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TIX CORP 8-K 2008

Documents found in this filing:

  1. 8-K/A
  2. 8-K/A


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A
Amendment No. 1

Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of Earliest Event Reported): August 14, 2007
 
Tix Corporation
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
0-24592
(Commission
File Number)
95-4417467
(I.R.S. Employer
Identification Number)
 
 
12001 Ventura Place, Suite 340
Studio City, California 91604
(Address of Principal Executive Offices, including Zip Code)
 
 
(818) 761-1002
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report.)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 



 
This Amendment No. 1 to the Current Report on Form 8-K/A dated August 14, 2007 of Tix Corporation, a Delaware corporation (the “Company”), relates to the acquisition of the business of Exhibit Merchandising, LLC effective August 8, 2007.

As permitted, the Current Report on Form 8-K reporting the transaction omitted the financial statements of Exhibit Merchandising, LLC and the pro forma information required by Items 9.01(a) and (b), respectively. This Amendment No. 1 to the Current Report on Form 8-K/A is being filed to provide the financial statements of Exhibit Merchandising, LLC and the pro forma information required by Items 9.01(a) and (b), respectively, and should be read in conjunction with the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 14, 2007 in which a more complete description of the transaction described herein appears.
 
Item 9.01. Financial Statements and Exhibits
 
 
(a)
Financial statements of businesses acquired
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
 
Financial Statements of Exhibit Merchandising, LLC --
 
 
 
Balance Sheet -- For the Year Ended December 31, 2006 and the Six Months Ended June 30, 2007
 
 
 
Statement of Operations -- For the years ended December 31, 2006 and 2005 and the Six Months Ended June 30, 2007 and 2006 (unaudited)
 
 
 
Statement of Member’s Equity (Deficit) -- For the Years Ended December 31, 2005
and 2006 and the Six Months Ended June 30, 2007 (unaudited)
 
 
 
Statement of Cash Flows -- For the Years Ended December 31, 2006 and 2005
and the Six Months Ended June 30, 2007 and 2006 (unaudited)
 
 
 
Notes to Financial Statements -- For the Years Ending December 31, 2007 and 2006 and the Six Months Ended June 30, 2007 and 2006 (unaudited)
 
 
(b)
Pro forma financial information
 
 
 
Summary of Unaudited Pro Forma Condensed Consolidated Financial Information
 
 
 
Pro Forma Condensed Consolidated Balance Sheet (Unaudited) - June 30, 2007

 
 
Pro Forma Condensed Consolidated Statement of Operations (Unaudited) - Six Months Ended June 30 2007
 
 
 
Pro Forma Condensed Consolidated Statement of Operations (Unaudited) -- Year Ended December 31, 2006
 
 
(c)
Shell company transactions
 
 
 
Not applicable
 
 
(d)
Exhibits
 
 
 
None
 
2

 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
Date: January 10, 2008
Tix Corporation
(Registrant)
 
 
 
 
 
 
By:  
/s/ Matthew Natalizio
 

Matthew Natalizio
 
Chief Financial Officer
 

3


REPORT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM

 
To the Member
Exhibit Merchandising, LLC


We have audited the accompanying balance sheet of Exhibit Merchandising, LLC (the "Company") as of December 31, 2006 and 2005, and the related statements of operations, member's equity (deficit) and cash flows for the years ended December 31, 2006 and 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Exhibit Merchandising, LLC as of December 31, 2006, and the results of its operations and its cash flows for the years ended December 31, 2006 and 2005, in conformity with accounting principles generally accepted in the United States of America.
 
As more fully described in Note 9, the Company’s business was acquired by Tix Corporation effective August 8, 2007.


WEINBERG & COMPANY, P.A.
Los Angeles, California
November 30, 2007
 
 

 

 
Exhibit Merchandising, LLC
 
Balance Sheets
 
 
 
 June 30
 
 December 31
 
 
 
 2007
 
 2006
 
   
(Unaudited)
     
 Assets
         
           
Current assets:          
Cash and cash equivalents
  $ 712,000   $ 447,000  
Accounts Receivable
    17,000     5,000  
Due from related parties
    333,000     1,015,000  
Inventory
    3,529,000     3,999,000  
Prepaid and other current assets
    140,000     193,000  
Total current assets
    4,731,000     5,659,000  
Property and equipment, net of accumulated depreciation of $211,000 and $151,000
    551,000     370,000  
Other assets
    14,000     14,000  
Total assets
  $ 5,296,000   $ 6,043,000  
Liabilities and Members’ Equity (Deficit)
         
Current liabilities:
         
Accounts payable
  $ 980,000   $ 1,230,000  
Accrued expenses
    148,000     148,000  
Accrued consulting fee and termination expense-current portion
    4,000,000     685,000  
Line of Credit
    350,000     1,950,000  
Total current liabilities
    5,478,000     4,013,000  
Accrued consulting fee and termination expense- long term portion
    1,000,000     -  
Total liabilities
    6,478,000     4,013,000  
Commitments and contingencies
             
               
Members’ equity (deficit)
    (1,182,000 )  
2,030,000
 
Total liabilities and members’ equity (deficit)
  $ 5,296,000   $ 6,043,000  
 
See accompanying notes to the financial statements.
 


Exhibit Merchandising, LLC
 
Statements of Operations
Years Ended December 31, 2006 and 2005
and the Six Months Ended June 30, 2007 and 2006 (unaudited)
 
   
June 30,
 
December 31
 
 
 
 2007
 
 2006
 
 2006
 
 2005
 
   
 (unaudited)  
           
               
Net sales
 
$
5,625,000
 
$
6,482,000
 
$
12,214,000
 
$
9,298,000
 
Cost of Goods Sold
   
(1,552,000
)
 
(2,140,000
)
 
(4,126,000
)
 
(3,532,000
)
Royalty expense
   
((1,612,000
)
 
((1,932,000
)
 
(3,610,000
)
 
(2,796,000
)
Gross profit
   
2,461,000
   
2,410,000
   
4,478,000
   
2,970,000
 
Selling, general, administrative and operating expenses
   
(1,307,000
)
 
(1,315,000
)
 
(2,769,000
)
 
(1,751,000
)
Consulting agreement termination expense
   
(4,315,000
)
 
-
   
-
   
-
 
Depreciation and amortization
   
(60,000
)
 
(47,000
)
 
(98,000
)
 
(53,000
)
Income (Loss) from operations
   
(3,221,000
)
 
1,048,000
   
1,611,000
   
1,166,000
 
Interest expense
   
(66,000
)
 
(51,000
)
 
(124,000
)
 
(27,000
)
Other income
   
75,000
   
39,000
   
87,000
   
7,000
 
Net income (loss)
 
$
(3,212,000
)
$
1,036,000
 
$
1,574,000
 
$
1,146,000
 
 
 

See accompanying notes to the financial statements.
 


Exhibit Merchandising, LLC
Members' Equity (Deficit)
Years Ended December 31, 2006 and 2005
and the Six Months Ended June 30, 2007 (unaudited)
 
 
 
   
Members'
 
Retained Earnings
 
Members'
 
 
 
Capital
 
(Accumulated Deficit)
 
Ending balance
 
               
December 31, 2004
 
$
-
 
$
(10,000
)
$
(10,000
)
                     
Distribution to Members
 
(520,000
)
 
-
   
(520,000
)
                     
Net Income
   
-
   
1,146,000
   
1,146,000
 
                     
December 31, 2005
 
(520,000
)  
1,136,000
   
616,000
 
                     
Distribution to Members
   
(160,000
)
 
-
   
(160,000
)
                     
Net Income
   
-
   
1,574,000
   
1,574,000
 
                     
December 31, 2006
   
(680,000
)
 
2,710,000
   
2,030,000
 
                     
Net Loss
   
-
   
(3,212,000
)
 
(3,212,000
)
                     
June 30, 2007 (unaudited)
 
$
(680,000
)
$
(502,000
)
$
(1,182,000
)
 
See accompanying notes to the financial statements.
 

 
Exhibit Merchandising, LLC
 
Condensed Statements of Cash Flows
Years Ended December 31, 2006 and 2005
and the Six Months Ended June 30, 2007 and 2006 (unaudited)
 
             
 
 
June 30,
 
  December 31
 
 
 
2007
 
2006 
 
2006
 
2005
 
 
 
(unaudited) 
 
 
 
 
 
Operating activities:
 
 
 
 
 
 
 
 
 
Net income(loss)
 
$
(3,212,000
)
$
1,036,000
 
$
1,574,000
 
$
1,146,000
 
Adjustment to reconcile net income ( loss) to net cash provided by (used in) operating activities:
                     
Depreciation and amortization
   
60,000
   
47,000
   
98,000
   
53,000
 
Change in reserve for inventory
   
(24,000
)
 
   
170,000
   
 
Changes in assets and liabilities:
                   
Accounts Receivable
   
(12,000
)
 
(153,000
)
 
   
(5,000
)
Due from related parties
   
682,000
   
(271,000
)
 
(784,000
)
 
(231,000
)
Inventory
   
494,000
 
 
(173,000
)
 
(1,479,000
)
 
(2,690,000
 
Prepaid and other current assets
   
53,000
   
(279,000
)
 
(14,000
)
 
(179,000
)
Other assets
   
   
(1,000
)
 
(4,000
)
 
(5,000
)
Accounts payable
   
(250,000
)
 
(960,000
)
 
(464,000
)
 
1,644,000
 
Termination of contract
   
4,315,000
   
   
   
 
Accrued expenses and other long-term liabilities
   
 
 
253,000
   
590,000
   
244,000
 
Net cash provided by (used in) operating activities
   
2,106,000
   
(501,000
)
 
(313,000
)
 
(23,000
)
Investing activities:
                     
Purchases of property and equipment
   
(241,000
)
 
(23,000
)
 
(65,000
)
 
(396,000
)
Net cash used in investing activities
   
(241,000
)
 
(23,000
)
 
(65,000
)
 
(396,000
)
Financing activities:
                     
Borrowings on line of credit
   
(1,600,000
)
 
35,000
   
185,000
   
1,715,000
 
Change in owner’s capital accounts
         
(160,000
)
 
(160,000
)
 
(520,000
)
Net cash provided by(used in) financing activities
   
(1,600,000
)
 
(125,000
)
 
25,000
   
1,195,000
 
Net increase (decrease) in cash and cash equivalents
   
265,000
   
(649,000
)
 
(353,000
)
 
776,000
 
Cash and cash equivalents:
                     
Beginning of period
   
447,000
   
800,000
   
800,000
   
24,000
 
End of period
 
$
712,000
  $
151,000
 
$
447,000
 
$
800,000
 
 
                     
Supplemental disclosures of cash flow information:
                     
Cash paid for interest
   
63,000
   
49,000
 
$
124,000
 
$
21,000
 
Cash paid for income taxes
   
   
 
$
 
$
 
 
See accompanying notes to the financial statements.
 


Exhibit Merchandising, LLC 
Notes to the Financial Statements
Years ending December 31, 2006 and 2005
and the six months ending June 30, 2007 and 2006 (unaudited)
 
1. Basis of Presentation
 
Exhibit Merchandising LLC, an Ohio limited liability company (“EM” or the Company), was established in 2004 to provide first-class retail specialty stores for traveling museum exhibitions and traveling theatrical productions. Exhibit Merchandising provides a complete turn-key retail store with commercially-available and extensive custom-branded product for sale in addition to professional management that complements the exhibition or theatrical production it represents. To date revenues from the management of retail outlets associated with the sale of merchandise related to traveling exhibits, have been primarily derived from “Tutankhamun and The Golden Age of the Pharaohs.”
 
Exhibit Merchandising offers exhibit and theatrical producers the opportunity for additional revenue streams without adding the retail expertise required to manage the operations, thereby leveraging the use of EM’s expertise and knowledge in the specialized retail world. The Producers receive a simple royalty payment each period with no other expense.
 
EM develops custom pieces that fit the specific exhibition branding in consultation with each event producer. EM strives to run an efficient operation, focused on providing superior customer service and quality products on the front end, and efficient management on the backend.
 
The interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at June 30, 2007, the results of operations for the six months ended June 30, 2007 and 2006, and the cash flows for the six months ended June 30, 2007 and 2006.
 
2. Significant Accounting Policies
 
Use of Estimates: We are required to make certain estimates and assumptions in order to prepare consolidated financial statements in conformity with generally accepted accounting principles. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Our most significant estimates relate to the valuation of inventory balances and the assessment of expected cash flows used in evaluating long-lived assets for impairment. The estimation process required to prepare our consolidated financial statements requires assumptions to be made about future events and conditions, and as such, is inherently subjective and uncertain. Our actual results could differ materially from those estimates.
 
Cash and Cash Equivalents: We consider all highly liquid investments with maturities of less than three months when purchased to be cash equivalents. We are potentially exposed to a concentration of credit risk when cash deposits in banks or other financial institutions are in excess of federally insured limits.
 
Inventory: Inventories consist of goods available for sale and are valued at the lower of average cost or market, on a weighted average cost basis. Throughout the year, we review our inventory levels in order to identify slow-moving merchandise and use permanent markdowns to sell through selected merchandise. We record a charge to cost of goods sold for permanent markdowns. Inherent in the our accounting for inventory are certain significant management judgments and estimates including initial merchandise markup, future sales, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost. To the extent our estimated markdowns at period-end prove to be insufficient, additional future markdowns will need to be recorded. Physical inventories are conducted during the year to determine actual inventory on hand and shrinkage.
 
Revenue Recognition: Revenue is recognized at our retail store locations at the point at which the customer receives and pays for the merchandise at the register. For online sales, revenue is recognized at the time of shipment, which we refer to as the date of purchase by the customer. Sales are recognized net of merchandise returns, which are reserved for based on historical experience. Shipping and handling revenues from our websites are included as a component of net sales.

Accounts receivable and credit policies: Although the Company generally does not have any accounts receivable associated with sales transactions to individual customers, as payment is collected at the time of sale. The Company extends credit based on the financial condition of its customers and collateral is generally not required. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts as a charge to operations during the period in which such determination is made based upon its assessment of the collectability of individual accounts. Balances that remain outstanding after reasonable collection efforts are written off. The amount charged to operations to reflect uncollectible accounts receivable bad debt expense has not been material to the financial statements periods presented.


Property and Equipment Property: Property and equipment are stated at cost and depreciated using the straight-line method based on the estimated useful lives (generally three to five years for equipment and furniture) of the related assets. Whenever there is a triggering event that might suggest an impairment, management evaluates the realizability of the recorded long-lived assets to determine whether their carrying values have been impaired. The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the non-discounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Any impairment loss is measured by comparing the fair value of the asset to its carrying amount.

Income taxes: As a limited liability company, the Company is treated as a partnership for federal and state income tax purposes. As such, the taxable income of the Company is included in the tax returns of the member for federal and state income tax purposes. Accordingly, no provision for federal and state income taxes is included in the financial statements. The Company's policy is to make periodic distributions in amounts sufficient to reimburse the member for tax liabilities resulting from the proportionate share of taxable income of the Company.
 
Recent Accounting Pronouncements
 
In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measures.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements that are already required or permitted by other accounting standards, except for measurements of share-based payments and measurements that are similar to, but not intended to be, fair value and does not change existing guidance as to whether or not an instrument is carried at fair value. The provisions of SFAS No. 157 are effective for the specified fair value measures for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact, if any, that the adoption of SFAS No. 157 will have on the Company’s financial statements.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value.  SFAS No. 159 applies to all entities that elect the fair value option.  The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact, if any, that the adoption of SFAS No. 159 will have on the Company’s financial statements.
 
3. Line of Credit
 
In December 2004, the Company entered into an unsecured revolving line of credit in the amount of $1.0 million. This facility was increased to $2.0 million in November 2005. Borrowings under the credit agreement bore interest rates of 7.25% and 8.25% for the years ended December 31, 2005 and 2006 respectively. During the first six months of 2007, borrowings under the line of credit bore an interest rate of 8.25%. The outstanding balance under this line of credit was $350,000 and $1,950,000 as of June 30, 2007 and December 31, 2006, respectively.
 
For the periods ended June 30, 2007 and 2006 and the years ended December 31, 2005 and 2006 the Company incurred interest expense of $63,000, $51,000, $27,000 and $124,000 respectively.
 
4.  Commitments and Contingencies
 
Leases
 
The Company leases its warehouse facility under a non-cancellable operating lease from an unrelated third party as well as certain equipment and software lease obligations with third party vendors. The Company’s warehouse lease is a triple net lease, which is a lease the lessee pays rent, as well as all taxes, insurance, and maintenance expenses that arise from the use of the property. The Company paid $58,000, $24,000, $71,000 and $90,000 in rent expense during the periods ended June 30, 2007 and 2006 and the years ended December 31, 2005, and 2006, respectively.
 
The Company, also leases on a month-to-month basis, additional storage space and housing at the locations of its exhibits, typically through the duration of the exhibit. The Company paid $25,000, $28,000 and $62,000 in rent expense during the period ended June 30, 2007 and the years ended December 31, 2005, and 2006, respectively.
 
Legal
 
The Company from time to time is involved in various legal proceedings incidental to the conduct of its business, including claims by customers, employees or former employees.  While litigation is subject to uncertainties and the outcome of any litigated matter is not predictable, the Company is not aware of any legal proceedings pending or threatened against it that it expects to have a material adverse effect on its financial condition, results of operations or cash flows.
 
Royalty Agreement
 
Through its agreement with Arts and Exhibits International (“AEI”) (note 5) the Company pays a 30% royalty on adjusted gross sales (sales less returns). AEI from the royalty funds received is responsible for all payments to the sponsors or producers of the event.
 
     
Payments due by Fiscal Years Ending December 31,
     
   
Total
 
2007
 
2008
 
2009
 
2010
 
2011
 
2012
 
 
 
 
 
(6 months)
 
 
 
 
 
 
 
 
 
   
                               
Contract termination cost (See note 8)
  1,000,000   -   1,000,000   -   -   -   -  
                               
Operating lease obligations
   
442,984
   
134,977
   
208,228
   
95,934
   
2,097
   
1,748
   
-
 
                                             
Total contractual cash obligations
 
$
1,442,984
 
$
134,977
 
$
1,208,228
 
$
95,934
 
$
2,097
 
$
1,748
 
$
-
 
 
5. Related party transactions
 
The Company, Magic Entertainment, LLC (“Magic”) and Arts and Exhibitions International (“AEI”) were under common ownership until December 2006, when AEI was sold to Anschutz Entertainment Group (“AEG”). AEG is a leading sports and entertainment presenter and a wholly owned subsidiary Anchutz Company. The Company and Magic remained under common ownership until the Company’s sale to Tix Corporation in August 2007. During the period the companies were under common ownership, services and other resources were often shared among the companies, with the party providing the services or resources being reimbursed for its incurred expense. The Company paid reimbursed expenses to AEI and Magic of $32,000, $230,000, $118,000 and $400,000 for the periods ended June 30, 2007 and 2006 and the years ended December 31, 2005, and 2006, respectively.
 

 
The Company purchased inventory items from AEI related to museum exhibits, “Tutankhamen and the Golden Age of Pharaohs,” “Real Pirates the Untold Story of the Whydah” and “Jesus Christ Superstar.” While the Company did not purchase any inventory for the period ending June 30, 2007, the Company purchased, $680,000 and $412,000 the years ended December 31, 2005, and 2006, respectively. In addition, the Company paid a royalty to AEI which approximated 30% of net sales of merchandise sold related to these exhibitions. The Company paid $1.5 million, and $1.9 million, and $2.8 million and $3.5 million in royalties during the periods ended June 30, 2007 and 2006 and the years ended December 31, 2005, and 2006, respectively.
 
The Company recognized rental income from its sub-lease of warehouse space to AEI of $40,000, for the periods ended June 30, 2007 and 2006, and $7,000 and $79,000 for the years ended December 31, 2005 and 2006, respectively.
 
Also during this period, the Company advanced funds to its affiliates. These unsecured non-interest bearing advances are expected to be repaid within twelve months and, as such, are classified as current assets. At June 30, 2007, the Company was due $333,000 from Magic and at December 31, 2006 the Company was due $1.0 million from affiliates, $765,000 from Magic and $250,000 from AEI.
 
7. Member’s Capital
 
The Company is a limited liability company. Therefore, no member, manager, agent or employee of the Company is personally liable for the debts, obligations or liabilities of the Company, whether arising in contract, tort or otherwise, or for the acts or omissions of any other member, director, manager, agent or employee of the Company, unless the individual has signed a specific personal guarantee.

The Company has two members that are allocated all of the profits and losses. Profits are allocated first to the member in proportion to and to the extent by which (i) the cumulative losses allocated to the member for all prior fiscal years exceeds (ii) the cumulative profits allocated to the member for all prior fiscal years; and, thereafter, to the member. Except as otherwise provided below, losses are allocated first to the member in proportion to and to the extent by which (i) the cumulative profits allocated to the member for all prior fiscal years exceeds (ii) the cumulative losses allocated to the member for all prior fiscal years; and, thereafter, to the member. Losses allocated cannot exceed the maximum amount of losses that can be so allocated without causing such member to have an, or to increase an existing, adjusted capital account deficit at the end of any fiscal year.
 
8. Museum Consulting Services, Inc. Contract and Termination
 
On April 29, 2005 EM engaged Museum Consulting Services, Inc. (MCS), to provide consulting, product design, product selection, and marketing services related to an exhibit called "Tutankhamun and the Golden Age of the Pharoahs" (the Exhibit) in five cities located in the United States and Europe.  The term of the agreement was for three years beginning June 2005.  Additionally, MCS was responsible for coordinating the international activities with the Arab Republic of Egypt, Ministry of Culture and related entities.  As compensation for its obligations MCS received 25% of the gross profit earned from the sale of merchandise related to the Exhibit. During the years ended December 31, 2006 and 2005 and during the six months ended June 30, 2007 and 2006 operating expenses include $4.3 million, $270,000, $540,000 and $315,000, respectively, of service fees under this agreement.
 
Further, on August 8, 2007, the Company entered into an agreement to terminate its consulting services agreement with Museum Consulting Services, Inc. (MCS). In consideration for the termination of the consulting agreement, and as full satisfaction of any and all amounts past due the Company agreed to pay MCS $6.0 million, of which $4.0 million was due at termination. Of the remaining $2.0 million due to MCS from the members of EM, $1.0 million was converted into a note payable due one year from the date of the acquisition and $1.0 million is conditionally due, if a new exhibition of Egyptian artifacts is obtained. The amount due under the consulting agreement was $685,000 at December 31, 2006. During the six months ended June 30, 2007, the Company recorded an additional expense of $4.3 million to reflect the amount agreed due under the termination agreement, and has reflected the $5.0 million amount due under the termination agreement as of June 30, 2007.
 

9. Subsequent Events
 
Effective August 8, 2007, Tix Corporation (“Tix”), a publicly-traded company, entered into an Asset Purchase Agreement (the “Agreement”) with Exhibit Merchandising, LLC, an Ohio limited liability company. Pursuant to the Agreement, Tix purchased all tangible and intangible assets of EM and assumed certain liabilities primarily related to EM’s purchase of inventory. The purchase price for the assets was $11,450,000 in cash and 5,000,000 restricted shares of the Company’s Common Stock with a market value of $35.0 million. The Company also assumed certain liabilities related to inventory.

In connection with the Asset Purchase Agreement, Tix has entered into an employment agreement with Curtis Bechdel (the “Employment Agreement”) pursuant to which he will serve as Vice President, Operations, of EM Nevada for a three year term, subject to extension. Mr. Bechdel will receive an initial base salary of $160,000 per year, an annual bonus to be determined and stock options to purchase 25,000 shares as of the closing date of the acquisition and on each anniversary thereof. Tix also entered into a two-year Consulting Agreement with Lee Marshall (the “Consulting Agreement”) pursuant to which Mr. Marshall agreed to act as a member of the Company’s transition, assimilation and operating team relating to the assets of EM and the operation of the business relating to the Purchased Assets. For his services, the Company agreed to pay Mr. Marshall 100,000 restricted shares of the Company’s Common Stock.
 
As a condition to the Closing, Tix entered into a Voting Agreement with Joseph Marsh pursuant to which, for a period of four years, Mr. Marsh granted the Company, through its board of directors, the right to vote all of his shares, including the shares acquired pursuant to the Asset Purchase Agreement. As of the date hereof, such shares total 3,524,627
 

(b)  Pro forma financial information
 
Tix Corporation and Subsidiaries
Summary of Unaudited Pro Forma Condensed Consolidated Financial Information
 
Effective August 8, 2007, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Tix Corporation. Effective August 8, 2007, Tix Corporation (“Tix”), a publicly-traded company, entered into an Asset Purchase Agreement (the “Agreement”) with Exhibit Merchandising, LLC, an Ohio limited liability company. Pursuant to the Agreement, Tix purchased all tangible and intangible assets of EM and assumed certain liabilities primarily related to EM’s purchase of inventory. The purchase price for the assets was $11,450,000 in cash and 5,000,000 restricted shares of the Company’s Common Stock with a market value of $35.0 million. The Company also assumed $34,000 of liabilities related to inventory.

In connection with the Asset Purchase Agreement, the Company has entered into an employment agreement with Curtis Bechdel (the “Employment Agreement”) pursuant to which he will serve as Vice President, Operations, of EM Nevada for a three year term, subject to extension. Mr. Bechdel will receive an initial base salary of $160,000 per year, an annual bonus to be determined and stock options to purchase 25,000 shares as of the closing date of the acquisition and on each anniversary thereof. Tix also entered into a two-year Consulting Agreement with Lee Marshall (the “Consulting Agreement”) pursuant to which Mr. Marshall agreed to act as a member of the Company’s transition, assimilation and operating team relating to the assets of EM and the operation of the business relating to the Purchased Assets. For his services, the Company agreed to pay Mr. Marshall 100,000 restricted shares of the Company’s Common Stock.

The purchase price has been allocated to specific identifiable tangible and intangible assets in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” and supported by a report prepared by Palisades Capital Group, LLC, an independent valuation firm, as follows:


 
Tangible
     
Inventory (net of A/P)
 
$
3,450,000
 
Prepaids/Deposits
   
316,000
 
         
Leasehold Improvements
   
52,000
 
Furniture and Fixtures
   
228,000
 
Machinery and Equipment
   
73,000
 
Computer Equipment
   
188,000
 
   
$
541,000
 
Intangible
       
Contract Based
 
$
2,601,000
 
Marketing Related
   
12,203,000
 
Technology Based
   
55,000
 
Goodwill
   
27,284,000
 
   
$
42,143,000
 
Purchase price
 
$
46,450,000
 

The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2006 and the six months ended June 30, 2007 presented herein gives effect to the acquisition as if the transaction had occurred at the beginning of such period and includes certain adjustments that are directly attributable to the transaction, which are expected to have a continuing impact on the Company, and are factually supportable, as summarized in the accompanying notes. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007, give affect to Tix acquisition of Exhibit Merchandising, LLC as if it had occurred on June 30, 2007, and  includes certain adjustments that are directly attributable to the transaction and are factually supportable, as summarized in the accompanying notes.

The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only. The unaudited pro forma condensed consolidated financial information presented herein is based on management’s estimate of the effects of the acquisition, had such transaction occurred on the dates indicated herein, based on currently available information and certain assumptions and estimates that the Company believes are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the results of operations or financial position that actually would have been achieved had the acquisition been consummated on the dates indicated, or that may be achieved in the future.
 
The unaudited pro forma condensed consolidated financial information presented herein should be read in conjunction with the financial statements of Exhibit Merchandising contained elsewhere in this Current Report on Form 8-K, /A, as filed with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, as filed with the Securities and Exchange Commission on March 30, 2007, and the Company’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2007, as filed with the Securities and Exchange Commission on August 20, 2007.
 

 
Tix Corporation and Subsidiaries
Pro Forma Condensed Statement of Operations (unaudited)
Year Ended December 31, 2006
 
 
 
Tix
 
  
             
   
Corporation
 
Exhibit
             
   
and
 
Merchandising,
 
Pro Forma
   
Pro Forma
 
   
Subsidiaries
 
LLC
 
Adjustments
   
Total
 
                    
(unaudited)
 
Revenues
 
$
5,388,000
 
$
12,214,000
 
$
-
   
$
17,602,000
 
                             
Cost of revenues
   
2,173,000
   
7,736,000
   
-
     
9,909,000
 
                             
Gross profit
   
3,215,000
   
4,478,000
   
-
     
7,693,000
 
                             
                             
Operating expenses:
                           
Selling and marketing expenses
   
631,000
   
267,000
   
2,419,000
 
(a) 
 
3,317,000
 
General and administrative expenses
   
3,306,000
   
2,600,000
   
-
     
5,906,000
 
Total costs and expenses
   
3,937,000
   
2,867,000
   
2,419,000
     
9,223,000
 
                             
Loss from operations
   
(722,000
)
 
1,611,000
   
(2,419,000
)
 
 
(1,530,000
)
                             
Other income (expense):
                           
Other Income
   
55,000
   
87,000
   
-
     
142,000
 
Gain on settlement with lender
   
1,079,000
    -     -      
1,079,000
 
Write-off deferred offering costs
   
(58,000
)
 
-
   
-
     
(58,000
)
Interest income
   
16,000
   
-
   
-
     
16,000
 
Interest expense
   
(331,000
)
 
(124,000
)
           
(455,000
)
     
761,000
   
(37,000
)
 
-
     
724,000
 
                             
Net income (loss)
 
$
39,000
   
1,574,000
   
(2,419,000
)
 
 
(806,000
)
                             
                             
Net loss per share -
                           
Basic and diluted
 
$
-                
$
(0.03
)
                             
                             
Weighted average common shares outstanding -
                           
Basic and diluted
   
14,886,334
               
23,660,350
 
 

 
Tix Corporation and Subsidiaries
Pro Forma Condensed Statement of Operations (unaudited)
Six Months Ended June 30, 2007
 
   
 Tix
                  
   
 Corporation
                  
   
 and
 
Exhibit
 
Pro Forma
   
Pro Forma
 
   
 Subsidiaries
 
Merchandising
 
Adjustments
   
Total
 
                     
(unaudited)
 
Revenues
 
$
6,459,000
 
$
5,625,000
    -    
$
12,084,000
 
                             
Cost of revenues
   
3,624,000
   
3,164,000
    -      
6,788,000
 
                             
Gross profit
   
2,835,000
   
2,461,000
    -      
5,296,000
 
                             
Operating expenses:
                           
Selling and marketing expenses
   
561,000
   
151,000
   
1,460,000
  (b  
2,172,000
 
General and administrative expenses
   
8,710,000
   
1,216,000
    -      
9,926,000
 
Termination of contract
   
250,000
   
4,315,000
   
(4,315,000
)
(c)
 
250,000
 
Total costs and expenses
   
9,521,000
   
5,682,000
   
(2,855,000
)
 
 
12,348,000
 
                             
Loss from operations
   
(6,686,000
)
 
(3,221,000
)
 
2,855,000
     
(7,052,000
)
                             
Other income (expense):
                           
Other Income
   
12,000
   
75,000
    -      
87,000
 
Interest income
   
4,000
    -     -      
4,000
 
Interest expense
   
(46,000
)
 
(66,000
)
  -      
(112,000
)
     
(30,000
)
 
9,000
   
-
     
(21,000
)
                             
Net income (loss)
 
$
(6,716,000
)
$
(3,212,000
)
 
2,855,000
     
(7,073,000
)
                             
Net loss per share -
                           
Basic and diluted
 
$
(0.45
)
             
$
(0.30
)
Weighted average common shares outstanding -
                           
Basic and diluted
   
14,886,334
                 
23,660,350
 
 

 
Tix Corporation and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
June 30, 2007
 
 
 
Tix
Corporation
and
 Subsidiaries
   
Exhibit
Merchandising
LLC
   
Pro Forma
Adjustments
     
Pro Forma
Total
 
                 
(unaudited)
 
 ASSETS
                   
                     
Current assets:
 
  
 
 
 
 
   
 
 
Cash
 
$
3,595,000
   
712,000
   
(712,000
)
(d)
 
7,193,000
 
                  (11,441,000 )
(e)
     
 
               
15,039,000
 
(e)
     
Accounts receivable
   
372,000
   
17,000
   
(17,000
)
(d)
 
372,000
 
Ticket inventory
   
684,000
                 
684,000
 
Due from related party
   
15,000
   
333,000
   
(333,000
)
(d)
 
15,000
 
Merchandise Inventory
   
-
   
3,529,000
   
(79,000
)
(d)
 
3,450,000
 
Prepaid expenses and other current assets
   
521,000
   
140,000
   
153,000
  (d)  
814,000
 
 
                           
Total current assets
   
5,187,000
   
4,731,000
   
2,610,000
 
 
 
12,528,000
 
 
                           
Total property and equipment, net
   
619,000
   
551,000
   
(10,000
)
(d)
 
1,160,000
 
 
                           
Other assets:
                           
Intangible assets
                           
Customer relationships, net
   
547,000
    -            
547,000
 
Marketing related, net
   
68,000
    -    
12,203,000
  (f)  
12,271,000
 
Technology based, net
   
90,000
    -    
55,000
  (f)  
145,000
 
Goodwill
    -     -    
27,284,000
  (f)  
27,284,000
 
Contract commitments, net
   
119,000
    -    
2,601,000
  (f)  
2,720,000
 
Deposits
   
125,000
   
14,000
              
139,000
 
Total other assets
   
949,000
   
14,000
   
42,143,000
     
43,106,000
 
 
                           
 
 
$
6,755,000
   
5,296,000
   
44,743,000
     
56,794,000
 
                     
LIABILITIES AND STOCKHOLDERS' EQUITY
                   
                     
Current liabilities:
 
  
                 
Accounts payable and accrued liabilities
 
$
1,297,000
 
$
1,128,000
 
$
(1,128,000
)
(d)
 
1,297,000
 
Current portion of capital lease obligations
   
47,000
   
-
   
-
     
47,000
 
Accrued termination expense - current portion
   
-
   
4,000,000
   
(4,000,000
)
(c)
 
-
 
Line of Credit
    -    
350,000
   
(350,000
)
(d)
 
-
 
Note payable due Stockholder
   
2,000,000
   
-
   
-
     
2,000,000
 
Deferred ticket revenues
   
391,000
   
-
   
-
     
391,000
 
Total current liabilities
   
3,735,000
   
5,478,000
   
(5,478,000
)
 
 
3,735,000
 
 
                           
Non-current liabilities:
                           
Capital lease obligations, less current portion
   
120,000
   
-
   
-
     
120,000
 
Deferred rent
   
181,000
   
-
   
-
     
181,000
 
Accrued termination expese - long term
    -    
1,000,000
   
(1,000,000
)
(c)
 
-
 
Total non-current liabilities
   
301,000
   
1,000,000
   
(1,000,000
)
 
 
301,000
 
 
                           
Stockholders' equity:
                           
Preferred stock, $0.01 par value
                           
Common stock, $0.08 par value
   
1,576,000
   
-
   
400,000
  (g)  
2,276,000
 
                  300,000   (e)      
Common stock subscriptions
   
2,745,000
   
-
   
(2,745,000
(e)  
-
 
Additional paid-in capital
   
20,489,000
   
-
   
34,600,000
  (g)  
72,573,000
 
                 
17,484,000
  (e)      
Return of owners' equity
    -    
(160,000
)
 
160,000
  (d)  
-
 
Accumulated deficit
   
(22,091,000
)
 
(1,022,000
)
 
1,022,000
  (d)  
(22,091,000
)
Total stockholders' equity
   
2,719,000
   
(1,182,000
)
 
51,221,000
     
52,758,000
 
 
                           
 
 
$
6,755,000
 
$
5,296,000
 
$
44,743,000
   
$
56,794,000
 
 

 
Notes to Pro Forma Condensed Financial Statements:
 
(a)
To record the amortization of intangible assets as if the asset purchase occurred on January 1, 2006.

(b)
To record the amortization of intangible assets for the six months ended June 30, 2007, as if the intangible assets had been acquired at January 1, 2007.

(c)
To eliminate the liability and expense related to Museum Consulting Services, Inc. as Tix Corporation did not assume the Museum Consulting Services, Inc. contract or the existing contract related liabilities.

(d)
To adjust the asset or liability to the opening account balance. Tix Corporation did not purchase or assume any of the assets or liabilities of EM, except those related to inventory and prepaid assets that existed on EM's books at closing.

(e)
To record the proceeds of the August 2007 private placement of Tix Corporation common stock and the payment of $11.4 million to the members of EM. The $11.4 million paid to the members included $3.4 million for inventory net of certain inventory related liabilities.

(f)
To record the intangible assets that were identified at the time of Tix Corporation's purcahse of EM's assets. The values assigned to the intangibles were based upon an independent asset appraisal. The amount of the purchase price in excess of the values of tangible and intangible assets was recroded as goodwill.

(g)
The amounts represent the value of the five million shares of Tix Corporation common stock, valued at $7.00 per share, that was issued to the members of EM as part of Tix Corporation's purchase of the assets of EM.
 
 

 
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