**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 September 30, 2008





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)





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


(Address
      of principal executive offices)




Issuer’s
      telephone number, including area code: (818) 761-1002




Not
      applicable


(Former
      name, former address and former fiscal year, if changed since last
      report.)





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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
      the
      Exchange Act)




Large
                accelerated filer
            o
            Accelerated
                filer
            oNon-accelerated
                filer
            o
            Smaller
                reporting company
            x




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





As
      of
      November 10, 2008, the Company had 32,470,169 shares of common stock, $0.08
      par value, issued and outstanding, excluding 554,470 shares held in
      treasury.




Documents
      incorporated by reference: None.












Special
      Note Regarding Forward-Looking Statements:




This
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2008
      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 September 30,
      2008
      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 September 30, 2008, 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 September 30, 2008, 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 -September 30, 2008 (Unaudited) and December
                31, 2007
            
            
            1Condensed
                Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
                -
                Three Months Ended September 30, 2008 and 2007
            
            
            2Condensed
                Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
                -
                Nine months ended September 30, 2008 and 2007
            
            
            3Condensed
                Consolidated Statement of Stockholders’ Equity (Unaudited) - Nine
                months ended September 30, 2008
            
            
            4Condensed
                Consolidated Statements of Cash Flows (Unaudited) - Nine months ended
                September 30, 2008 and 2007
            
            
            5Notes
                to Condensed Consolidated Financial Statements (Unaudited) - Nine
                months ended September 30, 2008 and 2007
            
            
            7Item
                2. Management’s Discussion and Analysis or Plan of
                Operations
            
            
            26Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            
            
            45Item
                4. Controls and Procedures
            
            
            46PART
                II. OTHER INFORMATIONItem
                1. Legal Proceedings
            
            
            46Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            
            46Item
                3. Defaults upon Senior Securities
            
            
            46Item
                4. Submission of Matters to a Vote of Security Holders
            
            
            47Item
                5. Other Information
            
            
            47Item
                6. Exhibits
            
            
            47SIGNATURES
            
            
            47




**TIX
                CORPORATION AND SUBSIDIARIES****CONDENSED
                CONSOLIDATED BALANCE SHEETS****September
                30,**
            
            **December
                31,****2008**
            
            **2007****(Unaudited)****Assets****Current
                assets:**Cash
            
            
            
            
            $
            5,154,000
            
            $
            7,417,000Other
                receivables
            
            
            
            
            
            -
            
            
            345,000Accounts
                receivable, net
            
            
            
            
            
            493,000
            
            
            129,000Inventory,
                net
            
            
            
            
            
            4,277,000
            
            
            3,938,000Prepaid
                expenses and other current assets
            
            
            
            
            
            1,857,000
            
            
            178,000**Total
                current assets**
            
            
            
            
            
            11,781,000
            
            
            12,007,000**Property
                and equipment**Office
                equipment and furniture
            
            
            
            
            
            1,763,000
            
            
            1,413,000Equipment
                under capital lease
            
            
            
            
            
            408,000
            
            
            386,000Leasehold
                improvements
            
            
            
            
            
            361,000
            
            
            313,0002,532,000
            
            
            2,112,000Less
                accumulated depreciation
            
            
            
            
            
            (1,026,000
            )
            
            (664,000
            )**Total
                property and equipment, net**
            
            
            
            
            
            1,506,000
            
            
            1,448,000**Other
                assets:**Intangible
                assets:Goodwill
            
            
            
            
            
            31,085,000
            
            
            27,115,000Intangibles,
                net
            
            
            
            
            
            15,535,000
            
            
            14,524,000**Total
                intangible assets**
            
            
            
            
            
            46,620,000
            
            
            41,639,000Capitalized
                theatrical costs
            
            
            
            
            
            459,000
            
            
            -Deposits
                and other assets
            
            
            
            
            
            96,000
            
            
            74,000**Total
                other assets**
            
            
            
            
            
            47,175,000
            
            
            41,713,000**Total
                assets**
            
            
            
            
            $
            60,462,000
            
            $
            55,168,000**Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable
            
            
            
            
            $
            2,721,000
            
            $
            1,945,000Accrued
                expenses
            
            
            
            
            
            1,702,000
            
            
            1,082,000Current
                portion of capital lease obligations
            
            
            
            
            
            51,000
            
            
            45,000Deferred
                revenue
            
            
            
            
            
            247,000
            
            
            54,000**Total
                current liabilities**
            
            
            
            
            
            4,721,000
            
            
            3,126,000**Non-current
                liabilities:**Capital
                lease obligations, less current portion
            
            
            
            
            
            89,000
            
            
            108,000Deferred
                rent
            
            
            
            
            
            100,000
            
            
            188,000**Total
                non-current liabilities**
            
            
            
            
            
            189,000
            
            
            296,000**Stockholder's
                equity:**Preferred
                stock, $.01 par value; 500,000 shares authorized; none
                issued
            
            
            
            
            
            -
            
            
            -Common
                Stock, $.08 par value; 100,000,000 shares authorized;33,024,639 sharesand
                30,402,325 shares issued at September 30, 2008 and December 31, 2007
                respectively
            
            
            
            
            
            2,642,000
            
            
            2,432,000Additional
                paid-in capital
            
            
            
            
            
            87,600,000
            
            
            81,034,000Cost
                of shares held in treasury (350,470 shares at September 30, 2008
                and no
                shares at December 31, 2007)
            
            
            
            
            
            (1,128,000
            )
            
            -Accumulated
                deficit
            
            
            
            
            
            (33,410,000
            )
            
            (31,720,000
            )Accumulated
                other comprehensive loss
            
            
            
            
            
            (152,000
            )
            
            -**Total
                stockholders' equity**
            
            
            
            
            
            55,552,000
            
            
            51,746,000**Total
                liabilities and stockholders' equity**
            
            
            
            
            $
            60,462,000
            
            $
            55,168,000See
                notes to the condensed consolidated financial
                statements.


1




**TIX
                CORPORATION AND SUBSIDIARIES****CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                (UNAUDITED)**




**Three Months Ended September 30,****2008**
            
            **2007**Revenues
            
            $
            8,839,000
            
            $
            5,702,000Operating
                expenses:Direct
                costs of revenues
            
            
            5,127,000
            
            
            4,494,000Selling
                and marketing expenses.
            
            
            217,000
            
            
            809,000General
                and administrative expenses, including non-cash equity-based costs
                of
                $560,000 and $8,008,000 in
              2008
                and 2007, respectively (including $479,000 and$1,140,000
                for officers and directors in 2008 and 2007,
                respectively).
            
            
            3,409,000
            
            
            8,369,000Depreciation
                and amortization
            
            
            1,151,000
            
            
            575,000Total
                costs and expenses
            
            
            9,904,000
            
            
            14,247,000Operating
                Loss
            
            
            (1,065,000
            )
            
            (8,545,000
            )Other
                income (expense):Other
                income
            
            
            77,000
            
            
            28,000Interest
                income
            
            
            7,000
            
            
            60,000Interest
                expense
            
            
            (5,000
            )
            
            (53,000
            )Other
                income (expense), net
            
            
            79,000
            
            
            35,000Net
                loss
            
            
            (986,000
            )
            
            (8,510,000
            )Other
                comprehensive lossForeign
                currency translation adjustments
            
            
            (108,000
            )
            
            -Comprehensive
                loss
            
            $
            (1,094,000
            )
            $
            (8,510,000
            )Net
                loss per common share - basic and diluted
            
            $
            (0.03
            )
            $
            (0.34
            )Weighted
                average common shares outstanding - basic and diluted
            
            
            32,912,630
            
            
            25,330,047See
                notes to the condensed consolidated financial
                statements


2




**TIX
                CORPORATION AND SUBSIDIARIES****CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                (UNAUDITED)**




**Nine
                months ended September 30,****2008**
            
            **2007**Revenues
            
            $
            48,866,000
            
            $
            12,161,000Operating
                expenses:Direct
                costs of revenues
            
            
            34,181,000
            
            
            8,119,000Selling
                and marketing expenses.
            
            
            2,392,000
            
            
            1,415,000General
                and administrative expenses, including non-cash equity-based costs
                of
                $1,841,000 and $13,126,000 in
              2008
                and 2007, respectively (including $1,255,000 and$2,455,000
                for officers and directors in 2008 and 2007,
                respectively).
            
            
            10,930,000
            
            
            17,101,000Depreciation
                and amortization
            
            
            3,375,000
            
            
            757,000Total
                costs and expenses
            
            
            50,878,000
            
            
            27,392,000Operating
                loss
            
            
            (2,012,000
            )
            
            (15,231,000
            )Other
                income (expense):Other
                income
            
            
            285,000
            
            
            31,000Interest
                income
            
            
            52,000
            
            
            72,000Interest
                expense
            
            
            (15,000
            )
            
            (99,000
            )Other
                income (expense), net
            
            
            322,000
            
            
            4,000Net
                loss
            
            
            (1,690,000
            )
            
            (15,227,000
            )Other
                comprehensive loss:Foreign
                currency translation adjustments
            
            
            (152,000
            )
            
            -Comprehensive
                loss
            
            $
            (1,842,000
            )
            $
            (15,227,000
            )Net
                loss per common share - basic and diluted
            
            $
            (0.06
            )
            $
            (0.72
            )Weighted
                average common shares outstanding -basic and diluted
            
            
            31,791,002
            
            
            21,161,157See
                notes to the condensed consolidated financial
                statements





3


**TIX
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**


**NINE
      MONTHS ENDED SEPTEMBER 30, 2008 (UNAUDITED)**


**Accumulated****Additional**
              
              
              
              
              
              **other**
              
              **Total****Common
                  Stock**
              
              **Paid In**
              
              **Accumulated**
              
              **Treasury**
              
              **comprehensive**
              
              **Stockholders’****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Stock**
              
              **loss**
              
              **Equity**Balance,
                  December 31, 2007
              
              
              30,402,325
              
              $
              2,432,000
              
              $
              81,034,000
              
              $
              (31,720,000
              )
              $
              -
              
              $
              -
              
              $
              51,746,000Issuance of
                  common stock to consultants
              
              
              86,136
              
              
              7,000
              
              
              417,000
              
              
              
              
              
              
              
              
              
              
              
              424,000Issuance
                  of common stock to officers and employees
              
              
              162,501
              
              
              13,000
              
              
              23,000
              
              
              
              
              
              
              
              
              
              
              
              36,000Issuance
                  of common stock upon exercise of warrants and options
              
              
              1,326,059
              
              
              106,000
              
              
              (52,000
              )
              
              
              
              
              
              
              
              
              
              
              54,000Fair
                  value of options issued to employees
              
              
              
              
              
              
              
              
              1,298,000
              
              
              
              
              
              
              
              
              
              
              
              1,298,000Issuance
                  of common stock for acquisition of Magic Arts &
                  Entertainment
              
              
              476,190
              
              
              38,000
              
              
              2,219,000
              
              
              
              
              
              
              
              
              
              
              
              2,257,000Issuance
                  of common stock for acquisition of NewSpace Entertainment
              
              
              571,428
              
              
              46,000
              
              
              2,549,000
              
              
              
              
              
              
              
              
              
              
              
              2,595,000Fair
                  value of warrants given to outside consultants
              
              
              
              
              
              
              
              
              112,000
              
              
              
              
              
              
              
              
              
              
              
              112,000Net
                  Loss for the Period
              
              
              
              
              
              
              
              
              
              
              
              (1,690,000
              )
              
              
              
              
              
              
              
              (1,690,000
              )Foreign
                  currency translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (152,000
              )
              
              (152,000
              )33,024,639
              
              
              2,642,000
              
              
              87,600,000
              
              
              (33,410,000
              )
              
              -
              
              
              (152,000
              )
              
              56,680,000Purchase
                  of Treasury Stock
              
              
              (350,470
              )
              
              
              
              
              
              
              
              
              
              
              (1,128,000
              )
              
              
              
              
              (1,128,000
              )Balance,
                  September 30, 2008
              
              
              32,674,169
              
              $
              2,642,000
              
              $
              87,600,000
              
              $
              (33,410,000
              )
              $
              (1,128,000
              )
              $
              (152,000
              )
              $
              55,552,000




See
                notes to the condensed consolidated financial statements.****


4




TIX
                CORPORATION AND SUBSIDIARIESCONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOW




**For
                the nine months ended September 30,****2008**
            
            **2007****(Unaudited)**
            
            **(Unaudited)**Cash
                flows from operating activities:Net
                loss
            
            $
            (1,690,000
            )
            $
            (15,227,000
            )Adjustments
                to reconcile net loss to cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            362,000
            
            
            178,000Amortization
                of intangible assets
            
            
            3,013,000
            
            
            579,000Fair
                valued common stock issued for services
            
            
            431,000
            
            
            8,953,000Fair
                value of options issued to employees
            
            
            1,298,000
            
            
            733,000Fair
                value of warrants issued to consultants
            
            
            112,000
            
            
            3,440,000Change
                in allowance of inventory
            
            
            70,000
            
            
            -(Increase)
                decrease in:Accounts
                receivable
            
            
            155,000
            
            
            30,000Inventory
            
            
            6,000
            
            
            (535,000
            )Due
                from related party
            
            
            -
            
            
            (621,000
            )Prepaid
                expenses and other current assets
            
            
            (1,259,000
            )
            
            (313,000
            )Capitalized
                theatrical costs, deposits and other assets
            
            
            (482,000
            )
            
            -Increase
                (decrease) in:Accounts
                payable and accrued expenses
            
            
            515,000
            
            
            (54,000
            )Deferred
                revenue
            
            
            184,000
            
            
            219,000Deferred
                rent
            
            
            (88,000
            )
            
            109,000Net
                cash provided by (used in) operating activities
            
            
            2,627,000
            
            
            (2,509,000
            )Cash
                flows from investing activities:Purchases
                of property and equipment
            
            
            (398,000
            )
            
            (442,000
            )Purchase
                of Exhibit Merchandising
            
            
            -
            
            
            (11,441,000
            )Purchase
                of Magic Arts & Entertainment, net of cash acquired
            
            
            (1,971,000
            )
            
            -Purchase
                of NewSpace Entertainment, net of cash acquired
            
            
            (1,254,000
            )
            
            -Purchase
                of ticket inventory from AnyEvent
            
            
            -
            
            
            (96,000
            )Acquisition
                of AnyEvent
            
            
            -
            
            
            (300,000
            )Net
                cash used in investing activities
            
            
            (3,623,000
            )
            
            (12,279,000
            )Cash
                flows from financing activities:Proceeds
                from note payable, stockholder
            
            
            -
            
            
            2,000,000Repayment
                of note payable, stockholder
            
            
            -
            
            
            (2,000,000
            )Proceeds
                from common stock subscription
            
            
            -
            
            
            17,784,000Payments
                for purchase of common stock
            
            
            (1,128,000
            )
            
            -Payments
                on capital lease obligations
            
            
            (34,000
            )
            
            (41,000
            )Net
                proceeds from exercise of options and warrants
            
            
            54,000
            
            
            203,000Net
                cash provided by financing activities
            
            
            (1,108,000
            )
            
            17,946,000Effect
                of exchange rate changes on cash
            
            
            (159,000
            )
            
            -Change
                in Cash:Net
                increase (decrease)
            
            
            (2,263,000
            )
            
            3,158,000Balance
                at beginning of period
            
            
            7,417,000
            
            
            1,944,000Balance
                at end of period
            
            $
            5,154,000
            
            $
            5,102,000


5




Nine
                months ended
              September
                30,2008
            
            2007Supplemental
                disclosure of cash flow information:Cash
                paid forIncome
                taxes
            
            $
            -
            
            $
            13,000Interest
            
            $
            15,000
            
            $
            99,000Non-cash
                activities:Issuance
                of 476,190 shares of common stock in conjunction with the acquisition
                of
                Magic Arts & Entertainment - Florida, Inc.
            
            $
            2,257,000
            
            $
            -Issuance
                of 571,428 shares of common stock in conjunction with the acquisition
                of
                NewSpace Entertainment, Inc.
            
            $
            2,595,000
            
            $
            -Issuance
                of 137,500 shares of common stock in conjunction with the acquisition
                of
                John's Tickets, LLC.
            
            $
            -
            
            $
            550,000Issuance
                of 5 million shares of common stock in conjunction with the acquisition
                of
                Exhibit Merchandising, LLC.
            
            $
            -
            
            $
            35,000,000Issuance
                of common stock to officers
            
            $
            -
            
            $
            671,000








In April
      2008 the Company issued common stock as payment of a $29,000 bonus to a former
      owner of Stand-by Golf that was accrued for at December 31, 2007.





The
      Company, during the nine months ended September 30, 2008, acquired $22,000
      of
      telephone equipment that was financed through a capital lease
      obligation.




See
      notes
      to the condensed consolidated financial statements ****


6


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 - Summary of Significant Accounting Policies**




***Nature
      of Business***





Tix
      Corporation (the “Company”) was incorporated in Delaware in April 1993 under the
      name Cinema Ride, Inc. The Company changed its name from Cinema Ride, Inc.
      to
      Tix Corporation effective March 3, 2005. The Company is an integrated
      entertainment company providing ticketing services, event merchandising and
      the
      production and promotion of live entertainment. We operate three complimentary
      business units: Ticketing Services (Tix4Tonight) provides our last minute
      ticketing and premium ticketing services, Exhibit Merchandising (EM) provides
      our event merchandise sales and services, and our newly formed subsidiary,
      Tix
      Productions Inc. (TPI), provides live entertainment.




***Operating
      Segments***





***Ticketing
      Services***




Our
      ticketing business falls under our wholly owned subsidiary Tix4Tonight.
      Ticketing Services offers two distinct services; discount ticketing and premium
      event ticketing.




**Discount
      Ticketing**




Discount
      Ticketing - Las Vegas




Six
      years
      ago we brought the idea of selling discounted tickets in Las Vegas. When selling
      discounted tickets, Tix4Tonight generally sells them, from six different
      locations in Las Vegas, under short-term, exclusive and non-exclusive agreements
      with approximately 75 Las Vegas shows, out of a total of approximately 85 shows
      running at any one time, and typically offers tickets for more than 60 shows
      on
      any given day at a discount plus a service fee. Tix4Tonight usually receives
      inventory for sale the same day directly from the show producer, artist or
      theater. This is a reflection of the Las Vegas market and its last minute
      purchasing pattern. Tix4Tonight does not know the exact number of tickets for
      each show 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 cost.





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, complimentary products and
      services. Toward these ends, Tix4Tonight also offers discounted dinning
      reservations tickets to approximately 30 Las Vegas area restaurants and
      discounted golf tee times to more than 30 Las Vegas golf courses.





Discount
      Ticketing - HalfPriceTickets.com





Tix
      Corporation recently announced the launch of its internet based
      HalfPriceTickets.com. As with our Tix4Tonight operation in Las Vegas,
      HalfPriceTickets.com offers a marketing channel for producers, presenters,
      artists, arenas and theaters nationwide that will take advantage of our strong
      position in the discount ticketing and live entertainment industries, and
      discounted ticket sales. HalfPriceTickets.com will operate in a manner similar
      to Tix4Tonight with a few key differences. Instead of relying on physical ticket
      booth facilities for direct sales we will primarily use the internet as our
      customer interface and instead of offering only deeply discounted day of show
      tickets we will expand the date range of our ticket
      availability.  7


***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.
      In
      the area of premium tickets, we have changed from a retail ticket seller to
      the
      public to a wholesaler of tickets, that is, our clients are usually national
      retail ticket brokers. As a result of this change we are assuming less risk,
      have been able to reduce our overhead and increase the likelihood of
      profitability. The tickets sold are generally obtained through the event
      sponsor, artist or producer, although in some circumstances the tickets that
      we
      sell are from secondary or resale markets. We continue to expand our event
      offerings in this field through our strong industry relationships. Tix4AnyEvent
      operations are located in the leased administrative offices of Tix4Tonight
      in
      Las Vegas.




***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
“Tutankhamen and The Golden Age of the Pharaohs.”





Management
      expects that EM’s growth will be from direct merchandising opportunities
      directed from our other operating units, for example, 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 of live theater and concerts with a history of working together.
      The
      Company merged the two entertainment companies into its newly-formed
      wholly-owned subsidiary Tix Productions, Inc. We believe that by combining
      the
      operations of the two companies into a single entity we will be able to leverage
      our resources, gain operating efficiencies and more fully utilize the
      combined network of producers and promoters. NewSpace and Magic will continue
      to
      operate under their current names for the foreseeable future as a reflection
      of
      the marketplace’s recognition of those entities.




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 eight 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 both upfront guaranteed
      income and 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 the upcoming
      theatrical production of 101 Dalmatians property.





As
      presenters, we generally contract for entertainment properties from producers
      to
      present in markets in the US and Canada. Throughout the US and Canada, we have
      a
      distinct competitive advantage in that we know and have worked in most major
      North American cities, something that few, if any, other organizations can
      claim. This allows us to work with shows throughout the country and negotiate
      terms that are unavailable to presenters in individual markets. In eight
      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, Fresno and Boise. 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.  8


Opportunities
      for growth in the Live Entertainment unit revolve around our expanding ownership
      of intellectual content, for example 101 Dalmatians and Bob the Builder, which
      gives us first rights to present these shows and provides us the ability to
      direct ticket sales and branded merchandising to our other operating segments.
      In addition, we see growth opportunities to present in major marketplaces where
      competition has diminished due to industry consolidation such as Chicago,
      Detroit and Boston and even more opportunities in smaller markets where
      individual promoters have gone out of business.





Tix
      Productions is the sole member of DCT Touring, LLC and Christmas Touring, LLC
      and the operations have been consolidated in the results of Tix
      Productions.




***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
      2007 Annual Report on Form 10-K and interim financial statements and
      information reported on Forms 8-K and 10-Q.




**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.





The
      Company’s HalfPriceTickets.com will recognize as revenue the commissions and
      related transaction fees from the sale of tickets will be 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 will
      be
      recorded as deferred revenue. Claims for ticket refunds, which will be generally
      received and paid the day after the show date, will be 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 will be processed. HalfPriceTIckets.com
      does not have any accounts receivable associated with sales transactions to
      individual customers because payment is collected at the time of
      sale.


9


Tix4Dinner
      offers reservations for discounted dinners at various restaurants on the Las
      Vegas strip with dining at specific times on the same day as the sale.
      Tix4Dinner recognizes as revenue the transaction fees earned from the booking
      of
      dinner reservations at the time that the reservations are made. At this time,
      the Company has minor accounts receivable and no accounts payable associated
      with the Tix4Dinner operations, as the Company collects the transaction fee
      at
      the time that the reservation is made, and the dinner payment is collected
      directly by the restaurant. The restaurants pay the Company a fee per
      guest.




Tix4Golf
      recognizes as revenue the difference between how much it charges its customers
      for tee-times and how much it pays golf courses for tee-times. The revenue
      per
      tee-time, as well as the cost per tee-time, varies, depending on the
      desirability of the golf course and tee-time, weather, time of year and several
      other factors. Revenue per tee-time is significantly higher when tee-times
      are
      guaranteed or pre-bought in large quantities. Tee-times are generally sold
      the
      day before or the day of the tee-time, however, tee-times may be booked in
      advance. Revenue is not recognized until the day of the tee-time. The Company
      does not have any accounts receivable associated with this business because
      all
      transactions are paid for at the time of purchase.




Tix4AnyEvent
      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.Tix4AnyEvent does not have any accounts receivable
      associated with sales transactions to individual 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.




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. 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. Shipping and handling revenues from our websites
      are
      included as a component of net sales. The Company does not have any accounts
      receivable associated with this business because all transactions are done
      by
      cash or credit card.




On
      January 1, 2008, the Company began its live entertainment productions. 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.





EITF
      99-19 “Reporting Revenues Gross as a Principal versus Net as an Agent” discusses
      whether revenues and cost of goods sold to arrive at gross profit and their
      corresponding assets and liabilities should be recorded at gross or net. EITF
      99-19 states the following items as indicators as of whether something should
      be
      recorded at gross or net:





·
            Acts
                as principal in the transaction


·
            Has
                risk and rewards of ownership, such as risk of loss for collection,
                delivery and returns, and


o
            Takes
                title to the products


o
            Selects
                the supplier


o
            Flexibility
                in pricing


o
            Assumes
                credit risk


·
            Acts
                as an agent or broker (including performing services, in substance,
                as an
                agent or broker) with compensation on a commission or fee basis.
                If the
                Company performs as an agent or broker with assuming the risks and
                rewards
                of ownership of the goods, sales should be reported on a net
                basis.





Tix
      Productions Inc.’s (TPI) operating units Magic Arts & Entertainment and
      NewSpace act as both presenter and promoters of productions, as well as agent.
      TPI’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.





EITF
      99-19 states that 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. It is management’s belief that this
      is consistent with EITF abstract 99-19 “Reporting Revenues Gross as Principal
      Versus Net as an Agent.”  10


***Consolidation:***




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




***Accounts
      receivable and credit policies:***




Accounts
      receivable are primarily associated with the revenues of shows in the process
      of
      settlement of all related event accounting. Accounts receivable are stated
      at
      the amount management expects to collect from the outstanding balances.
      Management provides for probable uncollectible amounts as a charge to operations
      during the period in which such determination is made based upon its assessment
      of the collectability of individual accounts. Balances that remain outstanding
      after reasonable collection efforts are written off. The amount charged to
      operations to reflect uncollectible accounts receivable bad debt expense has
      not
      been material to the financial statements periods presented.  11


***Capitalization
      of Theatrical Production Development Costs:***




There
      is
      no accounting guidance related to the capitalization of theatrical production
      development costs. Therefore consistent with SOP 00-2 for the capitalization
      of
      certain film production and development costs and by analogy applied to
      theatrical productions, the Company capitalizes costs incurred in the
      development of its theatrical productions. Costs capitalized by the Company
      include, but are not limited to, payments to directors, authors, composers,
      crews and other expenses directly associated with bringing a production to
      market. Management periodically reviews each theatrical production and will
      write down or write-off those capitalized costs if management determines the
      likelihood those costs will be recouped or to receive earnings from all sources
      related to the production has diminished. The Company amortizes these
      capitalized costs when the production is open to the public or is licensed
      to a
      third party. At September 30, 2008, the Company had $459,000 of capitalized
      costs, of which $400,000 relates to the theatrical rights of 101 Dalmatians,
      and
      $59,000 relates to the theatrical rights of Bob the Builder, with both shows
      to
      begin staging in the second half of 2008 and 2009.




***Purchase
      Accounting***




The
      Company accounts for its business acquisitions under the purchase method of
      accounting. The total cost of acquisitions is allocated to the underlying
      identifiable net assets based on their respective estimated fair values. The
      excess of the purchase price over the estimated fair values of the assets
      acquired is recorded as goodwill. Determining the fair value of the assets
      acquired and liabilities assumed requires management’s judgment and often
      involves the use of significant estimates and assumptions with respect to future
      cash flows, discount rates, asset lives and market values, among other items.
      Reserves have been established on the Company’s balance sheet related to
      acquired liabilities and qualifying restructuring costs and contingencies based
      on assumptions made at the time of acquisition. The Company evaluates these
      reserves on a regular basis to determine the adequacies of the
      amounts.




***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 using Statement of Financial Accounting Standards (SFAS)
      No. 123R effective January 1, 2006, for all share-based payments granted based
      on the requirements of SFAS No. 123R for all awards granted to employees.
      The Company accounts for stock option and warrant grants issued and vesting
      to
      non-employees in accordance with EITF No. 96-18: "Accounting for Equity
      Instruments that are Issued to Other Than Employees for Acquiring, or in
      Conjunction with Selling, Goods or Services” and EITF 00-18 “Accounting
      Recognition for Certain Transactions involving Equity Instruments Granted to
      Other Than Employees” 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:***




The
      Company accounts for intangible assets in accordance with Statement of Financial
      Accounting Standards No. 141, “Business Combinations” and Statement of Financial
      Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”
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, 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 its net book value to the 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
      undiscounted cash flows, the asset is considered impaired, and a second test
      is
      performed to measure the amount of impairment loss.  At March 31, 2008, we
      relinquished our rights to purchase season tickets to Cleveland Browns and
      Cleveland Cavaliers games, acquired through the purchase of Tix4AnyEvent. As
      a
      result, a one-time charge of $25,000 was recorded to the amortization of
      intangible expense to reduce the value of the related intangible asset. There
      were no other indications of impairment based on management’s assessment at
      September 30, 2008.


12


***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 adopted the provisions of FIN 48 on January 1, 2007. FIN 48 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.




Effective
      January 1, 2008, the Company adopted Statement of Financial Accounting Standards
      (SFAS) No. 157, Fair Value Measurements. This Statement defines fair value
      for
      certain financial and nonfinancial assets and liabilities that are recorded
      at
      fair value, establishes a framework for measuring fair value, and expands
      disclosures about fair value measurements. This guidance applies to other
      accounting pronouncements that require or permit fair value measurements. On
      February 12, 2008, the Financial Accounting Standards Board (FASB) finalized
      FASB Staff Position (FSP) No.157-2, Effective Date of FASB Statement No. 157.
      This Staff Position delays the effective date of SFAS No. 157 for nonfinancial
      assets and liabilities to fiscal years beginning after November 15, 2008 and
      interim periods within those fiscal years, except for those items that are
      recognized or disclosed at fair value in the financial statements on a recurring
      basis (at least annually). The adoption of SFAS No. 157 had no effect on the
      Company’s consolidated financial position or results of operations.




***Cash
      Concentrations:***




The
      Company's cash balances on deposit in the United States (US) with banks 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 September 30, 2008 the Company’s aggregate cash in excess of
      the FDIC insured amount was $2.7 million. In addition the Company had aggregate
      cash balances in Austria, Spain, and The United Kingdom of $365,000, $262,000,
      and $326,000, respectively, that were in excess of that respective countries
      equivalent of the US FDIC guarantee.





***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 gains and losses were minor in 2007
      and were $7,000 and $(44,000), respectively. The related translation adjustments
      are recorded in a separate component of stockholders’ equity in accumulated
      other comprehensive loss. Foreign currency transaction gains and losses are
      included in operations. The Company began operating in the United Kingdom in
      November 2007, with the opening of its exhibit shop at the O2 for “Tutankhamen
      and The Golden Age of the Pharaohs.” Additionally, in March 2008, the Company
      opened a second exhibit shop in Vienna, Austria for “Tutankhamen and the World
      of the Pharaohs” and a third exhibit shop for “The Undersea Treasures of Egypt”
in Madrid, Spain.


13




***Net
      Income (Loss) Per Common Share:***





Statement
      of Financial Accounting Standards No. 128, “Earnings Per Share,” requires
      presentation of basic earnings per share (“Basic EPS”) and diluted earnings per
      share (“Diluted EPS”). Basic earnings (loss) per share is computed by dividing
      income (loss) available to common stockholders by the weighted average number
      of
      common shares outstanding during the period. The diluted earnings per share
      calculation give effect to all potentially dilutive common shares outstanding
      during the period using the treasury stock method. These potentially dilutive
      securities were not included in the calculation of loss per share for the three
      and nine months ended September 30, 2008 and 2007, because the Company incurred
      a loss during these periods and thus their effect would have been anti-dilutive.
      Accordingly, basic and diluted loss per share is the same for the three and
      nine
      months ended September 30, 2008 and 2007. At September 30, 2008 we had
      outstanding warrants and stock options to acquire an aggregate of 3.9 million
      of
      which, 2.6 million were warrants to purchase shares of our common stock
      and 1.3 million were options to purchase shares of our common
      stock.





Issued
      but unvested shares of common stock are excluded from the calculation of basic
      earnings per share, but are included in the calculation of diluted earnings
      per
      share, when dilutive.




***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.




***Advertising
      Costs:***




Advertising
      costs are charged to operations as selling and marketing expenses at the time
      the costs are incurred. For the three and nine months ended September 30, 2008
      and 2007, advertising costs were $377,000 and $168,000, and $4.2 million and
      $597,000, respectively.





***Impairment
      of Long-Lived Assets:***




Statement
      of Financial Accounting Standards No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets” (“SFAS No. 144”), 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. SFAS No. 144 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.





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 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 September 30, 2008
      or December 31, 2007.


14




***Recent
      Accounting Pronouncements:***




References
      to the “FASB”, “SFAS” and “SAB” herein refer to the “Financial Accounting
      Standards Board”, “Statement of Financial Accounting Standards”, and the “SEC
      Staff Accounting Bulletin”, respectively.




In
      May
      2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 162, “The Hierarchy of
      Generally Accepted Accounting Principles.”  SFAS No. 162 identifies
      the sources of accounting principles and the framework for selecting the
      principles used in the preparation of financial statements that are presented
      in
      conformity with generally accepted accounting principles.  SFAS No.
      162 becomes effective 60 days following the SEC’s approval of the Public Company
      Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present
      Fairly in Conformity With Generally Accepted Accounting
      Principles.”  The Company does not expect that the adoption of SFAS
      No. 162 will have a material impact on its financial statements.




In
      April
      2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
      Intangible Assets.”  FSP No. FAS 142-3 amends the factors that should
      be considered in developing renewal or extension assumptions used to determine
      the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
      and Other Intangible Assets.”  The Company is required to adopt FSP
      No. FAS 142-3 effective at the beginning of 2010.  The Company is
      evaluating the impact that the adoption of FSP No. FAS 142-3 will have on its
      financial statements.





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS No.
      161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No.
      133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No.
      133”). The objective of SFAS No. 161 is to provide users of financial statements
      with an enhanced understanding of how and why an entity uses derivative
      instruments, how derivative instruments and related hedged items are accounted
      for under SFAS No. 133 and its related interpretations, and how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires qualitative
      disclosures about objectives and strategies for using derivatives, quantitative
      disclosures about fair value amounts of and gains and losses on derivative
      instruments, and disclosures about credit-risk-related contingent features
      in
      derivative agreements. SFAS No. 161 applies to all derivative financial
      instruments, including bifurcated derivative instruments (and nonderivative
      instruments that are designed and qualify as hedging instruments pursuant to
      paragraphs 37 and 42 of SFAS No. 133) and related hedged items accounted for
      under SFAS No. 133 and its related interpretations. SFAS No. 161 also amends
      certain provisions of SFAS No. 131. SFAS No. 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008, with early application encouraged. SFAS No. 161 encourages, but does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company has not yet determined the effect on its consolidated financial
      statements, if any, upon adoption of SFAS No. 161.





In
      December 2007, the FASB issued FASB Statement No. 141 (R), “Business
      Combinations” (FAS 141(R)), which establishes accounting principles and
      disclosure requirements for all transactions in which a company obtains control
      over another business. Statement 141(R) applies prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008. Earlier
      adoption is prohibited.




15


In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS No. 160
      establishes accounting and reporting standards that require that the ownership
      interests in subsidiaries held by parties other than the parent be clearly
      identified, labeled, and presented in the consolidated statement of financial
      position within equity, but separate from the parent’s equity; the amount of
      consolidated net income attributable to the parent and to the noncontrolling
      interest be clearly identified and presented on the face of the consolidated
      statement of income; and changes in a parent’s ownership interest while the
      parent retains its controlling financial interest in its subsidiary be accounted
      for consistently. SFAS No. 160 also requires that any retained noncontrolling
      equity investment in the former subsidiary be initially measured at fair
      value when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the
      disclosure requirements to identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners. SFAS No. 160 applies
      to
      all entities that prepare consolidated financial statements, except
      not-for-profit organizations, but will affect only those entities that have
      an
      outstanding noncontrolling interest in one or more subsidiaries or that
      deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. Earlier adoption is prohibited. SFAS No. 160 must be applied prospectively
      as of the beginning of the fiscal year in which it is initially applied, except
      for the presentation and disclosure requirements. The presentation and
      disclosure requirements are applied retrospectively for all periods
      presented.




The
      Company does not believe the adoption of the above recent pronouncements, with
      the exception of FAS 141(R), will have a material effect on the Company’s
      consolidated results of operations, financial position, or cash flows. FAS
      141(R) introduces significant changes to the accounting for and reporting of
      business combinations, continuing the movement toward greater use of fair values
      in financial reporting and expanded disclosures. FAS 141(R) impacts the annual
      goodwill impairment test associated with acquisitions that occurred prior to
      the
      standard's effective date and acquisitions closing after the effective date.
      Thus, companies such as us that have goodwill from an acquisition that closed
      prior to the standard's effective date will need to understand and implement
      the
      provisions of FAS 141(R). Management is currently evaluating the potential
      effects of FAS 141(R) on its currently recorded goodwill, as well as any
      goodwill that could be recorded as result of a future acquisition.





**Note
      3. - Acquisitions**




On
      January 2, 2008, the Company entered into separate letters of intent to acquire
      Magic Arts and Entertainment, LLC (Magic) and NewSpace Entertainment, LLC
      (NewSpace). As part of the letters of intent, the managements of Magic and
      NewSpace agreed to manage the operations of their respective companies for
      the
      benefit of the Company from January 2, 2008 until the transactions could be
      finalized. The managements of Magic and NewSpace were required to consult and
      obtain the approval of the management of the Company prior to entering into
      any
      long term arrangements or transactions that were outside the normal course
      of
      business. Further, the Company assumed all responsibility for any losses or
      profits that might be incurred or earned during this period by both Magic and
      NewSpace. As such, the Company has included the results of operation of Magic
      and NewSpace in its consolidated operations as of January 2, 2008, the date
      the
      company acquired effective control. The acquisition of Magic was completed
      on
      February 29, 2008 and the acquisition of NewSpace was completed on
      March 12, 2008.




***Magic
      Arts and Entertainment:***




.
      Pursuant to the Merger Agreement and Plan of Merger, we paid to the two
      stockholders of Magic a total $2.1 million in cash and issued to them a total
      of
      476,190 restricted shares of our common stock with a market value of $2.3
      million. Additionally, we will be required to issue to the former Magic
      stockholders a total of up to 380,952 additional shares of our common stock
      if
      certain EBITDA milestones are achieved during the first thirty-six months.
      These
      milestones are based upon the results achieved by Tix Productions, Inc. (“TPI”),
      a wholly owned subsidiary of the Company that focuses on providing live
      entertainment.




The
      assets of Magic consist primarily of agreements, copyrights and licenses to
      theatres, productions, and touring acts. We carry on Magic’s business through
      TPI.




The
      acquisition of Magic has been accounted for as a purchase in accordance with
      SFAS No. 141, “Business Combinations,” and the operations of the company have
      been consolidated commencing with the closing of the transaction. The $4.4
      million purchase price was allocated based upon the fair value of the acquired
      assets, as determined by Gemini Valuation Services, an independent valuation
      firm.


16




Allocation
      of the Purchase Price of Magic Arts & Entertainment:





Tangible
                assets, net of liabilities assumed:
            
            $
            143,000Intangible
                assets:Employment
                Agreement
            
            
            1,775,000Technology-based
            
            
            5,000Contract
            
            
            476,000Goodwill
            
            
            2,017,000Purchase
                price
            
            $
            4,416,000




In
      conjunction with the completion of the Merger, we entered into written
      employment agreements with Joseph B. Marsh and Lee D. Marshall, the co-founders
      of Magic, under which they serve as the Co-Chief Executive Officers of TPI.
      The
      term of each of the employment agreements commenced on February 29, 2008 and
      will expire on February 28, 2011, unless sooner terminated in accordance with
      the applicable provisions of the employment agreement. Under the employment
      agreements, Mr. Marsh is entitled to an annual salary of $100,000 and Mr.
      Marshall is entitled to an annual salary of $300,000 that will increase by
      $25,000 each year during the term of the agreement. Mr. Marshall also is
      eligible to receive annual bonuses based upon TPI exceeding performance
      milestones specified in his employment agreement.




In
      the
      event of the termination of employment of Mr. Marsh or Mr. Marshall for any
      reason other than termination by us for “cause” (as defined in the employment
      agreement) or termination by reason of his death or permanent disability, we
      have agreed to continue to pay Mr. Marsh or Mr. Marshall or their personal
      representatives, as the case may be, the annual salary under his employment
      agreement for six months following their departure.




Under
      their employment agreements, each of Messrs. Marsh and Marshall agrees not
      to
      compete with us during the period from the date on which their employment with
      the Company is terminated for any reason through the fifth anniversary of such
      date.  Mr. Marsh was a shareholder of Tix prior to its acquisition of Magic
      and presently owns approximately 15% of Tix's common stock.





***NewSpace
      Entertainment***




Pursuant
      to the Merger, we paid to the three stockholders of NewSpace $1.4 million in
      cash and issued to them a total of 571,428 restricted shares of our common
      stock
      with a market value of $2.6 million.




The
      assets of NewSpace consist primarily of agreements, copyrights and licenses
      to
      theatres, productions, and touring acts. We carry on the business of NewSpace
      through TPI.







The
      acquisition of NewSpace has been accounted for as a purchase in accordance
      with
      SFAS No. 141, “Business Combinations,” and the operations of the company have
      been consolidated commencing with the closing of the transaction. The $4.0
      million purchase price was allocated and based upon the fair value of the
      acquired assets, as determined by Gemini Valuation Services, an independent
      valuation firm. This valuation is still subject to change and revision may
      occur
      in the assigned value. The Company does not believe any changes or revisions
      will be significant.




17


Allocation
      of the Purchase Price of NewSpace Entertainment:





Tangible
                assets, net of liabilities assumed:
            
            $
            293,000Intangible
                assets:Licensing
                Contracts
            
            
            64,000Employment
                Agreements
            
            
            1,698,000Technology-based
            
            
            5,000Goodwill
            
            
            1,953,000Purchase
                price
            
            $
            4,013,000





In
      conjunction with the completion of the Merger, we entered into written
      employment agreements with John Ballard, Steve Boulay and Bruce Granath, the
      three stockholders of NewSpace, pursuant to which they serve as President,
      Chief
      Operating Officer and Vice President - Marketing, respectively, at TPI. The
      term
      of each of the employment agreements commenced on March 11, 2008, and will
      expire on the third anniversary of such date, unless sooner terminated in
      accordance with applicable provisions of the employment agreements.




Mr.
      Ballard and Mr. Boulay are entitled under their respective employment agreements
      to an annual salary of $185,000. Under his employment agreement, Mr. Granath
      is
      entitled to an annual salary of $115,000. Each of Messrs. Ballard, Boulay and
      Granath are entitled to increases in their annual salaries of at least 3% per
      annum.




If
      Messrs. Ballard, Boulay and Granath are terminated “for cause” as defined in
      their employment agreements or the employment agreements expire upon their
      respective terms, each agrees not to compete with us during the period from
      the
      date of termination or expiration through the fifth anniversary of such
      date.




In
      the
      event of our termination of employment of any of Messrs. Ballard, Boulay or
      Granath “without cause” (as defined in their respective employment agreements)
      or termination of any of Messrs. Ballard, Boulay and Granath for “good reason”
(as defined in their respective employment agreements), we have agreed to
      continue to pay each of Messrs. Ballard, Boulay and Granath or their personal
      representatives, as the case may be, his annual salary under his employment
      agreement for six months.




**Pro
      forma financial information (unaudited)**





The
      unaudited financial information in the table below summarizes the combined
      results of operations of the Company and Exhibit Merchandising (acquired August
      2007) , Magic Arts & Entertainment (acquired January 1, 2008) and NewSpace
      Entertainment (acquired January 2, 2008) on a pro forma basis, as though the
      companies had been combined as of the beginning of each of the periods
      presented. The pro forma financial information is presented for informational
      purposes only and is not indicative of the results of operations that would
      have
      been achieved if the these acquisitions had taken place at the beginning of
      the
      period presented.





The
      pro
      forma financial information for the period presented includes the business
      combination accounting effect on the amortization charges from acquired
      intangible assets, acquisition costs reflected in the Company’s and the acquired
      companies’ historical statements of operations for the period prior to the asset
      purchase, and the related tax effects.





The
      unaudited pro forma financial information for the three and nine months ended
      September 30, 2007, combines the historical results for the Company for that
      period, with the historical results for the companies acquired as a separate
      entity for the similar period.





**Pro
      forma:**




**Nine
                months ended**
            
            **Three
                months ended****September 30, 2007**
            
            **September 30, 2007**Total
                revenues
            
            $
            30,073,000
            
            $
            9,208,000Net
                loss
            
            $
            (15,261,000
            )
            $
            (9,060,000
            )Basic
                and diluted net loss per share
            
            $
            (0.58
            )
            $
            (0.24
            )




18




**Note
      4. Intangible Assets**





The
      following table summarizes the original cost, the related accumulated
      amortization, and the net carrying amounts for the Company’s intangible assets
      at September 30, 2008.




**Estimated**
            
            **Original**
            
            **Accumulated**
            
            **Net**
              **Carrying****Useful Lives**
            
            **Cost**
            
            **Amortization**
            
            **Amount**Marketing Based
            
            
            3-6
                years
            
            $
            12,277,000
            
            $
            2,367,000
            
            $
            9,910,000Contract
                commitments
            
            
            3
                years
            
            
            6,794,000
            
            
            1,647,000
            
            
            5,147,000Customer
                relationships
            
            
            3
                years
            
            
            612,000
            
            
            321,000
            
            
            291,000Technology
                Based
            
            
            3
                years
            
            
            111,000
            
            
            54,000
            
            
            57,000Intellectual
                property (e.g. domain names)
            
            
            5
                years
            
            
            130,000
            
            
            —
            
            
            130,000Goodwill
            
            
            indefinite
            
            
            31,085,000
            
            
            —
            
            
            31,085,000Total
            
            
            
            
            $
            51,009,000
            
            $
            4,389,000
            
            $
            46,620,000





Total
      amortization expense related to intangible assets for the three months ending
      September, 2008 and 2007 was $1,026,000 and $494,000, respectively. Total
      amortization expense for the nine months ended September 30, 2008 and 2007
      was
      $3,013,000 and $579,000. Total estimated amortization expense with respect
      to
      intangible assets for the remainder of 2008 though 2013 is as
      follows:





Years
                Ending December 31,Remaining
                2008
            
            $
            1,032,0002009
            
            
            3,984,0002010
            
            
            3,417,0002011
            
            
            2,827,0002012
            
            
            2,827,0002013
            
            
            1,311,000Thereafter
            
            
            137,000Total
            
            $
            15,535,000





**Note
      5. Obligations under Capital Leases**





The
      Company has entered into various capital leases for equipment with monthly
      payments ranging from $33 to $1,767 per month, including interest, at interest
      rates ranging from 9.8% to 19.7% per annum. At September 30, 2008, monthly
      payments under these leases aggregated $5,000. The leases expire at various
      dates through 2013.





At
      September 30, 2008 and 2007, property and equipment included assets under
      capital leases of $408,000 and $386,000, less accumulated amortization of
      $268,000 and $237,000, respectively.




Minimum
      future payments under capital lease obligations for the remainder of 2008,
      and
      thereafter are as follows:




19




Years
                Ending December 31,2008
            
            $
            17,0002009
            
            
            64,0002010
            
            
            67,0002011
            
            
            9,0002012
            
            
            8,0002013
            
            
            3,000Total
                payments
            
            
            168,000Less:
                amount representing interest
            
            
            (28,000
            )Present
                value of minimum lease payments
            
            
            140,000Less:
                current portion
            
            
            (51,000
            )Non-current
                portion
            
            $
            89,000





**Note
      6. Related Party Transactions**





In
      April,
      2008, the Company agreed to advance $329,000, to a ticket vendor to allow the
      vendor to purchase season seats to the Detroit Tigers. In return the Company
      received 900 tickets to Detroit Tigers games of the Company’s choosing and a
      promissory note from the ticket vendor to repay the entire $329,000. Joseph
      Marsh, Co-CEO of Tix Productions, advanced the funds to the vendor and submitted
      a request for reimbursement of the funds. The funds were recorded as a liability
      at June 30, 2008 and Mr. Marsh was repaid in July 2008.





During
      2008 and 2007, 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 and nine months
      ended September 30, 2008 we paid Mr. Frankel or his firm for tax preparation
      and
      advisory services $2,000 and $24,000 respectively. For the three and nine months
      ended September 30, 2007, we paid Mr. Frankel or his firm for tax
      preparation and advisory services $2,000 and $52,000 respectively.





Mr.
      Joseph Marsh, a greater than 10% shareholder of Tix, was a principal in Magic
      Arts and Entertainment - Florida, Inc., a company Tix acquired on January 1,
      2008.  For more details regarding the purchase of Magic, see Note 3.
      -  Acquisitions.





**Note
      7. Stockholder’ equity**





During
      the nine months ended September 30, 2008, the Company issued 86,136 shares
      of
      common stock to consultants in the amount of $424,000, issued 162,501 shares
      of
      common stock to officers and employees in the amount of $36,000, issued
      1,326,059 of common stock upon exercise of options and warrants, in the amount
      of $54,000, issued 476,190 shares of common stock for the acquisition of Magic
      Arts and Entertainment (note 3), and issued 571,000 shares of common stock
      for
      the acquisition of New Space Entertainment (note 3).





In
      the
      third quarter of 2008, the Company’s board of directors authorized a share
      repurchase program. As of September 30, 2008 the Company repurchased 350,470
      shares for gross proceeds of $1,128,000. Through October 31, 2008 the Company
      has repurchased 524,470 shares for gross proceeds of $1,611,000. The shares were
      repurchased at prices that range from $2.41 per share to $4.10 per share.





**Note
      8. Stock-Based Compensation Plans**





The
      Company has various stock-based compensation plans, which are described
      below.





**Consultant
      Stock Plan:**





On
      December 11, 2003, the Company adopted the 2003 Consultant Stock Plan (the
      “Consultant Stock Plan”). The purpose of the Consultant Stock Plan is to advance
      the interests of the Company by helping the Company obtain and retain the
      services of persons providing consulting services upon whose judgment,
      initiative, efforts and/or services the Company is substantially dependent,
      by
      offering to or providing those persons with incentives or inducements affording
      such persons an opportunity to become owners of capital stock of the Company.
      Consultants or advisors are eligible to receive grants under the stock plan
      program only if they are natural persons providing bona fide consulting services
      to the Company or its subsidiaries, with the exception of any services they
      may
      render in connection with the offer and sale of the Company’s securities in a
      capital-raising transaction, or which may directly or indirectly promote or
      maintain a market for the Company’s securities.





The
      Consultant Stock Plan provides for the granting of either common share purchase
      options or stock bonuses as compensation. A total of 1,600,000 common shares
      were reserved for issuance under the Consultant Stock Plan. If any awards
      granted under the plan are forfeited for any reason before they have been
      exercised, vested or issued in full, the unused shares subject to those expired,
      terminated or forfeited awards will again be available for purposes of the
      plan.
      No awards may be issued after December 11, 2013.





On
      March
      3, 2004, the Company filed with the Securities and Exchange Commission a
      registration statement on Form S-8 for the purpose of registering 1,600,000
      common shares issuable under the Consultant Stock Plan under the Securities
      Act
      of 1933. As of September 30, 2008, 715,243 common shares were reserved for
      issuance under the Consultant Stock Plan.


20




**2004
      Option Plan:**





On
      March
      3, 2005, the Company adopted the 2004 Stock Option Plan (the “2004 Option Plan”)
      for officers and employees of the Company or its subsidiaries. The 2004 Option
      Plan was approved pursuant to a Joint Written Consent of the Board of Directors
      and Majority Stockholders of the Company dated September 22, 2004. The 2004
      Option Plan authorized the granting of incentive stock options and non-qualified
      stock options to purchase an aggregate of not more than 960,000 shares of the
      Company’s common stock. The 2004 Option Plan provided that options granted would
      generally be exercisable at any time during a ten-year period (five years for
      a
      stockholder owning in excess of 10% of the Company’s common stock) and vest
      one-third in each of the three years following the grant, unless otherwise
      provided by the plan administrator. The exercise price for non-qualified stock
      options would not be less than the par value of the Company’s common stock. The
      exercise price for incentive stock options would not be less than 100% of the
      fair market value of the Company’s common stock on the date of grant (110% of
      the fair market value of the Company’s common stock on the date of grant for a
      stockholder owning in excess of 10% of the Company’s common stock). No option
      may be exercised during the first six months of its term except in the case
      of
      death.





During
      the nine months ended September 30, 2008, the Company issued 25,000 options
      to purchase shares of its common stock under the 2004 Option Plan. As of
      September 30, 2008, options to purchase 138,000 shares of common stock were
      reserved for issuance under the 2004 Option Plan.




**2004
      Directors Option Plan:**




On
      March
      3, 2005, the Company adopted the Directors Stock Option Plan (the “2004
      Directors Option Plan”) for non-employee directors of the Company. The 2004
      Directors Option Plan was approved pursuant to a Joint Written Consent of the
      Board of Directors and Majority Stockholders of the Company dated September
      22,
      2004. The 2004 Directors Option Plan authorized the granting of non-qualified
      stock options to purchase an aggregate of not more than 240,000 shares of the
      Company’s common stock. The 2004 Directors Option Plan provided that options
      granted would be exercisable for a period not to exceed ten years and would
      vest
      on a cumulative basis as to one-third of the total number of shares covered
      thereby at any time after one year from the date the option was granted and
      an
      additional one-third of such total number of shares at any time after the end
      of
      each consecutive one-year period thereafter until the option had become
      exercisable as to all of such total number of shares. The exercise price for
      non-qualified stock options would be the fair value of the Company’s common
      stock at the date of the grant. No option may be exercised during the first
      six
      months of its term except in the case of death. The Company  issued
      50,000  options
      under the 2004 Directors Option Plan, during the nine months ended September
      30,
      2008.





The
      fair
      value of each option on the date of grant was estimated using the
      Black-Scholes option pricing model with the following weighted average
      assumptions:


2008
            
            2007Risk
                free rate of return
            
            
            2.12%
                - 2.82
            %
            
            4
            %Option
                lives in years
            
            
            3
            
            
            6Annual
                volatility of stock price
            
            
            81.5%
                - 82.3
            %
            
            112.5
            %Dividend
                yield
            
            
            0
            %
            
            0
            %





**Summary
      of Stock Options:**





The
      intrinsic value of outstanding stock options at September 30, 2008
      was  $927,400,
      as compared to $1,848,000 at September 30, 2007. The intrinsic value of
      exercisable stock options at September 30, 2008 was $683,000, as compared to
      $868,000 at September 30, 2007. A summary of the combined stock options for
      the
      nine months ended September 30, 2008 for the three plans discussed above is
      as
      follows:




21





Number
              of
              options
            
            Weighted
              average
              exercise
              priceBalance
                outstanding, December 31, 2007
            
            
            1,288,500
            
            $
            5.24Options
                granted
            
            
            75,000
            
            
            3.70Options
                exercised
            
            
            (100,500
            )
            
            2.01Options
                expired or forfeited
            
            
            -
            
            
            -Balance
                outstanding, September 30, 2008
            
            
            1,263,000
            
            $
            5.41Balance
                exercisable September 30, 2008
            
            
            536,000
            
            $
            4.66




Information
      relating to outstanding stock options at September 30, 2008, summarized by
      exercise price, is as follows:





**Outstanding**
            
            **Exercisable**Exercise Price Per Share
            
            **Shares**
            
            **Life**
              **(Years)**
            
            **Exercise Price**
            
            **Shares**
            
            **Weighted**
              **Average Exercise**
              **Price**$6.00
                - $7.20
            
            
            818,000
            
            
            8.92
            
            $
            7.01
            
            
            316,000
            
            $
            7.02$4.00
                - $5.99
            
            
            145,000
            
            
            5.89
            
            $
            4.16
            
            
            20,000
            
            $
            4.30$2.00
                - $3.99
            
            
            150,000
            
            
            4.61
            
            $
            3.07
            
            
            50,000
            
            $
            3.20$0.22
                - $1.99
            
            
            150,000
            
            
            0.92
            
            $
            0.22
            
            
            150,000
            
            $
            0.221,263,000
            
            
            7.11
            
            $
            5.41
            
            
            536,000
            
            $
            4.66




For
      the
      three months ended September 30, 2008 and 2007, the value of options vesting
      during the period was $408,000 and $506,000 respectively. For the nine months
      ended September 30, 2008 and 2007 the value of options vested during the period
      was $1.2 million and $733,000, respectively. As of September 30, 2008, the
      Company has outstanding unvested options with future compensation costs of
      $2.9
      million, which will be recorded as compensation cost as the options vest over
      their remaining average life of 7.11 years.




The
      assumptions used in calculating the fair value of the warrants granted during
      2008, using the Black-Scholes option-pricing model were as follows: risk free
      interest rate - 2.28% - 2.60%; expected life - 2 - 3 years; estimated volatility
      - 82.3%; dividends - $0.





In
      conjunction with a consulting agreement, the Company issued 150,000 warrants,
      of
      which 50,000 vested immediately. The remaining 100,000 warrants vest over six
      months, which is the term of the consulting agreement. The consulting agreement
      may be terminated at any time and therefore the related consulting expense
      on
      these 100,000 warrants is being recognized over the life of the
      contract.





A
      summary
      of warrant activity for the nine months ended September 30, 2008 is as
      follows:





Number
              of
              warrants
            
            Weighted
              average
              exercise
              priceBalance
                outstanding, December 31, 2007
            
            
            3,972,007
            
            $
            3.47Warrants
                granted
            
            
            150,000
            
            $
            4.00Warrants
                exercised
            
            
            (1,400,000
            )
            $
            0.50Warrants
                expired
            
            
            (50,000
            )
            $
            0.50Balance
                outstanding, September 30, 2008
            
            
            2,672,007
            
            $
            5.11






22




The
      intrinsic value of outstanding warrants at September 30, 2008 was $407,000,
      as
      compared to $12.5 million at September 30, 2007. Information relating to
      outstanding warrants at September 30, 2008, summarized by exercise price, is
      as
      follows:





Outstanding
            
            
            
            ExercisableExercise Price Per Share
            
            Shares
            
            Life
              (Years)
            
            Exercise
              Price
            
            Shares
            
            Weighted
              Average
              Exercise
              Price$2.00
                - $5.50
            
            
            2,522,
                007
            
            
            1.09
            
            $
            5.38
            
            
            2,438,673
            
            $
            5.43$0.36
                - $1.99
            
            
            150,000
            
            
            3.19
            
            $
            0.49
            
            
            150,000
            
            $
            0.492,672,007
            
            
            1.15
            
            $
            5.14
            
            
            2,588,673
            
            $
            5.14





**Note
      9. Income Taxes**





At
      September 30, 2008, the Company had Federal net operating loss carryforwards
      of
      approximately $26.3 million expiring beginning in 2008 in varying amounts
      through 2027. The Company also had California state net operating loss
      carryforwards of approximately $700,000. In October, 2008 California temporarily
      suspended use of net operating losses for 2008 and 2009, and the California
      state net operating losses expire beginning in 2015 in varying amounts through
      2018.





SFAS
      No.
      109 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 will likely be
      limited 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 September 30, 2008 and
      2007.





The
      tax
      effects of temporary differences that give rise to a significant portion of
      the
      deferred tax assets at September 30, 2008 and 2007 are presented
      below:





September
                30,2008
            
            2007Deferred
                tax assets:Net
                operating loss carryforward
            
            $
            9,190,000
            
            $
            6,262,000Use
                of NOL
            
            
            -
            
            
            -Less:
                Valuation allowance
            
            
            (9,190,000
            )
            
            (6,262,000
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -




23




As
      a
      result of the Company’s significant operating loss carryforwards and the
      corresponding valuation allowance, no income tax benefit has  been
      recorded at September 30, 2008 and 2007. The provision for income taxes using
      the statutory federal tax rate as compared to the Company’s effective tax rate
      is summarized as follows:





Nine
                months ended September 30,2008
            
            2007Tax
                benefit at statutory rate
            
            
            (35
            )%
            
            (35
            )%Adjustments
                to change in valuation allowance
            
            
            35
            
            
            35Effective
                tax rate
            
            
            -
            %
            
            -
            %





**Note
      10. Segment Reporting**





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





Our
      ticketing services are carried out by our wholly-owned subsidiary Tix4Tonight,
      which offers for sale discount and premium tickets. Discounted tickets are
      sold
      byTix4Tonight, while premium tickets are offered through Tix4AnyEvent. When
      selling last minute discounted tickets, Tix4Tonight sells them under short-term,
      exclusive and non-exclusive agreements with approximately 75 Las Vegas shows
      and
      attractions, out of a total of approximately 85 Las Vegas shows and attractions
      running at any one time, and typically offers tickets for more than 60 shows
      on
      any given day at a discount plus a service fee. Tix4Tonight does not know the
      exact number of tickets for each show 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 show producers 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 cost.





The
      Company provides exhibit and event merchandising through its wholly-owned
      subsidiary Exhibit Merchandising, LLC (EM), which was acquired August 8, 2007.
      EM provides retail specialty stores with branded merchandise for touring museum
      exhibitions and touring theatrical productions. EM owns and operates complete
      turn-key retail stores with commercially-available and extensive custom-branded
      products for sale in addition to professional management that complements the
      exhibition or theatrical production it represents. It 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.”





January
      2, 2008, the Company began operating two live theatrical and concert production
      companies; Magic Arts & Entertainment, LLC (Magic) and NewSpace
      Entertainment, Inc. (NewSpace). The Company has  combined
      the operations of the two entertainment companies into its newly-formed
      wholly-owned subsidiary Tix Productions Inc. We believe that by combining the
      operations of the two companies under a single entity, we will be able to
      leverage resources, gain operating efficiencies and more fully utilize the
      combined network of producers and promoters. NewSpace and Magic will continue
      to
      operate under their current names for the foreseeable future as a reflection
      of
      their marketplace recognition.





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:




24


**Consolidating
      Statement of Operations (unaudited)**


**Three
      months ended September 30,**




**Ticketing**
            
            **Exhibit**
            
            **Live**
            
            **Corporate**
            
            **Consolidated****Services**
            
            **Merchandising**
            
            **Entertainment**
            
            **Expenses**
            
            **and
                Combined****2008**Revenue
            
            $
            3,737,000
            
            $
            2,419,000
            
            $
            2,683,000
            
            $
            -
            
            $
            8,839,000Direct
                operating expenses
            
            
            1,473,000
            
            
            1,401,000
            
            
            2,253,000
            
            
            -
            
            
            5,127,000Selling,
                general and administrative expenses
            
            
            690,000
            
            
            827,000
            
            
            695,000
            
            
            1,414,000
            
            
            3,626,000Depreciation
                and amortization
            
            
            52,000
            
            
            796,000
            
            
            235,000
            
            
            68,000
            
            
            1,151,000Operating
                income (loss)
            
            $
            1,522,000
            
            $
            (605,000
            )
            $
            (500,000
            )
            $
            (1,482,000
            )
            $
            (1,065,000
            )Total
                assets
            
            $
            2,956,000
            
            $
            45,445,000
            
            $
            11,071,000
            
            $
            990,000
            
            $
            60,462,000**2007**Revenue
            
            $
            3,356,000
            
            $
            2,346,000
            
            $
            -
            
            $
            -
            
            $
            5,702,000Direct
                operating expenses
            
            
            3,002,000
            
            
            1,492,000
            
            
            -
            
            
            -
            
            
            4,494,000Selling,
                general and administrative expenses
            
            
            769,000
            
            
            236,000
            
            
            -
            
            
            8,173,000
            
            
            9,178,000Depreciation
                and amortization
            
            
            49,000
            
            
            449,000
            
            
            -
            
            
            77,000
            
            
            575,000Operating
                income (loss)
            
            $
            (464,000
            )
            $
            169,000
            
            $
            -
            
            $
            (8,250,000
            )
            $
            (8,545,000
            )Total
                assets
            
            $
            2,935,000
            
            $
            47,043,000
            
            $
            -
            
            $
            3,824,000
            
            $
            53,802,000





**Consolidating
      Statement of Operations (unaudited)**


**Nine
      months ended September 30,**





**Ticketing**
            
            **Exhibit**
            
            **Live**
            
            **Corporate**
            
            **Consolidated****Services**
            
            **Merchandising**
            
            **Entertainment**
            
            **Expenses**
            
            **and
                Combined****2008**Revenue
            
            $
            10,100,000
            
            $
            8,501,000
            
            $
            30,265,000
            
            $
            -
            
            $
            48,866,000Direct
                operating expenses
            
            
            4,283,000
            
            
            5,082,000
            
            
            24,816,000
            
            
            -
            
            
            34,181,000Selling,
                general and administrative expenses
            
            
            1,903,000
            
            
            2,873,000
            
            
            4,231,000
            
            
            4,315,000
            
            
            13,322,000Depreciation
                and amortization
            
            
            153,000
            
            
            2,376,000
            
            
            609,000
            
            
            237,000
            
            
            3,375,000Operating
                income (loss)
            
            $
            3,761,000
            
            $
            (1,830,000
            )
            $
            609,000
            
            $
            (4,552,000
            )
            $
            (2,012,000
            )Total
                assets
            
            $
            2,956,000
            
            $
            45,445,000
            
            $
            11,071,000
            
            $
            990,000
            
            $
            60,462,000**2007**Revenue
            
            $
            9,815,000
            
            $
            2,346,000
            
            $
            -
            
            $
            -
            
            $
            12,161,000Direct
                operating expenses
            
            
            6,627,000
            
            
            1,492,000
            
            
            -
            
            
            -
            
            
            8,119,000Selling,
                general and administrative expenses
            
            
            1,801,000
            
            
            236,000
            
            
            -
            
            
            16,479,000
            
            
            18,516,000Depreciation
                and amortization
            
            
            140,000
            
            
            449,000
            
            
            -
            
            
            168,000
            
            
            757,000Operating
                income (loss)
            
            $
            1,247,000
            
            $
            169,000
            
            $
            -
            
            $
            (16,647,000
            )
            $
            (15,231,000
            )Total
                assets
            
            $
            2,935,000
            
            $
            47,043,000
            
            $
            -
            
            $
            3,824,000
            
            $
            53,802,000





25




**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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 2007
      Form 10-KSB 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 third quarter of 2008, 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
      first three quarters of 2008 were as follows:





**Tix4Tonight**





·
            For
                the three and nine months ended September 30, 2008, Tix4Tonight sold
                283,000 tickets and 758,000 tickets, respectively. These ticket sales
                represented an increase of 105,000 tickets and 269,000 tickets over
                the
                prior year’s comparable three and nine month periods and reflected a 59%
                and 55% increase over the respective prior year’s period ticket
                sales.





·
            For
                the three and nine months ended September 30, 2008, Tix4Tonight sold
                tickets with a value of $14.0 million and $37.4million,
                respectively. The value of the tickets sold represented an increase
                of
                $5.9 million and $14.7 million over prior year’s comparable three and nine
                month periods and reflected a 73% and 65% increase over the respective
                prior year’s period ticket sales.


26





**Exhibit
      Merchandising**





·
            EM
                opened its second foreign gift shop. The second gift shop was for
                “Tutankhamun and the World of the Pharaohs” in Vienna, Austria at the
                Kunsthistorisches Museum. Tutankhamun operated at the Kunsthistorisches
                Museum from March 2008 until September 2008. In October 2008 the
                exhibition was moved to Atlanta, Georgia where it is scheduled to
                open
                November 14, 2008.





·
            EM
                negotiated a new contractwith
                HILTI Arts & Cultute GmbH to operate its exhibit “Egypt’s Sunken
                Treasures,” in Madrid, Spain and opened its third foreign gift shop. This
                exhibit opened April 15, 2008 and was scheduled to operate through
                September 2008, and has been extended through December 31,
                2008.





**Live
      Entertainment**





·
            Live
                Entertainment acquired Magic Arts & Entertainment - Florida, Inc.
                (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. We believe that by combining
                the operations of the two companies under a single entity, we will
                better
                leverage our resources, and gain operating
                efficiencies.





·
            Tix
                Productions, Inc. entered into a two year producing partnership with
                Manheim Steamroller. Manheim Steamroller’s seven Christmas Albums have
                sold more than 35 million copies.





**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.





The
      Company’s HalfPriceTickets.com will recognize as revenue the commissions and the
      related transaction fees 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. 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. HalfPriceTickets.com does not have any accounts receivable associated
      with sales transactions to individual customers, as payment is collected at
      the
      time of sale.


27





Tix4Dinner
      offers reservations for discounted dinners at various restaurants on the Las
      Vegas strip with dining at specific times on the same day as 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.





Tix4Golf
      recognizes as revenue the difference between how much it charges its customers
      for tee-times and how much it pays golf courses for tee-times. The revenue
      per
      tee-time, as well as the cost per tee-time, varies depending on the desirability
      of the golf course and tee-time, weather, time of year and several other
      factors. Revenue per tee-time is significantly higher when tee-times are
      guaranteed or pre-bought in large quantities. Tee-times are generally sold
      the
      day before or the day of the tee-time, however, tee-times may be booked in
      advance. Revenue is not recognized until the day of the tee-time. The Company
      does not have any accounts receivable associated with this business, as all
      transactions are paid for at the time of purchase.





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 our websites are included as a component
      of
      net sales. The Company does not have any accounts receivable associated with
      this business all transactions are done by cash or credit card.





In
      January, 2008, the Company began its live entertainment segment. Revenue from
      the presentation and production of an event is recognized 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 using SFAS No. 123R effective January 1, 2006, for all
      share-based payments granted based on the requirements of SFAS No. 123R for
      all awards granted to employees. The Company accounts for stock option and
      warrant grants issued and vesting to non-employees in accordance with EITF
      No.
      96-18: "Accounting for Equity Instruments that are Issued to Other Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and
      EITF 00-18 “Accounting Recognition for Certain Transactions involving Equity
      Instruments Granted to Other Than Employees” 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.


28





**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:**





The
      Company accounts for intangibles in accordance with Statement of Financial
      Accounting Standards No. 141, “Business Combinations” and Statement of Financial
      Accounting Standards No. 142, “Goodwill and Other Intangible Assets”.
      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 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 December 31, 2007 or September 30, 2008.





**Recent
      Accounting Pronouncements:**





References
      to the “FASB”, “SFAS” and “SAB” herein refer to the “Financial Accounting
      Standards Board”, “Statement of Financial Accounting Standards”, and the “SEC
      Staff Accounting Bulletin”, respectively.





In
      May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 162, “The Hierarchy of
      Generally Accepted Accounting Principles.”  SFAS No. 162 identifies
      the sources of accounting principles and the framework for selecting the
      principles used in the preparation of financial statements that are presented
      in
      conformity with generally accepted accounting principles.  SFAS No.
      162 becomes effective 60 days following the SEC’s approval of the Public Company
      Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present
      Fairly in Conformity With Generally Accepted Accounting
      Principles.”  The Company does not expect that the adoption of SFAS
      No. 162 will have a material impact on its financial statements.





The
      Company does not believe the adoption of the above recent pronouncements, with
      the exception of FAS 141(R), will have a material effect on the Company’s
      consolidated results of operations, financial position, or cash flows. FAS
      141(R) introduces significant changes to the accounting for and reporting of
      business combinations, continuing the movement toward greater use of fair values
      in financial reporting and expanded disclosures. FAS 141(R) impacts the annual
      goodwill impairment test associated with acquisitions that occurred prior to
      the
      standard's effective date and acquisitions closing after the effective date.
      Thus, companies such as us that have goodwill from an acquisition that closed
      prior to the standard's effective date will need to understand the provisions
      of
      FAS 141(R). Management is currently evaluating the potential effects of FAS
      141(R) on its currently recorded goodwill, as well as any goodwill that could
      be
      recorded as result of a future acquisition.


29


In
      April
      2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
      Intangible Assets.”  FSP No. FAS 142-3 amends the factors that should
      be considered in developing renewal or extension assumptions used to determine
      the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
      and Other Intangible Assets.”  The Company is required to adopt FSP
      No. FAS 142-3 effective at the beginning of 2010.  The Company is
      evaluating the impact that the adoption of FSP No. FAS 142-3 will have on its
      financial statements.





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS No.
      161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No.
      133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No.
      133”). The objective of SFAS No. 161 is to provide users of financial statements
      with an enhanced understanding of how and why an entity uses derivative
      instruments, how derivative instruments and related hedged items are accounted
      for under SFAS No. 133 and its related interpretations, and how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires qualitative
      disclosures about objectives and strategies for using derivatives, quantitative
      disclosures about fair value amounts of and gains and losses on derivative
      instruments, and disclosures about credit-risk-related contingent features
      in
      derivative agreements. SFAS No. 161 applies to all derivative financial
      instruments, including bifurcated derivative instruments (and nonderivative
      instruments that are designed and qualify as hedging instruments pursuant to
      paragraphs 37 and 42 of SFAS No. 133) and related hedged items accounted for
      under SFAS No. 133 and its related interpretations. SFAS No. 161 also amends
      certain provisions of SFAS No. 131. SFAS No. 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008, with early application encouraged. SFAS No. 161 encourages, but does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company has not yet determined the effect on its consolidated financial
      statements, if any, upon adoption of SFAS No. 161.





In
      December 2007, the FASB issued FASB Statement No. 141 (R), “Business
      Combinations” (FAS 141(R)), which establishes accounting principles and
      disclosure requirements for all transactions in which a company obtains control
      over another business. Statement 141(R) applies prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008. Earlier
      adoption is prohibited.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS No. 160
      establishes accounting and reporting standards that require that the ownership
      interests in subsidiaries held by parties other than the parent be clearly
      identified, labeled, and presented in the consolidated statement of financial
      position within equity, but separate from the parent’s equity; the amount of
      consolidated net income attributable to the parent and to the noncontrolling
      interest be clearly identified and presented on the face of the consolidated
      statement of income; and changes in a parent’s ownership interest while the
      parent retains its controlling financial interest in its subsidiary be accounted
      for consistently. SFAS No. 160 also requires that any retained noncontrolling
      equity investment in the former subsidiary be initially measured at fair
      value when a subsidiary is deconsolidated. SFAS No. 160 also sets forth the
      disclosure requirements to identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners. SFAS No. 160 applies
      to
      all entities that prepare consolidated financial statements, except
      not-for-profit organizations, but will affect only those entities that have
      an
      outstanding noncontrolling interest in one or more subsidiaries or that
      deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. Earlier adoption is prohibited. SFAS No. 160 must be applied prospectively
      as of the beginning of the fiscal year in which it is initially applied, except
      for the presentation and disclosure requirements. The presentation and
      disclosure requirements are applied retrospectively for all periods
      presented.


30
  **Consolidated
      Results of Operations -**


**Three
      and Nine months ended September 30, 2008 compared to the Three and Nine months
      ended September 30, 2007:**


****


**Consolidated
      Results of Operations:**





**Results
                of Operations:****Consolidated
                Results of Operations**




Three
                Months Ended
              September
                30,
            
            %
                change
              2008
                v
            
            Nine
                Months Ended
              September
                30
            
            %
                  change
                2008
                  v2008
            
            2007
            
            2007
            
            2008
            
            2007
            
            2007Revenue
            
            $
            8,839,000
            
            $
            5,702,000
            
            
            55
            %
            $
            48,866,000
            
            $
            12,161,000
            
            
            302
            %Operating
                Expenses:Direct
                operating expenses
            
            
            5,127,000
            
            
            4,494,000
            
            
            14
            %
            
            34,181,000
            
            
            8,119,000
            
            
            321
            %Selling,
                general and administrative expenses
            
            
            2,212,000
            
            
            1,005,000
            
            
            120
            %
            
            9,007,000
            
            
            2,037,000
            
            
            342
            %Depreciation
                and Amortization
            
            
            1,151,000
            
            
            575,000
            
            
            100
            %
            
            3,375,000
            
            
            757,000
            
            
            346
            %Corporate
                expenses
            
            
            1,414,000
            
            
            8,173,000
            
            
            -83
            %
            
            4,315,000
            
            
            16,479,000
            
            
            -74
            %Operating
                Loss
            
            
            (1,065,000
            )
            
            (8,545,000
            )
            
            -88
            %
            
            (2,012,000
            )
            
            (15,231,000
            )
            
            -87
            %Operating
                Margin
            
            
            -12
            %
            
            -150
            %
            
            
            
            
            -4
            %
            
            -125
            %Interest
                expense
            
            
            (5,000
            )
            
            (53,000
            )
            
            
            
            
            (15,000
            )
            
            (99,000
            )Interest
                income
            
            
            7,000
            
            
            60,000
            
            
            
            
            
            52,000
            
            
            72,000Other
                income (expense) - net
            
            
            77,000
            
            
            28,000
            
            
            
            
            
            285,000
            
            
            31,000Loss
                before income taxes
            
            
            (986,000
            )
            
            (8,510,000
            )
            
            
            
            
            (1,690,000
            )
            
            (15,227,000
            )Income
                tax expense
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -Net
                Loss
            
            $
            (986,000
            )
            $
            (8,510,000
            )
            
            
            
            $
            (1,690,000
            )
            $
            (15,227,000
            )




**Three
      Months Ended September 30, 2008 and 2007:**





**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 and golf tee times. Additionally, with the formation of Exhibit
      Merchandising, LLC “EM”, from the assets acquired from Exhibit Merchandising,
      LLC (Ohio), 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.” Additionally, through our live
      entertainment segment we earn revenues from the presentation and production
      of
      an event, as well as sponsorship and ancillary revenues. Our revenues for the
      three months ended September 30, 2008 and 2007 were $8.8 million and $5.7
      million, respectively. Our revenues increased $3.1 million, or 55%, during
      the
      three months ended September 30, 2008 as compared to the same period of the
      prior year due to acquisitions. During the three months ended September 30,
      2008
      the Company realized $5.6 million of revenues from operations that it purchased
      over the last fifteen months including AnyEvent, Exhibit Merchandising, Magic
      Arts & Entertainment and NewSpace Entertainment. For the three months ended
      September 30, 2007 the Company realized $4.2 million from operations that it
      purchased over the last fifteen months.





More
      detailed explanations of the three and nine months ended September 30, 2008
      and
      2007 changes are included in the applicable segment discussions
      following.




31




**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 September 30, 2008 were
      $5.1
      million and $4.5 million for the three months ended September 30, 2007. Our
      operating expenses increased $1 million or 14% during the three months ended
      September 30, 2008 as compared to the same period of the prior year primarily
      as
      a result of a 55% increase in revenues. Additionally, the companies that we
      acquired have higher direct cost of goods and services than our discount
      ticketing operations, which was approximately half of our source of revenue
      during the three months ended September 30, 2007.





**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 September 30, 2008 and 2007 were $2.2 million and $1.0 million,
      respectively. Our selling, general and administrative expenses
      increased $1.2 million or 120%, during the three months ended September 30,
      2008 as compared to the same period of the prior year due to increases in
      selling, marketing and administrative expenses related to the four acquisitions
      that have occurred in the last fifteen months.





More
      detailed explanations of the three months ended September 30, 2008 and 2007
      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, merchant fees and corporate occupancy costs.
      Corporate expenses for the three months ended September 30, 2008 and 2007 were
      $1.4 million and $8.2 million, respectively. Corporate expenses decreased $
      6.8
      million for the three months ended September 30, 2008, as compared to same
      period of the prior year. This decrease in corporate expenses is the result
      of a
      decline of $6.4 million in aggregate business consulting fees incurred in 2007
      for which there is no corresponding expense in 2008. The 2007 consulting expense
      was the result of the issuance of $6.4 million of stock based compensation
      given
      to consultants related to our ticketing services business. Other changes were
      a
      decrease in employee expenses of $500,000, and an increase of $100,000 in fees
      to the Board of Directors. The $600,000 decrease in corporate employee expenses
      relates to non cash compensation of $1 million paid in 2007 and not repeated
      in
      2008 offset by a $400,000 increase in accounting and management personnel that
      have been added to support the increased level of corporate
      activity.





**Depreciation
      and Amortization**





Our
      depreciation and amortization was $1.2 million and $600,000 for the three months
      ended September 30, 2008 and 2007 respectively. The increase of $600,000 in
      depreciation and amortization expense in 2008 primarily reflects a $500,000
      increase in amortization expense and a $100,000 increase in depreciation
      expense. The increase in amortization expense relates primarily to the $19.9
      million of intangible assets we have recorded related to our acquisitions of
      AnyEvent, Exhibit Merchandising, Magic and NewSpace during the last fifteen
      months, of which $15.5 million will be amortized over the next twelve to
      seventy-five months.





**Other
      Income and (Expense)**





Other
      Income and Expense was immaterial for all periods presented.





**Interest
      Income**





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





32







**Nine
      months ended September 30, 2008 and 2007:**





**Revenues.**





Our
      revenues for the nine months ended September 30, 2008 and 2007 were $48.8
      million and $12.2 million, respectively. Our revenues increased $36.7 million,
      or 302%, during the nine months ended September 30, 2008 as compared to the
      same
      period of the prior year due to acquisitions. During the nine months ended
      September 30, 2008 the Company realized $40 million of revenues from operations
      that it purchased in the last fifteen months including AnyEvent, Exhibit
      Merchandising, Magic Arts & Entertainment and NewSpace Entertainment. The
      corresponding amount of realized revenues from operations purchased was $6.7
      million in 2007.





More
      detailed explanations of the nine month periods ended September 30, 2008 and
      2007 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 were $34.1 million for the nine months ended September
      30, 2008 as compared to $8.1 million for the nine months ended September 30,
      2007. Our operating expenses increased $26 million or 321% during the nine
      months ended September 30, 2008 as compared to the same period of the prior
      year
      primarily as a result of a 360% increase in revenues. Additionally, the
      companies that we acquired have higher direct cost of goods and services than
      our discount ticketing operations, which was our primary source of revenue
      during the nine months ended September 30, 2007.





More
      detailed explanations of the nine months ended September 30, 2008 and 2007
      are
      included in the applicable segment discussions following.





**Operating
      Segment Selling, General and Administrative Expenses**





Operating
      segment selling, marketing and administrative expenses, excluding those expenses
      that relate to activities at or directed by our executive offices, include
      advertising and promotional costs related to the company’s business activities.
      Our operating segment selling, marketing and administrative expenses were $9
      million for the nine months ended September 30, 2008, as compared to $2.0
      million for the nine months ended September 30, 2007. Our selling, general
      and
      administrative expenses increased $7 million or 350%, during the nine
      months ended September 30, 2008 as compared to the same period of the prior
      year
      due to increases in selling and administrative expenses related to the four
      acquisitions.





More
      detailed explanations of the nine months ended September 30, 2008 and 2007
      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, merchant fees and corporate occupancy costs.
      Corporate expenses for the nine months ended September 30, 2008 and 2007 were
      $4.3 million and $16.5 million, respectively. Corporate expenses decreased
      $12.2
      million for the nine months ended September 30, 2008, as compared to the same
      period of the prior year. This decrease in corporate expenses is the result
      of a
      decline of $13.4 million of consulting costs incurred in 2007 for which there
      is
      not corresponding expense in 2008. The 2007 consulting expense was the result
      of
      the issuance of $11.8 million of stock based compensation and $1.6 million
      in
      cash compensation, given to consultants related to our ticketing services
      business. Offsetting the decrease in corporate consulting expenses was an
      increase in employee expenses of $433,000, and NASDAQ listing fees and expenses
      of $207,000, as well as $116,000 in other miscellaneous expenses. The $433,000
      increase in corporate employee expenses relates to an increase in accounting
      and
      management personnel that have been added to support the increased level of
      corporate activity.








33


**Depreciation
      and Amortization**





Our
      depreciation and amortization was $3.4 million and $800,000 for the nine months
      ended September 30, 2008 and 2007 respectively. The increase of $2.6 million
      in
      depreciation and amortization expense in 2008, primarily reflect a $2.4 million
      increase in amortization expense and a $182,000 increase in depreciation
      expense. The increase in amortization expense relates primarily to the $19.9
      million of intangible assets we have recorded related to our acquisitions of
      AnyEvent, Exhibit Merchandising, Magic and NewSpace during the last fifteen
      months, of which $15.5 million will be amortized over the next twelve to sixty
      months.


.


**Other
      Income and (Expense)**





Other
      Income and Expense was immaterial for all periods presented.





**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 (T4T, AE)**





**Three
                Months Ended**
              **September
                30,**
            
            **%
                Change**
              **2008
                v**
            
            **Nine
                Months Ended**
              **September
                30,**
            
            **%
                  Change**
                **2008
                  v****2008**
            
            **2007**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **2007**Revenue
            
            $
            3,737,000
            
            $
            3,356,000
            
            
            11
            %
            $
            10,100,000
            
            $
            9,815,000
            
            
            3
            %Operating
                Expenses:Direct
                operating expenses
            
            
            1,473,000
            
            
            3,002,000
            
            
            -51
            %
            
            4,283,000
            
            
            6,627,000
            
            
            -35
            %Selling,
                general and administrative expenses
            
            
            690,000
            
            
            769,000
            
            
            -10
            %
            
            1,903,000
            
            
            1,801,000
            
            
            6
            %Depreciation
                and amortization
            
            
            52,000
            
            
            49,000
            
            
            6
            %
            
            153,000
            
            
            140,000
            
            
            9
            %Operating
                income
            
            $
            1,522,000
            
            $
            (464,000
            )
            
            -428
            %
            $
            3,761,000
            
            $
            1,247,000
            
            
            202
            %Operating
                margin
            
            
            41
            %
            
            -14
            %
            
            
            
            
            37
            %
            
            13
            %




34


**Three
      months ended September 30, 2008 and 2007:**





**Revenues:**





Ticketing
      Services has two operating units: Tix4Tonight, our discount ticket seller and
      AnyEvent our premium ticketing operation. The Ticketing Service 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 and
      golf tee times. Ticketing Services revenues were $3.7 million for the three
      months ended September 30, 2008 as compared to $3.3 million for the three months
      ended September 30, 2007. Our revenues increased $400,000, or 11%, during the
      three months ended September 30, 2008 as compared to the same period of the
      prior year. The increase in Ticketing Service revenues is the result of a $1.8
      million increase in Tix4Tonight revenues and a $200,000 increase in ancillary
      revenues i.e. the sale of dinner reservations and tee times, offset by a $1.6
      million decline in revenues in AnyEvent.





**Tix4Tonight:**





Tix4Tonight
      revenues for the three month ended September 30, 2008 and 2007 were $3.2 million
      and $1.4 million, which resulted in an increase of $1.8 million or 128% in
      2008
      as compared to the same period in 2007. The increase reflects a greater demand
      for discount tickets as well as an increase in the average selling price per
      ticket in 2008 as compared to 2007. The average selling price per ticket in
      2008
      was $49.67 per ticket, which represented an increase of $4.02 per ticket or
      8.8%
      as compared to $45.65 per ticket in 2007. Tix4Tonight discount tickets sold
      increased 105,000 tickets or 59% to 283,000 discounted show tickets for the
      three months ended September 30, 2008. Commissions and fees were earned on
      the
      gross sales value of show tickets sold to customers of $14.1
      million for the three months ended September 30, 2008, as compared
      to $8.1 million for the three months ended September 30, 2007 or a 74%
      increase. Lastly, during the three months ended September 30, 2008, revenues
      from miscellaneous sources of income including discount golf, and dinner
      reservations increased by $200,000, to $300,000 or 200%.





**AnyEvent:**





AnyEvent
      sells premium tickets to concerts, theatre shows and sporting events. AnyEvents
      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
      September 30, 2008 and 2007 were $300,000 and $1.9 million respectively. The
      $1.6 million decline in revenues is the result of two factors: First, management
      has made the decision to change from a retail ticket seller to the public to
      a
      wholesaler of tickets, that is our clients are national retail brokers. As
      a
      result of this change we are assuming less risk and have been able to reduce
      our
      overhead and increase the likelihood of profitability. Second, during the third
      quarter of 2007, the Company participated in the distribution of premium tickets
      to several major concerts for which there was no corresponding activity in
      2008.
      Management expects that AnyEvent’s revenues will decline in 2008 as compared to
      2007, but expects its net income to be greater with the reduction of risk and
      a
      more measured approach in participating in the sale and distribution of premium
      tickets to concerts, theatre shows and sporting events.





**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 September 30, 2008
      and
      2007 were $1.5 million and $3.0 million, respectively, which represented a
      decrease in direct operating expenses of $1.5 million or 50%. Direct operating
      expenses decreased to 39% of revenues in 2008, as compared to 89% of revenues
      in
      2007. The lower operating expenses were reflective of the higher revenues from
      our existing discount ticket operations, higher cost per ticket and lower
      margins related to our premium ticket business, AnyEvent, and the opening of
      our
      fifth ticket booth location during the fourth quarter 2007 that is not reflected
      in the third quarter of 2007.





**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
      September 30, 2008 and 2007 were $700,000 and $800,000, respectively. Our
      selling, marketing and general and administrative expenses decreased $100,000
      or
      12.5%, during the three months ended September 30, 2008 and is associated with
      an increase of $100,000 at Tix4Tonight offset by a decrease of $200,000 at
      AnyEvent. These changes are reflective of the increased revenue activity at
      Tix4Tonight and decreased revenue activity at AnyEvent. Selling, marketing
      and
      administrative expenses were 18% percent of revenues during the three months
      ended September 30, 2008 as compared to 23% during the three months ended
      September 30 2007.





35


**Depreciation
      and amortization**





Depreciation
      and amortization expense incurred during the three months ended September 30,
      2008 was $52,000 and we expect to incur a similar level of depreciation and
      amortization for the foreseeable future.





**Nine
      months ended September 30, 2008 and 2007:**





Ticketing
      Services revenues were $10.1 million for the nine months ended September 30,
      2008 as compared to $9.8 million for the nine months ended September 30, 2007.
      Our revenues increased $300,000, or 3%, during the nine months ended September
      30, 2008 as compared to the same period of the prior year. The increase in
      Ticketing Service revenues is the result of a $3.3 million decline in revenues
      at AnyEvent, which was offset by a $3.2 million increase in Tix4Tonight revenues
      and a $200,000 increase in ancillary revenues i.e. the sale of dinner
      reservations and golf tee times.





**Tix4Tonight:**





Tix4Tonight
      revenues for the nine months ended September 30, 2008 and 2007 were $8.3 million
      and $5.1 million, an increase of $3.2 million or 63% in 2008 as compared to
      the
      same period in 2007. The increase reflects a greater demand for discount tickets
      as well as an increase in the average selling price per ticket in 2008 as
      compared to 2007 revenue. The average selling price per ticket in 2008 was
      $49.39 per ticket, which represented an increase of $2.92 per ticket or 6%
      as
      compared to $46.47 per ticket in 2007. Tix4Tonight discount tickets sold
      increased 269,000 tickets or 55% to 758,000 discounted show tickets for the
      nine
      months ended September 30, 2008. Commissions and fees were earned on the gross
      sales value of show tickets sold to customers of $37.4 million for the
      nine months ended September 30, 2008, as compared to $22.7 million for
      the nine months ended September 30, 2007. Lastly, during the nine months ended
      September 30, 2008, revenues from miscellaneous sources of income including
      discount golf and dinner reservations increased by $200,000, to $1.0 million
      or
      31%.





**AnyEvent:**





AnyEvent
      revenues for the nine months ended September 30, 2008 and 2007 were $1.1 million
      and $4.4 million, respectively. The $3.3 million decline in revenues is the
      result of several factors: First, management has made the decision to change
      from a retail ticket seller to the public to a wholesaler of tickets, that
      is
      our clients are national retail ticket brokers. As a result of this change
      we
      are assuming less risk, and have been able to reduce our overhead and increase
      the likelihood of profitability. Second, during the second quarter of 2007
      the
      Company participated in the distribution of premium tickets to two major boxing
      matches for which there was no corresponding event in 2008. Third, during the
      third quarter of 2007 we sold tickets for concerts for which there is no
      corresponding activity in the third quarter of 2008. Management expects that
      AnyEvent’s revenues will decline in 2008 as compared to 2007, but expects its
      net income to be greater with the reduction of risk and a more measured approach
      in participating in the sale and distribution of premium tickets to concerts,
      theatre shows and sporting events.




**Direct
      operating expenses**




Direct
      operating expenses include payroll and related costs, rents, and cost of tickets
      sold. Direct Costs of revenues for the nine months ended September 30, 2008
      and
      2007 were $4.3 million and $6.6 million, respectively, which represented a
      decrease in direct operating expenses of $2.3 million or 35%. Direct operating
      expenses decreased to 42% of revenues in 2008, as compared to 68% of revenues
      in
      2007. The lower operating expenses were reflective of the higher revenues from
      our existing discount ticket operations, higher cost per ticket and lower
      margins related to our premium ticket business, AnyEvent, and the opening of
      our
      fifth ticket booth location during the fourth quarter 2007 that is not reflected
      in the first three quarters of 2007.




36


**Selling,
      Marketing 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,
      marketing and administrative expenses for the nine months ended September 30,
      2008 and 2007 were $1.9 million and $1.8 million, respectively. Our selling,
      marketing and general and administrative expenses increased $100,000 or 6%,
      during the nine months ended September 30, 2008 . The 6% increase in selling,
      marketing and general administrative expenses is reflective of the relatively
      fixed cost of the administrative expense portion of the Ticketing Services
      operations.





**Depreciation
      and amortization**





Depreciation
      and amortization expense incurred during the nine months ended September 30,
      2008 was $153,000 and we expect to incur a similar level of depreciation and
      amortization for the foreseeable future.





**Segment
      Reporting - Exhibit Merchandising**




**Three
                Months Ended September 30,**
            
            **%
                Change 2008 v**
            
            **Nine
                Months Ended September 30,**
            
            **%
                  Change 2008 v****2008**
            
            **2007**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **2007**Revenue
            
            $
            2,419,000
            
            $
            2,346,000
            
            
            3
            %
            $
            6,082,000
            
            $
            2,346,000
            
            
            159
            %Operating
                Expenses:Direct
                operating expenses
            
            
            1,401,000
            
            
            1,492,000
            
            
            -6
            %
            
            3,681,000
            
            
            1,492,000
            
            
            147
            %Selling,
                general and administrative expenses
            
            
            827,000
            
            
            236,000
            
            
            250
            %
            
            2,046,000
            
            
            236,000
            
            
            767
            %Depreciation
                and amortization
            
            
            796,000
            
            
            449,000
            
            
            77
            %
            
            1,580,000
            
            
            449,000
            
            
            252
            %Operating
                loss
            
            $
            (605,000
            )
            $
            169,000
            
            
            -458
            %
            $
            (1,225,000
            )
            $
            169,000
            
            
            -825
            %Operating
                margin
            
            
            -25
            %
            
            7
            %
            
            
            
            
            -20
            %
            
            7
            %







Exhibit
      Merchandising was acquired in August 2007; therefore the comparable results
      for
      the three months ended September 30, 2007 are the same as for the nine months
      ended September 30, 2007.





**Three
      Months Ended September 30, 2008 and 2007:**





**Revenues.**





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 September 30, 2008 and 2007, EM generated $2.4 million
      and $2.3 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” closed at the “02” in London England in August
      2008 and opened in October 2008 in Dallas, Texas., ”Tutankhaman and the Golden
      King and the Great Pharoahs” continued in Vienna, Austria through September 30,
      2008, when it closed. It is moving to Atlanta, Georgia, where it will open
      November 15, 2008. Additionally, in April 2008, we opened a gift shop in Madrid,
      Spain related to the exhibit “Egyptian Undersea Treasures”, and this exhibit is
      expected to run through December 15, 2008.








37







**Direct
      operating expenses**





EM’s
      operating expenses include payroll and related costs, rents, and cost of goods
      sold. Direct operating expenses were $1.4 million or 58% of revenues for the
      three months ended September 30, 2008 and $1.5 million or 64% of revenues for
      the three months ended September 30, 2007.


Statement
      of Financial Accounting Standard No. 141 “Business Combinations” (SFAS 141)
      requires an acquiring Company to record any inventory acquired at its fair
      market value adjusted for certain related period expenses, such as warehousing
      and selling costs. At the time we acquired EM, we increased the value of the
      inventory on hand by $485,000 using a methodology that we believe to be
      consistent with SFAS 141. Therefore, we realized lower margins as this inventory
      was sold, than we would on inventory acquired from vendors. EM’s cost of goods
      sold during the three months ended September 30, 2008 reflects a charge of
      approximately $40,000 related to this increase in the inventory on hand at
      the
      time we acquired EM. At September 30, 2008, the SFAS 141 fair market adjustment
      is fully amortized.





**Selling,
      Marketing and Administrative Expenses**





EM’s
      selling, marketing and administrative expenses include advertising and
      promotional costs related to our business activities, as well as the
      segment cost of management. EM’s selling, marketing and administrative expenses
      were $827,000 or 34% of revenues and $236,000 or 10% of revenues, respectively.
      The increase is primarily a result of increased payroll of approximately
      $600,000. In the third quarter of 2008 we had exhibits in the US, London
      (England), Madrid (Spain), and Vienna (Austria), while in 2007 all our Exhibits
      were located in the US.





**Depreciation
      and amortization**





Depreciation
      and amortization expense incurred during the three months ended September 30,
      2008 and 2007 was $796,000 and $449,000, respectively, and relates primarily
      to
      the amortization of the intangible assets that were created as a result of
      EM
      being acquired in August 2007. During the three months ended September 30,
      2008
      amortization and depreciation expense was $730,000 and $66,000 respectively.
      We
      expect these levels of depreciation and amortization to continue through
      2010.










38







**Nine
      months ended September 30, 2008 and 2007:**




**Revenues.**




During
      the nine months ended September 30, 2008 and 2007, EM earned $6.1million and
      $2.3 million, respectively, in revenues 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”
closed at the “02” in London England in August 2008 and opened in October 2008
      in Dallas, Texas., ”Tutankhaman and the Golden King and the Great Pharoahs”
continued in Vienna, Austria through September 30, 2008, when it closed. It
      is
      moving to Atlanta Georgia, where it will open November 15, 2008. Additionally,
      in April 2008, we opened a gift shop in Madrid, Spain related to the exhibit
      “Egyptian Undersea Treasures”, and this exhibit is expected to run through
      December 15, 2008.




**Direct
      operating expenses**





EM’s
      operating expenses include payroll and related costs, rents, and cost of goods
      sold. Direct operating expenses for the nine months ended September 30, 2008
      and
      2007, were $3.7 million or 61% of revenues for, 2008 and $2.3 million or 64%
      of
      revenues, respectively. Our
      operations for the nine months ended September 30, 2007 are for the period
      of
      August, 2007 through September 30, 2007, as a result of our Acquisition of
      Exhibit Merchandising in August 2007.





Statement
      of Financial Accounting Standard No. 141 “Business Combinations” (SFAS 141)
      requires an acquiring Company to record any inventory acquired at its fair
      market value adjusted for certain related period expenses, such as warehousing
      and selling costs. At the time we acquired EM we increased the value of the
      inventory on hand by $485,000 using a methodology that we believe to be
      consistent with SFAS 141. Therefore, we will realize lower margins as this
      inventory is sold, than we would on inventory acquired from vendors. EM’s cost
      of goods sold during the nine months ended September 30, 2008 reflects a charge
      of approximately $283,000 related to this increase in the inventory on hand
      at
      the time we acquired EM. At September 30, 2008, the SFAS 141 fair market
      adjustment is fully amortized.





**Selling,
      Marketing and Administrative Expenses**





EM’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 nine months ended September 30, 2008 and 2007,
      EM’s
      selling, marketing and administrative expenses were $2.0 million or 34% of
      revenues and $236,000 or 19% of revenues, respectively. Our operations for the
      nine months ended September 30, 2007 are for the period of August, 2007 through
      September 30, 2007, as a result of our Acquisition of Exhibit Merchandising
      in
      August 2007.





**Depreciation
      and amortization**





Depreciation
      and amortization expense incurred during the nine months ended September 30,
      2008 and 2007 was $1.6 million and $449,000, 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 these levels of depreciation and
      amortization to continue through 2010.





**Live
      Entertainment:**





**Live
                Entertainment:****Our
                Live Entertainment segment operating results were as
                follows:****Segment
                Reporting-Tix Productions**




**Three
                Months Ended September 30,**
            
            **%
                Change 2008 v**
            
            **Nine
                Months Ended September 30,**
            
            **%
                Change 2008 v****2008**
            
            **2007**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **2007**Revenue
            
            $
            2,683,000
            
            $
            -
            
            
            N/A
            
            $
            30,265,000
            
            $
            -
            
            
            N/AOperating
                Expenses:Direct
                operating expenses
            
            
            2,253,000
            
            
            -
            
            
            N/A
            
            
            24,816,000
            
            
            -
            
            
            N/ASelling,
                general and administrative expenses
            
            
            695,000
            
            
            -
            
            
            N/A
            
            
            4,231,000
            
            
            -
            
            
            N/ADepreciation
                and amortization
            
            
            235,000
            
            
            -
            
            
            N/A
            
            
            609,000
            
            
            -
            
            
            N/AOperating
                income (loss)
            
            $
            (500,000
            )
            $
            -
            
            
            N/A
            
            $
            609,000
            
            $
            -
            
            
            N/AOperating
                margin
            
            
            -19
            %
            
            N/A
            
            
            
            
            
            2
            %
            
            N/A




Tix
      Productions, Inc., the Company’s Live Entertainment segment, does business under
      the names Magic Arts & Entertainment (Magic) and NewSpace Entertainment
      (NewSpace). We acquired Magic and NewSpace operations effective January 2,
      2008.
      Both Magic and NewSpace are independent presenters and producers of live theater
      and concerts with a history of working together. We believe that by combining
      the operations of the two companies under a single entity, we will be able
      to
      better leverage our resources, and gain operating efficiencies.







39







As
      a live
      entertainment presenter, we book touring theatrical and concert presentations
      with a history of successful commercial appeal as well as 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 eight US cities, our Salt Lake
      City based group and corporate sales team and standard marketing tools including
      print, radio, television, outdoor and e-marketing tools. In addition, we invest
      in shows or productions in advance of their initial tour to obtain favorable
      touring and distribution rights.




**Three
      Months Ended September 30, 2008:**





**Revenues.**





During
      the three months ended September 30, 2008, revenues from our Live Entertainment
      operations were $2.7 million. Revenues from live entertainment 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 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 EITF abstract 99-19 “Reporting
      Revenues Gross as Principal Versus Net as an Agent.” Revenues from our Live
      Entertainment operations are seasonal with the first and fourth quarters being
      traditionally the strongest.





**Direct
      Operating Expenses**





During
      the three months ended September 30, 2008, direct operating expense was $2.3
      million or 85% of revenues. Expenses that would be characterized as direct
      operating expenses include the guarantees, profit sharing and royalties paid
      directly to the touring productions, direct expenses of the theater which
      include staffing, rent and box office charges, marketing costs and production
      costs which include equipment rentals, stagehands and the cost of our production
      and settlement manager to attend the production. Live Entertainment productions
      typically have large back-end sharing relationships with the productions
      involved and, as a result, significant increases in presentation revenue do
      not
      typically result in comparable increases in operating income as much of that
      goes to the production at hand. On the other hand, significant decreases in
      presentation revenue do have a comparable impact on operating income as the
      largest burden of risk in these presentations lies with the promoter. 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 expenses at gross.





**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. Live Entertainment’s administrative expenses
      were $700,000 million or 30% of revenues.





**Depreciation
      and amortization**





Depreciation
      and amortization expense incurred during the three months ended September 30,
      2008 was $235,000 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 2009.





**Nine
      months ended September 30, 2008:**





**Revenues.**





During
      the nine months ended September 30, 2008, revenues from our Live Entertainment
      operations were $30.3 million. Revenues from live entertainment 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 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 EITF abstract 99-19 “Reporting
      Revenues Gross as Principal Versus Net as an Agent.” Revenues from our Live
      Entertainment operations are seasonal with the first and fourth quarters being
      traditionally the strongest.








40







**Direct
      Operating Expenses**





During
      the nine months ended September 30, 2008, direct operating expense was $24.8
      million or 83% of revenues. Expenses that would be characterized as direct
      operating expenses include the guarantees, profit sharing and royalties paid
      directly to the touring productions, direct expenses of the theater which
      include staffing, rent and box office charges, marketing costs and production
      costs which include equipment rentals, stagehands and the cost of our production
      and settlement manager to attend the production. Live Entertainment productions
      typically have large back-end sharing relationships with the productions
      involved and, as a result, significant increases in presentation revenue do
      not
      typically result in comparable increases in operating income as much of that
      goes to the production at hand. On the other hand, significant decreases in
      presentation revenue do have a comparable impact on operating income as the
      largest burden of risk in these presentations lies with the promoter. 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 expenses at gross.





**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. Live Entertainment’s administrative expenses
      which were $4.2 million or 14% of revenues.





**Depreciation
      and amortization**





Depreciation
      and amortization expense incurred during the nine months ended September 30,
      2008 was $609,000 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 2009.





**Liquidity
      and Capital Resources:**




**Summary
      of consolidated cash flows:**





For
                The Nine Months
              Ended
                September 30,2008
            
            2007Net
                cash provided by (used in) operating activities
            
            $
            2,627,000
            
            $
            (2,509,000
            )Net
                cash used in investing activities
            
            $
            (3,623,000
            )
            $
            (12,279,000
            )Net
                cash provided by financing activities
            
            $
            (1,108,000
            )
            $
            17,946,000Effect
                of exchange rate on cash
            
            $
            (159,000
            )
            $
            -Change
                in cash:Net
                (decrease) increase
            
            
            (2,263,000
            )
            
            3,158,000Balance
                at beginning of period
            
            
            7,417,000
            
            
            1,944,000Balance
                at end of period
            
            $
            5,154,000
            
            $
            5,102,000





41


At
      September 30, 2008, we had cash of $5.2 million and total assets of
      $60.5 million compared to $7.4 million and $55.2 million,
      respectively, at December 31, 2007. Our working capital totaled $7.1
      million at September 30, 2008, compared to $8.9 million at December 31, 2007.
      We
      had no debt for the nine months ended September 30, 2008 and the year-ended
      December 31, 2007.





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, as well as borrowings from
      related and unrelated parties. We will need to incur debt or issue equity to
      make other strategic acquisitions. 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
      first and fourth quarters. Exhibit Merchandising and AnyEvent are not subject
      to
      seasonal fluctuation, but other factors. Exhibit Merchandising is less subject
      to seasonal fluctuations in revenues than our other businesses. EM is however,
      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. We expect cash flows from operations
      and
      other financing alternatives, to satisfy working capital, and capital
      expenditures for at least the succeeding year.




**Operating
      Activities:**




Cash
      flows from operations were $2.6 million for the nine months ended September
      30,
      2008, compared to cash used in operations of $2.5 million for the nine months
      ended September 30, 2007. The $12.6 million increase in cash flows provided
      from
      operations was the result of a net loss in 2008 of $1.7 million, as compared
      to
      a net loss in 2007 of $15.2 million, and adjustments for non-cash items and
      changes in accounts reflecting operating activities. Significant items adjusting
      net loss in 2008 were a $155,000 decrease in accounts receivable, a $1.3 million
      increase in prepaid expenses and other current assets, a $482,000 increase
      in
      capitalized theatrical costs, deposits and other assets which was off-set by
      a
      $515,000 increase in accounts payable, a $184,000 increase in deferred revenue,
      $3.4 million of amortization and depreciation expense and $1.8 million of fair
      value of common stock issued for services. During 2007, items adjusting the
      net
      loss included a $13.1 million of common stock, warrants and stock options issued
      for services, which was offset by increases of $219,000 in deferred revenue,
      $30,000 in accounts receivable, $535,000 in inventory, $313,000 in prepaid
      expenses and other assets, offset by a decrease in accounts payable and accrued
      expenses of $54,000. The remaining amounts relate to operating accounts that
      are
      reflective of the level and timing of activity that occurred during the period,
      e.g., accrued liabilities.


42
 **Cash
      Flows from Investing Activities:**





Acquisitions





During
      the nine months ended September 30, 2008 and 2007 we used $3.6 million and
      $12.3
      million related to investing activities. Effective January 2, 2008, we acquired
      through merger Magic and NewSpace. As consideration for the acquisition of
      Magic, the Company paid $2.0 million, net of cash acquired and issued 476,190
      shares of stock that had market value of $2.3 million, which approximated the
      fair market value of the shares at the time of issuance. As consideration for
      the acquisition of NewSpace, the Company paid $1.7 million, net of cash acquired
      and issued 571,428 shares of stock that had market value of $2.7 million, which
      approximated the fair market value of the shares at the time of issuance. During
      the nine months ended September 30, 2007 the Company paid $396,000 for AnyEvent
      and the related inventory. We paid $11.4 million in cash for substantially
      all
      the assets of Exhibit Merchandising, and issued 5,000,000 restricted shares
      of
      the Company’s Common Stock with a market value of $35 million. The Company also
      agreed to assume certain liabilities of Exhibit Merchandising.





Other





During
      the nine months ended September 30, 2008 and 2007, we purchased fixed assets
      with a value of $398,000 and $442,000 respectively.





**Cash
      Flows from Financing Activities:**





During
      the nine months ended September 30, 2008 and 2007, financing activities used
      $1.1 million and provided $18.0 million, respectively. During 2008, cash used
      by
      financing activities resulted from the cost of Treasury Stock of $1.1 million,
      minor amount of payments related to capital leases offset by the proceeds from
      the exercise of options and warrants of $54,000. During 2007, cash generated
      from financing activities was the result of proceeds from note payable,
      stockholder of $2.0 million, repayment of this $2.0 note payable, stockholder,
      proceeds from stock subscriptions of $17.8 million, and proceeds from exercise
      of options and warrants of $203,000, offset by a minor amount of payments for
      capital leases.





**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 its operating performance with 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.


43


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, 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 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 endedSeptember
                30, 2008
            
            
            
            September
                30, 2007Net
                loss
            
            
            
            
            $
            (986,000
            )
            
            
            
            $
            (8,510,000
            )Interest
                income
            
            $
            7,000
            
            
            
            
            $
            60,000Interest
                expense
            
            
            (5,000
            )
            
            
            
            
            (53,000
            )Net
                interest income (expense)
            
            $
            2,000
            
            
            2,000
            
            $
            7,000
            
            
            7,000Depreciation
            
            
            
            
            
            126,000
            
            
            
            
            
            81,000Amortization
            
            
            
            
            
            1,025,000
            
            
            
            
            
            494,000Income
                taxes
            
            
            
            
            
            -
            
            
            
            
            
            -EBITDA
            
            
            
            
            $
            163,000
            
            
            
            
            $
            (7,942,000
            )




Nine
                months ended
            
            
            
            Nine
                months endedSeptember
                30, 2008
            
            
            
            September
                30, 2007Net
                loss
            
            
            
            
            $
            (1,690,000
            )
            
            
            
            $
            (15,227,000
            )Interest
                income
            
            $
            52,000
            
            
            
            
            $
            72,000Interest
                expense
            
            
            (15,000
            )
            
            
            
            
            (99,000
            )Net
                interest income (expense)
            
            $
            37,000
            
            
            37,000
            
            $
            (27,000
            )
            
            (27,000
            )Depreciation
            
            
            
            
            
            363,000
            
            
            
            
            
            180,000Amortization
            
            
            
            
            
            3,012,000
            
            
            
            
            
            579,000Income
                Taxes
            
            
            
            
            
            -
            
            
            
            
            
            -EBITDA
            
            
            
            
            $
            1,648,000
            
            
            
            
            $
            (14,441,000
            )








44
 **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 five 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 September 30, 2008, 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 31,2012 andTotal
            
            2008
            
            2009
            
            2010
            
            2011
            
            beyondEmployment
                agreements
            
            $
            2,684,000
            
            $
            478,000
            
            $
            1,273,000
            
            $
            875,000
            
            $
            58,000
            
            $
            —Capital
                lease obligations
            
            
            168,000
            
            
            17,000
            
            
            64,000
            
            
            67,000
            
            
            9,000
            
            
            11,000Operating
                lease obligations
            
            
            6,903,000
            
            
            647,000
            
            
            2,433,000
            
            
            1,780,000
            
            
            1,120,000
            
            
            923,000Total
                contractual cash obligations
            
            $
            9,755,000
            
            $
            1,142,000
            
            $
            3,770,000
            
            $
            2,722,000
            
            $
            1,187,000
            
            $
            934,000





Employment
      Agreements:




The
      Company has employment agreements with its President and Chief Executive Officer
      and 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 $86,000
      and
      $3,000 for the nine months ended September 30, 2008 and 2007,
      respectively.




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




Not
      applicable.  45
 **ITEM
      4. CONTROLS AND PROCEDURES**





(a)
      Evaluation of Disclosure Controls and Procedures




Disclosure
      controls and procedures are designed to ensure that information required to
      be
      disclosed in the reports filed or submitted by the Company under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported, within
      the
      time periods specified in the rules and forms of the Securities and Exchange
      Commission. Disclosure controls and procedures include, without limitation,
      controls and procedures designed to ensure that information required to be
      disclosed in the reports filed under the Securities Exchange Act of 1934 is
      accumulated and communicated to the Company’s management, including its
      principal executive and financial officers, as appropriate, to allow timely
      decisions regarding required disclosure.





The
      Company is
      in the process
      of carrying out an evaluation, under the supervision and with the participation
      of the Company's management, including its principal executive and financial
      officer, of the effectiveness of the Company's disclosure controls and
      procedures as of the end of the period covered by this report as a result of
      its
      acquisitions of Magic and NewSpace. Based upon and as of the date of that
      evaluation, the Company's principal executive and financial officer concluded
      that the Company's disclosure controls and procedures are effective to ensure
      that information required to be disclosed in the reports the Company files
      and
      submits under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission's rules and forms.





(b)
      Changes in Internal Control Over Financial Reporting





There
      were no changes in the Company's internal control over financial reporting
      or in
      other factors that could have materially affected or is reasonably likely to
      materially affect the Company’s internal controls over financial
      reporting.




**PART
      II. OTHER INFORMATION**


**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is currently not a party to any pending or threatened legal
      proceedings.





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




On
      February 29, 2008, we completed our merger acquisition of Magic Arts &
Entertainment -Florida, Inc., a privately held Florida corporation (“Magic”).
      Pursuant to the merger, we paid to the two stockholders of Magic $2.0 million
      in
      cash and issued to them a total of 476,190 restricted shares of our common
      stock
      with a market value of $2.3 million. Additionally, we will be required to
      issue to the former Magic stockholders a total of up to 380,952 additional
      shares of our common stock if certain EBITDA milestones are achieved during
      the
      next thirty-six months. These milestones are based upon the results of Tix
      Productions, Inc., a wholly owned subsidiary of the Company that will focus
      on providing live entertainment.




On
      March
      11, 2008, we completed our merger acquisition of NewSpace Entertainment, Inc.,
      (“NewSpace”). Pursuant to the Merger, we paid to the three stockholders of
      NewSpace $1 million in cash and issued to them a total of 571,428 restricted
      shares of our common stock with a market value of $2.6
      million.





All
      securities were exempt from registration pursuant to section 4(2) of the
      Securities Act of 1934, as amended, and Regulation D.  The certificates
      evidencing the securities bear a restrictive legend.





On
      August
      25, 2008, the Company announced plans to repurchase up to 1 million shares
      of
      common stock over a twelve month period. The following is the activity for
      the
      third quarter of 2008.





**Period**
            
            **Total
                number of shares purchased**
            
            **Average
                price paid per share**
            
            **Total
                number of shares purchased as part of publicly announced plans**
            
            **Maximum
                number of shares that may yet be purchased under the
                plans**8/29/2008
                - 8/29/2008
            
            
            16,000
            
            $
            4.13
            
            
            16,000
            
            
            984,0009/02/2008
                - 9/29/2008
            
            
            334,470
            
            $
            3.03
            
            
            350,470
            
            
            649,530Total
            
            
            350,470
            
            $
            3.22
            
            
            350,470
            
            
            649,530





There
      were no other issues.


****


**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





Not
      applicable.




46


**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.


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:
                November12,2008
            By:
            /s/Mitch
                FrancisMitch
                FrancisChief
                Executive OfficerDate:
                November 12,2008
            By:
            /s/
                Matthew NatalizioMatthew
                NatalizioChief
                Financial Officer
              (Duly
                Authorized Officer and
              Principal
                Financial Officer)





INDEX
      TO
      EXHIBITS





**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.


47