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Item 1. Financial Statements

2013-08-14 compared with 2013-05-14 · 738 added, 899 removed, 974 unchanged (63% of the section changed)

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TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCES

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’

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22,640,966 and

shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively

23,162,466 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively

Additional paid-in capital

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

Three Months Ended March 31,

CONDENSED CONSOLIDATED STATEMENTS OF

Six Months Ended June 30,

Three Months Ended June 30,

OPERATING COSTS AND EXPENSES

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Gain on sale of discontinued operations, net of income taxes

Loss from discontinued operations

Income from discontinued operations

Basic and diluted income (loss) per common share

Income from discontinued operations

Basic and diluted (loss) income per common share

Continuing operations

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Total basic and diluted net loss per share

Weighted average common and common equivalent shares outstanding - basic

The accompanying notes to condensed consolidated

financial statements are an integral part of

these condensed consolidated statements

of operations.

Weighted average common and common equivalent shares outstanding –

basic and diluted

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

these condensed consolidated statements of operations.

HOLLYWOOD MEDIA CORP.

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CONDENSED CONSOLIDATED STATEMENTS OF

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Loss on disposal of fixed assets

Gain on sale of business

Change in fair value of derivative liabilities

Change in fair value of warrant

Changes in assets and liabilities:

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Continuing operations

Net cash provided by operating activities –

Net cash used in operating activities –

Discontinued operations

Net cash used in operating activities

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Capital expenditures

Net proceeds from sale of assets and businesses

Cash received on notes receivable

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CASH AND CASH EQUIVALENTS, end of period

SUPPLEMENTAL SCHEDULE OF CASH RELATED ACTIVITIES AND NON-CASH FINANCING

SUPPLEMENTAL SCHEDULE OF CASH RELATED ACTIVITIES:

AND NON-CASH FINANCING ACTIVITIES

Interest paid

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financial statements

are an integral part of these condensed

consolidated statements of cash flows.

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

HOLLYWOOD MEDIA CORP.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL

OF PRESENTATION AND CONSOLIDATION:

In the opinion of

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

(“Hollywood Media”, “our”

or “Company”) in accordance with accounting principles generally

accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article

8 of Regulation S-X.

Certain information and footnote disclosures normally included in annual financial statements prepared in

accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed

or omitted pursuant to applicable rules and regulations.

However, management believes that the disclosures contained herein are

adequate to make the information presented not misleading.

The accompanying financial statements reflect, in the opinion of management,

all material adjustments (which include only normal recurring adjustments) necessary to present fairly Hollywood Media’s

condensed consolidated financial position, results of operations and cash flows.

The results of operations for the three months

ended March 31, 2013 and the cash flows for the three months ended March 31, 2013 are not necessarily indicative of the results

of operations or cash flows for the remainder of 2013.

The accompanying unaudited condensed consolidated financial statements

should be read in conjunction with the audited consolidated financial statements and notes thereto included in Hollywood Media’s

Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission.

OF SIGNIFICANT ACCOUNTING POLICIES:

(1) BASIS OF PRESENTATION AND CONSOLIDATION:

In the opinion of management,

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

(“Hollywood

Media”, “our”

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

States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

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

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

GAAP”) have been condensed or omitted pursuant to applicable

rules and regulations.

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

presented not misleading.

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

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

position, results of operations and cash flows.

The results of operations for the six and three months ended June 30, 2013 and

the cash flows for the six months ended June 30, 2013 are not necessarily indicative of the results of operations or cash flows

for the remainder of 2013.

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

with the audited consolidated financial statements and notes thereto included in Hollywood Media’s Annual Report on Form

10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

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balances and transactions have been eliminated in consolidation.

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

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

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

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

Loss per Common Share

Financial Accounting Standards Board Accounting

Standards Codification (“ASC”) Topic No.

Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”) Topic No.

260, “Earnings Per Share”

(ASC 260), requires companies

to present basic and diluted earnings per share (“EPS”).

Loss per common share is computed by dividing net loss attributable

to Hollywood Media Corp.

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

period presented.

(ASC 260), requires

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

Loss per common share is computed by dividing net

loss attributable to Hollywood Media Corp.

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

for the period presented.

The weighted average

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

totaled 75,000 shares for the three months ended March 31, 2013 and such shares were excluded from the calculation of basic and

diluted loss per share for the three months ended March 31, 2013 because their impact was anti-dilutive to the loss per share

from continuing operations.

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

in the diluted calculation because they are anti-dilutive.

There were no unvested shares as of March 31, 2013 and 2012, respectively.

totaled 75,000 shares for each of the six and three months ended June 30, 2013 and such shares were excluded from the calculation

of basic and diluted loss per share for the six and three months ended June 30, 2013 because their impact was anti-dilutive to

the loss per share from continuing operations.

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

are not included in the diluted calculation because they are anti-dilutive.

There were no unvested shares as of June 30, 2013 and

2012, respectively.

For the Six Months

For the Three Months

Ended March 31,

Ended June 30,

Basic weighted average shares outstanding

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Dilutive weighted average shares outstanding

Options to purchase shares of Common Stock and other stock-based awards outstanding which

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

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

Segment Information

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The Company records

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

of those instruments reported in earnings in our condensed consolidated results of operations.

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

those instruments reported in earnings in our condensed consolidated results of operations.

The Company does not hold any derivative

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In October 2012, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections

and Improvements"

FASB issued ASU 2012-04, ''Technical Corrections and Improvements"

in Accounting Standards Update No.

The amendments in this update cover a wide range of Topics

in the Accounting Standards Codification.

These amendments include technical corrections and improvements to the Accounting Standards

Codification and conforming amendments related to fair value measurements.

The amendments in this update will be effective for

fiscal periods beginning after December 15, 2012.

The adoption of ASU 2012-04 did not have a material impact on our financial

position or results of operations.

(3) DISCONTINUED

The amendments

in this update cover a wide range of Topics in the Accounting Standards Codification.

These amendments include technical corrections

and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements.

The amendments

in this update will be effective for fiscal periods beginning after December 15, 2012.

The adoption of ASU 2012-04 did not have

a material impact on our financial position or results of operations.

(3) DISCONTINUED OPERATIONS:

Sale of Broadway Ticketing Division

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On December 15, 2010,

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

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.

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

Hollywood Media and Key Brand (as amended, the "Purchase Agreement”).

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

There are no material relationships among Hollywood

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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) an $8,500,000 note (the "Loan”)

to the estimated working capital adjustment described in the Purchase Agreement), (ii) an $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 (as amended, the

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(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

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

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capital adjustment of $3,734,106 was paid on March 22, 2011.

April 2012 Amendments

to the Broadway Sale Purchase Agreement, the Credit Agreement and the JPM Intercreditor Agreement

April 2012 Amendments to the Broadway

Sale Purchase Agreement, the Credit Agreement and the JPM Intercreditor Agreement

On April 22, 2012,

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As part of the

Fourth Purchase Agreement Amendment, Key Brand agreed to pay the first $7,000,000 earnout amount (the “First $7 Million

Earnout”) to Hollywood Media 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 Hollywood

Media on October 1, 2012 and was recorded upon collection of the $7,000,000 received on October 1, 2012.

In addition, the revenue

calculation for the second $7,000,000 earnout amount (the “Second $7 Million Earnout”) was modified to exclude “group

(and the revenues of the new joint venture conducting such business) and the revenue 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 Fourth Purchase Agreement Amendment, the Second $7 Million Earnout was added

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

As of October 5, 2012, pursuant to the Credit

Agreement, interest at a rate of 12% per annum and principal on the $7,000,000 portion of the Loan 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

$8,500,000 principal amount of the Loan, the principal amount of the Loan due Hollywood Media by Key Brand was $15,500,000 as

of October 5, 2012.

Hollywood Media initially

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

Fourth Purchase Agreement Amendment, Key Brand agreed to pay the first $7,000,000 earnout amount (the “First $7 Million Earnout”)

to Hollywood Media 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 Hollywood Media on

October 1, 2012 and was recorded upon collection of the $7,000,000 received on October 1, 2012.

In addition, the revenue calculation

for the second $7,000,000 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 revenue 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,

Accordingly, pursuant to the Fourth Purchase Agreement Amendment, the Second $7 Million Earnout was added as of October 5,

2012 to the principal amount of the Loan under the Credit Agreement.

As of October 5, 2012, pursuant to the Credit Agreement, interest

at a rate of 12% per annum and principal on the $7,000,000 portion of the Loan 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 $8,500,000 principal amount of

the Loan, the principal amount of the Loan due Hollywood Media by Key Brand was $15,500,000 as of October 5, 2012.

Hollywood Media

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

Amortization under the effective interest method

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

in the accompanying unaudited condensed

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 $7,000,000

portion of the Loan and $260,666 of interest on the $8,500,000 portion of the Loan.

The principal payment of $538,462, combined

with accretion of discount of $288,585, reduced the value of the $7,000,000 portion of the Loan 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 $8,500,000 portion

of the Loan during the three months ended December 31, 2012.

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 $7,000,000

portion of the Loan and $276,250 of interest on the $8,500,000 portion of the Loan.

The principal payment of $646,154, combined

initially recorded 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 is included in "Accretion of discount, net of allowance for uncollectability"

accompanying unaudited condensed 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 $7,000,000 portion of the Loan and $260,666 of interest on the $8,500,000 portion of the

The principal payment of $538,462, combined with accretion of discount of $288,585, reduced the value of the

$7,000,000 portion of the Loan 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 $8,500,000 portion of the Loan during the three months ended December

For the six months ended June 30, 2013, Hollywood Media received scheduled payments under the Loan in the amount of

$2,248,977, which included principal payments of $1,292,308, interest payments of $401,100 on the $7,000,000 portion of the

Loan and $555,569 of interest on the $8,500,000 portion of the Loan.

The principal payments of $1,292,308, combined

with accretion of discount of $666,126, reduced the value of the $7,000,000 portion of the Loan from $4,250,123 at December

2012 to $3,947,295 at March 31, 2013.

Accretion of discount was $267,159 on the $8,500,000 portion of the Loan during the three

months ended March 31, 2013.

31, 2012 to $3,623,941 at June 30, 2013.

The uncollected face amount (principal) of the $7,000,000 portion of the Loan was $5,169,231 and $6,461,538

at June 30, 2013 and December 31, 2012, respectively.

For the three months

ended June 30, 2013, Hollywood Media received a scheduled payment under the Loan in the amount of $1,116,573, which included a

principal payment of $646,154, an interest payment of $191,100 on the $7,000,000 portion of the Loan and $279,319 of interest on

the $8,500,000 portion of the Loan.

The principal payment of $646,154, combined with accretion of discount of $322,800, reduced

the value of the $7,000,000 portion of the Loan from $4,250,123 at December 31, 2012 to $3,623,941 at June 30, 2013.

of discount was $584,253 and $317,094 on the $8,500,000 portion of the Loan during the six and three months ended June 30,

2013, respectively.

On April 22, 2012,

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and to provide for additional reporting requirements.

Hollywood Media also agreed to amend the JPM Intercreditor Agreement to

provide that, subject to Key Brand’s compliance with the terms and conditions of Key Brand’s senior secured credit

agreement, Key Brand would be permitted to make scheduled quarterly installment payments of the Second $7 Million Earnout prior

to the maturity of the Credit Agreement, notwithstanding that the obligations under the Credit Agreement were subordinated to

$15 million of Key Brand’s obligations under Key Brand’s senior secured credit agreement.

December 2012 Amendments

to the Credit Agreement and the Warrant and New Intercreditor Agreement

Hollywood Media also agreed to amend the JPM Intercreditor Agreement to provide

that, subject to Key Brand’s compliance with the terms and conditions of Key Brand’s senior secured credit agreement,

Key Brand would be permitted to make scheduled quarterly installment payments of the Second $7 Million Earnout prior to the maturity

of the Credit Agreement, notwithstanding that the obligations under the Credit Agreement were subordinated to $15 million of Key

Brand’s obligations under Key Brand’s senior secured credit agreement.

December 2012 Amendments to the Credit

Agreement and the Warrant and New Intercreditor Agreement

On December 31, 2012,

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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.

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 Second Credit Agreement 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 “Terido

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 Terido

Intercreditor Agreement are substantially similar to the terms and conditions of the prior JPM Intercreditor Agreement.

and Key Brand entered into that certain Subordination and Intercreditor Agreement, dated December 31, 2012 (the “Terido 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 Terido Intercreditor

Agreement are substantially similar to the terms and conditions of the prior JPM Intercreditor Agreement.

On December 31, 2012,

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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 fair value of the Warrant was $700,000 on March 31, 2013 and December 31, 2012, respectively.

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 fair value of the Warrant was $750,000 and $700,000 on June 30, 2013 and December 31, 2012, respectively.

In connection with

the Second Credit Agreement Amendment, Terido Intercreditor Agreement and the amendment to the Warrant described above, on December

31, 2012, 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.

the Second Credit Agreement Amendment, the Terido Intercreditor Agreement and the amendment to the Warrant described above, on

December 31, 2012, 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.

On August 8, 2013 Key Brand paid Hollywood Media a total of $16,611,738 consisting of $13,861,738 from

the prepayment of the Loan and $2,750,000 from the redemption of the Warrant.

For additional information about this transaction,

see Note 10 “Subsequent Events.”

Hollywood.com Business

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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 $197,517 in earnout gain during the three months ended March 31, 2012, which is included in “Gain

on sale of discontinued operations, net of income taxes”

in our accompanying unaudited condensed consolidated statements

of operations.

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 2012.

Media recognized $326,758 and $129,241 in earnout gain during the six and three months ended June 30, 2012, which is included in

“Gain on sale of discontinued operations, net of income taxes”

in our accompanying unaudited condensed consolidated

statements of operations.

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

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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”).

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.

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

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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 unaudited condensed consolidated balance sheets.

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”

the accompanying unaudited condensed consolidated balance sheets.

Pursuant to the R&S

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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

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.

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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).

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.

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

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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.

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 unaudited condensed consolidated

balance sheets.

gain on sale attributable to the sale of Cinemasource UK Limited of $649,215 for the six months ended June 30, 2012.

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

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

in our accompanying

unaudited condensed consolidated balance sheets.

The purchase price

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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.

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.

Results from Discontinued Operations

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from discontinued operations”

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

Summarized results of discontinued

operations include the operating loss from the Cinemasource UK Limited Business and through their respective dates of disposition,

for the three months ended March 31, 2013 and 2012.

Three Months Ended March 31,

and includes the gain on sale of the Hollywood.com Business and the Cinemasource UK Limited

Summarized results of discontinued operations include the operating loss from the Cinemasource UK Limited Business and

through their respective dates of disposition, for the six and three months ended June 30, 2013 and 2012, respectively.

Six Months Ended June 30,

Three Months Ended June 30,

Net Revenues:

Gain on sale of discontinued operations, net of

Loss from discontinued operations

Gain on sale of discontinued operations, net of income taxes

Income from discontinued operations

REPURCHASE PROGRAM:

During the first quarter

of 2013, 510,700 shares of Hollywood Media’s common stock were purchased under the repurchase program for $749,966.

No shares were repurchased during the three months ended March 31, 2012.

For additional information relating to the stock repurchase

program, see Part II, Item 2 of this Quarterly Report on Form 10-Q and “Liquidity and Capital Resources”

Item 2 of this Quarterly Report on Form 10-Q.

As of March 31, 2013, the maximum approximate dollar value of shares that may have

been purchased under the Repurchase Program was $1,923,295 (calculated by subtracting (i) the total paid for all shares purchased

under the Repurchase Program from inception through March 31, 2013 or $8,076,705 from (ii) the $10,000,000 potential maximum dollar

value of repurchases approved under the life of the Repurchase Program).

VALUE MEASUREMENTS:

The carrying amounts of cash and

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

The carrying value of notes payable and the non-interest bearing loan receivable with imputed interest at 16.5%, per annum, approximate

fair value because the interest rates approximate the market rates.

Income from discontinued operations

(4) STOCK REPURCHASE PROGRAM:

During the first and

second quarter of 2013, 510,700 shares and 10,800 shares, respectively, of Hollywood Media’s common stock were purchased

under the repurchase program for $749,966 and $16,063, respectively.

No shares were repurchased during the first and second

quarter of 2012.

For additional information relating to the stock repurchase program, see Part II, Item 2 of this Quarterly Report

on Form 10-Q and “Liquidity and Capital Resources”

in Part I, Item 2 of this Quarterly Report on Form 10-Q.

30, 2013, the maximum approximate dollar value of shares that could be purchased under the Repurchase Program was $1,907,232 (calculated

by subtracting (i) the total paid for all shares purchased under the Repurchase Program from inception through June 30, 2013 which

was $8,092,768 from (ii) the $10,000,000 potential maximum dollar value of repurchases approved under the life of the Repurchase

(5) FAIR VALUE MEASUREMENTS:

The carrying amounts

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

of these instruments.

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

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

Financial instruments

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The Company generally does not require collateral when granting credit.

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

Fair value is the price

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

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

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

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

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

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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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unaudited condensed consolidated statements of operations.

See Note 3, “Discontinued Operations”

to these unaudited condensed consolidated financial statements for information

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

At March 31, 2013 and December 31, 2012, the fair value of

the derivative liability was $60,000.

Warrant Held by

Hollywood Media in Theatre Direct

See Note 3, “Discontinued

Operations”

to these unaudited condensed consolidated financial statements for information on the Buyout Amount and its reduction

of the derivative liability.

At June 30, 2013 and December 31, 2012, the fair value of the derivative liability was $60,000.

Warrant 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, and which also contains a put option that allows the Company,

after the seventh anniversary of the issue date (which was later shortened to June 30, 2015 as referenced below), to put the warrant

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, and which also contains a put option that allows the Company, after

the seventh anniversary of the issue date (which was later shortened to June 30, 2015 as referenced below), to put the warrant

to Key Brand for the greater of (i) fair market value of the shares and (ii) $1.0 million (which was later increased to $3.0 million

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The Warrant is revalued on a recurring basis.

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 March 31, 2013 and December

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.

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 $750,000 and $700,000 at June 30, 2013 and December 31, 2012,

respectively.

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 value of the Warrant was 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 2013 and fiscal 2012 were:

implied multiples used in the business

enterprise value income and market approaches ranging from 3.25 to 4.0;

and a discount rate of 25%, based on the Company’s

best estimate of the equity cost of capital adjusted for risks associated with the Warrant.

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

basis within the fair value hierarchy utilized to measure fair value as of March 31, 2013:

basis within the fair value hierarchy utilized to measure fair value as of June 30, 2013:

Derivative liabilities

There were no transfers between the levels

of the fair value hierarchy during the quarter ended March 31, 2013.

of the fair value hierarchy during the quarter ended June 30, 2013.

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, 2012 to March 31, 2013:

3) from December 31, 2012 to June 30, 2013:

Balance at December 31, 2012

Change in fair value included in earnings

Balance at March 31, 2013

Balance at June 30, 2013

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, 2012 to March 31,

measured at fair value on a recurring basis using significant unobservable input (Level 3) from December 31, 2012 to June 30, 2013:

Balance at December 31, 2012

Change in fair value included in "Other, net"

Balance at March 31, 2013

Balance at June 30, 2013

On August 8, 2013 Key Brand paid Hollywood Media a total of $16,611,738 consisting of $13,861,738 from

the prepayment of the Loan and $2,750,000 from the redemption of the Warrant.

For additional information about this transaction,

see Note 10 “Subsequent Events.”

(6) SEGMENT REPORTING:

Hollywood Media’s

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Ad Sales segment also sold advertising on plasma TV displays throughout the U.K.

and Ireland, on lobby display posters, movie

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

See Note 3, “Discontinued Operations”

to these unaudited condensed consolidated financial statements for information

on the sale of Cinemasource UK Limited.

The Intellectual Properties

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

which it licenses across all media.

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

The Other segment

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

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

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

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

This segment also included Hollywood Media’s investment

in Project Hollywood, LLC ("Project Hollywood").

On August 28, 2012 Hollywood Media assigned to Baseline Holdings LLC

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

Note 9, “Related Party Transactions”

to these unaudited condensed consolidated financial statements for more information

on the assignment of Hollywood Media’s membership interest in Project Hollywood.

and Ireland, on lobby display posters, movie brochure

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

3, “Discontinued Operations”

to these unaudited condensed consolidated financial statements for information on the

sale of Cinemasource UK Limited.

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

created by best-selling authors and media celebrities, which it seeks to license across all media.

This segment also includes Tekno

Books, a book development business.

The Other segment is

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

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

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

of and report on internal control over financial reporting.

This segment also included Hollywood Media’s investment in Project

Hollywood, LLC ("Project Hollywood").

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

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

See Note 9, “Related

Party Transactions”

to these unaudited condensed consolidated financial statements for more information on the assignment

of Hollywood Media’s membership interest in Project Hollywood.

There are no intersegment

sales or transfers.

As of March 31,

As of June 30,

2013, the Ad Sales segment consists of the Company’s investment in MovieTickets.com.

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regarding Hollywood Media’s reportable segments.

Three months ended March 31,

Six Months Ended June 30,

Three Months Ended June 30,

Net Revenues:

Intellectual Properties

Operating Income (Loss):

Operating Loss:

Intellectual Properties

$ (2,566,927 )

$ (2,476,454 )

$ (1,197,060 )

$ (1,587,023 )

Capital Expenditures:

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Intellectual Properties

COMMITMENTS AND CONTINGENCIES:

(7) CERTAIN COMMITMENTS AND CONTINGENCIES:

On October 27, 2011,

the Company, together with National Amusements Inc.

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

(“AMC”) and MovieTickets.com Inc.

(as nominal defendant) (Case No.

50 2011 CA 016684) in the Circuit Court of

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

On February 8,

2012, MovieTickets.com, Inc.

the Company and National Amusements Inc.

filed a lawsuit against AMC Entertainment Inc.

(“AMC”) (Case No.

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

On February 8, 2012, MovieTickets.com, Inc.

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

MovieTickets.com is an online

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

MovieTickets.com

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

and AMC each own a 26.2% equity interest.

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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,

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.

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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.

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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in MovieTickets.com, Inc.

as of March 31, 2013 and shares in 26.2% of the income or losses generated by the joint venture.

as of June 30, 2013 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 unaudited condensed consolidated statements

of operations.

Hollywood Media

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

loss as “Earnings of Unconsolidated Investees”

in the accompanying unaudited condensed consolidated statements of operations.

Hollywood Media recorded

its 26.2% share of net loss of $72,115 and $121,034 under “Earnings of unconsolidated investees”

in the accompanying

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

Hollywood Media did not record

$410,249 of its share of losses from MovieTickets.com for 2012 and the three months ended March 31, 2013 because accumulated dividends

and net losses from 2013 and prior years exceed the Company’s investment in MovieTickets.com as of March 31, 2013.

There were no dividends declared or received during the three months ended March 31, 2013 or during the three months ended March

PARTY TRANSACTIONS:

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

Media did not record $33,035 of its share of losses from MovieTickets.com for 2012 and $367,717 for the six months ended June 30,

2013 for a total of $400,752, because accumulated dividends and net losses from 2013 and prior years exceed the Company’s

investment in MovieTickets.com as of June 30, 2013.

There were no dividends declared or received during the six and three

months ended June 30, 2013 or during the six and three months ended June 30, 2012.

(9) RELATED PARTY TRANSACTIONS:

Hollywood Media recorded

$197,517 in earn-out gain from R&S Investments, LLC ("R&S Investments") during the three months ended March

As of March 31, 2013, the Company had $30,929 included in “Related Party Receivable”

in our accompanying

unaudited condensed consolidated balance sheet which primarily consisted of expense reimbursements from R&S Investments.

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.

During the year ended December

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

$326,758 and $129,241 in earn-out gain from R&S Investments, LLC (“R&S Investments”) during the six and three

months ended June 30, 2012, respectively, which is included in “Gain on sale of discontinued operations, net of income taxes”

in our accompanying unaudited condensed consolidated statements of operations.

As of June 30, 2013, the Company had $26,552 included

in “Related Party Receivable”

in our accompanying unaudited condensed consolidated balance sheet which primarily consisted

of expense reimbursements from R&S Investments.

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.

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

reimbursements in accordance with the payment terms.

Pursuant to the R&S

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Purchase Agreement or otherwise.

Accordingly, the earnout receivable from R&S Investments was $0 as of December 31,

2012 and March 31, 2013.

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

31, 2012 and June 30, 2013.

See Note 3, “Discontinued Operations”

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On October 27, 2011,

following Project Hollywood's acquisition of all of the membership interests of Baseline LLC, Hollywood Media acquired a 21.74%

ownership interest in Project Hollywood for $1.25 million, which was contributed to Project Hollywood and which was based on the

same per membership unit price paid by Baseline Holdings LLC for its 78.26% ownership interest in Project Hollywood.

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

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

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

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

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

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

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Distributions of $177,182

to Hollywood Media reduced Hollywood Media’s investment in Project Hollywood during the three months ended March 31, 2012.

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, Mitchell Rubenstein and Laurie S.

Baseline Holdings is wholly-owned by Mr.

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

to Hollywood Media reduced Hollywood Media’s investment in Project Hollywood during the six months ended June 30, 2012.

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, Mitchell Rubenstein and Laurie S.

Holdings is wholly-owned by Mr.

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

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”).

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,

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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 $8,500,000 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 $8,500,000 portion of the Loan (as of August 28, 2012,

Rubenstein had the right to receive 4.76% of the principal, or $404,600,

and interest on account of the $8,500,000 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 $8,500,000 portion of the Loan (as of August 28, 2012,

Silvers has the right to receive 1.94% of the principal, or $164,900, and interest on account of the $8,500,000 portion of

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in the accompanying unaudited condensed consolidated balance sheets.

As described above, Hollywood

Media acquired its membership interest in Project Hollywood on October 27, 2011 for $1,250,000.

As described above, Hollywood Media

acquired its membership interest in Project Hollywood on October 27, 2011 for $1,250,000.

As a result of the

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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.

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

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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.

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.

Amended and Restated Employment Agreements

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for, among other things, the following:

a period of ninety days after the closing of the sale of Theatre

For a period of ninety days after the closing of the sale of Theatre

Rubenstein’s and Ms.

Silvers’

continued in accordance with then existing terms.

this ninety-day period, Mr.

compensation continued in accordance with then existing terms.

After this ninety-day period, Mr.

Rubenstein and Ms.

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,

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

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

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,

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

((i) and (ii) are referred

to herein as the “5% Distribution”).

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

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.

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

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

Rubenstein and Ms.

Silvers or their heirs regardless of

whether or not Mr.

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

Silvers or their heirs regardless of whether or not Mr.

Rubenstein and/or Ms.

Silvers continue in

the employment of the Company.

deferment by Mr.

Silvers continue in the employment of the

A 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

(referred to herein as the “Deferred Change in Control

Payments”).

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,

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Rubenstein and Ms.

Silvers entered into a

letter agreement regarding the R&S Agreement (the “Rubenstein Silvers Letter Agreement”), and (3) R&S Investments

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”).

Investments is wholly-owned by Mr.

R&S Investments

is wholly-owned by Mr.

Rubenstein and Ms.

See Note 3, “Discontinued Operations”

unaudited condensed consolidated financial statements for more information on the R&S Agreement, the Rubenstein Silvers Letter

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

and the R&S Letter.

to these unaudited condensed

consolidated financial statements for more information on the R&S Agreement, the Rubenstein Silvers Letter Agreement and the

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