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 June 30, 2010
 
  ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT
OF 1934
 
 For the
transition period from _________ to _________
 
 Commission
File Number: 0-24592
 
 Tix
Corporation
 (Exact
name of small business issuer as specified in its charter)
 
 Delaware
                  95-4417467(State or other jurisdiction of
                  (I.R.S. Employerincorporation or organization)
                  Identification Number)
 
 12711 Ventura Blvd, Suite
340, Studio City, California 91604
 (Address
of principal executive offices)
 
 (818)
761-1002
 (Registrant’s
telephone number, including area code)
 
 Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x
     No  ̈
 
 Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
proceeding 12 months (or for such shorter period that the Registrant was
required to submit and post such reports).  Yes  ̈
     No  ̈ ‪
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large
      accelerated filer  ̈
                Accelerated
      filer x
                Non-accelerated
      filer  ̈
                Smaller
      reporting company  ̈(Do
      not check if a smaller reporting
company)
 
 Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12(b)-2 of the Exchange Act).  Yes  ̈
     No x
 
 Number of
shares of Tix Corporation common stock, $.08 par value, issued and outstanding
as of July 15, 2010: 31,123,357, exclusive of treasury shares.
  
 
 Special
Note Regarding Forward-Looking Statements:
  This
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010
contains "forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements that include the words “believes”,
“expects”, “anticipates”, “intends”, “plans”, “may”, “will” or similar
expressions that are intended to identify forward-looking statements. In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. These forward-looking statements
may include, among others, statements concerning the Company's expectations
regarding its business, growth prospects, revenue trends, operating costs,
working capital requirements, facility expansion plans, competition, results of
operations and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010
involve known and unknown risks, uncertainties and other factors that could
cause the actual results, performance or achievements of the Company to differ
materially from those expressed in or implied by the forward-looking statements
contained herein.
 
 Each
forward-looking statement should be read in context with, and with an
understanding of, the various disclosures concerning the Company and its
business made throughout this Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2010, as well as other public reports filed with the
United States Securities and Exchange Commission. Investors should not place
undue reliance on any forward-looking statement as a prediction of actual
results or developments. Except as required by applicable law or regulation, the
Company undertakes no obligation to update or revise any forward-looking
statement contained in this Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2010, whether as a result of new information, future
events or otherwise.
  2
  Tix
Corporation and Subsidiaries
 
 Index
  Page No.PART
      I. FINANCIAL INFORMATIONItem
      1. Financial StatementsCondensed
      Consolidated Balance Sheets – June 30, 2010 (Unaudited) and December 31,
      2009
                      
                      4Condensed
      Consolidated Statements of Operations and Comprehensive Income (Loss)
      (Unaudited) - Three months ended June 30, 2010 and 2009
                      
                      5Condensed
      Consolidated Statements of Operations and Comprehensive Income (Loss)
      (Unaudited) - Six months ended June 30, 2010 and 2009
                      
                      6Condensed
      Consolidated Statement of Stockholders’ Equity (Unaudited) – Six
      months ended June 30, 2010
                      
                      7Condensed
      Consolidated Statements of Cash Flows (Unaudited) – Six months ended
      June 30, 2010 and 2009
                      
                      8Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                      
                      9Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                      
                      22Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                      
                      39Item
      4. Controls and Procedures
                      
                      39PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
                      
                      41Item
      1A. Risk Factors
                      
                      41Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                      
                      41Item
      3. Defaults upon Senior Securities
                      
                      41Item
      4. Reserved
                      
                      41Item
      5. Other Information
                      
                      41Item
      6. Exhibits
                      
                      41SIGNATURES
                      
                      42
 
 3
  TIX
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 June
      30,
                                        
                                        
                                        December 31,2010
                                        
                                        
                                        2009(Unaudited)AssetsCurrent
      assets:Cash
                                        
                                        $
                                        8,453,000
                                        
                                        
                                        $
                                        9,885,000Accounts
      receivable, including show revenues earned but not billed
                                        
                                        
                                        423,000
                                        
                                        
                                        
                                        1,911,000Advances
      to vendors, net
                                        
                                        
                                        -
                                        
                                        
                                        
                                        964,000Inventory,
      net
                                        
                                        
                                        1,921,000
                                        
                                        
                                        
                                        2,172,000Prepaid
      expenses and other current assets
                                        
                                        
                                        1,486,000
                                        
                                        
                                        
                                        1,350,000Total
      current assets
                                        
                                        
                                        12,283,000
                                        
                                        
                                        
                                        16,282,000Property
      and equipment, net
                                        
                                        
                                        1,558,000
                                        
                                        
                                        
                                        1,308,000Other
      assets:Intangible
      assets:Goodwill
                                        
                                        
                                        7,104,000
                                        
                                        
                                        
                                        5,895,000Intangibles,
      net
                                        
                                        
                                        4,675,000
                                        
                                        
                                        
                                        4,499,000Total
      intangible assets
                                        
                                        
                                        11,779,000
                                        
                                        
                                        
                                        10,394,000Investments
      in and advances to nonconsolidated affiliates
                                        
                                        
                                        713,000
                                        
                                        
                                        
                                        1,052,000Capitalized
      theatrical costs
                                        
                                        
                                        344,000
                                        
                                        
                                        
                                        368,000Deposits
      and other assets
                                        
                                        
                                        161,000
                                        
                                        
                                        
                                        158,000Total
      other assets
                                        
                                        
                                        12,997,000
                                        
                                        
                                        
                                        11,972,000Total
      assets
                                        
                                        $
                                        26,838,000
                                        
                                        
                                        $
                                        29,562,000Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts
      payable
                                        
                                        $
                                        3,938,000
                                        
                                        
                                        $
                                        6,357,000Accrued
      expenses
                                        
                                        
                                        1,096,000
                                        
                                        
                                        
                                        1,797,000Deferred
      revenue
                                        
                                        
                                        545,000
                                        
                                        
                                        
                                        160,000Other
      current liabilities
                                        
                                        
                                        132,000
                                        
                                        
                                        
                                        120,000Convertible
      note payable
                                        
                                        
                                        1,000,000
                                        
                                        
                                        
                                        -Total
      current liabilities
                                        
                                        
                                        6,711,000
                                        
                                        
                                        
                                        8,434,000Commitments
      and contingenciesStockholders'
      equity:Preferred
      stock, $.01 par value; 500,000 shares authorized; none
    issuedCommon
      Stock, $.08 par value; 100,000,000 shares authorized; 31,123,357 shares
      net of 2,340,103 treasury shares, issued at June 30, 2010 and December 31,
      2009 respectively
                                        
                                        
                                        2,678,000
                                        
                                        
                                        
                                        2,678,000Additional
      paid-in capital
                                        
                                        
                                        90,192,000
                                        
                                        
                                        
                                        89,955,000Cost
      of shares held in treasury
                                        
                                        
                                        (4,610,000
                                        )
                                        
                                        
                                        (4,610,000
                                        )Accumulated
      deficit
                                        
                                        
                                        (68,156,000
                                        )
                                        
                                        
                                        (66,902,000
                                        )Accumulated
      other comprehensive income
                                        
                                        
                                        23,000
                                        
                                        
                                        
                                        7,000Total
      stockholders' equity
                                        
                                        
                                        20,127,000
                                        
                                        
                                        
                                        21,128,000Total
      liabilities and stockholders' equity
                                        
                                        $
                                        26,838,000
                                        
                                        
                                        $
                                        29,562,000
 
 See
accompanying notes to the condensed consolidated financial
statements
  4
  TIX
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
 (UNAUDITED)
 Three Months Ended June
      30,2010
                                      
                                      
                                      2009Revenues
                                      
                                      $
                                      14,806,000
                                      
                                      
                                      $
                                      26,584,000Operating
      expenses:Direct
      costs of revenues
                                      
                                      
                                      10,261,000
                                      
                                      
                                      
                                      21,410,000Selling
      and marketing expenses
                                      
                                      
                                      376,000
                                      
                                      
                                      
                                      581,000General
      and administrative expenses, including non-cash equity-based costs of
      $202,000 and $438,000 in 2010 and 2009, respectively (including
      $202,000 and $303,000 for officers, directors and employees in 2010 and
      2009, respectively)
                                      
                                      
                                      4,811,000
                                      
                                      
                                      
                                      3,337,000Depreciation
      and amortization
                                      
                                      
                                      665,000
                                      
                                      
                                      
                                      626,000Total
      costs and expenses
                                      
                                      
                                      16,113,000
                                      
                                      
                                      
                                      25,954,000Operating
      income (loss)
                                      
                                      
                                      (1,307,000
                                      )
                                      
                                      
                                      630,000Other:Other
      income
                                      
                                      
                                      71,000
                                      
                                      
                                      
                                      129,000Interest
      income
                                      
                                      
                                      18,000
                                      
                                      
                                      
                                      9,000Interest
      expense
                                      
                                      
                                      (2,000
                                      )
                                      
                                      
                                      (3,000
                                      )Other
      income, net
                                      
                                      
                                      87,000
                                      
                                      
                                      
                                      135,000Net
      income (loss) before income tax expense
                                      
                                      
                                      (1,220,000
                                      )
                                      
                                      
                                      765,000Current
      income tax expense
                                      
                                      
                                      111,000
                                      
                                      
                                      
                                      106,000Net
      income (loss)
                                      
                                      
                                      (1,331,000
                                      )
                                      
                                      
                                      659,000Other
      comprehensive income (loss)Foreign
      currency translation adjustments
                                      
                                      
                                      (5,000
                                      )
                                      
                                      
                                      9,000Comprehensive
      income (loss)
                                      
                                      $
                                      (1,336,000
                                      )
                                      
                                      $
                                      668,000Net
      income (loss) per common share -Basic
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      0.02Diluted
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      0.02Weighted
      average common shares outstanding -Basic
                                      
                                      
                                      31,123,357
                                      
                                      
                                      
                                      32,361,325Diluted
                                      
                                      
                                      31,123,357
                                      
                                      
                                      
                                      32,645,364
 
 See
accompanying notes to the condensed consolidated financial
statements.
  5
  TIX CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
 (UNAUDITED)
 Six
      Months Ended June 30,2010
                                      
                                      
                                      2009Revenues
                                      
                                      $
                                      31,556,000
                                      
                                      
                                      $
                                      46,754,000Operating
      expenses:Direct
      costs of revenues
                                      
                                      
                                      22,090,000
                                      
                                      
                                      
                                      36,336,000Selling
      and marketing expenses
                                      
                                      
                                      776,000
                                      
                                      
                                      
                                      1,187,000General
      and administrative expenses, including non-cash equity-based costs of
      $237,000 and $851,000 in 2010 and 2009, respectively (including
      $237,000 and $693,000 for officers, directors and employees in 2010 and
      2009, respectively)
                                      
                                      
                                      8,646,000
                                      
                                      
                                      
                                      7,093,000Depreciation
      and amortization
                                      
                                      
                                      1,286,000
                                      
                                      
                                      
                                      1,247,000Total
      costs and expenses
                                      
                                      
                                      32,798,000
                                      
                                      
                                      
                                      45,863,000Operating
      income (loss)
                                      
                                      
                                      (1,242,000
                                      )
                                      
                                      
                                      891,000Other:Other
      income
                                      
                                      
                                      78,000
                                      
                                      
                                      
                                      154,000Interest
      income
                                      
                                      
                                      25,000
                                      
                                      
                                      
                                      22,000Interest
      expense
                                      
                                      
                                      (4,000
                                      )
                                      
                                      
                                      (7,000
                                      )Other
      income, net
                                      
                                      
                                      99,000
                                      
                                      
                                      
                                      169,000Net
      income (loss) before income tax expense
                                      
                                      
                                      (1,143,000
                                      )
                                      
                                      
                                      1,060,000Current
      income tax expense
                                      
                                      
                                      111,000
                                      
                                      
                                      
                                      106,000Net
      income (loss)
                                      
                                      
                                      (1,254,000
                                      )
                                      
                                      
                                      954,000Other
      comprehensive incomeForeign
      currency translation adjustments
                                      
                                      
                                      16,000
                                      
                                      
                                      
                                      14,000Comprehensive
      income (loss)
                                      
                                      $
                                      (1,238,000
                                      )
                                      
                                      $
                                      968,000Net
      income (loss) per common share -Basic
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      0.03Diluted
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      0.03Weighted
      average common shares outstanding -Basic
                                      
                                      
                                      31,123,357
                                      
                                      
                                      
                                      32,332,963Diluted
                                      
                                      
                                      31,123,357
                                      
                                      
                                      
                                      32,592,125
 
 See
accompanying notes to the condensed consolidated financial
statements.
  6
 
 TIX
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 SIX
MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
 
 AccumulatedAdditional
                      
                      
                      
                      
                      
                      
                      
                      
                      Other
                      
                      
                      TotalCommon Stock
                      
                      
                      Paid In
                      
                      
                      Accumulated
                      
                      
                      Treasury
                      
                      
                      Comprehensive
                      
                      
                      Stockholders’Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Deficit
                      
                      
                      Stock
                      
                      
                      Income
                      
                      
                      EquityBalance,
      December 31, 2009
                      
                      
                      31,123,357
                      
                      
                      $
                      2,678,000
                      
                      
                      $
                      89,955,000
                      
                      
                      $
                      (66,902,000
                      )
                      
                      $
                      (4,610,000
                      )
                      
                      $
                      7,000
                      
                      
                      $
                      21,128,000Fair
      value of options issued to employees and directors
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      237,000
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      237,000Foreign
      currency translation adjustment
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      16,000
                      
                      
                      
                      16,000Net
      loss
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (1,254,000)
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (1,254,000)Balance,
      June 30, 2010
                      
                      
                      31,123,357
                      
                      
                      $
                      2,678,000
                      
                      
                      $
                      90,192,000
                      
                      
                      $
                      (68,156,000
                      )
                      
                      $
                      (4,610,000
                      )
                      
                      $
                      23,000
                      
                      
                      $
                      20,127,000
  See
accompanying notes to the condensed consolidated financial
statements.
  7
  TIX CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 Six Months Ended June
      30,2010
                                          
                                          
                                          2009Cash
      flows from operating activities:Net
      income (loss)
                                          
                                          $
                                          (1,254,000)
                                          
                                          
                                          $
                                          954,000Adjustments
      to reconcile net income (loss) to cash provided by operating
      activities:Depreciation
                                          
                                          
                                          291,000
                                          
                                          
                                          
                                          264,000Amortization
      of intangible assets
                                          
                                          
                                          995,000
                                          
                                          
                                          
                                          983,000Fair
      value of common stock issued for services to employees
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,000Fair
      value of common stock issued for services to consultants
                                          
                                          
                                          -
                                          
                                          
                                          
                                          50,000Fair
      value of options issued to employees and directors
                                          
                                          
                                          237,000
                                          
                                          
                                          
                                          685,000Fair
      value of warrants issued to consultants
                                          
                                          
                                          -
                                          
                                          
                                          
                                          108,000Loss
      on advance to vendors
                                          
                                          
                                          991,000
                                          
                                          
                                          
                                          -Change
      in allowance of inventory
                                          
                                          
                                          2,000
                                          
                                          
                                          
                                          (2,000
                                          )(Increase)
      decrease in:Accounts
      receivable
                                          
                                          
                                          1,488,000
                                          
                                          
                                          
                                          66,000Advances
      to vendors
                                          
                                          
                                          (27,000
                                          )
                                          
                                          
                                          -Advances
      to non consolidated affiliates
                                          
                                          
                                          37,000
                                          
                                          
                                          
                                          -Inventory
                                          
                                          
                                          249,000
                                          
                                          
                                          
                                          1,073,000Prepaid
      expenses and other current assets
                                          
                                          
                                          (136,000
                                          )
                                          
                                          
                                          243,000Capitalized
      theatrical costs, deposits and other assets
                                          
                                          
                                          24,000
                                          
                                          
                                          
                                          (456,000
                                          )Increase
      (decrease) in:Accounts
      payable and accrued expenses
                                          
                                          
                                          (2,850,000
                                          )
                                          
                                          
                                          324,000Income
      taxes payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          106,000Deferred
      revenue
                                          
                                          
                                          385,000
                                          
                                          
                                          
                                          (20,000
                                          )Deferred
      rent
                                          
                                          
                                          52,000
                                          
                                          
                                          
                                          (33,000
                                          )Net
      cash provided by operating activities
                                          
                                          
                                          484,000
                                          
                                          
                                          
                                          4,353,000Cash
      flows from investing activities:Purchases
      of property and equipment
                                          
                                          
                                          (394,000
                                          )
                                          
                                          
                                          (98,000
                                          )Purchase
      of All Access Entertainment
                                          
                                          
                                          (1,500,000
                                          )
                                          
                                          
                                          -Net
      cash used in investing activities
                                          
                                          
                                          (1,894,000
                                          )
                                          
                                          
                                          (98,000
                                          )Cash
      flows from financing activities:Cost
      of treasury stock
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (443,000
                                          )Payments
      on capital lease obligations
                                          
                                          
                                          (38,000
                                          )
                                          
                                          
                                          (28,000
                                          )Net
      proceeds from exercise of options and warrants
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (46,000)Net
      cash used in financing activities
                                          
                                          
                                          (38,000
                                          )
                                          
                                          
                                          (517,000
                                          )Effect
      of exchange rate changes on cash
                                          
                                          
                                          16,000
                                          
                                          
                                          
                                          14,000Change
      in Cash:Net
      increase (decrease)
                                          
                                          
                                          (1,432,000
                                          )
                                          
                                          
                                          3,752,000Balance
      at beginning of period
                                          
                                          
                                          9,885,000
                                          
                                          
                                          
                                          9,192,000Balance
      at end of period
                                          
                                          $
                                          8,453,000
                                          
                                          
                                          $
                                          12,944,000Supplemental
      disclosures of cash flow information:Cash
      paid for:Income
      taxes
                                          
                                          $
                                          111,000
                                          
                                          
                                          $
                                          -Interest
                                          
                                          $
                                          4,000
                                          
                                          
                                          $
                                          7,000Non-cash operating
      activitiesAt
      December 31, 2009, the Company accrued $474,000 for future losses, wind
      down costs and reserves against the remaining investments related to “101
      Dalmatians the Musical” (See Note 3).  During the six months
      ended June 30, 2010, the actual costs incurred approximated $200,000 which
      amount was offset against the original accrual of $474,000.  The
      remaining balance of $274,000 is offset against the “Investment in and
      advances to nonconsolidated affiliates” on the June 30, 2010 condensed
      consolidated balance sheets
                                          
                                          $
                                          274,000
                                          
                                          
                                          $
                                          -Non-cash investing
    activitiesIssuance
      of secured convertible note payable related to the acquisition of All
      Access Entertainment
                                          
                                          $
                                          1,000,000
                                          
                                          
                                          $
                                          -Issuance
      of 190,476 earn-out shares of common stock in conjunction with the
      acquisition of Magic Arts & Entertainment - Florida, Inc. in
      2009
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          256,000
 
 See
accompanying notes to the condensed consolidated financial
statements.
  8
  TIX CORPORATION AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SIX
MONTHS ENDED JUNE 30, 2010 AND 2009
 
 Note
1 - Nature of Business
 
 Tix
Corporation (the “Company”) was incorporated in Delaware in April 1993. The
Company is a diversified integrated entertainment company providing ticketing
services, event merchandising, and the production and promotion of live
entertainment. It operates three complementary business segments: Ticketing
Services provides discount and premium ticket sales; Exhibit Merchandising
provides event and branded merchandising; and Live Entertainment provides the
production and promotion of live entertainment.
  Preparation
of Interim Financial Statements:
  The
consolidated financial statements included in this report have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”) and, in the opinion of management, include all adjustments
(consisting of normal recurring accruals and adjustments necessary for adoption
of new accounting standards) necessary to present fairly the results of the
interim periods shown. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles in the United States have been condensed or omitted
pursuant to such SEC rules and regulations. Management believes that its
disclosures are sufficiently presented to prevent this information from being
misleading. Due to seasonality and other factors, the results for the interim
periods are not necessarily indicative of results for a full year. The financial
statements contained herein should be read in conjunction with the consolidated
and combined financial statements and notes thereto included in the Company’s
2009 Annual Report on Form 10-K and interim financial statements and
information reported on Forms 8-K and 10-Q.
 
 Accounting
Estimates:
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
  Consolidation:
  The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. Intercompany transactions and balances are eliminated
in consolidation.
  Note
2 - Summary of Significant Accounting Policies
 
 Revenue
Recognition, Presentation and Concentrations:
  The
Company has several streams of income, each of which is required under Generally
Accepted Accounting Principles (GAAP) to be recognized in varying ways. The
following is a summary of our revenue recognition policies.
  The
Company’s Las Vegas discount show ticketing business recognizes as revenue the
commissions and related transaction fees earned from the sale of Las Vegas show
tickets at the time the tickets are paid for and delivered to the customers. The
Company’s commissions are calculated based on the face value of the show tickets
sold. The Company’s transaction fees are charged on a per-ticket basis. With
certain exceptions, ticket sales are generally non-refundable, although same-day
exchanges of previously sold tickets are permitted. Claims for ticket refunds,
which are generally received and paid the day after the show date, are charged
back to the respective shows and are recorded as a reduction to the Company’s
commissions and fees at the time that such refunds are processed. The Company
does not have accounts receivable associated with its sales transactions, as
payment is collected at the time of sale.
 
 Tix4Dinner
offers reservations for discounted dinners at various restaurants on and
surrounding the Las Vegas strip and downtown, with dining at specific times on
the same day or in some cases as much as seven days after the day of the sale.
Tix4Dinner recognizes as revenue the transaction fees earned from the purchaser
of the dinner reservations at the time the reservations are made and a
subsequent nominal fee from the restaurant at the time the reservation is used.
At this time, the Company has immaterial amounts of accounts receivable and does
not have any accounts payable associated with the Tix4Dinner operations, as the
Company collects the transaction fee at the time the reservation is made, and
the dinner payment is collected directly from the restaurant.
  9
  Tix4AnyEvent
(AnyEvent) recognizes as revenue the gross amount of ticket sales from the sale
of its ticket inventory. AnyEvent bears the risk of economic loss if the tickets
are not sold by the date the event is scheduled to occur. Revenue is considered
earned when the related event has occurred. Refunds are only issued if the event
is canceled or postponed. Payments for such ticket sales received prior to the
event are recorded as deferred revenue. AnyEvent does not have any accounts
receivable associated with sales transactions to retail customers because
payment is collected at the time of sale. However, sales transactions to other
ticket brokers may be conducted on a credit basis, which would generate accounts
receivable.
  Exhibit
Merchandising recognizes retail store sales at the time the customer takes
possession of the merchandise. Sales are recorded net of discounts and returns
and exclude sales tax. Discounts are estimated based upon historical experience.
For online sales, revenue is recognized free on board (“FOB”) origin where title
and risk of loss pass to the buyer when the merchandise leaves
the Company's distribution facility at the time of shipment, which we refer
to as the date of purchase by the customer. Sales are recognized net of
merchandise returns, which are reserved for based on historical experience.
Shipping and handling revenues from sales are included as a component of net
sales. Conversely, shipping and handling costs are a component of direct cost of
revenues. The Company does not have any accounts receivable associated with this
business as transactions are done by cash or credit card.
  The
Company generates revenue from its live entertainment business. Revenue from the
presentation and production of an event is recognized after the performance
occurs. Revenue collected in advance of the event is recorded as deferred
revenue until the event occurs. Revenue collected from sponsorship and other
revenue, which is not related to any single event, is classified as deferred
revenue and generally amortized over the tour’s season or the term of the
contract. We account for taxes that are externally imposed on revenue producing
transactions on a net basis, as a reduction to revenue.
 
 Tix
Productions Inc.’s operating units, Magic Arts & Entertainment and NewSpace
Entertainment, act as both presenters and promoters of productions, as well as
agents.  Tix Productions Inc.’s revenues from live entertainment where
it is acting as the producer or promoter are a function of a number of elements;
revenue is a direct reflection of tickets sold times ticket prices plus
ancillary revenue streams including sponsorships and revenues generated through
premium ticketing opportunities. In instances where the Company acts as the
presenter or promoter, it:
 
 ·
              selects the suppliers or approves
      the selection of the
supplier,
 ·
              is
      the primary obligor with suppliers,
 ·
              assumes
      credit risk,
 ·
              directs the pricing of the
      tickets, and
 ·
              purchases the
      advertising.
 
 The above
are indicators of ownership and would be evidence that revenues and related
expenses should be recorded at gross.  As the Company is acting as the
principal in the transaction, i.e., it has the risks and rewards of ownership
and has recorded the related revenues and expenses at gross. In other instances
where we only receive a fee and are not the principal obligors to vendors, we
record these revenues at net.
  Stock-Based
Compensation:
  The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs. The Company accounts for stock option and warrant grants issued and
vesting to employees based on the authoritative guidance provided by the
Financial Accounting Standards Board (FASB). The Company accounts for stock
option and warrant grants issued and vesting to non-employees in accordance with
the authoritative guidance of the FASB whereas the value of the stock
compensation is based upon the measurement date as determined at either a) the
date at which a performance commitment is reached, or b) at the date at which
the necessary performance to earn the equity instruments is
complete.
  Intangible
Assets and Goodwill:
  The
Company accounts for intangible assets and goodwill in accordance with the
authoritative guidance issued by the FASB. Intangibles are valued at their fair
market value and are amortized taking into account the character of the acquired
intangible asset and the expected period of benefit. The Company evaluates
intangible assets for impairment, at a minimum, on an annual basis and whenever
events or changes in circumstances indicate the carrying value may not be
recoverable from its estimated future cash flows. Recoverability of intangible
assets is measured by comparing their net book value to the related projected
undiscounted cash flows from these assets, considering a number of factors,
including past operating results, budgets, economic projections, market trends
and product development cycles. If the net book value of the asset exceeds the
related undiscounted cash flows, the asset is considered impaired, and a second
test is performed to measure the amount of impairment loss.
 
 Impairment
of Long-Lived Assets:
  Authoritative
guidance issued by the FASB established guidelines regarding when impairment
losses on long-lived assets, which include property and equipment, should be
recognized, and how impairment losses should be measured. Authoritative guidance
from the FASB 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.
  10
 
 Management
regularly reviews property, equipment and other long-lived assets for possible
impairment. This review occurs quarterly, or more frequently if events or
changes in circumstances indicate the carrying amount of the asset may not be
recoverable. If there is indication of impairment, then management prepares an
estimate of the future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition. If
these cash flows are less than the carrying amount of the asset, an impairment
loss is recognized to write down the asset to its estimated fair value.
Management believes that the accounting estimate related to impairment of its
property and equipment is a “critical accounting estimate” because: (1) it
is highly susceptible to change from period to period because it requires
management to estimate fair value, which is based on assumptions about cash
flows and discount rates; and (2) the impact that recognizing an impairment
would have on the assets reported on the Company’s balance sheet, as well as net
income, could be material. Management’s assumptions about cash flows and
discount rates require significant judgment because actual revenues and expenses
have fluctuated in the past and are expected to continue to do so. There were no
indications of impairment based on management’s assessment at June 30,
2010. As of June 30, 2010, we have $11.8 million of remaining goodwill and
intangible assets related to our acquisitions of Exhibit Merchandising LLC,
Magic Arts and Entertainment, NewSpace Entertainment, and All Access. Factors we
consider important that could trigger an impairment review include significant
underperformance relative to historical or projected future operating results,
significant changes in the manner of the use of our assets or the strategy for
our overall business, and significant negative industry or economic
trends.  If current economic conditions worsen causing decreased
revenues and increased costs, we may have further goodwill
impairments.
 
 Income
Taxes:
  Current
income tax expense is the amount of income taxes expected to be payable for the
current year. A deferred income tax asset or liability is established for the
expected future consequences of temporary differences in the financial reporting
and tax basis of assets and liabilities. The Company considers future taxable
income and ongoing, prudent and feasible tax planning strategies, in assessing
the value of its deferred tax assets. If the Company determines that it is more
likely than not that these assets will not be realized, the Company will reduce
the value of these assets to their expected realizable value, thereby decreasing
net income. Evaluating the value of these assets is necessarily based on the
Company’s judgment. If the Company subsequently determines that the deferred tax
assets which were written down would be realized in the future, the value of the
deferred tax assets would be increased, thereby increasing net income in the
period when that determination was made.
  The
Company prescribes a recognition threshold and a measurement attributable for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more likely than not to be sustained upon examination by taxing
authorities. The amount recognized is measured as the largest amount of benefit
that is greater than 50% likelihood of being realized.
  Fair
Value of Financial Instruments:
  The
carrying amounts of financial instruments, including cash, accounts and other
receivables, accounts payable and accrued liabilities, and short-term loans
approximate fair value because of their short maturity. The carrying amounts of
capital lease obligations approximate fair value because the related
effective interest rates on these instruments approximate the rates currently
available to the Company.
 
 The
Company uses various inputs in determining the fair value of its investments and
measures these assets on a recurring basis.  Financial assets recorded
at fair value in the consolidated balance sheets are categorized by the level of
objectivity associated with the inputs used to measure their fair
value.  Authoritative guidance provided by the FASB defines the
following levels directly related to the amount of subjectivity associated with
the inputs to fair valuation of these financial assets:
  ·
              Level 1 – quoted prices in active
      markets for identical
investments
 
 ·
              Level 2 – other significant
      observable inputs (including quoted prices for similar investments, market
      corroborated inputs, etc.)
 
 ·
              Level 3 – significant
      unobservable inputs (including the Company’s own assumptions in
      determining the fair value of
  investments)
  As of
June 30, 2010 and December 31, 2009, respectively, the Company’s financial
assets subject to measurement included Level 1 items of cash and short term
investments.  The fair value of these financial assets was equal to
their recorded value. There were no unrealized gains or losses included in
earnings resulting from long-term investments associated with Level 2 or 3
financial assets during the six month period ended June 30, 2010.
  Cash
Concentrations:
  The
Company's cash balances on deposit with banks in accounts in the United States
(US) are guaranteed up to $250,000 by the Federal Deposit Insurance Corporation
(the “FDIC”). The Company may periodically be exposed to risk for the amount of
funds held in one bank in excess of the insurance limit. In order to control the
risk, the Company's policy is to maintain cash balances with high quality
financial institutions. At June 30, 2010, the Company’s aggregate cash in excess
of the FDIC insured amount was $7.0 million. In addition, the Company had
aggregate cash balances in Canada of $31,000, which is below the Canadian
equivalent of the US FDIC guarantee.
  11
 
 Foreign
Currency:
  Results
of foreign operations are translated into U.S. dollars using the average
exchange rates during the year. The assets and liabilities of those operations
are translated into U.S. dollars using the exchange rates at the balance sheet
date. The realized and unrealized exchange losses and gains were minor in the
six months ending June 30, 2010. The related translation adjustments are
recorded in a separate component of stockholders’ equity in accumulated other
comprehensive income.  Foreign currency transaction gains and losses
are included in the results of operations.
 
 Advertising
Costs:
  Advertising
costs are charged to operations as selling and marketing expenses at the time
the costs are incurred. For the three and six months ended June 30, 2010 and
2009, advertising costs were $376,000, $581,000, $776,000 and $1.2 million,
respectively.
 
 Recently
Issued Accounting Guidance:
  In
April 2010, the Financial Accounting Standards Board (FASB) issued new
accounting guidance in applying the milestone method of revenue recognition to
research or development arrangements. Under this guidance management may
recognize revenue contingent upon the achievement of a milestone in its
entirety, in the period in which the milestone is achieved, only if the
milestone meets all the criteria within the guidance to be considered
substantive. This standard is effective on a prospective basis for research and
development milestones achieved in fiscal years, beginning on or after
June 15, 2010. Early adoption is permitted; however, adoption of this
guidance as of a date other than January 1, 2011 will require the Company
to apply this guidance retrospectively effective as of January 1, 2010 and
will require disclosure of the effect of this guidance as applied to all
previously reported interim periods in the fiscal year of adoption. As the
Company plans to implement this standard prospectively, the effect of this
guidance will be limited to future transactions. The Company does not expect
adoption of this standard to have a material impact on its financial position or
results of operations as it has no material research and development
arrangements which will be accounted for under the milestone
method.
 
 In
January 2010, the FASB issued new accounting guidance which requires new
disclosures regarding transfers in and out of Level 1 and Level 2 fair value
measurements, as well as requiring presentation on a gross basis of information
about purchases, sales, issuances and settlements in Level 3 fair value
measurements. The guidance also clarifies existing disclosures regarding level
of disaggregation, inputs and valuation techniques. The new guidance is
effective for interim and annual reporting periods beginning after
December 15, 2009.  Disclosures about purchases, sales, issuances
and settlements in the roll forward of activity in Level 3 fair value
measurements are effective for fiscal years beginning after December 15,
2010.  As this guidance requires only additional disclosure, there
should be no impact on the consolidated financial statements of the Company upon
adoption.
 
 In
October 2009, a new accounting consensus was issued for
multiple-deliverable revenue arrangements. This consensus amends existing
revenue recognition accounting standards. This consensus provides accounting
principles and application guidance on whether multiple deliverables exist, how
the arrangement should be separated and the consideration allocated. This
guidance eliminates the requirement to establish the fair value of undelivered
products and services and instead provides for separate revenue recognition
based upon management’s estimate of the selling price for an undelivered item
when there is no other means to determine the fair value of that undelivered
item. Previously the existing accounting consensus required that the fair value
of the undelivered item be the price of the item either sold in a separate
transaction between unrelated third parties or the price charged for each item
when the item is sold separately by the vendor. Under the existing accounting
consensus, if the fair value of all of the elements in the arrangement was not
determinable, then revenue was deferred until all of the items were delivered or
fair value was determined. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The Company is in the process of
evaluating whether the adoption of this standard will have a material effect on
its financial position, results of operations or cash flows.
 
 In June
2009, the FASB issued authoritative guidance on consolidation of variable
interest entities.  The new guidance is intended to improve financial
reporting by requiring additional disclosures about a company’s involvement in
variable interest entities.  This new guidance is effective for fiscal
years and interim periods beginning after November 15, 2009.  The
Company adopted this guidance effective January 3, 2010, and it had no impact on
the consolidated financial statements of the Company.
 
 Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the Securities Exchange Commission (the
"SEC") did not or are not believed by management to have a material impact on
the Company's present or future consolidated financial
statements.
  12
 
 Note
3 - Investments
 
 The
Company in 2008 acquired the rights from the estate of Dodie Smith to develop,
promote and tour the production “101 Dalmatians the Musical,” for $400,000.
These rights were estimated to have a seven year life, and as of June 30, 2010
had a remaining unamortized balance of $271,000.  As part of an
amendment to the original rights with the estate of Dodie Smith, future rights
to the show “101 Dalmatians the Musical” would vest for a twenty-four year
period once the show was performed sixteen times in New
York.  Separately, the Company invested $2.2 million, resulting in a
40% interest in the limited liability company that was formed to produce,
promote and tour “101 Dalmatians the Musical.” In addition, the Company advanced
$820,000 to the limited liability company during the development period of the
show, of which $730,000 remains outstanding at June 30, 2010. The advance is
expected to be repaid from the projected future licensing revenues of the show
over a four year or five year period.
 
 The
touring event associated with the affiliate ended in April 2010, which included
a sixteen performance run in New York. During 2009, the Company’s share of
losses from the tour including advertising costs that were expensed when
incurred or first performed was $1.3 million. In addition, the Company had
recorded a $1.3 million charge to write off its investment and the estimated
expenses related to its proportionate share of losses that were expected to be
incurred in 2010 to secure the future rights to the show.  At December
31, 2009, the Company  accrued $474,000 for future losses, wind down
costs and reserves against the remaining investments related to this
production.  During the six months ended June 30, 2010,
the  actual costs incurred approximated $200,000 which amount was
offset against the original accrual of $474,000.  The remaining
balance of $274,000 is offset against the “Investment in and advances to
nonconsolidated affiliates” on the June 30, 2010 condensed consolidated balance
sheets.
 
 The
rights to the show have now been extended to 24 years as the Company met its
commitment for the sixteen performances run in New York.  The
remaining balance of the note receivable and the show rights totaling $713,000
related to the show are recoverable from future show rights. The Company expects
future recoveries from royalties will exceed the note and intangible
values.
 
 Note
4 - Acquisitions
  All
Access Entertainment, LLC:
  On
February 10, 2010, the Company entered into an Asset Purchase Agreement with All
Access Entertainment, LLC (All Access) with an effective date of March 1,
2010.  Pursuant to the Asset Purchase Agreement, the Company paid the
owner of All Access $1.5 million in cash and issued a six month secured
convertible promissory note in the principal amount of $1.0 million at no
interest due on August 10, 2010.  The secured convertible promissory
note is secured by the assets purchased.  The secured convertible
promissory note is convertible at the option of the owner or the Company into
the aggregate number of shares of the Company’s common stock equal to the
quotient determined by dividing $1.0 million by the daily average closing sale
price of the Company’s common stock as reported on the NASDAQ Capital Market for
the thirty (30) day period prior to conversion but in no event less than $3.00
per share.
  The
Company additionally entered into a two-year Consulting Agreement with the
former owner of All Access. The Consulting Agreement requires the former owner
of All Access to maintain former business relationships of All Access and to
pursue additional strategic alliances on behalf of the Company.  The
Consulting Agreement provides an annual compensation of $200,000.
 
 The
assets of All Access Entertainment consisted primarily of a small amount of
property and equipment and operating lease agreements. The All Access business
was immediately absorbed and integrated into our existing Las Vegas discount
ticketing business.  The acquisition of All Access has been accounted
for as a purchase in accordance with authoritative guidance issued by the FASB
and the operations of the company have been consolidated commencing with the
closing of the transaction.  The $2.5 million purchase price was
allocated and based upon the fair value of the acquired assets, as determined by
management with the assistance of an independent valuation firm.
  Allocation
of the Purchase Price of All Access:
 
 Tangible
      assets, net of liabilities assumed:
                    
                    $
                    150,000Intangible
      assets:Contract
      commitments
                    
                    
                    922,000Employment
      Agreements
                    
                    
                    219,000Goodwill
                    
                    
                    1,209,000Purchase
      price
                    
                    $
                    2,500,000
  No pro
forma results of operations of All Access combined with the operations of the
Company as of the beginning of the periods presented are being provided as the
results were not significant.
  13
 
 Note
5 - Property and Equipment
 
 The table
below displays our property and equipment balances as of June 30, 2010 and
December 31, 2009.
 
 June
      30, 2010
                          
                          
                          December
      31, 2009Office
      equipment and furniture
                          
                          $
                          2,754,000
                          
                          
                          $
                          2,191,000Equipment
      under capital lease
                          
                          
                          386,000
                          
                          
                          
                          408,000Leasehold
      improvements
                          
                          
                          395,000
                          
                          
                          
                          394,000Property
      and equipment
                          
                          
                          3,535,000
                          
                          
                          
                          2,993,000Less
      accumulated depreciation
                          
                          
                          (1,977,000
                          )
                          
                          
                          (1,685,000
                          )Total property and equipment, net
                          
                          $
                          1,558,000
                          
                          
                          $
                          1,308,000
 
 Depreciation
expense was $154,000, $291,000, $133,000 and $264,000 for the three and six
months ended June 30, 2010 and 2009, respectively.
 
 Note
6 - Intangible Assets
 
 The
following tables summarize the original cost, the related accumulated
amortization, impairment adjustment, and the net carrying amounts for the
Company’s intangible assets at June 30, 2010 in total and by
segment.
 
 Estimated
                                    
                                    Net
      Carrying
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    Net
      CarryingUseful
                                    
                                    Amount
      At
                                    
                                    
                                    Addition/
                                    
                                    
                                    Amortization
                                    
                                    
                                    Amount
      AtLives
                                    
                                    12/31/2009
                                    
                                    
                                    Adjustment
                                    
                                    
                                    Expense
                                    
                                    
                                    6/30/2010Marketing
      Based
                                    
                                    3-6
      years
                                    
                                    $
                                    1,969,000
                                    
                                    
                                    $
                                    
                                    
                                    
                                    $
                                    (233,000
                                    )
                                    
                                    $
                                    1,736,000Contract
      commitments
                                    
                                    3-7
      years
                                    
                                    
                                    2,375,000
                                    
                                    
                                    
                                    1,141,000
                                    
                                    
                                    
                                    (673,000
                                    )
                                    
                                    
                                    2,843,000Customer
      relationships
                                    
                                    3
      years
                                    
                                    
                                    38,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (38,000
                                    )
                                    
                                    
                                    -Technology
      Based
                                    
                                    3
      years
                                    
                                    
                                    11,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (8,000
                                    )
                                    
                                    
                                    3,000Intellectual
      property (e.g. domain names)
                                    
                                    5
      years
                                    
                                    
                                    106,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (13,000
                                    )
                                    
                                    
                                    93,000Goodwill
                                    
                                    indefinite
                                    
                                    
                                    5,895,000
                                    
                                    
                                    
                                    1,209,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,104,000Total
                                    
                                    
                                    
                                    $
                                    10,394,000
                                    
                                    
                                    $
                                    2,350,000
                                    
                                    
                                    $
                                    (965,000
                                    )
                                    
                                    $
                                    11,779,000
 
 Ticketing
Services
 
 Net
      Carrying
                      
                      
                      
                      
                      
                      
                      
                      
                      Net
      CarryingAmount
      At
                      
                      
                      Addition/
                      
                      
                      Amortization
                      
                      
                      Amount
      At12/31/2009
                      
                      
                      Adjustment
                      
                      
                      Expense
                      
                      
                      6/30/2010Marketing
      based
                      
                      $
                      5,000
                      
                      
                      $
                      -
                      
                      
                      $
                      (5,000
                      )
                      
                      $
                      -Contract
      commitments
                      
                      
                      75,000
                      
                      
                      
                      1,141,000
                      
                      
                      
                      (94,000
                      )
                      
                      
                      1,122,000Customer
      relationships
                      
                      
                      38,000
                      
                      
                      
                      
                      
                      
                      
                      (38,000
                      )
                      
                      
                      -Technology
      based
                      
                      
                      7,000
                      
                      
                      
                      
                      
                      
                      
                      (7,000
                      )
                      
                      
                      -Intellectual
      property (e.g. domain names)
                      
                      
                      106,000
                      
                      
                      
                      
                      
                      
                      
                      (13,000
                      )
                      
                      
                      93,000Goodwill
                      
                      
                      -
                      
                      
                      
                      1,209,000
                      
                      
                      
                      
                      
                      
                      
                      1,209,000Total
                      
                      $
                      231,000
                      
                      
                      $
                      2,350,000
                      
                      
                      $
                      (157,000
                      )
                      
                      $
                      2,424,000
 
 Merchandising
 
 Net
      Carrying
                      
                      
                      
                      
                      
                      
                      
                      
                      Net
      CarryingAmount
      At
                      
                      
                      Addition/
                      
                      
                      Amortization
                      
                      
                      Amount
      At12/31/2009
                      
                      
                      Adjustment
                      
                      
                      Expense
                      
                      
                      6/30/2010Marketing
      based
                      
                      $
                      1,964,000
                      
                      
                      $
                      -
                      
                      
                      $
                      (274,000
                      )
                      
                      $
                      1,690,000Contract
      commitments
                      
                      
                      216,000
                      
                      
                      
                      -
                      
                      
                      
                      (186,000
                      )
                      
                      
                      30,000Goodwill
                      
                      
                      1,670,000
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      1,670,000Total
                      
                      $
                      3,850,000
                      
                      
                      $
                      -
                      
                      
                      $
                      (460,000
                      )
                      
                      $
                      3,390,000
  14
 
 Live
Entertainment
 
 Net
      Carrying
                      
                      
                      
                      
                      
                      
                      
                      
                      Net
      CarryingAmount
      At
                      
                      
                      Addition/
                      
                      
                      Amortization
                      
                      
                      Amount
      At12/31/2009
                      
                      
                      Adjustment
                      
                      
                      Expense
                      
                      
                      6/30/2010Contract
      commitments
                      
                      $
                      2,084,000
                      
                      
                      $
                      -
                      
                      
                      $
                      (346,000
                      )
                      
                      $
                      1,738,000Technology
      based
                      
                      
                      4,000
                      
                      
                      
                      -
                      
                      
                      
                      (2,000
                      )
                      
                      
                      2,000Goodwill
                      
                      
                      4,225,000
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      4,225,000Total
                      
                      $
                      6,313,000
                      
                      
                      $
                      -
                      
                      
                      $
                      (348,000
                      )
                      
                      $
                      5,965,000
 
 Total
amortization expense related to intangible assets for the three and six months
ended June 30, 2010 and 2009 was $511,000, $965,000, $493,000 and $981,000,
respectively.   Additional amortization expense related to
“Investment in and advances to nonconsolidated affiliates” as described in Note
3 was $30,000 for the six months ended June 30, 2010.  No similar
expense existed in the prior year.
 
 Note
7- Related Party Transactions
 
 During
2010 and 2009, Benjamin Frankel, a director of the Company, was a principal in
Frankel, LoPresti & Co., an accountancy corporation that provides tax
advisory and preparation services to the Company. For the three and six months
ended June 30, 2010 and 2009, we paid Mr. Frankel or his firm $36,000, $12,000,
$65,000 and $20,000, respectively, for tax preparation and advisory
services.
 
 Mr.
Joseph Marsh, a greater than 10% shareholder of the Company, was a principal in
Magic Arts and Entertainment - Florida, Inc., a company the Company acquired on
January 2, 2008.
 
 Note
8- Stock-Based Compensation Plans
 
 Summary
of Stock Options:
 
 The
Company has various stock-based compensation plans. The intrinsic value of
outstanding stock options at June 30, 2010 was $0, as compared to $296,000
at June 30, 2009.  A summary of the combined stock options for the six
months ended June 30, 2010 is as follows:
 
 WeightedNumber
                        
                        
                        averageof
                        
                        
                        exerciseoptions
                        
                        
                        priceBalance
      outstanding, December 31, 2009
                        
                        
                        1,251,000
                        
                        
                        $
                        5.24Options
      granted
                        
                        
                        -
                        
                        
                        
                        -Options
      exercised
                        
                        
                        -
                        
                        
                        
                        -Options
      expired or forfeited
                        
                        
                        (441,000
                        )
                        
                        
                        7.00Balance
      outstanding, June 30, 2010
                        
                        
                        810,000
                        
                        
                        $
                        4.78Balance
      exercisable, June 30, 2010
                        
                        
                        489,000
                        
                        
                        $
                        5.34
 
 Information relating to outstanding stock options
at June 30, 2010, summarized by exercise price, is as follows:
 
 Outstanding
                          
                          
                          ExercisableWeighted
                          
                          
                          
                          
                          
                          WeightedLife
                          
                          
                          Average
                          
                          
                          
                          
                          
                          AverageExercise Price Per Share
                          
                          Shares
                          
                          
                          (Years)
                          
                          
                          Exercise Price
                          
                          
                          Shares
                          
                          
                          Exercise Price$6.00
      - $7.20
                          
                          
                          465,000
                          
                          
                          
                          5.66
                          
                          
                          $
                          7.02
                          
                          
                          
                          319,000
                          
                          
                          $
                          7.03$4.00
      - $5.99
                          
                          
                          20,000
                          
                          
                          
                          1.71
                          
                          
                          
                          4.30
                          
                          
                          
                          20,000
                          
                          
                          
                          4.30$2.00
      - $3.99
                          
                          
                          50,000
                          
                          
                          
                          3.00
                          
                          
                          
                          3.20
                          
                          
                          
                          50,000
                          
                          
                          
                          3.20$0.22
      - $1.99
                          
                          
                          275,000
                          
                          
                          
                          7.00
                          
                          
                          
                          1.30
                          
                          
                          
                          100,000
                          
                          
                          
                          1.25810,000
                          
                          
                          
                          5.85
                          
                          
                          $
                          4.58
                          
                          
                          
                          489,000
                          
                          
                          $
                          5.34
  15
 
 The
Company recorded compensation expense pursuant to authoritative guidance
provided by the Financial Accounting Standards Board for the six months ended
June 30, 2010 and 2009 of $237,000 and $685,000, respectively.  During
the six months ended June 30, 2010, the Company adjusted its estimate of
forfeitures of unvested options and revised stock based compensation cost by
$167,000, related to previously recorded stock based compensation
expense.  As of June 30, 2010, the Company has outstanding unvested
options with future compensation costs of $205,000, which will be recorded as
compensation expense as the options vest over their remaining average life of
two years.
 
 A summary
of warrant activity for the six months ended June 30, 2010 is as
follows:
 
 WeightedNumber
                        
                        
                        averageof
                        
                        
                        exercisewarrants
                        
                        
                        priceBalance
      outstanding, December 31, 2009
                        
                        
                        950,000
                        
                        
                        $
                        3.70Warrants
      granted
                        
                        
                        -
                        
                        
                        
                        -Warrants
      exercised
                        
                        
                        -
                        
                        
                        
                        -Warrants
      expired
                        
                        
                        (500,000)
                        
                        
                        
                        5.35Balance
      outstanding, June 30, 2010
                        
                        
                        450,000
                        
                        
                        $
                        1.88
 
 The intrinsic value of
outstanding warrants was $92,000 and $491,000 at June 30, 2010 and 2009,
respectively.  Information relating to outstanding warrants at June
30, 2010, summarized by exercise price, is as follows:
 
 Outstanding
                          
                          
                          ExercisableWeighted
                          
                          
                          
                          
                          
                          WeightedLife
                          
                          
                          Average
                          
                          
                          
                          
                          
                          AverageExercise Price Per Share
                          
                          Shares
                          
                          
                          (Years)
                          
                          
                          Exercise Price
                          
                          
                          Shares
                          
                          
                          Exercise Price$2.00
      - $5.50
                          
                          
                          150,000
                          
                          
                          
                          1.17
                          
                          
                          $
                          4.00
                          
                          
                          
                          150,000
                          
                          
                          $
                          4.00$0.36
      - $1.99
                          
                          
                          300,000
                          
                          
                          
                          1.62
                          
                          
                          
                          0.82
                          
                          
                          
                          300,000
                          
                          
                          
                          0.82450,000
                          
                          
                          
                          1.47
                          
                          
                          $
                          1.88
                          
                          
                          
                          450,000
                          
                          
                          $
                          1.88
 
 Note
9- Income Taxes
 
 At June
30, 2010, the Company had Federal net operating loss carryforwards (“NOL”) of
approximately $19.9 million that begin expiring in 2009 in varying amounts
through 2027. The Company also had California State net operating loss
carryforwards of approximately $1.6 million. In September, 2008 California
temporarily suspended use of net operating losses for 2008 and 2009, and the
California state net operating losses expire beginning in 2012 in varying
amounts through 2029.
 
 Authoritative
guidance issued by the Financial Accounting Standards Board requires that a
valuation allowance be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized. Due to the restrictions
imposed by Internal Revenue Code Section 382 regarding substantial changes in
ownership of companies with loss carryforwards, the utilization of the Company’s
NOL is limited to $6.7 million per year as a result of cumulative changes in
stock ownership. As a result of the limitations related to Internal Revenue Code
Section 382 and the Company’s lack of history of profits, as such, the Company
recorded a 100% valuation allowance against its net deferred tax assets as of
June 30, 2010 and December 31, 2009.
 
 The
provision for income taxes was $111,000 and 106,000 for the three and six months
ended June 30, 2010 and 2009, respectively.  The provision for income
taxes for the three and six months ended June 30, 2010 and 2009 was determined
using our effective rate estimated for the entire fiscal year.
  16
 
 During
2010, we have utilized certain NOL’s. We have provided valuation allowances
related to the benefits from income taxes resulting from the application of a
statutory tax rate to our NOL’s generated in previous periods. The allowances
were established and maintained as a result of our history of losses from
operations.
 
 Note
10- Earnings Per Share
 
 Basic net
income per common share is computed by dividing the net income applicable to
common shares by weighted average number of common shares outstanding during the
period. Diluted net income per common share adjusts basic net income per common
share for the effects of stock options, restricted stock and other potentially
dilutive financial instruments only in the periods in which such effect is
dilutive.
 
 The
following table sets forth the computation of basic and diluted income per
common share:
 
 Six
      months Ended June 30,2010
                                
                                
                                2009Net
      income (loss)
                                
                                $
                                (1,254,000
                                )
                                
                                $
                                954,000Weighted
      average common shares- basic
                                
                                
                                31,123,357
                                
                                
                                
                                32,332,963Dilutive
      effect of employee incentive plans
                                
                                
                                -
                                
                                
                                
                                139,055Dilutive
      effect of warrants issued
                                
                                
                                -
                                
                                
                                
                                120,107Weighted
      average shares- diluted
                                
                                
                                31,123,357
                                
                                
                                
                                32,592,125Net
      income per common share:Basic
                                
                                $
                                (0.04
                                )
                                
                                $
                                0.03Diluted
                                
                                $
                                (0.04
                                )
                                
                                $
                                0.03
  As the
Company had a loss in the six months ended June 30, 2010, basic and diluted loss
per share are the same. Potentially dilutive securities were excluded from the
earnings per diluted share calculation for the six months ended June 30, 2010
because their effect is anti-dilutive. These potentially dilutive securities at
June 30, 2010 included outstanding warrants and options to purchase 1.3 million
shares of our common stock, of which 450,000 were warrants to purchase shares of
our common stock and 810,000 were options to purchase shares of our common
stock.
 
 As part
of the acquisition of All Access discussed in Note 4, a secured convertible
promissory note is convertible in August 2010, at the option of the owner or the
Company, into the aggregate number of shares of the Company’s common stock equal
to the quotient determined by dividing $1.0 million by the daily average closing
sale price of the Company’s common stock as reported on the NASDAQ Capital
Market for the thirty (30) day period prior to conversion but in no event less
than $3.00 per share or 333,333 common shares.
 Note
11- Segment Reporting
 
 We
operate in three reportable segments: Ticketing Services, Exhibit Merchandising,
and Live Entertainment.
 
 Ticketing
Services:
  Our
ticketing business is operated by our wholly owned subsidiary Tix4Tonight.
Ticketing Services offers two distinct services: discount ticketing and premium
event ticketing.
  Discount
Ticketing – Tix4Tonight, Las Vegas
  When
selling discounted tickets, Tix4Tonight generally sells them from eleven
locations in Las Vegas under short-term, exclusive and non-exclusive agreements
with approximately 85 Las Vegas shows and attractions out of a total of
approximately 110 shows and attractions running at any one time. Tix4Tonight
typically does not know the exact shows it will be able to offer tickets for
until the same day of the show. There are usually many more tickets available
each day than are sold, although it is not uncommon for Tix4Tonight to sell out
its supply of tickets for individual shows. The producers of the shows are paid
on a weekly basis only for the tickets that Tix4Tonight actually sells to
customers. Tix4Tonight has no financial risk with respect to unsold tickets and
revenues are recorded at net of ticket cost, that is, commissions and fees on
tickets sold.
  17
 
 Our
opportunities to grow the Las Vegas operations are focused on growing our
inventory by reaching agreements with additional shows, increasing the number of
our storefront sales locations and working to further monetize the relationships
we have with customers by offering additional complementary products and
services. Toward these ends, Tix4Tonight also offers discounted dining
reservation tickets to approximately 30 Las Vegas area restaurants. Further, in
March 2010, Tix4Tonight acquired certain assets and assumed the responsibility
of certain leases of All Access Entertainment, LLC (All Access) see Note 4. All
Access was a competitor of Tix4Tonight in the Las Vegas last minute discount
ticket market and operated five locations with the main location located in
Circus-Circus. The acquisition of these assets and the assumption of the leases
provide us with greater coverage of the Las Vegas area in which to sell our
discount tickets.
 
 Premium
Ticketing – Tix4AnyEvent
 
 Tix4Tonight
operates a national event ticket broker called Tix4AnyEvent (AnyEvent), which
focuses on premium tickets for sporting events, concert tours and theatres.
Tix4AnyEvent operations are located in our leased offices in Las Vegas,
Nevada.
  Exhibit
Merchandising:
 
 The
segment provides exhibit and event merchandising through its wholly-owned
subsidiary, Exhibit Merchandising, LLC (EM). EM provides retail specialty stores
for touring museum exhibitions and touring theatrical productions. EM provides a
complete turn-key retail store including professional management and both
custom-branded products and commercially-available products for sale. EM
operates the stores in space provided in conjunction with the exhibit. To date,
revenues from the management of retail outlets associated with the sale of
merchandise related to touring exhibits have been primarily derived from
“Tutankhamun and The Golden Age of the Pharaohs.”
 
 Management
expects that EM’s growth will be from merchandising opportunities derived from
shows produced or presented by our Live Entertainment segment, such as Jesus
Christ Superstar and Mannheim Steamroller Christmas, or by adding additional
exhibits and events that we currently do not represent.
  Live
Entertainment:
  In
January 2008, the Company acquired two live theatrical and concert production
companies: Magic Arts & Entertainment, LLC (Magic) and NewSpace
Entertainment, Inc. (NewSpace). Both Magic and NewSpace are independent
presenters and producers of live theater and concerts with a history of working
together. The Company merged the two entertainment companies into its
wholly-owned subsidiary Tix Productions, Inc. We believe that by combining the
operations of the two companies into a single entity, we are able to
leverage our resources, gain operating efficiencies and more fully utilize
the combined network of producers and promoters. NewSpace and Magic continue to
do business under their former names as a reflection of the marketplace’s
recognition of these entities.
  As a live
entertainment presenter, we book touring theatrical and concert presentations
with a history of successful commercial appeal and participate in the
development and roll out of new theatrical and concert presentations often
originating on Broadway in New York or the West End in London. We use a
wide variety of marketing channels to sell tickets to these programs including
our substantial subscriber-based businesses in eleven US cities, our Salt Lake
City based group sales team, and standard marketing tools including print,
radio, television, outdoor and internet marketing tools. In addition, we invest
in shows or productions in advance of their initial tour to obtain favorable
touring and distribution rights.
  Our Live
Entertainment segment focuses on two major areas: production and presentation.
As producers, we invest in the creation of original entertainment properties,
which are then sold to third party presenters generating upfront guaranteed
income, revenue sharing opportunities, and additional opportunities for
sponsorship and other ancillary revenue streams. Examples of this are tours of
Mannheim Steamroller Christmas and Jesus Christ Superstar.
 
 As
presenters, we generally contract for entertainment properties from producers to
present in markets in the US and Canada. We have worked in most major North
American cities and can negotiate terms that are unavailable to presenters in
individual markets. In eleven markets, we have substantial subscriber-based
operations operating as “Broadway in (city name)” series which greatly reduces
the risk associated with individual presentations and provides additional
opportunities to generate sponsorship and other ancillary revenue streams. These
markets are Salt Lake City, Eugene, Kalamazoo, Akron, Albuquerque, Colorado
Springs, Detroit, Fresno, Boise, Birmingham, and Milwaukee. In Canada, we have a
presenting relationship that operates under the name Canada Theatricals Live
which is now the second largest presenter of theater-based events in
Canada.
 
 Revenue
and expenses earned and charged between segments are eliminated in
consolidation. Corporate expenses, interest income, interest expense and income
taxes are managed on a total company basis. Information related to these
operating segments is as follows:
  18
 
 Consolidating
Statement of Operations (Unaudited)
 Six
months ended June 30,
 
 Ticketing
                            
                            
                            Exhibit
                            
                            
                            LiveServices
                            
                            
                            Merchandising
                            
                            
                            Entertainment
                            
                            
                            Corporate
                            
                            
                            Consolidated2010Revenue
                            
                            $
                            9,841,000
                            
                            
                            $
                            4,368,000
                            
                            
                            $
                            17,347,000
                            
                            
                            $
                            
                            
                            
                            $
                            31,556,000Direct
      cost of revenues
                            
                            
                            4,182,000
                            
                            
                            
                            2,580,000
                            
                            
                            
                            15,328,000
                            
                            
                            
                            
                            
                            
                            
                            22,090,000Selling,
      general and administrative expenses
                            
                            
                            3,692,000
                            
                            
                            
                            1,368,000
                            
                            
                            
                            2,025,000
                            
                            
                            
                            2,337,000
                            
                            
                            
                            9,422,000Depreciation
      and amortization
                            
                            
                            296,000
                            
                            
                            
                            577,000
                            
                            
                            
                            397,000
                            
                            
                            
                            16,000
                            
                            
                            
                            1,286,000Operating
      income (loss)
                            
                            $
                            1,671,000
                            
                            
                            $
                            (157,000
                            )
                            
                            $
                            (403,000
                            )
                            
                            $
                            (2,353,000
                            )
                            
                            $
                            (1,242,000
                            )Current
      assets
                            
                            $
                            3,552,000
                            
                            
                            $
                            2,635,000
                            
                            
                            $
                            2,425,000
                            
                            
                            $
                            3,671,000
                            
                            
                            $
                            12,283,000Fixed
      assets
                            
                            
                            935,000
                            
                            
                            
                            424,000
                            
                            
                            
                            64,000
                            
                            
                            
                            135,000
                            
                            
                            
                            1,558,000Intangible
      assets and goodwill
                            
                            
                            2,425,000
                            
                            
                            
                            3,391,000
                            
                            
                            
                            5,963,000
                            
                            
                            
                            -
                            
                            
                            
                            11,779,000Other
      non-current assets
                            
                            
                            174,000
                            
                            
                            
                            28,000
                            
                            
                            
                            997,000
                            
                            
                            
                            19,000
                            
                            
                            
                            1,218,000Total
      assets
                            
                            $
                            7,086,000
                            
                            
                            $
                            6,478,000
                            
                            
                            $
                            9,449,000
                            
                            
                            $
                            3,825,000
                            
                            
                            $
                            26,838,0002009Revenue
                            
                            $
                            8,825,000
                            
                            
                            
                            5,110,000
                            
                            
                            
                            32,819,000
                            
                            
                            
                            
                            
                            
                            
                            46,754,000Direct
      cost of revenues
                            
                            
                            3,263,000
                            
                            
                            
                            3,103,000
                            
                            
                            
                            29,971,000
                            
                            
                            
                            
                            
                            
                            
                            36,336,000Selling,
      general and administrative expenses
                            
                            
                            1,775,000
                            
                            
                            
                            1,267,000
                            
                            
                            
                            2,334,000
                            
                            
                            
                            2,904,000
                            
                            
                            
                            8,280,000Depreciation
      and amortization
                            
                            
                            119,000
                            
                            
                            
                            593,000
                            
                            
                            
                            395,000
                            
                            
                            
                            140,000
                            
                            
                            
                            1,247,000Operating
      income (loss)
                            
                            $
                            3,668,000
                            
                            
                            
                            147,000
                            
                            
                            
                            120,000
                            
                            
                            
                            (3,044,000
                            )
                            
                            
                            891,000Current
      assets
                            
                            $
                            3,086,000
                            
                            
                            
                            5,439,000
                            
                            
                            
                            3,407,000
                            
                            
                            
                            4,922,000
                            
                            
                            
                            16,854,000Fixed
      assets
                            
                            
                            512,000
                            
                            
                            
                            582,000
                            
                            
                            
                            97,000
                            
                            
                            
                            76,000
                            
                            
                            
                            1,267,000Intangible
      assets and goodwill
                            
                            
                            119,000
                            
                            
                            
                            4,310,000
                            
                            
                            
                            6,976,000
                            
                            
                            
                            258,000
                            
                            
                            
                            11,663,000Other
      non-current assets
                            
                            
                            191,000
                            
                            
                            
                            13,000
                            
                            
                            
                            789,000
                            
                            
                            
                            6,000
                            
                            
                            
                            999,000Total
      assets
                            
                            $
                            3,908,000
                            
                            
                            
                            10,344,000
                            
                            
                            
                            11,269,000
                            
                            
                            
                            5,262,000
                            
                            
                            
                            30,783,000
 
 Consolidating
Statement of Operations (unaudited)
 Three
months ended June 30,
 
 Ticketing
                                      
                                      
                                      Exhibit
                                      
                                      
                                      LiveServices
                                      
                                      
                                      Merchandising
                                      
                                      
                                      Entertainment
                                      
                                      
                                      Corporate
                                      
                                      
                                      Consolidated2010Revenue
                                      
                                      $
                                      5,098,000
                                      
                                      
                                      $
                                      1,823,000
                                      
                                      
                                      $
                                      7,885,000
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      14,806,000Direct
      cost of revenues
                                      
                                      
                                      2,202,000
                                      
                                      
                                      
                                      1,133,000
                                      
                                      
                                      
                                      6,926,000
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      10,261,000Selling,
      general and administrative expenses
                                      
                                      
                                      2,332,000
                                      
                                      
                                      
                                      731,000
                                      
                                      
                                      
                                      973,000
                                      
                                      
                                      
                                      1,151,000
                                      
                                      
                                      
                                      5,187,000Depreciation
      and amortization
                                      
                                      
                                      173,000
                                      
                                      
                                      
                                      285,000
                                      
                                      
                                      
                                      198,000
                                      
                                      
                                      
                                      9,000
                                      
                                      
                                      
                                      665,000Operating
      income (loss)
                                      
                                      $
                                      391,000
                                      
                                      
                                      $
                                      (326,000
                                      )
                                      
                                      $
                                      (212,000
                                      )
                                      
                                      $
                                      (1,160,000
                                      )
                                      
                                      $
                                      (1,307,000
                                      )2009Revenue
                                      
                                      $
                                      4,670,000
                                      
                                      
                                      $
                                      2,321,000
                                      
                                      
                                      $
                                      19,593,000
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      26,584,000Direct
      cost of revenues
                                      
                                      
                                      1,729,000
                                      
                                      
                                      
                                      1,398,000
                                      
                                      
                                      
                                      18,283,000
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      21,410,000Selling,
      general and administrative expenses
                                      
                                      
                                      904,000
                                      
                                      
                                      
                                      642,000
                                      
                                      
                                      
                                      1,140,000
                                      
                                      
                                      
                                      1,232,000
                                      
                                      
                                      
                                      3,918,000Depreciation
      and amortization
                                      
                                      
                                      61,000
                                      
                                      
                                      
                                      297,000
                                      
                                      
                                      
                                      198,000
                                      
                                      
                                      
                                      70,000
                                      
                                      
                                      
                                      626,000Operating
      income (loss)
                                      
                                      $
                                      1,976,000
                                      
                                      
                                      $
                                      (16,000
                                      )
                                      
                                      $
                                      (28,000
                                      )
                                      
                                      $
                                      (1,302,000
                                      )
                                      
                                      $
                                      630,000
  19
 
 Note
12- Commitment and Contingencies
 
 As of
June 30, 2010, the end of the period covered by this report, the Company was
subject to various legal proceedings and claims discussed below, as well as
certain other legal proceedings and claims that have not been fully resolved and
that have arisen in the ordinary course of business. Other than as discussed
below, in the opinion of management, the Company does not have a potential
liability related to any current legal proceedings and claims that would
individually or in the aggregate have a material adverse effect on its financial
condition or operating results. However, the results of legal proceedings
cannot be predicted with certainty. The Company intends to contest each
lawsuit vigorously but should the Company fail to prevail in any of these legal
matters or should several of these legal matters be resolved against the Company
in the same reporting period, the operating results of a particular reporting
period could be materially adversely affected. Management continues to
evaluate the lawsuits discussed below and based on the stage of these
proceedings, management is unable to reasonably estimate the likelihood of any
loss or the amount or range of any potential loss that could result from the
litigation. Therefore, no accrual has been established for any potential
loss in connection with these lawsuits.
 
 Vegas.Com Trademark
Litigation
 
 On
October 23, 2009, the Company and Tix4Tonight filed a complaint against
Vegas.com ("Vegas.com") and Vegas Tix4Less (“VT4L”) in the United States
District Court for the Central District of California for federal trademark
infringement, federal trade dress infringement and unfair competition, and
common law unfair competition. Specifically, the complaint alleges that
Vegas.com and VT4L are intentionally confusing consumers by using the Company's
and Tix4Tonight's trademarks and trade dress. The complaint seeks damages,
an injunction, declaratory relief, and attorneys' fees and costs. On
December 4, 2009, Vegas.com and VT4L filed a Motion to Dismiss and/or Transfer
the Litigation to Nevada, arguing that the court lacked personal jurisdiction
over the defendants and that venue was either improper or inconvenient. The
Company and Tix4Tonight filed its Opposition on January 29, 2010, and on March
1, 2010 Vegas.com and VT4L filed their Reply.  To stop Vegas.com and VT4L's
infringement during the pendency of the litigation, the Company and Tix4Tonight
filed a Motion for Preliminary Injunction on February 22, 2010. Vegas.com
and VT4L responded on March 8, 2010, and the Company and Tix4Tonight filed a
Reply one week later.  On March 24, 2010, the Court granted both parties’
requests for jurisdictional discovery, which was completed on May 25,
2010.  Pursuant to an order issued by the Court, the parties submitted
supplemental briefing on June 21, 2010, addressing the results of jurisdictional
discovery.  The Company and Tix4Tonight requested that, if the Court denies
Vegas.com's and VT4L's Motion to Dismiss on personal jurisdiction grounds, it
proceed immediately to the merits of the Motion for Preliminary
Injunction.  Both motions are now fully briefed and awaiting decision by
the Court.
 Vegas.Com Antitrust
Litigation
 
 On
December 14, 2009, Vegas.com and VT4L filed a complaint in the United States
District Court for the District of Nevada alleging violations by the Company and
its wholly owned subsidiary Tix4Tonight of 15 U.S.C. §1, 15 U.S.C. §2, 15 U.S.C.
§14, and Nevada state law. The Complaint specifically alleges that the
Company and Tix4Tonight entered into exclusive deals with venues and producers
with the effect of unreasonably restricting trade and commerce, prevented actual
and prospective competitors such as Vegas.com and VT4L from entering the market
or obtaining a non-trivial share of the market, interfered with existing or
prospective contractual arrangements between Vegas.com and VT4L and venues and
producers, and asserted an invalid patent to prevent competition. In their
demand, Vegas.com and VT4L seek compensatory, consequential, incidental, treble
and punitive damages in an amount to be determined at trial, in addition to
attorneys' fees and costs and injunctive relief. On December 23, 2009,
Vegas.com and VT4L filed an Amended Complaint to add requests for declaratory
judgment of non-infringement and invalidity related to the Company's ticket
systems patent and also a claim for unfair trade practices under the Lanham Act
related to the assertion of that patent. On February 3, 2010, Vegas.com and
VT4L filed their Second Amended Complaint, to add allegations that the Company
and Tix4tonight helped organize a group boycott among venues and producers
against VT4L. On March 4, 2010, the Company and Tix4Tonight filed a Motion to
Dismiss the Second Amended Complaint.  On April 21, 2010, Vegas.com and
VT4L filed an Opposition to the Motion to Dismiss.  The Company and
Tix4Tonight then filed a Reply in Support of the Motion to Dismiss on May 10,
2010.  The Motion to Dismiss is now fully briefed and awaiting decision by
the Court.
 
 We are
currently defending these proceedings and claims, and, although the outcome of
legal proceedings is inherently uncertain, we anticipate that we will be able to
resolve these matters in a manner that will not have a material adverse effect
on our consolidated financial position, results of operations or cash
flows.
 
 Lease
Commitments:
 
 The
Company leases office space for its corporate headquarters in Studio City,
California. Additionally, the Company’s wholly-owned subsidiaries, Tix4Tonight,
LLC, Tix Productions, LLC and Exhibit Merchandising, lease space. Tix4Tonight
leases its ticket facilities and its administrative offices in Las Vegas,
Nevada, for various periods ranging from one year to five years. Tix Production,
LLC leases office space in Salt Lake City, Utah and Aurora, Ohio. Exhibit
Merchandising leases warehouse and office space in Streetsboro,
Ohio.
  20
  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 obligations for debt payments, rental payments under
non-cancelable operating and capital leases for facilities in operation at June
30, 2010, excluding operating expenses, annual rent escalation provisions, and
contingent rental payments based on achieving certain pre-determined sales
levels, are as follows:
  On March
19, 2010, the Company entered into a sixty month lease under which we lease our
principal executive offices.  Pursuant to the lease, we relocated our
offices to 12711 Ventura Boulevard, Suite 340, Studio City CA 91604, a 3,970
square foot space.  The lease commenced May 1, 2010 and our monthly
rent under the lease is $12,250.  The rent is subject to increase to
approximately $12,600, $13,000, $13,400 and $13,800 respectively, on the first,
second, third and fourth anniversaries of the extended lease term.  We
will be responsible for paying our allocable portion of operating expenses in
addition to the monthly rent.
 
 When we
acquired All Access Entertainment, LLC (Note 4), we assumed certain operating
leases for various locations.  The obligations related to these
locations are included in the table below.
 
 Payments
      due by Fiscal Years Ending December 31,Total
                        
                        
                        2010
                        
                        
                        2011
                        
                        
                        2012
                        
                        
                        2013
                        
                        
                        2014
      and beyondDebt
      obligations
                        
                        $
                        1,000,000
                        
                        
                        $
                        1,000,000
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Capital
      lease obligations
                        
                        
                        44,000
                        
                        
                        
                        24,000
                        
                        
                        
                        9,000
                        
                        
                        
                        8,000
                        
                        
                        
                        3,000
                        
                        
                        
                        -Operating
      lease obligations
                        
                        
                        10,388,000
                        
                        
                        
                        1,694,000
                        
                        
                        
                        3,030,000
                        
                        
                        
                        2,582,000
                        
                        
                        
                        1,512,000
                        
                        
                        
                        1,570,000Total
      contractual cash obligations
                        
                        $
                        11,432,000
                        
                        
                        $
                        2,718,000
                        
                        
                        $
                        3,039,000
                        
                        
                        $
                        2,590,000
                        
                        
                        $
                        1,515,000
                        
                        
                        $
                        1,570,000
  21
 
 ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
 
 “Tix”
(which may be referred to as the “Company”, “we”, “us” or “our”) means Tix
Corporation and its subsidiaries, or one of our segments or subsidiaries, as the
context requires. You should read the following discussion of our financial
condition and results of operations together with the unaudited consolidated
financial statements and notes to the financial statements included elsewhere in
this quarterly report.
 
 Certain
statements contained in this quarterly report (or otherwise made by us or on our
behalf from time to time in other reports, filings with the Securities and
Exchange Commission, news releases, conferences, internet postings or otherwise)
that are not statements of historical fact constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Exchange Act of 1934, as amended,
notwithstanding that such statements are not specifically identified.
Forward-looking statements include, but are not limited to, statements about our
financial position, business strategy, competitive position, potential growth
opportunities, potential operating performance improvements, and the effects of
competition, the effects of future legislation or regulations and plans and
objectives of our management for future operations. We have based our
forward-looking statements on our management’s beliefs and assumptions based on
information available to our management at the time the statements are made. Use
of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “project,”
“seek,” “predict” or variations of such words and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements.
 
 Forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from those in
such statements. Factors that could cause actual results to differ from those
discussed in the forward-looking statements include, but are not limited to,
those set forth under Item 1A. — Risk Factors in both our 2009
Form 10-K and this quarterly report, as well as other factors described
herein or in our annual, quarterly and other reports we file with the SEC
(collectively, “cautionary statements”). Based upon changing conditions, should
any one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary materially from
those described in any forward-looking statements. All subsequent written and
oral forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by the applicable cautionary
statements. We do not intend to update these forward-looking statements, except
as required by applicable law.
 
 Executive
Overview
 
 During
the second quarter of 2010, we continued to execute our strategy to improve and
build our operations comprised of Tix4Tonight, Exhibit Merchandising (EM) and
Tix Productions, Inc. (TPI). The highlights for each of our segments for the six
months ended June 30, 2010 were as follows:
 
 Tix4Tonight
 
 ·
              For the six months ended June 30,
      2010, Tix4Tonight sold 716,000 tickets. These ticket sales represented an
      increase of 58,000 tickets over the prior year’s comparable six month
      period and reflected a 9% increase over the prior year’s ticket
      sales.
 
 ·
              For the six months ended June 30,
      2010, Tix4Tonight sold tickets with a value of $44.2 million. The value of
      the tickets sold represented an increase of $6.2 million over the prior
      year’s comparable six month period, and reflected a 16% increase over the
      prior year’s ticket sales.
  ·
              For the six months ended June 30,
      2010, Tix4Tonight’s Tix4Dinner business sold dinner reservations with a
      value of $636,000. These reservation sales represented an increase of
      $33,000 over the prior year’s comparable six month period, and reflected a
      6% increase over prior year’s dinner reservations
      revenue.
 
 ·
              Tix4Tonight
      acquired certain assets and assumed the responsibility of certain leases
      of All Access Entertainment, LLC (All Access). All Access was a competitor
      of Tix4Tonight in the Las Vegas last minute discount ticket market and
      operated five locations with the main location located in Circus-Circus.
      The acquisition of these assets and the assumption of the leases provide
      us with greater coverage of the Las Vegas area in which to sell our
      discount tickets.
  Exhibit
Merchandising
 
 ·
              EM is now providing and operating
      the retail specialty store for the museum exhibition tour by Arts and
      Exhibitions International, LLC (AEI), a subsidiary of AEG, “Cleopatra: The
      Search for the Last Queen of Egypt”, which made its worldwide debut in
      Philadelphia at The Franklin Institute on June 5, 2010.  The
      tour runs to January 2, 2011, before moving on to four other cities that
      are currently scheduled.
  22
 
 Live
Entertainment
 
 ·
              Total shows produced or presented
      declined to 459 during the six months ended June 30, 2010 as compared to
      664 performances during the same period of the prior year.  This
      segment of our business often fluctuates quarter to quarter due to the
      number of shows available on the market and the timing of the actual
      shows.  The Company expects the number of performances to
      increase throughout the year.  While revenues from this segment
      have historically experienced a signficant  seasonal
      decline  in the third quarter of a fiscal year, we don’t expect
      to see this seasonality this fiscal year due to the portfolio of shows and
      revenues scheduled during the third quarter of this year.  This
      segment does typically experience a substantial increase during the fourth
      quarter of the fiscal year due to holiday related performances, and we
      expect that trend to continue for the coming fourth
      quarter.
 
 Critical Accounting Policies and
Estimates:
 
 The
preparation of our consolidated financial statements is in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Management periodically evaluates its earlier estimates and judgments.
Management bases its estimates and judgments on historical experience and on
various factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates as a result of different
assumptions or conditions.
 
 The
following narrative describes the critical accounting policies that affect the
more significant judgments and estimates used in the preparation of the
Company's consolidated financial statements.
 
 Revenue
Recognition and Presentation:
 
 The
Company has several streams of income, each of which is required under GAAP to
be recognized in varying ways. The following is a summary of our revenue
recognition policies:
 
 The
Company’s Las Vegas discount show ticketing business recognizes as revenue the
commissions and related transaction fees earned from the sale of Las Vegas show
tickets at the time the tickets are paid for and delivered to the customers. The
Company’s commissions are calculated based on the face value of the show tickets
sold. The Company’s transaction fees are charged on a per-ticket basis. With
certain exceptions, ticket sales are generally non-refundable, although same-day
exchanges of previously sold tickets are permitted. Claims for ticket refunds,
which are generally received and paid the day after the show date, are charged
back to the respective shows and are recorded as a reduction to the Company’s
commissions and fees at the time that such refunds are processed. The Company
does not have accounts receivable associated with its sales transactions, as
payment is collected at the time of sale.
 
 Tix4Dinner
offers reservations for discounted dinners at various restaurants on and
surrounding the Las Vegas strip and downtown with dining at specific times on
the same day as the sale or in some cases as much as seven days after the day of
the sale. Tix4Dinner recognizes as revenue the transaction fees earned from the
purchaser of the dinner reservations at the time that the reservations are made
and a subsequent nominal fee from the restaurant at the time the reservation is
used. At this time, the Company has immaterial amounts of accounts receivable
and does not have any accounts payable associated with the Tix4Dinner operations
because the Company collects the transaction fee at the time that the
reservation is made and the dinner payment is collected directly by the
restaurant.
 
 Tix4AnyEvent
(AnyEvent) recognizes as revenue the gross amount from the sale of tickets that
it owns. AnyEvent bears the risk of economic loss if the tickets are not sold by
the date that the event is scheduled to occur. Revenue is considered earned when
the related event has occurred. Refunds are only issued if the event is canceled
or postponed. Payments for such ticket sales received prior to the event are
recorded as deferred revenue. AnyEvent does not have any accounts receivable
associated with sales transactions to individual customers, as payment is
collected at the time of sale. However, sales transactions with other ticket
brokers may be conducted on a credit basis, which would generate accounts
receivable.
 
 Exhibit
Merchandising recognizes retail store sales at the time the customer takes
possession of the merchandise. All sales are net of discounts and returns and
exclude sales tax. For online sales, revenue is recognized free on board ("FOB")
origin where title and risk of loss pass to the buyer when the merchandise
leaves the Company's distribution facility at the time of shipment, which
we refer to as the date of purchase by the customer. Sales are recognized net of
merchandise returns, which are reserved for based on historical experience.
Shipping and handling revenues from sales are included as a component of net
sales. Conversely, shipping and handling costs are a component of direct costs
of revenues, pursuant to the authoritative guidance provided by the Financial
Accounting Standards Board. The Company does not have any accounts receivable
associated with this business because all transactions are done by cash or
credit card.
  23


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





Stock-Based
Compensation:





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





Impairment
of Long-Lived Asset:





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





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





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





Intangible
Assets and Goodwill:





The
Company evaluates intangible assets and goodwill for impairment, at a minimum,
on an annual basis and whenever events or changes in circumstances indicate that
the carrying value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets is measured by comparing their net book
value to the related projected undiscounted cash flows from these assets,
considering a number of factors, including past operating results, budgets,
economic projections, market trends and product development cycles. If the net
book value of the asset exceeds the related undiscounted cash flows, the asset
is considered impaired, and a second test is performed to measure the amount of
impairment loss.  There were no indications of impairment based on
management’s assessment at June 30, 2010. As of June 30, 2010, we have
$11.8 million of remaining goodwill and intangible assets related to our
acquisitions of Exhibit Merchandising LLC, Magic and Arts Entertainment,
NewSpace Entertainment, and All Access. Factors we consider important that could
trigger an impairment review include significant underperformance relative to
historical or projected future operating results, significant changes in the
manner of the use of our assets or the strategy for our overall business, and
significant negative industry or economic trends.  If current economic
conditions worsen causing decreased revenues and increased costs, we may have
further goodwill impairments.





Recently
Issued Accounting Guidance:





In
April 2010, the Financial Accounting Standards Board (FASB) issued new
accounting guidance in applying the milestone method of revenue recognition to
research or development arrangements. Under this guidance management may
recognize revenue contingent upon the achievement of a milestone in its
entirety, in the period in which the milestone is achieved, only if the
milestone meets all the criteria within the guidance to be considered
substantive. This standard is effective on a prospective basis for research and
development milestones achieved in fiscal years, beginning on or after
June 15, 2010. Early adoption is permitted; however, adoption of this
guidance as of a date other than January 1, 2011 will require the Company
to apply this guidance retrospectively effective as of January 1, 2010 and
will require disclosure of the effect of this guidance as applied to all
previously reported interim periods in the fiscal year of adoption. As the
Company plans to implement this standard prospectively, the effect of this
guidance will be limited to future transactions. The Company does not expect
adoption of this standard to have a material impact on its financial position or
results of operations as it has no material research and development
arrangements which will be accounted for under the milestone
method.





In
January 2010, the FASB issued new accounting guidance which requires new
disclosures regarding transfers in and out of Level 1 and Level 2 fair value
measurements, as well as requiring presentation on a gross basis of information
about purchases, sales, issuances and settlements in Level 3 fair value
measurements. The guidance also clarifies existing disclosures regarding level
of disaggregation, inputs and valuation techniques. The new guidance is
effective for interim and annual reporting periods beginning after
December 15, 2009.  Disclosures about purchases, sales, issuances
and settlements in the roll forward of activity in Level 3 fair value
measurements are effective for fiscal years beginning after December 15,
2010.  As this guidance requires only additional disclosure, there
should be no impact on the consolidated financial statements of the Company upon
adoption.


24


In
October 2009, a new accounting consensus was issued for
multiple-deliverable revenue arrangements. This consensus amends existing
revenue recognition accounting standards. This consensus provides accounting
principles and application guidance on whether multiple deliverables exist, how
the arrangement should be separated and the consideration allocated. This
guidance eliminates the requirement to establish the fair value of undelivered
products and services and instead provides for separate revenue recognition
based upon management’s estimate of the selling price for an undelivered item
when there is no other means to determine the fair value of that undelivered
item. Previously the existing accounting consensus required that the fair value
of the undelivered item be the price of the item either sold in a separate
transaction between unrelated third parties or the price charged for each item
when the item is sold separately by the vendor. Under the existing accounting
consensus, if the fair value of all of the elements in the arrangement was not
determinable, then revenue was deferred until all of the items were delivered or
fair value was determined. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The Company is in the process of
evaluating whether the adoption of this standard will have a material effect on
its financial position, results of operations or cash flows.





In June
2009, the FASB issued authoritative guidance on consolidation of variable
interest entities.  The new guidance is intended to improve financial
reporting by requiring additional disclosures about a company’s involvement in
variable interest entities.  This new guidance is effective for fiscal
years and interim periods beginning after November 15, 2009.  The
Company adopted this guidance effective January 3, 2010, and it had no impact on
the consolidated financial statements of the Company.





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





Consolidated
Results of Operations –





Three
and Six Months Ended June 30, 2010 compared to the Three and Six Months Ended
June 30, 2009:





Consolidated
Results of Operations - Three and Six Months ended June 30,





% change
                    
                    
                    
                    
                    
                    
                    
                    
                    % changeThree Months Ended June 30,
                    
                    
                    2010
      v
                    
                    
                    Six Months Ended June 30,
                    
                    
                    2010
      v2010
                    
                    
                    2009
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009
                    
                    
                    2009Revenue
                    
                    $
                    14,806,000
                    
                    
                    $
                    26,584,000
                    
                    
                    
                    -44
                    %
                    
                    $
                    31,556,000
                    
                    
                    $
                    46,754,000
                    
                    
                    
                    -33
                    %Operating
      Expenses:Direct
      operating expenses
                    
                    
                    10,261,000
                    
                    
                    
                    21,410,000
                    
                    
                    
                    -52
                    %
                    
                    
                    22,090,000
                    
                    
                    
                    36,336,000
                    
                    
                    
                    -39
                    %Selling,
      general and administrative expenses
                    
                    
                    4,036,000
                    
                    
                    
                    2,686,000
                    
                    
                    
                    50
                    %
                    
                    
                    7,085,000
                    
                    
                    
                    5,376,000
                    
                    
                    
                    32
                    %Depreciation
      and Amortization
                    
                    
                    665,000
                    
                    
                    
                    626,000
                    
                    
                    
                    6
                    %
                    
                    
                    1,286,000
                    
                    
                    
                    1,247,000
                    
                    
                    
                    3
                    %Corporate
      expenses
                    
                    
                    1,151,000
                    
                    
                    
                    1,232,000
                    
                    
                    
                    -7
                    %
                    
                    
                    2,337,000
                    
                    
                    
                    2,904,000
                    
                    
                    
                    -20
                    %Operating
      Income (Loss)
                    
                    
                    (1,307,000
                    )
                    
                    
                    630,000
                    
                    
                    
                    -307
                    %
                    
                    
                    (1,242,000
                    )
                    
                    
                    891,000
                    
                    
                    
                    -239Operating
      Margin
                    
                    
                    -9
                    %
                    
                    
                    2
                    %
                    
                    
                    
                    
                    
                    
                    -4
                    %
                    
                    
                    2
                    %Interest
      expense
                    
                    
                    (2,000
                    )
                    
                    
                    (3,000
                    )
                    
                    
                    
                    
                    
                    
                    (4,000
                    )
                    
                    
                    (7,000
                    )Interest
      income
                    
                    
                    18,000
                    
                    
                    
                    9,000
                    
                    
                    
                    
                    
                    
                    
                    25,000
                    
                    
                    
                    22,000Other
      income – net
                    
                    
                    71,000
                    
                    
                    
                    129,000
                    
                    
                    
                    
                    
                    
                    
                    78,000
                    
                    
                    
                    154,000Income
      (loss) before income taxes
                    
                    
                    (1,220,000
                    )
                    
                    
                    765,000
                    
                    
                    
                    
                    
                    
                    
                    (1,143,000
                    )
                    
                    
                    1,060,000Income
      tax expense
                    
                    
                    111,000
                    
                    
                    
                    106,000
                    
                    
                    
                    
                    
                    
                    
                    111,000
                    
                    
                    
                    106,000Net
      income (loss)
                    
                    $
                    (1,331,000
                    )
                    
                    $
                    659,000
                    
                    
                    
                    
                    
                    
                    $
                    (1,254,000
                    )
                    
                    $
                    954,000




25




Three Months Ended June 30, 2010 and
2009:





Revenues





The
Company earns fee revenues from the sales of discounted tickets from purchasers
of the tickets and commissions from the entertainment supplier, as well as
revenues from the sale of premium tickets to sporting and other entertainment
events. Through our discounted ticket venues we also offer discount dinner
reservations. From Exhibit Merchandising, LLC “EM”, we earn revenues from the
management of retail outlets associated with the sale of merchandise related to
touring exhibits, such as “Tutankhamun and The Golden Age of the Pharaohs.”
Through our Live Entertainment segment, we earn revenues from the presentation
and production of events, as well as sponsorship and ancillary revenues. Our
revenues for the three months ended June 30, 2010 and 2009 were $14.8 million
and $26.6 million, respectively. Our revenues decreased $11.8 million, or 44%,
during the three months ended June 30, 2010 as compared to the same period of
the prior year. The decrease in revenues was primarily the result of an $11.7
million decrease in Live Entertainment segment, a decrease in revenues of
$498,000 from our Exhibit Merchandising segment partially offset by a $428,000
increase in revenues from our Ticketing Services segment.





More
detailed explanations of the three months ended June 30, 2010 and 2009 changes
are included in the applicable segment discussions following.





Direct
Operating Expenses





Direct
operating expenses include payroll and related costs, rents, cost of tickets and
goods sold, artist fees, show related marketing costs and advertising expenses
along with other related costs of promoting and producing live entertainment.
Direct costs of revenues for the three months ended June 30, 2010 and 2009 were
$10.3 million and $21.4 million, respectively. Our operating expenses decreased
$11.1 million or 52% during the three months ended June 30, 2010 as compared to
the same period of the prior year. The decrease in direct operating expenses is
reflective primarily of the lower overall revenues from our Live Entertainment
and Exhibit Merchandising segments.





More
detailed explanations of the three months ended June 30, 2010 and 2009 changes
are included in the applicable segment discussions following.





Selling,
General and Administrative Expenses





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 June 30, 2010
and 2009 were $4.0 million and $2.7 million, respectively. Our selling, general
and administrative expenses increased $1.4 million or 50% during the three
months ended June 30, 2010 as compared to the same period of the prior year due
to an increase of $1,428,000 and $89,000 increase in selling and general and
administrative expenses in our Ticketing Services and Exhibit Merchandising
segments, respectively.  This increase was partially offset by a
$167,000 decrease in selling, general and administrative expenses at our Live
Entertainment segment.





During
the three and six months ended June 30, 2010, the Company recorded a charge for
bad debt of $1.0 million.  This balance owed to us is related to our
premium ticket business done through our Tix4AnyEvent unit, which is part of our
Ticketing Services segment.  Throughout fiscal year 2009, we both
advanced funds and purchased tickets on behalf of an unrelated ticket
broker.  The tickets were for various sporting and live entertainment
events, including the recent FIFA World Cup event concluded in July
2010.  Our broker’s responsibility was to sell the tickets and both
refund our advances and provide us with a commission based on our
agreement.  Due to non-payment, we have hired legal counsel to pursue
collection on our behalf.  Based on management’s current belief that
collection is uncertain, we recorded a full reserve against the balance owed to
us of $1.0 million.





More
detailed explanations of the three months ended June 30, 2010 and 2009 changes
are included in the applicable segment discussions following.





Corporate
Expenses





Corporate
expenses are expenses that relate to activities at or directed by our executive
offices. Significant components of corporate expenses consist of corporate
personnel and personnel-related costs, insurance, legal and accounting fees,
consulting and advisory fees, merchant fees and corporate occupancy
costs.  Corporate expenses for the three months ended June 30, 2010
and 2009 were approximately the same at $1.2 million.  Corporate
expenses decreased $80,000 for the three months ended June 30, 2010, as compared
to same period of the prior year. This decrease in corporate expenses is the
result of a decrease in employee costs associated with stock option expense and
regulatory costs, which was offset in part by $125,000 in severance costs
associated with the departure of a former officer of the
Company.


26


Depreciation
and Amortization





Our
depreciation and amortization was $665,000 and $626,000 for the three months
ended June 30, 2010 and 2009 respectively. The increase of $39,000 in
depreciation and amortization expense in 2009 primarily is the result of
intangible assets acquired in February 2010 as part of the All Access
acquisition and the purchase of fixed assets during the first half of this
fiscal year.





Other
Income





Other
income was $71,000 and 129,000 for the three months ended June 30, 2010, and was
the result of miscellaneous box office revenues, such as patron club income and
season handling fees, earned by our Live Entertainment segment Tix
Productions.





Interest
Income





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





Income
Tax Expense





The
provision for income taxes was $111,000 for the three months ended June 30, 2010
compared to $106,000 for the three months ended June 30, 2009. The provision for
income taxes for the three months ended June 30, 2010 and 2009 was determined
using our effective rate estimated for the entire fiscal year. We have provided
valuation allowances related to any benefits from income taxes resulting from
the application of a statutory tax rate to our net operating losses generated in
previous periods, as a result of our history of losses from
operations.





Six
Months Ended June 30, 2010 and 2009:





Revenues





Our
revenues for the six months ended June 30, 2010 and 2009 were $31.6 million and
$46.8 million, respectively. Our revenues decreased $15.2 million, or 32%,
during the six months ended June 30, 2010 as compared to the same period of the
prior year. The decrease in revenues was primarily the result of a $15.5 million
decrease in Live Entertainment segment revenues and a $742,000 decrease in
Exhibit Merchandising segment revenues, which was partially offset by a $1.0
million increase in revenues from our Ticketing Services segment.





More
detailed explanations of the six months ended June 30, 2010 and 2009 changes are
included in the applicable segment discussions following.





Direct
Operating Expenses





Direct
operating expenses include payroll and related costs, rents, cost of tickets and
goods sold, artist fees, show related marketing costs and advertising expenses
along with other related costs of promoting and producing live entertainment.
Direct costs of revenues were $22.1 million for the six months ended June 30,
2010 as compared to $36.3 million for the six months ended June 30, 2009. Our
operating expenses decreased $14.2 million or 39% during the six months ended
June 30, 2010 as compared to the same period of the prior year. The decrease in
direct operating expenses is reflective of the 32% decline in overall revenues
earned.





More
detailed explanations of the six months ended June 30, 2010 and 2009 changes are
included in the applicable segment discussions following.





Selling,
General and Administrative Expenses





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 were $7.1 million and $5.4 million for the
six months ended June 30, 2010 and 2009, respectively. Our selling, general and
administrative expenses increased $1.7 million or 32% during the six months
ended June 30, 2010 as compared to the same period of the prior year due to a
$309,000 decline in selling and general and administrative expenses in our Live
Entertainment segment.  This decline was offset by $1.9 million and
$101,000 increases in selling, general and administrative expenses at our
Ticketing Services and Exhibit Merchandising segments,
respectively.


27


During
the three and six months ended June 30, 2010, the Company recorded a charge for
bad debt of $1.0 million.  This balance owed to us is related to our
premium ticket business done through our Tix4AnyEvent unit, which is part of our
Ticketing Services segment.  Throughout fiscal year 2009, we both
advanced funds and purchased tickets on behalf of an unrelated ticket
broker.  The tickets were for various sporting and live entertainment
events, including the recent FIFA World Cup event concluded in July
2010.  Our broker’s responsibility was to sell the tickets and both
refund our advances and provide us with a commission based on our
agreement.  Due to non-payment, we have hired legal counsel to pursue
collection on our behalf.  Based on management’s current belief that
collection is uncertain, we recorded a full reserve against the balance owed to
us of $1.0 million.





More
detailed explanations of the six months ended June 30, 2010 and 2009 changes are
included in the applicable segment discussions following.





Corporate
Expenses





Corporate
expenses are expenses that relate to activities at or directed by our executive
offices. Significant components of corporate expenses consist of corporate
personnel and personnel-related costs, insurance, legal and accounting fees,
consulting and advisory fees, merchant fees and corporate occupancy costs.
Corporate expenses for the six months ended June 30, 2010 and 2009 were $2.4 and
$2.9 million, respectively. The reduction in expense of $567,000 was due to a
decline of $614,000 in stock based compensation expense which was partially
offset by the recording of severance expense of $125,000 related to the
departure of one of our former officers.  The remaining decline was
due to normal fluctuations in our operating accounts with no one account that
was individually significant.





Depreciation
and Amortization





Our
depreciation and amortization was $1.3 million and $1.2 million for the six
months ended June 30, 2010 and 2009 respectively. The increase of $39,000 in
depreciation and amortization expense in 2010 primarily reflects an increase in
amortization expense related to intangible assets acquired during our
acquisition of All Access in February 2010.





Other
Income


Other
Income and Expense was $78,000 and 154,000 for the six months ended June 30,
2010, and was the result of miscellaneous box office revenues, such as patron
club income and season handling fees, earned by our Live Entertainment segment
Tix Productions.





Interest
Income





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





Income
Tax Expense





The
provision for income taxes was $111,000 and $106,000 for the six months ended
June 30, 2010 and 2009, respectively. The provision for income taxes for the six
months ended June 30, 2010 and 2009 were determined using our effective rate
estimated for the entire fiscal year. We have provided valuation allowances
related to any benefits from income taxes resulting from the application of a
statutory tax rate to our net operating losses generated in previous periods, as
a result of our history of losses from operations.


28


Ticketing
Services:





Our
Ticketing Services segment operating results were as follows:





Segment
Reporting- Ticketing Services





%
                  Change
                
                
                
                
                
                
                
                
                %
                  ChangeThree Months Ended June 30,
                
                
                2010 vs.
                
                
                Six Months Ended June 30,
                
                
                2010 vs.2010
                
                
                2009
                
                
                2009
                
                
                2010
                
                
                2009
                
                
                2009Revenue
                
                $
                5,098,000
                
                
                $
                4,670,000
                
                
                
                9
                %
                
                $
                9,841,000
                
                
                $
                8,825,000
                
                
                
                12
                %Operating
      Expenses:Direct
      operating expenses
                
                
                2,202,000
                
                
                
                1,729,000
                
                
                
                27
                %
                
                
                4,182,000
                
                
                
                3,263,000
                
                
                
                28
                %Selling,
      general and administrative expenses
                
                
                2,332,000
                
                
                
                904,000
                
                
                
                158
                %
                
                
                3,692,000
                
                
                
                1,775,000
                
                
                
                108
                %Depreciation
      and amortization
                
                
                173,000
                
                
                
                61,000
                
                
                
                184
                %
                
                
                296,000
                
                
                
                119,000
                
                
                
                149
                %Operating
      income (loss)
                
                $
                391,000
                
                
                $
                1,976,000
                
                
                
                -80
                %
                
                $
                1,671,000
                
                
                $
                3,668,000
                
                
                
                -54
                %Operating
      margin
                
                
                8
                %
                
                
                42
                %
                
                
                -82
                %
                
                
                17
                %
                
                
                42
                %
                
                
                -59
                %





Three
months ended June 30, 2010 and 2009:





Revenues





Ticketing
Services has two operating units:





·
            Tix4Tonight, our discount ticket
      seller





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





The
Ticketing Services segment earns fee revenues from the sales of discounted
tickets from purchasers of the tickets and commissions from the entertainment
supplier, as well as revenues from the sale of premium tickets to sporting and
other entertainment events. Through our discounted ticket venues, we also
offer discount dinner reservations. Ticketing Services revenues were $5.1
million for the three months ended June 30, 2010 as compared to $4.7 million for
the three months ended June 30, 2009.  Our revenues increased
$428,000, or 9%, during the three months ended June 30, 2010 as compared to the
same period of the prior year. The increase in Ticketing Service revenues is the
result of a $615,000 million increase in Tix4Tonight revenues including a
$93,000 increase in ancillary revenues i.e. the sale of dinner reservations,
partially offset by an $187,000 decline in premium ticket revenues.





Tix4Tonight:





Tix4Tonight
revenues for the three months ended June 30, 2010 and 2009 were $5.1 million and
$4.5 million, which is an increase of $615,000 or 14% in 2010 as compared to the
same period in 2009. The increase reflects a greater demand for discount tickets
as well as an increase in the average selling price per ticket in 2010 as
compared to 2009.  Tix4Tonight discount tickets sold increased by
25,000 tickets or 7% to 366,000 discounted show tickets for the three months
ended June 30, 2010. The gross sales value of show tickets sold to customers
plus commissions and fees earned were $23.0 million for the three
months ended June 30, 2010, as compared to $20.0 million for the three
months ended June 30, 2009, or a 15% increase.  Lastly, during the
three months ended June 30, 2010, revenues from miscellaneous sources of income
including dinner and golf reservations decreased by $10,000 and $86,000,
respectively, as compared to the prior year.  Tix4Tonight discontinued
selling its golf reservations in 2009.





Tix4AnyEvent:





AnyEvent
sells premium tickets to concerts, theatre shows and sporting events. AnyEvent’s
revenues are dependent in part on sporting events and special concerts
occurring, such as boxing matches and reunion tours, as well as our ability to
obtain tickets to these events.  AnyEvent revenues for the three
months ended June 30, 2010 and 2009 were $7,000 and $196,000
respectively.  Management reviews the events available on the market
and determines, based on risk and other factors, which events to participate
in.  Due to the mix of current events and their associated risk, the
Company has selectively declined to participate in a number of events in 2010
which has led to a decline of $187,000 in revenue during the three months ended
June 30, 2010.


29


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 June 30, 2010 and 2009
were $2.2 million and $1.7 million, respectively, which represented an increase
in direct operating expenses of $473,000 or 27%.  The direct operating
expenses for the three months ended June 30, 2010 and 2009, as a percentage of
revenues were comparable at 43% and 37%, respectively.  The increase
in direct operating expenses is not only due to the increase in sales, but we
have also experienced increases in both our payroll and rent costs as a
percentage of revenue compared to the prior year.  The planned
increase in payroll costs was required in order to manage our continued growth
while the increase in rent costs is associated primarily with the recent
acquisition of All Access Entertainment as discussed in Note 5.





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 June 30,
2010 and 2009 were $2.3 million and $904,000, respectively. Our selling,
marketing and general and administrative expenses increased $1.4 million or
158%, during the three months ended June 30, 2010 as compared to
2009.  During the three months ended June 30, 2010, the Company
incurred a charge for bad debt of approximately $1.0 million, as discussed
below, and $385,000 in litigation expense for which no similar expense existed
in 2009.  Excluding the bad debt charge and litigation expense,
selling, general and administrative expenses were comparable at 17% percent of
revenues during the three months ended June 30, 2010 as compared to 19% during
the three months ended June 30, 2009.





During
the three and six months ended June 30, 2010, the Company recorded a charge for
bad debt of $1.0 million.  This balance owed to us is related to our
premium ticket business done through our Tix4AnyEvent name, which is part of our
Ticketing Services segment.  Throughout fiscal year 2009, we both
advanced funds and purchased tickets on behalf of our ticket
broker.  The tickets were for various sporting and live entertainment
events, including the recent FIFA World Cup event concluded in July
2010.  Our broker’s responsibility was to sell the tickets and both
refund our advances and provide us with a commission based on our
agreement.  Due to non-payment, we have hired legal counsel to pursue
collection on our behalf.  Based on management’s current belief that
collection is uncertain, we recorded a full reserve against the balance owed to
us of $1.0 million.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the three months ended June 30, 2010
and 2009 were $173,000 and $61,000, respectively.  The increase of
$112,000 or 184% was due primarily to additional amortization expense associated
with the intangible assets purchased as part of the All Access acquisition in
March 2010.  We expect to incur a similar level of depreciation and
amortization for the foreseeable future.





Six
months ended June 30, 2010 and 2009:





Revenues





Ticketing
Services revenues were $9.8 million and $8.8 million for the six months ended
June 30, 2010 and 2009, respectively. Our revenues increased $1.0 million, or
12%, during the six months ended June 30, 2010 as compared to the same period of
the prior year. The increase in Ticketing Service revenues is the result of a
$1.2 million increase in Tix4Tonight revenues, offset by a $491,000 decline in
premium ticket revenues.





Tix4Tonight:





Tix4Tonight
revenues for the six months ended June 30, 2010 and 2009 were $9.8 million and
$8.6 million, which is an increase of $1.2 million or 14% in 2010 as compared to
the same period in 2009. The increase reflects a greater demand for discount
tickets as well as an increase in the average selling price per ticket in 2010
as compared to 2009.  Tix4Tonight discount tickets sold increased by
57,000 tickets or 9% to 716,000 discounted show tickets for the six months ended
June 30, 2010. The gross sales value of show tickets sold to customers plus
commissions and fees earned were $44.2 million for the six months
ended June 30, 2010, as compared to $38.0 million for the six months
ended June 30, 2009, or a 17% increase.  Lastly, during the six months
ended June 30, 2010, revenues from miscellaneous sources of income such as
dinner reservations increased by $33,000 while golf reservations decreased by
$156,000 compared to the prior year.  Tix4Tonight discontinued selling
its golf reservations in 2009.


30


AnyEvent:





AnyEvent
sells premium tickets to concerts, theatre shows and sporting events. AnyEvent’s
revenues are dependent in part on sporting events and special concerts
occurring, such as boxing matches and reunion tours, as well as our ability to
obtain tickets to these events.  AnyEvent revenues for the six months
ended June 30, 2010 and 2009 were $31,000 and $254,000
respectively.  Management reviews the events available on the market
and determines, based on risk and other factors, which events to participate
in.  Due to the mix of current events and their associated risk, the
Company has selectively declined to participate in a number of events in 2010
which has led to a decline of $224,000 in revenue during the three months ended
June 30, 2009.





Direct
Operating Expenses





Direct
operating expenses include payroll and related costs, rents, and cost of tickets
sold. Direct Costs of revenues for the six months ended June 30, 2010 and 2009
were $4.2 and $3.3 million, respectively, which represented an increase in
direct operating expenses of $919,000 or 28%, which was the result of 24%
increase in revenues.  The direct operating expenses for the six
months ended June 30, 2010 and 2009, as a percentage of revenues were 43% and
37%, respectively.  The increase in direct
operating expenses is not only due to the increase in sales, but from increases
in both our payroll and rent costs, as a percentage of revenue, compared to the
prior year.  The planned increase in payroll costs was required in
order to manage our continued growth while the increase in rent costs is
associated primarily with the recent acquisition of All Access Entertainment as
discussed in Note 5.





Selling,
General and Administrative Expenses





Selling,
general 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 six months
ended June 30, 2010 and 2009 were $3.7 million and $1.8 million, respectively.
Our selling, general and administrative expenses increased $1.9 million or 108%,
during the six months ended June 30, 2010 as compared to 2009.  During
the six months ended June 30, 2010, the Company incurred a charge for bad debt
of approximately $1.0 million, and approximately $900,000 in litigation expense
for which no similar expense existed in 2009.  Excluding the bad debt
charge and litigation expense, selling, general and administrative expenses were
comparable at 18% percent of revenues during the three months ended June 30,
2010 as compared to 20% during the three months ended June 30,
2009.





During
the three and six months ended June 30, 2010, the Company recorded a charge for
bad debt of $1.0 million.  This balance owed to us is related to our
premium ticket business done through our Tix4AnyEvent name, which is part of our
Ticketing Services segment.  Throughout fiscal year 2009, we both
advanced funds and purchased tickets on behalf of our ticket
broker.  The tickets were for various sporting and live entertainment
events, including the recent FIFA World Cup event concluded in July
2010.  Our broker’s responsibility was to sell the tickets and both
refund our advances and provide us with a commission based on our
agreement.  Due to non-payment, we have hired legal counsel to pursue
collection on our behalf.  Based on management’s current belief that
collection is uncertain, we recorded a full reserve against the balance owed to
us of $1.0 million.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the six months ended June 30, 2010 and
2009 were $296,000 and $119,000, respectively.  The increase of
$177,000 or 149% was due primarily to additional amortization expense related to
intangible assets acquired during the All Access acquisition in March
2010.  We expect to incur a similar level of depreciation and
amortization for the foreseeable future.





Exhibit
Merchandising:





Our
Exhibit Merchandising segment operating results were as follows:





Segment
Reporting - Exhibit Merchandising





%
                  Change
                
                
                
                
                
                
                
                
                %
                  ChangeThree Months Ended June 30,
                
                
                2010 vs.
                
                
                Six Months Ended June 30,
                
                
                2010vs.2010
                
                
                2009
                
                
                2009
                
                
                2010
                
                
                2009
                
                
                2009Revenue
                
                $
                1,823,000
                
                
                $
                2,321,000
                
                
                
                -21
                %
                
                $
                4,368,000
                
                
                $
                5,110,000
                
                
                
                -15
                %Operating
      Expenses:Direct
      operating expenses
                
                
                1,133,000
                
                
                
                1,398,000
                
                
                
                -19
                %
                
                
                2,580,000
                
                
                
                3,103,000
                
                
                
                -17
                %Selling,
      general and administrative expenses
                
                
                731,000
                
                
                
                642,000
                
                
                
                14
                %
                
                
                1,368,000
                
                
                
                1,267,000
                
                
                
                8
                %Depreciation
      and amortization
                
                
                285,000
                
                
                
                297,000
                
                
                
                -4
                %
                
                
                577,000
                
                
                
                593,000
                
                
                
                3
                %Operating
      income (loss)
                
                $
                (326,000
                )
                
                $
                (16,000
                )
                
                
                -1938
                %
                
                $
                (157,000
                )
                
                $
                147,000
                
                
                
                -207
                %Operating
      margin
                
                
                -18
                %
                
                
                -1
                %
                
                
                -2494
                %
                
                
                -4
                %
                
                
                3
                %
                
                
                -225
                %




31


Three
Months Ended June 30, 2010 and 2009:





Revenues





Exhibit
Merchandising (EM) provides retail specialty stores for touring museum
exhibitions and touring theatrical productions. EM provides a complete turn-key
retail store with commercially available and extensive custom-branded product
for sale. It operates the stores in space rented in conjunction with the
exhibit. During the three months ended June 30, 2010 and 2009, EM generated
$1.8 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” and “Tutankhamun the Golden King and the Great
Pharaohs” are currently booked in museums through July 2011 and December 2012,
respectively. The $498,000 decline in revenues during the second quarter of 2010
is due to the move of the exhibits, “Tutankhamun and The Golden Age of the
Pharaohs” from San Francisco to New York, “Tutankhamun the Golden King and the
Great Pharaohs” from Toronto,  Canada to Denver, and “Real
Pirates: The Untold Story of the Whydahfrom Slave Ship to
Pirate Ship” from Norfolk to St. Louis, which caused the exhibits to be closed
for approximately 98 combined days as compared to 40 days during the same period
of the prior year.  Exhibit Merchandising introduced one new exhibit
during the three months ended June 30, 2010 titled “Cleopatra: The Search for
the Last Queen of Egypt” which opened in Philadelphia on June 5,
2010.





Direct
Operating Expenses





Exhibit
Merchandising’s operating expenses include payroll and related costs, rents, and
cost of goods sold. Direct operating expenses for the three months ended June
30, 2010 and 2009 were $1.1 million and $1.4 million, respectively and as a
percent of revenues were 62% and 60%, respectively.  Direct operating
expenses declined due to the decline in revenues.





Selling,
General and Administrative Expenses





Selling,
marketing and administrative expenses include advertising and promotional costs
related to our business activities, as well as the segment’s cost of
management. For the three months ended June 30, 2010 and 2009, selling,
marketing and administrative expenses were $731,000 or 40% of revenues and
$642,000 or 28% of revenues, respectively. The increase in selling, marketing
and administrative expenses reflects the increased cost of operating our stores
abroad as compared to domestic stores.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the three months ended June 30, 2010
and 2009 was $285,000 and $297,000, respectively, and relates primarily to the
amortization of the intangible assets that were created as a result of EM being
acquired in August 2007. We expect the current level of depreciation and
amortization to continue through 2010.





Six
Months Ended June 30, 2010 and 2009:





Revenues





During
the six months ended June 30, 2010 and 2009, EM generated $4.4 million and
$5.1 million in revenues, respectively. Revenue is derived from the Company’s
retail outlets associated with the sale of merchandise related to touring
exhibits, primarily derived from “Tutankhamun and The Golden Age of the
Pharaohs.” EM is subject to revenue fluctuations as a result of the exhibits
that it represents moving from one location to another. The move of an exhibit
from one location to another generally results in the exhibit being closed from
four to six weeks. The length of time an exhibit is closed is dependent upon the
type of exhibit, the distance the exhibit is to be shipped, as well as any
special needs that may be required in re-setting the exhibit. “Tutankhamun and
The Golden Age of the Pharaohs” and “Tutankhamun the Golden King and the Great
Pharaohs” are currently booked in museums through July 2011 and December 2012,
respectively. The $742,000 decline in revenues during the six months ended June
30, 2010 is due to the movement of a number of our exhibits from one location to
another.  During the six months of 2010, although there was a 6%
decline in overall attendance to the exhibits, there was a 9% decrease in
revenue per attendee at our retail specialty stores. The decline in revenues per
attendee was the result of generally poor economic conditions.


32


Direct
Operating Expenses





EM’s
operating expenses include payroll and related costs, rents, and cost of goods
sold. Direct operating expenses for the six months ended June 30, 2010 and 2009
were $2.6 million and $3.1 million, respectively and were 59% and 60% of
revenues.  The decline in direct operating expenses was due to the
decline in revenues.





Selling,
General 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’s cost of management. For the six months ended June 30, 2010 and 2009,
EM’s selling, marketing and administrative expenses were $1.4 million or 31% of
revenues and $1.3 million or 25% of revenues, respectively. The increase in
selling, marketing and administrative expenses reflects the increased cost of
operating our stores abroad as compared to domestic stores.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the six months ended June 30, 2010 and
2009 was $577,000 and $593,000, respectively, and relates primarily to the
amortization of the intangible assets that were created as a result of EM being
acquired in August 2007. We expect the current level of depreciation and
amortization to continue through 2010.





Live
Entertainment:





Our
Live Entertainment segment operating results were as follows:





Segment
Reporting- Tix Productions





%
                  Change
                
                
                
                
                
                
                
                
                %
                  ChangeThree Months Ended June 30,
                
                
                2010vs.
                
                
                Six Months Ended June 30,
                
                
                2010 vs.2010
                
                
                2009
                
                
                2009
                
                
                2010
                
                
                2009
                
                
                2009Revenue
                
                $
                7,885,000
                
                
                $
                19,593,000
                
                
                
                -60
                %
                
                $
                17,347,000
                
                
                $
                32,819,000
                
                
                
                -47
                %Operating
      Expenses:Direct
      operating expenses
                
                
                6,926,000
                
                
                
                18,283,000
                
                
                
                -62
                %
                
                
                15,328,000
                
                
                
                29,970,000
                
                
                
                -49
                %Selling,
      general and administrative expenses
                
                
                973,000
                
                
                
                1,140,000
                
                
                
                -15
                %
                
                
                2,025,000
                
                
                
                2,334,000
                
                
                
                -13
                %Depreciation
      and amortization
                
                
                198,000
                
                
                
                198,000
                
                
                
                0
                %
                
                
                397,000
                
                
                
                395,000
                
                
                
                1
                %Operating
      income (loss)
                
                $
                (212,000
                )
                
                $
                (28,000
                )
                
                
                657
                %
                
                $
                (403,000
                )
                
                $
                120,000
                
                
                
                -436
                %Operating
      margin
                
                
                -3
                %
                
                
                0
                %
                
                
                -1781
                %
                
                
                -2
                %
                
                
                0
                %
                
                
                -735
                %





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. Combining the operations of
these two companies under a single entity, we have better leveraged our
resources, and gained operating efficiencies.





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 eleven US cities, our Salt Lake
City based group and corporate sales team, standard marketing tools including
print, radio, television, outdoor and, most recently new e-marketing tools. In
addition, we invest in shows or productions in advance of their initial tour to
obtain favorable touring and distribution rights.


33


Three
Months Ended June 30, 2010:





Revenues





During
the three months ended June 30, 2010 and 2009, revenues from our Live
Entertainment operations were $7.9 million and $19.6 million, respectively. The
$11.7 million decrease in revenues is due to several factors
including:





·
            In the second quarter of 2010 we
      presented or produced 219 show dates as compared to 305 show dates in the
      second quarter of 2009.  This segment of our business often
      fluctuates quarter to quarter due to the number of shows available on the
      market and the timing of the actual shows.  The Company expects
      the number of performances to increase throughout the
      year.  While revenues from this segment have historically
      experienced  significant seasonal decline in the third quarter
      of a fiscal year, we don’t expect to see this seasonality this fiscal year
      due to the portfolio of shows and revenues scheduled during the third
      quarter of this year.  This segment does typically experience a
      substantial increase during the fourth quarter of the fiscal year due to
      holiday related performances and we expect that trend to continue for the
      coming fourth quarter.





·
            In 2009, many productions that
      Tix was associated with toured Canada during the election cycle which, due
      to a strong Canadian dollar and economy, resulted in unusually strong
      profits. These combined factors resulted in an unusually large number of
      productions in the first and fourth quarters that under normal
      circumstances would have naturally fallen in the second or third
      quarters.





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





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





Direct
Operating Expenses





During
the three months ended June 30, 2010 and 2009, direct operating expenses were
$6.9 million and $18.3 million and represented 88% and 93% of revenues,
respectively. The lower direct operating cost as a percentage of revenues
reflects the mix of shows currently being presented.  Expenses that
are direct operating expenses include the show 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,
General and Administrative Expenses





Live
Entertainment’s selling, marketing and administrative expenses include
advertising and promotional costs related to its business activities, as well as
the segment cost of management. For the three months ended June 30, 2010 and
2009, Live Entertainment’s administrative expenses were $973,000 and $1.1
million, respectively.  The decrease is due to decreased marketing
expenses due to the decline in revenues.


34


Depreciation
and Amortization





Depreciation
and amortization expense incurred during the three months ended June 30, 2010
and 2009 was $198,000 and $198,000, and primarily relates to amortization of the
intangible assets that resulted from the acquisitions of Magic and NewSpace. We
expect to incur a similar level of depreciation and amortization for the
remainder of 2010.





Six
Months Ended June 30, 2010:





Revenues





During
the six months ended June 30, 2010 and 2009, revenues from our Live
Entertainment operations were $17.3 million and $32.8 million, respectively. The
$15.5 million decrease in revenues is due to several factors
including:





·
            During the six months ended June
      30, 2010, we presented or produced 459 show dates as compared to 664 show
      dates in the six months ended June 30, 2009.  This segment of
      our business often fluctuates quarter to quarter due to the number of
      shows available on the market and the timing of the actual
      shows.  The Company expects the number of performances to
      increase throughout the year.  While revenues from this segment
      have historically experienced a significant seasonal decline  in
      the third quarter of a fiscal year, we don’t expect to see this
      seasonality this fiscal year due to the portfolio of shows and revenues
      scheduled during the third quarter of this year.  This segment
      does typically experience a substantial increase during the fourth quarter
      of the fiscal year due to holiday related performances and we expect that
      trend to continue in the coming fourth
  quarter.





·
            In 2009, many productions that
      Tix was associated with toured Canada during the election cycle which, due
      to a strong Canadian dollar and economy, resulted in unusually strong
      profits. These combined factors resulted in an unusually large number of
      productions in the first and fourth quarters that under normal
      circumstances would have naturally fallen in the second or third
      quarters.





Direct
Operating Expenses





During
the six months ended June 30, 2010 and 2009, direct operating expenses were
$15.3 million and $30.0 million and represented 88% and 88% of revenues,
respectively. Expenses that are 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,
General and Administrative Expenses





Live
Entertainment’s selling, marketing and administrative expenses include
advertising and promotional costs related to its business activities, as well as
the segment cost of management. For the six months ended June 30, 2010 and 2009,
Live Entertainment’s administrative expenses were $2.2 million and $2.4 million,
respectively.  The decrease is due to decreased marketing expenses due
to the decline in revenues.





Depreciation
and Amortization





Depreciation
and amortization expense incurred during the six months ended June 30, 2010 and
2009 was $397,000 and $395,000, and primarily relates to amortization of the
intangible assets that resulted from the acquisitions of Magic and NewSpace. We
expect to incur a similar level of depreciation and amortization for the
remainder of 2010.


35


Liquidity
and Capital Resources:





Summary
of consolidated cash flows:





For The Six Months Ended June 30,2010
                  
                  
                  2009Net
      cash provided by operating activities
                  
                  $
                  484,000
                  
                  
                  $
                  4,353,000Net
      cash used in investing activities
                  
                  $
                  (1,895,000
                  )
                  
                  $
                  (98,000
                  )Net
      cash provided by (used in) financing activities
                  
                  $
                  (38,000
                  )
                  
                  $
                  (517,000
                  )Effect
      of exchange rate on cash
                  
                  $
                  16,000
                  
                  
                  $
                  14,000Change
      in cash:Net
      increase (decrease)
                  
                  
                  (1,432,000
                  )
                  
                  
                  3,752,000Balance
      at beginning of period
                  
                  
                  9,885,000
                  
                  
                  
                  9,192,000Balance
      at end of period
                  
                  $
                  8,453,000
                  
                  
                  $
                  12,944,000





At June
30, 2010, we had cash of $8.5 million and total assets of
$26.8 million compared to $9.9 million and $29.6 million,
respectively, at December 31, 2009. Our working capital totaled $5.6 million at
June 30, 2010, compared to $7.8 million at December 31, 2009. We had no debt for
the six months ended June 30, 2010 and the year ended December 31,
2009.





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





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





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




Operating
Activities:





Cash
flows from operations were $484,000 for the six months ended June 30, 2010,
compared to $4.4 million for the six months ended June 30, 2009. The $3.9
million decrease in cash flows provided from operations was the result of a $2.2
million decrease in net income in 2010, and adjustments for non-cash items and
changes in accounts reflecting operating activities. Significant items adjusting
net income in 2010 were $1.3 million in depreciation and amortization expense, a
$1.0 million change in allowance for doubtful accounts and $237,000 of fair
value of common stock options issued to directors and employees.  Cash
provided by operating activities was impacted by decreases in accounts
receivable of $1.5 million, a decrease in inventory of 249,000, an increase in
deferred revenue of $385,000 offset by a decline accounts payable and accrued
expenses of $2.8 million.  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.


36


Cash
Flows from Investing Activities:





During
the six months ended June 30, 2010 and 2009, we used $1.9 million and $98,000
related to investing activities.





Acquisitions





On
February 10, 2010, the Company entered into an Asset Purchase Agreement with All
Access Entertainment, LLC (All Access) with an effective date of March 1,
2010.  Pursuant to the Asset Purchase Agreement, The Company paid the
owner of All Access $1.5 million in cash and issued a six month secured
convertible promissory note in the principal amount of $1.0 million at no
interest due on August 10, 2010.





During
the six months ended June 30, 2010 and 2009, we purchased fixed assets with a
value of $394,000 and $98,000 respectively.





Cash
Flows from Financing Activities:





During
the six months ended June 30, 2010, we used $38,000 related to financing
activities for payments on our existing capital lease
obligations.  During 2009, cash used by financing activities included
the repurchase of 273,000 shares of our common stock with a fair value of
$443,000, $46,000 related to the exercise of options and warrants, and $28,000
related to 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 the operating performance of management of Tix
Productions, Tix4AnyEvent and Exhibit Merchandising based upon this non-GAAP
measure.





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





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


37





Three months ended
                  
                  
                  
                  
                  
                  Three months endedJune 30, 2010
                  
                  
                  
                  
                  
                  June 30, 2009Net
      income (loss)
                  
                  
                  
                  
                  $
                  (1,331,000
                  )
                  
                  
                  
                  
                  $
                  659,000Interest
      income
                  
                  $
                  18,000
                  
                  
                  
                  
                  
                  
                  $
                  9,000Interest
      expense
                  
                  
                  (2,000
                  )
                  
                  
                  
                  
                  
                  
                  (3,000
                  )Net
      interest income (expense)
                  
                  $
                  16,000
                  
                  
                  
                  (16,000
                  )
                  
                  $
                  6,000
                  
                  
                  
                  (6,000
                  )Depreciation
                  
                  
                  
                  
                  
                  
                  154,000
                  
                  
                  
                  
                  
                  
                  
                  133,000Amortization
                  
                  
                  
                  
                  
                  
                  535,000
                  
                  
                  
                  
                  
                  
                  
                  493,000Income
      taxes
                  
                  
                  
                  
                  
                  
                  111,000
                  
                  
                  
                  
                  
                  
                  
                  106,000EBITDA
                  
                  
                  
                  
                  
                  $
                  (571,000
                  )
                  
                  
                  
                  
                  
                  $
                  1,385,000





Six months ended
                  
                  
                  
                  
                  
                  Six months endedJune 30, 2010
                  
                  
                  
                  
                  
                  June 30, 2009Net
      income (loss)
                  
                  
                  
                  
                  $
                  (1,254,000
                  )
                  
                  
                  
                  
                  $
                  954,000Interest
      income
                  
                  $
                  25,000
                  
                  
                  
                  
                  
                  
                  $
                  22,000Interest
      expense
                  
                  
                  (4,000
                  )
                  
                  
                  
                  
                  
                  
                  (7,000
                  )Net
      interest income (expense)
                  
                  $
                  21,000
                  
                  
                  
                  (21,000
                  )
                  
                  $
                  15,000
                  
                  
                  
                  (15,000
                  )Depreciation
                  
                  
                  
                  
                  
                  
                  291,000
                  
                  
                  
                  
                  
                  
                  
                  264,000Amortization
                  
                  
                  
                  
                  
                  
                  995,000
                  
                  
                  
                  
                  
                  
                  
                  983,000Income
      Taxes
                  
                  
                  
                  
                  
                  
                  111,000
                  
                  
                  
                  
                  
                  
                  
                  106,000EBITDA
                  
                  
                  
                  
                  
                  $
                  122,000
                  
                  
                  
                  
                  
                  
                  $
                  2,292,000





Principal
Commitments:





Lease
Commitments:





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





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 June 30, 2010, excluding operating expenses,
annual rent escalation provisions, and contingent rental payments based on
achieving certain pre-determined sales levels, are as follows:


38




On March
19, 2010, the Company entered into a sixty month lease under which we lease our
principal executive offices.  Pursuant to the lease, we relocated our
offices to 12711 Ventura Boulevard, Suite 340, Studio City CA 91604, a 3,970
square foot space.  The lease commenced May 1, 2010 and our monthly
rent under the lease is $12,250.  The rent is subject to increase to
approximately $12,600, $13,000, $13,400 and $13,800 respectively, on the first,
second, third and fourth anniversaries of the extended lease term.  We
will be responsible for paying our allocable portion of operating expenses in
addition to the monthly rent.
 
 When we
acquired All Access Entertainment, LLC (Note 4), we assumed certain operating
leases for various locations.  The obligations related to these
locations are included in the table below.
 
 Payments
      due by Fiscal Years Ending December 31,Total
                        
                        
                        2010
                        
                        
                        2011
                        
                        
                        2012
                        
                        
                        2013
                        
                        
                        2014
      and beyondDebt
      obligations
                        
                        $
                        1,000,000
                        
                        
                        $
                        1,000,000
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Capital
      lease obligations
                        
                        
                        44,000
                        
                        
                        
                        24,000
                        
                        
                        
                        9,000
                        
                        
                        
                        8,000
                        
                        
                        
                        3,000
                        
                        
                        
                        -Operating
      lease obligations
                        
                        
                        10,388,000
                        
                        
                        
                        1,694,000
                        
                        
                        
                        3,030,000
                        
                        
                        
                        2,582,000
                        
                        
                        
                        1,512,000
                        
                        
                        
                        1,570,000Total
      contractual cash obligations
                        
                        $
                        11,432,000
                        
                        
                        $
                        2,718,000
                        
                        
                        $
                        3,039,000
                        
                        
                        $
                        2,590,000
                        
                        
                        $
                        1,515,000
                        
                        
                        $
                        1,570,000


Employment
Agreements:





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





Retirement
Plan:





The
Company has a 401(k) retirement plan which covers substantially all employees.
Under the plan, participants may defer the receipt of up to 75% percent of their
annual compensation, but not to exceed the maximum amount as determined by the
Internal Revenue Code. The amount of the employer matching contribution is equal
to 100% of the first 3% withheld and 50% for the next 2% withheld. The Company
may make additional matching contributions as determined and approved by the
Board of Directors. Total 401(k) retirement plan expense amounted to $83,000 and
$76,000 for the six months ended June 30, 2010 and 2009,
respectively.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





As
substantially all of our investments are in short-term bank deposits, our
exposure to market risk is limited primarily to interest income sensitivity,
which is affected by changes in the general level of U.S. interest rates. The
primary objective of our investment activities is to preserve principal. Due to
the nature of our short-term investments, we believe that we are not subject to
any material market risk exposure. We do not have any derivative financial
instruments or foreign currency instruments. If interest rates had varied by 10%
in the three or six month periods ended June 30, 2010, it would not have had a
material effect on our results of operations or cash flows for that
period.





ITEM
4. CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





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





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


39


Changes
in Internal Control Over Financial Reporting





In
addition, our management with the participation of our Principal Executive
Officer and Principal Financial Officer have determined that no change in our
internal control over financial reporting (as that term is defined in Rules
13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) occurred
during or subsequent to the quarter ended June 30, 2010 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.


40





PART
II. OTHER INFORMATION





ITEM
1. LEGAL PROCEEDINGS





As of
June 30, 2010, the end of the period covered by this report, the Company was
subject to various legal proceedings and claims discussed below, as well as
certain other legal proceedings and claims that have not been fully resolved and
that have arisen in the ordinary course of business. Other than as discussed
below, in the opinion of management, the Company does not have a potential
liability related to any current legal proceedings and claims that would
individually or in the aggregate have a material adverse effect on its financial
condition or operating results. However, the results of legal proceedings
cannot be predicted with certainty. The Company intends to contest each
lawsuit vigorously but should the Company fail to prevail in any of these legal
matters or should several of these legal matters be resolved against the Company
in the same reporting period, the operating results of a particular reporting
period could be materially adversely affected. Management continues to
evaluate the lawsuits discussed below and based on the stage of these
proceedings, management is unable to reasonably estimate the likelihood of any
loss or the amount or range of any potential loss that could result from the
litigation. Therefore, no accrual has been established for any potential
loss in connection with these lawsuits.





We are
party to the legal proceedings described in Part I, Item 3, “Legal Proceedings”
of our Annual Report on Form 10-K for the year ended December 31, 2009 and Note
12 of this Quarterly Report on Form 10-Q.





ITEM
1A. RISK FACTORS





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





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





None.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES





None.





ITEM
4. RESERVED





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.


41





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:
      August 9, 2010
                  By:
                  /s/Mitch FrancisMitch
      FrancisChief
      Executive OfficerDate:
      August 9, 2010
                  By:
                  /s/ Steve HandySteve
      HandyChief
      Financial Officer
                    (On
      behalf of the registrant and
                    Principal
      Financial and Accounting
Officer)


42


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.




43