UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the
Quarterly Period Ended March 31, 2010





o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT
OF 1934





For the
transition period from _________ to _________





Commission
File Number: 0-24592





Tix
Corporation


(Exact
name of small business issuer as specified in its charter)





Delaware
              95-4417467(State or other jurisdiction of
              (I.R.S. Employerincorporation or organization)
              Identification Number)





12711 Ventura Blvd, Suite
340, Studio City, California 91604


(Address
of principal executive offices)





(818)
761-1002


(Registrant’s
telephone number, including area code)





12001 Ventura Place, Suite
340, Studio City, California 91604


(Former
name or former address, if changed since last report)





Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x
     No  ̈





Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
proceeding 12 months (or for such shorter period that the Registrant was
required to submit and post such reports).  Yes  ̈
     No  ̈ ‪





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer  ̈
            Accelerated
      filer x
            Non-accelerated
      filer  ̈
            Smaller
      reporting company  ̈(Do
      not check if a smaller reporting
company)





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12(b)-2 of the Exchange Act).  Yes  ̈
     No x





Number of
shares of Tix Corporation common stock, $.08 par value, issued and outstanding
as of April 15, 2010: 31,123,357, exclusive of treasury shares.













Special
Note Regarding Forward-Looking Statements:




This
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010
contains "forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements that include the words “believes”,
“expects”, “anticipates”, “intends”, “plans”, “may”, “will” or similar
expressions that are intended to identify forward-looking statements. In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. These forward-looking statements
may include, among others, statements concerning the Company's expectations
regarding its business, growth prospects, revenue trends, operating costs,
working capital requirements, facility expansion plans, competition, results of
operations and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010
involve known and unknown risks, uncertainties and other factors that could
cause the actual results, performance or achievements of the Company to differ
materially from those expressed in or implied by the forward-looking statements
contained herein.





Each
forward-looking statement should be read in context with, and with an
understanding of, the various disclosures concerning the Company and its
business made throughout this Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2010, as well as other public reports filed with the
United States Securities and Exchange Commission. Investors should not place
undue reliance on any forward-looking statement as a prediction of actual
results or developments. Except as required by applicable law or regulation, the
Company undertakes no obligation to update or revise any forward-looking
statement contained in this Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2010, whether as a result of new information, future
events or otherwise.







Tix
Corporation and Subsidiaries





Index




Page No.PART
      I. FINANCIAL INFORMATIONItem
      1. Financial StatementsCondensed
      Consolidated Balance Sheets – March 31, 2010 (Unaudited) and December 31,
      2009
                
                4Condensed
      Consolidated Statements of Operations and Comprehensive Income (Unaudited)
      - Three months ended March 31, 2010 and 2009
                
                5Condensed
      Consolidated Statement of Stockholders’ Equity (Unaudited) – Three
      months ended March 31, 2010
                
                6Condensed
      Consolidated Statements of Cash Flows (Unaudited) – Three months
      ended March 31, 2010 and 2009
                
                7Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                
                8Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                
                20Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                
                31Item
      4. Controls and Procedures
                
                32PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
                
                32Item
      1A. Risk Factors
                
                33Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                
                33Item
      3. Defaults upon Senior Securities
                
                33Item
      4. Submission of Matters to a Vote of Security Holders
                
                33Item
      5. Other Information
                
                33Item
      6. Exhibits
                
                33SIGNATURES
                
                34




3




TIX
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





March 31,
                
                
                December 31,2010
                
                
                2009(Unaudited)AssetsCurrent
      assets:Cash
                
                $
                10,634,000
                
                
                $
                9,885,000Accounts
      receivable, including show revenues earned but not billed
                
                
                1,102,000
                
                
                
                1,911,000Advances
      to vendors
                
                
                914,000
                
                
                
                964,000Inventory,
      net
                
                
                1,717,000
                
                
                
                2,172,000Prepaid
      expenses and other current assets
                
                
                1,220,000
                
                
                
                1,350,000Total
      current assets
                
                
                15,587,000
                
                
                
                16,282,000Property
      and equipment, net
                
                
                1,341,000
                
                
                
                1,308,000Other
      assets:Intangible
      assets:Goodwill
                
                
                7,700,000
                
                
                
                5,895,000Intangibles,
      net
                
                
                4,731,000
                
                
                
                4,499,000Total
      intangible assets
                
                
                12,431,000
                
                
                
                10,394,000Investments
      in and advances to nonconsolidated affiliates
                
                
                1,001,000
                
                
                
                1,052,000Capitalized
      theatrical costs
                
                
                368,000
                
                
                
                368,000Deposits
      and other assets
                
                
                169,000
                
                
                
                158,000Total
      other assets
                
                
                13,969,000
                
                
                
                11,972,000Total
      assets
                
                $
                30,897,000
                
                
                $
                29,562,000Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts
      payable
                
                $
                6,315,000
                
                
                $
                6,357,000Accrued
      expenses
                
                
                2,057,000
                
                
                
                1,797,000Deferred
      revenue
                
                
                135,000
                
                
                
                160,000Other
      current liabilities
                
                
                120,000
                
                
                
                120,000Convertible
      note payable
                
                
                1,000,000
                
                
                
                -Total
      current liabilities
                
                
                9,627,000
                
                
                
                8,434,000Commitments
      and contingenciesStockholders'
      equity:Preferred
      stock, $.01 par value; 500,000 shares authorized; none
    issuedCommon
      Stock, $.08 par value; 100,000,000 shares authorized; 31,123,357 shares
      net of 2,340,103 treasury shares, and 31,123,357 shares net of 2,340,103
      treasury shares issued at March 31, 2010 and December 31, 2009
      respectively
                
                
                2,678,000
                
                
                
                2,678,000Additional
      paid-in capital
                
                
                89,990,000
                
                
                
                89,955,000Cost
      of shares held in treasury
                
                
                (4,610,000
                )
                
                
                (4,610,000
                )Accumulated
      deficit
                
                
                (66,816,000
                )
                
                
                (66,902,000
                )Accumulated
      other comprehensive income
                
                
                28,000
                
                
                
                7,000Total
      stockholders' equity
                
                
                21,270,000
                
                
                
                21,128,000Total
      liabilities and stockholders' equity
                
                $
                30,897,000
                
                
                $
                29,562,000





See
accompanying notes to the condensed consolidated financial
statements.


4





TIX
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME





Three Months Ended March 31,2010
                
                
                2009(Unaudited)
                
                
                (Unaudited)Revenues
                
                $
                16,750,000
                
                
                $
                20,170,000Operating
      expenses:Direct
      costs of revenues
                
                
                11,829,000
                
                
                
                14,972,000Selling
      and marketing expenses
                
                
                400,000
                
                
                
                606,000General
      and administrative expenses, including non-cash equity-based costs of
      $35,000 and $413,000 in 2010 and 2009, respectively (including
      $35,000 and $390,000 for officers, directors and employees in 2010 and
      2009, respectively)
                
                
                3,835,000
                
                
                
                3,710,000Depreciation
      and amortization
                
                
                621,000
                
                
                
                621,000Total
      costs and expenses
                
                
                16,685,000
                
                
                
                19,909,000Operating
      income
                
                
                65,000
                
                
                
                261,000Other:Other
      income
                
                
                16,000
                
                
                
                25,000Interest
      income
                
                
                7,000
                
                
                
                13,000Interest
      expense
                
                
                (2,000
                )
                
                
                (4,000
                )Other,
      net
                
                
                21,000
                
                
                
                34,000Net
      income
                
                
                86,000
                
                
                
                295,000Other
      comprehensive incomeForeign
      currency translation adjustments
                
                
                21,000
                
                
                
                5,000Comprehensive
      income
                
                $
                107,000
                
                
                $
                300,000Net
      income per common share -Basic
                
                $
                0.00
                
                
                $
                0.01Diluted
                
                $
                0.00
                
                
                $
                0.01Weighted
      average common shares outstanding -Basic
                
                
                31,123,357
                
                
                
                32,304,286Diluted
                
                
                31,217,494
                
                
                
                32,429,891





See
accompanying notes to the condensed consolidated financial
statements.


5





TIX
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


THREE
MONTHS ENDED MARCH 31, 2010 (UNAUDITED)





AccumulatedAdditional
                  
                  
                  
                  
                  
                  
                  
                  
                  Other
                  
                  
                  TotalCommon Stock
                  
                  
                  Paid In
                  
                  
                  Accumulated
                  
                  
                  Treasury
                  
                  
                  Comprehensive
                  
                  
                  Stockholders’Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  Stock
                  
                  
                  Income
                  
                  
                  EquityBalance,
      December 31, 2009
                  
                  
                  31,123,357
                  
                  
                  $
                  2,678,000
                  
                  
                  $
                  89,955,000
                  
                  
                  $
                  (66,902,000
                  )
                  
                  $
                  (4,610,000
                  )
                  
                  $
                  7,000
                  
                  
                  $
                  21,128,000Fair
      value of options issued to employees and directors
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  35,000
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  35,000Foreign
      currency translation adjustment
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  21,000
                  
                  
                  
                  21,000Net
      income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  86,000
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  86,000Balance,
      March 31, 2010
                  
                  
                  31,123,357
                  
                  
                  $
                  2,678,000
                  
                  
                  $
                  89,990,000
                  
                  
                  $
                  (66,816,000
                  )
                  
                  $
                  (4,610,000
                  )
                  
                  $
                  28,000
                  
                  
                  $
                  21,270,000





See
accompanying notes to the condensed consolidated financial
statements.


6





TIX
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS





Three Months Ended March 31,2010
                
                
                2009(Unaudited)
                
                
                (Unaudited)Cash
      flows from operating activities:Net
      income
                
                $
                86,000
                
                
                $
                295,000Adjustments
      to reconcile net income to cash provided by operating
      activities:Depreciation
                
                
                137,000
                
                
                
                131,000Amortization
      of intangible assets
                
                
                484,000
                
                
                
                490,000Fair
      value of common stock issued for services to employees
                
                
                -
                
                
                
                13,000Fair
      value of options issued to employees and directors
                
                
                35,000
                
                
                
                382,000Fair
      value of warrants issued to consultants
                
                
                -
                
                
                
                18,000Change
      in allowance of inventory
                
                
                10,000
                
                
                
                (30,000
                )(Increase)
      decrease in:Accounts
      receivable
                
                
                809,000
                
                
                
                290,000Advances
      to vendors
                
                
                50,000
                
                
                
                89,000Advances
      to nonconsolidated affiliates
                
                
                36,000
                
                
                
                -Inventory
                
                
                445,000
                
                
                
                590,000Prepaid
      expenses and other current assets
                
                
                130,000
                
                
                
                233,000Capitalized
      theatrical costs, deposits and other assets
                
                
                (11,000
                )
                
                
                9,000Increase
      (decrease) in:Accounts
      payable and accrued expenses
                
                
                218,000
                
                
                
                (816,000
                )Deferred
      revenue
                
                
                (26,000
                )
                
                
                181,000Deferred
      rent
                
                
                13,000
                
                
                
                (16,000
                )Net
      cash provided by operating activities
                
                
                2,416,000
                
                
                
                1,859,000Cash
      flows from investing activities:Purchases
      of property and equipment
                
                
                (170,000
                )
                
                
                (45,000
                )Purchase
      of All Access Entertainment
                
                
                (1,505,000
                )
                
                
                -Net
      cash used in investing activities
                
                
                (1,675,000
                )
                
                
                (45,000
                )Cash
      flows from financing activities:Cost
      of Treasury Stock
                
                
                -
                
                
                
                (378,000
                )Payments
      on capital lease obligations
                
                
                (13,000
                )
                
                
                (12,000
                )Net
      cash used in financing activities
                
                
                (13,000
                )
                
                
                (390,000
                )Effect
      of exchange rate changes on cash
                
                
                21,000
                
                
                
                5,000Change
      in Cash:Net
      increase
                
                
                749,000
                
                
                
                1,429,000Balance
      at beginning of period
                
                
                9,885,000
                
                
                
                9,192,000Balance
      at end of period
                
                $
                10,634,000
                
                
                $
                10,621,000Supplemental
      disclosures of cash flow information:Cash
      paid for:Income
      taxes
                
                $
                -
                
                
                $
                -Interest
                
                $
                2,000
                
                
                $
                4,000Non-cash
      investing activities:Issuance
      of secured convertible note payable related to the acquisition of All
      Access Entertainment
                
                $
                1,000,000
                
                
                $
                -Issuance
      of 190,476 earn-out shares of common stock in conjunction with the
      acquisition of Magic Arts & Entertainment - Florida, Inc. in
      2009
                
                $
                -
                
                
                $
                256,000





See
accompanying notes to the condensed consolidated financial
statements.


7




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





Note
1 - Nature of Business





Tix
Corporation (the “Company”) was incorporated in Delaware in April 1993. The
Company is a diversified integrated entertainment company providing ticketing
services, event merchandising, and the production and promotion of live
entertainment. It operates three complementary business units: Ticketing
Services provides discount, premium and membership group sales; Exhibit
Merchandising provides exhibit and event merchandise sales and services; and Tix
Productions Inc. provides the production and promotion of live
entertainment.




Preparation
of Interim Financial Statements:




The
consolidated financial statements included in this report have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”) and, in the opinion of management, include all adjustments
(consisting of normal recurring accruals and adjustments necessary for adoption
of new accounting standards) necessary to present fairly the results of the
interim periods shown. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles in the United States have been condensed or omitted
pursuant to such SEC rules and regulations. Management believes that its
disclosures are sufficiently presented to prevent this information from being
misleading. Due to seasonality and other factors, the results for the interim
periods are not necessarily indicative of results for a full year. The financial
statements contained herein should be read in conjunction with the consolidated
and combined financial statements and notes thereto included in the Company’s
2009 Annual Report on Form 10-K and interim financial statements and
information reported on Forms 8-K and 10-Q.





Accounting
Estimates:




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.




Consolidation:




The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. Intercompany transactions and balances are eliminated
in consolidation.




Note
2 - Summary of Significant Accounting Policies





Revenue
Recognition, Presentation and Concentrations:




The
Company has several streams of income, each of which is required under Generally
Accepted Accounting Principles (GAAP) to be recognized in varying ways. The
following is a summary of our revenue recognition policies.




The
Company’s Las Vegas discount show ticketing business recognizes as revenue the
commissions and related transaction fees earned from the sale of Las Vegas show
tickets at the time the tickets are paid for and delivered to the customers. The
Company’s commissions are calculated based on the face value of the show tickets
sold. The Company’s transaction fees are charged on a per-ticket basis. With
certain exceptions, ticket sales are generally non-refundable, although same-day
exchanges of previously sold tickets are permitted. Claims for ticket refunds,
which are generally received and paid the day after the show date, are charged
back to the respective shows and are recorded as a reduction to the Company’s
commissions and fees at the time that such refunds are processed. The Company
does not have accounts receivable associated with its sales transactions, as
payment is collected at the time of sale.





Tix4Dinner
offers reservations for discounted dinners at various restaurants on and
surrounding the Las Vegas strip and downtown, with dining at specific times on
the same day or in some cases as much as seven days after the day of the sale.
Tix4Dinner recognizes as revenue the transaction fees earned from the purchaser
of the dinner reservations at the time the reservations are made and a
subsequent nominal fee from the restaurant at the time the reservation is used.
At this time, the Company has immaterial amounts of accounts receivable and does
not have any accounts payable associated with the Tix4Dinner operations, as the
Company collects the transaction fee at the time the reservation is made, and
the dinner payment is collected directly from the restaurant.




Tix4AnyEvent
(AnyEvent) recognizes as revenue the gross amount of ticket sales from the sale
of its ticket inventory. AnyEvent bears the risk of economic loss if the tickets
are not sold by the date the event is scheduled to occur. Revenue is considered
earned when the related event has occurred. Refunds are only issued if the event
is canceled or postponed. Payments for such ticket sales received prior to the
event are recorded as deferred revenue. AnyEvent does not have any accounts
receivable associated with sales transactions to retail customers because
payment is collected at the time of sale. However, sales transactions to other
ticket brokers may be conducted on a credit basis, which would generate accounts
receivable.


8




Exhibit
Merchandising recognizes retail store sales at the time the customer takes
possession of the merchandise. Sales are recorded net of discounts and returns
and exclude sales tax. Discounts are estimated based upon historical experience.
For online sales, revenue is recognized free on board (“FOB”) origin where title
and risk of loss pass to the buyer when the merchandise leaves
the Company's distribution facility at the time of shipment, which we refer
to as the date of purchase by the customer. Sales are recognized net of
merchandise returns, which are reserved for based on historical experience.
Shipping and handling revenues from sales are included as a component of net
sales. Conversely, shipping and handling costs are a component of direct cost of
revenues. The Company does not have any accounts receivable associated with this
business as transactions are done by cash or credit card.




The
Company generates revenue from its live entertainment business. Revenue from the
presentation and production of an event is recognized after the performance
occurs. Revenue collected in advance of the event is recorded as deferred
revenue until the event occurs. Revenue collected from sponsorship and other
revenue, which is not related to any single event, is classified as deferred
revenue and generally amortized over the tour’s season or the term of the
contract. We account for taxes that are externally imposed on revenue producing
transactions on a net basis, as a reduction to revenue.





Tix
Productions Inc.’s operating units, Magic Arts & Entertainment and NewSpace
Entertainment, act as both presenters and promoters of productions, as well as
agent.  Tix Productions Inc.’s revenues from live entertainment where
it is acting as the producer or promoter are a function of a number of elements;
revenue is a direct reflection of tickets sold times ticket prices plus
ancillary revenue streams including sponsorships and revenues generated through
premium ticketing opportunities. In instances where the Company acts as the
presenter or promoter, it:





·
            selects the suppliers or approves
      the selection of the
supplier,


·
            is
      the primary obligor with suppliers,


·
            assumes
      credit risk,


·
            directs the pricing of the
      tickets, and


·
            purchases the
      advertising.





The above
are indicators of ownership and would be evidence that revenues and related
expenses should be recorded at gross.  As the Company is acting as the
principal in the transaction, i.e., it has the risks and rewards of ownership
and has recorded the related revenues and expenses at gross. In other instances
where we only receive a fee and are not the principal obligors to vendors, we
record these revenues at net.




Stock-Based
Compensation:




The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs. The Company accounts for stock option and warrant grants issued and
vesting to employees based on the authoritative guidance provided by the
Financial Accounting Standards Board. The Company accounts for stock option and
warrant grants issued and vesting to non-employees in accordance with the
authoritative guidance of the Financial Accounting Standards Board whereas the
value of the stock compensation is based upon the measurement date as determined
at either a) the date at which a performance commitment is reached, or b) at the
date at which the necessary performance to earn the equity instruments is
complete.




Intangible
Assets and Goodwill:




The
Company accounts for intangible assets and goodwill in accordance with the
authoritative guidance issued by the Financial Accounting Standards Board.
Intangibles are valued at their fair market value and are amortized taking into
account the character of the acquired intangible asset and the expected period
of benefit. The Company evaluates intangible assets for impairment, at a
minimum, on an annual basis and whenever events or changes in circumstances
indicate the carrying value may not be recoverable from its estimated future
cash flows. Recoverability of intangible assets is measured by comparing their
net book value to the related projected undiscounted cash flows from these
assets, considering a number of factors, including past operating results,
budgets, economic projections, market trends and product development cycles. If
the net book value of the asset exceeds the related undiscounted cash flows, the
asset is considered impaired, and a second test is performed to measure the
amount of impairment loss.





Impairment of Long-Lived Assets:




Authoritative
guidance issued by the Financial Accounting Standards Board established
guidelines regarding when impairment losses on long-lived assets, which include
property and equipment, should be recognized, and how impairment losses should
be measured. Authoritative guidance from the Financial Accounting Standards
Board also provided a single accounting model for long-lived assets to be
disposed of and significantly changed the criteria that would have to be met to
classify an asset as held-for-sale.


9





Management
regularly reviews property, equipment and other long-lived assets for possible
impairment. This review occurs quarterly, or more frequently if events or
changes in circumstances indicate the carrying amount of the asset may not be
recoverable. If there is indication of impairment, then management prepares an
estimate of the future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition. If
these cash flows are less than the carrying amount of the asset, an impairment
loss is recognized to write down the asset to its estimated fair value.
Management believes that the accounting estimate related to impairment of its
property and equipment is a “critical accounting estimate” because: (1) it
is highly susceptible to change from period to period because it requires
management to estimate fair value, which is based on assumptions about cash
flows and discount rates; and (2) the impact that recognizing an impairment
would have on the assets reported on the Company’s balance sheet, as well as net
income, could be material. Management’s assumptions about cash flows and
discount rates require significant judgment because actual revenues and expenses
have fluctuated in the past and are expected to continue to do so. There were no
indications of impairment based on management’s assessment at March 31,
2010. As of March 31, 2010, we have $12.4 million of remaining goodwill and
intangible assets related to our acquisitions of EM, Magic, NewSpace, and All
Access. Factors we consider important that could trigger an impairment review
include significant underperformance relative to historical or projected future
operating results, significant changes in the manner of the use of our assets or
the strategy for our overall business, and significant negative industry or
economic trends.  If current economic conditions worsen causing
decreased revenues and increased costs, we may have further goodwill
impairments.





Income
Taxes:




Current
income tax expense is the amount of income taxes expected to be payable for the
current year. A deferred income tax asset or liability is established for the
expected future consequences of temporary differences in the financial reporting
and tax basis of assets and liabilities. The Company considers future taxable
income and ongoing, prudent and feasible tax planning strategies, in assessing
the value of its deferred tax assets. If the Company determines that it is more
likely than not that these assets will not be realized, the Company will reduce
the value of these assets to their expected realizable value, thereby decreasing
net income. Evaluating the value of these assets is necessarily based on the
Company’s judgment. If the Company subsequently determines that the deferred tax
assets which were written down would be realized in the future, the value of the
deferred tax assets would be increased, thereby increasing net income in the
period when that determination was made.




The
Company prescribes a recognition threshold and a measurement attributable for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more likely than not to be sustained upon examination by taxing
authorities. The amount recognized is measured as the largest amount of benefit
that is greater than 50% likelihood of being realized.




Fair
Value of Financial Instruments:




The
carrying amounts of financial instruments, including cash, accounts and other
receivables, accounts payable and accrued liabilities, and short-term loans
approximate fair value because of their short maturity. The carrying amounts of
capital lease obligations approximate fair value because the related
effective interest rates on these instruments approximate the rates currently
available to the Company.





The
Company uses various inputs in determining the fair value of its investments and
measures these assets on a recurring basis.  Financial assets recorded
at fair value in the consolidated balance sheets are categorized by the level of
objectivity associated with the inputs used to measure their fair
value.  Authoritative guidance provided by the FASB defines the
following levels directly related to the amount of subjectivity associated with
the inputs to fair valuation of these financial assets:




·
            Level 1 – quoted prices in active
      markets for identical
investments





·
            Level 2 – other significant
      observable inputs (including quoted prices for similar investments, market
      corroborated inputs, etc.)





·
            Level 3 – significant
      unobservable inputs (including the Company’s own assumptions in
      determining the fair value of
  investments)




As of
March 31, 2010 and December 31, 2009, respectively, the Company’s financial
assets subject to measurement included only Level 1 items of cash and short term
investments.  The fair value of these financial assets was equal to
their recorded value. There were no unrealized gains or losses included in
earnings resulting from long-term investments associated with Level 2 or 3
financial assets during the three month period ended March 31,
2010.





Cash
Concentrations:




The
Company's cash balances on deposit with banks in savings accounts in the United
States (US) are guaranteed up to $250,000 by the Federal Deposit Insurance
Corporation (the “FDIC”). The Company may periodically be exposed to risk for
the amount of funds held in one bank in excess of the insurance limit. In order
to control the risk, the Company's policy is to maintain cash balances with high
quality financial institutions. At March 31, 2010, the Company’s aggregate cash
in excess of the FDIC insured amount was $9.2 million. In addition, the Company
had aggregate cash balances in Canada of $202,000, which is $104,000 in excess
of this country’s equivalent of the US FDIC guarantee.


10





Foreign
Currency:




Results
of foreign operations are translated into U.S. dollars using the average
exchange rates during the year. The assets and liabilities of those operations
are translated into U.S. dollars using the exchange rates at the balance sheet
date. The realized and unrealized exchange losses and gains were minor in the
three months ending March 31, 2010. The related translation adjustments are
recorded in a separate component of stockholders’ equity in accumulated other
comprehensive income.  Foreign currency transaction gains and losses
are included in the results of operations.





Advertising
Costs:




Advertising
costs are charged to operations as selling and marketing expenses at the time
the costs are incurred. For the three months ended March 31, 2010 and 2009,
advertising costs were $394,000 and $593,000, respectively.





Recently
Issued Accounting Guidance:





In
October 2009, the FASB issued authoritative guidance on revenue recognition that
will become effective in fiscal years beginning on or after June 15, 2010, with
earlier adoption permitted. Under the new guidance on arrangements that include
software elements, tangible products that have software components that are
essential to the functionality of the tangible product will no longer be within
the scope of the software revenue recognition guidance, and software-enabled
products will now be subject to other relevant revenue recognition guidance.
Additionally, the FASB issued authoritative guidance on revenue arrangements
with multiple deliverables that are outside the scope of the software revenue
recognition guidance. Under the new guidance, when vendor specific objective
evidence or third party evidence for deliverables in an arrangement cannot be
determined, a best estimate of the selling price is required to separate
deliverables and allocate arrangement consideration using the relative selling
price method. The new guidance includes new disclosure requirements on how the
application of the relative selling price method affects the timing and amount
of revenue recognition.   We believe the adoption of this new
guidance will not have a material impact on our financial
statements.





In
January 2010, the FASB issued guidance on improving disclosures about fair value
measurements to add new disclosure requirements for significant transfers in and
out of Level 1 and 2 measurements and to provide a gross presentation of the
activities within the Level 3 rollforward.   The guidance also
clarifies existing fair value disclosures about the level of disaggregation and
about inputs and valuation techniques used to measure fair value.  The
disclosure requirements are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the requirement to present
the Level 3 rollforward on a gross basis, which is effective for fiscal years
beginning after December 15, 2010.  The adoption of this guidance was
limited to the form and content of disclosures, and will not have a material
impact on our consolidated results of operations and financial
condition.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not or are not believed by
management to have a material impact on the Company's present or future
consolidated financial statements.





Note
3 - Investments





The
Company in 2008 acquired the rights from the estate of Dodie Smith to develop,
promote and tour the production “101 Dalmatians the Musical,” for $400,000.
These rights were estimated to have a seven year life, and as of March 31, 2010
had a remaining unamortized balance of $271,000.  Separately, the
company invested $2.2 million, resulting in a 40% interest in the limited
liability company that was formed to produce, promote and tour “101 Dalmatians
the Musical.” Further, as part of an amendment to the original rights with the
estate of Dodie Smith, future rights to the show “101 Dalmatians the Musical”
would vest for a twenty-four year period once the show was performed sixteen
times in New York. In addition, the Company advanced $820,000 to the limited
liability company during the development period of the show, of which $730,000
remains outstanding at March 31, 2010. The advance earns interest at 15% per
annum and is expected to be repaid from the projected future licensing revenues
of the show over a four year or five year period.





The
touring event associated with the affiliate ended in April 2010, which included
a sixteen performance run in New York. During 2009, the Company’s share of
losses from the tour including advertising costs that were expensed when
incurred or first performed was $1.3 million. In addition, the Company had
recorded a $1.3 million charge to write off its investment and the estimated
expenses related to its proportionate share of losses that were expected to be
incurred in 2010 to secure the future rights to the show.  As of March 31,
2010 and December 31, 2009, accrued expenses on the accompanying balance sheets
includes an accrual of $474,177 and $474,177, respectively, for future losses
and wind down costs.


11





The
rights to the show have now been extended to 24 years as the Company met its
commitment for the sixteen performance run in New York.  The remaining
balance of the note receivable and the intangible asset totaling $1,001,000
related to the show are to be recovered from future show rights. The Company
expects future recoveries from royalties will exceed the note and intangible
values.





Note
4 - Acquisitions




All
Access Entertainment, LLC:




On
February 10, 2010, the Company entered into an Asset Purchase Agreement with All
Access Entertainment, LLC (All Access) with an effective date of March 1,
2010.  Pursuant to the Asset Purchase Agreement, The Company paid the
owner of All Access $1.5 million in cash and issued a six month secured
convertible promissory note in the principal amount of $1.0 million at no
interest due on August 10, 2010.  The secured convertible promissory
note shall be convertible at the option of the owner or the Company into the
aggregate number of shares of the Company’s common stock equal to the quotient
determined by dividing $1,000,000 by the daily average closing sale price of the
Company’s common stock as reported on the NASDAQ Capital Market for the thirty
(30) day period prior to conversion but in no event less than $3.00 per
share.




The
Company additionally entered into a two-year Consulting Agreement with the
former owner of All Access. The Consulting Agreement requires the former owner
of All Access to maintain former business relationships of All Access and to
pursue additional strategic alliances on behalf of the Company.  The
Consulting Agreement provides an annual compensation of $200,000.





The
assets of All Access Entertainment consist primarily of a small amount of
property and equipment and operating lease agreements. The All Access business
was immediately absorbed and integrated into our existing Las Vegas discount
ticketing business.  The Company’s management estimates that there are
identifiable intangible assets of approximately $700,000 with the remainder of
the purchase price of $1.8 million recorded to Goodwill at March 31,
2010.  The Company plans to update its purchase price allocation upon
completion of an independent valuation firm’s measurement and allocation of the
purchase price based upon the fair value of the acquired assets.





No pro
forma results of operations of All Access combined with the operations of the
Company as of the beginning of the periods presented are being provided as the
results were not significant.





Note 5 - Property and Equipment





The table below displays our
property and equipment balances as of March 31, 2010 and December 31,
2009.





Property and equipment:
                    
                    March 31, 2010
                    
                    
                    December 31, 2009Office
      equipment and furniture
                    
                    $
                    2,360,000
                    
                    
                    $
                    2,191,000Equipment
      under capital lease
                    
                    
                    408,000
                    
                    
                    
                    408,000Leasehold
      improvements
                    
                    
                    395,000
                    
                    
                    
                    394,000Property
      and equipment
                    
                    
                    3,163,000
                    
                    
                    
                    2,993,000Less
      accumulated depreciation
                    
                    
                    (1,822,000
                    )
                    
                    
                    (1,685,000
                    )Total
      property and equipment, net
                    
                    $
                    1,341,000
                    
                    
                    $
                    1,308,000





Depreciation
expense was $137,000 and $131,000 for the three months ended March 31, 2010 and
2009, respectively.





Note 6 - Intangible Assets





The
following tables summarize the original cost, the related accumulated
amortization, impairment adjustment, and the net carrying amounts for the
Company’s intangible assets at March 31, 2010 in total and by
segment.





Estimated
                  
                  Net Carrying
                  
                  
                  
                  
                  
                  
                  
                  
                  Net CarryingUseful
                  
                  Amount At
                  
                  
                  Addition/
                  
                  
                  Amortization
                  
                  
                  Amount AtLives
                  
                  12/31/2009
                  
                  
                  Adjustment
                  
                  
                  Expense
                  
                  
                  3/31/2010Marketing
      Based
                  
                  3-6 years
                  
                  $
                  1,969,000
                  
                  
                  $
                  -
                  
                  
                  $
                  (142,000
                  )
                  
                  $
                  1,827,000Contract
      commitments
                  
                  3-7 years
                  
                  
                  2,375,000
                  
                  
                  
                  700,000
                  
                  
                  
                  (289,000
                  )
                  
                  
                  2,801,000Customer
      relationships
                  
                  3 years
                  
                  
                  38,000
                  
                  
                  
                  -
                  
                  
                  
                  (38,000
                  )
                  
                  
                  -Technology
      Based
                  
                  3 years
                  
                  
                  11,000
                  
                  
                  
                  -
                  
                  
                  
                  (8,000
                  )
                  
                  
                  3,000Intellectual
      property (e.g. domain names)
                  
                  5 years
                  
                  
                  106,000
                  
                  
                  
                  -
                  
                  
                  
                  (7,000
                  )
                  
                  
                  99,000Goodwill
                  
                  indefinite
                  
                  
                  5,895,000
                  
                  
                  
                  1,806,000
                  
                  
                  
                  -
                  
                  
                  
                  7,701,000Total
                  
                  
                  
                  $
                  10,394,000
                  
                  
                  $
                  2,506,000
                  
                  
                  $
                  (484,000
                  )
                  
                  $
                  12,431,000




12





Ticketing
Services


Net Carrying
                
                
                
                
                
                
                
                
                Net CarryingAmount At
                
                
                Addition/
                
                
                Amortization
                
                
                Amount At12/31/2009
                
                
                Adjustment
                
                
                Expense
                
                
                3/31/2010Marketing
      based
                
                $
                5,000
                
                
                $
                -
                
                
                $
                (5,000
                )
                
                $
                -Contract
      commitments
                
                
                75,000
                
                
                
                700,000
                
                
                
                (8,000
                )
                
                
                767,000Customer
      relationships
                
                
                38,000
                
                
                
                -
                
                
                
                (38,000
                )
                
                
                -Technology
      based
                
                
                7,000
                
                
                
                
                
                
                
                (7,000
                )
                
                
                -Intellectual
      property (e.g. domain names)
                
                
                106,000
                
                
                
                -
                
                
                
                (7,000
                )
                
                
                99,000Goodwill
                
                
                -
                
                
                
                1,806,000
                
                
                
                -
                
                
                
                1,806,000Total
                
                $
                231,000
                
                
                $
                2,506,000
                
                
                $
                (65,000
                )
                
                $
                2,672,000





Merchandising


Net Carrying
                
                
                
                
                
                
                
                
                Net CarryingAmount At
                
                
                Addition/
                
                
                Amortization
                
                
                Amount At12/31/2009
                
                
                Adjustment
                
                
                Expense
                
                
                3/31/2010Marketing
      based
                
                $
                1,964,000
                
                
                $
                -
                
                
                $
                (137,000
                )
                
                $
                1,827,000Contract
      commitments
                
                
                216,000
                
                
                
                -
                
                
                
                (93,000
                )
                
                
                123,000Goodwill
                
                
                1,670,000
                
                
                
                -
                
                
                
                -
                
                
                
                1,670,000Total
                
                $
                3,850,000
                
                
                $
                -
                
                
                $
                (230,000
                )
                
                $
                3,620,000





Live
Entertainment


Net Carrying
                
                
                
                
                
                
                
                
                Net CarryingAmount At
                
                
                Addition/
                
                
                Amortization
                
                
                Amount At12/31/2009
                
                
                Adjustment
                
                
                Expense
                
                
                3/31/2010Contract
      commitments
                
                $
                2,099,000
                
                
                $
                -
                
                
                $
                (188,000
                )
                
                $
                1,911,000Technology
      based
                
                
                4,000
                
                
                
                -
                
                
                
                (1,000
                )
                
                
                3,000Goodwill
                
                
                4,225,000
                
                
                
                -
                
                
                
                -
                
                
                
                4,225,000Total
                
                $
                6,313,000
                
                
                $
                -
                
                
                $
                (189,000
                )
                
                $
                6,139,000





Total
amortization expense related to intangible assets for the three months ended
March 31, 2010 and 2009 was $484,000 and $490,000, respectively.





Note 7- Related Party
Transactions





During
2010 and 2009, Benjamin Frankel, a director of the Company, was a principal in
Frankel, LoPresti & Co., an accountancy corporation that provides tax
advisory and preparation services to the Company. For the three months ended
March 31, 2010 and 2009, we paid Mr. Frankel or his firm $29,000 and $8,000,
respectively for tax preparation and advisory services.





Mr.
Joseph Marsh, a greater than 10% shareholder of Tix Corporation, was a principal
in Magic Arts and Entertainment - Florida, Inc., a company Tix acquired on
January 2, 2008.


13


Note
8- Stock-Based Compensation Plans





Summary
of Stock Options:





The
Company has various stock-based compensation plans. The intrinsic value of
outstanding stock options at March 31, 2010 was $0, as compared to $153,000
at March 31, 2009. The intrinsic value of exercisable stock options at March 31,
2010 was $0, as compared to $153,000 at March 31, 2009. A summary of the
combined stock options for the three months ended March 31, 2010 is as
follows:





WeightedNumber
                  
                  
                  averageof
                  
                  
                  exerciseoptions
                  
                  
                  priceBalance
      outstanding, December 31, 2009
                  
                  
                  1,251,000
                  
                  
                  $
                  5.24Options
      granted
                  
                  
                  -
                  
                  
                  
                  -Options
      exercised
                  
                  
                  -
                  
                  
                  
                  -Options
      expired or forfeited
                  
                  
                  (341,000
                  )
                  
                  
                  7.00Balance
      outstanding, March 31, 2010
                  
                  
                  910,000
                  
                  
                  $
                  4.58Balance
      exercisable, March 31, 2010
                  
                  
                  589,000
                  
                  
                  $
                  4.94





Information relating to outstanding stock options at March 31,
2010, summarized by exercise price, is as follows:





Outstanding
                
                
                ExercisableWeighted
                
                
                
                
                
                WeightedLife
                
                
                Average
                
                
                
                
                
                AverageExercise Price Per Share
                
                Shares
                
                
                (Years)
                
                
                Exercise Price
                
                
                Shares
                
                
                Exercise Price$6.00
      - $7.20
                
                
                465,000
                
                
                
                5.91
                
                
                $
                7.02
                
                
                
                319,000
                
                
                $
                7.03$4.00
      - $5.99
                
                
                20,000
                
                
                
                1.96
                
                
                
                4.30
                
                
                
                20,000
                
                
                
                4.30$2.00
      - $3.99
                
                
                150,000
                
                
                
                3.03
                
                
                
                3.07
                
                
                
                150,000
                
                
                
                3.07$0.22
      - $1.99
                
                
                275,000
                
                
                
                7.25
                
                
                
                1.30
                
                
                
                100,000
                
                
                
                1.25910,000
                
                
                
                5.75
                
                
                $
                4.58
                
                
                
                589,000
                
                
                $
                4.94





Tix
Corporation recorded compensation expense pursuant to authoritative guidance
provided by the Financial Accounting Standards Board for the three months ended
March 31, 2010 and 2009 of $35,000 and $382,000, respectively. As of March 31,
2010, the Company has outstanding unvested options with future compensation
costs of $477,000, which will be recorded as compensation expense as the options
vest over their remaining average life of 5.75 years.





A summary
of warrant activity for the three months ended March 31, 2010 is as
follows:





WeightedNumber
                  
                  
                  averageof
                  
                  
                  exercisewarrants
                  
                  
                  priceBalance
      outstanding, December 31, 2009
                  
                  
                  950,000
                  
                  
                  $
                  3.70Warrants
      granted
                  
                  
                  -
                  
                  
                  
                  -Warrants
      exercised
                  
                  
                  -
                  
                  
                  
                  -Warrants
      expired
                  
                  
                  -
                  
                  
                  
                  -Balance
      outstanding, March 31, 2010
                  
                  
                  950,000
                  
                  
                  $
                  3.70


14




The
intrinsic value of outstanding warrants at March 31, 2010 was $116,000, as
compared to $102,000 at March 31, 2009. Information relating to outstanding
warrants at March 31, 2010, summarized by exercise price, is as follows:





Outstanding
                
                
                ExercisableWeighted
                
                
                
                
                
                WeightedLife
                
                
                Average
                
                
                
                
                
                AverageExercise Price Per Share
                
                Shares
                
                
                (Years)
                
                
                Exercise Price
                
                
                Shares
                
                
                Exercise Price$2.00
      - $5.50
                
                
                650,000
                
                
                
                0.40
                
                
                $
                5.04
                
                
                
                650,000
                
                
                $
                5.04$0.36
      - $1.99
                
                
                300,000
                
                
                
                1.87
                
                
                
                0.82
                
                
                
                300,000
                
                
                
                0.82950,000
                
                
                
                0.86
                
                
                $
                3.70
                
                
                
                950,000
                
                
                $
                3.70





Note 9- Income Taxes





At
March 31, 2010, the Company had Federal net operating loss carryforwards of
approximately $19.9 million that begin expiring in 2009 in varying amounts
through 2027. The Company also had California state net operating loss
carryforwards of approximately $1.6 million. In September, 2008 California
temporarily suspended use of net operating losses for 2008 and 2009, and the
California state net operating losses expire beginning in 2012 in varying
amounts through 2029.





Authoritative
guidance issued by the Financial Accounting Standards Board requires that a
valuation allowance be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized. Due to the restrictions
imposed by Internal Revenue Code Section 382 regarding substantial changes in
ownership of companies with loss carryforwards, the utilization of the Company’s
net operating loss carryforwards are limited to $6.7 million per year as a
result of cumulative changes in stock ownership. As a result of the limitations
related to Internal Revenue Code Section 382 and the Company’s lack of history
of profits, as such, the Company recorded a 100% valuation allowance against its
net deferred tax assets as of March 31, 2010 and December 31,
2009.





There was
no provision for income taxes for the three months ended March 31, 2010 and
2009, respectively.  The provision for income taxes for the three months
ended March 31, 2010 and 2009 was determined using our effective rate estimated
for the entire fiscal year.





Note 10-
Earnings Per Share





Basic net
income per common share is computed by dividing the net income applicable to
common shares by weighted average number of common shares outstanding during the
period. Diluted net income per common share adjusts basic net income per common
share for the effects of stock options, restricted stock and other potentially
dilutive financial instruments only in the periods in which such effect is
dilutive.





The
following table sets forth the computation of basic and diluted income per
common share:





Three Months Ended March 31,2010
                  
                  
                  2009Net
      income
                  
                  $
                  86,000
                  
                  
                  $
                  295,000Weighted
      average common shares- basic
                  
                  
                  31,123,357
                  
                  
                  
                  32,304,286Dilutive
      effect of employee incentive plans
                  
                  
                  13,211
                  
                  
                  
                  88,185Dilutive
      effect of warrants issued
                  
                  
                  80.926
                  
                  
                  
                  37,420Weighted
      average shares- diluted
                  
                  
                  31,217,494
                  
                  
                  
                  32,429,891Net
      income per common share:Basic
                  
                  $
                  0.00
                  
                  
                  $
                  0.01Diluted
                  
                  $
                  0.00
                  
                  
                  $
                  0.01




15


Potentially
dilutive securities were excluded from the earnings per diluted share
calculation for the three months ended March 31, 2010 because their effect is
anti-dilutive. These potentially dilutive securities at March 31, 2010 included
outstanding warrants and options to purchase 1.9 million shares of our common
stock, of which 950,000 were warrants to purchase shares of our common stock and
910,000 were options to purchase shares of our common stock.





Note 11- Segment Reporting





We
operate in three reportable segments: ticketing services, event and branded
merchandising, and live entertainment.





Ticketing
Services:




Our
ticketing business is operated by our wholly owned subsidiary Tix4Tonight.
Ticketing Services offers two distinct services: discount ticketing, and premium
event ticketing.




Discount
Ticketing – Tix4Tonight, Las Vegas




When
selling discounted tickets, Tix4Tonight generally sells them from eleven
locations in Las Vegas under short-term, exclusive and non-exclusive agreements
with approximately 85 Las Vegas shows and attractions out of a total of
approximately 110 shows and attractions running at any one time. Tix4Tonight
typically does not know the exact shows it will be able to offer tickets for
until the same day of the show. There are usually many more tickets available
each day than are sold, although it is not uncommon for Tix4Tonight to sell out
its supply of tickets for individual shows. The producers of the shows are paid
on a weekly basis only for the tickets that Tix4Tonight actually sells to
customers. Tix4Tonight has no financial risk with respect to unsold tickets and
revenues are recorded at net of ticket cost, that is, commissions and fees on
tickets sold.





Our
opportunities to grow the Las Vegas operations are focused on growing our
inventory by reaching agreements with additional shows, increasing the number of
our storefront sales locations and working to further monetize the relationships
we have with customers by offering additional complementary products and
services. Toward these ends, Tix4Tonight also offers discounted dining
reservation tickets to approximately 30 Las Vegas area restaurants. Further, in
March 2010, Tix4Tonight acquired certain assets and assumed the responsibility
of certain leases of All Access Entertainment, LLC (All Access). All Access was
a competitor of Tix4Tonight in the Las Vegas last minute discount ticket market
and operated five locations with the main location located in Circus-Circus. The
acquisition of these assets and the assumption of the leases provide us with
greater coverage of the Las Vegas area in which to sell our discount
tickets.





Premium
Ticketing – Tix4AnyEvent





Tix4Tonight
operates a national event ticket broker called Tix4AnyEvent (AnyEvent), which
focuses on premium tickets for sporting events, concert tours and theatres.
Tix4AnyEvent operations are located in our leased offices of Tix Corporation in
Las Vegas, Nevada.




Exhibit
and Event Merchandising:





The
Company provides exhibit and event merchandising through its wholly-owned
subsidiary, Exhibit Merchandising, LLC (EM). EM provides retail specialty stores
for touring museum exhibitions and touring theatrical productions. EM provides a
complete turn-key retail store including professional management and both
custom-branded products and commercially-available products for sale. EM
operates the stores in space provided in conjunction with the exhibit. To date,
revenues from the management of retail outlets associated with the sale of
merchandise related to touring exhibits have been primarily derived from
“Tutankhamun and The Golden Age of the Pharaohs.”





Management
expects that EM’s growth will be from merchandising opportunities derived from
shows produced or presented by our Live Entertainment segment, such as Jesus
Christ Superstar and Mannheim Steamroller, or by adding additional exhibits and
events that we currently do not represent.




Live
Entertainment:




In
January 2008, the Company acquired two live theatrical and concert production
companies: Magic Arts & Entertainment, LLC (Magic) and NewSpace
Entertainment, Inc. (NewSpace). Both Magic and NewSpace are independent
presenters and producers of live theater and concerts with a history of working
together. The Company merged the two entertainment companies into its
wholly-owned subsidiary Tix Productions, Inc. We believe that by combining the
operations of the two companies into a single entity, we are able to
leverage our resources, gain operating efficiencies and more fully utilize
the combined network of producers and promoters. NewSpace and Magic continue to
do business under their former names as a reflection of the marketplace’s
recognition of these entities.


16


As a live
entertainment presenter, we book touring theatrical and concert presentations
with a history of successful commercial appeal and participate in the
development and roll out of new theatrical and concert presentations often
originating on Broadway in New York or the West End in London. We use a
wide variety of marketing channels to sell tickets to these programs including
our substantial subscriber-based businesses in eleven US cities, our Salt Lake
City based group sales team, and standard marketing tools including print,
radio, television, outdoor and internet marketing tools. In addition, we invest
in shows or productions in advance of their initial tour to obtain favorable
touring and distribution rights.




Our Live
Entertainment operation focuses on two major areas: production and presentation.
As producers, we invest in the creation of original entertainment properties,
which are then sold to third party presenters generating upfront guaranteed
income, revenue sharing opportunities, and additional opportunities for
sponsorship and other ancillary revenue streams. Examples of this are tours of
Mannheim Steamroller Christmas, Jesus Christ Superstar and 101
Dalmatians.





As
presenters, we generally contract for entertainment properties from producers to
present in markets in the US and Canada. We have worked in most major North
American cities and can negotiate terms that are unavailable to presenters in
individual markets. In eleven markets, we have substantial subscriber-based
operations operating as “Broadway in (city name)” series which greatly reduces
the risk associated with individual presentations and provides additional
opportunities to generate sponsorship and other ancillary revenue streams. These
markets are Salt Lake City, Eugene, Kalamazoo, Akron, Albuquerque, Colorado
Springs, Detroit, Fresno, Boise, Birmingham, and Milwaukee. In Canada, we have a
presenting relationship that operates under the name Canada Theatricals Live
which is now the second largest presenter of theater-based events in
Canada.





Revenue
and expenses earned and charged between segments are eliminated in
consolidation. Corporate expenses, interest income, interest expense and income
taxes are managed on a total company basis. Information related to these
operating segments is as follows:





Consolidating
Statement of Operations (unaudited)


Three
months ended March 31,





Ticketing
                  
                  
                  Exhibit
                  
                  
                  Live
                  
                  
                  
                  
                  
                  ConsolidatedServices
                  
                  
                  Merchandising
                  
                  
                  Entertainment
                  
                  
                  Corporate
                  
                  
                  and Combined2010Revenue
                  
                  $
                  4,743,000
                  
                  
                  $
                  2,545,000
                  
                  
                  $
                  9,462,000
                  
                  
                  $
                  -
                  
                  
                  $
                  16,750,000Direct
      cost of revenues
                  
                  
                  1,980,000
                  
                  
                  
                  1,447,000
                  
                  
                  
                  8,402,000
                  
                  
                  
                  -
                  
                  
                  
                  11,829,000Selling,
      general and administrative expenses
                  
                  
                  1,360,000
                  
                  
                  
                  637,000
                  
                  
                  
                  1,052,000
                  
                  
                  
                  1,186,000
                  
                  
                  
                  4,235,000Depreciation
      and amortization
                  
                  
                  123,000
                  
                  
                  
                  292,000
                  
                  
                  
                  199,000
                  
                  
                  
                  7,000
                  
                  
                  
                  621,000Operating
      income
                  
                  $
                  1,280,000
                  
                  
                  $
                  169,000
                  
                  
                  $
                  (191,000
                  )
                  
                  $
                  (1,193,000
                  )
                  
                  $
                  65,000Current
      assets
                  
                  $
                  4,110,000
                  
                  
                  $
                  3,951,000
                  
                  
                  $
                  2,892,000
                  
                  
                  $
                  4,634,000
                  
                  
                  $
                  15,587,000Fixed
      assets
                  
                  
                  713,000
                  
                  
                  
                  439,000
                  
                  
                  
                  73,000
                  
                  
                  
                  116,000
                  
                  
                  
                  1,341,000Intangible
      assets and goodwill
                  
                  
                  2,672,000
                  
                  
                  
                  3,621,000
                  
                  
                  
                  6,138,000
                  
                  
                  
                  -
                  
                  
                  
                  12,431,000Other
      non-current assets
                  
                  
                  180,000
                  
                  
                  
                  31,000
                  
                  
                  
                  1,309,000
                  
                  
                  
                  18,000
                  
                  
                  
                  1,538,000Total
      assets
                  
                  $
                  7,675,000
                  
                  
                  $
                  8,042,000
                  
                  
                  $
                  10,412,000
                  
                  
                  $
                  4,768,000
                  
                  
                  $
                  30,897,0002009Revenue
                  
                  $
                  4,155,000
                  
                  
                  $
                  2,789,000
                  
                  
                  $
                  13,226,000
                  
                  
                  $
                  -
                  
                  
                  $
                  20,170,000Direct
      cost of revenues
                  
                  
                  1,534,000
                  
                  
                  
                  1,705,000
                  
                  
                  
                  11,733,000
                  
                  
                  
                  -
                  
                  
                  
                  14,972,000Selling,
      general and administrative expenses
                  
                  
                  871,000
                  
                  
                  
                  625,000
                  
                  
                  
                  1,148,000
                  
                  
                  
                  1,672,000
                  
                  
                  
                  4,316,000Depreciation
      and amortization
                  
                  
                  126,000
                  
                  
                  
                  296,000
                  
                  
                  
                  197,000
                  
                  
                  
                  2,000
                  
                  
                  
                  621,000Operating
      income (loss)
                  
                  $
                  1,624,000
                  
                  
                  $
                  163,000
                  
                  
                  $
                  148,000
                  
                  
                  $
                  (1,674,000
                  )
                  
                  $
                  261,000Current
      assets
                  
                  $
                  2,571,000
                  
                  
                  $
                  5,312,000
                  
                  
                  $
                  1,728,000
                  
                  
                  $
                  5,128,000
                  
                  
                  $
                  14,739,000Fixed
      assets
                  
                  
                  573,000
                  
                  
                  
                  645,000
                  
                  
                  
                  102,000
                  
                  
                  
                  27,000
                  
                  
                  
                  1,347,000Intangible
      assets and goodwill
                  
                  
                  452,000
                  
                  
                  
                  4,539,000
                  
                  
                  
                  7,165,000
                  
                  
                  
                  -
                  
                  
                  
                  12,156,000Other
      non-current assets
                  
                  
                  74,000
                  
                  
                  
                  13,000
                  
                  
                  
                  440,000
                  
                  
                  
                  6,000
                  
                  
                  
                  533,000Total
      assets
                  
                  $
                  3,670,000
                  
                  
                  $
                  10,509,000
                  
                  
                  $
                  9,435,000
                  
                  
                  $
                  5,161,000
                  
                  
                  $
                  28,775,000




17





Note 12- Commitment and
Contingencies





As of
March 31, 2010, the end of the period covered by this report, the Company was
subject to various legal proceedings and claims discussed below, as well as
certain other legal proceedings and claims that have not been fully resolved and
that have arisen in the ordinary course of business. Other than as discussed
below, in the opinion of management, the Company does not have a potential
liability related to any current legal proceedings and claims that would
individually or in the aggregate have a material adverse effect on its financial
condition or operating results. However, the results of legal proceedings
cannot be predicted with certainty. The Company intends to contest each
lawsuit vigorously but should the Company fail to prevail in any of these legal
matters or should several of these legal matters be resolved against the Company
in the same reporting period, the operating results of a particular reporting
period could be materially adversely affected. Management continues to
evaluate the lawsuits discussed below and based on the stage of these
proceedings, management is unable to reasonably estimate the likelihood of any
loss or the amount or range of any potential loss that could result from the
litigation. Therefore, no accrual has been established for any potential
loss in connection with these lawsuits.





Vegas.Com Trademark
Litigation





On
October 23, 2009, the Company and Tix4Tonight filed a complaint against
Vegas.com ("Vegas.com")and Vegas
Tix4Less(“VT4L”) in
the United States District Court for the Central District of California for
federal trademark infringement, federal trade dress infringement and unfair
competition, and common law unfair competition. Specifically, the complaint
alleges that Vegas.com and VT4L are intentionally confusing consumers by using
the Company's and Tix4Tonight's trademarks and trade dress. The complaint
seeks damages, an injunction, declaratory relief, and attorneys' fees and
costs. On December 4, 2009, Vegas.com and VT4L filed a motion to dismiss
and/or transfer the litigation to Nevada, arguing that the court lacked personal
jurisdiction over the defendants and that venue was either improper or
inconvenient. The Company and Tix4Tonight filed its opposition on January
29, 2010, and on March 1, 2010 Vegas.com and VT4L filed their reply.  To
stop Vegas.com and VT4L's infringement during the pendency of the litigation,
the Company and Tix4Tonight filed a motion for preliminary injunction on
February 22, 2010. Vegas.com and VT4L responded on March 8, 2010, and the
Company and Tix4Tonight filed a reply one week later.  The Court has not
yet ruled on either motion and, instead, on March 24, 2010, granted both
parties’ requests for jurisdictional discovery, which will be completed by May
25, 2010.





Vegas.Com Antitrust
Litigation





On
December 14, 2009, Vegas.com and VT4L filed a complaint in the United States
District Court for the District of Nevada alleging violations by the Company and
its wholly owned subsidiary Tix4Tonight of 15 U.S.C. §1, 15 U.S.C. §2, 15 U.S.C.
§14, and Nevada state law. The Complaint specifically alleges that the
Company and Tix4Tonight entered into exclusive deals with venues and producers
with the effect of unreasonably restricting trade and commerce, prevented actual
and prospective competitors such as Vegas.com and VT4L from entering the market
or obtaining a non-trivial share of the market, interfered with existing or
prospective contractual arrangements between Vegas.com and VT4L and venues and
producers, and asserted an invalid patent to prevent competition. In their
demand, Vegas.com and VT4L seek compensatory, consequential, incidental, treble
and punitive damages in an amount to be determined at trial, in addition to
attorneys' fees and costs and injunctive relief. On December 23, 2009,
Vegas.com and VT4L filed an Amended Complaint to add requests for declaratory
judgment of non-infringement and invalidity related to the Company's ticket
systems patent and also a claim for unfair trade practices under the Lanham Act
related to the assertion of that patent. On February 3, 2010, Vegas.com and
VT4L filed their Second Amended Complaint, to add allegations that the Company
and Tix4tonight helped organize a group boycott among venues and producers
against VT4L. The Company and Tix4Tonight's response to the Second Amended
Complaint was filed on March 4, 2010.  On April 21, 2010, Vegas.com
and VT4L filed an Opposition to the Company and Tix4Tonight's Motion to Dismiss
the Second Amended Complaint.  The Company and Tix4Tonight's reply is due
on May 10, 2010.





Lease
Commitments:





The
Company leases office space for its corporate headquarters in Studio City,
California. Additionally, the Company’s wholly-owned subsidiaries, Tix4Tonight,
LLC, Tix Productions, LLC and Exhibit Merchandising, lease space. Tix4Tonight
leases its ticket facilities and its administrative offices in Las Vegas,
Nevada, for various periods ranging from one year to five years. Tix Production,
LLC leases office space in Salt Lake City, Utah and Aurora, Ohio. Exhibit
Merchandising leases warehouse and office space in Streetsboro,
Ohio.




Many of
the Company’s operating leases contain predetermined fixed increases in the
minimum rental rate during the initial lease term and/or rent holiday periods.
For these leases, the Company recognizes the related rent expense on a
straight-line basis beginning on the effective date of the lease.  The
Company records the difference between the amounts charged to expense and the
rent paid as deferred rent on the Company’s balance sheet.





The
aggregate minimum future rental payments under non-cancelable operating leases
for facilities in operation at March 31, 2010, excluding operating expenses,
annual rent escalation provisions, and contingent rental payments based on
achieving certain pre-determined sales levels, are as follows:


18





Payments due by Fiscal Years Ending December 31,Total
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                2013
                
                
                2014 and beyondDebt
      obligations
                
                $
                1,000,000
                
                
                $
                1,000,000
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Capital
      lease obligations
                
                
                72,000
                
                
                
                52,000
                
                
                
                9,000
                
                
                
                8,000
                
                
                
                3,000
                
                
                
                -Operating
      lease obligations
                
                
                11,337,000
                
                
                
                2,643,000
                
                
                
                3,030,000
                
                
                
                2,582,000
                
                
                
                1,512,000
                
                
                
                1,570,000Total
      contractual cash obligations
                
                $
                12,409,000
                
                
                $
                3,695,000
                
                
                $
                3,039,000
                
                
                $
                2,590,000
                
                
                $
                1,515,000
                
                
                $
                1,570,000





On March
19, 2010, the Company entered into a sixty month lease under which we will lease
our principal executive offices.  Pursuant to the lease, we relocated our
offices to 12711 Ventura Boulevard, Suite 340, Studio City CA 91604, a 3,970
square foot space.  The lease commenced May 1, 2010 and our monthly
rent under the lease is $12,250.  The rent is subject to increase to
approximately $12,600, $13,000, $13,400 and $13,800 respectively, on the first,
second, third and fourth anniversaries of the extended lease term.  We
will be responsible for paying our allocable portion of operating expenses in
addition to the monthly rent.





When we
acquired All Access Entertainment, LLC (Note 4), we assumed certain operating
leases for various locations.  The obligations related to these
locations are included in the table above.


19





ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:





“Tix”
(which may be referred to as the “Company”, “we”, “us” or “our”) means Tix
Corporation and its subsidiaries, or one of our segments or subsidiaries, as the
context requires. You should read the following discussion of our financial
condition and results of operations together with the unaudited consolidated
financial statements and notes to the financial statements included elsewhere in
this quarterly report.





Certain
statements contained in this quarterly report (or otherwise made by us or on our
behalf from time to time in other reports, filings with the Securities and
Exchange Commission, news releases, conferences, internet postings or otherwise)
that are not statements of historical fact constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Exchange Act of 1934, as amended,
notwithstanding that such statements are not specifically identified.
Forward-looking statements include, but are not limited to, statements about our
financial position, business strategy, competitive position, potential growth
opportunities, potential operating performance improvements, and the effects of
competition, the effects of future legislation or regulations and plans and
objectives of our management for future operations. We have based our
forward-looking statements on our management’s beliefs and assumptions based on
information available to our management at the time the statements are made. Use
of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “project,”
“seek,” “predict” or variations of such words and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements.





Forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from those in
such statements. Factors that could cause actual results to differ from those
discussed in the forward-looking statements include, but are not limited to,
those set forth under Item 1A. — Risk Factors in both our 2009
Form 10-K and this quarterly report, as well as other factors described
herein or in our annual, quarterly and other reports we file with the SEC
(collectively, “cautionary statements”). Based upon changing conditions, should
any one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary materially from
those described in any forward-looking statements. All subsequent written and
oral forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by the applicable cautionary
statements. We do not intend to update these forward-looking statements, except
as required by applicable law.





Executive
Overview





During
the first quarter of 2010, we continued to execute our strategy to improve and
build our operations comprised of Tix4Tonight, Exhibit Merchandising (EM) and
Tix Productions, Inc. (TPI). The highlights for each of our segments for the
three months ended March 31, 2010 were as follows:





Tix4Tonight





·
            For
      the three months ended March 31, 2010, Tix4Tonight sold 351,000 tickets.
      These ticket sales represented an increase of 32,000 tickets over the
      prior year’s comparable three month period and reflected a 10% increase
      over the prior year’s ticket sales.





·
            For
      the three months ended March 31, 2010, Tix4Tonight sold tickets with a
      value of $20.9 million. The value of the tickets sold represented an
      increase of $3.3 million over the prior year’s comparable three month
      period, and reflected a 19% increase over the prior year’s ticket
      sales.




·
            For
      the three months ended March 31, 2010, Tix4Tonight’s Tix4Dinner business
      sold dinner reservations with a value of $325,000. These reservation sales
      represented an increase of $43,000 over the prior year’s comparable three
      month period, and reflected a 15% increase over prior year’s dinner
      reservations revenue.





·
            Tix4Tonight
      acquired certain assets and assumed the responsibility of certain leases
      of All Access Entertainment, LLC (All Access). All Access was a competitor
      of Tix4Tonight in the Las Vegas last minute discount ticket market and
      operated five locations with the main location located in Circus-Circus.
      The acquisition of these assets and the assumption of the leases provide
      us with greater coverage of the Las Vegas area in which to sell our
      discount tickets.




Exhibit
Merchandising





·
            Was
      profitable for the three months ended March 31,
  2010.





·
            EM
      will be providing and operating the retail specialty stores for the next
      museum exhibition tour by Arts and Exhibitions International, LLC (AEI), a
      subsidiary of AEG, “Cleopatra: The Search for the Last Queen of Egypt”,
      when it makes its worldwide debut in Philadelphia at The Franklin
      Institute, and runs from June 5, 2010 to January 2, 2011, before moving on
      to four other cities that are currently
  scheduled.




20





Live
Entertainment





·
            Total
      shows produced or presented declined to 206 during the three months ended
      March 31, 2010 as compared to 358 performances during the same period of
      the prior year.  This segment of our business often fluctuates
      quarter to quarter due to the number of shows available on the market and
      the timing of the actual shows.  The Company expects the number
      of performances to increase throughout the year.  This segment
      does seasonally decline significantly in the third quarter of the fiscal
      year with a substantial increase during the fourth quarter of the fiscal
      year.  While revenues were down to the decline in the volume of
      shows, this segment, excluding depreciation and amortization, did generate
      cash flow from operations.





·
            Shows
      that are produced or presented by TPI such as David Copperfield, Rain, and
      Lord of the Dance continue to perform in line with
      expectations.





Critical
Accounting Policies and Estimates:





The
preparation of our consolidated financial statements is in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Management periodically evaluates its earlier estimates and judgments.
Management bases its estimates and judgments on historical experience and on
various factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates as a result of different
assumptions or conditions.





The
following narrative describes the critical accounting policies that affect the
more significant judgments and estimates used in the preparation of the
Company's consolidated financial statements.





Revenue
Recognition and Presentation:





The
Company has several streams of income, each of which is required under GAAP to
be recognized in varying ways. The following is a summary of our revenue
recognition policies:





The
Company’s Las Vegas discount show ticketing business recognizes as revenue the
commissions and related transaction fees earned from the sale of Las Vegas show
tickets at the time the tickets are paid for and delivered to the customers. The
Company’s commissions are calculated based on the face value of the show tickets
sold. The Company’s transaction fees are charged on a per-ticket basis. With
certain exceptions, ticket sales are generally non-refundable, although same-day
exchanges of previously sold tickets are permitted. Claims for ticket refunds,
which are generally received and paid the day after the show date, are charged
back to the respective shows and are recorded as a reduction to the Company’s
commissions and fees at the time that such refunds are processed. The Company
does not have accounts receivable associated with its sales transactions, as
payment is collected at the time of sale.





Tix4Dinner
offers reservations for discounted dinners at various restaurants on and
surrounding the Las Vegas strip and downtown with dining at specific times on
the same day as the sale or in some cases as much as seven days after the day of
the sale. Tix4Dinner recognizes as revenue the transaction fees earned from the
purchaser of the dinner reservations at the time that the reservations are made
and a subsequent nominal fee from the restaurant at the time the reservation is
used. At this time, the Company has immaterial amounts of accounts receivable
and does not have any accounts payable associated with the Tix4Dinner operations
because the Company collects the transaction fee at the time that the
reservation is made and the dinner payment is collected directly by the
restaurant.





Tix4AnyEvent
(AnyEvent) recognizes as revenue the gross amount from the sale of tickets that
it owns. AnyEvent bears the risk of economic loss if the tickets are not sold by
the date that the event is scheduled to occur. Revenue is considered earned when
the related event has occurred. Refunds are only issued if the event is canceled
or postponed. Payments for such ticket sales received prior to the event are
recorded as deferred revenue. AnyEvent does not have any accounts receivable
associated with sales transactions to individual customers, as payment is
collected at the time of sale. However, sales transactions with other ticket
brokers may be conducted on a credit basis, which would generate accounts
receivable.





Exhibit
Merchandising recognizes retail store sales at the time the customer takes
possession of the merchandise. All sales are net of discounts and returns and
exclude sales tax. For online sales, revenue is recognized free on board ("FOB")
origin where title and risk of loss pass to the buyer when the merchandise
leaves the Company's distribution facility at the time of shipment, which
we refer to as the date of purchase by the customer. Sales are recognized net of
merchandise returns, which are reserved for based on historical experience.
Shipping and handling revenues from sales are included as a component of net
sales. Conversely, shipping and handling costs are a component of direct costs
of revenues, pursuant to the authoritative guidance provided by the Financial
Accounting Standards Board. The Company does not have any accounts receivable
associated with this business because all transactions are done by cash or
credit card.


21





Tix
Productions, Inc. recognizes revenue from the presentation and production of an
event after the performance occurs upon settlement of the event; however any
profits related to these tours is recognized after minimum revenue thresholds,
if any have been achieved. Revenue collected in advance of the event is recorded
as deferred revenue until the event occurs. Revenue collected from sponsorship
and other revenue, which is not related to any single event, is classified as
deferred revenue and generally amortized over the tour’s season or the term of
the contract. We account for taxes that are externally imposed on revenue
producing transactions on a net basis, as a reduction to revenue.





Stock-Based
Compensation:





The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions for services and financing
costs. The Company accounts for stock option and warrant grants issued and
vesting to employees based on the authoritative guidance provided by the FASB.
The Company accounts for stock option and warrant grants issued and vesting to
non-employees in accordance with the guidelines provided by the Financial
Accounting Standards Board whereas the value of the stock compensation is based
upon the measurement date as determined at either a) the date at which a
performance commitment is reached, or b) at the date at which the necessary
performance to earn the equity instruments is complete.





Impairment
of Long-Lived Asset:





Our
long-lived assets, such as property and equipment, are reviewed for impairment
when events and circumstances indicate that depreciable or amortizable long
lived assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of those assets.
When specific assets are determined to be unrecoverable, the cost basis of the
asset is reduced to reflect the current value.





We use
various assumptions in determining the current fair value of these assets,
including future expected cash flows and discount rates, as well as other fair
value measures. Our impairment loss calculations require us to apply judgment in
estimating future cash flows, including forecasting useful lives of the assets
and selecting the discount rate that reflects the risk inherent in future cash
flows.





If actual
results are not consistent with our assumptions and judgments used in estimating
future cash flows and asset fair values, we may be exposed to future impairment
losses that could be material to our results.





Intangible
Assets and Goodwill:





The
Company evaluates intangible assets and goodwill for impairment, at a minimum,
on an annual basis and whenever events or changes in circumstances indicate that
the carrying value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets is measured by comparing their net book
value to the related projected undiscounted cash flows from these assets,
considering a number of factors, including past operating results, budgets,
economic projections, market trends and product development cycles. If the net
book value of the asset exceeds the related undiscounted cash flows, the asset
is considered impaired, and a second test is performed to measure the amount of
impairment loss.  There were no indications of impairment based on
management’s assessment at March 31, 2010. As of March 31, 2010, we have
$12.4 million of remaining goodwill and intangible assets related to our
acquisitions of EM, Magic, NewSpace, and All Access. Factors we consider
important that could trigger an impairment review include significant
underperformance relative to historical or projected future operating results,
significant changes in the manner of the use of our assets or the strategy for
our overall business, and significant negative industry or economic
trends.  If current economic conditions worsen causing decreased
revenues and increased costs, we may have further goodwill
impairments.





Recently
Issued Accounting Guidance:





In October 2009, the FASB issued authoritative
guidance on revenue recognition that will become effective in fiscal years
beginning on or after June 15, 2010, with earlier adoption permitted. Under the
new guidance on arrangements that include software elements, tangible products
that have software components that are essential to the functionality of the
tangible product will no longer be within the scope of the software revenue
recognition guidance, and software-enabled products will now be subject to other
relevant revenue recognition guidance. Additionally, the FASB issued
authoritative guidance on revenue arrangements with multiple deliverables that
are outside the scope of the software revenue recognition guidance. Under the
new guidance, when vendor specific objective evidence or third party evidence
for deliverables in an arrangement cannot be determined, a best estimate of
the selling price is required to separate deliverables and allocate arrangement
consideration using the relative selling price method. The new guidance includes
new disclosure requirements on how the application of the relative selling price
method affects the timing and amount of revenue recognition.   We
believe the adoption of this new guidance will not have a material impact on our
financial statements.


22


In
January 2010, the FASB issued guidance on improving disclosures about fair value
measurements to add new disclosure requirements for significant transfers in and
out of Level 1 and 2 measurements and to provide a gross presentation of the
activities within the Level 3 rollforward.   The guidance also
clarifies existing fair value disclosures about the level of disaggregation and
about inputs and valuation techniques used to measure fair value.  The
disclosure requirements are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the requirement to present
the Level 3 rollforward on a gross basis, which is effective for fiscal years
beginning after December 15, 2010.  The adoption of this guidance was
limited to the form and content of disclosures, and will not have a material
impact on our consolidated results of operations and financial
condition.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not or are not believed by
management to have a material impact on the Company's present or future
consolidated financial statements.





Consolidated
Results of Operations –


Three
Months Ended March 31, 2010 compared to the Three Months Ended March 31,
2009:





Consolidated
Results of Operations - Three Months ended March 31,





% changeThree Months Ended March 31,
                  
                  
                  2010v2010
                  
                  
                  2009
                  
                  
                  2009Revenue
                  
                  $
                  16,750,000
                  
                  
                  $
                  20,170,000
                  
                  
                  
                  -17
                  %Operating
      expenses:Direct
      operating expenses
                  
                  
                  11,829,000
                  
                  
                  
                  14,972,000
                  
                  
                  
                  -21
                  %Selling,
      general and administrative expenses
                  
                  
                  3,050,000
                  
                  
                  
                  2,644,000
                  
                  
                  
                  15
                  %Depreciation
      and Amortization
                  
                  
                  621,000
                  
                  
                  
                  621,000
                  
                  
                  
                  -1
                  %Corporate
      expenses
                  
                  
                  1,186,000
                  
                  
                  
                  1,672,000
                  
                  
                  
                  -29
                  %Operating
      income
                  
                  
                  65,000
                  
                  
                  
                  261,000
                  
                  
                  
                  -75
                  %Operating
      margin
                  
                  
                  0
                  %
                  
                  
                  1
                  %Interest
      expense
                  
                  
                  (2,000
                  )
                  
                  
                  (4,000
                  )Interest
      income
                  
                  
                  7,000
                  
                  
                  
                  13,000Other
      income (expense) - net
                  
                  
                  16,000
                  
                  
                  
                  25,000Net
      income
                  
                  $
                  86,000
                  
                  
                  $
                  295,000


23




Three
Months Ended March 31, 2010 and 2009:





Revenues





The
Company earns fee revenues from the sales of discounted tickets from purchasers
of the tickets and commissions from the entertainment supplier, as well as
revenues from the sale of premium tickets to sporting and other entertainment
events. Through our discounted ticket venues we also offer discount dinner
reservations. From Exhibit Merchandising, LLC “EM”, we earn revenues from the
management of retail outlets associated with the sale of merchandise related to
touring exhibits, such as “Tutankhamun and The Golden Age of the Pharaohs.”
Through our live entertainment segment, we earn revenues from the presentation
and production of events, as well as sponsorship and ancillary revenues. Our
revenues for the three months ended March 31, 2010 and 2009 were $16.8 million
and $20.2 million, respectively. Our revenues decreased $3.4 million, or 17%,
during the three months ended March 31, 2010 as compared to the same period of
the prior year. The decrease in revenues was primarily the result of a $3.7
million decline in revenues from our Live Entertainment segment and a $244,000
decline in revenues from our Merchandising segment, which were offset in part by
a $588,000 increase in Ticketing Services revenues.





More
detailed explanations of the three months ended March 31, 2010 and 2009 changes
are included in the applicable segment discussions following.





Direct
Operating Expenses





Direct
operating expenses include payroll and related costs, rents, cost of tickets and
goods sold, artist fees, show related marketing costs and advertising expenses
along with other related costs of promoting and producing live entertainment.
Direct costs of revenues for the three months ended March 31, 2010 and 2009 were
$11.8 million and $15.0 million, respectively. Our operating expenses decreased
$3.2 million or 21% during the three months ended March 31, 2010 as compared to
the same period of the prior year. The decrease in direct operating expenses is
reflective of the 17% decline in revenues.





More
detailed explanations of the three months ended March 31, 2010 and 2009 changes
are included in the applicable segment discussions following.





Operating
Segment Selling, General and Administrative Expenses





Operating
segment selling, marketing and administrative expenses include advertising and
promotional costs related to the Company’s business activities. Our operating
segment selling, marketing and administrative expenses for the three months
ended March 31, 2010 and 2009 were $3.0 million and $2.6 million, respectively.
Our selling, general and administrative expenses increased $406,000 or 15%
during the three months ended March 31, 2010 as compared to the same period of
the prior year due to a $490,000 and $12,000 increase in selling and general and
administrative expenses in our Ticketing Services and Exhibit Merchandising
segments, respectively.  These increases were offset in part by a
$96,000 decline in selling, general and administrative expenses at Live
Entertainment segment.





More
detailed explanations of the three months ended March 31, 2010 and 2009 changes
are included in the applicable segment discussions following.





Corporate
Expenses





Corporate
expenses are expenses that relate to activities at or directed by our executive
offices. Significant components of corporate expenses consist of corporate
personnel and personnel-related costs, insurance, legal and accounting fees,
consulting and advisory fees, and corporate occupancy costs. Corporate expenses
for the three months ended March 31, 2010 and 2009 were $1.2 million and $1.7
million, respectively. Corporate expenses decreased $481,000 for the three
months ended March 31, 2010, as compared to same period of the prior year. This
decrease in corporate expenses is mainly the result of a decrease in stock based
compensation expense including $257,000 related to the departure of an
officer.





Depreciation
and Amortization





Our
depreciation and amortization was $621,000 for both the three months ended March
31, 2010 and 2009, respectively.




Other
Income and (Expense)





Other
Income and Expense was $16,000 for the three months ended March 31, 2010, and
was the result of miscellaneous box office revenues, such as patron club income
and season handling fees, earned by our Live Entertainment segment Tix
Productions.


24





Interest
Income





Interest
income was immaterial for all periods presented. Fluctuations in interest income
were due primarily to fluctuations in our cash balances.





Ticketing
Services





Our
Ticketing Services segment operating results were as follows:





Segment
Reporting- Ticketing Services





% ChangeThree Months Ended March 31,
                
                
                2010 vs.2010
                
                
                2009
                
                
                2009Revenue
                
                $
                4,743,000
                
                
                $
                4,155,000
                
                
                
                14
                %Operating
      Expenses:Direct
      operating expenses
                
                
                1,980,000
                
                
                
                1,534,000
                
                
                
                29
                %Selling,
      general and administrative expenses
                
                
                1,360,000
                
                
                
                871,000
                
                
                
                56
                %Depreciation
      and amortization
                
                
                123,000
                
                
                
                126,000
                
                
                
                -2
                %Operating
      income
                
                $
                1,280,000
                
                
                $
                1,624,000
                
                
                
                -21
                %Operating
      margin
                
                
                27
                %
                
                
                39
                %
                
                
                -31
                %





Three
months ended March 31, 2010 and 2009:





Revenues





Ticketing
Services has two operating units:





·
            Tix4Tonight,
      our discount ticket seller





·
            Tix4AnyEvent
      (AnyEvent or AE), our premium ticket
operation




The
Ticketing Services segment earns fee revenues from the sales of discounted
tickets from purchasers of the tickets and commissions from the entertainment
supplier, as well as revenues from the sale of premium tickets to sporting and
other entertainment events. Through our discounted ticket venues, we also
offer discount dinner reservations. Ticketing Services revenues were $4.7
million for the three months ended March 31, 2010 as compared to $4.1 million
for the three months ended March 31, 2009. Our revenues increased $588,000, or
14%, during the three months ended March 31, 2010 as compared to the same period
of the prior year. The increase in Ticketing Service revenues is the result of a
$580,000 increase in Tix4Tonight revenues and a $43,000 increase in ancillary
revenues i.e. the sale of dinner reservations, offset by a $35,000 decline in
premium ticket revenues.





Tix4Tonight:





Tix4Tonight
revenues for the three months ended March 31, 2010 and 2009 were $4.7 million
and $4.1 million, respectively, which is an increase of $583,000 or 15% in 2010
as compared to the same period in 2009. The increase reflects a greater demand
for discount tickets as well as an increase in the average selling price per
ticket in 2010 as compared to 2009. The average selling price per ticket in 2010
was $59.49 per ticket, which represented an increase of $4.33 per ticket or 8%
as compared to $55.16 per ticket in 2009. Tix4Tonight discount tickets sold
increased by 32,000 tickets or 10% to 351,000 discounted show tickets for the
three months ended March 31, 2010. The gross sales value of show tickets sold to
customers plus commissions and fees earned were $20.9 million for the
three months ended March 31, 2010, as compared to $17.6 million for
the three months ended March 31, 2009, or a 19% increase. Lastly, during the
three months ended March 31, 2010, revenues from discount dinner reservations
increased by $43,000, to $325,000 or 15%.


25




AnyEvent:





AnyEvent
sells premium tickets to concerts, theatre shows and sporting events. AnyEvent’s
revenues are dependent in part on sporting events and special concerts
occurring, such as boxing matches and reunion tours, as well as our ability to
obtain tickets to these events. AnyEvent revenues for the three months ended
March 31, 2010 and 2009 were $24,000 and $59,000 respectively. The $35,000
decline in revenues is primarily the result of an overall decline in demand for
premium tickets due to an overall economic malaise, which has led to a decline
in discretionary spending.





Direct
Operating Expenses





Direct
operating expenses include payroll and related costs, rents, and cost of tickets
sold. Direct costs of revenues for the three months ended March 31, 2010 and
2009 were $2.0 million and $1.5 million, respectively, which represented an
increase in direct operating expenses of $446,000 or 29%. The increase in direct
operating expenses was mainly due to an increase in payroll costs and rent
expense associated with two additional Tix4Tonight locations that opened in late
2009 as well as additional locations and employees related to the acquisition of
All Access.





Selling,
General and Administrative Expenses





Marketing
and administrative expenses include advertising and promotional costs related
to our business activities, as well as the segment cost of management.
Selling, general and administrative expenses for the three months ended March
31, 2010 and 2009 were $1.4 million and $871,000, respectively. Our selling,
marketing and general and administrative expenses increased $490,000 or 56%,
during the three months ended March 31, 2010 as compared to 2009. The increase
in selling, marketing, and general and administrative expenses was the result of
legal expenses incurred related to the litigation discussed elsewhere in this
financial statement. See Part II, Item 1, Legal Proceedings, for further
detail.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the three months March 31, 2010 and
2009 were $123,000 and $126,000, respectively. We expect to incur a similar
level of depreciation and amortization for the foreseeable future.





Exhibit
Merchandising





Our
Exhibit Merchandising segment operating results were as follows:





Segment
Reporting - Exhibit Merchandising





% ChangeThree Months Ended March 31,
                
                
                2010 vs.2010
                
                
                2009
                
                
                2009Revenue
                
                $
                2,545,000
                
                
                $
                2,789,000
                
                
                
                -9
                %Operating
      Expenses:Direct
      operating expenses
                
                
                1,447,000
                
                
                
                1,705,000
                
                
                
                -15
                %Selling,
      general and administrative expenses
                
                
                637,000
                
                
                
                625,000
                
                
                
                2
                %Depreciation
      and amortization
                
                
                292,000
                
                
                
                296,000
                
                
                
                -1
                %Operating
      income
                
                $
                169,000
                
                
                $
                163,000
                
                
                
                4
                %Operating
      margin
                
                
                7
                %
                
                
                6
                %
                
                
                14
                %




26





Three
Months Ended March 31, 2010 and 2009:





Revenues





Exhibit
Merchandising (EM) provides retail specialty stores for touring museum
exhibitions and touring theatrical productions. EM provides a complete turn-key
retail store with commercially available and extensive custom-branded product
for sale. It operates the stores in space rented in conjunction with the
exhibit. During the three months ended March 31, 2010 and 2009, EM
generated $2.5 million and $2.7 million in revenues, respectively. Revenue is
derived from the Company’s retail outlets associated with the sale of
merchandise related to touring exhibits, primarily derived from “Tutankhamun and
The Golden Age of the Pharaohs.” EM is subject to revenue fluctuations as a
result of the exhibits that it represents moving from one location to another.
The move of an exhibit from one location to another generally results in the
exhibit being closed from four to six weeks. The length of time an exhibit is
closed is dependent upon the type of exhibit, the distance the exhibit is to be
shipped, as well as any special needs that may be required in re-setting the
exhibit. “Tutankhamun and The Golden Age of the Pharaohs” and “Tutankhamun the
Golden King and the Great Pharaohs” are currently booked in museums through July
2011 and December 2012, respectively. During the first quarter of 2010, although
there was a 9% increase in attendance to the exhibits, there was a 16% decrease
in revenue per attendee at our retail specialty stores. The decline in revenues
per attendee is the result of generally poor economic conditions, as well as a
competing store at one of the exhibit locations, which management believes
resulted in a $244,000 decline in revenues.





Direct
Operating Expenses





Exhibit
Merchandising’s operating expenses include payroll and related costs, rents, and
cost of goods sold. Direct operating expenses for the three months ended March
31, 2010 and 2009 were $1.4 million and $1.7 million, respectively and as a
percent of revenues were 56% and 61%, respectively.





Selling,
Marketing and Administrative Expenses





Exhibit
Merchandising’s selling, marketing and administrative expenses include
advertising and promotional costs related to our business activities, as
well as the segment’s cost of management. For the three months ended March 31,
2010 and 2009, EM’s selling, marketing and administrative expenses were $637,000
or 25% of revenues and $625,000 or 22% of revenues, respectively.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the three months ended March 31, 2010
and 2009 was $292,000 and $296,000, respectively, and relates primarily to the
amortization of the intangible assets that were created as a result of EM being
acquired in August 2007. We expect the current level of depreciation and
amortization to continue through 2010.





Live
Entertainment





Our
Live Entertainment segment operating results were as follows:





Segment
Reporting- Tix Productions


% ChangeThree Months Ended March 31,
                
                
                2010 vs.2010
                
                
                2009
                
                
                2009Revenue
                
                $
                9,462,000
                
                
                $
                13,226,000
                
                
                
                -28
                %Operating
      Expenses:Direct
      operating expenses
                
                
                8,402,000
                
                
                
                11,733,000
                
                
                
                -28
                %Selling,
      general and administrative expenses
                
                
                1,052,000
                
                
                
                1,148,000
                
                
                
                -8
                %Depreciation
      and amortization
                
                
                199,000
                
                
                
                197,000
                
                
                
                1
                %Operating
      income (loss)
                
                $
                (191,000
                )
                
                $
                148,000
                
                
                
                -229
                %Operating
      margin
                
                
                -2
                %
                
                
                1
                %
                
                
                -280
                %





Tix Productions, Inc., the Company’s Live Entertainment segment,
books touring theatrical and concert presentations with a history of successful
commercial appeal as well as participates in the development and roll out of new
theatrical and concert presentations often originating on Broadway in New York
or the West End in London. We use a wide variety of marketing channels to
sell tickets to these programs including our substantial subscriber-based
businesses in eleven US cities, our Salt Lake City based group and corporate
sales team, standard marketing tools including print, radio, television,
outdoor, and internet marketing tools. In addition, we invest in shows or
productions in advance of their initial tour to obtain favorable touring and
distribution rights.


27




Three
Months Ended March 31, 2010 and 2009:





Revenues





During
the three months ended March 31, 2010 and 2009, revenues from our Live
Entertainment operations were $9.5 million and $13.2 million, respectively. The
$3.7 million decrease in revenues is due to a decrease in show dates in the
first quarter of 2010. In the first quarter of 2010, we presented or produced
240 show dates as compared to 359 show dates in the first quarter of
2009.  This segment of our business often fluctuates quarter to
quarter due to the number of shows available on the market and the timing of the
actual shows.  The Company expects the number of performances to
increase throughout the year.  This segment does seasonally decline
significantly in the third quarter of the fiscal year with a substantial
increase during the fourth quarter of the fiscal year.  While revenues
were down to the decline in the volume of shows, this segment, excluding
depreciation and amortization, did generate cash flow from
operations.





Revenues
from live entertainment are a function of a number of elements: tickets sold,
ticket prices and ancillary revenue streams including sponsorships and revenues
generated through premium ticketing opportunities. In instances where the
Company acts as the primary obligor with suppliers, assumes credit risk, directs
the pricing of the tickets and purchases the advertising, the Company records
these revenues at gross. In other instances where we only receive a fee and are
not the principal obligors to vendors, we record these revenues at net. It is
management’s belief that this is consistent with the authoritative guidance
provided by the Financial Accounting Standards Board. Revenues from our Live
Entertainment operations are seasonal with the first and fourth quarters being
traditionally the strongest.





Opportunities
for growth in the Live Entertainment unit revolve around our expanding ownership
of intellectual content and expanding into additional markets.  We see
growth opportunities to present in major marketplaces where competition has
diminished due to industry consolidation such as Detroit and Milwaukee, and even
more opportunities in smaller markets where individual promoters and competitors
have left the market.





Direct
Operating Expenses





During
the three months ended March 31, 2010 and 2009, direct operating expenses were
$8.4 million and $11.7 million, and represented 89% of revenues. The decrease in
direct operating costs is associated with the 28% decline in
revenues.




Selling,
Marketing and Administrative Expenses





Live
Entertainment’s selling, marketing and administrative expenses include
advertising and promotional costs related to its business activities, as well as
the segment cost of management. For the three months ended March 31, 2010 and
2009, Live Entertainment’s administrative expenses were $1.0 million or 11% of
revenues, and $1.1 million or 8% of revenues, respectively.




Depreciation
and Amortization





Depreciation
and amortization expense incurred during the three months ended March 31, 2010
and 2009 was $199,000 and $197,000, and primarily relates to amortization of the
intangible assets that resulted from the acquisitions of Magic and NewSpace. We
expect to incur a similar level of depreciation and amortization for the
remainder of 2010.





Liquidity
and Capital Resources




At March
31, 2010, we had cash of $10.6 million and total assets of
$31.0 million compared to $9.9 million and $29.6 million,
respectively, at December 31, 2009. Our working capital totaled $6.0
million at March 31, 2010, compared to $7.9 million at December 31, 2009. In
conjunction with our purchase of All Access Entertainment, LLC at February 10,
2010, the Company issued a six month secured convertible promissory note in the
principal amount of $1.0 million. We had no debt as of March 31,
2010.





Our
working capital requirements and capital for our general corporate purposes,
including acquisitions and capital expenditures, are funded from operations or
from the selling of equity securities and to a much lesser extent upon proceeds
received upon the exercise of options and warrants. We will need to incur debt
or issue equity to make other strategic acquisitions. We currently do not have
any lines of credit available to us. We have no commitments from third parties
to provide us with any additional future financing, and may not be able to
obtain future financing on favorable terms.





We
generally receive cash related to the sale of discount tickets and merchandise
at the time of purchase and for Live Entertainment at the time of the settlement
of revenues and expenses of the show, which is generally on the last date of the
show. In certain instances, but not all, the sale of premium tickets occurs
before the event. In these instances, the sale is recorded as deferred revenue
until the event occurs. We pay the majority of event related expenses at the
time of or after the event occurs.





Our
revenues and cash fluctuate based upon the seasonality of our various
businesses. Examples of seasonality of our businesses include Ticketing
Services, which reports slightly greater revenues in the third and fourth
quarters than those reported in the first half of the year. Our Live
Entertainment segment expects to record the majority of its revenues in the
fourth quarter. Exhibit Merchandising and AnyEvent are not subject to seasonal
fluctuation. Exhibit Merchandising is subject to revenue fluctuations as a
result of exhibits that it represents moving from one location to another.
Moving an exhibit from one location to another generally results in the exhibit
being closed from four to six weeks. The length of time an exhibit is closed is
dependent upon the type of exhibit, the distance the exhibit is to be shipped,
as well as any special needs that may be required in re-setting the exhibit.
AnyEvent revenues are not subject to seasonal fluctuation, but depend on our
ability to obtain tickets for events. We expect cash flows from operations and
other financing alternatives, to satisfy working capital, and capital
expenditures for at least the succeeding year.


28





Cash
Flows from Operating Activities





Cash
flows from operating activities are as follows:





Three Months Ended March 31,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      income
                  
                  $
                  86,000
                  
                  
                  $
                  295,000Non-cash
      charges, net
                  
                  
                  646,000
                  
                  
                  
                  1,004,000Change
      in cash from working capital changes
                  
                  
                  1,684,000
                  
                  
                  
                  560,000Cash
      flows from operating activities
                  
                  $
                  2,416,000
                  
                  
                  $
                  1,859,000





Cash
provided by operating activities increased $557,000 for the three months ended
March 31, 2010 compared to the three months ended March 31, 2009.  The
increase in cash provided from operating activities is the result of a $1.0
million increase in working capital changes, which was offset by a decrease of
$358,000 in non-cash charges, and $209,000 decrease in net income net of tax.
Items contributing to the increase in working capital were $1.0 million increase
in accounts payable and accrued expenses and a $519,000 decrease in accounts
receivable, which were offset by $207,000 decrease in deferred revenue, $125,000
increase in inventory, and $103,000 increase in prepaid expenses and other
current assets. The decline in non-cash charges for the three months ended March
31, 2010 as compared to the same period of 2009 was primarily attributable to a
$391,000 decline in non-cash compensation to employees, directors, and
consultants for services.





Cash
Flows from Investing Activities





Cash
flows from investing activities are as follows:





Three Months Ended March 31,2010
                  
                  
                  2009Cash
      flows from investing activities:Purchases
      of property, plant and equipment
                  
                  $
                  (170,000
                  )
                  
                  $
                  (45,000
                  )Acquisitions
                  
                  
                  (1,505,000
                  )
                  
                  
                  -Cash
      flows from investing activities
                  
                  $
                  (1,675,000
                  )
                  
                  $
                  (45,000
                  )





For the
three months ended March 31, 2010 and 2009, net purchases of property, plant and
equipment accounted for minor cash outlays. We expect purchase of property,
plant and equipment to be an insignificant portion of our cash flow activities.
During the three months ended March 31, 2010, we used $1.5 million in cash to
fund the acquisition of All Access Entertainment, LLC, for which there was no
corresponding transaction in the three months ended March 31, 2009.





Cash
Flows from Financing Activities





Cash
flows from financing activities are as follows:





Three Months Ended March 31,2010
                  
                  
                  2009Cash
      flows from financing activities:Cost
      of treasury stock
                  
                  $
                  -
                  
                  
                  $
                  (378,000
                  )Payments
      on capital lease obligations
                  
                  
                  (13,000
                  )
                  
                  
                  (12,000
                  )Cash
      flows from financing activities
                  
                  $
                  (13,000
                  )
                  
                  $
                  (390,000
                  )


29


Cash used
in financing activities decreased by $378,000 for the three months ended March
31, 2010, and was driven by a $378,000 decrease in cash used to repurchase
shares of our common stock under the stock repurchase program described below.
Amounts paid related to capital leases obligations or amounts received related
to options and warrants were immaterial.





Summary





Our
primary short-term liquidity needs are to fund general working capital
requirements while our long-term liquidity needs are primarily acquisition
related. Our primary source of funds for our short-term needs will be cash flows
from operations, while our long-term sources of funds will be from operations
and debt or equity financing. We have sufficient cash on hand and are generating
sufficient cash from operations to meet our current operating
needs.





Earnings
before interest, income taxes, depreciation and amortization or
EBITDA





The
following includes the financial measure of performance earnings before
interest, income taxes, depreciation and amortization, or EBITDA, that is a
commonly used measure of performance in the entertainment industry. EBITDA is
not a measure of performance calculated in accordance with accounting principles
generally accepted in United States of America or GAAP. Management has
historically evaluated the operating performance of management of Tix
Productions, Tix4AnyEvent and Exhibit Merchandising based upon this non-GAAP
measure.





EBITDA is
presented solely as a supplemental disclosure because (1) management believes it
enhances an overall understanding of its past and current performance; (2)
management believes it is a useful tool for investors to assess the operating
performance of the business in comparison to other entertainment businesses
since EBITDA excludes certain items that may not be indicative of management’s
operating results; (3) measures that are comparable to EBITDA are often used as
an important basis for the valuation of entertainment companies; and (4)
management uses EBITDA internally to evaluate its operating performance in
comparison to its competitors.





The use of EBITDA has certain limitations. EBITDA should be
considered in addition to, not as a substitute for or superior to any GAAP
financial measure including net income as an indicator of management’s
performance, or cash flows provided by operating activities as an indicator of
the Company’s liquidity, nor should it be considered as an indicator of
management’s overall performance. Management’s calculation of EBITDA may be
different from the calculation of EBITDA or other similarly titled measurements
used by other entertainment companies, and therefore comparability may be
limited. EBITDA eliminates certain substantial recurring items from net income
(loss), such as depreciation, amortization, interest expense and income taxes.
Each of these items has been incurred in the past, will continue to be incurred
in the future and should be considered in the overall evaluation of the
Company’s results. We compensate for these limitations by providing the relevant
disclosure of depreciation and amortization, interest expense and income taxes
that are excluded in the calculation of EBITDA both in the reconciliation to the
GAAP financial measure of net income (loss) and in the consolidated financial
statements and related footnotes, all of which should be considered when
evaluating the Company’s results. Management strongly encourages readers to
review our financial information in its entirety and not to rely on a single
measure. A reconciliation of EBITDA to net income (loss)
follows:





Three months ended
                          
                          
                          Three months endedMarch 31, 2010
                          
                          
                          March 31, 2009Net
      income
                          
                          $
                          86,000
                          
                          
                          $
                          295,000Interest,
      net
                          
                          
                          (5,000
                          )
                          
                          
                          (9,000
                          )Depreciation
                          
                          
                          137,000
                          
                          
                          
                          131,000Amortization
                          
                          
                          484,000
                          
                          
                          
                          490,000EBITDA
                          
                          $
                          702,000
                          
                          
                          $
                          907,000





Principal Commitments




Lease
Commitments:





The
Company leases office space for its corporate headquarters in Studio City,
California. Additionally, the Company’s wholly-owned subsidiaries, Tix4Tonight,
LLC, Tix Productions, LLC and Exhibit Merchandising, lease space. Tix4Tonight
leases its ticket facilities and its administrative offices in Las Vegas,
Nevada, for various periods ranging from one year to five years. Tix Production,
LLC leases office space in Salt Lake City, Utah and Aurora, Ohio. Exhibit
Merchandising leases warehouse and office space in Streetsboro,
Ohio.


30




Many of
the Company’s operating leases contain predetermined fixed increases in the
minimum rental rate during the initial lease term and/or rent holiday periods.
For these leases, the Company recognizes the related rent expense on a
straight-line basis beginning on the effective date of the lease.  The
Company records the difference between the amounts charged to expense and the
rent paid as deferred rent on the Company’s balance sheet.





The
aggregate minimum future rental payments under non-cancelable operating leases
for facilities in operation at March 31, 2010, excluding operating expenses,
annual rent escalation provisions, and contingent rental payments based on
achieving certain pre-determined sales levels, are as follows:





Payments due by Fiscal Years Ending December 31,Total
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                2013
                
                
                2014 and beyondDebt
      obligations
                
                $
                1,000,000
                
                
                $
                1,000,000
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Capital
      lease obligations
                
                
                72,000
                
                
                
                52,000
                
                
                
                9,000
                
                
                
                8,000
                
                
                
                3,000
                
                
                
                -Operating
      lease obligations
                
                
                11,337,000
                
                
                
                2,643,000
                
                
                
                3,030,000
                
                
                
                2,582,000
                
                
                
                1,512,000
                
                
                
                1,570,000Total
      contractual cash obligations
                
                $
                12,409,000
                
                
                $
                3,695,000
                
                
                $
                3,039,000
                
                
                $
                2,590,000
                
                
                $
                1,515,000
                
                
                $
                1,570,000





On March
19, 2010, the Company entered into a sixty month lease under which we will lease
our principal executive offices.  Pursuant to the lease, we relocated our
offices to 12711 Ventura Boulevard, Suite 340, Studio City CA 91604, a 3,970
square foot space.  The lease commenced May 1, 2010 and our monthly
rent under the lease is $12,250.  The rent is subject to increase to
approximately $12,600, $13,000, $13,400 and $13,800 respectively, on the first,
second, third and fourth anniversaries of the extended lease term.  We
will be responsible for paying our allocable portion of operating expenses in
addition to the monthly rent.





When we
acquired All Access Entertainment, LLC (Note 4), we assumed certain operating
leases for various locations.  The obligations related to these
locations are included in the table above.





Employment Agreements:




The
Company has employment agreements with its President and Chief Executive
Officer, as well as several of its key officers and employees that are for
varying periods of one to three years.





Retirement
Plan:





The
Company has a 401(k) retirement plan which covers substantially all employees.
Under the plan, participants may defer the receipt of up to 75% percent of their
annual compensation, but not to exceed the maximum amount as determined by the
Internal Revenue Code. The amount of the employer matching contribution is equal
to 100% of the first 3% withheld and 50% for the next 2% withheld. The Company
may make additional matching contributions as determined and approved by the
Board of Directors. Total 401(k) retirement plan expense amounted to $40,000 and
$33,000 for the three months ended March 31, 2010 and 2009,
respectively.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




As
substantially all of our investments are in short-term bank deposits, our
exposure to market risk is limited primarily to interest income sensitivity,
which is affected by changes in the general level of U.S. interest rates. The
primary objective of our investment activities is to preserve principal. Due to
the nature of our short-term investments, we believe that we are not subject to
any material market risk exposure. We do not have any derivative financial
instruments or foreign currency instruments. If interest rates had varied by 10%
in the three month period ended March 31, 2010, it would not have had a material
effect on our results of operations or cash flows for that period.


31


ITEM
4. CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our principal executive officer and principal
financial officer, of the effectiveness of our disclosure controls and
procedures (as defined  in  Rules  13a-15(e) and
15d-15(e) of the  Exchange  Act (defined  below)).
Based upon that evaluation, our principal executive officer and principal
financial officer concluded that, as of the end of the period covered in this
report, our disclosure controls and procedures were effective to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed,
summarized and reported within the required time periods and is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.





Our
management, including our principal executive officer and principal financial
officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error or fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected. Accordingly, management
believes that the financial statements included in this report fairly present in
all material respects our financial condition, results of operations and cash
flows for the periods presented.





Changes
in Internal Control Over Financial Reporting





In
addition, our management with the participation of our Principal Executive
Officer and Principal Financial Officer have determined that no change in our
internal control over financial reporting (as that term is defined in Rules
13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) occurred
during or subsequent to the quarter ended March 31, 2010 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.




PART
II. OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





As of
March 31, 2010, the end of the period covered by this report, the Company was
subject to various legal proceedings and claims discussed below, as well as
certain other legal proceedings and claims that have not been fully resolved and
that have arisen in the ordinary course of business. Other than as discussed
below, in the opinion of management, the Company does not have a potential
liability related to any current legal proceedings and claims that would
individually or in the aggregate have a material adverse effect on its financial
condition or operating results. However, the results of legal proceedings
cannot be predicted with certainty. The Company intends to contest each
lawsuit vigorously but should the Company fail to prevail in any of these legal
matters or should several of these legal matters be resolved against the Company
in the same reporting period, the operating results of a particular reporting
period could be materially adversely affected. Management continues to
evaluate the lawsuits discussed below and based on the stage of these
proceedings, management is unable to reasonably estimate the likelihood of any
loss or the amount or range of any potential loss that could result from the
litigation. Therefore, no accrual has been established for any potential
loss in connection with these lawsuits.





Vegas.Com Trademark
Litigation





On
October 23, 2009, the Company and Tix4Tonight filed a complaint against
Vegas.com ("Vegas.com")and Vegas
Tix4Less(“VT4L”) in
the United States District Court for the Central District of California for
federal trademark infringement, federal trade dress infringement and unfair
competition, and common law unfair competition. Specifically, the complaint
alleges that Vegas.com and VT4L are intentionally confusing consumers by using
the Company's and Tix4Tonight's trademarks and trade dress. The complaint
seeks damages, an injunction, declaratory relief, and attorneys' fees and
costs. On December 4, 2009, Vegas.com and VT4L filed a motion to dismiss
and/or transfer the litigation to Nevada, arguing that the court lacked personal
jurisdiction over the defendants and that venue was either improper or
inconvenient. The Company and Tix4Tonight filed its opposition on January
29, 2010, and on March 1, 2010 Vegas.com and VT4L filed their reply.  To
stop Vegas.com and VT4L's infringement during the pendency of the litigation,
the Company and Tix4Tonight filed a motion for preliminary injunction on
February 22, 2010. Vegas.com and VT4L responded on March 8, 2010, and the
Company and Tix4Tonight filed a reply one week later.  The Court has not
yet ruled on either motion and, instead, on March 24, 2010, granted both
parties’ requests for jurisdictional discovery, which will be completed by May
25, 2010.





Vegas.Com Antitrust
Litigation





On
December 14, 2009, Vegas.com and VT4L filed a complaint in the United States
District Court for the District of Nevada alleging violations by the Company and
its wholly owned subsidiary Tix4Tonight of 15 U.S.C. §1, 15 U.S.C. §2, 15 U.S.C.
§14, and Nevada state law. The Complaint specifically alleges that the
Company and Tix4Tonight entered into exclusive deals with venues and producers
with the effect of unreasonably restricting trade and commerce, prevented actual
and prospective competitors such as Vegas.com and VT4L from entering the market
or obtaining a non-trivial share of the market, interfered with existing or
prospective contractual arrangements between Vegas.com and VT4L and venues and
producers, and asserted an invalid patent to prevent competition. In their
demand, Vegas.com and VT4L seek compensatory, consequential, incidental, treble
and punitive damages in an amount to be determined at trial, in addition to
attorneys' fees and costs and injunctive relief. On December 23, 2009,
Vegas.com and VT4L filed an Amended Complaint to add requests for declaratory
judgment of non-infringement and invalidity related to the Company's ticket
systems patent and also a claim for unfair trade practices under the Lanham Act
related to the assertion of that patent. On February 3, 2010, Vegas.com and
VT4L filed their Second Amended Complaint, to add allegations that the Company
and Tix4tonight helped organize a group boycott among venues and producers
against VT4L. The Company and Tix4Tonight's response to the Second Amended
Complaint was filed on March 4, 2010.  On April 21, 2010, Vegas.com
and VT4L filed an Opposition to the Company and Tix4Tonight's Motion to Dismiss
the Second Amended Complaint.  The Company and Tix4Tonight's reply is due
on May 10, 2010.


32





ITEM
1A. RISK FACTORS





There are
no material changes from the risk factors set forth under Part I, Item 1A “Risk
Factors” in the Company’s 2009 Annual Report on Form 10-K.





ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




None.





ITEM 3. DEFAULTS
UPON SENIOR SECURITIES





None.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





Not
applicable.





ITEM 5. OTHER INFORMATION




Not
applicable.





ITEM
6. EXHIBITS





A list of
exhibits required to be filed as part of this report is set forth in the Index
to Exhibits, which immediately precedes such exhibits, and is incorporated
herein by reference.


33





SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




TIX CORPORATION
                  (Registrant)Date:
      May10, 2010
                By:
                /s/Mitch FrancisMitch
      FrancisChief
      Executive OfficerDate:
      May 10, 2010
                By:
                /s/ Steve HandySteve
      HandyChief
      Financial Officer
                  (On
      behalf of the registrant and
                  Principal
      Financial and Accounting
Officer)




34





INDEX TO
EXHIBITS





10.1
            
            Employment
      Agreement dated as of March 1, 2009 between Mitch Francis and the Company.
      (1)31.1
            
            Officer’s
      Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
            
            Officer’s
      Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
            
            Officer’s
      Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            
            Officer’s
      Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





(1)
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 7, 2009.


35