |
| **Three months ended  March 31, 2006:** | ** ** |                                 | ** ** | ** **                        |       |                      | ** ** | ** **            |       |                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Revenue                                      |       |                                 | $          | 3,046                             | ** ** |                      |       | $                     | 5,178      |                  |       |   | $ | 31,379 | ** ** |   |   | $ | — | ** ** |   |   | $ | 1,506 |   |   | $ | 41,109 |   |
| Operating income (loss)                      |       |                                 | $          | 1,346                             | ** ** |                      |       | $                     | (1,131     | )                     |       |   | $ | 9,273 | ** ** |   |   | $ | — | ** ** |   |   | $ | (3,960 | ) |   | $ | 5,528 |   |
| Depreciation and  amortization               |       |                                 | $          | 645                               | ** ** |                      |       | $                     | 342        |                  |       |   | $ | 3,548 | ** ** |   |   | $ | — | ** ** |   |   | $ | 202 |   |   | $ | 4,737 |   |
| OIBDAN                                       |       |                                 | $          | 1,993                             | ** ** |                      |       | $                     | (784       | )                     |       |   | $ | 12,866 | ** ** |   |   | $ | — | ** ** |   |   | $ | (3,554 | ) |   | $ | 10,521 |   |
| **Asset Information:**                       | ** ** |                                 | ** ** | ** **                        |       |                      | ** ** | ** **            |       |                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Segment assets at  March 31, 2007       |       |                                 | $          | 73,131                            | ** ** |                      |       | $                     | 68,575     |                  |       |   | $ | 224,923 | ** ** |   |   | $ | 55,379 | ** ** |   |   | $ | 51,728 |   |   | $ | 473,736 |   |
| Segment assets at  December 31, 2006    |       |                                 | $          | 73,705                            | ** ** |                      |       | $                     | 62,440     |                  |       |   | $ | 222,122 | ** ** |   |   | $ | 54,806 | ** ** |   |   | $ | 61,572 |   |   | $ | 474,645 |   |
|                                              |            |                                      |            |                                   |            |                           |            |                       |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The increase in Graceland Operations segment assets isprimarily related to the purchase of additional land adjacent to Graceland for$6.7 million.

12

----

Below is a reconciliationof the Company’s OIBDAN to net income:

| ** **                       | ** ** | **Three Months Ended  March 31,**                     | ** ** |
|----------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                       | ** ** | **     2007     ** | ** ** | **     2006     ** | ** ** |
| ** **                       | ** ** | **(amounts in thousands)**                                 | ** ** |
| OIBDAN                           |       |                                                                 | $          | 13,988 |   |   |   | $ | 10,521 |   |   |
| Depreciation and amortization    |       |                                                                 | (5,572     | ) |   |   | (4,737 | ) |   |
| Non-cash compensation            |       |                                                                 | (296       | ) |   |   | (256 | ) |   |
| Interest income                  |       |                                                                 | 290        |   |   |   | 739 |   |   |
| Interest expense                 |       |                                                                 | (416       | ) |   |   | (135 | ) |   |
| Equity in earnings of affiliates |       |                                                                 | 377        |   |   |   | (102 | ) |   |
| Other income (expense)           |       |                                                                 | 2          |   |   |   | (151 | ) |   |
| Income tax expense               |       |                                                                 | (4,809     | ) |   |   | (2,746 | ) |   |
| Minority interest                |       |                                                                 | (208       | ) |   |   | (162 | ) |   |
| Net income                       |       |                                                                 | $          | 3,356 |   |   |   | $ | 2,971 |   |   |

 

* * * * *

**FORWARDLOOKING STATEMENTS**

In addition to historicalinformation, this Form 10-Q (this “Quarterly Report”) containsforward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended. Forward-looking statements are thosethat predict or describe future events or trends and that do not relate solelyto historical matters. You can generally identify forward-lookingstatements as statements containing the words “believe,” “expect,” “will,” “anticipate,”“intend,” “estimate,” “project,” “assume” or other similar expressions,although not all forward-looking statements contain these identifyingwords. All statements in this Quarterly Report regarding our future strategy,future operations, projected financial position, estimated future revenue,projected costs, future prospects, and results that might be obtained bypursuing management’s current plans and objectives are forward-lookingstatements. You should not place undue reliance on our forward-lookingstatements because the matters they describe are subject to known and unknownrisks, uncertainties and other unpredictable factors, many of which are beyondour control. Our forward-looking statements are based on the informationcurrently available to us and speak only as of the date on which this QuarterlyReport was filed with the Securities and Exchange Commission (“SEC”). We expresslydisclaim any obligation to issue any updates or revisions to our forward-lookingstatements, even if subsequent events cause our expectations to changeregarding the matters discussed in those statements. Over time, our actualresults, performance or achievements will likely differ from the anticipatedresults, performance or achievements that are expressed or implied by ourforward-looking statements, and such difference might be significant andmaterially adverse to our stockholders.

13

----

**Item 2.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

*Management’sdiscussion and analysis of financial condition and results of operations shouldbe read in conjunction with the historical financial statements and footnotesof the registrant included in its Annual Report on Form 10-K for theyear ended December 31, 2006. Our future results of operations may changematerially from the historical results of operations reflected in ourhistorical financial statements.*

**Restatement**

Management’s Discussion and Analysis of FinancialCondition and Results of Operations gives effect to the restatement discussedin Note 1 to the condensed consolidated financial statements in Item 1 of this Form 10-Q.

**General**

We are engaged in theownership, development and commercial utilization of entertainment content. Ourprimary assets and operations include the rights to the name, image andlikeness of Elvis Presley and the operations of Graceland, the rights to thename, image and likeness of Muhammad Ali and proprietary rights to the *IDOLS*television brand, including the *American Idol* series in the United States and localadaptations of the *IDOLS *televisionshow format which, collectively with *American Idol*,air in over 100 countries around the world. Our existing properties generaterecurring revenues across multiple entertainment platforms, including music andtelevision; licensing and merchandising; artist management; themed attractionsand touring/live events.

On February 7, 2005,RFX Acquisition LLC, a management group led by Robert F.X. Sillerman, acquiredcontrol of the Company (formerly known as Sports Entertainment Enterprises, Inc.)which had been inactive since it sold all of its assets in August 2002.Simultaneous with that transaction, the Company acquired an 85% interest in thePresley Business. The former owner of the Presley Business maintains a 15%interest in the business, is entitled to certain future distributions and hasother contractual rights. On March 17, 2005, the Company acquired 100% ofthe outstanding capital stock of 19 Entertainment. On August 9, 2005 weacquired 100% of the outstanding capital stock of MBST. On April 10, 2006,the Company acquired an 80% interest in the Ali Business. The former owner ofthe Ali Business maintains a 20% interest in the business and is entitled tocertain future distributions and has other contractual rights.

**Presley Business**

The Presley Businessconsists of entities which own and/or control the commercial utilization of thename, image and likeness of Elvis Presley and the operation of the Gracelandmuseum and related attractions and derive revenue from Elvis Presley’stelevision specials, films and certain of his recorded musical works. ThePresley Business consists of two reportable segments: Royalties and Licensing—intellectualproperty, including the licensing of the name, image, likeness and trademarksassociated with Elvis Presley, as well as other owned and/or controlledintellectual property and the collection of royalties from certain motionpictures, television specials and recorded musical works and musiccompositions; and Graceland Operations - the operation of the Graceland museumand related attractions and retail establishments, including Elvis Presley’sHeartbreak Hotel and other ancillary real estate assets.

The Royalties andLicensing segment generates revenue from the name, image and likeness of ElvisPresley, including physical and intellectual property owned or created by ElvisPresley during his life. The primary revenue source of this segment comes fromlicensing Elvis’ name and likeness for consumer products, commercials and otheruses and royalties and other income derived from intellectual property createdby Elvis including records, movies, videos and music publishing. Licensingrevenue is primarily derived from long-term contracts with terms of one to tenyears. Although we seek to obtain significant minimum guarantees, our licensingrevenue varies based on the actual product sales generated by licensees. Theintellectual property created by Elvis during his lifetime that is owned by theCompany has generally been assigned to third parties for commercialexploitation under long-term agreements. 

14

----

Althoughwe maintain certain controls over the use of this content and, in certaincases, have rights to terminate these agreements if the third party fails toperform, our revenue from this intellectual property is highly dependant uponthe ability of third parties to successfully market the content.

The Graceland Operationssegment generates its primary revenue from ticket and merchandise sales andrelated income from public tours of Graceland as well as from the operation ofElvis Presley’s Heartbreak Hotel and the Meadow Oaks and Craft Manor apartmentcomplexes. Revenue from Graceland has historically been seasonal with sharplyhigher numbers of visitors during the late spring and summer seasons ascompared to the fall and winter seasons.

Most of the PresleyBusiness’ revenue sources are dependant upon the public’s continued interest inElvis Presley and the intellectual property he created.

Our significant costs tooperate the Presley Business include salaries, rent and other overhead costs.Most of our costs do not vary significantly with our revenue. Our discretionarycosts are generally in our marketing and promotions department which weprimarily incur to maintain and/or increase the number of visitors toGraceland. We may also incur expenses in exploring opportunities to bringElvis-related attractions to Las Vegas and other strategic locations throughoutthe world.

**19 Entertainment**

19 Entertainment generatesrevenue from the creation and production of entertainment properties. Ourprimary revenue sources include production and license fees and related ratingsand rankings bonuses from television programs, and royalties from the sale ofrecorded music by artists signed to our record label. We also derive revenuefrom the sale of merchandise, sponsorships and tours based on our televisionprograms and recorded music artists, and fee income from management clients.

The majority of 19Entertainment’s revenue is derived from production and license fees and relatedperformance bonuses from producing and licensing the *IDOLS* television show format in various countries andancillary revenue streams from the *IDOLS*brand. Ancillary revenue from the *IDOLS*brand is generated through agreements which provide us with the option to signfinalists on the *IDOLS* televisionshows to long-term recording contracts, concert tours we produce featuring *IDOLS* finalists and the sale ofsponsorships and merchandise involving the *IDOLS*brand.

Most of our *IDOLS* related revenue is paid underagreements with our global television production and distribution partner,FremantleMedia Limited (“FremantleMedia”), and our principal global recordlabel partners, Ronagold Limited (an affiliate of SonyBMG) for seasons *American Idol 1*through *American Idol 4*and Simco Limited (an affiliate of SonyBMG) for all contracted seasonssubsequent to *American Idol 4*. Therefore, weare highly dependent upon the continued ability of these entities tosuccessfully maintain the *IDOLS*brand and promote our recording artists.

Other than *American Idol*, which is discussed below, the *IDOLS* television shows are generallyproduced or licensed under one year contracts whereby each local televisionnetwork has the right, but not the obligation, to renew the agreement foradditional years. Our recording artists are generally signed to long-termrecording contracts under which we and Sony BMG have the right, but not theobligation, to require the artist to release a specified number of albums.

Our revenue from the *IDOLS* brand is highly dependent upon thecontinued success of the *American Idol*series, which currently airs on the Fox television network in the UnitedStates, and local adaptations of the *IDOLS*television show which air around the world. Our revenue is also dependent uponthe continued success and productivity of our recording artists and managementclients. A portion of our revenue from the *American Idol*series is dependent upon the number of hours of programming we deliver. Thecurrent sixth broadcast season has aired 31.5 hours during the first quarter of2007 and we expect to air 17.5 hours in the second quarter for a total of 49hours. Included in the second quarter hours are 1.5 hours for a special episodetitled “Idol Gives Back,” to raise money for several charities, for which theCompany will contribute its license fees. In 2006 we aired 30.5 hours and 14.5hours during the first and 

15

----

secondquarters, respectively, for a total of 45 hours. On November 28, 2005,19 Entertainment entered into a series of agreements with Fox,FremantleMedia and SonyBMG/Simco, related to the *AmericanIdol* television program. Under the terms of the agreements, Fox hasguaranteed at least two more seasons of *American Idol*(2008-2009),with an automatic renewal for up to two additional seasons upon the showachieving certain minimum ratings in 2009 and potentially 2010. Additionalterms of the agreements call for Fox to order a minimum of 37 hours and amaximum of 45 hours of *American Idol*programmingeach season (though 19 Entertainment and FremantleMedia can agree to produceadditional hours) and to pay 19 Entertainment and FremantleMedia an increasedlicense fee per season. Fox also agreed to make an annual payment to19 Entertainment tied to the most recent recording agreement with SonyBMG.

19 Entertainment’s revenueand OIBDAN are seasonal in nature, reflecting the timing of our televisionshows and tours in various markets. 19 Entertainment generates higher revenueand OIBDAN during the first three quarters of the calendar year, whichcorresponds to the dates our *American Idol*and *So You Think You Can Dance* series air onFox in the United States and the *American Idol*tour is presented. 19 Entertainment’s revenues reflect its contractual share ofthe *IDOLS* television revenue representingproducer, format and licensing fees as well as ratings and rankings bonuses anddo not include the revenues earned or the production costs incurred directly byour production and distribution partner, FremantleMedia. 19 Entertainmentrecords all of the television and sponsorship revenue for *So You ThinkYou Can Dance* and operating expenses include the contractual sharethat we distribute to our production partners.

Our significant costs tooperate 19 Entertainment include salaries and other compensation,royalties, tour expenses, rents and general overhead costs. Our discretionarycosts include salary and overhead costs incurred in the development of newentertainment content.

**Ali Business**

The Ali Business consistsof the commercial exploitation of the name, image, likeness and intellectualproperty of Muhammad Ali, primarily through endorsement and licensingarrangements.

The primary revenue sourcecomes from licensing Muhammad Ali’s name and likeness for consumer products,commercials and other uses. Licensing revenue is primarily derived from long-termcontracts with terms of one to five years. Although we seek to obtainsignificant minimum guarantees, our licensing revenue varies based on theactual product sales generated by licensees. The intellectual property that isowned by the Company is licensed to third parties for commercial exploitationunder long-term agreements. Although we maintain certain controls over the useof this content and, in certain cases, have rights to terminate theseagreements if the third party fails to perform, our revenue from thisintellectual property is highly dependant upon the ability of third parties tosuccessfully market the content. Most of our revenue sources are dependant uponthe public’s continued interest in Muhammad Ali and associated intellectualproperty. The Ali Business also generates revenue from sports memorabiliasignings performed by Mr. Ali.

Our significant costs tooperate the Ali Business include commissions, salaries and other generaloverhead costs. With the exception of commissions, most of our costs do notvary significantly with our revenue.

**Other**

MBST is a full servicemanagement company representing an array of leading entertainers includingRobin Williams, Billy Crystal and Woody Allen. In addition to its managementactivities, MBST produces motion pictures.

MBST earns revenue througharrangements with artists that result in MBST receiving a percentage of theartists’ performance revenue, from consulting fees paid by advisory clients andfrom participations in films it has produced. Executives and other employees ofMBST are also actively involved in developing 

16

----

andimplementing revenue enhancement opportunities for the Company’s otherentertainment content and assets.

Our significant costs tooperate MBST include salaries, rent and general overhead costs. Most of thesecosts do not vary significantly with our revenue.

**Use of OIBDAN**

We evaluate our operatingperformance based on several factors, including a financial measure ofoperating income (loss) before non-cash depreciation of tangible assetsand non-cash amortization of intangible assets and non-cash compensation(which we refer to as “OIBDAN”). The Company considers OIBDAN to be animportant indicator of the operational strengths and performance of ourbusinesses and the critical measure the chief operating decision maker (CEO)uses to manage and evaluate our businesses, including the ability to providecash flows to service debt. However, a limitation of the use of OIBDAN as aperformance measure is that it does not reflect the periodic costs of certaincapitalized tangible and intangible assets used in generating revenue in ourbusinesses or stock-based compensation expense. Accordingly, OIBDAN should beconsidered in addition to, not as a substitute for, operating income (loss),net income (loss) and other measures of financial performance reported inaccordance with US GAAP as OIBDAN is not a GAAP equivalent measurement.

We have reconciled OIBDANto operating income in the following consolidated operating results tables forthe three months ended March 31, 2007 and 2006.

**ConsolidatedOperating Results Three Months Ended March 31, 2007Compared to Three Months Ended March 31, 2006**
|                                | ** ** | **Three Months  Ended  March 31,  2007** | ** ** | **Three Months  Ended  March 31,  2006** | ** ** | **Variance** | ** ** |
|--------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|--------------|------------|
| ** **                     | ** ** | **(in thousands)**                            | ** ** |
| Revenue                        |       |                                               | $          | 49,598                                             |       |         |       | $ | 41,109 |   |   |   | $ | 8,489 |   |   |
| Operating  expenses            |       |                                               | 41,478     |                                               |       |         | 35,581     |   |   |   | 5,897 |   |   |
| Operating income               |       |                                               | 8,120      |                                               |       |         | 5,528      |   |   |   | 2,592 |   |   |
| Income tax  expense            |       |                                               | 4,809      |                                               |       |         | 2,746      |   |   |   | 2,063 |   |   |
| Net income                     |       |                                               | 3,356      |                                               |       |         | 2,971      |   |   |   | 385 |   |   |
| Operating income               |       |                                               | $          | 8,120                                              |       |         |       | $ | 5,528 |   |   |   | $ | 2,592 |   |   |
| Depreciation and  amortization |       |                                               | 5,572      |                                               |       |         | 4,737      |   |   |   | 835 |   |   |
| Non-cash  compensation         |       |                                               | 296        |                                               |       |         | 256        |   |   |   | 40 |   |   |
| OIBDAN                         |       |                                               | $          | 13,988                                             |       |         |       | $ | 10,521 |   |   |   | $ | 3,467 |   |   |

 

The 2007 results reflect afull three months of results for the Ali Business as it was acquired in April2006. In addition, revenue growth in 2007 was driven by 19 Entertainment, whichbenefited from the continued success and growth of its television programmingand related licensing initiatives, primarily related to *AmericanIdol*. Higher operating expenses for the three months ended March 31,2007 resulted from higher overall costs at the Presley Business and 19Entertainment to support revenue growth and higher corporate expenses. 

 

17

----

**Presley Business—Royaltiesand Licensing**

Thefollowing table provides a breakdown of Presley Business—Royalties andLicensing revenue, cost of sales, selling, general and administrative expensesand OIBDAN for the three months ended March 31, 2007 and 2006:
|                                                                               | ** ** | **2007**                | ** ** | **2006** | ** ** | **Variance** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------|------------|----------|------------|--------------|------------|
| ** **                                                                    | ** ** | **(in thousands)** | ** ** |
| Revenue                                                                       |       | $                       | 3,759      |     | $          | 3,046        |       |   | $ | 713 |   |   |
| Cost of sales                                                                 |       | (316                    | )          | (13      | )          |         | 303        |   |   |
| Selling, general  and administrative expense, excluding non-cash compensation |       | (2,160                  | )          | (1,040   | )          |         | 1,120      |   |   |
| OIBDAN                                                                        |       | $                       | 1,283      |     | $          | 1,993        |       |   | $ | (710 | ) |   |
| OIBDAN                                                                        |       | $                       | 1,283      |     | $          | 1,993        |       |   | $ | (710 | ) |   |
| Depreciation and  amortization                                                |       | (645                    | )          | (645     | )          |         | —     |   |   |
| Non-cash  compensation                                                        |       | (7                      | )          | (2       | )          |         | (5         | ) |   |
| Operating income                                                              |       | $                       | 631        |     | $          | 1,346        |       |   | $ | (715 | ) |   |

 

The increase in royaltiesand licensing revenue was due to sales of a limited edition collectible DVD boxset of Elvis movies of $0.9 million and increased licensing royalties of $0.4million, offset by a $0.6 million royalty audit settlement with SonyBMGreceived in the prior year period. Royalties and licensing cost of salesincreased $0.3 million due to the sales of the DVD box set. Royalties andlicensing selling, general and administrative expenses increased $1.1 milliondue to advertising and marketing of the DVD box set, including upfront costs toproduce an infomercial.

**Presley Business—GracelandOperations**

Thefollowing table provides a breakdown of the Presley Business—GracelandOperations revenue, cost of sales, selling, general and administrative expensesand OIBDAN for the three months ended March 31, 2007 and 2006: 

| ** **                                                                    | ** ** | **2007**                | ** ** | **2006** | ** ** | **Variance** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------|------------|----------|------------|--------------|------------|
| ** **                                                                    | ** ** | **(in thousands)** | ** ** |
| Revenue                                                                       |       | $                       | 6,162      |     | $          | 5,178        |       |   | $ | 984 |   |   |
| Cost of sales                                                                 |       | (1,060                  | )          | (1,056   | )          |         | 4          |   |   |
| Selling, general  and administrative expense, excluding non-cash compensation |       | (5,844                  | )          | (4,906   | )          |         | 938        |   |   |
| OIBDAN                                                                        |       | $                       | (742       | )        | $          | (784         | )          |   | $ | 42 |   |   |
| OIBDAN                                                                        |       | $                       | (742       | )        | $          | (784         | )          |   | $ | 42 |   |   |
| Depreciation and  amortization                                                |       | (502                    | )          | (342     | )          |         | (160       | ) |   |
| Non-cash  compensation                                                        |       | (11                     | )          | (5       | )          |         | (6         | ) |   |
| Operating income                                                              |       | $                       | (1,255     | )        | $          | (1,131       | )          |   | $ | (124 | ) |   |

 

Tour and exhibit revenue of $2.4 million in 2007accounted for $0.5 million of the increase in Graceland Operations revenue.This increase resulted from a 10.3% increase in per visitor spending and an11.4% increase in attendance to 94,742 in 2007 from 85,026 in 2006. Per visitorspending increased due to an increase in the number of visitors choosingpremium tour packages. Attendance in 2006 was negatively impacted by HurricaneKatrina.

18

----

Retail operations revenue of $2.3 million in 2007accounted for $0.1 million of the overall increase in revenue due to theincrease in attendance.

Other revenue of $1.5 million increased by $0.4million in 2007 over the prior year due primarily to higher overall hotel andrental revenue, partially due to the operations of newly purchased additional propertiesadjoining Graceland.

Graceland Operations costof sales remained flat for the three months ended March 31, 2007 comparedto 2006. Graceland Operations selling, general and administrative expensesincreased $0.9 million due primarily to $0.4 million in increasedprofessional services and related costs associated with our new initiativeswith Cirque du Soleil for the creation, development, production and promotionof touring and permanent shows, including a permanent Elvis Presley show at theMGM CityCenter hotel/casino in Las Vegas, $0.2 million due to the impact ofadditional headcount added in 2006 and $0.2 million in costs to operatethe newly acquired adjoining properties.

**19 Entertainment**

Revenue for 19 Entertainment was $37.4 million for thethree months ended March 31, 2007, an increase of $6.0 million over theprior period. Operating expenses for 19 Entertainment, including amortizationexpense of intangible assets of $3.9 million, were $23.8 million, an increaseof $1.7 million over the prior period. 19 Entertainment’s revenue is seasonalin nature, reflecting the timing of our television shows and tours in variousmarkets.

Thefollowing tables provide a breakdown of 19 Entertainment’s revenue, cost ofsales, selling, general and administrative expenses and other costs,  OIBDAN and operating income for the threemonths ended March 31, 2007 and 2006:

| **Three months ended March 31, 2007**                                                 | ** ** | ** **              | ** ** | **Revenue** | ** ** | **Cost of Sales** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------|------------|-----------------------------|------------|------------|------------|
| ** **                                                                                                     | ** ** | **(in thousands)** | ** ** |
| *American  Idol* (including television production, foreign syndication,  sponsorship, merchandise and touring) |       | $                       | 20,203     |        |       | $                           | (5,508     | )          |       | $ | 14,695 |   |
| Other*IDOLS* television programs (including license fees and  sponsorship)                                     |       | 3,839                   |       |        | (79        | )                           |       | 3,760      |       |
| *So You  Think You Can Dance*and other television productions                                                  |       | 352                     |       |        | (697       | )                           |       | (345       | )          |
| Recorded music,  management clients and other                                                                  |       | 13,012                  |       |        | (3,746     | )                           |       | 9,266      |       |
|                                                                                                           |       | $                       | 37,406     |        |       | $                           | (10,030    | )          |       | $ | 27,376 |   |
| Selling, general and administrative expenses and  other costs, excluding non-cash compensation                 |       |                    |       |        |       |                        |       | (9,490     | )          |
| OIBDAN                                                                                                         |       |                    |       |        |       |                        |       | $          | 17,886     |   |
| OIBDAN                                                                                                         |       |                    |       |        |       |                        |       | $          | 17,886     |   |
| Depreciation and  amortization                                                                                 |       |                    |       |        |       |                        |       | (4,189     | )          |
| Non-cash  compensation                                                                                         |       |                    |       |        |       |                        |       | (55        | )          |
| Operating income                                                                                               |       |                    |       |        |       |                        |       | $          | 13,642     |   |

19

----

 

| ** **                                                                                                    | ** ** | ** **              | ** ** | ** **  | ** ** | ** **                  | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------|------------|-----------------------------|------------|------------|------------|
| **Three months ended March 31, 2006**                                                | ** ** | ** **              | ** ** | **Revenue** | ** ** | **Cost of Sales** | ** ** | ** ** | ** ** |
| ** **                                                                                                    | ** ** | **(in thousands)** | ** ** |
| *American  Idol*(including television production, foreign syndication,  sponsorship, merchandise and touring) |       |                    | $          | 13,868      |       |                        |       | $          | (4,167     | ) |   | $ | 9,701 |   |
| Other*IDOLS* television programs (including license fees and  sponsorship)                                    |       |                    | 2,426      |        |       |                        | (28        | )          |       | 2,398 |   |
| *So You  Think You Can Dance*and other television productions                                                 |       |                    | 1,231      |        |       |                        | (1,139     | )          |       | 92 |   |
| Recorded music,  management clients and other                                                                 |       |                    | 13,854     |        |       |                        | (6,844     | )          |       | 7,010 |   |
|                                                                                                          |       |                    | $          | 31,379      |       |                        |       | $          | (12,178    | ) |   | $ | 19,201 |   |
| Selling, general and administrative expenses and  other costs, excluding non-cash compensation                |       |                    |       |        |       |                        |       |       |       | (6,335 | ) |
| OIBDAN                                                                                                        |       |                    |       |        |       |                        |       |       |       | $ | 12,866 |   |
| OIBDAN                                                                                                        |       |                    |       |        |       |                        |       |       |       | $ | 12,866 |   |
| Depreciation and  amortization                                                                                |       |                    |       |        |       |                        |       |       |       | (3,548 | ) |
| Non-cash  compensation                                                                                        |       |                    |       |        |       |                        |       |       |       | (45 | ) |
| Operating income                                                                                              |       |                    |       |        |       |                        |       |       |       | $ | 9,273 |   |

 

The revenue increase of $6.0 million in the threemonths ended March 31, 2007 over the 2006 period is primarily due to anincrease in revenue for *American Idol* and higher revenue from other *IDOLS*-related programming in countries other than the UnitedStates.

*AmericanIdol 6**aired 31.5 series hours the U.S. in the three monthsended March 31, 2007 while*American Idol 5 aired 30.5series hours in the U.S. in the comparable 2006 period.  The additional hour of programming along withan increase in guaranteed license fees accounted for approximately $2.0 millionof higher revenue in the three months ended March 31, 2007. Additionally,19 Entertainment recognized an incremental $3.7 million in tape sales in thethree months ended March 31, 2007 over the prior period reflecting higherfees and changes in the timing of tape sales, certain of which were recognizedlater in the year in 2006. Other *IDOLS*  revenue increased $1.4 million primarily dueto the timing of format sales. These increases are offset by a decrease inrevenue related to *So You Think You Can Dance*due to the timing of tape sales and a decrease in music revenue due to thetiming and size of royalty income related to music artists.

Operating expenses,including cost of sales, selling, general and administrative expenses,depreciation and amortization and non-cash compensation, increased by $1.7million in the three months ended March 31, 2007 over the prior periodprimarily due to higher costs associated with *AmericanIdol*, including an online songwriting competition, and higherselling, general and administrative expenses, offset by decreased music royaltyexpenses. Other costs of $0.1 million and $0.3 million for the three monthsended March 31, 2007 and 2006, respectively, represent foreign exchangelosses generated at 19 Entertainment from transactions denominated in non-UKpound sterling currencies, primarily the U.S. dollar. The $0.6 millionincrease in depreciation and amortization expense in 2007 is primarily due toforeign exchange movements as the 19 Entertainment goodwill and intangibleassets are denominated in UK pound sterling and a full period of amortizationof intangible assets in 2007 related to 19 Entertainment acquisitions in 2006.

**Ali Business**

The Ali Businesscontributed $1.4 million in revenue for the three months ended March 31,2007. Operating expenses for the period were $0.7 million and OIBDAN was $0.7million.

20

----

**Corporate and Other**

***MBST***

MBST contributed $0.9million and $1.5 million in revenue for the three months ended March 31,2007 and 2006, respectively. The revenue decrease of $0.6 million is primarilydue to the timing of significant client projects. Operating expenses for thesame periods, including acquisition-related amortization expenses of $0.2million for each period, were $1.5 million and $1.4 million, respectively.OIBDAN was $(0.4) million and $0.3 million for the three months ended March 31,2007 and 2006, respectively.

***Corporate Expenses and Other Costs***

The Company incurredcorporate overhead expenses of $5.0 million and $4.1 million in the threemonths ended March 31, 2007 and 2006, respectively. The increase of $0.9million reflects increased headcount, legal costs and increased accounting andaudit-related expenses arising from the Company’s compliance with therequirements of the Sarbanes-Oxley Act.

***InterestIncome/Expense***

The Company had interestexpense of $0.4 million and $0.1 million for the three months ended March 31,2007 and 2006, respectively. The increase in interest expense in 2007 reflectscosts associated with maintaining the Company’s revolving credit facility whichwas established in May 2006. The Company had interest income of$0.3 million and $0.7 million for the three months ended March 31,2007 and 2006, respectively. The decline reflects the reduced level of cash andcash equivalents in the quarter ended March 31, 2007 as compared to theprior year due to the acquisition of the Ali business in April 2006.

***Other Income(Expense)***

Other expense of $0.2million for the three months ended March 31, 2006 relates to foreignexchange losses generated as a result of short-term intercompany loans between19 Entertainment and the parent company that were denominated in U.S. dollars.

***Income Taxes***

In calculating theprovision for income taxes on an interim basis, the Company uses an estimate ofthe annual effective tax rate based upon the facts and circumstances known atthat time. The Company’s effective tax rate is based on expected income,statutory tax rates and permanent differences applicable to the Company invarious jurisdictions in which the Company operates.

For the three months endedMarch 31, 2007, the Companyrecorded a provision for income taxes of $4.8 million. Theprovision is comprised of $3.3 million, reflecting the Company'sestimated 2007 effective tax rateof 41.9%, and $1.5 millionrelated to a change in theexpected historical U.K. income tax filing position which resulted in thereversal of a previously recorded deferred tax asset. As this reversal relatedto the purchase of 19 Entertainment, there was a decrease in the valuationallowance, offset by a decrease in goodwill, of $1.8 million.

For the three months endedMarch 31, 2006, the Company’s estimated effective tax rate was 45.9%. TheCompany recorded a provision for income taxes of $2.7 million for thethree months ended March 31, 2006.

The decrease in the 2007effective tax rate relates primarily to the Company’s expected use in 2007 ofits foreign tax credits to offset a significant portion of its U.K. tax expense.The Company was unable to offset a significant portion of its U.K. tax expensewith foreign credits in 2006.

21

----

The Company adopted the provisions of FinancialAccounting Standards Board (“FASB”) Interpretation No. 48, *Accounting for Uncertainty in Income Taxes* (“FIN 48”), aninterpretation of FASB No. 109, *Accounting for IncomeTaxes*(“SFAS 109”) on January 1, 2007. In response to theissuance of FIN 48, the Company reviewed its uncertain tax positions inaccordance with the recognition standards established by FIN 48. As a result ofthis review, the Company has adjusted its estimate of its uncertain taxpositions by recognizing an additional liability (including interest andpenalties) of approximately $0.2 million through a charge to goodwill andan additional liability (including interest and penalties) of approximately$0.1 million through a charge to accumulated deficit. The liability is includedin taxes payable. The Company does not expect any material changes to the estimatedamount of liability associated with its uncertain tax positions through January 1,2008. If all the uncertain tax positions were settled with the taxingauthorities, there would be no effect on the effective tax rate.

The Company generally recognizes interest andpenalties related to uncertain tax positions through income tax expense. As of January 1,2007, the Company had accrued approximately $0.1 million for the payment oftax-related interest and penalties.

There are no federal, state or city audits in processas of March 31, 2007. Open tax years related to federal filingsare for the years ended December 31, 2003, 2004 and 2005. Open tax yearsfor state and local jurisdictions are not expected to have a material impact onthe financial statements in the event of an examination.

The U.K.’s Revenue &Customs (“HMRC”) has reviewed the historic 19 Entertainment Ltd. UK groupthrough December 2005. HMRC usually has twelve months from the end of theaccounting period to review and query each return.

***Equity in Earnings (Losses) of Affiliates***

The Company recorded $0.4million and $(0.1) million of earnings (losses) in unconsolidated affiliatesfor the three months ended March 31, 2007 and 2006, respectively,primarily reflecting the Company’s investment in Beckham Brands Limited.

***Minority Interest***

Minority interest expenseof $0.2 million for the three months ended March 31, 2007 reflect sharesin the net income of the Presley Business and the Ali Business related to theequity interests retained by the former owners. Minority interest expense of$0.2 million for the three months ended March 31, 2006 reflect the sharein the net income of the Presley Business related to the equity interestretained by the former owner.

**Liquidity andCapital Resources**

*Revolving Credit Facility—**On***May 24, 2006, the Company entered into a $125.0million revolving credit agreement (the “Credit Facility”) with variouslenders, including Bear, Stearns & Co. Inc. Loans under the CreditFacility are guaranteed by all of the Company’s wholly-owned domesticsubsidiaries and certain of its wholly-owned foreign subsidiaries. The loansare secured by a pledge of certain assets of the Company and its subsidiaryguarantors, including ownership interests in all wholly-owned domesticsubsidiaries, substantially all wholly-owned foreign subsidiaries and certainsubsidiaries that are not wholly-owned. As of March 31, 2007, the Companyhad not drawn on the Credit Facility. Loans under the Credit Facility areavailable to the Company for general corporate purposes and to finance futureacquisitions and joint ventures. Base rate loans under the Credit Facility willbear interest at a rate equal to the greater of (i) the prime rate or (ii) thefederal funds rate, plus 50 basis points. Eurodollar loans under the CreditFacility will bear interest at a rate determined by a formula based on apublished Telerate rate, adjusted for the reserve requirements prescribed foreurocurrency funding by a member bank of the Federal 

22

----

Reserve, plus 150basis points. Any loans under the Credit Facility must be repaid by May 24,2011. A commitment fee of 0.50% on the daily unused portion of the CreditFacility is payable monthly in arrears. The Credit Facility requires theCompany and its subsidiaries to maintain certain financial covenants, including(a) a maximum debt to EBITDA ratio of 4.5 to 1.0 and (b) a minimumEBITDA to interest expense ratio. Under the terms of the Credit Facility,EBITDA is defined as consolidated net income plus income tax expense, interestexpense, depreciation and amortization expense, extraordinary charges andnon-cash charges and minus interest income, extraordinary gains and any othernon-cash income. The Credit Facility also contains covenants that regulate theCompany’s and its subsidiaries’ incurrence of debt, disposition of property andcapital expenditures.

**Cash Flows for thethree months ended March 31, 2007 and 2006**

**OperatingActivities**

Net cash provided by operating activities was $2.3million for the three months ended March 31, 2007, reflecting net incomeof $3.4 million, which includes depreciation and amortization expenses of $5.6 millionand the impact of seasonal changes in working capital levels.

Net cash provided byoperating activities was $1.3 million for the three months ended March 31,2006 reflecting net income of $3.0 million, which includes depreciation andamortization expenses of $4.7 million and the impact of seasonal changesin working capital levels.

**InvestingActivities**

Net cash used in investing activities was $7.7 millionfor the three months ended March 31, 2007 reflecting capital expendituresof $7.7 million related primarily to the purchase of additional land adjacentto Graceland.

Net cash used in investingactivities was $6.3 million for the three months ended March 31,2006. Cash paid for acquisitions and related costs were $6.7 million. TheCompany sold $3.5 million of marketable securities during the three monthsended March 31, 2006. Capital expenditures were $3.1 million.

**FinancingActivities**

Cash used in financing activities was $1.1 million forthe three months ended March 31, 2007. The Company made distributions tominority interest shareholders of $0.5 million, principal payments on notespayable of $0.4 million and dividend payments of $0.5 million to the holder ofthe Series B Convertible Preferred Stock. The Company received $0.2million of net proceeds from warrant exercises.

Cash provided by financingactivities was $1.4 million for the three months ended March 31, 2006. TheCompany made distributions to the Presley minority interest shareholder of $0.6million, principal payments on the Priscilla Presley note of $0.4 million anddividend payments of $0.5 million to the holder of the Series BConvertible Preferred Stock.

**Uses of Capital**

At March 31, 2007, the Company had $3.3 millionof debt outstanding and $30.1 million in cash and cash equivalents.

We believe that ourcurrent cash on hand together with the Company’s revolving credit facility andcash flow from operations will be sufficient to fund our current operations,including payments of interest and principal due on the Company’s debt,dividends on our Series B Convertible Preferred Stock, mandatory minimumdistributions to the minority shareholder in the each of the Presley Businessand Ali Business and capital expenditures.

23

----

**Capital Expenditures**

We presently anticipate thatour total capital expenditures for the remainder of 2007, primarily for newcomputer equipment and leasehold improvements, will total between $1.0 and $2.0million. This estimate excludes expenditures for the Company’s Cirque du Soleiland Graceland re-development projects, the timing and extent of which is notdeterminable at this time.

We announced preliminaryplans to re-develop our Graceland attraction including an expanded visitorscenter, developing new attractions and merchandising shops and building a newboutique convention hotel. This project is conditioned on a number of factors,including obtaining necessary approvals and concessions from local and stateauthorities and attracting an appropriate hotel partner. Although we have notyet determined the exact scope, cost, financing plan and timing of thisproject, we expect that the re-development of Graceland will take several yearsand could require a substantial financial investment by the Company.

**Future Acquisitions**

We intend to acquireadditional businesses that fit our strategic goals. We expect to finance ourfuture acquisitions of entertainment related businesses from cash on hand, ourrevolving credit facility, new credit facilities, additional debt and equity offerings,issuance of our equity directly to sellers of businesses and cash flow fromoperations. However, no assurance can be given that we will be able to obtainadequate financing to complete any potential future acquisitions we mightidentify.

**Dividends**

Our Series BConvertible Preferred Stock requires payment of a cash dividend of 8% per annumin quarterly installments. On an annual basis, our total dividend payment onthe Series B Convertible Preferred Stock is $1.8 million. If we failto make our quarterly dividend payments to the holders of the Series BConvertible Preferred Stock on a timely basis, the dividend rate increases to12% and all amounts owing must be paid within three business days in shares ofcommon stock valued at the average closing price over the previous 30consecutive trading days. After such payment is made, the dividend rate returnsto 8% per annum.

We have no intention ofpaying any dividends on our common stock for the foreseeable future.

**Commitments and Contingencies**

There are various lawsuitsand claims pending against us. We believe that any ultimate liability resultingfrom these actions or claims will not have a material adverse effect on ourresults of operations, financial condition or liquidity.

In addition to ourscheduled maturities of debt, obligations to redeem preferred stock andobligations to the seller of the Presley Business, to certain sellers of19 Entertainment and to the sellers of MBST and the Ali Business, we have futurecash obligations under various types of contracts. We lease office space andequipment under long-term operating leases. We have also entered into long-termemployment agreements with certain of our executives and other key employees.These employment agreements typically contain provisions that allow us toterminate the contract with good cause.

On August 17, 2006,the Company announced that, together with its subsidiaries, Elvis PresleyEnterprises, Inc. and Elvis Presley Enterprises LLC, it has reached anagreement with Cirque du Soleil and MGM MIRAGE (“MGM”) to create a permanentElvis Presley show at MGM’s CityCenter hotel/casino, which is currently underconstruction in Las Vegas. The new Elvis Presley show is expected to open withthe CityCenter hotel/casino in November 2009. CKX and Cirque du Soleilhave each agreed to pay one-half of the creative development and productioncosts of the new Elvis Presley show. CKX expects its portion of the investmentto be approximately $24 million, with the largest amount expected to be fundedin the later stages of development.

24

----

**Inflation**

Inflation has affected thehistorical performances of the businesses primarily in terms of higheroperating costs for salaries and other administrative expenses. Although theexact impact of inflation is indeterminable, we believe that the PresleyBusiness has offset these higher costs by increasing prices at Graceland andfor intellectual property licenses and that 19 Entertainment has offsetthese higher costs by increasing fees charged for its production services andhigher royalty and sponsorship rates.

**Critical AccountingPolicies**

During the three monthsended March 31, 2007, there have been no significant changes related tothe Company’s critical accounting policies and estimates as disclosed in theCompany’s Form 10-K for the year ended December 31, 2006. TheCompany adopted the provisions of FIN 48, an interpretation of SFAS 109 onJanuary 1, 2007.

**OffBalance Sheet Arrangements**

As of March 31, 2007, we did not have any offbalance sheet arrangements other than operating leases for facilities andequipment.

**Item 3.   Quantitative And Qualitative DisclosureAbout Market Risk**

We are exposed to market risk arising from changes inmarket rates and prices, including movements in foreign currency exchangerates, interest rates and the market price of our common stock. To mitigatethese risks, we may utilize derivative financial instruments, among otherstrategies. We do not use derivative financial instruments for speculativepurposes.

**InterestRate Risk**

We had $3.3 million oftotal debt outstanding at March 31, 2007, none of which was variable ratedebt. Accordingly, we are not currently exposed to changes in interest rates.

Any future borrowings under the Company’s revolvingcredit facility commitment would be variable rate debt and the Company wouldtherefore have exposure to interest rate risk.

**ForeignExchange Risk**

We have significantoperations outside the United States, principally in the United Kingdom. Someof our foreign operations are conducted in local currencies. As a result, ourfinancial results could be affected by factors such as changes in foreigncurrency exchange rates or weak economic conditions in foreign markets in whichwe operate.

Assuming a hypotheticalweakening of the U.S. dollar exchange rate with the U.K. pound sterling of 10%,our net income for the three months ended March 31, 2007 would havedecreased by approximately $0.7 million, reflecting an excess of U.K. poundsterling denominated operating expenses over U.K. pound sterling denominatedrevenue.

As of March 31, 2007, we have not entered intoany foreign currency option contracts or other financial instruments intendedto hedge our exposure to changes in foreign exchange rates. We intend tocontinue to monitor our operations outside the United States and in the futuremay seek to reduce our exposure to such fluctuations by entering into foreigncurrency option contracts or other hedging arrangements.

25

----

**19Entertainment Put Option**

In connection with the acquisition of 19Entertainment, certain sellers of 19 Entertainment entered into a Put and CallOption Agreement that provides them with certain rights whereby, during a shortperiod following the six year anniversary of the acquisition, these sellers canexercise a put right to sell 1,672,170 shares of the Company’s common stock tothe Company at a price equal to $13.18 per share. If the Company’s stock priceis below $13.18 per share during the period that the put is exercisable and thesellers exercise this put right, the Company will have exposure to market riskfor the amount that $13.18 per share exceeds the then market price of the stockfor the number of shares put back to the Company.

**Item 4.**                        Controlsand Procedures

**Evaluationof Disclosure Controls and Procedures**

Management, with the participation of the Company’s chiefexecutive officer, Robert F.X. Sillerman, and its chief financial officer,Thomas P. Benson, has evaluated the effectiveness of the Company’s disclosurecontrols and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15 (e)or 15d-15 (e)) as of March 31, 2007. Based on this evaluation,the chief executive officer and chief financial officer have concluded that, asof that date, our disclosure controls and procedures were effective to ensurethat the material information required to be disclosed by us in the report thatwe file or submit under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified in the rules andforms of the Securities and Exchange Commission.

**Changes in InternalControls over Financial Reporting**

Management has designed and implemented additional internalcontrol procedures related to the accounting for foreign exchange gains andlosses on short-term intercompany loans. These procedures include additionaldocumentation of intercompany loan terms, formal review and approval of allloan transactions and improved reporting of foreign currency transactions.

Based on the additional procedures noted above, we haveremediated the material weakness related to the ineffective oversight andreview of the Company’s accounting for foreign exchange gains and losses oncertain short-term intercompany loans reported in our Form 10-K forthe year ended December 31, 2006.

26

----

**Part II—Other Information**

**Item 6.**                        Exhibits

| Exhibit No. | ** ** | ** **                                                                                                                                                                                                                                                                                                                                  | ** ** | **Description** |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| 3.1         |       | Certificate of Incorporation (Previously filed as Exhibit 3.1  to the Form 10-KSB filed September 30, 2005, and incorporated  herein by reference).                                                                                                                                                                          |
| 3.2         |       | By-Laws (Previously filed as Exhibit 3.2 to the  Form 10-KSB filed September 30, 2005, and incorporated herein  by reference).                                                                                                                                                                                               |
| 4.1         |       | Registration Rights Agreement, dated March 17,  2005, by and among the Company, Simon Robert Fuller and Fuller Nominees  Limited (Previously filed as Exhibit 4.2 to the Form 10-QSB  for the period ended September 30, 2005, and incorporated herein by  reference).                                                  |
| 4.2         |       | Registration Rights Agreement, dated February 7,  2005 between the Company and The Huff Alternative Fund, L.P. (Previously  filed as Exhibit 4.4 to the Form 8-K/A filed February 11,  2005, and incorporated herein by reference).                                                                                     |
| 4.3         |       | Letter Agreement dated June 6, 2005, among the  Company, The Huff Alternative Fund, L.P. and The Huff Alternative Parallel  Fund, L.P. (Previously filed as Exhibit 4.9 to Amendment No. 3 to Form S-1/A  (Registration Statement No. 333-123995) filed June 21, 2005  and incorporated herein by reference). |
| 4.4         |       | Registration Rights Agreement, dated February 7,  2005 between the Company and The Promenade Trust (Previously filed as Exhibit 4.5  to the Form 8-K/A filed February 11, 2005, and incorporated  herein by reference).                                                                                                 |
| 4.5         |       | Form of Common Stock Purchase Warrant, dated as  of February 7, 2005, to purchase shares of common stock of the Company  (Previously filed as Exhibit 4.6 to the Form 8-K/A filed February 11,  2005, and incorporated herein by reference).                                                                       |
| 4.6         |       | Form of Promissory Term Note made on February 7,  2005, payable to Priscilla Presley (Previously filed as Exhibit 4.8 to  the Form 8-K/A filed February 11, 2005, and incorporated  herein by reference).                                                                                                          |
| 31.1        |       | Certification of Principal Executive Officer (Filed  herewith).                                                                                                                                                                                                                                                                             |
| 31.2        |       | Certification of Principal Financial Officer (Filed  herewith).                                                                                                                                                                                                                                                                             |
| 32.1        |       | Section 1350 Certification of Principal  Executive Officer (Filed herewith).                                                                                                                                                                                                                                                           |
| 32.2        |       | Section 1350 Certification of Principal  Financial Officer (Filed herewith).                                                                                                                                                                                                                                                           |

 

27

----

**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

|        |   |   | CKX, INC.            |
|--------|--------|--------|---------------------------|
|   |   | BY:    | /s/ ROBERT F.X. SILLERMAN |
|   |   |   | Name:                     |   | Robert F.X. Sillerman |
|   |   |   | Title:                    | * * | *Chief Executive Officer and*

*Chairman of the Board* |
|   |   | BY:    | /s/ THOMAS P. BENSON      |
|   |   |   | Name:                     |   | Thomas P. Benson |
|   |   |   | Title:                    | * * | *Chief Financial Officer, Executive*

*Vice President and Treasurer* |
|        |        |        |                           |  |  |  |

 

DATE:  May 9, 2007

28

----

**INDEX TO EXHIBITS**

| Exhibit No. | ** ** | **Description**                                                  |
|------------------|------------|------------------------------------------------------------------|
| 31.1             |       | Certification of  Principal Executive Officer.                   |
| 31.2             |       | Certification of  Principal Financial Officer.                   |
| 32.1             |       | Section 1350  Certification of Principal Executive Officer. |
| 32.2             |       | Section 1350  Certification of Principal Financial Officer. |

 

----