What changed in this filing

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Item 1. Financial Statements

2012-08-20 compared with 2012-05-15 · 643 added, 510 removed, 818 unchanged (58% of the section changed)

4 unchanged sentences

Cash and cash equivalents

Receivables, net

Prepaid expenses

2 unchanged sentences

Current portion of deferred compensation

Current assets of discontinued operations

Total current assets

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DEFERRED COMPENSATION, less current portion

LONG TERM ASSETS OF DISCONTINUED OPERATIONS

LIABILITIES AND SHAREHOLDERS’

3 unchanged sentences

Deferred revenue

Customer deposits

Current portion of capital lease obligations

Current liabilities of discontinued operations

Total current liabilities

3 unchanged sentences

DERIVATIVE LIABILITIES

COMMITMENTS AND CONTINGENCIES

LONG TERM LIABILITIES OF DISCONTINUED OPERATIONS

COMMITMENTS AND CONTINGENCES

SHAREHOLDERS’

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none outstanding

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

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

23,179,066 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

Additional paid-in capital

5 unchanged sentences

The accompanying notes to condensed consolidated

financial statements

are an integral part of these condensed

consolidated balance sheets.

financial statements are an integral part of these condensed consolidated balance sheets.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Six Months Ended June 30,

Three Months Ended June 30,

OPERATING COSTS AND EXPENSES

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Loss from operations

EARNINGS OF UNCONSOLIDATED INVESTEES

EARNINGS (LOSSES) OF UNCONSOLIDATED INVESTEES

OTHER INCOME (EXPENSE)

Interest, net

Loss from continuing operations

Income from discontinued operations

(Loss) income from continuing operations

Gain (loss) on sale of discontinued operations, net of Income taxes

Income (loss) from discontinued operations

Net (loss) income

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST

Net loss attributable to Hollywood Media Corp.

Net (loss) income attributable to Hollywood Media Corp.

$ (1,482,316 )

Basic and diluted income (loss) per common share

Basic and diluted (loss) income per common share

Continuing operations

Discontinued operations

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.

Total basic and diluted net (loss) income per share

Weighted average common and common equivalent shares outstanding –

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

HOLLYWOOD MEDIA CORP.

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CONDENSED CONSOLIDATED STATEMENTS OF

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Income from discontinued operations

(Income) loss from discontinued operations

Depreciation and amortization

Amortization of deferred compensation costs - officers

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

Recovery (provision) for bad debts

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

Loss on disposal of fixed assets

Gain on sale of business

Change in fair value of derivative liabilities

Changes in assets and liabilities:

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Deferred revenue

Customer deposits

Other deferred liability

Net cash used in operating activities –

continuing operations

Net cash (used in) provided by operating activities –

discontinued operations

Net cash used in operating activities

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Net proceeds (expenditures) from sale of assets and businesses

Net cash provided by (used in) investing activities –

continuing operations

Net cash used in investing activities –

discontinued operations

Net cash provided by (used in) investing activities

1 unchanged sentence

Repayments under capital lease obligations

Repayments of notes payable

Purchase of tendered common stock

(16,400,000 )

Net cash used in financing activities –

continuing operations

(16,435,265 )

Net cash used in financing activities –

discontinued operations

Net cash used in financing activities

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The accompanying notes to condensed consolidated

financial statements

are an integral part of these condensed

consolidated statements of cash flows.

financial statements are an integral part of these condensed consolidated statements of cash flows.

HOLLYWOOD MEDIA CORP.

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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.

The results of operations for the six and three months ended June 30, 2012 and

the cash flows for the six months ended June 30, 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:

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Loss per Common Share

Financial Accounting

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

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.

(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 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.

totaled 75,000 shares for each of the six and three months ended June 30, 2012 and such shares were excluded from the calculation

of basic and diluted loss per share for the six and three months ended June 30, 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 June 30, 2012 and

2011, respectively.

For the Six Months

For the Three Months

Ended March 31,

Ended June 30,

Basic weighted average shares outstanding

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Dilutive weighted average shares outstanding

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

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.

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

Segment Information

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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

derivative instruments at fair value in our accompanying condensed consolidated balance sheets with changes in the fair values

of those instruments reported in earnings in our condensed 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

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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.

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

(3) DISCONTINUED OPERATIONS:

Sale of Broadway Ticketing

Division to Key Brand Entertainment, Inc.

Sale of Broadway

Ticketing Division to Key Brand Entertainment, Inc.

On December 15, 2010,

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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.

Amendment to the Broadway Sale Purchase

On April 22, 2012,

the Company entered into Amendment No.

4 (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.

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.

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 payments of $515,667 and $257,833 of interest from Key Brand during

the six and three months ended June 30, 2012, respectively, and $512,833 and $257,833 in payments or interest from Key Brand during

the six and three months ended June 30, 2011, respectively, in accordance with the terms of the Loan which was included in “Interest,

in the accompanying condensed consolidated statements of operations for the six and three months ended June 30, 2012

and 2011, respectively.

After the closing date

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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”

of interest which is included in “Gain (loss) 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.

condensed consolidated statements of operations for the six and three months ending June 30, 2011.

In connection with

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professional services to the Company.

Hollywood.com

Hollywood.com Business

On August 21, 2008,

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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.

of which $1,892,692 has been paid as of June 30, 2012.

Hollywood Media recognized $326,758 and $129,241 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.

the six and three months ended June 30, 2012, respectively, and $304,499 and $152,543 in earn-out gain during the six and three

months ended June 30, 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

As of June 30, 2012, there remains $7,107,308 in potential earn-out payments.

9, “Related Party Transactions”

for information on the extension of payment terms of such earn-out.

If a subsequent change

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with the same earn-out terms.

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 Limited.

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).

Janette 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).

Pursuant to the Share

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

$250,000, payable in cash in a non-interest bearing loan

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 was due and was paid to the Company on July 31, 2012

and subsequent installments of the purchase price are due every three calendar months thereafter.

The Company imputed interest

at 16.5%, per annum, on this non-interest bearing loan resulting in a discounted amount of $168,014 which was included in the total

gain on sale attributable to the sale of Cinemasource UK Limited of $649,215.

This gain on sale is included in “Income (loss)

from discontinued operations”

in our accompanying Condensed Consolidated Statement of Operations.

portion of the discounted amount of the non-interest bearing loan is included in “Other receivables”

and the long-term

portion of the non-interest bearing loan is included in “Other assets”

in our accompanying condensed consolidated balance

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 defined 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 demands 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.

Pursuant to ASC Topic

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 Cinemasource

UK Limited as discontinued operations.

The sale of Cinemasource UK Limited qualifies for discontinued operations treatment under

The assets and liabilities of such operations have been reclassified as current or long term “Assets of discontinued

operations”

and current and long term “Liabilities of discontinued operations”

in the accompanying December 31,

2011 consolidated balance sheet, and consist of the following:

December 31, 2011

Current assets

Property and equipment, net

Total assets of discontinued operations

Current liabilities

Long-term liabilities

Total liabilities of discontinued operations

Results from Discontinued Operations

The net income from

discontinued operations has been classified in the accompanying condensed consolidated statements of operations as “Income

(loss) from discontinued operations”

and includes the gain on sale of the Hollywood.com Business and the gain on sale of

Cinemasource UK Limited Business.

Summarized results of discontinued operations include the operating gain from the Hollywood.com

Business and the operating gain from the Cinemasource UK Limited Business and through their respective dates of disposition, for

the six and three months ended June 30, 2012 and 2011.

Six Months Ended June 30,

Three Months Ended June 30,

Net Revenues:

Gain (loss) on sale of discontinued operations, net of income taxes

Income (loss) from discontinued operations

Income (loss) from discontinued Operations

(4) PURCHASE OF COMMON STOCK TENDERED:

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shares of common stock outstanding.

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

its common stock.

During the six and three months ended June 30, 2012, respectively, Hollywood Media did not

repurchase shares of its common stock.

(5) FAIR VALUE MEASUREMENTS:

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of these instruments.

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

The carrying value of notes payable and the non-interest bearing loan receivable with imputed interest at

16.5%, per annum, approximate fair value because the interest rates approximate the market rates.

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.

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.

Fair value is the price

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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.

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 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 condensed consolidated statements of

At June 30, 2012, the fair value of the derivative liability was $1,040,000.

In conjunction with

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After estimating future cash flows

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

adjusted for risk factors it was determined that the fair value was zero at June 30, 2012.

Certain assets such

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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:

basis within the fair value hierarchy utilized to measure fair value as of June 30, 2012:

Derivative liabilities –

March 31, 2012

June 30, 2012

Warrant –

March 31, 2012

June 30, 2012

Goodwill –

March 31, 2012

June 30, 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:

of the fair value hierarchy during the quarter ended June 30, 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 June 30, 2012:

Balance at December 31, 2011

Payment to officers

Change in fair value included in earnings

Balance at March 31, 2012

Balance at June 30, 2012

(6) SEGMENT REPORTING:

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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.

consists of Hollywood Media’s investment in MovieTickets.com.

Prior to the sale of Cinemasource UK Limited on May 1, 2012

(which business included UK Theatres Online Limited, Spring Leisure Limited, Cinemasonline Limited and WWW.CO.UK Limited), the

Ad Sales segment also sold 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.

3, “Discontinued Operations”

for information on the sale of Cinemasource UK Limited.

The Intellectual Properties

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sales or transfers.

The following table

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

Three months ended March 31,

As of June 30,

2012, the Ad Sales segment consists of the Company’s investment in MovieTickets.com.

As the Company accounts for its investment

in MovieTickets.com under the equity method of accounting, there are no net revenues, operating income (loss), capital expenditures

or depreciation and amortization expense to report for the Ad Sales segment.

The following table illustrates the financial information

regarding Hollywood Media’s reportable segments.

Six Months Ended June 30,

Three Months Ended June 30,

Net Revenues:

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$ (2,476,454 )

$ (3,218,659 )

$ (1,587,023 )

$ (1,161,663 )

Capital Expenditures:

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Intellectual Properties

(1) December 31, 2011 segment

assets have been adjusted for the reclassification of

assets related to Cinemasource UK Limited of $590,507

from the Ad Sales segment to the Other segment.

(7) CERTAIN COMMITMENTS AND CONTINGENCIES:

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,

the Company, together with National Amusements Inc., filed a lawsuit against AMC Entertainment Inc.

(“AMC”) (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, Inc.

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.

MovieTickets.com

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

and AMC each own a 26.2% equity interest.

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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’

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.

is proceeding.

Hollywood Media is

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(8) MOVIETICKETS.COM:

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.

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 owns 26.2% of the equity

in MovieTickets.com, Inc.

as of June 30, 2012 and shares in 26.2% of the income or losses generated by the joint venture.

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

loss as “Equity (losses) in earnings of unconsolidated investees”

in the accompanying condensed consolidated balance

Hollywood Media recorded

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

its 26.2% share of net loss or $72,115 and $121,034 under “Earnings (Losses) 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.

unaudited condensed consolidated statement of operations for the six and three months ended June 30, 2012, respectively.

recorded $179,068 and $115,610 in earnings of unconsolidated investees for the six and three months ended June 30, 2011, respectively.

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

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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

above, there were no dividends declared or received during the six and three months ended June 30, 2012 or during the year ended

December 31, 2011.

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

Rubenstein and Ms.

Silvers, see Note 9, “Related

Party Transactions”

Silvers, see Note

9, “Related Party Transactions”

to these unaudited condensed consolidated financial statements.

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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.

Under that vesting schedule, Hollywood Media’s ownership in Project Hollywood was reduced to 20.65%

at June 30, 2012, and (if vesting occurs) will be reduced to 19.57% at June 30, 2013 and 18.48% at June 30, 2014.

Distributions of $176,866

and $177,182 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.

year ended December 31, 2011 and the six months ended June 30, 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.

$326,758 and $129,241 in earn-out gain from R&S Investments, LLC during the six and three months ending June 30, 2012, respectively,

which is included in “Income (loss) from discontinued operations”

recorded in the accompanying condensed consolidated

statement of operations.

As of June 30, 2012, the Company has $642,082 included in “Related party receivable”

accompanying condensed consolidated balance sheets which consisted of $542,600 in earn-out receivable from R&S Investments,

LLC, $10,870 in distributions receivable from Project Hollywood, $72,109 in expense reimbursements from R&S Investments, LLC,

$16,139 for payroll taxes receivable from Mr.

Rubenstein and Ms.

Silvers and $364 for an expense reimbursement receivable from

MovieTickets.com.

$284,231 of the earn-out from R&S Investments, LLC was due on June 30, 2012.

However, the due date for such

earn-out, together with any other earn-out payments that may become due from R&S Investments, LLC on or before October 31,

2012 has been extended until October 31, 2012 in order for the parties to seek to finalize discussions that may lead to the buy-out

of the entire earn-out at a negotiated price.

The discussions are being handled on behalf of Hollywood Media by

a Special Committee of Hollywood Media’s Board of Directors comprised solely of independent directors.

There is no guaranty

or assurance that such discussions will lead to a final agreement regarding a buy-out of such earn-out.

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.

$304,499 and $152,543 in earn-out gain from R&S Investments, LLC during the six and three months ending June 30, 2011 which

is included in “Income (loss) 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 sheets 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.

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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.

From time to time

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

Rubenstein and Ms.

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or performance to the Company.

(10) SUBSEQUENT EVENTS:

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

Rubenstein received a bonus of $225,000 and Ms.

Silvers received a bonus of $200,000 during

the three months ended June 30, 2012 and no bonuses during the three months ended March 31, 2012.

Bonuses are included in “Payroll

and benefits”

in the accompanying unaudited condensed consolidated statements of operations.

Rubenstein and Ms.

Silvers have notified the Compensation Committee that each of them plans to voluntarily waive the first $225,000 (in the case

Rubenstein) and the first $200,000 (in the case of Ms.

Silvers) of the 5% Distribution each of them would be entitled to

receive of the 5% Distribution.

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

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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

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.

Prior to the sale of Cinemasource UK Limited on May 1, 2012 (which business included

UK Theatres Online Limited, Spring Leisure Limited, Cinemasonline Limited and WWW.CO.UK Limited), the Ad Sales segment also sold

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.

See Note 3, “Discontinued

Operations”

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 sale of Cinemasource UK Limited.

Intellectual Properties –

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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.

This segment also includes Hollywood Media’s equity interest in Project Hollywood (which was reduced from 21.74% of the total

equity in Project Hollywood to 20.65% of the total equity in Project Hollywood at June 30, 2012), which in turn owns Baseline.

For additional information about the change in Hollywood Media’s equity interest in Project Hollywood, see Note 9, “Related

Party Transactions”

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

Report on Form 10-Q.

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 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:

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 Ad Sales segment

currently consists of the Company’s investment in MovieTickets.com.

As the Company accounts for its investment in MovieTickets.com

under the equity method of accounting, there are no net revenues, operating income (loss), capital expenditures or depreciation

and amortization expense to report for the Ad Sales segment.

The following table summarizes Hollywood Media’s revenues, operating

expenses and operating income (loss) from continuing operations by reportable segment for the six months ended June 30, 2012 (“Y2-12”)

and 2011 (“Y2-11”) and the three months ended June 30, 2012 (“Q1-12”) and 2011 (“Q1-11”), respectively:

Operating Expenses

Operating Income (Loss)

% of Total Net Revenue

$ (2,453,073 )

$ (2,476,454 )

Operating Expenses

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$ (3,218,659 )

% of Total Net Revenue

Operating Expenses

Operating Income (Loss)

$ (1,544,736 )

$ (1,587,023 )

Operating Expenses

Operating Income (Loss)

$ (1,222,452 )

$ (1,161,663 )

Results of Discontinued Operations

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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 “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 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 the changes in fair value.

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 3, “Discontinued

Operations”

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

Report on Form 10-Q 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 the changes in fair value.

After the closing date

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see Note 3 “Discontinued Operations”

and 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.

in the Notes to the Condensed Consolidated Financial Statements included in Part

I, Item I of this Quarterly Report on Form 10-Q.

Sale of Hollywood.com Business Unit

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and potential earn-out payments totaling $9.0 million.

During the three months ending March 31, 2012 and 2011, Hollywood

Media recorded $197,517 and $151,956 respectively, in earn-out income under the R&S Purchase 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.

31, 2012, there remains $7,107,308 in potential earn-out payments pursuant to the R&S Purchase Agreement.

The Hollywood.com

Business included the Hollywood.com website and related URLs and celebrity fan websites and Hollywood.com Television, a free video

on demand service distributed pursuant to annual affiliation agreements with certain cable operators.

For additional information

about this transaction, see Note 3 “Discontinued Operations”

on the Notes to the Condensed Consolidated Financial Statements

included in Item I, Part I of this Quarterly Report on Form 10-Q.

net revenues were $709,875 for Q1-12 as compared to $970,873 for Q1-11, a decrease of $260,998 or 27%.

The decrease in net revenue

in Q1-12 as compared to Q1-11 is primarily the result of a $209,184 decrease in Ad Sales revenue and a $51,814 decrease in Intellectual

Property revenue.

Ad Sales division net

revenues were $533,041 for Q1-12 as compared to $742,225 for Q1-11, a decrease of $209,184 or 28%.

The decrease in Ad Sales net

revenues in Q1-12 as compared to Q1-11 is attributable to a decrease in UK advertising sales of $209,184, which includes:

in plasma advertising revenue of $131,089 along with a decrease of $78,095 in brochure and web advertising.

The decrease is primarily

attributable to the adverse economic conditions in the UK.

Net revenues from our

Intellectual Properties division were $176,834 for Q1-12 as compared to $228,648 for Q1-11, a decrease of 23% or $51,814.

in Intellectual Properties net revenues in Q1-12 as compared to Q1-11 was attributable to the timing of the delivery of manuscripts.

The Intellectual Properties division generates revenues from several different activities including intellectual property licensing

and book development.

Revenues vary quarter to quarter depending on the timing of delivery of manuscripts to the publishers.

are recognized when the earnings process is complete and the ultimate collection of such revenues is no longer subject to contingencies.

During the six and three months ending June 30, 2012, Hollywood Media

recorded $326,758 and $129,241 respectively, in earn-out income under the R&S Purchase Agreement.

As of June 30, 2012, there

remains $7,107,308 in potential earn-out payments pursuant to the R&S Purchase Agreement.

For information on the extension

of payment terms in earn-out receivable under the R&S Purchase Agreement, see Note 9 “Related Party Transactions”

in the Notes to the Condensed Consolidated Financial Statements included in Item I, Part I of this Quarterly Report on Form 10-Q.

The Hollywood.com Business included the Hollywood.com website and related URLs and celebrity fan websites and Hollywood.com Television,

a free video on demand service distributed pursuant to annual affiliation agreements with certain cable operators.

additional information about this transaction, see Note 3 “Discontinued Operations”

in the Notes to the Condensed Consolidated

Financial Statements included in Item I, Part I of this Quarterly Report on Form 10-Q.

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

Pursuant to the Share

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

$250,000, payable in cash in a non-interest bearing loan

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 was due and was paid to the Company on July 31, 2012

and subsequent installments of the purchase price are due every three calendar months thereafter.

The Company imputed interest

at 16.5%, per annum, on this $250,000 non-interest bearing loan resulting in a discounted amount of $168,014 which was included

in the total gain on sale attributable to the sale of Cinemasource UK Limited of $649,215.

This gain on sale is included in “Income

from Discontinued Operations”

in the Condensed Consolidated Statement of Operations included in Item I, Part I of this quarterly

report on Form 10-Q.

The discounted amount of the non-interest bearing loan is included in “Other Assets”

in the condensed consolidated balance sheets included in Item I, Part I of this quarterly report on Form 10-Q.

net revenues were $333,047 for Y2-12 as compared to $689,123 for Y2-11, a decrease of $356,076 or 52% and $156,213 for Q2-12 as

compared to $460,475 for Q2-11, a decrease of $304,262 or 66%.

The decrease in net revenue in Y2-12 as compared to Y2-11 and Q2-12

as compared to Q2-11 is the result of a decrease in Intellectual Property revenue.

The decrease in Intellectual

Properties net revenues in Y2-12 as compared to Y2-11 and Q2-12 as compared to Q2-11 was attributable to the timing of the delivery

of manuscripts.

The Intellectual Properties division generates revenues from several different activities including intellectual

property licensing and book development.

Revenues vary quarter to quarter depending on the timing of delivery of manuscripts to

the publishers.

Revenues are recognized when the earnings process is complete and the ultimate collection of such revenues is no

longer subject to contingencies.

This division does not include NetCo Partners, which is reported separately;

see “Earnings (Losses) of Unconsolidated Investees”

see “Earnings

(Losses) of Unconsolidated Investees”

EARNINGS (LOSSES) OF UNCONSOLIDATED

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consisted of the following:

Six Months Ended

Three Months Ended

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Hollywood Media owns

50% of NetCo Partners as of March 31, 2012 and accounts for its investment under the equity method.

50% of NetCo Partners as of June 30, 2012 and accounts for its investment under the equity method.

NetCo Partners owns NetForce

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Hollywood Media’s 50%

share of income of NetCo Partners was essentially $0 for Q1-12 and Q1-11.

share of income of NetCo Partners was essentially $0 for Y2-12 and Y2-11 as well as Q2-12 and Q2-11.

(b) MovieTickets.com

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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

as of June 30, 2012 and shares in 26.2% of the income or losses generated by the

joint venture.

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of operations.

Under applicable accounting principles, Hollywood Media recorded $48,919 in income from its investment in

MovieTickets.com for Q1-12.

Hollywood Media recorded $63,458 in income from its investment in MovieTickets.com for Q1-11.

Under applicable accounting principles, Hollywood Media recorded $72,115 and $121,034 in loss from its investment

in MovieTickets.com for the six and three months ended June 30, 2012, respectively.

Hollywood Media recorded $179,068 and $115,610

in income from its investment in MovieTickets.com for the six and three months ended June 30, 2011, respectively.

The MovieTickets.com

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advertising and research fees.

There were no dividends declared or received during Q1-12 or Q1-11.

There were no dividends declared or received during the six and three months ended June 30, 2012

and June 30, 2011, respectively.

Hollywood Media owns

21.74% of the total equity in Project Hollywood LLC (“Project Hollywood”) as of March 31, 2012 (Hollywood Media did

not own any equity in Project Hollywood as of March 31, 2011).

Hollywood Media records its investment in Project Hollywood

under the equity method of accounting, recognizing its percentage interest in Project Hollywood’s income or loss as earnings

of unconsolidated investees.

Under applicable accounting principles, Hollywood Media recorded $23,119 in income from its

investment in Project Hollywood for Q1-12.

There were $130,683 of distributions during Q1-12.

20.65% of the total equity in Project Hollywood LLC (“Project Hollywood”) as of June 30, 2012 (Hollywood Media’s

equity ownership in Project Hollywood was reduced from 21.74% of the total equity in Project Hollywood to 20.65% of the total equity

in Project Hollywood at June 30, 2012).

Hollywood Media did not own any equity in Project Hollywood as of June 30, 2011 (Hollywood

Media’s initial interest in Project Hollywood was acquired on October 27, 2011).

Hollywood Media records its investment in

Project Hollywood under the equity method of accounting, recognizing its percentage interest in Project Hollywood’s income

or loss as earnings of unconsolidated investees.

Under applicable accounting principles, Hollywood Media recorded $90,213

and $67,094 in income from its investment in Project Hollywood for the six and three months ended June 30, 2012, respectively.

There were $177,182 and $46,499 of distributions during the six and three months ended June 30, 2012, respectively.

For additional

information about the change in Hollywood Media’s equity interest in Project Hollywood, see Note 9, “Related Party

Transactions”

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

Report on Form 10-Q.

OPERATING EXPENSES

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Editorial, production,

development and technology costs include commissions, royalties, media buying, production services and internet access for CinemasOnline

and fees and royalties paid to authors and co-editors for the Intellectual Properties segment.

Editorial, production, development

and technology costs were $448,821 for Q1-12 as compared to $626,416 for Q1-11, a decrease of $177,595 or 28%.

As a percentage

of revenues from our Ad Sales and Intellectual Properties segments, these costs were 63% and 65% for Q1-12 and Q1-11, respectively.

The Q1-12 decrease compared to Q1-11 was due primarily from a $139,312 decrease in the Ad Sales segment, which is primarily attributable

to the aforementioned decline in revenues.

In addition, there was a $38,283 decrease in the Intellectual Properties segment

operating expenses due to a decrease in payments to writers and co-editors.

development and technology costs include fees and royalties paid to authors and co-editors for the Intellectual Properties segment.

Editorial, production, development and technology costs were $282,776 for Y2-12 as compared to $456,903 for Y2-11, a decrease of

$174,127 or 38%, and $157,672 for Q2-12 as compared to $293,516 for Q2-11, a decrease of $135,844 or 46%.

As a percentage of revenues,

these costs were 85% and 66% for Y2-12 and Y2-11 respectively, and 101% and 64% for Q2-12 and Q2-11, respectively.

in Y2-12 as compared to Y2-11 and the decrease in Q2-12 as compared to Q2-11 was due primarily to a decrease in payments to writers

and co-editors.

Selling, General

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firms and other parties).

SG&A expenses for Q1-12 were $642,892 compared to $1,300,870 for Q1-11, a decrease of $657,978

As a percentage of net revenue, SG&A expenses were 91% in Q1-12 compared to 134% in Q1-11.

SG&A expenses for Y2-12 were $1,200,978 compared to $1,727,449 for Y2-11, a decrease of $526,471

SG&A expenses for Q2-12 were $696,132 compared to $527,173 for Q2-11, an increase of $168,959 or 32%.

As a percentage

of net revenue, SG&A expenses were 361% in Y2-12 compared to 251% in Y2-11 and 446% in Q2-11 compared to 114% in Q1-11.

The decrease in SG&A

expense in Q1-12 as compared to Q1-11 was due to the following:

legal expense decreased by $402,000 primarily due to a $350,000

indemnification payment in Q1-11 and no such payment in Q1-12, a $32,000 decrease in contributions and sponsorships, and a $51,000

decrease in shareholder relations expense associated with the purchase of common stock tendered.

For additional information

see Note 9 –

Related Party Transactions in the Notes to Condensed Consolidated Financial Statements included Part I, Item

I of this Quarterly Report on Form 10-Q.

expenses in Y2-12 as compared to Y2-11 was due primarily to the following:

legal expense decreased by approximately $191,000 primarily

due to the $350,000 indemnification payment to R&S Investments and $101,000 in legal fees and other costs associated with the

purchase of common stock under Hollywood Media’s tender offer, partially offset by increased legal expenses, a $32,000 decrease

in contributions and sponsorships and a $51,000 decrease in shareholder relations expense associated with the purchase of common

stock tendered.

For additional information, see Note 9 –

Related Party Transactions in the Notes to Condensed Consolidated

Financial Statements included in Part I, of this Quarterly Report on Form 10-Q.

The increase in SG&A

expenses for Q2-12 as compared to Q2-11 was primarily due to increased legal expenses.

Payroll and Benefits.

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Payroll and benefits

expenses for Q1-12 were $551,147 compared to $1,016,991 for Q1-11, a decrease of $465,844 or 46%.

As a percentage of net revenues,

payroll and benefits expenses were approximately 78% for Q1-12 and 105% for Q1-11.

expenses for Y2-12 were $1,250,583 compared to $1,610,791 for Y2-11, a decrease of $360,208 or 22%.

Payroll and benefits expenses

for Q2-12 were $851,862 compared to $746,459 for Q2-11, an increase of $105,403 or 14%.

As a percentage of net revenues, payroll

and benefits expenses were approximately 376% for Y2-12 and 234% for Y2-11, and 545% for Q2-12 and 162% for Q2-11.

The decrease in payroll

and benefits expense in Q1-12 as compared to Q1-11 was primarily due to a decrease in executive payroll of approximately $303,000

and a decrease in the information technology payroll of approximately $91,000.

The decrease in executive payroll is

primarily due to reductions in compensation expense for Mitchell Rubenstein, the Chairman and Chief Executive Officer of the Company

and Laurie Silvers, the Vice-Chairman, President and Secretary of the Company.

and benefits expense in Y2-12 as compared to Y2-11 was primarily due to a decrease in payroll of the accounting department of approximately

$63,000, a combined decrease in payroll of human resources, administration, MIS and legal of approximately $285,500 and an overall

reduction in the Intellectual Properties division payroll of $55,300.

This was partially offset by an increase in executive

payroll of approximately $59,100.

The increase in payroll

and benefits expenses in Q2-12 as compared to Q2-11 was primarily due to the following:

an increase in executive payroll of $365,500,

a decrease in payroll of the accounting department of $56,200, a combined decrease in the payroll of human resources, administration,

MIS and legal of $147,000, and an overall reduction in the Intellectual Properties division payroll of $59,100.

Depreciation and

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capital leases and amortization of intangible assets.

Depreciation and amortization expense was $42,637 for Q1-12 and $74,806 for

The decrease in depreciation and amortization expense of $32,169 or 43% in Q1-12 from Q1-11 was primarily due to a $18,256

decrease due to reduced furniture and fixtures depreciation due to fixed assets becoming fully depreciated during or prior to Q1-11.

Depreciation and amortization expense was $75,164 for Y2-12 and $112,639

for Y2-11, and $37,570 for Q2-12 and $54,990 for Q2-11.

The decrease in depreciation

and amortization expense of $37,475 or 33% in Y2-12 from Y2-11 was primarily due to reduced leasehold improvements depreciation

amortization because of a change in location of the corporate office to a less expensive rental space and the balance is due to

fixed assets becoming fully depreciated during or prior to Q1-11.

The decrease in depreciation

and amortization expense of $17,420 or 32% in Q2-12 from Q2-11 was primarily due to reduced leasehold improvements depreciation

amortization because of a change in location of the corporate office to a less expensive rental space and the balance is due to

fixed assets becoming fully depreciated during or prior to Q1-11.

Interest, net.

Interest, net was $253,037

of income for Q1-12 as compared to $269,101 of income for Q1-11.

Interest, net primarily relates to the Loan to the purchaser of

the Broadway Ticketing Division (Key Brand Entertainment, Inc.).

The Loan has an interest rate of 12% per annum and matures on

December 15, 2015.

For additional information, see Note 3 –

“Discontinued Operations”

in the Notes to the Condensed

Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Interest, net remained

essentially unchanged at $513,009 of income for Y2-12 as compared to $529,278 of income for Y2-11.

Interest, net remained essentially

unchanged at $259,972 of income for Q2-12 as compared to $259,976 of income for Q2-11.

Interest, net primarily consists of the

interest on the $8,500,000 note received by Hollywood Media from the purchaser of the Broadway Ticketing Division.

an interest rate of 12% per annum, is paid quarterly and matures on December 15, 2015.

For additional information, see Note 3 -

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

Report on Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Hollywood Media’s

cash and cash equivalents were $3,359,481 at March 31, 2012 as compared to $3,717,599 at December 31, 2011.

cash and cash equivalents were $2,408,472 at June 30, 2012 as compared to $3,683,063 at December 31, 2011.

Our net working capital

(defined as current assets less current liabilities) was $2,808,632 at March 31, 2012 as compared to $3,067,463 at December 31,

(defined as current assets less current liabilities) was $2,280,919 at June 30, 2012 as compared to $3,067,463 at December 31,

Net cash used in operating

activities from continuing operations during Q1-12 was $489,986, which was primarily attributable to losses from continuing operations.

By comparison, net cash used in continuing operations during Q1-11 was $1,885,110.

activities from continuing operations during Y2-12 was $1,344,012, which was primarily attributable to losses from continuing operations.

By comparison, net cash used in continuing operations during Y2-11 was $2,849,100.

Net cash provided by

investing activities from continuing operations during Q1-12 was $138,621 primarily attributable to the Hollywood.com earn-out

investing activities from continuing operations during Y2-12 was $119,289 primarily attributable to the Hollywood.com earn-out

payments to the Company.

By comparison, net cash used in continuing investing activities during Q1-11 was $5,508,833 primarily

By comparison, net cash used in continuing investing activities during Y2-11 was $5,554,461 primarily

used to pay Key Brand a working capital adjustment of $3,734,106 in connection with the sale of the Broadway Ticketing business

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Net cash used in financing

activities from continuing operations during Q1-12 was $6,753, which cash was for repayments under capital lease obligations.

comparison, net cash used in continuing financing activities during Q1-11 was $16,418,638, which cash usage was primarily for the

purchase of common stock tendered.

See Note 4 –

Purchase of Common Stock Tendered for additional information.

activities from continuing operations during Y2-12 was $11,734, which cash was for repayments under capital lease obligations.

By comparison, net cash used in continuing financing activities during Y2-11 was $16,435,265, which cash usage was primarily for

the purchase of common stock tendered.

For additional information about the purchase of common stock tendered, see Note 4 –

“Purchase of Common Stock Tendered”

in the Notes to the Condensed Consolidated Financial Statements included in Part

I, Item I, of this Quarterly Report on Form 10-Q.

Sale of Broadway Ticketing Division

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(iii) be paid over the then remaining term of the Credit Agreement in equal quarterly installments).

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 revisions to the earn-out payments.

See Note 3, “Discontinued

Operations”

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

Report on Form 10-Q for revisions to the earn-out payments.

In connection with

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interests of Hollywood Media.

For additional information

about the sale of the Broadway Ticketing Business, see Note 3 “Discontinued Operations”

in the Notes to the Condensed

Consolidated Financial Statements included in Part I, Item I, of this Quarterly Report on Form 10-Q.

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

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which included $1.0 million in cash that was paid to Hollywood Media at closing and potential earn-out payments of up to $9.0

Since August 21, 2008, $1,892,692 in earn-out payments were paid to Hollywood Media through March 31, 2012 and, therefore,

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

Commencing October

1, 2009, R&S Investments is contractually obligated to make periodic earn-out payments equal to the greater of (i) 10 percent

of collected gross revenue and (ii) 90 percent of EBITDA (as defined in the purchase agreement) for the Hollywood.com

Business until the full earn-out is paid.

If a change of control of Hollywood.com occurs before the earn-out is fully paid, the

remaining portion of the earn-out would be payable immediately upon such a change of control, up to the amount of consideration

received by R&S Investments less related expenses.

If the consideration in such a change of control is 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.

Subsequent to March 31, 2012, Hollywood Media has received the earn-out and expense

reimbursement amounts in accordance with the payment terms.

Since August 21, 2008, $1,892,692 in earn-out payments were paid to Hollywood Media through June 30, 2012 and, therefore,

there remains, as of June 30, 2012, $7,107,308 in potential earn-out payments.

Commencing October 1, 2009, R&S Investments is contractually obligated to make periodic earn-out payments

equal to the greater of (i) 10 percent of collected gross revenue and (ii) 90 percent of EBITDA (as defined

in the purchase agreement) for the Hollywood.com Business until the full earn-out is paid.

If a change of control of Hollywood.com

occurs before the earn-out is fully paid, the remaining portion of the earn-out would be payable immediately upon such a change

of control, up to the amount of consideration received by R&S Investments less related expenses.

If the consideration in such

a change of control is 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.

For information on the extension of payment terms in earn-out receivable under the R&S Purchase

Agreement, see Note 9 “Related Party Transactions”

in the Notes to the Condensed Consolidated Financial Statements

included in Item I, Part I of this Quarterly Report on Form 10-Q.

For additional information

about the sale of the Broadway Ticketing Business and the Hollywood.com business transactions, see Note 3 “Discontinued Operations”

in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I, of this Quarterly Report on Form 10-Q.

about the Hollywood.com business transactions, see Note 3 “Discontinued Operations”

in the Notes to the Condensed Consolidated

Financial Statements included in Part I, Item I, of this Quarterly Report on Form 10-Q.

Sale of CinemaSource UK Limited to Orchard

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 Limited.

Pursuant to the Share

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

$250,000, payable in cash in a non-interest bearing note

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 was due and was paid to the Company on July 31, 2012

and subsequent installments of the purchase price are due every three calendar months thereafter.

The Company imputed interest

at 16.5%, per annum, on this $250,000 non-interest bearing loan resulting in a discounted amount of $168,014 which was included

in the total gain on sale attributable to the sale of Cinemasource UK Limited of $649,215.

This gain on sale is included in “Income

from Discontinued Operations”

in the Condensed Consolidated Statement of Operations included in Item I, Part I of this quarterly

report on Form 10-Q.

The discounted amount of the non-interest bearing loan is included in “Other Assets”

in the condensed

consolidated balance sheets included in Item I, Part I of this quarterly report on Form 10-Q.

For additional information

about the sale of CinemaSource UK Limited to Orchard Advertising, see Note 3 “Discontinued Operations”

to the Condensed Consolidated Financial Statements included in Part I, Item I, of this Quarterly Report on Form 10-Q.

Purchase of Common Stock Tendered

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had approximately 23,179,066 shares outstanding.

For additional information see Note 4 –

Purchase of Common Stock Tendered

in the Notes to Condensed Consolidated Financial Statements included Part I, Item 1 of this Quarterly Report on Form 10-Q.

For additional information about the purchase of common stock tendered, see Note

“Purchase of Common Stock Tendered”

in the Notes to the Condensed Consolidated Financial Statements included

in Part I, Item I, of this Quarterly Report on Form 10-Q.

Capital Expenditures

Hollywood Media’s

capital expenditures during the three months ended March 31, 2012 were $16,890.

We currently anticipate that additional capital

expenditures during 2012 will total approximately $83,000 including various system and equipment upgrades.

capital expenditures during the six and three months ended June 30, 2012 were $36,222 and $19,332 respectively.

We currently anticipate

that additional capital expenditures during 2012 will total approximately $64,000 including various system and equipment upgrades.

Authorization of Stock Repurchase Program

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repurchase shares of its outstanding common stock.

During the first quarter of 2012, no shares of Hollywood Media’s common

During the second quarter of 2012, no shares of Hollywood Media’s common

stock were repurchased under the Repurchase Program.

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Off-Balance Sheet Arrangements

At March 31, 2012,

we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as

structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements

or other contractually narrow or limited purposes of the sort contemplated by paragraph (a) (4) of Item 303 of SEC Regulation S-K.

As such, management believes that we currently do not have any disclosures to make of the sort contemplated by paragraph (a) (4)

of Item 303 of Sec Regulation S-K regarding “off-balance sheet arrangements.”

At June 30, 2012, we

did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured

finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements or other

contractually narrow or limited purposes of the sort contemplated by paragraph (a) (4) of Item 303 of SEC Regulation S-K.

management believes that we currently do not have any disclosures to make of the sort contemplated by paragraph (a) (4) of Item

303 of SEC Regulation S-K regarding “off-balance sheet arrangements.”

Critical Accounting Estimates

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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.

For additional information about our significant accounting policies, including the critical accounting policies

discussed below, see Note 2 –

Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial

Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and Note 2 to the Consolidated Financial Statements

included in Part II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended.

Hollywood Media maintains

an allowance for doubtful accounts for estimated losses resulting from the inability of its customers or debtors to make required

The Company’s accounting for doubtful accounts and reserve on notes receivable contains uncertainty because management

must use judgment to assess the collectability of these accounts.

When preparing these estimates, management considers a number

of factors, including the aging of a customer’s account, past transactions with customers and debtors, creditworthiness of

specific customers and debtors, historical trends and other information.

The allowance for doubtful accounts 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 CinemasOnline.

Although the Company believes its allowance is sufficient, if the financial condition of the Company’s

customers were to unexpectedly deteriorate, resulting in an impairment of their ability to make payments, additional allowances

may be required that could materially impact the Company’s 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 geographic regions.

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 CinemasOnline on May 1, 2012.

The Company records derivative

instruments at fair value in our accompanying condensed consolidated balance sheets with changes in the fair values of those

instruments reported in earnings in our condensed 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.

For additional information about our significant

accounting policies, including the critical accounting policies discussed below, see Note 2 –

Summary of Significant

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

Report on Form 10-Q, and Note 2 to the Consolidated Financial Statements included in Part II, Item 8 in our Annual Report on

Form 10-K for the year ended December 31, 2011, as amended.

Under FASB Accounting

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The Company believes that the fair value of

its remaining reporting unit that contains goodwill at March 31, 2012 and December 31, 2011 exceeded the book value of those units.

its remaining reporting unit that contains goodwill at June 30, 2012 and December 31, 2011 exceeded the book value of those units.

Inflation and Seasonality

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements