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Item 1. Financial Statements

2012-05-15 compared with 2011-11-21 · 1126 added, 568 removed, 202 unchanged (89% of the section changed)

FINANCIAL STATEMENTS

HOLLYWOOD MEDIA CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS:

10 unchanged sentences

DEFERRED COMPENSATION, less current portion

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES AND SHAREHOLDERS’

CURRENT LIABILITIES:

4 unchanged sentences

Current portion of capital lease obligations

Current portion of notes payable

Total current liabilities

3 unchanged sentences

DERIVATIVE LIABILITIES

COMMITMENTS AND CONTINGENCES

SHAREHOLDERS’ EQUITY:

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’

Preferred stock, $.01 par value, 1,000,000 shares authorized;

none outstanding

Common stock, $.01 par value, 100,000,000 shares authorized;

23,179,068 and 31,179,066 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively

Common stock, $.01 par value, 100,000,000 shares authorized;23,179,066 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively

Additional paid-in capital

Accumulated deficit

Total Hollywood Media Corp.

shareholders’ equity

Non-controlling interest

Total shareholders’ equity

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets.

HOLLYWOOD MEDIA CORP.

(279,685,151 )

(279,272,612 )

Total shareholders’

TOTAL LIABILITIES AND SHAREHOLDERS’

The accompanying notes to condensed consolidated

financial statements

are an integral part of these condensed

consolidated balance sheets.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Nine Months Ended September 30,

Three Months Ended September 30,

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

OPERATING COSTS AND EXPENSES

6 unchanged sentences

EARNINGS OF UNCONSOLIDATED INVESTEES

Equity in earnings of unconsolidated investees

Impairment loss

Total equity in earnings (losses) of unconsolidated investees

OTHER INCOME (EXPENSE)

Interest, net

Loss from continuing operations

Gain on sale of discontinued operations, net of income taxes

Income from discontinued operations

NET LOSS (INCOME) ATTRIBUTABLE TO NON-CONTROLLING INTEREST

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST

Net loss attributable to Hollywood Media Corp.

$ (1,610,928 )

Basic and diluted income (loss) per common share

2 unchanged sentences

Total basic and diluted net loss per share

Weighted average common and common equivalent shares outstanding – basic and diluted

The accompanying notes to condensed consolidated financial statements are an integral part of

these condensed consolidated statements of operations.

Weighted average common and common equivalent

shares outstanding –

basic and diluted

The accompanying notes to condensed consolidated

financial statements are an integral part of

these condensed consolidated statements

of operations.

HOLLYWOOD MEDIA CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

CONDENSED CONSOLIDATED STATEMENTS OF

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ (1,603,857 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Depreciation and amortization

401(k) stock match

Amortization of deferred compensation costs - officers

Equity in (earnings) of unconsolidated investees, net of distributions or dividends

Stock compensation expense - employees

Stock compensation expense - officers

Provision for bad debts

Distributions to subsidiary minority owner

Goodwill impairment

Change in fair value of derivative liability

Recovery (provision) for bad debts

Changes in assets and liabilities:

4 unchanged sentences

Accrued expenses and other

Derivative liabilities

Deferred revenue

1 unchanged sentence

Other deferred liability

Net cash used in operating activities – continuing operations

Net cash provided by operating activities – discontinued operations

Net cash used in operating activities

3 unchanged sentences

Net proceeds (expenditures) from sale of assets and businesses

Net cash (used in) provided by investing activities – continuing operations

Net cash used in investing activities – discontinued operations

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

2 unchanged sentences

Purchase of tendered common stock

Loan to minority shareholder

Net cash used in financing activities – continuing operations

Net cash used in financing activities – discontinued operations

(16,400,000 )

Net cash used in financing activities

(16,418,638 )

NET DECREASE IN CASH AND CASH EQUIVALENTS

(23,812,581 )

CASH AND CASH EQUIVALENTS, beginning of period

3 unchanged sentences

Income taxes paid

The accompanying notes to condensed consolidated financial statements

are an integrated part of these condensed consolidated statements of cash flows.

The accompanying notes to condensed consolidated

financial statements

are an integral part of these condensed

consolidated statements of cash flows.

HOLLYWOOD MEDIA CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

(1) BASIS OF PRESENTATION AND CONSOLIDATION:

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared by Hollywood Media Corp.

(“Hollywood Media”, “our” or “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted pursuant to applicable rules and regulations.

However, management believes that the disclosures contained herein are adequate to make the information presented not misleading.

The accompanying financial statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly Hollywood Media’s condensed consolidated financial position, results of operations and cash flows.

The results of operations for the nine and three months ended September 30, 2011 and the cash flows for the nine months ended September 30, 2011 are not necessarily indicative of the results of operations or cash flows for the remainder of 2011.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Hollywood Media’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission.

In the opinion of management,

the accompanying unaudited condensed consolidated financial statements have been prepared by Hollywood Media Corp.

(“Hollywood

Media”, “our”

or “Company”) in accordance with accounting principles generally accepted in the United

States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles

generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted pursuant to applicable

rules and regulations.

However, management believes that the disclosures contained herein are adequate to make the information

presented not misleading.

The accompanying financial statements reflect, in the opinion of management, all material adjustments

(which include only normal recurring adjustments) necessary to present fairly Hollywood Media’s condensed consolidated financial

position, results of operations and cash flows.

The results of operations for the three months ended March 31, 2012 and the cash

flows for the three months ended March 31, 2012 are not necessarily indicative of the results of operations or cash flows for the

remainder of 2012.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the

audited consolidated financial statements and notes thereto included in Hollywood Media’s Annual Report on Form 10-K for

the year ended December 31, 2011, as amended, as filed with the Securities and Exchange Commission.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

Hollywood Media’s condensed consolidated financial statements include the accounts of Hollywood Media, its wholly owned subsidiaries, and its 51% owned subsidiary Tekno Books, which is a partnership.

All significant intercompany balances and transactions have been eliminated in consolidation and a non-controlling interest has been established to reflect the outside ownership of Tekno Books.

Hollywood Media’s 50% and 26.2% ownership interests in NetCo Partners and MovieTickets.com, respectively, are accounted for under the equity method of accounting.

Hollywood Media’s

consolidated financial statements include the accounts of Hollywood Media and its wholly-owned subsidiaries.

All significant intercompany

balances and transactions have been eliminated in consolidation.

Hollywood Media’s 50%, 26.2% and 21.74% ownership interests

in NetCo Partners, MovieTickets.com and Project Hollywood LLC, respectively, are accounted for under the equity method of accounting.

Loss per Common Share

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No.

260, “Earnings Per Share” (ASC 260), requires companies to present basic and diluted earnings per share (“EPS”).

Loss per common share is computed by dividing net loss attributable to Hollywood Media Corp.

(the numerator) by the weighted average number of common shares outstanding (the denominator) for the period presented.

The weighted average number of common shares issuable upon conversion of convertible securities and upon exercise of outstanding options totaled 80,435 shares for the nine and three months ended September 30, 2011 and such shares were excluded from the calculation of basic and diluted loss per share for the nine and three months ended September 30, 2011, because their impact was anti-dilutive to the loss per share from continuing operations.

Unvested shares are not included in the basic calculation until vesting occurs and are not included in the diluted calculation because they are anti-dilutive.

There were no unvested shares as of September 30, 2011.

There were 233,333 unvested shares as of September 30, 2010.

For the Nine Months

Financial Accounting

Standards Board Accounting Standards Codification (“ASC”) Topic No.

260, “Earnings Per Share”

260), requires companies to present basic and diluted earnings per share (“EPS”).

Loss per common share is computed

by dividing net loss attributable to Hollywood Media Corp.

(the numerator) by the weighted average number of common shares outstanding

(the denominator) for the period presented.

The weighted average

number of common shares issuable upon conversion of convertible securities and upon exercise of outstanding options and warrants

totaled 75,000 shares for the three months ended March 31, 2012 and such shares were excluded from the calculation of basic and

diluted loss per share for the three months ended March 31, 2012, because their impact was anti-dilutive to the loss per share

from continuing operations.

Unvested shares are not included in the basic calculation until vesting occurs and are not included

in the diluted calculation because they are anti-dilutive.

There were no unvested shares as of March 31, 2012 and 2011, respectively.

For the Three Months

Ended September 30,

Ended March 31,

Basic weighted average shares outstanding

1 unchanged sentence

Dilutive weighted average shares outstanding

Unvested restricted stock which are not included in the calculation of diluted income (loss) per share because their impact is anti-dilutive

Options to purchase shares of Common Stock and other stock-based awards outstanding which are not included in the calculation of diluted income (loss) per share because their impact is anti-dilutive

Receivables consist of unsecured amounts due from customers who have advertised on plasma TV displays, posters, brochures and websites in the Company’s U.K.

business and amounts due from publishers relating to signed contracts in connection with the Company’s Intellectual Property business, to the extent that the earnings process is complete and amounts are realizable.

Allowance for Doubtful Accounts

Hollywood Media maintains an allowance for doubtful accounts for estimated losses (“Allowance”) resulting from the inability of its customers to make required payments.

The Company’s accounting for doubtful accounts contains uncertainty because management must use judgment to assess the estimated collectability of these accounts.

When preparing these estimates, management considers a number of factors, including the aging of customers’ accounts, past transactions with customers, creditworthiness of specific customers, historical trends and other information.

The Allowance was $253,534 and $308,713 at September 30, 2011 and December 31, 2010, respectively.

The Allowance is primarily attributable to receivables due from customers of the United Kingdom based companies CinemasOnline Limited, U.K.

Theatres Online Limited, WWW.CO.U.K.

Limited and Spring Leisure Limited (collectively known as “CinemasOnline”).

Although the Company believes its Allowance is sufficient, if the financial condition of the Company’s customers were to unexpectedly deteriorate, additional Allowances may be required and the additional Allowances could materially impact the Company’s condensed consolidated financial statements.

Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across many different geographical regions within the U.K.

(See Note 8).

Receivables consist

of unsecured amounts due from customers who have advertised on plasma TV displays, posters, brochures and websites in the Company’s

UK business and amounts due from publishers relating to signed contracts in connection with the Company’s Intellectual Property

business, to the extent that the earnings process is complete and amounts are realizable.

Allowance for Doubtful

Hollywood Media maintains

an allowance for doubtful accounts for estimated losses (“Allowance”) resulting from the inability of its customers

to make required payments.

The Company’s accounting for doubtful accounts contains uncertainty because management must use

judgment to assess the estimated collectability of these accounts.

When preparing these estimates, management considers a number

of factors, including the aging of customers’

accounts, past transactions with customers, creditworthiness of specific customers,

historical trends and other information.

The Allowance was $236,561 and $240,048 at March 31, 2012 and December 31, 2011, respectively.

The Allowance is primarily attributable to receivables due from customers of the United Kingdom based companies CinemasOnline

Limited, UK Theatres Online Limited, WWW.CO.UK Limited and Spring Leisure Limited (collectively known as “CinemasOnline”).

Although the Company believes its Allowance is sufficient, if the financial condition of the Company’s customers were to

unexpectedly deteriorate, additional Allowances may be required and the additional Allowances could materially impact the Company’s

condensed consolidated financial statements.

Concentrations of credit risk with respect to accounts receivable are limited due

to the large number of customers comprising the Company’s customer base and their dispersion across many different geographical

regions within the U.K.

Segment Information

ASC Topic No.

280, “Segment Reporting” , establishes standards for reporting of selected information about operating segments in interim financial reports issued to shareholders.

It also establishes standards for related disclosures about products and services, geographic areas and major customers.

“Segment Reporting”

, establishes standards for reporting of selected information about operating segments in

interim financial reports issued to shareholders.

It also establishes standards for related disclosures about products and services,

geographic areas and major customers.

ASC Topic No.

280 has been applied to the information appearing in Note 6.

Derivative Liabilities

Derivative liabilities are comprised of the compensation arrangements for Mitchell Rubenstein, Chairman and CEO of the Company and Laurie Silvers, Vice Chair and President of the Company relating to their each being entitled to receive 5% of any dividends and other distributions received by the Company on account of its interest in MovieTickets.com, Inc.

which includes 5% of any proceeds received by the Company from the sale of all or any portion of MovieTickets.com.

For the nine and three months ended September 30, 2011, $52,444 of this compensation arrangement has been paid to each of Mr.

Rubenstein and Ms.

The Company records compensation derivative liabilities in our accompanying unaudited condensed consolidated balance sheet within the “Derivative Liabilities” at fair value.

Changes in the fair values of derivative liabilities will be reported in the results of operations for future periods.

The Company does not hold any derivative liability financial instruments that reduce risk associated with hedging exposure, accordingly the Company has not designated any of its derivatives liability financial instruments as hedge instruments.

Based upon the collective 10% dividends and other distributions due to Mr.

Rubenstein and Ms.

Silvers as described above, the Company recorded the compensation as derivative liabilities based upon the independent valuation of MovieTickets.com less a non-equity holder rights discount as of March 15, 2011 which was the effective date of the amended and restated employment agreements.

The initial fair value measurement of $1,720,000 was reduced to $980,000 to reflect the adjusted fair value and is recorded as “Derivative Liabilities” in the accompanying condensed consolidated balance sheet at September 30, 2011.

Changes in the fair values of these liabilities are included in “Other, net” in the accompanying unaudited condensed consolidated statement of operations.

See Note 6 “Fair Value Measurements” for additional information.

The Company initially recorded $1,720,000 as “Deferred compensation” in our accompanying condensed consolidated balance sheet (representing $860,000 with respect to each of Mr.

Rubenstein and Ms.

Silvers) as a result of the aforementioned collective 10% distribution participation under the amended employment agreements with them which is being amortized over an expected service period of four years starting from the 91 st day (March 15, 2011) from the completion of the Broadway Sale.

The Company expensed $233,850 and $107,500 respectively, as a result of this amortization for the nine and three months ended September 30, 2011 and is included in “Payroll and benefits” in the accompanying unaudited condensed consolidated statement of operations.

Derivative Instruments

The Company records

derivative instruments at fair value in our accompanying consolidated balance sheet with changes in the fair values of those instruments

reported in earnings in our consolidated results of operations.

The Company does not hold any derivative instruments that reduce

risk associated with hedging exposure, accordingly the Company has not designated any of its derivatives liability financial instruments

as hedge instruments.

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No.

In May 2011, the FASB

issued Accounting Standards Update (“ASU”) No.

2011-4, Fair Value Measurement (Topic 820):

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.

Amendments to Achieve

Common Fair Value Measurement and Disclosure Requirements in U.S.

GAAP and IFRS .

This ASU represents the converged guidance of the FASB and the IASB ("the Boards") on fair value measurement.

The collective efforts of the Boards and their staffs have resulted in common requirements, including a consistent meaning of the term "fair value." The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S.

This ASU represents the converged guidance

of the FASB and the IASB ("the Boards") on fair value measurement.

The collective efforts of the Boards and their staffs

have resulted in common requirements, including a consistent meaning of the term "fair value."

The Boards have concluded

the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements

prepared in accordance with U.S.

GAAP and IFRS.

The ASU is effective during interim and annual periods beginning after December 15, 2011 and its adoption is not expected to have a material effect on the Company’s unaudited condensed consolidated financial statements.

In September 2011, the FASB issued ASU No.

2011-08, “Testing for Goodwill Impairment (Topic 350),” (“ASU 2011-08”).

ASU 2011-08 allows entities to first assess qualitatively whether it is necessary to perform the two-step goodwill impairment test.

If an entity believes, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting period is less than its carrying amount, the quantitative two-step goodwill impairment test is required.

An entity has the unconditional option to bypass the qualitative assessment and proceed directly to performing the first step of the goodwill impairment test.

The ASU is effective for fiscal years beginning after December 15, 2011 and its early adoption by the Company during the quarter ended September 30, 2011 did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

Hollywood Media’s significant accounting policies discussed in Note 2 of its audited consolidated financial statements for our fiscal year ended December 31, 2010 have not changed.

The ASU is effective during interim and annual periods beginning after December

15, 2011 and its adoption did not have a material effect on the Company’s consolidated financial statements.

(3) DISCONTINUED OPERATIONS:

Sale of Broadway Ticketing Division to Key Brand Entertainment, Inc.

On December 15, 2010, Hollywood Media Corp.

(“Hollywood Media”) completed and closed on the sale of its Broadway Ticketing Division (the “Broadway Sale”) through the sale of all of the outstanding capital stock of Theatre Direct NY, Inc.

(“Theatre Direct”) to Key Brand Entertainment Inc.

(“Key Brand”), as contemplated by the Stock Purchase Agreement, dated as of December 22, 2009, entered into between Hollywood Media and Key Brand (the “Purchase Agreement”).

There are no material relationships among Hollywood Media and Key Brand or any of their respective affiliates other than in respect of the Purchase Agreement and the related ancillary agreements.

Pursuant to the Purchase Agreement, at the closing of the Broadway Sale, (a) Hollywood Media received (i) $20,530,102 in cash (including $530,102 pursuant to the estimated working capital adjustment described in the Purchase Agreement), (ii) a $8,500,000 note (the “Loan”) from Key Brand pursuant to a Second Lien, Security and Pledge Agreement, dated as of December 15, 2010 (the “Credit Agreement”), pursuant to which Key Brand is obligated to pay Hollywood Media interest at a rate of 12% per annum, with the loan maturing on December 15, 2015, which Loan is collateralized on a second lien basis by all stock and assets of Theatre Direct and its subsidiaries, and (iii) a warrant to purchase 5% of the outstanding shares of common stock of Theatre Direct as of the closing date on a fully diluted basis at an exercise price of $.01 per share (the “Warrant”), and (b) Key Brand assumed $1,600,000 of liabilities associated with employment agreements with certain employees of Theatre Direct.

In addition, Hollywood Media is entitled to receive earn-out payments (the “Earn-out”) of up to $14,000,000 contingent upon Theatre Direct and its subsidiaries achieving certain revenue targets during the period from the closing date through the end of the 10 th full fiscal year following the closing date as set forth in the Purchase Agreement.

As collectability of the Loan, Earn-outs and Warrant is not reasonably assured, they are not included in the “Gain on sale of discontinued operations, net of income taxes” in the accompanying condensed consolidated statement of operations.

Hollywood Media received payments of $773,500 and $260,667 of interest from Key Brand during the nine and three months ended September 30, 2011, respectively, in accordance with the terms of the Loan which was included in “Interest, net” in the accompanying unaudited condensed consolidated statements of operations for the nine and three months ended September 30, 2011.

On March 14, 2011 the Company delivered to Key Brand a closing statement setting forth Hollywood Media’s calculation of Theatre Direct’s working capital on December 15, 2010, (the “closing date”) determined in the manner described in the Purchase Agreement.

Pursuant to the closing statement, Hollywood Media accrued $3,702,620 as a working capital adjustment as of December 31, 2010 under the Purchase Agreement which included $530,102 related to the estimated working capital adjustment delivered at closing to Key Brand.

The accrual was included in “Accrued expenses and other” in our accompanying consolidated balance sheets as of December 31, 2010.

The working capital adjustment of $3,734,106 was paid on March 22, 2011 and included $31,486 of interest which is included in “Gain on sale of discontinued operations, net of income taxes” in the accompanying unaudited condensed consolidated statements of operations for the nine months ending September 30, 2011.

In connection with the Credit Agreement, Hollywood Media and Key Brand entered into a Subordination and Intercreditor Agreement, dated December 15, 2010 (the “Intercreditor Agreement”), with JP Morgan Chase Bank, N.A., as administrative agent for the senior secured lenders of Key Brand, which defines the rights and obligations of the senior secured lenders and Hollywood Media as subordinated creditor, including, without limitation, the rights of payment and the subordination of the security interests of Hollywood Media.

Hollywood Media also agreed to provide certain transition services to Key Brand and Theatre Direct for a six-month period which ended on June 15, 2011.

Pursuant to ASC Topic No.

360, “Accounting for the Impairment or Disposal of Long-Lived Assets” ASC 360, the Company’s consolidated financial statements have been reclassified for all periods presented to reflect the operations, assets and liabilities of the Broadway Ticketing Business as discontinued operations.

The sale of the Broadway Ticketing Business qualifies for discontinued operations treatment under ASC 360.

Hollywood.com Business

On August 21, 2008, Hollywood Media entered into a purchase agreement with R&S Investments, LLC (“R&S Investments”) for the sale of Hollywood Media’s subsidiaries Hollywood.com, Inc.

and Totally Hollywood TV, LLC (collectively, the “Hollywood.com Business”).

R&S Investments is owned by Mitchell Rubenstein, Hollywood Media’s Chief Executive Officer and Chairperson of the Board, and Laurie S.

Silvers, Hollywood Media’s President and Vice-Chairperson of the Board.

Pursuant to the R&S purchase agreement (the “R&S purchase agreement”), Hollywood Media sold the Hollywood.com Business to R&S Investments for a potential purchase price of $10,000,000 cash, which includes $1,000,000 that was paid to Hollywood Media at closing and potential earn-out payments totaling $9,000,000, of which $1,600,640 has been paid to Hollywood Media as of September 30, 2011.

Hollywood Media recognized $460,037 and $155,538 in earn-out gain during the nine and three months ended September 30, 2011, respectively, and $507,561 and $181,458 in earn-out gain during the nine and three months ended September 30, 2010, respectively, which are included in “Income from discontinued operations” in our accompanying unaudited condensed consolidated statements of operations.

Hollywood Media does not have a significant continuing involvement in the Hollywood.com Business operations.

The earn-out payments equal the greater of 10 percent of gross collected revenue and 90 percent of EBITDA (as defined in the R&S Purchase Agreement) for the Hollywood.com Business until the earn-out is fully paid.

The Company considers the remaining potential earn-out payments to be contingent consideration and non-recourse.

Thus, the Company will not record a receivable and any corresponding gain until the contingencies have been met.

The Company will estimate an appropriate reserve for at-risk amounts, if necessary, at the time that any accounts receivable are recorded.

As of September 30, 2011, there remains $7,399,360 in potential earn-out payments.

Hollywood Media has received the earn-out monies in accordance with the payment terms.

If a subsequent change of control of the Hollywood.com Business, or a portion thereof, occurs before the earn-out is fully paid, the remaining portion of the earn-out would be paid to the Company immediately upon such an event, up to the amount of the consideration received less related expenses.

If the aggregate proceeds received by the Company in such a change of control are less than the remaining balance of the earn-out, then the surviving entity which owns the Hollywood.com Business will be obligated to pay the difference in accordance with the same earn-out terms.

Hollywood Media established an escrow account to fund negative EBITDA of the sold business as necessary, up to a total of $2,600,000, the maximum amount of negative EBITDA required to be funded per the purchase agreement.

During 2009, Hollywood Media distributed the full balance of the escrow to fund operating losses.

In addition, Hollywood Media paid $400,000 to the Purchaser for working capital adjustments at closing.

Pursuant to Staff Accounting Bulletin (“SAB”) Topic 5-E, the Company must consider if it has transferred risks of ownership, which the Company has considered and concluded that the risks of ownership have been transferred.

The Hollywood.com Business included:

(i) Hollywood.com, Inc., which owned the Hollywood.com website and related URLs and celebrity fan websites.

Hollywood.com features in-depth movie information including movie showtimes listings, celebrity biographical data, and celebrity photos primarily obtained by Hollywood.com through licenses with third party licensors which are made available on the Hollywood.com website and mobile platform.

Hollywood.com also has celebrity fan sites and a library of feature stories and interviews which incorporate photos and multimedia videos taken at entertainment events including movie premiers and award shows;

(ii) Totally Hollywood TV, LLC, which owned Hollywood.com Television, a free video on demand service distributed pursuant to annual affiliation agreements with certain cable operators for the distribution of movie trailers to subscribers of those cable systems.

COMMON STOCK:

During the nine months ended September 30, 2011:

See Note 5 regarding our purchase of common stock tendered.

During the year ended December 31, 2010:

On February 19, 2010, Hollywood Media issued 141,410 shares of common stock valued at the December 31, 2009 closing share price of $1.40, or $197,974, for payment of Hollywood Media’s 401(k) employer match for the calendar year 2009.

The 401(k) plan was terminated in November, 2010.

Sale of Broadway Ticketing

Division to Key Brand Entertainment, Inc.

On December 15, 2010,

Hollywood Media Corp.

(“Hollywood Media”) completed the sale of its Broadway Ticketing Division (“the Broadway

Sale”) through the sale of all of the outstanding capital stock of Theatre Direct NY, Inc.

(“Theatre Direct”)

to Key Brand Entertainment Inc.

(“Key Brand”), as contemplated by the Stock Purchase Agreement, dated as of December

22, 2009, entered into between Hollywood Media and Key Brand (“the Purchase Agreement”).

There are no material relationships

among Hollywood Media and Key Brand or any of their respective affiliates other than in respect of the Purchase Agreement and the

related ancillary agreements.

Pursuant to the Purchase

Agreement, at the closing of the Broadway Sale, (a) Hollywood Media received (i) $20,530,102 in cash (including $530,102 pursuant

to the estimated working capital adjustment described in the Purchase Agreement), (ii) a $8,500,000 note (“the Loan”)

from Key Brand pursuant to a Second Lien, Security and Pledge Agreement, dated as of December 15, 2010 (the “Credit Agreement”),

pursuant to which Key Brand is obligated to pay Hollywood Media interest at a rate of 12% per annum, with the loan maturing on

December 15, 2015, which Loan is secured on a second lien basis by all stock and assets of Theatre Direct and its subsidiaries,

and (iii) a warrant to purchase 5% of the outstanding shares of common stock of Theatre Direct as of the closing date on a fully

diluted basis at an exercise price of $.01 per share (the “Warrant”), and (b) Key Brand assumed $1,600,000 of liabilities

associated with employment agreements with certain employees of Theatre Direct.

In addition, Hollywood Media is entitled to receive

earn-out payments (“the Earn-out”) of up to $14,000,000 contingent upon Theatre Direct and its subsidiaries achieving

certain revenue targets during the period from the closing date through the end of the 10 th full fiscal year following

the closing date as set forth in the Purchase Agreement.

On April 22, 2012, the Company entered into Amendment No.

4 (the "Amendment")

to the Broadway Sale Purchase Agreement which entitled the Company to receive an earn-out payment of $7,000,000 on or before October

1, 2012 (regardless of the actual revenues of Theatre Direct and its subsidiaries) and up to an additional $7,000,000 of earn-out

payments contingent upon Theatre Direct and its subsidiaries achieving $123 million in revenue (excluding revenue from "group

sales") during any annual period from July 1, 2011 through June 30, 2021 (provided that if such earn-out payment is earned

based on revenues of Theatre Direct and its subsidiaries for the period from July 1, 2011 to June 30, 2012, then such earn-out

payment will (i) be added to the principal amount of the $8.5 million loan due the Company under the Credit Agreement, (ii) accrue

and be paid interest in accordance with the Credit Agreement, and (iii) be paid over the then remaining term of the Credit Agreement

in equal quarterly installments).

See Note 10 for revisions to the earn-out payments.

Hollywood Media will record a gain on the

loan and earn-out upon collection of consideration.

The Warrant will be marked to market each reporting period to reflect changes

in fair value.

Hollywood Media received a payment of $257,833 and $255,000 of interest from Key Brand during the three months ended

March 31, 2012 and 2011, respectively, in accordance with the terms of the Loan which was included in “Interest, net”

in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2012.

After the closing date

of the sale of Theatre Direct pursuant to the Purchase Agreement, Hollywood Media delivered on March 14, 2011 to Key Brand a closing

statement setting forth Hollywood Media’s calculation of Theatre Direct’s working capital as of the closing date determined

in the manner described in the Purchase Agreement.

Pursuant to the closing statement, Hollywood Media accrued $3,702,620 as a working

capital adjustment as of December 31, 2010 under the agreement which included $530,102 related to the estimated working capital

delivered at closing by Key Brand.

The working capital adjustment of $3,734,106 was paid on March 22, 2011 and included $31,486

of interest which is included in “Gain on sale of discontinued operations, net of income taxes”

in the accompanying

condensed consolidated statements of operations for the three months ending March 31, 2011.

In connection with

the transactions contemplated by the Purchase Agreement, Hollywood Media incurred (i) $440,000 plus payroll taxes in aggregate

change of control payments to two executives in Hollywood Media’s legal department which were included in “Gain (loss)

on sale of discontinued operations, net of income taxes”

in the December 31, 2010 accompanying consolidated statements of

operations which was paid as follows:

$240,000 less payroll taxes was paid to one executive prior to December 31, 2010 and $200,000

less payroll taxes was paid to the other executive in January 2011.

As of December 31, 2010, the $200,000 unpaid amount was included

in “Accrued expenses and other”

in the accompanying December 31, 2010 consolidated balance sheet;

(ii) approximately

$400,000 in severance payments payable by Hollywood Media to 14 employees after a brief transition period;

(iii) approximately

$250,000 in fees to a valuation firm for providing the fairness opinion to Hollywood Media’s board of directors in connection

with evaluating and approving the Purchase Agreement and the transactions contemplated thereby;

(iv) $1,361,632 in legal fees in

connection with preparing and negotiating the Purchase Agreement and the related documents and preparing and filing the proxy statement

relating to the transactions contemplated by the Purchase Agreement;

and (v) $170,000 in investment banking fees for providing

professional services to the Company.

Hollywood.com

On August 21, 2008,

Hollywood Media entered into a purchase agreement with R&S Investments, LLC (“R&S Investments”) for the sale

of Hollywood Media’s subsidiaries Hollywood.com, Inc.

and Totally Hollywood TV, LLC (collectively, the “Hollywood.com

Business”).

R&S Investments is owned by Mitchell Rubenstein, Hollywood Media’s Chief Executive Officer and Chairperson

of the Board, and Laurie S.

Silvers, Hollywood Media’s President and Vice-Chairperson of the Board.

Pursuant to the purchase

agreement, Hollywood Media sold the Hollywood.com Business to R&S Investments for a potential purchase price of $10,000,000

cash, which includes $1,000,000 that was paid to Hollywood Media at closing and potential earn-out payments totaling $9,000,000,

of which $1,892,692 has been paid as of March 31, 2012.

Hollywood Media recognized $197,517 and $151,956 in earn-out gain during

the three months ended March 31, 2012 and 2011, respectively, which is included in “Income from discontinued operations”

in our accompanying condensed consolidated statements of operations.

Hollywood Media does not have a significant continuing involvement

in the Hollywood.com Business operations.

The earn-out payments

equal the greater of 10 percent of gross collected revenue and 90 percent of EBITDA (as defined in the purchase agreement)

for the Hollywood.com Business until the earn-out is fully paid.

The Company considers the remaining potential earn-out payments

to be contingent consideration and non-recourse.

Thus, the Company will not record a receivable and any corresponding gain until

the contingencies have been met.

The Company will estimate an appropriate reserve for at-risk amounts, if necessary, at the time

that any accounts receivable are recorded.

As of March 31, 2012, there remains $7,107,308 in potential earn-out payments.

Media has received the earn-out monies in accordance with the payment terms.

If a subsequent change

of control of the Hollywood.com Business, or a portion thereof, occurs before the earn-out is fully paid, the remaining portion

of the earn-out would be paid to the Company immediately upon such an event, up to the amount of the consideration received less

related expenses.

If the aggregate proceeds received by the Company in such a change of control are less than the remaining balance

of the earn-out, then the surviving entity which owns the Hollywood.com Business will be obligated to pay the difference in accordance

with the same earn-out terms.

(4) PURCHASE OF COMMON STOCK TENDERED:

On February 25, 2011, Hollywood Media announced the final results of a tender offer to purchase up to 8,000,000 shares of its common stock at a price of $2.05 per share (less any applicable withholding taxes and without interest) which tender offer expired on February 18, 2011.

On February 25, 2011,

Hollywood Media announced the final results of a tender offer to purchase up to 8,000,000 shares of its common stock at a price

of $2.05 per share (less any applicable withholding taxes and without interest) which tender offer expired on February 18, 2011.

Hollywood Media accepted 8,000,000 shares for purchase for a total cost of approximately $16,400,000.

The number of shares properly tendered was 24,157,429.

Accordingly, payment was made for approximately 33% of the tendered shares, and the rest of the tendered shares were withdrawn from the tender offer.

Immediately following the purchase of the tendered shares, Hollywood Media had 23,179,068 shares of common stock outstanding.

The number of shares properly

tendered was 24,157,429.

Accordingly, payment was made for approximately 33% of the tendered shares, and the rest of the tendered

shares were withdrawn from the tender offer.

Immediately following the purchase of the tendered shares, Hollywood Media had 23,179,066

shares of common stock outstanding.

During the three months ended March 31, 2012, Hollywood Media did not repurchase shares of

its common stock.

(5) FAIR VALUE MEASUREMENTS:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the Company’s principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price.

In accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the Company and the Company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances.

The levels of fair value hierarchy are:

Quoted prices in active markets for identical assets and liabilities at the measurement date.

Observable inputs other than quoted prices included in Level 1, such as (i) quoted prices for similar assets and liabilities in active markets, (ii) quoted prices for identical or similar assets and liabilities in markets that are not active, and (iii) other inputs that are observable or can be corroborated by observable market data.

Unobservable inputs for which there is little or no market data available.

Within this level of the hierarchy, fair value is based upon the lowest level of any input that is significant to the fair value measurement.

However, the determination of what constitutes “observable” requires significant judgment by the Company.

The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

In contrast, the Company considers unobservable data to be data that reflects the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

As described more fully herein in “ Note 2.

Summary of Significant Accounting Policies – Derivative Liabilities ,” the Company and Mitchell Rubenstein and Laurie S.

Silvers entered into amended and restated employment agreements which include a compensation arrangement that includes the right of each to receive 5% of all of the distributions that the Company receives from its interest in MovieTickets.com which includes 5% to each of all proceeds received by the Company from the sale of all or any portion of MovieTickets.com.

As a result, the fair value of the compensation is reflected in the Company’s balance sheet as derivative liabilities.

The fair value of the derivative liabilities were measured at the date that the compensation arrangement was effective, which was 91 days following the Broadway Sale or March 15, 2011, and will be re-measured each subsequent balance sheet date.

Any changes in the fair value of the derivative liabilities will be recorded as non-operating, non-cash income or expense in the Company’s condensed consolidated statements of operations and at each balance sheet date.

Changes in the fair values of these liabilities are included in “Other, net” in the accompanying unaudited condensed consolidated statement of operations

The following table presents the Company’s derivative liabilities within the fair value hierarchy utilized to measure fair value on a recurring basis as of September 30, 2011:

Derivative liabilities – September 30, 2011

The following table presents a reconciliation of the compensation derivative liabilities measured at fair value on a recurring basis using significant unobservable input (Level 3) from March 15, 2011 to September 30, 2011:

The carrying amounts

of cash and cash equivalents, receivables and accounts payable, approximate their fair values due to the short-term maturities

of these instruments.

The carrying value of notes payable approximates fair value because the interest rates approximate the market

Financial instruments

that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents

and accounts receivable.

The Company’s cash management and investment policies restrict investments to low risk, highly-liquid

securities, and the Company performs periodic evaluations of the credit standing of the financial institutions with which it deals.

The Company generally does not require collateral when granting credit.

The Company performs ongoing credit evaluations and maintains

an allowance for doubtful accounts for accounts which management believes may have become impaired and, to date, losses have not

been significant.

See Note 2 for a further discussion on allowance for doubtful accounts.

Fair value is the price

that would be received to sell an asset or paid to transfer a liability in the Company’s principal or most advantageous market

for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit

In accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), the

Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed

based on market data obtained from sources independent of the Company and the Company’s own assumptions about market participant

assumptions developed based on the best information available in the circumstances.

The levels of fair

value hierarchy are:

prices in active markets for identical assets and liabilities at the measurement date.

inputs other than quoted prices included in Level 1, such as (i) quoted prices for similar assets and liabilities in active

markets, (ii) quoted prices for identical or similar assets and liabilities in markets that are not active, and (iii) other inputs

that are observable or can be corroborated by observable market data.

inputs for which there is little or no market data available.

Within this level of

the hierarchy, fair value is based upon the lowest level of any input that is significant to the fair value measurement.

the determination of what constitutes “observable”

requires significant judgment by the Company.

considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable,

not proprietary, and provided by independent sources that are actively involved in the relevant market.

the Company considers unobservable data to be data that reflects the Company’s assumptions of what market participants would

use in pricing the asset or liability developed based on the best information available in the circumstances.

Compensation Liabilities

On December 29, 2009,

t he Company and Mitchell Rubenstein and Laurie S.

Silvers entered into amended and restated employment

agreements which include a compensation arrangement that includes the right for each

to receive 5% of all of the distributions that the Company receives from its interest in MovieTickets.com

which includes 5% to each of all proceeds received by the Company from either dividends or from

the sale of all or any portion of MovieTickets.com .

The fair value of this liability, which

was initially measured on March 15, 2011, the date that the compensation arrangement was effective, is recorded in “Derivative

Liabilities”, with any changes in the fair value recorded in “Other, net”

in the accompanying

consolidated statement of operations.

At March 31, 2012, the fair value of the derivative liability

was $1,090,000.

In conjunction with

the Broadway Sale, the Company received a warrant (initially valued at zero) to purchase 5% of the outstanding shares of common

stock of Theatre Direct, which can only be exercised upon a Conversion Event, as defined, and which also contains a put option

that allows the Company, after the seventh anniversary of the issue date, to put the warrant to Key Brand for the greater of fair

market value of the shares or $1.0 million.

The warrant is revalued on a recurring basis.

After estimating future cash flows

adjusted for risk factors it was determined that the fair value was zero at March 31, 2012.

Certain assets such

as long-lived assets and goodwill are measured at fair value on a nonrecurring basis;

that is, the assets and liabilities are not

measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstance such as impairment

In those circumstances, fair value measurements are principally based upon unobservable inputs (Level 3 of the fair value

hierarchy) using the Company’s own assumptions in determining fair value.

The following table

presents the Company’s derivative liabilities and warrant on a recurring basis and the Company’s goodwill on a non-recurring

basis within the fair value hierarchy utilized to measure fair value as of March 31, 2012:

Derivative liabilities –

March 31, 2012

Warrant –

March 31, 2012

Goodwill –

March 31, 2012

There were no transfers between the levels

of the fair value hierarchy during the quarter ended March 31, 2012.

The following table presents a reconciliation

of the compensation derivative liabilities measured at fair value on a recurring basis using significant unobservable input (Level

3) from December 31, 2011 to March 31, 2012:

Balance at December 31, 2011

Recognition of derivative liabilities – March 15, 2011

Payments to officers

Payment to officers

Change in fair value included in earnings

Balance at September 30, 2011

Balance at March 31, 2012

(6) SEGMENT REPORTING:

Hollywood Media’s reportable segments are Ad Sales, Intellectual Properties, and Other.

The Ad Sales segment sells advertising on plasma TV displays throughout the U.K.

and Ireland, on lobby display posters, movie brochure booklets and ticket wallets distributed in cinemas, live theater and other entertainment venues, and on cinema and theater websites in the U.K.

This segment also includes Hollywood Media’s investment in MovieTickets.com.

The Intellectual Properties segment owns or controls the exclusive rights to certain intellectual properties created by best-selling authors and media celebrities, which it seeks to license across all media.

This segment also includes a 51% interest in Tekno Books, a book development business.

The Other segment is comprised of payroll and benefits for corporate and administrative personnel as well as other corporate-wide expenses such as legal fees, audit fees, proxy costs, insurance, centralized information technology, and includes consulting fees and other fees and costs relating to compliance with the provisions of the Sarbanes-Oxley Act of 2002.

Management evaluates performance based on a comparison of actual profit or loss from operations before income taxes, depreciation, amortization, interest and nonrecurring gains and losses to budgeted amounts.

There are no intersegment sales or transfers.

The following table provides summary financial information, for continuing operations only, regarding Hollywood Media’s reportable segments:

Nine months ended September 30,

Three months ended September 30,

Hollywood Media’s

reportable segments are Ad Sales, Intellectual Properties, and Other.

The Ad Sales segment

sells advertising on plasma TV displays throughout the U.K.

and Ireland, on lobby display posters, movie brochure booklets and

ticket wallets distributed in cinemas, live theater and other entertainment venues in the U.K and Ireland.

This segment also includes

Hollywood Media’s investment in MovieTickets.com.

The Intellectual Properties

segment owns or controls the exclusive rights to certain intellectual properties created by best-selling authors and media celebrities,

which it licenses across all media.

This segment also includes Tekno Books, a book development business.

The Other segment is

comprised of payroll and benefits for corporate and administrative personnel as well as other corporate-wide expenses such as legal

fees, audit fees, proxy costs, insurance, centralized information technology, and includes consulting fees and other fees and costs

relating to compliance with the provisions of the Sarbanes-Oxley Act of 2002 that require Hollywood Media to make an assessment

of and report on internal control over financial reporting.

This segment also includes Hollywood Media’s investment in Project

There are no intersegment

sales or transfers.

The following table

illustrates the financial information regarding Hollywood Media’s reportable segments.

Three months ended March 31,

Net Revenues:

2 unchanged sentences

Intellectual Properties

$ (2,048,210 )

Capital Expenditures:

2 unchanged sentences

Intellectual Properties

September 30,

Segment Assets:

Intellectual Properties

During the three months ended September 30, 2011 an event occurred that caused us to question previous estimates of expected cash flows relative to the Ad Sales division.

As a result, in connection with the preparation of our financial statements for the third quarter of 2011, we performed an interim impairment test of goodwill.

For purposes of testing goodwill for potential impairment, we estimated the fair value of the applicable reporting unit to which all goodwill is allocated using generally accepted valuation methodologies, including market and income based approaches, and relevant data available through and as of November 15, 2011.

The market approach is a valuation method in which fair value is estimated based on observed market prices of publicly traded guideline companies.

Under the market approach, the valuation process is essentially that of comparison and correlation between the subject company and other similar companies.

The income approach is a method in which fair value is estimated based on the cash flows that an asset could be expected to generate over its useful life, including residual value cash flows.

These cash flows are then discounted to their present value equivalents using a rate of return that accounts for the relative risk of not realizing the estimated annual cash flows and for the time value of money.

The key inputs to the discounted cash flow model were our historical and estimated future revenues and the discount rate, among others.

During the three months ended September 30, 2011, as a result of this testing, it was determined that the future cash flow of these assets is likely impaired, and the risk associated with previously expected cash flows has increased.

Accordingly, we concluded that goodwill was impaired and we recorded a non-cash goodwill impairment charge of $4,795,783 in the third quarter of 2011.

This charge, representing approximately 33% of the previous carrying value is included in the impairment loss line item in “Earnings (Losses) of Unconsolidated Investees” in our condensed consolidated statement of operations for the three and nine months ended September 30, 2011.

The perceived increased uncertainty and risk associated with expected cash flows are based in part upon the dispute discussed at footnote 12, Litigation.

(7) CERTAIN COMMITMENTS AND CONTINGENCIES:

Hollywood Media is from time to time, a party to various legal proceedings including matters arising in the ordinary course of business.

Currently the Company is unaware of any actual or threatened litigation against it.

Financial Institution Termination

The Company’s CinemasOnline Business in the U.K.

received a letter in Q1-11 seeking to terminate the Company’s ability to process banker’s drafts through a financial institution in the U.K.

that processes substantially all of the U.K.

customers’ banker’s drafts.

To date, there has been no cancellation or termination of this bank account.

bank has agreed to rescind the termination as long as the Company performs certain actions to ensure that no future payments are set up without notice to our customers.

The Company is complying with the bank’s request and considers this matter closed.

customers advertising agreements with the Company automatically renew, the loss of this U.K.

bank account would require the Company to re-establish each such customers’ contract, and therefore a termination could significantly negatively impact U.K.

On October 27, 2011,

the Company, together with National Amusements Inc.

and the MovieTickets.com Joint Venture, filed a lawsuit against AMC Entertainment

(“AMC”) and MovieTickets.com Inc.

(as nominal defendant) (Case No.

50 2011 CA 016684) in the Circuit Court of

the 15th Judicial Circuit in and for Palm Beach County, Florida relating to MovieTickets.com.

On February 8, 2012, MovieTickets.com,

joined the lawsuit against AMC and an amended complaint was filed.

MovieTickets.com is an online movie ticketing service in

which Hollywood Media, National Amusements, Inc.

and AMC each own a 26.2% equity interest.

The amended complaint

alleges that AMC has breached and continues to breach the MovieTickets.com Joint Venture Agreement, which obligates AMC to exclusively

provide its ticket inventory to MovieTickets.com, and has breached its contractual and common law duties of good faith, fair dealing,

and loyalty with respect to MovieTickets.com and its joint venturers, Hollywood Media and National Amusements, Inc., as a result

of various actions by AMC.

The amended complaint contends that when AMC’s demands for greater control and a larger share

of MovieTickets.com were not met, AMC breached and continues to breach the MovieTickets.com Joint Venture Agreement, which obligates

AMC to exclusively provide its ticket inventory to MovieTickets.com.

The amended complaint further specifies breaches by AMC of

its contractual and common law duties of good faith, fair dealing, and loyalty and violations of Florida’s Deceptive and

Unfair Trade Practices Act.

Among other things, the plaintiffs allege in the amended complaint that AMC used its inside position

with MovieTickets.com and access to MovieTickets.com’s proprietary information in order to advance AMC’s own goals

in contravention of its duty of loyalty to the joint venture and to the detriment of MovieTickets.com.

Hollywood Media and

the other plaintiffs have asked for a jury trial and are seeking unspecified consequential damages and have reserved the right

to seek punitive damages.

Hollywood Media and the other plaintiffs also are seeking a declaratory judgment that

AMC is obligated to make available on MovieTickets.com’s website AMC’s ticket inventory for sale on an exclusive basis

and to honor its’

contractual and common law fiduciary duties of good faith and loyalty.

Discovery is proceeding.

Hollywood Media is

from time to time party to various legal proceedings, including matters arising in the ordinary course of business.

the Company is unaware of any actual or threatened litigation against it.

(8) MOVIETICKETS.COM:

Hollywood Media owns 26.2% of the total equity in the MovieTickets.com, Inc.

Hollywood Media owns

26.2% of the equity in MovieTickets.com, Inc.

as of March 31, 2012 and shares in 26.2% of the income or losses generated by the

joint venture.

Hollywood Media accounts for its investment in MovieTickets.com under the equity method of accounting, recognizing its percentage interest in MovieTickets.com’s income or loss as equity in earnings of unconsolidated investees.

Hollywood Media recorded its 26.2% share of net income or $409,232 and $230,164 under “Earnings of unconsolidated investees” in the accompanying unaudited condensed consolidated statement of operations for the nine and three months ended September 30, 2011, respectively.

The Company recorded $597,535 and $76,787 in “Earnings of unconsolidated investees” for the nine and three months ended September 30, 2010, respectively.

The MovieTickets.com web site generates revenues primarily from service fees charged to users for the purchase of movie tickets online and the sale of advertising.

On July 18, 2011 MovieTickets.com declared a dividend of $4,000,000.

Hollywood Media received its 26.2% pro rata share of such dividend, amounting to $1,048,875 on July 19, 2011, which reduced the Company’s investment in MovieTickets.com as the dividend did not exceed the amount of the Company’s investment.

Hollywood Media distributed on July 19, 2011 $52,444 of such dividend distribution, representing 5% of Hollywood Media’s share of the dividends, to each of Mr.

This investment is recorded under the equity method of accounting, recognizing 26.2% of ownership of MovieTickets.com

income or loss as “Equity in Earnings of Unconsolidated Investees”

in the accompanying consolidated balance sheets.

Hollywood Media recorded

its 26.2% share of net income or $48,919 and $63,458 under “Earnings of unconsolidated investees”

in the accompanying

unaudited condensed consolidated statement of operations for the three months ended March 31, 2012 and 2011, respectively.

18, 2011 MovieTickets.com declared a dividend of $4,000,000.

Hollywood Media received its 26.2% pro rata share of such dividend,

amounting to $1,048,875 on July 19, 2011, which reduced the Company’s investment in MovieTickets.com as the dividend did

not exceed the amount of the Company’s investment.

Hollywood Media distributed on July 19, 2011 $52,444 of such dividend

distribution, representing 5% of Hollywood Media’s share of the dividends, to each of Mr.

Rubenstein and Ms.

Silvers in accordance with their amended and restated employment agreements dated December 23, 2009.

Other than the July 18, 2011 dividend discussed above, there were no dividends declared or received during the nine and three months ended September 30, 2011 or September 30, 2010, respectively.

Silvers in accordance

with their amended and restated employment agreements dated December 23, 2009.

Other than the July 18, 2011 dividend discussed

above, there were no dividends declared or received during the three months ended March 31, 2012 or during the year ended December

For a description of the amended and restated employment agreements to Mr.

Rubenstein and Ms.

Silvers, see Note 10, “Related Party Transactions” to these unaudited condensed consolidated financial statements.

Silvers, see Note 9, “Related

Party Transactions”

to these unaudited condensed consolidated financial statements.

(9) RELATED PARTY TRANSACTIONS:

Hollywood Media recorded $460,037 and $155,538 in earn-out gain from R&S Investments during the nine and three months ended September 30, 2011, respectively, which is included in “Gain on sale of discontinued operations” recorded in the accompanying unaudited condensed consolidated statement of operations.

As of September 30, 2011, the Company has $270,552 included in “Related party receivable” in our accompanying consolidated balance sheet which consisted of $238,581 in earn-out receivable, $23,162 in expense reimbursements from R&S Investments and $8,809 for an expense reimbursement receivable from MovieTickets.com.

Hollywood Media recorded $507,561 and $181,458 in earn-out gain from R&S Investments during the nine and three months ended September 30, 2010.

As of December 31, 2010, the Company had $299,963 included in “Related party receivables” in our accompanying unaudited condensed consolidated balance sheet which consisted of $205,562 in earn-out receivable, $13,829 in expense reimbursements from R&S Investments and $80,572 for an expense reimbursement receivable from MovieTickets.com.

Hollywood Media received such earn-out and expense reimbursements in accordance with the payment terms.

On October 27, 2011,

following Project Hollywood LLC’s acquisition of all of the membership interests of Baseline LLC, Hollywood Media acquired

a 21.74% ownership interest in Project Hollywood LLC for $1.25 million, which was contributed to Project Hollywood LLC and which

was based on the same per membership unit price paid by Baseline Holdings for its 78.26% ownership interest in Project Hollywood

The funds contributed were used for working capital and other capital needs of the Baseline StudioSystems business.

Hollywood entered into two agreements with the two former senior executives of Baseline StudioSystems to manage the business on

a day-to-day basis, as of December 1, 2011.

Under those agreements, the managers will each receive 7.5% of Project Hollywood LLC’s

membership units subject to a three year vesting schedule (at a rate of 2.5% per annum) and the obtaining of certain performance-based

EBITDA hurdles each year.

Under that vesting schedule (and if vesting occurs), Hollywood Media’s ownership in Project Hollywood

will be reduced to 20.65% at June 30, 2012, 19.57% at June 30, 2013 and 18.48% at June 30, 2014.

Distributions of $176,866

and $130,683 from Project Hollywood to Hollywood Media reduced Hollywood Media’s investment in Project Hollywood during the

year ended December 31, 2011 and quarter ended March 31, 2012, respectively.

Hollywood Media recorded

$197,517 in earn-out gain from R&S Investments, LLC during the three months ending March 31, 2012 which is included in “Income

from discontinued operations”

recorded in the accompanying condensed consolidated statement of operations.

As of March 31,

2012, the Company has $518,734 included in “Related party receivable”

in our accompanying consolidated balance sheet

which consisted of $413,359 in earn-out receivable, $61,115 in distributions receivable from Project Hollywood, $40,779 in expense

reimbursements from R&S Investments and $3,481 for an expense reimbursement receivable from MovieTickets.com.

Subsequent to

March 31, 2012, Hollywood Media received such earn-out amounts and expense reimbursements in accordance with the payment terms.

Hollywood Media recorded

$151,956 in earn-out gain from R&S Investments, LLC during the three months ending March 31, 2011 which is included in “Income

from discontinued operations”

recorded in the accompanying condensed consolidated statement of operations.

As of December

31, 2011, the Company has $521,497 included in “Related party receivable”

in our accompanying consolidated balance

sheet which consisted of $371,353 in earn-out receivable, $105,561 in distributions receivable from Project Hollywood, $36,106

in expense reimbursements from R&S Investments, $5,904 for an expense reimbursement receivable from MovieTickets.com and $2,576

for a combined receivable from Mr.

Rubenstein and Ms.

R&S Investments, LLC Indemnification

On November 5, 2010, Hollywood.com, LLC, a former subsidiary of the Company, was sued for copyright infringement for the alleged display of unlicensed celebrity photographs on the Hollywood.com website, which is owned by R&S Investments.

Certain of the celebrity photographs at issue were posted during the time that Hollywood Media Corp.

On November 5, 2010,

Hollywood.com, LLC, a former subsidiary of the Company, was sued for copyright infringement for the alleged display of unlicensed

celebrity photographs on the hollywood.com website, which is owned by Hollywood.com, LLC.

Certain of the celebrity photographs

at issue were posted during the time that Hollywood Media Corp.

owned Hollywood.com.

Because Hollywood Media owned Hollywood.com during part of the time that the alleged display of unlicensed celebrity photographs on the Hollywood.com website occurred, the possibility exists that Hollywood Media could be subject to claims relating to this matter and other similar claims.

To address the potential risks to Hollywood Media associated with any such claims, in February 2011, Hollywood Media entered into an indemnification agreement with R&S Investments, whereby R&S Investments agreed to indemnify and hold Hollywood Media harmless from any and all potential liabilities and claims against Hollywood Media arising from any such claims in exchange for a one-time cash payment by Hollywood Media to R&S Investments of $350,000.

The indemnification agreement was approved on behalf of the Company by an Independent Committee of the Board of Directors.

The $350,000 was paid to R&S Investments on February 8, 2011 and is included in “Selling, general and administrative” in the accompanying unaudited condensed consolidated statement of operations.

The lawsuit was settled by Hollywood.com during the three months ended September 30, 2011.

Amended and Restated Employment Agreements of Mr.

Because Hollywood Media owned Hollywood.com

during part of the time that the alleged display of unlicensed celebrity photographs on the hollywood.com website occurred, the

possibility exists that Hollywood Media could be subject to claims relating to this matter and other similar claims.

the potential risks to Hollywood Media associated with any such claims, in February 2011, Hollywood Media entered into an indemnification

agreement with R&S Investments, LLC, whereby R&S Investments, LLC agrees to indemnify and hold Hollywood Media harmless

from any and all potential liabilities and claims against Hollywood Media arising from any such claims in exchange for a one-time

cash payment by Hollywood Media to R&S Investments, LLC of $350,000.

The indemnification agreement was approved on behalf of

the Company by an Independent Committee of the Board of Directors.

Amended and Restated Employment Agreements

Rubenstein and Ms.

On December 23, 2009, (i) Hollywood Media and Mitchell Rubenstein entered into an amendment to his amended and restated employment agreement and (ii) Hollywood Media and Laurie S.

Silvers entered into an amendment to her amended and restated employment agreement (hereafter, collectively referred to as “Amendments to Employment Agreements”).

The Amendments to Employment Agreements provide for, among other things, the following:

On December 23, 2009,

(i) Hollywood Media and Mitchell Rubenstein entered into an amendment to his amended and restated employment agreement and (ii)

Hollywood Media and Laurie S.

Silvers entered into an amendment to her amended and restated employment agreement (hereafter, collectively

referred to as “Amendments to Employment Agreements).

The Amendments to Employment Agreements provide for, among other things,

the following:

For a period of ninety days after the closing of the sale of Theatre Direct, Mr.

Rubenstein’s and Ms.

Silvers’ compensation continues in accordance with then existing terms.

Rubenstein’s and Ms.

Silvers’

compensation continues in accordance with then existing terms.

After this ninety-day period, Mr.

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and (ii) certain other amounts that may be received by Hollywood Media from MovieTickets.com, Inc.

((i) and (ii) are referred to herein as the “5% Distribution”).

Upon a sale of Hollywood Media’s interest in MovieTickets.com, Inc., Mr.

((i) and (ii) are referred to herein as the “5% Distribution”).

Upon a sale of Hollywood Media’s interest in MovieTickets.com, Inc., Mr.

Rubenstein and Ms.

Silvers would each also receive 5% of the proceeds received by Hollywood Media in such sale.

Should the employment agreements be terminated by Hollywood Media without “cause”, by death or by Mr.

Rubenstein and/or Ms.

Silvers, as applicable, for “good reason”, the 5% Distributions and 5% of proceeds upon sale are due to Mr.

Silvers, as applicable, for “good reason”

the 5% Distributions and 5% of proceeds upon sale are due to Mr.

Rubenstein and Ms.

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Rubenstein and Ms.

Silvers of $812,501 and $332,189, respectively, otherwise due to them as change of control payments upon the consummation of the sale of Theatre Direct (collectively, the “Deferred Change in Control Payments”).

The Amendments to Employment Agreements also provide that if Mr.

Silvers of $812,501 and $332,189, respectively otherwise due to them as change of control payments upon the consummation of the sale of Theatre Direct (Deferred Change in Control Payments).

The Amendments to Employment

Agreements also provide that if Mr.

Rubenstein and/or Ms.

Silvers, continue to be employed by Hollywood Media on the first anniversary (Sale Anniversary) of the sale of Theatre Direct (or if such employment is terminated on or before the Sale Anniversary by Hollywood Media without “cause” or by Mr.

Silvers, continue to be employed by Hollywood Media on the first anniversary

(Sale Anniversary) of the sale of Theatre Direct (or if such employment is terminated on or before the Sale Anniversary by Hollywood

Media without “cause”

Rubenstein and/or Ms.

Silvers, as applicable, for “good reason”), and Hollywood Media receives payments from the buyer of Theatre Direct under either (i) the Promissory Note or (ii) an earn-out provision (Earn-out), they will be entitled to their Deferred Change in Control Payments.

Specifically, up to one-half of the Deferred Change in Control Payments would be due upon collections under the Promissory Note, on a pro-rata basis, and up to one-half of the Deferred Change in Control Payments would be due upon certain collections of the Earn-out, on a pro-rata basis.

Silvers, as applicable, for “good reason”), and Hollywood

Media receives payments from the buyer of Theatre Direct under either i) the Promissory Note or ii) an earn-out provision (Earn-out),

they may be entitled to their Deferred Change in Control Payments.

Specifically, up to one-half of the Deferred Change in Control

Payments would be due upon collections under the Promissory Note, on a pro-rata basis, and up to one-half of the Deferred Change

in Control Payments would be due upon certain collections of the Earn-out, on a pro-rata basis.

These amounts will be due to Mr.

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Rubenstein and/or Ms.

Silvers continue in the employment of Hollywood Media after the Sale Anniversary.

The Deferred Change in Control Payments would be due according to the following schedule:

Silvers continue in the employment

of Hollywood Media after the Sale Anniversary.

The Deferred Change in Control Payments would be due according to the following

Rubenstein will be entitled to:

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2.36% of the first $7 million of Earn-out payments received by Hollywood Media (for a maximum amount of $165,200).

From time to time the Company’s Compensation Committee may award discretionary bonuses to Mr.

Rubenstein and Ms.

Silvers based on their service or performance to the Company.

From time to time the

Company’s Compensation Committee may award discretionary bonuses to Mr.

Rubenstein and Ms.

Silvers each received bonuses of $375,000 during the three months ended September 30, 2011.

These bonuses are included in “Payroll and benefits” in the accompanying unaudited condensed consolidated statement of operations.

Mitchell Rubenstein was appointed Chief Executive Partner of Tekno Books (which is 51% owned by Hollywood Media) on July 21, 2011 due to the death on June 25, 2011 of Tekno Books’ then Chief Executive Partner, Dr.

Martin Greenberg.

In July 2011, Hollywood Media and Tekno Books each received a $750,000 payment from a key-man life insurance policy resulting from Dr.

Greenberg’s death.

There is a dispute with the Estate of Martin Greenberg as to whether the $750,000 distributed to Tekno Books should instead have been paid to Hollywood Media.

Hollywood Media believes that pursuant to the amended and restated partnership agreement of Tekno Books, the entire $1.5 million in policy proceeds are due to Hollywood Media.

Pending the resolution of such dispute, an accrual in the amount of $367,500 (representing the Estate’s 49% ownership interest in Tekno Books multiplied by the $750,000 in insurance proceeds which were paid to Tekno Books) was established.

There is no dispute as to the $750,000 payment on the policy which was made to Hollywood Media in July 2011.

The $1.5 million in policy proceeds, less the amount in dispute of $367,500 are included in “Other, net” in the accompanying unaudited condensed consolidated statement of operations.

Silvers based on their service

or performance to the Company.

(10) SUBSEQUENT EVENTS:

On October 7, 2011, Project Hollywood LLC, a newly formed limited liability company owned by Baseline Holdings LLC (which is owned by Mitchell Rubenstein and Laurie Silvers) acquired from The New York Times Company all of the membership interests of Baseline LLC.

Baseline LLC owns Baseline StudioSystems, a leading provider of movie and TV data services for the entertainment and motion picture industries and a licensor of information to Internet and digital media companies.

Rubenstein and Ms.

Silvers individually contributed $4.5 million in cash to Baseline Holdings LLC which in turn contributed it to Project Hollywood LLC to fund the acquisition.

Hollywood Media previously owned the Baseline StudioSystems business and sold it on August 25, 2006 to The New York Times Company.

The opportunity to purchase the Baseline StudioSystems business was presented to Mr.

Rubenstein and Ms.

Silvers in their individual capacity, and they presented to Hollywood Media’s independent directors the opportunity for Hollywood Media.

Rather than acquire 100% of the Baseline StudioSystems business, Hollywood Media’s independent directors decided unanimously for Hollywood Media to make a minority investment in Project Hollywood LLC alongside Mr.

Rubenstein and Ms.

Silvers with the relative ownership interest of Project Hollywood LLC interests determined based on the proportionate amount each invested.

On October 27, 2011, following Project Hollywood LLC’s acquisition of all of the membership interests of Baseline LLC, Hollywood Media acquired a 21.74% ownership interest in Project Hollywood LLC for $1.25 million, which was based on the same per membership unit price paid by Baseline Holdings for its 78.26% ownership interest in Project Hollywood LLC.

The funds contributed were used for working capital and other capital needs of the Baseline StudioSystems business.

Pursuant to the Project Hollywood LLC Limited Liability Company Agreement, Baseline holdings or its designee will be the managing member, as long as Baseline Holdings or any of its permitted transferees, as defined, has an ownership interest in Project Hollywood LLC.

The managing member of Project Hollywood LLC has full authority, power and discretion to manage and control Project Hollywood LLC’s business and to determine the timing and amounts of distributions.

The Project Hollywood LLC Limited Liability Company Agreement provides that (i) distributions of available cash will be made in accordance with the members’ percentage interests, (ii) Hollywood Media’s ownership interest in Project Hollywood LLC is subject to a right of first refusal in favor of Project Hollywood LLC and Baseline holdings in the event Hollywood Media desires to transfer such ownership interest, (iii) if Baseline Holdings and/or its permitted transferees who together own at least a majority of Project Hollywood LLC agree to sell its ownership interest in Project Hollywood LLC or is required to consent to the transaction, waive any appraisal rights, and agree to sell its ownership interest in Project Hollywood LLC on the same terms and conditions as other members;

and (iv) if Baseline Holdings desires to sell its ownership interest in Project Hollywood LLC, Hollywood Media would be able to participate in such sale by selling a proportionate amount of its interest in Project Hollywood LLC.

On October 27, 2011, the Company, together with National Amusements Inc.

and the MovieTickets.com Joint Venture, filed a lawsuit against AMC Entertainment Inc.

(“AMC”) and MovieTickets.com Inc.

(as nominal defendant) (Case No.

50 2011 CA 016684) in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida relating to the MovieTickets.com Joint Venture.

MovieTickets.com is an online movie ticketing service in which Hollywood Media, National Amusements, Inc.

and AMC each own a 26.2% equity interest.

The complaint alleges that AMC has breached and continues to breach the MovieTickets.com Joint Venture Agreement, which obligates AMC to exclusively provide its ticket inventory to MovieTickets.com, and has breached its contractual, statutory, and common law duties of good faith, fair dealing, and loyalty with respect to the MovieTickets.com Joint Venture and its partners, Hollywood Media and National Amusements, Inc., as a result of various actions by AMC.

The complaint alleges that these actions include, among other things, (i) AMC failing and refusing to provide the movie theater ticket inventory of Loews and Kerasotes (both of which were acquired by AMC) to MovieTickets.com for Internet ticketing, (ii) ticketing its Loews and Kerasotes ticket inventory through a MovieTickets.com competitor, (iii) anticipatorily repudiating its obligations to the MovieTickets.com Joint Venture, (iv) AMC engaging in negotiations with a competitor to MovieTickets.com and other exhibitors regarding business transactions in competition with MovieTickets.com, and (v) otherwise acting solely for its own benefit to the detriment of its partners in the MovieTickets.com Joint Venture.

Hollywood Media and the other plaintiffs have asked for a jury trial and are seeking unspecified consequential damages and have reserved the right to seek punitive damages.

Hollywood Media and the other plaintiffs also are seeking a declaratory judgment that AMC is obligated to make available on MovieTickets.com’s website AMC’s ticket inventory for sale on an exclusive basis and to honor its contractual, common law, and statutory fiduciary duties of good faith and loyalty to the MovieTickets.com Joint Venture and its partners, Hollywood Media and National Amusements, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Amendment to the

Broadway Sale Purchase Agreement

On April 22, 2012,

the Company entered into the Amendment to the Broadway Sale Purchase Agreement.

Pursuant to the Amendment, the Company consented

to the contribution of the “

group sales ”

business (but not the Broadway.com consumer ticketing business) owned

by Key Brand to a newly formed joint venture (the “Group Sales JV”;

such contribution, the “Group Sales Contribution”).

The balance of the business sold to Key Brand under the terms of the Purchase Agreement, which includes Broadway.com, remains at

Key Brand and Theatre Direct.

As part of the Amendment, Key Brand agreed to pay the first $7 million earn-out amount to the Company

on or before October 1, 2012 regardless of the actual revenues of Theatre Direct and its subsidiaries for the fiscal year of Key

Brand ending June 30, 2012.

The $7 million earn-out amount agreed to by Key Brand will be recorded upon collection of the amount.

In addition, the revenue calculation for the second $7 million earn-out amount (the “Second Earn-out”) was modified

to exclude “

group sales ”

(and the revenues of the new joint venture conducting such business) and the target

for such second earn-out was reduced from $150 million to $123 million accordingly.

Lastly, if the Second Earn-out amount is earned

in Key Brand’s fiscal year ending June 30, 2012, then such amount would be added to the principal amount of the $8.5 million

loan due the Company under the Credit Agreement, would accrue and be paid interest in accordance with such loan, and be paid over

the then remaining term of the Credit Agreement in equal quarterly installments, in each case as further described below.

If the Second Earn-out

amount is earned in any subsequent fiscal year, then such amount would be paid pursuant to the terms of the Purchase Agreement.

The Company also consented to certain amendments to the Credit Agreement, including consent to the Group Sales Contribution and

to provide for additional reporting requirements.

The Company also agreed to amend the Subordination and Intercreditor Agreement,

dated December 15, 2010 (the “Intercreditor Agreement”), among the Company, Key Brand and JPMorgan Chase Bank, N.A.,

as administrative agent for the senior secured lenders of Key Brand, to provide that, subject to Key Brand’s compliance with

the terms and conditions of its senior secured credit agreement, Key Brand would be permitted to make scheduled quarterly installment

payments of the Second Earn-out amounts prior to the maturity of the Credit Agreement, notwithstanding that the obligations under

the Credit Agreement are subordinated to Key Brand’s obligations under the senior secured credit agreement.

Sale of Cinemasource UK Limited - Share

Purchase Agreement

On May 1, 2012,

the Company entered into a share purchase agreement (the “Share Purchase Agreement”) with Orchard Advertising

Limited (“Buyer”), pursuant to which the Company sold, and Buyer purchased, the entire issued share capital of

Cinemasource UK Limited (the “Purchased Shares”) which business was part of the Company’s Ad Sales division and

included UK Theatres Online Limited, Spring Leisure Limited, Cinemasonline Limited and WWW.Co.UK

UK Limited accounted for approximately 75% and 76% of net revenues for the three months ended March 31, 2012 and 2011,

respectively and approximately $(12,000) and $28,000 in net income (loss) for the same

Additionally, Cinemasource UK Limited accounted for approximately $600,000 of total consolidated assets as of

March 31, 2012 and substantially all the deferred revenue as of March 31, 2012.

Jeffrey Spector, a director of Buyer,

is also (i) a director of all four subsidiaries of Cinemasource UK Limited (UK Theatres Online Limited, Spring

Leisure Limited, Cinemasonline Limited and WWW.

Co.UK Limited) and (ii) an employee of one of the subsidiaries of

Cinemasource UK Limited (UK Theatres Online).

Erskine, a director of Buyer, is also (i) a director of three subsidiaries of Cinemasource UK Limited (UK Theatres Online

Limited, Spring Leisure Limited and Cinemasonline Limited) and (ii) an employee of one of the subsidiaries of Cinemasource UK

Limited (UK Theatres Online).

None of Buyer's directors, officers or shareholders are (or were ever) directors or officers of Hollywood

Pursuant to the Share

Purchase Agreement, the purchase price for the Purchased Shares is U.S.

$250,000, payable in cash in twenty equal quarter-annual

installments of $12,500 each over a period of five years.

Subject to the terms and conditions of the Share Purchase Agreement,

the first installment of the purchase price is due on July 31, 2012 and subsequent installments of the purchase price are due every

three calendar months thereafter.

The purchase price

for the Purchased Shares is collateralized by a lien on the Purchased Shares (and certain dividends, payments or other derivative

assets received in respect of the Purchased Shares) pursuant to the terms of the share charge deed, dated as of May 1, 2012, between

the Company and Buyer (the “Share Charge Deed”).

Except as permitted by the Share Purchase Agreement, the Share Charge

Deed also restricts Buyer from (i) permitting any other lien to exist against the Purchased Shares (and certain dividends, payments

or other derivative assets received in respect of the Purchased Shares), (ii) selling or transferring the Purchased Shares (and

certain dividends, payments or other derivative assets received in respect of the Purchased Shares), and (iii) disposing of the

equity of redemption in respect of the Purchased Shares (and certain dividends, payments or other derivative assets received in

respect of the Purchased Shares).

In the event of (i) a transaction whereby any persons or group of persons acting in concert purchase

at least 80% of the Purchased Shares or at least 80% of the issued share capital of each of the subsidiaries of Cinemasource UK

Limited or Buyer or (ii) a transaction whereby any person or group of persons acting in concert purchase the whole or substantially

the whole of the business and assets of Cinemasource UK Limited and its subsidiaries (each, an “Exit Event”), then

(A) if the proposed purchaser in such Exit Event is a “connected person”

to Buyer (as set forth in the Share Purchase

Agreement) or if the aggregate consideration payable to Buyer, Cinemasource UK Limited and its subsidiaries, and/or the shareholders

of Buyer in respect of an Exit Event (the “Subsequent Sale Proceeds”) exceeds the balance of the purchase price remaining

to be paid by Buyer to the Company under the Share Purchase Agreement (the “Balance”), then the Balance shall become

immediately payable to the Company or (B) if the proposed purchaser is not a “connected person”

to Buyer and the Subsequent

Sale Proceeds are less than the Balance, then Buyer will pay to The Company the amount of the Subsequent Sale Proceeds in lieu

of the Balance, unless the Company requests that the Purchased Shares are transferred back to the Company (and Buyer transfers

the Purchased Shares back to the Company) in satisfaction of the Balance.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q or that are otherwise made by us or on our behalf about our financial condition, results of operations and business constitute “forward-looking statements,” within the meaning of federal securities laws.

Certain statements

in this Quarterly Report on Form 10-Q or that are otherwise made by us or on our behalf about our financial condition, results

of operations and business constitute “forward-looking statements,”

within the meaning of federal securities laws.

Hollywood Media Corp.

(“Hollywood Media”, “our”, or “Company”) cautions readers that certain important factors may affect Hollywood Media’s actual results, levels of activity, performance or achievements and could cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements anticipated, expressed or implied by any forward-looking statements that may be deemed to have been made in this Quarterly Report on Form 10-Q or that are otherwise made by or on behalf of Hollywood Media.

Without limiting the generality of the foregoing, “forward-looking statements” are typically phrased using words such as “may,” “will,” “should,” “expect,” “plans,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “pro forma” or “continue” or the negative variations thereof or similar expressions or comparable terminology.

Factors that may affect Hollywood Media’s results and the market price of our common stock include, but are not limited to:

(“Hollywood Media”, “our”, or “Company”) cautions readers that certain

important factors may affect Hollywood Media’s actual results, levels of activity, performance or achievements and could

cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels

of activity, performance or achievements anticipated, expressed or implied by any forward-looking statements that may be deemed

to have been made in this Quarterly Report on Form 10-Q or that are otherwise made by or on behalf of Hollywood Media.

limiting the generality of the foregoing, “forward-looking statements”

are typically phrased using words such as “may,”

“will,”

“should,”

“expect,”

“plans,”

“believe,”

“anticipate,”

“intend,”

“could,”

“estimate,”

“pro forma”

or “continue”

or the negative

variations thereof or similar expressions or comparable terminology.

Factors that may affect Hollywood Media’s results and

the market price of our common stock include, but are not limited to:

our continuing operating losses;

1 unchanged sentence

our ability to develop and maintain strategic relationships;

MovieTickets.com Inc.’s ability to compete with other online ticketing services and other competitors, and the outcome of, and potential impact of matters relating to, the lawsuit filed by Hollywood Media, National Amusements Inc.

and the MovieTickets.com Joint Venture against AMC Entertainment Inc.

MovieTickets.com Inc.’s ability to compete with the other online movie ticketing service

and other competitors, and the outcome of, and potential impact of matters relating to, the lawsuit filed by Hollywood Media, National

Amusements Inc.

and MovieTickets.com, Inc.

(as nominal defendant) relating to the MovieTickets.com Joint Venture (for more information about such lawsuit, see Note 12 “Subsequent Events” in the Notes to the Unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q;

against AMC Entertainment Inc.

relating to MovieTickets.com (for more information about

such lawsuit, see Part II, Item 1 (Legal Proceedings) of this Quarterly Report on Form 10-Q and Note 7 “Certain Commitments

and Contingencies”

in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly

Report on Form 10-Q);

our ability to maintain and obtain sufficient capital to finance our operations;

1 unchanged sentence

government regulation;

adverse economic factors such as recession, war, terrorism, international incidents or labor strikes and disputes;

adverse economic factors such as recession, war, terrorism, international incidents or labor strikes

and disputes;

our ability to design, implement and maintain effective internal controls;

1 unchanged sentence

the unpredictability of our stock price;

the possibility of our common stock being delisted from the NASDAQ Global Market and not qualifying for trading on another exchange or market (such as the NASDAQ Capital Market, the NYSE Amex (formerly the American Stock Exchange) or the over-the-counter market);

the possibility of our common stock being delisted from the NASDAQ Global Market and not qualifying

for trading on another exchange or market (such as the NASDAQ Capital Market, the NYSE Amex (formerly the American Stock Exchange)

or the over-the-counter market);

the possibility of not receiving payments from Key Brand Entertainment Inc.

in connection with the sale of our Broadway Ticketing business pursuant to that certain Second Lien Credit Security and Pledge Agreement dated as of December 15, 2010, entered into by Theatre Direct NY, Inc., Key Brand Entertainment Inc., and Hollywood Media (the “Credit Agreement”) or pursuant to the potential earn-out under that certain Stock Purchase Agreement, dated as of December 22, 2009, entered into between Hollywood Media and Key Brand Entertainment Inc.

(as amended, the “Purchase Agreement”);

the impact of Dr.

Martin Greenberg’s death on the ability of Tekno Books to maintain relationships it has with certain authors and publishers;

the timing and amount of the payments we receive pursuant to the Credit Agreement and the potential earn-out under the Purchase Agreement;

our ability to exercise or put our warrant to purchase 5% of the outstanding shares of common stock of Theatre Direct NY, Inc.

in connection with

the sale of our Broadway Ticketing business pursuant to that certain Second Lien Credit Security Pledge Agreement dated as of December

15, 2010, entered into by Theatre Direct NY, Inc., Key Brand Entertainment Inc., and Hollywood Media (the “Credit Agreement”)

or payment due under Amendment No.

4 (the “Amendment”) to the Broadway Sale Purchase Agreement or pursuant to the potential

earn-out under that certain Stock Purchase Agreement, dated as of December 22, 2009, entered into between Hollywood Media and Key

Brand Entertainment Inc.

(as amended, the “Purchase Agreement”);

the impact of the death of Tekno Books’

former Chief Executive Partner, Dr.

Martin Greenberg,

on the ability of Tekno Books to maintain relationships it has with certain authors and publishers;

the timing and amount of the payments we receive pursuant to the Credit Agreement and the potential

earn-out under the Purchase Agreement;

our ability to exercise or put our warrant to purchase 5% of the outstanding shares of common stock

of Theatre Direct NY, Inc.

issued to us by Theatre Direct NY, Inc.

pursuant to the Purchase Agreement.

Hollywood Media is also subject to other risks detailed herein, or detailed in our Annual Report on Form 10-K for the year ended December 31, 2010, as amended, and in other filings made by Hollywood Media with the Securities and Exchange Commission.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.

Other factors, including unknown or unpredictable ones, also could have material adverse effects on our future results.

Because these forward-looking statements are subject to risks and uncertainties, we caution you not to place undue reliance on these statements, which speak only as of the date of this Quarterly Report on Form 10-Q.

We do not undertake any responsibility to review or confirm analysts’ expectations or estimates or to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this Quarterly Report on Form 10-Q, except as required by law.

As a result of the foregoing and other factors, no assurance can be given as to the future results, levels of activity or achievements and neither we nor any other person assumes responsibility for the accuracy and completeness of such statements.

Until December 15, 2010, Hollywood Media was comprised of various businesses focusing primarily on online ticket sales, deriving revenue primarily from Broadway, Off-Broadway and London’s West End ticket sales to individuals and groups, as well as advertising and book development license fees and royalties.

Our Broadway Ticketing business was comprised of Broadway.com, 1-800-BROADWAY, Theatre Direct and Theatre.com.

On December 15, 2010, we completed the sale of our Broadway Ticketing Business through the sale of all of the outstanding capital stock of Theatre Direct to Key Brand, as contemplated by the Purchase Agreement.

Following this sale, our business segments for our continuing operations are as follows:

Ad Sales – includes U.K.

Theatres Online (formerly CinemasOnline), which sells advertising on plasma TV displays throughout the U.K.

and Ireland, on lobby display posters, movie brochure booklets and ticket wallets distributed in cinemas, live theater and other entertainment venues in the U.K.

Intellectual Properties – owns or controls the exclusive rights to certain intellectual properties created by best-selling authors and media celebrities, which it licenses for book and other media.

This segment includes a 51% interest in Tekno Books, which is a book development business, and this segment does not include our 50% interest in NetCo Partners, for purposes of this discussion and analysis.

Other – is comprised of payroll and benefits for corporate and administrative personnel as well as other corporate-wide expenses, such as legal fees, audit fees, proxy costs, insurance, centralized information technology, and includes consulting and other fees and costs relating to compliance with the provisions of the Sarbanes-Oxley Act of 2002 that require Hollywood Media to assess and report on internal control over financial reporting, and related development of controls.

Hollywood Media is

also subject to other risks detailed herein, or detailed in our Annual Report on Form 10-K for the year ended December 31, 2011,

as amended, and in other filings made by Hollywood Media with the Securities and Exchange Commission.

These factors are not

necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our

forward-looking statements.

Other factors, including unknown or unpredictable ones, also could have material adverse effects on

our future results.

Because these forward-looking

statements are subject to risks and uncertainties, we caution you not to place undue reliance on these statements, which speak

only as of the date of this Quarterly Report on Form 10-Q.

We do not undertake any responsibility to review or confirm analysts’

expectations or estimates or to release publicly any revisions to these forward-looking statements to take into account events

or circumstances that occur after the date of this Quarterly Report on Form 10-Q, except as required by law.

As a result of the

foregoing and other factors, no assurance can be given as to the future results, levels of activity or achievements and neither

we nor any other person assumes responsibility for the accuracy and completeness of such statements.

Until December 15,

2010, Hollywood Media was comprised of various businesses focusing primarily on online ticket sales, deriving revenue primarily

from Broadway, Off-Broadway and London’s West End ticket sales to individuals and groups, as well as advertising and book

development license fees and royalties.

Our Broadway Ticketing business was comprised of Broadway.com, 1-800-BROADWAY, Theatre

Direct and Theatre.com.

On December 15, 2010, we completed the sale of our Broadway Ticketing Business through the sale of all

of the outstanding capital stock of Theatre Direct to Key Brand, as contemplated by the Purchase Agreement.

Following this sale,

our business segments for our continuing operations are as follows:

Ad Sales –

includes UK Theatres Online (formerly CinemasOnline), which sells advertising

on plasma TV displays throughout the U.K.

and Ireland, on lobby display posters, movie brochure booklets and ticket wallets distributed

in cinemas, live theater and other entertainment venues in the U.K.

This segment also includes Hollywood Media’s

26.2% equity interest in MovieTickets.com.

See Note 10 “Subsequent Events”

in the Notes to the Condensed Consolidated

Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q for information on the Company’s sale

of UK Theatres Online on May 1, 2012.

Intellectual Properties –

owns or controls the exclusive rights to certain intellectual

properties created by best-selling authors and media celebrities, which it licenses for book and other media.

This segment includes

our wholly-owned subsidiary, Tekno Books, and a book development business, and this segment does not include our 50% interest in

NetCo Partners, for purposes of this discussion and analysis.

Other –

is comprised of payroll and benefits for corporate and administrative personnel

as well as other corporate-wide expenses, such as legal fees, audit fees, proxy costs, insurance, centralized information technology,

and includes consulting and other fees and costs relating to compliance with the provisions of the Sarbanes-Oxley Act of 2002 that

require Hollywood Media to assess and report on internal control over financial reporting, and related development of controls.

This segment also includes Hollywood Media’s 21.74% equity interest in Project Hollywood, which in turn owns Baseline.

Results of Operations

The following discussion and analysis should be read in conjunction with Hollywood Media’s Unaudited Condensed Consolidated Financial Statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table summarizes Hollywood Media’s revenues, operating expenses and operating income (loss) from continuing operations by reportable segment for the nine months ended September 30, 2011 (“Y3-11”) and 2010 (“Y3-10”) and the three months ended September 30, 2011 (“Q3-11”) and 2010 (“Q3-10”), respectively:

Operating Expenses

Operating Income (Loss)

% of Total Net Revenue

Operating Expenses

Operating Income (Loss)

% of Total Net Revenue

The following discussion

and analysis should be read in conjunction with Hollywood Media’s Unaudited Condensed Consolidated Financial Statements and

the notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

The following table

summarizes Hollywood Media’s revenues, operating expenses and operating income (loss) from continuing operations by reportable

segment for the three months ended March 31, 2012 (“Q1-12”) and 2011 (“Q1-11”), respectively:

Operating Expenses

3 unchanged sentences

Operating Income (Loss)

$ (2,071,233 )

$ (2,048,210 )

% of Total Net Revenue

(a) Does not include Hollywood Media’s 50% non-controlling interest in NetCo Partners which is accounted for under the equity method of accounting and Hollywood Media’s share of the income (loss) is reported as Equity in Earnings of Unconsolidated Investees.

Results of Discontinued Operations

Sale of Broadway Ticketing Division to Key Brand Entertainment, Inc.

On December 15, 2010, Hollywood Media Corp.

(“Hollywood Media”) completed the sale of its Broadway Ticketing Division (the “Broadway Sale”) through the sale of all of the outstanding capital stock of Theatre Direct NY, Inc.

(“Theatre Direct”) to Key Brand Entertainment Inc.

(“Key Brand”), as contemplated by the Stock Purchase Agreement, dated as of December 22, 2009, entered into between Hollywood Media and Key Brand (the “Purchase Agreement”).

There are no material relationships among Hollywood Media and Key Brand or any of their respective affiliates other than in respect of the Purchase Agreement and the related ancillary agreements.

Hollywood Media received payments of $773,500 and $260,667 of interest from Key Brand during the nine and three months ended September 30, 2011, respectively, in accordance with the terms of the Loan which was included in “Interest, net” in the accompanying condensed consolidated statements of operations for the nine and three months ended September 30, 2011.

The accrual was included in “Accrued expenses and other” in our consolidated balance sheets as of December 31, 2010.

This working capital adjustment of $3,734,106 was paid on March 22, 2011 and included $31,486 of interest which is included in “Gain on sale of discontinued operations, net of income taxes” in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2011.

Hollywood Media agreed to provide certain transition services to Key Brand and Theatre Direct for a six-month period which ended on June 15, 2011.

The financial results of our Broadway Ticketing Division for all periods presented prior to December 15, 2010 have been reclassified from continuing operations and included in discontinued operations.

For additional information about this transaction, see Note 3 “Discontinued Operations” on the Notes to the Unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Sale of Hollywood.com Business Unit to R&S Investments, LLC

On August 21, 2008, Hollywood Media entered into a purchase agreement (the “R&S Purchase Agreement”) with R&S Investments, LLC (“Purchaser” and “R&S Investments”) for the sale of the Hollywood.com Business.

The Purchaser is owned by Mitchell Rubenstein, Hollywood Media’s Chief Executive Officer and Chairperson of the Board, and Laurie S.

Silvers, Hollywood Media’s President and Vice-Chairperson of the Board.

Pursuant to the R&S Purchase Agreement, Hollywood Media sold the Hollywood.com Business to Purchaser for a potential purchase price of $10.0 million, which includes $1.0 million in cash which was paid to Hollywood Media at closing and potential earn-out payments totaling $9.0 million.

During the nine and three months ended September 30, 2011, Hollywood Media recorded $460,037 and $155,538, respectively, in earn-out income under this agreement.

As of the filing of this Quarterly Report on Form 10-Q, the earn-out receivable was collected in full in accordance with the payment terms.

As of September 30, 2011, there remains $7,399,360 in potential earn-out payments pursuant to this agreement.

Total net revenues were $2,947,314 for Y3-11 as compared to $2,981,093 for Y3-10, a decrease of $33,779 or 1% and $860,620 for Q3-11 as compared to $973,392 for Q3-10, a decrease of $112,772 or 12%.

The decrease in net revenue for Y3-11 as compared to Y3-10 was primarily due to the result of a $192,126 decrease in Ad Sales revenue offset by a $158,347 increase in Intellectual Property revenue.

The decrease in net revenue for Q3-11 as compared to Q3-10 is primarily the result of a $76,581 decrease in Intellectual Property revenue and a $36,164 decrease in Ad Sales revenue.

Ad Sales division net revenues were $2,105,768 for Y3-11 as compared to $2,297,894 for Y3-10, an decrease of $192,126 or 8%, and such net revenues were $708,196 for Q3-11 as compared to $784,777 for Q3-10, a decrease of $76,581 or 10%.

The decrease in Ad Sales net revenues for Y3-11 as compared to Y3-10 is attributable primarily to a decrease in U.K.

advertising sales of $192,153, which includes:

a decrease in plasma advertising revenue of $129,767 and a decrease of $62,386 in brochure and web advertising.

The decrease in Ad Sales net revenues for Q3-11 as compared to Q3-10 was primarily attributable to a decrease in U.K.

advertising sales of $76,581, which includes:

a decrease in plasma advertising revenue of $58,908 and a decrease of $17,700 in brochure and web advertising.

These decreases are primarily attributable to the adverse economic conditions in the U.K.

Net revenues from our Intellectual Properties division were $841,546 for Y3-11 as compared to $683,199 for Y3-10, an increase of 23% or $158,347, and such net revenues were $152,424 for Q3-11 as compared to $188,615 for Q3-10, a decrease of 19% or $36,191.

The increase in net revenues from our Intellectual Properties division in Y3-11 as compared to Y3-10 and the decrease in net revenues from Q3-11 as compared to Q3-10 was attributable to the timing of royalty payments received.

The Intellectual Properties division generates revenues from several different activities including intellectual property licensing and book development.

Sale of Broadway Ticketing Division

to Key Brand Entertainment, Inc.