UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K






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





For the
Fiscal Year Ended December 31, 2008,





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





For the
transition period from _____________ to _____________





Commission
File Number: 0-24592





Tix
Corporation


(Exact
name of registrant in its charter)





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





12001
Ventura Place, Suite 340,


Studio
City, California 91604


(Address
of principal executive offices, including zip code)





(818)
761-1002


(Registrant’s
telephone number, including area code)





Securities
      registered pursuant to Section 12(b) of the Act:
            
            NASDAQ
      Capital MarketCommon
      Stock $0.08 Par Value
              (Title
      of Class)
            
            (Name
      of Exchange)





Securities
registered pursuant to Section 12(g) of the Act:


None





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. o





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes o No x





Indicate
by check mark whether the registrant is (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities 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 o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K.  o




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




Large
      accelerated filer o
              Accelerated
      filer xNon-accelerated
      filer o
              Smaller
      reporting company o












The
aggregate market value of the issuer’s common stock held by non-affiliates of
the issuer as of June 30, 2008, based on the closing market price of $4.72 per
share, was $83,819,016.





As of
March 13, 2009, the issuer had 32,188,249, shares of common stock issued and
outstanding, net of treasury shares.







Documents incorporated by
reference: None.













TABLE OF
CONTENTS





PagePART
      IITEM
      1.
            DESCRIPTION
      OF BUSINESS
            4ITEM
      1A
            RISK
      FACTORS
            8ITEM
      1B
            UNRESOLVED
      STAFF COMMENTS
            12ITEM
      2.
            DESCRIPTION
      OF PROPERTY
            12ITEM
      3.
            LEGAL
      PROCEEDINGS
            12ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            12PART
      IIITEM
      5.
            MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND  ISSUER
      PURCHASES OF EQUITY SECURITIES
            13ITEM
      6.
            SELECTED
      CONSOLIDATED FINANCIAL DATA
            15ITEM
      7
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            17ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            34ITEM
      8
            FINANCIAL
      STATEMENTS
            34ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            34ITEM
      9A.
            CONTROLS
      AND PROCEDURES
            35ITEM
      9B.
            OTHER
      INFORMATION
            35PART
      IIIITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
            36ITEM
      11
            EXECUTIVE
      COMPENSATION
            38ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            49ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
            50ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            51ITEM
      15
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
            51SIGNATURES
            
            52





3





PART
I.





“Tix Corporation” (which may
be referred to as “Tix”, the “Company”, “we”, “us” or “our”) means Tix
Corporation and its subsidiaries, or one of our segments or subsidiaries, as the
context requires.





Special
Note about Forward-Looking Statements





Certain
statements contained in this Form 10-K (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 statement of historical facts constitute "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, not withstanding
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, and potential operating performance improvements, the effects of
competition, the effects of future legislation or regulations and plans and
objectives or our management for future operations.  We have based our
forward looking statements on our beliefs and assumptions based on information
available to us at the time the statements are made.  Use of the words
“anticipates”, “believes”, “expects”, “estimates” “intends”, “may”, “outlook”,
“plans”,  “potential”, “project”, “predict”, “should”, “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
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 involve
known and unknown risks, uncertainties and other factors that could cause 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 elsewhere in this Annual Report on Form 10-K for the fiscal year
ended December 31, 2008, as well as other public reports filed with the United
States Securities and Exchange Commission. Investors should not place undue
reliance on any forward-looking statement as a prediction of actual results or
developments. Except as required by applicable law or regulation, the Company
undertakes no obligation to update or revise any forward-looking statement
contained in this Annual Report on Form 10-K for the fiscal year ended December
31, 2008, whether as a result of new information, future events or
otherwise.





ITEM
1. BUSINESS





Tix
Corporation was incorporated in Delaware in April 1993 under the name Cinema
Ride, Inc. We changed our name from Cinema Ride, Inc. to Tix Corporation
effective March 3, 2005.





Our
principal executive offices are located at 12001 Ventura Place, Suite 340,
Studio City, California 91604. Our principal website is www.tixcorp.com. Tix
Corporation is listed on The NASDAQ Stock Market LLC, trading under the symbol
“TIXC.”





Our
Business Strategy





Tix
Corporation is an integrated entertainment company focusing on ticketing
services, event merchandising and the production and promotion of live
entertainment. We operate three complementary business units; Tix4Tonight,
Exhibit Merchandising (EM) and Tix Productions Inc. (TPI).  TPI was
formed by combining Magic Arts & Entertainment, LLC (Magic) and NewSpace
Entertainment, Inc. (NewSpace), which were acquired at the beginning of 2008.
Our broad strategic goals are to be the leading discount ticket and group ticket
seller in the US, a leading exhibition and event merchandising company, and a
major presenter and producer of live entertainment in the US and Canada. We are
pursuing these strategic goals through both internal and external means.
Internally we are looking at opportunities to enhance both revenue and
operating income by increasing market share, focusing on internal cost control
and streamlining our operating procedures. Externally we are looking for
accretive growth opportunities through the acquisition of complementary
businesses and exploitation of new market opportunities. We have begun, and will
continue, to execute on these strategies through utilizing tactical approaches
as outlined below:





·
            Improve the profitability of
      our existing businesses.o
            Tix4Tonight,
      our Las Vegas last minute discount ticket operation, is working to
      increase market penetration and product offerings, such as our discount
      dinners program, called Tix4Dinners;o
            Tix4Tonight
      is expanding our market reach through development of new targeted
      marketing channels including a national, online, branded discount ticket
      portal that is called WWW.TIX4MEMBERS.COM;o
            Tix4Tonight
      is expanding its premium ticket distribution offerings through inclusion
      of Tix Productions produced and presented events as well as third party
      events identified by TPI’s respected industry
    professionals;o
            Event
      Merchandising is increasing revenues by identifying new projects
      internally through Tix Productions and externally through add-on
      opportunities created via relationships from existing
    clients.o
            Tix
      Productions is expanding its live entertainment footprint through
      development of presenting relationships with new presenters, expanding
      existing relationship with several major show producers, and more focused
      exploitation of internally produced
shows.




4




·
            Focus on acquiring and
      developing intellectual property. We are always seeking to expand
      the opportunities inherent in owning the creative content of live
      entertainment productions. Tix Productions is aggressively pursuing
      producing opportunities which can provide add-on opportunities across our
      complementary businesses of presenting, ticket distribution and
      merchandising. When we take an equity position in a touring production, we
      are sharing the financial risk of the tour with the other equity holders,
      which makes it easier to assure that we have complementary opportunities
      to present those shows in our markets, sell the merchandise and handle
      discount and premium ticketing
opportunities.





·
            Extend our network of
      relationships with producers, promoters and venue managers.
      Recognizing the value inherent in strong relationships, TPI is pursuing
      promoting and producing opportunities with a group of leading producers
      and promoters of live entertainment and with leading venues in major
      markets in the US and Canada.  In a difficult economic time the
      multiple revenue streams that we can offer a producer allows for novel
      partnerships and deal-making, thus increasing our business
      opportunities.




·
            Further develop our ticketing
      and online services. Tix4Tonight, a leader in the field of last
      minute discount ticket sales, has launched a co-branded nationwide
      internet-mediated discount ticketing site with
  Costco.





In order
to achieve our objectives and successfully implement our strategies, we have
made and expect to continue to pursue investments and acquisitions that
contribute to the above goals where the valuations, returns and growth potential
are consistent with our long-term goal of increasing shareholder
value.





Our History





Prior to
December 31, 2003, we were in an unrelated business. From January 2004
until March 2007, our principal business activity was the sale of tickets for
Las Vegas shows at a discount from the original box office price, on the day of
the performance, through our wholly-owned subsidiary, Tix4Tonight, LLC
(Tix4Tonight). In March 2007, we acquired the assets of John’s Tickets, LLC,
which was a premium ticket reseller of live theatre, concerts and sporting
events.  In August, 2008, we acquired the assets of Exhibit Merchandising,
LLC (Ohio). The assets of Exhibit Merchandising, LLC (Ohio) were assigned to
Exhibit Merchandising, LLC (Nevada) (EM) which owns and operates complete
turnkey retail stores that are leased in conjunction with the exhibits that they
are supporting, stocked with commercially-available and extensive custom-branded
products for sale in addition to professional management that complements the
exhibition or theatrical production it represents. The major exhibit currently
operated by EM is “Tutankhamun and The Golden Age of the Pharaohs.” EM has
agreements to operate stores for three exhibitions in 2009. In January 2008, we
acquired two live theatrical and concert production companies; Magic Arts &
Entertainment, LLC (Magic) and NewSpace Entertainment, Inc.
(NewSpace).





Our
Business





We
operate in three reportable segments; ticket services, event and branded
merchandising, and with our formation of Tix Productions, Inc. (TPI), in 2008,
live entertainment.





Operating
Segments





Ticketing
Services




Our
ticketing services are carried out by our wholly owned subsidiary Tix4Tonight,
which offers for sale discount and premium tickets and provides group sale
services. Discounted tickets are sold byTix4Tonight, while premium tickets are
offered through Tix4AnyEvent and group sales are handled through
Tix4Members.com. When selling last minute discounted tickets, Tix4Tonight sells
them under short-term, exclusive and non-exclusive agreements with approximately
70 Las Vegas shows and attractions, out of a total of approximately 85 Las Vegas
shows and attractions running at any one time.  Tix4Tonight typically
offers tickets for more than 60 shows on any given day at a discount plus a
service fee. Tix4Tonight typically does not know exactly what 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 shows
are paid on a weekly basis only for the tickets that Tix4Tonight actually sells
to customers. Tix4Tonight has no financial risk with respect to unsold tickets
and revenues are recorded at net of cost.




We
conduct the operations of Tix4Tonight at six leased locations in Las Vegas,
Nevada:


1.
            The
      South Strip location is at the Showcase Mall at the base of the world
      famous giant glass Coke bottle, (which commenced operations in November
      2007) across from New York, New
York;




5




2.
            Mid-South
      Strip location is at the Hawaiian Marketplace Shopping
    Center;3.
            At
      the heart of the strip our location is at Bill’s Gamblin Hall between the
      Flamingo Hotel and Bally’s Las Vegas (opened November
    2008);4.
            Our
      Mid-North Strip location is at the Fashion Show Mall Strip entrance by
      Neiman-Marcus;5.
            North
      Strip location is in front of the Peppermill Restaurant between the
      Riveria Hotel and Denny’s;6.
            Downtown
      Fremont Street Experience is at the Four Queens
  Hotel.





Tix4Tonight
also maintains leased administrative offices for Tix4Tonight in Las Vegas,
Nevada.





Effective
March 14, 2007, we acquired substantially all the assets of John’s Tickets, LLC,
an Ohio limited liability company dba Tix4AnyEvent (“AnyEvent”).  AnyEvent
is a national event ticket broker that sells premium tickets for sporting
events, concerts, tours and theatre. AnyEvent operations are located in the
administrative offices of Tix4Tonight in Las Vegas, Nevada.





Beginning
August 10, 2006, as an adjunct to its Las Vegas show ticketing business, we
launched our Tix4Dinner operations from the same leased locations as the sale of
show tickets. Tix4Dinner offers reservations for discounted dinners at various
restaurants on the Las Vegas strip, usually sold in conjunction with show ticket
sales at T4T.





In
December 2006, we introduced Tix4Golf discount golf reservation business through
the acquisition of Stand-By Golf Las Vegas. Stand-By Golf Las Vegas has operated
in the Las Vegas area for approximately ten years, offering tee-time bookings to
approximately 30 area golf courses usually at discounted prices. We offer our
discount golf offerings at our six Las Vegas ticketing facilities, online and at
our Tix4Tonight’s leased administrative office in Las Vegas via its telephone
center.





Because
of the seasonal nature of tourism and convention attendance in Las Vegas,
attendance patterns at Las Vegas shows may vary accordingly. The nature and
degree of this seasonality varies among Las Vegas shows depending on the time of
year, as well as the nature of entertainment alternatives available to
audiences. Tix4Tonight’s revenues are more dependent on the presence of
conventions in Las Vegas and the type of shows being offered for sale than
seasonality.





Exhibit
and Event Merchandising




We
provide exhibit and event merchandising through our wholly owned subsidiary
Exhibit Merchandising, LLC Nevada (EM). EM provides retail specialty stores with
branded merchandise for touring museum exhibitions and touring theatrical
productions. EM owns and operates complete turnkey retail stores with
commercially-available and extensive custom-branded products for sale. We
operate the stores in spaces rented 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” and “Tutankhamun the Golden
King and the Great Pharaohs.”




EM offers
exhibit and theatrical producers the opportunity for additional revenue streams
without adding the retail expertise required to manage the operations, thereby
leveraging the use of EM’s expertise and knowledge in the specialized retail
world. Producers receive a simple royalty payment based upon gross sales that
occur in each period with no other expense to the producer.





EM
develops custom pieces that fit the specific exhibition branding in consultation
with each event producer. EM strives to run an efficient operation, focused on
providing superior customer service and quality products on the front end, and
efficient management on the back end.




Live
Entertainment




In
December 2007, we entered into letters of intent to acquire two live theatrical
and concert production companies; Magic Arts & Entertainment, LLC (Magic)
and NewSpace Entertainment, Inc. (NewSpace). As part of the letters of intent
the managements of Magic and NewSpace agreed to manage the operations of their
respective companies for the benefit of Tix from January 2, 2008 until the
transactions were finalized. The managements of Magic and NewSpace were required
to consult and obtain the approval of the management of Tix prior to entering
into any long term arrangements or transactions that were outside the normal
course of business. Further, Tix Corporation assumed all responsibility for any
profits or losses that might be incurred during this period by both Magic and
NewSpace. The acquisition of Magic was completed on February 29, 2008 and the
acquisition of NewSpace was completed on March 12, 2008.  Both Magic
and NewSpace are presenters of live theater and concerts. In May 2008 we
combined the operations of these two entertainment companies into our
newly-formed, wholly-owned subsidiary Tix Productions Inc. We believe that by
combining the operations of these two companies into a single entity we have
been better able to leverage resources, gain operating efficiencies
and more fully utilize their combined experience with venues, producers and
promoters. NewSpace and Magic continue to operate under their previous names and
will for the foreseeable future as a reflection of the marketplace recognition
those entities have.




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




6




Net
revenues from live entertainment are a function of tickets sold times ticket
prices plus ancillary revenue streams including sponsorships and revenues
generated through premium ticketing opportunities.  Expenses that would be
characterized as Cost of Goods Sold 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 substantial artist 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 or artist. On the other hand, significant
decreases in presentation revenue do have a comparably large impact on operating
income as the largest burden of risk in these presentations lies with the
promoter.




Revenue
Concentrations:





During
2008, 24% of our Ticketing Service segment’s revenues were derived from a single
producer of shows for which we sell discount tickets for multiple shows. Each
show appears at a different venue, hotel or theatre; however no single show,
venue or theatre was greater than 10% of revenues. During the years ended
December 31, 2007 and 2006, there were no showrooms or other ticket sources
which accounted for 10% or more of ticketing services revenues.





Substantially
all of Exhibit Merchandising’s revenues since its acquisition on August 8, 2007
have been derived from the exhibit “Tutankhamun and The Golden Age of the
Pharaohs” and “Tutankhamun the Golden King and the Great Pharaohs.”




During
2008, our Live Entertainment segment had several shows, which represented
approximately 10% of its revenues. Shows that represented approximately 10% of
our revenues included Walking with Dinosaurs, Jesus Christ Superstar, Lord of
the Dance and Mannheim Steamroller.





Competition:





The
following is a discussion of the competitive landscape of each of our operating
segments.





Ticketing
Services





Tix4Tonight
sells unsold tickets on the same day of the performance, generally at 20% to 50%
off the box office price. Producers provide such tickets to the Company both on
an exclusive and non-exclusive basis. Therefore, new ticket brokers can enter
into competition with the Company to offer the same or similar
ticketing services to non-exclusive shows and customers. Tix4Tonight
currently has one competitor in the Las Vegas market and the possibility exists
for other competitors to compete both there and in other markets targeted by the
Company. Additionally, with the Company’s launch of its third ticketing platform
Tix4Members.com in 2009, the Company has entered the national group sales
market.  The first affiliate member group to launch is Costco
Wholesale Corporation whose co-branded website became operational in February
2009.  Other competitors may possess longer operating histories,
larger customer bases, longer relationships with producers, and significantly
greater financial, technical, marketing, and public relations resources than the
Company. Accordingly, we may not be able to compete successfully and competitive
pressures may adversely affect our business, results of operations and financial
condition.





Exhibit
and Event Merchandising





Our main
competitor is Event Network, whose business model is to manage smaller permanent
location retail gift shops at museums, zoos, historical and other like
attractions that are more of a permanent nature, with a small number of touring
exhibits. We differ in our operations by focusing on large touring exhibitions
with higher volume of sales.  We believe our background and experience in
the entertainment industry allows us to be able to react quickly to changes in
schedules, volume of sales and other business perspectives related to
touring events and exhibitions. Further, our experience operating in
foreign market places including Canada, Australia, United Kingdom
and Austria, provide us significant opportunities.




Live
Entertainment





Competition
in the live entertainment industry is intense. We believe that we compete
primarily on the basis of our ability to deliver quality entertainment products
and enhanced revenues to promoters, producers and live entertainment venues. We
are able to do this through our ability to provide complementary revenue
opportunities in our markets, sell the merchandise and handle discount, premium
group sale ticketing opportunities. We believe that our primary strengths
include:





·
            The
      quality of service provided to the producer, promoter and
      venues.·
            Our
      management’s track record promoting and producing live entertainment
      events and tours both in the United States and internationally;
      and·
            The
      scope and effectiveness of our expertise in event
    marketing.




7




Although
we believe that our entertainment products and services currently compete
favorably with respect to such factors, we cannot provide any assurance that we
can maintain our competitive position against current and potential competitors,
especially those with significantly greater brand recognition, financial,
marketing, service support, technical and other resources.




Our main
competitors in the global theatrical industry include Nederlander Producing
Company of America, Mirvish Productions, The Shubert Organization, The Walt
Disney Company, Jujamcym Theatres in North America, Key Brands and Jam
Productions. Some of the competitors in the theatrical industry have more
Broadway show investments, from which most North America theatrical touring
productions originate. In addition, these competitors may have significantly
greater brand recognition and greater financial and other resources, which could
enable them to strengthen their competitive positions in comparison to
us.





Government
Regulations





From time
to time, state and federal government bodies have proposed legislation that
could have an effect on our business. For example, some legislatures have
proposed laws in the past that would impose potential liability on us and other
promoters and producers of live entertainment events for entertainment taxes and
for incidents that occur at our events, particularly relating to drugs and
alcohol.




Intellectual
Property:





We
create and own intellectual property. It is our practice to protect our
trademarks, brands, copyrights, patents and other original and acquired works,
ancillary goods and services. Our trademarks include, among others,
“Tix4Tonight”, “Tix4Dinners”, “Tix4Members.com” and “Tix4Members.net”.
Additionally, through acquisition of Magic Arts and Entertainment we acquired
the “Broadway” theatrical rights to “101Dalmatians.” We believe that
our trademarks and other proprietary rights have significant value and are
important to our brand-building efforts and the marketing of our services. We
cannot predict however whether steps taken by us to protect our proprietary
rights will be adequate to prevent misappropriation of these
rights.





Insurance:





We
maintain insurance coverage that we believe provides adequate coverage for all
of our current operations. We maintain $1,000,000 of "key-man" life insurance on
the life of Mitch Francis, our President and Chief Executive Officer, as to
which we are the sole beneficiary.





Employees:





As of
February 28, 2009, we had 150 employees. At Tix corporate operations we had
eleven full-time employees; 74 employees at our Las Vegas operations; 36
employees at Exhibit Merchandising, of which three were in Dallas, Texas and one
was in Atlanta, Georgia and 29 employees at Tix Productions. Employees at the
Las Vegas operation consist of both full-time and part-time employees. Our
employees are not represented by any unions. We believe that our relations with
our employees are satisfactory.





Available Information





Our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports are available without charge on our
website, www.tixcorp.com, as
soon as reasonably practicable after they are filed electronically with the
SEC.  We are providing the address to our Internet site solely for the
information of investors.  We do not intend the address to be an
active link or to otherwise incorporate the contents of the website into the
report.





Item
1A. RISK FACTORS





We are
subject to various risks that may materially affect our business, financial
condition and results of operations. An investor should carefully consider the
risks and uncertainties described below and the other information in this filing
before deciding to purchase the Company’s common stock. If any of these risks or
uncertainties actually occurs, our business, financial condition or operating
results could be materially harmed. In that case, the trading price of our
common stock could decline and an investor could lose all or part of their
investment.





WE MAY BE
ADVERSELY AFFECTED BY A GENERAL DETERIORATION IN ECONOMIC CONDITIONS, WHICH
COULD AFFECT CONSUMER AND CORPORATE SPENDING AND, THEREFORE, SIGNIFICANTLY
ADVERSELY IMPACT OUR OPERATING RESULTS.





Recent
turmoil in the financial markets has adversely affected economic activity in the
United States and other regions of the world in which we do
business.  The impact of slowdowns on our businesses is difficult to
predict, but they may result in reductions in ticket sales and our ability to
generate revenue. The risks associated with our businesses become more acute in
periods of a slowing economy or recession, which may be accompanied by a
decrease in attendance at events that we are involved in the ticket sales,
merchandising, or production and promotion.There is evidence that
this is affecting demand for some of our products and services, and a continued
decline in economic activity could adversely affect demand for any of our
businesses, thus reducing our revenue and earnings.  A sustained
decline in economic conditions could result in a decline in attendance at or
reduction in the number of live entertainment events, which would have an
adverse effect on our revenue and operating income.




8




Our
business depends on discretionary consumer and corporate spending. Many factors
related to discretionary consumer spending and corporate spending, including
economic conditions affecting disposable consumer income such as employment,
fuel prices, interest, tax rates and inflation can significantly impact our
operating results.




WE HAVE
INCURRED NET LOSSES AND MAY EXPERIENCE FUTURE NET LOSSES.





Our
operating results have been adversely affected by among, other things, goodwill
and intangible asset impairments, increased stock compensation expense related
to obtaining access to the distribution rights of tickets to sporting, theatre
and concert events. We incurred net losses of approximately $34.7 million, and
$16.3 million in 2008, 2007 respectively and earned $39,000 in 2006. We may face
reduced demand for our entertainment offerings and other factors that could
adversely affect our results of operations in the future. We cannot predict
whether we will achieve profitability in future periods.





CHANGES
IN OUR BUSINESS STRATEGY OR RESTRUCTURING OF OUR BUSINESSES MAY INCREASE OUR
COSTS OR OTHERWISE AFFECT PROFITABILITY OF OUR BUSINESSES.





As
changes to our business environment occur we may need to adjust our business
strategy to meet these changes or we may otherwise find it necessary to
restructure our operations or particular business assets.  In
addition, external events including acceptance of our theatrical offerings, our
merchandise and changes in macro-economic conditions may impair the value of our
assets.  When these changes or events occur, we may incur costs to
change our business strategy and may need to write down the value of
assets.  We may also need to invest in businesses that have short-term
returns that are negative or low and whose ultimate business prospects are
uncertain.  In any of these events, our costs may increase, and we may
have significant charges associated with the write-down of assets or returns on
new investments may be lower than prior to the change in strategy or
restructuring.





OUR
FUTURE CAPITAL NEEDS MAY NOT BE MET AND WE MAY BE FORCED TO ABANDON OR CURTAIL
OUR BUSINESS PLANS OR OPERATIONS.





Our
growth and expansion could be impaired by limitations on our access to capital
markets. We may require additional capital to continue to expand the operations
of Tix4Tonight, Exhibit Merchandising, and our live entertainment subsidiary Tix
Productions Inc. To the extent that we are unable to secure the capital
necessary to fund our future growth on a timely basis and/or under acceptable
terms and conditions, we may not have sufficient cash resources to continue to
expand our operations. Additionally, if the market for entertainment offerings
were to weaken for an extended period of time, our ability to raise capital
would be substantially reduced. There can be no assurances that capital from
outside sources will be available; and if such financing is available, it may
involve issuing securities senior to the common stock or equity financings which
would be dilutive to holders of common stock.




THERE IS
A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND THE COMPANY’S STOCKHOLDERS MAY
BE UNABLE TO LIQUIDATE THEIR SHARES OR COULD BE SUBJECT TO EXTREME
VOLATILITY.





Our
common stock is listed on the The NASDAQ Capital Market and is quoted under the
symbol “TIXC.”  The NASDAQ Capital Market exists for securities of
smaller, less-capitalized companies that do not qualify for inclusion in The
NASDAQ National Market. There is limited volume of sales in our stock, thus
providing limited liquidity into the market for the Company’s shares. As a
result of the foregoing, stockholders may be unable to liquidate their shares or
if a large volume of stock is being sold into the market at any one time could
result in the price of our stock to rapidly decline.





LOSS OF
OUR KEY PROMOTERS, MANAGEMENT AND OTHER PERSONNEL COULD RESULT IN THE LOSS OF
KEY TOURS AND NEGATIVELY IMPACT OUR BUSINESS.





The
entertainment industry is uniquely dependent upon personal relationships. As
promoters and executives within the entertainment industry we leverage our
existing network of relationships with producers, promoters, and venue managers
in order to secure the rights to distribute tickets, sell merchandise and secure
the other resources that are critical to our success. Due to the importance of
those industry contacts to our business, the loss of any of our producers,
promoters, officers or other key personnel could adversely affect our
operations. Although we have entered into long-term agreements with many of
those individuals to protect our interests in those relationships, we can give
no assurance that all or any of these key employees will remain with us or will
retain their associations with key contacts.




9




OUR
OPERATIONS ARE SUBJECT TO INTENSE COMPETITION AND COMPETITIVE PRESSURES THAT
COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.




Our three
business segments operate in highly competitive market environments and we may
not be able to maintain or increase our current share of entertainment
revenues.  We compete in the ticket services, exhibit and branded
merchandising and live entertainment segments of the entertainment
industry.  In addition, our competitors compete with us for key employees
who have relationships with the artists, theatre managers, promoters and
producers we rely upon.  These competitors may engage in more extensive
development efforts, undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to theatre managers,
producers and promoters with whom we presently have relationships. Our
competitors may develop services, advertising strategies and opportunities with
entertainment venues that are equal or superior to those we provide and/or
utilize or that achieve greater market acceptance and brand recognition than we
are able to achieve.  Other variables that could adversely affect our
financial performance by, among other things, leading to decreases in overall
revenue, event attendance, ticket prices or profit margins include:




·
            Unfavorable
      fluctuations in operating costs, including increased guarantees to
      producers, promoters and venues, which we may be unwilling or unable to
      pass through to our customers.·
            Our
      competitors may offer more favorable terms than we do in order to obtain
      agreements for new venues or to obtain events from venues they
      operate.·
            Other
      entertainment options available to our audiences may reduce our share of
      the overall entertainment market.·
            Competition
      in the specialized labor market we operate within may require us to spend
      more to retain key employees.·
            Unfavorable
      changes in the macro-economic environment may affect the ability of
      patrons to buy tickets and merchandise.·
            New
      competitors may enter our business segments as the barriers to entry are
      low.





We
believe that barriers to entry into the business segments that we compete are
low and that certain local ticket brokers, promoters and producers are
increasingly expanding their geographic scope of their operations.





CHANGES
IN PUBLIC AND CONSUMER TASTES AND PREFERENCES FOR ENTERTAINMENT AND CONSUMER
PRODUCTS COULD REDUCE DEMAND FOR OUR ENTERTAINMENT OFFERINGS AND PRODUCTS AND
ADVERSELY AFFECT THE PROFITABILITY OF ANY OF OUR BUSINESS.





Our live
entertainment and our exhibit merchandising businesses create entertainment and
consumer products whose success depends substantially on consumer tastes and
preferences that change in often unpredictable ways.  The success of
our business depends on our ability to consistently create, purchase, present,
and promote live entertainment and consumer products that meet the changing
preferences of the broad consumer marketplace.  Further, our live
entertainment and merchandising businesses are increasingly dependent on our
ability to successfully predict and adapt to changing consumer tastes and
preferences outside the United States, and their success therefore depends on
our ability to successfully predict and adapt to changing consumer tastes and
preferences outside the United States.




WE MAY BE
UNABLE TO MANAGE GROWTH WHICH COULD ADVERSELY AFFECT OUR BUSINESS.





Successful
implementation of the Company’s business strategy requires the Company to manage
its growth. Growth could place an increasing strain on the Company’s management
and financial resources. To manage growth effectively, the Company will need to
establish definitive business strategies, goals and objectives, install and
maintain a system of management controls, and attract and retain qualified
personnel, as well as develop, train and manage management-level and other
employees. If the Company fails to manage its growth effectively, the Company’s
business, financial condition and/or operating results could be materially
adversely affected, and the Company’s stock price may decline accordingly.





THE
COMPANY DOES NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.





We have
not declared or paid, and we do not anticipate declaring or paying in the
foreseeable future, any cash dividends on our common stock. Our ability to pay
dividends is dependent upon, among other things, our future earnings, if any, as
well as our operating and financial condition, capital requirements, general
business conditions and other pertinent factors. Furthermore, any payment of
dividends by the Company is subject to the discretion of our board of directors.
Accordingly, there is no assurance that any dividends will ever be paid on our
common stock.





DOING
BUSINESS IN FOREIGN COUNTRIES CREATES RISKS NOT FOUND IN DOING BUSINESS IN THE
UNITED STATES.





Our
international operations accounted for approximately 11% of our revenue in 2008
and are expected to account for between 5% and 10% of our revenues in 2009. The
risks involved in foreign operations that could result in losses, which we are
not insured against include:





·
            exposure
      to local economic conditions;·
            potential
      adverse changes in diplomatic relationships with the United States of
      America;·
            risks
      of renegotiations or modifications of existing agreements with
      governmental authorities;·
            diminished
      ability to legally enforce our contractual rights in foreign
      countries;·
            withholding
      and other taxes on remittances and other payments by subsidiaries;
      and·
            changes
      in foreign taxation structures.




10




In
addition, we may incur substantial tax liabilities when we repatriate any of the
cash generated by our international operations back to the United States due to
our current inability to recognize any foreign tax credits that would be
associated with repatriation of the funds. We currently expect to repatriate
substantially all of the cash generated by our international operations. We are
not currently in a position to recognize any tax assets in the United States
that are the results of payment of income taxes or withholding taxes in foreign
jurisdictions.





WE MAY BE
UNSUCCESSFUL IN OUR FUTURE ACQUISITIONS, IF ANY, WHICH MAY HAVE AN ADVERSE
EFFECT ON OUR BUSINESSES.





Our
future growth rate depends in part on our acquisitions of additional businesses.
A significant portion of our recent and projected growth is expected to be
growth attributable to acquisitions including John’s Tickets, LLC and Exhibit
Merchandising, LLC, as well as our 2008 acquisitions of Magic Arts &
Entertainment, LLC and NewSpace Entertainment, Inc. We may be unable to identify
suitable acquisition targets or make further acquisitions at favorable prices.
If we identify a suitable acquisition candidate, our ability to successfully
implement the acquisition would depend on a variety of factors, including our
ability to obtain financing on acceptable terms and requisite government
approvals. Acquisitions involve risks, including those associated
with:





·
            integrating
      the operations, financial reporting, technologies and personnel of
      acquired companies;·
            managing
      geographically dispersed operations;·
            the
      diversion of management’s attention from other business
      concerns;·
            the
      inherent risks in entering markets or lines of business in which we have
      limited or no direct experience; and·
            the
      potential loss of key employees, customers and strategic partners of
      acquired companies.





We may
not successfully integrate any businesses or technologies we may acquire in the
future and may not achieve anticipated revenue and cost benefits. Acquisitions
may be expensive, time consuming and may strain our resources. Acquisitions may
not be accretive to our earnings and may negatively impact our results of
operation, as a result of, among other things, the incurrence of debt, one-time
write-offs of goodwill and amortization expenses of intangible assets. In
addition, future acquisitions that we may pursue could result in dilutive
issuances of equity securities.





OUR
EXISTING DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS HOLD A
SUBSTANTIAL AMOUNT OF THE COMPANY’S COMMON STOCK AND MAY BE ABLE TO PREVENT
OTHER STOCKHOLDERS FROM INFLUENCING SIGNIFICANT CORPORATE
DECISIONS.




As of
February 28, 2009, our directors and executive officers and principal
shareholders beneficially owned or have the right to vote approximately 50% of
our outstanding common stock. These stockholders, if they act together, may be
able to direct the outcome of matters, including the election of our directors
and other corporate actions, such as a merger with or into another company, a
sale of substantially all of the Company’s assets, and amendments to the
Company’s certificate of incorporation. The decisions of these stockholders may
conflict with the Company’s interests or the interests of the Company’s other
stockholders.





INCREASED
COSTS ASSOCIATED WITH CORPORATE GOVERNANCE COMPLIANCE MAY SIGNIFICANTLY AFFECT
OUR RESULTS OF OPERATIONS.





The
Sarbanes-Oxley Act of 2002 and the Securities Exchange Act of 1934, as amended,
requires compliance with the corporate governance and securities disclosure
requirements, and requires an ongoing review of our internal control
procedures.  These requirements could make it more difficult for us to
attract and retain qualified members of the board of directors, or qualified
executives officers.  In addition, director and officer liability
insurance for public companies like us has become more difficult and more
expensive to obtain, and we may be required to accept reduced coverage or incur
higher costs to obtain coverage that is satisfactory to us and our officers and
directors.  We continue to evaluate and monitor regulatory
developments and cannot estimate the timing and magnitude of additional costs we
may incur as a result.





If in any
year we are unable to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 and our internal control over financial reporting is
not effective, the reliability of our financial statements may be questioned and
our stock price may suffer.





IF
DETERIORATION OF THE ECONOMY CONTINUES, THIS COULD CAUSE ADDITIONAL FINANCIAL
AND STOCK MARKET DECLINES, WHICH COULD LEAD TO REDUCED EARNINGS AND COULD RESULT
IN FUTURE GOODWILL AND INTANGIBLE ASSET IMPAIRMENTS.





In the
fourth quarter of fiscal year 2008, we recorded an impairment charge related to
the goodwill and intangible assets of $33.1 million related to our acquisition
of EM.  As of December 31, 2008, we have remaining goodwill and
intangible assets related to our acquisitions of John’s Tickets, LLC, EM, Magic
and NewSpace of $12.4 million. 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.  For additional information see Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”




11





ITEM
1B. UNRESOLVED STAFF COMMENTS





None.





ITEM
2. DESCRIPTION OF PROPERTY





Corporate
Offices:





We lease
office space at 12001 Ventura Place, Suite 340, Studio City, California 91604 as
our corporate headquarters, pursuant to a lease for a period of five years
expiring June 2010, with an option to extend the term of the lease for one
additional five-year period.





Las Vegas
Operations:





We
conduct the operations of Tix4Tonight at six leased locations in Las Vegas,
Nevada:





1.
            The
      South Strip location is at the Showcase Mall at the base of the world
      famous giant glass Coke bottle, (which commenced operations in November
      2007)  across from New York, New York;2.
            Mid-South
      Strip location is at the Hawaiian Marketplace Shopping
    Center;3.
            At
      the heart of the strip our location is at Bill’s Gamblin Hall between the
      Flamingo Hotel and Bally’s Las Vegas (opened November
    2008);4.
            Our
      Mid-North Strip location is at the Fashion Show Mall Strip entrance by
      Neiman-Marcus;5.
            North
      Strip location is at the front of the Peppermill Restaurant between the
      Riveria Hotel and Denny’s;6.
            Downtown
      Fremont Street Experience at the Four Queens Hotel.




Tix4Tonight
also maintains administrative offices in Las Vegas, Nevada, pursuant to a lease
that terminates on August 31, 2011, with an option to extend the term of the
lease for one additional five-year period.





Exhibit
Merchandising:





EM leases
its combined administrative and warehouse facility in Streetsboro, Ohio under a
non-cancelable operating lease. EM also leases on a month-to-month basis,
additional storage space and housing at the locations of its exhibits, typically
through the duration of the exhibit. Presently, we have leased additional retail
space, storage space and housing in Dallas, Texas, Atlanta, Georgia and Chicago,
Illinois.





Live
Entertainment:




Live
Entertainment has two facilities; one facility houses the Magic Arts and
Entertainment operations, while the other facility contains NewSpace
Entertainment. The Magic Arts and Entertainment leases an 800 square foot
facility that expires in August 2009 and is connected to Exhibit
Merchandising’s facility located in Streetsboro, Ohio. The NewSpace offices are
in Salt Lake City, Utah, pursuant to a lease that terminates on June 1, 2011,
with an option to extend the term of the lease for one additional five-year
period.




Minimum
future rental payments:





The
aggregate minimum future rental payments under non-cancelable operating leases
for facilities in operation at December 31, 2008, excluding operating expenses,
annual rent escalation provisions, and contingent rental payments based on
achieving certain pre-determined sales levels, are as follows:




Years
      Ending December 31,2009
              
              $
              2,433,0002010
              
              
              1,780,0002011
              
              
              1,120,0002012
              
              
              833,000$
              6,166,000





ITEM
3. LEGAL PROCEEDINGS





At
December 31, 2008, we were not a party to any known or anticipated material
legal proceedings by or against us, including our wholly-owned
subsidiaries.




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





There
were no matters submitted to a vote by our security holders during the fourth
quarter of the fiscal year ended December 31, 2008.





12




PART
II.




ITEM 5.
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES


(a)
Market Information





Our
common stock trades on the NASDAQ Capital Market under the symbol “TIXC”. The
following table sets forth the high and low sale prices for our common stock for
the periods indicated as reported by The NASDAQ Capital Market:




Low
            
            
            HighFiscal Year Ended
      December 31, 2007:Three
      months ended -March
      31, 2007
            
            $
            3.65
            
            
            $
            5.15June
      30, 2007
            
            $
            3.80
            
            
            $
            6.20September
      30, 2007
            
            $
            5.50
            
            
            $
            7.90December
      31, 2007
            
            $
            5.35
            
            
            $
            7.00Fiscal
      Year Ended December 31, 2008:Three
      months ended -March
      31, 2008
            
            $
            4.45
            
            
            $
            5.65June
      30, 2008
            
            $
            4.05
            
            
            $
            5.44September
      30, 2008
            
            $
            2.33
            
            
            $
            4.75December
      31, 2008
            
            $
            1.89
            
            
            $
            4.70




(b)
Holders





As of
December 31, 2008, we had 671 common shareholders of record, excluding
15,900,461 shares held in "street name" by brokerage firms and other nominees
who hold shares for multiple investors. We estimate that we had approximately
1,100 beneficial common shareholders as of December 31, 2008.





(c)
Dividends





Holders
of common stock are entitled to receive dividends if, as and when declared by
the Board of Directors out of funds legally available for distribution, subject
to the dividend and liquidation rights of any preferred stock that may be issued
and outstanding. We have not paid cash dividends on our common stock and have no
present intention of paying cash dividends in the foreseeable future. It is the
present policy of the Board of Directors to retain all earnings to provide for
the future growth and development of our business operations.





(d)
Repurchases of common stock





The
following table sets forth the common shares repurchased during the quarter
ended December 31, 2008:





Shares
            
            
            Cost
      of SharesRepurchased
            
            
            RepurchasedOctober
            
            
            160,000
            
            
            $
            430,000November
            
            
            118,000
            
            
            
            289,000December
            
            
            105,000
            
            
            
            217,000383,000
            
            
            $
            936,000





13





Comparison of Cumulative Total
Returns





The
following line graph presentation compares cumulative total stockholder returns
of Tix with The NASDAQ Stock Market Index and the NASDAQ Peer Index for the
five-year period from December 31, 2003 to December 31, 2008. The
graph and table assume that $100 was invested in each of Tix’s common stock, the
NASDAQ Stock Market Index and the Peer Index on December 31, 2003, and that
all dividends were reinvested. This data was furnished by Zacks Investment
Research, Inc. Copyright© 2008, NASDAQ, Inc.  All rights reserved.
Used with permission.








Comparison
of 5 Year Cumulative Total Return


Assumes
Initial Investment of $100


December
2008











14




Equity
Compensation Plan


The
securities authorized for issuance under the Company's equity compensation plans
at December 31, 2008 are summarized as follows:





Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                  
                  
                  Weighted-average
      exercise price of outstanding options, warrants and rights
                  
                  
                  Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a)Plan
      CategoryEquity
      compensation plans approved by our security holders2004
      Directors stock option plan
                  
                  
                  70,000
                  
                  
                  $
                  3.51
                  
                  
                  
                  30,0002004
      Stock option plan
                  
                  
                  703,000
                  
                  
                  $
                  5.93
                  
                  
                  
                  157,0002003
      Consultant stock plan
                  
                  
                  1,191,000
                  
                  
                  $
                  2.11
                  
                  
                  
                  409,000Subtotal
                  
                  
                  1,964,000
                  
                  
                  $
                  3.53
                  
                  
                  
                  596,000Equity
      compensation plans not approved by security holdersStock
      options (1)
                  
                  
                  490,000
                  
                  
                  $
                  4.92
                  
                  
                  
                  N/AOutstanding
      warrants (2)
                  
                  
                  750,000
                  
                  
                  $
                  4.41
                  
                  
                  
                  N/ATotal
                  
                  
                  3,204,000
                  
                  
                  $
                  3.95
                  
                  
                  
                  596,000




(1)
            
            The
      options shown were issued as compensation to employees that were
      negotiated in connection with employment contracts.  The
      material terms of the options are consistent with stock options issued
      under the 2004 Stock Option that is the stock option prices approximated
      the market price of our common stock at or about the date of
      grant.  These stock options may convert to stock options under
      the 2004 Stock Option Plan once there are sufficient shares
      available.(2)
            
            The
      warrants shown were issued from time to time as compensation for services
      rendered by consultants, advisors or other third parties, and do not
      include warrants sold in private placement transactions. The material
      terms of such warrants were determined based upon arm’s-length
      negotiations with the service providers. The warrant exercise prices
      approximated the market price of our common stock at or about the date of
      grant, and the warrant terms range from five to ten years from the grant
      date. The warrants contain customary anti-dilution adjustments in the
      event of a stock split, reverse stock split, reclassification or
      combination of our outstanding common stock and similar events. Certain
      warrants contain anti-dilution adjustments triggered by other corporate
      events, such as dividends and sales of equity below market
      price.




ITEM
6.   SELECTED CONSOLIDATED FINANCIAL DATA




The following selected financial data are derived
from our audited financial statements. Our financial statements for 2008, 2007
and 2006 have been audited by Weinberg & Company, P.A., our independent
registered public accounting firm. These historical results do not necessarily
indicate future results. When you read this data, it is important that you also
read our financial statements and related notes, as well as the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
“Risk Factors” sections of this Annual Report. Financial information provided
below has been rounded to the nearest thousand.




15




Year
      Ended December 31, (1)2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004Results
      of Operations Data:Revenue
              
              $
              69,545,000
              
              
              $
              18,567,000
              
              
              $
              5,388,000
              
              
              $
              2,695,000
              
              
              $
              1,557,000Operating
      Expenses:Direct
      operating expenses
              
              
              48,490,000
              
              
              
              11,672,000
              
              
              
              2,173,000
              
              
              
              1,510,000
              
              
              
              800,000Selling
      and marketing expense
              
              
              3,008,000
              
              
              
              13,475,000
              (4)
              
              
              467,000
              
              
              
              326,000
              
              
              
              366,000General
      and administrative expenses
              
              
              15,193,000
              
              
              
              8,117,000
              
              
              
              3,306,000
              
              
              
              1,907,000
              
              
              
              1,488,000Impairment
      of goodwill
              
              
              25,445,000
              (2)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Impairment
      of intangible assets
              
              
              7,687,000
              (2)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Depreciation
      and amortization
              
              
              4,601,000
              
              
              
              1,668,000
              
              
              
              164,000
              
              
              
              109,000
              
              
              
              62,000Operating
      income (loss)
              
              
              (34,879,000
              )
              
              
              (16,365,000
              )
              
              
              (722,000
              )
              
              
              (1,157,000
              )
              
              
              (1,159,000
              )Interest
      expense
              
              
              (19,000
              )
              
              
              (104,000
              )
              
              
              (329,000
              )
              
              
              (677,000
              )
              
              
              (194,000
              )Interest
      income
              
              
              59,000
              
              
              
              96,000
              
              
              
              15,000
              
              
              
              -
              
              
              
              -Gain
      on settlement of debt, net
              
              
              -
              
              
              
              -
              
              
              
              1,033,000
              (3)
              
              
              -
              
              
              
              -Other
      expense (income) – net
              
              
              175,000
              
              
              
              28,000
              
              
              
              37,000
              
              
              
              68,000
              
              
              
              -Income
      (loss) from continuing operations
              
              
              (34,664,000
              )
              
              
              (16,345,000
              )
              
              
              34,000
              
              
              
              (1,766,000
              )
              
              
              (1,353,000
              )Income
      (loss) from discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              5,000
              
              
              
              743,000
              
              
              
              (264,000
              )Net
      income (loss)
              
              
              (34,664,000
              )
              
              
              (16,345,000
              )
              
              
              39,000
              
              
              
              (1,023,000
              )
              
              
              (1,617,000
              )Other
      comprehensive loss:Foreign
      currency translation adjustments
              
              
              (29,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Comprehensive
      loss
              
              $
              (34,693,000
              )
              
              $
              (16,345,000
              )
              
              $
              39,000
              
              
              $
              (1,023,000
              )
              
              $
              (1,617,000
              )Net
      income (loss) per common share-basic and dilutedFrom
      continuing operations
              
              $
              (1.09
              )
              
              $
              (0.70
              )
              
              $
              -
              
              
              $
              (0.17
              )
              
              $
              (0.14
              )From
      discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              0.07
              
              
              
              (0.03
              )Combined
      net income (loss) per common share-basic and diluted
              
              $
              (1.09
              )
              
              $
              (0.70
              )
              
              $
              -
              
              
              $
              (0.10
              )
              
              $
              (0.17
              )
 
 Year
      Ended December 31,(1)2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004Balance
      Sheet Data:Total
      assets
              
              $
              28,848,000
              
              
              $
              55,168,000
              
              
              $
              2,632,000
              
              
              $
              1,042,000
              
              
              $
              554,000Long-term
      debt; including current maturities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,379,000
              
              
              
              1,062,000Shareholders'
      equity (deficiency)
              
              $
              22,197,000
              
              
              $
              51,746,000
              
              
              $
              378,000
              
              
              $
              (2,400,000
              )
              
              $
              (2,011,000
              )


1.
            Acquisitions
      significantly impact the comparability of the historical consolidated
      financial data reflected in the schedule of Selected Financial
      Data.  The following is a list of acquisitions that we have made
      in the last five years and the effective date of each
      acquisition:




·
              Stand-by
      Golf
              November
      30, 2006·
              John’s
      Tickets, LLC
              March
      14, 2007·
              Exhibit
      Merchandising, LLC
              August
      7, 2007·
              NewSpace
      Entertainment, Inc.
              January
      2, 2008·
              Magic
      Arts & Entertainment, LLC
              January
      2, 2008


2.
            The
      Company performed its 2008 annual impairment testing of goodwill and
      intangibles as of December 31, 2008. Based on a combination of factors,
      including the current economic environment, decreased revenues and
      increased decline in margins, management determined that an impairment of
      goodwill and intangible assets had occurred, thus  recording
      impairment charges to goodwill and intangible assets of $25.4 million and
      $7.7 million, respectively. There were no impairments of goodwill or
      intangible assets in 2007 or in prior
years.




3.
            On
      September 13, 2006, the Company repaid in full its obligation to the
      lender of $1,180,000 (including accrued interest of $298,000) by making
      final cash payment of $101,000. As a result, the Company recognized a
      non-cash gain on settlement of debt of $1,079,000 during the year ended
      December 31, 2006. Netted against the gain on settlement of debt is
      $58,000 of deferred offering costs and an additional $12,000 gain from a
      separate settlement with other
lenders.




4.
            During
      the year ended December 31, 2007, the Company issued its common stock and
      warrants to purchase its common stock to outside consultants as
      compensation for services provided that had a fair market value
      of $10.9 million at the time of grant. These services were
      primarily attributable to our efforts to enter into strategic
      alliances with producers, presenters and venues.  The Selected
      Financial Data should be read in conjunction with Item 7. Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.




16




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





Please
read the following discussion of our financial condition and results of
operations together with the audited consolidated financial statements and notes
to the financial statements included elsewhere in this Annual Report. This
discussion contains forward-looking statements that involve risks and
uncertainties. The forward-looking statements are not historical facts, but
rather are based on current expectations, estimates, assumptions and projections
about our industry, business and future economic results. Our actual results
could differ materially from the results contemplated by these forward looking
statements due to a number of factors, including those discussed under Item 1A.
Risk Factors and other sections of this Annual Report.





During
2008 we continued to execute our strategy to improve and build our operations
comprised of Tix4Tonight, Exhibit Merchandising (EM) and Tix Productions Inc.
(TPI). The key developments for each of our segments for 2008 were:





Tix4Tonight


·
            For
      the year ended December 31, 2008, the value of the discount tickets sold
      increased by $20.7 million or 62% to $53.9
  million.





·
            For
      the year ended December 31, 2008, the number of the discount tickets sold
      increased by 346,000 tickets or 48% to 1,060,000
  tickets.





·
            For
      the year ended December 31, 2008, the number of dinner reservations sold
      increased by 135,000 or 107% to 261,000 dinner
    reservations.




·
            In
      November 2008, we opened our sixth leased ticket location in Las Vegas.
      The ticket booth is located at Bill’s Gamblin Hall on the Las Vegas Strip,
      between the Flamingo Hotel and Bally’s Las
  Vegas.





Exhibit
Merchandising


·
            Recorded
      an impairment charge of $33.1 million of which $25.4 million is related to
      goodwill and $7.7 million is related to intangible assets, in the fourth
      quarter of 2008.





·
            EM
      opened its first foreign gift shop for Tutankhamun and the Golden Age of
      the Pharaohs at the London O2 Dome. Tutankhamun drew 1.1 million visitors
      to the London O2 Dome from November 2007, until August
    2008.




·
            EM
      operated the gift shop for Tutankhamun the Golden King and the Great
      Pharaohs in Vienna, Austria. Tutankhamun the Golden King and the Great
      Pharaohs in Vienna, Austria drew more than 400,000
    visitors.





Live
Entertainment


·
            Tix
      acquired Magic Arts & Entertainment - Florida, Inc. (Magic) and
      NewSpace Entertainment, Inc. (NewSpace). Both Magic and NewSpace are
      independent presenters and producers of live theater and concerts with a
      history of working together.





·
            Tix
      Productions, Inc. entered into a two year producing partnership with
      Mannheim Steamroller and completed a successful Christmas concert tour of
      46 cities performing more than 60 shows. Mannheim Steamroller’s seven
      Christmas Albums have sold more than 35 million copies.·
            Obtained
      the rights to promote “Rain” the Beatles Experience in 10 cities with 16
      performances for the 2008 – 2009
tour.





Basis
of Presentation





The
consolidated financial statements include the accounts of Tix together with
those of its wholly-owned subsidiaries, Tix4Tonight, EM and TPI.





Segment
Overview:





Ticketing
Services




Our
ticketing services are carried out by our wholly owned subsidiary Tix4Tonight.
Tix4Tonight offers both the sale of discount and premium tickets to live shows
and events. Additionally, Tix4Tonight also offers discounts on meals and golf
tee time bookings. Tix4Tonight sells its offerings from six leased locations in
Las Vegas, Nevada. Through these same six leased locations, Tix4Tonight also
sells discount dinner reservations to various restaurants through Tix4Dinners as
well as discount tee times through Tix4Golf.




17




Tix4Tonight
also sells premium tickets through Tix4AnyEvent (AnyEvent).  AnyEvent
is a national event ticket broker that sells premium tickets for sporting
events, concerts, tours and theatre. AnyEvent operations are located in the
leased administrative offices of Tix4Tonight in Las Vegas, Nevada.





In
December 2008, Tix4Tonight announced its new ticket distribution channel
Tix4Members.com (Tix4Members).  Tix4Members sells discount tickets to
concerts, live theater and sporting events to affinity group members through
co-branded websites. To this end Tix4Tonight entered into an agreement to
provide Costco Wholesale Corporation (Costco) with event and ticketing services
to its over 47 million members. In February 2009, Tix4Members launched its first
co-branded discount website with Costco Event Ticket Services. The success of
this program is dependent upon our ability to sign-up additional affinity
groups, and to predict, adapt and obtain live entertainment that meets the
changing consumer tastes and preferences, so that we are able to successfully
reach these consumers.





The
Company also maintains leased administrative offices for Tix4Tonight in Las
Vegas, Nevada.





See
further discussion of our Ticketing Services segment in Item 1. Business -
Operating Segments.





Exhibit
and Event Merchandising




The
Company provides exhibit and event merchandising services through its wholly
owned subsidiary Exhibit Merchandising LLC (EM). EM provides a complete turnkey
retail store with commercially-available and extensive custom-branded product
retail specialty stores for touring museum exhibitions and touring theatrical
productions.




See
further discussion of our Exhibit and Event Merchandising segment in Item 1.
Business - Operating Segments.





Live Entertainment





Effective
January 2008 the Company acquired two live theatrical and concert production
companies; Magic Arts & Entertainment, LLC (Magic) and NewSpace
Entertainment, Inc. (NewSpace). During 2008, the Company combined the operations
of Magic and NewSpace to form its wholly-owned subsidiary Tix Productions Inc.
We believe the combination of the two companies has allowed us to
better  leverage our resources, gain operating efficiencies
and more fully utilize the combined network of producers and promoters.
NewSpace and Magic will continue to operate under their current names for the
foreseeable future as a reflection of their marketplace
recognition.





See
further discussion of our Live Entertainment segment in Item 1. Business -
Operating Segments.




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





The
Company’s Tix4Members.com will consider earned the revenues, commissions and
related transaction fees from the sale of tickets when the related event has
occurred.  Refunds are only issued if the event is canceled or
postponed.  Payments for such ticket sales received prior to the event
will be recorded as deferred revenue.  Claims for ticket refunds,
which will be generally received and paid the day after the show date, will be
charged back to the respective shows and recorded as a reduction to the
Company’s commissions and fees at the time that such refunds are
processed.  Tix4Members does not have any accounts receivable
associated with sales transactions to individual customers because payment is
collected at the time of sale.




18




Tix4Dinner
offers reservations for discounted dinners at various restaurants on the Las
Vegas strip, with dining at specific times on the same day or in some cases the
next 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 that the reservation is made, and the dinner payment is collected directly
by the restaurant.





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





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





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




On
January 2, 2008, the Company began producing and presenting live entertainment.
Revenue from the presentation and production of an event is recognized after the
performance occurs. Revenue from our producing and presenting activities are
reported consistent with EITF 99-19 “Reporting Revenues Gross as a Principal
versus Net as an Agent” (EITF 99-19).  EITF 99-19 discusses whether
revenues and cost of goods sold to arrive at gross profit and their
corresponding assets and liabilities should be recorded at gross or net. EITF
99-19 states the following items as indicators as to whether something should be
recorded at gross or net:





·
            Acts
      as principal in the transaction·
            Has
      risk and rewards of ownership, such as risk of loss for collection,
      delivery and returns, and


o
            Takes
      title to the productso
            Selects
      the supplier


o
            Flexibility
      in pricingo
            Assumes
      credit risk


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





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





·
            selects
      the suppliers or approves the selection of the
supplier,·
            is
      the primary obligor with suppliers,


·
            assumes
      credit risk,·
            directs
      the pricing of the tickets and


·
            purchases
      the advertising.




19




EITF
99-19 states that above are indicators of ownership and would be evidence that
revenues and related expenses should be recorded at gross. As the Company is
acting as the principal in the transaction, i.e., it has the risks and rewards
of ownership and has recorded the related revenues and expenses at gross. In
other instances where we only receive a fee and are not the principal obligors
to vendors we record these revenues at net. It is management’s belief that this
is consistent with EITF abstract 99-19 “Reporting Revenues Gross as Principal
Versus Net as an Agent.”





TPI
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:





Our
share-based employee compensation plans are described in Note 10 of the Notes to
our Financial Statements. Effective January 1, 2006, we adopted the
provisions of SFAS 123(R), “Share-Based Payment.” SFAS 123(R), which requires
that companies recognize compensation expense associated with stock option
grants and other equity instruments to employees in the financial statements.
SFAS 123(R) applies to all grants after the effective date and to the unvested
portion of stock options outstanding as of the effective date. We adopted SFAS
123(R) using he modified-prospective method and the Black-Scholes valuation
model for valuing share-based payments. We will continue to account for
transactions in which services are received in exchange for equity instruments
based on the fair value of such services received from non-employees, in
accordance with SFAS 123(R), Emerging Issues Task Force Issue No. 96-18
(“EITF 96-18”), Accounting for Equity Instruments that are Issued to other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services and
EITF 00-18, Accounting Recognition for Certain Transactions involving Equity
Instruments Granted to Other Than Employees, as amended.





Our
Statement of Operations as of and for the years ended December 31, 2008,
2007 and 2006 reflects the impact of SFAS 123(R). In accordance with the
modified prospective transition method, our results of operations for prior
periods have not been restated to reflect the impact of SFAS
123(R).





Non-employee
share-based compensation charges generally are amortized over the vesting period
on a straight-line basis. In certain circumstances, where there are no future
performance requirements by the non-employee, option grants are immediately
vested in instances and the total share-based compensation charge is recorded in
the period of the measurement date.





The fair
value of Tix’s common stock option grant is estimated using the Black-Scholes
option pricing model, which uses certain assumptions related to risk-free
interest rates, expected volatility, expected life of the common stock options
and future dividends. Compensation expense is recorded based upon the value
derived from the Black-Scholes option pricing model, based on actual experience.
The assumptions used in the Black-Scholes option pricing model assumptions could
materially affect compensation expense recorded in future periods.




Impairment
of Long-Lived Assets, Goodwill and Intangible Assets:





We review
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable in accordance with SFAS No.
144, Accounting for the
Impairment or Disposal of Long-lived Assets. 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 measurements. 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.





Valuation
of Intangible Assets:





The
Company has acquired and continues to acquire significant intangible assets that
Tix records at fair value.  Adoption of SFAS No. 141(R) "Business
Combinations" on January 1, 2009, requires Tix to make assumptions regarding
inputs into the discounted cash flow model about the timing and amount of future
net cash flows, risk, cost of capital, terminal values and market participants.
Each of these factors can significantly affect the value of the intangible
asset. Tix engages independent valuation experts who review Tix's critical
assumptions and calculations for acquisitions of significant intangibles. Tix’s
management reviews intangible assets for impairment annually using an
undiscounted net cash flows approach. If the undiscounted cash flows of an
intangible asset are less than the carrying value of an intangible asset, the
intangible asset is written down to its fair value, which is usually the
discounted cash flow amount. Where cash flows cannot be identified for an
individual asset, the review is applied at the lowest group level for which cash
flows are identifiable. Goodwill and intangible assets are reviewed for
impairment annually or when an event that could result in an impairment of
goodwill occurs. At December 31, 2008, goodwill and intangibles amounted to $5.6
million and $6.8 million, respectively, and amortization expense for intangible
assets amounted to $5.5 million in 2008. During 2008, Tix recorded impairment
charges to goodwill and intangible assets of $25.4 million and $7.7 million,
respectively.  There were no impairments of goodwill in 2007 or 2006.
Once an impairment of goodwill or other intangible assets has been recorded, it
cannot be reversed. There can be no assurance that future goodwill impairments
will not occur.




20




Inventory
Valuation:




Inventories
are stated at the lower of cost or market. Market is defined as current
replacement cost, except that market should not exceed the net realizable value
and should not be less than net realizable value reduced by an allowance for an
approximately normal profit margin. The cost of inventories is determined by
using the first-in, first-out method. We perform a monthly analysis of our
inventory balances to determine if the carrying amount of inventories exceeds
their net realizable value. Our determination of estimated net realizable value
is based on customer orders, market trends and historical pricing. If the
carrying amount exceeds the estimated net realizable value, the carrying amount
is reduced to the estimated net realizable value. We estimate a reserve for
obsolescence and excess of our supplies inventory. Inventory is stated net of
the reserve.





Recent
Accounting Pronouncements:





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





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Accounting
and Reporting of Non-Controlling Interest in Consolidated Financial
Statements, an Amendment of ARB No. 51. These new standards will
significantly change the financial accounting and reporting of business
combination transactions and non-controlling (or minority) interests in
consolidated financial statements. We will be required to adopt SFAS No. 141(R)
and SFAS No. 160 on or after December 15, 2008. The Company is evaluating
the impact , if any, that the adoption of SFAS 141(R) and SFAS No. 160 will have
on our consolidated financial.





In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin  (“SAB") No. 110 to permit entities, under certain
circumstances, to continue to use the “simplified” method, in developing
estimates of expected term of “plain-vanilla” share options in accordance with
SFAS No. 123 (R) Share-Based Payment. SAB No. 110 amended SAB No. 107 to permit
the use of the “simplified” method beyond December 31, 2007. The Company
continues to use the “simplified” method and will do so until more detailed
relevant information about exercise behavior becomes readily
available.





In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (“FSP 157-2”).
FSP 157-2 delays the implementation of SFAS 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis. This statement
defers the effective date to fiscal years beginning after November 15, 2008
and interim periods within those fiscal years, which is fiscal year 2010 for the
Company.





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
instruments and Hedging Activities. The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable better understanding of the effects
on financial position, financial performance, and cash flows. The effective date
is for fiscal years and interim periods beginning after November 15, 2008. The
Company has not yet determined the effect, if any, the adoption of SFAS No. 161
will have on the Company’s consolidated financial statements.





In April
2008, the FASB issued Staff Position No. FAS 142-3 which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, “Goodwill and Other Intangible Assets.” The intent of this FSP is to
improve the consistency between the useful life of a recognized intangible asset
under Statement 142 and the period of expected cash flows used to measure the
fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and
other U.S. generally accepted accounting principles (GAAP). The Company is in
the process of evaluating the effect of FAS No. 142-3 on the Company’s
consolidated financial statements.




In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States. The FASB believes that the GAAP hierarchy should be directed
to entities because it is the entity (not its auditor) that is responsible for
selecting accounting principles for financial statements that are presented in
conformity with GAAP. The FASB does not believe this Statement will result in a
change in current practice. SFAS 162 is effective November 15,
2008.





Liquidity and Capital
Resources:





At
December 31, 2008, we had cash and cash equivalents of $9.2 million
and total assets of $28.8 million compared to $7.4 million and
$55.2 million, respectively, at December 31, 2007. Working capital at
December 31, 2008 and 2007 was $8.0 million and $8.9 million, respectively. We
had no debt for the years ending December 31, 2008 and 2007.




21




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





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





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





Sources
of Cash:




For the
years ended December 31, 2008, 2007 and 2006, the Company generated $7.6
million, $144,000 and $1.2 million from operating activities
respectively.  During the year ended December 31, 2008 the Company did
not undertake any capital fund raising activities. During the year ended
December 31, 2007, the Company raised gross proceeds of $18. 0 million, $17.8
million of which were the result of the Company’s sale of common stock and
warrants. The Company for the years ended December 31, 2008, 2007 and
2006  received net proceeds of $54,000, $229,000 and $211,000,
respectively from the exercise of options and warrants.





On
September 24, 2007, the Company completed the closing of a private placement. At
the closing, the Company sold to institutional and accredited investors
3,744,000 shares of its common stock for a price of $4.75 per share, or an
aggregate of approximately $17.8 million. In addition, the Company also issued
to the investors two-year warrants to purchase 1,870,000 shares of common stock
at an exercise price of $5.50 per share. In conjunction with this offering, the
Company paid fees of $75,000 and issued a total of 147,000 shares of its common
stock to finders in connection with the financing.





On April
24, 2007, the Company borrowed $2,000,000 from Joseph Marsh, a stockholder of
the Company, pursuant to an unsecured short-term note, with interest at 8%, per
annum payable monthly. The note was due on or before April 1, 2008. During the
term of the loan, Mr. Marsh had the right to convert the loan into an investment
in any subsequent private placement the Company may conduct. On September 29,
2007 the Company repaid the loan in full. During the term of the loan the
Company paid $76,000 in interest.





Uses
of Cash:





Acquisitions





During
the years ended December 31, 2008, 2007, and 2006, we used $3.7 million, $12.6
million and an immaterial amount related to investing activities. Effective
January 2, 2008, we acquired through merger Magic and NewSpace. As consideration
for the acquisition of Magic, the Company paid $2.0 million, net of cash
acquired and issued 476,190 shares of stock that had a market value of $2.3
million, which approximated the fair market value of the shares at the time of
issuance. As consideration for the acquisition of NewSpace, the Company paid
$1.3 million, net of cash acquired and issued 571,428 shares of stock that had a
market value of $2.6 million, which approximated the fair market value of the
shares at the time of issuance.





Effective
March 14, 2007, pursuant to an Asset Purchase Agreement (the “Agreement”) with
John’s Tickets, LLC, dba AnyEvent Tickets (“AnyEvent”) we acquired the assets of
AnyEvent. Pursuant to the Agreement, we purchased the domain name
“http://anyevent.com,” the contents of the website “http://anyevent.com,” the
inventory of sporting events, concerts and tours, and theatre tickets
outstanding as of the date of the Agreement, the phone number 1-800-ANYEVENT,
and all existing contracts between Any Event and other existing box offices,
theatres and brokers, pursuant to which AnyEvent acquires its ticket inventory.
In consideration for the assets purchased under the Agreement, we paid $300,000
in cash and issued 137,500 shares of restricted common stock valued at $4.00 per
share (aggregate value $550,000), which approximated the fair market value on
the date of issuance, for total purchase consideration of $850,000.
Additionally, the Company paid $96,000 for the actual costs of the ticket
inventory based on a post-closing audit.




22




On August
7, 2007, pursuant to an Asset Purchase Agreement with Exhibit Merchandising LLC,
and the members of EM, the Company purchased substantially all of the assets of
EM. The purchase price for the assets was $11.5 million in cash and 5,000,000
restricted shares of the Company’s Common Stock with a market value of $35.0
million. We also assumed $120,000 in liabilities, primarily related to inventory
of EM.





Other





During
2008, 2007 and 2006 the Company purchased $454,000, $678,000 and $41,000 of
fixed assets. Further in 2007 the Company acquired certain website domain names
for an additional $132,000.





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.





Results
of Operations:





Consolidated
Results of Operations


%
      change
              
              
              %
      change2008
      v
              
              
              2007
      v2008
              
              
              2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
              
              $
              69,545,000
              
              
              $
              18,567,000
              
              
              $
              5,388,000
              
              
              
              275
              %
              
              
              245
              %Operating
      Expenses:Direct
      operating expenses
              
              
              48,490,000
              
              
              
              11,672,000
              
              
              
              2,173,000
              
              
              
              315
              %
              
              
              437
              %Selling,
      general and administrative expenses
              
              
              12,547,000
              
              
              
              15,934,000
              
              
              
              1,214,000
              
              
              
              -21
              %
              
              
              1,213
              %Depreciation
      and Amortization
              
              
              4,601,000
              
              
              
              1,668,000
              
              
              
              164,000
              
              
              
              176
              %
              
              
              917
              %Impairment
      of goodwill
              
              
              25,445,000
              
              
              
              -
              
              
              
              -
              
              
              
              N/A
              
              
              
              N/AImpairment
      of intangible assets
              
              
              7,687,000
              
              
              
              -
              
              
              
              -
              
              
              
              N/A
              
              
              
              N/ACorporate
      expenses
              
              
              5,654,000
              
              
              
              5,658,000
              
              
              
              2,559,000
              
              
              
              0
              %
              
              
              611
              %Operating
      Loss
              
              
              (34,879,000
              )
              
              
              (16,365,000
              )
              
              
              (722,000
              )
              
              
              113
              %
              
              
              2167
              %Operating
      Margin
              
              
              -3
              %
              
              
              -88
              %
              
              
              -13
              %Interest
      expense
              
              
              (19,000
              )
              
              
              (104,000
              )
              
              
              (329,000
              )Interest
      income
              
              
              59,000
              
              
              
              96,000
              
              
              
              16,000Gain
      on settlement with lender
              
              
              -
              
              
              
              -
              
              
              
              1,078,000Other
      income (expense) – net
              
              
              175,000
              
              
              
              28,000
              
              
              
              (9,000
              )Income
      from continuing operations
              
              
              (34,664,000
              )
              
              
              (16,345,000
              )
              
              
              34,000Income
      from discontinued operationsNon-cash
      gain from settlement of debts
              
              
              -
              
              
              
              -
              
              
              
              5,000Net
      Income (Loss)
              
              $
              (34,664,000
              )
              
              $
              (16,345,000
              )
              
              $
              39,000




23




Revenues.





The
Company earns fee revenues from the sales of discounted tickets from purchasers
of the tickets and commissions from the entertainment supplier, as well as
revenues from the sale of premium tickets to sporting and other entertainment
events. Through our discounted ticket venues we also offer discount dinner
reservations and golf tee times. Additionally, with the formation of Exhibit
Merchandising, LLC, from the assets acquired from Exhibit Merchandising, LLC
(Ohio), we earn revenues from the management of retail outlets associated with
the sale of merchandise related to touring exhibits, such as “Tutankhamun and
The Golden Age of the Pharaohs.” Further, 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 year ended December 31,
2008 and 2007 were $69.5 million and $18.6 million, respectively. Our revenues
increased $50.9 million, or 275%, during the year ended December 31, 2008 as
compared to the same period of the prior year.  The increase in
revenues is due to the acquisitions of Magic, NewSpace and Exhibit Merchandising
and the organic growth of our existing Ticketing Services. During the twelve
months ended December 31, 2008, the Company realized $44.6million of revenues
from Tix Productions whose operating units Magic Arts & Entertainment and
NewSpace Entertainment, were acquired effective January 2, 2008, and therefore
there are no corresponding revenues in 2007.





Our
revenues were $18.6 million for the year ended December 31, 2007 as compared to
$5.4 million for the year ended December 31, 2006. Our revenues increased $13.2
million, or 245%, during the year ended December 31, 2007 as compared to the
same period of the prior year due to increases in revenues in our Ticketing
Services segment of $8.9 million, and revenues from acquisitions that were
completed during 2007.





During
2006 and 2005 substantially all of our revenues were the result of commissions
and fees generated by our discount ticket operation. Over revenues from ticket
commissions and fees were $5.4 million for the year ended December 31, 2006, as
compared to $2.7 million  for the year ended December 31, 2005, an
increase of $2.7 million or 100%, as a result of an increase in the number of
tickets sold and an increase in the average ticket price.





More
detailed explanations for the changes in the years ended December 31, 2008,
2007, and 2006 changes are included in the applicable segment discussions
following.





Direct
operating expenses





Direct
operating expenses include payroll and related costs, rents, cost of tickets,
goods sold and, 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 $48.5 million for the
year ended December 31, 2008 as compared to $11.7 million for the year ended
December 31, 2007. Our operating expenses increased $36.8 million or 315% during
the year ended December 31, 2008 as compared to the same period of the prior
year primarily as a result of a 275% increase in revenues. Additionally, the
live entertainment companies that we acquired have higher direct cost of goods
and services than our Ticketing Services and Exhibit Merchandising businesses,
which were our primary sources of revenue in 2007.





Direct
Costs of Revenues were $11.7 million for the year ended December 31, 2007 as
compared to $2.2 million for the year ended December 31, 2006. Our operating
expenses increased $9.5 million or 437% during the year ended December 31, 2007
as compared to the same period of the prior year primarily as a result of a 245%
increase in revenues. Additionally, the companies that we acquired have higher
direct cost of goods and services than our discount ticketing operations, which
was our primary source of revenue in 2006.





During
2006 and 2005 substantially all of our direct operating costs were related to
the sales of discount tickets. Direct costs of revenues were $2.2 million for
the year ended December 31, 2006, as compared to $1.5 million for the year ended
December 31, 2005, an increase of $660,000, or 44%.





More
detailed explanations of the years ended 2008 and 2007 changes are included in
the applicable segment discussions following.





Operating
Segment Selling, Marketing and Administrative Expenses





Operating
segment selling, marketing and administrative expenses include advertising and
promotional costs related to the Company’s business activities, as well as the
segment cost of management. Our operating segment selling, marketing and
administrative expenses were $12.5 million for the year ended December 31, 2008,
as compared to $15.9 million for the year ended December 31, 2007. Our selling,
general and administrative expenses decreased $3.4 million or 21%, during
the year ended December 31, 2008 as compared to the same period of the prior
year.  The decrease in operating segments’ selling, marketing and
administrative expenses is a result of a $12.3 million decline at our Ticket
Services segment, which was offset in part by an increase in selling and
administrative expenses at Exhibit Merchandising of $2.8 million and a $6.1
million increase due to the operations of our Live Entertainment segment that
was formed in January 2008 from the merged assets of Magic and
NewSpace.





Our
operating segment selling, marketing and administrative expenses were $15.9
million for the year ended December 31, 2007, as compared to $1.2 million for
the year ended December 31, 2006. Our selling, general and administrative
expenses increased $14.7 million or 1,213%, during the year ended December
31, 2007 as compared to the same period of the prior year due to increases in
selling and administrative expenses of our Ticket Service segment of $13.8
million, as well the acquisition of EM in August 2007. We issue our common stock
as payment for certain consulting services provided in conjunction with the
development of strategic relationships with producers, presenters and venues.
These agreements are reviewed and approved by the Board of Directors prior to
their being entered and have durations that vary from two to four years. Due to
the nature of the work being performed by the service provider there are no
performance requirements included in these agreements, as a result the fair
value of the common stock is expensed at the time the agreement is entered into
by us. During 2007, we paid $1.7 million and issued common stock and warrants
with a fair market value of $10.9 million to consultants in our efforts to enter
into and expand our strategic relationships with producers, presenters and
venues related to our ticketing services segment.




24




During
2006 and 2005 substantially all of our segment selling, general and
administrative expenses were related to the sales of discount tickets. Our
selling, general and administrative expenses were $467,000 for the year ended
December 31, 2006, as compared to $326,000 for the year ended December 31, 2005,
an increase of $141,000 or 43.1%. Selling and marketing expenses decreased to
8.7% of revenues for the year ended December 31, 2006, as compared to 12.1% of
revenues for the year ended December 31, 2005.





More
detailed explanations of the years ended 2008 and 2007 changes are included in
the applicable segment discussions following.





Corporate
expenses





Corporate
expenses are expenses that relate to activities 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 were relatively unchanged for the year ended December 31,
2008, as compared to the same period of the prior year. Corporate expenses are
$5.7 million for the twelve months ended December 31, 2008 and represented 8% of
revenues as compared to $5.7 million for the year ended December 31, 2007 and
31% of revenues.  During the twelve months ended December 31, 2008,
corporate consulting expenses related to marketing services and public relations
declined $900,000 to $1.4 million, as compared to $2.3 million during
2007.  This was offset by an increase in the corporate payroll and
related expenses of $600,000 during 2008, as well as an additional $200,000 in
other corporate expenses, including $100,000 related to our NASDAQ listing. The
increase in payroll and related benefits was attributable to additional
administrative personnel being added to the payroll during 2008 due to our
growth and employees added in 2007 being employed for the entire
year.





Corporate
expenses increased $3.1 million, or 121% for the year ended December 31, 2007,
as compared to same period of the prior year. The majority of the increase in
corporate expense is related to the Company incurring $1.6 million in additional
consulting expenses during 2007 attributable to equity compensation paid to
outside consultants. We issued our common stock as payment for certain
consulting services provided in conjunction with investor relations and public
relations. These agreements were reviewed and approved by the Board of
Directors prior to their being entered and have durations that vary from two to
four years. Due to the nature of the work being performed by the service
provider there are no performance requirements included in these agreements. As
result the fair value of the common stock is expensed at the time these
agreements were entered into by us. Further, we paid an additional $600,000
in consulting expenses related to our efforts to expand and improve
our investor relations programs. Employee compensation expense increased
$1.2 million during 2007. The increase was attributable to a $1.0 million
increase in employee stock option expense resulting from 822,000 employee stock
option grants in 2007. Additionally corporate payroll and related expenses
increased approximately $200,000 during 2007. The increase was attributable to
additional administrative personnel being added to the payroll during 2007 and
employees added in 2006 being employed for the entire year.





Corporate
expenses increased $1.1 million, or 75% for the year ended December 31, 2006.
Included in general and administrative expenses were non-cash equity-based costs
of $1.3 million for the year ended December 31, 2006 (including $658,000
non-cash equity-based costs for officers and directors); as compared to $238,000
non-cash equity-based costs for the year ended December 31, 2005 (There were no
non-cash equity-based costs for officers and directors).





Goodwill
and Intangible Asset Impairment




The
Company has acquired and continues to acquire significant intangible assets that
Tix records at fair value. Tix’s management makes assumptions regarding inputs
into the discounted cash flow model about the timing and amount of future net
cash flows, risk, the cost of capital, terminal values and market participants.
Each of these factors can significantly affect the value of the intangible
asset. Tix engages independent valuation experts who review Tix's critical
assumptions and calculations for acquisitions of significant intangibles. Tix’s
management reviews intangible assets for impairment annually using an
undiscounted net cash flows approach. If the undiscounted cash flows of an
intangible asset are less than the carrying value of an intangible asset, the
intangible asset is written down to its fair value, which is usually the
discounted cash flow amount. Where cash flows cannot be identified for an
individual asset, the review is applied at the lowest group level for which cash
flows are identifiable. Goodwill and intangible assets are reviewed for
impairment annually or when an event that could result in an impairment of
goodwill occurs. During 2008, Tix’s management recorded impairment charges to
goodwill and intangible assets of $25.4 million and $7.7 million,
respectively.  There were no impairments of goodwill or intangible
assets in 2007 or 2006.


Changes
in forecasted operations can materially affect these estimates.  Once
an impairment of goodwill or other intangible assets has been recorded, it
cannot be reversed. There can be no assurance that future goodwill impairments
will not occur.





Depreciation
and Amortization





Our
depreciation and amortization was $4.6 million and $1.7 million for the years
ended December 31, 2008 and 2007 respectively. The approximate increase of $2.9
million in depreciation and amortization expense in 2008, reflects a $1.8
million increase in amortization expense associated with EM and $900,000
associated with our acquisitions of Magic and NewSpace in January 2008, for
which there are no corresponding charges in 2007.  The increase in
amortization expense associated with EM reflects twelve months of amortization
in 2008, whereas 2007 reflects the five months of expense following its
acquisition in August 2007.  For the year ended December 31, 2008,
depreciation expense increased $200,000 as compared to the same period in the
prior year. The increase reflects $175,000 in depreciation expense resulting
from the EM fixed assets acquired in August 2007 being depreciated for twelve
months in 2008 versus five months of depreciation expense in
2007.  Additionally, the remaining amount of the increase in
depreciation expense was related to the fixed assets acquired in our
acquisitions of Magic and NewSpace in January 2008, for which there is no
corresponding expense in 2007.  We expect that our future depreciation
of expenses will be consistent with our past amounts recorded.




25




Our
depreciation and amortization was $1.7 million and $164,000 for the years ended
December 31, 2007 and 2006 respectively. The approximate increase of $1.6
million in depreciation and amortization expense in 2007 primarily reflects a
$1.4 million increase in amortization expense and a $200,000 increase in
depreciation expense. The increase in amortization expense relates primarily to
a $14.9 million increase in amortizable intangible assets resulting from our
acquisition of Exhibit Merchandising, LLC in August 2007 and John’s Tickets in
March 2007, and to a lesser extent an increase in depreciable assets resulting
from the acquisitions.





During
2006 and 2005 substantially all of our depreciation expenses were related to our
Ticket Services segment. Depreciation and amortization was $164,000 for the year
ended December 31, 2006, as compared to $109,000 for the year ended December 31,
2005, an increase of $55,000 or 51.0%, primarily as a result of an increase in
leasehold improvements and equipment acquired for Tix4Tonight’s new ticketing
locations in Las Vegas.





Other
Income and (Expense)





Other
Income and Expense was immaterial for all periods presented.





Gain
on Settlement with Lender





On
September 13, 2006, the Company repaid in full its obligation to
Finova/Steamboat of $1.2 million (including accrued interest of $300,000) by
making final cash payment of $102,000. As a result, the Company recognized a
non-cash gain on settlement with lender of $1,078,000 during the year ended
December 31, 2006. There were no comparable events in 2007 or 2005.





Interest
Income




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




Interest
Expense





Interest
expense was $19,000, $104,000, and $329,000 for the years ended December 31,
2008, 2007, and 2006. Interest expense in 2008 was primarily the result of
interest associated with capital leases. Interest Expense of $76,000 incurred in
2007 was related to a $2.0 million note payable with a related party
and  an additional $28,000 incurred was a result of capital leased
assets. Interest expense of $329,000 in 2006 was principally the result
of  non-cash interest charges being realized through the amortization
of the discount of debentures that were issued in December 2004 and January
2005.  Debentures were fully amortized in March 2006.





Cash Flows





Year
      Ended December 31,2008
            
            2007
            
            2006Cash
      provided by (used in):Operating
      activities
            
            $
            7,570,000
            
            
            $
            144,000
            
            
            $
            1,169,000Investing
      activities
            
            $
            (3,679,000
            )
            
            $
            (12,642,000
            )
            
            $
            (41,000
            )Financing
      activities
            
            $
            (2,090,000
            )
            
            $
            17,972,000
            
            
            $
            499,000





Operating
Activities





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 is cash flows from
operations, while our long-term sources of funds will be from operations and
debt or equity financing.  During the last few years, we have relied
on the proceeds from loans from both unrelated and related parties and the
sale of our debt and equity securities to provide the resources necessary to
execute our business strategy.




26




Year
Ended 2008 Compared to Year Ended 2007





Cash
flows provided from operating activities were $7.6 million for the year ended
December 31, 2008, compared to cash provided from operations of $144,000 for the
year ended December 31, 2007. The $7.5 million increase in cash flows provided
from operating activities were the result of a $33.1 million impairment charge
to goodwill and intangible assets, for which there is no corresponding charge in
2007; and $2.9 million higher amortization expense in 2008 than 2007. This was
partially was offset by an $18.4 million larger net operating loss in 2008 as
compared to 2007; and  a reduction of $11.8 million in non-cash
consulting and payroll expenses from the issuance of  common stock for
payment of services in 2008 compared to 2007. The remaining amounts relate to
operating accounts that are reflective of the level and timing of activity that
occurred during the period, i.e., accounts receivable, accounts payable and
accrued liabilities.





Year
Ended 2007 Compared to Year Ended 2006





Cash
flows from operations were $144,000 for the year ended December 31, 2007,
compared to cash provided from operations of $1.2 million for the year ended
December 31, 2006. The $1.0 million decrease in cash flows provided from
operations were the result of a net operating loss in 2007, as compared to an
operating profit in 2006, and adjustments for non-cash items and changes in
accounts reflecting non-operating activities. Net loss in 2007 was $16.3 million
as compared to a $39,000 profit in 2006. Items that offset the additional $16.3
million loss in 2007 were $13.0 million more in consulting and payroll expenses
from the issuance of our common stock for payment of services in 2007 than in
2006, as well as $1.5 million more in amortization and depreciation expense
being recognized in 2007 than in 2006. Also, during 2006, we settled our
outstanding debt with a lender; the transaction resulted in us recognizing a
$1.1 million gain on the transaction and there was no comparable transaction in
2007. The remaining amounts relate to operating accounts that are reflective of
the level and timing of activity that occurred during the period, i.e., accounts
receivable, accounts payable and accrued liabilities.





Year
Ended 2006 Compared to Year Ended 2005





Cash
provided by operations was $1.2 million for the year ended December 31, 2006,
compared to cash provided from operations of $290,000 for the year ended
December 31, 2005. The $910,000 increase in cash provided by operations
primarily resulted from an increase in net income, adjusted for non-cash charges
and accounts reflecting non-operating activities, Net income in 2006 was $39,000
as compared to a $1.0 million loss in 2005. During 2006, we settled our
outstanding debt with a lender, the transaction resulted in our recognizing a
$1.1 million gain on the transaction, and there was no comparable transaction in
2005. Offsetting this gain we issued common stock for services in the amount of
$1.2 million for the year ended December 31, 2006, as compared to $223,000 for
the year ended December 31, 2005. The remaining amounts relate to operating
accounts that are reflective of the level and timing of activity that occurred
during the period, i.e., accounts receivable, accounts payable and accrued
liabilities.





Investing Activities





Year
Ended 2008 Compared to 2007





Cash used
in investing activities was $3.7 million for the year ended December 31, 2008
compared to $12.6 million in 2007. During 2008, Tix acquired through merger
Magic Arts & Entertainment, LLC and NewSpace Entertainment, Inc for $2.0
million and $1.3 million respectively, as compared to 2007 when Tix acquired the
assets of Exhibit Merchandising, LLC (Ohio) for $11.4 million and AnyEvent, LLC
for $396,000. Additionally, in 2008 and 2007 we made investments in our
infrastructure (e.g., telephone system and intellectual property) of $454,000
and $703,000 respectively.  We expect to continue to consider
acquisition opportunities; however there is no assurance that we can find such
opportunities in the future or if identified that we can come to an agreement
with their owners.  The Company expects to make similar levels of
investment in its infrastructure in future years.





Year
Ended 2007 Compared to 2006





Cash used
in investing activities was $12.6 million for the year ended December 31, 2007
compared to $41,000 in 2006. The increase in cash used in investing activities
is reflective of our acquiring the assets of Exhibit Merchandising, LLC (Ohio)
for $11.4 million and AnyEvent, LLC for $396,000. There were no comparable
events in 2006. Additionally, in 2007 we made investments in our infrastructure
(e.g., telephone system and intellectual property) of $703,000.





Year
Ended 2006 Compared to 2005





Cash used
in investing activities was $41,000 for the year ended December 31, 2006
compared to $221,000 in 2005. The decrease in cash used in investing activities
is reflective of the opening of three new ticket facilities in 2005, while
during the year ended December 31, 2006, no new discount ticket locations were
added.




27




Financing
Activities





Year
Ended 2008 Compared to 2007





Cash used
in financing activities for the twelve months ended December 31, 2008, were $2.1
million, as compared to $18.0 million generated from financing activities during
the year ended December 31, 2007. The $20.1 million decrease in cash provided
from financing activities during the year ended December 31, 2008, primarily
reflects $2.1 million used in our buy-back program, while in the year ended
December 31, 2007 we received $17.8 million of net proceeds from the sale of
common stock and warrants. Net proceeds from the exercise of options and
warrants in 2008 and 2007 were $54,000 and $229,000 respectively. Partially
offsetting these increases was the repayment in 2008 and 2007 of long term
capital lease obligations of $46,000 and $41,000 respectively.





Year
Ended 2007 Compared to 2006





Cash flow
from financing activities was $18.0 million for the year ended December 31,
2007, compared to $499,000 in 2006. The $17.5 million increase in cash provided
from financing activities during the year ended December 31, 2007, primarily
reflects a $16.8 million increase in net proceeds received from the sale of
common stock and warrants in 2007, as compared to 2006. We received comparable
amounts of net proceeds from the exercise of options and warrants in 2007 and
2006. Net proceeds from the exercise of options and warrants in 2007 and 2006
were $229,000 and $211,000 respectively. Partially offsetting these increases
was the repayment in 2007 and 2006 of long term capital lease obligations and
convertible debentures of $41,000 and $582,000 respectively.





In April
24, 2007, we borrowed $2,000,000 from a stockholder of the Company, pursuant to
an unsecured short-term note, with interest at 8%, per annum payable monthly. On
September 29, 2007 the Company repaid the loan in full.





Year
Ended 2006 Compared to 2005





Cash
provided from financing activities was $499,000 for the year ended December 31,
2006 compared to $116,000 for the year ended December 31, 2005. The $383,000
increase in cash provided from financing activities during the year ended
December 31, 2006, primarily reflects $1.0 million of proceeds resulting from
the sale of our common stock and warrants and the receipt of $214,000 resulting
from the exercise of options and warrants that were offset by $714,000 in
payments related to notes payable, capital lease obligations and convertible
debentures. During the year ended December 31, 2005 we received $239,000 as a
result of the conversion of convertible debentures into its common stock that
was offset by the repayment of $123,000 related to notes payable and capital
lease obligations.





Discussion
of Segment Results





We
operate in three reportable segments; ticket services, event and branded
merchandising and with our formation of Tix Productions, Inc. (TPI) in 2008,
live entertainment.




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.





28





Information
related to our operating segments is as follows:





Ticketing
            
            
            Exhibit
            
            
            Live
            
            
            Corporate
            
            
            ConsolidatedServices
            
            
            Merchandising
            
            
            Entertainment
            
            
            Expenses
            
            
            and
      Combined2008Revenue
            
            $
            13,952,000
            
            
            $
            11,030,000
            
            
            $
            44,563,000
            
            
            $
            -
            
            
            $
            69,545,000Direct
      operating expenses
            
            
            5,725,000
            
            
            
            6,877,000
            
            
            
            35,888,000
            
            
            
            -
            
            
            
            48,490,000Selling,
      general and administrative expenses
            
            
            2,720,000
            
            
            
            3,681,000
            
            
            
            6,146,000
            
            
            
            5,654,000
            
            
            
            18,201,000Impairment
      of goodwill
            
            
            -
            
            
            
            25,445,000
            
            
            
            -
            
            
            
            -
            
            
            
            25,445,000Impairment
      of intangible assets
            
            
            -
            
            
            
            7,687,000
            
            
            
            -
            
            
            
            -
            
            
            
            7,687,000Depreciation
      and amortization
            
            
            206,000
            
            
            
            3,173,000
            
            
            
            916,000
            
            
            
            306,000
            
            
            
            4,601,000Operating
      income (loss)
            
            $
            5,301,000
            
            
            $
            (35,833,000
            )
            
            $
            1,613,000
            
            
            $
            (5,960,000
            )
            
            $
            (34,879,000
            )Total
      assets
            
            $
            3,738,000
            
            
            $
            10,462,000
            
            
            $
            10,449,000
            
            
            $
            4,199,000
            
            
            $
            28,848,0002007Revenue
            
            $
            14,284,000
            
            
            $
            4,283,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            18,567,000Direct
      operating expenses
            
            
            8,829,000
            
            
            
            2,843,000
            
            
            
            -
            
            
            
            -
            
            
            
            11,672,000Selling,
      general and administrative expenses
            
            
            15,029,000
            
            
            
            905,000
            
            
            
            -
            
            
            
            5,658,000
            
            
            
            21,592,000Depreciation
      and amortization
            
            
            195,000
            
            
            
            1,229,000
            
            
            
            -
            
            
            
            244,000
            
            
            
            1,668,000Operating
      income (loss)
            
            $
            (9,769,000
            )
            
            $
            (694,000
            )
            
            $
            -
            
            
            $
            (5,902,000
            )
            
            $
            (16,365,000
            )Total
      assets
            
            $
            2,977,000
            
            
            $
            47,224,000
            
            
            $
            -
            
            
            $
            4,967,000
            
            
            $
            55,168,0002006Revenue
            
            $
            5,388,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            5,388,000Direct
      operating expenses
            
            
            2,173,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,173,000Selling,
      general and administrative expenses
            
            
            1,214,000
            
            
            
            -
            
            
            
            -
            
            
            
            2,559,000
            
            
            
            3,773,000Depreciation
      and amortization
            
            
            159,000
            
            
            
            -
            
            
            
            -
            
            
            
            5,000
            
            
            
            164,000Operating
      income (loss)
            
            $
            1,842,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (2,564,000
            )
            
            $
            (722,000
            )Total
      assets
            
            $
            1,699,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            933,000
            
            
            $
            2,632,000




29





The
following is a summary of the operating results of our operating
segments.





Ticketing
Services:




Our
Ticketing Services segment operating results were as follows:




Segment
Reporting (T4T, AE, Tix4Members)





%
      Change
            
            
            %
      ChangeYear Ended December 31,
            
            
            2008
      vs.
            
            
            2007
      vs.2008
            
            
            2007
            
            
            2006
            
            
            2007
            
            
            2006Revenue
            
            $
            13,952,000
            
            
            $
            14,284,000
            
            
            $
            5,388,000
            
            
            
            -2
            %
            
            
            165
            %Operating
      Expenses:Direct
      operating expenses
            
            
            5,725,000
            
            
            
            8,829,000
            
            
            
            2,173,000
            
            
            
            -35
            %
            
            
            306
            %Selling,
      general and administrative expenses
            
            
            2,720,000
            
            
            
            15,029,000
            
            
            
            1,214,000
            
            
            
            -82
            %
            
            
            1138
            %Depreciation
      and amortization
            
            
            206,000
            
            
            
            195,000
            
            
            
            159,000
            
            
            
            6
            %
            
            
            23
            %Operating
      income (loss)
            
            $
            5,301,000
            
            
            $
            (9,769,000
            )
            
            $
            1,842,000
            
            
            
            -154
            %
            
            
            -630
            %Operating
      margin
            
            
            38
            %
            
            
            -68
            %
            
            
            34
            %
            
            
            -156
            %
            
            
            -300
            %





Revenues





The
Ticketing services operations are performed by our Tix4Tonight subsidiary.
Tix4Tonight has two operating units: Tix4Tonight, our discount ticket seller,
and Tix4AnyEvent (AnyEvent), our premium ticketing operation. The Ticketing
Service segment earns fee revenues from the sales of discounted tickets to
purchasers of the tickets and commissions from the entertainment supplier, as
well as revenues from the sale of premium tickets to sporting and other
entertainment events. Through our discounted ticket venues, we also offer
discount dinner reservations and golf tee times. Ticketing service revenues were
$14.0 million for the year ended December 31, 2008 as compared to $14.3 million
for the year ended December 31, 2007. Our revenues were unchanged during the
year ended December 31, 2008 as compared to the same period of the prior year.
The stability in our Ticket Service segment revenues is the result of two
factors. The first factor is that we have changed our strategy with regards to
premium tickets.  AnyEvent’s customer changed from the general public
to national retail ticket brokers. As a result of this change we are assuming
less risk. The effect of this change in strategy was that our premium ticket
revenues declined $5.1 million to $1.2 million for the year ended December 31,
2008.  The second factor is Tix4Tonight’s revenues increased $4.7
million or 59% in 2008 as compared to the same period in 2007. The increase
reflects both higher demand for discount tickets as well as a higher average
selling ticket price in 2008. Tix4Tonight discount tickets sold increased
346,000 tickets or 48% to 1,060,000 discounted show tickets for the year ended
December 31, 2008. This increase in revenues in 2008 as compared to 2007
reflects an increased customer demand for tickets, and higher
revenues  our dinner reservation operations. Tix4Tonight earned
commissions and fees related to the sale of $53.9 million of tickets to Las
Vegas shows and events for the year ended December 31, 2008, as compared
to $33.2 million for the year ended December 31, 2007. The average
ticket price increased to $50.88 during the year-ended December 31, 2008, as
compared to $46.56 for the comparable period in 2007.





Ticketing
Services revenues were $14.3 million for the year ended December 31, 2007 as
compared to $5.4 million for the year ended December 31, 2006. Our revenues
increased $8.9 million, or 165%, during the year ended December 31, 2007 as
compared to the same period of the prior year. The increase in Ticket Service
segment revenues is the result of two factors. The first factor is AnyEvent was
acquired in March 2007 and its results are reflected in this segment. During the
approximately 10 months that we owned AnyEvent it generated $6.2 million in
revenues. The second factor is Tix4Tonight’s revenues increased $2.6 million or
49% in 2007 as compared to the same period in 2006. The increase reflects both
higher demand for discount tickets as well as an average higher selling price
per ticket in 2007. Tix4Tonight discount tickets sold increased 141,000 tickets
or 27% to 714,000 discounted show tickets for the year ended December 31, 2007.
This increase in revenues in 2007 as compared to 2006 reflects an increased
customer demand for tickets, and new sources of revenue, including discount
golf, and dinner reservations. Commissions and fees were earned on the gross
sales value of show tickets sold to customers of $33.2 million for the
year ended December 31, 2007, as compared to $23.0 million for the
year ended December 31, 2006. The average ticket price increased to $48.39 in
2007, as compared to $36.38 in 2006.





During
2006 and 2005 substantially all of our revenues were from ticket commissions and
fees generated by our discount ticket operation. For the year ended December 31,
2006, our revenues were $5.4 million as compared to $2.7 million for the year
ended December 31, 2005, an increase of $2.7 million or 99.9%. The average
ticket price increased to $36.38 in 2006, as compared to $28.25 in 2005.
Commissions and fees were earned on the gross sales value of show tickets sold
to customers of $23.2 million for the year ended December 31, 2006, as
compared to $10.3 million for the year ended December 31, 2005, an increase
of $12.9 million or 125.2%. The Company sold 573,597 tickets in 2006, as
compared to 319,238 tickets in 2005, an increase of 254,359 tickets or 79.7%.
Revenues from dinner reservations and golf reservations, introduced in the
second half of 2006, were not material.




30




During
2008, 24% of our Ticketing Service segment’s revenues were derived from a single
producer of shows for which we sell discount tickets for multiple shows. Each
show appears at a different venue, hotel or theatre; however no single show,
venue or theatre was greater than 10% of revenues. During the years ended
December 31, 2007 and 2006, there were no showrooms or other ticket sources
which accounted for 10% or more of ticketing services revenues.





Direct
operating expenses





Tix4Tonight
direct operating expenses include payroll and related costs, rents, and cost of
tickets sold. Direct operating expenses were $5.7 million for the year ended
December 31, 2008 as compared to $8.8 million for the year ended December 31,
2007. Our direct operating expenses declined $3.1 million or 35%. The decline in
direct operating expenses is reflective of our change in strategy regarding the
sale of premium tickets. During the year ended December 31, 2008, our premium
ticket direct operating cost declined $4.5 million to $1.0 million, as a result
of a corresponding decline in premium ticket revenues. The decline in direct
operating costs associated with our premium ticket business was offset in part
by higher costs associated with the higher revenues from our discount ticket
operations.  Direct operating cost expenses associated with our
discount ticket operations increased 40%, which is consistent with our 59%
increase in revenues associated with our discount tickets
operations.





Direct
Costs of Revenues were $8.8 million for the year ended December 31, 2007 as
compared to $2.2 million for the year ended December 31, 2006. Our operating
expenses increased $6.6 million or 306%. The higher operating expenses were
reflective of the higher revenues from our existing discount ticket operations,
as well as the acquisition of AnyEvent.





Direct
operating expense of same day discount ticket sales were $3.4 million for the
year ended December 31, 2007, as compared to $2.2 million for the year ended
December 31, 2006, an increase $1.2 million or 50%. The increase in direct
operating costs is consistent with the 49% increase in discount ticket revenues.
Direct costs of revenues increased to 42% of revenues for the year ended
December 31, 2006, as compared to 40% of revenues for the year ended December
31, 2006. The slightly higher increase in direct operating expense as a
percentage of revenues as compared to 2006, is primarily due to the start up
cost related to opening our fifth leased ticket outlet in November
2007.





Direct
operating expense for our premium ticket operation, AnyEvent, were $5.4 million,
from the date of acquisition on March 14, 2007 to December 31, 2007. Direct
operating expenses represented 87% of revenues earned.





During
2006 and 2005 substantially all of our direct operating costs were related to
the sales of discount tickets. Direct costs of revenues were $2.2 million for
the year ended December 31, 2006, as compared to $1.5 for the year ended
December 31, 2005, an increase of $663, or 44%. Direct costs of revenues
decreased to 40.3% of revenues for the year ended December 31, 2006, as compared
to 56.0% of revenues for the year ended December 31, 2005, as a result of a
slower rate of increase in direct costs of revenues as compared to the growth in
revenues in 2006 as compared to 2005. Direct costs of revenues increased on an
absolute basis in 2006 as compared to 2005 as a result of an increase in rent
expense of $300,000 relating to an increase in the number of ticketing locations
and contingent rent based upon achieving significant revenue increases, and as a
result of an increase in personnel costs of $328,000 resulting from the hiring
additional employees to staff these locations.





Selling,
Marketing and Administrative Expenses





Tix4Tonight
selling, marketing and administrative expenses include advertising and
promotional costs related to its business activities, as well as the segment
cost of management. Tix4Tonight’s selling; marketing and administrative expenses
were $2.7 million for the year ended December 31, 2008, as compared to $15.0
million for the year ended December 31, 2007. Our selling, marketing and
administrative expenses decreased $12.3 million or 82%, during the year ended
December 31, 2008. The $12.3 million decrease in selling, marketing and
administrative expenses is the result of the Company issuing $12.6 million of
common stock in 2007 as a payment for certain consulting services provided in
conjunction with the development of strategic relationships with producers,
presenters and venues for which there was no corresponding expense in 2008. This
was partially offset by a $300,000 increase in Tix4Tonight’s selling, marketing,
and administrative expense due to additional selling, and administrative expense
associated with an increase in revenues.





Tix4Tonight’s
selling; marketing and administrative expenses were $15.0 million for the year
ended December 31, 2007, as compared to $1.2 million for the year ended December
31, 2006. Our selling, marketing and general and administrative expenses
increased $13.8 million or 1,138%, during the year ended December 31, 2007. The
$13.8 million increase in selling, general and administrative expenses includes
$12.6 million related to consulting expenses. We issue our common stock as a
payment for certain consulting services provided in conjunction with the
development of strategic relationships with producers, presenters and venues.
These agreements are reviewed and approved by our Board of Directors prior to
their being entered and have durations that vary from two to four years. Due to
the nature of the work being performed by the service provider there are no
performance requirements included in these agreements, as a result the fair
value of the common stock is expensed at the time the agreement is entered into
by us. During 2007, we paid $1.7 million and issued common stock and warrants,
which at the time of issuance had a fair market value of $10.9 million. The
remaining $1.2 million increase is due to additional selling, and
administrative expense associated with an increase in revenues and our
acquisition of  John's Tickets.




During
2006 and 2005 substantially all of our segment selling, general and
administrative expenses were related to the sales of discount tickets. Our
selling, general and administrative expenses were $1.2 million for the year
ended December 31, 2006, as compared to $779,000 for the year ended December 31,
2005, an increase of $435,000 or 55%. Selling and marketing expenses decreased
21% to 23% of revenues for the year ended December 31, 2006, as compared to 29%
of revenues for the year ended December 31, 2005.   The decrease reflects
the higher revenues earned at Tix4Tonight.




31





Exhibit
Merchandising:





Our
Exhibit Merchandising segment operating results were as follows:





Segment
Reporting - Exhibit Merchandising




%
      Change
            
            
            %
      ChangeYear
      Ended December 31,
            
            
            2008
      vs.
            
            
            2007
      vs2008
            
            
            2007
            
            
            2006
            
            
            2007
            
            
            2006Revenue
            
            $
            11,030,000
            
            
            $
            4,283,000
            
            
            $
            -
            
            
            
            158
            %
            
            
            N/AOperating
      Expenses:Direct
      operating expenses
            
            
            6,877,000
            
            
            
            2,843,000
            
            
            
            -
            
            
            
            142
            %
            
            
            N/ASelling,
      general and administrative expenses
            
            
            3,681,000
            
            
            
            905,000
            
            
            
            -
            
            
            
            303
            %
            
            
            N/AImpairment
      of goodwill
            
            
            25,445,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/AImpairment
      of intangible assets
            
            
            7,687,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/ADepreciation
      and amortization
            
            
            3,173,000
            
            
            
            1,229,000
            
            
            
            -
            
            
            
            158
            %
            
            
            N/AOperating
      income (loss)
            
            $
            (35,833,000
            )
            
            $
            (694,000
            )
            
            
            -
            
            
            
            5,063
            %
            
            
            N/AOperating
      margin
            
            
            -325
            %
            
            
            -16
            %
            
            
            N/A





Exhibit
Merchandising was acquired in August 2007; therefore there are no comparable
balances: EM offers exhibit and theatrical producers the opportunity for
additional revenue streams while adding the retail expertise required to manage
the operations, thereby leveraging the use of EM’s expertise and knowledge in
the specialized retail world. Exhibitors receive a simple royalty payment each
period with no other expense to the producer.




Revenues





EM
provides retail specialty stores for touring museum exhibitions and touring
theatrical productions. EM provides a complete turnkey retail store with
commercially-available and extensive custom-branded product for sale. It
operates the stores in spaced rented in conjunction with the exhibit. For the
year ended December 31, 2008 revenues from our Exhibit Merchandising operation
were $11.0 million or $917,000 per month as compared to $4.3 million or $860,000
per month for the five months of operation from August 8, 2007 to December 31,
2007. EM earned its revenues from the management of retail outlets
associated with the sale of merchandise related to touring exhibits, primarily
derived from “Tutankhamun and The Golden Age of the Pharaohs” and “Tutankhamun
the Golden King and the Great Pharaohs.” EM is subject to revenue fluctuations
as a result of the 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.




Direct operating
expenses





EM’s
operating expenses include payroll and related costs, rents, and cost of goods
sold. Direct operating expenses were $6.9 million, for the year ended December
31, 2008 or 62% of revenues as compared to $2.8 million or 66% of revenues for
the year ended December 31, 2007.







Selling,
Marketing and Administrative Expenses





EM’s
selling, marketing and administrative expenses include advertising and
promotional costs related to its business activities, as well as the segment
cost of management. EM’s selling, marketing and administrative expenses for the
twelve months ended December 31, 2008 were $3.7 million or 33% of revenues, as
compared to $905,000 or 21% of revenues.  The higher selling;
marketing and administrative expenses incurred during 2008 are reflective of
legal fees associated with the establishment of the foreign subsidiaries and the
associated cost of housing, travel and transportation.





Goodwill
and Intangible Asset Impairment





As part
of the annual review of goodwill and intangible assets, management determined an
impairment of goodwill and intangible assets had occurred.  As a
result, in 2008, Tix’s management recorded impairment charges to goodwill and
intangible assets of $25.4 million and $7.7 million,
respectively.  There were no impairments of goodwill or intangible
assets in 2007 or 2006.  Once an impairment of goodwill or other
intangible assets has been recorded, it cannot be reversed. There can be no
assurance that future goodwill impairments will not occur.




32




Live
Entertainment:





Our
Live Entertainment segment operating results were as follows:





Segment
Reporting – Live Entertainment





%
      Change
            
            
            %
      ChangeYear
      Ended December 31,
            
            
            2008
      vs.
            
            
            2007
      vs2008
            
            
            2007
            
            
            2006
            
            
            2007
            
            
            2006Revenue
            
            $
            44,563,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/AOperating
      Expenses:Direct
      operating expenses
            
            
            35,888,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/ASelling,
      general and administrative expenses
            
            
            6,146,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/ADepreciation
      and amortization
            
            
            916,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/AOperating
      income (loss)
            
            $
            1,613,000
            
            
            
            -
            
            
            
            -
            
            
            
            N/A
            
            
            
            N/AOperating
      margin
            
            
            4
            %
            
            
            N/A
            
            
            
            N/A





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





Revenues





During
the year ended December 31, 2008, revenues from our Live Entertainment
operations were $44.6 million. Revenues from live entertainment are a function
of a number of elements: revenue is a direct reflection of tickets sold times
ticket prices plus ancillary revenue streams including sponsorships and revenues
generated through premium ticketing opportunities.  In instances where the
Company acts as the primary obligor with suppliers, assumes credit risk, directs
the pricing of the tickets and purchases the advertising, the Company records
these revenues at gross. In other instances where we only receive a fee and are
not the principal obligors to vendors, we record these revenues at net. It is
management’s belief that this is consistent with EITF abstract 99-19 “Reporting
Revenues Gross as Principal Versus Net as an Agent.” Revenues from our Live
Entertainment operations are seasonal with the first and fourth quarters being
traditionally the strongest.




During
2008, our Live Entertainment segment had several shows, which represented
approximately 10% of its revenues. Shows that represented approximately 10% of
our revenues included “Walking with Dinosaurs,” “Jesus Christ Superstar,” “Lord
of the Dance” and “Mannheim Steamroller.”





Direct
Operating Expenses





During
the year ended December 31, 2008, direct operating expense was $35.9 million or
81% of revenues. Expenses that would be characterized as direct operating
expenses include the guarantees, profit sharing and royalties paid directly to
the touring productions, direct expenses of the theater which include staffing,
rent and box office charges, marketing costs and production costs which include
equipment rentals, stagehands and the cost of our production and settlement
manager to attend the production. Live Entertainment productions typically have
sharing arrangements whereby the artist receives an increasingly higher share of
the operating income as revenues increase therefore, significant increases in
presentation revenue do not typically result in comparable increases in
operating income as much of that goes to the production at hand. On the other
hand, significant decreases in presentation revenue do have a comparable impact
on operating income as the largest burden of risk in these presentations lies
with the promoter. In instances where the Company acts as the primary obligor
with suppliers, assumes credit risk, directs the pricing of the tickets and
purchases the advertising, the Company records these expenses at
gross.





Selling,
Marketing and Administrative Expenses





Live
Entertainment’s selling, marketing and administrative expenses include
advertising and promotional costs related to its business activities, as well as
the segment cost of management. Live Entertainment’s administrative expenses for
the year ended December 31, 2008, were $6.1 million or 14% of
revenues.





Depreciation
and amortization





Depreciation
and amortization expense incurred during the year ended December 31, 2008 was
$916,000 and primarily relates to amortization of the intangible assets that
resulted from the acquisitions of Magic and NewSpace. We expect to incur a
similar level of depreciation and amortization for 2009.




33




Contractual
Obligations and Commitments:





At
December 31, 2008, the Company did not have any material commitments for capital
expenditures. The Company’s principal commitments for the next five fiscal years
consisted of contractual commitments as summarized below.





Payments
      due by Fiscal Years Ending December 31,Total
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
            
            
            2013Employment
      agreement
            
            $
            3,245,000
            
            
            $
            1,690,000
            
            
            $
            1,394,000
            
            
            $
            161,000
            
            
            $
            -
            
            
            $
            -Capital
      lease obligations
            
            
            152,000
            
            
            
            64,000
            
            
            
            67,000
            
            
            
            9,000
            
            
            
            9,000
            
            
            
            3,000Operating
      lease obligations
            
            
            6,166,000
            
            
            
            2,433,000
            
            
            
            1,780,000
            
            
            
            1,120,000
            
            
            
            833,000
            
            
            
            -Total
      contractual cash obligations
            
            $
            9,
      563,000
            
            
            $
            4,187,000
            
            
            $
            3,241,000
            
            
            $
            1,290
      ,000
            
            
            $
            842,000
            
            
            $
            3,000





Off-Balance
Sheet Arrangements:





At
December 31, 2008, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.





ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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,
particularly because a significant portion of our investments are in short-term
debt securities issued by the U.S. government and institutional money market
funds. 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 year ended December 31, 2008, it would not have
had a material effect on our results of operations or cash flows for that
period.




ITEM
8. FINANCIAL STATEMENTS





The
consolidated financial statements are listed at the "Index to Consolidated
Financial Statements" elsewhere in this document.




ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





Not
applicable.




34




Item 9A     Control and
Procedures





Disclosure Controls and
Procedures





We
maintain disclosure controls and procedures that are designed to ensure that the
information disclosed in the reports we file with the Securities and Exchange
Commission under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.





Management,
including our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures, as of December 31,
2008, in accordance with Rules 13a-15(b) and 15d-15(b) of the Securities
and Exchange Act of 1934, as amended are effective to ensure the information
required to be disclosed by us in the reports that we file or submit under the
Securities and Exchange Act of 1934, as amended is recorded, processed,
summarized and reported within the time period specified in SEC rules and
forms.





Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls, and procedures or internal
controls will prevent all possible error and fraud.  Our disclosure
controls and procedures are, however, designed to provide reasonable assurance
of achieving their objectives, and our Chief Executive Officer and Chief
Financial Officer have concluded that our financial controls and procedures are
effective at that reasonable assurance level.





Management’s Report on Internal
Control Over Financial Reporting







Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended. Our management conducted an
evaluation of the effectiveness of our internal controls over financial
reporting based on the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Based on its evaluation, our management
concluded that our internal control over financial reporting was effective as of
December 31, 2008.









During
2008, we completed the acquisitions of Magic Arts & Entertainment, LLC and
NewSpace, Inc., which were included in the scope of our assessment of internal
control over financial reporting as of December 31, 2008.







Our
independent registered public accounting firm, Weinberg & Company, P.A., who
also audited our consolidated financial statements, independently assessed the
effectiveness of our internal control over financial reporting as of December
31, 2008, as stated in their report which is included in this Annual
Report.




Changes
in Internal Control Over Financial Reporting




There has
been no change in our internal control over financial reporting during the
fourth quarter of 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





ITEM
9B. OTHER INFORMATION





None.




35




PART
III.




ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT




The
following table and text set forth the names and ages of all directors and
executive officers of the Company as of February 28, 2009. The Board of
Directors is comprised of only one class. All of the directors will serve until
the next annual meeting of stockholders and until their successors are elected
and qualified, or until their earlier death, retirement, resignation or removal.
There are no family relationships among directors and executive officers. There
are no arrangements or understandings between any two or more of the Company's
directors or executive officers. Except as noted below, there is no arrangement
or understanding between any of the Company's directors or executive officers
and any other person pursuant to which any director or officer was or is to be
selected as a director or officer, there is no arrangement, plan or
understanding as to whether non-management shareholders will exercise their
voting rights to continue to elect the current board of directors, and there are
also no arrangements, agreements or understandings between non-management
shareholders that may directly or indirectly participate in or influence the
management of the Company's affairs.





As a
condition to the Closing of the Company’s acquisition of Exhibit Merchandising,
LLC (EM) the Company entered into a Voting Agreement with Joseph Marsh, a former
owner of EM pursuant to which, for a period of four
years our-management, Mr. Marsh granted the Company, through its
board of directors, the right to vote all of his shares, including the shares
acquired pursuant to the Asset Purchase Agreement. As of the date hereof, such
shares total 4,555,000.





On
September 11, 2006, Mitch Francis, the President and Chief Executive Officer of
the Company, entered into a Voting Agreement (the “Agreement") dated as of July
12, 2006 with Iqbal Ashraf, an individual. The parties entered into the
Agreement in connection with the Company's private equity financing with
accredited investors. Pursuant to the Agreement, Mr. Ashraf agreed to grant
voting power to Mr. Francis over 2,000,000 shares of the Company's common stock
and 1,000,000 shares of common stock issuable upon exercise of a warrant that
Mr. Ashraf holds (the "Voting Shares"). The parties agreed that at each
shareholders meeting of the Company at which a vote will take place and in
connection with any action by written consent, Mr. Francis will vote the Voting
Shares (or execute such written consent) or cause the Voting Shares to be voted
(or such consent to be executed).




Also provided herein is a brief description of the business
experience of each director and executive officer during the past five years and
an indication of directorships held by each director in other companies subject
to the reporting requirements under the Federal securities
laws.





Name
            
            Age
            
            Position(s)Mitch
      Francis
            
            53
            
            Chairman
      of the Board of Directors, President, Chief Executive
    OfficerKimberly
      Simon
            
            40
            
            Chief
      Operating OfficerMatthew
      Natalizio
            
            53
            
            Chief
      Financial OfficerBenjamin
      Frankel
            
            72
            
            DirectorNorman
      Feirstein
            
            59
            
            DirectorSam
      Georges
            
            62
            
            DirectorAndrew
      Pells
            
            52
            
            Director





None of
the Company's directors or executive officers has, during the past five years,
(1) had any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (2) been convicted in a
criminal proceeding or subject to a pending criminal proceeding; (3) been
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities, futures, commodities or banking activities; or (4) been
found by a court of competent jurisdiction (in a civil action), the Securities
and Exchange Commission or the Commodity Futures Trading Commission, to have
violated a federal or state securities or commodities law, and the judgment has
not been reversed, suspended or vacated.





Biographies
of Directors and Executive Officers:





Mitch
Francis has been the Chairman of the Board of Directors since June 1993, has
been Chief Executive Officer and President since the Company's inception in
April 1993, and was Chief Financial Officer March 1999 until September 2007.
Prior to founding the Company, Mr. Francis was involved in site acquisition,
analysis, architectural design, construction, management and marketing of
numerous residential and commercial real estate projects, and has been the
general partner of numerous real estate limited partnerships. Mr. Francis is
also the President and principal shareholder of Francis Development Inc., a real
estate development company that he founded in 1981.





Kimberly
Simon has been employed by the Company for over eleven years. Ms. Simon started
her career with the Company in September 1997 as the general manager of the
Company's Las Vegas ride simulator facility. Effective March 1, 2007, Ms. Simon
was promoted to Chief Operating Officer and is responsible for all day-to-day
operations. Prior to joining the Company, Ms. Simon gained managerial experience
with several national companies. Ms. Simon graduated from Northern Illinois
University with a Bachelor’s Degree.





Matthew
Natalizio has been Chief Financial Officer of the Company since September 2007.
Prior to joining us Mr. Natalizio was the CFO of CytRx Corporation from July
2004 to September 2007 and from November 2002 to December 2003, he was President
and General Manager of a privately held furniture manufacturing company. Prior
to that, from January 2000 to October 2002, he was Chief Financial Officer of
Qualstar Corporation, a publicly traded designer and manufacturer of data
storage devices. Mr. Natalizio is a CPA and was a Senior Manager at KPMG. He
earned his Bachelor of Arts degree in Economics from the University of
California, Los Angeles.




36




Benjamin
Frankel has been a director of the Company since March 17, 1995. Mr. Frankel is
a certified public accountant and was a partner in the accounting firm of
Frankel, Lodgen, Lacher, Golditch, Sardi & Howard and its predecessors from
1965 through 2005. In 2006, Mr. Frankel left his former firm and formed Frankel,
LoPresti & Co., an accountancy corporation.





Norman
Feirstein has been a director of the Company since March 17, 1995. Mr. Feirstein
practiced law as a sole practitioner from 1978 until July 1993. Mr. Feirstein
currently practices law as the Law Offices of Norman Feirstein.





Sam
Georges joined the Company as a director in February 2007. Mr. Georges is the
Chief Executive Officer and President of various entities affiliated with
Anthony Robbins, and has worked with Mr. Robbins since 1993. Mr. Georges also
serves as a director of many of the same privately-held companies affiliated
with Anthony Robbins.




Andrew
Pells was elected as a Director of the effective July 2, 2007. From 1990 to
December 2003, Mr. Pells served as an executive of Hotels.com and its
predecessors in various management capacities. From January 1, 2004 to the
present, Mr. Pells has been an independent consultant to the Internet/Travel
Industry.




Compliance
with Section 16(a) of the Securities Exchange Act of 1934, as
amended:





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file various reports with
the Securities and Exchange Commission concerning their holdings of, and
transactions in, securities of the Company. Copies of these filings must be
furnished to the Company.




To the
Company’s knowledge based solely on its review of the copies of the Section
16(a) reports furnished to the Company and written representations to the
Company that no other reports were required, the Company believes that all
individual filing requirements applicable to the Company's directors and
executive officers complied with Section 16(a) during 2008.





Family
Relationships among Directors and Executive Officers:





There
were no family relationships among directors and executive officers during the
years ended December 31, 2008, 2007 and 2006.





Indebtedness
of Directors and Executive Officers:





None of
the Company's directors or executive officers or their respective associates or
affiliates is indebted to the Company.







Legal
Proceedings with Affiliates:





The
Company is not involved in any legal proceedings with any director, officer,
affiliate or stockholder of the Company.





Code of
Ethics:





The
Company has adopted a written Code of Ethics that applies to its senior
management. A copy of the Company's Code of Ethics, executed by the Company's
Chief Executive Officer and Chief Financial Officer, has been filed as an
amended exhibit to this Annual Report on Form 10-K. A copy of the Company's Code
of Ethics is available on the Company’s website http://www.tixcorp.com
or alternatively to any shareholder by addressing a request to the attention of
the Secretary of the Company and mailing such request to the Company's corporate
offices. Any amendment to the Code of Ethics or any waiver of the Code of Ethics
will be disclosed promptly following the date of such amendment or waiver
pursuant to a filing under a Current Report on Form 8-K with the Securities and
Exchange Commission.





Changes
in Procedures to Nominate Directors:





Since the
date of the Company's last disclosures pursuant to Item 7(d)(s)(ii)(G) of
Schedule 14A of the Securities Exchange Act of 1934, as amended, there have been
no material changes to the procedures by which security holders may recommend
nominees to the Company's Board of Directors.




37





Meetings
and Committees of the Board of Directors:





During
the year ended December 31, 2008, the Company’s Board of Directors met on three
occasions. Additional board actions were taken by unanimous written
consent.




The
Company has a Nomination and Governance Committee of the Board of Directors. The
purpose of the Nomination and Governance Committee of the Board of Directors of
Tix Corporation is to assist the Board in discharging its duties relating to
corporate governance and the composition and evaluation of the
Board.  The members of the Committee are Messrs. Pells, Feirstein
and Georges, none of whom is an employee of the Company. Mr. Pells serves as the
Chairman of the Committee. Each of the members is an “independent director”
under the NASDAQ and Exchange Act rules.





The
Compensation Committee of the Board of Directors consists of three directors of
the Company, Andy Pells, Norman Feirstein and Sam Georges, none of whom is an
employee of the Company. Mr. Feirstein serves as the Chairman of the Committee.
The Compensation Committee reviews the performance of the executive officers of
the Company and reviews the compensation programs and agreements for key
employees, including salary and bonus levels.  Each of the members is
an “independent director” under the NASDAQ rules.





The Audit
Committee of the Board of Directors consists of Andy Pells, Norman Feirstein and
Sam Georges, none of whom is an employee of the Company. Mr. Georges serves as
the Chairman of the Committee. The audit committee reviews, acts on and reports
to the Board of Directors with respect to various auditing and accounting
matters, including the selection of the Company's independent public
accountants, the scope of the annual audits, the nature of non-audit services,
the fees to be paid to the independent public accountants, the performance of
the independent public accountants, and the accounting practices of the
Company.  Each of the members is an “independent director” under the
NASDAQ rules.  The Board of Directors has determined that
Mr. Georges is an audit committee financial expert as that term is defined
in Item 407(d)(5) of the Exchange Act.





ITEM 11.
EXECUTIVE COMPENSATION





Overview of
Executive Compensation Program





The
Compensation Committee of our board of directors has responsibility for
establishing, implementing and monitoring our executive compensation program
philosophy and practices. The Compensation Committee seeks to ensure that the
total compensation paid to our named executive officers is fair, reasonable and
competitive. Generally, the types of compensation and benefits provided to the
named executive officers are similar to those provided to our other
officers.





Throughout
this Annual Report, the individuals included in the Summary Compensation Table
are referred to as the “named executive officers.”





Compensation
Philosophy and Objectives





The
components of our executive compensation consist of salary, annual cash bonuses
awarded based on the Compensation Committee’s subjective assessment of each
individual executive’s job performance during the past year, stock option grants
to provide executives with longer-term incentives, and occasional special
compensation awards (either cash or stock options) to reward extraordinary
efforts or results.





The
Compensation Committee believes that an effective executive compensation program
should provide base annual compensation that is reasonable in relation to
individual executive’s job responsibilities and reward the achievement of both
annual and long-term strategic goals of our Company. The Compensation Committee
uses annual and other periodic cash bonuses to reward an officer’s achievement
of specific goals and employee stock options as a retention tool and as a means
to align the executive’s long-term interests with those of our stockholders,
with the ultimate objective of improving stockholder value. The Compensation
Committee evaluates both performance and compensation to maintain our company’s
ability to attract and retain excellent employees in key positions and to assure
that compensation provided to key employees remains competitive relative to the
compensation paid to similarly situated executives of comparable companies. To
that end, the Compensation Committee believes executive compensation packages
provided by us to our named executive officers should include both cash
compensation and stock options.





Because
of the size of our Company, the small number of executive officers in our
Company, and our company’s financial priorities, the Compensation Committee has
decided not to implement or offer any pension benefits, deferred compensation
plans, or other similar plans for our named executive officers.





Role of Executive
Officers in Compensation Decisions





The
Compensation Committee makes all compensation decisions for the named executive
officers and approves recommendations regarding equity awards to all of our
officers. Decisions regarding the non-equity compensation of our other officers
are made by our President and Chief Executive Officer.





The
Compensation Committee and the President and Chief Executive Officer annually
review the performance of each named executive officer (other than the President
and Chief Executive Officer, whose performance is reviewed only by the
Compensation Committee). The conclusions reached and recommendations based on
these reviews, including with respect to salary adjustments and annual award
amounts, are presented to the Compensation Committee. The Compensation Committee
can exercise its discretion in modifying any recommended adjustments or awards
to executives.




38




Setting Executive
Compensation





Based on
the foregoing objectives, the Compensation Committee has structured the
Company’s annual cash and incentive-based cash and non-cash executive
compensation to seek to motivate our named executives to achieve the business
goals set by the Company, to reward the executives for achieving such goals, and
to retain the executives. In doing so, the Compensation Committee historically
has not employed outside compensation consultants. The Compensation Committee
utilizes data to set compensation for our executive officers at levels targeted
at or around a range of compensation amounts provided to executives at
comparable companies considering, for each individual, their individual
experience level related to their position with us. There is no pre-established
policy or target for the allocation between either cash and non-cash incentive
compensation.





2008 Executive
Compensation Components





For 2008,
the principal components of compensation for the named executive officers
were:





•
            
            base
      salary;•
            
            annual
      bonuses; and•
            
            equity
      incentive compensation.





Base
Salary





The
Company provides named executive officers and other employees with base salary
to compensate them for services rendered during the year. Base salary ranges for
the named executive officers are determined for each named executive officer
based on his position and responsibility.





During
its review of base salaries for executives, the Compensation Committee primarily
considers:





•
            
            the
      negotiated terms of each executive employment
agreement;•
            
            internal
      review of the executive’s compensation, both individually and relative to
      other named executive officers; and•
            
            individual
      performance of the executive.





Salary
levels are typically considered annually as part of the company’s performance
review process, as well as upon a change in job responsibility. Merit-based
increases to salaries are based on the Compensation Committee’s assessment of
the individual’s performance. Base salaries for the named executive officers in
2008 were increased from the base salaries in effect during the prior year by
amounts ranging from 3% for our prior to 8%. The salaries and other terms of
employment of Mr. Matthew Natalizio, our Chief Executive Officer, and Mr. Mitch
Francis are in the process of being negotiated with our compensation
committee.





Annual and
Special Bonuses





The
Compensation Committee has not established an incentive compensation program
with fixed performance targets. Because we do not generate significant profits,
the Compensation Committee bases its discretionary compensation awards on the
achievement of milestones, and effective fund-raising efforts, and effective
management of personnel and capital resources, among other criteria. During
2008, there were no bonuses paid to management.





Equity Incentive
Compensation





As
indicated above, the Compensation Committee also aims to encourage the company’s
executive officers to focus on long-term company performance by allocating to
them stock options that vest over a period of several years. In 2007, the
Compensation Committee granted to Ms. Simon a nonqualified option to
purchase 300,000 shares of our common stock at a price of $7.00 per share, which
equaled the closing market price on the date of grant. The option vests annually
over three years, provided that Mr. Simon continues in our employ. In
addition, in connection with the hiring of Matthew Natalizio as Chief Financial
Officer, and our other named executive officers, the Compensation Committee also
granted stock options to those named executive officers. All of these other
stock options had an exercise price equal to the closing market price on the
date of grant, and also vest monthly over three years, provided that such
executives remain in our employ through such monthly vesting
periods.




39




Retirement Plans,
Perquisites and Other Personal Benefits





We have
adopted a tax-qualified employee savings and retirement plan, the 401(k) Plan,
for eligible United States employees, including our named executive officers.
Eligible employees may elect to defer a percentage of their eligible
compensation in the 401(k) Plan, subject to the statutorily prescribed annual
limit. We may make matching contributions on behalf of all participants in the
401(k) Plan in an amount determined by our board of directors. Matching and
profit-sharing contributions, if any, are subject to a vesting schedule; all
other contributions are at all times fully vested. We intend the 401(k) Plan,
and the accompanying trust, to qualify under Sections 401(k) and 501 of the
Internal Revenue Code so that contributions by employees to the 401(k) Plan, and
income earned (if any) on plan contributions, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that we will be able to deduct our
contributions, if any, when made. The trustee under the 401(k) Plan, at the
direction of each participant, may invest the assets of the 401(k) Plan in any
of a number of investment options.





We do not
provide any of our executive officers with any other perquisites or personal
benefits, other than benefits that we offer Mr. Francis and Ms. Simon
provided for in their employment agreements. As required by Mr. Francis’
employment agreement, during 2008 we paid insurance premiums with respect to
life insurance policies for Mr. Francis which had a face value of
approximately $5.0 million as of December 31, 2008 and under which
Mr. Francis’ designee is the beneficiary. In addition Mr. Francis receives
a car allowance, car insurance, tax preparation, long term disability and health
insurance for his spouse. As required by Ms. Simon’s employment agreement,
during 2008 we paid a car allowance, car insurance, and medical insurance
premiums.





Ownership
Guidelines





The
Compensation Committee has no requirement that each named executive officer
maintain a minimum ownership interest in our company.


Our
long-term incentive compensation consists solely of periodic grants of stock
options to our named executive officers. The stock option program:





•
            
            links
      the creation of stockholder value with executive
    compensation;•
            
            provides
      increased equity ownership by executives;•
            
            functions
      as a retention tool, because of the vesting features included in all
      options granted by the Compensation Committee; and•
            
            maintains
      competitive levels of total
compensation.





We
normally grant stock options to new executive officers when they join our
company based upon their position with us and their relevant prior experience.
The options granted by the Compensation Committee generally vest annually over
the first three years of the ten-year option term. Vesting and exercise rights
cease upon termination of employment (or, in the case of exercise rights,
90 days thereafter), except in the case of death (subject to a one-year
limitation), disability or retirement. Prior to the exercise of an option, the
holder has no rights as a stockholder with respect to the shares subject to such
option, including voting rights and the right to receive dividends or dividend
equivalents. In addition to the initial option grants, our Compensation
Committee may grant additional options to retain our executives and reward, or
provide incentive for, the achievement of corporate goals and strong individual
performance. Options are granted based on a combination of individual
contributions to our company and on general corporate achievements, which may
include the attainment of product development milestones and attaining
other annual corporate goals and objectives. On an annual basis, the
Compensation Committee assesses the appropriate individual and corporate goals
for our new executives and provides additional option grants based upon the
achievement by the new executives of both individual and corporate goals. We
expect that we will continue to provide new employees with initial option grants
in the future to provide long-term compensation incentives and will continue to
rely on performance-based and retention grants to provide additional incentives
for current employees. Additionally, in the future, the Compensation Committee
may consider awarding additional or alternative forms of equity incentives, such
as grants of restricted stock, restricted stock units and other
performance-based awards.





It is our
policy to award stock options at an exercise price equal to The NASDAQ Capital
Market’s closing price of our common stock on the date of the grant. In certain
limited circumstances, the Compensation Committee may grant options to an
executive at an exercise price in excess of the closing price of the common
stock on the grant date. The Compensation Committee has never granted options
with an exercise price that is less than the closing price of our common stock
on the grant date, nor has it granted options which are priced on a date other
than the grant date. For purposes of determining the exercise price of stock
options, the grant date is deemed to be the first day of employment for newly
hired employees, or the date on which the Compensation Committee or the Chief
Executive Officer, as applicable, approves the stock option grant to existing
employees.





We have
no program, practice or plan to grant stock options to our executive officers,
including new executive officers, in coordination with the release of material
nonpublic information. We also have not timed the release of material nonpublic
information for the purpose of affecting the value of stock options or other
compensation to our executive officers, and we have no plan to do so. We have no
policy regarding the adjustment or recovery of stock option awards in connection
with the restatement of our financial statements, as our stock option awards
have not been tied to the achievement of specific financial goals.




40




Tax and
Accounting Implications





Deductibility of Executive
Compensation





As part
of its role, the Compensation Committee reviews and considers the deductibility
of executive compensation under Section 162(m) of the Internal Revenue Code,
which provides that corporations may not deduct compensation of more than
$1,000,000 that is paid to certain individuals. We believe that compensation
paid to our executive officers generally is fully deductible for federal income
tax purposes.





Accounting for Share-Based
Compensation





Beginning
on January 1, 2006, we began accounting for share-based compensation in
accordance with the requirements of FASB Statement 123(R), Share-Based Payment. This
accounting treatment has not significantly affected our compensation decisions.
The Compensation Committee takes into consideration the tax consequences of
compensation to the named executive officers, but tax considerations are not a
significant part of the company’s compensation policy.





Compensation Committee Interlocks and
Insider Participation in Compensation Decisions





There are
no “interlocks,” as defined by the SEC, with respect to any member of the
Compensation Committee. Messrs. Feirstein, Georges, and Pells served as all of
the members of the Compensation Committee during 2008.





Compensation Committee
Report





The
Compensation Committee has reviewed and discussed with management the
“Compensation Discussion and Analysis” required by Item 402(b) of
Regulation S-K and, based on such review and discussions, has recommended
to our board of directors that the foregoing “Compensation Discussion and
Analysis” be included in this Annual Report.





The
following table and text sets forth information with respect to the compensation
paid to the Company’s senior executive officers during the years ended
December 31, 2008, 2007 and 2006. Except as listed below, there are no
bonuses, other annual compensation, restricted stock awards or stock
options/SARs or any other compensation paid to the named executive
officers.





SUMMARY COMPENSATION
TABLE





YearEnded
              
              
              Base
              
              
              
              
              
              Stock
              
              
              Option
              
              
              Other
              
              
              TotalDecember
              
              
              Salary
              
              
              Bonus
              
              
              Awards
              
              
              Awards
              
              
              Compensation
              
              
              CompensationName
      and Principal Position
              
              31
              
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $Mitch
      Francis (1)
              
              2008
              
              
              
              297,000
              
              
              
              -
              
              
              
              37,000
              (2)
              
              
              -
              
              
              
              54,000
              (3)
              
              
              388,000Chief
      Executive Officer,
              
              2007
              
              
              
              297,000
              
              
              
              -
              
              
              
              37,000
              (2)
              
              
              -
              
              
              
              39,000
              (3)
              
              
              373,000Chairman
      of the Board
              
              2006
              
              
              
              275,000
              
              
              
              -
              
              
              
              253,000
              (2)
              
              
              -
              
              
              
              72,000
              
              
              
              600,000Kimberly
      Simon
              
              2008
              
              
              
              243,000
              
              
              
              -
              
              
              
              11,000
              (5)
              
              
              844,000
              (4)
              
              
              17,000
              (7)
              
              
              1,115,000Chief
      Operating Officer
              
              2007
              
              
              
              225,000
              
              
              
              21,000
              
              
              
              11,000
              (5)
              
              
              135,000
              (4)
              
              
              10,000
              (7)
              
              
              402,0002006
              
              
              
              109,000
              
              
              
              15,000
              
              
              
              131,000
              (5)
              
              
              120,000
              (6)
              
              
              9,000
              
              
              
              384,000Matthew
      Natalizio
              
              2008
              
              
              
              215,000
              
              
              
              -
              
              
              
              -
              
              
              
              541,000
              (8)
              
              
              -
              
              
              
              756,000Chief
      Financial Officer
              
              2007
              
              
              
              62,000
              
              
              
              -
              
              
              
              -
              
              
              
              383,000
              (8)
              
              
              -
              
              
              
              445,000Lee
      Marshall
              
              2008
              (9)
              
              
              250,000
              
              
              
              102,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              352,000Co-CEO
      Tix Productions (TPI)Steve
      Boulay
              
              
              2008
              (10)
              
              
              149,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,000
              (10)
              
              
              152,000Vice
      President, Marketing (TPI)John
      Ballard
              
              
              2008
              (10)
              
              
              149,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,000
              (10)
              
              
              153,000President,
      Tix Productions (TPI)




41




(1)  
Compensation to Mr. Francis was paid to Francis Development Inc., a company
founded and controlled by Mr. Francis, for the six months ended June 30, 2006.
Beginning July 1, 2006, compensation to Mr. Francis has been paid to him
directly.





(2)  
During March 2006, the Company issued 500,000 shares of common stock pursuant to
a new three-year employment agreement with Mr. Francis. The 500,000 shares of
common stock had a fair market value on the date of issuance of $110,000 ($0.22
per share), which was charged to operations as general and administrative
expense over the three-year period commencing March 1, 2006. At December 31,
2008, 472,223 of these shares of common stock had vested and were recorded at
their approximate fair market value. During the years ended December 31, 2008,
2007 and 2006 the Company recorded $37,000, $37,000 and $31,000, respectively,
which was charged to operations as general and administrative
expense.





On
September 28, 2006, the Company issued 200,000 shares of common stock to Mr.
Francis, as a bonus for services rendered. The shares of common stock were
recorded at their fair market value on the date of issuance of $222,000 ($1.11
per share) and were charged to operations as general and administrative expense
during the year ended December 31, 2006.





(3)  
In 2008 this amount includes $8,000 of disability insurance premiums, $17,000 of
automobile expense, $11,000 of life insurance premiums and $4,000 for personal
tax consultation paid to or on behalf of Mr. Francis and $11,000 of company
401(k) matching funds. In 2007 this amount includes $11,000 of disability
insurance premiums, $18,000 automobile expense, $7,000 of life insurance
premiums and $4,000 for personal tax consultation paid to or on behalf of Mr.
Francis.





(4)  
On September 27, 2007, the Company entered into a written employment agreement
with Kimberly Simon, in conjunction with the agreement the Compensation
Committee of the Company’s board of directors granted Ms. Simon a ten-year,
nonqualified stock option to purchase 300,000 shares of our common stock at a
price of $7.00 per share.  The options vest in three installments of
100,000 shares each on September 1, 2008, 2009 and 2010, subject to Ms. Simon
remaining in the continuous employ of the Company through such vesting
dates.  Upon termination of Ms. Simon’s employment agreement for any reason
other than “cause” (as defined), any options not previously vested will
immediately vest and be exercisable for a period of one year from the date of
termination. The amount charged to operations as general and administrative
expense during the years ended December 31, 2008 and 2007 was $518,000 and
$135,000, respectively. During May 2008 , Ms. Simon exercised 50,000 warrants
which resulted in compensation of $326,000.





(5) On
March 13, 2006, the Company issued 50,000 shares of common stock to Ms. Simon,
as a bonus for services rendered. The shares of common stock were recorded at
their fair market value on the date of issuance of $11,000 ($0.22 per share) and
were charged to operations as general and administrative expense during the year
ended December 31, 2006.




On March
13, 2006, the Company issued 150,000 shares of common stock to Ms. Simon. The
shares of common stock are subject to pro rata forfeiture over a three-year
period if Ms. Simon ceases to be employed by the Company. The 150,000 shares of
common stock had a fair market value on the date of issuance of $33,000 ($0.22
per share), which is being charged to operations as a general and administrative
expense over the three-year period commencing March 13, 2006. At December 31,
2008, 139,583 of these shares of common stock had vested and were recorded at
their approximate fair market value. During the years ended December 31, 2008,
2007 and 2006, the Company recorded $11,000, $11,000 and $9,000 respectively,
which was charged to operations as general and administrative
expense.





On
September 28, 2006, the Company issued 100,000 shares of common stock to Ms.
Simon, as a bonus for services rendered. The shares of common stock were
recorded at their fair market value on the date of issuance of $111,000 ($1.11
per share) and were charged to operations as general and administrative expense
during the year ended December 31, 2006.





(6)  
On January 18, 2006, the Company entered into an agreement with Ms. Simon that
provides for her to receive a bonus in the form of a warrant for 100,000 shares
of common stock, exercisable for a period of five years at $0.36 per share (the
fair market value on the date of the agreement), that vests only in the event
that the gross number of tickets sold in 2006 is at least equal to 125% of the
gross number of tickets sold in 2005. As of June 30, 2006, the Company had
determined that such vesting milestone had been met. Accordingly, the fair value
of such warrant of $70,000, calculated pursuant to the Black-Scholes
option-pricing model, was charged to operations as general and administrative
expense during the remainder of the year ended December 31, 2006.




On April
19, 2006, the Company extended the expiration date of a stock option to purchase
150,000 shares of common stock held by Ms. Simon. The expiration date was
extended from June 5, 2006 to June 5, 2009. The fair value of such stock option
of $49,500, as calculated pursuant to the Black-Scholes option-pricing model,
was credited to additional paid-in capital and was charged to operations as
general and administrative expense during the year ended December 31,
2006.





(7)  For
2008 this amount includes $7,000 of automobile expense, $2,000 of medical
insurance premiums and $8,000 of Company 401(k) matching funds. For 2007 this
amount includes $7,000 of automobile expense, $2,000 of medical insurance
premiums and $1,000 for personal tax consultation paid to or on behalf of Ms.
Simon.





(8) In
conjunction with his employment agreement, in September 2007, Mr. Natalizio was
granted a ten-year, nonqualified option to purchase 340,000 shares of our common
stock at a price of $7.00 per share, which equaled the closing market price of
our common stock on the date Mr. Natalizio commenced service. The first 40,000
options vested immediately and the remaining 300,000 stock options vest annually
over a three-year period, provided that Mr. Natalizio remains in our employ.
During the years ended December 31, 2008 and 2007 the Company recorded $541,000
and $383,000, respectively, which was charged to operations as general and
administrative expense.




42




(9)  In
conjunction with the completion of the Merger with Magic Arts and Entertainment,
we entered into an employment agreement with Lee D. Marshall, a founder of
Magic, under which he will serve as the Co-Chief Executive Officer of TPI. The
employment agreement commenced on February 29, 2008 and will expire on February
28, 2011, unless sooner terminated in accordance with the applicable provisions
of the employment agreement. Under the employment agreements, Mr. Marshall
is entitled to an annual salary of $300,000 that will increase by $25,000 each
year during the term of the agreement. Mr. Marshall also is eligible to receive
annual bonuses based upon TPI exceeding performance milestones specified in his
employment agreement. For 2008, the Company recorded $102,000 which was charged
to operations as general and administrative expense.




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




Mr.
Ballard and Mr. Boulay are entitled under their respective employment agreements
to an annual salary of $185,000. Each of Messrs. Ballard and Boulay are entitled
to increases in their annual salaries of at least 3% per annum. For 2008 the
salary amount represents salary from March 11, 2008 through December 31, 2008.
Other compensation represents the Company’s
401(k) contribution match.




Stock
Option and Warrant Grants:




The
following table sets forth information as of December 31, 2008 concerning
unexercised options and warrants, unvested stock and equity incentive plan
awards for the executive officers named in the Summary Compensation Table. For
additional information related to stock options and the valuation of stock
options see footnote 11 to the consolidated financial statements.




OUTSTANDING
EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2008




Option
      and Warrant Awards
                
                Stock
      AwardsName
                
                Number
      of Securities Underlying Unexercised Options and
Warrants
                  (#)
      Exercisable
                
                Number
      of Securities Underlying Unexercised Options and
Warrants
                  (#)
      Unexercisable
                
                Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options and Warrants
                  (#)
                
                Option
                  and
                  Warrant
      Exercise Price
                  ($)
                
                Option
                  and
                  Warrant
      Expiration Date
                
                Number
                  of
                  Shares
                  or Units
                  of Stock
      That
                  Have
                  Not
                  Vested
                  (#)
                
                Market
      Value of Shares or Units of Stock That Have Not
      Vested
                  ($)
                
                Equity
      Incentive Plan Awards: Number
                  of
                  Unearned
      Shares, Units or Other
                  Rights
                  That
                  Have Not
      Vested
                  (#)
                
                Equity
                  Incentive
                  Plan
                  Awards:
                  Market
                  or Payout
      Value of Unearned Shares, Units or Other
                  Rights
                  That
                  Have Not
      Vested
                  ($)Mitch
      Francis
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                27,777
                
                
                59,721
                
                -
                
                
                -Chief
      Executive OfficerKimberly
      Simon
                
                
                100,000
                
                200,000
                
                
                
                
                7.00
                
                
                9-27-2017
                
                -
                
                
                -
                
                -
                
                
                -Chief
      Operating Officer
                
                
                150,000
                
                -
                
                
                -
                
                0.15
                
                
                6-05-2009
                
                10,417
                
                
                22,397
                
                -
                
                
                -100,000
                
                -
                
                
                -
                
                0.36
                
                
                2-27-2012
                
                -
                
                
                -
                
                -
                
                
                -Matthew
      Natalizio
                
                
                140,000
                
                200,000
                
                
                -
                
                7.00
                
                
                9-10-2017
                
                -
                
                
                -
                
                -
                
                
                -Chief
      Financial Officer




43




Option
and Warrant Exercises and Stock Vested





The
following table provides information regarding exercise of stock options and
warrants by each of our named executive officers during 2008:





2008
      Exercises of Plan-Based AwardsNumber
      ofShares
      Acquired
            
            
            Value
      RealizedName
            
            on
      Exercise
            
            
            On
      Exercise ($)(1)Mitch
      Francis
            
            
            -
            
            
            $
            -Chief
      Executive Officer,Chairman
      of the BoardKimberly
      Simon (1)Chief
      Operating Officer
            
            
            50,000
            
            
            $
            242,000Matthew
      Natalizio
            
            
            -
            
            
            $
            -Chief
      Financial OfficerLee
      Marshall
            
            
            -
            
            
            $
            -Co-CEO
      Tix ProductionsSteve
      Boulay
            
            
            -
            
            
            $
            -President,
      NewSpace EntertainmentJohn
      Ballard
            
            
            -
            
            
            $
            -President,
      Tix Productions





1.
            Represents
      the difference between the exercise price and the fair market value of the
      common stock on the date of exercise of
  warrants.





Quantification
of Termination Payments and Benefits




The table
below reflects the amount of compensation to each of our named executive
officers in the event of termination of such executive’s employment without
“cause” or his resignation for “good reason,” termination following a change in
control and termination upon the executive’s death of permanent disability. The
named executive officers are not entitled to any payments other than accrued
compensation and benefits in the event of their voluntary resignation. The
amounts shown in the table below assume that such termination was effective as
of December 31, 2008, and thus includes amounts earned through such time, and
are estimates only of the amounts that would be payable to the executives. The
actual amounts to be paid will be determined upon the occurrence of the events
indicated.





44





Termination
      Payments and BenefitsTermination w/o Cause or for Good ReasonBefore
      Change in
            
            
            After
      Change in
            
            
            
            
            
            
            
            
            Change
      inName
            
            Benefit
            
            Control
      ($)
            
            
            Control
      ($)
            
            
            Death
      ($)
            
            
            Disability
      ($)
            
            
            Control
      ($)Mitch
      Francis (1)
            
            Severance
      Payment (4)
            
            
            939,000
            
            
            
            1,485,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Chief
      Executive Officer,
            
            Health
      Insurance (2)
            
            
            -
            
            
            
            7,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Chairman
      of the Board
            
            Life
      Insurance (2)
            
            
            -
            
            
            
            18,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Disability
      Insurance (2)
            
            
            -
            
            
            
            12,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Automobile
      (3)
            
            
            52,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Tax
      Preparation (3)
            
            
            12,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Kimberly
      Simon
            
            Severance
      Payment (4)
            
            
            445,000
            
            
            
            1,215,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Chief
      Operating Officer
            
            Stock
      Options (5)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            289,500Health
      Insurance (2)
            
            
            -
            
            
            
            3,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Automobile
      (3)
            
            
            11,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Tax
      Preparation (3)
            
            
            7,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Matthew
      Natalizio
            
            Severance
      Payment (6)
            
            
            107,500
            
            
            
            107,500
            
            
            
            -
            
            
            
            -
            
            
            
            -Chief
      Financial OfficerLee
      Marshall
            
            Severance
      Payment (6)
            
            
            150,000
            
            
            
            150,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Co-CEO
      Tix ProductionsSteve
      Boulay
            
            Severance
      Payment (6)
            
            
            92,500
            
            
            
            92,500
            
            
            
            -
            
            
            
            -
            
            
            
            -President,
      NewSpace EntertainmentJohn
      Ballard
            
            Severance
      Payment (6)
            
            
            92,500
            
            
            
            92,500
            
            
            
            -
            
            
            
            -
            
            
            
            -President,
      Tix Productions





1.
            The
      employment contract with Mitch Francis ended February 28, 2009. The
      amounts included in this table assume the contract is renewed for an
      additional three year period under similar terms and
      condition.





2.
            Represents
      the cost as of December 31, 2008 for a period of eighteen
      months.





3.
            Represents
      the cost as of December 31, 2008 for the remaining term of the employment
      agreement. For Mitch Francis see (1) above regarding the term used to
      compute these benefits. For Kimberly Simon the contract term ends August
      31, 2010.





4.
            The
      Severance Payment in the Before Change in Control column represents salary
      paid through the end of the employment contract term. For Mitch Francis
      see (1) above regarding the term used to compute this amount. For Kimberly
      Simon the contract term ends August 31, 2010. The Severance Payment in the
      After Change in Control Payment column represents five times the annual
      base salary as of December 31, 2008, and is a lump sum payment no later
      than 30 days after employees date of
  termination.





5.
            Represents
      the aggregate value of stock options that vest and become exercisable
      immediately upon the triggering event, as if such event took place on
      December 31, 2008. The amount was determined as the aggregate difference
      between the stock price as of December 31, 2008 and the exercise price of
      the underlying options.





6.
            Amount
      is paid over a six month period in accordance with the Company's normal
      payroll practices.




45




Directors
Compensation:





Beginning
in July 2008, members of the Board of Directors who are not employees of the
Company receive $25,000 annually quarterly  and reimbursement for any
expenses incurred in attending the meetings. Also, the Chairman of the Audit
Committee receives an additional $10,000for each Audit Committee
annually.  Further, Messers, Pells and Georges receive 25,000 options
annually.  Directors who are employees of the Company receive no
additional compensation for serving on the Board of Directors. The non-employee
directors are eligible to participate in the 2004 Directors Option
Plan.





Prior to
July 2008, members of the Board of Directors who were not employees of the
Company received $2,000 for each meeting they attended of the Board of
Directors, and reimbursement for any expenses incurred in attending the
meetings.





On March
13, 2006, the Company issued 150,000 shares of common stock to Benjamin Frankel
and 150,000 shares of common stock to Norman Feirstein for services. The shares
of common stock were recorded at their fair market value on the date of issuance
of $66,000 ($0.22 per share) and were charged to operations as general and
administrative expense during the year ended December 31, 2006.





On
September 28, 2006, the Company issued 40,000 shares of common stock to Benjamin
Frankel and 40,000 shares of common stock to Norman Feirstein for services. The
shares of common stock were recorded at their fair market value on the date of
issuance of $89,000 ($1.11 per share) and were charged to operations as general
and administrative expense during the year ended December 31, 2006.





DIRECTOR
COMPENSATION TABLE




Name
      and Principal Position
            
            Year
            
            Stock
              Awards
              ($)
            
            All
      Other
              Compensation
              ($)(1)(2)(3)
            
            Total
              ($)Andrew
      Pells
            
            
            2008
            
            -
            
            
            55,500
            
            55,500Sam
      Georges
            
            
            2008
            
            -
            
            
            58,000
            
            58,000Benjamin
      Frankel – Director
            
            
            2008
            
            -
            
            
            12,500
            
            12,500Norman
      Feirstein – Director
            
            
            2008
            
            -
            
            
            12,500
            
            12,500Andrew
      Pells
            
            
            2007
            
            -
            
            
            48,000
            
            48,000Sam
      Georges
            
            
            2007
            
            -
            
            
            48,000
            
            48,000Benjamin
      Frankel – Director
            
            
            2007
            
            -
            
            
            8,000
            
            8,000Norman
      Feirstein – Director
            
            
            2007
            
            -
            
            
            8,000
            
            8,000Benjamin
      Frankel – Director
            
            
            2006
            
            77,400
            
            
            4,000
            
            81,400Norman
      Feirstein – Director
            
            
            2006
            
            77,400
            
            
            4,000
            
            81,400




(1)
            During
      the year ended December 31, 2008, the Company’s Board of Directors met on
      three occasions. Messrs. Frankel, Feirstein, Georges and Pells attended
      all three meetings. Directors received $2,000 per each meeting until July
      2008, when their compensation was increased to $6,250 per
      quarter.  In addition Sam Georges receives an additional $2,500
      per quarter for chairing the audit committee. Andrew Pells and Sam Georges
      each received options to purchase 25,000 shares of our common stock, and
      management estimated the option value to be $43,000 using the
      Black-Scholes Model.(2)
            During
      the year ended December 31, 2007, the Company’s Board of Directors met on
      four occasions. Messrs. Frankel, Feirstein, and Georges attended all four
      meetings and received $2,000 for each meeting they attended. Mr. Pells
      attended one meeting and received $2,000 for his attendance and
      participation. During the year ended December 31, 2007 Messrs. Pells and
      Georges each received options to purchase 10,000 shares of our common
      stock. The stock options granted to Messrs. Pells and Georges had
      estimated value, using the Black-Scholes Model, of $46,000 and $40,000,
      respectively.(3)
            During
      the year ended December 31, 2006, the Company’s Board of Directors met on
      two occasions. Mr. Frankel and Mr. Feirstein received $2,000 for each
      meeting they attended.




Long-Term
Incentive Plans:




2004
Option Plan:





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




46




During
the year ended December 31, 2008, the Company issued options to purchase 25,000
shares of common stock under the 2004 Option Plan. During the year ended
December 31, 2007, the Company issued options to purchase 507,000 shares of
common stock under the 2004 Option Plan. The Company issued 300,000 options
under the 2004 Option Plan in 2006.





On
November 6, 2006, the Company issued options to purchase 300,000 shares of
common stock under the 2004 Option Plan, to its newly-hired director of business
development, Craig Stein. On each of the first three year anniversary dates of
his employment, as long as Mr. Stein remains an employee of the Company, 100,000
shares will vest. Exercise prices are, $4.00, $3.00 and $2.02 for 2009, 2008 and
2007 respectively. The approximate fair value of such options, calculated
pursuant to the Black-Scholes option-pricing model, was $906,000. The Company
will amortize the fair value of such options over 36 months, and as a result,
$302,000 and $50,000 were charged to operations as general and administrative
expenses during the years ended December 31, 2007 and 2006, respectively.
Mr. Stein terminated his employment affective March 6, 2009.





As of
December 31, 2008, options to purchase 803,000 shares of common stock were
reserved for issuance under the 2004 Option Plan.





2004
Directors Option Plan:





On March
3, 2005, the Company adopted the Directors Stock Option Plan (the “2004
Directors Option Plan”) for non-employee directors of the Company. The 2004
Directors Option Plan was approved pursuant to a Joint Written Consent of the
Board of Directors and Majority Stockholders of the Company dated September 22,
2004. The 2004 Directors Option Plan authorized the granting of non-qualified
stock options to purchase an aggregate of not more than 100,000 shares of the
Company’s common stock. The 2004 Directors Option Plan provided that options
granted would be exercisable for a period not to exceed ten years and would vest
on a cumulative basis as to one-third of the total number of shares covered
thereby at any time after one year from the date the option was granted and an
additional one-third of such total number of shares at any time after the end of
each consecutive one-year period thereafter until the option had become
exercisable as to all of such total number of shares. The exercise price for
non-qualified stock options would be the fair value of the Company’s common
stock at the date of the grant. No option may be exercised during the first six
months of its term except in the case of death. During 2008, the Company’s board
of directors granted 25,000 options each to Messrs. Pells and Georges. The value
of the options granted to Messrs. Pells and Georges, in 2008, as calculated
using the Black Scholes Model, to Messrs Pells and Georges were $43,000each,
respectively. During 2007, the Company’s board of directors granted 10,000
options to purchase our common stock to each of Messrs. Pells and Georges in
conjunction with them becoming directors of Tix Corporation. The value of the
options granted, as calculated using the Black Scholes Model, to Messrs Pells
and Georges were $46,000 and $40,000, respectively. Prior to the above issuance
the Company had not granted any options under the Directors’ Plan.




Issuance
of Non-Plan Stock Options, Warrants and Common Stock to Officers:





Matthew
Natalizio:





On
September 10, 2007, in conjunction with his employment agreement, the
Compensation Committee of the Company’s board of directors granted Mr. Natalizio
a ten-year, nonqualified stock option to purchase 340,000 shares of our common
stock at a price of $7.00 per share.  Under the terms of his employment
40,000 options vested immediately and the remaining options will vest in three
installments of 100,000 shares each on September 10, 2008, 2009 and 2010,
subject to Mr. Natalizio remaining in the continuous employ of the Company
through such vesting dates.




Kimberly
Simon:





On March
13, 2006, the Company issued 50,000 shares of common stock to Ms. Simon,
its Chief Operating Officer, as a bonus for services rendered. The shares of
common stock were recorded at their fair market value on the date of issuance of
$11,000 ($0.22 per share) and were charged to operations as general and
administrative expense during the year ended December 31, 2006.





On March
13, 2006, the Company issued 150,000 shares of common stock to Ms. Simon.
The shares of common stock are subject to pro rata forfeiture over a three-year
period if Ms. Simon ceases to be employed by the Company. The 150,000 shares of
common stock had a fair market value on the date of issuance of $33,000 ($0.22
per share), which is being charged to operations as general and administrative
expense over the three-year period commencing March 13, 2006. At December 31,
2006, 39,583 shares of common stock had vested and were recorded at their
approximate fair market value of $8,708, which was charged to operations as
general and administrative expense during the year ended December 31,
2006.





On April
19, 2006, the Company extended the expiration date of a stock option to purchase
150,000 shares of common stock held by Ms. Simon. The expiration date was
extended from June 5, 2006 to June 5, 2009. The fair value of such stock option
of $49,500, as calculated pursuant to the Black-Scholes option-pricing model,
was credited to additional paid-in capital and was charged to operations as
general and administrative expense during the year ended December 31,
2006.




47




On
September 28, 2006, the Company issued 100,000 shares of common stock to Ms.
Simon, as a bonus for services rendered. The shares of common stock were
recorded at their fair market value on the date of issuance of $111,000 ($1.11
per share) and were charged to operations as general and administrative expense
during the year ended December 31, 2006.





On
January 18, 2006, the Company entered into an agreement with Ms. Simon, its
Chief Operating Officer, that provides for her to receive a bonus in the form of
a warrant for 100,000 shares of common stock, exercisable for a period of
five years at $0.36 per share (the fair market value on the date of the
agreement), that vests only in the event that the gross number of tickets sold
in 2006 is at least equal to 125% of the gross number of tickets sold in 2005.
As of June 30, 2006, the Company had determined that such vesting milestone had
been met. Accordingly, the fair value of such warrant of $70,000, calculated
pursuant to the Black-Scholes option-pricing model, was charged to operations as
general and administrative expense over the remainder of the year ended December
31, 2006.





Mitch
Francis:





During
March 2006, the Company issued 500,000 shares of common stock pursuant to a new
three-year employment agreement with Mr. Francis. The 500,000 shares of common
stock had a fair market value on the date of issuance of $110,000 ($0.22 per
share), which is being charged to operations as general and administrative
expense over the three-year period commencing March 1, 2006. At December 31,
2006, 138,889 shares of common stock had vested and were recorded at their
approximate fair market value of $30,556, which was charged to operations as
general and administrative expense during the year ended December 31,
2006.








On
September 28, 2006, the Company issued 200,000 shares of common stock to Mr.
Francis, as a bonus for services rendered. The shares of common stock were
recorded at their fair market value on the date of issuance of $222,000 ($1.11
per share) and were charged to operations as general and administrative expense
during the year ended December 31, 2007 and 2006, respectively.





A summary
of stock options and warrants issued to officers, directors and employees as of
December 31, 2008 is presented below:





Stock Option and Warrant Value TableNumber
      of Shares of
                        Common
      Stock
                        Underlying
                        Stock
      Options and
                        Warrants
                      
                      
                      Weighted
                        Average
                        Exercise
                      
                      
                      Value
      of Unexercised
                        in-the-Money
      Stock
                        Options
                        and
      Warrants at Fiscal
                        Year-End
      (1)Unvested
                      
                      
                      Vested
                      
                      
                      Price
                      
                      
                      Unvested
                      
                      
                      VestedOption
      Plans:Directors
                      
                      
                      -
                      
                      
                      
                      70,000
                      
                      
                      $
                      3.51
                      
                      
                      $
                      -
                      
                      
                      $
                      -Kimberly
      Simon
                      
                      
                      200,000
                      
                      
                      
                      100,000
                      
                      
                      $
                      7.00
                      
                      
                      $
                      -
                      
                      
                      $
                      -Craig
      Stein
                      
                      
                      100,000
                      
                      
                      
                      100,000
                      
                      
                      $
                      3.50
                      
                      
                      $
                      -
                      
                      
                      $
                      -Curt
      Bechdel
                      
                      
                      50,000
                      
                      
                      
                      50,000
                      
                      
                      $
                      7.20
                      
                      
                      $
                      -
                      
                      
                      $
                      -Richard
      Kam
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      $
                      4.70
                      
                      
                      $
                      -
                      
                      
                      $
                      -Employees
                      
                      
                      52,000
                      
                      
                      
                      26,000
                      
                      
                      
                      6.85
                      
                      
                      $
                      -
                      
                      
                      $
                      -Non-Plan
      Stock Options and Warrants:Kimberly
      Simon:Stock
      Options
                      
                      
                      
                      
                      
                      
                      150,000
                      
                      
                      $
                      0.22
                      
                      
                      $
                      -
                      
                      
                      $
                      289,500Warrants
                      
                      
                      
                      
                      
                      
                      100,000
                      
                      
                      $
                      0.36
                      
                      
                      $
                      -
                      
                      
                      $
                      179,000Matthew
      Natalizio:Stock
      Options
                      
                      
                      200,000
                      
                      
                      
                      140,000
                      
                      
                      $
                      7.00
                      
                      
                      $
                      -
                      
                      
                      $
                      -




48





(1) The
dollar values are calculated by determining the difference between the weighted
average exercise price of the stock options and warrants and the market price
for the common stock of $2.15 per share at December 31, 2008.





ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS





As used
in this section, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended, as
consisting of sole or shared voting power (including the power to vote or direct
the vote) and/or sole or shared investment power (including the power to dispose
of or direct the disposition of) with respect to the security through any
contract, arrangement, understanding, relationship or otherwise, subject to
community property laws where applicable.




As
of March 13, 2009, the Company had a total of 32,188,249 shares of common
stock issued and outstanding, which is the only issued and outstanding voting
equity security of the Company.





The
following table sets forth, as of February 28, 2009: (a) the names and addresses
of each beneficial owner of more than five percent (5%) of the Company's common
stock known to the Company, the number of shares of common stock beneficially
owned by each such person, and the percent of the Company's common stock so
owned; and (b) the names and addresses of each director and executive officer,
the number of shares of common stock beneficially owned, and the percentage of
the Company's common stock so owned, by each such person, and by all directors
and executive officers of the Company as a group. Each person has sole voting
and investment power with respect to the shares of common stock, except as
otherwise indicated. Beneficial ownership consists of a direct interest in the
shares of common stock, except as otherwise indicated.





Percent
      ofAmount
      and
            
            
            
            
            Shares
      ofNature
      of
            
            
            
            
            Common
      StockBeneficial
            
            
            
            
            OutstandingName
      and Address of Beneficial Owner
            
            Ownership
            
            
            
            
            
            (2)Mitch
      Francis (1)
            
            
            6,927,042
            
            
            (3)
            
            
            21.5
            %Kimberly
      Simon (1)
            
            
            1,033,135
            
            
            (4)
            
            
            2.6
            %Matthew
      Natalizio (1)
            
            
            340,000
            
            
            (8)
            
            
            0.4
            %Benjamin
      Frankel (1)
            
            
            304,500
            
            
            
            
            0.9
            %Norman
      Feirstein (1)
            
            
            430,625
            
            
            
            
            
            1.3
            %Sam
      Georges (1)
            
            
            45,000
            
            
            (8)
            
            
            0.1
            %Andy
      Pells (1)
            
            
            35,000
            
            
            (8)
            
            
            0.1
            %Joe
      Marsh (1)
            
            
            4,555,063
            
            
            
            
            
            14.2
            %Lee
      Marshall (1)
            
            
            1,695,476
            
            
            
            
            
            5.3
            %All
      directors and officers as a group (9 persons)
            
            
            15,365,841
            
            
            (5)
            
            
            44.8
            %Iqbal
      Ashraf (9)
            
            
            3,559,095
            
            
            (7)
            
            
            11.1
            %Christopher
      Maggiore (10)
            
            
            2,021,151
            
            
            
            
            
            6.3
            %




49




(1)  
The address of each such person is c/o the Company, 12001 Ventura Place, Suite
340, Studio City, California 91604.




(2) 
The calculation is based on the number of shares of common stock outstanding on
February 28, 2008, plus, with respect to each named person, the number of shares
of common stock which the stockholder has the right to acquire upon exercise of
stock options and warrants exercisable within 60 days of February 28,
2009.




(3)
Includes 3,753,000 shares of common stock owned by Mr. Francis. Also includes
3,324,000 shares of common stock owned by Mr. Iqbal Ashraf and 235,000 shares of
common stock issuable upon exercise of warrants held by Mr. Ashraf, for which
voting power has been granted to Mr. Francis. The amount presented also includes
a warrant to purchase 110,000 of the Company’s common stock. Excludes 194,000
unvested shares issued to Mr. Francis in March 2006. The balance also excludes
255,000 shares of common stock owned by Sandra Francis, the wife of Mr. Francis,
as to which Mr. Francis disclaims beneficial ownership.





(4) 
 Includes 494,000 shares of common stock owned by Ms. Simon and 550,000
shares of common stock issuable upon exercise of stock options and warrants
granted to Ms. Simon. Excludes 10,000 unvested shares issued to Ms. Simon in
March 2006.




(5)  
Includes 11,114,000 shares of common stock owned by officers and directors and
960,000 shares of common stock issuable upon exercise of stock options and
warrants granted to officers and directors. Also includes 3,324,000 shares of
common stock owned by Mr. Iqbal Ashraf and 235,000 shares of common stock
issuable upon exercise of warrants held by Mr. Ashraf, for which voting power
has been granted to Mr. Francis. Excludes 38,000 unvested shares issued in March
2006. Also excludes 255,000 shares of common stock owned by Sandra Francis, the
wife of Mr. Francis, as to which Mr. Francis disclaims beneficial
ownership.




(6)  
Includes 770,000 shares of common stock owned by Mr. Kraniak and 200,000 shares
of common stock issuable upon exercise of warrants granted to Mr. Kraniak.
Excludes 3,000 unvested shares issued in July 2006.





(7)  
Includes 3,324,000 shares of common stock owned by Mr. Ashraf and 235,000 shares
of common stock issuable upon exercise of warrants held by Mr. Ashraf. Voting
power with respect to these shares has been granted to Mitch
Francis.





(8) Messrs Pells and Georges were each granted options to
purchase 35,000 shares of the Company’s common stock as a result of their
directorships. Mr. Georges separately purchased 10,000 shares of Tix common
stock in the open market.  Mr. Natalizio was granted 340,000 shares as
a result of his appointment as Chief Financial Officer.




(9)  
The address of this person is 201 S. Lake Ave., Suite 603, Pasadena, California
91101.




(10)  
The address of this person is 6860 Chillingsworth Circle, Canton, Ohio
44718.





Changes
in Control:





The
Company is unaware of any contract or other arrangement, the operation of which
may at a subsequent date result in a change in control of the
Company.





Information
with respect to securities authorized for issuance under equity compensation
plans is provided at "ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS - Securities Authorized for Issuance Under Equity Compensation
Plans".





ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE





During
2007, Benjamin Frankel, a director of the Company, was a principal in Frankel,
LoPresti & Co., an accountancy corporation. During 2005 and 2004, Mr.
Frankel was a principal in the accounting firm of Frankel, Lodgen, Lacher,
Golditch, Sardi & Howard LLP.





Effective
March 6, 2006, the Company entered into a one-year agreement with Mr. Frankel’s
current firm for certain business, accounting and tax advisory services to be
provided by Mr. Frankel, for a monthly retainer fee of $5,000 commencing as of
January 1, 2006. Other services outside the scope of this agreement are invoiced
separately by Mr. Frankel’s firm. This agreement was approved by the
disinterested members of the Company’s Board of Directors.




50




During
the years ended December 31, 2008, 2007 and 2006, the Company incurred fees to
such accounting firms for accounting and tax services of $33,000, $53,000 and
$108,000, respectively. In addition, during the year ended December 31, 2006,
the Company wrote-off the remaining balance of the prepaid accounting fee to Mr.
Frankel’s former firm at December 31, 2005 of $9,000.





Review,
Approval or Ratification of Transactions with Related Persons





As
provided in our audit committee charter, all related party transactions must be
reviewed and approved by our audit committee.  As such, we conduct a
review of all related party transactions for potential conflicts of interest on
an ongoing basis.  All such transactions relating to executive
officers and directors must be approved by our audit committee.





Director
Independence





Our board
of directors reviewed our directors’ responses to a questionnaire inquiring
about their transactions, relationships and arrangements with us, as well as
those of their immediate family members.  The questionnaire also
inquired as to other potential conflicts of interest.  After reviewing
this information, our board of directors determined that it is comprised of a
majority of “independent directors,”  as such term is defined in the
NASDAQ rules and Rule 10A-3 of the Exchange Act.  Among our five
directors, Andy Pels, Norman Feirstein, Benjamin Frankel and Sam Georges meet
the NASDAQ and the Exchange Act standards for independent directors except that
Mr. Frankel does not meet the independence standards under the Exchange Act for
members of the Audit Committee and is not a member of such
Committee.  The remaining director, Mitch Francis does not qualify as
an independent director.  Our independent directors did not engage in
any transaction, or otherwise have relationship or arrangement with us that
would compromise their independency as defined by the NASDAQ rules or Rule 10A-3
of the Exchange Act.  Our Audit Committee is comprised of three
independent directors, Messrs. Pels, Feirstein and Georges.  Our
Compensation Committee is comprised of three independent directors, Messrs.
Pels, Feirstein and Georges.  Our Nominating and Governance Committee
is comprised of three independent directors, Messrs. Pells, Feirstein and
Georges.





Additional
information with respect to securities issued to the Company’s officers and
directors in 2005 and 2006 is provided at “ITEM 11. EXECUTIVE
COMPENSATION”.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit and
Audit Related Fees:





Weinberg
& Company, P.A. ("Weinberg") was the Company's independent registered public
accounting firm for the years ended December 31, 2008, 2007 and 2006. Services
provided to the Company by Weinberg with respect to such periods consisted of
the audits of the Company's consolidated financial statements and limited
reviews of the condensed consolidated financial statements included in Quarterly
Reports on Form 10-Q. Weinberg & Co. also provided audit services with
respect to our 2008 Sarbanes-Oxley compliance, acquisition of Magic Arts &
Entertainment, LLC, 2007 acquisitions of John’s Tickets and Exhibit
Merchandising, LLC to the filing of the Company’s Registration Statement on Form
SB-2, and amendments thereto, during 2006. Charges by Weinberg with respect to
these matters aggregated $343,000 $346,000, and $74,000 respectively, for the
years ended December 31, 2008, 2007 and 2006.




Tax Fees:





Weinberg
did not provide any services to the Company with respect to the preparation of
corporate income tax returns or tax planning matters.





All Other
Fees:





Weinberg
did not provide any services with respect to any matters other than those
related to audit and audit-related matters.





Pre-Approval
Policies and Procedures:





The Audit
Committee meets telephonically to periodically review and approve the scope of
the services to be provided to the Company by its independent accountant, as
well to review and discuss any issues that may arise during an engagement. The
Audit Committee considers various issues with respect to the services to be
provided by its independent accountant, including the complexity of any
engagement, its expected cost, the knowledge and expertise of the independent
accountant's staff, any complex accounting or disclosure issues, new accounting
pronouncements, and the capability of the Company's financial
staff.




ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SERVICES





(a)           Financial
Statements





(1)
            Consolidated
      Financial Statements and Supplementary Data at
  Item 8





(2)
            Financial
      Statement Schedules at Schedule II – Valuation and Qualifying
      Accounts.





(b)           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.




51




SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.





TIX CORPORATION
              (Registrant)Date:
      March  12, 2009
            By:
            /s/
      MITCH FRANCISMitch
      Francis
              Chief
      Executive Officer, President,
              and
      Chairman of the   Board of
Directors





In
accordance with the Exchange Act, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.





Date:
      March 12, 2009
            By:
            /s/
      MATTHEW NATALIZIOMatthew
      Natalizio
              Chief
      Financial OfficerDate:
      March 12, 2009
            By:
            /s/
      BENJAMIN FRANKELBenjamin
      Frankel
              Director












Date:
      March 12, 2009
            By:
            /s/
      NORMAN FEIRSTEINNorman
      Feirstein
              DirectorDate:
      March 12, 2009
            By:
            /s/
      SAM GEORGESSam
      Georges
              DirectorDate:
      March 12, 2009
            By:
            /s/
      ANDREW PELLSAndrew
      Pells
              Director





52





TIX
CORPORATION AND SUBSIDIARIES





INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS





PAGEReport
      of Independent Registered Public Accounting Firm
            F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheets as of December 31, 2008 and 2007
            F-3Consolidated
      Statements of Operations for the Years Ended December 31, 2008, 2007
      and 2006
            F-4Consolidated
      Statements of Stockholders’ Equity for the Years Ended
              December
      31, 2008, 2007 and 2006
            F-5Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
      2006
            F-6Notes
      to Consolidated Financial Statements
            F-8




F-1




Report
of Independent Registered Public Accounting Firm





To the
Board of Directors


Tix
Corporation





We have
audited the accompanying consolidated balance sheets of Tix Corporation and
Subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related
consolidated statements of operations and comprehensive loss, stockholders’
equity and cash flows for each of the three years in the period ended December
31, 2008.  Our audits also include the financial statement schedules
on pages F-27 and F-28. We have also audited the Company’s internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organization of the
Treadway Commission.  The Company’s management is responsible for
these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting.  Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedules and an opinion on the Company’s
internal control over financial reporting based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in
all material respects.  An audit of the consolidated financial
statements includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk.  Our audits also
included performing such other procedures as we considered necessary in the
circumstances.  We believe that our audits provide a reasonable basis
for our opinions.





A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with  generally
accepted accounting principles and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial
statements.





Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be detected on a
timely basis.   Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Tix Corporation and
Subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2008, in conformity with accounting principles generally accepted
in the United States of America.  Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material repects the information set forth therein. Also in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.











Weinberg
& Company, P.A.


Los
Angeles, California





March 12,
2009




F-2




TIX
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSDecember
      31,
            
            
            December
      31,2008
            
            
            2007AssetsCurrent
      assets:Cash
            
            $
            9,192,000
            
            
            $
            7,417,000Other
      receivables
            
            
            -
            
            
            
            345,000Accounts
      receivable, including show revenues earned but not billed
            
            
            1,104,000
            
            
            
            129,000Inventory,
      net
            
            
            3,320,000
            
            
            
            3,938,000Prepaid
      expenses and other current assets
            
            
            867,000
            
            
            
            178,000Total
      current assets
            
            
            14,483,000
            
            
            
            12,007,000Property
      and equipmentOffice
      equipment and furniture
            
            
            1,816,000
            
            
            
            1,413,000Equipment
      under capital lease
            
            
            408,000
            
            
            
            386,000Leasehold
      improvements
            
            
            364,000
            
            
            
            313,000Property
      and equipment, cost basis
            
            
            2,588,000
            
            
            
            2,112,000Less
      accumulated depreciation and amortization
            
            
            (1,155,000
            )
            
            
            (664,000
            )Total
      property and equipment, net
            
            
            1,433,000
            
            
            
            1,448,000Other
      assets:Intangible
      assets:Goodwill
            
            
            5,639,000
            
            
            
            27,115,000Intangibles,
      net
            
            
            6,751,000
            
            
            
            14,524,000Total
      intangible assets
            
            
            12,390,000
            
            
            
            41,639,000Capitalized
      theatrical costs
            
            
            459,000
            
            
            
            -Deposits
      and other assets
            
            
            83,000
            
            
            
            74,000Total
      other assets
            
            
            12,932,000
            
            
            
            41,713,000Total
      assets
            
            $
            28,848,000
            
            
            $
            55,168,000Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts
      payable
            
            $
            4,822,000
            
            
            $
            1,945,000Accrued
      expenses
            
            
            1,515,000
            
            
            
            1,082,000Current
      portion of capital lease obligations
            
            
            51,000
            
            
            
            45,000Deferred
      revenue
            
            
            100,000
            
            
            
            54,000Total
      current liabilities
            
            
            6,488,000
            
            
            
            3,126,000Non-current
      liabilities:Capital
      lease obligations, less current portion
            
            
            78,000
            
            
            
            108,000Deferred
      rent
            
            
            85,000
            
            
            
            188,000Total
      non-current liabilities
            
            
            163,000
            
            
            
            296,000Commitments
      and ContingenciesStockholder's
      equity:Preferred
      stock, $.01 par value; 500,000 shares authorized; none
    issued
            
            
            -
            
            
            
            -Common
      Stock $0.08 par value; 100,000,000 shares authorized; 33,078,233 and
      30,402,325 shares issued at December 31, 2008 and December 31, 2007
      respectively
            
            
            2,646,000
            
            
            
            2,432,000Additional
      paid-in capital
            
            
            88,062,000
            
            
            
            81,034,000Cost
      of shares held in treasury (732,370 shares at December 31, 2008 and no
      shares held at December 31, 2007 respectively.)
            
            
            (2,098,000
            )
            
            
            -Accumulated
      deficit
            
            
            (66,384,000
            )
            
            
            (31,720,000
            )Accumulated
      other comprehensive loss
            
            
            (29,000
            )
            
            
            -Total
      stockholders' equity
            
            
            22,197,000
            
            
            
            51,746,000Total
      liabilities and stockholders' equity
            
            $
            28,848,000
            
            
            $
            55,168,000




See
      accompanying notes to consolidated financial statements.





F-3


TIX
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 
 YEARS
      ENDED DECEMBER 31,2008
                
                
                2007
                
                
                2006Revenues
                
                $
                69,545,000
                
                
                $
                18,567,000
                
                
                $
                5,388,000Operating
      expenses:Direct
      costs of revenues
                
                
                48,490,000
                
                
                
                11,672,000
                
                
                
                2,173,000Selling
      and marketing expenses.
                
                
                3,008,000
                
                
                
                13,475,000
                
                
                
                467,000General
      and administrative expenses, including non-cash equity-based costs of
      $2,336,000, $3,284,000, and $1,326,000 in 2008, 2007, and 2006,
      respectively (including $1,753,000, $682,000, and $658,000 for employees,
      officers and directors in 2008, 2007, and 2006,
    respectively).
                
                
                15,193,000
                
                
                
                8,117,000
                
                
                
                3,306,000Impairment
      of goodwill
                
                
                25,445,000
                
                
                
                -
                
                
                
                -Impairment
      of intangible assets
                
                
                7,687,000
                
                
                
                -
                
                
                
                -Depreciation
      and amortization
                
                
                4,601,000
                
                
                
                1,668,000
                
                
                
                164,000Total
      costs and expenses
                
                
                104,424,000
                
                
                
                34,932,000
                
                
                
                6,110,000Loss
      from operations
                
                
                (34,879,000
                )
                
                
                (16,365,000
                )
                
                
                (722,000
                )Other
      income (expense):Other
      income
                
                
                175,000
                
                
                
                28,000
                
                
                
                37,000Gain
      on settlement with lender
                
                
                -
                
                
                
                -
                
                
                
                1,078,000Gain
      on settlement of debt
                
                
                -
                
                
                
                -
                
                
                
                12,000Write-off
      deferred offering costs
                
                
                -
                
                
                
                -
                
                
                
                (58,000
                )Interest
      income
                
                
                59,000
                
                
                
                96,000
                
                
                
                16,000Interest
      expense
                
                
                (19,000
                )
                
                
                (104,000
                )
                
                
                (329,000
                )Other
      income (expense), net
                
                
                215,000
                
                
                
                20,000
                
                
                
                756,000Income
      (loss) from continuing operations
                
                
                (34,664,000
                )
                
                
                (16,345,000
                )
                
                
                34,000Income
      from discontinued operations, primarily non-cash gain resulting from
      settlement of debts
                
                
                -
                
                
                
                -
                
                
                
                5,000Net
      income (loss)
                
                
                (34,664,000
                )
                
                
                (16,345,000
                )
                
                
                39,000Other
      comprehensive loss:Foreign
      currency translation adjustments
                
                
                (29,000
                )
                
                
                -
                
                
                
                -Comprehensive
      income (loss)
                
                $
                (34,693,000
                )
                
                $
                (16,345,000
                )
                
                $
                39,000Net
      income (loss) per common share – basic and diluted
                
                $
                (1.09
                )
                
                $
                (0.70
                )
                
                $
                0.00Weighted
      average common shares outstanding:Basic
                
                
                31,962,375
                
                
                
                23,446,349
                
                
                
                14,886,334Diluted
                
                
                31,962,375
                
                
                
                23,446,349
                
                
                
                15,999,473
  See
      accompanying notes to the consolidated financial
statements




F-4





TIX
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006




AccumulatedAdditional
            
            
            
            
            
            
            
            
            
            
            
            Other
            
            
            TotalCommon
      Stock
            
            
            Paid In
            
            
            Deferred
            
            
            Accumulated
            
            
            Treasury
            
            
            Comprehensive
            
            
            Stockholders’Shares
            
            
            Amount
            
            
            Capital
            
            
            Compensation
            
            
            Deficit
            
            
            Stock
            
            
            Loss
            
            
            EquityBalance,
      January 1, 2006
            
            
            11,166,621
            
            
            $
            893,000
            
            
            $
            12,156,000
            
            
            $
            (35,000
            )
            
            $
            (15,414,000
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (2,400,000
            )Issuance
      of common stock upon conversion of convertible debenture
            
            
            93,563
            
            
            
            8,000
            
            
            
            18,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            26,000Issuance of
      common stock to consultants
            
            
            353,750
            
            
            
            28,000
            
            
            
            360,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            388,000Issuance
      of common stock to directors
            
            
            380,000
            
            
            
            30,000
            
            
            
            124,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            154,000Issuance
      of common stock to officers and employees
            
            
            758,472
            
            
            
            61,000
            
            
            
            517,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            578,000Issuance
      of common stock to law firm as payment of accrued legal
    fees
            
            
            230,000
            
            
            
            18,000
            
            
            
            56,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            74,000Sale
      of common stock and warrants to private investors, net of offering
      costs
            
            
            4,080,000
            
            
            
            327,000
            
            
            
            677,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,004,000Issuance
      of common stock upon exercise of warrants and options
            
            
            1,351,353
            
            
            
            108,000
            
            
            
            102,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            210,000Issuance
      of warrants and options and extension of options
            
            
            -
            
            
            
            -
            
            
            
            170,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            170,000Issuance
      of common stock for acquisition of Stand-By Golf
            
            
            26,546
            
            
            
            2,000
            
            
            
            98,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            100,000Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            35,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            35,000Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            39,000
            
            
            
            -
            
            
            
            -
            
            
            
            39,000Balance,
      December 31, 2006
            
            
            18,440,305
            
            
            
            1,475,000
            
            
            
            14,278,000
            
            
            
            -
            
            
            
            (15,375,000
            )
            
            
            -
            
            
            
            -
            
            
            
            378,000Issuance of
      common stock to consultants
            
            
            1,601,924
            
            
            
            128,000
            
            
            
            8,764,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,892,000Issuance
      of common stock to officers and employees
            
            
            316,668
            
            
            
            25,000
            
            
            
            657,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            682,000Issuance
      of common stock upon exercise of warrants and options
            
            
            1,161,912
            
            
            
            93,000
            
            
            
            136,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            229,000Issuance
      of common stock for acquisition of Any Event
            
            
            137,500
            
            
            
            11,000
            
            
            
            539,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            550,000Issuance
      of common stock for acquisition of Exhibit Merchandising
            
            
            5,000,000
            
            
            
            400,000
            
            
            
            34,600,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            35,000,000Fair
      value of options issued to employees
            
            
            -
            
            
            
            -
            
            
            
            1,136,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,136,000Fair
      value of options and warrants issued to consultants
            
            
            -
            
            
            
            -
            
            
            
            3,440,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,440,000Sale
      of common stock
            
            
            3,744,016
            
            
            
            300,000
            
            
            
            17,484,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            17,784,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (16,345,000
            )
            
            
            -
            
            
            
            -
            
            
            
            (16,345,000
            )Balance,
      December 31, 2007
            
            
            30,402,325
            
            
            
            2,432,000
            
            
            
            81,034,000
            
            
            
            -
            
            
            
            (31,720,000
            )
            
            
            -
            
            
            
            -
            
            
            
            51,746,000Issuance of
      common stock to consultants
            
            
            85,564
            
            
            
            7,000
            
            
            
            417,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            424,000Issuance
      of common stock to officers and employees
            
            
            216,667
            
            
            
            17,000
            
            
            
            30,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            47,000Issuance
      of common stock upon exercise of warrants and options
            
            
            1,326,059
            
            
            
            106,000
            
            
            
            (52,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            54,000Fair
      value of options issued to employees and directors
            
            
            -
            
            
            
            -
            
            
            
            1,706,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,706,000Issuance
      of common stock for acquisition of Magic Arts &
      Entertainment
            
            
            476,190
            
            
            
            38,000
            
            
            
            2,219,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,257,000Issuance
      of common stock for acquisition of NewSpace Entertainment
            
            
            571,428
            
            
            
            46,000
            
            
            
            2,549,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,595,000Fair
      value of warrants issued to outside consultants
            
            
            -
            
            
            
            -
            
            
            
            159,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            159,000Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (34,664,000
            )
            
            
            -
            
            
            
            -
            
            
            
            (34,664,000
            )Foreign
      currency translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (29,000
            )
            
            
            (29,000
            )Equity
      before treasury stock
            
            
            33,078,233
            
            
            
            2,646,000
            
            
            
            88,062,000
            
            
            
            -
            
            
            
            (66,384,000
            )
            
            
            -
            
            
            
            (29,000
            )
            
            
            24,295,000Cost
      of Treasury Stock
            
            
            (732,370
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,098,000
            )
            
            
            -
            
            
            
            (2,098,000
            )Balance,
      December 31, 2008
            
            
            32,345,863
            
            
            $
            2,646,000
            
            
            $
            88,062,000
            
            
            $
            -
            
            
            $
            (66,384,000
            )
            
            $
            (2,098,000
            )
            
            $
            (29,000
            )
            
            $
            22,197,000




See
      accompanying notes to the consolidated financial
      statements.




F-5




TIX
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH
FLOW




YEARS
      ENDED DECEMBER 31,2008
            
            
            2007
            
            
            2006Cash
      flows from operating activities:Net
      income (loss)
            
            $
            (34,664,000
            )
            
            $
            (16,345,000
            )
            
            $
            39,000Adjustments
      to reconcile net income (loss) to cash provided by operating
      activities:Depreciation
      and amortization
            
            
            491,000
            
            
            
            294,000
            
            
            
            124,000Impairment
      of goodwill
            
            
            25,445,000
            
            
            
            -
            
            
            
            -Impairment
      of intangible assets
            
            
            7,687,000
            
            
            
            -
            
            
            
            -Amortization
      of intangible assets
            
            
            4,110,000
            
            
            
            1,375,000
            
            
            
            2,000Gain
      on settlement with lender
            
            
            -
            
            
            
            -
            
            
            
            (1,079,000
            )Gain
      on settlement of debt
            
            
            -
            
            
            
            -
            
            
            
            (12,000
            )Fair
      valued common stock issued for services to employees and
      consultants
            
            
            442,000
            
            
            
            8,892,000
            
            
            
            -Fair
      value of options issued to employees and directors
            
            
            1,706,000
            
            
            
            1,136,000
            
            
            
            767,000Fair
      value of warrants issued to consultants
            
            
            159,000
            
            
            
            3,440,000
            
            
            
            389,000Common
      stock issued to employees
            
            
            -
            
            
            
            682,000
            
            
            
            -Fair
      value of vested options and warrants
            
            
            -
            
            
            
            -
            
            
            
            170,000Amortization
      of loan discount
            
            
            -
            
            
            
            -
            
            
            
            65,000Write-off
      of deferred financing costs
            
            
            -
            
            
            
            -
            
            
            
            58,000Change
      in allowance of inventory
            
            
            (44,000
            )
            
            
            -
            
            
            
            -(Increase)
      decrease in:Accounts
      receivable
            
            
            (456,000
            )
            
            
            (408,000
            )
            
            
            -Inventory
            
            
            1,077,000
            
            
            
            (56,000
            )
            
            
            -Due
      from related party
            
            
            -
            
            
            
            -
            
            
            
            -Prepaid
      expenses and other current assets
            
            
            (268,000
            )
            
            
            55,000
            
            
            
            4,000Capitalized
      theatrical costs, deposits and other assets
            
            
            (469,000
            )
            
            
            (7,000
            )
            
            
            (10,000
            )Increase
      (decrease) in:Accounts
      payable and accrued expenses
            
            
            2,419
      ,000
            
            
            
            1,019,000
            
            
            
            612,000Deferred
      revenue
            
            
            38,000
            
            
            
            53,000
            
            
            
            -Deferred
      rent
            
            
            (103,000
            )
            
            
            14,000
            
            
            
            41,000Liabilities
      related to discontinued operations
            
            
            -
            
            
            
            -
            
            
            
            (1,000
            )Net
      cash provided by operating activities
            
            
            7,570,000
            
            
            
            144,000
            
            
            
            1,169,000Cash
      flows from investing activities:Purchase
      of Domain Names
            
            
            -
            
            
            
            (132,000
            )
            
            
            -Purchases
      of property and equipment
            
            
            (454,000
            )
            
            
            (678,000
            )
            
            
            (41,000
            )Purchase
      of Exhibit Merchandising
            
            
            -
            
            
            
            (11,436,000
            )
            
            
            -Purchase
      of Magic Arts & Entertainment, net of cash acquired
            
            
            (1,971,000
            )
            
            
            -
            
            
            
            -Purchase
      of NewSpace Entertainment, net of cash acquired
            
            
            (1,254,000
            )
            
            
            -
            
            
            
            -Purchase
      of ticket inventory from AnyEvent
            
            
            -
            
            
            
            (96,000
            )
            
            
            -Acquisition
      of AnyEvent
            
            
            -
            
            
            
            (300,000
            )
            
            
            -Net
      cash used in investing activities
            
            
            (3,679,000
            )
            
            
            (12,642,000
            )
            
            
            (41,000
            )Cash
      flows from financing activities:Payments
      on notes payable
            
            
            
            
            
            
            
            
            
            
            (132,000
            )Proceeds
      from note payable, stockholder
            
            
            -
            
            
            
            2,000,000
            
            
            
            -Repayment
      of note payable, stockholder
            
            
            -
            
            
            
            (2,000,000
            )
            
            
            -Proceeds
      from common stock subscription
            
            
            -
            
            
            
            17,784,000
            
            
            
            -Cost
      of Treasury Stock
            
            
            (2,098,000
            )
            
            
            -
            
            
            
            -Payments
      on capital lease obligations
            
            
            (46,000
            )
            
            
            (41,000
            )
            
            
            (78,000
            )Payments
      on convertible debentures
            
            
            -
            
            
            
            -
            
            
            
            (505,000
            )Net
      proceeds from sale of common stock and warrants
            
            
            -
            
            
            
            -
            
            
            
            1,003,000Net
      proceeds from exercise of options and warrants
            
            
            54,000
            
            
            
            229,000
            
            
            
            211,000Net
      cash provided by (used in) financing activities
            
            
            (2,090,000
            )
            
            
            17,972,000
            
            
            
            499,000Effect
      of exchange rate changes on cash
            
            
            (26,000
            )
            
            
            -
            
            
            
            -Change
      in Cash:Net
      increase
            
            
            1,775,000
            
            
            
            5,474,000
            
            
            
            1,627,000Balance
      at beginning of period
            
            
            7,417,000
            
            
            
            1,943,000
            
            
            
            316,000Balance
      at end of period
            
            $
            9,192,000
            
            
            $
            7,417,000
            
            
            $
            1,943,000








F-6


TIX
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOW(CONTINUED)




2008
            
            
            2007
            
            
            2006Supplemental
      disclosures of cash flow informationCash
      paid forIncome
      taxes
            
            $
            -
            
            
            $
            -
            
            
            $
            1,000Interest
            
            $
            19,000
            
            
            $
            104,000
            
            
            $
            154,000Non-cash
      activities:Issuance
      of 476,190 shares of common stock in conjunction with acquisition of Magic
      Arts & Entertainment - Florida, Inc.
            
            $
            2,257,000
            
            
            $
            -
            
            
            $
            -Issuance
      of 571,428 shares of common stock in conjunction with acquisition of
      NewSpace Entertainment, Inc.
            
            $
            2,595,000
            
            
            $
            -
            
            
            $
            -Issuance
      of 137,500 shares of common stock in conjunction with the acquisition of
      John's Tickets, LLC
            
            $
            -
            
            
            $
            550,000
            
            
            $
            -Issuance
      of 5 million shares of common stock in conjunction with the acquisition of
      Exhibit Merchandising, LLC.
            
            $
            -
            
            
            $
            35,000,000
            
            
            $
            -Issuance
      of common stock to officers
            
            $
            -
            
            
            $
            671,000
            
            
            $
            -Issuance
      of common stock as payment for accrued bonus
            
            $
            29,000
            
            
            $
            -
            
            
            $
            -Equipment
      acquired through capital lease
            
            $
            22,000
            
            
            $
            -
            
            
            $
            -




See
accompanying notes to consolidated financial statements.




F-7




TIX CORPORATION AND
SUBSIDIARIES




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006





1. Organization and Basis of
Presentation





Tix
Corporation (the “Company”) was incorporated in Delaware in April 1993 under the
name Cinema Ride, Inc. The Company changed its name from Cinema Ride, Inc. to
Tix Corporation (Tix), effective March 3, 2005. Tix is an integrated
entertainment company focusing on ticketing services, event merchandising, and
the production and promotion of live entertainment. We operate three
complementary business units; Tix4Tonight, Exhibit Merchandising (EM) and Tix
Productions Inc. (TPI), our live entertainment subsidiary.




Operating
Segments





Ticketing
Services




Our
ticketing services are carried out by our wholly owned subsidiary Tix4Tonight,
which offers for sale discount and premium tickets and provides group sale
services. Discounted tickets are sold byTix4Tonight, while premium tickets are
offered through Tix4AnyEvent and group sales are handled through
Tix4Members.com. When selling last minute discounted tickets, Tix4Tonight sells
them under short-term, exclusive and non-exclusive agreements with approximately
75 Las Vegas shows and attractions, out of a total of approximately 85 Las Vegas
shows and attractions running at any one time.  Tix4Tonight typically
offers tickets for more than 70 shows on any given day at a discount plus a
service fee. Tix4Tonight typically does not know exactly what 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 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 our cost.




Tix4Tonight
dba AnyEvent, a national event ticket broker, sells premium tickets for sporting
events, concerts, tours and theatre. Any Event operations are located in the
administrative offices of Tix4Tonight.





Tix4Tonight
is expanding our market reach through development of new targeted marketing
channel including a national, online, branded discount ticket portal that is
called Tix4members.com.
Tix4Tonight has launched its first co-branded ticketing site with Costco. In
connection with the Costco co-branded website we anticipate operating brick and
mortar facilities in certain larger metropolitan areas.




Exhibit
and Event Merchandising





The
Company provides exhibit and event merchandising through its wholly owned
subsidiary Exhibit Merchandising LLC (EM). EM provides retail specialty stores
for touring museum exhibitions and touring theatrical productions. EM provides a
complete turnkey retail store with commercially-available and extensive
custom-branded product for sale in addition to professional management that
complements the exhibition or theatrical production it represents. It operates
the stores in space rented 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” and “Tutankhamun the Golden King and the Great
Pharaohs.”




Live
Entertainment




In
December 2007, we announced that we had entered into letters of intent to
acquire two live theatrical and concert production companies; Magic Arts &
Entertainment, LLC (Magic) and NewSpace Entertainment, Inc. (NewSpace). As part
of the letters of intent the managements of Magic and NewSpace agreed to manage
the operations of their respective companies for the benefit of Tix Corporation
from January 2, 2008 until the transactions were finalized. The managements of
Magic and NewSpace were required to consult and obtain the approval of the
management of Tix Corporation prior to entering into any long term arrangements
or transactions that were outside the normal course of business. Further, Tix
Corporation assumed all responsibility for any profits or losses that might be
incurred during this period by both Magic and NewSpace. The acquisition of Magic
was completed on February 29, 2008 and the acquisition of NewSpace was completed
on March 12, 2008.  In May of 2008 we combined the operations of these
two entertainment companies into our newly-formed, wholly-owned subsidiary Tix
Productions Inc. We believe that by combining the operations of these two
companies into a single entity we have been better able to leverage resources,
gain operating efficiencies and more fully utilize their combined
experience with venues, producers and promoters. NewSpace and Magic continue to
operate under their previous names and will for the foreseeable future as a
reflection of the equity and marketplace recognition those entities
have.




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




F-8




2. Summary of Significant Accounting
Policies





Revenue
Recognition, Presentation and Concentrations:





The
Company has several streams of revenue, 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 by 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 the Las
Vegas strip, with dining at specific times on the same day as the sale.
Tix4Dinner recognizes as revenue the transaction fees earned from the booking of
dinner reservations at the time that the reservations are made. At this time,
the Company does not have accounts receivable or accounts payable associated
with the Tix4Dinner operations, as the Company collects the transaction fee at
the time that the reservation is made, and the dinner payment is collected
directly by the restaurant.





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





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





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





On
January 2, 2008, the Company began producing and presenting live entertainment.
Revenue from the presentation and production of an event is recognized after the
performance occurs. Revenue from our producing and presenting activities are
reported consistent with EITF 99-19 “Reporting Revenues Gross as a Principal
versus Net as an Agent” (EITF 99-19).  EITF 99-19 discusses whether
revenues and cost of goods sold to arrive at gross profit and their
corresponding assets and liabilities should be recorded at gross or net. EITF
99-19 states the following items as indicators as of whether something should be
recorded at gross or net:





·
            Acts
      as principal in the transaction·
            Has
      risk and rewards of ownership, such as risk of loss for collection,
      delivery and returns, and





o
            Takes
      title to the productso
            Selects
      the supplier


o
            Flexibility
      in pricingo
            Assumes
      credit risk




F-9




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





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





·
            selects
      the suppliers or approves the selection of the
supplier,·
            is
      the primary obligor with suppliers,


·
            assumes
      credit risk,·
            directs
      the pricing of the tickets, and


·
            purchases
      the advertising.





EITF
99-19 states that above are indicators of ownership and would be evidence that
revenues and related expenses should be recorded at gross. As the Company is
acting as the principal in the transaction, i.e., it has the risks and rewards
of ownership and has recorded the related revenues and expenses at gross. In
other instances where we only receive a fee and are not the principal obligors
to vendors we record these revenues at net. It is management’s belief that this
is consistent with EITF abstract 99-19 “Reporting Revenues Gross as Principal
Versus Net as an Agent.”





TPI
revenues collected in advance of an event are recorded as deferred revenues
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.




Consolidation:





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





Inventory:





We record
inventories at the lower of cost (FIFO basis) or market value. We assess the
value of our inventories periodically based upon numerous factors including
expected product or material demand, current market conditions, current cost and
net realizable value. If necessary, we write down our inventory for estimated
obsolescence, potential shrinkage, or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions.





Business
Combinations:





We
allocate the purchase price of acquired companies to the tangible assets
acquired, liabilities assumed and intangible assets acquired, based on their
estimated fair values. The excess of the purchase price over these fair values
is recorded as goodwill. We engage independent third-party appraisal firms to
assist us in determining the fair values of assets acquired and liabilities
assumed. Such valuations require management to make significant estimates and
assumptions, especially with respect to intangible assets. The significant
purchased intangible assets recorded by Tix include customer contracts and trade
names.





Critical
estimates in valuing certain intangible assets include but are not limited to:
future expected cash flows from customer contracts, customer lists, distribution
agreements, and intellectual property; and estimating cash flows from projects
when completed, and discount rates. Management's estimates of fair value are
based upon assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable and, as a result, actual results may differ from
estimates.





Property
and Equipment:





Property
and equipment are stated at cost or fair value at date of acquisition.
Depreciation which is recorded for both owned assets and assets under capital
leases, at the time property and equipment is placed in service using the
straight-line method over the estimated useful lives of the related assets,
which range from four to ten years. Leasehold improvements are amortized over
the shorter of the expected useful lives of the related assets or the lease
term.




F-10




Stock-Based
Compensation:





The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs. The Company accounts for stock option and warrant grants issued and
vesting to employees using SFAS No. 123R effective January 1, 2006, for all
share-based payments granted based on the requirements of SFAS No. 123R for
all awards granted to employees. The Company accounts for stock option and
warrant grants issued and vesting to non-employees in accordance with EITF No.
96-18: "Accounting for Equity Instruments that are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and
EITF 00-18 “Accounting Recognition for Certain Transactions involving Equity
Instruments Granted to Other Than Employees” whereas the value of the stock
compensation is based upon the measurement date as determined at either a) the
date at which a performance commitment is reached, or b) at the date at which
the necessary performance to earn the equity instruments is
complete.




We
estimate volatility and forfeitures based upon historical data. Securities and
Exchange Commission Staff Accounting Bulletin No. 110, issued in December 2007,
permits certain companies to use the "simplified" method for estimating the term
of "plain vanilla" share options granted under specified conditions. We use this
method to estimate our expected term of options granted. All of these variables
have an effect on the estimated fair value of our share-based
awards.





Intangible
Assets:





The
Company accounts for intangibles in accordance with Statement of Financial
Accounting Standards No. 141, “Business Combinations” and Statement of Financial
Accounting Standards No. 142, “Goodwill and Other Intangible Assets”.
Intangibles are valued at their fair market value and are amortized taking into
account the character of the acquired intangible asset and the expected period
of benefit.




The
Company evaluates intangible assets for impairment, at a minimum, on an annual
basis and whenever events or changes in circumstances indicate that the carrying
value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets is measured by comparing their net book
value to the related projected undiscounted cash flows from these assets,
considering a number of factors, including past operating results, budgets,
economic projections, market trends and product development cycles. If the net
book value of the asset exceeds the related undiscounted cash flows, the asset
is considered impaired, and a second test is performed to measure the amount of
impairment loss.  During the year ended December 31, 2008, we recorded an
impairment charge of $33.1 million related to goodwill and intangible assets
related to Exhibit Merchandising, LLC. There were no indications of impairment
based on managements’ assessment at December 31, 2007 or 2006.




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 bases 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 determined that the deferred tax
assets, which had been written down, would be realized in the future, the value
of the deferred tax assets would be increased, thereby increasing net income in
the period when that determination was made.





The
Company adopted the provisions of FIN48 on January 1, 2007. Fin 48 prescribes a
recognition threshold and a measurement attributable for the financial statement
recognition and measurement of tax positions taken or expected to be taken in a
tax return. For those benefits to 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%
likely of being realized.





Fair
Value Measurements:





Fair
Value Measurements are determined by the Company's adoption of Statement of
Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements
("SFAS 157") as of January 6, 2008, with the exception of the
application of the statement to non-recurring, non-financial assets and
liabilities as permitted. The adoption of SFAS 157 did not have a material
impact on the Company's fair value measurements. SFAS 157 defines fair
value as the price that would be received to sell an asset or paid to transfer a
liability in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the
measurement date. SFAS 157 establishes a fair
value hierarchy, which prioritizes the inputs used in measuring fair value into
three broad levels as follows:





Level 1—Quoted
prices in active markets for identical assets or liabilities.


Level 2—Inputs,
other than the quoted prices in active markets, that are observable either
directly or indirectly.


Level 3—Unobservable
inputs based on the Company's assumptions.




F-11




SFAS 157
requires the use of observable market data if such data is available without
undue cost and effort.





Cash
Concentrations:





The
Company's cash balances on deposit with banks are now 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.
The Company had cash balances with a bank in excess of the insurance limit as of
December 31, 2008, 2007 and 2006.





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. Exchange gains and losses are minor in 2008 and 2007. The Company began
operating in the United Kingdom in November 2007, with the opening of its
exhibit shop at the O2 for “Tutankhamen and The Golden Age of the Pharaohs.”
Additionally, in March 2008, the Company opened a second exhibit shop in Vienna,
Austria for “Tutankamun and the World of the Pharaohs.” Foreign currency gains
and losses are included in operations.





Net
Income (Loss) Per Common Share:





Statement
of Financial Accounting Standards No. 128, “Earnings Per Share”, requires
presentation of basic earnings per share (“Basic EPS”) and diluted earnings per
share (“Diluted EPS”). Basic earnings (loss) per share is computed by dividing
income (loss) available to common stockholders by the weighted average number of
common shares outstanding during the period. The diluted earnings per share
calculation give effect to all potentially dilutive common shares outstanding
during the period using the treasury stock method. These potentially dilutive
securities were included in the calculation of earnings per share for the year
ended December 31, 2006, but were not included in the calculation of loss per
share for the years ended December 31, 2008 and 2007, because the Company
incurred a loss during those periods and thus their effect would have been
anti-dilutive. Accordingly, basic and diluted loss per share is the same for the
years ended December 31, 2008 and 2007. At December 31, 2008 and 2007,
potentially dilutive securities consisted of outstanding warrants and stock
options to acquire an aggregate of 3,935,000 and 5,261,000 shares,
respectively.




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





Comprehensive
Income (Loss):





The
Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, “Reporting Comprehensive Income” (“SFAS No. 130”).
SFAS No. 130 established standards for the reporting and display of
comprehensive income, its components and accumulated balances in a full set of
general purpose financial statements. SFAS No. 130 defines comprehensive
income (loss) to include all changes in equity except those resulting from
investments by owners and distributions to owners, including adjustments to
minimum pension liabilities, accumulated foreign currency translation, and
unrealized gains or losses on marketable securities. During the year ended
December 31, 2008 the Company had a comprehensive loss of $29,000. The Company
did not have items of comprehensive income (loss) for the years ended December
31, 2007 and 2006.




Accounting
Estimates:





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





Advertising
Costs:





Advertising
costs are charged to operations as selling and marketing expenses at the time
the costs are incurred. Advertising costs for the years ended December 31, 2008,
2007 and 2006, were $4.4 million, $823,000 and $426,000,
respectively.





Impairment
of Long-Lived Assets:





Statement
of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS No. 144”), established guidelines
regarding when impairment losses on long-lived assets, which include property
and equipment, should be recognized, and how impairment losses should be
measured. SFAS No. 144 also provided a single accounting model for long-lived
assets to be disposed of and significantly changed the criteria that would have
to be met to classify an asset as held-for-sale.




F-12




Management
regularly reviews property, equipment and other long-lived assets for possible
impairment. This review occurs quarterly, or more frequently if events or
changes in circumstances indicate the carrying amount of the asset may not be
recoverable. If there is indication of impairment, then management prepares an
estimate of future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition. If
these cash flows are less than the carrying amount of the asset, an impairment
loss is recognized to write down the asset to its estimated fair value.
Management believes that the accounting estimate related to impairment of its
property and equipment is a “critical accounting estimate” because: (1) it
is highly susceptible to change from period to period because it requires
management to estimate fair value, which is based on assumptions about cash
flows and discount rates; and (2) the impact that recognizing an impairment
would have on the assets reported on the Company’s balance sheet, as well as net
income, could be material. Management’s assumptions about cash flows and
discount rates require significant judgment because actual revenues and expenses
have fluctuated in the past and are expected to continue to do so. Based upon
the results of a review of the goodwill and intangible assets performed by
Sanli, Pastore and Hill, Inc., during the fourth quarter of 2008, Tix’s
management recorded impairment charges to goodwill and intangible assets of
$25.4 million and $7.7 million, respectively. There can be no assurance that
future goodwill impairments will not occur. There were no impairments of
goodwill or intangible assets in 2007 or 2006.





Changes
in forecasted operations can materially affect these estimates.  Once
an impairment of goodwill or other intangible assets has been recorded, it
cannot be reversed.





Reclassifications:





During
2006 the Company reclassified certain components of its stockholders' equity
section to reflect the elimination of deferred compensation arising from
unvested share-based compensation pursuant to the requirements of Staff
Accounting Bulletin No. 107, regarding Statement of Financial Accounting
Standards No. 123(R), “Share-Based Payment.” This deferred compensation was
previously recorded as an increase to additional paid-in capital with a
corresponding reduction to stockholders' equity for such deferred compensation.
This reclassification has no effect on net income or total stockholders' equity
as previously reported. The Company will record an increase to additional
paid-in capital as the share-based payments vest.




Recent
Accounting Pronouncements:





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





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Accounting
and Reporting of Non-Controlling Interest in Consolidated Financial
Statements, an Amendment of ARB No. 51. These new standards will
significantly change the financial accounting and reporting of business
combination transactions and non-controlling (or minority) interests in
consolidated financial statements. We will be required to adopt SFAS No. 141(R)
and SFAS No. 160 on or after December 15, 2008. The Company is evaluating
the impact , if any, that the adoption of SFAS 141(R) and SFAS No. 160 will have
on our consolidated financial.





In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin  (“SAB") No. 110 to permit entities, under certain
circumstances, to continue to use the “simplified” method, in developing
estimates of expected term of “plain-vanilla” share options in accordance with
SFAS No. 123 (R) Share-Based Payment. SAB No. 110 amended SAB No. 107 to permit
the use of the “simplified” method beyond December 31, 2007. The Company
continues to use the “simplified” method and will do so until more detailed
relevant information about exercise behavior becomes readily
available.





In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (“FSP 157-2”).
FSP 157-2 delays the implementation of SFAS 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis. This statement
defers the effective date to fiscal years beginning after November 15, 2008
and interim periods within those fiscal years, which is fiscal year 2010 for the
Company.





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
instruments and Hedging Activities. The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable better understanding of the effects
on financial position, financial performance, and cash flows. The effective date
is for fiscal years and interim periods beginning after November 15, 2008. The
Company has not yet determined the effect, if any, the adoption of SFAS No. 161
will have on the Company’s consolidated financial statements.





In April
2008, the FASB issued Staff Position No. FAS 142-3 which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, “Goodwill and Other Intangible Assets.” The intent of this FSP is to
improve the consistency between the useful life of a recognized intangible asset
under Statement 142 and the period of expected cash flows used to measure the
fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and
other U.S. generally accepted accounting principles (GAAP). The Company is in
the process of evaluating the effect of FAS No. 142-3 on the Company’s
consolidated financial statements.




F-13




In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States. The FASB believes that the GAAP hierarchy should be directed
to entities because it is the entity (not its auditor) that is responsible for
selecting accounting principles for financial statements that are presented in
conformity with GAAP. The FASB does not believe this Statement will result in a
change in current practice. SFAS 162 is effective November 15,
2008.





3. Gain
on Settlement with Lender




From 2004
through 2006 we entered into a series of agreements with Finova, which both
extended and amended the original terms of the debt agreements. On September 13,
2006, the Company repaid in full its obligation to the lender of $1,180,000
(including accrued interest of $298,000-) by making a final cash payment of
$102,000. As a result, the Company recognized a non-cash gain on settlement of
debt of $1,078,000 ($0.07 per basic and fully diluted common share for the year
ended December 31, 2006), which has been presented as other income in the
consolidated statement of operations. At December 31, 2006, the Company had no
continuing financial obligations of any kind to Finova or Steamboat. There were
no early termination or prepayment penalties incurred by the Company in
conjunction with this transaction.





4. Acquisitions





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




Magic
Arts and Entertainment:




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




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




The
acquisition of Magic has been accounted for as a purchase in accordance with
SFAS No. 141, “Business Combinations,” and the operations of the company have
been consolidated since January 2, 2008, the effective date of the
acquisition.  The $4.4 million purchase price was allocated based upon
the fair value of the acquired assets, as determined by management with the
assistance of an independent valuation firm to determine the components of the
acquired business.





Allocation
of the Purchase Price of Magic Arts & Entertainment:





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




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




F-14




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




Under
their employment agreements, each of Messrs. Marsh and Marshall agrees not to
compete with us during the period from the date on which their employment with
the Company is terminated for any reason through the fifth anniversary of such
date.  Mr. Marsh was a shareholder of Tix prior to its acquisition of Magic
and presently owns approximately 14% of Tix's common stock.





NewSpace
Entertainment




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




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







The
acquisition of NewSpace has been accounted for as a purchase in accordance with
SFAS No. 141, “Business Combinations,” and the operations of the company have
been consolidated since January 2, 2008, the effective date of the acquisition.
The $4.0 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 to determine the components of the acquired
business.





Allocation
of the Purchase Price of NewSpace Entertainment:





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





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




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




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




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





During
the year ended December 31, 2007 the Company acquired John’s Tickets, LLC and
Exhibit Merchandising, LLC.





Acquisition
of Exhibit Merchandising





On August
8, 2007, Tix Corporation purchased substantially all of the assets of Exhibit
Merchandising LLC, an Ohio limited liability company (“EM”). In exchange for the
assets of EM we paid $11,450,000 in cash and issued 5,000,000 shares of
restricted common stock of the Company’s with a market value of $35.0 million
and assumed $120,000 accounts payable and accrued expenses, primarily related to
inventory purchases of EM. EM is based in Streesboro, Ohio, and is engaged in
the business of product merchandise development and sales related to museum
exhibits, including the King Tutankhamen and Pirates of the Caribbean tours. EM
sells themed merchandise, memorabilia and collector’s items in specialty stores
that operate for the duration of the tours’ presence at a particular museum. EM
is the sole operating unit in our Event and Exhibit Merchandising
segment.





F-15




In
connection with the Asset Purchase Agreement, the Company entered into an
employment agreement with Mr. Curtis Bechdel (the “Employment Agreement”)
pursuant to which he will serve as Vice President, Operations, of EM Nevada for
a three year term, subject to extension. In addition, the Company also entered
into a two-year Consulting Agreement with Lee Marshall (the “Consulting
Agreement”) pursuant to which Mr. Marshall agreed to act as a member of the
Company’s transition, assimilation and operating team relating to the assets of
EM and the operation of the business relating to the Purchased Assets. For his
services, the Company agreed to pay Mr. Marshall 100,000 restricted shares
of the Company’s Common Stock.




As a
condition to the Closing, the Company entered into a Voting Agreement with
Joseph Marsh pursuant to which, for a period of four years, Mr. Marsh
granted the Company, through its board of directors, the right to vote all of
his shares, including the shares acquired pursuant to the Asset Purchase
Agreement. As of the date hereof, such shares totaled 4,401,599.




The
acquisition of Exhibit Merchandising has been accounted for as a purchase in
accordance with SFAS No. 141, “Business Combinations”, and the operations of the
company have been consolidated commencing with the closing of the transaction.
The $46.6 million purchase price was allocated based upon the fair value of the
acquired assets, as determined by management with the assistance of an
independent valuation firm to determine the components of the acquired
business.




Tangible
      assets:
            
            $
            4,597,000Intangible
      assets:Licensing
      Contracts
            
            
            12,202,000Employment
      Agreements
            
            
            2,538,000Miscellaneous
            
            
            118,000Goodwill
            
            
            27,115,000Purchase
      price
            
            $
            46,570,000




The
Company’s management performed its 2008 annual impairment testing of goodwill
and intangibles based on a combination of factors, including the current
economic environment, decreased revenues and increased costs, it determined that
a noncash goodwill and intangible impairment charge associated with the
intangible assets of EM was required. Management engaged Sanli Pastore &
Hill, Inc., an outside valuation firm to perform a study of the goodwill and
intangible assets acquired related to EM.  Based upon the results of
the study performed by Sanli Pastore & Hill, Inc. the Company’s management
recorded charges to goodwill and intangible assets of $25.4 million and $7.7
million, respectively for the year ended December 31, 2008. There were no
impairments of goodwill or intangible assets in 2007. Once an impairment of
goodwill or other intangible assets has been recorded, it cannot be reversed.
There can be no assurance that future goodwill impairments will not
occur.




Acquisition of John's Tickets,
LLC





Effective
March 14, 2007, the Company entered into an Asset Purchase Agreement (the
“Agreement”) with John’s Tickets, LLC, an Ohio limited liability company dba
AnyEvent Tickets (“AnyEvent”). AnyEvent is a national event ticket broker
located in Las Vegas, Nevada that sells tickets for sporting events, concerts,
tours and theater. Pursuant to the Agreement, the Company purchased the domain
name “http://anyevent.com”, the contents of the website “http://anyevent.com”,
the inventory of sporting events, concerts and tours, and theatre tickets
outstanding as of the date of the Agreement, the phone number 1-800-ANYEVENT,
and all existing contracts by and between AnyEvent and other existing box
offices, theatres and brokers, pursuant to which AnyEvent acquires its ticket
inventory.





In
connection with this transaction, effective March 14, 2007, the Company entered
into an employment agreement with John Pirample, sole member of AnyEvent,
pursuant to which Mr. Pirample agreed to provide his exclusive services to the
Company as its Premium Ticket Manager through February 28, 2010.





In
consideration for the assets purchased under the Agreement, the Company paid
$300,000 in cash and issued 137,500 shares of restricted common stock valued at
$4.00 per share (aggregate value $550,000), which approximated market value on
the date of issuance, for total purchase consideration of $850,000.
Additionally, the Company paid $96,324 for the actual costs of the ticket
inventory based on a post-closing audit.




The
acquisition of AnyEvent has been accounted for as a purchase in accordance with
SFAS No. 141, “Business Combinations”, and the operations of the two companies
have been consolidated commencing with the closing of the transaction. The
$850,000 purchase price was allocated as follows, based upon the fair value of
the acquired assets, as determined by management with the assistance of an
independent valuation firm to determine the components of the acquired
business.





Tangible
      assets:Office
      equipment and furniture
            
            $
            25,000Intangible
      assets:Customer
      relationships
            
            
            550,000Contract
      commitments
            
            
            100,000Marketing
      related
            
            
            75,000Technology
      based
            
            
            100,000Purchase
      price
            
            $
            850,000




F-16




The
unaudited pro forma condensed consolidated statement of operations for the year
ended December 31, 2007 and 2006 presented below gives effect to the
acquisitions as if the transaction had occurred at the beginning of such period
and includes certain adjustments that are directly attributable to the
transaction, which are expected to have a continuing impact on the Company. No
pro forma information is necessary for 2008 as the companies acquired were
included for the entire year.




Pro forma
data:





Pro
      Forma
            
            
            Pro
      Forma(unaudited)
            
            
            (unaudited)Year
      Ended
            
            
            Year
      EndedDecember
      31,
            
            
            December
      31,2007
            
            
            2006Revenues
            
            $
            44,384,000
            
            
            $
            27,596,000Net
      loss
            
            $
            (16,417,000
            )
            
            $
            (2,319,000
            )Pro
      forma net loss per weighted average share, basic and
    diluted
            
            $
            (0.60
            )
            
            $
            (0.11
            )





5. Intangible
Assets





The
following table summarizes the original cost, the related accumulated
amortization, and the net carrying amounts for the Company’s intangible assets
at December 31, 2008.




Estimated
            
            Original
            
            
            Accumulated
            
            
            Impairment
            
            
            Net
      CarryingUseful
      Lives
            
            Cost
            
            
            Amortization
            
            
            Adjustment
            
            
            AmountMarketing
      Based
            3-6
      years
            
            $
            12,277,000
            
            
            $
            (2,882,000
            )
            
            $
            (6,852,000
            )
            
            $
            2,543,000Contract
      commitments
            3-7
      years
            
            
            6,794,000
            
            
            
            (2,169,000
            )
            
            
            (835,000
            )
            
            
            3,790,000Customer
      relationships
            3
      years
            
            
            612,000
            
            
            
            (372,000
            )
            
            
            -
            
            
            
            240,000Technology
      Based
            3
      years
            
            
            111,000
            
            
            
            (63,000
            )
            
            
            -
            
            
            
            48,000Intellectual
      property (e.g. domain names)
            5
      years
            
            
            130,000
            
            
            
            -
            
            
            
            -
            
            
            
            130,000Goodwill
            indefinite
            
            
            31,084,000
            
            
            
            -
            
            
            
            (25,445,000
            )
            
            
            5,639,000Total
            
            
            $
            51,008,000
            
            
            $
            (5,486,000
            )
            
            $
            (33,132,000
            )
            
            $
            12,390,000





Total
amortization expense related to intangible assets in 2008, 2007 and 2006 was
$4,110,000, $1,375,000 and $2,000, respectively. Total estimated amortization
expense with respect to intangible assets for 2009 though 2013 is as
follows:




Years
      Ending December 31,2009
            
            $
            1,968,0002010
            
            
            1,596,0002011
            
            
            1,326,0002012
            
            
            1,326,0002013
            
            
            403,000Beyond
      2013
            
            
            132,000Total
            
            $
            6,751,000




F-17




6. Obligations
Under Capital Leases





The
Company has entered into various capital leases for equipment with monthly
payments ranging from $33 to $1,767 per month, including interest, at interest
rates ranging from 9.8% to 19.7% per annum. At December 31, 2008, monthly
payments under these leases aggregated $5,600. The leases expire at various
dates through 2013.





At
December 31, 2008 and 2007, property and equipment included assets under capital
leases of $408,000 and $386,000, less accumulated amortization of $279,000 and
$237,000, respectively.




Minimum
future payments under capital lease obligations are as follows:




Years
      Ending December 31,2009
              
              $
              64,0002010
              
              
              67,0002011
              
              
              9,0002012
              
              
              9,0002013
              
              
              3,000Total
      payments
              
              
              152,000Less:
      amount representing interest
              
              
              (23,000
              )Present
      value of minimum lease payments
              
              
              129,000Less:
      current portion
              
              
              (51,000
              )Non-current
      portion
              
              $
              78,000





7. Related
Party Transactions





Note
Payable, Stockholder





On April
24, 2007, the Company borrowed $2,000,000 from Joseph Marsh, a greater than 10%
stockholder of the Company, pursuant to an unsecured short-term note, with
interest at 8%, per annum payable monthly. The note was due on or before April
1, 2008. During the term of the loan, Mr. Marsh had the right to convert the
loan into an investment in any subsequent private placement that the Company may
conduct. On September 29, 2007 the Company repaid the loan in full. During the
term of the loan the Company paid $76,000 in interest. On March 1, 2008, as a
result of Tix acquisition of Magic Arts & Entertainment, Mr. Marsh became an
employee of Tix.





Member of
the Board of Directors:





During
2008, 2007 and 2006, Benjamin Frankel, a director of the Company, was a
principal in Frankel, LoPresti & Co., an accountancy corporation. Effective
March 6, 2006, the Company entered into a one-year agreement with Mr. Frankel’s
current firm for certain business, accounting and tax advisory services. This
agreement was approved by the Company’s Board of Directors. This agreement was
terminated in October 2006. For the years ended December 31, 2008, 2007
and 2006 we paid Mr. Frankel or his firm for accounting and tax
services $33,000, $53,000 and $108,000.  In addition, during the
year ended December 31, 2006, the Company wrote-off the remaining balance of the
prepaid accounting fee to Mr. Frankel’s former firm at December 31, 2005 of
$9,000.




8. Income
Taxes





At
December 31, 2008, the Company had Federal net operating loss carryforwards of
approximately $26.3 million expiring beginning in 2008 in varying amounts
through 2027. The Company also had California state net operating loss
carryforwards of approximately $700,000 expiring beginning in 2013 in varying
amounts through 2016.





SFAS No.
109 requires that a valuation allowance be established when it is more likely
than not that all or a portion of deferred tax assets will not be realized. Due
to the restrictions imposed by Internal Revenue Code Section 382 regarding
substantial changes in ownership of companies with loss carryforwards, the
utilization of the Company’s net operating loss carryforwards we believe are
limited as a result of cumulative changes in stock ownership. As such, the
Company recorded a 100% valuation allowance against its net deferred tax assets
as of December 31, 2008 and 2007.




F-18




The tax
effects of temporary differences that give rise to a significant portion of the
deferred tax assets at December 31, 2008 and 2007 are presented
below:




December
      31,2008
                      
                      
                      2007Deferred
      tax assetsNet
      operating loss carryforward
                      
                      $
                      9,481,000
                      
                      
                      $
                      9,190,000Goodwill
                      
                      
                      1,974,000
                      
                      
                      
                      9,174,000Other
      Assets
                      
                      
                      96,000
                      
                      
                      
                      93,000Less:
      Valuation allowance
                      
                      
                      (11,551,000
                      )
                      
                      
                      (18,457,000
                      )Net
      deferred tax asset
                      
                      $
                      -
                      
                      
                      $
                      -




As a
result of the Company’s significant operating loss carryforwards and the
corresponding valuation allowance, no income tax benefit has been recorded at
December 31, 2008 and 2007. The provision for income taxes using the statutory
federal tax rate as compared to the Company’s effective tax rate is summarized
as follows:




Years
      ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Tax
      benefit at statutory rate
                  
                  
                  (39.6
                  )%
                  
                  
                  (39.6
                  )%
                  
                  
                  (39.6
                  )%Adjustments
      to change in valuation allowance
                  
                  
                  39.6
                  
                  
                  
                  39.6
                  
                  
                  
                  39.6-
                  
                  
                  
                  -
                  
                  
                  
                  -




Effective
January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”) an
interpretation of FASB Statement No. 109, Accounting for Income Taxes.” The
Interpretation addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, the Company may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than fifty percent likelihood of being realized upon ultimate
settlement. FIN 48 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. At the date of adoption, and as of December 31,
2008, the Company does not have a liability for unrecognized tax
benefits.




The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for five years after 2003.




During
the periods open to examination, the Company has net operating loss and tax
credit carryforwards for U.S. federal and state tax purposes that have
attributes from closed periods. Since these NOLs and tax credit carryforwards
may be utilized in future periods, they remain subject to
examination.




The
Company’s policy is to record interest and penalties on uncertain tax provisions
as income tax expense. As of December 31, 2008, the Company has no accrued
interest or penalties related to uncertain tax positions.





9. Stockholder’
equity





The
Company from time to time issues its common stock, options and warrants as
non-cash compensation for services rendered, often in conjunction with an
agreement that requires the service provider to assist the Company for a period
of two to four years in obtaining strategic alliances and discount and premium
ticket opportunities. Issued stock is valued at the closing stock price and the
entire value of the contract is expensed on the date of grant since success is
not assured in these types of arrangements and there are no performance
requirements. The expense is recorded in marketing and general administrative
expenses commensurate with the services provided. During the year ended December
31, 2008, the Company issued 86,000 shares of common stock to consultants with a
fair market value of $424,000 on the date of issuance, issued 217,000 shares of
common stock to officers and employees with a fair market value of $47,000 on
the date of issuance, issued 1,326,000 shares of common stock upon exercise of
options and warrants with a fair market value of $54,000 on the date of
issuance, issued 476,000 shares of common stock for the acquisition of Magic
Arts and Entertainment (note 3), and issued 571,000 shares of common stock for
the acquisition of New Space Entertainment (note 3).





In the
third quarter of 2008, the Company’s board of directors authorized a share
repurchase program.  As of December 31, 2008 the Company repurchased
732,370 shares for gross proceeds of $2,098,000. Through February 27, 2009 the
Company has repurchased 907,000 shares for gross proceeds of $2,413,000. The
shares were repurchased at prices that range from $1.26 per share to $4.13 per
share.




F-19


Service
Providers and Vendors:




During
the years ended December 31, 2008, 2007 and 2006 the Company incurred $424,000,
$6.1 million and $389,000 of consulting expense as a result of the issuance of
86,000, 1.1 million and 354,000 shares of its common stock, respectively. The
fair market value of the shares issued during the year ended December 31, 2008
was between $4.58 and $5.20 per share at the time the stock was issued. The fair
market value of the shares issued during the year ended December 31, 2007 was
between $3.75 and $7.20. The fair value of the shares issued during the year
ended December 31, 2006 was between $0.22 and $2.57.




On May
31, 2007, in conjunction with a three year consulting agreement to assist us
with developing strategic relationships with sporting event promoters and
presenters, we issued to Centaurus One, LLC (Centaurus) 250,000 shares of our
common stock which had a fair market value at the time of issuance of $1.4
million and we issued a three year warrant to purchase 1,000,000 shares of our
common stock for $5.35 which had a fair market value of  $3.4
million as calculated using the Black Scholes option pricing model. On
November 27, 2007, we entered into a mutual termination agreement with
Centaurus  whereby the services provided to Tix by Centaurus have earned
all the granted stock, but only half of the warrants to purchase 1,000,000
shares of our common stock, therefore the number of shares the warrant can
purchase was reduced to 500,000 shares. As the agreement did not have any
performance requirements included in it the fair market value of the warrants
and shares were expensed at the time of issuance.




On July
20, 2007, in conjunction with a four year consulting agreement to assist us in
establishing strategic relationships with producers, promoters and venues, we
issued a private consultant 250,000 shares of our common stock with a fair
market value of $1.4 million. As the agreement did not have any performance
requirements included in it, the fair market value of the shares was expensed at
the time of issuance.




Related
Parties and Employees




During
the year ended December 31, 2007, the Company issued a total of 100,000 shares
of common stock to a non-officer employee for services rendered. The shares of
common stock were recorded at their fair market value on the date of issuance of
$635,000 and were charged to operations as general and administrative expense
during the year ended December 31, 2007.





During
March 2006, the Company issued 500,000 shares of common stock pursuant to a new
three-year employment agreement with its President and Chief Executive Officer.
The 500,000 shares of common stock had a fair market value on the date of
issuance of $110,000 ($0.22 per share) and are being charged to operations as
general and administrative expense over the three-year period commencing March
1, 2006. During the years ended December 31, 2008, 2007 and 2006, 167,000,
167,000, and 139,000 shares of common stock had vested, and were recorded at
their approximate fair market values of $37,000, $37,000, and $31,000,
respectively, which were charged to operations as general and administrative
expenses.





On March
13, 2006, the Company issued 150,000 shares of common stock to Kimberly Simon,
its Chief Operating Officer. The shares of common stock are subject to pro rata
forfeiture over a three-year period if Ms. Simon ceases to be employed by the
Company. The 150,000 shares of common stock had a fair market value on the date
of issuance of $33,000 ($0.22 per share) and are being charged to operations as
general and administrative expense over the three-year period commencing March
13, 2006. During the years ended December 31, 2008, 2007 and 2006, 50,000,
50,000, and 40,000 shares of common stock had vested and were recorded at their
approximate fair market values of $11,000, $11,000, and $9,000 respectively,
which were charged to operations as general and administrative
expenses.




Private
Placement





On
September 24, 2007, the Company completed the closing of a private investment in
public equity financing. At the closing, the Company sold to institutional and
accredited investors 3,744,000 shares of its common stock for a price of $4.75
per share, or an aggregate of approximately $17.8 million. In addition the
Company also issued to the investors two-year warrants to purchase 1,870,000
shares of its common stock at an exercise price of $5.50 per share. In
conjunction with this offering the Company paid fees of $75,000 and issued a
total of 147,000 shares of its common stock to finders in connection with the
financing. The offer and sale of the shares sold were not registered under the
Securities Act of 1933 in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act and Regulation D
promulgated thereunder. The shares sold in this offering may not be reoffered or
sold in the United States by the holders in the absence of an effective
registration statement, or exemption from the registration requirements, under
the Securities Act.





10. Stock-Based
Compensation Plans





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





Consultant
Stock Plan:




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




F-20




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





On March
3, 2004, the Company filed with the Securities and Exchange Commission a
registration statement on Form S-8 for the purpose of registering 1,600,000
common shares issuable under the Consultant Stock Plan under the Securities Act
of 1933. As of December 31, 2008, 715,243 shares of common stock were reserved
for issuance under the Consultant Stock Plan.





2004
Option Plan:





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





During
the year ended December 31, 2008, the Company issued 25,000 options to
purchase shares of its common stock under the 2004 Option Plan. As of December
31, 2008, options to purchase 803,000 shares of common stock were reserved for
issuance under the 2004 Option Plan.




2004
Directors Option Plan:




On March
3, 2005, the Company adopted the Directors Stock Option Plan (the “2004
Directors Option Plan”) for non-employee directors of the Company. The 2004
Directors Option Plan was approved pursuant to a Joint Written Consent of the
Board of Directors and Majority Stockholders of the Company dated September 22,
2004. The 2004 Directors Option Plan authorized the granting of non-qualified
stock options to purchase an aggregate of not more than 100,000 shares of the
Company’s common stock. The 2004 Directors Option Plan provided that options
granted would be exercisable for a period not to exceed ten years and would vest
on a cumulative basis as to one-third of the total number of shares covered
thereby at any time after one year from the date the option was granted and an
additional one-third of such total number of shares at any time after the end of
each consecutive one-year period thereafter until the option had become
exercisable as to all of such total number of shares. The exercise price for
non-qualified stock options would be the fair value of the Company’s common
stock at the date of the grant. No option may be exercised during the first six
months of its term except in the case of death. During the year ended December
31, 2008 the Company issued 50,000 options under the 2004 Directors
Option Plan.





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





2008
            
            
            2007
            
            
            2006Risk
      free rate of return
            
            
            2.12%
      - 2.82
            %
            
            
            4
            %
            
            
            4
            %Option
      lives in years
            
            
            3
            
            
            
            6
            
            
            
            6Annual
      volatility of stock price
            
            
            81.5%
      - 82.3
            %
            
            
            112.5
            %
            
            
            112.5
            %Dividend
      yield
            
            
            0
            %
            
            
            0
            %
            
            
            0
            %





Summary
of Stock Options:





The
intrinsic value of outstanding stock options at December 31, 2008
was $290,000, as compared to $1,731,000 at December 31, 2007. The intrinsic
value of exercisable stock options at December 31, 2008 was $290,000, as
compared to $1,261,000 at December 31, 2007. A summary of the combined stock
options for the year ended December 31, 2008 for the three plans discussed above
is as follows:





F-21




WeightedNumber
            
            
            averageof
            
            
            exerciseOptions
            
            
            priceBalance
      outstanding, January 1, 2006
            
            
            211,500
            
            
            $
            0.15Options
      granted
            
            
            300,000
            
            
            
            3.01Options
      exercised
            
            
            (60,000
            )
            
            
            0.15Options
      expired
            
            
            -
            
            
            
            -Balance
      outstanding, December 31, 2006
            
            
            451,500
            
            
            
            2.05Options
      granted
            
            
            847,000
            
            
            
            6.94Options
      exercised
            
            
            (1,000
            )
            
            
            0.39Options
      expired or forfeited
            
            
            (9,000
            )
            
            
            6.85Balance
      outstanding, December 31, 2007
            
            
            1,288,500
            
            
            
            5.24Options
      granted
            
            
            75,000
            
            
            
            3.70Options
      exercised
            
            
            (100,500
            )
            
            
            2.01Options
      expired
            
            
            -
            
            
            
            -Balance
      outstanding, December 31, 2008
            
            
            1,263,000
            
            
            $
            5.41Balance
      exercisable, December 31, 2008
            
            
            636,000
            
            
            $
            4.40




Information
relating to outstanding stock options at December 31, 2008, summarized by
exercise price, is as follows:




Outstanding
                  
                  ExercisableExercise
      Price Per Share
                  
                  
                  Shares
                  
                  Life
                    (Years)
                  
                  Exercise Price
                  
                  Shares
                  
                  Weighted
                    Average Exercise
                    Price$6.00
      - $7.20
                  
                  
                  
                  818,000
                  
                  8.7
                  
                  $
                  7.01
                  
                  316,000
                  
                  $
                  7.02$4.00
      - $5.99
                  
                  
                  
                  145,000
                  
                  5.6
                  
                  $
                  4.16
                  
                  20,000
                  
                  $
                  4.30$2.00
      - $3.99
                  
                  
                  
                  150,000
                  
                  4.3
                  
                  $
                  3.07
                  
                  150,000
                  
                  $
                  3.07$0.22
      - $1.99
                  
                  
                  
                  150,000
                  
                  0.7
                  
                  $
                  0.22
                  
                  150,000
                  
                  $
                  0.221,263,000
                  
                  6.85
                  
                  $
                  5.41
                  
                  636,000
                  
                  $
                  4.40




For year
ended December 31, 2008 and 2007, the value of options vested during the period
was $1.7 million and $1.1 million, respectively. As of December 31, 2008, the
Company has outstanding unvested options with future compensation costs of $2.5
million, which will be recorded as compensation cost as the options vest over
their remaining average life of 6.85 years.





During
the year-ended December 31, 2008, in conjunction with a consulting agreement,
the Company issued 150,000 warrants, of which 50,000 vested immediately. The
remaining 100,000 warrants vest over six months, which is the term of the
consulting agreement. The consulting agreement may be terminated at any time and
therefore the related consulting expense on these 100,000 warrants is being
recognized over the life of the contract.




F-22




A summary
of warrant activity for the year ended December 31, 2008 is as
follows:





Number
                  of
                  warrants
                
                
                Weighted
                  average
                  exercise
                  priceBalance
      outstanding, January 1, 2006
                
                
                2,014,184
                
                
                $
                0.34Warrants
      granted
                
                
                2,140,000
                
                
                
                0.49Warrants
      exercised
                
                
                (1,324,388
                )
                
                
                0.20Warrants
      expired
                
                
                -
                
                
                
                -Balance
      outstanding, December 31, 2006
                
                
                2,829,796
                
                
                
                0.52Warrants
      granted
                
                
                2,372,007
                
                
                
                5.47Warrants
      exercised
                
                
                (1,229,796
                )
                
                
                0.48Warrants
      expired
                
                
                -
                
                
                
                -Balance
      outstanding, December 31, 2007
                
                
                3,972,007
                
                
                
                3.47Warrants
      granted
                
                
                150,000
                
                
                
                4.00Warrants
      exercised
                
                
                (1,400,000
                )
                
                
                0.50Warrants
      expired
                
                
                (50,000
                )
                
                
                0.50Balance
      outstanding, December 31, 2008
                
                
                2,672,007
                
                
                $
                5.11





The
intrinsic value of outstanding warrants at December 31, 2008 was $249,000, as
compared to $9.5 million at December 31, 2007. Information relating to
outstanding warrants at December 31, 2008, summarized by exercise price, is as
follows:




Outstanding
                      
                      ExercisableExercise Price Per Share
                      
                      
                      Shares
                      
                      Life
                        (Years)
                      
                      Exercise
                        Price
                      
                      Shares
                      
                      Weighted
                        Average
                        Exercise
                        Price$2.00
      - $5.50
                      
                      
                      
                      2,522,007
                      
                      0.84
                      
                      $
                      5.38
                      
                      2,488,673
                      
                      $
                      5.40$0.36
      - $1.99
                      
                      
                      
                      150,000
                      
                      2.93
                      
                      $
                      0.49
                      
                      150,000
                      
                      $
                      0.492,672,007
                      
                      0.95
                      
                      $
                      5.11
                      
                      2,638,673
                      
                      $
                      5.12




11. Commitments





Payments
      due by Fiscal Years Ending December 31,Total
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
            
            
            2013Employment
      agreement
            
            $
            3,245
      ,000
            
            
            $
            1,690,000
            
            
            $
            1,394
      ,000
            
            
            $
            161,000
            
            
            $
            -
            
            
            
            -Capital
      lease obligations
            
            
            152,000
            
            
            
            64,000
            
            
            
            67,000
            
            
            
            9,000
            
            
            
            9,000
            
            
            
            3,000Operating
      lease obligations
            
            
            6,166,000
            
            
            
            2,433,000
            
            
            
            1,780,000
            
            
            
            1,120,000
            
            
            
            833,000Total
      contractual cash obligations
            
            $
            9,563
      ,000
            
            
            $
            4,187,000
            
            
            $
            3,241
      ,000
            
            
            $
            1,290
      ,000
            
            
            $
            842,000
            
            
            $
            3,000




Lease
Commitments:





The
Company leases office space for its corporate headquarters in Studio City,
California. Additionally, the Company’s wholly-owned subsidiary, Tix4Tonight,
LLC, leases space for its six ticket facilities and its administrative offices
in Las Vegas, Nevada, for various periods ranging from one year to five
years.




F-23




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.




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 12% 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 the sum of 25% of each dollar deferred, limited to 1% of the participant’s
compensation. The Company may make additional matching contributions as
determined and approved by the Board of Directors. Total 401(k) retirement plan
expense amounted to $119,000, $8,000, and $10,000 for the years ended December
31, 2008, 2007, and 2006, respectively.





12. Segment
Reporting





We
operate in three reportable segments; ticket services, event and branded
merchandising, and with our formation of the Tix Productions, Inc. (TPI), in
2008, live entertainment.





Our
ticketing services are carried out by our wholly owned subsidiary Tix4Tonight,
which offers for sale discount and premium tickets. Discounted tickets are sold
byTix4Tonight, while premium tickets are offered through Tix4AnyEvent. When
selling last minute discounted tickets, Tix4Tonight sells them under short-term,
exclusive and non-exclusive agreements with approximately 70 Las Vegas shows and
attractions, out of a total of approximately 85 Las Vegas shows and attractions
running at any one time, and typically offers tickets for more than 60 shows on
any given day at a discount plus a service fee. Tix4Tonight typically does not
know exactly what 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 shows are paid on a weekly basis only for the
tickets that Tix4Tonight actually sells to customers. Tix4Tonight has no
financial risk with respect to unsold tickets and revenues are recorded at net
of cost.




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




In
December 2007, the Company announced that it had entered into letters of intent
to acquire two live theatrical and concert production companies; Magic Arts
& Entertainment, LLC (Magic) and NewSpace Entertainment, Inc. (NewSpace). As
part of the letters of intent the managements’ of Magic and NewSpace would
manage the operations of their respective companies’ for the benefit of Tix
Corporation from January 2, 2008 until the transactions could be finalized. The
managements’ of Magic and NewSpace were required to consult and obtain the
approval of the management of Tix Corporation prior to entering into any long
term arrangements or transactions that were outside the normal course of
business. Further, Tix Corporation assumed all responsibility for any losses or
profits that might be incurred or earned during this period by both Magic and
NewSpace. The acquisition of Magic was completed on February 29, 2008 and the
acquisition of NewSpace was completed on March 12, 2008.  Both Magic
and NewSpace are presenters of live theater and concerts. The Company’s combined
the operations of the two entertainment companies into its newly-formed
wholly-owned subsidiary Tix Productions Inc. We believe that by combining the
operations of the two companies under a single entity, we will be able to better
leverage resources, gain operating efficiencies and more fully utilize the
combined network of producers and promoters. NewSpace and Magic will continue to
operate under their current names for the foreseeable future as a reflection of
the equity and marketplace recognition those entities have.




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.





F-24




Information
related to these operating segments is as follows.




Ticketing
            
            
            Exhibit
            
            
            Live
            
            
            Corporate
            
            
            ConsolidatedServices
            
            
            Merchandising
            
            
            Entertainment
            
            
            Expenses
            
            
            and
      Combined2008Revenue
            
            $
            13,952,000
            
            
            $
            11,030,000
            
            
            $
            44,563,000
            
            
            $
            -
            
            
            $
            69,545,000Direct
      operating expenses
            
            
            5,725,000
            
            
            
            6,877,000
            
            
            
            35,888,000
            
            
            
            -
            
            
            
            48,490,000Selling,
      general and administrative expenses
            
            
            2,720,000
            
            
            
            3,681,000
            
            
            
            6,146,000
            
            
            
            5,654,000
            
            
            
            18,201,000Impairment
      of goodwill
            
            
            -
            
            
            
            25,445,000
            
            
            
            -
            
            
            
            -
            
            
            
            25,445,000Impairment
      of intangible assets
            
            
            -
            
            
            
            7,687,000
            
            
            
            -
            
            
            
            -
            
            
            
            7,687,000Depreciation
      and amortization
            
            
            206,000
            
            
            
            3,173,000
            
            
            
            916,000
            
            
            
            306,000
            
            
            
            4,601,000Operating
      income (loss)
            
            $
            5,301,000
            
            
            $
            (35,833,000
            )
            
            $
            1,613,000
            
            
            $
            (5,960,000
            )
            
            $
            (34,879,000
            )Total
      assets
            
            $
            3,738,000
            
            
            $
            10,462,000
            
            
            $
            10,449,000
            
            
            $
            4,199,000
            
            
            $
            28,848,0002007Revenue
            
            $
            14,284,000
            
            
            $
            4,283,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            18,567,000Direct
      operating expenses
            
            
            8,829,000
            
            
            
            2,843,000
            
            
            
            -
            
            
            
            -
            
            
            
            11,672,000Selling,
      general and administrative expenses
            
            
            15,029,000
            
            
            
            905,000
            
            
            
            -
            
            
            
            5,658,000
            
            
            
            21,592,000Depreciation
      and amortization
            
            
            195,000
            
            
            
            1,229,000
            
            
            
            -
            
            
            
            244,000
            
            
            
            1,668,000Operating
      income (loss)
            
            $
            (9,769,000
            )
            
            $
            (694,000
            )
            
            $
            -
            
            
            $
            (5,902,000
            )
            
            $
            (16,365,000
            )Total
      assets
            
            $
            2,977,000
            
            
            $
            47,224,000
            
            
            $
            -
            
            
            $
            4,967,000
            
            
            $
            55,168,0002006Revenue
            
            $
            5,388,000
            
            
            $
            
            
            
            $
            -
            
            
            $
            
            
            
            $
            5,388,000Direct
      operating expenses
            
            
            2,173,000
            
            
            
            
            
            
            
            -
            
            
            
            
            
            
            
            2,173,000Selling,
      general and administrative expenses
            
            
            1,214,000
            
            
            
            
            
            
            
            -
            
            
            
            2,559,000
            
            
            
            3,773,000Depreciation
      and amortization
            
            
            159,000
            
            
            
            
            
            
            
            -
            
            
            
            5,000
            
            
            
            164,000Operating
      income (loss)
            
            $
            1,842,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (2,564,000
            )
            
            $
            (722,000
            )Total
      assets
            
            $
            1,699,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            933,000
            
            
            $
            2,632,000





F-25





13. Quarterly
Financial Information (Unaudited)





Summarized
unaudited quarterly financial information for the year-ended December 31, 2008
and fiscal year 2007 are noted below:





TIX
CORPORATION AND SUBSIDIARIES
 QUARTERLY
RESULTS
 
 Year
      Ended December 31, 2008 (1)First
                
                
                Second
                
                
                Third
                
                
                FourthQuarter
                
                
                Quarter
                
                
                Quarter
                
                
                QuarterRevenues
                
                $
                23,163,000
                
                
                $
                16,864,000
                
                
                $
                8,839,000
                
                
                $
                20,679,000Gross
      profit
                
                
                6,433,000
                
                
                
                4,540,000
                
                
                
                3,712,000
                
                
                
                6,370,000Impairment
      charge of goodwill and intangible assets
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                33,132,000Depreciation
      and amortization
                
                
                1,122,000
                
                
                
                1,102,000
                
                
                
                1,151,000
                
                
                
                1,226,000Income
      (loss) from operations
                
                
                472,000
                
                
                
                (1,419,000
                )
                
                
                (1,065,000
                )
                
                
                (32,867,000
                )
      (2)Net
      income (loss)
                
                $
                462,000
                
                
                $
                (1,166,000
                )
                
                $
                (986,000
                )
                
                $
                (32,974,000
                )
      (2)Basic
      earnings per share
                
                $
                0.02
                
                
                $
                (0.04
                )
                
                $
                (0.03
                )
                
                $
                (1.02
                )Diluted
      earnings per share
                
                $
                0.01
                
                
                $
                (0.04
                )
                
                $
                (0.03
                )
                
                $
                (1.02
                )Shares
      used in computation of earnings per share:Basic
                
                
                30,642,823
                
                
                
                31,805,228
                
                
                
                32,912,630
                
                
                
                32,386,209Diluted
                
                
                32,493,343
                
                
                
                31,805,228
                
                
                
                32,912,630
                
                
                
                32,386,209Year
      Ended December 31, 2007First
                
                
                Second
                
                
                Third
                
                
                FourthQuarter
                
                
                Quarter
                
                
                Quarter
                
                
                QuarterRevenues
                
                $
                1,747,000
                
                
                $
                4,712,000
                
                
                $
                5,702,000
                
                
                $
                6,406,000Gross
      profit
                
                
                1,033,000
                
                
                
                1,802,000
                
                
                
                1,207,000
                
                
                
                2,853,000Depreciation
      and amortization
                
                
                64,000
                
                
                
                120,000
                
                
                
                575,000
                
                
                
                909,000Income
      (loss) from operations
                
                
                (521,000
                )
                
                
                (6,165,000
                )
                
                
                (8,545,000
                )
                
                
                (1,134,000
                )Net
      income (loss)
                
                $
                (520,000
                )
                
                $
                (6,196,000
                )
                
                $
                (8,510,000
                )
                
                $
                (1,119,000
                )Earnings
      per share- basic and diluted
                
                $
                (0.03
                )
                
                $
                (0.32
                )
                
                $
                (0.34
                )
                
                $
                (0.04
                )Shares
      used in computation of earnings per share basic and
diluted
                
                
                18,705,939
                
                
                
                19,374,693
                
                
                
                25,330,047
                
                
                
                30,274,752


1.
              Acquisitions
      significantly impact the comparability of the historical quarterly data
      reflected in the schedule of Quarterly Data.  The following is a
      list of acquisitions that we have made in the last two years and the
      effective date of each
acquisition:




·
                John’s
      Tickets, LLC
                March
      14, 2007·
                Exhibit
      Merchandising, LLC
                August
      7, 2007·
                NewSpace
      Entertainment, Inc.
                January
      2, 2008·
                Magic
      Arts & Entertainment, LLC
                January
      2, 2008


2.
              The
      Company performed its 2008 annual impairment testing of goodwill and
      intangibles as of December 31, 2008. Based on a combination of factors,
      including the current economic environment, decreased revenues and
      increased decline in margins management determined an impairment of
      goodwill and intangible assets had occurred, thus  recorded
      impairment charges to goodwill and intangible assets of $25.4 million and
      $7.7 million, respectively. There were no impairments of goodwill or
      intangible assets in 2007.




F-26




TIX
      CORPORATIONSCHEDULE
      IIVALUATION
      AND QUALIFYING ACCOUNTSDeferred
      Tax Asset Valuation AllowanceChargesBalance
            
            
            to
      costs,
            
            
            
            
            
            
            
            
            Balanceat
      beginning
            
            
            expenses
            
            
            
            
            
            
            
            
            at
      endDescription
            
            of
      period
            
            
            and
      other
            
            
            Deletions
            
            
            Other
            
            
            of
      periodYear
      ended December 31, 2006
            
            $
            3,900,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (400,000
            )
            
            $
            3,500,000Year
      ended December 31, 2007
            
            $
            3,500,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            14,957,000
            
            
            $
            18,457,000Year
      ended December 31, 2008
            
            $
            18,457,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (6,906,000
            )
            
            $
            11,551,000





F-27




TIX
      CORPORATIONSCHEDULE
      IIVALUATION
      AND QUALIFYING ACCOUNTSInventory
      Valuation AllowanceChargesBalance
              
              
              to
      costs,
              
              
              
              
              
              
              
              
              Balanceat
      beginning
              
              
              expenses
              
              
              
              
              
              Other
              
              
              at
      endDescription
              
              of
      period
              
              
              and
      other
              
              
              Deletions
              
              
              (1)
              
              
              of
      periodYear
      ended December 31, 2006
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Year
      ended December 31, 2007
              
              $
              -
              
              
              $
              45,000
              
              
              $
              -
              
              
              $
              311,000
              
              
              $
              356,000Year
      ended December 31, 2008
              
              $
              356,000
              
              
              $
              44,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              400,000(1)
      Resulted from the acquisistion of Exhibit Merchandising in August of
      2007.




F-28





INDEX TO
EXHIBITS




ExhibitNumber
              
              Description
      of Document3.1
              
              Certificate
      of Incorporation, as filed with the State of Delaware on April 6, 1993
      (1)3.2
              
              Certificate
      of Amendment to Certificate of Incorporation of Cinema Ride, Inc., as
      filed with the State of Delaware on August 31, 1993 (1)3.3
              
              Certificate
      of Amendment to Certificate of Incorporation of Cinema Ride, Inc., as
      filed with the State of Delaware on September 16, 1996
  (1)3.4
              
              Fourth
      Amendment to Certificate of Incorporation of Cinema Ride, Inc., as filed
      with the State of Delaware, effective March 3, 2005 (6)3.5
              
              Bylaws
      of the Company (1)4
              
              Voting
      Agreement between Mitch Francis and Iqbal Ashraf dated as of July 12,
      200610.5
              
              Warrant
      Holder Rights Agreement between the Company and Finova Capital Corporation
      (2)10.8
              
              2003
      Consultant Stock Plan (3) (C)10.9
              
              2004
      Stock Option Plan (5) (C)10.10
              
              2004
      Directors Stock Option Plan (5) (C)10.22
              
              Gang
      Consulting Ltd. Consulting Agreement dated January 3, 2005
    (7)10.25
              
              Third
      Amendment to Lease between the Company and 12001 Ventura Corporation
      (9)10.29
              
              Employment
      Agreement between Tix Corporation and Mitch Francis effective March 1,
      2006 (11) (C)10.30
              
              Agreement
      of Purchase and Sale between Tix Corporation and William Bartfield and
      David Bates effective November 30, 2006 (12)10.31
              
              Amendment
      to Agreement of Purchase and Sale between Tix Corporation and William
      Bartfield and David Bates dated January 11, 2007 (12)10.32
              
              Asset
      Purchase Agreement between Tix Corporation and John’s Tickets, LLC, dba
      AnyEvent Tickets, effective March 14, 2007 (13)10.33
              
              Employment
      Agreement between Tix Corporation and John Pirample effective March 14,
      2007 (13) (C)10.35
              
              Asset
      Purchase Agreement dated as of August 6, 2007 among the Company, EM and
      the Members (14)10.36
              
              Employment
      Agreement dated as of August 8, 2007 with Curt A. Bechdel
    (14)10.37
              
              Voting
      Agreement dated as of August 8, 2007 between the Company and Joseph B.
      Marsh (14)10.38
              
              Consulting
      Agreement dated as of August 8, 2007 between Lee D. Marshall and the
      Company (14)10.39
              
              Non-Competition
      and Confidentiality Agreement dated as of August 8, 2007 among EM, Joseph
      Marsh, Lee Marshall, John T. Norman and the Company
(14)10.40
              
              Mutual
      Termination Agreement dated November 5, 2007 between Tix Corporation and
      Centaurus One, LLC (15)10.41
              
              Agreement
      and Plan of Merger By and Among Tix Corporation, a Delaware Corporation,
      on the one hand, and Magic Arts & Entertainment - Florida, Inc., a
      Florida Corporation, Joseph B. Marsh, and Lee D. Marshall on the other
      hand, dated as of February 29, 2008
(16)
  10.42
              
              Employment
      Agreement dated as of February 29, 2008 with Joseph B. Marsh
      (16)10.43
              
              Employment
      Agreement dated as of February 29, 2008 with Lee Marshall
    (16)10.44
              
              Agreement
      and Plan of Merger by and among Tix Corporation and Newspace Acquisition,
      Inc., on the one hand, and Newspace Entertainment Inc., John Ballard,
      Steve Boulay and Bruce Granath, on the other hand, dated as of March 11,
      2008 (17)10.45
              
              Employment
      Agreement dated as of March 11, 2008, between Tix Corporation and John
      Ballard (17)10.46
              
              Employment
      Agreement dated as of March 11, 2008, between Tix Corporation and Steve
      Boulay (17)10.47
              
              Employment
      Agreement dated as of March 11, 2008, between Tix Corporation and Bruce
      Granath (17)
  
  14.
              
              Code
      of Ethics (4)21
              
              Subsidiaries
      of the Registrant (18)23
              
              Consent
      of Weinberg & Company, P.A.31.1
              
              Officer’s
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
              
              Officer’s
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
              
              Officer’s
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
              
              Officer’s
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002


(1)
            
            Previously
      filed as an Exhibit to the Company’s Registration Statement on Form S-3,
      as filed with the Securities and Exchange Commission on June 16, 1997, and
      incorporated herein by reference.(2)
            
            Previously
      filed as an Exhibit to the Company’s Quarterly Report on Form 10-QSB for
      the quarterly period ended June 30, 2001, and incorporated herein by
      reference.(3)
            
            Previously
      filed as an Exhibit to the Company’s Registration Statement on Form S-8,
      as filed with the Securities and Exchange Commission on March 3, 2004, and
      incorporated herein by reference.(4)
            
            Previously
      filed as an Exhibit to the Company’s Quarterly Report on Form 10-QSB for
      the quarterly period ended September 30, 2004, and incorporated herein by
      reference.(5)
            
            Previously
      filed as an Exhibit to the Company’s Schedule 14C Information Statement,
      as filed with the Securities and Exchange Commission on January 26, 2005,
      and incorporated herein by reference.(6)
            
            Previously
      filed as an Exhibit to the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2004, and incorporated herein by
      reference.(7)
            
            Previously
      filed as an Exhibit to the Company’s Registration Statement on Form SB-2,
      as filed with the Securities and Exchange Commission on July 20, 2005, and
      incorporated herein by reference.(8)
            
            Intentinaly
      deleted(9)
            
            Previously
      filed as an Exhibit to the Company’s Quarterly Report on Form 10-QSB for
      the quarterly period ended September 30, 2005, and incorporated herein by
      reference.(10)
            
            Intentionally
      deleted.(11)
            
            Previously
      filed as an Exhibit to the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2005, and incorporated herein by
      reference.(12)
            
            Previously
      filed as an Exhibit to the Company’s Current Report on Form 8-K originally
      filed December 13, 2006 and amended on February 6, 2007, and incorporated
      herein by reference.(13)
            
            Previously
      filed as an Exhibit to the Company’s Current Report on Form 8-K filed
      March 20, 2007, and incorporated herein by
  reference.





(14)
            
            Previously
      filed as an Exhibit to the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2003, and incorporated herein by
      reference.(15)
            
            Previously
      filed as an Exhibit to the Company’s Current Report on Form 8-K filed
      December 03, 2007, and incorporated herein by
reference.(16)
            
            Previously
      filed as an Exhibit to the Company’s Current Report on Form 8-K filed
      March 5, 2008, and incorporated herein by reference.(17)
            
            Previously
      filed as an Exhibit to the Company’s Current Report on Form 8-K filed
      March 17, 2008, and incorporated herein by reference.(18)
            
            Previously
      filed as an Exhibit to the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2006, and incorporated herein by
      reference.




(C)
            
            Indicates
      compensatory plan, agreement or
arrangement.