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Item 8. Financial Statements and Supplementary Data

2013-04-01 compared with 2012-04-16 · 1026 added, 898 removed, 782 unchanged (71% of the section changed)

STATEMENTS AND SUPPLEMENTARY DATA .

FINANCIAL STATEMENTS AND

SUPPLEMENTARY DATA .

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2012 and December 31, 2011

Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009

Consolidated Statements of Operations for the Years Ended December 31, 2012 and December 31, 2011

Consolidated Statements of Shareholders’

Equity for the Years Ended December 31, 2011, 2010 and 2009

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009

Equity for the Years Ended December 31 2012 and December 31, 2011

Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and December 31, 2011

Notes to Consolidated Financial Statements

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Boca Raton, Florida

We have audited the

accompanying consolidated balance sheets of Hollywood Media Corp.

and Subsidiaries as of December 31, 2011 and 2010, and the related

consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion

on these financial statements based on our audits.

We conducted our audits

in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the

consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hollywood

and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each

of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United

States of America.

We have audited the accompanying consolidated

balance sheet of Hollywood Media Corp.

and Subsidiaries as of December 31, 2012, and the related consolidated statements of operations,

shareholders’

equity, and cash flows for the year then ended.

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with

the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform

the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Our audit included

consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over

financial reporting.

Accordingly, we express no such opinion.

An audit also includes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made

by management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable

basis for our opinion.

In our opinion, the consolidated financial

statements referred to above present fairly, in all material respects, the financial position of Hollywood Media Corp.

and Subsidiaries

as of December 31, 2012, and the results of its operations and its cash flows for the year then ended, in conformity with accounting

principles generally accepted in the United States of America.

April 1, 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

The Board of Directors and Shareholders

of Hollywood Media Corp.

Boca Raton, Florida

We have audited the accompanying consolidated

balance sheet of Hollywood Media Corp.

and Subsidiaries as of December 31, 2011, and the related consolidated statements of operations,

shareholders' equity, and cash flows for the year then ended.

These financial statements are the responsibility of the Company's

Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with

the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform

the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial

statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial

statements referred to above present fairly, in all material respects, the financial position of Hollywood Media Corp.

and Subsidiaries

as of December 31, 2011, and the results of its operations and its cash flows for the year then ended, in conformity with accounting

principles generally accepted in the United States of America.

KAUFMAN, ROSSIN & CO., P.A.

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Cash and cash equivalents

Receivables, net

Prepaid expenses

Other receivables

Notes receivable, current

Related party receivable

Current portion of deferred compensation

Current assets of discontinued operations

Total current assets

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INTANGIBLE ASSETS, net

NOTES RECEIVABLE, less current portion

DEFERRED COMPENSATION, less current portion

LONG TERM ASSETS OF DISCONTINUED OPERATIONS

LIABILITIES AND SHAREHOLDERS’

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Deferred revenue

Customer deposits

Current portion of capital lease obligations

Current portion of notes payable

Current liabilities of discontinued operations

Total current liabilities

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DERIVATIVE LIABILITIES

COMMITMENTS AND CONTINGENCES

LONG TERM LIABILITIES OF DISCONTINUED OPERATIONS

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’

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(279,272,612 )

Total Hollywood Media Corp.

shareholders’

Non-controlling interest

Total shareholders’

TOTAL LIABILITIES AND SHAREHOLDERS’

The accompanying notes to consolidated financial

are an integral part of these consolidated

balance sheets.

The accompanying

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

HOLLYWOOD MEDIA CORP.

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Loss from operations

(LOSSES) EARNINGS OF UNCONSOLIDATED INVESTEES

Equity in earnings of unconsolidated investees

LOSSES OF UNCONSOLIDATED INVESTEES

Equity in (losses) earnings of unconsolidated investees

Impairment loss

Total (losses) equity in earnings of unconsolidated investees

Total losses in earnings of unconsolidated investees

OTHER INCOME (EXPENSE):

Interest, net

Income taxes, net of refunds

Loss from continuing operations

(10,936,542 )

Accretion of discount, net of allowance for uncollectability

Loss from continuing operations before income taxes

Income tax benefit (expense), net of refund

Income (loss) from continuing operations

Gain on sale of discontinued operations, net of income taxes

Income of discontinued operations

Income (loss) of discontinued operations

Income from discontinued operations

Net (loss) income

NET LOSS (INCOME) ATTRIBUTABLE TO NON-CONTROLLING INTEREST

Net (loss) income attributable to Hollywood Media Corp.

$ (6,862,331 )

Net income (loss)

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

Net income (loss) attributable to Hollywood Media Corp.

$ (6,862,331 )

Basic and diluted (loss) income per common share

Basic and diluted income (loss) per common share

Continuing operations

Discontinued operations

Total basic and diluted net (loss) income per share

Total basic and diluted net income (loss) per share

Weighted average common and common equivalent shares outstanding –

basic and diluted

The accompanying notes to consolidated financial

are an integral part of these consolidated

statements of operations.

The accompanying

notes to consolidated financial statements are an integral part of these consolidated statements of operations.

HOLLYWOOD MEDIA CORP.

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$ (272,410,281 )

Repurchase of company stock

Issuance of stock –

401(k) employer match

Stock compensation expense - officers

Stock compensation expense - employees

Balance –

December 31, 2009

(277,315,848 )

Issuance of stock –

401(k) employer match

Stock compensation expense - officers

Stock compensation expense - employees

Balance –

December 31, 2010

(272,410,281 )

Purchase of tendered common stock

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(279,272,612 )

Repurchase of Company stock

Balance –

December 31, 2012

$ 293,591,903

The accompanying notes to consolidated financial

statements are an integral part of these consolidated statements of shareholders’

$ (268,863,048 )

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements of shareholders’

HOLLYWOOD MEDIA CORP.

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$ (6,777,238 )

$ (5,622,826 )

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Income from discontinued operations

(11,967,184 )

Income tax benefit

Depreciation and amortization

401(k) stock match

Equity in earnings (losses) of unconsolidated investees, net of

distributions

Stock compensation expense –

Accretion of discount, net of allowance for uncollectability

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

Loss on retirement of property

Stock compensation expense - officers

Amortization of deferred compensation costs - officers

Provision for bad debts

Distributions to minority owners

Goodwill impairment

Gain on sale of Project Hollywood

Change in fair value of derivative liabilities

Change in fair value of warrant

Changes in assets and liabilities:

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Deferred revenue

Customer deposits

Other deferred liability

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continuing operations

Net cash provided by operating activities - discontinued operations

Net cash (used in) provided by operating activities

Net cash (used in) provided by operating activities - discontinued operations

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

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Net proceeds (expenditures) from sale of assets and businesses

Net cash (used in) provided by investing activities –

Cash received on note receivable

Net cash provided by (used in) investing activities –

continuing operations

Net cash used in investing activities –

Net cash provided by (used in) investing activities –

discontinued operations

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments under capital lease obligations

Repayment of notes payable

Purchase of tendered common stock

Purchase of Company stock

(16,400,000 )

Stock repurchase program

Stock buy-back

Net cash used in financing activities –

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(16,461,822 )

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

(25,689,254 )

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or “the Company”) was incorporated in the State of Florida on January 22, 1993.

Media is comprised of various businesses focusing primarily on advertising, book development license fees and royalties.

Media owns the U.K.

based companies CinemasOnline Limited, UK Theatres Online Limited, WWW.CO.UK Limited and Spring Leisure Limited

(collectively known as “CinemasOnline”), which were acquired in November 2005.

CinemasOnline, included as part of Hollywood

Media’s Ad Sales Segment, sells contracted advertising space on lobby display posters in cinemas and movie brochure

booklets distributed in independent cinemas and theatre ticket wallets in the United Kingdom and Ireland.

There is also a limited

focus on advertising sales on plasma screens located in a small number of cinemas and live theatre venues.

Media is comprised of various businesses focusing primarily on book development license fees and royalties.

The Intellectual Properties

segment owns or controls the exclusive rights to certain original characters and concepts created by best-selling authors and media

celebrities, which it licenses across all media, including books, films and television, multimedia software, and other products.

Hollywood Media acquires the rights to its intellectual properties pursuant to agreements that grant it exclusive rights in the

intellectual property itself as well as the right to use the creator’s name in the title of the intellectual property.

intellectual properties division also includes a wholly-owned book development and licensing operation named Tekno Books which

focuses on developing and executing book projects, typically with best-selling authors, which books are then licensed for publication

to book publishers.

Tekno Books generates revenues from new book projects in the form of non-refundable advances paid by publishers

and royalties from its library of book titles.

celebrities, which it seeks to license across all media, including books, films and television, and other products.

Hollywood Media

acquires the rights to its intellectual properties pursuant to agreements that grant it exclusive rights in the intellectual property

itself as well as the right to use the creator’s name in the title of the intellectual property.

The intellectual properties

division also includes a wholly-owned book development and licensing operation named Tekno Books which focuses on developing and

executing book projects, typically with best-selling authors, which books are then licensed for publication to book publishers.

Tekno Books generates revenues from new book projects in the form of non-refundable advances paid by publishers and royalties from

its library of book titles.

Hollywood Media is

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26.2% of the equity of MovieTickets.com Inc.

(“MovieTickets.com”), a joint venture, primarily with AMC Entertainment

Inc., National Amusements, Inc.

and Viacom Inc.

The MovieTickets.com joint venture is not consolidated in the accompanying consolidated

financial statements.

The MovieTickets.com website allows users to purchase movie tickets online and retrieve them at “will

(“MovieTickets.com”), a joint venture.

The MovieTickets.com joint venture

is not consolidated in the accompanying consolidated financial statements.

The MovieTickets.com website allows users to purchase

movie tickets online and retrieve them at “will call”

windows or kiosks at the theaters.

MovieTickets.com generates revenue from the sale of advertising and from service

fees charged to users for the purchase of tickets and from the sale of research data, which revenues are not included in Hollywood

Media’s revenues.

Hollywood Media records its share of the earnings or loss in MovieTickets.com as “Equity in Earnings

of Unconsolidated Investees”

in the accompanying consolidated financial statements.

MovieTickets.com generates

revenue from the sale of advertising and from service fees charged to users for the purchase of tickets and from the sale of research

data, which revenues are not included in Hollywood Media’s revenues.

Hollywood Media records its share of the earnings or

loss in MovieTickets.com as “Equity in Earnings of Unconsolidated Investees”

in the accompanying consolidated financial

On October 27, 2011,

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LLC (“Baseline Holdings”).

Baseline Holdings is owned by Mitchell Rubenstein and Laurie Silvers.

to the acquisition, on October 7, 2011, Project Hollywood LLC had acquired all of the membership interests of Baseline LLC from

The New York Times Company.

Project Hollywood LLC is not consolidated in these financial statements, and Hollywood Media

records 21.74% of the earnings of Project Hollywood LLC as “equity in earnings of unconsolidated investees”

accompanying consolidated financial statements.

Baseline Holdings is owned by Mitchell Rubenstein, Hollywood Media's Chief Executive

Officer and Chairperson of the Board, and Laurie Silvers, Hollywood Media's President, Secretary and Vice-Chairperson of the Board.

Prior to the acquisition, on October 7, 2011, Project Hollywood LLC had acquired all of the membership interests of Baseline LLC

from The New York Times Company.

On August 28, 2012 Hollywood Media assigned to Baseline Holdings all of Hollywood Media’s

membership interest in Project Hollywood in exchange for total consideration of $1,800,000.

See Note 18, “Related Party Transactions”

to these Consolidated Financial Statements for more information on the assignment of the membership interest of Hollywood Media

in Project Hollywood, LLC.

Prior to this assignment, Project Hollywood LLC was not consolidated in these financial statements,

and Hollywood Media recorded its share of the earnings of Project Hollywood LLC as “equity in earnings of unconsolidated

investees”

in the accompanying consolidated financial statements.

The Company had an

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shares outstanding.

the fourth quarter of 2012, 16,600 shares of Hollywood Media’s common stock were purchased under the repurchase program.

As of December 31, 2012, the maximum approximate dollar value of shares that may have been purchased under the Repurchase Program

was $2,673,261 (calculated by subtracting (i) the total paid for all shares purchased under the Repurchase Program from inception

through December 31, 2012 or $7,326,739 from (ii) the $10,000,000 potential maximum dollar value of repurchases approved under

the life of the Repurchase Program).

During the first quarter of 2013, 510,700 shares of Hollywood Media’s common stock

were purchased under the repurchase program.

For additional information relating

to the stock repurchase program, see Part II, Item 5 of this Annual Report on Form 10-K and “Liquidity and Capital Resources”

in Part II, Item 7 of this Annual Report on Form 10-K.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :

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Hollywood Media’s

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

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

All significant intercompany

balances and transactions have been eliminated in consolidation.

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

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

Hollywood Media’s 50% and 26.2% ownership interests in NetCo

Partners and MovieTickets.com, respectively, are accounted for under the equity method of accounting.

Accounting Estimates

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consolidated financial statements, which are evaluated on an ongoing basis, include the deferred tax asset valuation allowance,

the adequacy of reserves for accounts receivables and accruals for compensation, contingencies and litigation, as well as Hollywood

Media’s ability to realize the carrying value of goodwill, intangible assets, investments in less than 50% owned companies

and other long-lived assets.

the adequacy of reserves for accounts receivables, note receivables and accruals for compensation, contingencies and litigation,

as well as Hollywood Media’s ability to realize the carrying value of goodwill, intangible assets, investments in less than

50% owned companies and other long-lived assets.

Cash and Cash Equivalents

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all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Interest bearing

amounts included in cash and cash equivalents were $3,110,540 and $26,667,785 at December 31, 2011 and 2010, respectively.

Company maintains cash balances with financial institutions in excess of federally insured limits.

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, 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 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 estimate the

collectibility of these accounts.

When preparing these estimates, management considers a number of factors, including the age of

a customer’s account, past transactions with customers, creditworthiness of specific customers, historical trends and other

The allowance for doubtful accounts was $240,048 and $308,713 at December 31, 2011 and 2010, 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

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.

in the allowance for doubtful accounts consisted of:

Additions (Deductions)

Allowance for doubtful accounts:

$ (199,203 )(A)

$ (447,269 )(A)

$ (435,433 )(A)

(A) Uncollectible accounts written off.

Consolidated cash

and cash equivalents were $11,378,519 and $3,683,063 at December 31, 2012 and 2011, respectively.

Interest bearing amounts included

in cash and cash equivalents were $9,527,401 and $3,110,540 at December 31, 2012 and 2011, respectively.

The Company maintains

cash balances with financial institutions in excess of federally insured limits.

Property and Equipment

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Goodwill and Intangible

FASB Accounting Standards

Codification (“ASC”) Topic No.

Financial Accounting

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

350, “Intangibles –

Goodwill and Other”

(ASC 350), goodwill

and certain intangibles are not amortized;

however, they are subject to evaluation for impairment annually, or more frequently

if indicators arise, using a fair value based test.

The fair value based test is a two-step test.

The first step involves comparing

the fair value of each of our reporting units to the carrying value of those reporting units.

If the carrying value of a reporting

unit exceeds the fair value of the reporting unit, we are required to proceed to the second step.

In the second step, the fair

value of the reporting unit would be allocated to the assets (including unrecognized intangibles) and liabilities of the reporting

unit, with any residual representing the implied fair value of goodwill.

An impairment loss would be recognized if and to the extent

that the carrying value of goodwill exceeds the implied value.

(ASC 350), goodwill and certain intangibles are not amortized;

however, they are subject to evaluation

for impairment annually, or more frequently if indicators arise, using a fair value based test.

The fair value based test is a

two-step test.

The first step involves comparing the fair value of each of our reporting units to the carrying value of those reporting

If the carrying value of a reporting unit exceeds the fair value of the reporting unit, we are required to proceed to the

In the second step, the fair value of the reporting unit would be allocated to the assets (including unrecognized

intangibles) and liabilities of the reporting unit, with any residual representing the implied fair value of goodwill.

An impairment

loss would be recognized if and to the extent that the carrying value of goodwill exceeds the implied value.

September 2011, the FASB issued ASU No.

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ASU 2011-08 is effective for fiscal years beginning after December 15, 2011 and its early adoption by

the Company during the quarter ended September 30, 2011 did not have a material effect on the Company’s condensed consolidated

financial statements.

the Company during the quarter ended September 30, 2011 did not have a material effect on the Company’s consolidated financial

During the three months

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December 31, 2012.

At December 31, 2011 the Company is not aware of any additional items or events that would cause us to

adjust the recorded value of Hollywood Media’s goodwill for impairment further.

Future changes in estimates used to

conduct the impairment review, including revenue projections or comparable market data and transactions could cause the analysis

to indicate that Hollywood Media’s goodwill is impaired in subsequent periods and result in a write-off of a portion or all

of the goodwill.

In order to evaluate the sensitivity of the fair value calculations of our reporting units on the

impairment calculation, we applied a hypothetical decrease to the fair values of each reporting unit.

The Company believes

that the fair value of its remaining reporting unit that contains goodwill at December 31, 2011 and December 31, 2010 met or exceeded the

book value of that reporting unit.

During the three months ended September 30, 2011, the Company determined that $4.8 million of the goodwill

associated with its Ad Sales division should be written down after it was determined that the future cash flow of these assets

is likely impaired, and the risk associated with previously expected cash flows has increased and accordingly recorded an impairment

loss of $4.8 million for the year ended December 31, 2011.

At December 31, 2012 the Company is not aware of any additional items

or events that would cause us to adjust the recorded value of Hollywood Media’s goodwill for impairment further.

changes in estimates used to conduct the impairment review, including revenue projections or comparable market data and transactions

could cause the analysis to indicate that Hollywood Media’s goodwill is impaired in subsequent periods and result in a write-off

of a portion or all of the goodwill.

In order to evaluate the sensitivity of the fair value calculations of our reporting

units on the impairment calculation, we applied a hypothetical decrease to the fair values of each reporting unit.

believes that the fair value of its remaining reporting unit that contains goodwill at December 31, 2012 and December 31, 2011

met or exceeded the book value of that reporting unit.

The Company believes

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There were no adjustments to the carrying value of long-lived

assets for any of the years ended December 31, 2011, 2010, and 2009.

assets for the years ended December 31, 2012 and 2011.

Revenue Recognition

Revenue recognition policies for advertising,

book packaging and licensing, are set forth below.

Advertising .

Advertising revenue is derived from the sale, by CinemasOnline, of advertising on plasma TV displays throughout the U.K.

on lobby display posters, movie brochure booklets and ticket wallets distributed in cinemas, live theater and other entertainment

venues in the U.K.

Advertising revenue is recognized over the period that the advertisement is displayed, provided that no significant

obligations of Hollywood Media remain and collection is reasonably assured.

Hollywood Media’s obligations typically are based

on maintaining plasma TV displays, posters and brochures where the advertisements are displayed.

Revenue recognition policies for book packaging

and licensing are set forth below.

Book Packaging

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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

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

as hedge instruments.

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Common shares issuable

upon exercise of outstanding options and warrants of 75,000, 95,435, and 1,328,443 were excluded from the calculation of diluted

earnings per share for the years ended December 31, 2011, 2010 and 2009, respectively, because their impact was anti-dilutive to

the loss from continuing operations.

Non-vested shares are not included in the basic calculation until vesting occurs.

no unvested shares as of December 31, 2011.

Advertising Costs

Hollywood Media expenses

the cost of advertising as incurred.

Advertising costs for the years ended December 31, 2011, 2010 and 2009 were $8,980,

$14,496 and $14,286, respectively, and are included in “Selling, general and administrative”

expenses in the accompanying

consolidated statements of operations

upon exercise of outstanding options and warrants of 75,000 were excluded from the calculation of diluted earnings per share for

the years ended December 31, 2012 and 2011, respectively, because their impact was anti-dilutive.

Non-vested shares are not included

in the basic calculation until vesting occurs.

There were no unvested shares as of December 31, 2012.

On September 27, 2010,

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no plan assets remaining as of December 31, 2011.

Income taxes are

accounted for under the liability method pursuant to FASB Accounting Standards Codification No.

Income taxes are accounted

for under the liability method pursuant to FASB Accounting Standards Codification No.

Income Taxes ”

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recognition threshold.

Variable Interest

ASC Topic No.

Consolidation ”

10-25 “Recognition”

(ASC 810-10-25), requires a variable interest

entity (“VIE”) to be consolidated by its primary beneficiary.

Hollywood Media determined that Hollywood.com, LLC met

the definition of a VIE based on one of the criteria described in ASC 810-10-25, which states the total equity investment at risk

is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by

any parties, including equity holders.

The initial investment provided by R&S Investments of $1,000,000 is not sufficient to

fund the ongoing losses without additional subordinated financial support.

The Company has made the determination that it is not

the primary beneficiary of Hollywood.com, LLC under ASU 2009-17.

Accordingly, Hollywood.com LLC is not consolidated into the Company’s

consolidated financial statements.

Company recognizes interest and penalties related to unrecognized tax benefits within "Income tax benefit (expense), net of

in the accompanying consolidated statements of operations.

Accrued interest and penalties are included "Accrued

expenses"

in the accompanying consolidated balance sheets.

(3) TEKNO BOOKS

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30, 2011 in connection with the settlement of a dispute involving life insurance proceeds from the death of Tekno Books’

Chief Executive Partner, Dr.

then Chief Executive Partner, Dr.

Greenberg, as described below, the Estate of Martin H.

Greenberg (“the Estate”)

Greenberg (the “Estate”)

transferred all of its partnership and ownership interest in Tekno Books to Hollywood Media for no additional consideration pursuant

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Greenberg’s widow) waived any right, entitlement or claim they may have to a $1.5 million key-man life

insurance policy payment, Tekno Books and Hollywood Media waived any right, entitlement or claim they may have to a $500,000 life

insurance policy payment received by Rosalind M.

Greenberg, and the Estate transferred all of its partnership and ownership interest

in Tekno Books to Hollywood Media for no additional consideration pursuant to an Assignment of General Partnership Interest.

such transfer, Hollywood Media owned 100% of Tekno Books and recorded the $367,500 reserve in “Other Income”

Consolidated Financial Statements contained in Part II, Item 8, of this Annual Report on Form 10-K.

insurance policy payment, Tekno Books and Hollywood Media waived any right, entitlement or claim they may have to a separate $500,000

life insurance policy payment received by Rosalind M.

Greenberg, and the Estate transferred all of its partnership and ownership

interest in Tekno Books to Hollywood Media for no additional consideration pursuant to an Assignment of General Partnership Interest.

Following such transfer, Hollywood Media owned 100% of Tekno Books.

(4) STOCK OPTION PLANS;

AND EMPLOYEE STOCK BASED COMPENSATION:

AND EMPLOYEE STOCK BASED

COMPENSATION:

Shareholder-Approved Plans

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Plan (the “Plans”).

In addition to stock options, the 2004 and 2000 Plans permit the granting of stock awards and other

forms of equity compensation for key personnel and non-employee directors.

There were an aggregate of 502,261, 487,261, and 524,313

shares remaining available for issuance under Hollywood Media’s equity compensation plans at December 31, 2011, 2010 and

2009, respectively.

The options may be either “qualified incentive stock options”

(as defined in Section 422 of the

Internal Revenue Code of 1986, as amended) or nonqualified stock options.

Stock options granted to date generally have had an exercise

price per share equal to the market value per share of the common stock on the date prior to grant and generally expire five years

or ten years from the date of grant.

Options awarded to Hollywood Media’s employees generally become exercisable in annual

increments over a four-year period beginning one year from the grant date, although some are immediately exercisable and some vest

based on other terms as specified in the option grants.

Options awarded to directors become exercisable six months after date of

The Plans are registered with the SEC on Form S-8.

Shares issued under the Plans are issued from the Company’s unissued

shares authorized under its articles of incorporation.

In addition to stock options, the Plans permit the granting of stock awards and other forms of

equity compensation for key personnel and non-employee directors.

There were an aggregate of 502,261 shares remaining available

for issuance under Hollywood Media’s equity compensation plans at December 31, 2012 and 2011, respectively.

The options may

be either “qualified incentive stock options”

(as defined in Section 422 of the Internal Revenue Code of 1986, as amended)

or nonqualified stock options.

Stock options granted to date generally have had an exercise price per share equal to the market

value per share of the common stock on the date prior to grant and generally expire five years or ten years from the date of grant.

Options awarded to Hollywood Media’s employees generally become exercisable in annual increments over a four-year period

beginning one year from the grant date, although some are immediately exercisable and some vest based on other terms as specified

in the option grants.

Options awarded to directors become exercisable six months after date of grant.

The Plans are registered

with the SEC on Form S-8.

Shares issued under the Plans are issued from the Company’s unissued shares authorized under its

articles of incorporation.

Equity compensation

45 unchanged sentences

During the year ended December 31, 2012,

no options were granted or exercised, and 10,000 and 5,000 shares were cancelled and expired, respectively, under the 2004 Plan.

There were 502,261 shares remaining available for issuance under the 2004 Plan.

no options were granted, cancelled or expired under the 2004 Plan.

There were 502,261 shares remaining available for issuance under

the 2004 Plan.

Directors Stock

12 unchanged sentences

During the year ended

December 31, 2011, no options were granted, exercised, or cancelled and 5,435 shares were expired under the Directors Stock Option

There were no options available for future grant under the Director’s Plan.

Accounting for Share-Based

Pursuant to ASC Topic No.

718, “Compensation-Stock

Compensation”

(ASC 718) the Company uses the modified prospective transition method and recognizes compensation cost

for (i) share-based awards granted prior to but not yet vested as of January 1, 2006, based on the fair value calculated on the

grant date, and (ii) share-based awards granted subsequent to January 1, 2006, also based on the fair value calculated on the grant

December 31, 2012, no options were granted, exercised, cancelled or expired under the Directors Stock Option Plan.

There were no

options available for future grant under the Director’s Plan.

Accounting for

Share-Based Compensation

Pursuant to ASC Topic

718, “Compensation-Stock Compensation”

(ASC 718) the Company uses the modified prospective transition method

and recognizes compensation cost for (i) share-based awards granted prior to but not yet vested as of January 1, 2006, based on

the fair value calculated on the grant date, and (ii) share-based awards granted subsequent to January 1, 2006, also based on

the fair value calculated on the grant date.

During the year ended

6 unchanged sentences

Outstanding at December 31, 2011

$2.03 - $4.60

$4.40 - $4.60

Outstanding at December 31, 2012

$2.03 - $4.50

Data on Outstanding

6 unchanged sentences

Total Outstanding Stock Options

(1) The aggregate intrinsic value is computed based on the closing price of Hollywood Media’s

stock on December 31, 2011, which is a price per share of $1.27.

(1) The aggregate

intrinsic value is computed based on the closing price of Hollywood Media’s stock on December 31, 2012, which is a price

per share of $1.35.

As of December 31, 2012 and 2011, there

were no unrecognized compensation costs related to non-vested stock option awards since all outstanding awards are fully vested.

As of December 31, 2009 there was $21,676 of unrecognized compensation not related to non-vested stock awards.

There were no stock

options exercised during the years ended December 31, 2012 and 2011.

The following is a

summary of stock options and warrants outstanding and exercisable as of December 31, 2011:

The following is

a summary of stock options and warrants outstanding and exercisable as of December 31, 2012:

Options and Warrants Outstanding

2 unchanged sentences

$4.14 - $4.50

Non-vested Stock Awards

(5) DISCONTINUED OPERATIONS

Sale of Broadway Ticketing Division

to Key Brand Entertainment, Inc.

On December 15, 2010,

Hollywood Media issued 250,000 and 150,000 restricted shares to the Chairman of the Board and President, respectively, in accordance

with and pursuant to Hollywood Media’s 2004 Stock Incentive Plan with an aggregate value of $408,000, the fair market value

on the date of issuance.

The restricted shares

had the following vesting schedule, provided that the respective executive remained employed by Hollywood Media on such vesting

(a) One-third of the issued shares vest at the rate of 25% per year on each of the first through fourth

anniversaries of the date of grant, such that these shares will be fully vested on the fourth anniversary of the date of grant,

assuming continued employment of the executives by Hollywood Media.

(b) One-third of the issued shares will vest if, at any time prior to the fourth anniversary of the

date of grant, Hollywood Media achieves EBITDA greater than zero for either (A) each of two consecutive fiscal quarters or

(B) any three quarters in any 15-month period, in each case beginning with the fourth fiscal quarter of 2008.

date of grant, the closing price of Hollywood Media’s Common Stock exceeds $2.00 per share for at least 10 consecutive trading

days after the date of grant.

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

of the outstanding capital stock of Theatre Direct NY, Inc.

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

Brand”), as contemplated by the Stock Purchase Agreement, dated as of December 22, 2009, as amended, entered into between

Hollywood Media and Key Brand (“the Purchase Agreement”).

There are no material relationships among Hollywood Media

and Key Brand or any of their respective affiliates other than in respect of the Purchase Agreement and the related ancillary

Pursuant to the Purchase

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

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

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

Agreement”), pursuant to which Key Brand is obligated to pay Hollywood Media interest at a rate of 12% per annum, with the

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

its subsidiaries, and (iii) a warrant to purchase 5% of the outstanding shares of common stock of Theatre Direct as of the closing

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

of liabilities associated with employment agreements with certain employees of Theatre Direct.

In addition, Hollywood Media was

entitled to receive earnout payments (“the Earnout”) of up to $14,000,000, in two $7,000,000 tranches, contingent

upon Theatre Direct and its subsidiaries achieving certain revenue targets during the period from the closing date through the

end of the 10 th full fiscal year following the closing date as set forth in the Purchase Agreement.

In connection with

the Credit Agreement, Hollywood Media, Key Brand and JPMorgan Chase Bank, N.A., as administrative agent for the senior secured

lenders of Key Brand, entered into a Subordination and Intercreditor Agreement, dated December 15, 2010 (the “Intercreditor

Agreement”) which defines the rights and obligations of the senior secured lenders and Hollywood Media as subordinated lender,

including, without limitation, the rights of payment and the subordination of the security interests of Hollywood Media.

After the closing

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

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

date determined in the manner described in the Purchase Agreement.

Pursuant to the closing statement, Hollywood Media accrued

$3,702,620 as a working capital adjustment as of December 31, 2010 under the agreement which included $530,102 related to the

estimated working capital delivered at closing by Key Brand.

The working capital adjustment of $3,734,106 was paid on March 22,

2011 and included $31,486 of interest which is included in “Gain (loss) on sale of discontinued operations, net of income

in the accompanying consolidated statements of operations for the year ended December 31, 2011.

Amendment to the Broadway Sale Purchase

On April 22, 2012,

the Company entered into Amendment No.

4 (the “Amendment”) to the 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 included

Broadway.com, remained at Key Brand and Theatre Direct.

As part of the Amendment, Key Brand agreed to pay the first $7 million

earnout amount (the “First $7 Million Earnout”) 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 First $7 Million Earnout

amount was paid by Key Brand to the Company on October 1, 2012 and was recorded upon collection of the $7 million received on

October 1, 2012.

In addition, the revenue calculation for the second $7 million earnout amount (the “Second $7 Million Earnout”)

was modified to exclude “group sales”

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

target for the Second $7 Million Earnout was reduced from $150 million to $123 million accordingly.

On October 5, 2012, Hollywood

Media received written notice from Key Brand that Theatre Direct achieved the revenue target for the Second $7 Million Earnout

in Key Brand’s fiscal year ended June 30, 2012.

Accordingly, pursuant to the Amendment, the Second $7 Million Earnout was

added as of October 5, 2012 to the principal amount of the Loan under the Credit Agreement.

Pursuant to the Credit Agreement,

interest at a rate of 12% per annum and principal on such Second $7 Million Earnout amount will be amortized over the term of

the Credit Agreement in equal quarterly installments.

As a result of the Second $7 Million Earnout being added to the $8.5 million

principal amount of the Loan, the principal amount of the Loan due Hollywood Media by Key Brand was $15.5 million as of October 5, 2012.

Hollywood Media recorded

$202,184 as compensation expense for the year ended December 31, 2010 relating to this issuance.

As of December 31, 2011 there

were no unvested shares or unrecognized compensation expense remaining under this issuance due to a clause in their employment

agreements which automatically vested the remaining shares upon the sale of the Broadway Ticketing Division.

(5) DISCONTINUED OPERATIONS

Broadway Ticketing

the Second $7 Million Earnout at a fair value of $4,500,000, which reflects a $2,500,000 discount.

Hollywood Media will

amortize the $2,500,000 discount under the effective interest method.

Amortization under the effective interest method will

be included in "Accretion of discount, net of allowance for uncollectability"

in the accompanying consolidated statements

of operations.

On December 31, 2012, Hollywood Media received a scheduled payment under the Loan in the amount of $1,002,128,

which included a principal payment of $538,462, an interest payment of $203,000 on the Second $7 Million Earnout and $260,666

of interest on the $8.5 million portion of the Loan.

The principal payment of $538,462, combined with accretion of discount

of $288,585, reduced the value of the Second $7 Million Earnout from $4,500,000 to $4,250,123.

Accretion of discount, net

of the reversal of previously recorded allowance for bad debt, was $1,429,315 on the $8.5 million portion of the Loan during the

three months ended December 31, 2012.

In addition, during the nine months ended September 30, 2012, Hollywood Media received

scheduled interest payments under the $8.5 million portion of the Loan of $776,333.

Hollywood Media received payments of

$1,034,167 of interest from Key Brand in accordance with the terms of the loan during the year ended December 31, 2011 which was

included in "Interest, net"

in the accompanying consolidated statement of operations.

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 Intercreditor Agreement 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 Earnout amounts prior to the maturity of the Credit Agreement, notwithstanding that

the obligations under the Credit Agreement are subordinated to $15 million of Key Brand’s obligations under the senior secured

credit agreement.

Amendment to Second Lien Credit, Security

and Pledge Agreement

On December 31, 2012,

Hollywood Media Corp.

(“Hollywood Media”) closed its Broadway Ticketing Division (the “Broadway Sale”),

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

(“Theatre Direct”) to Key Brand

Entertainment Inc.

(“Key Brand”), as contemplated by the Stock Purchase Agreement, dated as of December 22, 2009, entered

into between Hollywood Media and Key Brand (the “Purchase Agreement”).

There are no material relationships among Hollywood

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

Pursuant to the Purchase

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

the estimated working capital adjustment described in the Purchase Agreement), (ii) Key Brand, Theatre Direct and Hollywood Media

entered into an $8,500,000 note (“the Loan”) Second Lien, Security and Pledge Agreement, dated as of December 15, 2010

(the “Credit Agreement”), pursuant to which Key Brand is obligated to pay Hollywood Media interest at a rate of 12%

per annum, with the loan maturing on December 15, 2015.

The Loan is collateralized on a second lien basis by all stock and assets

of Theatre Direct and its subsidiaries, (iii) Theatre Direct issued Hollywood Media a warrant to purchase 5% of the outstanding

shares of common stock of Theatre Direct as of the closing date on a fully diluted basis at an exercise price of $.01 per share

(the “Warrant”) and (iv) Key Brand assumed $1,600,000 of liabilities associated with employment agreements with certain

employees of Theatre Direct.

In addition, Hollywood Media is entitled to receive earn-out payments (“the Earn-out”)

of up to $14,000,000 contingent upon Theatre Direct and its subsidiaries achieving certain revenue targets during the period from

the closing date through the end of the 10 th full fiscal year following the closing date as set forth in the Purchase

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.

On March 14, 2011 the

Company delivered to Key Brand a closing statement setting forth Hollywood Media’s calculation of Theatre Direct’s

working capital on December 15, 2010, (the “closing date”) determined in the manner described in the Purchase Agreement.

Pursuant to the closing statement, Hollywood Media accrued $3,702,620 as a working capital adjustment as of December 31, 2010 under

the Purchase Agreement which included $530,102 related to the estimated working capital adjustment delivered at closing to Key

The accrual is included in “Accrued expenses and other”

in our accompanying consolidated balance sheets.

working capital adjustment was paid on March 22, 2011.

connection with the Credit Agreement, Hollywood Media and Key Brand entered into a Subordination and Intercreditor Agreement, dated

December 15, 2010 (The “Intercreditor Agreement”), with JP Morgan Chase Bank, N.A., as administrative agent for the

senior secured lenders of Key Brand, which defines the rights and obligations of the senior secured lenders and Hollywood Media

as subordinated creditor, including, without limitation, the rights of payment and the subordination of the security interests

of Hollywood Media.

Hollywood Media agreed to provide certain

transition services to Key Brand and Theatre Direct relating to the Broadway Ticketing business following the closing of the Broadway

Sale for a six-month period ending on June 15, 2011.

Pursuant to Staff Accounting Bulletin (“SAB”) Topic 5-E, the Company

must consider if it has transferred rights of ownership of the Broadway Ticketing business to Key Brand, which the Company has

considered and concluded that rights of ownership have been transferred to Key Brand and no significant continuing involvement

of the Company in the Broadway Ticketing business exists.

(“Hollywood Media ”) entered into Amendment No.

2 (the “Second Amendment”) to that

certain Second Lien Credit, Security and Pledge Agreement, dated as of December 15, 2010, as amended by that Amendment No.

the Credit Agreement, by and among Key Brand, Theatre Direct, and Hollywood Media.

Pursuant to the Amendment, (i) effective as

of December 31, 2012, the interest rate on the Loan was increased from 12% per annum to 13% per annum, (ii) the maturity date

of the Loan was shortened from December 15, 2015 to June 30, 2015, (iii) Hollywood Media consented to Key Brand amending and restating

Key Brand’s senior secured credit agreement to replace Key Brand’s prior senior lender, JPMorgan Chase Bank, N.A.,

with Key Brand’s new senior lender, Terido LLP (with the terms and conditions of such senior secured credit agreement remaining

substantially the same), (iv) subject to the terms and conditions of the Intercreditor Agreement described below, the net proceeds

from any indebtedness incurred by Key Brand that is not otherwise permitted under Key Brand’s amended and restated senior

secured credit agreement (other than from the proceeds of a refinancing of such amended and restated senior secured credit agreement)

will be used to prepay the Loan, (v) the prior consent of Hollywood Media is required for any amendment to Key Brand’s amended

and restated senior secured credit agreement that would be adverse to Hollywood Media in any material respect, and (vi) Key Brand

will provide Hollywood Media with additional and more frequent financial reporting.

Except as described in this paragraph, the

terms and conditions of the Credit Agreement and the Loan remain substantially the same.

In connection with

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

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

on sale of discontinued operations, net of income taxes”

in the December 31, 2010 accompanying consolidated statements of

operations which was paid as follows:

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

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

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

in “Accrued expenses and other”

in the accompanying December 31, 2010 consolidated balance sheet;

(ii) approximately

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

(iii) approximately

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

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

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

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

relating to the transactions contemplated by the Purchase Agreement;

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

professional services to the Company.

the Amendment and Key Brand’s amended and restated senior secured credit agreement, Hollywood Media and Key Brand entered

into that certain Subordination and Intercreditor Agreement, dated December 31, 2012 (the “2012 Intercreditor Agreement”),

with Terido LLP, as administrative agent for the senior secured lenders of Key Brand, which defines the rights and obligations

of the senior secured lenders and Hollywood Media as subordinated lender, including, without limitation, the rights of payment

and the subordination of the security interests of Hollywood Media.

The terms and conditions of the 2012 Intercreditor Agreement

are substantially similar to the terms and conditions of the prior subordination and intercreditor agreement among Hollywood Media,

Key Brand and JPMorgan Chase Bank, N.A.

On December 31, 2012,

in connection with the Amendment, the Warrant was amended to (i) shorten the earliest date that Hollywood Media can put the Warrant

to Theatre Direct from December 16, 2017 to June 30, 2015, (ii) increase the minimum price that Hollywood Media can put the Warrant

to Theatre Direct from $1,000,000 to $3,000,000, and (iii) increase the minimum price that Theatre Direct can redeem the Warrant

from Hollywood Media from $1,000,000 to $3,000,000.

Except as described in the preceding sentence, the terms and conditions of

the Warrant remain substantially the same.

The Warrant is marked to market each reporting period to reflect changes in fair value.

The change in fair value of the Warrant during the year ended December 31, 2012 was $700,000.

In connection with

the transactions and agreements described above, Key Brand paid Hollywood Media an amendment fee of $50,000 and reimbursed Hollywood

Media for all out-of-pocket costs and expenses incurred in documenting such agreements.

Hollywood.com Business

On August 21, 2008,

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

(“R&S Investments”) for the sale of Hollywood Media’s subsidiaries Hollywood.com, Inc.

and Totally Hollywood

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

R&S Investments is wholly-owned by Mitchell Rubenstein,

Hollywood Media’s Chief Executive Officer and Chairperson of the Board, and Laurie S.

Silvers, Hollywood Media’s President,

Secretary and Vice-Chairperson of the Board.

Pursuant to the R&S Purchase Agreement, Hollywood Media sold the Hollywood.com

Business to R&S Investments for a potential purchase price of $10,000,000 cash, which included $1,000,000 that was paid to

Hollywood Media at closing and potential earnout payments totaling $9,000,000, of which $1,892,692 had been paid as of August

Hollywood Media recognized $412,684 and $729,351 in earnout gain during the years ended December 31, 2012 and 2011, respectively,

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

in our accompanying consolidated

statements of operations.

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

On August 28, 2012,

(1) Hollywood Media and R&S Investments entered into an Agreement (the “R&S Agreement”) regarding the

R&S Purchase Agreement, (2) Hollywood Media, Mr.

Rubenstein and Ms.

Silvers entered into a letter agreement regarding the

R&S Agreement (the “Rubenstein Silvers Letter Agreement”), and (3) R&S Investments provided Hollywood Media

with a letter regarding a contingent additional payment (the “R&S Letter”).

As described below, the R&S

Agreement and the Rubenstein Silvers Letter Agreement and the transactions contemplated by the R&S Agreement and the Rubenstein

Silvers Letter Agreement were approved by a Special Committee of Hollywood Media’s Board of Directors comprised solely of

independent directors (the “Special Committee”).

Pursuant to the R&S

Agreement, in exchange for R&S Investments paying Hollywood Media $2,950,000 in cash (the “Buyout Amount”), which

payment has been made to Hollywood Media, R&S Investments fully satisfied all of its obligation to pay the purchase price

under Section 3.1 of the R&S Purchase Agreement and any additional consideration or earnout payment under Section 3.3 of the

R&S Purchase Agreement, and R&S Investments shall have no further obligations and/or liabilities (and Hollywood Media

shall have no further rights and/or remedies) under Article III of the R&S Purchase Agreement or otherwise.

Pursuant to the Rubenstein

Silvers Letter Agreement, Mr.

Rubenstein agreed that, in connection with the transaction consummated under the R&S Agreement

and in addition to the Buyout Amount, the next $280,000 of the MovieTickets.com 5% Interest (as defined in the Amended and Restated

Employment Agreement dated as of December 22, 2008, between Hollywood Media and Mr.

Rubenstein, as amended (the “Rubenstein

Employment Agreement”)) that would be distributed by Hollywood Media to Mr.

Rubenstein pursuant to the Rubenstein Employment

Agreement will be retained by Hollywood Media (and not paid to Mr.

Rubenstein) and is a reduction to “Derivative Liabilities”

in the accompanying consolidated balance sheets.

In addition, pursuant

to the Rubenstein Silvers Letter Agreement, Ms.

Silvers agreed that, in connection with the transaction consummated under the

R&S Agreement and in addition to the Buyout Amount, the next $280,000 of the MovieTickets.com 5% Interest (as defined in the

Amended and Restated Employment Agreement dated as of December 22, 2008, between Hollywood Media and Ms.

Silvers, as amended (the

“Silvers Employment Agreement”)) that would be distributed by Hollywood Media to Ms.

Silvers pursuant to the Silvers

Employment Agreement will be retained by Hollywood Media (and not paid to Ms.

Silvers) and is a reduction to “Derivative

Liabilities”

in the accompanying consolidated balance sheets.

Pursuant to the R&S

Letter, R&S Investments agreed that in the event of a sale of all the assets of Hollywood.com, LLC to one person or a group

of persons not controlled, directly or indirectly, by Mr.

Rubenstein and Ms.

Silvers or their heirs, personal representatives

or affiliates prior to August 31, 2015, R&S Investments shall pay to Hollywood Media $3,500,000 or, if less, the amount received

by R&S Investments in connection with such transaction.

The Special Committee

unanimously approved the R&S Agreement and the Rubenstein Silvers Letter Agreement and determined that the transactions contemplated

by the R&S Agreement and the Rubenstein Silvers Letter Agreement were advisable, fair to and in the best interests of Hollywood

Media and its shareholders.

In connection with approving the transactions contemplated by the R&S Agreement and the Rubenstein

Silvers Letter Agreement, the Special Committee received a fairness opinion from a firm with experience in valuation work, which

stated that as of August 28, 2012, based upon and subject to (and in reliance on) the assumptions made, matters considered and

limits of such review, in each case as set forth in its opinion, the Buyout Amount which was paid by R&S Investments was fair

from a financial point of view to Hollywood Media.

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.

As of the closing

of the transactions contemplated by the Share Purchase Agreement, (1) Jeffrey Spector, a director of Buyer, was 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) and (2)

Janette Erskine, a director of Buyer, was 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 “Gain on

sale of discontinued operations, net of income taxes”

in our accompanying Consolidated Statements of Operations.

The current portion of the discounted amount of the non-interest bearing loan is included in “Notes receivable, current”

and the long-term portion of the non-interest bearing loan is included in “Notes receivable, less current portion”

in our accompanying consolidated balance sheets.

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

1 unchanged sentence

ASC 360, the Company’s consolidated

financial statements have been reclassified for all periods presented to reflect the operations, assets and liabilities of the

Broadway Ticketing Business as discontinued operations.

The sale of the Broadway Ticketing Business qualifies for discontinued

operations treatment under ASC 360.

Hollywood.com Business

On August 21, 2008,

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

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

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

Business”).

R&S Investments is owned by Mitchell Rubenstein and Laurie S.

Pursuant to the purchase agreement,

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

includes $1,000,000 that was paid to Hollywood Media at closing and potential earn-out payments totaling $9,000,000, of which $1,737,188

has been paid as of December 31, 2011.

Hollywood Media recognized $729,351, $701,842 and $677,342 in earn-out gain during the years

ended December 31, 2011, 2010 and 2009 respectively, which is included in “Income from discontinued operations”

Hollywood Media’s 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 December 31, 2011, there remains $7,262,812 in potential earn-out payments.

Media recorded $729,351 in income under this earn-out arrangement for the year ended December 31, 2011 and $701,842 for the year

ended December 31, 2010, offset by $659 of expenses, which was recorded in “Income from discontinued operations”

the accompanying consolidated statement of operations.

Hollywood Media has received all of the earn-out monies in accordance with

the payment terms.

If a subsequent change

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

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

related expenses.

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

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

with the same earn-out terms.

Hollywood Media established an escrow account to fund negative EBITDA of the sold business as necessary,

up to a total of $2,600,000, the maximum amount of negative EBITDA required to be funded per the purchase agreement.

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

In addition, Hollywood Media paid $400,000

to the Purchaser for working capital adjustments at closing.

Pursuant to SAB Topic 5-E, the Company must consider if it has transferred

risks of ownership, which the Company has considered and concluded that the risks of ownership have been transferred.

The Hollywood.com Business

(i) Hollywood.com, Inc., which owned

the Hollywood.com website and related URLs and celebrity fan websites.

Hollywood.com features in-depth movie information including

movie showtimes listings, celebrity biographical data, and celebrity photos primarily obtained by Hollywood.com through licenses

with third party licensors which are made available on the Hollywood.com website and mobile platform.

Hollywood.com also has celebrity

fan sites and a library of feature stories and interviews which incorporate photos and multimedia videos taken at entertainment

events including movie premiers and award shows;

(ii) Totally Hollywood

TV, LLC, which owned Hollywood.com Television, a free video on demand service.

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 consolidated statement of operations as “Income (loss) from

discontinued operations”

and include the gain on sale of the Broadway Ticketing Business and the loss on sale of the Hollywood.com

Summarized results of discontinued operations include the operating gain from the Broadway Ticketing Business and the

operating loss from the Hollywood.com Business through their respective dates of disposition, for the years ended December 31,

2011, 2010 and 2009:

$ 104,452,373

Gain on sale of discontinued operations, net of income taxes

Income from discontinued operations

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

operations”

and includes the gain on sale of the Broadway.com Business, 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 years ended December 31, 2012 and 2011.

Year Ended December 31,

Net Revenues:

Gain on sale of discontinued operations

Income tax expense (1)

Gain on sale of discontinued operations, net of income

Income (loss) from discontinued

Income from discontinued Operations

(1) Income tax expense is offset by consolidated net operating losses in the accompanying Consolidated Statements of Operations.

(6) PURCHASE OF COMMON STOCK TENDERED:

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shares of common stock outstanding.

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK:

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS

AND CONCENTRATION OF CREDIT RISK:

The carrying amounts

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The Company generally does not require collateral when granting credit.

The Company performs ongoing credit evaluations and maintains

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

been significant.

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

Fair value is the price

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

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

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

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

Fair value is the

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

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

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

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

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

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

Within this level of

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

Within this level

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

the determination of what constitutes “observable”

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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”

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.

In connection with the buyout of the obligation

of R&S Investments, LLC to pay to Hollywood Media the Hollywood.com earnout under the R&S Purchase Agreement, the Rubenstein

Silvers Letter Agreement reduced the amount of distributions payable to Mr.

Rubenstein and Ms.

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 December 31, 2011, the fair value of the derivative

liability was $1,090,000.

conjunction with the Broadway Sale, the Company received a warrant (initially valued at zero)

to purchase 5% of the outstanding shares of common stock of Theatre Direct, which can only be exercised upon a Conversion Event,

as defined, and which also contains a put option that allows the Company, after the seventh anniversary of the issue date, to put

the warrant to Key Brand for the greater of fair market value of the shares or $1.0 million.

The warrant is revalued on a

recurring basis.

After estimating future cash flows adjusted for risk factors it wa s determined

that the fair value was zero at December 31, 2011.

consolidated statements of operations.

See Note 5, “Discontinued Operations”

to these Consolidated Financial Statements

for information on the Buyout Amount and its reduction of the derivative liability.

At December 31, 2012, the fair value of the

derivative liability was $60,000.

Warrant held by

Hollywood Media in Theatre Direct

In conjunction with

the Broadway Sale, the Company received a Warrant to purchase 5% of the outstanding shares of common stock of Theatre Direct,

which can only be exercised upon a Conversion Event, as defined in the Warrant, and which also contains a put option that allows

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

of the shares or $1.0 million which was later increased to $3.0 million, as referenced below.

The Warrant is revalued on a recurring

On December 31, 2012,

in connection with the Second Credit Agreement Amendment, the Warrant was amended to (i) shorten the earliest date that Hollywood

Media can put the Warrant to Theatre Direct from December 16, 2017 to June 30, 2015, (ii) increase the minimum

price that Hollywood Media can put the Warrant to Theatre Direct from $1,000,000 to $3,000,000, and (iii) increase the minimum

price that Theatre Direct can redeem the Warrant from Hollywood Media from $1,000,000 to $3,000,000.

After estimating future cash

flows adjusted for risk factors it was determined that the fair value of the Warrant was $700,000 at December 31, 2012.

The estimate of fair

value of the Warrant employed using a multiples approach and discounted cash flow analysis and assumed the Warrant was to be monetized

as of the valuation date.

The Warrant's values were then adjusted to reflect a range of outcomes and assigned probability

weights, and the Warrant's put and call rights of Hollywood Media and Key Brand.

The key assumptions used to determine the

fair value of the Warrant during fiscal 2012 were:

implied multiples used in the business enterprise value income and market approaches

ranging from 3.25 to 4.0 for fiscal 2012;

and a discount rate of 25%, based on the Company’s best estimate of the weighted-average

cost of capital adjusted for risks associated with the Warrant for fiscal 2012.

Certain assets such

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

that is, the assets and liabilities are not

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

that is, the assets and liabilities are

not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstance such as impairment

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

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

Derivative liabilities –

December 31, 2011

Warrant –

December 31, 2011

Goodwill –

December 31, 2011

Derivative liabilities

There were no transfers between the levels

of the fair value hierarchy during the year ended December 31, 2011.

The following table

presents a reconciliation of the compensation derivative liabilities measured at fair value on a recurring basis using significant

unobservable input (Level 3) from March 15, 2011 to December 31, 2011:

of the fair value hierarchy during the year ended December 31, 2012 and 2011.

The following

table presents a reconciliation of the compensation derivative liabilities measured at fair value on a recurring basis using significant

unobservable input (Level 3) from December 31, 2010 to December 31, 2012:

Balance at December 31, 2010

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Payment to officers

Change in fair value included in earnings

Change in fair value included

Balance at December 31, 2011

(8) RECENTLY ISSUED ACCOUNTING STANDARDS:

In May 2011, the FASB

issued Accounting Standards Update (“ASU”) No.

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

Amendments to Achieve

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

GAAP and IFRS .

This ASU represents the converged guidance

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

The collective efforts of the Boards and their staffs

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

The Boards have concluded

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

prepared in accordance with U.S.

GAAP and IFRS.

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

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

In September 2011,

the FASB issued ASU No.

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

(“ASU 2011-08”).

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

If an entity believes, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting

period is less than its carrying amount, the quantitative two-step goodwill impairment test is required.

An entity has the unconditional

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

The ASU is effective for fiscal years beginning after December 15, 2011 and its early adoption by the Company during the quarter

ended September 30, 2011 did not have a material effect on the Company’s consolidated financial statements.

Hollywood Media’s

significant accounting policies discussed in Note 2 of its audited consolidated financial statements for our fiscal year ended

December 31, 2010 have not changed.

Change in fair value included in "Other, net"

Change in fair value resulting

from R&S Agreement waivers included in Income from discontinued operations

Balance at December 31, 2012

The following

table presents a reconciliation of the Warrant measured at fair value on a recurring basis using significant unobservable input

(Level 3) from December 31, 2011 to December 31, 2012:

Balance at December 31, 2011

Change in fair value included in "Other, net"

Balance at December 31, 2012

(8) PROPERTY AND EQUIPMENT, NET:

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Website development

Accumulated depreciation and amortization

Accumulated depreciation

and amortization

Depreciation and amortization

expense of property and equipment was $128,010 and $187,500 for the years ended December 31, 2012 and 2011, respectively.

Included in these amounts is depreciation and amortization expense for equipment under capital leases of $14,928, $87,216, and

$110,159 for the years ended December 31, 2011, 2010 and 2009, respectively.

in these amounts is depreciation and amortization expense for equipment under capital leases of $20,236 and $50,421 for the years

ended December 31, 2012 and 2011, respectively.

(9) GOODWILL AND INTANGIBLE ASSETS:

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for the years ended December 31, 2012 and 2011:

Ad Sales and Other

Balance at December 31, 2011

Balance at December 31, 2012

The intangible assets

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was $8,433 and $15,733 for the years ended December 31, 2012 and 2011, respectively.

Based on the carrying value

of identified intangible assets recorded at December 31, 2011, and assuming no subsequent impairment of the underlying assets,

the annual amortization expense is expected to be as follows:

Based on the carrying value of identified

intangible assets recorded at December 31, 2012, and assuming no subsequent impairment of the underlying assets, the annual amortization

expense is expected to be as follows:

Patents and trademarks

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current portion

(12) OFFERINGS OF SECURITIES:

On March 30, 2009,

Hollywood Media issued 225,343 shares of common stock valued at the December 31, 2008 closing share price of $1.00 or $225,343

for payment of Hollywood Media’s 401(k) employer match for 2008.

On February 19, 2010,

Hollywood Media issued 141,410 shares of common stock valued at the December 31, 2009 closing share price of $1.40 or $197,974,

for payment of Hollywood Media’s 401(k) employer match for the calendar year 2009.

(11) STOCK REPURCHASE PROGRAM :

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ended December 31, 2012.

The shares were purchased for $72,954 for the year ended December 31, 2009, reflecting an approximate

The shares were purchased for $24,582 during the year ended December 31, 2012, reflecting an approximate

average price per share of $1.45 for the year ended December 31, 2012.

No shares were repurchased under the stock repurchase program

during the years ended December 31, 2011 and 2010.

Subsequent to December 31, 2012 through January 24, 2013,

pursuant to the repurchase program, Hollywood Media purchased an aggregate of 510,700 shares of its common stock for $749,966

reflecting an approximate average price per share of $1.44.

No shares were repurchased under the stock repurchase program during

the year ended December 31, 2011.

(12) INCOME TAXES:

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provisions of Section 382 of the U.S.

Revenue Code, Hollywood Media has established a valuation allowance for the full amount of the deferred tax asset.

The net operating loss

carryforwards expire as follows:

Internal Revenue Code, Hollywood Media has established a valuation allowance for the full amount of the deferred tax asset.

The net operating

loss carryforwards expire as follows:

$ 173,402,068

The components of Hollywood

Media’s deferred tax assets and liabilities consist of the following at December 31:

Net difference in tax basis and book basis for certain assets and liabilities

Net operating loss and tax credit carryforwards

The components of

Hollywood Media’s deferred tax assets and liabilities consist of the following at December 31:

Net difference in tax basis and book basis

for certain assets and liabilities

$ (1,007,822 )

Net operating loss and tax credit

carryforwards

Valuation allowance

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Net deferred tax asset

The provision for income

taxes from continuing operations is different from that which would be obtained by applying the statutory Federal income tax rate

of 35% as a result of the following:

For the Year Ended December 31,

Income tax expense (benefit) at Federal statutory tax rate

Income tax (benefit)

expense is included in the consolidated financial statements as follows:

Continuing operations

$ (5,326,300 )

Discontinued operations

The provision for

income taxes from continuing operations is different from that which would be obtained by applying the statutory Federal income

tax rate of 35% as a result of the following:

For the Year Ended December 31,

Income tax expense (benefit) at Federal

statutory tax rate

$ (2,415,418 )

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Change in valuation allowance

Change in valuation allowance resulting from change in cumulative temporary differences

(18,359,237 )

Change in valuation allowance resulting from change

in cumulative temporary differences

Impairment of goodwill

Sale of subsidiaries

Dividends received deduction

Sale of subsidiaries –

basis difference

Loss of foreign subsidiaries

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Interest computation –

deferred gain

The Company is currently

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all years due to the net operating loss carryovers from those years.

(15) INVESTMENTS IN AND ADVANCES TO EQUITY METHOD UNCONSOLIDATED

(13) INVESTMENTS IN AND ADVANCES TO

EQUITY METHOD UNCONSOLIDATED INVESTEES:

Investments in and

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Project Hollywood LLC (c)

Any difference between

the carrying amount of the investments on our balance sheet and the underlying equity in net assets is evaluated for impairment

at each reporting period.

(a) Netco Partners:

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through to the partners.

The revenues, gross profit and net income of NetCo Partners for the years ended December 31, 2011, 2010

and 2009 are presented below:

The revenues, gross profit and net income of NetCo Partners for the years ended December 31, 2012 and

2011 are presented below:

Year Ended December 31,

Net income (loss)

Company’s share of net income (loss)

Company’s share of net (loss) income

The current assets,

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In August 2000, the joint venture entered into an agreement with Viacom Inc.

to acquire a five percent

interest in the joint venture for $25 million of advertising over 5 years.

to acquire a five

percent interest in the joint venture for $25 million of advertising over 5 years.

In addition to the Viacom advertising and promotion,

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

at December 31, 2011 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.

Under applicable accounting principles, Hollywood Media had not recorded income from MovieTickets.com operating results for 2008

because accumulated losses from 2007 and prior years exceeded MovieTickets.com’s accumulated net income in 2008.

2010 and 2009, Hollywood Media recorded $485,385, $726,038 and $95,283, respectively, of income because accumulated income surpassed

accumulated losses.

Dividends of $1,914,202 are included in “Equity in Earnings of Unconsolidated Investees”

accompanying consolidated statement of operations for the year ended December 31, 2009.

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

There were no dividends received during the year ended December 31, 2010.

Receivables from MovieTickets.com of $5,904

and $80,572 were recorded as “Related Party Receivables”

as of December 31, 2011 and 2010, respectively.

The consolidated statements

as of December 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

statements of operations.

Under applicable accounting principles, Hollywood Media recorded $252,855 in loss from its investment

in MovieTickets.com during 2012.

Hollywood Media did not record $33,034 of its share of losses from MovieTickets.com for 2012

because accumulated dividends and net losses from 2012 and prior years exceed the Company’s investment in MovieTickets.com

as of December 31, 2012.

During 2011, Hollywood Media recorded $485,385 of income because accumulated income surpassed accumulated

During the three months ended September 30, 2011, the Company determined that goodwill associated with the assets of the

Ad Sales Segment was impaired and accordingly recorded a non-cash goodwill impairment charge of $4,795,783.

During the three months

ended September 30, 2012, the Company determined that goodwill associated with the assets of the Ad Sales Segment was impaired

and accordingly recorded a non-cash goodwill impairment charge of $3,600,000.

For additional information see Note 16 –

“Segment Reporting”

to these Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on

The MovieTickets.com

web site generates revenues primarily from service fees charged to users for the purchase of movie tickets online, the sale of

advertising and research fees.

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

Hollywood Media received its

26.2% pro rata share of such dividend, amounting to $1,048,875 on July 19, 2011, which reduced the Company’s investment

in MovieTickets.com as the dividend did not exceed the amount of the Company’s investment.

Hollywood Media distributed on,

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

Rubenstein and Ms.

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

Other than the July 18, 2011 dividend discussed above, there were no dividends declared by MovieTickets.com or received

from MovieTickets.com during the years ended December 31, 2012 and 2011, respectively.

The condensed statements

of income of MovieTickets.com for the years ended December 31, 2012 and 2011, which are not included in Hollywood Media’s

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Depreciation and amortization

Provision for income taxes

Provision (benefit) for income taxes

Net (loss) income

$ (1,091,182 )

The current assets,

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Non-current liabilities

Hollywood Media previously

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

The opportunity to purchase

the Baseline StudioSystems business was presented to Mr.

Hollywood LLC

The opportunity to

purchase the Baseline StudioSystems business was presented to Mr.

Rubenstein and Ms.

Silvers in their individual capacity, and they presented

to Hollywood Media’s independent directors the opportunity for Hollywood Media.

Rather than acquire 100% of the Baseline

StudioSystems business, and taking into account, among other factors

and considerations, Hollywood Media’s then available cash, Hollywood Media’s independent directors decided unanimously for Hollywood Media to make a minority

Silvers in their individual capacity, and

they presented to Hollywood Media’s independent directors the opportunity for Hollywood Media.

Rather than acquire 100%

of the Baseline StudioSystems business, and taking into account, among other factors and expectations, Hollywood Media’s

then available cash, Hollywood Media’s independent directors decided unanimously for Hollywood Media to make a minority

investment in Project Hollywood LLC alongside Mr.

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Silvers with the relative ownership interest of Project Hollywood

LLC whose interests were determined based on the proportionate amount each invested.

LLC determined based on the proportionate amount each invested.

On October 27, 2011,

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

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

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

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

Project Hollywood

entered into two agreements with the two former senior executives of Baseline StudioSystems (who have no relationship with

Hollywood Media) to manage the business on a day-to-day basis, as of December 1, 2011.

Under those agreements, the managers

will each receive 7.5% of Project Hollywood LLC’s membership units subject to a three year vesting schedule (at a rate

of 2.5% per annum) and the obtaining of certain performance-based EBITDA hurdles each year.

Under that vesting schedule

(and if vesting occurs), Hollywood Media’s ownership in Project Hollywood will be reduced to 20.65% at June 30, 2012,

19.57% at June 30, 2013 and 18.48% at June 30, 2014.

Distribution of $176,866

to Hollywood Media reduced Hollywood Media’s investment in Project Hollywood during the year ended December 31, 2011.

Pursuant to the Project

Hollywood Limited Liability Company Agreement (the “LLC Agreement”), Baseline Holdings or its designee is the managing

member, as long as Baseline Holdings or any of its permitted transferees, as defined in the LLC Agreement, has an ownership interest

in Project Hollywood LLC.

The managing member of Project Hollywood LLC has full authority, power and discretion to manage and control

Project Hollywood LLC’s business and to determine the timing and amounts of distributions.

The LLC Agreement provides

that (i) distributions of available cash will be made in accordance with the members’

percentage interests, (ii) Hollywood

Media’s ownership interest in Project Hollywood LLC is subject to a right of first refusal in favor of Project Hollywood

LLC and Baseline Holdings in the event Hollywood Media desires to transfer such ownership interest, (iii) if Baseline Holdings

and/or its permitted transferees who together own at least a majority of Project Hollywood LLC agree to sell its ownership interest

in Project Hollywood LLC or is required to consent to the transaction, waive any appraisal rights, and agree to sell its ownership

interest in Project Hollywood LLC on the same terms and conditions as other members;

and (iv) if Baseline Holdings desires to sell

its ownership interest in Project Hollywood LLC, Hollywood Media would be able to participate in such sale by selling a proportionate

amount of its interest in Project Hollywood LLC.

The consolidated statements

of income of Project Hollywood LLC for the period from October 27, 2011 to December 31, 2011, which are not included in Hollywood

Media’s consolidated statements of operations, are presented below:

Distributions of $176,866

and $182,617 to Hollywood Media during 2011 and 2012, respectively, reduced Hollywood Media’s investment in Project Hollywood.

On August 28, 2012

Hollywood Media assigned to Baseline Holdings all of Hollywood Media’s membership interest in Project Hollywood in exchange

for total consideration of $1.8 million.

Prior to that assignment, Hollywood Media owned 20.65% of the total equity in Project

Hollywood LLC.

Hollywood Media’s equity ownership in Project Hollywood LLC was reduced from 21.74% of the total equity

in Project Hollywood LLC to 20.65% of the total equity in Project Hollywood LLC at June 30, 2012.

The condensed statements

of income of Project Hollywood LLC for the period from January 1, 2012 to August 28, 2012 and for the period from October 27,

2011 to December 31, 2011, which are not included in Hollywood Media’s consolidated statements of operations, are presented

January 1, 2012 - August

October 27, 2011 –

December 31, 2011

Editorial & production expenses

Editorial and production expenses

Selling, general and administrative expenses

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The current assets, non-current assets,

current liabilities and non-current liabilities of Project Hollywood LLC as of December 31, 2011 which is not included in Hollywood

Media’s consolidated balance sheets, are presented below:

current liabilities and non-current liabilities of Project Hollywood LLC as of August 28, 2012 and December 31, 2011 which are

not included in Hollywood Media’s consolidated balance sheets, are presented below:

As of December 31,

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lease, and expire at various dates through the year 2015.

Operating lease commitments at December 31, 2012 amount to $205,311,

$174,891 in 2013, $17,738 in 2014 and $8,869 in 2015.

Operating lease commitments at December 31, 2012 amount to $54,914 in

2013, $17,738 in 2014 and $8,869 in 2015.

The fixed foregoing

operating lease commitments assume that Hollywood Media continues the leases through their initial lease terms.

Rent expense, including

equipment rentals, was $280,329, $265,791, and $233,125 during the years ended December 31, 2011, 2010 and 2009, respectively,

and is included in “Selling, general and administrative”

Rent expense,

including equipment rentals, was $260,140 and $209,042 during the years ended December 31, 2012 and 2011, respectively, and is

included in “Selling, general and administrative”

expense in the accompanying consolidated statements of operations.

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

On February 8, 2012, 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.

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

AMC to exclusively provide its ticket inventory to MovieTickets.com, and has breached its contractual and common law duties

of good faith, fair dealing, and loyalty with respect to the MovieTickets.com Joint Venture and its joint venturers,

Hollywood Media and National Amusements, Inc., as a result of various actions by AMC.

The amended complaint contends that

when AMC’s demands for greater control and a larger share of MovieTickets.com were not met, AMC breached and continues

to breach the MovieTickets.com Joint Venture Agreement, which obligates AMC to exclusively provide its ticket inventory to

MovieTickets.com.

The amended complaint further specifies breaches by AMC of its contractual and common law duties of good

faith, fair dealing, and loyalty and violations of Florida’s Deceptive and Unfair Trade Practices Act.

things, the plaintiffs allege in the amended complaint that AMC used its inside position with MovieTickets.com and access to

MovieTickets.com’s proprietary information in order to advance AMC’s own goals in contravention of its duty of

loyalty to the joint venture and to the detriment of MovieTickets.com.

The amended complaint

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

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

and loyalty with respect to the MovieTickets.com Joint Venture and its joint venturers, Hollywood Media and National Amusements,

Inc., as a result of various actions by AMC.

The amended complaint contends that when AMC’s demands for greater control

and a larger share of MovieTickets.com were not met, AMC breached and continues to breach the MovieTickets.com Joint Venture Agreement,

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

The amended complaint further specifies breaches

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

and Unfair Trade Practices Act.

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

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

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

Hollywood Media and

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

(17) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

(15) SUPPLEMENTAL DISCLOSURE OF NON-CASH

INVESTING AND FINANCING ACTIVITIES:

INVESTING ACTIVITIES:

Acquisition of property and equipment under capital leases

Acquisition of property and equipment under

capital leases

Total non-cash investing activities

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Obligations acquired under capital leases

Common stock issued and vesting for compensation to officers

Common stock issued for contributions to Company 401(k) Plan

Total non-cash financing activities

(1) On February 19, 2010, Hollywood

Media issued 141,410 shares of common stock valued at the December 31, 2009 closing price of $1.40 per share or $197,974 for payment

of Hollywood Media’s 401(k) employer match for calendar year 2009 (See Note 2).

(2) On March 30, 2009, Hollywood

Media issued 225,343 shares of common stock valued at the December 31, 2008 closing price of $1.00 per share or $225,343 for payment

of Hollywood Media’s 401(k) employer match for 2008 (See Note 2).

(3) On December 22, 2008, Hollywood

Media issued 250,000 shares and 150,000 shares, respectively, of restricted common stock to the Chief Executive Officer and President

of Hollywood Media, valued at $408,000 in the aggregate based on the $1.02 closing share price as of the date of grant.

shares were issued as payment of restricted stock bonuses granted by the Compensation Committee of the Board of Directors.

Compensation expense was recognized quarterly on one-third of the shares, or $136,000, over a 4-year period beginning on the date

The shares were based on a service condition, of which Hollywood Media recorded compensation expense of $33,977 in the

consolidated statement of operations for the year ended December 31, 2009.

Hollywood Media recorded compensation expense

of $202,184 for the year ended December 31, 2010 since these shares automatically vested due to the change of control provisions

in the employment agreements on the sale of the Broadway Ticketing Division.

As described below, one-third of the shares, or $136,000

of value was recorded as compensation expense in fiscal 2009 since Hollywood Media achieved three quarters of positive EBITDA in

a 15-month period which was a vesting condition to such one-third of the shares.

The remaining one-third of shares, or $136,000

of value, was recorded to compensation expense pro-rata over a 4-year period beginning on the date of grant.

The vesting of the

shares would not have occurred until Hollywood Media’s share price exceeded $2.00 for ten consecutive trading days or there

is a change in control in Hollywood Media.

Hollywood Media recorded compensation expense of $34,908 for the year ended December

See Note 4 for additional information.

(16) SEGMENT REPORTING:

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

The Ad Sales segment sells advertising on plasma TV displays

throughout the U.K.

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

theater and other entertainment venues in the U.K and Ireland.

This segment also includes Hollywood Media’s investment in

MovieTickets.com.

The Intellectual Properties segment owns or controls the exclusive rights to certain intellectual properties

created by best-selling authors and media celebrities, which it licenses across all media.

This segment also includes Tekno Books,

a book development business (see Note 3).

The Other segment is comprised of payroll and benefits for corporate and administrative

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

technology, and includes consulting fees and other fees and costs relating to compliance with the provisions of the Sarbanes-Oxley

Act of 2002 that require Hollywood Media to make an assessment of and report on internal control over financial reporting.

segment also includes Hollywood Media’s investment in Project Hollywood.

The Ad Sales segment 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.

“Discontinued Operations”

to these Consolidated Financial Statements.

The Intellectual Properties segment owns or

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

it licenses across all media.

This segment also includes Tekno Books, a book development business (see Note 3).

The Other segment

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

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

fees and costs relating to compliance with the provisions of the Sarbanes-Oxley Act of 2002 that require Hollywood Media to make

an assessment of and report on internal control over financial reporting.

This segment also includes Hollywood Media’s investment

in Project Hollywood.

On August 28, 2012 Hollywood Media assigned to Baseline Holdings all of Hollywood Media’s membership

interest in Project Hollywood in exchange for total consideration of $1,800,000.

See Note 18, “Related Party Transactions”

to these Consolidated Financial Statements.

There are no intersegment

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$ (5,811,366 )

$ (8,007,260 )

Capital Expenditures (a)

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Intellectual Properties

(a) Capital expenditures do not include property and equipment acquired under capital lease obligations

(a) Capital expenditures do not include

property and equipment acquired under capital lease obligations

or through acquisitions.

During the three months

ended September 30, 2011, events occurred that caused us to reconsider expected cash flows

relative to the Ad Sales division.

As a result, in connection with the preparation of our financial statements,

we performed impairment tests of goodwill.

For purposes of testing

goodwill for potential impairment, we estimated the fair value of the applicable reporting unit to which all goodwill is allocated

using generally accepted valuation methodologies, including market and income based approaches, and relevant data available through

and as of April 10, 2012.

The market approach is a valuation method in which fair value is estimated based on observed market prices

of publicly traded guideline companies.

Under the market approach, the valuation process is essentially that of comparison

and correlation between the subject company and other similar companies.

The income approach is a method in which fair value is

estimated based on the cash flows that an asset could be expected to generate over its useful life, including residual value cash

These cash flows are then discounted to their present value equivalents using a rate of return that accounts for the relative

risk of not realizing the estimated annual cash flows and for the time value of money.

The key inputs to the discounted

cash flow model were our historical and estimated future revenues and the discount rate, among others.

During the three months

ended September 30, 2011, as a result of this testing, it was determined that the future cash flow of these assets is likely impaired,

and the risk associated with previously expected cash flows has increased.

Accordingly, we concluded that goodwill was impaired

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

This charge is included

in the impairment loss line item in “Earnings (Losses) of Unconsolidated Investees”

in the Consolidated Financial Statements.

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

Footnote 16, Commitments and Contingencies.

(19) UNAUDITED QUARTERLY FINANCIAL INFORMATION:

For the quarter ended March 31, 2011

Loss from continuing operations

$ (1,713,299 )

Income from discontinued operations

Net income attributable to Hollywood Media Corp.

$ (1,610,928 )

Weighted average shares

Loss per share - continuing operations

Income per share - discontinued operations

Net income per share (1)

For the quarter ended June 30, 2011

Income from continuing operations

Loss from discontinued operations

Net income attributable to Hollywood Media Corp.

Weighted average shares

Income per share - continuing operations

Income per share - discontinued operations

Net income per share (1)

For the quarter ended September 30, 2011

Loss from continuing operations

$ (5,579,875 )

Income from discontinued operations

Net loss attributable to Hollywood Media Corp.

$ (5,419,024 )

Weighted average shares

Loss per share - continuing operations

Income per share - discontinued operations

Net loss per share (1)

For the quarter ended December 31, 2011

Loss from continuing operations

Income from discontinued operations

Net income attributable to Hollywood Media Corp.

Weighted average shares

Loss per share - continuing operations

Income per share - discontinued operations

Net loss per share (1)

For the quarter ended March 31, 2010

Loss from continuing operations

$ (1,513,228 )

Income from discontinued operations

Net loss attributable to Hollywood Media Corp.

Weighted average shares

Loss per share - continuing operations

Income per share - discontinued operations

Net loss per share (1)

For the quarter ended June 30, 2010

Loss from continuing operations

$ (1,847,073 )

Income from discontinued operations

Net income attributable to Hollywood Media Corp.

Weighted average shares (basic)

Weighted average shares (diluted)

Loss per share - continuing operations

Income per share - discontinued operations

Net income per share (1)

For the quarter ended September 30, 2010

Loss from continuing operations

$ (2,170,192 )

Income from discontinued operations

Net loss attributable to Hollywood Media Corp.

Weighted average shares

Loss per share - continuing operations

Income per share - discontinued operations

Net loss per share (1)

For the quarter ended December 31, 2010

Loss from continuing operations

$ (1,581,045 )

Income from discontinued operations

Net income attributable to Hollywood Media Corp.

Weighted average shares

Loss per share - continuing operations

Income per share - discontinued operations

Net income per share (1)

(1) Quarterly earnings per share are

calculated on an individual basis and, because of roundings and changes in the weighted average shares outstanding during the year,

the summation of each quarter may not equal the amount calculated for the year as a whole.

(20) RELATED PARTY TRANSACTIONS:

(b) 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.

(17) SIGNIFICANT FOURTH QUARTER ADJUSTMENTS:

During the fourth

quarter of 2012, the Company recorded the following unusual or infrequently occurring items or adjustments that were deemed to

be material to the fourth quarter 2012 results:

Brand’s

During the fourth quarter of 2011, the

Company had no unusual or infrequently occurring items or adjustments that were deemed to be material to the fourth quarter 2011

(18) RELATED PARTY

TRANSACTIONS:

Hollywood Media recorded

$729,351 in earn-out gain from R&S Investments, LLC during 2011.

$412,684 and $729,351 in earn-out gain from R&S Investments, LLC during 2012 and 2011, respectively.

As of December 31, 2012,

the Company had $37,287 included in “Related Party Receivable”

in our accompanying consolidated balance sheet which

primarily consisted of expense reimbursements from R&S Investments.

As of December 31, 2011, the Company has $521,497 included

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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 taxes receivable from Mr Rubenstein and Ms,

Subsequent to December 31, 2011, Hollywood Media received such earn-out amounts and expense reimbursements in accordance

with the payment terms.

Hollywood Media recorded

$701,842 in earn-out gain from R&S Investments, LLC during 2010.

In addition, $659 of expenses offset this overall earn-out

gain which is included on sale of discontinued operations recorded in the accompanying statement of operations.

As of December

31, 2010, the Company has $299,963 included in “Related party receivable”

in our accompanying consolidated balance

sheet which consisted of $205,562 in earn-out receivable, $13,829 in expense reimbursements from R&S Investments and $80,572

for an expense reimbursement receivable from MovieTickets.com.

Subsequent to December 31, 2010, Hollywood Media received such earn-out

amounts and expense reimbursements in accordance with the payment terms.

Hollywood Media recorded

$677,842 in earn-out gain from R&S Investments, LLC during 2009 which was offset by $61,543 of indemnification expense related

to claims by former employees relating to the period of their employment with Hollywood Media and a $1,227 tax expense.

As of December

31, 2009, the Company has $335,245 included in “Related party receivables”

in our accompanying consolidated balance

sheet which consisted of $204,422 in earn-out receivable, $18,034 in expense reimbursements from R&S Investments, LLC and $112,789

for an expense reimbursement receivable from MovieTickets.com.

Subsequent to December 31, 2009, Hollywood Media received such earn-out

amounts and expense reimbursements in accordance with the payment terms.

At September 30, 2010

a $49,000 loan was granted to the President of Tekno Books, a then 51% owned subsidiary that is recorded as an offset to additional

paid in capital.

The President of Tekno Books was not an executive officer of Hollywood Media Corp.

and he then owned 49% of Tekno

The loan proceeds were contributed capital by the minority partner of Tekno Books.

The loan was due December 1, 2010, and

it was secured with collateral consisting of 342,127 shares of Hollywood Media Corp.

common stock owned by the minority partner.

As of December 31, 2010, this loan was cancelled and the monies returned to Hollywood Media.

In addition, the contribution monies

were returned to Hollywood Media.

$5,904 for an expense reimbursement receivable from MovieTickets.com and $2,576 for taxes receivable from Mr.

Rubenstein and Ms.

During the years ended December 31, 2011 and 2012, Hollywood Media received such earn-out amounts and expense reimbursements

in accordance with the payment terms.

Pursuant to the R&S

Agreement dated August 28, 2012, in exchange for the Buyout Amount, which payment has been made to Hollywood Media, R&S Investments

fully satisfied all of its obligation to pay the purchase price under Section 3.1 of the R&S Purchase Agreement and any additional

consideration or earnout payment under Section 3.3 of the R&S Purchase Agreement, and R&S Investments shall have no further

obligations and/or liabilities (and Hollywood Media shall have no further rights and/or remedies) under Article III of the R&S

Purchase Agreement or otherwise.

Accordingly, the earnout receivable from R&S Investments, LLC was $0 as of December

See Note 5, “Discontinued Operations”

to these Consolidated Financial Statements for more information

on the Buyout Amount and this transaction.

On October 27, 2011,

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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.

Distribution of $176,866

to Hollywood Media reduced Hollywood Media’s investment in Project Hollywood during the year ended December 31, 2011.

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

to 20.65% at June 30, 2012.

Distributions of $176,866

and $182,617 to Hollywood Media reduced Hollywood Media’s investment in Project Hollywood during the years ended December

31, 2011 and 2012, respectively.

On August 28, 2012,

Hollywood Media entered into an Assignment and Assumption of Membership Interest and Waiver (the “Assignment”) with

Baseline Holdings LLC (“Baseline Holdings”), Project Hollywood LLC, Mitchell Rubenstein and Laurie S.

Baseline Holdings is wholly-owned by Mr.

Rubenstein, Hollywood Media’s Chief Executive Officer and Chairperson of the Board,

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

As described below, the

Assignment and the transactions contemplated by the Assignment were approved by a Special Committee of Hollywood Media’s

Board of Directors comprised solely of independent directors (the “Special Committee”).

Pursuant to the Assignment,

Hollywood Media assigned to Baseline Holdings all of Hollywood Media’s membership interest in Project Hollywood in exchange

for total consideration of $1,800,000 (the “Project Hollywood Purchase Price”).

The Project Hollywood Purchase Price

has been paid as follows:

(1) $1,230,500 in cash (which has been paid by Baseline Holdings to Hollywood Media), (2) Mr.

Rubenstein waived his right to receive any future principal and interest owed by Key Brand to Hollywood Media pursuant to the $8.5

million portion of the Loan (as of August 28, 2012, Mr.

Rubenstein had the right to receive 4.76% of the principal, or

$404,600, and interest on account of the $8.5 million portion of the Loan), and (3) Ms.

Silvers waived her right to receive

any future principal and interest owed by Key Brand to Hollywood Media pursuant to the $8.5 million portion of the Loan (as of

August 28, 2012, Ms.

Silvers has the right to receive 1.94% of the principal, or $164,900, and interest on account of

the $8.5 million portion of the Loan).

Hollywood Media recorded the fair value of the waivers by Mr.

Rubenstein and Ms.

in the long term portion of “Other Assets”

in the accompanying consolidated balance sheets and in "Other, net"

in the accompanying consolidated statements of operations.

Hollywood Media acquired its membership interest in Project Hollywood

on October 27, 2011 for $1,250,000.

As a result of the

waivers of Mr.

Rubenstein and Ms.

Silvers described in the preceding paragraph, after August 28, 2012, Hollywood Media will retain

all payments of principal and interest made by Key Brand under the Loan.

As of August 28, 2012, the principal balance due under

the Loan was $8,500,000.

As of October 5, 2012, the principal balance due under the Loan increased to $15,500,000 as a result of

the achievement of the revenue threshold for the Second $7 Million Earnout in the Purchase Agreement.

The Special Committee

unanimously approved the Assignment and determined that the transactions contemplated by the Assignment were advisable, fair to

and in the best interests of Hollywood Media and its shareholders.

In connection with approving the transactions contemplated by

the Assignment, the Special Committee received a fairness opinion from a firm with experience in valuation work, which stated that

as of August 28, 2012, based upon and subject to (and in reliance on) the assumptions made, matters considered and limits of such

review, in each case as set forth in its opinion, the Project Hollywood Purchase Price was fair from a financial point of view

to Hollywood Media.

R&S Investments, LLC Indemnification

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

Amendments to Amended and

Restated Employment Agreements of Mr.

Amended and Restated Employment Agreements

Rubenstein and Ms.

On December 23, 2009,

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

Hollywood Media and Laurie S.

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

referred to as “Amendments to Employment Agreements”).

The Amendments to Employment Agreements provide for, among other

things, the following:

For a period of ninety days after the

closing of the sale of Theatre Direct, Mr.

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

Employment Agreement”) and (ii) Hollywood Media and Laurie S.

Silvers entered into an amendment to her amended and restated

employment agreement (“Silvers Employment Agreement”) (hereafter, collectively referred to as “Amendments to

Employment Agreements).

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

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

Rubenstein’s and Ms.

Silvers’

compensation continues in accordance with

then existing terms.

After this ninety-day period, Mr.

Silvers base salaries are each reduced to a nominal amount of $1 per year plus five percent (5%) of the sum of (i) any

distributions and other proceeds Hollywood Media receives after such ninety-day period in connection with its ownership interest

in MovieTickets.com, Inc.

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

(collectively,

the “5% Distribution”).

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

Rubenstein and

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

Should the employment agreements be

terminated more than ninety days after the closing of the sale of Theatre Direct by Hollywood Media without “cause”,

by death or by Mr.

continued in accordance with then existing terms.

this ninety-day period, Mr.

Rubenstein and Ms.

Silvers base salaries were each reduced to a nominal amount of $1 per year plus

each is entitled to five percent (5%) of the sum of (i) any distributions and other proceeds Hollywood Media receives after such

ninety-day period in connection with its ownership interest in MovieTickets.com, Inc.

and (ii) certain other amounts that may

be received by Hollywood Media from MovieTickets.com, Inc.

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

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

Rubenstein and Ms.

Silvers would each also receive 5%

of the proceeds received by Hollywood Media in such sale.

Should the employment agreements be terminated by Hollywood Media

without “cause”, by death or by Mr.

Rubenstein and/or Ms.

Silvers, as applicable, for “good reason”

the 5% Distributions and 5% of proceeds

upon sale are due to Mr.

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

Rubenstein and Ms.

Silvers, or their heirs regardless of whether or not Mr.

Silvers or their heirs regardless of whether or

Rubenstein and/or Ms.

continue in the employment of the Company.

A deferment by Mr.

Silvers continue in the employment of the Company.

deferment by Mr.

Rubenstein and Ms.

Silvers of $812,501 and $332,189, respectively otherwise due to them as change of control payments upon the consummation of the

sale of Theatre Direct (Deferred Change in Control Payments).

The Amendments to Employment

Agreements also provide that if Mr.

Rubenstein and/or Ms.

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

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

Media without “cause”

Silvers of $812,501 and $332,189, respectively otherwise due to them as change of control

payments upon the consummation of the sale of Theatre Direct (referred to herein as the “Deferred Change in Control Payments”).

On August 28, 2012,

(1) Hollywood Media and R&S Investments, LLC (“R&S Investments”) entered into an Agreement (the “R&S

Agreement”) regarding the Purchase Agreement dated as of August 21, 2008 between Hollywood Media and R&S Investments,

as amended (the “R&S Purchase Agreement”) and (2) Hollywood Media, Mr.

Rubenstein and Ms.

Silvers entered into

a letter agreement regarding the R&S Agreement (the “Rubenstein Silvers Letter Agreement”).

R&S Investments

is wholly-owned by Mr.

Rubenstein and Ms.

See Note 5, “Discontinued Operations”

to these Consolidated Financial

Pursuant to the R&S

Agreement, in exchange for R&S Investments paying Hollywood Media $2,950,000 in cash (the “Buyout Amount”), which

payment has been made to Hollywood Media, R&S Investments fully satisfied all of its obligation to pay the purchase price under

Section 3.1 of the R&S Purchase Agreement and any additional consideration or earnout payment under Section 3.3 of the R&S

Purchase Agreement, and R&S Investments shall have no further obligations and/or liabilities (and Hollywood Media shall have

no further rights and/or remedies) under Article III of the R&S Purchase Agreement or otherwise.

Pursuant to the Rubenstein

Silvers Letter Agreement, Mr.

Rubenstein agreed that, in connection with the transaction consummated under the R&S Agreement

and in addition to the Buyout Amount, the next $280,000 of the 5% Distribution that would be distributed by Hollywood Media to

Rubenstein pursuant to his amended employment agreement will be retained by Hollywood Media (and not paid to Mr.

and is a reduction to “Derivative Liabilities”

in the accompanying consolidated balance sheets.

In addition, pursuant

to the Rubenstein Silvers Letter Agreement, Ms.

Silvers agreed that, in connection with the transaction consummated under the R&S

Agreement and in addition to the Buyout Amount, the next $280,000 of the 5% Distribution that would be distributed by Hollywood

Silvers pursuant to her amended employment agreement will be retained by Hollywood Media (and not paid to Ms.

and is a reduction to “Derivative Liabilities”

in the accompanying consolidated balance sheets.

Regardless of whether

Rubenstein or Ms.

Silvers continued to provide services to Hollywood Media after the first anniversary of the sale of Theatre

Direct, one-half of the Deferred Change in Control Payments were to be paid to Mr.

Rubenstein and/or Ms.

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

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

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

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

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

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

These amounts will be due to Mr.

Rubenstein, Ms.

Silvers and/or their heirs regardless of whether or not Mr.

Silvers, as applicable,

upon the receipt by Hollywood Media of payments from Key Brand pursuant to the $8.5 million credit agreement (the “Credit

Agreement”) entered into in connection with the sale of Theatre Direct, on a pro rata basis, and one-half of such payments

were be paid to Mr.

Rubenstein and/or Ms.

Silvers continue in the employment

of Hollywood Media after the Sale Anniversary.

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

Rubenstein will be entitled to:

4.76% of all payments of principal and interest received by Hollywood Media on account of the Promissory

Note (for a maximum amount of $407,201, of which a total of $51,519 has been paid to Mr.

Rubenstein), and

5.79% of the first $7 million of Earn-out payments received

by Hollywood Media (for a maximum amount of $405,300).

Silvers will be entitled to:

1.94% of all payments of principal and

interest received by Hollywood Media on account of the Promissory Note (for a maximum amount of $166,989, of which a total of $20,997

has been paid to Ms.

Silvers), and

2.36% of the first $7 million of Earn-out

payments received by Hollywood Media (for a maximum amount of $165,200).

Silvers, as applicable, upon the receipt by Hollywood Media of payments under the first

$7 million tranche of the earnout in connection with the sale of Theatre Direct, on a pro rata basis.

On August 28, 2012,

Hollywood Media entered into an Assignment and Assumption of Membership Interest and Waiver (the “Assignment”) with

Baseline Holdings LLC (“Baseline Holdings”), Project Hollywood LLC (“Project Hollywood”), Mr.

Baseline Holdings is wholly-owned by Mr.

Rubenstein and Ms.

Pursuant to the Assignment, Hollywood Media

assigned to Baseline Holdings all of Hollywood Media’s membership interest in Project Hollywood in exchange for total consideration

of $1,800,000 (the “Project Hollywood Purchase Price”), which interest Hollywood Media had acquired on October 27,

2011 for $1,250,000.

The Project Hollywood Purchase Price was paid as follows:

(1) $1,230,500 in cash (which was paid by Baseline

Holdings to Hollywood Media), (2) Mr.

Rubenstein waived his right to receive any future principal and interest owed to Hollywood

Media pursuant to the Loan under the Credit Agreement (as of August 28, 2012, Mr.

Rubenstein had the right to receive

4.76% of the principal, or $404,600, and interest on account of the Loan under the Credit Agreement), and (3) Ms.

Silvers waived

her right to receive any future principal and interest owed to Hollywood Media under the Loan under the Credit Agreement (as of

August 28, 2012, Ms.

Silvers has the right to receive 1.94% of the principal, or $164,900, and interest on account of the Loan

under the Credit Agreement).

Hollywood Media recorded the fair value of the waivers by Mr.

Rubenstein and Ms.

Silvers in the long

term portion of “Other Assets”

in the accompanying consolidated balance sheets.

On October 1, 2012,

Hollywood Media received the first $7 million tranche of the earnout pursuant to the Broadway Sale.

In connection with the Deferred

Change in Control Payments due to Mr.

Rubenstein and Ms.

Silvers in connection with the Broadway Sale, Mr.

Rubenstein received

$405,300 of such earnout payment and Ms.

Silvers received $165,200 of such earnout payment on October 5, 2012.

From time to time the

3 unchanged sentences

or performance to the Company.

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

Silvers received a bonus of $200,000 in the

quarter ended June 30, 2012.

Bonuses are included in “Payroll and benefits”

in the accompanying consolidated statements

of operations.

Rubenstein and Ms.

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

These bonuses are included in “Payroll and benefits”

in the accompanying consolidated statement of operations.

No bonuses have been paid since then.

Silvers have notified the Compensation Committee that each of them plans to voluntarily waive

the first $225,000 (in the case of Mr.

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.

(19) SUBSEQUENT

On March 29, 2013,

Hollywood Media received a scheduled payment under the Loan in the amount of $1,132,404, which included a principal payment of

$646,154, an interest payment of $210,000 on the Second $7 Million Earnout and $276,250 of interest on the $8.5 million portion

The Company has evaluated

events that occurred subsequent to December 31, 2012 and through the date the financial statements were issued.

No events, other

than the events described above, required disclosure.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

The firm of Kaufman

Rossin & Co., P.A.

(“Kaufman”) served as Hollywood Media’s independent registered public accounting firm

for the fiscal year ended December 31, 2011 and for the period from January 1, 2012 to October 12, 2012.

On October 12,

2012, Hollywood Media dismissed Kaufman as Hollywood Media’s independent registered public accounting firm, effective as

of October 12, 2012.

The decision to dismiss Kaufman was recommended and approved jointly by Hollywood Media’s Board of Directors

and the Audit Committee of Hollywood Media’s Board of Directors as part of Hollywood Media’s continuing effort to reduce

costs and expenses while maintaining an equivalent level of audit quality and services.

The reports of Kaufman

on Hollywood Media’s consolidated financial statements as of and for the years ended December 31, 2011 and 2010 did not contain

an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting

During the years ended

December 31, 2011 and 2010, and through October 12, 2012, there were no (a) disagreements with Kaufman on any matter of accounting

principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to

Kaufman’s satisfaction, would have caused Kaufman to make reference to the subject matter thereof in connection with its

reports for such years;

or (b) reportable events, as described under Item 304(a)(1)(v) of Regulation S-K.

Hollywood Media provided

Kaufman with a copy of the disclosures it made regarding the dismissal of Kaufman in Hollywood Media’s Current Report on

Form 8-K filed with the Securities and Exchange Commission on October 18, 2012 and requested from Kaufman a letter addressed to

the Securities and Exchange Commission indicating whether Kaufman agrees with such disclosures.

A copy of Kaufman’s letter

to the Securities and Exchange Commission dated October 15, 2012 is attached as Exhibit 16.1 to Hollywood Media’s Current

Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2012.

On October 12, 2012,

concurrently with the dismissal of Kaufman and upon the joint recommendation and approval of Hollywood Media’s Board of Directors

and the Audit Committee of Hollywood Media’s Board of Directors, Hollywood Media engaged Marcum LLP as Hollywood Media’s

independent registered public accounting firm for the fiscal year ending December 31, 2012, effective as of October 17, 2012.

appointment of Marcum LLP as Hollywood Media’s independent registered public accounting firm for the fiscal year ending December

31, 2012 was ratified by Hollywood Media’s shareholders at the 2012 annual meeting of Hollywood Media’s shareholders.

During the years ended

December 31, 2011 and 2010 and the subsequent interim period through October 17, 2012, neither Hollywood Media nor anyone on Hollywood

Media’s behalf has consulted with Marcum LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii)

of Regulation S-K.

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-K

Item 8. Financial Statements and Supplementary Data