UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB




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





For
      the
      Fiscal Year Ended December 31, 2006





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


(Name
      of
      small business issuer 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)





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





Securities
      registered pursuant to Section 12(b) of the Act: None




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





Common
      Stock, $0.08 Par Value


(Title
      of
      Class)


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





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act 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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B in this form, and no disclosure will 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-KSB or any amendment
      to
      this Form 10-KSB. o





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




The
      issuer’s revenues for the fiscal year ended December 31, 2006 were
      $5,387,728.





The
      aggregate market value of the issuer’s common stock held by non-affiliates of
      the issuer as of February 28, 2007, based on the closing market price of $4.10
      per share, was $46,819,470.





As
      of
      February 28, 2007, the issuer had 18,848,226 shares of common stock issued
      and
      outstanding.










Transitional
      Small Business Disclosure Format: Yes o No x





Documents
      incorporated by reference: None.





Special
      Note Regarding Forward-Looking Statements:





This
      Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006
      contains "forward-looking" statements within the meaning of Section 27A of
      the
      Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
      Act of 1934, as amended, including statements that include the words “believes”,
“expects”, “anticipates”, “intends”, “plans”, “may”, “will” or similar
      expressions that are intended to identify forward-looking statements. In
      addition, any statements that refer to expectations, projections or other
      characterizations of future events or circumstances, including any underlying
      assumptions, are forward-looking statements. These forward-looking statements
      may include, among others, statements concerning the Company's expectations
      regarding its business, growth prospects, revenue trends, operating costs,
      working capital requirements, facility expansion plans, competition, results
      of
      operations and other statements of expectations, beliefs, future plans and
      strategies, anticipated events or trends, and similar expressions concerning
      matters that are not historical facts. The forward-looking statements in this
      Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 involve
      known and unknown risks, uncertainties and other factors that could the 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-KSB for the fiscal
      year
      ended December 31, 2006, 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-KSB for the fiscal year ended
      December 31, 2006, whether as a result of new information, future events or
      otherwise.




2




TABLE
      OF
      CONTENTS


PagePART IITEM
                  1.
              
              DESCRIPTION
                  OF BUSINESS
              
              4ITEM
                  2.
              
              DESCRIPTION
                  OF PROPERTY
              
              7ITEM
                  3.
              
              LEGAL
                  PROCEEDINGS
              
              8ITEM
                  4.
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS
              
              8PART
                  IIITEM
                    5.
              
              MARKET
                    FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER
                    PURCHASES OF EQUITY SECURITIES
              
              9ITEM
                  6.
              
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR
                  PLAN OF OPERATIONS
              
              16ITEM
                  7.
              
              FINANCIAL
                  STATEMENTS
              
              26ITEM
                  8.
              
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE
              
              26ITEM 8A.
              
              CONTROLS
                  AND PROCEDURES
              
              26ITEM
                  8B.
              
              OTHER
                  INFORMATION
              
              26PART
                  IIIITEM
                  9.
              
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS AND
                  CONTROL PERSONS; COMPLIANCE WITH SECTION
                  16(a) OF THE EXCHANGE ACT
              
              27ITEM
                  10.
              
              EXECUTIVE
                  COMPENSATION
              
              29ITEM
                  11.
              
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT
              
              34ITEM
                  12.
              
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS
              
              36ITEM
                  13.
              
              EXHIBITS
              
              36ITEM
                  14.
              
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              
              36SIGNATURES
              
              38





3





PART
      I.





ITEM
      1.
      DESCRIPTION OF BUSINESS





Tix
      Corporation (the “Company”) was incorporated in Delaware in April 1993 under the
      name Cinema Ride, Inc. The Company changed its name from Cinema Ride, Inc.
      to
      Tix Corporation effective March 3, 2005.





Business
      Activity:





Since
      January 1, 2004, the Company’s principal business activity, through its
      wholly-owned subsidiary, Tix4Tonight, LLC, has been the sale of tickets for
      Las
      Vegas shows at a discount to the original box office price, on the same day
      of
      the performance, from ticket booths located on the Las Vegas Strip.





Tix4Tonight
      generally sells show tickets under short-term, non-exclusive agreements with
      approximately 60 Las Vegas shows, out of a total of approximately 80 Las Vegas
      shows running at any one time, and typically offers tickets for approximately
      50
      shows on any given day at a discount plus a service fee. Tix4Tonight 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.





The
      Company conducts the operations of Tix4Tonight at four locations in Las Vegas,
      Nevada: South Strip at the Hawaiian Marketplace Shopping Center (which commenced
      operations in November 2005 and replaced the location next to the
      Harley-Davidson Cafe at Harmon); the Fashion Show Mall Strip entrance in front
      of Neiman-Marcus (which commenced operations in February 2005); North Strip,
      just south of the Riviera Hotel; and a downtown Las Vegas facility at the Four
      Queens Hotel fronting onto the Fremont Street Experience (which commenced
      operations in December 2005). The Company also maintains administrative offices
      for Tix4Tonight in Las Vegas, Nevada.





Beginning
      August 10, 2006, as an adjunct to its Las Vegas show ticketing business, the
      Company launched its Tix4Dinner operations from the same locations as the sale
      of show tickets. 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.





In
      December 2006, the Company introduced its Tix4Stand-byGolf 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 at
      significant discounts. The Company anticipates marketing its new golf offerings
      at its four Las Vegas ticketing facilities, online and at its Las Vegas
      office.




Revenue
      Concentrations:





During
      the year ended December 31, 2006, there were no showrooms or other ticket
      sources which accounted for 10% or more of revenues . During
      the year ended December 31, 2005, one hotel showroom and one other ticket source
      accounted for 14.0% and 11.6% of revenues, respectively.





Seasonality:





Because
      of the seasonal nature of tourism 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. The Company’s revenues are
      more dependent on the presence of conventions in Las Vegas and the type of
      shows
      being offered for sale than seasonality.





Competition:





The
      Company sells unsold tickets on the same day of the performance, generally
      at
      20% to 50% off the box office price. Typically, the producers provide such
      tickets to the Company on a non-exclusive basis. Therefore, other ticket brokers
      can enter into competition with the Company to offer the same or similar
      services to both producers and customers. The Company currently has two
      competitors in the Las Vegas market and the possibility exists for other
      competitors to compete both there and in other markets targeted by the Company.
      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, the Company may not be able to compete successfully and competitive
      pressures may adversely affect its business, results of operations and financial
      condition.





Intellectual
      Property:





The
      Company has filed three applications for patents with the United
      States Patent and Trademark Office covering the distribution of tickets and
      restaurant reservations. The Company has also filed trademark applications
      for
      the Tix4Dinner and Tix4Tonight marks.




4





Insurance:





The
      Company maintains insurance coverage that it believes provides adequate coverage
      for all of its current operations. The Company also maintains $1,000,000 of
      "key-man" life insurance on the life of Mitch Francis, its President and Chief
      Executive Officer, as to which the Company is the sole beneficiary





Employees:





As
      of
      February 28, 2007, the Company had five full-time employees at its corporate
      offices and 45 employees at its Las Vegas operation. Employees at the Las Vegas
      operation consist of both full-time and part-time employees. The Company's
      employees are not represented by any unions. The Company believes that its
      relations with its employees are satisfactory.





Business
      Operations Prior to 2004:





During
      2002 and 2003, the Company owned 50% of a business venture named Tickets2Nite,
      LLC, a Nevada limited liability company, which was formed on September 24,
      2002
      pursuant to an Operating Agreement, with the other 50% owned by an independent
      third party entity. The business venture, which commenced operations during
      November 2002, sold tickets to Las Vegas shows at 50% of the original box office
      price, on the same day of the performance, from a ticket booth located on the
      Las Vegas Strip. On December 24, 2002, the Company filed a lawsuit against
      its
      joint venture partner in the Clark County, Nevada District Court (the “Court”).
      On October 1, 2003, the Court rendered its Decision and Order with respect
      to
      the parties' ownership rights and management rights and obligations with respect
      to Tickets2Nite, LLC. The Court ruled that the parties were unable to operate
      the business together pursuant to the Operating Agreement, and therefore ordered
      that Tickets2Nite, LLC be dissolved. Accordingly, the business operations of
      Tickets2Nite, LLC were terminated effective December 31, 2003.





Through
      December 31, 2003, the Company was in the ride simulator business. The Company’s
      two remaining ride facilities, which were located in Las Vegas, Nevada and
      Edmonton, Alberta, Canada, were closed on or about December 31, 2003, thus
      terminating this line of business effective as of that date. Three other ride
      facilities were previously closed between January 1998 and June 2002.




RISK
      FACTORS





The
      Company is subject to various risks that may materially affect its 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, the Company’s business, financial
      condition or operating results could be materially harmed. In that case, the
      trading price of the Company’s common stock could decline and an investor could
      lose all or part of his or her investment.





THE
      COMPANY IS RELIANT ON MITCH FRANCIS, ITS CHIEF EXECUTIVE OFFICER, CHIEF
      FINANCIAL OFFICER AND CHAIRMAN, AND IF THE COMPANY LOSES MR. FRANCIS, IT COULD
      HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS AND OPERATIONS





The
      success of the Company depends to a large extent upon the personal efforts
      and
      abilities of Mitch Francis, its Chairman of the Board of Directors and the
      Company's Chief Executive Officer and Chief Financial Officer. The Company’s
      ability to operate and expand its business is heavily dependent on access to
      the
      continued services of Mr. Francis. The Company may face competition for the
      services of Mr. Francis, although Mr. Francis has recently signed a three-year
      employment agreement with the Company. The Company cannot be certain that it
      will be able to retain Mr. Francis or attract and retain other qualified
      employees. The loss of Mr. Francis or the Company’s inability to attract and
      retain qualified employees on an as-needed basis could have a material adverse
      effect on the Company’s business and operations. The Company maintains
      $1,000,000 of key-man life insurance on the life of Mr. Francis, as to which
      it
      is the sole beneficiary.





THE
      COMPANY’S FUTURE CAPITAL NEEDS MAY NOT BE MET AND IT MAY BE FORCED TO ABANDON OR
      CURTAIL ITS BUSINESS PLANS OR OPERATIONS





The
      Company’s growth and expansion could be impaired by limitations on its access to
      capital markets. The Company may require additional capital to continue to
      expand the operations of Tix4Tonight, and has been exploring various
      alternatives to raise this required capital. To the extent that the Company
      is
      unable to secure the capital necessary to fund its future growth on a timely
      basis and/or under acceptable terms and conditions, the Company may not have
      sufficient cash resources to continue to expand its operations. Additionally,
      if
      the market for the ticket broker industry were to weaken for an extended period
      of time, the Company’s ability to raise capital would be substantially reduced.
      There can be no assurances that capital from outside sources will be available,
      or that 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.




5





THE
      COMPANY’S STOCK IS QUOTED ON THE OVER-THE-COUNTER BULLETIN BOARD AND COULD BE
      SUBJECT TO EXTREME VOLATILITY





The
      Company’s common stock is currently quoted under the symbol "TIXC" on the
      Over-the-Counter Bulletin Board, which is often characterized by low trading
      volume. A large volume of stock being sold into the market at any one time
      could
      cause the stock to rapidly decline in price. In addition, the Company must
      comply with ongoing eligibility rules to ensure that the listing of the
      Company’s common stock on the Over-the-Counter Bulletin Board is maintained,
      without which the liquidity and volatility of the Company’s common stock would
      be materially adversely affected.





THERE
      IS
      A LIMITED PUBLIC MARKET FOR THE COMPANY’S COMMON STOCK AND THE COMPANY’S
      STOCKHOLDERS MAY BE UNABLE TO LIQUIDATE THEIR SHARES





The
      Company’s common stock is listed on the Over-the-Counter Bulletin Board, and
      there is a limited volume of sales, thus providing a limited liquidity into
      the
      market for the Company’s shares. As a result of the foregoing, stockholders may
      be unable to liquidate their shares.





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





The
      Company has not declared or paid, and it does not anticipate declaring or paying
      in the foreseeable future, any cash dividends on its common stock. The Company’s
      ability to pay dividends is dependent upon, among other things, its future
      earnings, if any, as well as its 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 the Company’s board of directors. Accordingly, there is no
      assurance that any dividends will ever be paid on the Company’s common
      stock.





THE
      COMPANY’S INDUSTRY IS SUBJECT TO COMPETITION AND COMPETITIVE PRESSURES THAT
      COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS, RESULTS OF OPERATIONS AND
      FINANCIAL CONDITION





The
      Company sells unsold tickets on the same day of the performance, generally
      at
      20% to 50% off the box office price. Typically, the producers provide such
      tickets to the Company on a non-exclusive basis. Therefore, other ticket brokers
      can enter into competition with the Company to offer the same or similar service
      to both producers and customers. The Company currently has two competitors
      in
      the Las Vegas market and the possibility exists for others to compete both
      there
      and in other markets targeted by the Company. 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. The Company may not be able to compete
      successfully and competitive pressures may adversely affect the Company’s
      business, results of operations and financial condition.





THE
      COMPANY MAY BE UNABLE TO MANAGE GROWTH WHICH COULD ADVERSELY AFFECT ITS
      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
      COMMON STOCK IS DEEMED TO BE A "PENNY STOCK", WHICH MAY MAKE IT MORE DIFFICULT
      FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS





Since
      the
      Company’s common stock is not listed on the Nasdaq Stock Market, if the trading
      price of the common stock remains below $5.00 per share, trading in the common
      stock will be subject to the requirements of certain rules promulgated under
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”), which require
      additional disclosure by broker-dealers in connection with any trades involving
      a stock defined as a penny stock (generally, any non-Nasdaq equity security
      that
      has a market price of less than $5.00 per share, subject to certain exceptions).
      Such rules require the delivery, prior to any penny stock transaction, of a
      disclosure schedule explaining the penny stock market and the risks associated
      therewith and impose various sales practice requirements on broker-dealers
      who
      sell penny stocks to persons other than established customers and accredited
      investors (generally defined as an investor with a net worth in excess of
      $1,000,000 or annual income exceeding $200,000 individually or $300,000 together
      with a spouse). For these types of transactions, the broker-dealer must make
      a
      special suitability determination for the purchaser and have received the
      purchaser’s written consent to the transaction prior to the sale. The
      broker-dealer also must disclose the commissions payable to the broker-dealer,
      current bid and offer quotations for the penny stock and, if the broker-dealer
      is the sole market maker, the broker-dealer must disclose this fact and the
      broker-dealer’s presumed control over the market. Such information must be
      provided to the customer orally or in writing before or with the written
      confirmation of trade sent to the customer. Monthly statements must be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks. The additional burdens
      imposed upon broker-dealers by such requirements could discourage broker-dealers
      from effecting transactions in the Company’s common stock, which could severely
      limit the market liquidity of the common stock and the ability of holders of
      the
      common stock to sell their shares.




6




THE
      COMPANY’S 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, 2007, the Company’s directors and executive officers and principal
      shareholders beneficially owned or has the right to vote approximately 50%
      of
      the Company’s outstanding common stock. These stockholders, if they act
      together, may be able to direct the outcome of matters, including the election
      of the Company’s 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.





ITEM
      2.
      DESCRIPTION OF PROPERTY





Las
      Vegas
      Operations:





The
      Company conducts the operations of Tix4Tonight at four locations in Las Vegas,
      Nevada: South Strip at the Hawaiian Marketplace Shopping Center (which commenced
      operations in November 2005 and replaced the location next to the
      Harley-Davidson Cafe at Harmon); the Fashion Show Mall Strip entrance in front
      of Neiman-Marcus (which commenced operations in February 2005); North Strip,
      just south of the Riviera Hotel; and a downtown Las Vegas facility at the Four
      Queens Hotel fronting onto the Fremont Street Experience (which commenced
      operations in December 2005).





The
      Company also maintains administrative offices for Tix4Tonight 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.





Corporate
      Offices:





The
      Company leases office space at 12001 Ventura Place, Suite 340, Studio City,
      California 91604 as its 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.





The
      aggregate minimum future rental payments under non-cancelable operating leases
      for facilities in operation at December 31, 2006, 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,


2007
              
              $
              948,0222008
              
              
              915,4982009
              
              
              836,3312010
              
              
              430,8482011
              
              
              43,856$
              3,174,555




7




ITEM
      3.
      LEGAL PROCEEDINGS





At
      December 31, 2006, the Company was not a party to any known or anticipated
      material legal proceedings by or against the Company, including its wholly-owned
      subsidiaries.





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





There
      were no matters submitted to a vote of the Company's security holders during
      the
      fourth quarter of the fiscal year ended December 31, 2006.




8




PART
      II.





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





(a)
      Market Information





The
      Company's common stock trades on the OTC Bulletin Board under the symbol “TIXC”.





The
      following table sets forth the range of reported closing prices of the Company's
      common stock during the periods indicated. Such quotations reflect prices
      between dealers in securities and do not include any retail mark-up, mark-down
      or commission, and may not necessarily represent actual transactions. Trading
      in
      the Company's common stock has generally been limited and sporadic, and should
      not be deemed to constitute an "established trading market". The information
      set
      forth below was obtained from online sources.




Low
                
                HighFiscal
                    Year Ended December 31, 2005:Three
                    months ended -March
                    31, 2005
                
                $
                0.30
                
                $
                0.60June
                    30, 2005
                
                
                0.24
                
                
                0.50September
                    30, 2005
                
                
                0.23
                
                
                0.40December
                    31, 2005
                
                
                0.21
                
                
                0.38Fiscal
                    Year Ended December 31, 2006:Three
                    months ended -March
                    31, 2006
                
                $
                0.22
                
                $
                0.45June
                    30, 2006
                
                
                0.27
                
                
                0.76September
                    30, 2006
                
                
                0.75
                
                
                1.33December
                    31, 2006
                
                
                1.00
                
                
                5.50


(b)
      Holders





As
      of
      December 31, 2006, the Company had 237 common shareholders of record, excluding
      6,388,483 shares held in "street name" by brokerage firms and other nominees
      who
      hold shares for multiple investors. The Company estimates that it had
      approximately 1,100 beneficial common shareholders as of December 31,
      2006.





(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. The Company has not paid cash dividends on its common stock
      and
      has 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 the Company's business
      operations.





(d)
      Securities Authorized for Issuance under Equity Compensation 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. No option may be exercised during the first six months
      of its term except in the case of death.




9





During
      the year ended December 31, 2006, the Company issued options to purchase 300,000
      shares of common stock under the 2004 Option Plan. As of December 31, 2006,
      options to purchase 660,000 shares of common stock were reserved for issuance
      under the 2004 Option Plan.





2004
      Directors Option Plan:





On
      March
      3, 2005, the Company adopted the Directors Stock Option Plan (the "2004
      Directors Option Plan") for non-employee directors of the Company. The 2004
      Directors Option Plan was approved pursuant to a Joint Written Consent of the
      Board of Directors and Majority Stockholders of the Company dated September
      22,
      2004. The 2004 Directors Option Plan authorized the granting of non-qualified
      stock options to purchase an aggregate of not more than 240,000 shares of the
      Company's common stock. The Company has not issued any options under the 2004
      Directors Option Plan as of December 31, 2006.





A
      more
      complete description of the Employee Stock Option Plans and the Directors Stock
      Option Plans is provided at "ITEM 10. EXECUTIVE COMPENSATION - Stock Option
      Plans".





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 plan program
      only if they are natural persons providing bona fide consulting services to
      the
      Company or its subsidiaries, with the exception of any services they may render
      in connection with the offer and sale of the Company's securities in a
      capital-raising transaction, or which may directly or indirectly promote or
      maintain a market for the Company's securities.





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





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





On
      March
      29, 2004, the Company issued 300,000 shares of common stock under the Consultant
      Stock Plan to Benjamin Frankel, a director of the Company who was, at that
      time,
      a partner in the accounting firm of Frankel, Lodgen, Lacher, Golditch, Sardi
      & Howard, for accounting and tax services (see
      "ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and
      "ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").





On
      June
      16, 2004, the Company issued 111,112 shares of common stock and an option to
      purchase 100,000 shares of common stock, all under the Consultant Stock Plan,
      to
      Erick Richardson, a partner in the law firm of Richardson & Patel LLP, for
      legal services. The option is exercisable for a period of five years, one-half
      at $0.50 per share and one-half at $1.00 per share (subsequently reduced to
      $0.50 per share on January 31, 2005).





Effective
      January 31, 2005, the Company also issued 104,845 shares of common stock and
      an
      option to purchase 18,800 shares of common stock, all under the Consultant
      Stock
      Plan, to Erick Richardson, a partner in the law firm of Richardson & Patel
      LLC, for legal services. The option is exercisable for a period of five years
      at
      $0.50 per share.





On
      February 23, 2006, the Company issued 230,000 shares of common stock to Erick
      Richardson, a partner in the law firm of Richardson & Patel LLC, under the
      Consultant Stock Plan, as payment for accrued legal fees.




10





On
      November 1, 2006, Erick Richardson, a partner in the law firm of Richardson
      & Patel LLC, exercised (on a cashless basis) previously issued options for
      118,800 shares of common stock with an exercise price of $0.50 per share.
      Accordingly, the aggregate exercise price was paid through the surrender and
      cancellation of 19,800 shares, which resulted in the issuance of 99,000 shares
      of common stock.





On
      November 6, 2006, the Company issued 20,000 shares of common stock to its new
      director of business development, Craig Stein, under the Consultant Stock
      Plan.





The
      Company has also periodically entered into individual equity-based compensation
      arrangements with its officers, which are described at "ITEM 10. EXECUTIVE
      COMPENSATION - Employment Agreements" and "ITEM 10. EXECUTIVE COMPENSATION
      -
      Issuance of Non-Plan Stock Options, Warrants and Common Stock to Officers",
      and
      which are not included below. None of the individual compensation arrangements
      have been approved by the stockholders of the Company.





The
      securities authorized for issuance under the Company's equity compensation
      plans
      at December 31, 2006 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))(a)
              
              
              (b
              )
              
              (c
              )Plan
                  CategoryEquity
                    compensationplans
                    approved bysecurity
                  holders
              
              
              301,500
              
              $
              2.99
              
              
              900,000Equity
                    compensationplans not approvedby
                  security holders
              
              
              -
              
              
              -
              
              
              715,243Total
              
              
              301,500
              
              $
              2.99
              
              
              1,615,243
  Registration
      Statement on Form S-8:





On
      February 9, 2007, the Company filed with the Securities and Exchange Commission
      a registration statement on Form S-8 for the purpose of registering 1,000,000
      shares of common stock, of which 430,000 shares relate to the proposed resale
      of
      previously issued shares of restricted common stock. The remaining 570,000
      shares have been allocated to establish the 2007 Equity Incentive Plan, the
      purpose of which is to provide incentives to attract, retain and motivate
      eligible persons whose present and potential contributions are important to
      the
      success of the Company by offering them an opportunity to participate in the
      Company’s future performance through awards of options, the right to purchase
      common stock and stock bonuses.





Sales
      of
      Unregistered Securities:





Effective
      as of January 3, 2002, the Company entered into a two-year consulting
      arrangement with a financial advisory firm, Gang Consulting, Inc., which
      provided for the payment of monthly compensation, either in the form of a
      payment of $10,000 or the issuance of 25,000 shares of common stock. This
      consulting arrangement was subsequently extended through December 31, 2004.




11





Effective
      January 3, 2005, the Company and Gang Consulting Ltd. entered into a two-year
      consulting arrangement commencing January 1, 2005 that provided for: (1) the
      termination of the consulting fee payable to Gang Consulting Ltd. of $10,000
      per
      month; (2) the cancellation of common stock purchase warrants previously issued
      to Gang Consulting Ltd. to purchase an aggregate of 800,000 shares of common
      stock in equal installments of 100,000 shares at $0.50, $1.00, $1.50, $2.00,
      $2.50, $3.00, $3.50 and $4.00 per share, respectively; and (3) the issuance
      of
      common stock purchase warrants to purchase 400,000 shares of common stock,
      which
      were fully vested at issuance and exercisable through May 1, 2008 as follows:
      100,000 shares at $0.25 per share; 100,000 shares at $0.50 per share; 50,000
      shares at $0.75 per share; 50,000 shares at $1.00 per share; 25,000 shares
      at
      $1.25 per share; 25,000 shares at $1.50 per share; 25,000 shares at $1.75 per
      share; and 25,000 shares at $2.00 per share. The aggregate fair value of such
      warrants, calculated pursuant to the Black-Scholes option-pricing model, was
      $172,000, and was charged to operations as general and administrative expense
      during 2005, as the warrants were fully vested and non-forfeitable at the date
      of issuance.





On
      December 7, 2004, the Company closed a financing transaction in which it sold
      5%
      secured convertible debentures with an aggregate face value of $530,000
      (collectively, the “Debentures”) to Advantage Capital Development Corp.
      (“Advantage”). The Company issued a Debenture with a face value of $250,000 upon
      closing (“Debenture No. 1”) and received net proceeds of $200,000. The Company
      issued another Debenture with a face value of $280,000 on January 6, 2005
      (“Debenture No. 2”) and received net proceeds of $239,300. The Debentures were
      originally scheduled to mature on March 7, 2006 and were classified in the
      Company’s balance sheet as current liabilities at December 31, 2005.





On
      February 27, 2006, the Company entered into a settlement agreement (the
“Agreement”) with Advantage.


In
      accordance with the Agreement, the Company agreed to honor the $25,000
      conversion notice previously submitted by Advantage, issue such conversion
      shares and reduce the balance on the Debentures accordingly. As a result, during
      February 2006, the Company issued 93,563 shares of common stock to Advantage
      with a fair market value of $25,000 based on a conversion price of $0.2672
      per
      share.





The
      Company agreed to pay interest on the Debenture's outstanding balance monthly
      and to repay one-third of the remaining loan balance plus the redemption premium
      each on April 1, 2006, June 1, 2006, and August 1, 2006 ($505,000 plus the
      20%
      redemption premium of $101,000, for a total of $606,000). On March 29, 2006,
      the
      Company paid the installment due on April 1, 2006 of $202,000, which consisted
      of a principal payment of $168,333 and a redemption premium of $33,667. On
      May
      30, 2006, the Company paid the installment due on June 1, 2006 of $202,000,
      which consisted of a principal payment of $168,333 and a redemption premium
      of
      $33,667. On July 1, 2006, the Company paid the final installment of $202,000
      due
      on August 1, 2006, which consisted of a principal payment of $168,334 and a
      redemption premium of $33,666.





On
      November 4, 2004, the Company also issued to Advantage a warrant to purchase
      100,000 shares of common stock exercisable at $0.25 per share through November
      4, 2007, which was determined to have a fair value, calculated pursuant to
      the
      Black-Scholes option-pricing model, of $36,000. The warrant to purchase 100,000
      shares of common stock was exercised in 2006. The aggregate value of the
      warrant, the value of the beneficial conversion features, and the aggregate
      related financing costs paid by the Company to the lender were recorded as
      a
      discount to the face value of the Debentures, and were charged to operations
      as
      interest expense over the term of the Debentures through March 31,
      2006.





In
      addition, on December 7, 2004, the Company entered into a financing transaction
      with Cornell Capital Partners, LP (“Cornell”) under which Cornell, at the
      request of the Company, would periodically purchase up to $10,000,000 of the
      Company’s common stock over 24 months pursuant to a Standby Equity Distribution
      Agreement. Cornell received 290,000 shares of the Company’s common stock as a
      commitment fee and received an additional 290,000 shares of the Company’s common
      stock on the first year anniversary of the Standby Equity Distribution
      Agreement. Newbridge Securities Corporation (“Newbridge”) would serve as
      exclusive placement agent for the sale of the shares of common stock. In
      consideration for Newbridge’s services, Newbridge received 20,000 shares of the
      Company’s common stock. The shares of common stock issued to Cornell and
      Newbridge were recorded at par value of $0.08 per share, of which $23,200 and
      $24,800 were recorded during the years ended December 31, 2005 and 2004,
      respectively, and were included in deferred offering costs in the Company’s
      balance sheet at December 31, 2005.





On
      July
      20, 2006, the Company terminated its $10,000,000 Standby Equity Distribution
      Agreement with Cornell. The Company never sold any shares of its common stock
      pursuant to such agreement and has no continuing financial obligations of any
      kind to Cornell. There were no early termination penalties incurred by the
      Company. As a result of the termination of the financing agreement with Cornell,
      deferred offering costs of $58,000 were charged to operations as other expense
      during the year ended December 31, 2006.




12





On
      January 6, 2005, pursuant to an agreement dated as of August 31, 2004 and as
      a
      result of the execution of the Standby Equity Distribution Agreement and the
      completion of the issuance of the Debentures, the Company issued 448,000 shares
      of common stock to Knightsbridge Holdings, LLC (“Knightsbridge”) as a referral
      fee. The Company was obligated to file a registration statement to cover 200%
      of
      the shares so issued. The agreement with Knightsbridge was for an initial term
      through February 28, 2005, and continued thereafter on a month-to-month basis,
      but the Company would not have the right to terminate the agreement until it
      had
      fulfilled all of its obligations under its agreement with Advantage. The Company
      also agreed to pay Knightsbridge a monthly consulting fee of $2,500. The fair
      market value of the shares of $201,600 ($0.45 per share) was recorded as a
      discount to the face value of the Debentures on January 6, 2005, and was charged
      to operations as interest expense over the
      term
      of the Debentures through March 31, 2006.





Effective
      July 30, 2006, the Company terminated its agreement with Knightsbridge, as
      the
      Company had fulfilled all of its obligations under its agreement with
      Advantage.





On
      January 31, 2005, the Company issued 136,539 shares of common stock to
      Richardson & Patel LLC for legal services. The shares of common stock had
      piggyback registration rights. The aggregate fair market value of the shares
      on
      the date of issuance was $57,346 ($0.42 per share).





Effective
      February 28, 2005, the Company terminated a consulting agreement with a
      financial public relations firm and agreed to issue 36,000 shares of common
      stock as payment of the accrued but unpaid fee to such firm of $18,000. The
      shares of common stock had piggyback registration rights. The effective price
      of
      $0.50 per share was in excess of the fair market value of the Company’s common
      stock on February 28, 2005.





On
      May
      24, 2005, the Company entered into a one-year consulting services agreement
      with
      CollegeStock LLC for public relations and communications services, which
      provided for a cash payment of $7,500 and the issuance of a warrant to purchase
      20,000 shares of the Company's common stock exercisable at $0.24 per share
      through May 24, 2008. The fair value of such warrant, calculated pursuant to
      the
      Black-Scholes option-pricing model, was $4,600, and was charged to operations
      as
      general and administrative expense during the year ended December 31, 2005,
      as
      the warrant was fully vested and non-forfeitable at the date of
      issuance.





On
      June
      30, 2005, the Company entered into a three-month consulting agreement with
      Wall
      Streets Inside Reporter, Inc. for marketing and strategic planning services,
      which provided for a monthly cash payment of $5,000 and the issuance of 140,000
      shares of common stock. The shares of common stock had piggyback registration
      rights. The aggregate fair market value of such shares of $35,000 was initially
      charged to deferred compensation in the stockholders’ equity (deficiency)
      section of the Company’s consolidated balance sheet. The parties had agreed that
      the services to be rendered pursuant to the consulting agreement would be
      provided beginning when the Company’s registration statement had been declared
      effective by the Securities and Exchange Commission. Accordingly, the $35,000
      was charged to operations as general and administrative expense over the three
      month period commencing from February 13, 2006, the date that the Company’s
      registration statement was declared effective by the Securities and Exchange
      Commission.





On
      March
      13, 2006, the Company issued 50,000 shares of common stock to Kimberly 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 a total of 120,000 shares of common stock to its
      non-officer employees as a bonus for services rendered. The shares of common
      stock were recorded at their fair market value on the date of issuance of
      $26,400 ($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 25,000 shares of common stock to a consultant,
      Ben
      Gayheart, for services rendered. The shares of common stock were recorded at
      their fair market value on the date of issuance of $5,500 ($0.22 per share)
      and
      were charged to operations as general and administrative expense during the
      year
      ended December 31, 2006.




13





On
      March
      13, 2006, the Company issued a total of 300,000 shares of common stock to its
      two non-officer directors for services, consisting of 150,000 shares to Benjamin
      Frankel and 150,000 shares to Norman Feirstein. 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
      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), 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.





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), 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.





During
      April 2006, the Company entered into consulting agreement with a consultant,
      Gord Stetling, for investor relations and strategic planning services. The
      Company issued 50,000 shares of common stock, which were recorded at their
      fair
      value of $17,500 ($0.35 per share) and were charged to operations as general
      and
      administrative expense during the year ended December 31, 2006.





During
      April 2006, the Company entered into a consulting agreement with a consultant,
      John Martin, for investor relations and strategic planning services. The Company
      issued 50,000 shares of common stock, which were recorded at their fair value
      of
      $18,000 ($0.36 per share) and were 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 Kimberly Simon, its Chief Operating
      Officer. 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.





On
      April
      25, 2006, the Company issued 10,000 shares of common stock to a consultant,
      Jerry Cornwell, for investor relation services, which were recorded at their
      fair value of $4,200 ($0.42 per share) and were charged to operations as general
      and administrative expense during the year ended December 31, 2006.





On
      June
      5, 2006, Sue Harrison, a former employee exercised (on a cashless basis) a
      previously issued stock option for 60,000 shares of common stock with an
      exercise price of $0.15 per share. Accordingly, the aggregate exercise price
      of
      $9,000 was paid through the surrender and cancellation of 13,235 shares with
      a
      fair market value on the date of exercise of $0.68 per share, which resulted
      in
      the issuance of 46,765 shares of common stock.





On
      June
      12, 2006, the Company issued 400,000 shares of common stock to Irwin Olian
      upon
      the exercise of a previously issued warrant at an exercise price of $0.10 per
      share and received cash proceeds of $40,000.





On
      July
      20, 2006, the Company entered into separate consulting agreements with two
      consultants, Rick Kraniak and Joe Marsh, to provide strategic advisory services
      to the Company over a two-year period which provide for each consultant to
      receive 150,000 shares of common stock vesting monthly over the term of the
      respective agreements. The 68,750 shares of common stock that had vested at
      December 31, 2006 were recorded at their approximate fair market value, as
      adjusted monthly, of $177,000, and were charged to operations as general and
      administrative expense during the year ended December 31, 2006.





On
      July
      28, 2006, the Company issued 100,000 shares of common stock to Rick Kraniak
      upon
      the exercise of a previously issued warrant at an exercise price of $0.30 per
      share and received cash proceeds of $30,000.




14





On
      September 28, 2006, the Company issued 200,000 shares of common stock to Mitch
      Francis, its President and Chief Executive 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 $222,000 ($1.11 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 100,000 shares of common stock to
      Kimberly 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 $111,000 ($1.11 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 a total of 90,000 shares of common stock
      to its non-officer employees as a bonus for services rendered. The shares of
      common stock were recorded at their fair market value on the date of issuance
      of
      $99,900 ($1.11 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 a total of 80,000 shares of common stock
      to its two non-officer directors for services, consisting of 40,000 shares
      to
      Benjamin  Frankel
      and 40,000 shares to Norman Feirstein. The shares of common stock were recorded
      at their fair market value on the date of issuance of $88,800 ($1.11 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 50,000 shares of common stock to each
      of
      three consultants (Rick Kraniak, Joe Marsh and Gang Consulting Ltd.) for
      services rendered, for a total of 150,000 shares of common stock. The 150,000
      shares of common stock were recorded at their fair market value on the date
      of
      issuance of $166,500 ($1.11 per share) and were charged to operations as general
      and administrative expense during the year ended December 31, 2006.





On
      October 26, 2006, the Company issued 50,000 shares of common stock to Rick
      Kraniak upon the exercise of a previously issued warrant at an exercise price
      of
      $0.50 per share and received cash proceeds of $25,000.





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, options
      to acquire 100,000 shares of common stock will be granted to Mr. Stein on each
      of November 6, 2007, November 6, 2008 and November 6, 2009, respectively, with
      per share exercise prices of $2.02, $3.00 and $4.00, 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, $50,333 was charged to operations
      as general and administrative expense during the year ended December 31, 2006.





On
      November 14, 2006, the Company issued 50,000 shares of common stock to B. Stuart
      Rogers upon the exercise of a previously issued warrant at an exercise price
      of
      $0.50 per share and received cash proceeds of $25,000.





On
      December 1, 2006, the Company acquired most of the tangible and intangible
      assets of Stand-By Golf Las Vegas, pursuant to the Agreement of Purchase and
      Sale, as amended, between the Company and the sellers, William Bartfield and
      David Bates. As consideration, the Company issued shares of unregistered common
      stock to the sellers, with a value at the close of trading on the date of
      closing in the amount of $100,000, based upon the average bid closing bid price
      per share for ten days prior to closing. As a result, the Company issued 26,546
      shares of common stock ($3.767 per share), with 13,273 shares of common stock
      issued to William Bartfield, and 13,273 shares of common stock issued to David
      Bates. However, if the market value of the 26,546 shares of common stock on
      December 1, 2007 is less than $100,000, the Company will issue additional shares
      to the sellers until the market value of all shares issued to the sellers equals
      $100,000. Such additional shares issued will not have a value of less than
      $1.50
      per share in determining how many additional shares would be issued in such
      circumstances.





During
      the year ended December 31, 2006, the Company raised additional equity capital
      through the sale of units in a private placement to accredited investors at
      $0.25 per unit, with each unit consisting of one share of restricted common
      stock and a warrant to purchase one-half share of common stock, exercisable
      at
      $0.50 per share for a period of 24 months. The shares and warrants have limited
      piggyback registration rights. The Company sold 4,080,000 units and received
      gross cash proceeds of $1,020,000, as a result of which the Company issued
      4,080,000 shares of common stock and 2,040,000 warrants. The Company paid a
      cash
      finder’s fee of $17,000 to Gang Consulting Ltd. with respect to such equity
      offering, which was recorded as a reduction to additional paid-in capital during
      the year ended December 31, 2006, as a result of which net cash proceeds from
      the private placement through December 31, 2006 were $1,003,000.




15





On
      September 28, 2006, Mitch Francis, the Company’s President and Chief Executive
      Officer, exercised a portion of a previously issued warrant to acquire 615,384
      shares of common stock at an exercise price of $0.13 per share. Pursuant to
      such
      warrant, Mr. Francis acquired 505,588 shares of common stock by offsetting
      accrued but unpaid compensation of $65,726.





On
      January 18, 2006, the Company entered into an agreement with Kimberly 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.





The
      shares of common stock acquired by investors were issued without registration
      pursuant to an exemption provided by Regulation D of the Securities Act of
      1933,
      as amended. The shares of common stock and warrants acquired by officers,
      directors, employees and consultants were issued without registration pursuant
      to an exemption provided by Section 4(2) of the Securities Act of 1933, as
      amended, based on certain representations made to the Company by the
      recipients.





ITEM
      6.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





Overview:




Effective
      January 1, 2004, the Company's principal business activity, through its
      wholly-owned subsidiary, Tix4Tonight, LLC, has been the sale of tickets for
      Las
      Vegas shows, generally at 20% to 50% off the original box office price, on
      the
      same day of the performance, from ticket booths located on the Las Vegas
      Strip.





The
      Company conducts the operations of Tix4Tonight at four locations in Las Vegas,
      Nevada: South Strip at the Hawaiian Marketplace Shopping Center (which commenced
      operations in November 2005 and replaced the location next to the
      Harley-Davidson Cafe at Harmon); the Fashion Show Mall Strip entrance in front
      of Neiman-Marcus (which commenced operations in February 2005); North Strip,
      just south of the Riviera Hotel; and a downtown Las Vegas facility at the Four
      Queens Hotel fronting onto the Fremont Street Experience (which commenced
      operations in December 2005).





Operating
      Liquidity:





During
      the year ended December 31, 2006, the Company’s operations experienced
      substantial and consistent improvement, reporting a 100% increase in revenues
      and a fourfold increase in operating cash flows as compared to the year ended
      December 31, 2005. Net income was $39,056 for the year ended December 31, 2006,
      as compared to a net loss of $1,022,952 for the year ended December 31, 2005.
      During 2006, the Company’s working capital improved by $2,811,168, to a working
      capital surplus of $44,547 at December 31, 2006 (equivalent to a current ratio
      of 1.02:1.00), as compared to a working capital deficiency of $2,766,621 at
      December 31, 2005. At December 31, 2006, the Company’s stockholders’ equity was
      $378,054, as compared to a stockholders’ deficiency of $2,399,569 at December
      31, 2005. During the year ended December 31, 2006, the Company’s net cash
      provided by operating activities was $1,169,032, as compared to net cash
      provided by operating activities of $289,506 for the year ended December 31,
      2005. In addition, during the year ended December 31, 2006, the Company sold
      common stock and warrants to accredited investors for net proceeds of $1,003,000
      and received $210,726 from the exercise of options and warrants. These funds
      were used to reduce debt obligations of $1,572,407 that existed at December
      31,
      2005, and to support the expansion of the operations of Tix4Tonight.
      Accordingly, based on the Company’s current cash resources and operating trends,
      the Company believes that it has sufficient working capital resources to fund
      its cash requirements for the foreseeable future.





Critical
      Accounting Policies and Estimates:





The
      Company prepared its consolidated financial statements in accordance with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires the use of 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.




16





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





Revenue
      Recognition and Presentation:





Tix4Tonight
      generally sells show tickets made available to it under short-term,
      non-exclusive agreements with approximately 60 Las Vegas shows, out of a total
      of approximately 80 Las Vegas shows running at any one time, and typically
      offers tickets for approximately 50 shows on any given day at a discount
      (usually 20% to 50% off the box office price) plus a service fee. Tix4Tonight
      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 only for the tickets
      that Tix4Tonight actually sells to customers, thus Tix4Tonight has no financial
      risk with respect to unsold tickets.





The
      Company’s Las Vegas 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.
      Beginning in December 2006, the Company began charging credit card customers
      an
      additional one dollar per ticket to offset the additional costs of processing
      credit cards. 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.





Beginning
      August 10, 2006, as an adjunct to its Las Vegas show ticketing business, the
      Company launched its Tix4Dinner operations from the same locations as the sale
      of show tickets. 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. The operations of Tix4Dinner through December 31, 2006
      were not material.





Tix4Dinner
      recognizes as revenue the transaction fees earned from the booking of dinner
      reservations at the time that the reservations are made. The Company expects
      that the number of restaurants participating in this program will initially
      be
      limited. 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.





In
      December 2006, the Company introduced its Tix4Stand-byGolf 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 Las Vegas area golf
      courses at significant discounts. The Company anticipates marketing its new
      golf
      offerings at its four Las Vegas ticketing facilities, online and at its Las
      Vegas office.





Tix4Stand-byGolf
      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. These guarantees or pre-buys
      are
      being provided by the former owners of Stand-By Golf Las Vegas in accordance
      with the terms of the purchase agreement. Tix4Stand-byGolf only pays the former
      owners for tee-times actually sold to customers, at their actual cost, and
      does
      not provide any advance payments. This arrangement can be terminated at any
      time
      by the Company without obligation. 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
      done
      by credit card. The operations of Tix4Stand-byGolf through December 31, 2006
      were not material.





Impairment
      of Long-Lived Assets:





The
      Company's long-lived assets consist of property and equipment. In assessing
      the
      impairment of property and equipment, the Company makes assumptions regarding
      the estimated future cash flows and other factors to determine the fair value
      of
      the respective assets. If these estimates or the related assumptions change
      in
      the future, the Company may be required to record impairment charges for these
      assets.





Deferred
      Compensation:





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.




17




Income
      Taxes:





The
      Company records a valuation allowance to reduce its deferred tax assets to
      the
      amount that is more likely than not to be realized. In the event the Company
      was
      to determine that it would be able to realize its deferred tax assets in the
      future in excess of its recorded amount, an adjustment to the deferred tax
      assets would be credited to operations in the period such determination was
      made. Likewise, should the Company determine that it would not be able to
      realize all or part of its deferred tax assets in the future, an adjustment
      to
      the deferred tax assets would be charged to operations in the period such
      determination was made.




Adjusted
      EBITDA:





The
      Company’s presentation of financial results includes “Adjusted EBITDA” as a
      financial measure, which is not a measure of performance calculated in
      accordance with accounting principles generally accepted in the United States
      (“GAAP”).  Adjusted EBITDA is a non-GAAP financial measure that represents
      income or loss from continuing operations before net interest expense, provision
      for income taxes, depreciation and amortization, and also excludes certain
      other
      items, including non-cash equity-based compensation, non-cash financing costs
      and related write-offs, impairment losses, and non-recurring gains and
      losses.  Management excludes these items in assessing financial
      performance, primarily due to their non-operational or non-cash nature or
      because they are outside of the Company’s normal operations.  The Company
      has provided this information because management believes that it is useful
      to
      investors in understanding the Company’s financial condition and results of
      operations.




Management
      believes that Adjusted EBITDA enhances an overall understanding of the Company’s
      financial performance by investors because it is frequently used by securities
      analysts and other interested parties in evaluating companies in the Company’s
      industry segment.  In addition, management believes that Adjusted EBITDA is
      useful in evaluating the Company’s operating performance compared to that of
      other companies in the Company’s industry segment because the calculation of
      Adjusted EBITDA eliminates the accounting effects of financing costs, income
      taxes and capital spending, which items may vary for different companies for
      reasons unrelated to overall operating performance.




However,
      Adjusted EBITDA is not a recognized measurement under GAAP, and when analyzing
      the Company’s operating performance, investors should use Adjusted EBITDA in
      addition to, and not as an alternative for, income (loss) from operations,
      income (loss) before income taxes, and net income (loss), or any other measure
      utilized in determining the Company’s operating performance that is calculated
      in accordance with GAAP.  Because Adjusted EBITDA is not calculated in
      accordance with GAAP, it may not be comparable to similarly-titled measures
      utilized by other companies.  Furthermore, Adjusted EBITDA is not intended
      to be a measure of the Company’s free cash flow, as it does not consider certain
      ongoing cash requirements, such as a required debt service payments and income
      taxes.




The
      following is a reconciliation of Net Income (Loss) to Adjusted EBITDA for the
      years ended December 31, 2006 and 2005, respectively. Adjusted EBITDA includes
      corporate general and administrative expenses of $1,232,504 and $1,124,960,
      respectively, for the years ended December 31, 2006 and 2005.


Years
                  Ended December 31,2006
              
              2005Reconciliation
                  of net income (loss) to Adjusted EBITDA:Net
                  income (loss)
              
              $
              39,056
              
              $
              (1,022,952
              )Add
                  (deduct):Non-cash
                  equity-based compensation
              
              
              1,325,701
              
              
              237,996Increase
                  in deferred rent liability
              
              
              40,512
              
              
              134,267Depreciation
              
              
              124,724
              
              
              108,612Loss
                  on disposal of fixed assets
              
              
              -
              
              
              32,236Amortization
                  of intangible assets
              
              
              2,389
              
              
              -Amortization
                  of prepaid accounting fees
              
              
              -
              
              
              30,521Write-off
                  of deferred financing costs
              
              
              58,000
              
              
              -Other
                  income
              
              
              (37,300
              )
              
              (100,000
              )Interest
                  income
              
              
              (15,539
              )
              
              (69
              )Interest
                  expense, including amortization of discounton
                    debt of $64,416 and $386,484 in 2006 and 2005,respectively
              
              
              329,491
              
              
              676,535Gain
                  on settlement with lender
              
              
              (1,078,796
              )
              
              -Gain
                  on settlement of debt
              
              
              (11,978
              )
              
              -Gain
                  on settlement of debt - discontinued operations
              
              
              -
              
              
              (691,689
              )Income
                  from discontinued operations
              
              
              (5,341
              )
              
              (51,096
              )Adjusted
                  EBITDA
              
              $
              770,919
              
              $
              (645,639
              )





18





Results
      of Operations:





Years
      Ended December 31, 2006 and 2005:





Revenues.
      Revenues from ticket commissions and fees were $5,387,728 for the year ended
      December 31, 2006, as compared to $2,695,191 for the year ended December 31,
      2005, an increase of $2,692,537 or 99.9%, as a result of an increase in the
      number of tickets sold and an increase in the average ticket price. 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 $23,182,794 for the year ended December 31, 2006, as compared
      to
      $10,295,287 for the year ended December 31, 2005, an increase of $12,887,507
      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.





Direct
      Costs of Revenues. Direct costs of revenues were $2,172,801 for the year ended
      December 31, 2006, as compared to $1,510,191 for the year ended December 31,
      2005, an increase of $662,610 or 43.9%. 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
      $299,362 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 $327,864 resulting from the hiring
      additional employees to staff these locations.





Direct
      costs of revenue consist primarily of rent at all Las Vegas locations and
      employee costs related to the Company’s ticketing operations in Las
      Vegas.





Selling
      and Marketing Expenses. Selling and marketing expenses were $467,260 for the
      year ended December 31, 2006, as compared to $326,439 for the year ended
      December 31, 2005, an increase of $140,821 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. Selling
      and
      marketing expenses increased on an absolute basis in 2006 as compared to 2005
      primarily as a result of efforts by the Company to increase its exposure in
      the
      marketplace through additional magazine and internet advertising.




Selling
      and marketing expenses consist primarily of advertising and promotional costs
      related to the Tix4Tonight business. The Company expects selling and marketing
      expenses to increase in future periods as a result of the Company increasing
      its
      expenditures to advertise and promote its new dinner and golf reservation
      operations.





General
      and Administrative Expenses. General and administrative expenses were $3,306,032
      for the year ended December 31, 2006, as compared to $1,906,983 for the year
      ended December 31, 2005, an increase of $1,399,049 or 73.4%, primarily as a
      result of non-cash equity-based costs. Included in general and administrative
      expenses were non-cash equity-based costs of $1,325,701 for the year ended
      December 31, 2006 (including $657,564 non-cash equity-based costs for officers
      and directors), as compared to $237,996 non-cash equity-based costs for the
      year
      ended December 31, 2005 (including $0 non-cash equity-based costs for officers
      and directors). As a result of increased revenues and expanded operations in
      2006, credit card merchant fees increased by $198,981 and administrative
      personnel costs increased by $120,401 in 2006 as compared to 2005. General
      and
      administrative expenses decreased to 61.4% of revenues for the year ended
      December 31, 2006, as compared to 70.8% of revenues for the year ended December
      31, 2005.




19





Significant
      components of general and administrative expenses consist of corporate personnel
      and personnel-related costs, insurance, legal and accounting fees, consulting
      and advisory fees, merchant fees and corporate occupancy costs.





Depreciation
      and Amortization. Depreciation and amortization was $164,042 for the year ended
      December 31, 2006, as compared to $108,612 for the year ended December 31,
      2005,
      an increase of $55,430 or 51.0%, primarily as a result of increased depreciation
      and amortization incurred with respect to leasehold improvements and equipment
      acquired for Tix4Tonight’s new ticketing locations in Las Vegas.





Loss
      from
      Operations. As a result of the aforementioned factors, the loss from operations
      was $722,407 for the year ended December 31, 2006, which included non-cash
      equity-based costs of $1,325,701, as compared to a loss from operations of
      $1,157,064 for the year ended December 31, 2005, which included non-cash
      equity-based costs of $237,996.





Other
      Income. Other income was $37,300 for the year ended December 31, 2006, which
      consisted of the reversal of an accrued liability of $37,300 at December 31,
      2005 relating to a potential claim from a supplier. Other income was $100,000
      for the year ended December 31, 2005, as the Company recognized a cash payment
      it had received in April 2005 for the early termination of a lease for its
      administrative offices in Las Vegas, Nevada.





Gain
      on
      Settlement with Lender. On September 13, 2006, the Company repaid in full its
      obligation to Finova/Steamboat of $1,180,493 (including accrued interest of
      $297,632) by making a final cash payment of $101,697. As a result, the Company
      recognized a non-cash gain on settlement with lender of $1,078,796 during the
      year ended December 31, 2006.





Gain
      on
      Settlement of Debt. On December 4, 2006, the Company paid the final installment
      of a legal obligation, as a result of which the Company recorded a gain on
      settlement of debt of $11,978.





Write-off
      of Deferred Offering Costs. On July 20, 2006, the Company terminated its
      $10,000,000 Standby Equity Distribution Agreement with Cornell. The Company
      never sold any shares of its common stock pursuant to such agreement. As a
      result of the termination of the financing agreement with Cornell, deferred
      offering costs of $58,000 were charged to operations during the year ended
      December 31, 2006.





Loss
      on
      Disposal of Fixed Assets. For the year ended December 31, 2005, loss on disposal
      of fixed assets was $32,237, which consisted of unamortized leasehold
      improvements abandoned as a result of the Company closing its ticketing booth
      located next to the Harley-Davidson Café in November 2005. The Company did not
      have any loss on disposal of fixed assets for the year ended December 31, 2006.





Interest
      Income. Interest income was $15,539 for the year ended December 31, 2006, as
      compared to $69 for the year ended December 31, 2005, as the result of an
      increase in cash balances during 2006.





Interest
      Expense. Interest expense was $329,491  for
      the
      year ended December 31, 2006, as compared to $676,535 for the year ended
      December 31, 2005, a decrease of $347,044. The decrease in interest expense
      in
      2006 as compared to 2005 was in part a result of non-cash interest charges
      generated by the amortization of the discount related to the Debentures that
      were issued in December 2004 and January 2005 being fully amortized through
      March 31, 2006.





For
      the
      year ended December 31, 2006, $101,000 of interest expense related to the
      premium paid on the March 29, 2006, May 30, 2006 and July 1, 2006 installment
      payments on the Debentures pursuant to the Agreement with Advantage. For the
      year ended December 31, 2005, $79,500 of interest expense was the result of
      the
      Company not having timely accomplished an effective registration statement
      with
      the SEC to register the shares of common stock issuable upon conversion of
      the
      Debentures by March 31, 2005.





Income
      (Loss) from Continuing Operations. As a result of the aforementioned factors,
      income from continuing operations was $33,715 for the year ended December 31,
      2006 (including a gain on settlement with lender of $1,078,796), as compared
      to
      a loss from continuing operations of $(1,765,737) for the year ended December
      31, 2005.




20





Income
      from Discontinued Operations. Income from discontinued operations was $5,341
      for
      the year ended December 31, 2006, as compared to income from discontinued
      operations of $742,785 for the year ended December 31, 2005, relating to the
      Company's former ride simulator business, which was terminated effective
      December 31, 2003.





In
      December 2005, the Company and the Forum Shops entered into a Settlement
      Agreement and Mutual Release of Claims with respect to a lawsuit relating to
      the
      Company’s former Las Vegas ride facility. The Settlement Agreement and Mutual
      Release provided that the Forum Shops would make a one-time cash payment to
      the
      Company of $50,000 in complete settlement of this matter, which was received
      by
      the Company on December 28, 2005. In connection with this settlement, the
      Company recorded a gain of $676,657 in 2005, of which $50,000 represented a
      cash
      settlement and $626,657 reflected a reduction in previously recorded accrued
      rent included in liabilities related to discontinued operations.





During
      the year ended December 31, 2005, the Company liquidated assets related to
      its
      discontinued operations for a cash payment of $25,000, incurred legal fees
      with
      respect to the litigation on its former Las Vegas ride facility, adjusted
      certain accruals related to its discontinued operations, and settled various
      obligations at a reduced amount with respect to its discontinued operations,
      as
      a result of which the Company recorded $66,128 of income from discontinued
      operations in 2005.





Net
      Income (Loss). As a result of the aforementioned factors, net income was $39,056
      for the year ended December 31, 2006 (including a gain on settlement with lender
      of $1,078,796), as compared to a net loss of $(1,022,952) for the year ended
      December 31, 2005 (including a gain on settlement of a liability related to
      discontinued operations of $676,657).





Liquidity
      and Capital Resources - December 31, 2006:





During
      the last few years, the Company has relied on the proceeds from loans from
      both
      unrelated and related parties, capital leases and the sale of its debt and
      equity securities to provide the resources necessary to develop its show
      ticketing business.





The
      Company has continued its efforts to raise new capital in 2006 to support the
      development and expansion of its Las Vegas show ticketing business. During
      2006,
      the Company raised $1,003,000 of new equity capital through the sale of units
      comprised of shares of its common stock and warrants, and also received $210,726
      from the exercise of options and warrants.





Operating
      Activities. Operating activities provided cash of $1,169,032 during the year
      ended December 31, 2006, as compared to $289,506 during the year ended December
      31, 2005, primarily as a result of the improved operating performance of the
      Company’s ticketing operations. At December 31, 2006, the Company had cash of
      $1,943,532, as compared to $315,763 at December 31, 2005.





The
      Company had a working capital surplus of $44,547 at December 31, 2006
      (equivalent to a current ratio of 1.02:1.00), as compared to a working capital
      deficiency of $2,766,621 at December 31, 2005, primarily as a result of the
      cash
      raised from the sale of units of the Company’s securities, the exercise of
      options and warrants, the settlement of the Finova/Steamboat note payable at
      substantially less than face value, and the improved operating performance
      of
      the Company’s ticketing operations. At December 31, 2006 and 2005, the Company
      had accrued compensation due to its President and Chief Executive Officer of
      $0
      and $65,726, respectively, which was included in accounts payable and accrued
      liabilities.




Investing
      Activities. For the year ended December 31, 2006 and December 31, 2005,
      investing activities utilized net cash of $41,205 and $220,925, respectively,
      for the purchases of property and equipment.





Financing
      Activities. For the year ended December 31, 2006, financing activities provided
      net cash of $499,942, consisting of net proceeds of $1,003,000 from the sale
      of
      units of the Company securities and $210,726 from the exercise of warrants,
      reduced by payments on capital lease obligations of $77,025, payments on notes
      payable of $131,759, and installment payments on the Debentures of $505,000
      (see
      below). For the year ended December 31, 2005, financing activities provided
      net
      cash of $115,996, consisting of the net proceeds from the issuance of a
      convertible debenture of $239,300, reduced by payments on capital lease
      obligations of $61,745 and payments on notes payable of $61,559.





Issuance
      of Convertible Debentures and Standby Equity Distribution
      Agreement:





Issuance
      of Convertible Debentures to Advantage Capital Development Corp. On December
      7,
      2004, the Company closed a financing transaction in which it sold 5% secured
      convertible debentures with an aggregate face value of $530,000 (collectively,
      the “Debentures”) to Advantage Capital Development Corp. (“Advantage”). The
      Company issued a Debenture with a face value of $250,000 upon closing
      (“Debenture No. 1”) and received net proceeds of $200,000. The Company issued
      another Debenture with a face value of $280,000 on January 6, 2005 (“Debenture
      No. 2”) and received net proceeds of $239,300. The Debentures were originally
      scheduled to mature on March 7, 2006. Based on the maturity date of the
      Debentures, the Debentures were classified in the Company’s balance sheet as
      current liabilities at December 31, 2005.




21





Interest
      on the Debentures was originally due at the maturity date was paid monthly
      in
      cash (see below). The Debentures were secured by all of the assets and property
      of the Company. At the option of the holder, the Debentures were convertible
      from time to time after nine months from the date of closing into the Company’s
      common stock at a price per share of either (a) an amount equal to 120% of
      the
      volume weighted average price of the Common Stock as listed on the National
      Association of Securities Dealers, Inc.’s Over-The-Counter Bulletin Board, as
      quoted by Bloomberg, L.P. on the closing date or (b) an amount equal to 80%
      of
      the average volume weighted average price of the Company’s Common Stock, as
      quoted by Bloomberg, L.P. for the 5 trading days immediately preceding the
      conversion date. Notwithstanding the foregoing, at no time could the conversion
      price be less than $0.25 per share. The Company had an option to redeem all
      or a
      portion of the outstanding Debentures at a redemption price of 120% of the
      amount redeemed plus accrued interest.





On
      November 4, 2004, the Company issued to Advantage a warrant to purchase 100,000
      shares of common stock exercisable at $0.25 per share through November 4, 2007,
      which was determined to have a fair value, calculated pursuant to the
      Black-Scholes option-pricing model, of $36,000. On July 26, 2006 and August
      28,
      2006, Advantage exercised a portion of such warrant to purchase 80,000 shares
      of
      common stock upon payment to the Company of $20,000. On October 18, 2006,
      Advantage exercised the remaining portion of the warrant to purchase 20,000
      shares of common stock upon payment to the Company of $5,000.





As
      described below, the Company had the right to determine the form of payment
      (cash or common stock) for any liquidated damages that the Company might be
      required to pay to Advantage as a result of its not fulfilling its registration
      statement requirements with the Securities and Exchange Commission (“SEC”) with
      respect to the shares of common stock underlying the warrant.





The
      Debentures were convertible into equity based on their face amount, which
      resulted in a beneficial conversion feature with a fair value of $62,500 for
      Debenture No. 1 and $70,000 for Debenture No. 2. The aggregate value of the
      warrant of $36,000, the value of the beneficial conversion features of $62,500
      and $70,000, and the aggregate related financing costs of $90,700 paid by the
      Company to the lender were recorded as a discount to the face value of the
      Debentures, and were charged to operations as interest expense over the term
      of
      the Debentures through March 31, 2006.





On
      February 27, 2006, the Company entered into a settlement agreement (the
“Agreement”) with Advantage to modify the Securities Purchase Agreement, the
      Security Agreement, the Warrant, the Debentures, the Escrow Agreement and the
      Investor Registration Rights Agreement, each executed on November 4, 2004,
      and
      the Amendments dated December 2004, January 2005 and February 2005, to satisfy
      the outstanding amount due in Liquidated Damages pursuant to the Company's
      late
      filing and effectiveness of its Registration Statement as set forth in the
      Investor Registration Rights Agreement. For the year ended December 31, 2005,
      the Company recorded Liquidated Damages of $79,500, which were included in
      interest expense in the Company’s consolidated statement of operations.





In
      accordance with the Agreement, the Company agreed to honor the $25,000
      conversion notice previously submitted by Advantage, issue such conversion
      shares and reduce the balance on the Debentures accordingly. As a result, during
      February 2006, the Company issued 93,563 shares of common stock to Advantage
      with a fair market value of $25,000 based on a conversion price of $0.2672
      per
      share.





The
      Company agreed to pay interest on the Debenture's outstanding balance monthly
      and to repay one-third of the remaining loan balance plus the redemption premium
      each on April 1, 2006, June 1, 2006, and August 1, 2006 ($505,000 plus the
      20%
      redemption premium of $101,000, for a total of $606,000). On March 29, 2006,
      the
      Company paid the installment due on April 1, 2006 of $202,000, which consisted
      of a principal payment of $168,333 and a redemption premium of $33,667. On
      May
      30, 2006, the Company paid the installment due on June 1, 2006 of $202,000,
      which consisted of a principal payment of $168,333 and a redemption premium
      of
      $33,667. On July 1, 2006, the Company paid the final installment of $202,000
      due
      on August 1, 2006, which consisted of a principal payment of $168,334 and a
      redemption premium of $33,666.





The
      Company recognized the redemption premium as additional interest expense as
      the
      respective installments were paid. As a result of the payment of the final
      installment on July 1, 2006, the Company has fully complied with the terms
      of
      the Agreement.





Standby
      Equity Distribution Agreement with Cornell Capital Partners, L.P. On December
      7,
      2004, the Company entered into a financing transaction with Cornell Capital
      Partners, LP ("Cornell") under which Cornell, at the request of the Company,
      would periodically purchase up to $10,000,000 of the Company's common stock
      over
      24 months pursuant to a Standby Equity Distribution Agreement. The Company
      had
      the right to decide if it would sell stock, as well as the timing and amount
      of
      such stock sold to Cornell, with the purchase price based upon the market price
      of the Company's common stock at the time of each sale, subject to the
      satisfaction of certain conditions, including the SEC having declared effective
      a registration statement covering the shares of common stock to be purchased
      by
      Cornell. The Company issued 290,000 shares of its common stock to Cornell as
      a
      commitment fee and an additional 290,000 shares of its common stock on the
      first
      year anniversary of the Standby Equity Distribution Agreement.




22





The
      Company entered into an agreement with Newbridge Securities Corporation
      ("Newbridge") to serve as exclusive placement agent for the sale of the shares
      of common stock. In consideration for Newbridge's services, the Company issued
      20,000 shares of its common stock to Newbridge. The shares of common stock
      issued to Cornell and Newbridge were recorded at par value of $0.08 per share
      (aggregate amount $48,000) and were included in deferred offering costs in
      the
      Company's balance sheet at December 31, 2005.




On
      July
      20, 2006, the Company terminated its $10,000,000 Standby Equity Distribution
      Agreement with Cornell. The Company never sold any shares of its common stock
      pursuant to such agreement and has no continuing financial obligations of any
      kind to Cornell. There were no early termination penalties incurred by the
      Company. As a result of the termination of the financing agreement with Cornell,
      deferred offering costs of $58,000 were charged to operations as other expense
      during the year ended December 31, 2006.





Agreement
      with Knightsbridge Holdings, LLC. On January 6, 2005, pursuant to an agreement
      dated as of August 31, 2004 and as a result of the execution of the Standby
      Equity Distribution Agreement and the completion of the issuance of the
      Debentures, the Company issued 448,000 shares of common stock to Knightsbridge
      Holdings, LLC ("Knightsbridge") as a referral fee. The Company was obligated
      to
      file a registration statement to cover 200% of the shares so issued. The
      agreement with Knightsbridge was for an initial term through February 28, 2005,
      and continued thereafter on a month-to-month basis, but the Company did not
      have
      the right to terminate the agreement until such time as it had fulfilled all
      of
      its obligations under its agreement with Advantage. The Company also agreed
      to
      pay Knightsbridge a monthly consulting fee of $2,500. The fair market value
      of
      the shares of $201,600 ($0.45 per share) was recorded as a discount to the
      face
      value of the Debentures on January 6, 2005, and was charged to operations as
      interest expense over the remaining term of the Debentures through March 31,
      2006.





Effective
      July 30, 2006, the Company terminated its agreement with Knightsbridge, as
      the
      Company had fulfilled all of its obligations under its agreement with
      Advantage.





Subsequent
      to July 30, 2006, the Company has no continuing financial obligations to
      Knightsbridge except that, for a period of two years thereafter, should the
      Company complete a financing transaction through a source introduced, directly
      or indirectly, by Knightsbridge, Knightsbridge will be entitled to receive
      a
      referral fee for debt financings ranging from 1.0% to 2.0%, and for equity
      financings ranging from 1.5% to 4.0%; and with respect to a merger or
      acquisition transaction, Knightsbridge will be entitled to receive 5.0% of
      any
      securities issued by the Company and a fee ranging from 3.0% to 5.0% of the
      defined transaction value.





Registration
      Rights. The Company was obligated to register the shares of common stock
      referred to above (the "Registrable Securities").





The
      Company was originally obligated to prepare and file, no later than 45 days
      from
      November 4, 2004 (the "Scheduled Filing Deadline"), a registration statement
      on
      Form S-1 or SB-2 (or, if the Company was then eligible, on Form S-3) with the
      SEC under the 1933 Act (the "Initial Registration Statement") for the
      registration for the resale by all investors who purchased Debentures or the
      Company's warrant. The Company was required to use its best efforts (i) to
      have
      the Initial Registration Statement declared effective by the SEC no later than
      120 days after the date of filing (the "Scheduled Effective Deadline") and
      (ii)
      to insure that the Initial Registration Statement and any subsequent
      Registration Statement remained in effect until all of the Registrable
      Securities were sold. The Company would be in default if the Initial
      Registration Statement was not declared effective by the SEC within 120 days
      after filing thereof.





In
      the
      event the Initial Registration Statement was not filed by the Scheduled Filing
      Deadline or was not declared effective by the SEC on or before the Scheduled
      Effective Deadline, or if after the Initial Registration Statement was declared
      effective by the SEC, sales could not be made pursuant to the Initial
      Registration Statement, the Company would be required to pay as liquidated
      damages (the "Liquidated Damages") to the holder, at the Company's option,
      either a cash amount or shares of the Company's common stock within 3 business
      days, after demand therefore, equal to 2% of the liquidated value of the
      Debentures outstanding as Liquidated Damages for each 30 day period after the
      Scheduled Filing Deadline or the Scheduled Effective Deadline, as the case
      may
      be. The Debentures were repaid in full in cash on July 1, 2006. Accordingly,
      the
      Company has no further registration obligation with respect to the
      Debentures.




23





On
      July
      20, 2005, the Company filed a Registration Statement on Form SB-2 with the
      SEC
      to register the shares of common stock pursuant to the Standby Equity
      Distribution Agreement with Cornell, as well as the shares of common stock
      with
      respect to the Company's commitments to Advantage, Newbridge and Knightsbridge.
      The Registration Statement, as amended, was declared effective by the SEC on
      February 13, 2006. The Company is in the process of withdrawing the Registration
      Statement.




Transactions
      with Primary Secured Lender:





On
      December 31, 1996, the Company completed a financing agreement with Finova
      Technology Finance, Inc. (“Finova”), which was structured as a sale/leaseback
      transaction of certain equipment owned by the Company. Based on the substance
      of
      this transaction, this financing agreement was accounted for as a note payable
      for financial reporting purposes. The gross loan amount was $1,575,027, with
      interest at 16.64% per annum, repayable over a four-year period at $40,903
      per
      month, with a balloon payment of $157,503.





On
      March
      10, 1999, the financing agreement was amended to reduce the monthly payments
      and
      to extend the maturity date of the note payable. On June 25, 2001 and April
      17,
      2002, the Company entered into modification agreements and waivers of default
      with the lender, which, among other provisions, cured prior defaults, provided
      for various modifications to the terms and conditions of the loan, extended
      the
      repayment date, and provided for the issuance of warrants to the
      lender.




Effective
      October 29, 2004, the Company entered into a further agreement with the lender
      which provided for the Company to repay the lender its aggregate obligation
      at
      September 30, 2004 of $956,439 (including accrued interest payable of $240,197)
      as follows: (i) $175,000 of the $956,439 (the “Discounted Amount”), to be paid
      commencing November 1, 2004, and on the first day of each consecutive month,
      by
      payment of $3,000 to the lender, to be applied first against interest accruing
      for the prior month at the rate of 7.5% per annum, and then, to the extent
      available, as a reduction of the $175,000 principal balance; (ii) on December
      1,
      2006, the unpaid principal balance of the $175,000, plus accrued and unpaid
      interest, would be fully due and payable; and (iii) the $175,000 and any unpaid
      accrued interest could be paid by the Company at any time prior to December
      1,
      2006. The remaining indebtedness in excess of the $175,000 in the amount of
      $781,439 (the “Remaining Indebtedness”) would continue to bear interest at
      16.64% per annum, but would be deemed fully satisfied if the Company paid the
      lender the entire $175,000, with interest, as specified above. In conjunction
      with this agreement, the Company also assigned to the lender as additional
      collateral its interest in and rights to a key man life insurance policy on
      the
      Company's President and Chief Executive Officer. On May 1, 2006, Finova conveyed
      all of its right, title and interest in and to the October 29, 2004 agreement
      to
      Steamboat Capital VII, LLC (“Steamboat”).





The
      balance of the discounted amount was $119,759 at December 31, 2005. On September
      13, 2006, the Company repaid in full its obligation to the lender of $1,180,493
      (including accrued interest of $297,632) by making a final cash payment of
      $101,697. As a result, the Company recognized a non-cash gain on settlement
      of
      debt of $1,078,796 during 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.




Principal
      Commitments:





At
      December 31, 2006, 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 YearContractual
                cash obligations
            
            Total
            
            2007
            
            2008
            
            2009
            
            2010
            
            2011Employment
                agreement
            
            $
            663,593
            
            $
            293,333
            
            $
            316,800
            
            $
            53,460
            
            $
            -
            
            $
            -Capital
                lease obligations
            
            
            247,838
            
            
            74,790
            
            
            59,859
            
            
            55,247
            
            
            57,942
            
            
            -Operating
                lease obligations
            
            
            3,174,555
            
            
            948,022
            
            
            915,498
            
            
            836,331
            
            
            430,848
            
            
            43,856Total
                contractual cash obligations
            
            $
            4,085,986
            
            $
            1,316,145
            
            $
            1,292,157
            
            $
            945,038
            
            $
            488,790
            
            $
            43,856




24




Off-Balance
      Sheet Arrangements:





At
      December 31, 2006, the Company did not have any transactions, obligations or
      relationships that could be considered off-balance sheet
      arrangements.





Recent
      Accounting Pronouncements:





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”), which provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value.  SFAS No. 159’s objective is to reduce both complexity in
      accounting for financial instruments and the volatility in earnings caused
      by
      measuring related assets and liabilities differently. Generally accepted
      accounting principles have required different measurement attributes for
      different assets and liabilities that can create artificial volatility in
      earnings. SFAS No. 159 helps to mitigate this type of accounting-induced
      volatility by enabling companies to report related assets and liabilities at
      fair value, which would likely reduce the need for companies to comply with
      detailed rules for hedge accounting. SFAS No. 159 also establishes presentation
      and disclosure requirements designed to facilitate comparisons between companies
      that choose different measurement attributes for similar types of assets and
      liabilities. SFAS No. 159 requires companies to provide additional information
      that will help investors and other users of financial statements to more easily
      understand the effect of the company’s choice to use fair value on its earnings.
      SFAS No. 159 also requires companies to display the fair value of those assets
      and liabilities for which the company has chosen to use fair value on the face
      of the balance sheet.  SFAS No. 159 does not eliminate disclosure
      requirements included in other accounting standards, including requirements
      for
      disclosures about fair value measurements included in SFAS No. 157 and SFAS
      No.
      107. SFAS No. 159 is effective as of the beginning of a company’s first fiscal
      year beginning after November 15, 2007.  Early adoption is permitted as of
      the beginning of the previous fiscal year provided that the company makes that
      choice in the first 120 days of that fiscal year and also elects to apply the
      provisions of SFAS No. 157. The Company is currently assessing the potential
      effect of SFAS No. 159 on its financial statements.





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (“SFAS
      No. 157”), which provides enhanced guidance for using fair value to measure
      assets and liabilities. SFAS No. 157 provides a common definition of fair value
      and establishes a framework to make the measurement of fair value in generally
      accepted accounting principles more consistent and comparable. SFAS No. 157
      also
      requires expanded disclosures to provide information about the extent to which
      fair value is used to measure assets and liabilities, the methods and
      assumptions used to measure fair value, and the effect of fair value measures
      on
      earnings. SFAS No. 157 is effective for financial statements issued in fiscal
      years beginning after November 15, 2007 and
      to
      interim periods within those fiscal years . The
      Company is currently assessing the potential effect of SFAS No. 157 on its
      financial statements.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements" (“SAB No.
      108”). SAB No. 108 was issued in order to eliminate the diversity in practice
      surrounding how public companies quantify financial statement misstatements.
      SAB
      No. 108 requires that registrants quantify errors using both a balance sheet
      (iron curtain) approach and an income statement (rollover) approach then
      evaluate whether either approach results in a misstated amount that, when all
      relevant quantitative and qualitative factors are considered, is material.
      SAB
      No. 108 is effective for fiscal years ending after November 15, 2006. The
      Company adopted SAB No. 108 during 2006. The adoption of SAB No. 108 did not
      have a material effect on the Company’s financial statements .





In
      June
      2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes--an
      interpretation of FASB Statement No. 109" (“FIN 48”), which seeks to reduce the
      diversity in practice associated with the accounting and reporting for
      uncertainty in income tax positions. FIN 48 prescribes a comprehensive model
      for
      the financial statement recognition, measurement, presentation and disclosure
      of
      uncertain tax positions taken or expected to be taken in an income tax return.
      FIN 48 presents a two-step process for evaluating a tax position. The first
      step
      is to determine whether it is more-likely-than-not that a tax position will
      be
      sustained upon examination, based on the technical merits of the position.
      The
      second step is to measure the benefit to be recorded from tax positions that
      meet the more-likely-than-not recognition threshold, by determining the largest
      amount of tax benefit that is greater than 50 percent likely of being realized
      upon ultimate settlement, and recognizing that amount in the financial
      statements. FIN 48 is effective for fiscal years beginning after December 15,
      2006. The Company is currently assessing the potential effect of FIN 48 on
      its
      financial statements.




25





Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards, if currently adopted, would have a material effect on
      the
      Company's financial statements.




ITEM
      7.
      FINANCIAL STATEMENTS





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




ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





Not
      applicable.




ITEM
      8A.
      CONTROLS AND PROCEDURES





(a)
      Evaluation of Disclosure Controls and Procedures





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





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





(b)
      Changes in Internal Control





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




ITEM
      8B.
      OTHER INFORMATION





None.




26





PART
      III.




ITEM
      9. 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, 2007. 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.





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
              
              51
              
              Chairman
                  of the Board of Directors, President, Chief Executive Officer and
                  Chief
                  Financial OfficerKimberly
                  Simon
              
              39
              
              Chief
                  Operating OfficerBenjamin
                  Frankel
              
              71
              
              DirectorNorman
                  Feirstein
              
              58
              
              DirectorSam
                  Georges
              
              61
              
              Director




27




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. Mr. 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 has been Chief Financial Officer since March 1,
      1999. 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. Ms. Simon has been employed by the Company for nearly nine 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. While retaining
      that
      capacity, she assumed the responsibility for overseeing the management of all
      of
      the Company's ride simulator facilities and was promoted to Vice President
      of
      Operations effective May 1, 2001. 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.





Benjamin
      Frankel. Mr. 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. Mr. 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. Mr. 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.





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.




28





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 were complied with under Section 16(a) during 2006, except
      as
      follows:





Mitch
      Francis did not timely file various Form 4’s with respect to the issuance of
      shares of common stock to him, the exercise of warrants by him and the
      assignment and transfer of shares to Sandra Francis, his spouse.





Kimberly
      Simon did not timely file various Form 4’s with respect to the issuance of
      shares of common stock to her, the issuance of warrants to her and the sale
      of
      shares of common stock by her.





Benjamin
      Frankel did not timely file various Form 4’s with respect to the issuance of
      shares of common stock to him and the sale of common stock by
      him.





Norman
      Feirstein did not timely file a Form 4 with respect to the issuance of shares
      of
      common stock to him.





The
      Company is in the process of establishing improved internal procedures to insure
      the timely filing of such reports in the future.





Family
      Relationships among Directors and Executive Officers:





There
      were no family relationships among directors and executive officers during
      the
      years ended December 31, 2004, 2005 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
      exhibit to the Company's Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2003. A copy of the Company's Code of Ethics is available 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.





ITEM
      10.
      EXECUTIVE COMPENSATION





The
      following table and text sets forth information with respect to the compensation
      paid to the Company’s senior executive officers during the year ended
      December 31, 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




Name
                  and PrincipalPosition
              
              Year
                Ended
                December
                  31,
              
              Base
                  Salary
                $
              
              Bonus
                $
              
              Stock
                  Awards
                $
              
              Option
                  Awards
                $
              
              All
                  Other Compensation
                $
              
              Total
                  Compensation
                $Mitch
                  Francis (1)
              
              
              2006
              
              
              275,000
              
              
              -
              
              
              252,556
              (2)
              
              -
              
              
              71,662
              (3)
              
              599,218Chief
                Executive Officer,Chief
                  Financial Officer,Chairman
                  of the BoardKimberly
                  Simon
              
              
              2006
              
              
              109,231
              
              
              15,300
              
              
              130,708
              (4)
              
              119,500
              (5)
              
              8,547
              (6)
              
              383,286Chief
                  Operating Officer









29


(1) Compensation
          to Mr. Francis was paid to Francis Development Inc., a company founded
          and
          controlled by Mr. Francis, for the years ended December 31, 2004 and 2005
          and
          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 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, 2006.
 
 (3) Includes
          $3,660 of disability insurance premiums, $26,952 of automobile expense,
          $10,274
          of life insurance premiums, $6,101 of long-term care insurance, $20,008
          of
          medical insurance premiums, $1,917 for personal tax consultation and $2,750
          of
          401(k) plan contributions paid to or on behalf of Mr. Francis in
          2006.
 
 (4) 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 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
      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.





(5) 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.





(6) Includes
        $5,485 of automobile expense, $1,940 of medical insurance premiums and $1,122
        of
        401(k) plan contributions paid to or on behalf of Ms. Simon in
        2006.





Stock
      Option and Warrant Grants:




The
      following table sets forth information as of December 31, 2006 concerning
      unexercised options and warrants, unvested stock and equity incentive plan
      awards for the executive officers named in the Summary Compensation
      Table.




OUTSTANDING
      EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2006




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
            
            
            109,796
            
            
            -
            
            
            -
            
            
            0.13
            
            
            2-02-2007
            
            
            361,111
            
            
            1,596,111
            
            
            -
            
            
            -Chief
                Executive OfficerKimberly
                Simon
            
            
            150,000
            
            
            -
            
            
            -
            
            
            0.15
            
            
            6-05-2009
            
            
            110,417
            
            
            488,043
            
            
            -
            
            
            -Chief
                  Operating Officer
            
            
            100,000
            
            
            -
            
            
            -
            
            
            0.36
            
            
            2-27-2012
            
            
            -
            
            
            -
            
            
            -
            
            
            -50,000
            
            
            -
            
            
            -
            
            
            0.41
            
            
            5-13-2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -1,000
            
            
            -
            
            
            -
            
            
            0.39
            
            
            6-18-2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -




30




Meetings
      and Committees of the Board of Directors:





During
      the year ended December 31, 2006, the Company’s Board of Directors met on two
      occasions. Additional board actions were taken by unanimous written
      consent.





The
      Company does not have a nominating committee of the Board of Directors, or
      any
      committee performing similar functions. Nominees for election as a director
      are
      selected by the Board of Directors.





The
      compensation committee of the Board of Directors consists of the four directors
      of the Company, one of whom is an employee of the Company. 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.





The
      audit
      committee of the Board of Directors consists of Benjamin Frankel, Norman
      Feirstein and Sam Georges, none of whom is an employee of the Company. 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. The Company does not currently have an
      audit committee financial expert serving on its audit committee. The Company
      may
      in the future attempt to add a qualified board member to serve as an audit
      committee financial expert in the future, subject to its ability to locate
      and
      compensate such a person.





The
      stock
      option committee of the Board of Directors consists of Benjamin Frankel, Norman
      Feirstein and Sam Georges, none of whom is an employee of the Company. The
      stock
      option committee is responsible for the operation and administration of the
      Company's stock option plans, including the grants thereunder.





Directors
      Compensation:





For
      serving on the Board of Directors, directors who are not employees of the
      Company receive $2,000 for each meeting of the Board of Directors, and
      reimbursement for any expenses incurred in attending board meetings. 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.





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 $88,800 ($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)
            
            Total
              ($)Benjamin
                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, 2006, the Company’s Board of Directors met on
        two occasions. Mr. Frankel and Mr. Feirstein received $2,000 for each meeting
        they attended.




31





Employment
      Agreements:





Effective
      March 1, 2006, the Company entered in a three-year employment agreement with
      Mitch Francis, its President and Chief Executive Officer, to serve as Chairman
      of the Board of Directors, President and Chief Executive Officer. The agreement
      provides for a base annual salary of $275,000, annual increases of 8%, benefits,
      and annual bonuses equal to 6% of the Company’s annual earnings in excess of
      $500,000 before taxes, depreciation and amortization, but after interest
      expense. Mr. Francis did not earn any bonus in 2006. The agreement also provides
      that the Company issue to Mr. Francis 500,000 shares of restricted common stock
      within 30 days of March 1, 2006. The shares of common stock were issued on
      March
      13, 2006. The shares of common stock are subject to a prohibition on being
      traded, encumbered or otherwise transferred, which restriction shall lapse
      in
      equal annual installments on March 13, 2007, 2008 and 2009. Upon the occurrence
      of a change in control of the Company, as defined, Mr. Francis will be entitled
      to, among other compensation, an amount equal to five times his annual base
      salary immediately prior to the change in control event.





Severance
      Agreement:





Effective
      December 12, 2002, the Company entered into a severance agreement with Kimberly
      Simon, its Chief Operating Officer, which provides for compensation varying
      from
      one month to six months of her salary and benefits at the time of termination,
      depending on circumstances.





Long-Term
      Incentive Plans:





The
      Company does not have any 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.





During
      the year ended December 31, 2006, the Company issued options to purchase 300,000
      shares of common stock under the 2004 Option Plan. As of December 31, 2006,
      options to purchase 660,000 shares of common stock were reserved for issuance
      under the 2004 Option Plan. The Company did not issue any options under the
      2004
      Option Plan in 2004 or 2005.





2004
      Directors Option Plan:





On
      March
      3, 2005, the Company adopted the Directors Stock Option Plan (the “2004
      Directors Option Plan”) for non-employee directors of the Company. The 2004
      Directors Option Plan was approved pursuant to a Joint Written Consent of the
      Board of Directors and Majority Stockholders of the Company dated September
      22,
      2004. The 2004 Directors Option Plan authorized the granting of non-qualified
      stock options to purchase an aggregate of not more than 240,000 shares of the
      Company’s common stock. The 2004 Directors Option Plan provided that options
      granted would be exercisable for a period not to exceed ten years and would
      vest
      on a cumulative basis as to one-third of the total number of shares covered
      thereby at any time after one year from the date the option was granted and
      an
      additional one-third of such total number of shares at any time after the end
      of
      each consecutive one-year period thereafter until the option had become
      exercisable as to all of such total number of shares. The exercise price for
      non-qualified stock options would be the fair value of the Company’s common
      stock at the date of the grant. No option may be exercised during the first
      six
      months of its term except in the case of death. The Company had not issued
      any
      options under the 2004 Directors Option Plan at December 31, 2006.




32





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





Kimberly
      Simon:





On
      March
      13, 2006, the Company issued 50,000 shares of common stock to Kimberly 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 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), 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 Kimberly Simon, its Chief Operating
      Officer. 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.





On
      September 28, 2006, the Company issued 100,000 shares of common stock to
      Kimberly 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 $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 Kimberly 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:





On
      June
      5, 2001, Mr. Francis exercised a portion of a previously issued warrant to
      purchase 1,538,461 shares of common stock exercisable at $0.13 per share through
      February 2, 2002. Mr. Francis exercised a portion of the warrant and acquired
      923,077 shares of common stock and paid the exercise consideration by canceling
      his $120,000 loan to the Company. At that time, the unexercised portion of
      the
      warrant for 615,384 shares of common stock was extended for an additional two
      years and cashless exercise provisions were added. The exercise price of the
      warrant was approximately equal to the fair market value of the Company's common
      stock on the extension date. On November 26, 2003, the expiration date of this
      warrant was extended from February 2, 2004 to February 2, 2007. The exercise
      price of the warrant was in excess of the fair market value of the Company's
      common stock on November 26, 2003. On September 28, 2006, Mr. Francis exercised
      a portion of the abovementioned warrant and acquired 505,588 shares of common
      stock by offsetting accrued but unpaid compensation of $65,726. On February
      2,
      2007, Mr. Francis exercised (on a cashless basis) the remainder of the
      previously issued warrant to acquire 109,796 shares of common stock at an
      exercise price of $0.13 per share. Accordingly, the aggregate exercise price
      of
      $14,273 was paid through the surrender and cancellation of 3,005 shares with
      a
      fair market value on the date of exercise of $4.75 per share, which resulted
      in
      the issuance of 106,791 shares of common stock.





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), 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.




33





On
      September 28, 2006, the Company issued 200,000 shares of common stock to Mitch
      Francis, its President and Chief Executive 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 $222,000 ($1.11 per share) and were charged to
      operations as general and administrative expense during the year ended December
      31, 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, options
      to acquire 100,000 shares of common stock will be granted to Mr. Stein on each
      of November 6, 2007, November 6, 2008 and November 6, 2009, respectively, with
      per share exercise prices of $2.02, $3.00 and $4.00, 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, $50,333 was charged to operations
      as general and administrative expense during the year ended December 31, 2006.





A
      summary
      of stock options and warrants issued to officers, directors and employees as
      of
      December 31, 2006 is presented below.


Stock
                  Option and Warrant Value TableNumber
                  of Shares of
                Common
                  Stock
                UnderlyingStock
                  Optionsand
                  Warrants
              
              Weighted
                  Average
                Exercise
                    Price
              
              Value
                  ofUnexercised
                  in-the-MoneyStock
                    Options
                    and
                      Warrants atFiscal
                      Year-End (1)Name
              
              Unvested
              
              Vested
              
              
              Unvested
              
              VestedOption
                  Plans:Kimberly
                  Simon
              
              
              -
              
              
              1,000
              
              $
              0.39
              
              $
              -
              
              $
              4,030Craig
                  Stein
              
              
              300,000
              
              
              -
              
              
              3.01
              
              
              423,000
              
              
              -Employees
              
              
              -
              
              
              500
              
              
              0.39
              
              
              -
              
              
              2,015Non-Plan
                  Stock Options and Warrants:Mitch
                  FrancisWarrants
              
              
              -
              
              
              109,796
              
              
              0.13
              
              
              -
              
              
              471,025Kimberly
                  SimonStock
                  Options
              
              
              -
              
              
              151,000
              
              
              0.15
              
              
              -
              
              
              644,530Warrants
              
              
              -
              
              
              150,000
              
              
              0.38
              
              
              -
              
              
              606,000


(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 $4.42 per share at December 31, 2006.




ITEM
      11.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





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.




34





As
      of
      February 28, 2007, the Company had a total of 18,848,207 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, 2007: (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.






Name
                  and Address
                  of
                    Beneficial Owner
              
              Amount
                  and Nature of Beneficial
                  Ownership
              
              Percent
                    of Shares of Common Stock Outstanding (2)Mitch
                  Francis (1)
              
              
              6,565,992
              (3)
              
              33.1
              %Kimberly
                  Simon (1)
              
              
              733,916
              (4)
              
              3.9
              %Benjamin
                  Frankel (1)
              
              
              450,500
              
              
              2.4
              %Norman
                  Feirstein (1)
              
              
              440,000
              
              
              2.3
              %Sam
                  Georges (1)
              
              
              10,000
              
              
              0.1
              %All
                  directors andexecutive
                  officersas
                  a group (5 persons)
              
              
              8,200,408
              (5)
              
              40.7
              %Rick
                  Kraniak (1)
              
              
              969,875
              (6)
              
              5.1
              %Joe
                  Marsh (1)
              
              
              1,678,051
              (7)
              
              8.9
              %Iqbal
                  Ashraf (1)
              
              
              3,094,000
              (8)
              
              15.6
              %







(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, 2007, 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,
        2007.




(3) Includes
        3,565,992 shares of common stock owned by Mr. Francis. Also includes 2,000,000
        shares of common stock owned by Mr. Iqbal Ashraf and 1,000,000 shares of
        common
        stock issuable upon exercise of warrants held by Mr. Ashraf, for which voting
        power has been granted to Mr. Francis. Excludes 333,332 unvested shares issued
        to Mr. Francis in March 2006. Also excludes 254,688 shares of common stock
        owned
        by Sandra Francis, the wife of Mr. Francis, as to which Mr. Francis disclaims
        beneficial ownership.




(4) Includes
        432,916 shares of common stock owned by Ms. Simon and 301,000 shares of common
        stock issuable upon exercise of stock options and warrants granted to Ms.
        Simon.
        Excludes 102,084 unvested shares issued to Ms. Simon in March
        2006.




(5) Includes
        4,899,408 shares of common stock owned by officers and directors and 301,000
        shares of common stock issuable upon exercise of stock options and warrants
        granted to officers and directors. Also includes 2,000,000 shares of common
        stock owned by Mr. Iqbal Ashraf and 1,000,000 shares of common stock issuable
        upon exercise of warrants held by Mr. Ashraf, for which voting power has
        been
        granted to Mr. Francis. Excludes 435,416 unvested shares issued in March
        2006.
        Also excludes 254,688 shares of common stock owned by Sandra Francis, the
        wife
        of Mr. Francis, as to which Mr. Francis disclaims beneficial
        ownership.




35




(6) Includes
        769,875 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
        3,125
        unvested shares issued in July 2006.




(7) Includes
        1,658,051 shares of common stock owned by Mr. Marsh and 20,000 shares of
        common
        stock issuable upon exercise of warrants granted to Mr. Marsh. Includes shares
        owned by Magic Arts and Entertainment, a company in which Mr. Marsh is a
        partner. Excludes 3,125 unvested shares issued in July 2006.




(8) Includes
        2,094,000 shares of common stock owned by Mr. Ashraf and 1,000,000 shares
        of
        common stock issuable upon exercise of warrants held by Mr. Asraf. Voting
        power
        with respect to 2,000,000 shares of common stock owned by Mr. Ashraf and
        1,000,000 shares of common stock issuable upon exercise of warrants held
        by Mr.
        Asraf has been granted to Mitch Francis.





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
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





During
      2006, 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.





During
      the years ended December 31, 2006, 2005 and 2004, the Company incurred fees
      to
      such accounting firms for accounting and tax services of $107,888, $76,419
      and
      $73,899, 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 $8,758.





At
      December 31, 2005, the Company had recorded accrued compensation due to its
      President and Chief Executive Officer of $65,726, which was included in accounts
      payable and accrued liabilities at such date. On September 28, 2006, such
      accrued compensation amount was settled by offsetting it against the aggregate
      exercise price of a portion of an outstanding warrant to acquire 615,384 shares
      of common stock exercisable at $0.13 per share that had been previously issued
      to the President and Chief Executive Officer, resulting in the issuance of
      505,588 shares of common stock.





Additional
      information with respect to securities issued to the Company’s officers and
      directors in 2005 and 2006 is provided at “ITEM 10. EXECUTIVE
      COMPENSATION”.





ITEM
      13.
      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.





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, 2006 and 2005. 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-QSB. Weinberg & Co. also provided services with respect
      to the filing of the Company’s Registration Statement on Form SB-2, and
      amendments thereto, during 2005 and 2006. Charges by Weinberg with respect
      to
      these matters aggregated $74,430 and $107,599, respectively, for the years
      ended
      December 31, 2006 and 2005.




36





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.




37





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 28, 2007
            By:
            /s/
                MITCH FRANCISMitch
                Francis
              Chief
                Executive Officer





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 28, 2007
            By:
            /s/
                MITCH FRANCISMitch
                Francis
              Chief
                Executive Officer,
              President,
                Chief Financial
              Officer
                and Chairman of the
              Board
                of Directors


Date:
              March 28, 2007
            By:
            /s/
                BENJAMIN FRANKELBenjamin
                Frankel
              Director


Date:
              March 28, 2007
            By:
            /s/
                NORMAN FEIRSTEINNorman
                Feirstein
              Director


Date:
              March 28, 2007
            By:
            /s/
                SAM GEORGESSam
                Georges
              Director




38


TIX
      CORPORATION AND SUBSIDIARIES





INDEX
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


PAGEReport
                    of Independent Registered Public Accounting Firm
                
                40Consolidated
                    Financial Statements:Consolidated
                    Balance Sheets as of December 31, 2006 and 2005
                
                41Consolidated
                    Statements of Operations for the Years Ended December 31, 2006
                    and
                    2005
                
                43Consolidated
                    Statements of Stockholders’ Equity (Deficiency) for the Years
                    EndedDecember
                    31, 2006 and 2005
                
                44Consolidated
                    Statements of Cash Flows for the Years Ended December 31, 2006
                    and
                    2005
                
                46Notes
                    to Consolidated Financial Statements
                
                48
 39





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACOUNTING 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, 2006 and 2005, and the related
      consolidated statements of operations, stockholders' equity (deficiency) and
      cash flows for the years then ended. These consolidated financial statements
      are
      the responsibility of the Company's management. Our responsibility is to express
      an opinion on these consolidated financial statements based on our
      audits.




We
      conducted our audits in accordance with 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. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall consolidated financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Tix Corporation
      and Subsidiaries as of December 31, 2006 and 2005, and the consolidated results
      of their operations and their cash flows for the years then ended, in conformity
      with accounting principles generally accepted in the United States of
      America.





As
      discussed in Note 2 to the consolidated financial statements, effective January
      1, 2006, the Company adopted Statement of Financial Accounting Standards No.
      123(R), “Share-Based Payment” (“SFAS 123(R)”), which requires companies to
      estimate the fair value of share-based payment awards on the date of grant
      using
      an option-pricing model.




WEINBERG
                & COMPANY, P.A.Los
                Angeles, California
              March
                9, 2007





40





TIX
      CORPORATION AND SUBSIDIARIES





CONSOLIDATED
      BALANCE SHEETS





DECEMBER
      31, 2006 AND 2005


ASSETS2006
              
              2005Current
                  assets:Cash
              
              $
              1,943,532
              
              $
              315,763Prepaid
                  accounting fee to related party
              
              
              -
              
              
              8,758Prepaid
                  expenses and other current assets
              
              
              39,547
              
              
              20,695Total
                  current assets
              
              
              1,983,079
              
              
              345,216Property
                  and equipment:Office
                  equipment and furniture
              
              
              221,083
              
              
              188,728Equipment
                  under capital lease
              
              
              386,494
              
              
              387,341Leasehold
                  improvements
              
              
              260,913
              
              
              251,216868,490
              
              
              827,285Less
                  accumulated depreciation and amortization
              
              
              (369,889
              )
              
              (245,165
              )Total
                  property and equipment, net
              
              
              498,601
              
              
              582,120Other
                  assets:Intangible
                  assets:Customer
                  relationships, net
              
              
              60,278
              
              
              -Contract
                  commitments, net
              
              
              23,333
              
              
              -Deferred
                  offering costs
              
              
              -
              
              
              58,000Deposits
              
              
              66,666
              
              
              56,196Total
                  other assets
              
              
              150,277
              
              
              114,196$
              2,631,957
              
              $
              1,041,532




(continued)




41


TIX
      CORPORATION AND SUBSIDIARIES





CONSOLIDATED
      BALANCE SHEETS (continued)





DECEMBER
      31, 2006 AND 2005





LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIENCY)


2006
                
                2005Current
                    liabilities:Accounts
                    payable and accrued liabilities
                
                $
                1,885,145
                
                $
                1,656,448Current
                    portion of capital lease obligations
                
                
                53,387
                
                
                76,007Current
                    portion of notes payable
                
                
                -
                
                
                913,198Debentures
                    payable, net of discount
                
                
                -
                
                
                465,584Liabilities
                    related to discontinued operations
                
                
                -
                
                
                600Total
                    current liabilities
                
                
                1,938,532
                
                
                3,111,837Non-current
                    liabilities:Capital
                    lease obligations, less current portion
                
                
                140,592
                
                
                194,997Deferred
                    rent
                
                
                174,779
                
                
                134,267Total
                    non-current liabilities
                
                
                315,371
                
                
                329,264Stockholders’
                    equity (deficiency):Preferred
                    stock, $0.01 par value; 500,000 shares authorized;none
                    issued
                
                
                -
                
                
                -Common
                    stock, $0.08 par value; 100,000,000 shares authorized;18,440,305
                    shares and 11,166,621 shares issued and outstandingat
                    December 31, 2006 and 2005, respectively
                
                
                1,475,225
                
                
                893,330Additional
                    paid-in capital
                
                
                14,277,663
                
                
                12,155,991Deferred
                    compensation
                
                
                -
                
                
                (35,000
                )Accumulated
                    deficit
                
                
                (15,374,834
                )
                
                (15,413,890
                )Total
                    stockholders’ equity (deficiency)
                
                
                378,054
                
                
                (2,399,569
                )$
                2,631,957
                
                $
                1,041,532




See
      accompanying notes to consolidated financial statements.




42


TIX
      CORPORATION AND SUBSIDIARIES





CONSOLIDATED
      STATEMENTS OF OPERATIONS





YEARS
      ENDED DECEMBER 31, 2006 AND 2005





2006
            
            2005Revenues
            
            $
            5,387,728
            
            $
            2,695,191Operating
                expenses:Direct
                costs of revenues
            
            
            2,172,801
            
            
            1,510,191Selling
                and marketing expenses
            
            
            467,260
            
            
            326,439General
                and administrative expenses, includingnon-cash
                equity-based costs of $1,325,701in
                2006 and $237,996 in 2005 (including $657,564and
                $0 to officers and directors in 2006 and 2005,respectively)
            
            
            3,306,032
            
            
            1,906,983Depreciation
                and amortization
            
            
            164,042
            
            
            108,612Total
                costs and expenses
            
            
            6,110,135
            
            
            3,852,225Loss
                from operations
            
            
            (722,407
            )
            
            (1,157,034
            )Other
                income (expense):Other
                income
            
            
            37,300
            
            
            100,000Gain
                on settlement with lender
            
            
            1,078,796
            
            
            -Gain
                on settlement of debt
            
            
            11,978
            
            
            -Write-off
                deferred offering costs
            
            
            (58,000
            )
            
            -Loss
                on disposal of fixed assets
            
            
            -
            
            
            (32,237
            )Interest
                income
            
            
            15,539
            
            
            69Interest
                expense
            
            
            (329,491
            )
            
            (676,535
            )Other
                income (expense), net
            
            
            756,122
            
            
            (608,703
            )Income
                (loss) from continuing operations
            
            
            33,715
            
            
            (1,765,737
            )Income
                from discontinued operations:Income
                from discontinued operations, primarilynon-cash
                gain resulting from settlement of debts
            
            
            5,341
            
            
            742,785Income
                from discontinued operations
            
            
            5,341
            
            
            742,785Net
                income (loss)
            
            $
            39,056
            
            $
            (1,022,952
            )Net
                income (loss) per common share - basic and dilutedFrom
                continuing operations
            
            $
            -
            
            $
            (0.17
            )From
                discontinued operations
            
            
            -
            
            
            0.07$
            -
            
            $
            (0.17
            )Weighted
                average common shares outstanding -Basic
            
            
            14,886,334
            
            
            10,744,712Diluted
            
            
            15,999,473
            
            
            10,744,712


See
        accompanying notes to consolidated financial statements.


43




TIX
        CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
  YEARS
        ENDED DECEMBER 31, 2005 AND 2006


Common
                stock
            
            Additional
                Paid-in
                  Capital
            
            Deferred
                Compensation
            
            Accumulated
                Deficit
            
            Total
                  Stockholder’s
                  Equity(Deficiency)Shares
            
            AmountBalance,
                January 1, 2005
            
            
            10,011,237
            
            $
            800,899
            
            $
            11,594,244
            
            $
            (15,000
            )
            
            (14,390,938
            )
            $
            (2,010,795
            )Issuance
                of common stockto
                consultants
            
            
            176,000
            
            
            14,080
            
            
            38,920
            
            
            (35,000
            )
            
            -
            
            
            18,000Issuance
                of common stockfor
                loan referral fee
            
            
            448,000
            
            
            35,840
            
            
            165,760
            
            
            -
            
            
            -
            
            
            201,600Issuance
                of warrants to consultants
            
            
            -
            
            
            -
            
            
            176,600
            
            
            -
            
            
            -
            
            
            176,600Beneficial
                  conversion feature of
                Debenture
            
            
            -
            
            
            -
            
            
            70,000
            
            
            -
            
            
            -
            
            
            70,000Issuance
                of common stockand
                warrants and adjustmentof
                warrant exercise priceto
                law firm as settlementof
                accrued legal fees andfor
                legal expenses
            
            
            241,384
            
            
            19,311
            
            
            110,467
            
            
            -
            
            
            -
            
            
            129,778Issuance
                  of common stock for deferred
                offering
                  costs
            
            
            290,000
            
            
            23,200
            
            
            -
            
            
            -
            
            
            -
            
            
            23,200Amortization
                  of deferred compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            15,000
            
            
            -
            
            
            15,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,022,952
            )
            
            (1,022,952
            )Balance,
                December 31, 2005
            
            
            11,166,621
            
            
            893,330
            
            
            12,155,991
            
            
            (35,000
            )
            
            (15,413,890
            )
            
            (2,399,569
            )





(continued)
  44


TIX
      CORPORATION AND SUBSIDIARIES




CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
      (continued)




YEARS
      ENDED DECEMBER 31, 2005 AND 2006


Common
                    stock
                
                Additional
                  Paid-in
                    Capital
                
                Deferred
                  Compensation
                
                Accumulated
                  Deficit
                
                Total
                  Stockholder’s
                  Equity
                  (Deficiency)Shares
                
                AmountIssuance
                    of common stock upon conversion ofconvertible
                    debenture
                
                
                93,563
                
                
                7,485
                
                
                17,515
                
                
                -
                
                
                -
                
                
                25,000Issuance
                    of common stock to consultants
                
                
                353,750
                
                
                28,300
                
                
                360,400
                
                
                -
                
                
                -
                
                
                388,700Issuance
                    of common stock  to directors
                
                
                380,000
                
                
                30,400
                
                
                124,400
                
                
                -
                
                
                -
                
                
                154,800Issuance
                    of common stock toofficers
                    and employees
                
                
                758,472
                
                
                60,678
                
                
                516,686
                
                
                -
                
                
                -
                
                
                577,364Issuance
                    of common stock to law firm as payment ofaccrued
                    legal fees
                
                
                230,000
                
                
                18,400
                
                
                55,743
                
                
                -
                
                
                -
                
                
                74,143Sale
                    of common stock and warrants to private investors,net
                    of offering costs
                
                
                4,080,000
                
                
                326,400
                
                
                676,600
                
                
                -
                
                
                -
                
                
                1,003,000Issuance
                    of common stock upon exercise of warrants and options
                
                
                1,351,353
                
                
                108,108
                
                
                102,619
                
                
                -
                
                
                -
                
                
                210,727Issuance
                    of warrants and options andextension
                    of options
                
                
                -
                
                
                -
                
                
                169,833
                
                
                -
                
                
                -
                
                
                169,833Issuance
                    of common stock for acquisitionof
                    Stand-By Golf
                
                
                26,546
                
                
                2,124
                
                
                97,876
                
                
                -
                
                
                -
                
                
                100,000Amortization
                    of deferred compensation
                
                
                -
                
                
                -
                
                
                -
                
                
                35,000
                
                
                -
                
                
                35,000Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                39,056
                
                
                39,056Balance,
                    December 31, 2006
                
                $
                18,440,305
                
                $
                1,475,225
                
                $
                14,277,663
                
                $
                -
                
                $
                (15,374,834
                )
                $
                378,054


See
        accompanying notes to consolidated financial statements.
  45


TIX
      CORPORATION AND SUBSIDIARIES





CONSOLIDATED
      STATEMENTS OF CASH FLOWS





YEARS
      ENDED DECEMBER 31, 2006 AND 2005





2006
              
              2005Cash
                  flows from operating activities:Net
                  income (loss)
              
              $
              39,056
              
              $
              (1,022,952
              )Adjustments
                  to reconcile net income (loss) to cash provided byoperating
                  activities:Depreciation
                  and amortization
              
              
              124,724
              
              
              108,612Amortization
                  of intangibles
              
              
              2,389
              
              
              -Loss
                  on disposal of fixed assets
              
              
              -
              
              
              32,236Gain
                  on settlement with lender
              
              
              (1,078,796
              )
              
              -Gain
                  on settlement of debt
              
              
              (11,978
              )
              
              -Common
                  stock issued for services
              
              
              1,155,865
              
              
              222,996Gain
                  on settlement of debts - discontinued operations
              
              
              -
              
              
              (691,689
              )Amortization
                  of prepaid accounting fee
              
              
              -
              
              
              30,521Fair
                  value of vested options and warrants
              
              
              169,833
              
              
              15,000Amortization
                  of loan discount
              
              
              64,416
              
              
              386,484Write-off
                  deferred financing costs
              
              
              58,000
              
              
              -Changes
                  in operating assets and liabilities:(Increase)
                  decrease in:Prepaid
                  expenses and other current assets
              
              
              3,906
              
              
              19,476Deposits
                  and other assets
              
              
              (10,470
              )
              
              (13,170
              )Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              612,175
              
              
              1,073,670Deferred
                  rent
              
              
              40,512
              
              
              134,267Liabilities
                  related to discontinued operations
              
              
              (600
              )
              
              (5,945
              )Net
                  cash provided by operating activities
              
              
              1,169,032
              
              
              289,506Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              (41,205
              )
              
              (220,925
              )Net
                  cash used in investing activities
              
              
              (41,205
              )
              
              (220,925
              )Cash
                  flows from financing activities:Payments
                  on notes payable
              
              
              (131,759
              )
              
              (61,559
              )Payments
                  on capital lease obligations
              
              
              (77,025
              )
              
              (61,745
              )Payments
                  on convertible debentures
              
              
              (505,000
              )
              
              -Net
                    proceeds from sale of common stock and warrants
              
              
              1,003,000
              
              
              -Net
                  proceeds from exercise of options and warrants
              
              
              210,726
              
              
              -Net
                  proceeds from convertible debenture
              
              
              -
              
              
              239,300Net
                  cash provided by financing activities
              
              
              499,942
              
              
              115,996Cash:Net
                  increase
              
              
              1,627,769
              
              
              184,577Balance
                  at beginning of year
              
              
              315,763
              
              
              131,186Balance
                  at end of year
              
              $
              1,943,532
              
              $
              315,763





(continued)





46





TIX
      CORPORATION AND SUBSIDIARIES





CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)





YEARS
      ENDED DECEMBER 31, 2006 AND 2005


2006
              
              2005Supplemental
                  disclosures of cash flow information:Cash
                  paid for:Income
                  taxes
              
              $
              800
              
              $
              -Interest
              
              $
              153,944
                  $
              
              $
              106,635Non-cash
                  financing and investing activities:Conversion
                  of accounts payable to notes payable
              
              $
              -
              
              $
              24,000Acquisition
                  of capital lease assets and related obligation
              
              
              -
              
              
              231,759Issuance
                  of common stock to settle accounts payable
              
              
              74,143
              
              
              101,382Issuance
                  of common stock for deferred offering costs
              
              
              -
              
              
              23,200Issuance
                  of common stock for loan referral fees
              
              
              -
              
              
              201,600Beneficial
                  conversion feature of convertible debenture
              
              
              -
              
              
              70,000Issuance
                    of common stock upon conversion ofconvertible
                    debenture
              
              
              25,000
              
              
              -Issuance
                  of common stock valued at $100,000 foracquisition of Stand-By Golf, allocated to:Intangible
                  assets
              
              
              86,000
              
              
              -Prepaid
                  assets
              
              
              14,000
              
              
              -




See
      accompanying notes to consolidated financial statements.




47








TIX
      CORPORATION AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





YEARS
      ENDED DECEMBER 31, 2006 AND 2005





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 effective March 3, 2005.





Business
      Activity:





Since
      January 1, 2004, the Company’s principal business activity, through its
      wholly-owned subsidiary, Tix4Tonight, LLC, has been the sale of tickets for
      Las
      Vegas shows at a discount to the original box office price, on the same day
      of
      the performance, from ticket booths located on the Las Vegas Strip.





Tix4Tonight
      generally sells show tickets under short-term, non-exclusive agreements with
      approximately 60 Las Vegas shows, out of a total of approximately 80 Las Vegas
      shows running at any one time, and typically offers tickets for approximately
      50
      shows on any given day at a discount plus a service fee. Tix4Tonight 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.





The
      Company conducts the operations of Tix4Tonight at four locations in Las Vegas,
      Nevada: South Strip at the Hawaiian Marketplace Shopping Center (which commenced
      operations in November 2005 and replaced the location next to the
      Harley-Davidson Cafe at Harmon); the Fashion Show Mall Strip entrance in front
      of Neiman-Marcus (which commenced operations in February 2005); North Strip,
      just south of the Riviera Hotel; and a downtown Las Vegas facility at the Four
      Queens Hotel fronting onto the Fremont Street Experience (which commenced
      operations in December 2005). The Company also maintains administrative offices
      for Tix4Tonight in Las Vegas, Nevada.





Beginning
      August 10, 2006, as an adjunct to its Las Vegas show ticketing business, the
      Company launched its Tix4Dinner operations from the same locations as the sale
      of show tickets. 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.





In
      December 2006, the Company introduced its Tix4Stand-byGolf discount golf
      reservation business through the acquisition of Stand-By Golf Las Vegas (see
      Note 4). 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 at significant discounts. The Company anticipates marketing its
      new
      golf offerings at its four Las Vegas ticketing facilities, online and at its
      Las
      Vegas office.




Business
      Operations Prior to 2004:





During
      2002 and 2003, the Company owned 50% of a business venture named Tickets2Nite,
      LLC, a Nevada limited liability company, which was formed on September 24,
      2002
      pursuant to an Operating Agreement, with the other 50% owned by an independent
      third party entity. The business venture, which commenced operations during
      November 2002, sold tickets to Las Vegas shows at 50% of the original box office
      price, on the same day of the performance, from a ticket booth located on the
      Las Vegas Strip. On December 24, 2002, the Company filed a lawsuit against
      its
      joint venture partner in the Clark County, Nevada District Court (the “Court”).
      On October 1, 2003, the Court rendered its Decision and Order with respect
      to
      the parties' ownership rights and management rights and obligations with respect
      to Tickets2Nite, LLC. The Court ruled that the parties were unable to operate
      the business together pursuant to the Operating Agreement, and therefore ordered
      that Tickets2Nite, LLC be dissolved. Accordingly, the business operations of
      Tickets2Nite, LLC were terminated effective December 31, 2003.





Through
      December 31, 2003, the Company was in the ride simulator business. The Company’s
      two remaining ride facilities, which were located in Las Vegas, Nevada and
      Edmonton, Alberta, Canada, were closed on or about December 31, 2003, thus
      terminating this line of business effective as of that date. Three other ride
      facilities were previously closed between January 1998 and June 2002. See Note
      3
      for additional information with respect to discontinued operations.




48





Operating
      Liquidity:





During
      the year ended December 31, 2006, the Company’s operations experienced
      substantial and consistent improvement, reporting a 100% increase in revenues
      and a fourfold increase in operating cash flows as compared to the year ended
      December 31, 2005. Net income was $39,056 for the year ended December 31, 2006,
      as compared to a net loss of $1,022,952 for the year ended December 31, 2005.
      During 2006, the Company’s working capital improved by $2,811,168, to a working
      capital surplus of $44,547 at December 31, 2006 (equivalent to a current ratio
      of 1.02:1.00), as compared to a working capital deficiency of $2,766,621 at
      December 31, 2005. At December 31, 2006, the Company’s stockholders’ equity was
      $378,054, as compared to a stockholders’ deficiency of $2,399,569 at December
      31, 2005. During the year ended December 31, 2006, the Company’s net cash
      provided by operating activities was $1,169,032, as compared to net cash
      provided by operating activities of $289,506 for the year ended December 31,
      2005. In addition, during the year ended December 31, 2006, the Company sold
      common stock and warrants to accredited investors for net proceeds of $1,003,000
      and received $210,726 from the exercise of options and warrants. These funds
      were used to reduce debt obligations of $1,572,407 that existed at December
      31,
      2005, and to support the expansion of the operations of Tix4Tonight.
      Accordingly, based on the Company’s current cash resources and operating trends,
      the Company believes that it has sufficient working capital resources to fund
      its cash requirements for the foreseeable future.





2.  Summary
      of Significant Accounting Policies





Revenue
      Recognition, Presentation and Concentrations:





The
      Company's Las Vegas show ticketing business recognizes as revenue the
      commissions and related transaction fees earned from the sale of Las Vegas
      show
      tickets at the time the tickets are paid for and delivered to the customers.
      The
      Company's commissions are calculated based on the face value of the show tickets
      sold. The Company’s 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. Beginning in December 2006, the Company began charging credit card
      customers an additional one dollar per ticket to offset the additional costs
      of
      processing credit cards. 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.





Beginning
      August 10, 2006, the Company launched its Tix4Dinner operations from the same
      locations as the sale of show tickets. 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. The operations
      of Tix4Dinner through December 31, 2006 were not material.





In
      December 2006, the Company introduced its Tix4Stand-byGolf discount golf
      reservation business through the acquisition of Stand-By Golf Las Vegas (see
      Note 4). Stand-By Golf Las Vegas offers tee-time bookings to approximately
      30
      Las Vegas area golf courses at significant discounts. Tix4Stand-byGolf
      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. These guarantees or pre-buys
      are
      being provided by the former owners of Stand-By Golf Las Vegas in accordance
      with the terms of the purchase agreement. Tix4Stand-byGolf only pays the former
      owners for tee-times actually sold to customers, at their actual cost, and
      does
      not provide any advance payments. This arrangement can be terminated at any
      time
      by the Company without obligation. 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
      done
      by credit card. The operations of Tix4Stand-byGolf through December 31, 2006
      were not material.




49





During
      the year ended December 31, 2006, there were no showrooms or other ticket
      sources which accounted for 10% or more of revenues. During the year ended
      December 31, 2005, one hotel showroom and one other ticket source accounted
      for
      14.0% and 11.6% of revenues, respectively.




Consolidation:





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





Property
      and Equipment:





Property
      and equipment are stated at cost. Depreciation is provided 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.





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.





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.





Fair
      Value of Financial Instruments:





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





Cash
      Concentrations:





The
      Company's cash balances on deposit with banks are guaranteed up to $100,000
      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 $100,000 insurance
      limit as of December 31, 2006.




50





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 accounted for stock option and warrant grants issued and
      vesting to employees up through December 31, 2005 utilizing the intrinsic value
      method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
      for
      Stock Issued to Employees" ("APB No. 12"), with pro forma disclosures of net
      income (loss) as if the fair value method had been applied using the guidance
      SFAS No 123, "Accounting for Stock-Based Compensation". The Company adopted
      SFAS
      No. 123R effective January 1, 2006, and is using the modified prospective method
      in which compensation cost is recognized beginning with the effective date
      (a)
      based on the requirements of SFAS No. 123R for all share-based payments granted
      after the effective date and (b) based on the requirements of SFAS No. 123R
      for
      all awards granted to employees prior to the effective date of SFAS No. 123R
      that remain unvested on the effective date. 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.





As
      the
      exercise price of stock options and warrants issued to employees was not less
      than the fair market value of the Company's common stock on the date of grant,
      and in accordance with accounting for such options utilizing the intrinsic
      value
      method, there was no related compensation expense recorded in the Company's
      2005
      consolidated financial statements. The fair value of stock options and warrants
      issued to officers, directors and employees at not less than fair market value
      of the Company's common stock on the date of grant was estimated using the
      Black-Scholes option-pricing model, and the effect on the Company's results
      of
      operations was shown in a pro forma disclosure as if such stock options and
      warrants had been accounted for pursuant to SFAS No. 123. During the year ended
      December 31, 2005, the Company did not issue any such stock options and warrants
      and did not have any previously issued stock options or warrants that vested.
      According, no pro forma financial disclosure has been presented for the year
      ended December 31, 2005.




In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), a revision to
      SFAS
      No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123R superseded
      APB
      No. 25 and amended SFAS No. 95, "Statement of Cash Flows". Effective January
      1,
      2006, SFAS No. 123R requires that the Company measure the cost of employee
      services received in exchange for equity awards based on the grant date fair
      value of the awards, with the cost to be recognized as compensation expense
      in
      the Company's financial statements over the vesting period of the awards. The
      Company adopted SFAS No. 123R effective January 1, 2006. Accordingly, the
      Company recognizes compensation cost for equity-based compensation for all
      new
      or modified grants issued after December 31, 2005. In addition, commencing
      January 1, 2006, the Company recognized the unvested portion of the grant date
      fair value of awards issued prior to adoption of SFAS No. 123R based on the
      fair
      values previously calculated for disclosure purposes over the remaining vesting
      period of the outstanding stock options and warrants.





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. Diluted earnings per share gives
      effect to all dilutive potential 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
      year ended December 31, 2005 because the Company incurred a loss during such
      period and thus their effect would have been anti-dilutive. Accordingly, basic
      and diluted loss per share is the same for the year ended December 31, 2005.
      At
      December 31, 2006, potentially dilutive securities consisted of outstanding
      warrants and stock options to acquire an aggregate of 3,281,296 shares. At
      December 31, 2005, potentially dilutive securities consisted of convertible
      debentures payable and outstanding warrants and stock options to acquire an
      aggregate of 4,245,684 shares.





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.





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. The Company did not have
      items of comprehensive income (loss) for the years ended December 31, 2005
      and
      2006.




51





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. During the years ended December 31, 2006 and 2005,
      advertising costs were $425,626 and $293,296, respectively.





Impairment
      of Long-Lived Assets:





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





Management
      regularly reviews property, equipment and other long-lived assets for possible
      impairment. This review occurs quarterly, or more frequently if events or
      changes in circumstances indicate the carrying amount of the asset may not
      be
      recoverable. If there is indication of impairment, then management prepares
      an
      estimate of future cash flows (undiscounted and without interest charges)
      expected to result from the use of the asset and its eventual disposition.
      If
      these cash flows are less than the carrying amount of the asset, an impairment
      loss is recognized to write down the asset to its estimated fair value.
      Management believes that the accounting estimate related to impairment of its
      property and equipment is a “critical accounting estimate” because: (1) it
      is highly susceptible to change from period to period because it requires
      management to estimate fair value, which is based on assumptions about cash
      flows and discount rates; and (2) the impact that recognizing an impairment
      would have on the assets reported on the Company’s balance sheet, as well as net
      income, could be material. Management’s assumptions about cash flows and
      discount rates require significant judgment because actual revenues and expenses
      have fluctuated in the past and are expected to continue to do so.





Deferred
      Offering Costs:





The
      Company defers costs incurred related to the future issuance of common stock
      until such time as the stock is issued, or the stock offering is abandoned
      by
      the Company. These costs include legal fees and placement fees paid to
      underwriters or investment bankers related to the future issuance of common
      stock.  Deferred offering costs of $58,000 were included in the
      consolidated balance sheet at December 31, 2005 in connection with the Standby
      Equity Distribution Agreement entered into on December 7, 2004. As a result
      of
      the termination of the financing agreement with the investor during 2006,
      deferred offering costs of $58,000 were charged to operations as other expense
      during the year ended December 31, 2006.





Debt
      Issuance Costs:





Direct
      costs incurred for the issuance of debt are recorded as a reduction to the
      related debt, and amortized using the effective interest method over the term
      of
      the respective debt. In the event that the debt is retired prior to the maturity
      date, debt issuance costs are expensed in the period that the debt is retired.
      The amortization of debt issuance costs is included in interest expense in
      the
      consolidated statements of operations. Amortization expense related to debt
      issuance costs for the years ended December 31, 2006 and 2005 was $64,416 and
      $386,484, respectively.




52





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:





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which provides companies with an option to report selected
      financial assets and liabilities at fair value.  SFAS No. 159’s objective
      is to reduce both complexity in accounting for financial instruments and the
      volatility in earnings caused by measuring related assets and liabilities
      differently. Generally accepted accounting principles have required different
      measurement attributes for different assets and liabilities that can create
      artificial volatility in earnings. SFAS No. 159 helps to mitigate this type
      of
      accounting-induced volatility by enabling companies to report related assets
      and
      liabilities at fair value, which would likely reduce the need for companies
      to
      comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. SFAS No. 159 requires companies to provide additional
      information that will help investors and other users of financial statements
      to
      more easily understand the effect of the company’s choice to use fair value on
      its earnings. SFAS No. 159 also requires companies to display the fair value
      of
      those assets and liabilities for which the company has chosen to use fair value
      on the face of the balance sheet.  SFAS No. 159 does not eliminate
      disclosure requirements included in other accounting standards, including
      requirements for disclosures about fair value measurements included in SFAS
      No.
      157 and SFAS No. 107. SFAS No. 159 is effective as of the beginning of a
      company’s first fiscal year beginning after November 15, 2007.  Early
      adoption is permitted as of the beginning of the previous fiscal year provided
      that the company makes that choice in the first 120 days of that fiscal year
      and
      also elects to apply the provisions of SFAS No. 157. The Company is currently
      assessing the potential effect of SFAS No. 159 on its financial
      statements.





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (“SFAS
      No. 157”), which provides enhanced guidance for using fair value to measure
      assets and liabilities. SFAS No. 157 provides a common definition of fair value
      and establishes a framework to make the measurement of fair value in generally
      accepted accounting principles more consistent and comparable. SFAS No. 157
      also
      requires expanded disclosures to provide information about the extent to which
      fair value is used to measure assets and liabilities, the methods and
      assumptions used to measure fair value, and the effect of fair value measures
      on
      earnings. SFAS No. 157 is effective for financial statements issued in fiscal
      years beginning after November 15, 2007 and
      to
      interim periods within those fiscal years .
      The
      Company is currently assessing the potential effect of SFAS No. 157 on its
      financial statements.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements" (“SAB No.
      108”). SAB No. 108 was issued in order to eliminate the diversity in practice
      surrounding how public companies quantify financial statement misstatements.
      SAB
      No. 108 requires that registrants quantify errors using both a balance sheet
      (iron curtain) approach and an income statement (rollover) approach then
      evaluate whether either approach results in a misstated amount that, when all
      relevant quantitative and qualitative factors are considered, is material.
      SAB
      No. 108 is effective for fiscal years ending after November 15, 2006. The
      Company adopted SAB No. 108 during 2006. The adoption of SAB No. 108 did not
      have a material effect on the Company’s financial statements.





In
      June
      2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes--an
      interpretation of FASB Statement No. 109" (“FIN 48”), which seeks to reduce the
      diversity in practice associated with the accounting and reporting for
      uncertainty in income tax positions. FIN 48 prescribes a comprehensive model
      for
      the financial statement recognition, measurement, presentation and disclosure
      of
      uncertain tax positions taken or expected to be taken in an income tax return.
      FIN 48 presents a two-step process for evaluating a tax position. The first
      step
      is to determine whether it is more-likely-than-not that a tax position will
      be
      sustained upon examination, based on the technical merits of the position.
      The
      second step is to measure the benefit to be recorded from tax positions that
      meet the more-likely-than-not recognition threshold, by determining the largest
      amount of tax benefit that is greater than 50 percent likely of being realized
      upon ultimate settlement, and recognizing that amount in the financial
      statements. FIN 48 is effective for fiscal years beginning after December 15,
      2006. The Company is currently assessing the potential effect of FIN 48 on
      its
      financial statements.




53





Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards, if currently adopted, would have a material effect on
      the
      Company's financial statements.





3.  Discontinued
      Operations





Prior
      to
      2004, the Company operated ride facilities including facilities located in
      Las
      Vegas, Nevada (the “Las Vegas Facility”), which commenced operations in October
      1994 and was located in the Forum Shops at Caesar’s Palace Hotel and Casino (the
“Forum Shops”), a high traffic tourist mall located between Caesar’s Palace
      Hotel and Casino and the Mirage Hotel, in Las Vegas, Nevada, and a ride facility
      located in Edmonton, Alberta, Canada (the “West Edmonton Mall Facility”), which
      commenced operations in August 1995 and was located in the West Edmonton Mall,
      a
      high traffic shopping mall. The Las Vegas Facility and the West Edmonton Mall
      Facility were closed on or about December 31, 2003, thus terminating this line
      of business. Three other ride facilities were previously closed between January
      1998 and June 2002.





Beginning
      in early 2003, the Forum Shops had been engaged in construction related to
      an
      expansion program immediately adjacent to the Company’s Las Vegas ride facility,
      which the Company believed negatively impacted customer traffic and operating
      conditions at this ride facility during 2003. The Company had been in
      discussions with the management of the Forum Shops regarding this issue, as
      a
      result of which the Company suspended the payment of rent on the Las Vegas
      ride
      facility lease during mid-2003. During October 2003, the Forum Shops commenced
      litigation against the Company to collect back rent and to evict the Company’s
      ride facility and terminate the Company’s lease. As a result of the
      aforementioned factors, the Company’s business, operating results and financial
      condition were adversely affected, which contributed to the Company’s decision
      to close this ride facility on or about December 31, 2003.





At
      December 31, 2004, liabilities related to discontinued operations aggregated
      $652,529, respectively, of which $626,657 related to accrued but unpaid rent
      with respect to the Company’s lease for its former Las Vegas ride facility from
      mid-2003, when the Company suspended the payment of rent to the Forum Shops,
      through the expiration date of the lease, January 31, 2005. The Company accrued
      rent on its former Las Vegas ride facility at the full monthly amount (which
      included common area fees and utilities) through the date the ride facility
      was
      shut-down, December 31, 2003, and at the base monthly rent subsequent to that
      date.





In
      December 2005, the Company and the Forum Shops entered into a Settlement
      Agreement and Mutual Release of Claims with respect to this litigation. The
      Settlement Agreement and Mutual Release provided that the Forum Shops would
      make
      a one-time cash payment to the Company of $50,000 in complete settlement of
      this
      matter, which was received by the Company on December 28, 2005. In addition,
      the
      Settlement Agreement and Mutual Release contained standard release provisions
      with respect to the Company’s former ride facility lease. In connection with
      this settlement, the Company recorded a gain of $676,657 in 2005, of which
      $50,000 represented the cash settlement and $626,657 reflected the reduction
      in
      previously recorded accrued rent included in liabilities related to discontinued
      operations.





During
      2005, the Company liquidated the remaining assets related to its discontinued
      operations for a cash payment of $25,000, incurred legal fees with respect
      to
      the litigation on its former Las Vegas ride facility, adjusted certain accruals
      related to its discontinued operations, and settled various obligations at
      a
      reduced amount with respect to its discontinued operations, as a result of
      which
      the Company recorded $66,128 of income from discontinued operations in the
      statement of operations for the year ended December 31, 2005. The $25,000
      received by the Company in 2005 upon liquidation of the remaining ride facility
      assets was paid to the Company’s secured lender, Finova, in 2005, in exchange
      for which Finova released its security interest in such assets. The $25,000
      payment was applied to reduce the outstanding principal balance of the liability
      to Finova, with the remainder of the Finova obligation considered as a corporate
      obligation (see Note 7). During 2006, the Company recorded a gain of $5,341,
      of
      which $10,000 represented the return of a legal retainer, offset by legal fees
      totaling $4,659 with respect to the settlement of the litigation of its former
      Las Vegas ride facility.





4. Acquisition





On
      December 1, 2006, the Company acquired most of the tangible and intangible
      assets of Stand-By Golf Las Vegas, pursuant to the Agreement of Purchase and
      Sale, as amended, between the Company and the sellers. The results of Stand-By
      Golf Las Vegas from December 1, 2006 have been included in the Company’s
      consolidated financial statements for the year ended December 31, 2006, although
      such results were not material from December 1, 2006 through December 31, 2006.
      Stand-By Golf Las Vegas offers tee-time bookings to approximately 30 Las Vegas
      area golf courses at significant discounts.




54





As
      consideration for the acquisition, the Company issued shares of unregistered
      common stock to the sellers, with a value at the close of trading on the date
      of
      closing in the amount of $100,000, based upon the average closing bid price
      per
      share for the ten days prior to closing. As a result, the Company issued 26,546
      shares of common stock at a value of $3.767 per share. However, if the market
      value of the 26,546 shares of common stock on December 1, 2007 is less than
      $100,000, the Company will issue additional shares to the sellers until the
      market value of all shares issued to the sellers equals $100,000. However,
      such
      additional shares issuable will not have a value of less than $1.50 per share
      in
      determining how many additional shares would be issued in such
      circumstances.





The
      purchase price was allocated as follows, based upon the fair value of the
      acquired assets, as determined by an independent valuation
      company:


Tangible
                  assets:Prepaid
                  golf tee times
              
              $
              14,000Intangible
                  assets:Customer
                  relationships
              
              
              62,000Contract
                  commitments
              
              
              24,000Purchase
                  price
              
              $
              100,000




Due
      to
      the limited historical operations, the Company has determined that the
      acquisition of this business is not a material acquisition. Accordingly, no
      pro
      forma information has been presented.





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, 2006, all of which were acquired in the purchase of Stand-By
      Golf on December 1, 2006.


Estimated
              
              Original
              
              Accumulated
              
              Net
                  CarryingUseful
                  Lives
              
              Cost
              
              Amortization
              
              AmountCustomer
                  relationships
              
              
              3
                  years
              
              $
              62,000
              
              $
              1,722
              
              $
              60,278Contract
                  commitments
              
              
              3
                  years
              
              
              24,000
              
              
              667
              
              
              23,333Total
              
              
              
              
              $
              86,000
              
              $
              2,389
              
              $
              83,611





Total
      amortization expense related to intangible assets in 2006 and 2005 was $2,389
      and $0, respectively. Total estimated amortization expense with respect to
      intangible assets for 2007 though 2009 is as follows:




Years
                  Ending December 31,2007
              
              $
              28,6662008
              
              
              28,6662009
              
              
              26,279Total
              
              $
              83,611





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, 2006, monthly
      payments under these leases aggregated $6,490. The leases expire at various
      dates through 2010.





At
      December 31, 2006, property and equipment included assets under capital leases
      of $386,494, less accumulated amortization of $162,448.




55





Minimum
      future payments under capital lease obligations are as follows:




Years
                  Ending December 31,2007
              
              $
              74,7902008
              
              
              59,8592009
              
              
              55,2472010
              
              
              57,942Total
                  payments
              
              
              247,838Less:
                  amount representing interest
              
              
              (53,859
              )Present
                  value of minimum lease payments
              
              
              193,979Less:
                  current portion
              
              
              (53,387
              )Non-current
                  portion
              
              $
              140,592
  7.  Notes
        Payable





Notes
      payable consisted of the following at December 31, 2006 and
      2005:


2006
              
              2005Note
                  payable, Finova (as modified October 29, 2004)-
                  Discounted Amount
              
              $
              -
              
              $
              119,759-
                  Remaining Indebtedness
              
              
              -
              
              
              781,439Notes
                  payable, other
              
              
              -
              
              
              12,000-
              
              
              913,198Less
                  current portion
              
              
              -
              
              
              (913,198
              )Non-current
                  portion
              
              $
              -
              
              $
              -





Note
      Payable, Steamboat Capital VII (as assigned by Finova):





On
      December 31, 1996, the Company completed a financing agreement with Finova
      Technology Finance, Inc. (“Finova”), which was structured as a sale/leaseback
      transaction of certain equipment owned by the Company. Based on the substance
      of
      this transaction, this financing agreement was accounted for as a note payable
      for financial reporting purposes. The gross loan amount was $1,575,027, with
      interest at 16.64% per annum, repayable over a four-year period at $40,903
      per
      month, with a balloon payment of $157,503.





On
      March
      10, 1999, the financing agreement was amended to reduce the monthly payments
      and
      to extend the maturity date of the note payable. On June 25, 2001 and April
      17,
      2002, the Company entered into modification agreements and waivers of default
      with the lender, which, among other provisions, cured prior defaults, provided
      for various modifications to the terms and conditions of the loan, extended
      the
      repayment date, and provided for the issuance of warrants to the
      lender.




Effective
      October 29, 2004, the Company entered into a further agreement with the lender
      which provided for the Company to repay the lender its aggregate obligation
      at
      September 30, 2004 of $956,439 (including accrued interest payable of $240,197)
      as follows: (i) $175,000 of the $956,439 (the “Discounted Amount”), to be paid
      commencing November 1, 2004, and on the first day of each consecutive month,
      by
      payment of $3,000 to the lender, to be applied first against interest accruing
      for the prior month at the rate of 7.5% per annum, and then, to the extent
      available, as a reduction of the $175,000 principal balance; (ii) on December
      1,
      2006, the unpaid principal balance of the $175,000, plus accrued and unpaid
      interest, would be fully due and payable; and (iii) the $175,000 and any unpaid
      accrued interest could be paid by the Company at any time prior to December
      1,
      2006. The remaining indebtedness in excess of the $175,000 in the amount of
      $781,439 (the “Remaining Indebtedness”) would to continue to bear interest at
      16.64% per annum, but would be deemed fully satisfied when the Company paid
      the
      lender the entire $175,000, with interest, as specified above. In conjunction
      with this agreement, the Company also assigned to the lender as additional
      collateral its interest in and rights to a key man life insurance policy on
      the
      Company's President and Chief Executive Officer. On May 1, 2006, Finova conveyed
      all of its right, title and interest in and to the October 29, 2004 agreement
      to
      Steamboat Capital VII, LLC (“Steamboat”).





During
      2005, the Company liquidated the remaining assets related to its discontinued
      operations for a cash payment of $25,000. The $25,000 received by the Company
      in
      2005 upon liquidation of the remaining ride facility assets was paid to Finova
      in 2005, in exchange for which Finova released its security interest in such
      assets. The $25,000 payment was applied to reduce the outstanding principal
      balance of the liability to Finova, with the remainder of the Finova obligation
      considered as a corporate obligation.




56





The
      balance of the discounted amount was $119,759 at December 31, 2005. On September
      13, 2006, the Company repaid in full its obligation to the lender of $1,180,493
      (including accrued interest of $297,632) by making a final cash payment of
      $101,697. As a result, the Company recognized a non-cash gain on settlement
      of
      debt of $1,078,796 ($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.





8.  Issuance
      of Convertible Debentures and Standby Equity Distribution Agreement





Issuance
      of Convertible Debentures to Advantage Capital Development Corp.:





On
      December 7, 2004, the Company closed a financing transaction in which it sold
      5%
      secured convertible debentures with an aggregate face value of $530,000
      (collectively, the “Debentures”) to Advantage Capital Development Corp.
      (“Advantage”). The Company issued a Debenture with a face value of $250,000 upon
      closing (“Debenture No. 1”) and received net proceeds of $200,000. The Company
      issued another Debenture with a face value of $280,000 on January 6, 2005
      (“Debenture No. 2”) and received net proceeds of $239,300. The Debentures were
      originally scheduled to mature on March 7, 2006. Based on the maturity date
      of
      the Debentures, the Debentures were classified in the Company’s balance sheet as
      current liabilities at December 31, 2005.





Interest
      on the Debentures was originally due at the maturity date was paid monthly
      in
      cash (see below). The Debentures were secured by all of the assets and property
      of the Company. At the option of the holder, the Debentures were convertible
      from time to time after nine months from the date of closing into the Company’s
      common stock at a price per share of either (a) an amount equal to 120% of
      the
      volume weighted average price of the common stock as listed on the National
      Association of Securities Dealers, Inc.’s Over-The-Counter Bulletin Board, as
      quoted by Bloomberg, L.P. on the closing date or (b) an amount equal to 80%
      of
      the average volume weighted average price of the Company’s common stock, as
      quoted by Bloomberg, L.P. for the 5 trading days immediately preceding the
      conversion date. Notwithstanding the foregoing, at no time could the conversion
      price be less than $0.25 per share. The Company had an option to redeem all
      or a
      portion of the outstanding Debentures at a redemption price of 120% of the
      amount redeemed plus accrued interest.





On
      November 4, 2004, the Company issued to Advantage a warrant to purchase 100,000
      shares of common stock exercisable at $0.25 per share through November 4, 2007,
      which was determined to have a fair value, calculated pursuant to the
      Black-Scholes option-pricing model, of $36,000. On July 26, 2006 and August
      28,
      2006, Advantage exercised a portion of such warrant to purchase 80,000 shares
      of
      common stock upon payment to the Company of $20,000. On October 18, 2006,
      Advantage exercised the remaining portion of the warrant to purchase 20,000
      shares of common stock upon payment to the Company of $5,000.





As
      described below, the Company had the right to determine the form of payment
      (cash or common stock) for any liquidated damages that the Company might be
      required to pay to Advantage as a result of its not fulfilling its registration
      statement requirements with the Securities and Exchange Commission (“SEC”) with
      respect to the shares of common stock underlying the warrant.





The
      Debentures were convertible into equity based on their face amount, which
      resulted in a beneficial conversion feature with a fair value of $62,500 for
      Debenture No. 1 and $70,000 for Debenture No. 2. The aggregate value of the
      warrant of $36,000, the value of the beneficial conversion features of $62,500
      and $70,000, and the aggregate related financing costs of $90,700 paid by the
      Company to the lender were recorded as a discount to the face value of the
      Debentures, and were charged to operations as interest expense over the term
      of
      the Debentures through March 31, 2006.





On
      February 27, 2006, the Company entered into a settlement agreement (the
“Agreement”) with Advantage to modify the Securities Purchase Agreement, the
      Security Agreement, the Warrant, the Debentures, the Escrow Agreement and the
      Investor Registration Rights Agreement, each executed on November 4, 2004,
      and
      the Amendments dated December 2004, January 2005 and February 2005, to satisfy
      the outstanding amount due in Liquidated Damages pursuant to the Company's
      late
      filing and effectiveness of its Registration Statement as set forth in the
      Investor Registration Rights Agreement. For the year ended December 31, 2005,
      the Company recorded Liquidated Damages of $79,500, which were included in
      interest expense in the Company’s consolidated statement of operations.




57





In
      accordance with the Agreement, the Company agreed to honor the $25,000
      conversion notice previously submitted by Advantage, issue such conversion
      shares and reduce the balance on the Debentures accordingly. As a result, during
      February 2006, the Company issued 93,563 shares of common stock to Advantage
      with a fair market value of $25,000 based on a conversion price of $0.2672
      per
      share.





The
      Company agreed to pay interest on the Debenture's outstanding balance monthly
      and to repay one-third of the remaining loan balance plus the redemption premium
      each on April 1, 2006, June 1, 2006, and August 1, 2006 ($505,000 plus the
      20%
      redemption premium of $101,000, for a total of $606,000). On March 29, 2006,
      the
      Company paid the installment due on April 1, 2006 of $202,000, which consisted
      of a principal payment of $168,333 and a redemption premium of $33,667. On
      May
      30, 2006, the Company paid the installment due on June 1, 2006 of $202,000,
      which consisted of a principal payment of $168,333 and a redemption premium
      of
      $33,667. On July 1, 2006, the Company paid the final installment of $202,000
      due
      on August 1, 2006, which consisted of a principal payment of $168,334 and a
      redemption premium of $33,666.





The
      Company recognized the redemption premium as additional interest expense as
      the
      respective installments were paid. As a result of the payment of the final
      installment on July 1, 2006, the Company has fully complied with the terms
      of
      the Agreement.





Standby
      Equity Distribution Agreement with Cornell Capital Partners, L.P.:





On
      December 7, 2004, the Company entered into a financing transaction with Cornell
      Capital Partners, LP ("Cornell") under which Cornell, at the request of the
      Company, would periodically purchase up to $10,000,000 of the Company's common
      stock over 24 months pursuant to a Standby Equity Distribution Agreement. The
      Company had the right to decide if it would sell stock, as well as the timing
      and amount of such stock sold to Cornell, with the purchase price based upon
      the
      market price of the Company's common stock at the time of each sale, subject
      to
      the satisfaction of certain conditions, including the SEC having declared
      effective a registration statement covering the shares of common stock to be
      purchased by Cornell. The Company issued 290,000 shares of its common stock
      to
      Cornell as a commitment fee and an additional 290,000 shares of its common
      stock
      on the first year anniversary of the Standby Equity Distribution Agreement.





The
      Company entered into an agreement with Newbridge Securities Corporation
      ("Newbridge") to serve as exclusive placement agent for the sale of the shares
      of common stock. In consideration for Newbridge's services, the Company issued
      20,000 shares of its common stock to Newbridge. The shares of common stock
      issued to Cornell and Newbridge were recorded at par value of $0.08 per share
      (aggregate amount $48,000) and were included in deferred offering costs in
      the
      Company's balance sheet at December 31, 2005.




On
      July
      20, 2006, the Company terminated its $10,000,000 Standby Equity Distribution
      Agreement with Cornell. The Company never sold any shares of its common stock
      pursuant to such agreement and has no continuing financial obligations of any
      kind to Cornell. There were no early termination penalties incurred by the
      Company. As a result of the termination of the financing agreement with Cornell,
      deferred offering costs of $58,000 were charged to operations as other expense
      during the year ended December 31, 2006.





Agreement
      with Knightsbridge Holdings, LLC:





On
      January 6, 2005, pursuant to an agreement dated as of August 31, 2004 and as
      a
      result of the execution of the Standby Equity Distribution Agreement and the
      completion of the issuance of the Debentures, the Company issued 448,000 shares
      of common stock to Knightsbridge Holdings, LLC ("Knightsbridge") as a referral
      fee. The Company was obligated to file a registration statement to cover 200%
      of
      the shares so issued. The agreement with Knightsbridge was for an initial term
      through February 28, 2005, and continued thereafter on a month-to-month basis,
      but the Company did not have the right to terminate the agreement until such
      time as it had fulfilled all of its obligations under its agreement with
      Advantage. The Company also agreed to pay Knightsbridge a monthly consulting
      fee
      of $2,500. The fair market value of the shares of $201,600 ($0.45 per share)
      was
      recorded as a discount to the face value of the Debentures on January 6, 2005,
      and was charged to operations as interest expense over the remaining term of
      the
      Debentures through March 31, 2006.





Effective
      July 30, 2006, the Company terminated its agreement with Knightsbridge, as
      the
      Company had fulfilled all of its obligations under its agreement with
      Advantage.




58





Subsequent
      to July 30, 2006, the Company has no continuing financial obligations to
      Knightsbridge except that, for a period of two years thereafter, should the
      Company complete a financing transaction through a source introduced, directly
      or indirectly, by Knightsbridge, Knightsbridge will be entitled to receive
      a
      referral fee for debt financings ranging from 1.0% to 2.0%, and for equity
      financings ranging from 1.5% to 4.0%; and with respect to a merger or
      acquisition transaction, Knightsbridge will be entitled to receive 5.0% of
      any
      securities issued by the Company and a fee ranging from 3.0% to 5.0% of the
      defined transaction value.





Registration
      Rights:





The
      Company was obligated to register the shares of common stock referred to above
      (the "Registrable Securities").





The
      Company was originally obligated to prepare and file, no later than 45 days
      from
      November 4, 2004 (the "Scheduled Filing Deadline"), a registration statement
      on
      Form S-1 or SB-2 (or, if the Company was then eligible, on Form S-3) with the
      SEC under the 1933 Act (the "Initial Registration Statement") for the
      registration for the resale by all investors who purchased Debentures or the
      Company's warrant. The Company was required to use its best efforts (i) to
      have
      the Initial Registration Statement declared effective by the SEC no later than
      120 days after the date of filing (the "Scheduled Effective Deadline") and
      (ii)
      to insure that the Initial Registration Statement and any subsequent
      Registration Statement remained in effect until all of the Registrable
      Securities were sold. The Company would be in default if the Initial
      Registration Statement was not declared effective by the SEC within 120 days
      after filing thereof.





In
      the
      event the Initial Registration Statement was not filed by the Scheduled Filing
      Deadline or was not declared effective by the SEC on or before the Scheduled
      Effective Deadline, or if after the Initial Registration Statement was declared
      effective by the SEC, sales could not be made pursuant to the Initial
      Registration Statement, the Company would be required to pay as liquidated
      damages (the "Liquidated Damages") to the holder, at the Company's option,
      either a cash amount or shares of the Company's common stock within 3 business
      days, after demand therefore, equal to 2% of the liquidated value of the
      Debentures outstanding as Liquidated Damages for each 30 day period after the
      Scheduled Filing Deadline or the Scheduled Effective Deadline, as the case
      may
      be. The Debentures were repaid in full in cash on July 1, 2006. Accordingly,
      the
      Company has no further registration obligation with respect to the
      Debentures.





On
      July
      20, 2005, the Company filed a Registration Statement on Form SB-2 with the
      SEC
      to register the shares of common stock pursuant to the Standby Equity
      Distribution Agreement with Cornell, as well as the shares of common stock
      with
      respect to the Company's commitments to Advantage, Newbridge and Knightsbridge.
      The Registration Statement, as amended, was declared effective by the SEC on
      February 13, 2006. The Company is in the process of withdrawing the Registration
      Statement.








9.  Related
      Party Transactions





During
      2006, Benjamin Frankel, a director of the Company, was a principal in Frankel,
      LoPresti & Co., an accountancy corporation. During 2005, Mr. Frankel was a
      principal in the accounting firm of Frankel, Lodgen, Lacher, Golditch, Sardi
      & Howard LLP.





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.





During
      the years ended December 31, 2006 and 2005, the Company incurred fees to such
      accounting firms for accounting and tax services of $107,888 and $76,419,
      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 $8,758.





At
      December 31, 2005, the Company had recorded accrued compensation due to its
      President and Chief Executive Officer of $65,726, which was included in accounts
      payable and accrued liabilities at such date. On September 28, 2006, such
      accrued compensation amount was settled by offsetting it against the aggregate
      exercise price of a portion of an outstanding warrant to acquire 615,384 shares
      of common stock exercisable at $0.13 per share that had been previously issued
      to the President and Chief Executive Officer, resulting in the issuance of
      505,588 shares of common stock.




59




10.  Income
      Taxes





At
      December 31, 2006, the Company had Federal net operating loss carryforwards
      of
      approximately $10,000,000 expiring beginning in 2010 in varying amounts through
      2025. The Company also had California state net operating loss carryforwards
      of
      approximately $700,000 expiring beginning in 2013 in varying amounts through
      2015.





SFAS
      No.
      109 requires that a valuation allowance be established when it is more likely
      than not that all or a portion of deferred tax assets will not be realized.
      Due
      to the restrictions imposed by Internal Revenue Code Section 382 regarding
      substantial changes in ownership of companies with loss carryforwards, the
      utilization of the Company’s net operating loss carryforwards will likely be
      limited as a result of cumulative changes in stock ownership. As such, the
      Company recorded a 100% valuation allowance against its net deferred tax assets
      as of December 31, 2006 and 2005.





The
      tax
      effects of temporary differences that give rise to a significant portion of
      the
      deferred tax assets at December 31, 2006 and 2005 are presented
      below:


December
                  31,2006
              
              2005Deferred
                  tax assetsNet
                  operating loss carryforward
              
              $
              3,500,000
              
              $
              3,885,000Less:
                  Valuation allowance
              
              
              (3,500,000
              )
              
              (3,885,000
              )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, 2006 and 2005. 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 31,2006
              
              2005Tax
                  benefit at statutory rate
              
              
              (35)
              %
              
              (35)
              %Adjustments
                  to change in valuation allowance
              
              
              35
              
              
              35-
              
              
              -





11.
      Equity-Based Transactions





Year
      Ended December 31, 2006:





On
      February 27, 2006, the Company entered into a settlement agreement with
      Advantage Capital Development Corp., whereby the Company agreed to honor the
      $25,000 conversion notice previously submitted by Advantage, issue such
      conversion shares and reduce the balance on the Debentures. As a result, the
      Company issued 93,563 shares of common stock to Advantage with a fair market
      value of $25,000, based on a conversion price of $0.2672 per share.





During
      the year ended December 31, 2006, the Company issued 353,750 shares of common
      stock to outside consultants valued at prices ranging from $0.22 per share
      to
      $1.11 per share, with an aggregate market value of $388,700. The shares were
      recorded at their fair market value, which was determined based on the closing
      market price of the common stock at the date of the agreement, and which was
      charged to operations as general and administrative expense during the year
      ended December 31, 2006. Included in the issuance of these shares are agreements
      with two consultants to provide strategic advisory services to the Company
      over
      a two-year period, which provide for each consultant to receive 150,000 shares
      of common stock vesting monthly over the term of the respective agreements.
      The
      68,750 shares of common stock that had vested at December 31, 2006 were recorded
      at their approximate fair market value, as adjusted monthly, of $177,000, and
      were charged to operations as general and administrative expense during the
      year
      ended December 31, 2006.





During
      the year ended December 31, 2006, the Company issued 380,000 shares of common
      stock to directors valued at $154,800 as follows:




60




On
      March
      13, 2006, the Company issued a total of 300,000 shares of common stock to its
      two non-officer directors for services, consisting of 150,000 shares to Benjamin
      Frankel and 150,000 shares to Norman Feirstein. 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 a total of 80,000 shares of common stock
      to its two non-officer directors for services, consisting of 40,000 shares
      to
      Benjamin Frankel and 40,000 shares to Norman Feirstein. The shares of common
      stock were recorded at their fair market value on the date of issuance of
      $88,800 ($1.11 per share) and were charged to operations as general and
      administrative expense during the year ended December 31, 2006.





During
      the year ended December 31, 2006, the Company issued 758,472 shares of common
      stock to officers and employees valued at $577,364 as follows:





On
      March
      13, 2006, the Company issued 50,000 shares of common stock to Kimberly 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 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. 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.





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. 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 Mitch
      Francis, its President and Chief Executive 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 $222,000 ($1.11 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 100,000 shares of common stock to
      Kimberly 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 $111,000 ($1.11 per share) and were charged to operations as
      general and administrative expense during the year ended December 31, 2006.





During
      the year ended December 31, 2006, the Company issued a total of 230,000 shares
      of common stock to its non-officer employees for services rendered. The shares
      of common stock were recorded at their fair market value on the date of issuance
      of $194,100 (based upon prices ranging from $0.22 per share to $3.39 per share)
      and were charged to operations as general and administrative expense during
      the
      year ended December 31, 2006.





On
      February 23, 2006, the Company issued 230,000 shares of common stock to Erick
      Richardson, a partner in the law firm of Richardson & Patel LLC, under the
      Consultant Stock Plan, with an approximate fair market value of $74,143 ($0.32
      per share) as payment for accrued legal fees.





During
      the year ended December 31, 2006, the Company raised additional equity capital
      through the sale of units in a private placement to accredited investors at
      $0.25 per unit, with each unit consisting of one share of restricted common
      stock and a warrant to purchase one-half share of common stock, exercisable
      at
      $0.50 per share for a period of 24 months. The shares and warrants have limited
      piggyback registration rights. The Company sold 4,080,000 units and received
      gross cash proceeds of $1,020,000, as a result of which the Company issued
      4,080,000 shares of common stock and 2,040,000 warrants. The Company paid a
      cash
      finder’s fee of $17,000 to Gang Consulting Ltd. with respect to such equity
      offering, which was recorded as a reduction to additional paid-in capital during
      the year ended December 31, 2006, as a result of which net cash proceeds from
      the private placement through December 31, 2006 were $1,003,000.




61




During
      the year ended December 31, 2006, the Company issued 1,351,353 shares of its
      common stock upon the exercise of 60,000 options and warrants for 1,324,388
      shares of common stock for total proceeds of $210,727.





On
      September 28, 2006, Mitch Francis, the Company’s President and Chief Executive
      Officer, exercised a portion of a previously issued warrant to acquire 615,384
      shares of common stock at an exercise price of $0.13 per share. Pursuant to
      such
      warrant, Mr. Francis acquired 505,588 shares of common stock by offsetting
      accrued but unpaid compensation of $65,726.





On
      November 1, 2006, Erick Richardson, a partner in the law firm of Richardson
      & Patel LLC, exercised (on a cashless basis) a previously issued warrant for
      118,800 shares of common stock with an exercise price of $0.50 per share.
      Accordingly, the aggregate exercise price of $59,400 was paid through the
      surrender and cancellation of 19,800 shares with a fair market value on the
      date
      of exercise of $3.00 per share, which resulted in the issuance of 99,000 shares
      of common stock.





During
      the year, the Company issued 100,000 shares of common stock to Advantage upon
      the exercise of previously issued warrants at an exercise price of $0.25 per
      share and received cash proceeds of $25,000.





During
      the year, the Company issued 600,000 shares of common stock to other individuals
      upon the exercise of previously issued warrants at an exercise prices ranging
      from $0.10 per share to $0.50 per share and received cash proceeds of
      $120,000.





During
      the year, a former employee exercised (on a cashless basis) a previously issued
      stock option for 60,000 shares of common stock with an exercise price of $0.15
      per share. Accordingly, the aggregate exercise price of $9,000 was paid through
      the surrender and cancellation of 13,235 shares with a fair market value on
      the
      date of exercise of $0.68 per share, which resulted in the issuance of 46,765
      shares of common stock.





During
      the year ended December 31, 2006, the Company issued options and warrants to
      employees that resulted in aggregate compensation of $169,833 as
      follows:





On
      April
      19, 2006, the Company extended the expiration date of a stock option to purchase
      150,000 shares of common stock held by Kimberly Simon, its Chief Operating
      Officer. The expiration date was extended from June 5, 2006 to June 5, 2009.
      The
      fair value of such stock option modification 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.





On
      January 18, 2006, the Company entered into an agreement with Kimberly 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 during the remainder of the year ended December 31,
      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, options
      to acquire 100,000 shares of common stock will be granted to Mr. Stein on each
      of November 6, 2007, November 6, 2008 and November 6, 2009, respectively, with
      per share exercise prices of $2.02, $3.00 and $4.00, 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, $50,333 was charged to operations
      as general and administrative expense during the year ended December 31, 2006.





Year
      Ended December 31, 2005:





Arrangement
      with Financial Advisory Firm:




62




Effective
      as of January 3, 2002, the Company entered into a two-year arrangement with
      a
      financial advisory firm, Gang Consulting Ltd., which provided for the payment
      of
      monthly compensation, either in the form of a payment of $10,000 or the issuance
      of 25,000 shares of common stock. This arrangement was subsequently extended
      through December 31, 2004.





Effective
      January 3, 2005, the Company and Gang Consulting Ltd. entered into a new
      two-year consulting arrangement effective as of January 1, 2005 that provided
      for: (1) the termination of the consulting fee payable to Gang Consulting Ltd.
      of $10,000 per month; (2) the cancellation of common stock purchase warrants
      previously issued to Gang Consulting Ltd. to purchase an aggregate of 800,000
      shares of common stock in equal installments of 100,000 shares at $0.50, $1.00,
      $1.50, $2.00, $2.50, $3.00, $3.50 and $4.00 per share, respectively; and (3)
      the
      issuance of common stock purchase warrants to purchase 400,000 shares of common
      stock, which were fully vested at issuance and exercisable through May 1, 2008
      as follows: 100,000 shares at $0.25 per share; 100,000 shares at $0.50 per
      share; 50,000 shares at $0.75 per share; 50,000 shares at $1.00 per share;
      25,000 shares at $1.25 per share; 25,000 shares at $1.50 per share; 25,000
      shares at $1.75 per share; and 25,000 shares at $2.00 per share. The aggregate
      fair value of such warrants of $172,000, as calculated pursuant to the
      Black-Scholes option-pricing model, was charged to operations as general and
      administrative expense during 2005, as the warrants were fully vested and
      non-forfeitable at the date of issuance.





On
      January 31, 2005, the Company issued 104,845 shares of common stock under the
      2003 Consultant Stock Plan and 136,539 shares of common stock pursuant to an
      exemption from registration to Erick Richardson, a partner in the law firm
      of
      Richardson & Patel LLP, for legal services. The shares issued pursuant to an
      exemption from registration have piggyback registration rights. The aggregate
      fair market value of the 241,384 shares on the date of issuance was $101,382
      ($0.42 per share), all of which was applied to reduce the Company’s accounts
      payable balance to such law firm. The Company also issued an option to purchase
      18,800 shares of common stock under the 2003 Consultant Stock Plan, exercisable
      for a period of five years at $0.50 per share, which had a fair value calculated
      pursuant to the Black-Scholes option pricing model of $7,896. The Company also
      agreed to reduce the exercise price of a warrant to purchase 50,000 shares
      of
      common stock previously issued to Erick Richardson under the 2003 Consultant
      Stock Plan on June 16, 2004, from $1.00 per share to $0.50 per share, which
      had
      a fair value calculated pursuant to the Black-Scholes option-pricing model
      of
      $20,500. The aggregate fair value of such warrants of $28,396 was charged to
      operations as general and administrative expense during the year ended December
      31, 2005.





Effective
      February 28, 2005, the Company terminated a consulting agreement with a
      financial public relations firm and agreed to issue 36,000 shares of its common
      stock as payment of the accrued but unpaid fee to such firm of $18,000. The
      shares of common stock have piggyback registration rights. The effective price
      of $0.50 per share was in excess of the fair market value of the Company’s
      common stock on February 28, 2005.





On
      January 6, 2005, the Company issued 448,000 shares of common stock to
      Knightsbridge Holdings, LLC as a loan referral fee with a value of $201,600
      (see
      Note 8).





On
      May
      24, 2005, the Company entered into a one-year consulting services agreement
      with
      CollegeStock LLC for public relations and communications services, which
      provided for a cash payment of $7,500 and the issuance of a warrant to purchase
      20,000 shares of the Company's common stock exercisable at $0.24 per share
      through May 24, 2008. The fair value of such warrant of $4,600, as calculated
      pursuant to the Black-Scholes option-pricing model, was charged to operations
      as
      general and administrative expense during the year ended December 31, 2005,
      as
      the warrant was fully vested and non-forfeitable at the date of
      issuance.





On
      June
      30, 2005, the Company entered into a three-month consulting agreement with
      Wall
      Streets Inside Reporter, Inc. for marketing and strategic planning services,
      which provided for a monthly cash payment of $5,000 and the issuance of 140,000
      shares of common stock. The shares of common stock had piggyback registration
      rights. The aggregate fair market value of such shares of $35,000 was initially
      recorded as deferred compensation in the stockholders’ equity (deficiency)
      section of the Company’s consolidated balance sheet. The parties had agreed that
      the services to be rendered pursuant to the consulting agreement would be
      provided beginning when the Company’s registration statement had been declared
      effective by the SEC. Accordingly, the $35,000 was charged to operations over
      the three-month period commencing February 13, 2006, the date that the Company’s
      registration statement was declared effective by the SEC.





During
      December 2005, the Company issued 290,000 shares of common stock to Cornell
      Capital Partners valued at $23,200 (see Note 8).





On
      October 10, 2003, the Company entered into a two-year consulting agreement
      with
      a consultant. The Company issued a warrant to the consultant to purchase 400,000
      shares of common stock, exercisable at $0.10 per share through October 10,
      2006,
      in monthly installments of 16,667 shares. The fair value of such warrant of
      $40,000, as calculated pursuant to the Black-Scholes option-pricing model,
      was
      initially recorded as deferred compensation in the stockholder's equity
      (deficiency) section of the Company’s consolidated balance sheet. This amount
      was charged to operations over the two-year period beginning October 1, 2003
      and
      ending September 30, 2005. Accordingly, for the year ended December 31, 2005,
      $20,000 was charged to operations with respect to such warrant.




63




12.
      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 plan program
      only if they are natural persons providing bona fide consulting services to
      the
      Company or its subsidiaries, with the exception of any services they may render
      in connection with the offer and sale of the Company’s securities in a
      capital-raising transaction, or which may directly or indirectly promote or
      maintain a market for the Company’s securities.





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





On
      March
      3, 2004, the Company filed with the Securities and Exchange Commission a
      registration statement on Form S-8 for the purpose of registering 1,600,000
      common shares issuable under the Consultant Stock Plan under the Securities
      Act
      of 1933. During the year ended December 31, 2004, the Company issued 411,112
      shares of common stock and an option to purchase 100,000 shares of common stock
      under the Consultant Stock Plan (exercisable on a cashless basis). During the
      year ended December 31, 2005, the Company issued 104,845 shares of common stock
      and an option to purchase 18,800 shares of shares of common stock (exercisable
      on a cashless basis) under the Consultant Stock Plan. During the year ended
      December 31, 2006, the Company issued 368,800 shares of common stock under
      the
      Consultant Stock Plan, of which 118,800 shares were issued upon the exercise
      of
      the options issued in 2004 and 2005, the payment for which was by the surrender
      and cancellation of 19,800 shares of common stock. As of December 31, 2006,
      715,243 common shares 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, 2006, the Company issued options to purchase 300,000
      shares of common stock under the 2004 Option Plan. As of December 31, 2006,
      options to purchase 660,000 shares of common stock were reserved for issuance
      under the 2004 Option Plan. The Company did not issue any options under the
      2004
      Option Plan in 2004 or 2005.




64




2004
        Directors Option Plan:


On
      March
      3, 2005, the Company adopted the Directors Stock Option Plan (the “2004
      Directors Option Plan”) for non-employee directors of the Company. The 2004
      Directors Option Plan was approved pursuant to a Joint Written Consent of the
      Board of Directors and Majority Stockholders of the Company dated September
      22,
      2004. The 2004 Directors Option Plan authorized the granting of non-qualified
      stock options to purchase an aggregate of not more than 240,000 shares of the
      Company’s common stock. The 2004 Directors Option Plan provided that options
      granted would be exercisable for a period not to exceed ten years and would
      vest
      on a cumulative basis as to one-third of the total number of shares covered
      thereby at any time after one year from the date the option was granted and
      an
      additional one-third of such total number of shares at any time after the end
      of
      each consecutive one-year period thereafter until the option had become
      exercisable as to all of such total number of shares. The exercise price for
      non-qualified stock options would be the fair value of the Company’s common
      stock at the date of the grant. No option may be exercised during the first
      six
      months of its term except in the case of death. The Company has not issued
      any
      options under the 2004 Directors Option Plan as of December 31, 2006.





A
      summary
      of the combined stock option activity during the years ended December 31, 2005
      and 2006 for the three plans discussed above is as follows:





WeightedNumber
              
              averageof
              
              exerciseoptions
              
              priceBalance
                  outstanding, January 1, 2005
              
              
              549,000
              
              $
              0.35Options
                  granted
              
              
              -
              
              
              -Options
                  exercised
              
              
              -
              
              
              -Options
                  expired
              
              
              (337,500
              )
              
              0.48Balance
                  outstanding, December 31, 2005
              
              
              211,500
              
              
              0.15Options
                  granted
              
              
              300,000
              
              
              3.01Options
                  exercised
              
              
              (60,000
              )
              
              0.15Options
                  expired
              
              
              -
              
              
              -Balance
                  outstanding, December 31, 2006
              
              
              451,500
              
              $
              2.05Balance
                  exercisable, December 31, 2006
              
              
              151,500
              
              $
              0.15




The
      intrinsic value of outstanding stock options at December 31, 2006 was
      $1,070,545, as compared to $25,200 at December 31, 2005. Information relating
      to
      outstanding stock options at December 31, 2006, summarized by exercise price,
      is
      as follows:




Outstanding
                
                ExercisableExercise
                    Price Per
                    Share
                
                Shares
                
                Life (Years)
                
                Exercise
Price
                
                Shares
                
                Weighted
                    Average Exercise
                    Price$4.00
                
                
                100,000
                
                
                7.8
                
                $
                4.00
                
                
                -
                
                $
                -$3.00
                
                
                100,000
                
                
                6.8
                
                $
                3.00
                
                
                -
                
                
                -$2.02
                
                
                100,000
                
                
                5.8
                
                $
                2.02
                
                
                -
                
                
                -$0.39
                
                
                1,500
                
                
                1.5
                
                $
                0.39
                
                
                1,500
                
                
                0.39$0.15
                
                
                150,000
                
                
                2.4
                
                $
                0.15
                
                
                150,000
                
                
                0.15$0.15
                    - $4.00
                
                
                451,500
                
                
                5.3
                
                $
                2.05
                
                
                151,500
                
                $
                0.15




For
      the
      year ended December 31, 2006, the value of options vesting during the period
      was
      $ 169,833. As of December 31, 2006, the Company has outstanding unvested options
      with future compensation costs of $855,667, which will be recorded as
      compensation cost as the options vest over their remaining average life of
      5.3
      years.




65




The
      assumptions used in calculating the fair value of the options granted during
      2006, using the Black-Scholes option-pricing model were as follows: risk free
      interest rate - 4%; expected life - 6 years; estimated volatility - 112.5%;
      dividends - $0.





A
      summary
      of warrant activity for the years ended December 31, 2005 and 2006 is as
      follows:





Number
                
                Weighted
                    averageof
                
                exercisewarrants
                
                priceBalance
                    outstanding, January 1, 2005
                
                
                5,331,884
                
                $
                0.68Warrants
                    granted
                
                
                488,800
                
                
                0.75Warrants
                    exercised
                
                
                -
                
                
                -Warrants
                    expired
                
                
                (3,806,500
                )
                
                0.87Balance
                    outstanding, December 31, 2005
                
                
                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
                
                $
                0.52
 
 The
          intrinsic value of outstanding warrants at December 31, 2006 was $11,036,125,
          as
          compared to $159,754 at December 31, 2005. Information relating to outstanding
          warrants at December 31, 2006, summarized by exercise price, is as follows:




Outstanding
              
              
              
              ExercisableExercise
                    PricePer
                    Share
              
              Shares
              
              Life
                  (Years)
              
              Exercise
                  Price
              
              Shares
              
              Weighted
                    Average
                  Exercise
                    Price$2.00
              
              
              25,000
              
              
              1.3
              
              $
              2.00
              
              
              25,000
              
              $
              2.00$1.75
              
              
              25,000
              
              
              1.3
              
              $
              1.75
              
              
              25,000
              
              $
              1.75$1.50
              
              
              25,000
              
              
              1.3
              
              $
              1.50
              
              
              25,000
              
              $
              1.50$1.25
              
              
              25,000
              
              
              1.3
              
              $
              1.25
              
              
              25,000
              
              $
              1.25$1.00
              
              
              75,000
              
              
              2.4
              
              $
              1.00
              
              
              75,000
              
              $
              1.00$0.75
              
              
              50,000
              
              
              1.3
              
              $
              0.75
              
              
              50,000
              
              $
              0.75$0.50
              
              
              2,125,000
              
              
              1.5
              
              $
              0.50
              
              
              2,125,000
              
              $
              0.50$0.42
              
              
              50,000
              
              
              0.8
              
              $
              0.42
              
              
              50,000
              
              $
              0.42$0.41
              
              
              50,000
              
              
              1.4
              
              $
              0.41
              
              
              50,000
              
              $
              0.41$0.36
              
              
              100,000
              
              
              5.2
              
              $
              0.36
              
              
              100,000
              
              $
              0.36$0.25
              
              
              150,000
              
              
              1.1
              
              $
              0.25
              
              
              150,000
              
              $
              0.25$0.24
              
              
              20,000
              
              
              1.4
              
              $
              0.24
              
              
              20,000
              
              $
              0.24$0.13
              
              
              109,796
              
              
              0.1
              
              $
              0.13
              
              
              109,796
              
              $
              0.13$0.13
                  - $2.00
              
              
              2,829,796
              
              
              1.5
              
              $
              0.52
              
              
              2,829,796
              
              $
              0.52


13.  Commitments





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 four ticket facilities and its administrative offices
      in Las Vegas, Nevada, for various periods ranging from one year to five years.




66




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 amount charged to expense and the
      rent paid as deferred rent on the Company’s balance sheet.





The
      aggregate minimum future rental payments under non-cancelable operating leases
      for facilities in operation at December 31, 2006, 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 31,2007
              
              $
              948,0222008
              
              
              915,4982009
              
              
              836,3312010
              
              
              430,8482011
              
              
              43,856$
              3,174,555




Employment
      Agreement with President and Chief Executive Officer:





Effective
      March 1, 2006, the Company entered in a three-year employment agreement with
      Mitch Francis, its President and Chief Executive Officer, to serve as Chairman
      of the Board of Directors, President and Chief Executive Officer. The agreement
      provides for a base annual salary of $275,000, annual increases of 8%, standard
      benefits, and annual bonuses equal to 6% of the Company’s annual earnings in
      excess of $500,000 before taxes, depreciation and amortization, but after
      interest expense. Mr. Francis did not earn any bonus in 2006. The agreement
      also
      provided that the Company issue to Mr. Francis 500,000 shares of restricted
      common stock within 30 days of March 1, 2006. The shares of common stock were
      issued on March 13, 2006. The shares of common stock are subject to a
      prohibition on being traded, encumbered or otherwise transferred, which
      restriction shall lapse in equal annual installments on March 13, 2007, 2008
      and
      2009. Upon the occurrence of a change in control of the Company, as defined,
      Mr.
      Francis will be entitled to, among other compensation, an amount equal to five
      times his annual base salary immediately prior to the change in control event.





Severance
      Agreement:




Effective
      December 12, 2002, the Company entered into a severance agreement with its
      Chief
      Operating Officer, which provides for compensation varying from one month to
      six
      months of her salary and benefits at the time of termination, depending on
      circumstances.





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 $9,614 and $3,876 for the years ended December 31, 2006
      and
      2005, respectively.





Bank
      Letters of Credit:





During
      the year ended December 31, 2006, at the request of two vendors, the Company
      opened two bank letters of credit for $5,000 and $6,930, respectively. The
      Company used two certificates of deposit in the amounts of $5,000 and $6,930,
      respectively, to secure the letters of credit. The vendors were the
      beneficiaries of the letters of credit. As of December 31, 2006, there were
      no
      amounts outstanding under the letters of credit.





Letter
      of
      Intent:





On
      December 12, 2006, the Company announced that it had signed a non-binding Letter
      Agreement outlining the terms and conditions and general process to acquire
      Exhibit Merchandising LLC, whose principal members are Joe Marsh and Lee
      Marshall, both of whom are current shareholders of the Company. In addition,
      Mr.
      Marsh has been providing consulting services to the Company since July
      2006.




67




The
      Letter Agreement provides that the Company will pay the greater of six-times
      calendar 2008 EBITDA or $4,000,000, resulting in an initial purchase price
      of
      $24,000,000, payable $10,000,000 in cash and $14,000,000 in shares of restricted
      common stock at a fixed price of $4.00 per share. Additional consideration
      based
      on calendar 2008 EBITDA will be paid in the form of shares of the Company's
      restricted common stock valued at the thirty-day closing bid price prior to
      December 31, 2008, but in no event less than $4.00 per share. Based on the
      current and expected future operations of Exhibit Merchandising LLC, such
      additional consideration could be substantial. Management of the Company will
      retain voting rights with respect to shares of common stock issued to acquire
      Exhibit Merchandising LLC.





The
      Letter Agreement provides for a thirty-day exclusive negotiation period and
      a
      subsequent ninety-day due diligence period for the Company to conduct a
      financial and operational review of Exhibit Merchandising LLC, to draft
      definitive transaction documents, and to obtain financing for the transaction.
      The Company intends to raise the funds required to close this transaction
      through a private placement of its equity securities.





The
      Letter Agreement is subject to, among other conditions, satisfactory completion
      of due diligence, obtaining $10,000,000 of new financing, negotiation,
      preparation and execution of definitive transaction and financing documents,
      preparation of consolidated financial statements, compliance with state and
      federal securities laws and regulations, and receipt of the requisite corporate
      approvals. The transaction is expected to close during the second quarter of
      2007. However, as a result of the foregoing uncertainties, there can be no
      assurances that the transaction will be completed. Furthermore, even if the
      transaction is completed, there can be no assurances that the future operations
      of the acquired business will be successful.




14.
      Subsequent Events:





Acquisition:





On
      March
      14, 2007, the Company entered into an asset purchase agreement with John’s
      Tickets, LLC, an Ohio limited liability company dba Any Event Tickets (“Any
      Event”). Any Event is a national event ticket broker located in Las Vegas,
      Nevada and Cleveland, Ohio, and has been in the business of selling tickets
      for
      sporting events, concerts, tours and theatre since 1987. Pursuant to the
      agreement, the Company agreed to purchase 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 “Inventory”), the phone number 1-800-ANYEVENT, and all
      existing contracts by and between Any Event and other existing box offices,
      theatres, and brokers, pursuant to which Any Event receives its Inventory (the
      “Asset Purchase Agreement”). In consideration for the assets purchased under the
      Asset Purchase Agreement, the Company has paid $300,000 in cash and issued
      137,500 shares of restricted common stock to Any Event. Additionally, the
      Company will pay to Any Event for the actual costs of the Inventory after
      completion of conducting an audit of the Inventory, post-closing.




In
      connection with the Asset Purchase Agreement, the Company has also entered
      into
      an employment agreement with John Pirample, sole member of Any Event, pursuant
      to which Mr. Pirample will provide his exclusive services to the Company as
      its
      Premium Ticket Manager. Mr. Pirample will receive a base salary of $80,000
      and
      10% of EBITDA relating to the sale of tickets that are sold above face value,
      provided that such incentive compensation does not exceed $200,000 on a
      cumulative basis. The Company also engaged Timothy Bordonaro, former President
      of Any Event, as a consultant for a period of 90 days. Mr. Bordonaro will
      receive $150,000
      and 25,000 shares of the Company’s restricted common stock for his consulting
      services to help the Company integrate and transition the business and assets
      purchased from Any Event.




Registration
      Statement on Form S-8:





On
      February 9, 2007, the Company filed with the Securities and Exchange Commission
      a registration statement on Form S-8 for the purpose of registering 1,000,000
      shares of common stock, of which 430,000 shares relate to the proposed resale
      of
      previously issued shares of restricted common stock. The remaining 570,000
      shares have been allocated to establish the 2007 Equity Incentive Plan, the
      purpose of which is to provide incentives to attract, retain and motivate
      eligible persons whose present and potential contributions are important to
      the
      success of the Company by offering them an opportunity to participate in the
      Company’s future performance through awards of options, the right to purchase
      common stock and stock bonuses.





Consulting
      Agreement:





On
      January 26, 2007, the Company entered into a consulting agreement, beginning
      February 1, 2007, with a consultant to provide financial advisory services
      to
      the Company. The consultant will receive 130,000 shares of restricted common
      stock during the two year consulting agreement, 10,000 shares of common stock
      upon signing of the agreement and 20,000 shares of common at the end of each
      quarter commencing April 1, 2007 and ending January 1, 2009, subject to
      forfeiture of the unissued or unvested shares of common stock should the
      agreement be terminated earlier.




68




The
      agreement with the consultant also provides, that with respect to any debt
      financing transaction completed, the consultant will receive shares of
      unregistered common stock equal to 3% of the debt financing raised, and that
      with regard to any equity financing completed, the consultant will receive
      shares of unregistered common stock equal to 5% of the equity financing raised.
      The value of the shares will be based upon the value of the financing divided
      by
      the price of the Company’s common stock during a 90 day period commencing 180
      days prior to the closing date and ending 90 days prior to the closing date
      or
      public announcement of the transaction, whichever is earlier.





Equity-Based
      Transactions Subsequent to December 31, 2006:





During
      the two months ended February 28, 2007, the Company issued 346,791 shares of
      its
      common stock upon the exercise of warrants for 349,796 shares of common stock
      for total proceeds of $130,273.





On
      February 2, 2007, Mitch Francis, the Company’s President and Chief Executive
      Officer, exercised (on a cashless basis) the remainder of a previously issued
      warrant to acquire 109,796 shares of common stock at an exercise price of $0.13
      per share. Accordingly, the aggregate exercise price of $14,273 was paid through
      the surrender and cancellation of 3,005 shares of common stock with a fair
      market value on the date of exercise of $4.75 per share, which resulted in
      the
      issuance of 106,791 shares of common stock.





During
      the two months ended February 28, 2007, the Company issued 240,000 shares of
      common stock to other individuals upon the exercise of previously issued
      warrants at exercise prices ranging from $0.42 per share to $0.50 per share
      and
      received cash proceeds of $116,000.





During
      the two months ended February 28, 2007, the Company recognized vesting of 25,000
      shares of common stock based on agreements with two consultants, to provide
      strategic advisory services to the Company over a two-year period which provide
      for each consultant to receive 150,000 shares of common stock vesting monthly
      over the term of the respective agreements. The 25,000 shares of common stock
      that had vested during the two months ended February 28, 2007, were recorded
      at
      their approximate fair market value, as adjusted monthly, of $115,000, and
      will
      be charged to operations as general and administrative expense during the three
      months ending March 31, 2007.





During
      the two months ended February 28, 2007, the Company recognized vesting of 36,130
      shares of common stock to officers valued at $7,948 as follows:





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), which is being charged to operations
      as
      general and administrative expense over the three-year period commencing March
      1, 2006. During the two months ended February 28, 2007, 27,792 shares of common
      stock had vested and were recorded at their approximate fair market value of
      $6,114, and will be charged to operations as general and administrative expense
      during the three months ending March 31, 2007.





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), which is being charged to operations
      as general and administrative expense over the three-year period commencing
      March 13, 2006. During the two months ended February 28, 2007, 8,338 shares
      of
      common stock had vested and were recorded at their approximate fair market
      value
      of $1,834, and will be charged to operations as general and administrative
      expense during the three months ending March 31, 2007.




69


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 Delawareon
                  August 31, 1993 (1)3.3
              
              Certificate
                  of Amendment to Certificate of Incorporation of Cinema Ride, Inc.,
                  as
                  filed with the State of Delawareon
                  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, 2006
                  (10)10.3
              
              Warrant
                  issued to Finova Capital Corporation to purchase 25,000 shares
                  of common
                  stock at $0.50 per share (2)10.4
              
              Warrant
                  issued to Finova Capital Corporation to purchase 25,000 shares
                  of common
                  stock at $1.00 per share (2)10.5
              
              Warrant
                  Holder Rights Agreement between the Company and Finova Capital
                  Corporation
                  (2)10.8
              
              2003
                  Consultant Stock Option 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)10.24
              
              Knightsbridge
                  Holdings Ltd. Consulting Agreement (8)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 effectiveNovember
                  30, 2006 (12)10.31
              
              Amendment
                  to Agreement of Purchase and Sale between Tix Corporation and William
                  Bartfield and David Batesdated
                  January 11, 2007 (12)10.32
              
              Asset
                  Purchase Agreement between Tix Corporation and John’s Tickets, LLC, dba
                  Any Event Tickets, effectiveMarch
                  14, 2007 (13)10.33
              
              Employment
                  Agreement between Tix Corporation and John Pirample effective March
                  14,
                  2007 (13) (C)10.34
              
              Consulting
                  Agreement between Tix Corporation and Timothy Bordonaro effective
                  March
                  14, 2007 (13) (C)14.
              
              Code
                  of Ethics (4)21
              
              Subsidiaries
                  of the Registrant (14)23
              
              Consent
                  of Weinberg & Company, P.A. (14)31
              
              Officer’s
                  Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002
                  (14)32
              
              Officer’s
                  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
                  of 2002
                  (14)








(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.


70




(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)
            Previously
                filed as an Exhibit to the Company’s Registration Statement on Form SB-2,
                as filed with the Securities and Exchange Commission on November
                10, 2005,
                and incorporated herein by
                reference.




(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)
            Previously
                filed as an Exhibit to the Company’s Current Report on Form 8-K filed
                September 11, 2006, and incorporated herein by
                reference.




(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)
            Filed
                herewith.




(C)
            Indicates
                compensatory plan, agreement or
                arrangement.




71